<PAGE>
THE MALAYSIA FUND, INC.
---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Barton M. Biggs Dato Malek Merican
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS William G. Morton, Jr.
Frederick B. Whittemore DIRECTOR
VICE-CHAIRMAN OF THE BOARD James W. Grisham
OF DIRECTORS VICE PRESIDENT
Warren J. Olsen Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR VICE PRESIDENT
Peter J. Chase Joseph P. Stadler
DIRECTOR VICE PRESIDENT
John W. Croghan Valerie Y. Lewis
DIRECTOR SECRETARY
David B. Gill James R. Rooney
DIRECTOR TREASURER
Graham E. Jones Joanna M. Haigney
DIRECTOR ASSISTANT TREASURER
John A. Levin
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
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(617) 575-3120
---------------------------------------------------------
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.
----------
FIRST QUARTER REPORT
MARCH 31, 1996
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the three months ended on March 31, 1996, the total return for The Malaysia
Fund, Inc. (the "Fund"), based on net asset value per share, was 14.86% compared
to 15.72% for the U.S. dollar adjusted Kuala Lumpur Stock Exchange ("KLSE")
Composite Index. For the period since the Fund's commencement of operations on
May 4, 1987 through March 31, 1996, the Fund's total return, based on net asset
value per share, is 201.26% compared with 187.38% for the KLSE Composite Index.
The Fund's share price on the New York Stock Exchange fluctuated between a
premium of 6.8% and a discount of 8.5% to its net asset value during the period
under review. On March 29, 1996, the closing price of the Fund's shares was
$19 7/8, representing a discount of 6.8% to the NAV per share.
After languishing for two years as a consequence of burgeoning current account
deficits and interest rate concerns, the Malaysian markets reacted positively at
the beginning of the year to increasing expectations that the current account
deficits were bottoming out. As foreign funds came back to the Malaysian market,
the KLSE Composite Index's 15.72% gain for the first quarter of 1996 was among
the best performance recorded in the Asian markets for the first quarter of
1996. In addition to growing expectations that the Malaysian economy had begun
to turn the corner, the reduction in the U.S. discount rate boosted investor
sentiment towards equities in the early part of the year and the environment
brightened further with resolutions on tariffs for the two major utilities,
Telekom (+17.7% for the three months ended March 31, 1996) and Tenaga (+7.0% for
the period). Speculation that Petronas Gas (+31.8% for the period) would be
included on the MSCI Index spurred further interest in that stock and helped
propel the KLSE Composite Index upward.
As noted, the Fund performed in line with the U.S. dollar adjusted KLSE
Composite Index with a gain of 14.86%, based on net asset value per share. The
marginal underperformance was due to the Fund's underweighting, resulting from
asset diversification requirements to which the Fund is subject, in Telekom
(8.0%) and Petronas Gas (4.8%) versus their respective compositions of 12.5% and
5.7% in the KLSE Composite Index.
Although the monthly trade statistics are expected to show some gyrations, the
overall trend over the next two years should improve with exports growing as a
result of increased production coming onstream and a slowing of imports of
capital goods. The current account deficit is forecast to improve from RM 17.8
billion (8.8% of GNP) in 1995 to RM 17.0 billion (7.5% of GNP) in 1996. With the
economy running at full employment, GDP growth is expected to slow in 1996 to
8.3% from a heady 9.5% in 1995. The Central Bank is expected to maintain a tight
grip on monetary policy and consequently, inflation as measured by the Consumer
Price Index, which improved from 3.7% in 1994 to 3.4% in 1995, is not expected
to exceed 4.0% in 1996. While the backdrop of a gradually improving
macro-economic picture will continue to bode well for the Malaysian stock
market, upside in the market is expected to be constrained by an already high
valuation of around 22.5x prospective 1996 earnings. The Fund will continue to
overweight the banking, gaming and construction sectors and will take actions to
reduce investment levels on further market strength.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT
[SIGNATURE]
Ean Wah Chin
SENIOR PORTFOLIO MANAGER
[SIGNATURE]
Joseph Tern
PORTFOLIO MANAGER
May 9, 1996
2
<PAGE>
The Malaysia Fund, Inc.
Investment Summary as of March 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION (UNAUDITED)
TOTAL RETURN (%)
----------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3)
------------------------ ------------------------ ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE 16.91% -- 14.86% -- 15.72% --
ONE YEAR 21.02 21.02% 16.75 16.75% 16.61 16.61%
FIVE YEAR 100.99+ 14.98+ 126.24+ 17.74+ 113.78 16.41
SINCE INCEPTION* 180.58+ 12.27+ 201.26+ 13.17+ 187.38 12.57
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987* 1988 1989 1990 1991 1992 1993 1994 1995
Net Asset Value Per Share $ 7.42 $ 8.98 $ 13.77 $ 12.41 $ 13.55 $ 16.28 $ 27.32 $ 18.57 $18.58
Market Value Per Share $ 5.88 $ 7.50 $ 18.75 $ 11.38 $ 11.75 $ 16.25 $ 28.00 $ 17.38 $17.00
Premium/(Discount) -20.8% -16.5% 36.2% -8.3% -13.3% -0.2% 2.5% -6.4% -8.5%
Income Dividends $0.15 $0.17 $0.11 $0.21 $0.07 - $0.16 $0.02 -
Capital Gains Distributions - - - - - - $1.13 $3.59 $0.84
Fund Total Return (2) -32.20% 23.32% 54.57% -8.35% 9.80% 20.15% 98.28%+ -18.87% 4.33%
Index Total Return (1)(3)** -33.54% 25.73% 57.91% -10.02% 9.13% 20.19% 92.60% -19.66% 3.05%
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31: MARCH 31,1996
<S> <C>
(Unaudited)
Net Asset Value Per Share $21.34
Market Value Per Share $19.88
Premium/(Discount) -6.8%
Income Dividends -
Capital Gains Distributions -
Fund Total Return (2) 14.86%
Index Total Return (1)(3)** 15.72%
</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. This return does not include the effect of dilution in
connection with the Rights Offering. These percentages are not an indication
of the performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the net
asset value per share of the Fund.
(3) U.S. dollar adjusted Kuala Lumpur Stock Exchange (KLSE) Composite Index.
* The Fund commenced operations on May 4, 1987.
** Unaudited.
+ Adjusted for Rights Offering.
3
<PAGE>
The Malaysia Fund, Inc.
Portfolio Summary as of March 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 98.4%
Short-Term Investments 1.6%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 13.8%
Beverages & Tobacco 4.0%
Construction & Housing 3.3%
Financial Services 8.1%
Leisure & Tourism 14.4%
Machinery & Engineering 5.6%
Metals - Non-Ferrous 2.8%
Multi-Industry 12.7%
Telecommunications 9.4%
Utilities - Electrical &
Gas 10.1%
Other 15.8%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
---------------
<C> <S> <C>
1. Malayan Banking Bhd 8.8%
2. Genting Bhd 8.6
3. Telekom Malaysia Bhd 8.0
4. Resorts World Bhd 5.8
5. United Engineers, Ltd. 5.6
<CAPTION>
PERCENT OF
NET ASSETS
---------------
<C> <S> <C>
6. Tenaga Nasional Bhd 5.3%
7. Petronas Gas Bhd 4.8
8. Renong Bhd 4.3
9. Rothmans of Pall Mall (Malaysia) Bhd 4.0
10. Sime Darby Bhd 3.7
---
58.9%
---
---
</TABLE>
4
<PAGE>
INVESTMENTS (UNUADITED)
- ---------
MARCH 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
MALAYSIAN COMMON STOCKS (98.8%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
AUTOMOBILES (2.2%)
Cycle & Carriage Bintang Bhd 378,000 U.S.$ 2,376
Edaran Otomobil Nasional Bhd 251,000 2,252
--------------
4,628
--------------
- -----------------------------------------------------------------
- -------------
BANKING (13.8%)
DCB Holdings Bhd 1,500,000 5,158
Malayan Banking Bhd 1,954,100 18,228
Public Bank Bhd (Foreign) 1,496,333 4,140
Southern Bank Bhd (Foreign) 500,000 1,156
--------------
28,682
--------------
- -----------------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (4.0%)
Rothmans of Pall Mall (Malaysia) Bhd 865,000 8,342
--------------
- -----------------------------------------------------------------
- -------------
BUILDING MATERIALS & COMPONENTS (1.2%)
Lingui Developments Bhd 1,068,332 2,555
--------------
- -----------------------------------------------------------------
- -------------
CHEMICALS (1.0%)
Metacorp Bhd 693,333 2,124
--------------
- -----------------------------------------------------------------
- -------------
CONSTRUCTION & HOUSING (3.3%)
ACP Industries Bhd 890,000 3,518
Asas Dunia Bhd 300,000 1,109
Ekran Bhd 698,000 2,303
--------------
6,930
--------------
- -----------------------------------------------------------------
- -------------
ELECTRICAL & ELECTRONICS (1.4%)
Time Engineering Bhd 1,000,000 2,905
--------------
- -----------------------------------------------------------------
- -------------
FINANCIAL SERVICES (8.1%)
Hong Leong Credit Bhd 916,199 4,309
Intiplus Bhd 500,000 427
MBF Capital Bhd 4,700,000 6,205
Rashid Hussain Bhd 650,000 2,068
TA Enterprise Bhd 2,420,000 3,884
--------------
16,893
--------------
- -----------------------------------------------------------------
- -------------
FOREST PRODUCTS & PAPER (1.5%)
Jaya Tiasa Holdings 500,000 3,201
--------------
- -----------------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (1.9%)
Leader Universal Cable Holdings 1,346,000 3,831
--------------
- -----------------------------------------------------------------
- -------------
LEISURE & TOURISM (14.4%)
Genting Bhd 1,974,000 17,867
Resorts World Bhd 2,106,666 11,991
--------------
29,858
--------------
- -----------------------------------------------------------------
- -------------
MACHINERY & ENGINEERING (5.6%)
United Engineers, Ltd. 1,668,000 11,538
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------
- ----------
METALS -- NON-FERROUS (2.8%)
Timah Langat Bhd 778,000 U.S.$ 5,781
--------------
- -----------------------------------------------------------------
- -------------
MISCELLANEOUS MATERIALS & COMMODITIES (1.1%)
Kian Joo Can Factory Bhd 412,000 2,296
--------------
- -----------------------------------------------------------------
- -------------
MULTI-INDUSTRY (12.7%)
Berjaya Sports Toto Bhd 1,000,000 3,004
Hong Leong Industries Bhd 494,000 2,499
Renong Bhd 5,520,000 8,989
Renong Bhd (Rights) 1,104,000 --
Road Builder Holdings Bhd 1,000,000 3,834
Sime Darby Bhd 2,809,400 7,773
--------------
26,099
--------------
- -----------------------------------------------------------------
- -------------
REAL ESTATE (0.8%)
Land & General Bhd 643,000 1,703
--------------
- -----------------------------------------------------------------
- -------------
TELECOMMUNICATIONS (9.4%)
Technology Resources Industries Bhd 837,000 3,010
Telekom Malaysia Bhd 1,798,000 16,559
--------------
19,569
--------------
- -----------------------------------------------------------------
- -------------
TRANSPORTATION -- AIRLINES (0.9%)
Malaysia Airline System Bhd 546,000 1,770
Malaysian Helicopter Bhd (Warrants)
expiring 6/11/00 158,800 74
--------------
1,844
--------------
- -----------------------------------------------------------------
- -------------
TRANSPORTATION -- SHIPPING (2.6%)
Konsortium Perkapalan Bhd 400,000 1,391
Malaysian International Shipping Bhd
(Foreign) 1,432,000 4,047
--------------
5,438
--------------
- -----------------------------------------------------------------
- -------------
UTILITIES -- ELECTRICAL & GAS (10.1%)
Petronas Gas Bhd 2,200,000 9,913
Tenaga Nasional Bhd 2,598,000 10,988
--------------
20,901
--------------
- -----------------------------------------------------------------
- -------------
TOTAL MALAYSIAN COMMON STOCKS
(Cost U.S. $123,049) 205,118
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (0.1%)
- ---------------------------------------------------------
- ------------
REPURCHASE AGREEMENT (0.1%)
The Chase Manhattan Bank, N.A. 5.15%,
dated 3/29/96, due 4/1/96, to be
repurchased at U.S.$253,
collateralized by U.S.$170 United
States Treasury Bonds 11.25%, due
2/15/15, valued at U.S.$259 (Cost
$253) U.S.$ 253 253
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT VALUE
(000) (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT
WITH CUSTODIAN (1.5%)
(Interest Bearing Demand Account)
Malaysian Ringgit (Cost U.S. $3,147) MYR 8,004 U.S.$ 3,163
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (100.4%)
(Cost U.S. $126,449) 208,534
--------------
- -----------------------------------------------------------------
- -------------
OTHER ASSETS AND LIABILITIES (-0.4%)
Other Assets U.S.$ 1,771
Liabilities (2,640) (869)
--------------- --------------
- -----------------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 9,732,966, issued and outstanding U.S.
$0.01 par value shares (20,000,000 shares authorized) U.S.$207,665
--------------
--------------
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$21.34
--------------
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
6
