[Annotated Form 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, NY

10036

(Address of principal executive offices)

(Zip code)

RONALD E. ROBISON
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:

3/31/08

 

 


 

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:

 


 

Morgan Stanley Emerging Markets Debt Fund, Inc.

Portfolio of Investments

First Quarter Report

March 31, 2008 (unaudited)

 

(Showing Percentage of Total Value of Investments)

 

 

 

 

 

Face

 

 

 

 

 

 

 

Amount

 

Value

 

 

 

 

 

(000)

 

(000)

 

DEBT INSTRUMENTS (97.9%)

 

 

 

 

 

 

 

Argentina (2.0%)

 

 

 

 

 

 

 

Sovereign (2.0%)

 

 

 

 

 

 

 

Republic of Argentina,

 

 

 

 

 

 

 

5.83%,12/31/33

 

 

 

$

6,040

 

$

2,031

 

8.28%,12/31/33

 

 

 

(e)3,974

 

2,752

 

 

 

 

 

 

 

4,783

 

Brazil (15.4%)

 

 

 

 

 

 

 

Corporate (1.0%)

 

 

 

 

 

 

 

Banco ABN AMRO Real S.A.,

 

 

 

 

 

 

 

 

16.20%, 2/22/10

 

 

 

BRL

4,240

 

2,567

 

Sovereign (14.4%)

 

 

 

 

 

 

 

Federative Republic of Brazil,

 

 

 

 

 

 

 

 

6.00%, 1/17/17

 

 

 

$

6,850

 

7,001

 

8.00%, 1/15/18

 

 

 

6,403

 

7,188

 

8.88%, 10/14/19 - 4/15/24

 

 

 

5,688

 

7,041

 

10.50%, 7/14/14

 

 

 

1,740

 

2,214

 

11.00%, 8/17/40

 

 

 

4,250

 

5,696

 

14.50%, 10/15/09

 

 

 

2,321

 

2,719

 

Nota do Tesouro Nacional,

 

 

 

 

 

 

 

Zero Coupon, 1/1/10

 

 

 

BRL

5,049

 

2,804

 

 

 

 

 

 

 

34,663

 

 

 

 

 

 

 

37,230

 

Bulgaria (1.6%)

 

 

 

 

 

 

 

Sovereign (1.6%)

 

 

 

 

 

 

 

Republic of Bulgaria,

 

 

 

 

 

 

 

 8.25%, 1/15/15

 

 

 

$

(b)1,699

 

1,992

 

Republic of Bulgaria (Registered),

 

 

 

 

 

 

 

 

8.25%, 1/15/15

 

 

 

1,490

 

1,747

 

 

 

 

 

 

 

3,739

 

Chile (1.4%)

 

 

 

 

 

 

 

Corporate (1.4%)

 

 

 

 

 

 

 

Empresa Nacional de Petroleo,

 

 

 

 

 

 

 

6.75%, 11/15/12

 

 

 

(b)3,090

 

3,343

 

Colombia (0.7%)

 

 

 

 

 

 

 

Sovereign (0.7%)

 

 

 

 

 

 

 

Republic of Colombia,

 

 

 

 

 

 

 

11.75%, 2/25/20

 

 

 

1,075

 

1,591

 

Ecuador (1.2%)

 

 

 

 

 

 

 

Sovereign (1.2%)

 

 

 

 

 

 

 

Republic of Ecuador,

 

 

 

 

 

 

 

9.38%,12/15/15

 

 

 

470

 

477

 

10.00%, 8/15/30

 

 

 

(d)2,500

 

2,425

 

 

 

 

 

 

 

2,902

 

Egypt (0.8%)

 

 

 

 

 

 

 

Sovereign (0.8%)

 

 

 

 

 

 

 

Arab Republic of Egypt,

 

 

 

 

 

 

 

8.75%, 7/18/12

 

 

 

EGP

(b)10,510

 

1,972

 

Ghana (0.8%)

 

 

 

 

 

 

 

Sovereign (0.8%)

 

 

 

 

 

 

 

Republic of Ghana,

 

 

 

 

 

 

 

8.50%, 10/4/17

 

 

 

$

(b)1,916

 

2,012

 

Indonesia (2.8%)

 

 

 

 

 

 

 

 


 

Corporate (1.8%)

 

 

 

 

 

 

 

Pindo Deli Finance BV,

 

 

 

 

 

 

 

Tranche A, 4.25%, 4/28/15

 

 

 

(b)(c)554

 

421

 

Tranche B, 4.25%, 4/28/18

 

 

 

(b)(c)1,707

 

700

 

Tranche C, Zero Coupon, 4/28/25

 

 

 

(b)(c)6,884

 

757

 

Tijiwi Kimia Finance BV,

 

 

 

 

 

 

 

Tranche A, 4.24%, 4/28/15

 

 

 

(b)(c)1,824

 

1,377

 

Tranche B, 4.29%, 4/28/18

 

 

 

(b)(c)1,477

 

598

 

Tranche C, Zero Coupon, 4/28/27

 

 

 

(b)(c)3,352

 

369

 

 

 

 

 

 

 

4,222

 

Sovereign (1.0%)

 

 

 

 

 

 

 

Republic of Indonesia,

 

 

 

 

 

 

 

7.75%, 1/17/38

 

 

 

2,317

 

2,409

 

 

 

 

 

 

 

6,631

 

Ivory Coast (0.3%)

 

 

 

 

 

 

 

Sovereign (0.3%)

 

 

 

 

 

 

 

Ivory Coast,

 

 

 

 

 

 

 

3.00%, 3/30/18

 

 

 

(a)2,045

 

736

 

Malaysia (1.0%)

 

 

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

 

 

Government of Malaysia,

 

 

 

 

 

 

 

7.50%, 7/15/11

 

 

 

420

 

470

 

8.75%, 6/1/09

 

 

 

1,929

 

2,049

 

 

 

 

 

 

 

2,519

 

Mexico (17.1%)

 

 

 

 

 

 

 

Corporate (7.5%)

 

 

 

 

 

 

 

Pemex Project Funding Master Trust,

 

 

 

 

 

 

 

4.10%, 6/15/10

 

 

 

(b)(c)4,250

 

4,237

 

5.75%, 3/1/18

 

 

 

(b)1,840

 

1,887

 

6.63%, 6/15/35

 

 

 

5,000

 

5,181

 

8.63%, 12/1/23

 

 

 

1,740

 

2,214

 

9.13%, 10/13/10

 

 

 

4,040

 

4,535

 

 

 

 

 

 

 

18,054

 

Sovereign (9.6%)

 

 

 

 

 

 

 

Mexican Bonos,

 

 

 

 

 

 

 

8.00%, 12/17/15

 

 

 

MXN

54,910

 

5,335

 

9.50%, 12/18/14

 

 

 

63,370

 

6,620

 

United Mexican States,

 

 

 

 

 

 

 

5.63%, 1/15/17

 

 

 

$

6,278

 

6,614

 

6.75%, 9/27/34

 

 

 

1,479

 

1,654

 

7.50%, 1/14/12

 

 

 

1

 

1

 

8.38%, 1/14/11

 

 

 

2,665

 

3,014

 

 

 

 

 

 

 

23,238

 

 

 

 

 

 

 

41,292

 

Panama (2.6%)

 

 

 

 

 

 

 

Sovereign (2.6%)

 

 

 

 

 

 

 

Republic of Panama,

 

 

 

 

 

 

 

7.13%, 1/29/26

 

 

 

1,910

 

2,072

 

7.25%, 3/15/15

 

 

 

700

 

770

 

9.38%, 4/1/29

 

 

 

1,890

 

2,495

 

9.63%, 2/8/11

 

 

 

906

 

1,038

 

 

 

 

 

 

 

6,375

 

Peru (3.5%)

 

 

 

 

 

 

 

Sovereign (3.5%)

 

 

 

 

 

 

 

Republic of Peru,

 

 

 

 

 

 

 

8.38%, 5/3/16

 

 

 

1,150

 

1,375

 

8.75%, 11/21/33

 

 

 

3,130

 

4,085

 

9.88%, 2/6/15

 

 

 

2,342

 

2,965

 

 

 

 

 

 

 

8,425

 

Philippines (10.8%)

 

 

 

 

 

 

 

Sovereign (10.8%)

 

 

 

 

 

 

 

 


 

Republic of Philippines,

 

 

 

 

 

 

 

8.88%, 3/17/15

 

 

 

(f)11,825

 

14,013

 

9.00%, 2/15/13

 

 

 

2,240

 

2,629

 

9.50%, 2/2/30

 

 

 

7,174

 

9,380

 

 

 

 

 

 

 

26,022

 

Qatar (0.8%)

 

 

 

 

 

 

 

Sovereign (0.8%)

 

 

 

 

 

 

 

State of Qatar (Registered),

 

 

 

 

 

 

 

9.75%, 6/15/30

 

 

 

1,260

 

1,966

 

Russia (16.4%)

 

 

 

 

 

 

 

Corporate (7.4%)

 

 

 

 

 

 

 

Gaz Capital S.A.,

 

 

 

 

 

 

 

6.21%, 11/22/16

 

 

 

(b)3,282

 

3,044

 

8.63%, 4/28/34

 

 

 

3,670

 

4,184

 

JPMorgan & Chase Co.,

 

 

 

 

 

 

 

 

7.00%, 6/28/17

 

 

 

RUB

62,000

 

2,169

 

RSHB Capital S.A. for OJSC Russian Agricultural Bank,

 

 

 

 

 

 

 

6.30%, 5/15/17

 

 

 

$

(b)2,004

 

1,861

 

7.18%, 5/16/13

 

 

 

(b)2,800

 

2,860

 

7.18%, 5/16/13

 

 

 

270

 

276

 

TNK-BP Finance S.A.,

 

 

 

 

 

 

 

7.88%, 3/13/18

 

 

 

(b)3,800

 

3,529

 

 

 

 

 

 

 

17,923

 

Sovereign (9.0%)

 

 

 

 

 

 

 

Russian Federation,

 

 

 

 

 

 

 

7.50%, 3/31/30

 

 

 

(d)875

 

1,011

 

Russian Federation (Registered),

 

 

 

 

 

 

 

7.50%, 3/31/30

 

 

 

(d)7,636

 

8,815

 

11.00%, 7/24/18

 

 

 

321

 

467

 

12.75%, 6/24/28

 

 

 

4,000

 

7,225

 

Russian Ministry of Finance,

 

 

 

 

 

 

 

3.00%, 5/14/11

 

 

 

4,230

 

4,067

 

 

 

 

 

 

 

21,585

 

 

 

 

 

 

 

39,508

 

South Korea (0.4%)

 

 

 

 

 

 

 

Sovereign (0.4%)

 

 

 

 

 

 

 

Korea Development Bank,

 

 

 

 

 

 

 

5.30%, 1/17/13

 

 

 

1,000

 

1,026

 

Trinidad (0.9%)

 

 

 

 

 

 

 

Corporate (0.9%)

 

 

 

 

 

 

 

National Gas Co. of Trinidad & Tobago Ltd.,

 

 

 

 

 

 

 

6.05%, 1/15/36

 

 

 

(b)2,369

 

2,229

 

Turkey (8.3%)

 

 

 

 

 

 

 

Sovereign (8.3%)

 

 

 

 

 

 

 

Republic of Turkey,

 

 

 

 

 

 

 

6.75%, 4/3/18

 

 

 

8,225

 

8,235

 

11.00%, 1/14/13

 

 

 

(f)7,145

 

8,717

 

11.50%, 1/23/12

 

 

 

320

 

386

 

11.88%, 1/15/30

 

 

 

1,737

 

2,573

 

 

 

 

 

 

 

19,911

 

Ukraine (1.0%)

 

 

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

 

 

Republic of Ukraine,

 

 

 

 

 

 

 

6.58%, 11/21/16

 

 

 

2,410

 

2,398

 

Venezuela (8.1%)

 

 

 

 

 

 

 

Sovereign (8.1%)

 

 

 

 

 

 

 

Republic of Venezuela,

 

 

 

 

 

 

 

9.25%, 9/15/27

 

 

 

11,581

 

11,031

 

10.75%, 9/19/13

 

 

 

8,330

 

8,517

 

 

 

 

 

 

 

19,548

 

TOTAL DEBT INSTRUMENTS (Cost $231,202)

 

 

 

 

 

236,158

 

 


 

 

 

No. of

 

 

 

 

 

Warrants

 

 

 

Warrants (0.5%)

 

 

 

 

 

Nigeria (0.3%)

 

 

 

 

 

Central Bank of Nigeria, expiring 11/15/20

 

3,000

 

690

 

Venezuela (0.2%)

 

 

 

 

 

Republic of Venezuela Oil-Linked Payment Obligation, expiring 4/15/20

 

11,350

 

417

 

Total Warrants (Cost $@—)

 

 

 

1,107

 

 

 

 

Shares

 

 

 

SHORT-TERM INVESTMENT (1.6%)

 

 

 

 

 

United States (1.6%)

 

 

 

 

 

Investment Company (1.6%)

 

 

 

 

 

Morgan Stanley Institutional Liquidity
Money Market Portfolio
— Institutional Class (Cost $3,784)

 

(g)3,784,319

 

3,784

 

TOTAL INVESTMENTS + (100.0%) (Cost $234,986)

 

 

 

241,049

 

LIABILITIES IN EXCESS OF OTHER ASSETS

 

 

 

(2,860

)

NET ASSETS

 

 

 

$

238,189

 

 

(a)

 

Issuer is in default.

(b)

 

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

(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, 2008.

(d)

 

Step Bond — coupon rate increases in increments to maturity. Rate disclosed is as of March 31, 2008. Maturity date disclosed is ultimate maturity.

(e)

 

Security was valued at fair value — At March 31, 2008 the Fund held $2,752,000 of fair valued securities, representing 1.2% of net assets.

(f)

 

Denotes all or a portion of securities subject to repurchase under the Reverse Repurchase Agreement as of March 31, 2008.

(h)

 

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Money Market Portfolio (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 three months ended March 31, 2008, advisory fees paid were reduced by approximately $1,000 relating to the Fund’s investment in the Liquidity Fund. For the same period, income distributions earned by the Fund are recorded as dividends from affiliates and totaled approximately $26,000. During the three months ended March 31, 2008, the approximate cost of purchases and sales in the Liquidity Fund were $29,520,000 and $31,696,000, respectively.

@

 

Amount is less than $500.

BRL

 

Brazilian Real

EGP

 

Egyptian Pound

MXN

 

Mexican Peso

RUB

 

Russian Ruble

+

 

At March 31, 2008, the U.S. Federal income tax cost basis of investments was approximately $234,986,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $6,063,000 of which $12,633,000 related to appreciated securities and $6,570,000 related to depreciated securities.

 


 

Futures Contracts:

The Fund had the following futures contract(s) open at period end:

 

 

 

 

 

 

 

 

 

Net Unrealized

 

 

 

 

 

 

 

 

 

Appreciation

 

 

 

Number of

 

 

 

Expiration

 

(Depreciation)

 

 

 

Contracts

 

Value (000)

 

Date

 

(000)

 

Short:

 

 

 

 

 

 

 

 

 

U.S. Treasury 2 yr. Note

 

33

 

$

7,084

 

Jun-08

 

$

14

 

U.S. Treasury 10 yr. Note

 

538

 

61,458

 

Jun-08

 

278

 

 

 

 

 

 

 

 

 

$

292

 

 


 

Interest Rate Swap Contracts

The Fund had the following interest rate swap agreement(s) open at period end:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

 

 

 

 

 

Notional

 

Appreciation

 

 

 

Floating Rate

 

Pay/Receive

 

Fixed

 

Termination

 

Amount

 

(Depreciation)

 

Swap Counterparty

 

Index

 

Floating Rate

 

Rate

 

Date

 

(000)

 

(000)

 

JPMorgan Chase

 

3 Month LIBOR

 

Pay

 

4.39

%

12/11/12

 

$

54,409

 

$

2,701

 

 

LIBOR — London Inter Bank Offer Rate

 


 

At March 31, 2008, the Fund had a reverse repurchase agreement outstanding with Lehman Brothers as follows:

 

 

 

Maturity in
less than

 

Lehman Brothers Agreement

 

366 Days

 

Value of Securities Subject to Repurchase

 

$

9,069,840

 

Liability Under Reverse Repurchase Agreement

 

$

9,117,256

 

Weighted Average Days to Maturity

 

44.57

 

 


 

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 pricing 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 pricing 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, 2008 in valuing the Fund’s investments carried at value:

 

Valuation Inputs

 

Investments in
Securities 
(000)

 

Other Financial
Instruments*
(000)

 

Level 1 - Quoted Prices

 

$

—

 

$

(292

)

Level 2 - Other Significant Observable Inputs

 

238,297

 

(6,368

)

Level 3 - Significant Unobservable Inputs

 

2,752

 

—

 

Total

 

$

241,049

 

$

(6,660

)

 

*Other financial instruments include futures, forwards and swap contracts.

 

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

 

 

 

Investments in
Securities
(000)

 

Other Financial
Instruments
(000)

 

Balance as of 12/31/07

 

$

3,787

 

$

—

 

Accrued discounts/premiums

 

1

 

—

 

Realized gain (loss)

 

—

 

—

 

Change in unrealized appreciation (depreciation)

 

(1,036

)

—

 

Net purchases (sales)

 

—

 

—

 

Net transfers in and/or out of Level 3

 

—

 

—

 

Balance as of 3/31/08

 

$

2,752

 

$

—

 

The amount of total realized gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at 3/31/08

 

$

(1,036

)

$

—

 

 

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. 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)

Morgan Stanley Emerging Markets Debt Fund, Inc.

 

By:

/s/ Ronald E. Robison

 

Name:

Ronald E. Robison

 

Title:

Principal Executive Officer

 

Date:

May 20, 2008

 

 

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/ Ronald E. Robison

 

Name:

Ronald E. Robison

 

Title:

Principal Executive Officer

 

Date:

May 20, 2008

 

 

 

 

By:

/s/ James Garrett

 

Name:

James Garrett

 

Title:

Principal Financial Officer

 

Date:

May 20, 2008