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)
|
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522 Fifth Avenue New York, NY
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10036
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(Address of principal executive
offices)
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(Zip code)
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Ronald E. Robison
522 Fifth Avenue New York, New York 10036
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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1-800-221-6726
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Date of fiscal year end:
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12/31
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Date of reporting period:
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12/31/07
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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
Funds annual report transmitted to shareholders pursuant to Rule 30e-1 under
the Investment Company Act of 1940 is as follows:
|
2007
Annual Report
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|
|
|
December 31,
2007
|
The Malaysia Fund, Inc.
Morgan Stanley
Investment Management Inc.
Investment Adviser
|
The
Malaysia Fund, Inc.
|
|
|
Letter to Stockholders
|
Overview
(unaudited)
|
Performance
For the year ended December 31, 2007, the Malaysia Fund, Inc.
(the Fund) had total returns, based on net asset value and market price per
share (including reinvestment of distributions), of 60.19%, net of fees and
55.48%, respectively, compared to its benchmark, the Kuala Lumpur Stock
Exchange Composite (KLSE) Index (the Index) expressed in U.S. dollars which
returned 40.63%. On December 31, 2007, the closing price of the Funds
shares on the New York Stock Exchange was $10.85, representing a 10.6% discount
to the Funds net asset value per share. Past performance is no guarantee of
future results.
Factors Affecting Performance
The Malaysian equity market started on a
strong note in 2007, as the government continued to drum up interest in the 9th
Malaysian Plan, a mid-term economic stimulus measure to boost the economy via
infrastructure projects. The government also unveiled a series of 20-year plans
for the various regions of the country over the year, which helped to shore up
sentiment. However, interest began waning in the later part of 2007 as the
government failed to provide follow-up details on these measures.
The political situation took a turn for the
worse as various groups took advantage of the coming elections to air their
grievances. The minority Indian and Chinese communities took to the streets to
demand better treatment and a review of the preferential rights of Malays.
Several religious incidents further increased tensions among the populace.
On the economic front, the economy continued
to grow at a stable rate of 6.0% (based on consensus estimates), compared to a
real gross domestic product growth of 5.2% in 2006. Despite the 7.0%
appreciation of the Malaysian Ringgit, exports continued to do well. This was
especially true for palm oil, which benefited from strong global demand for
edible oils. In fact, at the end of the period the largest Malaysian stocks by
capitalization were palm oil stocks, overtaking the banks.
Managment Strategies
The Fund benefited from an overweight position
in palm oil stocks, which did well due to strong earnings growth, as palm oil
prices more than doubled during the period. Another positive
contributor was the Funds underweight in government-linked companies, which
continued to underperform owing to their disappointing results.
Detractors from performance included
the Funds overweight in a construction company, which underperformed as
investor interest shifted from construction stocks with overseas exposure
towards those with domestic businesses. However, we remain confident in the
execution ability of the companys management.
The
Fund seeks long-term capital appreciation and integrates top-down sector
allocation and bottom-up stock selection with a growth bias. The team utilizes a rigorous fundamental
research approach that considers dynamics, valuation, and sentiment and focuses
on companies with strong management and solid earnings.
Sincerely,
|
|
Ronald E. Robison
|
|
President and Principal Executive Office
r
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January 2008
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2
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The
Malaysia Fund, Inc.
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Portfolio of Investments
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December 31,
2007
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|
|
Value
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|
|
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Shares
|
|
(000)
|
|
COMMON
STOCKS (98.6%)
|
|
|
|
|
|
(Unless
Otherwise Noted)
|
|
|
|
|
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Automobiles
(1.2%)
|
|
|
|
|
|
Proton Holdings Bhd
|
|
(a)512,000
|
|
$
|
567
|
|
TAN Chong Motor Holdings Bhd
|
|
1,309,000
|
|
820
|
|
|
|
|
|
1,387
|
|
Commercial
Banks (16.4%)
|
|
|
|
|
|
Bumiputra-Commerce Holdings Bhd
|
|
2,693,196
|
|
8,873
|
|
Malayan Banking Bhd
|
|
1,473,500
|
|
5,095
|
|
Public Bank Bhd
|
|
1,591,390
|
|
5,283
|
|
|
|
|
|
19,251
|
|
Construction &
Engineering (5.5%)
|
|
|
|
|
|
Gamuda Bhd
|
|
882,200
|
|
1,276
|
|
IJM Corp. Bhd
|
|
1,985,500
|
|
5,143
|
|
|
|
|
|
6,419
|
|
Construction
Materials (0.8%)
|
|
|
|
|
|
Lafarge Malayan Cement Bhd
|
|
548,100
|
|
967
|
|
Diversified
Telecommunication Services (4.7%)
|
|
|
|
|
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Telekom Malaysia Bhd
|
|
1,636,000
|
|
5,513
|
|
Electric
Utilities (2.3%)
|
|
|
|
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Tenaga Nasional Bhd
|
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945,750
|
|
2,736
|
|
Food
Products (24.8%)
|
|
|
|
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IOI Corp. Bhd
|
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5,296,250
|
|
12,304
|
|
Kuala Lumpur Kepong Bhd
|
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1,225,500
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6,407
|
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Wilmar International Ltd.
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2,794,500
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10,405
|
|
|
|
|
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29,116
|
|
Hotels,
Restaurants & Leisure (6.9%)
|
|
|
|
|
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Genting Bhd
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2,019,000
|
|
4,783
|
|
Resorts World Bhd
|
|
2,793,500
|
|
3,264
|
|
|
|
|
|
8,047
|
|
Independent
Power Producers & Energy Traders (1.5%)
|
|
|
|
|
|
Tanjong plc
|
|
314,000
|
|
1,747
|
|
Industrial
Conglomerates (11.1%)
|
|
|
|
|
|
MMC Corp. Bhd
|
|
667,000
|
|
1,860
|
|
Sime Darby Bhd
|
|
(a)3,092,910
|
|
11,130
|
|
|
|
|
|
12,990
|
|
Insurance
(0.5%)
|
|
|
|
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MAA Holdings Bhd
|
|
1,174,000
|
|
592
|
|
Marine
(3.2%)
|
|
|
|
|
|
Malaysia International Shipping Corp. Bhd
|
|
1,271,000
|
|
3,742
|
|
Multi-Utilities
(4.0%)
|
|
|
|
|
|
YTL Corp. Bhd
|
|
1,955,733
|
|
4,659
|
|
Real
Estate (10.8%)
|
|
|
|
|
|
Bandar Raya Developments Bhd
|
|
1,050,000
|
|
$
|
1,004
|
|
Glomac Bhd
|
|
1,763,000
|
|
729
|
|
IGB Corp. Bhd
|
|
3,024,000
|
|
2,048
|
|
IOI Properties Bhd
|
|
415,000
|
|
1,633
|
|
Naim Cendera Holdings Bhd
|
|
789,000
|
|
1,130
|
|
SP Setia Bhd
|
|
3,350,248
|
|
5,027
|
|
YNH Property Bhd
|
|
1,338,200
|
|
1,089
|
|
|
|
|
|
12,660
|
|
Wireless
Telecommunication Services (4.9%)
|
|
|
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Digi.Com Bhd
|
|
777,000
|
|
5,806
|
|
TOTAL
COMMON STOCKS
|
|
|
|
|
|
(Cost $51,302)
|
|
|
|
115,632
|
|
|
|
No. of
|
|
|
|
|
|
Rights
|
|
|
|
RIGHTS
(0.1%)
|
|
|
|
|
|
Multi-Utilities
(0.0%)
|
|
|
|
|
|
YTL Corp. Bhd,
expiring 1/7/08
|
|
(a)130,382
|
|
58
|
|
Real
Estate (0.1%)
|
|
|
|
|
|
SP Setia Bhd,
expiring 1/14/08
|
|
(a)558,374
|
|
71
|
|
TOTAL
RIGHTS
(Cost $0)
|
|
|
|
129
|
|
|
|
No. of
|
|
|
|
|
|
Warrants
|
|
|
|
WARRANTS
(0.1%)
|
|
|
|
|
|
Construction &
Engineering (0.1%)
|
|
|
|
|
|
IJM Corp. Bhd,
expiring 7/7/10 (Cost $2)
|
|
(a)148,600
|
|
167
|
|
|
|
Shares
|
|
|
|
SHORT-TERM
INVESTMENT (1.9%)
|
|
|
|
|
|
Investment
Company (1.9%)
|
|
|
|
|
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Morgan
Stanley Institutional
Liquidity Money Market Portfolio Institutional Class
(Cost $2,269)
|
|
(b)2,268,942
|
|
2,269
|
|
TOTAL
INVESTMENTS
(100.7%)
(Cost $53,573)
|
|
|
|
(c) 118,197
|
|
LIABILITIES
IN EXCESS OF OTHER ASSETS (-0.7%)
|
|
|
|
(924)
|
|
NET ASSETS (100%)
|
|
|
|
$
|
117,273
|
|
(a)
|
Non-income producing security.
|
(b)
|
See Note G within the Notes to Financial
Statements regarding investment in Morgan Stanley Institutional Liquidity
Money Market Portfolio Institutional Class.
|
|
The accompanying notes are an integral part of the financial
statements.
|
3
|
|
The
Malaysia Fund, Inc.
|
|
|
Portfolio of Investments (contd)
|
December 31,
2007
|
(c)
|
The approximate market value and percentage
of the investments, $115,761,000 and 97.9%, respectively, represent the
securities that have been fair valued under the fair valuation policy for
international investments as described in Note A within the Notes to
Financial Statements
.
|
Graphic Presentation of Portfolio Holdings
The following graph depicts the Funds holdings by industry and/or
security type, as a percentage of total investments.
* Industries
which do not appear in the above graph, as well as those which represent less
than 5% of total investments, if applicable, are included in the category
labeled Other.
4
|
The accompanying notes are an integral part of the financial
statements.
|
|
|
The
Malaysia Fund, Inc.
|
|
|
|
Financial
Statements
|
Statement of Assets and Liabilities
|
|
December 31, 2007
(000)
|
Assets:
|
|
|
|
Investments in Securities of Unaffiliated
Issuers, at Value (Cost $51,304)
|
|
$
|
115,928
|
|
Investment in Security of Affiliated
Issuer, at Value (Cost $2,269)
|
|
2,269
|
|
Total Investments in Securities, at Value
(Cost $53,573)
|
|
118,197
|
|
Foreign Currency, at Value (Cost $846)
|
|
857
|
|
Dividends Receivable
|
|
139
|
|
Interest Receivable
|
|
8
|
|
Receivable from Affiliate
|
|
@
|
|
Other Assets
|
|
2
|
|
Total Assets
|
|
119,203
|
|
Liabilities:
|
|
|
|
Payable For:
|
|
|
|
Dividends Declared
|
|
1,722
|
|
U.S. Investment Advisory Fees
|
|
82
|
|
Malaysian Investment Advisory Fees
|
|
54
|
|
Custodian Fees
|
|
22
|
|
Administration Fees
|
|
4
|
|
Directors Fees and Expenses
|
|
@
|
|
Other Liabilities
|
|
46
|
|
Total Liabilities
|
|
1,930
|
|
Net Assets
|
|
|
|
Applicable to 9,662,129, Issued and Outstanding $0.01
Par Value Shares (20,000,000 Shares Authorized)
|
|
$
|
117,273
|
|
Net Asset Value Per Share
|
|
$
|
12.14
|
|
Net Assets Consist of:
|
|
|
|
Common Stock
|
|
$
|
97
|
|
Paid-in Capital
|
|
55,762
|
|
Undistributed (Distributions in Excess of)
Net Investment Income
|
|
(6)
|
|
Accumulated Net Realized Gain (Loss)
|
|
(3,215)
|
|
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations
|
|
64,635
|
|
Net Assets
|
|
$
|
117,273
|
|
@ Amount is less than $500.
|
|
|
|
|
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, 2007
(000)
|
|
Investment Income
|
|
|
|
Dividends from Securities of Unaffiliated
Issuers
|
|
$
|
2,718
|
|
Dividends from Security of Affiliated
Issuer
|
|
44
|
|
Interest from Securities of Unaffiliated
Issuers
|
|
7
|
|
Total Investment Income
|
|
2,769
|
|
Expenses
|
|
|
|
U.S. Investment Advisory Fees (Note B)
|
|
790
|
|
Malaysian Investment Advisory Fees (Note B)
|
|
198
|
|
Administration Fees (Note C)
|
|
79
|
|
Custodian Fees (Note D)
|
|
73
|
|
Professional Fees
|
|
47
|
|
Stockholder Reporting Expenses
|
|
22
|
|
Stockholder Servicing Agent Fees
|
|
14
|
|
Directors Fees and Expenses
|
|
2
|
|
Other Expenses
|
|
34
|
|
Total Expenses
|
|
1,259
|
|
Waiver of Administration Fees (Note C)
|
|
(31)
|
|
Rebate from Morgan Stanley Affiliated Cash
Sweep (Note G)
|
|
(1)
|
|
Expense Offset (Note D)
|
|
@
|
|
Net Expenses
|
|
1,227
|
|
Net Investment Income (Loss)
|
|
1,542
|
|
Net Realized Gain (Loss) on:
|
|
|
|
Investments
|
|
2,797
|
|
Foreign Currency Transactions
|
|
138
|
|
Net Realized Gain (Loss)
|
|
2,935
|
|
Change in Unrealized Appreciation
(Depreciation) on:
|
|
|
|
Investments
|
|
40,226
|
|
Foreign Currency Translations
|
|
9
|
|
Change in Unrealized Appreciation
(Depreciation)
|
|
40,235
|
|
Net Realized Gain (Loss) and Change in
Unrealized Appreciation (Depreciation)
|
|
43,170
|
|
Net Increase (Decrease) in Net Assets
Resulting from Operations
|
|
$
|
44,712
|
|
@ Amount is less than $500.
|
|
|
|
6
|
The accompanying notes are an integral part of the financial
statements.
|
|
|
The
Malaysia Fund, Inc.
|
|
|
|
Financial
Statements
|
Statements of Changes
in Net Assets
|
|
Year Ended
December 31, 2007
(000)
|
|
Year Ended
December 31, 2006
(000)
|
Increase (Decrease) in Net Assets
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
Net
Investment Income (Loss)
|
|
$
|
1,542
|
|
$
|
653
|
|
Net Realized
Gain (Loss)
|
|
2,935
|
|
2,710
|
|
Change in
Unrealized Appreciation (Depreciation)
|
|
40,235
|
|
18,946
|
|
Net
Increase (Decrease) in Net Assets Resulting from Operations
|
|
44,712
|
|
22,309
|
|
Distributions from and/or in Excess of:
|
|
|
|
|
|
Net
Investment Income
|
|
(1,748
|
)
|
(796
|
)
|
Capital Share Transactions:
|
|
|
|
|
|
Reinvestment
of Distributions (2,592 shares in 2006)
|
|
|
|
15
|
|
Repurchase
of Shares (23,828 and 3,870 shares, respectively)
|
|
(237
|
)
|
(25
|
)
|
Net
Increase (Decrease) in Net Assets Resulting from Capital Share Transactions
|
|
(237
|
)
|
(10
|
)
|
Total
Increase (Decrease)
|
|
42,727
|
|
21,503
|
|
Net Assets:
|
|
|
|
|
|
Beginning of
Period
|
|
74,546
|
|
53,043
|
|
End of Period (Including Undistributed
(Distributions in Excess of) Net Investment Income of $(6) and $21,
respectively)
|
|
$
|
117,273
|
|
$
|
74,546
|
|
|
The accompanying notes are an integral part of the financial
statements.
|
7
|
|
The
Malaysia Fund, Inc.
|
|
|
Selected Per Share Data and Ratios
|
Financial
Highlights
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
Net Asset Value, Beginning of Period
|
|
$
|
7.70
|
|
$
|
5.48
|
|
$
|
6.09
|
|
$
|
5.76
|
|
$
|
4.63
|
|
Net Investment Income (Loss)
|
|
0.16
|
|
0.07
|
|
0.11
|
|
0.08
|
|
0.06
|
|
Net Realized and Unrealized Gain (Loss) on
Investments
|
|
4.46
|
|
2.23
|
|
(0.59
|
)
|
0.31
|
|
1.22
|
|
Total from Investment Operations
|
|
4.62
|
|
2.30
|
|
(0.48
|
)
|
0.39
|
|
1.28
|
|
Distributions from and/or in Excess of:
Net Investment Income
|
|
(0.18
|
)
|
(0.08
|
)
|
(0.13
|
)
|
(0.06
|
)
|
(0.15
|
)
|
Anti-Dilutive Effect of Share Repurchase
Program
|
|
0.00
|
#
|
0.00
|
#
|
|
|
|
|
0.00
|
#
|
Net Asset Value, End of Period
|
|
$
|
12.14
|
|
$
|
7.70
|
|
$
|
5.48
|
|
$
|
6.09
|
|
$
|
5.76
|
|
Per Share Market Value, End of Period
|
|
$
|
10.85
|
|
$
|
7.09
|
|
$
|
5.18
|
|
$
|
6.21
|
|
$
|
6.01
|
|
TOTAL INVESTMENT RETURN:
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
55.48
|
%
|
38.41
|
%
|
(14.60
|
)%
|
4.40
|
%
|
60.33
|
%
|
Net Asset Value (1)
|
|
60.19
|
%
|
42.09
|
%
|
(7.87
|
)%
|
6.83
|
%
|
27.67
|
%
|
RATIOS, SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets, End of Period (Thousands)
|
|
$
|
117,273
|
|
$
|
74,546
|
|
$
|
53,043
|
|
$
|
59,017
|
|
$
|
55,758
|
|
Ratio of Expenses to Average Net Assets
(2)
|
|
1.24
|
%+
|
1.49
|
%
|
1.57
|
%
|
1.50
|
%
|
1.78
|
%
|
Ratio of Net Investment Income (Loss) to
Average
Net Assets
(2)
|
|
1.56
|
%+
|
1.08
|
%
|
1.80
|
%
|
1.38
|
%
|
1.16
|
%
|
Portfolio Turnover Rate
|
|
7
|
%
|
28
|
%
|
25
|
%
|
24
|
%
|
29
|
%
|
(2)
Supplemental
Information on the Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Ratio Before Expenses Waived by
Administrator:
Ratio of Expenses to Average Net Assets
|
|
1.27
|
%+
|
1.51
|
%
|
1.58
|
%
|
1.50
|
%
|
N/A
|
|
Ratio of Net Investment Income (Loss) to
Average Net Assets
|
|
1.53
|
%+
|
1.06
|
%
|
1.79
|
%
|
1.38
|
%
|
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 stockholders 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.
|
+
|
Reflects rebate of certain Fund expenses in
connection with the investments in Morgan Stanley Institutional Liquidity
Money Market Portfolio Institutional Class during the period. As a
result of such rebate, the expenses as a percentage of its net assets were
effected by less than 0.005%.
|
8
|
The accompanying notes are an integral part of the financial
statements.
|
|
|
The
Malaysia Fund, Inc.
|
|
|
Notes to Financial Statements
|
December 31,
2007
|
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, as amended (the 1940 Act). The Funds investment
objective is long-term capital appreciation through investment in equity
securities of Malaysian companies.
A. Accounting Policies:
The following significant
accounting policies are in conformity with U.S. generally accepted accounting
principles. 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:
Securities
listed on a foreign exchange are valued at their closing price. Unlisted
securities and listed securities not traded on the valuation date for which
market quotations are readily available are valued at the mean between the
current bid and asked prices obtained from reputable brokers. Equity securities
listed on a U.S. exchange are valued at the latest quoted sales price on the
valuation date. Equity securities listed or traded on NASDAQ, for which market
quotations are available, are valued at the NASDAQ Official Closing Price. Debt
securities purchased with remaining maturities of 60 days or less are valued at
amortized cost, if it approximates value.
All other securities and
investments for which market values are not readily available, including
restricted securities, and those securities for which it is inappropriate to
determine prices in accordance with the aforementioned procedures, are valued
at fair value as determined in good faith under procedures adopted by the Board
of Directors (the Directors), although the actual calculations may be done by
others. Factors considered in making this determination may include, but are
not limited to, information obtained by contacting the issuer, analysts, or the
appropriate stock exchange (for exchange-traded securities), analysis of the
issuers financial statements or other available documents and, if necessary,
available information concerning other securities in similar circumstances.
Most foreign markets
close before the New York Stock Exchange (NYSE). Occasionally, developments
that could affect the closing prices of securities and other assets may occur
between the times at which valuations of such securities are determined (that
is, close of the foreign market on which the securities trade) and the close of
business on the NYSE. If these developments are expected to materially affect the
value of the securities, the valuations may be adjusted to reflect the
estimated fair value as of the close of the NYSE, as determined in good faith
under procedures established by the Directors.
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. At December 31,
2007, the Fund did not have any outstanding 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 changes in the market prices of the securities
held at period
9
|
The
Malaysia Fund, Inc.
|
|
|
Notes to Financial Statements (contd)
|
December 31,
2007
|
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 Funds 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 Funds 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.
4.
Derivatives:
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 products. Consistent with the Funds 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:
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. At December 31, 2007, the Fund did not have any outstanding
foreign currency exchange contracts.
5.
New Accounting
Pronouncement:
In September 2006,
Statement of Financial Accounting Standards No. 157,
Fair Value Measurements
(SFAS 157), was
issued and is effective for fiscal years beginning after November 15,
2007. SFAS 157 defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. As of December 31,
2007, the Adviser does not believe the adoption of SFAS 157 will impact the
amounts reported in the financial statements, however, additional disclosures
will be required about the inputs used to develop the measurements of fair value
and the effect of certain measurements reported in the Statement of Operations
for a fiscal period.
6.
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
and distributions are 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.
10
|
The
Malaysia Fund, Inc.
|
|
|
Notes to Financial Statements (contd)
|
December 31,
2007
|
B. Investment Advisory Fees:
Morgan
Stanley Investment Management Inc. (the U.S. Adviser or MS Investment
Management) 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 Funds first $50 million of average weekly net assets,
0.70% of the Funds next $50 million of average weekly net assets and 0.50% of
the Funds average weekly net assets in excess of $100 million.
AMMB Consultant Sdn Bhd
(the Malaysian Adviser) provides investment related research and assistance
on behalf of the Fund to Morgan Stanley Investment Management Inc. 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 Funds first $50
million of average weekly net assets, 0.15% of the Funds next $50 million of
average weekly net assets and 0.10% of the Funds average weekly net assets in
excess of $100 million.
Effective January 31,
2008, the Adviser has terminated the agreement with the Malaysian Adviser.
C. Administration Fees:
MS
Investment Management also serves as Administrator to the Fund pursuant to an
Administration Agreement. Effective July 1, 2007 the Administration
Agreement has been amended to 0.08% of the Funds average weekly net assets.
Prior to July 1, 2007, under the Administration Agreement, the
administration fee was 0.08% of the Funds average daily net assets. MS
Investment Management has agreed to limit the administration fee so that it
will be no greater than the previous administration fee (prior to November 1,
2004) of 0.02435% of the Funds 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, 2007, approximately $31,000 of administration fees were
waived pursuant to this arrangement. Under a sub-administration agreement
between the Administrator and JPMorgan Investor Services Co. (JPMIS), a
corporate affiliate of JPMorgan Chase Bank, N.A., JPMIS provides certain
administrative services to the Fund. For such services, the Administrator pays
JPMIS a portion of the fee the Administrator receives from the Fund.
Administration costs (including out-of-pocket expenses) incurred in the
ordinary course of providing services under the agreement, except pricing
services and extraordinary expenses, will be covered under the administration
fee.
D. Custodian Fees:
JPMorgan
Chase Bank, N.A. (the Custodian) 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.
The Fund has entered into
an arrangement with its Custodian whereby credits realized on uninvested cash
balances were used to offset a portion of the Funds expenses. These custodian
credits are shown as Expense Offset on the Statement of Operations.
E. Federal Income Taxes:
It
is the Funds 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. The Fund files
tax returns with the U.S. Internal Revenue Service and various states.
Generally, the tax authorities can examine all tax returns filed for the last
three years.
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 Fund adopted the
provisions of the Financial Accounting Standards Boards (FASB) Interpretation
number 48
Accounting for Uncertainty in
Income Taxes (the Interpretation)
,
on June 30, 2007. The Interpretation is to be applied to all
open tax years as of the date of effectiveness. As of December 31, 2007,
this did not result in an impact to the Funds financial statements.
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 2007 and 2006 were as follows:
2007 Distributions
Paid From:
(000)
|
|
2006 Distributions
Paid From:
(000)
|
Ordinary
Income
|
|
Long-term
Capital
Gain
|
|
Ordinary
Income
|
|
Long-term
Capital
Gain
|
$1,748
|
|
$
|
|
$796
|
|
$
|
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. These book/tax differences are considered
either temporary or permanent in nature.
11
|
The
Malaysia Fund, Inc.
|
|
|
Notes to Financial Statements (contd)
|
December 31,
2007
|
Temporary differences are
generally due to differing book and tax treatments for the timing of the
recognition of gains (losses) on certain investment transactions and the timing
of the deductibility of certain expenses.
Permanent differences,
primarily due to differing treatments of gains (losses) related to foreign currency
transactions, expired capital loss carryforward and excess distribution,
resulted in the following reclassifications among the components of net assets
at December 31, 2007:
Increase (Decrease)
|
|
Accumulated
Undistributed
(Distributions in
Excess of) Net
Investment
Income (Loss)
(000)
|
|
Accumulated
Net Realized
Gain (Loss)
(000)
|
|
Paid-in
Capital
(000)
|
|
$ 179
|
|
$ (43)
|
|
$(136)
|
|
At December 31,
2007, the Fund had no distributable earnings on a tax basis.
At December 31,
2007, the U.S. Federal income tax cost basis of investments was $53,669,000
and, accordingly, net unrealized appreciation for U.S. Federal income tax
purposes was $64,528,000, of which $65,671,000 related to appreciated
securities and $1,143,000 related to depreciated securities.
At December 31,
2007, the Fund had a capital loss carryforward for U.S. Federal income tax
purposes of approximately $3,119,000 available to offset future capital gains
of which $2,005,000 will expire on December 31, 2009, and $1,114,000 will
expire on December 31, 2013. At December 31, 2007, the Fund had
expired capital loss carryforward for U.S. Federal income tax purposes of
approximately $94,000. During the year ended December 31, 2007, the Fund
utilized capital loss carryforwards for U.S. Federal income tax purposes of
approximately $2,625,000.
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.
F. Contractual Obligations:
The Fund enters into
contracts that contain a variety of indemnifications. The Funds 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. Security Transactions and Transactions
with Affiliates:
The
Fund invests in the Institutional Class of the Morgan Stanley
Institutional Liquidity Money Market Portfolio, an open-end management
investment company managed by the Adviser. Investment Advisory fees paid by the
Fund are reduced by an amount equal to its pro-rata share of advisory and
administration fees paid by the Morgan Stanley Institutional Liquidity Money
Market Portfolio. For the year ended December 31, 2007, advisory fees paid
were reduced by approximately $1,000 relating to the Funds investment in the
Morgan Stanley Institutional Liquidity Money Market Portfolio.
A summary of the Funds
transactions in shares of the affiliated issuer during the year ended December 31,
2007 is as follows:
Market Value
December 31,
2006
(000)
|
|
Purchases
at Cost
(000)
|
|
Sales
Proceeds
(000)
|
|
Dividend
Income
(000)
|
|
Market Value December 31,
2007
(000)
|
|
$
|
|
$3,109
|
|
$840
|
|
$44
|
|
$2,269
|
|
During the year ended December 31,
2007, the Fund made purchases and sales totaling approximately $6,843,000 and
$7,267,000, 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.
H. Other:
On July 15, 2002, the
Fund commenced a share repurchase program for purposes of enhancing stockholder
value and reducing the discount at which the Funds shares traded from their
net asset value. During the year ended December 31, 2007, the Fund
repurchased 23,828 of its shares at an average discount of 11.42% from net
asset value per share. Since the inception of the program, the Fund has
repurchased 80,801 of its shares at an average discount of 13.80% 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
Directors.
On July 1, 2007, the
Stockholder Servicing Agent changed from American Stock Transfer &
Trust Company to Computershare Trust Company, N.A. Requests for information or
any correspondence concerning the Dividend Reinvestment and Cash Purchase Plan
after July 1, 2007 should be directed to Computershare Trust Company,
N.A., P.O. Box 43010, Providence, Rhode Island 02940-3010, 1 (800)
231-2608.
12
|
The
Malaysia Fund, Inc.
|
|
|
Notes to Financial Statements (contd)
|
December 31,
2007
|
On December 14,
2007, the Officers of the Fund, pursuant to authority granted by the Directors,
declared a distribution of $0.1782 per share, derived from net investment
income, payable on January 7, 2008, to stockholders of record on December 21,
2007.
I. Supplemental Proxy Information
(unaudited):
On June 19,
2007, an annual meeting of the Funds stockholders was held for the pupose of
voting on the following matter, the result of which were as follows:
Election of Directors by
all stockholders:
|
|
For
|
|
Withhold
|
|
|
|
|
|
|
|
Frank L. Bowman
|
|
5,680,401
|
|
684,079
|
|
James F. Higgins
|
|
5,686,451
|
|
678,029
|
|
Manuel H. Johnson
|
|
5,680,792
|
|
683,688
|
|
For More
Information About Portfolio Holdings (unaudited)
The Fund provides a
complete schedule of portfolio holdings in its semi-annual and annual reports
within 60 days of the end of the Funds second and fourth fiscal quarters. The
semi-annual reports and the annual reports are filed electronically with the
Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR,
respectively. 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/msim. Each Morgan Stanley fund also files a complete
schedule of portfolio holdings with the SEC for the Funds 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
SECs website, http://www.sec.gov. You may also review and copy them at the SECs
public reference room in Washington, DC. Information on the operation of the
SECs 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 SECs e-mail address
(publicinfo@sec.gov) or by writing the public reference section of the SEC,
Washington, DC 20549-0102.
In addition to filing a
complete schedule of portfolio holdings with the SEC each fiscal quarter, the
Fund makes portfolio holdings information available by periodically providing
the information on its public website, www.morganstanley.com/msim.
The Fund provides a complete
schedule of portfolio holdings on the public website on a calendar-quarter
basis approximately 31 calendar days after the close of the calendar quarter.
The Fund also provides Top 10 holdings information on the public website
approximately 15 business days following the end of each month. You may obtain
copies of the Funds monthly or calendar-quarter website postings, by calling
1(800) 231-2608.
13
|
The
Malaysia Fund, Inc.
|
|
|
Notes to Financial Statements (contd)
|
December 31,
2007
|
Proxy
Voting Policy and Procedures and Proxy Voting Record (unaudited)
A copy of (1) the
Funds policies and procedures with respect to the voting of proxies relating
to the Funds 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/msim. This
information is also available on the SECs web site at www.sec.gov.
14
|
The
Malaysia Fund, Inc.
|
|
|
Report of Independent Registered Public
Accounting Firm
|
December 31,
2007
|
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,
2007, and the related statement of operations for the year then ended, the
statements 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 Funds 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. We were not engaged to
perform an audit of the Funds internal control over financial reporting. Our
audits included 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
Funds 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, and evaluating the overall financial statement
presentation. Our procedures included confirmation of securities owned as of December 31,
2007, by correspondence with the custodian. 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, 2007, 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.
Boston, Massachusetts
February 19, 2008
15
|
The
Malaysia Fund, Inc.
|
|
|
Director and Officer Information (unaudited)
|
December 31,
2007
|
Independent Directors:
Name, Age and Address of
Independent Director
|
|
Position(s)
Held with
Registrant
|
|
Length of
Time
Served*
|
|
Principal Occupation(s) During
Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen
by
Independent
Director**
|
|
Other Directorships Held by
Independent Director
|
Frank L. Bowman (63)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the Independent
Directors
1177 Avenue of the
Americas
New York, NY 10036
|
|
Director
|
|
Since
August
2006
|
|
President and Chief Executive Officer, Nuclear Energy
Institute (policy organization) (since February 2005); Director or
Trustee of various Retail Funds and Institutional Funds (since August 2006);
Chairperson of the Insurance Sub-Committee of the Insurance, Valuation and
Compliance Committee (since February 2007); formerly, variously, Admiral
in the U.S. Navy, Director of Naval Nuclear Propulsion Program and Deputy
Administrator Naval Reactors in the National Nuclear Security Administration
at the U.S. Department of Energy (1996-2004). Honorary Knight Commander of
the Most Excellent Order of the British Empire.
|
|
180
|
|
Director of the National Energy Foundation, the U.S.
Energy Association, the American Council for Capital Formation and the Armed
Services YMCA of the USA.
|
|
|
|
|
|
|
|
|
|
|
|
Michael Bozic (66)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the Independent
Directors
1177 Avenue of the
Americas
New York, NY 10036
|
|
Director
|
|
Since
April
2004
|
|
Private Investor; Chairperson of the Insurance,
Valuation and Compliance Committee (since October 2006); Director or
Trustee of the Retail Funds (since April 1994) and the Institutional
Funds (since July 2003); formerly, Chairperson of the Insurance
Committee (July 2006- September 2006), Vice Chairman of Kmart
Corporation (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);
variously Chairman, Chief Executive Officer, President and Chief Operating
Officer (1987- 1991) of the Sears Merchandise Group of Sears, Roebuck &
Co.
|
|
182
|
|
Director of various business organizations.
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen A. Dennis (54)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the Independent
Directors
1177 Avenue of the
Americas
New York, NY 10036
|
|
Director
|
|
Since
August
2006
|
|
President, Cedarwood Associates (mutual fund and
investment management) (since July 2006); Chairperson of the Money
Market and Alternatives Sub-Committee of the Investment Committee (since October 2006)
and Director or Trustee of various Retail Funds and Institutional Funds (since
August 2006); formerly, Senior Managing Director of Victory Capital
Management (1993-2006).
|
|
180
|
|
Director of various non-profit organizations.
|
16
|
The
Malaysia Fund, Inc.
|
|
|
Director and Officer Information (contd)
|
December 31,
2007
|
Independent Directors (contd) :
Name, Age and Address of
Independent Director
|
|
Position(s)
Held with
Registrant
|
|
Length of
Time
Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen
by
Independent
Director**
|
|
Other Directorships Held by
Independent Director
|
Dr. Manuel H.
Johnson (58)
c/o Johnson Smick
Group, Inc.
888 16th Street, N.W.
Suite 740
Washington, D.C. 20006
|
|
Director
|
|
Since
July
1991
|
|
Senior Partner, Johnson Smick International, Inc.
(consulting firm); Chairperson of the Investment Committee (since October 2006)
and Director or Trustee of the Retail Funds (since July 1991) and the
Institutional Funds (since July 2003); Co-Chairman and a founder of the
Group of Seven Council (G7C) international economic commission; formerly,
Chairperson of the Audit Committee (July 1991- September 2006);
Vice Chairman of the Board of Governors of the Federal Reserve System and
Assistant Secretary of the U.S. Treasury.
|
|
182
|
|
Director of NVR, Inc. (home construction);
Director of Evergreen Energy.
|
|
|
|
|
|
|
|
|
|
|
|
Joseph J. Kearns (65)
c/o Kearns & Associates
LLC
PMB754
23852 Pacific Coast
Highway
Malibu, CA 90265
|
|
Director
|
|
Since August
1994
|
|
President, Kearns & Associates LLC
(investment consulting); Chairperson of the Audit Committee (since October 2006)
and Director or Trustee of the Retail Funds (since July 2003) and the
Institutional Funds (since August 1994); formerly Deputy Chairperson of
the Audit Committee (July 2003-September 2006) and Chairperson of
the Audit Committee of the Institutional Funds (October 2001- July 2003);
CFO of the J. Paul Getty Trust.
|
|
183
|
|
Director of Electro Rent Corporation (equipment
leasing) and The Ford Family Foundation.
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Klein (49)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the
Independent Directors
1177 Avenue of the Americas
New York, NY 10036
|
|
Director
|
|
Since
August
2006
|
|
Managing Director, Aetos Capital, LLC (since March 2000)
and Co-President, Aetos Alternatives Management, LLC (since January 2004);
Chairperson of the Fixed-Income Sub-Committee of the Investment Committee
(since October 2006) and Director or Trustee of various Retail Funds and
Institutional Funds (since August 2006); formerly, Managing Director,
Morgan Stanley & Co., Inc. and Morgan Stanley Dean Witter
Investment Management, President, Morgan Stanley Institutional Funds (June 1998-March 2000)
and Principal, Morgan Stanley & Co., Inc. and Morgan Stanley
Dean Witter Investment Management (August 1997-December 1999).
|
|
180
|
|
Director of certain investment funds managed or
sponsored by Aetos Capital LLC; Director of Sanitized AG and Sanitized
Marketing AG (specialty chemicals).
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Nugent (71)
c/o Triumph Capital, L.P.
445 Park Avenue
New York, NY 10022
|
|
Chairman of the Board and Director
|
|
Chairman
of the
Boards
since July
2006 and
Trustee
since July
1991
|
|
General Partner of Triumph Capital, L.P. (private
investment partnership); Chairman of the Boards of the Retail Funds and
Institutional Funds (since July 2006); Director or Trustee of the Retail
Funds (since July 1991) and the Institutional Funds (since July 2001);
formerly, Chairperson of the Insurance Committee (until July 2006).
|
|
182
|
|
None.
|
17
|
The
Malaysia Fund, Inc.
|
|
|
Director and Officer Information (contd)
|
December 31,
2007
|
Independent Directors (contd) :
Name, Age and Address of
Independent Director
|
|
Position(s)
Held with
Registrant
|
|
Length of
Time
Served*
|
|
Principal Occupation(s) During
Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen
by
Independent
Director**
|
|
Other Directorships Held by
Independent Director
|
W. Allen Reed (60)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the
Independent Directors
1177 Avenue of the
Americas
New York, NY 10036
|
|
Director
|
|
Since
August
2006
|
|
Chairperson of the Equity Sub-Committee of the
Investment Committee (since October 2006) and Director or Trustee of
various Retail Funds and Institutional Funds (since August 2006);
formerly, President and CEO of General Motors Asset Management; Chairman and
Chief Executive Officer of the GM Trust Bank and Corporate Vice President of
General Motors Corporation (July 1994-December 2005).
|
|
180
|
|
Director of Temple-Inland Industries (packaging and
forest products); Director of Legg Mason and Director of the Auburn
University Foundation.
|
|
|
|
|
|
|
|
|
|
|
|
Fergus Reid (75)
c/o Lumelite Plastics
Corporation
85 Charles Coleman Blvd.
Pawling, NY 12564
|
|
Director
|
|
Since
June
1992
|
|
Chairman of Lumelite Plastics Corporation;
Chairperson of the Governance Committee and Director or Trustee of the Retail
Funds (since July 2003) and the Institutional Funds (since June 1992).
|
|
183
|
|
Trustee and Director of certain investment companies
in the JPMorgan Funds complex managed by JP Morgan Investment Management Inc.
|
Interested Directors:
Name, Age and Address of
Interested Director
|
|
Position(s)
Held with
Registrant
|
|
Term of
Office and
Length of
Time
Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen
by
Interested Director**
|
|
Other Directorships Held by
Interested Director
|
James F. Higgins (59)
c/o Morgan Stanley Trust
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
|
|
Director
|
|
Since
June
2000
|
|
Director or Trustee of the Retail Funds (since
June 2000) and the Institutional Funds (since July 2003); Senior
Advisor of Morgan Stanley (since August 2000).
|
|
181
|
|
Director of AXA Financial, Inc. and The
Equitable Life Assurance Society of the United States (financial services).
|
*
This
is the earliest date the Director began serving the Retail Funds or
Institutional Funds. Each Director serves an indefinite term, until his or her
successor is elected.
**
The Fund
Complex includes all open-end and closed-end funds (including all of their
portfolios) advised by the Adviser and any funds that have an investment
adviser that is an affiliated person of the Adviser (including, but not limited
to, Morgan Stanley Investment Management, Inc.).
18
|
The
Malaysia Fund, Inc.
|
|
|
Director and Officer Information (contd)
|
December 31,
2007
|
Executive Officers:
|
|
|
|
Term of Office
|
|
|
|
|
Position(s) Held
|
|
and Length of
|
|
|
Name, Age and Address of Executive Officer
|
|
with Registrant
|
|
Time Served*
|
|
Principal Occupation(s) During
Past 5 Years
|
Ronald E. Robison (67)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
President and
Principal
Executive
Officer
|
|
President since September 2005 and Principal
Executive Officer since May 2003
|
|
President (since September 2005) and Principal
Executive Officer (since May 2003) of funds in the Fund Complex;
President (since September 2005) and Principal Executive Officer (since May 2003)
of the Van Kampen Funds; Managing Director, Director and/or Officer of the
Adviser and various entities affiliated with the Adviser; Director of Morgan
Stanley SICAV (since May 2004). Formerly, Executive Vice President (July 2003
to September 2005) of funds in the Fund Complex and the Van Kampen Funds;
President and Director of the Institutional Funds (March 2001 to July 2003);
Chief Administrative Officer of Morgan Stanley Investment Advisors Inc.;
Chief Administrative Officer of Morgan Stanley Services Company Inc.
|
|
|
|
|
|
|
|
J. David Germany (53)
Morgan Stanley Investment Management Limited
20 Bank Street
Canary Wharf
London, England
E144AD
|
|
Vice President
|
|
Since
February 2006
|
|
Managing Director and (since December 2005)
Chief Investment Officer Global Fixed Income of Morgan Stanley Investment
Management; Managing Director and Director of Morgan Stanley Investment
Management Limited; Vice President of the Retail Funds and Institutional
Funds (since February 2006).
|
|
|
|
|
|
|
|
Dennis F. Shea (54)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Vice President
|
|
Since
February 2006
|
|
Managing Director and (since February 2006)
Chief Investment Officer Global Equity of Morgan Stanley Investment
Management; Vice President of the Retail Funds and Institutional Funds (since
February 2006). Formerly, Managing Director and Director of Global
Equity Research at Morgan Stanley.
|
|
|
|
|
|
|
|
Amy R. Doberman (45)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Vice President
|
|
Since
July 2004
|
|
Managing Director and General Counsel, U.S.
Investment Management of Morgan Stanley Investment Management (since July 2004);
Vice President of the Retail Funds and Institutional Funds (since July 2004);
Vice President of the Van Kampen Funds (since August 2004); Secretary (since
February 2006) and Managing Director (since July 2004) of the
Adviser and various entities affiliated with the Adviser. Formerly, Managing
Director and General Counsel Americas, UBS Global Asset Management (July 2000-July 2004).
|
|
|
|
|
|
|
|
Carsten Otto (44)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Chief
Compliance
Officer
|
|
Since
October 2004
|
|
Managing Director and Global Head of Compliance for
Morgan Stanley Investment Management (since April 2007); and Chief Compliance
Officer of Morgan Stanley Retail Funds and Institutional Funds (since October 2004).
Formerly, U.S. Director of Compliance (October 2004 - April 2007)
and Assistant Secretary and Assistant General Counsel of the Retail Funds.
|
|
|
|
|
|
|
|
Stefanie V. Chang Yu
(41)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Vice President
|
|
Since
December 1997
|
|
Managing Director of the Adviser and various entities
affiliated with the Adviser; Vice President of the Retail Funds (since July 2002)
and the Institutional Funds (since December 1997). Formerly, Secretary
of various entities affiliated with the Adviser.
|
19
|
The
Malaysia Fund, Inc.
|
|
|
Director and Officer Information (contd)
|
December 31,
2007
|
Executive Officers (contd):
|
|
|
|
Term of Office
|
|
|
|
|
Position(s) Held
|
|
and Length of
|
|
|
Name, Age and Address of Executive Officer
|
|
with Registrant
|
|
Time Served*
|
|
Principal
Occupation(s) During Past 5 Years
|
Mary E. Mullin (40)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Secretary
|
|
Since
June 1999
|
|
Executive Director of the Adviser and various
entities affiliated with the Adviser; Secretary of the Retail Funds (since July 2003)
and the Institutional Funds (since June 1999).
|
|
|
|
|
|
|
|
James W. Garrett (39)
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, NY 10036
|
|
Treasurer and
Chief Financial
Officer
|
|
Treasurer since February 2002 and Chief
Financial Officer since July 2003
|
|
Head of Global Fund Administration; Managing Director
of the Adviser and various entities affiliated with the Adviser; Treasurer
and Chief Financial Officer of the Institutional Funds.
|
*
This
is the earliest date the Officer began serving the Retail Funds or Institutional
Funds. Each Officer serves an indefinite term, until his or her successor is
elected.
In accordance with Section 303A.
12(a) of the New York Stock Exchange Listed Company Manual, the Funds
Annual CEO Certification certifying as to compliance with NYSEs Corporate
Governance Listing Standards was submitted to the Exchange on August 8,
2007.
The Funds Principal
Executive Officer and Principal Financial Officer Certifications required by Section 302
of the Sarbanes-Oxley Act of 2002 were filed with the Funds N-CSR and are
available on the Securities and Exchange Commissions Website at
http://www.sec.gov.
20
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 Computershare Trust Company, N.A. (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 or, 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
issue shares of its Common Stock 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 Agents
fees for the reinvestment of dividends and distributions will be paid by the
Fund. However, each participants account will be charged a pro rata share of
brokerage commissions incurred on any open market purchases effected on such
participants 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 stockholders 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.
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
1(800) 231-2608
21
Morgan Stanley
Institutional Closed-End Funds
An Important Notice Concerning Our
U.S. Privacy Policy (unaudited)
We are required by
federal law to provide you with a copy of our Privacy Policy annually.
The following Policy
applies to current and former individual investors in Morgan Stanley
Institutional closed-end funds. This Policy is not applicable to partnerships,
corporations, trusts or other non-individual clients or account holders. Please
note that we may amend this Policy at any time, and will inform you of any
changes to this Policy as required by law.
We
Respect Your Privacy
We appreciate that you
have provided us with your personal financial information. We strive to
maintain the privacy of such information while we help you achieve your
financial objectives. This Policy describes what non-public personal
information we collect about you, why we collect it, and when we may share it
with others. We hope this Policy will help you understand how we collect and
share non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you
or your accounts as personal information.
1. What
Personal Information Do We Collect About You?
To serve you better and
manage our business, it is important that we collect and maintain accurate
information about you. We may obtain this information from applications and
other forms you submit to us, from your dealings with us, from consumer
reporting agencies, from our Web sites and from third parties and other
sources.
For example:
·
We may collect
information such as your name, address, e-mail address, telephone/fax numbers,
assets, income and investment objectives through applications and other forms
you submit to us.
·
We may obtain
information about account balances, your use of account(s) and the types
of products and services you prefer to receive from us through your dealings
and transactions with us and other sources.
·
We may obtain
information about your creditworthiness and credit history from consumer
reporting agencies.
·
We may collect
background information from and through third-party vendors to verify
representations you have made and to comply with various regulatory
requirements.
·
If you interact
with us through our public and private Web sites, we may collect information
that you provide directly through online communications (such as an e-mail
address). We may also collect information about your Internet service provider,
your domain name, your computers operating system and Web browser, your use of
our Web sites and your product and service preferences, through the use of cookies.
Cookies recognize your computer each time you return to one of our sites, and
help to improve our sites content and personalize your experience on our sites
by, for example, suggesting offerings that may interest you. Please consult the
Terms of Use of these sites for more details on our use of cookies.
2. When
Do We Disclose Personal Information We Collect About You?
To provide you with the
products and services you request, to serve you better and to manage our
business, we may disclose personal information we collect about you to our
affiliated companies and to non-affiliated third parties as required or
permitted by law.
A.
Information We Disclose to Our Affiliated Companies.
We do
not disclose personal information that we collect about you to our affiliated
companies except to enable them to provide services on our behalf or as
otherwise required or permitted by law.
22
Morgan Stanley
Institutional Closed-End Funds
An Important Notice Concerning Our
U.S. Privacy Policy (contd)
B.
Information We Disclose to Third Parties.
We do not disclose
personal information that we collect about you to non-affiliated third parties
except to enable them to provide services on our behalf, to perform joint
marketing agreements with other financial institutions, or as otherwise
required or permitted by law. For example, some instances where we may disclose
information about you to nonaffiliated third parties include: for servicing and
processing transactions, to offer our own products and services, to protect
against fraud, for institutional risk control, to respond to judicial process
or to perform services on our behalf. When we share personal information with
these companies, they are required to limit their use of personal information
to the particular purpose for which it was shared and they are not allowed to
share personal information with others except to fulfill that limited purpose.
3. How Do We Protect the Security and Confidentiality of
Personal Information We Collect About You?
We maintain physical,
electronic and procedural security measures to help safeguard the personal
information we collect about you. We have internal policies governing the
proper handling of client information. Third parties that provide support or
marketing services on our behalf may also receive personal information, and we
require them to adhere to confidentiality standards with respect to such
information.
23
The Malaysia Fund, Inc.
Directors
|
|
Michael E. Nugent
|
J. David Germany
|
|
Vice President
|
Frank L. Bowman
|
|
|
Dennis F. Shea
|
Michael Bozic
|
Vice President
|
|
|
Kathleen A. Dennis
|
Amy R. Doberman
|
|
Vice President
|
James F. Higgins
|
|
|
Stefanie V. Chang Yu
|
Dr. Manuel H. Johnson
|
Vice President
|
|
|
Joseph J. Kearns
|
James W. Garrett
|
|
Treasurer and Chief
|
Michael F. Klein
|
Financial
Officer
|
|
|
W. Allen Reed
|
Carsten Otto
|
|
Chief Compliance Officer
|
Fergus Reid
|
|
|
Mary E. Mullin
|
Officers
|
Secretary
|
Michael E. Nugent
|
|
Chairman of the Board and
|
|
Director
|
|
|
|
Ronald E. Robison
|
|
President and Principal
|
|
Executive Officer
|
|
U.S. Investment Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Malaysian Investment Adviser
AMMB Consultant Sdn Bhd
9th Floor, Bangurian Arab-Malaysian
55 Jalan Raja Chulan, 50200
Kuala Lumpur, Malaysia
Custodian
JPMorgan Chase Bank, N.A.
270 Park Avenue
New York, New York 10017
Stockholder Servicing Agent
Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021
Legal Counsel
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019-6131
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
For additional Fund information, including the Funds net asset value
per share and information regarding the investments comprising the Funds
portfolio, please call 1(800) 231-2608 or visit our website at
www.morganstanley.com/msim. All investments involve risks, including the
possible loss of principal.
© 2008 Morgan Stanley
CEMFANN IU08-00734I-Y12/07
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)
Not
applicable.
(d)
Not
applicable.
(e)
Not
applicable.
(f)
(1)
The
Funds Code of Ethics is attached hereto as Exhibit 12 A.
(2)
Not
applicable.
(3)
Not
applicable.
Item 3.
Audit
Committee Financial Expert.
The Funds Board of Trustees has determined that Joseph J. Kearns, an independent Trustee, is an audit committee financial expert serving on its audit committee. 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 Trustees 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:
2007
|
|
Registrant
|
|
Covered Entities(1)
|
|
Audit Fees
|
|
$
|
40,200
|
|
N/A
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
|
|
Audit-Related Fees
|
|
$
|
|
$
|
731,800
|
(2)
|
Tax Fees
|
|
$
|
3,100
|
(3)
|
$
|
104,020
|
(4)
|
All Other Fees
|
|
$
|
|
$
|
166,270
|
(5)
|
Total Non-Audit Fees
|
|
$
|
3,100
|
|
$
|
1,002,090
|
|
|
|
|
|
|
|
Total
|
|
$
|
43,300
|
|
$
|
1,002,090
|
|
2006
|
|
Registrant
|
|
Covered Entities(1)
|
|
Audit Fees
|
|
$
|
39,000
|
|
N/A
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
|
|
Audit-Related Fees
|
|
$
|
|
$
|
756,000
|
(2)
|
Tax Fees
|
|
$
|
3,000
|
(3)
|
$
|
79,422
|
(6)
|
All Other Fees
|
|
$
|
|
$
|
531,708
|
(7)
|
Total Non-Audit Fees
|
|
$
|
3,000
|
|
$
|
1,367,130
|
|
|
|
|
|
|
|
Total
|
|
$
|
42,000
|
|
$
|
1,367,130
|
|
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 Registrants tax returns.
(4) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of PFIC Entities and consulting services for the Van Kampen Funds.
(5) All Other Fees represent attestation services provided in connection with performance presentation standards.
(6) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of PFIC Entities.
(7) All Other Fees represent attestation services provided in
connection
with performance presentation standards and a compliance review project performed.
(e)(1) The audit
committees pre-approval policies and procedures are as follows:
APPENDIX A
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)
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
auditors 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 committees administration of the engagement of
the independent auditor. The SECs 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
(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.
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.
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 Committees responsibilities to pre-approve services performed by the
Independent Auditors to management.
The Funds Independent Auditors have reviewed
this Policy and believes that implementation of the Policy will not adversely
affect the Independent Auditors independence.
2.
Delegation
As provided in the Act and the SECs 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.
3.
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 Funds 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).
4.
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 Funds 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 SECs 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).
5.
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 auditors 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).
6.
All
Other Services
The Audit Committee believes, based on the SECs 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 SECs 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).
7.
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.
8.
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 Funds Chief Financial Officer
and must include a detailed description of the services to be rendered. The Funds 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 Funds Chief Financial
Officer, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SECs rules on
auditor independence.
The Audit Committee has designated the Funds
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 Funds
Chief Financial Officer will report to the Audit Committee on a periodic basis
on the results of its monitoring. Both
the Funds 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 Funds Chief Financial Officer or any member of management.
9.
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 auditors 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.
10.
Covered
Entities
Covered Entities include the Funds
investment adviser(s) and any entity controlling, controlled by or under
common control with the Funds 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 Funds
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 Committees pre-approval policies and procedures
(attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee
of the Board of Trustees 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: Frank Joseph Kearns, Michael Nugent and
Allen Reed.
(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.
The Funds/Trusts and its Investment Advisors Proxy Voting Policies
and Procedures are as follows:
POLICY APPROVED MARCH 15, 2007
MORGAN
STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND
PROCEDURES
I.
POLICY STATEMENT
Introduction
- Morgan Stanley Investment
Managements (MSIM) policy and procedures for voting proxies (Policy) 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 authority to vote proxies. This Policy is reviewed and
updated as necessary to address new and evolving proxy voting issues and
standards.
The MSIM entities covered by this Policy currently include the
following: Morgan Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP,
Morgan Stanley Investment Management 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, Van Kampen Asset Management, and Van
Kampen Advisors Inc. (each an MSIM Affiliate and
collectively referred to as the MSIM Affiliates or as we below).
Each MSIM Affiliate will use its best efforts to 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
Fundscollectively referred to herein as the MSIM Funds), each MSIM Affiliate
will vote proxies under this Policy pursuant to authority granted under its
applicable investment advisory agreement or, in the absence of such authority,
as authorized by the Board of Directors/Trustees of the MSIM Funds. An 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 or investment
advisory agreement does not authorize the MSIM Affiliate to vote proxies. MSIM
Affiliates will vote proxies in a prudent and diligent manner and in the best
interests of clients, including beneficiaries of and participants in a clients
benefit plan(s) for which the MSIM Affiliates 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 an MSIM Affiliate with a proxy voting policy. In these situations, the
MSIM Affiliate will comply with the clients policy.
Proxy Research Services
- Institutional
Shareholder Services (ISS) and Glass Lewis (together with other proxy
research providers as we may retain from time to time, the Research Providers)
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 include in-depth research, global issuer analysis, and voting
recommendations. While we may review and utilize the recommendations of the
Research Providers in making proxy voting decisions, we are in no way obligated
to follow such recommendations. In addition to research, ISS provides vote
execution, reporting, and recordkeeping.
Voting Proxies for Certain Non-U.S. Companies
-
Voting proxies of companies located in some jurisdictions, particularly
emerging markets, may involve several problems that can restrict or prevent the
ability to vote such proxies or entail significant costs. 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 issuers 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 our voting instructions. As a
result, we vote clients non-U.S. proxies on a best efforts basis only, after
weighing the costs and benefits of voting such proxies, consistent with the
Client Proxy Standard. ISS has been retained to provide assistance in
connection with voting non-U.S. proxies.
II.
GENERAL PROXY VOTING GUIDELINES
To promote consistency in voting proxies on behalf of its clients, we
follow this Policy (subject to any exception set forth herein), including the
guidelines set forth below. These guidelines address a broad range of issues,
and provide general voting parameters on proposals that arise most frequently.
However, details of specific proposals vary, and those details affect
particular voting decisions, as do factors specific to a given company.
Pursuant to the procedures set forth herein, we may vote in a manner that is
not in accordance with the following general guidelines, provided the vote is
approved by the Proxy Review Committee and is consistent with the Client Proxy
Standard. Morgan Stanley AIP GP LP will follow the procedures as described in
Appendix A.
We endeavor to integrate governance and proxy voting policy with
investment goals and to follow the Client Proxy Standard for each client. At
times, this may result in split votes, for example when different clients have
varying economic interests in the outcome of a particular voting matter (such
as a case in which varied ownership interests in two companies involved in a
merger result in different stakes in the outcome). We also may split votes at
times based on differing views of portfolio managers, but such a split vote
must be approved by the Proxy Review Committee.
A.
Routine Matters.
We generally support routine
management proposals. The following are examples of routine management proposals:
·
|
|
Approval of financial statements and auditor reports.
|
|
|
|
·
|
|
General updating/corrective amendments to the charter.
|
|
|
|
·
|
|
Most proposals related to the conduct of the annual meeting, with the
following exceptions. We may oppose proposals that relate to the transaction
of such other business which may come before the meeting, and open-ended
requests for adjournment. However, where management specifically states
the reason for requesting an adjournment and the requested adjournment is
necessary to permit a proposal that would otherwise be supported under this
Policy to be carried out (i.e. an uncontested corporate transaction), the adjournment request will be supported. Finally, we
generally support shareholder proposals advocating confidential voting
procedures and independent tabulation of voting results.
|
B.
Board of Directors
1.
Election of directors
: In the
absence of a proxy contest, we generally support the boards nominees for
director except as follows:
a. We
withhold or vote against interested directors if the companys board does not
meet market standards for director independence, or if otherwise we believe
board independence is insufficient. We refer to prevalent market standards,
generally as promulgated by a stock exchange or other authority within a given
market (e.g., New York Stock Exchange or Nasdaq
rules for most U.S. companies, and The Combined Code on Corporate
Governance in the United Kingdom). Thus, for a NYSE company with dispersed
ownership, we would expect that at a minimum a majority of directors should be
independent as defined by NYSE. Non-independent directors under NYSE standards
include an employee or an individual with an immediate family member who is an
executive (or in either case was in such position within the previous three
years). A directors consulting arrangements with the company, or material
business relationships between the directors employer and the company, also
impair independence. Market standards notwithstanding, we generally do not view
long board tenure alone as a basis to classify a director as non-independent.
Where we view market standards as inadequate, we may withhold votes based on
stronger independence standards.
b. Depending
on market standards, we consider withholding support from or voting against a
nominee who is interested and who is standing for election as a member of the
companys compensation, nominating or audit committees.
c.
We
consider withholding support or voting against a nominee if we believe a direct
conflict exists between the interests of the nominee and the public
shareholders. This includes consideration for withholding support or voting
against individual board members or an entire slate if we believe the board is
entrenched and dealing inadequately with performance problems, and/or with
insufficient independence between the board and management.
d.
We
consider withholding support from or voting against a nominee standing for
election if the board has not taken action to implement generally accepted
governance practices for which there is a bright line test. In the context of
the U.S. market, these would include elimination of dead hand or slow hand
poison pills, requiring audit, compensation or nominating committees to be
composed of independent directors and requiring a majority independent board.
e.
We
generally withhold support from or vote against a nominee who has failed to
attend at least 75% of board meetings within a given year without a reasonable
excuse.
f.
We
consider withholding support from or voting against a nominee who serves on the
board of directors of more than six companies (excluding investment companies).
We also consider voting against a director who otherwise appears to have too
many commitments to serve adequately on the board of the company.
2.
Board
independence:
We generally support proposals requiring that a certain
percentage (up to 66
2
/
3
%) of the companys board members
be independent directors, and promoting all-independent audit, compensation and
nominating/governance committees.
3.
Board
diversity:
We consider on a case-by-case basis proposals urging
diversity of board membership with respect to social, religious or ethnic group.
4.
Majority
voting:
We generally support proposals requesting or requiring
majority voting policies in election of directors, so long as there is a
carve-out for plurality voting in the case of contested elections.
5.
Proposals
to elect all directors annually:
We generally support proposals to
elect all directors annually at public companies (to declassify the Board of
Directors) where such action is supported by the board, and otherwise consider
the issue on a case-by-case basis.
6.
Cumulative voting:
We generally support proposals to eliminate cumulative voting (which provides
that shareholders may concentrate their votes for one or a handful of
candidates
, a system that can enable a
minority bloc to place representation on a board). Proposals to establish
cumulative voting in the election of directors generally will not be supported.
7.
Separation
of Chairman and CEO positions:
We vote on shareholder proposals to
separate the Chairman and CEO positions and/or to appoint a non-executive
Chairman based in part on prevailing practice in particular markets, since the
context for such a practice varies. In many non-U.S. markets, we view
separation of the roles as a market standard practice, and support division of
the roles in that context.
8.
Director
retirement age:
Proposals recommending set director retirement ages
are voted on a case-by-case basis.
9.
Proposals
to limit directors liability and/or broaden indemnification of directors.
Generally, we will support such proposals provided that the officers and
directors are eligible for indemnification and liability protection if they
have acted in good faith on company business and were found innocent of any
civil or criminal charges for duties performed on behalf of the company.
C. Corporate
transactions and proxy fights.
We examine proposals
relating to mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings
and recapitalizations) on a case-by-case basis. However, proposals for mergers
or other significant transactions that are friendly and approved by the
Research Providers generally will be supported and in those instances will not
need to be reviewed by the Proxy Review Committee, where there is no portfolio
manager objection and where there is no material conflict of interest. We also
analyze proxy contests on a case-by-case basis.
D. Changes
in legal and capital structure.
We generally vote in
favor of management proposals for technical and administrative changes to a
companys charter, articles of association or bylaws. We review non-routine
proposals, including reincorporation to a different jurisdiction, on a
case-by-case basis.
1.
We
generally support the following:
·
Proposals that eliminate other classes of stock and/or eliminate
unequal 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 to authorize 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 generally will be approved if
the resulting increase in authorized shares coincides with the proxy guidelines
set forth above for common stock increases.
·
Proposals for higher dividend
payouts.
2.
We
generally oppose the following (notwithstanding management support):
·
Proposals that add classes of stock
that would 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.
·
Proposals to create blank check
preferred stock.
·
Proposals relating to changes in
capitalization by 100% or more.
E. Takeover
Defenses and Shareholder Rights
1.
Shareholder
rights plans:
We support proposals to require shareholder approval or
ratification of shareholder rights plans (poison pills).
2.
Supermajority
voting requirements:
We generally oppose requirements for supermajority
votes to amend the charter or bylaws, unless the provisions protect minority
shareholders where there is a large shareholder. In line with this view, in the
absence of a large shareholder we support reasonable shareholder proposals to
limit such supermajority voting requirements.
3.
Shareholder
rights to call meetings:
We consider proposals to enhance shareholder
rights to call meetings on a case-by-case basis.
4.
Anti-greenmail
provisions:
Proposals relating to the adoption of anti-greenmail provisions
will be supported, provided that the proposal: (i) defines
greenmail; (ii) prohibits buyback offers to large block holders (holders
of at least 1% of the outstanding shares and in certain cases, a greater
amount, as determined by the Proxy Review Committee) 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.
F. Auditors.
We generally support management proposals for
selection or ratification of independent auditors. However, we may consider
opposing such proposals with reference to incumbent audit firms if the company
has suffered from serious accounting irregularities, or if fees paid to the
auditor for non-audit-related services are excessive. Generally, to determine
if non-audit fees are excessive, a 50% test will be applied (i.e.,
non-audit-related fees should be less than 50% of the total fees paid to the
auditor). Proposals requiring auditors to attend the annual meeting of
shareholders will be supported. We generally vote against proposals to
indemnify auditors.
G. Executive
and Director Remuneration.
1.
We
generally support the following proposals:
·
Proposals relating to director fees,
provided the amounts are not excessive relative to other companies in the
country or industry.
·
Proposals for 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.
·
Proposals for employee equity
compensation plans and other employee ownership plans, provided that our
research does not indicate that approval of the plan would be against
shareholder interest. Such approval may be against shareholder interest if it
authorizes excessive dilution and shareholder cost, particularly in the context
of high usage (run rate) of equity compensation in the recent past; or if
there are objectionable plan design and provisions.
·
Proposals for the establishment of
employee retirement and severance plans, provided that our research does not
indicate that approval of the plan would be against shareholder interest.
2.
Blanket
proposals requiring shareholder approval of all severance agreements will not
be supported, but proposals that require shareholder approval for agreements in
excess of three times the annual compensation (salary and bonus) generally will
be supported.
3.
Proposals
advocating stronger and/or particular pay-for-performance models will be
evaluated on a case-by-case basis, with consideration of the merits of the
individual proposal within the context of the particular company and its
current and past practices.
4.
Proposals
to U.S. companies that request disclosure of executive compensation in addition
to the disclosure required by the Securities and Exchange Commission (SEC)
regulations generally will not be supported.
5.
We
generally support proposals advocating reasonable senior executive and director
stock ownership guidelines and holding requirements for shares gained in option
exercises.
6.
Management
proposals effectively to re-price stock options are considered on a
case-by-case basis. Considerations include the companys reasons and
justifications for a re-pricing, the companys competitive position, whether
senior executives and outside directors are excluded, potential cost to
shareholders, whether the re-pricing or share exchange is on a value-for-value
basis, and whether vesting requirements are extended.
H.
Social, Political and Environmental Issues.
We
consider proposals relating to social, political and environmental issues on a
case-by-case basis to determine whether they will have a financial impact on
shareholder value. However, we generally vote against proposals requesting
reports that are duplicative, related to matters not material to the business,
or that would impose unnecessary or excessive costs. We may abstain from voting
on proposals that do not have a readily determinable financial impact on
shareholder value. We generally oppose proposals requiring adherence to
workplace standards that are not required or customary in market(s) to
which the proposals relate.
I.
Fund of Funds
. Certain Funds
advised by an MSIM Affiliate invest only in other MSIM Funds. If an underlying
fund has a shareholder meeting, in order to avoid any potential conflict of
interest, such proposals will be voted in the same proportion as the votes of
the other shareholders of the underlying fund, unless otherwise determined by
the Proxy Review Committee.
III.
ADMINISTRATION
OF POLICY
The MSIM Proxy Review Committee (the Committee) has overall
responsibility for creating and implementing the Policy, working with an MSIM
staff group (the Corporate Governance Team). The Committee, which is
appointed by MSIMs Chief Investment Officer of
Global Equities (CIO), consists of senior investment professionals who
represent the different investment disciplines and geographic locations of the
firm. Because proxy voting is an investment responsibility and impacts
shareholder value, and because of their knowledge of companies and markets,
portfolio managers and
other
members of
investment staff play a key role in proxy voting, although the Committee has
final authority over proxy votes.
The Committee Chairperson is the head of the Corporate Governance Team,
and is responsible for identifying issues that require Committee deliberation
or ratification. The Corporate Governance Team, working with advice of
investment teams and the Committee, is responsible for voting on routine items
and on matters that can be addressed in line with these Policy guidelines. The
Corporate Governance Team has responsibility for voting case-by-case where
guidelines and precedent provide adequate guidance, and to refer other
case-by-case decisions to the Proxy Review Committee.
The Committee will periodically review and have the authority to amend,
as necessary, the Policy and establish and direct voting positions consistent
with the Client Proxy Standard.
A. Committee
Procedures
The Committee will meet at least monthly to (among other matters)
address any outstanding issues relating to the Policy or its implementation.
The Corporate Governance Team will timely communicate to ISS MSIMs Policy (and any amendments and/or any additional
guidelines or procedures the Committee may adopt).
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 Policy); (2) review
and approve upcoming votes, as appropriate, for matters for which specific
direction has been provided in this Policy; and (3) determine how to vote
matters for which specific direction has not been provided in this Policy.
Members of the Committee may take into account Research Providers
recommendations and research as well as any other relevant information they may
request or receive, including portfolio manager and/or analyst research, as
applicable. Generally, proxies related to securities held in accounts
that are managed pursuant to quantitative, index or index-like strategies (Index
Strategies) will be voted in the same manner as those held in actively managed
accounts, unless economic interests of the accounts differ. Because
accounts managed using Index Strategies are passively managed accounts,
research from portfolio managers and/or analysts related to securities held in
these accounts may not be available. If the affected securities are
held only in accounts that are managed pursuant to Index Strategies, and the
proxy relates to a matter that is not described in this Policy, the Committee
will consider all available information from the Research Providers, and to the
extent that the holdings are significant, from the portfolio managers and/or
analysts.
B. Material
Conflicts of Interest
In addition to the procedures discussed above, if the Committee
determines that an issue raises a material conflict of interest, the Committee
will request a special committee to review, and recommend a course of action
with respect to, the conflict(s) in question (Special Committee).
The Special Committee shall be comprised of the Chairperson of the
Proxy Review Committee, the Chief Compliance Officer or his/her designee, a
senior portfolio manager (if practicable, one who is a member of the Proxy
Review Committee) designated by the Proxy Review Committee, and MSIMs relevant Chief Investment Officer or his/her
designee, and any other persons deemed necessary by the Chairperson. The
Special Committee may request the assistance of MSIMs
General Counsel or his/her designee who will have sole discretion to cast a
vote. In addition to the research provided by Research Providers, the Special
Committee may request analysis from MSIM Affiliate investment professionals and
outside sources to the extent it deems appropriate.
C. Identification
of Material Conflicts of Interest
A potential material conflict of interest could exist in the following
situations, among others:
1.
The
issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the
vote is on a material matter affecting the issuer.
2.
The
proxy relates to Morgan Stanley common stock or any other security issued by
Morgan Stanley or its affiliates except if echo voting is used, as with MSIM
Funds, as described herein.
3.
Morgan
Stanley has a material pecuniary interest in the matter submitted for a vote
(e.g., acting as a financial advisor to a party to a merger or acquisition for
which Morgan Stanley will be paid a success fee if completed).
If the Chairperson of the Committee determines that an issue raises a
potential material conflict of interest, depending on the facts and
circumstances, the Chairperson will address the issue as follows:
1.
If
the matter relates to a topic that is discussed in this Policy, the proposal
will be voted as per the Policy.
2.
If
the matter is not discussed in this Policy or the Policy indicates that the
issue is to be decided case-by-case, the proposal will be voted in a manner
consistent with the Research Providers, provided that all the Research
Providers have the same recommendation, no portfolio manager objects to that
vote, and the vote is consistent with MSIMs Client
Proxy Standard.
3.
If
the Research Providers recommendations differ, the Chairperson will refer the
matter to the Committee to vote on the proposal. If the Committee determines
that an issue raises a material conflict of interest, the Committee will
request a Special Committee to review and recommend a course of action, as
described above. Notwithstanding the above, the Chairperson of the Committee
may request a Special Committee to review a matter at any time as he/she deems
necessary to resolve a conflict.
D. Proxy
Voting Reporting
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 Fund, the Committee and Special Committee,
or their designee(s), will report their decisions to each applicable Board of
Trustees/Directors of those Funds at each Boards 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.
The Corporate Governance Team will timely communicate to applicable
portfolio managers and to ISS, decisions of the Committee and Special Committee
so that, among other things, ISS will vote proxies consistent with their
decisions.
MSIM will promptly provide a copy of this Policy to any client
requesting it. MSIM will also, upon client request, promptly provide a report
indicating how each proxy was voted with respect to securities held in that
clients account.
MSIMs
Legal
Department is responsible for filing an annual Form N-PX on behalf of each
MSIM Fund for which such filing is required, indicating how all proxies were
voted with respect to such Funds holdings.
APPENDIX A
The following procedures apply to accounts managed by Morgan Stanley
AIP GP LP (AIP).
Generally, AIP will follow the guidelines set forth in Section II
of MSIMs Proxy Voting Policy and Procedures. To the
extent that such guidelines do not provide specific direction, or AIP
determines that consistent with the Client Proxy Standard, the guidelines
should not be followed, the Proxy Review Committee has delegated the voting
authority to vote securities held by accounts managed by AIP to the Liquid
Markets investment team and the Private Markets investment team of AIP. A
summary of decisions made by the investment teams will be made available to the
Proxy Review Committee for its information at the next scheduled meeting of the
Proxy Review Committee.
In certain cases, AIP may determine to abstain from determining (or
recommending) how a proxy should be voted (and therefore abstain from voting
such proxy or recommending how such proxy should be voted), such as where the
expected cost of giving due consideration to the proxy does not justify the
potential benefits to the affected account(s) that might result from
adopting or rejecting (as the case may be) the measure in question.
Waiver of Voting Rights
For regulatory reasons, AIP may either 1) invest in a class of
securities of an underlying fund (the Fund) that does not provide for voting
rights; or 2) waive 100% of its voting rights with respect to the following:
1.
Any
rights with respect to the removal or replacement of a director, general
partner, managing member or other person acting in a similar capacity for or on
behalf of the Fund (each individually a Designated Person, and collectively,
the Designated Persons), which may include, but are not limited to, voting on
the election or removal of a Designated Person in the event of such Designated
Persons death, disability, insolvency, bankruptcy, incapacity, or other event
requiring a vote of interest holders of the Fund to remove or replace a
Designated Person; and
2.
Any
rights in connection with a determination to renew, dissolve, liquidate, or
otherwise terminate or continue the Fund, which may include, but are not
limited to, voting on the renewal, dissolution, liquidation, termination or
continuance of the Fund upon the occurrence of an event described in the Funds
organizational documents;
provided
,
however
, that, if the Funds
organizational documents require the consent of the Funds general partner or
manager, as the case may be, for any such termination or continuation of the
Fund to be effective, then AIP may exercise its voting rights with
respect to such matter.
Item 8.
Portfolio Managers of Closed-End
Management Investment Companies
FUND MANAGEMENT
As of the date of this report, the Fund is managed by members of the Asian Equity team. The team consists of portfolio managers and analysts. The member of the team primarily responsible for the day-to-day operation of the Fund is Sebestian Chia, a Vice President of the Sub-Adviser. Mr. Chia has been associated with the Sub-Adviser in an investment management capacity since April 2000 and joined the team managing the Fund in April 2000.
The composition of the team may change without notice from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGER
The following information is as of December 31, 2007.
Mr. Chia managed two registered investment companies with a total of approximately $321.4 million in assets; no pooled investment vehicles other than registered investment companies; and no other accounts.
Because the portfolio manager manages assets for other investment
companies, pooled investment vehicles, and/or other accounts (including
institutional clients, pension plans and certain high net worth individuals),
there may be an incentive to favor one client over another resulting in
conflicts of interest. For instance, the Adviser and/or Sub-Adviser may receive
fees from certain accounts that are higher than the fee it receives from the
Fund, or it may receive a performance-based fee on certain accounts. In those
instances, the portfolio managers may have an incentive to favor the higher
and/or performance-based fee accounts over the Fund. In addition, a conflict of interest could
exist to the extent the Adviser and/or Sub-Adviser has proprietary investments
in certain accounts, where portfolio managers have personal investments in
certain accounts or when certain accounts are investment options in the Advisers
and/or Sub-Advisers employee benefits and/or deferred compensation plans. The portfolio manager may have an incentive
to favor these accounts over others. If
the Adviser and/or Sub-Adviser manage accounts that engage in short sales of
securities of the type in which the Fund invests, the Adviser and/or
Sub-Adviser could be seen as harming the performance of the Fund for the
benefit of the accounts engaged in short sales if the short sales cause the
market value of the securities to fall.
The Adviser has adopted trade allocation and other policies and
procedures that it believes are reasonably designed to address these and other
conflicts of interest.
PORTFOLIO MANAGER
COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and
discretionary compensation, comprised of a cash bonus and several deferred
compensation programs described below. The methodology used to determine
portfolio manager compensation is applied across all accounts managed by the
portfolio managers.
BASE SALARY COMPENSATION.
Generally, portfolio managers receive base salary compensation based on the
level of their position with the Adviser and/or Sub-Adviser.
DISCRETIONARY COMPENSATION.
In addition to base compensation, portfolio managers may receive discretionary
compensation.
Discretionary compensation can include:
·
Cash Bonus;
·
Morgan
Stanleys Long-Term Incentive Compensation Program awards a mandatory program
that defers a portion of discretionary year-end compensation into restricted
stock
units or other awards or other investments based on Morgan Stanley
common stock that are subject to vesting and other conditions;
·
Investment Management Alignment Plan (IMAP)
awards a mandatory program that defers a portion of discretionary year-end
compensation and notionally invests it in designated funds advised by the
Adviser and/or Sub-Adviser or its affiliates. The award is subject to vesting
and other conditions. Portfolio managers must notionally invest a minimum of
25% to a maximum of 100% of the IMAP deferral into a combination of the
designated open-end funds they manage that are included in the IMAP Fund menu;
·
Voluntary Deferred Compensation Plans voluntary
programs that permit certain employees to elect to defer a portion of their
discretionary year-end compensation and directly or notionally invest the
deferred amount: (1) across a range of designated investment funds,
including funds advised by the Adviser or its affiliates; and/or (2) in
Morgan Stanley stock units.
Several factors determine discretionary compensation, which can vary by
portfolio management team and circumstances. In order of relative importance,
these factors include:
·
Investment performance.
A portfolio managers compensation is linked to the pre-tax investment
performance of the funds/accounts managed by the portfolio manager. Investment
performance is calculated for one-, three- and five-year periods measured
against an appropriate securities market index (or indices) for the
funds/accounts managed by the portfolio manager. The assets managed by the
portfolio managers in funds, pooled investment vehicles and other accounts are
described in Other Accounts Managed by the Portfolio Managers above.
Generally, the greatest weight is placed on the three- and five-year periods.
·
Revenues generated by the investment
companies, pooled investment vehicles and other accounts managed by the
portfolio manager.
·
Contribution to the business
objectives of the Adviser and/or Sub-Adviser.
·
The dollar amount of assets
managed by the portfolio manager.
·
Market compensation survey
research by independent third parties.
·
Other qualitative factors,
such as contributions to client objectives.
·
Performance of Morgan
Stanley and Morgan Stanley Investment Management Inc., and the overall
performance of the investment team(s) of which the portfolio is a member.
SECURITIES OWNERSHIP
OF PORTFOLIO MANAGER
As of December 31,
2007, the portfolio manager did not own any shares of the Fund.
Item 9.
Closed-End Fund Repurchases
The Malaysia Fund, Inc.*
|
|
|
|
|
|
TOTAL NUMBER OF
SHARES PURCHASED
AS
|
|
MAXIMUM NUMBER
OF SHARES THAT MAY
|
|
|
|
|
|
|
|
PART OF PUBLICLY
|
|
YET
|
|
|
|
TOTAL NUMBER OF
|
|
AVERAGE PRICE
|
|
ANNOUNCED PLANS
|
|
BE PURCHASED UNDER
|
|
Period
|
|
SHARES PURCHASED
|
|
PAID PER SHARE
|
|
OR PROGRAMS
|
|
THE PLANS OR PROGRAMS
|
|
July
|
|
|
|
|
|
|
|
Unlimited
|
|
August
|
|
|
|
|
|
|
|
Unlimited
|
|
September
|
|
|
|
|
|
|
|
Unlimited
|
|
October
|
|
|
|
|
|
|
|
Unlimited
|
|
November
|
|
23,828
|
|
$
|
9.93
|
|
23,828
|
|
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 Funds principal
executive officer and principal financial officer have concluded that the Funds
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 Commissions 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
registrants internal control over financial reporting that occurred during the
second fiscal quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrants
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
|
|
Name:
|
Ronald
E. Robison
|
Title:
|
Principal
Executive Officer
|
Date:
|
February
15, 2008
|
|
|
|
|
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By:
|
/s/
Ronald E. Robison
|
|
Name:
|
Ronald
E. Robison
|
Title:
|
Principal
Executive Officer
|
Date:
|
February
15, 2008
|
|
|
|
|
By:
|
/s/
James W. Garrett
|
|
Name:
|
James
W. Garrett
|
Title:
|
Principal
Financial Officer
|
Date:
|
February
15, 2008
|
|
|
|
|
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