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.
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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
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MORGAN STANLEY LIQUIDITY FUNDS Société d'Investissement à Capital Variable
organised under the laws of the Grand Duchy of Luxembourg
RCS Number: B 174 137
Annual Report
31 March 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
MORGAN STANLEY LIQUIDITY FUNDS
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
Grand Duchy of Luxembourg
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)
Grand Duchy of Luxembourg
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.
MORGAN STANLEY LIQUIDITY FUNDS
2
Board of Directors’ Report
The Board of Directors of the Company (the “Board”) is pleased to present the Audited Financial Statements and Annual
Report for the year ended 31 March 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.
MORGAN STANLEY LIQUIDITY FUNDS
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.
MORGAN STANLEY LIQUIDITY FUNDS
4
Board of Directors’ Report (cont.)
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.
MORGAN STANLEY LIQUIDITY FUNDS
5
Board of Directors’ Report (cont.)
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
MORGAN STANLEY LIQUIDITY FUNDS
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
MORGAN STANLEY LIQUIDITY FUNDS
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.
MORGAN STANLEY LIQUIDITY FUNDS
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
MORGAN STANLEY LIQUIDITY FUNDS
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
MORGAN STANLEY LIQUIDITY FUNDS
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
Grand Duchy of Luxembourg
We have audited the accompanying financial statements of Morgan Stanley Liquidity Funds (the “Company”) and of each of its sub-
funds, which comprise the statement of net assets including the schedule of investments as at 31 March 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
MORGAN STANLEY LIQUIDITY FUNDS
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
Grand Duchy of Luxembourg
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
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
*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.
MORGAN STANLEY LIQUIDITY FUNDS
The accompanying notes form an integral part of financial statements.
16
Statement of Net Assets Statistics
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
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
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
COMMERCIAL PAPER 18.64%
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
Total Commercial Paper - Interest Bearing 1,020,000,000 9.95
FLOATING RATE NOTE 7.19%
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
Total Floating Rate Note 737,694,287 7.19
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
MORGAN STANLEY LIQUIDITY FUNDS US Dollar Liquidity Fund
Schedule of Investments (continued)
As of 31 March 2016
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
24
ISSUE DENOMINATION
CURRENCY HOLDINGS COUPON
RATE MATURITY
DATE AMORTIZED
COST
PERCENTAGE OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
CORPORATE BOND 0.91%
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
Total Corporate Bond 93,754,711 0.91
Total Transferable Securities and Money Market Instruments 8,020,197,165 78.21
Total Investments 8,020,197,165 78.21
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
Schedule of Investments
As of 31 March 2016
(Expressed in USD)
The accompanying notes form an integral part of financial statements.
25
ISSUE DENOMINATION
CURRENCY HOLDINGS COUPON
RATE MATURITY
DATE AMORTIZED
COST
PERCENTAGE OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
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 Treasury Bill 539,127,751 35.02
Total Transferable Securities and Money Market Instruments 1,365,302,629 88.69
Total Investments 1,365,302,629 88.69
Other assets in excess of liabilities 174,074,630 11.31
Total Net Assets 1,539,377,259 100.00
MORGAN STANLEY LIQUIDITY FUNDS Sterling Liquidity Fund
Schedule of Investments
As of 31 March 2016
(Expressed in GBP)
The accompanying notes form an integral part of financial statements.
26
ISSUE DENOMINATION
CURRENCY HOLDINGS COUPON
RATE MATURITY
DATE AMORTIZED
COST
PERCENTAGE OF
NET ASSETS
TRANSFERABLE SECURITIES AND MONEY MARKET INSTRUMENTS
COMMERCIAL PAPER 33.17%
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
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
FLOATING RATE NOTE 22.08%
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