UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number  811-06111

The Mexico Equity and Income Fund, Inc.
(Exact name of registrant as specified in charter)

Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)

Milwaukee, WI 53202
(Name and address of agent for service)

Registrant's telephone number, including area code

Date of fiscal year end: July 31, 2018

Date of reporting period:  July 31, 2018

The Mexico Equity

and Income Fund, Inc.

Annual Report

July 31, 2018

The Mexico Equity and Income Fund, Inc.

Report of Pichardo Asset Management (“PAM”),

The Investment Adviser.

 

Dear Fund Stockholders,

 

At the publishing of this letter, the U.S. labor market has continued to strengthen economic activity with gradual expected increases within the Fed’s target range of 2.00% to 2.25%.

 

In Europe, the British and EU institutions are spending time on BREXIT negotiations while China and Canada got into trade tensions with the U.S.

 

In the EM region, there has been a perception of serious economic problems in countries like Argentina, Turkey, Brazil, and China. In this regard, the Mexican Peso has stood apart (Please see Exhibit 1), likely due to the following factors:

 

 

 

Exhibit 1. EM Currencies

(100 Base Index from December 31, 2017 to September 11, 2018)

 

 

Source: Bloomberg.

 

Exhibit 2: MXN/USD Spot Exchange Rate

As of August 31, 2018

 

 

Source: BANXICO, Bloomberg.

 

One of the risks for the Mexican economy relates to the pace of the Fed’s normalization to its neutral level that is likely to set at 3.25% by the end of 2019. In this context, Mexico Central Bank’s “BANXICO”, reference rate stands at 8.00% with a spread of 475 basis points. (Please see Exhibit 3).

 

Exhibit 3: Mexico & U.S. Overnight Rates

 

Source: Bloomberg.

 

 

 

 

Exhibit 4: Mexico Credit Default Swap (CDS) vs. LATAM Peers

Ten-Year Period as of July 31, 2018

 

 

Source: Bloomberg.

 

The Mexican gross domestic product (“GDP”) showed an annual growth rate of 2.5% in the first quarter of this year and an unexpected 1.5% contraction during the second quarter. Mining and construction industries slowed down, and manufacturing came to a halt. Services, mainly commerce, continue to be the main engine of the economy with year-on-year growth rates above 3%. In particular investment lost momentum as compared to the incipient recovery displayed at the end of 2017 and early 2018. In contrast, private consumption maintained a positive trend, supported by the performance of the real wage bill and workers’ remittances, according to BANXICO. Manufacturing exports showed a degree of weakness at the second quarterly report. (Source: Banxico).

 

(Please see full economic report at the Fund’s web page dated September 2018).

 

 

 

 

MXE’S PERFORMANCE AND INVESTMENT STRATEGY

Fund’s Excess Return with Lower Turnover

 

The Fund’s U.S. net asset value (“NAV”) per share registered a -2.46% decrease for the one year period ended July 31, 2018, compared to 11.28% gain for one year period ended July 31, 2017 and a 2.13% increase in local currency. For the seven month period ended July 31, 2018, the NAV increased 12.50% in U.S. Dollars. (Source: U.S. Bancorp, Bloomberg).

 

PAM’s team has provided the Fund’s stockholders a 297 basis point excess return compared to that of the MSCI-Mexico Index for the Fund’s fiscal year ended July 31, 2018 and 680 excess basis points for the seven month period. (See Exhibit 5). The Fund’s turnover has also decreased. (See Exhibit 6). (Source: U.S. Bancorp, Bloomberg).

 

Exhibit 5: The MXE’s Net U.S. Dollar Asset Value per Share Return with Dividends Reinvested

 

 

Source: U.S. Bancorp¹; Thomson²; PAM³; MSCI⁴, Bloomberg.

 

Performance data represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Performance data to the most recent month end may be obtained by calling U.S. Bancorp Fund Services, LLC, (414) 765-4255, or by consulting the Fund’s web page: www.mxefund.com.

 

 

 

 

Exhibit 6: MXE’s Turnover Ratio & Spread Performance vs. MSCI-Mexico Index.

Ten Years to the Fund’s Fiscal Year Ended July 31, 2018

 

 

Source: U.S. Bancorp, Bloomberg.

 

The Fund’s common share market price decreased -3.60% for the one year period ended July 31, 2018, registering a discount of -14.41% to the Fund’s NAV of U.S. $13.32, compared to a discount of -13.35% at July 31, 2017. For the seven month period the Fund’s common share market price increased 11.11% in U.S. Dollars.  (Source: U.S. Bancorp). (See Exhibit 7).

 

Exhibit 7: MXE’s NAV Discount

(07/31/2017 – 7/31/2018)

 

 

Source: Bloomberg.

 

MXE INVESTMENT PHILOSOPHY

 

Searching for Investment Themes at Attractive Valuations, always supported by our in-depth fundamental analysis.

 

The Fund continues to adhere to our high-quality growth stocks investment philosophy, including “special situations” investment themes, as categorized by PAM (oversold, misunderstood stocks by the market).  At the time of this writing, the Fund has increased stocks with visible growth drivers in the materials sector, mainly chemicals with geographically diversified EBITDA contribution, local toll road concessions with an estimated 8% free cash flow yield in 2019, and copper related stock misunderstood by the market. Also, the Fund has reduced risky assets mainly related to interest rate raising cycle.

 

At July 31, 2018, the portfolio construction registered 97% weight in equities (with no single one position higher than 10%), with 2% in private investment and 1% approximately in U.S. Dollar denominated daily liquid mutual funds. (Source: PAM). High-quality growth and “special situation” stocks had a weight of 88% and 9%, respectively. PAM categorizes quality growth stocks into three investment themes: i) 77%, high profitability, ii) 14%, investment yield and iii) 9%, energy-related stocks. (See Exhibit 8). (Source: PAM).

 

Exhibit 8: Investment Themes (%)

As of July 31, 2018

 

 

Source: PAM.

 

MXE’s De-Indexed Strategy

 

Bottom-up Approach Availing a Favorable Tax Treatment (With respect of any one issuer, represent an amount not greater in than 5% of the value of the fund’s total assets).

 

The Fund’s portfolio is constructed with approximately 28 issuers. At July 31, 2018, small caps stocks (US$ 0.5bn to US$ 1bn) accounted for about 9%, medium capitalization stocks (US$ 1bn to US$ 5bn) for 22% and large caps (US$ 5bn - up) for 66%. (Source: PAM; Bloomberg).

 

The top ten stocks comprised 61% of total assets as of July 31, 2018. (Source PAM).

 

 

Exhibit 9: Sectors Overweight / Underweight vs. the MSCI Mexico Index in basis points as of July 31, 2018

 

Decision-making process tactically taking advantage of the market’s misconceptions albeit a lower turnover. Overseen by the Investment Committee and Investment Process. Fundamental in-depth Analysis.

 

 

Source: PAM, Bloomberg.

 

Exhibit 10: MXE’s Absolute Contribution by Sectors.

One Year to July 31, 2018.

 

 

Source: PAM, Bloomberg.

 

Exhibit 11: MXE’s Attribution by Sectors Relative to the MSCI Mexico Index.

One Year to July 31, 2018.

 

 

Source: PAM, Bloomberg.

 

FINAL REMARKS

 

According to BANXICO, the balance of risks to the economic growth of Mexico is biased to the downside, likely due to i) the escalation of protectionist measures affects global growth and trade negatively, ii) observed bouts of volatility in international financial markets, and iii) the environment of uncertainty has been changing investment.

 

We are cautiously optimistic about Mexico’s economy and sound fundamentals in the long-term; justifying the excellent performance of the Mexican Peso in the forex market with 4.65% appreciation against the U.S. Dollar, year-to-date through September 27, 2018, according to Bloomberg.

 

Some of the so-called emerging markets that were “rising stars” in the 2000 decade are now “falling in flames” due to different causes such as:

 

 

 

 

In remarkable contrast, Mexico’s change of political regime is being conducted in an orderly, coordinated, and transparent manner with the goal of avoiding any disruption in the economy.  This political behavior would be the third change of political regime in the last 18 years without any economic or political crisis. So far Mexico seems to be more than a stable economy, but also a mature democracy.

 

Yours sincerely,

 

Eugenia Pichardo

Portfolio Manager

 

 

The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be obtained by calling U.S. Bancorp Fund Services, LLC, (414) 765-4255 or visiting www.themexicoequityandincomefund.com. Read it carefully before investing.

 

All investments involve risk. Principal loss is possible. Investing internationally involves additional risks such as currency fluctuations, currency devaluations, price volatility, social and economic instability, differing securities regulations and accounting standards, limited publicly available information, changes in taxation, periods of illiquidity and other factors. These risks are greater in the emerging markets. Stocks of small-and-mid-capitalization companies involve greater volatility and less liquidity than larger-capitalization companies.

 

Investing in Foreign Securities

 

Investment in Mexican securities involves special considerations and risks that are not normally associated with investments in U.S. securities, including (1) relatively higher price volatility, lower liquidity and the small market capitalization of Mexican securities markets; (2) currency fluctuations and the cost of converting Mexican pesos into U.S. dollars; (3) restrictions on foreign investment; (4) political, economic and social risks and uncertainties (5) higher rates of inflation and interest rates than in the United States.

 

Diversification does not assure a profit or protect against a loss in a declining market.

 

The Portfolio Securities are denominated in pesos. As a result, the Portfolio Securities must increase in market value at a rate in excess of the rate of any decline in the value of the peso against the U.S. dollar in order to avoid a decline in their equivalent U.S. dollar value.

 

 

The Fund’s holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please refer to the Schedule of Investments in this report for a complete list of fund holdings. Current and future portfolio holdings are subject to risk.

 

The Fund may have a higher turnover rate, which could result in higher transaction costs and higher tax liability, which may affect returns.

 

Earnings growth is not a measure of the Fund’s future performance.

 

Definitions

 

 

 

 

The information provided herein represents the opinion of Pichardo Asset Management not the Fund’s Board of Directors’ and is not intended to be a forecast of future events, a guarantee of future results, or investment advice.

 

---

RELEVANT ECONOMIC INFORMATION for the years ended December 31

 

 

Sources: Banamex, Banco de Mexico, Bloomberg, INEGI

 

 

(Calculated as a percentage of Total Investments)

 

 

 

 

 

 

 

 

 

Schedule of Investments

The accompanying notes are an integral part of these financial statements.

Schedule of Investments (continued)

The accompanying notes are an integral part of these financial statements.

Schedule of Investments (concluded)

Percentages are stated as a percent of net assets.

The accompanying notes are an integral part of these financial statements.

Statement of Assets & Liabilities

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

Statements of Changes in Net Assets

The accompanying notes are an integral part of these financial statements.

Financial Highlights

For a Common Share Outstanding Throughout Each Year

The accompanying notes are an integral part of these financial statements.

Notes to Financial Statements

NOTE A:  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Mexico Equity and Income Fund, Inc. (the “Fund”) was incorporated in Maryland on May 24, 1990, and commenced operations on August 21, 1990. The Fund is registered under the Investment Company Act of 1940, as amended, as a closed-end, non-diversified management investment company.

 

The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies”.

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

 

Significant accounting policies are as follows:

 

Portfolio Valuation. Investments are stated at value in the accompanying financial statements. Listed equity securities are valued at the closing price on the exchange or market on which the security is primarily traded (the “Primary Market”) at the valuation time. If the security did not trade on the Primary Market, it shall be valued at the closing price on another comparable exchange where it trades at the valuation time.  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. 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.

 

Investment Transactions and Investment Income. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income, including the accretion of discount and amortization of premium on investments, is recorded on an accrual basis; dividend income is recorded on the ex-dividend date or, using reasonable diligence, when known to the Fund. The collectibility of income receivable from foreign securities is evaluated periodically, and any resulting allowances for uncollectible amounts are reflected currently in the determination of investment income. There was no allowance for uncollectible amounts at July 31, 2018.

 

 

 

Notes to Financial Statements (continued)

 

Tax Status. No provision is made for U.S. Federal income or excise taxes as it is the Fund’s intention to continue to qualify as a regulated investment company and to make the requisite distributions to its shareholders that will be sufficient to relieve it from all or substantially all U.S. Federal income and excise taxes.

 

The Fund is subject to the following withholding taxes on income from Mexican sources:

 

 

Summary of Fair Value Exposure at July 31, 2018. 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:

 

 

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 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

 

 

 

Notes to Financial Statements (continued)

 

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 to the fair value measurement in its entirety.

 

The inputs or methodology used for valuing securities are not necessarily 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 July 31, 2018:

 

 

 

Notes to Financial Statements (continued)

 

Transfers between Level 2 and Level 3 securities as of July 31, 2018 resulted from securities priced previously at the mean between the most recent bid and asked prices (Level 2 securities) to a price provided by the Adviser (Level 3 securities). Transfers as of July 31, 2018 are summarized in the table below:

 

Level 3 Reconciliation Disclosure

The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:

 

 

 

Notes to Financial Statements (continued)

 

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 July 31, 2018:

 

 

 

Disclosures about Derivative Instruments and Hedging Activities

The Fund did not invest in derivative securities or engage in hedging activities during the period ended July 31, 2018.

 

Federal Income Taxes. The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all or substantially all federal income taxes. Therefore, no federal income tax provision is required. Accounting principles generally accepted in the United States of America require that permanent differences between financial reporting and tax reporting be reclassified between various components of net assets.

 

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more-likely-than-not” to be sustained assuming examination by tax authorities. The Adviser has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2015-2017), or expected to be taken in the Fund’s 2018 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal, New York State and foreign jurisdictions where the Fund makes significant investments; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

 

 

 

Notes to Financial Statements (continued)

 

Reclassification of Capital Accounts. Accounting Principles generally accepted in the United States of America require certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. The permanent differences are primarily attributed to foreign currency loss reclassifications. For the year ended July 31, 2018, the following reclassifications were made for permanent tax differences on the Statement of Assets and Liabilities.

 

 

Foreign Currency Translation. The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis:

 

 

The Fund reports realized foreign exchange gains and losses on all other foreign currency related transactions as components of realized gains and losses for financial reporting purposes, whereas such gains and losses are treated as ordinary income or loss for Federal income tax purposes.

 

Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in the foreign exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the level of governmental supervision and regulation of foreign securities markets and the possibilities of political or economic instability.

 

Distribution of Income and Gains. The Fund intends to distribute to shareholders, at least annually, substantially all of its net investment income, including foreign currency gains. The Fund also intends to distribute annually any net realized capital gains in excess of net realized capital losses (including any capital loss carryovers), except in circumstances where the Directors of the Fund determine that the decrease in the size of the Fund’s assets resulting from the distribution of the gains would generally not be in the interest of the Fund’s shareholders. An additional distribution may be made to the extent necessary to avoid payment of a 4% U.S. Federal excise tax.

 

 

Notes to Financial Statements (continued)

 

Distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized gains are determined in accordance with U.S. Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their Federal tax-basis treatment; temporary differences do not require reclassification. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as distributions from additional paid-in capital.

 

Distributions to Shareholders. The tax character of distributions paid to shareholders during the periods ended July 31, 2018 and July 31, 2017 were as follows:

 

 

As of July 31, 2018, the components of distributable earnings on a tax basis were as follows:

 

 

 

At July 31, 2018, the Fund had tax basis capital losses which may be carried forward to offset future short term and long term capital gains indefinitely in the amount of $2,483,780 and $3,975,708, respectively.  To the extent that the Fund may realize future net capital gains, those gains will be offset by any of the unused capital loss carryforward.

 

 

 

Notes to Financial Statements (continued)

 

NOTE B:  MANAGEMENT, INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES

 

Pichardo Asset Management, S.A. de C.V. serves as the Fund’s Investment Adviser (the “Investment Adviser”) under the terms of the Investment Advisory Agreement (the “Advisory Agreement”) effective July 1, 2003. Pursuant to the Advisory Agreement, the Investment Adviser makes investment decisions for the Fund and supervises the acquisition and disposition of securities by the Fund. For its services, the Investment Adviser is paid a base fee, accrued daily at the annual rate of 1.00%, subject to a performance fee adjustment which increases or decreases the fee depending upon how well the Fund has performed relative to the MSCI Mexico Index (the “Index”) 12 month rolling average. The fee adjustment will be calculated using a monthly adjustment rate that is based upon the Fund’s relative performance to the Index. The performance adjustment rate will be positive (resulting in an upward fee adjustment) for each percentage point, or portion thereof, that the investment performance of the Fund exceeds the investment performance of the Index for the performance period multiplied by three (3) and will be negative (resulting in a downward fee adjustment) for each percentage point, or portion thereof, that the investment performance of the Index exceeds the investment performance of the Fund for the performance period multiplied by three (3).  Determinations of the performance adjustment rate (positive or negative) will be made in increments of 0.01% of differential performance.  As an example, if the Fund’s performance for the preceding 12 months exceeds the performance of the Index by 1.00%, the performance adjustment rate would be 3 x 0.01, which would result in a monthly fee equal to an annual rate of 1.03%. The performance adjustment rate will be limited to a 0.15% fee adjustment, positive or negative.

 

For the year ended July 31, 2018, the Fund’s monthly investment performance ranged from 2.7% to (6.2)% above/(below) the monthly investment performance of the Index.  Accordingly, for the year ended July 31, 2018 the net investment advisor fee consisted of the base fee of $902,234 and a net downward performance fee adjustment of $(32,464).

 

Effective January 1, 2015, the Fund pays each of its directors who is not a director, officer or employee of the Investment Adviser, the Administrator or any affiliate thereof an annual fee of $35,000, paid pro rata, quarterly plus a fee of $500 for each meeting held telephonically. As additional annual compensation, the Chairman of the Fund will receive $5,000, the Audit Committee Chairman and Valuation Committee Chairman will receive $3,000, and the Nomination Committee Chairman will receive $2,000. For serving the Fund as Chief Compliance Officer, in addition to the aforementioned Directors’ fees, Mr. Hellerman receives annual compensation in the amount of $45,000. In addition, the Fund reimburses the directors and Chief Compliance Officer (“CCO”) for travel and out-of-pocket expenses incurred in connection with Board of Directors’ meetings and CCO due diligence requirements.

 

U.S. Bancorp Fund Services, LLC (“USBFS”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Fund’s Administrator and, in that capacity, performs various administrative services for the Fund. USBFS also serves as the Fund’s Fund Accountant (the “Fund Accountant”) and Transfer Agent.

 

 

Notes to Financial Statements (continued)

 

U.S. Bank, N.A. serves as the Fund’s custodian (the “Custodian”). The Custodian is an affiliate of the Administrator. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the directors; monitors the activities of the Fund’s Custodian and Fund Accountant; coordinates the preparation and payment of the Fund’s expenses and reviews the Fund’s expense accruals.

 

NOTE C:  PORTFOLIO ACTIVITY

 

Purchases and sales of securities other than short-term obligations, aggregated $166,407,836 and $170,823,722 respectively, for the year ended July 31, 2018.

 

At July 31, 2018 approximately 99.8% of the Fund’s net assets were invested in Mexican securities. The Mexican securities markets are substantially smaller, less liquid, and more volatile than the major securities markets in the United States. Consequently, acquisitions and dispositions of securities by the Fund may be limited.

 

NOTE D:  CAPITAL STOCK

 

During the year ended July 31, 2018, the Fund purchased 48,714 shares of capital stock in the open market at a cost of $522,027. The weighted average discount of these purchases comparing the average purchase price to net asset value at the close of the New York Stock Exchange was 14.01%.

 

The Fund announced on January 19, 2018 that it was offering to purchase up to 5% of common shares outstanding of the Fund at 95% of the net asset value (“NAV”) per common share on February 23, 2018.  At the expiration of the offer on February 23, 2018, a total of 1,961,143 shares or approximately 26.71% of the Fund’s outstanding common shares were validly tendered.  As the total number of shares tendered exceeded the number of shares the Fund offered to purchase pursuant to the Offer, on a pro-rated basis, approximately 18.72% of the Fund’s shares tendered by each tendering shareholder were accepted for payment. There were 367,174 shares accepted for payment at a price of $12.15 per share (95% of the NAV per common share of $12.79) or $4,461,164.

 

During the year ended July 31, 2017, the Fund purchased 82,941 shares of capital stock in the open market at a cost of $882,728.  The weighted average discount of these purchases comparing the average purchase price to net asset value at the close of the New York Stock Exchange was 13.74%.

 

During the year ended July 31, 2016, the Fund purchased 109,636 shares of capital stock in the open market at a cost of $1,207,197.  The weighted average discount of these purchases comparing the average purchase price to net asset value at the close of the New York Stock Exchange was 13.68%.

 

On December 8, 2015, the Board of Directors declared a stock dividend of $0.56 per share. This dividend was paid in shares of common stock of the Fund, or in cash by specific election of the

 

 

 

Notes to Financial Statements (concluded)

 

stockholders. The Fund issued 113,378 shares of common stock to stockholders that did not elect the cash option, which amounted to $1,089,584.

 

On December 17, 2015 at the Annual Meeting of Stockholders of the Fund, the preferred stockholders, voting as a separate class, and the common and preferred stockholders, voting together as a single class, each approved an amendment to the Fund’s Articles Supplementary authorizing the elimination of the preferred stock.  Consequently, the Fund redeemed all 48,535 preferred shares outstanding at 98% of the Fund’s net asset value per common share as of the close of business on Friday, January 8, 2016. Since such net asset value was $11.50, the Fund paid each preferred stockholder $11.27 per share on or about February 10, 2016. The total amount of the redemption payment was $546,989.  The net asset value per share of the Fund’s stockholders was increased by approximately $0.001 per share as a result of this redemption.

 

Share Repurchase

 

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock in the open market.

 

NOTE E: SUBSEQUENT EVENTS

 

The Fund announced on September 17, 2018 that its Board of Directors has approved in principle a tender offer to repurchase up to 25% to 30% of its outstanding shares for cash at 99% of net asset value subject to (1) any required regulatory approvals, and (2) on each proposal presented at the 2018 Annual Meeting of Stockholders, a majority of the shares being voted in accordance with the recommendation of the Board of Directors. (At this time, the only matter known to the Board of Directors to be considered at the Annual Meeting is the election of directors.) If these conditions are met, the tender offer is expected to commence shortly after the 2018 Annual Meeting. In addition, if a majority of the shares on each proposal presented at the 2018 Annual Meeting of Stockholders are voted in accordance with the recommendation of the Board of Directors, the Board intends to pursue a course of action designed to afford stockholders an opportunity to realize a price for their shares at or close to net asset value by the end of 2019. Such course of action may include converting the Fund to an open-end mutual fund.

 

Report Of Independent Registered Public

Accounting Firm

To the Shareholders and Board of Directors

of The Mexico Equity and Income Fund, Inc.,

 

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of The Mexico Equity and Income Fund, Inc., (the “Fund”), including the schedule of investments, as of July 31, 2018, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of July 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Fund’s auditor since 2002.

 

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of July 31, 2018 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

 

 

Philadelphia, Pennsylvania

September 24, 2018

 

BOARD CONSIDERATION OF THE CONTINUATION OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited)

 

At its in-person meeting held on March 23, 2018, the Board of Directors (the “Board”) of The Mexico Equity and Income Fund, Inc. (the “Fund”), met to consider the renewal of the Investment Advisory Agreement (the “Advisory Agreement”) between the Fund and Pichardo Asset Management S.A. de C.V. (the “Adviser”). The Independent Directors (as defined below) and Mr. Gerald Hellerman also met to review materials related to the renewal of the Advisory Agreement during a telephonic board meeting held on March 21, 2018 (the “March 21, 2018 Meeting”). At the March 21, 2018 Meeting, the Board received and discussed a memorandum from the Fund’s independent legal counsel regarding the duties and responsibilities of the Board and the Independent Directors under the Investment Company Act of 1940, as amended (the “1940 Act”), in reviewing advisory contracts. Based on their evaluation of the information provided, the Directors, by a unanimous vote (including a separate vote of the Directors who are not “interested persons”, as that term is defined in the 1940 Act, as amended (the “Independent Directors”)), approved the continuation of the Advisory Agreement for an additional one-year term.The information, material facts and conclusions that formed the basis for the Board’s approval are described below.

 

INFORMATION REVIEWED

 

During the course of the year, Board members review a wide variety of materials relating to the nature, extent and quality of the services provided to the Fund by the Adviser, including reports on the Fund’s investment results, portfolio composition, investment strategy, economic outlook, valuation, and other matters. In addition, in connection with its annual review of the Agreement, independent counsel on behalf of the Board requested and the Board reviewed information that included materials regarding the Fund’s investment results, advisory fee and expense comparisons, financial and profitability information regarding the Adviser, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the Fund. In connection with its review, the Board received assistance and advice in the form of a written memorandum regarding legal and industry standards with respect to the renewal of an investment advisory agreement from counsel to the Fund. The Independent Directors discussed the approval of the Agreement with representatives of the Adviser and during the March 23, 2018 with counsel at which no representatives of the Adviser were present. In deciding to recommend approval of the Agreement, the Board and the Independent Directors did not identify any single or particular piece of information that, in isolation, was the controlling factor. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.

 

1.  NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED TO THE FUND

 

The Directors considered the nature, extent and quality of services provided by the Adviser to the Fund and the amount of time devoted to the Fund’s affairs by the Adviser’s staff.  The Directors considered the Adviser’s specific responsibilities in all aspects of daily management of the Fund, as well as the qualifications, experience and responsibilities of Ms. Maria Eugenia Pichardo, the Fund’s portfolio manager, and other key personnel at

 

 

 

 

the Adviser involved in the day-to-day activities of the Fund.  The Board also considered the operational strength of the Adviser.  The Directors discussed in detail the Adviser’s performance and compliance oversight, including the reports of the Fund’s chief compliance officer to the Directors on the effectiveness of the Adviser’s compliance program.  The Directors noted that the Adviser exhibited a high level of diligence and attention to detail in carrying out its responsibilities under the Agreement and that the nature, overall quality, and extent of the management services were satisfactory and the Adviser continued to be reliable.

 

The Independent Directors reviewed the personnel responsible for providing services to the Fund and concluded, based on their experience and interaction with the Adviser, that (a) the Adviser was able to retain quality personnel, (b) the Adviser exhibited a high level of diligence and attention to detail in carrying out its responsibilities under the Investment Advisory Agreement, (c) the Adviser was sufficiently responsive to the requests of the Independent Directors, and (d) the Adviser had consistently kept the Independent Directors apprised of developments related to the Fund and the Mexican economy in general.

 

2.  INVESTMENT PERFORMANCE OF THE FUND

 

The Independent Directors discussed the performance of the Fund for the one-year, three-year, five-year and ten year periods ended January 31, 2018. In assessing the quality of the portfolio management services delivered by the Adviser, the Independent Directors also compared the short-term and long-term performance of the Fund on both an absolute basis and in comparison to a peer group of closed end international funds constructed by data provided by Morningstar, Inc. (the “Morningstar Peer Group”). The Independent Directors noted that the Fund produced positive returns for the one-year, three-year, five-year and ten-year periods ended January 31, 2018.  The Independent Directors noted that the one year return for the Fund ranked twentieth amongst its peer group while the Fund ranked twenty second, sixteenth and fifteenth for the three-year, five-year and ten year periods, respectively.  The Independent Directors further noted that the Fund’s performance was below the Morningstar Peer Group median for the one-year, three-year, five-year and ten-year periods ended January 31, 2018, though still satisfactory. The Independent Directors noted that the Board had reviewed the investment performance of the Fund at each quarterly Meeting over the course of the year. The Independent Directors concluded that the Fund’s performance was satisfactory under current market conditions. Although past performance is not a guarantee or indication of future results, the Independent Directors determined that the Fund and its shareholders were likely to benefit from the Adviser’s continued management.

 

3.  COSTS OF SERVICES PROVIDED AND PROFITS REALIZED BY THE ADVISER

 

The Directors considered the cost of services and the structure of the Adviser’s fees, including a review of the expense analyses and other pertinent material with respect to the Fund. In addition, the Independent Directors reviewed information comparing the Fund’s contractual advisory fees with the Morningstar Peer Group. The Independent Directors noted that the Fund’s contractual investment advisory fee of 1.00% was higher than the 0.96% Morningstar Peer Group average and that the current year’s contractual investment advisory fee adjusted for the downward performance adjustment under the fulcrum fee was seven basis

 

 

 

 

points lower than the Morningstar Peer Group average.  The Independent Directors further noted that the then current expense ratio of 1.71% for the Fund was higher than the Morningstar Peer Group average of 1.43%. The Independent Directors noted that the higher expense ratio was in part due to the Fund’s asset size being smaller than the average asset size of the Morningstar Peer Group. The Independent Directors further noted that the expense ratio had since decreased to 1.64%, largely due to a decrease in advisory fees paid resulting from the negative fulcrum fee adjustments. The Independent Directors concluded that the Fund’s expenses and advisory fees paid to the Adviser were fair and not unreasonable in light of the comparative performance, expense and advisory fee information.  The Directors also considered the overall profitability of the Adviser, after reviewing the Adviser’s financial information.  The Directors examined the level of profits that could be expected to accrue to the Adviser from the fees payable under the Agreement, as well as the Fund’s brokerage arrangements, noting that the Adviser makes no effort to seek soft dollar arrangements.  These considerations were based on materials requested by the Directors and the Fund’s administrator specifically for the March 23, 2018 meeting at which the Agreement was formally considered, as well as the presentations made by the Adviser over the course of the year.

 

The Directors concluded that the Fund’s expenses and the management fees paid to the Adviser were fair and reasonable in light of the comparative performance, expense and management fee information.  The Directors further concluded that the Adviser’s profit from advising the Fund had not been, and currently was not, excessive and that the Adviser had maintained adequate profit levels to support its services to the Fund from the revenues of its overall investment advisory business.

 

4.  EXTENT OF ECONOMIES OF SCALE AS THE FUND GROWS

 

The Directors considered the extent to which economies of scale were or should be reflected in the Fund’s advisory fee, and concluded that in view of the Fund’s investment results, the Fund’s reasonable level of total expenses and overall size of the net assets in the Fund that the investment advisory fees were reasonable and that there were no economies of scale available at this time that should be passed along to the Fund.

 

5.  BENEFITS DERIVED FROM THE RELATIONSHIP WITH THE FUND

 

The Directors considered the direct and indirect benefits that could be realized by the Adviser from its association with the Fund.  The Directors examined the brokerage and commissions of the Adviser with respect to the Fund, noting that the Adviser receives no soft dollar benefits from its relationship with the Fund and has no affiliated entities that provide services to the Fund.  The Directors concluded that any such benefits were difficult to quantify and likely not significant.

 

CONCLUSIONS

 

Based on their review, including consideration of each of the factors referred to above, the Board and the Independent Directors concluded that the terms of the Agreement are fair and reasonable to the Fund and its stockholders, that the Fund’s stockholders receive reasonable value in return for the advisory fees paid to the Adviser by the Fund and that renewal of the Agreement was in the best interests of the Fund and its stockholders.

 

 

 

NOTE 1:  INFORMATION ABOUT PROXY VOTING

 

Information regarding how the Fund votes proxies relating to portfolio securities is available without charge upon request by calling toll-free at 1-877-785-0376 and the SEC’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve month period ended June 30 is available on the SEC’s website at www.sec.gov or by calling the toll-free number listed above.

 

NOTE 2:  AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The filing will be available, upon request, by calling 1-877-785-0376. Furthermore, you will be able to obtain a copy of the filing on the SEC’s website at http://www.sec.gov beginning with the filing for the period ended October 31, 2004. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

NOTE 3:  INFORMATION ABOUT CERTIFICATIONS

 

In December 2017, the Fund submitted a CEO annual certification to the NYSE in which the Fund’s principal executive officer certified that she was not aware, as of the date of the certification, of any violation by the Fund of the NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s principal executive and principal financial officers have made quarterly certifications, included in the filing with the SEC on Forms N-CSR and N-Q, relating to, among other things, the Fund’s disclosure controls and procedures and internal control over financial reporting.

 

NOTE 4:  INFORMATION ON FORWARD LOOKING STATEMENTS

 

Except for historical information contained in this report for the Fund, the matters discussed in this report may constitute forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These include any adviser or portfolio manager predictions, assessments, analyses or outlooks for individual securities, industries, market sectors and/or markets. These statements involve risks and uncertainties. In addition to the general risks described for the Fund in the most recent Prospectus, other factors bearing on this report include the accuracy of the adviser’s or portfolio manager’s data, forecasts and predictions, and the appropriateness of the investment programs designed by the adviser or portfolio manager to implement their strategies efficiently and effectively. Any one or more of these factors, as well as other risks affecting the securities markets and investment instruments generally, could cause the actual results of the Fund to differ materially as compared to benchmarks associated with the Fund.

 

 

 

ADDITIONAL INFORMATION APPLICABLE TO FOREIGN SHAREHOLDERS ONLY

 

The percent of ordinary income distributions designated as interest related dividends for the fiscal year ended July 31, 2018 was 0.00%. (unaudited)

 

The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C) was 0.00%. (unaudited)

 

The Fund designates 0.25% of dividends declared for the fiscal year July 31, 2018 from net investment income as qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003. (unaudited)

 

DIVIDEND REINVESTMENT PLAN

 

The Fund intends to distribute to shareholders substantially all of its net investment company taxable income at least annually. Investment company taxable income, as defined in section 852 of the Internal Revenue Service Code of 1986, includes all of the Fund’s taxable income minus the excess, if any, of its net realized long-term capital gains over its net realized short-term capital losses (including any capital loss carryovers), plus or minus certain other required adjustments. The Fund also expects to distribute annually substantially all of its net realized long-term capital gains in excess of net realized short-term capital losses (including any capital loss carryovers), except in circumstances where the Fund realizes very large capital gains and where the Directors of the Fund determine that the decrease in the size of the Fund’s assets resulting from the distribution of the gains would not be in the interest of the Fund’s shareholders generally.

 

Pursuant to the Fund’s Dividend Reinvestment Plan (the “Plan”), each shareholder will be deemed to have elected, unless the Plan Agent (as defined below) is otherwise instructed by the shareholder in writing, to have all distributions, net of any applicable U.S. withholding tax, automatically reinvested in additional shares of the Fund by U.S. Bancorp Fund Services, LLC, the Fund’s transfer agent, as the Plan Agent (the “Plan Agent”). Shareholders who do not participate in the Plan will receive all dividends and distributions in cash, net of any applicable U.S. withholding tax, paid in U.S. dollars by check mailed directly to the shareholder by the Plan Agent, as dividend-paying agent. Shareholders who do not wish to have dividends and distributions automatically reinvested should notify the Plan Agent for The Mexico Equity and Income Fund, Inc., c/o U.S. Bancorp Fund Services, ATTN: Ms. Casey Sauer, 615 East Michigan Street, Milwaukee, WI 53202. Dividends and distributions with respect to shares of the Fund’s Common Stock registered in the name of a broker-dealer or other nominee (i.e., in “street name”) will be reinvested under the Plan unless the service is not provided by the broker or nominee or the shareholder elects to receive dividends and distributions in cash. A shareholder whose shares are held by a broker or nominee that does not provide a dividend reinvestment program may be required to have his shares registered in his own name to participate in the Plan. Investors who own shares of the Fund’s Common Stock registered in street name should contact the broker or nominee for details.

 

The Plan Agent serves as agent for the shareholders in administering the Plan. If the Directors of the Fund declare an income dividend or a capital gains distribution payable in the Fund’s Common Stock, or in cash, as shareholders may have elected, nonparticipants in the Plan will receive cash and participants in the Plan will receive Common Stock to be issued by the Fund. If the market price per share on the valuation date equals or exceeds net asset value per share on that date, the Fund will issue new shares to participants at net asset value; or, if the net asset value is less than 95% of the market price on the valuation date, then such shares will be issued at 95% of the market price.

 

If net asset value per share on the valuation date exceeds the market price per share on that date, participants in the Plan will receive shares of Common Stock from the Fund valued at market price. The

 

 

 

 

valuation date is the dividend or distribution payment date or, if that date is not a New York Stock Exchange trading day, the next preceding trading day. If the Fund should declare an income dividend or capital gains distribution payable only in cash, the Plan Agent will, as agent for the participants, buy Fund shares in the open market on the New York Stock Exchange or elsewhere, for the participants’ accounts on, or shortly after, the payment date.

 

The Plan Agent maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in an account, including information needed by shareholders for personal and tax records. Shares in the account of each Plan participant will be held by the Plan Agent in noncertified form in the name of the participant, and each shareholder’s proxy will include those shares purchased pursuant to the Plan.

 

In the case of shareholders such as banks, brokers or nominees that hold shares for others who are beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the shareholders as representing the total amount registered in the shareholder’s name and held for the account of beneficial owners who participate in the Plan.

 

There is no charge to participants for reinvesting dividends or capital gains distributions payable in either Common Stock or cash. The Plan Agent’s fees for the handling or reinvestment of such dividends and capital gains distributions will be paid by the Fund. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or capital gains distributions payable either in stock or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of dividends or capital gains distributions payable in cash.

 

Brokerage charges for purchasing small amounts of Common Stock for individual accounts through the Plan are expected to be less than usual brokerage charges for such transactions because the Plan Agent will be purchasing stock for all participants in blocks and prorating the lower commissions thus attainable. Brokerage commissions will vary based on, among other things, the broker selected to effect a particular purchase and the number of participants on whose behalf such purchase is being made.

 

The receipt of dividends and distributions in Common Stock under the Plan will not relieve participants of any income tax (including withholding tax) that may be payable on such dividends or distributions.

 

Experience under the Plan may indicate that changes in the Plan are desirable. Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan as applied to any dividend or distribution paid subsequent to notice of the termination sent to participants at least 30 days before the record date for such dividend or distribution. The Plan also may be amended by the Fund or the Plan Agent, but (except when necessary or appropriate to comply with applicable law, or rules or policies of a regulatory authority) only upon at least 30 days’ written notice to participants. All correspondence concerning the Plan should be directed to the Plan Agent at the address above.

 

The Fund’s Annual Stockholders meeting was held on December 14, 2017, at the offices of U.S. Bancorp Fund Services LLC, 777 E. Wisconsin Avenue, Milwaukee, WI 53202. As of October 12, 2017, the record date, outstanding shares of common stock were 7,349,716. Holders of 6,649,174 common shares of the Fund were present at the meeting either in person or by proxy. These holders, as being holders of a majority of the outstanding shares of the Fund, constituted a quorum. The stockholders voted on one proposal. The stockholders elected one Director to the Board of Directors.  The following table provides information concerning the matter voted on at the meeting:

 

 

 

 

 

 

Board of Directors. The management and affairs of the Fund are supervised by the Board of Directors. The Board consists of five individuals, whom are not “interested persons” of the Fund as the term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”). The Directors are fiduciaries for the Fund’s shareholders and are governed by the laws of the State of Maryland in this regard. The Board establishes policies for the operation of the Fund and appoints the officers who conduct the daily business of the Fund. The Directors and Interested Officers of the Fund are listed below with their addresses, present position(s) with the Fund, length of time served, principal occupations over at least the last five years, and any other Directorships held. Please note that the Fund is not part of a fund complex.

 

Additional information about the Directors and Officers of the Fund is included in the Fund’s most recent Proxy Statement.

 

 

 

 

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THE MEXICO EQUITY

AND INCOME FUND, INC.

Investment Adviser:

Pichardo Asset Management, S.A. de C.V.

Andres Bello No. 45 – 22 Floor

Col. Chapultepec Polanco

Del. Miguel Hidalgo

Mexico, CDMX (D.F.), C.P. 11560

 

Independent Registered Public

Accounting Firm:

Tait, Weller & Baker LLP

1818 Market Street, Suite 2400

Philadelphia, PA 19103

 

Transfer Agent and Registrar,

Fund Administrator

and Fund Accountant:

U.S. Bancorp Fund Services, LLC

615 East Michigan Street

Milwaukee, WI 53202

 

Custodian:

U.S. Bank, N.A.

Custody Operations

1555 Rivercenter Drive, Suite 302

Milwaukee, WI 53212

 

Board of Directors:

Richard Abraham

Rajeev Das

Phillip Goldstein

Glenn Goodstein

Gerald Hellerman

	FYE  7/31/2018	FYE  7/31/2017
Audit Fees	$30,900	$30,900
Audit-Related Fees	$0	$0
Tax Fees	$3,300	$3,300
All Other Fees	$0	$0

	FYE  7/31/2018	FYE  7/31/2017
Audit-Related Fees	0%	0%
Tax Fees	0%	0%
All Other Fees	0%	0%

Non-Audit Related Fees	FYE  7/31/2018	FYE  7/31/2017
Registrant	$0	$0
Registrant’s Investment Adviser	$0	$0

Portfolio Manager Name	Registered Investment Company (dollar amount and number of accounts)	Other Pooled Investments (dollar amount and number of accounts)	Other Accounts (dollar amount and number of accounts)
Ms. Maria Eugenia Pichardo	$92,343,559 (1)	$13,531,148 (2)	$40,000,000(1)

Portfolio Manager Name	Dollar Range of Equity Securities in the Fund (None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, $100,001 - $500,000, $500,001 to $1,000,000, Over $1,000,000)	Aggregate Dollar Range of Securities in all Registered Investment Companies Overseen by Portfolio Manager in Family of Investment Companies
Ms. Maria Eugenia Pichardo	None	None

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
2/1/18 to 2/28/18	367,174(1)	$12.15	367,174	0
3/1/18 to 3/31/18	0	$0.00	0	0
4/1/18 to 4/30/18	0	$0.00	0	0
5/1/18 to 5/31/18	0	$0.00	0	0
6/1/18 to 6/30/18	12,859(2)	$10.22	0	0
7/1/18 to 7/31/18	29,555(2)	$11.03	0	0
Total	409,588	$11.83	0	0