<Page>
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
---------------------------------------------
The Malaysia Fund, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-221-6726
----------------------------
Date of fiscal year end: 12/31
--------------------------
Date of reporting period: 6/30/04
-------------------------
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.
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
<Page>
SEMI-ANNUAL REPORT
THE MALAYSIA FUND, INC.
DIRECTORS
CHARLES A. FIUMEFREDDO JOSEPH J. McALINDEN JUNE 30, 2004
VICE PRESIDENT
MICHAEL BOZIC
EDWIN J. GARN BARRY FINK
VICE PRESIDENT
WAYNE E. HEDIEN
JAMES F. HIGGINS STEFANIE V. CHANG
VICE PRESIDENT
DR. MANUEL H. JOHNSON
JOSEPH J. KEARNS AMY R. DOBERMAN
VICE PRESIDENT
MICHAEL NUGENT
FERGUS REID JAMES W. GARRETT
TREASURER AND CHIEF
OFFICERS FINANCIAL OFFICER
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD MICHAEL J. LEARY [MORGAN STANLEY LOGO]
ASSISTANT TREASURER
MITCHELL M. MERIN
PRESIDENT MARY E. MULLIN
SECRETARY
RONALD E. ROBISON
EXECUTIVE VICE PRESIDENT THE MALAYSIA FUND, INC.
AND PRINCIPAL EXECUTIVE
OFFICER
U.S. INVESTMENT ADVISER
MORGAN STANLEY INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
MALAYSIAN INVESTMENT ADVISER
AMMB CONSULTANT SDN BHD
9TH FLOOR, BANGURIAN ARAB-MALAYSIAN
55 JALAN RAJA CHULAN, 50200
KUALA LUMPUR, MALAYSIA
ADMINISTRATOR
JPMORGAN INVESTOR SERVICES COMPANY
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108
CUSTODIAN
JPMORGAN CHASE BANK
270 PARK AVENUE
NEW YORK, NEW YORK 10017
STOCKHOLDER SERVICING AGENT
AMERICAN STOCK TRANSFER & TRUST COMPANY
59 MAIDEN LANE
NEW YORK, NEW YORK 10030
1 (800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR ADDITIONAL FUND INFORMATION, INCLUDING THE
FUND'S NET ASSET VALUE PER SHARE AND INFORMATION
REGARDING THE INVESTMENTS COMPRISING THE FUND'S MORGAN STANLEY
PORTFOLIO, PLEASE CALL 1-800-221-6726 OR VISIT OUR INVESTMENT MANAGEMENT INC.
WEBSITE AT www.morganstanley.com/im. INVESTMENT ADVISER
(C) 2004 MORGAN STANLEY
<Page>
THE MALAYSIA FUND, INC.
LETTER TO STOCKHOLDERS
Overview
PERFORMANCE
For the six months ended June 30, 2004, The Malaysia Fund, Inc. (the "Fund") had
a total return, based on net asset value per share of 0.17%, compared to 3.26%
for the Kuala Lumpur Stock Exchange Composite Index (the "Index") expressed in
U.S. dollars. On June 30, 2004, the closing price of the Fund's shares on the
New York Stock Exchange was $5.31, representing a 8.0% discount to the Fund's
net asset value per share.
FACTORS AFFECTING PERFORMANCE
- The Malaysian market was one of the better performing markets during the
first six months of the year, starting strong with the Index increasing by
13.6% in the first quarter, with sentiments lifted by the new Prime
Minister's goals to restructure the government-linked companies, which
account for a significant portion of the Index.
- The weak external environments weighed down the market's performance in the
second quarter.
- The economy continued its growth momentum with real gross domestic product
rising at a pace of 7.6% in the first quarter of 2004 from 6.6% in the
fourth quarter of 2003.
- Growth was driven mostly by the private sector through higher consumption
and investment, which in turn were helped by Malaysia's accommodative
interest rate environment.
- Corporate earnings for the first six months were mostly in line with
expectations with banks surprising on the upside, due to higher
non-interest income.
MANAGEMENT STRATEGIES
- We believe the outlook for the market is positive as higher domestic demand
leads to better pricing power and top line growth for sectors such as
property and banks.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President--
Principal Executive Officer
July 2004
2
<Page>
THE MALAYSIA FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2004 (unaudited)
<Table>
<Caption>
VALUE
SHARES (000)
- -----------------------------------------------------------------------------------------
MALAYSIAN COMMON STOCKS: (97.7%)
(UNLESS OTHERWISE NOTED)
AUTOMOBILES (1.1%)
TAN Chong Motor Holdings Bhd 1,896,000 $ 609
=========================================================================================
COMMERCIAL BANKS (23.0%)
Commerce Asset Holdings Bhd 2,446,000 3,128
Malayan Banking Bhd 2,125,500 5,649
Public Bank Bhd 2,582,390 4,112
- -----------------------------------------------------------------------------------------
12,889
=========================================================================================
CONSTRUCTION & ENGINEERING (7.0%)
Gamuda Bhd 1,181,000 1,694
IJM Corp. Bhd 743,000 935
Road Builder (Malaysia)
Holdings Bhd 1,769,000 1,261
- -----------------------------------------------------------------------------------------
3,890
=========================================================================================
CONSTRUCTION MATERIALS (1.7%)
TRC Synergy Bhd 2,252,400 972
=========================================================================================
DIVERSIFIED FINANCIAL SERVICES (4.0%)
CIMB Bhd 1,435,500 2,115
IOI Oleochemical Industries Bhd 39,041 96
- -----------------------------------------------------------------------------------------
2,211
=========================================================================================
DIVERSIFIED TELECOMMUNICATION SERVICES (5.9%)
Telekom Malaysia Bhd 1,224,000 3,318
=========================================================================================
ELECTRIC UTILITIES (4.1%)
YTL Corp. Bhd 1,833,500 2,268
=========================================================================================
HOTELS, RESTAURANTS & LEISURE (14.6%)
Genting Bhd 615,800 2,479
Magnum Corp. Bhd 3,268,000 2,090
Resorts World Bhd 923,700 2,176
Tanjong plc 435,000 1,431
- -----------------------------------------------------------------------------------------
8,176
=========================================================================================
INDUSTRIAL CONGLOMERATES (4.3%)
Malaysian Resources Corp. Bhd (a)462,000 87
Sime Darby Bhd 1,572,000 2,296
- -----------------------------------------------------------------------------------------
2,383
=========================================================================================
INSURANCE (1.5%)
MAA Holdings Bhd 607,000 846
=========================================================================================
INFORMATION TECHNOLOGY SERVICES (1.2%)
Computer Systems Advisers Bhd 718,600 650
=========================================================================================
MARINE (6.1%)
Malaysia International Shipping
Corp. Bhd 459,000 1,425
Naim Cendera Holdings Bhd 2,311,000 2,007
- -----------------------------------------------------------------------------------------
3,432
=========================================================================================
MEDIA (3.3%)
Star Publications Malaysia Bhd 1,065,000 $ 1,822
=========================================================================================
REAL ESTATE (7.3%)
IOI Properties Bhd 415,000 748
Selangor Properties Bhd 1,105,000 657
SP Setia Bhd 2,565,499 2,674
- -----------------------------------------------------------------------------------------
4,079
=========================================================================================
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (8.5%)
Malaysian Pacific Industries Bhd 600,000 2,447
Unisem (Malaysia) Bhd 1,116,000 2,320
- -----------------------------------------------------------------------------------------
4,767
=========================================================================================
SPECIALTY RETAIL (1.1%)
Courts Mammoth Bhd 1,253,000 640
=========================================================================================
TOBACCO (3.0%)
British American Tobacco
(Malaysia) Bhd 126,000 1,674
=========================================================================================
TOTAL COMMON STOCKS
(Cost $45,127) 54,626
=========================================================================================
<Caption>
FACE
AMOUNT
(000)
- -----------------------------------------------------------------------------------------
CORPORATE BOND (0.1%)
MEDIA (0.1%)
Media Prima Bhd
2.0%, 7/18/08 (Cost $101) MYR 100 25
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.3%)
REPURCHASE AGREEMENT (1.3%)
J.P. Morgan Securities, Inc., 1.25%,
dated 6/30/04, due 7/1/04,
repurchase price $734
(Cost $734) $ (b)734 734
=========================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 3
<Page>
THE MALAYSIA FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
<Table>
<Caption>
VALUE
(000)
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.1%)
(Cost $45,962) $ 55,385
=========================================================================================
<Caption>
AMOUNT
(000)
- -----------------------------------------------------------------------------------------
OTHER ASSETS (1.3%)
Cash $ 1
Foreign Currency
(Cost $624) 624
Dividends Receivable 90
Other 9 724
=========================================================================================
LIABILITIES (-0.4%)
Payable For:
U.S. Investment Advisory Fees (40)
Malaysian Investment Advisory
Fees (34)
Directors' Fees and Expenses (14)
Custodian Fees (5)
Administrative Fees (6)
Other Liabilities (101) (200)
=========================================================================================
NET ASSETS (100%)
Applicable to 9,687,235, issued and outstanding
$ 0.01 par value shares (20,000,000 shares
authorized) $ 55,909
=========================================================================================
NET ASSETS VALUE PER SHARE $ 5.77
=========================================================================================
AT JUNE 30, 2004, NET ASSETS CONSISTED OF:
Common Stock $ 97
Paid-in Capital 119,992
Undistributed (Distributions in Excess of) Net
Investment Income (235)
Accumulated Net Realized Gain (Loss) (73,368)
Unrealized Appreciation (Depreciation)
on Investments 9,423
=========================================================================================
TOTAL NET ASSETS $ 55,909
=========================================================================================
</Table>
(a) Non-income producing.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated funds.
MYR Malaysian Ringgit
4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<Page>
THE MALAYSIA FUND, INC.
Financial Statements
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, 2004
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $173 of foreign taxes withheld) $ 856
Interest 2
==========================================================================================================================
TOTAL INCOME 858
==========================================================================================================================
EXPENSES
U.S. Investment Advisory Fees 255
Malaysian Investment Advisory Fees 69
Professional Fees 36
Proxy Fees 30
Custodian Fees 26
Administrative Fees 23
Stockholder Reporting Expenses 18
Directors' Fees and Expenses 1
Other Expenses 22
==========================================================================================================================
TOTAL EXPENSES 480
==========================================================================================================================
NET INVESTMENT INCOME (LOSS) 378
==========================================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments 1,305
Foreign Currency Transactions (24)
==========================================================================================================================
NET REALIZED GAIN (LOSS) 1,281
==========================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (1,522)
==========================================================================================================================
NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (241)
==========================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 137
==========================================================================================================================
</Table>
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- --------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 378 $ 573
Net Realized Gain (Loss) 1,281 3,816
Change in Unrealized Appreciation (Depreciation) (1,522) 7,971
==========================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 137 12,360
==========================================================================================================================
Distributions from and/or in excess of:
Net Investment Income -- (1,495)
==========================================================================================================================
Capital Share Transactions:
Reinvestment of Shares (2,321 shares in 2004) 14 --
Repurchase of Shares (28,936 shares in 2003) -- (119)
==========================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 14 (119)
==========================================================================================================================
TOTAL INCREASE (DECREASE) 151 10,746
==========================================================================================================================
Net Assets:
Beginning of Period 55,758 45,012
==========================================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT
INCOME OF $(235) AND $(613), RESPECTIVELY) $55,909 $55,758
==========================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5
<Page>
THE MALAYSIA FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
Financial Highlights
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 -----------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.76 $ 4.63 $ 5.00 $ 4.73 $ 5.62 $ 3.02
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.04++ 0.06++ 0.03++ 0.04 0.03 0.01
Net Realized and Unrealized Gain (Loss) on
Investments (0.03) 1.22 0.25) 0.27 (0.81) 2.59
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.01 1.28 (0.22) 0.31 (0.78) 2.60
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income -- (0.15) (0.15) (0.04) (0.11) --
- -----------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Share Repurchase Program -- 0.00# 0.00# -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.77 $ 5.76 $ 4.63 $ 5.00 $ 4.73 $ 5.62
===================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 5.31 $ 6.01 $ 3.85 $ 3.92 $ 3.75 $ 7.06
===================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value (11.65)%** 60.33% 1.86% 5.64% (45.77)% 76.56%
Net Asset Value (1) 0.17%** 27.67% (3.89)% 6.83% (14.04)% 86.09% +
===================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $55,909 $ 55,758 $45,012 $48,703 $46,020 $54,740
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.64%* 1.78% 1.67% 2.03% 1.78% 2.24%
Ratio of Net Investment Income (Loss)
to Average Net Assets 1.29%* 1.16% 0.65% 0.93% 0.44% 0.27%
Portfolio Turnover Rate 3%** 29% 35% 21% 21% 37%
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This percentage is not an indication of the performance of a
stockholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
+ During the period from September 1998 to February 1999, the Fund adjusted
its net asset value in reaction to the imposition of capital controls by
the Malaysian government. During February 1999, the Fund's net asset value
was again modified to reflect the relaxation of these capital controls. The
result of such adjustment was a decrease to the total return in 1998 and an
increase to the total return in 1999.
++ Per share amount is based on average shares outstanding.
# Amount is less than $0.005 per share.
* Annualized
** Not Annualized
6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<Page>
THE MALAYSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 (unaudited)
The Malaysia Fund, Inc. (the "Fund") was incorporated on March 12, 1987 and
is registered as a diversified, closed-end management investment company under
the Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund's
investment objective is long-term capital appreciation through investment
primarily in equity securities.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with accounting principles generally accepted in the United States.
Such policies are consistently followed by the Fund in the preparation of its
financial statements. Accounting principles generally accepted in the United
States may require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued
at the latest quoted sales price on the valuation date. Equity securities
listed or traded on NASDAQ, for which market quotations are available, are
valued at the NASDAQ Official Closing Price. Securities listed on a foreign
exchange are valued at their closing price. Unlisted securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean between the current bid and asked
prices obtained from reputable brokers. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates value.
All other securities and investments for which market values are not
readily available, including restricted securities, and those securities
for which it is inappropriate to determine prices in accordance with the
aforementioned procedures, are valued at fair value as determined in good
faith under procedures adopted by the Board of Directors, although the
actual calculations may be done by others. Factors considered in making
this determination may include, but are not limited to, information
obtained by contacting the issuer, analysts, or the appropriate stock
exchange (for exchange-traded securities), analysis of the issuer's
financial statements or other available documents and, if necessary,
available information concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of
securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on
which the securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value of the securities,
the valuations may be adjusted to reflect the estimated fair value as of
the close of the NYSE, as determined in good faith under procedures
established by the Board of Directors.
2. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
The Fund, along with other affiliated investment companies, may utilize a
joint trading account for the purpose of entering into one or more
repurchase agreements.
3. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the mean of the bid and asked prices of such currencies
against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rate of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
7
<Page>
THE MALAYSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
changes in the market prices of the securities held at period end.
Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) due to securities transactions
are included in the reported net realized and unrealized gains (losses) on
investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized currency gains (losses) from valuing foreign currency
denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) on
investments and foreign currency translations in the Statement of Net
Assets. The change in net unrealized currency gains (losses) on foreign
currency translations for the period is reflected in the Statement of
Operations.
A significant portion of the Fund's net assets consist of Malaysian equity
securities and foreign currency. Future economic and political developments
in Malaysia could adversely affect the liquidity or value, or both, of
securities in which the Fund is invested. Changes in currency exchange
rates will affect the value of and investment income from such investments.
Foreign securities may be subject to greater price volatility, lower
liquidity and less diversity than equity securities of companies based in
the United States. In addition, foreign securities may be subject to
substantial governmental involvement in the economy and greater social,
economic and political uncertainty.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund has utilized
and their associated risks:
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
5. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date (except certain dividends which may be recorded as
soon as the Fund is informed of such dividends) net of applicable
withholding taxes. Distributions to stockholders are recorded on the
ex-dividend date.
B. ADVISERS: Morgan Stanley Investment Management Inc. (the "U.S. Adviser")
provides investment advisory services to the Fund under the terms of an
Investment Advisory Agreement (the "Agreement"). Under the Agreement, the U.S.
Adviser is paid a fee computed weekly and payable monthly at an annual rate of
0.90% of the Fund's first $50 million of average weekly net assets, 0.70% of the
Fund's next $50 million of average weekly net assets and 0.50% of the Fund's
average weekly net assets in excess of $100 million.
AMMB Consultant Sdn Bhd (the "Malaysian Adviser") provides investment advice,
research and assistance on behalf of the Fund to Morgan Stanley Investment
Management Inc.
8
<Page>
THE MALAYSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
under terms of a contract. Under the contract, the Malaysian Adviser is paid a
fee computed weekly and payable monthly at an annual rate of 0.25% of the Fund's
first $50 million of average weekly net assets, 0.15% of the Fund's next $50
million of average weekly net assets and 0.10% of the Fund's average weekly net
assets in excess of $100 million.
C. ADMINISTRATOR: JPMorgan Chase Bank, through its corporate affiliate J.P.
Morgan Investor Services Company (the "Administrator"), provides administrative
services to the Fund under an Administration Agreement. The Administrator is
paid a fee computed weekly and payable monthly at an annual rate of 0.02435% of
the Fund's average weekly net assets, plus $24,000 per annum. In addition, the
Fund is charged certain out of pocket expenses incurred by the Administrator on
its behalf. An employee of the Administrator is an Officer of the Fund.
D. CUSTODIAN: JPMorgan Chase Bank serves as custodian for the Fund. The
Custodian holds cash, securities, and other assets of the Fund as required by
the 1940 Act. Custody fees are payable monthly based on assets held in custody,
investment purchases and sales activity and account maintenance fees, plus
reimbursement for certain out-of-pocket expenses.
E. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to stockholders are recorded on
the ex-dividend date.
The 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 2003 and 2002 were as follows:
<Table>
<Caption>
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
- ------------------------- ------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
- -----------------------------------------------------
$1,495 $-- $1,492 $--
</Table>
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 accounting principles generally accepted in the United States.
The book/tax differences are considered either temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications among
undistributed (distributions in excess of) net investment income (or accumulated
net investment loss), accumulated net realized gain (loss) and paid-in capital.
At June 30, 2004, the U.S. Federal income tax cost basis of investments was
$45,962,000 and, accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was $9,423,000, of which $12,863,000 related to appreciated
securities and $3,440,000 related to depreciated securities.
At December 31, 2003, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $73,808,000 available to offset future
capital gains of which $3,400,000 will expire on December 31, 2005, $65,683,000
will expire on December 31, 2006, $2,720,000 will expire on December 31, 2007,
and $2,005,000 will expire on December 31, 2009.
To the extent that capital loss carryforwards are used to offset any future
capital gains realized during the carryover period as provided by U.S. Federal
income tax regulations, no capital gains tax liability will be incurred by the
Fund for gains realized and not distributed. To the extent that capital gains
are offset, such gains will not be distributed to the stockholders.
Net capital, currency and passive foreign investment company losses incurred
after October 31, 2003 and within the taxable year are deemed to arise on the
first business day of the Fund's next taxable year. For the year ended December
31, 2003, the Fund deferred to January 1, 2004, for U.S. Federal income tax
purposes, post-October passive foreign investment company losses of $1,000.
F. CONTRACTUAL OBLIGATIONS: The Fund enters into contracts that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
G. OTHER: During the six months ended June 30, 2004, the Fund made purchases
and sales totaling approximately $3,477,000 and $1,918,000, 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.
9
<Page>
THE MALAYSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
On July 15, 2002, the Fund commenced a share repurchase program for purposes of
enhancing stockholder value and reducing the discount at which the Fund's shares
traded from their net asset value. During the six months ended June 30, 2004,
the Fund did not repurchase any of its shares. Since the inception of the
program, the Fund has repurchased 53,103 of its shares at an average discount of
16.78% from net asset value per share. The Fund expects to continue to
repurchase its outstanding shares at such time and in such amounts as it
believes will further the accomplishment of the foregoing objectives, subject to
review by the Board of Directors.
H. SUPPLEMENTAL PROXY INFORMATION:
The Annual Meeting of the Stockholders of the Fund was held on June 22, 2004.
The following is a summary of the proposal presented and the total number of
shares voted:
PROPOSAL:
1. To elect the following Directors:
<Table>
<Caption>
VOTES IN VOTES
FAVOR OF AGAINST
- ----------------------------------------------------------
Wayne E. Hedien 5,409,060 517,933
James F. Higgins 5,409,060 517,933
Dr. Manuel H. Johnson 5,412,113 514,880
</Table>
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A copy of (1) the Fund's policies and procedures with respect to the voting of
proxies relating to the Fund's portfolio securities; and (2) how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30, 2004 is available without charge, upon request, by calling
1-800-548-7786 or by visiting our website at www.morganstanley.com/im. This
information is also available on the Securities and Exchange Commission's
website at www.sec.gov.
10
<Page>
THE MALAYSIA FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each stockholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the stockholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the reinvestment
date in full and fractional shares. If the market price per share equals or
exceeds net asset value per share on the reinvestment date, the Fund will issue
shares to participants at net asset value. If net asset value is less than 95%
of the market price on the reinvestment date, shares will be issued at 95% of
the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions will
be paid by the Fund. However, each participant's account will be charged a pro
rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
stockholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of stockholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Stockholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and stockholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Malaysia Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
59 Maiden Lane
New York, New York 10030
1-800-278-4353
11
<Page>
ITEM 2. CODE OF ETHICS. Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual
reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual
reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable for semi-annual
reports.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. Not applicable for semi-annual reports.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
MORGAN STANLEY CLOSED-END FUNDS SHARE REPURCHASE PROGRAM
The Malaysia Fund, Inc.*
1/1/04-6/30/04
<Table>
<Caption>
TOTAL NUMBER OF SHARES MAXIMUM NUMBER OF
PURCHASED AS PART OF SHARES THAT MAY YET BE
TOTAL NUMBER OF SHARES AVERAGE PRICE PAID PUBLICLY ANNOUNCED PLANS PURCHASED UNDER THE
PERIOD PURCHASED PER SHARE OR PROGRAMS PLANS OR PROGRAMS
------ --------- --------- ----------- -----------------
January -- -- -- Unlimited
February -- -- -- Unlimited
March -- -- -- Unlimited
April -- -- -- Unlimited
May -- -- -- Unlimited
June -- -- -- Unlimited
</Table>
* 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 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Fund's principal executive officer and principal financial officer
have concluded that the Fund's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the Fund in
this Form N-CSR was recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and procedures
as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
<Page>
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: August 19, 2004
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: August 19, 2004
By: /s/ James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: August 19, 2004