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

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-06574

 

 

THE LATIN AMERICAN DISCOVERY FUND, INC.

(Exact name of registrant as specified in charter)

 

522 FIFTH AVENUE NEW YORK, NY

 

10036

(Address of principal executive offices)

 

(Zip code)

 

RANDY TAKIAN

522 FIFTH AVENUE NEW YORK, NY, 10036

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

1-800-231-2608

 

 

Date of fiscal year end:

12/31

 

 

 

 

Date of reporting period:

3/31/09

 

 


 

Item 1. Schedule of Investments.

 

The Fund’s schedule of investment as of the close of the reporting period prepared pursuant to Rule 12-12 Regulation S-X is as follows:

 


 

The Latin American Discovery Fund, Inc.

Portfolio of Investments

First Quarter Report

March 31, 2009 (unaudited)

 

 

 

Shares

 

Value
(000)

 

COMMON STOCKS (97.9%)
(Unless Otherwise Noted)

 

 

 

 

 

Brazil (64.1%)

 

 

 

 

 

Airlines

 

 

 

 

 

Tam S.A. (Preference) ADR

 

96,925

 

$

533

 

 

 

 

 

 

 

Beverages

 

 

 

 

 

Cia de Bebidas das Americas (Preference) ADR

 

60,700

 

 2,898

 

 

 

 

 

 

 

Commercial Banks

 

 

 

 

 

Banco Bradesco S.A. ADR

 

108,900

 

 1,078

 

Banco Bradesco S.A. (Preference)

 

29,800

 

 297

 

Banco Nacional S.A. (Preference) (a)(b)(c)

 

95,420,000

 

 —

 

Investimentos Itau S.A. (Preference)

 

449,852

 

 1,548

 

Itau Unibanco Banco Multiplo S.A. ADR

 

441,289

 

 4,801

 

Itau Unibanco Banco Multiplo S.A. (Preference)

 

279,909

 

 3,089

 

 

 

 

 

10,813

 

Diversified Telecommunication Services

 

 

 

 

 

Tele Norte Leste Participacoes S.A. ADR

 

28,200

 

 390

 

 

 

 

 

 

 

Finance Companies

 

 

 

 

 

BM&F Bovespa S.A.

 

379,200

 

 1,152

 

 

 

 

 

 

 

Food Products

 

 

 

 

 

Perdigao S.A.

 

126,751

 

 1,585

 

 

 

 

 

 

 

Household Durables

 

 

 

 

 

Cyrela Brazil Realty S.A.

 

114,889

 

 456

 

PDG Realty S.A. Empreendimentos e Participacoes

 

126,370

 

 708

 

 

 

 

 

1,164

 

Insurance

 

 

 

 

 

Amil Participacoes S.A.

 

198,720

 

 548

 

 

 

 

 

 

 

Media

 

 

 

 

 

NET Servicos de Comunicacao S.A. (Preference) (c)

 

254,367

 

 1,848

 

 

 

 

 

 

 

Metals & Mining

 

 

 

 

 

Cia Vale do Rio Doce ADR

 

709,345

 

 8,001

 

Cia Vale do Rio Doce (Preference), Class A

 

67,212

 

 777

 

Usinas Siderurgicas de Minas Gerais S.A.

 

7,200

 

 83

 

Usinas Siderurgicas de Minas Gerais S.A. (Preference), Class A

 

94,505

 

 1,199

 

 

 

 

 

10,060

 

Multiline Retail

 

 

 

 

 

Lojas Renner S.A.

 

113,500

 

 703

 

 

 

 

 

 

 

Oil, Gas & Consumable Fuels

 

 

 

 

 

Petroleo Brasileiro S.A. ADR

 

316,873

 

 7,763

 

Petroleo Brasileiro S.A. (Preference)

 

288,746

 

 3,563

 

 

 

 

 

11,326

 

Road & Rail

 

 

 

 

 

All America Latina Logistica S.A.

 

229,800

 

 976

 

Localiza Rent a Car S.A.

 

233,878

 

837

 

 

 

 

 

1,813

 

Specialty Retail

 

 

 

 

 

Ultrapar Participacoes S.A. (Preference)

 

50,400

 

 1,204

 

 

 

 

 

 

 

Wireless Telecommunication Services

 

 

 

 

 

Vivo Participacoes S.A. ADR

 

93,400

 

 1,219

 

 

 

 

 

47,256

 

Chile (1.3%)

 

 

 

 

 

Airlines

 

 

 

 

 

Lan Airlines S.A. ADR

 

115,151

 

 963

 

 

 

 

 

 

 

Colombia (2.4%)

 

 

 

 

 

Commercial Banks

 

 

 

 

 

BanColombia S.A. ADR

 

42,417

 

 826

 

 

 

 

 

 

 

Food & Staples Retailing

 

 

 

 

 

Almacenes Exito S.A. GDR (d)

 

239,821

 

 987

 

 

 

 

 

1,813

 

Luxembourg (1.8%)

 

 

 

 

 

Wireless Telecommunication Services

 

 

 

 

 

Millicom International Cellular S.A.

 

36,400

 

 1,348

 

 

 

 

 

 

 

Mexico (24.7%)

 

 

 

 

 

Beverages

 

 

 

 

 

Fomento Economico Mexicano S.A.B. de C.V. ADR

 

91,700

 

 2,312

 

 

 

 

 

 

 

Commercial Banks

 

 

 

 

 

Grupo Financiero Banorte S.A.B. de C.V., Class O

 

1,155,199

 

 1,528

 

 

 

 

 

 

 

Construction & Engineering

 

 

 

 

 

Empresas ICA S.A.B. de C.V. (c)

 

421,000

 

 713

 

 

 

 

 

 

 

Food & Staples Retailing

 

 

 

 

 

Wal-Mart de Mexico S.A.B. de C.V., Class V

 

1,111,836

 

 2,597

 

 

 

 

 

 

 

Household Durables

 

 

 

 

 

Corp. GEO S.A.B. de C.V., Class B (c)

 

487,482

 

 492

 

Urbi Desarrollos Urbanos S.A.B de C.V. (c)

 

403,416

 

 355

 

 

 

 

 

847

 

Media

 

 

 

 

 

Grupo Televisa S.A. ADR

 

219,400

 

 2,992

 

Megacable Holdings S.A.B. de C.V. (c)

 

370,570

 

 375

 

 

 

 

 

3,367

 

Wireless Telecommunication Services

 

 

 

 

 

America Movil S.A.B. de C.V., Class L ADR

 

252,805

 

 6,846

 

 

 

 

 

18,210

 

Panama (1.8%)

 

 

 

 

 

Airlines

 

 

 

 

 

Copa Holdings S.A., Class A

 

45,463

 

 1,304

 

 

 

 

 

 

 

Peru (1.8%)

 

 

 

 

 

Commercial Banks

 

 

 

 

 

Credicorp Ltd.

 

9,400

 

 440

 

 


 

The Latin American Discovery Fund, Inc.

Portfolio of Investments

First Quarter Report

March 31, 2009 (unaudited)

 

 

 

Shares

 

Value
(000)

 

Peru (cont’d)

 

 

 

 

 

Metals & Mining

 

 

 

 

 

Cia de Minas Buenaventura S.A. ADR

 

36,400

 

$

873

 

 

 

 

 

1,313

 

TOTAL COMMON STOCKS (Cost $84,141)

 

 

 

72,207

 

 

 

 

 

 

 

SHORT-TERM INVESTMENT (1.5%)

 

 

 

 

 

United States (1.5%)

 

 

 

 

 

Investment Company

 

 

 

 

 

Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (Cost $1,127) (e)

 

1,126,976

 

 1,127

 

TOTAL INVESTMENTS  (99.4%) (Cost $85,268) +

 

 

 

73,334

 

OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%)

 

 

 

433

 

NET ASSETS (100%)

 

 

 

$

73,767

 

 

(a)

 

Security has been deemed illiquid at March 31, 2009.

(b)

 

At March 31, 2009, the Fund held less than $500 of fair valued securities, representing less than 0.05% of net assets. These securities have been fair valued as determined in good faith under procedures established by and under the general supervision of the Fund’s Directors.

(c)

 

Non-income producing security.

(d)

 

144A security — Certain conditions for public sale may exist.  Unless otherwise noted, these securities are deemed to be liquid.

(e)

 

The Fund invests in the Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (the “Liquidity Fund”), an open-end management investment company managed by the Adviser. Investment Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Liquidity Fund. For the period ended March 31, 2009, advisory fees paid were reduced by less than $500 relating to the Fund’s investments in the Liquidity Fund. For the same period, income distributions earned by the Fund are recorded as dividends from affiliates and totaled approximately $2,000. For the period ended March 31, 2009, the approximate cost of purchases and sales in the Liquidity Fund were $14,047,000 and $14,293,000, respectively.

@

 

Value is less than $500.

+

 

At March 31, 2009, the U.S. Federal income tax cost basis of investments was approximately $85,268,000 and, accordingly, net unrealized depreciation for U.S. Federal income tax purposes was $11,934,000 of which $6,897,000 related to appreciated securities and $18,831,000 related to depreciated securities.

 

 

 

ADR

 

American Depositary Receipt

GDR

 

Global Depositary Receipt

 

Foreign Currency Exchange Contract Information:

 

The Fund had the following foreign currency exchange contract(s) open at period end:

 

 

 

 

 

 

 

 

 

 

 

Net

 

Currency

 

 

 

 

 

In

 

 

 

Unrealized

 

to

 

 

 

 

 

Exchange

 

 

 

Appreciation

 

Deliver

 

Value

 

Settlement

 

For

 

Value

 

(Depreciation)

 

(000)

 

(000)

 

Date

 

(000)

 

(000)

 

(000)

 

USD

$

80

 

$

80

 

4/1/09

 

BRL

$

183

 

$

79

 

$

(1

)

USD

 81

 

 81

 

4/1/09

 

MXN

 1,180

 

 83

 

 2

 

USD

 38

 

 38

 

4/2/09

 

MXN

 529

 

 38

 

—

@

 

 

 

$

 199

 

 

 

 

 

 

$

200

 

$

1

 

 

BRL

—

Brazilian Real

MXN

—

Mexican Peso

USD

—

United States Dollar

 


 

Notes to Portfolio of Investments (unaudited)

 

The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), effective January 1, 2008. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. SFAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below.

 

Level 1 — quoted prices in active markets for identical investments

Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following is a summary of the inputs used as of March 31, 2009 in valuing the Fund’s investments carried at value:

 

 

 

Investments in

 

Other Financial

 

 

 

Securities

 

Instruments*

 

Valuation Inputs - Assets

 

(000)

 

(000)

 

Level 1 - Quoted Prices

 

$

71,990

 

—

 

Level 2 - Other Significant Observable Inputs

 

1,344

 

1

 

Level 3 - Significant Unobservable Inputs

 

—

**

—

 

Total

 

$

73,334

 

1

 

 

Following is a reconciliation of investmnets in which significant unobservable inputs (Level 3) were used in determining value:

 

 

 

Investments in

 

 

 

Securities

 

 

 

(000)

 

Balance as of 3/31/09

 

 

 

Accrued discounts/premiums

 

$

—

**

Realized gain (loss)

 

—

 

Change in unrealized appreciation (depreciation)

 

—

 

Net purchases (sales)

 

$

—

 

Net transfers in and/or out of Level 3

 

—

 

Balance as of 3/31/09

 

—

**

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 3/31/09.

 

—

 

 

* Other financial instruments include forwards.

** Includes a securitiy which is valued at zero.

 

Security Valuation — Securities listed on a foreign exchange are valued at their closing price. Unlisted securities and listed securities not traded on the valuation date for which market quotations are readily available are valued at the mean between the current bid and asked prices obtained from reputable brokers. Equity securities listed on a U.S. exchange are valued at the latest quoted sales price on the valuation date. Equity securities listed or traded on NASDAQ, for which market quotations are available, are valued at the NASDAQ Official Closing Price. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, if it approximates market value.

 

All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board of Directors (the “Directors”), although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.

 


 

Most foreign markets close before the New York Stock Exchange (“NYSE”). Occasionally, developments that could affect the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If these developments are expected to materially affect the value of the securities, the valuations may be adjusted to reflect the estimated fair value as of the close of the NYSE, as determined in good faith under procedures established by the Directors.

 


 

Item 2. Controls and Procedures.

 

(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

 

(b) There were no changes in the Fund’s internal control over financial reporting that occurred during the registrant’s fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

 

Item 3. Exhibits.

 


 

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 Latin American Discovery Fund, Inc.

 

 

By:

/s/ Randy Takian

 

Name:

Randy Takian

Title:

Principal Executive Officer

Date:

May 19, 2009

 

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

 

By:

/s/ Randy Takian

 

Name:

Randy Takian

Title:

Principal Executive Officer

Date:

May 19, 2009

 

By:

/s/ James Garrett

 

Name:

James Garrett

Title:

Principal Financial Officer

Date:

May 19, 2009