The Malaysia Fund, Inc.

Directors

Michael E. Nugent

Frank L. Bowman

Michael Bozic

Kathleen A. Dennis

James F. Higgins

Dr. Manuel H. Johnson

Joseph J. Kearns

Michael F. Klein

W. Allen Reed

Fergus Reid

Officers

Michael E. Nugent

Chairman of the Board and Director

Arthur Lev

President and Principal
Executive Officer

Stefanie V. Chang Yu

Vice President

Francis J. Smith

Treasurer and Principal Financial Officer

Mary Ann Picciotto

Chief Compliance Officer

Mary E. Mullin

Secretary

Investment Adviser and Administrator

Morgan Stanley Investment Management Inc.

522 Fifth Avenue

New York, New York 10036

Custodian

State Street Bank and Trust Company

One Lincoln Street

Boston, Massachusetts 02111

Stockholder Servicing Agent

Computershare Trust Company, N.A.

250 Royall Street

Canton, Massachusetts 02021

Legal Counsel

Dechert LLP

1095 Avenue of the Americas

New York, New York 10036

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 portfolio, please call toll free 1(800) 231-2608 or visit our website at www.morganstanley.com/im. All investments involve risks, including the possible loss of principal.

© 2012 Morgan Stanley

CEMFANN
IU12-00326P-Y12/11

INVESTMENT MANAGEMENT

The Malaysia Fund, Inc. (MAY)

Morgan Stanley

Investment Management Inc.

Investment Adviser

Annual
Report

December 31, 2011

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The Malaysia Fund, Inc.

December 31, 2011

Table of Contents

Letter to Stockholders					3
Portfolio of Investments					5
Statement of Assets and Liabilities					7
Statement of Operations					8
Statements of Changes in Net Assets					9
Financial Highlights					10
Notes to Financial Statements					11
Report of Independent Registered Public Accounting Firm					19
Portfolio Management					20
Investment Policy					21
Dividend Reinvestment and Cash Purchase Plan					22
U.S. Privacy Policy					23
Director and Officer Information					27

 

2

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The Malaysia Fund, Inc.

Overview

Letter to Stockholders (unaudited)

Performance

For the year ended December 31, 2011, the Malaysia Fund, Inc. (the "Fund") had total returns of -3.40%, based on net asset value, and -4.58%, based on market value per share (including reinvestment of distributions), compared to its benchmark, the FTSE Bursa Malaysia KLCI Index (formerly the Kuala Lumpur Stock Exchange Composite (KLSE) Index), expressed in U.S. dollars which returned -1.97%. On December 31, 2011, the closing price of the Fund's shares on the New York Stock Exchange was $9.02, representing a 9.4% discount to the Fund's net asset value per share. Past performance is no guarantee of future results.

Factors Affecting Performance

•  2011 saw reasonable and broad-based growth in Malaysia's economy. During the year, domestic consumption stayed buoyant amid low real interest rates and sporadic government stimulus. When the final numbers come out the Malaysian economy is expected to register gross domestic product (GDP) growth in the 4% to 5% range for 2011. This is not bad for an economy that is considered to be stuck in a "middle income trap," where an emerging economy grows from a low- to a middle-income economy but remains challenged in moving to the high-income level.

•  Looking into 2012, government projects should continue to be a positive influence and the prospects of the export sector will likely determine the final growth for the economy. Given a recession in Europe and a not-so-vibrant U.S. economy, the market expectation for Malaysia's GDP growth for 2012 is around 3.5% to 4%, which is lower than the government's target of 4% to 5%.

•  On the economic reform front, 2011 seemed to show further positive momentum in the Economic Transformation Programs (ETP), announced a few years back by Prime Minister Najib. These programs are aimed at addressing Malaysia's longstanding status as a net exporter of capital by curbing this capital outflow. While we appreciate the steps taken so far through the ETP, like many investors, we would like to see continued support for these plans.

•  The uncertainty around the timing and eventual outcome of general elections in 2012 or 2013 are likely to play havoc with the Malaysian market in the short term, with the eventual result to determine whether the ETP will be continued by the winner.

•  The Fund's underperformance relative to the FTSE Bursa Malaysia KLCI Index over the 12 months under review came equally from stock selection and sector allocation.

•  Regarding sector/industry allocation, the Fund's performance suffered from its underweight exposure to the telecommunications and energy sectors. The latter saw a slew of initial public offerings (IPOs) which the Fund did not participate in. However, the Fund's overweight position in the consumer staples and utilities sectors did add to relative performance versus the FTSE Bursa Malaysia KLCI Index.

•  Stock selection in industrials, especially in the airline, transportation and automotive sub-sectors, was the largest detractor. Conversely, the property sector contributed somewhat positively to relative returns through stock selection.

3

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The Malaysia Fund, Inc.

Overview

Letter to Stockholders (unaudited) (cont'd)

Management Strategies

•  The Fund seeks long-term capital appreciation and integrates top-down sector allocation and bottom-up stock selection with a growth bias. The team utilizes a rigorous fundamental research approach that considers dynamics, valuation, and sentiment and focuses on companies with strong management and solid earnings.

•  From a sector perspective, we are looking toward sectors that we believe will benefit from a pre-election spending spree. We also expect the government infrastructure programs to continue and therefore are exploring the construction sector. The government's ETP should see further privatization of government assets and we will remain selective on these investment opportunities. We are also interested in inefficient government-run entities that may see corporatization of their management teams and therefore some value creation in the coming years.

Sincerely,

Arthur Lev
President and Principal Executive Officer  January 2012

4

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The Malaysia Fund, Inc.

December 31, 2011

Portfolio of Investments

				Shares				Value (000)
COMMON STOCKS (95.6%)
Airlines (3.7%)
AirAsia Bhd					1,806,800			$	2,149
Malaysian Airline System Bhd (a)					1,235,700				507
									2,656
Automobiles (2.5%)
TAN Chong Motor Holdings Bhd					1,389,700				1,789
Commercial Banks (18.8%)
CIMB Group Holdings Bhd					2,574,692				6,043
Malayan Banking Bhd					1,419,075				3,841
Public Bank Bhd					843,392				3,559
									13,443
Construction & Engineering (8.8%)
Gamuda Bhd					2,638,300				2,821
IJM Corp. Bhd					1,921,430				3,425
									6,246
Construction Materials (1.4%)
Lafarge Malayan Cement Bhd					446,900				987
Diversified Financial Services (5.8%)
AMMB Holdings Bhd					2,205,800				4,140
Food Products (5.0%)
Kuala Lumpur Kepong Bhd					502,300				3,597
Health Care Equipment & Supplies (5.2%)
Top Glove Corp. Bhd					2,344,600				3,698
Hotels, Restaurants & Leisure (12.9%)
Genting Bhd					1,601,100				5,556
Genting Malaysia Bhd					3,021,700				3,651
									9,207
Industrial Conglomerates (4.1%)
Sime Darby Bhd					1,009,610				2,930
Marine (1.2%)
MISC Bhd					504,160				870
Multi-Utilities (4.3%)
YTL Corp. Bhd					6,592,265				3,078
Multiline Retail (2.8%)
Parkson Holdings Bhd					1,133,254				2,023

 

 

				Shares				Value (000)
Real Estate Management & Development (12.1%)
IGB Corp. Bhd					3,367,981			$	2,614
SP Setia Bhd					1,476,322				1,793
UEM Land Holdings Bhd (a)					5,531,250				4,222
									8,629
Wireless Telecommunication Services (7.0%)
Axiata Group Bhd					2,264,525				3,672
DiGi.Com Bhd					1,048,000				1,283
									4,955
TOTAL COMMON STOCKS (Cost $32,222)									68,248
				No. of Warrants
WARRANTS (0.2%)
Construction & Engineering (0.1%)
Gamuda Bhd, expires 5/25/15 (a)					329,750				105
Hotels, Restaurants & Leisure (0.1%)
IJM Land Bhd, expires 9/11/13 (a)					175,560				50
TOTAL WARRANTS (Cost $10)									155
				Shares
SHORT-TERM INVESTMENT (0.3%)
Investment Company (0.3%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (See Note F) (Cost $186)					185,868				186
TOTAL INVESTMENTS (96.1%) (Cost $32,418)									68,589
OTHER ASSETS IN EXCESS OF LIABILITIES (3.9%)									2,798
NET ASSETS (100.0%)								$	71,387

 

(a)  Non-income producing security.

 

The accompanying notes are an integral part of the financial statements.

5

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The Malaysia Fund, Inc.

December 31, 2011

Portfolio of Investments (cont'd)

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Fund's investments as of December 31, 2011. (See Note A-3 to the financial statements for further information regarding fair value measurement.)

Investment Type				Level 1 Unadjusted quoted prices (000)				Level 2 Other significant observable inputs (000)				Level 3 Significant unobservable inputs (000)				Total (000)
Assets:
Common Stocks
Airlines				$	2,656			$	—			$	—			$	2,656
Automobiles					1,789				—				—				1,789
Commercial Banks					13,443				—				—				13,443
Construction & Engineering					6,246				—				—				6,246
Construction Materials					987				—				—				987
Diversified Financial Services					4,140				—				—				4,140
Food Products					3,597				—				—				3,597
Health Care Equipment & Supplies					3,698				—				—				3,698
Hotels, Restaurants & Leisure					9,207				—				—				9,207
Industrial Conglomerates					2,930				—				—				2,930
Marine					870				—				—				870
Multi-Utilities					3,078				—				—				3,078
Multiline Retail					2,023				—				—				2,023
Real Estate Management & Development					8,629				—				—				8,629
Wireless Telecommunication Services					4,955				—				—				4,955
Total Common Stocks					68,248				—				—				68,248

Fair Value Measurement Information: (cont'd)

Investment Type				Level 1 Unadjusted quoted prices (000)				Level 2 Other significant observable inputs (000)				Level 3 Significant unobservable inputs (000)				Total (000)
Assets: (cont'd)
Warrants				$	155			$	—			$	—			$	155
Short-Term Investment —
Investment Company					186				—				—				186
Total Assets				$	68,589			$	—			$	—			$	68,589

 

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of December 31, 2011, the Fund did not have any significant investments transfer between investment levels.

Portfolio Composition

Classification				Percentage of Total Investments
Other*					21.2	%
Commercial Banks					19.6
Hotels, Restaurants & Leisure					13.5
Real Estate Management & Development					12.6
Construction & Engineering					9.3
Wireless Telecommunication Services					7.2
Diversified Financial Services					6.0
Health Care Equipment & Supplies					5.4
Food Products					5.2
Total Investments					100.0	%

 

* Industries representing less than 5% of total investments.

The accompanying notes are an integral part of the financial statements.

6

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The Malaysia Fund, Inc.

December 31, 2011

Financial Statements

Statement of Assets and Liabilities				December 31, 2011 (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Value (Cost $32,232)				$	68,403
Investment in Security of Affiliated Issuer, at Value (Cost $186)					186
Total Investments in Securities, at Value (Cost $32,418)					68,589
Foreign Currency, at Value (Cost $8,321)					8,277
Receivable for Investments Sold					5,189
Dividends Receivable					13
Receivable from Affiliate					—	@
Other Assets					1
Total Assets					82,069
Liabilities:
Dividends Declared					10,522
Payable for Investment Advisory Fees					55
Payable for Professional Fees					43
Payable for Tender Offer Fees					38
Payable for Custodian Fees					9
Payable for Administration Fees					4
Payable for Stockholder Servicing Agent Fees					1
Payable for Directors' Fees and Expenses					1
Other Liabilities					9
Total Liabilities					10,682
Net Assets
Applicable to 7,167,078 Issued and Outstanding $0.01 Par Value Shares (20,000,000 Shares Authorized)				$	71,387
Net Asset Value Per Share				$	9.96
Net Assets Consist of:
Common Stock				$	72
Paid-in-Capital					29,813
Undistributed Net Investment Income					929
Accumulated Net Realized Gain					4,443
Unrealized Appreciation (Depreciation) on:
Investments					36,171
Foreign Currency Translations					(41	)
Net Assets				$	71,387

 

@ Amount is less than $500.

 

The accompanying notes are an integral part of the financial statements.

7

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The Malaysia Fund, Inc.

December 31, 2011

Financial Statements (cont'd)

Statement of Operations				Year Ended December 31, 2011 (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers (Net of $253 of Foreign Taxes Withheld)				$	2,166
Dividends from Security of Affiliated Issuer					—	@
Total Investment Income					2,166
Expenses:
Investment Advisory Fees (Note B)					768
Professional Fees					142
Tender Offer Fees					141
Administration Fees (Note C)					78
Custodian Fees (Note D)					69
Stockholder Reporting Expenses					9
Stockholder Servicing Agent Fees					6
Directors' Fees and Expenses					4
Other Expenses					34
Total Expenses					1,251
Waiver of Administration Fees (Note C)					(30	)
Rebate from Morgan Stanley Affiliate (Note F)					(—	@)
Net Expenses					1,221
Net Investment Income					945
Realized Gain (Loss):
Investments Sold					15,033
Foreign Currency Transactions					(15	)
Net Realized Gain					15,018
Change in Unrealized Appreciation (Depreciation):
Investments					(21,564	)
Foreign Currency Translations					(61	)
Net Change in Unrealized Appreciation (Depreciation)					(21,625	)
Total Net Realized Gain and Change in Unrealized Appreciation (Depreciation)					(6,607	)
Net Decrease in Net Assets Resulting from Operations				$	(5,662	)

 

@ Amount is less than $500.

 

The accompanying notes are an integral part of the financial statements.

8

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The Malaysia Fund, Inc.

December 31, 2011

Financial Statements (cont'd)

Statements of Changes in Net Assets				Year Ended December 31, 2011 (000)				Year Ended December 31, 2010 (000)
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income				$	945			$	1,420
Net Realized Gain					15,018				5,287
Net Change in Unrealized Appreciation (Depreciation)					(21,625	)			29,115
Net Increase (Decrease) in Net Assets Resulting from Operations					(5,662	)			35,822
Distributions from and/or in Excess of:
Net Investment Income					(1,474	)			—
Net Realized Gain					(11,307	)			(5,911	)
Total Distributions					(12,781	)			(5,911	)
Capital Share Transactions:
Repurchase of Shares (67,664 and 668,948 shares)					(749	)			(5,791	)
Common Stock Redeemed Through Tender Offers (1,708,559 and 0 shares)					(20,417	)			—
Net Decrease in Net Assets Resulting from Capital Share Transactions					(21,166	)			(5,791	)
Fee Reimbursement from U.S. Adviser (Note I)					1,302				—
Total Increase (Decrease)					(38,307	)			24,120
Net Assets:
Beginning of Period					109,694				85,574
End of Period (Including Undistributed Net Investment Income of $929 and $1,473)				$	71,387			$	109,694

 

The accompanying notes are an integral part of the financial statements.

9

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The Malaysia Fund, Inc.

December 31, 2011

Financial Highlights

Selected Per Share Data and Ratios

				Year Ended December 31,
				2011				2010				2009				2008				2007
Net Asset Value, Beginning of Period				$	12.27			$	8.90			$	5.96			$	12.14			$	7.70
Net Investment Income†					0.12				0.16				0.09				0.60				0.16
Net Realized and Unrealized Gain (Loss)					(0.87	)			3.78				2.97				(5.82	)			4.46
Total from Investment Operations					(0.75	)			3.94				3.06				(5.22	)			4.62
Distributions from and/or in excess of:
Net Investment Income					(0.20	)			—				(0.12	)			(0.62	)			(0.18	)
Net Realized Gain					(1.57	)			(0.66	)			—				(0.40	)			—
Total Distributions					(1.77	)			(0.66	)			(0.12	)			(1.02	)			(0.18	)
Anti-Dilutive Effect of Share Repurchase Program					0.01				0.09				0.00	‡			0.00	‡			0.00	‡
Anti-Dilutive Effect of Tender Offer					0.04				—				—				—				—
Fee Reimbursement from U.S. Adviser					0.16				—				—				0.06				—
Net Asset Value, End of Period				$	9.96			$	12.27			$	8.90			$	5.96			$	12.14
Per Share Market Value, End of Period				$	9.02			$	11.25			$	7.55			$	5.05			$	10.85
TOTAL INVESTMENT RETURN:
Market Value					(4.58	)%			58.27	%			51.85	%			(44.89	)%			55.48	%
Net Asset Value(1)					(3.40	)%**			46.43	%			51.67	%			(41.88	)%**			60.19	%
RATIOS, SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)				$	71,387			$	109,694			$	85,574			$	57,458			$	117,273
Ratio of Expenses to Average Net Assets(2)					1.26	%+			1.11	%+			1.16	%+			1.10	%+			1.24	%+
Ratio of Net Investment Income to Average Net Assets(2)					0.98	%+			1.47	%+			1.20	%+			6.24	%+			1.56	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets					0.00	%§			0.00	%§			0.00	%§			0.00	%§			0.00	%§
Portfolio Turnover Rate					6	%			2	%			33	%			15	%			7	%
(2) Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expenses Waived by Administrator:
Ratio of Expenses to Average Net Assets					1.29	%			1.15	%+			1.18	%+			1.13	%+			1.27	%+
Ratio of Net Investment Income to Average Net Assets					0.95	%			1.43	%+			1.18	%+			6.21	%+			1.53	%+

 

(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.

†  Per share amount is based on average shares outstanding.

‡  Amount is less than $0.005 per share.

**  If the U.S. Adviser had not made a fee reimbursement to the Fund, the total return would have been (42.46)% and (4.84)% for years ended 2008 and 2011, respectively.

+  The Ratios of Expenses and Net Investment Income reflect the rebate of certain Fund expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."

§  Amount is less than 0.005%.

 

The accompanying notes are an integral part of the financial statements.

10

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements

The Malaysia Fund, Inc. (the "Fund") was incorporated on March 12, 1987 and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the "Act"). The Fund's investment objective is long-term capital appreciation through investment in equity securities of Malaysian companies. To the extent that the Fund invests in derivative instruments that the Adviser believes have economic characteristics similar to equity securities of Malaysian companies, such investments will be counted for purposes of the Fund's policy in the previous sentence. To the extent the Fund makes such investments, the Fund will be subject to the risks of such derivative instruments as described herein.

A.  Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Fund in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

1.  Security Valuation: Securities listed on a foreign exchange are valued at their closing price except as noted below. 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 ask prices. 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. Short-term debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, unless the Board of Directors (the "Directors") determines such valuation does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined in good faith under procedures adopted by the Directors.

  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 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 Directors.

2.  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 ask prices of such currencies against U.S. dollars last quoted by a major bank as follows:

  —investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;

11

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

  —investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.

  Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of 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) on investments in securities 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 (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 Assets and Liabilities. The change in 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 securities of issuers located in emerging markets, which are denominated in foreign currencies. Changes in currency exchange rates will affect the value of and investment income from such securities. Securities in emerging markets involve certain considerations and risks not typically associated with investments in the United States. In addition to its smaller size, less liquidity and greater volatility, certain securities' markets in which the Fund may invest are less developed than the U.S. securities market and there is often substantially less publicly available information about these issuers. Further, emerging market issues may be subject to substantial governmental involvement in the economy and greater social, economic and political uncertainty. Accordingly, the price which the Fund may realize upon sale of securities in such markets may not be equal to its value as presented in the financial statements.

3.  Fair Value Measurement: Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosure" ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value

12

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

of the Fund's investments. The inputs are summarized in the three broad levels listed below.

•  Level 1 – unadjusted quoted prices in active markets for identical investments

•  Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•  Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. 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

  The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

  In May 2011, FASB issued Accounting Standards Update ("ASU") 2011-04. The amendments in this update are the results of the work of FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements, which are effective during interim and annual periods beginning after December 15, 2011. Consequently, these amendments improve the comparability of fair value measurements presented and disclosed in the financial statements prepared in accordance with GAAP and International Financial Reporting Standards. At this time, the Fund's management is evaluating the implications of ASU 2011-04.

4.  Indemnifications: 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.

5.  Other: Security transactions are accounted for on the date the securities are purchased or sold. Realized gains (losses) on the sale of investment securities are determined on the specific identified cost basis. Interest income is recognized on the accrual basis. Dividend income and distributions are recorded on the ex-dividend date (except certain dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes.

B.  Investment Advisory/Sub-Advisory Fees: Morgan Stanley Investment Management Inc. (the "Adviser" or "MS Investment Management") provides investment advisory services to the Fund under the terms of an Investment Advisory Agreement (the "Agreement"). Under the Agreement, the 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.

The Adviser has entered into a Sub-Advisory Agreement with Morgan Stanley Investment Management Company (the "Sub-Adviser"), a wholly-owned subsidiary of Morgan Stanley. The Sub-Adviser provides the Fund with investment advisory services subject to the overall supervision of the Adviser and the Fund's Officers and Directors. The Adviser pays the Sub-Adviser on a monthly basis a portion of the net advisory fees the Adviser receives from the Fund.

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

C.  Administration Fees: MS Investment Management also serves as Administrator to the Fund pursuant to an Administration Agreement. Under the Administration Agreement, the administration fee is 0.08% of the Fund's average weekly net assets. MS Investment Management has agreed to limit the administration fee through a waiver so that it will be no greater than the previous administration fee of 0.02435% of the Fund's average weekly net assets plus $24,000 per annum. This waiver is voluntary and may be terminated at any time. For the year ended December 31, 2011, approximately $30,000 of administration fees were waived pursuant to this arrangement. Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.

D.  Custodian Fees: State Street (the "Custodian") and its affiliates serve as Custodian for the Fund. The Custodian holds cash, securities, and other assets of the Fund as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.

The Fund has entered into an arrangement with its Custodian whereby credits realized on uninvested cash balances were used to offset a portion of the Fund's expenses. If applicable, these custodian credits are shown as "Expense Offset" in the Statement of Operations.

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 Fund may be subject to taxes imposed by countries in which it invests. The Fund is currently not subject to Malaysian withholding taxes on dividends and/or capital gains.

FASB ASC 740-10 "Income Taxes—Overall" sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in ''Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended December 31, 2011, remains subject to examination by taxing authorities.

The tax character of distributions paid may differ from the character of distributions shown in 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 fiscal 2011 and 2010 was as follows:

2011 Distributions Paid From:								2010 Distributions Paid From:
Ordinary Income (000)				Long-Term Capital Gain (000)				Ordinary Income (000)				Long-Term Capital Gain (000)
$	1,474			$	11,307			$	28			$	5,883

 

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 GAAP. These 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 (losses) on

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

certain investment transactions and the timing of the deductibility of certain expenses.

Permanent differences, primarily due to differing treatments of gains (losses) related to foreign currency transactions, resulted in the following reclassifications among the components of net assets at December 31, 2011:

Undistributed (Distributions in Excess of) Net Investment Income (Loss) (000)				Accumulated Net Realized Gain (Loss) (000)				Paid-in Capital (000)
$	(15	)		$	15			$	—

 

At December 31, 2011, the components of distributable earnings for the Fund on a tax basis were as follows:

Undistributed Ordinary Income (000)				Undistributed Long-Term Capital Gain (000)
$	932			$	4,510

 

At December 31, 2011, the U.S. Federal income tax cost basis of investments was approximately $32,486,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $36,103,000 of which $36,519,000 related to appreciated securities and $416,000 related to depreciated securities.

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the "Modernization Act") was signed into law. The Modernization Act modernizes several tax provisions related to Regulated Investment Companies ("RICs") and their shareholders. One key change made by the Modernization Act is that capital losses will generally retain their character as short-term or long-term and may be carried forward indefinitely to offset future gains. These losses are utilized before other capital loss carryforwards that expire. Generally, the Modernization Act is effective for taxable years beginning after December 22, 2010.

F.  Security Transactions and Transactions with Affiliates: For the year ended December 31, 2011, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments, were approximately $5,576,000 and $39,669,000.

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds—Money Market Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser. Investment Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the year ended December 31, 2011, advisory fees paid were reduced by less than $500 relating to the Fund's investment in the Liquidity Funds.

A summary of the Fund's transactions in shares of the Liquidity Funds during the year ended December 31, 2011 is as follows:

Value December 31, 2010 (000)				Purchases at Cost (000)				Sales (000)				Dividend Income (000)				Value December 31, 2011 (000)
$	468			$	6,026			$	6,308				—	@		$	186

 

@Amount is less than $500

G.  Other: On July 15, 2002, the Fund commenced a share repurchase program for purposes of enhancing stockholder value and reducing the discount at which the Fund's shares trade from their net asset value. During the year ended December 31, 2011, the Fund repurchased 67,664 of its shares at an average discount of 10.27% from net asset value per share. Since the inception of the program, the Fund has repurchased 867,293 of its shares at an average discount of 12.84% 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

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

further the accomplishment of the foregoing objectives, subject to review by the Directors.

On May 9, 2011, the Directors of the Fund authorized the Fund to conduct a tender offer during the second quarter of 2011 for up to 15% of the Fund's outstanding shares, at a price equal to 98.5% of the Fund's net asset value per share ("NAV"). On June 9, 2011, the Fund completed the tender offer. The Fund accepted 1,331,345 shares for payment which represented 15% of the Fund's then outstanding shares. Final payment was made on or about June 17, 2011 at $12.33 per share, representing 98.5% of the NAV per share on June 10, 2011.

On January 3, 2011, the Fund announced that the Directors approved a policy designed to attempt to narrow the trading discount for the Fund (the "Policy"). The Policy, which was amended by announcement on April 7, 2011, requires the Fund to conduct up to four, consecutive, semi-annual tender offers, each to purchase up to 5 percent of the Fund's outstanding shares of common stock for cash at a price equal to 98 percent of its net asset value per share as of the close of trading on the New York Stock Exchange on the day after the date on which the tender offer expires if the Fund's shares trade at an average discount of at least 10 percent during the 12-week measurement period. The first 12-week measurement period under the amended Policy commenced on July 11, 2011.

Pursuant to the Policy, on October 17, 2011, the Directors of the Fund authorized the Fund to conduct a tender offer during the fourth quarter of 2011 for up to 5% of the Fund's outstanding shares, at a price equal to 98% of the Fund's net asset value per share ("NAV"). On November 28, 2011, the Fund completed the offer. The Fund accepted 377,214 shares for payment which represented 5% of the Fund's then outstanding shares. Final payment was made on or about December 6, 2011 at $10.61 per share, representing 98% of the NAV per share on November 29, 2011.

H.  Results of Annual Meeting of Stockholders (unaudited): On June 30, 2011, an annual meeting of the Fund's stockholders was held for the purpose of voting on the following matter, the results of which were as follows:

Election of Directors by all stockholders:

				For				Withheld
Kathleen D. Dennis					4,290,199				434,402
Joseph J. Kearns					4,287,594				437,007
Michael E. Nugent					4,288,418				436,183
Fergus Reid					4,270,908				453,693

 

I.  Fee Reimbursement to Fund for Malaysian Adviser Fees Pursuant to SEC Settlement:  On November 16, 2011, the U.S Adviser settled charges by the SEC relating to the Fund. The settlement relates to the period from 1996 until the end of 2007, during which time the SEC found the U.S. Adviser represented to the Fund's investors and board of directors that the Fund's unaffiliated Malaysian sub-adviser, AMMB Consultant Senderian Berhad ("AMMB") was providing certain services that AMMB in fact was not providing. Effective December 31, 2007, AMMB was terminated.

Without admitting or denying the findings, the U.S. Adviser consented to the entry of an administrative cease and desist order finding violations of Sections 15(c) and 34(b) of the Investment Company Act of 1940 and Sections 206(2) and 206(4) of the Investment Advisers Act, and Rule 206(4)-7 thereunder. The U.S. Adviser was censured and was ordered to make a reimbursement to the Fund in the amount of $1,845,074.92 for the amount of advisory fees the Fund paid to AMMB from 1996 until the end of 2007, less a credit of $543,000 for the portion the U.S. Adviser had already reimbursed to the Fund. The reimbursement to the Fund was made on November 16, 2011. The U.S. Adviser also was ordered to pay a civil money penalty in the amount of $1,500,000 to the U.S. Treasury.

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

The U.S. Adviser was further ordered to implement and maintain policies and procedures, with respect to the U.S. registered mutual funds for which it serves as investment adviser, specifically governing: (1) the investment advisory contract renewal process; (2) the U.S. Adviser's oversight of certain service providers, including sub-advisers; and (3) the U.S. Adviser's disclosures regarding such service providers. Lastly, the U.S. Adviser was ordered to certify, in writing, compliance with the undertakings above, which certification shall be supported by written evidence of compliance and exhibits.

Federal Income Tax Information (unaudited)

For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during its taxable year ended December 31, 2011.

The Fund designated and paid $11,307,000 as long-term capital gain distribution.

In January, the Fund provides tax information to stockholders for the preceding calendar year.

For More Information About Portfolio Holdings (unaudited)

The Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the Fund's second and fourth fiscal quarters. The semi-annual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semi-annual and annual reports to Fund stockholders and makes these reports available on its public website, www.morganstanley.com/im. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the Fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to stockholders, nor are the reports posted to the Morgan Stanley public website. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC toll free at 1(800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.

In addition to filing a complete schedule of portfolio holdings with the SEC each fiscal quarter, the Fund makes portfolio holdings information available by periodically providing the information on its public website, www.morganstanley.com/im.

The Fund provides a complete schedule of portfolio holdings on the public website on a calendar-quarter basis approximately 31 calendar days after the close of the calendar quarter. The Fund also provides Top 10 holdings information on the public website approximately 15 business days following the end of each month. You may obtain copies of the Fund's monthly or calendar-quarter website postings, by calling toll free 1(800) 231-2608.

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The Malaysia Fund, Inc.

December 31, 2011

Notes to Financial Statements (cont'd)

Proxy Voting Policy and Procedures and Proxy Voting Record (unaudited)

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, is available without charge, upon request, by calling toll free 1(800) 548-7786 or by visiting our website at www.morganstanley.com/im. This information is also available on the SEC's web site at www.sec.gov.

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The Malaysia Fund, Inc.

December 31, 2011

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of
The Malaysia Fund, Inc.

We have audited the accompanying statement of assets and liabilities of The Malaysia Fund, Inc. (the "Fund"), including the portfolio of investments, as of December 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Malaysia Fund, Inc. at December 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  

Boston, Massachusetts
February 24, 2012

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The Malaysia Fund, Inc.

December 31, 2011

Portfolio Management (unaudited)

The Fund is managed within the Emerging Markets Equity team. The team consists of portfolio managers and analysts. Current members of the team jointly and primarily responsible for the day-to-day management of the Fund's portfolio are James Cheng, a Managing Director of the Sub-Adviser, Munib Madni, a Managing Director of the Sub-Adviser, and Ruchir Sharma, a Managing Director of the U.S. Adviser.

Mr. Cheng has been associated with the Sub-Adviser in an investment management capacity since July 2006 and began managing the Fund in August 2008. Prior to July 2006, Mr. Cheng worked in an investment management capacity at Invesco Asia Limited, Asia Strategic Investment Management Limited and Munich Re Asia Capital Management. Mr. Madni has been associated with the Sub-Adviser in an investment management capacity since February 2005 and began managing the Fund in August 2008. Mr. Sharma has been associated with the U.S. Adviser in an investment management capacity since 1996 and began managing the Fund in August 2008.

20

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The Malaysia Fund, Inc.

December 31, 2011

Investment Policy (unaudited)

The Fund may use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of another underlying asset, interest rate, index or financial instrument. A derivative instrument often has risks similar to its underlying instrument and may have additional risks, including imperfect correlation between the value of the derivative and the underlying instrument, risks of default by the other party to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which they relate, and risks that the transactions may not be liquid. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. Certain derivative transactions may give rise to a form of leverage. Leverage associated with derivative transactions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet earmarking or segregation requirements, pursuant to applicable SEC rules and regulations, or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Investment Adviser seeks to use derivatives to further the Fund's investment objectives, there is no assurance that the use of derivatives will achieve this result.

Following is a description of the derivative instruments and techniques that the Fund may use and their associated risks:

Foreign Currency Forward Contracts. In connection with its investments in foreign securities, the Fund also may enter into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date ("forward contracts"). A foreign currency forward contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Forward foreign currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. A currency exchange 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 (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. Hedging the Fund's currency risks involves the risk of mismatching the Fund's objectives under a currency exchange or futures contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts.

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The Malaysia Fund, Inc.

December 31, 2011

Dividend Reinvestment and Cash Purchase Plan (unaudited)

Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the Plan), each stockholder will be deemed to have elected, unless Computershare Trust Company, N.A. (the Plan Agent) is otherwise instructed by the stockholder in writing, to have all distributions automatically reinvested in Fund shares. Participants in the Plan have the option of making additional voluntary cash payments to the Plan Agent, annually, in any amount from $100 to $3,000, for investment in Fund shares.

Dividend and capital gain distributions (Distributions) will be reinvested on the reinvestment date in full and fractional shares. If the market price per share equals or exceeds net asset value per share on the reinvestment date, the Fund will issue shares to participants at net asset value or, if net asset value is less than 95% of the market price on the reinvestment date, shares will be issued at 95% of the market price. If net asset value exceeds the market price on the reinvestment date, participants will receive shares valued at market price. The Fund may 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 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 a Distribution 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.
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
1 (800) 231-2608

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The Malaysia Fund, Inc.

December 31, 2011

U.S. Privacy Policy (unaudited)

An Important Notice Concerning Our U.S. Privacy Policy

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds ("us", "our", "we").

We are required by federal law to provide you with notice of our U.S. privacy policy ("Policy"). This Policy applies to both our current and former clients unless we state otherwise and is intended for individual clients who purchase products or receive services from us for personal, family or household purposes. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, or accounts subject to the Uniform Gifts to Minors Act.

This notice sets out our business practices to protect your privacy; how we collect and share personal information about you; and how you can limit our sharing or certain uses by others of this information. We may amend this Policy at any time, and will inform you of any changes to our Policy as required by law.

We Respect Your Privacy

We appreciate that you have provided us with your personal financial information and understand your concerns about your information. We strive to safeguard the information our clients entrust to us. Protecting the confidentiality and security of client information is an important part of how we conduct our business.

This notice describes what personal information we collect about you, how we collect it, when we may share it with others, and how certain others may use it. It discusses the steps you may take to limit our sharing of certain information about you with our affiliated companies, including, but not limited to our affiliated banking businesses, brokerage firms and credit service affiliates. It also discloses how you may limit our affiliates' use of shared information for marketing purposes.

Throughout this Policy, we refer to the nonpublic information that personally identifies you as "personal information." We also use the term "affiliated company" in this notice. An affiliated company is a company in our family of companies and includes companies with the Morgan Stanley name. These affiliated companies are financial institutions such as broker-dealers, banks, investment advisers and credit card issuers. We refer to any company that is not an affiliated company as a nonaffiliated third party. For purposes of Section 5 of this notice, and your ability to limit certain uses of personal information by our affiliates, this notice applies to the use of personal information by our affiliated companies.

1. What Personal Information Do We Collect From You?

We may collect the following types of information about you: (i) information provided by you, including information from applications and other forms we receive from you, (ii) information about your transactions with us or our affiliates, (iii) information

23

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The Malaysia Fund, Inc.

December 31, 2011

U.S. Privacy Policy (unaudited) (cont'd)

about your transactions with nonaffiliated third parties, (iv) information from consumer reporting agencies, (v) information obtained from our websites, and (vi) information obtained from other sources. For example:

•  We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us.

•  We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.

•  We may obtain information about your creditworthiness and credit history from consumer reporting agencies.

•  We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.

2. When Do We Disclose Personal Information We Collect About You?

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

a. Information We Disclose to Affiliated Companies. We may disclose personal information that we collect about you to our affiliated companies to manage your account(s) effectively, to service and process your transactions, and to let you know about products and services offered by us and affiliated companies, to manage our business, and as otherwise required or permitted by law. Offers for products and services from affiliated companies are developed under conditions designed to safeguard your personal information.

b. Information We Disclose to Third Parties. We may disclose personal information that we collect about you to nonaffiliated third parties to provide marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. We may also disclose all of the information we collect to other nonaffiliated third parties for our everyday business purposes, such as to process transactions, maintain account(s), respond to court orders and legal investigations, report to credit bureaus, offer our own products and services, protect against fraud, for institutional risk control, to perform services on our behalf, and as otherwise required or permitted by law.

When we share personal information about you with a nonaffiliated third party, they are required to limit their use of personal information about you to the particular purpose for which it was shared and they are not allowed to share personal information about you with others except to fulfill that limited purpose or as may be permitted or required by law.

3. How Do We Protect The Security and Confidentiality Of Personal Information We Collect About You?

We maintain physical, electronic and procedural security measures that comply with applicable law and regulations to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information by

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The Malaysia Fund, Inc.

December 31, 2011

U.S. Privacy Policy (unaudited) (cont'd)

employees. Third parties that provide support or marketing services on our behalf may also receive personal information about you, and we require them to adhere to appropriate security standards with respect to such information.

4. How Can You Limit Our Sharing Certain Personal Information About You With Our Affiliated Companies For Eligibility Determination?

By following the opt-out procedures in Section 6, below, you may limit the extent to which we share with our affiliated companies, personal information that was collected to determine your eligibility for products and services such as your credit reports and other information that you have provided to us or that we may obtain from third parties ("eligibility information"). Eligibility information does not include your identification information or personal information pertaining to our transactions or experiences with you. Please note that, even if you direct us not to share eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with our affiliated companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account.

5. How Can You Limit the Use of Certain Personal Information About You by Our Affiliated Companies for Marketing?

By following the opt-out instructions in Section 6, below, you may limit our affiliated companies from marketing their products or services to you based on personal information we disclose to them. This information may include, for example, your income and account history with us. Please note that, even if you choose to limit our affiliated companies from using personal information about you that we may share with them for marketing their products and services to you, our affiliated companies may use your personal information that they obtain from us to market to you in circumstances permitted by law, such as if the affiliated party has its own relationship with you.

6. How Can You Send Us an Opt-Out Instruction?

If you wish to limit our sharing of eligibility information about you with our affiliated companies, or our affiliated companies' use of personal information for marketing purposes, as described in this notice, you may do so by:

•  Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 5p.m. (EST)

•  Writing to us at the following address:

  Morgan Stanley Services Company Inc.
c/o Privacy Coordinator
201 Plaza Two, 3rd Floor
Jersey City, New Jersey 07311

If you choose to write to us, your request should include: your name, address, telephone number and account number(s) to which the opt-out applies and whether you are opting out with respect to sharing of eligibility information (Section 4 above), or information used for marketing (Section 5 above), or both. Written opt-out requests should not be sent with any other correspondence. In order to

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The Malaysia Fund, Inc.

December 31, 2011

U.S. Privacy Policy (unaudited) (cont'd)

process your request, we require that the request be provided by you directly and not through a third party. Once you have informed us about your privacy preferences, your opt-out preference will remain in effect with respect to this Policy (as it may be amended) until you notify us otherwise. If you are a joint account owner, we will accept instructions from any one of you and apply those instructions to the entire account.

Please understand that if you limit our sharing or our affiliated companies' use of personal information, you and any joint account holder(s) may not receive information about our affiliated companies' products and services, including products or services that could help you manage your financial resources and achieve your investment objectives.

If you have more than one account or relationship with us, please specify the accounts to which you would like us to apply your privacy choices. If you have accounts or relationships with our affiliates, you may receive multiple privacy policies from them, and will need to separately notify those companies of your privacy choices for those accounts or relationships.

7. What if an affiliated company becomes a nonaffiliated third party?

If, at any time in the future, an affiliated company becomes a nonaffiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to nonaffiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies, your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.

SPECIAL NOTICE TO RESIDENTS OF VERMONT

The following section supplements our Policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above Policy with respect to those clients only.

The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with nonaffiliated third parties, or eligibility information with affiliated companies, other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or eligibility information with affiliated companies, unless you provide us with your written consent to share such information.

SPECIAL NOTICE TO RESIDENTS OF CALIFORNIA

The following section supplements our Policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above Policy with respect to those clients only.

In response to a California law, if your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.

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The Malaysia Fund, Inc.

December 31, 2011

Director and Officer Information (unaudited)

Independent Directors:

Name, Age and Address of Independent Director

Position(s) Held with Registrant

Length of Time Served*

Principal Occupation(s) During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Independent Director**

Other Directorships Held by Independent Director***

Frank L. Bowman (67) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036

Director

Since August 2006

President, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005-November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004); served as Chief of Naval Personnel (July 1994-September 1996) and on the Joint Staff as Director of Political Military Affairs (June 1992 to July 1994); Knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; Awarded the Officer de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009).

102

Director of BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board; Member of the American Lung Association's President's Council.

Michael Bozic (71) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036

Director

Since April 1994

Private investor; Chairperson of the Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

104

Director of various business organizations.

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The Malaysia Fund, Inc.

December 31, 2011

Director and Officer Information (unaudited) (cont'd)

Independent Directors (cont'd):

Name, Age and Address of Independent Director

Position(s) Held with Registrant

Length of Time Served*

Principal Occupation(s) During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Independent Director**

Other Directorships Held by Independent Director***

Kathleen A. Dennis (58) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036

Director

Since August 2006

President, Cedarwood Associates (mutual fund and investment management consulting) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006).

102

Director of various non-profit organizations.

Dr. Manuel H. Johnson (63) c/o Johnson Smick Group, Inc. 888 16th Street, N.W. Suite 740 Washington, D.C. 20006

Director

Since July 1991

Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since July 1991); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006), Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.

104

Director of NVR, Inc. (home construction).

Joseph J. Kearns (69) c/o Kearns & Associates LLC PMB754 22631 Pacific Coast Highway Malibu, CA 90265

Director

Since August 1994

President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of various Morgan Stanley Funds (since August 1994); CFO of the J. Paul Getty Trust.

105

Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation.

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The Malaysia Fund, Inc.

December 31, 2011

Director and Officer Information (unaudited) (cont'd)

Independent Directors (cont'd):

Name, Age and Address of Independent Director

Position(s) Held with Registrant

Length of Time Served*

Principal Occupation(s) During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Independent Director**

Other Directorships Held by Independent Director***

Michael F. Klein (53) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036

Director

Since August 2006

Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, various Morgan Stanley Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).

102

Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals).

Michael E. Nugent (75) c/o Triumph Capital, L.P. 445 Park Avenue New York, NY 10022

Chairperson of the Board and Director

Chairperson of the Boards since July 2006 and Director since July 1991

General Partner, Triumph Capital, L.P. (private investment partnership); Chairperson of the Boards of various Morgan Stanley Funds (since July 2006); Director or Trustee of various Morgan Stanley Funds (since July 1991); formerly, Chairperson of the Insurance Committee (until July 2006).

104

None.

W. Allen Reed (64) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036

Director

Since August 2006

Chairperson of the Equity Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, President and CEO of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005).

102

Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation.

Fergus Reid (79) c/o Joe Pietryka, Inc. 85 Charles Colman Blvd. Pawling, NY 12564

Director

Since June 1992

Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992).

105

Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by JP Morgan Investment Management Inc.

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The Malaysia Fund, Inc.

December 31, 2011

Director and Officer Information (unaudited) (cont'd)

Interested Director:

Name, Age and Address of Independent Director

Position(s) Held with Registrant

Length of Time Served*

Principal Occupation(s) During Past 5 Years

Number of Portfolios in Fund Complex Overseen by Independent Director**

Other Directorships Held by Independent Director***

James F. Higgins (64) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311

Director

Since June 2000

Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000).

103

Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services).

 

*  Each Director serves an indefinite term, until his or her successor is elected.

**  The Fund Complex includes (as of December 31, 2011) all open-end and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Management Inc. (the "Adviser") and any funds that have an adviser that is an affiliated person of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP).

***  This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.

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The Malaysia Fund, Inc.

December 31, 2011

Director and Officer Information (unaudited) (cont'd)

Executive Officers:

Name, Age and Address of Executive Officer

Position(s) Held with Registrant

Length of Time Served*

Principal Occupation(s) During Past 5 Years

Arthur Lev (50) 522 Fifth Avenue New York, NY 10036

President and Principal Executive Officer – Equity and Fixed Income Funds

Since June 2011

President and Principal Executive Officer (since June 2011) of the Equity and Fixed Income Funds in the Fund Complex; Head of the Long Only Business of Morgan Stanley Investment Management (since February 2011); Managing Director of the Adviser and various entities affiliated with the Adviser (since December 2006). Formerly, Chief Strategy Officer of Morgan Stanley Investment Management's Traditional Asset Management business (November 2010-February 2011); General Counsel of Morgan Stanley Investment Management (December 2006-October 2010); Partner and General Counsel of FrontPoint Partners LLC (July 2002-December 2006); Managing Director and General Counsel of Morgan Stanley Investment Management (May 2000-June 2002).

Mary Ann Picciotto (38) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311

Chief Compliance Officer

Since May 2010

Managing Director of the Adviser and various entities affiliated with the Adviser; Chief Compliance Officer of various Morgan Stanley Funds (since May 2010); Chief Compliance Officer of the Adviser (since April 2007).

Stefanie V. Chang Yu (45) 522 Fifth Avenue New York, NY 10036

Vice President

Since December 1997

Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds (since December 1997).

Francis J. Smith (46) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311

Treasurer and Principal Financial Officer

Treasurer since July 2003 and Principal Financial Officer since September 2002

Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer and Principal Financial Officer of various Morgan Stanley Funds (since July 2003).

Mary E. Mullin (44) 522 Fifth Avenue New York, NY 10036

Secretary

Since June 1999

Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999).

 

*  Each Officer serves an indefinite term, until his or her successor is elected.

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