EX-99.(H)(2) 4 a2150493zex-99_h2.txt EX 99.(H)(2) ADMINISTRATION AGREEMENT AGREEMENT made as of the November 1, 2004, by and between the registered investment companies, including any portfolio/series thereof, as set forth on Schedule A (each, a "Fund" and collectively, the "Funds") as may be amended from time to time, and Morgan Stanley Services Company Inc., a Delaware corporation (hereinafter called the "MS Services"): WHEREAS, on the date hereof, the Funds and Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") are entering into an Amended and Restated Investment Advisory Agreement (the "Investment Advisory Agreement") which further amends an Amended and Restated Investment Management Agreement, dated as of May 1, 2004 between the Funds and the Investment Adviser (the "Amended and Restated Investment Management Agreement") to remove from the Amended and Restated Investment Management Agreement administrative and other management services, with those services to be provided for in a separate agreement; WHEREAS, the Funds desire to retain MS Services to perform the administrative services as described below; and WHEREAS, MS Services desires to be retained by the Funds to perform such administrative services; Now, therefore, in consideration of the mutual covenants and agreements of the parties hereto as herein set forth, the parties covenant and agree as follows: 1. MS Services agrees to provide administrative services to each Fund as hereinafter set forth. Without limiting the generality of the foregoing, MS Services shall (i) administer the Fund's business affairs and supervise the overall day-to-day operations of the Fund (other than rendering investment advice); (ii) provide the Fund with full administrative services, including the maintenance of certain books and records, such as journals, ledger accounts and other records required under the Investment Company Act of 1940, as amended (the "Act"), the notification to the Fund of available funds for investment, the reconciliation of account information and balances among the Fund's custodian, transfer agent and dividend disbursing agent and the Fund, and the calculation of the net asset value of the Fund's shares; (iii) provide the Fund with the services of persons competent to perform such supervisory, administrative and clerical functions as are necessary to provide effective operation of the Fund; (iv) oversee the performance of administrative and professional services rendered to the Fund by others, including its custodian, transfer agent and dividend disbursing agent, as well as accounting, auditing and other services, including: (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; (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; (7) liaison with the Fund's independent registered public accounting firms; (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 Investment Company Act of 1940 (the "1940 Act") and preparation of the filings required in connection therewith; (v) provide the Fund with adequate general office space and facilities; (vi) assist in the preparation and the printing of the periodic updating of the Fund's registration statement and prospectus (and, in the case of an open-end Fund, the statement of additional information), tax returns, proxy statements, and reports 1 to its shareholders and the Securities and Exchange Commission; and (vii) monitor the compliance of the Fund's investment policies and restrictions. 2. MS Services shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it shall from time to time determine to be necessary or useful to the performance of its obligations under this Agreement. Without limiting the generality of the foregoing, the staff and personnel of MS Services shall be deemed to include officers of MS Services and persons employed or otherwise retained by MS Services (including officers and employees of the Funds, with the consent of the Funds) to furnish services, statistical and other factual data, information with respect to technical and scientific developments, and such other information, advice and assistance as MS Services may desire. MS Services shall maintain each Fund's records and books of account (other than those maintained by the Fund's transfer agent, registrar, custodian and other agencies). All such books and records so maintained shall be the property of the Fund and, upon request therefor, MS Services shall surrender to the Fund such of the books and records so requested. 3. The Funds will, from time to time, furnish or otherwise make available to MS Services such financial reports, proxy statements and other information relating to the business and affairs of the Fund as MS Services may reasonably require in order to discharge its duties and obligations to the Fund under this Agreement or to comply with any applicable law and regulation or request of the Board of Directors/Trustees of the Fund. 4. For the services to be rendered, the facilities furnished, and the expenses assumed by MS Services, the Funds shall pay to MS Services monthly compensation calculated daily (in the case of an open-end Fund) or weekly (in the case of a closed-end Fund) by applying the annual rate or rates set forth on Schedule B to the net assets of each Fund. Except as hereinafter set forth, (i) in the case of an open-end Fund, compensation under this Agreement shall be calculated by applying 1/365th of the annual rate or rates to the Fund's or the Series' daily net assets determined as of the close of business on that day or the last previous business day and (ii) in the case of a closed-end Fund, compensation under this Agreement shall be calculated by applying the annual rate or rates to the Fund's average weekly net assets determined as of the close of the last business day of each week. 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 calculation of the fees as set forth on Schedule B. For the purposes of calculating the administrative fee for the closed-end funds referenced on ANNEX 2 to the Investment Advisory Agreement, the liquidation preference of any Preferred Shares issued by each of such Funds will not be deducted from the Fund's total assets. Subject to the provisions of paragraph 5 hereof, payment of MS Services' compensation for the preceding month shall be made as promptly as possible after completion of the computations contemplated by paragraph 5 hereof. 5. In the event the operating expenses of those Funds identified in ANNEX 3 to the Investment Advisory Agreement, including amounts payable to the Investment Adviser pursuant to paragraph 7 thereof and the amounts payable hereunder, for any fiscal year ending on a date on which this Agreement is in effect, exceed the expense limitations applicable to the Fund and/or any Series thereof imposed by state securities laws or regulations thereunder, as such limitations may be raised or lowered from time to time, the fee payable hereunder shall be reduced on a pro rata basis in the same proportion as the fee payable by the Fund under the Investment Advisory Agreement is reduced. 6. MS Services shall bear the cost of rendering the administrative services to be performed by it under this Agreement, and shall, at its own expense, pay the compensation of the officers and employees, if any, of the Funds who are also directors, officers or employees of MS Services, and provide such office space and equipment and such clerical and bookkeeping services as each Fund shall reasonably require in 2 the conduct of its business. MS Services shall also bear the cost of heat, light, power and other utilities provided to each Fund and the cost of out-of-pocket expenses incurred in the ordinary course of providing services under this Agreement, such as telephone, fax, system usage, internal controls assurance (such as a Statement on Auditing Standards (SAS) No. 70 report), envelopes, postage and special delivery mail. Each Fund shall reimburse MS Services for any extraordinary expenses and the expenses of one or more independent pricing services, approved from time to time by the Board of Directors of a Fund, to obtain securities prices in connection with determining the net asset value of the Fund. The Fund will reimburse MS Services for its share of the cost of such services based upon its actual use of the services. 7. MS Services will use its best efforts in the performance of administrative activities on behalf of each Fund, but in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations hereunder, MS Services shall not be liable to the Fund or any of its investors for any error of judgment or mistake of law or for any act or omission by MS Services or for any losses sustained by the Fund or its investors. 8. It is understood that any of the shareholders, Directors/Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, MS Services, and in any person controlling, controlled by or under common control with MS Services, and that MS Services and any person controlling, controlled by or under common control with MS Services may have an interest in the Fund. It is also understood that MS Services and any affiliated persons thereof or any persons controlling, controlled by or under common control with MS Services have and may have advisory, management, administration service or other contracts with other organizations and persons, and may have other interests and businesses, and further may purchase, sell or trade any securities or commodities for their own accounts or for the account of others for whom they may be acting. 9. This Agreement shall continue unless terminated by either party by written notice delivered to the other party within 30 days. In the event that the Amended and Restated Investment Advisory Agreement between any Fund and the Investment Adviser is terminated, this Agreement will automatically terminate with respect to such Fund. 10. This Agreement may be amended or modified by the parties in any manner by written agreement executed by each of the parties hereto. 11. This Agreement may be assigned by either party with the written consent of the other party. 12. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement, as amended, on November 1, 2004 in New York, New York. ON BEHALF OF EACH FUND AS SET FORTH IN SCHEDULE A By: /s/ Ronald E. Robison ------------------------- Ronald E. Robison Attest: /s/ Sheldon Winicour ----------------------------------- Sheldon Winicour MORGAN STANLEY SERVICES COMPANY INC. By: /s/ Mitchell M. Merin ------------------------- Mitchell M. Merin Attest: /s/ Sheldon Winicour ----------------------------------- Sheldon Winicour 4 SCHEDULE A MORGAN STANLEY FUNDS OPEN-END FUNDS 1. Active Assets California Tax-Free Trust 2. Active Assets Government Securities Trust 3. Active Assets Institutional Government Securities Trust 4. Active Assets Institutional Money Trust 5. Active Assets Money Trust 6. Active Assets Tax-Free Trust 7. Morgan Stanley Aggressive Equity Fund 8. Morgan Stanley Allocator Fund 9. Morgan Stanley American Opportunities Fund 10. Morgan Stanley Balanced Growth Fund 11. Morgan Stanley Balanced Income Fund 12. Morgan Stanley Biotechnology Fund 13. Morgan Stanley California Tax-Free Daily Income Trust 14. Morgan Stanley California Tax-Free Income Fund 15. Morgan Stanley Capital Opportunities Trust 16. Morgan Stanley Convertible Securities Trust 17. Morgan Stanley Developing Growth Securities Trust 18. Morgan Stanley Dividend Growth Securities Inc. 19. Morgan Stanley European Growth Fund Inc. 20. Morgan Stanley Federal Securities Trust 21. Morgan Stanley Financial Services Trust 22. Morgan Stanley Flexible Income Trust 23. Morgan Stanley Fund of Funds (i) Domestic Portfolio 24. Morgan Stanley Fundamental Value Fund 25. Morgan Stanley Global Advantage Fund 26. Morgan Stanley Global Dividend Growth Securities 27. Morgan Stanley Global Utilities Fund 28. Morgan Stanley Growth Fund 29. Morgan Stanley Health Sciences Trust 30. Morgan Stanley High Yield Securities Inc. A-1 31. Morgan Stanley Income Builder Fund 32. Morgan Stanley Information Fund 33. Morgan Stanley International Fund 34. Morgan Stanley International SmallCap Fund 35. Morgan Stanley International Value Equity Fund 36. Morgan Stanley Japan Fund 37. Morgan Stanley KLD Social Index Fund 38. Morgan Stanley Limited Duration Fund 39. Morgan Stanley Limited Duration U.S. Treasury Trust 40. Morgan Stanley Limited Term Municipal Trust 41. Morgan Stanley Liquid Asset Fund Inc. 42. Morgan Stanley Mid-Cap Value Fund 43. Morgan Stanley Nasdaq-100 Index Fund 44. Morgan Stanley Natural Resource Development Securities Inc. 45. Morgan Stanley New York Municipal Money Market Trust 46. Morgan Stanley New York Tax-Free Income Fund 47. Morgan Stanley Pacific Growth Fund Inc. 48. Morgan Stanley Quality Income Trust 49. Morgan Stanley Real Estate Fund 50. Morgan Stanley Select Dimensions Investment Series (i) American Opportunities Portfolio (ii) Balanced Growth Portfolio (iii) Capital Opportunities Portfolio (iv) Developing Growth Portfolio (v) Dividend Growth Portfolio (vi) Flexible Income Portfolio (vii) Global Equity Portfolio (viii) Growth Portfolio (ix) Money Market Portfolio (x) Utilities Portfolio (xi) Value-Added Market Portfolio 51. Morgan Stanley Small-Mid Special Value Fund 52. Morgan Stanley Special Growth Fund 53. Morgan Stanley Special Value Fund 54. Morgan Stanley Strategist Fund A-2 55. Morgan Stanley S&P 500 Index Fund 56. Morgan Stanley Tax-Exempt Securities Trust 57. Morgan Stanley Tax-Free Daily Income Trust 58. Morgan Stanley Total Market Index Fund 59. Morgan Stanley Total Return Bond Fund 60. Morgan Stanley Total Return Trust 61. Morgan Stanley U.S. Government Money Market Trust 62. Morgan Stanley U.S. Government Securities Trust 63. Morgan Stanley Utilities Fund 64. Morgan Stanley Value Fund 65. Morgan Stanley Value-Added Market Series, Equity Portfolio 66. Morgan Stanley Variable Investment Series (i) Aggressive Equity Portfolio (ii) Dividend Growth Portfolio (iii) Equity Portfolio (iv) European Growth Portfolio (v) Global Advantage Portfolio (vi) Global Dividend Growth Portfolio (vii) High Yield Portfolio (viii) Income Builder Portfolio (ix) Information Portfolio (x) Limited Duration Portfolio (xi) Money Market Portfolio (xii) Quality Income Plus Portfolio (xiii) S&P 500 Index Portfolio (xiv) Strategist Portfolio (xv) Utilities Portfolio CLOSED-END FUNDS 67. Morgan Stanley California Insured Municipal Income Trust 68. Morgan Stanley California Quality Municipal Securities 69. Morgan Stanley Government Income Trust 70. Morgan Stanley Income Securities Inc. 71. Morgan Stanley Insured California Municipal Securities 72. Morgan Stanley Insured Municipal Bond Trust 73. Morgan Stanley Insured Municipal Income Trust A-3 74. Morgan Stanley Insured Municipal Securities 75. Morgan Stanley Insured Municipal Trust 76. Morgan Stanley New York Quality Municipal Securities 77. Morgan Stanley Quality Municipal Income Trust 78. Morgan Stanley Quality Municipal Investment Trust 79. Morgan Stanley Quality Municipal Securities A-4 SCHEDULE B MORGAN STANLEY SERVICES COMPANY INC. SCHEDULE OF ADMINISTRATIVE FEES Monthly compensation calculated daily by applying the following annual rates to a fund's daily net assets. The fees set forth herein are subject to the waivers and/or limitations for certain of the Funds described in Schedule A of the Investment Advisory Agreement: FIXED INCOME FUNDS 0.080% of the daily net assets. Morgan Stanley Balanced Income Fund Morgan Stanley California Tax-Free Income Fund Morgan Stanley Convertible Securities Trust Morgan Stanley Federal Securities Trust Morgan Stanley Flexible Income Trust Morgan Stanley High Yield Securities Inc. Morgan Stanley Limited Duration Fund Morgan Stanley Limited Term Municipal Trust Morgan Stanley New York Tax-Free Income Fund Morgan Stanley Quality Income Trust Morgan Stanley Select Dimensions Investment Series--Flexible Income Portfolio Morgan Stanley Tax-Exempt Securities Trust Morgan Stanley Total Return Bond Fund B-1 Morgan Stanley U.S. Government Securities Trust Morgan Stanley Variable Investment Series--High Yield Portfolio Quality Income Plus Portfolio Limited Duration Portfolio EQUITY FUNDS 0.080% of the daily net assets. Morgan Stanley Aggressive Equity Fund Morgan Stanley Allocator Fund Morgan Stanley American Opportunities Fund Morgan Stanley Balanced Growth Fund Morgan Stanley Biotechnology Fund Morgan Stanley Capital Opportunities Trust Morgan Stanley Developing Growth Securities Trust Morgan Stanley Dividend Growth Securities Inc. Morgan Stanley European Growth Fund Inc. Morgan Stanley Financial Services Trust Morgan Stanley Fundamental Value Fund Morgan Stanley Global Advantage Fund Morgan Stanley Global Dividend Growth Securities Morgan Stanley Global Utilities Fund B-2 Morgan Stanley Growth Fund Morgan Stanley Health Sciences Trust Morgan Stanley Income Builder Fund Morgan Stanley Information Fund Morgan Stanley International Fund Morgan Stanley International SmallCap Fund Morgan Stanley International Value Equity Fund Morgan Stanley Japan Fund Morgan Stanley KLD Social Index Fund Morgan Stanley Mid-Cap Value Fund Morgan Stanley Nasdaq-100 Index Fund Morgan Stanley Natural Resource Development Securities Inc. Morgan Stanley Pacific Growth Fund Inc. Morgan Stanley Real Estate Fund Morgan Stanley Select Dimensions Investment Series-- American Opportunities Portfolio Balanced Growth Portfolio Capital Opportunities Portfolio Developing Growth Portfolio Dividend Growth Portfolio Global Equity Portfolio Growth Portfolio B-3 Utilities Portfolio Value-Added Market Portfolio Morgan Stanley Small-Mid Special Value Fund Morgan Stanley Special Growth Fund Morgan Stanley Special Value Fund Morgan Stanley Strategist Fund Morgan Stanley S&P 500 Index Fund Morgan Stanley Total Market Index Fund Morgan Stanley Total Return Trust Morgan Stanley Utilities Fund Morgan Stanley Value Fund Morgan Stanley Value-Added Market Series Morgan Stanley Variable Investment Series-- Aggressive Equity Portfolio Dividend Growth Portfolio Equity Portfolio European Growth Portfolio Global Advantage Portfolio Global Dividend Growth Portfolio Income Builder Portfolio Information Portfolio S&P 500 Index Portfolio Strategist Portfolio Utilities Portfolio B-4 MONEY MARKET FUNDS 0.050% of the daily net assets. Active Assets Trusts: (1) Active Assets California Tax-Free Trust (2) Active Assets Government Securities Trust (3) Active Assets Institutional Government Securities Trust (4) Active Assets Institutional Money Trust (5) Active Assets Money Trust (6) Active Assets Tax-Free Trust Morgan Stanley California Tax-Free Daily Income Trust Morgan Stanley Liquid Asset Fund Inc. Morgan Stanley New York Municipal Money Market Trust Morgan Stanley Select Dimensions Investment Series -- Money Market Portfolio Morgan Stanley Tax-Free Daily Income Trust Morgan Stanley U.S. Government Money Market Trust Morgan Stanley Variable Investment Series -- Money Market Portfolio Monthly compensation calculated weekly by applying the following annual rates to a fund's weekly net assets: CLOSED-END FUNDS 0.080% of the average weekly net assets. Morgan Stanley California Insured Municipal Income Trust Morgan Stanley California Quality Municipal Securities B-5 Morgan Stanley Government Income Trust Morgan Stanley Income Securities Inc. Morgan Stanley Insured California Municipal Securities Morgan Stanley Insured Municipal Bond Trust Morgan Stanley Insured Municipal Income Trust Morgan Stanley Insured Municipal Securities Morgan Stanley Insured Municipal Trust Morgan Stanley New York Quality Municipal Securities Morgan Stanley Quality Municipal Income Trust Morgan Stanley Quality Municipal Investment Trust Morgan Stanley Quality Municipal Securities B-6