MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND INC, N-30D, 1999-08-27

MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND INC
N-30D, 1999-08-27

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<PAGE>
MORGAN STANLEY
DEAN WITTER

<TABLE>
<S> <C>
DIRECTORS OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
Director and Managing Director,
Morgan Stanley Dean Witter Stefanie V. Chang
Investment Management Inc. and VICE PRESIDENT
Morgan Stanley Dean Witter
Investment Management Limited;
Managing Director, Morgan Stanley
& Co. Incorporated
Michael F. Klein
DIRECTOR AND PRESIDENT Harold J. Schaaff, Jr.
Principal, Morgan Stanley Dean VICE PRESIDENT
Witter Investment Management Inc.
and Morgan Stanley & Co.
Incorporated
John D. Barrett II
Chairman and Director, Barrett
Associates, Inc. Joseph P. Stadler
Gerard E. Jones VICE PRESIDENT
Partner, Richards & O'Neil LLP
Andrew McNally IV
River Road Partners
Samuel T. Reeves
Chairman of the Board and Chief
Executive Officer, Pinacle L.L.C. Mary E. Mullin
Fergus Reid SECRETARY
Chairman and Chief Executive
Officer, LumeLite Plastics
Corporation
Frederick O. Robertshaw
Of Counsel, Copple, Chamberlin &
Boehm, P.C. Karl O. Hartmann
INVESTMENT ADVISER AND ASSISTANT SECRETARY
ADMINISTRATOR
Morgan Stanley Dean Witter
Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020 Belinda A. Brady
DISTRIBUTOR ASSISTANT TREASURER
Morgan Stanley & Co., Incorporated
1221 Avenue of the Americas
New York, New York 10020
CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
</TABLE>

FOR CURRENT PERFORMANCE, CURRENT NET ASSET VALUE, OR FOR ASSISTANCE WITH YOUR
ACCOUNT, PLEASE CONTACT THE FUND AT (800) 548-7786.

MORGAN STANLEY DEAN WITTER
STRATEGIC ADVISER FUND, INC.

SEMI-ANNUAL REPORT
JUNE 30, 1999
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
President's Letter.............................. 1

Managers' Reports and Portfolio of Investments
by Portfolio:

Conservative Portfolio........................ 3

Moderate Portfolio............................ 6

Aggressive Portfolio.......................... 9

Statement of Assets and Liabilities............. 12

Statement of Operations......................... 13

Statement of Changes in Net Assets.............. 14

Financial Highlights............................ 15

Notes to Financial Statements................... 18
</TABLE>

This report is authorized for distribution only when preceded or accompanied by
the prospectus of the Morgan Stanley Dean Witter Strategic Adviser Fund, Inc.
The prospectus describes in detail each of the Portfolio's investment policies
to the prospective investor. Please read the prospectus carefully before you
invest or send money.

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<PAGE>
[LOGO] Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
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PRESIDENT'S LETTER
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DEAR SHAREHOLDERS:
- --------
We are pleased to present to you the Fund's Semi-Annual Report for the six
months ended June 30, 1999. Our Fund offers three Portfolios that are intended
to provide investors a range of asset allocation strategies designed to
accommodate different investors' philosophies, goals and risk tolerances. Set
forth below is a general market review for the first half of 1999. Additional
portfolio manager commentary, performance statistics and other useful
information for each of the Fund's Portfolios are contained in the report.

After the Asian and Russian economic crises experienced in 1997 and the end of
1998, the global economy began to "heal" in the first half of 1999. The
reflationary policies of central banks around the world began to take root,
spurring improved and broader economic growth in many troubled areas of the
world. Reflecting this global healing, interest rates in the U.S. crept upward
on fears of faster inflation as the world economy resumes broader based growth.
The Lehman Aggregate Bond Index fell 1.4% in the first half of the year.
Performance in equity markets was strong despite rising interest rates in the
U.S. The S&P 500 Index rose 12.4% during this period. Foreign stock prices also
rose, but weakening foreign currencies hampered returns to U.S. investors. In
the first half of the year, the MSCI EAFE Index rose 13.6% in local terms, but
only 4.0% in U.S. dollar terms.

While the bull market of 1998 was characterized by narrow market leadership and
was concentrated in particular sectors and names, the strength in 1999 has so
far been much broader in scope. The disparity between value and growth stock
performance in the U.S. narrowed, as did the disparity between large cap and
small cap stock performance, creating a benign environment for active stock
pickers. Within the bond market, performance also reflected broader economic
growth. Spread products, such as mortgages and high yield corporates, which had
been battered in last year's flight to quality, saw improved performance, as
spreads relative to Treasuries narrowed to more normal levels. Spread products
have outperformed higher quality Treasuries (-2.4%) in the first half of this
year (Corporate Bonds -2.0%, High Yield Debt +1.8%, Mortgages +0.7%).

Foreign stock performance was mixed in the first half of 1999. While Japan
(+20.7%) and Developed Pacific Markets (+23.0%) showed strong gains, a weak Euro
and softening economies held back European stock performance (-2.4%). Emerging
market equities were the star performer of the first half. Although Brazil was
forced to devalue its currency, the move had been widely anticipated and priced
into emerging markets. Because of the strong financial reforms Brazil had
already enacted, the financial sector was able to manage through the
devaluation. As the situation in Latin America stabilized, emerging market
equities began to soar. The MSCI Emerging Markets Free Index rose 39.9% in the
first half of the year, led by Asia (+55.4%), and followed by Latin America
(+31.0%) and Eastern Europe (+28.4%).

While broader economic growth has driven many equity markets to new highs this
year, this news has not been positive for bonds. The unabated economic expansion
in the U.S., coupled with rising commodity prices, has led market participants
to speculate that inflation, and therefore bond yields, will pick up. Although
inflation data remained mixed, retail sales data showed surprising strength. At
the end of June, the Federal Reserve responded by raising interest rates 25
basis points.

Broadening economic growth has been reflected in the global recovery of the
manufacturing sector, which had stagnated in 1998. The recovery has been led by
Asia and the U.S., with Europe pointing to a stronger second half. Consumption
may slow modestly in the West, as commodity prices bottom, and interest-rate
sensitive sectors react to

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1
<PAGE>
the rise in bond yields. However, 1999 growth is expected to increase globally,
compared to 1998. Growth in the year 2000 should show an acceleration of this
trend. Earnings should benefit and grow approximately 10% over the next twelve
months in the U.S. and Europe, and close to 20% for Japan.

Although the current bull market appears to be eternal, we emphasize that there
are significant differences between the environment today and that of the past
two years. The key difference is that inflationary pressures, particularly in
the U.S., may not be quiescent. Oil prices are up near 100% from their lows.
World growth is picking up, and is reflected in bottoming commodity prices.
Strong consumption and tight labor markets in the U.S. will ultimately lead to
inflationary pressures. Although the Fed has adopted a "neutral bias", we
believe that further interest hikes this year are likely, possibly forcing a
final capitulation in the bond market. With interest rates and liquidity less
supportive of an overvalued U.S. equity market, stronger earnings will become
crucial to continued strength for U.S. stocks. We anticipate better equity
performance in non-U.S. markets, where valuations, growth prospects, and
liquidity trends are more favorable.

We hope you find the enclosed Report informative. As always, we very much
appreciate your continued support of the Fund.

Sincerely,

/s/Michael F. Klein

Michael F. Klein
PRESIDENT

July 1999

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2
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
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OVERVIEW
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CONSERVATIVE PORTFOLIO

COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
- -----------------------------------------

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
U.S. Fixed Income 77.2%
U.S. Equity 19.6%
International Equity 1.4%
Other 1.8%
</TABLE>

PERFORMANCE COMPARED TO THE LEHMAN 1-3 YEAR
GOVERNMENT BOND INDEX AND THE COMPOSITE INDEX

<TABLE>
<CAPTION>
TOTAL RETURNS(2)
-------------------------------------------
AVERAGE ANNUAL
YTD ONE YEAR SINCE INCEPTION(3)
---------- ---------- -------------------
<S> <C> <C> <C>
PORTFOLIO--CLASS A(3).... 3.73% 6.46% 7.80%
PORTFOLIO--CLASS B(3).... 3.54 6.12 7.43
LEHMAN 1-3 YEAR
GOVERNMENT BOND
INDEX(1)................. 1.15 5.04 5.41
COMPOSITE INDEX(1)....... 3.43 8.31 9.73
</TABLE>

1.The Lehman 1-3 Year Government Bond Index is comprised of government agency
and treasury securities with maturities of 1-3 years. The Composite Index for
the Conservative Portfolio is a composite comprised of 70% of the Lehman 1-3
Year Government Bond Index, 20% of the S&P 500 Index and 10% of the Salomon
High Yield Market Index.

2.Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3.The Portfolio commenced operations on December 31, 1997.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

- ----------------------------------------------------------

THE PERFORMANCE RESULTS PROVIDED ARE FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE CONSTRUED AS A GUARANTEE OF THE PORTFOLIO'S FUTURE PERFORMANCE. PAST
PERFORMANCE SHOWN IS NOT PREDICTIVE OF FUTURE PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PLEASE SEE THE PROSPECTUS FOR A
DESCRIPTION OF CERTAIN RISK CONSIDERATIONS ASSOCIATED WITH INTERNATIONAL
INVESTING.

The Conservative Portfolio seeks the highest level of long-term total return
that is consistent with a relatively conservative level of risk. The Portfolio
invests primarily in certain fixed income portfolios, and, to a lesser degree,
certain equity portfolios of the Morgan Stanley Dean Witter Institutional Fund,
Inc. and the MAS Funds. The Portfolio's assets are normally allocated within the
ranges of 75%-85% fixed income and 15%-25% equities. The allocations are
expected to be relatively static with subtle periodic adjustments in response to
market developments.

For the six months ended June 30, 1999, the Portfolio had a total return of
3.73% for the Class A shares and 3.54% for the Class B shares compared to 1.15%
for the Lehman 1-3 Year Government Bond Index (the "Lehman Index") and 3.43% for
the Composite Index. For the one year period ended June 30, 1999, the Portfolio
had a total return of 6.46% for the Class A shares and 6.12% for the Class B
shares compared to 5.04% for the Lehman Index and 8.31% for the Composite Index.
For the period since inception on December 31, 1997 through June 30, 1999, the
Portfolio had an average annual total return of 7.80% for the Class A shares and
7.43% for the Class B shares compared to 5.41% for the Lehman Index and 9.73%
for the Composite Index.

Our asset allocation in the first half modestly overweight equities and high
yield debt while underweighting high quality fixed income. As of June 30, our
allocation to U.S. equity mutual funds was 19.6%, with a 1.4% allocation to
non-U.S. equities. Our allocation to high yield debt was 10.8%, while our
allocation to high quality U.S. fixed income was 66.4%.

The outperformance of the Portfolio was due to both strong security selection
within the underlying mutual funds and to marginal allocation decisions. The
MSDWIF Equity Growth Portfolio was the largest contributor to outperformance,
returning 15.49% over the last six months, exceeding the 12.38% return for the
S&P 500 (inclusive of dividends). The MAS High Yield Portfolio

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Conservative Portfolio

3
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------

OVERVIEW
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CONSERVATIVE PORTFOLIO (CONT.)
also outperformed, returning 3.91% relative to 1.77% for the Salomon High Yield
Market Index. The MAS Limited Duration Portfolio returned 1.56%, outperforming
the 1.15% return for the Lehman 1-3 Year Government Bond Index. The MSDWIF U.S.
Equity Plus Portfolio performed close to the S&P 500, returning 11.91% in the
first half. In 1999, the broadening market and economic strength provided a
benign environment for active stock selection strategies and spread products.

Allocation decisions that contributed positively to results included our
decision to overweight high yield debt and underweight high quality debt. This
position was positively rewarded, as spreads narrowed to more normal levels. Our
decision to slightly overweight U.S. equities also added value, as equity prices
continued to rise despite a weak bond market.

The U.S. equity market has now reached an overvaluation extreme not seen since
1987. Although U.S. economic growth continues to surprise on the upside, the
benign low inflation, low interest rate environment is coming to an end. Higher
interest rates are already less supportive of an equity market priced for
perfection, and given this overvaluation, the market may not be able to
withstand a series of Federal Reserve tightenings. We are closely monitoring key
factors that will influence the pace and magnitude of the Fed's interest rate
hikes. In the meantime, we have positioned the Portfolio with an emphasis on
areas of attractive relative valuation. We have introduced a significant
exposure to the MSDWIF Value Equity Portfolio's strategy, which focuses on large
cap value stocks. We have also introduced the MAS Mid Cap Growth and Mid Cap
Value strategies to take advantage of a segment of the U.S. market at a less
extreme valuation level. In June, we added in an international equity strategy.
We believe that Europe and Asia are in an early part of the growth cycle, and
expect to see acceleration in these economies relative to the U.S. over the
months ahead. While our Portfolio is slightly overweight equities, we will be
looking to reduce exposure to large cap equities in favor of short-term bonds in
light of the extreme valuations.

Francine J. Bovich
PORTFOLIO MANAGER

July 1999

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Conservative Portfolio

4
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
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CONSERVATIVE PORTFOLIO
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<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- --------------------------------------------------------------------------

INVESTMENTS (98.2%)
U.S. FIXED INCOME FUNDS (77.2%)
56,466 MAS High Yield Portfolio, Institutional Class..... $ 510
307,882 MAS Limited Duration Portfolio, Institutional
Class........................................... 3,150
----------
3,660
----------
U.S. EQUITY FUNDS (19.6%)
3,573 MAS Mid Cap Growth Portfolio, Institutional
Class........................................... 92
4,047 MAS Mid Cap Value Portfolio, Institutional
Class........................................... 95
13,920 MSDWIF Equity Growth Portfolio, Class A........... 306
13,330 MSDWIF U.S. Equity Plus Portfolio, Class A........ 185
19,174 MSDWIF Value Equity Portfolio, Class A............ 250
----------
928
----------
INTERNATIONAL EQUITY FUND (1.4%)
5,494 MSDWIF Active International Allocation Portfolio,
Class A......................................... 68
----------
TOTAL INVESTMENTS (98.2%) (Cost $4,654)....................... 4,656
OTHER ASSETS AND LIABILITIES -- NET (1.8%).................... 85
----------
NET ASSETS (100%)............................................. $ 4,741
----------
----------
</TABLE>

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

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Conservative Portfolio

5
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------

OVERVIEW
- --------------------------------------------------------------------------------
MODERATE PORTFOLIO

COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
- -----------------------------------------

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
U.S. Fixed Income 46.3%
U.S. Equity 36.3%
International Equity 16.1%
Other 1.3%
</TABLE>

PERFORMANCE COMPARED TO THE S&P 500 INDEX AND
THE COMPOSITE INDEX

<TABLE>
<CAPTION>
TOTAL RETURNS(2)
-------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION(3)
---------- ---------- -------------------
<S> <C> <C> <C>
PORTFOLIO--CLASS
A(3)................... 6.20% 7.49% 10.90%
PORTFOLIO--CLASS
B(3)................... 6.01 7.25 10.60
S&P 500 INDEX(1)....... 12.38 22.75 27.90
COMPOSITE INDEX(1)..... 4.81 11.13 14.65
</TABLE>

1. The S&P 500 Index is a stock index comprised of 500 large-cap U.S. companies
with market capitalization of $1 billion or more. These 500 companies are a
representative sample of some 100 industries, chosen mainly for market size,
liquidity and industry group representation. The Composite Index for the
Moderate Portfolio is a composite comprised of 40% of the Lehman Intermediate
Government/Corporate Bond Index, 35% of the S&P 500 Index, 15% of the Morgan
Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE)
Index and 10% of the Salomon High Yield Market Index.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3. The Portfolio commenced operations on December 31, 1997.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

- ------------------------------------------------------------

The Moderate Portfolio seeks the highest level of long-term total return
consistent with a relatively moderate level of risk primarily through investment
in a mix of fixed income and equity portfolios of the Morgan Stanley Dean Witter
Institutional Fund, Inc. and the MAS Funds. The Portfolio's assets are normally
allocated within the range of 45%-55% equities and 45%-55% fixed income. The
allocations are expected to be relatively static with subtle periodic
adjustments in response to market developments.

For the six months ended June 30, 1999, the Portfolio had a total return of
6.20% for the Class A shares and 6.01% for the Class B shares compared to 12.38%
for the S&P 500 Index and 4.81% for the Composite Index. For the one year period
ended June 30, 1999, the Portfolio had a total return of 7.49% for the Class A
shares and 7.25% for the Class B shares compared to 22.75% for the S&P 500 Index
and 11.13% for the Composite Index. For the period since inception on December
31, 1997 through June 30, 1999, the Portfolio had an average annual total return
of 10.90% for the Class A shares and 10.60% for the Class B shares compared to
27.90% for the S&P 500 Index and 14.65% for the Composite Index.

Our asset allocation in the first half modestly overweight equities and high
yield debt while underweighting high quality fixed income. As of June 30, our
allocation to U.S. equity mutual funds was 36.3%, with a 16.1% allocation to
non-U.S. equity mutual funds. Our allocation to high yield debt was 10.6%, while
our allocation to high quality U.S. fixed income was 35.7%.

The outperformance of the Portfolio was due to both strong security selection
within the underlying mutual funds and marginal allocation decisions. The MSDWIF
Equity Growth Portfolio was the largest contributor to outperformance, returning
15.49% over the last six months, exceeding the 12.38% return for the S&P 500
(inclusive of dividends). The MAS High Yield Portfolio also outperformed
returning 3.91% relative to 1.77% for the Salomon High Yield Market Index. The
MAS

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Moderate Portfolio

6
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------

OVERVIEW
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MODERATE PORTFOLIO (CONT.)
Intermediate Duration Portfolio returned -0.51%, outperforming the -0.58% return
for the Lehman Intermediate Government/Corporate Bond Index. The MSDWIF Active
International Allocation Portfolio and the MSDWIF U.S. Equity Plus Portfolio
performed in line with their respective benchmarks. The MSDWIF Equity Plus
Portfolio returned 11.91% in the first half. The MSDWIF Active International
Allocation Portfolio returned 4.12% in the first half, compared to 3.97% for
MSCI EAFE. In 1999, the broadening market and economic strength provided a
benign environment for active stock selection strategies and spread products.

Allocation decisions that contributed positively to results included a small
opportunistic overweight to Latin America. We established this position in
March, after the Brazilian devaluation seemed to have little impact on global
emerging markets. The economic recovery and cheap valuations in emerging
markets, particularly Latin America at the time made these markets a compelling
investment. Latin America rose significantly from March through June (+20%). We
then sold off our investment in Latin America in favor of a more diversified
approach to emerging markets. Our decision to overweight high yield debt and
underweight high quality debt was also positively rewarded, as spreads narrowed
to more normal levels. We were also underweighted to non-U.S. developed market
equities, which have underperformed U.S. equities. This underperformance is due
primarily to European stock weakness. European stocks had experienced strong
price increases over the past three years, leading to stretched valuation
levels, rivaling those of the U.S. However, poor economic performance led to a
less favorable earnings environment in Europe, whereas in the U.S., economic and
earnings growth remained strong. We also broadened our U.S. equity exposure to
incorporate a small cap stock strategy. We added the MAS Small Cap Growth
Portfolio in late March, seeking to capture the benefits of attractive
valuations and improved earnings outlook for small cap stocks. The MAS Small Cap
Growth Portfolio has risen 57% since the purchase.

The U.S. equity market has now reached an overvaluation extreme not seen since
1987. Although U.S. economic growth continues to surprise on the upside, the
benign low inflation, low interest rate environment is coming to an end. Higher
interest rates are already less supportive of an equity market priced for
perfection, and given this overvaluation, the market may not be able to
withstand a series of Federal Reserve tightenings. We are closely monitoring key
factors that will influence the pace and magnitude of the Fed's interest rate
hikes. In the meantime, we have positioned the Portfolio with an emphasis on
areas of attractive relative valuation. We have introduced a significant
exposure to the MSDWIF Value Equity Portfolio's strategy, which focuses on large
cap value stocks. We have also introduced the MAS Small Cap Growth and Mid Cap
Value strategies to take advantage of a segment of the U.S. market at a less
extreme valuation level. Within equities, we favor non-U.S. stocks (developed
and emerging). We believe that Europe and Asia are in an early part of the
growth cycle, and expect to see acceleration in these economies relative to the
U.S. over the months ahead. While our Portfolio is currently slightly overweight
equities, we will be looking to reduce exposure to large cap U.S. equities in
favor of intermediate-term bonds in light of the extreme valuations.

Francine J. Bovich
PORTFOLIO MANAGER

July 1999

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Moderate Portfolio

7
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------

MODERATE PORTFOLIO
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -------------------------------------------------------------------------

INVESTMENTS (98.7%)
U.S. FIXED INCOME FUNDS (46.3%)
73,377 MAS High Yield Portfolio, Institutional Class..... $ 663
218,446 MAS Intermediate Duration Portfolio, Institutional
Class........................................... 2,160
6,049 MAS Limited Duration Portfolio, Institutional
Class........................................... 62
---------
2,885
---------
U.S. EQUITY FUNDS (36.3%)
2,666 MAS Mid Cap Value Portfolio, Institutional
Class........................................... 63
5,288 MAS Small Cap Growth Portfolio, Institutional
Class........................................... 150
35,865 MSDWIF Equity Growth Portfolio, Class A........... 789
42,597 MSDWIF U.S. Equity Plus Portfolio, Class A........ 592
50,996 MSDWIF Value Equity Portfolio, Class A............ 663
---------
2,257
---------
INTERNATIONAL EQUITY FUNDS (16.1%)
77,715 MSDWIF Active International Allocation Portfolio,
Class A......................................... 963
4,016 MSDWIF Latin American Portfolio, Class A.......... 38
---------
1,001
---------
TOTAL INVESTMENTS (98.7%) (Cost $5,965)....................... 6,143
OTHER ASSETS AND LIABILITIES -- NET (1.3%).................... 84
---------
NET ASSETS (100%)............................................. $ 6,227
---------
---------
</TABLE>

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

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Moderate Portfolio

8
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------

OVERVIEW
- --------------------------------------------------------------------------------
AGGRESSIVE PORTFOLIO

COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
- -----------------------------------------

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
U.S. Equity 48.3%
International Equity 36.2%
U.S. Fixed Income 13.7%
Other 1.8%
</TABLE>

PERFORMANCE COMPARED TO THE MSCI WORLD INDEX
AND THE COMPOSITE INDEX

<TABLE>
<CAPTION>
TOTAL RETURNS(2)
-------------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION(3)
---------- ---------- -------------------
<S> <C> <C> <C>
PORTFOLIO--CLASS
A(3)................... 12.97% 11.20% 14.49%
PORTFOLIO--CLASS
B(3)................... 12.75 10.94 14.31
MSCI WORLD INDEX(1).... 8.51 15.67 22.17
COMPOSITE INDEX(1)..... 9.94 15.73 17.76
</TABLE>

1. The MSCI World Index is an unmanaged index of common stocks and includes
securities representative of the market structure of 22 developed market
countries in North America, Europe, and the Asia/ Pacific region, including
dividends. The Composite Index for the Aggressive Portfolio is a composite
comprised of 50% of the Russell 3000 Index, 25% of the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East (EAFE) Index, 15% of
the Lehman Aggregate Bond Index and 10% of the IFC Investable Emerging
Markets Index.

2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.

3. The Portfolio commenced operations on December 31, 1997.

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.

- ------------------------------------------------------------

The Aggressive Portfolio seeks the highest level of
long-term capital appreciation that is consistent with a relatively high level
of risk primarily through investment in certain equity portfolios, and, to a
lesser degree certain fixed income portfolios of the Morgan Stanley Dean Witter
Institutional Fund, Inc. and the MAS Funds. The Portfolio's assets are normally
allocated within the range of 80%-90% equities and 10%-20% fixed income. The
allocations are expected to be relatively static with subtle periodic
adjustments in response to market developments.

For the six months ended June 30, 1999, the Portfolio had a total return of
12.97% for Class A shares and 12.75% for Class B shares compared to 8.51% for
the MSCI World Index and 9.94% for the Composite Index. For the one year period
ended June 30, 1999, the Portfolio had a total return of 11.20% for the Class A
shares and 10.94% for the Class B shares compared to 15.67% for the MSCI World
Index and 15.73% for the Composite Index. For the period since inception on
December 31, 1997 through June 30, 1999, the Portfolio had an average annual
total return of 14.49% for the Class A shares and 14.31% for the Class B shares
compared to 22.17% for the MSCI World Index and 17.76% for the Composite Index.

Our asset allocation in the first half modestly overweight equities while
underweighting fixed income. As of June 30, our allocation to U.S. equity mutual
funds was 48.3%, with a 36.2% allocation to non-U.S. equities, including
emerging markets. Our exposure to U.S. fixed income and cash equivalents was
14.8% (inclusive of high yield debt).

The outperformance of the Aggressive Portfolio was due to both strong security
selection within the underlying mutual funds and successful marginal allocation
decisions. The MSDWIF Equity Growth Portfolio was the largest contributor to
outperformance, returning 15.49% over the last six months, exceeding the 12.38%
return for the S&P 500 (inclusive of dividends). The MAS Mid Cap Growth
Portfolio continued to deliver strong returns, rising 20.71%, far outpacing the
S&P 400 Mid Cap Index return of 6.88%. In combination, the Equity Growth and

- --------------------------------------------------------------------------------
Aggressive Portfolio

9
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------

OVERVIEW
- --------------------------------------------------------------------------------
AGGRESSIVE PORTFOLIO (CONT.)
Mid Cap Growth Portfolios far outpaced the Russell 3000 Index return of 11.4% in
the first half. The MAS Fixed Income Portfolio returned -1.6%, in line with the
- -1.4% return for the Lehman Aggregate Bond Index. The MSDWIF Active
International Allocation Portfolio, the MSDWIF Emerging Markets Portfolio, and
the MSDWIF U.S. Equity Plus Portfolio also performed in line with their
respective benchmarks. The MSDWIF U.S. Equity Plus Portfolio returned 11.91% in
the first half. The MSDWIF Active International Allocation Portfolio returned
4.12% in the first half, compared to 3.97% for MSCI EAFE. The MSDWIF Emerging
Markets Portfolio kept pace with the surge in emerging markets, rising 40.00%,
compared to 38.3% for the IFC Investable Emerging Markets Index. In 1999, the
broadening market and economic strength provided a benign environment for active
stock selection strategies and spread products.

Allocation decisions that contributed positively to results included a small
overweight to emerging markets, with an emphasis on Latin America. We
established these positions in March, after the Brazilian devaluation seemed to
have little impact on global emerging markets. The economic recovery and cheap
valuations in emerging markets, particularly Latin America at the time made
these markets a compelling investment. Latin America rose significantly from
March through mid-June. We then sold off our investment in Latin America in
favor of a more diversified approach to emerging markets. We were also
underweighted to non-U.S. developed market equities, which have underperformed
U.S. equities. This underperformance is due primarily to European stock
weakness. European stocks had experienced strong price increases over the past
three years, leading to stretched valuation levels, rivaling those of the U.S.
However, poor economic performance led to a less favorable earnings environment
in Europe, whereas in the U.S., economic and earnings growth remained strong. We
also broadened our U.S. equity exposure in the U.S. to incorporate a small cap
strategy. We added the MAS Small Cap Growth Portfolio in late February, seeking
to capture the benefits of attractive valuations and improved earnings outlook
for small cap stocks. The MAS Small Cap Growth Portfolio has risen 70% from
March through June.

The U.S. equity market has now reached an overvaluation extreme not seen since
1987. Although U.S. economic growth continues to surprise on the upside, the
benign low inflation, low interest rate environment is coming to an end. Higher
interest rates are already less supportive of an equity market priced for
perfection, and given this overvaluation, the market may not be able to
withstand a series of Federal Reserve tightenings. We are closely monitoring key
factors that will influence the pace and magnitude of the Fed's interest rate
hikes. In the meantime, we have positioned the Portfolio with an emphasis on
areas of attractive relative valuation. We have introduced a significant
exposure to the MSDWIF Value Equity Portfolio's strategy and the MAS Mid Cap
Value strategy which focus on large cap value stocks and mid cap value stocks,
respectively. Our allocation within U.S. equities favors mid cap and small cap
stocks, where valuations are less stretched. Within global equities, we favor
non-U.S. stocks (developed and emerging). We believe that Europe and Asia are in
an early part of the growth cycle, and expect to see acceleration in these
economies relative to the U.S. over the months ahead. While our Portfolio is
currently slightly overweight equities, we will be looking to reduce exposure to
large cap U.S. equities in favor of short-term bonds in light of extreme equity
valuations and interest rate uncertainties.

Francine J. Bovich
PORTFOLIO MANAGER

July 1999

- --------------------------------------------------------------------------------
Aggressive Portfolio

10
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------

AGGRESSIVE PORTFOLIO
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- -------------------------------------------------------------------------

INVESTMENTS (98.2%)
U.S. EQUITY FUNDS (48.3%)
11,863 MAS Mid Cap Growth Portfolio, Institutional
Class........................................... $ 306
9,817 MAS Mid Cap Value Portfolio, Institutional
Class........................................... 230
8,167 MAS Small Cap Growth Portfolio, Institutional
Class........................................... 232
36,928 MSDWIF Equity Growth Portfolio, Class A........... 813
45,876 MSDWIF U.S. Equity Plus Portfolio, Class A........ 638
45,212 MSDWIF Value Equity Portfolio, Class A............ 588
---------
2,807
---------
INTERNATIONAL EQUITY FUNDS (36.2%)
116,063 MSDWIF Active International Allocation Portfolio,
Class A......................................... 1,438
43,110 MSDWIF Emerging Markets Portfolio, Class A........ 577
9,203 MSDWIF Latin American Portfolio, Class A.......... 86
---------
2,101
---------
U.S. FIXED INCOME FUNDS (13.7%)
57,203 MAS Fixed Income Portfolio, Institutional Class... 652
6,778 MAS High Yield Portfolio, Institutional Class..... 61
8,195 MAS Limited Duration Portfolio, Institutional
Class........................................... 84
---------
797
---------
TOTAL INVESTMENTS (98.2%) (Cost $5,162)....................... 5,705
OTHER ASSETS AND LIABILITIES -- NET (1.8%).................... 104
---------
NET ASSETS (100%)............................................. $ 5,809
---------
---------
</TABLE>

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

- --------------------------------------------------------------------------------
Aggressive Portfolio

11
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
PORTFOLIO PORTFOLIO PORTFOLIO
(000) (000) (000)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------

ASSETS
Investments, at Cost....................... $4,653 $5,965 $5,162
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Investments, at Value...................... $4,656 $6,143 $5,705
Cash....................................... 27 28 64
Dividends Receivable....................... 15 7 --
Deferred Organization Costs................ 69 69 69
Receivable from Investment Adviser......... 12 13 15
- -----------------------------------------------------------------------------------------
TOTAL ASSETS................................. 4,779 6,260 5,853
- -----------------------------------------------------------------------------------------
LIABILITIES
Payable for Investments Purchased.......... (15) (7) --
Payable for Shares Redeemed................ -- -- (19)
Professional Fees Payable.................. (12) (14) (13)
Shareholder Reporting Fees Payable......... (10) (10) (10)
Custodian Fees Payable..................... -- (1) (1)
Other Liabilities.......................... (1) (1) (1)
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES............................ (38) (33) (44)
- -----------------------------------------------------------------------------------------
NET ASSETS................................... $4,741 $6,227 $5,809
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital............................ $4,604 $5,899 $5,138
Undistributed Net Investment Income........ 80 58 3
Accumulated Net Realized Gain.............. 54 92 125
Unrealized Appreciation on Investments..... 3 178 543
- -----------------------------------------------------------------------------------------
NET ASSETS................................... $4,741 $6,227 $5,809
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
CLASS A:
- ---------------------------------------------
NET ASSETS................................... $4,166 $5,627 $5,178
SHARES ISSUED AND OUTSTANDING ($0.001 PAR
VALUE)
(Authorized 1,500,000 shares).............. 394 505 437
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE............................ $10.57 $11.14 $11.85
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
CLASS B:
- ---------------------------------------------
NET ASSETS................................... $ 575 $ 600 $ 631
SHARES ISSUED AND OUTSTANDING ($0.001 PAR
VALUE)
(Authorized 1,500,000 shares).............. 55 54 53
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE............................ $10.54 $11.12 $11.85
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------

12
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------

INVESTMENT INCOME:
Dividends from Underlying Funds............ $ 87 $ 65 $ 11
Interest................................... -- 1 1
- -----------------------------------------------------------------------------------------
Total Income............................ 87 66 12
- -----------------------------------------------------------------------------------------
EXPENSES:
Administrative Fees:
Basic Fees.............................. 4 5 5
Less: Fees Waived....................... (4) (5) (5)
--- --- ---
Administrative Fees--Net.................... -- -- --
Professional Fees........................... 25 32 29
Filing and Registration Fees................ 14 17 17
Amortization of Organizational Costs........ 10 10 10
Custodian Fees.............................. 3 5 6
Distribution Fees on Class B Shares......... 1 1 1
Other Expenses.............................. 1 1 1
Expenses Reimbursed by Adviser.............. (47) (58) (55)
- -----------------------------------------------------------------------------------------
Total Net Expenses....................... 7 8 9
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME........................ 80 58 3
- -----------------------------------------------------------------------------------------
NET REALIZED GAIN:
Investments Sold........................... 62 112 164
- -----------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION:
Investments................................ 15 182 492
- -----------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN AND CHANGE IN
UNREALIZED APPRECIATION.................... 77 294 656
- -----------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations............................. $ 157 $ 352 $ 659
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------

13
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------ ---------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS
ENDED YEAR SIX MONTHS YEAR SIX MONTHS YEAR
JUNE 30, ENDED ENDED ENDED ENDED ENDED
1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998
(000) (000) (000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment
Income............ $ 80 $ 131 $ 58 $ 138 $ 3 $ 59
Net Realized Gain... 62 48 112 60 164 32
Change in Unrealized
Appreciation
(Depreciation).... 15 (12) 182 (4) 492 51
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net
Assets Resulting
from Operations... 157 167 352 194 659 142
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
CLASS A:
Net Investment
Income............ -- (138) -- (182) -- (96)
Net Realized Gain... -- (32) -- (12) -- (3)
In Excess of Net
Realized Gain..... -- (7) -- (18) -- (34)
CLASS B:
Net Investment
Income............ -- (23) -- (21) -- (12)
Net Realized Gain... -- (6) -- (2) -- (1)
In Excess of Net
Realized Gain..... -- (1) -- (2) -- (4)
- -----------------------------------------------------------------------------------------------------------------------------------
Total
Distributions..... -- (207) -- (237) -- (150)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE
TRANSACTIONS:(1)
CLASS A:
Subscribed.......... 1,434 5,206 1,749 6,446 1,274 6,426
Distributions
Reinvested........ -- 177 -- 212 -- 133
Redeemed............ (546) (2,710) (1,020) (2,527) (877) (2,848)
CLASS B:
Subscribed.......... -- -- -- -- -- --
Distributions
Reinvested........ -- 30 -- 25 -- 17
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in
Capital Share
Transactions...... 888 2,703 729 4,156 397 3,728
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase in
Net Assets........ 1,045 2,663 1,081 4,113 1,056 3,720
NET ASSETS:
Beginning of
Period............ 3,696 1,033 5,146 1,033 4,753 1,033
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period....... $ 4,741 $ 3,696 $ 6,227 $ 5,146 $ 5,809 $ 4,753
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net
investment income
included in end of
period net
assets............ $ 80 $ -- $ 58 $ -- $ 3 $ --
- -----------------------------------------------------------------------------------------------------------------------------------
(1) CAPITAL SHARE
TRANSACTIONS:
CLASS A:
Shares
Subscribed....... 138 489 163 600 118 598
Shares Issued on
Reinvesting
Distributions.... -- 17 -- 20 -- 13
Shares Redeemed.... (52) (250) (95) (235) (81) (263)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in
Class A Shares
Outstanding...... 86 256 68 385 37 348
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B:
Shares
Subscribed....... -- -- -- -- -- --
Shares Issued on
Reinvesting
Distributions.... -- 3 -- 2 -- 1
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in
Class B Shares
Outstanding...... -- 3 -- 2 -- 1
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------

14
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
CONSERVATIVE PORTFOLIO
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED ONE DAY ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997*
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 10.18 $ 10.00 $ 10.00
- ------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.......................... 0.18 0.35 --
Net Realized and Unrealized Gain............... 0.21 0.42 --
- ------------------------------------------------------------------------------------------------------------
Total From Investment Operations............. 0.39 0.77 --
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.......................... -- (0.46) --
Net Realized Gain.............................. -- (0.11) --
In Excess of Net Realized Gain................. -- (0.02) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions.......................... -- (0.59) --
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................... $ 10.57 $ 10.18 $ 10.00
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN..................................... 3.73% 7.76% 0.00%
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)............ $ 4,166 $ 3,141 $ 517
Ratio of Expenses to Average Net Assets (1)...... 0.32%(a) 0.32% 0.00%(a)
Ratio of Net Investment Income to Average Net
Assets (1)..................................... 3.78%(a) 5.31% 0.00%(a)
Portfolio Turnover............................... 34% 129% 0%
- ---------------------------
(1) Effect of Voluntary Expense Limitation During
the Period:
Per Share Benefit to Net Investment Income... $ 0.12 $ 0.27 $ 0.00
Ratios Before Expense Limitation:
Expenses to Average Net Assets............... 2.71%(a) 4.45% 0.00%(a)
Net Investment Income to Average Net
Assets..................................... 1.38%(a) 1.21% 0.00%(a)
- ------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED ONE DAY ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997*
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 10.18 $ 10.00 $ 10.00
- ------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.......................... 0.17 0.52 --
Net Realized and Unrealized Gain............... 0.19 0.23 --
- ------------------------------------------------------------------------------------------------------------
Total From Investment Operations............. 0.36 0.75 --
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.......................... -- (0.44) --
Net Realized Gain.............................. -- (0.11) --
In Excess of Net Realized Gain................. -- (0.02) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions.......................... -- (0.57) --
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................... $ 10.54 $ 10.18 $ 10.00
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN..................................... 3.54% 7.52% 0.00%
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)............ $ 575 $ 555 $ 516
Ratio of Expenses to Average Net Assets (2)...... 0.57%(a) 0.57% 0.00%(a)
Ratio of Net Investment Income to Average Net
Assets (2)..................................... 3.53%(a) 5.06% 0.00%(a)
Portfolio Turnover............................... 34% 129% 0%
- ---------------------------
(2) Effect of Voluntary Expense Limitation During
the Period:
Per Share Benefit to Net Investment Income... $ 0.12 $ 0.42 $ 0.00
Ratios Before Expense Limitation:
Expenses to Average Net Assets............... 2.96%(a) 4.70% 0.00%(a)
Net Investment Income to Average Net
Assets..................................... 1.13%(a) 0.96% 0.00%(a)
</TABLE>

- --------------------------------------------------------------------------------

* Commencement of operations
(a) Annualized
The ratios of expenses to average net assets do not reflect the expenses of
the Underlying Funds attributable to the Portfolio.

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

- --------------------------------------------------------------------------------

15
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
MODERATE PORTFOLIO
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED ONE DAY ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997*
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.49 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.11 0.28 --
Net Realized and Unrealized Gain..... 0.54 0.71 --
- --------------------------------------------------------------------------------------------------
Total From Investment Operations... 0.65 0.99 --
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ -- (0.43) --
Net Realized Gain.................... -- (0.03) --
In Excess of Net Realized Gain....... -- (0.04) --
- --------------------------------------------------------------------------------------------------
Total Distributions................ -- (0.50) --
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $ 11.14 $ 10.49 $ 10.00
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 6.20% 9.93% 0.00%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).......................... $ 5,627 $ 4,580 $ 517
Ratio of Expenses to Average Net Assets
(1).................................. 0.24%(a) 0.25% 0.00%(a)
Ratio of Net Investment Income to
Average Net Assets (1)............... 1.98%(a) 4.26% 0.00%(a)
Portfolio Turnover..................... 41% 139% 0%
- ---------------------------
(1) Effect of Voluntary Expense
Limitation During the Period:
Per Share Benefit to Net Investment
Income........................... $ 0.12 $ 0.22 $ 0.00
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.36%(a) 3.63% 0.00%(a)
Net Investment Income (Loss) to
Average Net Assets............... (0.14)%(a) 0.88% 0.00%(a)
- --------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED ONE DAY ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997*
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.48 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.09 0.42 --
Net Realized and Unrealized Gain..... 0.55 0.53 --
- --------------------------------------------------------------------------------------------------
Total From Investment Operations... 0.64 0.95 --
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ -- (0.40) --
Net Realized Gain.................... -- (0.03) --
In Excess of Net Realized Gain....... -- (0.04) --
- --------------------------------------------------------------------------------------------------
Total Distributions................ -- (0.47) --
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $ 11.12 $ 10.48 $ 10.00
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 6.01% 9.57% 0.00%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).......................... $ 600 $ 566 $ 516
Ratio of Expenses to Average Net Assets
(2).................................. 0.49%(a) 0.50% 0.00%(a)
Ratio of Net Investment Income to
Average Net Assets (2)............... 1.73%(a) 4.01% 0.00%(a)
Portfolio Turnover..................... 41% 139% 0%
- ---------------------------
(2) Effect of Voluntary Expense
Limitation During the Period:
Per Share Benefit to Net Investment
Income........................... $ 0.11 $ 0.35 $ 0.00
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.61%(a) 3.88% 0.00%(a)
Net Investment Income (Loss) to
Average Net Assets............... (0.39)%(a) 0.63% 0.00%(a)
</TABLE>

- --------------------------------------------------------------------------------

* Commencement of operations
(a) Annualized
The ratios of expenses to average net assets do not reflect the expenses of
the Underlying Funds attributable to the Portfolio.

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

- --------------------------------------------------------------------------------

16
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS:
- --------------------------------------------------------------------------------
AGGRESSIVE PORTFOLIO
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED ONE DAY ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997*
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.49 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.01 0.13 --
Net Realized and Unrealized Gain..... 1.35 0.70 --
- --------------------------------------------------------------------------------------------------
Total From Investment Operations... 1.36 0.83 --
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ -- (0.24) --
Net Realized Gain.................... -- (0.01) --
In Excess of Net Realized Gain....... -- (0.09) --
- --------------------------------------------------------------------------------------------------
Total Distributions................ -- (0.34) --
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $ 11.85 $ 10.49 $ 10.00
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 12.97% 8.38% 0.00%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).......................... $ 5,178 $ 4,194 $ 517
Ratio of Expenses to Average Net Assets
(1).................................. 0.31%(a) 0.31% 0.00%(a)
Ratio of Net Investment Income to
Average Net Assets (1)............... 0.13%(a) 2.18% 0.00%(a)
Portfolio Turnover..................... 48% 188% 0%
- ---------------------------
(1) Effect of Voluntary Expense
Limitation During the Period:
Per Share Benefit to Net Investment
Income........................... $ 0.14 $ 0.23 $ 0.00
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.55%(a) 4.19% 0.00%(a)
Net Investment Income (Loss) to
Average Net Assets............... (2.11)%(a) (1.69)% 0.00%(a)
- --------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED ONE DAY ENDED
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997*
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.50 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)......... (0.01) 0.20 --
Net Realized and Unrealized Loss..... 1.36 0.62 --
- --------------------------------------------------------------------------------------------------
Total From Investment Operations... 1.35 0.82 --
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ -- (0.22) --
Net Realized Gain.................... -- (0.01) --
In Excess of Net Realized Gain....... -- (0.09) --
- --------------------------------------------------------------------------------------------------
Total Distributions................ -- (0.32) --
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $ 11.85 $ 10.50 $ 10.00
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
TOTAL RETURN........................... 12.75% 8.23% 0.00%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period
(Thousands).......................... $ 631 $ 559 $ 516
Ratio of Expenses to Average Net Assets
(2).................................. 0.56%(a) 0.56% 0.00%(a)
Ratio of Net Investment Income to
Average Net Assets (2)............... (0.12)%(a) 1.93% 0.00%(a)
Portfolio Turnover..................... 48% 188% 0%
- ---------------------------
(2) Effect of Voluntary Expense
Limitation During the Period:
Per Share Benefit to Net Investment
Income........................... $ 0.12 $ 0.41 $ 0.00
Ratios Before Expense Limitation:
Expenses to Average Net Assets..... 2.80%(a) 4.44% 0.00%(a)
Net Investment Income (Loss) to
Average Net Assets............... (2.36)%(a) (1.94)% 0.00%(a)
</TABLE>

- --------------------------------------------------------------------------------

* Commencement of operations
(a) Annualized
The ratios of expenses to average net assets do not reflect the expenses of
the Underlying Funds attributable to the Portfolio.

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

- --------------------------------------------------------------------------------

17
<PAGE>
Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999 (UNAUDITED)
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Morgan Stanley Dean Witter Strategic Adviser Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund is a type of mutual fund often described
as a "fund of funds." The Fund consists of three separate investment portfolios:
Conservative Portfolio, Moderate Portfolio and Aggressive Portfolio, (each a
"Portfolio" and collectively, the "Portfolios") that invest primarily in
different combinations of the Class A shares of certain investment portfolios of
Morgan Stanley Dean Witter Institutional Fund, Inc. ("MSDWIF") and Institutional
Class shares of certain investment portfolios of MAS Funds (each an "Underlying
Fund" and collectively, the "Underlying Funds"). The MAS Funds are managed by an
affiliate of the Investment Adviser. The Fund currently offers two classes of
shares, Class A and Class B shares. Both classes have identical voting rights
(except shareholders of a Class have exclusive voting rights regarding any
matter relating solely to that Class of shares), dividend, liquidation and other
rights. The investment objective of the Conservative, Moderate and Aggressive
Portfolios is to seek the highest level of long-term total return that is
consistent with a relatively conservative level, moderate level and high level
of risk, respectively.

A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.

1. SECURITY VALUATION: Investments in the Underlying Funds are valued at the net
asset value per share of the Underlying Fund at the close of each valuation day.
Short-term securities with a maturity date of less than 60 days are valued at
amortized cost which approximates market value.

2. INCOME TAXES: It is each Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable and tax-exempt income.
Accordingly, no provision for Federal income taxes is required in the financial
statements.

3. REPURCHASE AGREEMENTS: The Portfolios of the Fund may enter into repurchase
agreements under which the Portfolio lends excess cash and takes possession of
securities with an agreement that the counterparty will repurchase such
securities. In connection with transactions in repurchase agreements, a bank as
custodian for the Fund takes possession of the underlying securities which are
held as collateral, with a market value at least equal to the amount of the
repurchase transaction, including principal and accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in satisfaction
of the obligation. In the event of default or bankruptcy by the counterparty to
the agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.

4. ORGANIZATIONAL COSTS: The Fund incurred organizational costs of approximately
$297,000 which have been capitalized and allocated equally to each Portfolio.
Such costs are being amortized on a straight line basis over a period of five
years beginning on December 31, 1997, the date the Fund commenced operations.
Morgan Stanley Dean Witter Investment Management Inc. has agreed that in the
event any of its initial shares which comprised the Fund at inception are
redeemed, the proceeds on redemption will be reduced by the pro-rata portion of
any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the initial shares held at time of redemption.

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18
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Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1999 (UNAUDITED)
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5. OTHER: Realized gains and losses from the sale of the Underlying Funds are
determined on the specific identified cost basis. Dividend income and capital
gain distributions from the Underlying Funds are recorded on the ex-dividend
date. Most expenses of the Fund can be directly attributed to a particular
Portfolio. Expenses which cannot be directly attributed are apportioned among
the Portfolios based upon relative net assets. Income, expenses (other than
class specific expenses) and realized and unrealized gains or losses are
allocated to each class of shares of a Portfolio based upon their relative net
assets. Distributions from the Portfolios are recorded on the ex-distribution
date.

The amount and character of income and capital gain distributions to be paid by
the Fund are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for the character and timing
of the recognition of gains or losses on investments.

Permanent book and tax basis differences relating to shareholder distributions
may result in reclassifications among undistributed net investment income
(loss), accumulated net realized gain (loss) and paid in capital. Permanent book
and tax differences, if any, are not included in ending undistributed net
investment income (loss) for the purpose of calculating net investment income
(loss) per share in the Financial Highlights.

B. INVESTMENT ADVISER AND ADMINISTRATOR: Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management" or the "Adviser"), a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., allocates the Portfolios'
investments in the Underlying Funds within the applicable ranges for each
Portfolio, at no charge, under the terms of an Investment Advisory and
Management Agreement (the "Agreement"). The Adviser also provides the Fund with
administrative services pursuant to an administrative agreement for a monthly
fee which on an annual basis equals 0.15% of the average daily net assets of
each Portfolio, plus reimbursement of out-of-pocket expenses. Under an agreement
between the Adviser and The Chase Manhattan Bank ("Chase"), Chase provides
certain administrative services to the Fund through its corporate affiliate
Chase Global Funds Services Company ("CGFSC"). For such services, the Adviser
pays CGFSC a portion of the fee the Adviser receives from the Fund. Certain
employees of CGFSC are officers of the Fund.

The Adviser has agreed to reduce fees payable to it and to reimburse the
Portfolios, if necessary, if the annual operating expenses of the Portfolios
plus the annual operating expenses of the Underlying Funds attributable to the
shares owned by the Portfolios, expressed as a percentage of average daily net
assets, exceed the maximum annual ratios indicated as follows:

<TABLE>
<CAPTION>
MAXIMUM EXPENSE RATIO
--------------------------
PORTFOLIO CLASS A CLASS B
- --------------------------------------- ------------ ------------
<S> <C> <C>
Conservative Portfolio................. 0.80% 1.05%
Moderate Portfolio..................... 0.90% 1.15%
Aggressive Portfolio................... 1.10% 1.35%
</TABLE>

C. DISTRIBUTOR: Morgan Stanley & Co., Incorporated (the "Distributor"), a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., and an affiliate of
MSDW Investment Management, serves as the distributor of the Fund and provides
Class B shareholders of each applicable Portfolio with distribution services
pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940, as amended. Under the Plan, the Distributor
is entitled to receive from each Portfolio, a distribution fee, which is accrued
daily and paid quarterly, at an annual rate of 0.25% of the Class B shares'
average daily net assets. The Distributor may voluntarily waive, from time to
time, all or a portion of its distribution fee.

D. CUSTODIAN: Chase serves as the custodian of the investments and cash of the
Portfolios.

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19
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Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.
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NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1999 (UNAUDITED)
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E. PURCHASES AND SALES: For the six months ended June 30, 1999, purchases and
sales of Underlying Funds were as follows:

<TABLE>
<CAPTION>
PURCHASES SALES
PORTFOLIO (000) (000)
- --------------------------------------- ----------- ---------
<S> <C> <C>
Conservative Portfolio................. $ 2,358 $ 1,416
Moderate Portfolio..................... 3,126 2,370
Aggressive Portfolio................... 2,921 2,489
</TABLE>

For the six months ended June 30, 1999, the Fund had no purchases and sales of
long-term U.S. Government securities.

F. OTHER: At June 30, 1999, cost, unrealized appreciation, unrealized
depreciation, and net unrealized appreciation (depreciation) for U.S. Federal
income tax purposes of the investments of each Portfolio were:

<TABLE>
<CAPTION>
NET
UNREALIZED
UNREALIZED UNREALIZED APPREC.
COST APPREC. DEPREC. (DEPREC.)
PORTFOLIO (000) (000) (000) (000)
- ------------------- --------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Conservative
Portfolio......... $ 4,653 $ 58 $ (55) $ 3
Moderate
Portfolio......... 5,965 282 (104) 178
Aggressive
Portfolio......... 5,162 574 (31) 543
</TABLE>

Certain Portfolios have investments in Underlying Funds which invest in
high-yield and/or foreign securities.

Investments in high-yield securities are accompanied by a greater degree of
credit risk and the risk tends to be more sensitive to economic conditions than
higher-rated securities. In addition, these investments tend to have thinner
trading markets which may result in less availability of price quotations and a
risk that amounts realized upon disposition of a security will differ from such
quotations.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated and
U.S. security market transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.

From time to time, certain Portfolios of the Fund have shareholders that hold a
significant portion of a Portfolio's outstanding shares. Investment activities
of these shareholders could have a material impact on those Portfolios.

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