UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-03326

Morgan Stanley U.S. Government Money Market Trust
(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York					10036
(Address of principal executive offices)					(Zip code)

John H. Gernon 522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

Registrant’s telephone number, including area code:				212-296-0289

Date of fiscal year end:	January 31,

Date of reporting period:		July 31, 2015

Trustees

Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
Nancy C. Everett
Jakki L. Haussler
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid

Officers

Michael E. Nugent
Chairperson of the Board

John H. Gernon
President and Principal Executive Officer

Stefanie V. Chang Yu
Chief Compliance Officer

Joseph C. Benedetti
Vice President

Francis J. Smith
Treasurer and Principal Financial Officer

Mary E. Mullin
Secretary

Transfer Agent

Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02169

Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111

Independent Registered Public Accounting Firm

Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

Legal Counsel

Dechert LLP
1095 Avenue of the Americas
New York, New York 10036

Counsel to the Independent Trustees

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

Adviser and Administrator

Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036

delivered an updated statement of the FOMC's views on the market. The most notable change from the March FOMC statement came in the assessment of the economy. While the pace of job growth "moderated" during the economic slowdown during the winter months, the statement noted that the FOMC perceives this pause in growth to be due to "transitory" factors. The Fed's interest rate forward guidance was maintained, as the Committee anticipated that it will increase rates when it is "reasonably confident" that inflation is moving toward the 2 percent objective over the medium term. Due in part to the slowdown in the first quarter and tepid inflation, market expectations for a rate hike were pushed back, as the probability of an increase in rates at the June meeting had decreased.

The June FOMC meeting was accompanied by the quarterly SEP and a press conference with Fed Chair Janet Yellen. The much-anticipated updated interest rate projections from FOMC members showed that the median forecast for the fed funds rate at the end of 2015 was unchanged from the March statement at 0.625 percent. Fifteen of the 17 voting members believe that 2015 will be the appropriate time to increase interest rates off of the zero bound. The Fed noted that the economy and labor market are improving but it needs to see more progress before raising rates. Specifically, the central bank has communicated that lift-off will be appropriate when it sees further improvement in the labor market and is "reasonably confident" that inflation is moving toward its 2 percent objective over the medium term. In the press conference, Chair Yellen reiterated that the forward path of rate hikes will be very gradual and that all policy decisions will be data dependent.

As is normal at quarter-end, investable supply becomes more scarce, including the availability of repurchase agreements, as dealers reduce the size of their balance sheets. The FRBNY conducted term RRP operations in addition to the overnight RRP operation, which helped counterbalance some of the supply pullback in our markets. The FRBNY held two term auctions, with 7-day and 2-day maturity tenors, both for $100 billion each that matured over June month-end. Both auctions were oversubscribed and each stopped at a 0.07 percent rate.

While the July FOMC meeting had no major changes announced, it had some small and meaningful adjustments to the FOMC statement. The statement upgraded the assessment of the labor market, noting the continued improvement with "solid job gains." Forward guidance was also slightly tweaked, as the Fed said it needs only to see "some" further improvement in the labor market in addition to its previous pledge of being reasonably confident that inflation is moving back toward its objective over the medium term. Overall, the Fed provided itself with flexibility moving forward, allowing it to be data dependent on future policy decisions, as it is not on a pre-set course.

Performance Analysis

As of July 31, 2015, Morgan Stanley U.S. Government Money Market Trust had net assets of approximately $1.1 billion and an average portfolio maturity of 11 days. For the six-month period ended July 31, 2015, the Fund provided a total return of 0.00 percent. For the seven-day period ended July 31, 2015, the Fund provided an effective annualized yield of 0.01 percent (subsidized) and –0.52 percent (non-subsidized) and

Investment Strategy

The Fund invests in high quality, short-term U.S. government securities. In selecting investments, the Fund's "Adviser," Morgan Stanley Investment Management Inc., seeks to maintain the Fund's share price at $1.00. The share price remaining stable at $1.00 means that the Fund would preserve the principal value of your investment.

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.

For More Information About Portfolio Holdings

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com/im. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q and monthly holdings for each money market fund on Form N-MFP. Morgan Stanley does not deliver these reports to shareholders, nor are the first and third fiscal quarter reports posted to the Morgan Stanley public web site. However, the holdings for each money market fund are posted to the Morgan Stanley public web site. You may

As a shareholder of the Fund, you incur ongoing costs, including advisory fees, administration fees, shareholder services fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 02/01/15 – 07/31/15.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds that have transactional costs, such as sales charges (loads) or exchange fees.

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	02/01/15		07/31/15		02/01/15 – 07/31/15
Actual (0.00% return)	$	1,000.00	$	1,000.05	$	0.60
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,024.33	$	0.61

@ Expenses are equal to the Fund's annualized expense ratio of 0.12% multiplied by the average account value over the period, multiplied by 182^@@/365 (to reflect the one-half year period). If the fund had borne all of its expenses, the annualized expense ratio would have been 0.59%.

@@ Adjusted to reflect non-business day accruals.

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE	VALUE
		Repurchase Agreements (76.9%)
$	169,000	ABN Amro Securities LLC, (dated 07/31/15; proceeds $169,002,113; fully collateralized by various U.S. Government agency securities, 1.75% - 10.50% due 05/30/19 - 06/01/45; valued at $174,033,860)		0.15	%	08/03/15	$	169,000,000
	40,000	Bank of Nova Scotia, (dated 09/08/14; proceeds $40,089,222; fully collateralized by various U.S. Government agency securities, 2.50% - 6.00% due 02/01/23 - 04/20/61; valued at $41,225,290) (Demand 08/07/15)		0.22	(a)	09/08/15		40,000,000
	15,000	Bank of Nova Scotia, (dated 08/04/14; proceeds $15,034,979; fully collateralized by various U.S. Government agency securities, 2.00% - 6.00% due 02/01/23 - 08/01/45; valued at $15,477,359)		0.23		08/04/15		15,000,000
	12,000	Bank of Nova Scotia, (dated 01/02/15; proceeds $12,042,817; fully collateralized by various U.S. Government agency securities, 1.99% - 6.00% due 02/01/23 - 07/01/45; valued at $12,360,000) (Demand 08/07/15)		0.35	(a)	01/04/16		12,000,000
	45,000	Bank of Nova Scotia, (dated 01/05/15; proceeds $45,159,688; fully collateralized by various U.S. Government agency securities, 1.02% - 6.00% due 10/17/17 - 06/20/45; valued at $46,363,754) (Demand 08/07/15)		0.35	(a)	01/05/16		45,000,000
	90,000	Barclays Capital, Inc., (dated 07/27/15; proceeds $90,001,925; fully collateralized by various U.S. Government agency securities, 2.50% - 3.50% due 11/01/27 - 07/01/45; valued at $92,745,537)		0.11		08/03/15		90,000,000

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE	VALUE
$	55,000	Barclays Capital, Inc., (dated 07/31/15; proceeds $55,001,497; fully collateralized by various U.S. Government agency securities, 3.00% - 4.50% due 06/01/41 - 12/01/42; valued at $56,657,514)		0.14	%	08/07/15	$	55,000,000
	90,000	Barclays Capital, Inc., (dated 07/31/15; proceeds $90,001,125; fully collateralized by various U.S. Government obligations, 0.50% - 1.63% due 07/31/16 - 06/30/20; valued at $91,758,067)		0.15		08/03/15		90,000,000
	650	BNP Paribas Securities Corp., (dated 07/31/15; proceeds $650,008; fully collateralized by various U.S. Government agency securities, 4.00% - 6.00% due 05/01/23 - 05/01/42 and a U.S. Government obligation, 6.25% due 08/15/23; valued at $668,370)		0.15		08/03/15		650,000
	10,000	ING Financial Markets LLC, (dated 06/02/15; proceeds $10,001,894; fully collateralized by a U.S. Government agency security, 3.50% due 09/01/42; valued at $10,300,403)		0.11		08/03/15		10,000,000
	25,000	ING Financial Markets LLC, (dated 05/11/15; proceeds $25,006,951; fully collateralized by a U.S. Government agency security, 3.50% due 10/01/42; valued at $25,752,959) (Demand 08/07/15)		0.11	(a)	08/10/15		25,000,000
	5,000	ING Financial Markets LLC, (dated 06/02/15; proceeds $5,001,806; fully collateralized by a U.S. Government agency security, 3.50% due 09/01/42; valued at $5,150,201)		0.13		09/10/15		5,000,000

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE	VALUE
$	21,500	ING Financial Markets LLC, (dated 07/14/15; proceeds $21,509,341; fully collateralized by various U.S. Government agency securities, 3.50% due 09/01/42 - 10/01/42; valued at $22,145,131)		0.17	%	10/14/15	$	21,500,000
	95,000	Mizuho Securities USA, Inc., (dated 07/29/15; proceeds $95,002,401; fully collateralized by various U.S. Government agency securities, Zero Coupon - 5.38% due 08/28/15 - 11/26/21; valued at $96,907,669)		0.13		08/05/15		95,000,000
	8,000	RBC Capital Markets LLC, (dated 02/06/15; proceeds $8,005,200; fully collateralized by various U.S. Government agency securities, 2.25% - 4.50% due 12/01/19 - 07/20/45; valued at $8,240,001)		0.13		08/05/15		8,000,000
	10,000	RBC Capital Markets LLC, (dated 03/04/15; proceeds $10,006,572; fully collateralized by various U.S. Government agency securities, 1.75% - 4.50% due 02/01/26 - 07/01/45; valued at $10,300,000) (Demand 08/07/15)		0.13	(a)	09/02/15		10,000,000
	32,000	RBC Capital Markets LLC, (dated 07/06/15; proceeds $32,010,516; fully collateralized by various U.S. Government agency securities, 1.35% - 4.50% due 12/01/19 - 07/20/45; valued at $32,960,000) (Demand 08/07/15)		0.13	(a)	10/05/15		32,000,000
	75,000	RBS Securities, Inc., (dated 07/31/15; proceeds $75,000,938; fully collateralized by various U.S. Government obligations, 2.13% - 2.25% due 04/30/21 - 06/30/22; valued at $76,500,448)		0.15		08/03/15		75,000,000

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE				MATURITY DATE	VALUE
$	5,000	TD Securities USA LLC, (dated 07/30/15; proceeds $5,000,146; fully collateralized by a U.S. Government agency security, 3.50% due 11/01/42 and a U.S. Government obligation, 2.13% due 01/31/21; valued at $5,100,551)		0.15	%		08/06/15	$	5,000,000
	20,000	Wells Fargo Securities LLC, (dated 07/21/15; proceeds $20,001,722; fully collateralized by a U.S. Government obligation, 2.00% due 04/30/16; valued at $20,400,231)		0.10			08/21/15		20,000,000
	9,000	Wells Fargo Securities LLC, (dated 05/19/15; proceeds $9,002,475; fully collateralized by various U.S. Government obligations, Zero Coupon - 2.63% due 12/17/15 - 02/29/16; valued at $9,180,015)		0.11			08/17/15		9,000,000
	35,000	Wells Fargo Securities LLC, (dated 07/29/15; proceeds $35,000,885; fully collateralized by a U.S. Government obligation, 0.38% due 01/15/16; valued at $35,705,815)		0.13			08/05/15		35,000,000
		Total Repurchase Agreements (Cost $867,150,000)							867,150,000
						DEMAND DATE (b)
		U.S. Agency Securities (22.3%)
		Federal Farm Credit Bank
	13,250			0.15	(a)	08/23/15	10/23/15		13,249,695
	6,000			0.17	(a)	08/09/15	08/09/16		5,999,391
	5,000			0.17	(a)	08/20/15	10/20/16		5,001,564
	12,000			0.18	(a)	10/19/15	10/19/15		11,999,830
	4,300			0.40		—	09/24/15		4,301,458
		Federal Home Loan Bank
	2,200			0.09		—	09/08/15		2,199,791
	20,000			0.14	(a)	08/20/15	11/20/15		19,998,766
	35,000			0.14	(a)	08/07/15	12/07/15		34,997,826
	5,000			0.14	(a)	08/22/15	12/22/15		4,999,703

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			DEMAND DATE (b)	MATURITY DATE			VALUE
$	10,000			0.14	(a)%	08/17/15	01/17/17			$	9,997,766
	8,000			0.15	(a)	08/14/15	10/14/15				7,999,918
	4,000			0.15	(a)	08/04/15	12/04/15				4,000,000
	9,000			0.15	(a)	08/08/15	12/08/15				9,000,000
	5,000			0.15	(a)	08/25/15	01/25/16				4,999,574
	15,000			0.16		—	09/25/15				14,999,736
	15,000			0.17	(a)	09/24/15	12/24/15				14,998,297
	14,000			0.18	(a)	08/28/15	08/28/15				14,000,002
		Federal Home Loan Mortgage Corporation
	35,000			0.15	(a)	08/18/15	02/18/16				34,997,057
	10,000			0.17	(a)	08/15/15	06/15/16				9,998,663
	13,000			0.19	(a)	08/21/15	07/21/16				12,998,700
	7,198			1.75		—	09/10/15				7,210,828
	4,332	Federal National Mortgage Association		2.00		—	09/21/15				4,343,107
		Total U.S. Agency Securities (Cost $252,291,672)									252,291,672
		Total Investments (Cost $1,119,441,672) (c)						99.2	%		1,119,441,672
		Other Assets in Excess of Liabilities						0.8			8,907,603
		Net Assets						100.0	%	$	1,128,349,275

(a) Rate shown is the rate in effect at July 31, 2015.

(b) Date of next interest rate reset.

(c) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes.

Statement of Assets and Liabilities

July 31, 2015 (unaudited)

Assets:
Investments in securities, at value (cost $1,119,441,672, including value of repurchase agreements of $867,150,000)	$	1,119,441,672
Cash		147,017
Receivable for:
Shares of beneficial interest sold		17,494,943
Interest		379,215
Prepaid expenses and other assets		104,074
Total Assets		1,137,566,921
Liabilities:
Payable for:
Shares of beneficial interest redeemed		8,891,872
Transfer and sub transfer agent fees		83,422
Administration fee		47,641
Advisory fee		26,229
Accrued expenses and other payables		168,482
Total Liabilities		9,217,646
Net Assets	$	1,128,349,275
Composition of Net Assets:
Paid-in-capital	$	1,128,423,568
Dividends in excess of net investment income		(75,302	)
Undistributed net realized gain		1,009
Net Assets	$	1,128,349,275
Net Asset Value Per Share
1,128,431,799 shares outstanding (unlimited shares authorized of $0.01 par value)	$	1.00

Statement of Operations

For the six months ended July 31, 2015 (unaudited)

Net Investment Income:
Interest Income	$	760,117
Expenses
Advisory fee (Note 3)		2,230,734
Shareholder services fee (Note 4)		577,368
Administration fee (Note 3)		288,684
Transfer and sub transfer agent fees (Note 5)		133,296
Professional fees		47,476
Shareholder reports and notices		24,775
Registration fees		23,740
Custodian fees		23,335
Trustees' fees and expenses		16,254
Other		28,243
Total Expenses		3,393,905
Less: amounts waived/reimbursed (Note 4)		(2,691,495	)
Net Expenses		702,410
Net Investment Income		57,707
Net Realized Gain		1,009
Net Increase	$	58,716

Statements of Changes in Net Assets

	FOR THE SIX MONTHS ENDED JULY 31, 2015			FOR THE YEAR ENDED JANUARY 31, 2015
	(unaudited)
Increase (Decrease) in Net Assets: Operations:
Net investment income	$	57,707		$	129,896
Net realized gain		1,009			2,265
Net Increase		58,716			132,161
Dividends to shareholders from net investment income		(57,707	)		(129,896	)
Net decrease from transactions in shares of beneficial interest		(63,611,743	)		(316,309,462	)
Net Decrease		(63,610,734	)		(316,307,197	)
Net Assets:
Beginning of period		1,191,960,009			1,508,267,206
End of Period (Including dividends in excess of net investment income of $(75,302) and $(75,302))	$	1,128,349,275		$	1,191,960,009

1. Organization and Accounting Policies

Morgan Stanley U.S. Government Money Market Trust (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 applies investment company accounting and reporting guidance. The Fund's investment objectives are security of principal, high current income and liquidity. The Fund was organized as a Massachusetts business trust on November 18, 1981 and commenced operations on February 17, 1982.

The following is a summary of significant accounting policies:

A. Valuation of Investments — Portfolio securities are valued at amortized cost, which approximates fair value, in accordance with Rule 2a-7 under the Act. The amortized cost of an instrument is determined by valuing it at its original cost and thereafter amortizing any discount or premium from its face value at a constant rate until maturity.

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 and are included in interest income. Interest income is accrued daily as earned.

C. Repurchase Agreements — The Fund invests directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest as earned. If such a decrease occurs, additional collateral will be requested and, when received, will be added to the account to maintain full collateralization.

Repurchase agreements are subject to Master Repurchase Agreements, which are agreements between the Fund and its counterparties that typically include provisions which provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated on the Portfolio of Investments, the cash or securities to be repurchased exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.

D. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the close of each business day. Dividends from net investment income, if any, are declared and paid daily. Net realized capital gains, if any, are distributed at least annually.

E. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and

assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

F. Indemnifications — The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

2. Fair Valuation Measurements

Financial Accounting Standards Board ("FASB") Accounting Standards Codification^TM ("ASC") 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs); and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below.

• Level 1 — unadjusted quoted prices in active markets for identical investments

• Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 — significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

The following is a summary of the inputs used to value the Fund's investments as of July 31, 2015.

INVESTMENT TYPE	LEVEL 1 UNADJUSTED QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS		TOTAL
Assets:
Repurchase Agreements	$	—	$	867,150,000	$	—	$	867,150,000
U.S. Agency Securities		—		252,291,672		—		252,291,672
Total Assets	$	—	$	1,119,441,672	$	—	$	1,119,441,672

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of July 31, 2015, the Fund did not have any investments transfer between investment levels.

3. Advisory/Administration Agreements

Pursuant to an Investment Advisory Agreement with Morgan Stanley Investment Management Inc. (the "Adviser"), the Fund pays the Adviser an advisory fee, accrued daily and paid monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.45% to the portion of the daily net assets not exceeding $500 million; 0.375% to the portion of the daily net assets exceeding $500 million but not exceeding $750 million; 0.325% to the portion of the daily net assets exceeding $750 million but not exceeding $1 billion; 0.30% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.275% to the portion of the daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.25% to the portion of the daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.225% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3 billion; and 0.20% to the portion of the daily net assets exceeding $3 billion. For the six months ended July 31, 2015, the advisory fee rate (net of waivers) was equivalent to an annual effective rate of 0.00% of the Fund's average daily net assets.

The Adviser also serves as the Administrator to the Fund and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.05% of the Fund's daily net assets.

Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.

The Adviser/Administrator has agreed to assume all operating expenses of the Fund and to waive the advisory fee and administration fee, as applicable, to the extent that such expenses and fees excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), on an annualized basis exceeds 0.75% of the average daily net assets of the Fund. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time that the Fund's Board of Trustees, (the "Trustees"), act to discontinue all or a portion of such waivers and/or expense reimbursements when they deem such action is appropriate.

4. Shareholder Services Plan

Pursuant to a Shareholder Services Plan (the "Plan"), the Fund may pay Morgan Stanley Distribution, Inc. (the "Distributor"), an affiliate of the Adviser/Administrator, as compensation for the provision of services to shareholders a service fee up to the rate of 0.15% on an annualized basis of the average daily net assets of the Fund.

Reimbursements for these expenses are made in monthly payments by the Fund to the Distributor, which will 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 July 31, 2015, the distribution fee was accrued at the annual rate of 0.10%.

The Distributor and Adviser/Administrator have agreed to waive and/or reimburse all or a portion of the Fund's shareholder services fee, advisory fee and administration fee, respectively, to the extent that total expenses exceed total income of the Fund on a daily basis. For the six months ended July 31, 2015, the Distributor waived $577,368 and the Adviser waived $2,114,127. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time that the Trustees act to discontinue all or a portion of such waivers and/or expense reimbursements when they deem such action is appropriate.

5. Dividend Disbursing and Transfer Agent

The Fund's dividend disbursing and transfer agent is Boston Financial Data Services, Inc. ("BFDS"). Pursuant to a Transfer Agency Agreement, the Fund pays BFDS a fee based on the number of classes, accounts and transactions relating to the Fund.

6. Transactions with Affiliates

The Fund has an unfunded noncontributory defined benefit pension plan covering certain independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of

retirement. Benefits under this plan are based on factors which include years of service and compensation. The Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003. Aggregate pension costs for the six months ended July 31, 2015, included in "Trustees' fees and expenses" in the Statement of Operations amounted to $1,771. At July 31, 2015, the Fund had an accrued pension liability of $56,531, which is included in "Accrued expenses and other payables" in the Statement of Assets and Liabilities.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value ("NAV") of the Fund.

7. Shares of Beneficial Interest

Transactions in shares of beneficial interest, at $1.00 per share, were as follows:

	FOR THE SIX MONTHS ENDED JULY 31, 2015			FOR THE YEAR ENDED JANUARY 31, 2015
	(unaudited)
Shares sold		1,610,688,485			3,991,503,429
Shares issued in reinvestment of dividends		57,707			129,896
		1,610,746,192			3,991,633,325
Shares redeemed		(1,674,357,935	)		(4,307,942,787	)
Net decrease in shares outstanding		(63,611,743	)		(316,309,462	)

8. Risks Relating to Certain Financial Instruments

The Fund may invest in, or receive as collateral for repurchase agreements, securities issued by Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). Securities issued by FNMA and FHLMC are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the U.S. Department of the Treasury.

The Federal Housing Finance Agency ("FHFA") serves as conservator of FNMA and FHLMC and the U.S. Department of the Treasury has agreed to provide capital as needed to ensure FNMA and FHLMC continue to provide liquidity to the housing and mortgage markets.

The Fund may enter into repurchase agreements under which the Fund sends cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral proceeds may be subject to certain costs and delays.

9. Federal Income Tax Status

It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for Federal income taxes is required in the financial statements.

FASB ASC 740-10, Income Taxes — Overall, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended January 31, 2015, remains subject to examination by taxing authorities.

The tax character of distributions paid may differ from the character of distributions shown in the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2015 and 2014 was as follows:

2015 DISTRIBUTIONS PAID FROM:				2014 DISTRIBUTIONS PAID FROM:
ORDINARY INCOME		LONG-TERM CAPITAL GAIN		ORDINARY INCOME		LONG-TERM CAPITAL GAIN
$	129,896		—	$	153,845		—

The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.

Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.

Permanent differences, due to equalization debits and nondeductible expenses, resulted in the following reclassifications among the Fund's components of net assets at January 31, 2015:

DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME				ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN				PAID-IN-CAPITAL
$	(5,376	)		$	(2,265	)		$	7,641

At January 31, 2015, the components of distributable earnings for the Fund on a tax basis were as follows:

UNDISTRIBUTED ORDINARY INCOME				UNDISTRIBUTED LONG-TERM CAPITAL GAIN
$	7,882				—

10. 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 to the latter half of 2016. "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 by government securities, 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. At this time, management is evaluating the implications of these amendments and their impact to the Fund's operations, financial statements and accompanying notes.

	FOR THE SIX			FOR THE YEAR ENDED JANUARY 31,
	MONTHS ENDED
	JULY 31, 2015			2015			2014			2013			2012			2011^
	(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		0.000	⁽¹⁾		0.000	⁽¹⁾		0.000	⁽¹⁾		0.000	⁽¹⁾		0.000	⁽¹⁾		0.000	⁽¹⁾
Less dividends from net investment income		(0.000	) ⁽¹⁾		(0.000	) ⁽¹⁾		(0.000	) ⁽¹⁾		(0.000	) ⁽¹⁾		(0.000	) ⁽¹⁾⁽²⁾		(0.000	) ⁽¹⁾⁽²⁾
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return		0.00	%⁽⁴⁾⁽⁵⁾		0.01	%		0.01	%		0.01	%		0.01	%		0.01	%
Ratios to Average Net Assets:
Net expenses		0.12	%⁽³⁾⁽⁶⁾		0.09	%⁽³⁾		0.10	%⁽³⁾		0.16	%⁽³⁾		0.09	%⁽³⁾		0.21	%⁽³⁾
Net investment income		0.01	%⁽³⁾⁽⁶⁾		0.01	%⁽³⁾		0.01	%⁽³⁾		0.01	%⁽³⁾		0.01	%⁽³⁾		0.01	%⁽³⁾
Supplemental Data:
Net assets, end of period, in millions	$	1,128		$	1,192		$	1,508		$	1,692		$	1,868		$	514

^ Beginning with the year ended January 31, 2012, the Fund was audited by Ernst & Young LLP. The previous year was audited by another independent registered public accounting firm.

(1) Amount is less than $0.001.

(2) Includes capital gain distribution of less than $0.001.

(3) If the Fund had borne all of its expenses that were reimbursed or waived by the Distributor and Adviser/Administrator, the annualized expense and net investment loss ratios, would have been as follows:

PERIOD ENDED	EXPENSE RATIO			NET INVESTMENT LOSS RATIO
July 31, 2015		0.59	%		(0.46	)%
January 31, 2015		0.58			(0.48	)
January 31, 2014		0.56			(0.45	)
January 31, 2013		0.55			(0.38	)
January 31, 2012		0.56			(0.46	)
January 31, 2011		0.70			(0.48	)

(4) Amount is less than 0.005%.

(5) Not annualized.

(6) Annualized.

Nature, Extent and Quality of Services

The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund's Adviser under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper, Inc. ("Lipper").

The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the administrative and advisory services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.

Performance, Fees and Expenses of the Fund

The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Lipper, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2014, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was equal to its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. When a fund's management fee and/or its total expense ratio are higher than its peers, the Board and the Adviser discuss the reasons for this and, where appropriate, they discuss possible waivers and/or caps. The Board noted that the Fund's management fee was higher than its peer group

average and the total expense ratio was higher but close to its peer group average. After discussion, the Board concluded that the Fund's (i) performance was competitive with its peer group average; (ii) total expense ratio was competitive with its peer group average; and (iii) management fee was acceptable.

Economies of Scale

The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.

Profitability of the Adviser and Affiliates

The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.

Other Benefits of the Relationship

The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.

Resources of the Adviser and Historical Relationship Between the Fund and the Adviser

The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the

An Important Notice Concerning Our U.S. Privacy Policy

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds ("us", "our", "we").

We are required by federal law to provide you with notice of our U.S. privacy policy ("Policy"). This Policy applies to both our current and former clients unless we state otherwise and is intended for individual clients who purchase products or receive services from us for personal, family or household purposes. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, or accounts subject to the Uniform Gifts to Minors Act.

This notice sets out our business practices to protect your privacy; how we collect and share personal information about you; and how you can limit our sharing or certain uses by others of this information. We may amend this Policy at any time, and will inform you of any changes to our Policy as required by law.

We Respect Your Privacy

We appreciate that you have provided us with your personal financial information and understand your concerns about your information. We strive to safeguard the information our clients entrust to us. Protecting the confidentiality and security of client information is an important part of how we conduct our business.

This notice describes what personal information we collect about you, how we collect it, when we may share it with others, and how certain others may use it. It discusses the steps you may take to limit our sharing of certain information about you with our affiliated companies, including, but not limited to our affiliated banking businesses, brokerage firms and credit service affiliates. It also discloses how you may limit our affiliates' use of shared information for marketing purposes.

Throughout this Policy, we refer to the nonpublic information that personally identifies you as "personal information." We also use the term "affiliated company" in this notice. An affiliated company is a company in our family of companies and includes companies with the Morgan Stanley name. These affiliated companies are financial institutions such as broker-dealers, banks, investment advisers and credit card issuers. We refer to any company that is not an affiliated company as a nonaffiliated third party. For purposes of Section 5 of this notice, and your ability to limit certain uses of personal information by our affiliates, this notice applies to the use of personal information by our affiliated companies.

1. What Personal Information Do We Collect From You?

We may collect the following types of information about you: (i) information provided by you, including information from applications and other forms we receive from you, (ii) information about your transactions with us or our affiliates, (iii) information about your transactions with nonaffiliated third parties, (iv) information from consumer reporting agencies, (v) information obtained from our websites, and (vi) information obtained from other sources. For example:

• We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us.

• We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.

• We may obtain information about your creditworthiness and credit history from consumer reporting agencies.

• We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.

2. When Do We Disclose Personal Information We Collect About You?

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

a. Information We Disclose to Affiliated Companies. We may disclose personal information that we collect about you to our affiliated companies to manage your account(s) effectively, to service and process your transactions, and to let you know about products and services offered by us and affiliated companies, to manage our business, and as otherwise required or permitted by law. Offers for products and services from affiliated companies are developed under conditions designed to safeguard your personal information.

b. Information We Disclose to Third Parties. We may disclose personal information that we collect about you to nonaffiliated third parties to provide marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. We may also disclose all of the information we collect to other nonaffiliated third parties for our everyday business purposes, such as to process transactions, maintain account(s), respond to court orders and legal investigations, report to credit bureaus, offer our own products and services, protect against fraud, for institutional risk control, to perform services on our behalf, and as otherwise required or permitted by law.

When we share personal information about you with a nonaffiliated third party, they are required to limit their use of personal information about you to the particular purpose for which it was shared and they are not allowed to share personal information about you with others except to fulfill that limited purpose or as may be permitted or required by law.

3. How Do We Protect The Security and Confidentiality Of Personal Information We Collect About You?

We maintain physical, electronic and procedural security measures that comply with applicable law and regulations to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information by employees. Third parties that provide support or marketing services on our behalf may also receive personal information about you, and we require them to adhere to appropriate security standards with respect to such information.

4. How Can You Limit Our Sharing Certain Personal Information About You With Our Affiliated Companies For Eligibility Determination?

By following the opt-out procedures in Section 6 below, you may limit the extent to which we share with our affiliated companies, personal information that was collected to determine your eligibility for products and services such as your credit reports and other information that you have provided to us or that we may obtain from third parties ("eligibility information"). Eligibility information does not include your identification information or personal information pertaining to our transactions or experiences with you. Please note that, even if you direct us not to share eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with our affiliated companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account.

5. How Can You Limit the Use of Certain Personal Information About You by Our Affiliated Companies for Marketing?

By following the opt-out instructions in Section 6 below, you may limit our affiliated companies from marketing their products or services to you based on personal information we disclose to them. This information may include, for example, your income and account history with us. Please note that, even if you choose to limit our affiliated companies from using personal information about you that we may share with them for marketing their products and services to you, our affiliated companies may use your personal information that they obtain from us to market to you in circumstances permitted by law, such as if the affiliated party has its own relationship with you.

6. How Can You Send Us an Opt-Out Instruction?

If you wish to limit our sharing of eligibility information about you with our affiliated companies, or our affiliated companies' use of personal information for marketing purposes, as described in this notice, you may do so by:

• Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 6p.m. (EST)

• Writing to us at the following address:
Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121

If you choose to write to us, your request should include: your name, address, telephone number and account number(s) to which the opt-out applies and whether you are opting out with respect to sharing of eligibility information (Section 4 above), or information used for marketing (Section 5 above), or both. Written opt-out requests should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party. Once you have informed us about your privacy preferences, your opt-out preference will remain in effect with respect to this Policy (as it may be amended) until you notify us otherwise. If you are a joint account owner, we will accept instructions from any one of you and apply those instructions to the entire account.

Please understand that if you limit our sharing or our affiliated companies' use of personal information, you and any joint account holder(s) may not receive information about our affiliated companies' products and services, including products or services that could help you manage your financial resources and achieve your investment objectives.

If you have more than one account or relationship with us, please specify the accounts to which you would like us to apply your privacy choices. If you have accounts or relationships with our affiliates, you may receive multiple privacy policies from them, and will need to separately notify those companies of your privacy choices for those accounts or relationships.

7. What if an affiliated company becomes a nonaffiliated third party?

If, at any time in the future, an affiliated company becomes a nonaffiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to nonaffiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies,

your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.

Special Notice to Residents of Vermont
The following section supplements our Policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above Policy with respect to those clients only.

The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with nonaffiliated third parties, or eligibility information with affiliated companies, other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or eligibility information with affiliated companies, unless you provide us with your written consent to share such information.

Special Notice to Residents of California
The following section supplements our Policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above Policy with respect to those clients only.

In response to a California law, if your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.

Item 2. Code of Ethics.