[ANNOTATED FORM N-CSR FOR ANNUAL REPORTS]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number: 811-05082
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The Malaysia Fund, Inc.
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(Exact name of registrant as specified in charter)
1221 Avenue of the America's 22nd Floor New York, NY 10020
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(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, 33rd Floor New York, New York 10020
--------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area
code: 1-800-221-6726
-----------------------------------
Date of fiscal year
end: 12/31
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Date of reporting
period: 12/31/04
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Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is
not required to respond to the collection of information contained in Form
N-CSR unless the Form displays a currently valid Office of Management and
Budget ("OMB") control number. Please direct comments concerning the accuracy
of the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
2004 ANNUAL REPORT
DECEMBER 31, 2004
[MORGAN STANLEY LOGO]
THE MALAYSIA FUND, INC.
MORGAN STANLEY
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE MALAYSIA FUND, INC.
Overview
LETTER TO STOCKHOLDERS
PERFORMANCE
For the year ended December 31, 2004, The Malaysia Fund, Inc. (the "Fund") had a
total return, based on net asset value per share, of 6.83%, net of fees,
compared to 14.29% for the Kuala Lumpur Stock Exchange Composite (KLSE) Index
(the "Index") expressed in U.S. dollars. On December 31, 2004, the closing price
of the Fund's shares on the New York Stock Exchange was $6.21, representing a
2.0% premium to the Fund's net asset value per share.
FACTORS AFFECTING PERFORMANCE
- The Malaysian market was excited by the government's plan to restructure
the government-linked companies and improve their performance through the
establishment of key performance indicators for company management.
Investors in the government-linked companies are projecting higher return
to stockholders through higher revenue growth and a more conscious effort
to contain costs.
- In addition, foreign interests in the market were sparked by expectations
that the Ringgit peg may be removed in the near future. Higher domestic
interest rates in Malaysia further increased the amount of funds flowing
into the country.
- The economy continued its growth momentum with real gross domestic product
estimated to grow in excess of 7% in 2004. Growth was driven mostly by
higher exports, aided by higher agriculture prices. An accommodative
interest rate environment also helped to spur investments.
- Corporate earnings were mostly in line with expectations. The best
performing stocks were the shipping stocks as global shipping rates rose.
The construction companies were some of the worst performing stocks as
rising raw material prices led to margins being squeezed.
MANAGEMENT STRATEGIES
- In our view, the economy remained well diversified and is expected to do
well despite concerns of a slowdown in the global economy. The Fund prefers
stocks that are exposed to the domestic economy with strong balance sheets
and good management.
Sincerely,
/s/ Ronald E. Robison
---------------------
Ronald E. Robison
Executive Vice President--
Principal Executive Officer
January 2005
2
THE MALAYSIA FUND, INC.
December 31, 2004
PORTFOLIO OF INVESTMENTS
VALUE
SHARES (000)
------------------------------------------------------------------------------------
MALAYSIAN COMMON STOCKS: (95.3%)
(UNLESS OTHERWISE NOTED)
AUTOMOBILES (4.8%)
DRB-Hicom Bhd 3,432,000 $ 1,978
TAN Chong Motor Holdings Bhd 1,896,000 828
------------------------------------------------------------------------------------
2,806
====================================================================================
CAPITAL MARKETS (3.7%)
CIMB Bhd 1,547,500 2,179
====================================================================================
COMMERCIAL BANKS (19.4%)
Commerce Asset Holdings Bhd 2,446,000 3,025
Malayan Banking Bhd 2,125,500 6,600
Public Bank Bhd 989,390 1,849
------------------------------------------------------------------------------------
11,474
====================================================================================
CONSTRUCTION & ENGINEERING (10.4%)
Gamuda Bhd 867,000 1,209
IJM Corp. Bhd 743,000 927
Naim Cendera Holdings Bhd 2,311,000 1,946
Road Builder (Malaysia) Holdings Bhd 1,769,000 1,169
TRC Synergy Bhd 2,252,400 883
------------------------------------------------------------------------------------
6,134
====================================================================================
CONSTRUCTION MATERIALS (0.8%)
JAKS Resources Bhd (a)958,000 466
====================================================================================
DIVERSIFIED TELECOMMUNICATION SERVICES (6.3%)
Telekom Malaysia Bhd 1,224,000 3,736
====================================================================================
ELECTRIC UTILITIES (6.5%)
Tenaga Nasional Bhd 428,000 1,228
YTL Corp. Bhd 1,833,500 2,581
------------------------------------------------------------------------------------
3,809
====================================================================================
HOTELS, RESTAURANTS & LEISURE (11.9%)
Genting Bhd 403,800 2,019
Magnum Corp. Bhd 2,597,000 1,654
Resorts World Bhd 667,700 1,757
Tanjong plc 435,000 1,614
------------------------------------------------------------------------------------
7,044
====================================================================================
INDUSTRIAL CONGLOMERATES (4.6%)
Bandar Raya Developments Bhd 429,000 220
Sime Darby Bhd 1,572,000 2,482
------------------------------------------------------------------------------------
2,702
====================================================================================
INSURANCE (1.3%)
MAA Holdings Bhd 607,000 792
====================================================================================
IT SERVICES (0.9%)
Computer Systems Advisers Bhd 718,600 520
====================================================================================
MARINE (2.0%)
Malaysia International Shipping
Corp. Bhd 287,000 $ 1,156
====================================================================================
MEDIA (3.2%)
Star Publications Malaysia Bhd 1,065,000 1,906
====================================================================================
REAL ESTATE (11.2%)
Glomac Bhd 1,763,000 974
IOI Properties Bhd 415,000 819
KLCC Property Holdings Bhd 1,050,000 489
MK Land Holdings Bhd 1,686,000 786
Selangor Properties Bhd 1,105,000 634
SP Setia Bhd 2,576,499 2,929
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6,631
====================================================================================
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.5%)
Malaysian Pacific Industries Bhd 152,000 600
Unisem (Malaysia) Bhd 468,000 862
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1,462
====================================================================================
SPECIALTY RETAIL (0.8%)
Courts Mammoth Bhd 1,253,000 455
====================================================================================
TOBACCO (2.6%)
British American Tobacco
(Malaysia) Bhd 126,000 1,517
====================================================================================
WATER UTILITIES (2.4%)
Puncak Niaga Holding Bhd (a)1,643,000 1,427
====================================================================================
TOTAL COMMON STOCKS
(Cost $45,579) 56,216
====================================================================================
FACE
AMOUNT
(000)
------------------------------------------------------------------------------------
CORPORATE BOND (0.0%)
MEDIA (0.0%)
Media Prima Bhd
2.00%, 7/18/08 (Cost $100) MYR 100 25
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SHORT-TERM INVESTMENT (1.9%)
REPURCHASE AGREEMENT (1.9%)
J.P. Morgan Securities, Inc., 2.00%,
dated 12/31/04, due 1/3/05,
repurchase price $1,112
(Cost $1,112) $ (b)1,112 1,112
====================================================================================
TOTAL INVESTMENTS (97.2%)
(Cost $46,791) 57,353
====================================================================================
OTHER ASSETS IN EXCESS OF LIABILITIES (2.8%) 1,664
====================================================================================
NET ASSETS (100%) $ 59,017
====================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
THE MALAYSIA FUND, INC.
December 31, 2004
PORTFOLIO OF INVESTMENTS (CONT'D)
(a) Non-income producing security.
(b) Represents the Fund's undivided interest in a joint repurchase agreement
which has a total value of $1,018,656,000. The repurchase agreement was
fully collateralized by U.S. government agency securities at the date of
this portfolio of investments as follows: Federal Farm Credit Bank, 0.00%
to 6.75%, due 2/28/05 to 8/15/13; Federal Home Loan Bank, 1.10% to 6.875%,
due 4/15/05 to 10/28/24; Federal Home Loan Mortgage Corp., 2.00% to 6.51%,
due 6/15/15 to 3/15/19; Federal National Mortgage Association, 1.75% to
8.20%, due 2/24/05 to 5/24/19; and Financial Assist Corp., 8.80%, due
6/10/05. The investment in the repurchase agreement is through
participation in a joint account with affiliated parties pursuant to
exemptive relief received by the Fund from the SEC.
MYR Malaysian Ringgit
GRAPHIC PRESENTATION OF PORTFOLIO HOLDINGS
The following graph depicts the Fund's holdings by industry, as a percentage of
total investments.
[CHART]
Commercial Banks 20.0%
Hotels, Restaurants & Leisure 12.3%
Real Estate 11.6%
Construction & Engineering 10.7%
Electric Utilities 6.6%
Diversified Telecommunication Services 6.5%
Automobiles 4.9%
Industrial Conglomerates 4.7%
Capital Markets 3.8%
Media 3.4%
Other* 13.6%
Short-Term Investment 1.9%
* Industries which do not appear in the top 10 industries and industries which
represent less than 3% of total investments, if applicable, are included in
the category labeled "Other".
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
THE MALAYSIA FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
(000)
---------------------------------------------------------------------------------------------
ASSETS:
Investments, at Value (Cost $46,791) $ 57,353
Foreign Currency, at Value (Cost $2,318) 2,318
Dividends Receivable 156
Interest Receivable 1
Other Assets 2
---------------------------------------------------------------------------------------------
TOTAL ASSETS 59,830
=============================================================================================
LIABILITIES:
Payable For:
Dividends Declared (618)
Investments Purchased (47)
U.S. Investment Advisory Fees (44)
Malaysian Investment Advisory Fees (34)
Directors' Fees and Expenses (15)
Custodian Fees (10)
Administration Fees (4)
Other Liabilities (41)
---------------------------------------------------------------------------------------------
TOTAL LIABILITIES (813)
=============================================================================================
NET ASSETS
Applicable to 9,687,235, Issued and Outstanding
$0.01 Par Value Shares (20,000,000 Shares Authorized) $ 59,017
=============================================================================================
NET ASSET VALUE PER SHARE $ 6.09
=============================================================================================
NET ASSETS CONSIST OF:
Common Stock $ 97
Paid-in Capital 119,992
Undistributed (Distributions in Excess of) Net Investment Income 109
Accumulated Net Realized Gain (Loss) (71,743)
Unrealized Appreciation (Depreciation) on Investments 10,562
---------------------------------------------------------------------------------------------
NET ASSETS $ 59,017
=============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
THE MALAYSIA FUND, INC.
Financial Statements
STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31, 2004
(000)
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 1,655
Interest 10
=============================================================================================================================
TOTAL INVESTMENT INCOME 1,665
=============================================================================================================================
EXPENSES
U.S. Investment Advisory Fees (Note B) 505
Malaysian Investment Advisory Fees (Note B) 137
Custodian Fees (Note D) 55
Professional Fees 46
Administration Fees (Note C) 44
Stockholder Reporting Expenses 31
Stockholder Servicing Fees 15
Directors' Fees and Expenses 3
Other Expenses 29
=============================================================================================================================
TOTAL EXPENSES 865
=============================================================================================================================
Waiver of Administration Fees (Note C) (1)
-----------------------------------------------------------------------------------------------------------------------------
NET EXPENSES 864
=============================================================================================================================
NET INVESTMENT INCOME (LOSS) 801
=============================================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments 3,471
Foreign Currency Transactions (26)
=============================================================================================================================
NET REALIZED GAIN (LOSS) 3,445
=============================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (383)
=============================================================================================================================
NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 3,062
=============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 3,863
=============================================================================================================================
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
(000) (000)
-----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 801 $ 573
Net Realized Gain (Loss) 3,445 3,816
Change in Unrealized Appreciation (Depreciation) (383) 7,971
=============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,863 12,360
=============================================================================================================================
Distributions from and/or in Excess of:
Net Investment Income (618) (1,495)
-----------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (2,321 Shares in 2004) 14 --
Repurchase of Shares (28,936 Shares in 2003) -- (119)
=============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 14 (119)
=============================================================================================================================
TOTAL INCREASE (DECREASE) 3,259 10,746
=============================================================================================================================
Net Assets:
Beginning of Period 55,758 45,012
=============================================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME OF $109 AND $(613), RESPECTIVELY) $ 59,017 $ 55,758
=============================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
THE MALAYSIA FUND, INC.
Financial Highlights
SELECTED PER SHARE DATA AND RATIOS
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.76 $ 4.63 $ 5.00 $ 4.73 $ 5.62
---------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.08+ 0.06+ 0.03+ 0.04 0.03
Net Realized and Unrealized Gain (Loss) on
Investments 0.31 1.22 (0.25) 0.27 (0.81)
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.39 1.28 (0.22) 0.31 (0.78)
---------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in Excess of:
Net Investment Income (0.06) (0.15) (0.15) (0.04) (0.11)
---------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Share Repurchase Program -- 0.00# 0.00# -- --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 6.09 $ 5.76 $ 4.63 $ 5.00 $ 4.73
===========================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 6.21 $ 6.01 $ 3.85 $ 3.92 $ 3.75
===========================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value 4.40% 60.33% 1.86% 5.64% (45.77)%
Net Asset Value (1) 6.83% 27.67% (3.89)% 6.83% (14.04)%
===========================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $ 59,017 $ 55,758 $ 45,012 $ 48,703 $ 46,020
---------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.50% 1.78% 1.67% 2.03% 1.78%
Ratio of Net Investment Income (Loss) to
Average Net Assets 1.38% 1.16% 0.65% 0.93% 0.44%
Portfolio Turnover Rate 24% 29% 35% 21% 21%
---------------------------------------------------------------------------------------------------------------------------
Ratios Before Expenses Waived by Administrator:
Ratio of Expenses to Average Net Assets 1.50% N/A N/A N/A N/A
Ratio of Net Investment Income (Loss) to Average
Net Assets 1.38% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------------
(1) 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. This percentage is not an indication of the performance of a
stockholder'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.
+ Per share amounts are based on average shares outstanding.
# Amount is less than $0.005 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
THE MALAYSIA FUND, INC.
December 31, 2004
NOTES TO FINANCIAL STATEMENTS
The Malaysia Fund, Inc. (the "Fund") was incorporated on March 12, 1987 and is
registered as a diversified, closed-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's
investment objective is long-term capital appreciation through investment
primarily in equity securities.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with U.S. generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of its financial statements. U.S. generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.
1. SECURITY VALUATION: 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. 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. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates 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, 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 Board of Directors.
2. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
The Fund, along with other affiliated investment companies, may utilize a
joint trading account for the purpose of entering into one or more
repurchase agreements.
3. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the mean of the bid and asked prices of such currencies
against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rate of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
8
THE MALAYSIA FUND, INC.
December 31, 2004
NOTES TO FINANCIAL STATEMENTS (CONT'D)
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) due to securities transactions
are included in the reported net realized and unrealized gains (losses) on
investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized currency gains (losses) from valuing foreign currency
denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) on
investments and foreign currency translations in the Statement of Assets
and Liabilities. The change in net unrealized currency gains (losses) on
foreign currency translations for the period is reflected in the Statement
of Operations.
A significant portion of the Fund's net assets consist of Malaysian equity
securities and foreign currency. Future economic and political developments
in Malaysia could adversely affect the liquidity or value, or both, of
securities in which the Fund is invested. Changes in currency exchange
rates will affect the value of and investment income from such investments.
Foreign securities may be subject to greater price volatility, lower
liquidity and less diversity than equity securities of companies based in
the United States. In addition, foreign securities may be subject to
substantial governmental involvement in the economy and greater social,
economic and political uncertainty.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund has utilized
and their associated risks:
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
5. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date (except certain dividends which may be recorded as
soon as the Fund is informed of such dividends) net of applicable
withholding taxes. Distributions to stockholders are recorded on the
exdividend date.
B. INVESTMENT ADVISORY FEES: Morgan Stanley Investment Management Inc. (the
"U.S. Adviser") provides investment advisory services to the Fund under the
terms of an Investment Advisory Agreement (the "Agreement"). Under the
Agreement, the U.S. Adviser is paid a fee computed weekly and payable monthly at
an annual rate of 0.90% of the Fund's first $50 million of average weekly net
assets, 0.70% of the Fund's next $50 million of average weekly net assets and
0.50% of the Fund's average weekly net assets in excess of $100 million.
AMMB Consultant Sdn Bhd (the "Malaysian Adviser") provides investment advice,
research and assistance on behalf of the Fund to Morgan Stanley Investment
Management Inc.
9
THE MALAYSIA FUND, INC.
December 31, 2004
NOTES TO FINANCIAL STATEMENTS (CONT'D)
under terms of a contract. Under the contract, the Malaysian Adviser is paid a
fee computed weekly and payable monthly at an annual rate of 0.25% of the Fund's
first $50 million of average weekly net assets, 0.15% of the Fund's next $50
million of average weekly net assets and 0.10% of the Fund's average weekly net
assets in excess of $100 million.
C. ADMINISTRATION FEES: Prior to November 1, 2004, JPMorgan Chase Bank,
through its corporate affiliate, J.P. Morgan Investor Services Co. ("JPMIS"),
provided administrative services to the Fund under an Administration Agreement.
JPMIS was paid a fee computed weekly and payable monthly at an annual rate of
0.02435% of the Fund's average weekly net assets, plus $24,000 per annum. In
addition, the Fund was charged for certain out-of-pocket expenses incurred by
JPMIS on its behalf.
Effective November 1, 2004, Morgan Stanley Investment Management Inc. (MSIM)
serves as Administrator to the Fund pursuant to a new Administrative Agreement.
Under the new Administrative Agreement, the new administrative fee will be 0.08%
of the Fund's average weekly net assets. As approved by the Board of Directors,
MSIM has agreed to limit the new administration fee so that it will be no
greater than the old administrative fee of 0.02435% of the Fund's average weekly
net assets plus $24,000 per annum. This waiver is voluntary and may be
terminated at any time. For the year ended December 31, 2004, $1,000 of
administration fees were waived pursuant to this arrangement. Administrative
costs (including out-of-pocket expenses incurred in the ordinary course of
providing services under the Agreement, which were previously borne by Fund),
except pricing services and extraordinary expenses, will now be covered under
the Administration Fee. JPMIS will continue to provide fund accounting and other
services pursuant to a sub-administrative agreement, dated November 1, 2004,
with MSIM and receives compensation from MSIM for these services.
D. CUSTODIAN FEES: JPMorgan Chase Bank serves as custodian for the Fund. The
Custodian holds cash, securities, and other assets of the Fund as required by
the 1940 Act. Custody fees are payable monthly based on assets held in custody,
investment purchases and sales activity and account maintenance fees, plus
reimbursement for certain out-of-pocket expenses.
E. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to stockholders are recorded on
the ex-dividend date. The Fund may be subject to taxes imposed by countries in
which it invests. The Fund is currently not subject to Malaysian withholding
taxes on dividends and/or capital gains.
The tax character of distributions paid may differ from the character of
distributions shown on the Statements of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2004 and 2003 were as follows:
2004 DISTRIBUTIONS 2003 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
---------------------------------------- ---------------------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
------------------------------------------------------------------------------------
$ 618 $ -- $ 1,495 $ --
The amount and character of income and capital gain distributions to be paid by
the Fund are determined in accordance with Federal income tax regulations, which
may differ from U.S. generally accepted accounting principles. The book/tax
differences are considered either temporary or permanent in nature.
Temporary differences are generally due to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent differences are generally due to differing treatments of gains and
losses related to foreign currency transactions and gains on certain equity
securities designated as issued by passive foreign investment companies.
Permanent book and tax basis differences may result in reclassifications among
undistributed (distributions in excess of ) net investment income (or
accumulated net investment loss), accumulated net realized gain (loss) and
paid-in capital.
At December 31, 2004, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
(000) (000)
---------------------------------------------------
$ 188 $ --
---------------------------------------------------
At December 31, 2004, the U.S. Federal income tax cost basis of investments was
$47,694,000 and, accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was
10
THE MALAYSIA FUND, INC.
December 31, 2004
NOTES TO FINANCIAL STATEMENTS (CONT'D)
$9,659,000, of which $13,868,000 related to appreciated securities and
$4,209,000 related to depreciated securities.
At December 31, 2004, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $70,903,000 available to offset future
capital gains of which $495,000 will expire on December 31, 2005, $65,683,000
will expire on December 31, 2006, $2,720,000 will expire on December 31, 2007,
and $2,005,000 will expire on December 31, 2009. During the year ended December
31, 2004, the Fund utilized capital loss carryforward for U.S. Federal income
tax purposes of approximately $2,905,000.
To the extent that capital loss carryforwards are used to offset any future
capital gains realized during the carryover period as provided by U.S. Federal
income tax regulations, no capital gains tax liability will be incurred by the
Fund for gains realized and not distributed. To the extent that capital gains
are offset, such gains will not be distributed to the stockholders.
Net capital, currency and passive foreign investment company losses incurred
after October 31, within the taxable year are deemed to arise on the first day
of the Fund's next taxable year. For the year ended December 31, 2004, the Fund
deferred to January 1, 2005, for U.S. Federal income tax purposes, post- October
currency losses of $2,000.
F. CONTRACTUAL OBLIGATIONS: The Fund enters into contracts that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
G. OTHER: During the year ended December 31, 2004, the Fund made purchases
and sales totaling approximately $13,651,000 and $13,806,000, respectively, of
investment securities other than long-term U.S. Government securities and
short-term investments. There were no purchases or sales of long-term U.S.
Government securities.
On July 15, 2002, the Fund commenced a share repurchase program for purposes of
enhancing stockholder value and reducing the discount at which the Fund's shares
traded from their net asset value. During the year ended December 31, 2004, the
Fund did not repurchase any of its shares. Since the inception of the program,
the Fund has repurchased 53,103 of its shares at an average discount of 16.78%
from net asset value per share. The Fund expects to continue to repurchase its
outstanding shares at such time and in such amounts as it believes will further
the accomplishment of the foregoing objectives, subject to review by the Board
of Directors.
On December 14, 2004, the Officers of the Fund, pursuant to authority granted by
the Board of Directors declared a distribution of $0.0638 per share, derived
from net investment income, payable on January 7, 2005 to stockholders of record
on December 23, 2004.
11
THE MALAYSIA FUND, INC.
December 31, 2004
NOTES TO FINANCIAL STATEMENTS (CONT'D)
REPORTING TO STOCKHOLDERS (UNAUDITED)
Each Morgan Stanley Fund provides a complete schedule of portfolio holdings in
its semi-annual and annual reports within 60 days of the end of the Fund's
second and fourth fiscal quarters by filing the schedule electronically with the
Securities and Exchange Commission (SEC). The semi-annual reports are filed on
Form N-CSRS and the annual reports are filed on Form N-CSR. Morgan Stanley also
delivers the semi-annual and annual reports to Fund stockholders and makes these
reports available on its public website, www.morganstanley.com. Each Morgan
Stanley Fund also files a complete schedule of portfolio holdings with the SEC
for the Fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does
not deliver the reports for the first and third fiscal quarters to stockholders,
nor are the reports posted to the Morgan Stanley public website. You may,
however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS
filings) by accessing the SEC's website, www.sec.gov. You may also review and
copy them at the SEC's Public Reference Room in Washington, DC. Information on
the operation of the SEC's Public Reference Room may be obtained by calling the
SEC at 1(800) SEC- 0330. You can also request copies of these materials, upon
payment of a duplicating fee, by electronic request at the SEC's email address
(publicinfo@sec.gov) or by writing the Public Reference section of the SEC,
Washington, DC 20549-0102.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD (UNAUDITED)
A copy of (1) the Fund's policies and procedures with respect to the voting of
proxies relating to the Fund's portfolio securities; and (2) how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30 is available without charge, upon request, by calling
1(800) 548-7786 or by visiting our website at www.morganstanley.com/im. This
information is also available on the SEC's website at www.sec.gov.
12
THE MALAYSIA FUND, INC.
December 31, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF THE MALAYSIA FUND, INC.
We have audited the accompanying statement of assets and liabilities of The
Malaysia Fund, Inc. (the "Fund"), including the portfolio of investments, as of
December 31, 2004, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of
December 31, 2004, by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Malaysia Fund, Inc. at December 31, 2004, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
13
THE MALAYSIA FUND, INC.
December 31, 2004
DIRECTOR AND OFFICER INFORMATION (UNAUDITED)
Independent Directors:
NUMBER OF
PORTFOLIOS IN
TERM OF FUND
OFFICE AND COMPLEX
POSITION(S) LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS HELD
DIRECTOR REGISTRANT SERVED* PAST 5 YEARS DIRECTOR** BY DIRECTOR
------------------------------ ------------- ------------ ------------------------------ ------------- ------------------------
Michael Bozic (63) Director Director Private investor; Director or 197 Director of various
c/o Kramer Levin Naftalis & since 2003 Trustee of the Retail Funds business organizations.
Frankel LLP (since April 1994) and the
Counsel to the Independent Institutional Funds (since
Directors July 2003); formerly Vice
919 Third Avenue Chairman of Kmart Corporation
New York, NY 10022 (December 1998-October 2000),
Chairman and Chief Executive
Officer of Levitz Furniture
Corporation (November
1995-November 1998) and
President and Chief Executive
Officer of Hills Department
Stores (May 1991-July 1995);
formerly variously Chairman,
Chief Executive Officer,
President and Chief Operating
Officer (1987-1991) of the
Sears Merchandise Group of
Sears Roebuck & Co.
Edwin J. Garn (72) Director Director Consultant. Director or 197 Director of Franklin
1031 N. Chartwell Court since 2003 Trustee of the Retail Funds Covey (time management
Salt Lake City, UT 84103 (since January 1993) and the systems), BMW Bank of
Institutional Funds (since North America, Inc.
July 2003); member of the Utah (industrial loan
Regional Advisory Board of corporation), United
Pacific Corp.; formerly Space Alliance (joint
Managing Director of Summit venture between Lockheed
Ventures LLC (2000-2004); Martin and The Boeing
United States Senator Company) and Nuskin Asia
(R-Utah) (1974-1992) and Pacific (multilevel
Chairman, Senate Banking marketing); member of
Committee (1980-1986), Mayor the board of various
of Salt Lake City, Utah civic and charitable
(1971-1974), Astronaut, Space organizations.
Shuttle Discovery (April
12-19, 1985), and Vice
Chairman, Huntsman Corporation
(chemical company).
Wayne E. Hedien (70) Director Director Retired; Director or Trustee 197 Director of the PMI
c/o Kramer Levin Naftalis & since 2003 of the Retail Funds (since Group Inc. (private
Frankel LLP September 1997) and the mortgage insurance);
Counsel to the Independent Institutional Funds (since Trustee and Vice
Directors July 2003); formerly Chairman of The Field
919 Third Avenue associated with the Allstate Museum of Natural
New York, NY 10022 Companies (1966-1994), most History; director of
recently as Chairman of The various other business
Allstate Corporation (March and charitable
1993-December 1994) and organizations.
Chairman and Chief Executive
Officer of its wholly-owned
subsidiary, Allstate Insurance
Company (July 1989-December
1994).
Dr. Manuel H. Johnson (55) Director Director Senior Partner, Johnson Smick 197 Director of NVR, Inc.
c/o Johnson Smick since 2003 International, Inc., a (home construction),
International, Inc. consulting firm; Chairman of Director of KFX Energy;
2099 Pennsylvania Avenue, the Audit Committee and Director of RBS
NW Suite 950 Director or Trustee of the Greenwich Capital
Washington, D.C. 20006 Retail Funds (since July 1991) Holdings (financial
and the Institutional Funds holdings company).
(since July 2003); Co-
Chairman and a founder of the
Group of Seven Council (G7C),
an international economic
commission; formerly Vice
Chairman of the Board of
Governors of the Federal
Reserve System and Assistant
Secretary of the U.S.
Treasury.
Joseph J. Kearns (62) Director Director President, Kearns & Associates 197 Director of Electro Rent
c/o Kearns & Associates since 2001 LLC (investment consulting); Corporation (equipment
LLC Deputy Chairman of the Audit leasing), The Ford
PMB754 Committee and Director or Family Foundation and
23852 Pacific Coast Hwy. Trustee of the Retail Funds the UCLA Foundation.
Malibu, CA 90265 (since July 2003) and the
Institutional Funds (since
August 1994); previously
Chairman of the Audit
Committee of the Institutional
Funds (October 2001-July
2003); formerly CFO of the J.
Paul Getty Trust.
Michael E. Nugent (68) Director Director General Partner of Triumph 197 Director of various
c/o Triumph Capital, L.P. since 2001 Capital, L.P., a private business organizations.
445 Park Avenue, 10th Floor investment partnership;
New York, NY 10022 Chairman of the Insurance
Committee and Director or
Trustee of the Retail Funds
(since July 1991) and the
Institutional Funds (since
July 2001); formerly Vice
President, Bankers Trust
Company and BT Capital
Corporation (1984-1988).
14
THE MALAYSIA FUND, INC.
December 31, 2004
DIRECTOR AND OFFICER INFORMATION (CONT'D)
Independent Directors: (cont'd)
NUMBER OF
PORTFOLIOS IN
TERM OF FUND
OFFICE AND COMPLEX
POSITION(S) LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS HELD
DIRECTOR REGISTRANT SERVED* PAST 5 YEARS DIRECTOR** BY DIRECTOR
------------------------------ ------------- ----------- ------------------------------ ------------- ------------------------
Fergus Reid (72) Director Director Chairman of Lumelite Plastics 198 Trustee and Director of
c/o Lumelite Plastics since 2000 Corporation; Chairman of the certain investment
Corporation Governance Committee and companies in the J.P.
85 Charles Coleman Blvd. Director or Trustee of the Morgan Funds complex
Pawling, NY 12564 Retail Funds (since July 2003) managed by J.P. Morgan
and the Institutional Funds Investment Management
(since June 1992). Inc.
INTERESTED DIRECTORS:
Charles A. Fiumefreddo (71) Chairman Chairman Chairman and Director or 197 None.
c/o Morgan Stanley Funds and and Trustee of the Retail Funds
Harborside Financial Center Director of Director (since July 1991) and the
Plaza Two 3rd Floor the Board since Institutional Funds (since
Jersey City, NJ 07311 2003 July 2003); formerly Chief
Executive Officer of the
Retail Funds (until September
2002).
James F. Higgins (56) Director Director Director or Trustee of the 197 Director of AXA
c/o Morgan Stanley Funds since 2003 Retail Funds (since June 2000) Financial, Inc. and The
Harborside Financial Center and the Institutional Funds Equitable Life Assurance
Plaza Two 2nd Floor (since July 2003); Senior Society of the United
Jersey City, NJ 07311 Advisor of Morgan Stanley States (financial
(since August 2000); Director services).
of Morgan Stanley Distributors
Inc. and Dean Witter Realty
Inc.; previously President and
Chief Operating Officer of the
Private Client Group of Morgan
Stanley (May 1999-August
2000), and President and Chief
Operating Officer of
Individual Securities of
Morgan Stanley (February
1997-May 1999).
* Each Director serves an indefinite term, until his or her successor is
elected.
** The Fund Complex includes all funds advised by Morgan Stanley Investment
Management Inc. and funds that have an investment advisor that is an
affiliated entity of Morgan Stanley Investment Management Inc. (including,
but not limited to, Morgan Stanley Investments LP and Morgan Stanley
Investment Advisors Inc.).
Officers:
TERM OF OFFICE AND
POSITION(S) HELD LENGTH OF TIME
NAME, AGE AND ADDRESS OF EXECUTIVE OFFICER WITH REGISTRANT SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
------------------------------------------ ---------------- ----------------------- ---------------------------------------------
Mitchell M. Merin (51) President President since President and Chief Operating Officer of
Morgan Stanley Investment 2003 Morgan Stanley Investment Management Inc.;
Management Inc. President, Director and Chief Executive
1221 Avenue of the Americas 33rd Officer of Morgan Stanley Investment Advisors
Floor Inc. and Morgan Stanley Services Company
New York, NY 10020 Inc.; Chairman and Director of Morgan Stanley
Distributors Inc.; Chairman and Director of
Morgan Stanley Trust; Director of various
Morgan Stanley subsidiaries; President of the
Institutional Funds (since July 2003) and
President of the Retail Funds (since May
1999); Trustee (since July 2003) and
President (since December 2002) of the Van
Kampen Closed-End Funds; Trustee (since May
1999) and President (since October 2002) of
the Van Kampen Open-End Funds.
Ronald E. Robison (65) Executive Vice Executive Vice Principal Executive Officer of Funds in the
Morgan Stanley Investment Management Inc. President and President and Fund complex (since May 2003); Managing
1221 Avenue of the Americas 33rd Principal Principal Director of Morgan Stanley & Co.
Floor Executive Executive Officer Incorporated, Managing Director of Morgan
New York, NY 10020 Officer since 2003 Stanley; Managing Director, Chief
Administrative Officer and Director of Morgan
Stanley Investment Advisors Inc. and Morgan
Stanley Services Company Inc.; Director of
Morgan Stanley Trust; Managing Director and
Director of Morgan Stanley Distributors Inc.;
Executive Vice President and Principal
Executive Officer of the Retail Funds (since
April 2003) and the Institutional Funds
(since July 2003); previously President and
Director of the Retail Funds (March 2001 -
July 2003) and Chief Global Operations
Officer and Managing Director of Morgan
Stanley Investment Management Inc.
15
THE MALAYSIA FUND, INC.
December 31, 2004
DIRECTOR AND OFFICER INFORMATION (CONT'D)
Officers: (cont'd)
TERM OF OFFICE AND
POSITION(S) HELD LENGTH OF TIME
NAME, AGE AND ADDRESS OF EXECUTIVE OFFICER WITH REGISTRANT SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
------------------------------------------ ---------------- ----------------------- ---------------------------------------------
Joseph J. McAlinden (61) Vice President Vice President Managing Director and Chief Investment
Morgan Stanley Investment Management Inc. since 2003 Officer of Morgan Stanley Investment Advisors
1221 Avenue of the Americas 33rd Floor Inc. and Morgan Stanley Investment Management
New York, NY 10020 Inc.; Director of Morgan Stanley Trust; Chief
Investment Officer of the Van Kampen Funds;
Vice President of the Institutional Funds
(since July 2003) and the Retail Funds (since
July 1995).
Barry Fink (49) Vice President Vice President General Counsel (since May 2000) and Managing
Morgan Stanley Investment Management Inc. since 2003 Director (since December 2000) of Morgan
1221 Avenue of the Americas 22nd Floor Stanley Investment Management; Managing
New York, NY 10020 Director (since December 2000), Secretary
(since February 1997) and Director (since
July 1998) of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley Services
Company Inc.; Vice President of the Retail
Funds; Assistant Secretary of Morgan Stanley
DW Inc.; Vice President of the Institutional
Funds (since July 2003); Managing Director,
Secretary and Director of Morgan Stanley
Distributors Inc.; previously Secretary of
the Retail Funds and General Counsel
(February 1997- April 2004) of the Retail
Funds; Vice President and Assistant General
Counsel of Morgan Stanley Investment Advisors
Inc. and Morgan Stanley Services Company Inc.
(February 1997- December 2001).
Amy R. Doberman (42) Vice President Vice President Managing Director and General Counsel, U.S.
Morgan Stanley Investment Management Inc. since July 2004 Investment Management; Managing Director of
1221 Avenue of the Americas 22nd Floor the Investment Manager and Morgan Stanley
New York, NY 10020 Investment Advisor Inc.; Vice President of
the Institutional and Retail Funds (since
July 2004); Vice President of the Van Kampen
Funds (since August 2004); previously,
Managing Director and General Counsel -
Americas, UBS Global Asset Management (July
2000-July 2004) and General Counsel, Aeltus
Investment Management, Inc. (January
1997-July 2000).
Carsten Otto (41) Chief Chief Compliance Executive Director and U.S. Director of
Morgan Stanley Investment Management Inc. Compliance Officer since Compliance for Morgan Stanley Investment
1221 Avenue of the Americas 22nd Floor Officer 2004 Management (since October 2004); Executive
New York, NY 10020 Director of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley Investment
Management Inc.; formerly Assistant Secretary
and Assistant General Counsel of the Morgan
Stanley Retail Funds.
Stefanie V. Chang (38) Vice President Vice President Executive Director of Morgan Stanley & Co.
Morgan Stanley Investment Management Inc. since 2001 Incorporated, Morgan Stanley Investment
1221 Avenue of the Americas 22nd Floor Management Inc. and Morgan Stanley Investment
New York, NY 10020 Advisors Inc.; Vice President of the
Institutional Funds and the Retail Funds;
formerly practiced law with the New York law
firm of Rogers & Wells (now Clifford Chance
US LLP).
James W. Garrett (36) Treasurer and Treasurer since Executive Director of Morgan Stanley & Co.
Morgan Stanley Investment Management Inc. Chief Financial 2002 and Incorporated, Morgan Stanley Investment
1221 Avenue of the Americas 34th Floor Officer Chief Financial Management Inc.; Treasurer and Chief
New York, NY 10020 Officer since Financial Officer of the Institutional Funds;
2003 previously with PriceWaterhouse LLP (now
PriceWaterhouseCoopers LLP).
Michael J. Leary (38) Assistant Assistant Assistant Director and Vice President of Fund
J.P. Morgan Investor Services Co. Treasurer Treasurer since Administration, J.P. Morgan Investor Services
73 Tremont Street 2003 Co. (formerly Chase Global Funds Company);
Boston, MA 02108 formerly Audit Manager at Ernst & Young LLP.
Mary E. Mullin (37) Secretary Secretary since Executive Director of Morgan Stanley & Co.
Morgan Stanley Investment Management Inc. 2001 Incorporated, Morgan Stanley Investment
1221 Avenue of the Americas 22nd Floor Management Inc. and Morgan Stanley Investment
New York, NY 10020 Advisors Inc.; Secretary of the Institutional
Funds and (since July 2003) the Retail Funds;
formerly practiced law with the New York law
firms of McDermott, Will & Emery and Skadden,
Arps, Slate, Meagher & Flom LLP.
* Each Officer serves an indefinite term, until his or her successor is
elected.
16
THE MALAYSIA FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each stockholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the stockholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
stockholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of stockholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Stockholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and stockholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Malaysia Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
59 Maiden Lane
New York, New York 10030
1 (800) 278-4353
17
THE MALAYSIA FUND, INC.
DIRECTORS
CHARLES A. FIUMEFREDDO
MICHAEL BOZIC
EDWIN J. GARN
WAYNE E. HEDIEN
JAMES F. HIGGINS
DR. MANUEL H. JOHNSON
JOSEPH J. KEARNS
MICHAEL NUGENT
FERGUS REID
OFFICERS
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
MITCHELL M. MERIN
PRESIDENT
RONALD E. ROBISON
EXECUTIVE VICE PRESIDENT
AND PRINCIPAL EXECUTIVE
OFFICER
JOSEPH J. MCALINDEN
VICE PRESIDENT
BARRY FINK
VICE PRESIDENT
AMY R. DOBERMAN
VICE PRESIDENT
STEFANIE V. CHANG
VICE PRESIDENT
JAMES W. GARRETT
TREASURER AND CHIEF
FINANCIAL OFFICER
CARSTEN OTTO
CHIEF COMPLIANCE OFFICER
MICHAEL J. LEARY
ASSISTANT TREASURER
MARY E. MULLIN
SECRETARY
U.S. INVESTMENT ADVISER AND ADMINISTRATOR
MORGAN STANLEY INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
MALAYSIAN INVESTMENT ADVISER
AMMB CONSULTANT SDN BHD
9TH FLOOR, BANGURIAN ARAB-MALAYSIAN
55 JALAN RAJA CHULAN, 50200
KUALA LUMPUR, MALAYSIA
CUSTODIAN
JPMORGAN CHASE BANK
270 PARK AVENUE
NEW YORK, NEW YORK 10017
STOCKHOLDER SERVICING AGENT
AMERICAN STOCK TRANSFER & TRUST COMPANY
59 MAIDEN LANE
NEW YORK, NEW YORK 10030
1 (800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
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.morganstanley.com/im.
(C) 2005 MORGAN STANLEY
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the Fund or a
third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by
the shareholder report presented in Item 1 hereto to delete from the end of the
following paragraph on page 2 of the Code the phrase "to the detriment of the
Fund."
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Directors has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Directors
in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004 REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 36,230 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ $ 115,000 (2)
TAX FEES $ 2,700 (3) $ 100,829 (4)
ALL OTHER FEES $ $ 60,985 (6)
TOTAL NON-AUDIT FEES $ 2,700 $ 276,814
TOTAL $ 38,930 $ 276,814
2003 REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 34,505 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ $ 93,000 (2)
TAX FEES $ 2,575 (3) $ 163,414 (5)
ALL OTHER FEES $ $ 341,775 (6)
TOTAL NON-AUDIT FEES $ 2,575 $ 598,189
TOTAL $ 37,080 $ 598,189
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any entity
controlling, controlled by or under common control with the Adviser that
provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial
statements of the Covered Entities' and funds advised by the Adviser or its
affiliates, specifically attestation services provided in connection with a SAS
70 Report.
(3) Tax Fees represent tax advice and compliance services provided in connection
with the review of the Registrant's tax returns.
(4) Tax Fees represent tax advice services provided to Covered Entities,
including research and identification of PFIC entities.
(5) All Other Fees represent attestation services provided in connection with
performance presentation standards.
(6) All Other Fees represent attestation services provided in connection with
performance presentation standards, general industry education seminars
provided, and a regulatory review project performed.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
- Statement of Principles
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.
The SEC has issued rules specifying the types of services that an independent
auditor may not provide to its audit client, as well as the audit committee's
administration of the engagement of the independent auditor. The SEC's rules
establish two different approaches to pre-approving services, which the SEC
considers to be equally valid. Proposed services either: may be pre-approved
without consideration of specific case-by-case services by the Audit Committee
("GENERAL PRE-APPROVAL"); or require the specific pre-approval of the Audit
Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit Committee
believes that the combination of these two approaches in this Policy will result
in an effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
----------
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and
Procedures (the "POLICY"), adopted as of the date above, supersedes and
replaces all prior versions that may have been adopted from time to time.
The purpose of this Policy is to set forth the policy and procedures by which
the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
- Delegation
As provided in the Act and the SEC's rules, the Audit Committee may delegate
either type of pre-approval authority to one or more of its members. The member
to whom such authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting.
- Audit Services
The annual Audit services engagement terms and fees are subject to the specific
pre-approval of the Audit Committee. Audit services include the annual financial
statement audit and other procedures required to be performed by the Independent
Auditors to be able to form an opinion on the Fund's financial statements. These
other procedures include information systems and procedural reviews and testing
performed in order to understand and place reliance on the systems of internal
control, and consultations relating to the audit. The Audit Committee will
approve, if necessary, any changes in terms, conditions and fees resulting from
changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All
other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
- Audit-related Services
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements and, to the extent they are Covered Services, the Covered Entities or
that are traditionally performed by the Independent Auditors. Because the Audit
Committee believes that the provision of Audit-related services does not impair
the independence of the auditor and is consistent with the SEC's rules on
auditor independence, the Audit Committee may grant general pre-approval to
Audit-related services. Audit-related services include, among others, accounting
consultations related to accounting, financial reporting or disclosure matters
not classified as "Audit services"; assistance with understanding and
implementing new accounting and financial reporting guidance from rulemaking
authorities; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal control
reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2.
All other Audit-related services not listed in Appendix B.2 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
- Tax Services
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the
Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
- All Other Services
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4.
Permissible All Other services not listed in Appendix B.4 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
- Pre-Approval Fee Levels or Budgeted Amounts
Pre-approval fee levels or budgeted amounts for all services to be provided by
the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services.
- Procedures
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be
rendered. The Fund's Chief Financial Officer will determine whether such
services are included within the list of services that have received the general
pre-approval of the Audit Committee. The Audit Committee will be informed on a
timely basis of any such services rendered by the Independent Auditors. Requests
or applications to provide services that require specific approval by the Audit
Committee will be submitted to the Audit Committee by both the Independent
Auditors and the Fund's Chief Financial Officer, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's rules on auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer to monitor
the performance of all services provided by the Independent Auditors and to
determine whether such services are in compliance with this Policy. The Fund's
Chief Financial Officer will report to the Audit Committee on a periodic basis
on the results of its monitoring. Both the Fund's Chief Financial Officer and
management will immediately report to the chairman of the Audit Committee any
breach of this Policy that comes to the attention of the Fund's Chief Financial
Officer or any member of management.
- Additional Requirements
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
- Covered Entities
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
MORGAN STANLEY RETAIL FUNDS
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Directors has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:
Michael Bozic, Edwin J. Garn, Wayne E. Hedien, Manual H. Johnson, Joseph J.
Kearns, Michael Nugent and Fergus Reid.
(b) Not applicable.
Item 6. Schedule of Investments
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES
I. POLICY STATEMENT
INTRODUCTION - Morgan Stanley Investment Management's ("MSIM") policies and
procedures for voting proxies with respect to securities held in the accounts of
clients applies to those MSIM entities that provide discretionary Investment
Management services and for which a MSIM entity has the authority to vote their
proxies. The policies and procedures and general guidelines in this section will
be reviewed and, as necessary, updated periodically to address new or revised
proxy voting issues. The MSIM entities covered by these policies and procedures
currently include the following: Morgan Stanley Investment Advisors Inc., Morgan
Stanley Alternative Investment Partners, L.P., Morgan Stanley AIP GP LP, Morgan
Stanley Investment Management Inc., Morgan Stanley Investment Group Inc., Morgan
Stanley Investment Management Limited, Morgan Stanley Investment Management
Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan
Stanley Investment Management Private Limited, Morgan Stanley Investments LP,
Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP,
Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., and Van
Kampen Advisors Inc. (each a "MSIM Affiliate" and collectively referred to as
the "MSIM Affiliates").
Each MSIM Affiliate will vote proxies as part of its authority to manage,
acquire and dispose of account assets. With respect to the MSIM registered
management investment companies (Van Kampen, Institutional and Advisor
Funds) (collectively referred to as the "MSIM Funds"), each MSIM Fund will vote
proxies pursuant to authority granted under its applicable investment advisory
agreement or, in the absence of such authority, as authorized by its Board of
Directors or Trustees. A MSIM Affiliate will not vote proxies if the "named
fiduciary" for an ERISA account has reserved the authority for itself, or in the
case of an account not governed by ERISA, the Investment Management Agreement
does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in
a prudent and diligent manner, vote proxies in the best interests of clients,
including beneficiaries of and participants in a client's benefit plan(s) for
which we manage assets, consistent with the objective of maximizing long-term
investment returns ("Client Proxy Standard"). In certain situations, a client or
its fiduciary may provide a MSIM Affiliate with a statement of proxy voting
policy. In these situations, the MSIM Affiliate will comply with the client's
policy unless to do so would be inconsistent with applicable laws or regulations
or the MSIM Affiliate's fiduciary responsibility.
PROXY RESEARCH SERVICES - To assist the MSIM Affiliates in their responsibility
for voting proxies and the overall global proxy voting process, Institutional
Shareholder Services ("ISS") and the Investor Responsibility Research Center
("IRRC") have been retained as experts in the proxy voting and corporate
governance area. ISS and IRRC are
independent advisers that specialize in providing a variety of fiduciary-level
proxy-related services to institutional investment managers, plan sponsors,
custodians, consultants, and other institutional investors. The services
provided to MSIM Affiliates include in-depth research, global issuer analysis,
and voting recommendations. In addition to research, ISS provides vote
execution, reporting, and recordkeeping. MSIM's Proxy Review Committee (see
Section IV.A. below) will carefully monitor and supervise the services provided
by the proxy research services.
VOTING PROXIES FOR CERTAIN NON-US COMPANIES - While the proxy voting process is
well established in the United States and other developed markets with a number
of tools and services available to assist an investment manager, voting proxies
of non-US companies located in certain jurisdictions, particularly emerging
markets, may involve a number of problems that may restrict or prevent a MSIM
Affiliate's ability to vote such proxies. These problems include, but are not
limited to: (i) proxy statements and ballots being written in a language other
than English; (ii) untimely and/or inadequate notice of shareholder meetings;
(iii) restrictions on the ability of holders outside the issuer's jurisdiction
of organization to exercise votes; (iv) requirements to vote proxies in person,
(v) the imposition of restrictions on the sale of the securities for a period of
time in proximity to the shareholder meeting; and (vi) requirements to provide
local agents with power of attorney to facilitate the MSIM Affiliate's voting
instructions. As a result, clients' non-U.S. proxies will be voted on a best
efforts basis only, consistent with the Client Proxy Standard. ISS has been
retained to provide assistance to the MSIM Affiliates in connection with voting
their clients' non-US proxies.
II. GENERAL PROXY VOTING GUIDELINES
To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) these Proxy
Voting Policies and Procedures, including the guidelines set forth below. These
guidelines address a broad
range of issues, including board size and composition, executive compensation,
anti-takeover proposals, capital structure proposals and social responsibility
issues and are meant to be general voting parameters on issues that arise most
frequently. The MSIM Affiliates, however, may vote in a manner that is contrary
to the following general guidelines, pursuant to the procedures set forth in
Section IV. below, provided the vote is consistent with the Client Proxy
Standard.
III. GUIDELINES
A. MANAGEMENT PROPOSALS
1. When voting on routine ballot items the following proposals are
generally voted in support of management, subject to the review and
approval of the Proxy Review Committee, as appropriate.
Selection or ratification of auditors.
Approval of financial statements, director and auditor reports.
Election of Directors.
Limiting Directors' liability and broadening indemnification of
Directors.
- Requirement that a certain percentage (up to 66 2/3%) of its
Board's members be comprised of independent and unaffiliated
Directors.
- Requirement that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated Directors.
Recommendations to set retirement ages or require specific levels of
stock ownership by Directors.
General updating/corrective amendments to the charter.
Elimination of cumulative voting.
Elimination of preemptive rights.
Provisions for confidential voting and independent tabulation of
voting results.
Proposals related to the conduct of the annual meeting except those
proposals that relate to the "transaction of such other
business which may come before the meeting."
2. The following non-routine proposals, which potentially may have a
substantive financial or best interest impact on a shareholder, are
generally voted in support of management, subject to the review and
approval of the Proxy Review Committee, as appropriate.
CAPITALIZATION CHANGES
Capitalization changes that eliminate other classes of stock and
voting rights.
Proposals to increase the authorization of existing classes of
common stock (or securities convertible into common stock) if:
(i) a clear and legitimate business purpose is stated; (ii)
the number of shares requested is reasonable in relation to
the purpose for which authorization is requested; and (iii)
the authorization does not exceed 100% of shares currently
authorized and at least 30% of the new authorization will be
outstanding.
Proposals to create a new class of preferred stock or for issuances
of preferred stock up to 50% of issued capital.
Proposals for share repurchase plans.
Proposals to reduce the number of authorized shares of common or
preferred stock, or to eliminate classes of preferred stock.
Proposals to effect stock splits.
Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set forth
in the corporate charter. Reverse stock splits that do not
adjust proportionately to the authorized share amount will
generally be approved if the resulting increase in authorized
shares coincides with the proxy guidelines set forth above for
common stock increases.
COMPENSATION
Director fees, provided the amounts are not excessive relative to
other companies in the country or industry.
Employee stock purchase plans that permit discounts up to 15%, but
only for grants that are part of a broad based employee plan,
including all non-executive employees.
Establishment of Employee Stock Option Plans and other employee
ownership plans.
ANTI-TAKEOVER MATTERS
- Modify or rescind existing supermajority vote requirements to
amend the charters or bylaws.
- Adoption of anti-greenmail provisions provided that the
proposal: (i) defines greenmail; (ii) prohibits buyback offers
to large block holders not made to all shareholders or not
approved by disinterested shareholders; and (iii) contains no
anti-takeover measures or other provisions restricting the
rights of shareholders.
3. The following non-routine proposals, which potentially may have a
substantive financial or best interest impact on the shareholder,
are generally voted AGAINST (notwithstanding management support),
subject to the review and approval of the Proxy Review Committee, as
appropriate.
- Capitalization changes that add classes of stock which
substantially dilute the voting interests of existing
shareholders.
- Proposals to increase the authorized number of shares of
existing classes of stock that carry preemptive rights or
supervoting rights.
- Creation of "blank check" preferred stock.
- Changes in capitalization by 100% or more.
- Compensation proposals that allow for discounted stock options
that have not been offered to employees in general.
- Amendments to bylaws that would require a supermajority
shareholder vote to pass or repeal certain provisions.
- Proposals to indemnify auditors.
4. The following types of non-routine proposals, which potentially may
have a potential financial or best interest impact on an issuer, are
voted as determined by the Proxy Review Committee.
CORPORATE TRANSACTIONS
- Mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations,
restructurings and recapitalizations) will be examined on a
case-by-case basis. In all cases, ISS and IRRC research and
analysis will be used along with MSIM Affiliates' research and
analysis, based on, among other things, MSIM internal
company-specific knowledge.
- Change-in-control provisions in non-salary compensation plans,
employment contracts, and severance agreements that benefit
management and would be costly to shareholders if triggered.
- Shareholders rights plans that allow appropriate offers to
shareholders to be blocked by the board or trigger provisions
that prevent legitimate offers from proceeding.
Executive/Director stock option plans. Generally, stock option plans
should meet the following criteria:
(i) Whether the stock option plan is incentive based;
(ii) For mature companies, should be no more than 5% of the
issued capital at the time of approval;
(iii) For growth companies, should be no more than 10% of the
issued capital at the time of approval.
ANTI-TAKEOVER PROVISIONS
Proposals requiring shareholder ratification of poison pills.
Anti-takeover and related provisions that serve to prevent the
majority of shareholders from exercising their rights or
effectively deter the appropriate tender offers and other
offers.
B. SHAREHOLDER PROPOSALS
1. The following shareholder proposals are generally supported, subject
to the review and approval of the Proxy Review Committee, as
appropriate:
- Requiring auditors to attend the annual meeting of
shareholders.
- Requirement that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated Directors.
- Requirement that a certain percentage of its Board's members
be comprised of independent and unaffiliated Directors.
- Confidential voting.
- Reduction or elimination of supermajority vote requirements.
2. The following shareholder proposals will be voted as determined by
the Proxy Review Committee.
- Proposals that limit tenure of directors.
- Proposals to limit golden parachutes.
- Proposals requiring directors to own large amounts of stock to
be eligible for election.
- Restoring cumulative voting in the election of directors.
- Proposals that request or require disclosure of executive
compensation in addition to the disclosure required by the
Securities and Exchange Commission ("SEC") regulations.
- Proposals that limit retirement benefits or executive
compensation.
- Requiring shareholder approval for bylaw or charter
amendments.
- Requiring shareholder approval for shareholder rights plan or
poison pill.
- Requiring shareholder approval of golden parachutes.
- Elimination of certain anti-takeover related provisions.
- Prohibit payment of greenmail.
3. The following shareholder proposals are generally not supported,
subject to the review and approval of the Committee, as appropriate.
- Requirements that the issuer prepare reports that are costly
to provide or that would require duplicative efforts or
expenditures that are of a non-business nature or would
provide no pertinent information from the perspective of
institutional shareholders.
- Restrictions related to social, political or special interest
issues that impact the ability of the company to do business
or be competitive and that have a significant financial or
best interest impact to the shareholders.
- Proposals that require inappropriate endorsements or corporate
actions.
IV. ADMINISTRATION OF PROXY POLICIES AND PROCEDURES
A. PROXY REVIEW COMMITTEE
1. The MSIM Proxy Review Committee ("Committee") is responsible for
creating and implementing MSIM's Proxy Voting Policy and Procedures
and, in this regard, has expressly adopted them. Following are some
of the functions and responsibilities of the Committee.
(a) The Committee, which will consist of members designated by
MSIM's Chief Investment Officer, is responsible for
establishing MSIM's proxy voting policies and guidelines and
determining how MSIM will vote proxies on an ongoing basis.
(b) The Committee will periodically review and have the authority
to amend as necessary MSIM's proxy voting policies and
guidelines (as expressed in these Proxy Voting Policy and
Procedures) and establish and direct voting positions
consistent with the Client Proxy Standard.
(c) The Committee will meet at least monthly to (among other
matters): (1) address any outstanding issues relating to
MSIM's Proxy Voting Policy and Procedures; and (2) generally
review proposals at upcoming shareholder meetings of MSIM
portfolio companies in accordance with this Policy and
Procedures including, as appropriate, the voting results of
prior shareholder meetings of the same issuer where a similar
proposal was presented to shareholders. The Committee, or its
designee, will timely communicate to ISS MSIM's Proxy Voting
Policy and Procedures (and any amendments to them and/or any
additional guidelines or procedures it may adopt).
(d) The Committee will meet on an ad hoc basis to (among other
matters): (1) authorize "split voting" (i.e., allowing certain
shares of the same issuer that are the subject of the same
proxy solicitation and held by one or more MSIM portfolios to
be voted differently than other shares) and/or "override
voting" (i.e., voting
all MSIM portfolio shares in a manner contrary to the
Procedures); (2) review and approve upcoming votes, as
appropriate, for matters for which specific direction has been
provided in Sections I, II, and III above; and (3) determine
how to vote matters for which specific direction has not been
provided in Sections I, II and III above. Split votes will
generally not be approved within a single Global Investor
Group team. The Committee may take into account ISS
recommendations and the research provided by IRRC as well as
any other relevant information they may request or receive.
(e) In addition to the procedures discussed above, if the
Committee determines that an issue raises a potential material
conflict of interest, or gives rise to the appearance of a
potential material conflict of interest, the Committee will
designate a special committee to review, and recommend a
course of action with respect to, the conflict(s) in question
("Special Committee"). The Special Committee may request the
assistance of the Law and Compliance Departments and will have
sole discretion to cast a vote. In addition to the research
provided by ISS and IRRC, the Special Committee may request
analysis from MSIM Affiliate investment professionals and
outside sources to the extent it deems appropriate.
(f) The Committee and the Special Committee, or their designee(s),
will document in writing all of their decisions and actions,
which documentation will be maintained by the Committee and
the Special Committee, or their designee(s) for a period of at
least 6 years. To the extent these decisions relate to a
security held by a MSIM U.S. registered investment company,
the Committee and Special Committee, or their designee(s),
will report their decisions to each applicable Board of
Trustees/Directors of those investment companies at each
Board's next regularly Scheduled Board meeting. The report
will contain information concerning decisions made by the
Committee and Special Committee during the most recently ended
calendar quarter immediately preceding the Board meeting.
(g) The Committee and Special Committee, or their designee(s),
will timely communicate to applicable PMs, the Compliance
Departments and, as necessary to ISS, decisions of the
Committee and Special Committee so that, among other things,
ISS will vote proxies consistent with their decisions.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not Applicable
Required disclosure beginning with fiscal year end 12/31/05.
Item 9. Closed-End Fund Repurchases
TOTAL NUMBER OF SHARES MAXIMUM NUMBER OF
AVERAGE PRICE PURCHASED AS PART OF SHARES THAT MAY YET BE
TOTAL NUMBER OF SHARES PAID PER PUBLICLY ANNOUNCED PLANS PURCHASED UNDER THE PLANS
PERIOD PURCHASED SHARE OR PROGRAMS OR PROGRAMS
---------------------------------------------------------------------------------------------------------
July -- -- -- Unlimited
August -- -- -- Unlimited
September -- -- -- Unlimited
October -- -- -- Unlimited
November -- -- -- Unlimited
December -- -- -- Unlimited
* The Share Repurchase Program commenced on 7/15/2002
** The Fund expects to continue to repurchase its outstanding shares at such
time and in such amounts as it believes will further the accomplishment of the
foregoing objectives, subject to review by the Board of Directors.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. 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-CSR
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 most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
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) The Malaysia Fund, Inc.
--------------------------------------------------------------------
By: /s/ Ronald E. Robison
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: 2/17/2005
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
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Name: Ronald E. Robison
Title: Principal Executive Officer
Date: 2/17/2005
By: /s/ James W. Garrett
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Name: James W. Garrett
Title: Chief Financial Officer
Date: 2/17/2005