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 | |||||||
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The Latin American Discovery Fund, Inc. | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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522 Fifth Avenue, New York, New York |
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10036 | ||||||
(Address of principal executive offices) |
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(Zip code) | ||||||
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John H. Gernon 522 Fifth Avenue, New York, New York 10036 | ||||||||
(Name and address of agent for service) | ||||||||
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Registrants telephone number, including area code: |
212-296-0289 |
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Date of fiscal year end: |
December 31, |
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Date of reporting period: |
September 30, 2015 |
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Item 1. Schedule of Investments.
The Funds schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:
The Latin American Discovery Fund, Inc.
Portfolio of Investments
Third Quarter Report
September 30, 2015 (unaudited)
|
|
Shares |
|
Value |
| |
Common Stocks (97.9%) |
|
|
|
|
| |
|
|
|
|
|
| |
Argentina (1.0%) |
|
|
|
|
| |
Banks |
|
|
|
|
| |
BBVA Banco Frances SA ADR (a) |
|
41,052 |
|
$ |
637 |
|
|
|
|
|
|
| |
Brazil (43.5%) |
|
|
|
|
| |
Banks |
|
|
|
|
| |
Banco Bradesco SA (Preference) |
|
258,178 |
|
1,395 |
| |
Banco Bradesco SA ADR |
|
294,915 |
|
1,581 |
| |
Itau Unibanco Holding SA (Preference) |
|
546,349 |
|
3,653 |
| |
Itau Unibanco Holding SA (Preference) ADR |
|
176,176 |
|
1,166 |
| |
|
|
|
|
7,795 |
| |
Beverages |
|
|
|
|
| |
Ambev SA |
|
64,911 |
|
318 |
| |
Ambev SA ADR |
|
486,378 |
|
2,383 |
| |
|
|
|
|
2,701 |
| |
Capital Markets |
|
|
|
|
| |
BTG Pactual Group (Units) (b) |
|
82,354 |
|
548 |
| |
|
|
|
|
|
| |
Diversified Telecommunication Services |
|
|
|
|
| |
Telefonica Brasil SA (Preference) |
|
116,800 |
|
1,080 |
| |
|
|
|
|
|
| |
Food & Staples Retailing |
|
|
|
|
| |
Raia Drogasil SA |
|
172,160 |
|
1,698 |
| |
|
|
|
|
|
| |
Food Products |
|
|
|
|
| |
BRF SA |
|
252,466 |
|
4,495 |
| |
|
|
|
|
|
| |
Health Care Providers & Services |
|
|
|
|
| |
Qualicorp SA |
|
195,052 |
|
730 |
| |
|
|
|
|
|
| |
Internet Software & Services |
|
|
|
|
| |
MercadoLibre, Inc. |
|
7,814 |
|
712 |
| |
|
|
|
|
|
| |
Machinery |
|
|
|
|
| |
Iochpe-Maxion SA |
|
118,858 |
|
454 |
| |
|
|
|
|
|
| |
Metals & Mining |
|
|
|
|
| |
Vale SA |
|
19,206 |
|
80 |
| |
Vale SA (Preference) |
|
45,850 |
|
154 |
| |
Vale SA (Preference) ADR |
|
50,341 |
|
169 |
| |
Vale SA ADR |
|
47,049 |
|
198 |
| |
|
|
|
|
601 |
| |
Multi-line Retail |
|
|
|
|
| |
Lojas Americanas SA (Preference) |
|
143,609 |
|
587 |
| |
Lojas Renner SA |
|
224,180 |
|
1,040 |
| |
|
|
|
|
1,627 |
| |
Oil, Gas & Consumable Fuels |
|
|
|
|
| |
Petroleo Brasileiro SA (a) |
|
99,704 |
|
215 |
| |
Petroleo Brasileiro SA (Preference) (a) |
|
335,846 |
|
613 |
| |
Petroleo Brasileiro SA ADR (a) |
|
73,636 |
|
320 |
| |
Ultrapar Participacoes SA |
|
128,998 |
|
2,174 |
|
|
|
|
|
3,322 |
|
Real Estate Management & Development |
|
|
|
|
|
Multiplan Empreendimentos Imobiliarios SA |
|
55,130 |
|
590 |
|
|
|
|
|
26,353 |
|
Chile (7.0%) |
|
|
|
|
|
Electric Utilities |
|
|
|
|
|
Enersis SA |
|
4,561,990 |
|
1,147 |
|
Enersis SA ADR |
|
14,050 |
|
177 |
|
|
|
|
|
1,324 |
|
Multi-line Retail |
|
|
|
|
|
SACI Falabella |
|
317,261 |
|
1,967 |
|
|
|
|
|
|
|
Real Estate Management & Development |
|
|
|
|
|
Parque Arauco SA |
|
571,877 |
|
982 |
|
|
|
|
|
4,273 |
|
Colombia (3.9%) |
|
|
|
|
|
Construction Materials |
|
|
|
|
|
Cementos Argos SA |
|
162,162 |
|
495 |
|
Cemex Latam Holdings SA (a) |
|
143,811 |
|
573 |
|
|
|
|
|
1,068 |
|
Diversified Financial Services |
|
|
|
|
|
Grupo de Inversiones Suramericana SA |
|
14,800 |
|
172 |
|
Grupo de Inversiones Suramericana SA (Preference) |
|
96,814 |
|
1,110 |
|
|
|
|
|
1,282 |
|
|
|
|
|
2,350 |
|
Mexico (37.3%) |
|
|
|
|
|
Banks |
|
|
|
|
|
Grupo Financiero Banorte SAB de CV Series O |
|
568,608 |
|
2,789 |
|
Grupo Financiero Inbursa SAB de CV Series O |
|
617,391 |
|
1,276 |
|
|
|
|
|
4,065 |
|
Beverages |
|
|
|
|
|
Fomento Economico Mexicano SAB de CV ADR |
|
68,120 |
|
6,080 |
|
|
|
|
|
|
|
Chemicals |
|
|
|
|
|
Mexichem SAB de CV |
|
627,959 |
|
1,543 |
|
|
|
|
|
|
|
Construction & Engineering |
|
|
|
|
|
Promotora y Operadora de Infraestructura SAB de CV (a) |
|
99,058 |
|
1,085 |
|
|
|
|
|
|
|
Construction Materials |
|
|
|
|
|
Cemex SAB de CV ADR (a) |
|
500,307 |
|
3,497 |
|
|
|
|
|
|
|
Industrial Conglomerates |
|
|
|
|
|
Alfa SAB de CV |
|
1,480,129 |
|
2,879 |
|
|
|
|
|
|
|
Multi-line Retail |
|
|
|
|
|
El Puerto de Liverpool SAB de CV |
|
124,344 |
|
1,614 |
|
Real Estate Investment Trusts (REITs) |
|
|
|
|
| |
Concentradora Fibra Hotelera Mexicana SA de CV REIT |
|
635,352 |
|
639 |
| |
|
|
|
|
|
| |
Wireless Telecommunication Services |
|
|
|
|
| |
America Movil SAB de CV, Class L ADR |
|
71,044 |
|
1,176 |
| |
|
|
|
|
22,578 |
| |
Panama (1.0%) |
|
|
|
|
| |
Airlines |
|
|
|
|
| |
Copa Holdings SA, Class A |
|
15,095 |
|
633 |
| |
|
|
|
|
|
| |
Peru (4.2%) |
|
|
|
|
| |
Banks |
|
|
|
|
| |
Credicorp Ltd. |
|
23,855 |
|
2,537 |
| |
Total Common Stocks (Cost $69,604) |
|
|
|
59,361 |
| |
|
|
|
|
|
| |
Short-Term Investment (1.7%) |
|
|
|
|
| |
Investment Company (1.7%) |
|
|
|
|
| |
Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (c) (Cost $1,024) |
|
1,024,171 |
|
1,024 |
| |
Total Investments (99.6%) (Cost $70,628) (d) |
|
|
|
60,385 |
| |
Other Assets in Excess of Liabilities (0.4%) |
|
|
|
219 |
| |
Net Assets (100.0%) |
|
|
|
$ |
60,604 |
|
(a) |
Non-income producing security. |
(b) |
Consists of one or more classes of securities traded together as a unit; stocks with attached warrants. |
(c) |
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - (the Liquidity Funds), an open-end management investment company managed by the Adviser. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administrative service fees paid by the Fund due to its investment in the Liquidity Funds. For the nine months ended September 30, 2015, advisory fees paid were reduced by approximately $1,000 relating to the Funds investment in the Liquidity Funds. |
(d) |
At September 30, 2015, the aggregate cost for Federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $9,103,000 and the aggregate gross unrealized depreciation is approximately $19,346,000 resulting in net unrealized depreciation of approximately $10,243,000. |
|
|
ADR |
American Depositary Receipt. |
REIT |
Real Estate Investment Trust. |
Portfolio Composition
Classification |
|
Percentage of |
|
Other* |
|
31.4 |
% |
Banks |
|
24.9 |
|
Beverages |
|
14.5 |
|
Multi-line Retail |
|
8.6 |
|
Construction Materials |
|
7.6 |
|
Food Products |
|
7.5 |
|
Oil, Gas & Consumable Fuels |
|
5.5 |
|
Total Investments |
|
100.0 |
% |
* |
Industries and/or investment types representing less than 5% of total investments. |
The Latin American Discovery Fund, Inc.
Notes to the Portfolio of Investments · September 30, 2015 (unaudited)
Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), if there were no sales on a given day, the security is valued at the mean between the last reported bid and asked prices; (2) all other equity portfolio securities for which over-the-counter (OTC) market quotations are readily available are valued at its latest reported sales price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (3) when market quotations are not readily available, including circumstances under which Morgan Stanley Investment Management Inc. (the Adviser) or Morgan Stanley Investment Management Limited (MSIM Limited) (the Sub-Adviser) determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a securitys market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Funds Board of Directors (the Directors). Occasionally, developments affecting 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 of the New York Stock Exchange (NYSE). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (4) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into United States dollar equivalents at the prevailing market rates prior to the close of the NYSE; (5) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; and (6) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser determines such valuation does not reflect the securities market value, in which case these securities will be valued at their fair market value determined by the Adviser.
The Directors have responsibility for determining in good faith the fair value of the investments, and the Directors may appoint others, such as the Funds Adviser or a valuation committee, to assist the Directors in determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Funds Adviser has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Funds valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available. Under these procedures, the Valuation Committee convenes on a regular and ad hoc basis to review such securities and considers a number of factors, including valuation methodologies and significant unobservable valuation inputs, when arriving at fair value. The Valuation Committee may employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The Valuation Committee employs various methods for calibrating these valuation approaches including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
Fair Value Measurement: Financial Accounting Standards Board (FASB) Accounting Standards CodificationTM (ASC) 820, Fair Value Measurement (ASC 820), defines fair value as the value 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. ASC 820 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 entitys 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 Funds investments. The inputs are summarized in the three broad levels listed below.
· Level 1 unadjusted 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 Funds own assumptions in determining the fair value of investments. 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 issuers financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Funds investments as of September 30, 2015.
Investment Type |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
| ||||
Common Stocks |
|
|
|
|
|
|
|
|
| ||||
Airlines |
|
$ |
633 |
|
$ |
|
|
$ |
|
|
$ |
633 |
|
Banks |
|
15,034 |
|
|
|
|
|
15,034 |
| ||||
Beverages |
|
8,781 |
|
|
|
|
|
8,781 |
| ||||
Capital Markets |
|
548 |
|
|
|
|
|
548 |
| ||||
Chemicals |
|
1,543 |
|
|
|
|
|
1,543 |
| ||||
Construction & Engineering |
|
1,085 |
|
|
|
|
|
1,085 |
| ||||
Construction Materials |
|
4,565 |
|
|
|
|
|
4,565 |
| ||||
Diversified Financial Services |
|
1,282 |
|
|
|
|
|
1,282 |
| ||||
Diversified Telecommunication Services |
|
1,080 |
|
|
|
|
|
1,080 |
| ||||
Electric Utilities |
|
1,324 |
|
|
|
|
|
1,324 |
| ||||
Food & Staples Retailing |
|
1,698 |
|
|
|
|
|
1,698 |
| ||||
Food Products |
|
4,495 |
|
|
|
|
|
4,495 |
| ||||
Health Care Providers & Services |
|
730 |
|
|
|
|
|
730 |
| ||||
Industrial Conglomerates |
|
2,879 |
|
|
|
|
|
2,879 |
| ||||
Internet Software & Services |
|
712 |
|
|
|
|
|
712 |
| ||||
Machinery |
|
454 |
|
|
|
|
|
454 |
| ||||
Metals & Mining |
|
601 |
|
|
|
|
|
601 |
| ||||
Multi-line Retail |
|
5,208 |
|
|
|
|
|
5,208 |
| ||||
Oil, Gas & Consumable Fuels |
|
3,322 |
|
|
|
|
|
3,322 |
| ||||
Real Estate Investment Trusts (REITs) |
|
639 |
|
|
|
|
|
639 |
| ||||
Real Estate Management & Development |
|
1,572 |
|
|
|
|
|
1,572 |
| ||||
Wireless Telecommunication Services |
|
1,176 |
|
|
|
|
|
1,176 |
| ||||
Total Common Stocks |
|
59,361 |
|
|
|
|
|
59,361 |
| ||||
Short-Term Investment |
|
|
|
|
|
|
|
|
| ||||
Investment Company |
|
1,024 |
|
|
|
|
|
1,024 |
| ||||
Total Assets |
|
$ |
60,385 |
|
$ |
|
|
$ |
|
|
$ |
60,385 |
|
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investments valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of September 30, 2015, securities with a total value of approximately $24,286,000 transferred from Level 2 to Level 1. Securities that were valued using other significant observable inputs at December 31, 2014 were valued using unadjusted quoted prices at September 30, 2015.
Item 2. Controls and Procedures.
(a) The Funds principal executive officer and principal financial officer have concluded that the Funds 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 Commissions 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 Funds internal control over financial reporting that occurred during the registrants fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Funds internal control over financial reporting.
Item 3. Exhibits.
(a) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto.
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.
The Latin American Discovery Fund, Inc. |
|
|
|
/s/ John H. Gernon |
|
John H. Gernon |
|
Principal Executive Officer |
|
November 19, 2015 |
|
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.
/s/ John H. Gernon |
|
John H. Gernon |
|
Principal Executive Officer |
|
November 19, 2015 |
|
|
|
/s/ Francis Smith |
|
Francis Smith |
|
Principal Financial Officer |
|
November 19, 2015 |
|