<PAGE>
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THE
MALAYSIA FUND,
INC.
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FIRST QUARTER REPORT
MARCH 31, 2000
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE MALAYSIA FUND, INC.
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DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin L. Conkey
ASSISTANT TREASURER
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INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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MALAYSIAN INVESTMENT ADVISER
Arab-Malaysian Consultant Sdn Bhd
21st-29th Floors, Bangurian Arab-Malaysian
Jalan Raja Chulan, 5200 Kuala Lampur, Malaysia
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(800) 730-6001
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LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
---------
For the three months ended March 31, 2000, The Malaysia Fund, Inc. (the "Fund")
had a total return, based on net asset value per share, of 23.13% compared to
19.95% for the Kuala Lumpur Stock Exchange Composite Index expressed in U.S.
dollars (the "Index"). For the period from the Fund's commencement of operations
on May 4, 1987 through March 31, 2000, the Fund's total return, based on net
asset value per share, was 18.34% compared to 62.46% for the Index. On March 31,
2000, the closing price of the Fund's shares on the New York Stock Exchange was
$6 1/4, representing a 9.7% discount to the Fund's net asset value per share.
Malaysia was the best performing ASEAN market in the first quarter of 2000.
While the export engine in Malaysia continues to run in top gear, we are seeing
a pick up in domestic consumption. During 1999, GDP growth for Malaysia exceeded
expectations coming in at 5.4%. GDP growth forecasts for the year 2000 have been
upgraded to over 6%. Electronics continue to be the main driver of Malaysian
exports. Even the domestic industrial sector is showing signs of revival as
projects deferred by the crisis are resumed. Strong manufacturing sector growth
is fast trickling to the non-tradeables side, with consumption sharply picking
up.
The expansionary monetary policy leading to an undervalued currency, deficit
spending and record-low interest rates is creating a very favorable environment
for equities. Malaysia is seemingly immune from the influence of rising U.S. and
global interest rates. Imposition of capital controls over the last 18 months
and the subsequent build-up of current account surpluses have allowed Malaysian
interest rates to decouple from the rest of the world. The benchmark three month
KLIBOR is hovering around 3% levels and is unlikely to trend upwards. The
exchange rate continues to be pegged and we believe fair value would be at least
10-15% higher. Though there have been no announced intentions of repegging the
exchange rate we expect that over the next twelve months it is very likely for
Malaysia to revalue the pegged rate in order to stem the inflationary impact of
massive capital inflows. Malaysia is also one of the few countries in Asia,
benefiting from rising oil prices as it is a net exporter of oil.
On the corporate front, most companies are reporting results ahead of
expectations. Companies within the banks, autos and plantations sectors have
surprised on the upside. Consumer and telecommunication sector companies
reported disappointing results. Over the next few quarters, we are likely to see
more earnings upgrades, especially for domestic-oriented companies on the back
of the government's pump priming efforts and the recovery in the stock market.
We have seen upward revisions in banking sector earnings growth following a
strong set of fourth quarter 1999 results.
To a large extent, the rise in the Malaysian stock market has been driven by
investors pre-empting MSCI's reinclusion of Malaysia into its indices at the end
of May 2000. However the thriving technology and export sectors are extremely
under-represented in the listed equity market, leaving very few inspiring
bottom-up stock ideas. The banking and telecommunications sectors' heavyweight
stocks like Maybank and Telekom are trading at the higher end of the historical
valuation range.
Our Fund has been favorably positioned in domestic media companies like Star
Publications and Nanyang Press Holdings. The Fund has also benefited from its
overweight position in Digi Swisscom, a wireless service provider that has been
aggressively gaining market share.
Sincerely,
/s/ Harold Schaaff
Harold J. Schaaff, Jr.*
PRESIDENT AND DIRECTOR
April 2000
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
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DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO
INFORMATION FOR THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement
* HAROLD J. SCHAAFF, JR. WAS ELECTED PRESIDENT AND DIRECTOR OF THE FUND ON
MARCH 20, 2000. MR. SCHAAFF JOINED MORGAN STANLEY DEAN WITTER IN 1989 AND IS A
MANAGING DIRECTOR OF MORGAN STANLEY & CO. INCORPORATED AND MORGAN STANLEY DEAN
WITTER INVESTMENT MANAGEMENT INC. HE FORMERLY SERVED AS GENERAL COUNSEL AND
SECRETARY OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
2
<PAGE>
The Malaysia Fund, Inc.
Investment Summary as of March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
HISTORICAL TOTAL RETURN (%)
INFORMATION ------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
---------------------- --------------------- ---------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year to Date -11.50% -- 23.13% -- 19.95% --
One Year 51.52 51.52% 97.15 97.15% 93.78 93.78%
Five Year -53.90 -14.35 -54.14 -14.44 -34.09 -8.00
Ten Year -25.33 -2.88 -10.14 -1.06 19.86 1.83
Since Inception* 6.88 0.52 18.34 1.31 62.46 3.83
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
ENDED
MARCH 31,
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share....... $12.41 $13.55 $16.28 $27.32 $18.57 $18.58 $19.29 $5.04 $3.02 $5.62 $6.92
Market Value Per Share.......... $11.38 $11.75 $16.25 $28.00 $17.38 $17.00 $17.50 $6.56 $4.00 $7.06 $6.25
Premium/(Discount).............. -8.3% -13.3% -0.2% 2.5% -6.4% -8.5% -9.3% 30.2% 32.5% 25.6% -9.7%
Income Dividends................ $ 0.21 $ 0.07 -- $ 0.16 $ 0.02 -- -- -- $0.03 -- --
Capital Gains Distributions..... -- -- -- $ 1.13 $ 3.59 $ 0.84 $ 2.82 $0.51 -- -- --
Fund Total Return(2)............ -8.35% 9.80% 20.15% 98.28%+ -18.87% 4.33% 19.93% -72.89% 39.70% 86.09% 23.13%
Index Total Return(3)........... -10.02% 9.13% 20.19% 92.60% -19.66% 3.05% 25.12% -68.71% -29.61% 98.04% 19.95%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund
during each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of
a shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The Kuala Lumpur Stock Exchange (KLSE) Composite Index expressed in U.S.
dollars (the "Index") is a broad based capitalization weighted index of 100
stocks listed on the exchange, including dividends. During September 1998,
the Fund adjusted its net asset value and the Index in reaction to the
imposition of capital controls by the Malaysian government. During February
1999, the performance returns for the Fund's net asset value and the Index
were again modified to reflect the relaxation of these capital controls.
* The Fund commenced operations on May 4, 1987.
+ This return does not include the effect of the rights issued in connection
with the Fund's 1993 rights offering.
3
<PAGE>
The Malaysia Fund, Inc.
Portfolio Summary as of March 31, 2000 (Unaudited)
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DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (98.1%)
Short-Term Investments (1.9%)
</TABLE>
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INDUSTRIES
[CHART]
<TABLE>
<S> <C>
Automobile (3.4%)
Banking (18.2%)
Diversified Financials (6.5%)
Diversified Telecommunication Services (8.8%)
Electric Utilities (10.7%)
Hotels Restaurants & Leisure (10.2%)
Marine (3.2%)
Media (7.5%)
Semiconductor Equipment & Products (8.0%)
Wireless Telecommunication Services (4.5%)
Other (19.0%)
</TABLE>
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TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Malayan Banking Bhd 9.2%
2. Telekom Malaysia Bhd 8.8
3. Star Publications (Malaysia) 5.3
4. Tenaga Nasional Bhd 5.1
5. Commerce Asset Holding Bhd 4.6
6. Digi Swisscom Bhd 4.5
7. Resorts World Bhd 4.4
8. Public Bank Bhd 4.3
9. Public Finance Bhd (Foreign) 4.3
10. Unisem (Malaysia) Bhd 4.1
----
54.6%
----
----
</TABLE>
* Excludes short-term investments.
4
<PAGE>
FINANCIAL STATEMENTS
---------
STATEMENT OF NET ASSETS (UNAUDITED)
---------
MARCH 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
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<S> <C> <C>
MALAYSIAN COMMON STOCKS (98.3%)
(Unless otherwise noted)
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AUTO COMPONENTS (0.6%)
APM Automotive Holdings Bhd 554,550 U.S.$ 438
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AUTOMOBILES (3.4%)
Oriental Holdings Bhd 210,000 509
Tan Chong Motor Holdings Bhd 3,697,000 1,751
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2,260
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BANKS (18.2%)
Commerce Asset-Holding Bhd 1,079,000 3,095
Malayan Banking Bhd 1,417,000 6,227
Public Bank Bhd 2,779,000 2,925
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12,247
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BEVERAGES (3.0%)
Carlsberg Brewery (Malaysia) Bhd 415,000 1,584
Guinness Anchor Bhd 430,000 466
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2,050
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DIVERSIFIED FINANCIALS (6.5%)
IOI Corporation Bhd 1,975,000 1,434
Public Finance Bhd (Foreign) 2,222,000 2,924
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4,358
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DIVERSIFIED TELECOMMUNICATION SERVICES (8.8%)
Telekom Malaysia Bhd 1,444,000 5,928
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ELECTRIC UTILITIES (10.1%)
Malakoff Bhd 262,000 697
Malaysian Resources Corp. Bhd 693,000 784
Tenaga Nasional Bhd 1,024,000 3,449
YTL Power International Bhd 2,263,200 1,894
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6,824
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FOOD PRODUCTS(2.1%)
Nestle Bhd 294,000 1,400
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GAS UTILITIES(2.3%)
Petronas Gas Bhd 783,000 1,556
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HOTELS RESTAURANTS & LEISURE (10.2%)
Genting Bhd 557,200 2,317
Resorts World Bhd 892,000 2,958
Tanjong plc 587,000 1,606
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6,881
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HOUSEHOLD PRODUCTS(0.2%)
Warisan TC Holdings Bhd 184,850 126
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INDUSTRIAL CONGLOMERATES (2.5%)
Sime Darby Bhd 1,315,400 U.S.$ 1,717
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INSURANCE(1.2%)
MAA Holdings Bhd 241,000 793
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IT CONSULTING & SERVICES(1.0%)
Computer Systems Advisers Bhd 124,000 692
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MARINE(3.2%)
Malaysian International Shipping Bhd 1,182,000 2,162
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MEDIA(7.5%)
Nanyang Press Holdings Bhd 496,000 1,501
Star Publications (Malaysia) 800,000 3,537
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5,038
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REAL ESTATE(1.8%)
Selangor Properties Bhd 1,782,000 1,219
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SEMICONDUCTOR EQUIPMENT & PRODUCTS(8.0%)
Malaysian Pacific Industries Bhd 195,000 2,617
Unisem (Malaysia) Bhd 264,000 2,744
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5,361
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TOBACCO(3.2%)
British American Tobacco Bhd 283,000 2,160
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WIRELESS TELECOMMUNICATION SERVICES(4.5%)
Digi Swisscom Bhd 1,176,000 3,033
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TOTAL COMMON STOCKS
(Cost U.S.$41,602) 66,243
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NO. OF
WARRANTS
--------------------------------------------------------------------------------
WARRANTS(0.6%)
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ELECTRIC UTILITIES(0.6%)
YTL Power International Bhd,
(Cost U.S.$--@) 2,263,200 399
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5
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
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SHORT-TERM INVESTMENTS(1.8%)
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<S> <C> <C>
REPURCHASE AGREEMENT(1.8%)
Chase Securities, Inc., 5.90%,
dated 3/31/00, due 4/3/00, to
be repurchased at U.S.$1,243,
collateralized by U.S.$1,255
Federal Home Loan Mortgage
Corporation, 5.75%, due
7/15/03 (Cost U.S. $1,242) U.S.$ 1,242 U.S.$ 1,242
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FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN(0.1%)
Malaysian Ringgit
(Cost U.S.$36) MYR 135 35
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TOTAL INVESTMENTS(100.8%)
(Cost U.S.$42,880) 67,919
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OTHER ASSETS AND LIABILITIES (-0.8%)
Other Assets U.S.$ 1,300
Liabilities (1,856) (556)
--------------------------------
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NET ASSETS (100%)
Applicable to 9,738,015 issued and
outstanding U.S.$0.01 par value shares
(20,000,000 shares authorized) U.S.$ 67,363
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NET ASSET VALUE PER SHARE U.S.$ 6.92
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@ -- Value is less than U.S.$500.
</TABLE>
6
