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MORGAN STANLEY LIQUIDITY FUNDS Société d'Investissement à Capital Variable
organised under the laws of the Grand Duchy of Luxembourg
RCS Number: B 174 137
Annual Report
31 March 2017
No Subscriptions can be received on the basis of financial reports only. Subscriptions are
only valid if made on the basis of the appropriate application form, the current Prospectus,
the financial reports and any other documents required under any applicable laws or regulations.
MORGAN STANLEY LIQUIDITY FUNDS
Table of Contents
Directors and Service Providers Page 1
Board of Directors’ Report Page 2
Investment Advisers and Sub-Advisers Report:
MS Liquidity Funds - Euro Liquidity Fund Page 6
MS Liquidity Funds - US Dollar Liquidity Fund & US Dollar Treasury Liquidity Fund Page 8
MS Liquidity Funds - Sterling Liquidity Fund Page 11
Independent Auditor’s Report for audit in accordance with International Standards on Auditing
as adopted in Luxembourg Page 12
Financial Statements:
Statement of Net Assets Page 13
Statement of Net Assets Statistics Page 15
Statement of Operations and Changes in Net Assets Page 18
Schedules of Investments:
MS Liquidity Funds - Euro Liquidity Fund Page 20
MS Liquidity Funds - US Dollar Liquidity Fund Page 24
MS Liquidity Funds - US Dollar Treasury Liquidity Fund Page 28
MS Liquidity Funds - Sterling Liquidity Fund Page 30
Notes to the Financial Statements Page 32
Appendix 1: Total Expense Ratio (Unaudited) Page 43
Appendix 2: Securities Financing Transactions Regulation (Unaudited) Page 44
MORGAN STANLEY LIQUIDITY FUNDS
1
Directors and Service Providers
Board of Directors of the Company Depositary
Michael Griffin, Chairman The Bank of New York Mellon (International)
Non-Executive Director Luxembourg Branch
Ireland 2-4 rue Eugène Ruppert
L-2453 Luxembourg
Andrew Mack Grand Duchy of Luxembourg
Non-Executive Director
United Kingdom Registrar and Transfer Agent*,
Administrative Agent* and Paying Agent*
William Jones The Bank of New York Mellon (International)
Non-Executive Director Luxembourg Branch
Grand Duchy of Luxembourg 2-4 rue Eugène Ruppert
L-2453 Luxembourg
Henry Kelly Grand Duchy of Luxembourg
Non-Executive Director
Grand Duchy of Luxembourg Domiciliary Agent
Judith Eden Morgan Stanley Investment Management
Non-Executive Director Limited, Luxembourg Branch
United Kingdom 6B, route de Trèves
L-2633 Senningerberg
Management Company Grand Duchy of Luxembourg
Morgan Stanley Investment Management Investment Adviser*
(ACD) Limited
25 Cabot Square Morgan Stanley Investment Management Inc.
Canary Wharf 522 Fifth Avenue
London E14 4QA New York, New York, 10036
United Kingdom United States of America
Directors of the Management Company Sub-Investment Adviser**
Judith Eden Morgan Stanley & Co International plc
Non-Executive Director 25 Cabot Square
United Kingdom Canary Wharf
London E14 4QA
Andrew Mack United Kingdom
Non-Executive Director
United Kingdom Distributor*
Andrew Onslow Morgan Stanley Investment Management Limited
Managing Director 25 Cabot Square
Morgan Stanley Investment Management Limited Canary Wharf
London London E14 4QA
United Kingdom United Kingdom
Ruairi O’Healai Independent Auditor of the Company
Managing Director,
Morgan Stanley Investment Management Limited Ernst & Young S.A.
London 35E, avenue J.F. Kennedy
United Kingdom L-1855 Luxembourg
Grand Duchy of Luxembourg
Diane Jane Hosie
Managing Director Legal Adviser
Morgan Stanley Investment Management Limited
London Arendt & Medernach S.A.
United Kingdom 41A, avenue J. F. Kennedy
L-2082 Luxembourg
Grand Duchy of Luxembourg
*Delegated by the Management Company.
**Delegated by the Investment Adviser.
MORGAN STANLEY LIQUIDITY FUNDS
2
Board of Directors’ Report
The Board of Directors of the Company (the “Board”) is pleased to present the Audited Financial Statements and Annual
Report for the year ended 31 March 2017.
Directors
Michael Griffin Independent Director and Chairman. A member of the Board since December 2012.
Mr. Griffin has over 30 years of experience in the financial sector. For the past 17 years he has been a non-executive
director of fund companies in Dublin & Luxembourg where he worked with some of the leading sponsors in the sector.
Most of his executive experience was with the wholesale arm of the Ulster Bank Group in Dublin where he served on the
board and management committee of Ulster Investment Bank Limited for twelve years. In this role, Mr. Griffin managed
the Treasury trading of the bank which included sovereign debt, money markets and foreign exchange. Mr. Griffin was
Chairman of the Irish Bankers’ Federation EMU Capital Markets Committee from 1996 to 1999. Mr. Griffin is a fellow of
the Institute of Bankers in Ireland.
William Jones Independent Director. A member of the Board since December 2012.
Mr. Jones is the founder of ManagementPlus Group which was established in 2006 and provides directorship and
management company services from Luxembourg, Cayman Islands, Singapore, New York and Geneva. Mr. Jones has 25
years’ experience in the hedge fund industry and has held senior positions with Goldman Sachs Asset Management
International and Bank of Bermuda/HSBC. Mr. Jones completed the first cohort of the INSEAD International Directors
Program (IIDP) in 2011 and is a member of the IIDP Advisory Board and served as its first President. Mr. Jones has been
certified as a director by IIDP and the Institut Luxembourgeois des Administrateurs (ILA). Mr. Jones serves the Board of
Directors of ILA and its Fund Governance Committee and co-chaired the Alternative Investment Task Force of ILA’s
Fund Governance Committee which issued the “ILA Guide for Board Members in the Context of AIF and AIFM” in July
2014. Mr. Jones serves multiple committees of ALFI, the Luxembourg fund industry association. Mr. Jones was co-vice
chair of the Alternative Investment Management Association’s (AIMA) working group which issued “AIMA’s Fund
Director Guide” in April 2015. Mr. Jones served on the Board of Governors of the International School of Luxembourg
from 2011 to 2015 and was its Chairman during the 2014-15 school year.
Andrew Mack Director (Director of Morgan Stanley Investment Management (ACD) Limited). A member of the Board since December
2012.
Mr. Mack joined Morgan Stanley in 1996 and has 30 years of investment experience. Mr. Mack joined Morgan Stanley as
a portfolio manager in the asset management business, where he launched and co-managed a global equity arbitrage fund.
He subsequently headed the global market risk oversight team for all of Morgan Stanley before taking over as market risk
manager of the European equities business. Mr. Mack was appointed as European head of multi asset class prime
brokerage in 2004 and took over prime brokerage sales for Europe in 2006 before running the European listed derivative
business. Mr. Mack re-joined Morgan Stanley Investment Management (MSIM) in 2008 as global chief risk officer, taking
over as head of MSIM EMEA at the beginning of 2009. Mr. Mack was an employee of Morgan Stanley until 30 June 2010.
Mr. Mack provided services as a consultant and senior adviser to Morgan Stanley between 1 July 2010 and 31 December
2013. Mr. Mack assumed a non-Executive Director role in Morgan Stanley Investment Management (ACD) Limited which
became the Management Company on 1st April 2014. Mr. Mack has been involved in taking and managing risk for most
of his investment career, his previous experience includes portfolio management, trading and risk management positions at
Cargill, Bankers Trust and Black River Asset Management, a Minneapolis based hedge fund.
Henry Kelly
Independent Director. A member of the Board since February 2013.
Henry Kelly is an independent board member of several investment funds and investment management companies
domiciled in Luxembourg and internationally. He is the Managing Director of the Luxembourg-based consultancy firm
that he founded in 1999, KellyConsult Sàrl, which provides advisory services to the investment fund sector. He is
Chairman of the Fund Governance Forum for the Association of the Luxembourg Fund Industry (ALFI) since its
establishment in 2011 and is a founding member of the Investment Funds Committee of the Luxembourg Institute of
Directors (ILA). He is a member of the European Fund and Asset Management Association (EFAMA) Corporate
Governance Working Group.
MORGAN STANLEY LIQUIDITY FUNDS
3
Board of Directors’ Report (continued)
From 1993 – 1999 he was a Managing Director of Flemings Luxembourg (now JP Morgan Asset Management) following
5 years’ experience in the capital markets division of BNP Paribas based in Paris. Prior to these posts he acquired seven
years’ experience with Price Waterhouse in Paris, Frankfurt and New York. He has a master’s degree in Modern
Languages from Cambridge University, is a Member of the Institute of Chartered Accountants in England & Wales and
holds the INSEAD Certificate in Corporate Governance. He obtained the qualification of ILA certified director in 2013.
Judith Eden
Director (Director of Morgan Stanley Investment Management (ACD) Limited). A member of the Board since July 2015.
Prior to retiring from Morgan Stanley in 2015, Ms. Eden was Chief Executive Officer of Morgan Stanley Investment
Management’s (MSIM’s) European Fund Management Company (MSIM ACD Ltd) and Chief Administrative officer of
MSIM’s international businesses. Ms. Eden originally joined Morgan Stanley in 1992 and has over 25 years of financial
industry experience spanning Strategy, Finance, Operational Management and Audit. Prior to joining Investment
Management (IM) in 2006, Ms. Eden held senior positions in Operations and Finance within the Morgan Stanley group.
Within IM she was previously a founding member and Chief Operating Officer of the Quantitative and Structured
Solutions (QSS) team within MSIM's Alternative Investments Unit.
Prior to joining Morgan Stanley, Ms. Eden worked in Price Waterhouse's (now PWC) Audit and Business Advisory
practice specialising in Financial Services. Ms. Eden is a Fellow of the Institute of Chartered Accountants of England and
Wales, a member of the UK Institute of Directors and hold INSEAD's Corporate Governance Certificate (IDP-C). Ms.
Eden serves on a number of boards, audit and risk committees in both public and private sector organisations.
Distribution of the Sub-Funds
Sub-Funds may be offered for sale in European Union Member States, subject to registration. In addition, applications to
register the Company and its Sub-Funds may be made in other countries.
All of the Sub-Funds and Share Classes are registered for distribution in the Grand Duchy of Luxembourg and a number of
the Sub-Funds and Share Classes are registered for distribution in the following jurisdictions: Denmark, France, Germany,
Ireland, Italy, the Netherlands, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
Role and Responsibility of the Board
The responsibility of the Board is governed exclusively by Luxembourg law. With respect to the annual accounts of the
Company, the duties of the Directors are governed by the law of 10 December 2010, as amended, on, inter alia, the
accounting and annual accounts of undertakings for collective investment and by the law of 17 December 2010, as
amended, relating to undertakings for collective investment.
The matters reserved for the Board include determination of each Sub-Fund’s investment objective and policies,
investment restrictions and powers, amendments to the Prospectus, reviewing and approving key investment and financial
data, including the annual accounts, as well as the appointment of, and review of the services provided by, the Investment
Adviser, the Depositary, the Administrator, the Distributor, the Auditor, and other service providers.
Prior to each Board meeting the Directors receive detailed and timely information allowing them to be prepared for the
items under discussion during the meeting. For each quarterly meeting the Board requests, and receives, reports from,
amongst others, the Investment Adviser, the Depositary, the Administrator, the Distributor, Risk Management as well as
proposals for changes to the Fund structure as appropriate. Senior representatives of each of these functions attend Board
meetings to present relevant information and address any matters arising.
The Directors take decisions in the interests of the Company and its shareholders as a whole, where conflicts of interest
arise, any conflicted Director will refrain from taking part in any related deliberation or decision. A description of the
Company’s policy on conflicts of interest is available for inspection at the registered office.
The Board can take independent professional advice if necessary and at the Company’s expense.
MORGAN STANLEY LIQUIDITY FUNDS
4
Board of Directors’ Report (continued)
Board Composition
The Board as a whole has a breadth of investment knowledge, financial skills, as well as legal and other experience
relevant to the Company’s business. Directors are elected annually by shareholders at the Annual General Meeting. The
Board takes into account the nature and requirements of the fund industry and of the Company’s business when making
recommendation to shareholders that Directors be elected.
Board Meetings and Committees
The Board meets regularly on a quarterly basis but if necessary additional ad hoc meetings will be arranged.
At the quarterly Board meetings, the agenda includes, amongst other matters, those items highlighted under the section
above called “Role and Responsibility of the Board” and the approval of the annual report and accounts.
In certain circumstances, when it may not be appropriate to wait until the next Board meeting to discuss a particular issue,
authority may be delegated to one or more Board member to deal with particular business issues.
Internal Control
The Board’s system of internal control mainly comprises monitoring the services provided by the service providers,
including the operational and compliance controls established by them to meet the Company’s obligations to shareholders
as set out in the Prospectus, Articles of Incorporation as well as all relevant regulations. They formally report to the Board
on a quarterly basis on the various activities they are responsible for and in addition shall inform the Board without delay
of any material administrative or accounting matters.
Corporate Governance and ALFI Code of Conduct
The Board is responsible for ensuring that a high level of corporate governance is met and considers that the Company has
complied with the best practices in the Luxembourg funds industry.
The Board has adopted the principles set out in the ALFI Code of Conduct (the “Code”). These principles were amended in
August 2013 and are set out below:
1. The Board should ensure that high standards of corporate governance are applied at all times;
2. The Board should have good professional standing and appropriate experience and ensure that it is collectively
competent to fulfill its responsibilities;
3. The Board should act fairly and independently in the best interests of the investors;
4. The Board should act with due care and diligence in the performance of its duties;
5. The Board should ensure compliance with all applicable laws, regulations and with the Company’s constitutional
documents;
6. The Board should ensure that investors are properly informed, are fairly and equitably treated, and receive the
benefits and services to which they are entitled;
7. The Board should ensure that an effective risk management process and appropriate internal controls are in place;
8. The Board should identify and manage fairly and effectively, to the best of its ability, any actual, potential or
apparent conflict of interest and ensure appropriate disclosure;
9. The Board should ensure that shareholder rights are exercised in a considered way and in the best interests of the
Company;
10. The Board should ensure that the remuneration of the Board members is reasonable and fair and adequately
disclosed
The Board considers that the Company has been in compliance with the principles of the Code in all material aspects
throughout the year ended 31 March 2017. The Board undertakes an annual review of ongoing compliance with the
principles of the Code.
Directors and Officers Indemnity Insurance
The Company has taken out Directors and Officers Indemnity Insurance which indemnifies the Directors against certain
liabilities arising in the course of their duties and responsibilities but does not cover against any fraudulent or dishonest
actions on their part.
MORGAN STANLEY LIQUIDITY FUNDS
5
Board of Directors’ Report (continued)
Independent Auditor
Ernst & Young S.A. has been the Company’s Independent Auditor since inception in 2012.
Annual General Meeting
The next Annual General Meeting of the Company will be held on 18 July 2017 at the Registered Office of the Company
to consider matters relating to the year ended on 31 March 2017. At this meeting shareholders will, amongst other matters,
be requested to consider the usual matters at such meetings including:
1. the adoption of the financial statements and approval of the allocation of the results;
2. the approval of Directors fees;
3. the election of the Directors, all of whom wish to stand for election;
4. the election of the Auditor.
On behalf of the Board of the Company:
Director
Director
Luxembourg, 28 June 2017
MORGAN STANLEY LIQUIDITY FUNDS
6
Morgan Stanley Liquidity Funds Euro Liquidity Fund
Investment Sub-Advisers Report for the year ended 31 March 2017
Market Review
In the year to 31 March 2017, the European Central Bank (ECB) has continued with its accommodative monetary policies,
commencing the Corporate Sector Purchase Program (CSPP) on 8 June. Two Targeted Longer-Term Refinancing Options
(TLTROs) were also launched during the period (in September 2016 and March 2017). The September TLTRO II added
€34bn of net liquidity, whilst the TLTRO in March had a larger than expected take up. This resulted in the amount of
excess liquidity in the system reaching a new record high of €1.5tn. The scale of the excess liquidity continues to push cash
rates lower against money market benchmarks. At its December 2016 meeting, the ECB extended its asset purchase
program to the end of 2017, as widely expected. Furthermore, the ECB loosened the eligibility requirements for their
program to include bonds that yield less than the ECB deposit rate and have residual maturities of at least one year.
However, the central bank surprised the market by tapering the monthly purchases by 20 billion euros to 60 billion euros
from April 2017 to the end of the year.
There has been some opposition to the ECBs policies, in particular negative rates, which have been compressing margin
for banks and increasing lending rates in the real economy. Politicians in Germany have become increasingly vocal in their
calls to increase interest rates, as inflation has increased in the Eurozone’s strongest economy. However, Draghi has
defended the ECB’s accommodative policies highlighting the importance of both fiscal and structural policies to work in
conjunction with monetary policies for interest rates to start normalizing at higher levels. Although in his press conference
at the March 2017 meeting, Draghi did open the door to the potential for a reduction in stimulus, stating that the balance of
risks has moved.
Money market rates in EUR have spent the period in a state of steady gradual decline. 3 month EURIBOR has dropped
from -0.244% to -0.329% over the period, with 3 month EUR LIBOR making a similar fall, from -0.249% to -0.358%,
despite the deposit rate being constant throughout the period. As a consequence of this decline, LIBOR – OIS swap spreads
in 3 month have compressed to basically flat. This is partly a base effect of the more diverse funding abilities in the
EONIA panel banks, the fact that there is little credit risk in the panel of LIBOR banks and partly due to the zero
probability of interest rate movements in the EUR market in the immediate future. Euro swap levels in longer dates have
however trended higher as the period has progressed, from a low of -0.448% in mid-2016 for 1 year, following the Brexit
referendum in the UK, to a high in late March following the less dovish rhetoric from Draghi of -0.312%.
The European Banking Authority (EBA) stress test results came out on 29 July 2016. The figures were healthy, showing
that capital buffers built over the past few years were sufficient to shelter them against negative growth scenarios.
European Money Market Fund (MMF) Regulation was agreed upon between the European Council and Parliament in
December 2016. Both short-term MMFs and standard MMFs (per European Securities and Markets Authority definition)
remain. Two new short-term MMF structures were introduced; Public Debt Constant Net Asset Value (CNAV) MMF and
Low Volatility (LVNAV) MMF. Trigger based liquidity fees and redemption gates are new features that apply to both
Public Debt CNAV MMFs and LVNAV MMFs. Once the regulation is published in the Official Journal of the European
Union, it will enter into force 20 days later. Implementation of the regulation must occur within 18 months after entry into
force for existing MMFs.
Domestic demand was robust at the start of the period and the main driver of growth, whilst manufacturing was weak. First
quarter of 2016 GDP came out at +1.7% year-on-year, stronger than consensus for +1.5% and likely supported by robust
private consumption. Euro area headline inflation was at -0.2% month-on-month in April 2016, down from 0% in March
2016, with euro appreciation the key factor behind the persistent low level of inflation. In June 2016, CPI increased more
than expected, although the change was small and attributable to the more volatile components of the basket such as energy
prices. Second quarter of GDP was also stronger than consensus (+1.5% year-on-year) at +1.6%, although this was down
from the first quarter. Analysts believe this moderation was driven by weaker domestic consumption. PMI data however
remained resilient despite the UK’s shock referendum result and a sluggish Eurozone economy. Third quarter GDP was
confirmed at +0.3% quarter-on-quarter, with domestic demand being the main driver. PMI data remained in expansionary
territory, whilst confidence remained resilient. Minutes from the ECB’s December meeting noted that officials believed the
Eurozone’s economic recovery was gathering strength. However, there were concerns about low core inflation, with the
uptick in headline inflation the result of rising oil prices. The strong economic data theme continued for the remainder of
the period, with the Euro-area Flash PMI printing at a new 71-month high at 56.7 in March 2017.
MORGAN STANLEY LIQUIDITY FUNDS
7
Morgan Stanley Liquidity Funds Euro Liquidity Fund
Investment Sub-Advisers Report for the year ended 31 March 2017
Market Review
On the political front, there has been further progress on Greece following the approval of the pension and tax reform bills
by the Greek parliament. Meanwhile, the far-right failed to win the presidential race in Austria (even after a repeat
presidential election runoff due to voting irregularities). There was another inconclusive general election in Spain before 10
months of upheaval came to an end in October 2016 when Mariano Rajoy, leader of the conservative People’s party (PP),
was returned to office. The theme of political fragmentation was prevalent throughout the period and there were victories
for populist movements/candidates in both the UK and Italian referendums, as well as Donald Trump in the US election.
The result of this was viewed as slightly negative for Europe as trade may be curtailed due to more protectionist measures
by the US. In a reverse of the political trend, the populist candidate Wilders in the Netherlands failed to take control of the
Dutch parliament. Instead incumbent premier Rutte took the most seats, and will now begin a projected period of
negoatiation to form a coalition. In France meanwhile, the first round of French elections is to be held on 23 April, with the
second round runoff between the top two candidates on 7 May.
MORGAN STANLEY & CO INTERNATIONAL PLC.
May 2017
MORGAN STANLEY LIQUIDITY FUNDS
8
Morgan Stanley Liquidity Funds US Dollar Liquidity Fund & Morgan Stanley Liquidity Funds US Dollar Treasury
Liquidity Fund
Investment Advisers Report for the year ended 31 March 2017
Market Review
The economy grew at a modest pace of 1.1 percent in the first half of 2016, as measured by gross domestic product (GDP)
growth, due to lagging growth caused by continued turbulence in the financial markets and global economic problems.i
Household purchases were the lone bright spot in the first half of 2016, while businesses continued to trim inventories and
reduce outlays on equipment and construction projects. The U.S. economy picked up in the third quarter of 2016, growing
at 3.5 percent, the largest increase in two years, predominantly due to a rebound in inventories and a jump in the export
market. Fourth-quarter 2016 GDP slowed to 2.1 percent, due to declining business investments that were partially offset by
a pickup in household purchases.
Despite global uncertainty, U.S. employment data continued to show resiliency in the first half of 2016, averaging
180,000.ii The first half was highlighted by a surprising 43,000 gain in May, where employers added the fewest number of
workers in almost six years. Payroll growth in June rebounded and came in at 297,000, tempering fears of a slowing labor
market. Both the unemployment rate and participation rate ended the first half of 2016 where they started, at 4.9 percent
and 62.7 percent, respectively. U.S. employment data in the third quarter of 2016 continued its positive momentum, with
non-farm payrolls averaging 238,000 through September.iii
Fourth-quarter non-farm payrolls averaged 148,000, with
participation in the labor force at 62.7 percent and the unemployment rate at 4.7 percent as of year-end 2016.
Through the first quarter of 2017, non-farm payrolls averaged 178,000, beating market consensus in both January and
February, but underperforming in March due to weather related factors. The unemployment rate ended the quarter at 4.5
percent, the lowest level since May 2007.
Monetary policy remained a key driver of sentiment and market performance. In line with market expectations, Federal
Reserve (Fed) officials held off from raising borrowing costs at the March 2016 Federal Open Market Committee (FOMC)
meeting, citing concerns about global economic and financial developments, keeping the target federal funds rate at 0.25 to
0.50 percent. The Committee revised their forecast of four rate hikes from the December 2015 meeting, down to two for
the remainder of 2016, with Federal Reserve Chair Janet Yellen saying it’s appropriate to “proceed cautiously” in raising
interest rates. The market was more cautious, only pricing in approximately one rate hike for the remainder of 2016.
At the April 2016 FOMC meeting, rates were left unchanged and the Committee signaled their openness to raising rates in
June if upcoming data warranted. The Fed acknowledged that financial conditions eased somewhat since the March
meeting and removed the assessment that “financial conditions continue to pose risks to the outlook” of the economy.
In May 2016, the April FOMC minutes were released and surprised the market with a hawkish tone. The minutes stated
that “most” participants judged that it “likely would be appropriate for the Committee to increase the target range for the
federal funds rate in June” if economic data were supportive. Referring to the June meeting, officials judged it appropriate
to leave their options open, making a decision based on upcoming economic data points.
June 2016 was full of market-moving events across the globe. The month started with the May non-farm payroll report,
which came in at 38,000, significantly below the 160,000 consensus. This was later revised to 24,000. The addition was the
fewest new jobs since September 2010, and immediately the market priced out any rate hike at the FOMC meeting later in
the month. With the poor non-farm payroll result still fresh and the upcoming Brexit vote on the horizon, as expected the
Fed held rates steady at their mid-month meeting and maintained a target federal funds range of 0.25 to 0.50 percent. The
Fed did express confidence in a jobs rebound and reiterated that interest rates are likely to rise at a gradual level. In
addition, the “dot plot,” which charts the Fed’s interest rate forecasts, took on a dovish tone, decreasing the members
voting for a 2016 hike, as well as lowering the 2017 and 2018 interest rate path.
In a referendum on June 23, 2016, the United Kingdom voted to leave the European Union (EU), with 52 percent in favor.
The vote to leave was supported by resentment over Britain’s high annual contributions to the EU as well as concerns
about the uptick in immigration due to the recent refugee crisis. The process of leaving the EU is lengthy, as it will take
two years from the time the U.K. files the official notification through Article 50 of the Lisbon Treaty. This is unchartered
territory, and the global markets reacted accordingly. Risk assets were down and investors piled into perceived safe-haven
assets, sending yields to near-record lows. The 30-year U.S. Treasury yield declined to 2.19 percent and the 10-year slid to
1.39 percent in days following the referendum.iv
MORGAN STANLEY LIQUIDITY FUNDS
9
Morgan Stanley Liquidity Funds US Dollar Liquidity Fund & Morgan Stanley Liquidity Funds US Dollar Treasury
Liquidity Fund (continued)
Investment Advisers Report for the year ended 31 March 2017 (continued)
Market Review (continued)
In July 2016, markets managed to stabilize from the turbulence following the Brexit vote in the prior month. The July
FOMC meeting went fairly in line with market expectations, with no changes to policy and rates. The tone of the meeting
was hawkish, with the Fed saying that “near-term risks to the economic outlook have diminished.” The Committee
repeated that it expects conditions will evolve in a manner that warrants a gradual increase in the federal funds rate.
With no FOMC meeting taking place in August 2016, market participants were focused on the annual Jackson Hole
summit, which was highlighted by comments from Fed Chair Yellen. “In light of the continued solid performance of the
labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate
has strengthened in recent months,” she said in the text of the speech to central bankers and economists. These remarks left
open the possibility of an interest-rate hike in September. As a result of the interpreted hawkish comments, bonds fell while
the dollar rose.
At the September 2016 FOMC meeting, however, the Committee left the target range for the federal funds rate unchanged,
citing that the risks to the economic outlook remained balanced and, although the case for an increase in policy rates had
strengthened, the Committee decided to wait for further progress toward its objectives. The non-hike appeared to be a very
close call, as three Committee members dissented against the decision. However, there was a material split in the
Committee, as three other members called for no further rate increases for the remainder of the year, blurring the
expectations of an additional rate hike before year-end.
On October 14, 2016, the long-awaited implementation of the revised SEC Rule 2a-7 took effect. Sweeping changes
included the mandatory adoption of trigger-based redemption fees and liquidity gates for prime and tax-exempt funds,
along with the conversion to floating net asset value. Government and treasury funds were largely unchanged. Money
market fund managers adopted a defensive approach leading up to the reform date, shortening their maturities and
increasing liquidity. This caused a shift in the supply/demand equilibrium for credit products, causing a technical
imbalance that resulted in a sharp rise for both 3- and 6-month Libor rates. Three-month Libor closed at 0.88 percent as of
October 14, 2016, up over 20 basis points from the start of the third quarter, while 6-month Libor closed at 1.26 percent, up
over 30 basis points from the start of the quarter.v
As expected, money market participants shifted over $1 trillion from
prime funds into government funds, for the year ended October 31, 2016.vi
November 2016 saw two major events. On November 8, 2016, the United States held Presidential elections, with
Republican candidate Donald Trump defeating Democratic candidate Hillary Clinton. Trump was viewed as a more
hawkish candidate, and the U.S. Treasury market reacted accordingly, sending yields higher across the curve. On
November 11, 2016, Fed Chair Yellen testified before the Joint Economic Committee in Congress. She signaled that the
U.S. central bank was getting closer to lifting interest rates, as the economy continued to create jobs at a healthy rate while
inflation inched higher. She warned of the risks of waiting too long before raising rates. In the weeks following her
testimony, the market-implied odds of a rate hike at the December FOMC meeting reached 100 percent.
In a unanimous decision, the FOMC raised interest rates for the first time in 2016 at its December meeting, citing
strengthening labor markets and increased inflation expectations. The move brought the target for the federal funds rate to
a range of 0.50 to 0.75 percent. The projections showed that central bankers expected three quarter-point rate increases in
2017, up from the two previously forecasted in September. Following the rate hike on December 14, 2016, the Federal
Reserve Bank of New York made adjustments to the overnight fixed-rate reverse repurchase (or RRP) facility, increasing
the offering rate from 25 basis points to 50 basis points, while maintaining a counterparty limit of $30 billion per day.
The January 2017 FOMC meeting statement was mostly in line with market expectations. The FOMC remained
accommodative and kept interest rates on hold at the target range of 0.50 percent to 0.75 percent. In its statement, the
FOMC expressed continued confidence in both economic activity and the labor market despite a lower-than-expected
fourth-quarter GDP growth result and below-target inflation levels. Job gains remained strong and the unemployment rate
remained near recent lows. The Committee expects economic activity will remain strong and expand at a moderate pace,
labor market conditions will continue to strengthen and inflation will meet its 2 percent target over the medium term.
MORGAN STANLEY LIQUIDITY FUNDS
10
Morgan Stanley Liquidity Funds US Dollar Liquidity Fund & Morgan Stanley Liquidity Funds US Dollar Treasury
Liquidity Fund (continued)
Investment Advisers Report for the year ended 31 March 2017 (continued)
Market Review (continued)
With the timing of rate hikes still uncertain, market participants in February 2017 focused on Fed Chair Yellen’s semi-
annual testimony to Congress and the release of the minutes from the January 2017 FOMC meeting. In her testimony
before Congress, Chair Yellen took a slightly hawkish tone when she raised concerns about delaying further rate hikes,
stating that “waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually
raise rates rapidly, which could risk disrupting the financial markets and pushing the economy into a recession.” Later in
the month, the January 2017 FOMC meeting minutes reiterated Fed Chair Yellen’s sentiments, as Fed officials indicated
that a hike “fairly soon” might be appropriate to avoid the risk of overheating the market. As a result, market participants
increased the odds of a rate hike occurring at the FOMC’s next meeting in March 2017.
In early March, Chair Yellen delivered a speech in which she indicated an interest-rate hike would “likely be appropriate”
at the upcoming central bank meeting if employment and inflation continued to meet expectations. With positive economic
data releases through the first half of the month, the Federal Reserve raised its benchmark lending rate a quarter point to
.75 to 1 percent at their March meeting. Officials reiterated their “gradual” approach to tightening monetary policy,
continuing to project two additional hikes in 2017 and three in 2018. The Federal Reserve Bank of New York adjusted the
overnight fixed-rate reverse repurchase (or RRP) facility, increasing the offering rate from 50 basis points to 75 basis
points, while maintaining a counterparty limit of $30 billion per day
MORGAN STANLEY INVESTMENT MANAGEMENT INC.
May 2017
.
i Source for GDP data: Bureau of Economic Analysis
ii Source for employment data: Bureau of Labor Statistics and Bloomberg L.P.
iii Source for employment data: Bureau of Labor Statistics and Bloomberg L.P.
iv Source: Bloomberg L.P., July 1, 2016
v Source: Intercontinental Exchange and Bloomberg L.P.
vi Source: iMoneynet, an Informa business
MORGAN STANLEY LIQUIDITY FUNDS
11
Morgan Stanley Liquidity Funds Sterling Liquidity Fund
Investment Sub-Advisers Report for the year ended 31 March 2017
Market Review
In the 12 month period ending 31 March 2017, the Bank of England (BoE) adjusted the Bank Rate for the first time since
March 2009. The vote to cut the Bank Rate to 0.25% in August 2016 was unanimous and takes the Rate to the lowest level
on record. At the same meeting there was a 6-3 vote to raise Quantitative Easing gilt purchases by £60bn to £435bn over a
6-month period. In addition a £10bn non-financial corporate bond purchase scheme was also announced, as well as a new
‘Term Funding Scheme’ to support banks’ profit margins and avoid reduced lending.
These aggressive measures came in the wake of the shock outcome of the European Union (EU) referendum on 23 June
2016, where contrary to market and bookmakers expectations the UK voted to leave the EU by a majority 52% of votes,
opening a long phase of uncertainty for global markets. The Sterling suffered the brunt of the move, declining over 10%
against the Dollar in early trading, when the Leave win had become all but certainty. Political turmoil also ensued, with
Prime Minister Cameron announcing that he would step down, although this period of uncertainty came to a close when
Theresa May became the new Prime Minister, without a leadership contest. Prime Minister May subsequently triggered the
Article 50 clause to start the process of exiting the European Union on 29 March 2017, kicking off 2 years of intense
negotiations. It is widely conceded a transition arrangement will need to be agreed, before a long term trade agreement can
be finalised.
The new Chancellor, Philip Hammond, delivered his Autumn statement in November 2016, signalling a shift in UK fiscal
policy away from closing the budget deficit by 2020. Hammond said that borrowing over the next five years would be
more than £100bn higher than previously expected, as the government tries to support a British economy that is predicted
to slow as it leaves the EU.
Money market rates after a stable period in the run up to the EU referendum, were far more volatile post the outcome of the
vote. Between the start of April and the days before the vote 3-month LIBOR fixed consistently around 0.58-0.59%,
peaking in mid-May at 0.5923%. While there was a small sell-off ahead of 23rd June of 4-5bps as the uncertainty of the
outcome became more of a concern for markets, the major movement was not seen until after the result, as markets started
to price in the probability of a base rate cut. When this was duly delivered in early August, 3 month LIBOR dropped to
around 0.38%. As the UK economy and subsequent data releases saw a degree of resilience, 3 month LIBOR recovered to
around 0.4%, however this trend declined through the rest of the period ending the financial year at a low for the period of
0.3374%. OIS curves have also seen significant flattening through the period as the probability of rate increases diminished
towards the end of the period. 1 year swaps having started the period pricing in a full 25bp rate hike, the outcome of the
referendum saw a 35bp fall in levels. 12 month swaps continued to match LIBOR movements, with a mid-period recovery
before ending the period falling back to below 0.5%.
European Money Market Fund (MMF) Regulation was agreed upon between the European Council and Parliament in
December 2016. Both short-term MMFs and standard MMFs (per European Securities and Markets Authority definition)
remain. Two new short-term MMF structures were introduced; Public Debt Constant Net Asset Value (CNAV) MMF and
Low Volatility (LVNAV) MMF. Trigger based liquidity fees and redemption gates are new features that apply to both
Public Debt CNAV MMFs and LVNAV MMFs. Once the regulation is published in the Official Journal of the European
Union, it will enter into force 20 days later. Implementation of the regulation must occur within 18 months after entry into
force for existing MMFs.
The period started with an ongoing moderation of UK growth, with surveys such as the Purchasing Managers’ Index (PMI)
weakening ahead of the June referendum, as firms postponed spending decisions. In the immediate aftermath of the vote to
leave the EU, the UK July PMI was very weak, with the composite reading the lowest since April 2009. All indicators
dropped below 50, some being the lowest since the 2008 financial crisis. However, second quarter of 2016 GDP was better
than expected at +0.6% quarter-on-quarter. Economic data was resilient in the following months, with a rebound in
investment despite the ongoing uncertainty. Consumption also remained strong despite weakening confidence surveys. The
impact of a weaker sterling added to inflationary pressures towards the end of 2016, leading to worries of a ‘slow-motion
slowdown’ as the purchasing power of consumers falls. In January 2017, Bank of England Governor Mr. Carney
highlighted that consumers seemed to be ‘entirely looking through Brexit related uncertainties’ but warned that relying on
consumer spending for economic growth did not bode well for the future. Indeed, retail sales have been falling in recent
months, suggesting that the post Brexit surge of confidence in the UK consumer is starting to recede as inflation starts
impacting on prices. Furthermore, despite a tight job market, there is little sign of nominal wage growth. This combined
with rising inflation is increasing the squeeze on consumers, leading to a downturn in overall activity.
MORGAN STANLEY & CO INTERNATIONAL PLC.
May 2017
MORGAN STANLEY LIQUIDITY FUNDS
12
Independent Auditor’s Report for audit in accordance with International Standards on Auditing as adopted in
Luxembourg
To the Shareholders of
Morgan Stanley Liquidity Funds
6B, route de Trèves
L-2633 Senningerberg
Grand Duchy of Luxembourg
We have audited the accompanying financial statements of Morgan Stanley Liquidity Funds (the “Company”) and of each of its sub-
funds, which comprise the statement of net assets including the schedule of investments as at 31 March 2017 and the statement of
operations and changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory
notes to the financial statements.
Responsibility of the Board of Directors of the Company for the financial statements
The Board of Directors of the Company is responsible for the preparation and fair presentation of these financial statements in
accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements and for such
internal control as the Board of Directors of the Company determines is necessary to enable the preparation and presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Responsibility of the “réviseur d’entreprises agréé”
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the judgement of the “réviseur d’entreprises agréé”, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the “réviseur d’entreprises
agréé” considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Board of Directors of the Company, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Morgan Stanley Liquidity Funds and of each
of its sub-funds as of 31 March 2017, and of the results of their operations and changes in their net assets for the year then ended in
accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements.
Other matter
Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to
specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such
information. However, we have no observation to make concerning such information in the context of the financial statements taken as a
whole.
ERNST & YOUNG
Société Anonyme
Cabinet de révision agréé
Luxembourg, 28 June 2017 Michael Ferguson
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
13
Statement of Net Assets
As of 31 March 2017
US Dollar
Euro US Dollar Treasury Sterling
Liquidity Liquidity Liquidity Liquidity
Fund Fund Fund Fund Combined
ASSETS EUR USD USD GBP USD
Investment in securities at amortized cost (Note 2a) 5,172,371,367 17,362,579,040 2,089,616,748 2,061,576,205 27,562,207,742
Time deposits (Note 9) 993,659,997 1,993,000,000 – 144,606,039 3,236,592,436
Reverse repurchase agreements (Note 8) 340,000,000 400,000,000 465,000,000 200,000,000 1,478,737,286 Interest receivable (Note 2c) 7,682,877 11,223,919 4,319,694 1,732,783 25,927,599
Cash at bank (Note 2d)(1) 42,439 1,099,634 35,172,196 2,639 36,320,520
Operating fee reimbursement 399,206 2,512,909 689,234 91,955 3,744,099 Other assets 264,084 10,160 22,802 9,419 327,191
TOTAL ASSETS 6,514,419,970 19,770,425,662 2,594,820,674 2,408,019,040 32,343,856,873
LIABILITIES
Payable for investment purchased 145,122,757 209,418,239 – – 364,634,392
Dividends payable (Note 3) – 15,844,310 1,149,944 469,269 17,581,052
Expense payable 1,762,968 7,762,438 1,416,483 846,790 12,123,373
TOTAL LIABILITIES 146,885,725 233,024,987 2,566,427 1,316,059 394,338,817
NET ASSET VALUE 6,367,534,245 19,537,400,675 2,592,254,247 2,406,702,981 31,949,518,056
(1) Cash is held at the Depositary. On behalf of the Board of the Company:
Director
Director
28 June 2017
.
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
14
Statement of Net Assets
As of 31 March 2016
US Dollar
Euro US Dollar Treasury Sterling
Liquidity Liquidity Liquidity Liquidity
Fund Fund Fund Fund Combined
ASSETS EUR USD USD GBP USD
Investment in securities at amortized cost (Note 2a) 2,620,917,518 8,020,197,165 1,365,302,629 2,007,415,111 15,257,429,049 Time deposits (Note 9) 353,447,628 930,000,000 – 286,301,563 1,744,273,165
Reverse repurchase agreements (Note 8) 200,000,000 900,000,000 130,000,000 250,000,000 1,617,235,473
Interest receivable (Note 2c) 3,397,146 4,267,698 1,329,908 1,242,697 11,254,957 Cash at bank (Note 2d)(1) 5,821 62,735,323 43,640,073 4,390 106,388,339
Receivable from investment sold – 347,478,028 99,992,313 – 447,470,341
Operating fee reimbursement 376,608 840,928 186,358 247,421 1,812,069 Other assets 24,456 – – – 27,869
TOTAL ASSETS 3,178,169,177 10,265,519,142 1,640,451,281 2,545,211,182 19,185,891,262
LIABILITIES
Payable for investment purchased 62,307,437 – 100,000,000 119,991,237 343,466,034 Dividends payable (Note 3) – 4,650,921 310,910 980,622 6,371,280
Expense payable 1,087,366 5,947,224 763,112 1,377,221 9,928,926
TOTAL LIABILITIES 63,394,803 10,598,145 101,074,022 122,349,080 359,766,240
NET ASSET VALUE 3,114,774,374 10,254,920,997 1,539,377,259 2,422,862,102 18,826,125,022
(1) Cash is held at the Depositary.
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
15
Statement of Net Assets Statistics
As of 31 March 2017
Outstanding
Shares as at
Outstanding
Shares as at
Outstanding
Shares as at
Currency 31 March 2017 31 March 2016 31 March 2015
Euro Liquidity Fund
Advisory Shares EUR – – 200,001
Institutional Shares EUR 5,195,468,206 2,619,231,047 2,626,897,424 Institutional Accumulation Shares EUR 5,052,534 292,742 355,656
Institutional Select Shares(Note 1) EUR – 1,891,776 –
Institutional (+1) Accumulation Shares(Note 1) EUR 1 – – MS Reserve Shares EUR 621,384,136 461,601,715 455,540,651
Qualified Accumulation Shares EUR – – 3,667
US Dollar Liquidity Fund
Advantage Accumulation Shares USD 1,915 1,915 1,915
Advisory Shares(Note 1) USD 50,000 – 10,000 Advisory Accumulation Shares USD – – 1
Institutional Shares USD 11,444,903,889 5,678,343,980 6,497,826,582
Institutional Accumulation Shares USD 3,920,026 434,384 1,292,896 Institutional Select Shares USD 9,730,272 96,411,194 1,010,208
Master Shares USD 5,527,514,738 4,162,860,364 4,237,292,052
MS Reserve Shares USD 294,745,484 254,905,289 272,821,475 Qualified Accumulation Shares(Note 1) USD 18,266,991 157,900 24,025
US Dollar Treasury Liquidity Fund Advisory Shares(Note 1) USD 50,000 – 10,000
Institutional Shares USD 1,734,597,405 956,120,649 224,190,299
Institutional Select Shares USD 50,088,298 50,010,000 10,000 MS Reserve Shares USD 807,518,544 533,246,611 438,736,235
Sterling Liquidity Fund Institutional Shares GBP 2,373,899,407 2,364,122,971 1,988,785,860
Institutional Accumulation Shares GBP 8,887 163,548 157,669
Institutional Select Shares GBP 25,000,000 7,000,000 7,041,521 Institutional Select Accumulation Shares GBP – – 570
MS Reserve Shares(Note 1) GBP – 24,195,694 27,321,857
Qualified Shares GBP 6,793,742 9,022,300 11,631,435 Qualified Accumulation Shares GBP – – 588
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
16
Statement of Net Assets Statistics
As of 31 March 2017 (continued)
Net Asset Value
per Share as at
Net Asset Value
per Share as at
Net Asset Value
per Share as at
Currency 31 March 2017 31 March 2016 31 March 2015
Euro Liquidity Fund
Advisory Shares EUR – – 1.00
Institutional Shares EUR 1.00 1.00 1.00 Institutional Accumulation Shares EUR 108.99 109.48 109.63
Institutional Select Shares(Note 1) EUR – 1.00 –
Institutional (+1) Accumulation Shares(Note 1) EUR 100.00 – – MS Reserve Shares EUR 1.00 1.00 1.00
Qualified Accumulation Shares EUR – – 109.62
US Dollar Liquidity Fund
Advantage Accumulation Shares USD 101.51 101.13 101.09
Advisory Shares(Note 1) USD 1.00 – 1.00 Advisory Accumulation Shares USD – – 101.07
Institutional Shares USD 1.00 1.00 1.00
Institutional Accumulation Shares USD 107.54 106.85 106.67 Institutional Select Shares USD 1.00 1.00 1.00
Master Shares USD 1.00 1.00 1.00
MS Reserve Shares USD 1.00 1.00 1.00 Qualified Accumulation Shares(Note 1)* USD 100.66 100.02 106.66
US Dollar Treasury Liquidity Fund Advisory Shares(Note 1) USD 1.00 – 1.00
Institutional Shares USD 1.00 1.00 1.00
Institutional Select Shares USD 1.00 1.00 1.00 MS Reserve Shares USD 1.00 1.00 1.00
Sterling Liquidity Fund Institutional Shares GBP 1.00 1.00 1.00
Institutional Accumulation Shares GBP 113.64 113.25 112.74
Institutional Select Shares GBP 1.00 1.00 1.00 Institutional Select Accumulation Shares GBP – – 100.08
MS Reserve Shares(Note 1) GBP – 1.00 1.00
Qualified Shares GBP 1.00 1.00 1.00 Qualified Accumulation Shares GBP – – 112.73
*All shares issued were redeemed on 8 September 2015. The share class remained inactive until 14 March 2016 when shares were issued at a Net Asset Value per Share of USD 100.00.
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
17
Statement of Net Assets Statistics
As of 31 March 2017 (continued)
Net Assets as at Net Assets as at Net Assets as at
Currency 31 March 2017 31 March 2016 31 March 2015
Euro Liquidity Fund
Advisory Shares EUR – – 200,001
Institutional Shares EUR 5,195,468,206 2,619,231,047 2,626,897,424 Institutional Accumulation Shares EUR 550,681,803 32,049,835 38,989,437
Institutional Select Shares(Note 1) EUR – 1,891,776 –
Institutional (+1) Accumulation Shares(Note 1) EUR 100 – – MS Reserve Shares EUR 621,384,136 461,601,715 455,540,651
Qualified Accumulation Shares EUR – – 401,945
US Dollar Liquidity Fund
Advantage Accumulation Shares USD 194,388 193,653 193,589
Advisory Shares(Note 1) USD 50,000 – 10,000 Advisory Accumulation Shares USD – – 101
Institutional Shares USD 11,444,903,889 5,678,343,980 6,497,826,582
Institutional Accumulation Shares USD 421,553,492 46,413,168 137,906,967 Institutional Select Shares USD 9,730,272 96,411,194 1,010,208
Master Shares USD 5,527,514,738 4,162,860,364 4,237,292,052
MS Reserve Shares USD 294,745,484 254,905,289 272,821,475 Qualified Accumulation Shares(Note 1) USD 1,838,708,412 15,793,425 2,562,486
US Dollar Treasury Liquidity Fund Advisory Shares(Note 1) USD 50,000 – 10,000
Institutional Shares USD 1,734,597,405 956,120,649 224,190,299
Institutional Select Shares USD 50,088,298 50,010,000 10,000 MS Reserve Shares USD 807,518,544 533,246,611 438,736,235
Sterling Liquidity Fund Institutional Shares GBP 2,373,899,407 2,364,122,971 1,988,785,860
Institutional Accumulation Shares GBP 1,009,832 18,521,138 17,775,955
Institutional Select Shares GBP 25,000,000 7,000,000 7,041,521 Institutional Select Accumulation Shares GBP – – 57,025
MS Reserve Shares(Note 1) GBP – 24,195,694 27,321,857
Qualified Shares GBP 6,793,742 9,022,300 11,631,435 Qualified Accumulation Shares GBP – – 66,239
MORGAN STANLEY LIQUIDITY FUNDS
Statement of Operations and Changes in Net Assets
For the year ended to 31 March 2017
The accompanying notes form an integral part of financial statements.
18
US Dollar
Euro US Dollar Treasury Sterling
Liquidity Liquidity Liquidity Liquidity
Fund Fund Fund Fund Combined
INCOME EUR USD USD GBP USD
Interest (Note 2c) (20,027,884) 133,912,823 8,638,932 11,960,782 136,206,569
Total Positive/(Negative) Income (20,027,884) 133,912,823 8,638,932 11,960,782 136,206,569
EXPENSES
Management fees (Note 4,6) 9,157,195 20,135,622 2,988,440 5,124,470 39,870,957
Less: Management fees waived (5,949,952) (212,827) (62,748) (2,044,373) (9,477,067)
Management fees - Net 3,207,243 19,922,795 2,925,692 3,080,097 30,393,890
Taxe d'Abonnement (Note 5) – 643,006 – 797 644,048
Legal fees (Note 6c) 30,341 32,645 32,645 26,042 132,624 Director's fees, director's liability insurance
premium and expenses (Note 6b) 56,214 61,374 61,270 48,638 247,904 Ratings fees (Note 6c) 61,028 75,728 47,897 53,521 260,550
Tax charges (excluding Taxe d'Abonnement) (Note 5) 15,571 16,527 934 12,276 50,594
Other fees (Note 6c) 19,187 22,771 17,685 15,711 82,046 Audit fees (Note 6c) 13,778 14,859 14,859 11,719 60,155
Professional fees (Note 6c) 13,556 22,426 – 8,129 47,927
Distribution fees (Note 6c) 6,316 6,994 6,993 5,116 27,605 Less: Operating fee reimbursement (215,749) (290,421) (181,861) (181,079) (945,720)
Total Expenses 3,207,485 20,528,704 2,926,114 3,080,967 31,001,623
Net Investment Income/(Expense) (23,235,369) 113,384,119 5,712,818 8,879,815 105,204,946
Less: Distribution paid from income (Note 3) – (102,491,846) (5,712,818) (8,864,975) (119,791,533)
Receipt from the Compulsory Redemption of shares (Note 3) 22,385,524 – – – 24,565,645
Net Increase/(Decrease) in Net Assets resulting from
operations (849,845) 10,892,273 – 14,840 9,979,058
Proceeds from issuance of shares 26,441,306,498 89,208,789,774 16,720,381,500 18,556,711,055 159,199,936,144 Shares redeemed (23,187,696,782) (79,937,202,369) (15,667,504,512) (18,572,885,016) (145,326,133,787)
Increase/(Decrease) in Net Assets from share transactions 3,253,609,716 9,271,587,405 1,052,876,988 (16,173,961) 13,873,802,357
Increase/(Decrease) in Net Assets 3,252,759,871 9,282,479,678 1,052,876,988 (16,159,121) 13,883,781,415
Net Assets at the beginning of the year 3,114,774,374 10,254,920,997 1,539,377,259 2,422,862,102 18,826,125,022 Foreign exchange adjustment on translation – – – – (760,388,381)
NET ASSETS AT THE END OF THE YEAR 6,367,534,245 19,537,400,675 2,592,254,247 2,406,702,981 31,949,518,056
On behalf of the Board of the Company: Director
Director
28 June 2017
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
19
Statement of Operations and Changes in Net Assets
For the year ended to 31 March 2016
US Dollar
Euro US Dollar Treasury Sterling
Liquidity Liquidity Liquidity Liquidity
Fund Fund Fund Fund Combined
INCOME EUR USD USD GBP USD
Interest (Note 2c) (2,725,036) 40,145,865 1,736,661 13,654,417 59,435,878
Total Positive/(Negative) Income (2,725,036) 40,145,865 1,736,661 13,654,417 59,435,878
EXPENSES
Management fees (Note 4,6) 5,423,641 14,646,196 1,306,196 4,770,045 29,121,815
Less: Management fees waived (4,101,086) (2,259,683) (652,466) (1,905,096) (10,307,628)
Management fees - Net 1,322,555 12,386,513 653,730 2,864,949 18,814,187
Taxe d'Abonnement (Note 5) – 406,859 – 533 407,662
Legal fees (Note 6c) 34,196 34,546 34,546 25,129 144,677 Director's fees, director's liability insurance
premium and expenses (Note 6b) 47,714 52,844 52,948 35,571 212,022 Ratings fees (Note 6c) 56,687 71,401 31,901 41,033 227,661
Tax charges (excluding Taxe d'Abonnement) (Note 5) 19,942 21,540 13,725 15,559 80,706
Other fees (Note 6c) 20,374 20,404 26,014 14,870 91,298 Audit fees (Note 6c) 13,766 15,687 15,687 10,914 63,003
Professional fees (Note 6c) 12,672 35,716 1,147 5,122 58,563
Distribution fees (Note 6c) 11,152 9,586 9,586 7,637 42,981 Less: Operating fee reimbursement (223,208) (258,994) (185,554) (155,596) (925,223)
Total Expenses 1,315,850 12,796,102 653,730 2,865,721 19,217,537
Net Investment Income/(Expense) (4,040,886) 27,349,763 1,082,931 10,788,696 40,218,341
Less: Distribution paid from income (Note 3) (1,829) (27,075,715) (1,082,957) (10,707,153) (44,283,831)
Receipt from the Compulsory Redemption of shares (Note 3) 3,985,919 – – – 4,399,611
Net Increase/(Decrease) in Net Assets resulting from
operations (56,796) 274,048 (26) 81,543 334,121
Proceeds from issuance of shares 14,162,192,012 62,301,227,920 12,170,777,189 16,125,747,721 114,386,682,282 Shares redeemed (14,169,390,300) (63,196,204,431) (11,294,346,438) (15,755,647,054) (113,855,865,173)
Increase/(Decrease) in Net Assets from share transactions (7,198,288) (894,976,511) 876,430,751 370,100,667 530,817,109
Increase/(Decrease) in Net Assets (7,255,084) (894,702,463) 876,430,725 370,182,210 531,151,230
Net Assets at the beginning of the year 3,122,029,458 11,149,623,460 662,946,534 2,052,679,892 18,212,834,027 Foreign exchange adjustment on translation – – – – 82,139,765
NET ASSETS AT THE END OF THE YEAR 3,114,774,374 10,254,920,997 1,539,377,259 2,422,862,102 18,826,125,022
MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund
Schedule of Investments
As of 31 March 2017
(Expressed in EUR)
The accompanying notes form an integral part of financial statements.
20
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
COMMERCIAL PAPER 42.71%
AGENCE CENTRALE DES ORGANISMES EUR 75,000,000 - 09-May-17 75,034,215 1.18
AGENCE CENTRALE DES ORGANISMES EUR 50,000,000 - 16-May-17 50,025,680 0.79
BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 30,000,000 - 03-Apr-17 30,000,000 0.47 BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 7,000,000 - 03-Apr-17 7,000,000 0.11
BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 30,000,000 - 09-Jun-17 30,021,517 0.47
BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 25,000,000 - 13-Jun-17 25,019,001 0.39 BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 50,000,000 - 03-Jul-17 50,046,827 0.79
BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 50,000,000 - 03-Jul-17 50,046,197 0.79
BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 25,000,000 - 10-Jul-17 25,024,537 0.39 CREDIT AGRICOLE CIB EUR 25,000,000 - 16-Jun-17 25,021,607 0.39
CREDIT AGRICOLE CIB EUR 25,000,000 - 27-Jun-17 25,024,818 0.39
CREDIT AGRICOLE CIB EUR 25,000,000 - 06-Jul-17 25,026,147 0.39 CREDIT AGRICOLE CIB EUR 50,000,000 - 31-Aug-17 50,081,385 0.79
DANSKE BANK A/S EUR 25,000,000 - 09-Jun-17 25,014,913 0.39
DANSKE BANK A/S EUR 25,000,000 - 11-Jul-17 25,020,656 0.39 DANSKE BANK A/S EUR 50,000,000 - 12-Jul-17 50,054,238 0.79
DANSKE BANK A/S EUR 50,000,000 - 14-Aug-17 50,060,133 0.79
DANSKE BANK A/S EUR 25,000,000 - 01-Sep-17 25,037,817 0.39 DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 50,000,000 - 05-Apr-17 50,000,807 0.79
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 11,000,000 - 05-Apr-17 11,000,281 0.17
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 25,000,000 - 10-May-17 25,009,267 0.39 ERSTE ABWICKLUNGSANSTALT EUR 25,000,000 - 18-Apr-17 25,004,904 0.39
ERSTE ABWICKLUNGSANSTALT EUR 25,000,000 - 27-Jul-17 25,038,396 0.39
HONEYWELL INTERNATIONAL INC EUR 25,000,000 - 22-May-17 25,008,514 0.39 HONEYWELL INTERNATIONAL INC EUR 25,500,000 - 24-May-17 25,510,846 0.40
HONEYWELL INTERNATIONAL INC EUR 25,000,000 - 09-Jun-17 25,012,573 0.39
HONEYWELL INTERNATIONAL INC EUR 20,000,000 - 09-Jun-17 20,010,059 0.32 HONEYWELL INTERNATIONAL INC EUR 25,000,000 - 27-Jun-17 25,018,315 0.39
HONEYWELL INTERNATIONAL INC EUR 25,000,000 - 02-Aug-17 25,019,348 0.39 HONEYWELL INTERNATIONAL INC EUR 25,000,000 - 14-Aug-17 25,021,267 0.39
KA FINANZ AG EUR 11,000,000 - 10-Apr-17 11,001,038 0.17
KA FINANZ AG EUR 15,500,000 - 20-Apr-17 15,503,551 0.24 KA FINANZ AG EUR 50,000,000 - 02-May-17 50,019,544 0.79
KA FINANZ AG EUR 25,000,000 - 16-May-17 25,011,380 0.39
KA FINANZ AG EUR 20,000,000 - 19-May-17 20,010,500 0.32 KA FINANZ AG EUR 30,000,000 - 24-May-17 30,017,463 0.47
KA FINANZ AG EUR 25,000,000 - 03-Jul-17 25,029,118 0.39
KA FINANZ AG EUR 35,000,000 - 19-Jul-17 35,045,485 0.55 KA FINANZ AG EUR 23,000,000 - 12-Oct-17 23,050,419 0.36
LANDESBANK HESSEN-THUERINGEN GIROZE EUR 75,000,000 - 02-May-17 75,033,850 1.18
NORDEA BANK AB EUR 25,000,000 - 12-Apr-17 25,002,441 0.39
NORDEA BANK AB EUR 30,000,000 - 25-May-17 30,016,063 0.47
NORDEA BANK AB EUR 25,000,000 - 13-Jun-17 25,018,766 0.39
NORDEA BANK AB EUR 25,000,000 - 14-Jun-17 25,022,526 0.39 NORDEA BANK AB EUR 30,000,000 - 27-Jun-17 30,032,622 0.47
NORDEA BANK AB EUR 25,000,000 - 06-Jul-17 25,026,801 0.39
NORDEA BANK AB EUR 30,000,000 - 22-Aug-17 30,044,735 0.47 OP CORPORATE BANK PLC EUR 12,000,000 - 19-Apr-17 12,002,456 0.19
OP CORPORATE BANK PLC EUR 11,250,000 - 05-May-17 11,253,906 0.18
OP CORPORATE BANK PLC EUR 30,000,000 - 08-May-17 30,011,394 0.47 OP CORPORATE BANK PLC EUR 50,000,000 - 31-May-17 50,037,891 0.79
OP CORPORATE BANK PLC EUR 17,000,000 - 13-Jun-17 17,014,443 0.27
OP CORPORATE BANK PLC EUR 27,500,000 - 13-Jul-17 27,531,698 0.43 OP CORPORATE BANK PLC EUR 17,000,000 - 14-Aug-17 17,026,434 0.27
OP CORPORATE BANK PLC EUR 22,500,000 - 15-Aug-17 22,535,249 0.35
OP CORPORATE BANK PLC EUR 13,000,000 - 16-Aug-17 13,020,518 0.21 OP CORPORATE BANK PLC EUR 11,000,000 - 22-Aug-17 11,018,133 0.17
PROCTER & GAMBLE COMPANY EUR 15,000,000 - 10-Apr-17 15,000,905 0.24
PROCTER & GAMBLE COMPANY EUR 13,500,000 - 12-Apr-17 13,501,047 0.21
MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in EUR)
The accompanying notes form an integral part of financial statements.
21
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
COMMERCIAL PAPER 42.71%
PROCTER & GAMBLE COMPANY EUR 26,000,000 - 24-Apr-17 26,004,706 0.41
PROCTER & GAMBLE COMPANY EUR 25,000,000 - 28-Apr-17 25,005,387 0.39 PROCTER & GAMBLE COMPANY EUR 25,000,000 - 04-May-17 25,009,170 0.39
PROCTER & GAMBLE COMPANY EUR 30,000,000 - 31-May-17 30,014,996 0.47
PROCTER & GAMBLE COMPANY EUR 3,000,000 - 09-Jun-17 3,001,900 0.05
PROCTER & GAMBLE COMPANY EUR 20,000,000 - 19-Jun-17 20,013,273 0.32
PROCTER & GAMBLE COMPANY EUR 11,000,000 - 22-Jun-17 11,007,584 0.17
PROCTER & GAMBLE COMPANY EUR 24,000,000 - 03-Jul-17 24,019,735 0.38 PROCTER & GAMBLE COMPANY EUR 23,500,000 - 07-Jul-17 23,520,173 0.37
PROCTER & GAMBLE COMPANY EUR 20,000,000 - 11-Jul-17 20,017,065 0.32
RABOBANK NEDERLAND NV EUR 30,000,000 - 13-Jul-17 30,027,821 0.47 SOCIETE DE FINANCEMENT LOCAL SA EUR 50,000,000 - 14-Jun-17 50,047,057 0.79
SOCIETE DE FINANCEMENT LOCAL SA EUR 20,000,000 - 16-Jun-17 20,018,741 0.32
SOCIETE DE FINANCEMENT LOCAL SA EUR 25,000,000 - 31-Jul-17 25,037,244 0.39 SUMITOMO MITSUI BANKING CORPORATION EUR 19,500,000 - 18-Apr-17 19,503,820 0.31
SUMITOMO MITSUI BANKING CORPORATION EUR 25,000,000 - 09-Jun-17 25,020,495 0.39
SUMITOMO MITSUI BANKING CORPORATION EUR 30,000,000 - 19-Jun-17 30,023,135 0.47 SUMITOMO MITSUI BANKING CORPORATION EUR 25,000,000 - 13-Jul-17 25,025,288 0.39
SVENSKA HANDELSBANKEN AB EUR 20,000,000 - 03-Apr-17 20,000,000 0.31
SVENSKA HANDELSBANKEN AB EUR 20,000,000 - 17-Jul-17 20,019,282 0.32 SVENSKA HANDELSBANKEN AB EUR 20,000,000 - 18-Jul-17 20,019,467 0.32
SVENSKA HANDELSBANKEN AB EUR 25,000,000 - 09-Aug-17 25,027,606 0.39
SVENSKA HANDELSBANKEN AB EUR 25,000,000 - 11-Aug-17 25,028,037 0.39
SVENSKA HANDELSBANKEN AB EUR 25,000,000 - 21-Aug-17 25,033,112 0.39
SVENSKA HANDELSBANKEN AB EUR 25,000,000 - 29-Aug-17 25,035,005 0.39
SVENSKA HANDELSBANKEN AB EUR 20,000,000 - 03-Oct-17 20,036,667 0.31 TORONTO DOMINION BANK EUR 25,000,000 - 04-Apr-17 25,000,125 0.39
TORONTO DOMINION BANK EUR 25,000,000 - 15-Jun-17 25,014,225 0.39
TORONTO DOMINION BANK EUR 25,000,000 - 21-Jun-17 25,014,292 0.39 TOYOTA MOTOR FINANCE (NETHERLANDS) EUR 50,000,000 - 22-May-17 50,029,286 0.79
UBS AG EUR 2,000,000 - 14-Sep-17 2,003,469 0.03
UNILEVER NV EUR 20,000,000 - 05-May-17 20,007,915 0.32 UNILEVER NV EUR 66,000,000 - 12-May-17 66,031,834 1.04
UNILEVER NV EUR 50,000,000 - 19-May-17 50,028,130 0.79
UNILEVER NV EUR 25,000,000 - 22-May-17 25,014,983 0.39 UNITED PARCEL SERVICE INC EUR 20,000,000 - 07-Apr-17 20,000,934 0.31
UNITED PARCEL SERVICE INC EUR 20,000,000 - 13-Apr-17 20,002,390 0.32
UNITED PARCEL SERVICE INC EUR 20,000,000 - 18-Apr-17 20,003,585 0.32 UNITED PARCEL SERVICE INC EUR 30,000,000 - 20-Apr-17 30,005,815 0.47
UNITED PARCEL SERVICE INC EUR 20,000,000 - 23-May-17 20,011,400 0.32
UNITED PARCEL SERVICE INC EUR 20,000,000 - 03-Jul-17 20,020,000 0.32
Total Commercial Paper 2,719,759,790 42.71
CERTIFICATES OF DEPOSIT 16.59%
BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 50,000,000 - 03-Apr-17 50,000,000 0.79
CITIBANK NA EUR 25,000,000 - 08-Jun-17 25,019,730 0.39 CITIBANK NA EUR 50,000,000 - 13-Jun-17 50,042,449 0.79
CITIBANK NA EUR 50,000,000 - 03-Jul-17 50,053,159 0.79
CITIBANK NA EUR 50,000,000 - 03-Jul-17 50,050,629 0.79 CREDIT SUISSE AG EUR 1,500,000 - 23-May-17 1,500,730 0.02
CREDIT SUISSE AG EUR 40,000,000 - 02-Jun-17 40,028,029 0.63
CREDIT SUISSE AG EUR 1,000,000 - 07-Jul-17 1,000,634 0.02 CREDIT SUISSE AG EUR 100,000,000 - 24-Aug-17 100,141,238 1.57
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 15,000,000 - 04-May-17 15,004,916 0.24
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 25,000,000 - 06-Jul-17 25,027,461 0.39 HSBC BANK PLC EUR 40,000,000 - 21-Jul-17 40,050,335 0.63
MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in EUR)
The accompanying notes form an integral part of financial statements.
22
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
CERTIFICATES OF DEPOSIT 16.59%
MIZUHO BANK LTD EUR 50,000,000 - 03-Apr-17 50,000,000 0.79
MIZUHO BANK LTD EUR 25,000,000 - 10-Apr-17 25,002,020 0.39 MIZUHO BANK LTD EUR 25,000,000 - 13-Apr-17 25,002,885 0.39
MIZUHO BANK LTD EUR 25,000,000 - 18-Apr-17 25,004,327 0.39
MIZUHO BANK LTD EUR 27,000,000 - 28-Apr-17 27,008,442 0.42
MIZUHO BANK LTD EUR 11,000,000 - 02-May-17 11,003,813 0.17
MIZUHO BANK LTD EUR 25,000,000 - 08-May-17 25,010,097 0.39
MIZUHO BANK LTD EUR 25,000,000 - 13-Jun-17 25,020,978 0.39 MIZUHO BANK LTD EUR 50,000,000 - 03-Jul-17 50,051,240 0.79
RABOBANK NEDERLAND NV EUR 25,000,000 - 19-Apr-17 25,003,338 0.39
RABOBANK NEDERLAND NV EUR 20,000,000 - 09-Aug-17 20,024,219 0.32 SUMITOMO MITSUI BANKING CORPORATION EUR 25,000,000 - 10-Apr-17 25,001,703 0.39
SUMITOMO MITSUI BANKING CORPORATION EUR 40,000,000 - 27-Apr-17 40,013,339 0.63
SUMITOMO MITSUI BANKING CORPORATION EUR 20,000,000 - 03-Jul-17 20,020,252 0.32 SUMITOMO MITSUI BANKING CORPORATION EUR 50,000,000 - 03-Jul-17 50,050,629 0.79
SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 - 10-Apr-17 25,001,217 0.39
SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 - 11-May-17 25,008,061 0.39 SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 - 03-Jul-17 25,024,999 0.39
SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 - 17-Jul-17 25,021,908 0.39
SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 - 31-Jul-17 25,025,658 0.39 SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 - 13-Sep-17 25,038,553 0.39
SVENSKA HANDELSBANKEN AB EUR 15,000,000 - 08-Sep-17 15,023,743 0.24
Total Certificates of Deposit 1,056,280,731 16.59
FLOATING RATE NOTES 8.38%
ABN AMRO BANK EUR 20,000,000 0.38% 03-Jul-17 20,038,267 0.32 ASB FINANCE LTD EUR 5,000,000 0.08% 03-Jul-17 5,006,003 0.08
BANK OF NOVA SCOTIA EUR 25,000,000 - 15-Sep-17 25,045,082 0.39 BAYERISCHE MOTOREN WERKE AG EUR 20,000,000 0.04% 28-Jul-17 20,025,588 0.31
DANSKE BANK A/S EUR 28,000,000 0.32% 29-May-17 28,029,326 0.44
EUROPEAN INVESTMENT BANK EUR 1,941,000 0.15% 27-Jul-17 1,944,915 0.03 HSBC BANK PLC EUR 39,000,000 - 25-Sep-17 39,066,612 0.61
ING BANK NV EUR 21,500,000 0.33% 05-Jun-17 21,528,428 0.34
ING BANK NV EUR 24,000,000 0.38% 14-Aug-17 24,068,702 0.38 LLOYDS BANK PLC EUR 15,500,000 0.21% 21-Aug-17 15,530,962 0.24
NATIONAL AUSTRALIA BANK LTD EUR 17,204,000 - 16-Jan-18 17,247,990 0.27
RABOBANK NEDERLAND NV EUR 79,000,000 0.30% 12-Jun-17 79,092,955 1.24 RABOBANK NEDERLAND NV EUR 17,100,000 - 20-Sep-17 17,127,252 0.27
RABOBANK NEDERLAND NV EUR 45,647,000 - 12-Oct-17 45,731,919 0.72
SKANDINAVISKA ENSKILDA BANKEN AB EUR 32,000,000 0.07% 15-Sep-17 32,062,234 0.50 TORONTO DOMINION BANK EUR 80,715,000 - 16-Jun-17 80,766,850 1.27
UBS AG EUR 61,423,000 - 15-May-17 61,447,186 0.97
Total Floating Rate Notes 533,760,271 8.38
TREASURY BILLS 7.07%
REPUBLIC OF FRANCE EUR 100,000,000 - 05-Apr-17 100,003,703 1.57 REPUBLIC OF FRANCE EUR 75,000,000 - 04-May-17 75,043,970 1.18
REPUBLIC OF FRANCE EUR 50,000,000 - 11-May-17 50,034,932 0.78
REPUBLIC OF FRANCE EUR 50,000,000 - 17-May-17 50,040,028 0.79 REPUBLIC OF FRANCE EUR 100,000,000 - 14-Jun-17 100,129,194 1.57
MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in EUR)
The accompanying notes form an integral part of financial statements.
23
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
TREASURY BILLS 7.07%
REPUBLIC OF FRANCE EUR 75,000,000 - 05-Jul-17 75,130,979 1.18
Total Treasury Bills 450,382,806 7.07
CORPORATE BONDS 5.69%
BA COVERED BOND ISSUER EUR 41,250,000 4.25% 05-Apr-17 41,260,468 0.65 BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 25,500,000 3.50% 25-Apr-17 25,560,886 0.40
DNB BANK ASA EUR 71,845,000 2.38% 11-Apr-17 71,890,894 1.13
DNB BANK ASA EUR 14,625,000 2.38% 31-Aug-17 14,794,765 0.23 ERSTE ABWICKLUNGSANSTALT EUR 60,100,000 1.13% 30-Aug-17 60,502,109 0.95
FMS WERTMANAGEMENT ANSTALT DES OFF EUR 1,700,000 1.00% 18-Jul-17 1,707,291 0.03
HSBC BANK PLC EUR 9,931,000 3.13% 15-Nov-17 10,144,814 0.16 LANDESBANK HESSEN-THUERINGEN GIROZE EUR 11,900,000 0.38% 26-May-17 11,914,751 0.19
NORDEA BANK AB EUR 76,500,000 2.38% 17-Jul-17 77,131,486 1.21
OP CORPORATE BANK PLC EUR 2,730,000 3.00% 08-Sep-17 2,770,337 0.04 RABOBANK NEDERLAND NV EUR 14,931,000 3.38% 21-Apr-17 14,959,083 0.24
SKANDINAVISKA ENSKILDA BANKEN AB EUR 24,169,000 3.88% 12-Apr-17 24,193,485 0.38
SVENSKA HANDELSBANKEN AB EUR 5,300,000 3.38% 17-Jul-17 5,357,400 0.08
Total Corporate Bonds 362,187,769 5.69
COMMERCIAL PAPER - INTEREST BEARING 0.79%
FMS WERTMANAGEMENT ANSTALT DES OFF EUR 50,000,000 (0.50)% 14-Aug-17 50,000,000 0.79
Total Commercial Paper - Interest Bearing 50,000,000 0.79
Total Transferable Securities and Money Market Instruments 5,172,371,367 81.23
Total Investments 5,172,371,367 81.23
Other assets in excess of liabilities 1,195,162,878 18.77
Total Net Assets 6,367,534,245 100.00
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund
Schedule of Investments
As of 31 March 2017
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
24
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
CERTIFICATES OF DEPOSIT 41.49%
BANCO DEL ESTADO DE CHILE USD 100,000,000 0.93% 03-Apr-17 100,000,000 0.51
BANCO DEL ESTADO DE CHILE USD 150,000,000 0.93% 06-Apr-17 150,000,000 0.77
BANK OF AMERICA NA USD 207,000,000 1.32% 16-Oct-17 207,000,000 1.06 BANK OF MONTREAL USD 50,000,000 1.10% 03-Apr-17 50,000,000 0.26
BANK OF MONTREAL USD 25,000,000 1.15% 17-Apr-17 25,000,000 0.13
BANK OF MONTREAL USD 100,000,000 1.15% 21-Apr-17 100,000,000 0.51 BANK OF MONTREAL USD 150,000,000 1.14% 20-Jun-17 150,000,000 0.77
BANK OF MONTREAL USD 150,000,000 1.14% 22-Jun-17 150,000,000 0.77
BANK OF NOVA SCOTIA USD 12,800,000 1.42% 12-Apr-17 12,800,341 0.07 CANADIAN IMPERIAL BANK OF COMMERCE USD 35,070,000 1.01% 06-Apr-17 35,069,558 0.18
CANADIAN IMPERIAL BANK OF COMMERCE USD 40,000,000 1.42% 23-May-17 40,008,012 0.20
CITIBANK NA USD 205,000,000 1.25% 12-Jun-17 205,000,000 1.05 CITIBANK NA USD 240,000,000 1.30% 15-Jun-17 240,000,000 1.23
CREDIT SUISSE AG USD 195,000,000 1.68% 24-Apr-17 195,000,000 1.00
CREDIT SUISSE AG USD 182,000,000 1.56% 10-Jul-17 182,000,000 0.93 CREDIT SUISSE AG USD 45,000,000 1.83% 24-Aug-17 45,086,553 0.23
CREDIT SUISSE AG USD 221,000,000 1.92% 12-Sep-17 221,408,923 1.13
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 81,000,000 1.20% 24-Apr-17 81,000,000 0.41 HSBC BANK PLC USD 110,000,000 1.37% 07-Aug-17 110,000,000 0.56
HSBC BANK PLC USD 75,000,000 1.46% 16-Aug-17 75,000,000 0.38
HSBC BANK PLC USD 102,000,000 1.24% 01-Nov-17 102,000,000 0.52 KBC BANK NV USD 150,000,000 - 16-Jun-17 149,638,617 0.77
KBC BANK NV USD 150,000,000 - 26-Jun-17 149,588,135 0.77
KBC BANK NV USD 20,000,000 - 27-Jun-17 19,943,493 0.10 MIZUHO BANK LTD USD 154,000,000 1.58% 11-Apr-17 154,000,000 0.79
MIZUHO BANK LTD USD 65,500,000 1.10% 03-May-17 65,499,980 0.34
MIZUHO BANK LTD USD 95,000,000 1.54% 17-May-17 95,000,000 0.49 MIZUHO BANK LTD USD 100,000,000 - 01-Jun-17 99,807,328 0.51
MIZUHO BANK LTD USD 50,000,000 - 06-Jun-17 49,895,519 0.26 MIZUHO BANK LTD USD 100,000,000 - 09-Jun-17 99,781,249 0.51
MIZUHO BANK LTD USD 150,000,000 1.38% 24-Aug-17 150,000,000 0.77
MIZUHO BANK LTD USD 230,000,000 1.23% 07-Sep-17 230,000,000 1.18 NORDEA BANK AB USD 40,000,000 1.60% 06-Sep-17 40,062,391 0.21
NORDEA BANK FINLAND PLC USD 30,000,000 1.44% 21-Apr-17 30,004,995 0.15
OVERSEA-CHINESE BANKING CORP USD 110,000,000 0.92% 03-Apr-17 110,000,000 0.56 OVERSEA-CHINESE BANKING CORP USD 215,000,000 1.15% 15-Jun-17 215,000,000 1.10
OVERSEA-CHINESE BANKING CORP USD 200,000,000 1.24% 22-Aug-17 200,000,000 1.02
ROYAL BANK OF CANADA USD 200,000,000 1.26% 04-Apr-17 200,000,000 1.02 ROYAL BANK OF CANADA USD 175,000,000 1.16% 20-Sep-17 175,000,000 0.90
ROYAL BANK OF CANADA USD 91,000,000 1.44% 24-Oct-17 91,000,000 0.47
SUMITOMO MITSUI BANKING CORPORATION USD 150,000,000 1.58% 12-Apr-17 150,000,000 0.77
SUMITOMO MITSUI BANKING CORPORATION USD 140,000,000 1.45% 09-May-17 140,000,000 0.72
SUMITOMO MITSUI TRUST BANK LTD USD 500,000,000 0.92% 03-Apr-17 500,000,000 2.56
SUMITOMO MITSUI TRUST BANK LTD USD 200,000,000 0.91% 04-Apr-17 200,000,000 1.02 SUMITOMO MITSUI TRUST BANK LTD USD 40,000,000 - 29-Jun-17 39,886,611 0.20
SUMITOMO MITSUI TRUST BANK LTD USD 150,000,000 - 30-Jun-17 149,564,976 0.77
SVENSKA HANDELSBANKEN AB USD 72,300,000 1.44% 21-Apr-17 72,311,422 0.37 SVENSKA HANDELSBANKEN AB USD 100,000,000 1.23% 07-Aug-17 100,000,000 0.51
SVENSKA HANDELSBANKEN AB USD 175,000,000 1.20% 27-Sep-17 175,000,000 0.90
SWEDBANK AB USD 850,000,000 0.88% 03-Apr-17 850,000,000 4.35 TORONTO DOMINION BANK USD 200,000,000 0.87% 06-Apr-17 200,000,000 1.02
TORONTO DOMINION BANK USD 75,000,000 1.42% 31-Aug-17 75,000,000 0.38
TORONTO DOMINION BANK USD 22,100,000 1.42% 16-Oct-17 22,135,228 0.11 TORONTO DOMINION BANK USD 14,500,000 1.52% 16-Oct-17 14,531,014 0.07
TORONTO DOMINION BANK USD 200,000,000 1.24% 06-Nov-17 200,000,000 1.02
TORONTO DOMINION BANK USD 225,000,000 1.50% 20-Nov-17 225,000,000 1.15
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
25
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
CERTIFICATES OF DEPOSIT 41.49%
TORONTO DOMINION BANK USD 170,000,000 1.12% 11-Dec-17 170,000,000 0.87
WELLS FARGO BANK NA USD 21,400,000 1.40% 07-Nov-17 21,407,901 0.11
Total Certificates of Deposit 8,105,432,246 41.49
COMMERCIAL PAPER - INTEREST BEARING 22.98%
ANZ NEW ZEALAND INT'L LTD USD 75,000,000 1.33% 14-Jul-17 75,000,000 0.38
ASB FINANCE LTD USD 115,000,000 1.38% 17-Jul-17 115,000,000 0.59
ASB FINANCE LTD USD 47,000,000 1.27% 06-Sep-17 47,000,000 0.24 ASB FINANCE LTD USD 42,000,000 1.21% 09-Nov-17 42,000,000 0.21
BNZ INTERNATIONAL FUNDING LTD USD 100,000,000 1.60% 21-Apr-17 100,000,000 0.51
BNZ INTERNATIONAL FUNDING LTD USD 145,000,000 1.46% 23-Aug-17 145,000,000 0.74 COMMONWEALTH BANK OF AUSTRALIA USD 200,000,000 1.44% 23-Aug-17 200,000,000 1.02
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 160,000,000 1.28% 11-Jul-17 160,000,000 0.82
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 300,000,000 1.01% 06-Sep-17 300,000,000 1.54 ERSTE ABWICKLUNGSANSTALT USD 245,000,000 0.98% 05-Jul-17 245,000,000 1.25
ERSTE ABWICKLUNGSANSTALT USD 155,000,000 1.05% 07-Sep-17 155,000,000 0.79
HSBC BANK PLC USD 35,000,000 1.38% 05-Jul-17 35,010,246 0.19 HSBC BANK PLC USD 40,000,000 1.28% 15-Sep-17 40,000,000 0.20
HSBC BANK PLC USD 25,000,000 1.27% 10-Nov-17 25,000,000 0.13
HSBC BANK PLC USD 50,000,000 1.29% 13-Nov-17 50,000,000 0.26
ING US FUNDING LLC USD 100,000,000 1.38% 03-May-17 100,000,000 0.51
ING US FUNDING LLC USD 247,000,000 1.20% 01-Aug-17 247,000,000 1.26
JP MORGAN SECURITIES LLC USD 200,000,000 1.35% 19-Jun-17 200,000,000 1.02 JP MORGAN SECURITIES LLC USD 150,000,000 1.21% 05-Jul-17 150,000,000 0.77
JP MORGAN SECURITIES LLC USD 100,000,000 1.36% 24-Jul-17 100,000,000 0.51
JP MORGAN SECURITIES LLC USD 100,000,000 1.23% 20-Sep-17 100,000,000 0.51 JP MORGAN SECURITIES LLC USD 278,000,000 1.23% 01-Nov-17 278,000,000 1.42
NATIONAL AUSTRALIA BANK LTD USD 90,000,000 1.45% 17-Nov-17 90,000,000 0.46 NATIONAL AUSTRALIA BANK LTD USD 170,000,000 1.02% 01-Dec-17 170,000,000 0.87
NATIONAL AUSTRALIA BANK LTD USD 175,000,000 1.19% 08-Mar-18 175,000,000 0.90
OVERSEA-CHINESE BANKING CORP USD 95,000,000 1.28% 07-Apr-17 95,000,000 0.49 OVERSEA-CHINESE BANKING CORP USD 200,000,000 1.05% 12-Sep-17 200,000,000 1.02
TOYOTA MOTOR FINANCE (NETHERLANDS) USD 172,500,000 1.52% 19-Jun-17 172,500,000 0.88
TOYOTA MOTOR FINANCE (NETHERLANDS) USD 200,000,000 1.50% 23-Jun-17 200,000,000 1.02 TOYOTA MOTOR FINANCE (NETHERLANDS) USD 190,000,000 1.33% 28-Jul-17 190,000,000 0.97
WESTPAC BANKING CORP USD 50,000,000 1.59% 22-Sep-17 50,087,823 0.27
WESTPAC BANKING CORP USD 93,000,000 1.32% 02-Nov-17 93,000,000 0.48 WESTPAC SECURITIES NZ LTD USD 64,000,000 1.44% 26-May-17 64,000,000 0.33
WESTPAC SECURITIES NZ LTD USD 81,000,000 1.17% 02-Nov-17 81,000,770 0.42
Total Commercial Paper - Interest Bearing 4,489,598,839 22.98
COMMERCIAL PAPER 22.13%
ABN AMRO BANK USD 50,000,000 - 10-Apr-17 49,988,139 0.26 ABN AMRO BANK USD 106,000,000 - 17-Apr-17 105,950,510 0.54
ABN AMRO BANK USD 344,000,000 - 19-Apr-17 343,810,418 1.76
ABN AMRO BANK USD 20,000,000 - 13-Jun-17 19,948,722 0.10 ABN AMRO BANK USD 40,000,000 - 20-Jun-17 39,887,333 0.20
ABN AMRO BANK USD 180,000,000 - 05-Jul-17 179,400,150 0.92
AGENCE CENTRALE DES ORGANISMES USD 200,000,000 - 06-Apr-17 199,981,715 1.02
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
26
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
COMMERCIAL PAPER 22.13%
AGENCE CENTRALE DES ORGANISMES USD 250,000,000 - 13-Apr-17 249,920,368 1.28
AGENCE CENTRALE DES ORGANISMES USD 150,000,000 - 18-Apr-17 149,929,576 0.77 AGENCE CENTRALE DES ORGANISMES USD 150,000,000 - 28-Apr-17 149,883,652 0.77
AGENCE CENTRALE DES ORGANISMES USD 100,000,000 - 15-May-17 99,876,366 0.51
BANK NEDERLANDSE GEMEENTEN USD 25,000,000 - 07-Apr-17 24,997,556 0.13
BANK OF NOVA SCOTIA USD 100,000,000 - 03-Apr-17 100,000,000 0.51
BANQUE ET CAISSE D'EPARGNE DE L'ETAT USD 125,000,000 - 15-Jun-17 124,695,833 0.64
BANQUE FEDERATIVE DU CREDIT MUTUEL USD 230,000,000 - 10-Jul-17 229,221,416 1.17 DBS BANK LTD USD 250,000,000 - 05-Apr-17 249,985,417 1.28
DBS BANK LTD USD 157,000,000 - 11-Apr-17 156,961,622 0.80
DBS BANK LTD USD 73,000,000 - 12-Apr-17 72,979,925 0.37 DNB BANK ASA USD 200,000,000 - 03-Apr-17 200,000,000 1.02
DNB BANK ASA USD 350,000,000 - 04-Apr-17 349,991,639 1.79
ERSTE ABWICKLUNGSANSTALT USD 75,000,000 - 24-Apr-17 74,950,125 0.38 ERSTE ABWICKLUNGSANSTALT USD 100,000,000 - 24-May-17 99,841,333 0.51
ERSTE ABWICKLUNGSANSTALT USD 87,250,000 - 26-May-17 87,106,135 0.45
ERSTE ABWICKLUNGSANSTALT USD 100,000,000 - 15-Jun-17 99,772,889 0.51 OVERSEA-CHINESE BANKING CORP USD 100,000,000 - 06-Apr-17 99,992,333 0.51
SUNCORP-METWAY LTD USD 25,000,000 - 10-Apr-17 24,994,653 0.13
SUNCORP-METWAY LTD USD 50,000,000 - 04-May-17 49,948,333 0.26 SUNCORP-METWAY LTD USD 60,000,000 - 07-Jun-17 59,865,667 0.31
SUNCORP-METWAY LTD USD 43,000,000 - 19-Jul-17 42,826,185 0.22
SUNCORP-METWAY LTD USD 25,000,000 - 24-Jul-17 24,894,222 0.13
SUNCORP-METWAY LTD USD 46,000,000 - 31-Jul-17 45,793,205 0.24
SUNCORP-METWAY LTD USD 95,000,000 - 01-Aug-17 94,566,333 0.48
SUNCORP-METWAY LTD USD 14,000,000 - 15-Aug-17 13,929,650 0.07 SUNCORP-METWAY LTD USD 30,000,000 - 21-Aug-17 29,842,500 0.15
SUNCORP-METWAY LTD USD 40,000,000 - 06-Sep-17 39,748,667 0.20
SUNCORP-METWAY LTD USD 25,000,000 - 12-Sep-17 24,836,875 0.13 UNITED OVERSEAS BANK LTD USD 90,000,000 - 15-Jun-17 89,790,125 0.46
UNITED OVERSEAS BANK LTD USD 100,000,000 - 20-Jun-17 99,750,833 0.51
UNITED OVERSEAS BANK LTD USD 50,000,000 - 21-Jul-17 49,818,333 0.26 UNITED OVERSEAS BANK LTD USD 75,000,000 - 24-Jul-17 74,720,000 0.38
Total Commercial Paper 4,324,398,753 22.13
ASSET BACKED COMMERCIAL PAPER 1.41%
METLIFE SHORT TERM FUNDING LLC USD 125,000,000 - 14-Jun-17 124,700,000 0.64 METLIFE SHORT TERM FUNDING LLC USD 150,000,000 - 20-Jun-17 149,632,750 0.77
Total Asset Backed Commercial Paper 274,332,750 1.41
CORPORATE BONDS 0.51%
CREDIT SUISSE AG USD 73,163,000 1.38% 26-May-17 73,171,114 0.37
MIZUHO BANK LTD USD 27,226,000 1.30% 16-Apr-17 27,226,564 0.14
Total Corporate Bonds 100,397,678 0.51
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
27
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
FLOATING RATE NOTES 0.35%
CREDIT SUISSE AG USD 4,600,000 1.54% 26-May-17 4,601,676 0.02
NATIONAL AUSTRALIA BANK LTD USD 51,690,000 1.43% 30-Jun-17 51,700,306 0.27 WESTPAC BANKING CORP USD 12,100,000 1.42% 01-Dec-17 12,116,792 0.06
Total Floating Rate Notes 68,418,774 0.35
Total Transferable Securities and Money Market Instruments 17,362,579,040 88.87
Total Investments 17,362,579,040 88.87
Other assets in excess of liabilities 2,174,821,635 11.13
Total Net Assets 19,537,400,675 100.00
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Treasury Liquidity Fund
Schedule of Investments
As of 31 March 2017
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
28
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
TREASURY NOTES 44.10%
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 15,000,000 0.88% 15-Apr-17 15,001,410 0.58
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 45,000,000 0.88% 30-Apr-17 45,011,159 1.74
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 320,000,000 0.86% 30-Apr-17 320,023,836 12.35 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 40,000,000 3.13% 30-Apr-17 40,076,556 1.55
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 53,000,000 0.50% 30-Apr-17 52,995,832 2.04
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 20,000,000 0.88% 15-May-17 20,007,374 0.77 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 5,000,000 8.75% 15-May-17 5,046,935 0.19
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 58,000,000 2.75% 31-May-17 58,201,065 2.25
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 106,000,000 0.63% 31-May-17 106,009,994 4.09 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 80,800,000 0.88% 15-Jun-17 80,845,398 3.12
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 45,000,000 2.50% 30-Jun-17 45,204,773 1.74
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 93,400,000 0.63% 30-Jun-17 93,403,072 3.60 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 107,000,000 0.75% 30-Jun-17 107,036,283 4.13
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 20,000,000 0.63% 31-Jul-17 19,997,553 0.77
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 20,000,000 0.50% 31-Jul-17 19,986,212 0.77
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 33,000,000 2.38% 31-Jul-17 33,181,173 1.28 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 5,000,000 0.88% 15-Aug-17 5,002,070 0.19
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 41,000,000 1.88% 31-Aug-17 41,189,747 1.59
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 35,000,000 0.63% 31-Aug-17 34,984,079 1.35
Total Treasury Notes 1,143,204,521 44.10
TREASURY BILLS 19.26%
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 15,000,000 - 27-Apr-17 14,992,525 0.58
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 10,000,000 - 18-May-17 9,993,250 0.39
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 420,000,000 - 15-Jun-17 419,334,938 16.18 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 10,000,000 - 22-Jun-17 9,985,667 0.38
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 25,000,000 - 27-Jul-17 24,952,083 0.96
GOVERNMENT OF THE UNITED STATES OF AMERICA USD 20,000,000 - 17-Aug-17 19,951,267 0.77
Total Treasury Bills 499,209,730 19.26
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Treasury Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
29
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
GOVERNMENT BONDS 17.25%
GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 159,864,000 0.13% 15-Apr-17 160,113,761 6.18 GOVERNMENT OF THE UNITED STATES OF
AMERICA USD 287,000,000 0.86% 31-Jul-17 287,088,736 11.07
Total Government Bonds 447,202,497 17.25
Total Transferable Securities and Money Market Instruments 2,089,616,748 80.61
Total Investments 2,089,616,748 80.61
Other assets in excess of liabilities 502,637,499 19.39
Total Net Assets 2,592,254,247 100.00
MORGAN STANLEY LIQUIDITY FUNDS Sterling Liquidity Fund
Schedule of Investments
As of 31 March 2017
(Expressed in GBP)
The accompanying notes form an integral part of financial statements.
30
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
CERTIFICATES OF DEPOSIT 37.44%
ABN AMRO BANK GBP 25,000,000 - 10-Jul-17 24,969,862 1.04
BANK OF AMERICA NA GBP 30,000,000 0.51% 18-May-17 30,000,000 1.25
BANK OF AMERICA NA GBP 25,000,000 0.42% 11-Jul-17 25,000,000 1.04 BANK OF AMERICA NA GBP 25,000,000 0.50% 18-Aug-17 25,000,000 1.04
BANK OF MONTREAL GBP 2,000,000 0.90% 26-Jun-17 2,002,982 0.08
BANK OF NOVA SCOTIA GBP 25,000,000 0.21% 03-Jul-17 25,000,000 1.04 CAISSE DES DEPOTS ET CONSIGNATIONS GBP 25,000,000 - 10-Jul-17 24,973,872 1.04
CAISSE DES DEPOTS ET CONSIGNATIONS GBP 50,000,000 - 24-Jul-17 49,946,379 2.07
CANADIAN IMPERIAL BANK OF COMMERCE GBP 3,000,000 0.85% 12-May-17 3,002,014 0.12 CREDIT AGRICOLE CIB GBP 25,000,000 - 16-May-17 24,985,897 1.04
CREDIT AGRICOLE CIB GBP 25,000,000 - 09-Jun-17 24,982,126 1.04
CREDIT AGRICOLE CIB GBP 25,000,000 - 19-Jun-17 24,983,664 1.04 DANSKE BANK A/S GBP 25,000,000 0.52% 06-Jun-17 25,000,000 1.04
DANSKE BANK A/S GBP 25,000,000 0.52% 09-Jun-17 25,000,000 1.04
DANSKE BANK A/S GBP 20,000,000 0.52% 12-Jun-17 20,000,000 0.83 LLOYDS BANK PLC GBP 15,000,000 0.29% 08-May-17 15,000,143 0.62
MIZUHO BANK LTD GBP 33,000,000 0.39% 06-Apr-17 33,000,460 1.37
MIZUHO BANK LTD GBP 25,000,000 - 03-May-17 24,992,404 1.04 MIZUHO BANK LTD GBP 25,000,000 0.37% 10-May-17 25,001,011 1.04
MIZUHO BANK LTD GBP 25,000,000 - 06-Jun-17 24,984,671 1.04
MIZUHO BANK LTD GBP 5,000,000 0.35% 06-Jun-17 5,000,000 0.21 NORDEA BANK AB GBP 10,000,000 0.35% 03-Apr-17 10,000,000 0.41
NORDEA BANK AB GBP 25,000,000 - 16-Jun-17 24,987,337 1.04
NORINCHUKIN BANK GBP 12,000,000 - 12-Apr-17 11,999,290 0.50 RABOBANK NEDERLAND NV GBP 25,000,000 0.40% 01-Sep-17 25,000,000 1.04
SUMITOMO MITSUI BANKING CORPORATION GBP 10,000,000 - 04-Apr-17 9,999,940 0.41
SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 - 24-Apr-17 24,997,124 1.04 SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 - 28-Apr-17 24,996,918 1.04
SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 - 09-May-17 24,986,475 1.04 SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 - 20-Sep-17 24,947,142 1.03
SVENSKA HANDELSBANKEN AB GBP 30,000,000 0.28% 15-May-17 30,000,000 1.25
SVENSKA HANDELSBANKEN AB GBP 20,000,000 0.28% 16-May-17 20,000,000 0.83 SVENSKA HANDELSBANKEN AB GBP 30,000,000 0.25% 27-Jun-17 30,000,000 1.25
TORONTO DOMINION BANK GBP 25,000,000 0.69% 22-May-17 25,000,000 1.04
UBS AG GBP 1,000,000 0.71% 06-Sep-17 1,001,102 0.04 UNITED OVERSEAS BANK LTD GBP 25,000,000 - 16-Jun-17 24,984,051 1.04
UNITED OVERSEAS BANK LTD GBP 25,000,000 - 20-Sep-17 24,956,998 1.04
UNITED OVERSEAS BANK LTD GBP 25,000,000 - 22-Sep-17 24,956,492 1.03 WELLS FARGO BANK INTERNATIONAL GBP 10,000,000 0.49% 13-Apr-17 10,000,656 0.41
WELLS FARGO BANK INTERNATIONAL GBP 35,000,000 0.60% 24-Apr-17 35,006,429 1.45
WELLS FARGO BANK INTERNATIONAL GBP 10,500,000 0.50% 25-Apr-17 10,500,000 0.44
Total Certificates of Deposit 901,145,439 37.44
COMMERCIAL PAPER 35.46%
ABN AMRO BANK GBP 25,000,000 - 24-Apr-17 24,993,253 1.04
AGENCE CENTRALE DES ORGANISMES GBP 10,000,000 - 09-May-17 9,997,929 0.41
AGENCE CENTRALE DES ORGANISMES GBP 25,000,000 - 10-May-17 24,992,656 1.04 AGENCE CENTRALE DES ORGANISMES GBP 25,000,000 - 10-May-17 24,993,667 1.04
BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 25,000,000 - 13-Apr-17 24,996,311 1.04
BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 15,000,000 - 08-Jun-17 14,985,932 0.62 BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 20,000,000 - 03-Jul-17 19,981,574 0.83
BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 20,000,000 - 12-Jul-17 19,972,671 0.83 DANSKE BANK A/S GBP 20,000,000 - 08-May-17 19,995,590 0.83
DEKABANK DEUTSCHE GIROZENTRALE GBP 25,000,000 - 07-Apr-17 24,999,397 1.04
DEKABANK DEUTSCHE GIROZENTRALE GBP 25,000,000 - 10-Apr-17 24,998,993 1.04
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS GBP 25,000,000 - 15-May-17 24,987,657 1.04
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS GBP 25,000,000 - 07-Jun-17 24,980,897 1.04
DZ BANK AG DEUTSCHE ZENTRAL-GENOSS GBP 25,000,000 - 20-Jun-17 24,986,652 1.04 ERSTE ABWICKLUNGSANSTALT GBP 40,000,000 - 06-Apr-17 39,998,655 1.66
ERSTE ABWICKLUNGSANSTALT GBP 10,000,000 - 07-Apr-17 9,999,617 0.41
ERSTE ABWICKLUNGSANSTALT GBP 25,000,000 - 13-Jun-17 24,984,454 1.04
MORGAN STANLEY LIQUIDITY FUNDS Sterling Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2017
(Expressed in GBP)
The accompanying notes form an integral part of financial statements.
31
ISSUE
DENOMINATION
CURRENCY HOLDINGS
COUPON
RATE
MATURITY
DATE
AMORTIZED
COST
PERCENTAGE
OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
COMMERCIAL PAPER 35.46%
ERSTE ABWICKLUNGSANSTALT GBP 20,000,000 - 20-Jul-17 19,982,855 0.83
HONDA FINANCE EUROPE PLC GBP 15,000,000 - 17-May-17 14,993,677 0.62 ING BANK NV GBP 18,000,000 - 05-Apr-17 17,999,754 0.75
NORDEA BANK AB GBP 25,000,000 - 03-May-17 24,993,840 1.04
NORDEA BANK AB GBP 30,000,000 - 17-May-17 29,989,520 1.25
OP CORPORATE BANK PLC GBP 10,000,000 - 10-Apr-17 9,999,444 0.41
OP CORPORATE BANK PLC GBP 10,000,000 - 08-Jun-17 9,990,981 0.41
OP CORPORATE BANK PLC GBP 14,000,000 - 12-Jun-17 13,988,475 0.58 OP CORPORATE BANK PLC GBP 8,000,000 - 06-Jul-17 7,989,724 0.33
OP CORPORATE BANK PLC GBP 5,000,000 - 24-Jul-17 4,994,332 0.21
OP CORPORATE BANK PLC GBP 50,000,000 - 27-Jul-17 49,952,786 2.08 OP CORPORATE BANK PLC GBP 17,000,000 - 14-Aug-17 16,974,037 0.70
OVERSEA-CHINESE BANKING CORP GBP 25,000,000 - 23-Jun-17 24,987,247 1.04
PACCAR FINANCIAL EUROPE BV GBP 25,000,000 - 18-Apr-17 24,997,535 1.04 PACCAR FINANCIAL EUROPE BV GBP 35,000,000 - 25-Apr-17 34,994,938 1.45
RABOBANK NEDERLAND NV GBP 6,000,000 - 11-Sep-17 5,988,117 0.25
SUMITOMO MITSUI BANKING CORPORATION GBP 25,000,000 - 11-May-17 24,986,760 1.04 SUMITOMO MITSUI BANKING CORPORATION GBP 25,000,000 - 03-Aug-17 24,959,986 1.04
SUMITOMO MITSUI BANKING CORPORATION GBP 25,000,000 - 14-Aug-17 24,957,285 1.04
TOYOTA MOTOR FINANCE (NETHERLANDS) GBP 19,000,000 - 28-Apr-17 18,996,618 0.79 TOYOTA MOTOR FINANCE (NETHERLANDS) GBP 12,000,000 - 09-Jun-17 11,990,329 0.50
TOYOTA MOTOR FINANCE (NETHERLANDS) GBP 50,000,000 - 21-Aug-17 49,937,756 2.07
Total Commercial Paper 853,491,901 35.46
FLOATING RATE NOTES 9.82%
COMMONWEALTH BANK OF AUSTRALIA GBP 25,000,000 0.61% 21-Apr-17 24,999,754 1.04 COMMONWEALTH BANK OF AUSTRALIA GBP 20,000,000 0.62% 06-Jun-17 19,999,299 0.83
COMMONWEALTH BANK OF AUSTRALIA GBP 9,000,000 0.62% 18-Sep-17 9,009,542 0.37 NATIONAL AUSTRALIA BANK LTD GBP 25,000,000 0.59% 15-Jun-17 24,999,000 1.04
NATIONAL AUSTRALIA BANK LTD GBP 25,000,000 0.40% 03-Apr-18 24,997,520 1.04
RABOBANK NEDERLAND NV GBP 25,000,000 0.60% 28-Apr-17 25,000,000 1.04 RABOBANK NEDERLAND NV GBP 25,000,000 0.59% 27-Jun-17 25,000,000 1.04
ROYAL BANK OF CANADA GBP 15,000,000 0.62% 31-Aug-17 15,000,000 0.62
SVENSKA HANDELSBANKEN AB GBP 25,000,000 0.64% 10-Jul-17 25,000,000 1.04 WESTPAC BANKING CORP GBP 24,500,000 0.62% 20-Apr-17 24,500,000 1.02
WESTPAC BANKING CORP GBP 17,800,000 0.59% 08-Jun-17 17,799,034 0.74
Total Floating Rate Notes 236,304,149 9.82
CORPORATE BONDS 2.94%
LLOYDS BANK PLC GBP 50,000,000 1.50% 02-May-17 50,051,056 2.08 NATIONAL AUSTRALIA BANK LTD GBP 16,194,000 3.63% 08-Nov-17 16,487,081 0.69
RABOBANK NEDERLAND NV GBP 2,597,000 3.25% 01-Nov-17 2,637,906 0.11
SVENSKA HANDELSBANKEN AB GBP 1,450,000 1.88% 29-Aug-17 1,458,673 0.06
Total Corporate Bonds 70,634,716 2.94
Total Transferable Securities and Money Market Instruments 2,061,576,205 85.66
Total Investments 2,061,576,205 85.66
Other assets in excess of liabilities 345,126,776 14.34
Total Net Assets 2,406,702,981 100.00
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements
31 March 2017
32
1. General information:
Morgan Stanley Liquidity Funds (the “Company”) was incorporated on 21 December 2012 for an unlimited
period of time as a self-managed société d’investissement à capital variable under the form of a société anonyme.
The Company is authorised under Part I of the Law of 17 December 2010 in accordance with the provisions of the
UCITS Directive and listed on the official list of UCITS approved by the Commission de Surveillance du Secteur
Financier (the “CSSF”). The registered office of the Company is located at 6B route de Trèves, L-2633
Senningerberg, Grand Duchy of Luxembourg.
Effective 1 April 2014, Morgan Stanley Investment Management (ACD) Limited (“MSIM (ACD)”) was
appointed as Management Company to provide collective portfolio management services to the Company. MSIM
(ACD) is authorised by the Financial Conduct Authority in the United Kingdom to provide these services. This
change was communicated to investors in the shareholder notices dated 28 February 2014 and was reflected
within the updated Prospectus that came into effect on 1 April 2014.
The Company is an “umbrella fund” which is composed of more than one Sub-Fund, each representing a separate
portfolio of assets. However, each Sub-Fund is exclusively responsible for all liabilities attributable to it.
The Company currently offers four Sub-Funds: the Euro Liquidity Fund, the US Dollar Liquidity Fund, the US
Dollar Treasury Liquidity Fund and the Sterling Liquidity Fund. The Euro Liquidity Fund was launched on 10
January 2013 and the three other Sub-Funds were launched on 17 June 2013.
The Class of Shares that are active (except footnoted differently) as at 31 March 2017 are detailed in the table
below:
Name of the Sub-Fund Class of Shares Launch date
Euro Liquidity Fund
Institutional Shares 17 June 2013 Institutional Accumulation Shares 17 June 2013
Institutional Select Shares* 24 June 2015 Institutional (+1) Accumulation Shares 24 May 2016
MS Reserve Shares 17 June 2013
US Dollar Liquidity Fund
Advantage Accumulation Shares 17 June 2013 Advisory Shares** 16 August 2016
Institutional Shares 17 June 2013
Institutional Accumulation Shares 17 June 2013
Institutional Select Shares 16 January 2014
Master Shares 9 September 2013
MS Reserve Shares 17 June 2013
Qualified Accumulation Shares*** 15 March 2016
US Dollar Treasury Liquidity Fund
Advisory Shares** 16 August 2016
Institutional Shares 17 June 2013
Institutional Select Shares 16 January 2014
MS Reserve Shares 17 June 2013
Sterling Liquidity Fund
Institutional Shares 17 June 2013
Institutional Accumulation Shares 17 June 2013
Institutional Select Shares 26 June 2014
MS Reserve Shares**** 28 November 2013
Qualified Shares 17 June 2013
* Share class was fully redeemed on 19 October 2016.
** Share class was fully redeemed on 24 February 2016 hence was inactive and re-launched on 16 August 2016 at
a price of USD 1.00.
*** Share class was fully redeemed on 4 September 2015 hence was inactive and re-launched on 15 March 2016
at a price of USD100.00.
**** Share class was fully redeemed on 28 March 2017.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
33
1. General information: (continued)
Each Sub-Fund’s Investment objective is to provide investors with liquidity and an attractive rate of income
relative to short term interest rates, to the extent consistent with the preservation of capital.
Each Sub-Fund has its own Investment policy but all are classified as Short-Term Money Market Funds in
accordance with CESR guidelines on a common definition of European money market funds (CESR/10-049).
The Board of Directors of the Company adopted the principles of the ALFI Code of Conduct, designed to provide
the Board with a framework of principles and best practice recommendations for the governance of the Company.
2. Summary of Significant Accounting Policies:
The financial statements of the Company have been prepared in accordance with the accounting principles
generally accepted in Luxembourg.
(a) Valuation of Investments
The securities, money market instruments and other instruments are valued based on their amortised cost. Under
this method, amortised cost is determined by valuing an instrument at its cost and thereafter assuming a constant
amortisation to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the
market value of the instruments.
The Company generally uses the amortised cost method of valuation to determine the value of the following
investments, provided that such investments comply with the above conditions: (i) investments with a residual
maturity of fifteen months or less or (ii) floating rate investments with a residual maturity of two years or less
(measured to the date on which the issuer must unconditionally repay the principal amount to the Company on
foot of either maturity, put option or other repayment demand feature), where the Board of Directors have
determined that the investment has a market value that approximates its amortised cost value and the investment
has an annual or shorter interval coupon/interest rate re-fix or (iii) floating rate investments which meet the
conditions described in (ii) above except that they have a residual maturity of up to five years, provided that they
are of high credit quality and are issued by the US government, an agency or instrumentality of the US
government, the government of an OECD member, an agency or instrumentality of such government or by the
government of a Member State or an agency or instrumentality of such government.
Subject to the above, the Board of Directors uses the amortised cost method of valuation of any investments of a
Fund which is a Money Market Fund or a Short Term Money Market Fund unless it is not appropriate to use such
method in respect of certain investment(s) of such Fund, in which case one of the other methods of valuation
outlined below is used.
The Administrator determines at least weekly the extent to which the Net Asset Value of the relevant Fund or
Class using this method of valuation deviates from the Net Asset Value which would be obtained using available
market quotations. Deviations in excess of 0.10% between the market value and the amortised cost value are
brought to the attention of the Investment Adviser. Deviations in excess of 0.15% between the market value and
the amortised cost value of the relevant Fund or Class are brought to the attention of the Board of Directors and
the Depositary. If this deviation exceeds 0.25% of the Net Asset Value of the relevant Fund, the Administrator
reviews the valuation daily and the Board of Directors takes such corrective action, if any, as they deem
appropriate to eliminate or reduce, to the extent reasonably practicable, any such deviation. Notwithstanding the
generality of the foregoing, the Board of Directors utilises the market value of any individual investment in the
event that the market value of that investment deviates by more than 1% from its amortised cost valuation. As at
31 March 2017 and 31 March 2016 there were no deviations in excess of 0.10%.
(b) Security Transactions
When applicable, security transactions are accounted for on the trade date.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
34
2. Summary of Significant Accounting Policies: (continued)
(c) Interest Income
Interest income is accrued daily and includes the amortisation of premiums and accretion of discounts. Interest
income is recognised on an accrual basis and is shown net of withholding taxes, except where the withholding tax
has been recovered or is receivable. It is possible for the interest income of a Sub-Fund to be negative depending
on market conditions.
(d) Cash
Cash and other liquid assets are valued at their face value plus interest accrued, where applicable. It is possible for
the interest accrual of a Sub-Fund to be negative depending on market conditions.
(e) Foreign currency translation
Financial statements are presented for each Sub-Fund in the base currency of the Sub-Fund. The combined
Statement of Net Assets, Statement of Operations and Changes in Net Assets are presented in US dollars, based
on the exchange rate ruling at the date of these financial statements and on the average exchange rate over the
reporting period for the Statement of Operations and Changes in Net Assets.
The currency exchange rates against the US Dollar were as follows:
as of 31 March 2017 as of 31 March 2016
1 USD = 0.934972 EUR 1 USD = 0.799712 GBP
1 USD = 0.877539 EUR 1 USD = 0.695749 GBP
The average currency exchange rates against the US Dollar were as follows:
as of 31 March 2017 as of 31 March 2016
1 USD = 0.911952 EUR
1 USD = 0.767960 GBP
1 USD = 0.905971 EUR 1 USD = 0.664086 GBP
(f) Reverse repurchase agreement valuation policy
The Company may enter into reverse repurchase transactions which consist of the purchase and sale of securities,
backed by collateral, with a clause reserving the seller the right or the obligation to repurchase from the acquirer
the securities sold at a price and term specified by the two parties in their contractual arrangement. These are
valued at par value.
3. Dividends and Distributions:
The Directors intend to declare all net income of the Euro Liquidity Fund, US Dollar Liquidity Fund, US Dollar
Treasury Liquidity Fund and Sterling Liquidity Fund with the exception of Advisory Accumulation Shares,
Institutional Accumulation Shares, Institutional Select Accumulation Shares, Qualified Accumulation Shares and
Advantage Accumulation Shares (“the Accumulating Share Classes”) on each Dealing Day as a dividend to
Shareholders on the register of members as at the close of business on the relevant Dealing Day in an attempt to
stabilise the Net Asset Value per Share of each class at €1.00 in the case of the Euro Liquidity Fund, US$1.00 in
the case of the US Dollar Liquidity Fund, US$1.00 in the case of the US Dollar Treasury Liquidity Fund and
£1.00 in the case of the Sterling Liquidity Fund. Dividends are declared daily and are payable monthly on or about
the first Business Day of each following month. For this purpose, net income of each Sub-Fund (from the time
immediately preceding determination thereof) shall consist of interest and dividends earned by each Sub-Fund and
realised and unrealised profits on the disposal/valuation of investments as may be lawfully distributed less realised
and unrealised losses (including fees and expenses) of each Sub-Fund.
In the case of the Accumulating Classes of Shares, the US Dollar Liquidity Fund, Euro Liquidity Fund, Sterling
Liquidity Fund and US Dollar Treasury Liquidity Fund intend to retain the net income and/or capital gains
attributable to such Classes of Shares and the value of these Classes of Shares.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
35
3. Dividends and Distributions: (continued)
Where there are substantial adverse movements in interest rates, there can be no assurance that the Sub-Funds will
be successful in maintaining positive net investment income. Where a Sub-Fund posts negative net investment
income, in order to maintain a stable Net Asset Value per Share for Distributing Classes of Shares, the
Management Company shall address such by the compulsory redemption equally of such number of Shares held
by each Shareholder in the relevant Class of Shares required to cover the negative net income of that Class of
Share, with the proceeds of each such redemption being retained by the Sub-Fund. In the case of Accumulating
Classes of Shares, the Net Asset Value per Share will decrease in lieu of the compulsory redemption of Shares.
4. Management Company Services Agreement, Investment Advisory Agreement, Depositary Agreement,
Administration Agreement, Registrar and Transfer Agent Agreement, Paying Agent Agreement,
Domiciliary Agreement and Distribution Agreement:
The Board of Directors of the Company has appointed MSIM (ACD) as designated management company (the
“Management Company”) pursuant to the Management Company Services Agreement dated 1 April 20141.
The Management Company is responsible for providing collective portfolio management services (including
investment management, administrative and distribution services), risk management and other administrative and
operational services to the Company, subject to the overall supervision and control of the Company.
The Management Company has delegated to Morgan Stanley Investment Management Inc., the function of
Investment Adviser of the Sub-Funds pursuant to an investment advisory agreement dated 1 April 2014 (the
“Investment Advisory Agreement”). The Company may terminate its appointment immediately where it is in the
best interest of Shareholders to do so.
The Board of Directors of the Company has appointed The Bank of New York Mellon (International) Limited,
Luxembourg Branch (the “Depositary”) as the depositary of all of the Company’s assets, including its cash and
securities, which are held either directly or through other financial institutions such as correspondent banks,
subsidiaries or affiliates of the Depositary or clearing systems. The rights and duties of the Depositary are
governed by the Depositary Agreement entered into on 7 March 2016 for an unlimited period of time from the
date of its signature.
The Management Company has delegated to The Bank of New York Mellon (International) Limited, Luxembourg
Branch (the “Adminstrator”) the function of Administrator pursuant to the Administration Agreement dated 7
March 2016. The Administrator carries out all administrative duties related to the administration of the Company,
including the calculation of the Net Asset Value of the Shares, the provision of accounting services to the
Company and notices and other documents to the Shareholders.
The Management Company has also delegated to the Administrator the function of registrar and transfer agent of
the Company pursuant to the Administration Agreement dated 7 March 2016. In this function the Administrator
processes all subscriptions, redemptions and transfers of Shares and will register these transactions in the share
register of the Company.
The Management Company has also appointed the Administrator as the paying agent of the Company pursuant to
the Administration Agreement dated 7 March 2016. In this function the Administrator assists in the payment of
dividends declared by the Company to its Shareholders.
Pursuant to a Domiciliary Agreement, the Management Company has appointed Morgan Stanley Investment
Management Limited, Luxembourg Branch, as its Domiciliary Agent to provide the Company’s registered office,
to store its corporate documents and to perform other related administrative functions.
The Management Company has appointed Morgan Stanley Investment Management Limited to act as Distributor
pursuant to the Distribution Agreement dated 1 April 2014. In this respect, it may engage certain financial
institutions (Intermediaries) to solicit and sell Shares to investors.
1 By way of a referendum, on 23 June 2016, the United Kingdom voted to leave the European Union. It is acknowledged that uncertainty exists in relation to the
United Kingdom’s future relationship with the European Union and specifically with regards to current ‘passporting’ which permits the management Company
(MSIM ACD), as a UK company, to sponsor an umbrella domiciled within Luxembourg. The Management Company are closely monitoring this and indeed all
other Brexit related developments to ensure that any potential impact to the Company and its Unitholders is managed in good faith and communicated
appropriately.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
36
5. Taxation:
Under current law and practice, the Company is not liable to any Luxembourg income tax, nor are dividends paid
by the Company liable to any Luxembourg withholding tax. However, the Company is liable in Luxembourg to a
reduced rate of subscription tax (“taxe d’abonnement”) of 0.01% per annum of its net assets, such tax being
payable quarterly and calculated on the total Net Asset Value of the Company at the end of the relevant quarter.
Pursuant to Article 175 b) of the Law, an exemption from the subscription tax may be applicable where a Fund or
Class meets the following criteria: (i) the Shares of the Fund or the Class must be reserved to Institutional
Investors; (ii) the exclusive object of the Fund's portfolio must be the investment in money market instruments
and/or deposits with credit institutions; (iii) the remaining average maturity of the Fund's portfolio must be less
than 90 days, and (iv) the Fund must benefit from the highest possible rating of a recognized rating agency.
Under the aforementioned legislation and regulations prevailing in Luxembourg, Master Shares, Master
Accumulation Shares, Qualified Shares, Qualified Accumulation Shares, Advantage Shares, Advantage
Accumulation Shares are subject to annual subscription tax (“taxe d’abonnement”) at a reduced rate of 0.01% per
annum of their net assets. The remaining Classes of Shares listed within the Company’s prospectus are exempt
from this tax.
The Company is registered for VAT in Luxembourg and is required to self-assess for Luxembourg VAT on
services received from outside Luxembourg (that are considered taxable under Luxembourg VAT rules).
In respect of any Sub-Fund or Class of Shares the Management Company may choose (in the event that the TER
as outlined in Appendix 1 is exceeded) to waive all or any portion of its subscription tax (“taxe
d’abonnement”) and/or absorb some or all other expenses in its absolute discretion for any period of time. This
waiver is entirely voluntary and may be discontinued at any time without notice at the sole discretion of the
Management Company.
6. Fees and expenses:
(a) Service Provider Fees
The Company shall pay the Management Company a Management Fee in respect of each Sub-Fund, the
particulars of which are set out in "Fund Particulars" within the Company’s prospectus. In addition, the Company
is responsible for all of the Management Company’s reasonable cash disbursements, including but not limited to
out-of-pocket expenses, provided however that the Management Company shall be required to provide the
Company with evidence of any such disbursement.
The fees of the Investment Adviser, the Depositary, the Administrator and the Distributor appointed in respect of
each Sub-Fund (all of which fees are payable monthly in arrears) will be paid by the Management Company out
of the Management Fee it receives. The Management Company may instruct the Company to pay any of these
fees to the Investment Adviser, the Depositary, the Administrator directly out of the assets of the Company. In
such case, the Management Fee due to the Management Company is reduced accordingly.
In respect of any Sub-Fund or Class of Shares the Management Company may choose to waive all or any portion
of its fee and/or absorb some or all other expenses in its absolute discretion for any period of time. This waiver is
entirely voluntary and may be discontinued at any time without notice at the sole discretion of the Management
Company.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
37
6. Fees and expenses: (continued)
(a) Service Provider Fees (continued)
The maximum chargeable Management fee rates as at 31 March 2017 were as follows:
Name of the Sub-Fund Class of Shares Management Fee Rate
Euro Liquidity Fund
Institutional Shares 0.20% per annum of the NAV
Institutional Accumulation Shares 0.20% per annum of the NAV
Institutional Select Shares 0.21% per annum of the NAV
Institutional (+1) Accumulation Shares 0.20% per annum of the NAV
MS Reserve Shares Nil
US Dollar Liquidity Fund
Advantage Accumulation Shares 0.45% per annum of the NAV
Advisory Shares 0.45% per annum of the NAV
Institutional Shares 0.20% per annum of the NAV
Institutional Accumulation Shares 0.20% per annum of the NAV
Institutional Select Shares 0.21% per annum of the NAV
Master Shares Nil
MS Reserve Shares Nil
Qualified Accumulation Shares 0.20% per annum of the NAV
US Dollar Treasury Liquidity Fund
Advisory Shares 0.45% per annum of the NAV
Institutional Shares 0.20% per annum of the NAV
Institutional Select Shares 0.21% per annum of the NAV
MS Reserve Shares Nil
Sterling Liquidity Fund
Institutional Shares 0.20% per annum of the NAV
Institutional Accumulation Shares 0.20% per annum of the NAV
Institutional Select Shares 0.21% per annum of the NAV
MS Reserve Shares Nil
Qualified Shares 0.20% per annum of the NAV
(b) Director’s Remuneration
The Directors are paid an annual fee of Euro 30,000 by the Company for their services as Directors. The
Chairman of the Board receives an additional Euro 5,000 in respect of his chairman duties. In addition, the
Directors are also entitled to be reimbursed for their reasonable and vouched out of pocket expenses incurred in
discharging their duties as Directors.
In respect of any Sub-Fund or Class of Shares the Management Company may choose (in the event that the TER
as outlined in Appendix 1 is exceeded) to waive all or any portion of its Director’s Remuneration and/or absorb
some or all other expenses in its absolute discretion for any period of time. This waiver is entirely voluntary and
may be discontinued at any time without notice at the sole discretion of the Management Company.
(c) Ongoing Charges and Expenses
The Company pays any expenses in respect of circulating details of the Net Asset Value, stamp duties, taxes,
company secretarial fees, insurance, the fees and expenses of the auditors, tax and legal advisers and fees
connected with listing on any stock exchange and the costs of regulatory bodies, trade bodies and rating agencies.
The costs of printing and distributing reports, accounts and any explanatory memoranda, any necessary translation
fees, the costs of registering the Company for sale in any jurisdiction, the fees and expenses of any paying or
information agents, or correspondent banks, the fees and expenses of any representative appointed in respect of
the Company in any jurisdiction, the cost of publishing prices and any costs incurred as a result of periodic
updates of the Prospectus, or of a change in law or the introduction of any new law (including any costs incurred
as a result of compliance with any applicable code, whether or not having the force of law) are also paid by the
Company. The Management Company has chosen to reimburse these expenses to all the share classes in the funds
in order to reduce the impact the fees may have on the net returns of the Fund. This reimbursement is entirely
voluntary and may be discontinued at any time without notice at the sole discretion of the Management Company.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
38
6. Fees and expenses: (continued)
(d) Establishment Charges and Expenses
The cost of establishing the Company and the expenses of the initial offer of Shares in the Sub-Funds, the
preparation and printing of the initial Prospectus, marketing costs and the fees of all professionals relating to it
were borne by the Distributor of the fund.
7. Related Party Holdings, Transactions and Affiliations:
Morgan Stanley Investment Funds - US Dollar Liquidity Fund (the “Feeder Fund”), which is administered by J.P.
Morgan Bank Luxembourg S.A., is a feeder fund of the Company’s US Dollar Liquidity Fund (the “Master
Fund”). The Feeder Fund invests at least 85% of its assets in shares of the Master Fund (Master Share Class).
As of 31 March 2017, the Feeder Fund held 28% of the net asset value of the Master Fund, or 100% of the Master
Class of Share within the Master Fund.
Morgan Stanley Investment Funds was incorporated on 21 November 1988 under the laws of the Grand Duchy of
Luxembourg as a “Société d’Investissement à Capital Variable” (“SICAV”) and is registered as an undertaking
for collective investment pursuant to Part 1 of the Law of 17 December 2010. The 2010 Law transposes the recast
UCITS Directive (Directive 2009/65/EC) into Luxembourg legislation.
A number of other Sub-Funds of Morgan Stanley Investment Funds invest into the Company from time to time.
These transactions were all executed in the normal course of business at arm’s length.
The Sub-Funds of Morgan Stanley Investment Funds that held shares in the Company’s Euro Liquidity Fund as at
31 March 2017 were as follows:
Absolute Return Fixed Income Fund
Diversified Alpha Plus Fund
Diversified Alpha Plus Low Volatility Fund
Emerging Europe, Middle East and Africa Equity Fund
Euro Bond Fund
Euro Corporate Bond Fund
Euro Strategic Bond Fund
European Currencies High Yield Bond Fund
European Equity Alpha Fund
European Property Fund
Eurozone Equity Alpha Fund
Global Balanced Risk Control Fund
Global Bond Fund
Short Maturity Euro Bond Fund
Buy and Hold 2020 Fund
European Champions Fund
The Sub-Funds of Morgan Stanley Investment Funds that held shares in the Company’s US Dollar Liquidity Fund
as at 31 March 2017 were as follows:
Asian Fixed Income Opportunities Fund
Asia-Pacific Equity Fund
Emerging Europe, Middle East & Africa Equity Fund
Emerging Leaders Equity Fund
Emerging Markets Corporate Debt Fund
Emerging Markets Debt Fund
Emerging Markets Domestic Debt Fund
Emerging Markets Equity Fund
Emerging Markets Fixed Income Opportunities Fund
Frontier Emerging Markets Equity Fund
Global Credit Fund
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
39
7. Related Party Holdings, Transactions and Affiliations: (continued)
Global Fixed Income Opportunities Fund
Global High Yield Bond Fund
Global Mortgage Securities Fund
Global Premier Credit Fund
Latin American Equity Fund
Liquid Alpha Capture Fund
Global Convertible Bond Fund
European Currencies High Yield Bond Fund
Euro Strategic Bond Fund
Euro Corporate Bond Fund
Global Bond Fund
Asian Equity Fund
Global Buy and Maintain Bond Fund
The Sub-Funds of Morgan Stanley Investment Funds that held shares in the Company’s US Dollar Treasury
Liquidity Fund as at 31 March 2017 were as follows:
Asian Property Fund
Global Advantage Fund
Global Brands Fund
Global Discovery Fund
Global Infrastructure Fund
Global Opportunity Fund
Global Property Fund
Global Quality Fund
International Equity (Ex US) Fund
US Advantage Fund
US Growth Fund
US Insight Fund
US Property Fund
Global Brands Equity Income Fund
No Sub-Fund of Morgan Stanley Investment Funds held shares in the Company’s Sterling Liquidity Fund.
The affiliations of the Board of Directors of the Company are as follows:
All the Directors of Morgan Stanley Liquidity Funds are also Directors of Morgan Stanley Investment Funds.
Ms. Judith Eden and Mr. Andrew Mack, Directors of Morgan Stanley Liquidity Funds, are also non-executive
Directors of the Management Company Morgan Stanley Investment Management (ACD) Limited.
The (Sub-)Investment Advisor, the Management Company, the Domiciliary Agent and the Distributor are related
parties to the Company following the contractual arrangement disclosed in note 4.
No portfolio transactions of the Company that occurred during the period were executed through affiliated firms
or brokers.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
40
8. Reverse Repurchase Transactions:
As at 31 March 2017, all the Sub-Funds had entered into reverse repurchase transactions. The total commitment
of the reverse repurchase agreements is as follows:
Name of the Sub-Fund Description Tri-Party
Agent
Reverse
Repurchase
Transactions
CCY
Market Value
of Collateral
Received
CCY
Euro Liquidity Fund
Societe Generale / -0.90%/
03/04/2017 Euroclear 200,000,000 EUR 204,001,021 EUR
Societe Generale / -1.30%/
03/04/2017 Euroclear 140,000,000 EUR 142,800,000 EUR
Total 340,000,000 EUR 346,801,021 EUR
US Dollar Liquidity
Fund
Goldman Sachs & Co / 0.79% /
03/04/2017
Bank of New
York 200,000,000 USD 206,000,000 USD
Merrill Lynch Pierce Fenner &
Smith Inc / 0.86% / 03/04/2017
Bank of New
York 200,000,000 USD 204,000,026 USD
Total 400,000,000 USD 410,000,026 USD
US Dollar Treasury
Liquidity Fund
JP Morgan Securities LLC / 0.80%
/ 03/04/2017
JP Morgan
Securities 350,000,000 USD 357,001,830 USD
Merrill Lynch Pierce Fenner &
Smith Inc / 0.85% / 03/04/2017
Bank of New
York 100,000,000 USD 102,000,078 USD
Merrill Lynch Pierce Fenner &
Smith Inc / 0.75% / 03/04/2017 Bank of New
York 15,000,000 USD 15,300,046 USD
Total 465,000,000 USD 474,301,954 USD
Sterling Liquidity
Fund
Lloyds TSB Bank PLC / 0.10% / 03/04/2017
Euroclear 100,000,000 GBP 102,000,001 GBP
National Australia Bank Limited /
-0.20% / 03/04/2017 Euroclear 100,000,000 GBP 102,000,000 GBP
Total 200,000,000 GBP 204,000,001 GBP
The collateral received by the Sub-Funds in respect of reverse repurchase transactions as at 31 March 2017 is
outlined in section II of Appendix 2: Securities Financing Transaction Regulations (Unaudited).
During the financial year, interest received by and charged to the Sub-Funds in relation to reverse repurchase
transactions was recorded under the heading “Interest” within the Statement of Operations and Changes in Net
Assets. These values are outlined in section V of Appendix 2. There are no other direct or indirect costs relating
to reverse repurchase transactions.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
41
9. Time Deposits:
As at 31 March 2017, the Sub-Funds Euro Liquidity Fund, US Dollar Liquidity Fund and Sterling Liquidity Fund
held time deposits as follows:
Name of the Sub-Fund Counterparty Currency Holdings Interest (%) Maturity Date
Euro Liquidity Fund
BNP PARIBAS EUR 322,188,097 (0.50) 3-Apr-17
ING Bank NV EUR 160,016,231 (0.50) 3-Apr-17
Bred Banque Populaire EUR 149,718,408 (0.46) 3-Apr-17
Commonwealth Bank of Australia EUR 112,000,000 (0.60) 3-Apr-17
Credit Agricole Group EUR 99,848,527 (0.55) 3-Apr-17
Bred Banque Populaire EUR 59,989,968 (0.43) 6-Apr-17
Bred Banque Populaire EUR 49,922,016 (0.43) 4-Apr-17
Bred Banque Populaire EUR 39,976,750 (0.43) 5-Apr-17
Total EUR 993,659,997
Name of the Sub-Fund Counterparty Currency Holdings Interest (%) Maturity Date
US Dollar Liquidity Fund
Canadian Imperial Bank of Commerce USD 363,000,000 0.82 3-Apr-17
DNB Bank ASA USD 313,000,000 0.80 3-Apr-17
Australia and New Zealand Banking USD 300,000,000 0.82 3-Apr-17
Skandinaviska Enskilda Banken AB USD 300,000,000 0.81 3-Apr-17
National Australia Bank Ltd USD 240,000,000 0.80 3-Apr-17
Natixis USD 221,000,000 0.82 3-Apr-17
Credit Agricole Group USD 136,000,000 0.80 3-Apr-17
National Bank of Canada USD 95,000,000 0.81 3-Apr-17
BNP Paribas USD 25,000,000 0.80 3-Apr-17
Total USD 1,993,000,000
Name of the Sub-Fund Counterparty Currency Holdings Interest (%) Maturity Date
Sterling Liquidity Fund
Commonwealth Bank of Australia GBP 116,147,706 0.25 3-Apr-17
Bred Banque Populaire GBP 26,044,171 0.22 3-Apr-17
BNP Paribas GBP 2,414,162 0.15 3-Apr-17
Total GBP 144,606,039
10. Indemnifications:
The Company has arrangements in place for the indemnification of the members of its Board of Directors, the
Administrator, the Depositary and the Management Company (the “Indemnified Parties”) in certain
circumstances, which exclude the Indemnified Parties’ own negligence, wilful default, or fraud.
11. Transaction Costs:
There were no transaction costs charged to the Sub-Funds during the year ended 31 March 2017.
12. Determination of Global Exposure:
The methodology used in order to calculate the Global Exposure resulting from the use of financial derivative
instruments is the commitment approach in accordance with the CSSF Circular 11/512.
13. Statement of Portfolios changes:
The list of changes in the portfolio for the period is available free of charge at the registered office of the
Management Company.
MORGAN STANLEY LIQUIDITY FUNDS
Notes to the Financial Statements (continued)
31 March 2017
42
14. Counterparty Risk:
All instruments listed in Notes 8 and 9 are transacted through third parties. The Company is subject to the risk that
counterparties will not be able to fulfil their obligations with respect to transactions, positions, balances or
otherwise, whether due to insolvency, bankruptcy or other causes. In such case, the Company may be able to
recover none or only a portion of its assets held with such counterparty. This could subject the Company to
substantial losses.
15. Remuneration Policy of the Management Company:
The Management Company has a remuneration policy in place which seeks to ensure that the interests of the
Company and the Shareholders are aligned. Such remuneration policy imposes remuneration rules on staff and
senior management within the Management Company whose activities have an impact on the risk profile of the
Company. The Management Company shall seek to ensure that such remuneration policies and practices will be
consistent with sound and effective risk management and with UCITS Regulation. The Management Company
shall also seek to ensure that such remuneration policies and practices shall not encourage risk taking which is
inconsistent with the risk profile and constitutional documents of the Company.
The Management Company shall seek to ensure that the remuneration policy will, at all times, be consistent with
the business strategy, objectives, values and interests of the Company and the Shareholders and that the
remuneration policy will include measures that seek to ensure that all relevant conflicts of interest can be managed
appropriately at all times.
Individuals who are subject to the provisions of the UCITS remuneration policy (“Remuneration Code Staff”) will
complete the first full remuneration performance year under the new UCITS remuneration rules on 31 December
2017. Therefore, the total amount of remuneration the Remuneration Code Staff receive, and how this
remuneration is split into fixed and variable remuneration, is not available for the Company’s annual accounting
period in question.
16. Significant events:
European Money Market Fund (MMF) Regulation was agreed upon between the European Council and
Parliament in December 2016. Both short-term MMFs and standard MMFs (per European Securities and Markets
Authority definition) remain. Two new short-term MMF structures were introduced; Public Debt Constant Net
Asset Value (CNAV) MMF and Low Volatility (LVNAV) MMF. Trigger based liquidity fees and redemption
gates are new features that apply to both Public Debt CNAV MMFs and LVNAV MMFs. 20 days after the
regulation is formally published in the official journal of the European Union, an 18 month implementation time-
frame will commence, providing investors and managers with time to prepare and communicate the changes.
There were no other significant events during the year.
MORGAN STANLEY LIQUIDITY FUNDS
Appendix 1: Total Expense Ratio (Unaudited)
43
The below table discloses the total expense ratios (TER) attributable to the Classes of Shares of the Sub-Funds as at 31
March 2017. All total expense ratios disclosed are net of waived investment management fees and reimbursed operating
fees.
Name of the Sub-Fund Class of Shares TER (%)
As at 31 March 2017
TER (%)
As at 31 March 2016
Euro Liquidity Fund
Institutional Shares 0.07% 0.05%
Institutional Accumulation Shares 0.07% 0.05%
Institutional Select Shares* - 0.10%
Institutional (+1) Accumulation Shares** 0.07% -
MS Reserve Shares 0.00% 0.00%
US Dollar Liquidity Fund
Advantage Accumulation Shares 0.46% 0.30%
Advisory Shares*** 0.45% -
Institutional Shares 0.20% 0.17%
Institutional Accumulation Shares 0.20% 0.17%
Institutional Select Shares 0.21% 0.21%
Master Shares 0.01% 0.01%
MS Reserve Shares 0.00% 0.00%
Qualified Accumulation Shares**** 0.21% 0.19%
US Dollar Treasury
Advisory Shares*** 0.45% -
Institutional Shares 0.20% 0.10%
Institutional Select Shares 0.21% 0.21%
MS Reserve Shares 0.00% 0.00%
Sterling Liquidity Fund
Institutional Shares 0.12% 0.12%
Institutional Accumulation Shares 0.12% 0.12%
Institutional Select Shares 0.17% 0.17%
MS Reserve Shares***** - 0.00%
Qualified Shares 0.13% 0.13%
* Share class was fully redeemed on 19 October 2016.
** Share class launched on 24 May 2016.
*** Share class was fully redeemed on 24 February 2016 hence was inactive and re-launched on 16 August 2016 at a price
of USD 1.00.
**** Share class was fully redeemed on 4 September 2015 hence was inactive and re-launched on 15 March 2016 at a
price of USD100.00.
***** Share class was fully redeemed on 28 March 2017.
MORGAN STANLEY LIQUIDITY FUNDS
Appendix 2: Securities Financing Transactions Regulation (Unaudited)
44
The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015/2365,
securities financing transactions include reverse repurchase transactions, securities or commodities lending and securities
or commodities borrowing, buy-sell back transactions or sell-buy back transactions and margin lending transactions). In
accordance with Article 13 of the Regulation, the Company’s only involvement in and exposures related to securities
financing transactions is its engagement in reverse repurchase activity for the year ended 31 March 2017 as detailed below:
I. Global Data
Amount of assets engaged in Reverse Repurchase Transactions
The following table details the total value of assets engaged in reverse repurchase transactions as at 31 March 2017:
Sub-Fund Name Sub-Fund
Currency
Market Value in Sub-Fund
Currency
% of Total Net Assets
Value
Euro Liquidity Fund EUR 340,000,000 5.34
US Dollar Liquidity Fund USD 400,000,000 2.05
US Dollar Treasury Liquidity Fund USD 465,000,000 17.94
Sterling Liquidity Fund GBP 200,000,000 8.31
II. Concentration Data
Collateral Issuers
The following table lists the issuers by value of non-cash collateral received by the Sub-Funds in respect of reverse
repurchase transactions as at 31 March 2017:
Issuer Name
COLLATERAL MARKET VALUE (in Sub-Fund Currency)
Euro Liquidity
Fund
US Dollar
Liquidity
Fund
US Dollar
Treasury
Liquidity Fund
Sterling
Liquidity
Fund
EUR USD USD GBP
Fannie Mae – 121,186,903 – –
Freddie Mac – 84,813,097 – –
Government of the Kingdom of Spain 72,430,753 – – –
Government of the Republic of France 142,800,000 – – –
Government of the Republic of Italy 131,570,268 – – –
Government of the United States of America – 204,000,026 474,301,954 –
Government of the United Kingdom – – – 204,000,001
Total 346,801,021 410,000,026 474,301,954 204,000,001
MORGAN STANLEY LIQUIDITY FUNDS
Appendix 2: Securities Financing Transactions Regulation (Unaudited) (continued)
45
II. Concentration Data (continued)
Counterparties
The following table lists the counterparties by value of assets engaged in reverse repurchase transactions as at 31 March
2017:
Sub-Fund Name Counterparty
Incorporation
Country
Settlement and
Clearing Currency
Market Value
of Reverse
Repurchase
Transactions
Euro Liquidity Fund Societe Generale France Tri-party EUR 346,801,021
US Dollar Liquidity Fund Merrill Lynch
United States of
America Tri-party USD 204,000,026
US Dollar Liquidity Fund Goldman Sachs
United States of
America Tri-party USD 206,000,000
US Dollar Treasury
Liquidity Fund
JP Morgan
Securities
United States of
America Tri-party USD 357,001,830
US Dollar Treasury
Liquidity Fund Merrill Lynch
United States of
America Tri-party USD 117,300,124
Sterling Liquidity Fund
Lloyds Bank
PLC
United
Kingdom Tri-party GBP 102,000,001
Sterling Liquidity Fund
National
Australia Bank
Ltd, London
United
Kingdom Tri-party GBP 102,000,000
III. Aggregate Transaction Data
Type, currency and quality of collateral
Non-cash collateral received by each Sub-Fund in respect of reverse repurchase transactions as at the reporting date is in
the form of fixed income instruments issued by United States government sponsored enterprises or by governments of the
following countries: Italy, France, Spain, UK and USA.
All collateral received is denominated in the same currency as each respective sub-fund.
All of the Sub-Funds’ securities collateral have a credit rating of investment grade. Quality of collateral has been
interpreted as pertaining to fixed income instruments, which have been assessed and reported in accordance with whether
they are considered investment grade, below investment grade or not-rated. These designations are derived from the credit
rating issued to the security or its issuer by at least one globally recognised credit rating agency, such as Standard & Poor’s
and Moody’s. Fixed income instruments with a credit rating between ‘AAA’ and ‘BBB’ are deemed as investment grade.
Credit ratings for fixed income instruments below these designations are considered below investment grade.
Sub-Fund Name
Sub-Fund
Currency
Type of
Collateral
Quality of
Collateral
COLLATERAL
MARKET
VALUE (in Sub-
Fund Currency)
Total
Euro Liquidity Fund EUR Fixed Income Investment grade 346,801,021
US Dollar Liquidity Fund USD Fixed Income Investment grade 410,000,026
US Dollar Treasury Liquidity Fund USD Fixed Income Investment grade 474,301,954
Sterling Liquidity Fund GBP Fixed Income Investment grade 204,000,001
MORGAN STANLEY LIQUIDITY FUNDS
Appendix 2: Securities Financing Transactions Regulation (Unaudited) (continued)
46
III. Aggregate Transaction Data (continued)
Maturity tenure of collateral
The following table provides an analysis of the maturity tenor of collateral received in relation to the reverse repurchase
transactions as at the reporting date:
COLLATERAL MARKET VALUE (in Sub-Fund Currency)
Sub-Fund
Name
Sub-Fund
Currency
1
day
2 to 6
days
1 to 4
weeks
1 to 3
months
3 to 12
months
more than
1 year
open
maturity
Euro Liquidity
Fund EUR – 763 59,483,105 72,204,386 86,638,378 128,474,390 –
US Dollar
Liquidity Fund USD – – – – – 410,000,027 –
US Dollar
Treasury
Liquidity Fund USD – – – 9,410,597 372,541,887 92,349,469 –
Sterling
Liquidity Fund GBP – – – – 7,211,539 196,788,462 –
Maturity tenure of reverse repurchase transactions
All transactions as at 31 March 2017 were entered into for a duration of one business day of the respective sub-fund.
IV. Re-use of Collateral
Non-cash collateral received by a Sub-Fund may not be sold, re-invested or pledged. As the collateral in receipt for reverse
repurchase transactions is entirely in the form of securities, there is no re-use of this collateral.
V. Safekeeping of Collateral
Collateral Received
Whilst there are several Tri-Party Agents who hold the collateral received by the Sub-Funds, it is the Depositary, Bank of
New York Mellon (International) Luxembourg Branch, who is ultimately responsible for the safekeeping of the collateral
on behalf of these sub-funds. All collateral is held in segregated accounts.
Collateral Granted
No collateral is granted by the Company as part of the reverse repurchase transactions.
MORGAN STANLEY LIQUIDITY FUNDS
Appendix 2: Securities Financing Transactions Regulation (Unaudited) (continued)
47
V. Safekeeping of Collateral (continued)
Return and Cost
All returns from reverse repurchase transactions will accrue to the Sub-Funds and are not subject to any returns sharing
arrangements with the Management Company, the Investment Advisor or any other third parties.
The following table provides an analysis of return and cost in respect of the reverse repurchase transactions for the year
ended 31 March 2017:
Sub-Fund Currency
in Sub-fund Currency
Interest received by
Sub-Funds
Interest charged to
Sub-Funds Sub-Fund Name
Euro Liquidity Fund EUR – 1,686,722
US Dollar Liquidity Fund USD 3,025,995 –
US Dollar Treasury Liquidity Fund USD 1,364,966 –
Sterling Liquidity Fund GBP 566,092 –
There are no other direct or indirect costs relating to reverse repurchase transactions.