-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MN0Jt7z4Tr10bI5F0VCADehOSDZ95iajKNWOmTwbRBvityOnssj30J9xJx5Msea0 NvuFoZ3TvMBMuMggDNz+Iw== 0000950123-04-002973.txt : 20040308 0000950123-04-002973.hdr.sgml : 20040308 20040308155901 ACCESSION NUMBER: 0000950123-04-002973 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040308 EFFECTIVENESS DATE: 20040308 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTIVE ASSETS TAX FREE TRUST CENTRAL INDEX KEY: 0000351881 IRS NUMBER: 133075002 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03162 FILM NUMBER: 04654863 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: (212) 869-6397 N-CSRS 1 y92929nvcsrs.txt N-CSRS 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: 811-03162 Active Assets Tax-Free Trust (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: June 30, 2004 Date of reporting period: December 31, 2003 Item 1 - Report to Shareholders Welcome, Shareholder: In this report, you'll learn about how your investment in Active Assets Tax-Free Trust 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 December 31, 2003 MARKET CONDITIONS The six months ended December 31, 2003, was a period of record low yields in the municipal money market. After its latest cut in the federal funds rate target on June 25, 2003, the Federal Reserve Open Market Committee (the "Fed") indicated that it intended to remain in an accommodative stance for a considerable period in an attempt to get the economy back onto a solid footing. The short end of the tax-free money market yield curve was largely flat through much of the year, though it inverted in the last quarter of the period as seasonal redemptions pushed yields for the shortest maturities higher. Yields on municipal money market paper were highly attractive relative to taxable instruments. Among one-year maturities the ratio of municipals to taxable yields exceeded 90 percent for much of the year and for overnight paper the ratio at times rose above 100 percent. The accommodative monetary policy appeared to be having a positive effect as corporate profits and overall GDP growth began to show signs of life. As the year drew to a close, these improvements were reflected in better prospects for most municipalities, with tax receipts on the rise and the general trend toward widespread credit downgrades slowing. Many states worked to close budget gaps through a combination of increased fees and service cuts and one-time measures such as tobacco bond receipts and long-term refinancing. New York and California continued to lead the country in both issuance and deficits, with California experiencing downgrades in its general obligation bond ratings by both Standard & Poor's and Moody's. Against this backdrop, the issuance of traditional notes rose considerably in 2003. Rising deficits led many issuers to turn to the capital markets for temporary borrowing to meet shortfalls in cash flow. Long-term bond issuance also rose as many states and local issuers moved to lock in low financing rates for capital expenditures and to refinance higher-cost debt. Overall municipal issuance for the calendar year 2003 exceeded the record levels of 2002, setting a new all-time high. PERFORMANCE ANALYSIS As of December 31, 2003, Active Assets Tax-Free Trust had net assets of more than $2,862 million. For the six-month period ended December 31, 2003, the Fund provided a total return of 0.24 percent. For the seven-day period ended December 31, 2003, the Fund provided an effective annualized yield of 0.65 percent and a current yield of 0.65 percent, while its 30-day moving average yield for December was 0.57 percent. Past performance is no guarantee of future results. The general shape of the yield curve and the very low level of interest rates reduced incentives for extending the portfolio's maturity structure. As a result, Active Assets Tax-Free Trust spent the period with an emphasis on the short-to-intermediate maturity range within the municipal money market. This approach had the added benefit of positioning the Fund defensively against any potential increases in interest rates at the short end of the curve. The uncertain state of the economy also made us largely unwilling to introduce added interest-rate risk into the Fund's portfolio. 2 Our general caution was reflected in the Fund's composition. By the end of the period, the portfolio was comprised of 70 to 75 percent short-term variable rate paper, with the remainder in short-term tax-exempt commercial paper and fixed rate notes and bonds. As always, we remained highly selective in our security selection and thoroughly screened potential purchases to ensure that they met the Fund's credit criteria.
PORTFOLIO COMPOSITION Variable Rate Municipal Obligations 74.8% Commercial Paper 13.4 Municipal Notes and Bonds 11.8
MATURITY SCHEDULE 1-30 Days 74.6% 31-60 Days 6.0 61-90 Days 2.6 91-120 Days 3.1 121+ Days 13.7
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 1) THE FUND INVESTS IN HIGH QUALITY SHORT-TERM DEBT OBLIGATIONS. 2) 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.* - ---------------------------------------------------- * 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. 3 Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
PRINCIPAL AMOUNT IN COUPON DEMAND THOUSANDS RATE+ DATE* VALUE - ---------------------------------------------------------------------------------------------------------- Short-Term Variable Rate Municipal Obligations (76.6%) Alabama $28,565 University of Alabama, Hospital Ser 2000................. 1.07% 01/08/04 $ 28,565,000 Arizona 20,000 Arizona Board of Regents, Arizona State University Ser 2003 B (Ambac)......................................... 1.06 01/08/04 20,000,000 2,400 Pinal County Industrial Development Authority, Newmont Mining Co Ser 1984..................................... 1.30 01/02/04 2,400,000 California 1,000 California Health Facilities Financing Authority, Adventist Health Systems 1998 Ser B (MBIA)............. 1.27 01/02/04 1,000,000 4,300 Golden Empire Schools Financing Authority, Kern High School District Ser 2001............................... 1.12 01/08/04 4,300,000 Colorado 15,000 Colorado Student Obligation Bond Authority, Ser 1989 A (Ambac) (AMT).......................................... 1.15 01/08/04 15,000,000 Delaware 14,000 Delaware Economic Development Authority, Delaware Clean Power Ser 1997 C (AMT)................................. 1.31 01/08/04 14,000,000 District of Columbia 16,000 District of Columbia, George Washington University Ser 1999 C (MBIA).......................................... 1.25 01/08/04 16,000,000 Florida 22,250 Dade County Industrial Development Authority, Dolphins Stadium Ser 1985 B & C................................. 1.12 01/08/04 22,250,000 8,000 Jacksonville Economic Development Commission, Florida Proton Therapy Institute Ser 2003 A.................... 1.23 07/01/04 8,000,000 9,800 Jacksonville Electric Authority, Water & Sewer System 2003 Ser B (XLCA)...................................... 1.07 01/08/04 9,800,000 44,150 Orlando-Orange County Expressway Authority, Ser 2003C3 (FSA) & 2003C4 (FSA)........................ 1.20 01/08/04 44,150,000 20,200 Orlando Utility Commission, Water & Electric Ser 2002 A...................................................... 1.10 01/08/04 20,200,000 18,600 Tampa Bay Water, Utility System Ser 2002 (AMT)........... 1.35 01/08/04 18,600,000 16,840 Volusia County Health Facilities Authority, Pooled Hospital Loan (FGIC)................................... 1.10 01/08/04 16,840,000 Georgia 21,000 Albany-Dougherty County Hospital Authority, Phoebe Putney Memorial Hospital Ser 1991 (Ambac)..................... 1.25 01/08/04 21,000,000 47,100 Atlanta, Water & Wastewater Ser 2001 B (FSA)............. 1.22 01/08/04 47,100,000
4 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON DEMAND THOUSANDS RATE+ DATE* VALUE - ---------------------------------------------------------------------------------------------------------- $26,285 Burke County Development Authority, Oglethorpe Power Co Ser 1994 A (FGIC)...................................... 1.15% 01/08/04 $ 26,285,000 13,600 Clayton County Hospital Authority, Southern Regional Medical Center Ser 1998 B.............................. 1.20 01/08/04 13,600,000 20,000 Metropolitan Atlanta Rapid Transit Authority, Ser 2000 A...................................................... 1.20 01/08/04 20,000,000 45,215 Private Colleges & Universities Authority, Emory University 2000 Ser B & 2001 Ser B..................... 1.08 01/08/04 45,215,000 Illinois 15,000 Chicago, Ser 2002 B (FGIC)............................... 1.30 01/08/04 15,000,000 Chicago Metropolitan Water Reclamation District, 60,000 2002 Ser A............................................. 1.07 01/08/04 60,000,000 24,000 2002 Ser E............................................. 1.15 01/08/04 24,000,000 30,500 Cook County, Ser 2002 B.................................. 1.28 01/08/04 30,500,000 8,000 Illinois Development Finance Authority, Palos Community Hospital Ser 1998...................................... 1.25 01/08/04 8,000,000 4,800 Illinois Health Facilities Authority, Northwestern Memorial Hospital Ser 2002 A........................... 1.30 01/02/04 4,800,000 19,900 Illinois Toll Highway Authority, Refg 1993 Ser B (MBIA)................................................. 1.07 01/08/04 19,900,000 Indiana Indiana Health Facilities Financing Authority, 35,000 Ascension Health Ser 2001 A............................ 0.98 07/02/04 35,000,000 11,500 Clarian Health Obligated Group Ser 2003 H.............. 1.10 01/08/04 11,500,000 Kentucky 3,345 Breckinridge County, Kentucky Association of Counties Leasing Trust 2002 Ser A............................... 1.30 01/02/04 3,345,000 22,500 Kenton County Airport Board, Flight Safety International Inc Ser 2001 A (AMT)................................... 1.33 01/08/04 22,500,000 Louisiana 2,100 Louisiana Public Facilities Authority, Kenner Hotel Ltd Ser 1985............................................... 1.26 01/02/04 2,100,000 12,100 New Orleans Aviation Board, Ser 1993 B (MBIA)............ 1.12 01/08/04 12,100,000 Massachusetts 36,250 Massachusetts Bay Transportation Authority, Ser 2000..... 1.10 01/08/04 36,250,000 Massachusetts Health & Educational Facilities Authority, 20,000 Amherst College 2003 Ser H............................. 0.88 06/09/04 20,000,000 20,000 Bentley College Ser K.................................. 1.20 01/08/04 20,000,000 440 Capital Asset Ser D (MBIA)............................. 1.26 01/02/04 440,000 1,500 Wellesley College Ser 1999 G........................... 1.22 01/02/04 1,500,000 22,100 Massachusetts Water Resources Authority, Multi-Modal Sub 2001 Ser A (FGIC)...................... 1.06 01/08/04 22,100,000
5 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON DEMAND THOUSANDS RATE+ DATE* VALUE - ---------------------------------------------------------------------------------------------------------- Michigan Detroit, $20,000 Sewage Disposal System Second Lien Ser 2000 E (FGIC)... 1.05% 09/02/04 $ 20,000,000 49,855 Sewage Disposal System Senior Lien Ser 2001 C-1 (FSA).................................................. 1.22 01/08/04 49,855,000 25,000 Detroit, Water Supply System Refg Second Lien Ser 2001-C (FGIC)................................................. 1.12 01/08/04 25,000,000 29,665 Holt Public Schools, Ser 2002............................ 1.20 01/08/04 29,665,000 21,410 Michigan Housing Development Authority, Rental Housing 2002 Ser B (MBIA)...................................... 1.22 01/08/04 21,410,000 11,000 Oakland University, Ser 2001 (FGIC)...................... 1.25 01/08/04 11,000,000 Minnesota 7,000 Minneapolis, Guthrie Theater on the River Ser 2003 A..... 1.27 01/08/04 7,000,000 6,500 University of Minnesota Regents, Ser 2001A............... 1.28 01/08/04 6,500,000 Mississippi Perry County, 12,900 Leaf River Forest Products Inc Ser 2002................ 1.22 01/08/04 12,900,000 35,000 Leaf River Forest Products Inc Ser 2003................ 1.10 01/08/04 35,000,000 Missouri 25,000 Lee's Summit, Multifamily Housing Ser 2001 A............. 1.47 01/08/04 25,000,000 38,600 Missouri Health & Educational Facilities Authority, Stowers Institute Ser 2002 (MBIA)...................... 1.25 01/08/04 38,600,000 Nebraska 25,000 American Public Energy Agency, National Public Gas Agency 2003 Ser A............................................. 1.06 01/08/04 25,000,000 Nevada Clark County, 9,000 Airport Sub Lien Ser 1999B-1 (AMT)..................... 1.11 01/08/04 9,000,000 30,000 Airport System Sub Lien Ser 2001C (FGIC)............... 1.06 01/08/04 30,000,000 New Hampshire 16,000 New Hampshire Health & Education Facilities Authority, Dartmouth College Ser 2002............................. 1.20 01/08/04 16,000,000 New Jersey 39,800 New Jersey Turnpike Authority, Ser 1991 D (FGIC)......... 1.07 01/08/04 39,800,000 New York 1,400 Jay Street Development Corporation, Fiscal 2001 Ser A-3.................................................... 1.08 01/08/04 1,400,000 10,000 Long Island Power Authority, Electric System Ser 2 Subser 2A..................................................... 1.10 01/08/04 10,000,000 900 Nassau County Industrial Development Agency, 1999 Cold Spring Harbor Laboratory............................... 1.27 01/02/04 900,000 42,800 Triborough Bridge & Tunnel Authority, Ser 2002 F......... 1.25 01/08/04 42,800,000
6 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON DEMAND THOUSANDS RATE+ DATE* VALUE - ---------------------------------------------------------------------------------------------------------- North Carolina $10,800 Charlotte, Fiscal Year 2002 Ser C COPs................... 1.25% 01/08/04 $ 10,800,000 30,000 Charlotte-Mecklenburg Hospital Authority, Health Care System Ser 1996 C...................................... 1.20 01/08/04 30,000,000 2,900 Durham, Ser 1993A COPs................................... 1.13 01/08/04 2,900,000 12,625 Mecklenburg County, Ser 2001 COPs........................ 1.25 01/08/04 12,625,000 North Carolina, 13,700 Ser 2002 C............................................. 1.06 01/08/04 13,700,000 15,000 Ser 2002 E............................................. 1.10 01/08/04 15,000,000 15,000 Ser 2002 F............................................. 1.05 01/08/04 15,000,000 North Carolina Medical Care Commission, 25,000 Firsthealth of the Carolinas Ser 2002.................. 1.10 01/08/04 25,000,000 35,000 North Carolina Baptist Hospitals Ser 2000.............. 1.13 01/08/04 35,000,000 Ohio 10,000 Cleveland, Airport System Ser 2001 C (FSA)............... 1.25 01/08/04 10,000,000 Oklahoma Oklahoma Water Resources Board, State Loan Program 8,985 Ser 1995............................................... 0.90 03/01/04 8,985,000 12,620 Ser 1999............................................... 0.95 03/01/04 12,620,000 26,420 Ser 2001............................................... 1.00 04/01/04 26,420,000 Tulsa County Industrial Authority, 10,000 Capital Improvement Ser 2003 A......................... 1.13 05/15/04 10,000,000 5,000 Montereau in Warren Woods Ser 2002 A................... 1.30 01/02/04 5,000,000 Oregon 5,000 Clackamas County Hospital Facility Authority, Legacy Health System Ser 2003................................. 1.10 01/08/04 5,000,000 45,000 Oregon, Veterans' Welfare Ser 73 G....................... 1.13 01/08/04 45,000,000 Pennsylvania Pennsylvania Higher Education Assistance Agency, 33,000 Student Loan 1988 Ser B (Ambac) (AMT).................. 1.13 01/08/04 33,000,000 15,000 Student Loan 2001 Ser A (Ambac) (AMT).................. 1.34 01/08/04 15,000,000 6,000 Pennsylvania Higher Educational Facilities Authority, Carnegie Mellon University Ser 1995 A.................. 1.30 01/02/04 6,000,000 25,000 Pennsylvania Turnpike Commission, 2002 Ser A-2........... 1.15 01/08/04 25,000,000 14,800 Philadelphia, Water & Wastewater Ser 2003 (FSA).......... 1.09 01/08/04 14,800,000 23,300 York General Authority, Harrisburg School District Subser 1996B (Ambac).......................................... 1.25 01/08/04 23,300,000
7 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON DEMAND THOUSANDS RATE+ DATE* VALUE - ---------------------------------------------------------------------------------------------------------- Rhode Island $33,620 Rhode Island Convention Center, Ser 2001................. 1.22% 01/08/04 $ 33,620,000 8,000 Rhode Island Health & Educational Building Corporation, Brown University 2003 Ser B............................ 1.20 01/08/04 8,000,000 South Carolina 13,100 Florence County, McLeod Regional Medical Center Ser 1985 A (FGIC)............................................... 1.10 01/08/04 13,100,000 24,000 Greenwood County, Fuji Photo Film Inc Ser 2001........... 1.35 01/08/04 24,000,000 21,000 Piedmont Municipal Power Agency, Electric Refg Ser 1997 A (MBIA)........................ 1.20 01/08/04 21,000,000 Tennessee 6,500 Memphis, Airport Refg Ser 1995 B (AMT)................... 1.18 01/08/04 6,500,000 Metropolitan Government of Nashville & Davidson County Health & Educational Facilities Board, 10,000 Ensworth School Ser 2002............................... 1.15 01/08/04 10,000,000 21,600 Vanderbilt University 2002 Ser B....................... 1.30 01/02/04 21,600,000 Montgomery County Public Building Authority, 49,825 Pooled Financing Ser 1997 & 1999....................... 1.25 01/08/04 49,825,000 11,000 Pooled Financing Ser 2003.............................. 1.30 01/02/04 11,000,000 Texas 1,400 Bell County Health Facilities Development Corporation, Scott & White Memorial Hospital Ser 2001-2 (MBIA)...... 1.20 01/02/04 1,400,000 26,100 Brownsville, Utilities System Sub Lien Ser 2001 B (MBIA)................................................. 1.10 01/08/04 26,100,000 5,440 Harris County Health Facilities Development Corporation, Methodist Hospital Ser 2002............................ 1.30 01/02/04 5,440,000 19,000 Harris County Industrial Development Corporation, Baytank Inc Ser 1998........................................... 1.15 01/08/04 19,000,000 16,500 San Antonio, Water System Ser 2003 B (MBIA).............. 1.15 01/08/04 16,500,000 9,300 Texas, Veterans' Housing Assistance Fund II Ser 2003 A (AMT).................................................. 1.11 01/08/04 9,300,000 31,245 Texas Municipal Gas Corporation, Senior Lien Ser 1998 (FSA).................................................. 1.15 01/08/04 31,245,000 25,000 Texas Turnpike Authority, Central Texas Turnpike System Ser 2002 B (Ambac)..................................... 1.06 01/08/04 25,000,000 Utah 9,500 Eagle Mountain, Gas & Electric Ser 2001.................. 1.30 01/08/04 9,500,000 Intermountain Power Agency, 30,000 1985 Ser E (Ambac)..................................... 1.05 06/01/04 30,000,000 16,750 1985 Ser E (Ambac)..................................... 0.92 03/15/04 16,750,000 35,900 1985 Ser F (Ambac)..................................... 0.90 03/15/04 35,900,000
8 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON DEMAND THOUSANDS RATE+ DATE* VALUE - ---------------------------------------------------------------------------------------------------------- Murray City, $ 9,400 IHC Health Services Inc Ser 2003 C..................... 1.30% 01/02/04 $ 9,400,000 19,000 IHC Health Services Inc Ser 2003 D..................... 1.33 01/02/04 19,000,000 5,500 Weber County, IHC Health Services Inc Ser 2000C.......... 1.30 01/02/04 5,500,000 Virginia 15,000 Chesapeake Hospital Authority, Chesapeake General Hospital Ser 2001A..................................... 1.15 01/08/04 15,000,000 Loudoun County Industrial Development Authority, 10,000 Howard Hughes Medical Institute Ser 2003 B............. 1.05 01/08/04 10,000,000 44,100 Howard Hughes Medical Institute Ser 2003 F............. 1.06 01/08/04 44,100,000 Washington 15,000 Port of Seattle, 1997 Ser A (AMT)........................ 1.33 01/08/04 15,000,000 18,800 Washington State, Ser VR-96 A............................ 1.06 01/08/04 18,800,000 Wisconsin 9,500 Brokaw, Wausau Paper Mills Co Ser 1995 (AMT)............. 1.55 01/08/04 9,500,000 Wyoming 1,000 Uinta County, Chevron USA Inc Ser 1993................... 1.30 01/02/04 1,000,000 -------------- Total Short-Term Variable Rate Municipal Obligations (Cost $2,192,400,000)..................................................... 2,192,400,000 --------------
YIELD TO MATURITY COUPON MATURITY ON DATE OF RATE DATE PURCHASE ------ -------- ---------- Tax-Exempt Commercial Paper (13.8%) Alabama Montgomery County Industrial Development Board, 16,400 PECO Energy 1994 Ser A................... 0.98% 01/15/04 0.98% 16,400,000 13,000 PECO Energy 1994 Ser A................... 1.05 02/23/04 1.05 13,000,000 Colorado 7,500 Regional Transportation District, Sub Lien Sales Tax Ser 2001 A..................... 1.05 02/10/04 1.05 7,500,000
9 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
YIELD TO PRINCIPAL MATURITY AMOUNT IN COUPON MATURITY ON DATE OF THOUSANDS RATE DATE PURCHASE VALUE - --------------------------------------------------------------------------------------------------------- Florida $15,000 Hillsborough County, Ser 2002 A............ 1.05% 05/20/04 1.05% $ 15,000,000 Jacksonville Health Facilities Authority, 17,445 St Luke's Hospital Association Ser 2001 A........................................ 1.03 02/24/04 1.03 17,445,000 20,000 St Luke's Hospital Association Ser 2001 A........................................ 1.10 01/12/04 1.10 20,000,000 Maryland Maryland Health & Higher Educational Facilities Authority, 22,750 The Johns Hopkins Hospital Ser C......... 1.02 02/18/04 1.02 22,750,000 15,000 The Johns Hopkins Hospital Ser C......... 1.05 02/11/04 1.05 15,000,000 Massachusetts 10,000 Massachusetts Port Authority, Ser 2003 A... 0.90 01/14/04 0.90 10,000,000 Massachusetts Water Resources Authority, 10,000 Ser 1999................................. 0.90 01/21/04 0.90 10,000,000 8,500 Ser 1999................................. 1.05 02/23/04 1.05 8,500,000 Minnesota Rochester, Mayo Foundation/Mayo Medical Center 5,700 Ser 1992 A............................... 1.00 01/22/04 1.00 5,700,000 15,000 Ser 1992 C............................... 1.05 02/24/04 1.05 15,000,000 10,000 Ser 2000 C............................... 1.05 01/15/04 1.05 10,000,000 15,000 Ser 2001 D............................... 0.95 01/21/04 0.95 15,000,000 Nebraska 10,000 Omaha Public Power District, Ser A......... 0.90 01/13/04 0.90 10,000,000 South Carolina 12,000 South Carolina Public Service Authority, Santee Cooper Ser 1998................... 0.90 01/14/04 0.90 12,000,000 Tennessee 9,000 Tennessee School Bond Authority, Higher Educational Facilities Ser 1997 A........ 1.05 02/19/04 1.05 9,000,000 Texas 20,000 Dallas Area Rapid Transit, Senior Sub Lien Ser 2001................................. 1.07 01/29/04 1.07 20,000,000 Houston, 25,000 Water & Sewer Ser A...................... 0.95 01/27/04 0.95 25,000,000 25,000 Water & Sewer Ser A...................... 0.95 01/28/04 0.95 25,000,000 20,000 Water & Sewer Ser A...................... 0.95 02/12/04 0.95 20,000,000 10,000 Water & Sewer Ser A...................... 1.00 02/11/04 1.00 10,000,000 10,000 Water & Sewer Ser A...................... 1.03 02/11/04 1.03 10,000,000
10 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
YIELD TO PRINCIPAL MATURITY AMOUNT IN COUPON MATURITY ON DATE OF THOUSANDS RATE DATE PURCHASE VALUE - --------------------------------------------------------------------------------------------------------- $13,000 San Antonio, Electric & Gas Ser 1995 A..... 1.00% 02/18/04 1.00% $ 13,000,000 15,000 University of Texas System, Permanent University Fund Ser A.................... 0.97 02/19/04 0.97 15,000,000 Washington 23,600 King County, Sewer Ser A................... 1.05 01/22/04 1.05 23,600,000 -------------- Total Tax-Exempt Commercial Paper (Cost $393,895,000)...................................................... 393,895,000 -------------- Short-Term Municipal Notes & Bonds (12.0%) California 22,500 California School Cash Reserve Program Authority, 2003 Pool Ser A (Ambac), dtd 07/03/03............................. 2.00 07/06/04 0.90 22,625,541 Colorado 38,000 Colorado, Education Loan Ser 2003 B TRANs, dtd 12/11/03............................. 2.00 08/09/04 0.90 38,179,065 Illinois 25,000 Illinois, Revenue Anticipation Certificates Ser 2003, dtd 05/22/03................... 2.00 04/15/04 0.96 25,073,804 Indiana 40,000 Indiana Bond Bank, Midyear Funding Notes Ser 2003 A, dtd 06/12/03................. 1.25 04/15/04 0.93 40,036,409 15,000 Indianapolis Local Public Improvement Bond Bank, Ser 2003 F Notes, dtd 06/26/03..... 1.25 01/08/04 0.88 15,001,055 Kentucky 50,000 Kentucky Association of Counties Advance Revenue Program, Ser 2003 A COPs TRANs, dtd 07/01/03............................. 2.00 06/30/04 0.90 50,269,516 Michigan 22,500 Michigan Municipal Bond Authority, Ser 2003 B-1, dtd 08/20/03........................ 2.00 08/20/04 1.02 22,638,344 New York 17,500 Erie County, Ser 2003 A RANs (FGIC), dtd 06/24/03............................. 1.50 06/23/04 0.90 17,549,471 Oregon 22,000 Oregon, 2003 Ser A TANs, dtd 10/22/03...... 2.25 11/15/04 1.07 22,223,856
11 See Notes to Financial Statements Active Assets Tax-Free Trust PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
YIELD TO PRINCIPAL MATURITY AMOUNT IN COUPON MATURITY ON DATE OF THOUSANDS RATE DATE PURCHASE VALUE - --------------------------------------------------------------------------------------------------------- Texas Texas, $37,000 Ser 2003 TRANs, dtd 09/02/03............. 2.00% 08/31/04 1.12% $ 37,213,907 18,000 Ser 2003 TRANs, dtd 09/02/03............. 2.00 08/31/04 1.15 18,100,458 10,000 Ser 2003 TRANs, dtd 09/02/03............. 2.00 08/31/04 1.16 10,055,142 Wisconsin 25,000 Wisconsin, Operating Notes Ser 2003, dtd 09/18/03................................. 2.25 06/15/04 1.12 25,127,256 -------------- Total Short-Term Municipal Notes & Bonds (Cost $344,093,824)...................................................... 344,093,824 -------------- Total Investments (Cost $2,930,388,824) (a) (b)................................... 102.4% 2,930,388,824 Liabilities in Excess of Other Assets............................. (2.4) (67,680,349) ----- -------------- Net Assets........................................................ 100.0% $2,862,708,475 ===== ==============
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. RANs Revenue Anticipation Notes. TANs Tax Anticipation Notes. TRANs Tax and Revenue Anticipation Notes. + Rate shown is the rate in effect at December 31, 2003. * Date on which the principal amount can be recovered through demand. (a) Securities have been designated as collateral in an amount equal to $68,396,525 in connection with the purchase of delayed delivery securities. (b) Cost is the same for federal income tax purposes. Bond Insurance: - --------------- Ambac Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. XLCA XL Capital Assurance Inc.
12 See Notes to Financial Statements Active Assets Tax-Free Trust FINANCIAL STATEMENTS Statement of Assets and Liabilities December 31, 2003 (unaudited) Assets: Investments in securities, at value (cost $2,930,388,824)..................................... $2,930,388,824 Cash........................................................ 980,123 Receivable for: Interest................................................ 5,644,773 Shares of beneficial interest sold...................... 199,577 Prepaid expenses and other assets........................... 47,318 -------------- Total Assets............................................ 2,937,260,615 -------------- Liabilities: Payable for: Investments purchased................................... 73,200,518 Investment management fee............................... 981,842 Distribution fee........................................ 275,660 Accrued expenses............................................ 94,120 -------------- Total Liabilities....................................... 74,552,140 -------------- Net Assets.............................................. $2,862,708,475 ============== Composition of Net Assets: Paid-in-capital............................................. $2,862,678,754 Accumulated undistributed net investment income............. 39,811 Accumulated net realized loss............................... (10,090) -------------- Net Assets.............................................. 2,862,708,475 ============== Net Asset Value Per Share, 2,862,719,488 shares outstanding (unlimited shares authorized of $.01 par value)............................... $1.00 ==============
13 See Notes to Financial Statements Active Assets Tax-Free Trust FINANCIAL STATEMENTS continued Statement of Operations For the six months ended December 31, 2003 (unaudited) Net Investment Income: Interest Income............................................. $14,802,726 ----------- Expenses Investment management fee................................... 5,556,750 Distribution fee............................................ 1,569,285 Transfer agent fees and expenses............................ 193,275 Custodian fees.............................................. 63,885 Registration fees........................................... 46,177 Shareholder reports and notices............................. 37,372 Professional fees........................................... 24,177 Trustees' fees and expenses................................. 20,078 Other....................................................... 47,874 ----------- Total Expenses.......................................... 7,558,873 Less: expense offset........................................ (63,316) ----------- Net Expenses............................................ 7,495,557 ----------- Net Investment Income....................................... $ 7,307,169 ===========
14 See Notes to Financial Statements Active Assets Tax-Free Trust FINANCIAL STATEMENTS continued Statement of Changes in Net Assets
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED DECEMBER 31, 2003 JUNE 30, 2003 ----------------- -------------- (unaudited) Increase (Decrease) in Net Assets: Operations: Net investment income....................................... $ 7,307,169 $ 24,809,627 Dividends to shareholders from net investment income........ (7,308,886) (24,808,438) Net increase (decrease) from transactions in shares of beneficial interest....................................... (252,948,671) 169,007,069 -------------- -------------- Net Increase (Decrease)................................. (252,950,388) 169,008,258 Net Assets: Beginning of period......................................... 3,115,658,863 2,946,650,605 -------------- -------------- End of Period (Including accumulated undistributed net investment income of $39,811 and $41,528, respectively)....................... $2,862,708,475 $3,115,658,863 ============== ==============
15 See Notes to Financial Statements Active Assets Tax-Free Trust NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED) 1. Organization and Accounting Policies Active Assets Tax-Free 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's investment objective is to provide a high level of daily income which is exempt from federal income tax consistent with stability of principal and liquidity. The Fund was organized as a Massachusetts business trust on March 30, 1981 and commenced operations on July 7, 1981. The following is a summary of significant accounting policies: A. Valuation of Investments -- Portfolio securities are valued at amortized cost, which approximates market value. B. Accounting for Investments -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. Federal Income Tax 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 and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. Dividends and Distributions to Shareholders -- The Fund records dividends and distributions to shareholders as of the close of each business day. E. 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 daily net assets not exceeding $500 million; 0.425% to the portion of daily net assets exceeding $500 million but not exceeding $750 million; 0.375% to the portion of daily net assets exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.325% to the portion of daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion of daily net assets exceeding $2 billion but not exceeding 16 Active Assets Tax-Free Trust NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED) continued $2.5 billion; 0.275% to the portion of daily net assets exceeding $2.5 billion but not exceeding $3 billion; 0.25% to the portion of daily net assets exceeding $3 billion but not exceeding $15 billion; and 0.249% to the portion of daily net assets exceeding $15 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 December 31, 2003, 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 December 31, 2003, aggregated $3,066,912,460 and $3,348,754,000, respectively. Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At December 31, 2003, the Fund had transfer agent fees and expenses payable of approximately $1,200. 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. Aggregate pension costs for the six months ended December 31, 2003, included in Trustees' fees and expenses in the Statement of Operations amounted to $3,674. At December 31, 2003, the Fund had an accrued pension liability of $60,293 which is included in accrued expenses in the Statement of Assets and Liabilities. On December 2, 2003, the Trustees 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 Trustee to defer payment of all or a portion of the fees he receives for serving on the Board of Trustees throughout the year. 17 Active Assets Tax-Free Trust NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED) continued 5. Shares of Beneficial Interest Transactions in shares of beneficial interest, at $1.00 per share, were as follows:
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED DECEMBER 31, 2003 JUNE 30, 2003 ----------------- -------------- (unaudited) Shares sold................................................. 5,022,228,644 9,532,821,650 Shares issued in reinvestment of dividends.................. 7,308,886 24,808,438 -------------- -------------- 5,029,537,530 9,557,630,088 Shares redeemed............................................. (5,282,486,201) (9,388,623,019) -------------- -------------- Net increase (decrease) in shares outstanding............... (252,948,671) 169,007,069 ============== ==============
6. Federal Income Tax Status At June 30, 2003, the Fund had a net capital loss carryover of approximately $10,000 which will be available through June 30, 2009, to offset future capital gains to the extent provided by regulations. 7. Expense Offset The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Fund. 8. Legal Matters The Investment Manager, certain affiliates of the Investment Manager and certain investment companies advised by the Investment Manager or its affiliates, including the Fund, are named as defendants in a number of recently filed, similar class action complaints. These complaints generally allege 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 steer investors to the funds advised by the Investment Manager or its affiliates 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 alleged efforts to steer investors to these funds. The complaints seek, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters 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 these matters. 18 Active Assets Tax-Free Trust FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED JUNE 30, MONTHS ENDED ---------------------------------------------------------------- DECEMBER 31, 2003 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...... 0.002 0.008 0.014 0.033 0.031 0.027 Less dividends from net investment income.................................... (0.002) (0.008) (0.014) (0.033) (0.031) (0.027) ------ ------- ------- ------- ------- ------- Net asset value, end of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ======= ======= ======= ======= ======= Total Return............................... 0.24%(1) 0.81% 1.38% 3.34% 3.15% 2.73% Ratios to Average Net Assets: Expenses (before expense offset)........... 0.48%(2) 0.48% 0.48%(3) 0.48% 0.50% 0.52% Net investment income...................... 0.47%(2) 0.80% 1.38% 3.28% 3.11% 2.68% Supplemental Data: Net assets, end of period, in millions..... $2,863 $3,116 $2,947 $3,075 $2,660 $2,290
- --------------------- (1) Not annualized. (2) Annualized. (3) Does not reflect the effect of expense offset of 0.01%.
See Notes to Financial Statements 19 TRUSTEES 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 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 trustees. 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. (c) 2003 Morgan Stanley [MORGAN STANLEY LOGO] MORGAN STANLEY FUNDS Active Assets Tax-Free Trust Semiannual Report December 31, 2003 [MORGAN STANLEY LOGO] 13680B04-AP-2/04 Item 2. Code of Ethics. Not applicable for semiannual reports. Item 3. Audit Committee Financial Expert. Not applicable for semiannual reports. Item 4. Principal Accountant Fees and Services Not applicable for semiannual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semiannual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semiannual reports. Item 8. [Reserved.] Item 9 - Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund 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. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10 Exhibits (a) Code of Ethics - Not applicable for semiannual reports. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. 2 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. Active Assets Tax-Free Trust /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer February 18, 2004 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/ Ronald E. Robison Ronald E. Robison Principal Executive Officer February 18, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer February 18, 2004 3 EX-99.CERT 3 y92929exv99wcert.txt SECTION 302 CERTIFICATION EXHIBIT 10 B1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER CERTIFICATIONS I, Ronald E. Robison, certify that: I have reviewed this report on Form N-CSR of Active Assets Tax-Free Trust; 1. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 2. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 3. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 4. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 4 a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 18, 2004 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer 5 EXHIBIT 10 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: I have reviewed this report on Form N-CSR of Active Assets Tax-Free Trust; 5. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 6. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 7. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: b) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] e) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and f) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 8. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): c) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and 6 d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 18, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer 7 EX-99.906CERT 4 y92929exv99w906cert.txt SECTION 906 CERTIFICATION SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Active Assets Tax-Free Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended December 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: February 18, 2004 /s/ Ronald E. Robison --------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Active Assets Tax-Free Trust and will be retained by Active Assets Tax-Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. 8 SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Active Assets Tax-Free Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended December 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: February 18, 2004 /s/ Francis Smith ----------------- Francis Smith Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Active Assets Tax-Free Trust and will be retained by Active Assets Tax-Free Trust and furnished to the Securities and Exchange Commission or its staff upon request. 9 -----END PRIVACY-ENHANCED MESSAGE-----