SUB-ADVISORY AGREEMENT



     AGREEMENT made as of the 11th day of August, 2003, by and between MORGAN

STANLEY INVESTMENT ADVISORS INC., a Delaware corporation (hereinafter referred

to as "Morgan Stanley Investment Advisors"), and MORGAN STANLEY INVESTMENT

MANAGEMENT LIMITED, a company incorporated under the laws of England

(hereinafter referred to the "Local Manager").



                              W I T N E S S E T H:

                              - - - - - - - - - -





     WHEREAS, Morgan Stanley International SmallCap Fund (the "Fund") is a

Massachusetts business trust engaged in business as an open-end management

investment company and is registered under the Investment Company Act of 1940,

as amended (hereinafter referred to as the "Investment Company Act"); and



     WHEREAS, Morgan Stanley Investment Advisors and the Local Manager are

engaged principally in rendering investment advisory services and are registered

as investment advisers under the Investment Advisors Act of 1940, as amended;

and



     WHEREAS, the Local Manager is regulated by the Financial Services Authority

in the United Kingdom; and



     WHEREAS, Morgan Stanley Investment Advisors has entered into an investment

advisory agreement (the "Advisory Agreement") with the Fund dated May 31, 1997,

pursuant to which Morgan Stanley Investment Advisors provides management and

investment and advisory services to the Fund; and



     WHEREAS, the Local Manager is willing to provide investment management

services to Morgan Stanley Investment Advisors in connection with the Fund's

operations on the terms and conditions hereinafter set forth and including the

terms and conditions contained in Annex 1 and Annex 2 to this Agreement;



     NOW THEREFORE, in consideration of the premises and the covenants

hereinafter contained, the Local Manager and Morgan Stanley Investment Advisors

hereby agree as follows:



                                   ARTICLE I



                           DUTIES OF THE LOCAL MANAGER



     Morgan Stanley Investment Advisors hereby employs the Local Manager to act

as discretionary investment manager to Morgan Stanley Investment Advisors and to

furnish the investment management services described below, subject to the broad

supervision of Morgan Stanley Investment Advisors and the Fund, for the period

and on the terms and conditions set forth in this Agreement. The Local Manager

hereby accepts such employment and agrees during such period, at its own

expense, to render, or arrange for the rendering of, such services and to assume

the obligations herein set forth for the compensation provided for herein.

Morgan Stanley Investment Advisors and its affiliates shall for all purposes

herein be deemed an Intermediate Customer as defined under the rules and

guidance promulgated by the Financial Services Authority (hereinafter referred

to as the "FSA Rules"). The Local Manager and its affiliates shall for all

purposes herein be deemed to be an independent contractor and shall, unless

otherwise expressly provided or authorized, have no authority to act for or

represent the Fund in any way or otherwise be deemed an agent of the Fund.



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     The Local Manager shall have full discretion, power and authority on the

Fund's behalf to buy, sell, retain, exchange or otherwise deal in investments

and other assets, make deposits, subscribe to issues and offers for sale and

accept placings of any investments, enter into foreign currency transactions on

a spot or forward basis, effect transactions on any markets, take all day to day

decisions and otherwise act as the Local Manager judges appropriate in relation

to the investment and reinvestment of the portfolio of assets of the Fund. This

includes performing all acts and executing all documents which the Local Manager

reasonably considers incidental thereto, including (without limitation) power to

execute and deliver all applications, requests, or claims for refund, reduction,

repayment or credit of, or exemption or relief from, any withholding tax or

similar taxes in any jurisdiction in which such applications, requests or claims

may be made. Subject to guidelines adopted by the Fund, the Local Manager shall

also make recommendations or take action as to the manner in which voting

rights, rights to consent to corporate action and any other rights pertaining to

the portfolio of assets of the Fund shall be exercised. All of the foregoing is

subject always to the restrictions of the Declaration of Trust and By-Laws of

the Fund, as they may be amended and/or restated from time to time and as

provided to the Local Manager by Morgan Stanley Investment Advisors, the

provisions of the Investment Company Act and the statements relating to the

Fund's investment objective(s), investment policies and investment restrictions

as the same are set forth in the currently effective prospectus and statement of

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