UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-02575

Morgan Stanley Liquid Asset Fund Inc.
(Exact name of registrant as specified in charter)

1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)

Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)

Registrant's telephone number, including area code: 212-762-4000

Date of fiscal year end: August 31, 2004

Date of reporting period: February 29, 2004

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley Liquid
Asset Fund Inc. performed during the semiannual period. We will provide an
overview of the market conditions, and discuss some of the factors that affected
performance during the reporting period. In addition, this report includes the
Fund's financial statements and a list of Fund investments.

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 the Fund will achieve its investment objective.
The Fund is subject to market risk, which is the possibility that market values
of securities owned by the Fund will decline and, therefore, the value of the
Fund's shares may be less than what you paid for them. Accordingly, you can lose
money investing in this Fund.

FUND REPORT

For the six-month period ended February 29, 2004

MARKET CONDITIONS

The Federal Open Market Committee (the "Fed") lowered its target rate for
federal funds to 1.00 percent, a 45-year low, on June 25, 2003. It maintained
that target throughout the second half of 2003 and the early months of 2004 in
an attempt to encourage strong economic activity. The combination of this highly
accommodative monetary posture and stimulative fiscal policies in the form of
tax cuts appeared to have a positive impact, with many companies reporting
significant profit growth and real fourth-quarter 2003 GDP increasing by more
than 4 percent. The Fed's sustained emphasis on low interest rates produced a
marked impact on money market fund yields, which reached record low levels
during the period.

PERFORMANCE ANALYSIS

As of February 29, 2004, Morgan Stanley Liquid Asset Fund Inc. had net assets of
more than $21.2 billion, and the average maturity of the Fund's portfolio was 54
days. For the six-month period ended February 29, 2004, the Fund returned 0.26
percent and an annualized return of 0.52 percent. For the seven-day period ended
February 29, 2004, the Fund provided an effective annualized yield of 0.52
percent and a current yield of 0.52 percent, while its 30-day moving average
yield was 0.52 percent. Past performance is no guarantee of future results and
current performance may be lower or higher than the figures shown. For more
up-to-date information, including month-end performance figures, please visit
morganstanley.com or speak with your Financial Advisor. Investment returns and
principal value will fluctuate and fund shares, when redeemed, may be worth more
or less than their original cost.

Our strategy in managing the Fund remained consistent with our long-term focus
on preserving capital and maintaining high liquidity. As we have in the past, we
adhered to a conservative approach that avoided the use of derivatives or
structured notes that might fluctuate excessively with changing interest rates.
On February 29, 2004, approximately 55 percent of the Fund's portfolio was
invested in high-quality commercial paper, 28 percent in U.S. Treasury and
federal agency obligations and the remaining 17 percent in certificates of
deposit and short-term notes issued by financially strong commercial banks. At
the end of the fiscal period, approximately 96 percent of the Fund's holdings
were due to mature in less than four months.

<Table>
<Caption>
PORTFOLIO COMPOSITION

Commercial Paper 55.2%
U.S. Government & Agency Obligations 27.9
Certificates of Deposit 11.6
Bank Notes 5.3
</Table>

<Table>
<Caption>
MATURITY SCHEDULE

1 - 30 Days 26.7%
31 - 60 Days 34.1
61 - 90 Days 27.3
91 - 120 Days 7.4
121+ Days 4.5
</Table>

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

INVESTMENT STRATEGY

THE FUND INVESTS IN HIGH QUALITY, SHORT-TERM DEBT OBLIGATIONS. IN SELECTING
INVESTMENTS, THE FUND'S "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS
INC., SEEKS TO MAINTAIN THE FUND'S SHARE PRICE AT $1.00. THE SHARE PRICE
REMAINING STABLE AT $1.00 MEANS THAT THE FUND WOULD PRESERVE THE PRINCIPAL VALUE
OF YOUR INVESTMENT. THE FUND'S INVESTMENTS INCLUDE THE FOLLOWING MONEY MARKET
SECURITIES*:

- - COMMERCIAL PAPER.

- - CORPORATE OBLIGATIONS.

- - DEBT OBLIGATIONS OF U.S.-REGULATED BANKS AND INSTRUMENTS SECURED BY THOSE
OBLIGATIONS. THESE INVESTMENTS INCLUDE CERTIFICATES OF DEPOSIT.

- - CERTIFICATES OF DEPOSIT OF SAVINGS BANKS AND SAVINGS AND LOAN ASSOCIATIONS.

- - DEBT OBLIGATIONS ISSUED OR GUARANTEED AS TO PRINCIPAL AND INTEREST BY THE U.S.
GOVERNMENT, ITS AGENCIES OR ITS INSTRUMENTALITIES.

- - REPURCHASE AGREEMENTS, WHICH MAY BE VIEWED AS A TYPE OF SECURED LENDING BY THE
FUND.

* AN INVESTMENT IN SHARES OF A MONEY MARKET FUND IS NOT A BANK DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY. ALTHOUGH MONEY MARKET FUNDS SEEK TO PRESERVE THE
VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN THIS FUND.

Morgan Stanley Liquid Asset Fund Inc.
PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED)

<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD ON
AMOUNT IN DATE OF MATURITY
THOUSANDS PURCHASE DATE VALUE
- ----------------------------------------------------------------------------------------------------------

Commercial Paper (55.9%)
Asset-Backed - Auto (0.5%)
$ 100,000 New Center Asset Trust.................... 1.05 % 04/06/04 $ 99,889,167
---------------
Asset-Backed - Corporate (0.7%)
150,000 CIESCO, LLC............................... 1.05 05/06/04 149,703,917
---------------
Asset-Backed - Mortgage (2.7%)
567,000 Mortgage Interest Networking Trust........ 1.02-1.04 03/16/04-04/27/04 566,290,827
---------------
Banking (5.8%)
160,000 Bank of America Corp. .................... 1.06 04/05/04 159,825,689
340,000 Citicorp.................................. 1.02-1.07 03/03/04-04/05/04 339,792,355
340,000 J.P. Morgan Chase & Co. .................. 1.03-1.04 04/28/04-05/07/04 339,361,000
400,000 Wells Fargo & Co. ........................ 1.02 03/23/04 399,728,000
---------------
1,238,707,044
---------------
Finance - Automotive (2.6%)
560,000 Toyota Motor Credit Corp. ................ 1.03-1.04 04/19/04-05/18/04 558,900,778
---------------
Finance - Consumer (2.0%)
200,000 American Express Credit Corp. ............ 1.01 03/09/04 199,943,889
230,000 Household Finance Corp. .................. 1.02-1.04 03/01/04-03/11/04 229,952,200
---------------
429,896,089
---------------
Financial Conglomerates (4.8%)
1,024,000 General Electric Capital Corp. ........... 1.03-1.16 03/08/04-07/08/04 1,022,540,264
---------------
International Banks (36.8%)
160,000 ABN-AMRO North America Finance Inc. ...... 1.08 03/11/04 159,942,667
150,000 ANZ (DE) Inc. ............................ 1.08 03/01/04 149,991,000
170,000 BNP Paribas Finance Inc. ................. 1.04 05/19/04 169,602,200
400,000 Barclays U.S. Funding Corp. .............. 1.03 04/27/04-04/28/04 399,319,056
145,000 CBA (Delaware) Finance Inc. 1.03 04/13/04 144,813,312
700,000 Canadian Imperial Holdings Inc. 1.03-1.07 03/30/04-05/13/04 698,846,875
1,025,000 Deutsche Bank Financial LLC............... 1.04-1.06 03/18/04-06/01/04 1,023,439,194
900,000 Dexia Delaware LLC........................ 1.03-1.09 03/05/04-05/28/04 898,595,819
550,000 ING (U.S.) Funding LLC.................... 1.03-1.07 03/29/04-04/21/04 549,393,543
250,000 Rabobank USA Financial Corp. ............. 1.14 04/20/04 249,591,944
700,000 Royal Bank of Canada...................... 1.03-1.13 03/31/04-05/27/04 698,632,944
</Table>

4
See Notes to Financial Statements

Morgan Stanley Liquid Asset Fund Inc.
PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

$ 915,000 Royal Bank of Scotland plc 1.02-1.05% 03/17/04-06/08/04 $ 912,969,906
445,000 Societe Generale N.A. Inc. ............... 1.07-1.08 03/02/04-04/02/04 444,743,324
640,000 Toronto-Dominion Holdings (USA) Inc. ..... 1.03-1.05 04/01/04-06/30/04 638,580,313
685,000 UBS Finance (Delaware) LLC 1.05-1.27 04/02/04-07/29/04 683,408,433
---------------
7,821,870,530
---------------
Total Commercial Paper (Cost $11,887,798,616).............................. 11,887,798,616
---------------
U.S. Government & Agency Obligations (28.2%)
330,000 Federal Home Loan Banks................... 1.06-1.09 03/10/04-08/13/04 329,314,133
2,523,000 Federal National Mortgage Assoc. ......... 1.05-1.15 03/08/04-08/20/04 2,517,089,847
2,414,000 Freddie Mac............................... 1.05-1.11 03/04/04-08/03/04 2,410,526,795
750,000 U.S. Treasury Bills....................... 1.00-1.04 03/04/04-04/22/04 749,238,153
---------------
Total U.S. Government & Agency Obligations (Cost $6,006,168,928)........... 6,006,168,928
---------------
Certificates of Deposit (11.8%)
300,000 Bank of America, N.A. .................... 1.10-1.15 03/19/04-05/18/04 300,000,000
700,000 Citibank, N.A. ........................... 1.03-1.09 03/19/04-04/23/04 700,000,000
900,000 State Street Bank & Trust Co. ............ 1.03-1.06 03/12/04-05/24/04 900,000,000
600,000 Wells Fargo Bank, N.A. ................... 1.02 03/03/04-04/19/04 600,000,000
---------------
Total Certificates of Deposit (Cost $2,500,000,000)........................ 2,500,000,000
---------------
Short-Term Bank Notes (5.4%)
550,000 Bank of America, N.A. .................... 1.06-1.13 05/03/04-05/11/04 550,000,000
250,000 LaSalle Bank, N.A. ....................... 1.06 05/27/04-06/07/04 250,000,000
350,000 Standard Federal Bank, N.A. .............. 1.06-1.08 03/25/04-05/28/04 350,000,000
---------------
Total Short-Term Bank Notes (Cost $1,150,000,000).......................... 1,150,000,000
---------------
Repurchase Agreement (0.0%)
9,148 The Bank of New York (dated 02/27/04;
proceeds $9,149,279) (a) (Cost
$9,148,612)............................. 0.875 03/01/04 9,148,612
---------------
</Table>

<Table>

Total Investments (Cost $21,553,116,156) (b).................... 101.3% 21,553,116,156

Liabilities In Excess of Other Assets........................... (1.3) (281,467,775)
----- ---------------
Net Assets...................................................... 100.0% $21,271,648,381
===== ===============
</Table>

- ---------------------

<Table>

(a) Collateralized by Federal National Mortgage Assoc. 3.53% due
09/01/33 valued at 9,331,584.
(b) Cost is the same for federal income tax purposes.
</Table>

5
See Notes to Financial Statements

Morgan Stanley Liquid Asset Fund Inc.
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
February 29, 2004 (unaudited)

<Table>

Assets:
Investments in securities, at
value
(cost $21,553,116,156)......... $21,553,116,156
Cash............................. 90,001
Receivable for:
Interest..................... 5,298,153
Capital stock sold........... 146,706
Prepaid expenses and other
assets......................... 448,253
---------------
Total Assets................. 21,559,099,269
---------------
Liabilities:
Payable for:
Capital stock redeemed....... 281,052,777
Investment management fee.... 4,340,799
Distribution fee............. 1,649,681
Accrued expenses and other
payables....................... 407,631
---------------
Total Liabilities............ 287,450,888
---------------
Net Assets................... $21,271,648,381
===============
Composition of Net Assets:
Paid-in-capital.................. $21,270,957,110
Accumulated undistributed net
investment income.............. 691,271
---------------
Net Assets................... $21,271,648,381
===============
Net Asset Value Per Share,
21,271,628,221 shares outstanding
(50,000,000,000 shares authorized
of $.01 par value)............... $1.00
===============
</Table>

Statement of Operations
For the six months ended February 29, 2004 (unaudited)

<Table>

Net Investment Income:
Interest Income..................... $120,529,677
------------
Expenses
Investment management fee........... 28,961,364
Transfer agent fees and expenses.... 22,147,824
Distribution fee.................... 11,023,782
Shareholder reports and notices..... 533,802
Custodian fees...................... 232,763
Insurance expenses.................. 181,903
Registration fees................... 151,879
Directors' fees and expenses........ 139,729
Professional fees................... 32,547
Other............................... 45,206
------------
Total Expenses.................. 63,450,799
------------
Net Investment Income............... $ 57,078,878
============
</Table>

6
See Notes to Financial Statements

Morgan Stanley Liquid Asset Fund Inc.
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
----------------- ---------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 57,078,878 $ 200,080,604
Dividends to shareholders from net investment income........ (57,088,163) (200,068,427)
Net decrease from capital stock transactions................ (1,809,294,896) (849,967,415)
--------------- ---------------
Net Decrease............................................ (1,809,304,181) (849,955,238)
Net Assets:
Beginning of period......................................... 23,080,952,562 23,930,907,800
--------------- ---------------
End of Period
(Including accumulated undistributed net investment income
of $691,271 and $700,556, respectively)..................... $21,271,648,381 $23,080,952,562
=============== ===============
</Table>

7
See Notes to Financial Statements

Morgan Stanley Liquid Asset Fund Inc.
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Liquid Asset Fund Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objectives are
high current income, preservation of capital and liquidity. The Fund was
incorporated in Maryland on September 3, 1974 and commenced operations on
September 22, 1975.

The following is a summary of significant accounting policies:

A. Valuation of Investments -- Portfolio securities are valued at amortized
cost, which approximates market value.

B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.

C. Repurchase Agreements -- The Fund may invest 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.

D. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.

E. Dividends and Distributions to Shareholders -- The Fund records dividends and
distributions to shareholders as of the close of each business day.

F. Use of Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.

2. Investment Management Agreement

Pursuant to an Investment Management Agreement with Morgan Stanley Investment
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding

Morgan Stanley Liquid Asset Fund Inc.
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

$750 million; 0.375% to the portion of the daily net assets exceeding $750
million but not exceeding $1 billion; 0.35% to the portion of the daily net
assets exceeding $1 billion but not exceeding $1.35 billion; 0.325% to the
portion of the daily net assets exceeding $1.35 billion but not exceeding $1.75
billion; 0.30% to the portion of the daily net assets exceeding $1.75 billion
but not exceeding $2.15 billion; 0.275% to the portion of the daily net assets
exceeding $2.15 billion but not exceeding $2.5 billion; 0.25% to the portion of
the daily net assets exceeding $2.5 billion but not exceeding $15 billion;
0.249% to the portion of the daily net assets exceeding $15 billion but not
exceeding $17.5 billion; 0.248% to the portion of the daily net assets exceeding
$17.5 billion but not exceeding $25 billion; 0.247% to the portion of the daily
net assets exceeding $25 billion but not exceeding $30 billion; and 0.246% to
the portion of the daily net assets exceeding $30 billion.

3. Plan of Distribution

Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,
finances certain expenses in connection with the promotion of sales of Fund
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 six months ended February 29, 2004, the
distribution fee was accrued at the annual rate of 0.10%.

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales/maturities of portfolio securities
for the six months ended February 29, 2004, aggregated $44,682,296,497 and
$46,554,397,945, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent.

The Fund has an unfunded noncontributory defined benefit pension plan covering
certain independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on factors which include years of service and compensation.
Aggregate pension costs for the six months ended February 29, 2004, included in
Directors' fees and expenses in the Statement of Operations amounted to $3,651.

Morgan Stanley Liquid Asset Fund Inc.
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

At February 29, 2004, the Fund had an accrued pension liability of $60,646 which
is included in accrued expenses in the Statement of Assets and Liabilities.

On December 2, 2003, the Directors voted to close the plan to new participants,
eliminate the future benefits growth due to increases to compensation after July
31, 2003 and effective April 1, 2004, establish an unfunded deferred
compensation plan which allows each independent Director to defer payment of all
or a portion of the fees he receives for serving on the Board of Directors
throughout the year.

5. Capital Stock

Transactions in capital stock, at $1.00 per share, were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
----------------- ---------------
(unaudited)

Shares sold................................................. 29,820,966,710 55,318,997,385
Shares issued in reinvestment of dividends.................. 56,991,762 199,710,575
--------------- ---------------
29,877,958,472 55,518,707,960
Shares redeemed............................................. (31,687,253,368) (56,368,675,375)
--------------- ---------------
Net decrease................................................ (1,809,294,896) (849,967,415)
=============== ===============
</Table>

6. Legal Matters

The Investment Manager, certain affiliates of the Investment Manager, certain
officers of such affiliates and certain investment companies advised by the
Investment Manager or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints, which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the Morgan Stanley funds. The consolidated
amended complaint generally alleges that defendants, including the Fund,
violated their statutory disclosure obligations and fiduciary duties by failing
properly to disclose (i) that the Investment Manager and certain affiliates of
the Investment Manager allegedly offered economic incentives to brokers and
others to recommend the funds advised by the Investment Manager or its
affiliates to investors rather than funds managed by other companies, and (ii)
that the funds advised by the Investment Manager or its affiliates, including
the Fund, allegedly paid excessive commissions to brokers in return for their
efforts to recommend these funds to investors. The complaint seeks, among other
things, unspecified compensatory damages, rescissionary damages, fees and costs.
The defendants intend to move to dismiss the action and otherwise vigorously to
defend it. While the Fund believes that it has meritorious defenses, the
ultimate outcome of this matter is not presently determinable at this early
stage of the litigation, and no provision has been made in the Fund's financial
statements for the effect, if any, of this matter.

Morgan Stanley Liquid Asset Fund Inc.
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of capital stock outstanding
throughout each period:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED AUGUST 31,
MONTHS ENDED ----------------------------------------------------
FEBRUARY 29, 2004 2003 2002 2001 2000 1999
----------------- -------- -------- -------- -------- --------
(unaudited)

Selected Per Share Data:

Net asset value, beginning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ -------

Net income from investment operations........ 0.003 0.009 0.018 0.051 0.055 0.046

Less dividends from net investment income.... (0.003) (0.009) (0.018)+ (0.051)+ (0.055) (0.046)
------ ------ ------ ------ ------ -------

Net asset value, end of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== =======

Total Return................................. 0.26%(1) 0.86% 1.78% 5.24% 5.69% 4.74%

Ratios to Average Net Assets:
Expenses..................................... 0.58%(2) 0.56% 0.56% 0.57% 0.58% 0.59%

Net investment income........................ 0.52%(2) 0.85% 1.76% 5.04% 5.51% 4.61%

Supplemental Data:
Net assets, end of period, in millions....... $21,272 $23,081 $23,931 $23,187 $19,628 $17,875
</Table>

- ---------------------

<Table>

+ Includes capital gain distribution of less than $0.001.
(1) Not annualized.
(2) Annualized.
</Table>

11
See Notes to Financial Statements

DIRECTORS

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Mitchell M. Merin
President

Ronald E. Robison
Executive Vice President and Principal Executive Officer

Barry Fink
Vice President and General Counsel

Joseph J. McAlinden
Vice President

Stefanie V. Chang
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Thomas F. Caloia
Vice President

Mary E. Mullin
Secretary

TRANSFER AGENT

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT AUDITORS

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

INVESTMENT MANAGER

Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020

The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.

This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its directors. It is available, without charge, by calling (800) 869-NEWS.

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

Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Liquid Asset Fund

Semiannual Report
February 29, 2004

[MORGAN STANLEY LOGO]

37925RPT-RA04-00027P-A02/04

Item 2. Code of Ethics.