Morgan Stanley Institutional Liquidity Funds

Transcription

1 Prospectus Supplement December 7, 2015 Supplement dated December 7, 2015 to the Morgan Stanley Institutional Liquidity Funds Prospectuses dated February 27, 2015 Money Market Portfolio Prime Portfolio Government Portfolio Government Securities Portfolio Treasury Portfolio Treasury Securities Portfolio Tax-Exempt Portfolio (each, a Portfolio ) Morgan Stanley Institutional Liquidity Funds The section of each Portfolio s Prospectus entitled Shareholder Information Pricing of Portfolio Shares is hereby deleted and replaced with the following: Pricing of Portfolio Shares Shares of the Portfolios may be purchased or sold (redeemed) at the NAV next determined after the Fund receives your order in good order and State Street Bank and Trust Company (the Custodian ) receives monies credited by a Federal Reserve Bank ( Federal Funds ) prior to the close of the Fed wire. You begin earning dividends the same day your Institutional Class shares are purchased provided the Fund receives your purchase amount in Federal Funds that day as set forth above. Orders to purchase shares of a Portfolio must be received by the Fund prior to the following times: for the Prime Portfolio, Government Portfolio and Treasury Portfolio 5:00 p.m. Eastern time; for the Government Securities Portfolio and Treasury Securities Portfolio 3:00 p.m. Eastern time; and for the Tax-Exempt Portfolio 2:00 p.m. Eastern time. On any business day that the NYSE closes early, or when SIFMA recommends that the securities markets close early, the Fund may close early and purchase orders received after such earlier closing times will be processed the following business day. If the NYSE is closed due to inclement weather, technology problems or any other reason on a day it would normally be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the Portfolio reserves the right to treat such day as a business day and accept purchase and redemption orders until, and calculate its NAV as of, the normally scheduled close of regular trading on the NYSE for that day, or such time noted above, so long as the Adviser believes there generally remains an adequate market to obtain reliable and accurate market quotations. The Fund may elect to remain open on days when the NYSE is closed or closes early but on which SIFMA recommends that the bond markets remain open for all or part of the day. Purchase orders received by the Fund and not funded by 6:00 p.m. on the trade date may be subject to an overdraft charge. Please retain this supplement for future reference. LFMMSPT-1215

2 INVESTMENT MANAGEMENT Morgan Stanley Institutional Liquidity Funds Institutional Class Portfolios Prime Portfolio Government Portfolio Government Securities Portfolio Treasury Portfolio Treasury Securities Portfolio Tax-Exempt Portfolio Prospectus February 27, 2015 e-delivery: Go Paperless. It s faster, easier and greener. Sign up today at: May not be available for all accounts. Ticker Fund Symbol Prime Portfolio MPFXX Government Portfolio MVRXX Government Securities Portfolio MUIXX Treasury Portfolio MISXX Treasury Securities Portfolio MSUXX Tax-Exempt Portfolio MTXXX The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

3 Table of Contents Page Portfolio Summary Prime Portfolio 1 Government Portfolio 4 Government Securities Portfolio 6 Treasury Portfolio 8 Treasury Securities Portfolio 10 Tax-Exempt Portfolio 12 Details of the Portfolios 14 Prime Portfolio 14 Government Portfolio 16 Government Securities Portfolio 18 Treasury Portfolio 20 Treasury Securities Portfolio 22 Tax-Exempt Portfolio 23 Additional Information about the Portfolios Investment Strategies and Related Risks 25 Shareholder Information 29 Fund Management 35 Financial Highlights 36

4 Morgan Stanley Institutional Liquidity Funds Prospectus Portfolio Summary Prime Portfolio Objective The Prime Portfolio seeks preservation of capital, daily liquidity and maximum current income. Fees and Expenses The table below describes the expenses that you may pay if you buy and hold Institutional Class shares of the Portfolio. The Portfolio does not charge any sales loads or other fees when you purchase or redeem shares. Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Institutional Class Advisory Fee 0.15% Distribution and/or Shareholder Service (12b-1) Fee N/A Other Expenses 0.06% Total Annual Portfolio Operating Expenses* 0.21% Fee Waiver and/or Expense Reimbursement* 0.01% Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.20% Example The example below is intended to help you compare the cost of investing in the Portfolio s Institutional Class with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio s Institutional Class, your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Institutional Class $20 $64 $113 $255 * The Portfolio s Adviser and Administrator, Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Portfolio s Institutional Class so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.20%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Principal Investment Strategies The Portfolio seeks to maintain a stable net asset value of $1.00 per share by investing in liquid, high quality U.S. dollar-denominated money market instruments of U.S. and foreign financial corporations and U.S. non-financial corporations. The Portfolio also invests in obligations issued or guaranteed by the U.S. Government and its agencies and instrumentalities. The Portfolio s money market investments may include commercial paper, corporate debt obligations, debt obligations (including certificates of deposit and promissory notes) of U.S. banks or foreign banks, or of U.S. branches or subsidiaries of foreign banks, or foreign branches of U.S. banks (such as Yankee obligations), certificates of deposit of savings banks and savings and loan organizations, asset-backed securities, repurchase agreements and municipal obligations. The Portfolio may also invest in U.S. dollar-denominated foreign securities and money market instruments. Principal Risks There can be no assurance that the Portfolio will achieve its investment objective. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible for an investor to lose money by investing in the Portfolio. The risks of investing in the Portfolio include: Credit and Interest Rate Risk. Credit risk refers to the possibility that the issuer or guarantor of a security will be unable to make interest payments and/or repay the principal on its debt. Interest rate risk refers to fluctuations in the value of a debt security resulting from changes in the general level of interest rates. The historically low interest rate environment increases the risk associated with rising interest rates. The Portfolio may face a heightened level of risk, especially since the Federal Reserve Board has ended its quantitative easing program and may begin to raise rates. Bank Obligations. The activities of U.S. and most foreign banks are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operations and profitability of domestic and foreign banks. In addition, banks may be particularly susceptible to certain economic factors. U.S. Government Securities. The U.S. government securities in which the Portfolio invests can be subject to two types of risk: credit risk and interest rate risk. When the general level of interest rates goes up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income securities go up. With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that the U.S. Government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Asset-Backed Securities. Asset-backed securities involve the risk that various federal and state consumer laws and other legal and economic factors may result in the collateral backing the securities being insufficient to support payment on the securities. 1

5 Prime Portfolio (Cont d) Some asset-backed securities entail prepayment risk, which may vary depending on the type of asset. Repurchase Agreements. Repurchase agreements are subject to risks associated with the possibility of default by the seller at a time when the collateral has declined in value, or insolvency of the seller, which may affect the Portfolio s right to control the collateral and result in certain costs and delays. Repurchase agreements may involve a greater degree of credit risk than investments in U.S. government securities. Foreign Money Market Securities. Investing in money market securities of foreign issuers involves some additional risks, including the possibility of adverse political, economic or other developments affecting the issuers of these securities. Municipal Obligations. To the extent the Portfolio invests in municipal obligations issued by state and local governments and their agencies, the Portfolio may be susceptible to political, economic, regulatory or other factors affecting issuers of these municipal obligations. To the extent that a Portfolio invests in municipal obligations of issuers in the same economic sector, it could be more sensitive to economic, business or political developments which affect such sector. Money Market Fund Regulation. The SEC recently adopted changes to the rules that govern money market funds. These changes have a phase-in period ranging from mid-2015 (primarily for certain new disclosure-related requirements) to the latter half of 2016 (for the most significant changes, such as the imposition of a floating NAV and the possible imposition of redemption fees and/or the temporary suspension of redemption privileges if a fund s portfolio liquidity falls below certain required minimum levels because of market conditions or other factors). While the industry is still assessing the impact of these rule changes, they may affect the investment strategies, performance, operating expenses and structure of money market funds. Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. Performance Information The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the performance of the Portfolio s Institutional Class shares from year-to-year and by showing the average annual returns of the Portfolio s Institutional Class shares for the one, five and 10 year periods. The Portfolio s past performance is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at Annual Total Returns Calendar Years 10% 5% 0% 3.23% 5.07% 5.34% 2.74% 0.26% 0.16% 0.11% 0.16% 0.08% 0.05% High Quarter 9/30/ % Low Quarter 9/30/ % Average Annual Total Returns for the Periods Ended December 31, 2014 Past Past Past One Year Five Years Ten Years Prime Portfolio 0.05% 0.11% 1.70% You may obtain the Portfolio s 7-day current yield by calling Fund Management Adviser. Morgan Stanley Investment Management Inc. Purchase and Sale of Portfolio Shares Institutional Class shares of the Portfolio are available to investors who at the time of initial purchase make a minimum investment of $10,000,000. You may not be subject to the minimum investment requirement under certain circumstances. For more information, please refer to the section of this Prospectus entitled Shareholder Information Minimum Investment Amount. Portfolio shares may be purchased or sold on any day the New York Stock Exchange ( NYSE ) is open for business directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box , Kansas City, MO ), by telephone ( ) or by contacting an authorized third-party, such as a brokerdealer or other financial intermediary that has entered into a selling agreement with the Portfolio s Distributor, Morgan Stanley Distribution, Inc. (each a Financial Intermediary ). You may purchase and redeem shares online through Morgan Stanley s ClientLink service at provided you have a pre-established Internet trading account. For more information, please refer to the sections of this Prospectus entitled Shareholder Information How to 2

6 Morgan Stanley Institutional Liquidity Funds Prospectus Portfolio Summary Prime Portfolio (Cont d) Purchase Shares and Shareholder Information How to Redeem Shares. Selected accounts that utilize the Portfolio as their sweep vehicle will be reviewed on each business day and shares will automatically be purchased or sold to cover any credits or debits incurred that day. Tax Information The Portfolio intends to make distributions that may be taxed as ordinary income or capital gains. Payments to Broker-Dealers and Other Financial Intermediaries If you purchase the Portfolio through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Portfolio shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your Financial Intermediary s web site for more information. 3

7 Government Portfolio Objective The Government Portfolio seeks preservation of capital, daily liquidity and maximum current income. Fees and Expenses The table below describes the expenses that you may pay if you buy and hold Institutional Class shares of the Portfolio. The Portfolio does not charge any sales loads or other fees when you purchase or redeem shares. Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Institutional Class Advisory Fee 0.15% Distribution and/or Shareholder Service (12b-1) Fee N/A Other Expenses 0.06% Total Annual Portfolio Operating Expenses* 0.21% Fee Waiver and/or Expense Reimbursement* 0.01% Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.20% Example The example below is intended to help you compare the cost of investing in the Portfolio s Institutional Class with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio s Institutional Class, your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Institutional Class $20 $64 $113 $255 * The Portfolio s Adviser and Administrator, Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Portfolio s Institutional Class so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.20%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Principal Investment Strategies The Portfolio seeks to maintain a stable net asset value of $1.00 per share by investing exclusively in obligations issued or guaranteed by the U.S. Government and its agencies and instrumentalities and in repurchase agreements collateralized by such securities. Principal Risks There can be no assurance that the Portfolio will achieve its investment objective. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible for an investor to lose money by investing in the Portfolio. The risks of investing in the Portfolio include: Credit and Interest Rate Risk. Credit risk refers to the possibility that the issuer or guarantor of a security will be unable to make interest payments and/or repay the principal on its debt. Interest rate risk refers to fluctuations in the value of a debt security resulting from changes in the general level of interest rates. The historically low interest rate environment increases the risk associated with rising interest rates. The Portfolio may face a heightened level of risk, especially since the Federal Reserve Board has ended its quantitative easing program and may begin to raise rates. U.S. Government Securities. The U.S. government securities in which the Portfolio invests can be subject to two types of risk: credit risk and interest rate risk. When the general level of interest rates goes up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income securities go up. With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that the U.S. Government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Repurchase Agreements. Repurchase agreements are subject to risks associated with the possibility of default by the seller at a time when the collateral has declined in value, or insolvency of the seller, which may affect the Portfolio s right to control the collateral and result in certain costs and delays. Repurchase agreements may involve a greater degree of credit risk than investments in U.S. government securities. Money Market Fund Regulation. The SEC recently adopted changes to the rules that govern money market funds. These changes have a phase-in period ranging from mid-2015 (primarily for certain new disclosure-related requirements) to the latter half of 2016 (for the most significant changes, such as the imposition of a floating NAV and the possible imposition of redemption fees and/or the temporary suspension of redemption privileges if a fund s portfolio liquidity falls below certain required minimum levels because of market conditions or other factors). Government money market funds, which are money market funds that invest in cash, U.S. government securities, and/or repurchase agreements that are collateralized fully, will be exempt from the requirement to consider imposing a redemption fee or suspending 4

8 Morgan Stanley Institutional Liquidity Funds Prospectus Portfolio Summary Government Portfolio (Cont d) redemptions at certain liquidity levels. Government money market funds will also be exempt from the requirement to operate with a floating NAV and may continue to seek a stable NAV of $1.00 per share. While the industry is still assessing the impact of these rule changes, they may affect the investment strategies, performance, operating expenses and structure of money market funds. Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. Performance Information The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the performance of the Portfolio s Institutional Class shares from year-to-year and by showing the average annual returns of the Portfolio s Institutional Class shares for the one, five and 10 year periods. The Portfolio s past performance is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at Annual Total Returns Calendar Years 10% 5% 0% 3.26% 5.07% 5.17% 2.37% 0.17% 0.06% 0.02% 0.05% 0.05% 0.04% High Quarter 12/31/ % Low Quarter 9/30/ % Average Annual Total Returns for the Periods Ended December 31, 2014 Past Past Past One Year Five Years Ten Years Government Portfolio 0.04% 0.04% 1.60% You may obtain the Portfolio s 7-day current yield by calling Fund Management Adviser. Morgan Stanley Investment Management Inc. Purchase and Sale of Portfolio Shares Institutional Class shares of the Portfolio are available to investors who at the time of initial purchase make a minimum investment of $10,000,000. You may not be subject to the minimum investment requirement under certain circumstances. For more information, please refer to the section of this Prospectus entitled Shareholder Information Minimum Investment Amount. Portfolio shares may be purchased or sold on any day the New York Stock Exchange ( NYSE ) is open for business directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box , Kansas City, MO ), by telephone ( ) or by contacting an authorized third-party, such as a brokerdealer or other financial intermediary that has entered into a selling agreement with the Portfolio s Distributor, Morgan Stanley Distribution, Inc. (each a Financial Intermediary ). You may purchase and redeem shares online through Morgan Stanley s ClientLink service at provided you have a pre-established Internet trading account. For more information, please refer to the sections of this Prospectus entitled Shareholder Information How to Purchase Shares and Shareholder Information How to Redeem Shares. Selected accounts that utilize the Portfolio as their sweep vehicle will be reviewed on each business day and shares will automatically be purchased or sold to cover any credits or debits incurred that day. Tax Information The Portfolio intends to make distributions that may be taxed as ordinary income or capital gains. Payments to Broker-Dealers and Other Financial Intermediaries If you purchase the Portfolio through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Portfolio shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your Financial Intermediary s web site for more information. 5

9 Government Securities Portfolio Objective The Government Securities Portfolio seeks preservation of capital, daily liquidity and maximum current income. Fees and Expenses The table below describes the expenses that you may pay if you buy and hold Institutional Class shares of the Portfolio. The Portfolio does not charge any sales loads or other fees when you purchase or redeem shares. Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Institutional Class Advisory Fee 0.15% Distribution and/or Shareholder Service (12b-1) Fee N/A Other Expenses 0.39% Total Annual Portfolio Operating Expenses* 0.54% Fee Waiver and/or Expense Reimbursement* 0.34% Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.20% Example The example below is intended to help you compare the cost of investing in the Portfolio s Institutional Class with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio s Institutional Class, your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Institutional Class $20 $64 $113 $255 * The Portfolio s Adviser and Administrator, Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Portfolio s Institutional Class so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.20%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Principal Investment Strategies The Portfolio seeks to maintain a stable net asset value of $1.00 per share by investing substantially all of its assets in U.S. Treasury obligations and certain U.S. government securities, the interest from which is generally exempt from state income taxation. These securities may include those issued or guaranteed either by the U.S. Treasury or certain agencies, authorities or instrumentalities of the U.S. Government. Principal Risks There can be no assurance that the Portfolio will achieve its investment objective. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible for an investor to lose money by investing in the Portfolio. The risks of investing in the Portfolio include: Credit and Interest Rate Risk. Credit risk refers to the possibility that the issuer or guarantor of a security will be unable to make interest payments and/or repay the principal on its debt. Interest rate risk refers to fluctuations in the value of a debt security resulting from changes in the general level of interest rates. The historically low interest rate environment increases the risk associated with rising interest rates. The Portfolio may face a heightened level of risk, especially since the Federal Reserve Board has ended its quantitative easing program and may begin to raise rates. U.S. Government Securities. The U.S. government securities in which the Portfolio invests can be subject to two types of risk: credit risk and interest rate risk. When the general level of interest rates goes up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income securities go up. With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that the U.S. Government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. Money Market Fund Regulation. The SEC recently adopted changes to the rules that govern money market funds. These changes have a phase-in period ranging from mid-2015 (primarily for certain new disclosure-related requirements) to the latter half of 2016 (for the most significant changes, such as the imposition of a floating NAV and the possible imposition of redemption fees and/or the temporary suspension of redemption privileges if a fund s portfolio liquidity falls below certain required minimum levels because of market conditions or other factors). Government money market funds, which are money market funds that invest in cash, U.S. government securities, and/or repurchase agreements that are collateralized fully, will be exempt from the requirement to consider imposing a redemption fee or suspending redemptions at certain liquidity levels. Government money market funds will also be exempt from the requirement to operate with a floating NAV and may continue to seek a stable NAV of $1.00 per share. While the industry is still assessing the impact of these rule changes, they may affect the investment strategies, performance, operating expenses and structure of money market funds. 6

10 Morgan Stanley Institutional Liquidity Funds Prospectus Portfolio Summary Government Securities Portfolio (Cont d) Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. Performance Information The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the performance of the Portfolio s Institutional Class shares from year-to-year and by showing the average annual returns of the Portfolio s Institutional Class shares for the one and five year periods and since inception. The Portfolio s past performance is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at Annual Total Returns Calendar Years 10% 5% 0% 0.08% 0.03% 0.01% 0.01% 0.01% 0.01% 2009 High Quarter 3/31/ % Low Quarter 3/31/ % Average Annual Total Returns for the Periods Ended December 31, 2014 Since Past Past Inception One Year Five Years 03/19/08 Government Securities Portfolio 0.01% 0.01% 0.22% You may obtain the Portfolio s 7-day current yield by calling Fund Management Adviser. Morgan Stanley Investment Management Inc. Purchase and Sale of Portfolio Shares Institutional Class shares of the Portfolio are available to investors who at the time of initial purchase make a minimum investment of $10,000,000. You may not be subject to the minimum investment requirement under certain circumstances. For more information, please refer to the section of this Prospectus entitled Shareholder Information Minimum Investment Amount. Portfolio shares may be purchased or sold on any day the New York Stock Exchange ( NYSE ) is open for business directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box , Kansas City, MO ), by telephone ( ) or by contacting an authorized third-party, such as a brokerdealer or other financial intermediary that has entered into a selling agreement with the Portfolio s Distributor, Morgan Stanley Distribution, Inc. (each a Financial Intermediary ). You may purchase and redeem shares online through Morgan Stanley s ClientLink service at provided you have a pre-established Internet trading account. For more information, please refer to the sections of this Prospectus entitled Shareholder Information How to Purchase Shares and Shareholder Information How to Redeem Shares. Selected accounts that utilize the Portfolio as their sweep vehicle will be reviewed on each business day and shares will automatically be purchased or sold to cover any credits or debits incurred that day. Tax Information The Portfolio intends to make distributions that may be taxed as ordinary income or capital gains. Payments to Broker-Dealers and Other Financial Intermediaries If you purchase the Portfolio through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Portfolio shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your Financial Intermediary s web site for more information. 7

11 Treasury Portfolio Objective The Treasury Portfolio seeks preservation of capital, daily liquidity and maximum current income. Fees and Expenses The table below describes the expenses that you may pay if you buy and hold Institutional Class shares of the Portfolio. The Portfolio does not charge any sales loads or other fees when you purchase or redeem shares. Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Institutional Class Advisory Fee 0.15% Distribution and/or Shareholder Service (12b-1) Fee N/A Other Expenses 0.06% Total Annual Portfolio Operating Expenses* 0.21% Fee Waiver and/or Expense Reimbursement* 0.01% Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.20% Example The example below is intended to help you compare the cost of investing in the Portfolio s Institutional Class with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio s Institutional Class, your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Institutional Class $20 $64 $113 $255 * The Portfolio s Adviser and Administrator, Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Portfolio s Institutional Class so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.20%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Principal Investment Strategies The Portfolio seeks to maintain a stable net asset value of $1.00 per share by investing exclusively in U.S. Treasury obligations, which are backed by the full faith and credit of the United States, and repurchase agreements collateralized by such securities. Principal Risks There can be no assurance that the Portfolio will achieve its investment objective. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible for an investor to lose money by investing in the Portfolio. The risks of investing in the Portfolio include: Credit and Interest Rate Risk. Credit risk refers to the possibility that the issuer or guarantor of a security will be unable to make interest payments and/or repay the principal on its debt. Interest rate risk refers to fluctuations in the value of a debt security resulting from changes in the general level of interest rates. The historically low interest rate environment increases the risk associated with rising interest rates. The Portfolio may face a heightened level of risk, especially since the Federal Reserve Board has ended its quantitative easing program and may begin to raise rates. Repurchase Agreements. Repurchase agreements are subject to risks associated with the possibility of default by the seller at a time when the collateral has declined in value, or insolvency of the seller, which may affect the Portfolio s right to control the collateral and result in certain costs and delays. Repurchase agreements may involve a greater degree of credit risk than investments in U.S. government securities. Money Market Fund Regulation. The SEC recently adopted changes to the rules that govern money market funds. These changes have a phase-in period ranging from mid-2015 (primarily for certain new disclosure-related requirements) to the latter half of 2016 (for the most significant changes, such as the imposition of a floating NAV and the possible imposition of redemption fees and/or the temporary suspension of redemption privileges if a fund s portfolio liquidity falls below certain required minimum levels because of market conditions or other factors). Government money market funds, which are money market funds that invest in cash, U.S. government securities, and/or repurchase agreements that are collateralized fully, will be exempt from the requirement to consider imposing a redemption fee or suspending redemptions at certain liquidity levels. Government money market funds will also be exempt from the requirement to operate with a floating NAV and may continue to seek a stable NAV of $1.00 per share. While the industry is still assessing the impact of these rule changes, they may affect the investment strategies, performance, operating expenses and structure of money market funds. Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. 8

12 Morgan Stanley Institutional Liquidity Funds Prospectus Portfolio Summary Treasury Portfolio (Cont d) Performance Information The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the performance of the Portfolio s Institutional Class shares from year-to-year and by showing the average annual returns of the Portfolio s Institutional Class shares for the one, five and 10 year periods. The Portfolio s past performance is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at Annual Total Returns Calendar Years 10% 5% 0% 3.15% 5.04% 4.93% 1.60% 0.07% 0.04% 0.01% 0.03% 0.03% 0.03% High Quarter 12/31/ % Low Quarter 12/31/ % Average Annual Total Returns for the Periods Ended December 31, 2014 Past Past Past One Year Five Years Ten Years Treasury Portfolio 0.03% 0.03% 1.47% You may obtain the Portfolio s 7-day current yield by calling Fund Management Adviser. Morgan Stanley Investment Management Inc. Purchase and Sale of Portfolio Shares Institutional Class shares of the Portfolio are available to investors who at the time of initial purchase make a minimum investment of $10,000,000. You may not be subject to the minimum investment requirement under certain circumstances. For more information, please refer to the section of this Prospectus entitled Shareholder Information Minimum Investment Amount. Portfolio shares may be purchased or sold on any day the New York Stock Exchange ( NYSE ) is open for business directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box , Kansas City, MO ), by telephone ( ) or by contacting an authorized third-party, such as a brokerdealer or other financial intermediary that has entered into a selling agreement with the Portfolio s Distributor, Morgan Stanley Distribution, Inc. (each a Financial Intermediary ). You may purchase and redeem shares online through Morgan Stanley s ClientLink service at provided you have a pre-established Internet trading account. For more information, please refer to the sections of this Prospectus entitled Shareholder Information How to Purchase Shares and Shareholder Information How to Redeem Shares. Selected accounts that utilize the Portfolio as their sweep vehicle will be reviewed on each business day and shares will automatically be purchased or sold to cover any credits or debits incurred that day. Tax Information The Portfolio intends to make distributions that may be taxed as ordinary income or capital gains. Payments to Broker-Dealers and Other Financial Intermediaries If you purchase the Portfolio through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Portfolio shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your Financial Intermediary s web site for more information. 9

13 Treasury Securities Portfolio Objective The Treasury Securities Portfolio seeks preservation of capital, daily liquidity and maximum current income. Fees and Expenses The table below describes the expenses that you may pay if you buy and hold Institutional Class shares of the Portfolio. The Portfolio does not charge any sales loads or other fees when you purchase or redeem shares. Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Institutional Class Advisory Fee 0.15% Distribution and/or Shareholder Service (12b-1) Fee N/A Other Expenses 0.06% Total Annual Portfolio Operating Expenses* 0.21% Fee Waiver and/or Expense Reimbursement* 0.01% Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.20% Example The example below is intended to help you compare the cost of investing in the Portfolio s Institutional Class with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio s Institutional Class, your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Institutional Class $20 $64 $113 $255 * The Portfolio s Adviser and Administrator, Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Portfolio s Institutional Class so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.20%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Principal Investment Strategies The Portfolio seeks to maintain a stable net asset value of $1.00 per share investing exclusively in U.S. Treasury obligations, which are backed by the full faith and credit of the United States. Principal Risks There can be no assurance that the Portfolio will achieve its investment objective. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible for an investor to lose money by investing in the Portfolio. The risks of investing in the Portfolio include: Credit and Interest Rate Risk. Credit risk refers to the possibility that the issuer or guarantor of a security will be unable to make interest payments and/or repay the principal on its debt. Interest rate risk refers to fluctuations in the value of a debt security resulting from changes in the general level of interest rates. The historically low interest rate environment increases the risk associated with rising interest rates. The Portfolio may face a heightened level of risk, especially since the Federal Reserve Board has ended its quantitative easing program and may begin to raise rates. Money Market Fund Regulation. The SEC recently adopted changes to the rules that govern money market funds. These changes have a phase-in period ranging from mid-2015 (primarily for certain new disclosure-related requirements) to the latter half of 2016 (for the most significant changes, such as the imposition of a floating NAV and the possible imposition of redemption fees and/or the temporary suspension of redemption privileges if a fund s portfolio liquidity falls below certain required minimum levels because of market conditions or other factors). Government money market funds, which are money market funds that invest in cash, U.S. government securities, and/or repurchase agreements that are collateralized fully, will be exempt from the requirement to consider imposing a redemption fee or suspending redemptions at certain liquidity levels. Government money market funds will also be exempt from the requirement to operate with a floating NAV and may continue to seek a stable NAV of $1.00 per share. While the industry is still assessing the impact of these rule changes, they may affect the investment strategies, performance, operating expenses and structure of money market funds. Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. 10

14 Morgan Stanley Institutional Liquidity Funds Prospectus Portfolio Summary Treasury Securities Portfolio (Cont d) Performance Information The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the performance of the Portfolio s Institutional Class shares from year-to-year and by showing the average annual returns of the Portfolio s Institutional Class shares for the one and five year periods and since inception. The Portfolio s past performance is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at Annual Total Returns Calendar Years 10% 5% 0% 0.07% 0.01% 0.01% 0.01% 0.01% 0.01% High Quarter 12/31/ % Low Quarter 6/30/ % Average Annual Total Returns for the Periods Ended December 31, 2014 Since Past Past Inception One Year Five Years 10/07/08 Treasury Securities Portfolio 0.01% 0.01% 0.02% You may obtain the Portfolio s 7-day current yield by calling Fund Management Adviser. Morgan Stanley Investment Management Inc. Purchase and Sale of Portfolio Shares Institutional Class shares of the Portfolio are available to investors who at the time of initial purchase make a minimum investment of $10,000,000. You may not be 10 subject to the minimum investment requirement under certain circumstances. For more information, please refer to the section of this Prospectus entitled Shareholder Information Minimum Investment Amount. Portfolio shares may be purchased or sold on any day the New York Stock Exchange ( NYSE ) is open for business directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box , Kansas City, MO ), by telephone ( ) or by contacting an authorized third-party, such as a brokerdealer or other financial intermediary that has entered into a selling agreement with the Portfolio s Distributor, Morgan Stanley Distribution, Inc. (each a Financial Intermediary ). You may purchase and redeem shares online through Morgan Stanley s ClientLink service at provided you have a pre-established Internet trading account. For more information, please refer to the sections of this Prospectus entitled Shareholder Information How to Purchase Shares and Shareholder Information How to Redeem Shares. Selected accounts that utilize the Portfolio as their sweep vehicle will be reviewed on each business day and shares will automatically be purchased or sold to cover any credits or debits incurred that day. Tax Information The Portfolio intends to make distributions that may be taxed as ordinary income or capital gains. Payments to Broker-Dealers and Other Financial Intermediaries If you purchase the Portfolio through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Portfolio shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your Financial Intermediary s web site for more information. 11

15 Tax-Exempt Portfolio Objective The Tax-Exempt Portfolio seeks to maximize current income exempt from federal income tax to the extent consistent with preservation of capital and maintenance of liquidity. Fees and Expenses The table below describes the expenses that you may pay if you buy and hold Institutional Class shares of the Portfolio. The Portfolio does not charge any sales loads or other fees when you purchase or redeem shares. Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Institutional Class Advisory Fee 0.15% Distribution and/or Shareholder Service (12b-1) Fee N/A Other Expenses 0.16% Total Annual Portfolio Operating Expenses* 0.31% Fee Waiver and/or Expense Reimbursement* 0.11% Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.20% Example The example below is intended to help you compare the cost of investing in the Portfolio s Institutional Class with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio s Institutional Class, your investment has a 5% return each year and that the Portfolio s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years Institutional Class $20 $64 $113 $255 * The Portfolio s Adviser and Administrator, Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Portfolio s Institutional Class so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.20%. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Principal Investment Strategies The Portfolio seeks to maintain a stable net asset value of $1.00 per share by investing at least 80% of its assets in high quality short-term municipal obligations, the interest of which is exempt from federal income taxes and is not subject to the federal alternative minimum tax. This policy is fundamental and may not be changed without shareholder approval. The Portfolio may also invest in variable and floating rate demand instruments, tender option bonds, custodial receipts and investments in other investment companies, including money market funds. The Portfolio may invest up to 20% of its assets in taxable money market securities or in municipal obligations that pay interest income that may be subject to the alternative minimum tax; however, it is currently intended that the Portfolio will be managed so that income generated by the Portfolio will not be subject to the alternative minimum tax. In addition, the Portfolio may temporarily invest more than 20% of its assets in taxable money market securities for defensive purposes in attempting to respond to adverse market conditions. Principal Risks There can be no assurance that the Portfolio will achieve its investment objective. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible for an investor to lose money by investing in the Portfolio. The risks of investing in the Portfolio include: Credit and Interest Rate Risk. Credit risk refers to the possibility that the issuer or guarantor of a security will be unable to make interest payments and/or repay the principal on its debt. Interest rate risk refers to fluctuations in the value of a debt security resulting from changes in the general level of interest rates. The historically low interest rate environment increases the risk associated with rising interest rates. The Portfolio may face a heightened level of risk, especially since the Federal Reserve Board has ended its quantitative easing program and may begin to raise rates. Municipal Obligations. To the extent the Portfolio invests in municipal obligations issued by state and local governments and their agencies, the Portfolio may be susceptible to political, economic, regulatory or other factors affecting issuers of these municipal obligations. To the extent that a Portfolio invests in municipal obligations of issuers in the same economic sector, it could be more sensitive to economic, business or political developments which affect such sector. Money Market Fund Regulation. The SEC recently adopted changes to the rules that govern money market funds. These changes have a phase-in period ranging from mid-2015 (primarily for certain new disclosure-related requirements) to the latter half of 2016 (for the most significant changes, such as the possible imposition of redemption fees and/or the temporary suspension of redemption privileges if a 12