<PAGE>
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THE MEXICO FUND, INC.
HIGHLIGHTS
.. The Fund's 1995 fiscal year ended October 31, 1995.
.. The Fund's transferable rights offering was concluded successfully on October
31, 1995.
.. Total net proceeds to the Fund from the offering, before payment of expenses,
amounted to approximately $134.9 million, increasing the Fund's net assets to
approximately $685.9 million at the end of this fiscal year.
.. The Fund's net asset value (NAV) and price per share closed this fiscal year
at $13.80 and $12.25, respectively, reflecting a discount of 11% on the New
York Stock Exchange (NYSE). The total volume of shares traded during this
year, on all US consolidated markets, amounted to 117.6 million.
.. On October 29, 1995, the Alianza para la Recuperacion Economica, or Alliance
for Economic Recovery (ARE), was signed by the Federal government, Banco de
Mexico (Central Bank) and the labor, agricultural and private sectors.
.. During the first ten months of 1995, Mexico registered a positive trade bal-
ance of $6 billion, as compared with a deficit of $15 billion during the same
period of 1994.
.. The Mexican Gross Domestic Product (GDP) declined 9.6% during the third quar-
ter of calendar 1995, as compared with the same period of 1994.
.. Mexico's inflation rate during October 1995 was 2.1%, or 45.7% for the last
twelve months.
.. Interest rates for the 28-day Cetes (Treasury Bills) have increased from
38.6% at the end of July, to levels of approximately 43.4% at the end of this
fiscal year.
.. The value of the Mexican Peso against the US Dollar decreased during this
last fiscal quarter, from N$6.110 per $1, to N$7.143 per $1.
.. During this 1995 fiscal year, the Bolsa index in US dollar terms declined
57%, while the Fund's NAV and price per share decreased 56% and 58%,
respectively.
.. A dividend of 2.930 cents per share is payable on January 31, 1996, to share-
holders of record on December 28, 1995.
<PAGE>
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THE MEXICO FUND, INC.
TO OUR SHAREHOLDERS:
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RIGHTS OFFERING
We informed you in our last Quarterly Report that the Fund's Board of Direc-
tors announced a transferable rights offering to its shareholders. As men-
tioned in various press releases and other communications to you, the Fund
proceeded with the rights offering upon the determination by the Board of Di-
rectors that it was in the best interests of the Fund and its shareholders to
increase the assets available for investment. In this way, the Fund will be
able to more fully take advantage of investment opportunities, given the cur-
rently depressed prices of Mexican equity securities.
A total of 37,286,930 transferable rights were issued to shareholders or rec-
ord as of the close of business on October 13, 1995. These rights entitled
shareholders to subscribe for an aggregate of 12,428,977 new shares, at the
rate of one share for every three rights held. The subscription price for
shares offered by the Fund in the rights offering was $11.25 per share. Net
proceeds of the offering, before payment of expenses, amounted to approxi-
mately $134.9 million.
Holders of record who fully exercised their rights in the primary subscrip-
tion period, that expired on October 31, 1995, were entitled to participate in
an "over-subscription privilege" for shares not subscribed for in the primary
subscription. Rights issued by the Fund traded on the NYSE under the symbol
MXF-RT, as securities independent of the Fund's shares, and their price ranged
from $ 1/16 to $ 13/16, closing at $ 5/16. A total of 12.9 million rights were
traded during the subscription period.
Approximately 85.6% of shares offered were subscribed for in the primary sub-
scription, and the Fund received over-subscription requests for approximately
43.2% of the total shares. At the close of market on October 31, 1995, the
Fund included net proceeds from the offering, after payment of expenses, in
its calculation of the net asset value.
Market prices and NAVs per share for periods prior to the rights offering
must be adjusted for comparison purposes. Prices before October 13, 1995 must
be multiplied by 0.9344, and NAVs before October 31, 1995, must be multiplied
by 0.9324.
After receipt by the Fund of the net proceeds of the rights offering, the
percentage of the Fund's portfolio invested in Mexican equity securities de-
clined to approximately 77.3% The new total number of outstanding shares is
49,715,907. The Fund is proceeding to invest these new assets in the equity
market in an orderly and progressive way, as described in the Fund's Prospec-
tus.
ECONOMIC COMMENTS
The performance of the Mexican economy continues being negatively impacted by
the adverse consequences of the devaluation of the Peso that has occurred
since December 1994. The economy still registers low levels of activity. Dur-
ing the third quarter of calendar 1995, the country's GDP declined 9.6% versus
the same period of calendar 1994.
As a result of the volatility of Mexican financial markets in the recent
months, the value of the Peso against the US Dollar declined from N$6.110 per
$1 at the end of July 1995, to N$7.143 per $1 at the end of this fiscal year.
As a consequence, interest rates for the 28-day Cetes increased from 38.6% to
43.4% during the same three-month period. Inflation rates, measured by the
Consumer Price Index (CPI) calculated by Banco de Mexico, increased 2.1% dur-
ing October 1995, or 45.7% during the last twelve months.
To respond to the negative performance of these economic indicators, on Octo-
ber 29, 1995,
<PAGE>
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the Federal government, Banco de Mexico and the labor, agricultural and pri-
vate sectors agreed to sign the ARE, which will be effective from November 1,
1995 through December 31, 1996. Under the ARE, the economic recovery will be
based on an increase of private investment and consumption, sustained export
growth and expansion of public investment. The main components of the ARE in-
clude a total minimum wage increase of 21%, an increase in prices of energy
products made by the Mexican government by approximately 29%, and the intro-
duction of some corporate fiscal incentives related to additional investments
and job creation. The ARE also provides for some other incentives to stimulate
the activity of the automotive industry.
According to information published by Banco de Mexico, during the third quar-
ter of 1995, Mexico had a current account surplus of $502 million, compared
with a deficit of $7.6 billion during the same period of 1994. For the first
nine months of 1995, Mexico's current account registered a deficit of $199
million, compared to a deficit of $21.3 billion over the same period of 1994.
During the first ten months of 1995, and compared with the same period of last
year, exports have increased 34% to $66 billion, while imports have declined
8% to $60 billion, resulting in a positive trade balance of $6 billion, as
compared with a deficit of $15 billion during the same period of 1994.
THE BOLSA AND THE FUND PERFORMANCE
The price performance of shares of companies listed on the Mexican Bolsa con-
tinued to be negatively impacted by the current economic environment of high
interest rates and volatility of the currency market. This negative perfor-
mance of the Bolsa has resulted in attractive investment opportunities for the
Fund, given the currently depressed prices of Mexican equity securities and
the availability of Fund resources after the transferable rights offering. As
previously mentioned, the Fund has already started to invest these new re-
sources in an orderly and progressive way.
During the last quarter of fiscal 1995, the Bolsa index declined 17% in US
dollar terms, and for the entire fiscal year, the decline reached 57%. As a
result, the market capitalization of the Bolsa declined from approximately
$106 billion at the end of July to almost $90 billion at the end of October.
The Fund's performance was significantly affected by the declines in the
value of the Peso and in the level of the Bolsa index. Adjusted by the recent
transferable rights offering, the Fund's NAV and price per share declined by
56% and 58%, respectively, during this 1995 fiscal year. At the end of this
period, the price of Fund shares on the NYSE closed at $12.25 and the NAV at
$13.80, representing a discount of 11.2%.
Fund shares continue registering high levels of liquidity on the NYSE. The
total volume of Fund shares traded on all US consolidated markets during this
1995 fiscal year amounted to 117.6 million, compared with 37.3 million out-
standing until October 30, 1995.
A dividend of 2.930 cents per share is payable on January 31, 1996, to share-
holders of record on December 28, 1995. This dividend is comprised of net in-
vestment income and subject to applicable Mexican withholding taxes (see be-
low). Non-US shareholders generally also will be subject to a US withholding
tax at a maximum rate of 30%. This distribution is reportable by US taxpayers
on their US Federal income tax returns. For 1995, the Fund's total net invest-
ment income distributed was 2.930 cents per share, 2.7 cents of which the Fund
designates as foreign source income from Mexico. This designation will assist
shareholders who need to claim a foreign tax credit against their US Federal
income tax for the Mexican taxes withheld from their dividends.
<PAGE>
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Pursuant to rulings of the Mexican Government applicable to the Fund since
its inception, 1.475 cents per share of the dividend payable by the Fund on
January 31, 1996, will be withheld in payment of Mexican taxes. The percentage
of the forthcoming dividend to be withheld in payment of such taxes is higher
than the percentage applicable to prior dividends paid by the Fund. This, how-
ever, is attributable to the manner in which the tax is imposed and computed
under the rulings and is not indicative of a higher statutory rate of tax be-
ing imposed by the Mexican Government. U.S. shareholders may be eligible to
claim a deduction or credit on their 1995 Federal income tax returns for all
or a portion of the amount of Mexican taxes withheld from their dividends; de-
pending on the circumstances, shareholders may wish to consult their tax advi-
sors about their deductions and tax credits.
DIVIDEND REINVESTMENT PLAN
The Fund's Dividend Reinvestment Plan ("Plan") was amended by the Board of
Directors at the December 7, 1994 Board Meeting. This new Plan became effec-
tive April 1, 1995. A brochure describing the Plan is enclosed with this mail-
ing of the Annual Report to Shareholders. UNDER THE TERMS OF THE AMENDED PLAN,
FUND SHAREHOLDERS ARE AUTOMATICALLY ENROLLED AS PARTICIPANTS IN THE PLAN. IF
YOU DO NOT WISH TO PARTICIPATE IN THE PLAN, PLEASE COMPLETE THE CARD LOCATED
IN THE PLAN BROCHURE (ENCLOSED) IN ACCORDANCE WITH THE INSTRUCTIONS ON THE
CARD. The Plan provides a convenient way to increase your holdings in the
Fund's common stock through the reinvestment of net investment income and cap-
ital gains distributions. If you have any questions concerning the Plan,
please review the Plan brochure or contact the Plan Agent:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Attention: Dividend Reinvestment Department
(212) 936-5100
ANNUAL SHAREHOLDERS MEETING
The Fund's Annual Meeting of Shareholders will be held on February 27, 1996
at 2:00 p.m. at the Omni Berkshire Place Hotel, 21 East 52nd Street, New York,
NY 10021. Accompanying this Report, you will find the corresponding proxy ma-
terials. We encourage all Fund shareholders who do not plan to attend the
meeting to vote by proxy and in this way help reduce the expenses of solicita-
tion.
COMMUNICATIONS WITH SHAREHOLDERS
The Adviser distributes, free of charge, a Monthly Summary Report with infor-
mation relating to the Fund, as well as other indicators of the Mexican econ-
omy and the Bolsa. If you are interested in receiving a copy of this Report,
please request that your name be included on the mailing list by writing to
the Adviser at:
Impulsora del Fondo Mexico, S.A. de C.V.
77 Aristoteles St., 3rd Floor
11560, Mexico, D.F.
MEXICO
The Fund has made arrangements to improve communications with the Fund's
shareholders and the investing public through a liaison office in New York
City. Upon request, this office will be pleased to provide you with the Fund's
current NAV, quarterly reports and other materials available from the Fund.
They will also be able to direct your inquiries regarding other Fund matters
to the appropriate firms or individuals.
Please refer your information requests to:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, NY 10005
(800) 224-4134
/s/ Jose Luis Gomez Pimienta /s/ Juan Gallardo T.
JOSE LUIS GOMEZ JUAN GALLARDO T.
PIMIENTA Chairman of the Board
President
December 21, 1995
<PAGE>
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NOTICE TO SHAREHOLDERS
In accordance with Internal Revenue Service requirements, the entire
amount of the Fund's 1994 distributions was reported on the Fund's Forms
1099-DIV for 1994 as taxable dividends; for non-U.S. shareholders, the en-
tire amount of these distributions was subject to applicable U.S. tax with-
holding.
The Fund has subsequently determined, also in accordance with IRS re-
quirements, that 3.469 cents per share of the ordinary dividends reported
on its 1994 Forms 1099-DIV (or subject to U.S. tax withholding) constituted
a non-taxable return of capital to shareholders (except to shareholders, if
any, whose tax basis in their Fund shares was zero). Shareholders who paid
tax on this entire amount or who were subject to U.S. tax withholding on
that entire amount may be eligible for a refund of tax paid on the portion
of the dividend that has now been classified as a return of capital. Be-
cause of the relatively small amounts of tax involved, many shareholders
may decide not to pursue these refunds but the foregoing information will
assist those who decide to file a refund claim.
Please note that this situation is attributable to the U.S. tax law re-
quirements applicable to the Fund and not to errors made by the Fund.
SHAREHOLDER INFORMATION
Weekly comparative NAV and market price information about Mexico Fund
shares is published each Monday in The Wall Street Journal, The New York
Times, and other newspapers in a table called "Closed-End Funds". Daily
market prices for the Fund's shares are published in the New York Stock Ex-
change Composite Transactions section of newspapers under the designations
"MexFd" or "MexicoFd". The Fund's New York Stock Exchange trading symbol is
MXF. The Fund's shares are also listed and traded on the Third Section
("Freiverkehr") of the Stuttgart Stock Exchange.
For current NAV information or copies of reports, call (800) 224-4134.
For information about dividends and shareholder accounts, call Shareholder
Services (212) 936-5100.
<PAGE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of The Mexico Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Mexico Fund, Inc. (a Maryland corporation), including the schedule of
investments, as of October 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the four years in the period ended October 31, 1995, the five months in the
period ended October 31, 1991 and the year ended May 31, 1991. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Mexico Fund, Inc. as of October 31, 1995, 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 four years in
the period ended October 31, 1995, the five months in the period ended October
31, 1991, and the year ended May 31, 1991, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
November 24, 1995
<PAGE>
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THE MEXICO FUND, INC.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE OF NET
INDUSTRIES HELD COMMON STOCK (77.30%) SERIES (NOTE 1) ASSETS
- -------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
CEMENT 5,250,043 Apasco, S.A. de C.V. ... * $ 19,183,273 2.80%
INDUSTRY 11,621,958 Cemex, S.A. ............ A 34,167,873 4.98
4,400,500 Tolmex, S.A de C.V. .... B2 16,479,543 2.40
------------ -----
69,830,689 10.18
- -------------------------------------------------------------------------------------
Grupo Televisa, S.A. de
COMMUNICATIONS 1,268,200 C.V.................... CPO 10,990,001 1.60
1,336,000 (a) Iusacell, S.A. de C.V. . D 1,346,661 0.20
Telefonos de Mexico,
10,000,000 S.A. de C.V. .......... *A 13,663,727 1.99
Telefonos de Mexico,
13,095,000 S.A. de C.V. .......... *L 18,002,646 2.62
------------ -----
44,003,035 6.41
- -------------------------------------------------------------------------------------
Empresas ICA, Sociedad
Controladora, S.A. de
CONSTRUCTION 841,332 C.V.................... * 8,115,326 1.18
- -------------------------------------------------------------------------------------
Coca-Cola Femsa, S.A. de
CONSUMER 3,430,000 C.V. .................. L 6,165,645 0.90
Fomento Economico
Mexicano, S.A. de
GOODS 7,838,000 C.V. .................. B 16,196,119 2.36
Grupo Industrial Bimbo,
6,958,474 S.A. de C.V. .......... A 26,302,506 3.83
Grupo Industrial Maseca,
23,016,000 S.A. de C.V. .......... B 14,306,459 2.09
Grupo Modelo, S.A. de
6,086,000 C.V. .................. C 23,089,822 3.37
Jugos del Valle, S.A. de
720,000 (a) C.V. .................. B 1,247,879 0.18
Sistema Argos, S.A. de
1,275,000 C.V. .................. A 615,813 0.09
Sistema Argos, S.A. de
5,040,000 C.V. .................. B 2,384,880 0.35
------------ -----
90,309,123 13.17
- -------------------------------------------------------------------------------------
Grupo Financiero Banamex
FINANCIAL 5,778,450 Accival, S.A. de C.V. . B 9,869,395 1.44
Grupo Financiero Banamex
GROUPS 288,922 Accival, S.A. de C.V. . L 473,245 0.07
Grupo Financiero
17,000,009 (a) Bancomer, S.A de C.V. . B 4,379,115 0.64
Grupo Financiero
555,556 (a) Bancomer, S.A de C.V. . L 128,331 0.02
Grupo Financiero GBM
Atlantico, S.A. de
366,000 (a) C.V. .................. B 395,565 0.06
Grupo Financiero
3,112,675 Inbursa, S.A de C.V. .. B 8,410,280 1.23
Grupo Financiero
Inverlat, S.A. de
1,412,500 (a) C.V. .................. B 351,988 0.05
Grupo Financiero
InverMexico, S.A. de
4,523,000 C.V. .................. BCP 1,393,056 0.20
Grupo Financiero
InverMexico, S.A. de
452,300 C.V. .................. LCP 139,306 0.02
Grupo Financiero Serfin,
1,663,283 (a) S.A. de C.V. .......... B4 1,071,133 0.16
Grupo Financiero Serfin,
2,507,941 (a) S.A. de C.V. .......... BCP 1,615,082 0.23
------------ -----
28,226,496 4.12
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HOLDINGS 2,390,000 Alfa, S.A. de C.V. ..... *A 27,269,355 3.98
4,006,284 (a) Cydsa, S.A. ............ A 10,151,721 1.48
1,789,190 (a) Desc, S.A. de C.V. ..... A 5,510,595 0.80
3,339,190 (a) Desc, S.A. de C.V. ..... B 10,705,229 1.56
178,919 (a) Desc, S.A. de C.V. ..... C 556,069 0.08
Grupo Carso, S.A. de
6,975,994 (a) C.V. .................. A1 36,427,912 5.31
Grupo Continental,
2,538,000 S.A. .................. *CP 6,296,144 0.92
Grupo Sidek, S.A. de
5,715,834 (a) C.V. .................. A 2,560,642 0.37
3,998,237 Vitro, S.A. ............ * 8,754,365 1.28
------------ -----
108,232,032 15.78
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Altos Hornos de Mexico,
IRON & 691,000 (a) S.A. de C.V. .......... * 3,676,046 0.54
STEEL INDUSTRY 4,050,000 (a) Hylsamex, S.A. de C.V. . BCP 11,453,171 1.67
Grupo Simec, S.A. de
4,000,000 (a) C.V. .................. B 1,315,974 0.19
------------ -----
16,445,191 2.40
- -------------------------------------------------------------------------------------
Grupo Industrial Minera
MINING 7,200,000 (a) Mexico, S.A. de C.V. .. B 29,987,400 4.37
Industrias Penoles, S.A
INDUSTRY 3,619,000 de C.V. ............... * 13,578,216 1.98
------------ -----
43,565,616 6.35
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Kimberly-Clark de
PAPER 4,258,400 Mexico, S.A. de C.V. .. A 55,443,259 8.08
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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THE MEXICO FUND, INC.
SCHEDULE OF INVESTMENTS AS OF OCTOBER 31, 1995 -- (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES VALUE OF NET
INDUSTRIES HELD COMMON STOCK (CONTINUED) SERIES (NOTE 1) ASSETS
- ----------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
RETAIL TRADE 39,698,422 Cifra, S.A. de C.V. .... B $ 42,127,123 6.14%
16,232,807 Cifra, S.A. de C.V. .... C 16,498,695 2.41
Controladora Comercial
Mexicana, S.A. de
11,000,000 (a) C.V. .................. B 6,313,874 0.92
------------ ------
64,939,692 9.47
- ----------------------------------------------------------------------------------------
Videoprima, S.A. de
SERVICE 256,700 (a) C.V. .................. * 1,078,119 0.16
- ----------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $427,966,233). 530,188,578 77.30%
- ----------------------------------------------------------------------------------------
<CAPTION>
PERCENT
FACE SHORT-TERM SECURITIES VALUE OF NET
SECURITIES VALUE (23.84%) (NOTE 1) ASSETS
- ----------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Bancomer, S.A., 44.25%
TIME DEPOSITS $ 23,831,955 due 11/01/95........... $ 23,831,955 3.47%
139,698,344 American Stock Transfer
& Trust Co.,
5.25% due 11/01/95..... 139,698,344 20.37
- ----------------------------------------------------------------------------------------
TOTAL SHORT-TERM
SECURITIES (Cost --
$163,530,299)......... 163,530,299 23.84%
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost -- $591,496,532). 693,718,877 101.14
LIABILITIES IN EXCESS OF
OTHER ASSETS........... (7,822,569) (1.14)
------------ ------
NET ASSETS (Equivalent
to $13.80 Per Share
on 49,715,907 Shares of
Capital Stock
Outstanding)........... $685,896,308 100.00%
------------ ------
</TABLE>
(a) Shares of these securities are currently non-income producing. Equity
investments that have not paid dividends within the last twelve months are
considered to be non-income producing.
See Notes to Financial Statements.
<PAGE>
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THE MEXICO FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AS OF OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments:
Mexican securities, at value (Note 1):
Common stock (cost -- $427,966,233) ................ $530,188,578
Short-term securities (cost -- $163,530,299)........ 163,530,299
------------
Total investments (cost -- $591,496,532)........... $693,718,877
Receivables from securities sold..................... 1,094,086
Interest receivable.................................. 29,294
Prepaid Mexican withholding taxes (Note 1)........... 748,473
------------
Total assets....................................... 695,590,730
------------
LIABILITIES:
Payables:
Investment adviser (Note 2)......................... 492,476
Trustee (Note 3).................................... 8,050
------------
Total payables..................................... 500,526
Accrued expenses and other liabilities............... 636,193
Payables for securities purchased.................... 2,994,265
Payables for offering expenses....................... 5,563,438
------------
Total liabilities.................................. 9,694,422
------------
NET ASSETS -- Equivalent to $13.80 Per Share on
49,715,907 shares of capital stock outstanding (Note
5).................................................. $685,896,308
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
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THE MEXICO FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
NET INVESTMENT INCOME:
Income (Note 1):
Dividends...................................... $ 7,217,772
Interest and discount earned................... 22,480,514
-------------
Total income................................... $ 29,698,286
Expenses:
Investment advisory fee (Note 2)............... 4,845,926
Administrative services (Note 3)............... 350,000
Trustee fee (Note 3)........................... 332,286
Value-added taxes (Note 1)..................... 728,473
Printing, distribution and mailing of
shareholder reports........................... 452,522
Legal fees expense ............................ 221,296
Directors' fees................................ 129,213
Directors' expenses............................ 21,407
Accounting and audit fees expense.............. 106,358
Custodian fees................................. 42,059
Transfer agent and dividend disbursing fees.... 21,295
Shareholders' information...................... 104,755
Stock exchange fees............................ 32,878
Miscellaneous.................................. 339,588
-------------
Operating expenses............................. 7,728,056
-------------
Net investment income (Note 1)................. 21,970,230
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Realized loss on investments and foreign
currency transactions (Notes 1 and 4):
Proceeds from sales............................ 67,426,154
Cost of securities sold........................ 89,298,847
-------------
Net realized loss on investments............... (21,872,693)
Net realized loss from foreign currency
transactions.................................. (23,843,637)
-------------
Net realized loss on investments and foreign
currency transactions......................... (45,716,330)
Unrealized gain (loss) on investments and
translation of assets and liabilities in
foreign currency:
End of period (Note 4)......................... 102,222,345
Beginning of period............................ 768,476,598
-------------
Net decrease in unrealized gain on investments. (666,254,253)
Net unrealized loss on translation of assets
and liabilities in foreign currency........... (3,745,787)
-------------
Net unrealized loss on investments and
translation of assets and liabilities in
foreign currency.............................. (670,000,040)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $(693,746,140)
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
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THE MEXICO FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED
YEAR ENDED OCTOBER 31,
OCTOBER 31, 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS (NOTE
1):
FROM OPERATIONS
Net investment income................... $ 21,970,230 $ 7,802,447
Net realized gain on investments........ -- 3,366,474
Net increase in unrealized gain on
investments............................ -- 179,706,642
Net unrealized loss on translation of
currency............................... -- (798,451)
Net realized loss on investments and
foreign currency transactions.......... (45,716,330) --
Net unrealized loss on investments and
translation of assets and liabilities
in foreign currency.................... (670,000,040) --
-------------- --------------
Net (decrease) increase in net assets
resulting from operations.............. (693,746,140) 190,077,112
Dividends to shareholders from net
investment income...................... (257,221) (10,371,335)
Dividends to shareholders from net
realized gain on investments........... (517,898) (8,557,365)
Tax return of capital (Note 1).......... (1,726,529) --
Net increase in capital stock (Note 5).. 134,050,437 997,214
-------------- --------------
Total (decrease) increase in net
assets................................ (562,197,351) 172,145,626
NET ASSETS:
Beginning of period..................... 1,248,093,659 1,075,948,033
-------------- --------------
End of period........................... $ 685,896,308 (A) $1,248,093,659 (A)
============== ==============
</TABLE>
See Notes to Financial Statements.
(A) Including undistributed net investment income and net realized gain on
investments of $0 and $0(B), respectively, as of October 31, 1995 and
undistributed net investment income and net realized gain on investments
of $0 and $4,661,132(B), respectively, as of October 31, 1994.
(B) Including $4,143,234 of capital gains, net of income taxes paid in 1991,
which will not be distributed.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FIVE MONTHS
FOR THE YEAR ENDED OCTOBER 31, ENDED FOR THE YEAR
THE MEXICO FUND, INC. ---------------------------------------------- OCTOBER 31, ENDED MAY 31,
FINANCIAL HIGHLIGHTS 1995 1994 1993 1992 1991 1991
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 33.48** $ 28.88** $ 24.91** $ 25.60** $ 24.07 $ 15.38
-------- ---------- ---------- -------- -------- --------
Net investment income
(loss) (Note 1)....... 0.59** 0.21** 0.58** 0.50** (0.02) 0.45
Net gain (loss) on
investments and
translation of foreign
currency (Note 1)..... (19.21)** 4.89** 8.77** 3.85** 1.81 8.60
-------- ---------- ---------- -------- -------- --------
Total from investments
operations............. (18.62)** 5.10** 9.35** 4.35** 1.79 9.05
-------- ---------- ---------- -------- -------- --------
Less dividends and
distributions:
Dividends to common
shareholders from net
investment income..... (0.00) (0.27) (0.49) (0.48) (0.26) (0.36)
Distributions to common
shareholders from net
capital gains......... (0.01) (0.23) (2.48) (1.03) -- --
-------- ---------- ---------- -------- -------- --------
Total dividends and
distributions......... (0.01) (0.50) (2.97) (1.51) (0.26) (0.36)
-------- ---------- ---------- -------- -------- --------
Tax return of capital.. (0.05) -- -- -- -- --
-------- ---------- ---------- -------- -------- --------
Capital charge
resulting from
issuance of fund
shares................ (1.00) -- (2.41) (3.53) -- --
-------- ---------- ---------- -------- -------- --------
Net asset value, end of
period................ $ 13.80 $ 33.48 $ 28.88 $ 24.91 $ 25.60 $ 24.07
======== ========== ========== ======== ======== ========
Market value per share,
end of period......... $ 12.25 $ 31.38 $ 27.00 $ 23.25 $ 22.88 $ 23.50
======== ========== ========== ======== ======== ========
TOTAL INVESTMENT RETURN
BASED ON MARKET VALUE
PER SHARE.............. (60.79%) 15.39% 27.41% 8.12% (1.52%) 63.08%
RATIOS TO AVERAGE NET
ASSETS
Expenses............... 1.14% 0.92% 1.08% 1.08% 1.25%* 1.37%
Net investment income
(loss)................ 3.24% 0.63% 2.27% 1.89% (0.23%)* 2.75%
SUPPLEMENTAL DATA:
Net assets at end of
period (in 000's)..... $685,896 $1,248,094 $1,075,948 $654,917 $504,849 $474,667
Portfolio turnover
rate.................. 10.61% 3.89% 5.14% 15.59% 3.34%* 12.53%
</TABLE>
- --------
*Annualized
**Amounts were computed based on average shares outstanding during the period.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-------------------------------------------------------------------------------------------------------------
QUARTER ENDED 10/31/1995 QUARTER ENDED 7/31/1995 QUARTER ENDED 4/30/1995 QUARTER ENDED 1/31/1995
-------------------------- --------------------------- -------------------------- ------------------------
TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE
------------- ----------- ------------- ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment
Income......... $ 4,482 $ 0.09 $ 9,911 $ 0.27 $ 9,731 $ 0.26 $ 5,574 $ 0.15
Net Investment
Income......... $ 2,366 $ 0.05 $ 8,102 $ 0.22 $ 8,151 $ 0.21 $ 3,351 $ 0.09
Net realized
gain (loss) on
investments.... $ 4,128 $ 0.08 $ 4,740 $ 0.12 $ (30,784) $ (0.83) $ 43 $ --
Net realized
loss from
foreign
currency
transactions... $ (878) $ (0.02) $ (3,724) $ (0.10) $ (4,039) $ (0.11) $ (15,203) $ (0.41)
Net increase
(decrease) in
unrealized gain
on investments. $ (104,340) $ (2.10) $ 77,535 $ 2.08 $ 25,997 $ 0.70 $(665,446) $ (17.85)
Net unrealized
gain (loss) on
translation of
assets and
liabilities in
foreign
currency....... $ (3,817) $ (0.08) $ 2,825 $ 0.07 $ 3,664 $ 0.10 $ (6,418) $ (0.17)
Net asset value. $ 685,896 $ 13.80 $ 654,476 $ 17.55 $ 564,998 $ 15.15 $ 561,919 $ 15.07
</TABLE>
- --------
See Notes to Financial Statements.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE MEXICO FUND, INC.
NOTES TO FINANCIAL STATEMENTS--
OCTOBER 31, 1995
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 as a diversi-
fied, closed-end management investment company. On July 17, 1991, the Board of
Directors voted to change the year-end of the Fund from May 31 to October 31.
The following is a summary of significant accounting policies followed by the
Fund.
Valuation of investments -- Investments traded on the Mexican Stock Exchange
are valued at the last sale price. Short-term securities are carried at cost,
plus accrued interest, which approximates market value.
Foreign Currency -- The Fund has adopted the provisions of Statement of Posi-
tion 93-4, Foreign Currency Accounting and Financial Statement Presentation
for Investment Companies ("SOP") effective for the period ended October 31,
1995. The Fund has elected not to restate prior periods. The adoption of this
SOP results in the reclassification of net realized gain (loss) from foreign
currency transactions, previously included as a component of net investment
income, to net realized gain (loss) on investments and foreign currency trans-
actions, and the inclusion of unrealized gain (loss) on translation of cur-
rency into unrealized appreciation (depreciation) of investments and transla-
tion of assets and liabilities in foreign currencies.
The market value of Mexican securities, currency holdings and other assets
and liabilities denominated in New Peso ("NP") were recorded in the financial
statements after translation into U.S. dollars based on the open market ex-
change rate prevailing in Mexico City at the end of the period. The open mar-
ket exchange rate at October 31, 1995 was NP 7.143 to $1.00.
The identified cost of portfolio holdings is translated at approximate rates
prevailing when acquired. Income and expense amounts are translated at approx-
imate rates prevailing when earned or incurred.
As a consequence of the exchange rate policy modification adopted by Banco de
Mexico as of December 20, 1994, there has been significant volatility in the
New Peso foreign exchange rates and interest rates. The accompanying financial
statements reflect the financial condition of the Fund at October 31, 1995 and
the results of operations for the year then ended.
Given the aforementioned conditions and the significant increases in infla-
tion rates during this period, the financial condition and results of opera-
tion of the Fund during 1996 could vary significantly from that in 1995.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, currency gains or losses realized between
the trade and settlement dates on securities transactions, the difference be-
tween the amounts of dividends, interests, and foreign withholding taxes re-
corded on the Fund's books, and the U.S. dollar equivalent of the amount actu-
ally received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
Since the net assets of the Fund are determined based on the currency ex-
change rate and market values at the close of each business day, it is not
practicable to isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the year. Accordingly,
the net realized and unrealized gain on investments presented in the accompa-
nying financial statements includes the effects of both such changes.
Security transactions and investment income --Security transactions are re-
corded on the date which the transactions are entered into (the trade date).
Dividend income is recorded on the ex-dividend date and interest income is re-
corded as it is earned.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Realized gains and losses on investments -- Realized gains and losses on in-
vestments are determined on the identified cost basis.
Taxes -- No provision has been made for U.S. income taxes for the year ended
October 31, 1995 on net investment company taxable income or net long-term
capital gains as defined by the Internal Revenue Code (the "Code"), since the
Fund intends to comply with the requirements of the Code applicable to regu-
lated investment companies and to distribute substantially all of such income
to its shareholders.
The Fund is not subject to Mexican income taxes. The provision for value-
added taxes represents Mexican value-added tax on certain services rendered by
Mexican corporations to the Fund. At October 31, 1995, prepaid Mexican with-
holding taxes represents income taxes withheld pursuant to Mexican tax law, on
behalf of the Fund's shareholders, on receipt of certain dividends and inter-
est. Such taxes will be applied to the shareholders upon payment of dividends
by the Fund.
Dividends to shareholders -- Cash dividends are recorded by the Fund on the
ex-dividend date. Dividends paid to shareholders are subject to Mexican with-
holding taxes.
A tax return of capital generally occurs when distributions exceed current
and accumulated tax earnings and profits. The Fund had no current earnings and
profits for the year ended October 31, 1995. This has had the effect of
recharacterizing a portion of the Fund's distribution as a tax return of capi-
tal.
2. INVESTMENT ADVISORY AGREEMENT:
The Fund has a management contract with Impulsora del Fondo Mexico, S.A. de
C.V. (the "Adviser"), a Mexican corporation registered under the U.S. Invest-
ment Advisers Act of 1940. The Adviser furnishes investment research and port-
folio management services consistent with the Fund's stated investment poli-
cies. The Fund pays to the Adviser a monthly fee at the annual rate of 0.85%
on the first $200 million of average daily net assets, 0.70% on the excess
over $200 million up to $400 million and 0.60% on the excess over $400 mil-
lion.
3. TRUST AGREEMENT AND TRUSTEE:
Pursuant to a Trust Agreement which provides for the Fund's assets to be held,
invested and reinvested for the benefit of the Fund, a trust was created be-
tween the Fiduciary Department of Nacional Financiera, S.N.C. ("NAFIN") and
the Series A stockholders of the Adviser. At the closing of the initial offer-
ing of the Fund, in June 1981, NAFIN reimbursed the Series A stockholders of
the Adviser the amounts each one had contributed to the creation of the trust
and they ceased to be parties thereto.
Effective April 1, 1994, the Fund entered into Administrative Services Agree-
ment with the Adviser, which provides for certain administrative services pre-
viously performed by NAFIN to be performed by the Adviser, including the de-
termination and publication of the net asset value of the Fund, the mainte-
nance of the Fund's books and records in accordance with applicable U.S. and
Mexican laws and the provision of assistance to the Fund's auditors in the
preparation and filing of annual reports and tax returns. The initial term of
this agreement runs until August 31, 1996. The annual fee payable to the Ad-
viser under this agreement is $350,000.
Effective May 1, 1994, the Fund amended its agreement with NAFIN, establish-
ing a fixed annual fee of $350,000 for the remaining services to be provided
by NAFIN.
At its June 7, 1995 meeting, the Board of Directors approved the appointment
of Bancomer, S.A. ("Bancomer"), as the trustee for the Mexican Trust through
which the Fund invests. The Fund also obtained the approval of the Comision
Nacional Bancaria y de Valores and the Mexican Foreign Investment Commission
to permit Bancomer to become the trustee. Under this new arrangement, effec-
tive October 5, 1995, Bancomer receives NP$ 600,000 (approximately $84,000)
per year for three years, subject to a monthly increase linked to the Mexican
Consumer Price Index, monthly cumulative basis. This fee arrangement will re-
sult in significantly lower trustee fees to the Fund. In this regard, the Fund
entered into a definitive arrangement on October 5, 1995 with Bancomer and
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAFIN, the previous trustee, which provided for the succession of Bancomer as
the trustee.
4. PURCHASES AND SALES OF INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1995 were as follows:
Purchases
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Common Stock....................................................... $110,139,341
Fixed Income Securities............................................ --
------------
Total Purchases.................................................. $110,139,341
============
Proceeds from Investments Sold
- --------------------------------------------------------------------------------
Common Stock....................................................... $ 67,426,154
Fixed Income Securities............................................ --
------------
Total Sales...................................................... $ 67,426,154
============
</TABLE>
As of October 31, 1995, net unrealized gain on investments for Federal income
tax purposes aggregated to approximately $102 million, of which approximately
$237 million related to appreciated securities and approximately $135 million
related to depreciated securities. The aggregate cost of investments at Octo-
ber 31, 1995 for Federal income tax purposes was approximately $591 million.
5. CAPITAL STOCK:
On January 27, 1995, the Annual Shareholders Meeting of the Fund approved an
increase in the number of authorized shares from 50,000,000 to 150,000,000. At
October 31, 1995, there were 150,000,000 shares of $1.00 par value common
stock authorized, of which 49,967,732 shares were issued, 49,715,907 shares
were outstanding and 251,825 shares were held in treasury.
Starting with the distribution made to the shareholders on July 30, 1993, the
Fund offered a Dividend Reinvestment Plan ("Plan"). Under this Plan the Com-
pany sold in fiscal 1995 4,571 shares of common stock held in treasury which
amounted to $89,706.
The Plan was amended by the Board of Directors at the December 7, 1994 Board
Meeting. The new Plan became effective April 1, 1995. Under the terms of the
amended Plan, Fund shareholders automatically will be enrolled as participants
in the Plan unless they notify the Fund otherwise.
On October 13, 1995, the Company issued rights to subscribe to an aggregate
of 12,428,977 shares of common stock. The Company issued all of the common
stock offered, and received net proceeds of $133,960,731.
As of October 31, 1995, net assets were comprised of the following:
<TABLE>
<S> <C>
Common Stock...................................................... $ 49,715,907
Additional paid-in capital........................................ 562,178,531
Accumulated net investment loss................................... (2,130,628)
Accumulated net realized loss on investments and net realized
loss from foreign currency transactions.......................... (17,729,459)
Unrealized appreciation of investments and depreciation
on translation of assets and liabilities in foreign currency..... 93,861,957
------------
$685,896,308
============
</TABLE>
Accumulated net realized losses from foreign currency transactions have been
netted against undistributed net investment income to be consistent with the
tax treatment for distributions from net investment income per the Code.
6. CAPITAL GAINS:
Net realized gains from security transactions, if any, are distributed annu-
ally to shareholders. Capital loss carryforwards will be used to offset future
capital gains available for distribution. The Fund had net capital loss
carryforwards at October 31, 1995, of approximately $21,870,000 expiring in
2003.
<PAGE>
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
- --------------------------------------------------------------------------------
DIRECTORS:
Juan Gallardo T. -- Chairman
Philip Caldwell
Ernesto Fernandez Hurtado
Jose Luis Gomez Pimienta
Claudio X. Gonzalez
Robert L. Knauss
Agustin Santamarina V.
OFFICERS:
Jose Luis Gomez Pimienta -- President
Samuel Garcia-Cuellar -- Secretary
Allan S. Mostoff -- Assistant Secretary
Sander M. Bieber -- Assistant Secretary
Carlos H. Woodworth -- Treasurer
INVESTMENT ADVISER --
Impulsora del Fondo Mexico, S.A. de C.V.
CUSTODIANS --
S.D. Indeval, S.A. de C.V.
Bancomer, S.A.
TRANSFER AGENT AND REGISTRAR --
American Stock Transfer & Trust Company
COUNSEL --
Dechert Price & Rhoads
Creel, Garcia-Cuellar y Muggenburg, S.C.
AUDITORS --
Arthur Andersen LLP
This report, including the financial statements herein, is transmitted to
shareholders of The Mexico Fund, Inc. for their information. It is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report.
- --------------------------------------------------------------------------------
---------------------------------
------------------------------
----------------------------
[LOGO OF THE MEXICO FUND, INC. APPEARS HERE]
THE MEXICO
FUND, INC.
----------------------
Annual Report
October 31, 1995
----------------------------
------------------------------
---------------------------------
- --------------------------------------------------------------------------------
