Edgar Filing: MEXICO FUND INC

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The Mexico Fund, Inc.
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Directors:
Juan Gallardo T. -- Chairman
Philip Caldwell
Jose Luis Gomez Pimienta
Claudio X. Gonzalez
Robert L. Knauss
Agustin Santamarina V.
Jaime Serra Puche

Officers:
Jose Luis Gomez Pimienta -- President
Samuel Garcia-Cuellar -- Secretary
Allan S. Mostoff -- Assistant Secretary
Sander M. Bieber -- Assistant Secretary
Carlos H. Woodworth -- Treasurer
Hector Trigos -- Research Vice President
Alberto Osorio -- Finance Vice President
Eduardo Solano -- Investor Relations Vice President
Investment Adviser --
Impulsora del Fondo Mexico, S.A. de C.V.

Custodian --
BBVA Bancomer, S.A.
Comerica Bank

Transfer Agent and Registrar --
American Stock Transfer & Trust Company

Counsel --
Dechert
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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The Mexico
Fund, Inc.

(Unaudited) 20th Anniversary 1981-2001

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First Quarter Report
January 31, 2001

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www.themexicofund.com
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The Mexico Fund, Inc.
First Quarter Report
January 31, 2001
Highlights

. The Fund's first quarter of fiscal 2001 ended January 31, 2001.

. During the first quarter, the Fund's share price increased 7.87%. At the same
time, the Fund's net asset value per share (NAV) increased 0.03%, while the
IFCG Mexico Index increased 1.24%. The Bolsa Index increased 0.41% during the
same period.

. The discount between the Fund's share price and its NAV at January 31, 2001
narrowed to 18.2% from 27.4% one year earlier.

. Additionally, the Fund continues to periodically repurchase shares in the
open market under its Share Repurchase Program ("SRP"), which was announced
on July 31, 2000 and is intended to enhance shareholder value.

. On March 2, 2001, the Fund filed applications with the US Securities and Ex-
change Commission (SEC) and the Internal Revenue Service (IRS) seeking neces-
sary approvals for conducting periodic in-kind repurchases of Fund shares
from shareholders at no less than 98% of NAV.

. In a Special Letter to Shareholders and Press Release dated March 5, 2001 the
Board of Directors announced these filings and their approval of an amendment
to the Fund's Investment Advisory and Management Agreement adopting a
performance fee component to the Fund's investment advisory fee.

. The Fund intends to seek shareholder approval for the performance fee and the
periodic repurchase policy after it has received comments from regulatory au-
thorities regarding the proposed periodic repurchase policy.

The Mexico Fund, Inc. is a non-diversified closed-end management invest-
ment company with the investment objective of long-term capital appreci-
ation through investments in securities, primarily equity, listed on the
Mexican Stock Exchange. The Fund provides a vehicle to investors who
wish to invest in Mexican companies through a managed non-diversified
portfolio as part of their overall investment program.

Notice is hereby given in accordance with Section 23(c) of the Invest-
ment Company Act of 1940 that the Fund may purchase, from time to time,
shares of its common stock in the open market.

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THE MEXICO FUND, INC.
TO OUR SHAREHOLDERS:
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Economic Environment

Mexican economic activity continued to grow dynamically, as during 2000 the
country's gross domestic product (GDP) increased by 6.9%. During that period,
the services sector increased by 7.3%, led by the transportation segment,
which grew 12.7%. The industrial sector expanded by 6.6%, and within this, the
manufacturing industry by 7.1%, energy and water by 6.2%, construction by 5.0%
and mining by 4.0%. Finally, the primary sector of the economy grew by 3.4%.
Economic analysts estimate that Mexican exports will likely be negatively af-
fected by the deceleration of the US economy, and, as a result, Mexico's GDP
growth during 2001 is expected to slow to approximately 3%.

This performance of the Mexican economy continued to be accompanied by a de-
clining trend in inflation rates. Mexico's inflation rate during 2000 was
8.96%, lower than 12.32% registered at the end of 1999, and below the 10% goal
set by Banco de Mexico (Mexico's central bank). Strict adherence to a restric-
tive monetary policy and the strong performance of the peso contributed to
this downward trend in inflation. Depending on the outcome of the fiscal re-
form to be approved by Congress, in which the elimination of the value added
tax exemption for food and medicines was submitted, inflation is expected by
analysts to further decline to between 7.1% and 9.0% during 2001, higher than
the 6.5% goal set by the Central Bank.

Domestic interest rates, which at the end of March 2001 were at 15.4% for
the 28-day Cetes, are not expected to decline substantially. Economic analysts
estimate that, due to the restrictive monetary policy to be implemented during
2001, the yield of the 28-day Cetes will decline to approximately 14.2% by the
end of this year.

The Mexican peso was stable against the US dollar during 2000. Although some
pressure was present at the end of 2000, the peso dollar exchange rate re-
mained below Ps. 10, ending the year at Ps. 9.60 per dollar, only 1% higher
than one year earlier. While the exchange rate held at that level until the
end of March 2001, economic analysts estimate that the peso will weaken in the
months to come and expect the exchange rate to end 2001 at approximately Ps.
10.53 per dollar.

As a result of the North American Free Trade Agreement (NAFTA), Mexico con-
tinued to be the second largest trade partner of the United States. Total
trade between Mexico and the US amounted to $247.6 billion during 2000 and was
exceeded only by total trade between the United States and Canada ($405.6 bil-
lion). President Fox has announced his intention to further enhance trade re-
lations with Central, South American and Asian countries in an effort to di-
versify Mexican exports and imports. A Free Trade Agreement was signed with
the European Union last year, making Mexico one of the most open economies in
the world. Ten international free trade agreements with 30 nations around the
globe have been so far executed. Also, among the universe of developing na-
tions, Mexico is one of the three most important recipients of direct foreign
investment. Last year, direct foreign investment in Mexico increased 14% to
$13.2 billion.

Mexico's external accounts continued to be healthy and manageable. During
2000, Mexico's exports increased 22% to $166.4 billion, and within this, oil
exports increased 65.0%, while total imports increased 23% to $174.5 billion,
resulting in a trade balance deficit of $8.0 billion, 44% higher than one year
earlier. Although the trade balance deficit is significantly higher than the
previous year, the amount of direct foreign investment into the country fi-
nanced 74% of the current account deficit, which amounted to $17.7 billion
during 2000 and was equivalent to 3.1% of GDP.

During 2000, Mexico's public sector deficit was equivalent to 1.10% of GDP,
higher than the one percent originally budgeted by the authorities. The per-
formance of the economy and higher international oil prices resulted in a 13%
increase of government income but were not sufficient to compensate for higher
than budgeted expenditures from the social security systems and additional
debt. However, the public sector deficit continued to reflect healthy public
sector finances and a prudent fiscal policy. The authorities have announced
their intention to reduce the public sector deficit to 0.65% of GDP during
2001.

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Fund's Performance & Portfolio Strategy

During the first quarter of fiscal 2001, the Bolsa continued to be affected by
the performance of US financial markets. The adjustments made by the Federal
Reserve to US interest rates, first upwards and then downwards, created vola-
tility in international financial markets. For the three months ended January
31, 2001, the Fund's market price and NAV per share increased 7.87% and 0.03%,
respectively, compared with 1.24% for the Fund's benchmark, the IFCG Mexico
index. At January 31, 2001, the Fund's market price per share was $17 and its
NAV $20.79, reflecting a market discount of 18.23%, significantly lower than
the 31% discount registered at the end of July 2000. Although liquidity of
Fund shares continued to be high, it has decreased as a result of increased
participation in the Fund by institutional investors. During calendar 2000,
total traded volume of Fund shares on all consolidated markets amounted to
33.8 million, compared with 40.9 million during 1999 and with 61.0 million
during 1998.

The Fund's 1.21% underperformance is mostly explained by the significant
price appreciation of financial companies, particularly Banacci, in which the
Fund was relatively underweighted during the period. With recent improvements
in the financial sector and the passage of legislation impacting the sector,
the Fund has been investing significant amounts in Banacci and Grupo BBV-
Bancomer, the two leading Mexican financial groups, and the Fund intends to be
overweighted relative to its benchmark in this sector in the near future.
Other investments that contributed to the 1.21% underperformance were CIE (en-
tertainment) and Femsa (beer and soft drinks producer), issuers in which the
Fund is overweighed and that underperformed the IFCG Mexico index. The Fund's
investment adviser intends to maintain an overweighted exposure to these two
issuers because of the substantial growth potential of the entertainment mar-
ket in Latin America, in which CIE is now the leading company, and due to the
current low valuation of Femsa. As a result of its recently increased invest-
ments in the financial sector and other asset reallocations, the Fund's rela-
tive performance has improved. During the first two months of calendar 2001,
the Fund's NAV increased 4.15% while the IFCG Mexico index increased 3.46%.

During the first quarter of fiscal 2001, the adviser reduced the Fund's in-
vestments in Grupo Modelo (beer producer) and Kimberly (consumer goods and pa-
per), issuers in which the Fund was overweighted relative to its benchmark.
The adviser decided to take profits on these issuers, as a deceleration of do-
mestic consumption has already started. However, the Fund continues
overweighted in these two issuers as the domestic sector may outperform ex-
port-oriented companies because of the deceleration of the US economy. Other
"non-strategic" sales, especially in Cemex (cement producer) and Walmex (re-
tail), were made towards the end of the quarter in order to comply with IRS
diversification requirements.

The main use of the proceeds from the sale of these holdings was to repur-
chase Fund shares through the Fund's SRP. At the same time, the Fund increased
its investments in the media/broadcast sector through the purchase of shares
of Televisa and TV Azteca (TV producer and broadcasting companies). The ad-
viser decided to take advantage of the recent weakness in the sector due to
lower valuations in international markets.

As for the balance of 2001, the adviser anticipates a highly volatile market
environment as a result of the deceleration of the US economy and the perfor-
mance of international financial markets. Accordingly, the Fund manager will
maintain overweighted positions in companies with greater exposure to the do-
mestic economy and plans to avoid additional exposure to companies with closer
links to international markets.

This Report includes for your reference a summary description of the Fund's
ten largest holdings, which at the end of January 2001 represented 72.1% of
its total net assets. The Fund's investments are categorized according to the
sector classification provided by the Mexican Stock Exchange.

The Fund has adopted a concentration policy which permits the Fund to con-
centrate its investments in any industry or group of industries of the IPC In-
dex (or any successor or comparable index as determined by the Board of Direc-
tors to be an appropriate measure of the Mexican market) if, at the time of
investment, such industry represents 20% or more of the IPC Index; provided,

Currently, the only industry group which represents 20% or more of the value
of the securities included in the IPC Index is the communications industry
group. This industry category includes local, long-distance, and cellular tele-
phone companies, as well as broadcast and media companies. Approximately four-
fifths of this industry group are telecommunications companies.

As of January 31, 2001, the Fund had 34.20% of its total assets invested in
this industry category, compared with this sector's 41.5% representation in the
IPC Index. The relatively high valuation of the companies in this industry ver-
sus other Mexican issuers, and the current negative sentiment in international
markets towards telecom companies have caused the Fund's adviser to maintain an
underweighted position relative to the Fund's benchmark in this industry. The
investment adviser to the Fund will continue to evaluate its concentration in
this industry category and may choose to not concentrate in this industry group
in the future or to concentrate in other industry categories subject to the
concentration policy described above.

The Fund publishes on its Web site, located at www.themexicofund.com, its in-
vestment portfolio as of the end of each fiscal quarter, updated within the
first five business days after the closing of the quarter. Accordingly, the
Fund's investment portfolio, as reported on the Web site, is updated during the
first five business days of February, May, August and November. The Fund's in-
vestment portfolio as of January 31, 2001 has been posted on the Web site since
early February 2001.

Further Restructuring Efforts Taken by the Board of Directors

On March 5, 2001, the Board announced its intention to implement a periodic
repurchase policy for the Fund which would allow shareholders to submit shares
for repurchase by the Fund with proceeds being paid in actual portfolio securi-
ties of the Fund. The Board believes this policy allows the Fund to maintain
its management strategy and to continue to make long-term investments in a rel-
atively illiquid market while providing further liquidity to shareholders. Im-
plementation of this policy is subject to regulatory approval.

The Fund has made filings with the SEC and the IRS to permit the Fund to con-
duct periodic, in-kind repurchases from shareholders at no less than 98% of net
asset value. The Fund is seeking approval to conduct repurchases for between
one and 25 percent of the Fund's outstanding shares, at least annually and as
frequently as quarterly. The Fund is also seeking approval to require share-
holders to submit a significant minimum number of shares for repurchase. Under
the periodic repurchase policy, shareholders would be notified in advance of
the amount to be repurchased and the procedures for submitting shares for re-
purchase. The periodic repurchase policy is intended to result in a long-term
reduction of the discount at which the Fund's shares trade with respect to
their net asset value, but there can be no assurance that this result will be
obtained. The Fund intends to continue listing the Fund's shares on the NYSE
both before and after the implementation of the periodic repurchase policy.

Additionally, in order to further align the interests of the Fund's invest-
ment adviser with the interests of shareholders, the Board has approved imple-
mentation of a performance fee component to the Fund's investment advisory fee
that would provide the adviser with an additional incentive to outperform the
Fund's benchmarket index. The Board hopes (depending on the SEC and IRS re-
sponses to the periodic repurchase policy proposal) to submit these two
initiatives for shareholder approval at a special shareholders meeting later
this year. Once the periodic repurchase policy is approved by shareholders, it
may not be terminated without subsequent shareholder approval.

The periodic repurchase policy and proposed performance fee are further mea-
sures to restructure the Fund with the goal of increasing shareholder value and
acting in the best interests of long-term shareholders. Within the last 12
months, the Board has implemented a share repurchase program (SRP) and has pro-
posed the conversion of the Fund to a non-diversified fund and the adop-

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tion of a concentration policy. Since the commencement of the SRP in August
2000, the Fund has repurchased 3.9 million of its own shares in the open mar-
ket, equivalent to 77% of the authorized total amount of the program. The
Fund's investment adviser has also taken advantage of the additional flexibil-
ity granted to it at the special shareholders meeting in October 2000. As a
non-diversified fund and with the adoption of a concentration policy, the Fund
may concentrate its investments in certain sectors of the Mexican Stock Ex-
change depending on their representation on a relevant Mexican securities in-
dex. Unlike an index fund which will attempt to replicate the representation
of a sector on the index in the fund, the Fund, which is actively managed and
has a concentration policy, can concentrate in a sector and not match the rep-
resentation in the Fund of that sector on the index. The Fund has the discre-
tion to invest its assets so that the Fund under-represents, matches or over-
represents (by no more than 5%) the representation of the sector on the index.

Annual Shareholders' Meeting

On March 22, 2001, the Fund held its Annual Shareholders' Meeting.
Shareholders of the Fund elected Robert Knauss, Jose Luis Gomez Pimienta and
Claudio X. Gonzalez as directors of the Fund for a three-year term and
ratified the selection of Arthur Andersen LLP as the Fund's independent public
accountants for fiscal year 2001. The exact percentage of votes cast in favor
of these proposals is as follows:

Proposal 1: Election
of Directors
Robert L. Knauss 29,410,801
% of outstanding 63.15%
% of votes cast 70.70%
Jose Luis Gomez Pimienta 29,417,811
% of outstanding 63.17%
% of votes cast 70.72%
Claudio X. Gonzalez 29,398,013
% of outstanding 63.12%
% of votes cast 70.67%

Proposal 2: Ratification of Auditors 31,616,092
% of outstanding 67.89%
% of votes cast 77.10%

The third item of business for the Annual Shareholders' Meeting was a pro-
posal submitted by a shareholder of the Fund. In accordance with the require-
ments of the federal proxy rules, this matter was not presented at the meeting
and no vote was taken.

A copy of the presentation made by the President of the Fund at the Meeting,
which deals with relevant matters of the Mexican economy, the Bolsa and the
Fund is available at the Fund's Web site located at www.themexicofund.com.

Investor Relations

The Fund's Web site presents the Fund's market price and NAV per share on a
same-day basis and provides a downloadable database containing the most impor-
tant historical figures for the Fund. Also available is the complete history
of dividend distributions made by the Fund and additional links to useful
sites of Mexican government agencies, capital markets and listed companies.
Web site visitors may now request online to receive via regular mail a copy of
this Annual Report and the most recent Quarterly and Monthly Summary Reports.
We hope that the Fund's Web site is a useful resource for information and we
will continue working to improve it.

The Fund also offers shareholders and the general public the ability to con-
tact the Fund via e-mail with questions or requests for additional information
about the Fund. Please direct your e-mail inquiries to:

Investor Relations Office
investor-relations@themexicofund.com

In addition to the quarterly reports published by the Fund, the Investment
Adviser distributes a Monthly Summary Report with information about the Fund,
the Mexican economy and the Bolsa. Interested persons may either access this
report on the Fund's Web site or receive it via regular mail. Please request
this report through the Fund's Web site or write to the Investment Adviser at:

The Fund also has a toll free telephone number and an information agent,
Morrow & Co. Inc., in the United States. Upon request, this office will be
pleased to provide you with the Fund's current NAV, quarterly reports and
other Fund materials. Please refer your information requests to:

Morrow & Co., Inc.
14755 Preston Road - Suite 725
One Signature Place
Dallas, TX 75240
(800) 224-4134

In addition to the Fund's Web site, information on the Fund's NAV and market
price per share is published weekly in The Wall Street Journal, The New York
Times and other newspapers in a table called "Closed-End Funds". Daily market
price for the Fund's shares is published in the NYSE Composite Transactions
under the designations "MexFd" or "MexicoFd". The Fund's NYSE trading symbol
is MXF.

The Fund's shares are also listed and traded on the Third Section
("Freiverkehr") of the Stuttgart Stock Exchange. The Fund's German Domestic
Tax Representative is:

ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
Mergenthalerallee 10-12
65760 Eschborn/Frankfurt/M.
Postfach 53 23
65728 Eschborn/Frankfurt/M.
Germany
Telefon: 06196-99-6264
Telefax: 06196-99-6419

The Fund's dividend reinvestment plan and transfer agent is:

American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
(212) 936-5100

Dividend Reinvestment Plan

The Fund's Dividend Reinvestment Plan (the "Plan") provides a convenient way
to increase your holdings in the Common Stock of the Fund through the rein-
vestment of net investment income and capital gain distributions. Under the
terms of the Plan, Fund shareholders are automatically enrolled as partici-
pants in the Plan. If you do not wish to participate in the Plan, please con-
tact the Plan Agent. Upon any termination of participation under the Plan, the
Plan Agent will cause a share certificate for the appropriate number of full
shares to be delivered to the participant, and a cash adjustment for any frac-
tional share. At a shareholder's request, the Plan Agent will sell the partic-
ipant's shares and remit any proceeds to the participant, net of brokerage
commissions. Shareholders who do not participate in the Plan will receive all
distributions in cash. The Plan provides a convenient way to increase your
holdings in the Common Stock through the reinvestment of distributions.

Under the terms of the Plan, whenever the Fund declares a distribution, Plan
participants will receive their distribution entirely in shares of Common
Stock purchased either in the open market or from the Fund. If, on the date a
distribution becomes payable or such other date as may be specified by the
Fund's Board of Directors (the valuation date), the market price of the Common
Stock plus estimated brokerage commissions is equal to or exceeds the NAV per
share of Common Stock, the Plan Agent will invest the distribution in newly
issued shares of Common Stock, which will be priced at NAV. If on the valua-
tion date, the market price of the Common Stock plus estimated brokerage
commis-

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sions is lower than the NAV per share, the Plan Agent will buy Common Stock in
the open market. As a participant in the Plan, you will be charged a pro-rata
portion of brokerage commissions on all open market purchases.

If your shares are registered or will be registered in the name of a broker-
dealer or any other nominee, you must contact the broker-dealer or other nomi-
nee regarding his or her status under the Plan, including whether such broker-
dealer or nominee will participate in the Plan on your behalf. Generally,
shareholders receiving Common Stock under the Plan will be treated as having
received a distribution equal to the amount payable to them in cash as a dis-
tribution had the shareholder not participated in the Plan.

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

Sincerely yours,

/s/ Jose Luis Gomez Pimienta /s/ Juan Gallardo T.
Jose Luis Gomez Juan Gallardo T.
Pimienta Chairman of the Board
President

April 3, 2001.

Description of the Fund's Ten Largest Holdings as of January 31, 2001.

1. Telefonos de Mexico/1/ ("Telmex") (18.67%)

On February 7, 2001, America Movil, a new Mexican corporation resulting from
the spin-off of Telmex's wireless business and from most of its international
operations, started trading in the Mexican Bolsa and on the NYSE. Therefore,
America Movil is now Mexico's leading provider of wireless telecommunications
services with 10.1 million customers and a 70.6% share of the Mexican market.
Since its inception, America Movil has business operations in Argentina, Bra-
zil, Ecuador, Guatemala, Puerto Rico and the United States.

Telmex is the major telecommunications company in Mexico and provides local,
domestic and international long-distance telephone service, internet access,
wireless, data, audio and video transmission services. Since its privatization
in 1990, Telmex has aggressively modernized and has emerged as a leader in
telecommunication services in Latin America. Starting in 1999, Telmex also
provides telecommunication services in the United States.

2. Wal-Mart de Mexico ("Walmex") (10.24%)

Walmex is the largest chain of retail stores in Mexico and has the dominant
market position in the commercial sector of the country. The company is a sub-
sidiary of the US firm Wal-Mart Stores, Inc (NYSE: WMT). Walmex has a total of
499 units in 46 cities in Mexico, which includes supermarkets, retail stores
and restaurants.

3. Carso Global Telecom ("Telecom") (7.76%)

Telecom is dedicated to the telecommunications business and is the holding
company of Telmex (see above) and Prodigy Inc. (Nasdaq: PRGY) (US), and has a
stock participation in McLeod USA, Inc. (Nasdaq: MCLD) (US). The shares of
Prodigy Inc., an important Internet service provider in the United States,
have traded on the NASDAQ since February 1999.

--------
/1/On February 7, 2001, America Movil, a new Mexican corporation resulting
from the spin-off of Telmex's wireless business and from most of its interna-
tional operations, started trading in the Mexican Bolsa and on the NYSE.
Therefore, America Movil is now Mexico's leading provider of wireless telecom-
munications services with 10.1 million customers and a 70.6% share of the Mex-
ican market. Since its inception, America Movil has business operations in Ar-
gentina, Brazil, Ecuador, Guatemala, Puerto Rico and the United States.

Banacci is one of the three largest financial institutions in Mexico, offer-
ing mainly banking, brokerage, insurance and pension funds management in Mexi-
co. Through two of its subsidiaries, Banacci is also engaged in financial ac-
tivities in Argentina and California, USA, and participates in the Mexican
telecommunications sector through its investment in Avantel.

5. Grupo Televisa ("Televisa") (6.07%)

Televisa is the largest media company in the Spanish-speaking world and a
major participant in the international entertainment industry. Televisa has
interests in television production and broadcasting, international distribu-
tion of television programming, direct-to-home satellite services, publishing,
music recording, cable television, radio production and broadcasting, profes-
sional sports and show business promotion, paging services, feature film pro-
duction and distribution and special events promotion and dubbing. Televisa
also has an unconsolidated equity stake in Univision (NYSE: UVN), the leading
Spanish-language television company in the United States, and owns the
"esmas.com" internet portal.

6. Grupo Modelo ("Gmodelo") (4.95%)

Founded in 1925, Gmodelo is the leader in the production, distribution and
sale of beer in Mexico with a market share in the domestic and export markets
of approximately 59%. The group exports its products to 150 countries and owns
10 brand names, including Corona, the most popular beer imported from Mexico,
Victoria and Modelo. The company also imports and distributes in Mexico brand
names of beer produced by its partner Anheuser-Busch, including Budweiser and
Bud Light.

7. Grupo Financiero BBVA--Bancomer ("GFBB")(4.82%)

GFBB is one of Mexico's two largest financial groups. In terms of deposits
and number of clients, GFBB is the largest private financial institution in
Latin America. Grupo Banco Bilbao Vizcaya Argentaria (BBVA), the largest fi-
nancial group in Spain in terms of market capitalization, is GFBB's main
stockholder. GFBB's principal subsidiary is Bancomer, one of Mexico's leading
commercial banks, which operates as a universal bank and offers products and
services to individuals and corporations. Through its network of 2,276
branches and 4,057 automated teller machines (ATMs) in Mexico, as of the end
of 2000 (including BBV-Mexico and Banca Promex), Bancomer engages in a wide
variety of commercial and retail banking activities. The bank has overseas
branches in London and Grand Cayman Island, agencies in New York and Los Ange-
les and a representative office in Sao Paulo, Brazil. Additionally, Bancomer
has a subsidiary bank in the Cayman Islands, Mercury Bank & Trust Limited.

8. Cemex (4.64%)

Cemex is the world's third largest cement producer. The company and its sub-
sidiaries are dedicated to the production, distribution, commercialization and
sale of cement, concrete, mix, clinker and value added products. Cemex pro-
duces and operates in 30 countries around the world and has commercial rela-
tions with 60 countries. Cemex is the leader in the cement markets of Mexico,
Spain, Venezuela, Panama, Costa Rica, the Dominican Republic, Egypt and Colom-
bia, and has important market presence in the Caribbean, Indonesia, the Phil-
ippines and the southwest region of the United States.

9. Fomento Economico Mexicano ("Femsa") (4.15%)

Femsa is Latin America's largest beverage company with exports to the United
States, Canada and selected countries in Latin America, Europe and the Far
East. Founded in 1890, Femsa is the largest totally integrated producer of
soft drinks and beer in Mexico and is the controlling company of Coca-Cola
Femsa (KOF), one of the leading bottlers in Latin America. Femsa also operates
the largest chain of convenience stores in Mexico (Oxxo), produces packaging
materials and is an important bottler in Argentina. Brand names produced by
Femsa include Sol beer and Coca Cola, among others.

10. Kimberly Clark de Mexico ("Kimber") (3.87%)

The company is dedicated to the manufacturing, marketing and sale of paper
and consumer products for personal care. Kimber has the leading market posi-
tion in every product category where in which it competes. Products sold by
the company include tissue paper, diapers, feminine care products, notebooks,
office paper and specialty products.

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The Mexico Fund, Inc.
Schedule of Investments as of January 31, 2001 (Unaudited)
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Percent
Shares Value of Net
Industries Held Common Stock (95.92%) Series (Note 1) Assets
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Cement
Industry 4,840,000 Apasco, S.A. de C.V. ... * $ 25,015,505 2.58%
10,500,000 Cemex, S.A. de C.V. .... CPO 44,956,585 4.64
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69,972,090 7.22
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(a) 34,000,000 Carso Global Telecom,
Communications S.A. de C.V. .......... A1 75,282,200 7.76
(a) 22,000,000 Grupo Televisa, S.A. ... CPO 58,877,403 6.07
19,000,000 Telefonos de Mexico,
S.A. de C.V. .......... A 52,439,529 5.41
47,500,000 Telefonos de Mexico,
S.A. de C.V. .......... L 128,545,586 13.26
25,515,000 TV Azteca, S.A. de
C.V. .................. CPO 16,537,012 1.70
------------ -----
331,681,730 34.20
----------------------------------------------------------------------------------------
Financial (a) 35,000,000 Grupo Financiero Banamex
Groups Accival, S.A. de C.V. . O 67,221,418 6.93
(a) 71,000,000 Grupo Financiero BBVA-
Bancomer, S.A. de
C.V. .................. O 46,710,771 4.82
(a) 4,827,000 Grupo Financiero
Inbursa, S.A. de C.V. . O 19,559,479 2.02
(a)(b) -- Grupo Financiero
Inverlat Recovery
Trust.................. -- 0.00
------------ -----
133,491,668 13.77
----------------------------------------------------------------------------------------
Food, 12,670,000 Fomento Economico
Beverages and Mexicano, S.A. de
Tobacco C.V. .................. UBD 40,207,670 4.15
23,000,000 Grupo Bimbo, S.A. de
C.V. .................. A 31,335,539 3.23
17,500,000 Grupo Modelo, S.A. de
C.V. .................. C 48,010,130 4.95
------------ -----
119,553,339 12.33
----------------------------------------------------------------------------------------
Holding 6,000,000
Companies Alfa, S.A. de C.V.. .... A 8,490,800 0.88
(a) 6,100,000 Corporacion
Interamericana de
Entretenimiento, S.A.
de C.V. ............... B 23,910,688 2.47
23,000,000 Desc, S.A. de C.V. ..... B 9,153,401 0.94
(a) 8,900,000 Grupo Carso, S.A. de
C.V. .................. A1 27,020,157 2.79
(a) 2,640,000 Grupo Sanborns, S.A. de
C.V. .................. B-1 3,962,456 0.40
------------ -----
72,537,502 7.48
----------------------------------------------------------------------------------------
(a) 6,370,600 Consorcio ARA, S.A. de
Housing C.V. .................. * 7,770,631 0.80
(a) 2,290,000 Corporacion Geo, S.A. de
C.V. .................. B 2,509,200 0.25
------------ -----
10,279,831 1.05
----------------------------------------------------------------------------------------
Mining 5,940,000 Nuevo Grupo Mexico, S.A.
Industry de C.V. ............... B 19,218,731 1.98
----------------------------------------------------------------------------------------
14,200,000 Kimberly-Clark de
Pulp and Paper Mexico, S.A. de C.V. .. A 37,562,332 3.87
----------------------------------------------------------------------------------------

-------------------------------------------------------------------------------
The Mexico Fund, Inc.
Schedule of Investments as of January 31, 2001 (Unaudited) -- (Continued)
-------------------------------------------------------------------------------

Percent
Value of Net
Industries Shares Held Common Stock (Continued) Series (Note 1) Assets
----------------------------------------------------------------------------------------

11,770,000 Controladora Comercial
Mexicana, S.A. de
Retail Stores C.V. .................. UBC $ 9,964,472 1.03%
7,450,000 Grupo Elektra, S.A. de
C.V. .................. CPO 7,716,456 0.80
4,650,000 Organizacion Soriana,
S.A. de C.V. .......... B 12,060,006 1.24
(a) 13,370,000 Wal-Mart de Mexico, S.A.
de C.V. ............... C 28,926,411 2.98
(a) 30,000,000 Wal-Mart de Mexico, S.A.
de C.V. ............... V 70,363,862 7.26
------------- ------
129,031,207 13.31
----------------------------------------------------------------------------------------
431,000 Tubos de Acero de
Steel Mexico, S.A. .......... * 6,902,950 0.71
----------------------------------------------------------------------------------------
Total Common Stock
(Identified Cost--
$577,630,022).......... $ 930,231,380 95.92%
----------------------------------------------------------------------------------------

Percent
Short-Term Securities Value of Net
Securities Fair Value (3.95%) (Note 1) Assets
----------------------------------------------------------------------------------------

$38,307,905 Bancomer, S.A., 17.50%,
dated 01/31/01, due
02/01/01, repurchase
price $38,326,527,
Repurchase collateralized by
Agreements Bondes................. $ 38,307,905 3.95%
----------------------------------------------------------------------------------------
Total Short-Term
Securities (Identified
cost--$38,307,905)..... 38,307,905 3.95
Total Investments
(Identified cost--
$615,937,927).......... 968,539,285 99.87
Other Assets in Excess
of Liabilities......... 1,228,331 0.13
------------- ------
Net Assets Equivalent to
$20.79 per share on
46,635,525 shares
of capital stock
outstanding (Note 7)... $ 969,767,616 100.00%
============= ======

(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.
(b) See Note 10 to Financial Statements.

See Notes to Financial Statements.

--------------------------------------------------------------------------------
The Mexico Fund, Inc.
Statement of Assets and Liabilities as of January 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

Assets:
Investments:
Securities, at value (Note 1):
Common stock (identified cost -- $577,630,022)...... $930,231,380
Short term securities (identified cost --
$38,307,905)...................................... 38,307,905
------------
Total investments (identified cost --
$615,937,927).................................... $968,539,285
Receivables from securities sold..................... 2,856,916
Prepaid Mexican withholding taxes (Note 1)........... 93,857
Interest receivable.................................. 18,622
------------
Total assets....................................... 971,508,680
------------
Liabilities:
Payable for repurchase of Fund's shares (Note 9)..... 995,786
Payable to Investment Advisor (Notes 2 and 3)........ 634,359
Accrued expenses and other liabilities............... 110,919
------------
Total liabilities.................................. 1,741,064
------------
Net Assets -- Equivalent to $20.79 per share on
46,635,525 shares of capital stock outstanding (Note
7).................................................. $969,767,616
============

See Notes to Financial Statements.

--------------------------------------------------------------------------------
The Mexico Fund, Inc.
Statement of Operations (Unaudited) For the Three Months Ended January 31, 2001
--------------------------------------------------------------------------------

Net Investment Income:
Income (Note 1):
Dividends.......................................... $ 1,416,294
Interest and discounts earned...................... 712,768
-----------
Total income....................................... $ 2,129,062
Expenses:
Investment advisory fee (Note 2)................... 1,582,327
Administrative services (Note 3)................... 90,478
Value-added taxes (Note 1)......................... 263,475
Printing, distribution and mailing of shareholder
reports........................................... 54,192
Legal fees......................................... 99,446
Directors' fees.................................... 60,395
Directors' and Officers' expenses.................. 32,122
Accounting and audit fees.......................... 27,726
Custodian fees (Note 5)............................ 24,284
Transfer agent and dividend disbursement fees...... 5,250
Shareholders' information.......................... 54,399
Stock exchange fees................................ 12,202
Insurance.......................................... 32,516
Miscellaneous...................................... 22,566
-----------
Operating expenses................................. 2,361,378
------------
Net investment loss (Note 1)....................... (232,316)
------------
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions:
Net realized gain on investments and foreign
currency transactions (Notes 1 and 6):
Proceeds from sales................................ 78,577,539
Cost of securities sold............................ 27,335,207
-----------
Net realized gain on investments................... 51,242,332
Net realized loss from foreign currency
transactions...................................... (147,795)
-----------
Net realized gain on investments and foreign
currency transactions............................. 51,094,537
Decrease in net unrealized gain on investments and
translation of assets and liabilities in foreign
currency:
Investments:
End of period (Note 6)............................. 352,601,357
Beginning of period................................ 416,636,993
-----------
Decrease in net unrealized gain on investments..... (64,035,636)
Translation of assets and liabilities in foreign
currency:
End of period...................................... 488,800
Beginning of period................................ 35,585
-----------
Increase in net unrealized gain on translation of
assets and liabilities in foreign currency........ 453,215
-----------
Decrease in net unrealized gain on investments and
translation of assets and liabilities in foreign
currency.......................................... (63,582,421)
------------
Net Decrease in Net Assets Resulting from
Operations......................................... $(12,720,200)
============

See Notes to Financial Statements.

--------------------------------------------------------------------------------
The Mexico Fund, Inc.
Statements of Changes in Net Assets

For the
Three Months Ended For the
January 31, 2001 Year Ended
(Unaudited) October 31, 2000
---------------------------------------------------------------------------------

Increase (Decrease) in Net Assets:
From Operations
Net investment (loss) income........... $ (232,316) $ 8,893,385
Net realized gain on investments and
foreign currency transactions......... 51,094,537 59,717,615
Decrease in net unrealized gain on
investments and translation of assets
and liabilities in foreign currency... (63,582,421) (2,934,353)
------------- --------------
Net (decrease) increase in net assets
resulting from operations............. (12,720,200) 65,676,647
Dividends to shareholders from net
realized gain on investments.......... (2,348,286) --
Dividends to shareholders from net
investment income..................... (87,660) (9,429,937)
------------- --------------
(15,156,146) 56,246,710
From Capital Share Transactions (Note
9)
Repurchase of stock, at cost........... (37,212,173) (22,737,565)
------------- --------------
Total increase in net assets.......... (52,368,319) 33,509,145
Net Assets:
Beginning of period.................... 1,022,135,935 988,626,790
------------- --------------
End of period.......................... $ 969,767,616 (A) $1,022,135,935 (A)
============= ==============

See Notes to Financial Statements.
(A) Including accumulated net investment loss of $(11,319,838) as of January
31, 2001 and $(10,852,067) as of October 31, 2000.

--------------------------------------------------------------------------------

For the
Three Months
Ended For the Year Ended October 31,
The Mexico Fund, Inc. January 31, 2001 -------------------------------------------------------
Financial Highlights (Unaudited) 2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------

Per Share Operating
Performance:
Net asset value,
beginning of period.... $ 20.84 $ 19.57 $ 15.52 $ 23.49 $ 17.33 $ 13.80
-------- ---------- -------- -------- ---------- --------
Net investment (loss)
income (Note 1)....... (0.00)** 0.18** 0.40 0.39** 0.40 0.50
Net (loss) gain on
investments and
translation of foreign
currency (Note1)...... (0.27)** 1.10** 4.10 (7.48)** 6.16 3.46
-------- ---------- -------- -------- ---------- --------
Total from investment
operations............. (0.27)** 1.28** 4.50 (7.09)** 6.56 3.96
-------- ---------- -------- -------- ---------- --------
Less Dividends and
Distributions:
Dividends to
shareholders from net
investment income..... (0.00) (0.19) (0.45) (0.23) (0.38) (0.43)
Distributions to
shareholders from net
capital gains......... (0.05) -- -- (0.60) (0.02) --
-------- ---------- -------- -------- ---------- --------
Total dividends and
distributions.......... (0.05) (0.19) (0.45) (0.83) (0.40) (0.43)
-------- ---------- -------- -------- ---------- --------
Capital Share
Transactions:
Effect on NAV of stock
repurchased........... 0.27 0.18 -- -- -- --
Capital charge
resulting from
issuance of fund
shares................ -- -- -- (0.05) -- --
-------- ---------- -------- -------- ---------- --------
Net asset value, end of
period................ $ 20.79 $ 20.84 $ 19.57 $ 15.52 $ 23.49 $ 17.33
======== ========== ======== ======== ========== ========
Market value per share,
end of period......... $ 17.00 $ 15.81 $ 14.31 $ 11.25 $ 18.69 $ 14.13
======== ========== ======== ======== ========== ========
Total investment return
based on market value
per share.............. 7.83% 11.82% 31.92% (36.70%) 35.03% 18.77%
Ratios to Average Net
Assets:
Expenses............... 1.01%* 0.96% 0.98% 0.93% 0.91% 1.00%
Net investment (loss)
income................ (0.10%)* 0.78% 2.14% 1.87% 1.80% 2.93%
Supplemental Data:
Net assets at end of
period (in 000's)..... $969,768 $1,022,136 $988,627 $783,775 $1,167,893 $861,750
Portfolio turnover
rate.................. 2.92% 22.27% 6.40% 3.69% 7.58% 9.57%

--------
*Annualized
**Amounts were computed based on average shares outstanding during the period.

See Notes to Financial Statements.
--------------------------------------------------------------------------------
Selected Quarterly Financial Data (Unaudited)
--------------------------------------------------------------------------------

(Amounts in thousands,
except per share amounts)
-------------------------------
Quarter Ended
January 31, 2001
-------------------------------
Total Per Share
-------------- ---------------

Investment Income............................... $ 2,129 $ 0.05
Net investment loss............................. $ (232) $ (0.00)
Net realized gain on investments................ $ 51,242 $ 1.10
Net realized loss from foreign currency
transactions................................... $ (148) $ (0.00)
Decrease in net unrealized gain on investments.. $ (64,036) $ (1.37)
Increase in net unrealized gain on translation
of assets and liabilities in foreign currency.. $ 453 $ 0.01
Net assets...................................... $ 969,768 $ 20.79

--------
See Notes to Financial Statements.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

The Mexico Fund, Inc.
Notes to Financial Statements-
January 31, 2001 (Unaudited)
-------------------------------------------------------------------------------

1. Operations and Significant Accounting Policies:

The Fund is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as closed-end management investment company. On October 16,
2000, the Fund received shareholder approval to convert from a diversified to
a non diversified investment company under the 1940 Act. The investment objec-
tive of the Fund is to seek long term capital appreciation through investment
in securities, primarily equity, listed on the Mexican Stock Exchange.

The preparation of financial statements in conformity with accounting princi-
ples generally accepted in the United States requires management to make esti-
mates and assumptions that affect the reported amounts of assets and liabili-
ties at the date of the financial statements and the reported amounts of reve-
nues and expenses for the period. Actual results could differ from those esti-
mates. 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 closing price reported by the Mexican Stock Exchange. The
closing price represents the weighted average for the last ten minutes of op-
erations in any business day. Short-term securities are carried at cost, plus
accrued interest, which approximates market value. All other securities are
valued in accordance with methods determined by the Board of Directors. If the
Board of Directors believes that the price of a security obtained under the
Fund's valuation procedures does not represent the amount that the Fund rea-
sonably expects to receive on a current sale of the security, the Fund will
value the security based on a method that the Board believes accurately re-
flects fair value.

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.

Foreign Currency -- The market value of Mexican securities, currency holdings
and other assets and liabilities denominated in Pesos ("Ps.") was recorded in
the financial statements after translation 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, 2001 was Ps. 9.674 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.

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.

Reported net realized foreign exchange gains or losses arise from sales of
short-term securities in

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
exchange of property, payment of services or functional currency denominated
assets, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of divi-
dends, interest, and foreign withholding taxes recorded by the Fund, and the
U.S. dollar equivalent of the amount actually received or paid.

Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in common stocks, re-
sulting from changes in the exchange rate.

Repurchase Agreements -- The Fund enters into repurchase agreements with ap-
proved institutions. The Fund's repurchase agreements are fully collateralized
by Mexican or U.S. Government securities. The Fund takes possession of the
collateral and the Fund's investment advisor monitors the credit standing of
repurchase agreement counterparties. The fair value of the collateral exceeds
the principal amount of the repurchase transaction, including accrued inter-
est, at all times. If the counterparty defaults, and the fair value of the
collateral declines, realization of the collateral by the Fund may be delayed
or limited. As of January 31, 2001, the Company has received collateral of
$38,307,905 related to these repurchase agreements.

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, 2001, 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 shareholders.

The Fund is subject to Mexican withholding taxes in accordance with the Mexi-
can Income Tax Law and with the provisions included in the treaty to avoid
double taxation signed between Mexico and the United States, on specific
sources of income. Such taxes will be applied to the shareholders upon payment
of dividends by the Fund.

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.

Lending of portfolio securities -- During fiscal year 1998, the Board of Di-
rectors approved a securities lending program for the Fund. Merrill Lynch
Portfolio Services, Inc. served as the lending agent for the Fund from August
1998 through August 1999.

In March 2000, the Board appointed Cantor Fitzgerald & Co. ("Cantor"), as the
lending agent for the Fund. Since March 7, 2000, the Fund has been lending
part of its portfolio securities to approved financial institutions, provided
that the market value of securities loaned will not at any time exceed one-
third of the Fund's total assets. The Fund continues to receive dividends on
the securities loaned. Any gain or loss in the value of the securities loaned
that may occur during the term of the loan will be accounted for by the Fund.
The Fund earns interest on the investment of the collateral received for the
securities loaned. The Fund may rebate a portion of the interest earned on the
investment of collateral to the borrower, and may pay a commission to the
lending agent. Under the agreement, Cantor may also reimburse to the

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Fund the custodian fees. In order to protect against the risk of failure by
the borrower to return the securities loaned or any delay in the delivery of
such securities, each loan is collateralized by U.S. dollars (cash), securi-
ties issued or guaranteed by the U.S. government or its agencies or instrumen-
talities, or irrevocable stand-by letters of credit issued by U.S. banks.
Portfolio securities loaned are initially collateralized at 105 percent of its
market value. If the collateral value falls below 105 percent, at the close of
any business day, Comerica Bank, the Fund's custodian of the collateral re-
ceived, will obtain additional collateral from the borrower, on the following
business day, in an amount sufficient to restore the collateral to 105 per-
cent.

Since September 29, 2000, the Fund has not been actively lending portfolio
securities under this Program.

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. Administrative Services Agreement:

Effective April 1, 1994, the Fund entered into an Administrative Services
Agreement with the Adviser, which provides for certain services to be per-
formed by the Adviser, including the determination 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 assistance in the prepa-
ration and filing of annual reports and tax returns. The term of this agree-
ment was renewed by the Board of Directors through August 31, 2001. The annual
fee payable to the Adviser by the Fund under this agreement is $350,000.

4. Trust Agreement and Trustee:

BBVA Bancomer, S.A. ("Bancomer") was the trustee for the Mexican Trust
through which the Fund invested. During 1997 and 1998, the Mexican governmen-
tal authorities gave approval to the Trustee for the transfer of the total as-
sets and liabilities of the Trust to the Fund. On February 27, 1998, the
Fund's shareholders approved matters in connection with the termination of the
Trust Agreement with Bancomer. The termination was effective on March 31,
1998.

5. Mandate Agreement and Mandatory Party:

In connection with the termination of the Trust Agreement discussed in the
preceding note, on March 31, 1998, the Fund signed a Mandate Agreement with
Bancomer. Under this Agreement, Bancomer acts as the Mandatory Party, perform-
ing certain activities related to the custody of the Fund's securities, that
were previously performed under the trust agreement.

The annual fee payable to Bancomer under this Agreement is denominated in
Mexican pesos, which currently translates to approximately $49,244. Due to the
nature of this Agreement, the fees paid to Bancomer are consolidated with the
Fund's custodian fees.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

6. Purchases and Sales of Investments:

Purchases and sales of investments, excluding short-term securities, for the
three months ended January 31, 2001 were as follows:

Purchases
-------------------------------------------------------------------------------
Common Stock....................................................... $26,950,933
-----------
Total Purchases.................................................. $26,950,933
===========
Proceeds from Investments Sold
-------------------------------------------------------------------------------
Common Stock....................................................... $78,577,539
-----------
Total Sales...................................................... $78,577,539
===========

As of January 31, 2001, net unrealized gains on investments in common stocks
for Federal income tax purposes aggregated to approximately $353 million, of
which approximately $408 million related to appreciated securities and approx-
imately $55 million related to depreciated securities. The aggregate cost of
investments in common stocks at January 31, 2001 for Federal income tax pur-
poses was approximately $578 million.

7. Capital Stock:

At January 31, 2001, there were 150,000,000 shares of $1.00 par value common
stock authorized, of which 50,758,750 shares were issued, 46,635,525 shares
were outstanding and 4,123,225 shares were held in treasury.

The Fund offers a Dividend Reinvestment Plan ("Plan") to its shareholders.
Fund shareholders are automatically enrolled as participants in the Plan un-
less they notify the Fund's transfer agent otherwise.

On December 10, 1997, the Board of Directors declared a stock dividend of $
29,625,602. This dividend was paid in shares of common stock of the Fund, and
in cash by specific election. Some shareholders selected the stock dividend,
therefore, on January 31, 1998 the Company issued 791,018 shares, which
amounted to $ 15,078,787.

As of January 31, 20010, net assets were comprised of the following:

Common stock................................................... $ 46,635,525
Additional paid-in capital..................................... 520,387,963
Accumulated net investment loss................................ (11,319,838)
Undistributed net realized gain on
investments................................................... 60,973,809(A)
Unrealized appreciation of investments and translation of
assets and liabilities in foreign currency.................... 353,090,157
------------
$969,767,616
============

-------
(A) ($51,256,350) for Federal Income Taxes.

Dividends to shareholders from net investment income are determined based on
Federal income tax regulations, whereas the corresponding net investment in-
come as reflected in the accompanying financial statements, is presented in
accordance with accounting principles generally accepted in the United States.

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 tax code.

8. Capital Gains:

Net realized gains from security transactions, are distributed annually to
shareholders. Capital loss carryforwards, if any will be used to offset future
capital gains available for distribution.

9. Stock Repurchase Program:

On July 31, 2000, the Board of Directors announced a Stock Repurchase Program
pursuant

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
to which the Fund may purchase in the open market up to 5,050,693 shares of its
stock at prevailing market prices. The Program started on August 7, 2000. As of
January 31, 2001, the Fund has repurchased 3,871,400 of its shares at a cost of
$59,949,738.

10. Investments:

As a result of significant losses incurred by Grupo Financiero Inverlat, S.A.
de C.V. ("Inverlat"), certain significant shareholders, together with the fi-
nancial authorities, developed a recapitalization program. On July 23, 1996,
after the absorption of accumulated losses through the total reduction of capi-
tal stock, shareholders of Inverlat approved a cash contribution by FOBAPROA
(Banking Fund for Savings Protection) to cover such losses. As a consequence,
all shares outstanding prior to July 23, 1996, were cancelled . The Fund has
received an interest in a Recovery Trust set up to manage the recovery assets
of Inverlat. Through the trust agreement, the Company may receive shares equal
to 9% and up to 36% of their ownership interest. Management has assigned the
market value of the Fund's holdings in the Recovery Trust at $0 as of January
31, 2001, due to the uncertainty regarding its ultimate realization.

According to the Bank Savings Protection Law, which was enacted on January 20,
1999, all assets of FOBAPROA have been transfered to a new entity called IPAB
(Bank Savings Protection Institute). This transfer will not modify the market
value assigned to the Recovery Trust.