<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
QUARTERLY REPORT JANUARY 31, 1996 HIGHLIGHTS
.. The Fund's first quarter of . The rate of exchange of the
fiscal 1996 ended January 31, Mexican peso against the US
1996. dollar increased from $7.143
at the end of October 1995,
.. The Fund's net asset value to $7.407 at the end of Janu-
(NAV) and price per share ary 1996.
ended this period at $16.84
and $15.50, respectively, re- . Mexico's annual inflation
flecting a discount of market rate during 1995 reached a
price to NAV ofapproximately level of 52%.
8%.
. The Mexican gross domestic
.. The Fund has continued in- product (GDP) declined 6.9%
vesting the proceeds from its in real terms during calendar
recent rights offering. As of 1995.
the end of this quarter, ap-
proximately 91% of the Fund's . Annual interest rates of the
net assets were invested in 28-day Cetes (Treasury Bills)
equity securities, compared ended January at a level of
with 77% immediately follow- 36%, compared with 43% at the
ing the closing of the rights end of October 1995.
offering.
.. Total volume of Fund shares . The Mexican Stock Exchange
traded on all US consolidated (Bolsa) index increased 27%
markets during this fiscal in US dollar terms during
quarter amounted to 37 mil- this fiscal quarter, while
lion, compared with 49.7 mil- the Fund's NAV and price per
lion outstanding. share increased 22% and 27%,
respectively.
.. During calendar 1995, the . A dividend of 8 cents per
Mexican current account reg- share is payable on April 30,
istered a deficit of $645 1996, to shareholders of rec-
million, compared with a def- ord on March 29, 1996.
icit of $29.4 billion one
year earlier.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
ECONOMIC COMMENTS:
The performance of the Mexican economy during 1995 was severly impacted by the
devaluation of the peso that began at the end of 1994 and continued during the
following year. During calendar 1995, the peso depreciated an additional 34%
against the US dollar. At the end of January 1996, the rate of exchange of the
peso versus the dollar closed at a level of $7.407, slightly lower than at the
end of 1995.
The inflationary impact of the devaluation of the peso was reflected through
higher inflation rates that reached an annual level of 52% at the end of 1995,
compared with 7% one year earlier. At the same time, interest rates performed
in a volatile manner with an upward trend that led the 28-day Cetes annual
yield to a maximum of 83%, and to subsequently decline to 36% by the end of
January 1996.
The levels of domestic economic activity and employment were also negatively
impacted by the higher levels of interest and inflation rates. During 1995, the
Mexican GDP declined 6.9% in real terms versus its 1994 level. In this regard,
it should be noted that this decline in GDP could have been greater without the
positive performance of Mexican exports in 1995. Similarly, unemployment rates
increased from levels of approximately 3% in 1994 to more than 5% at the end of
1995.
One positive impact of the devaluation was evidenced by the Mexican trade bal-
ance. During 1995, exports increased 31% to approximately $80 billion, while
imports decreased 9% to $72.5 billion. This $7.4 billion trade surplus compares
favorably with a deficit of $18.5 billion the year before, and contributed to a
positive performance of the current account, which during 1995 registered a
deficit of $645 million, compared with a $29.4 billion deficit one year earli-
er.
THE BOLSA AND THE FUND PERFORMANCE
The Bolsa index registered a positive performance during this fiscal quarter,
and in particular during January 1996. After a decline of 57% in US dollar
terms during fiscal 1995, the Bolsa index gained 27%, also in US dollar
terms, during this first fiscal quarter, to end at a level of 3,035 points. The
Bolsa index began to increase towards the end of December 1995, and by the end
of January it had reached a new historical index high of 3,088 points. This in-
crease in the Bolsa index was high enough to compensate for a 4% increase in
the peso/US dollar exchange rate.
Similarly, the Fund's price and NAV per share increased 27% and 22%,
respectively, during this three-month period. The closing price per share at
the end of January was $15.50, while the NAV per share at $16.84 reflects a
discount of market price to NAV of approximately 8%. Total net assets at the
end of this quarter amounted to $837 million, compared with $686 million
(including net proceeds from the rights offering) at the end of fiscal 1995.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Fund continues investing the proceeds from the rights offering concluded
on October 31, 1995. The portion of the Fund's total net assets invested in
equity securities has increased from 77% immediately following the closing of
the rights offering, to approximately 91% at the end of this quarter. Compared
to the subscription price per share in the rights offering of $11.25, the
closing price on January 31, 1996 of $15.50 represents an increase of approxi-
mately 38%.
Fund shares continue registering high levels of liquidity. During this three-
month period, a total of 37 million shares traded on all US consolidated mar-
kets, equivalent to 75% of the 49.7 million shares outstanding.
A dividend of 8 cents per share is payable on April 30, 1996, to shareholders
of record on March 29, 1996. This dividend is comprised of net investment in-
come. This dividend is subject to applicable Mexican withholding taxes. Non-US
shareholders generally will be subject to a US withholding tax at a maximum
rate of 30%. Shareholders are advised to consult with their own tax adviser
about this and other taxes. This distribution is reportable by US taxpayers on
their US Federal income tax return.
ANNUAL SHAREHOLDERS MEETING
The Annual Shareholders Meeting of the Fund was held on February 27, 1996 in
New York City. There were approximately 78% of the outstanding shares present
at the meeting in person and by proxy. The two directors nominated for reelec-
tion, Messrs. Juan Gallardo T. and Agustin Santamarina V. were reelected to
the Board. In addition, the proposal to ratify the selection of Arthur Ander-
sen LLP as independent auditors for the 1996 fiscal year received a favorable
shareholders vote.
The specific results of the meeting were as follows:
<TABLE>
<CAPTION>
VOTES
VOTES VOTES WITH- ABSTEN-
FOR AGAINST HELD TIONS
---------- ------- ------- -------
<S> <C> <C> <C> <C>
1. Election of Directors
Juan Gallardo T. 38,685,724 -- 742,504 --
Agustin Santamarina V. 38,682,253 -- 745,974 --
2. Ratify selection of
Arthur Andersen LLP 38,821,194 295,807 -- 311,223
</TABLE>
All of the Fund's other directors, Messrs. Philip Caldwell, Ernesto Fernandez
Hurtado, Jose Luis Gomez Pimienta, Claudio X. Gonzalez and Robert L. Knauss,
continue to serve as directors of the Fund.
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. UNDER THE TERMS OF THE AMENDED PLAN, FUND SHAREHOLDERS ARE
AUTOMATICALLY ENROLLED AS PARTICIPANTS IN THE PLAN. IF YOU DO NOT WISH TO PAR-
TICIPATE IN THE PLAN, PLEASE CONTACT THE PLAN AGENT. The Plan provides a con-
venient way to increase your holdings in the Fund's common stock through the
reinvestment of net
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
investment income and capital gains distributions. If you have any questions
concerning the Plan or would like a copy of the Plan brochure, please contact
the Plan Agent:
AMERICAN STOCK TRANSFER & TRUST COMPANY
Attention: Dividend Reinvestment Department
40 Wall Street
New York, NY 10005
(212) 936-5100
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 economy
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 Ad-
viser 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 share-
holders 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 ap-
propriate 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 Pimienta Juan Gallardo T.
President Chairman of the Board
March 26, 1996
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Exchange 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>
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
SCHEDULE OF INVESTMENTS AS OF JANUARY 31,1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES DIV HELD COMMON STOCK (90.72%) SERIES (NOTE 1) NET ASSETS
- -----------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
CEMENT 6,088,043 Apasco, S.A. de C.V..... * $ 31,479,958 3.76%
INDUSTRY 19,016,958 Cemex, S.A.............. A 72,273,170 8.63
------------ -----
103,753,128 12.39
- -----------------------------------------------------------------------------------------
COMMUNICATIONS 1,268,200 Grupo Televisa, S.A. de
C.V.................... CPO 17,977,724 2.15
(a) 1,336,000 Grupo Iusacell, S.A. de
C.V.................... D 1,244,552 0.15
10,000,000 Telefonos de Mexico, S.A
de C.V................. *A 16,848,927 2.01
13,095,000 Telefonos de Mexico, S.A
de C.V................. *L 22,169,745 2.65
------------ -----
58,240,948 6.96
- -----------------------------------------------------------------------------------------
CONSTRUCTION (a) 1,000,000 Corporacion Geo, S.A. de
C.V.................... B 3,307,682 0.40
1,496,332 Empresas ICA, Sociedad
Controladora, S.A. de
C.V.................... * 20,181,391 2.41
------------ -----
23,489,073 2.81
- -----------------------------------------------------------------------------------------
CONSUMER GOODS 4,430,000 Coca-Cola Femsa, S.A. de
C.V.................... L 11,160,227 1.33
7,842,000 Fomento Economico
Mexicano, S.A. de C.V.. B 21,915,674 2.62
3,053,000 Grupo Continental, S.A.. *CP 9,892,264 1.18
7,502,474 Grupo Industrial Bimbo,
S.A de C.V............. A 31,197,003 3.73
27,097,000 Grupo Industrial Maseca,
S.A. de C.V............ B 19,462,136 2.32
8,628,000 Grupo Modelo, S.A. de
C.V.................... C 40,187,120 4.80
(a) 720,000 Jugos del Valle, S.A. de
C.V.................... B 1,020,656 0.12
1,275,000 Sistema Argos, S.A. de
C.V.................... A 791,819 0.09
5,805,000 Sistema Argos, S.A. de
C.V.................... B 3,722,661 0.44
------------ -----
139,349,560 16.63
- -----------------------------------------------------------------------------------------
FINANCIAL 5,778,450 Grupo Financiero Banamex
GROUPS Accival, S.A. de C.V... B 11,421,157 1.36
288,922 Grupo Financiero Banamex
Accival, S.A. de C.V... L 565,596 0.07
(a) 17,000,009 Grupo Financiero
Bancomer, S.A de C.V... B 7,068,993 0.85
(a) 555,556 Grupo Financiero
Bancomer, S.A de C.V... L 208,512 0.03
(a) 366,000 Grupo Financiero GBM
Atlantico, S.A. de
C.V.................... B 237,181 0.03
3,112,675 Grupo Financiero
Inbursa, S.A de C.V.... B 10,484,844 1.25
(a) 1,412,500 Grupo Financiero
Inverlat, S.A. de C.V.. B 324,187 0.04
(a) 9,985,554 Grupo Financiero
InverMexico, S.A. de
C.V.................... BCP 1,213,312 0.14
(a) 998,555 Grupo Financiero
InverMexico, S.A. de
C.V.................... LCP 121,331 0.01
(a) 1,663,283 Grupo Financiero Serfin,
S.A. de C.V............ B4 1,212,600 0.15
(a) 2,507,941 Grupo Financiero Serfin,
S.A. de C.V............ BCP 1,828,390 0.22
------------ -----
34,686,103 4.15
- -----------------------------------------------------------------------------------------
HOLDINGS 3,110,000 Alfa, S.A. de C.V....... *A 41,777,373 4.99
830,000 Corporacion Industrial
San Luis, S.A. de C.V.. CPO 4,571,891 0.55
(a) 5,126,284 Cydsa, S.A.............. A 12,665,181 1.51
(a) 1,789,190 Desc, S.A. de C.V....... A 6,811,821 0.81
(a) 5,760,190 Desc, S.A. de C.V....... B 23,174,519 2.77
(a) 178,919 Desc, S.A. de C.V....... C 717,415 0.09
(a) 6,975,994 Grupo Carso, S.A. de
C.V.................... A1 48,126,542 5.75
(a) 5,715,834 Grupo Sidek, S.A. de
C.V.................... A 2,654,579 0.32
3,998,237 Vitro, S.A.............. * 8,183,242 0.98
------------ -----
148,682,563 17.77
- -----------------------------------------------------------------------------------------
IRON & STEEL (a) 2,202,826 Altos Hornos de Mexico,
INDUSTRY S.A. de C.V............ * 14,438,666 1.72
(a) 4,000,000 Grupo Simec, S.A. de
C.V.................... B 1,479,681 0.18
(a) 6,028,000 Hylsamex, S.A. de C.V... BCP 21,729,121 2.60
------------ -----
37,647,468 4.50
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
SCHEDULE OF INVESTMENTS AS OF JANUARY 31,1996 (UNAUDITED) -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON STOCK (90.72%) VALUE PERCENT OF
INDUSTRIES DIV HELD (CONTINUED) SERIES (NOTE 1) NET ASSETS
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
MINING (a) 8,259,000 Grupo Mexico, S.A. de
INDUSTRY C.V...................... B 33,562,292 4.01%
6,205,000 Industrias Penoles, S.A de
C.V...................... * 26,890,846 3.21
------------ ------
60,453,138 7.22
- -----------------------------------------------------------------------------------------------
PAPER 4,258,400 Kimberly-Clark de Mexico,
S.A. de C.V.............. A 71,002,079 8.48
- -----------------------------------------------------------------------------------------------
RETAIL TRADE (a) 39,698,422 Cifra, S.A. de C.V........ B 51,344,793 6.13
(a) 16,232,807 Cifra, S.A. de C.V........ C 20,469,072 2.45
(a) 13,800,000 Controladora Comercial
Mexicana, S.A. de C.V.... B 9,315,512 1.11
------------ ------
81,129,377 9.69
- -----------------------------------------------------------------------------------------------
SERVICE (a) 256,700 Videoprima, S.A. de C.V... * 985,975 0.12
- -----------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost
$496,676,054).............. 759,419,412 90.72%
- -----------------------------------------------------------------------------------------------
<CAPTION>
FACE SHORT-TERM SECURITIES VALUE PERCENT OF
SECURITIES VALUE (9.46%) (NOTE 1) NET ASSETS
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
TIME DEPOSITS $ 79,204,397 Bancomer, S.A., 33.5% due
02/01/96................. $ 79,204,397 9.46%
- -----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM
SECURITIES (Cost
$79,204,397 ).............. 79,204,397 9.46
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost
$575,880,451 )............. 838,623,809 100.18
LIABILITIES IN EXCESS OF
OTHER ASSETS............. (1,526,921) (0.18)
------------ ------
NET ASSETS (Equivalent to
$16.84 Per Share on
49,715,907 Shares of
Capital Stock Outstanding). $837,096,888 100.00%
------------ ------
</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>
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AS OF JANUARY 31,1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments:
Mexican securities, at value (Note 1):
Common stock (identified cost $496,676,054)......... $759,419,412
Short term securities (identified cost $79,204,397). 79,204,397
------------
Total investments (identified cost $575,880,451)... $838,623,809
Interest receivable.................................. 73,738
------------
Total assets....................................... 838,697,547
------------
LIABILITIES:
Payables:
Investment adviser (Note 2)......................... 617,189
Trustee (Note 3).................................... 8,382
------------
Total payables..................................... 625,571
Accrued expenses and other liabilities............... 811,535
Payables for offering expenses....................... 163,553
------------
Total liabilities.................................. 1,600,659
------------
NET ASSETS -- Equivalent to $16.84 Per Share on
49,715,907 shares of capital stock outstanding (Note
5).................................................. $837,096,888
============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE
JANUARY YEAR
THE MEXICO FUND, INC. 31, 1996 ENDED
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) OCTOBER 31,1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income...................... $ 6,945,817 $ 21,970,230
Net realized gain (loss) on investments and
foreign currency transactions............. (16,143,169) (45,716,330)
Net unrealized gain (loss) on investments
and translation of assets and liabilities
in foreign currency....................... 161,854,248 (670,000,040)
------------ --------------
Net increase (decrease) in net assets
resulting from operations................. 152,656,896 (693,746,140)
Dividends to shareholders from net
investment income......................... (1,456,316) (257,221)
Dividends to shareholders from net realized
gain on investments....................... -- (517,898)
Tax return of capital (Note 1)............. -- (1,726,529)
Net increase in capital stock (Note 5)..... -- 134,050,437
------------ --------------
Total increase (decrease) in net assets... 151,200,580 (562,197,351)
NET ASSETS:
Beginning of period........................ 685,896,308 1,248,093,659
------------ --------------
End of period.............................. $837,096,888 (A) $ 685,896,308 (A)
============ ==============
</TABLE>
See Notes to Financial Statements.
(A) Including undistributed net investment income and net realized gain on
investments of $3,387,784 and $0 (B), respectively, as of January 31, 1996
and undistributed net investment income and net realized gain on
investments of $0 and $0(B), respectively, as of October 31, 1995.
(B) Including $4,143,234 of capital gains, net of income taxes paid in 1991,
which will not be distributed.
<PAGE>
- --------------------------------------------------------------------------------
THE MEXICO FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED JANUARY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
NET INVESTMENT INCOME:
Income (Note 1):
Dividends......................................... $ 754,002
Interest and discount earned...................... 8,208,422
------------
Total income...................................... $ 8,962,424
Expenses:
Investment advisory fee (Note 2).................. 1,292,850
Administrative services (Note 3).................. 87,500
Trustee fee (Note 3).............................. 20,749
Value-added taxes (Note 1)........................ 212,564
Printing, distribution and mailing of shareholder
reports.......................................... 115,329
Legal fees expense................................ 56,143
Directors' fees................................... 40,962
Directors' expenses............................... 6,823
Accounting and audit fees expense................. 25,240
Custodian fees.................................... 12,302
Transfer agent and dividend disbursing fees....... 4,747
Shareholders' information......................... 34,996
Stock exchange fees............................... 8,893
Miscellaneous..................................... 97,509
------------
Operating expenses................................ 2,016,607
------------
Net investment income (Note 1).................... 6,945,817
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVEST-
MENTS AND FOREIGN CURRENCY:
Realized gain (loss) on investments and foreign
currency transactions (Notes 1 and 4)
Proceeds from sales............................... 25,858,315
Cost of securities sold........................... 42,030,395
------------
Net realized gain (loss) on investments........... (16,172,080)
Net realized gain (loss) from foreign currency
transactions...................................... 28,911
------------
Net realized gain (loss) on investments and for-
eign currency transactions....................... (16,143,169)
Unrealized gain (loss) on investments and transla-
tion of assets and liabilities in foreign curren-
cy:
End of period (Note 4)............................ 262,743,358
Beginning of period............................... 102,222,345
------------
Net increase (decrease) in unrealized gain on in-
vestments........................................ 160,521,013
Net unrealized gain (loss) on translation of assets
and liabilities in foreign currency............... 1,333,235
------------
Net unrealized gain (loss) on investments and
translation of assets and liabilities in foreign
currency......................................... 161,854,248
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS............................................. $152,656,896
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE
ENDED FIVE MONTHS
JANUARY 31, FOR THE YEAR ENDED OCTOBER 31, ENDED
1996 ---------------------------------------------- OCTOBER 31,
THE MEXICO FUND, INC. (UNAUDITED) 1995 1994 1993 1992 1991
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 13.80 $ 33.48** $ 28.88** $ 24.91** $ 25.60** $ 24.07
-------- -------- ---------- ---------- -------- --------
Net investment income
(loss)(Note 1)........ 0.11 0.59** 0.21** 0.58** 0.50** (0.02)
Net gain (loss) on
investments and
translation of foreign
currency (Note 1)..... 2.96 (19.21)** 4.89** 8.77** 3.85** 1.81
-------- -------- ---------- ---------- -------- --------
Total from investment
operations............. 3.07 (18.62)** 5.10** 9.35** 4.35** 1.79
-------- -------- ---------- ---------- -------- --------
Less dividends and
distributions:
Dividends to common
shareholders from net
investment income..... (0.03) 0.00 (0.27) (0.49) (0.48) (0.26)
Distributions to common
shareholders from net
capital gains......... -- (0.01) (0.23) (2.48) (1.03) --
-------- -------- ---------- ---------- -------- --------
Total dividends and
distributions......... (0.03) (0.01) (0.50) (2.97) (1.51) (0.26)
-------- -------- ---------- ---------- -------- --------
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................ $ 16.84 $ 13.80 $ 33.48 $ 28.88 $ 24.91 $ 25.60
======== ======== ========== ========== ======== ========
Market value per share,
end of period......... $ 15.50 $ 12.25 $ 31.38 $ 27.00 $ 23.25 $ 22.88
======== ======== ========== ========== ======== ========
TOTAL INVESTMENT RETURN
BASED ON MARKET VALUE
PER SHARE.............. 26.77% (60.79%) 15.39% 27.41% 8.12% (1.52%)
RATIOS TO AVERAGE NET
ASSETS
Expenses............... 1.09%* 1.14% 0.92% 1.08% 1.08% 1.25%*
Net investment income
(loss)................ 3.75%* 3.24% 0.63% 2.27% 1.89% (0.23%)*
SUPPLEMENTAL DATA:
Net assets at end of
period (in 000's)..... $837,097 $685,896 $1,248,094 $1,075,948 $654,917 $504,849
Portfolio turnover
rate.................. 3.99% 10.61% 3.89% 5.14% 15.59% 3.34%*
</TABLE>
- -------
* Annualized
** Amounts were computed based on average shares outstanding during the period.
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------
QUARTER ENDED
01/31/1996
---------------------------
TOTAL PER SHARE
----------- --------------
<S> <C> <C>
Investment Income....... $ 8,962 $ 0.18
Net Investment Income... $ 6,946 $ 0.14
Net realized gain (loss)
on investments......... $ (16,172) $ (0.33)
Net realized gain (loss)
from foreign currency
transactions........... $ 29 $ 0.00
Net increase (decrease)
in unrealized gain on
investments............ $ 160,521 $ 3.23
Net unrealized (loss) on
translation of assets
and liabilities in
foreign currency....... $ 1,333 $ 0.03
Net asset value......... $ 837,097 $ 16.84
</TABLE>
- -------
See Notes to Financial Statements.
- ----------------------------------
THE MEXICO FUND, INC.
NOTES TO FINANCIAL STATEMENTS --
JANUARY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 as a diversi-
fied, closed-end management investment company. The investment objective of the
Fund is to seek long term capital appreciation through investment in securi-
ties, primarily equity but also fixed income securities, listed on the Mexican
Stock Exchange. On July 17, 1991, the Board of Directors voted to change the
year-end of the Fund from May 31 to October 31.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses for the
period. Actual results could differ from those estimates. 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 re-
sults 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 transactions, and
the inclusion of unrealized gain (loss)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
on translation of currency into unrealized appreciation (depreciation) of in-
vestments and translation of assets and liabilities in foreign currencies.
Effective January 1, 1996, the name of the mexican currency unit is "Peso
(P)", which prior to 1996 was referred to as "New Peso (NP)." The market value
of Mexican securities, currency holdings and other assets and liabilities de-
nominated in "Peso (P)" were recorded in the financial state-ments after trans-
lation into U.S. dollars based on the open market exchange rate prevailing in
Mexico City at the end of the period. The open market exchange rate at January
31, 1996 was P 7.407 to $1.00.
The identified cost of portfolio holdings is translated at approximate rates
prevailing when acquired. Income and expense amounts are translated at approxi-
mate 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
Peso foreign exchange rates, interest rates and portfolio value. The accompany-
ing financial statements reflect the financial condition of the Fund at January
31, 1996 and the results of operations for the three months then ended.
Given the aforementioned conditions and the significant increases in inflation
rates during this period, the financial condition and results of operation 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, interest, 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 exchange
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 accompanying
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.
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 three months
ended January 31, 1996 on net investment company taxable income or net long-
term capital gains as defined
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
by the Internal Revenue Code (the "Code"), since the Fund intends to comply
with the requirements of the Code applicable to regulated 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 Mexi-
can corporations to 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 if applicable.
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 million.
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 offering of
the Fund, in June 1981, the 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 deter-
mination and publication of the net asset value of the Fund, the maintenance 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 agree-
ment runs until August 31, 1996. The annual fee payable to the Adviser under
this agreement is $350,000.
Effective May 1, 1994, the Fund amended its agreement with NAFIN, establishing
a fixed annual fee of $350,000 for the remaining services to be provided by
NAFIN.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, effective
October 5, 1995, Bancomer receives P 600,000 (approximately $81,000) per year
for three years, subject to a monthly increase linked to the Mexican Consumer
Price Index, monthly cumulative basis. This fee arrangement will result in sig-
nificantly lower trustee fees to the Fund. In this regard, the Fund entered
into a definitive arrangement on October 5, 1995 with Bancomer and 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
three months ended January 31, 1996 were as follows:
<TABLE>
<CAPTION>
Purchases
- --------------------------------------------------------------------------------
<S> <C>
Common Stock....................................................... $110,740,216
Fixed Income Securities............................................ --
------------
Total Purchases.................................................. $110,740,216
============
<CAPTION>
Proceeds from Investments Sold
- --------------------------------------------------------------------------------
<S> <C>
Common Stock....................................................... $25,858,315
Fixed Income Securities............................................ --
------------
Total Sales...................................................... $25,858,315
============
</TABLE>
As of January 31, 1996, net unrealized gain on investments for Federal income
tax purposes aggregated to approximately $263 million, of which approximately
$345 million related to appreciated securities and approximately $82 million
related to depreciated securities. The aggregate cost of investments at January
31, 1996 for Federal income tax purposes was approximately $576 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
January 31,1996 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 out-
standing and 251,825 shares were held in treasury.
Starting with the distribution made to share- holders on July 30, 1993, the
Fund offered a Dividend Reinvestment Plan ("Plan"). Under this Plan, the Com-
pany sold, in fiscal year 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 share- holders automatically will be enrolled as partici-
pants in the Plan unless they notify the Fund otherwise.
On October 13, 1995, the Company issued rights to suscribe 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.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As of January 31, 1996, net assets were comprised of the following:
<TABLE>
<S> <C>
Common Stock..................................................... $ 49,715,907
Additional paid-in capital....................................... 562,178,531
Undistributed net investment income.............................. 3,387,784
Accumulated net realized loss on investments..................... (33,901,539)
Unrealized appreciation of investments and depreciation on
translation of assets and liabilities in foreign currency....... 255,716,205
------------
$837,096,888
============
</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 annually
to shareholders. Capital loss carryforwards will be used to offset future capi-
tal gains available for distribution. The Fund had net capital loss
carryforwards at January 31, 1996 of approximately $38,040,000 of which
$21,870,000 and $16,172,000 expire in 2003 and 2004, respectively.
<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.
CUSTODIAN --
Bancomer, S.A.
TRANSFER AGENT AND REGISTRAR --
American Stock Transfer & Trust Company
COUNSEL --
Dechert Price & Rhoads
Creel, Garcia-Cuellar y Muggenburg, S.C.
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 MEXICO FUND APPEARS HERE]
THE MEXICO
FUND, INC.
(Unaudited)
--------------------
Quarterly Report
January 31, 1996
--------------------------
-----------------------------
-------------------------------
- --------------------------------------------------------------------------------
