Annual Report - Morgan Stanley · 2020-03-07 · MORGAN STANLEY LIQUIDITY FUNDS Société d'Investissement à Capital Variable organised under the laws of the Grand Duchy of Luxembourg

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 2019

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 3

Investment Advisers and Sub-Advisers Report:

MS Liquidity Funds - Euro Liquidity Fund Page 8

MS Liquidity Funds - US Dollar Liquidity Fund & US Dollar Treasury Liquidity Fund Page 10

MS Liquidity Funds - Sterling Liquidity Fund Page 13

Independent Auditor’s Report for audit in accordance with International Standards on Auditing

as adopted in Luxembourg Page 15

Financial Statements:

Statement of Net Assets Page 18

Statement of Net Assets Statistics Page 20

Statement of Operations and Changes in Net Assets Page 23

Schedules of Investments:

MS Liquidity Funds - Euro Liquidity Fund Page 25

MS Liquidity Funds - US Dollar Liquidity Fund Page 27

MS Liquidity Funds - US Dollar Treasury Liquidity Fund Page 30

MS Liquidity Funds - Sterling Liquidity Fund Page 31

Notes to the Financial Statements Page 33

Appendix 1: Total Expense Ratio (Unaudited) Page 45

Appendix 2: Securities Financing Transactions Regulation (Unaudited) Page 46

Appendix 3: Remuneration Policy (Unaudited) Page 50


1

Directors and Service Providers

Board of Directors of the Company Depositary

Michael Griffin, Chairman The Bank of New York Mellon (International) Limited

Independent Non-Executive Director (Luxembourg Branch) (until 17 March 2019)

Ireland

The Bank of New York Mellon SA/NV

Andrew Mack Luxembourg Branch (since 18 March 2019)

Non-Executive Director 2-4 rue Eugène Ruppert

United Kingdom L-2453 Luxembourg

Grand Duchy of Luxembourg

William Jones Independent Non-Executive Director Registrar and Transfer Agent*,

Grand Duchy of Luxembourg Administrative Agent* and Paying Agent*

Henry Kelly The Bank of New York Mellon (International) Limited

Independent Non-Executive Director (Luxembourg Branch) (until 17 March 2019)


The Bank of New York Mellon SA/NV

Diane Hosie (appointed effective 17 July 2018)

Luxembourg Branch (since 18 March 2019)

Executive Director

2-4 rue Eugène Ruppert

United Kingdom L-2453 Luxembourg


Carine Feipel (appointed effective 17 July 2018) Independent Non-Executive Director

Domiciliary Agent


Morgan Stanley Investment Management

Susanne Van Dootingh (appointed effective 17 July 2018) Limited, Luxembourg Branch Independent Non-Executive Director

6B, route de Trèves Belgium

L-2633 Senningerberg


Management Company

Investment Adviser*

Morgan Stanley Investment Management (ACD) Limited

(until 31 December 2018) Morgan Stanley Investment Management Inc.

25 Cabot Square 522 Fifth Avenue

Canary Wharf New York, New York, 10036

London E14 4QA United States of America

United Kingdom

Sub-Investment Adviser**

MSIM Fund Management

(Ireland) Limited (since 1 January 2019) Morgan Stanley & Co International plc

The Observatory, 7-11, 25 Cabot Square

Sir John Rogerson’s Quay Canary Wharf

Dublin 2 D02VC42 London E14 4QA

Ireland United Kingdom

Board of Directors of the Management Company Distributor*

Andrew Mack Morgan Stanley Investment Management Limited

Non-Executive Director (until 31 December 2018)

United Kingdom 25 Cabot Square

Canary Wharf

Eimear Cowhey London E14 4QA

Independent Non-Executive Director United Kingdom

Ireland

Morgan Stanley Investment Management (Ireland) Limited

Liam Manahan (since 1 January 2019)

Independent Non-Executive Director The Observatory, 7-11,

Ireland Sir John Rogerson’s Quay

Dublin 2 D02VC42

Elaine Keenan Ireland

Executive Director, Ireland

CEO and COO MSIM Fund Management (Ireland) Limited

Ireland

Diane Hosie

Executive Director

Morgan Stanley Investment Management Limited

United Kingdom


2

Directors and Service Providers (continued)

Independent Auditor of the Company Legal Adviser

Ernst & Young S.A. Arendt & Medernach S.A.

35E, avenue J.F. Kennedy 41A, avenue J. F. Kennedy

L-1855 Luxembourg L-2082 Luxembourg

Grand Duchy of Luxembourg Grand Duchy of Luxembourg

*Delegated by the Management Company.

**Delegated by the Investment Adviser.


3

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 2019.

Directors

Michael Griffin Independent Non-Executive Director and Chairman. A member of the Board since December 2012.

Mr. Griffin has over 35 years of experience in the financial sector. For the past 19 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.

Andrew Mack Non-Executive Director (Director and Chairman of Morgan Stanley Investment Management (ACD) Limited and Morgan

Stanley Investment Management Fund Management Ireland Ltd). A member of the Board since December 2012.

Mr. Mack joined Morgan Stanley in 1996 and has 32 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

(MSIM ACD) the Management Company between 1 April 2014 and 31 December 2018. More recently, Mr. Mack

assumed a non-Executive Director role in MSIM Fund Management (Ireland) Ltd which became the Management

Company on 1 January 2019. 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.

William Jones

Independent Non-Executive 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 27

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.

Henry Kelly Independent Non-Executive 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.


4

Board of Directors’ Report (continued)

Directors (continued)

Henry Kelly

Independent Non-Executive Director. A member of the Board since February 2013. (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.

Diane Hosie

Executive Director of the Board of Directors of MSIM Fund Management (Ireland) Limited

Diane is a Managing Director of Morgan Stanley and International Head of Client Account Management and Intermediary

Due Diligence within the Investment Management division of Morgan Stanley based in London. Diane joined Morgan

Stanley in 1997 in Investment Management Operations based in London. She has spent her career at Morgan Stanley

within the Investment Management division serving in a number of roles within both operations and distribution.

Previously, Diane worked for Nomura Capital Management Limited from 1988 until 1997 and started her career with the

Clydesdale Bank. Diane is an employee of Morgan Stanley Investment Management ("MSIM") and is also Chief Executive

Officer and a director of MSIM ACD.

Carine Feipel

Independent Non-Executive Director

Carine Feipel is a Luxembourg attorney and certified independent director. Ms. Feipel obtained the INSEAD IDP

Certificate on Corporate Governance in 2014 and was admitted by ILA (Luxembourg Institute of Directors) as a Certified

Director in the same year. Ms. Feipel serves the Board of Directors of a Luxembourg based bank, four insurance

companies, both active in the life insurance and the non-life insurance fields. Ms. Feipel is further a member of the Board

of Directors of various Luxembourg companies active in the financial and investment funds sectors. In 2014, Ms. Feipel

was elected to the Board of Directors of ILA and became a member of the Management Committee of such association.

Finally, Ms. Feipel is a member of the Board of a Foundation which operates under the aegis of Fondation de Luxembourg.

Since January 2014, Ms. Feipel practices as an independent lawyer, notably advising insurance and reinsurance companies

as well as other financial institutions. Ms. Feipel has 19 years of experience as a lawyer with the Luxembourg law firm

Arendt & Medernach where she headed the insurance law practice and was co-head of the employment law practice. Ms.

Feipel was also a member of the Board of such firm and headed its New York office from 2007 to 2012. Since 2010, Ms.

Feipel has been a member of various committees within the Haut Comité pour la Place Financière, a Government lead

think tank coordinating promotion and innovation initiatives for the Luxembourg financial sector.

Susanne Van Dootingh Independent Non-Executive Director

Ms Van Dootingh was at State Street Global Advisors from 2002 to 2017 with her final position being Senior Managing

Director, Head of European Governance and Regulatory Strategy, EMEA. In addition she was the Chair of the SSGA

Luxembourg Sicav and Management Company and has been a member of various ESMA consultative working groups

since 2013. Prior to this she held positions within State Street Global Advisors as the Global Head of Institutional Product

Development and Research, Head of European Product Development and Management, Head of EMEA Fixed Income

Product Engineering, and Senior Fixed Income Product Engineer. Before 2002 Ms Van Dootingh worked at Fortis

Investment Management as Senior Product Manager, European Fixed Income, at Barclays Global Investors as Product

Manager, Fixed Income, and at ABN AMRO Asset Management as Portfolio Manager Global Fixed Income. She

graduated from the Vrije Universiteit Amsterdam with a Master’s degree in Financial Sector Management. Ms Van

Dootingh is a director of various Luxembourg domiciled investment funds and management companies.

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.


5


Distribution of the Sub-Funds (continued)

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: Austria, 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.

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.

The following table captures the Directors’ attendance of Board Meetings throughout the year.

Director Number of board meetings attended Michael Griffin 10 of 10 Henry Kelly 10 of 10 William Jones 9 of 10 Andrew Mack 10 of 10 Carine Feipel* 5 of 6 Diane Hosie* 6 of 6 Susanne Van Dootingh* 6 of 6

* Carine Feipel, Diane Hosie and Susanne Van Dootingh attended or provided apologies in respect of meetings which took

place from the point of their respective appointments.


6


Role and Responsibility of the Board (continued)

Internal Control

The Board is responsible for the oversight of the design, implementation and maintenance of internal controls comprising

monitoring the services provided by the Management Company and the Depositary, 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. The Management Company formally reports to the Board on a

quarterly basis on the various activities it is 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 2019. 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.

Independent Auditor

Ernst & Young S.A. has been the Company’s Independent Auditor since inception in 2012.


Board ofDirectors’ Report (continued)

Annual General Meeting

The next Annual General Meeting of the Company will be held on 17 July 2019 at the Registered Office of the Companyto consider matters relating to the year ended 31 March 2019. At this meeting shareholders will, amongst other matters, berequested to consider the usual matters at such meetings including:

the adoption of the financial statements and approval of the allocation of the results;the approval of Directors fees;the election of the Directors, all of whom wish to stand for election;the election of the Auditor.9

93

.“?

On behalf of the Board of the Company:

Director “/11 ‘C"

Director

Luxembourg, 20 June 2019


8

Morgan Stanley Liquidity Funds Euro Liquidity Fund - Short-Term LVNAV Money Market Fund

Investment Sub-Advisers Report for the year ended 31 March 2019

Market Review

In the year to 31 March 2019, the European Central Bank (ECB) held the deposit rate steady at -0.40%. However, at the

June 2018 meeting, the central bank confirmed that they would end their bond-buying scheme in December 2018. Up until

September 2018, bond buying continued at €30bn a month, before the rate was halved to €15bn for the final three months

of the programme. On 13 December 2018, the ECB confirmed the formal end of the €2.6 trillion bond purchase scheme,

bringing to a close almost four years of quantitative easing. However, the central bank said that it would keep reinvesting

cash from maturing bonds ‘for an extended period of time past the date when it starts raising the key ECB interest rates’.

Following a slowdown in Europe and bearish economic projections for 2019, the ECB announced a series of two-year

Targeted Long-Term Refinancing Operations (TLTRO) in March 2019. The announcement of TLTRO III came slightly

earlier than the market had expected and indicated that the terms will be less generous than previous TLTRO’s. The central

bank was also more dovish with its rate guidance, stating that rates would remain at their present levels ‘at least through

the end of 2019’ rather than the previous guidance of ‘at least through the summer’. On 27 March 2019, amid complaints

that negative interest rates were hurting banks, ECB President Draghi said that ‘If necessary, we need to reflect on possible

measures that can preserve the favourable implications of negative rates for the economy, while mitigating the side effects,

if any’. This was taken by investors as an assurance that the ECB is ready to ease the squeeze on profit margins produced

by banks’ inability to pass on negative rates, leading to speculation of a tiered deposit rate system.

The Governor of the Irish Central Bank, Philip Lane, was appointed to the European Central Bank’s executive board by

European Union leaders on 22 March 2019. The confirmation of Lane as the successor to Peter Praet in the role of the

ECB’s chief economist was widely expected. He is due to take up the position on 1 June 2019. This is ahead of a number

of ECB positions due for replacement in 2019, including the Presidency.

Money market rates in EUR were relatively stable through most of 2018 before showing more volatility following the turn

of the year, likely linked to the increase in USD funding levels as swap levels meant a marginal increase in EUR. 3 month

EURIBOR fixed within a 2bps range between -0.33% to -0.31% over the period, however 3 month EUR LIBOR trended

higher through the period, increasing from -0.36% to -0.32% largely due to the short term market stress experienced in

USD LIBOR around the turn of the year, before falling back to -0.35% by the end of the period. The main ECB deposit

rate was again constant throughout the period at -0.40%. LIBOR – OIS swap spreads in 3 month have traded essentially

flat for the period, with huge amounts of excess liquidity in the EUR market meaning that bank funding has traded in line

with Euro Overnight Index Average (EONIA). The lack of premium is also partly due to 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

through the period, for the most part, traded in a tight band around 2-3bps, until the ECB changed their interest rate

forecast to move potential rate hikes to after 2019 year end. This caused a fall in 1yr swaps to -0.37% from -0.34%, as the

Euro market ended the period on a less optimistic front.

The period also saw the European Money Market Fund (MMF) Regulation come into effect, as the 18 month

implementation period ran out. The fund saw its conversion from a constant NAV fund into the new Low Volatility NAV

(LVNAV) structure delayed as regulatory uncertainty around the EUR fund product and its ability to treat negative interest

utilising the reverse distribution mechanism (RDM). As such the two month review period delay was utilised by regulators

to ensure that all funds converted. The EUR fund duly converted in mid-March 2019 into the LVNAV product, however

the lack of RDM meant that all distribution share classes were converted to accumulation share classes. This meant that

negative income is reflected in the share price on a daily basis, rather than the number of shares held. This change meant a

number of clients were unable initially to cope with the new format, and were forced to disinvest while they made system

changes. This meant the fund saw a significant drawdown in the run up to conversion.

Euro area GDP grew 0.4% quarter-on-quarter in Q1 18, the weakest growth in six quarters and down from a reading of

0.7% at the end of 2017. The deceleration had been widely signalled by country-level releases as well as by surveys,

including PMIs. Preliminary readings for Q2 showed GDP growth for the euro area slowing further to 0.3%, as the

region’s economic expansion entered a sixth year.


9

Morgan Stanley Liquidity Funds Euro Liquidity Fund - Short-Term LVNAV Money Market Fund (continued)

Investment Sub-Advisers Report for the year ended 31 March 2019 (continued)

Market Review (continued)

Whilst domestic demand remained healthy thanks to rising wages and employment, uncertainty over the threat of a trade

war had an impact on the region. Confidence in the euro-area economy slipped to its lowest level in almost a year in July,

according to a European Commission report, with manufacturers’ export orders and production expectations declining.

However, Q2 growth was later revised up to 0.4% after Germany recorded a better-than-expected 0.5% expansion for the

quarter. Euro area GDP disappointed in Q3, growing at just 0.2%, the slowest rate since 2014. This came as Italy’s

economy shrunk by 0.1%, putting pressure on the populist government’s ambitious spending plans. Output shrank once

more in Italy in Q4, as the -0.2% reading tipped the country into a technical recession for the first time since 2013.

Germany just avoided a recession in the same period, with the economy flat in Q4 after a 0.2% decrease in Q3. However,

even with these disappointing prints from two of the regions largest economies, the euro area still grew at 0.2% in Q4,

unchanged from Q3. This took the annual growth rate for 2018 to 1.1%, down from 2.5% in 2017. Disappointing economic

data continued into 2019 leading the ECB to acknowledge that Europe’s slowdown was longer and deeper than earlier

thought. As a result the central bank revised its forecasts in March 2019 and it now assumes euro area growth of 1.1% in

2019 (down from 1.7% in the December forecast) and 1.2% inflation (down from 1.6%). Headline inflation trended

upwards at the start of the period, peaking at a six-year high of 2.3% year-on-year in October 2018. However, this increase

had largely been driven by energy prices. Core inflation remained subdued throughout, staying in a range of 0.7% to 1.2%.

On 1 June 2018, following three months of political deadlock, a little-known 53-year-old law professor with no political

experience, Giuseppe Conte, was sworn in as Prime Minister of Italy. This came after the 5-Star Movement and League

struck a last-minute deal on 31 May to avert fresh elections amid growing market turmoil. The leaders of the parties in

Italy’s government had promised to spend more and tax less after forming their coalition. Following an early warning that

spending plans would breach EU rules; Italy’s populist government submitted its draft 2019 budget to the European

Commission on 15 October 2018. This was subsequently rejected by European Commissioners, leading to a stand off.

After insisting that it would not back down, the Italian government revised its general government deficit target for 2019

from 2.4% of GDP to 2.04%, gaining the green light from EU authorities. In Germany, the CSU lost its absolute majority

in the Bavarian regional election on 14 October 2018. Chancellor Merkel’s coalition partners dropped to a historical low,

whilst the anti-immigration AfD and the Greens benefited. The instability plaguing German Chancellor Merkel’s fourth

term continued, as both parties in the governing collation suffered heavy losses in the Hesse regional election a few weeks

later. This led Chancellor Merkel to take responsibility for the decline in support and on 29 October 2018, she announced

that she will quit as head of the Christian Democratic Party and will not run for another term as chancellor (although she

intends to remain in power until the end of her term in 2021). The Christian Democrats elected Annegret Kramp-

Karrenbauer as her replacement on 7 December 2018. Now the head of Germany’s largest party, this also moves her into

pole positon to succeed Merkel as chancellor. There was also political turmoil in Spain, as Prime Minister Sánchez called a

snap general election for 28 April 2019, just eight months after taking office. This came after Parliament's rejection of the

2019 draft budget. Opinion polls suggest that no single party would win a clear majority. Meanwhile, in an attempt to

defuse the ‘Yellow Vest’ protests, French President Macron unveiled new spending measures and tax cuts. According to

initial estimates these could push France’s deficit to 3.5%, far higher than the European Union’s 3% ceiling.

MORGAN STANLEY & CO INTERNATIONAL PLC.

1 April 2019


10

Morgan Stanley Liquidity Funds US Dollar Liquidity Fund - Short-Term LVNAV Money Market Fund

& Morgan Stanley Liquidity Funds US Dollar Treasury Liquidity Fund - Public Debt CNAV Money Market Fund

Investment Advisers Report for the year ended 31 March 2019

Market Review

Economic growth, as measured by gross domestic product (GDP), in the first quarter of 2018 expanded by 2.2 percent,

reflecting lower personal consumptioni. However, economic growth expanded at 4.2 percent in the second quarter, led by a

rebound in consumer spending, making second quarter growth the fastest pace recorded since 2014. GDP remained on

solid footing in the third quarter, coming in at 3.4 percent, in line with market expectations, on strong business

investments. Growth slowed in the fourth quarter to 2.2 percent as consumer spending and manufacturing weakened;

however, this lower move in GDP was expected by the market as growth settles into a more sustainable pace.

Second-quarter 2018 non-farm payrolls averaged 242,000, reflecting continued robust job growth.ii

The unemployment

rate ended the third quarter at a 49-year low, at 3.7 percent, while the participation rate remained static at 62.7 percent.

Third-quarter non-farm payrolls averaged 187,000, which was lower than expected due to disruptions in September caused

by Hurricane Florence. Hiring rebounded in the fourth-quarter of 2018, with non-farm payrolls averaging 233,000. Payroll

increases were broad based across all sectors. In the first-quarter 2019, payrolls bounced around month-over-month due to

weather effects and from large gains in January, but averaged a healthy 180,000 in the quarter. The unemployment rate

ended the reporting period at 3.8 percent, while the participation rate increased to 63.0 percent.

In March 2018, the Federal Reserve (Fed) unanimously raised the target range for the Fed funds rate by 0.25 percent to

1.50 percent to 1.75 percent. This was Chairman’s Jerome Powell’s first meeting as chair. The tone of the meeting was

generally hawkish, as the Fed upgraded its projections of the Fed funds rate, GDP and the unemployment rate. The 2018

median outlook for the Fed funds rate was unchanged at 2.1 percent, suggesting that there were two more rate hikes

expected for the remainder of the year. The Fed believed economic activity would expand in the medium term, saying that

activity had “strengthened” in recent months. Inflation continued to receive significant attention from Federal Open Market

Committee (FOMC or Committee) members, as it remained below the Fed’s 2 percent target. However, FOMC members

were confident that it will reach and stabilize around 2 percent by 2019. The market initially perceived the March meeting

positively due to the Fed’s optimistic outlook on the economy.

The May 2018 FOMC meeting concluded early in the month, and Fed officials opted to keep interest rate and balance sheet

policies unchanged. While this was largely expected by the markets, investors looked to the statement for guidance on rate

hikes for the remainder of the year. The Fed indicated that it believed that further rate hikes are warranted due to the

continued strength in the labor market and economic conditions. Additionally, when discussing inflation, the Fed showed

confidence that inflation had moved close to its 2 percent target. The word “symmetric” was also utilized in the statement

in multiple places, indicating that the Fed is comfortable with inflation going over 2 percent, as long as it normalizes

around the target. Following the meeting, the markets continued to fully price a rate hike at the Fed’s June meeting.

In June 2018, the FOMC unanimously voted to increase interest rates by 25 basis points to a target range of 1.75 percent to

2.00 percent. The Summary of Economic Projections showed that the FOMC expected two additional rate hikes this year.

Additionally, the Fed believed there would be three rate hikes in 2019. No changes were made to the balance sheet

normalization program, and the Fed funds rate remained the main monetary policy tool for the FOMC.

The tone of the FOMC meeting was generally optimistic, as Chair Powell stated that the economy is doing “very well”.

Inflation had picked up and moved closer to the Fed’s 2 percent target, and the Fed believed that inflation will be

symmetric around its target range in the coming months. With regard to employment, job gains continued to be strong and

the unemployment rate decreased further. Unemployment forecasts for the fourth-quarter of 2018 decreased to 3.6 percent

from 3.8 percent. With additional Fed rate hikes, economic activity was expected to expand at a solid rate.

Fed officials left their benchmark policy rate unchanged at the conclusion of their July 2018 FOMC meeting. The

Committee confirmed that economic activity was “rising at a strong rate” and that “further gradual increases in the target

range for the Fed funds rate will be consistent with sustained expansion of economic activity, strong labor market

conditions and inflation near the Committee's symmetric 2 percent objective,” repeating language from its June statement.


11



(continued)

Investment Advisers Report for the year ended 31 March 2019 (continued)


Minutes from the July FOMC meeting that were released the following month reinforced the markets’ conviction that the

Fed would raise rates at the upcoming September FOMC meeting.

In August 2018, Chair Powell delivered his first speech at the annual Jackson Hole Symposium. Chair Powell confirmed

that “fundamentals of the U.S. economic expansion look strong and support the case for continued gradual interest rate

increases.” His speech reaffirmed the markets’ conviction that a rate hike would be likely at the following FOMC meeting.

As widely expected, the Fed raised rates 25 basis points at its September 2018 FOMC meeting, in line with market

expectations and the third hike of 2018. Both one- and three-month LIBOR increased to a September 28, 2018 setting of

2.26 percent and 2.40 percent, respectively.iii

Twelve of sixteen FOMC members anticipated one additional rate hike in

2018, and median forecasts indicated three additional hikes in 2019. LIBOR-OIS spreads narrowed to 17.4 basis points

leading up to the hike, the tightest level since the prior December.iii

Minutes from the September FOMC meeting, released

in October 2018, confirmed that participants were in broad agreement continuing the current gradual path of policy

normalization. With expectations of an additional rate hike in 2018, and funding pressures over year-end, three-month

LIBOR rose 16 basis points during the month of October, ending the reporting period at 2.56 percent.iii

At the December FOMC meeting, the Fed raised rates for the fourth time in 2018 by 25 basis points as widely expected.

Members lowered their growth forecasts for 2019 and beyond but reiterated that current economic indicators such as

unemployment and GDP remain strong. The FOMC decreased the GDP projections to 3.0 percent for 2018 and 2.3 percent

for 2019. Core inflation remains around the FOMC’s 2 percent target and is expected to reach 2.0 percent in 2019. After

this year, inflation is expected to remain at target levels through 2021. While the FOMC now expected two hikes versus the

three expected in 2019 at the September meeting, the markets priced in zero rate hikes for 2019. In January 2019, the

release of the December FOMC minutes confirmed Fed policy is more data dependent and subdued inflation will allow the

Committee to be patient in executing further rate hikes in 2019.

As expected, no rate action was taken by the FOMC at its January meeting. Chair Powell started a new practice of holding

a press conference after every central bank meeting to improve communications. The Fed’s statement showed that the

FOMC decided to maintain the target range for the Fed funds rate at 2.25 percent to 2.50 percent and the FOMC

downgraded its classification of economic growth from “rising at a strong rate” in December to “solid” in January. The

overall tone of the conference was dovish. This called into question the expectations for future monetary policy, especially

since there was no explicit mention of a rate hike. One notable change in the FOMC statement was the lack of forward

guidance. In his semiannual testimony on the state of monetary policy to Congress, Chair Powell stated that “muted”

inflation pressures as well as economic and financial crosscurrents are conflicting signals that are influencing the FOMC to

take a “patient” approach in delivering policy changes. He maintained the Fed’s wait-and-see approach and underscored

the need for being data dependent going forward.

At the March 2019 meeting, the FOMC kept the range for the Fed funds rate unchanged at 2.25 percent to 2.50 percent.

Their forward-looking statements were more dovish than anticipated with the Committee downgrading expectations for the

economy, lowering its rates outlook, and ending its balance sheet normalization sooner than expected. After the

announcement, U.S. Treasury bonds rallied substantially with yields (2-year, 5-year, and 10-year) all falling 8-10 basis

points. The FOMC member consensus projected no rate hikes in 2019, versus the two that were expected at the December

meeting, dropping the median Fed funds rate forecast to 2.4 percent from 2.9 percent for 2019. Additionally, the median

rate forecast for 2020 is for one additional hike in 2020, bringing the median Fed funds rate projection to 2.6 percent. The

Fed noted in light of global economic and financial developments and muted inflation pressures, the Committee will be

patient as it determines what future adjustments to the Fed funds rate are appropriate. While Chair Powell stated labor

markets remain strong, economic growth has slowed in the first quarter due to a number of factors such as global

headwinds. Their GDP projections were revised down to 2.1 percent from 2.3 percent at its December meeting. Core

inflation remained around the FOMC’s 2 percent target and is expected to be 2.0 percent in 2019.


12



(continued)

Investment Advisers Report for the year ended 31 March 2019 (continued)



implementation period ran out. While the US Dollar Treasury Liquidity Fund remained a Constant Net Asset Value

(CNAV) fund, the US Dollar Liquidity Fund converted to a Low Volatility Net Asset Value (LVNAV) structure. Post

reform, the investment objectives of the funds has remained consistent, providing an attractive rate of income while

emphasizing capital preservation and liquidity.

MORGAN STANLEY INVESTMENT MANAGEMENT INC. 1 April 2019

i Source for GDP data: Bureau of Economic Analysis

ii Source for employment data: Bureau of Labor Statistics and Bloomberg L.P.

iii Source: Bloomberg L.P.


13

Morgan Stanley Liquidity Funds Sterling Liquidity Fund - Short-Term LVNAV Money Market Fund

Investment Sub-Advisers Report for the year ended 31 March 2019

Market Review

In the 12 month period ending 31 March 2019, the Bank of England raised its benchmark interest rate by 25 basis points

(bps) to 0.75%, the highest level since 2009. The vote in favour of the move at the August 2018 meeting was unanimous

(9-0), exceeding expectations of an 8-1 vote. However, the Monetary Policy Committee also signaled that it was in no

hurry to raise rates further with Brexit uncertainty on the horizon. This proved to be the case and there were no further

policy changes in the period, as policymakers attempted to strike a balance between taming inflation as the economy ran

out of slack, and protecting against the risk that Brexit talks will end in an exit from the EU that hits growth. In September,

finance minister Philip Hammond told parliament that Bank of England Governor Mark Carney will futher extend his stay

at the central bank, committing to an extra seven months until the end of January 2020, to help smooth Britain’s departure

from the EU. There was also a change of personal at the MPC, as it was announced that Jonathan Haskel, a professor of

economics at Imperial College Business School in London, would replace the hawkish Ian McCafferty.

In July, the Cabinet signed off on a blueprint for the future relationship that Britain will seek to negotiate with the EU. The

Chequers agreement saw Britain keeping close ties to the EU for trade in goods, but breaking free on services, including

financial services. This was welcomed by the UK’s main business lobbies, but led to the resignations of the UK’s Brexit

Secretary David Davis and lead Brexiter Boris Johnson. As well as coming under attack from eurosceptic Tories, the

Chequers plan was bluntly rejected by European leaders in September.

On 13 November, UK and EU negotiators announced that they had agreed to the final draft of the Withdrawal Agreement.

This was supported by May’s cabinet but led to the resignation of Davis’ replacement as Brexit Secretary, Dominic Raab.

Following the deferral of a Parliamentary vote on the deal, originally scheduled for 11 December, a vote of confidence in

May’s leadership was triggered by Conservative MPs. May won the vote by 200 to 117 but agreed to leave before the next

general election as a condition for MPs backing.

Over a month after the original date for the Parliamentary vote, Prime Minister May's Brexit deal was rejected by 432 to

202 on 15 January – the largest defeat for a sitting government in history. Labour leader Jeremy Corbyn immediately

tabled a no confidence motion, however the government survived, winning 325-306. On 29 January, MPs voted on changes

to Prime Minister May’s Brexit deal. Only two of the amendments that were put forward passed; a nonbinding one that

voted against leaving with no-deal and one that asked the government to renegotiate the withdrawal agreement to

accommodate ‘ alternative arrangements’ to the controversial Irish backstop plan. After further talks with the EU, May said

that she had secured ‘legally binding’ changes to her Brexit deal. However, Attorney General Geoffrey Cox told MPs that

May’s 'backstop package' did not remove the legal risk of the UK being indefinitely stuck in the Irish backstop. As such,

the withdrawal agreement was rejected by MPs by an overwhelming majority for a second time (391 to 242).

This second defeat led to a surprise ruling by House of Commons Speaker John Bercow that he would not allow a third

‘meaningful vote’ on ‘substantially the same’ motion. This threw May’s Brexit plans into further turmoil and led to her

sending a letter to the EU on 20 March formally asking for an extension of the Brexit deadline to 30 June. The following

day, EU leaders agreed on a plan to delay the Article 50 process. Due to the upcoming European Parliament elections on

23 May, the UK was offered a delay until 22 May, if MPs approved the withdrawal deal. If they did not, the EU will back a

shorter delay until 12 April.

The Prime Minister told Conservative MPs that she is ready to step down once the withdrawal phase of Brexit has been

delivered, leading to a number of Brexiter MPs announcing that they would vote in favour of her deal. However, despite

this support there was not sufficient backing and on 29 March parliament rejected May’s withdrawal agreement for the

third time. The final vote of 286-344 was the narrowest defeat of the three.


14

Morgan Stanley Liquidity Funds Sterling Liquidity Fund - Short-Term LVNAV Money Market Fund (continued)

Investment Sub-Advisers Report for the year ended 31 March 2019 (continued)


Money market rates continued their climb higher after years of ultra low rates. While early 2018 saw expectations of a rate

hike initially disappointed, only to be subsequently delivered, the yield curve reflected this through movements in LIBOR

through the year. 3 month LIBOR, the key money market term level, rose in early 2018 as markets anticipated a Q2 rate

hike in May, only for weak data to force the MPC to pause, and levels fell 20bps from mid April to end of May. When the

rate hike was duly delivered in August 3 month LIBOR recovered to the 0.8-0.85% range where it traded until the end of

October, when the impact of US market disruption at year end started moving levels higher. 3 month LIBOR peaked at

0.93% in late January 2019 before falling back toward the 0.85% range towards the end of the period . OIS curves have

also broadly followed this pricing pattern over the year. After starting the year pricing in a May hike, the fall back and

subsequent recovery was not as dramatic as 3 month LIBOR, peaking at just 0.85% in October. Towards the end of the

period with Brexit weighing on rate hike sentiment, levels fell to 0.675%. Sterling Overnight Index Average (SONIA)

levels have again been the model of consistency, tracking around 4bps below base rate through the year, with even period

ends showing minimal level disruption, despite the fall in volumes.


implementation period ran out. The fund saw its conversion from a constant NAV fund into the new Low Volatility NAV

structure delayed as regulatory uncertainty around the EUR fund product and its ability to treat negative interest utilising

the reverse distribution mechanism. As such the two month review period delay was utilised by regulators to ensure that all

funds converted. The funds conversion however was carried out without any issues being experienced by either the funds

or clients.

Preliminary Q1 18 gross domestic product (GDP) growth was estimated at 0.1% quarter-on-quarter, below consensus of

0.3% and down from 0.4% in Q4 17. This was the UK’s weakest growth since 2012 and whilst unseasonably cold weather

had an impact, the Office for National Statistics have said the overall effect was limited, raising questions over the

underlying strength of the economy. Growth was stronger in Q2, with the economy expanding at 0.4% quarter-on-quarter,

double the revised rate of 0.2% from Q1. A recovery in construction and retail sales drove the improvement in growth,

aided by warmer weather. However manufacturing struggled, falling into technical recession after consecutive quarters of

negative growth. Consumer spending continued to be a key driving force for the UK economy in July, as a record

heatwave helped GDP growth hit 0.6% quarter-on-quarter in Q3, the fastest rate since Q4 2016. However, this quarterly

figure masked a sudden loss of momentum, as the economy stagnated in August and September, with the dominant

services industry posting a modest contraction and business investment falling. The weaknesses continued into Q4 as

Brexit uncertainty dragged investment to its worst slump since the financial crash a decade ago. Businesses cut investment

for a fourth consecutive quarter, the longest continuous decline since 2008-2009, as Q4 growth dropped to 0.2% quarter-

on-quarter, whilst the 2018 annual rate of 1.4% was the slowest since 2012. The Bank of England does not expect the

economy to improve in 2019 and in February the central bank cut its forecast for 2019 to 1.2%, having predicted 1.7% as

recently as November 2018. This would be the slowest year since 2009, when the economy was in recession. Despite this

weakening economic backdrop, the labour market performed well throughout the past year, with the unemployment rate

falling below 4% for the first time since 1975 in January. The subsequent rise in wage growth plus an inflation rate that

trended lower led to increasing real wage growth across the period, cushioning the Brexit uncertainty for many households.

MORGAN STANLEY & CO INTERNATIONAL PLC. 1 April 2019

EYf.mst 2, YoungSociete anonyme

35E, Avenue Jolln F. KenneclyL-1855 LuxembourCJ

B.P. 780L-2017 LuxembourCJ

R.C.S. Luxelllboul'g B 47 771TVA LU 16063074

Building a betterworking world

Tel: +352 421241

www.cy.com/luxernbourg

Independent auditor's report

To the Shareholders ofMorgan Stanley Liquidity Funds6B, route de TrevesL-2633 SenningerbergLuxembourg

Opinion

We have audited the financial statements of Morgan Stanley Liquidity Funds (the "Company") and of each ofits sub-funds, which comprise the statement of net assets and the schedule of investments as at31 March 2019, and the statement of operations and changes in net assets for the year then ended, and thenotes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of theCompany and of each of its sub-funds as at 31 March 2019, and of the results of their operations andchanges in their net assets for the year then ended in accordance with Luxembourg legal and regulatoryrequirements relating to the preparation and presentation of the financial statements.

Basis for Opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (the "Law of23 July 2016") and with International Standards on Auditing ("ISAs") as adopted for Luxembourg by the"Commission de Surveillance du Secteur Financier" ("CSSF"). Our responsibilities under the Law of23 July 2016 and ISAs are further described in the "responsibilities of the "reviseur d'entreprises agree" forthe audit of the financial statements" section of our report. We are also independent of the Company inaccordance with the International Ethics Standards Board for Accountants' Code of Ethics for ProfessionalAccountants ("IESBA Code") as adopted for Luxembourg by the CSSF together with the ethical requirementsthat are relevant to our audit of the financial statements, and have fulfilled our other ethical responsibilitiesunder those ethical requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.

Other information

The Board of Directors of the Company is responsible for the other information. The other informationcomprises the information included in the annual report but does not include the financial statements and ourreport of the "reviseur d'entreprises agree" thereon.

Our opinion on the financial statements does not cover the other information and we do not express any formof assurance conclusion thereon.

15


In connection with our audit of the financial statements, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, basedon the work we have performed, we conclude that there is a material misstatement of this other information,we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors of the Company and those charged with governance forthe financial statements

The Board of Directors of the Company is responsible for the preparation and fair presentation of thesefinancial statements in accordance with Luxembourg legal and regulatory requirements relating to thepreparation and presentation of the financial statements, and for such internal control as the Board ofDirectors of the Company determines is necessary to enable the preparation of financial statements that arefree from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors of the Company is responsible for assessing theCompany's and of each of its sub-funds' ability to continue as a going concern, disclosing, as applicable,matters related to going concern and using the going concern basis of accounting unless the Board ofDirectors of the Company either intends to liquidate the Company or any of its sub-funds or to ceaseoperations, or has no realistic alternative but to do so.

Responsibilities of the "reviseur d'entreprises agree" for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue a report of the "reviseurd'entreprises agree" that includes our opinion. Reasonable assurance is a high level of assurance but is nota guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adoptedfor Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if, individually or in the aggregate, they couldreasonably be expected to influence the economic decisions of users taken on the basis of these financialstatements.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg bythe CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. Wealso:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraudor error, design and perform audit procedures responsive to those risks, and obtain audit evidence thatis sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company's internal control.

16


Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the Board of Directors of the Company.

Conclude on the appropriateness of Board of Directors of the Company's use of the going concernbasis of accounting and, based on the audit evidence obtained, whether a material uncertainty existsrelated to events or conditions that may cast significant doubt on the Company's or any of its sub-funds'ability to continue as a going concern. If we conclude that a material uncertainty exists, we are requiredto draw attention in our report of the "reviseur d'entreprises agree" to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions arebased on the audit evidence obtained up to the date of our report of the "reviseur d'entreprises agree".However, future events or conditions may cause the Company or any of its sub-funds to cease tocontinue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internal controlthat we identify during our audit.

Ernst & YoungSociete anonyme

Cabinet de revision agree

Michael Ferguson

Luxembourg, 20 June 2019

17f\ m()rnl")(~r fll:l~ of ernst S. YoU!),) Global Llmrt(,d


Statement of Net AssetsAs of 31 March 2019

ASSETS

Investment in securities at amortised cost/marketprice (Note 2a)Time deposits (Note 9)Reverse repurchase agreements (Note 8)Interest receivable (Note 20)Cash at bank (Note 2d)‘“Receivable from investment soldOperating fee reimbursementOther assets

TOTAL ASSETS

LIABILITIES

Payable for investment purchasedBank overdrafi (Note 2d)(”Dividends payable (Note 3)Expense payable

TOTAL LIABILITIES

NET ASSET VALUE

(1; Cash is held at the Depositary.

On behalf of the Board of the Company:

Director

Director

20 June 2019

.

’2

v!

EuroLiquidity

FundEUR

2,557,556,058785,720,291170,000,000

56,920

115,035,431415,958

13,475

US DollarLiquidity

FundUSD

16,848,255,070400,000,000

1,609,000,00011,058,4255,307,922

298,261,1102,576,668

11,067

US DollarTreasuryLiquidity

FundUSD

3,126,382,129

2,841,000,0007,759,4874,637,657

829,38419,695

SterlingLiquidity

FundGBP

1,742,691,584505,125,942220,000,000

2,007,839801

79,1268,910

CombinedUSD

25,117,206,9821,940,451,5094,927,555,791

21,498,1409,946,623

427,428,7753,976,216

57,503

3,628,798,133 19,174,470,262 5,980,628,352 2,469,914,202 32,448,121,539

6,100

1,317,58739,016,46610,581,951

8,585,0512,778,579

94,882,731

1,407,0691,272,635

123,636,9846,849

49,434,99916,498,292

1,323,687 49,598,417 11,363,630 97,562,435 189,577,124

3,627,474,446 l9,124,87l,845 5,969,264,722

The accompanying notes form an integral part of financial statements.

2,372,351,767 32,258,544,415

18



19

Statement of Net Assets

As of 31 March 2018

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 amortised cost (Note 2a) 4,552,462,158 17,631,317,156 3,826,343,705 1,774,646,371 29,545,984,096 Time deposits (Note 9) 1,162,572,371 3,684,000,000 – 448,488,413 5,742,930,122

Reverse repurchase agreements (Note 8) 275,000,000 – – – 338,208,870

Interest receivable (Note 2c) 4,515,144 6,142,781 2,767,619 1,270,198 16,245,187 Cash at bank (Note 2d)(1) 45 – 15,114,978 1,446 15,117,062

Operating fee reimbursement 518,272 2,870,246 780,065 136,482 4,479,165

Other assets 372,821 201 8,825 – 467,540

TOTAL ASSETS 5,995,440,811 21,324,330,384 3,845,015,192 2,224,542,910 35,663,432,042

LIABILITIES

Payable for investment purchased 120,023,403 – – 50,000,000 217,750,883

Bank overdraft (Note 2d)(1) – 562,027 – – 562,027 Dividends payable (Note 3) – 26,556,725 4,364,883 703,063 31,907,866

Expense payable 2,128,356 10,913,532 1,830,271 993,571 16,755,145

TOTAL LIABILITIES 122,151,759 38,032,284 6,195,154 51,696,634 266,975,921

NET ASSET VALUE 5,873,289,052 21,286,298,100 3,838,820,038 2,172,846,276 35,396,456,121

(1) Cash is held at the Depositary.



20

Statement of Net Assets Statistics

As of 31 March 2019

Outstanding

Shares as at

Outstanding

Shares as at

Outstanding

Shares as at

Currency 31 March 2019 31 March 2018 31 March 2017

Euro Liquidity Fund

Institutional Select Accumulation D Shares (Note 1) EUR 1,948 – –

Institutional Accumulation D Shares (Note 1) EUR 228,479 – – Qualified Accumulation D Shares (Note 1) EUR 78,523 – –

MS Reserve Accumulation D Shares (Note 1) EUR 28,645 – –

Institutional Shares (Note 1) EUR – 4,449,515,461 5,195,468,206 Institutional Accumulation Shares EUR 2,200,650 5,490,506 5,052,534

Institutional Select Shares (Note 1) EUR – 75,245,166 –

Institutional (+1) Accumulation Shares EUR 147,447 21,102 1 MS Reserve Shares (Note 1) EUR – 751,087,841 621,384,136

US Dollar Liquidity Fund Advantage Accumulation Shares (Note 1) USD – 1,915 1,915

Advisory Shares USD 507,700,659 247,789,213 50,000

Institutional Shares USD 15,562,746,084 13,998,783,215 11,444,903,889 Institutional Accumulation Shares USD 6,190,529 1,308,386 3,920,026

Institutional Select Shares USD 5,709,506 2,787,473 9,730,272

Master Shares (Note 1) USD – 4,612,665,260 5,527,514,738 MS Reserve Shares USD 458,669,953 464,369,975 294,745,484

Qualified Shares (Note 1) USD 347,359,839 – –

Qualified Accumulation Shares USD 14,890,181 17,833,849 18,266,991

US Dollar Treasury Liquidity Fund

Advisory Shares USD 50,000 50,000 50,000 Institutional Shares USD 2,906,406,671 2,628,900,943 1,734,597,405

Institutional Accumulation Shares (Note 1) USD 5,027,867 – –

Institutional Select Shares USD 68,863 50,481,806 50,088,298 MS Reserve Shares USD 1,391,690,804 1,159,387,289 807,518,544

Qualified Accumulation Shares (Note 1) USD 11,487,983 – –

Sterling Liquidity Fund

Institutional Shares GBP 2,309,780,042 2,167,262,234 2,373,899,407

Institutional Accumulation Shares GBP 392,105 8,891 8,887 Institutional Select Shares GBP 1,140,201 1,350,201 25,000,000

Qualified Shares GBP 16,439,358 3,221,142 6,793,742



21


As of 31 March 2019 (continued)

Net Asset Value

per Share as at

Net Asset Value

per Share as at

Net Asset Value

per Share as at


Euro Liquidity Fund

Institutional Select Accumulation D Shares (Note 1) EUR 9,998.21 – –

Institutional Accumulation D Shares (Note 1) EUR 9,998.33 – – Qualified Accumulation D Shares (Note 1) EUR 9,998.30 – –

MS Reserve Accumulation D Shares (Note 1) EUR 9,998.68 – –

Institutional Shares (Note 1) EUR – 1.00 1.00 Institutional Accumulation Shares EUR 107.90 108.43 108.99

Institutional Select Shares (Note 1) EUR – 1.00 –

Institutional (+1) Accumulation Shares EUR 99.31 99.81 100.00 MS Reserve Shares (Note 1) EUR – 1.00 1.00

US Dollar Liquidity Fund Advantage Accumulation Shares (Note 1) USD – 102.51 101.51

Advisory Shares USD 1.00 1.00 1.00

Institutional Shares USD 1.00 1.00 1.00 Institutional Accumulation Shares USD 111.30 108.88 107.54

Institutional Select Shares USD 1.00 1.00 1.00

Master Shares (Note 1) USD – 1.00 1.00 MS Reserve Shares USD 1.00 1.00 1.00

Qualified Shares (Note 1) USD 1.00 – –

Qualified Accumulation Shares USD 104.15 101.90 100.66


Advisory Shares USD 1.00 1.00 1.00 Institutional Shares USD 1.00 1.00 1.00

Institutional Accumulation Shares (Note 1) USD 101.35 – –

Institutional Select Shares USD 1.00 1.00 1.00 MS Reserve Shares USD 1.00 1.00 1.00

Qualified Accumulation Shares (Note 1) USD 101.11 – –


Institutional Shares GBP 1.00 1.00 1.00

Institutional Accumulation Shares GBP 114.58 113.91 113.64 Institutional Select Shares GBP 1.00 1.00 1.00

Qualified Shares GBP 1.00 1.00 1.00



22


As of 31 March 2019 (continued)

Net Assets as at Net Assets as at Net Assets as at


Euro Liquidity Fund

Institutional Select Accumulation D Shares (Note 1) EUR 19,480,818 – –

Institutional Accumulation D Shares (Note 1) EUR 2,284,408,856 – – Qualified Accumulation D Shares (Note 1) EUR 785,091,937 – –

MS Reserve Accumulation D Shares (Note 1) EUR 286,408,796 – –

Institutional Shares (Note 1) EUR – 4,449,515,461 5,195,468,206 Institutional Accumulation Shares EUR 237,440,526 595,334,534 550,681,803

Institutional Select Shares (Note 1) EUR – 75,245,166 –

Institutional (+1) Accumulation Shares EUR 14,643,513 2,106,050 100 MS Reserve Shares (Note 1) EUR – 751,087,841 621,384,136

US Dollar Liquidity Fund Advantage Accumulation Shares (Note 1) USD – 196,296 194,388

Advisory Shares USD 507,772,244 247,789,213 50,000

Institutional Shares USD 15,565,419,416 13,998,783,215 11,444,903,889 Institutional Accumulation Shares USD 688,982,435 142,451,717 421,553,492

Institutional Select Shares USD 5,709,300 2,787,473 9,730,272

Master Shares (Note 1) USD – 4,612,665,260 5,527,514,738 MS Reserve Shares USD 458,742,292 464,369,975 294,745,484

Qualified Shares (Note 1) USD 347,390,028 – –

Qualified Accumulation Shares USD 1,550,856,130 1,817,254,951 1,838,708,412


Advisory Shares USD 50,000 50,000 50,000 Institutional Shares USD 2,906,406,671 2,628,900,943 1,734,597,405

Institutional Accumulation Shares (Note 1) USD 509,555,575 – –

Institutional Select Shares USD 68,863 50,481,806 50,088,298 MS Reserve Shares USD 1,391,690,804 1,159,387,289 807,518,544

Qualified Accumulation Shares (Note 1) USD 1,161,492,809 – –


Institutional Shares GBP 2,309,844,517 2,167,262,234 2,373,899,407

Institutional Accumulation Shares GBP 44,927,240 1,012,699 1,009,832 Institutional Select Shares GBP 1,140,231 1,350,201 25,000,000

Qualified Shares GBP 16,439,779 3,221,142 6,793,742


Statement of Operations and Changes in Net Assets

For the year ended to 31 March 2019


23

US Dollar




INCOME EUR USD USD GBP USD

Interest (Note 2c) (20,246,988) 525,667,099 108,940,979 18,025,179 634,827,888

Total Positive/(Negative) Income (20,246,988) 525,667,099 108,940,979 18,025,179 634,827,888

EXPENSES

Management fees (Note 4,6) 9,030,278 38,359,774 7,922,262 4,860,043 63,102,277

Less: Management fees waived (4,956,744) – – (971,886) (7,008,531)

Management fees - Net 4,073,534 38,359,774 7,922,262 3,888,157 56,093,746

Taxe d'Abonnement (Note 5) 39,657 481,662 21,545 941 550,316

Legal fees (Note 6c) 74,596 87,699 93,039 65,832 353,371 Director's fees, director's liability insurance premium and expenses

(Note 6b) 58,145 66,322 66,322 51,445

267,378

Ratings fees (Note 6c) 59,389 73,169 54,407 51,067 263,253

Tax charges (excluding Taxe d'Abonnement) (Note 5) 15,054 19,212 17,516 13,014 71,211

Other fees (Note 6c) 20,807 17,130 17,130 12,361 74,541 Audit fees (Note 6c) 9,771 25,157 11,160 8,988 59,408

Professional fees (Note 6c) 5,115 5,917 5,917 4,511 23,668

Distribution fees (Note 6c) 26,337 22,586 22,587 16,039 96,675 Less: Operating fee reimbursement (269,294) (317,317) (288,391) (223,290) (1,210,079)

Total Expenses 4,113,111 38,841,311 7,943,494 3,889,065 56,643,488

Net Investment Income/(Expense) (24,360,099) 486,825,788 100,997,485 14,136,114 578,184,400

Change in net unrealised appreciation

Investments 74,835 3,147,333 – 66,119 3,320,619

Total change in net unrealised appreciation 74,835 3,147,333 – 66,119 3,320,619

Less: Distribution paid from income (Note 3) – (433,114,736) (89,411,334) (13,966,269) (540,843,633) Receipt from the Compulsory Redemption of shares (Note 3) 21,366,151 – – – 24,715,868

Net Increase/(Decrease) in Net Assets resulting from operations (2,919,113) 56,858,385 11,586,151 235,964 65,377,254

Proceeds from issuance of shares 34,682,920,344 160,898,275,854 38,709,810,958 19,868,726,580 265,787,458,034 Shares redeemed (36,925,815,837) (163,116,560,494) (36,590,952,425) (19,669,457,053) (268,220,060,194)

Increase/(Decrease) in Net Assets from share transactions (2,242,895,493) (2,218,284,640) 2,118,858,533 199,269,527 (2,432,602,160)

Increase/(Decrease) in Net Assets (2,245,814,606) (2,161,426,255) 2,130,444,684 199,505,491 (2,367,224,906)

Net Assets at the beginning of the year 5,873,289,052 21,286,298,100 3,838,820,038 2,172,846,276 35,396,456,121 Foreign exchange adjustment on translation – – – – (770,686,800)

NET ASSETS AT THE END OF THE YEAR 3,627,474,446 19,124,871,845 5,969,264,722 2,372,351,767 32,258,544,415

On behalf of the Board of the Company: Director

Director

20 June 2019



24

Statement of Operations and Changes in Net Assets

For the year ended to 31 March 2018

US Dollar




INCOME EUR USD USD GBP USD

Interest (Note 2c) (29,459,633) 305,669,416 31,187,832 9,718,341 315,318,874

Total Positive/(Negative) Income (29,459,633) 305,669,416 31,187,832 9,718,341 315,318,874

EXPENSES

Management fees (Note 4,6) 12,079,557 31,867,527 3,915,764 5,229,744 56,823,968 Less: Management fees waived (6,957,639) – – (1,675,500) (10,347,946)

Management fees - Net 5,121,918 31,867,527 3,915,764 3,554,244 46,476,022

Taxe d'Abonnement (Note 5) – 693,129 – 327 693,562 Legal fees (Note 6c) 38,090 43,824 43,824 33,584 176,643

Director's fees, director's liability insurance premium and expenses (Note 6b) 49,677 57,530 57,530 43,988 231,376

Ratings fees (Note 6c) 56,052 68,854 46,893 47,048 243,565

Tax charges (excluding Taxe d'Abonnement) (Note 5) 18,901 24,193 27,521 17,942 97,567 Other fees (Note 6c) 24,050 28,295 28,396 22,327 114,369

Audit fees (Note 6c) 10,166 17,717 11,642 9,053 53,230

Professional fees (Note 6c) 8,910 23,626 11,085 6,716 54,018 Distribution fees (Note 6c) 8,622 10,637 10,637 7,656 41,490

Less: Operating fee reimbursement (214,536) (275,010) (237,563) (188,341) (1,012,742)

Total Expenses 5,121,850 32,560,322 3,915,729 3,554,544 47,169,100

Net Investment Income/(Expense) (34,581,483) 273,109,094 27,272,103 6,163,797 268,149,774

Less: Distribution paid from income (Note 3) – (245,643,814) (27,272,103) (6,161,379) (281,079,577)

Receipt from the Compulsory Redemption of shares (Note 3) 32,388,276 – – – 37,836,170

Net Increase/(Decrease) in Net Assets resulting from operations (2,193,207) 27,465,280 – 2,418 24,906,367

Proceeds from issuance of shares 36,232,873,164 132,510,873,666 21,560,209,150 18,116,383,071 220,402,251,432 Shares redeemed (36,724,925,150) (130,789,441,521) (20,313,643,359) (18,350,242,194) (218,318,928,472)

Increase/(Decrease) in Net Assets from share transactions (492,051,986) 1,721,432,145 1,246,565,791 (233,859,123) 2,083,322,960

Increase/(Decrease) in Net Assets (494,245,193) 1,748,897,425 1,246,565,791 (233,856,705) 2,108,229,327

Net Assets at the beginning of the year 6,367,534,245 19,537,400,675 2,592,254,247 2,406,702,981 31,949,518,056 Foreign exchange adjustment on translation – – – – 1,338,708,738

NET ASSETS AT THE END OF THE YEAR 5,873,289,052 21,286,298,100 3,838,820,038 2,172,846,276 35,396,456,121

MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund

Schedule of Investments

As of 31 March 2019

(Expressed in EUR)


25

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS

TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS

COMMERCIAL PAPER 33.94%

BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 50,000,000 - 05-Apr-19 50,001,944 1.38

BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 50,000,000 - 11-Jun-19 50,040,034 1.38

BAYERISCHE MOTOREN WERKE AG EUR 50,000,000 - 11-Apr-19 50,004,331 1.38 BAYERISCHE MOTOREN WERKE AG EUR 50,000,000 - 29-Apr-19 50,011,129 1.38

BAYERISCHE MOTOREN WERKE AG EUR 50,000,000 - 21-Jun-19 50,042,737 1.38

BRED BANQUE POPULAIRE EUR 100,000,000 - 29-Apr-19 100,029,579 2.76 BRED BANQUE POPULAIRE EUR 50,000,000 - 01-Jul-19 50,047,044 1.38

DEKABANK DEUTSCHE GIROZENTRALE EUR 50,000,000 - 08-Apr-19 50,003,504 1.38

DEKABANK DEUTSCHE GIROZENTRALE EUR 50,000,000 - 24-Apr-19 50,010,722 1.38 DEKABANK DEUTSCHE GIROZENTRALE EUR 25,000,000 - 31-May-19 25,013,809 0.69

ERSTE ABWICKLUNGSANSTALT EUR 50,000,000 - 27-May-19 50,029,617 1.38

HSBC BANK PLC EUR 50,000,000 - 01-Oct-19 50,078,916 1.38 LINDE AG EUR 7,000,000 - 15-Apr-19 7,001,071 0.19

LINDE AG EUR 25,000,000 - 26-Apr-19 25,006,239 0.69

MACQUARIE BANK LTD EUR 50,000,000 - 01-Apr-19 50,000,507 1.38 OP CORPORATE BANK PLC EUR 31,000,000 - 12-Apr-19 31,003,582 0.85

OP CORPORATE BANK PLC EUR 52,500,000 - 21-May-19 52,524,198 1.45

OP CORPORATE BANK PLC EUR 26,000,000 - 27-Sep-19 26,040,416 0.72 PROCTER & GAMBLE COMPANY EUR 20,000,000 - 08-Apr-19 20,001,571 0.55

PROCTER & GAMBLE COMPANY EUR 11,000,000 - 11-Apr-19 11,001,195 0.30

PROCTER & GAMBLE COMPANY EUR 15,000,000 - 02-May-19 15,004,831 0.41 SOCIETE DE FINANCEMENT LOCAL SA EUR 40,000,000 - 12-Apr-19 40,005,649 1.10

SOCIETE DE FINANCEMENT LOCAL SA EUR 19,500,000 - 06-May-19 19,508,419 0.54

SOCIETE DE FINANCEMENT LOCAL SA EUR 40,000,000 - 01-Aug-19 40,047,417 1.10 SOCIETE DE FINANCEMENT LOCAL SA EUR 50,000,000 - 23-Sep-19 50,076,508 1.38

SVENSKA HANDELSBANKEN AB EUR 52,500,000 - 08-May-19 52,520,576 1.45

SVENSKA HANDELSBANKEN AB EUR 40,000,000 - 05-Aug-19 40,048,649 1.10 TORONTO DOMINION BANK EUR 50,000,000 - 17-Jun-19 50,046,377 1.38

TOYOTA FINANCE AUSTRALIA LTD EUR 50,000,000 - 06-Jun-19 50,033,340 1.38 TOYOTA MOTOR FINANCE (NETHERLANDS) EUR 26,000,000 - 31-May-19 26,015,241 0.72

Total Commercial Paper 1,231,199,152 33.94

CERTIFICATES OF DEPOSIT 33.10%

ABN AMRO BANK EUR 25,000,000 - 03-May-19 25,007,858 0.69

BNP PARIBAS EUR 60,000,000 - 05-Apr-19 60,003,391 1.65 BNP PARIBAS EUR 40,000,000 - 08-Apr-19 40,003,227 1.10

BNP PARIBAS EUR 50,000,000 - 11-Jun-19 50,035,626 1.38

CITIBANK NA EUR 50,000,000 - 04-Apr-19 50,001,891 1.38

CITIBANK NA EUR 50,000,000 - 03-May-19 50,015,265 1.38

CITIBANK NA EUR 50,000,000 - 28-Jun-19 50,045,668 1.38

CREDIT AGRICOLE SA EUR 50,000,000 - 06-May-19 50,015,691 1.38 CREDIT AGRICOLE SA EUR 50,000,000 - 02-Jul-19 50,050,057 1.38

DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 50,000,000 - 04-Jul-19 50,051,382 1.38

ING BANK NV EUR 50,000,000 - 05-Apr-19 50,001,977 1.38 ING BANK NV EUR 50,000,000 - 09-May-19 50,014,903 1.38

KBC BANK NV EUR 50,000,000 - 23-Apr-19 50,010,575 1.38

LLOYDS BANK PLC EUR 40,000,000 - 07-May-19 40,011,705 1.10 LLOYDS BANK PLC EUR 60,000,000 - 31-May-19 60,038,180 1.65

MIZUHO BANK LTD EUR 25,000,000 - 03-Apr-19 25,000,609 0.69

MIZUHO BANK LTD EUR 50,000,000 - 08-Apr-19 50,003,686 1.38 MIZUHO BANK LTD EUR 50,000,000 - 17-Apr-19 50,007,595 1.38

NATIONWIDE BUILDING SOCIETY EUR 50,000,000 - 20-Jun-19 50,042,228 1.38 NATIONWIDE BUILDING SOCIETY EUR 50,000,000 - 28-Jun-19 50,045,668 1.38

MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund

Schedule of Investments (continued)

As of 31 March 2019

(Expressed in EUR)


26

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS



NATIONWIDE BUILDING SOCIETY EUR 50,000,000 - 28-Aug-19 50,068,705 1.38

NORINCHUKIN BANK EUR 25,000,000 - 18-Apr-19 25,004,605 0.69 TORONTO DOMINION BANK EUR 50,000,000 - 20-Sep-19 50,082,532 1.38

TORONTO DOMINION BANK EUR 50,000,000 - 14-Nov-19 50,099,545 1.38

ZUERCHER KANTONALBANK EUR 75,000,000 - 16-Jul-19 75,079,791 2.07

Total Certificates of Deposit 1,200,742,360 33.10

FLOATING RATE NOTES 1.74%

BANK OF NOVA SCOTIA EUR 58,000,000 0.14% 30-Apr-19 58,021,377 1.60

BNZ INTERNATIONAL FUNDING LTD EUR 5,000,000 0.19% 02-Dec-19 5,013,900 0.14

Total Floating Rate Notes 63,035,277 1.74

ASSET BACKED COMMERCIAL PAPER 1.38%

COLLATERALIZED COMMERCIAL PAPER CO III EUR 20,000,000 - 28-May-19 20,008,910 0.55

COLLATERALIZED COMMERCIAL PAPER CO III EUR 30,000,000 - 07-Aug-19 30,036,834 0.83

Total Asset Backed Commercial Paper 50,045,744 1.38

CORPORATE BONDS 0.35%

WESTPAC SECURITIES NZ LTD EUR 12,500,000 0.88% 24-Jun-19 12,533,525 0.35

Total Corporate Bonds 12,533,525 0.35

Total Transferable Securities and Money Market Instruments 2,557,556,058 70.51

Total Investments 2,557,556,058 70.51

Other assets in excess of liabilities 1,069,918,388 29.49

Total Net Assets 3,627,474,446 100.00

*Securities with residual maturity days up to 75 days or with Mark to Market deviance under 10bps are valued at Amortised Cost.

MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund


As of 31 March 2019

(Expressed in USD)


27

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS



BANK NEDERLANDSE GEMEENTEN USD 400,000,000 - 02-Apr-19 399,946,000 2.09

BANK NEDERLANDSE GEMEENTEN USD 10,000,000 - 05-Apr-19 9,996,500 0.05

BANQUE FEDERATIVE DU CREDIT MUTUEL USD 275,000,000 - 01-Aug-19 272,560,209 1.43 BNP PARIBAS USD 200,000,000 - 20-Jun-19 198,845,378 1.04

BPCE SFH USD 255,000,000 - 01-Jul-19 253,313,445 1.32

BRED BANQUE POPULAIRE USD 250,000,000 - 19-Jun-19 248,574,680 1.30 BRED BANQUE POPULAIRE USD 150,000,000 - 21-Jun-19 149,121,500 0.78

CREDIT SUISSE AG USD 100,000,000 - 20-Jun-19 99,412,544 0.52

CREDIT SUISSE AG USD 125,000,000 - 23-Sep-19 123,381,313 0.65 DBS BANK LTD USD 50,000,000 - 18-Apr-19 49,931,461 0.26

DBS BANK LTD USD 300,000,000 - 20-Jun-19 298,237,632 1.56

DBS BANK LTD USD 150,000,000 - 25-Jun-19 149,065,366 0.78 DBS BANK LTD USD 150,000,000 - 27-Jun-19 149,043,750 0.78

DEKABANK DEUTSCHE GIROZENTRALE USD 150,000,000 - 24-Jun-19 149,064,000 0.78

DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 134,500,000 - 04-Jun-19 133,873,455 0.70 ERSTE ABWICKLUNGSANSTALT USD 58,976,000 - 03-Jun-19 58,708,642 0.31

ERSTE ABWICKLUNGSANSTALT USD 200,000,000 - 21-Jun-19 198,824,934 1.04

ERSTE ABWICKLUNGSANSTALT USD 100,000,000 - 01-Aug-19 99,103,125 0.52 ERSTE ABWICKLUNGSANSTALT USD 200,000,000 - 25-Sep-19 197,380,000 1.03

ERSTE ABWICKLUNGSANSTALT USD 150,000,000 - 26-Sep-19 148,023,328 0.77

FEDERATION DES CAISSES DESJARDINS USD 500,000,000 - 02-Apr-19 499,933,055 2.61 JP MORGAN SECURITIES LLC USD 145,000,000 - 02-Jul-19 143,990,981 0.75

KREDITANSTALT FUR WIEDERAUFBAU USD 56,000,000 - 23-Aug-19 55,423,988 0.29

KREDITANSTALT FUR WIEDERAUFBAU USD 300,000,000 - 17-Sep-19 296,377,968 1.55 KREDITANSTALT FUR WIEDERAUFBAU USD 250,000,000 - 18-Sep-19 246,962,890 1.29

KREDITANSTALT FUR WIEDERAUFBAU USD 250,000,000 - 20-Sep-19 246,927,777 1.29

NESTLE SA USD 219,000,000 - 01-Apr-19 218,985,401 1.14 NESTLE SA USD 185,000,000 - 18-Sep-19 182,752,539 0.96

NRW.BANK USD 88,000,000 - 12-Jun-19 87,550,142 0.46

NRW.BANK USD 250,000,000 - 17-Jun-19 248,603,890 1.30 STATE OF THE NETHERLANDS USD 840,000,000 - 01-Apr-19 839,951,482 4.39

SUMITOMO MITSUI TRUST BANK LTD USD 150,000,000 - 21-Jun-19 149,101,900 0.78

SUNCORP-METWAY LTD USD 40,000,000 - 23-Sep-19 39,446,420 0.21 TORONTO DOMINION BANK USD 150,000,000 - 02-Oct-19 147,972,609 0.77

TOYOTA MOTOR CREDIT CORP USD 50,000,000 - 27-Aug-19 49,469,403 0.26

TOYOTA MOTOR CREDIT CORP USD 50,000,000 - 28-Aug-19 49,465,678 0.26 TOYOTA MOTOR CREDIT CORP USD 50,000,000 - 18-Sep-19 49,390,175 0.26

TOYOTA MOTOR CREDIT CORP USD 50,000,000 - 19-Sep-19 49,386,650 0.26

Total Commercial Paper 6,988,100,210 36.54


BANK OF MONTREAL USD 150,000,000 2.87% 09-May-19 150,000,000 0.78

BANK OF MONTREAL USD 115,000,000 2.93% 12-Jun-19 115,071,604 0.60

BANK OF NOVA SCOTIA USD 150,000,000 2.86% 16-May-19 150,000,000 0.78 BNP PARIBAS USD 365,000,000 2.83% 08-Oct-19 365,367,555 1.91

BRANCH BANKING & TRUST CO USD 300,000,000 2.43% 05-Apr-19 300,000,000 1.57

CANADIAN IMPERIAL BANK OF COMMERCE USD 100,000,000 3.04% 20-Sep-19 100,174,349 0.52 CITIBANK NA USD 100,000,000 2.62% 18-Sep-19 100,008,916 0.52

CREDIT SUISSE AG USD 100,000,000 3.08% 02-May-19 100,000,000 0.52

CREDIT SUISSE AG USD 240,000,000 3.10% 12-Jul-19 240,192,571 1.26 CREDIT SUISSE AG USD 295,000,000 3.10% 12-Jul-19 295,236,735 1.54



As of 31 March 2019

(Expressed in USD)


28

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS



EUROCLEAR BANK SA/NV USD 49,500,000 - 15-Aug-19 48,839,595 0.26

EUROCLEAR BANK SA/NV USD 150,000,000 - 16-Sep-19 147,468,860 0.77

EUROCLEAR BANK SA/NV USD 50,000,000 - 20-Sep-19 49,132,417 0.26 HSBC BANK PLC USD 295,000,000 2.50% 01-Apr-19 295,000,000 1.54

LANDESBANK HESSEN-THUERINGEN GIROZE USD 700,000,000 2.43% 01-Apr-19 700,000,000 3.66

MIZUHO BANK LTD USD 50,000,000 - 12-Jun-19 49,654,285 0.26 MIZUHO BANK LTD USD 100,000,000 - 13-Jun-19 99,295,519 0.52

MIZUHO BANK LTD USD 50,000,000 - 20-Jun-19 49,603,292 0.26

MIZUHO BANK LTD USD 150,000,000 - 24-Jun-19 148,749,999 0.78 MIZUHO BANK LTD USD 100,000,000 - 25-Jun-19 99,156,689 0.52

MIZUHO BANK LTD USD 150,000,000 - 26-Jun-19 149,052,000 0.78

NATIXIS SA USD 250,000,000 2.67% 20-Jun-19 250,080,965 1.31 NORDEA BANK AB USD 95,000,000 3.00% 05-Apr-19 95,001,071 0.50

ROYAL BANK OF CANADA USD 310,000,000 2.68% 26-Jun-19 310,064,502 1.62

ROYAL BANK OF CANADA USD 350,000,000 2.69% 26-Jun-19 350,081,035 1.83 SUMITOMO MITSUI TRUST BANK LTD USD 290,000,000 2.41% 02-Apr-19 290,000,000 1.52

SVENSKA HANDELSBANKEN AB USD 110,000,000 2.79% 24-Jun-19 110,066,586 0.58

SVENSKA HANDELSBANKEN AB USD 150,000,000 2.79% 22-Jul-19 150,100,296 0.79 SVENSKA HANDELSBANKEN AB USD 50,000,000 2.80% 21-Aug-19 50,042,630 0.26

SVENSKA HANDELSBANKEN AB USD 185,000,000 2.75% 27-Sep-19 185,125,069 0.97 TORONTO DOMINION BANK USD 150,000,000 2.79% 22-Jul-19 150,077,419 0.78

US BANCORP USD 175,000,000 2.79% 24-Jul-19 175,121,796 0.92

WELLS FARGO BANK NA USD 85,000,000 2.76% 24-Jun-19 85,044,510 0.44 WELLS FARGO BANK NA USD 250,000,000 2.85% 01-Oct-19 250,315,652 1.31

Total Certificates of Deposit 6,203,125,917 32.44

COMMERCIAL PAPER - INTEREST BEARING 15.38%

ANZ NEW ZEALAND INT'L LTD USD 50,000,000 2.80% 21-Jun-19 50,030,904 0.26

ASB FINANCE LTD USD 155,000,000 2.79% 24-Jun-19 155,093,826 0.81 CANADIAN IMPERIAL BANK OF COMMERCE USD 175,000,000 2.86% 26-Sep-19 175,230,603 0.92

CANADIAN IMPERIAL BANK OF COMMERCE USD 50,000,000 2.84% 01-Oct-19 50,064,486 0.26

COMMONWEALTH BANK OF AUSTRALIA USD 25,000,000 2.68% 06-Sep-19 25,011,516 0.13 COMMONWEALTH BANK OF AUSTRALIA USD 25,000,000 2.69% 09-Sep-19 25,011,776 0.13

HSBC BANK PLC USD 130,000,000 2.77% 24-Jun-19 130,053,154 0.68

HSBC BANK PLC USD 150,000,000 2.79% 22-Jul-19 150,100,296 0.78 HSBC BANK PLC USD 150,000,000 2.81% 24-Jul-19 150,110,214 0.78

HSBC BANK PLC USD 140,000,000 2.80% 25-Sep-19 140,113,602 0.73

ING US FUNDING LLC USD 175,000,000 2.86% 01-Oct-19 175,209,528 0.92 ING US FUNDING LLC USD 175,000,000 2.86% 04-Oct-19 175,210,726 0.92

JP MORGAN SECURITIES LLC USD 100,000,000 2.97% 15-Apr-19 100,004,343 0.52

NATIONAL AUSTRALIA BANK LTD USD 165,000,000 2.82% 24-Sep-19 165,173,463 0.86 OVERSEA-CHINESE BANKING CORP USD 150,000,000 2.77% 22-May-19 150,000,000 0.78

TORONTO DOMINION BANK USD 200,000,000 2.68% 26-Jun-19 200,022,828 1.05 TORONTO DOMINION BANK USD 70,000,000 2.83% 23-Aug-19 70,063,833 0.37

TORONTO DOMINION BANK USD 150,000,000 2.78% 24-Sep-19 150,135,364 0.79

TORONTO DOMINION BANK USD 140,000,000 2.80% 25-Sep-19 140,127,016 0.73 TOYOTA MOTOR CREDIT CORP USD 175,000,000 2.75% 11-Oct-19 175,121,256 0.92

UBS AG USD 390,000,00 2.70% 24-Jun-19 390,034,320 2.04

Total Commercial Paper - Interest Bearing 2,941,923,054 15.38



As of 31 March 2019

(Expressed in USD)


29

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS


ASSET BACKED COMMERCIAL PAPER 2.96%

COLLATERALIZED COMMERCIAL PAPER CO II USD 100,000,000 - 01-Jul-19 99,333,122 0.52 COLLATERALIZED COMMERCIAL PAPER CO II USD 150,000,000 2.85% 23-Aug-19 150,148,956 0.79

COLLATERALIZED COMMERCIAL PAPER CO II USD 320,000,000 - 19-Sep-19 315,953,920 1.65

Total Asset Backed Commercial Paper 565,435,998 2.96


AUSTRALIA AND NEW ZEALAND BANKING USD 44,292,000 2.25% 13-Jun-19 44,258,936 0.23 CREDIT SUISSE AG USD 33,400,000 5.30% 13-Aug-19 33,700,023 0.18

NATIONAL AUSTRALIA BANK LTD USD 24,228,000 2.25% 01-Jul-19 24,203,225 0.13

SUMITOMO MITSUI BANKING CORPORATION USD 23,521,000 2.25% 11-Jul-19 23,492,772 0.12 SVENSKA HANDELSBANKEN AB USD 24,035,000 2.25% 17-Jun-19 24,014,935 0.12





Total Net Assets 19,124,871,845 100.00


MORGAN STANLEY LIQUIDITY FUNDS US Dollar Treasury Liquidity Fund


As of 31 March 2019

(Expressed in USD)


30

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

AMORTISED

COST

PERCENTAGE

OF

NET ASSETS


TREASURY BILLS 22.36%

GOVERNMENT OF THE UNITED STATES USD 499,000,000 - 20-Jun-19 496,257,010 8.31

GOVERNMENT OF THE UNITED STATES USD 245,000,000 - 27-Jun-19 243,571,074 4.08

GOVERNMENT OF THE UNITED STATES USD 75,000,000 - 05-Jul-19 74,504,219 1.25 GOVERNMENT OF THE UNITED STATES USD 400,000,000 - 01-Aug-19 396,665,969 6.65

GOVERNMENT OF THE UNITED STATES USD 125,000,000 - 29-Aug-19 123,720,417 2.07

Total Treasury Bills 1,334,718,689 22.36

GOVERNMENT BONDS 21.67%

GOVERNMENT OF THE UNITED STATES USD 268,348,000 0.13% 15-Apr-19 268,493,808 4.50

GOVERNMENT OF THE UNITED STATES USD 265,000,000 2.48% 31-Jul-19 265,096,521 4.44

GOVERNMENT OF THE UNITED STATES USD 460,000,000 2.47% 31-Oct-19 460,204,966 7.71 GOVERNMENT OF THE UNITED STATES USD 300,000,000 2.42% 31-Jan-20 299,899,803 5.02

Total Government Bonds 1,293,695,098 21.67

TREASURY NOTES 8.34%

GOVERNMENT OF THE UNITED STATES USD 25,000,000 1.25% 30-Apr-19 24,976,260 0.42

GOVERNMENT OF THE UNITED STATES USD 25,977,000 1.63% 30-Apr-19 25,959,338 0.43 GOVERNMENT OF THE UNITED STATES USD 90,000,000 3.13% 15-May-19 90,065,997 1.51

GOVERNMENT OF THE UNITED STATES USD 10,000,000 1.50% 31-May-19 9,983,922 0.17

GOVERNMENT OF THE UNITED STATES USD 105,000,000 1.25% 31-May-19 104,780,408 1.75 GOVERNMENT OF THE UNITED STATES USD 51,000,000 1.25% 30-Jun-19 50,840,466 0.85

GOVERNMENT OF THE UNITED STATES USD 25,000,000 1.63% 30-Jun-19 24,945,007 0.42

GOVERNMENT OF THE UNITED STATES USD 75,000,000 0.75% 15-Jul-19 74,623,959 1.25 GOVERNMENT OF THE UNITED STATES USD 62,000,000 1.38% 31-Jul-19 61,778,706 1.03

GOVERNMENT OF THE UNITED STATES USD 20,000,000 3.63% 15-Aug-19 20,087,941 0.34 GOVERNMENT OF THE UNITED STATES USD 10,000,000 1.00% 30-Sep-19 9,926,338 0.17

Total Treasury Notes 497,968,342 8.34




Total Net Assets 5,969,264,722 100.00

MORGAN STANLEY LIQUIDITY FUNDS Sterling Liquidity Fund


As of 31 March 2019

(Expressed in GBP)


31

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS



ABN AMRO BANK GBP 25,000,000 - 08-Apr-19 24,994,787 1.05

ABN AMRO BANK GBP 25,000,000 - 17-May-19 24,970,013 1.05

BANK OF AMERICA NA GBP 25,000,000 1.04% 16-Jul-19 25,013,049 1.06 BANK OF AMERICA NA GBP 25,000,000 1.04% 06-Aug-19 25,013,288 1.06

BANK OF AMERICA NA GBP 25,000,000 0.98% 06-Sep-19 25,005,868 1.06

BANK OF MONTREAL GBP 25,000,000 0.95% 08-Apr-19 25,000,000 1.05 BNP PARIBAS GBP 25,000,000 0.96% 05-Apr-19 25,000,000 1.06

BNP PARIBAS GBP 25,000,000 0.97% 07-May-19 25,000,000 1.05

CREDIT AGRICOLE CIB GBP 25,000,000 1.06% 02-May-19 25,000,000 1.05 CREDIT AGRICOLE CIB GBP 25,000,000 0.91% 07-May-19 25,000,000 1.06

CREDIT AGRICOLE CIB GBP 25,000,000 0.98% 13-May-19 25,000,000 1.05

ING BANK NV GBP 25,000,000 - 01-Oct-19 24,878,510 1.05 KBC BANK NV GBP 25,000,000 0.94% 17-Apr-19 25,000,000 1.05

LLOYDS BANK PLC GBP 25,000,000 0.95% 02-May-19 25,000,000 1.05

LLOYDS BANK PLC GBP 25,000,000 0.94% 07-May-19 25,000,000 1.05 LLOYDS BANK PLC GBP 25,000,000 1.00% 09-May-19 25,000,000 1.05

LLOYDS BANK PLC GBP 25,000,000 0.93% 15-Jul-19 25,003,074 1.06

MIZUHO BANK LTD GBP 25,000,000 - 02-May-19 24,980,101 1.05 MIZUHO BANK LTD GBP 25,000,000 - 07-May-19 24,975,221 1.05

MIZUHO BANK LTD GBP 25,000,000 0.87% 20-Jun-19 24,999,308 1.05

MIZUHO BANK LTD GBP 25,000,000 - 12-Sep-19 24,889,538 1.05 NATIONAL AUSTRALIA BANK LTD GBP 25,000,000 0.89% 03-May-19 25,000,000 1.06

NATIONAL AUSTRALIA BANK LTD GBP 25,000,000 0.95% 07-May-19 25,000,000 1.05

NATIONWIDE BUILDING SOCIETY GBP 25,000,000 1.01% 14-May-19 25,000,000 1.05 NATIONWIDE BUILDING SOCIETY GBP 25,000,000 1.00% 04-Jul-19 25,007,072 1.06

NATIONWIDE BUILDING SOCIETY GBP 20,000,000 0.87% 01-Aug-19 20,000,000 0.84

NATIONWIDE BUILDING SOCIETY GBP 20,000,000 0.90% 05-Aug-19 20,001,160 0.84 NORDEA BANK AB GBP 50,000,000 0.75% 01-Apr-19 50,000,000 2.11

NORDEA BANK AB GBP 50,000,000 0.75% 08-Apr-19 50,000,000 2.11 SKANDINAVISKA ENSKILDA BANKEN AB GBP 25,000,000 1.00% 23-May-19 25,000,000 1.05

SOCIETE GENERALE GBP 15,000,000 1.05% 19-Aug-19 15,007,973 0.63

SVENSKA HANDELSBANKEN AB GBP 25,000,000 0.91% 15-Apr-19 25,000,050 1.06 SVENSKA HANDELSBANKEN AB GBP 25,000,000 1.00% 12-Aug-19 25,006,203 1.06

TORONTO DOMINION BANK GBP 20,000,000 1.02% 20-Jun-19 20,007,428 0.84

Total Certificates of Deposit 874,752,643 36.87


AUSTRALIA AND NEW ZEALAND BANKING GBP 25,000,000 - 07-May-19 24,976,755 1.05

AUSTRALIA AND NEW ZEALAND BANKING GBP 1,500,000 - 23-May-19 1,497,779 0.06

BANQUE ET CAISSE D'EPARGNE DE L'ETAT GBP 25,000,000 - 02-May-19 24,981,644 1.05

BANQUE ET CAISSE D'EPARGNE DE L'ETAT GBP 25,000,000 - 07-Aug-19 24,930,655 1.05 BRED BANQUE POPULAIRE GBP 25,000,000 - 06-Jun-19 24,962,572 1.05

CAISSE DES DEPOTS ET CONSIGNATIONS GBP 11,000,000 - 09-Apr-19 10,997,915 0.47

COLLATERALIZED COMMERCIAL PAPER CO III GBP 20,000,000 - 06-Sep-19 19,918,641 0.84 DNB BANK ASA GBP 25,000,000 - 02-Apr-19 24,998,783 1.06

DNB BANK ASA GBP 25,000,000 - 08-Apr-19 24,995,095 1.06

DNB BANK ASA GBP 25,000,000 - 12-Apr-19 24,992,472 1.05 DZ BANK AG DEUTSCHE ZENTRAL-GENOSS GBP 25,000,000 - 20-May-19 24,972,068 1.05

ERSTE ABWICKLUNGSANSTALT GBP 25,000,000 - 08-Apr-19 24,995,589 1.06

ERSTE ABWICKLUNGSANSTALT GBP 25,000,000 - 15-Apr-19 24,991,783 1.05 ERSTE ABWICKLUNGSANSTALT GBP 8,500,000 - 07-May-19 8,493,087 0.36

HSBC BANK PLC GBP 25,000,000 - 07-Aug-19 24,920,398 1.05 HSBC BANK PLC GBP 25,000,000 - 09-Sep-19 24,895,857 1.05

KREDITANSTALT FUR WIEDERAUFBAU GBP 25,000,000 - 18-Sep-19 24,904,152 1.05

LANDESBANK BADEN-WURTTEMBERG GBP 27,000,000 - 16-Apr-19 26,990,485 1.14

NEDERLANDSE WATERSCHAPSBANK NV GBP 25,000,000 - 30-Sep-19 24,897,657 1.05

OP CORPORATE BANK PLC GBP 20,000,000 - 08-Apr-19 19,996,262 0.84

OP CORPORATE BANK PLC GBP 25,000,000 - 03-May-19 24,978,915 1.05 OP CORPORATE BANK PLC GBP 10,000,000 - 13-May-19 9,989,492 0.42

OP CORPORATE BANK PLC GBP 10,000,000 - 11-Sep-19 9,957,702 0.42

TOYOTA FINANCE AUSTRALIA LTD GBP 25,000,000 - 06-Jun-19 24,962,572 1.05

MORGAN STANLEY LIQUIDITY FUNDS Sterling Liquidity Fund


As of 31 March 2019

(Expressed in GBP)


32

ISSUE

DENOMINATION

CURRENCY HOLDINGS

COUPON

RATE

MATURITY

DATE

MARKET

PRICE/AMORTISED

COST*

PERCENTAGE

OF

NET ASSETS



TOYOTA FINANCE AUSTRALIA LTD GBP 25,000,000 - 15-Jul-19 24,936,398 1.05

Total Commercial Paper 532,134,728 22.43

FLOATING RATE NOTES 11.82%

AUSTRALIA AND NEW ZEALAND BANKING GBP 20,000,000 1.04% 27-Nov-19 19,997,353 0.84 COMMONWEALTH BANK OF AUSTRALIA GBP 25,000,000 1.07% 12-Jul-19 25,001,057 1.06

COMMONWEALTH BANK OF AUSTRALIA GBP 20,000,000 1.08% 14-Nov-19 19,999,212 0.84

DBS BANK LTD GBP 25,000,000 1.02% 15-Oct-19 24,997,511 1.05 DBS BANK LTD GBP 20,000,000 0.92% 24-Oct-19 19,996,549 0.84

EUROPEAN INVESTMENT BANK GBP 42,925,000 1.17% 16-Apr-19 42,930,525 1.81

ROYAL BANK OF CANADA GBP 10,500,000 0.89% 11-Oct-19 10,492,326 0.44 ROYAL BANK OF CANADA GBP 14,000,000 1.09% 24-Jan-20 14,007,186 0.59

TORONTO DOMINION BANK GBP 10,000,000 1.01% 11-Oct-19 9,998,916 0.42

UNITED OVERSEAS BANK LTD GBP 25,000,000 1.03% 12-Dec-19 24,998,208 1.06 WESTPAC BANKING CORP GBP 23,000,000 1.03% 19-Nov-19 22,999,237 0.97

WESTPAC BANKING CORP GBP 20,000,000 1.11% 17-Dec-19 20,000,603 0.84

WESTPAC BANKING CORP GBP 25,000,000 1.17% 10-Jan-20 24,999,584 1.06

Total Floating Rate Notes 280,418,267 11.82

TREASURY BILLS 1.69%

GOVERNMENT OF THE UNITED KINGDOM GBP 40,000,000 - 08-Apr-19 39,993,768 1.69

Total Treasury Bills 39,993,768 1.69


NATIONAL AUSTRALIA BANK LTD GBP 15,297,000 1.88% 20-Feb-20 15,392,178 0.65




Other assets in excess of liabilities 629,660,183 26.54

Total Net Assets 2,372,351,767 100.00



Notes to the Financial Statements

31 March 2019

33

1. General information:

Capital terms used and not defined herein shall have the same meaning as included in the Prospectus of Morgan

Stanley Liquidity Sub-Fund (the “Company”). 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 18 March 2019, each Sub-Fund qualified as a short-term Money Market Fund pursuant to the Money

Market Fund (MMF) Regulation. The MMF Regulation describes three different types of Money Market Funds as

below:

Public Debt CNAV Money Market Fund

Seeks to maintain a Stable NAV and at least 99.5% of the assets are invested in Money Market Instruments issued

or guaranteed by International Public Entities, reverse repurchase agreements secured with government debt and in

cash. The US Dollar Treasury Fund was converted to Public Debt CNAV fund.

Low Volatility NAV (LVNAV) Money Market Fund Seeks to maintain a Stable NAV under the condition that the Stable NAV does not deviate from the Net Asset

Value per Share by more than 20 basis points. In case of a deviation of more than 20 basis points between the

Stable NAV and the Net Asset Value per Share, the following redemption or issue of Shares will be undertaken at a

price that is equal to the Net Asset Value per Share.

The Euro Liquidity Fund, Sterling Liquidity Fund and US Dollar Liquidity Fund were converted to LVNAV funds.

Variable NAV (VNAV) Money Market Fund

Shares are issued or redeemed at a price that is equal to the Fund’s Net Asset Value per Share. There were no

VNAV funds as at 31 March 2019.

In view of the departure of the United Kingdom from the European Union, the board of directors of the Company

(the “Board”) decided to replace the Management Company, Morgan Stanley Investment Management (ACD)

Limited ("MSIM (ACD)"), with a Management Company of the Morgan Stanley group which is located in a

European Union Member State. One of the principal reasons for this decision was the need for continuity of

‘passporting’ of financial services licenses in the event that the United Kingdom left the European Union without

agreeing any deal. With effect from 1 January 2019, MSIM Fund Management (Ireland) Limited ("MSIM

(Ireland)") replaced MSIM (ACD) as the Company’s Management Company.

MSIM (Ireland) is an indirect wholly owned subsidiary of Morgan Stanley and was incorporated as a company

limited by shares under the laws of Ireland on 5 December 2017 and is regulated in Ireland by the Central Bank of

Ireland. This change was communicated to investors in the shareholder notices dated 30 November 2018 and was

reflected within the updated Prospectus that came into effect on 18 March 2019.

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 does not rely on external support for guaranteeing the liquidity of the funds or stabilising the NAV per

share.

The Company currently offers four Sub-Funds: the Euro Liquidity Fund, the US Dollar Liquidity Fund, the US

Dollar Treasury Liquidity Fund, the Sterling Liquidity Fund. The Euro Liquidity Fund was launched on 10

January 2013, US Dollar Liquidity Fund, US Dollar Treasury Liquidity Fund and the Sterling Liquidity Fund

were launched on 17 June 2013.


Notes to the Financial Statements (continued)

31 March 2019

34

1. General information: (continued)

The Class of Shares that are active (except footnoted differently) as at 31 March 2019 are detailed in the table

below:

Name of the Sub-Fund Class of Shares Launch date

Euro Liquidity Fund

Institutional Accumulation D Shares 18 March 2019

Institutional Accumulation Shares 17 June 2013

Institutional Select Accumulation D Shares 18 March 2019

Institutional (+1) Accumulation Shares 24 May 2016

MS Reserve Accumulation D Shares 18 March 2019

Qualified Accumulation D Shares 18 March 2019

US Dollar Liquidity Fund

Institutional Shares 17 June 2013


Institutional Select Shares 16 January 2014

Qualified Shares 12 April 2018

MS Reserve Shares 17 June 2013

Qualified Accumulation Shares 15 March 2016

Advisory Shares 16 August 2016



Institutional Select Shares 16 January 2014

MS Reserve Shares 17 June 2013

Institutional Accumulation Shares 10 August 2018

Advisory Shares 16 August 2016

Qualified Accumulation Shares* 26 September 2018




Institutional Select Shares 26 June 2014

Qualified Shares 17 June 2013

*Share class was reactivated on 26 September 2018 at a price of USD100.00.

The Class of Shares that closed during the period are detailed in the table below:

Name of the Sub-Fund Class of Shares Closure date

US Dollar Liquidity Fund Advantage Accumulation Shares 18 September 2018

Master Shares 17 December 2018

Euro Liquidity Fund

Institutional Shares 18 March 2019

Institutional Select Shares 18 March 2019

MS Reserve Shares 18 March 2019

Qualified Shares 18 March 2019

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 European Money Market Fund (MMF) Regulation.

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.



31 March 2019

35

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

Pursuant to the MMF Regulation, the Company's investments are valued on each Business Day using the Mark-

to-Market Method. Where the use of the Mark-to-Market Method is not relevant or possible, the Company values

the relevant assets of each Sub-Fund conservatively by using the Mark-to-Model Method. A Net Asset Value per

share is then calculated.

By way of derogation for a Sub-Fund qualifying as a Public Debt CNAV Money Market Fund, 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. A stable Net Asset Value per share is then calculated.

By way of derogation for a Sub-Fund qualifying as an LVNAV Money Market Fund, the securities, money

market instruments and other instruments are valued based on market-to-market / market-to-model pricing with

the permitted use of “Amortised cost accounting” where there is a residual maturity of up to seventy-five (75)

days and the deviation between the amortised cost price versus the mark-to-market / mark-to-model price is below

0.10%. A stable Net Asset Value per share is then calculated.

The Management Company may adjust the value of any investment if taking into account currency, marketability

and/or such other considerations as is deem relevant (such as, applicable rate of interest, anticipated rate of

dividend, maturity or liquidity) if it is considered that such adjustment is required to reflect the fair value thereof.

The Administrator determines and publishes, at least daily, the extent to which the Stable NAV per Share of each

class of Stable NAV deviates from the Net Asset Value per Share of such class. For LVNAV Money Market

Funds, a Stable NAV per Share may only be applied for subscription and/or redemption if such Stable NAV,

including part of the assets valued in accordance with Mark-to-Market Method or Mark-to-Model Method, does

not deviate by more than 0.20% from the relevant Net Asset Value. Should the deviation exceed 0.20%, the

subscriptions and redemptions will be undertaken at a price equal to the Net Asset Value per Share with no

obligation to revert back to a Stable NAV per Share once the deviation falls back under 0.20%. There were no

deviations in excess of 0.20% as at 31 March 2019.

(b) Security Transactions

When applicable, security transactions are accounted for on the trade date.

(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. Cash owed to bank is shown in

current liabilities in the Statement of Net Assets.

(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



31 March 2019

36

2. Summary of Significant Accounting Policies: (continued)

(e) Foreign currency translation (continued)

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 2019 as of 31 March 2018

1 USD = 0.890590 EUR 1 USD = 0.767430 GBP

1 USD = 0.813107 EUR 1 USD = 0.712860 GBP

The average currency exchange rates against the US Dollar were as follows:

as of 31 March 2019 as of 31 March 2018

1 USD = 0.864471 EUR

1 USD = 0.762452 GBP

1 USD = 0.856014 EUR 1 USD = 0.754732 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 US Dollar Liquidity Fund, US Dollar Treasury Liquidity

Fund and Sterling Liquidity Fund with the exception of Institutional Accumulation Shares, Institutional Select

Accumulation Shares, Institutional (+1) Accumulation Shares, Qualified Accumulation Shares, Administrative

Accumulation Shares, Advisory Accumulation Shares, Advantage Accumulation Shares, and MS Reserve

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 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 profits on the disposal/valuation of investments as

may be lawfully distributed less realised 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.

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. Post 18 March 2019, where a Sub-Fund posts

negative net investment income, such negative net investment income will be retained in the value of the

Share classes.

Pre 18 March 2019, where a Sub-Fund posted a negative net investment income, in order to maintain a stable Net

Asset Value per Share for Distributing Classes of Shares, the ManagementCompany addressed 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 decreased in lieu of the compulsory redemption of Shares.



31 March 2019

37

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 until

31 December 2018 pursuant to the Management Company Services Agreement dated 1 April 2014. Effective 1

January 2019, MSIM (Ireland) (the "Management Company") was appointed by the Board of Directors of the

Company to replace MSIM (ACD).

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 as depositary until 17 March 2019 pursuant to the Depositary Agreement dated 7 March

2016. Effective 18 March 2019, The Bank of New York Mellon SA/NV, Luxembourg Branch (the “Depositary”)

was appointed by the Board of Directors of the Company as the new 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 dated 7 March 2016, amended and novated effective 18

March 2019 for an unlimited period of time from the date of its signature.

The Management Company has delegated the administrator function to The Bank of New York Mellon

(International) Limited, Luxembourg Branch until 17 March 2019 pursuant to the Administration Agreement 7

March 2016. Effective 18 March 2019, the administrator function was delegated by the Management Company to

The Bank of New York Mellon SA/NV, Luxembourg Branch (the “Administrator”) pursuant to the

Administration Agreement dated 7 March 2016, amended and novated effective 18 March 2019. 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 and appointed to The Bank of New York Mellon (International)

Limited, Luxembourg Branch the registrar and transfer agent, and paying agent function until 17 March 2019

pursuant to the Administration Agreement dated 7 March 2016. Effective 18 March 2019, the registrar and

transfer agent, and paying agent function was delegated and appointed by the Management Company to The Bank

of New York Mellon SA/NV, Luxembourg Branch pursuant to the Administration Agreement dated 7 March

2016, amended and novated effective 18 March 2019. The registrar and transfer agent of the Company processes

all subscriptions, redemptions and transfers of shares and will register these transactions in the share register of

the Company while the paying agent of the Company 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

until 31 December 2018 pursuant to the Distribution Agreement dated 1 April 2014. Effective 1 January 2019,

Morgan Stanley Investment Management (Ireland) Limited was appointed by the Management Company to

replace Morgan Stanley Investment Management Limited. In this respect, it may engage certain financial

institutions (Intermediaries) to solicit and sell Shares to investors.



31 March 2019

38

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 Sub-

Fund or Class meets the following criteria: (i) the Shares of the Sub-Fund or the Class must be reserved for

Institutional Investors; (ii) the exclusive object of the Sub-Fund's portfolio must be the investment in money market instruments and/or deposits with credit institutions; (iii) the remaining average maturity of the Sub-Fund's

portfolio must be less than 90 days, and (iv) the Sub-Fund must benefit from the highest possible rating of a

recognised rating agency.

Under the aforementioned legislation and regulations prevailing in Luxembourg, Qualified A Shares, Qualified A

Accumulation Shares, Qualified Accumulation D Shares, Qualified Shares, Qualified Accumulation Shares,

Advantage Shares, Advantage Accumulation D 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.



31 March 2019

39

6. Fees and expenses: (continued)

(a) Service Provider Fees (continued)

The maximum chargeable Management fee rates as at 31 March 2019 were as follows:

Name of the Sub-Fund Class of Shares Management Fee Rate

Euro Liquidity Fund

Institutional Accumulation D Shares 0.20% per annum of the NAV

Institutional Accumulation Shares 0.20% per annum of the NAV

Institutional Select Accumulation D Shares 0.25% per annum of the NAV

Institutional (+1) Accumulation Shares 0.20% per annum of the NAV

MS Reserve Accumulation D Shares Nil

Qualified Accumulation D Shares 0.20% per annum of the NAV


Institutional Shares 0.20% per annum of the NAV


Institutional Select Shares 0.25% per annum of the NAV

Qualified Shares 0.20% per annum of the NAV

MS Reserve Shares Nil

Qualified Accumulation Shares 0.20% per annum of the NAV

Advisory Shares 0.45% per annum of the NAV




MS Reserve Shares Nil


Advisory Shares 0.45% per annum of the NAV

Qualified Accumulation Shares 0.20% per annum of the NAV





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.

Directors who are executive directors or employees of the Investment Advisor, the Management Company or its

affiliate will not be entitled to remuneration from the Company for their services as Directors of the 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 Sub-Funds in

order to reduce the impact the fees may have on the net returns of the Sub-Fund. This reimbursement is entirely

voluntary and may be discontinued at any time without notice at the sole discretion of the Management Company.



31 March 2019

40

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 sub-fund.

7. Related Party Holdings, Transactions and Affiliations:

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 2019 were as follows:

Absolute Return Fixed Income Fund

Emerging Europe, Middle East and Africa Equity Fund

Euro Bond Fund

European Champions Fund

Euro Corporate Bond Fund

Euro Corporate Bond Duration Hedge Fund

European Currencies High Yield Bond Fund

European Equity Alpha Fund

Eurozone Equity Alpha Fund

European Property Fund

Euro Strategic Bond Fund

Euro Strategic Bond Duration Hedge Fund

Global Balanced Risk Control Fund

Global Bond Fund

Global Buy and Hold 2020 Bond Fund

Global Multi Asset Opportunity Fund

Short Maturity Euro Bond Fund

The Sub-Funds of Morgan Stanley Investment Funds that held shares in the Company’s US Dollar Liquidity Fund

as at 31 March 2019 were as follows:

Asian Equity Fund

Buy and Hold 2020 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

Euro Corporate Bond Fund

European Currencies High Yield Bond Fund

Euro Strategic Bond Fund

Frontier Emerging Markets Equity Fund

Global Bond Fund

Global Buy and Maintain Bond Fund



31 March 2019

41

7. Related Party Holdings, Transactions and Affiliations: (continued)

Global Credit Fund

Global Fixed Income Opportunities Fund

Global High Yield Bond Fund

Global Mortgage Securities Fund

Liquid Alpha Capture Fund

Latin American Equity 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 2019 were as follows:

Asian Property Fund

Global Advantage Fund

Global Brands Equity Income Fund

Global Brands Fund

Global Discovery Fund

Global Infrastructure Fund

Global Infrastructure Unconstrained Fund

Global Opportunity Fund

Global Property Fund

Global Property Unconstrained Fund

Global Sustain Fund

Global Quality Fund

International Equity (ex US) Fund

US Advantage Fund

US Growth Fund

US Insight Fund

US Property 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.

Mr. Andrew Mack, Director of Morgan Stanley Liquidity Funds, is also non-executive Director of the

Management Company MSIM Fund Management (Ireland) Limited.

Diane Hosie, Director of Morgan Stanley Liquidity Funds, is also Executive Director of the Management

Company MSIM Fund Management (Ireland) Limited.

The Investment Advisor, 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 year were executed through affiliated firms or

brokers.



31 March 2019

42

8. Reverse Repurchase Transactions:

As at 31 March 2019, the Euro Liquidity Fund, US Dollar Liquidity Fund, US Dollar Treasury Liquidity Fund

and Sterling Liquidity Fund 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

Citigroup Global Markets / -0.45% / 01/04/2019

Euroclear 170,000,000 EUR 173,400,001 EUR

Total 170,000,000 EUR 173,400,001 EUR

US Dollar Liquidity

Fund

Bank of Nova Scotia / 2.60% / 01/04/2019

Bank of New York

514,000,000 USD 514,240,094 USD

Credit Agricole CIB / 2.60% /

01/04/2019

Bank of

New York 695,000,000 USD 695,680,272 USD

JP Morgan Securities LLC / 2.55% / 01/04/2019

Bank of New York

400,000,000 USD 400,169,934 USD

Total 1,609,000,000 USD 1,610,090,300 USD

US Dollar Treasury

Liquidity Fund

Bank of Nova Scotia / 2.60% / 01/04/2019

Bank of New York

645,000,000 USD 647,040,584 USD

Barclays Bank Plc / 2.55% /

01/04/2019

Bank of

New York 700,000,000 USD 701,700,000 USD

BNP Paribas / 2.55% / 01/04/2019

Bank of New York

600,000,000 USD 600,168,999 USD

Canadian Imperial Bank of

Commerce / 2.55% / 01/04/2019

Bank of

New York 475,000,000 USD 474,969,982 USD

Credit Agricole CIB / 2.60% / 01/04/2019

Bank of New York

105,000,000 USD 104,960,915 USD

JP Morgan Securities LLC / 2.55% /

01/04/2019

Bank of

New York 316,000,000 USD 316,140,206 USD

Total 2,841,000,000 USD 2,844,980,686 USD

Sterling Liquidity

Fund

BNP Paribas / 0.72% /

01/04/2019 Euroclear 110,000,000 GBP 112,200,001 GBP

Lloyds Bank Plc / 0.72 / 01/04/2019

Euroclear 110,000,000 GBP 112,200,001 GBP

Total 220,000,000 GBP 224,400,002 GBP

The collateral received by the Sub-Funds in respect of reverse repurchase transactions as at 31 March 2019 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.



31 March 2019

43

9. Time Deposits:

As at 31 March 2019, 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

SUMITOMO MITSUI BANKING CORPORATION EUR 172,564,101 (0.49) 1-Apr-19

MIZUHO BANK LTD EUR 172,251,774 (0.46) 1-Apr-19

BRED BANQUE POPULAIRE EUR 149,372,088 (0.50) 1-Apr-19

SUMITOMO MITSUI TRUST BANK LTD EUR 139,627,328 (0.49) 1-Apr-19

CREDIT AGRICOLE CIB EUR 76,905,000 (0.50) 1-Apr-19

BNP PARIBAS EUR 75,000,000 (0.50) 1-Apr-19

Total EUR 785,720,291



AUSTRALIA AND NEW ZEALAND BANKING USD 400,000,000 2.41 1-Apr-19

Total USD 400,000,000



COMMONWEALTH BANK OF AUSTRALIA GBP 188,326,044 0.75 1-Apr-19

ROYAL BANK OF CANADA GBP 117,799,472 0.71 1-Apr-19

MIZUHO BANK LTD GBP 115,083,373 0.71 1-Apr-19

BRED BANQUE POPULAIRE GBP 83,917,053 0.71 1-Apr-19

Total GBP 505,125,942

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 2019.

12. Determination of Global Exposure (Unaudited):

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 and latest Prospectus changes:

The list of changes in the portfolio for the year and latest prospectus are available free of charge at the registered

office of the Management Company.



31 March 2019

44

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. Investment Risk:

Money Market Fund is not a guaranteed investment therefore investment in any Sub-Fund carries with it a degree

of financial risk, which may vary among Sub-Funds. Investments in Money Market Funds is different from

investments in deposits, the value of Investor shares and the return generated from them may go up or down, and

investors may not recover the amount initially invested.

16. Significant events:

Diane Hosie, Carine Feipel, Susanne Van Dootingh are appointed as directors’ to the Board of the Company

effective 17 July 2018.

Effective 1 January 2019 Morgan Stanley Investment Management (ACD) Limited was replaced by MSIM Fund

Management (Ireland) Limited as Management Company and Morgan Stanley Investment Management (Ireland)

Limited as Distributor. Refer to Note 4 for further details.

Effective 18 March 2019 The Bank of New York Mellon (International) Limited, Luxembourg Branch, was replaced

by the Bank of New York Mellon SA/NV, Luxembourg Branch to provide Depositary, Administrator, Registrar and

Transfer Agent and Paying Agent services. Refer to Note 1 for further details.

An updated prospectus was issued on the 15 March 2019.

Effective 18 March 2019, each Sub-Fund qualified as a short-term Money Market Fund pursuant to the European

Money Market Fund (MMF) Regulation. The MMF Regulation prohibits the use of Reverse Distribution Mechanism

(Share cancellation) in a negative interest rate environment hence, the Euro Liquidity Fund’s Income share classes

were liquidated and the assets transferred to new ‘Accumulation D’ classes. The negative net investment income is

retained in the value of each Accumulation classes of the Euro Liquidity fund. Refer to Note 1 for further details.

There were no other significant events during the year.

17 Post balance sheet events:

The following shares classes were launched after the year end on the 1 April 2019:

US Dollar Treasury Fund Capital

US Dollar Treausry Fund NR

US Dollar Treasury Fund LF

US Dollar Liquidity Fund Capital

US Dollar Liquidity Fund Capital

US Dolalr Liquidity Fund NR

Sterling Liquidty Institutional Plus

The US Dollar Ultra Short Income Fund was launched on the 25 April 2019.


Appendix 1: Total Expense Ratio (Unaudited)

45

The below table discloses the total expense ratios (TER) attributable to the Classes of Shares of the Sub-Funds as at 31

March 2019. 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 2019

TER (%)

As at 31 March 2018

Euro Liquidity Fund

Institutional Accumulation D Shares1 0.09% -

Institutional Accumulation Shares 0.09% 0.09%

Institutional Select Accumulation D Shares1 0.14% -

Institutional (+1) Accumulation Shares 0.09% 0.09%

MS Reserve Accumulation D Shares1 0.00% -

Qualified Accumulation D Shares1 0.10% -


Institutional Shares 0.20% 0.20%


Institutional Select Shares 0.25% 0.24%

Qualified Shares1 0.21% -

MS Reserve Shares 0.00% 0.00%

Qualified Accumulation Shares 0.21% 0.21%

Advisory Shares 0.45% 0.45%

US Dollar Treasury



MS Reserve Shares 0.00% 0.00%

Institutional Accumulation Shares1 0.20% -

Advisory Shares 0.45% 0.45%

Qualified Accumulation Shares1 0.21% -





Qualified Shares 0.17% 0.14%

1

1 Refer to Note 1 for details of launch dates of Sub – Funds and Classes of Shares


Appendix 2: Securities Financing Transactions Regulation (Unaudited)

46

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 2019 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 2019:

Sub-Fund Name Sub-Fund

Currency Market Value in Sub-Fund Currency

% of Total Net

Assets Value

Euro Liquidity Fund EUR 170,000,000 4.69%

US Dollar Liquidity Fund USD 1,609,000,000 8.41%

US Dollar Treasury Liquidity Fund USD 2,841,000,000 47.59%

Sterling Liquidity Fund GBP 220,000,000 9.27%

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 2019:

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

Government of the United

Kingdom

- - - 224,400,002

Government of the Kingdom of

Spain

170,903,389 - - -

Government of the Republic of

Italy

2,496,612 - - -

Government of the United States

of America

- 1,610,090,300 2,844,980,686 -

Total 173,400,001 1,610,090,300 2,844,980,686 224,400,002


Appendix 2: Securities Financing Transactions Regulation (Unaudited) (continued)

47

Counterparties

The following table lists the counterparties by value of assets engaged in reverse repurchase transactions as at 31 March

2019:

Sub-Fund Name Counterparty

Incorporation

Country

Settlement and

Clearing Currency

Market Value

of Reverse

Repurchase

Transactions

Euro Liquidity Fund Citigroup Global

Markets

United States

of America

Tri-party EUR 170,000,000

US Dollar Liquidity Fund Bank of Nova

Scotia

Canada Tri-party USD 514,000,000

US Dollar Liquidity Fund JP Morgan

Securities LLC

United States

of America

Tri-party USD 400,000,000

US Dollar Liquidity Fund Credit Agricole France Tri-party USD 695,000,000

US Dollar Treasury

Liquidity Fund

Canadian

Imperial Bank of

Commerce


US Dollar Treasury

Liquidity Fund

Bank of Nova

Scotia


US Dollar Treasury

Liquidity Fund

Barclays Bank

Plc

United

Kingdom


US Dollar Treasury

Liquidity Fund

BNP Paribas France Tri-party USD 600,000,000

US Dollar Treasury

Liquidity Fund

JP Morgan

Securities LLC

United States of

America


US Dollar Treasury

Liquidity Fund

Credit Agricole France Tri-party USD 105,000,000

Sterling Liquidity Fund BNP Paribas France Tri-party GBP 110,000,000

Sterling Liquidity Fund Lloyds Bank United

Kingdom

Tri-party GBP 110,000,000

III. Aggregate Transaction Data

Type, currency and quality of collateral

Non-cash collateral received by the Sub-Fund in respect of reverse repurchase transactions as at the reporting date is in the

form of fixed income instruments issued by governments of the following countries: Italy, Spain, United Kingdom and

United States.

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.



48

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 173,400,001

US Dollar Liquidity Fund USD Fixed Income Investment Grade 1,610,090,300

US Dollar Treasury Liquidity Fund USD Fixed Income Investment Grade 2,844,980,686

Sterling Liquidity Fund GBP Fixed Income Investment Grade 224,400,002

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

- - -

599

64,647,816

108,751,586

-

US Dollar Liquidity

Fund

USD

102,753

392

3,805,700

11,460,773

185,328,618

1,409,392,064

-

US Dollar Treasury

Liquidity Fund

USD

- -

1,468

3,908

4,423,272

2,840,552,038

-

Sterling Liquidity

Fund

GBP

- - - -

5,760,088

218,639,914

-

Maturity tenure of reverse repurchase transactions

All transactions as at 31 March 2019 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, The Bank

of New York Mellon SA/NV, Luxembourg Branch, who is ultimately responsible for the safekeeping of the collateral on

behalf of these Sub-Funds. All collaterals are held in segregated accounts.



49

V. Safekeeping of Collateral (continued)

Collateral Granted

No collateral is granted by the Company as part of the reverse repurchase transactions.

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 2019:

Sub-Fund Currency

in Sub-fund Currency

Interest received by

Sub-Funds

Interest charged to

Sub-Funds Sub-Fund Name

Euro Liquidity Fund EUR - 940,265

US Dollar Liquidity Fund USD 30,733,492 -

US Dollar Treasury Liquidity Fund USD 43,936,555 -

Sterling Liquidity Fund GBP 553,830 -

There are no other direct or indirect costs relating to reverse repurchase transactions.


Appendix 3: Remuneration Policy (Unaudited)

50

1. Legal background

This remuneration disclosure has been prepared as required by, and in accordance with, the guidance provided in (1)

EU Commission Recommendation on remuneration policies in the financial services sector (2009/384 EC) dated 30

April 2004 ("the Recommendation"); (2) EU Directive 2009/65/EC (as amended by Directive 2014/91/EU) ("the

UCITS Directive"); and (3) the European Securities and Markets Authority's "Guidelines on sound remuneration

policies under the UCITS Directive", (ESMA/2016/575) dated 14 October 2016 ("the Guidelines") and in particular

with section 14.1 (headed "External Disclosure").

The data used in the analysis for this disclosure relates to the financial year ending 31 December 2018 of Morgan

Stanley ("the Firm") and to the remuneration of staff of Morgan Stanley Investment Management (ACD) Limited

(“the UCITS Management Company”) and its senior management team and other members of its staff whose

actions have a material impact on the risk profile of the UCITS it manages or on the UCITS Management Company

itself.

As of 1 January 2019, Morgan Stanley Liquidity Funds changed Management Company from Morgan Stanley

Investment Management (ACD) Limited to MSIM Fund Management (Ireland) Limited. Remuneration is reviewed

on a calendar year basis and for the 2018 performance year, for which this disclosure relates, the Management

Company was Morgan Stanley Investment Management (ACD) Limited.

2. The "Identified Staff" for the purposes of this disclosure

The Guidelines define “Identified Staff” as follows:

a) "categories of staff, including senior management, risk takers, control functions, staff responsible for

heading the investment management, administration, marketing, and any employee receiving total

remuneration that falls into the remuneration bracket of senior management and risk takers, whose

professional activities have a material impact on the management company's risk profile or the risk profiles

of UCITS that it manages" ("Group A"); and

b) "categories of staff of the entity(ies) to which investment management activities have been delegated by the

management company and whose professional activities have a material impact on the risk profiles of the

UCITS that the management company manages" ("Group B").

References in this disclosure letter to "Identified Staff" or to staff in Group A or Group B, should be construed

accordingly.

No Identified Staff are employed or paid by the UCITS Management Company itself (as it has no employees). All of

the Identified Staff are employees of other Morgan Stanley entities whose professional activities are considered to

have a material impact on the risk profile of the UCITS managed by the UCITS Management Company, taking into

consideration the internal organisation, nature, scope and complexity of the UCITS Management Company and the

UCITS it manages.

The Identified Staff within Group A are staff who have been identified as having a material impact on the risk

profile of the Morgan Stanley International Group. The identified staff are subject to applicable CRD IV rules on

remuneration which are deemed “equally as effective” as those outlined in the Guidelines.

The Identified Staff in Group B are staff of one of the Morgan Stanley group entities to which the portfolio

management of one or more of the UCITS Management Company's Funds has been delegated pursuant to Article 13

of the UCITS Directive. They are not seconded to, or performing a function of, the UCITS Management Company.

Accordingly they are not staff of the UCITS Management Company. Where appropriate they are subject to UCITS

rules on remuneration.


Appendix 3: Remuneration Policy (Unaudited) (continued)

51

3. Process for determining remuneration policies and principles

The UCITS Management Company, as an affiliate of Morgan Stanley, benefits from the resources available within

the Firm and is subject to the remuneration policies and practices that are applied to all UK regulated entities of the

Firm.

In determining, maintaining and implementing the UK remuneration policies and practices applicable to the UCITS

Management Company, including Identified Staff, the UCITS Management Company is subject to the remuneration

policies and practices that apply to all UK regulated entities of the Firm and may consult, or receive guidance from,

the Firm’s control functions and relevant remuneration committees to ensure consistency. Remuneration policy is

designed to satisfy four key Firm-wide remuneration objectives: (i) deliver pay for sustainable performance, (ii)

align remuneration with shareholders’ interests, (iii) attract and retain top talent, and (iv) mitigate excessive risk-

taking.

In support of these objectives, annual compensation (i.e. remuneration) for the majority of the Firm's employees,

including Identified Staff, is comprised of two key elements: fixed remuneration and variable remuneration (variable

incentive remuneration) that is discretionary based on, among other factors, Firm performance measured against

risk-adjusted metrics and individual and business segment performance.

The committee that manages remuneration for the Firm is the Compensation, Management Development and

Succession Committee (CMDS Committee) of the Morgan Stanley Board of Directors. As of December 31, 2018, it

consisted of four directors, all of whom are independent under the New York Stock Exchange listing standards.

Each year, the CMDS Committee’s mandate is to review the Firm-wide aggregate variable remuneration pool for

variable incentive remuneration and to review and approve the design and structure of Morgan Stanley's Firm-wide

deferred incentive remuneration programs, including the form of deferred incentive remuneration awards to be

granted, the portion of variable incentive remuneration to be deferred, and the vesting, payment, cancellation and

clawback provisions of deferred incentive remuneration awards. The CMDS Committee has adopted the Global

Incentive Compensation Discretion Policy, which applies to all Firm entities worldwide and sets forth guidance for

managers on the use of discretion and considerations for assessing risk management and outcomes when making

variable incentive remuneration decisions, and considerations for assessing risk management and outcomes. It has

also approved the Global Compensation Policy which covers compensation philosophy and objectives, framework

and governance.

In addition, the Board of the UCITS Management Company has adopted a remuneration policy (the "ACD

Remuneration Policy") in compliance with the UCITS Directive and the Financial Conduct Authority's (FCA)

Remuneration Code. The policy is appropriate to the UCITS Management Company's size, and internal

organization and to the nature, scope and complexity of its activities. As well as complying with all of the UCITS

Management Company's legal obligations, the principles of the ACD Remuneration Policy support the business

strategy, objectives, values and long-term interests of its clients, including the Fund. In particular, the ACD

Remuneration Policy is designed to ensure that remuneration is consistent with and promotes sound and effective

risk management and does not encourage risk taking that is inconsistent with the risk profile of the UCITS managed

by the UCITS Management Company.

When determining its own remuneration decisions or influencing the decisions made by other Morgan Stanley

entities, the UCITS Management Company takes fully into account and complies with (1) UK and EU legislation;

(2) the ACD Remuneration Policy and FCA requirements; and (3) the requirements of other remuneration policies

set by the Firm. In doing so, it applies consistent principles with the objective of aligning the incentivisation of

Identified Staff with business objectives, supporting the delivery of the UCITS Management Company’s business

plans and corporate values, avoiding conflicts of interest and enabling the right calibre of staff to be recruited. The

UCITS Management Company always seeks to ensure, therefore, that the remuneration principles applied by it and

the Firm are consistent with and promote sound and effective risk management and do not encourage risk-taking

that is inconsistent with the risk profiles, rules or instruments of incorporation of the UCITS managed by the UCITS

Management Company.



52

The following considerations are taken into account in the design, implementation and oversight of the UCITS

Management Company’s remuneration policies and practices:

Overall corporate governance principles and structures as well as their interactions with the remuneration

system;

The inputs provided by all control functions (i.e. human resources, risk management, compliance, internal

audit, etc.), which will be properly involved in the design of the Remuneration Policy, as further described

below; and

The clear distinction between operating and control functions, the safeguards for preventing conflicts of

interests and the internal reporting system.

4. Involvement of control functions in risk management and the remuneration of those control functions

The control functions of the Firm assist the UCITS Management Company in implementing its overall

remuneration strategy, having regard to operational, liquidity, market and counterparty risks.

In particular:

a. The Risk Management function helps to ensure that the structure and design of remuneration arrangements

does not encourage risk taking that is inconsistent with the risk profile of the UCITS managed by the

UCITS Management Company;

b. The Human Resources and Compliance functions analyse how the remuneration structure affects the

UCITS Management Company's compliance with legislation, regulations and internal policies;

c. The Internal Audit function periodically carries out an independent audit of the design, implementation and

effects of Morgan Stanley's remuneration policies;

d. The EMEA Remuneration Oversight Committee (EROC) provides formal oversight of EMEA

remuneration matters to ensure remuneration practices in EMEA are compliant with relevant UK and EU

legislation and follow good practice standards. The membership of the EROC is made up of the EMEA

control function heads as well as the EMEA Chief Executive Officer. The EROC reviews activities of the

UCITS Management Company that may lead to individual or collective adjustments of remuneration for its

employees; and

e. The UK Remuneration Committee was established with effect from January 1, 2017. It is appointed by the

Board of Directors of Morgan Stanley International Limited (MSI) to assist in discharging its obligations in

relation to remuneration matters of MSI and its subsidiaries (the Morgan Stanley UK Group) and identified

material risk takers. Its remit includes reviewing the remuneration policies and practices of the UCITS

Management Company in accordance with the Remuneration Code.

The Control Functions, including Risk Management, Compliance, Finance, Internal Audit, and Human

Resources, along with Legal, are independent from the businesses they monitor. Those engaged in control

functions are remunerated in accordance with objectives linked to their functions. This is independent of the

UCITS they control. Potential conflicts that may arise in relation to individual compensation decisions are

mitigated by the independent role of Human Resources in the year end compensation process.



53

5. Design and structure of remuneration

Remuneration paid to Identified Staff is awarded in accordance with Morgan Stanley principles relating to

remuneration. Annual remuneration is comprised of two key elements: fixed remuneration and variable

remuneration. Staff eligibility for annual variable incentive compensation (variable remuneration) is discretionary

and subject to a multi-dimensional performance measurement, which considers, as applicable, the performance of

the individual, the UCITS Management Company, the business segment and the Firm.

Identified Staff receive a total annual remuneration package consisting of fixed pay that is comprised of base salary

and, in certain circumstances, one or more allowances that are reviewed at least annually; and variable

remuneration2, payable partially as a cash bonus and partially in the form of deferred incentive remuneration awards.

The amount of variable incentive remuneration is discretionary and is determined on the basis of, but not limited to,

a variety of factors, including performance measured against risk-adjusted metrics and individual performance. It is

possible that an individual could be awarded no variable incentive remuneration. Deferred incentive remuneration

awards are typically subject to vesting over a multi-year period and are subject to cancellation until the payment date

for competition, cause (i.e., any act or omission that constitutes a breach of obligation to the Company, including

failure to comply with internal compliance, ethics or risk management standards, and failure or refusal to perform

duties satisfactorily, including supervisory and management duties), disclosure of proprietary information, and

solicitation of employees or clients. Awards are also subject to malus until the payment date if an employee’s act or

omission (including with respect to direct supervisory responsibilities) causes a restatement of the Firm’s

consolidated financial results, constitutes a violation of the Firm’s global risk management principles, policies and

standards, or causes a loss of revenue associated with a position on which the employee was paid and the employee

operated outside of internal control policies.

The UCITS Management Company competes for access to talent globally with investment management firms,

private equity firms, hedge funds, investment banks, brokerage firms and other companies offering financial

services, and the UCITS Management Company’s ability to sustain or improve its position in this highly competitive

environment depends substantially on its ability to continue to attract and retain the most qualified individuals. In

support of the UCITS Management Company’s recruitment and retention objectives, the Firm continually monitors

competitive pay levels and structures its variable incentive awards to include, among other things, vesting, deferred

payment and cancellation provisions that protect the UCITS Management Company’s interests and align the

interests of Identified Staff with those of the UCITS’ investors.

The Firm’s Global Incentive Compensation Discretion Policy requires compensation managers to consider only

legitimate, business related factors when exercising discretion in determining variable incentive compensation,

including adherence to Morgan Stanley’s core values, conduct, disciplinary actions in the current performance year,

risk management and risk outcomes. The policy specifically provides that all managers must consider whether or

not an individual managed risk appropriately and effectively managed and supervised the risk control practices of

his or her reports during the performance year. Compensation managers are trained on the Global Incentive

Compensation Discretion Policy and are required to certify that they have followed the requirements of that policy

and have escalated situations potentially requiring attention.

Other performance criteria that may be taken into account in deciding whether to award, and the amount of any

variable incentive remuneration to award, includes (but is not limited to):

business and market conditions;

individual conduct, including but not limited to, adherence to Morgan Stanley's code of conduct and

policies;

contribution to the performance and profitability of the business unit, the UCITS Management Company

and the Firm;

2 The Firm does not award variable remuneration to a non-executive director for their non-executive director role.



54

contribution to the strategic objectives of the UCITS Management Company, business unit, the Firm and

the team;

revenue and profitability of funds managed by a portfolio manager;

assets managed by a portfolio manager; and

contribution to client objectives.

6. Quantitative remuneration disclosure3: scope of disclosure

We are required to disclose and include in this report certain aggregate remuneration details for (1) the entire staff of

the UCITS Management Company4, (2) the UCITS Management Company's senior management team and other

members of its staff whose actions have a material impact on the risk profile of the UCITS the UCITS Management

Company manages or on the UCITS Management Company itself5, and (3) the staff of the delegate of the UCITS

As explained above, however, the UCITS Management Company has no employees. Its staff are all secondees.

7. Quantitative remuneration disclosure: financial information

The requisite remuneration information in respect of the 2018 financial year ending December 31, 2018, was as

follows:

a. The total fixed remuneration paid to all staff of the UCITS Management Company’s was USD 81,587.

b. The total variable remuneration (variable incentive compensation) paid to all staff of the UCITS Management

Company was USD 86,871.

c. The number of individuals included as UCITS Management Company's staff was 68.

d. The total remuneration (fixed and variable combined) paid to senior management and other members of staff

whose actions have a material impact on the risk profile of the UCITS or on the UCITS Management Company

itself was USD 153,634.

8. Quantitative remuneration disclosure: rationale for apportionment

In calculating the "remuneration paid" to the staff in a) to d) above, we have, in accordance with the UCITS

Directive and the Guidelines, adopted a proportionate approach and included a relevant proportion of staff’s total

remuneration. The apportionment method takes in to account a number of factors including, but not limited to;

number of accounts managed by investment managers, number of accounts of the contracting entity, headcount of

the Investment Management business as a proportion of the Institutional Securities Group and Investment

Management Group overall headcount.

3 Identified Staff and their associated remuneration are not allocated to individual UCITS so a breakdown by

UCITS Fund does not exist and is not readily available. 4 Article 69 (3) (a) of the UCITS Directive.

5 Article 69 (3) (b) of the UCITS Directive and section 14 of the Guidelines.

Documents

Annual Report - Morgan Stanley · 2020-03-07 · MORGAN STANLEY LIQUIDITY FUNDS Société d'Investissement à Capital Variable organised under the laws of the Grand Duchy of Luxembourg