MORGAN STANLEY STRATEGIC ADVISER FUND INC, 485APOS, 1999-02-26

MORGAN STANLEY STRATEGIC ADVISER FUND INC
485APOS, 1999-02-26

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<PAGE>
As filed with the Securities and Exchange Commission on February 26, 1999.

Securities Act File No. 333-32231
Investment Company Act File No. 811-08303
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT No.2 /X/

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT No. 4 /X/
--------------

MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
(Exact Name of Registrant as Specified in Charter)

1221 Avenue of the Americas, New York, New York 10020
(Address of Principal Executive Office)
Registrant's Telephone Number (800) 548-7786

Harold J. Schaaff, Jr., Esquire
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas, New York, New York 10020
(Name and Address of Agent for Service)
--------------
COPIES TO:

Michael F. Klein, Esq. Richard W. Grant, Esquire
Morgan Stanley Dean Witter Morgan, Lewis & Bockius LLP
Investment Management Inc. 1701 Market Street
1221 Avenue of the America Philadelphia, PA 19103-2921
New York, NY 10020
--------------

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It is proposed that this filing will become effective (check appropriate box)

immediately upon filing pursuant to paragraph (b) of Rule 485.
----
on [ date ] pursuant to paragraph (b) of Rule 485.
----
x 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
----
75 days after filing pursuant to paragraph (a)(2) of Rule 485.
----
on May 1, 1999 pursuant to paragraph (a) of Rule 485.
----

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<PAGE>
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PROSPECTUS MAY 1, 1999
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PORTFOLIOS OF [LOGO] MORGAN STANLEY DEAN WITTER
STRATEGIC ADVISER FUND, INC.

CONSERVATIVE PORTFOLIO
THE CONSERVATIVE PORTFOLIO SEEKS THE HIGHEST LEVEL OF LONG-TERM TOTAL RETURN
THAT IS CONSISTENT WITH A RELATIVELY CONSERVATIVE LEVEL OF RISK.

MODERATE PORTFOLIO
THE MODERATE PORTFOLIO SEEKS THE HIGHEST LEVEL OF LONG-TERM TOTAL RETURN THAT IS
CONSISTENT WITH A RELATIVELY MODERATE LEVEL OF RISK.

AGGRESSIVE PORTFOLIO
THE AGGRESSIVE PORTFOLIO SEEKS THE HIGHEST LEVEL OF LONG-TERM TOTAL RETURN THAT
IS CONSISTENT WITH A RELATIVELY HIGH LEVEL OF RISK.

INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.

DISTRIBUTOR
Morgan Stanley & Co. Incorporated
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC. (THE "FUND") IS A
NO-LOAD MUTUAL FUND THAT OFFERS INVESTORS A RANGE OF ASSET ALLOCATION STRATEGIES
DESIGNED TO ACCOMMODATE DIFFERENT INVESTMENT PHILOSOPHIES, GOALS AND RISK
TOLERANCES. THE FUND IMPLEMENTS THESE STRATEGIES BY INVESTING IN A COMBINATION
OF MUTUAL FUNDS ("UNDERLYING FUNDS") THAT ARE INVESTMENT PORTFOLIOS OF MORGAN
STANLEY DEAN WITTER INSTITUTIONAL FUND, INC. ("MSDWIF") AND MAS FUNDS. THE
UNDERLYING FUNDS ARE MANAGED BY EITHER MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC. ("MSDW INVESTMENT MANAGEMENT") OR MILLER ANDERSON & SHERRERD,
LLP ("MAS"). THIS PROSPECTUS OFFERS CLASS A AND CLASS B SHARES OF THE PORTFOLIOS
LISTED ABOVE (EACH A "PORTFOLIO" AND COLLECTIVELY THE "PORTFOLIOS").

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT SUMMARY
THE FUND 1
CONSERVATIVE PORTFOLIO 2
MODERATE PORTFOLIO 3
AGGRESSIVE PORTFOLIO 4
PAST PERFORMANCE 5
FEES AND EXPENSES OF THE PORTFOLIOS 6
ADDITIONAL INVESTMENT INFORMATION 7
INVESTMENT ADVISER 13
PORTFOLIO MANAGER 13
DISTRIBUTION OF PORTFOLIO SHARES 14
SHAREHOLDER INFORMATION 14
FINANCIAL HIGHLIGHTS 15
CONSERVATIVE PORTFOLIO 16
MODERATE PORTFOLIO 17
AGGRESSIVE PORTFOLIO 18
</TABLE>
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
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THE FUND
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THIS SECTION DISCUSSES THE INVESTMENT APPROACH OF THE FUND AND, IN GENERAL, HOW
MSDW INVESTMENT MANAGEMENT MANAGES THE INVESTMENTS OF ALL OF THE PORTFOLIOS. IN
ADDITION, THE INVESTMENT SUMMARIES THAT FOLLOW DESCRIBE IN GREATER DETAIL THE
INDIVIDUAL INVESTMENT OBJECTIVES AND POLICIES OF EACH PORTFOLIO.

APPROACH
The Fund is a type of mutual fund often described as a "fund of funds." The
three Portfolios of the Fund have distinct investment objectives and are
designed to accommodate different investment philosophies, goals and risk
tolerances. Each Portfolio invests in different combinations of shares of
Underlying Funds, which are Class A shares of investment portfolios of MSDWIF or
Institutional Class shares of MAS Funds. These Underlying Funds, in turn, invest
directly in securities in accordance with their own varying investment
objectives and policies.

PROCESS
MSDW Investment Management allocates each Portfolio's investments among
Underlying Funds within broad ranges for Underlying Funds that invest primarily
in fixed income securities ("Underlying Fixed Income Funds") and equity
securities ("Underlying Equity Funds") set forth in the Investment Summaries
that follow. The allocation process is strategic, rather than tactical and
focuses on subtle adjustments in response to longer term trends in market
forces. Accordingly, MSDW Investment Management expects each Portfolio's
allocation among Underlying Funds to remain relatively static, but it may
rebalance the investment allocations to restore weightings to the permitted
ranges.

You can find additional information about these Underlying Funds, including a
discussion of their investment strategies, later in this Prospectus under
"Additional Investment Information." The Portfolios may also invest in other
Underlying Funds (i.e., other investment portfolios that MSDW Institutional Fund
and MAS Funds currently offer or may offer in the future). The Portfolios intend
to invest entirely in combinations of Underlying Funds, however, they also may
invest directly in certain fixed income securities.

1
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
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CONSERVATIVE PORTFOLIO
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THE CONSERVATIVE PORTFOLIO SEEKS THE HIGHEST LEVEL OF LONG-TERM TOTAL RETURN
THAT IS CONSISTENT WITH A RELATIVELY CONSERVATIVE LEVEL OF RISK.

APPROACH
MSDW Investment Management seeks to invest in Underlying Funds that together
have low to moderate potential risk and reward. The Conservative Portfolio may
be appropriate for relatively conservative investors who have a shorter time
horizon for their investments and seek some capital appreciation while generally
preserving principal -- for example, investors who are investing with a 3-5 year
time horizon.

PROCESS
The Conservative Portfolio invests in Underlying Fixed Income Funds and, to a
lesser extent, in Underlying Equity Funds, within the following permitted
ranges:

<TABLE>
<S> <C>
Fixed Income:(75%-85%) Equity:(15%-25%)
</TABLE>

MSDW Investment Management anticipates allocating the Portfolio's investments to
Underlying Funds that focus their investments on the U.S. and which invest in
short-duration fixed income securities. The Portfolio invests, to a lesser
extent, in Underlying Funds that invest in equity securities of larger issuers.
The following is an example of how MSDW Investment Management may allocate the
Portfolio's investments, based on the allocations on the date of this
Prospectus:

<TABLE>
<C> <S> <C> <C>
MAS Limited Duration MSDWIF U.S. Equity Plus
70% Portfolio 13% Portfolio
10% MAS High Yield Portfolio 7% MSDWIF Equity Growth Portfolio
</TABLE>

This example only illustrates the Portfolio's investments. MSDW Investment
Management may alter the Portfolio's investment allocation at any time,
consistent with the permitted ranges for Underlying Fixed Income and Underlying
Equity Funds.

RISK
The value of your investment in the Conservative Portfolio is based primarily on
the prices of the Underlying Funds that the Portfolio purchases. The price of
each Underlying Fund, in turn, is based on the value of the securities that it
purchases. These prices change daily due to economic and other events
that affect equity and fixed income markets generally, as well as
those that affect particular issuers, such as companies and
governments. These price movements, sometimes called volatility, may
be greater or lesser depending on the types of Underlying Funds and,
indirectly, the types of securities the Portfolio owns and the
markets in which the securities trade. Over time, equity securities,
and therefore Underlying Equity Funds, have shown superior gains,
although they have tended to be more volatile in the short term.
Fixed income securities, and therefore Underlying Fixed Income Funds,
also experience price volatility, especially in response to interest
rate changes. As a result of price volatility, there is a risk that
you may lose money by investing in the Portfolio.

<TABLE>
<CAPTION>
[EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC]
PERFORMANCE (CLASS A SHARES)
<S> <C>
COMMENCED OPERATIONS ON DECEMBER 31, 1997
1998 xx.xx%
HIGH (QUARTER)
MO/YR-MO/YR
xx.xx%
LOW (QUARTER)
MO/YR-MO/YR
xx.xx%
</TABLE>

THE BAR CHART ABOVE SHOWS THE PERFORMANCE OF THE PORTFOLIO AND THE PORTFOLIO'S
BEST AND WORST PERFORMANCE FOR A QUARTER. TOGETHER WITH THE TABLE UNDER "PAST
PERFORMANCE", THIS INFORMATION DEMONSTRATES THE VARIABILITY OF PERFORMANCE OVER
TIME AND PROVIDES AN INDICATION OF THE RISKS OF INVESTING IN THE PORTFOLIO. HOW
THE PORTFOLIO HAS PERFORMED IN THE PAST DOES NOT NECESSARILY INDICATE HOW THE
PORTFOLIO WILL PERFORM IN THE FUTURE.

2
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
- -------------------------------------------------------------------------------
MODERATE PORTFOLIO
- -------------------------------------------------------------------------------

THE MODERATE PORTFOLIO SEEKS THE HIGHEST LEVEL OF LONG-TERM TOTAL RETURN THAT IS
CONSISTENT WITH A RELATIVELY MODERATE LEVEL OF RISK.

APPROACH
MSDW Investment Management seeks to invest in Underlying Funds that together
have moderate potential risk and reward. The Moderate Portfolio may be
appropriate for moderately aggressive investors who have an intermediate time
horizon for their investments and are willing to bear a moderate level of risk
in the hope of achieving capital appreciation -- for example, investors with a
5-20 year time horizon.

PROCESS

The Moderate Portfolio invests primarily in a mix of Underlying Equity Funds and
Underlying Fixed Income Funds, within the following permitted ranges:

<TABLE>
<S> <C>
Fixed Income: Equity:
45%-55% 45%-55%
-------------- --------------
</TABLE>

MSDW Investment Management anticipates allocating the Portfolio's investments to
Underlying Funds that focus their investments on equity securities of mid- to
large-size U.S. and foreign issuers. The Portfolio also invests in Underlying
Funds that focus on short- to intermediate-duration fixed income securities,
including high yield securities and mortgage securities. The following is an
example of how MSDW Investment Management may allocate the Portfolio's
investments, based on the allocations on the date of this Prospectus:

<TABLE>
<S> <C>
40% MAS Intermediate Duration Portfolio 15% MSDWIF U.S. Equity Plus
10% MAS High Yield Portfolio Portfolio
15% MSDWIF International Magnum 10% MSDWIF Equity Growth Portfolio
Portfolio 10% MSDWIF Value Portfolio
</TABLE>

RISK
The value of your investment in the Moderate Portfolio is based
primarily on the prices of the Underlying Funds that the Portfolio
purchases. The price of each Underlying Fund, in turn, is based on
the value of the securities that it purchases. These prices change
daily due to economic and other events that affect equity and fixed
income markets generally, as well as those that affect particular
issuers, such as companies and governments. These price movements,
sometimes called volatility, may be greater or lesser depending on
the types of Underlying Funds and, indirectly, the types of
securities the Portfolio owns and the markets in which the securities
trade. Over time, equity securities, and therefore Underlying Equity
Funds, have shown superior gains, although they have tended to be
more volatile in the short term. Fixed income securities, and
therefore Underlying Fixed Income Funds, also experience price
volatility, especially in response to interest rate changes. As a
result of price volatility, there is a risk that you may lose money
by investing in the Portfolio.

3
<PAGE>
- ----------------------------
INVESTMENT SUMMARY
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AGGRESSIVE PORTFOLIO
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THE AGGRESSIVE PORTFOLIO SEEKS THE HIGHEST LEVEL OF LONG-TERM TOTAL RETURN THAT
IS CONSISTENT WITH A RELATIVELY HIGH LEVEL OF RISK.

APPROACH
MSDW Investment Management seeks to invest in Underlying Funds that together
have moderate to high potential risk and reward. The Aggressive Portfolio may be
appropriate for relatively aggressive investors who have a longer time horizon
for their investments and are willing to bear a higher level of risk in the hope
of achieving greater appreciation -- for example, investors with a 20 year or
longer time horizon.

PROCESS
The Aggressive Portfolio invests primarily in Underlying Equity Funds and, to a
lesser extent, in Underlying Fixed Income Funds within the following permitted
ranges:

<TABLE>
<S> <C>
Fixed Income: Equity:
10%-20% 80%-90%
-------------- --------------
</TABLE>

MSDW Investment Management anticipates allocating the Portfolio's investments to
Underlying Funds that focus their investments on equity securities of U.S. and
foreign issuers, including those in emerging markets. The Portfolio also
invests, to a lesser extent, in Underlying Funds that focus on intermediate- to
long-duration fixed income securities, including high yield securities and
mortgage securities. The following is an example of how MSDW Investment
Management may allocate the Portfolio's investments, based on the allocations on
the date of this Prospectus:

<TABLE>
<S> <C>
25% MSDWIF International Magnum 10% MAS Mid Cap Growth Portfolio
Portfolio 15% MSDWIF U.S. Equity Plus
15% MSDWIF Equity Growth Portfolio Portfolio
15% MSDWIF Value Portfolio 15% MAS Fixed Income Portfolio
10% MSDWIF Emerging Markets Portfolio
</TABLE>

RISK
The value of your investment in the Aggressive Portfolio is based
primarily on the prices of the Underlying Funds that the Portfolio
purchases. The price of each Underlying Fund, in turn, is based on
the value of the securities that it purchases. These prices change
daily due to economic and other events that affect equity and fixed
income markets generally, as well as those that affect particular
issuers, such as companies and governments. These price movements,
sometimes called volatility, may be greater or lesser depending on
the types of Underlying Funds and, indirectly, the types of
securities the Portfolio owns and the markets in which the securities
trade. Over time, equity securities, and therefore Underlying Equity
Funds, have shown superior gains, although they have tended to be
more volatile in the short term. Fixed income securities, and
therefore Underlying Fixed Income Funds, also experience price
volatility, especially in response to interest rate changes. As a
result of price volatility, there is a risk that you may lose money
by investing in the Portfolio.

4
<PAGE>
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PAST PERFORMANCE
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These tables compare the performance of each Portfolio to an index of similar
securities. An index is a hypothetical measure of performance based on the ups
and downs of securities that make up a particular market. The index does not
show actual investment returns or reflect payment of management or brokerage
fees, which would lower the index's performance.

AVERAGE ANNUAL TOTAL RETURN (FOR THE PERIOD ENDED DECEMBER 31, 1998)

<TABLE>
<CAPTION>
CONSERVATIVE PORTFOLIO
CLASS A CLASS B
(COMMENCED OPERATIONS (COMMENCED OPERATIONS
ON DECEMBER 31, 1997) ON DECEMBER 31, 1997)
INDEX
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
PAST ONE YEAR
- ----------------------------------------------------------------------------------------------------
SINCE INCEPTION % % %
</TABLE>

THE INDEX IS A .

<TABLE>
<CAPTION>
MODERATE PORTFOLIO
CLASS A CLASS B
(COMMENCED OPERATIONS (COMMENCED OPERATIONS
ON DECEMBER 31, 1997) ON DECEMBER 31, 1997) INDEX
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
PAST ONE YEAR
- ------------------------------------------------------------------------------------------------------
SINCE INCEPTION % % %
</TABLE>

THE INDEX IS .

<TABLE>
<CAPTION>
AGGRESSIVE PORTFOLIO
CLASS A CLASS B
(COMMENCED OPERATIONS (COMMENCED OPERATIONS INDEX
ON DECEMBER 31, 1997) ON DECEMBER 31, 1997) CLASS A CLASS B
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
PAST ONE YEAR % % % %
- ---------------------------------------------------------------------------------------------------------------------
SINCE INCEPTION % % % %
</TABLE>

THE INDEX IS .

5
<PAGE>
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FEES AND EXPENSES OF THE PORTFOLIOS
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The Securities and Exchange Commission (the "Commission") requires that the Fund
disclose in the table below the fees and expenses that you may pay if you buy
and hold shares of the Portfolios. The Portfolios do not charge any sales loads
or similar fees when you purchase or redeem shares. The Annual Fund Operating
Expenses in the table below do not reflect voluntary fee waivers and/or expense
reimbursements from MSDW Investment Management.

ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
PORTFOLIO PORTFOLIO PORTFOLIO
CLASS A
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
MANAGEMENT FEES NONE NONE NONE
- ---------------------------------------------------------------------------------------------
12B-1 FEE NONE NONE NONE
- ---------------------------------------------------------------------------------------------
OTHER EXPENSES 0.75% 0.90% 1.10%
- ---------------------------------------------------------------------------------------------
ADMINISTRATION FEE 0.15% 0.14% 0.15%
- ---------------------------------------------------------------------------------------------
UNDERLYING FUND EXPENSES 0.31% 0.67% 0.86%
- ---------------------------------------------------------------------------------------------
OTHER EXPENSES 0.09% 0.09% 0.09%
- ---------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.75% 0.90% 1.10%

CLASS B
- ---------------------------------------------------------------------------------------------
MANAGEMENT FEES NONE NONE NONE
- ---------------------------------------------------------------------------------------------
12B-1 FEE 0.25% 0.25% 0.25%
- ---------------------------------------------------------------------------------------------
OTHER EXPENSES 0.75% 0.90% 1.10%
- ---------------------------------------------------------------------------------------------
ADMINISTRATION FEE 0.15% 0.14% 0.15%
- ---------------------------------------------------------------------------------------------
UNDERLYING FUND EXPENSES 0.51% 0.67% 0.86%
- ---------------------------------------------------------------------------------------------
OTHER EXPENSES 0.09% 0.09% 0.09%
- ---------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.00% 1.15% 1.35%
</TABLE>

The Operating Expenses for the Portfolios shown in the table above are the
highest that could be charged. This table does not show the effects of MSDW
Investment Management's voluntary fee waivers and/or expense reimbursements.
MSDW Investment Management has voluntarily agreed to reduce its administration
fee and/or reimburse the Portfolios so that total expenses will not exceed the
following rates:

MAXIMUM EXPENSES AFTER FEE WAIVERS/EXPENSE REIMBURSEMENTS

<TABLE>
<CAPTION>
CONSERVATIVE MODERATE AGGRESSIVE
PORTFOLIO PORTFOLIO PORTFOLIO
CLASS A 0.75% 0.90% 1.10%
<S> <C> <C> <C>
- -------------------------------------------------------------------------
CLASS B 1.00% 1.15% 1.35%
</TABLE>

FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS ARE VOLUNTARY AND MSDW INVESTMENT
MANAGEMENT RESERVES THE RIGHT TO TERMINATE ANY WAIVER AND/OR REIMBURSEMENT AT
ANY TIME AND WITHOUT NOTICE.

6
<PAGE>
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN EACH
PORTFOLIO WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS HAVING SIMILAR
INVESTMENT OBJECTIVES.
The example assumes that you invest $10,000 in each Portfolio for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example assumes that your investment has a 5% return each year and
that each Portfolio's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CONSERVATIVE PORTFOLIO
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
CLASS A $ $ $ $
- ----------------------------------------------------------------------
CLASS B $ $ $ $

MODERATE PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $ $ $ $
- ----------------------------------------------------------------------
CLASS B $ $ $ $

AGGRESSIVE PORTFOLIO
- ----------------------------------------------------------------------
CLASS A $ $ $ $
- ----------------------------------------------------------------------
CLASS B $ $ $ $
</TABLE>

- --------------------------------------------------------------------------------
ADDITIONAL INVESTMENT INFORMATION
- -------------------------------------------------------------------------------

THIS SECTION DISCUSSES ADDITIONAL RISK FACTORS AND INFORMATION RELATED TO THE
PORTFOLIOS AND THEIR INVESTMENTS IN THE UNDERLYING FUNDS. THE PORTFOLIOS'
INVESTMENT PRACTICES AND LIMITATIONS AND THE UNDERLYING FUNDS' INVESTMENTS ARE
DESCRIBED IN GREATER DETAIL IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI"),
WHICH LEGALLY IS A PART OF THIS PROSPECTUS. FOR DETAILS ABOUT HOW TO OBTAIN A
COPY OF THE SAI AND OTHER REPORTS AND INFORMATION, SEE THE BACK COVER OF THIS
PROSPECTUS.

BANK INVESTORS. An investment in a Portfolio is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.

YEAR 2000 RISK. The advisory and distribution services that MSDW Investment
Management and Morgan Stanley & Co. Incorporated ("Morgan Stanley") provide to
the Fund depend on the smooth operation of their computer systems. Many computer
and software systems in use today cannot recognize the year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on the handling of
securities trades, pricing and account services. MSDW Investment Management and
Morgan Stanley have been actively working on necessary changes to their own
computer systems to deal with the year 2000 problem and expect that their
systems will be adapted before that date. There can be no assurance, however,
that they will be successful. In addition, other unaffiliated service providers
may be faced with similar problems. MSDW Investment Management and Morgan
Stanley are monitoring their remedial efforts, but there can be no assurance
that they and the services they provide will not be adversely affected.

In addition, it is possible that the Underlying Funds and the markets for
securities in which they invest may be detrimentally affected by computer
failures throughout the financial services industry beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing errors
may result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Portfolios' investments may be
adversely affected.

7
<PAGE>
TEMPORARY DEFENSIVE INVESTMENTS. When MSDW Investment Management believes that
changes in economic, financial or political conditions warrant, each Portfolio
may invest without limit in certain short- and medium-term fixed income
securities for temporary purposes. If MSDW Investment Management incorrectly
predicts the effects of these changes, such defensive investments may adversely
affect the Portfolios' performance.
UNDERLYING FUNDS
The Portfolios initially will consider the following Underlying Funds for
investment. However, MSDW Investment Management may, in accordance with the
Portfolios' investment objectives and policies, select additional Underlying
Funds for investment.

Underlying Equity Funds:
U.S. Equity Funds:
MSDWIF Equity Growth Portfolio
MSDWIF U.S. Equity Plus Portfolio
MSDWIF U.S. Real Estate Portfolio
MAS Mid Cap Growth Portfolio
MAS Mid Cap Value Portfolio
MAS Value Portfolio

International Equity Funds:
MSDWIF Active International Allocation Portfolio
MSDWIF Asian Equity Portfolio
MSDWIF Emerging Markets Portfolio
MSDWIF European Equity Portfolio
MSDWIF International Equity Portfolio
MSDWIF International Magnum Portfolio
MSDWIF Japanese Equity Portfolio
MSDWIF Latin American Portfolio

Underlying Fixed Income Funds:
U.S. Fixed Income Funds:
MSDWIF Fixed Income Portfolio
MAS Fixed Income Portfolio
MAS High Yield Portfolio
MAS Intermediate Duration Portfolio
MAS Limited Duration Portfolio

International Fixed Income Fund:
MAS International Fixed Income
Portfolio

8
<PAGE>
U.S. EQUITY FUNDS
MSDWIF EQUITY GROWTH PORTFOLIO
The MSDWIF Equity Growth Portfolio seeks long-term capital appreciation by
investing in growth-oriented equity securities of medium and large
capitalization U.S. corporations and, to a limited extent, foreign corporations.
The Underlying Fund focuses on well established companies, consistent or rising
earnings growth, generally with market capitalizations of $500 million or more.

MSDWIF U.S. EQUITY PLUS PORTFOLIO
The MSDWIF U.S. Equity Plus Portfolio seeks long-term capital appreciation by
investing primarily in common stocks and other equity securities of issuers
included in the Standard & Poor's Ratings Group ("S&P") 500 Index.

MSDWIF U.S. REAL ESTATE PORTFOLIO
The MSDWIF U.S. Real Estate Portfolio seeks above-average current income and
long-term capital appreciation by investing primarily in equity securities of
companies in the U.S. real estate industry, including real estate investment
trusts ("REITs").

MAS MID CAP GROWTH PORTFOLIO
The MAS Mid Cap Growth Portfolio seeks long-term capital growth by investing
primarily in common stocks and other equity securities of smaller and medium
size U.S. companies that MAS believes offer long-term growth potential. The
Underlying Fund invests in companies with equity capitalizations generally
matching the S&P MidCap 400 Index.

MAS MID CAP VALUE PORTFOLIO
The MAS Mid Cap Value Portfolio seeks above-average total return over a market
cycle of three to five years by investing primarily in equity securities of U.S.
companies with equity capitalizations in the range generally matching the S&P
MidCap 400 Index that MAS believes are undervalued.

MSDWIF VALUE EQUITY PORTFOLIO
The MSDWIF Value Equity Portfolio seeks above-average total return over a market
cycle of three to five years by investing primarily in equity securities of U.S.
companies with equity capitalizations usually greater than $300 million that MAS
believes are relatively undervalued.

INTERNATIONAL EQUITY FUNDS
MSDWIF ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO
The MSDWIF Active International Allocation Portfolio seeks long-term capital
appreciation by investing in equity securities of non-U.S. issuers which, in the
aggregate, replicate broad country indices.

MSDWIF ASIAN EQUITY PORTFOLIO
The MSDWIF Asian Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities that are traded on recognized stock
exchanges in Asia (excluding Japan) and in equity securities of companies
organized under the laws of an Asian country (excluding Japan) whose business is
conducted principally in Asia. The Underlying Fund invests primarily in the more
established markets in Asia.

MSDWIF EMERGING MARKETS PORTFOLIO
The MSDWIF Emerging Markets Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of emerging market country issuers. The
Underlying Fund also may invest in fixed income securities, including high yield
securities, of issuers in emerging and developed countries.

MSDWIF EUROPEAN EQUITY PORTFOLIO
The MSDWIF European Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of European issuers. Investments
generally will be made in issuers

9
<PAGE>
located in the more developed countries in Europe, but the Underlying Fund may
also invest in the smaller and emerging markets of Europe.

MSDWIF INTERNATIONAL EQUITY PORTFOLIO
The MSDWIF International Equity Portfolio seeks long-term capital appreciation
by investing primarily in the equity securities of non-U.S. issuers. The
Underlying Fund invests primarily in issuers domiciled in developed countries,
but may invest in issuers domiciled in emerging markets.

MSDWIF INTERNATIONAL MAGNUM PORTFOLIO
The MSDWIF International Magnum Portfolio seeks long-term capital appreciation
by investing primarily in equity securities of non-U.S. issuers domiciled in
countries comprising the Morgan Stanley Capital International EAFE Index (the
"Index"), which include Australia, Japan, New Zealand, most nations located in
Western Europe and certain of the developed countries in Asia.

MSDWIF JAPANESE EQUITY PORTFOLIO
The MSDWIF Japanese Equity Portfolio seeks long-term capital appreciation by
investing primarily in equity securities and, to a limited extent, fixed income
securities of Japanese issuers.

MSDWIF LATIN AMERICAN PORTFOLIO
The MSDWIF Latin American Portfolio seeks long-term capital appreciation by
investing primarily in equity securities of Latin American issuers and also in
fixed income securities issued or guaranteed by Latin American governments or
governmental entities. The Underlying Fund focuses its investments in the more
established markets in Latin America.

U.S. FIXED INCOME FUNDS
MSDWIF FIXED INCOME PORTFOLIO
The MSDWIF Fixed Income Portfolio seeks a high total return consistent with the
preservation of capital by investing primarily in fixed income securities of
U.S. issuers and, to a limited extent, non-U.S. issuers. Short- and
intermediate-term bonds form the core of the Underlying Fund's portfolio, and
long-term bonds are purchased on a short-term opportunistic basis.

MAS FIXED INCOME PORTFOLIO
The MAS Fixed Income Portfolio seeks above-average total return over a market
cycle of three to five years by investing primarily in fixed income securities.
The Underlying Fund will focus on investment grade securities and investments of
intermediate maturity, but may invest in high yield securities to a limited
extent. Average weighted maturity will ordinarily exceed five years.

MAS HIGH YIELD PORTFOLIO
The MAS High Yield Portfolio seeks above-average total return over a market
cycle of three to five years by investing primarily in high yield securities.
The Underlying Fund's average weighted maturity will ordinarily exceed five
years.

MAS INTERMEDIATE DURATION PORTFOLIO
The MAS Intermediate Duration Portfolio seeks above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of fixed income securities, of
U.S. and foreign issuers. The Underlying Fund ordinarily will have a portfolio
duration between two and five years.

MAS LIMITED DURATION PORTFOLIO
The MAS Limited Duration Portfolio seeks above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing in a diversified portfolio of investment grade fixed income
securities. The Underlying Fund will maintain a duration of between one and
three years.

10
<PAGE>
INTERNATIONAL FIXED
INCOME FUND
MAS INTERNATIONAL FIXED INCOME PORTFOLIO
The MAS International Fixed Income Portfolio seeks above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in investment grade fixed income securities of foreign
issuers including those in emerging markets. The average-weighted maturity will
ordinarily be greater than five years.

UNDERLYING FUND
INVESTMENT RISKS
The following sections describe some of the risks associated with the Underlying
Funds' investment policies and strategies.

PRICE VOLATILITY
The value of a Portfolio's investment in an Underlying Fund is based on the
market prices of the securities the Underlying Fund holds. These prices change
daily due to economic and other events that affect markets generally, as well as
those that affect particular regions, countries, industries, companies or
governments. These price movements, sometimes called volatility, may be greater
or lesser depending on the types of securities the Underlying Fund owns and the
markets in which the securities trade. Over time, equity securities have
generally shown superior gains, but they have tended to be more volatile in the
short term. Fixed income securities, regardless of credit quality, experience
price volatility, especially in response to interest rate changes. However,
shorter duration fixed income securities tend to experience less price
volatility than longer term fixed income securities.

DERIVATIVES
An Underlying Fund may use various instruments that derive their values from
those of specified securities, indices, currencies or other points of reference
for both hedging and non-hedging purposes. Derivatives include futures, options,
forward contracts, swaps, and structured notes. These derivatives, including
those used to manage risk, are themselves subject to risks of the different
markets in which they trade and, therefore, may not serve their intended
purposes.

The primary risks of derivatives are: (i) changes in the market value of
securities held by the Underlying Fund, and of derivatives relating to those
securities, may not be proportionate, (ii) there may not be a liquid market for
an Underlying Fund to sell a derivative, which could result in difficulty
closing a position and (iii) certain derivatives can magnify the extent of
losses incurred due to changes in the market value of the securities to which
they relate. In addition, derivatives are subject to counterparty risk. To
minimize this risk, an Underlying Fund may enter into derivatives transactions
only with counterparties that meet certain requirements for credit quality and
collateral. Also, an Underlying Fund may invest in certain derivatives that
require it to segregate some or all of its cash or liquid securities to cover
its obligations under those instruments. At certain levels, this can cause an
Underlying Fund to lose flexibility in managing its investments properly,
responding to shareholder redemption requests, or meeting other obligations. If
an Underlying Fund is in that position, it could be forced to sell other
securities that it wanted to retain.

While the use of derivatives may be advantageous to an Underlying Fund, if MSDW
Investment Management or MAS is not successful in employing them, an Underlying
Fund's performance may be worse than if it did not make such investments. See
the Statement of Additional Information for more about the risks of different
types of derivatives.

EQUITY SECURITIES
Equity securities generally represent an ownership interest in an issuer, or may
be convertible into or represent a right to acquire an ownership interest in an
issuer. While there are many types of equity securities, prices of all equity
securities will fluctuate. Economic, political and other events may affect the
prices of broad equity markets. For example, changes in inflation or consumer
demand may affect the prices of all equity securities in the United States.
Similar events also may affect the prices of particular equity securities. For
example, news about the success or failure of a new product may affect the price
of a particular issuer's equity securities.

11
<PAGE>
FIXED INCOME SECURITIES
Fixed income securities generally are subject to risks related to changes in
interest rates and in the financial health or credit rating of the issuers. The
value of a fixed income security typically moves in the opposite direction of
prevailing interest rates: if rates rise, the value of a fixed income security
falls; if rates fall, the value increases. Certain types of fixed income
securities, such as inverse floaters, are designed to respond differently to
changes in interest rates. The maturity and duration of a fixed income
instrument also affects the extent to which the price of the security will
change in response to these and other factors. Longer term securities tend to
experience larger changes than shorter term securities because they are more
sensitive to changes in interest rates or in the credit ratings of the issuers.
The average duration of a fixed income portfolio measures its exposure to the
risk of changing interest rates. An Underlying Fund with a lower average
duration generally will experience less price volatility in response to changes
in interest rates as compared with a portfolio with a higher duration.

FOREIGN INVESTING
Investing in foreign countries, particularly emerging markets, entails the risk
that news and events unique to a country or region will affect those markets and
their issuers. These same events will not necessarily have an effect on the U.S.
economy or similar issuers located in the United States. In addition, an
Underlying Fund's investments in foreign countries generally will be denominated
in foreign currencies. As a result, changes in the value of a country's currency
compared to the U.S. dollar may affect the value of an Underlying Fund's
investments. These changes may happen separately from and in response to events
that do no otherwise affect the value of the security in the issuer's home
country. An Underlying Fund's adviser may invest in certain instruments, such as
derivatives and may use certain techniques such as hedging, to manage these
risks. However, the adviser cannot guarantee that it will be practical to hedge
these risks or that it will succeed in doing so. An Underlying Fund's adviser
may use derivatives for other purposes, such as gaining exposure to foreign
markets.

EMERGING MARKET RISKS
Emerging market countries are foreign countries that major international
financial institutions, such as the World Bank, generally consider to be less
economically mature than developed nations, such as the United States or most
nations in Western Europe. Emerging market countries can include every nation in
the world except the United States, Canada, Japan, Australia, New Zealand,
Singapore and most locations located in Western Europe. Emerging market
countries may be more likely to experience political turmoil or rapid changes in
economic conditions than more developed countries, and the financial condition
of issuers in emerging market countries may be more precarious than in other
countries. These characteristics result in greater risk of price volatility in
emerging market countries, which may be heightened by currency fluctuations
relative to the U.S. dollar.

HIGH YIELD SECURITIES
Fixed income securities that are not investment grade are commonly referred to
as junk bonds or high yield, high risk securities. These securities offer a
higher yield than other, higher rated securities, but they carry a greater
degree of risk and are considered speculative by the major credit rating
agencies. High yield securities may be issued by companies that are
restructuring, are smaller and less credit worthy, or are more highly indebted
than other companies. This means that they may have more difficulty making
scheduled payments of principal and interest. Changes in the value of high yield
securities are influenced more by changes in the financial and business position
of the issuing company than by changes in interest rates when compared to
investment grade securities. An Underlying Fund's investments in high yield
securities expose it to a substantial degree of credit risk.

MORTGAGE SECURITIES
Mortgage securities are fixed income securities representing an interest in a
pool of underlying mortgage loans. They are sensitive to changes in interest
rates, but may respond to these changes differently from other fixed income
securities due to the possibility of prepayment of the

12
<PAGE>
underlying mortgage loans. As a result, it may not be possible to determine in
advance the actual maturity date or average life of a mortgage security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase and its market price will
decrease. When interest rates fall, however, mortgage securities may not gain as
much in value because additional mortgage prepayments must be reinvested at
lower interest rates. Prepayment risk may make it difficult to calculate the
average maturity of a portfolio of mortgage securities and, therefore, the
ability to assess the volatility risk of that portfolio.

Collateralized Mortgage Obligations ("CMOs") and Stripped Mortgage Backed
Securities ("SMBSs") are derivatives based on mortgage securities. Both CMOs and
SMBSs are subject to the risks of price movements in response to changing
interest rates and the level of prepayments made by borrowers. Depending on the
class of CMO or SMBS that an Underlying Fund holds, these price movements may be
significantly greater than that experienced by mortgage securities generally.

- -------------------------------------------------------------------------------
INVESTMENT ADVISER
- -------------------------------------------------------------------------------

Morgan Stanley Dean Witter Investment Management Inc. ("MSDW Investment
Management"), as investment adviser, allocates each Portfolio's investments in
the Underlying Funds. MSDW Investment Management also advises the Underlying
Funds that are portfolios of MSDWIF. Miller Anderson & Sherrerd, LLP ("MAS")
advises the Underlying Funds that are portfolios of MAS Funds.

MSDW Investment Management with principal offices at 1221 Avenue of the
Americas, New York, New York 10020, conducts a worldwide portfolio management
business and provides a broad range of portfolio management services to
customers in the United States and abroad. MAS, with principal offices at One
Tower Bridge, West Conshohocken, Pennsylvania 19428, provides investment
advisory services to employee benefit plans, endowment funds, foundations and
other institutional investors, and serves as investment adviser to several
mutual funds. Morgan Stanley Dean Witter & Co. ("MSDW") is the parent of MSDW
Investment Management, MAS and Morgan Stanley. MSDW is a preeminent global
financial services firm that maintains leading market positions in each of its
three primary businesses -- securities, asset management and credit services. At
December 31, 1998, MSDW Investment Management and MAS, together with their
affiliated institutional asset management companies, managed assets of
approximately $163.4 billion, including assets under fiduciary advice.

- -------------------------------------------------------------------------------
PORTFOLIO MANAGER
- -------------------------------------------------------------------------------

THE FOLLOWING INDIVIDUAL HAS PRIMARY DAY-TO-DAY PORTFOLIO MANAGEMENT
RESPONSIBILITY FOR EACH PORTFOLIO:

FRANCINE J. BOVICH
Francine J. Bovich joined MSDW Investment Management in 1993 and is currently a
Managing Director. She is responsible for product development, portfolio
management and communication of MSDW Investment Management's asset allocation
strategy to institutional investor clients. Previously, Ms. Bovich was a
Principal and Executive Vice President of Westwood Management Corp. She holds a
B.A. in Economics from Connecticut College and an M.B.A. in Finance from New
York University. Ms. Bovich has had primary responsibility for managing each
Portfolio's assets since inception.

13
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION OF PORTFOLIO SHARES
- -------------------------------------------------------------------------------

Morgan Stanley is the exclusive Distributor of Class A shares and Class B shares
of each Portfolio. Morgan Stanley receives no compensation for distributing
Class A shares of the Portfolios. The Fund has adopted a Plan of Distribution
with respect to the Class B shares of each Portfolio pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, (the "Plan"). Under the
Plan, each Portfolio pays the Distributor a distribution fee of 0.25% of the
Class B shares' average daily net assets on an annualized basis. The
distribution fee compensates the Distributor for marketing and selling Class B
shares. The Distributor may pay others for providing distribution-related and
other services, including account maintenance services. Over time the
distribution fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.

- -------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
ABOUT NET ASSET VALUE
The net asset value per share of a class of shares of a Portfolio is determined
by dividing the total market value of the Portfolio's investments and other
assets attributable to the class, less any liabilities attributable to the
class, by the total number of outstanding shares of that class of the Portfolio.
In making this calculation, the Portfolio values Underlying Funds at their net
asset value and generally values other securities at market price. If market
prices are unavailable or may be unreliable because of events occurring after
the close of trading, fair value prices may be determined in good faith using
methods approved by the Board of Directors.

PRICING OF PORTFOLIO SHARES
The price to buy or sell (redeem) Class A and Class B shares of each Portfolio
is the net asset value next determined for the class after receipt of your
order. The Fund determines net asset value as of the close of the NYSE (normally
4:00 p.m. Eastern Time) on each day that the NYSE is open for business (the
"Pricing Time").

HOW TO PURCHASE AND
REDEEM SHARES
Shares of the Portfolios are currently offered only to institutional investors
such as defined contribution plans, defined benefit plans and endowment funds.
Retirement plan participants should refer to materials provided by their plan
sponsor or plan administrator for information on how to invest in and redeem
shares of the Portfolios.

Plan sponsors or administrators who have made arrangements with the Fund will
receive orders from their plan participants to purchase or redeem shares of the
Portfolios, generally on each business day. That night, all orders received by
that plan sponsor or plan administrator prior to the Pricing Time on that day
are aggregated, and the plan sponsor or plan administrator places a net purchase
and/or redemption order(s) for shares of the Portfolios on the morning of the
next business day. These orders are normally executed at the net asset value
that was computed for each Portfolio as of the Pricing Time the previous day.

Plan sponsors and plan administrators who choose not to enter into arrangements
of the type described above will need to transmit orders for receipt by the Fund
prior to the Pricing Time in order for those orders to be executed at the net
asset value computed for that day.

The Fund will normally wire redemption proceeds to the plan sponsor or plan
administrator on the next business day after receipt of the redemption
instructions by the Fund, but in no event later than seven days following
receipt of such instructions. The Fund may suspend redemptions or postpone
payment dates on days when the NYSE is closed (other than weekends or holidays),
when trading on the NYSE is suspended or restricted or as permitted by the SEC.

DIVIDENDS AND DISTRIBUTIONS
Each Portfolio's policy is to distribute to shareholders substantially all of
its taxable net investment income in the form of [quarterly] dividends and to
distribute net capital gains on an annual basis.

14
<PAGE>
The Fund automatically reinvests all dividends and distributions in additional
shares. However, if eligible, you may elect to receive distributions in cash by
giving written notice to the Fund or your plan sponsor or plan administrator.
TAXES
The dividends and distributions you receive from a Portfolio may be subject to
Federal, state and local taxation, depending on your tax situation. The tax
treatment of dividends and distributions is the same whether or not you reinvest
them. Dividends are ordinary income and capital gains distributions are taxed
based on how long the Portfolio held the assets. The Fund will tell you annually
how to treat dividends and distributions.

If you redeem shares of a Portfolio, you will be subject to tax on any gains you
earn based on your holding period for the shares. An exchange of shares of a
Portfolio for shares of another portfolio is a sale of Portfolio shares for tax
purposes. Conversions of shares between classes will not result in taxation.

IRAs and participants in tax-qualified retirement plans generally will not be
subject to federal tax liability on either dividend and capital gain
distributions from the Portfolios or redemption of shares of the Portfolios.
Rather, participants in such plans will be taxed when they begin taking
distributions from their IRAs and/or the retirement plans. There are various
restrictions on eligibility, contributions and withdrawals, depending on the
type of tax-deferred account or tax-qualified retirement plan. You should
consult with a tax professional on the specific rules governing your own plan.

- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

The following financial highlights tables are intended to help you understand
the financial performance of the Class A shares and Class B shares of each
Portfolio for the past five years or, if less than five years, the life of the
Portfolio or Class. Certain information reflects financial results for a single
Portfolio share. The total returns in the tables represent the rate that an
investor would have earned (or lost) on an investment in each Portfolio
(assuming reinvestment of all dividends and distributions). This information has
been audited by , whose report, along with the Fund's financial
statements, are incorporated by reference into the Fund's Statement of
Additional Information and are included in the Fund's December 31, 1998 Annual
Report to Shareholders.

15
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
CONSERVATIVE PORTFOLIO
- -------------------------------------------------------------------------------

16
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
MODERATE PORTFOLIO
- -------------------------------------------------------------------------------

17
<PAGE>
- ----------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
AGGRESSIVE PORTFOLIO
- -------------------------------------------------------------------------------

18
<PAGE>
- -------------------------------------------------------------------------------
WHERE TO FIND ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION
In addition to this Prospectus, the Fund has a Statement of Additional
Information ("SAI"), dated ________, 1999, which contains additional, more
detailed information about the Fund and the Portfolios. The SAI is incorporated
by reference into this Prospectus and, therefore, legally forms a part of this
Prospectus.

SHAREHOLDER REPORTS
The Fund publishes annual and semi-annual reports containing financial
statements, and quarterly reports. These reports contain additional information
about each Portfolio's investments. In the Fund's shareholder reports, you will
find a discussion of the market conditions and the investment strategies that
significantly affected each Portfolio's performance during that period.

For additional Fund information, including information regarding the investments
comprising the Fund's Portfolios, please call 1-800-354-8185 or visit the MSDW
Investment Management web site at www.____.com .

You may obtain the SAI and shareholder reports without charge by contacting the
Fund at the toll-free number below. If you purchased shares through a retirement
plan, you may also obtain these documents, without charge, by contacting your
plan sponsor or plan administrator.

Information about the Fund, including the SAI, and the annual and semi-annual
reports, may be obtained from the Securities and Exchange Commission in any of
the following ways: (1) In person: you may review and copy documents in the
Commission's Public Reference Room in Washington D.C. (for information call
1-800-SEC-0330); (2) On-line: you may retrieve information from the Commission's
web site at "http://www.sec.gov"; or (3) By mail: you may request documents,
upon payment of a duplicating fee, by writing to Securities and Exchange
Commission, Public Reference Section, Washington, D.C. 20549-6009. To aid you in
obtaining this information, the Fund's Investment Company Act registration
number is 811-05624.

[LOGO]
MORGAN STANLEY DEAN WITTER
STRATEGIC ADVISER FUND, INC.
P.O. Box 2798
Boston, Massachusetts 02208-2798

FOR INFORMATION CALL 1-800-354-8185
<PAGE>
MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION

Morgan Stanley Dean Witter Strategic Adviser Fund, Inc. (the "Fund") is a
no-load, open-end management investment company with three series ("Portfolios")
each of which has Class A and Class B shares. Each Portfolio offers investors a
distinct risk/return profile by investing in various investment portfolios of
Morgan Stanley Dean Witter Institutional Funds, Inc. and MAS Funds ("Underlying
Funds"). Class A and Class B shares of each Portfolio are offered with no sales
charge, exchange or redemption fee. The Portfolios are advised by Morgan Stanley
Dean Witter Investment Management Inc. ("MSDW Investment Management" or the
"Adviser"). Morgan Stanley & Co. Incorporated ("Morgan Stanley") is the
distributor of the Fund's shares. The Underlying Funds are managed by either
MSDW Investment Management or Miller Anderson & Sherrerd, LLP ("MAS"), an
affiliate of MSDW Investment Management.

This Statement of Additional Information addresses information about the Fund
applicable to each of the Portfolios and certain information regarding the
Underlying Funds. The Fund was incorporated under the laws of the State of
Maryland on May 20, 1997. The Fund has filed a registration statement with the
Securities and Exchange Commission (the "SEC") registering itself as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and its shares under the Securities Act of 1933, as
amended (the "1933 Act").

This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus for the Fund's Portfolios (the "Prospectus").
This Statement of Additional Information is incorporated by reference into the
Prospectus in its entirety. To obtain the Prospectus, please contact the Fund.

STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1999 RELATING TO PROSPECTUS
DATED MAY 1, 1999.
--------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
PAGE
-----
SECURITIES AND INVESTMENT TECHNIQUES.... 2
INVESTMENT LIMITATIONS.................. 18
PURCHASE OF SHARES...................... 20
REDEMPTION OF SHARES.................... 20
MANAGEMENT OF THE FUND.................. 20
COMPENSATION TABLE...................... 23
INVESTMENT ADVISORY AND OTHER
SERVICES.............................. 23
DISTRIBUTION OF SHARES.................. 24
PORTFOLIO TRANSACTIONS.................. 25
GENERAL INFORMATION..................... 25
TAXES................................... 25
CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES............................ 27
PERFORMANCE INFORMATION................. 28
DESCRIPTION OF RATINGS.................. 30
FINANCIAL STATEMENTS.................... 31
APPENDIX A.............................. 31
</TABLE>

The Fund's audited financial statements for the fiscal year ended December 31,
1998, including notes thereto and the report of are incorporated by
reference herein from the Fund's Annual Report. A copy of the Fund's Annual
Report to Shareholders must accompany the delivery of this Statement of
Additional Information. You may obtain the Fund's most recent Annual Report by
calling the Morgan Stanley Dean Witter Strategic Adviser Fund, Inc. Services
Group at 1-800-354-8185.

1
<PAGE>
SECURITIES AND INVESTMENT TECHNIQUES

The following pages contain more detailed information about types of instruments
in which the Underlying Funds may invest, and strategies MSDW Investment
Management or MAS may employ, in pursuit of an Underlying Fund's investment
objective.

EQUITY SECURITIES

Equity Securities generally represent an ownership interest in an issuer, or may
be convertible into or represent a right to acquire an ownership interest in an
issuer. While there are many types of Equity Securities, prices of all equity
securities will fluctuate. Economic, political and other events may affect the
prices of broad equity markets. For example, changes in inflation or consumer
demand may affect the prices of all Equity Securities in the United States.
Similar events also may affect the prices of particular equity securities. For
example, news about the success or failure of a new product may affect the price
of a particular issuer's Equity Securities.

COMMON STOCKS. Common Stocks represent an ownership interest in a corporation,
entitling the stockholder to voting rights and receipt of dividends paid based
on proportionate ownership.

DEPOSITARY RECEIPTS. Depositary Receipts represent an ownership interest in
securities of foreign companies (an "underlying issuer") that are deposited with
a depositary. Depositary Receipts are not necessarily denominated in the same
currency as the underlying securities. Depositary Receipts include American
Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other
types of Depositary Receipts (which, together with ADRs and GDRs, are
hereinafter collectively referred to as "Depositary Receipts"). ADRs are
dollar-denominated Depositary Receipts typically issued by a U.S. financial
institution which evidence an ownership interest in a security or pool of
securities issued by a foreign issuer. ADRs are listed and traded in the United
States. GDRs and other types of Depositary Receipts are typically issued by
foreign banks or trust companies, although they also may be issued by U.S.
financial institutions, and evidence ownership interests in a security or pool
of securities issued by either a foreign or a U.S. corporation. Generally,
Depositary Receipts in registered form are designed for use in the U.S.
securities market and Depositary Receipts in bearer form are designed for use in
securities markets outside the United States.

Depositary Receipts may be "sponsored" or "unsponsored." Sponsored Depositary
Receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored Depositary Receipts may be established by a depositary
without participation by the underlying issuer. Holders of unsponsored
Depositary Receipts generally bear all the costs associated with establishing
unsponsored Depositary Receipts. In addition, the issuers of the securities
underlying unsponsored Depository Receipts are not obligated to disclose
material information in the United States and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the Depositary Receipts. For
purposes of a Portfolio's investment policies, the Portfolio's investments in
Depositary Receipts will be deemed to be an investment in the underlying
securities, except that ADRs may be deemed to be issued by a U.S. issuer.

PREFERRED STOCKS. Preferred Stocks are securities that evidence ownership in a
corporation and pay a fixed or variable stream of dividends. Preferred Stocks
have a preference over Common Stocks in the event of the liquidation of an
issuer and usually do not carry voting rights. Because Preferred Stocks pay a
fixed or variable stream of dividends they have many of the characteristics of a
Fixed Income Security and are, therefore, included in both the definition of
Equity Security and Fixed Income Security.

RIGHTS. Rights represent the right, but not the obligation, for a fixed period
of time to purchase additional shares of an issuer's Common Stock at the time of
a new issuance, usually at a price below the initial offering price of the
Common Stock and before the Common Stock is offered to the general public.
Rights are usually freely transferrable. The risk of investing in a Right is
that the Right may expire prior to the market value of the Common Stock
exceeding the price fixed by the Right.

WARRANTS. Warrants give holders the right, but not the obligation, to buy
Common Stock of an issuer at a given price, usually higher than the market price
at the time of issuance, during a specified period. Warrants are usually freely
transferrable. The risk of investing in a Warrant is that the Warrant may expire
prior to the market value of the Common Stock exceeding the price fixed by the
Warrant.

CONVERTIBLE SECURITIES. Convertible Securities are securities that may be
exchanged under certain circumstances for a fixed number of shares of Common
Stock or other Equity Securities. Convertible Securities generally represent a
feature of some other type of security, such as a Fixed Income Security or
Preferred Stock, so that, for example, a Convertible Fixed Income Security would
be a Fixed Income Security that is convertible into Common Stock. Convertible
Securities may be viewed as an investment in the current security or the
security into which the Convertible Security may be exchanged and, therefore,
are included in both the definition of Equity Security and Fixed Income
Security.

INVESTMENT COMPANY SECURITIES. Investment Company Securities are securities of
other open-end or closed-end investment companies. The Investment Company Act of
1940, as amended (the "1940 Act"), generally prohibits an Underlying Fund from
acquiring more than 3% of the outstanding voting shares of an investment company
and limits such investments to no more than 5% of the Portfolio's total assets
in any one investment company and no more than 10% in any combination of
investment

2
<PAGE>
companies. To the extent an Underlying Fund invests a portion of its assets in
Investment Company Securities, those assets will be subject to the risks of the
purchased investment company's portfolio securities. The Underlying Fund also
will bear its proportionate share of the expenses of the purchased investment
company in addition to its own expenses.

REAL ESTATE INVESTING. Investments in securities of issuers engaged in the real
estate industry entail special risks and considerations. In particular,
securities of such issuers may be subject to risks associated with the direct
ownership of real estate. These risks include: the cyclical nature of real
estate values, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, demographic trends and variations in rental income, changes
in zoning laws, casualty or condemnation losses, environmental risks, regulatory
limitations on rents, changes in neighborhood values, changes in the appeal of
properties to tenants, increases in interest rates and other real estate capital
market influences. Generally, increases in interest rates will increase the
costs of obtaining financing, which could directly and indirectly decrease the
value of the Portfolios' investments.

REITS. Real Estate Investment Trusts ("REITs") pool investors' funds for
investment primarily in income producing real estate or real estate related
loans or interests. A REIT is not taxed on income distributed to its
shareholders or unitholders if it complies with regulatory requirements relating
to its organization, ownership, assets and income, and with a regulatory
requirement that it distribute to its shareholders or unitholders at least 95%
of its taxable income for each taxable year. Generally, REITs can be classified
as Equity REITs, Mortgage REITs or Hybrid REITs. Equity REITs invest the
majority of their assets directly in real property and derive their income
primarily from rents and capital gains from appreciation realized through
property sales. Equity REITs are further categorized according to the types of
real estate securities they own, e.g., apartment properties, retail shopping
centers, office and industrial properties, hotels, health-care facilities,
manufactured housing and mixed-property types. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive their income
primarily from interest payments. Hybrid REITs combine the characteristics of
both Equity and Mortgage REITs.

A shareholder in any of the Portfolios, by investing in REITs indirectly through
the Portfolio, will bear not only his proportionate share of the expenses of the
Portfolio, but also, indirectly, the management expenses of underlying REITs.
REITs may be affected by changes in the value of their underlying properties and
by defaults by borrowers or tenants. Mortgage REITs may be affected by the
quality of the credit extended. Furthermore, REITs are dependent on specialized
management skills. Some REITs may have limited diversification and may be
subject to risks inherent in investments in a limited number of properties, in a
narrow geographic area, or in a single property type. REITs depend generally on
their ability to generate cash flow to make distributions to shareholders or
unitholders, and may be subject to defaults by borrowers and to
self-liquidations. In addition, the performance of a REIT may be affected by its
failure to qualify for tax-free pass-through of income, or its failure to
maintain exemption from registration under the 1940 Act.

SPECIALIZED OWNERSHIP VEHICLES. Specialized ownership vehicles pool investors'
funds for investment primarily in income-producing real estate or real estate
related loans or interests. Such specialized ownership vehicles in which the
Portfolios may invest include property unit trusts, REITs and other similar
specialized investment vehicles. Investments in such specialized ownership
vehicles may have favorable or unfavorable legal, regulatory or tax implications
for a Portfolio and, to the extent such vehicles are structured similarly to
investment funds, may cause the Underlying Funds' shareholders to indirectly
bear certain additional operating expenses.

FIXED INCOME SECURITIES

Fixed Income Securities generally represent an issuer's obligation to repay
money that it has borrowed together with interest on the amount borrowed. Fixed
Income Securities come in many varieties and may differ in the way that interest
is calculated, the amount and frequency of payments, the type of collateral, if
any, and some Fixed Income Securities may have other novel features such as
conversion rights. Prices of Fixed Income Securities fluctuate and, in
particular, are subject to credit risk and market risk. Credit risk is the
possibility that an issuer may be unable to meet scheduled interest and
principal payments. Market risk is the possibility that a change in interest
rates or the market's perception of the issuer's prospects may adversely affect
the value of a fixed income security. Economic, political and other events also
may affect the prices of broad fixed income markets. Generally, the values of
Fixed Income Securities vary inversely with changes in interest rates, so that
during periods of falling interest rates the values of outstanding Fixed Income
Securities generally rise and during periods of rising interest rates, the
values of such securities generally decline. Prepayments also will affect the
maturity and value of Fixed Income Securities. Prepayments generally rise in
response to a decline in interest rates as debtors take advantage of the
opportunity to refinance their obligations. When this happens, an Underlying
Fund may be forced to reinvest in lower yielding Fixed Income Securities.

The length of time to the final payment, or maturity, of a Fixed Income Security
also affects its price volatility. While securities with longer maturities tend
to produce higher yields, the prices of longer maturity securities are subject
to greater market fluctuation, especially as a result of changes in interest
rates. Traditionally, term to maturity has been used as a barometer of a Fixed
Income Security's sensitivity to interest rate changes. However, this measure
considers only the time until final payment and takes no account of the pattern
of payments prior to maturity. Duration is a more precise measure of the
expected life of a Fixed Income Security that combines consideration of yield,
coupon, interest payments, final maturity and call features and measures the
expected life of a Fixed Income Security on a present value basis. The duration
of a Fixed Income Security ordinarily is shorter than its maturity.

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INVESTMENT GRADE SECURITIES. Investment Grade Securities are Fixed Income
Securities rated by one or more of the rating agencies in one of the four
highest rating categories at the time of purchase (e.g., AAA, AA, A or BBB by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc.
("Fitch"), or Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"))
or determined to be of equivalent quality by MSDW Investment Management or MAS.
Securities rated BBB or Baa represent the lowest of four levels of Investment
Grade Securities and are regarded as borderline between definitely sound
obligations and those in which the speculative element begins to predominate.
Ratings assigned to Fixed Income Securities represent only the opinion of the
rating agency assigning the rating and are not dispositive of the credit risk
associated with the purchase of a particular Fixed Income Security. Moreover,
market risk also will affect the prices of even the highest rated Fixed Income
Securities so that their prices may rise or fall even if the issuer's capacity
to repay its obligations remains unchanged.

HIGH YIELD SECURITIES. High Yield Securities are generally considered to
include Fixed Income Securities rated below the four highest rating categories
at the time of purchase (e.g., Ba through C by Moody's or BB through D by S&P)
and unrated securities considered by MSDW Investment Management or MAS to be of
equivalent quality. High Yield Securities are not considered investment grade
and are commonly referred to as junk bonds or high yield, high risk securities.

While High Yield Securities offer higher yields, they carry a high degree of
credit risk and are considered speculative by the major credit rating agencies.
High Yield Securities are often issued by smaller, less credit worthy issuers,
or by highly leveraged (indebted) issuers that are generally less able than more
established or less leveraged issuers to make scheduled payments of interest and
principal. In comparison to Investment Grade Securities, the price movement of
these securities is influenced less by changes in interest rates and more by the
financial and business position of the issuer. The values of High Yield
Securities are more volatile and may react with greater sensitivity to market
changes.

U.S. GOVERNMENT SECURITIES. U.S. Government Securities are Fixed Income
Securities that are backed by the full faith and credit of the U.S. Government
as to the payment of both principal and interest. U.S. Government Securities may
include securities issued by the U.S. Treasury and securities issued by federal
agencies and U.S. Government sponsored instrumentalities.

AGENCIES. Agencies are Fixed Income Securities which are not guaranteed by, or
backed by the full faith and credit of the U.S. Government, but which are
issued, sponsored or guaranteed by a federal agency or federally sponsored
agency such as the Student Loan Marketing Association, Resolution Funding
Corporation, or any of several other agencies.

CORPORATES. Corporates are Fixed Income Securities issued by private
businesses. Holders, as creditors, have a prior legal claim over holders of
Equity Securities of the issuer as to both income and assets for the principal
and interest due the holder.

MONEY MARKET INSTRUMENTS. Money Market Instruments are high quality short-term
fixed income securities. Money Market Instruments may include obligations of
governments, government agencies, banks, corporations and special purpose
entities and Repurchase Agreements relating to these obligations. Certain Money
Market Instruments may be denominated in a foreign currency.

MORTGAGE RELATED SECURITIES. Mortgage related securities are securities that,
directly or indirectly, represent a participation in, or are secured by and
payable from, mortgage loans on real property. Mortgage related securities
include collateralized mortgage obligations and mortgage-backed securities
issued or guaranteed by agencies or instrumentalities of the U.S. Government or
by private sector entities.

MORTGAGE-BACKED SECURITIES. With mortgage-backed securities ("MBSs"), many
mortgagee's obligations to make monthly payments to their lending institution
are pooled together and passed through to investors. The pools are assembled by
various governmental, Government-related and private organizations. An
Underlying Fund may invest in securities issued or guaranteed by Government
National Mortgage Association ("GNMA" or "Ginnie Mae"), Federal Home Loan
Mortgage Corporation ("FHLMC" or "Freddie Mac"), Fannie Mae, private issuers and
other government agencies. MBSs issued by non-agency issuers, whether or not
such securities are subject to guarantees, may entail greater risk, since
private issuers may not be able to meet their obligations under the policies. If
there is no guarantee provided by the issuer, a Portfolio will purchase only
MBSs which at the time of purchase are rated investment grade by one or more
NRSROs or, if unrated, are deemed by MSDW Investment Management or MAS to be of
comparable quality.

MBSs are issued or guaranteed by private sector originators of or investors in
mortgage loans and structured similarly to governmental pass-through securities.
Because private pass-throughs typically lack a guarantee by an entity having the
credit status of a governmental agency or instrumentality, however, they are
generally structured with one or more of the types of credit enhancement
described below. Fannie Mae and FHLMC obligations are not backed by the full
faith and credit of the U.S. Government as GNMA certificates are. FHLMC
securities are supported by its right to borrow from the U.S. Treasury. Each of
GNMA, Fannie Mae and FHLMC guarantees timely distributions of interest to
certificate holders. Each of GNMA and Fannie Mae also guarantees timely
distributions of scheduled principal. FHLMC has in the past guaranteed only the
ultimate collection of principal of the underlying mortgage loan, however, FHLMC
has now issued MBSs (FHLMC Gold PCS) which also guarantee timely payment of
monthly principal reductions. Resolution Funding Corporation ("REFCORP)
obligations are backed, as to principal payments, by zero coupon U.S. Treasury
bonds, and as to interest payment, ultimately by the U.S. Treasury.

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There are two methods of trading MBSs. A specified pool transaction is a trade
in which the pool number of the security to be delivered on the settlement date
is known at the time the trade is made. This is in contrast with the typical MBS
transaction, called a TBA (to be announced) transaction, in which the type of
MBS to be delivered is specified at the time of trade but the actual pool
numbers of the securities that will be delivered are not known at the time of
the trade. The pool numbers of the pools to be delivered at settlement will be
announced shortly before settlement takes place. The terms of the TBA trade may
be made more specific if desired. Generally, agency pass-through MBSs are traded
on a TBA basis.

Like fixed income securities in general, MBSs will generally decline in price
when interest rates rise. Rising interest rates also tend to discourage
refinancings of home mortgages, with the result that the average life of MBSs
held by an Underlying Fund may be lengthened. As average life extends, price
volatility generally increases. This extension of average life causes the market
price of the MBSs to decrease further than if their average lives were fixed.
However, when interest rates fall, mortgages may not enjoy as large a gain in
market value due to prepayment risk because additional mortgage prepayments must
be reinvested at lower interest rates. Faster prepayment will shorten the
average life and slower prepayments will lengthen it. However, it is possible to
determine what the range of the average life movement could be and to calculate
the effect that it will have on the price of the MBS. In selecting MBSs, MSDW
Investment Management or MAS looks for those that offer a higher yield to
compensate for any variation in average maturity. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, a Portfolio
may fail to fully recoup its initial investment in these securities, even if the
security is in one of the highest rating categories. A Portfolio may invest,
without limit, in MBSs issued by private issuers when MSDW Investment Management
or MAS deems that the quality of the investment, the quality of the issuer, and
market conditions warrant such investments. Securities issued by private issuers
will be rated investment grade by Moody's or S&P or be deemed by MSDW Investment
Management to be of comparable investment quality.

FANNIE MAE CERTIFICATES. Fannie Mae is a federally chartered and privately
owned corporation organized and existing under the Federal National Mortgage
Association Charter Act of 1938. The obligations of Fannie Mae are not backed by
the full faith and credit of the U.S. Government.

Each Fannie Mae certificate represents a pro rata interest in one or more pools
of mortgage loans insured by the Federal Housing Administration under the
Housing Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed
by the Department of Veteran Affairs under the Servicemen's Readjustment Act of
1944, as amended ("VA Loans") or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate
growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate and adjustable mortgage loans secured by
multi-family projects.

FREDDIE MAC CERTIFICATES. Freddie Mac is a corporate instrumentality of the
United States created pursuant to the Emergency Home Finance Act of 1970, as
amended (the "FHLMC Act"). The obligations of Freddie Mac are obligations solely
of Freddie Mac and are not backed by the full faith and credit of the U.S.
Government.

Freddie Mac certificates represent a pro rata interest in a group of mortgage
loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The mortgage
loans underlying the Freddie Mac Certificates consist of fixed rate or
adjustable rate mortgage loans with original terms to maturity of between ten
and thirty years, substantially all of which are secured by first liens on
one-to-four-family residential properties or multi-family projects. Each
mortgage loan must meet the applicable standards set forth in the FHLMC Act. A
Freddie Mac Certificate group may include whole loans, participation interests
in whole loans and undivided interests in whole loans and participations
comprising another Freddie Mac Certificate group.

GINNIE MAE CERTIFICATES. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. The National Housing Act of 1934, as amended (the "Housing Act"),
authorizes Ginnie Mae to guarantee the timely payment of the principal and
interest on certificates that are based on and backed by a pool of FHA Loans, VA
Loans or by pools of other eligible mortgage loans. The Housing Act provides
that the full faith and credit of the U.S. Government is pledged to the payment
of all amounts that may be required to be paid under any guaranty. In order to
meet its obligations under such guaranty, Ginnie Mae is authorized to borrow
from the U.S. Treasury with no limitations as to amount.

Each Ginnie Mae certificate represents a pro rata interest in one or more of the
following types of mortgage loans: (i) fixed rate level payment mortgage loans;
(ii) fixed rate graduated payment mortgage loans; (iii) fixed rate growing
equity mortgage loans; (iv) fixed rate mortgage loans secured by manufactured
(mobile) homes; (v) mortgage loans on multi-family residential properties under
construction; (vi) mortgage loans on completed multi-family projects; (vii)
fixed rate mortgage loans as to which escrowed funds are used to reduce the
borrower's monthly payments during the early years of the mortgage loans
("buydown" mortgage loans); (viii) mortgage loans that provide for adjustments
in payments based on periodic changes in interest rates or in other payment
terms of the mortgage loans; and (ix) mortgage-backed serial notes. All of these
mortgage loans will be FHA Loans or VA loans and, except as otherwise specified
above, will be fully-amortizing loans secured by first liens on one-
to-four-family housing units.

COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations
("CMOs") are debt obligations or multiclass pass-through certificates issued by
agencies or instrumentalities of the U.S. Government or by private originators
or investors in

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mortgage loans. They are backed by mortgage-backed securities (discussed below)
or whole loans (all such assets, the "Mortgage Assets") and are evidenced by a
series of bonds or certificates issued in multiple classes. Each class of a CMO,
often referred to as a "tranche," may be issued with a specific fixed or
floating coupon rate and has a stated maturity or final scheduled distribution
date. The principal and interest on the underlying Mortgage Assets may be
allocated among the several classes of a series of CMOs in many ways. Interest
is paid or accrues on CMOs on a monthly, quarterly or semi-annual basis.

CMOs may be issued by agencies or instrumentalities of the U.S. Government, or
by private originators of, or investors in, mortgage loans, including savings
and loan associations, mortgage bankers, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. CMOs that are issued by private
sector entities and are backed by assets lacking a guarantee of an entity having
the credit status of a governmental agency or instrumentality are generally
structured with one or more types of credit enhancement as described below. An
issuer of CMOs may elect to be treated for federal income tax purposes as a Real
Estate Mortgage Investment Conduit (a "REMIC"). An issuer of CMOs issued after
1991 must elect to be treated as a REMIC or it will be taxable as a corporation
under rules regarding taxable mortgage pools.

The principal and interest on the Mortgage Assets may be allocated among the
several classes of a CMO in many ways. The general goal in allocating cash flows
on Mortgage Assets to the various classes of a CMO is to create certain tranches
on which the expected cash flows have a higher degree of predictability than do
the underlying Mortgage Assets. As a general matter, the more predictable the
cash flow is on a particular CMO tranche, the lower the anticipated yield on
that tranche at the time of issue will be relative to prevailing market yields
on Mortgage Assets. As part of the process of creating more predictable cash
flows on certain tranches of a CMO, one or more tranches generally must be
created that absorb most of the changes in the cash flows on the underlying
Mortgage Assets. The yields on these tranches are generally higher than
prevailing market yields on other mortgage related securities with similar
average lives. Principal prepayments on the underlying Mortgage Assets may cause
the CMOs to be retired substantially earlier than their stated maturities or
final scheduled distribution dates. Because of the uncertainty of the cash flows
on these tranches, the market prices and yields of these tranches are more
volatile. In addition, some inverse floating rate obligation CMOs exhibit
extreme sensitivity to changes in prepayments. As a result, the yield to
maturity of these CMOs is sensitive not only to changes in interest rates, but
also to changes in prepayment rates on the related underlying Mortgage Assets.

Included within the category of CMOs are PAC Bonds. PAC Bonds are a type of CMO
tranche or series designed to provide relatively predictable payments, provided
that, among other things, the actual prepayment experience on the underlying
Mortgage Assets falls within a predefined range. If the actual prepayment
experience on the underlying Mortgage Assets is faster or slower than the
predefined range or if deviations from other assumptions occur, payments on the
PAC Bond may be earlier or later than predicted and the yield may rise or fall.
The magnitude of the predefined range varies from one PAC Bond to another; a
narrower range increases the risk that prepayments on the PAC Bond will be
greater or smaller than predicted. Because of these features, PAC Bonds
generally are less subject to the risk of prepayment than are other types of
mortgage related securities.

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped Mortgage-Backed Securities
("SMBSs") are multi-class mortgage securities issued by agencies or
instrumentalities of the U.S. Government and private originators of, or
investors in, mortgage loans. SMBSs are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of Mortgage Assets. In some cases, one class will receive all of the
interest ("interest-only" or "IO class"), while the other class will receive all
of the principal ("principal-only" or "PO class"). The yield to maturity on IO
classes and PO classes is extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets, and
significant changes in the rate of principal repayments will have a
corresponding effect on the SMBSs yield to maturity.

CREDIT ENHANCEMENT. Mortgage related securities are often backed by a pool
of assets representing the obligations of a number of parties. To lessen the
effect of failure by obligors on underlying assets to make payments, these
securities may have various types of credit support. Credit support falls into
two primary categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection generally refers to the provision of advances, typically by
the entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties (referred
to herein as "third party credit support"), through various means of structuring
the transaction or through a combination of such approaches.

The ratings of mortgage related securities for which third party credit
enhancement provides liquidity protection or protection against losses from
default are generally dependent upon the continued creditworthiness of the
provider of the credit enhancement. The ratings of such securities could decline
in the event of deterioration in the creditworthiness of the credit enhancement
provider even in cases where the delinquency and loss experience on the
underlying pool of assets is better than expected.

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal and
interest thereon, with defaults on the underlying assets being borne first by
the holders of the most subordinated class), creation of "reserve funds" (where
cash or investments, sometimes funded from a portion of the payments on the
underlying assets, are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed

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those required to make payment of the securities and pay any servicing or other
fees). The degree of credit support provided for each security is generally
based on historical information with respect to the level of credit risk
associated with the underlying assets. Delinquency or loss in excess of that
which is anticipated could adversely affect the return on an investment in such
a security.

REPURCHASE AGREEMENTS. Repurchase Agreements are transactions in which a
Portfolio purchases a security or basket of securities and simultaneously
commits to resell that security or basket to the seller (a bank, broker or
dealer) at a mutually agreed upon date and price. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated to
the coupon rate or date of maturity of the purchased security. Repurchase
Agreements may be viewed as a fully collateralized loan of money by the
Portfolio to the seller at a mutually agreed upon rate and price. The term of
these agreements is usually from overnight to one week, and never exceeds one
year. Repurchase Agreements with a term of over seven days are considered
illiquid.

In these transactions, the Portfolio receives as collateral securities that have
a market value at least equal to the purchase price (including accrued interest)
of the Repurchase Agreement, and this value is maintained during the term of the
agreement. These securities are held by the Portfolio's Custodian or an approved
third party for the benefit of the Portfolio until repurchased. Repurchase
Agreements permit a Portfolio to remain fully invested while retaining overnight
flexibility to pursue investments of a longer-term nature. If the seller
defaults and the collateral value declines, the Portfolio might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, the Portfolio's
realization upon the collateral may be delayed or limited.

Pursuant to an order expected to be issued by the Securities and Exchange
Commission (the "SEC"), the Underlying Funds may pool their daily uninvested
cash balances in order to invest in Repurchase Agreements on a joint basis with
other investment companies advised by MSDW Investment Management or MAS. By
entering into Repurchase Agreements on a joint basis, the Underlying Funds
expect to incur lower transaction costs and potentially obtain higher rates of
interest on such Repurchase Agreements. Each Underlying Fund's participation in
the income from jointly purchased Repurchase Agreements will be based on that
Underlying Fund's percentage share in the total Repurchase Agreement. The
Underlying Funds' ability to invest in Repurchase Agreements on a joint basis
will be contingent upon issuance of the order by the SEC described above.

MUNICIPALS. Municipal securities ("Municipals") are debt obligations issued by
local, state and regional governments that provide interest income that is
exempt from federal income taxes. Municipals include both municipal bonds (those
securities with maturities of five years or more) and municipal notes (those
securities with maturities of less than five years). Municipal bonds are issued
for a wide variety of reasons: to construct public facilities, such as airports,
highways, bridges, schools, hospitals, mass transportation, streets, water and
sewer works; to obtain funds for operating expenses; to refund outstanding
municipal obligations; and to loan funds to various public institutions and
facilities. Certain industrial development bonds are also considered municipal
bonds if their interest is exempt from federal income taxes. Industrial
development bonds are issued by or on behalf of public authorities to obtain
funds for various privately-operated manufacturing facilities, housing, sports
arenas, convention centers, airports, mass transportation systems and water, gas
or sewer works. Industrial development bonds are ordinarily dependent on the
credit quality of a private user, not the public issuer.

ASSET-BACKED SECURITIES. Asset-Backed Securities ("Asset-Backeds") are
securities collateralized by shorter-term loans such as automobile loans, home
equity loans, equipment or computer leases or credit card receivables. The
payments from the collateral are passed through to the security holder. The
collateral underlying Asset-Backeds tends to have prepayment rates that usually
do not vary with interest rates. In addition, the short-term nature of the loans
reduces the impact of any change in prepayment level. However, it is possible
that prepayments (on automobile loans and other collateral) will alter the cash
flow on Asset-Backeds and it is not possible to determine in advance the actual
final maturity date or average life. Faster prepayment will shorten the average
life and slower prepayment will lengthen it. However, it is possible to
determine what the range of that movement could be and to calculate the effect
that it will have on the price of the security. The maturity of Asset-Backeds
will be based on the expected average life of the instrument. In selecting these
securities, MSDW Investment Management or MAS will look for those securities
that offer a higher yield to compensate for any variation in average maturity.

PREFERRED STOCKS. Preferred Stocks are securities that evidence ownership in a
corporation and pay a fixed or variable stream of dividends. Preferred Stocks
have a preference over Common Stocks in the event of the liquidation of an
issuer and usually do not carry voting rights. Because Preferred Stocks
represent an ownership interest in the issuer they have many of the
characteristics of an Equity Security and are, therefore, included in both the
definition of Fixed Income Security and Equity Security.

CONVERTIBLE SECURITIES. Convertible Securities are securities that may be
exchanged under certain circumstances for a fixed number of shares of Common
Stock or other Equity Securities. Convertible Securities generally represent a
feature of some other type of security, such as a Fixed Income Security or
Preferred Stock, so that, for example, a Convertible Fixed Income Security would
be a Fixed Income Security that is convertible into Common Stock. Prices of
Convertible Fixed Income Securities frequently are more volatile than
non-Convertible Fixed Income Securities. Convertible Securities may be viewed as
an investment in the current security or the security into which the Convertible
Security may be exchanged and, therefore, are included in both the definition of
Fixed Income Security or Equity Security.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Loan Participations are interests in loans
or other direct debt instruments ("Loans") relating to amounts owed by a
corporate, governmental or other borrower to another party. Loans may represent
amounts owed

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to lenders or lending syndicates, to suppliers of goods or services (trade
claims or other receivables), or to other parties ("Lenders") and may be fixed
rate or floating rate. Loans also may be arranged through private negotiations
between an issuer of sovereign debt obligations and Lenders.

A Portfolio's investments in Loans are expected in most instances to be in the
form of a participation in Loans ("Participations") and assignments of all or a
portion of Loans ("Assignments") from third parties. In the case of a
Participation, a Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In the event of an insolvency of the Lender selling a Participation, a
Portfolio may be treated as a general creditor of the Lender and may not benefit
from any set-off between the Lender and the borrower. Certain Participations may
be structured in a manner designed to avoid purchasers of Participations being
subject to the credit risk of the Lender with respect to the Participation. Even
under such a structure, in the event of a Lender's insolvency, the Lender's
servicing of the Participation may be delayed and the assignability of the
Participation may be impaired. A Portfolio will acquire Participations only if
the Lender interpositioned between an Underlying Fund and the borrower is
determined by MSDW Investment Management or MAS to be creditworthy.

When a Portfolio purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired an Underlying Fund as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender. Because there is no liquid market for such securities,
it is likely that such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market may have an
adverse impact on the value of such securities and an Underlying Fund's ability
to dispose of particular Assignments or Participations when necessary to meet an
Underlying Fund's liquidity needs or in response to a specific economic event,
such as a deterioration in the creditworthiness of the borrower. The lack of a
liquid secondary market for Assignments and Participations also may make it more
difficult for an Underlying Fund to assign a value to these securities for
purposes of valuing an Underlying Fund's securities and calculating its NAV.

Loan Participations and Assignments involve a risk of loss in case of default or
insolvency of the borrower. In addition, they may offer less legal protection to
a Underlying Fund in the event of fraud or misrepresentation and may involve a
risk of insolvency of the Lender. Certain Loan Participations and Assignments
may also include standby financing commitments that obligate the investing
Underlying Fund to supply additional cash to the borrower on demand.
Participations involving emerging market country issuers may relate to Loans as
to which there has been or currently exists an event of default or other failure
to make payment when due, and may represent amounts owed to Lenders that are
themselves subject to political and economic risks, including the risk of
currency devaluation, expropriation, or failure. Such Loan Participations and
Assignments present additional risk of default or loss.

TEMPORARY INVESTMENTS. When MSDW Investment Management or MAS believes that
changes in economic, financial or political conditions make it advisable, each
Underlying Fund may invest up to 100% of its assets in cash and certain short-
and medium-term Fixed Income Securities for temporary defensive purposes. These
Temporary Investments may consist of obligations of the U.S. or foreign
governments, their agencies or instrumentalities; Money Market Instruments; and
instruments issued by international development agencies.

ZERO COUPONS, PAY-IN-KIND SECURITIES OR DEFERRED PAYMENT SECURITIES. Zero
Coupon, Pay-In-Kind and Deferred Payment Securities are all types Fixed Income
Securities where the holder does not receive periodic cash payments of interest
or principal. Generally, these securities are subject to greater price
volatility and lesser liquidity in the event of adverse market conditions than
comparably rated securities paying cash interest at regular intervals. Although
an Underlying Fund will not receive cash periodic coupon payments on these
securities, the Underlying Fund may be deemed to have received interest income,
or "phantom income" during the life of the obligation. The Portfolio may have to
pay taxes on this phantom income, although it has not received any cash payment.

ZERO COUPONS. Zero Coupons are fixed income securities that do not make
regular interest payments. Instead, Zero Coupons are sold at a discount from
their face value. The difference between a Zero Coupon's issue or purchase price
and its face value represents the imputed interest an investor will earn if the
obligation is held until maturity. Zero Coupons may offer investors the
opportunity to earn a higher yield than that available on ordinary
interest-paying obligations of similar credit quality and maturity.

PAY-IN-KIND SECURITIES. Pay-In-Kind Securities are securities that have
interest payable by delivery of additional securities. Upon maturity, the holder
is entitled to receive the aggregate par value of the securities.

DEFERRED PAYMENT SECURITIES. Deferred Payment Securities are securities
that remain Zero Coupons until a predetermined date, at which time the stated
coupon rate becomes effective and interest becomes payable at regular intervals.

FLOATERS. Floaters are Fixed Income Securities with a rate of interest that
varies with changes in specified market rates or indices, such as the prime
rate, or at specified intervals. Certain Floaters may carry a demand feature
that permits the holder to

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tender them back to the issuer of the underlying instrument, or to a third
party, at par value prior to maturity. When the demand feature of certain
Floaters represents an obligation of a foreign entity, the demand feature will
be subject to certain risks discussed under "Foreign Investment."

INVERSE FLOATERS. Inverse floating rate obligations ("Inverse Floaters") are
Fixed Income Securities that have coupon rates that vary inversely at a multiple
of a designated floating rate, such as LIBOR (London Inter-Bank Offered Rate).
Any rise in the reference rate of an Inverse Floater (as a consequence of an
increase in interest rates) causes a drop in the coupon rate while any drop in
the reference rate of an Inverse Floater causes an increase in the coupon rate.
Inverse Floaters may exhibit substantially greater price volatility than fixed
rate obligations having similar credit quality, redemption provisions and
maturity, and Inverse Floater CMOs exhibit greater price volatility than the
majority of other mortgage-related securities.

EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS. The Underlying Funds may invest in
Eurodollar and Yankee dollar obligations. Eurodollar bank obligations are
dollar-denominated certificates of deposit and time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign banks.
Yankee dollar bank obligations are dollar-denominated obligations issued in the
U.S. capital markets by foreign banks.

Eurodollar and Yankee dollar obligations are subject to the same risks as
domestic issues but Eurodollar (and to a limited extent, Yankee dollar)
obligations are also subject to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in the form of
dollars, from flowing across its borders. Other risks include adverse political
and economic developments; the extent and quality of government regulations of
financial markets and institutions; the imposition of foreign withholding taxes;
and the expropriation or nationalization of foreign issuers.

FOREIGN INVESTMENT

Investing in foreign securities involves certain special considerations which
are not typically associated with investing in the Equity Securities or Fixed
Income Securities of U.S. issuers. Foreign issuers are not generally subject to
uniform accounting, auditing and financial reporting standards and may have
policies that are not comparable to those of domestic issuers. As a result,
there may be less information available about foreign issuers than about
domestic issuers. Securities of some foreign issuers are generally less liquid
and more volatile than securities of comparable domestic issuers. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed issuers than in the United States. In addition, with respect to
certain foreign countries, there is a possibility of expropriation or
confiscatory taxation, political and social instability, or diplomatic
developments which could affect U.S. investments in those countries. The costs
of investing in foreign countries frequently is higher than the costs of
investing in the United States. Although MSDW Investment Management and MAS
endeavor to achieve the most favorable execution costs in portfolio
transactions, fixed commissions on many foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges.

Investments in securities of foreign issuers generally are denominated in
foreign currencies. Accordingly, the value of an Underlying Fund's assets, as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
currency exchange rates and in exchange control regulations. An Underlying Fund
may incur costs in connection with conversions between various currencies.

Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. The Underlying Funds may
be able to claim a credit for U.S. tax purposes with respect to any such foreign
taxes.

FOREIGN EQUITY SECURITIES. Foreign Equity Securities are Equity Securities of
an issuer in a foreign country.

FOREIGN FIXED INCOME SECURITIES. Foreign Fixed Income Securities are Fixed
Income Securities issued by a foreign government, government-related or a
private issuer in a foreign country.

FOREIGN BONDS. Foreign Bonds are Fixed Income Securities denominated in
foreign currency and issued and traded primarily outside the United States,
including: (i) obligations issued or guaranteed by foreign national governments,
their agencies, instrumentalities, or political subdivisions; (ii) Fixed Income
Securities issued, guaranteed or sponsored by supranational organizations
established or supported by several national governments, including the World
Bank, the European Community, the Asian Development Bank and others; (iii)
non-government foreign corporate debt securities; (iv) foreign MBSs and various
other MBSs and Asset-Backeds denominated in a foreign currency; and (v) Brady
Bonds.

RUSSIAN SECURITIES. The registration, clearing and settlement of securities
transactions involving Russian issuers are subject to significant risks not
normally associated with securities transactions in the United States and other
more developed markets. Ownership of Equity Securities in Russian companies is
evidenced by entries in a company's share register (except where shares are held
through depositories that meet the requirements of the 1940 Act) and the
issuance of extracts from the register or, in certain limited cases, by formal
share certificates. However, Russian share registers are frequently unreliable
and an Underlying Fund could possibly lose its registration through oversight,
negligence or fraud. Moreover, Russia lacks a centralized registry to record
securities transactions and registrars located throughout Russia or the
companies themselves maintain share registers. Registrars are under no
obligation to provide extracts to potential purchasers in a timely manner or at
all and are not necessarily

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subject to effective state supervision. In addition, while registrars are liable
under law for losses resulting from their errors, it may be difficult for an
Underlying Fund to enforce any rights it may have against the registrar or
issuer of the securities in the event of loss of share registration. Although
Russian companies with more than 1,000 shareholders are required by Russian law
to employ an independent registrar, in practice, such companies have not always
followed this law. Because of this lack of independence of registrars,
management of a Russian company may be able to exert considerable influence over
who can purchase and sell the company's shares by illegally instructing the
registrar to refuse to record transactions on the share register. Furthermore,
these practices may prevent an Underlying Fund from investing in the securities
of certain Russian companies deemed suitable by the Adviser and could cause a
delay in the sale of Russian Securities by an Underlying Fund if the company
deems a purchaser unsuitable, which may expose the Underlying Fund to potential
loss on its investment.

In light of the risks described above, the Board Directors of the Fund has
approved certain procedures concerning the Fund's investments in Russian
Securities. Among these procedures is a requirement that an Underlying Fund will
not invest in the Equity Securities of a Russian company unless that issuer's
registrar has entered into a contract with the Fund's sub-custodian containing
certain protective conditions, including, among other things, the
sub-custodian's right to conduct regular share confirmations on behalf of the
Underlying Fund. This requirement will likely have the effect of precluding
investments in certain Russian companies that an Underlying Fund would otherwise
make.

FOREIGN CURRENCY TRANSACTIONS. The U.S. dollar value of the assets of the
Underlying Funds, to the extent they invest in securities denominated in foreign
currencies, may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Underlying
Funds may incur costs in connection with conversions between various currencies.
The Underlying Funds may conduct their foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, but also may enter into forward contracts to purchase
or sell foreign currencies. A foreign currency forward contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for such
trades.

The Underlying Funds may enter into foreign currency forward contracts in
several circumstances. When an Underlying Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when an
Underlying Fund anticipates the receipt in a foreign currency of dividends or
interest payments on a security which it holds, the Underlying Fund may desire
to "lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent
of such dividend or interest payment, as the case may be. By entering into a
forward contract for a fixed amount of dollars, for the purchase or sale of the
amount of foreign currency involved in the underlying transactions, the
Underlying Fund will be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the U.S. dollar and the
subject foreign currency during the period between the date on which the
security is purchased or sold, or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.
Additionally, when any of the Underlying Funds anticipates that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
such Underlying Fund's securities denominated in such foreign currency.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. None of the Underlying Funds
intend to enter into such forward contracts to protect the value of portfolio
securities on a continuous basis. The Underlying Funds will not enter into such
forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate such Underlying Fund to deliver an
amount of foreign currency in excess of the value of such Underlying Fund's
securities or other assets denominated in that currency.

Under normal circumstances, consideration of the prospect for currency parities
will be incorporated into the long-term investment decisions made with regard to
overall diversification strategies. However, the management of the Fund believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of each
Underlying Fund will thereby be served. Except under circumstances where a
segregated account is not required under the 1940 Act or the rules adopted
thereunder, the Fund's Custodian will place cash or liquid securities into a
segregated account of an Underlying Fund in an amount equal to the value of such
Underlying Fund's total assets committed to the consummation of forward currency
exchange contracts. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the account on
a daily basis so that the value of the account will be equal to the amount of
such Underlying Fund's commitments with respect to such contracts.

The Underlying Funds generally will not enter into a forward contract with a
term of greater than one year. At the maturity of a forward contract, a
Underlying Fund may either sell the portfolio security and make delivery of the
foreign currency, or it may retain the security and terminate its contractual
obligation to deliver the foreign currency by purchasing an "offsetting"
contract with the same currency trader obligating it to purchase, on the same
maturity date, the same amount of the foreign currency.

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It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for an Underlying Fund to purchase additional foreign currency
on the spot market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency that such Underlying
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency.

If an Underlying Fund retains the portfolio security and engages in an
offsetting transaction, such Underlying Fund will incur a gain or a loss (as
described below) to the extent that there has been movement in forward contract
prices. Should forward prices decline during the period between an Underlying
Fund entering into a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of the foreign
currency, such Underlying Fund will realize a gain to the extent that the price
of the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, such Underlying Fund would
suffer a loss to the extent that the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.

The Underlying Funds are not required to enter into such transactions with
regard to their foreign currency-denominated securities. It also should be
realized that this method of protecting the value of portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange which one can achieve at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.

FOREIGN CURRENCY WARRANTS. Underlying Funds may invest in foreign currency
warrants, which entitle the holder to receive from the issuer an amount of cash
(generally, for warrants issued in the U.S., in U.S. dollars) which is
calculated pursuant to a predetermined formula and based on the exchange rate
between a specified foreign currency and the U.S. dollar as of the exercise date
of the warrant. Foreign currency warrants generally are exercisable upon their
issuance and expire as of a specified date and time.

Foreign currency warrants have been issued in connection with U.S.
dollar-denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk which, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may attempt to reduce the
foreign exchange risk assumed by purchasers of a security by, for example,
providing for a supplemental payment in the event that the U.S. dollar
depreciates against the value of a major foreign currency such as the Japanese
Yen or German Deutschmark. The formula used to determine the amount payable upon
exercise of a foreign currency warrant may make the warrant worthless unless the
applicable foreign currency exchange rate moves in a particular direction (E.G.,
unless the U.S. dollar appreciates or depreciates against the particular foreign
currency to which the warrant is linked or indexed). Foreign currency warrants
are severable from the debt obligations with which they may be offered, and may
be listed on exchanges.

Foreign currency warrants may be exercisable only in certain minimum amounts,
and an investor wishing to exercise warrants who possesses less than the minimum
number required for exercise may be required either to sell the warrants or to
purchase additional warrants, thereby incurring additional transaction costs. In
the case of any exercise of warrants, there may be a delay between the time a
holder of warrants gives instructions to exercise and the time the exchange rate
relating to exercise is determined, during which time the exchange rate could
change significantly, thereby affecting both the market and cash settlement
values of the warrants being exercised. The expiration date of the warrants may
be accelerated if the warrants should be delisted from an exchange or if their
trading should be suspended permanently, which would result in the loss of any
remaining "time value" of the warrants (I.E., the difference between the current
market value and the exercise value of the warrants), and, in the case where the
warrants were "out-of-the-money," in a total loss of the purchase price of the
warrants.

Foreign currency warrants are generally unsecured obligations of their issuers
and are not standardized foreign currency options issued by the OCC. Unlike
foreign currency options issued by the OCC, the terms of foreign exchange
warrants generally will not be amended in the event of governmental or
regulatory actions affecting exchange rates or in the event of the imposition of
other regulatory controls affecting the international currency markets. The
initial public offering price of foreign currency warrants is generally
considerably in excess of the price that a commercial user of foreign currencies
might pay in the interbank market for a comparable option involving
significantly larger amounts of foreign currencies. Foreign currency warrants
are subject to complex political or economic factors.

PRINCIPAL EXCHANGE RATE LINKED SECURITIES. Principal exchange rate linked
securities are debt obligations the principal on which is payable at maturity in
an amount that may vary based on the exchange rate between the U.S. dollar and a
particular foreign currency at or about that time. The return on "standard"
principal exchange rate linked securities is enhanced if the foreign currency to
which the security is linked appreciates against the U.S. dollar, and is
adversely affected by increases in the foreign exchange value of the U.S.
dollar; "reverse" principal exchange rate linked securities are like the
"standard" securities, except that their return is enhanced by increases in the
value of the U.S. dollar and adversely impacted by increases in the value of
foreign currency. Interest payments on the securities are generally made in U.S.
dollars at rates that reflect the degree of foreign currency risk assumed or
given up by the purchaser of the notes (I.E., at relatively higher interest
rates if the purchaser has assumed some Underlying Funds that invest in emerging
markets may also be exposed to an extra degree of custodial and/or market risk,
especially where the securities purchased are not traded on an official exchange
or where ownership records regarding the securities are maintained by an
unregulated entity (or even the issuer itself).

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EMERGING MARKET COUNTRY SECURITIES. An emerging market country security is one
issued by a foreign government or private issuer that has one or more of the
following characteristics: (i) its principal securities trading market is in an
emerging market country, (ii) alone or on a consolidated basis it derives 50% or
more of its annual revenue from either goods produced, sales made or services
performed in emerging markets, or (iii) it is organized under the laws of, and
has a principal office in, an emerging market country.

Emerging market describes any country which is generally considered to be an
emerging or developing country by major organizations in the international
financial community, such as the International Bank for Reconstruction and
Development (more commonly known as the World Bank) and the International
Finance Corporation. There are currently over 150 countries which are generally
considered to be emerging or developing countries by the international financial
community. Emerging markets can include every nation in the world except the
United States, Canada, Japan, Australia, New Zealand and most nations located in
Western Europe.

The economies of individual emerging market countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, currency depreciation, capital reinvestment,
resource self-sufficiency and balance of payments position. Further, the
economies of developing countries generally are heavily dependent upon
international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures. These economies also
have been, and may continue to be, adversely affected by economic conditions in
the countries with which they trade.

Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in certain fixed income securities and domestic companies may be
subject to limitation in other emerging countries. Foreign ownership limitations
also may be imposed by the charters of individual companies in emerging
countries to prevent, among other concerns, violation of foreign investment
limitations. Repatriation of investment income, capital and the proceeds of
sales by foreign investors may require governmental registration and/or approval
in some emerging countries. An Underlying Fund could be adversely affected by
delays in, or a refusal to grant, any required governmental registration of
approval for such repatriation. Any investment subject to such repatriation
controls will be considered illiquid if it appears reasonably likely that this
process will take more than seven days.

Investing in emerging market countries may entail purchasing securities issued
by or on behalf of entities that are insolvent, bankrupt, in default or
otherwise engaged in an attempt to reorganize or reschedule their obligations,
and in entities that have little or no proven credit rating or credit history.
In any such case, the issuer's poor or deteriorating financial condition may
increase the likelihood that the investing Underlying Fund will experience
losses or diminution in available gains due to bankruptcy, insolvency or fraud.
With respect to any emerging market country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) that could affect adversely the economies of such countries or the value of
an Underlying Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside the United States.

Underlying Funds that invest in emerging markets may also be exposed to an extra
degree of custodial and/or market risk, especially where the securities
purchased are not traded on an official exchange or where ownership records
regarding the securities are maintained by an unregulated entity (or even the
issuer itself).

BRADY BONDS. Brady Bonds are Fixed Income Securities that are created through
the exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring under a plan introduced by
Nicholas F. Brady when he was the U.S. Secretary of the Treasury. Brady Bonds
have only been issued in recent years, and, accordingly, do not have a long
payment history. They may be collateralized or uncollateralized and issued in
various currencies (although most are U.S. dollar-denominated) and they are
actively traded in the over-the-counter secondary market. The Underlying Funds
will invest in Brady Bonds only if they are consistent with the Underlying
Fund's quality specifications. However, Brady Bonds should be viewed as
speculative in light of the history of defaults with respect to commercial bank
loans by public and private entities of countries issuing Brady Bonds.

INVESTMENT FUNDS. Some emerging market countries have laws and regulations that
currently preclude direct investment in the securities of their companies.
However, indirect investment in the securities of companies listed and traded on
the stock exchanges in these countries is permitted by certain emerging market
countries through Investment Funds that have been specifically authorized. An
Underlying Fund may invest in these Investment Funds subject to the provisions
of the 1940 Act, as applicable, and other applicable laws.

EUROPEAN CURRENCY TRANSITION. On January 1, 1999, the European Monetary Union
(EMU) implemented a new currency unit, the Euro, which is expected to reshape
financial markets, banking systems and monetary policies in Europe and other
parts of the world. Implementation of this plan will mean that financial
transactions and market information, including share quotations and company
accounts, in participating countries will be denominated in Euros. Monetary
policy for participating countries will be uniformly managed by a new central
bank, the European Central Bank (ECB).

The transition to the Euro may change the economic environment and behavior of
investors, particularly in European markets. For example, the process of
implementing the Euro may adversely affect financial markets world-wide and may
result in changes in the relative strength and value of the U.S. dollar or other
major currencies, as well as possible adverse tax consequences. The

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transition to the Euro is likely to have a significant impact on fiscal and
monetary policy in the participating countries and may produce unpredictable
effects on trade and commerce generally. These resulting uncertainties could
create increased volatility in financial markets world-wide.

OTHER SECURITIES

LOANS OF PORTFOLIO SECURITIES. Each Underlying Fund may lend its investment
securities to qualified institutional investors that need to borrow securities
in order to complete certain transactions, such as covering short sales,
avoiding failures to deliver securities or completing arbitrage operations. By
lending its investment securities, an Underlying Fund attempts to increase its
net investment income through the receipt of interest of the loan. Any gain or
loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Underlying Fund. Each
Underlying Fund may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, structure and the aggregate amount of such loans are not inconsistent
with the 1940 Act or the Rules and Regulations or interpretations of the SEC
thereunder, which currently require that (i) the borrower pledge and maintain
with the Underlying Fund collateral consisting of liquid, unencumbered assets
having a value at all times not less than 100% of the value of the securities
loaned; (ii) the borrower add to such collateral whenever the price of the
securities loaned rises (i.e., the borrower "marks to market" on a daily basis);
(iii) the loan be made subject to termination by the Underlying Fund at any
time; and (iv) the Underlying Fund receive reasonable interest on the loan
(which may include the Underlying Fund investing any cash collateral in interest
bearing short-term investments), any distributions on the loaned securities and
any increase in their market value. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially. However, loans will be made only to borrowers
deemed by MSDW Investment Management or MAS to be of good standing and when, in
the judgment of MSDW Investment Management or MAS, the consideration which can
be earned currently from such securities loans justifies the attendant risk. All
relevant facts and circumstances, including the creditworthiness of the broker,
dealer or institution, will be considered in making decisions with respect to
the lending of securities, subject to review by the Board of Directors.

At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Directors. In addition, voting rights may pass
with the loaned securities, but if a material event will occur affecting an
investment on loan, the loan must be called and the securities voted.

NON-PUBLICLY TRADED SECURITIES, PRIVATE PLACEMENTS AND RESTRICTED
SECURITIES. The Underlying Funds may invest in securities that are neither
listed on a stock exchange nor traded over-the-counter, including privately
placed and restricted securities. Such unlisted securities may involve a higher
degree of business and financial risk that can result in substantial losses. As
a result of the absence of a public trading market for these securities, they
may be less liquid than publicly traded securities. Although these securities
may be resold in privately negotiated transactions, the prices realized from
these sales could be less that those originally paid by the Underlying Fund or
less than what may be considered the fair value of such securities. Furthermore,
companies whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements which might be applicable
if their securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
sold, the Underlying Fund may be required to bear the expenses of registration.

As a general matter, an Underlying Fund may not invest more than 15% of its net
assets in illiquid securities, such as securities for which there is not readily
available secondary market or securities that are restricted from sale to the
public without registration. However, certain Restricted Securities can be
offered and sold to qualified institutional buyers under Rule 144A under the
1933 Act ("Rule 144A Securities") and may be deemed to be liquid under
guidelines adopted by the Fund's Board of Directors. The Underlying Funds may
invest without limit in liquid Rule 144A Securities. Rule 144A Securities may
become illiquid if qualified institutional buyers are not interested in
acquiring the securities. Investors should note that investment of 5% of an
Underlying Fund's total assets in Restricted Securities may be considered a
speculative activity and may involve greater risk and expense to that Underlying
Fund.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. When-Issued and Delayed Delivery
Securities are securities purchased with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous yield or
price at the time of the transaction. Delivery of and payment for these
securities may take as long as a month or more after the date of the purchase
commitment, but will take place no more than 120 days after the trade date. The
payment obligation and the interest rates that will be received are each fixed
at the time an Underlying Fund enters into the commitment and no interest
accrues to the Underlying Fund until settlement. Thus, it is possible that the
market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed. When an
Underlying Fund agrees to purchase When-Issued or delayed delivery securities,
it will, in accordance with SEC rules and regulations, segregate or earmark cash
or liquid securities in an amount equal to the Underlying Fund's commitment to
purchase these securities.

BORROWING FOR INVESTMENT PURPOSES. Borrowing for investment purposes creates
leverage which is a speculative characteristic. Underlying Funds authorized to
borrow will do so only when MSDW Investment Management or MAS believes that
borrowing will benefit the Underlying Fund after taking into account
considerations such as the costs of borrowing and the likely investment

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returns on securities purchased with borrowed funds. Borrowing by an Underlying
Fund will create the opportunity for increased net income but, at the same time,
will involve special risk considerations. Leverage that results from borrowing
will magnify declines as well as increases in an Underlying Fund's net asset
value per share and net yield. Each Underlying Fund that engages in borrowing
expects that all of its borrowing will be made on a secured basis. The
Underlying Fund's Custodian will either segregate the assets securing the
borrowing for the benefit of the lenders or arrangements will be made with a
suitable sub-custodian. If assets used to secure the borrowing decrease in
value, an Underlying Fund may be required to pledge additional collateral to the
lender in the form of cash or securities to avoid liquidation of those assets.

REVERSE REPURCHASE AGREEMENTS. Under a Reverse Repurchase Agreement, an
Underlying Fund sells a security and promises to repurchase that security at an
agreed upon future date and price. The price paid to repurchase the security
reflects interest accrued during the term of the agreement. The Underlying Fund
will establish a separate custodial account holding cash and other liquid assets
in an amount not less than the purchase obligations of the agreement. Reverse
Repurchase Agreements may be viewed as a speculative form of borrowing called
leveraging. An Underlying Fund may invest in reverse repurchase agreements if
(i) interest earned from leveraging exceeds the interest expense of the original
reverse repurchase transaction and (ii) proceeds from the transaction are not
invested for longer than the term of the Reverse Repurchase Agreement.

SHORT SALES. A short sale is a transaction in which the Underlying Fund sells
securities it owns or has the right to acquire at no added cost (i.e., "against
the box") or does not own (but has borrowed) in anticipation of a decline in the
market price of the securities. To deliver the securities to the buyer, the
Underlying Fund arranges through a broker to borrow the securities and, in so
doing, the Underlying Fund becomes obligated to replace the securities borrowed
at their market price at the time of replacement. When selling short, the
Underlying Fund intends to replace the securities at a lower price and
therefore, profit from the difference between the cost to replace the securities
and the proceeds received from the sale of the securities. When the Underlying
Fund makes a short sale, the proceeds it receives from the sale will be held on
behalf of a broker until the Underlying Fund replaces the borrowed securities.
The Underlying Fund may have to pay a premium to borrow the securities and must
pay any dividends or interest payable on the securities until they are replaced.

The Underlying Fund's obligation to replace the securities borrowed in
connection with a short sales will be secured by collateral deposited with the
broker that consists of cash or other liquid securities. In addition, the
Underlying Fund will place in a segregated account with its Custodian an amount
of cash or other liquid securities equal to the difference, if any, between (i)
the market value of the securities sold at the time they were sold short, and
(ii) any cash or other liquid securities deposited as collateral with the broker
in connection with the short sale. Short sales by the Underlying Fund involve
certain risk and special considerations. If MSDW Investment Management or MAS
incorrectly predicts that the price of the borrowed security will decline, the
Underlying Fund will have to replace the securities with securities with a
greater value than the amount received from the sale. As a result, losses from
short sales differ from losses that could be incurred from a purchase of a
security, because losses from short sales may be unlimited, whereas losses from
purchases can equal only the total amount invested.

STRUCTURED INVESTMENTS. Structured Investments are securities that are
convertible into, or the value of which is based upon the value of, other fixed
income or equity securities or indices upon certain terms and conditions. The
amount an Underlying Fund receives when it sells a Structured Investment or at
maturity of a Structured Investment is not fixed, but is based on the price of
the underlying security or index. Particular Structured Investments may be
designed so that they move in conjunction with or differently from their
underlying security or index in terms of price and volatility. It is impossible
to predict whether the underlying index or price of the underlying security will
rise or fall, but prices of the underlying indices and securities (and,
therefore, the prices of Structured Investments) will be influenced by the same
types of political and economic events that affect particular issuers of fixed
income and equity securities and capital markets generally. Structured
Investments also may trade differently from their underlying securities.
Structured Investments generally trade on the secondary market, which is fairly
developed and liquid. However, the market for such securities may be shallow
compared to the market for the underlying securities or the underlying index.
Accordingly, periods of high market volatility may affect the liquidity of
Structured Investments, making high volume trades possible only with
discounting.

Structured Investments are a relatively new innovation and may be designed to
have various combinations of equity and fixed income characteristics. The
following sections describe four of the more common types of Structured
Investments. The Underlying Funds may invest in other Structured Investments,
including those that may be developed in the future, to the extent that the
Structured Investments are otherwise consistent with an Underlying Fund's
investment objective and policies.

PERCS. Preferred Equity Redemption Cumulative Stock ("PERCS") technically
is preferred stock with some characteristics of common stock. PERCS are
mandatorily convertible into common stock after a period of time, usually three
years, during which the investors' capital gains are capped, usually at 30%.
Commonly, PERCS may be redeemed by the issuer at any time or if the issuer's
common stock is trading at a specified price level or better. The redemption
price starts at the beginning of the PERCS duration period at a price that is
above the cap by the amount of the extra dividends the PERCS holder is entitled
to receive relative to the common stock over the duration of the PERCS and
declines to the cap price shortly before maturity of the PERCS. In exchange for
having the cap on capital gains and giving the issuer the option to redeem the
PERCS at any time or at the specified common stock price level, an Underlying
Fund may be compensated with a substantially higher dividend yield than that on
the underlying common stock. Investors that seek current income find PERCS
attractive because PERCS provide a high dividend income than that paid with
respect to a company's common stock.

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ELKS. Equity-Linked Securities ("ELKS") differ from ordinary debt
securities, in that the principal amount received at maturity is not fixed but
is based on the price of the issuer's common stock. ELKS are debt securities
commonly issued in fully registered form for a term of three years under an
indenture trust. At maturity, the holder of ELKS will be entitled to receive a
principal amount equal to the lesser of a cap amount, commonly in the range of
30% to 55% greater than the current price of the issuer's common stock, or the
average closing price per share of the issuer's common stock , subject to
adjustment as a result of certain dilution events, for the 10 trading days
immediately prior to maturity. Unlike PERCS, ELKS are commonly not subject to
redemption prior to maturity. ELKS usually bear interest during the three-year
term at a substantially higher rate than the dividend yield on the underlying
common stock. In exchange for having the cap on the return that might have been
received as capital gains on the underlying common stock, an Underlying Fund may
be compensated with the higher yield, contingent on how well the underlying
common stock does. Investors that seek current income, find ELKS attractive
because ELKS provide a higher dividend income than that paid with respect to a
company's common stock. The return on ELKS depends on the creditworthiness of
the issuer of the securities, which may be the issuer of the underlying
securities or a third party investment banker or other lender. The
creditworthiness of such third party issuer of ELKS may, and often does, exceed
the creditworthiness of the issuer of the underlying securities. The advantage
of using ELKS over traditional equity and debt securities is that the former are
income producing vehicles that may provide a higher income than the dividend
income on the underlying equity securities while allowing some participation in
the capital appreciation of the underlying equity securities. Another advantage
of using ELKS is that they may be used for hedging to reduce the risk of
investing in the generally more volatile underlying equity securities.

LYONS. Liquid Yield Option Notes ("LYONs") differ from ordinary debt
securities, in that the amount received prior to maturity is not fixed but is
based on the price of the issuer's common stock. LYONs are zero-coupon notes
that sell at a large discount from face value. For an investment in LYONs, the
Underlying Fund will not receive any interest payments until the notes mature,
typically in 15 to 20 years, when the notes are redeemed at face, or par, value.
The yield on LYONs, typically, is lower-than-market rate for debt securities of
the same maturity, due in part to the fact that the LYONs are convertible into
common stock of the issuer at any time at the option of the holder of the LYONs.
Commonly, the LYONs are redeemable by the issuer at any time after an initial
period or if the issuer's common stock is trading at a specified price level or
better or, at the option of the holder, upon certain fixed dates. The redemption
price typically is the purchase price of the LYONs plus accrued original issue
discount to the date of redemption, which amounts to the lower-than-market
yield. An Underlying Fund will receive only the lower-than-market yield unless
the underlying common stock increases in value at a substantial rate. LYONs are
attractive to investors when it appears that they will increase in value due to
the rise in value of the underlying common stock.

STRUCTURED NOTES. Structured Notes are derivative securities for which the
amount of principal repayment and/or interest payments is based upon the
movement of one or more "factors." These factors include, but are not limited
to, currency exchange rates, interest rates (such as the prime lending rate and
LIBOR) and stock indices, such as the S&P 500. In some cases, the impact of the
movements of these factors may increase or decrease through the use of
multipliers or deflators. Structured Notes may be designed to have particular
quality and maturity characteristics and may vary from money market quality to
below investment grade. Depending on the factor used and the use of multipliers
or deflators, however, changes in interest rates and movement of the factor may
cause significant price fluctuations or may cause particular Structured Notes to
become illiquid. The Underlying Funds will use Structured Notes to tailor their
investments to the specific risks and returns MSDW Investment Management or MAS
wish to accept while avoiding or reducing certain other risks.

DERIVATIVES

The Underlying Funds are permitted to utilize various exchange-traded and
over-the-counter derivative instruments and derivative securities, both for
hedging and non-hedging purposes. Permitted derivative products include, but are
not limited to futures contracts ("futures"); forward contracts ("forwards");
options; swaps, caps, collars and floors; structured notes; and other derivative
products yet to be developed, so long as these new products are used in a manner
consistent with the objectives of the Underlying Funds. These derivative
products may be based upon a wide variety of underlying rates, indices,
instruments, securities and other products, such as interest rates, foreign
currencies, foreign and domestic fixed income and equity securities, groups or
"baskets" of securities and securities indices (for each derivative product, the
"underlying"). Exclusive of forward foreign currency contracts and any
derivative products used for hedging purposes, the Underlying Funds of the
Morgan Stanley Dean Witter Institutional Fund, Inc. will limit their use of
derivative products to 33 1/3% of their total assets, measured by the aggregate
notional amount of outstanding derivative products. The Underlying Fixed Income
Funds of MAS Funds, exclusive of derivatives used for hedging purposes, will
limit their use of derivatives so that no more than 5% of the Underlying Fund's
total assets at the time of the transaction are required as margin and option
premiums to secure the Underlying Fund's obligations under such derivatives. The
Underlying Equity Funds of MAS Funds, exclusive of derivatives used for hedging
purposes, are subject to the same 5% limit, but also will not incur obligations
to purchase securities under futures and options contracts in excess of 50% of
their total.

The Underlying Funds may use derivative products under a number of different
circumstances to further their investment objectives. For example, an Underlying
Fund may purchase derivatives to gain exposure to a market quickly in response
to changes in the Underlying Fund's investment strategy, upon the inflow of
investable cash or when the derivative provides greater liquidity than the
underlying market. An Underlying Fund may also use derivatives when it is
restricted from directly owning the

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"underlying" or when derivatives provide a pricing advantage or lower
transaction costs. The Underlying Funds also may purchase combinations of
derivatives in order to gain exposure to an investment in lieu of actually
purchasing such investment. Derivatives may also be used by an Underlying Fund
for hedging or risk management purposes and in other circumstances when MSDW
Investment Management believes it advantageous to do so consistent with the
Underlying Fund's investment objectives and policies. The Underlying Funds will
not use derivatives in a manner that creates leverage, except to the extent that
the use of leverage is expressly permitted by a particular Underlying Fund's
investment policies, and then only in a manner consistent with such policies.

The use of derivative products is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If MSDW Investment Management or MAS is
incorrect in forecasts of market values, interest rates, and currency exchange
rates, the investment performance of the Underlying Funds will be less favorable
than it would have been if these investment techniques had not been used.

Some of the derivative products in which the Underlying Funds may invest and
some of the risks related thereto are described in further detail below.

FUTURES CONTRACTS (FUTURES) AND FORWARD CONTRACTS (FORWARDS). The Underlying
Funds may purchase and sell futures contracts, including futures on securities
indices, baskets of securities, foreign currencies and interest rates of the
type generally known as financial futures. These are standardized contracts that
are bought and sold on organized exchanges. A futures contract obligates a party
to buy or sell a specific amount of the "underlying," such as a particular
foreign currency, on a specified future date at a specified price or to settle
the value in cash.

The Underlying Funds may also purchase and sell forward contracts, such as
forward rate agreements and other financial forward contracts. The Underlying
Funds may also use foreign currency forward contracts which are separately
discussed under "Foreign Currency Transactions." These forward contracts are
privately negotiated and are bought and sold in the over-the-counter market.
Like a future, a forward contract obligates a party to buy or sell a specific
amount of the underlying on a specified future date at a specified price. The
terms of the forward contract are customized. Forward contracts, like other
over-the-counter contracts that are negotiated directly with an individual
counterparty, subject the Underlying Fund to the risk of counterparty default.

In some cases, the Underlying Funds may be able to use either futures contracts,
forward contracts or exchange-traded or over-the-counter options to accomplish
similar purposes. In all cases, the Underlying Funds will uses these products
only as permitted by applicable laws and regulations. Some of the ways in which
the Underlying Funds may utilize futures contracts, forward contracts and
related options are as follows:

The Underlying Funds may sell securities index futures contracts and/or index
options thereon in anticipations of or during a market decline to attempt to
offset the decrease in market value of investments in its portfolio, or may
purchase securities index futures or options in order to gain market exposure.
There currently are limited securities index futures and options on such futures
in many countries, particularly emerging markets. The nature of the strategies
adopted by MSDW Investment Management or MAS, and the extent to which those
strategies are used, may depend on the development of such markets. The
Underlying Funds may also purchase and sell foreign currency rates or to adjust
their exposure to a particular currency.

The Underlying Fund may engage in transactions in interest rate futures and
related products. The value of these contracts rises and falls inversely with
change in interest rates. The Underlying Funds may engage in such transactions
to hedge their holdings of debt instruments against future changes in interest
rates or for other purposes.

Gains and losses on futures contracts, forward contracts and related options
depend on MSDW Investment Management's or MAS' ability to predict correctly the
direction of movement of securities prices, interest rates and other economic
factors. Other risks associated with the use of these instruments include (i)
imperfect correlation between the change in market value of investments held by
an Underlying Fund and the prices of derivative products relating to investments
purchased or sold by the Underlying Fund, and (ii) possible lack of a liquid
secondary market for a derivative product and the resulting inability to close
out a position. The risk that an Underlying Fund will be unable to close out a
position will be minimized by only entering into transactions for which there
appears to be a liquid exchange or secondary market. In some strategies, the
risk of loss in trading on futures and related transactions can be substantial,
due both to the low margin deposits required and the extremely high degree of
leverage involved in pricing.

Under rules adopted by the Commodity Futures Trading Commission (the "CFTC"),
each Underlying Fund may, without registering with the CFTC as a Commodity Pool
Operator, enter into futures contracts and options thereon for both hedging and
non-hedging purposes, provided that not more than 5% of such Underlying Fund's
total assets at the time of entering the transaction are required as margin and
option premiums to secure obligations under such contracts relating to non-bona
fide hedging activities.

OPTIONS. The Underlying Funds may seek to increase their returns or may hedge
their portfolio investments through options transactions with respect to
individual securities, indices or baskets in which such Underlying Funds may
invest; other financial instruments; and foreign currency. Various options may
be purchased and sold on either the exchange-traded or over-the-counter markets.

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Each Underlying Fund may purchase put and call options. Purchasing a put option
gives an Underlying Fund the right, but not the obligation, to sell the
underlying (such as a securities index or a particular foreign currency) at the
exercise price either on a specific date or during a specified exercise period.
The purchaser pays a premium to the seller (also known as the writer) of the
option.

Each Underlying Fund also may write put and call options on investments held in
its portfolio, as well as foreign currency options. An Underlying Fund that has
written an option receives a premium that increases the Underlying Fund's return
on the underlying in the event the option expires unexercised or is closed out
at a profit. However, by writing a call option, an Underlying Fund will limit
its opportunity to profit from an increase in the market value of the underlying
above the exercise price of the option. By writing a put option, an Underlying
Fund will be exposed to the amount by which the price of the underlying is less
than the strike price.

By writing an option, an Underlying Fund incurs an obligation either to buy (in
the case of a put option) or sell (in the case of a call option) the underlying
from the purchaser of the option at the option's exercise price, upon exercise
by the purchaser. Pursuant to guidelines established by the Board of Directors,
the Underlying Funds may only write options that are "covered." A covered call
option means that until the expiration of the option, the Underlying Fund will
either earmark or segregate sufficient liquid assets to cover its obligations
under the option or will continue to own (i) the underlying; (ii) securities or
instruments convertible or exchangeable without the payment of any consideration
into the underlying; or (iii) a call option on the same underlying with a strike
price no higher than the price at which the underlying was sold pursuant to a
short option position. In the case of a put option, the Underlying Fund will
either earmark or segregate sufficient liquid assets to cover its obligations
under the option or will own another put option on the same underlying with an
equal or higher strike price.

There currently are limited options markets in many countries, particularly
emerging market countries, and the nature of the strategies adopted by MSDW
Investment Management or MAS and the extent to which those strategies are used
will depend on the development of these options markets. The primary risks
associated with the Underlying Funds' use of options as described include (i)
imperfect correlation between the change in market value of investments held,
purchased or sold by an Underlying Fund and the prices of options relating to
such investments, and (ii) possible lack of a liquid secondary market for an
option.

INTEREST RATE, CURRENCY, COMMODITY AND EQUITY SWAPS, CAPS, COLLARS AND
FLOORS. Swaps are privately negotiated over-the-counter derivative products in
which two parties agree to exchange payment streams calculated in relation to a
rate, index, instrument or certain securities and a particular "notional
amount." As with many of the other derivative products available to the
Underlying Funds, the underlying may include an interest rate (fixed or
floating), a currency exchange rate, a commodity price index, and a security,
securities index or a combination thereof. A great deal of flexibility is
possible in the way the products may be structured, with the effect being that
the parties may have exchanged amounts equal to the return on one rate, index or
group of securities for another. For example, in a simple fixed-to-floating
interest rate swap, one party makes payments equivalent to a fixed interest
rate, and the other make payments equivalent to a specified interest rate index.
An Underlying Fund may engage in simple or more complex swap transactions
involving a wide variety of underlyings. The currency swaps that the Underlying
Funds may enter will generally involve an agreement to pay interest streams in
one currency based on a specified index in exchange for receiving interest
streams denominated in another currency. Such swaps may involve initial and
final exchange that correspond to the agreed upon notional amount.

Caps, collars and floors are privately-negotiated option-based derivative
products. An Underlying Fund may use one or more of these products in addition
to or in lieu of a swap involving a similar rate or index. As in the case of a
put or call option, the buyer of a cap or floor pays a premium to the writer. In
exchange for that premium, the buyer receives the right to a payment equal to
the differential if the specified index or rate rises above (in the case of a
cap) or falls below (in the case of a floor) a pre-determined strike level. As
in the case of swaps, obligations under caps and floors are calculated based
upon an agreed notional amount, and like most swaps (other than foreign currency
swaps), the entire notional amount is not exchanged and thus is not at risk. A
collar is a combination product in which the same party, such as the Underlying
Fund, buys a cap from and sells a floor to the other party. As with put and call
options, the amount at risk is limited for the buyer, but, if the cap or floor
in not hedged or covered, may be unlimited for the seller. Under current market
practice, caps, collars and floors between the same two parties are generally
documented under the same "master agreement." In some cases, options and forward
agreements may also be governed by the same master agreement. In the event of a
default, amounts owed under all transactions entered into under, or covered by,
the same master agreement would be netted and only a single payment would be
made.

Swaps, caps, collars and floors are credit-intensive products. An Underlying
Fund that enters into a swap transaction bears the risk of default, i.e.
nonpayment, by the other party. The guidelines under which each Underlying Fund
enters derivative transactions, along with some features of the transactions
themselves, are intended to reduce these risks to the extent reasonably
practicable, although they cannot eliminate the risks entirely. Under guidelines
established by the Board of Directors, an Underlying Fund may enter into swaps
only with parties that meet certain credit rating guidelines. Consistent with
current market practices, an Underlying Fund will generally enter into swap
transactions on a net basis, and all swap transactions with the same party will
be documented under a single master agreement to provide for net payment upon
default. In addition, an Underlying Fund's obligations under an agreement will
be accrued daily (offset against any amounts owing to the Underlying Fund) and
any accrued, but unpaid, net amounts owed to the other party to a master
agreement will be covered by the maintenance of a segregated account consisting
of cash or liquid securities.

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Interest rate and total rate of return (fixed income or equity) swaps generally
do not involve the delivery of securities, other underlying assets, or
principal. In such case, if the other party to an interest rate or total rate of
return swap defaults, an Underlying Fund's risk of loss will consist of the
payments that an Underlying Fund is contractually entitled to receive from the
other party. This may not be true for currency swaps that require the delivery
of the entire notional amount of one designated currency in exchange for the
other. If there is a default by the other party, an Underlying Fund may have
contractual remedies pursuant to the agreements related to the transaction.

UNDERLYING EQUITY FUND. An Underlying Equity Fund is an Underlying Fund that
invests primarily in Equity Securities of U.S or foreign issuers.

UNDERLYING FIXED INCOME FUND. An Underlying Fixed Income Fund is an Underlying
Fund that invests primarily in Fixed Income Securities of U.S. or foreign
issuers.

INVESTMENT LIMITATIONS

FUNDAMENTAL LIMITATIONS

Each Portfolio has adopted the following restrictions, which are fundamental
policies and may not be changed without the approval of the lesser of: (i) at
least 67% of the voting securities of the Portfolio present at a meeting if the
holders of more than 50% of the outstanding voting securities of the Portfolio
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Portfolio. Each Portfolio of the Fund will not:

(1) purchase or sell physical commodities, unless acquired as a result of
ownership of securities or other instruments, except this shall not prevent a
Portfolio from purchasing or selling futures contracts or options thereon or
from investing in securities or other instruments backed by physical
commodities;

(2) purchase or sell real estate, although it may purchase or sell
securities of companies that deal in real estate and may purchase and sell
securities that are secured by interests in real estate;

(3) lend any security or make any other loan if, as a result, more than 33
1/3% of its total assets would be lent to other parties, but this limitation
does not apply to purchases of debt securities or repurchase agreements;

(4) except with respect to the shares of Underlying Funds, with respect to
75% of the Portfolio's assets (i) purchase more than 10% of the outstanding
voting securities of any issuer or (ii) purchase securities of an issuer (except
obligations of the U.S. Government and its agencies and instrumentalities) if as
a result more than 5% of the Portfolio's total assets, at market value, would be
invested in the securities of such issuer;

(5) issue senior securities or borrow money, except from banks in an amount
not in excess of 33 1/3% of its total assets (including the amount borrowed)
less liabilities;

(6) underwrite securities issued by others, except to the extent that a
Portfolio may be considered an underwriter within the meaning of the 1933 Act in
the disposition of restricted securities; or

(7) acquire any securities of companies within one industry if, as a result
of such acquisition, 25% or more of the value of the Portfolio's total assets
would be invested in securities of companies within such industry; provided,
that (i) each Portfolio will invest at least 25% of its assets in shares of
investment companies, and (ii) there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

NON-FUNDAMENTAL LIMITATIONS

In addition, each Portfolio of the Fund has adopted non-fundamental investment
limitations as stated below. Such limitations may be changed without shareholder
approval. Each Portfolio of the Fund will not:

(1) sell short (other than "against the box") unless the Portfolio's
obligation is covered by unencumbered liquid assets in a segregated account and
by collateral held by the lending broker; provided that transactions in futures
contracts and options are not deemed to constitute selling securities short;

(2) invest for the purpose of exercising control over management of any
company;

(3) invest its assets in securities of any investment company except for
shares of the Underlying Funds, and as otherwise may be permitted by the 1940
Act;

(4) invest more than an aggregate of 15% of the net assets of the Portfolio
in illiquid securities;

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(5) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements) that are publicly distributed, and
(ii) by lending its portfolio securities to banks, brokers, dealers and other
financial institutions so long as such loans are not inconsistent with the 1940
Act or the Rules and Regulations or interpretations of the SEC thereunder;

(6) purchase on margin, except for use of short-term credit as may be
necessary for the clearance of purchases and sales of securities, but it may
make margin deposits in connection with transactions in options, futures, and
options on futures; or

(7) purchase additional securities while borrowings exceed 5% of total
assets.

The percentage limitations contained in these restrictions apply at the time of
purchase of securities. Future Portfolios of the Fund may adopt different
limitations.

Notwithstanding the foregoing fundamental and non-fundamental investment
restrictions, the Underlying Funds in which the Portfolios invest have adopted
certain investment limitations which may be more or less restrictive than those
listed above, thereby permitting a Portfolio to engage in investment strategies
indirectly that are prohibited under the fundamental and non-fundamental
investment limitations listed above. The investment limitations of an Underlying
Fund are described in the Statement of Additional Information for such
Underlying Fund.

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PURCHASE OF SHARES

The purchase price of each Portfolio of the Fund is the net asset value next
determined after the order is received. For each Portfolio, an order received
prior to the close of the New York Stock Exchange (the "NYSE") (normally 4:00
p.m. Eastern Time) will be executed at the price computed on the date of
receipt; and an order received after the close of the NYSE will be executed at
the price computed on the next day the NYSE is open. Shares of the Fund may be
purchased on any day the NYSE is open. The NYSE will be closed on the following
days: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day,
and on the preceding Friday or subsequent Monday when any of these holidays
falls on a Saturday or Sunday, respectively.

Each Portfolio reserves the right in its sole discretion to suspend the offering
of its shares and to reject purchase orders when in the judgment of management
such rejection is in the best interest of the Portfolio.

REDEMPTION OF SHARES

REDEMPTIONS. Each Portfolio may suspend redemption privileges or postpone the
date of payment (i) during any period that the NYSE is closed, or trading on the
NYSE is restricted or suspended as determined by the SEC; (ii) during any period
when an emergency exists as defined by the rules of the SEC as a result of which
it is not reasonably practicable for a Portfolio to dispose of securities owned
by it, or fairly to determine the value of its assets; and (iii) for such other
periods as the SEC may permit.

DISTRIBUTIONS IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the shareholders of a Portfolio to make a
redemption payment wholly in cash, and subject to applicable agreements with
entities qualified under qualified pension and profit sharing plans, the Fund
may pay any portion of a redemption by distribution in kind of portfolio
securities in lieu of cash. Securities issued in a distribution in kind will be
readily marketable, although shareholders receiving distributions in kind may
incur brokerage commissions when subsequently redeeming shares of those
securities.

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS

The Fund's officers, under the supervision of the Board of Directors, manage the
day-to-day operations of the Fund. The Directors set broad policies for the Fund
and choose its officers. Directors and officers of the Fund are also directors
and officers of some or all of the other investment companies managed,
administered, advised or distributed by MSDW Investment Management, MAS or their
affiliates. Two Directors and all of the officers of the Fund are directors,
officers or employees of the Fund's adviser, distributor or sub-administrator.
The other Directors have no affiliation with the Fund's adviser, distributor or
sub-administrator. A list of the Directors and officers of the Fund and a brief
statement of their present positions and principal occupations during the past
five years is set forth below:

<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- --------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
Barton M. Biggs (66)* Chairman and Director Chairman, Director and Managing Director of Morgan
1221 Avenue of the Americas Stanley Dean Witter Investment Management Inc.
New York, NY 10020 and Morgan Stanley Dean Witter Management
Limited; Managing Director of Morgan Stanley &
Co. Incorporated; Director of Rand McNally
Company; Member of the Yale Development Board;
Chairman and Director of various U.S. registered
investment companies managed by Morgan Stanley
Dean Witter Investment Management Inc.

Michael F. Klein (40)* Director and President Principal of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas Morgan Stanley Dean Witter Investment Management
New York, NY 10020 Inc; President and Director of various U.S.
registered investment companies managed by
Morgan Stanley Dean Witter Investment Management
Inc.; Previously practiced law with the New York
firm of Rogers & Wells.
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- --------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
John D. Barrett, II (63) Director Chairman and Director of Barrett Associates, Inc.
521 Fifth Avenue (investment counseling); Director of the
New York, NY 10135 Ashforth Company (real estate); Director of
Morgan Stanley Dean Witter Institutional Fund,
Inc., Morgan Stanley Dean Witter Universal
Funds, Inc. and Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.

Gerard E. Jones (62) Director Partner in Richards & O'Neil LLP (law firm);
43 Arch Street Director of Morgan Stanley Dean Witter
Greenwich, CT 06830 Institutional Fund, Inc., Morgan Stanley Dean
Witter Universal Funds, Inc. and Morgan Stanley
Dean Witter Strategic Adviser Fund, Inc.

Andrew McNally IV (59) Director Director of Allendale Insurance Co., Mercury
8255 North Central Park Avenue Finance (consumer finance); Zenith Electronics,
Skokie, IL 60076 Hubbell, Inc. (industrial electronics); Director
of Morgan Stanley Dean Witter Institutional
Fund, Inc., Morgan Stanley Dean Witter Universal
Funds, Inc. and Morgan Stanley Dean Witter
Strategic Adviser Fund, Inc.; Formerly, Chairman
and Chief Executive Officer of Rand McNally &
Company (publishing).

Samuel T. Reeves (64) Director Chairman of the Board and CEO, Pinacle L.L.C.
8211 North Fresno Street (investments); Director, Pacific Gas and
Fresno, CA 93720 Electric and PG&E Enterprises (utilities);
Director of Morgan Stanley Dean Witter
Institutional Fund, Inc., Morgan Stanley Dean
Witter Universal Funds, Inc. and Morgan Stanley
Dean Witter Strategic Adviser Fund, Inc.

Fergus Reid (66) Director Chairman and Chief Executive Officer of LumeLite
85 Charles Colman Blvd Plastics Corporation (injection molding);
Pawling, NY 12564 Trustee and Director of Vista Mutual Fund Group;
Director of Morgan Stanley Dean Witter
Institutional Fund, Inc., Morgan Stanley Dean
Witter Universal Funds, Inc. and Morgan Stanley
Dean Witter Strategic Adviser Fund, Inc.

Frederick O. Robertshaw (65) Director Of Counsel, Copple, Chamberlin and Boehm, P.C.
2800 North Central Avenue Formerly of Counsel, Bryan, Cave LLP; (law
Phoenix, AZ 85004 firms). Director of Morgan Stanley Dean Witter
Institutional Fund, Inc., Morgan Stanley Dean
Witter Universal Funds, Inc. and Morgan Stanley
Dean Witter Strategic Adviser Fund, Inc.

Harold J. Schaaff, Jr. (38)* Vice President Principal of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas of Morgan Stanley Dean Witter Investment
New York, NY 10020 Management Inc.; General Counsel and Secretary
of Morgan Stanley Dean Witter Investment
Management Inc.; Vice President of various U.S.
registered investment companies managed by
Morgan Stanley Dean Witter Investment Management
Inc.

Joseph P. Stadler (44)* Vice President Principal of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas Morgan Stanley Dean Witter Investment Management
New York, NY 10020 Inc.; Previously with Price Waterhouse LLP (now
PricewaterhouseCoopers LLP) (accounting); Vice
President of various U.S. registered investment
companies managed by Morgan Stanley Dean Witter
Investment Management Inc.
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- --------------------------------------- ---------------------- --------------------------------------------------
<S> <C> <C>
Stefanie V. Chang (32)* Vice President Vice President of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated and Morgan Stanley Dean Witter
New York, NY 10020 Investment Management Inc.; Vice President of
various U.S. registered investment companies
managed by Morgan Stanley Dean Witter Investment
Management Inc. Previously practiced law with
the New York law firm of Rogers & Wells.

Valerie Y. Lewis (43)* Secretary Vice President of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated and Morgan Stanley Dean Witter
New York, NY 10020 Investment Management Inc.; Previously with
Citicorp (banking); Secretary of various U.S.
registered investment companies managed by
Morgan Stanley Dean Witter Investment Management
Inc.

Karl O. Hartmann (44) Assistant Secretary Senior Vice President, Secretary and General
73 Tremont Street Counsel of Chase Global Funds Services Company;
Boston, MA 02108-3913 Previously, President, Secretary and General
Counsel, Leland, O'Brien, Rubinstein Associates,
Inc. (investments).

Joanna Haigney (32) Treasurer Assistant Vice President, Senior Manager of Fund
73 Tremont Street Administration and Compliance Services of Chase
Boston, MA 02108-3913 Global Funds Services Company; Treasurer of
various U.S. registered investment companies
managed by Morgan Stanley Dean Witter Investment
Management Inc. Previously with Coopers &
Lybrand LLP.

Belinda A. Brady (31) Assistant Treasurer Fund Administration Manager, Chase Global Funds
73 Tremont Street Services Company. Previously was senior auditor
Boston, MA 02108-3913 at Coopers & Lybrand LLP (now
PricewaterhouseCoopers LLP).
</TABLE>

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

* "Interested Person" within the meaning of the 1940 Act.

REMUNERATION OF DIRECTORS AND OFFICERS

Members of the Board of Directors of the Fund do not receive compensation for
serving as Directors of the Fund. However, members of the Board of Directors who
are not "interested persons" within the meaning of the 1940 Act ("Disinterested
Directors") are also members of the boards of directors of certain other
investment companies advised by MSAM or MAS (or by affiliated companies),
including certain Underlying Funds (such other investment companies are referred
to as the "Fund Complex"), and receive compensation from such other investment
companies in the Fund Complex. Accordingly, as shareholders of the Underlying
Funds, the Portfolios will indirectly bear their proportionate share of
Directors' compensation paid by the Fund Complex. The open-end investment
companies in the Fund Complex pay each of the Disinterested Directors an annual
aggregate compensation of $65,000, plus out-of-pocket expenses, and pay each of
the Disinterested Directors on the Board Audit Committees additional annual
aggregate compensation of $10,000 for serving on such committees. The aggregate
of such compensation for each Disinterested Director is allocated among the
open-end investment companies in direct proportion to their respective average
annual net assets. Column (2) in the following table sets forth that no
compensation was paid by the Fund to any Director for serving as a Director of
the Fund. Column (5) in the table sets forth aggregate compensation paid by the
Fund Complex to each Director during the fiscal year ended December 31, 1998.
Compensation amounts do not include reimbursements of out-of-pocket expenses. As
of December 31, 1998, to Fund management's knowledge, the Directors and officers
of the Fund, as a group, owned less than 1% of the outstanding common stock of
each Portfolio of the Fund.

22
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
(3) (4)
PENSION OR ESTIMATED
(2) RETIREMENT ANNUAL
AGGREGATE BENEFITS ACCRUED BENEFITS
(1) COMPENSATION AS PART OF FUND UPON
NAME OF DIRECTOR FROM FUND EXPENSES RETIREMENT
- -------------------------------------------------------------------- ----------------- --------------------- ---------------
<S> <C> <C> <C>
Barton M. Biggs..................................................... $ 0 $ 0 $ 0
Michael F. Klein.................................................... 0 0 0
John D. Barrett, II(b).............................................. 0 0 0
Gerard E. Jones(b).................................................. 0 0 0
Andrew McNally, IV.................................................. 0 0 0
Samuel T. Reeves.................................................... 0 0 0
Fergus Reid(b)...................................................... 0 0 0
Frederick O. Robertshaw............................................. 0 0 0

(5)
TOTAL COMPENSATION
FROM FUND COMPLEX
(1) PAID TO
NAME OF DIRECTOR DIRECTORS(A)
- -------------------------------------------------------------------- -------------------
<S> <C>
Barton M. Biggs..................................................... $ 0
Michael F. Klein.................................................... 0
John D. Barrett, II(b).............................................. --(c)
Gerard E. Jones(b).................................................. --(c)(d)
Andrew McNally, IV.................................................. --(c)
Samuel T. Reeves.................................................... --(c)
Fergus Reid(b)...................................................... --(c)(d)
Frederick O. Robertshaw............................................. --(c)
</TABLE>

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

(a) Amounts include $ , $ and $ of deferred compensation for
Messrs. McNally, Reeves and Reid, respectively.

(b) Member of Audit Committee of the Board of Directors of the Fund.

(c) Number of other investment companies in Fund Complex from whom Director is
expected to receive compensation: Mr. Barrett -- 2; Mr. Jones -- 3; Mr.
McNally -- 2; Mr. Reeves -- 2; Mr. Reid -- 3; Mr. Robertshaw -- 2.

(d) Includes amounts paid for service as Director of a closed-end investment
company in the Fund Complex, in addition to amounts paid by the open-end
investment companies.

INVESTMENT ADVISORY AND OTHER SERVICES

MSDW Investment Management is a wholly owned subsidiary of Morgan Stanley Dean
Witter & Co. ("MSDW"). The principal offices of MSDW Investment Management are
at 1221 Avenue of the Americas, New York, New York 10020. MSDW Investment
Management receives no compensation for advisory services to the Portfolios.

Pursuant to a separate Administration Agreement with the Fund, MSDW Investment
Management provides administrative services, including accounting, transfer
agency, dividend disbursement, and other services, directly or through third
parties to the Portfolios. For its services under the Administration Agreement,
the Fund pays MSDW Investment Management a monthly fee which on an annual basis
equals 0.15% of the average daily net assets of each Portfolio.

Under a Sub-Administration Agreement between MSDW Investment Management and The
Chase Manhattan Bank ("Chase"), Chase Global Funds Services Company ("Chase
Global," a corporate affiliate of Chase) provides dividend disbursing, transfer
agent and other fund accounting services to the Fund. Chase Global's business
address is 73 Tremont Street, Boston, Massachusetts 02108-3913.

PRINCIPAL UNDERWRITER

Morgan Stanley serves as principal underwriter to the Fund. For information
relating to the services provided by Morgan Stanley
see "Distribution of Shares."

FUND ADMINISTRATION

MSDW Investment Management also provides administrative services to the Fund
pursuant to an Administration Agreement. The services provided under the
Administration Agreement are subject to the supervision of the officers and the
Board of Directors of the Fund and include day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of records,
preparation of reports, supervision of the Fund's arrangements with its
custodian, and assistance in the preparation of the Fund's registration
statement under federal laws. The Administration Agreement also provides that
MSDW Investment Management, through its agents, will provide dividend disbursing
and transfer agent services to the Fund. For its services under the
Administration Agreement, the Fund pays MSDW Investment Management a monthly fee
which on an annual basis equals 0.15% of the average daily net assets of each
Portfolio.

SUB-ADMINISTRATOR. Under an agreement between MSDW Investment Management and
Chase, Chase Global, a corporate affiliate of Chase, provides certain
administrative services to the Fund. MSDW Investment Management supervises and
monitors the administrative services provided by Chase Global. Their services
are also subject to the supervision of the officers and Board of Directors of
the Fund. Chase Global provides operational and administrative services to
investment companies with approximately $161 billion in assets and having
approximately 216,918 shareholder accounts as of March 31, 1998. Chase Global's
business address is 73 Tremont Street, Boston, Massachusetts 02108-3913.

23
<PAGE>
CUSTODIAN

Chase, located at 73 Tremont Street, Boston, MA, acts as the Fund's custodian.

DIVIDEND DISBURSING AND TRANSFER AGENT

Chase Global, 73 Tremont Street, Boston, MA, 02108-3913, provides dividend
disbursing and transfer agency for the Fund pursuant to the Sub-Administration
Agreement.

INDEPENDENT ACCOUNTANTS

, located at 1177 Avenue of the Americas, New York, NY,
serves as independent accountants for the Fund and audits the annual financial
statements of each Portfolio.

FUND COUNSEL

Morgan, Lewis & Bockius LLP, located at 1701 Market Street, Philadelphia, PA
19103, acts as the Fund's legal counsel.

YEAR 2000

The management and distribution services provided to the Fund by MSDW Investment
Management and Morgan Stanley depend on the smooth functioning of their computer
systems. Many computer software systems in use today cannot recognize the year
2000, but revert to 1900 or some other date, due to the manner in which dates
were encoded and calculated. That failure could have a negative impact on the
handling of securities trades, pricing and account services. MSDW Investment
Management and Morgan Stanley have been actively working on necessary changes to
their own computer systems to deal with the year 2000 problem and expect that
their systems will be adapted before that date. There can be no assurance,
however, that they will be successful. In addition, other unaffiliated service
providers may be faced with similar problems. MSDW Investment Management and
Morgan Stanley are monitoring their remedial efforts, however, there can be no
assurance that they and the services they provide will not be adversely
affected.

In addition, it is possible that the markets for securities in which the
Portfolios invest may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Portfolios' investments may be
adversely affected.

DISTRIBUTION OF SHARES

Morgan Stanley, a wholly-owned subsidiary of MSDW, serves as the Fund's
exclusive distributor of Portfolio shares pursuant to a Distribution Agreement.
In addition, to promote the sale of Fund shares, the Fund has adopted a Plan of
Distribution with respect to the Class B shares of each Portfolio under Rule
12b-1 of the 1940 Act (each, a "Plan"). Under each Plan Morgan Stanley is
entitled to receive as compensation from each Portfolio a fee, which is accrued
daily and paid quarterly, at an annual rate of 0.25% of the average daily net
assets of the Class B shares. Each Plan is designed to compensate Morgan Stanley
for its services in connection with distributing shares of all Portfolios.
Morgan Stanley may retain any portion of the fees it does not expend in meeting
its obligations to the Fund. Morgan Stanley may compensate financial
intermediaries, plan fiduciaries and administrators for providing
distribution-related services, including account maintenance services, to
shareholders (including, where applicable, underlying beneficial owners) of
Class B shares.

The Plans for the Class B shares were most recently approved by the Fund's Board
of Directors, including those directors who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of a
Plan or in any agreements related thereto, on June 25, 1998.

For the fiscal year ended December 31, 1998 Morgan Stanley spent 12b-1 fees
received from the Portfolios pursuant to the Plan in the following ways:

<TABLE>
<CAPTION>
TOTAL DOLLAR AMOUNT OF 12B-1 FEES SPENT
DURING
FISCAL YEAR ENDED DECEMBER 31, 1998
-------------------------------------------
<S> <C>
Advertising.....................................................
Printing and mailing of prospectuses to other than current
shareholders...................................................
Compensation to underwriters....................................
Compensation to broker-dealers..................................
Compensation to sales personnel.................................
Interest, carrying, or other financing charges..................
Shareholder servicing...........................................
</TABLE>

24
<PAGE>
PORTFOLIO TRANSACTIONS

The Portfolios will invest primarily in shares of the Underlying Funds. Orders
for transactions in the Underlying Funds will be placed with Morgan Stanley or
MAS Fund Distribution, Inc., the distributors for MSDWIF and MAS Funds,
respectively. Morgan Stanley also acts as distributor for the Portfolios.

PORTFOLIO TURNOVER

Each Portfolio's turnover rate for a year is calculated by dividing the lesser
of the value of the purchases or sales for the year by the average monthly
market value of the Portfolio for the year. The rate of portfolio turnover will
not be a limiting factor when a Portfolio deems it appropriate to purchase or
sell shares of the Underlying Funds or other portfolio securities.

GENERAL INFORMATION

FUND HISTORY

The Fund was incorporated pursuant to the laws of the State of Maryland on May
20, 1997 under the name Morgan Stanley Strategic Adviser Fund, Inc. The Fund
filed a registration statement with the SEC registering itself as an open-end
management investment company offering diversified and non-diversified series
under the 1940 Act and its shares under the Securities Act of 1933, as amended,
and commenced operations on December 31, 1997. Effective December 1, 1998, the
Fund changed its name to Morgan Stanley Dean Witter Strategic Adviser Fund, Inc.

DESCRIPTION OF SHARES AND VOTING RIGHTS

The Fund's Articles of Incorporation currently permit the Directors to issue
three billion shares of common stock, par value $.001 per share, from an
unlimited number of classes ("Portfolios") of shares. Currently the Fund
consists of shares of three Portfolios.

When issued, the shares of each Portfolio of the Fund will be fully paid and
nonassessable, and have no preference as to conversion, exchange, dividends,
retirement or other features. The shares of each Portfolio of the Fund have no
pre-emptive rights. The shares of the Fund have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books of
the Fund.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

The Fund's policy is to distribute substantially all of each Portfolio's net
investment income, if any. The Fund may also distribute any net realized capital
gains in the amount and at the times that will avoid both income (including
taxable gains) taxes on it and the imposition of the federal excise tax on
income and capital gains (see discussion under "Taxes" in this Statement of
Additional Information). However, the Fund may also choose to retain net
realized capital gains and pay taxes on such gains. The amounts of any income
dividends or capital gains distributions cannot be predicted. Any dividend or
distribution paid by a Portfolio will have the effect of reducing the per share
net asset value of that Portfolio by the per share amount of the dividend or
distribution.

As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividends and capital gains distributions for a class of shares are
automatically received in additional shares of such class of that Portfolio of
the Fund at the net asset value as of the business day following the record
date. This automatic reinvestment of dividends and distributions will remain in
effect until the Fund is notified by the shareholder in writing at least three
days prior to the record date that either the Income Option (income dividends in
cash and capital gains distributions in additional shares at net asset value) or
the Cash Option (both income dividends and capital gains distributions in cash)
has been elected.

TAXES

The following is a summary of certain federal income tax considerations
generally affecting the Fund, Portfolios and their shareholders that are not
described in the Prospectuses. No attempt is made to present a detailed
explanation of the federal, state or local tax treatment of the Fund, Portfolios
or shareholders, and the discussion here and in the Prospectuses is not intended
to be a substitute for careful tax planning.

The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.

Each Portfolio within the Fund is generally treated as a separate corporation
for federal income tax purposes. Thus, the provisions of the Code generally will
be applied to each Portfolio separately, rather than to the Fund as a whole.

25
<PAGE>
REGULATED INVESTMENT COMPANY QUALIFICATION

Each Portfolio intends to qualify and elect to be treated for each taxable year
as a regulated investment company ("RIC") under Subchapter M of the Code. In
order to so qualify, each Portfolio must, among other things, (i) derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, and certain other
related income, including, generally, certain gains from options, futures and
forward contracts; and (ii) diversify its holdings so that, at the end of each
fiscal quarter of the Portfolio's taxable year, (a) at least 50% of the market
value of the Portfolio's total assets is represented by cash and cash items,
U.S. Government securities, securities of other RICs, and other securities, with
such other securities limited, in respect to any one issuer, to an amount not
greater than 5% of the value of the Portfolio's total assets or 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets are invested in the securities (other than U.S.
Government securities or securities of other RICs) of any one issuer or two or
more issuers which the Portfolio controls and which are engaged in the same,
similar, or related trades or business. For purposes of the 90% of gross income
requirement described above, foreign currency gains which are not directly
related to a Portfolio's principal business of investing in stock or securities
(or options or futures with respect to stock or securities) may be excluded from
income that qualifies under the 90% requirement.

In addition to the requirements described above, in order to qualify as a RIC, a
Portfolio must distribute at least 90% of its net investment income (which
generally includes dividends, taxable interest, and the excess of net short-term
capital gains over net long-term capital losses less operating expenses) and at
least 90% of its net tax-exempt interest income, for each tax year, if any, to
its shareholders. If a Portfolio meets all of the RIC requirements, it will not
be subject to federal income tax on any of its net investment income or capital
gains that it distributes to shareholders.

If a Portfolio fails to qualify as a RIC for any year, all of its income will be
subject to tax at corporate rates, and its distributions (including capital
gains distributions) will be taxable as ordinary income dividends to its
shareholders to the extent of the Portfolio's current and accumulated earnings
and profits, and will be eligible for the corporate dividends received deduction
for corporate shareholders.

GENERAL TAX TREATMENT OF QUALIFYING RICS AND SHAREHOLDERS

Each Portfolio intends to distribute substantially all of its taxable net
investment income (including, for this purpose, net short-term capital gain) to
shareholders. Dividends from a Portfolio's net investment income are taxable to
shareholders as ordinary income, whether received in cash or in additional
shares. Such dividends paid by a Portfolio generally will not qualify for the
dividends-received deduction for corporate shareholders. Each Portfolio will
report annually to its shareholders the amount of dividend income qualifying for
such treatment.

Each Portfolio will decide whether to distribute or to retain all or part of any
net capital gains (the excess of net long-term capital gains over net short-term
capital losses) in any year for reinvestment. Distributions of net capital gain
are taxable to shareholders as a long-term capital gain regardless of how long
shareholders have held their shares. Each Portfolio will send reports annually
to shareholders regarding the federal income tax status of all distributions
made during the preceding year. If any such gains are retained, the Portfolio
will pay federal income tax thereon, and, if the Portfolio makes an election,
the shareholders will include such undistributed gains in their income, will
increase their tax basis in Portfolio shares by 65% of the amount included in
their income and will be able to claim their share of the tax paid by the
Portfolio as a refundable credit.

Dividends and other distributions declared by a Portfolio in October, November
or December of any year and payable to shareholders of record on a date in such
month will be deemed to have been paid by the Portfolio and received by
shareholders on December 31 of that year if the distributions are paid by the
Portfolio at any time during the following January.

A gain or loss realized by a shareholder on the sale, exchange or redemption of
shares of a Portfolio held as a capital asset will be capital gain or loss, and
such gain or loss will be long-term if the holding period for the shares exceeds
12 months and otherwise will be short-term. Any loss realized on a sale,
exchange or redemption of shares of a Portfolio will be disallowed to the extent
the shares disposed of are replaced within the 61-day period beginning 30 days
before and ending 30 days after the shares are disposed of. Any loss realized by
a shareholder on the disposition of shares held 6 months or less is treated as a
long-term capital loss to the extent of any distributions of net long-term
capital gains received by the shareholder with respect to such shares or any
inclusion of undistributed capital gain with respect to such shares.

Each Portfolio will generally be subject to a nondeductible 4% federal excise
tax to the extent it fails to distribute by the end of any calendar year at
least 98% of its ordinary income for that year and 98% of its capital gain net
income (the excess of short- and long-term capital gains over short- and
long-term capital losses) for the one-year period ending on October 31 of that
year, plus certain other amounts. Each Portfolio intends to make sufficient
distributions or deemed distributions of its ordinary income and capital gain
net income (the excess of short-term and long-term capital gain over short-term
and long-term capital losses, including any available capital loss
carryforwards), prior to the end of each calendar year to avoid liability for
federal excise tax.

The Fund may be required to withhold and remit to the U.S. Treasury 31% of any
dividends, capital gains distributions and redemption proceeds paid to any
individual or certain other non-corporate shareholder (i) who has failed to
provide a correct taxpayer identification number (generally an individual's
social security number or non-individual's employer identification

26
<PAGE>
number) on the Account Registration Form; (ii) who is subject to backup
withholding by the Internal Revenue Service; or (iii) who has not certified to
the Fund that such shareholder is not subject to backup withholding. This backup
withholding is not an additional tax, and any amounts withheld may be credited
against the shareholder's ultimate U.S. tax liability.

A Section 1256 position held by a Portfolio will generally be marked-to-market
(i.e. treated as if it were sold for fair market value) on the last business day
of the Fund's fiscal year, and all gain or loss associated with fiscal year
transactions and mark-to-market positions at fiscal year end (except certain
currency gain or loss covered by Section 988 of the Code) will generally be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. The effect of Section 1256 mark-to-market rules may be to accelerate
income or to convert what otherwise would have been long-term capital gains into
short-term capital gains or short-term capital losses into long-term capital
losses within a Portfolio. The acceleration of income on Section 1256 positions
may require a Portfolio to accrue taxable income without the corresponding
receipt of cash. In order to generate cash to satisfy the distribution
requirements of the Code, a Portfolio may be required to dispose of portfolio
securities that it otherwise would have continued to hold or to use cash flows
from other sources. Any or all of these rules may, therefore, affect the amount,
character and timing of income earned and, in turn, distributed to shareholders
by a Portfolio.

As discussed above, in order for each Portfolio to continue to qualify for
federal income tax treatment as a RIC, at least 90% of its gross income for a
taxable year must be derived from certain qualifying income, including
dividends, interest, income derived from loans of securities, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business of investing in stock, securities or
currencies. Any net gain realized from the closing out of futures contracts will
therefore generally be qualifying income for purposes of the 90% requirement.

TAXES AND FOREIGN SHAREHOLDERS

Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, a foreign trust or estate, a foreign corporation, or a foreign
partnership ("Foreign Shareholder") depends on whether the income from the
Portfolio is "effectively connected" with a U.S. trade or business carried on by
such shareholder.

If the income from a Portfolio is not effectively connected with a U.S. trade or
business carried on by a Foregin Shareholder, distributions of net investment
income plus the excess of net short-term capital gains over net long-term
capital losses will be subject to U.S. withholding tax at the rate of 30% (or
such lower treaty rate as may be applicable) upon the gross amount of the
dividend. furthermore, Foreign Shareholders will generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of a Portfolio,
distributions of net long-term capital gains, and amounts retained by the Fund
which are designated as undistributed capital gains.

If the income from a Portfolio is effectively connected with a U.S. trade or
business carried on by a Foreign Shareholder, then distributions from the
Portfolio and any gains realized upon the sale of shares of the Portfolio, will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens
and residents or domestic corporations.

A Portfolio may be required to withhold U.S. federal income tax on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless the Foreign Shareholder complies with Internal Revenue Service
certification requirements.

The tax consequences to a Foreign Shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described here. Furthermore,
Foreign Shareholders are strongly urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in a
Portfolio, including the potential application of the provisions of the Foreign
Investment in Real Estate Property Tax Act of 1980, as amended.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

CONTROL PERSONS

As of March 31, 1999, the following persons were record or beneficial owners of
5% or more of the outstanding shares of the Portfolios:
<TABLE>
<CAPTION>
PORTFOLIO NAME OF BENEFICIAL OWNER
- -------------------------------------------------------------------- ---------------------------------------------------
<S> <C>
Conservative Portfolio.............................................. [Name and Address]
Moderate Portfolio.................................................. [Name and Address]
Aggressive Portfolio................................................ [Name and Address]

<CAPTION>
PERCENT OF
OUTSTANDING
PORTFOLIO SHARES
- -------------------------------------------------------------------- -------------
<S> <C>
Conservative Portfolio.............................................. %
Moderate Portfolio.................................................. %
Aggressive Portfolio................................................ %
</TABLE>

MSDW has voting power with respect to the voting securities in its ownership.
Consequently, under the 1940 Act, MSDW may be deemed to be a controlling person
of the Portfolio.

To the best knowledge of the Fund, MSDW's ownership of such securities is for
investment only, not for the purposes of control, but may materially affect the
voting rights of other shareholders.

27
<PAGE>
PERFORMANCE INFORMATION

The Fund may from time to time quote various performance figures to illustrate a
Portfolio's past performance.

Performance quotations by investment companies are subject to rules adopted by
the SEC, which require the use of standardized performance quotations. In the
case of total return, non-standardized performance quotations may be furnished
by the Fund but must be accompanied by certain standardized performance
information computed as required by the SEC. Current yield and average annual
compounded total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used by the Fund to compute or express
performance follows.

TOTAL RETURN

From time to time each Portfolio may advertise total return for the shares of
the Portfolio. Total return figures are based on historical earnings and are not
intended to indicate future performance. The average annual total return is
determined by finding the average annual compounded rates of return over 1-, 5-,
and 10-year periods (or over the life of the Portfolio) that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1-, 5-, and 10-year period (or over the life of the Portfolio) and the
deduction of all applicable Fund expenses on an annual basis.

The average annual compounded rates of return (unless otherwise noted) for the
Fund's Portfolios for the one year and five year periods ended December 31, 1998
and for the period from inception through December 31, 1998 are as follows:
<TABLE>
<CAPTION>
INCEPTION ONE AVERAGE ANNUAL
NAME OF PORTFOLIO DATE YEAR FIVE YEARS
- ---------------------------------------------------------------------------------- --------- --------- -----------------
<S> <C> <C> <C>
CONSERVATIVE PORTFOLIO
CLASS A......................................................................... 12/31/97 N/A
CLASS B......................................................................... 12/31/97 N/A
MODERATE PORTFOLIO
CLASS A......................................................................... 12/31/97 N/A
CLASS B......................................................................... 12/31/97 N/A
AGGRESSIVE PORTFOLIO
CLASS A......................................................................... 12/31/97 N/A
CLASS B......................................................................... 12/31/97 N/A

<CAPTION>
AVERAGE ANNUAL
NAME OF PORTFOLIO SINCE INCEPTION
- ---------------------------------------------------------------------------------- -----------------
<S> <C>
CONSERVATIVE PORTFOLIO
CLASS A.........................................................................
CLASS B.........................................................................
MODERATE PORTFOLIO
CLASS A.........................................................................
CLASS B.........................................................................
AGGRESSIVE PORTFOLIO
CLASS A.........................................................................
CLASS B.........................................................................
</TABLE>

These figures were calculated according to the following formula:

where:

<TABLE>
<C> <C> <S>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of hypothetical $1,000 payment made at the beginning
of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year
periods (or fractional portion thereof).
</TABLE>

CALCULATION OF YIELD

From time to time certain of the Portfolios may advertise yield.

Current yield reflects the income per share earned by a Portfolio's investments.

Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.

Yield is obtained using the following formula:

Yield = 2 [( (a-b)/cd + 1)(6) - 1 ]

where:

<TABLE>
<C> <C> <S>
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that were entitled
to receive income distributions
d = the maximum offering price per share on the last day of the period
</TABLE>

28
<PAGE>
GENERAL PERFORMANCE INFORMATION

Each Portfolio's performance will fluctuate, unlike bank deposits or other
investments which pay a fixed yield for a stated period of time. Past
performance is not necessarily indicative of future return. Actual performance
will depend on such variables as portfolio quality, average portfolio maturity,
the type of portfolio instruments acquired, changes in interest rates, portfolio
expenses and other factors. Performance is one basis investors may use to
analyze a Portfolio as compared to other funds and other investment vehicles.
However, performance of other funds and other investment vehicles may not be
comparable because of the foregoing variables, and differences in the methods
used in valuing their portfolio instruments, computing net asset value and
determining performance.

From time to time, a Portfolio's performance may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, a Portfolio may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. Rankings that compare the performance of the
Funds to one another in appropriate categories over specific periods of time may
also be quoted in advertising.

Portfolio advertising may include data on historical returns of the capital
markets in the United States compiled or published by Ibbotson Associates of
Chicago, Illinois ("Ibbotson"), including returns on common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the Consumer Price Index), and combinations of various capital
markets. The performance of these capital markets is based on the returns of
different indices. The Portfolios may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the
Portfolios. The Portfolios may also compare their performance to that of other
compilations or indices that may be developed and made available in the future.

The Portfolios may include in advertisements, charts, graphs or drawings which
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, foreign securities, stocks, bonds,
treasury bills and shares of a Portfolio. In addition, advertisements may
include a discussion of certain attributes or benefits to be derived by an
investment in a Portfolio and/or other mutual funds, shareholder profiles and
hypothetical investor scenarios, timely information on financial management, tax
and retirement planning and various investment alternatives. Advertisements may
include lists of representative Morgan Stanley clients. The Portfolios may also
from time to time include discussions or illustrations of the effects of
compounding in advertisements. "Compounding" refers to the fact that, if
dividends or other distributions on a Portfolio investment are reinvested by
being paid in additional Portfolio shares, any future income or capital
appreciation of a Portfolio would increase the value, not only of the original
investment in the Portfolio, but also of the additional Portfolio shares
received through reinvestment.

The Portfolios may include in advertisements, discussions or illustrations of
the potential investment goals of a prospective investor (including materials
that describe general principles of investing, such as asset allocation,
diversification, risk tolerance, goal setting, questionnaires designed to help
create a personal financial profile, worksheets used to project savings needs
based on assumed rates of inflation and hypothetical rates of return and action
plans offering investment alternatives), investment management techniques,
policies or investment suitability of a Portfolio (such as value investing,
market timing, dollar cost averaging, asset allocation, constant ratio transfer,
automatic account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments). Advertisements and sales materials
relating to a Portfolio may include information regarding the background and
experience of its portfolio managers; the resources, expertise and support made
available to the portfolio managers by Morgan Stanley; and the portfolio
manager's goals, strategies and investment techniques.

The Portfolios' advertisements may discuss economic and political conditions of
the United States and foreign countries, the relationship between sectors of the
U.S., a foreign, or the global economy and the U.S., a foreign, or the global
economy as a whole and the effects of inflation. The Portfolios may include
discussions and illustrations of the growth potential of various global markets
including, but not limited to, Africa, Asia, Europe, Latin America, North
America, South America, Emerging Markets and individual countries. These
discussions may include the past performance of the various markets or market
sectors; forecasts of population, gross national product and market performance;
and the underlying data which supports such forecasts. From time to time,
advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in the
Portfolios' shareholder reports (including the investment composition of a
Portfolio), as well as the views of Morgan Stanley as to current market,
economic, trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Portfolio.

The Portfolios may quote various measures of volatility and benchmark
correlation in advertising. The Portfolios may compare these measures to those
of other funds. Measures of volatility seek to compare the historical share
price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Portfolio may also advertise its current interest rate
sensitivity, duration, weighted average maturity or similar maturity
characteristics.

29
<PAGE>
The Portfolio may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Portfolio at periodic intervals,
thereby purchasing fewer shares when prices are high and more shares when prices
are low. While such a strategy does not assure a profit or guard against loss in
a declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels.

DESCRIPTION OF RATINGS

DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS

EXCERPTS FROM MOODY'S DESCRIPTION OF BOND RATINGS: Aaa -- Bonds which are rated
Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt-edged." Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues. Aa -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than Aaa securities. A -- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment some time in the future. Baa -- Bonds which are rated Baa are
considered as medium-grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba -- Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B -- Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Moody's applies numerical modifiers
1, 2 and 3 in each generic voting classification from Aa through B. The modifier
1 indicates that the security ranks at a higher end of the rating category;
modifier 2 indicates a mid-range rating; and the modifier 3 indicates that the
issue ranks at the lower end of the rating category. Caa -- Bonds which are
rated Caa are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Ca -- Bonds
which are rated Ca represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. C -- Bonds
which are rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.

EXCERPTS FROM S&P'S DESCRIPTION OF BOND RATINGS: AAA -- Bonds rated AAA have
the highest rating assigned by Standard & Poor's to a debt obligation and
indicate an extremely strong capacity to pay principal and interest. AA -- Bonds
rated AA have a very strong capacity to pay interest and repay principal and
differ from the highest rated issues only to a small degree. A -- Bonds rated A
have a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than bonds in higher rated categories. BBB -- Bonds rated
BBB are regarded as having an adequate capacity to pay interest and repay
principal. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than for debt in higher rated categories. BB, B, CCC, CC -- Debt rated BB, B,
CCC, CC and C is regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. C -- The rating C may be used to cover a
situation where a bankruptcy petition has been filed or similar action has been
taken, but payments on this obligation are being continued. D -- Debt rated D is
in default, and payment of interest and/or repayment of principal is in arrears.

DESCRIPTION OF MOODY'S RATINGS OF STATE AND MUNICIPAL NOTES: Moody's ratings
for state and municipal notes and other short-term obligations are designated
Moody's Investment Grade ("MIG"). Symbols used are as follows: MIG-1 -- best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established broad-based access to the market for
refinancing, or both; MIG-2 -- high quality with margins of protection ample
although not so large as in the preceding group; MIG-3 -- favorable quality,
with all security elements accounted for but lacking the undeniable strength of
the preceding grades.

DESCRIPTION OF MOODY'S HIGHEST COMMERCIAL PAPER RATING: Prime-1 ("Pl") --
Judged to be of the best quality. Their short-term debt obligations carry the
smallest degree of investment risk.

30
<PAGE>
EXCERPT FROM S&P'S RATING OF MUNICIPAL NOTE ISSUES: SP-l+ -- very strong
capacity to pay principal and interest; SP-2-- strong capacity to pay principal
and interest.

DESCRIPTION OF S&P'S HIGHEST COMMERCIAL PAPER RATINGS: A-l+ -- this designation
indicates the degree of safety regarding timely payment is extremely strong. A-1
- -- this designation indicates the degree of safety regarding timely payment is
strong.

FINANCIAL STATEMENTS

The Fund's audited financial statements for the fiscal year ended December 31,
1998, including notes thereto and the report of are
herein incorporated by reference from the Fund's Annual Report. A copy of the
Fund's Annual Report to Shareholders must accompany the delivery of this
Statement of Additional Information.

APPENDIX A

The following is a list of the Underlying Funds which are investment portfolios
of MORGAN STANLEY DEAN WITTER INSTITUTIONAL FUND, INC., with their respective
investment objectives and a brief statement of their investment policies.

GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS:

The ACTIVE INTERNATIONAL ALLOCATION PORTFOLIO seeks long-term capital
appreciation by investing in accordance with country weightings determined by
MSDW Investment Management in equity securities of non-U.S. issuers which, in
the aggregate, replicate broad country indices.

The ASIAN EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of Asian issuers.

The ASIAN REAL ESTATE PORTFOLIO seeks to provide long-term capital appreciation
by investing primarily in equity securities of companies in the Asian real
estate industry.

The CHINA GROWTH PORTFOLIO seeks to provide long-term capital appreciation by
investing primarily in equity securities of issuers in the People's Republic of
China, Hong Kong and Taiwan.

The EMERGING MARKETS PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of emerging country issuers.

The EUROPEAN EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of European issuers.

The EUROPEAN REAL ESTATE PORTFOLIO seeks to provide current income and long-term
capital appreciation by investing primarily in equity securities of companies in
the European real estate industry.

The GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of issuers throughout the world, including U.S.
issuers.

The GOLD PORTFOLIO seeks long-term capital appreciation by investing primarily
in equity securities of foreign and domestic issuers engaged in gold-related
activities.

The INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers.

The INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers domiciled in EAFE
countries.

The INTERNATIONAL SMALL CAP PORTFOLIO seeks long-term capital appreciation by
investing primarily in equity securities of non-U.S. issuers with equity market
capitalizations of less than $1 billion.

The JAPANESE EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of Japanese issuers.

The LATIN AMERICAN PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of Latin American issuers and, from time to time,
debt securities issued or guaranteed by Latin American governments or
governmental entities.

U.S. EQUITY PORTFOLIOS:

The AGGRESSIVE EQUITY PORTFOLIO seeks capital appreciation by investing
primarily in corporate equity and equity-linked securities.

The EMERGING GROWTH PORTFOLIO seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of small- to medium-sized
corporations.

The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of medium and large
capitalization companies.

31
<PAGE>
The MICROCAP PORTFOLIO seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of small corporations.

The TECHNOLOGY PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of companies that, in the opinion of MSDW
Investment Management, are expected to benefit from their involvement in
technology and technology-related industries.

The U.S. EQUITY PLUS PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of issuers included in the S&P 500 Index.

The U.S. REAL ESTATE PORTFOLIO seeks to provide above-average current income and
long-term capital appreciation by investing primarily in equity securities of
companies in the U.S. real estate industry, including substantial investment in
real estate investment trusts.

The VALUE EQUITY PORTFOLIO seeks high total return by investing in equity
securities which MSDW Investment Management believes to be undervalued relative
to the stock market in general at the time of purchase.

EQUITY AND FIXED INCOME PORTFOLIOS:

FIXED INCOME PORTFOLIOS:

The EMERGING MARKETS DEBT PORTFOLIO seeks high total return by investing
primarily in debt securities of government, government-related and corporate
issuers located in emerging countries.

The FIXED INCOME PORTFOLIO seeks to produce a high total return consistent with
the preservation of capital by investing in a diversified portfolio of fixed
income securities.

The GLOBAL FIXED INCOME PORTFOLIO seeks to produce an attractive real rate of
return while preserving capital by investing in fixed income securities of
issuers throughout the world, including U.S. issuers.

The HIGH YIELD PORTFOLIO seeks to maximize total return by investing in a
diversified portfolio of high yield fixed income securities that offer a yield
above that generally available on debt securities in the four highest rating
categories of the recognized rating services.

The MORTGAGE-BACKED SECURITIES PORTFOLIO seeks to produce as high a level of
current income as is consistent with the preservation of capital by investing
primarily in a variety of investment grade mortgage-backed securities.

The MUNICIPAL BOND PORTFOLIO seeks to produce a high level of current income
consistent with preservation of principal by investing in municipal obligations,
the interest on which is exempt from federal income tax.

MONEY MARKET PORTFOLIOS:

The MONEY MARKET PORTFOLIO seeks to maximize current income and preserve capital
while maintaining high levels of liquidity through investing in high quality
money market instruments with remaining maturities of one year or less.

The MUNICIPAL MONEY MARKET PORTFOLIO seeks to maximize current tax-exempt income
and preserve capital while maintaining high levels of liquidity through
investing in high quality money market instruments with remaining maturities of
one year or less which are exempt from federal income tax.

The following is a list of the Underlying Funds which are investment portfolios
of MAS FUNDS, INC., with their respective investment objectives and a brief
statement of their investment policies.

EQUITY PORTFOLIOS:

The EQUITY PORTFOLIO seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing
primarily in a diversified portfolio of common stocks of companies which are
deemed by MAS to have earnings growth potential greater than the economy in
general and greater than the expected rate of inflation.

The GROWTH PORTFOLIO seeks to achieve long-term capital growth by investing
primarily in a diversified portfolio of common stocks of larger size companies
that are deemed by MAS to offer long-term growth potential.

The MID CAP GROWTH PORTFOLIO seeks to achieve long-term capital growth by
investing primarily in a diversified portfolio of common stocks of smaller and
medium size companies that are deemed by MAS to offer long-term growth
potential.

The MID CAP VALUE PORTFOLIO seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing in common stocks with equity capitalizations in the range of the
companies represented in the S&P MidCap 400 Index which are deemed by MAS to be
relatively undervalued based on certain proprietary measures of value. The
portfolio will typically exhibit a lower price/earnings value ratio than the S&P
MidCap 400 Index.

32
<PAGE>
The SMALL CAP GROWTH PORTFOLIO seeks long-term capital growth by investing
primarily in equity securities of companies with equity capitalizations in the
range of the Russell 2000 Index that are deemed by MAS to offer long-term growth
potential.

The SMALL CAP VALUE PORTFOLIO (not currently offered to new investors) seeks to
achieve above-average total return over a market cycle of three to five years,
consistent with reasonable risk, by investing primarily in a diversified
portfolio of common stocks with equity capitalizations in the range of companies
represented in the Russell 2000 Index which are deemed by MAS to be relatively
undervalued based on certain proprietary measures of value. The portfolio will
typically exhibit lower price/earnings and price/ book value ratios than the
Russell 2000.

The VALUE PORTFOLIO seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing
primarily in a diversified portfolio of common stocks which are deemed by MAS to
be relatively undervalued based on various measures such as price/earnings
ratios and price/book ratios.

The VALUE II PORTFOLIO seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing in
common stocks which are deemed by the Adviser to be relatively undervalued,
based on various measures such as price/earnings ratios and price/book ratios.

FIXED INCOME PORTFOLIOS:

The CASH RESERVES PORTFOLIO seeks to realize maximum current income, consistent
with preservation of capital and liquidity, by investing in a diversified
portfolio of money market instruments, cash equivalents and other short-term
securities having expected maturities of thirteen months or less. THE PORTFOLIOS
SEEKS TO MAINTAIN, BUT DOES NOT GUARANTEE, A CONSTANT NET ASSET VALUE OF $1.00
PER SHARE.

The DOMESTIC FIXED INCOME PORTFOLIO seeks to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing in a diversified portfolio of U.S. Governments and other investment
grade fixed income securities of domestic issuers.

The FIXED INCOME PORTFOLIO seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of U.S. Governments, corporate
fixed income securities, mortgage securities, foreign bonds and other fixed
income securities and derivatives. The portfolio's average-weighted maturity
will ordinarily exceed five years.

The FIXED INCOME II PORTFOLIO seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of U.S. Governments and other
investment grade fixed income securities.

The GLOBAL FIXED INCOME PORTFOLIO seeks to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in high-grade fixed income securities, foreign bonds and
derivatives representing securities of United States and foreign issuers. The
portfolio's average weighted maturity will ordinarily exceed five years.

The HIGH YIELD PORTFOLIO seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of high yield securities,
corporate fixed income securities and other fixed income securities (including
bonds rated below investment grade) and derivatives. The portfolio's average
weighted maturity will ordinarily exceed five years.

The INTERMEDIATE DURATION PORTFOLIO seeks to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of U.S. Governments and
investment-grade corporate fixed income securities, mortgage securities, foreign
bonds and other fixed income securities and derivatives. The portfolio with
maintain an average duration of between two and five years.

The INTERNATIONAL FIXED INCOME PORTFOLIO seeks to achieve above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in high-grade foreign bonds and derivatives. The
portfolio's average weighted maturity will ordinarily exceed five years.

The LIMITED DURATION PORTFOLIO seeks to achieve above-average total return over
a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of U.S. Governments, mortgage
securities, investment-grade corporate fixed income securities and other fixed
income securities. The portfolio will maintain an average duration of between
one and three years.

The MULTI-MARKET FIXED INCOME PORTFOLIO seeks to realize above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in a diversified portfolio of fixed income
securities of U.S. and foreign issuers. The portfolio's average weighted
maturity will ordinarily exceed five years.

33
<PAGE>
The MUNICIPAL PORTFOLIO seeks to realize above-average total return over a
market cycle of three to five years, consistent with conservation of capital and
the realization of current income which is exempt from federal income tax, by
investing primarily in a diversified portfolio of municipal and other fixed
income securities and derivatives, including a limited percentage of bonds rated
below investment grade. The portfolio's average weighted maturity will
ordinarily be between five and ten years.

The SPECIAL PURPOSE FIXED INCOME PORTFOLIO seeks to achieve above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in a diversified portfolio of U.S. Governments,
corporate fixed income securities, mortgage securities, foreign bonds and other
fixed income securities and derivatives. The portfolio's average weighted
maturity will ordinarily exceed five years.

The TARGETED DURATION PORTFOLIO seeks above average total return consistent with
reasonable risk by investing in fixed income securities and maintaining an
average weighted duration of the Merrill Lynch 1-3 Year Government Bond Index.

BALANCED PORTFOLIOS:

The BALANCED PORTFOLIO seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing in a
diversified portfolio of equity securities, fixed income securities and
derivatives. When MAS judges the relative outlook for the equity and
fixed-income markets to be neutral, the portfolio will be invested 60% in equity
securities and 40% in fixed income securities. The asset mix is actively managed
by MAS, with equity securities ordinarily representing between 45% and 75% of
the total investment. The average weighted maturity of the fixed-income portion
of the portfolio will ordinarily be greater than five years.

The BALANCED PLUS PORTFOLIO seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing in a diversified portfolio of common stocks of domestic and foreign
issuers and fixed income securities.

The MULTI-ASSET-CLASS PORTFOLIO seeks to achieve above-average total return over
a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of equity securities, fixed
income securities and high yield securities of United States and foreign issuers
and derivatives. The asset mix is actively managed by MAS.

ADVISORY PORTFOLIOS:

The ADVISORY FOREIGN FIXED INCOME PORTFOLIO seeks to achieve above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in high-grade foreign bonds and derivatives.

The ADVISORY MORTGAGE PORTFOLIO seeks to achieve returns consistent with returns
generated by the market for mortgage securities by investing primarily (at least
65% of its assets under normal circumstances) in mortgage securities. The
portfolio's average weighted maturity will ordinarily be greater than seven
years.

34
<PAGE>

PART C

Morgan Stanley Dean Witter Strategic Adviser Fund, Inc.
Other Information

Item 23. EXHIBITS

(a) (1) Registrant's Articles of Incorporation are incorporated by
reference to Exhibit No. 1 to the Pre-Effective Amendment No.1 to
the Registrant's Registration Statement on Form N-1A( File Nos.
333-32231 and 811-08303) as filed with the Securities and Exchange
Commission via EDGAR(Accession #0000912057-97-025172) on July 28,
1997.

(2) Articles of Amendment to Articles of Incorporation regarding name
change are filed herewith.

(b) Registrant's By-laws are incorporated by reference to Exhibit No. 2 to the
Pre-Effective Amendment No 1. to the Registrant's Registration Statement on
Form N-1A( File Nos. 333-32231 and 811-08303) as filed with the Securities
and Exchange Commission via EDGAR (Accession #0000912057-97-025172) on July
28, 1997.

(c) Instruments Defining Rights of Security Holders, incorporated by
reference to Exhibit 1 (Articles of Incorporation) as amended to date,
filed as part of Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (Registration No. 333-32231) filed
with the Securities and Exchange Commission via EDGAR (Accession
No. 0000912057-97-025172) on July 28, 1997, and Exhibit 2 (By-Laws) as
amended to date, filed as part of Pre-Effective Amendment No. 1 to such
Registration Statement filed with the Securities and Exchange Commission
via EDGAR on July 28, 1997.

(d) Investment Advisory Agreement between Registrant and Morgan Stanley Asset
Management Inc. ("MSAM") with respect to the Strategic Adviser
Conservative, Strategic Adviser Moderate and Strategic Adviser Aggressive
Portfolios is filed herewith.

(e) Distribution Agreement between Registrant and Morgan Stanley & Co.
Incorporated is filed herewith.

(f) Not applicable.

(g) Not applicable.

(h) (1) Administration Agreement between Registrant and Morgan Stanley Asset
Management Inc. is filed herewith.

(2) Form of Sub-Administration Agreement between Registrant and The
Chase Manhattan Bank to be filed by amendment.

(i) Opinion of Counsel is incorporated by reference to Exhibit 10 to the
Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-32231 and 811-08303) as filed with the Securities
and Exchange Commission via EDGAR (Accession #0001047469-97-006108) on
November 26, 1997.

(j) Consent of Independent Accountants, to be filed by amendment.

(k) None.

(l) Not applicable.

(m) Form of Plan of Distribution Pursuant to Rule 12b-1 for shares of the
Strategic Aggressive, Strategic Conservative and Strategic Moderate
Portfolios is incorporated by reference to Exhibit No. 15 to the
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A( File Nos. 333-32231 and 811-08303) as filed with the
Securities and Exchange Commission via EDGAR(Accession
#0000912057-97-025172) on July 28, 1997.

C-1
<PAGE>

(n) Financial Data Schedules filed herewith.

(o) Registrant's Rule 18f-3 Multiple Class Plan is incorporated by reference to
Exhibit No.18 to the Pre-Effective Amendment No.1 to the Registrant's
Registration Statement on Form N-1A( File Nos. 333-32231 and 811-08303) as
filed with the Securities and Exchange Commission via EDGAR (Accession
#0000912057-97-025172) on July 28, 1997.

(p) Powers of Attorney are incorporated by reference to Post-Effective
Amendment No.1 to Exhibit No. 24 to the Registrant's Registration Statement
on Form N-1A (File No. 333-32231 and 811-08303)as filed with the Securities
and Exchange Commission via EDGAR(Accession #0001047469-98-017392) on April
30, 1998 .

C-2
<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant. For any person
controlled by another person, disclose the percentage of voting securities owned
by the immediately controlling person or other basis of that person's control.
For each company, also provide the state or other sovereign power under the laws
of which the company is organized.

No person is controlled by or under common control with the
Registrant.

Item 25. INDEMNIFICATION

State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified against any liability incurred in their
official capacity, other than insurance provided by any director, officer,
affiliated person, or underwriter for their own protection.

Reference is made to Article SEVEN of the Registrant's Articles of
Incorporation. Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Describe any other business, profession, vocation or employment of a
substantial nature in which the investment adviser and each director, officer or
partner of the investment adviser, is or has been, engaged within the last two
fiscal years for his or her own account or in the capacity of director, officer,
employee, partner or trustee. (Disclose the name and principal business address
of any company for which a person listed above serves in the capacity of
director, officer, employee, partner or trustee, and the nature of the
relationship.)

Reference is made to the caption "Investment Adviser" in the
Prospectus constituting Part A of this Registration Statement and "Management of
the Fund" in Part B of this Registration Statement.

Listed below are the officers and Directors of Morgan Stanley Dean
Witter Investment Management Inc.:

C-3
<PAGE>

NAME AND POSITION WITH MSDW
INVESTMENT MANAGEMENT INC. NAME OF OTHER COMPANY POSITION WITH OTHER COMPANY
-------------------------- --------------------- ---------------------------
<S> <C> <C>
Barton M. Biggs Morgan Stanley & Co. Incorporated Managing Director
Chairman, Director and Managing Director

Dennis G. Sherva Morgan Stanley & Co. Incorporated Managing Director
Director and Managing Director

Harold J. Schaaff, Jr. Morgan Stanley & Co. Incorporated Principal
General Counsel, Secretary and Principal

Donald P. Ryan Morgan Stanley & Co. Incorporated Principal
Compliance Officer and Principal

Alexander C. Frank Morgan Stanley & Co. Managing Director
Treasurer Incorporated

Marna C. Whittington Miller Anderson & Sherrerd, LLP Executive Committee Member
Chief Operating Officer, Managing
Director and Member of Executive
Committee

Richard B. Worley Miller Anderson & Sherrerd, LLP Portfolio Manager and Executive
President, Director and Member of Committee Member
Executive Committee
MAS Fund Distribution, Inc. Registered Representative

Morgan Stanley & Co. Incorporated Managing Director

Peter D. Caldecott Morgan Stanley Dean Witter Investment Managing Director
Managing Director and Member of Management Limited
Executive Committee

Thomas L. Bennett Morgan Stanley & Co. Incorporated Managing Director
Member of Executive Committee and
Portfolio Manager
MAS Fund Distribution, Inc. Director

Miller Anderson & Sherrerd, LLP Portfolio Manager

Frank P. L. Minard Morgan Stanley & Co. Incorporated Managing Director
Managing Director and Member of
Executive Committee

Alan E. Goldberg Morgan Stanley & Co. Incorporated Managing Director
Member of Executive Committee
</TABLE>

In addition, MSDW Investment Management acts as investment adviser or
sub-adviser to the following registered investment companies: American
Advantage International Equity Fund; Fountain Square International Equity Fund;
The Latin American Discovery Fund, Inc.; The Malaysia Fund, Inc.; Morgan Stanley
Africa Investment Fund, Inc.; Morgan Stanley Asia-Pacific Fund, Inc.; Morgan
Stanley Emerging Markets Debt Fund, Inc.; Morgan Stanley Emerging Markets Fund,
Inc.; Morgan Stanley Global Opportunity Bond Fund, Inc.; Morgan Stanley High

C-4
<PAGE>

Yield Fund, Inc.; Morgan Stanley Russia and New Europe Fund, Inc.; Morgan
Stanley India Investment Fund, Inc.; certain portfolios of Morgan Stanley Dean
Witter Universal Funds, Inc.; Morgan Stanley Dean Witter Strategic Adviser Fund,
Inc.; The Pakistan Investment Fund, Inc.; The Thai Fund, Inc.; The Turkish
Investment Fund, Inc.; Aggressive Growth and Asset Allocation Fund, Inc.;
Accounts of Principal Variable Contracts Fund, Inc.; certain portfolios of the
SunAmerica Series Trust; Fortis Series Fund, Inc. - Global Asset Allocation
Series; Morgan Stanley Dean Witter International Fund; Morgan Stanley Dean
Witter International SmallCap Fund; Morgan Stanley Dean Witter Pacific Growth
Fund, Inc.; Morgan Stanley Dean Witter Real Estate Fund; Morgan Stanley Dean
Witter Variable Investment Series - Pacific Growth Portfolio; Morgan Stanley
Dean Witter Japan Fund, Inc.; Morgan Stanley Dean Witter European Growth Fund
Inc.; Morgan Stanley Dean Witter Variable Investment Series - European Growth
Portfolio; Morgan Stanley Dean Witter Growth Fund; Morgan Stanley Dean Witter
Select Dimensions Investment Series -- The Growth Portfolio; Morgan Stanley Dean
Witter Worldwide High Income Fund; Endeavor Series Trust - Endeavor Money Market
Portfolio; Endeavor Series Trust - Endeavor Asset Allocation Portfolio; EQ
Advisors Trust - Morgan Stanley Emerging Markets Equity Portfolio; Frank Russell
Investment Company - Diversified Equity Fund; Frank Russell Investment Company -
Equity I Fund; NASL Series Trust - Global Equity Trust; New England Zenith Fund
- - Morgan Stanley International Magnum Equity Series; North American Funds -
Global Equity Fund; Pacific Select Fund - The International Portfolio; Pacific
Select Fund - Real Estate Investment Trust ("REIT") Portfolio; SEI Institutional
Investments Trust - Emerging Markets Equity Fund; SEI Institutional
International Trust - Emerging Markets Equity Portfolio; Style Select Series
Inc. - Large Cap Blend Portfolio; TCW/DW Emerging Markets Opportunities Trust;
Van Kampen World Portfolio Series Trust - Global Government Securities Fund; Van
Kampen Life Investment Trust - Global Equity Fund; Van Kampen Life Investment
Trust - Real Estate Securities Fund; Van Kampen Global Managed Assets Fund; Van
Kampen Real Estate Securities Fund; certain portfolios of the Van Kampen Series
Fund, Inc.

Item 27. PRINCIPAL UNDERWRITERS

(a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal underwriter, depositor or
investment adviser.

Morgan Stanley & Co. Incorporated ("MS&Co.") is distributor for Morgan
Stanley Dean Witter Strategic Adviser Fund, Inc., Morgan Stanley Dean Witter
Institutional Fund, Inc. and Morgan Stanley Dean Witter Universal Funds, Inc.

(b) Provide the information with respect to each director, officer or
partner of each principal underwriter named in answer to Item 20.

- --------------------------------------------------------------------------------
Name and Principal Position and Offices with Position and Offices
Business Address* Morgan Stanley & Co. with Registrant
- --------------------------------------------------------------------------------

Barton M. Biggs Chairman and Director Chairman and Director

Bruce D. Fiedorek Director and Vice Chairman

Richard B. Fisher Director and Chairman of
the Board

Takeo Kani Director

Peter F. Karches Director and President and
Chief Operating Officer

John J. Mack Director

Robert A. Metzler Director

Stephan F. Newhouse Director and Vice Chairman

Ralph L. Pellechio Director and General
Counsel and Secretary

Joseph R. Perella Director

Robert G. Scott Director and Chief
Financial Officer

John S. Wadsworth, Jr. Director

C-5
<PAGE>

J. Steven W. Ward Director

*Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036

Item 28. LOCATION OF ACCOUNTS AND RECORDS

State the name and address of each person maintaining principal
possession of each account, book or other document required to be maintained by
section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and the rules under that
section.

The books, accounts and other documents required by Section 31(a)
under the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder are maintained in the physical possession of the Registrant;
Registrant's Sub-Transfer Agent, Chase Global Funds Services Company,
P.O. Box 2798, Boston, Massachusetts 02208-2798; and the Registrant's custodian
banks, including sub-custodians.

In addition, Morgan Stanley Dean Witter Investment Management Inc. and
Miller Anderson & Sherrerd, LLP, Registrant's investment advisers and
administrators, maintain possession of the Fund's corporate organizational
records, in addition to certain other records required by Rule 31a-1(b).

Item 29. MANAGEMENT SERVICES

Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B,
disclosing the parties to the contract and the total amount paid and by whom,
for the Fund's last three fiscal years.

Morgan Stanley Dean Witter Investment Management has entered into a
Chase Administration Agreement with The Chase Manhattan Bank ("Chase") (which
will be filed by amendment) pursuant to which Chase will provide the following
services to the Registrant: (i) managing, administering and conducting the
general business activities of the Registrant, other than those which are
contracted to third parties; (ii) providing personnel and facilities to perform
the foregoing; (iii) accounting services, including the preparation of
statements and reports; (iv) transfer agent services, including processing
correspondence from shareholders, recording transfers, issuing stock
certificates and handling checks; (v) handling dividends and distributions,
including disbursing, withholding and tax reporting; and (vi) providing office
facilities, statistical and research data, office supplies and assisting the
Registrant to comply with regulatory developments.

Item 30. UNDERTAKINGS

In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Fund intends to raise
its initial capital under section 14(a)(3)[15U.S.C. 80a-14(a)(3)].

(a) Not applicable.

(b) Registrant hereby undertakes that whenever a Shareholder or
Shareholders who meet the requirements of Section 16(c) of the 1940 Act inform
the Board of Directors of his or their desire to communicate with other
Shareholders of the Fund, the Directors will inform such Shareholder(s) as to
the approximate number of

C-6
<PAGE>

Shareholders of record and the approximate costs of mailing or afford said
Shareholders access to a list of Shareholders.

(c) Registrant hereby undertakes to furnish to each prospective person to
whom a prospectus will be delivered a copy of Registrant's latest annual report
to shareholders, when such annual report is issued, containing information
called for by Item 5A of Form N-1A, upon request and without charge.

C-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York and State of New
York on the 25th day of February, 1999.

MORGAN STANLEY DEAN WITTER STRATEGIC ADVISER FUND, INC.

By: /s/Michael F. Klein
-------------------
Michael F. Klein
President and Director

Pursuant to the requirements of the Securities Act of 1933 as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date(s) indicated.

Signature Title(s) Date
- --------- -------- ----

/s/Michael F. Klein Director, President, February 25, 1999
- ------------------------------ (Principal Executive
Michael F. Klein Officer)

*/s/ Barton M. Biggs Director (Chairman) February 25, 1999
- ------------------------------
Barton M. Biggs

*/s/ John D. Barrett, II Director February 25, 1999
- ------------------------------
John D. Barrett, II

*/s/ Gerard E. Jones Director February 25, 1999
- ------------------------------
Gerard E. Jones

*/s/ Andrew McNally, IV Director February 25, 1999
- ------------------------------
Andrew McNally, IV

*/s/ Samuel T. Reeves Director February 25, 1999
- ------------------------------
Samuel T. Reeves

*/s/ Fergus Reid Director February 25, 1999
- ------------------------------
Fergus Reid

*/s/ Frederick O. Robertshaw Director February 25, 1999
- ------------------------------
Frederick O. Robertshaw

/s/Joanna M. Haigney Treasurer February 25, 1999
- ------------------------------ (Principal
Joanna M. Haigney Accounting
Officer)

*By: /s/Michael F. Klein
------------------------
Michael F. Klein
Attorney-In-Fact

C-8
<PAGE>

EXHIBIT INDEX

Ex-99.(a)(2)Articles of Amendment to Articles of Incorporation regarding name
change are filed herewith.

(c) Instruments Defining Rights of Security Holders, incorporated by
reference to Exhibit 1 (Articles of Incorporation) as amended to date,
filed as part of Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A (Registration No. 333-32231) filed
with the Securities and Exchange Commission via EDGAR (Accession No.
0000912057-97-025172) on July 28, 1997, and Exhibit 2 (By-Laws) as
amended to date, filed as part of Pre-Effective Amendment No. 1 to such
Registration Statement filed with the Securities and Exchange Commission
via EDGAR on July 28, 1997.

Ex-99.(d) Investment Advisory Agreement between Registrant and Morgan
Stanley Asset Management Inc. ("MSAM") with respect to the
Strategic Adviser Conservative, Strategic Adviser Moderate and
Strategic Adviser Aggressive Portfolios is filed herewith.

Ex-99.(e) Distribution Agreement between Registrant and Morgan Stanley & Co.
Incorporated is filed herewith.

(f) Not applicable.

(g) Not applicable.

Ex-99.(h) (1) Administration Agreement between Registrant and Morgan
Stanley Asset Management Inc. is filed herewith.

(2) Form of Sub-Administration Agreement between Registrant and The
Chase Manhattan Bank to be filed by amendment.

(j) Consent of Independent Accountants, to be filed by amendment.

(k) None.

(l) Not applicable.

Ex-27.(n) Financial Data Schedules filed herewith.

C-9
<PAGE>

C-10

<PAGE>
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<PAGE>
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<PAGE>
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<MULTIPLIER> 1,000

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<PAGE>
<ARTICLE> 6
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<MULTIPLIER> 1,000

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<PAGE>
<ARTICLE> 6
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<NAME> MORGAN STANLEY STRATEGIC ADVISER FUND, INC.
<SERIES>
<NUMBER> 032
<NAME> STRATEGIC ADVISER AGGRESSIVE PORTFOLIO - CLASS B
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,000
<INVESTMENTS-AT-VALUE> 1,000
<RECEIVABLES> 5
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<TOTAL-ASSETS> 2,104
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<OTHER-ITEMS-LIABILITIES> 71
<TOTAL-LIABILITIES> 1,071
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<PAID-IN-CAPITAL-COMMON> 1,033
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</TABLE>

<PAGE>

ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
MORGAN STANLEY STRATEGIC ADVISER FUND, INC.

MORGAN STANLEY STRATEGIC ADVISER FUND, INC. (the "Corporation"), a
corporation organized under the laws of the State of Maryland, having its
principal place of business at 1221 Avenue of the Americas, New York, New York
10020, does hereby certify to the State Department of Assessments and Taxation
of Maryland that:

FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.

SECOND: Pursuant to the authority contained in Section 2-605(a)(4) of the
Maryland General Corporation Law, a majority of the full Board of Directors by
resolution passed on September 19, 1998, have changed the name of the
Corporation to Morgan Stanley Dean Witter Strategic Adviser Fund, Inc.

THIRD: Pursuant to the requirements of Section 2-607 of the Maryland
General Corporation Law, the Board of Directors has determined to file of record
these Articles of Amendment, which Amendment is limited to changes expressly
permitted by Section 2-605 of the Maryland General Corporation Law to be made
without action by the stockholders and which Amendment is solely for the purpose
of changing the name of the Corporation.

FOURTH: Article SECOND, of the Articles of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:

The name of the Corporation is Morgan Stanley Dean Witter Strategic
Adviser Fund, Inc.

FIFTH: These Articles of Amendment shall be effective upon the later of
December 1, 1998 or the time the State Department of Assessments and Taxation of
Maryland accepts these Articles of Amendment of record.

<PAGE>

IN WITNESS WHEREOF, Morgan Stanley Strategic Adviser Fund, Inc. has caused
these Articles of Amendment to be signed in its corporate name and on its behalf
by its President and its corporate seal to be hereunto affixed and attested by
its Secretary as of the 20th day of November, 1998.

MORGAN STANLEY STRATEGIC ADVISER FUND, INC.

By: /s/ Michael F. Klein
----------------------------------------
Michael F. Klein
President

[SEAL]

Attest:

/s/ Valerie Y. Lewis
- ------------------------------
Valerie Y. Lewis
Secretary

<PAGE>

THE UNDERSIGNED, President of Morgan Stanley Strategic Adviser Fund,
Inc., who executed on behalf of said corporation the foregoing Articles of
Amendment of which this certificate is made a part, hereby acknowledges, in the
name and on behalf of said corporation, the foregoing Articles of Amendment to
be the corporate act of said corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth herein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.

/s/ Michael F. Klein
----------------------------------------
Michael F. Klein
President

<PAGE>

MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISORY AGREEMENT
OF THE MORGAN STANLEY STRATEGIC ADVISER FUND, INC.

AGREEMENT made as of this 29th day of December, 1997 by and between Morgan
Stanley Strategic Adviser Fund, Inc., a Maryland corporation (the "Fund") and
Morgan Stanley Asset Management Inc., a Delaware corporation (the "Adviser").

1. DUTIES OF ADVISER. The Fund hereby appoints the Adviser to act as
investment adviser to each of the Fund's Portfolios identified at Schedule A,
and any additional portfolios as may be added to Schedule A by mutual agreement
of the Fund and the Adviser, for the period and on such terms set forth in this
Agreement. The Fund employs the Adviser to manage the investment and
reinvestment of the assets of the Fund's Portfolios, to continuously review,
supervise and administer the investment program of each of the Portfolios, to
determine in its discretion the securities to be purchased or sold and the
portion of each such Portfolio's assets to be held uninvested, to provide the
Fund with records concerning the Adviser's activities which the Fund is
required to maintain, and to render regular reports to the Fund's officer and
Board of Directors concerning the Adviser's discharge of the foregoing
responsibilities. The Adviser shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Directors of the Fund,
and in compliance with the objectives, policies and limitations set forth in
the Fund's prospectus and applicable laws and regulations. The Adviser accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishing and equipment and the personnel required
by it to perform the services on the terms and for the compensation provided
herein.

1
<PAGE>

2. PORTFOLIO TRANSACTIONS. The Adviser is authorized to select the
brokers or dealers that will execute the purchases and sales of securities for
each of the Fund's Portfolios and is directed to use its best efforts to obtain
the best available price and most favorable execution, except as prescribed
herein. Unless and until otherwise directed by the Board of Directors of the
Fund, the Adviser may also be authorized to effect individual securities
transactions at commission rates in excess of the minimum commission rates
available, if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage or research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the Fund. The execution of such transactions shall not be deemed to represent
an unlawful act or breach of any duty created by this Agreement or otherwise .
The Adviser will promptly communicate to the officers and Directors of the Fund
such information relating to portfolio transactions as they may reasonably
request.

3. COMPENSATION OF THE ADVISER. In recognition of the fact that the
Fund's investment in shares of other registered investment companies advised by
the Adviser or its affiliates will result in increased compensation to the
Adviser or its affiliates under their investment advisory contracts with those
investment companies, the receipt of such compensation is deemed to be
sufficient consideration for the services to be rendered by the Adviser as
provided in Section 1 of this Agreement.

4. OTHER SERVICES. At the request of the Fund, the Adviser in its
discretion may make available to the Fund office facilities, equipment,
personnel and other services. Such office

2
<PAGE>

facilities, equipment, personnel and services shall be provided for or rendered
by the Adviser and billed to the Fund at the Adviser's cost.

5. REPORTS. The Fund and the Adviser agree to furnish to each other
current prospectuses, proxy statements, reports to shareholders, certified
copies of their financial statements, and such other information with regard to
their affairs as eh may reasonably request.

6. STATUS OF ADVISER. The services of the Adviser to the Fund are not to
be deemed exclusive, and the Adviser shall be free to render similar services to
others.

7. LIABILITY OF ADVISER. In the absence of (i) wilful misfeasance, bad
faith or gross negligence on the part of the Adviser in performance of its
obligations and duties hereunder, (ii) reckless disregard by the Adviser of its
obligations and duties hereunder, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the Investment Company Act of 1940 ("1940
Act"), the Adviser shall not be subject to any liability whatsoever to the Fund,
or to any shareholder of the Fund, for any error or judgment, mistake of law or
any other act or omission in the course of, or connected with, rendering
services hereunder including, without limitation, for any losses that may be
sustained in connection with the purchase, holding, redemption or sale of any
security on behalf of any Portfolio of the Fund.

8. PERMISSIBLE INTERESTS. Subject to and in accordance with the Articles
of Incorporation of the Fund and the Articles of Incorporation of the Adviser,
Directors, officers, agents and shareholders of the Fund are or may be
interested in the Adviser (or any successor thereof) as Directors, officers,
agents, shareholders or otherwise;

3
<PAGE>

Directors, officers, agents and shareholders of the Adviser are or may be
interested in the Fund as Directors, officers, shareholders or otherwise; and
the Adviser (or any successor) is or may be interested in the Fund as a
shareholder or otherwise; and that the effect of any such interrelationships
shall be governed by said Articles of Incorporation and the provisions of the
1940 Act.

9. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall continue until December 29, 1999 and thereafter for
additional periods of one year from the anniversary thereof, but only so long as
such continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Directors of the Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of each Portfolio of the Fund; PROVIDED HOWEVER,
that if the holders of any Portfolio fail to approve the Agreement as provided
herein, the Adviser may continue to serve in such capacity in the manner and to
the extent permitted by the 1940 Act and Rules thereunder. This Agreement may
be terminated by any Portfolio of the Fund at any time, without the payment of
any penalty, by vote of a majority of the entire Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities of the Portfolio
on 60 days' written notice to the Adviser. This Agreement may be terminated by
the Adviser at any time, without the payment of any penalty, upon 90 days'
written notice to the Fund. This agreement will automatically and immediately
terminate in the event of its assignment, PROVIDED that an assignment to a
corporate successor to all of substantially all of the Adviser's business or to
a wholly-owned subsidiary of such corporate successor which does not result in a
change of actual control of the Adviser's business shall not be deemed to be an
assignment for the purposes of this Agreement. Any

4
<PAGE>

notice under this Agreement shall be given in writing, addressed and delivered
or mailed postpaid, to the other party at any office of such party and shall be
deemed given when received by the addressee.

As used in this Section 9, the terms "assignment", "interested persons",
and "a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.

10. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, but the consent of the Fund must be approved (a) by vote of a majority
of those members of the Board of Directors of the Fund who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b) by vote of a
majority of the outstanding voting securities of each Portfolio of the Fund.

11. USE OF NAME. The Fund agrees that if this Agreement is terminated and
the Adviser shall no longer be the adviser to the Fund, the Fund will, within a
reasonable period of time, change its name to delete reference to "Morgan
Stanley".

12. SEVERABILITY. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.

13. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of the State of New York, PROVIDED, HOWEVER, that nothing herein shall
be construed as being inconsistent with the 1940 Act.

14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.

5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first written above.

MORGAN STANLEY ASSET MORGAN STANLEY STRATEGIC
MANAGEMENT INC. ADVISER FUND, INC.

By: /s/ Michael F. Klein By: /s/ Michael F. Klein
--------------------- ---------------------

6
<PAGE>

SCHEDULE A

Strategic Adviser Aggressive Portfolio

Strategic Adviser Conservative Portfolio

Strategic Adviser Moderate Portfolio

<PAGE>

DISTRIBUTION AGREEMENT

AGREEMENT made as of this 29th day of December, 1997, between MORGAN
STANLEY STRATEGIC ADVISER FUND, INC., a Maryland Corporation (the "Fund"), and
MORGAN STANLEY & CO. INCORPORATED, a Delaware corporation (the "Distributor").

W I T N E S S E T H :

WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified open-end management
investment company and it is in the interest of the Fund to offer its shares for
sale continuously and to appoint a principal underwriter for the purpose of
facilitating such offers and sales;

WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Fund's shares of
beneficial interest ("Shares"), to commence after the effectiveness of its
initial registration statement filed pursuant to the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act.

NOW, THEREFORE, the parties agree as follows:

Section 1. APPOINTMENT OF THE DISTRIBUTOR.

The Fund hereby appoints the Distributor its exclusive underwriter in connection
with the offering and sale of the Shares on the terms set forth in this
Agreement and the Distributor hereby accepts such appointment and agrees to act
hereunder.

Section 2. SERVICES AND DUTIES OF THE DISTRIBUTOR.

(a) The Distributor agrees to sell, as agent for the Fund, from time
to time during the term of this Agreement, Shares upon the terms described in
the Prospectus. As used in this Agreement, the term "Prospectus" shall mean the
prospectus included as part of the Fund's Registration Statement, as such
prospectus may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement most recently
filed from time to time by the Fund with the Securities and Exchange Commission
and effective under the 1933 Act and the 1940 Act, as such Registration
Statement is amended by any amendments thereto at the time in effect.

(b) Upon commencement of the Fund's operations, the Distributor will
hold itself available to receive orders, satisfactory to the Distributor, for
the purchase of Shares and will accept such orders on behalf of the Fund and
will transmit such orders as are so accepted to

-1-
<PAGE>

the Fund's transfer and shareholder servicing agent as promptly as practicable.
The Distributor shall promptly forward to the Fund's Custodian funds received in
respect of purchases of shares in accordance with the instructions of the Fund's
Administrator. Purchase orders shall be deemed effective at the time and in the
manner set forth in the Prospectus.

(c) The offering price of the Shares shall be the net asset value
(determined as set forth in the Prospectus) per Share next determined following
receipt of an order. The Fund shall furnish the Distributor, with all possible
promptness, an advice of each computation of net asset value.

(d) The Distributor shall not be obligated to sell any certain number
of Shares and nothing herein contained shall prevent the Distributor from
entering into like distribution arrangements with other investment companies.

Section 3. DUTIES OF THE FUND.

(a) The Fund agrees to sell its Shares so long as it has Shares
available for sale and to cause the Fund's transfer and shareholder servicing
agent to record on its books the ownership of (or deliver certificates, if any,
for) such Shares registered in such names and amounts as the Distributor has
requested in writing or other means of data transmission, as promptly as
practicable after receipt by the Fund of the net asset value thereof and written
request of the Distributor therefor.

(b) The Fund shall keep the Distributor fully informed with regard to
its affairs and shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares of the Fund, and
this shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent accountants and such
reasonable number of copies of its most current Prospectus and annual and
interim reports as the Distributor may request and shall cooperate fully in the
efforts of the Distributor to sell and arrange for the sale of the Shares and in
the performance of the Distributor under this Agreement.

(c) The Fund shall take, from time to time, such steps, including
payment of the related filing fee, as may be necessary to register its Shares
under the 1933 Act to the end that there will be available for sale such number
of Shares as the Distributor may be expected to sell. The Fund agrees to file
from time to time such amendments, reports and other documents as may be
necessary in order that there may be no untrue statement of a material fact in a
Registration Statement or Prospectus, or necessary in order that there may be no
omission to state a material fact in the Registration Statement or Prospectus
which omission would make the statements therein misleading.

(d) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Shares for sale under the
securities laws of such states as the

-2-
<PAGE>

Distributor and the Fund may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the qualification of the Fund as a
broker or dealer in such states; provided that the Fund shall not be required to
amend its Articles of Incorporation or By-Laws to comply with the laws of any
state, to maintain an office in any state, to change the terms of the offering
of the Shares in any state from the terms set forth in its Registration
Statement and Prospectus, to qualify as a foreign corporation in any state or to
consent to service of process in any state other than with respect to claims
arising out of the offering of the Shares. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund in connection with such qualifications.

Section 4. EXPENSES.

(a) The Fund shall bear all costs and expenses of the continuous
offering of the Shares in connection with (i) fees and disbursements of its
counsel and independent accountants, (ii) the preparation, filing and printing
of any registration statements and/or prospectuses required to be filed by and
under the federal and state securities laws, (iii) the preparation and mailing
of annual and interim reports, prospectuses and proxy materials to shareholders
and (iv) the qualifications of Shares for sale and of the Fund as a broker or
dealer under the securities laws of such states or other jurisdictions as shall
be selected by the Fund and the Distributor pursuant to Section 3(d) hereof and
the cost and expenses payable to each such state for continuing qualification
therein.

(b) The Distributor shall bear (i) the costs and expenses of
preparing, printing and distributing any materials not prepared by the Fund and
other materials used by the Distributor in connection with its offering of the
Shares for sale to the public, including the additional cost of printing copies,
at printer's over-run cost, of the Prospectus and of annual and interim reports
to shareholders other than copies thereof required for distribution to
shareholders or for filing with any federal and state securities authorities,
(ii) any expenses of advertising incurred by the Distributor in connection with
such offering and (iii) the expenses of registration or qualification of the
Distributor as a dealer or broker under federal or state laws and the expenses
of continuing such registration or qualification.

Section 5. COMPENSATION. For the services to be rendered and the
expenses assumed by the Distributor with respect to the Class B Shares, the Fund
shall pay to the Distributor, compensation at the annual rate of .25% of the
average daily net assets of the Class B Shares. Except as hereinafter set
forth, continuing compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly in
arrears within ten days after the end of the month. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate before the
last day of a month, compensation for that part of the month this Agreement is
in effect shall be prorated in a manner consistent with the calculations of the
fees as set forth above. Payment of the Distributor's compensation for the
preceding month shall be made as promptly as possible, but in no event later
than ten days after the end of the month.

-3-
<PAGE>

Section 6. INDEMNIFICATION. The Fund agrees to indemnify, defend and
hold the Distributor, its officers and directors and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement, to the extent that it might
require indemnity of any person who is also an officer or Director of the fund
or who controls the Fund within the meaning of Section 15 of the 1933 Act, shall
not inure to the benefit of such officer, Director or controlling person unless
a court of competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would not be against
public policy as expressed in the 1933 Act; and further provided, that in no
event shall anything contained herein be so construed as to protect the
Distributor against any liability to the Fund or to its security holders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations under this Agreement.
The Fund's agreement to indemnify the Distributor, its officers and directors
and any such controlling person as aforesaid is expressly conditioned upon the
Fund's being promptly notified of any action brought against the Distributor,
its officers or directors, or any such controlling person, such notification to
be given to the Fund at its principal business office. The Fund agrees promptly
to notify the Distributor of the commencement of any litigation or proceedings
against it or any of its officers or Directors in connection with the issue and
sale of any Shares.

The Distributor agrees to indemnify, defend and hold the Fund, its
Directors and officers and any person who controls the Fund, if any, within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its Directors or
officers or any such controlling person may incur under the 1933 Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
allegeduntrue statement of a material fact contained in information furnished
in writing by the Distributor to the Fund for use in the preparation of the
Registration Statement or Prospectus or shall arise out of or be based upon any
alleged omission to state a material fact in such information or a fact
necessary to make such information not misleading, it being understood that the
Fund will rely upon the information provided by the Distributor for use in the

-4-
<PAGE>

preparation of the Registration Statement and Prospectus. The Distributor's
agreement to indemnify the Fund, its Directors and officers, and any such
controlling person as aforesaid is expressly conditioned upon the Distributor's
being promptly notified of any action brought against the Fund, its Directors
or officers or any such controlling person, such notification to be given to
the Distributor at its principal business office.

Section 7. COMPLIANCE WITH SECURITIES LAWS. The Fund represents that
it is registered as a diversified open-end management investment company under
the 1940 Act, and agrees that it will comply with the provisions of the 1940 Act
and of the rules and regulations thereunder. The Fund and the Distributor each
agree to comply with the applicable terms and provisions of the 1940 Act, the
1933 Act and, subject to the provisions of Section 3(d), applicable state "Blue
Sky" laws. The Distributor agrees to comply with the applicable terms and
provisions of the Securities Exchange Act of 1934.

Section 8. TERM OF AGREEMENT; TERMINATION. This Agreement shall
commence on the date first set forth above. This Agreement shall continue in
effect for a period more than two years from the date hereof only so long as
such continuance is specifically approved at least annually in conformity with
the requirements of the 1940 Act.

This Agreement shall terminate automatically in the event of its
assignment (as defined by the 1940 Act). In addition, this Agreement may be
terminated by either party at any time, without penalty, on not more than sixty
days' nor less than thirty days' written notice to the other party.

Section 9. NOTICES. Any notice required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Distributor at Morgan Stanley & Co. Incorporated,
1221 Avenue of the Americas, 21st Floor, New York, N.Y. 10020, Attention:
Michael F. Klein, or (2) to the Fund at Morgan Stanley Strategic Adviser Fund,
Inc., 1221 Avenue of the Americas, Attention: Valerie Y. Lewis.

Section 10. The Directors have authorized the execution of this
Agreement in their capacity as Directors and not individually and the
Distributor agrees that neither the shareholders nor the Directors nor any
officer, employee, representative or agent of the Fund shall be personally
liable upon, nor shall resort be had to their private property for the
satisfaction of, obligations given, executed or delivered on behalf of or by the
Fund, that the shareholders, Directors, officers, employees, representatives and
agents of the Fund shall not be personally liable hereunder, and that it shall
look solely to the property of the Fund for the satisfaction of any claim
hereunder.

Section 11. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of New York.

-5-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.

MORGAN STANLEY & CO. INCORPORATED

By /s/ Michael F. Klein
--------------------

MORGAN STANLEY
STRATEGIC ADVISER FUND, INC.

By /s/ Michael F. Klein
--------------------

-6-

<PAGE>

ADMINISTRATION AGREEMENT

Agreement dated as of December 29, 1997 between MORGAN STANLEY
STRATEGIC ADVISER FUND, INC., a Maryland corporation (the "Fund") and MORGAN
STANLEY ASSET MANAGEMENT INC., a Delaware corporation ("MSAM").

WHEREAS, the Fund has filed a Registration Statement on Form N-1A to
register as an investment company under the Investment Company Act of 1940 (the
"1940 Act") and to offer shares of three portfolios (the Aggressive Portfolio,
the Conservative Portfolio, and the Moderate Portfolio) under the Securities Act
of 1933, and such additional portfolios as may be mutually agreed by the Fund
and MSAM; and

WHEREAS, the Fund desires to retain MSAM to render certain management,
administrative, transfer agency, dividend disbursing and other services to the
Fund, and MSAM is willing to render such services;

NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:

1. APPOINTMENT OF ADMINISTRATOR

The Fund hereby appoints MSAM to act as administrator to the Fund for
the period and on the terms set forth in this Agreement. In connection
therewith, MSAM accepts such appointment and agrees to render the services and
provide, at its own expense, the office space, furnishings and equipment and the
personnel required by it to perform the services on the terms and for the
compensation herein provided. The parties hereto agree that MSAM may render and
provide the services described herein directly or through the services of third
parties. In connection with such appointment, the Fund will deliver to MSAM
copies of each of the following documents and will deliver to it all future
amendments and supplements, if any:

A. Certified copies of the Articles of Incorporation of the Fund as
presently in effect and as amended from time to time;

B. A certified copy of the Fund's By-Laws as presently in effect as
amended from time to time;

C. A copy of the resolution of the Fund's Board of Directors
authorizing this Agreement;

D. Specimens of all forms of outstanding and new stock certificates
in the forms approved from time to time by the Board of Directors of the Fund
with a certificate of the Secretary of the Fund as to such approval;

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<PAGE>

E. The Fund's registration statement on Form N-1A as filed with, and
declared effective by, the U.S. Securities and Exchange Commission, and all
amendments thereto;

F. Each resolution of the Board of Directors of the Fund authorizing
the original issue of its shares.

G. Certified copies of the resolutions of the Fund's Board of
Directors authorizing: (1) certain persons to give instructions to the Fund's
Custodian pursuant to the Corporate Custody Agreement and (2) certain persons to
sign checks and pay expenses on behalf of the Fund.

H. A copy of the Investment Advisory Agreement dated October 1, 1988
between the Fund and Morgan Stanley Asset Management, Inc.

I. A copy of the Corporate Custody Agreement dated October 1, 1988
between the Fund and The Morgan Guaranty Trust Company of New York.

J. Such other certificates, documents or opinions which MSAM may, in
its reasonable discretion, deem necessary or appropriate in the proper
performance of its duties.

2. REPRESENTATION AND WARRANTIES OF MSAM

MSAM represents and warrants to the Fund that:

A. It is a corporation, duly organized and existing in good standing
under the laws of Delaware.

B. It is duly qualified to carry on its business in the State of New
York.

C. It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform the services contemplated in
this Agreement.

D. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.

E. It has and will continue to have and maintain, directly or
through third parties, the necessary facilities, equipment and personnel to
perform its duties and obligations under this Agreement.

2
<PAGE>

3. AUTHORIZED SHARES

The Fund certifies to MSAM that as of the close of business on the
date of this Agreement, the Fund is authorized to issue 3 billion shares of
common stock ("shares"), $.001 par value, and that the Board of Directors has
the power to classify or reclassify unissued shares of stock, from time to time,
into one or more classes ("Portfolios") of shares, and that it would initially
offer shares of three Portfolios (the Aggressive Portfolio, the Conservative
Portfolio and the Moderate Portfolio).

4. SERVICES PROVIDED BY MSAM

MSAM shall discharge, directly or through third parties, the following
responsibilities subject to the control of the Fund's Board of Directors, and in
compliance with the objectives, policies and limitations set forth in the
Fund's registration statement, By-Laws and applicable laws and regulations.

A. GENERAL ADMINISTRATION. Under the direction of the Fund's Board
of Directors, MSAM shall manage, administer, and conduct all of the general
business activities of the Fund other than those which have been contracted to
third parties by the Fund. MSAM shall, directly or through third parties,
provide the personnel and facilities necessary to perform such general business
activities under the supervision of the Fund's Board of Directors and Executive
Officers.

B. ACCOUNTING. MSAM shall, directly or through third parties,
provide the following accounting services to the Fund:

1) Maintenance of the books and records and accounting controls for
the Fund's assets, including records of all securities transactions;

2) Daily calculation of the net asset value for each of the Fund's
Portfolios;

3) Accounting for dividends and interest received and distributions
made by each of the Fund's Portfolios;

4) Preparation and filing of the Fund's U.S. tax returns and annual
and semi-annual reports on Form N-SAR:

5) The production of transaction data, financial reports and such
other periodic and special reports as the Board of Directors of the
Fund may reasonably request;

6) The preparation of financial statements for the annual and
semi-annual reports and other shareholder communications;

3
<PAGE>

7) Liaison with the Fund's independent auditors;

8) Monitoring and administration of arrangements with the Fund's
custodian and depository banks; and

9) Maintenance of (but not the payment for) the Fidelity Bond
required to be maintained under the 1940 Act and preparation of the
filings required in connection therewith.

C. TRANSFER AGENT. The Fund hereby directs MSAM to be responsible
for the appointment of Transfer Agent for the Fund and MSAM agrees to act in
such capacity. In connection with such appointment, the transfer agent shall:

1) Maintain records showing for each Fund shareholder the following:

a) Name, address and tax identifying number (if applicable);

b) Number of shares of the Portfolio of the Fund held;

c) Historical information including dividends paid and date and
price of all transactions including individual purchases and
redemptions; and

d) Any dividend reinvestment order, application, dividend
address and correspondence relating to the current maintenance of
the account;

2) Record the issuance of shares of common stock of each Portfolio of
the Fund and shall notify the Fund in case any proposed issue of
shares by the fund shall result in an over-issue as identified by
Section 8-104(2) of the Uniform Commercial Code and in case any issue
would result in such an over-issue, shall refuse to countersign and
issue, and/or credit, said shares. Except as specifically agreed in
writing, MSAM and any transfer agent appointed by MSAM shall have no
obligation when countersigning and issuing and/or crediting shares, to
take cognizance of any other laws relating to the issue and sale of
such shares except insofar as policies and procedures of the Stock
Transfer Association recognize such laws.

3) Process all orders for the purchase of each Portfolio of the Fund
in accordance with the Fund's current registration statement. Upon
receipt of any check or other payment for purchase of shares of the
Fund from an investor, the transfer agent will (i) stamp the order
with the date of receipt, (ii) determine the amounts thereof due the
Fund, and notify the Fund of such determination and deposit, such
notification to be given on a daily basis of the total amounts
determined and deposited to said account during such day. The
transfer agent shall then credit the

4
<PAGE>

share account of the investor with the number of shares to be
purchased according to the price of the Portfolio's shares in effect
for purchases made on the date such payment is received as set forth
in the Fund's current prospectus and shall promptly mail a
confirmation of said purchase to the investor, all subject to any
instructions which the fund may give to MSAM or the transfer agent
with respect to the timing or manner of acceptance of orders for
shares relating to payments so received by it.

4) Receive and stamp with the date of receipt all requests for
redemptions of shares, and shall process said redemptions requests as
follows:

a) If such redemption request complies with the applicable
standards approved by the Fund, MSAM or the transfer agent shall
on each business day notify the Fund of the total number of
shares presented and covered by such requests received by MSAM or
the transfer agent on such day;

b) On or prior to the seventh calendar day succeeding any such
request for redemption, MSAM or the transfer agent shall notify
the Custodian, subject to instructions from the Fund, to transfer
monies to such account as designated by MSAM or the transfer
agent for such payment to the redeeming shareholder of the
applicable redemption or repurchase price.

c) If any such request for redemption does not comply with
applicable standards, MSAM or the transfer agent shall promptly
notify the investor of such fact, together with the reason
therefore, and shall effect such redemption at the Portfolio's
price next determined after receipt of documents complying with
said standards or, at such other time as the Fund shall so
direct;

5) Acknowledge all correspondence from shareholders relating to their
share accounts and undertake such other shareholder correspondence as
may from time to time be mutually agreed upon;

6) Process redemptions, exchanges and transfers of Fund shares upon
telephone instructions from qualified shareholders in accordance with
the procedures set forth in the Fund's current prospectus. MSAM and
any transfer agent appointed by MSAM shall be permitted to act upon
the instruction of any person by telephone to redeem, exchange and/or
transfer Fund shares from any account for which such services have
been authorized. In accordance with Section 7 herein, the Fund hereby
agrees to indemnify and hold MSAM and any transfer agent appointed by
MSAM harmless against all losses, costs or expenses, including
attorney fees, suffered or incurred by MSAM and any transfer agent
appointed by MSAM directly or indirectly as a result of (i) taping the
telephone conversation of

5
<PAGE>

any shareholder, or (ii) relying on the telephone instructions of any
person acting on behalf of a shareholder account for which telephone
services have been authorized.

D. RECORDING OF TRANSFER. A transfer agent duly appointed by MSAM
is authorized to transfer on the records of the Fund maintained by it issued
shares held in non-certificate form, upon the surrender to it of documents
evidencing ownership in proper form for transfer, and upon cancellation thereof
to countersign and issue new documents of ownership for a like amount of stock
and to deliver the same pursuant to the transfer instructions.

E. RETURNED CHECKS. In the event that any check or other order for
the payment of money is returned unpaid for any reason, MSAM or a third party
appointed by MSAM will take such steps, including redepositing said check for
collection or returning said check to the investor, as MSAM or a third party
appointed by MSAM may, at its discretion, deem appropriate, or as the Fund may
instruct.

F. DIVIDEND TAX REPORTING AND WITHHOLDING. MSAM or a third party
appointed by MSAM will prepare, file with the Internal Revenue Service and mail
to shareholders such returns for reporting payment of dividends and
distributions as are required by applicable laws to be so filed and/or mailed
and MSAM or a third party appointed by MSAM shall withhold such sums as are
required to be withheld under applicable Federal income tax laws, rules and
regulations.

G. PROXIES. MSAM or a third party appointed by MSAM shall mail
proxy statements, proxy cards and other materials supplied to it by the Fund and
shall receive, examine and tabulate returned proxies. MSAM or a third party
appointed by MSAM shall make interim reports of the status of such tabulation to
the Fund upon request, and shall certify the final results of the tabulation.

H. DIVIDENDS DISBURSING. MSAM or a third party appointed by MSAM
shall act as Dividend Disbursing Agent for the Fund and each of its Portfolios,
and, as such shall prepare and mail checks or credit income and capital gain
payments to shareholders. The Fund shall advise MSAM or a third party appointed
by MSAM of the declaration of any dividend or distribution and the record and
payable date thereof at least five (5) days prior to the record date. MSAM or a
third party appointed by MSAM shall, on or before the payment date of any such
dividend or distribution, notify the Fund's Custodian of the estimated amount
required to pay any portion of said dividend or distribution which is payable in
cash, and on or before the payment date of such distribution, the Fund shall
instruct its Custodian to make available to MSAM or a third party appointed by
MSAM sufficient funds for the cash amount to be paid out. If a shareholder is
entitled to receive additional shares by virtue of any such distribution or
dividend, appropriate credits will be made to this account. A shareholder will
receive a confirmation from MSAM or a third party appointed by MSAM indicating
the number of shares credited to his account as a result of the reinvested
dividend or distribution.

6
<PAGE>

I. OTHER INFORMATION. MSAM shall, directly or through third
parties, furnish for the Fund such other information as is required by law,
including but not limited to shareholder lists, and such statistical information
as may be reasonably requested by the Fund.

5. SERVICES TO BE OBTAINED INDEPENDENTLY BY THE FUND

The following shall be provided at no expense to MSAM hereunder:

A. Organizational expenses;

B. Services of an independent accountant;

C. Services of outside legal counsel (including such counsel's
review of the Fund's registration statement, proxy materials and other reports
and materials prepared by MSAM, directly or through third parties under this
Agreement);

D. Any services contracted for by the Fund directly from parties
other than MSAM;

E. Trading operations and brokerage fees, commissions and transfer
taxes in connection with the purchase and sale of securities for its investment
portfolio;

F. Taxes, insurance premiums and other fees and expenses applicable
to its operation;

G. Investment advisory services;

H. Costs incidental to any meetings of shareholders including, but
not limited to, legal and accounting fees, proxy filing fees and the
preparation, printing and mailing of any proxy materials;

I. Costs incidental to Directors' meetings, including fees and
expenses of Directors;

J. The salary and expenses of any officer or employee of the Fund;

K. Custodian and depository banks, and all services related thereto;

L. Costs incidental to the preparation, printing and distribution of
its registration statement and any amendments thereto, and shareholder reports;

M. All registration fees and filing fees required under the
securities laws of the United States and state regulatory authorities;

7
<PAGE>

N. Fidelity bond and Director's and Officers' liability insurance.

6. PRICES, CHARGES AND INSTRUCTIONS

A. The Fund will pay to MSAM, as compensation for the services
provided and the expenses assumed pursuant to this Agreement, as agreed to in a
written fee schedule approved by the parties hereto (see Schedule A). In
addition, MSAM, or third parties providing such services for the benefit of the
Fund through arrangements with MSAM, shall be reimbursed for the cost of any and
all forms, including blank checks and proxies, used by it in communicating with
shareholders of the Fund, or especially prepared for use in connection with its
obligations hereunder, as well as the cost of postage, telephone, telex and
telecopy used in communicating with shareholders of the Fund and microfilm used
each year to record the previous year's transactions in shareholder accounts and
computer tapes used for permanent storage of records, permanent storage costs
for hard copy Fund records and cost of insertion of materials in mailing
envelopes by outside firms. Prior to ordering any forms in such supply as it
estimates will be adequate for more than two years' use, MSAM or any third party
appointed by MSAM shall obtain the written consent of the Fund. All forms for
which MSAM or any third party appointed by MSAM has received reimbursement from
the Fund shall be and remain the property of the Fund until used.

B. At any time MSAM, and third parties providing such services for
the benefit of the Fund through arrangements with MSAM may apply to any officer
of the fund or officer of the Fund's investment adviser for instructions, and
may consult with legal counsel for the Fund, or its own outside legal counsel,
at the expense of the Fund, with respect to any matter arising in connection
with the services to be performed by MSAM or any third party appointed by MSAM
under this Agreement and MSAM and such third parties shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in good
faith in reliance upon such instructions. In carrying out its duties hereunder,
MSAM and such third parties shall be protected and indemnified in acting upon
any paper or document believed by it to be genuine and to have been signed by
the proper person or persons and shall not be held to have notice of any change
or authority of any person, until receipt of written notice thereof from the
Fund.

7. LIMITATION OF LIABILITY AND INDEMNIFICATION.

A. MSAM shall be responsible hereunder for the performance of only
such duties as are set forth or contemplated herein or contained in instructions
given to it which are not contrary to this Agreement. MSAM shall have no
liability for any loss or damage resulting from the performance or non-
performance of its duties hereunder unless solely caused by or resulting from
the gross negligence or willful misconduct of MSAM, its officers and employees.

B. The fund shall indemnify and hold MSAM, and third parties
providing services for the benefit of the Fund through arrangements with MSAM,
harmless from all loss, cost, damage and expense, including reasonable expenses
for counsel, incurred by any such

8
<PAGE>

person resulting from any claim, demand, action or omission by it in the
performance of its duties hereunder or under such arrangements with MSAM, or as
a result of acting upon any instructions reasonably believed by any such person
to have been executed by a duly authorized officer of the fund or of the Fund's
investment advisers, provided that this indemnification shall not apply to
actions or omission of MSAM, its officers, employees or agents in cases of its
or their own gross negligence or willful misconduct.

C. The Fund will be entitled to participate at its own expense in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above, but, if the
Fund elects to assume the defense, such defense shall be conducted by counsel
chosen by the Fund. In the event the Fund elects to assume the defense of any
such suit and retain such counsel, MSAM or any of its affiliated persons or any
third parties providing services for the benefit of the Fund through
arrangements with MSAM, named as defendant or defendants in the suit, may retain
additional counsel but shall bear the fees and expenses of such counsel unless
at such time the Fund specifically authorizes in writing the retaining of such
counsel at the Fund's expense.

D. No provisions of this Agreement shall be deemed to protect MSAM
or any of its directors, officers and/or employees, against liability to the
Fund or its shareholders to which it might otherwise be subject by reason of any
fraud, willful misfeasance or gross negligence in the performance of its duties
or the reckless disregard of its obligations under this Agreement.

8. CONFIDENTIALITY

MSAM agrees that, except as otherwise required by law or as necessary in
accordance with this Agreement, MSAM will keep confidential all records and
information in its possession relating to the Fund or its shareholders or
shareholder accounts and will not disclose the same to any person except at the
request or with the written consent of the Fund.

9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS

The Fund assumes full responsibility hereunder for complying with all
applicable requirements of the Securities Act of 1933, the Investment Company
Act of 1940 and the Securities Exchange Act of 1934, all as amended, and any
laws, rules and regulations of governmental authorities having jurisdiction,
except to the extent that MSAM specifically assumes any such obligations under
the terms of this Agreement.

MSAM shall, directly or through third parties, maintain and preserve
for the periods prescribed, such records relating to the services to be
performed by MSAM under this Agreement as are required pursuant to the
Investment Company Act of 1940 and the Securities Exchange Act of 1934. All
such records shall at all times remain the respective properties of the Fund,
shall be readily accessible during normal business hours to each, and shall be
promptly

9
<PAGE>

surrendered upon the termination of this Agreement or otherwise on written
request. Records shall be surrendered in usable machine readable form.

10. STATUS OF MSAM

The services of MSAM to the Fund are not to be deemed exclusive, and
MSAM shall be free to render similar services to others. MSAM shall be deemed
to be an independent contractor hereunder and shall, unless otherwise expressly
provided herein or authorized by the Fund from time to time, have no authority
to act or represent the Fund in any way or otherwise be deemed an agent of the
Fund with respect to this Agreement.

11. PRINTED MATTER CONCERNING THE FUND OR MSAM

Neither the fund nor MSAM shall, with respect to this Agreement,
publish and circulate any printed matter which contains any reference to the
other party without its prior written approval, excepting such printed matter as
refers in accurate terms to MSAM's appointment under this Agreement and except
as required by applicable laws.

12. TERM, AMENDMENT AND TERMINATION

This Agreement may be modified or amended from time to time by mutual
agreement between the parties hereto. The Agreement shall remain in effect for
a period of one year from the date the Fund's registration statement on file
with the U.S. Securities and Exchange Commission becomes effective and shall
automatically continue in effect thereafter unless terminated by either party at
the end of such period or thereafter on one 60 days' prior written notice. Upon
termination of the Agreement, the fund shall pay to MSAM such compensation as
may be due under the terms hereof as the of the date of such termination. If,
during the initial one year period, either of the parties hereto shall be in
default in the performance of any its duties and obligations hereunder (the
defaulting party), the other party hereto may give written notice to the
defaulting party and if such default shall not have been remedied within 30 days
after such written notice is given, then the party giving such notice may
terminate this Agreement by 90 days' written notice of such termination to the
defaulting party, but such termination shall not affect any rights or
obligations of either party arising from or relating to such default under the
terms hereof.

13. NOTICES

Any notice or other communication authorized or required by this
Agreement to be given to any party mentioned herein shall be sufficiently given
if addressed to such party and mailed postage prepaid or delivered to its
principal office.

14. NON-ASSIGNABILITY

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<PAGE>

This Agreement shall not be assigned by any of the parties hereto
without the prior consent in writing of the other party.

15. SUCCESSORS

This Agreement shall be binding on and shall inure to the benefit of
the Fund and MSAM, and their respective successors.

16. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

17. COUNTERPARTS

This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the day and year first above written.

ATTEST: MORGAN STANLEY STRATEGIC
ADVISER FUND, INC.

/s/ Patricia Amato By: /s/ Michael F. Klein
- -------------------- --------------------

ATTEST: MORGAN STANLEY ASSET
MANAGEMENT INC.

/s/ Patricia Amato By: /s/ Michael F. Klein
- -------------------- --------------------

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<PAGE>

SCHEDULE A
TO
ADMINISTRATION AGREEMENT DATED AS OF DECEMBER 29, 1997
MORGAN STANLEY STRATEGIC ADVISER FUND, INC.
and
MORGAN STANLEY ASSET MANAGEMENT INC.

PORTFOLIOS

1. Strategic Adviser Aggressive Portfolio
2. Strategic Adviser Conservative Portfolio
3. Strategic Adviser Moderate Portfolio

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<PAGE>

SCHEDULE B
TO
ADMINISTRATION AGREEMENT DATED AS OF DECEMBER 29, 1997
MORGAN STANLEY STRATEGIC ADVISER FUND, INC.
and
MORGAN STANLEY ASSET MANAGEMENT INC.

FEE SCHEDULE

For the services provided and the expenses assumed pursuant to the attached
Administration Agreement, the Morgan Stanley Strategic Adviser Fund, Inc. shall
pay to Morgan Stanley Asset Management Inc. an annual fee, in monthly
installments, of .25% of the average daily net assets of each Portfolio of the
Fund listed on Schedule A.