<PAGE>
----------------------------------------------------------------
MORGAN STANLEY
DEAN WITTER
EMERGING MARKETS
DEBT FUND, INC.
----------------------------------------------------------------
THIRD QUARTER REPORT
SEPTEMBER 30, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY DEAN WITTER
EMERGING MARKETS DEBT FUND, INC.
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DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
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INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
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LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the nine months ended September 30, 1999, the Morgan Stanley Dean Witter
Emerging Markets Debt Fund, Inc. (the "Fund") had a total return, based on net
asset value per share, of 16.22% compared to 11.90% for the J.P. Morgan Emerging
Markets Bond Plus Index (the "Index"). For the period since the Fund's
commencement of operations on July 23, 1993 through September 30, 1999, the
Fund's total return, based on net asset value per share, was 82.74% compared to
84.03% for the Index. On September 30, 1999, the closing price of the Fund's
shares on the New York Stock Exchange was $7.00, representing a 5.3% discount to
the Fund's net asset value per share.
Over the last few months, bad headlines plagued the emerging markets: panics
over the fate of the Argentine peso, Fed rate hikes in the U.S., scandals in
Russia, a bloodless political coup in Venezuela, increased violence in Colombia
and Indonesia, default in Ecuador, and a severe earthquake in Turkey.
Notwithstanding these events, emerging market debt has remained in a narrow
trading range. During this time, investors have collected a healthy amount of
coupon income while experiencing little overall capital appreciation or
depreciation. Considering all of the negatives mentioned above, the seemingly
miraculous performance of emerging debt is evidence of its relative cheapness
and under-representation in portfolios. Current prices for emerging market debt
remain close to those seen during the Mexican and Russian crises. Relative
valuations remain near historically wide levels as measured by spread
differentials with other fixed income alternatives. Simply put, emerging market
bonds no longer sell-off on bad news.
Within the Fund, overweight positions in Colombia and Morocco and underweight
positions in Korea and Ecuador contributed to relative returns. Colombian assets
rallied after the announcement that the country had signed a letter of intent
with the IMF, which should lead to a $2.5 billion extended funds facility. An
overweight in Turkish local currency Treasury-bills bolstered returns, as the
high yield to maturity and short duration characteristics of these securities
allowed them to outperform the market, despite the earthquake in Turkey.
Relative performance was adversely affected by security selection decisions in
Russia, an underweight in Venezuela, and overweights in Ivory Coast and
Indonesian assets.
Beyond valuation arguments, there are fundamental reasons why we think emerging
debt is attractive at current levels. Recent economic indicators have reinforced
our view that the world economy is steadily improving. The resumption of growth
in Japan and in Western Europe has positively impacted commodity prices and
economic activity in the emerging world. All indications are that economic
activity has bottomed out during the third quarter in most of Latin America and
in either the second or third quarter in Eastern Europe. Growth in Emerging Asia
continues to surprise on the upside. These are only a few of the developments
that point to a global economy moving beyond healing and into growth.
For these reasons, we believe that emerging market debt currently offers
attractive risk/return characteristics and we will continue to position the Fund
more aggressively. However, we are unlikely to get immediate gratification from
this new posture. Seasonal factors such as the "year end effect" and the lagged
nature of economic statistics required to verify our expectation of economic
recoveries might inhibit any substantial rally. However, over the medium term,
we believe that the Fund should benefit from this shift in stance.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
October 1999
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
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DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
WWW.MSDW.COM/INSTITUTIONAL/INVESTMENTMANAGEMENT.
2
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Debt Fund, Inc.
Investment Summary as of September 30, 1999 (Unaudited)
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HISTORICAL
INFORMATION
<TABLE>
<CAPTION>
TOTAL RETURN (%)
------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
---------------------- ---------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year to Date 7.37% -- 16.22% -- 11.90% --
One Year 7.36 7.36% 30.58 30.58% 23.00 23.00%
Five Year 70.21 11.22 69.37 11.11 73.06 11.59
Since Inception* 73.10 9.27 82.74 10.23 84.03 10.36
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS
ENDED
SEPTEMBER 30,
1993* 1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share.... $ 18.96 $ 12.23 $ 12.40 $ 17.31 $ 15.21 $ 7.01 $ 7.39
Market Value Per Share....... $ 18.13 $ 11.38 $ 12.50 $ 15.13 $ 15.38 $ 7.19 $ 7.00
Premium/(Discount)........... -4.4% -7.0% 0.8% -12.6% 1.1% 2.6% -5.3%
Income Dividends............. $ 0.16 $ 1.49 $ 1.72 $ 1.08 $ 1.27 $ 1.41 $ 0.72
Capital Gains Distributions.. -- $ 0.41 -- -- $ 3.44 $ 2.94 --
Fund Total Return (2)........ 35.96% -25.95% 26.85%+ 50.98% 21.71% -33.00% 16.22%
Index Total Return (3)....... 18.67% -18.93% 26.77% 39.31% 13.02% -14.35% 11.90%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The J.P. Morgan Emerging Markets Bond Plus Index is a market weighted index
composed of all Brady bonds, outstanding loans and Eurobonds, as well as
U.S. Dollar local market instruments of Argentina, Brazil, Bulgaria,
Colombia, Ecuador, Mexico, Morocco, Nigeria, Panama, Peru, the Philippines,
Poland, Russia, South Korea and Venezuela. Because the J.P. Morgan Emerging
Markets Bond Plus Index was not available prior to January 1, 1994, the
performance of the J.P. Morgan Emerging Markets Bond Index is shown for the
period July 23, 1993 to December 31, 1993, and used for purposes of
computing cumulative performance of the benchmark index for that period.
* The Fund commenced operations on July 23, 1993.
+ This return does not include the effect of the rights issued in connection
with the Rights Offering.
3
<PAGE>
Morgan Stanley Dean Witter Emerging Markets Debt Fund, Inc.
Portfolio Summary as of September 30, 1999 (Unaudited)
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DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Debt Securities (96.2%)
Short-Term Investments (3.8%)
</TABLE>
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[CHART]
<TABLE>
<S> <C>
Argentina (24.7%)
Brazil (21.3%)
Mexico (16.7%)
Russia (6.7%)
Colombia (4.9%)
Turkey (4.5%)
Venezuela (4.5%)
Bulgaria (3.2%)
Morocco (2.5%)
Philippines (2.2%)
Other (8.8%)
</TABLE>
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TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
INVESTMENTS
-----------
<S> <C>
1. Republic of Argentina 'L'
5.938%, 3/31/05 (Argentina) 7.7%
2. Federative Republic of Brazil 'C' Bond
8.00%, 4/15/14 (Brazil) 7.7
3. United Mexican States Discount Bonds
12/31/19 (Mexico) 6.7
4. Republic of Argentina
11.75%, 4/7/09 (Argentina) 5.8
5. Federative Republic of Brazil
Debt Conversion Bond 'L'
5.938%, 4/15/12 (Brazil) 5.3
6. Republic of Argentina Global Units (Euro)
12.125%, 2/15/19 (Argentina) 5.2
7. United Mexican States Par Bonds
6.25%, 12/31/19 (Mexico) 3.7
8. Russia Principal Note, PIK
6.063%, 12/15/20 (Russia) 3.2
9. Brazil Global Bond
10.125%, 5/15/27 (Brazil) 3.1
10. Russian Federation
11.00%, 7/24/18 (Russia) 3.1
----
51.5%
----
----
</TABLE>
* Excludes short-term investments.
4
<PAGE>
FINANCIAL STATEMENTS
- --------
STATEMENT OF NET ASSETS (UNAUDITED)
(SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENTS)
- --------
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
DEBT INSTRUMENTS (96.2%)
- ------------------------------------------------------------------------------
ALGERIA (0.6%)
SOVEREIGN (0.6%)
Republic of Algeria
0.00%, 3/31/00 U.S.$ 600 U.S.$ 453
0.00%, 3/31/00 1,000 705
--------------
1,158
--------------
- ------------------------------------------------------------------------------
ARGENTINA (24.7%)
CORPORATE (3.3%)
(a)Cablevision S.A.
13.75%, 5/1/09 500 463
CIA International Telecom
(a)10.375%, 8/1/04 ARP 2,570 1,902
10.375%, 8/1/04 250 185
(a)Nortel Inversora 'A'
6.00%, 3/31/07 U.S.$ 6,486 3,899
--------------
6,449
--------------
SOVEREIGN (21.4%)
Republic of Argentina
(b)2.77%, 4/1/07 ARP 1,467 1,008
11.75%, 4/7/09 U.S.$ 11,460 11,099
(b)Republic of Argentina 'L'
5.938%, 3/31/05 17,013 14,907
Republic of Argentina
Global Bond
11.375%, 1/30/17 4,400 4,159
Republic of Argentina
Global Units (Euro)
12.125%, 2/15/19 9,946 10,001
-------------
41,174
-------------
47,623
-------------
- ------------------------------------------------------------------------------
BRAZIL (21.3%)
SOVEREIGN (21.3%)
Brazil Global Bond
10.125%, 5/15/27 8,050 6,017
Federative Republic of
Brazil 'C' Bond
8.00%, 4/15/14 325 203
Federative Republic of
Brazil 'C' Bond PIK
8.00%, 4/15/14 23,425 14,655
(b)Federative Republic of
Brazil 'EI-L' Bond
5.875%, 4/15/06 1,530 1,200
(c)Federative Republic of
Brazil 'L'
4.50%, 4/15/09 1,600 952
(b)Federative Republic of Brazil
Debt Conversion Bond 'L'
5.938%, 4/15/12 16,850 10,110
- ------------------------------------------------------------------------------
(b)Federative Republic of
Brazil EI-Euro
5.875%, 4/15/06 U.S.$ 2,632 U.S.$ 2,064
(b)Federative Republic of Brazil
New Money Bond 'L' (Euro)
5.938%, 4/15/09 910 644
(b)Federative Republic of Brazil
New Money Bond 'L'
5.938%, 4/15/09 7,290 5,158
-------------
41,003
-------------
- ------------------------------------------------------------------------------
BULGARIA (3.2%)
SOVEREIGN (3.2%)
(b)Republic of Bulgaria Discount
Bond 'A' (Euro)
5.875%, 7/28/24 3,000 2,069
(c)Republic of Bulgaria
Front Loaded Interest
Reduction Bond
2.50%, 7/28/12 2,450 1,547
(b)Republic of Bulgaria Past
Due Interest Bond
5.875%, 7/28/11 3,450 2,462
-------------
6,078
-------------
- ------------------------------------------------------------------------------
COLOMBIA (4.9%)
CORPORATE (0.3%)
(c)Occidente y Caribe
0.00%, 3/15/04 1,050 604
-------------
SOVEREIGN (4.6%)
Republic of Colombia
9.75%, 4/23/09 4,100 3,521
(b)Republic of Columbia
9.705%, 8/13/05 1,320 1,227
Republic of Colombia
Global Euro
10.875%, 3/9/04 4,200 4,153
-------------
8,901
-------------
9,505
-------------
- ------------------------------------------------------------------------------
ECUADOR (0.6%)
SOVEREIGN (0.6%)
(b)Republic of Ecuador
Discount Bond
6.00%, 2/28/25 4,020 1,236
-------------
- ------------------------------------------------------------------------------
INDIA (0.3%)
CORPORATE (0.3%)
Surashtra Cement Ltd.
19.00%, 6/26/00 INR 30,000 656
-------------
5
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA (1.3%)
CORPORATE (1.3%)
Indah Kiat International
Finance
11.875%, 6/15/02 U.S .$ 1,000 U.S.$ 765
Tjiwi Kimia International
Global Bond
13.25%, 8/1/01 2,300 1,783
-------------
2,548
-------------
- ------------------------------------------------------------------------------
IVORY COAST (0.4%)
SOVEREIGN (0.4%)
(b)Ivory Coast
2.00%, 3/29/18 4,100 820
-------------
- ------------------------------------------------------------------------------
JORDAN (0.9%)
SOVEREIGN (0.9%)
Jordan Discount Bond
(b)6.188%, 12/23/23 1,484 979
(a,b)6.188%, 12/23/23 1,061 700
-------------
1,679
-------------
- ------------------------------------------------------------------------------
MEXICO (16.7%)
CORPORATE (2.4%)
Petro Mexicanos
(a)9.50%, 9/15/27 3,700 3,566
(b)9.52%, 7/15/05 1,080 1,032
-------------
4,598
-------------
SOVEREIGN (14.3%)
(b)United Mexican States
Discount Bond 'A'
6.116%, 12/31/19 4,070 3,480
(b)United Mexican States
Discount Bond 'B'
5.875%, 12/31/19 4,500 3,847
(b)United Mexican States
Discount Bond 'C'
5.874%, 12/31/19 3,500 2,993
(b)United Mexican States
Discount Bond 'D'
7.25%, 12/31/19 2,950 2,522
United Mexican States
Euro Bond
10.375%, 2/17/09 1,650 1,674
United Mexican States
Global Bond
11.375%, 9/15/16 5,506 5,846
United Mexican States Par
Bond 'W-A'
6.25%, 12/31/19 6,210 4,576
United Mexican States Par
Bond 'W-B'
6.25%, 12/31/19 3,533 2,603
-------------
27,541
-------------
32,139
-------------
- ------------------------------------------------------------------------------
MOROCCO (2.5%)
SOVEREIGN (2.5%)
(b)Morocco R&C 'A'
5.906%, 1/1/09 U.S.$ 5,693 U.S.$ 4,846
-------------
PANAMA (1.2%)
SOVEREIGN (1.2%)
Republic of Panama
9.375%, 4/1/29 2,400 2,241
-------------
- ------------------------------------------------------------------------------
PERU (1.7%)
SOVEREIGN (1.7%)
Peru Past Due Interest Bond
4.00%, 3/7/17 2,720 1,683
Republic of Peru Front Loaded
Interest Reduction Bond
(c)3.25%, 3/7/17 2,350 1,272
(a,c)3.25%, 3/7/17 498 269
-------------
3,224
-------------
- ------------------------------------------------------------------------------
PHILIPPINES (2.2%)
CORPORATE (1.2%)
(a)Bayan Telecommunications, Inc.
13.50%, 7/15/06 2,500 2,363
-------------
SOVEREIGN (1.0%)
Republic of Philippines
9.875%, 1/15/19 1,900 1,806
-------------
4,169
-------------
- ------------------------------------------------------------------------------
POLAND (0.8%)
CORPORATE (0.8%)
(a)Netia Holdings II B.V.
13.125%, 6/15/09 1,500 1,455
-------------
- ------------------------------------------------------------------------------
RUSSIA (6.7%)
SOVEREIGN (6.7%)
(b)Russia Interest Arrears Notes
6.063%, 12/15/15 1,150 131
(b)Russia Principal Note, PIK
6.063%, 12/15/20 65,646 6,113
Russian Federation
(a)8.75%, 7/24/05 1,640 689
(a)11.00%, 7/24/18 14,310 6,010
-------------
12,943
-------------
- ------------------------------------------------------------------------------
SOUTH KOREA (0.6%)
SOVEREIGN (0.6%)
Republic of Korea
8.875%, 4/15/08 1,100 1,144
-------------
- ------------------------------------------------------------------------------
TURKEY (1.1%)
CORPORATE (1.1%)
Cellco Finance NV
(a)15.00%, 8/1/05 1,910 1,991
15.00%, 8/1/05 100 104
-------------
2,095
-------------
- ------------------------------------------------------------------------------
6
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
VENEZUELA (4.5%)
SOVEREIGN (4.5%)
(b)Republic of Venezuela Debt
Conversion Bond 'DL'
6.313%, 12/18/07 U.S.$ 7,488 U.S.$ 5,761
Republic of Venezuela Global Bond
9.25%, 9/15/27 4,350 2,873
-------------
8,634
-------------
- ------------------------------------------------------------------------------
TOTAL DEBT INSTRUMENTS
(Cost U.S.$184,142) 185,196
-------------
- ------------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- ------------------------------------------------------------------------------
<S> <C>
RIGHTS (0.0%)
- ------------------------------------------------------------------------------
MEXICO (0.0%)
United Mexican States Value
Recovery Rights, expiring
06/30/03 (Cost U.S.$--@) 23,106,000 --@
-------------
- ------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
- ------------------------------------------------------------------------------
<S> <C>
WARRANTS (0.0%)
- ------------------------------------------------------------------------------
ARGENTINA (0.0%)
Republic of Argentina,
expiring 2/25/00 10,500 15
-------------
COLOMBIA (0.0%)
(a)Occidente y Caribe,
expiring 3/15/04 41,200 62
-------------
- ------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$27) 77
-------------
- ------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS(3.6%)
- ------------------------------------------------------------------------------
TURKEY (3.4%)
BILLS
Turkey Treasury Bill
0.00%, 10/27/99 TRL 274,750,000 568
0.00%, 2/9/00 2,417,032,000 4,067
0.00%, 3/15/00 1,255,997,000 1,974
-------------
6,609
-------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES (0.2%)
REPURCHASE AGREEMENT
Chase Securities, Inc. 5.05%,
dated 9/30/99, due
10/1/99, to be
repurchased at U.S. $343,
collateralized by U.S.
$350 United States
Treasury Bonds, 6.375%,
due 8/15/27, valued at
U.S.$346 U.S.$ 343 U.S.$ 343
-------------
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost U.S.$7,799) 6,952
-------------
- ------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.2%)
Indian Rupee
(Cost U.S.$307) INR 13,398 307
-------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost U.S.$192,275) 192,532
-------------
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES
Other Assets U.S.$ 13,740
Liabilities (43,391) (29,651)
---------------- -------------
- ------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 22,046,681 issued and
outstanding U.S.$0.01 par value shares
shares (100,000,000 shares authorized) U.S.$162,881
-------------
-------------
- ------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 7.39
-------------
-------------
- ------------------------------------------------------------------------------
</TABLE>
(a) -- 144A Security - certain conditions for public sale may exist.
(b) -- Variable/floating rate security rate disclosed is as of
September 30, 1999.
(c) -- Step Bond coupon rate increases in increments to maturity. Rate
disclosed is as of September 30, 1999. Maturity date disclosed is
ultimate maturity.
@ -- Amount is less than U.S.$500.
ARP -- Argentine Peso
PIK -- Payment-in-Kind. Income may be paid in additional securities or cash.
TRL -- Turkish Lira
7
