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)

 

Arthur Lev

522 Fifth Avenue, New York, New York 10036

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

201-830-8894

 

 

Date of fiscal year end:

December 31, 2012

 

 

Date of reporting period:

September 30, 2012

 

 


 

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

Third Quarter Report

September 30, 2012 (unaudited)

(Showing Percentage of Total Value of Investments)

 

 

 

Face
Amount
(000)

 

Value
(000)

 

Fixed Income Securities (88.6%)

 

 

 

 

 

Argentina (1.5%)

 

 

 

 

 

Sovereign (1.5%)

 

 

 

 

 

Argentina Boden Bonds,

 

 

 

 

 

7.00%, 10/3/15

 

$

5,409

 

$

4,963

 

 

 

 

 

 

 

Brazil (9.0%)

 

 

 

 

 

Corporate Bonds (1.6%)

 

 

 

 

 

Banco Safra Cayman Islands Ltd.,

 

 

 

 

 

6.75%, 1/27/21

 

690

 

782

 

6.75%, 1/27/21 (a)

 

1,360

 

1,540

 

Odebrecht Finance Ltd.,

 

 

 

 

 

6.00%, 4/5/23 (a)(b)

 

2,870

 

3,200

 

 

 

 

 

5,522

 

Sovereign (7.4%)

 

 

 

 

 

Banco Nacional de Desenvolvimento, Economico e Social,

 

 

 

 

 

5.50%, 7/12/20 (a)

 

1,960

 

2,332

 

5.50%, 7/12/20

 

2,300

 

2,737

 

6.37%, 6/16/18 (a)(b)

 

276

 

333

 

Brazilian Government International Bond,

 

 

 

 

 

4.88%, 1/22/21 (b)

 

1,080

 

1,296

 

5.88%, 1/15/19 (b)

 

4,535

 

5,669

 

7.13%, 1/20/37

 

3,290

 

4,976

 

8.88%, 10/14/19

 

5,504

 

7,994

 

 

 

 

 

25,337

 

 

 

 

 

30,859

 

Colombia (4.8%)

 

 

 

 

 

Corporate Bond (0.5%)

 

 

 

 

 

Grupo Aval Ltd.,

 

 

 

 

 

4.75%, 9/26/22 (a)

 

1,620

 

1,600

 

 

 

 

 

 

 

Sovereign (4.3%)

 

 

 

 

 

Colombia Government International Bond,

 

 

 

 

 

4.38%, 7/12/21

 

2,760

 

3,192

 

4.39%, 3/21/23

 

COP

5,507,000

 

3,021

 

6.13%, 1/18/41 (b)

 

$

2,080

 

2,829

 

7.38%, 3/18/19

 

390

 

518

 

11.75%, 2/25/20

 

3,015

 

4,922

 

 

 

 

 

14,482

 

 

 

 

 

16,082

 

Croatia (0.4%)

 

 

 

 

 

Sovereign (0.4%)

 

 

 

 

 

Croatia Government International Bond,

 

 

 

 

 

6.63%, 7/14/20 (a)

 

1,340

 

1,509

 

 

 

 

 

 

 

Ecuador (0.7%)

 

 

 

 

 

Sovereign (0.7%)

 

 

 

 

 

Ecuador Government International Bond,

 

 

 

 

 

9.38%, 12/15/15

 

2,235

 

2,324

 

 


 

 

 

Face
Amount
(000)

 

Value
(000)

 

Hungary (0.5%)

 

 

 

 

 

Sovereign (0.5%)

 

 

 

 

 

Hungary Government International Bond,

 

 

 

 

 

6.38%, 3/29/21

 

$

1,050

 

$

1,149

 

7.63%, 3/29/41

 

490

 

556

 

 

 

 

 

1,705

 

India (0.3%)

 

 

 

 

 

Corporate Bond (0.3%)

 

 

 

 

 

Reliance Holdings USA, Inc.,

 

 

 

 

 

6.25%, 10/19/40 (a)(b)

 

810

 

913

 

 

 

 

 

 

 

Indonesia (6.5%)

 

 

 

 

 

Sovereign (6.5%)

 

 

 

 

 

Indonesia Government International Bond,

 

 

 

 

 

6.88%, 1/17/18

 

320

 

393

 

7.75%, 1/17/38

 

630

 

944

 

7.75%, 1/17/38 (a)

 

1,353

 

2,026

 

11.63%, 3/4/19

 

430

 

659

 

11.63%, 3/4/19 (a)(b)

 

2,169

 

3,324

 

Majapahit Holding BV,

 

 

 

 

 

7.75%, 1/20/20

 

7,590

 

9,582

 

Pertamina Persero PT,

 

 

 

 

 

4.88%, 5/3/22

 

350

 

378

 

5.25%, 5/23/21

 

870

 

969

 

Perusahaan Listrik Negara PT,

 

 

 

 

 

5.50%, 11/22/21

 

3,470

 

3,899

 

 

 

 

 

22,174

 

Ivory Coast (0.4%)

 

 

 

 

 

Sovereign (0.4%)

 

 

 

 

 

Ivory Coast Government International Bond,

 

 

 

 

 

3.75%, 12/31/32 (c)(d)

 

1,620

 

1,405

 

 

 

 

 

 

 

Kazakhstan (4.0%)

 

 

 

 

 

Sovereign (4.0%)

 

 

 

 

 

Development Bank of Kazakhstan JSC,

 

 

 

 

 

5.50%, 12/20/15

 

230

 

251

 

5.50%, 12/20/15 (a)

 

1,250

 

1,362

 

Intergas Finance BV,

 

 

 

 

 

6.38%, 5/14/17

 

700

 

798

 

KazMunayGas National Co.,

 

 

 

 

 

6.38%, 4/9/21

 

1,510

 

1,820

 

6.38%, 4/9/21 (a)(b)

 

2,430

 

2,930

 

9.13%, 7/2/18

 

1,930

 

2,505

 

9.13%, 7/2/18 (a)(b)

 

3,080

 

3,998

 

 

 

 

 

13,664

 

Lithuania (1.2%)

 

 

 

 

 

Sovereign (1.2%)

 

 

 

 

 

Lithuania Government International Bond,

 

 

 

 

 

6.13%, 3/9/21 (a)

 

520

 

623

 

 


 

 

 

Face
Amount
(000)

 

Value
(000)

 

6.63%, 2/1/22 (a)

 

$

670

 

$

833

 

6.75%, 1/15/15 (a)

 

160

 

177

 

7.38%, 2/11/20

 

1,790

 

2,282

 

 

 

 

 

3,915

 

Malaysia (0.8%)

 

 

 

 

 

Sovereign (0.8%)

 

 

 

 

 

Malaysia Government Bond,

 

 

 

 

 

3.21%, 5/31/13

 

MYR

8,110

 

2,657

 

 

 

 

 

 

 

Mexico (12.7%)

 

 

 

 

 

Corporate Bonds (0.6%)

 

 

 

 

 

Cemex SAB de CV,

 

 

 

 

 

9.00%, 1/11/18 (b)

 

$

280

 

281

 

9.00%, 1/11/18 (a)(b)

 

1,900

 

1,910

 

 

 

 

 

2,191

 

Sovereign (12.1%)

 

 

 

 

 

Mexican Bonos,

 

 

 

 

 

8.00%, 6/11/20

 

MXN

66,500

 

6,110

 

Mexico Government International Bond,

 

 

 

 

 

3.63%, 3/15/22

 

$

3,244

 

3,546

 

5.95%, 3/19/19 (b)

 

3,032

 

3,775

 

6.05%, 1/11/40

 

1,760

 

2,354

 

6.75%, 9/27/34

 

4,674

 

6,679

 

Pemex Project Funding Master Trust,

 

 

 

 

 

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

 

4,316

 

5,438

 

8.63%, 12/1/23

 

1,990

 

2,676

 

Petroleos Mexicanos,

 

 

 

 

 

4.88%, 1/24/22 (b)

 

1,800

 

2,038

 

5.50%, 1/21/21 (b)

 

5,430

 

6,394

 

8.00%, 5/3/19

 

1,750

 

2,299

 

 

 

 

 

41,309

 

 

 

 

 

43,500

 

Panama (1.6%)

 

 

 

 

 

Sovereign (1.6%)

 

 

 

 

 

Panama Government International Bond,

 

 

 

 

 

5.20%, 1/30/20

 

1,810

 

2,184

 

7.13%, 1/29/26

 

1,140

 

1,622

 

8.88%, 9/30/27

 

483

 

786

 

9.38%, 4/1/29

 

569

 

971

 

 

 

 

 

5,563

 

Peru (3.9%)

 

 

 

 

 

Corporate Bond (0.2%)

 

 

 

 

 

Corp. Azucarera del Peru SA,

 

 

 

 

 

6.38%, 8/2/22 (a)(b)

 

710

 

753

 

 

 

 

 

 

 

Sovereign (3.7%)

 

 

 

 

 

Peruvian Government International Bond,

 

 

 

 

 

7.35%, 7/21/25 (b)

 

2,410

 

3,543

 

 


 

 

 

Face
Amount
(000)

 

Value
(000)

 

8.20%, 8/12/26 (Units) (e)

 

PEN

9,000

 

4,682

 

8.75%, 11/21/33

 

$

2,580

 

$

4,508

 

 

 

 

 

12,733

 

 

 

 

 

13,486

 

Philippines (4.4%)

 

 

 

 

 

Sovereign (4.4%)

 

 

 

 

 

Philippine Government International Bond,

 

 

 

 

 

4.00%, 1/15/21

 

6,756

 

7,567

 

8.38%, 6/17/19

 

1,491

 

2,065

 

9.50%, 2/2/30

 

3,072

 

5,322

 

 

 

 

 

14,954

 

Poland (2.2%)

 

 

 

 

 

Sovereign (2.2%)

 

 

 

 

 

Poland Government International Bond,

 

 

 

 

 

3.00%, 3/17/23

 

6,850

 

6,749

 

5.00%, 3/23/22

 

770

 

895

 

 

 

 

 

7,644

 

Russia (13.4%)

 

 

 

 

 

Corporate Bonds (0.7%)

 

 

 

 

 

Vimpel Communications Via VIP Finance Ireland Ltd. OJSC,

 

 

 

 

 

7.75%, 2/2/21 (a)

 

1,390

 

1,489

 

VimpelCom Holdings BV,

 

 

 

 

 

7.50%, 3/1/22 (a)(b)

 

820

 

862

 

 

 

 

 

2,351

 

Sovereign (12.7%)

 

 

 

 

 

Russian Agricultural Bank OJSC Via RSHB Capital SA,

 

 

 

 

 

6.30%, 5/15/17 (a)

 

2,104

 

2,319

 

7.18%, 5/16/13 (a)

 

2,030

 

2,097

 

Russian Foreign Bond - Eurobond,

 

 

 

 

 

5.00%, 4/29/20

 

7,100

 

8,169

 

5.63%, 4/4/42 (a)

 

11,200

 

13,469

 

7.50%, 3/31/30

 

1,393

 

1,762

 

7.50%, 3/31/30 (a)

 

954

 

1,207

 

12.75%, 6/24/28

 

4,225

 

8,197

 

Vnesheconombank Via VEB Finance PLC,

 

 

 

 

 

6.90%, 7/9/20

 

4,900

 

5,801

 

 

 

 

 

43,021

 

 

 

 

 

45,372

 

South Africa (3.2%)

 

 

 

 

 

Sovereign (3.2%)

 

 

 

 

 

Eskom Holdings SOC Ltd.,

 

 

 

 

 

5.75%, 1/26/21 (a)

 

3,556

 

4,072

 

5.75%, 1/26/21

 

2,370

 

2,714

 

South Africa Government Bond,

 

 

 

 

 

7.25%, 1/15/20

 

ZAR

24,200

 

3,045

 

 


 

 

 

Face
Amount
(000)

 

Value
(000)

 

Transnet SOC Ltd.,

 

 

 

 

 

4.00%, 7/26/22 (a)(b)

 

$

970

 

$

988

 

 

 

 

 

10,819

 

Sri Lanka (0.4%)

 

 

 

 

 

Sovereign (0.4%)

 

 

 

 

 

Sri Lanka Government International Bond,

 

 

 

 

 

5.88%, 7/25/22 (a)(b)

 

490

 

531

 

6.25%, 10/4/20

 

100

 

109

 

6.25%, 10/4/20 (a)

 

650

 

710

 

 

 

 

 

1,350

 

Thailand (0.4%)

 

 

 

 

 

Corporate Bond (0.4%)

 

 

 

 

 

PTT Global Chemical PCL,

 

 

 

 

 

4.25%, 9/19/22 (a)(b)

 

1,370

 

1,387

 

 

 

 

 

 

 

Turkey (5.6%)

 

 

 

 

 

Sovereign (5.6%)

 

 

 

 

 

Export Credit Bank of Turkey,

 

 

 

 

 

5.88%, 4/24/19 (a)(b)

 

2,850

 

3,144

 

Turkey Government International Bond,

 

 

 

 

 

5.63%, 3/30/21

 

4,650

 

5,324

 

6.88%, 3/17/36

 

2,904

 

3,695

 

7.50%, 7/14/17 – 11/7/19

 

2,866

 

3,520

 

11.88%, 1/15/30

 

1,771

 

3,328

 

 

 

 

 

19,011

 

Uruguay (0.7%)

 

 

 

 

 

Sovereign (0.7%)

 

 

 

 

 

Uruguay Government International Bond,

 

 

 

 

 

8.00%, 11/18/22

 

1,589

 

2,318

 

 

 

 

 

 

 

Venezuela (9.7%)

 

 

 

 

 

Sovereign (9.7%)

 

 

 

 

 

Petroleos de Venezuela SA,

 

 

 

 

 

8.50%, 11/2/17

 

17,190

 

15,600

 

Venezuela Government International Bond,

 

 

 

 

 

6.00%, 12/9/20

 

1,340

 

1,017

 

7.65%, 4/21/25

 

2,850

 

2,244

 

9.00%, 5/7/23

 

600

 

531

 

9.25%, 9/15/27 (b)

 

14,920

 

13,525

 

 

 

 

 

32,917

 

Zambia (0.3%)

 

 

 

 

 

Sovereign (0.3%)

 

 

 

 

 

Zambia Government International Bond,

 

 

 

 

 

5.38%, 9/20/22 (a)(b)

 

1,150

 

1,161

 

Total Fixed Income Securities (Cost $262,605)

 

 

 

301,651

 

 


 

 

 

No. of
Warrants

 

Value
(000)

 

Warrants (0.2%)

 

 

 

 

 

Nigeria (0.1%)

 

 

 

 

 

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

 

2,250

 

$

405

 

 

 

 

 

 

 

Venezuela (0.1%)

 

 

 

 

 

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

 

5,450

 

164

 

Total Warrants (Cost $—)

 

 

 

569

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Short-Term Investments (11.2%)

 

 

 

 

 

Securities held as Collateral on Loaned Securities (6.7%)

 

 

 

 

 

Investment Company (5.0%)

 

 

 

 

 

Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (h)

 

16,851,962

 

16,852

 

 

 

 

 

 

 

 

 

Face
Amount
(000)

 

 

 

Repurchase Agreements (1.7%)

 

 

 

 

 

Barclays Capital, Inc., (0.15%, dated 9/28/12, due 10/1/12; proceeds $1,783; fully collateralized by a U.S. Government Obligation; U.S. Treasury Note 0.75% due 6/30/17; valued at $1,819)

 

$

1,784

 

1,784

 

Merrill Lynch & Co., Inc., (0.15%, dated 9/28/12, due 10/1/12; proceeds $657; fully collateralized by a U.S. Government Obligation; U.S. Treasury Note 1.75% due 5/15/22; valued at $671)

 

657

 

657

 

Merrill Lynch & Co., Inc., (0.22%, dated 9/28/12, due 10/1/12; proceeds $3,379; fully collateralized by a U.S. Government Agency; Federal National Mortgage Association 4.00% due 4/1/42; valued at $3,447)

 

3,379

 

3,379

 

 

 

 

 

5,820

 

Total Securities held as Collateral on Loaned Securities (Cost $22,672)

 

 

 

22,672

 

 

 

 

 

 

 

 

 

Shares

 

 

 

Investment Company (4.5%)

 

 

 

 

 

Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (h) (Cost $15,142)

 

15,142,290

 

15,142

 

Total Short-Term Investments (Cost $37,814)

 

 

 

37,814

 

Total Investments (100.0%) (Cost $300,419) Including $22,301 of Securities Loaned (i)+

 

 

 

340,034

 

Liabilities in Excess of Other Assets

 

 

 

(36,552

)

Net Assets

 

 

 

$

303,482

 

 

(a)

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

 


 

(b)

The value of loaned securities and related collateral outstanding at September 30, 2012 were approximately $22,301,000 and $22,696,000, respectively. The Fund received cash collateral of approximately $22,671,000 which was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class as reported in the Portfolio of Investments. As of September 30, 2012, there was uninvested cash of approximately 25,000 which is not reflected in the Portfolio of Investments. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.

(c)

Step Bond — Coupon rate increases in increments to maturity. Rate disclosed is as of September 30, 2012. Maturity date disclosed is the ultimate maturity date.

(d)

Issuer is in default.

(e)

Consists of one or more classes of securities traded together as a unit.

(f)

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 September 30, 2012.

(g)

Security has been deemed illiquid at September 30, 2012.

(h)

The Fund invests in the Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (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 the advisory and administrative service fees paid by the Liquidity Funds with respect to assets invested by the Fund in the Liquidity Funds.

(i)

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

+

At September 30, 2012, the U.S. Federal income tax cost basis of investments was approximately $300,419,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was approximately $39,615,000 of which approximately $39,763,000 related to appreciated securities and approximately $148,000 related to depreciated securities.

 


 

Foreign Currency Exchange Contracts Information:

 

The Fund had the following foreign currency exchange contracts open at period end:

 

Counterparty

 

Currency
to
Deliver
(000)

 

Value
(000)

 

Settlement
Date

 

In
Exchange
For
(000)

 

Value
(000)

 

Unrealized
Appreciation
(Depreciation)
(000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JPMorgan Chase Bank

 

USD

3,060

 

$

3,060

 

10/17/12

 

KRW

3,440,205

 

$

3,093

 

$

33

 

JPMorgan Chase Bank

 

USD

3,116

 

3,116

 

10/17/12

 

RUB

96,000

 

3,070

 

(46

)

 

 

 

 

$

6,176

 

 

 

 

 

$

6,163

 

$

(13

)

 

COP

–

Colombian Peso

KRW

–

South Korean Won

MXN

–

Mexican New Peso

MYR

–

Malaysian Ringgit

PEN

–

Peruvian Nuevo Sol

RUB

–

Russian Ruble

USD

–

United States Dollar

ZAR

–

South African Rand

 


 

Morgan Stanley Emerging Markets Debt Fund, Inc.

 

Notes to the Portfolio of Investments · September 30, 2012 (unaudited)

 

Security Valuation: 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. The prices provided by a pricing service take into account broker-dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. Securities listed on a foreign exchange are valued at their closing price, except as noted below. 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 last reported bid and ask prices. 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. Short-term debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, unless the Fund’s Board of Directors (the “Directors”) determines such valuation does not reflect the securities’ fair value, in which case these securities will be valued at their fair value as determined in good faith under procedures adopted by the Directors.

 

Under procedures approved by the Directors, the Fund’s adviser, Morgan Stanley Investment Management Inc. (the “Adviser”), has formed a Valuation Committee. The Valuation Committee provides administration and oversight of the Fund’s valuation policies and procedures, which are reviewed at least annually by the Directors. Among other things, 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 adhoc 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.

 

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.

 

Fair Value Measurement: Financial Accounting Standards Board (“FASB”) Accounting Standards CodificationTM (“ASC”) 820, “Fair Value Measurements and Disclosures” (“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 September 30, 2012.

 

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

 

$

—

 

$

14,716

 

$

—

 

$

14,716

 

Sovereign

 

—

 

286,935

 

—

 

286,935

 

Total Fixed Income Securities

 

—

 

301,651

 

—

 

301,651

 

Warrants

 

—

 

569

 

—

 

569

 

Short-Term Investments

 

 

 

 

 

 

 

 

 

Investment Company

 

31,994

 

—

 

—

 

31,994

 

Repurchase Agreements

 

—

 

5,820

 

—

 

5,820

 

Total Short-Term Investments

 

31,994

 

5,820

 

—

 

37,814

 

Foreign Currency Exchange Contracts

 

—

 

33

 

—

 

33

 

Total Assets

 

31,994

 

308,073

 

—

 

340,067

 

Liabilities:

 

 

 

 

 

 

 

 

 

Foreign Currency Exchange Contracts

 

—

 

(46

)

—

 

(46

)

Total

 

$

31,994

 

$

308,027

 

$

—

 

$

340,021

 

 

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 September 30, 2012, 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/ Arthur Lev

 

Arthur Lev

 

Principal Executive Officer

 

November 15, 2012

 

 

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/ Arthur Lev

 

Arthur Lev

 

Principal Executive Officer

 

November 15, 2012

 

 

 

/s/ Francis Smith

 

Francis Smith

 

Principal Financial Officer

 

November 15, 2012