-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pvy3Xj2vs13Mp3H0niXhUg/6Tmc9JfvcDJ5cti0PRlqePPwpRkaBsoE9uhGBxoKt snXWtOQnUm5cuEyI1veFFw== 0000950123-02-003863.txt : 20020417 0000950123-02-003863.hdr.sgml : 20020417 ACCESSION NUMBER: 0000950123-02-003863 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020228 FILED AS OF DATE: 20020417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY LIQUID ASSET FUND INC CENTRAL INDEX KEY: 0000093285 IRS NUMBER: 132822397 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02575 FILM NUMBER: 02613198 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: (212) 869-6397 MAIL ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER LIQUID ASSET FUND INC DATE OF NAME CHANGE: 19930715 FORMER COMPANY: FORMER CONFORMED NAME: DEAN WITTER SEARS LIQUID ASSET FUND INC DATE OF NAME CHANGE: 19930209 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER LIQUID ASSET FUND INC DATE OF NAME CHANGE: 19980622 N-30D 1 y58128n-30d.txt MORGAN STANLEY LIQUID ASSET FUND INC. Morgan Stanley Liquid Asset Fund Inc. LETTER TO THE SHAREHOLDERS - FEBRUARY 28, 2002 Dear Shareholder: As of February 28, 2002, Morgan Stanley Liquid Asset Fund had net assets of more than $23.5 billion, up slightly from six months earlier. The average maturity of the Fund's portfolio was 53 days. For the seven-day period ended February 28, 2002, the Fund provided an effective yield of 1.50 percent and a current yield of 1.49 percent, while its 30-day average yield was 1.48 percent. For the six-month period ended February 28, 2002, the Fund provided a total return of 1.08 percent.* Market Overview Yields available from money-market securities continued to trend down during the second half of 2001, resulting in a 475-basis-point decline for the full calendar year. By December 11, the Federal Open Market Committee had lowered its federal funds target to 1.75 percent, a 40-year low. These low yield levels reflected the Federal Reserve Board's accommodative posture as it tried to moderate the slowing pace of economic activity, which became evident during the spring and summer of 2001, and the adverse impact of the September 11 terrorist attacks. During the early months of 2002, however, approaching the six-month anniversary of the attacks, the economy showed clear signs of recovery as it responded to stimulative monetary and fiscal initiatives. Portfolio Composition and Structure On February 28, 2002, approximately 57 percent of the Fund's portfolio was invested in federal agency and U.S. Treasury obligations, 37 percent in high-quality commercial paper and the remaining 6 percent in short-term bank notes and certificates of deposit issued by financially strong commercial banks. At the end of the fiscal period, approximately 91 percent of the portfolio's holdings were due to mature in less than four months. Consequently, we believe the portfolio is well positioned for stability of value with a very high degree of liquidity. As always, we try to operate the Fund in a conservative manner without the use of derivatives or structured notes that might fluctuate excessively with changing interest rates. We believe that the Fund continues to serve as a useful investment for liquidity, preservation of capital and a yield that reflects prevailing money-market conditions. Looking Ahead We expect the pace of economic activity during the next six months to begin to reflect some improvement as the economy regains its footing. Barring further significant terrorist activity in the - --------------------- *The Fund's yield figures are annualized; the total return figure is not. Morgan Stanley Liquid Asset Fund Inc. LETTER TO THE SHAREHOLDERS - FEBRUARY 28, 2002 continued world, we believe that consumer and business confidence should continue to improve, resulting in a return to economic expansion. Such a recovery would likely lead to moderately higher levels of short-term interest rates, which could potentially materialize during the second half of 2002. We appreciate your ongoing support of Morgan Stanley Liquid Asset Fund and look forward to continuing to serve your investment needs. Very truly yours, /s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN Charles A. Fiumefreddo Mitchell M. Merin Chairman of the Board President
2 Morgan Stanley Liquid Asset Fund Inc. PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2002 (UNAUDITED)
ANNUALIZED PRINCIPAL YIELD AMOUNT IN ON DATE OF MATURITY THOUSANDS PURCHASE DATE VALUE - --------------------------------------------------------------------------------------------------------- U.S. Government & Agency Obligations (57.9%) $1,040,000 Federal Home Loan Banks................... 1.61-3.63% 03/22/02-04/22/02 $ 1,037,892,458 4,760,000 Federal Home Loan Mortgage Corp. ......... 1.69-3.89 03/19/02-07/29/02 4,741,099,290 5,255,000 Federal National Mortgage Assoc........... 1.58-3.60 03/06/02-08/09/02 5,239,045,064 2,640,000 U.S. Treasury Bills....................... 1.70-2.10 03/07/02-08/15/02 2,626,795,903 --------------- Total U.S. Government & Agency Obligations (Cost $13,644,832,715)......... 13,644,832,715 --------------- Commercial Paper (37.7%) Banking (4.4%) 1,045,000 Citicorp.................................. 1.77-1.80 03/04/02-04/10/02 1,044,234,747 --------------- Finance - Consumer (3.0%) 180,000 FCAR Owner Trust.......................... 1.73 03/13/02 179,896,800 500,000 New Center Asset Trust.................... 1.78-1.80 03/01/02-04/08/02 499,626,333 30,000 Wells Fargo Financial Inc. ............... 2.34 03/08/02 29,986,467 --------------- 709,509,600 --------------- Finance - Corporate (1.8%) 420,000 Ciesco, L.P. ............................. 1.79-1.81 04/11/02-06/05/02 418,490,372 --------------- Financial Conglomerates (4.9%) 1,152,000 General Electric Capital Corp. ........... 1.74-2.01 03/01/02-07/31/02 1,149,588,440 --------------- Integrated Oil (0.5%) 15,000 BP Amoco Capital PLC...................... 1.86 07/08/02 14,900,563 100,000 ChevronTexaco Corp. ...................... 1.77 03/07/02 99,970,500 --------------- 114,871,063 --------------- International Banks (21.7%) 300,000 ABN-AMRO North America Finance, Inc. ..... 1.86 03/05/02 299,938,331 1,100,000 Abbey National North America Corp. ....... 1.78 03/12/02-05/17/02 1,098,455,264 1,075,000 Barclays U.S. Funding Corp. .............. 1.79-1.82 05/10/02-05/31/02 1,070,461,167 200,000 Canadian Imperial Holdings Inc. .......... 1.83 06/11/02 198,968,667 1,145,000 Deutsche Bank Financial LLC............... 1.62-1.80 04/04/02-05/03/02 1,142,268,886 100,000 ING (U.S.) Funding LLC.................... 1.77 03/05/02 99,980,333 800,000 Societe Generale N.A. Inc. ............... 1.78-1.80 03/11/02-04/12/02 798,818,333 400,000 Toronto-Dominion Holdings USA Inc. ....... 1.78-1.81 04/02/02-05/29/02 398,578,500 --------------- 5,107,469,481 --------------- Pharmaceuticals: Major (1.4%) 340,000 Merck & Co., Inc. ........................ 1.73-1.84 03/08/02-03/13/02 339,863,792 --------------- Total Commercial Paper (Cost $8,884,027,495).............................. 8,884,027,495 ---------------
See Notes to Financial Statements 3 Morgan Stanley Liquid Asset Fund Inc. PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2002 (UNAUDITED) continued
ANNUALIZED PRINCIPAL YIELD AMOUNT IN ON DATE OF MATURITY THOUSANDS PURCHASE DATE VALUE - --------------------------------------------------------------------------------------------------------- Short-Term Bank Note (3.2%) $ 750,000 Wells Fargo Bank, N.A. (Cost $750,000,000)........................... 1.73-1.78% 03/12/02-03/18/02 $ 750,000,000 --------------- Certificates of Deposit (2.7%) 450,000 Chase Manhattan Bank (USA) N.A............ 1.75 03/15/02 450,000,000 200,000 Wells Fargo Bank, N.A..................... 1.78 03/21/02 200,000,000 --------------- Total Certificates of Deposit (Cost $650,000,000)......................... 650,000,000 --------------- Repurchase Agreement (0.1%) 13,785 The Bank of New York (dated 02/28/02; proceeds $13,785,880) (a) (Cost $13,785,234)............................ 1.688 03/01/02 13,785,234 --------------- Total Investments (Cost $23,942,645,444) (b).................... 101.6% 23,942,645,444 Liabilities In Excess of Other Assets..... (1.6) (371,080,507) ----- --------------- Net Assets................................ 100.0% $23,571,564,937 ===== ===============
- --------------------- (a) Collateralized by $13,915,658 U.S. Treasury Note 3.50% due 11/15/06 valued at $14,061,017. (b) Cost is the same for federal income tax purposes.
See Notes to Financial Statements 4 Morgan Stanley Liquid Asset Fund Inc. FINANCIAL STATEMENTS Statement of Assets and Liabilities February 28, 2002 (unaudited) Assets: Investments in securities, at value (cost $23,942,645,444).......................................... $23,942,645,444 Cash........................................................ 90,000 Receivable for: Interest................................................ 3,402,146 Capital stock sold...................................... 1,986,253 Prepaid expenses and other assets........................... 391,938 --------------- Total Assets............................................ 23,948,515,781 --------------- Liabilities: Payable for: Capital stock repurchased............................... 369,566,600 Investment management fee............................... 4,762,557 Distribution fee........................................ 1,819,469 Accrued expenses and other payables......................... 802,218 --------------- Total Liabilities....................................... 376,950,844 --------------- Net Assets.............................................. $23,571,564,937 =============== Composition of Net Assets: Paid-in-capital............................................. $23,570,864,383 Accumulated undistributed net investment income............. 700,554 --------------- Net Assets.............................................. $23,571,564,937 =============== Net Asset Value Per Share, 23,571,535,577 shares outstanding (50,000,000,000 shares authorized of $.01 par value)............................. $1.00 ===============
See Notes to Financial Statements 5 Morgan Stanley Liquid Asset Fund Inc. FINANCIAL STATEMENTS continued Statement of Operations For the six months ended February 28, 2002 (unaudited) Net Investment Income: Interest Income............................................. $320,866,231 ------------ Expenses Investment management fee................................... 30,761,753 Transfer agent fees and expenses............................ 23,415,777 Distribution fee............................................ 11,751,577 Shareholder reports and notices............................. 493,915 Registration fees........................................... 338,983 Custodian fees.............................................. 194,127 Professional fees........................................... 28,164 Directors' fees and expenses................................ 9,990 Other....................................................... 52,695 ------------ Total Expenses.......................................... 67,046,981 ------------ Net Investment Income................................... 253,819,250 Net Realized Gain....................................... 2,750 ------------ Net Increase................................................ $253,822,000 ============
See Notes to Financial Statements 6 Morgan Stanley Liquid Asset Fund Inc. FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED FEBRUARY 28, 2002 AUGUST 31, 2001 --------------- --------------- (unaudited) Increase (Decrease) in Net Assets: Operations: Net investment income....................................... $ 253,819,250 $ 1,088,248,494 Net realized gain........................................... 2,750 222,933 --------------- --------------- Net Increase............................................ 253,822,000 1,088,471,427 --------------- --------------- Dividends and Distributions to Shareholders from: Net investment income....................................... (253,809,101) (1,088,242,206) Net realized gain........................................... (2,750) (237,104) --------------- --------------- Total Dividends and Distributions....................... (253,811,851) (1,088,479,310) --------------- --------------- Net increase from capital stock transactions................ 384,783,029 3,558,465,439 --------------- --------------- Net Increase............................................ 384,793,178 3,558,457,556 Net Assets: Beginning of period......................................... 23,186,771,759 19,628,314,203 --------------- --------------- End of Period (Including accumulated undistributed net investment income of $700,554 and $690,405, respectively)..................... $23,571,564,937 $23,186,771,759 =============== ===============
See Notes to Financial Statements 7 Morgan Stanley Liquid Asset Fund Inc. NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2002 (UNAUDITED) 1. Organization and Accounting Policies Morgan Stanley Liquid Asset Fund Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objectives are high current income, preservation of capital and liquidity. The Fund was incorporated in Maryland on September 3, 1974 and commenced operations on September 22, 1975. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. Valuation of Investments -- Portfolio securities are valued at amortized cost, which approximates market value. B. Accounting for Investments -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. Federal Income Tax Status -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. D. Dividends and Distributions to Shareholders -- The Fund records dividends and distributions to shareholders as of the close of each business day. 2. Investment Management Agreement Pursuant to an Investment Management Agreement with Morgan Stanley Investment Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.50% to the portion of the daily net assets not exceeding $500 million; 0.425% to the portion of the daily net assets exceeding $500 million but not exceeding $750 million; 0.375% to the portion of the daily net assets exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.35 billion; 0.325% to the portion of the daily net assets 8 Morgan Stanley Liquid Asset Fund Inc. NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2002 (UNAUDITED) continued exceeding $1.35 billion but not exceeding $1.75 billion; 0.30% to the portion of the daily net assets exceeding $1.75 billion but not exceeding $2.15 billion; 0.275% to the portion of the daily net assets exceeding $2.15 billion but not exceeding $2.5 billion; 0.25% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $15 billion; 0.249% to the portion of the daily net assets exceeding $15 billion but not exceeding $17.5 billion; 0.248% to the portion of the daily net assets exceeding $17.5 billion but not exceeding $25 billion; and 0.247% to the portion of daily net assets in excess of $25 billion. 3. Plan of Distribution Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager, is the distributor of the Fund's shares and, in accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act, finances certain expenses in connection therewith. The Fund is authorized to reimburse the Distributor for specific expenses the Distributor incurs or plans to incur in promoting the distribution of the Fund's shares. The amount of each monthly reimbursement payment may in no event exceed an amount equal to a payment at the annual rate of 0.15% of the Fund's average daily net assets during the month. Expenses incurred by the Distributor pursuant to the Plan in any fiscal year will not be reimbursed by the Fund through payments accrued in any subsequent fiscal year. For the six months ended February 28, 2002, the distribution fee was accrued at the annual rate of 0.10%. 4. Security Transactions and Transactions with Affiliates The cost of purchases and proceeds from sales/maturities of portfolio securities for the six months ended February 28, 2002, aggregated $52,705,124,150 and $52,400,436,514, respectively. Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At February 28, 2002, the Fund had transfer agent fees and expenses payable of approximately $220,600. The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Directors of the Fund who will have served as independent Directors for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended February 28, 2002 included in Directors' fees and expenses in the Statement of Operations amounted to $3,926. At February 28, 2002, the Fund had an accrued pension liability of $57,728, which is included in accrued expenses in the Statement of Assets and Liabilities. 9 Morgan Stanley Liquid Asset Fund Inc. NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2002 (UNAUDITED) continued 5. Capital Stock Transactions in capital stock, at $1.00 per share, were as follows:
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED FEBRUARY 28, 2002 AUGUST 31, 2001 ----------------- --------------- (unaudited) Shares sold................................................. 27,923,229,877 60,629,418,854 Shares issued in reinvestment of dividends and distributions............................................. 253,296,829 1,086,049,366 --------------- --------------- 28,176,526,706 61,715,468,220 Shares repurchased.......................................... (27,791,743,677) (58,157,002,781) --------------- --------------- Net increase................................................ 384,783,029 3,558,465,439 =============== ===============
10 Morgan Stanley Liquid Asset Fund Inc. FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of capital stock outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED ----------------------------------------------- FEBRUARY 28, 2002 2001 2000 1999 1998 1997 ----------------- ------- ------- ------- ------- ------- (unaudited) Selected Per Share Data: Net asset value, beginning of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ ------ Net income from investment operations......... 0.011 0.051 0.055 0.046 0.052 0.050 Less dividends from net investment income..... (0.011)+ (0.051)+ (0.055) (0.046) (0.052) (0.050) ------ ------ ------ ------ ------ ------ Net asset value, end of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== ====== Total Return.................................. 1.08%(1) 5.24% 5.69% 4.74% 5.29% 5.13% Ratios to Average Net Assets: Expenses...................................... 0.57%(2) 0.57% 0.58% 0.59% 0.61% 0.62% Net investment income......................... 2.16%(2) 5.04% 5.51% 4.61% 5.11% 5.01% Supplemental Data: Net assets, end of period, in millions........ $23,572 $23,187 $19,628 $17,875 $15,321 $13,166
- --------------------- (1) Not annualized. (2) Annualized. + Includes capital gain distributions of less than $0.001 per share.
See Notes to Financial Statements 11 DIRECTORS Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS Charles A. Fiumefreddo Chairman and Chief Executive Officer Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel Jonathan R. Page Vice President Thomas F. Caloia Treasurer TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon. This report is submitted for the general information of shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its directors. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Morgan Stanley Distributors Inc., member NASD. 37925RPT MORGAN STANLEY LIQUID ASSET FUND Semiannual Report February 28, 2002 -----END PRIVACY-ENHANCED MESSAGE-----