MORGAN STANLEY RUSSIA & NEW EUROPE FUND INC, PRE 14A, 1999-02-24

MORGAN STANLEY RUSSIA & NEW EUROPE FUND INC
PRE 14A, 1999-02-24

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>

Morgan Stanley Russia & New Europe Fund, Inc.
- --------------------------------------------------------------------------------
(Names of Registrant as Specified in Its Charters)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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

(4) Date Filed:

------------------------------------------------------------------------
<PAGE> 2

MORGAN STANLEY RUSSIA & NEW EUROPE FUND, INC.

C/O MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------

To Our Stockholders:

Notice is hereby given that the Annual Meeting of Stockholders of Morgan
Stanley Russia & New Europe Fund, Inc. (the "Fund") will be held on Thursday,
April 29, 1999 at 11:00 a.m. (New York time), in Conference Room 3 at 1221
Avenue of the Americas, 22nd Floor, New York, New York 10020, for the following
purposes:

1. To elect three Class I Directors for a term of three years.

2. To ratify or reject the selection by the Board of Directors of
PricewaterhouseCoopers LLP as independent accountants of the Fund for
the fiscal year ending December 31, 1999.

3. To approve an amendment to the Fund's Articles of Incorporation to
change the name of the Fund to Morgan Stanley Dean Witter Eastern Europe
Fund, Inc.

4. To approve an amendment to the Fund's investment restrictions to allow
the Fund to invest more than 25% of the Fund's total assets in
securities of companies involved in the telecommunications industry if
the Board of Directors of the Fund determines that certain criteria are
met.

5. To consider and act upon any other business as may properly come before
the Meeting or any adjournment thereof.

Only stockholders of record at the close of business on March 1, 1999 are
entitled to notice of, and to vote at, this Meeting or any adjournment thereof.

STEFANIE V. CHANG
Acting Secretary

Dated: March , 1999

IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
<PAGE> 3

MORGAN STANLEY RUSSIA & NEW EUROPE FUND, INC.

C/O MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020

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

PROXY STATEMENT
-------------------------------

This statement is furnished by the Board of Directors of Morgan Stanley
Russia & New Europe Fund, Inc. (the "Fund") in connection with the solicitation
of Proxies for use at the Annual Meeting of Stockholders (the "Meeting") to be
held on Thursday, April 29, 1999 at 11:00 a.m. (New York time), in Conference
Room 3 at the principal executive office of Morgan Stanley Dean Witter
Investment Management Inc. (hereinafter "MSDW Investment Management" or the
"Manager"), 1221 Avenue of the Americas, 22nd Floor, New York, New York 10020.
It is expected that the Notice of Annual Meeting, Proxy Statement and form of
Proxy will first be mailed to stockholders on or about March , 1999. The
purpose of the Meeting and the matters to be acted upon are set forth in the
accompanying Notice of Annual Meeting of Stockholders.

If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. A Proxy may be revoked at any time prior to the time
it is voted by written notice to the Secretary of the Fund or by attendance at
the Meeting. If no instructions are specified, shares will be voted FOR the
election of the nominees for Directors, FOR ratification of
PricewaterhouseCoopers LLP as independent accountants of the Fund for the fiscal
year ending December 31, 1999, FOR approval of the amendment to the Fund's
Articles of Incorporation to change the name of the Fund and FOR the approval of
the amendment to the Fund's investment restrictions. Abstentions and broker
non-votes are each included in the determination of the number of shares present
and voting at the Meeting.

The Board has fixed the close of business on March 1, 1999 as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Meeting and at any adjournment thereof. On that date, the Fund had
4,767,248 shares of Common Stock outstanding and entitled to vote. Each share
will be entitled to one vote at the Meeting.

The expense of solicitation will be borne by the Fund and will include
reimbursement to brokerage firms and others for expenses in forwarding proxy
solicitation materials to beneficial owners. The solicitation of Proxies will be
largely by mail, but may include, without cost to the Fund, telephonic,
telegraphic or oral communications by regular employees of the Manager. The
solicitation of Proxies is also expected to include communications by employees
of Shareholder Communications Corporation, a proxy solicitation firm expected to
be engaged by the Fund at a cost not expected to exceed $
plus expenses.

THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR ITS
FISCAL YEAR ENDED DECEMBER 31, 1998, TO ANY STOCKHOLDER REQUESTING SUCH REPORT.
REQUESTS FOR THE ANNUAL REPORT SHOULD BE MADE IN WRITING TO MORGAN STANLEY
RUSSIA & NEW EUROPE FUND, INC., C/O CHASE
<PAGE> 4

GLOBAL FUNDS SERVICES COMPANY, P.O. BOX 2798, BOSTON, MASSACHUSETTS 02208-2798,
OR BY CALLING 1-800-221-6726.

Chase Global Funds Services Company is an affiliate of the Fund's
administrator, The Chase Manhattan Bank ("Chase Bank"), and provides
administrative services to the Fund. The business address of Chase Bank and
Chase Global Funds Services Company is 73 Tremont Street, Boston, Massachusetts
02108.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF EACH OF THE
MATTERS MENTIONED IN ITEMS 1, 2, 3 AND 4 OF THE NOTICE OF ANNUAL MEETING.

ELECTION OF DIRECTORS
(PROPOSAL NO. 1)

At the Meeting, three Directors will be elected to hold office for a term
of three years and until their successors are duly elected and qualified. It is
the intention of the persons named in the accompanying form of Proxy to vote, on
behalf of the stockholders, for the election of Peter J. Chase, David B. Gill
and Michael F. Klein as Class I Directors.

Pursuant to the Fund's By-laws, the terms of office of the Directors are
staggered. The Board of Directors is divided into three classes, designated
Class I, Class II and Class III, with each class having a term of three years.
Each year the term of one class expires. Class I currently consists of Peter J.
Chase, David B. Gill and Michael F. Klein. Class II currently consists of John
W. Croghan and Graham E. Jones. Class III currently consists of Barton M. Biggs,
John A. Levin and William G. Morton, Jr. Only the Directors in Class I are being
considered for election at this Meeting.

Pursuant to the Fund's By-Laws, each Director holds office until (i) the
expiration of his term and until his successor has been elected and qualified,
(ii) his death, (iii) his resignation, (iv) December 31 of the year in which he
reaches seventy-three years of age, or (v) his removal as provided by statute or
the Articles of Incorporation.

The Board of Directors has an Audit Committee. The Audit Committee makes
recommendations to the full Board of Directors with respect to the engagement of
independent accountants and reviews with the independent accountants the plan
and results of the audit engagement and matters having a material effect on the
Fund's financial operations. The members of the Audit Committee are currently
Peter J. Chase, David B. Gill and Graham E. Jones, none of whom is an
"interested person," as defined under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Chairman of the Audit Committee is Mr. Jones.
[After the Meeting, the Audit Committee will continue to consist of those
Directors of the Fund mentioned above who are not "interested persons."] The
Audit Committee met two times during the fiscal year ended December 31, 1998.
The Board of Directors does not have nominating or compensation committees or
other committees performing similar functions.

There were four meetings of the Board of Directors held during the fiscal
year ended December 31, 1998. For the fiscal year ended December 31, 1998, each
current Director attended at least seventy-five percent of the aggregate number
of meetings of the Board and of any committee on which he served.
2
<PAGE> 5

Each of the nominees for Director has consented to be named in this Proxy
Statement and to serve as a director of the Fund if elected. The Board of
Directors has no reason to believe that any of the nominees named above will
become unavailable for election as a director, but if that should occur before
the Meeting, Proxies will be voted for such persons as the Board of Directors
may recommend.

Certain information regarding the Directors and officers of the Fund is set
forth below:

<TABLE>
<CAPTION>
COMMON
STOCK SHARE
BENEFICIALLY EQUIVALENTS
OWNED AS OF OWNED UNDER
POSITION WITH PRINCIPAL OCCUPATIONS MARCH 1, DEFERRED FEE
NAME, ADDRESS AND DATE OF BIRTH THE FUND AND OTHER AFFILIATIONS 1999 ARRANGEMENTS+ PERCENTAGE
- ------------------------------- --------------- ---------------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Barton M. Biggs*............... Director and Chairman, Director and Managing 10,023 -- ***
1221 Avenue of the Americas Chairman of Director of Morgan Stanley Dean
New York, New York 10020 the Board Witter Investment Management Inc.
11/26/32 since 1996 and Chairman and Director of
Morgan Stanley Asset Management
Limited; Managing Director of
Morgan Stanley & Co.
Incorporated; Director of the
Rand McNally Company; Member of
the Yale Development Board;
Director and Chairman of the
Board of various U.S. registered
investment companies managed by
Morgan Stanley Dean Witter
Investment Management Inc.
Michael F. Klein*.............. Director and Principal of Morgan Stanley & Co. 0 -- ***
1221 Avenue of the Americas President Incorporated and Morgan Stanley
New York, New York 10020 since 1997 Dean Witter Investment Management
12/12/58 Inc. and previously a Vice
President thereof; Director and
President of various investment
companies managed by Morgan
Stanley Dean Witter Investment
Management Inc.; Previously
practiced law with the New York
law firm of Rogers & Wells.
Peter J. Chase................. Director since Chairman and Chief Financial 359 0 ***
1441 Paseo De Peralta 1996 Officer, High Mesa Technologies,
Santa Fe, New Mexico 87501 Inc.; Principal, Statements;
10/12/32 Director of various U.S.
registered investment companies
managed by Morgan Stanley Dean
Witter Investment Management Inc.
John W. Croghan................ Director since President of Lincoln Partners, a 526 227.6094 ***
200 South Wacker Drive 1996 partnership of Lincoln Capital
Chicago, Illinois 60606 Management Company; Director of
6/8/30 St. Paul Bancorp, Inc., Lindsay
Manufacturing Co. and Republic
Services; Director of various
U.S. registered investment
companies managed by Morgan Stan-
ley Dean Witter Investment
Management Inc.; Previously
Director of Blockbuster
Entertainment Corporation.
</TABLE>

3
<PAGE> 6

<TABLE>
<CAPTION>
COMMON
STOCK SHARE
BENEFICIALLY EQUIVALENTS
OWNED AS OF OWNED UNDER
POSITION WITH PRINCIPAL OCCUPATIONS MARCH 1, DEFERRED FEE
NAME, ADDRESS AND DATE OF BIRTH THE FUND AND OTHER AFFILIATIONS 1999 ARRANGEMENTS+ PERCENTAGE
- ------------------------------- --------------- ---------------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
David B. Gill.................. Director since Director of various U.S. 501 0 ***
26210 Ingleton Circle 1996 registered investment companies
Easton, Maryland 21601 managed by Morgan Stanley Dean
6/7/26 Witter Investment Management
Inc.; Director of the Mauritius
Fund Limited; Director of Moneda
Chile Fund Limited; Director of
First NIS Regional Fund SIAC;
Director of Commonwealth Africa
Investment Fund Ltd.; Chairman of
the Advisory Board of Advent
Latin American Private Equity
Fund; Chairman and Director of
Norinvest Bank; Director of
Surinvest International Limited;
Director of National Registry
Company; Director of South Asia
Regional Fund Ltd.; Previously
Director of Capital Markets
Department of the International
Finance Corporation; Trustee,
Batterymarch Finance Management;
Chairman and Director of Equity
Fund of Latin America S.A.;
Director of Commonwealth Equity
Fund Limited; and Director of
Global Securities, Inc.
Graham E. Jones................ Director since Senior Vice President of BGK 500 0 ***
330 Garfield Street 1996 Properties; Trustee of ten
Suite 200 investment companies managed by
Santa Fe, New Mexico 87501 Weiss, Peck & Greer; Trustee of
1/31/33 various investment companies
managed by Morgan Grenfell
Capital Management Incor-
porated; Director of various U.S.
registered investment companies
managed by Morgan Stanley Dean
Witter Investment Management
Inc.; Previously Chief Financial
Officer of Practice Management
Systems, Inc.
John A. Levin.................. Director since Chairman and Chief Executive 526 227.6094 ***
One Rockefeller Plaza 1996 Officer of John A. Levin & Co.,
New York, New York 10020 Inc.; Director of various U.S.
8/20/38 registered investment companies
managed by Morgan Stanley Dean
Witter Investment Management
Inc.; Director, President and
Chief Executive Officer of Baker
Fentress & Company
William G. Morton, Jr.......... Director since Chairman and Chief Executive 400 0 ***
One Boston Place 1996 Officer of Boston Stock Exchange;
Boston, Massachusetts 02108 Director of Tandy Corporation;
3/13/37 Director of various U.S.
registered investment companies
managed by Morgan Stanley Dean
Witter Investment Management Inc.
Harold J. Schaaff, Jr.*........ Vice President Principal of Morgan Stanley & Co. 0 -- ***
1221 Avenue of the Americas since 1996 Incorporated and Morgan Stanley
New York, New York 10020 Dean Witter Investment Management
6/10/60 Inc.; General Counsel and
Secretary of Morgan Stanley Dean
Witter Investment Management
Inc.; Officer of various
investment companies managed by
Morgan Stanley Dean Witter In-
vestment Management Inc.
</TABLE>

4
<PAGE> 7

- ---------------
* "Interested person" within the meaning of the 1940 Act. Mr. Biggs is
chairman, director and managing director of the Manager, and Messrs. Klein,
Schaaff and Stadler and Ms. Chang are officers of the Manager.
** This information has been furnished by each nominee, director and officer.
*** Less than 1%.
+ Indicates share equivalents owned by the Directors and held in cash
accounts by the Fund on behalf of the Directors in connection with the
deferred fee arrangements described below.

Each officer of the Fund will hold such office until a successor has been
duly elected and qualified.

The Fund pays each of its Directors who is not a director, officer or
employee of MSDW Investment Management or its affiliates, in addition to certain
out-of-pocket expenses, an annual fee of $4,262. Each of the members of the
Fund's Audit Committee, which consists of the Fund's Directors who are not
"interested persons" of the Fund as defined in the 1940 Act, will receive an
additional fee of $787 for serving on such committee. Aggregate fees and
expenses paid or payable to the Board of Directors for the fiscal year ended
December 31, 1998 were approximately $28,292.

Each of the Directors who is not an "affiliated person" of MSDW Investment
Management within the meaning of the 1940 Act may enter into a deferred fee
arrangement (the "Fee Arrangement") with the Fund, pursuant to which such
Director may defer to a later date the receipt of his Director's fees. The
deferred fees owed by the Fund are credited to a bookkeeping

5
<PAGE> 8

account maintained by the Fund on behalf of such Director and accrue income from
and after the date of credit in an amount equal to the amount that would have
been earned had such fees (and all income earned thereon) been invested and
reinvested either (i) in shares of the Fund or (ii) at a rate equal to the
prevailing rate applicable to 90-day United States Treasury Bills at the
beginning of each calendar quarter for which this rate is in effect, whichever
method is elected by the Director.

Under the Fee Arrangement, deferred Director's fees (including the return
accrued thereon) will become payable in cash upon such Director's resignation
from the Board of Directors in generally equal annual installments over a period
of five years (unless the Fund has agreed to a longer or shorter payment period)
beginning on the first day of the year following the year in which such
Director's resignation occurred. In the event of a Director's death, remaining
amounts payable to him under the Fee Arrangement will thereafter be payable to
his designated beneficiary; in all other events, a Director's right to receive
payments is non-transferable. Under the Fee Arrangement, the Board of Directors
of the Fund, in its sole discretion, has reserved the right, at the request of a
Director or otherwise, to accelerate or extend the payment of amounts in the
deferred fee account at any time after the termination of such Director's
service as a director. In addition, in the event of liquidation, dissolution or
winding up of the Fund or the distribution of all or substantially all of the
Fund's assets and property to its stockholders (other than in connection with a
reorganization or merger into another fund advised by MSDW Investment
Management), all unpaid amounts in the deferred fee account maintained by the
Fund will be paid in a lump sum to the Directors participating in the Fee
Arrangement on the effective date thereof.

Currently, Messrs. Croghan and Levin are the only Directors who have
entered into the Fee Arrangement with the Fund.

Set forth below is a table showing the aggregate compensation paid by the
Fund to each of its Directors, as well as the total compensation paid to each
Director of the Fund by the Fund and by other U.S. registered investment
companies advised by MSDW Investment Management or its affiliates (collectively,
the "Fund Complex") for their services as Directors of such investment companies
for the fiscal year ended December 31, 1998.

<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT TOTAL COMPENSATION NUMBER OF FUNDS
COMPENSATION BENEFITS ACCRUED FROM FUND AND IN FUND COMPLEX
FROM FUND AS PART OF THE FUND COMPLEX PAID FOR WHICH
NAME OF DIRECTORS (2)(3) FUND'S EXPENSES TO DIRECTORS(2)(4) DIRECTOR SERVES(5)
- ----------------- ------------ --------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Barton M. Biggs(1)......... $ 0 None $ 0 16
Michael F. Klein(1)........ 0 None 0 16
Peter J. Chase............. 5,049 None 75,753 12
John W. Croghan............ 4,442 None 72,368 12
David B. Gill.............. 5,049 None 80,683 12
Graham E. Jones............ 5,049 None 75,891 12
John A. Levin.............. 4,442 None 80,256 13
William G. Morton, Jr...... 4,262 None 64,997 12
</TABLE>

- ---------------
(1) "Interested persons" of the Fund within the meaning of the 1940 Act.
(2) The amounts reflected in this table include amounts payable by the Fund and
the Fund Complex for services rendered during the fiscal year ended December
31, 1998, regardless of whether such amounts were actually received by the
Directors during such fiscal year.
(3) Mr. Croghan earned $4,442 and Mr. Levin earned $4,442 in deferred
compensation from the Fund, pursuant to the deferred fee arrangements
described above, including any capital gains or losses or interest
associated therewith, during the fiscal year ended December 31, 1998. Such
amounts are included in these Directors' respective aggregate compensation
from the Fund reported in this table.

6
<PAGE> 9

(4) Mr. Croghan earned $72,368, Mr. Gill earned $20,881, Mr. Jones earned $138
and Mr. Levin earned $80,256 in deferred compensation from the Fund and the
Fund Complex, pursuant to the deferred fee arrangements described above,
including any capital gains or losses or interest associated therewith,
during the fiscal year ended December 31, 1998. Such amounts are included in
these Directors' respective compensations from the Fund and the Fund Complex
reported in this table.
(5) Indicates the total number of boards of directors of investment companies in
the Fund Complex, including the Fund, on which the Director served at any
time during the fiscal year ended December 31, 1998.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's officers and directors, and persons who own
more than ten percent of a registered class of the Fund's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "Commission") and the New York Stock Exchange, Inc. The
Manager assumes responsibility for filing such reports for the Fund's officers
and directors and believes that all required reports under Section 16(a) have
been filed on a timely basis for the Fund's officers and directors.

The election of Messrs. Chase, Gill and Klein requires the affirmative vote
of a majority of the votes cast at a meeting at which a quorum is present. Under
the Fund's By-laws, the presence in person or by proxy of stockholders entitled
to cast a majority of the votes entitled to be cast thereat shall constitute a
quorum. For this purpose, abstentions and broker non-votes will be counted in
determining whether a quorum is present at the Meeting, but will not be counted
as votes cast at the Meeting.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF THE THREE NOMINEES AS DIRECTORS.

SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 2)

The Board of Directors of the Fund, including a majority of the Directors
who are not "interested persons" of the Fund as defined in the 1940 Act, has
selected PricewaterhouseCoopers LLP as independent accountants for the Fund for
the fiscal year ending December 31, 1999. The ratification of the selection of
independent accountants is to be voted on at the Meeting, and it is intended
that the persons named in the accompanying Proxy will vote for
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP acts as the independent
accountants for certain of the other investment companies advised by MSDW
Investment Management. Although it is not expected that a representative of
PricewaterhouseCoopers LLP will attend the Meeting, a representative will be
available by telephone to respond to stockholder questions, if any.

The Board's policy regarding engaging independent accountants' services is
that management may engage the Fund's principal independent accountants to
perform any services normally provided by independent accounting firms, provided
that such services meet any and all of the independence requirements of the
American Institute of Certified Public Accountants and the Securities and
Exchange Commission. In accordance with this policy, the Audit Committee reviews
and approves all services provided by the independent accountants prior to their
being rendered. The Board of Directors also receives a report from its Audit
Committee relating to all services that have been performed by the Fund's
independent accountants.

7
<PAGE> 10

The ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes cast at a meeting at which a quorum
is present. For this purpose, abstentions and broker non-votes will be counted
in determining whether a quorum is present at the Meeting, but will not be
counted as votes cast at the Meeting.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL NO. 2.

APPROVAL OF AN AMENDMENT TO THE
FUND'S ARTICLES OF INCORPORATION
(PROPOSAL NO. 3)

The Board of Directors has approved an amendment to the Fund's Articles of
Incorporation to change the name of the Fund to Morgan Stanley Dean Witter
Eastern Europe Fund, Inc. The Board determined that the name change was
necessary and appropriate in light of the merger between Morgan Stanley Group
Inc. and Dean Witter, Discover & Co. effective May 31, 1998. Furthermore, the
Board determined that such name change was appropriate to more clearly reflect
the Fund's continued policy and current focus on investing in Eastern European
countries (including but not limited to the Czech Republic, Hungary, Poland and
Russia).

In connection with the proposed name change to Morgan Stanley Dean Witter
Eastern Europe Fund, Inc., the Board of Directors of the Fund has determined to
update the investment policy of the Fund to reflect more clearly the new name of
the Fund. Shareholders should note, however, that the investment objective of
the Fund of long term capital appreciation is not being changed. Furthermore,
the countries in which the Fund intends to invest ("RNE countries") as set forth
in the Fund's prospectus dated September 24, 1996 (the "Prospectus") and below,
is not being changed. The Fund's focus on certain countries will be highlighted
as set forth below.

Currently, it is the Fund's policy, under normal market conditions, to
invest all, but not less than 65%, of its total assets in equity securities of
RNE country issuers and in Sovereign Debt (as defined in the Prospectus). The
Prospectus states that:

"[the] Fund intends to invest in equity securities of RNE country issuers
and Sovereign Debt as appropriate opportunities arise. The amount invested
in any one RNE country will vary depending on market conditions. The Fund
is not limited in the percentage of its assets that may be invested in any
one country and it is anticipated that, from time to time, the Fund may
have a significant portion of its assets invested in securities of Russian
issuers. The Fund anticipates that, initially, its investments will be made
primarily in Russia, the Czech Republic, Hungary and Poland, which
currently have the most developed capital markets of the RNE countries.
Bulgaria, Croatia, Estonia, Latvia, Lithuania, Slovakia, Slovenia and the
Ukraine also offer current investment opportunities on a more limited
basis. As opportunities develop, investments may be made in the remaining
RNE countries."

8
<PAGE> 11

The complete list of RNE countries is as follows:

<TABLE>
<S> <C> <C>
Albania Republic of Hungary Romania
Armenia Kazakhstan Russian Federation
Azerbaijan Kyrgyzstan Serbia
Belarus Latvia Slovakia
People's Republic of Bulgaria Lithuania Slovenia
Croatia Macedonia Tajikistan
Czech Republic Moldova Turkmenistan
Estonia Montenegro Ukraine
Georgia Republic of Poland Uzbekistan
</TABLE>

The Board has determined, if the proposed name change is approved by
shareholders of the Fund, to update the investment policy to reflect the Fund's
current focus on Eastern European countries. Thus, the Board has approved
updating this policy of the Fund as follows:

"It is the Fund's policy, under normal market conditions, to invest
substantially all, but not less than 65%, of its total assets in equity
securities of Eastern European countries (as defined below) and in
Sovereign Debt. The list of Eastern European countries is as follows:

<TABLE>
<S> <C> <C>
Albania Latvia Romania
Belarus Lithuania Russian Federation
People's Republic of Bulgaria Macedonia Serbia
Croatia Moldova Slovakia
Czech Republic Montenegro Slovenia
Estonia Republic of Poland Ukraine
Republic of Hungary
</TABLE>

As opportunities develop with respect to the portion of the Fund's assets
not invested in Eastern European countries, the Fund may invest in those
RNE countries (as defined herein) which are not Eastern European countries
as set forth above and in Sovereign Debt. The Fund intends to invest in
equity securities of Eastern European countries and RNE countries and
Sovereign Debt as appropriate opportunities arise. The amount invested in
any one Eastern European country or RNE country will vary depending on
market conditions. Subject to the investment policy set forth above, the
Fund is not limited in the percentage of its assets that may be invested in
any one country."

Shareholders should note that this updated investment policy does not limit
or change the list of countries in which the Fund may invest. It simply aligns
the proposed new name of the Fund with the current investment practices of the
Fund. The proposed update to the Fund's investment policy was approved by the
Board of Directors at a meeting held on February 17, 1999. This amendment to a
non-fundamental investment policy of the Fund does not require a Shareholder
vote. If the Shareholders approve the proposed name change, the above-mentioned
update to the Fund's investment policy will be effected.

9
<PAGE> 12

APPROVAL OF AN AMENDMENT TO THE
FUND'S INVESTMENT RESTRICTIONS
(PROPOSAL NO. 4)

The Board of Directors of the Fund has approved an amendment to the Fund's
investment restrictions to allow the Fund to invest more than 25% of its total
assets in securities of companies involved in the telecommunications industry in
RNE countries (as set forth above). This change would provide the Fund with
greater flexibility to take advantage of investment opportunities. This
amendment is subject to shareholder approval, and the ability of the Fund to
invest more than 25% of its total assets in the telecommunications industry is
subject to a determination by the Board of Directors that certain criteria
exist.

These criteria include that the Board of Directors determine that the
telecommunications industry comprises a significant percentage (20% or more) of
the market of an RNE country. Furthermore, the Board must determine that the
Fund's ability to achieve its investment objective would be materially adversely
affected if the Fund were not able to concentrate in such industry.

The Board of Directors has approved investing more than 25% of the Fund's
total assets in the telecommunications industry in RNE countries. If the
amendment to the Fund's investment restrictions is approved by the shareholders
of the Fund, the Fund will commence investing more than 25% of its total assets
in the telecommunications industry. This policy will continue until the Board of
Directors determines otherwise.

The text of the current investment restriction and the proposed amendment
is set forth as Exhibit A to this proxy statement. As used in this proxy
statement, the telecommunications industry refers broadly to companies generally
involved in the provision of telephone, cellular, data transmission and other
communications services. At present, approximately % of the Fund's total
assets are invested in securities of issuers in the telecommunications industry
in RNE countries.

INCREASED INVESTMENT RISK

If greater than 25% of the Fund's assets are invested in the
telecommunications industry in RNE countries, the Fund may be exposed to
increased investment risks peculiar to that industry. The Fund's performance
would be more closely linked to the performance of that industry and would be
more dramatically affected by fluctuations in that industry. Market price
movements affecting telecommunications companies and their securities will have
a greater impact on the Fund's performance because of its more concentrated
position in such securities. Telecommunications may be subject to greater
government regulation than many other industries. Changes in government policies
and the need to obtain regulatory approvals may have a material effect on
products and services offered by telecommunications companies. Technological and
structural developments may adversely affect the profitability of
telecommunications companies.

STOCKHOLDER NOTICE

Stockholders are hereby notified that, as stated above, the Board of
Directors has approved investing more than 25% of the Fund's total assets in the
telecommunications industry in RNE countries, subject to stockholder approval of
the amendment to the Fund's investment restrictions

10
<PAGE> 13

described herein. The Fund will notify its stockholders of any decision by the
Board of Directors to cease investing more than 25% of the Fund's total assets
in the telecommunications industry.

STOCKHOLDER APPROVAL

The Fund's investment restrictions are fundamental policies of the Fund and
may not be changed without stockholder approval. Approval of the proposed
amendment to the Fund's investment restrictions will require the affirmative
vote of a majority of the Fund's outstanding shares. As defined in the 1940 Act,
a "majority of outstanding shares" means the lesser of 67% of the voting
securities present at the Annual Meeting of Stockholders, if a quorum is
present, or 50% of the outstanding securities. For this purpose, both
abstentions and broker non-votes will have the effect of a vote to disapprove
the proposed amendment.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

To the knowledge of the Fund's management, the following persons owned
beneficially more than 5% of the Fund's outstanding shares at March 1, 1999:

<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- -------------------- ----------------
<S> <C> <C>
Morgan Stanley Dean
Witter & Co........................ 444,109 shares with shared voting power and 11.35%
1585 Broadway shared dispositive power; 96,845 shares with
New York, New York 10036 shared dispositive power but no voting
power(1)
Morgan Stanley & Co.
International Limited.............. 362,106 shares with shared voting power and 7.60%
25 Cabot Square shared dispositive power;(1)
Canary Wharf
London E14 4QA
England
</TABLE>

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

(1) Based on a Schedule 13G/A filed with the Commission on February 5, 1999.

OTHER MATTERS

No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of stockholders arise,
including any question as to an adjournment of the Meeting, the persons named in
the enclosed Proxy will vote thereon according to their best judgment in the
interests of the Fund.

11
<PAGE> 14

STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING

A stockholders' proposal intended to be presented at the Fund's Annual
Meeting of Stockholders in 2000 must be received by the Fund on or before
November , 1999, in order to be included in the Fund's proxy statement and
form of proxy relating to that meeting. Any stockholder who desires to bring a
proposal at the Fund's Annual Meeting of Stockholders in 2000, without including
such proposal in the Fund's proxy statement, must deliver written notice thereof
to the Secretary of the Fund not before January , 2000 and not later than
February , 2000, pursuant to the Fund's Bylaws.

STEFANIE V. CHANG
Acting Secretary

Dated: March , 1999

STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.

12
<PAGE> 15

EXHIBIT A

Currently, the Fund's investment restrictions state:

"As a matter of fundamental policy:

1. The Fund may not invest more than 25% of its total assets in a
particular industry (including for this purpose any securities issued by a
government, other than the U.S. government), except to the extent, and only for
such period of time as, the Board of Directors of the Fund determines in view of
the considerations discussed below that it is appropriate and in the best
interest of the Fund and its stockholders to invest more than 25% of the Fund's
total assets in securities of companies involved in the energy sources industry
or the electric utilities industry in RNE countries. Since the securities
markets of many RNE countries are emerging markets characterized by a relatively
small number of issues, it is possible that the energy sources industry or the
electric utilities industry may on occasion comprise a significant percentage
(20% or more) of the market of one or more RNE countries. As a result, the Fund
has adopted a policy under which it may invest more than 25% of its total assets
in the securities of issuers in each of those industries. The Fund would only
take this action if the Board of Directors determines that the energy sources
industry or the electric utilities industry comprises a significant percentage
(20% or more) of the market of an RNE country, and that, in light of the
anticipated return, investment quality, availability and liquidity of the issues
in either such industry, the Fund's ability to achieve its investment objective
would, in light of its investment policies and limitations, be materially
adversely affected if the Fund were not able to invest greater than 25% of its
total assets in either such industry. In the event the Board of Directors
permits greater than 25% of the Fund's total assets to be invested in the energy
sources industry or the electric utilities industry in RNE countries, the Fund
may be exposed to increased investment risks peculiar to that industry. The Fund
will notify its stockholders of any decision by the Board of Directors to permit
(or cease) investments of more than 25% of the Fund's total assets in the energy
sources industry or the electric utilities industry in RNE countries. Such
notice will, to the extent applicable, include a discussion of any increased
investment risks peculiar to such industry to which the Fund may be exposed . .
."

The text of the proposed amendment is set forth below:

"As a matter of fundamental policy:

A-1
<PAGE> 16

take this action if the Board of Directors determines that the energy sources
industry, the electric utilities industry or the telecommunications industry
comprises a significant percentage (20% or more) of the market of an RNE
country, and that, in light of the anticipated return, investment quality,
availability and liquidity of the issues in the energy sources industry, the
electric utilities industry or the telecommunications industry, as the case may
be, the Fund's ability to achieve its investment objective would, in light of
its investment policies and limitations, be materially adversely affected if the
Fund were not able to invest greater than 25% of its total assets in such
industry. In the event the Board of Directors permits greater than 25% of the
Fund's total assets to be invested in the energy sources industry, the electric
utilities industry or the telecommunications industry in RNE countries, the Fund
may be exposed to increased investment risks peculiar to that industry. The Fund
will notify its stockholders of any decision by the Board of Directors to permit
(or cease) investments of more than 25% of the Fund's total assets in the energy
sources industry, the electric utilities industry or the telecommunications
industry in RNE countries. Such notice will, to the extent applicable, include a
discussion of any increased investment risks peculiar to such industry to which
the Fund may be exposed . . ."

A-2
<PAGE> 17
PROXY

MORGAN STANLEY RUSSIA & NEW EUROPE FUND, INC.

C/O MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints MICHAEL F. KLEIN, HAROLD J.
SCHAAFF, JR. and STEFANIE V. CHANG, and each of them, as proxies for the
undersigned, with full power of substitution and resubstitution, and hereby
authorizes said proxies, and each of them, to represent and vote, as designated
on the reverse side, all stock of the above Company held of record by the
undersigned on March 1, 1999 at the Annual Meeting of Stockholders to be held on
April 29, 1999, and at any adjournment thereof.

The undersigned hereby revokes any and all proxies with respect to such stock
heretofore given by the undersigned. The undersigned acknowledges receipt of the
Proxy Statement dated March ___, 1999.

(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE.)
SEE REVERSE SIDE

[X] Please mark your votes as in this sample.

1. Election of the following nominees as Directors:

FOR WITHHELD

[ ] [ ] Class I Nominees:
Peter J. Chase, David B. Gill and Michael F. Klein

--------------------------------------
For all nominees except as noted above

2. Ratification of the selection of PricewaterhouseCoopers LLP as independent
accountants.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

3. Approval of an amendment to the Fund's Articles of Incorporation to
change the name of the Fund to Morgan Stanley Dean Witter Eastern
Europe Fund, Inc.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

4. Approval of an amendment to the Fund's investment restrictions to allow the
Fund to invest more than 25% of the Fund's total assets in securities of
companies involved in the telecommunications industry if the Board of
Directors of the Fund determines that certain criteria are met.

FOR AGAINST ABSTAIN

[ ] [ ] [ ]

5. In the discretion of such proxies, upon any and all other business as may
properly come before the Meeting or any adjournment thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE THREE CLASS I NOMINEES AND IN FAVOR OF PROPOSAL NO. 2,
PROPOSAL NO. 3 AND PROPOSAL NO. 4.

PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. WHEN SHARES ARE HELD BY JOINT TENANTS,
EACH JOINT TENANT SHOULD SIGN.

SIGNATURES(S)___________________________________

DATE _______________, 1999

When signing as attorney, executor, administrator, trustee, guardian or
custodian, please sign full title as such. If a corporation, please sign full
corporate name by authorized officer and indicate the signer's office. If a
partnership, please sign in partnership name. PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]