<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: 811-08283
Morgan Stanley Fund of Funds
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: September 30, 2003
Date of reporting period: September 30, 2003
Item 1 - Report to Shareholders
<Page>
WELCOME, SHAREHOLDER:
IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY FUND OF
FUNDS PERFORMED DURING THE ANNUAL PERIOD. WE WILL PROVIDE AN OVERVIEW OF THE
MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED PERFORMANCE
DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE FUND'S
FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES
OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
<Page>
FUND REPORT -- DOMESTIC PORTFOLIO
FOR THE YEAR ENDED SEPTEMBER 30, 2003
TOTAL RETURN FOR THE 12-MONTHS ENDED
SEPTEMBER 30, 2003
<Table>
<Caption>
LIPPER
S&P FLEXIBLE
500 PORTFOLIO
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)
28.55% 27.49% 27.45% 28.76% 24.40% 19.09%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF
ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES
CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE
INFORMATION.
MARKET CONDITIONS
Early in the 12-month period ended September 30, 2003, the economic recovery
began to falter and stocks were in the midst of a rare triple bottom. Despite
interest rates being at historically low levels, corporate earnings remained
sluggish and business investment failed to take off. Uncertainty over the
likelihood and timing of a potential war with Iraq further undermined investor
confidence. As the war's outcome became clear, however, stocks began to rally,
the economic recovery resumed and investor sentiment improved. The rally in
stocks continued into the third quarter, slipping only modestly in September.
At the end of the period the economic data remained strong. Consumer spending
stayed robust, and manufacturing surveys suggested a renewed recovery in that
sector, supporting expectations of vigorous economic growth. The period as a
whole was marked by solid productivity gains and corporate earnings growth,
marred only by a stubbornly slow turnaround in the labor market.
PERFORMANCE ANALYSIS
The Domestic Portfolio gained significantly during the period, because of its
overweighted position in technology fund shares, which led the broader market in
the rally. Other sectors that contributed positively to the Fund's performance
were health care and energy. Natural resources took a big hit in the beginning
of this year in response to the war in Iraq. The Portfolio is invested across a
large selection of Morgan Stanley funds.
2
<Page>
TOP FIVE FUNDS
<Table>
Morgan Stanley Value Fund 9.2%
Morgan Stanley U.S. Government Securities Trust 8.9
Morgan Stanley Growth Fund 8.6
Morgan Stanley Financial Services Trust 8.5
Morgan Stanley Special Growth Fund 7.2
</Table>
DATA AS OF SEPTEMBER 30, 2003. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A
PERCENTAGE OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE DEEMED AS A RECOMMENDATION TO BUY THE SECURITIES MENTIONED. MORGAN
STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND
BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND
FINANCIAL ADVISORY SERVICES.
INVESTMENT STRATEGY
1. THE DOMESTIC PORTFOLIO MAY CURRENTLY INVEST IN AS MANY AS 33 FUNDS.
2. FIXED-INCOME FUNDS COVER DIFFERENT TYPES OF BONDS WITH VARYING MATURITIES
AND CREDIT CHARACTERISTICS.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS (6397). THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
http://www.sec.gov.
ANNUAL HOUSEHOLDING NOTICE
TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M. ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
3
<Page>
FUND REPORT -- INTERNATIONAL PORTFOLIO
FOR THE YEAR ENDED SEPTEMBER 30, 2003
TOTAL RETURN FOR THE 12-MONTHS ENDED
SEPTEMBER 30, 2003
<Table>
<Caption>
LIPPER
MSCI INTERNATIONAL
EAFE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)
18.72% 17.97% 18.03% 19.12% 26.01% 25.63%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF
ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES
CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE
INFORMATION.
MARKET CONDITIONS
The international markets also rallied sharply in the period, bolstered by a
falling dollar. In Europe, tax cuts and fiscal stimulus policies were adopted,
notably in Germany and France, despite strictures stipulated by the
stabilization pact set by the European Union. In Asia, economic growth continued
to surge in China as emerging markets recovered. Even Japan showed promising
signs of a long-overdue rebound, with the Nikkei rallying sharply after reaching
a multidecade low in April. Despite this encouraging development, however, many
investors remain convinced that more significant structural reform will have to
be undertaken in Japan's banking sector before improvements become apparent.
PERFORMANCE ANALYSIS
The International Portfolio underperformed during this reporting period. Japan
and Asia had a negative effect on the Fund during the SARS epidemic but turned
around midyear to provide some of the strongest contributions. Latin America
posted strong results at the start of the year but weakened in the third
quarter. The Portfolio benefited from its decision later in the period to
decrease its European holdings and increase its positions in Japan and other
Asian markets. The Portfolio invests its assets in up to six Morgan Stanley
international funds: European Growth Fund, Japan Fund, Pacific Growth Fund,
International SmallCap Fund, International Value Equity and Latin American
Growth.
4
<Page>
TOP FIVE FUNDS
<Table>
Morgan Stanley European Growth Fund 52.0%
Morgan Stanley Japan Fund 24.9
Morgan Stanley Pacific Growth Fund 8.3
Morgan Stanley International SmallCap Fund 8.1
Morgan Stanley International Value Equity Fund 3.1
</Table>
DATA AS OF SEPTEMBER 30, 2003. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A
PERCENTAGE OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE DEEMED AS A RECOMMENDATION TO BUY THE SECURITIES MENTIONED. MORGAN
STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND
BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND
FINANCIAL ADVISORY SERVICES.
INVESTMENT STRATEGY
THE INTERNATIONAL PORTFOLIO MAY CURRENTLY INVEST IN AS MANY AS SIX FUNDS, WHICH
ARE INTENDED TO GIVE THE PORTFOLIO BROAD INTERNATIONAL EXPOSURE.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS (6397). THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
http://www.sec.gov.
ANNUAL HOUSEHOLDING NOTICE
TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M. ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
5
<Page>
PERFORMANCE SUMMARY
[CHART]
DOMESTIC PORTFOLIO--PERFORMANCE OF A $10,000 INVESTMENT
($ IN THOUSANDS)
<Table>
<Caption>
CLASS A## CLASS B## CLASS C## CLASS D## S&P 500(1) LIPPER(2)
25-Nov-97 $ 9,475 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
31-Dec-97 $ 9,635 $ 10,169 $ 10,169 $ 10,169 $ 10,227 $ 10,179
31-Mar-98 $ 10,539 $ 11,113 $ 11,103 $ 11,134 $ 11,654 $ 11,097
30-Jun-98 $ 10,435 $ 10,973 $ 10,973 $ 11,023 $ 12,038 $ 11,269
30-Sep-98 $ 9,254 $ 9,717 $ 9,717 $ 9,787 $ 10,841 $ 10,457
31-Dec-98 $ 10,795 $ 11,309 $ 11,314 $ 11,424 $ 13,149 $ 11,860
31-Mar-99 $ 11,046 $ 11,551 $ 11,598 $ 11,699 $ 13,804 $ 12,047
30-Jun-99 $ 11,848 $ 12,371 $ 12,417 $ 12,559 $ 14,777 $ 12,539
30-Sep-99 $ 11,567 $ 12,045 $ 12,102 $ 12,262 $ 13,854 $ 12,072
31-Dec-99 $ 13,022 $ 13,537 $ 13,596 $ 13,809 $ 15,915 $ 13,026
31-Mar-00 $ 13,191 $ 13,689 $ 13,749 $ 14,000 $ 16,280 $ 13,348
30-Jun-00 $ 13,034 $ 13,502 $ 13,561 $ 13,833 $ 15,848 $ 13,164
30-Sep-00 $ 13,899 $ 14,368 $ 14,430 $ 14,762 $ 15,693 $ 13,362
31-Dec-00 $ 13,417 $ 13,837 $ 13,898 $ 14,250 $ 14,465 $ 12,944
31-Mar-01 $ 11,932 $ 12,285 $ 12,339 $ 12,686 $ 12,750 $ 11,882
30-Jun-01 $ 12,959 $ 13,324 $ 13,383 $ 13,790 $ 13,496 $ 12,384
30-Sep-01 $ 10,112 $ 10,374 $ 10,420 $ 10,767 $ 11,515 $ 11,144
31-Dec-01 $ 12,092 $ 12,380 $ 12,437 $ 12,876 $ 12,747 $ 12,011
31-Mar-02 $ 11,805 $ 12,072 $ 12,127 $ 12,584 $ 12,783 $ 12,010
30-Jun-02 $ 10,420 $ 10,633 $ 10,684 $ 11,122 $ 11,071 $ 10,975
30-Sep-02 $ 8,349 $ 8,502 $ 8,545 $ 8,916 $ 9,158 $ 9,687
31-Dec-02 $ 8,848 $ 9,002 $ 9,034 $ 9,461 $ 9,931 $ 10,245
31-Mar-03 $ 8,648 $ 8,771 $ 8,815 $ 9,249 $ 9,619 $ 10,034
30-Jun-03 $ 10,121 $ 10,248 $ 10,297 $ 10,830 $ 11,099 $ 11,242
30-Sep-03 $ 10,732 $ 10,754 $ 10,890 $ 11,481 $ 11,393 $ 11,535
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION
OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF
FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL
VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
6
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED SEPTEMBER 30, 2003
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
11/25/97 11/25/97 11/25/97 11/25/97
SYMBOL DOFAX DOFBX DOFCX DOFDX
1 YEAR 28.55%(3) 27.49%(3) 27.45%(3) 28.76%(3)
21.80(4) 22.49(4) 26.45(4) -
5 YEARS 3.01(3) 2.21(3) 2.31(3) 3.24(3)
1.90(4) 1.89(4) 2.31(4) -
SINCE INCEPTION 2.15(3) 1.39(3) 1.47(3) 2.39(3)
1.22(4) 1.25(4) 1.47(4) -
</Table>
- ----------
Notes on Performance
(1) THE STANDARD AND POOR'S 500 INDEX (S&P 500(R)) IS A BROAD-BASED INDEX, THE
PERFORMANCE OF WHICH IS BASED ON THE PERFORMANCE OF 500 WIDELY-HELD COMMON
STOCKS CHOSEN FOR MARKET SIZE, LIQUIDITY AND INDUSTRY GROUP REPRESENTATION.
INDEXES ARE UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR
FEES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN AN INDEX.
(2) THE LIPPER FLEXIBLE PORTFOLIO FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE
INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER
FLEXIBLE PORTFOLIO FUNDS CLASSIFICATION. THE INDEX, WHICH IS ADJUSTED FOR
CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD
NOT BE CONSIDERED AN INVESTMENT. THERE ARE CURRENTLY 30 FUNDS REPRESENTED IN
THIS INDEX.
(3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT
THE DEDUCTION OF ANY SALES CHARGES.
(4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF
THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR
COMPLETE DETAILS ON FEES AND SALES CHARGES.
* THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%.
** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%. THE
CDSC DECLINES TO 0% AFTER SIX YEARS.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
++ CLASS D HAS NO SALES CHARGE.
## CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON SEPTEMBER 30, 2003.
7
<Page>
PERFORMANCE SUMMARY
[CHART]
INTERNATIONAL PORTFOLIO--PERFORMANCE OF A $10,000 INVESTMENT
($ IN THOUSANDS)
<Table>
<Caption>
CLASS A## CLASS B## CLASS C## CLASS D## MSCI EAFE(1) LIPPER(2)
25-Nov-97 $ 9,475 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
31-Dec-97 $ 9,419 $ 9,941 $ 9,941 $ 9,941 $ 10,220 $ 10,162
31-Mar-98 $ 10,146 $ 10,688 $ 10,688 $ 10,708 $ 11,724 $ 11,670
30-Jun-98 $ 9,783 $ 10,284 $ 10,284 $ 10,335 $ 11,848 $ 11,769
30-Sep-98 $ 8,683 $ 9,113 $ 9,113 $ 9,174 $ 10,164 $ 9,912
31-Dec-98 $ 10,251 $ 10,728 $ 10,728 $ 10,839 $ 12,264 $ 11,449
31-Mar-99 $ 10,777 $ 11,253 $ 11,293 $ 11,394 $ 12,435 $ 11,596
30-Jun-99 $ 11,743 $ 12,242 $ 12,293 $ 12,424 $ 12,751 $ 12,239
30-Sep-99 $ 12,183 $ 12,676 $ 12,727 $ 12,898 $ 13,310 $ 12,652
31-Dec-99 $ 14,458 $ 15,039 $ 15,093 $ 15,341 $ 15,571 $ 15,781
31-Mar-00 $ 14,489 $ 15,039 $ 15,093 $ 15,373 $ 15,555 $ 15,878
30-Jun-00 $ 14,181 $ 14,692 $ 14,746 $ 15,058 $ 14,938 $ 15,132
30-Sep-00 $ 12,937 $ 13,370 $ 13,422 $ 13,745 $ 13,733 $ 14,022
31-Dec-00 $ 12,196 $ 12,590 $ 12,640 $ 12,973 $ 13,365 $ 13,458
31-Mar-01 $ 10,703 $ 11,007 $ 11,055 $ 11,372 $ 11,533 $ 11,702
30-Jun-01 $ 10,870 $ 11,161 $ 11,198 $ 11,559 $ 11,412 $ 11,786
30-Sep-01 $ 9,136 $ 9,357 $ 9,392 $ 9,716 $ 9,815 $ 10,011
31-Dec-01 $ 9,851 $ 10,081 $ 10,111 $ 10,483 $ 10,499 $ 10,857
31-Mar-02 $ 10,062 $ 10,269 $ 10,342 $ 10,718 $ 10,552 $ 11,123
30-Jun-02 $ 9,777 $ 9,971 $ 10,044 $ 10,427 $ 10,329 $ 10,913
30-Sep-02 $ 7,906 $ 8,041 $ 8,071 $ 8,433 $ 8,291 $ 8,773
31-Dec-02 $ 8,202 $ 8,327 $ 8,358 $ 8,747 $ 8,826 $ 9,355
31-Mar-03 $ 7,473 $ 7,577 $ 7,608 $ 7,985 $ 8,101 $ 8,532
30-Jun-03 $ 8,762 $ 8,868 $ 8,898 $ 9,363 $ 9,662 $ 10,215
30-Sep-03 $ 9,386 $ 9,400 $ 9,526 $ 10,046 $ 10,447 $ 11,021
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION
OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF
FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL
VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
8
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED SEPTEMBER 30, 2003
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
11/25/97 11/25/97 11/25/97 11/25/97
SYMBOL IOFAX IOFBX IOFCX IOFDX
1 YEAR 18.72%(3) 17.97%(3) 18.03%(3) 19.12%(3)
12.48(4) 12.97(4) 17.03(4) -
5 YEARS 1.57(3) 0.80(3) 0.89(3) 1.83(3)
0.48(4) 0.43(4) 0.89(4) -
SINCE INCEPTION (0.16)(3) (0.90)(3) (0.83)(3) 0.08(3)
(1.08)(4) (1.05)(4) (0.83)(4) -
</Table>
- ----------
Notes on Performance
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX ("MSCI EAFE INDEX")
MEASURES THE PERFORMANCE FOR A DIVERSE RANGE OF GLOBAL STOCK MARKETS WITHIN
EUROPE, AUSTRALASIA, AND THE FAR EAST. THE PERFORMANCE OF THE INDEX IS
LISTED IN U.S. DOLLARS AND ASSUMES REINVESTMENT OF NET DIVIDENDS. "NET
DIVIDENDS" REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT
WITHHOLDING OF TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX.
INDEXES ARE UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR
FEES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN AN INDEX.
(2) THE LIPPER INTERNATIONAL FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE
INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER
INTERNATIONAL FUNDS CLASSIFICATION. THE INDEX, WHICH IS ADJUSTED FOR CAPITAL
GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD NOT BE
CONSIDERED AN INVESTMENT. THERE ARE CURRENTLY 30 FUNDS REPRESENTED IN THIS
INDEX.
(3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT
THE DEDUCTION OF ANY SALES CHARGES.
(4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF
THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR
COMPLETE DETAILS ON FEES AND SALES CHARGES.
* THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%.
** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%. THE
CDSC DECLINES TO 0% AFTER SIX YEARS.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
++ CLASS D HAS NO SALES CHARGE.
## CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON SEPTEMBER 30, 2003.
9
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------
COMMON STOCKS (94.0%)
115,796 Morgan Stanley Capital Opportunities Trust* $ 1,315,446
71,603 Morgan Stanley Convertible Securities Trust 1,056,863
76,993 Morgan Stanley Developing Growth Securities Trust* 1,295,794
157,062 Morgan Stanley Financial Services Trust 2,148,610
198,729 Morgan Stanley Growth Fund* 2,186,015
64,718 Morgan Stanley Health Sciences Trust 1,127,389
121,111 Morgan Stanley Income Builder Fund 1,182,047
122,262 Morgan Stanley Information Fund* 1,118,701
117,317 Morgan Stanley Next Generation Trust* 793,064
112,321 Morgan Stanley S&P 500 Index Fund 1,228,792
138,660 Morgan Stanley Special Growth Fund* 1,837,250
96,608 Morgan Stanley Special Value Fund* 1,542,829
451,742 Morgan Stanley Technology Fund* 1,111,284
241,347 Morgan Stanley U. S. Government Securities Trust 2,246,944
228,639 Morgan Stanley Value Fund* 2,338,973
43,297 Morgan Stanley Value-Added Market Series/Equity Portfolio 1,339,615
------------
TOTAL COMMON STOCKS
(COST $22,356,688) 23,869,616
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
SHORT-TERM INVESTMENT (5.6%)
REPURCHASE AGREEMENT
$ 1,420 Joint repurchase agreement account 1.085% due 10/01/03
(dated 09/30/03; proceeds $1,420,043) (a)
(Cost $1,420,000) 1,420,000
------------
TOTAL INVESTMENTS
(COST $23,776,688) (b) 99.6% 25,289,616
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4 97,312
--------- ------------
NET ASSETS 100.0% $ 25,386,928
========= ============
</Table>
- ----------
* NON-INCOME PRODUCING SECURITY.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $24,441,027. THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $1,046,608 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $198,019, RESULTING IN NET UNREALIZED
APPRECIATION OF $848,589.
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
MORGAN STANLEY FUND OF FUNDS -- INTERNATIONAL
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------
COMMON STOCKS (99.0%)
2,539,146 Morgan Stanley European Growth Fund Inc.* $ 33,034,286
461,992 Morgan Stanley International SmallCap Fund* 5,128,114
192,313 Morgan Stanley International Value Equity Fund 1,951,976
2,493,150 Morgan Stanley Japan Fund* 15,806,568
159,662 Morgan Stanley Latin American Growth Fund* 1,662,088
465,553 Morgan Stanley Pacific Growth Fund Inc.* 5,251,436
------------
TOTAL COMMON STOCKS
(COST $71,868,850) 62,834,468
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT
$ 597 Joint repurchase agreement account 1.085% due 10/01/03
(dated 09/30/03; proceeds $597,018) (a) (Cost $597,000) 597,000
------------
TOTAL INVESTMENTS
(COST $72,465,850) (b) 99.9% 63,431,468
OTHER ASSETS IN EXCESS OF LIABILITIES 0.1 50,864
--------- ------------
NET ASSETS 100.0% $ 63,482,332
========= ============
</Table>
- ----------
* NON-INCOME PRODUCING SECURITY.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $75,911,260. THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $2,247,719 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $14,727,511, RESULTING IN NET UNREALIZED
DEPRECIATION OF $12,479,792.
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
MORGAN STANLEY FUND OF FUNDS
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
<Table>
<Caption>
DOMESTIC INTERNATIONAL
--------------- ---------------
ASSETS:
Investments in securities, at value
(cost $23,776,688 and $72,465,850, respectively) $ 25,289,616 $ 63,431,468
Cash 18,772 850
Receivable for share of beneficial interest sold 117,712 195,806
Receivable from affiliate 18,472 26,506
Prepaid expenses and other assets 4,335 7,962
--------------- ---------------
TOTAL ASSETS 25,448,907 63,662,592
--------------- ---------------
LIABILITIES:
Payable for:
Distribution fee 21,488 19,588
Shares of beneficial interest redeemed 18,621 127,422
Accrued expenses and other payables 21,870 33,250
--------------- ---------------
TOTAL LIABILITIES 61,979 180,260
--------------- ---------------
NET ASSETS $ 25,386,928 $ 63,482,332
=============== ===============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 33,130,645 $ 99,972,214
Net unrealized appreciation (depreciation) 1,512,928 (9,034,382)
Accumulated net realized loss (9,256,645) (27,455,500)
--------------- ---------------
NET ASSETS $ 25,386,928 $ 63,482,332
=============== ===============
CLASS A SHARES:
Net Assets $ 890,501 $ 921,020
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 103,586 103,754
NET ASSET VALUE PER SHARE $ 8.60 $ 8.88
=============== ===============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 9.08 $ 9.37
=============== ===============
CLASS B SHARES:
Net Assets $ 21,803,768 $ 19,848,693
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 2,582,570 2,307,409
NET ASSET VALUE PER SHARE $ 8.44 $ 8.60
=============== ===============
CLASS C SHARES:
Net Assets $ 2,622,618 $ 1,796,633
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 310,399 207,942
NET ASSET VALUE PER SHARE $ 8.45 $ 8.64
=============== ===============
CLASS D SHARES:
Net Assets $ 70,041 $ 40,915,986
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 8,107 4,560,480
NET ASSET VALUE PER SHARE $ 8.64 $ 8.97
=============== ===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
<Table>
<Caption>
DOMESTIC INTERNATIONAL
--------------- ---------------
NET INVESTMENT LOSS:
INCOME
Dividends $ 84,925 $ 20,779
Interest 4,115 16,845
--------------- ---------------
TOTAL INCOME 89,040 37,624
--------------- ---------------
EXPENSES
Distribution fee (Class A shares) 2,269 5,399
Distribution fee (Class B shares) 194,110 196,704
Distribution fee (Class C shares) 22,284 17,730
Transfer agent fees and expenses 47,974 122,879
Professional fees 26,854 26,854
Shareholder reports and notices 23,237 56,410
Organizational expenses 766 766
Other 729 64
--------------- ---------------
TOTAL EXPENSES 318,223 426,806
Less: amounts waived/reimbursed (99,560) (206,973)
--------------- ---------------
NET EXPENSES 218,663 219,833
--------------- ---------------
NET INVESTMENT LOSS (129,623) (182,209)
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss (1,829,188) (12,332,725)
Capital gain distributions received 8,914 --
--------------- ---------------
NET REALIZED LOSS (1,820,274) (12,332,725)
Net change in unrealized depreciation 7,306,012 23,285,667
--------------- ---------------
Net Gain 5,485,738 10,952,942
--------------- ---------------
NET INCREASE $ 5,356,115 $ 10,770,733
=============== ===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
DOMESTIC INTERNATIONAL
---------------------------------------- ----------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------ ------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ (129,623) $ (73,602) $ (182,209) $ 587,367
Net realized loss (1,820,274) (5,173,908) (12,332,725) (10,302,558)
Net change in unrealized depreciation 7,306,012 44,960 23,285,667 1,224,946
------------------ ------------------ ------------------ ------------------
NET INCREASE (DECREASE) 5,356,115 (5,202,550) 10,770,733 (8,490,245)
------------------ ------------------ ------------------ ------------------
DIVIDENDS TO SHAREHOLDERS FROM NET
INVESTMENT INCOME
Class A shares -- (9,320) -- (20,390)
Class B shares -- (45,416) -- (96,935)
Class C shares -- (1,812) -- (3,468)
Class D shares -- (1,907) -- (544,212)
------------------ ------------------ ------------------ ------------------
TOTAL DIVIDENDS -- (58,455) -- (665,005)
------------------ ------------------ ------------------ ------------------
Net decrease from transactions in shares
of beneficial interest (1,607,685) (3,176,416) (5,080,989) (4,361,319)
------------------ ------------------ ------------------ ------------------
NET INCREASE (DECREASE) 3,748,430 (8,437,421) 5,689,744 (13,516,569)
NET ASSETS:
Beginning of period 21,638,498 30,075,919 57,792,588 71,309,157
------------------ ------------------ ------------------ ------------------
END OF PERIOD: $ 25,386,928 $ 21,638,498 $ 63,482,332 $ 57,792,588
================== ================== ================== ==================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
MORGAN STANLEY FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Fund of Funds (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end
management investment company. The Fund will invest in Class D shares of other
open-end management investment companies that are Morgan Stanley Funds
(individually, an "Underlying Fund" and collectively, the "Underlying Funds").
The Fund, which consists of two separate portfolios ("Portfolios"), Domestic and
International, was organized as a Massachusetts business trust on July 3, 1997
and commenced operations on November 25, 1997.
The investment objectives of each Portfolio are as follows:
<Table>
<Caption>
PORTFOLIO INVESTMENT OBJECTIVE
Domestic Seeks to maximize total investment return through capital growth
and income by investing in a selection of Underlying Funds which
invest their assets primarily in the U.S. equity and fixed-income
markets.
International Seeks long-term capital appreciation by investing in a selection
of Underlying Funds which invest their assets primarily in the
international equity markets.
</Table>
Each Portfolio offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) Investments are valued at the net asset value
per share of each Underlying Fund determined as of the close of the New York
Stock Exchange on valuation date; and (2) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
15
<Page>
C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.
D. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
E. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
G. ORGANIZATIONAL EXPENSES -- The Investment Manager incurred the organizational
expenses of the Fund in the amount of approximately $50,000 ($25,000 per
Portfolio). Such expenses were deferred and fully amortized as of November 24,
2002. The reimbursement of these expenses by the Fund were waived by Morgan
Stanley Investment Advisors Inc. (the "Investment Manager").
H. USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays no investment
management fee. However, the Fund, through its investments in the Underlying
Funds, will pay its pro rata share of the management fees to the Investment
Manager of the Underlying Funds.
The Investment Manager has agreed to assume all operating expenses (except for
distribution fees) until December 31, 2004. At September 30, 2003, included in
the Statements of Assets and Liabilities are receivables from an affiliate which
represent expense reimbursements due to the Portfolios.
16
<Page>
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the average daily
net assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised Domestic and International that such excess amounts
totaled $3,972,407 and $2,461,844, respectively at September 30, 2003.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the year ended September 30, 2003, the distribution fee was accrued for
Domestic and International Class A shares and Class C shares at the annual rate
of 0.23% and 1.0% and 0.23% and 1.0%, respectively.
The Distributor has informed Domestic and International that for the year ended
September 30, 2003, it received contingent deferred sales charges from certain
redemptions of the Fund's shares as follows: Class A shares $1,000 and $26,209,
Class B shares $57,881 and $53,414 and Class C shares $512 and $260,
respectively; and received $13,478 and $6,738, respectively, in front-end sales
charges from sales of the Fund's Class A shares. The respective shareholders pay
such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended September 30, 2003 aggregated
$19,318,250 and $22,519,879, respectively, for Domestic and $15,798,588 and
$20,608,374, respectively, for International.
17
<Page>
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Funds transfer agent. At September 30, 2003, the Funds had transfer agent
fees and expenses payable of approximately $4,000 and $9,900, respectively for
Domestic and International.
5. FEDERAL INCOME TAX STATUS
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
The tax character of distributions paid was as follows:
<Table>
<Caption>
DOMESTIC INTERNATIONAL
--------------------------------------- ---------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------ ------------------ ------------------
Ordinary income -- $ 58,455 -- $ 665,005
As of September 30, 2003, the tax-basis components of accumulated losses were as
follows:
Net accumulated earnings -- --
Capital loss carryforward* $ (7,303,064) $ (12,339,722)
Post-October losses (1,289,242) (11,670,368)
Net unrealized appreciation
(depreciation) 848,589 (12,479,792)
------------------ ------------------
Total accumulated losses $ (7,743,717) $ (36,489,882)
================== ==================
</Table>
* As of September 30, 2003, Domestic had a net capital loss carryforward of
$7,303,064 of which $201,640 will expire on September 30, 2009, $672,400 will
expire on September 30, 2010 and $6,429,024 will expire on September 30, 2011 to
offset future capital gains to the extent provided by regulations.
* As of September 30, 2003, International had a net capital loss carryforward
of $12,339,722 of which $2,122,277 will expire on September 30, 2010 and
$10,217,445 will expire on September 30, 2011 to offset future capital gains to
the extent provided by regulations.
18
<Page>
As of September 30, 2003, Domestic and International had temporary book/tax
differences attributable to post-October losses (capital losses incurred after
October 31 within the taxable year which are deemed to arise on the first
business day of the Fund's next taxable year) and capital loss deferrals on wash
sales and permanent book/tax differences primarily attributable to a net
operating loss. To reflect reclassifications arising from the permanent
differences, the following accounts were (charged) credited:
<Table>
<Caption>
PAID-IN-CAPITAL NET INVESTMENT LOSS
------------------ -------------------
Domestic $ (129,623) $ 129,623
International (182,209) 182,209
</Table>
19
<Page>
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
DOMESTIC INTERNATIONAL
----------------------------------------------------- -----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------------- ------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
CLASS A
Sold 137,198 $ 1,029,447 75,172 $ 657,179 7,880,363 $62,215,562 2,418,173 $20,137,497
Reinvestment of
dividends -- -- 961 9,310 -- -- 2,074 19,330
Redeemed (160,015) (1,199,423) (69,223) (560,442) (8,022,935) (63,959,883) (2,360,184) (19,893,914)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) --
Class A (22,817) (169,976) 6,910 106,047 (142,572) (1,744,321) 60,063 262,913
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
CLASS B
Sold 573,877 4,530,971 1,187,513 10,552,534 604,246 4,568,187 1,667,175 14,716,815
Reinvestment of
dividends -- -- 4,265 41,116 -- -- 9,243 84,480
Redeemed (780,681) (5,792,811) (1,663,293) (14,066,173) (1,236,232) (9,309,015) (2,260,317) (19,832,981)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net decrease --
Class B (206,804) (1,261,840) (471,515) (3,472,523) (631,986) (4,740,828) (583,899) (5,031,686)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
CLASS C
Sold 75,812 595,381 110,762 984,881 1,084,981 8,319,205 814,863 7,122,686
Reinvestment of
dividends -- -- 164 1,587 -- -- 340 3,113
Redeemed (100,056) (720,626) (103,180) (857,068) (1,126,497) (8,664,056) (860,214) (7,614,353)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) --
Class C (24,244) (125,245) 7,746 129,400 (41,516) (344,851) (45,011) (488,554)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
CLASS D
Sold 1,262 9,367 17,549 161,948 3,706,955 28,811,446 3,764,030 33,184,373
Reinvestment of
dividends -- -- 151 1,459 -- -- 48,416 453,172
Redeemed (8,107) (59,991) (14,100) (102,747) (3,491,521) (27,062,435) (3,694,852) (32,741,537)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) --
Class D (6,845) (50,624) 3,600 60,660 215,434 1,749,011 117,594 896,008
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net decrease in
Fund (260,710) $(1,607,685) (453,259) $(3,176,416) (600,640) $(5,080,989) (451,253) $(4,361,319)
=========== =========== =========== =========== =========== =========== =========== ===========
</Table>
20
<Page>
(This page has been left blank intentionally.)
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
NET ASSET NET TOTAL
VALUE INVESTMENT NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS
YEAR ENDED BEGINNING INCOME AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
SEPTEMBER 30 OF PERIOD (LOSS)++ GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ------------ --------- ---------- -------------- ---------- ------------ ------------- -------------
DOMESTIC
CLASS A
1999 $ 9.72 $ 0.46 $ 1.93 $ 2.39 $ (0.36) $ (0.21) $ (0.57)
2000 11.54 0.38 1.83 2.21 (0.29) (1.09) (1.38)
2001 12.37 0.11 (3.21) (3.10) (0.31) (0.79) (1.10)
2002 8.17 0.05 (1.45) (1.40) (0.08) -- (0.08)
2003 6.69 0.01 1.90 1.91 -- -- --
CLASS B
1999 9.67 0.35 1.94 2.29 (0.29) (0.21) (0.50)
2000 11.46 0.30 1.81 2.11 (0.20) (1.09) (1.29)
2001 12.28 0.01 (3.16) (3.15) (0.25) (0.79) (1.04)
2002 8.09 (0.02) (1.44) (1.46) (0.01) -- (0.01)
2003 6.62 (0.05) 1.87 1.82 -- -- --
CLASS C
1999 9.67 0.40 1.94 2.34 (0.28) (0.21) (0.49)
2000 11.52 0.31 1.80 2.11 (0.25) (1.09) (1.34)
2001 12.29 0.01 (3.17) (3.16) (0.26) (0.79) (1.05)
2002 8.08 (0.02) (1.42) (1.44) (0.01) -- (0.01)
2003 6.63 (0.05) 1.87 1.82 -- -- --
CLASS D
1999 9.74 0.46 1.96 2.42 (0.39) (0.21) (0.60)
2000 11.56 0.48 1.75 2.23 (0.31) (1.09) (1.40)
2001 12.39 0.13 (3.21) (3.08) (0.33) (0.79) (1.12)
2002 8.19 0.07 (1.45) (1.38) (0.10) -- (0.10)
2003 6.71 0.03 1.90 1.93 -- -- --
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) DOES NOT INCLUDE ANY EXPENSES INCURRED AS A RESULT OF INVESTMENT IN THE
UNDERLYING FUNDS.
(2) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS
VALUE END OF
YEAR ENDED END OF TOTAL PERIOD
SEPTEMBER 30 PERIOD RETURN+ (000'S)
- -------------- --------- ------- ----------
DOMESTIC
CLASS A
1999 $ 11.54 25.00% $ 1,097
2000 12.37 20.16 1,493
2001 8.17 (27.24) 976
2002 6.69 (17.44) 846
2003 8.60 28.55 890
CLASS B
1999 11.46 23.96 26,007
2000 12.28 19.29 28,974
2001 8.09 (27.79) 26,364
2002 6.62 (18.05) 18,474
2003 8.44 27.49 21,804
CLASS C
1999 11.52 24.55 1,364
2000 12.29 19.23 1,954
2001 8.08 (27.79) 2,643
2002 6.63 (18.00) 2,218
2003 8.45 27.45 2,623
CLASS D
1999 11.56 25.28 15
2000 12.39 20.39 37
2001 8.19 (27.07) 93
2002 6.71 (17.18) 100
2003 8.64 28.76 70
<Caption>
RATIOS TO AVERAGE RATIOS TO AVERAGE
NET ASSETS NET ASSETS
(AFTER EXPENSES (BEFORE EXPENSES
WERE ASSUMED) (1)(2) WERE ASSUMED) (1)(2)
-------------------------- ---------------------------
NET NET PORTFOLIO
YEAR ENDED INVESTMENT INVESTMENT TURNOVER
SEPTEMBER 30 EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE
- ------------ -------- ------------- -------- ------------- ---------
DOMESTIC
CLASS A
1999 0.23% 3.92% 0.67% 3.48% 295%
2000 0.24 3.35 0.67 2.92 434
2001 0.23 0.91 0.57 0.57 177
2002 0.24 0.50 0.63 0.11 163
2003 0.23 0.16 0.67 (0.28) 87
CLASS B
1999 1.00 3.15 1.44 2.71 295
2000 1.00 2.59 1.43 2.16 434
2001 1.00 0.14 1.34 (0.20) 177
2002 1.00 (0.26) 1.39 (0.65) 163
2003 1.00 (0.61) 1.44 (1.05) 87
CLASS C
1999 0.54 3.61 0.98 3.17 295
2000 1.00 2.59 1.43 2.16 434
2001 1.00 0.14 1.34 (0.20) 177
2002 1.00 (0.26) 1.39 (0.65) 163
2003 1.00 (0.61) 1.44 (1.05) 87
CLASS D
1999 -- 4.15 0.44 3.71 295
2000 -- 3.59 0.43 3.16 434
2001 -- 1.14 0.34 0.80 177
2002 -- 0.74 0.39 0.35 163
2003 -- 0.39 0.44 (0.05) 87
</Table>
23
<Page>
<Table>
<Caption>
NET ASSET NET TOTAL
VALUE INVESTMENT NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS
YEAR ENDED BEGINNING INCOME AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
SEPTEMBER 30 OF PERIOD (LOSS)++ GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
- ------------ --------- ---------- -------------- ---------- ------------ ------------- -------------
INTERNATIONAL
CLASS A
1999 $ 9.08 $ 0.10 $ 3.56 $ 3.66 -- -- --
2000 12.74 0.03 0.85 0.88 $ (0.04) $ (0.99) $ (1.03)
2001 12.59 0.09 (3.74) (3.65) (0.07) (0.12) (0.19)
2002 8.75 0.08 (1.24) (1.16) (0.11) -- (0.11)
2003 7.48 (0.01) 1.41 1.40 -- -- --
CLASS B
1999 9.03 0.02 3.51 3.53 -- -- --
2000 12.56 (0.08) 0.86 0.78 (0.01) (0.99) (1.00)
2001 12.34 0.01 (3.67) (3.66) (0.05) (0.12) (0.17)
2002 8.51 0.03 (1.22) (1.19) (0.03) -- (0.03)
2003 7.29 (0.07) 1.38 1.31 -- -- --
CLASS C
1999 9.03 0.07 3.51 3.58 -- -- --
2000 12.61 (0.08) 0.86 0.78 (0.03) (0.99) (1.02)
2001 12.37 0.02 (3.69) (3.67) (0.05) (0.12) (0.17)
2002 8.53 0.03 (1.23) (1.20) (0.01) -- (0.01)
2003 7.32 (0.07) 1.39 1.32 -- -- --
CLASS D
1999 9.09 0.23 3.46 3.69 -- -- --
2000 12.78 0.04 0.89 0.93 (0.06) (0.99) (1.05)
2001 12.66 0.12 (3.78) (3.66) (0.08) (0.12) (0.20)
2002 8.80 0.11 (1.25) (1.14) (0.13) -- (0.13)
2003 7.53 0.00 1.44 1.44 -- -- --
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) DOES NOT INCLUDE ANY EXPENSES INCURRED AS A RESULT OF INVESTMENT IN THE
UNDERLYING FUNDS.
(2) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
NET ASSET NET ASSETS
VALUE END OF
YEAR ENDED END OF TOTAL PERIOD
SEPTEMBER 30 PERIOD RETURN+ (000'S)
- ------------ --------- ------- ----------
INTERNATIONAL
CLASS A
1999 $ 12.74 40.31% $ 1,074
2000 12.59 6.19 3,366
2001 8.75 (29.38) 1,629
2002 7.48 (13.46) 1,843
2003 8.88 18.72 921
CLASS B
1999 12.56 39.09 6,615
2000 12.34 5.48 43,697
2001 8.51 (30.01) 29,980
2002 7.29 (14.07) 21,423
2003 8.60 17.97 19,849
CLASS C
1999 12.61 39.65 442
2000 12.37 5.46 4,246
2001 8.53 (30.02) 2,512
2002 7.32 (14.07) 1,826
2003 8.64 18.03 1,796
CLASS D
1999 12.78 40.59 564
2000 12.66 6.56 43,645
2001 8.80 (29.31) 37,188
2002 7.53 (13.20) 32,701
2003 8.97 19.12 40,916
<Caption>
RATIOS TO AVERAGE RATIOS TO AVERAGE
NET ASSETS NET ASSETS
(AFTER EXPENSES (BEFORE EXPENSES
WERE ASSUMED) (1)(2) WERE ASSUMED) (1)(2)
-------------------------- ---------------------------
NET NET PORTFOLIO
YEAR ENDED INVESTMENT INVESTMENT TURNOVER
SEPTEMBER 30 EXPENSES INCOME (LOSS) EXPENSES INCOME (LOSS) RATE
- ------------ -------- ------------- -------- ------------- ---------
INTERNATIONAL
CLASS A
1999 0.24% 0.91% 1.34% (0.19)% 154%
2000 0.24 0.12 0.60 (0.24) 85
2001 0.16 0.93 0.42 0.67 22
2002 0.24 1.04 0.57 0.71 22
2003 0.23 (0.17) 0.58 (0.52) 28
CLASS B
1999 1.00 0.15 2.10 (0.95) 154
2000 1.00 (0.64) 1.36 (1.00) 85
2001 1.00 0.09 1.26 (0.17) 22
2002 1.00 0.28 1.33 (0.05) 22
2003 1.00 (0.94) 1.35 (1.29) 28
CLASS C
1999 0.77 0.38 1.87 (0.72) 154
2000 1.00 (0.64) 1.36 (1.00) 85
2001 1.00 0.09 1.26 (0.17) 22
2002 0.98 0.30 1.31 (0.03) 22
2003 1.00 (0.94) 1.35 (1.29) 28
CLASS D
1999 -- 1.15 1.10 0.05 154
2000 -- 0.36 0.36 0.00 85
2001 -- 1.09 0.26 0.83 22
2002 -- 1.28 0.33 0.95 22
2003 -- 0.06 0.35 (0.29) 28
</Table>
25
<Page>
MORGAN STANLEY FUND OF FUNDS
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF
TRUSTEES OF MORGAN STANLEY FUND OF FUNDS:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Fund of Funds (the "Fund"), comprising the Domestic Portfolio and the
International Portfolio (the "Portfolios"), as of September 30, 2003, and the
related statements of operations for the year then ended and 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 auditing standards generally accepted
in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2003, by correspondence with the custodian
and broker. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 each
of the respective Portfolios constituting Morgan Stanley Fund of Funds as of
September 30, 2003, the results of their operations for the year then ended, the
changes in their 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 accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
NOVEMBER 17, 2003
26
<Page>
MORGAN STANLEY FUND OF FUNDS
TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX
POSITION(S) OFFICE AND OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** TRUSTEE*** HELD BY TRUSTEE
- ------------------------------ ---------- ------------ ------------------------------ ---------- --------------------------------
Michael Bozic (62) Trustee Since Retired; Director or Trustee 216 Director of Weirton Steel
c/o Mayer, Brown, April 1994 of the Retail Funds and Corporation.
Rowe & Maw LLP TCW/DW Term Trust 2003
Counsel to the Independent (since April 1994) and the
Directors Institutional Funds (since
1675 Broadway July 2003); formerly Vice
New York, NY 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); formerly
variously Chairman, Chief
Executive Officer, President
and Chief Operating Officer
(1987-1991) of the Sears
Merchandise Group of Sears,
Roebuck & Co.
Edwin J. Garn (70) Trustee Since Director or Trustee of the 216 Director of Franklin Covey (time
c/o Summit Ventures LLC January Retail Funds and TCW/DW Term management systems), BMW Bank of
1 Utah Center 1993 Trust 2003 (since North America, Inc. (industrial
201 S. Main Street January 1993) and the loan corporation), United Space
Salt Lake City, UT Institutional Funds (since Alliance (joint venture between
July 2003); member of the Lockheed Martin and the Boeing
Utah Regional Advisory Board Company) and Nuskin Asia Pacific
of Pacific Corp.; formerly (multilevel marketing); member
United States Senator of the board of various civic
(R-Utah) (1974-1992) and and charitable organizations.
Chairman, Senate Banking
Committee (1980-1986), Mayor
of Salt Lake City, Utah
(1971-1974), Astronaut, Space
Shuttle Discovery (April
12-19, 1985), and Vice
Chairman, Huntsman Corporation
(chemical company).
Wayne E. Hedien (69) Trustee Since Retired; Director or Trustee 216 Director of The PMI Group Inc.
c/o Mayer, Brown, September of the Retail Funds and (private mortgage insurance);
Rowe & Maw LLP 1997 TCW/DW Term Trust 2003; Trustee and Vice Chairman of The
Counsel to the Independent (Since September 1997) and Field Museum of Natural History;
Directors the Institutional Funds director of various other
1675 Broadway (since July 2003); formerly business and charitable
New York, NY associated with the Allstate organizations.
Companies (1966-1994), most
recently as Chairman of The
Allstate Corporation (March
1993- December 1994) and
Chairman and Chief Executive
Officer of its wholly- owned
subsidiary, Allstate Insurance
Company (July 1989-December
1994).
</Table>
27
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX
POSITION(S) OFFICE AND OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** TRUSTEE*** HELD BY TRUSTEE
- ------------------------------ ---------- ------------ ------------------------------ ---------- --------------------------------
Dr. Manuel H. Johnson (54) Trustee Since Chairman of the Audit 216 Director of NVR, Inc. (home
c/o Johnson Smick July 1991 Committee and Director or construction); Chairman and
International, Inc. Trustee of the Retail Funds Trustee of the Financial
2099 Pennsylvania Avenue, N.W. and TCW/DW Term Trust 2003 Accounting Foundation (oversight
Suite 950 (since July 1991) and the organization of the Financial
Washington, D.C. Institutional Funds (since Accounting Standards Board);
July 2003); Senior Partner, Director of RBS Greenwich
Johnson Smick Capital Holdings (financial
International, Inc., a holding company).
consulting firm; Co-Chairman
and a founder of the Group of
Seven Council (G7C), an
international economic
commission; formerly Vice
Chairman of the Board of
Governors of the Federal
Reserve System and Assistant
Secretary of the U.S.
Treasury.
Joseph J. Kearns (61) Trustee Since Deputy Chairman of the 217 Director of Electro Rent
PMB754 July 2003 Audit Committee and Corporation (equipment leasing),
23852 Pacific Coast Highway Director or Trustee of the The Ford Family Foundation, and
Malibu, CA Retail Funds and TCW/DW the UCLA Foundation.
Term Trust 2003 (since July
2003) and the Institutional
Funds (since August 1994);
previously Chairman of the
Audit Committee of the
Institutional Funds (October
2001-July 2003); President,
Kearns& Associates LLC
(investment consulting);
formerly CFO of the J. Paul
Getty Trust.
Michael E. Nugent (67) Trustee Since Chairman of the Insurance 216 Director of various business
c/o Triumph Capital, L.P. July 1991 Committee and Director or organizations.
445 Park Avenue Trustee of the Retail Funds
New York, NY and TCW/DW Term Trust 2003
(since July 1991) and the
Institutional Funds (since
July 2001); General Partner of
Triumph Capital, L.P., a
private investment
partnership; formerly Vice
President, Bankers Trust
Company and BT Capital
Corporation (1984-1988).
Fergus Reid (71) Trustee Since Chairman of the Governance 217 Trustee and Director of certain
85 Charles Colman Blvd. July 2003 Committee and Director or investment companies in the
Pawling, NY Trustee of the Retail Funds JPMorgan Funds complex managed
and TCW/DW Term Trust 2003 by JP Morgan Investment
(since July 2003) and the Management Inc.
Institutional Funds (since
June 1992); Chairman of
Lumelite Plastics Corporation.
</Table>
28
<Page>
INTERESTED TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF COMPLEX
POSITION(S) OFFICE AND OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) BY OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** TRUSTEE*** HELD BY TRUSTEE
- ------------------------------ ---------- ------------ ------------------------------ ---------- --------------------------------
Charles A. Fiumefreddo (70) Chairman Since Chairman and Director or 216 None
c/o Morgan Stanley Trust of the July 1991 Trustee of the Retail Funds
Harborside Financial Center, Board and and TCW/DW Term Trust 2003
Plaza Two, Trustee (since July 1991) and the
Jersey City, NJ Institutional Funds (since
July 2003); formerly Chief
Executive Officer of the
Retail Funds and the TCW/DW
Term Trust 2003 (until
September 2002).
James F. Higgins (55) Trustee Since Director or Trustee of the 216 Director of AXA Financial, Inc.
c/o Morgan Stanley Trust June 2000 Retail Funds and TCW/DW and The Equitable Life
Harborside Financial Center, Term Trust 2003 (since Assurance Society of the
Plaza Two, June 2000) and the United States (financial
Jersey City, NJ Institutional Funds (since services).
July 2003); Senior Advisor of
Morgan Stanley (since
August 2000); Director of the
Distributor and Dean Witter
Realty Inc.; previously
President and Chief Operating
Officer of the Private Client
Group of Morgan Stanley (May
1999-August 2000), and
President and Chief Operating
Officer of Individual
Securities of Morgan Stanley
(February 1997-May 1999).
Philip J. Purcell (60) Trustee Since Director or Trustee of the 216 Director of American Airlines,
1585 Broadway April 1994 Retail Funds and TCW/DW Term Inc. and its parent company,
New York, NY Trust 2003 (since April 1994) AMR Corporation.
and the Institutional Funds
(since July 2003); Chairman of
the Board of Directors and
Chief Executive Officer of
Morgan Stanley and Morgan
Stanley DW Inc.; Director of
the Distributor; Chairman of
the Board of Directors and
Chief Executive Officer of
Novus Credit Services Inc.;
Director and/or officer of
various Morgan Stanley
subsidiaries.
</Table>
- ----------
* THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY
MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER") (THE
"RETAIL FUNDS").
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS
DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN
STANLEY INVESTMENT MANAGEMENT INC., MORGAN STANLEY INVESTMENTS LP AND MORGAN
STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS ") REFLECT THE EARLIEST DATE THE
DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS
APPLICABLE.
*** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL
OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS THAT
HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE INVESTMENT
MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY INVESTMENT MANAGEMENT
INC. AND MORGAN STANLEY INVESTMENTS LP).
29
<Page>
OFFICERS:
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ----------------------------- ----------------- ------------------- ----------------------------------------------------------------
Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Director and Chief
New York, NY Executive Officer of the Investment Manager and Morgan Stanley
Services; Chairman, Chief Executive Officer and Director of
the Distributor; Chairman and Director of the Transfer Agent;
Director of various Morgan Stanley subsidiaries; President
Morgan Stanley Investments LP (since February 2003); President
of the Institutional Funds (since July 2003) and President of
the Retail Funds and TCW/DW Term Trust 2003 (since May 1999);
Trustee (since July 2003) and President (since December 2002) of
the Van Kampen Closed-End Funds; Trustee (since May 1999) and
President (since October 2002) of the Van Kampen Open-End
Funds.
Ronald E. Robison (64) Executive Vice Since April 2003 Chief Global Operations Officer and Managing Director of Morgan
1221 Avenue of the Americas President and Stanley Investment Management Inc.; Managing DIrector of Morgan
New York, NY Principal Stanley & Co. Incorporated; Managing DIrector of Morgan Stanley;
Executive Managing Director, Chief Administrative Officer and Director of
Officer the Investment Manager and Morgan Stanley Services; Chief
Executive Officer and Director of the Transfer Agent;
Executive Vice President and Principal Executive Officer of
the Institutional Funds (since July 2003); and the TCW/DW Term
Trust 2003 (since April 2003); previously President of the
Institutional Funds (March 2001-July 2003) and Director of the
Institutional Funds (March 2001-July 2003).
Barry Fink (48) Vice President Since February 1997 General Counsel (since May 2000) and Managing Director (since
1221 Avenue of the Americas and General December 2000) of Morgan Stanley Investment Management; Managing
New York, NY Counsel Director (since December 2000), Secretary (since February 1997)
and Director (since July 1998) of the Investment Manager and
Morgan Stanley Services; Assistant Secretary of Morgan Stanley
DW; Chief Legal Officer of Morgan Stanley Investments LP
(since July 2002); Vice President of the Institutional Funds
(since July 2003); Vice President and Secretary of the
Distributor; previously Secretary of the Retail Funds
(February 1997-July 2003); previously Vice President and
Assistant General Counsel of the Investment Manager and Morgan
Stanley Services (February 1997-December 2001).
Joseph J. McAlinden (60) Vice President Since July 1995 Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas Investment Manager, Morgan Stanley Investment Management Inc.
New York, NY and Morgan Stanley Investments LP; Director of the Transfer
Agent, Chief Investment Officer of the Van Kampen Funds; Vice
President of the Institutional Funds (since July 2003) and the
Retail Funds (since July 1995).
Stefanie V. Chang (36) Vice President Since July 2003 Executive Director of Morgan Stanley & Co. and Morgan Stanley
1221 Avenue of the Americas Investment Management Inc. and Vice President of the
New York, NY Institutional Funds (since December 1997) and the Retail Funds
(since July 2003); formerly practiced law with the New York law
firm of Rogers & Wells (now Clifford Chance LLP).
</Table>
30
<Page>
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ----------------------------- ----------------- ------------------- ----------------------------------------------------------------
Francis Smith (38) Treasurer Treasurer since Executive Director of the Investment Manager and Morgan
c/o Morgan Stanley Trust and Chief July 2003 and Chief Stanley Services (since December 2001); previously Vice
Harborside Financial Center, Financial Financial Officer President of the Retail Funds (September 2002-July 2003);
Plaza Two, Officer since September previously Vice President of the Investment Manager and Morgan
Jersey City, NJ 2002 Stanley Services (August 2000-November 2001) and Senior Manager
at PricewaterhouseCoopers LLP (January 1998-August 2000).
Thomas F. Caloia (57) Vice Since July 2003 Executive Director (since December 2002) and Assistant
c/o Morgan Stanley Trust President Treasurer of the Investment Manager, the Distributor and
Harborside Financial Center, Morgan Stanley Services; previously Treasurer of the Retail
Plaza Two, Funds (April 1989-July 2003); formerly First Vice President of
Jersey City, NJ the Investment Manager, the Distributor and Morgan Stanley
Services.
Mary E. Mullin (36) Secretary Since July 2003 Vice President of Morgan Stanley & Co. Incorporated and Morgan
1221 Avenue of the Americas Stanley Investment Management Inc.; Secretary of the
New York, NY Institutional Funds (since June 1999) and the Retail Funds
(since July 2003); formerly practiced law with the New York law
firms of McDermott, Will & Emery and Skadden, Arps, Slate,
Meagher & Flom LLP.
</Table>
- ----------------
* THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH
OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED.
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER
FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE OFFICER
BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE.
31
<Page>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Mitchell M. Merin
PRESIDENT
Ronald E. Robison
EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT and GENERAL COUNSEL
Joseph J. McAlinden
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
Francis J. Smith
TREASURER and CHIEF FINANCIAL OFFICER
Thomas F. Caloia
VICE PRESIDENT
Mary E. Mullin
SECRETARY
TRANSFER AGENT
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
This report is submitted for the general information of the shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.
(C) 2003 Morgan Stanley
[MORGAN STANLEY LOGO]
36016RPT-00-12718J03-OP-10/03
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
FUND OF FUNDS
ANNUAL REPORT
SEPTEMBER 30, 2003
[MORGAN STANLEY LOGO]
<Page>
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto
(d) The Fund has granted a waiver or an implicit waiver from a provision of
its Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
<Page>
Item 9 - 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.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(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.
<Page>
Item 10 Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
Items 4 - 8 are not applicable
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.
Morgan Stanley Funds of Funds
Ronald E. Robison
Principal Executive Officer
November 19, 2003
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.
Ronald E. Robison
Principal Executive Officer
November 19, 2003
Francis Smith
Principal Financial Officer
November 19, 2003