As filed with the Securities and Exchange Commission on October 7, 2003

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06111

THE MEXICO EQUITY AND INCOME FUND, INC.

615 EAST MICHIGAN STREET
MILWAUKEE, WI 53202
(Address of principal executive offices) (Zip code)

MR. GERALD HELLERMAN
C/O U.S. BANCORP FUND SERVICES, LLC
615 EAST MICHIGAN STREET
MILWAUKEE, WI 53202
(Name and address of agent for service)

(866) 700-6104
Registrant's telephone number, including area code

Date of fiscal year end: JULY 31, 2003
-------------

Date of reporting period: AUGUST 1, 2002 TO JULY 31, 2003
--------------------------------

ITEM 1. REPORT TO STOCKHOLDERS.

THE MEXICO EQUITY AND INCOME FUND, INC.

September 23, 2003

DEAR FUND SHAREHOLDER,

We are pleased to present you with the audited financial statements of the
Mexico Equity and Income Fund, Inc. (the "Fund") for the year ended July 31,
2003. The Fund presents investors with the opportunity to own Mexican securities
and its objective continues to be superior long-term performance.

The Fund's net assets were $25,104,015 on July 31, 2003, as compared to
$21,628,531 on July 31, 2002, which represents an increase of 16% in the value
of the Fund's net assets and the NAV of your shares. For the same period, the
Bolsa IPC Index, which is a measure of the market performance of Mexican
securities, increased 14%.

As we have reported previously, your Board of Directors is focused on action to
control the discount at which the Fund's shares trade. Our discussions with the
U.S. Securities & Exchange Commission continue in our effort to obtain the
necessary regulatory approvals to permit the Fund to issue put warrants to our
shareholders. These warrants are intended to enable shareholders to receive NAV
from time to time, if they decide to sell their shares. While we continue to be
hopeful that the necessary approvals to issue the warrants will be obtained,
there can be no assurance when (or if) such approvals will be obtained. We will
keep you informed on this matter.

We believe that if the Fund is able to issue put warrants, the discount at which
the Fund's shares trade relative to NAV will be permanently reduced. Once the
discount is under control, your Board of Directors will consider measures to
increase the asset base of the Fund in order to reduce the expense ratio, which
continues to be too high.

On behalf of the Board of Directors, we thank you for your continued support of
the Fund. If you have any questions, please call our toll-fee number (866)
700-6104.

Sincerely yours,

/s/ GERALD HELLERMAN
- ---------------------
Gerald Hellerman

President

This page intentionally left blank.

THE MEXICO EQUITY AND INCOME FUND, INC.

INVESTMENT ADVISER:
Pichardo Asset Management, S.A. de C.V.
408 Teopanzolco Avenue
3rd Floor - Reforma
Cuernavaca, 62260 Morelos
Mexico

INDEPENDENT AUDITOR:
Tait, Weller & Baker
1818 Market Street, Suite 2400
Philadelphia, PA 19103

ADMINISTRATOR AND FUND ACCOUNTANT:
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202

TRANSFER AGENT AND REGISTRAR:
Computershare Investor Services, LLC
2 North La Salle Street
Chicago, IL 60602

CUSTODIANS:
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202

Deutsche Bank Trust Company/State Street
100 Plaza One
Jersey City, NJ 07311

The Mexico Equity
and Income Fund, Inc.

Annual Report

July 31, 2003

THE MEXICO EQUITY AND INCOME FUND, INC.

Report of the Investment Adviser

FOR THE FISCAL YEAR ENDED JULY 31, 2003

Dear Fund Shareholder,

We are pleased to provide you with the report of the Investment Adviser of The
Mexico Equity and Income Fund, Inc. ("The Fund"), for the fiscal year ended July
31, 2003.

- --------------------------------------------------------------------------------
MEXICO'S ECONOMY: REVIEW AND OUTLOOK

The Mexican economy has remained stable despite adverse external factors. Fiscal
discipline has been preserved and international reserves stand at historically
high levels of US$52.4 billion. Foreign direct investment flows are expected to
be US$12.5 billion in 2003, increasing to US$14.5 billion in 2004. Access to
international capital markets has increased, total foreign debt at the end of
2003 is expected to increase to US$143 billion from US$138 billion in 2002 and
the structure and maturity of public sector debt has improved. Financial
indicators have continued to improve during the Fund's fiscal year as follows:
(i) rates on 28 day CETES (Treasury Bills) have come down to 4.3% from 6.7%,
(ii) the Peso has depreciated 8.3% during the Fund's fiscal year, in line with
inflation of 4.4% for the same period, closing at 10.5985 Pesos to one U.S.
Dollar, and (iii) 12-month inflation at July 31, 2003, was 4.4%, compared to
4.9% at the end of July 31, 2002.

The correlation of Mexico's industrial activity with that of the U.S. has
dramatically increased to almost 100% since the North American Free Trade
Agreement was signed in 1994, and it has been the main determining factor in
Mexico's economic growth. Due to low industrial activity in the U.S. at the end
of 2002, the slowdown in Mexico's export-manufacturing sector continued during
the first half of 2003. Gross Domestic Product growth for the 2003 calendar year
is projected at 1.6%, down from 3.9% in July 2002 and 3.2% as of January 31,
2003.

- --------------------------------------------------------------------------------
FUND UPDATES
The Fund's toll-free phone number is (866) 700-6104.

TRACKING THE FUND'S NAV
The Fund's net asset value (NAV) is calculated daily and published in The Wall
Street Journal every Monday under the heading "Closed End Funds." The Fund's net
asset value is also published in Barron's on Saturdays and in The New York Times
on Mondays. The Fund is listed on the New York Stock Exchange under the ticker
symbol MXE.
- --------------------------------------------------------------------------------

THE MEXICO EQUITY AND INCOME FUND, INC.

- --------------------------------------------------------------------------------
THE MEXICAN STOCK EXCHANGE

As of 2002, the Bolsa IPC Index (the "Bolsa"), an equity index and the Fund's
benchmark, had return values that were comparable to most international indices.
However, for the year ended July 31, 2003, the Bolsa increased 14.0%. The
Bolsa's gain ranked last in the Latin American region while the Argentina Merval
Index increased 167.7%, Venezuelan Indice Bursatil de Caracas gained 80.2%,
Brazil's Bovespa Index gained 61.3% and Chile's IPSA Index increased 29.1%.

In general, housing, cellular and media stocks recorded the biggest dollar
returns during the Fund's fiscal year. The worst-performing sector in the
Mexican stock market for the same period was industrial conglomerates, which was
impacted by overall sector stagnation.

Second quarter 2003 corporate results were stronger than expected, particularly
in terms of top-line growth, although operating margins continued to
deteriorate. Sales increased 9.0%, operating income increased 2.1%, net income
increased 144.5% and operating margins stood at 15.9%.

We believe that some quality stocks in the Mexican stock market are inexpensive
today, and that based on their current one year prospective market multiple,
they are also undervalued. As of the end of the second quarter of 2003, the
market's EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes,
Depreciation and Amortization) ratio was 7.4 times, compared to its past 3-year
average of approximately 6.6 times, 9 times in 2000 and 13 times in 1994.

- --------------------------------------------------------------------------------
THE FUND'S PERFORMANCE

For the year ended July 31, 2003, the Mexico Equity and Income Fund, Inc.'s Net
Asset Value ("NAV") gained 16%, outperforming the Bolsa's gain of 14%, as well
as The Mexico Fund (MXF), whose NAV increased 12% during the same period. The
return calculations are according to Bloomberg, L.P. and include reinvested
dividends.

For the year ended July 31, 2003, the common share market price of the Fund
increased 14.5%, outperforming the Bolsa's gain of 14.0%, and The Mexico Fund's
common share market price gain of 9.8%. Thus, for the fiscal year ended July 31,
2003, the Fund achieved one of the best dollar returns when compared to its
peers. Additionally, the Bolsa is an equity-only index, while The Mexico Equity
and Income Fund, Inc. invests in equity and fixed-income instruments.

THE MEXICO EQUITY AND INCOME FUND, INC.

- --------------------------------------------------------------------------------
PORTFOLIO STRATEGY

A portfolio with 83% in equities and 17% in fixed income, on average, with a
consistent stock selection focused on a value approach, as well as, companies
with high dividend yields, has led the Fund to outperform its benchmark over the
past 12 months. The following are several trends in the Fund's strategy and
structure during its fiscal year:

o For the six months ended January 31, 2003, the Fund's equity allocation
included the following top-three asset categories: (i) 28.8% in strong
market position, (ii) 14.2% in Mexican financial institutions, and (iii)
13.1% in undervalued restructuring stories. The Fund's fixed income
allocation included Mexico's Federal three-year and five-year bonds with
coupon rates of 14% and 14.5% and a yield to maturity of approximately 5%
and 11%, respectively.

o The beginning of the second half of the Fund's 2003 fiscal year was marked
by heightened international tensions over the possibility of a U.S.
military intervention in Iraq. Our research indicated that 2003 appeared
complicated due to the sluggish U.S. and Mexican economies and the Fund's
portfolio continued to maintain an investment strategy to strengthen the
Fund's total yield over the long term.

o The Fund's stock allocation was overweighed in quality stocks with high
dividend yields and the Fund's top-three asset categories at the end of the
fiscal year were as follows: (i) 30.2% in strong market position, (ii)
22.6% in undervalued restructuring stories, and (iii) 10% in Mexican
financial institutions.

o The fixed-income allocation during the period included a 10% swap of
short-term Cetes (Mexican Treasury Bills) into Mexico's U.S. Dollar
High-Yield Sovereign Bonds with 8 3/8% and 10 3/8% fixed-dollar coupons.
The coupons are payable semi-annually with a yield-to-maturity of
approximately 5.9% and 5.4%, respectively, which compared favorably to the
3% interpolation in U.S. Treasury Bills with similar maturities.

THE MEXICO EQUITY AND INCOME FUND, INC.

- --------------------------------------------------------------------------------
CONCLUSION AND OUTLOOK July 31, 2003

Although Mexican economic growth is highly correlated with U.S. economic growth,
we believe that given the current strict adherence to public finance goals and
the new distribution of seats in the Lower House, it is likely that fiscal and
energy reforms will be approved during the second half of the Fox
administration.

We believe that contributing factors that could lead to the Bolsa's growth
include: (i) the approval of structural reforms, (ii) ongoing positive U.S.
economic data and (iii) the Central Bank's continuing efforts of keeping
domestic interest rates at relatively low levels. Other factors that could
contribute to the Bolsa's growth are the high quality Mexican stocks that are
undervalued today in comparison to their international peers.

As always, we will continue to work to the best of our abilities to manage the
Mexico Equity and Income Fund, Inc. We look forward to continuing to offer you
an attractive alternative for asset diversification and the opportunity to
remain active in Mexico, which we believe, is one of the most promising emerging
markets around the globe. Thank you for your continued support.

Sincerely,

/S/ EUGENIA PICHARDO
- --------------------
Eugenia Pichardo
Portfolio Manager
Pichardo Asset Management, S.A. de C.V.

THE DISCUSSION ABOVE REFLECTS THE OPINIONS OF THE PORTFOLIO MANAGER. THESE
OPINIONS ARE SUBJECT TO CHANGE AND ANY FORECASTS MADE CANNOT BE GUARANTEED.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. SECTOR ALLOCATIONS AND FUND
HOLDINGS ARE SUBJECT TO CHANGE AND ARE NOT RECOMMENDATIONS TO BUY OR SELL ANY
SECURITY. PLEASE REFERENCE THE FOLLOWING ANNUAL REPORT FOR MORE COMPLETE FUND
INFORMATION.

THE MEXICO EQUITY AND INCOME FUND, INC.

Schedule of Investments JULY 31, 2003

MEXICO - 99.87% Shares Value
- --------------------------------------------------------------------------------

COMMON STOCKS - 88.01%

COMMUNICATIONS - 23.78%

America Movil, S.A. de C.V. - ADR .................... 49,300 $ 1,101,363
America Telecom, S.A. de C.V. - Class A1* ............ 937,000 965,288
Carso Global Telecom, S.A. de C.V. - Class A1* ....... 229,051 276,386
Grupo Iusacell, S.A. - Class V* ...................... 4,718,000 233,571
Telefonos de Mexico, S.A. de C.V. - Class L .......... 1,458,600 2,281,780
Telefonos de Mexico, S.A. de C.V. - Class L ADR ...... 36,000 1,110,960
-------------
5,969,348
-------------

CONSTRUCTION - 16.15%
Apasco, S.A. de C.V. ................................. 105,100 825,281
Cemex, S.A. de C.V. CPO .............................. 123,580 589,521
Consorcio ARA, S.A. de C.V.* ......................... 685,100 1,548,802
Corporacion GEO, S.A. de C.V. - Class B* ............. 292,100 1,090,830
-------------
4,054,434
-------------

FINANCIAL GROUPS - 10.20%
Grupo Financiero BBVA Bancomer,
S.A. de C.V. - Class B* ......................... 1,965,200 1,658,990
Grupo Financiero GBM Atlantico,
S.A. de C.V. - Class O*+ ........................ 742,264 106,205
Grupo Financiero Banorte, S.A. de C.V. - Class O ..... 298,000 795,917
-------------
2,561,112
-------------

FOOD, BEVERAGE, AND TOBACCO - 8.80%
Fomento Economico Mexicano, S.A. de C.V. UBD ......... 239,200 924,081
Grupo Modelo, S.A. de C.V. - Class C ................. 430,000 1,041,828
Industrias Bachoco, S.A. UBL ......................... 146,000 243,716
-------------
2,209,625
-------------

INDUSTRIAL CONGLOMERATES - 4.00%
Alfa, S.A. - Class A ................................. 487,100 1,003,611
-------------

See Notes to the Financial Statements.
7

THE MEXICO EQUITY AND INCOME FUND, INC.

Schedule of Investments (continued) JULY 31, 2003

COMMON STOCKS (continued) Shares Value

MEDIA - 6.87%
Grupo Televisa, S.A. ADR ............................. 9,800 $ 367,500
Grupo Televisa, S.A. CPO ............................. 311,400 594,076
TV Azteca, S.A. de C.V. CPO .......................... 1,804,000 764,035
-------------
1,725,611
-------------

MINING - 3.99%
Grupo Mexico, S.A. - Class B* ........................ 646,100 1,001,490
-------------

RETAILING - 14.22%
Controladora Comercial Mexicana, S.A. de C.V. UBC .... 595,000 419,426
Grupo Elektra, S.A. de C.V. .......................... 350,200 1,202,575
Wal-Mart de Mexico, S.A. de C.V. - Class C ........... 721,425 1,947,472
-------------
3,569,473
-------------

TOTAL COMMON STOCKS (Cost $19,131,026) ............... 22,094,704
-------------

STRUCTURED EQUITY NOTE - 2.32% Shares Value
- --------------------------------------------------------------------------------
Mexico Bolsa IPC Index* (Cost $554,062) .............. 870 582,647
-------------

GOVERNMENT BONDS - 8.70% Principal Amount
- --------------------------------------------------------------------------------
Mexican Fixed Rate Bond, 14.0000%, 01/22/2004 ........ 4,074,200 405,424
Mexican Fixed Rate Bond, 14.5000%, 05/12/2005 ........ 1,916,500 207,453
United Mexican States, 8.3750%, 01/14/2011 ........... 500,000 568,750
United Mexican States, 10.3750%, 02/17/2009 .......... 800,000 1,002,000
-------------

TOTAL GOVERNMENT BONDS (Cost $2,174,983) 2,183,627
-------------

TREASURY OBLIGATIONS - 0.84%
- --------------------------------------------------------------------------------
Mexican Cetes, 0.0000%, 08/07/2003 (Cost $218,395) ... 2,375,460 209,906
-------------

TOTAL MEXICO (Cost $22,078,466) 25,070,884
-------------

See Notes to the Financial Statements.
8

THE MEXICO EQUITY AND INCOME FUND, INC.

Schedule of Investments (concluded) JULY 31, 2003

UNITED STATES - 0.56% Shares Value
- --------------------------------------------------------------------------------

INVESTMENT COMPANIES - 0.56%
- --------------------------------------------------------------------------------
First American Treasury Obligations Fund -
Class S (Cost $139,923) ......................... 139,923 $ 139,923
-------------
TOTAL UNITED STATES .................................. 139,923
-------------
TOTAL INVESTMENTS (Cost $22,218,389) - 100.43% ....... 25,210,807
OTHER LIABILITIES IN EXCESS OF ASSETS - (0.43)% ...... (106,792)
-------------
TOTAL NET ASSETS - 100.00% ........................... $25,104,015
=============
<FN>

- ---------------
FOOTNOTES AND ABBREVIATIONS
* - Non-income producing security.
+ - At fair value as determined under the supervision of the
Board of Directors.
ADR - American Depository Receipts.
^ - Principal Amount in Mexican Pesos.

See Notes to the Financial Statements.
9
</FN>

THE MEXICO EQUITY AND INCOME FUND, INC.

Statement of Assets and Liabilities July 31, 2003

ASSETS

Investments, at value (Cost $22,218,389) .................. $ 25,210,807
Foreign currency holdings (Cost $49,419) .................. 49,315
Cash ...................................................... 20,938
Receivables:
Investments sold ..................................... 399,532
Interest ............................................. 46,524
Prepaid expenses .......................................... 11,809
------------
TOTAL ASSETS .................................... 25,738,925
------------

LIABILITIES
Payable for securities purchased .......................... 505,055
Advisory fees payable ..................................... 16,390
Directors' fees payable ................................... 13,261
Administration fee payable ................................ 8,356
Accrued expenses .......................................... 91,848
------------
TOTAL LIABILITIES ............................... 634,910
------------
NET ASSETS ...................................... $ 25,104,015
============
NET ASSET VALUE PER SHARE
($25,104,015/2,473,504) ....................... $ 10.15
============

NET ASSETS CONSIST OF:
Capital stock, $0.001 par value;
2,473,504 shares outstanding
(100,000,000 shares authorized) ...................... $ 2,474
Paid-in capital ........................................... 34,603,415
Undistributed net investment income ....................... 16,325
Accumulated net realized loss on
investments and foreign currency ..................... (12,510,485)
Net unrealized appreciation on
investments and foreign currency ..................... 2,992,286
------------
Net Assets ...................................... $ 25,104,015
============

See Notes to the Financial Statements.
10

THE MEXICO EQUITY AND INCOME FUND, INC.

FOR THE YEAR ENDED
Statement of Operations JULY 31, 2003

INVESTMENT INCOME

Interest (Net of foreign taxes
withheld of $5,236) .................................... $ 193,088
Dividends ................................................ 379,436
-----------
TOTAL INVESTMENT INCOME ........................ 572,524
-----------

EXPENSES
Advisory fees ........................................ $ 171,711
Legal fees ........................................... 89,990
Reports to shareholders .............................. 36,906
Administration fees .................................. 55,014
Audit fees ........................................... 19,491
Directors' fees and expenses ......................... 45,509
Custodian fees ....................................... 25,262
Shareholder servicing fees ........................... 17,412
NYSE fees ............................................ 23,182
Other expenses ....................................... 83,255
-----------
TOTAL EXPENSES ............................. 567,732
LESS, EXPENSE REIMBURSEMENT
BY ADVISER ............................... (4,750)
-----------
NET EXPENSES ............................... 562,982
-----------
NET INVESTMENT INCOME ...................... 9,542
-----------

NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized loss from investments
and foreign currency transactions ...................... (2,817,619)
Net change in unrealized appreciation
from investments and foreign
currency transactions .................................. 6,283,561
-----------
Net gain from investments and
foreign currency transactions .......................... 3,465,942
-----------
Net increase in net assets resulting
from operations ........................................ $ 3,475,484
===========

See Notes to the Financial Statements.
11

THE MEXICO EQUITY AND INCOME FUND, INC.

Statements of Changes in Net Assets

FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 2003 JULY 31, 2002
------------- -------------

INCREASE (DECREASE) IN NET ASSETS
OPERATIONS

Net investment income (loss) ................... $ 9,542 $ (82,360)
Net realized gain (loss) on investments
and foreign currency transactions ......... (2,817,619) 4,576,182
Net change in unrealized appreciation
(depreciation) in value of investments
and foreign currency transactions ......... 6,283,561 (2,040,371)
------------ ------------
Net increase in net assets resulting
from operations ........................... 3,475,484 2,453,451
------------ ------------

CAPITAL SHARE TRANSACTIONS
Shares repurchased under Tender Offer
(0 and 6,122,069 shares, respectively) .... -- (68,444,728)
------------ ------------
Decrease in net assets from capital
share transactions ........................ -- (68,444,728)
------------ ------------
Total increase (decrease) in net assets ........ 3,475,484 (65,991,277)

NET ASSETS
Beginning of period ............................ 21,628,531 87,619,808
------------ ------------
End of period .................................. $ 25,104,015 $ 21,628,531
============ ============

See Notes to the Financial Statements.
12

THE MEXICO EQUITY AND INCOME FUND, INC.

Financial Highlights

FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR

For the For the For the For the For the
Year Year Year Year Year
Ended Ended Ended Ended Ended
July 31, July 31, July 31, July 31, July 31,
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE

Net asset value, beginning of year ... $ 8.74 $ 10.19 $ 11.36 $ 8.64 $ 10.16
--------- --------- --------- --------- ---------
Net investment income (loss) ......... 0.00(2) (0.03)(1) (0.02) 0.03 0.22
Net realized and unrealized gains
(losses) on investments and foreign
currency transactions .............. 1.41 (1.42) (0.64) 2.62 (0.87)
--------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations .............. 1.41 (1.45) (0.66) 2.65 (0.65)
--------- --------- --------- --------- ---------
Less: Distributions
Dividends from net investment
Income ........................... -- -- (0.01) (0.12) --
Distributions from net realized
Gains ............................ -- -- (0.60) -- (0.93)
Return of capital .................. -- -- (0.01) -- --
--------- --------- --------- --------- ---------
Total dividends and distributions .... -- -- (0.62) (0.12) (0.93)
--------- --------- --------- --------- ---------
Capital share transactions
Anti-dilutive effect of Tender Offer -- -- 0.09 -- 0.04
Anti-dilutive effect of Share
Repurchase Program ................. -- -- 0.02 0.19 0.02
--------- --------- --------- --------- ---------
Total capital share transactions ..... -- -- 0.11 0.19 0.06
--------- --------- --------- --------- ---------
Net asset value, end of year ......... $ 10.15 $ 8.74 $ 10.19 $ 11.36 $ 8.64
========= ========= ========= ========= =========
Per share market value, end of year .. $ 9.10 $ 7.95 $ 9.11 $ 10.69 $ 7.06
TOTAL INVESTMENT RETURN BASED ON
MARKET VALUE, END OF YEAR* ......... 14.47% (12.73)% (8.64)% 53.36% 7.24%

See Notes to the Financial Statements.
13

THE MEXICO EQUITY AND INCOME FUND, INC.

Financial Highlights (concluded)

FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR

Net assets, end of period (in 000s) ...... $ 25,104 $ 21,629 $ 87,620 $ 114,112 $ 97,150
Ratios of expenses to average net assets:
Before expense reimbursement ........... 2.64% 1.81% 1.90% 2.03% 1.88%
After expense reimbursement ............ 2.62% 1.81% 1.90% 2.03% 1.88%
Ratios of net investment income (loss)
to average net assets:
Before expense reimbursement ........... 0.02% (0.14)% (0.16)% 0.27% 2.72%
After expense reimbursement ............ 0.04% (0.14)% (0.16)% 0.27% 2.72%
Portfolio turnover ....................... 180.67% 189.05% 220.85% 249.28% 163.23%
<FN>

- ----------
* Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each year reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions.

(1) Net investment income per share is calculated using ending balances prior
to consideration of adjustments for permanent financial reporting and tax
differences.

(2) The amount listed is less than $0.005 per share.

See Notes to the Financial Statements.
14

</FN>

THE MEXICO EQUITY AND INCOME FUND, INC.

Notes to Financial Statements July 31, 2003

NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Mexico Equity and Income Fund, Inc. (the "Fund") was incorporated in
Maryland on May 24, 1990, and commenced operations on August 21, 1990. The Fund
is registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company.

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.

Significant accounting policies are as follows:
PORTFOLIO VALUATION. Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the last sales price prior to the time of determination
of net asset value, or, if no sales price is available at that time, at the
closing price last quoted for the securities (but if bid and asked quotations
are available, at the mean between the current bid and asked prices, rather than
the quoted closing price). Securities that are traded over-the-counter are
valued, if bid and asked quotations are available, at the mean between the
current bid and asked prices. Investments in short-term debt securities having a
maturity of 60 days or less are valued at amortized cost if their term to
maturity from the date of purchase was less than 60 days, or by amortizing their
value on the 61st day prior to maturity if their term to maturity from the date
of purchase when acquired by the Fund was more than 60 days. Securities for
which market values are not readily ascertainable, which aggregated $106,205
(0.42% of net assets) at July 31, 2003, are carried at fair value as determined
in good faith by, or under the supervision of, the Board of Directors. It is
possible that the estimated value may differ significantly from the amount that
might ultimately be realized in the near term, and the difference could be
material.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes. Interest income, including the accretion of
discount and amortization of premium on investments, is recorded on an accrual
basis; dividend income is recorded on the ex-dividend date or, using reasonable
diligence, when known to the Fund. The collectibility of income receivable from
foreign securities is evaluated periodically, and any resulting allowances for
uncollectible amounts are reflected currently in the determination of investment
income.

TAX STATUS. No provision is made for U.S. Federal income or excise taxes as it
is the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders that will be
sufficient to relieve it from all or substantially all U.S. Federal income and
excise taxes. At July 31, 2003, the Fund had capital loss carryovers of
$5,218,649 expiring July 31, 2009, $1,363,046 expiring in 2010 and $4,024,771
expiring in 2011, which are available to offset future net realized gains on
securities transactions to the extent provided for in the Internal Revenue Code.

THE MEXICO EQUITY AND INCOME FUND, INC.

Notes to Financial Statements (continued) July 31, 2003

In accordance with U.S. Treasury regulations, the Fund elected to defer
$1,069,636 of capital losses and $21,901 of Post-October currency losses arising
after October 31, 2002. Such losses are treated for tax purposes as arising on
August 1, 2003.

The Fund is subject to the following withholding taxes on income from Mexican
sources:

Dividends distributed by Mexican companies are subject to withholding tax
at an effective rate of 7.69%. Effective January 1, 2002, the effective
rate was reduced to 0.00%.

Interest income on debt issued by the Mexican federal government is
generally not subject to withholding. Withholding tax on interest from
other debt obligations such as publicly traded bonds and loans by banks or
insurance companies is at a rate of 4.9% under the tax treaty between
Mexico and the United States.

Gains realized from the sale or disposition of debt securities may be
subject to a 4.9% withholding tax. Gains realized by the Fund from the sale
or disposition of equity securities that are listed and traded on the
Mexican Stock Exchange ("MSE") are exempt from Mexican withholding tax if
sold through the stock exchange. Gains realized on transactions outside of
the MSE may be subject to withholding at a rate of 20% (25% rate effective
January 1, 2002) of the value of the shares sold or, upon the election of
the Fund, at 40% (35% rate effective January 1, 2002) of the gain. If the
Fund has owned less than 25% of the outstanding stock of the issuer of the
equity securities within the 12 month period preceding the disposition,
then such disposition will not be subject to capital gains taxes as
provided for in the treaty to avoid double taxation between Mexico and the
United States.

RECLASSIFICATION OF CAPITAL ACCOUNTS. The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2; Determination,
Disclosure and Financial Statement Presentation of Income, Capital, and Return
of Capital Distributions by Investment Companies. For the year ended July 31,
2003, the Fund increased undistributed net investment income by $6,783 and
decreased accumulated net realized loss on investments by $6,783, due to the tax
treatment of foreign currency gains and losses.

FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, assets and liabilities at the
current Mexican peso exchange rate on the valuation date, and
(ii) purchases and sales of investment securities, income and expenses at
the Mexican peso exchange rate prevailing on the respective dates of such
transactions.

The Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market prices of
securities. The Fund does isolate the effect of fluctuations in foreign currency
rates, however, when determining the gain or loss upon the sale of foreign
currency denominated debt obligations pursuant to U.S. Federal income tax
regulations; such amounts are categorized as foreign exchange gain or loss for
income tax reporting purposes.

THE MEXICO EQUITY AND INCOME FUND, INC.

Notes to Financial Statements (continued) July 31, 2003

The Fund reports realized foreign exchange gains and losses on all other foreign
currency related transactions as components of realized gains and losses for
financial reporting purposes, whereas such gains and losses are treated as
ordinary income or loss for Federal income tax purposes.

Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in the foreign exchange rate. Foreign
security and currency transactions may involve certain considerations and risks
not typically associated with those of domestic origin as a result of, among
other factors, the level of governmental supervision and regulation of foreign
securities markets and the possibilities of political or economic instability.

DISTRIBUTION OF INCOME AND GAINS. The Fund intends to distribute to
shareholders, at least annually, substantially all of its net investment income,
including foreign currency gains. The Fund also intends to normally distribute
annually any net realized capital gains in excess of net realized capital losses
(including any capital loss carryovers), except in circumstances where the
Directors of the Fund determine that the decrease in the size of the Fund's
assets resulting from the distribution of the gains would generally not be in
the interest of the Fund's shareholders. An additional distribution may be made
to the extent necessary to avoid payment of a 4% U.S. Federal excise tax.

Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized gains
are determined in accordance with U.S. Federal income tax regulations, which may
differ from accounting principles generally accepted in the United States of
America. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their Federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes are
reported as dividends in excess of net investment income and net realized
capital gains, respectively. To the extent they exceed net investment income and
net realized gains for tax purposes, they are reported as distributions of
additional paid-in capital.

DISTRIBUTIONS TO SHAREHOLDERS. The tax character of distributions paid to
shareholders during the years ended July 31, 2003 and July 31, 2002 were as
follows:

DISTRIBUTIONS PAID FROM 7/31/03 7/31/02
----------------------- ------- -------
Ordinary Income .......................... $ -- $ --
Long-Term Capital Gain ................... -- --
Return of Capital ........................ -- --
------- -------
Total .................................... $ -- $ --
======= =======

THE MEXICO EQUITY AND INCOME FUND, INC.

Notes to Financial Statements (continued) July 31, 2003

As of July 31, 2003, the components of accumulated earnings (losses) on a tax
basis were as follows:

Cost of investments and foreign currency (a) .............. $ 23,102,191
------------
Gross unrealized appreciation ............................. 3,237,464
Gross unrealized depreciation ............................. (1,079,561)
------------
Net unrealized appreciation ............................... $ 2,157,903
============

Undistributed ordinary income ............................. $ 38,226
Undistributed long-term capital gain ...................... --
------------
Total distriubutal earnings ............................... $ 38,226
============
Other accumulated losses .................................. $(11,698,003)
------------
Total accumulated losses .................................. $ (9,501,874)
------------
- ---------
(a) Represents cost for federal income tax purposes. Differences between the
Fund's cost basis of investments and foreign currency at July 31, 2003, for
book and tax purposes, relate primarily to the deferral of losses related
to wash sales.

NOTE B: MANAGEMENT, INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES

Pichardo Asset Management, S.A. de C.V. serves as the Fund's Investment Adviser
(the "Investment Adviser") under the terms of the new Investment Advisory
Agreement (the "Advisory Agreement") effective July 1, 2003. Pursuant to the
Advisory Agreement, the Investment Adviser makes investment decisions for the
Fund and supervises the acquisition and disposition of securities by the Fund.
For its services, the Investment Adviser receives a monthly fee at an annual
rate of 0.80% of the Fund's average daily net assets. For the one-month ended
July 31, 2003, these fees amounted to $16,625. The Investment Adviser has
voluntarily agreed to reimburse the Fund for certain fees and expenses on an
annual basis. These expense reimbursements may be terminated at any time. For
the one-month ended July 31, 2003, the total expense reimbursements made by the
Investment Adviser amounted to $255.

Clemente Capital, Inc. served as the Fund's former Adviser under the terms of
the former Investment Advisory Agreement (the "former Advisory Agreement"). The
former Advisory Agreement was terminated by mutual consent, as approved by the
Board of Directors of the Fund, as of June 30, 2003. Prior to the mutual
termination of the former Advisory Agreement, the former Adviser made investment
decisions for the Fund and supervised the acquisition and disposition of
securities by the Fund. For its services, the former Adviser received a monthly
fee at an annual rate of 0.80% of the Fund's average daily net assets. For the
six months ended June 30, 2003, these fees amounted to $84,669. The former
Adviser voluntarily agreed to

THE MEXICO EQUITY AND INCOME FUND, INC.

Notes to Financial Statements (continued) July 31, 2003

reimburse the Fund for certain fees and expenses on an annual basis. The expense
reimbursements could have been terminated at any time. For the six months ended
June 30, 2003, the total expense reimbursements made by the former Adviser
amounted to $1,980.

Acci Worldwide S.A. de C.V. served as the Fund's previous Adviser under the
terms of the former Investment Advisory Agreement (the "Acci Advisory
Agreement"). The Acci Advisory Agreement was terminated by mutual consent, as
approved by the Board of Directors of the Fund, as of December 31, 2002. Prior
to the mutual termination of the Acci Advisory Agreement, the previous Adviser
made investment decisions for the Fund and supervised the acquisition and
disposition of securities by the Fund. For its services, the previous Adviser
received a monthly fee at an annual rate of 0.80% of the Fund's average daily
net assets. For the five months ended December 31, 2002, these fees amounted to
$70,417. The previous Adviser voluntarily agreed to reimburse the Fund for
certain fees and expenses on an annual basis. The expense reimbursements could
have been terminated at any time. For the five months ended December 31, 2002,
the total expense reimbursements made by the previous Adviser amounted to
$2,515.

The Fund pays each of its directors who is not a director, officer or employee
of the Investment Adviser, the Administrator or any affiliate thereof an annual
fee of $5,000 plus $700 for each Board of Directors meeting attended in person
and $100 for each special telephonic meeting attended. At the Board of Directors
meeting held on December 13, 2001, Mr. Gerald Hellerman, a non-interested
director, was appointed President of the Fund. For serving the Fund as
President, in addition to the aforementioned Directors' fees, Mr. Hellerman
receives annual compensation in the amount of $6,000. In addition, the Fund
reimburses the directors for travel and out-of-pocket expenses incurred in
connection with Board of Directors' meetings.

NOTE C: TRANSACTIONS WITH AFFILIATES
Acciones y Valores de Mexico, S.A. de C.V., the parent company of the previous
Investment Adviser, received total brokerage commissions from the Fund of
$10,464 during the five-month period ended December 31, 2002.

NOTE D: PORTFOLIO ACTIVITY
Purchases and sales of securities other than short-term obligations, aggregated
$37,573,266 and $35,513,413 respectively, for the year ended July 31, 2003.

At July 31, 2003 substantially all of the Fund's assets were invested in Mexican
securities. The Mexican securities markets are substantially smaller, less
liquid, and more volatile than the major securities markets in the United
States. Consequently, acquisitions and dispositions of securities by the Fund
may be limited.

THE MEXICO EQUITY AND INCOME FUND, INC.

Notes to Financial Statements (continued) July 31, 2003

NOTE E: CAPITAL STOCK
At a meeting of the Board of Directors held on December 13, 2001, the Board of
Directors approved a tender offer (the "Tender").

The Tender allowed the Fund to purchase up to 100% of each shareholder's shares
of common stock, not to exceed 80% of the total outstanding shares of common
stock of the Fund, for cash at a price equal to 100% of the Fund's net asset
value per share as of the closing date. The Tender commenced on February 19,
2002 and expired on March 20, 2002. In connection with the Tender, the Fund
purchased 6,122,069 shares of capital stock at a total cost of $68,444,728.
There were no gains or losses to the Fund because the repurchase of tendered
shares was executed at 100% of the Fund's NAV as calculated on the expiration
date.

At a special meeting of the Board of Directors held on October 11, 1999, the
Board of Directors approved a share repurchase program. Pursuant to the share
repurchase program, the Fund was authorized to commence a two phase share
repurchase program for up to 2,800,000 shares, or approximately 25% of the
Fund's then outstanding shares of common stock, through a combination of share
purchases and tender offers.

During the years ended July 31, 2002 and July 31, 2003, the Fund made no
repurchases pursuant to the program. Pursuant to the share repurchase program,
during the year ended July 31, 2001, the Fund purchased 174,000 shares of
capital stock in the open market at a total cost of $1,703,552. The weighted
average discount of these purchases comparing the purchase price to the net
asset value at the time of purchase was 9.01%. During the fiscal year ended July
31, 2000, the Fund purchased 1,199,700 shares of capital stock in the open
market at a total cost of $10,573,159. The weighted average discount of these
purchases comparing the purchase prices to the net asset value at the time of
purchase was 16.40%.

THE MEXICO EQUITY AND INCOME FUND, INC.

Report of Independent Certified Public Accountants July 31, 2003

The Board of Directors and Shareholders of
The Mexico Equity and Income Fund, Inc.
Milwaukee, Wisconsin

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Mexico Equity and Income Fund, Inc. (the
"Fund"), as of July 31, 2003, and the related statement of operations for the
year then ended, and changes in net assets and financial highlights for the two
years then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. For all years ending prior to August 1, 2001, the statements of changes
in net assets and financial highlights were audited by other auditors whose
report dated September 20, 2001, expressed an unqualified opinion.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
investments owned as of July 31, 2003, by correspondence with the custodian and
brokers. Where brokers have not replied to our confirmation requests, we carried
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as, evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Mexico Equity and Income Fund, Inc. as of July 31, 2003, the results of their
operations for the year then ended, and the changes in their net assets and
their financial highlights for the two years then ended, in conformity with
accounting principles generally accepted in the United Sates of America.

TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
September 12, 2003

THE MEXICO EQUITY AND INCOME FUND, INC.

Dividends and Distributions (Unaudited)

DIVIDEND REINVESTMENT PLAN
The Fund intends to distribute to shareholders substantially all of its net
investment company taxable income at least annually. Investment company taxable
income, as defined in section 852 of the Internal Revenue Service Code of 1986,
includes all of the Fund's taxable income minus the excess, if any, of its net
realized long-term capital gains over its net realized short-term capital losses
(including any capital loss carryovers), plus or minus certain other required
adjustments. The Fund also expects to distribute annually substantially all of
its net realized long-term capital gains in excess of net realized short-term
capital losses (including any capital loss carryovers), except in circumstances
where the Fund realizes very large capital gains and where the Directors of the
Fund determine that the decrease in the size of the Fund's assets resulting from
the distribution of the gains would not be in the interest of the Fund's
shareholders generally.

Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), each shareholder
will be deemed to have elected, unless the Plan Agent (as defined below) is
otherwise instructed by the shareholder in writing, to have all distributions,
net of any applicable U.S. withholding tax, automatically reinvested in
additional shares of the Fund by Computershare Trust Company, Inc., the Fund's
transfer agent, as the Plan Agent (the "Plan Agent"). Shareholders who do not
participate in the Plan will receive all dividends and distributions in cash,
net of any applicable U.S. withholding tax, paid in U.S. dollars by check mailed
directly to the shareholder by the Plan Agent, as dividend-paying agent.
Shareholders who do not wish to have dividends and distributions automatically
reinvested should notify the Plan Agent for The Mexico Equity and Income Fund,
Inc., c/o Computershare Investor Services, ATTN: Mr. Charles Zade, 2 North La
Salle Street, Chicago, Illinois 60602. Dividends and distributions with respect
to shares of the Fund's Common Stock registered in the name of a broker-dealer
or other nominee (i.e., in "street name") will be reinvested under the Plan
unless the service is not provided by the broker or nominee or the shareholder
elects to receive dividends and distributions in cash. A shareholder whose
shares are held by a broker or nominee that does not provide a dividend
reinvestment program may be required to have his shares registered in his own
name to participate in the Plan. Investors who own shares of the Fund's Common
Stock registered in street name should contact the broker or nominee for
details.

The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash and
participants in the Plan will receive Common Stock, to be issued by the Fund. If
the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants at
net asset value; or, if the net asset value is less than 95% of the market price
on the valuation date, then such shares will be issued at 95% of the market
price.

THE MEXICO EQUITY AND INCOME FUND, INC.

Dividends and Distributions (unaudited) (concluded)

If net asset value per share on the valuation date exceeds the market price per
share on that date, participants in the Plan will receive shares of Common Stock
from the Fund valued at market price. The valuation date is the dividend or
distribution payment date or, if that date is not a New York Stock Exchange
trading day, the next preceding trading day. If the Fund should declare an
income dividend or capital gains distribution payable only in cash, the Plan
Agent will, as agent for the participants, buy Fund shares in the open market on
the New York Stock Exchange or elsewhere, for the participants' accounts on, or
shortly after, the payment date.

The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in noncer-tified form in
the name of the participant, and each shareholder's proxy will include those
shares purchased pursuant to the Plan.

In the case of shareholders such as banks, brokers or nominees that hold shares
for others who are beneficial owners, the Plan Agent will administer the Plan on
the basis of the number of shares certified from time to time by the
shareholders as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who participate in the Plan.

There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either Common Stock or cash. The Plan Agent's fees for
the handling or reinvestment of such dividends and capital gains distributions
will be paid by the Fund. There will be no brokerage charges with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
or capital gains distributions payable in cash.

Brokerage charges for purchasing small amounts of Common Stock for individual
accounts through the Plan are expected to be less than usual brokerage charges
for such transactions because the Plan Agent will be purchasing stock for all
participants in blocks and prorating the lower commissions thus attainable.
Brokerage commissions will vary based on, among other things, the broker
selected to effect a particular purchase and the number of participants on whose
behalf such purchase is being made.

The receipt of dividends and distributions in Common Stock under the Plan will
not relieve participants of any income tax (including withholding tax) that may
be payable on such dividends or distributions.

Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any dividend or distribution paid subsequent to notice of the
termination sent to participants at least 30 days before the record date for
such dividend or distribution. The Plan also may be amended by the Fund or the
Plan Agent, but (except when necessary or appropriate to comply with applicable
law, or rules or policies of a regulatory authority) only upon at least 30 days'
written notice to participants. All correspondence concerning the Plan should be
directed to the Plan Agent at the address above.

THE MEXICO EQUITY AND INCOME FUND, INC.

Results of Annual Stockholders Meeting (Unaudited) July 31, 2003

The Fund's Annual Stockholders meeting was held on February 14, 2003, at 405
Park Avenue, New York, New York 10022. As of December 30, 2002, the record date,
outstanding shares of common stock ("shares") of the Fund were 2,473,504.
Holders of 2,136,673 shares of the Fund were present at the meeting either in
person or by proxy. These holders, as being holders of a majority of the
outstanding shares of the Fund, constituted a quorum. The stockholders voted on
four proposals.

The stockholders elected three Directors to the Board of Directors, approved a
new Investment Advisory agreement between Clemente Capital, Inc. and the Fund,
and approved the creation and registration of put warrants, which are designed
to afford stockholders an opportunity to realize net asset value for their
shares. The stockholders also ratified the selection of Tait, Weller & Baker as
the Fund's independent auditor for the fiscal year ending July 31, 2003.

The following table provides information concerning the matters voted on at the
meeting:

I. Election of Directors

NOMINEE FOR WITHHELD
------- --- --------
Glenn Goodstein 2,015,470 121,203
Phillip Goldstein 2,016,023 120,650
Leopoldo M. Clemente, Jr. 2,019,996 116,677

II. Approval of the new Investment Advisory Agreement between Clemente Capital,
Inc. and the Fund

VOTES FOR VOTES AGAINST VOTES ABSTAINED BROKER NON-VOTES
--------- ------------- --------------- ----------------

1,993,353 96,489 46,831 2

III. Adoption of a proposal to approve the creation, issuance and registration
of put warrants, which are designed to afford stockholders the opportunity
to realize net asset value for their shares

VOTES FOR VOTES AGAINST VOTES ABSTAINED BROKER NON-VOTES
--------- ------------- --------------- ----------------

724,401 169,275 79,677 1,163,322

IV. Ratification of the selection of Tait, Weller & Baker as the Fund's
independent auditor

Votes For Votes Against Votes Abstained Broker Non-Votes
--------- ------------- --------------- ----------------

2,033,955 59,381 43,339 0

THE MEXICO EQUITY AND INCOME FUND, INC.

The Mexico Equity and Income Fund, Inc. (the "Fund") has adopted the following
privacy policy in order to safeguard the personal information of its consumers
and customers in accordance with SEC Regulation S-P, 17 CFR 284.30:

Commitment to Consumer Privacy. The Fund recognizes and respects the privacy
expectations of each of our customers and believes that the confidentiality and
protection of consumer information is one of our fundamental responsibilities.
The Fund is committed to maintaining the confidentiality, integrity and security
of the customers' personal information and will handle personal consumer and
customer information only in accordance with Regulation S-P and any other
applicable laws, rules and regulations. The Fund will ensure: (a) the security
and confidentiality of customer records and information; (b) that customer
records and information are protected from any anticipated threats and hazards;
and (c) that unauthorized access to, or use of, customer records or information
is protected against.

Collection and Disclosure of Shareholder Information. Consumer information
collected by, or on behalf of, The Fund, generally consists of the following:

o Information received from consumers or customers on or in applications or
other forms, correspondence, or conversations, including, but not limited
to, their name, address, phone number, social security number, assets,
income and date of birth; and

o Information about transactions with us, our affiliates, or others,
including, but not limited to, shareholder account numbers and balance,
payments history, parties to transactions, cost basis information, and
other financial information.

The Fund does not disclose any nonpublic personal information about our current
or former consumers or customers to nonaffiliated third parties, except as
permitted by law. For example, as The Fund has no employees, it conducts its
business affairs through third parties that provide services pursuant to
agreements with The Fund (as well as through its officers and directors).

Security of Consumer and Customer Information. The Fund will determine whether
the policies and procedures of its affiliates and service providers and
reasonably designed to safeguard customer information and require only
appropriate and authorized access to, and use of, customer information through
the application of appropriate administrative, technical, physical, and
procedural safeguards that comply with applicable federal standards and
regulations. The Fund directs each of its service providers to adhere to The
Fund's privacy policy and to their respective privacy policies with respect to
all customer information of The Fund and to take all actions reasonably
necessary so that The Fund is in compliance with the provisions of 17 CFR
248.30, including, as applicable, the

THE MEXICO EQUITY AND INCOME FUND, INC.

development and delivery of initial and annual privacy notices and maintenance
of appropriate and adequate records. The Fund will require its service providers
to confirm to The Fund, in writing, that they are restricting access to
nonpublic personal information about customers to those employees who need to
know that information to provide products or services to customers.

The Fund requires its service providers to provide periodic reports, no less
frequently than annually, to the Board of Directors outlining their privacy
policies and implementation and promptly report to The Fund any material changes
to their privacy policy before, or promptly after, their adoption.

THE MEXICO EQUITY AND INCOME FUND, INC.

Management of the Fund (unaudited) July 31, 2003

Board of Directors. The management and affairs of the Fund are supervised by the
Board of Directors. The Board consists of five individuals, all of whom are not
"interested persons" of the Fund as the term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). The Directors are fiduciaries
for the Fund's shareholders and are governed by the laws of the State of
Maryland in this regard. The Board establishes policies for the operation of the
Fund and appoints the officers who conduct the daily business of the Fund. The
Directors of the Fund are listed below with their addresses, present position(s)
with the Fund, length of time served, principal occupations over at least the
last five years, and any other Directorships held.

Term of
Position(s) Office/Length Principal Occupation Other Directorships
Name and Address Age with the Fund of Time Served During the Past Five Years Held by Director
- -------------------------------------------------------------------------------------------------------------------------------

Gerald Hellerman 66 Director, 2004 / 2 years Managing Director, Director, Frank's Nursery
10965 Eight Bells Lane President, Hellerman & Associates & Crafts, Inc.; Director,
Columbia, MD 21044 CEO and Innovative Clinical
CFO Solutions, Ltd.; Director,
MeVC Draper Fisher
Jurveston Fund I, Inc.;
Director, Brantley Capital
Corporation

Phillip Goldstein 58 Director 2005 / 3 years President, Kimball & Director, Brantley Capital
60 Heritage Drive Winthrop, Inc.; and general Corporation
Pleasantville, NY 10570 partner of Opportunity
Partners, L.P.; Managing
Member of the general partner
of Full Value Partners, L.P.

Glenn Goodstein 39 Director 2005 / 2 years Registered Investment Director, The Italy Fund,
16830 Adlon Road Advisor; held numerous Inc.
Encino, CA 91436 executive positions with
Automatic Data Processing
until 1996.

Rajeev Das 34 Director 2003 / 2 years Senior analyst, Kimball & N/A
68 Lafayette Avenue Winthrop, Inc.; prior
Dumont, NJ 07628 Credit Manager, Muriel
Siebert & Company.

Andrew Dakos 36 Director 2003 / 2 years President and CEO, Uvitec N/A
43 Waterford Drive Printing Ink, Inc.; and
Montville, NJ 07045 Managing Member of the
general partner of Full Value
Partners, L.P.; President of
Elmhurst Capital, Inc.

ITEM 2. CODE OF ETHICS.

The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the covered period. The
registrant has not granted any waivers from any provisions of the code of ethics
during the covered period. The registrant undertakes to provide to any person
without charge, upon request, a copy of its code of ethics by mail when they
call the registrant at 1-414-765-5307.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant's board of directors has determined that there is at least one
audit committee financial expert serving on its audit committee. Mr. Gerald
Hellerman is the audit committee financial expert and is considered to be
independent.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not required for annual reports filed for periods ending before December 15,
2003.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

The standing audit committee is comprised of the same members as the Fund's
Board of Directors. These members include Mr. Gerald Hellerman, Mr. Phillip
Goldstein, Mr. Glenn Goodstein, Mr. Andrew Dakos, and Mr. Rajeev P. Das.

ITEM 6. [RESERVED]

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

PROXY VOTING POLICIES AND GUIDELINES

The Proxy Voting Policies and Guidelines contained in this document
summarize The Mexico Equity and Income Fund, Inc.'s (the "Fund") positions on
various issues of concern to the Fund's shareholders. These Guidelines give
general indication as to how the Fund's Advisor will vote Fund shares on each
issue listed. However, this listing does not address all potential voting issues
or the intricacies that may surround individual proxy votes. For that reason
there may be instances in which votes may vary from the guidelines presented
here. The Fund endeavors to vote Fund shares in accordance with the Fund's
investment objectives and strategies.

The Fund will vote NO on any proposals that would limit or restrict a
shareholders rights.

I. CORPORATE GOVERNANCE

A. BOARD AND GOVERNANCE ISSUES

1. BOARD OF DIRECTOR/TRUSTEE COMPOSITION

The Board of Directors is responsible for the overall governance of the
corporation.

The Fund advisor will OPPOSE slates without at least a majority of
independent directors (1/3 of directors who are outsiders to the corporation).

The Fund advisor will vote FOR shareholder proposals that request that the
board audit, compensation and/or nominating committees include independent
directors exclusively.

2. INCREASE AUTHORIZED COMMON STOCK

The Fund advisor will generally SUPPORT the authorization of additional
common stock necessary to facilitate a stock split.

The Fund advisor will generally SUPPORT the authorization of additional
common stock, if the company already has a large amount of stock authorized but
not issued or reserved for its stock option plans. In this latter instance,
there is a concern that the authorized but unissued shares will be used as a
poison pill or other takeover defense, which will be OPPOSED. In addition, we
will require the company to provide a specific purpose for any request to
increase shares by more than 100 percent of the current authorization.

3. BLANK CHECK PREFERRED STOCK

Blank check preferred is stock with a fixed dividend and a preferential
claim on company assets relative to common shares. The terms of the stock
(voting dividend and conversion rights) are set by the Board at a future date
without further shareholder action. While such an issue can in theory have
legitimate corporate purposes, most often it has been used as a takeover defense
since the stock has terms that make the entire company less attractive.

The Fund advisor will generally OPPOSE the creation of blank check
preferred stock.

4. CLASSIFIED OR "STAGGERED" BOARD

On a classified (or staggered) board, directors are divided into
separate classes (usually three) with directors in each class elected to
overlapping three-year terms. Companies argue that such Boards offer continuity
in direction which promotes long-term planning. However, in some instances they
may serve to deter unwanted takeovers since a potential buyer would have to wait
at least two years to gain a majority of Board seats.

The Fund advisor will vote no on proposals involving classified
boards.

5. SUPERMAJORITY VOTE REQUIREMENTS

Supermajority vote requirements in a company's charter or bylaws
require a level of voting approval in excess of a simple majority. Generally,
supermajority provisions require at least 2/3 affirmative vote for passage of
issues.

The Fund advisor will vote no on proposals involving supermajority voting.

6. RESTRICTIONS ON SHAREHOLDERS TO ACT BY WRITTEN CONSENT

Written consent allows shareholders to initiate and carry out a
shareholder action without waiting until the annual meeting or by calling a
special meeting. It permits action to be taken by the written consent of the
same percentage of outstanding shares that would be required to effect the
proposed action at a shareholder meeting.

The Fund advisor will vote no on proposals to limit or eliminate the
right of shareholders to act by written consent.

7. RESTRICTIONS ON SHAREHOLDERS TO CALL MEETINGS

The Fund advisor will generally OPPOSE such a restriction as it
limits the right of the shareholder.

8. LIMITATIONS, DIRECTOR LIABILITY AND INDEMNIFICATION

Because of increased litigation brought against directors of
corporations and the increased costs of director's liability insurance, many
states have passed laws limiting director liability for those acting in good
faith. Shareholders however must opt into such statutes. In addition, many
companies are seeking to add indemnification of directors to corporate bylaws.

The Fund advisor will generally SUPPORT director liability and
indemnification resolutions because it is important for companies to be able to
attract the most qualified individuals to their Boards. Note: Those directors
acting fraudulently would remain liable for their actions irrespective of this
resolution.

9. REINCORPORATION

Corporations are in general bound by the laws of the state in which
they are incorporated. Companies reincorporate for a variety of reasons
including shifting incorporation to a state where the company has its most
active operations or corporate headquarters, or shifting incorporation to take
advantage of state corporate takeover laws.

While each reincorporation proposal will be evaluated based on its
own merits, the Fund advisor will generally SUPPORT reincorporation resolutions
for valid business reasons (such as reincorporating in the same state as the
corporate headquarters).

10. CUMULATIVE VOTING

Cumulative voting allows shareholders to "stack" their votes behind
one or a few directors running for the board, thereby helping a minority of
shareholders to win board representation. Cumulative voting gives minority
shareholders a voice in corporate affairs proportionate to their actual strength
in voting shares.

The Fund advisor will generally SUPPORT proposals calling for
cumulative voting in the election of directors.

11. DUAL CLASSES OF STOCK

In order to maintain corporate control in the hands of a certain
group of shareholders, companies may seek to create multiple classes of stock
with differing rights pertaining to voting and dividends.

The Fund advisor will generally OPPOSE dual classes of stock.
However, the advisor will SUPPORT classes of stock offering different dividend
rights (such as one class which pays cash dividends and a second which pays
stock dividends) depending on the circumstances.

12. LIMIT DIRECTORS' TENURE

In general corporate directors may stand for re-election
indefinitely. Opponents of this practice suggest that limited tenure would
inject new perspectives into the boardroom as well as possibly creating room for
directors from diverse backgrounds; however, continuity is important to
corporate leadership and in some instances alternative means may be explored for
injecting new ideas or members from diverse backgrounds into corporate
boardrooms.

Accordingly, the Fund advisor will vote on a case-by-case basis
attempts to limit director tenure.

13. MINIMUM DIRECTOR STOCK OWNERSHIP

The director share ownership proposal requires that all corporate
directors own a minimum number of shares in the corporation. The purpose of this
resolution is to encourage directors to have the same interest as other
shareholders.

The Fund advisor will SUPPORT resolutions that require corporate
directors to own shares in the company.

14. SELECTION OF AUDITOR

Annual election of the outside accountants is standard practice.
While it is recognized that the company is in the best position to evaluate the
competence of the outside accountants, we believe that outside accountants must
ultimately be accountable to shareholders. Furthermore, audit committees have
been the subject of a report released by the Blue Ribbon Commission on Improving
the Effectiveness of Corporate Audit Committees in conjunction with the NYSE and
the National Association of Securities Dealers. The Blue Ribbon Commission
concluded that audit committees must improve their current level of oversight of
independent accountants. Given the rash of accounting irregularities that were
not detected by audit panels or auditors, shareholder ratification is an
essential step in restoring investor confidence.

The Fund advisor will OPPOSE the resolutions seeking ratification of
the auditor when fees for financial systems design and implementation exceed
audit and all other fees, as this can compromise the independence of the
auditor.

The Fund advisor will OPPOSE the election of the audit committee
chair if the audit committee recommends an auditors whose fees for financial
systems design and implementation exceed audit and all other fees, as this can
compromise the independence of the auditor.

B. EXECUTIVE COMPENSATION

1. DISCLOSURE OF CEO, EXECUTIVE, BOARD AND MANAGEMENT COMPENSATION

On a case-by-case basis, the Fund advisor will SUPPORT shareholder
resolutions requesting companies to disclose the salaries of top management and
the Board of Directors.

2. COMPENSATION FOR CEO, EXECUTIVE, BOARD AND MANAGEMENT

The Fund advisor will OPPOSE an executive compensation proposal if we
believe the compensation does not reflect the economic and social circumstances
of the company (i.e. at times of layoffs, downsizing, employee wage freezes,
etc.).

3. FORMATION AND INDEPENDENCE OF COMPENSATION REVIEW COMMITTEE

The Fund advisor will SUPPORT shareholder resolutions requesting the
formation of a committee of independent directors to review and examine
executive compensation.

4. STOCK OPTIONS FOR BOARD AND EXECUTIVES

The Fund advisor will generally OPPOSE stock option plans that in
total offer greater than 15% of shares outstanding because of voting and
earnings dilution.

The Fund advisor will generally OPPOSE option programs that allow the
repricing of underwater options. (Repricing divides shareholder and employee
interests. Shareholders cannot "reprice" their stock and, therefore, optionees
should not be treated differently).

The Fund advisor will generally OPPOSE stock option plans that have
option exercise prices below the marketplace on the day of the grant.

The Fund advisor will generally SUPPORT options programs for outside
directors subject to the same constraints previously described.

5. EMPLOYEE STOCK OWNERSHIP PLAN (ESOPS)

The Fund advisor will SUPPORT ESOPs created to promote active
employee ownership. However, they will OPPOSE any ESOP whose purpose is to
prevent a corporate takeover.

6. PAY EQUITY

The Fund advisor will SUPPORT shareholder resolutions that request
that management provide a race and/or gender pay equity report.

7. RATIO BETWEEN CEO AND WORKER PAY

The Fund advisor will generally SUPPORT shareholder resolutions
requesting that management report on the ratio between CEO and employee
compensation.

8. MAXIMUM RATIO BETWEEN CEO AND WORKER COMPENSATION AND/OR CAP ON CEO
COMPENSATION

The Fund advisor will vote on a case-by-case basis shareholder
resolutions requesting management to set a maximum ratio between CEO and
employee compensation and/or a cap on CEO compensation.

9. CHANGES TO CHARTER OR BY-LAWS

The Fund advisor will conduct a case-by-case review of the proposed
changes with the voting decision resting on whether the proposed changes are in
shareholder's best interests.

10. CONFIDENTIAL VOTING

Typically, proxy voting differs from voting in political elections in
that the company is made aware of shareholder votes as they are cast. This
enables management to contact dissenting shareholders in an attempt to get them
to change their votes.

The Fund advisor will SUPPORT confidential voting because the voting
process should be free of coercion.

11. EQUAL ACCESS TO PROXY

Equal access proposals ask companies to give shareholders access to
proxy materials to state their views on contested issues, including director
nominations. In some cases, they would actually allow shareholders to nominate
directors. Companies suggest that such proposals would make an increasingly
complex process even more burdensome.

In general, the Fund advisor will OPPOSE resolutions for equal access
proposals.

12. GOLDEN PARACHUTES

Golden parachutes are severance payments to top executives who are
terminated or demoted pursuant to a takeover. Companies argue that such
provisions are necessary to keep executives from "jumping ship" during potential
takeover attempts.

The Fund advisor will SUPPORT the right of shareholders to vote on
golden parachutes because they go above and beyond ordinary compensation
practices. In evaluating a particular golden parachute, we will examine total
management compensation, the employees covered by the plan, and the quality of
management.

C. MERGERS AND ACQUISITIONS

1. CONSIDERING THE NON-FINANCIAL EFFECTS OF A MERGER PROPOSAL

Such a proposal allows or requires the Board to consider the impact
of merger decisions on various "stakeholders," such as employees, communities,
customers and business partners. This proposal gives the Board the right to
reject a tender offer on the grounds that it would adversely affect the
company's stakeholders.

The Fund advisor will SUPPORT shareholder resolutions that consider
non-financial impacts of mergers.

2. MERGERS, RESTRUCTURING AND SPIN-OFFS

A merger, restructuring, or spin-off in some way affects a change in
control of the company's assets. In evaluating the merit of each issue, we will
consider the terms of each proposal. This will include an analysis of the
potential long-term value of the investment.

The Fund advisor will SUPPORT management proposals for merger or
restructuring if the transaction appears to offer fair value and other proxy
voting policies stated are not violated. For example, the advisor may oppose
restructuring resolution which include in it significant takeover defenses and
may again oppose the merger of a non-nuclear and a nuclear utility if it poses
potential liabilities.

3. POISON PILLS

Poison pills (or shareholder rights plans) are triggered by an
unwanted takeover attempt and cause a variety of events to occur which may make
the company financially less attractive to the suitor. Typically, directors have
enacted these plans without shareholder approval. Most poison pill resolutions
deal with putting poison pills up for a vote or repealing them altogether.

The Fund advisor will SUPPORT proposals to put rights plans up for a
shareholder vote. In general, poison pills will be OPPOSED unless management is
able to present a convincing case fur such a plan.

4. OPT-OUT OF STATE ANTI-TAKEOVER LAW

A strategy for dealing with anti-takeover issues has been a
shareholder resolution asking for a company to opt-out of a particular state's
anti-takeover laws.

The Fund advisor will generally SUPPORT bylaws changes requiring a
company to opt-out of state anti-takeover laws. However, resolutions requiring
companies to opt-into state anti-takeover statutes will be OPPOSED.

Adopted JUNE 18, 2003

ITEM 8. [RESERVED]

ITEM 9. CONTROLS AND PROCEDURES.

(a) The Registrant's President/Chief Executive Officer and Treasurer/Chief
Financial Officer have concluded that the Registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940 (the "Act")) are effective as of a date within 90 days of the
filing date of the report that includes the disclosure required by this
paragraph, based on the evaluation of these controls and procedures
required by Rule 30a-3(b) under the Act.

(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.

ITEM 10. EXHIBITS.

(A) ANY CODE OF ETHICS OR AMENDMENT THERETO. Filed herewith.

(B) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) The Mexico Equity and Income, Fund, Inc.

By (Signature and Title) /S/ GERALD HELLERMAN, PRESIDENT
-------------------------------
Gerald Hellerman, President

Date OCTOBER 6, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By (Signature and Title) /S/ GERALD HELLERMAN, PRESIDENT & TREASURER
-------------------------------------------
Gerald Hellerman, President & Treasurer

Date OCTOBER 6, 2003