<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, 2004
Date of reporting period: March 31, 2004
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 SEMIANNUAL 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'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
<Page>
MORGAN STANLEY FUND OF FUNDS --
DOMESTIC AND INTERNATIONAL PORTFOLIOS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
TOTAL RETURN FOR THE SIX MONTHS ENDED MARCH 31, 2004: DOMESTIC PORTFOLIO
<Table>
<Caption>
LIPPER
S&P FLEXIBLE
500 PORTFOLIO
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)
13.37% 13.03% 13.02% 13.54% 14.08% 11.84%
</Table>
THE PERFORMANCE OF EACH FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. A 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 THE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION.
DOMESTIC MARKET CONDITIONS
Early in 2003, in the run-up to war in Iraq, the markets retested their October
2002 lows before rallying sharply. The rally cooled through the summer after a
string of weak postwar economic data raised concerns about the viability of the
economic recovery. By autumn, however, the economic news improved dramatically
and the rally in stocks resumed through the end of the calendar year. In early
2004, economic growth remained well above trend, consumer spending and
investment were generally buoyant and corporate earnings were robust. By the end
of the first quarter, after a long-awaited correction in stocks, investor
concerns shifted from the strength of the economic recovery to the timing of
higher interest rates.
During the six-month period ended March 31, 2004, U.S. equity investors enjoyed
gains across all sectors and capitalization levels. Overall, small caps
outperformed large caps, and value beat growth. Among sectors, information
technology issues outperformed across all market caps, followed closely by the
consumer discretionary area. Within large caps, health care and energy were the
laggards, although energy began to outperform in the second half of the period
as sustained higher oil prices supported stronger earnings.
DOMESTIC PERFORMANCE ANALYSIS
Morgan Stanley Fund of Funds Domestic Portfolio underperformed the S&P 500 Index
but outperformed its peers as represented by the Lipper Flexible Portfolio Funds
Index for the six-month period ending March 31, 2004. The Domestic Portfolio is
diversified across a wide selection of Morgan Stanley mutual funds that we
increase or decrease exposure to as the market environment warrants. The
Domestic Portfolio's fractional underperformance was due in large part to its 9
percent position in fixed-income and convertible securities, a tactical
allocation that potentially provides a defensive buffer against stock market
volatility. Despite March's long-awaited stock market correction, equities went
on to outperform during the period, with our fixed-income allocation ultimately
causing the portfolio to lag the S&P 500 Index. The Fund's holdings in utilities
also dampened the Domestic Portfolio's performance, because that sector fell
behind both the S&P and its cyclical peers.
Several of the Domestic Portfolio's positions aided its performance, however,
led by information technology, which made the bulk of its contributions in the
fourth
2
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quarter of 2003. We trimmed the Portfolio's exposure to this sector in early
2004 to take profits in anticipation of the market correction that then did
occur in March. The Portfolio's positioning for this eventual market correction
greatly aided performance. Additionally, our decision to increase the
Portfolio's exposure to basic materials relative to the S&P 500 Index helped the
Domestic Portfolio as high commodity prices, a falling U.S. dollar and high
demand for exports like steel from China boosted this sector.
TOP HOLDINGS: DOMESTIC
<Table>
Morgan Stanley S&P 500 Index 10.5%
Morgan Stanley Value Fund 9.6
Morgan Stanley Dividend Growth 9.4
Morgan Stanley Value-Added Market 7.8
Morgan Stanley Financial Services Trust 6.7
</Table>
DATA AS OF MARCH 31, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A
PROPORTION OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE DEEMED A RECOMMENDATION TO BUY OR SELL 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 -- DOMESTIC
THE DOMESTIC PORTFOLIO NORMALLY INVESTS AT LEAST 80 PERCENT OF ITS ASSETS IN
SHARES OF THE UNDERLYING FUNDS DESCRIBED BELOW. THESE UNDERLYING FUNDS ARE
INTENDED TO GIVE THE PORTFOLIO BROAD EXPOSURE TO THE U.S. EQUITY AND
FIXED-INCOME MARKETS. AT ANY TIME THE PORTFOLIO'S INVESTMENT MANAGER, MORGAN
STANLEY INVESTMENT ADVISORS INC., MAY ADD OR SUBSTITUTE UNDERLYING FUNDS IN
WHICH THE PORTFOLIO MAY INVEST. IN DECIDING HOW TO ALLOCATE THE PORTFOLIO'S
ASSETS AMONG THE SELECTED UNDERLYING FUNDS, THE INVESTMENT MANAGER CONSIDERS ITS
OUTLOOK FOR THE U.S. ECONOMY AND FINANCIAL MARKETS AS WELL AS THE RELATIVE
MARKET VALUATIONS OF THE UNDERLYING FUNDS. THE PORTFOLIO NORMALLY EXPECTS TO
INVEST BETWEEN 50 AND 100 PERCENT OF ITS NET ASSETS IN UNDERLYING FUNDS THAT
INVEST PRIMARILY IN EQUITY SECURITIES AND UP TO 50 PERCENT OF ITS NET ASSETS IN
UNDERLYING FUNDS THAT INVEST PRIMARILY IN FIXED-INCOME SECURITIES. THERE ARE NO
MINIMUM OR MAXIMUM PERCENTAGES IN WHICH THE PORTFOLIO MUST INVEST IN ANY
UNDERLYING FUND.
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.
3
<Page>
MORGAN STANLEY FUND OF FUNDS --
DOMESTIC AND INTERNATIONAL PORTFOLIOS
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2004
TOTAL RETURN FOR THE SIX MONTHS ENDED MARCH 31, 2004: INTERNATIONAL PORTFOLIO
<Table>
<Caption>
MORGAN
STANLEY LIPPER
CAPITAL INTER-
INTERNATIONAL NATIONAL
(MSCI) EAFE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)
19.26% 18.84% 18.87% 19.51% 22.16% 21.21%
</Table>
THE PERFORMANCE OF EACH FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. A 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 THE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION.
INTERNATIONAL MARKET CONDITIONS
International equities performed extremely well during the six-month period
under review, as the MSCI EAFE Index returned 22 percent for the period versus
14 percent for the S&P 500 Index. Japan led the international charge over the
past two quarters, advancing more than 24 percent in U.S. dollars. Overall,
however, emerging markets generally gained more than developed ones during the
period, in both U.S. dollars and local currencies. The emerging markets'
relative outperformance can be attributed to their heavy emphasis on commodity
exports and close tracking of the advanced markets. From a regional perspective,
the MSCI Emerging Markets Europe Index returned the strongest results for
U.S.-dollar-based investors, while both the MSCI Emerging Markets Latin America
and MSCI Emerging Markets Asia indexes also produced significant returns for the
period. Sector leadership mirrored the domestic markets as well, with
economically sensitive sectors driving the market but defensive sectors lagging.
INTERNATIONAL PERFORMANCE ANALYSIS
For the period ended March 31, 2004, Morgan Stanley Fund of Funds International
Portfolio underperformed both its benchmark, the MSCI EAFE Index, and its peer
group, as represented by the Lipper International Funds Index. The Portfolio
invests in six Morgan Stanley international funds: European Growth Fund, Japan
Fund, International SmallCap Fund, International Value Equity, Pacific Growth
Fund and Latin American Growth Fund. We adjust the Fund's exposure to these
funds to take advantage of changes in global market conditions. Our slight
underweighting in Europe hampered the International Portfolio's performance,
because that region returned strong results for the period, in both U.S. dollars
and local currencies. Europe benefited from both a weakened dollar and an
accommodative fiscal policy put in place by the European Union. On a positive
note, our best-performing geographical allocation was to Latin America, where
emerging economies recovered quickly as global economic conditions continued
strong.
To take advantage of current market dynamics we made some tactical moves to the
International Portfolio during the period. To capture gains from
more-economically sensitive markets we increased the Fund's exposure relative to
the MSCI EAFE Index to small-cap stocks that we thought would rally during the
period. Additionally, we increased the allocation to the International Value
Equity
4
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portfolio, anticipating strong growth in value stocks. The combined effect of
these two moves was to reduce the International Portfolio's relatively large
overweighting in Japan.
TOP HOLDINGS: INTERNATIONAL
<Table>
Morgan Stanley European Growth Fund 46.9%
Morgan Stanley Japan Fund 23.9
Morgan Stanley International SmallCap 9.0
Morgan Stanley International Value Equity 8.5
Morgan Stanley Pacific Growth 8.2
</Table>
DATA AS OF MARCH 31, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A
PROPORTION OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE DEEMED A RECOMMENDATION TO BUY OR SELL 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 -- INTERNATIONAL
THE INTERNATIONAL PORTFOLIO NORMALLY INVESTS AT LEAST 80% OF ITS ASSETS IN
SHARES OF THE UNDERLYING FUNDS DESCRIBED BELOW. THESE UNDERLYING FUNDS ARE
INTENDED TO GIVE THE PORTFOLIO BROAD INTERNATIONAL EXPOSURE. AT ANY TIME THE
PORTFOLIO'S "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC., MAY
ADD OR SUBSTITUTE UNDERLYING FUNDS IN WHICH THE PORTFOLIO MAY INVEST. IN
DECIDING HOW TO ALLOCATE THE PORTFOLIO'S ASSETS AMONG THE SELECTED UNDERLYING
FUNDS, THE INVESTMENT MANAGER CONSIDERS ITS OUTLOOK FOR THE VARIOUS ECONOMIES
AND FINANCIAL MARKETS WORLDWIDE, AND THE RELATIVE MARKET VALUATIONS OF THE
UNDERLYING FUNDS. THERE ARE NO MINIMUM OR MAXIMUM PERCENTAGES IN WHICH THE
PORTFOLIO MUST INVEST IN ANY UNDERLYING FUND.
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.
APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION
ON APRIL 22, 2004, THE BOARD OF TRUSTEES APPROVED A PLAN OF LIQUIDATION AND
DISSOLUTION, PURSUANT TO WHICH SUBSTANTIALLY ALL OF THE ASSETS OF THE
INTERNATIONAL PORTFOLIO OF THE FUND WOULD BE LIQUIDATED, KNOWN LIABILITIES OF
THE INTERNATIONAL PORTFOLIO SATISFIED AND THE REMAINING PROCEEDS DISTRIBUTED TO
THE INTERNATIONAL PORTFOLIO'S SHAREHOLDERS (THE "LIQUIDATION"). THE LIQUIDATION
IS SUBJECT TO THE APPROVAL OF SHAREHOLDERS OF THE INTERNATIONAL PORTFOLIO AT A
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OR ABOUT AUGUST 13, 2004. A PROXY
STATEMENT FORMALLY DETAILING THE PROPOSAL AND THE REASONS FOR THE LIQUIDATION
WILL BE DISTRIBUTED TO SHAREHOLDERS OF THE INTERNATIONAL PORTFOLIO. ANY
CONTINGENT DEFERRED SALES CHARGE THAT WOULD BE APPLICABLE TO A SHAREHOLDER OF
THE INTERNATIONAL PORTFOLIO'S CLASS B OR CLASS C SHARES WILL BE WAIVED WITH
RESPECT TO THE LIQUIDATION. EFFECTIVE APRIL 30, 2004, THE FUND WILL NO LONGER
OFFER SHARES OF THE INTERNATIONAL PORTFOLIO.
5
<Page>
PERFORMANCE SUMMARY
DOMESTIC PORTFOLIO--AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED MARCH 31, 2004
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
(SINCE 11/25/97) (SINCE 11/25/97) (SINCE 11/25/97) (SINCE 11/25/97)
SYMBOL DOFAX DOFBX DOFCX DOFDX
1 YEAR 40.69%(3) 39.68%(3) 39.62%(3) 40.95%(3)
33.31(4) 34.68(4) 38.62(4) -
5 YEARS 1.95(3) 1.18(3) 1.20(3) 2.19(3)
0.86(4) 0.85(4) 1.20(4) -
SINCE INCEPTION 4.02(3) 3.25(3) 3.33(3) 4.27(3)
3.14(4) 3.25(4) 3.33(4) -
</Table>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR MORE UP-TO-DATE INFORMATION,
INCLUDING MONTH-END PERFORMANCE FIGURES, PLEASE VISIT MORGANSTANLEY.COM OR SPEAK
WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. THE TABLE DOES 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.
Notes on Performance
(1) THE STANDARD & 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.
6
<Page>
INTERNATIONAL PORTFOLIO--AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED MARCH 31,
2004
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
(SINCE 11/25/97) (SINCE 11/25/97) (SINCE 11/25/97) (SINCE 11/25/97)
SYMBOL IOFAX IOFBX IOFCX IOFDX
1 YEAR 49.79%(3) 48.76%(3) 48.84%(3) 50.35%(3)
41.92(4) 43.76(4) 47.84(4) -
5 YEARS 0.76(3) 0.03(3) 0.05(3) 1.05(3)
(0.32)(4) (0.33)(4) 0.05(4) -
SINCE INCEPTION 2.66(3) 1.91(3) 1.98(3) 2.92(3)
1.79(4) 1.91(4) 1.98(4) -
</Table>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR MORE UP-TO-DATE INFORMATION,
INCLUDING MONTH-END PERFORMANCE FIGURES, PLEASE VISIT MORGANSTANLEY.COM OR SPEAK
WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. THE TABLE DOES 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.
Notes on Performance
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (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.
7
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (98.7%)
70,187 Morgan Stanley Aggressive Equity Fund* $ 634,494
9,178 Morgan Stanley Biotechnology Fund 151,623
76,521 Morgan Stanley Capital Opportunities Trust* 1,033,795
110,537 Morgan Stanley Convertible Securities Trust 1,806,180
101,835 Morgan Stanley Developing Growth Securities Trust* 2,023,466
84,948 Morgan Stanley Dividend Growth Securities Inc. 3,531,298
158,844 Morgan Stanley Financial Services Trust 2,492,256
143,422 Morgan Stanley Growth Fund* 1,748,317
40,487 Morgan Stanley Health Sciences Trust* 795,980
121,111 Morgan Stanley Income Builder Fund 1,297,104
73,251 Morgan Stanley Information Fund* 755,950
92,363 Morgan Stanley Nasdaq-100 Index Fund* 763,840
145,106 Morgan Stanley Natural Resource Development Securities Inc.* 2,211,414
318,787 Morgan Stanley S&P 500 Index Fund 3,924,265
92,204 Morgan Stanley Special Growth Fund* 1,431,001
96,608 Morgan Stanley Special Value Fund* 1,864,533
115,163 Morgan Stanley Total Market Index Fund 1,110,169
188,361 Morgan Stanley U. S. Government Securities Trust 1,753,637
96,260 Morgan Stanley Utilities Fund 1,122,395
300,590 Morgan Stanley Value Fund 3,586,042
84,756 Morgan Stanley Value-Added Market Series/Equity Portfolio 2,907,991
------------
TOTAL COMMON STOCKS
(COST $32,786,183) 36,945,750
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT
$ 335 Joint repurchase agreement account 1.055% due 04/01/04 (dated 03/31/04;
proceeds $335,010) (a) (COST $335,000) 335,000
------------
TOTAL INVESTMENTS
(COST $33,121,183) (b) 99.6% 37,280,750
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4 163,806
----- ------------
NET ASSETS 100.0% $ 37,444,556
===== ============
</Table>
- ----------
* NON-INCOME PRODUCING SECURITY.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE
AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS AND NET UNREALIZED
APPRECIATION IS $4,159,567.
SEE NOTES TO FINANCIAL STATEMENTS
8
<Page>
MORGAN STANLEY FUND OF FUNDS -- INTERNATIONAL
PORTFOLIO OF INVESTMENTS - MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (99.1%)
2,543,436 Morgan Stanley European Growth Fund Inc. $ 38,533,057
539,286 Morgan Stanley International SmallCap Fund* 7,404,400
575,616 Morgan Stanley International Value Equity Fund 6,941,924
2,555,587 Morgan Stanley Japan Fund* 19,601,348
159,580 Morgan Stanley Latin American Growth Fund* 2,192,634
489,912 Morgan Stanley Pacific Growth Fund Inc.* 6,755,892
------------
TOTAL COMMON STOCKS
(COST $78,297,648) 81,429,255
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ----------
SHORT-TERM INVESTMENT (0.4%)
REPURCHASE AGREEMENT
$ 317 Joint repurchase agreement account 1.055% due 04/01/04 (dated 03/31/04;
proceeds $317,009) (a) (COST $317,000) 317,000
------------
TOTAL INVESTMENTS
(COST $78,614,648) (b) 99.5% 81,746,255
OTHER ASSETS IN EXCESS OF LIABILITIES 0.5 374,711
----- ------------
NET ASSETS 100.0% $ 82,120,966
===== ============
</Table>
- ----------
* NON-INCOME PRODUCING SECURITY.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE
AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED
APPRECIATION IS $6,758,101 AND THE AGGREGATE GROSS UNREALIZED
DEPRECIATION IS $3,626,494, RESULTING IN NET UNREALIZED APPRECIATION OF
$3,131,607.
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
MORGAN STANLEY FUND OF FUNDS
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
DOMESTIC INTERNATIONAL
------------- -------------
ASSETS:
Investments in securities, at value
(cost $33,121,183 and $78,614,648, respectively) $ 37,280,750 $ 81,746,255
Cash 47,704 263
Receivable for shares of beneficial interest sold 192,909 579,876
Receivable from affiliate 6,624 12,265
Prepaid expenses and other assets 11,934 24,658
------------- -------------
TOTAL ASSETS 37,539,921 82,363,317
------------- -------------
LIABILITIES:
Payable for:
Distribution fee 32,188 23,564
Shares of beneficial interest redeemed 45,115 183,074
Accrued expenses and other payables 18,062 35,713
------------- -------------
TOTAL LIABILITIES 95,365 242,351
------------- -------------
NET ASSETS $ 37,444,556 $ 82,120,966
============= =============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 41,562,654 $ 106,182,425
Net unrealized appreciation 4,159,567 3,131,607
Undistributed net investment income 38,142 280,044
Accumulated net realized loss (8,315,807) (27,473,110)
------------- -------------
NET ASSETS $ 37,444,556 $ 82,120,966
============= =============
CLASS A SHARES:
Net Assets $ 1,625,164 $ 1,262,260
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 166,669 119,209
NET ASSET VALUE PER SHARE $ 9.75 $ 10.59
============= =============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 10.29 $ 11.18
============= =============
CLASS B SHARES:
Net Assets $ 31,020,689 $ 24,058,928
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 3,251,618 2,353,476
NET ASSET VALUE PER SHARE $ 9.54 $ 10.22
============= =============
CLASS C SHARES:
Net Assets $ 4,634,367 $ 2,469,165
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 485,451 240,479
NET ASSET VALUE PER SHARE $ 9.55 $ 10.27
============= =============
CLASS D SHARES:
Net Assets $ 164,336 $ 54,330,613
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 16,750 5,070,384
NET ASSET VALUE PER SHARE $ 9.81 $ 10.72
============= =============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
<Table>
<Caption>
DOMESTIC INTERNATIONAL
------------- -------------
NET INVESTMENT INCOME:
INCOME
Dividends $ 189,031 $ 396,320
Interest 6,855 6,168
------------- -------------
TOTAL INCOME 195,886 402,488
------------- -------------
EXPENSES
Distribution fee (Class A shares) 1,513 1,270
Distribution fee (Class B shares) 136,350 110,449
Distribution fee (Class C shares) 19,881 10,725
Transfer agent fees and expenses 26,882 65,039
Professional fees 20,242 24,479
Registration fees 11,461 29,139
Shareholder reports and notices 16,441 31,909
Other 3,994 9,290
------------- -------------
TOTAL EXPENSES 236,764 282,300
Less: amounts waived/reimbursed (79,020) (159,856)
------------- -------------
NET EXPENSES 157,744 122,444
------------- -------------
NET INVESTMENT INCOME 38,142 280,044
------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) 694,399 (17,610)
Capital gain distributions received 246,439 --
------------- -------------
NET REALIZED GAIN (LOSS) 940,838 (17,610)
Net change in unrealized appreciation 2,646,639 12,165,989
------------- -------------
NET GAIN 3,587,477 12,148,379
------------- -------------
NET INCREASE $ 3,625,619 $ 12,428,423
============= =============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
DOMESTIC INTERNATIONAL
---------------------------------- -----------------------------------
FOR THE SIX FOR THE YEAR FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED MONTHS ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003 MARCH 31,2004 SEPTEMBER 30, 2003
-------------- ------------------ -------------- ------------------
(UNAUDITED) (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 38,142 $ (129,623) $ 280,044 $ (182,209)
Net realized gain (loss) 940,838 (1,820,274) (17,610) (12,332,725)
Net change in unrealized depreciation 2,646,639 7,306,012 12,165,989 23,285,667
-------------- -------------- -------------- --------------
NET INCREASE 3,625,619 5,356,115 12,428,423 10,770,733
Net increase (decrease) from
transactions in shares of
beneficial interest 8,432,009 (1,607,685) 6,210,211 (5,080,989)
-------------- -------------- -------------- --------------
NET INCREASE 12,057,628 3,748,430 18,638,634 5,689,744
NET ASSETS:
Beginning of period 25,386,928 21,638,498 63,482,332 57,792,588
-------------- -------------- -------------- --------------
END OF PERIOD $ 37,444,556 $ 25,386,928 $ 82,120,966 $ 63,482,332
============== ============== ============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME $ 38,142 -- $ 280,044 --
============== ============== ============== ==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
MORGAN STANLEY FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2004 (UNAUDITED)
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 either members of the Morgan
Stanley Family of Funds or managed by an investment advisor that is an affiliate
of Morgan Stanley Investment Advisors, Inc. (the "Investment Manager")
(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
13
<Page>
date. Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
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. 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 or advisory or sub-advisory
fees to the Investment Manager and/or Sub-Advisors or Advisor of the Underlying
Funds.
The Investment Manager has agreed to assume all operating expenses (except for
distribution fees) until December 31, 2004. At March 31, 2004, included in the
Statements of Assets and Liabilities are receivables from an affiliate which
represent expense reimbursements due to the Portfolios.
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
14
<Page>
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 $4,040,203 and $2,440,832, respectively at March 31, 2004.
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 six months ended March 31, 2004, 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 0.25% and 1.0%, respectively.
The Distributor has informed Domestic and International that for the six months
ended March 31, 2004, it received contingent deferred sales charges from certain
redemptions of the Fund's shares as follows: Class B shares $24,499 and $18,485
and Class C shares of $221 and $246, respectively and received $24,532 and
$10,107, 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 six months ended March 31, 2004 aggregated
$16,777,583 and $7,042,487, respectively, for Domestic and $6,841,797 and
$395,389, respectively, for International.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Funds transfer agent. At March 31, 2004, the Funds had transfer agent fees
and expenses payable of approximately $400 and $40, respectively for Domestic
and International.
15
<Page>
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.
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.
As of September 30, 2003, Domestic and International had temporary book/tax
differences primarily 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.
6. LEGAL MATTERS
The Investment Manager, certain affiliates of the Investment Manager, certain
officers of such affiliates and certain investment companies advised by the
Investment Manager or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the Morgan Stanley funds. The consolidated
amended complaint generally alleges that defendants, including the Fund,
violated their statutory disclosure obligations and fiduciary duties by failing
properly to disclose (i) that the Investment Manager and certain affiliates of
the Investment Manager allegedly offered economic incentives to brokers and
others to recommend the funds advised by the Investment Manager or its
affiliates to investors rather than funds managed by other companies, and (ii)
that the funds advised by the Investment Manager or its affiliates, including
the Fund, allegedly paid excessive commissions to brokers in return for their
efforts to recommend these funds to investors. The complaint seeks, among other
things, unspecified compensatory damages, rescissionary damages, fees and costs.
The defendants intend to move to dismiss the action and otherwise vigorously to
defend it. While the Fund believes that it has meritorious defenses, the
ultimate outcome of this matter is not presently determinable at this early
stage of the litigation, and no provision has been made in the Fund's financial
statements for the effect, if any, of this matter.
16
<Page>
7. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
DOMESTIC
------------------------------------------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
---------------------------- ---------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
--------- -------------- -------- --------------
CLASS A
Sold 91,453 $ 866,138 137,198 $ 1,029,447
Redeemed (28,370) (264,721) (160,015) (1,199,423)
--------- -------------- -------- --------------
Net increase (decrease) --
Class A 63,083 601,417 (22,817) (169,976)
--------- -------------- -------- --------------
CLASS B
Sold 1,059,133 9,768,719 573,877 4,530,971
Redeemed (390,085) (3,612,500) (780,681) (5,792,811)
--------- -------------- -------- --------------
Net increase (decrease) --
Class B 669,048 6,156,219 (206,804) (1,261,840)
--------- -------------- -------- --------------
CLASS C
Sold 215,909 1,972,221 75,812 595,381
Redeemed (40,857) (378,372) (100,056) (720,626)
--------- -------------- -------- --------------
Net increase (decrease) --
Class C 175,052 1,593,849 (24,244) (125,245)
--------- -------------- -------- --------------
CLASS D
Sold 10,304 96,802 1,262 9,367
Redeemed (1,661) (16,278) (8,107) (59,991)
--------- -------------- -------- --------------
Net increase (decrease) --
Class D 8,643 80,524 (6,845) (50,624)
--------- -------------- -------- --------------
Net increase (decrease) in Fund 915,826 $ 8,432,009 (260,710) $ (1,607,685)
========= ============== ======== ==============
<Caption>
INTERNATIONAL
------------------------------------------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
---------------------------- -----------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
--------- -------------- ---------- --------------
CLASS A
Sold 56,319 $ 566,828 7,880,363 $ 62,215,562
Redeemed (40,864) (394,370) (8,022,935) (63,959,883)
--------- -------------- ---------- --------------
Net increase (decrease) --
Class A 15,455 172,458 (142,572) (1,744,321)
--------- -------------- ---------- --------------
CLASS B
Sold 434,936 4,224,688 604,246 4,568,187
Redeemed (388,869) (3,740,457) (1,236,232) (9,309,015)
--------- -------------- ---------- --------------
Net increase (decrease) --
Class B 46,067 484,231 (631,986) (4,740,828)
--------- -------------- ---------- --------------
CLASS C
Sold 66,402 640,665 1,084,981 8,319,205
Redeemed (33,865) (320,081) (1,126,497) (8,664,056)
--------- -------------- ---------- --------------
Net increase (decrease) --
Class C 32,537 320,584 (41,516) (344,851)
--------- -------------- ---------- --------------
CLASS D
Sold 1,074,535 10,929,157 3,706,955 28,811,446
Redeemed (564,631) (5,696,219) (3,491,521) (27,062,435)
--------- -------------- ---------- --------------
Net increase (decrease) --
Class D 509,904 5,232,938 215,434 1,749,011
--------- -------------- ---------- --------------
Net increase (decrease) in Fund 603,963 $ 6,210,211 (600,640) $ (5,080,989)
========= ============== ========== ==============
</Table>
8. SUBSEQUENT EVENT -- PORTFOLIO LIQUIDATION
On April 22, 2004, the Trustees recommended the liquidation of International.
The liquidation is subject to the approval of International's shareholders at a
meeting scheduled to be held on or about August 16, 2004. If approved, the
liquidation will occur as soon as is reasonable and practicable.
Effective April 30, 2004, the Fund ceased offering shares of International.
17
<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 -- -- --
2004* 8.60 0.04 1.11 1.15 -- -- --
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 -- -- --
2004* 8.44 0.01 1.09 1.10 -- -- --
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 -- -- --
2004* 8.45 0.01 1.09 1.10 -- -- --
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 -- -- --
2004* 8.64 0.06 1.11 1.17 -- -- --
</Table>
- ----------
* FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED).
++ 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) NOT ANNUALIZED
(2) ANNUALIZED
(3) DOES NOT INCLUDE ANY EXPENSES INCURRED AS A RESULT OF INVESTMENT IN THE
UNDERLYING FUNDS.
(4) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
<Table>
<Caption>
RATIOS TO AVERAGE
NET ASSETS
(AFTER EXPENSES
WERE ASSUMED)(3)(4)
NET ASSET NET ASSETS -----------------------------------
VALUE END OF NET
YEAR ENDED END OF TOTAL PERIOD INVESTMENT
SEPTEMBER 30 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS)
- --------------- --------------- --------------- --------------- --------------- ---------------
DOMESTIC
CLASS A
1999 $ 11.54 25.00% $ 1,097 0.23% 3.92%
2000 12.37 20.16 1,493 0.24 3.35
2001 8.17 (27.24) 976 0.23 0.91
2002 6.69 (17.44) 846 0.24 0.50
2003 8.60 28.55 891 0.23 0.16
2004* 9.75 13.37(1) 1,625 0.23(2) 0.97(2)
CLASS B
1999 11.46 23.96 26,007 1.00 3.15
2000 12.28 19.29 28,974 1.00 2.59
2001 8.09 (27.79) 26,364 1.00 0.14
2002 6.62 (18.05) 18,474 1.00 (0.26)
2003 8.44 27.49 21,804 1.00 (0.61)
2004* 9.54 13.03(1) 31,021 1.00(2) 0.20(2)
CLASS C
1999 11.52 24.55 1,364 0.54 3.61
2000 12.29 19.23 1,954 1.00 2.59
2001 8.08 (27.79) 2,643 1.00 0.14
2002 6.63 (18.00) 2,218 1.00 (0.26)
2003 8.45 27.45 2,623 1.00 (0.61)
2004* 9.55 13.02(1) 4,634 1.00(2) 0.20(2)
CLASS D
1999 11.56 25.28 15 -- 4.15
2000 12.39 20.39 37 -- 3.59
2001 8.19 (27.07) 93 -- 1.14
2002 6.71 (17.18) 100 -- 0.74
2003 8.64 28.76 70 -- 0.39
2004* 9.81 13.54(1) 164 -- 1.20(2)
<Caption>
RATIOS TO AVERAGE
NET ASSETS
(BEFORE EXPENSES
WERE ASSUMED)(3)(4)
----------------------------------
NET PORTFOLIO
YEAR ENDED INVESTMENT TURNOVER
SEPTEMBER 30 EXPENSES INCOME (LOSS) RATE
- --------------- --------------- --------------- ---------------
DOMESTIC
CLASS A
1999 0.67% 3.48% 295%
2000 0.67 2.92 434
2001 0.57 0.57 177
2002 0.63 0.11 163
2003 0.67 (0.28) 87
2004* 0.71(2) 0.49(2) 23(1)
CLASS B
1999 1.44 2.71 295
2000 1.43 2.16 434
2001 1.34 (0.20) 177
2002 1.39 (0.65) 163
2003 1.44 (1.05) 87
2004* 1.48(2) (0.28)(2) 23(1)
CLASS C
1999 0.98 3.17 295
2000 1.43 2.16 434
2001 1.34 (0.20) 177
2002 1.39 (0.65) 163
2003 1.44 (1.05) 87
2004* 1.48(2) (0.28)(2) 23(1)
CLASS D
1999 0.44 3.71 295
2000 0.43 3.16 434
2001 0.34 0.80 177
2002 0.39 0.35 163
2003 0.44 (0.05) 87
2004* 0.48(2) 0.72(2) 23(1)
</Table>
19
<Page>
MORGAN STANLEY FUND OF FUNDS -- INTERNATIONAL
FINANCIAL HIGHLIGHTS
<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 -- -- --
2004* 8.88 0.04 1.67 1.71 -- -- --
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 -- -- --
2004* 8.60 0.01 1.61 1.62 -- -- --
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 -- -- --
2004* 8.64 0.00 1.63 1.63 -- -- --
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 -- -- --
2004* 8.97 0.06 1.69 1.75 -- -- --
</Table>
- ----------
* FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED).
++ 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) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) DOES NOT INCLUDE ANY EXPENSES INCURRED AS A RESULT OF INVESTMENT IN THE
UNDERLYING FUNDS.
(4) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
RATIOS TO AVERAGE
NET ASSETS
(AFTER EXPENSES
WERE ASSUMED)(3)(4)
NET ASSET NET ASSETS -----------------------------------
VALUE END OF NET
YEAR ENDED END OF TOTAL PERIOD INVESTMENT
SEPTEMBER 30 PERIOD RETURN+ (000'S) EXPENSES INCOME (LOSS)
- --------------- --------------- --------------- --------------- --------------- ---------------
INTERNATIONAL
CLASS A
1999 $ 12.74 40.31% $ 1,074 0.24% 0.91%
2000 12.59 6.19 3,366 0.24 0.12
2001 8.75 (29.38) 1,629 0.16 0.93
2002 7.48 (13.46) 1,843 0.24 1.04
2003 8.88 18.72 921 0.23 (0.17)
2004* 10.59 19.26(1) 1,262 0.25(2) 0.85(2)
CLASS B
1999 12.56 39.09 6,615 1.00 0.15
2000 12.34 5.48 43,697 1.00 (0.64)
2001 8.51 (30.01) 29,980 1.00 0.09
2002 7.29 (14.07) 21,423 1.00 0.28
2003 8.60 17.97 19,849 1.00 (0.94)
2004* 10.22 18.84(1) 24,059 1.00(2) 0.10(2)
CLASS C
1999 12.61 39.65 442 0.77 0.38
2000 12.37 5.46 4,246 1.00 (0.64)
2001 8.53 (30.02) 2,512 1.00 0.09
2002 7.32 (14.07) 1,826 0.98 0.30
2003 8.64 18.03 1,796 1.00 (0.94)
2004* 10.27 18.87(1) 2,469 1.00(2) 0.10(2)
CLASS D
1999 12.78 40.59 564 -- 1.15
2000 12.66 6.56 43,645 -- 0.36
2001 8.80 (29.31) 37,188 -- 1.09
2002 7.53 (13.20) 32,701 -- 1.28
2003 8.97 19.12 40,916 -- 0.06
2004* 10.72 19.51(1) 54,331 -- 1.10(2)
<Caption>
RATIOS TO AVERAGE
NET ASSETS
(BEFORE EXPENSES
WERE ASSUMED)(3)(4)
----------------------------------
NET PORTFOLIO
YEAR ENDED INVESTMENT TURNOVER
SEPTEMBER 30 EXPENSES INCOME (LOSS) RATE
- --------------- --------------- --------------- ---------------
INTERNATIONAL
CLASS A
1999 1.34% (0.19)% 154%
2000 0.60 (0.24) 85
2001 0.42 0.67 22
2002 0.57 0.71 22
2003 0.58 (0.52) 28
2004* 0.69(2) 0.41(2) 1(1)
CLASS B
1999 2.10 (0.95) 154
2000 1.36 (1.00) 85
2001 1.26 (0.17) 22
2002 1.33 (0.05) 22
2003 1.35 (1.29) 28
2004* 1.44(2) (0.34)(2) 1(1)
CLASS C
1999 1.87 (0.72) 154
2000 1.36 (1.00) 85
2001 1.26 (0.17) 22
2002 1.31 (0.03) 22
2003 1.35 (1.29) 28
2004* 1.44(2) (0.34)(2) 1(1)
CLASS D
1999 1.10 0.05 154
2000 0.36 0.00 85
2001 0.26 0.83 22
2002 0.33 0.95 22
2003 0.35 (0.29) 28
2004* 0.44(2) 0.66(2) 1(1)
</Table>
21
<Page>
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<Page>
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<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
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
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.
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)2004 Morgan Stanley
[MORGAN STANLEY LOGO]
3601 6RPT-RA04-00147P-Y03/04
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
FUND OF FUNDS
SEMIANNUAL REPORT
MARCH 31, 2004
[MORGAN STANLEY LOGO]
<Page>
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
Item 8. [Reserved.]
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.
<Page>
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10 Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(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.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Fund of Funds
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 18, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
May 18, 2004