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

811-22011

 

Morgan Stanley Emerging Markets Domestic 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:

October 31,

 

 

Date of reporting period:

January 31, 2019

 

 


 

Item 1.  Schedule of Investments.

 

The Registrant’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 Domestic Debt Fund, Inc.

Portfolio of Investments

First Quarter Report

January 31, 2019 (unaudited)

(Showing Percentage of Total Value of Investments)

 

 

 

Face
Amount
(000)

 

Value
(000)

 

Fixed Income Securities (93.1%)

 

 

 

 

 

 

Argentina (2.5%)

 

 

 

 

 

 

Corporate Bonds (2.5%)

 

 

 

 

 

 

Autonomous City of Buenos Aires Argentina,

 

 

 

 

 

 

BADLAR + 3.25%, 48.97%, 3/29/24 (a)

 

ARS

92,677

 

$

2,345

 

Banco Hipotecario SA,

 

 

 

 

 

 

3 Month USD LIBOR + 4.00%, 48.63%, 11/7/22 (a)(b)

 

 

25,000

 

650

 

Provincia de Buenos Aires,

 

 

 

 

 

 

BADLAR + 3.83%, 51.03%, 5/31/22 (a)

 

 

218,010

 

5,629

 

Provincia de Mendoza Argentina,

 

 

 

 

 

 

BADLAR + 4.38%, 51.06%, 6/9/21 (a)

 

 

172,370

 

4,450

 

Tarjeta Naranja SA,

 

 

 

 

 

 

BADLAR + 3.50%, 48.13%, 4/11/22 (a)(b)

 

$

 

5,150

 

1,977

 

YPF SA,

 

 

 

 

 

 

BADLAR + 4.00%, 51.73%, 7/7/20 (a)(b)

 

 

9,137

 

3,754

 

 

 

 

 

 

18,805

 

Brazil (15.3%)

 

 

 

 

 

 

Sovereign (15.3%)

 

 

 

 

 

 

Brazil Notas do Tesouro Nacional, Series F,

 

 

 

 

 

 

10.00%, 1/1/21 — 1/1/25

 

BRL

392,361

 

113,518

 

 

 

 

 

 

 

 

Chile (1.0%)

 

 

 

 

 

 

Sovereign (1.0%)

 

 

 

 

 

 

Bonos de la Tesoreria de la Republica en pesos,

 

 

 

 

 

 

5.00%, 3/1/35

 

CLP

3,570,000

 

5,721

 

Chile Government International Bond,

 

 

 

 

 

 

5.50%, 8/5/20

 

 

1,165,000

 

1,828

 

 

 

 

 

 

7,549

 

Colombia (5.6%)

 

 

 

 

 

 

Corporate Bond (0.2%)

 

 

 

 

 

 

Fideicomiso PA Costera, TIPS

 

 

 

 

 

 

6.25%, 1/15/34 (b)

 

COP

4,979,415

 

1,633

 

 

 

 

 

 

 

 

Sovereign (5.4%)

 

 

 

 

 

 

Colombia Government International Bond,

 

 

 

 

 

 

9.85%, 6/28/27

 

 

1,466,000

 

580

 

Colombian TES,

 

 

 

 

 

 

6.00%, 4/28/28

 

 

15,000,000

 

4,629

 

7.75%, 9/18/30

 

 

16,848,100

 

5,804

 

10.00%, 7/24/24

 

 

44,128,500

 

16,737

 

11.00%, 7/24/20

 

 

14,087,000

 

4,928

 

Financiera de Desarrollo Territorial SA Findeter,

 

 

 

 

 

 

7.88%, 8/12/24 (b)

 

 

21,492,000

 

7,058

 

 

 

 

 

 

39,736

 

 

 

 

 

 

41,369

 

Dominican Republic (0.1%)

 

 

 

 

 

 

Sovereign (0.1%)

 

 

 

 

 

 

Dominican Republic International Bond,

 

 

 

 

 

 

8.90%, 2/15/23 (b)

 

DOP

22,000

 

422

 

 


 

Georgia (0.7%)

 

 

 

 

 

 

Corporate Bond (0.7%)

 

 

 

 

 

 

Bank of Georgia JSC,

 

 

 

 

 

 

11.00%, 6/1/20 (b)

 

GEL

14,300

 

5,413

 

 

 

 

 

 

 

 

Hungary (3.5%)

 

 

 

 

 

 

Sovereign (3.5%)

 

 

 

 

 

 

Hungary Government Bond,

 

 

 

 

 

 

3.00%, 10/27/27

 

HUF

3,481,590

 

12,860

 

5.50%, 6/24/25

 

 

2,992,920

 

12,854

 

 

 

 

 

 

25,714

 

India (2.9%)

 

 

 

 

 

 

Sovereign (2.9%)

 

 

 

 

 

 

India Government Bond,

 

 

 

 

 

 

8.40%, 7/28/24

 

INR

1,445,000

 

21,285

 

 

 

 

 

 

 

 

Indonesia (9.1%)

 

 

 

 

 

 

Sovereign (9.1%)

 

 

 

 

 

 

Indonesia Treasury Bond,

 

 

 

 

 

 

8.38%, 3/15/34

 

IDR

291,441,000

 

21,098

 

8.75%, 5/15/31

 

 

412,855,000

 

30,670

 

9.00%, 3/15/29

 

 

204,725,000

 

15,629

 

 

 

 

 

 

67,397

 

Malaysia (4.5%)

 

 

 

 

 

 

Sovereign (4.5%)

 

 

 

 

 

 

Malaysia Government Bond,

 

 

 

 

 

 

3.96%, 9/15/25

 

MYR

27,854

 

6,794

 

4.18%, 7/15/24

 

 

86,575

 

21,397

 

4.23%, 6/30/31

 

 

19,500

 

4,728

 

 

 

 

 

 

32,919

 

Mexico (10.0%)

 

 

 

 

 

 

Sovereign (10.0%)

 

 

 

 

 

 

Mexican Bonos,

 

 

 

 

 

 

Series M

 

 

 

 

 

 

6.50%, 6/10/21

 

MXN

137,760

 

6,946

 

7.50%, 6/3/27

 

 

212,300

 

10,487

 

7.75%, 5/29/31

 

 

113,776

 

5,569

 

8.00%, 12/7/23

 

 

129,000

 

6,693

 

10.00%, 12/5/24

 

 

97,500

 

5,507

 

Petroleos Mexicanos,

 

 

 

 

 

 

(Units)

 

 

 

 

 

 

7.65%, 11/24/21 (b)(c)

 

 

791,300

 

38,620

 

 

 

 

 

 

73,822

 

Peru (3.9%)

 

 

 

 

 

 

Sovereign (3.9%)

 

 

 

 

 

 

Peru Government Bond,

 

 

 

 

 

 

(Units)

 

 

 

 

 

 

5.70%, 8/12/24 (c)

 

PEN

44,037

 

13,770

 

6.15%, 8/12/32 (b)

 

 

20,660

 

6,322

 

Peruvian Government International Bond,

 

 

 

 

 

 

(Units)

 

 

 

 

 

 

5.70%, 8/12/24 (b)(c)

 

 

14,001

 

4,378

 

 


 

8.20%, 8/12/26 (c)

 

 

13,154

 

4,656

 

 

 

 

 

 

29,126

 

Poland (9.9%)

 

 

 

 

 

 

Sovereign (9.9%)

 

 

 

 

 

 

Poland Government Bond,

 

 

 

 

 

 

5.25%, 10/25/20

 

PLN

75,898

 

21,735

 

Republic of Poland Government Bond,

 

 

 

 

 

 

3.25%, 7/25/25

 

 

29,850

 

8,435

 

5.75%, 9/23/22

 

 

141,500

 

43,210

 

 

 

 

 

 

73,380

 

Romania (1.2%)

 

 

 

 

 

 

Sovereign (1.2%)

 

 

 

 

 

 

Romania Government Bond,

 

 

 

 

 

 

4.75%, 2/24/25

 

RON

31,330

 

7,627

 

5.80%, 7/26/27

 

 

6,090

 

1,580

 

 

 

 

 

 

9,207

 

Russia (5.2%)

 

 

 

 

 

 

Sovereign (5.2%)

 

 

 

 

 

 

Russian Federal Bond - OFZ,

 

 

 

 

 

 

6.40%, 5/27/20

 

RUB

185,800

 

2,799

 

7.00%, 8/16/23

 

 

391,387

 

5,796

 

7.05%, 1/19/28

 

 

61,200

 

881

 

7.10%, 10/16/24

 

 

500,000

 

7,382

 

7.60%, 7/20/22

 

 

438,000

 

6,669

 

8.15%, 2/3/27

 

 

961,800

 

14,897

 

 

 

 

 

 

38,424

 

South Africa (7.3%)

 

 

 

 

 

 

Sovereign (7.3%)

 

 

 

 

 

 

Republic of South Africa Government Bond,

 

 

 

 

 

 

8.25%, 3/31/32

 

ZAR

37,243

 

2,579

 

8.75%, 1/31/44

 

 

260,000

 

17,973

 

South Africa Government Bond,

 

 

 

 

 

 

6.75%, 3/31/21

 

 

83,700

 

6,291

 

7.25%, 1/15/20

 

 

24

 

2

 

7.75%, 2/28/23

 

 

54,000

 

4,074

 

8.00%, 1/31/30

 

 

328,200

 

22,908

 

 

 

 

 

 

53,827

 

Thailand (5.2%)

 

 

 

 

 

 

Sovereign (5.2%)

 

 

 

 

 

 

Thailand Government Bond,

 

 

 

 

 

 

3.63%, 6/16/23

 

THB

630,000

 

21,512

 

3.85%, 12/12/25

 

 

477,460

 

16,826

 

 

 

 

 

 

38,338

 

Turkey (3.6%)

 

 

 

 

 

 

Sovereign (3.6%)

 

 

 

 

 

 

Turkey Government Bond,

 

 

 

 

 

 

7.10%, 3/8/23

 

TRY

19,550

 

2,891

 

8.00%, 3/12/25

 

 

24,250

 

3,520

 

9.20%, 9/22/21

 

 

22,000

 

3,632

 

10.50%, 1/15/20

 

 

29,475

 

5,340

 

 


 

10.60%, 2/11/26

 

 

30,700

 

5,069

 

11.00%, 2/24/27

 

 

34,850

 

5,814

 

 

 

 

 

 

26,266

 

Uruguay (1.6%)

 

 

 

 

 

 

Sovereign (1.6%)

 

 

 

 

 

 

Uruguay Government International Bond,

 

 

 

 

 

 

8.50%, 3/15/28 (b)

 

UYU

69,890

 

1,894

 

9.88%, 6/20/22

 

 

17,260

 

534

 

9.88%, 6/20/22 (b)

 

 

304,500

 

9,416

 

 

 

 

 

 

11,844

 

Total Fixed Income Securities (Cost $790,775)

 

 

 

 

688,625

 

 

 

 

 

 

 

 

Short-Term Investments (6.9%)

 

 

 

 

 

 

U.S. Treasury Securities (1.2%)

 

 

 

 

 

 

U.S. Treasury Bills,

 

 

 

 

 

 

2.38%, 3/21/19 (d)

 

 

$

8,230

 

8,204

 

2.39%, 3/21/19 (d)

 

 

326

 

325

 

Total U.S. Treasury Securities (Cost $8,529)

 

 

 

 

8,529

 

 

 

 

Shares

 

 

 

Investment Company (2.6%)

 

 

 

 

 

 

Morgan Stanley Institutional Liquidity Funds - Treasury Securities Portfolio - Institutional Class (e) (Cost $19,586)

 

 

19,586,499

 

19,586

 

 

 

 

 

 

 

 

 

 

 

Face
Amount
(000)

 

 

 

Egypt (3.1%)

 

 

 

 

 

 

Sovereign (3.1%)

 

 

 

 

 

 

Egypt Treasury Bills,

 

 

 

 

 

 

16.30%, 3/5/19

 

EGP

77,225

 

4,314

 

16.40%, 3/5/19

 

 

133,550

 

7,460

 

16.57%, 3/5/19

 

 

204,675

 

11,430

 

Total Sovereign (Cost $23,217)

 

 

 

 

23,204

 

Total Short-Term Investments (Cost $51,332)

 

 

 

 

51,319

 

Total Investments (100.0%) (Cost $842,107) (f)(g)(h)

 

 

 

 

739,944

 

Liabilities in Excess of Other Assets

 

 

 

 

(218,006

)

Net Assets

 

 

 

 

$

521,938

 

 

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)

 

Floating or Variable rate securities: The rates disclosed are as of January 31, 2019. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description in the Portfolio of Investments. Certain variable rate securities may not be based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description in the Portfolio of Investments.

 


 

(b)

 

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

(c)

 

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

(d)

 

Rate shown is the yield to maturity at January 31, 2019.

(e)

 

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. 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 January 31, 2019, advisory fees paid were reduced by approximately $8,000 relating to the Fund’s investment in the Liquidity Funds.

(f)

 

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

(g)

 

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 January 31, 2019, the Fund did not engage in any cross-trade transactions.

(h)

 

At January 31, 2019, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $16,680,000 and the aggregate gross unrealized depreciation is approximately $124,268,000, resulting in net unrealized depreciation of approximately $107,588,000.

BADLAR

 

Buenos Aires Deposits of Large Amount Rate.

LIBOR

 

London Interbank Offered Rate.

OFZ

 

Obilgatsyi Federal’novo Zaima (Russian Federal Loan Obligation).

TIPS

 

Treasury Inflation Protected Security.

 


 

Foreign Currency Forward Exchange Contracts:

The Fund had the following foreign currency forward exchange contracts open at January 31, 2019:

 

Counterparty

 

Contracts
to
Deliver
(000)

 

In
Exchange
For
(000)

 

Delivery
Date

 

Unrealized
Appreciation
(Depreciation)
(000)

 

JPMorgan Chase Bank NA

 

BRL

213,788

 

$

54,382

 

2/4/19

 

$

(4,235

)

JPMorgan Chase Bank NA

 

BRL

12,700

 

$

3,478

 

2/4/19

 

(4

)

JPMorgan Chase Bank NA

 

$

58,542

 

BRL

213,788

 

2/4/19

 

75

 

JPMorgan Chase Bank NA

 

$

3,395

 

BRL

12,700

 

2/4/19

 

87

 

State Street Bank and Trust Co.

 

BRL

201,088

 

$

55,064

 

2/4/19

 

(71

)

State Street Bank and Trust Co.

 

$

53,424

 

BRL

201,088

 

2/4/19

 

1,711

 

State Street Bank and Trust Co.

 

BRL

201,088

 

$

53,324

 

3/6/19

 

(1,722

)

Bank of America NA

 

$

2,132

 

THB

68,000

 

3/28/19

 

47

 

Bank of America NA

 

ZAR

52,000

 

$

3,719

 

3/28/19

 

(178

)

Barclays Bank PLC

 

MYR

20,000

 

$

4,892

 

3/28/19

 

14

 

BNP Paribas SA

 

COP

18,230,000

 

$

5,799

 

3/28/19

 

(60

)

BNP Paribas SA

 

HUF

1,090,000

 

$

3,890

 

3/28/19

 

(74

)

BNP Paribas SA

 

MXN

375,300

 

$

19,405

 

3/28/19

 

(69

)

BNP Paribas SA

 

$

11,217

 

CLP

7,565,000

 

3/28/19

 

320

 

BNP Paribas SA

 

$

12,248

 

CZK

274,100

 

3/28/19

 

(49

)

BNP Paribas SA

 

$

4,041

 

RON

16,510

 

3/28/19

 

(57

)

Goldman Sachs International

 

INR

1,577,670

 

$

22,009

 

3/28/19

 

(43

)

Goldman Sachs International

 

PLN

68,000

 

$

18,104

 

3/28/19

 

(193

)

Goldman Sachs International

 

RUB

112,000

 

$

1,666

 

3/28/19

 

(36

)

UBS AG

 

$

1,465

 

RON

6,000

 

3/28/19

 

(17

)

 

 

 

 

 

 

 

 

$

(4,554

)

 

Futures Contracts:
The Fund had the following futures contracts open at January 31, 2019:

 

 

 

Number
of
Contracts

 

Expiration
Date

 

Notional Amount
(000)

 

Value
(000)

 

Unrealized
Depreciation
(000)

 

Short:

 

 

 

 

 

 

 

 

 

 

 

German Euro Bund

 

150

 

Mar-19

 

(15,000

)

$

(28,444

)

$

(562

)

U.S. Treasury 10 yr. Note

 

89

 

Mar-19

 

(8,900

)

(10,900

)

(309

)

 

 

 

 

 

 

 

 

 

 

$

(871

)

 

ARS

Argentine Peso

BRL

Brazilian Real

CLP

Chilean Peso

COP

Colombian Peso

CZK

Czech Koruna

DOP

Dominican Peso

EGP

Egyptian Pound

GEL

Georgian Lari

HUF

Hungarian Forint

IDR

Indonesian Rupiah

INR

Indian Rupee

MXN

Mexican Peso

MYR

Malaysian Ringgit

PEN

 

Peruvian Nuevo Sol

PLN

Polish Zloty

RON

Romanian New Leu

RUB

Russian Ruble

THB

Thai Baht

TRY

Turkish Lira

UYU

Uruguay Peso

ZAR

South African Rand

 


 

Portfolio Composition

 

Classification

 

Percentage of
Total Investments

 

Sovereign

 

89.6

%

Short-Term Investments

 

6.9

 

Other*

 

3.5

 

Total Investments

 

100.0

%**

 


*

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

**

Does not include open short futures contracts with a value of approximately $39,344,000 and total unrealized depreciation of approximately $871,000. Does not include open foreign currency forward exchange contracts with net unrealized depreciation of approximately $4,554,000.

 


 

Morgan Stanley Emerging Markets Domestic Debt Fund, Inc.

 

Notes to the Portfolio of Investments · January 31, 2019 (unaudited)

 

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820) - Disclosures Framework - Changes to Disclosure Requirements of Fair Value Measurement (“ASU 2018-13”) which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU 2018-13 would be effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years; however, management has elected to early adopt ASU 2018-13 effective with the current reporting period as permitted by the standard. The impact of the Fund’s adoption was limited to changes in the Fund’s financial statement disclosures regarding fair value, primarily those disclosures related to transfers between levels of the fair value hierarchy and disclosure of the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, when applicable.

 

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) 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; (3) futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, at the last sale price on the exchange; (4) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. 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.

 

Fair Value Measurement: 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 January 31, 2019:

 

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

 

$

 

$

25,851

 

$

 

$

25,851

 

Sovereign

 

 

662,774

 

 

662,774

 

Total Fixed Income Securities

 

 

688,625

 

 

688,625

 

Short-Term Investments

 

 

 

 

 

 

 

 

 

U.S. Treasury Securities

 

 

8,529

 

 

8,529

 

Investment Company

 

19,586

 

 

 

19,586

 

Sovereign

 

 

23,204

 

 

23,204

 

Total Short-Term Investments

 

19,586

 

31,733

 

 

51,319

 

Foreign Currency Forward Exchange Contracts

 

$

 

$

2,254

 

$

 

$

2,254

 

Total Assets

 

19,586

 

722,612

 

 

742,198

 

Liabilities:

 

 

 

 

 

 

 

 

 

Foreign Currency Forward Exchange Contracts

 

 

(6,808

)

 

 

(6,808

)

Futures Contracts

 

(871

)

 

 

(871

)

Total Liabilities

 

(871

)

(6,808

)

 

 

(7,679

)

Total

 

$

18,715

 

$

715,804

 

$

 

$

734,519

 

 

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes.

 


 

Item 2.  Controls and Procedures.

 

(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the registrant 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 registrant’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 registrant’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 Domestic Debt Fund, Inc.

 

/s/ John H. Gernon

 

John H. Gernon

 

Principal Executive Officer

 

March 19, 2019

 

 

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

 

March 19, 2019

 

 

 

/s/ Francis Smith

 

Francis Smith

 

Principal Financial Officer

 

March 19, 2019