<PAGE>
THE MALAYSIA FUND, INC.
---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS Frederick B. Whittemore
Warren J. Olsen DIRECTOR
PRESIDENT AND DIRECTOR James W. Grisham
Peter J. Chase VICE PRESIDENT
DIRECTOR Harold J. Schaaff, Jr.
John W. Croghan VICE PRESIDENT
DIRECTOR Joseph P. Stadler
David B. Gill VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Graham E. Jones SECRETARY
DIRECTOR James R. Rooney
John A. Levin TREASURER
DIRECTOR Joanna M. Haigney
Dato Malek Merican ASSISTANT TREASURER
DIRECTOR
</TABLE>
---------------------------------------------
U.S. INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
---------------------------------------------------------
MALAYSIAN INVESTMENT ADVISER
Arab-Malaysian Consultant Sdn Bhd
21st-29th Floors, Bangurian Arab-Malaysian
Jalan Raja Chulan, 5200 Kuala Lumpur, Malaysia
---------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street
Boston, Massachusetts 02108
---------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank, N.A. (Domestic)
770 Broadway
New York, New York 10003
---------------------------------------------------------
SHAREHOLDER SERVICING AGENT
The First National Bank of Boston
Investor Relations Department
P.O. Box 644, Mail Stop 45-02-09
Boston, Massachusetts 02102-0644
(617) 575-2900
---------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
---------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
---------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
-------
THE
MALAYSIA FUND,
INC.
-------
THIRD QUARTER REPORT
SEPTEMBER 30, 1995
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- -------
After a relatively strong performance in the first half of 1995, the Malaysian
equity market declined in the third quarter as a robust GDP growth rate of 9.5%
for the first six months of the year rekindled fears of overheating in the
economy. Larger than expected trade and current account deficits further
undermined investor confidence and triggered selling as concerns mounted over
the need for significant monetary tightening in order to slow down consumption
and investment spending. Also aggravating the negative market sentiment was
political infighting, including a perceived rift between the Prime Minister and
the Finance Minister. The Malaysian equity market fell -5.41% as measured by the
U.S. dollar adjusted Kuala Lumpur Stock Exchange ("KLSE") Composite Index during
the third quarter, eroding the year-to-date U.S. dollar adjusted Malaysian
market gain to 4.75%.
The Malaysia Fund, Inc. underperformed the KLSE Composite Index in the third
quarter by 0.90% with a decline of -6.31% in its net asset value per share. The
underperformance was largely due to sharp declines in the share prices of
Resorts World (-12.6%) and Genting (-10.0%) following a landslide incident which
disrupted traffic flow and patronage at the highland casinos. The Fund's
underperformance also was partially attributable to its lower than Index
weightings in Telekom and Tenaga which outperformed the Index due in part to
recent regulatory changes. Together, the two companies comprised 20% of the KLSE
Composite Index. The Fund was constrained from increasing its holdings in the
two stocks under asset diversification requirements applicable to the Fund. On a
year-to-date basis, the Fund managed to outperform the benchmark by a marginal
0.93% with a total return of 5.68% based on net asset value per share compared
to a 4.75% increase for the KLSE Composite Index. The Fund's share price on the
New York Stock Exchange decreased 5.5% to close at $18.25 per share on September
30, 1995, which represents a discount of 6.9% to the underlying net asset value
per share. An interim dividend of $0.0704 per share was distributed in July. On
a year-to-date dividend reinvestment basis, the Fund's market price per share
appreciated by 5.4%.
Fueled by impressive growth rates in the manufacturing and construction sectors
and improved performance in the mining and agricultural sectors, the Malaysian
economy recorded strong growth in the third quarter. However, the fast pace of
growth had a negative impact on external balances. The trade deficit widened to
MR5.5 billion from MR0.8 billion for the same period in 1994. At the current
pace of imports and exports, Malaysia could experience a trade deficit of MR9.0
billion for 1995 and the Malaysian current account deficit could deteriorate to
MR19.8 billion or 9.9% of GNP. As a result of the already wide differential
between Malaysian and Singapore interest rates, Malaysian interest rates are
unlikely to be raised sharply to curtail excessive consumption demands as a
significant interest rate rise would be expected to attract unwanted "hot" money
from the region as well as internationally. Instead, the government is expected
to adopt micro-economic policies to rein in excessive consumer demand. Higher
capital gains taxes and lower margin financing for certain categories of
properties are also expected to be introduced to dampen the level of speculative
activity.
Looking forward, the current account deficit is expected to narrow in the coming
years as imports of capital goods slow down. More immediately, in the absence of
convincing measures in the upcoming budget to address the current account
deficit and inflation problems in the Malaysian economy, our portfolio managers
expect the market to trade within a narrow range for the rest of 1995. Our
portfolio managers believe that while the Malaysian equity market lacks
compelling justification for an upward re-rating, downside risk in the market is
expected to
1
<PAGE>
be underpinned by the valuation of around 20x and 17x prospective 1995 and 1996
price to earnings ratios, which is in line with historical averages. Our
portfolio managers intend to keep the Fund largely invested in large cap "blue
chip" Malaysian stocks which offer defensive attributes while continuing to
exploit opportunities to accumulate long term positions in stocks with robust
fundamentals.
Sincerely,
[SIG]
Warren J. Olsen
PRESIDENT
November 7, 1995
2
<PAGE>
The Malaysia Fund, Inc.
Investment Summary as of September 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
----------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
------------------------ ------------------------ ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT QUARTER -5.49% -- -6.31% -- -5.41% --
FISCAL YEAR TO DATE 5.39 -- 5.68 -- 4.75 --
ONE YEAR -15.45 -15.45% -10.40 -10.40% -9.60 -9.60%
FIVE YEAR 129.66 18.09 144.73 19.60 134.45 18.58
SINCE INCEPTION* 147.90 11.39 166.24 12.34 152.42 11.63
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION (2)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1987* 1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 7.42 $ 8.98 $ 13.77 $ 12.41 $ 13.55 $ 16.28 $ 27.32 $ 18.57
Income Dividends 0.15 0.17 0.11 0.21 0.07 -- 0.16 0.02
Capital Gains and Other Distributions -- -- -- -- -- -- 1.13 3.59
Total Return (1) (32.2%) 23.3% 54.6% (8.4%) 9.8% 20.1% 98.3% (18.9%)
Index Total Return (3) (33.5%) 25.7% 57.9% (10.1%) 9.2% 20.3% 92.5% (19.7%)
<CAPTION>
9 MONTHS ENDED 9/30/95 (UNAUDITED)
<S> <C>
Net Asset Value 19.60
Income Dividends --
Capital Gains and Other Distributions 0.07
Total Return (1) 5.7%
Index Total Return (3) 4.8%
</TABLE>
(1)Assumes dividends and distributions, if any, were reinvested.
(2)Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to differences
between the market price of the stock and the net asset value of the Fund.
(3)U.S. dollar adjusted Kuala Lumpur Stock Exchange (KLSE) Composite Index
* The Fund commenced operations on May 4, 1987.
3
<PAGE>
The Malaysia Fund, Inc.
Portfolio Summary as of September 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 96.8%
Short-Term Investments 3.2%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Leisure & Tourism 14.4%
Banking 12.8%
Multi-Industry 12.5%
Telecommunications 9.3%
Machinery & Engineering 8.6%
Utilities - Electrical &
Gas 7.9%
Financial Services 6.5%
Construction & Housing 4.3%
Beverages & Tobacco 4.1%
Other 19.6%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<C> <S>
1. Genting Bhd
2. Malayan Banking Bhd
3. Telekom Malaysia Bhd
4. United Engineers, Ltd.
5. Resorts World Bhd
6. Renong Bhd
7. Tenaga Nasional Bhd
8. Sime Darby Bhd
9. Rothmans of Pall Mall (Malaysia)
Bhd
10. Petronas Gas Bhd
</TABLE>
4
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
MALAYSIAN COMMON STOCKS (98.1%)
(Unless otherwise noted)
- -----------------------------------------------------------
- -------------
AUTOMOBILES (3.4%)
Cycle & Carriage Bintang Bhd 871,000 U.S.$ 4,022
Edaran Otomobil Nasional Bhd 301,000 2,409
------------
6,431
------------
- -----------------------------------------------------------
- -------------
BANKING (12.8%)
Development & Commercial
Bank Bhd 1,500,000 4,180
Development & Commercial
Bank Bhd (Warrants),
expiring 12/28/99 425,000 430
Malayan Banking Bhd 2,104,100 17,003
Public Bank Bhd (Foreign) 1,496,333 2,776
------------
24,389
------------
- -----------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (4.1%)
Rothmans of Pall Mall
(Malaysia) Bhd 1,005,000 7,802
------------
- -----------------------------------------------------------
- -------------
BUILDING MATERIALS & COMPONENTS (1.5%)
Lingui Developments Bhd 1,368,332 2,887
------------
- -----------------------------------------------------------
- -------------
CHEMICALS (1.1%)
Metacorp Bhd 793,333 2,179
------------
- -----------------------------------------------------------
- -------------
CONSTRUCTION & HOUSING (4.3%)
ACP Industries Bhd 940,000 4,004
Ekran Bhd 698,000 1,945
TH Loy Industries (Malaysia)
Bhd 916,500 2,207
------------
8,156
------------
- -----------------------------------------------------------
- -------------
ELECTRICAL & ELECTRONICS (2.3%)
Time Engineering Bhd 1,591,000 4,275
------------
- -----------------------------------------------------------
- -------------
ELECTRONIC COMPONENTS & INSTRUMENTS (0.7%)
Malaysian Pacific Industries
Bhd 499,000 1,321
------------
- -----------------------------------------------------------
- -------------
FINANCIAL SERVICES (6.5%)
Affin Holdings Bhd 1,600,000 3,044
Hong Leong Credit Bhd 916,199 4,377
MBF Capital Bhd 4,700,000 5,052
------------
12,473
------------
- -----------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (0.4%)
Cold Storage (Malaysia) Bhd 541,000 715
------------
- -----------------------------------------------------------
- -------------
LEISURE & TOURISM (14.4%)
Genting Bhd 1,974,000 17,052
Resorts World Bhd 2,106,666 10,483
------------
27,535
------------
- -----------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
MACHINERY & ENGINEERING (8.6%)
Promet Bhd 2,056,000 U.S.$ 2,537
UMW Holdings Bhd 566,666 1,534
UMW Holdings Bhd (Warrants),
expiring 1/26/00 66,666 58
United Engineers, Ltd. 1,918,000 12,293
------------
16,422
------------
- -----------------------------------------------------------
- -------------
METALS -- NON-FERROUS (1.6%)
Timah Langat Bhd 572,000 3,051
------------
- -----------------------------------------------------------
- -------------
MISCELLANEOUS MATERIALS & COMMODITIES (1.4%)
Kian Joo Can Factory Bhd 626,000 2,666
------------
- -----------------------------------------------------------
- -------------
MULTI-INDUSTRY (12.5%)
Berjaya Sport Toto Bhd 1,000,000 2,110
Hong Leong Industries Bhd 494,000 2,596
Pilecon Engineering Bhd 700,000 736
Pilecon Engineering Bhd
(Warrants), expiring 7/6/99 166,666 66
Renong Bhd 5,920,000 10,275
Sime Darby Bhd 3,044,400 8,120
------------
23,903
------------
- -----------------------------------------------------------
- -------------
REAL ESTATE (1.0%)
Land & General Bhd 343,000 901
Malaysian Resources
Corporation Bhd 60,000 100
Tan & Tan Development Bhd 920,000 901
------------
1,902
------------
- -----------------------------------------------------------
- -------------
TELECOMMUNICATIONS (9.3%)
Technology Resources
Industries Bhd 1,335,000 3,481
Telekom Malaysia Bhd 1,798,000 13,528
Uniphone Telecommunications
Bhd 311,000 381
Uniphone Telecommunications
Bhd (Warrants), expiring
9/7/99 587,000 246
------------
17,636
------------
- -----------------------------------------------------------
- -------------
TRANSPORTATION -- AIRLINES (2.0%)
Malaysia Airline System Bhd 846,000 2,425
Malaysian Helicopter 794,000 1,226
Malaysian Helicopter
(Warrants), expiring
6/11/00 158,800 77
------------
3,728
------------
- -----------------------------------------------------------
- -------------
TRANSPORTATION -- SHIPPING (2.3%)
Malaysian International
Shipping Bhd (Foreign) 1,432,000 4,304
------------
- -----------------------------------------------------------
- -------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
UTILITIES -- ELECTRICAL & GAS (7.9%)
Petronas Gas Bhd 1,490,000 U.S.$ 5,190
Tenaga Nasional Bhd 2,598,000 9,929
------------
15,119
------------
- -----------------------------------------------------------
- -------------
TOTAL MALAYSIAN COMMON STOCKS
(Cost U.S. $125,154) 186,894
------------
- -----------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (0.1%)
- ---------------------------------------------------------
- ------------
REPURCHASE AGREEMENT (0.1%)
Chase Manhattan Bank, N.A.,
6.00%, dated 9/29/95, due
10/2/95 to be repurchased
at U.S.$200, collateralized
by U.S.$165 United States
Treasury Bonds 8.75%, due
8/15/20, valued at U.S.$206
(Cost U.S. $200) U.S.$ 200 200
------------
- -----------------------------------------------------------
- -------------
<CAPTION>
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (3.1%)
(Interest Bearing Demand Account)
Malaysian Ringgit
(Cost U.S. $5,982) MYR 15,078 U.S.$ 6,003
- -----------------------------------------------------------
- -------------
TOTAL INVESTMENTS (101.3%)
(Cost U.S. $131,336) 193,097
------------
- -----------------------------------------------------------
- -------------
OTHER ASSETS AND LIABILITIES (-1.3%)
Other Assets U.S. $ 2,306
Liabilities (4,820) (2,514)
------------- ------------
- -----------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 9,722,148, issued and
outstanding U.S.$.01 par value shares
(20,000,000 shares authorized) U.S.$190,583
-------------
- -----------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 19.60
-------------
- -----------------------------------------------------------
- -------------
</TABLE>
6
