Morgan Stanley Us Government Money Market Trust N-CSR Certified annual shareholder report (management investment company)

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: January 31, 2021

Item 1 - Report to Shareholders

INVESTMENT MANAGEMENT

Morgan Stanley U.S. Government
Money Market Trust

Annual Report

January 31, 2021

Morgan Stanley U.S. Government Money Market Trust

Table of Contents

Welcome Shareholder	3
Fund Report	4
Expense Example	10
Portfolio of Investments	11
Statement of Assets and Liabilities	16
Statement of Operations	17
Statements of Changes in Net Assets	18
Notes to Financial Statements	19
Financial Highlights	28
Report of Independent Registered Public Accounting Firm	30
Privacy Notice	31
Trustee and Officer Information	34

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Welcome Shareholder,

We are pleased to provide this Annual Report, in which you will learn how your investment in Morgan Stanley U.S. Government Money Market Trust (the "Fund") performed during the latest twelve-month period. It includes an overview of the market conditions and discusses some of the factors that affected performance during the reporting period. In addition, the report contains financial statements and a list of portfolio holdings.

Morgan Stanley Investment Management is a client-centric, investor-led organization. Our global presence, intellectual capital, and breadth of products and services enable us to partner with investors to meet the evolving challenges of today's financial markets. We aim to deliver superior investment service and to empower our clients to make the informed decisions that help them reach their investment goals.

As always, we thank you for selecting Morgan Stanley Investment Management and look forward to working with you in the months and years ahead.

This material must be preceded or accompanied by a prospectus for the fund being offered.

Market forecasts provided in this report may not necessarily come to pass. There is no assurance that a mutual fund will achieve its investment objective. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund and you should not expect that the sponsor will provide financial support to the Fund at any time.

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Fund Report (unaudited)

For the year ended January 31, 2021

Market Conditions

On January 28, 2020, the Federal Reserve (Fed) held its first policy meeting of the new decade. Although the federal funds rate was unchanged at 1.50% to 1.75%, Federal Open Market Committee (FOMC or Committee) members opted to increase the interest on excess reserves (IOER) rate by 5 basis points to 1.60%. The modification was a technical adjustment done in part to move the IOER rate closer to middle of the fed funds range from the lower end where it had trended in recent months. While most commentary was left unchanged in the accompanying press release, the Fed downgraded household spending from "strong" to "moderate." Similarly, the press release indicated that inflation needs to "return" to its 2% target rather than stay "near" the target, which had been used in previous press releases. Overall, the first meeting of 2020 was benign, as Chairman Jerome Powell viewed current policy as "appropriate." He reiterated that without any material change in the data going forward, policy was likely to remain unchanged. The January 2020 Fed statement did not address the emerging coronavirus epidemic, but Chairman Powell discussed the risk to the global economy in his press conference.

Throughout February 2020, investors flocked into relative safe-haven securities as fears of COVID-19 took center stage, sending the yield on the 10-year Treasury to its lowest level since 2016. In Europe, the entire German yield curve fell back below 0%. On February 25, 2020, the 10-year U.S. Treasury yield fell to a record low amid concern that the global spread of

the virus was threatening supply chains critical to economic growth. The 30-year U.S. Treasury ended the month at record lows of 1.676%.⁽ⁱ⁾

As COVID-19 continued to spread rapidly around the world in early 2020, central bankers' fears surrounding potential impacts began to materialize. Responding to the economic impact of the virus, the Fed conducted two unscheduled meetings in March 2020, which resulted in monetary easing and more accommodative monetary policy. The Fed lowered the target range for the federal funds rate to 0.00% to 0.25%. In addition to the rate cut, the Fed implemented several facilities to alleviate stresses in the marketplace. Most notably for short-term fixed income markets, these include the Money Market Mutual Fund Liquidity Facility (MMLF), Commercial Paper Funding Facility (CPFF) and Primary Dealer Credit Facility (PDCF). The Fed's overall goal was to ease the flow of credit across the broader fixed income markets and increase market confidence with their actions. Additionally, the FOMC announced an open-ended quantitative easing program that will increase its holdings of Treasury securities, agency mortgage-backed securities and commercial mortgage-backed securities in the amount needed to support the smooth functioning of these markets. The governmental actions taken, not only on the monetary side but also through fiscal stimulus aid, served to calm markets and support improved liquidity in the market.

First quarter 2020 gross domestic product (GDP) growth came in at –5.0% and initial jobless claims

(i)  Source: Bloomberg L.P.

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surged to around 30 million.⁽ⁱⁱ⁾ While extraordinarily weak readings were anticipated as a result of the temporary pause across many parts of the economy, both data points underperformed expectations. Fed Chairman Powell noted in his press conference that the current policy was appropriate while acknowledging that "the ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term." The chairman also noted that the Committee will "maintain this target range until it is confident that the economy has weathered recent events."

At the April 29, 2020 meeting, the FOMC decided to keep the target range for the federal funds rate unchanged at 0.00% to 0.25%. This was the first meeting since tangible economic data had been collected on the coronavirus impact. The Committee noted that the virus had catalyzed significant job losses and steep drawdowns in both consumer spending and consumer confidence.

As expected, the FOMC kept the range for the federal funds rate unchanged at 0.00% to 0.25% at the conclusion of its June 2020 meeting. The FOMC pledged to "continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will

use its tools and act as appropriate to support the economy." The press release stated the FOMC will "increase its holdings" of Treasury securities and agency mortgage-backed securities at paces of $80 billion and $40 billion, respectively. However, publicizing the dollar figure diverges from previous meetings, which stated purchases would be conducted "in the amounts needed." In their updated dot plot, officials unanimously expected to keep rates at current levels through 2021, while 15 of the 17 officials expected rates to remain unchanged through 2022. As a result, the average federal funds forecast for 2020 and 2021 fell significantly.

Due to business shutdowns and stay-at-home orders, second quarter 2020 GDP contracted by –31.4% (annualized), the sharpest downturn since the 1940s. Personal spending fell by –34.5%, the largest slump on record. While the economic hit was well anticipated, the path of the recovery is linked to the complexity of the pandemic impact across the country. Ongoing unemployment benefits still remained high at 17 million at the end of July 2020, and the unemployment rate was at 10.2%. Personal spending has since improved, but uncertainty remained on how quickly and broadly the U.S. economy would fare in the second half of 2020.

In the July 2020 meeting, the FOMC kept the range for the federal funds rate unchanged at 0.00% to 0.25%. Although no structural policy changes were made in the

(ii)  Source for GDP and personal consumption data used in this report: Bureau of Economic Analysis and Bloomberg L.P. Source for employment data used in this report: Bureau of Labor Statistics and Bloomberg L.P.

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month, the Fed extended the duration of its pandemic lending facilities such as the MMLF, PDCF and others to December 31, 2020. Many of the pandemic lending facilities were set to expire at the end of September 2020. Economic activity and employment have "picked up somewhat," the July 2020 release noted, but such data are "well below" pre-pandemic levels. While Chairman Powell and the Committee acknowledged positive economic data, they believed the "path of the economy will depend significantly on the course of the virus." Going forward, the FOMC continued to pledge that it "will use its tools and act as appropriate to support the economy."

Minutes from the July 2020 FOMC meeting indicated that U.S. central bankers "agreed that the ongoing public health crisis would weigh heavily on economic activity, employment and inflation in the near term and was posing considerable risks to the economic outlook over the medium term." Chairman Powell reiterated this sentiment when he said the path forward for the economy was "extraordinarily uncertain" and would remain dependent on containing the virus.

The annual Jackson Hole conference in August 2020 was notable in that Chairman Powell announced a new approach to monetary policy, one that takes a more relaxed stance on inflation and unemployment. A highlight from the released text indicated that the "Committee seeks to achieve inflation that averages 2% over time, and therefore judges that, following periods when inflation has been running persistently below 2%,

appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time." In essence, the Fed has adopted a flexible form of average inflation targets as the key driver of monetary policy going forward.

Fed officials kept the benchmark policy rate unchanged at their September 2020 FOMC meeting, signaling they expect to maintain an accommodative stance of monetary policy until they achieve inflation averaging 2% over time and longer-term inflation expectations remain well anchored at 2%. The newly released dot plot showed that bankers expected near zero interest rates through 2023.

Third quarter 2020 GDP rose by a record 33.1% (annualized) following a –31.4% drop (annualized) in the second quarter due to pandemic-related shutdowns. The rebound reflects the gradual reopening of businesses and the strength of the resilient consumer. Consumer spending rose 1.4% in September 2020 versus the prior month,⁽ⁱⁱⁱ⁾ and the employment picture has continued to improve. Unemployment claims continued to trend lower and the unemployment rate stood at 6.9% in October 2020. While the U.S. economy was heading into the final quarter of 2020 with momentum, rising virus cases were making the growth outlook less certain.

As expected, the FOMC kept the target range for the federal funds rate unchanged at 0.00% to 0.25% at the conclusion of its November 5, 2020 meeting. In

(iii)  Source: Bureau of Economic Analysis.

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addition, the FOMC maintained its quantitative easing program, saying, "over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace." The consistent messaging from the Fed allowed it to maintain a low profile while much of the country focused on the U.S. presidential election.

At the December 2020 meeting, the FOMC kept the range for the federal funds rate unchanged at 0.00% to 0.25%. Much of the meeting's focus related to forward guidance and the asset purchase program. The Fed reiterated it will "continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee's maximum employment and price stability goals." Effectively signifying that until both maximum unemployment and consistent 2% inflation is met, the Fed will continue asset purchases.

In addition to the press release, the Fed updated its economic projections at the December 2020 meeting. Chairman Powell and the FOMC reinforced their forward guidance and accommodative policy stance with the updated dot plot, which illustrates that 16 out of 17 officials expect to keep rates at current levels through 2022, while 12 of the 17 officials expect rates to remain unchanged through 2023. The FOMC projects real GDP to contract by 2.4% in 2020, but rebound in both 2021 and 2022. The Fed estimates the unemployment rate will decrease to 6.7% in 2020, then recover sharply in the following two years. The Committee marginally

increased projections for core Personal Consumption Expenditures, but does not see inflation rising to 2% until 2023. While many of these figures were positively revised since September 2020, the FOMC plans to use "its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals."

After a record third quarter 2020 growth, the U.S. economy slowed down in the fourth quarter, expanding at 4% (annualized) as the pandemic weighed on the labor market and Americans' willingness to spend. Personal consumption, the largest part of the economy, increased at 2.5%, below 3.1% expectations. Additionally, nonfarm payrolls posted the first decline in eight months as of December 2020, decreasing 140,000 from the prior month, while the unemployment and participation rates held constant at 6.7% and 61.5%, respectively. While overall this was a disappointing release, sentiment about the outlook for the economy remained relatively unchanged.

As expected, the FOMC held the range for the federal funds rate steady at 0.00% to 0.25% at the conclusion of its January 2021 meeting. In addition, forward guidance and quantitative easing policy were left intact. While much was left unchanged, the Fed tweaked its view on economic conditions. The Fed has continued to acknowledge the ongoing economic recovery in prior language, but its January 2021 statement noted, "the pace of the recovery in economic activity and employment has moderated in recent months." The Fed views its current policy stance as appropriate until "until labor market conditions have reached levels consistent

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with the Committee's assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time."

Performance Analysis

As of January 31, 2021, Morgan Stanley U.S. Government Money Market Trust had net assets of approximately $696.3 million and an average portfolio maturity of 46 days. For the 12-month period ended January 31, 2021, the Fund's Class R and Class S shares provided a total return of 0.18%. For the seven-day period ended January 31, 2021, each of the Fund's Class R and Class S shares provided an effective annualized yield of 0.01% (subsidized) and –0.24% (non-subsidized) a current yield of 0.01% (subsidized) and –0.24% (non-subsidized), while its 30-day moving average yield for January for Class R and Class S shares was 0.01% (subsidized) and –0.24% (non-subsidized). Yield quotations more closely reflect the current earnings of the Fund. The nonsubsidized yield reflects what the yield would have been had a fee and/or expense waiver not been in place during the period. Past performance is no guarantee of future results.

During the reporting period, we increased our overall allocation to Treasury bills as short-term rates declined and the 1-year yield curve flattened. As mentioned, the FOMC is expected to keep rates at the zero lower bound for the foreseeable future. We will continue to focus on conservative positioning and liquidity while being responsive to the dynamic market conditions.

There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Fund in the future.

PORTFOLIO COMPOSITION as of 01/31/21
U.S. Treasury Securities	51.4	%
Repurchase Agreements	25.6
U.S. Agency Securities	23.0
MATURITY SCHEDULE as of 01/31/21
1 - 30 Days	57.3	%
31 - 60 Days	12.1
61 - 90 Days	13.6
91 - 120 Days	7.6
121 + Days	9.4

Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the types of securities mentioned above. All percentages for portfolio composition and maturity schedule are stated as a percentage of total investments.

Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

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Investment Strategy

The Fund has adopted a policy to invest exclusively in obligations issued or guaranteed by the U.S. Government and its agencies and instrumentalities and in repurchase agreements collateralized by such securities in order to qualify as a "government money market fund" under federal regulations. The Fund may also hold cash from time to time. A "government money market fund" is a money market fund that invests at least 99.5% of its total assets in cash, securities issued or guaranteed by the United States or certain U.S. government agencies or instrumentalities and/or repurchase agreements that are collateralized fully by the foregoing. A "government money market fund" is exempt from requirements that permit money market funds to impose a "liquidity fee" and/or a "redemption gate" that temporarily restricts redemptions. In selecting investments, Morgan Stanley Investment Management Inc. (the "Adviser") 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 Semi-Annual and Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual 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 Semi-Annual and Annual Reports to fund shareholders and makes these reports available on its public website, www.morganstanley.com/im/moneymarketfundsshareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT and monthly holdings for each money market fund on Form N-MFP. Morgan Stanley does not deliver these reports to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR, N-CSRS and N-MFP filings) by accessing the SEC's website, http://www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov).

Householding Notice

To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 548-7786, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.

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Expense Example (unaudited)

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 08/01/20 – 01/31/21.

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(1)
	08/01/20		01/31/21		08/01/20 – 01/31/21
Class R
Actual (0.01% return)	$	1,000.00	$	1,000.05	$	0.65
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,024.22	$	0.65
Class S
Actual (0.01% return)	$	1,000.00	$	1,000.05	$	0.65
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,024.22	$	0.65

  (1)  Expenses are equal to the Fund's annualized expense ratios of 0.13% and 0.13% for Class R and Class S shares, respectively, multiplied by the average account value over the period and multiplied by 182**/366 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratio would have been 0.36% and 0.36% for Class R and Class S shares, respectively.

  **  Adjusted to reflect non-business days accruals.

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Morgan Stanley U.S. Government Money Market Trust

Portfolio of Investments  n  January 31, 2021

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			DEMAND DATE (a)	MATURITY DATE	VALUE
		U.S. Treasury Securities (51.7%)
		U.S. Treasury Bills
$	10,000	(b)		0.07	%	—	05/27/21	$	9,996,766
	5,000	(b)		0.07		—	03/11/21		4,999,631
	5,000	(b)(c)		0.08		—	05/18/21		4,998,906
	10,000	(b)		0.09		—	03/23/21		9,998,819
	15,000	(b)(c)		0.09		—	03/30/21		14,997,981
	5,000	(b)		0.09		—	05/11/21		4,998,831
	5,000	(b)		0.09		—	07/29/21		4,997,899
	8,000	(b)		0.09		—	05/04/21		7,998,242
	15,000	(b)		0.09		—	03/23/21		14,997,972
	10,000	(b)		0.09		—	03/30/21		9,998,989
	5,000	(b)		0.09		—	05/04/21		4,998,850
	5,000	(b)		0.09		—	05/13/21		4,998,738
	5,000	(b)		0.09		—	06/15/21		4,998,325
	5,000	(b)		0.09		—	06/24/21		4,998,213
	5,000	(b)		0.09		—	06/29/21		4,998,150
	5,000	(b)		0.09		—	06/29/21		4,998,129
	5,000	(b)		0.09		—	06/10/21		4,998,343
	15,000	(b)		0.10		—	02/23/21		14,999,129
	5,000	(b)		0.10		—	04/29/21		4,998,785
	10,000	(b)		0.10		—	06/08/21		9,996,649
	2,000	(b)		0.10		—	07/22/21		1,999,098
	15,000	(b)		0.10		—	04/15/21		14,997,080
	3,000	(b)		0.10		—	04/22/21		2,999,360
	13,930	(b)		0.10		—	02/25/21		13,929,124
	5,000	(b)		0.10		—	03/04/21		4,999,630
	10,000	(b)		0.10		—	04/01/21		9,998,279
	10,000	(b)		0.10		—	04/06/21		9,998,267
	8,941	(b)		0.10		—	04/13/21		8,938,749
	9,000	(b)		0.10		—	04/15/21		8,998,368
	15,000	(b)		0.10		—	04/22/21		14,996,500
	5,000	(b)		0.10		—	04/20/21		4,998,917
	5,000	(b)		0.10		—	03/04/21		4,999,565
	5,000	(b)		0.10		—	04/01/21		4,999,172
	5,000	(b)		0.10		—	04/22/21		4,998,878
	10,000	(b)		0.10		—	07/22/21		9,995,131
	5,000	(b)		0.11		—	02/04/21		4,999,956
	1,070	(b)		0.11		—	02/09/21		1,069,975

See Notes to Financial Statements
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Morgan Stanley U.S. Government Money Market Trust

Portfolio of Investments  n  January 31, 2021 continued

PRINCIPAL AMOUNT (000)				ANNUALIZED YIELD ON DATE OF PURCHASE			DEMAND DATE (a)	MATURITY DATE	VALUE
$	10,000	(b)			0.11	%	—	02/18/21	$	9,999,504
	3,000	(b)			0.11		—	02/09/21		2,999,929
	3,000	(b)			0.11		—	02/18/21		2,999,850
	3,930	(b)			0.11		—	02/09/21		3,929,935
	5,000	(b)			0.11		—	02/18/21		4,999,728
	10,000	(b)			0.11		—	04/27/21		9,997,509
	10,000	(b)(c)			0.11		—	05/06/21		9,997,851
	5,000	(b)			0.11		—	05/06/21		4,998,564
	5,000	(b)			0.12		—	02/11/21		4,999,861
	10,000	(b)	��		0.12		—	03/02/21		9,999,041
		U.S. Treasury Notes
	7,000	3 Month Treasury Money Market Yield + 0.06%			0.14	(d)	02/02/21	10/31/22		6,999,690
	5,000	3 Month Treasury Money Market Yield + 0.22%			0.30	(d)	02/01/21	07/31/21		4,999,552
	2,000	3 Month Treasury Money Market Yield + 0.30%			0.38	(d)	02/01/21	10/31/21		2,000,589
		Total U.S. Treasury Securities(Cost $359,804,999)							359,804,999
		Repurchase Agreements (25.8%)
	25,000	ABN Amro Securities LLC, (Interest in $1,000,000,000 joint repurchase agreement, 0.06% dated 01/29/21 under which ABN Amro Securities LLC, will repurchase the securities provided as collateral for $1,000,005,000 on 02/01/21. The securities provided as collateral at the end of the period held with BNY Mellon, tri-party agent, were various U.S. Government agency securities and U.S. Government obligations with various maturities to 01/01/51; valued at $1,029,408,997)			0.06			02/01/21		25,000,000
	30,000	BNP Paribas Securities Corp., (dated 12/15/20; proceeds $30,005,250; fully collateralized by various U.S. Government agency securities, 0.00% - 5.50% due 05/15/22 - 10/20/48 and U.S. Government obligations, 0.00% - 3.38% due 07/15/21 - 05/15/48 (e); valued at $30,600,081) (Demand 05/02/21)			0.10			02/16/21		30,000,000

See Notes to Financial Statements
12

Morgan Stanley U.S. Government Money Market Trust

Portfolio of Investments  n  January 31, 2021 continued

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			DEMAND DATE (a)	MATURITY DATE	VALUE
$	10,000	JP Morgan Securities LLC, (dated 01/28/21; proceeds $10,000,097; fully collateralized by various U.S. Government obligations securities, 0.00% - 7.50% due 04/15/21 - 11/15/24; valued at $10,200,061)		0.05	%		02/04/21	$	10,000,000
	50,000	JP Morgan Securities LLC, (dated 01/26/21; proceeds $50,000,583; fully collateralized by various U.S. Government agency securities, 2.00% - 8.00% due 04/15/27 - 01/20/51; valued at $51,279,952)		0.06			02/02/21		50,000,000
	35,000	Norinchukin Bank, (dated 11/24/20; proceeds $35,013,417; fully collateralized by a U.S. Government obligation security, 2.38% due 05/15/27; valued at $35,700,091)		0.15			02/24/21		35,000,000
	29,500	Wells Fargo Securities LLC, (Interest in $565,000,000 joint repurchase agreement, 0.06% dated 01/29/21 under which Wells Fargo Securities LLC, will repurchase the securities provided as collateral for $565,002,825 on 02/01/21. The securities provided as collateral at the end of the period held with BNY Mellon, tri-party agent, were various U.S. Government agency securities with various maturities to 02/01/51 (e); valued at $581,950,004)		0.06			02/01/21		29,500,000
		Total Repurchase Agreements(Cost $179,500,000)						179,500,000
		U.S. Agency Securities (23.1%)
		Federal Farm Credit Bank
	3,000	SOFR + 0.04%	0.08(d)			02/01/21	02/09/21		3,000,000
	1,000	SOFR + 0.08%	0.12(d)			02/01/21	06/10/21		1,000,000
	5,000		0.13			—	11/02/21		4,999,556
	3,000		0.13			—	08/03/21		2,997,865
	4,000		0.13			—	08/03/21		3,997,357
	5,000	1 Month USD LIBOR + 0.04%	0.17(d)			02/11/21	02/11/21		5,000,000
	5,000		0.18			—	03/26/21		4,998,675
	5,000	Daily FCPR - 3.05%	0.20(d)			02/01/21	03/09/22		4,999,442
	5,000	1 Month USD LIBOR + 0.08%	0.21(d)			02/13/21	08/13/21		5,000,000
	5,000	1 Month USD LIBOR + 0.09%	0.22(d)			02/21/21	04/21/21		4,999,992

See Notes to Financial Statements
13

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Portfolio of Investments  n  January 31, 2021 continued

PRINCIPAL AMOUNT (000)			ANNUALIZED YIELD ON DATE OF PURCHASE			DEMAND DATE (a)	MATURITY DATE			VALUE
$	2,000	3 Month Treasury Money Market Yield + 0.14%		0.22	(d)%	02/02/21	09/17/21			$	1,998,259
	2,000	SOFR + 0.19%		0.23	(d)	02/01/21	11/18/21				2,000,000
	2,000	1 Month USD LIBOR + 0.09%		0.23	(d)	02/28/21	08/30/21				2,000,000
	5,000	1 Month USD LIBOR + 0.10%		0.23	(d)	02/09/21	09/09/21				5,000,000
	3,000	1 Month USD LIBOR + 0.11%		0.24	(d)	02/09/21	07/09/21				3,000,000
	8,000	1 Month USD LIBOR + 0.10%		0.24	(d)	02/05/21	08/05/21				8,000,000
	1,900	3 Month Treasury Money Market Yield + 0.26%		0.34	(d)	02/01/21	05/17/21				1,899,972
		Federal Home Loan Bank
	5,000	SOFR + 0.015%		0.06	(d)	02/01/21	02/05/21				5,000,000
	10,000	SOFR + 0.015%		0.06	(d)	02/01/21	05/19/21				10,000,000
	8,000	SOFR + 0.035%		0.08	(d)	02/01/21	02/25/21				8,000,000
	1,000	SOFR + 0.04%		0.08	(d)	02/01/21	02/09/21				1,000,000
	5,000	SOFR + 0.04%		0.08	(d)	02/01/21	02/19/21				5,000,000
	10,000	SOFR + 0.04%		0.08	(d)	02/01/21	02/26/21				10,000,000
	5,000	SOFR + 0.04%		0.08	(d)	02/01/21	03/17/21				5,000,000
	5,000	SOFR + 0.04%		0.08	(d)	02/01/21	03/19/21				5,000,000
	3,000	SOFR + 0.04%		0.08	(d)	02/01/21	04/23/21				3,000,000
	5,000	SOFR + 0.075%		0.12	(d)	02/01/21	06/11/21				5,000,000
	5,000	SOFR + 0.08%		0.12	(d)	02/01/21	03/04/21				5,000,000
	2,000			0.13		—	06/15/21				1,999,951
	2,000	SOFR + 0.115%		0.16	(d)	02/01/21	02/10/22				2,000,000
	10,000	SOFR + 0.12%		0.16	(d)	02/01/21	02/28/22				10,000,000
	9,000			0.21		—	04/12/21				8,996,325
		Federal Home Loan Mortgage Corp.
	4,400	SOFR + 0.15%		0.19	(d)	02/01/21	03/04/22				4,400,773
	2,000	SOFR + 0.26%		0.30	(d)	02/01/21	05/05/22				2,000,000
	5,000	Federal National Mortgage Association		0.26	(d)	02/01/21	05/09/22				5,000,000
		Total U.S. Agency Securities (Cost $161,288,167)									161,288,167
		Total Investments(Cost $700,593,166) (f)(g)						100.6	%		700,593,166
		Liabilities in Excess of Other Assets						(0.6	)		(4,335,257	)
		Net Assets						100.0	%	$	696,257,909

  FCPR  Federal Reserve Bank Prime Loan Rate U.S.

  LIBOR  London Interbank Offered Rate.

  SOFR  Secured Overnight Financing Rate.

  USD  United States Dollar.

  (a)  Date of next interest rate reset.

  (b)  Rate shown is the yield to maturity at January 31, 2021.

See Notes to Financial Statements
14

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Portfolio of Investments  n  January 31, 2021 continued

  (c)  All or a portion of the security is subject to delayed delivery.

  (d)  Floating or variable rate securities: The rates disclosed are as of January 31, 2021. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description in the Portfolio of Investments. Certain variable rate securities may not be based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description in the Portfolio of Investments.

  (e)  Perpetual - One or more securities do not have a predetermined maturity date. Rates for these securities are fixed for a period of time, after which they revert to a floating rate. Interest rates in effect are as of January 31, 2021.

  (f)  Securities are available for collateral in connection with securities purchased on a forward commitment basis.

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

See Notes to Financial Statements
15

Morgan Stanley U.S. Government Money Market Trust

Financial Statements

Statement of Assets and Liabilities January 31, 2021

Assets:
Investments in securities, at value (cost $700,593,166, including value of repurchase agreements of $179,500,000)	$	700,593,166
Cash		347,089
Receivable for:
Investments sold		25,998,133
Shares of beneficial interest sold		1,906,591
Interest		68,253
Prepaid expenses and other assets		95,744
Total Assets		729,008,976
Liabilities:
Payable for:
Investments purchased		24,995,747
Shares of beneficial interest redeemed		7,584,174
Trustees' fees		40,439
Administration fee		28,546
Transfer and sub transfer agent fees		14,271
Dividends to shareholders		102
Accrued expenses and other payables		87,788
Total Liabilities		32,751,067
Net Assets	$	696,257,909
Composition of Net Assets:
Paid-in-Capital	$	696,329,281
Total Accumulated Loss		(71,372	)
Net Assets	$	696,257,909
Class R Shares:
Net Assets	$	571,638,613
Shares Outstanding (unlimited shares authorized, $0.01 par value)		571,712,573
Net Asset Value Per Share	$	1.00
Class S Shares:
Net Assets	$	124,619,296
Shares Outstanding (unlimited shares authorized, $0.01 par value)		124,617,571
Net Asset Value Per Share	$	1.00

See Notes to Financial Statements
16

Morgan Stanley U.S. Government Money Market Trust

Financial Statements continued

Statement of Operations For the year ended January 31, 2021

Net Investment Income:
Interest Income	$	3,008,333
Expenses
Advisory fee (Note 3)		1,122,272
Shareholder services fee (Note 4)		748,181
Administration fee (Note 3)		374,091
Professional fees		154,654
Registration fees		66,295
Transfer and sub transfer agent fees (Note 5)		64,378
Shareholder reports and notices		39,391
Custodian fees (Note 6)		24,854
Trustees' fees and expenses		16,880
Other		30,177
Total Expenses		2,641,173
Less: amounts waived/reimbursed (Note 3 & 4)		(1,056,436	)
Net Expenses		1,584,737
Net Investment Income		1,423,596
Net Realized Gain		2,711
Net Increase	$	1,426,307

See Notes to Financial Statements
17

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Financial Statements continued

Statements of Changes in Net Assets

	FOR THE YEAR ENDED JANUARY 31, 2021			FOR THE YEAR ENDED JANUARY 31, 2020
Increase (Decrease) in Net Assets: Operations:
Net investment income	$	1,423,596		$	14,743,587
Net realized gain		2,711			5,050
Net Increase		1,426,307			14,748,637
Distributions to Shareholders:
Class R shares		(1,098,448	)		(11,127,185	)
Class S shares		(325,148	)		(3,616,402	)
Total Distributions to Shareholders		(1,423,596	)		(14,743,587	)
Net increase (decrease) from transactions in shares of beneficial interest		(157,916,941	)		186,112,593
Net Increase (Decrease)		(157,914,230	)		186,117,643
Net Assets:
Beginning of period		854,172,139			668,054,496
End of Period	$	696,257,909		$	854,172,139

See Notes to Financial Statements
18

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Notes to Financial Statements  nJanuary 31, 2021

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 Fund offers two classes of shares, Class R and Class S Shares. The two classes have the same fees and expenses.

The Securities and Exchange Commission ("SEC") has adopted changes to the rules that govern money market funds. The Fund operates as a "government money market fund," which allows the Fund to continue to seek a stable Net Asset Value ("NAV"). The Fund will also be exempt from the requirements relating to the imposition of liquidity fees and/or redemption gates.

The following is a summary of significant accounting policies:

In March 2020, the Financial Accounting Standards Board ("FASB") issued an Accounting Standard Update, ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate ("LIBOR") and other IBOR-based reference rates at the end of 2021. The temporary relief provided by ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 on the Fund's investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform.

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.

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Notes to Financial Statements  nJanuary 31, 2021 continued

C. Multiple Class Allocations — Investment income, expenses and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Shareholder services fees are charged directly to the respective class.

D. 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.

The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian for investment companies advised by Morgan Stanley Investment Management Inc. (the "Adviser"). The Fund will participate on a pro-rata basis with the other investment companies in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

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 repurchase agreement reducing the net settlement amount to zero.

E. 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.

F. When-Issued/Delayed Delivery Securities — The Fund may purchase or sell when-issued and delayed delivery securities. Securities purchased on a when-issued or delayed delivery basis are purchased for delivery beyond the normal settlement date at a stated price, and no income accrues to the Fund on such securities prior to delivery date. Payment and delivery for when-issued and delayed delivery securities can take place a month or more after the date of the transaction. When the Fund enters into a purchase transaction on a when-issued or delayed delivery basis, securities are available for collateral in an amount at least equal in value to the Fund's commitments to purchase such securities. Purchasing securities on a when-issued or delayed delivery basis may involve a risk that the market price at the time of delivery may be lower than the agreed upon purchase price, in which case there could be an unrealized loss at the time of delivery. Purchasing investments on a when-issued or

20

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Notes to Financial Statements  nJanuary 31, 2021 continued

delayed delivery basis may be considered a form of leverage which may increase the impact that gains (losses) may have on the Fund.

G. 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.

H. 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

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.

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Notes to Financial Statements  nJanuary 31, 2021 continued

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 January 31, 2021:

INVESTMENT TYPE	LEVEL 1 UNADJUSTED QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS		TOTAL
Assets:
U.S. Treasury Securities	$	—	$	359,804,999	$	—	$	359,804,999
Repurchase Agreements		—		179,500,000		—		179,500,000
U.S. Agency Securities		—		161,288,167		—		161,288,167
Total Assets	$	—	$	700,593,166	$	—	$	700,593,166

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.

3. Advisory/Administration Agreements

Pursuant to an Investment Advisory Agreement with the Adviser, the Fund pays the Adviser an advisory fee, accrued daily and paid monthly, by applying the annual rate of 0.15% to the average net assets of the Fund determined as of the close of each business day.

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 0.56% 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

22

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Notes to Financial Statements  nJanuary 31, 2021 continued

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 reimbursements when they deem such action is appropriate.

In addition, the Adviser and Administrator have also agreed to waive all or a portion of the Fund's advisory fee and administration fee, respectively, and/or reimburse expenses, to the extent that total expenses exceed total income of the Fund on a daily basis. These 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 as the Fund's Trustees act to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

The Adviser and Administrator may make additional voluntary fee waivers and/or expense reimbursements. The ratios of expenses to average net assets disclosed in the Fund's Financial Highlights may be lower than the maximum expense cap of 0.56% due to these additional fee waivers and/or expense reimbursements. The Adviser and Administrator may discontinue these voluntary fee waivers and/or expense reimbursements at any time in the future. For the year ended January 31, 2021, the Adviser waived $537,495 and the Administrator waived $1,566.

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 for Class R and Class S shares.

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 year ended January 31, 2021, the distribution fee was accrued at the annual rate of 0.10%.

The Distributor has agreed to waive all or a portion of the Fund's shareholder services fee and/or reimburse expenses, to the extent that total expenses exceed total income of the Fund on a daily basis. This fee waiver and/or expense reimbursement 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. For the year ended January 31, 2021, the Distributor waived $517,375.

23

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Notes to Financial Statements  nJanuary 31, 2021 continued

5. Dividend Disbursing and Transfer Agent

The Fund's dividend disbursing and transfer agent is DST Asset Manager Solutions, Inc. ("DST"). Pursuant to a Transfer Agency Agreement, the Fund pays DST a fee based on the number of classes, accounts and transactions relating to the Fund.

6. Custodian Fees

State Street (the "Custodian") also serves as Custodian for the Fund in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Fund as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.

7. Transactions with Affiliates

The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Trustees in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the year ended January 31, 2021, the Fund did not engage in any cross-trade transactions.

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 year ended January 31, 2021, included in "Trustees' fees and expenses" in the Statement of Operations amounted to $501. At January 31, 2021, the Fund had an accrued pension liability of $40,439, which is reflected as "Trustees' fees" 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 NAV of the Fund.

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Notes to Financial Statements  nJanuary 31, 2021 continued

8. Shares of Beneficial Interest

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

	FOR THE YEAR ENDED JANUARY 31, 2021			FOR THE YEAR ENDED JANUARY 31, 2020
CLASS R SHARES
Shares sold		1,509,529,049			1,451,847,592
Shares issued in reinvestment of dividends		1,098,448			11,127,185
Shares redeemed		(1,595,445,193	)		(1,326,187,748	)
Net increase (decrease) — Class R		(84,817,696	)		136,787,029
CLASS S SHARES
Shares sold		54,364,962			355,721,186
Shares issued in reinvestment of dividends		325,148			3,616,402
Shares redeemed		(127,789,355	)		(310,012,024	)
Net increase (decrease) — Class S		(73,099,245	)		49,325,564
Net increase (decrease) in Fund		(157,916,941	)		186,112,593

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. Generally, each of the tax years in the four-year period ended January 31, 2021 remains subject to examination by taxing authorities.

The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2021 and 2020 was as follows:

2021 DISTRIBUTIONS PAID FROM:		2020 DISTRIBUTIONS PAID FROM:
ORDINARY INCOME		ORDINARY INCOME
$	1,423,596	$	14,743,587

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Notes to Financial Statements  nJanuary 31, 2021 continued

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.

The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended January 31, 2021.

At January 31, 2021, the components of distributable earnings for the Fund on a tax basis were as follows:

UNDISTRIBUTED ORDINARY INCOME		UNDISTRIBUTED LONG-TERM CAPITAL GAIN
$	21,145	$	—

10. Market Risk and 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.

Certain impacts to public health conditions particular to the coronavirus (COVID-19) outbreak could impact the operations and financial performance of certain of the Fund's investments. The extent of the impact to the financial performance of the Fund's investments will depend on future developments,

26

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Notes to Financial Statements  nJanuary 31, 2021 continued

including (i) the duration and spread of the outbreak, (ii) the restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. If the financial performance of the Fund's investments is impacted because of these factors for an extended period, the Fund's investment results may be adversely affected.

11. Other

At January 31, 2021, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 94.9%.

12. LIBOR Risk

The Fund's investments, payment obligations and financing terms may be based on floating rates, such as London Interbank Offer Rate ("LIBOR"), Euro Interbank Offered Rate and other similar types of reference rates (each, a "Reference Rate"). These Reference Rates are generally intended to represent the rate at which contributing banks may obtain short-term borrowings from each other within certain financial markets. On July 27, 2017, the Chief Executive of the UK Financial Conduct Authority ("FCA"), which regulates LIBOR, announced that the FCA will no longer persuade nor require banks to submit rates for the calculation of LIBOR and certain other Reference Rates after 2021. Such announcement indicates that the continuation of LIBOR and other Reference Rates on the current basis cannot and will not be guaranteed after the end of 2021. This announcement and any additional regulatory or market changes may have an adverse impact on the Fund or its investments.

In advance of 2022, regulators and market participants are currently engaged in identifying successor Reference Rates ("Alternative Reference Rates"). Additionally, prior to the end of 2021, it is expected that market participants will focus on the transition mechanisms by which the Reference Rates in existing contracts or instruments may be amended, whether through marketwide protocols, fallback contractual provisions, bespoke negotiations or amendments or otherwise. Nonetheless, the termination of certain Reference Rates presents risks to the Fund. At this time, it is not possible to completely identify or predict the effect of any such changes, any establishment of Alternative Reference Rates or any other reforms to Reference Rates that may be enacted in the UK or elsewhere. The elimination of a Reference Rate or any other changes or reforms to the determination or supervision of Reference Rates could have an adverse impact on the market for or value of any securities or payments linked to those Reference Rates and other financial obligations held by the Fund or on its overall financial condition or results of operations.

27

Morgan Stanley U.S. Government Money Market Trust

Financial Highlights

Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:

	FOR THE YEAR ENDED JANUARY 31,
	2021			2020			2019			2018			2017(1)
Class R Shares(2)
Selected Per Share Data:
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net income from investment operations		0.002			0.018			0.016			0.005			0.000	(3)
Less dividends from net investment income		(0.002	)		(0.018	)		(0.016	)		(0.005	)		(0.000	)(3)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return		0.18	%		1.85	%		1.61	%		0.53	%		0.02	%
Ratios to Average Net Assets:
Net expenses		0.21	%(4)		0.35	%		0.36	%		0.49	%(4)		0.46	%(4)
Net investment income		0.19	%(4)		1.82	%		1.55	%		0.52	%(4)		0.01	%(4)
Supplemental Data:
Net assets, end of period, in millions	$	572		$	656		$	520		$	1,028		$	1,274

(1)  Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of Class R shares. The annualized expense and net investment income ratios would be unchanged as the reimbursement of custodian fees was offset against expense waivers/reimbursements with no impact to the net expenses or net investment income

(2)  Effective June 28, 2016, the original class was re-designated as Class R shares.

(3)  Amount is less than $0.001.

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

PERIOD ENDED	EXPENSE RATIO			NET INVESTMENT INCOME (LOSS) RATIO
January 31, 2021		0.35	%		0.05	%
January 31, 2018		0.53			0.48
January 31, 2017		0.58			(0.11	)

See Notes to Financial Statements
28

Morgan Stanley U.S. Government Money Market Trust

Financial Highlights continued

				FOR THE YEAR ENDED JANUARY 31,									PERIOD FROM JUNE 28, 2016(1) TO
	2021			2020			2019			2018			JANUARY 31, 2017(2)
Class S Shares
Selected Per Share Data:
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Net income from investment operations		0.002			0.018			0.016			0.005			0.000	(3)
Less dividends from net investment income		(0.002	)		(0.018	)		(0.016	)		(0.005	)		(0.000	)(3)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return		0.18	%		1.85	%		1.61	%		0.53	%		0.01	%(5)
Ratios to Average Net Assets:
Net expenses		0.21	%(4)		0.35	%		0.36	%		0.49	%(4)		0.46	%(4)(6)
Net investment income		0.19	%(4)		1.82	%		1.55	%		0.52	%(4)		0.01	%(4)(6)
Supplemental Data:
Net assets, end of period, in thousands	$	124,619		$	197,718		$	148,391		$	19,765		$	50

(1)  Commencement of Offering.

(2)  Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of Class S shares. The annualized expense and net investment income ratios would be unchanged as the reimbursement of custodian fees was offset against expense waivers/reimbursements with no impact to the net expenses or net investment income.

(3)  Amount is less than $0.001.

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

PERIOD ENDED	EXPENSE RATIO			NET INVESTMENT INCOME (LOSS) RATIO
January 31, 2021		0.35	%		0.05	%
January 31, 2018		0.53			0.48
January 31, 2017		0.58			(0.11	)

(5)  Not annualized.

(6)  Annualized.

See Notes to Financial Statements
29

Morgan Stanley U.S. Government Money Market Trust

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of
Morgan Stanley U.S. Government Money Market Trust

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Morgan Stanley U.S. Government Money Market Trust (the "Fund"), including the portfolio of investments, as of January 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund at January 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund's internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of January 31, 2021 by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

  

We have served as the auditor of one or more Morgan Stanley investment companies since 2000.

Boston, Massachusetts
March 18, 2021

30

Morgan Stanley U.S. Government Money Market Trust

Privacy Notice (unaudited)  April 2019

FACTS	WHAT DOES MSIM DO WITH YOUR PERSONAL INFORMATION?
Why?	Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?	The types of personal information we collect and share depend on the product or service you have with us. This information can include: n Social Security number and income n investment experience and risk tolerance n checking account number and wire transfer instructions
How?	All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons MSIM chooses to share; and whether you can limit this sharing.

Reasons we can share your personal information	Does MSIM share?	Can you limit this sharing?
For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus	Yes	No
For our marketing purposes — to offer our products and services to you	Yes	No
For joint marketing with other financial companies	No	We don't share
For our affiliates' everyday business purposes — information about your transactions and experiences	Yes	No
For our affiliates' everyday business purposes — information about your creditworthiness	No	We don't share
For our affiliates to market to you	No	We don't share
For non-affiliates to market to you	No	We don't share

Questions?Call toll-free (844) 312-6327 or email: imprivacyinquiries@morganstanley.com

31

Morgan Stanley U.S. Government Money Market Trust

Privacy Notice (unaudited) continued  April 2019

Who we are

Who is providing this notice? Morgan Stanley Investment Management, Inc. and its affiliated registered investment advisers, registered broker-dealers, and registered and unregistered funds ("MSIM")

What we do

How does MSIM protect my personal information?	To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. We have policies governing the proper handling of customer information by personnel and requiring third parties that provide support to adhere to appropriate security standards with respect to such information.
How does MSIM collect my personal information?	We collect your personal information, for example, when you n open an account or make deposits or withdrawals from your account n buy securities from us or make a wire transfer n give us your contact information We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
Why can't I limit all sharing?	Federal law gives you the right to limit only n sharing for affiliates' everyday business purposes — information about your creditworthiness n affiliates from using your information to market to you n sharing for non-affiliates to market to you State laws and individual companies may give you additional rights to limit sharing. See below for more on your rights under state law.

32

Morgan Stanley U.S. Government Money Market Trust

Privacy Notice (unaudited) continued  April 2019

Definitions

Affiliates	Companies related by common ownership or control. They can be financial and non-financial companies. n Our affiliates include companies with a Morgan Stanley name and financial companies such as Morgan Stanley Smith Barney LLC and Morgan Stanley & Co.
Non-affiliates	Companies not related by common ownership or control. They can be financial and non-financial companies. n MSIM does not share with non-affiliates so they can market to you.
Joint marketing	A formal agreement between non-affiliated financial companies that together market financial products or services to you. n MSIM doesn't jointly market

Other important information

Vermont: Except as permitted by law, we will not share personal information we collect about Vermont residents with Non-affiliates unless you provide us with your written consent to share such information.

California: Except as permitted by law, we will not share personal information we collect about California residents with Non-affiliates and we will limit sharing such personal information with our Affiliates to comply with California privacy laws that apply to us.

33

Morgan Stanley U.S. Government Money Market Trust

Trustee and Officer Information (unaudited)

Independent Trustees:

Name, Address and Birth Year of Independent Trustee	Position(s) Held with Registrant	Length of Time Served*	Principal Occupation(s) During Past 5 Years and Other Relevant Professional Experience	Number of Funds in Fund Complex Overseen by Independent Trustee**		Other Directorships Held by Independent Trustee***
Frank L. Bowman c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1944	Trustee	Since August 2006	President, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Compliance and Insurance Committee (since October 2015); formerly, Chairperson of the Insurance Sub- Committee of the Compliance and Insurance Committee (2007-2015); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005-November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996- 2004); served as Chief of Naval Personnel (July 1994-September 1996) and on the Joint Staff as Director of Political Military Affairs (June 1992- July 1994); knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; awarded the Officier de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009).		79	Director of Naval and Nuclear Technologies LLP; Director Emeritus of the Armed Services YMCA; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board; Trustee of Fairhaven United Methodist Church; Member of the Board of Advisors of the Dolphin Scholarship Foundation; Director of other various non-profit organizations; Formerly, Director of BP, plc (November 2010-May 2019).

34

Morgan Stanley U.S. Government Money Market Trust

Trustee and Officer Information (unaudited) continued

Name, Address and Birth Year of Independent Trustee	Position(s) Held with Registrant	Length of Time Served*	Principal Occupation(s) During Past 5 Years and Other Relevant Professional Experience	Number of Funds in Fund Complex Overseen by Independent Trustee**		Other Directorships Held by Independent Trustee***
Kathleen A. Dennis c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1953	Trustee	Since August 2006	Chairperson of the Governance Committee (January 2021); Chairperson of the Liquidity and Alternatives Sub-Committee of the Investment Committee (2006-2020); and Director or Trustee of various Morgan Stanley Funds (since August 2006); President, Cedarwood Associates (mutual fund and investment management consulting) (since July 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006).		79	Board Member, University of Albany Foundation (2012-present); Board Member, Mutual Funds Directors Forum (2014-present); Director of various non-profit organizations.
Nancy C. Everett c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1955	Trustee	Since January 2015	Chairperson of the Equity Investment Committee (since January 2021); Director or Trustee of various Morgan Stanley Funds (since January 2015); Chief Executive Officer, Virginia Commonwealth University Investment Company (since November 2015); Owner, OBIR, LLC (institutional investment management consulting) (since June 2014); formerly, Managing Director, BlackRock, Inc. (February 2011-December 2013); and Chief Executive Officer, General Motors Asset Management (a/k/a Promark Global Advisors, Inc.) (June 2005-May 2010).		80	Formerly, Member of Virginia Commonwealth University School of Business Foundation (2005-2016); Member of Virginia Commonwealth University Board of Visitors (2013-2015); Member of Committee on Directors for Emerging Markets Growth Fund, Inc. (2007-2010); Chairperson of Performance Equity Management, LLC (2006-2010); and Chairperson, GMAM Absolute Return Strategies Fund, LLC (2006-2010).

35

Morgan Stanley U.S. Government Money Market Trust

Trustee and Officer Information (unaudited) continued

Name, Address and Birth Year of Independent Trustee	Position(s) Held with Registrant	Length of Time Served*	Principal Occupation(s) During Past 5 Years and Other Relevant Professional Experience	Number of Funds in Fund Complex Overseen by Independent Trustee**		Other Directorships Held by Independent Trustee***
Jakki L. Haussler c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1957	Trustee	Since January 2015	Director or Trustee of various Morgan Stanley Funds (since January 2015); Chairman, Opus Capital Group (since 1996); formerly, Chief Executive Officer, Opus Capital Group (1996-2019); Director, Capvest Venture Fund, LP (May 2000-December 2011); Partner, Adena Ventures, LP (July 1999-December 2010); Director, The Victory Funds (February 2005- July 2008).		80	Director of Cincinnati Bell Inc. and Member, Audit Committee and Chairman, Governance and Nominating Committee; Director of Service Corporation International and Member, Audit Committee and Investment Committee; Director of Northern Kentucky University Foundation and Member, Investment Committee; Member of Chase College of Law Transactional Law Practice Center Board of Advisors; Director of Best Transport; Director of Chase College of Law Board of Visitors; formerly, Member, University of Cincinnati Foundation Investment Committee; Member, Miami University Board of Visitors (2008-2011); Trustee of Victory Funds (2005-2008) and Chairman, Investment Committee (2007-2008); and Member, Service Provider Committee (2005-2008).
Dr. Manuel H. Johnson c/o Johnson Smick International, Inc. 220 I Street, NE — Suite 200 Washington, D.C. 20002 Birth Year: 1949	Trustee	Since July 1991	Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Fixed Income, Liquidity and Alternatives Investment Committee (since January 2021), Chairperson of the Investment Committee (2006-2020); and Director or Trustee of various Morgan Stanley Funds (since July 1991); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.		79	Director of NVR, Inc. (home construction).

36

Morgan Stanley U.S. Government Money Market Trust

Trustee and Officer Information (unaudited) continued

Name, Address and Birth Year of Independent Trustee	Position(s) Held with Registrant	Length of Time Served*	Principal Occupation(s) During Past 5 Years and Other Relevant Professional Experience	Number of Funds in Fund Complex Overseen by Independent Trustee**		Other Directorships Held by Independent Trustee***
Joseph J. Kearns c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1942	Trustee	Since August 1994	Senior Adviser, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of various Morgan Stanley Funds (since August 1994); CFO of the J. Paul Getty Trust (1982-1999).		80	Director, Rubicon Investments (since February 2019); Prior to August 2016, Director of Electro Rent Corporation (equipment leasing); Prior to December 31, 2013, Director of The Ford Family Foundation.
Michael F. Klein c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1958	Trustee	Since August 2006	Chairperson of the Risk Committee (since January 2021); Managing Director, Aetos Alternatives Management, LP (since March 2000); Co-President, Aetos Alternatives Management, LP (since January 2004) and Co-Chief Executive Officer of Aetos Alternatives Management, LP (since August 2013); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (2006-2020) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management and President, various Morgan Stanley Funds (June 1998-March 2000); Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).		79	Director of certain investment funds managed or sponsored by Aetos Alternatives Management, LP; Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals).

37

Morgan Stanley U.S. Government Money Market Trust

Trustee and Officer Information (unaudited) continued

Name, Address and Birth Year of Independent Trustee	Position(s) Held with Registrant	Length of Time Served*	Principal Occupation(s) During Past 5 Years and Other Relevant Professional Experience	Number of Funds in Fund Complex Overseen by Independent Trustee**		Other Directorships Held by Independent Trustee***
Patricia Maleski c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1960	Trustee	Since January 2017	Director or Trustee of various Morgan Stanley Funds (since January 2017); Managing Director, JPMorgan Asset Management (2004-2016); Oversight and Control Head of Fiduciary and Conflicts of Interest Program (2015-2016); Chief Control Officer-Global Asset Management (2013-2015); President, JPMorgan Funds (2010-2013); Chief Administrative Officer (2004-2013); various other positions including Treasurer and Board Liaison (since 2001).		80	None.
W. Allen Reed c/o Perkins Coie LLP Counsel to the Independent Trustees 1155 Avenue of the Americas, 22nd Floor New York, NY 10036 Birth Year: 1947	Chair of the Board and Trustee	Chair of the Boards since August 2020 and Trustee since August 2006	Chair of the Boards of various Morgan Stanley Funds (since August 2020); Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Vice Chair of the Boards of various Morgan Stanley Funds (January 2020-August 2020); President and Chief Executive Officer of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005).		79	Formerly, Director of Legg Mason, Inc. (2006-2019); and Director of the Auburn University Foundation (2010-2015).

  *  This is the earliest date the Trustee began serving the Morgan Stanley Funds. Each Trustee serves an indefinite term, until his or her successor is elected.

  **  The Fund Complex includes (as of December 31, 2020) all open-end and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Management Inc. (the "Adviser") and any funds that have an adviser that is an affiliated person of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP).

  ***  This includes any directorships at public companies and registered investment companies held by the Trustee at any time during the past five years.

38

Morgan Stanley U.S. Government Money Market Trust

Trustee and Officer Information (unaudited) continued

Executive Officers:

Name, Address and Birth Year of Executive Officer	Position(s) Held with Registrant	Length of Time Served*	Principal Occupation(s) During Past 5 Years
John H. Gernon 522 Fifth Avenue New York, NY 10036 Birth Year: 1963	President and Principal Executive Officer	Since September 2013	President and Principal Executive Officer of the Equity and Fixed Income Funds and the Morgan Stanley AIP Funds (since September 2013) and the Liquidity Funds and various money market funds (since May 2014) in the Fund Complex; Managing Director of the Adviser; Head of Public Markets Product Development (since 2006).
Timothy J. Knierim 1633 Broadway New York, NY 10019 Birth Year: 1959	Chief Compliance Officer	Since December 2016	Managing Director of the Adviser and various entities affiliated with the Adviser; Chief Compliance Officer of various Morgan Stanley Funds and the Adviser (since December 2016) and Chief Compliance Officer of Morgan Stanley AIP GP LP (since 2014). Formerly, Managing Director and Deputy Chief Compliance Officer of the Adviser (2014-2016).
Francis J. Smith 522 Fifth Avenue New York, NY 10036 Birth Year: 1965	Treasurer and Principal Financial Officer	Treasurer since July 2003 and Principal Financial Officer since September 2002	Managing Director of the Adviser and various entities affiliated with the Adviser; Treasurer (since July 2003) and Principal Financial Officer of various Morgan Stanley Funds (since September 2002).
Mary E. Mullin 1633 Broadway New York, NY 10019 Birth Year: 1967	Secretary	Since June 1999	Managing Director of the Adviser; Secretary of various Morgan Stanley Funds (since June 1999).
Michael J. Key 522 Fifth Avenue New York, NY 10036 Birth Year: 1979	Vice President	Since June 2017	Vice President of the Equity and Fixed Income Funds, Liquidity Funds, various money market funds and the Morgan Stanley AIP Funds in the Fund Complex (since June 2017); Executive Director of the Adviser; Head of Product Development for Equity and Fixed Income Funds (since August 2013).

  *  This is the earliest date the officer began serving the Morgan Stanley Funds. Each officer serves a one-year term, until his or her successor is elected and qualifies.

39

Transfer Agent

DST Asset Manager Solutions, 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

Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036

Adviser and Administrator

Morgan Stanley Investment Management Inc.
522 Fifth Avenue

New York, New York 10036

This report is submitted for the general information of the 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 Trustees. It is available, without charge, by calling (800) 548-7786.

This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Please read the Prospectus carefully before investing.

Morgan Stanley Distribution, Inc., member FINRA.

© 2021 Morgan Stanley

DWGANN
3478330 EXP 03.31.22

Item 2. Code of Ethics.

(a)            The registrant has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

(b)            No information need be disclosed pursuant to this paragraph.

(c)            Not applicable.

(d)            Not applicable.

(e)            Not applicable.

(f)

(1)            The registrant’s Code of Ethics is attached hereto as Exhibit 13 A.

(2)            Not applicable.

(3)            Not applicable.

Item 3. Audit Committee Financial Expert.

The registrant's Board of Trustees has determined that Joseph J. Kearns, an “independent” Trustee, is an “audit committee financial expert" serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.

Item 4. Principal Accountant Fees and Services.

(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:

2021

	Registrant			Covered Entities(1)
Audit Fees	$	34,317			N/A
Non-Audit Fees
Audit-Related Fees	$	—	(2)	$	—	(2)
Tax Fees	$	—	(3)	$	231,320	(4)
All Other Fees	$	—		$	—	(5)
Total Non-Audit Fees	$	—		$	231,320
Total	$	34,317		$	231,320

2020

	Registrant			Covered Entities(1)
Audit Fees	$	34,317			N/A
Non-Audit Fees
Audit-Related Fees	$	—	(2)	$	—	(2)
Tax Fees	$	3,588	(3)	$	535,939	(4)
All Other Fees	$	—		$	30,000	(5)
Total Non-Audit Fees	$	3,588		$	565,939
Total	$	37,905		$	565,939

N/A- Not applicable, as not required by Item 4.

(1)	Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
(2)	Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements.
(3)	Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant’s tax returns.
(4)	Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities' tax returns.
(5)	All other fees represent project management for future business applications and improving business and operational processes.

(e)(1) The audit committee’s pre-approval policies and procedures are as follows:

AUDIT COMMITTEE 

AUDIT AND NON-AUDIT SERVICES 

PRE-APPROVAL POLICY AND PROCEDURES 

OF THE 

MORGAN STANLEY FUNDS

AS ADOPTED AND AMENDED JULY 23, 2004 AND JUNE 12 AND 13, 2019³

1. Statement of Principles

The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor’s independence from the Fund.

The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee’s administration of the engagement of the independent auditor. The SEC’s rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (“general pre-approval”); or require the specific pre-approval of the Audit Committee or its delegate (“specific pre-approval”). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.

The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.

The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities to pre-approve services performed by the Independent Auditors to management.

The Fund’s Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.

³  This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the “Policy”), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time.

2. Delegation

As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

3. Audit Services

The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund’s financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.

In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.

The Audit Committee has pre-approved the Audit services in Appendix A. All other Audit services not listed in Appendix A must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

4. Audit-related Services

Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-CEN and/or N-CSR.

The Audit Committee has pre-approved the Audit-related services in Appendix A. All other Audit-related services not listed in Appendix A must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

5. Tax Services

The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor’s independence, and the SEC has stated that the Independent Auditors may provide such services.

Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix A. All Tax services in Appendix A must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

6. All Other Services

The Audit Committee believes, based on the SEC’s rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence.

The Audit Committee has pre-approved the All Other services in Appendix A. Permissible All Other services not listed in Appendix A must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

7. Pre-Approval Fee Levels or Budgeted Amounts

Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.

8. Procedures

All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund’s Principal Financial and Accounting Officer and must include a detailed description of the services to be rendered. The Fund’s Principal Financial and Accounting Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee or Chairperson of the Audit Committee will be submitted to the Audit Committee by the Fund's Principal Financial and Accounting Officer, who, after consultation with the Independent Auditors, will discuss whether, the request or application is consistent with the SEC’s rules on auditor independence.

The Audit Committee has designated the Fund’s Principal Financial and Accounting Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund’s Principal Financial and Accounting Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund’s Principal Financial and Accounting Officer and management will immediately report to the Chairperson of the Audit Committee any breach of this Policy that comes to the attention of the Fund’s Principal Financial and Accounting Officer or any member of management.

9. Additional Requirements

The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor’s independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with the PCAOB’s Ethics and Independence Rule 3526, and discussing with the Independent Auditors its methods and procedures for ensuring independence.

10. Covered Entities

Covered Entities include the Fund’s investment adviser(s) and any entity controlling, controlled by or under common control with the Fund’s investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund’s audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:

Morgan Stanley Funds 

Morgan Stanley & Co. LLC 

Morgan Stanley Investment Management Inc. 

Morgan Stanley Investment Management Limited 

Morgan Stanley Investment Management Private Limited 

Morgan Stanley Asset & Investment Trust Management Co., Limited 

Morgan Stanley Investment Management Company 

Morgan Stanley Services Company, Inc. 

Morgan Stanley Distribution, Inc. 

Morgan Stanley AIP GP LP 

Morgan Stanley Alternative Investment Partners LP 

Morgan Stanley Smith Barney LLC 

Morgan Stanley Capital Management LLC 

Morgan Stanley Asia Limited 

Morgan Stanley Services Group

(e)(2)  Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee’s pre-approval policies and procedures (attached hereto).

(f)  Not applicable.

(g)  See table above.

(h)  The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors' independence in performing audit services.

APPENDIX A

Pre-Approved Audit Services

Service  Range of Fees
	The Fund(s)	Covered Entities
Statutory audits or financial audits for the Funds	For a complete list of fees, please contact the legal department **	N/A
Services associated with SEC registration statements (including new fund filings/seed audits), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end fund offerings, consents), and assistance in responding to SEC comment letters	*	*
Consultations by the Fund’s management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard setting bodies (Note: Under SEC rules, some consultations may be “audit related” services rather than “audit” services)	*	*

Pre-Approved Audit-Related Services

Service Range of Fees
	The Fund(s)	Covered Entities
Attest procedures not required by statute or regulation	*	*
Due diligence services pertaining to potential fund mergers	*	*
Consultations by the Fund’s management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be “audit” services rather than “audit-related” services)	*	*
General assistance with implementation of the requirements of SEC rules or listing standards promulgated pursuant to the Sarbanes-Oxley Act	*	*

Pre-Approved Tax Services

Service Range of Fees
	The Fund(s)	Covered Entities
U.S. federal, state and local tax planning and advice	*	*
U.S. federal, state and local tax compliance	*	*
International tax planning and advice	*	*
International tax compliance	*	*
Review/preparation of federal, state, local and international income, franchise, and other tax returns	$400,000 PwC	N/A
Identification of Passive Foreign Investment Companies PwC ITV Tool – assist in determining which Fund holdings have foreign capital gains tax exposure	$150,000 PwC $125,000 PwC	* *

Foreign Tax Services - Preparation of local foreign tax returns and assistance with local tax compliance issues (including maintenance of transaction schedules, assistance in periodic tax remittances, tax registration, representing funds before foreign revenue authorities and assistance with assessment orders)	$500,000 PwC/EY	*
Assistance with tax audits and appeals before the IRS and similar state, local and foreign agencies	*	*
Tax advice and assistance regarding statutory, regulatory or administrative developments (e.g., excise tax reviews, evaluation of Fund’s tax compliance function)	*	*

Pre-Approved All Other Services

Service  Range of Fees
	The Fund(s)	Covered Entities
Risk management advisory services, e.g., assessment and testing of security infrastructure controls	*	*

*Aggregate fees related to the pre-approved services will be limited to 10% of the 2020/2021 annual fees for audit and tax services (see fee schedule distributed by the Auditors).

** Audit and tax services for new funds/portfolios will be subject to the maximum audit and tax fee for a fund/portfolio on fee schedule distributed by the Auditors.

Prohibited Non-Audit Services

· Bookkeeping or other services related to the accounting records or financial statements of the audit client

· Financial information systems design and implementation

· Appraisal or valuation services, fairness opinions or contribution-in-kind reports

· Actuarial services

· Internal audit outsourcing services

· Management functions

· Human resources

· Broker-dealer, investment adviser or investment banking services

· Legal services

· Expert services unrelated to the audit

Item 5. Audit Committee of Listed Registrants.

(a) The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:

Joseph J. Kearns, Jakki L. Haussler, Michael F. Klein and W. Allen Reed.

(b) Not applicable.

Item 6. Schedule of Investments

(a) Refer to Item 1.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Applicable only to reports filed by closed-end funds.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable only to reports filed by closed-end funds.

Item 10. Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominee to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.

Item 11. Controls and Procedures

(a)  The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

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(b)  There were no changes in the registrant's internal control over financial reporting that

occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed End Management Investment Companies.

Not Applicable

Item 13. Exhibits

(a) The Code of Ethics for Principal Executive and Senior Financial Officers

(b) A separate certification for each principal executive officer and principal financial officer of the registrant as part of EX-99.CERT

(c) Section 906 Certification

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley U.S. Government Money Market Trust

/s/ John H. Gernon 

John H. Gernon 

Principal Executive Officer 

March 16, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ John H. Gernon

John H. Gernon 

Principal Executive Officer 

March 16, 2021

/s/ Francis Smith

Francis Smith 

Principal Financial Officer 

March 16, 2021