A Prospectus Supplement filing for Morgan Stanley Institutional Liquidity Funds - Tax-Exempt Portfolio explains, "Effective on or about February 29, 2024, the Fund will operate as a 'retail money market fund,' as defined in Rule 2a-7 under the Investment Company Act of 1940, as amended. A 'retail money market fund' is defined as a money market fund that has policies and procedures reasonably designed to limit all beneficial owners of the fund to natural persons. As a result, investments in the Fund will be limited to shareholder accounts beneficially owned by natural persons. Before the Effective Date, Morgan Stanley Distribution, Inc., the Fund's principal distributor, and authorized financial intermediaries will be required to take steps to remove any shareholder accounts that are not beneficially owned by natural persons. As a result, if your shares are held in an account that does not qualify as being beneficially owned by a natural person, your shares will be involuntarily redeemed by the Fund, which may result in a taxable gain or loss." It continues, "Shareholders of the Fund receiving this notice who are not eligible investors for a retail money market fund (i.e., natural persons or accounts beneficially owned by natural persons) will be involuntarily redeemed from the Fund and will no longer be permitted to purchase shares of the Fund, as discussed below. Neither the Fund nor Morgan Stanley Investment Management, Inc. (or its affiliates) will be responsible for any loss in an investor's account or tax liability resulting from an involuntary redemption as described above. Although the Fund's conversion to a retail money market fund will not result in any change to the Fund's investment objective, types of investments or principal investment strategies other than those resulting from its conversion to a retail money market fund, the conversion will result in certain other important changes summarized below. A prospectus for the Fund reflecting these and other related changes will be provided to the Fund's shareholders in connection with the conversion to a retail money market fund.... The Fund currently operates as an 'institutional money market fund,' which is neither a 'government money market fund' nor 'retail money market fund' as such terms are defined or interpreted under Rule 2a-7 under the 1940 Act. As such, the Fund is required to price and transact in its shares at a net asset value per share reflecting market-based values of its portfolio holdings (i.e., at a 'floating' net asset value per share), rounded to a minimum of the fourth decimal place. Like other money market funds of its type, the Fund is subject to the possible imposition of liquidity fees if the Morgan Stanley Institutional Liquidity Funds' Board of Trustees (or its delegate, as applicable) determines that such fee is in the best interests of the Fund. As a retail money market fund, the price of the Fund's shares will be based on the amortized cost of the Fund's securities and the Fund will seek to maintain the Fund's share price at $1.00, but there is the risk that the Fund may be unable to maintain a stable $1.00 share price at all times. If the Fund or another money market fund fails to maintain a stable net asset value per share or maintain certain weekly liquid asset levels (or if there is a perceived threat of the inability to maintain a stable net asset value per share or a particular weekly liquid asset level), the Fund could be subject to increased redemptions, which may adversely impact the Fund's share price. The net asset value calculation time of the Fund will remain at 1:00 p.m. Eastern time." The filing adds, "As a retail money market fund, the Fund will continue to be permitted to impose a fee upon the sale of your shares if the Trust's Board of Trustees (or its delegate, as applicable) determines that such fee is in the best interests of the Fund.... Also, effective on the Effective Date, certain of the Fund's share classes will be redesignated as follows: (i) Institutional Class shares to Wealth Class shares and (ii) Institutional Select Class to Wealth S Class shares. In connection with these changes, all share classes of the Fund will no longer have a minimum investment amount." For more, see these Crane Data News pieces, "WSJ on Record Cash Sums: Bullish or Not? BlackRock Liquidating CA, NY" (11/28/23), "Morgan Stanley Liquidates Tax-Exempts" (9/21/23), "JPMorgan Liquidates E*Trade Shares" (9/7/23) and "Morgan Stanley Latest to Abandon ESG MMFs" (8/16/23).

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