Mexico Equity & Income Fund : Semi Annual Report 2022

The Mexico equiTy and incoMe Fund, inc.

Semi-annual Report

January 31, 2022

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

• 15 Relevant Economic Information

• 17 Allocation of Portfolio Assets

• 18 Schedule of Investments

• 22 Statement of Assets & Liabilities

• 23 Statement of Operations

• 24 Statements of Changes in Net Assets

• 25 Financial Highlights

• 26 Notes to Financial Statements

• 52 Additional Information

• 54 Dividends and Distributions

• 56 Results of Annual Stockholders Meeting

• 57 Privacy Policy

• 59 Management of the Fund

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

Dear Fund Stockholder,

Introduction

During a period of high financial volatility resulting from a shift in monetary policy in the U.S. and other developed countries, due to continued price pressures and geopolitical turmoil, the Mexican Stock Exchange Index, ("The Mexbol Index"), recorded an outstanding return of +24.07% in Mexican Pesos (+20.94% in U.S. Dollars), comparing favorably to other emerging markets for the calendar year ended December 31, 2021.

In 2021 Mexico's Gross Domestic Product ("GDP") grew 5% compared to the previous year, recovering more than half of the contraction observed in 2020 due to the Covid-19 pandemic, because of a recovery in private consumption, investments, and higher exports. Please see Exhibit 1.

The equity market performance during 2021 is mainly the reflection of its 10-year forward price-to-earnings attractive relative valuations. Mexico's economic recovery from the Covid-19 pandemic, coupled with sound public finances, fiscal discipline, and a resilient exchange rate, favored as good drivers of the Mexbol Index performance during the calendar year ended December 31, 2021. Please see Exhibit 2.

The 21.1% dilutive non-transferable rights offering, posted a decrease of -25.09% in the net asset value "NAV" return for the six months ended January 31, 2022. In turn, the opportunistic capitalization resulted in a NAV per share decrease of -1.10% for the one year ended on January 31, 2022, according to Bloomberg.

Please see Exhibit 3, 4 & 5.

The Fund's strategy presents a more defensive stock selection at the closing of its semi-annual period, which ended January 31, 2022, compared to the Fund's fiscal annual period, which ended July 31, 2021. Thus, highly liquid stocks, with fair valuations, represent approximately 38% of the Fund's net assets compared to 35% during July 31, 2021. Discounted stocks to their intrinsic value, as determined by PAM, in the medium and small market capitalization ranking, represent 51.7% of the Fund's net assets. The Fund also includes a 3.4% in cash and readily instruments at the semi-annual period, ended January 31, 2021.

Macro Environment

Mexico's GDP in 2021 grew 5% compared to the previous year, recovering more than half of what it had lost in 2020 due to the pandemic. This resulted from higher employment levels, an increase in minimum wages, above expected remittances levels, which fueled internal sales and private consumption and gave a gradual recovery of private investment and exports (manufacturing, electronic components, agricultural products, among others). See Exhibit 1, 6, 7 & 8. Please see the full macro-economic report on the Fund's web page:www.mxefund.com.

MXE's Investment Strategy

We have adhered the Fund to a bottom-up approach centered on high-quality growth stocks, targeting companies with pricing power, free cash flow, and quality management. (Source: PAM; Bloomberg). Please see Exhibits 9 & 10.

THE MEXICO EQUITY AND INCOME FUND, INC.

The largest contributors to the Fund's return during the six months ended January 31, 2022, were Communications Services (+141 bps), Financials (+54 bps), and Consumer Staples (+8 bps); while the largest detractors to the Fund's return during the six months ended January 31, 2022, were Materials (-)436 bps, Industrials (-)79, and Consumer Discretionary (-)42bps.

The largest sector allocation continues to be Materials as companies in the sector consolidate M&A activity for 20-years, a market share positioning in the North American Free Trade zone. Please see Exhibit 11. In particular, Alpeka with 500 + basis points weight in the petrochemical- commodity-related industry with a zero allocation in the MSCI -Mexico Index. Alpeka is a leader in the production of PET in the North American Region (among other petrochemical products) a polymer of the polyester family used for producing fibers, containers, and polyester fibers. PET is widely used in today's consumer goods and goods packaging and is found in everything from plastic water bottles and food containers to clothing, home furnishings, and automotive production. The annual dividend policy of the company is approximately 7.00%, and its cyclicality is likely to decrease after a compound 12-months quarterly revenue growth of 11% for the 2020 to 2021 period, at the emergence of the Covid-19 pandemic. Please see Exhibit 12.

MXE'S Performance

To elaborate on the Fund's performance aligned to its investment strategy, please have in mind that the Fund's NAV return decreased -4.88% for the six months ended January 31, 2022, and posted a 25.57% NAV return for the one-year period ended January 31, 2022, after adjusting with a 0.79% split factor related to the rights offering that occurred in October of 2021. Please see Exhibit 3 for complete Fund performance.

Final Remarks

The equity market risk primarily relates to higher inflationary pressures and the possibility of a tighter monetary policy by Banco de Mexico, Central Bank, with a reference rate of 6.00% on February 10, 2022, and projections of a 0.50% rate increase on its coming March 24, 2022, meeting. Please see Exhibit 13. Furthermore, the stretchy earnings yield plots a 7.15%, directing portfolio management decisions to a stronger focus on stock selection, especially those with pricing power, market share positioning, consistent free cash flow generation, and good management.

The political main risk, in our opinion, is the initiative to change the Electricity Reform approved in April 2014, which will be discussed in Congress in the coming weeks.

On behalf of PAM's team, we thank you for your confidence. We believe the experience and dedication of our Team are critical elements in continue delivering a good quality portfolio management service.

Sincerely,

Maria Eugenia Pichardo	David Estevez	Juan Elizalde
Senior Portfolio Manager	Analyst & Portfolio Manager	Analyst & Portfolio Manager

THE MEXICO EQUITY AND INCOME FUND, INC.

The Mexico Equity and Income Fund, Inc. ("the Fund") maintains a long-term capital appreciation investment objective through investments in securities, primarily equity, listed on the Mexican Stock Exchange. The Fund provides a vehicle to investors who wish to invest in Mexican companies through a managed non-diversified portfolio as part of their overall investment program.

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please see the Schedule of Investments in this report for a complete list of fund holdings.

The information and views provided herein represent the opinion of Pichardo Asset Management, not the Fund's Board of Directors, and it does not intend to be a forecast of future events, a guarantee of future results, or investment advice. This report contains certain forward-looking statements about factors that may affect the performance of the Fund in the future.

Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict.

Investors must carefully consider the Fund's investment objectives, risks, charges, expenses and restrictions. The prospectus contains this and other important information about the investment company, which may be obtained by calling U.S. Bancorp Fund Services, LLC, [phone]. Read it carefully before investing.

All investments involve risk. Principal loss is possible. Investing in equities in Emerging markets 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 more significant in 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 generally 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. In addition, Mexican equity investments are in Mexican pesos. As a result, the Portfolio Securities must increase in market value at a rate over the rate of any decline in the peso's value against the U.S. dollar to avoid a reduction in their equivalent U.S. dollar value.

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