<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS Two World Trade Center,
LETTER TO THE SHAREHOLDERS March 31, 2000 New York, New York 10048
DEAR SHAREHOLDER:
This semiannual report to shareholders of Morgan Stanley Dean Witter Fund of
Funds (International Portfolio and Domestic Portfolio) covers the six-month
period ended March 31, 2000.
INTERNATIONAL PORTFOLIO
The international markets continued to exhibit strong performance during the
period under review. The severe economic problems that had spread throughout
Asia during 1998 and 1999, reverberating everywhere from Europe to Mexico and
South America, abated and business activity began to recover. A continued
stabilization in Japan's market, despite deep pessimism over its economy, and
the strength in the emerging markets of Asia and South America encouraged both
domestic and international investors to look outside the United States for
promising opportunities.
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended March 31, 2000, Morgan Stanley Dean Witter Fund
of Funds International Portfolio's Class A, B, C and D shares returned 18.93
percent, 18.64 percent, 18.59 percent and 19.19 percent. During the same
period, the Morgan Stanley Capital International Europe, Australia, Far East
(MSCI EAFE) Index returned 16.86 percent.1 The performance of the Fund's four
share classes varies because of differing expenses. Total return figures assume
the reinvestment of all distributions and do not reflect the deduction of any
applicable sales charges.
Since its inception in November 1997, the International Portfolio has invested
its assets in four Morgan Stanley Dean Witter Funds: European
------------------
1 The MSCI EAFE Index measures the performance of a diverse range of global
stock markets within Europe, Australia and the Far East. The Index does not
include any expenses, fees or charges. The Index is unmanaged and should not
be considered an investment.
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
LETTER TO THE SHAREHOLDERS March 31, 2000, continued
Growth Fund, International SmallCap Fund, Japan Fund and Pacific Growth Fund.
In November 1999 the Latin American Growth Fund was added to its portfolio.
At the end of the Fund's fiscal year on September 30, 1999, the Fund's managers
established a defensive position that cushioned the International Portfolio
from some volatile swings caused by anxiety over U.S. Federal Reserve Board
actions, the Y2K phenomenon and a weak U.S. dollar. However, certain positions
were rebuilt going into the new year as our confidence in foreign markets grew.
As the Fed's actions took shape, investors became more comfortable in the
belief that future monetary policy decisions would remain incremental and that
the domestic equity markets would not cause too much discomfort to their
international counterparts. Furthermore, the U.S. dollar gained strength versus
the euro and the yen, and the Y2K crisis passed with no major problems. At
year-end 1999 the Portfolio was weighted heavily in Europe, moderately in Japan
and marginally in the emerging markets and small-cap arena. By the end of the
first quarter of 2000, the Portfolio's European position was scaled back in
favor of Japan and the emerging markets.
LOOKING AHEAD
Going forward, we anticipate maintaining the Portfolio's current allocations of
an overweighted-to-neutral weighting in the Asian-exposed funds, particularly
Japan, and a neutral to underweighted stance in the European-exposed funds.
This decision has been heavily rooted in the currency relationship between the
yen and the euro. The Fund's management believes that the Asian countries have
been experiencing a genuine recovery that goes beyond trading rallies, with
further improvement likely going into the new millennium. The clear signs of
recovery in the commodities markets and the still relatively benign
inflationary environments strictly monitored in the United States and abroad
have helped both foreign and domestic investors gain confidence in the
international markets. The GDP outlook for 2000, 4 percent for world growth and
nearly 6 percent for the emerging countries, remains encouraging.
DOMESTIC PORTFOLIO
During the six-month period ended March 31, 2000, the domestic economy
continued to exhibit very strong economic growth with moderate inflationary
pressures. Concerned by the strength in the global economy and the threat of
rising inflation, the Federal Reserve continued its recent pattern of raising
the federal funds rate, increasing it to 6.00 percent in three steps during the
period.
Investors witnessed unprecedented appreciation in the technology-laden Nasdaq
composite index during the period, while stocks of more traditional companies
suffered from slowing growth rates and capital
2
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
LETTER TO THE SHAREHOLDERS March 31, 2000, continued
outflows before surging toward the end of the period. Correctly assuming that
the Y2K computer bug would cause little disruption, investors bid up technology
stocks in anticipation of strong corporate spending and consumer demand during
2000.
PERFORMANCE AND PORTFOLIO STRATEGY
For the 6-month period ended March 31, 2000, Morgan Stanley Dean Witter Fund of
Funds Domestic Portfolio's Class A, B, C and D shares returned 14.04 percent,
13.65 percent, 13.61 percent and 14.17 percent, respectively. During the same
period, the Standard & Poor's 500 Composite Stock Price Index2 returned 17.50
percent, while the Lehman Brothers Government/Corporate Bond Index3 returned
2.27 percent. The performance of the Fund's four share classes varies because
of differing expenses. Total return figures assume the reinvestment of all
distributions and do not reflect the deduction of any applicable sales charges.
In keeping with its investment strategy, the Domestic Portfolio continues to
diversify its portfolio across a fairly large cross-section of Morgan Stanley
Dean Witter funds. During the second half of 1999, the Portfolio's assets were
shifted away from a large position in equity-oriented funds toward the
fixed-income funds. Once the threatened Y2K crisis had passed, the Portfolio's
assets were reallocated across the majority of the equity funds.
In the months ahead, we anticipate maintaining the Portfolio's current asset
mix, although the mix of funds held may change as conditions warrant. The
Portfolio will attempt to maintain a cushion for its investors against
short-term volatility in particular markets and sectors by careful
diversification across investment styles, market caps and asset classes.
LOOKING AHEAD
We believe that U.S. economic growth is likely to moderate, with inflation
remaining at acceptable levels. However, should our economy continue to display
inordinately strong growth coupled with accelerating
------------
2 The Standard & Poor's Composite Stock Price Index (S&P 500) is a broad-based
index the performance of which is based on the average performance of 500
widely held common stocks. The performance of the Index does not include any
expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
3 The Lehman Brothers Government/Corporate Bond Index tracks the performance of
government and corporate obligations, including U.S. government agency and
U.S. Treasury securities and corporate Yankee. The Index does not include
any expenses, fees or charges. The Index is unmanaged and should not be
considered an investment.
3
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
LETTER TO THE SHAREHOLDERS March 31, 2000, continued
inflation, the Federal Reserve Board may need to take a more aggressive stance
on monetary policy. The Goldilocks economy remains vibrant and healthy. For the
financial markets as a whole, we expect continued volatility but overall
improvement as the outlook for the global economy strengthens.
We appreciate your ongoing support of Morgan Stanley Dean Witter Fund of Funds
and look forward to continuing to serve your investment objectives.
Very truly yours,
s/ Charles A. Fiumefreddo s/ Mitchell M. Merin
--------------------------- ---------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
4
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
FUND PERFORMANCE March 31, 2000
AVERAGE ANNUAL TOTAL RETURNS - INTERNATIONAL
--------------------------------------------------------------------------------
Class A Shares*
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 34.44%(1) 27.38%(2)
Since Inception (11/25/97) 19.84%(1) 17.12%(2)
CLASS B SHARES**
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 33.64%(1) 28.64%(2)
Since Inception (11/25/97) 18.99%(1) 17.98%(2)
CLASS C SHARES+
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 33.64%(1) 32.64%(2)
Since Inception (11/25/97) 19.18%(1) 19.18%(2)
CLASS D SHARES ++
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 34.92%(1)
Since Inception (11/25/97) 20.12%(1)
AVERAGE ANNUAL TOTAL RETURNS - DOMESTIC
--------------------------------------------------------------------------------
Class A Shares*
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 19.42%(1) 13.15%(2)
Since Inception (11/25/97) 15.14%(1) 12.53%(2)
Class B Shares**
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 18.51%(1) 13.51%(2)
Since Inception (11/25/97) 14.32%(1) 13.25%(2)
CLASS C SHARES+
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 18.55%(1) 17.55%(2)
Since Inception (11/25/97) 14.53%(1) 14.53%(2)
Class D Shares++
----------------------------------------------------------------
Period Ended 3/31/00
----------------------------
1 Year 19.66%(1)
Since Inception (11/25/97) 15.42%(1)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
---------------
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) 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 CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
++ Class D shares have no sales charge.
5
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS - INTERNATIONAL
PORTFOLIO OF INVESTMENTS March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------ --------------
<S> <C> <C>
COMMON STOCKS (87.4%)
1,454,919 Morgan Stanley Dean Witter European Growth Fund Inc. ............ $33,404,944
15,672 Morgan Stanley Dean Witter International SmallCap Fund .......... 200,760
620,244 Morgan Stanley Dean Witter Japan Fund ........................... 6,897,117
159,311 Morgan Stanley Dean Witter Latin American Growth Fund ........... 2,150,703
22,861 Morgan Stanley Dean Witter Pacific Growth Fund Inc. ............. 407,842
-----------
TOTAL COMMON STOCKS
(Identified Cost $41,739,606).................................... 43,061,366
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
-----------
<S> <C> <C>
SHORT-TERM INVESTMENT (a) (10.5%)
U.S. GOVERNMENT AGENCY
$ 5,200 Federal Home Loan Mortgage Corp. 6.05% due 04/03/00
(Amortized Cost $5,198,252)....................................... 5,198,252
-----------
TOTAL INVESTMENTS
(Identified Cost $46,937,858) (b)......................... 97.9% 48,259,618
OTHER ASSETS IN EXCESS OF LIABILITIES .................... 2.1 1,039,451
----- ----------
NET ASSETS ............................................... 100.0% $49,299,069
===== ===========
</TABLE>
---------------------
(a) Purchased on a discount basis. The interest rate shown has been
adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross and net unrealized appreciation
is $1,321,760.
See Notes to Financial Statements
6
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS - DOMESTIC
PORTFOLIO OF INVESTMENTS March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -------------
<S> <C> <C>
COMMON STOCKS (99.1%)
78,429 Morgan Stanley Dean Witter Aggressive Equity Fund ............... $1,276,041
30,113 Morgan Stanley Dean Witter American Opportunities Fund .......... 1,337,604
76,213 Morgan Stanley Dean Witter Capital Growth Securities ............ 1,295,623
113,816 Morgan Stanley Dean Witter Competitive Edge Fund -
"Best Ideas" Portfolio ......................................... 1,603,664
45,388 Morgan Stanley Dean Witter Convertible Securities Trust ......... 808,364
12,058 Morgan Stanley Dean Witter Developing Growth Securities
Trust .......................................................... 581,554
88,641 Morgan Stanley Dean Witter Dividend Growth Securities Inc. ...... 4,850,450
106,117 Morgan Stanley Dean Witter Financial Services Trust ............. 1,253,242
83,879 Morgan Stanley Dean Witter Health Sciences Trust ................ 1,381,479
211,848 Morgan Stanley Dean Witter Income Builder Fund .................. 2,209,573
15,830 Morgan Stanley Dean Witter Information Fund ..................... 658,038
44,298 Morgan Stanley Dean Witter Market Leader Trust .................. 936,026
225,887 Morgan Stanley Dean Witter Natural Resource Development
Securities Inc. ................................................ 3,268,584
101,426 Morgan Stanley Dean Witter Short-Term Bond Fund ................. 937,175
201,445 Morgan Stanley Dean Witter Special Value Fund ................... 2,280,357
75,859 Morgan Stanley Dean Witter U.S. Government Securities Trust...... 653,148
77,754 Morgan Stanley Dean Witter Utilities Fund ....................... 1,608,735
510,947 Morgan Stanley Dean Witter Value Fund ........................... 4,943,667
----------
TOTAL COMMON STOCKS
(Identified Cost $30,696,332).................................... 31,883,324
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
-----------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.7%)
REPURCHASE AGREEMENT
$225 The Bank of New York 6.063% due 04/03/00 (dated 03/31/00;
proceeds $225,546) (a) (Identified Cost $225,432)......... 225,432
-----------
TOTAL INVESTMENTS
(Identified Cost $30,921,764) (b).......... 99.8% 32,108,756
OTHER ASSETS IN EXCESS OF LIABILITIES ..... 0.2 58,119
----- -----------
NET ASSETS ................................ 100.0% $32,166,875
===== ===========
</TABLE>
---------------------
(a) Collateralized by $227,759 U.S. Treasury Note 5.875% due 11/30/01
valued at $229,941.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$1,296,070 and the aggregate gross unrealized depreciation is
$109,078, resulting in net unrealized appreciation of $1,186,992.
See Notes to Financial Statements
7
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL DOMESTIC
--------------- ----------------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost $46,937,858 and $30,921,764, respectively)......... $48,259,618 $32,108,756
Cash ................................................................. 82,956 73,802
Receivable for shares of beneficial interest sold .................... 1,007,003 19,471
Receivable from affiliate ............................................ 17,550 25,935
Prepaid expenses and other assets .................................... 15,335 1,858
Deferred organizational expenses ..................................... 13,260 13,260
----------- -----------
TOTAL ASSETS ...................................................... 49,395,722 32,243,082
----------- -----------
LIABILITIES:
Payable for:
Plan of distribution fee ........................................... 25,902 26,509
Shares of beneficial interest repurchased .......................... 25,806 9,225
Organizational expenses .............................................. 13,260 13,260
Accrued expenses and other payables .................................. 31,685 27,213
----------- -----------
TOTAL LIABILITIES ................................................. 96,653 76,207
----------- -----------
NET ASSETS ........................................................ $49,299,069 $32,166,875
=========== ===========
COMPOSITION OF NET ASSETS:
Paid-in-capital ...................................................... $46,786,608 $27,859,572
Net unrealized appreciation .......................................... 1,321,760 1,186,992
Accumulated undistributed net investment income (loss) ............... (20,621) 142,000
Accumulated undistributed net realized gain .......................... 1,211,322 2,978,311
----------- -----------
NET ASSETS ........................................................ $49,299,069 $32,166,875
=========== ===========
CLASS A SHARES:
Net Assets ........................................................... $ 2,584,516 $ 1,255,632
Shares Outstanding (unlimited authorized, $.01 par value)............. 183,276 106,988
NET ASSET VALUE PER SHARE ......................................... $ 14.10 $ 11.74
=========== ===========
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) .................. $ 14.88 $ 12.39
=========== ===========
CLASS B SHARES:
Net Assets ........................................................... $31,683,367 $29,165,649
Shares Outstanding (unlimited authorized, $.01 par value)............. 2,283,036 2,493,785
NET ASSET VALUE PER SHARE ......................................... $ 13.88 $ 11.70
=========== ===========
CLASS C SHARES:
Net Assets ........................................................... $ 2,443,751 $ 1,728,087
Shares Outstanding (unlimited authorized, $.01 par value)............. 175,673 147,624
NET ASSET VALUE PER SHARE ......................................... $ 13.91 $ 11.71
=========== ===========
CLASS D SHARES:
Net Assets ........................................................... $12,587,435 $ 17,507
Shares Outstanding (unlimited authorized, $.01 par value)............. 888,798 1,491
NET ASSET VALUE PER SHARE ......................................... $ 14.16 $ 11.74
=========== ===========
</TABLE>
See Notes to Financial Statements
8
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL DOMESTIC
--------------- --------------
<S> <C> <C>
NET INVESTMENT INCOME (LOSS):
INCOME
Interest .......................................... $ 49,088 $ 68,951
Dividends ......................................... 8,675 325,180
---------- ----------
TOTAL INCOME ................................... 57,763 394,131
---------- ----------
EXPENSES
Plan of distribution fee (Class A shares) ......... 1,954 1,441
Plan of distribution fee (Class B shares) ......... 70,819 139,447
Plan of distribution fee (Class C shares) ......... 5,610 7,405
Registration fees ................................. 13,499 -
Professional fees ................................. 13,301 13,426
Transfer agent fees and expenses .................. 9,281 15,714
Shareholder reports and notices ................... 5,271 21,263
Custodian fees .................................... 2,909 4,549
Organizational expenses ........................... 2,504 2,504
Other ............................................. 1,429 1,317
---------- ----------
TOTAL EXPENSES ................................. 126,577 207,066
Less: amounts waived/reimbursed ................... (48,194) (58,774)
---------- ----------
NET EXPENSES ................................... 78,383 148,292
---------- ----------
NET INVESTMENT INCOME (LOSS) ................... (20,620) 245,839
---------- ----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments .................. 172,010 2,719,406
Capital gain distributions received ............... 1,087,329 259,778
---------- ----------
NET REALIZED GAIN .............................. 1,259,339 2,979,184
Net change in unrealized appreciation ............. 954,932 636,048
---------- ----------
NET GAIN ....................................... 2,214,271 3,615,232
---------- ----------
NET INCREASE ...................................... $2,193,651 $3,861,071
========== ==========
</TABLE>
See Notes to Financial Statements
9
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL
-------------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------- --------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) ............................... $ (20,620) $ 18,007
Net realized gain .......................................... 1,259,339 996,778
Net change in unrealized appreciation/depreciation ......... 954,932 730,380
----------- ----------
NET INCREASE ............................................. 2,193,651 1,745,165
----------- ----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares ............................................ (3,349) -
Class B shares ............................................ (6,946) -
Class C shares ............................................ (1,794) -
Class D shares ............................................ (5,919) -
Net realized gain
Class A shares ............................................ (88,352) -
Class B shares ............................................ (722,203) -
Class C shares ............................................ (53,378) -
Class D shares ............................................ (102,450) -
----------- ----------
TOTAL DIVIDENDS AND DISTRIBUTIONS ........................ (984,391) -
----------- ----------
Net increase (decrease) from transactions in shares of
beneficial interest ....................................... 39,394,625 2,996,421
----------- ----------
NET INCREASE ............................................. 40,603,885 4,741,586
NET ASSETS:
Beginning of period ........................................ 8,695,184 3,953,598
----------- ----------
END OF PERIOD ............................................ $49,299,069 $8,695,184
=========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) ................. $ (20,621) $ 18,007
=========== ==========
<CAPTION>
DOMESTIC
------------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------- -------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) ............................... $ 245,839 $ 945,796
Net realized gain .......................................... 2,979,184 2,757,235
Net change in unrealized appreciation/depreciation ......... 636,048 2,572,316
------------ ------------
NET INCREASE ............................................. 3,861,071 6,275,347
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares ............................................ (28,024) (47,405)
Class B shares ............................................ (455,908) (697,012)
Class C shares ............................................ (30,653) (45,091)
Class D shares ............................................ (417) (493)
Net realized gain
Class A shares ............................................ (106,057) (27,008)
Class B shares ............................................ (2,514,502) (499,329)
Class C shares ............................................ (134,131) (32,843)
Class D shares ............................................ (1,443) (259)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ........................ (3,271,135) (1,349,440)
------------ ------------
Net increase (decrease) from transactions in shares of
beneficial interest ....................................... 3,093,294 (3,853,481)
------------ ------------
NET INCREASE ............................................. 3,683,230 1,072,426
NET ASSETS:
Beginning of period ........................................ 28,483,645 27,411,219
------------ ------------
END OF PERIOD ............................................ $ 32,166,875 $ 28,483,645
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) ................. $ 142,000 $ 411,163
============ ============
</TABLE>
See Notes to Financial Statements
10
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter 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 Dean Witter Family of Funds or managed by an investment
advisor that is an affiliate of Morgan Stanley Dean Witter Advisors Inc. (the
"Investment Manager") (individually, an "Underlying Fund" and collectively, the
"Underlying Funds").
The Fund, which consists of two separate portfolios ("Portfolios"),
International and Domestic, 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:
PORTFOLIO INVESTMENT OBJECTIVE
--------------------------------------------------------------------------------
International Seeks long-term capital appreciation by investing in a
selection of Underlying Funds which invest their assets
primarily in the international equity markets.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
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 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.
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
11
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited) continued
(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 over the life of the respective securities. Interest
income is accrued daily.
C. 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.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. 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 financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. ORGANIZATIONAL AND EXPENSES -- The Investment Manager incurred the
organizational expenses of the Fund in the amount of approximately $50,000
($25,000 per Portfolio) which will be reimbursed for the full amount thereof,
exclusive of amounts waived of $23,480 ($11,740 per Portfolio). Such expenses
have been deferred and are being amortized on the straight-line method over a
period not to exceed five years from the commencement of operations.
12
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited) continued
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
plan of distribution fees) until December 31, 2000. At March 31, 2000, 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 Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
average daily net assets of Class B; and (iii) Class C - up to 1.0% of the
average daily net assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised International and Domestic that such
excess amounts totaled $1,807,752 and $2,684,946, respectively, at March 31,
2000.
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 Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended March 31, 2000, the distribution fee
was accrued for International and Domestic Class A shares and Class C shares at
the annual rate of 0.22% and 1.0%, and 0.24% and 1.0%, respectively.
13
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited) continued
The Distributor has informed International and Domestic that for the six months
ended March 31, 2000, it received contingent deferred sales charges from
certain redemptions of the Fund's shares as follows: Class B shares - $12,107
and $50,207, respectively; and Class C shares - $157 and $670, respectively;
and received $14,904 and $706, 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, 2000
aggregated $52,321,561 and $14,701,411, respectively, for International and
$89,610,499 and $81,572,684, respectively, for Domestic.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Funds transfer agent.
5. FEDERAL INCOME TAX STATUS
As of September 30, 1999, International had temporary book/tax differences
attributable to capital loss deferrals on wash sales.
14
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
NOTES TO FINANCIAL STATEMENTS March 31, 2000 (unaudited) continued
6. SHARES OF BENEFICIAL INTEREST
Transaction in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL
------------------------------------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
------------------------------ -----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
CLASS A
Sold ........................... 1,011,704 $13,851,280 550,112 $6,239,334
Reinvestment of dividends
and distributions ............. 6,664 91,630 - -
Redeemed ....................... (919,422) (12,636,433) (531,386) (6,100,329)
--------- ----------- -------- ----------
Net increase (decrease) -
Class A ....................... 98,946 1,306,477 18,726 139,005
--------- ----------- -------- ----------
CLASS B
Sold ........................... 2,408,500 33,115,114 500,948 5,944,141
Reinvestment of dividends
and distributions ............. 49,809 675,406 - -
Redeemed ....................... (701,833) (9,575,559) (333,419) (3,893,728)
--------- ----------- -------- ----------
Net increase (decrease) -
Class B ....................... 1,756,476 24,214,961 167,529 2,050,413
--------- ----------- -------- ----------
CLASS C
Sold ........................... 154,776 2,129,173 33,776 404,327
Reinvestment of dividends
and distributions ............. 3,771 51,282 - -
Redeemed ....................... (17,888) (245,995) (10,432) (120,636)
--------- ----------- -------- ----------
Net increase (decrease) -
Class C ....................... 140,659 1,934,460 23,344 283,691
--------- ----------- -------- ----------
CLASS D
Sold ........................... 850,384 12,017,014 44,401 542,528
Reinvestment of dividends
and distributions ............. 5,418 74,761 - -
Redeemed ....................... (11,165) (153,048) (1,503) (19,216)
--------- ----------- -------- ----------
Net increase - Class D ......... 844,637 11,938,727 42,898 523,312
--------- ----------- -------- ----------
Net increase (decrease) in
Fund .......................... 2,840,718 $39,394,625 252,497 $2,996,421
========= =========== ======= ==========
<CAPTION>
DOMESTIC
---------------------------------------------------------
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------------------- ----------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A
Sold ........................... 15,406 $ 180,356 14,034 $ 155,913
Reinvestment of dividends
and distributions ............. 10,569 120,168 6,260 67,433
Redeemed ....................... (14,083) (163,616) (64,979) (708,891)
------- ---------- ------- -----------
Net increase (decrease) -
Class A ....................... 11,892 136,908 (44,685) (485,545)
------- ---------- ------- ------------
CLASS B
Sold ........................... 449,918 5,237,382 398,969 4,424,123
Reinvestment of dividends
and distributions ............. 218,230 2,476,913 94,800 1,020,047
Redeemed ....................... (443,652) (5,099,014) (742,013) (8,165,648)
-------- ---------- -------- -----------
Net increase (decrease) -
Class B ....................... 224,496 2,615,281 (248,244) (2,721,478)
-------- ---------- -------- -----------
CLASS C
Sold ........................... 50,021 580,691 22,129 249,660
Reinvestment of dividends
and distributions ............. 13,457 152,870 6,918 74,495
Redeemed ....................... (34,310) (394,317) (86,673) (971,366)
-------- ---------- -------- -----------
Net increase (decrease) -
Class C ....................... 29,168 339,244 (57,626) (647,211)
-------- ---------- -------- -----------
CLASS D
Sold ........................... - - - -
Reinvestment of dividends
and distributions ............. 164 1,861 70 753
Redeemed ....................... - - - -
-------- ---------- -------- -----------
Net increase - Class D ......... 164 1,861 70 753
-------- ---------- -------- -----------
Net increase (decrease) in
Fund .......................... 265,720 $3,093,294 (350,485) ($3,853,481)
======== ========== ======== ===========
</TABLE>
15
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
NET ASSET NET TOTAL
YEAR VALUE INVESTMENT NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INCOME AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
SEPTEMBER 30 OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL#
CLASS A
1998* $10.00 $0.05 $(0.88) $(0.83) $(0.09) - $(0.09)
1999 9.08 0.10 3.56 3.66 - - -
2000** 12.74 0.04 2.35 2.39 (0.04) $(0.99) (1.03)
CLASS B
1998* 10.00 0.03 (0.91) (0.88) (0.09) - (0.09)
1999 9.03 0.02 3.51 3.53 - - -
2000** 12.56 (0.03) 2.35 2.32 (0.01) (0.99) (1.00)
CLASS C
1998* 10.00 0.04 (0.92) (0.88) (0.09) - (0.09)
1999 9.03 0.07 3.51 3.58 - - -
2000** 12.61 (0.03) 2.35 2.32 (0.03) (0.99) (1.02)
CLASS D
1998* 10.00 0.14 (0.96) (0.82) (0.09) - (0.09)
1999 9.09 0.23 3.46 3.69 - - -
2000** 12.78 0.03 2.40 2.43 (0.06) (0.99) (1.05)
</TABLE>
-------------
* For the period November 25, 1997 (commencement of operations) through
September 30, 1998.
** For the six months ended March 31, 2000 (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
16
<PAGE>
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS RATIOS TO AVERAGE NET ASSETS
(3)(4) (3)(4)
(AFTER EXPENSES WERE ASSUMED) (BEFORE EXPENSES WERE ASSUMED)
---------------------------------- ----------------------------------
NET ASSET NET ASSETS NET NET
VALUE END OF INVESTMENT INVESTMENT PORTFOLIO
END OF TOTAL PERIOD INCOME INCOME TURNOVER
PERIOD RETURN+ (000'S) EXPENSES (LOSS) EXPENSES (LOSS) RATE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.08 (8.36)%(1) $ 596 0.25%(2) 1.01%(2) 6.16%(2) (4.90)%(2) 135%(1)
12.74 40.31 1,074 0.24 0.91 1.34 (0.19) 154
14.10 18.93 (1) 2,585 0.22 (2) 0.35 (2) 0.70 (2) (0.13) (2) 82 (1)
9.03 (8.87) (1) 3,241 0.94 (2) 0.32 (2) 6.91 (2) (5.65) (2) 135 (1)
12.56 39.09 6,615 1.00 0.15 2.10 (0.95) 154
13.88 18.64 (1) 31,683 1.00 (2) (0.43)(2) 1.48 (2) (0.91) (2) 82 (1)
9.03 (8.87) (1) 105 0.92 (2) 0.34 (2) 6.91 (2) (5.65) (2) 135 (1)
12.61 39.65 442 0.77 0.38 1.87 (0.72) 154
13.91 18.59 (1) 2,444 1.00 (2) (0.43)(2) 1.48 (2) (0.91) (2) 82 (1)
9.09 (8.26) (1) 11 - 1.26 (2) 5.91 (2) (4.65) (2) 135
12.78 40.59 564 - 1.15 1.10 0.05 154
14.16 19.19 (1) 12,587 - 0.57 (2) .48 (2) 0.09 (2) 82 (1)
</TABLE>
17
<PAGE>
MORGAN STANLEY DEAN WITTER FUND OF FUNDS
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
NET ASSET TOTAL
YEAR VALUE NET NET REALIZED TOTAL FROM DISTRIBUTIONS DIVIDENDS
ENDED BEGINNING INVESTMENT AND UNREALIZED INVESTMENT DIVIDENDS TO TO AND
SEPTEMBER 30 OF PERIOD INCOME GAIN (LOSS) OPERATIONS SHAREHOLDERS SHAREHOLDERS DISTRIBUTIONS
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DOMESTIC#
CLASS A
1998* $10.00 $0.21 $(0.44) $(0.23) $(0.05) - $(0.05)
1999 9.72 0.46 1.93 2.39 (0.36) $(0.21) (0.57)
2000** 11.54 0.14 1.44 1.58 (0.29) (1.09) (1.38)
CLASS B
1998* 10.00 0.14 (0.42) (0.28) (0.05) - (0.05)
1999 9.67 0.35 1.94 2.29 (0.29) (0.21) (0.50)
2000** 11.46 0.09 1.44 1.53 (0.20) (1.09) (1.29)
CLASS C
1998* 10.00 0.13 (0.41) (0.28) (0.05) - (0.05)
1999 9.67 0.40 1.94 2.34 (0.28) (0.21) (0.49)
2000** 11.52 0.09 1.44 1.53 (0.25) (1.09) (1.34)
CLASS D
1998* 10.00 0.22 (0.43) (0.21) (0.05) - (0.05)
1999 9.74 0.46 1.96 2.42 (0.39) (0.21) (0.60)
2000** 11.56 0.15 1.43 1.58 (0.31) (1.09) (1.40)
</TABLE>
-------------
* For the period November 25, 1997 (commencement of operations) through
September 30, 1998.
** For the six months ended March 31, 2000 (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 RATIOS TO AVERAGE NET ASSETS
(3)(4) (3)(4)
(AFTER EXPENSES WERE ASSUMED) (BEFORE EXPENSES WERE ASSUMED)
NET ASSET NET ASSETS ------------------------------- -------------------------------
VALUE END OF NET NET
END OF TOTAL PERIOD INVESTMENT INVESTMENT
PERIOD RETURN+ (000'S) EXPENSES INCOME EXPENSES INCOME PORTFOLIO
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.72 (2.33)%(1) $ 1,359 0.22%(2) 2.21%(2) 1.15%(2) 1.28%(2) 227%(1)
11.54 25.00 1,097 0.23 3.92 0.67 3.48 295
11.74 14.04 (1) 1,256 0.24 (2) 2.33 (2) 0.62 (2) 1.95 (2) 299 (1)
9.67 (2.83) (1) 24,338 0.92 (2) 1.51 (2) 1.90 (2) 0.53 (2) 227 (1)
11.46 23.96 26,007 1.00 3.15 1.44 2.71 295
11.70 13.65 (1) 29,166 1.00 (2) 1.57 (2) 1.38 (2) 1.19 (2) 299 (1)
9.67 (2.83) (1) 1,702 0.92 (2) 1.51 (2) 1.90 (2) 0.53 (2) 227 (1)
11.52 24.55 1,364 0.54 3.61 0.98 3.17 295
11.71 13.61 (1) 1,728 1.00 (2) 1.57 (2) 1.38 (2) 1.19 (2) 299 (1)
9.74 (2.13) (1) 12 - 2.43 (2) 0.90 (2) 1.53 (2) 227 (1)
11.56 25.28 15 - 4.15 0.44 3.71 295
11.74 14.17 (1) 18 - 2.57 (2) 0.38 (2) 2.19 (2) 299 (1)
</TABLE>
19
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken fromthe records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
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.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
FUND OF FUNDS
[GRAPHIC OMMITTED]
SEMIANNUAL REPORT
March 31, 2000
