Investment Manager’s Report · State Street Bank Luxembourg S.C.A. (until 7 March 2016) Michael Griffin, Chairman 49, avenue J.F. Kennedy ... (the “Board”) is pleased to present

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 2016

No Subscriptions can be received on the basis of financial reports only. Subscriptions are

only valid if made on the basis of the appropriate application form, the current Prospectus,

the financial reports and any other documents required under any applicable laws or regulations.

MORGAN STANLEY LIQUIDITY FUNDS

Table of Contents

Directors and Service Providers Page 1

Board of Directors’ Report Page 2

Investment Advisers and Sub-Advisers Report:

MS Liquidity Funds - Euro Liquidity Fund Page 6

MS Liquidity Funds - US Dollar Liquidity Fund & US Dollar Treasury Liquidity Fund Page 7

MS Liquidity Funds - Sterling Liquidity Fund Page 9

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

as adopted in Luxembourg Page 10

Independent Auditor’s Report for audit in accordance with auditing standards generally accepted

in the United States Page 11

Financial Statements:

Statement of Net Assets Page 12

Statement of Net Assets Statistics Page 14

Statement of Operations and Changes in Net Assets Page 17

Schedules of investments:

MS Liquidity Funds - Euro Liquidity Fund Page 19

MS Liquidity Funds - US Dollar Liquidity Fund Page 22

MS Liquidity Funds - US Dollar Treasury Liquidity Fund Page 25

MS Liquidity Funds - Sterling Liquidity Fund Page 26

Notes to the Financial Statements Page 29

Appendix 1: Total Expense Ratio (Unaudited) Page 43


1

Directors and Service Providers

Board of Directors of the Company Depositary (continued)

State Street Bank Luxembourg S.C.A. (until 7 March 2016)

Michael Griffin, Chairman 49, avenue J.F. Kennedy

Ireland L-1855 Luxembourg

Grand Duchy of Luxembourg

Andrew Mack

United Kingdom Registrar and Transfer Agent**,

Administrative Agent** and Paying Agent**

William Jones The Bank of New York Mellon (International)

Luxembourg Luxembourg Branch (from 7 March 2016)

2-4 rue Eugène Ruppert

Henry Kelly L-2453 Luxembourg

Luxembourg Luxembourg

Judith Eden*(appointed on 21 July 2015) State Street Bank Luxembourg S.C.A. (until 7 March 2016)

United Kingdom 49, avenue J.F. Kennedy

L-1855 Luxembourg

Management Company Grand Duchy of Luxembourg

Morgan Stanley Investment Management Domiciliary Agent

(ACD) Limited

25, Cabot Square Morgan Stanley Investment Management

Canary Wharf Limited, Luxembourg Branch

London E14 4QA 6B, route de Trèves

United Kingdom L-2633 Senningerberg


Directors of the Management Company

Investment Adviser**

Judith Eden*

United Kingdom Morgan Stanley Investment Management Inc.

522 Fifth Avenue

Véronique Gillet (resigned on 12 May 2015) New York, New York, 10036

Luxembourg United States of America

Bryan Greener (resigned on 18 September 2015) Sub-Investment Adviser***

Executive Director

Morgan Stanley Investment Management Limited Morgan Stanley & Co International plc

London 25, Cabot Square

United Kingdom Canary Wharf

London E14 4QA

Andrew Mack United Kingdom

United Kingdom

Distributor**

Andrew Onslow

Managing Director Morgan Stanley Investment Management Limited

Morgan Stanley Investment Management Limited 25, Cabot Square

London Canary Wharf

United Kingdom London E14 4QA

United Kingdom

Ruairi O’Healai

Managing Director Independent Auditor of the Company

Morgan Stanley Investment Management Limited

London Ernst & Young S.A.

United Kingdom 35E, avenue J.F. Kennedy

L-1855 Luxembourg

Diane Jane Hosie (appointed on 8 February 2016) Luxembourg

Managing Director

Morgan Stanley Investment Management Limited Legal Adviser

London

United Kingdom Arendt & Medernach S.A.

14, rue Erasme

Depositary L-2082 Luxembourg

The Bank of New York Mellon (International)


Luxembourg Branch (from 7 March 2016)

2-4 rue Eugène Ruppert

L-2453 Luxembourg

Luxembourg

*Judith Eden resigned as a Managing Director from Morgan Stanley Investment Management Limited as well as a member of the Board of Directors of the

Management Company on 31 August 2015. She was re-appointed as a non-executive member of the Board of Directors of the Management Company on 6

January 2016.

**Delegated by the Management Company.

***Delegated by the Investment Adviser.


2

Board of Directors’ Report

The Board of Directors of the Company (the “Board”) is pleased to present the Audited Financial Statements and Annual

Report for the year ended 31 March 2016.

Directors

Michael Griffin

Independent Director and Chairman. A member of the Board since December 2012.

Mr. Griffin has over 30 years of experience in the financial sector. For the past 16 years he has been a nonexecutive

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 he managed the

Treasury trading of the bank which included sovereign debt, money markets and foreign exchange. He was Chairman of

the Irish Bankers’ Federation EMU Capital Markets Committee from 1996 to 1999. He is a fellow of the Institute of

Bankers in Ireland.

William Jones

Independent Director. A member of the Board since December 2012.

Mr. Jones is the founder of ManagementPlus Group which was established in 2006 and provides directorship and

management company services from Luxembourg, Cayman Islands, Singapore, New York and Geneva. Mr. Jones has 24

years’ experience in the hedge fund industry and has held senior positions with Goldman Sachs Asset Management

International and Bank of Bermuda/HSBC. Mr. Jones completed the first cohort of the INSEAD International Directors

Program (“IIDP”) in 2011 and is a member of the IIDP Advisory Board and served as its first President. Mr. Jones has

been certified as a director by IIDP and the Institut Luxembourgeois des Administrateurs (ILA). Mr. Jones serves the

Board of Directors of ILA and its Fund Governance Committee and co-chaired the Alternative Investment Task Force of

ILA’s Fund Governance Committee which issued the “ILA Guide for Board Members in the Context of AIF and AIFM” in

July 2014. Mr. Jones serves multiple committees of ALFI, the Luxembourg fund industry association. Mr. Jones was co-

vice chair of the Alternative Investment Management Association’s (AIMA) working group which issued “AIMA’s Fund

Director Guide” in April 2015. Mr. Jones served on the Board of Governors of the International School of Luxembourg

from 2011 to 2015 and was its Chairman during the 2014-15 school year.

Andrew Mack

Director (Director of Morgan Stanley Investment Management (ACD) Limited). A member of the Board since December

2012.

Mr. Mack joined Morgan Stanley in 1996 and has 29 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 Morgan Stanley before taking over as market risk

manager of the European equities business. Mr. Mack was appointed as European head of multi asset class prime

brokerage in 2004 and took over prime brokerage sales for Europe in 2006 before running the European listed derivative

business. Mr. Mack re-joined Morgan Stanley Investment Management (MSIM) in 2008 as global chief risk officer, taking

over as head of MSIM EMEA at the beginning of 2009. Mr. Mack was an employee of Morgan Stanley until 30 June 2010.

Mr. Mack provided services as a consultant and senior adviser to Morgan Stanley between 1 July 2010 and 31 December

2013. Mr. Mack assumed a non-Executive Director role in Morgan Stanley Investment Management (ACD) Limited which

became the Management Company on 1st April 2014. Mr. Mack has been involved in taking and managing risk for most

of his investment career, his previous experience includes portfolio management, trading and risk management positions at

Cargill, Bankers Trust and Black River Asset Management, a Minneapolis based hedge fund.

Henry Kelly

Independent Director. A member of the Board since February 2013.

Henry Kelly is an independent board member of several investment funds and investment management companies

domiciled in Luxembourg and internationally. He is the Managing Director of the Luxembourg-based consultancy firm

that he founded in 1999, KellyConsult Sàrl, which provides advisory services to the investment fund sector. He is

Chairman of the Fund Governance Forum for the Association of the Luxembourg Fund Industry (ALFI) since its

establishment in 2011 and is a founding member of the Investment Funds Committee of the Luxembourg Institute of

Directors (ILA). He is a member of the European Fund and Asset Management Association (EFAMA) Corporate

Governance Working Group.


3

Board of Directors’ Report (cont.)

From 1993 – 1999 he was a Managing Director of Flemings Luxembourg (now JP Morgan Asset Management) following

5 years’ experience in the capital markets division of BNP Paribas based in Paris. Prior to these posts he acquired seven

years’ experience with Price Waterhouse in Paris, Frankfurt and New York. He has a master’s degree in Modern

Languages from Cambridge University, is a Member of the Institute of Chartered Accountants in England & Wales and

holds the INSEAD Certificate in Corporate Governance. He obtained the qualification of ILA certified director in 2013.

Judith Eden

Director (Director of Morgan Stanley Investment Management (ACD) Limited). A member of the Board since July 2015.

Prior to retiring from Morgan Stanley in 2015, Ms. Eden was Chief Executive Officer of Morgan Stanley Investment

Management’s (MSIM’s) European Fund Management Company (MSIM ACD Ltd) and Chief Administrative officer of

MSIM’s international businesses. Ms. Eden originally joined Morgan Stanley in 1992 and has over 25 years of financial

industry experience spanning Strategy, Finance, Operational Management and Audit. Prior to joining Investment

Management (IM) in 2006, Judith held senior positions in Operations and Finance within the Morgan Stanley group.

Within IM she was previously a founding member and Chief Operating Officer of the Quantitative and Structured

Solutions (QSS) team within MSIM's Alternative Investments Unit.

Prior to joining Morgan Stanley, Ms. Eden worked in Price Waterhouse's (now PWC) Audit and Business Advisory

practice specialising in Financial Services. Ms. Eden is a Fellow of the Institute of Chartered Accountants of England and

Wales, a member of the UK Institute of Directors and hold INSEAD's Corporate Governance Certificate (IDP-C). Ms.

Eden serves on a number of boards, audit and risk committees in both public and private sector organisations.

Distribution of the Sub-Funds

Sub-Funds may be offered for sale in European Union Member States, subject to registration. In addition, applications to

register the Company and its Sub-Funds may be made in other countries.

All of the Sub-Funds and Share Classes are registered for distribution in the Grand Duchy of Luxembourg and a number of

the Sub-Funds and Share Classes are registered for distribution in the following jurisdictions: Denmark, France, Germany,

Ireland, Italy, the Netherlands, Singapore, Spain, 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 on, inter alia, the accounting and

annual accounts of undertakings for collective investment and by the law of 17 December 2010 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

Administrator, Auditor, Distributor, Depositary 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.


4


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 does not limit the number of years of Directors’ service and it does take into account the nature and requirements of

the fund industry and of the Company’s business when making recommendation to shareholders that Directors be elected.

Board Meetings and Committees

The Board meets regularly on a quarterly basis but if necessary additional ad hoc meetings will be arranged.

At the quarterly Board meetings, the agenda includes, amongst other matters, those items highlighted under the section

above called “Role and Responsibility of the Board” and the approval of the annual report and accounts.

In certain circumstances, when it may not be appropriate to wait until the next Board meeting to discuss a particular issue,

authority may be delegated to one or more Board member to deal with particular business issues.

Internal Control

The Board’s system of internal control mainly comprises monitoring the services provided by the service providers,

including the operational and compliance controls established by them to meet the Company’s obligations to shareholders

as set out in the Prospectus, Articles of Incorporation as well as all relevant regulations. They formally report to the Board

on a quarterly basis on the various activities they are responsible for and in addition shall inform the Board without delay

of any material administrative or accounting matters.

Corporate Governance and ALFI Code of Conduct

The Board is responsible for ensuring that a high level of corporate governance is met and considers that the Company has

complied with the best practices in the Luxembourg funds industry.

The Board has adopted the principles set out in the ALFI Code of Conduct (the “Code”). These principles were amended in

August 2013 and are set out below:

1. The Board should ensure that high standards of corporate governance are applied at all times;

2. The Board should have good professional standing and appropriate experience and ensure that it is collectively

competent to fulfill its responsibilities;

3. The Board should act fairly and independently in the best interests of the investors;

4. The Board should act with due care and diligence in the performance of its duties;

5. The Board should ensure compliance with all applicable laws, regulations and with the Company’s constitutional

documents;

6. The Board should ensure that investors are properly informed, are fairly and equitably treated, and receive the

benefits and services to which they are entitled;

7. The Board should ensure that an effective risk management process and appropriate internal controls are in place;

8. The Board should identify and manage fairly and effectively, to the best of its ability, any actual, potential or

apparent conflict of interest and ensure appropriate disclosure;

9. The Board should ensure that shareholder rights are exercised in a considered way and in the best interests of the

Company;

10. The Board should ensure that the remuneration of the Board members is reasonable and fair and adequately

disclosed

The Board considers that the Company has been in compliance with the principles of the Code in all material aspects

throughout the financial year ended 31 March 2016. 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.


5


Independent Auditor

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

Annual General Meeting

The next Annual General Meeting of the Company will be held on 19 July 2016 at the Registered Office of the Company

to consider matters relating to the year ended on 31 March 2016. At this meeting shareholders will, amongst other matters,

be requested to consider the usual matters at such meetings including:

1. the adoption of the financial statements and approval of the allocation of the results;

2. the approval of Directors fees;

3. the election of the Directors, all of whom wish to stand for election;

4. the election of the Auditor.

On behalf of the Board of the Company:

Director

Director

Luxembourg, 30 June 2016


6

MSLF Euro Liquidity Fund

Investment Sub-Advisers Report for the year ended 31 March 2016

Market Review In 2015 European Money Markets have continued their declining trend which was set in the middle of 2014 by the ECB by cutting the

deposit facility rate into negative territory. Although there was only a single 10 basis point cut in the deposit facility rate toward the end

of 2014, a series of monetary easing measures helped short term rates march lower throughout that year. Most importantly, on 22nd

January 2015 the European Central Bank (ECB) announced the long awaited sovereign quantitative easing (QE) program.

The ECB QE program was the driving force in money markets. Excess liquidity increased from €150bn at the start of 2015 to €650bn by

year-end and €750bn by March 2016, pushing money market yields toward the deposit facility rate (-0.30% in December 2015), and

increasing the supply/demand imbalance for European money market assets. Money market rates declined throughout 2015. 3-month

Euribor declined from +0.08% in January to -0.13% in December 2015. 3-month Eonia declined from -0.02% to -0.22%, while Eonia

overnight fixing ended 2015 at -0.15% from -0.07%. With short term rates moving firmly into negative territory, it was only a matter of

time for Money Market Funds yields to go negative, and indeed between April and May 2015 most of the industry was generating

negative returns. The transition to a negative rate regime was smooth and without notable operational hiccups and market consequences.

The move lower in short-term rates continues in Q1 2016. At their meeting on 10 March 2016, the ECB governing council surprised

markets by announcing a series of new easing measures. First, the ECB announced a cut in all policy rates. The deposit rate was cut by

10bp to -40bp as largely expected. However, there was a surprise cut in the main refinancing rate of 5bp to 0. This means that banks can

now borrow money at the ECB liquidity operations at no cost. The Marginal Lending Facility rate was also cut by 5 basis points to 25bp.

Second, the ECB announced €20bn of extra purchases a month under the asset purchase program, expanding the monthly size to €80bn.

It is worthy of note that there is also going to be an expansion of the underlying eligible assets with the introduction of non-bank euro

denominated investment grade corporate bonds. Finally, the ECB launched a new 4-year targeted longer-term refinancing operations

program (TLTRO II), with four operations starting in June 2016. Depending on each individual bank's ability to meet certain lending

criteria, the final rate of the TLTRO II operations can be reduced to a level as low as -0.40%, which means banks would be paid by the

ECB to borrow money. We conclude that this was a very important series of announcements from the ECB, which clearly indicate a

shift in focus from interest rate targets to quantitative and credit easing measures. Following the announcements, money market rates

plummeted further, with Eonia fixing at -0.34% and rates predicted to be at -0.40% one year forward.

The ECB staff macroeconomic projections have slowly declined through the year and give us a good narrative of how disappointing the

overall growth pick-up has been. Back in March 2015 growth was penciled in at 1.5%, 1.9% and 2% for 2015, 2016 and 2017

respectively. In March 2016, GDP growth for 2016, 2017 and 2018 were set at 1.4% (down from 1.7% in December 2015), 1.7% (1.9%)

and 1.8%, virtually pushing out by 1-year the growth expectations set in March 2015. It was a similar story for inflation with March

2015 projections at 0.0%, 1.5% and 1.8% for 2015, 2016 and 2017, while in March 2016 the figures for 2016, 2017 and 2018 were

forecast at 0.1%, 1.3% and 1.8%. From a macro perspective 2015 has been a “muddle through” year, where extraordinary monetary

support from the ECB, a weak currency partially driven by ECB accommodation, and low energy prices have provided a highly

supportive back-drop for the Eurozone economy. This though was partially offset by ongoing political squabbling, which produced very

little in terms of structural reforms and fiscal support. Europe seems stuck in a low growth and low or no inflation environment which

looks hardly likely to change any time soon. Conversely, this is supporting for ongoing ECB easing and depressed level of rates in the

Eurozone for the foreseeable future. Looking at market pricing, Euribor future contracts indicate rates are expected to stay negative until

2020. Macro date confirmed this slow recovery. Unemployment improved from 11.5% to just over 10% while consumer confidence,

industrial production and retail sales were all flat from Q1 2015 to Q1 2016. Purchasing Managers’ Index data were also stable and in

expansion territory.

The political backdrop has worsened, as 2015 saw the rise of non-traditional parties across Europe, increasing political fragmentation

and uncertainty on the continent. Political uncertainty remains a theme throughout Europe, with Eurosceptic parties growing. The far

right Front National (FN) party of Marie Le Pen gained the largest share of votes (28%) in the first round of the French regional

election, and came first in 6 out of 13 regions. In the second round though, they failed to win any region. The Greek general election in

September 2015 has delivered some stability with Alexis Tsipras re-elected with the same coalition as before, but with a parliamentary

majority cleared of the more radical wing of the Syriza party. Negotiations with the IMF and EU on Greek debt and reforms have been

ongoing without a definitive conclusion. Spanish elections in December 2015 were inconclusive with four parties sharing the votes and

unable to form a viable reform.

Portfolio Activity

The investment strategy for the fund continued to be prudent and defensive in nature. We remained conservative in our approach to both

credit, duration and liquidity management keeping high levels of liquidity in the fund as well as targeting high quality and highly liquid

investments.

MORGAN STANLEY & CO INTERNATIONAL PLC.

April 2016


7

MSLF US Dollar Liquidity Fund & MSLF US Dollar Treasury Liquidity Fund

Investment Advisers Report for the year ended 31 March 2016

Market Review

The economy grew an average of 2.3 percent in the first half of 2015, as 3.9 percent gross domestic product (GDP) growth in the second

quarter more than compensated for weak first quarter growth of 0.6 percent caused by bad winter weather. The economy expanded at a

somewhat slower pace in the third quarter, at 2.0 percent, as slower inventory growth subtracted from GDP as did lower exports due to

the dollar’s appreciation. Fourth quarter GDP rose in line with median forecasts, growing at 1.4 percent (annualized). Growth was

diminished due to slowing markets abroad, strong dollar appreciation, and plunging oil prices. The economy grew at an average of 2

percent through 2015. First quarter 2016 expanded at a modest 0.5 percent, the slowest pace in two years.

While economic growth continued to exhibit a choppy pattern, labour market conditions improved markedly. Non-farm payrolls rose an

average of 192,000 per month in the third quarter of 2015, accelerating in the fourth quarter to an average of 282,000. Healthy job

creation and fairly static participation rates allowed the unemployment rate to fall to 5.0 percent as of December 2015, at or near the

Federal Reserve’s (Fed) definition of full employment.

The January non-farm payrolls rose 168,000, led by strong results in the retail trade sector, but fell short of consensus expectation. The

unemployment rate decreased to 4.9 percent in January 2016. February 2016 produced strong employment data. Non-farm payrolls

increased 233,000 compared to consensus 195,000. The unemployment rate remained unchanged from January at 4.9 percent, and the

average hourly earnings fell 0.1 percent. The participation rate continued its upward trend, increasing to 62.9 percent. March 2016 non-

farm payrolls came in slightly above expectations at 208,000, compared to consensus 205,000. Most notable was an uptick in the

unemployment rate from 4.9 percent to 5 percent, which rose for positive reasons due to an increase in the participation rate that

outpaced job creation. The participation rate rose to 63 percent, the highest level since March 2014. US employment data continues to

show resilience despite increased global uncertainty.

At the June 2015 meeting, the Federal Open Market Committee (FOMC) delivered its much-anticipated updated interest rate projections

from FOMC members, which showed that the median forecast for the fed funds rate at the end of 2015 was unchanged from the March

2015 statement at 0.625 percent and that 15 of the 17 voting members believed that 2015 would be the appropriate time to increase

interest rates off of the zero bound. The Fed noted that the economy and labour market were improving but it needs to see more progress

before raising rates. Fed Chair Janet Yellen reiterated that the forward path of rate hikes will be very gradual and that all policy decisions

will be data dependent.

Over the 30 June 2015 quarter-end, the Federal Reserve Bank of New York (FRBNY) conducted term fixed-rate reverse repurchase

agreement (RRP) facility, in addition to the overnight RRP operation, which helped counterbalance some of the supply pullback in our

markets over quarter-ends. The FRBNY held two term auctions, with 7-day and 2-day maturity tenors, both for $100 billion each that

matured over month-end. Both auctions were oversubscribed and each stopped at a 0.07 percent rate. Aggregating the overnight RRP,

which totalled nearly $200 billion, with the term auctions, total RRP outstandings over the third quarter 2015 was about $450 billion, a

new high for the facility.

The July 2015 FOMC meeting went as expected, with no changes to policy and an upgraded assessment of the labour market. There was

no FOMC meeting in August 2015. However, China stole the spotlight globally as growth concerns sent the Shanghai Composite Index,

a gauge of the Chinese stock market, sharply lower. The People’s Bank of China has struggled to stem the market sell-off, despite using

a wide array of unconventional policy tools. Although global growth concerns linger, U.S. economic data continued to remain solid.

All eyes were on the FOMC in September 2015 as markets around the world eagerly anticipated the interest rate decision and update on

the economy. The September FOMC meeting was accompanied by the quarterly Summary of Economic Projections (SEP) and a press

conference with Chair Yellen. In the meeting’s most noteworthy decision, the benchmark fed funds rate was left unchanged, as the Fed

refrained from hiking rates for the first time since 2006. In terms of a rate outlook going forward, projections from FOMC members

showed that the median forecasts for the level of the fed funds rate over the next few years were revised downward slightly. Despite this,

13 of the 17 FOMC members still believed that 2015 was the appropriate time for the initial interest rate hike, which was down from 15

of 17 members in June. This messaging suggested a likelihood of a rate hike before the end of 2015.

The Fed saw further improvement in the labour market but inflation continued to run below the longer-run objective. The Fed also noted

that the “recent global economic and financial developments may restrain economic activity somewhat and are likely to put downward

pressure on inflation in the near-term.” Overall, in light of heightened uncertainties abroad and subdued inflation, the Fed believed it

should wait for further economic data to justify a rate hike. Forward guidance on this topic remained unchanged as the FOMC needed to

see further progress in the labour market and must be “reasonably confident” that inflation is moving toward the long-run target of 2

percent over the medium term before raising rates. Messaging from Chair Yellen reiterated that the forward path of rate hikes will be

very gradual and that all policy decisions will be data dependent.

The October 2015 FOMC meeting offered the market an important update on the Fed’s views on market conditions and the economy.

The FOMC indicated that the economy continued to expand at a moderate pace and upgraded household spending and business fixed

investment progress to “solid” from “moderate.” The statement also noted that the pace of job gains had slowed but the unemployment

rate remained steady. Concerns had dissipated about global developments restraining financial activity, as this wording was completely

dropped from the October statement. A key addition to this statement was the explicit mentioning of the next meeting in the context of

raising rates. Many believed that the FOMC continued to favor increasing rates off of the zero bound before the end of the year.


8

MSLF US Dollar Liquidity Fund & MSLF US Dollar Treasury Liquidity Fund (continued)

Investment Advisers Report for the year ended 31 March 2016 (continued)

Market Review (continued)

November 2015 contained no Fed meetings, but continued to produce strong non-farm payroll and GDP results.

The rates market reflected this positive sentiment as short-dated Treasuries sold off considerably during November, with yields on 1-, 3-,

6-, and 12-month Treasuries all rising by 10 to 20 basis points.

At the much-anticipated December 2015 FOMC meeting, interest rates were increased in line with expectations by basis points to a

range of 0.25 percent to 0.50 percent. FOMC members acknowledged progress in the labour market but noted that inflation remains

below their target. The Committee expects inflation to rise to 2 percent over the medium term as transitory factors dissipate. The Fed’s

updated interest rate forecasts were revised down very slightly. These projections imply four rate hikes in 2016, while market pricing

indicated expectations of only two hikes in 2016. Overall, the Fed vowed to remain data dependent in terms of its decisions on further

policy normalization going forward.

Following the December 2015 rate hike, the FRBNY made adjustments to the overnight fixed-rate RRP facility, increasing the offering

rate from 5 basis points to 25 basis points. In addition, the previous $300 billion overnight limit was removed. On year-end, the FOMC

accepted a new high of over $474 billion in overnight repos that all matured on 4 January 2016, aiding the collateral squeeze in our

markets at quarter-end periods. Unlike previous quarter-ends, there were no submissions in the term auctions leading up to year-end due

to a lack of yield incentive.

The January 2016 FOMC meeting went as expected, with members concerned about weakening growth in foreign economies and

turbulence in the global equity markets. With the Committee’s uncertainty about the impact of global developments on the U.S.

economy, they have adopted a “wait and see” stance before considering any additional monetary actions in the near term.

In line with market expectations, Federal Reserve officials held off from raising borrowing costs at the March 2016 FOMC meeting

citing concerns about global economic and financial developments, keeping the target federal funds rate at .25 percent to .5 percent. The

committee also revised their forecast of four rate hikes from the December 2015 meeting, down to two for the remainder of 2016, with

Fed Chair Janet Yellen saying it’s appropriate to “proceed cautiously” in raising interest rates. The market is more cautious, only pricing

in approximately 1 rate hike for the remainder of 2016.

Portfolio Activity

We remain quite comfortable in our conservative approach to managing both these Sub-Funds. Our investment process and focus on

credit research and risk management, combined with the continued high degree of liquidity and short maturity position of the Sub-Funds,

has put us in a unique position to respond to market uncertainty and regulatory developments. Our investment philosophy continues to

revolve around prudent credit, duration, and risk management and portfolios that are positioned defensively and with very high levels of

liquidity.

MORGAN STANLEY INVESTMENT MANAGEMENT INC.

April 2016


9

MSLF Sterling Liquidity Fund

Investment Sub-Advisers Report for the year ended 31 March 2016

Market Review The Bank of England (BoE) did not adjust monetary policy during the 12 month period ending 31 March 2016, maintaining the Bank

Rate at 0.50% and the asset purchase program at £375 billion. The Monetary Policy Committee (MPC) minutes released throughout the

period showed the votes to maintain the Bank Rate and the asset purchase program were, with some minor exceptions, generally

unanimous. The lonely dissenter, Ian McCafferty, dropped his rate hike vote in February 2016.

The message from the MPC minutes and inflation report turned out to be rather consistent, indicating robust domestic growth threatened

by the global slowdown and potential shocks, such as oil price volatility, Chinese currency devaluation, European banking worries, and

the US economy stuttering. The great overhang is represented by the referendum on EU membership which will take place on 23 June

2016. This event is raising uncertainty and slowing the economic momentum with new projects and investment being put on hold until

after the vote. At the time of writing the outcome is highly uncertain with polls putting the “Leave” and “Remain” camps neck and neck.

At a Parliament’s Treasury Select Committee (TSC) hearing, Carney said the BoE would not make any recommendation on the EU

referendum. Nonetheless he acknowledged the benefits of being part of the Union, though admitting this would expose the British

economy more to external shocks. He also highlighted the risk the referendum would bring to UK financial stability and made available

three long-term repo operations for banks to access 6-month liquidity around the referendum (14, 21 and 28 June 2016).

Concerns over global deflationary forces increased over the course of the year to the point that for a period the SONIA Overnight Index

Swaps (OIS) curve, the main indicator of BoE policy rates, was inverted pricing 10 basis point interest rate cuts toward the beginning of

2017. At a TSC (Treasury Select Committee) hearing in February 2016, MPC member Dr. Gertjan Vlieghe said he has “little tolerance

for further downside (inflation) surprises”, and should they continue, “we will get relatively quickly to a point where I find it appropriate

to respond to it”. At the same meeting, it was noted that the BoE balance sheet grew from 7% of Gross Domestic Product (GDP) pre-

crisis to approximately 22% of GDP now, and is expected to remain at these levels. Finally, despite rate cuts being a distinct possibility,

the Monetary Policy Committee (MPC) is not considering negative interest rates. Committee members indicated very broad ranges for

the new normal Bank Rate: Dr. Gertjan Vlieghe: 1 – 3%; Nemat Shafik: 2.5%; Martin Weale: 1.5 – 3.5%.

Money market rates were ranged-bound over the period. 3-month LIBOR ranged between 0.57% and 0.59%, while 3-month OIS traded

consistently between 0.46% and 0.47%, indicating that a rate hike was never imminent. However, future rate hike expectations have

been aggressively pared back as the year went on. Back in June 2015, the Mar-17 future contract implied a LIBOR level as high as

1.60%. By the end of March 2016 this expectation was pared back to 0.60%. It is possible that once the EU referendum is out of the way,

rate hike expectations might be pulled forward again, but a weakening domestic macro picture and persistently declining global growth

expectations are unlikely to see the BoE in a hurry to move interest rates higher.

Macro data were characterized by robust domestic indicators, particularly labour market with unemployment reaching a multi-year rate

of 5%. Nonetheless, surveys such as Purchasing Managers’ Index continued to weaken during the year, driven by softer global growth

expectations and EU referendum uncertainty. GDP growth and inflation expectations have been consistently adjusted lower. The

February 2016 inflation report showed that the Consumer Price Index was expected to remain lower for most of 2016 before picking up

and reaching 2.1% at the 2-year horizon. The GDP forecast was lowered to 2.2% for 2016, 2.4% for 2017 and 2.5% for 2018. This is in

stark contrast with much rosier expectations set a year earlier for 2016 and 2017. Back in February 2015, the inflation report forecast

inflation for 2015 at 0.5% (from 1.4% forecast in November 2014). In 2016 instead inflation was expected to accelerate to 1.8% and in

2017 to reach 2.1%. GDP growth was seen at 2.9% for 2015 and 2016, and 2.7% in 2017. It is now quite possible that 2016 GDP growth

will come in below 2%. Despite the skills shortage in the labour market wage inflation has failed to pick up substantially casting further

doubts on the BoE’s ability to bring inflation back to target. After a long phase of sustained strength, the British Pound has started to

depreciate substantially, partially driven by EU referendum uncertainty. This could prove to be a boost for inflation.

Portfolio Activity

The investment strategy for the fund continued to be prudent and defensive in nature. We remained conservative in our approach to both

credit, duration and liquidity management keeping high levels of liquidity in the fund as well as targeting high quality and highly liquid

investments.

MORGAN STANLEY & CO INTERNATIONAL PLC.

April 2016


10

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

Luxembourg

To the Shareholders of

Morgan Stanley Liquidity Funds

6B, route de Trèves

L-2633 Senningerberg


We have audited the accompanying financial statements of Morgan Stanley Liquidity Funds (the “Company”) and of each of its sub-

funds, which comprise the statement of net assets including the schedule of investments as at 31 March 2016 and the statement of

operations and changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory

notes to the financial statements.

Responsibility of the Board of Directors of the Company for the financial statements

The Board of Directors of the Company is responsible for the preparation and fair presentation of these financial statements in

accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements and for such

internal control as the Board of Directors of the Company determines is necessary to enable the preparation and presentation of financial

statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the “réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those

standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The

procedures selected depend on the judgement of the “réviseur d’entreprises agréé”, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the “réviseur d’entreprises

agréé” considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by the Board of Directors of the Company, as well as evaluating the overall presentation of the financial

statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of Morgan Stanley Liquidity Funds and of each

of its sub-funds as of 31 March 2016, and of the results of their operations and changes in their net assets for the year then ended in

accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements.

Other matter

Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to

specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such

information. However, we have no observation to make concerning such information in the context of the financial statements taken as a

whole.

ERNST & YOUNG

Société Anonyme

Cabinet de révision agréé

Luxembourg, 30 June 2016 Michael Ferguson


11

Independent Auditor’s Report for audit in accordance with auditing standards generally accepted in the United

States

To the Shareholders of

Morgan Stanley Liquidity Funds

6B, route de Trèves

L-2633 Senningerberg


We have audited the accompanying financial statements of Morgan Stanley Liquidity Funds (the “Company”), which comprise the

statement of net assets including the schedule of investments as of 31 March 2016 and the related statements of operations and changes

in net assets for the year then ended, and the related notes to the financial statements.

Responsibility of the Board of Directors of the Company for the Financial Statements

The Board of Directors of the Company is responsible for the preparation and fair presentation of these financial statements in

conformity with Luxembourg legal and regulatory requirements; this includes the design, implementation, and maintenance of internal

control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to

fraud or error.

Responsibility of the “réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The

procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the

Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we

express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Morgan Stanley

Liquidity Funds at 31 March 2016, and the results of its operations, changes in net assets for the year then ended, in conformity with

Luxembourg legal and regulatory requirements.

Ernst & Young S.A.

Luxembourg, 30 June 2016


The accompanying notes form an integral part of financial statements.

12

Statement of Net Assets

As of 31 March 2016

US Dollar

Euro US Dollar Treasury Sterling

Liquidity Liquidity Liquidity Liquidity

Fund Fund Fund Fund Combined

ASSETS EUR USD USD GBP USD

Investment in securities at amortized cost (Note

2a) 2,620,917,518 8,020,197,165 1,365,302,629 2,007,415,111 15,257,429,049

Time deposits (Note 9) 353,447,628 930,000,000 – 286,301,563 1,744,273,165

Reverse Repurchase agreements (Note 8) 200,000,000 900,000,000 130,000,000 250,000,000 1,617,235,473

Interest receivable (Note 2c) 3,397,146 4,267,698 1,329,908 1,242,697 11,254,957

Cash at bank (Note 2d)(1) 5,821 62,735,323 43,640,073 4,390 106,388,339

Receivable from investment sold – 347,478,028 99,992,313 – 447,470,341

Operating fee reimbursement 376,608 840,928 186,358 247,421 1,812,069

Other assets 24,456 – – – 27,869

TOTAL ASSETS 3,178,169,177 10,265,519,142 1,640,451,281 2,545,211,182 19,185,891,262

LIABILITIES

Payable for investment purchased 62,307,437 – 100,000,000 119,991,237 343,466,034

Dividends payable (Note 3) – 4,650,921 310,910 980,622 6,371,280

Expense payable 1,087,366 5,947,224 763,112 1,377,221 9,928,926

TOTAL LIABILITIES 63,394,803 10,598,145 101,074,022 122,349,080 359,766,240

NET ASSET VALUE 3,114,774,374 10,254,920,997 1,539,377,259 2,422,862,102 18,826,125,022

(1) Cash is held at the Depositary. On behalf of the Board of the Company:

Director

Director

30 June 2016

.



13

Statement of Net Assets

As of 31 March 2015

US Dollar Euro US Dollar Treasury Sterling



ASSETS EUR USD USD GBP USD

Investment in securities at amortized cost (Note 2a) 2,654,422,491 9,484,455,513 548,075,226 1,687,026,129 15,387,771,653

Time deposits (Note 9) 374,677,104 1,280,000,000 – 375,750,213 2,240,204,670

Reverse Repurchase agreements (Note 8) 190,000,000 125,000,000 135,000,000 140,000,000 671,890,083

Interest receivable (Note 2c) 6,844,724 6,390,473 251,250 857,105 15,265,327

Cash at bank (Note 2d)1 – 280,275,987 29,836,414 2,325 310,115,852

Operating fee reimbursement 156,565 118,852 – 21,007 318,188

TOTAL ASSETS 3,226,100,884 11,176,240,825 713,162,890 2,203,656,779 18,625,565,773

LIABILITIES

Payable for investment purchased 103,670,544 23,846,337 49,998,056 149,886,045 407,692,515

Dividends payable (Note 3) 6,321 1,088,806 14,179 701,728 2,151,490

Expense payable 319,795 1,682,222 204,014 389,113 2,807,334

Other liabilities 74,766 – 107 1 80,407

TOTAL LIABILITIES 104,071,426 26,617,365 50,216,356 150,976,887 412,731,746

NET ASSET VALUE 3,122,029,458 11,149,623,460 662,946,534 2,052,679,892 18,212,834,027

(1) Cash is held at the Depositary.



14

Statement of Net Assets Statistics

As of 31 March 2016

Outstanding Shares as at



Currency 31 March 2016 31 March 2015 31 March 2014

Euro Liquidity Fund

Advisory Shares(Note 1) EUR – 200,001 700,001 Institutional Shares EUR 2,619,231,047 2,626,897,424 1,940,539,493

Institutional Accumulation Shares EUR 292,742 355,656 251,523

Institutional Select Shares(Note 1) EUR 1,891,776 – – MS Reserve Shares EUR 461,601,715 455,540,651 210,040,485

Qualified Accumulation Shares(Note 1) EUR – 3,667 3,672

US Dollar Liquidity Fund

Advantage Accumulation Shares USD 1,915 1,915 1,915

Advisory Shares(Note 1) USD – 10,000 10,000 Advisory Accumulation Shares(Note 1) USD – 1 1

Institutional Shares USD 5,678,343,980 6,497,826,582 5,275,034,000

Institutional Accumulation Shares USD 434,384 1,292,896 2,666,827 Institutional Select Shares USD 96,411,194 1,010,208 1,010,008

Master Shares USD 4,162,860,364 4,237,292,052 4,206,346,687

MS Reserve Shares USD 254,905,289 272,821,475 203,605,553 Qualified Shares USD – – 1,101,168

Qualified Accumulation Shares(Note 1) USD 157,900 24,025 138,190

US Dollar Treasury Liquidity Fund

Advisory Shares(Note 1) USD – 10,000 10,000

Institutional Shares USD 956,120,649 224,190,299 322,780,457 Institutional Select Shares USD 50,010,000 10,000 10,000

MS Reserve Shares USD 533,246,611 438,736,235 664,837,334

Sterling Liquidity Fund

Institutional Shares GBP 2,364,122,971 1,988,785,860 1,164,747,566

Institutional Accumulation Shares GBP 163,548 157,669 264,609 Institutional Select Shares GBP 7,000,000 7,041,521 –

Institutional Select Accumulation Shares(Note 1) GBP – 570 –

MS Reserve Shares GBP 24,195,694 27,321,857 25,725,407 Qualified Shares GBP 9,022,300 11,631,435 12,450,530

Qualified Accumulation Shares(Note 1) GBP – 588 1,359



15


As of 31 March 2016 (cont.)

Net Asset Value per Share as at



Currency 31 March 2016 31 March 2015 31 March 2014

Euro Liquidity Fund

Advisory Shares(Note 1) EUR – 1.00 1.00 Institutional Shares EUR 1.00 1.00 1.00

Institutional Accumulation Shares EUR 109.48 109.63 109.57

Institutional Select Shares(Note 1) EUR 1.00 – – MS Reserve Shares EUR 1.00 1.00 1.00

Qualified Accumulation Shares(Note 1) EUR – 109.62 109.56


Advantage Accumulation Shares USD 101.13 101.09 101.08

Advisory Shares(Note 1) USD – 1.00 1.00 Advisory Accumulation Shares(Note 1) USD – 101.07 101.07

Institutional Shares USD 1.00 1.00 1.00

Institutional Accumulation Shares USD 106.85 106.67 106.63 Institutional Select Shares USD 1.00 1.00 1.00

Master Shares USD 1.00 1.00 1.00

MS Reserve Shares USD 1.00 1.00 1.00 Qualified Shares USD – – 1.00

Qualified Accumulation Shares(Note 1)* USD 100.02 106.66 106.63


Advisory Shares(Note 1) USD – 1.00 1.00

Institutional Shares USD 1.00 1.00 1.00 Institutional Select Shares USD 1.00 1.00 1.00

MS Reserve Shares USD 1.00 1.00 1.00


Institutional Shares GBP 1.00 1.00 1.00

Institutional Accumulation Shares GBP 113.25 112.74 112.29 Institutional Select Shares GBP 1.00 1.00 –

Institutional Select Accumulation Shares(Note 1) GBP – 100.08 –

MS Reserve Shares GBP 1.00 1.00 1.00 Qualified Shares GBP 1.00 1.00 1.00

Qualified Accumulation Shares(Note 1) GBP – 112.73 112.29

*All shares issued were redeemed on 8 September 2015. The share class remained inactive until 14 March 2016 when shares were issued at a Net Asset Value per Share of $100.00.



16


As of 31 March 2016 (cont.)

Net Assets as at Net Assets as at Net Assets as at Currency 31 March 2016 31 March 2015 31 March 2014

Euro Liquidity Fund

Advisory Shares(Note 1) EUR – 200,001 700,001

Institutional Shares EUR 2,619,231,047 2,626,897,424 1,940,539,493 Institutional Accumulation Shares EUR 32,049,835 38,989,437 27,558,788

Institutional Select Shares(Note 1) EUR 1,891,776 – –

MS Reserve Shares EUR 461,601,715 455,540,651 210,040,485 Qualified Accumulation Shares(Note 1) EUR – 401,945 402,330

US Dollar Liquidity Fund Advantage Accumulation Shares USD 193,653 193,589 193,567

Advisory Shares(Note 1) USD – 10,000 10,000

Advisory Accumulation Shares(Note 1) USD – 101 101 Institutional Shares USD 5,678,343,980 6,497,826,582 5,275,034,000

Institutional Accumulation Shares USD 46,413,168 137,906,967 284,375,119

Institutional Select Shares USD 96,411,194 1,010,208 1,010,008 Master Shares USD 4,162,860,364 4,237,292,052 4,206,346,687

MS Reserve Shares USD 254,905,289 272,821,475 203,605,553

Qualified Shares USD – – 1,101,168 Qualified Accumulation Shares(Note 1) USD 15,793,425 2,562,486 14,735,829

US Dollar Treasury Liquidity Fund Advisory Shares(Note 1) USD – 10,000 10,000

Institutional Shares USD 956,120,649 224,190,299 322,780,457

Institutional Select Shares USD 50,010,000 10,000 10,000 MS Reserve Shares USD 533,246,611 438,736,235 664,837,334

Sterling Liquidity Fund Institutional Shares GBP 2,364,122,971 1,988,785,860 1,164,747,566

Institutional Accumulation Shares GBP 18,521,138 17,775,955 29,712,988

Institutional Select Shares GBP 7,000,000 7,041,521 – Institutional Select Accumulation Shares(Note 1) GBP – 57,025 –

MS Reserve Shares GBP 24,195,694 27,321,857 25,725,407

Qualified Shares GBP 9,022,300 11,631,435 12,450,530 Qualified Accumulation Shares(Note 1) GBP – 66,239 152,586


Statement of Operations and Changes in Net Assets

For the Year ended 31 March 2016


17

US Dollar




INCOME EUR USD USD GBP USD

Interest (Note 2c) (2,725,036) 40,145,865 1,736,661 13,654,417 59,435,878

Total Positive/(Negative) Income (2,725,036) 40,145,865 1,736,661 13,654,417 59,435,878

EXPENSES

Management fees (Note 4,6) 5,423,641 14,646,196 1,306,196 4,770,045 29,121,815

Less: Management fees waived (4,101,086) (2,259,683) (652,466) (1,905,096) (10,307,628)

Management fees - Net 1,322,555 12,386,513 653,730 2,864,949 18,814,187

Taxe d'Abonnement (Note 5) – 406,859 – 533 407,662

Legal fees (Note 6c) 34,196 34,546 34,546 25,129 144,677 Director's fees and director's liability insurance

premium (Note 6b) 47,714 52,844 52,948 35,571 212,022

Ratings fees (Note 6c) 56,687 71,401 31,901 41,033 227,661 Tax Charges (excluding Taxe d'Abonnement) (Note 5) 19,942 21,540 13,725 15,559 80,706

Other fees (Note 6c) 20,374 20,404 26,014 14,870 91,298

Audit fees (Note 6c) 13,766 15,687 15,687 10,914 63,003

Professional fees (Note 6c) 12,672 35,716 1,147 5,122 58,563

Distribution fees (Note 6c) 11,152 9,586 9,586 7,637 42,981

Less: Operating fee reimbursement (223,208) (258,994) (185,554) (155,596) (925,223)

Total Expenses 1,315,850 12,796,102 653,730 2,865,721 19,217,537

Net Investment Income/(Expense) (4,040,886) 27,349,763 1,082,931 10,788,696 40,218,341

Less: Distribution paid from income (Note 3) (1,829) (27,075,715) (1,082,957) (10,707,153) (44,283,831)

Receipt from the Compulsory Redemption of shares (Note 3, 16) 3,985,919 – – – 4,399,611

Net Increase/(Decrease) in Net Assets resulting

from operations (56,796) 274,048 (26) 81,543 334,121

Proceeds from issuance of shares 14,162,192,012 62,301,227,920 12,170,777,189 16,125,747,721 114,386,682,282

Shares redeemed (14,169,390,300) (63,196,204,431) (11,294,346,438) (15,755,647,054) (113,855,865,173)

Increase/(Decrease) in Net Assets from share

transactions (7,198,288) (894,976,511) 876,430,751 370,100,667 530,817,109

Increase/(Decrease) in Net Assets (7,255,084) (894,702,463) 876,430,725 370,182,210 531,151,230

Net Assets at the beginning of the year 3,122,029,458 11,149,623,460 662,946,534 2,052,679,892 18,212,834,027

Foreign exchange adjustment on translation – – – – 82,139,765

NET ASSETS AT THE END OF THE YEAR 3,114,774,374 10,254,920,997 1,539,377,259 2,422,862,102 18,826,125,022

On behalf of the Board of the Company: Director

Director

30 June 2016



18

Statement of Operations and Changes in Net Assets

For the Year ended 31 March 2015

US Dollar




INCOME EUR USD USD GBP USD

Interest (Note 2c) 3,627,480 19,151,392 336,192 9,345,389 39,112,629

Total Income 3,627,480 19,151,392 336,192 9,345,389 39,112,629

EXPENSES

Management fees (Note 4,6) 6,375,840 11,480,737 788,446 3,529,911 25,997,200

Less: Management fees waived (4,578,960) (2,367,061) (613,357) (1,406,039) (11,021,453)

Management fees - Net 1,796,880 9,113,676 175,089 2,123,872 14,975,747

Taxe d'Abonnement (Note 5) 45 470,244 – 1,072 472,027

Legal fees (Note 6c) 72,873 82,943 82,944 52,242 341,949 Director's fees and director's liability insurance

premium (Note 6b) 44,586 57,084 57,085 34,718 226,325

Ratings fees (Note 6c) 44,755 62,850 30,035 36,114 207,502 Tax Charges (excluding Taxe d'Abonnement)

(Note 5) 15,442 16,846 11,990 10,883 65,843

Other fees 13,916 21,751 20,347 11,778 78,620

Audit fees (Note 6c) 14,000 17,663 17,663 10,969 70,652

Professional fees (Note 6c) 11,292 22,806 1,890 3,278 44,221

Distribution fees (Note 6c) 6,099 8,407 8,407 5,076 32,682

Less: Operating fee reimbursement (222,442) (338,510) (230,402) (165,204) (1,115,572)

Total Expenses 1,797,446 9,535,760 175,048 2,124,798 15,399,996

Net Investment Income 1,830,034 9,615,632 161,144 7,220,591 23,712,633

Less: Distribution paid from income (Note 3) (1,815,262) (9,552,090) (161,140) (7,162,178) (23,536,390)

Net Increase/Decrease in Net Assets resulting

from operations 14,772 63,542 4 58,413 176,243

Proceeds from issuance of shares 13,599,152,544 50,560,263,780 8,930,587,315 11,160,336,886 94,618,978,887

Shares redeemed (12,656,378,955) (49,397,115,894) (9,255,278,576) (10,340,504,484) (91,270,948,507)

Increase/(Decrease) in Net Assets from share

transactions 942,773,589 1,163,147,886 (324,691,261) 819,832,402 3,348,030,380

Increase/(Decrease) in Net Assets 942,788,361 1,163,211,428 (324,691,257) 819,890,815 3,348,206,623

Net Assets at the beginning of the year 2,179,241,097 9,986,412,032 987,637,791 1,232,789,077 16,032,832,406

Foreign exchange adjustment on translation – – – – (1,168,205,002)

NET ASSETS AT THE END OF THE YEAR 3,122,029,458 11,149,623,460 662,946,534 2,052,679,892 18,212,834,027

MORGAN STANLEY LIQUIDITY FUNDS Euro Liquidity Fund

Schedule of Investments

As of 31 March 2016

(Expressed in EUR)


19

ISSUE DENOMINATION

CURRENCY HOLDINGS COUPON

RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS

TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS

COMMERCIAL PAPER 38.67%

BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 25,000,000 0.00% 21-Apr-16 25,000,695 0.80 BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 30,000,000 0.00% 27-Apr-16 30,001,084 0.96

BANQUE FEDERATIVE DU CREDIT MUTUEL EUR 30,000,000 0.00% 09-Sep-16 30,026,189 0.97 CATERPILLAR INTERNATIONAL FINANCE EUR 6,000,000 0.00% 04-Apr-16 6,000,085 0.19

CATERPILLAR INTERNATIONAL FINANCE EUR 35,000,000 0.00% 15-Jun-16 35,021,161 1.13

CATERPILLAR INTERNATIONAL FINANCE EUR 6,000,000 0.00% 04-Jul-16 6,004,402 0.19 DEKABANK DEUTSCHE GIROZENTRALE EUR 15,000,000 0.00% 08-Apr-16 15,000,729 0.48

DEKABANK DEUTSCHE GIROZENTRALE EUR 14,000,000 0.00% 08-Apr-16 14,000,681 0.45

DEKABANK DEUTSCHE GIROZENTRALE EUR 28,000,000 0.00% 15-Apr-16 28,001,144 0.90 DEKABANK DEUTSCHE GIROZENTRALE EUR 24,000,000 0.00% 02-May-16 24,002,274 0.77

DEKABANK DEUTSCHE GIROZENTRALE EUR 20,000,000 0.00% 21-Jun-16 20,014,410 0.64

DZ BANK AG DEUTSCHE ZENTRAL-GENOSS EUR 25,000,000 0.00% 07-Apr-16 25,000,083 0.80 ENGIE SA EUR 10,000,000 0.00% 20-Apr-16 10,000,026 0.32

ENGIE SA EUR 22,000,000 0.00% 22-Apr-16 22,001,797 0.71

GE CAPITAL EUROPEAN FUNDING EUR 15,000,000 0.00% 19-Apr-16 15,000,975 0.48 GE CAPITAL EUROPEAN FUNDING EUR 10,000,000 0.00% 19-Apr-16 10,000,650 0.32

HONEYWELL INTERNATIONAL INC EUR 25,000,000 0.00% 07-Apr-16 25,000,125 0.80

HONEYWELL INTERNATIONAL INC EUR 25,000,000 0.00% 11-May-16 25,000,278 0.80 KA FINANZ AG EUR 30,000,000 0.00% 07-Apr-16 30,000,275 0.96

KA FINANZ AG EUR 25,000,000 0.00% 27-May-16 25,001,167 0.80

KA FINANZ AG EUR 25,000,000 0.00% 17-Jun-16 25,007,759 0.80 KA FINANZ AG EUR 5,000,000 0.00% 12-Jul-16 5,001,134 0.16

KA FINANZ AG EUR 10,000,000 0.00% 21-Jul-16 10,006,482 0.32

KA FINANZ AG EUR 20,000,000 0.00% 10-Oct-16 20,027,776 0.64 POHJOLA BANK PLC EUR 30,000,000 0.00% 12-Apr-16 30,002,201 0.97

POHJOLA BANK PLC EUR 12,000,000 0.00% 14-Apr-16 12,000,173 0.39

POHJOLA BANK PLC EUR 14,500,000 0.00% 24-May-16 14,506,623 0.47 POHJOLA BANK PLC EUR 15,000,000 0.00% 01-Jun-16 15,008,647 0.48

POHJOLA BANK PLC EUR 30,000,000 0.00% 13-Jun-16 30,012,786 0.97

POHJOLA BANK PLC EUR 13,000,000 0.00% 15-Aug-16 13,014,260 0.42 PROCTER & GAMBLE COMPANY EUR 13,500,000 0.00% 01-Apr-16 13,500,000 0.44

PROCTER & GAMBLE COMPANY EUR 26,000,000 0.00% 12-Apr-16 26,000,318 0.84

PROCTER & GAMBLE COMPANY EUR 25,000,000 0.00% 26-Apr-16 25,000,695 0.80 PROCTER & GAMBLE COMPANY EUR 11,000,000 0.00% 28-Apr-16 11,000,578 0.35

PROCTER & GAMBLE COMPANY EUR 20,000,000 0.00% 22-Jun-16 20,007,292 0.64

PROCTER & GAMBLE COMPANY EUR 15,000,000 0.00% 29-Jun-16 15,005,936 0.48 PROCTER & GAMBLE COMPANY EUR 13,500,000 0.00% 01-Jul-16 13,505,462 0.43

SUMITOMO MITSUI BANKING CORPORATION EUR 25,000,000 0.00% 19-May-16 25,007,671 0.80

SUMITOMO MITSUI BANKING CORPORATION EUR 25,000,000 0.00% 10-Jun-16 25,014,108 0.80 SUMITOMO MITSUI BANKING CORPORATION EUR 30,000,000 0.00% 08-Jul-16 30,016,345 0.97

SVENSKA HANDELSBANKEN AB EUR 25,000,000 0.00% 01-Apr-16 25,000,000 0.80

SVENSKA HANDELSBANKEN AB EUR 20,000,000 0.00% 11-May-16 20,001,556 0.64 SVENSKA HANDELSBANKEN AB EUR 25,000,000 0.00% 08-Jun-16 25,004,725 0.80

SVENSKA HANDELSBANKEN AB EUR 20,000,000 0.00% 06-Jul-16 20,005,603 0.64

SVENSKA HANDELSBANKEN AB EUR 7,000,000 0.00% 22-Jul-16 7,002,506 0.23 SVENSKA HANDELSBANKEN AB EUR 25,000,000 0.00% 25-Aug-16 25,018,267 0.81

SVENSKA HANDELSBANKEN AB EUR 20,000,000 0.00% 03-Oct-16 20,026,758 0.64

TORONTO DOMINION BANK EUR 50,000,000 0.00% 10-Aug-16 49,998,181 1.61 UNILEVER NV EUR 25,000,000 0.00% 31-May-16 25,004,169 0.80

UNILEVER NV EUR 25,000,000 0.00% 06-Jun-16 25,006,420 0.80

UNILEVER NV EUR 25,000,000 0.00% 05-Jul-16 25,008,582 0.80 UNILEVER NV EUR 25,000,000 0.00% 05-Sep-16 25,026,194 0.81

UNITED PARCEL SERVICE INC EUR 50,000,000 0.00% 08-Apr-16 50,001,945 1.61 UNITED PARCEL SERVICE INC EUR 25,000,000 0.00% 08-Jun-16 25,013,232 0.80

UNITED PARCEL SERVICE INC EUR 20,000,000 0.00% 30-Jun-16 20,016,013 0.64

UNITED PARCEL SERVICE INC EUR 18,500,000 0.00% 18-Jul-16 18,516,665 0.60

Total Commercial Paper 1,204,375,292 38.67


Schedule of Investments (continued)

As of 31 March 2016

(Expressed in EUR)


20

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS


TREASURY BILL 18.63%

FRANCE TREASURY BILL EUR 215,000,000 0.00% 06-Apr-16 215,012,895 6.90 FRANCE TREASURY BILL EUR 65,000,000 0.00% 13-Apr-16 65,009,030 2.09

FRANCE TREASURY BILL EUR 50,000,000 0.00% 20-Apr-16 50,009,323 1.60 FRANCE TREASURY BILL EUR 25,000,000 0.00% 04-May-16 25,008,211 0.80

FRANCE TREASURY BILL EUR 50,000,000 0.00% 19-May-16 50,024,523 1.61

FRANCE TREASURY BILL EUR 50,000,000 0.00% 01-Jun-16 50,036,254 1.61 FRANCE TREASURY BILL EUR 75,000,000 0.00% 15-Jun-16 75,066,215 2.41

FRANCE TREASURY BILL EUR 50,000,000 0.00% 29-Jun-16 50,052,590 1.61

Total Treasury Bill 580,219,041 18.63

CERTIFICATE OF DEPOSIT 11.30%

CREDIT SUISSE AG EUR 7,000,000 0.21% 13-Apr-16 7,000,490 0.23 MIZUHO BANK LTD EUR 25,000,000 0.00% 08-Apr-16 25,000,681 0.80

MIZUHO BANK LTD EUR 25,000,000 0.00% 16-May-16 25,007,191 0.80

MIZUHO BANK LTD EUR 30,000,000 0.00% 06-Jun-16 30,014,860 0.97 MIZUHO BANK LTD EUR 25,000,000 0.00% 01-Jul-16 25,017,391 0.80

SOCIETE DE FINANCEMENT LOCAL SA EUR 50,000,000 0.00% 23-May-16 50,009,757 1.61

SOCIETE DE FINANCEMENT LOCAL SA EUR 10,000,000 0.00% 08-Jun-16 10,005,671 0.32

SOCIETE DE FINANCEMENT LOCAL SA EUR 25,000,000 0.00% 13-Jun-16 25,005,072 0.80

SOCIETE DE FINANCEMENT LOCAL SA EUR 25,000,000 0.00% 23-Aug-16 25,022,526 0.81

SUMITOMO MITSUI BANKING CORPORATION EUR 25,000,000 0.00% 06-Jun-16 25,013,758 0.80 SUMITOMO MITSUI TRUST BANK LTD EUR 30,000,000 0.00% 11-Apr-16 30,001,434 0.96

SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 0.00% 11-Jul-16 25,015,442 0.80

SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 0.00% 18-Aug-16 25,013,523 0.80 SUMITOMO MITSUI TRUST BANK LTD EUR 25,000,000 0.00% 23-Aug-16 25,014,010 0.80

Total Certificate of Deposit 352,141,806 11.30

FLOATING RATE NOTE 8.58%

ANZ NEW ZEALAND INT'L LTD EUR 13,475,000 0.26% 05-Dec-16 13,506,752 0.43 AUSTRALIA AND NEW ZEALAND BANKING EUR 1,250,000 0.20% 04-Oct-16 1,251,584 0.04

COMMONWEALTH BANK OF AUSTRALIA EUR 11,365,000 0.19% 21-Oct-16 11,382,637 0.36

CREDIT SUISSE AG EUR 30,110,000 0.16% 22-Jul-16 30,129,357 0.97 NATIONAL AUSTRALIA BANK LTD EUR 26,400,000 0.16% 19-Jul-16 26,417,986 0.85

NORDEA BANK AB EUR 36,100,000 0.10% 25-Nov-16 36,149,526 1.16

RABOBANK NEDERLAND NV EUR 10,000,000 0.00% 29-Jul-16 10,000,000 0.32 RABOBANK NEDERLAND NV EUR 40,000,000 0.16% 18-Nov-16 40,049,053 1.29

RABOBANK NEDERLAND NV EUR 50,000,000 0.05% 13-Jan-17 50,013,911 1.61

RABOBANK NEDERLAND NV EUR 30,000,000 0.03% 19-Jan-17 30,000,000 0.96 SWEDBANK AB EUR 18,500,000 0.15% 20-Sep-16 18,526,344 0.59

Total Floating Rate Note 267,427,150 8.58



As of 31 March 2016

(Expressed in EUR)


21

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS


CORPORATE BOND 5.01%

DEUTSCHE BAHN FINANCE BV EUR 2,630,000 4.25% 23-Nov-16 2,705,438 0.09 ERSTE ABWICKLUNGSANSTALT EUR 19,100,000 0.50% 04-Nov-16 19,189,692 0.62

KREDITANSTALT FUR WIEDERAUFBAU EUR 20,000,000 0.50% 25-Jul-16 20,047,495 0.64 NATIONAL AUSTRALIA BANK LTD EUR 62,818,000 4.75% 15-Jul-16 63,678,910 2.05

NATIONAL AUSTRALIA BANK LTD EUR 2,157,000 3.75% 06-Jan-17 2,219,927 0.07

NRW.BANK EUR 3,060,000 0.63% 01-Aug-16 3,069,603 0.10 OESTERREICHISCHE KONTROLLBANK AG EUR 20,000,000 3.88% 15-Sep-16 20,376,289 0.65

SKANDINAVISKA ENSKILDA BANKEN AB EUR 5,610,000 3.75% 19-May-16 5,638,353 0.18

SWEDBANK AB EUR 19,107,000 2.38% 04-Apr-16 19,110,815 0.61

Total Corporate Bond 156,036,522 5.01

COMMERCIAL PAPER - INTEREST BEARING 1.61%

FMS WERTMANAGEMENT ANSTALT DES OFF EUR 50,000,000 -0.36% 02-Mar-17 50,000,000 1.61

Total Commercial Paper - Interest Bearing 50,000,000 1.61

GOVERNMENT BOND 0.34%

STATE OF NORTH RHINE-WESTPHALIA EUR 10,715,000 0.50% 14-Apr-16 10,717,707 0.34

Total Government Bond 10,717,707 0.34

Total Transferable Securities and Money Market Instruments 2,620,917,518 84.14

Total Investments 2,620,917,518 84.14

Other assets in excess of liabilities 493,856,856 15.86

Total Net Assets 3,114,774,374 100.00

MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund


As of 31 March 2016

(Expressed in USD)


22

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS



BANCO DEL ESTADO DE CHILE USD 150,000,000 0.36% 04-Apr-16 150,000,000 1.46 BANK OF MONTREAL USD 165,000,000 0.30% 06-Apr-16 165,000,000 1.61

BANK OF MONTREAL USD 125,000,000 0.63% 20-May-16 125,000,000 1.22 BANK OF NOVA SCOTIA USD 80,000,000 0.77% 26-Jul-16 80,000,000 0.78

BANQUE FEDERATIVE DU CREDIT MUTUEL USD 125,000,000 0.00% 01-Jul-16 124,766,670 1.22

BNZ INTERNATIONAL FUNDING LTD USD 100,000,000 0.81% 19-Sep-16 100,000,000 0.98 CANADIAN IMPERIAL BANK OF COMMERCE USD 65,000,000 0.77% 22-Jul-16 65,000,000 0.63

CITIBANK NA USD 130,000,000 0.64% 01-Jun-16 130,000,000 1.27

CREDIT INDUSTRIEL ET COMMERCIAL USD 25,000,000 0.72% 02-May-16 25,000,000 0.24 CREDIT INDUSTRIEL ET COMMERCIAL USD 250,000,000 0.84% 07-Jul-16 250,000,000 2.44

CREDIT INDUSTRIEL ET COMMERCIAL USD 65,000,000 0.83% 21-Jul-16 65,000,000 0.63

CREDIT SUISSE AG USD 102,000,000 0.70% 25-Apr-16 102,000,000 0.99 CREDIT SUISSE AG USD 105,000,000 0.73% 20-May-16 105,000,000 1.02

CREDIT SUISSE AG USD 75,000,000 0.78% 30-Jun-16 75,000,000 0.73

CREDIT SUISSE AG USD 60,000,000 0.78% 08-Jul-16 60,000,000 0.59 CREDIT SUISSE AG USD 85,000,000 0.86% 22-Jul-16 85,000,000 0.83

DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 64,000,000 0.68% 17-Jun-16 64,000,000 0.62

DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 63,000,000 0.68% 24-Jun-16 63,000,000 0.61 DZ BANK AG DEUTSCHE ZENTRAL-GENOSS USD 63,000,000 0.68% 24-Jun-16 63,000,000 0.61

HSBC BANK PLC USD 133,000,000 0.74% 11-Jul-16 133,000,000 1.30

MIZUHO BANK LTD USD 63,000,000 0.70% 15-Jun-16 62,999,998 0.62 MIZUHO BANK LTD USD 25,000,000 0.70% 15-Jun-16 25,000,000 0.24

MIZUHO BANK LTD USD 63,000,000 0.70% 16-Jun-16 63,000,000 0.61

MIZUHO BANK LTD USD 60,000,000 0.68% 18-Jul-16 60,000,000 0.59 MIZUHO BANK LTD USD 64,000,000 0.67% 21-Jul-16 64,000,000 0.62

OVERSEA-CHINESE BANKING CORP USD 64,000,000 0.70% 08-Jul-16 64,000,000 0.62

ROYAL BANK OF CANADA USD 109,500,000 0.73% 30-Jun-16 109,499,303 1.07 STATE STREET BANK & TRUST CO USD 127,000,000 0.65% 10-Jun-16 127,000,000 1.24

SUMITOMO MITSUI BANKING CORPORATION USD 150,000,000 0.67% 04-Apr-16 150,003,492 1.47

SUMITOMO MITSUI BANKING CORPORATION USD 215,000,000 0.69% 27-May-16 215,000,000 2.10 SWEDBANK AB USD 165,000,000 0.36% 05-Apr-16 165,000,000 1.61

SWEDBANK AB USD 300,000,000 0.35% 06-Apr-16 300,000,000 2.93

TORONTO DOMINION BANK USD 133,800,000 0.60% 24-May-16 133,800,000 1.30 UBS AG USD 100,000,000 0.67% 01-Jun-16 100,000,000 0.98

UBS AG USD 25,000,000 0.67% 03-Jun-16 25,000,000 0.24

WELLS FARGO BANK NA USD 200,000,000 0.74% 27-Jun-16 200,000,000 1.95 WESTPAC BANKING CORP USD 14,920,000 0.80% 15-Apr-16 14,920,117 0.15

Total Certificate of Deposit 3,908,989,580 38.12


AGENCE CENTRALE DES ORGANISMES USD 100,000,000 0.00% 16-Jun-16 99,847,264 0.98 AGENCE CENTRALE DES ORGANISMES USD 150,000,000 0.00% 24-Jun-16 149,755,571 1.46

AGENCE CENTRALE DES ORGANISMES USD 250,000,000 0.00% 06-Jul-16 249,514,770 2.43

BANQUE ET CAISSE D'EPARGNE DE L'ETAT USD 70,000,000 0.00% 08-Jul-16 69,862,800 0.68 BPCE SA USD 25,000,000 0.00% 02-May-16 24,984,500 0.24

COMMONWEALTH BANK OF AUSTRALIA USD 160,000,000 0.00% 29-Sep-16 159,999,676 1.56

ERSTE ABWICKLUNGSANSTALT USD 45,000,000 0.00% 13-Jun-16 44,940,687 0.44 ERSTE ABWICKLUNGSANSTALT USD 76,400,000 0.00% 14-Jun-16 76,297,921 0.75

ERSTE ABWICKLUNGSANSTALT USD 77,000,000 0.00% 16-Jun-16 76,894,339 0.75

ING US FUNDING LLC USD 140,000,000 0.00% 10-May-16 139,893,833 1.37 ING US FUNDING LLC USD 125,000,000 0.00% 01-Jul-16 124,756,701 1.22

SUMITOMO MITSUI TRUST BANK LTD USD 6,280,000 0.00% 02-May-16 6,275,890 0.06



As of 31 March 2016

(Expressed in USD)


23

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS



SUMITOMO MITSUI TRUST BANK LTD USD 75,000,000 0.00% 15-Jun-16 74,890,625 0.73 SUMITOMO MITSUI TRUST BANK LTD USD 82,000,000 0.00% 16-Jun-16 81,878,822 0.80

SUMITOMO MITSUI TRUST BANK LTD USD 140,000,000 0.00% 24-Jun-16 139,771,333 1.36 SUNCORP-METWAY LTD USD 25,000,000 0.00% 22-Jun-16 24,956,153 0.24

SUNCORP-METWAY LTD USD 50,000,000 0.00% 29-Jun-16 49,906,921 0.49

SUNCORP-METWAY LTD USD 37,350,000 0.00% 05-Jul-16 37,275,093 0.36 SUNCORP-METWAY LTD USD 10,000,000 0.00% 11-Jul-16 9,978,958 0.10

SUNCORP-METWAY LTD USD 32,000,000 0.00% 14-Jul-16 31,914,027 0.31

SUNCORP-METWAY LTD USD 25,000,000 0.00% 19-Jul-16 24,929,604 0.24 SUNCORP-METWAY LTD USD 22,000,000 0.00% 27-Jul-16 21,934,545 0.22

SUNCORP-METWAY LTD USD 25,000,000 0.00% 08-Aug-16 24,923,854 0.24

UNITED OVERSEAS BANK LTD USD 26,000,000 0.00% 15-Apr-16 25,993,226 0.25 UNITED OVERSEAS BANK LTD USD 65,000,000 0.00% 05-Jul-16 64,879,931 0.63

UNITED OVERSEAS BANK LTD USD 75,000,000 0.00% 15-Aug-16 74,787,500 0.73

Total Commercial Paper 1,911,044,544 18.64

COMMERCIAL PAPER - INTEREST BEARING 9.95%

ABS FINANCE LTD USD 100,000,000 0.80% 22-Sep-16 100,000,000 0.97

ASB FINANCE LTD USD 55,000,000 0.69% 31-May-16 55,000,000 0.54

BNZ INTERNATIONAL FUNDING LTD USD 75,000,000 0.80% 23-Sep-16 75,000,000 0.73

HSBC BANK PLC USD 250,000,000 0.86% 19-Sep-16 250,000,000 2.44 JP MORGAN SECURITIES LLC USD 250,000,000 0.66% 19-May-16 250,000,000 2.44

OVERSEA-CHINESE BANKING CORP USD 90,000,000 0.66% 23-May-16 90,000,000 0.88

WESTPAC SECURITIES NZ LTD USD 100,000,000 0.81% 19-Sep-16 100,000,000 0.97 WESTPAC SECURITIES NZ LTD USD 100,000,000 0.80% 22-Sep-16 100,000,000 0.98

Total Commercial Paper - Interest Bearing 1,020,000,000 9.95


BANK OF AMERICA NA USD 57,000,000 0.78% 22-Jul-16 57,000,000 0.56 JPMORGAN CHASE BANK NA USD 163,500,000 0.80% 07-Jun-16 163,500,000 1.59

MACQUARIE BANK LTD USD 45,608,000 1.08% 15-Jun-16 45,616,424 0.44

SUMITOMO MITSUI BANKING CORPORATION USD 37,530,000 1.29% 19-Jul-16 37,580,587 0.37 SVENSKA HANDELSBANKEN AB USD 121,000,000 0.63% 13-May-16 121,000,000 1.18

WELLS FARGO BANK NA USD 28,000,000 0.78% 02-Jun-16 27,997,276 0.27

WELLS FARGO BANK NA USD 84,000,000 0.75% 14-Jun-16 84,000,000 0.82 WELLS FARGO BANK NA USD 201,000,000 0.68% 17-Jun-16 201,000,000 1.96


TREASURY NOTE 3.40%

UNITED STATES TREASURY NOTE USD 348,546,500 0.13% 15-Apr-16 348,714,043 3.40

Total Treasury Note 348,714,043 3.40



As of 31 March 2016

(Expressed in USD)


24

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS



EUROPEAN INVESTMENT BANK USD 46,000,000 10.00% 05-May-16 46,390,715 0.45 MACQUARIE BANK LTD USD 47,199,000 2.00% 15-Aug-16 47,363,996 0.46




Other assets in excess of liabilities 2,234,723,832 21.79

Total Net Assets 10,254,920,997 100.00

MORGAN STANLEY LIQUIDITY FUNDS US Dollar Treasury Liquidity Fund


As of 31 March 2016

(Expressed in USD)


25

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS


TREASURY NOTE 53.67%

UNITED STATES TREASURY NOTE USD 100,000,000 0.25% 15-Apr-16 100,000,000 6.50 UNITED STATES TREASURY NOTE USD 32,181,000 0.13% 15-Apr-16 32,195,077 2.09

UNITED STATES TREASURY NOTE USD 330,000,000 0.37% 30-Apr-16 330,011,817 21.44 UNITED STATES TREASURY NOTE USD 30,000,000 2.63% 30-Apr-16 30,053,994 1.95

UNITED STATES TREASURY NOTE USD 10,000,000 0.25% 15-May-16 9,998,942 0.65

UNITED STATES TREASURY NOTE USD 10,000,000 3.25% 31-May-16 10,047,693 0.65 UNITED STATES TREASURY NOTE USD 18,000,000 1.75% 31-May-16 18,041,980 1.17

UNITED STATES TREASURY NOTE USD 25,000,000 3.25% 30-Jun-16 25,158,838 1.63

UNITED STATES TREASURY NOTE USD 20,000,000 0.63% 15-Jul-16 20,016,866 1.30 UNITED STATES TREASURY NOTE USD 5,000,000 3.25% 31-Jul-16 5,041,893 0.33

UNITED STATES TREASURY NOTE USD 55,000,000 3.00% 31-Aug-16 55,558,726 3.61

UNITED STATES TREASURY NOTE USD 5,000,000 1.00% 31-Aug-16 5,009,896 0.33 UNITED STATES TREASURY NOTE USD 5,000,000 3.00% 30-Sep-16 5,061,848 0.33

UNITED STATES TREASURY NOTE USD 10,000,000 0.50% 30-Sep-16 9,999,839 0.65

UNITED STATES TREASURY NOTE USD 60,000,000 0.35% 31-Oct-16 59,983,696 3.90 UNITED STATES TREASURY NOTE USD 110,000,000 0.38% 31-Jan-17 109,993,773 7.14

Total Treasury Note 826,174,878 53.67

TREASURY BILL 35.02%

UNITED STATES TREASURY BILL USD 135,000,000 0.00% 21-Apr-16 134,979,750 8.77

UNITED STATES TREASURY BILL USD 125,000,000 0.00% 28-Apr-16 124,981,249 8.12 UNITED STATES TREASURY BILL USD 30,000,000 0.00% 12-May-16 29,989,391 1.95

UNITED STATES TREASURY BILL USD 30,000,000 0.00% 16-Jun-16 29,963,520 1.95

UNITED STATES TREASURY BILL USD 20,000,000 0.00% 23-Jun-16 19,986,167 1.30 UNITED STATES TREASURY BILL USD 50,000,000 0.00% 30-Jun-16 49,954,063 3.24

UNITED STATES TREASURY BILL USD 25,000,000 0.00% 07-Jul-16 24,966,926 1.62 UNITED STATES TREASURY BILL USD 75,000,000 0.00% 14-Jul-16 74,900,333 4.86

UNITED STATES TREASURY BILL USD 25,000,000 0.00% 04-Aug-16 24,959,705 1.62

UNITED STATES TREASURY BILL USD 9,500,000 0.00% 25-Aug-16 9,482,470 0.62 UNITED STATES TREASURY BILL USD 15,000,000 0.00% 29-Sep-16 14,964,177 0.97





Total Net Assets 1,539,377,259 100.00

MORGAN STANLEY LIQUIDITY FUNDS Sterling Liquidity Fund


As of 31 March 2016

(Expressed in GBP)


26

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS



ABN AMRO BANK GBP 20,000,000 0.00% 18-Apr-16 19,995,345 0.83 ABN AMRO BANK GBP 25,000,000 0.00% 09-Jun-16 24,971,215 1.03

AGENCE CENTRALE DES ORGANISMES GBP 15,000,000 0.00% 11-Apr-16 14,997,946 0.62 AGENCE CENTRALE DES ORGANISMES GBP 18,000,000 0.00% 09-May-16 17,989,888 0.74

BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 10,000,000 0.00% 06-Apr-16 9,999,247 0.41

BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 25,000,000 0.00% 08-Apr-16 24,996,560 1.03 BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 15,000,000 0.00% 08-Jun-16 14,978,149 0.62

BANQUE FEDERATIVE DU CREDIT MUTUEL GBP 30,000,000 0.00% 01-Aug-16 29,921,099 1.23

DEKABANK DEUTSCHE GIROZENTRALE GBP 25,000,000 0.00% 07-Apr-16 24,997,538 1.03 DNB BANK ASA GBP 25,000,000 0.00% 06-Jul-16 24,953,480 1.03

DZ BANK AG DEUTSCHE ZENTRAL-GENOSS GBP 25,000,000 0.00% 07-Apr-16 24,997,093 1.03

ERSTE ABWICKLUNGSANSTALT GBP 15,000,000 0.00% 13-Apr-16 14,997,535 0.62 ERSTE ABWICKLUNGSANSTALT GBP 27,000,000 0.00% 23-May-16 26,976,958 1.11

ERSTE ABWICKLUNGSANSTALT GBP 30,000,000 0.00% 22-Jun-16 29,959,645 1.24

GE CAPITAL UK FUNDING GBP 30,000,000 0.00% 15-Apr-16 29,994,133 1.24 MACQUARIE BANK LTD GBP 25,000,000 0.00% 08-Apr-16 24,996,936 1.03

OVERSEA-CHINESE BANKING CORP GBP 25,000,000 0.00% 14-Apr-16 24,994,010 1.03

PACCAR FINANCIAL EUROPE BV GBP 20,000,000 0.00% 01-Apr-16 20,000,000 0.83 PACCAR FINANCIAL EUROPE BV GBP 15,000,000 0.00% 05-Apr-16 14,999,178 0.62

PACCAR FINANCIAL EUROPE BV GBP 10,000,000 0.00% 08-Apr-16 9,999,041 0.41

PACCAR FINANCIAL EUROPE BV GBP 10,000,000 0.00% 18-Apr-16 9,997,672 0.41 PACCAR FINANCIAL EUROPE BV GBP 15,000,000 0.00% 25-Apr-16 14,995,071 0.62

PACCAR FINANCIAL EUROPE BV GBP 20,000,000 0.00% 03-May-16 19,991,237 0.83

POHJOLA BANK PLC GBP 10,000,000 0.00% 10-May-16 9,993,918 0.41 POHJOLA BANK PLC GBP 17,000,000 0.00% 20-May-16 16,987,235 0.70

POHJOLA BANK PLC GBP 6,000,000 0.00% 08-Jun-16 5,992,969 0.25

POHJOLA BANK PLC GBP 22,500,000 0.00% 10-Jun-16 22,472,901 0.93 POHJOLA BANK PLC GBP 30,000,000 0.00% 14-Jun-16 29,959,990 1.24

POHJOLA BANK PLC GBP 10,000,000 0.00% 06-Jul-16 9,983,221 0.41

SKANDINAVISKA ENSKILDA BANKEN AB GBP 25,000,000 0.00% 06-Apr-16 24,997,645 1.03 SKANDINAVISKA ENSKILDA BANKEN AB GBP 20,000,000 0.00% 11-Apr-16 19,996,124 0.83

SKANDINAVISKA ENSKILDA BANKEN AB GBP 20,000,000 0.00% 27-Jul-16 19,947,752 0.82

SKANDINAVISKA ENSKILDA BANKEN AB GBP 20,000,000 0.00% 01-Aug-16 19,952,041 0.82 STADSHYPOTEK AB GBP 25,000,000 0.00% 22-Aug-16 24,936,541 1.03

SUMITOMO MITSUI BANKING CORPORATION GBP 25,000,000 0.00% 11-Aug-16 24,935,137 1.03

SUMITOMO MITSUI BANKING CORPORATION GBP 25,000,000 0.00% 19-Aug-16 24,931,206 1.03 TORONTO DOMINION BANK GBP 25,000,000 0.00% 18-Oct-16 24,887,235 1.03

TOYOTA MOTOR FINANCE (NETHERLANDS) GBP 49,000,000 0.00% 01-Apr-16 49,000,000 2.02

Total Commercial Paper 803,672,891 33.17


BANK OF AMERICA NA GBP 40,000,000 0.63% 04-Apr-16 40,000,000 1.65

BANK OF AMERICA NA GBP 18,000,000 0.63% 08-Jul-16 18,000,000 0.74

BANK OF MONTREAL GBP 30,000,000 0.00% 10-Jun-16 29,960,438 1.24 BANK OF MONTREAL GBP 25,000,000 0.69% 02-Aug-16 25,000,000 1.03

CREDIT SUISSE AG GBP 25,000,000 0.00% 07-Apr-16 24,996,929 1.03

CREDIT SUISSE AG GBP 25,000,000 0.00% 15-Apr-16 24,992,835 1.03 DZ BANK AG DEUTSCHE ZENTRAL-GENOSS GBP 25,000,000 0.00% 22-Jul-16 24,944,203 1.03

MIZUHO BANK LTD GBP 25,000,000 0.00% 23-May-16 24,979,017 1.03

MIZUHO BANK LTD GBP 15,400,000 0.00% 31-May-16 15,384,834 0.64 NATIONWIDE BUILDING SOCIETY GBP 50,000,000 0.86% 07-Apr-16 50,002,934 2.06

NORDEA BANK AB GBP 7,000,000 0.60% 04-Apr-16 7,000,040 0.29

NORINCHUKIN BANK GBP 25,000,000 0.00% 15-Apr-16 24,995,207 1.03



As of 31 March 2016

(Expressed in GBP)


27

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS



RABOBANK NEDERLAND NV GBP 25,000,000 0.00% 29-Jul-16 24,941,525 1.03 SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 0.61% 08-Apr-16 25,000,000 1.03

SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 0.00% 09-Aug-16 24,928,167 1.03 SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 0.00% 05-Sep-16 24,914,322 1.03

SUMITOMO MITSUI TRUST BANK LTD GBP 25,000,000 0.00% 19-Sep-16 24,906,680 1.03

SVENSKA HANDELSBANKEN AB GBP 25,000,000 0.62% 31-May-16 25,000,000 1.03 SVENSKA HANDELSBANKEN AB GBP 25,000,000 0.55% 06-Jun-16 25,000,000 1.03

TORONTO DOMINION BANK GBP 20,000,000 0.95% 02-Dec-16 20,000,000 0.83

TORONTO DOMINION BANK GBP 15,000,000 0.97% 11-Jan-17 15,000,000 0.62 WELLS FARGO BANK INTERNATIONAL GBP 25,000,000 0.60% 29-Jul-16 25,000,000 1.03

Total Certificate of Deposit 544,947,131 22.49


AUSTRALIA AND NEW ZEALAND BANKING GBP 25,000,000 0.57% 06-Jun-16 24,999,429 1.03

AUSTRALIA AND NEW ZEALAND BANKING GBP 25,000,000 0.63% 28-Oct-16 25,000,000 1.03 AUSTRALIA AND NEW ZEALAND BANKING GBP 25,000,000 0.85% 17-Jan-17 25,000,000 1.03

COMMONWEALTH BANK OF AUSTRALIA GBP 25,000,000 0.84% 29-Mar-17 24,995,041 1.03

DBS BANK LTD GBP 30,000,000 0.53% 01-Apr-16 30,000,000 1.24

DBS BANK LTD GBP 10,000,000 0.58% 08-Jun-16 9,999,907 0.42

ERSTE ABWICKLUNGSANSTALT GBP 19,000,000 0.59% 08-Jul-16 19,000,000 0.78

EUROPEAN INVESTMENT BANK GBP 15,000,000 0.79% 22-Feb-17 15,014,755 0.62 NATIONAL AUSTRALIA BANK LTD GBP 25,000,000 0.59% 10-Jun-16 25,000,000 1.03

NATIONAL AUSTRALIA BANK LTD GBP 10,000,000 0.61% 19-Aug-16 9,999,618 0.41

NATIONAL AUSTRALIA BANK LTD GBP 25,000,000 0.83% 17-Dec-16 24,994,672 1.03 NATIONAL AUSTRALIA BANK LTD GBP 27,000,000 0.85% 14-Feb-17 26,995,319 1.12

NRW.BANK GBP 25,000,000 0.56% 18-Jul-16 24,997,977 1.03 NRW.BANK GBP 20,000,000 0.59% 17-Aug-16 19,999,246 0.83

NRW.BANK GBP 10,000,000 0.61% 16-Sep-16 9,998,932 0.41

NRW.BANK GBP 20,000,000 0.67% 11-Nov-16 20,000,000 0.83 RABOBANK NEDERLAND NV GBP 50,000,000 0.77% 16-Jan-17 50,000,000 2.06

ROYAL BANK OF CANADA GBP 35,000,000 0.59% 25-Aug-16 35,000,000 1.44

ROYAL BANK OF CANADA GBP 20,000,000 0.77% 01-Dec-16 20,000,000 0.83 ROYAL BANK OF CANADA GBP 20,000,000 0.84% 19-Dec-16 20,000,000 0.83

ROYAL BANK OF CANADA GBP 25,000,000 0.86% 08-Feb-17 25,000,000 1.03

WESTPAC BANKING CORP GBP 24,000,000 0.59% 08-Jul-16 23,997,541 0.99 WESTPAC SECURITIES NZ LTD GBP 25,000,000 0.89% 23-Dec-16 24,994,549 1.03


TREASURY BILL 3.28%

UK TREASURY BILL GBP 3,266,500 0.00% 04-Apr-16 3,266,386 0.13

UK TREASURY BILL GBP 7,200,000 0.00% 11-Apr-16 7,199,113 0.30 UK TREASURY BILL GBP 34,000,000 0.00% 18-Apr-16 33,993,237 1.40

UK TREASURY BILL GBP 35,127,000 0.00% 25-Apr-16 35,116,380 1.45




As of 31 March 2016

(Expressed in GBP)


28

ISSUE DENOMINATION


RATE MATURITY

DATE AMORTIZED

COST

PERCENTAGE OF

NET ASSETS



LANDESBANK BADEN-WURTTEMBERG GBP 15,000,000 1.25% 15-Dec-16 15,052,121 0.62 NEDERLANDSE WATERSCHAPSBANK NV GBP 4,161,000 2.13% 07-Sep-16 4,184,431 0.18

WESTPAC BANKING CORP GBP 25,000,000 0.84% 14-Mar-17 24,996,435 1.03





Total Net Assets 2,422,862,102 100.00


Notes to the Financial Statements

31 March 2016

29

1. General information:

Morgan Stanley Liquidity Funds (the “Company”) was incorporated on 21 December 2012 for an unlimited

period of time as a self-managed société d’investissement à capital variable under the form of a société anonyme.

The Company is authorised under Part I of the Law of 17 December 2010 in accordance with the provisions of the

UCITS Directive and listed on the official list of UCITS approved by the Commission de Surveillance du Secteur

Financier (the “CSSF”). The registered office of the Company is located at 6B route de Trèves, L-2633

Senningerberg, Grand Duchy of Luxembourg.

Effective 1 April 2014, Morgan Stanley Investment Management (ACD) Limited (“MSIM (ACD)”) was

appointed as Management Company to provide collective portfolio management services to the Company. MSIM

(ACD) is authorised by the Financial Conduct Authority in the United Kingdom to provide these services. This

change was communicated to investors in the shareholder notices dated 28 February 2014 and was reflected

within the updated Prospectus that came into effect on 1 April 2014.

The Company is an “umbrella fund” which is composed of more than one Sub-Fund, each representing a separate

portfolio of assets. However, each Sub-Fund is exclusively responsible for all liabilities attributable to it.

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

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

January 2013 and the three other Sub-Funds were launched on 17 June 2013.

The Class of Shares that are active as at 31 March 2016 are detailed in the table below:

Name of the Sub-Fund Class of Shares Launch date

Euro Liquidity Fund

Institutional Shares 17 June 2013 Institutional Accumulation Shares 17 June 2013

Institutional Select Shares* 24 June 2015 MS Reserve Shares 17 June 2013


Advantage Accumulation Shares 17 June 2013 Institutional Shares 17 June 2013

Institutional Accumulation Shares 17 June 2013

Institutional Select Shares 16 January 2014

Master Shares 9 September 2013

MS Reserve Shares 17 June 2013

Qualified Accumulation Shares** 17 June 2013


Institutional Shares 17 June 2013

Institutional Select Shares 16 January 2014

MS Reserve Shares 17 June 2013


Institutional Shares 17 June 2013

Institutional Accumulation Shares 17 June 2013

Institutional Select Shares 26 June 2014

MS Reserve Shares 28 November 2013

Qualified Shares 17 June 2013

*Share class opened during the year.

** Share class was suspended on 4 September 2015 and re-launched on 15 March 2016 at a price of USD100.00.

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

Name of the Sub-Fund Class of Shares Closure date

Euro Liquidity Fund Advisory Shares 16 June 2015

Qualified Accumulation Shares 31 July 2015

US Dollar Liquidity Fund Advisory Shares 24 February 2016

Advisory Accumulation Shares 4 February 2016

US Dollar Treasury Liquidity Fund Advisory Shares 24 February 2016

Sterling Liquidity Fund Institutional Select Accumulation Shares 1 April 2015

Qualified Accumulation Shares 28 October 2015


Notes to the Financial Statements (continued)

31 March 2016

30

1. General information: (continued)

Each Sub-Fund’s Investment objective is to provide investors with liquidity and an attractive rate of income

relative to short term interest rates, to the extent consistent with the preservation of capital.

Each Sub-Fund has its own Investment policy but all are classified as Short-Term Money Market Funds in

accordance with CESR guidelines on a common definition of European money market funds (CESR/10-049).

2. Summary of Significant Accounting Policies:

The financial statements of the Company have been prepared in accordance with the accounting principles

generally accepted in Luxembourg.

(a) Valuation of Investments

The securities, money market instruments and other instruments are valued based on their amortised cost. Under

this method, amortised cost is determined by valuing an instrument at its cost and thereafter assuming a constant

amortisation to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the

market value of the instruments.

The Company generally uses the amortised cost method of valuation to determine the value of the following

investments, provided that such investments comply with the above conditions: (i) investments with a residual

maturity of fifteen months or less or (ii) floating rate investments with a residual maturity of two years or less

(measured to the date on which the issuer must unconditionally repay the principal amount to the Company on

foot of either maturity, put option or other repayment demand feature), where the Board of Directors have

determined that the investment has a market value that approximates its amortised cost value and the investment

has an annual or shorter interval coupon/interest rate re-fix or (iii) floating rate investments which meet the

conditions described in (ii) above except that they have a residual maturity of up to five years, provided that they

are of high credit quality and are issued by the US government, an agency or instrumentality of the US

government, the government of an OECD member, an agency or instrumentality of such government or by the

government of a Member State or an agency or instrumentality of such government.

Subject to the above, the Board of Directors uses the amortised cost method of valuation of any investments of a

Fund which is a Money Market Fund or a Short Term Money Market Fund unless it is not appropriate to use such

method in respect of certain investment(s) of such Fund, in which case one of the other methods of valuation

outlined below is used.

The Administrator determines at least weekly the extent to which the Net Asset Value of the relevant Fund or

Class using this method of valuation deviates from the Net Asset Value which would be obtained using available

market quotations. Deviations in excess of 0.10% between the market value and the amortised cost value are

brought to the attention of the Investment Adviser. Deviations in excess of 0.15% between the market value and

the amortised cost value of the relevant Fund or Class are brought to the attention of the Board of Directors and

the Depositary. If this deviation exceeds 0.25% of the Net Asset Value of the relevant Fund, the Administrator

reviews the valuation daily and the Board of Directors takes such corrective action, if any, as they deem

appropriate to eliminate or reduce, to the extent reasonably practicable, any such deviation. Notwithstanding the

generality of the foregoing, the Board of Directors utilises the market value of any individual investment in the

event that the market value of that investment deviates by more than 1% from its amortised cost valuation.

(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.



31 March 2016

31

2. Summary of Significant Accounting Policies: (continued)

(d) Cash

Cash and other liquid assets are valued at their face value plus interest accrued, where applicable. It is possible for

the interest accrual of a Sub-Fund to be negative depending on market conditions.

(e) Foreign currency translation

Financial statements are presented for each Sub-Fund in the base currency of the Sub-Fund. The combined

Statement of Net Assets, Statement of Operations and Changes in Net Assets are presented in US dollars, based

on the exchange rate ruling at the date of these financial statements and on the average exchange rate over the

reporting period for the Statement of Operations and Changes in Net Assets.

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

as of 31 March 2016 as of 31 March 2015

1 USD = 0.877539 EUR 1 USD = 0.695749 GBP

1 USD = 0.931099 EUR 1 USD = 0.673627 GBP

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

as of 31 March 2016 as of 31 March 2015

1 USD = 0.905971 EUR

1 USD = 0.664086 GBP

1 USD = 0.792627 EUR 1 USD = 0.621017 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, Euro Liquidity Fund, Sterling

Liquidity Fund and US Dollar Treasury Liquidity Fund with the exception of Advisory Accumulation Shares,

Institutional Accumulation Shares, Institutional Select Accumulation Shares, Qualified Accumulation Shares and

Advantage Accumulation Shares (“the Accumulating Share Classes”) on each Dealing Day as a dividend to

Shareholders on the register of members as at the close of business on the relevant Dealing Day in an attempt to

stabilise the Net Asset Value per Share of each class at US$1.00 in the case of the US Dollar Liquidity Fund,

€1.00 in the case of the Euro Liquidity Fund, £1.00 in the case of the Sterling Liquidity Fund and US$1.00 in the

case of the US Dollar Treasury Liquidity Fund. Dividends are declared daily and are payable monthly on or about

the first Business Day of each following month. For this purpose, net income of each Sub-Fund (from the time

immediately preceding determination thereof) shall consist of interest and dividends earned by each Sub-Fund and

realised and unrealised profits on the disposal/valuation of investments as may be lawfully distributed less realised

and unrealised losses (including fees and expenses) of each Sub-Fund.

In the case of the Accumulating Classes of Shares, the US Dollar Liquidity Fund, Euro Liquidity Fund, Sterling

Liquidity Fund and US Dollar Treasury Liquidity Fund intend to retain the net income and/or capital gains

attributable to such Classes of Shares and the value of these Classes of Shares.



31 March 2016

32

3. Dividends and Distributions: (continued)

Where there are substantial adverse movements in interest rates, there can be no assurance that the Sub-Funds will

be successful in maintaining positive net investment income. Where a Sub-Fund posts negative net investment

income, in order to maintain a stable Net Asset Value per Share for Distributing Classes of Shares, the

Management Company shall address such by the compulsory redemption equally of such number of Shares held

by each Shareholder in the relevant Class of Shares required to cover the negative net income of that Class of

Share, with the proceeds of each such redemption being retained by the Sub-Fund. In the case of Accumulating

Classes of Shares, the Net Asset Value per Share will decrease in lieu of the compulsory redemption of Shares.

4. Management Company Services Agreement, Investment Advisory Agreement, Depositary Agreement,

Administration Agreement, Registrar and Transfer Agent Agreement, Paying Agent Agreement,

Domiciliary Agreement and Distribution Agreement:

The Board of Directors of the Company has appointed MSIM (ACD) as designated management company (the

“Management Company”) pursuant to the Management Company Services Agreement dated 1 April 2014.

The Management Company is responsible for providing collective portfolio management services (including

investment management, administrative and marketing services), risk management and other administrative and

operational services to the Company, subject to the overall supervision and control of the Company.

The Management Company has delegated to Morgan Stanley Investment Management Inc., the function of

Investment Adviser of the Sub-Funds pursuant to an investment advisory agreement dated 1 April 2014 (the

“Investment Advisory Agreement”). The Company may terminate its appointment immediately where it is in the

best interest of Shareholders to do so.

The Board of Directors of the Company has appointed The Bank of New York Mellon (International) Limited,

Luxembourg Branch (the “Depositary”) as the depositary of all of the Company’s assets, including its cash and

securities, which are held either directly or through other financial institutions such as correspondent banks,

subsidiaries or affiliates of the Depositary or clearing systems. The rights and duties of the Depositary are

governed by the Depositary Agreement entered into on 7 March 2016 for an unlimited period of time from the

date of its signature. Prior to 7 March 2016 State Street Bank Luxembourg S.C.A was delegated the function of

the depositary.

The Management Company has delegated to The Bank of New York Mellon (International) Limited, Luxembourg

Branch (the “Adminstrator”) the function of Administrator pursuant to the Administration Agreement dated 7

March 2016. The Administrator carries out all administrative duties related to the administration of the Company,

including the calculation of the Net Asset Value of the Shares, the provision of accounting services to the

Company and notices and other documents to the Shareholders. Prior to 7 March 2016 State Street Bank

Luxembourg S.C.A was delegated the function of the administrator.

The Management Company has also delegated to the Administrator the function of registrar and transfer agent of

the Company pursuant to the Administration Agreement dated 7 March 2016. In this function the Administrator

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

register of the Company. Prior to 7 March 2016 State Street Bank Luxembourg S.C.A was delegated the function

of the registrar and transfer agent.

The Management Company has also appointed the Administrator as the paying agent of the Company pursuant to

the Administration Agreement dated 7 March 2016. In this function the Administrator assists in the payment of

dividends declared by the Company to its Shareholders. Prior to 7 March 2016 State Street Bank Luxembourg

S.C.A was delegated the function of the paying agent.

Pursuant to a Domiciliary Agreement, the Management Company has appointed Morgan Stanley Investment

Management Limited, Luxembourg Branch, as its Domiciliary Agent to provide the Company’s registered office,

to store its corporate documents and to perform other related administrative functions.

The Management Company has appointed Morgan Stanley Investment Management Limited to act as Distributor

pursuant to the Distribution Agreement dated 1 April 2014. In this respect, it may engage certain financial

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



31 March 2016

33

5. Taxation:

Under current law and practice, the Company is not liable to any Luxembourg income tax, nor are dividends paid

by the Company liable to any Luxembourg withholding tax. However, the Company is liable in Luxembourg to a

reduced rate of subscription tax (“taxe d’abonnement”) of 0.01% per annum of its net assets, such tax being

payable quarterly and calculated on the total Net Asset Value of the Company at the end of the relevant quarter.

Pursuant to Article 175 b) of the Law, an exemption from the subscription tax may be applicable where a Fund or

Class meets the following criteria: (i) the Shares of the Fund or the Class must be reserved to Institutional

Investors; (ii) the exclusive object of the Fund's portfolio must be the investment in money market instruments

and/or deposits with credit institutions; (iii) the remaining average maturity of the Fund's portfolio must be less

than 90 days, and (iv) the Fund must benefit from the highest possible rating of a recognized rating agency.

Under the aforementioned legislation and regulations prevailing in Luxembourg, Master Shares, Master

Accumulation Shares, Qualified Shares, Qualified Accumulation Shares, Advantage Shares, Advantage

Accumulation Shares are subject to annual subscription tax (“taxe d’abonnement”) at a reduced rate of 0.01% per

annum of their net assets. The remaining Classes of Shares listed within the Company’s prospectus are exempt

from this tax.

The Company is registered for VAT in Luxembourg and is required to self-assess for Luxembourg VAT on

services received from outside Luxembourg (that are considered taxable under Luxembourg VAT rules).

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.

The Management Fee Rates as at 31 March 2016 were as follows:

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

Euro Liquidity Fund

Institutional Shares 0.20% per annum of the NAV

Institutional Accumulation Shares 0.20% per annum of the NAV

Institutional Select Shares 0.21% per annum of the NAV

MS Reserve Shares Nil


Advantage Accumulation Shares 0.45% per annum of the NAV

Advisory Shares 0.45% per annum of the NAV

Advisory Accumulation Shares 0.45% per annum of the NAV




Master Shares Nil


Qualified Accumulation Shares 0.20% per annum of the NAV



31 March 2016

34

6. Fees and expenses: (continued)

(a) Service provider fees (continued)

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










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. 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.

(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.

(d) Establishment Charges and Expenses

The cost of establishing the Company and the expenses of the initial offer of Shares in the Sub-Funds, the

preparation and printing of the initial Prospectus, marketing costs and the fees of all professionals relating to it

were borne by the Distributor of the fund.

7. Related Party Holdings, Transactions and Affiliations:

Morgan Stanley Investment Funds - US Dollar Liquidity Fund (the “Feeder Fund”), which is administered by J.P.

Morgan Bank Luxembourg S.A., is a feeder fund of the Company’s US Dollar Liquidity Fund (the “Master

Fund”). The Feeder Fund invests at least 85% of its assets in shares of the Master Fund (Master Share Class).

As of 31 March 2016, the Feeder Fund held 41% of the net asset value of the Master Fund, or 100% of the Master

Class of Share within the Master Fund.

Morgan Stanley Investment Funds was incorporated on 21 November 1988 under the laws of the Grand Duchy of

Luxembourg as a “Société d’Investissement à Capital Variable” (“SICAV”) and is registered as an undertaking

for collective investment pursuant to Part 1 of the Law of 17 December 2010. The 2010 Law transposes the recast

UCITS Directive (Directive 2009/65/EC) into Luxembourg legislation.

A number of other Sub-Funds of Morgan Stanley Investment Funds invest into the Company from time to time.

These transactions were all executed in the normal course of business at arm’s length.

The Sub-Funds of Morgan Stanley Investment Funds that held shares in the Company’s Euro Liquidity Fund as at

31 March 2016 were as follows:



31 March 2016

35

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

Absolute Return Fixed Income Fund

Diversified Alpha Plus Fund

Diversified Alpha Plus Low Volatility Fund

Emerging Europe, Middle East and Africa Equity Fund

Euro Bond Fund

Euro Corporate Bond (Ex Financials) Fund

Euro Corporate Bond Fund

Euro Strategic Bond Fund

European Currencies High Yield Bond Fund

European Equity Alpha Fund

European Property Fund

Eurozone Equity Alpha Fund

Global Balanced Risk Control Fund

Global Bond Fund

Short Maturity Euro Bond Fund

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

as at 31 March 2016 were as follows:

Asian Fixed Income Opportunities Fund

Asia-Pacific Equity Fund

Emerging Europe, Middle East & Africa Equity Fund

Emerging Leaders Equity Fund

Emerging Markets Corporate Debt Fund

Emerging Markets Debt Fund

Emerging Markets Domestic Debt Fund

Emerging Markets Equity Fund

Emerging Markets Fixed Income Opportunities Fund

Frontier Emerging Markets Equity Fund

Global Convertible Bond Fund

Global Credit Fund

Global Fixed Income Opportunities Fund

Global High Yield Bond Fund

Global Mortgage Securities Fund

Global Premier Credit Fund

Latin American Equity Fund

Liquid Alpha Capture Fund

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

Liquidity Fund as at 31 March 2016 were as follows:

Asian Property Fund

Global Advantage Fund

Global Brands Fund

Global Discovery Fund

Global Infrastructure Fund

Global Opportunity Fund

Global Property Fund

Global Quality Fund

International Equity (Ex US) Fund

US Advantage Fund

US Growth Fund

US Insight Fund

US Property Fund

No Sub-Fund of Morgan Stanley Investment Funds held shares in the Company’s Sterling Liquidity Fund.



31 March 2016

36

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

No portfolio transactions of the Company that occurred during the period were executed through affiliated firms

or brokers.

8. Reverse repurchase agreements:

As at 31 March 2016, all the Sub-Funds had entered into reverse repurchase agreements. The total commitment of

the reverse repurchase agreements is as follows:

Name of the Sub-Fund Description Counterparty

Reverse

Repurchase

Agreements

CCY

Market

Value of

Collateral

Received

CCY

Euro Liquidity Fund

Citigroup Global Markets / -0.15% /

01/04/2016 Euroclear 100,000,000 EUR 101,999,617 EUR

Societe Generale / -0.37% /

01/04/2016 Euroclear 100,000,000 EUR 101,999,021 EUR

Total 200,000,000 203,998,638


Goldman Sachs & Co / 0.30% /

01/04/2016 Bank of New

York 200,000,000 USD 206,000,000 USD

JP Morgan Securities LLC / 0.31% /

01/04/2016 JP Morgan

Securities 250,000,000 USD 255,002,907 USD Merrill Lynch Pierce Fenner & Smith

Inc / 0.30% / 01/04/2016 Bank of New

York 250,000,000 USD 255,000,047 USD Merrill Lynch Pierce Fenner & Smith

Inc / 0.29% / 01/04/2016 Bank of New

York 200,000,000 USD 204,180,447 USD

Total 900,000,000 920,183,401

US Dollar Treasury

Liquidity Fund

JP Morgan Securities LLC / 0.31% /

01/04/2016 JP Morgan

Securities 130,000,000 USD 132,602,653 USD

Total 130,000,000 132,602,653


National Australia Bank Ltd / 0.43% /

04/04/2016 Euroclear 100,000,000 GBP 102,000,001 GBP

BNP Paribas / 0.10% / 01/04/2016 Euroclear 100,000,000 GBP 102,000,280 GBP

Lloyds Bank Plc / 0.40% / 01/04/2016 Euroclear 50,000,000 GBP 51,000,560 GBP

Total 250,000,000 255,000,841

The collateral received in respect of the reverse repurchase agreements consists of the following securities:

Name of the Sub-Fund Collateral Description Collateral Type Tri-Party

Agent CCY

Market Value of

Securities Collateral

received

Euro Liquidity Fund

Italy Government Bond, 4.50%,

01/08/18

Government

Bond Euroclear EUR 101,999,617

Spain Government Bond, 0.00%, 30/11/19

Government Bond Euroclear EUR 101,999,021

Total 203,998,638


Fannie Mae / 3.50 / 01/03/2045 US Agency Goldman Sachs

USD 38,144,881

Fannie Mae / 4.50 / 01/11/2043 US Agency Goldman

Sachs

USD 33,884,386

Fannie Mae / 4.00 / 01/04/2044 US Agency Goldman Sachs

USD 37,826,863


Sachs

USD 38,009,283

Freddie Mac / 1.86 / 01/07/2045 US Agency Goldman

Sachs

USD 37,774,158


Sachs

USD 20,360,429

United States Treasury Notes / 0.50% / 30/09/2016

Treasury Note JP Morgan Securities

USD 173,556,849



31 March 2016

37

8. Reverse repurchase agreements (continued):


Agent

CCY Market Value of


received


(continued)

United States Treasury Notes / 2.00% / 15/02/2023

Treasury Note JP Morgan Securities

USD 81,446,057

United States Treasury Notes / 0.63 /

15/01/2026

Treasury Note Merrill

Lynch

USD 100,122,269

United States Treasury Notes / 1.25 / 31/03/2021

Treasury Note Merrill Lynch

USD 154,877,778

Tenn Valley Authority / 0.00 /

15/06/2030

US Agency Merrill

Lynch

USD 1,240


05/01/2026

US Agency Merrill

Lynch

USD 763


15/12/2017

US Agency Merrill

Lynch

USD 304,761

Tenn Valley Authority / 6.75 / 01/11/2025

US Agency Merrill Lynch

USD 651,324


15/10/2018

US Agency Merrill

Lynch

USD 3,080



USD 1,030,262


15/09/2024

US Agency Merrill

Lynch

USD 905,368



USD 2,789,877


18/07/2017

US Agency Merrill

Lynch

USD 1,044,696



USD 43,649


15/06/2035

US Agency Merrill

Lynch

USD 303,315



USD 4,009,880


01/04/2056

US Agency Merrill

Lynch

USD 130,589



USD 3,254,022


01/04/2018

US Agency Merrill

Lynch

USD 2,240,195



USD 448,155


15/01/2038

US Agency Merrill

Lynch

USD 1,424,793

Freddie Mac / 0.75 / 14/07/2017 US Agency Merrill Lynch

USD 83,156

Freddie Mac / 0.50 / 13/05/2016 US Agency Merrill

Lynch

USD 200,423

Fannie Mae / 6.03 / 08/10/2027 US Agency Merrill

Lynch

USD 205,950


Lynch

USD 237,214


Lynch

USD 1,402,343


Lynch

USD 4,991


Lynch

USD 111,014


Lynch

USD 2,531,774


Lynch

USD 2,040


Lynch

USD 220,077


Lynch

USD 173,359


Lynch

USD 2,444



31 March 2016

38



Agent

CCY Market Value of


received


(continued)

Fannie Mae / 6.25 / 15/05/2029 US Agency Merrill Lynch

USD 5,306,981


Lynch

USD 2,650,470

Fannie Mae Dn / 0.00 / 01/08/2016 US Agency Merrill Lynch

USD 3,033,747

Fannie Mae Dn / 0.00 / 06/07/2016 US Agency Merrill

Lynch

USD 999


Lynch

USD 1,439,631


Lynch

USD 71,983

Fannie Mae Dn / 0.00 / 20/04/2016 US Agency Merrill Lynch

USD 3,000


Lynch

USD 219,591

Freddie Mac / 0.00 / 15/09/2028 US Agency Merrill Lynch

USD 362,962


Lynch

USD 633

Federal Home Loan Bank / 3.50 / 09/12/2016


USD 15,446

Federal Home Loan Bank / 3.75 /

09/09/2016

US Agency Merrill

Lynch

USD 203,271



USD 234,928


16/12/2016

US Agency Merrill

Lynch

USD 78,214



USD 122,155


18/05/2016

US Agency Merrill

Lynch

USD 71,762



USD 37,681

Federal Farm Credit Bank / 3.33 /

27/11/2030

US Agency Merrill

Lynch

USD 1,274,338

Federal Farm Credit Bank / 3.37 / 13/11/2030


USD 5,109,092


28/10/2030

US Agency Merrill

Lynch

USD 4,420,459



USD 4,453,491


30/03/2020

US Agency Merrill

Lynch

USD 1,598,290


28/03/2025

US Agency Merrill

Lynch

USD 4,560,413


10/02/2025

US Agency Merrill

Lynch

USD 1,113,921


27/01/2031

US Agency Merrill

Lynch

USD 4,908,378


25/01/2030

US Agency Merrill

Lynch

USD 3,889,860


12/01/2026

US Agency Merrill

Lynch

USD 3,331,572


20/07/2035

US Agency Merrill

Lynch

USD 3,534,733


01/06/2035

US Agency Merrill

Lynch

USD 4,257,834


13/04/2035

US Agency Merrill

Lynch

USD 2,032,687


24/07/2034

US Agency Merrill

Lynch

USD 2,057,532



31 March 2016

39



Agent

CCY Market Value of


received


(continued)



USD 922,068


13/09/2027

US Agency Merrill

Lynch

USD 3,377,968



USD 84,016

Freddie Mac Dn / 0.00 / 06/06/2016 US Agency Merrill

Lynch

USD 437,737


Lynch

USD 307,994


Lynch

USD 3,539,965

Federal Home Loan Dn / 0.00 / 21/10/2016


USD 3,989,360

Federal Home Loan Dn / 0.00 /

08/07/2016

US Agency Merrill

Lynch

USD 3,995,920



USD 1,040,157


10/06/2016

US Agency Merrill

Lynch

USD 152,904



USD 3,270,200


02/05/2016

US Agency Merrill

Lynch

USD 4,793,849



USD 1,308,764


06/04/2016

US Agency Merrill

Lynch

USD 1,999,920



USD 77,885


10/09/2021

US Agency Merrill

Lynch

USD 156,817



USD 15,243


08/03/2019

US Agency Merrill

Lynch

USD 15,383



USD 139,031


10/06/2016

US Agency Merrill

Lynch

USD 75,734



USD 33,173


08/12/2017

US Agency Merrill

Lynch

USD 25,959


06/02/2017

US Agency Merrill

Lynch

USD 19,891


17/01/2017

US Agency Merrill

Lynch

USD 12,518


Lynch

USD 380,374

United States Treasury Notes / 2.63 /

15/08/2020

Treasury Note Merrill

Lynch

USD 89,850,810

Total 920,183,401

US Dollar Treasury

Liquidity Fund

United States Treasury Notes / 2.13%

/ 15/05/2025 Treasury Note

JP Morgan

Securities USD 132,602,653

Total 132,602,653



31 March 2016

40



Agent CCY

Market Value of


received


United Kingdom Government Bond, FRN, 17/07/2024

Government Bond Euroclear GBP 19,890,000

United Kingdom Government Bond,

4.25%, 07/12/2027

Government

Bond Euroclear GBP 19,889,999

United Kingdom Government Bond, 0.06%, 22/03/2029



1.75%, 22/07/2019

Government



4.50%, 07/09/2034

Government



2.25%, 07/09/2023

Government

Bond Euroclear GBP 114,835

United Kingdom Government Bond, 4.25%, 07/03/2036



6.00%, 07/12/2028

Government





FRN 22/11/2017

Government


United Kingdom Government Bond, FRN 22/11/2022



FRN 22/11/2019

Government


United Kingdom Government Bond, 3.75, 07/09/2021



8.00%, 07/06/2021

Government





4.50%, 07/12/2042

Government





0.63%, 22/11/2042

Government





FRN, 11/01/35

Government


Total 255,000,841

During the financial year, the following income was recorded by the Fund in relation to its reverse repurchase

agreements under the heading “Interest” within the Statement of Operations and Changes in Net Assets:

Sub-Fund Reverse repurchase

agreement income Sub-Fund base Ccy

Euro Liquidity Fund (1,137,750) EUR

US Dollar Liquidity Fund 4,956,781 USD

US Dollar Treasury Liquidity Fund 295,422 USD

Sterling Liquidity Fund 2,464,983 GBP

Total 6,579,436 USD



31 March 2016

41

9. Time Deposits:

As at 31 March 2016, the Sub-Funds Euro Liquidity Fund, US Dollar Liquidity Fund and Sterling Liquidity Fund

held time deposits as follows:

Name of the Sub-Fund Counterparty Currency Holdings Interest

(%) Maturity Date

Euro Liquidity Fund

BNP Paribas EUR 118,797,764 (0.46) 1-Apr-16

Bred Banque Populaire EUR 95,613,010 (0.42) 1-Apr-16

Commonwealth Bank of Australia EUR 139,036,854 (0.34) 1-Apr-16

Total 353,447,628


Lloyds Bank Plc USD 115,000,000 0.26 1-Apr-16

Lloyds Bank Plc USD 75,000,000 0.26 1-Apr-16

Skandinaviska Enskilda Banken AB USD 80,000,000 0.25 1-Apr-16

Canadian Imperial Bank of Commerce USD 130,000,000 0.23 1-Apr-16

National Australia Bank Ltd USD 230,000,000 0.23 1-Apr-16

United Overseas Bank Ltd USD 300,000,000 0.38 6-Apr-16

Total 930,000,000


Bred Banque Populaire GBP 156,237,415 0.46 1-Apr-16

Canadian Imperial Bank of Commerce GBP 50,005,055 0.20 1-Apr-16

Lloyds Bank Plc GBP 80,059,093 0.30 1-Apr-16

Total 286,301,563

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 2016.

12. Determination of Global Exposure:

The methodology used in order to calculate the Global Exposure resulting from the use of financial derivative

instruments is the commitment approach in accordance with the CSSF Circular 11/512.

13. Statement of Portfolios changes:

The list of changes in the portfolio for the period is available free of charge at the registered office of the

Management Company.

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



31 March 2016

42

14. Counterparty Risk: (continued)

recover none or only a portion of its assets held with such counterparty. This could subject the Company to

substantial losses.

15. Remuneration Policy of the Management Company

The Management Company has a remuneration policy in place which seeks to ensure that the interests of the

Company and the Shareholders are aligned. Such remuneration policy imposes remuneration rules on staff and

senior management within the Management Company whose activities have an impact on the risk profile of the

Company. The Management Company shall seek to ensure that such remuneration policies and practices will be

consistent with sound and effective risk management and with UCITS Regulation. The Management Company

shall also seek to ensure that such remuneration policies and practices shall not encourage risk taking which is

inconsistent with the risk profile and constitutional documents of the Company.

The Management Company shall seek to ensure that the remuneration policy will, at all times, be consistent with

the business strategy, objectives, values and interests of the Company and the Shareholders and that the

remuneration policy will include measures that seek to ensure that all relevant conflicts of interest can be managed

appropriately at all times.

16. Significant events:

On 6 May 2015 the Euro Liquidity Fund for the first time posted negative net investment income. Consequently,

the compulsory redemption of Shares was initiated for Distributing Classes of Shares in order to maintain a stable

Net Asset Value per Share. The daily compulsory redemptions equal such number of Shares held by each

Shareholder in the relevant Class of Shares required to cover the declared negative net investment income of that

Class of Share, with the proceeds of each such redemption being retained by the Sub-Fund. Given the current

monetary policies employed by the ECB it is anticipated that this negative Euro money market yield environment

will continue for the foreseeable future.

Ms. Veronique Gillet resigned as member of the Board of Directors of the Management Company with effect

from 12 May 2015.

Mr. Bryan Greener resigned as member of the Board of Directors of the Management Company with effect from

18 September 2015.

Ms. Judith Eden was appointed as a Director to the Board of Directors of the Company on 21 July 2015. In

addition she resigned as a Managing Director from Morgan Stanley Investment Management Limited as well as a

member of the Board of Directors of the Management Company on 31 August 2015. She was re-appointed as a

non-executive member of the Board of Directors of the Management Company on 6 January 2016.

Ms. Diane Jane Hosie was appointed to the Board of Directors of the Management Company on 8 February 2016.

On 7 March 2016, the Board of Directors of the Company appointed The Bank of New York Mellon

(International) Limited, Luxembourg Branch as depositary, administrator, registrar and transfer agent and paying

agent to the Company. Prior to 7 March 2016, State Street Bank Luxembourg S.C.A performed these roles.

17. Summary of accounting differences between Luxembourg legal and regulatory requirements for

investment funds and accounting principles generally accepted in the United States:

The Company's financial statements are prepared in accordance with Luxembourg legal and regulatory

requirements for investment funds. There are no significant accounting differences between Luxembourg and

United States generally accepted accounting principles for the Company. These differences have no impact on the

net assets of the sub-funds.


43

Appendix 1: Total Expense Ratio (Unaudited)

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

March 2016. 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 2016

TER (%)

As at 31 March 2015

Euro Liquidity Fund

Institutional Shares 0.05% 0.06%

Institutional Accumulation Shares 0.05% 0.06%

Institutional Select Shares* 0.10% -

MS Reserve Shares 0.00% 0.00%


Advantage Accumulation Shares 0.30% 0.18%


Institutional Select Shares 0.21% 0.17%


Master Shares 0.01% 0.01%


Qualified Accumulation Shares 0.19% 0.16%

US Dollar Treasury









Qualified Shares 0.13% 0.13%

* Launch date of 24 June 2015

Documents

Investment Manager’s Report · State Street Bank Luxembourg S.C.A. (until 7 March 2016) Michael Griffin, Chairman 49, avenue J.F. Kennedy ... (the “Board”) is pleased to present