Mexico Equity & Income Fund : Semi Annual Report 2023

The Mexico equiTy and incoMe Fund, inc.

Semi-annual Report

January 31, 2023

El Palacio de Bellas Artes Mexico city, Mexico. canVa. 2021

The Mexico equiTy and incoMe Fund, inc.

Semi-annual Report

Table of conten ts

• 1 Letter to Stockholders

• 11 Relevant Economic Information

• 13 Allocation of Portfolio Assets

• 14 Schedule of Investments

• 18 Statement of Assets & Liabilities

• 19 Statement of Operations

• 20 Statements of Changes in Net Assets

• 21 Financial Highlights

• 22 Notes to Financial Statements

• 48 Additional Information

• 50 Dividends and Distributions

• 52 Results of Annual Stockholders Meeting

• 53 Privacy Policy

• 55 Management of the Fund

The Mexico Equity and Income Fund, Inc. Report of Pichardo Asset Management ("PAM"), the Investment Adviser.

Dear Fund Stockholders,

Introduction

In 2022, characterized by global lower economic growth, and restrictive financial conditions, Mexico's Gross Domestic Product ("GDP") grew by 3.1% year-over-year, seasonally adjusted, in real terms. (Source: National Institute of Geography & Statistics, ("INEGI"). A high minimum wage policy, resulting in a four-year 16% annual average real wages increase broad-based, was one of the main drivers of the higher economic activity in 2022 compared to 2021. In addition, Consumption remained remarkably strong, while remittances and tourism delivered substantial numbers in 2022. Remittances grew yearly at 13.4%, reaching US$ 58.5 billion, and tourism reached US$ 28.0 billion, year-over-year, an increase of 41.7%.

Challenges to the 2023 economic activity refer to the expected continued complex global economic environment and higher uncertainty leading to a low dynamism of domestic economic activity over the next quarters.

Central Bank ("BANXICO") estimated core inflation at 4.9% by the end of December 31, 2023, and it continues assessing that core inflation will converge to its 3% +-1% target by the fourth quarter of 2024. At writing, core inflation stands at 7.62%. Challenges to core price inflation are:

On the upside: i) persistence of core inflation at high levels, ii) pressures on energy prices or agricultural and livestock product prices, iii) the Chinese economy's reopening, iv) exchange rate depreciation. (Local currency shows an 8.11% appreciation to the USD for the Fund's Semi-Annual period, which ended January 31, 2023, according to a Bloomberg source), and v) more significant cost-related pressures.

On the downside: i) a greater-than-anticipated slowdown of the world economy, ii) a decline in the intensity of the geopolitical conflict, iii) a better functioning of supply chains. iv) a lower pass-through effect from some cost-related pressures, and v) a larger-than-anticipated effect from the Federal Government's measures to fight elevated prices.

The balance of risks for the inflation trajectory within the forecast horizon remains biased to the upside, according to BANXICO. Source: BANXICO (Central Bank) Minutes as of February 24, 2023. Please see the macroeconomic update on the Fund's web page:www.mxefund.com.

Performance & Investment Strategy

The Fund's net asset value return for the six months ended January 31, 2023, was 29.17%, mainly explained by active decision-making under continued discipline and monitoring of the Fund's investment objective and policies. October 2022 and January 2023 reflected the two best months' returns, with 14.49% and 15.24% in dollar terms for the period. The market price return registered a U.S. Dollar increase of 27.41% for the six months ended January 31, 2023. (Source: U.S. Bancorp Fund Services, LLC). Please see table below.

THE MEXICO EQUITY AND INCOME FUND, INC.

Comparative Mexican Peso and U.S. Dollar Returns

Source: U.S. Bancorp Fund Services, LLC1; Bloomberg2; MSCI3.

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 the 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, [phone], or by consulting the Fund's web page:www.mxefund.com.

The Fund's shares have traded in the market above (at a premium), at, and below (at a discount) the net asset value per share (NAV) since the commencement of the Fund's operations. Generally, shares of closed-end investment companies, including those of the Fund, trade at a discount from NAV.

The return attribution analysis presents 466 basis points ("bps") of excess positive performance compared to the MSCI - Mexico Total Return Index. Evaluating PAM's investment decisions to which the Fund has adhered across the period, we found the below sector contributors and detractors from the Fund's performance at the end of its Semi-Annual period. Source PAM; Bloomberg.

THE MEXICO EQUITY AND INCOME FUND, INC.

USD Return Attribution Analysis

Source PAM; Bloomberg.

The Fund's return attribution analysis also reflects PAM's decision-making and the Fund's turnover throughout the Fund's Semi-Annual period.

The portfolio Sector allocation changes, including active management and price changes, are presented below.

Fiscal Quarterly Portfolio Sector Allocation.

Source: Bloomberg & PAM.

The below Fund's Sectors deviation refers mainly to a high benchmark concentration in Consumer Staples (34.37% weight) and Telecommunication Services (19.76% weight).

PAM's active management reflects the Fund's relative overweight in Consumer Discretionary and Real Estate, Industrials, and utilities compared to the MSCI - Mexico Total Return Index at the end of January 31, 2023. Real Estate sector weight refers mainly to Service Management Companies and Development Trust Certificates -industrial parks for manufacturing; Utilities refer to a 12% annual Mex. Pesos dividend yield -a bond proxy- with quarterly payments from the "CFE" Federal Electricity Commission.