<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08283
Morgan Stanley Fund of Funds - Domestic Portfolio
(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: September 30, 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 -- DOMESTIC PORTFOLIO 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'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
<Page>
FUND REPORT
For the year ended September 30, 2004
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED SEPTEMBER 30, 2004
<Table>
<Caption>
LIPPER
S&P 500 FLEXIBLE
INDEX PORTFOLIO
CLASS A CLASS B CLASS C CLASS D FUND(1) FUNDS INDEX(2)
13.95% 13.15% 13.02% 14.24% 13.87% 11.02%
</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
Equity markets posted moderate returns for the 12-month period ended September
30, 2004. The bulk of the equity returns over the period were realized in a
strong fourth-quarter rally in 2003, when the S&P 500 Index advanced 12.2
percent. Thereafter, although the markets managed to produce positive gains for
the first three quarters of 2004, geopolitical tensions, high oil prices and the
U.S. presidential election added uncertainty to a strained market. The dominant
themes over the period were the inauguration of a new interest-rate tightening
cycle, inflation and an oil price spike.
As the economic cycle matured, strong payroll growth in the spring set the stage
for the Federal Reserve Board's Open Market Committee to begin a new tightening
cycle in interest rates in June. As the Fed moved into tightening mode, a broad
array of inflation indicators moved sharply upward, prompting concerns that
interest-rate hikes would be accelerated substantially. However, as Fed
officials had projected, by late summer the pass-through of higher commodity
prices gave way to lower inflation. At the same time, the flow of economic data
slowed materially, prompting expectations of a slower pace of Fed tightening.
By autumn, inflation pressures remained benign and economic growth for the
second half of the year regained strength. However, the surge in oil prices
accelerated sharply in the third quarter. Fears of supply disruptions in the
Middle East and elsewhere, demand growth from China and investor speculation all
contributed to record high oil prices. The persistence of these prices raised
legitimate concerns about the outlook for both growth and inflation. In such an
uncertain environment, stock prices and bond yields both remained range-bound.
Within the equity markets, the sector with the strongest performance over the
period was energy. The S&P 500 energy sector advanced nearly 42 percent over the
12-month period under review, driven by skyrocketing oil prices. Although all
sectors managed positive gains for the period, none could keep pace with energy.
After leading the bull market in 2003, information technology posted the weakest
returns for the 12-month period. Health care also faltered, as news of drug
patent expirations and failed trials of new products tainted investor
confidence.
PERFORMANCE ANALYSIS
Morgan Stanley Fund of Funds Domestic Portfolio's class B and C shares
underperformed the S&P 500 Index for the 12-month period ended September 2004,
while the Fund's A and D share classes modestly outperformed that index. All
four-share classes of the Fund outperformed the Lipper Flexible Portfolio Funds
Index.
2
<Page>
The Portfolio's underperformance to the S&P 500 Index was largely the result of
its position in both fixed income and convertible securities funds. While the
S&P 500 posted double-digit returns during the period, fixed-income and
convertible securities in general had far less substantial returns for the 12
months. In response, the Portfolio began to increase its equity allocation and
significantly reduced its exposure to fixed income and convertible securities
funds over the last quarter of the period.
At the beginning of the period, its large position in information technology
added to the Fund's performance. The Portfolio's energy and natural resources
positions were also positive for its returns. At the close of the period, the
Fund of Funds Domestic Portfolio was invested in 20 Morgan Stanley funds. The
positions of the Portfolio will be adjusted to reflect its underlying style,
size and sector funds as the market warrants.
TOP FIVE FUNDS
<Table>
Morgan Stanley S&P 500 Index Fund 14.9%
Morgan Stanley Value Fund 10.1
Morgan Stanley Value-Added Market
Series/Equity Portfolio 9.5
Morgan Stanley Information Fund 8.5
Morgan Stanley Dividend Growth Securities 8.2
</Table>
DATA AS OF SEPTEMBER 30, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR THE
TOP FIVE FUNDS ARE AS A PERCENTAGE 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
THE FUND OF FUNDS DOMESTIC PORTFOLIO NORMALLY INVESTS AT LEAST 80 PERCENT OF ITS
ASSETS IN SHARES OF UNDERLYING MORGAN STANLEY FUNDS 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 BETWEEN 0 AND 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.
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO
DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE
REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, www.morganstanley.com. EACH MORGAN
STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH
3
<Page>
THE SEC FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN
STANLEY DOES NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO
SHAREHOLDERS, NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE.
YOU MAY, HOWEVER, OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE FORM N-CSR AND
N-CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE, http://www.sec.gov. YOU MAY
ALSO REVIEW AND COPY THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC.
INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED
BY CALLING THE SEC AT (800) SEC-0330. YOU CAN ALSO REQUEST COPIES OF THESE
MATERIALS, UPON PAYMENT OF A DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S
E-MAIL ADDRESS (publicinfo@sec.gov) OR BY WRITING THE PUBLIC REFERENCE SECTION
OF THE SEC, WASHINGTON, DC 20549-0102. YOU MAY OBTAIN COPIES OF A FUND'S FISCAL
QUARTER FILINGS BY CONTACTING MORGAN STANLEY CLIENT RELATIONS AT (800) 869-NEWS.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF (1) THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE
VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES AND (2) HOW THE
FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT
12-MONTH PERIOD ENDED SEPTEMBER 30, 2004 IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING (800) 869-NEWS OR BY VISITING THE MUTUAL FUND CENTER ON OUR
WEB SITE AT www.morganstanley.com. 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.
4
<Page>
(This page has been left blank intentionally.)
5
<Page>
PERFORMANCE SUMMARY
PERFORMANCE OF A $10,000 INVESTMENT
[CHART]
<Table>
<Caption>
CLASS A++ CLASS B++ CLASS C++ CLASS D++ S&P 500(1) LIPPER(2)
11/25/1997 9475 10000 10000 10000 10000 10000
12/31/1997 9635 10169 10169 10169 10227 10179
3/31/1998 10539 11113 11103 11134 11654 11098
6/30/1998 10435 10973 10973 11023 12038 11269
9/30/1998 9254 9717 9717 9787 10841 10457
12/31/1998 10795 11309 11314 11424 13149 11860
3/31/1999 11046 11551 11598 11699 13804 12048
6/30/1999 11848 12371 12417 12559 14777 12539
9/30/1999 11567 12045 12102 12262 13854 12072
12/31/1999 13022 13537 13596 13809 15915 13025
3/31/2000 13191 13689 13749 14000 16280 13347
6/30/2000 13034 13502 13561 13833 15848 13162
9/30/2000 13899 14368 14430 14762 15693 13359
12/31/2000 13417 13837 13898 14250 14465 12941
3/31/2001 11932 12285 12339 12686 12750 11879
6/30/2001 12959 13324 13383 13790 13496 12380
9/30/2001 10112 10374 10420 10767 11515 11141
12/31/2001 12092 12380 12437 12876 12747 12008
3/31/2002 11805 12072 12127 12584 12783 12007
6/30/2002 10420 10633 10684 11122 11071 10972
9/30/2002 8349 8502 8545 8916 9158 9684
12/31/2002 8848 9002 9034 9461 9931 10242
3/31/2003 8648 8771 8815 9249 9619 10030
6/30/2003 10121 10248 10297 10830 11099 11239
9/30/2003 10732 10754 10890 11481 11393 11533
12/31/2003 11818 11837 11973 12664 12780 12601
3/31/2004 12167 12156 12308 13036 12996 12899
6/30/2004 12279 12245 12385 13155 13220 12885
9/30/2004 $ 12229 $ 12264 $ 12308 $ 13116 $ 12973 $ 12804
</Table>
6
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED SEPTEMBER 30, 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 13.95%(3) 13.15%(3) 13.02%(3) 14.24%(3)
7.97(4) 8.15(4) 12.02(4) --
5 YEARS 1.12(3) 0.36(3) 0.34(3) 1.36(3)
0.03(4) 0.03(4) 0.34(4) --
SINCE INCEPTION 3.80(3) 3.03(3) 3.08(3) 4.04(3)
2.98(4) 3.03(4) 3.08(4) --
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT 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 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.
* 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.
(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.
++ ENDING VALUE ASSUMING A COMPLETE REDEMPTION ON SEPTEMBER 30, 2004.
7
<Page>
EXPENSE EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including distribution
and service (12b-1) fees; and other Fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 04/01/04 - 09/30/04.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the second line of the table is useful in
comparing ongoing costs, and will not help you determine the relative total cost
of owning different funds that have transactional costs, such as sales charges
(loads), and redemption fees, or exchange fees.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- -------------- ---------------
04/01/04 -
04/01/04 09/30/04 09/30/04
------------- -------------- ---------------
CLASS A
Actual (0.51% return) $ 1,000.00 $ 1,005.10 $ 1.25
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,023.75 $ 1.26
CLASS B
Actual (0.10% return) $ 1,000.00 $ 1,001.00 $ 5.00
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,020.00 $ 5.05
CLASS C
Actual (0.00% return) $ 1,000.00 $ 1,000.00 $ 5.00
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,020.00 $ 5.05
CLASS D
Actual (0.61% return) $ 1,000.00 $ 1,006.10 $ 0.00
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,025.00 $ 0.00
</Table>
- ----------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.25%, 1.00%,
1.00% AND 0.00% RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER
THE PERIOD, MULTIPLIED BY 183/366 (TO REFLECT THE ONE-HALF YEAR PERIOD). IF
THE FUND HAD BORNE ALL OF ITS EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN
0.58%, 1.33%, 1.33% AND 0.33%, RESPECTIVELY.
8
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2004
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------------
COMMON STOCKS (99.5%)
70,187 Morgan Stanley Aggressive Equity Fund* $ 616,947
120,595 Morgan Stanley Biotechnology Fund 1,942,782
76,520 Morgan Stanley Capital Opportunities Trust* 1,060,578
24,914 Morgan Stanley Convertible Securities Trust 393,138
101,835 Morgan Stanley Developing Growth Securities Trust* 2,061,145
84,948 Morgan Stanley Dividend Growth Securities Inc. 3,171,117
185,946 Morgan Stanley Financial Services Trust 2,802,208
143,422 Morgan Stanley Growth Fund* 1,695,251
77,970 Morgan Stanley Health Sciences Trust* 1,508,722
121,111 Morgan Stanley Income Builder Fund 1,284,992
367,472 Morgan Stanley Information Fund* 3,310,919
92,363 Morgan Stanley Nasdaq-100 Index Fund* 749,985
48,098 Morgan Stanley Natural Resource Development Securities Inc.* 837,875
76,561 Morgan Stanley Real Estate Fund 1,202,769
472,442 Morgan Stanley S&P 500 Index Fund 5,792,136
92,204 Morgan Stanley Special Growth Fund* 1,439,299
85,658 Morgan Stanley U.S. Government Securities Trust 788,908
32,717 Morgan Stanley Utilities Fund 393,586
317,337 Morgan Stanley Value Fund 3,931,807
108,001 Morgan Stanley Value-Added Market Series/Equity Portfolio 3,707,685
--------------
TOTAL COMMON STOCKS
(COST $35,430,095) 38,691,849
--------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ------------
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
$ 181 Joint repurchase agreement
account 1.83% due 10/01/04
(dated 09/30/04; proceeds
$181,009) (a)
(COST $181,000) 181,000
--------------
TOTAL INVESTMENTS
(COST $35,611,095) (b) 100.0% 38,872,849
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0) (10,186)
----- --------------
NET ASSETS 100.0% $ 38,862,663
===== ==============
</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 $35,749,787. THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $3,471,729 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $348,667, RESULTING IN NET UNREALIZED
APPRECIATION OF $3,123,062.
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004
<Table>
ASSETS:
Investments in securities, at value
(cost $35,611,095) $ 38,872,849
Cash 40,586
Receivable for shares of beneficial
interest sold 9,451
Receivable from affiliate 430
Prepaid expenses and other assets 22,343
----------------
TOTAL ASSETS 38,945,659
----------------
LIABILITIES:
Payable for:
Distribution fee 30,596
Shares of beneficial interest redeemed 29,834
Accrued expenses and other payables 22,566
----------------
TOTAL LIABILITIES 82,996
----------------
NET ASSETS $ 38,862,663
================
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 42,954,611
Net unrealized appreciation 3,261,754
Undistributed net investment income 822
Accumulated net realized loss (7,354,524)
----------------
NET ASSETS $ 38,862,663
================
CLASS A SHARES:
Net Assets $ 1,895,905
Shares Outstanding (UNLIMITED
AUTHORIZED, $.01 PAR VALUE) 193,526
NET ASSET VALUE PER SHARE $ 9.80
================
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET
ASSET VALUE) $ 10.34
================
CLASS B SHARES:
Net Assets $ 32,308,852
Shares Outstanding (UNLIMITED
AUTHORIZED, $.01 PAR VALUE) 3,383,698
NET ASSET VALUE PER SHARE $ 9.55
================
CLASS C SHARES:
Net Assets $ 4,314,376
Shares Outstanding (UNLIMITED
AUTHORIZED, $.01 PAR VALUE) 451,536
NET ASSET VALUE PER SHARE $ 9.55
================
CLASS D SHARES:
Net Assets $ 343,530
Shares Outstanding (UNLIMITED
AUTHORIZED, $.01 PAR VALUE) 34,803
NET ASSET VALUE PER SHARE $ 9.87
================
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
<Table>
NET INVESTMENT INCOME:
INCOME
Dividends $ 332,032
Interest 10,934
----------------
TOTAL INCOME 342,966
----------------
EXPENSES
Distribution fee (Class A shares) 3,791
Distribution fee (Class B shares) 295,654
Distribution fee (Class C shares) 42,699
Transfer agent fees and expenses 58,151
Professional fees 31,851
Shareholder reports and notices 23,028
Registration fees 20,390
Custodian fees 3,018
Other 6,871
----------------
TOTAL EXPENSES 485,453
Less: amounts waived/reimbursed (143,309)
----------------
NET EXPENSES 342,144
----------------
NET INVESTMENT INCOME 822
----------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain 1,345,242
Capital gain distributions received 556,879
----------------
NET REALIZED GAIN 1,902,121
Net change in unrealized appreciation 1,748,826
----------------
NET GAIN 3,650,947
----------------
NET INCREASE $ 3,651,769
================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 822 $ (129,623)
Net realized gain (loss) 1,902,121 (1,820,274)
Net change in unrealized appreciation/depreciation 1,748,826 7,306,012
------------------ ------------------
NET INCREASE 3,651,769 5,356,115
Net increase (decrease) from transactions in shares of beneficial interest 9,823,966 (1,607,685)
------------------ ------------------
NET INCREASE 13,475,735 3,748,430
NET ASSETS:
Beginning of period 25,386,928 21,638,498
------------------ ------------------
END OF PERIOD
(Including undistributed net investment income of
$822 and $0, respectively) $ 38,862,663 $ 25,386,928
================== ==================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2004
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Fund of Funds -- Domestic Portfolio (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's investment objective is to maximize total
investment return. The Fund was organized as a Massachusetts business trust on
July 3, 1997 and commenced operations on November 25, 1997.
The Fund 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.
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.
12
<Page>
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 April 30, 2006. At September 30, 2004, included in the
Statements of Assets and Liabilities are receivables from an affiliate which
represent expense reimbursements due to the Fund.
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 -- up to 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
13
<Page>
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 the Fund that such excess amounts totaled $3,937,461 at
September 30, 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 year ended September 30, 2004, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.24% and 1.0%,
respectively.
The Distributor has informed the Fund that for the year ended September 30,
2004, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $53,044 and $730, respectively
and received $35,137 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, 2004 aggregated
$27,425,388 and $15,697,224, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Funds transfer agent. At September 30, 2004, the Fund had transfer agent
fees and expenses payable of approximately $5,800.
Effective April 1, 2004, the Fund began an unfunded Deferred Compensation Plan
(the "Compensation Plan") which allows each independent Trustee to defer payment
of all, or a portion, of the fees he receives for serving on the Board of
Trustees. Each eligible Trustee generally may elect to have the deferred amounts
credited with a return equal to the total return on one or more of the Morgan
Stanley funds that are offered as investment options under the Compensation
Plan. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.
14
<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, 2004, the tax-basis components of accumulated losses were as
follows:
<Table>
Undistributed ordinary income $ 822
Undistributed long-term gains --
-------------
Net accumulated earnings 822
Capital loss carryforward* (7,215,832)
Net unrealized appreciation 3,123,062
-------------
Total accumulated losses $ (4,091,948)
=============
</Table>
*During the year ended September 30, 2004, the Fund utilized $87,232 of its net
capital loss carryforward. As of September 30, 2004, the Fund had a net capital
loss carryforward of $7,215,832 of which $114,408 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, 2004, the Fund had temporary book/tax differences
attributable to capital loss deferrals on wash sales.
15
<Page>
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 have moved to dismiss the action and intend to otherwise
vigorously 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.
7. PORTFOLIO LIQUIDATION
On August 13, 2004, the shareholders of Morgan Stanley Fund of Funds --
International Portfolio approved its liquidation. On August 20, 2004, the
Portfolio was liquidated and the value of the Portfolio's shares were paid to
its shareholders.
16
<Page>
8. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
CLASS A SHARES
Sold 169,650 $ 1,603,045 137,198 $ 1,029,447
Redeemed (79,710) (761,520) (160,015) (1,199,423)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class A 89,940 841,525 (22,817) (169,976)
------------ ------------ ------------ ------------
CLASS B SHARES
Sold 1,660,602 15,444,499 573,877 4,530,971
Redeemed (859,474) (7,998,992) (780,681) (5,792,811)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class B 801,128 7,445,507 (206,804) (1,261,840)
------------ ------------ ------------ ------------
CLASS C SHARES
Sold 279,197 2,567,087 75,812 595,381
Redeemed (138,060) (1,293,226) (100,056) (720,626)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class B 141,137 1,273,861 (24,244) (125,245)
------------ ------------ ------------ ------------
CLASS D SHARES
Sold 49,710 482,507 1,262 9,367
Redeemed (23,014) (219,434) (8,107) (59,991)
------------ ------------ ------------ ------------
Net increase (decrease) -- Class D 26,696 263,073 (6,845) (50,624)
------------ ------------ ------------ ------------
Net increase (decrease) in Fund 1,058,901 $ 9,823,966 (260,710) $ (1,607,685)
============ ============ ============ ============
</Table>
17
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.60 $ 6.69 $ 8.17 $ 12.37 $ 11.54
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income++ 0.06 0.01 0.05 0.11 0.38
Net realized and unrealized gain (loss) 1.14 1.90 (1.45) (3.21) 1.83
------- ------- ------- ------- -------
Total income (loss) from investment operations 1.20 1.91 (1.40) (3.10) 2.21
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income - - (0.08) (0.31) (0.29)
Net realized gain - - - (0.79) (1.09)
------- ------- ------- ------- -------
Total dividends and distributions - - (0.08) (1.10) (1.38)
------- ------- ------- ------- -------
Net asset value, end of period $ 9.80 $ 8.60 $ 6.69 $ 8.17 $ 12.37
======= ======= ======= ======= =======
TOTAL RETURN+ 13.95% 28.55% (17.44)% (27.24)% 20.16%
RATIOS TO AVERAGE NET ASSETS(1)(2)(3):
Expenses 0.24% 0.23% 0.24% 0.23% 0.24%
Net investment income 0.72% 0.16% 0.50% 0.91% 3.35%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 1,896 $ 890 $ 846 $ 976 $ 1,493
Portfolio turnover rate 46% 87% 163% 177% 434%
</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.
(3) IF THE FUND HAD BORNE ALL OF ITS EXPENSES THAT WERE REIMBURSED OR WAIVED BY
THE INVESTMENT MANAGER, THE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
(LOSS) RATIOS WOULD HAVE BEEN AS FOLLOWS:
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED: RATIO INCOME (LOSS) RATIO
------------- ------- -------------------
SEPTEMBER 30, 2004 0.64% 0.32%
SEPTEMBER 30, 2003 0.67% (0.28)%
SEPTEMBER 30, 2002 0.63% 0.11%
SEPTEMBER 30, 2001 0.57% 0.57%
SEPTEMBER 30, 2000 0.67% 2.92%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.44 $ 6.62 $ 8.09 $ 12.28 $ 11.46
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss)++ 0.00 (0.05) (0.02) 0.01 0.30
Net realized and unrealized gain (loss) 1.11 1.87 (1.44) (3.16) 1.81
------- ------- ------- ------- -------
Total income (loss) from investment operations 1.11 1.82 (1.46) (3.15) 2.11
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income - - (0.01) (0.25) (0.20)
Net realized gain - - - (0.79) (1.09)
------- ------- ------- ------- -------
Total dividends and distributions - - (0.01) (1.04) (1.29)
------- ------- ------- ------- -------
Net asset value, end of period $ 9.55 $ 8.44 $ 6.62 $ 8.09 $ 12.28
======= ======= ======= ======= =======
TOTAL RETURN+ 13.15% 27.49% (18.05)% (27.79)% 19.29%
RATIOS TO AVERAGE NET ASSETS(1)(2)(3):
Expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income (loss) (0.04)% (0.61)% (0.26)% 0.14% 2.59%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $32,309 $21,804 $18,474 $26,364 $28,974
Portfolio turnover rate 46% 87% 163% 177% 434%
</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.
(3) IF THE FUND HAD BORNE ALL OF ITS EXPENSES THAT WERE REIMBURSED OR WAIVED BY
THE INVESTMENT MANAGER, THE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
(LOSS) RATIOS WOULD HAVE BEEN AS FOLLOWS:
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED: RATIO INCOME (LOSS) RATIO
------------- ------- -------------------
SEPTEMBER 30, 2004 1.40% (0.44)%
SEPTEMBER 30, 2003 1.44% (1.05)%
SEPTEMBER 30, 2002 1.39% (0.65)%
SEPTEMBER 30, 2001 1.34% (0.20)%
SEPTEMBER 30, 2000 1.43% 2.16%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.45 $ 6.63 $ 8.08 $ 12.29 $ 11.52
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss)++ 0.00 (0.05) (0.02) 0.01 0.31
Net realized and unrealized gain (loss) 1.10 1.87 (1.42) (3.17) 1.80
------- ------- ------- ------- -------
Total income (loss) from investment operations 1.10 1.82 (1.44) (3.16) 2.11
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income - - (0.01) (0.26) (0.25)
Net realized gain - - - (0.79) (1.09)
------- ------- ------- ------- -------
Total dividends and distributions - - (0.01) (1.05) (1.34)
------- ------- ------- ------- -------
Net asset value, end of period $ 9.55 $ 8.45 $ 6.63 $ 8.08 $ 12.29
======= ======= ======= ======= =======
TOTAL RETURN+ 13.02% 27.45% (18.00)% (27.79)% 19.23%
RATIOS TO AVERAGE NET ASSETS(1)(2)(3):
Expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income (loss) (0.04)% (0.61)% (0.26)% 0.14% 2.59%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 4,314 $ 2,623 $ 2,218 $ 2,643 $ 1,954
Portfolio turnover rate 46% 87% 163% 177% 434%
</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.
(3) IF THE FUND HAD BORNE ALL OF ITS EXPENSES THAT WERE REIMBURSED OR WAIVED BY
THE INVESTMENT MANAGER, THE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
(LOSS) RATIOS WOULD HAVE BEEN AS FOLLOWS:
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED: RATIO INCOME (LOSS) RATIO
------------- ------- -------------------
SEPTEMBER 30, 2004 1.40% (0.44)%
SEPTEMBER 30, 2003 1.44% (1.05)%
SEPTEMBER 30, 2002 1.39% (0.65)%
SEPTEMBER 30, 2001 1.34% (0.20)%
SEPTEMBER 30, 2000 1.43% 2.16%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- -------
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.64 $ 6.71 $ 8.19 $ 12.39 $ 11.56
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income++ 0.09 0.03 0.07 0.13 0.48
Net realized and unrealized gain (loss) 1.14 1.90 (1.45) (3.21) 1.75
------- ------- ------- ------- -------
Total income (loss) from investment operations 1.23 1.93 (1.38) (3.08) 2.23
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income - - (0.10) (0.33) (0.31)
Net realized gain - - - (0.79) (1.09)
------- ------- ------- ------- -------
Total dividends and distributions - - (0.10) (1.12) (1.40)
------- ------- ------- ------- -------
Net asset value, end of period $ 9.87 $ 8.64 $ 6.71 $ 8.19 $ 12.39
======= ======= ======= ======= =======
TOTAL RETURN+ 14.24% 28.76% (17.18)% (27.07)% 20.39%
RATIOS TO AVERAGE NET ASSETS(1)(2)(3):
Expenses -% -% -% -% -%
Net investment income 0.96% 0.39% 0.74% 1.14% 3.59%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 344 $ 70 $ 100 $ 93 $ 37
Portfolio turnover rate 46% 87% 163% 177% 434%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ 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.
(3) IF THE FUND HAD BORNE ALL OF ITS EXPENSES THAT WERE REIMBURSED OR WAIVED BY
THE INVESTMENT MANAGER, THE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
(LOSS) RATIOS WOULD HAVE BEEN AS FOLLOWS:
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED: RATIO INCOME (LOSS) RATIO
------------- ------- -------------------
SEPTEMBER 30, 2004 0.40% 0.56%
SEPTEMBER 30, 2003 0.44% (0.05)%
SEPTEMBER 30, 2002 0.39% 0.35%
SEPTEMBER 30, 2001 0.34% 0.80%
SEPTEMBER 30, 2000 0.43% 3.16%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
21
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Fund of Funds -- Domestic Portfolio (the "Fund"), including the
portfolio of investments, as of September 30, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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, 2004, by correspondence with the custodian
and transfer agent. 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 Morgan
Stanley Fund of Funds -- Domestic Portfolio as of September 30, 2004, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
NOVEMBER 15, 2004
22
<Page>
MORGAN STANLEY FUND OF FUNDS -- DOMESTIC PORTFOLIO
TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------------------- ------------ ------------- ----------------------- ------------- ---------------------
Michael Bozic (63) Trustee Since Private Investor; 208 Director of Weirton
c/o Kramer Levin Naftalis & Frankel LLP April 1994 Director or Trustee of Steel Corporation.
Counsel to the Independent Trustees the Retail Funds (since
919 Third Avenue April 1994) and the
New York, NY Institutional Funds
(since July 2003);
formerly Vice Chairman
of Kmart Corporation
(December 1998-October
2000), Chairman and
Chief Executive Officer
of Levitz Furniture
Corporation (November
1995-November 1998)
and President and Chief
Executive Officer of
Hills Department Stores
(May 1991-July 1995);
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 (71) Trustee Since Managing Director of 208 Director of Franklin
c/o Summit Ventures LLC January 1993 Summit Ventures LLC; Covey (time
1 Utah Center Director or Trustee of management systems),
201 S. Main Street the Retail Funds (since BMW Bank of North
Salt Lake City, UT January 1993) and the America, Inc.
Institutional Funds (industrial loan
(since July 2003); corporation), United
member of the Utah Space Alliance (joint
Regional Advisory Board venture between
of Pacific Corp.; Lockheed Martin and
formerly United States the Boeing Company)
Senator (R-Utah) and Nuskin Asia
(1974-1992) and Pacific (multilevel
Chairman, Senate marketing); member of
Banking Committee the board of various
(1980-1986), Mayor of civic and charitable
Salt Lake City, Utah organizations.
(1971-1974), Astronaut,
Space Shuttle Discovery
(April 12-19, 1985),
and Vice Chairman,
Huntsman Corporation
(chemical company).
Wayne E. Hedien (70) Trustee Since Retired; Director or 208 Director of The PMI
c/o Kramer Levin Naftalis & Frankel LLP September Trustee of the Retail Group Inc. (private
Counsel to the Independent Trustees 1997 Funds (since September mortgage insurance);
919 Third Avenue 1997) and the Trustee and Vice
New York, NY Institutional Funds Chairman of The Field
(since July 2003); Museum of Natural
formerly associated History; director of
with the Allstate various other
Companies (1966-1994), business and
most recently as charitable
Chairman of The organizations.
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>
23
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------------------- ------------ -------------- ----------------------- ------------- ---------------------
Dr. Manuel H. Johnson (55) Trustee Since Senior Partner, Johnson 208 Director of NVR, Inc.
c/o Johnson Smick International, Inc. July 1991 Smick International, (home construction);
2099 Pennsylvania Avenue, N.W. Inc., a consulting Chairman and Trustee
Suite 950 firm; Chairman of the of the Financial
Washington, D.C. Audit Committee and Accounting Foundation
Director or Trustee of (oversight
the Retail Funds (since organization of the
July 1991) and the Financial Accounting
Institutional Funds Standards Board);
(since July 2003); Director of RBS
Co-Chairman and a Greenwich Capital
founder of the Group of Holdings (financial
Seven Council (G7C), an holding company).
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 (62) Trustee Since President, Kearns & 209 Director of Electro
PMB754 July 2003 Associates LLC Rent Corporation
23852 Pacific Coast Highway (investment (equipment leasing),
Malibu, CA consulting); Deputy The Ford Family
Chairman of the Audit Foundation, and the
Committee and Director UCLA Foundation.
or Trustee of the
Retail Funds (since
July 2003) and the
Institutional Funds
(since August
1994); previously
Chairman of the Audit
Committee of the
Institutional Funds
(October 2001-July
2003); formerly CFO of
the J. Paul Getty
Trust.
Michael E. Nugent (68) Trustee Since General Partner of 208 Director of various
c/o Triumph Capital, L.P. July 1991 Triumph Capital, L.P., business
445 Park Avenue a private investment organizations.
New York, NY partnership; Chairman
of the Insurance
Committee and Director
or Trustee of the
Retail Funds (since
July 1991) and the
Institutional Funds
(since July 2001);
formerly Vice
President, Bankers
Trust Company and BT
Capital Corporation
(1984-1988).
Fergus Reid (72) Trustee Since Chairman of Lumelite 209 Trustee and Director
c/o Lumelite Plastics Corporation July 2003 Plastics Corporation; of certain investment
85 Charles Colman Blvd. Chairman of the companies in the
Pawling, NY Governance Committee JPMorgan Funds
and Director or Trustee complex managed by
of the Retail Funds J.P. Morgan
(since July 2003) and Investment Management
the Institutional Funds Inc.
(since June 1992).
</Table>
24
<Page>
INTERESTED TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INTERESTED TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------------------- ------------ -------------- ----------------------- ------------- ---------------------
Charles A. Fiumefreddo (71) Chairman of Since Chairman and Director 208 None
c/o Morgan Stanley Trust the Board July 1991 or Trustee of the
Harborside Financial Center, and Trustee Retail Funds (since
Plaza Two, July 1991) and the
Jersey City, NJ Institutional Funds
(since July 2003);
formerly Chief
Executive Officer of
the Retail Funds (until
September 2002).
James F. Higgins (56) Trustee Since Director or Trustee of 208 Director of AXA
c/o Morgan Stanley Trust June 2000 the Retail Funds (since Financial, Inc. and
Harborside Financial Center, June 2000) and the The Equitable Life
Plaza Two, Institutional Funds Assurance Society of
Jersey City, NJ (since July 2003); the United States
Senior Advisor of (financial services).
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).
</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. 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.).
25
<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 (51) President Since May 1999 President and Chief Operating Officer of Morgan
1221 Avenue of the Americas Stanley Investment Management Inc.; President,
New York, NY Director and Chief Executive Officer of the
Investment Manager and Morgan Stanley Services;
Chairman and Director of the Distributor; Chairman
and Director of the Transfer Agent; Director of
various Morgan Stanley subsidiaries; President of the
Institutional Funds (since July 2003) and President
of the Retail Funds (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 (65) Executive Vice Since April 2003 Principal Executive Officer-Office of the Funds
1221 Avenue of the Americas President and (since November 2003); Managing Director of Morgan
New York, NY Principal Stanley & Co. Incorporated, Managing Director of
Executive Morgan Stanley; Managing Director, Chief
Officer Administrative Officer and Director of the Investment
Manager and Morgan Stanley Services; Chief Executive
Officer and Director of the Transfer Agent; Managing
Director and Director of the Distributor; Executive
Vice President and Principal Executive Officer of the
Institutional Funds (since July 2003) and the Retail
Funds (since April 2003); Director of Morgan Stanley
SICAV (since May 2004); previously President and
Director of the Retail Funds (March 2001-July 2003)
and Chief Global Operations Officer and Managing
Director of Morgan Stanley Investment Management Inc.
Joseph J. McAlinden (61) Vice President Since July 1995 Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas Investment Manager and Morgan Stanley Investment
New York, NY Management Inc., 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).
Barry Fink (49) Vice President Since General Counsel (since May 2000) and Managing
1221 Avenue of the Americas February 1997 Director (since December 2000) of Morgan Stanley
New York, NY Investment Management; Managing Director (since
December 2000), Secretary (since February 1997) and
Director (since July 1998) of the Investment Manager
and Morgan Stanley Services; Vice President of the
Retail Funds; Assistant Secretary of Morgan Stanley
DW; Vice President of the Institutional Funds (since
July 2003); Managing Director, Secretary and Director
of the Distributor; previously Secretary (February
1997-July 2003) and General Counsel (February
1997-April 2004) of the Retail Funds; Vice President
and Assistant General Counsel of the Investment
Manager and Morgan Stanley Services (February
1997-December 2001).
Amy R. Doberman (42) Vice President Since July 2004 Managing Director and General Counsel, U.S.
1221 Avenue of the Americas Investment Management; Managing Director of Morgan
New York, NY Stanley Investment Management Inc. and the Investment
Manager, Vice President of the Institutional and
Retail Funds (since July 2004); previously, Managing
Director and General Counsel - Americas, UBS Global
Asset Management (July 2000 - July 2004) and General
Counsel, Aeltus Investment Management, Inc. (January
1997 - July 2000).
Stefanie V. Chang (37) Vice President Since July 2003 Executive Director of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated, Morgan Stanley Investment Management
New York, NY Inc., and the Investment Manager; Vice President of
the 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 US LLP).
</Table>
26
<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 J. Smith (39) Treasurer and Treasurer since Executive Director of the Investment Manager and
c/o Morgan Stanley Trust Chief Financial July 2003 and Morgan Stanley Services (since December 2001);
Harborside Financial Center, Officer Chief Financial previously, Vice President of the Retail Funds
Plaza Two, Officer since (September 2002-July 2003), and Vice President of the
Jersey City, NJ September 2002 Investment Manager and Morgan Stanley Services
(August 2000-November 2001) and Senior Manager at
PricewaterhouseCoopers LLP (January 1998-August
2000).
Thomas F. Caloia (58) Vice President Since July 2003 Executive Director (since December 2002) and
c/o Morgan Stanley Trust Assistant Treasurer of the Investment Manager, the
Harborside Financial Center, Distributor and Morgan Stanley Services; previously
Plaza Two, Treasurer of the Retail Funds (April 1989-July 2003);
Jersey City, NJ formerly First Vice President of the Investment
Manager, the Distributor and Morgan Stanley Services.
Mary E. Mullin (37) Secretary Since July 2003 Executive Director of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated, Morgan Stanley Investment Management
New York, NY Inc. and the Investment Manager; Secretary of the
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.
27
<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
Joseph J. McAlinden
VICE PRESIDENT
Barry Fink
VICE PRESIDENT
Amy R. Doberman
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 REGISTERED PUBLIC ACCOUNTING FIRM
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) 2004 Morgan Stanley
[MORGAN STANLEY LOGO]
36016RPT-RA04-00752P-Y09/04
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
FUND OF FUNDS --
DOMESTIC PORTFOLIO
ANNUAL REPORT
SEPTEMBER 30, 2004
[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 to delete from the end of the
following paragraph on page 2 of the Code the phrase "to the detriment of the
Fund.":
"Each Covered Officer must not use his personal influence or personal
relationship improperly to influence investment decisions or financial reporting
by the Fund whereby the Covered Officer would benefit personally (directly or
indirectly)."
(d) Not applicable.
(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 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
<Table>
<Caption>
2004 REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 10,064 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 452 (2) $ 5,067,400 (2)
TAX FEES $ 5,215 (3) $ 545,053 (4)
ALL OTHER FEES $ - $ -
TOTAL NON-AUDIT FEES $ 5,667 $ 5,612,453
TOTAL $ 15,731 $ 5,612,453
</Table>
<Table>
<Caption>
2003 REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 9,309 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 684 (2) $ 1,086,576 (2)
TAX FEES $ 5,417 (3) $ 252,500 (4)
ALL OTHER FEES $ - $ - (5)
TOTAL NON-AUDIT FEES $ 6,101 $ 1,339,076
TOTAL $ 15,410 $ 1,339,076
</Table>
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and
any entity controlling, controlled by or under common control with
the Adviser that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically data
verification and agreed-upon procedures related to asset
securitizations and agreed-upon procedures engagements.
(3) Tax Fees represent tax compliance, tax planning and tax advice
services provided in connection with the preparation and review of
the Registrant's tax returns.
(4) Tax Fees represent tax compliance, tax planning and tax advice
services provided in connection with the review of Covered
Entities' tax returns.
(5) All other fees represent project management for future business
applications and improving business and operational processes.
<Page>
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.
The SEC has issued rules specifying the types of services that an independent
auditor may not provide to its audit client, as well as the audit committee's
administration of the engagement of the independent auditor. The SEC's rules
establish two different approaches to pre-approving services, which the SEC
considers to be equally valid. Proposed services either: may be pre-approved
without consideration of specific case-by-case services by the Audit Committee
("GENERAL PRE-APPROVAL"); or require the specific pre-approval of the Audit
Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit Committee
believes that the combination of these two approaches in this Policy will result
in an effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
- ----------
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and
Procedures (the "POLICY"), adopted as of the date above, supersedes and
replaces all prior versions that may have been adopted from time to time.
<Page>
The purpose of this Policy is to set forth the policy and procedures by which
the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may delegate
either type of pre-approval authority to one or more of its members. The member
to whom such authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the specific
pre-approval of the Audit Committee. Audit services include the annual financial
statement audit and other procedures required to be performed by the Independent
Auditors to be able to form an opinion on the Fund's financial statements. These
other procedures include information systems and procedural reviews and testing
performed in order to understand and place reliance on the systems of internal
control, and consultations relating to the audit. The Audit Committee will
approve, if necessary, any changes in terms, conditions and fees resulting from
changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All
other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements and, to the extent they are Covered Services, the Covered Entities or
that are traditionally performed by the Independent Auditors. Because the Audit
Committee believes that the provision of Audit-related services does not impair
the independence of the auditor and is consistent with the SEC's rules on
auditor independence, the Audit Committee may grant general pre-approval to
Audit-related services. Audit-related services include, among others, accounting
consultations related to accounting, financial reporting or disclosure matters
<Page>
not classified as "Audit services"; assistance with understanding and
implementing new accounting and financial reporting guidance from rulemaking
authorities; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal control
reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2.
All other Audit-related services not listed in Appendix B.2 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the
Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4.
Permissible All Other services not listed in Appendix B.4 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided by
the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services.
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be
<Page>
rendered. The Fund's Chief Financial Officer will determine whether such
services are included within the list of services that have received the general
pre-approval of the Audit Committee. The Audit Committee will be informed on a
timely basis of any such services rendered by the Independent Auditors. Requests
or applications to provide services that require specific approval by the Audit
Committee will be submitted to the Audit Committee by both the Independent
Auditors and the Fund's Chief Financial Officer, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's rules on auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer to monitor
the performance of all services provided by the Independent Auditors and to
determine whether such services are in compliance with this Policy. The Fund's
Chief Financial Officer will report to the Audit Committee on a periodic basis
on the results of its monitoring. Both the Fund's Chief Financial Officer and
management will immediately report to the chairman of the Audit Committee any
breach of this Policy that comes to the attention of the Fund's Chief Financial
Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
MORGAN STANLEY RETAIL FUNDS
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
<Page>
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:
Michael Bozic, Edwin J. Garn, Wayne E. Hedien, Manual H. Johnson, Joseph J.
Kearns, Michael Nugent and Fergus Reid.
(b) Not applicable.
Item 6. Schedule of Investments
Refer to Item 1.
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Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. Closed-End Fund Repurchases
Applicable to reports filed by closed-end funds.
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 10 - Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11 Exhibits
(a) 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.
<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 - Domestic Portfolio
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
November 19, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
November 19, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
November 19, 2004
<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 - Domestic Portfolio
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
January 3, 2005
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
January 3, 2005
/s/ Francis Smith
Francis Smith
Principal Financial Officer
January 3, 2005