N-Q 1 a17-9976_5nq.htm N-Q

 

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

811-07694

 

Morgan Stanley Emerging Markets Debt Fund, Inc.

(Exact name of registrant as specified in charter)

 

522 Fifth Avenue, New York, New York

 

10036

(Address of principal executive offices)

 

(Zip code)

 

John H. Gernon

522 Fifth Avenue, New York, New York 10036

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

212-296-0289

 

 

Date of fiscal year end:

December 31,

 

 

Date of reporting period:

March 31, 2017

 

 


 

Item 1.  Schedule of Investments.

 

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

 


 

Morgan Stanley Emerging Markets Debt Fund, Inc.

Portfolio of Investments

First Quarter Report

March 31, 2017 (unaudited)

 

 

 

Face
Amount
(000)

 

Value
(000)

 

Fixed Income Securities (92.2%)

 

 

 

 

 

Argentina (6.4%)

 

 

 

 

 

Corporate Bonds (3.3%)

 

 

 

 

 

IRSA Propiedades Comerciales SA,

 

 

 

 

 

8.75%, 3/23/23 (a)(b)

 

$

520

 

$

574

 

Province of Santa Fe,

 

 

 

 

 

6.90%, 11/1/27 (a)

 

1,180

 

1,121

 

Provincia de Cordoba,

 

 

 

 

 

7.45%, 9/1/24 (a)

 

1,610

 

1,635

 

Provincia de Entre Rios Argentina,

 

 

 

 

 

8.75%, 2/8/25 (a)

 

2,230

 

2,237

 

Provincia del Chaco Argentina,

 

 

 

 

 

9.38%, 8/18/24 (a)

 

2,380

 

2,308

 

 

 

 

 

7,875

 

Sovereign (3.1%)

 

 

 

 

 

Argentina Bonar Bonds,

 

 

 

 

 

22.81%, 10/9/17 (c)

 

ARS

14,020

 

929

 

Argentine Republic Government International Bond,

 

 

 

 

 

5.63%, 1/26/22 (a)

 

$

1,950

 

1,999

 

6.88%, 1/26/27 (a)

 

1,950

 

1,980

 

7.50%, 4/22/26 (a)

 

730

 

778

 

Republic of Argentina,

 

 

 

 

 

2.50%, 12/31/38 (d)

 

1,750

 

1,107

 

7.13%, 7/6/36 (a)

 

720

 

699

 

 

 

 

 

7,492

 

 

 

 

 

15,367

 

Azerbaijan (0.5%)

 

 

 

 

 

Sovereign (0.5%)

 

 

 

 

 

Southern Gas Corridor CJSC,

 

 

 

 

 

6.88%, 3/24/26 (a)

 

1,050

 

1,154

 

 

 

 

 

 

 

Brazil (4.9%)

 

 

 

 

 

Corporate Bonds (1.7%)

 

 

 

 

 

CIMPOR Financial Operations BV,

 

 

 

 

 

5.75%, 7/17/24 (a)

 

1,318

 

1,173

 

Minerva Luxembourg SA,

 

 

 

 

 

8.75%, 4/3/19 (a)(c)(e)

 

1,290

 

1,355

 

Petrobras Global Finance BV,

 

 

 

 

 

6.13%, 1/17/22

 

644

 

677

 

7.38%, 1/17/27

 

880

 

933

 

 

 

 

 

4,138

 

Sovereign (3.2%)

 

 

 

 

 

Brazilian Government International Bond,

 

 

 

 

 

4.25%, 1/7/25 (b)

 

4,956

 

4,888

 

5.00%, 1/27/45

 

2,988

 

2,674

 

 

 

 

 

7,562

 

 

 

 

 

11,700

 

 


 

Chile (1.1%)

 

 

 

 

 

Corporate Bond (0.6%)

 

 

 

 

 

Colbun SA,

 

 

 

 

 

4.50%, 7/10/24 (a)

 

1,372

 

1,403

 

 

 

 

 

 

 

Sovereign (0.5%)

 

 

 

 

 

Empresa Nacional del Petroleo,

 

 

 

 

 

4.75%, 12/6/21

 

1,102

 

1,165

 

 

 

 

 

2,568

 

China (3.3%)

 

 

 

 

 

Sovereign (3.3%)

 

 

 

 

 

Sinopec Group Overseas Development 2013 Ltd.,

 

 

 

 

 

4.38%, 10/17/23

 

4,740

 

5,021

 

Three Gorges Finance I Cayman Islands Ltd.,

 

 

 

 

 

2.30%, 6/2/21 (a)

 

2,000

 

1,963

 

3.70%, 6/10/25 (a)

 

780

 

797

 

 

 

 

 

7,781

 

Colombia (1.9%)

 

 

 

 

 

Sovereign (1.9%)

 

 

 

 

 

Colombia Government International Bond,

 

 

 

 

 

4.38%, 7/12/21

 

1,460

 

1,551

 

5.00%, 6/15/45

 

1,930

 

1,945

 

11.75%, 2/25/20

 

815

 

1,033

 

 

 

 

 

4,529

 

Croatia (1.0%)

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

Croatia Government International Bond,

 

 

 

 

 

5.50%, 4/4/23 (b)

 

2,200

 

2,375

 

 

 

 

 

 

 

Dominican Republic (1.0%)

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

Dominican Republic International Bond,

 

 

 

 

 

6.85%, 1/27/45 (a)

 

432

 

448

 

6.88%, 1/29/26 (a)

 

1,215

 

1,337

 

7.45%, 4/30/44 (a)

 

666

 

736

 

 

 

 

 

2,521

 

Ecuador (1.4%)

 

 

 

 

 

Sovereign (1.4%)

 

 

 

 

 

Ecuador Government International Bond,

 

 

 

 

 

10.75%, 3/28/22 (a)

 

3,080

 

3,265

 

 

 

 

 

 

 

Egypt (1.0%)

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

Egypt Government International Bond,

 

 

 

 

 

5.88%, 6/11/25

 

980

 

961

 

6.13%, 1/31/22 (a)

 

1,320

 

1,375

 

 

 

 

 

2,336

 

 


 

El Salvador (0.8%)

 

 

 

 

 

Sovereign (0.8%)

 

 

 

 

 

El Salvador Government International Bond,

 

 

 

 

 

6.38%, 1/18/27

 

1,185

 

1,066

 

8.63%, 2/28/29 (a)(b)

 

760

 

787

 

 

 

 

 

1,853

 

Gabon (0.5%)

 

 

 

 

 

Sovereign (0.5%)

 

 

 

 

 

Republic of Gabon,

 

 

 

 

 

6.95%, 6/16/25 (a)

 

1,200

 

1,176

 

 

 

 

 

 

 

Ghana (1.0%)

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

Ghana Government International Bond,

 

 

 

 

 

10.75%, 10/14/30

 

1,950

 

2,296

 

 

 

 

 

 

 

Guatemala (0.4%)

 

 

 

 

 

Sovereign (0.4%)

 

 

 

 

 

Guatemala Government Bond,

 

 

 

 

 

4.50%, 5/3/26 (a)

 

890

 

888

 

 

 

 

 

 

 

Honduras (1.1%)

 

 

 

 

 

Sovereign (1.1%)

 

 

 

 

 

Honduras Government International Bond,

 

 

 

 

 

6.25%, 1/19/27 (a)

 

1,360

 

1,383

 

8.75%, 12/16/20

 

1,030

 

1,172

 

 

 

 

 

2,555

 

Hungary (1.8%)

 

 

 

 

 

Sovereign (1.8%)

 

 

 

 

 

Hungary Government International Bond,

 

 

 

 

 

4.00%, 3/25/19

 

152

 

158

 

6.38%, 3/29/21

 

1,050

 

1,185

 

7.63%, 3/29/41

 

1,970

 

2,866

 

 

 

 

 

4,209

 

India (0.4%)

 

 

 

 

 

Corporate Bond (0.1%)

 

 

 

 

 

Adani Transmission Ltd.,

 

 

 

 

 

4.00%, 8/3/26 (a)(b)

 

288

 

283

 

 

 

 

 

 

 

Sovereign (0.3%)

 

 

 

 

 

Export-Import Bank of India,

 

 

 

 

 

3.38%, 8/5/26 (a)

 

800

 

766

 

 

 

 

 

1,049

 

Indonesia (8.8%)

 

 

 

 

 

Sovereign (8.8%)

 

 

 

 

 

Indonesia Government International Bond,

 

 

 

 

 

4.13%, 1/15/25

 

2,670

 

2,747

 

4.75%, 1/8/26 (a)

 

1,360

 

1,451

 

5.13%, 1/15/45 (a)

 

1,530

 

1,625

 

5.88%, 1/15/24 (a)

 

1,200

 

1,364

 

5.88%, 1/15/24

 

4,360

 

4,955

 

5.95%, 1/8/46 (a)

 

1,360

 

1,600

 

7.75%, 1/17/38

 

2,429

 

3,364

 

Majapahit Holding BV,

 

 

 

 

 

7.75%, 1/20/20

 

729

 

824

 

 


 

Pertamina Persero PT,

 

 

 

 

 

4.30%, 5/20/23

 

1,100

 

1,136

 

6.45%, 5/30/44 (a)

 

1,720

 

1,946

 

 

 

 

 

21,012

 

Ivory Coast (0.3%)

 

 

 

 

 

Sovereign (0.3%)

 

 

 

 

 

Ivory Coast Government International Bond,

 

 

 

 

 

5.38%, 7/23/24 (a)

 

830

 

793

 

 

 

 

 

 

 

Jamaica (1.5%)

 

 

 

 

 

Corporate Bond (0.4%)

 

 

 

 

 

Digicel Group Ltd.,

 

 

 

 

 

8.25%, 9/30/20

 

1,150

 

994

 

 

 

 

 

 

 

Sovereign (1.1%)

 

 

 

 

 

Jamaica Government International Bond,

 

 

 

 

 

7.63%, 7/9/25 (b)

 

380

 

441

 

7.88%, 7/28/45 (b)

 

870

 

997

 

8.00%, 3/15/39

 

1,010

 

1,162

 

 

 

 

 

2,600

 

 

 

 

 

3,594

 

Kazakhstan (2.6%)

 

 

 

 

 

Sovereign (2.6%)

 

 

 

 

 

Development Bank of Kazakhstan JSC,

 

 

 

 

 

4.13%, 12/10/22 (a)

 

278

 

276

 

KazAgro National Management Holding JSC,

 

 

 

 

 

4.63%, 5/24/23 (a)

 

1,390

 

1,365

 

Kazakhstan Government International Bond,

 

 

 

 

 

5.13%, 7/21/25 (a)

 

2,100

 

2,287

 

KazMunayGas National Co., JSC,

 

 

 

 

 

9.13%, 7/2/18

 

2,180

 

2,351

 

 

 

 

 

6,279

 

Lithuania (0.7%)

 

 

 

 

 

Sovereign (0.7%)

 

 

 

 

 

Lithuania Government International Bond,

 

 

 

 

 

6.63%, 2/1/22

 

950

 

1,115

 

7.38%, 2/11/20

 

500

 

570

 

 

 

 

 

1,685

 

Mexico (13.8%)

 

 

 

 

 

Corporate Bonds (1.3%)

 

 

 

 

 

Alfa SAB de CV,

 

 

 

 

 

6.88%, 3/25/44

 

1,340

 

1,374

 

Fermaca Enterprises S de RL de CV,

 

 

 

 

 

6.38%, 3/30/38 (a)

 

1,803

 

1,857

 

 

 

 

 

3,231

 

Sovereign (12.5%)

 

 

 

 

 

Banco Nacional de Comercio Exterior SNC,

 

 

 

 

 

3.80%, 8/11/26 (a)(c)

 

2,250

 

2,211

 

Comision Federal de Electricidad,

 

 

 

 

 

4.75%, 2/23/27 (a)

 

770

 

774

 

 


 

Mexican Bonos, Series M

 

 

 

 

 

6.50%, 6/10/21

 

MXN

46,580

 

2,459

 

Mexico City Airport Trust,

 

 

 

 

 

5.50%, 10/31/46 (a)(b)

 

$

1,450

 

1,431

 

Mexico Government International Bond,

 

 

 

 

 

4.15%, 3/28/27

 

3,409

 

3,471

 

4.35%, 1/15/47

 

1,110

 

1,024

 

4.60%, 1/23/46

 

2,080

 

1,999

 

6.05%, 1/11/40

 

898

 

1,029

 

Petroleos Mexicanos,

 

 

 

 

 

4.88%, 1/24/22 (b)

 

1,863

 

1,921

 

5.63%, 1/23/46

 

2,000

 

1,796

 

6.38%, 1/23/45

 

2,520

 

2,470

 

6.50%, 3/13/27 (a)

 

1,240

 

1,336

 

6.50%, 6/2/41

 

2,600

 

2,603

 

6.63%, 6/15/35 - 6/15/38

 

2,030

 

2,089

 

6.88%, 8/4/26

 

860

 

957

 

8.63%, 12/1/23

 

1,990

 

2,328

 

 

 

 

 

29,898

 

 

 

 

 

33,129

 

Mongolia (1.3%)

 

 

 

 

 

Sovereign (1.3%)

 

 

 

 

 

Mongolia Government International Bond,

 

 

 

 

 

8.75%, 3/9/24 (a)(b)

 

640

 

700

 

10.88%, 4/6/21 (b)

 

2,170

 

2,506

 

 

 

 

 

3,206

 

Namibia (0.6%)

 

 

 

 

 

Sovereign (0.6%)

 

 

 

 

 

Namibia International Bonds,

 

 

 

 

 

5.25%, 10/29/25 (a)

 

1,402

 

1,418

 

 

 

 

 

 

 

Nigeria (1.1%)

 

 

 

 

 

Sovereign (1.1%)

 

 

 

 

 

Nigeria Government International Bond,

 

 

 

 

 

6.38%, 7/12/23

 

1,430

 

1,456

 

7.88%, 2/16/32 (a)

 

1,100

 

1,150

 

 

 

 

 

2,606

 

Panama (1.7%)

 

 

 

 

 

Sovereign (1.7%)

 

 

 

 

 

Aeropuerto Internacional de Tocumen SA,

 

 

 

 

 

5.63%, 5/18/36 (a)

 

1,530

 

1,599

 

Panama Government International Bond,

 

 

 

 

 

4.00%, 9/22/24

 

1,434

 

1,504

 

5.20%, 1/30/20

 

460

 

498

 

8.88%, 9/30/27

 

263

 

371

 

 

 

 

 

3,972

 

Paraguay (1.1%)

 

 

 

 

 

Sovereign (1.1%)

 

 

 

 

 

Paraguay Government International Bond,

 

 

 

 

 

4.63%, 1/25/23 (a)(b)

 

680

 

710

 

4.70%, 3/27/27 (a)

 

450

 

457

 

6.10%, 8/11/44 (a)

 

1,420

 

1,530

 

 

 

 

 

2,697

 

 


 

Peru (1.9%)

 

 

 

 

 

Corporate Bond (0.4%)

 

 

 

 

 

Union Andina de Cementos SAA,

 

 

 

 

 

5.88%, 10/30/21 (a)(b)

 

960

 

1,001

 

 

 

 

 

 

 

Sovereign (1.5%)

 

 

 

 

 

Corporación Financiera de Desarrollo SA,

 

 

 

 

 

5.25%, 7/15/29 (a)(c)

 

978

 

1,029

 

Fondo MIVIVIENDA SA,

 

 

 

 

 

3.50%, 1/31/23 (a)

 

491

 

496

 

Peruvian Government International Bond,

 

 

 

 

 

6.55%, 3/14/37

 

1,550

 

2,009

 

 

 

 

 

3,534

 

 

 

 

 

4,535

 

Philippines (2.8%)

 

 

 

 

 

Sovereign (2.8%)

 

 

 

 

 

Philippine Government International Bond,

 

 

 

 

 

3.95%, 1/20/40

 

3,114

 

3,213

 

9.50%, 2/2/30

 

2,200

 

3,485

 

 

 

 

 

6,698

 

Poland (1.3%)

 

 

 

 

 

Sovereign (1.3%)

 

 

 

 

 

Poland Government International Bond,

 

 

 

 

 

3.00%, 3/17/23

 

1,910

 

1,909

 

4.00%, 1/22/24

 

570

 

599

 

5.00%, 3/23/22

 

470

 

517

 

 

 

 

 

3,025

 

Russia (7.4%)

 

 

 

 

 

Sovereign (7.4%)

 

 

 

 

 

Russian Federal Bond - OFZ,

 

 

 

 

 

6.40%, 5/27/20

 

RUB

139,800

 

2,385

 

Russian Foreign Bond - Eurobond,

 

 

 

 

 

4.50%, 4/4/22

 

$

14,000

 

14,878

 

5.63%, 4/4/42

 

400

 

440

 

 

 

 

 

17,703

 

Serbia (0.6%)

 

 

 

 

 

Sovereign (0.6%)

 

 

 

 

 

Republic of Serbia,

 

 

 

 

 

7.25%, 9/28/21

 

1,245

 

1,422

 

 

 

 

 

 

 

South Africa (1.2%)

 

 

 

 

 

Sovereign (1.2%)

 

 

 

 

 

South Africa Government International Bond,

 

 

 

 

 

5.88%, 9/16/25

 

2,600

 

2,804

 

 

 

 

 

 

 

Sri Lanka (1.2%)

 

 

 

 

 

Sovereign (1.2%)

 

 

 

 

 

Sri Lanka Government International Bond,

 

 

 

 

 

6.25%, 10/4/20

 

100

 

106

 

 


 

6.25%, 10/4/20 (a)

 

650

 

686

 

6.85%, 11/3/25 (a)

 

1,980

 

2,052

 

 

 

 

 

2,844

 

Tunisia (0.5%)

 

 

 

 

 

Sovereign (0.5%)

 

 

 

 

 

Banque Centrale de Tunisie SA,

 

 

 

 

 

5.75%, 1/30/25 (a)

 

1,210

 

1,169

 

 

 

 

 

 

 

Turkey (4.8%)

 

 

 

 

 

Sovereign (4.8%)

 

 

 

 

 

Export Credit Bank of Turkey,

 

 

 

 

 

5.88%, 4/24/19 (a)

 

2,100

 

2,179

 

Turkey Government International Bond,

 

 

 

 

 

3.25%, 3/23/23

 

3,100

 

2,849

 

4.88%, 4/16/43

 

1,800

 

1,549

 

5.63%, 3/30/21

 

3,600

 

3,766

 

6.88%, 3/17/36

 

1,000

 

1,086

 

 

 

 

 

11,429

 

Ukraine (3.2%)

 

 

 

 

 

Sovereign (3.2%)

 

 

 

 

 

Ukraine Government International Bond,

 

 

 

 

 

7.75%, 9/1/22 - 9/1/26

 

8,150

 

7,700

 

 

 

 

 

 

 

Venezuela (4.4%)

 

 

 

 

 

Sovereign (4.4%)

 

 

 

 

 

Petroleos de Venezuela SA,

 

 

 

 

 

6.00%, 11/15/26

 

15,570

 

5,490

 

Venezuela Government International Bond,

 

 

 

 

 

7.75%, 10/13/19

 

8,950

 

5,057

 

 

 

 

 

10,547

 

Zambia (0.9%)

 

 

 

 

 

Sovereign (0.9%)

 

 

 

 

 

Zambia Government International Bond,

 

 

 

 

 

8.50%, 4/14/24

 

2,200

 

2,273

 

Total Fixed Income Securities (Cost $215,891)

 

 

 

220,162

 

 

 

 

No. of
Warrants

 

 

 

Warrants (0.1%)

 

 

 

 

 

Nigeria (0.1%)

 

 

 

 

 

Central Bank of Nigeria Bond, expires 11/15/20 (c)(f)

 

2,250

 

187

 

Venezuela (0.0%)

 

 

 

 

 

Venezuela Government International Bond, Oil-Linked Payment Obligation, expires 4/15/20 (c)(f)

 

5,450

 

33

 

Total Warrants (Cost $—)

 

 

 

220

 

 


 

 

 

Shares

 

Value
(000)

 

Short-Term Investments (7.7%)

 

 

 

 

 

Securities held as Collateral on Loaned Securities (5.5%)

 

 

 

 

 

Investment Company (4.8%)

 

 

 

 

 

Morgan Stanley Institutional Liquidity Funds - Treasury Securities Portfolio - Institutional Class (g) 

 

11,431,046

 

11,431

 

 

 

 

Face
Amount
(000)

 

 

 

Repurchase Agreements (0.7%)

 

 

 

 

 

Barclays Capital, Inc., (0.78%, dated 3/31/17, due 4/3/17; proceeds $1,047; fully collateralized by U.S. Government obligations; 1.00% - 1.50% due 12/15/17 - 3/31/23; valued at $1,068)

 

$

1,047

 

1,047

 

Merrill Lynch & Co., Inc., (0.83%, dated 3/31/17, due 4/3/17; proceeds $603; fully collateralized by a U.S. Government agency security; 3.50% due 2/20/47; valued at $615)

 

603

 

603

 

 

 

 

 

1,650

 

Total Securities held as Collateral on Loaned Securities (Cost $13,081)

 

 

 

13,081

 

 

 

 

Shares

 

 

 

Investment Company (2.2%)

 

 

 

 

 

Morgan Stanley Institutional Liquidity Funds - Treasury Securities Portfolio - Institutional Class (g) (Cost $5,208)

 

5,207,718

 

5,208

 

Total Short-Term Investments (Cost $18,289)

 

 

 

18,289

 

Total Investments (100.0%) (Cost $234,180) Including $15,482 of Securities Loaned (h)(i)(j)

 

 

 

238,671

 

Liabilities in Excess of Other Assets

 

 

 

(13,169

)

Net Assets

 

 

 

$

225,502

 

 

Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund’s prospectus and/or statement of additional information relating to geographic classifications.

 

(a)

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

(b)

All or a portion of this security was on loan. The value of loaned securities and related collateral outstanding at March 31, 2017 were approximately $15,482,000 and $15,788,000, respectively. The Fund received cash collateral of approximately $13,966,000, of which approximately $13,081,000 was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds - Treasury Securities Portfolio - Institutional Class as reported in the Portfolio of Investments. At March 31, 2017, there was uninvested cash collateral of approximately $885,000, which is not reflected in the Portfolio of Investments. The remaining collateral of approximately $1,822,000 was received in the form of U.S. Government obligations, which the Fund cannot sell or re-pledge and accordingly are not reflected in the Portfolio of Investments. The Fund has the right under the lending agreement to recover the securities.

(c)

Variable/Floating Rate Security — Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on March 31, 2017.

(d)

Multi-step — Coupon rate changes in predetermined increments to maturity. Rate disclosed is as of March 31, 2017. Maturity date disclosed is the ultimate maturity date.

 


 

(e)

Perpetual — One or more securities do not have a predetermined maturity date. Rates for these securities are fixed for a period of time, after which they revert to a floating rate. Interest rates in effect are as of March 31, 2017.

(f)

Security has been deemed illiquid at March 31, 2017.

(g)

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds - Treasury Securities Portfolio - (the “Liquidity Funds”), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. 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 Fund due to its investment in the Liquidity Funds. For the three months ended March 31, 2017, advisory fees paid were reduced by approximately $2,000 relating to the Fund’s investment in the Liquidity Funds.

(h)

Securities are available for collateral in connection with open foreign currency forward exchange contracts.

(i)

The Fund is permitted to purchase and sell securities (“cross-trade”) from and to other Morgan Stanley Funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the “Rule”). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the three months ended March 31, 2017, the Fund did not engage in any cross-trade transactions.

(j)

At March 31, 2017, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $9,624,000 and the aggregate gross unrealized depreciation is approximately $5,133,000 resulting in net unrealized appreciation of approximately $4,491,000.

 

 

OFZ

Obilgatsyi Federal’novo Zaima (Russian Federal Loan Obligation)

 


 

Foreign Currency Forward Exchange Contracts:

 

The Fund had the following foreign currency forward exchange contracts open at March 31, 2017:

 

 

Counterparty

 

Contracts
to
Deliver
(000)

 

In
Exchange
For
(000)

 

Delivery
Date

 

Unrealized
Appreciation
(Depreciation)
(000)

 

Citibank NA

 

ARS

11,850

 

$

747

 

4/17/17

 

$

(19

)

Citibank NA

 

ARS

23,100

 

$

1,261

 

6/13/17

 

(195

)

Citibank NA

 

$

1,328

 

ARS

23,100

 

6/13/17

 

128

 

 

 

 

 

 

 

 

 

$

(86

)

 

ARS

–

Argentine Peso

MXN

–

Mexican Peso

RUB

–

Russian Ruble

 


 

Portfolio Composition*

 

Classification

 

Percentage of
Total Investments

 

Sovereign

 

89.2

%

Corporate Bonds

 

8.4

 

Other**

 

2.4

 

Total Investments

 

100.0

%***

 

*

 

Percentages indicated are based upon total investments (excluding Securities held as Collateral on Loaned Securities) as of March 31, 2017.

**

 

Industries and/or investment types representing less than 5% of total investments.

***

 

Does not include open foreign currency forward exchange contracts with net unrealized depreciation of approximately $86,000.

 


 

Morgan Stanley Emerging Markets Debt Fund, Inc.

 

Notes to the Portfolio of Investments · March 31, 2017 (unaudited)

 

Security Valuation: (1) Bonds and other fixed income securities may be valued according to the broadest and most representative market. In addition, bonds and other fixed income securities may be valued on the basis of prices provided by a pricing service/vendor. The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads, and/or other market data and specific security characteristics. Alternatively, if a valuation is not available from an outside pricing service/vendor, and the security trades on an exchange, the security may be valued at its latest reported sale price (or at the exchange official closing price if such exchange reports an official closing price), prior to the time when assets are valued. If there are no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available in the relevant exchanges; (2) 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), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges; (3) when market quotations are not readily available, including circumstances under which Morgan Stanley Investment Management Inc. (the “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 security’s 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 Fund’s 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; and (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.

 

The Directors have responsibility for determining in good faith the fair value of the investments, and the Directors may appoint others, such as the Fund’s 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 Fund’s Adviser has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Fund’s 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 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 – 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 Fund’s 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 issuer’s 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 Fund’s investments as of March 31, 2017.

 

Investment Type

 

Level 1
Unadjusted
quoted
prices
(000)

 

Level 2
Other
significant
observable
inputs
(000)

 

Level 3
Significant
unobservable
inputs
(000)

 

Total
(000)

 

Assets:

 

 

 

 

 

 

 

 

 

Fixed Income Securities

 

 

 

 

 

 

 

 

 

Corporate Bonds

 

$

—

 

$

18,925

 

$

—

 

$

18,925

 

Sovereign

 

—

 

201,237

 

—

 

201,237

 

Total Fixed Income Securities

 

—

 

220,162

 

—

 

220,162

 

Warrants

 

—

 

220

 

—

 

220

 

Short-Term Investments

 

 

 

 

 

 

 

 

 

Investment Company

 

16,639

 

—

 

—

 

16,639

 

Repurchase Agreements

 

—

 

1,650

 

—

 

1,650

 

Total Short-Term Investments

 

16,639

 

1,650

 

—

 

18,289

 

Foreign Currency Forward Exchange Contract

 

—

 

128

 

—

 

128

 

Total Assets

 

16,639

 

222,160

 

—

 

238,799

 

Liabilities:

 

 

 

 

 

 

 

 

 

Foreign Currency Forward Exchange Contracts

 

—

 

(214

)

—

 

(214

)

Total

 

$

16,639

 

$

221,946

 

$

—

 

$

238,585

 

 

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of March 31, 2017, the Fund did not have any investments transfer between investment levels.

 


 

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.

 

(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.

 

Morgan Stanley Emerging Markets Debt Fund, Inc.

 

/s/ John H. Gernon

 

John H. Gernon

 

Principal Executive Officer

 

May 18, 2017

 

 

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

 

May 18, 2017

 

 

 

/s/ Francis Smith

 

Francis Smith

 

Principal Financial Officer

 

May 18, 2017