<PAGE>
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THE MEXICO FUND, INC.
SEMI-ANNUAL REPORT
APRIL 30, 1996
HIGHLIGHTS
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.. On June 11, 1996, the Fund . Mexico's 12-month inflation
celebrated its fifteenth year rate at the end of April 1996
anniversary. reached a level of 36.9%,
compared with 52% at the end
of 1995.
.. The Fund's second fiscal
quarter of 1996 ended April . The Program of Additional
30, 1996. Benefits for Mortgage Debt-
ors, announced on May 17,
.. The Fund's net asset value 1996, will offer debtors who
(NAV) and price per share participate an immediate 30%
ended this period at $18.15 discount in their monthly
and $15.50, respectively, re- payments during 1996.
flecting a discount from mar-
ket price to NAV of approxi- . Mexico's gross domestic
mately 15%. product (GDP) declined 1%
during the first calendar
.. The Fund has continued in- quarter of 1996.
vesting the proceeds from its
recent rights offering. As of . Annual interest rates for
the end of this quarter, 92% the 28-day Cetes (Treasury
of the Fund's net assets were Bills) ended May 1996 at a
invested in equity securi- level of 25.6%, compared with
ties, compared with 77% imme- 36.4% at the end of January.
diately following the closing
of the rights offering. . The Mexican Stock Exchange
(Bolsa) index increased 4.8%
.. Total volume of Fund shares in US dollar terms during
traded on all U.S. consoli- this fiscal quarter, while
dated markets during this the Fund's NAV increased ap-
second fiscal quarter proximately 8%.
amounted to 19.3 million,
compared with 49.7 million . A dividend of 15.0 cents per
outstanding. share is payable on July 31,
1996, to shareholders of rec-
.. According to preliminary ord on June 28, 1996.
figures issued by the Mexican
authorities, during the first
four months of calendar 1996,
the Mexican trade account
registered a surplus of $2.6
billion, 68% higher than one
year before.
.. The Mexican peso has per-
formed in a stable manner
during this fiscal quarter.
<PAGE>
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THE MEXICO FUND, INC.
TO OUR SHAREHOLDERS:
- --------------------------------------------------------------------------------
We are pleased to announce the fifteenth anniversary of your Fund.
ECONOMIC COMMENTS
According to preliminary figures prepared by the Mexican Secretary of Finance
and Public Credit (Hacienda), the country's GDP declined 1% during the first
quarter of calendar 1996, compared with the same period of last year. Although
negative, this decline was expected to be higher. The Mexican government esti-
mates that the GDP will register a positive growth beginning with the second
calendar quarter of 1996.
The Mexican trade balance continues registering surpluses. According to Haci-
enda, during the first four months of calendar 1996, and compared with the same
period of 1995, total exports increased 20% and amounted to $29.7
billion, while total imports increased 17% to $27 billion. The result was a
trade balance surplus of $2.6 billion, which compares positively with a $1.5
billion surplus registered during the same period of 1995.
Inflation rates, measured by the increase in the Consumer Price Index (CPI),
continue to register a declining trend. For the month of April 1996, the infla-
tion rate was 2.84%, and 36.93% on a 12-month basis. For the first four months
of 1996, the cumulative inflation rate was 11.43%. The Mexican government esti-
mates that at the end of this year, the annual inflation rate will be approxi-
mately 20.5%.
The Mexican peso has been following a stable performance during the first four
months of calendar 1996. At the end of April, the rate of exchange of the peso
against the US dollar closed at P$7.425 compared with P$7.690 at the end of
1995. This fluctuation is equivalent to a 3.5% strengthening of the peso versus
the US dollar during this period.
Domestic interest rates continue experiencing a declining trend. At the last
auction of May 1996, the yield of the 28-day Cetes (treasury bills) closed at
25.6%, its lowest level since the December 1994 devaluation of the peso. This
level is significantly lower than the 61% registered one year earlier.
The high levels of interest rates and financial difficulties since the Decem-
ber 1994 devaluation of the peso have affected a significant portion of mort-
gage debtors and resulted in an important increase in the levels of non-per-
forming loans for commercial banks. In a response to this situation, the Mexi-
can government and commercial banks unveiled on May 17, 1996, the Program of
Additional Benefits for Mortgage Debtors. Under the terms of this program,
debtors will receive a 30% discount on their monthly payments during 1996, and
the discount will gradually decrease to 5% in 2005. The program will have a
cost equivalent to 1.2% of the GDP in 1996, which will be shared between the
government and the banks. The costs associated with this mortgage program will
be a continuing charge to the government and banking system throughout the pro-
gram's 10-year life. Since this program is only applicable to mortgage
<PAGE>
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debtors who are making timely payments, it is expected that non-performing
loans will be restructured to permit mortgage debtors to benefit from the new
program.
Hacienda announced that $1.75 billion of a new 30-year global bond was issued
in exchange for a portion of the currently outstanding Mexican Brady bonds. The
transaction will raise new capital by freeing up the US bond collateral that
guaranteed the Mexican Brady securities. The total amount of tender offers re-
ceived exceeded $3 billion.
THE BOLSA AND THE FUND PERFORMANCE
Encouraged by the recent positive performance of most of the economic indica-
tors, foreign investment into the country amounted to $2.7 billion during the
first three months of 1996, compared with an outflow of $5.9 billion during the
same period of last year. Partially impacted by these positive expectations of
foreign investors, the Bolsa index continued its upward trend during this fis-
cal period and reached a new historical level of 3,284 points on April 19,
1996. At the end of this fiscal quarter, the index closed at 3,187 points, 4.8%
higher in dollar terms than at the end of the previous quarter, and 19% higher
than the level registered one year earlier.
During this fiscal quarter, the Fund's NAV per share increased approximately
8% to close at $18.15, while the market price remained stable at $15.50, re-
flecting a discount of nearly 15%. Since the closing of the rights offering
transaction on October 31, 1995, and until the end of this fiscal quarter, the
Fund's NAV and price per share have increased 32% and 27%, respectively.
At the end of this fiscal quarter, 92% of the Fund's portfolio was comprised
of equity securities, compared with 77% at the end of the rights offering. To-
tal net assets at the end of this quarter amounted to $902 million, compared
with $837 million at the end of the previous quarter of fiscal 1996.
Fund shares continue registering high levels of liquidity. During this second
fiscal quarter, more than 19 million shares were traded on all US consolidated
markets; for the first half of fiscal 1996, this figure amounted to more than
56 million shares, equivalent to 1.13 times the total number of outstanding
shares.
The Board of Directors has declared a dividend of 15.0 cents per share payable
on July 31, 1996, to shareholders of record on June 28, 1996. This dividend is
comprised entirely of net investment income and is subject to applicable with-
holding taxes. Non-US shareholders generally will be subject to a US withhold-
ing 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 report-
able by US taxpayers on their US Federal income tax return.
<PAGE>
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DIVIDEND REINVESTMENT PLAN
The Fund's Dividend Reinvestment Plan ("Plan") was amended by the Board of Di-
rectors at the December 7, 1994 Board Meeting. This new Plan became effective
April 1, 1995. UNDER THE TERMS OF THE AMENDED PLAN, FUND SHAREHOLDERS ARE AUTO-
MATICALLY ENROLLED AS PARTICIPANTS IN THE PLAN. IF YOU DO NOT WISH TO PARTICI-
PATE IN THE PLAN, PLEASE CONTACT THE PLAN AGENT. The Plan provides a convenient
way to increase your holdings in the Fund's common stock through the reinvest-
ment of net 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
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 Pimienta Juan Gallardo T.
President Chairman of the Board
June 11, 1996
<PAGE>
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SHAREHOLDER INFORMATION
Weekly comparative NAV and market price information about 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 news-
papers 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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THE MEXICO FUND, INC.
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES DIV HELD COMMON STOCK (92.13%) SERIES (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CEMENT INDUSTRY 6,088,043 Apasco, S.A. de C.V. ............................... * $ 33,043,519 3.66%
19,016,958 Cemex, S.A. de C.V. ................................ A 76,323,953 8.46
------------ -----
109,367,472 12.12
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS (a) 1,268,200 Grupo Televisa, S.A. de C.V. ...................... CPO 19,898,357 2.20
10,000,000 Telefonos de Mexico, S.A. de C.V................... *A 16,996,633 1.88
13,095,000 Telefonos de Mexico, S.A. de C.V................... *L 22,116,000 2.45
------------ -----
59,010,990 6.53
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION (a) 1,000,000 Corporacion Geo, S.A. de C.V. ..................... B 3,959,596 0.44
(a) 1,496,332 Empresas ICA, Sociedad Controladora, S.A. de C.V... * 20,595,977 2.28
------------ -----
24,555,573 2.72
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER GOODS 4,430,000 Coca-Cola Femsa, S.A. de C.V. ..................... L 11,872,997 1.32
7,842,000 Fomento Economico Mexicano, S.A. de C.V. B......... 23,658,020 2.62
3,053,000 Grupo Continental, S.A............................. *CP 10,937,347 1.21
7,802,474 Grupo Industrial Bimbo, S.A de C.V. ............... A 35,728,500 3.96
27,097,000 Grupo Industrial Maseca, S.A. de C.V. ............. B 26,494,844 2.94
8,775,000 Grupo Modelo, S.A. de C.V. ........................ C 41,304,545 4.58
(a) 818,000 Jugos del Valle, S.A. de C.V....................... B 1,079,650 0.12
1,275,000 Sistema Argos, S.A. de C.V. ....................... A 841,414 0.09
5,805,000 Sistema Argos, S.A. de C.V. ....................... B 3,784,000 0.42
------------ -----
155,701,317 17.26
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL GROUPS (a) 5,778,450 Grupo Financiero Banamex Accival, S.A. de C.V...... B 13,323,510 1.48
(a) 470,944 Grupo Financiero Banamex Accival, S.A. de C.V...... L 967,893 0.11
(a) 21,000,009 Grupo Financiero Bancomer, S.A de C.V. ............ B 9,333,337 1.03
(a) 555,556 Grupo Financiero Bancomer, S.A de C.V. ............ L 197,531 0.02
(a) 366,000 Grupo Financiero GBM Atlantico, S.A. de C.V. ...... B 216,889 0.02
3,112,675 Grupo Financiero Inbursa, S.A. de C.V. ............ B 12,115,328 1.34
(a) 1,412,500 Grupo Financiero Inverlat, S.A. de C.V. ........... B 323,401 0.04
(a) 9,985,554 Grupo Financiero InverMexico, S.A. de C.V. ........ BCP 1,250,716 0.14
(a) 998,555 Grupo Financiero InverMexico, S.A. de C.V. ........ LCP 123,727 0.01
(a) 1,663,283 Grupo Financiero Serfin, S.A. de C.V. ............. B4 1,075,254 0.12
(a) 2,507,941 Grupo Financiero Serfin, S.A. de C.V. ............. BCP 1,621,295 0.18
------------ -----
40,548,881 4.49
- ------------------------------------------------------------------------------------------------------------------------------------
HOLDINGS 3,110,000 Alfa, S.A. de C.V. ................................ *A 45,487,677 5.04
1,280,000 Corporacion Industrial San Luis, S.A. de C.V....... CPO 7,516,229 0.83
5,126,284 Cydsa, S.A. ....................................... A 13,117,764 1.45
(a) 1,789,190 Desc, S.A. de C.V. ................................ A 8,674,861 0.96
(a) 6,193,190 Desc, S.A. de C.V. ................................ B 30,945,098 3.43
(a) 178,919 Desc, S.A. de C.V. ................................ C 860,257 0.10
(a) 6,975,994 Grupo Carso, S.A. de C.V. ......................... A1 53,271,227 5.90
(a) 4,050,834 Grupo Sidek, S.A. de C.V. ......................... A 1,129,323 0.13
3,998,237 Vitro, S.A. ....................................... * 9,208,061 1.02
------------ -----
170,210,497 18.86
- ------------------------------------------------------------------------------------------------------------------------------------
IRON & STEEL INDUSTRY (a) 2,254,826 Altos Hornos de Mexico, S.A. de C.V. ............... * 16,398,735 1.82
(a) 4,500,000 Grupo Simec, S.A. de C.V. .......................... B 1,303,030 0.14
6,048,000 Hylsamex, S.A. de C. ............................... BCP 24,029,091 2.66
(a) 550,000 Tubos de Acero de Mexico, S.A. de C.V. ............. * 4,555,556 0.51
------------ -----
46,286,412 5.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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THE MEXICO FUND, INC.
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 1996 (UNAUDITED) -- (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE PERCENT OF
INDUSTRIES DIV HELD COMMON STOCK (92.13%)(CONTINUED) SERIES (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MINING INDUSTRY (a) 8,700,000 Grupo Mexico, S.A. de C.V............................... B $ 32,925,252 3.65%
6,299,000 Industrias Penoles, S.A. de C.V......................... * 26,553,360 2.94
------------ ------
59,478,612 6.59
- ------------------------------------------------------------------------------------------------------------------------------------
PAPER 4,258,400 Kimberly-Clark de Mexico, S.A. de C.V................... A 77,998,976 8.64
- ------------------------------------------------------------------------------------------------------------------------------------
RETAIL TRADE (a) 38,698,422 Cifra, S.A. de C.V...................................... B 53,369,945 5.92
(a) 16,232,807 Cifra, S.A. de C.V...................................... C 21,600,018 2.39
(a) 13,800,000 Controladora Comercial Mexicana, S.A. de C.V............ B 12,638,384 1.40
------------ ------
87,608,347 9.71
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICE (a) 256,700 Videoprima, S.A. de C.V................................. * 726,020 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (identified cost) -- $507,477,028)............. 831,493,097 92.13
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE PERCENT OF
SECURITIES VALUE SHORT-TERM SECURITIES (7.99%) (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TIME DEPOSITS $ 29,145 Bancomer, S.A., 3.65% due 05/02/96................................ 29,145 0.00
72,084,869 Bancomer, S.A., 31.25% due 05/02/96............................... 72,084,869 7.99
------------ ------
72,114,014 7.99
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES (identified cost -- $72,114,014)...... 72,114,014 7.99
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (identified cost -- $579,591,042)............... 903,607,111 100.12
LIABILITIES IN EXCESS OF OTHER ASSETS............................. (1,110,131) (0.12)
------------ ------
NET ASSETS (Equivalent to $18.15 Per Share on 49,715,907 Shares of
Capital Stock Outstanding)...................................... $902,496,980 100.00%
------------ ------
</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 APRIL 30, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments:
Mexican securities, at value (Note 1):
Common stock (identified cost $507,477,028)......... $831,493,097
Short-term securities (identified cost
$72,114,014)....................................... 72,114,014
------------
Total investments (identified cost $579,591,042)... $903,607,111
Dividends receivable................................. 846,618
Interest receivable.................................. 62,577
------------
Total assets........................................ 904,516,306
------------
LIABILITIES:
Payables:
Investment adviser (Note 2)......................... 637,705
Trustee (Note 3).................................... 9,060
------------
Total payables.................................... 646,765
Accrued expenses and other liabilities............... 820,141
Payables for securities purchased.................... 414,763
Payables for offering expenses....................... 137,657
------------
Total liabilities................................. 2,019,326
------------
NET ASSETS -- Equivalent to $18.15 Per Share on
49,715,907 shares of capital stock outstanding (Note
5).................................................. $902,496,980
============
</TABLE>
See Notes to Financial Statements.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
THE MEXICO FUND, INC. APRIL 30, 1996 YEAR ENDED
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income.................... $ 16,531,940 $ 21,970,230
Net realized gain (loss) on investments
and foreign currency transactions....... (17,434,192) (45,716,330)
Net unrealized gain (loss) on investments
and translation of assets and
liabilities in foreign currency......... 222,936,513 (670,000,040)
------------ --------------
Net increase (decrease) in net assets re-
sulting from operations................. 222,034,261 (693,746,140)
Dividends to shareholders from net in-
vestment income......................... (5,433,589) (257,221)
Dividends to shareholders from net real-
ized 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 as-
sets................................... 216,600,672 (562,197,351)
NET ASSETS:
Beginning of period...................... 685,896,308 1,248,093,659
------------ --------------
End of period............................ $902,496,980 (A) $ 685,896,308 (A)
============ ==============
</TABLE>
(A) Including undistributed net investment income and net realized gain on
investments of $8,978,654 and $0 (B), respectively, as of April 30, 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.
See Notes to Financial Statements.
<PAGE>
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THE MEXICO FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30,1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
NET INVESTMENT INCOME:
Income (Note 1):
Dividends......................................... $ 5,533,877
Interest and discount earned...................... 15,185,425
------------
Total income...................................... $ 20,719,302
Expenses:
Investment advisory fee (Note 2).................. 2,708,425
Administrative services (Note 3).................. 175,000
Trustee fee (Note 3).............................. 43,607
Value-added taxes (Note 1)........................ 441,929
Printing, distribution and mailing of shareholder
reports.......................................... 249,775
Legal fees expense................................ 119,839
Directors' fees................................... 72,570
Directors' expenses............................... 14,535
Accounting and audit fees expense................. 52,436
Custodian fees.................................... 23,302
Transfer agent and dividend disbursing fees....... 9,438
Shareholders' information......................... 59,300
Stock exchange fees............................... 20,161
Miscellaneous..................................... 197,045
------------
Operating expenses................................ 4,187,362
------------
Net investment income (Note 1).................... 16,531,940
------------
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............................... 28,889,194
Cost of securities sold........................... 46,334,317
------------
Net realized gain (loss) on investments........... (17,445,123)
Net realized gain (loss) from foreign currency
transactions...................................... 10,931
------------
Net realized gain (loss) on investments and for-
eign currency transactions....................... (17,434,192)
Unrealized gain (loss) on investments and transla-
tion of assets and liabilities in foreign curren-
cy:
End of period (Note 4)............................ 324,016,069
Beginning of period............................... 102,222,345
------------
Net increase (decrease) in unrealized gain on in-
vestments........................................ 221,793,724
Net unrealized gain (loss) on translation of assets
and liabilities in foreign currency............... 1,142,789
------------
Net unrealized gain (loss) on investments and
translation of assets and
liabilities in foreign currency.................. 222,936,513
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS............................................. $222,034,261
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE
ENDED FIVE MONTHS
APRIL 30, FOR THE YEAR ENDED OCTOBER 31, ENDED
THE MEXICO FUND, INC. 1996 ------------------------------------------ OCTOBER 31,
FINANCIAL HIGHLIGHTS (UNAUDITED) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PER-
FORMANCE:
Net asset value, begin-
ning of period......... $ 13.80 $ 33.48** $ 28.88** $ 24.91** $ 25.60** $ 24.07
------- ------- --------- --------- ------- -------
Net investment income
(loss) (Note 1)....... 0.22 0.59** 0.21** 0.58** 0.50** (0.02)
Net gain (loss) on in-
vestments and transla-
tion of foreign cur-
rency (Note 1)........ 4.24 (19.21)** 4.89** 8.77** 3.85** 1.81
------- ------- --------- --------- ------- -------
Total from investments
operations............. 4.46 (18.62)** 5.10** 9.35** 4.35** 1.79
------- ------- --------- --------- ------- -------
Less dividends and dis-
tributions:
Dividends to common
shareholders from net
investment income..... (0.11) 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 dis-
tributions............. (0.11) (0.01) (0.50) (2.97) (1.51) (0.26)
------- ------- --------- --------- ------- -------
Tax return of capital.. -- (0.05) -- -- -- --
------- ------- --------- --------- ------- -------
Capital charge result-
ing from issuance of
fund shares........... -- (1.00) -- (2.41) (3.53) --
------- ------- --------- --------- ------- -------
Net asset value, end of
period................ $ 18.15 $ 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.............. 27.42% (60.79%) 15.39% 27.41% 8.12% (1.52%)
RATIOS TO AVERAGE NET
ASSETS
Expenses............... 1.07%* 1.14% 0.92% 1.08% 1.08% 1.25%*
Net investment income
(loss)................ 4.21%* 3.24% 0.63% 2.27% 1.89% (0.23%)*
SUPPLEMENTAL DATA:
Net assets at end of
period (in 000's)..... $902,497 $685,896 $1,248,094 $1,075,948 $654,917 $504,849
Portfolio turnover
rate.................. 4.12% 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 04/30/1996 QUARTER ENDED 01/31/1996
----------------------------- -----------------------------
TOTAL PER SHARE TOTAL PER SHARE
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Investment Income....... $ 11,757 $ 0.24 $ 8,962 $ 0.18
Net Investment Income... $ 9,586 $ 0.19 $ 6,946 $ 0.14
Net realized gain (loss)
on investments......... $ (1,273) $ (0.03) $ (16,172) $ (0.33)
Net realized gain (loss)
from foreign currency
transactions........... $ (18) $ (0.00) $ 29 $ 0.00
Net increase (decrease)
in unrealized gain on
investments............ $ 61,273 $ 1.23 $ 160,521 $ 3.23
Net unrealized gain
(loss) on translation
of assets and
liabilities in foreign
currency............... $ (190) $ (0.00) $ 1,333 $ 0.03
Net asset value......... $ 902,497 $ 18.15 $ 837,097 $ 16.84
</TABLE>
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See Notes to Financial Statements.
THE MEXICO FUND, INC.
NOTES TO FINANCIAL STATEMENTS --
APRIL 30, 1996 (UNAUDITED)
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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 secu-
rities, primarily equity but also fixed income securities, listed on the Mexi-
can 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 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)
<PAGE>
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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 statements 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 April
30, 1996 was P 7.425 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
Peso foreign exchange rates, interest rates and portfolio value. The accompa-
nying financial statements reflect the financial condition of the Fund at
April 30, 1996 and the results of operations for the six months 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, 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 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 include 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 six months
ended April 30,
<PAGE>
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1996 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 regulated investment
companies and to distribute substantially all of such income to its sharehold-
ers.
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.
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 prior year distributions as a tax re-
turn of capital.
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 an Administrative Services
Agreement with the Adviser, which provides for certain administrative services
previously performed by NAFIN to be performed by the Adviser, including the
determination 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.
<PAGE>
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("Bancomer") as the trustee for the Mexican Trust through which the Fund in-
vests. 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 (aproximately $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 significantly
lower trustee fees to the Fund. In this regard, the Fund entered into a defin-
itive 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
six months ended April 30, 1996 were as follows:
<TABLE>
<S> <C>
Purchases
- --------------------------------------------------------------------------------
Common Stock....................................................... $125,845,112
Fixed Income Securities............................................ --
------------
Total Purchases.................................................. $125,845,112
============
Proceeds from Investments Sold
- --------------------------------------------------------------------------------
Common Stock....................................................... $ 28,889,194
Fixed Income Securities............................................ --
------------
Total Sales...................................................... $ 28,889,194
============
</TABLE>
As of April 30, 1996, net unrealized gain on investments for Federal income
tax purposes aggregated to approximately $324 million, of which approximately
$396 million related to appreciated securities and approximately $72 million
related to depreciated securities. The aggregate cost of investments at April
30, 1996 for Federal income tax purposes was approximately $580 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
April 30, 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
outstanding and 251,825 shares were held in treasury.
Starting with the distribution made to shareholders 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 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 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>
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As of April 30, 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.............................. 8,978,654
Accumulated net realized loss on investments..................... (35,174,582)
Unrealized appreciation of investments and depreciation on
translation of assets and liabilities in foreign currency....... 316,798,470
------------
$902,496,980
============
</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 April 30, 1996 of approximately $39,315,000 of which
$21,870,000 and $17,445,000 expire in 2003 and 2004, respectively.
<PAGE>
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THE MEXICO FUND, INC.
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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.
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[LOGO OF THE MEXICO FUND, INC. APPEARS HERE]
THE MEXICO
FUND, INC.
(Unaudited)
---------------------
Semi-Annual Report
April 30, 1996
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