<PAGE> 1
ACTIVE ASSETS TAX-FREE TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS December 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
Tax-free money market yields moved higher during 1999, following the trend in
the taxable money market. Although 1999 began amid fears of a global recession,
economic problems overseas abated as the year progressed. At the same time the
U.S. economy continued to experience robust growth, led by consumer demand. The
stage was set for the Federal Reserve Board to change monetary policy and remove
the liquidity it had provided during the 1998 international economic crisis.
Between June and November, the Fed raised the federal funds rate a total of 75
basis points, from 4.75 percent to 5.50 percent. Subsequently, on February 2,
2000, the federal-funds rate was raised an additional 25 basis points.
Within the municipal money market, the upward course of interest rates was most
obvious among longer fixed-rate instruments. One-year yields fell modestly at
the outset of the year, helped by heavy seasonal cash inflows. The Bond Buyer
One Year Note Index, a benchmark indicator for the longest maturities in the
tax-free money market sector, registered its low for the year of 2.88 percent in
February. For the balance of the year, one-year yields trended upward. At the
end of December 1999, the index stood at 3.97 percent, 94 basis points above its
level at the end of 1998.
The ratio of the One Year Note Index to the yield for one-year U.S. Treasury
bills was 67 percent at year-end, just slightly above the level of 66 percent
one year earlier. A stable ratio means that the performance of securities in
this sector of the municipal market has tracked the performance of Treasuries
with comparable maturities.
Yields also moved higher for daily and weekly variable-rate demand obligations
(VRDOs), but within widely fluctuating bands. Yields for these instruments,
which are driven for the most part by changing cash flows, are subject to much
larger swings than yields for longer fixed-rate investments. Weekly VRDO yields
moved over a range of nearly 300 basis points during the year. Their low of 2.20
percent was set in early February when cash inflows were strong. The high of
5.00 percent came
<PAGE> 2
ACTIVE ASSETS TAX-FREE TRUST
LETTER TO THE SHAREHOLDERS December 31, 1999, continued
in late December amid Y2K uncertainty and expectations for the usual seasonal
redemptions. Reflecting the overall rise in interest rates, however, the average
yield for weekly VRDOs was 4.15 percent for the month of December 1999, up 70
basis points from their average of 3.45 percent in December 1998.
PERFORMANCE AND PORTFOLIO MANAGEMENT
Active Assets Tax-Free Trust's annualized net investment income was 2.86 percent
for the six-month period ended December 31, 1999. The Trust's 30-day average
yield was 3.22 percent as of December 31, 1999.
On December 31, the Trust's net assets totaled $2.4 billion, with 68 percent of
the Trust's portfolio invested in VRDOs. Tax-exempt commercial paper and
municipal notes, the two other types of securities utilized in the portfolio,
comprised 22 percent and 10 percent of the portfolio, respectively. The Trust
was broadly diversified geographically with holdings in 41 states and Puerto
Rico. The Trust's portfolio holdings are continuously reviewed to maintain or
improve creditworthiness. In addition to evaluating the issuer's credit,
particular attention is devoted to monitoring the credit quality of institutions
that provide enhancement and/or liquidity facilities.
At the end of December the weighted average maturity of the Trust stood at 38
days, down from 62 days six months earlier. The longer weighted average maturity
in June resulted from the purchase of newly issued one-year tax and revenue
anticipation notes (TRANs). These instruments come to market in large supply
each year between mid-June and early July in conjunction with the start of the
new fiscal year for most municipal governments. During the final quarter of
1999, the Trust's asset allocation leaned toward investments in highly liquid
daily and weekly VRDOs. The emphasis on liquidity was prompted by anticipated
seasonal cash outflows as well as the uncertainty arising from the Y2K
changeover.
LOOKING FORWARD
The Federal Reserve Board's steps to raise short-term interest rates during the
second half of 1999 confirmed its previously disclosed bias of becoming less
accommodative in the face of continued strong domestic economic growth. We
anticipate additional increases in the federal funds rate in the period ahead.
Accordingly, we will monitor the Trust's weighted average maturity with an eye
toward the Fed's stance on monetary policy. However, with the Y2K changeover now
behind us, we anticipate that the Trust's new investments will again be more
evenly balanced among VRDOs and fixed-rate instruments.
2
<PAGE> 3
ACTIVE ASSETS TAX-FREE TRUST
LETTER TO THE SHAREHOLDERS December 31, 1999, continued
We appreciate your ongoing support of Active Assets Tax-Free Trust and look
forward to continuing to serve your investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
3
<PAGE> 4
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS (69.7%)
Alabama
$21,000 Birmingham Medical Clinic Board, University of Alabama
Health Services Foundation Ser 1991........................ 5.15 % 01/07/00 $ 21,000,000
32,500 McIntosh Industrial Development Board, Ciba Specialty
Chemicals Corp 1998 Ser E (AMT)............................ 5.15 01/03/00 32,500,000
21,500 Stevenson Industrial Development Board, The Mead Corp Ser
1997 (AMT)................................................. 5.10 01/03/00 21,500,000
23,700 University of Alabama, Birmingham Hospital Ser 1997B........ 5.15 01/07/00 23,700,000
Arizona
12,200 Arizona Educational Loan Marketing Corporation, 1991 Ser A
(AMT)...................................................... 5.50 01/07/00 12,200,000
1,300 Maricopa County, Arizona Public Service Co Palo Verde 1994
Ser C...................................................... 4.80 01/03/00 1,300,000
4,000 Pinal County Industrial Development Authority, Magma Copper
Co Ser 1984A............................................... 4.75 01/03/00 4,000,000
Arkansas
20,000 Crossett, Georgia Pacific Corp Ser 1984**................... 5.40 01/07/00 20,000,000
California
12,300 Big Bear Lake, Southwest Gas Corp 1993 Ser A (AMT).......... 5.00 01/07/00 12,300,000
1,500 California Pollution Control Financing Authority, Shell Oil
Co 1996 Ser A (AMT)........................................ 4.20 01/03/00 1,500,000
1,700 California Statewide Communities Development Authority,
Sutter Health Ser 1995 COPs (AMBAC)........................ 4.20 01/03/00 1,700,000
5,445 Sacramento County, Admin Center & Courthouse Ser 1990
COPs....................................................... 4.70 01/07/00 5,445,000
Colorado
15,000 Colorado Student Obligation Bond Authority, Ser 1989A
(AMT)...................................................... 5.35 01/07/00 15,000,000
Connecticut
7,500 Connecticut Health & Educational Facilities Authority, Yale
University Ser T-2......................................... 5.10 01/07/00 7,500,000
25,500 Connecticut Special Assessment, Unemployment Compensation
1993 Ser C (FGIC).......................................... 3.38 07/01/00 25,500,000
19,000 Connecticut Special Tax Obligation, 2nd Lien Ser 1990....... 5.70 01/07/00 19,000,000
Delaware
Delaware Economic Development Authority,
7,500 Ciba Specialty Chemicals Corp 1998 Ser A (AMT)............. 4.90 01/03/00 7,500,000
10,000 Star Enterprise Ser 1997C (AMT)............................ 5.67 01/07/00 10,000,000
Florida
9,600 Collier County Health Facilities Authority, Cleveland Clinic
Health System Ser 1999..................................... 4.70 01/03/00 9,600,000
24,900 Dade County, Water & Sewer Ser 1994 (FGIC).................. 4.75 01/07/00 24,900,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$21,150 Dade County Industrial Development Authority, Dolphins
Stadium Ser 1985 B & C..................................... 5.35 % 01/07/00 $ 21,150,000
14,700 Jacksonville Health Facilities Authority, Charity Obligated
Group Ser 1997 C (MBIA).................................... 4.75 01/07/00 14,700,000
4,700 Jacksonville Pollution Control Financing Authority, Florida
Power & Light Co Ser 1995.................................. 4.00 01/03/00 4,700,000
Putnam County Development Authority, Seminole Electric Co-op
Inc
20,000 Ser 1984 D (NRU-CFC Gtd)................................... 3.80 06/15/00 20,000,000
4,400 Ser 1984 H-3 (NRU-CFC Gtd)................................. 3.60 03/15/00 4,400,000
19,700 Volusia County Health Facilities Authority, Pooled Ser 1985
(FGIC)..................................................... 5.25 01/07/00 19,700,000
Georgia
21,000 Albany-Dougherty County Hospital Authority, Phoebe-Putney
Memorial Hospital Ser 1991 (AMBAC)**....................... 5.70 01/07/00 21,000,000
13,900 Clayton County Hospital Authority, Southern Regional Medical
Center Ser 1998B........................................... 5.55 01/07/00 13,900,000
Idaho
5,895 Idaho Health Facilities Authority, St Luke's Regional
Medical Center Ser 1995.................................... 4.70 01/03/00 5,895,000
Illinois
Chicago, Tender Notes
20,000 Ser 1999................................................... 2.95 01/27/00 20,000,000
15,000 Ser 2000 A (WI)............................................ 3.90 12/07/00 15,000,000
4,000 Chicago, Chicago Midway Airport Second Lien Ser 1998B (MBIA)
(AMT)...................................................... 4.95 01/03/00 4,000,000
34,900 Illinois Development Finance Authority, Palos Community
Hospital Ser 1994.......................................... 5.65 01/07/00 34,900,000
Illinois Health Facilities Authority,
2,700 Central Dupage Hospital Assn Ser 1990...................... 4.75 01/03/00 2,700,000
8,700 Gottlieb Health Resources Ser 1990......................... 5.35 01/07/00 8,700,000
8,500 Northwestern Memorial Hospital Ser 1995.................... 4.75 01/03/00 8,500,000
4,550 Resurrection Health Care System Ser 1999A (FSA)............ 5.00 01/03/00 4,550,000
Indiana
8,500 Indiana Development Finance Authority, Southern Indiana Gas
& Electric Co 1998 Ser A................................... 3.00 03/01/00 8,500,000
21,200 Indiana Hospital Equipment Financing Authority, Ser 1985 A
(MBIA)..................................................... 5.50 01/07/00 21,200,000
10,000 Mount Vernon Pollution Control Financing Authority, General
Electric Co Ser 1998 (AMT)................................. 5.05 01/03/00 10,000,000
8,400 Petersburg, Indianapolis Power & Light Co Ser 1995B
(AMBAC).................................................... 5.65 01/07/00 8,400,000
Kentucky
7,000 Jamestown, Union Underwear Co 1983 Ser A.................... 4.50 01/07/00 7,000,000
13,000 Louisville & Jefferson County Regional Airport Authority,
United Parcel Service Worldwide Forwarding Inc 1999 Ser C
(AMT)...................................................... 5.05 01/03/00 13,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Louisiana
$ 1,450 East Baton Rouge Parish, Exxon Corp Ser 1993................ 4.80 % 01/03/00 $ 1,450,000
14,500 New Orleans Aviation Board, Ser 1993 B (MBIA)............... 5.40 01/07/00 14,500,000
6,400 St Charles Parish, Shell Oil Co Ser 1993 (AMT).............. 5.35 01/03/00 6,400,000
Maryland
Maryland Health & Higher Educational Facilities Authority,
6,900 Johns Hopkins Hospital Ser A............................... 5.40 01/07/00 6,900,000
9,720 North Arundel Hospital Ser 1997A........................... 5.65 01/07/00 9,720,000
16,800 Washington Suburban Sanitary District, 1998 Ser BANs**...... 5.35 01/07/00 16,800,000
Massachusetts
15,000 Massachusetts, Refg 1998 Ser A.............................. 5.50 01/07/00 15,000,000
Massachusetts Health & Educational Facilities Authority,
9,900 Amherst College Ser F...................................... 5.10 01/07/00 9,900,000
30,000 Capital Asset Ser D (MBIA)................................. 4.90 01/03/00 30,000,000
28,420 Harvard University Ser 1985 I & Ser 1996 Q-1............... 5.40 01/07/00 28,420,000
16,205 Williams College Ser E..................................... 5.28 01/07/00 16,205,000
19,900 Massachusetts Water Resources Authority, Multi-Modal Sub
1999 Ser B................................................. 5.50 01/07/00 19,900,000
Michigan
Delta County Economic Development Corporation, Mead-Escanaba
Paper Co
5,800 Ser 1985 E................................................. 4.80 01/03/00 5,800,000
1,900 Ser 1992 (AMT)............................................. 4.75 01/03/00 1,900,000
Minnesota
2,000 Beltrami County, Environmental Northwood Panelboard Co Ser
1991....................................................... 4.95 01/03/00 2,000,000
30,400 Minneapolis, Convention Center Ser 1999..................... 5.40 01/07/00 30,400,000
5,100 Minneapolis & St Paul Housing & Redevelopment Authority,
Children's Health Care Ser 1995B (FSA)..................... 4.75 01/03/00 5,100,000
20,000 University of Minnesota Regents, Ser 1999A.................. 5.50 01/07/00 20,000,000
Mississippi
20,000 Jackson County, Chevron USA Inc Ser 1993.................... 3.85 05/01/00 20,000,000
Missouri
Missouri Health & Educational Facilities Authority,
9,300 Cox Health Systems Ser 1997 (MBIA)......................... 4.70 01/03/00 9,300,000
9,850 St Louis University Ser 1999 B............................. 4.75 01/03/00 9,850,000
16,000 The Washington University Ser 1996 C & D................... 4.70 01/03/00 16,000,000
Nevada
Clark County,
8,500 Airport Impr Refg 1993 Ser A (MBIA)........................ 5.20 01/07/00 8,500,000
9,000 Airport Sub Lien Ser 1999 B-1 (AMT)........................ 3.75 03/01/00 9,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New Hampshire
$10,000 New Hampshire Higher Educational & Health Facilities
Authority, St Paul's School Ser 1998....................... 5.40 % 01/07/00 $ 10,000,000
New Jersey
5,000 New Jersey Economic Development Authority, New Jersey
Natural Gas Co
Ser 1995A (AMBAC) (AMT).................................... 4.75 01/03/00 5,000,000
32,500 New Jersey Educational Facilities Authority, College of New
Jersey Ser 1999A (AMBAC)................................... 5.35 01/07/00 32,500,000
10,000 New Jersey Turnpike Authority, Ser 1991 D (FGIC)............ 5.00 01/07/00 10,000,000
New Mexico
34,700 Albuquerque, Airport Sub Lien Ser 1995 (AMBAC).............. 5.15 01/07/00 34,700,000
14,800 Farmington, Arizona Public Service Co Ser 1994B............. 4.70 01/03/00 14,800,000
New York
12,000 Babylon Industrial Development Agency, OFS Equity of Babylon
Ser 1989 (AMT)............................................. 4.75 01/03/00 12,000,000
5,150 Nassau County Industrial Development Agency, 1999 Cold
Spring Harbor Laboratory................................... 4.75 01/03/00 5,150,000
4,000 New York City, Fiscal 1994 SubSer E-6 (FGIC)................ 4.75 01/03/00 4,000,000
2,300 New York State Dormitory Authority, Cornell University Ser
1990B...................................................... 4.75 01/03/00 2,300,000
4,660 New York State Energy Research & Development Authority, New
York State Electric & Gas Corp Ser 1994C................... 4.65 01/03/00 4,660,000
New York State Local Government Assistance Corporation,
15,000 Ser 1994B.................................................. 5.40 01/07/00 15,000,000
10,000 Ser 1995G.................................................. 5.00 01/07/00 10,000,000
Port Authority of New York & New Jersey,
1,500 Ser 2...................................................... 4.90 01/03/00 1,500,000
5,000 Ser 6 (AMT)................................................ 5.00 01/03/00 5,000,000
North Carolina
9,705 Charlotte, Airport Refg Ser 1993A (MBIA).................... 5.15 01/07/00 9,705,000
23,500 Charlotte-Mecklenberg Hospital Authority, Health Care System
Ser C...................................................... 5.30 01/07/00 23,500,000
14,800 Durham, Ser 1993A COPs...................................... 5.55 01/07/00 14,800,000
North Carolina Educational Facilities Finance Agency,
7,000 The Bowman Gray School of Medicine Ser 1996................ 5.55 01/07/00 7,000,000
23,200 Duke University Ser 1987A & 1991B**........................ 4.95 01/07/00 23,200,000
18,500 North Carolina Medical Care Commission, Duke University
Hospital Ser 1985 B........................................ 4.95 01/07/00 18,500,000
Ohio
10,000 Cleveland, Airport System Ser 1997 D (AMT).................. 5.25 01/07/00 10,000,000
12,000 Columbus, Unlimited Tax Ser 1995-1.......................... 5.30 01/07/00 12,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$15,000 Cuyahoga County, Cleveland Clinic Health System Obligated
Group Ser 1998A............................................ 5.65 % 01/07/00 $ 15,000,000
1,300 Ohio Air Quality Development Authority, Sohio Air-British
Petroleum Co Ser 1995...................................... 4.80 01/03/00 1,300,000
Oklahoma
8,000 Oklahoma Student Loan Authority, Ser 1998A (MBIA) (AMT)..... 5.45 01/07/00 8,000,000
48,515 Oklahoma Water Resources Board, State Loan Program Ser
1994A, Ser 1995 & Ser 1999................................. 3.60 03/01/00 48,515,000
Oregon
20,000 Oregon, Veterans' Ser 73 E.................................. 5.65 01/07/00 20,000,000
Pennsylvania
3,000 Lehigh County General Purpose Authority, Lehigh Valley
Hospital Ser 1999 B (MBIA)................................. 4.75 01/03/00 3,000,000
Pennsylvania Higher Education Assistance Agency,
8,000 1999 Ser A (AMBAC) (AMT)................................... 5.25 01/07/00 8,000,000
16,500 Student Loan 1997 Ser A (AMT).............................. 6.05 01/07/00 16,500,000
20,000 Pennsylvania Turnpike Commission, Ser Q of 1998............. 4.80 01/03/00 20,000,000
6,500 Philadelphia Hospitals & Higher Education Facilities
Authority, The Children's Hospital of Philadelphia Ser A of
1996....................................................... 4.80 01/03/00 6,500,000
2,000 Philadelphia Industrial Development Authority, The Fox Chase
Cancer Center Ser 1997..................................... 4.80 01/03/00 2,000,000
York General Authority,
17,900 Harrisburg School District Subser 1996 B (AMBAC)........... 5.35 01/07/00 17,900,000
9,100 Pooled Ser 1996............................................ 5.40 01/07/00 9,100,000
South Carolina
14,385 York County, North Carolina Electric Membership Corp Ser
1984 N-5 (NRU-CFC Gtd)..................................... 3.60 03/15/00 14,385,000
Tennessee
18,955 Clarksville Public Building Authority, Pooled Financing Ser
1995....................................................... 5.40 01/07/00 18,955,000
64,050 Montgomery County Public Building Authority, Tennessee
County Pool Ser 1997 & 1999................................ 5.40 01/07/00 64,050,000
7,000 Metropolitan Nashville Airport Authority, American Airlines
Inc Refg Ser 1995A......................................... 4.80 01/03/00 7,000,000
9,200 Tennessee, Ser 1999 C BANs.................................. 5.15 01/07/00 9,200,000
Texas
14,000 Brazos River Authority, Texas Utilities Electric Co Ser
1997A (MBIA) (AMT)......................................... 5.20 01/03/00 14,000,000
6,800 Gulf Coast Industrial Development Authority, CITGO Petroleum
Corp Ser 1994 (AMT)........................................ 5.40 01/03/00 6,800,000
24,400 Harris County, Toll Road Unlimited Tax Sub Lien Ser 1994
E.......................................................... 5.00 01/07/00 24,400,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- -------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 9,700 Harris County Industrial Development Corporation, Shell Oil
Co Ser 1997................................................ 4.70 % 01/03/00 $ 9,700,000
2,200 North Central Texas Health Facilities Development
Corporation, Presbyterian Medical Center Ser 1985 C
(MBIA)..................................................... 4.80 01/03/00 2,200,000
10,000 Texas Municipal Gas Corporation, Senior Lien Gas Reserve Ser
1998....................................................... 5.40 01/07/00 10,000,000
4,200 Texas Water Development Board, Revolving Fund Ser 1992-A.... 4.80 01/03/00 4,200,000
Utah
20,000 Intermountain Power Agency, 1985 Ser E (AMBAC).............. 3.625 03/15/00 20,000,000
14,000 Salt Lake City, IHC Health Services Ser 1990 B.............. 5.65 01/07/00 14,000,000
14,375 Utah County Environmental Improvement, USX Corp Ser 1995.... 3.85 05/02/00 14,375,000
Virginia
3,800 Alexandria Industrial Development Authority,
Alexandria/Arlington Waste to Energy Ser 1986A (AMT)....... 5.10 01/03/00 3,800,000
Washington
19,100 Washington, Ser 1996 A...................................... 5.40 01/07/00 19,100,000
Wisconsin
9,500 Brokaw, Wausau Paper Mills Co Ser 1995 (AMT)................ 5.30 01/07/00 9,500,000
Wyoming
Lincoln County, Exxon Corp
8,900 Ser 1984 A & B............................................. 4.70 01/03/00 8,900,000
25,950 Ser 1987 A & C (AMT)....................................... 5.05 01/03/00 25,950,000
10,800 Sweetwater County, Pacificorp Ser 1984...................... 4.75 01/03/00 10,800,000
PUERTO RICO
4,000 Puerto Rico Government Development Bank, Refg Ser 1985
(MBIA)..................................................... 4.95 01/07/00 4,000,000
--------------
TOTAL SHORT-TERM VARIABLE RATE MUNICIPAL OBLIGATIONS
(Amortized Cost $1,657,530,000)................................................. 1,657,530,000
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
TAX-EXEMPT COMMERCIAL PAPER (22.7%)
Arizona
$ 7,750 Maricopa County Pollution Control Corporation, Southern
California Edison Co 1985 Ser B.......................... 3.80 % 02/09/00 3.80 % $ 7,750,000
16,300 Salt River Project Agricultural Improvement & Power
District, Ser 1997 A..................................... 3.85 02/07/00 3.85 16,300,000
Colorado
15,000 Platte River Power Authority, Electric Sub Lien S-1....... 3.60 01/26/00 3.60 15,000,000
Florida
Jacksonville Electric Authority,
12,000 Ser C.................................................... 3.80 01/10/00 3.80 12,000,000
10,000 Ser E.................................................... 3.70 03/08/00 3.70 10,000,000
Hawaii
Honolulu City & County,
13,500 Ser 1998 BANs............................................ 3.80 01/18/00 3.80 13,500,000
4,000 Ser 1998 BANs............................................ 3.70 03/09/00 3.70 4,000,000
Indiana
Petersburg,
13,000 Indianapolis Power & Light Co Ser 1991................... 3.80 01/13/00 3.80 13,000,000
1,000 Indianapolis Power & Light Co Ser 1991................... 3.85 01/13/00 3.85 1,000,000
20,000 Indianapolis Power & Light Co Ser 1991................... 3.50 01/27/00 3.50 20,000,000
Louisiana
Louisiana Public Facilities Authority,
10,000 Christus Health Ser 1999 B (AMBAC)....................... 3.80 02/03/00 3.80 10,000,000
15,000 Christus Health Ser 1999 B (AMBAC)....................... 3.70 02/08/00 3.70 15,000,000
Plaquemines Port Harbor & Terminal District,
4,450 Electric - Coal Transfer Co Ser 1985 B................... 3.75 02/03/00 3.75 4,450,000
10,000 Electric - Coal Transfer Co Ser 1985 B................... 3.85 02/15/00 3.85 10,000,000
Maryland
Baltimore County,
10,000 Cons Ser 1995 BANs....................................... 3.65 01/19/00 3.65 10,000,000
16,000 Baltimore Gas & Electric Co Ser 1985..................... 3.85 02/08/00 3.85 16,000,000
15,000 Montgomery County, 1995 Ser BANs.......................... 3.80 01/24/00 3.80 15,000,000
Massachusetts
11,500 Massachusetts Bay Transportation Authority, Ser E......... 3.75 03/07/00 3.75 11,500,000
Minnesota
Rochester,
19,000 Mayo Foundation/Mayo Medical Center Ser 1988 F........... 3.80 02/17/00 3.80 19,000,000
12,950 Mayo Foundation/Mayo Medical Center Ser 1992 C........... 3.75 03/08/00 3.75 12,950,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Nebraska
Lincoln County,
$ 7,550 Lincoln Electric System Ser 1995......................... 3.85 % 01/13/00 3.85 % $ 7,550,000
6,100 Lincoln Electric System Ser 1995......................... 3.75 03/07/00 3.75 6,100,000
10,000 Nebraska Public Power District, Ser A Notes............... 3.85 01/12/00 3.85 10,000,000
Nevada
15,000 Las Vegas Valley Water District, Water Ser 1999 A......... 3.80 02/09/00 3.80 15,000,000
New Hampshire
15,000 New Hampshire State Business Finance Authority, New
England Power Co Ser 1993 A (AMT)........................ 3.90 01/24/00 3.90 15,000,000
New Jersey
10,300 New Jersey, Ser Fiscal 2000A TRANs........................ 3.75 03/07/00 3.75 10,300,000
Oklahoma
Oklahoma City Industrial & Cultural Facilities Trust,
10,000 SSM Health Care Ser 1998 B (MBIA)........................ 3.85 02/10/00 3.85 10,000,000
8,000 SSM Health Care Ser 1998 B (MBIA)........................ 3.75 03/08/00 3.75 8,000,000
Pennsylvania
9,100 Delaware County Industrial Development Authority, PECO
Energy Co Ser 1988 C (FGIC).............................. 3.80 02/07/00 3.80 9,100,000
Montgomery County Industrial Development Authority,
12,000 PECO Energy Co Ser 1994 A................................ 3.80 01/20/00 3.80 12,000,000
8,700 PECO Energy Co Ser 1994 A................................ 3.65 01/26/00 3.65 8,700,000
South Carolina
South Carolina Public Service Authority,
30,000 Santee Cooper Ser 1998................................... 3.70 01/25/00 3.70 30,000,000
10,000 Santee Cooper Ser 1998................................... 3.80 02/15/00 3.80 10,000,000
10,000 Santee Cooper Ser 1998................................... 3.80 02/16/00 3.80 10,000,000
Texas
15,000 Bexar Metropolitan Water District, Ser 1997............... 3.75 02/09/00 3.75 15,000,000
8,000 Dallas Area Rapid Transit, Sales Tax Ser B................ 3.85 01/12/00 3.85 8,000,000
4,600 Harris County Health Facilities Development Corporation,
Memorial Hospital System Ser 1997 B (MBIA)............... 3.70 03/01/00 3.70 4,600,000
Houston,
12,000 Water & Sewer 1994 Ser A................................. 3.80 01/19/00 3.80 12,000,000
10,000 Water & Sewer 1994 Ser A................................. 3.65 01/27/00 3.65 10,000,000
10,000 Water & Sewer 1994 Ser A................................. 3.75 02/15/00 3.75 10,000,000
14,750 Texas Municipal Power Agency, Ser 1991.................... 3.45 02/17/00 3.45 14,750,000
Texas Public Finance Authority,
7,650 Ser 1993 A............................................... 3.80 02/24/00 3.80 7,650,000
10,000 Ser 1993 A............................................... 3.85 02/29/00 3.85 10,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Utah
$ 7,300 Intermountain Power Agency, 1985 Ser F-2 (AMBAC).......... 3.85 % 02/10/00 3.85 % $ 7,300,000
Washington
15,315 Port of Seattle, Ser 1999 B (AMT)......................... 3.80 03/09/00 3.80 15,315,000
7,200 Seattle, Municipal Light & Power Ser 1990................. 3.40 01/27/00 3.40 7,200,000
Wisconsin
8,000 Wisconsin Health & Educational Facilities Authority,
SSM Health Care Ser 1998 B (MBIA)........................ 3.85 02/14/00 3.85 8,000,000
Wyoming
11,000 Sweetwater County, Pacificorp Ser 1988 A.................. 3.65 01/20/00 3.65 11,000,000
--------------
TOTAL TAX-EXEMPT COMMERCIAL PAPER (Amortized Cost $539,015,000)............................. 539,015,000
--------------
SHORT-TERM MUNICIPAL NOTES (10.0%)
Arizona
15,000 Arizona School District, Tax Anticipation Note Financing
Ser 1999A COPs, dtd 08/19/99............................. 4.05 07/31/00 3.58 15,039,498
California
10,000 Los Angeles County, 1999-2000 Ser A TRANs, dtd 07/01/99... 4.00 06/30/00 3.32 10,032,530
Idaho
35,000 Idaho, Ser 1999 TANs, dtd 07/01/99........................ 4.25 06/30/00 3.40 35,142,147
Iowa
Iowa School Corporations,
20,000 Warrant Certificates 1998-1999 Ser B (FSA), dtd
01/28/99............................................... 3.50 01/28/00 2.97 20,007,604
35,000 Warrant Certificates 1999-2000 Ser A (FSA), dtd
06/24/99............................................... 4.00 06/23/00 3.23 35,123,975
Kentucky
50,000 Kentucky Asset/Liability Commission, 1999 Ser A TRANs, dtd
07/01/99................................................. 4.25 06/28/00 3.375 50,206,861
Massachusetts
20,000 Massachusetts Bay Transportation Authority, 1999 Ser A
Notes, dtd 02/26/99...................................... 3.50 02/25/00 3.45 20,017,558
New Mexico
25,000 New Mexico, Ser 1999-2000 A TRANs, dtd 07/01/99........... 4.00 06/30/00 3.23 25,092,112
Pennsylvania
7,000 Temple University, Ser 1999 Notes, dtd 05/13/99........... 3.15 05/12/00 3.15 7,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
ACTIVE ASSETS TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS December 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
YIELD TO
PRINCIPAL MATURITY
AMOUNT IN COUPON MATURITY ON DATE OF
THOUSANDS RATE DATE PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Texas
$20,000 Texas, Ser 1999A TRANs, dtd 09/01/99...................... 4.50 % 08/31/00 3.70 % $ 20,102,659
--------------
TOTAL SHORT-TERM MUNICIPAL NOTES (Amortized Cost $237,764,944).............................. 237,764,944
--------------
TOTAL INVESTMENTS (Amortized Cost $2,434,309,944) (a)................................ 102.4%
2,434,309,944
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS....................................... (2.4) (58,160,699)
---- --------------
NET ASSETS........................................................................... 100.0% $2,376,149,245
===== ==============
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
NRU-CFC National Rural Utilities - Cooperative Finance Corporation.
TANs Tax Anticipation Notes.
TRANs Tax and Revenue Anticipation Notes.
WI Security purchased on a "when-issued" basis.
+ Rate shown is rate in effect at December 31, 1999.
* Date on which the principal amount can be recovered through
demand.
** All or a portion of these securities have been segregated in
connection with the purchase of "when-issued" or delayed
delivery securities.
(a) 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.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
ACTIVE ASSETS TAX-FREE TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(amortized cost $2,434,309,944)....... $2,434,309,944
Cash................................... 2,829,319
Receivable for:
Interest............................ 16,259,038
Shares of beneficial interest
sold............................... 42,215
Prepaid expenses and other assets...... 114,973
--------------
TOTAL ASSETS........................ 2,453,555,489
--------------
LIABILITIES:
Payable for:
Investments purchased............... 76,279,610
Investment management fee........... 796,036
Plan of distribution fee............ 212,591
Accrued expenses....................... 118,007
--------------
TOTAL LIABILITIES................... 77,406,244
--------------
NET ASSETS.......................... $2,376,149,245
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................ $2,376,139,813
Accumulated undistributed net
investment income..................... 9,432
--------------
NET ASSETS.......................... $2,376,149,245
==============
NET ASSET VALUE PER SHARE,
2,376,149,913 shares outstanding
(unlimited shares authorized of $.01
par value)............................ $1.00
==============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the six months ended December 31, 1999 (unaudited)
<S> <C>
NET INVESTMENT INCOME:
INTEREST............................... $ 41,284,780
--------------
EXPENSES
Investment management fee.............. 4,620,506
Plan of distribution fee............... 1,195,378
Transfer agent fees and expenses....... 173,306
Registration fees...................... 81,569
Custodian fees......................... 50,855
Professional fees...................... 39,095
Shareholder reports and notices........ 37,112
Trustees' fees and expenses............ 8,609
Other.................................. 15,084
--------------
TOTAL EXPENSES...................... 6,221,514
Less: expense offset................... (50,719)
--------------
NET EXPENSES........................ 6,170,795
--------------
NET INVESTMENT INCOME.................. $ 35,113,985
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
ACTIVE ASSETS TAX-FREE TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1999 JUNE 30, 1999
- ----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 35,113,985 $ 58,616,609
Net realized gain.................................. -- 23,373
-------------- --------------
NET INCREASE................................... 35,113,985 58,639,982
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................. (35,114,131) (58,616,865)
Net realized gain.................................. -- (22,054)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.............. (35,114,131) (58,638,919)
-------------- --------------
Net increase from transactions in shares of
beneficial interest............................... 86,339,651 420,417,833
-------------- --------------
NET INCREASE................................... 86,339,505 420,418,896
NET ASSETS:
Beginning of period................................ 2,289,809,740 1,869,390,844
-------------- --------------
END OF PERIOD
(Including undistributed net investment income
of $9,432 and $9,578, respectively)............ $2,376,149,245 $2,289,809,740
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
ACTIVE ASSETS TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Active Assets Tax-Free Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Trust'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 Trust was organized as a
Massachusetts business trust on March 30, 1981 and commenced operations on July
7, 1981.
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.
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.
The Trust amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute 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 Trust records dividends
and distributions to shareholders as of the close of each business day.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Trust pays the Investment Manager
a management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Trust 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
16
<PAGE> 17
ACTIVE ASSETS TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1999 (unaudited) continued
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 $2.5 billion; 0.275% to the portion of daily net
assets exceeding $2.5 billion but not exceeding $3 billion; and 0.25% to the
portion of daily net assets exceeding $3 billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Trust who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Trust.
3. PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"), an affiliate
of the Investment Manager, is the distributor of the Trust'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 therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Trust, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor and other
broker-dealers under the Plan: (1) compensation to sales representatives of the
Dean Witter Reynolds Inc., an affiliate of the Investment Manager and
Distributor, and other broker-dealers; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales of
the Trust's shares; (3) expenses incurred in connection with promoting sales of
the Trust's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Trust is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Trust's shares. The amount of each monthly reimbursement payment may in no event
exceed an amount equal to a payment at the annual rate of 0.15% of the Trust's
average daily net assets. Expenses incurred by the Distributor pursuant to the
Plan in any fiscal year will not be reimbursed by the Trust through payments
accrued in any subsequent
17
<PAGE> 18
ACTIVE ASSETS TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS December 31, 1999 (unaudited) continued
fiscal year. For the six months ended December 31, 1999, 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, 1999 aggregated $2,353,924,850 and
$2,343,924,000, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Trust's transfer agent. At December 31, 1999, the Trust had
transfer agent fees and expenses payable of approximately $2,200.
The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended December 31, 1999,
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,003. At December 31, 1999, the Trust had an accrued pension liability of
$52,582 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 1999 JUNE 30, 1999
----------------- --------------
(unaudited)
<S> <C> <C>
Shares sold................................................. 4,111,332,339 7,461,949,724
Shares issued in reinvestment of dividends and
distributions.............................................. 35,114,131 58,638,919
-------------- --------------
4,146,446,470 7,520,588,643
Shares repurchased.......................................... (4,060,106,819) (7,100,170,810)
-------------- --------------
Net increase in shares outstanding.......................... 86,339,651 420,417,833
============== ==============
</TABLE>
18
<PAGE> 19
ACTIVE ASSETS TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED JUNE 30,
MONTHS ENDED ----------------------------------------------------
DECEMBER 31, 1999 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
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.................. 0.014 0.027 0.031 0.030 0.031 0.030
Less dividends from net investment income.............. (0.014) (0.027) (0.031) (0.030) (0.031) (0.030)
------- ------- ------- ------- ------- -------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURN........................................... 1.45%(1) 2.73% 3.11% 3.05% 3.12% 3.09%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................................... 0.51%(2)(3) 0.52% 0.54% 0.55% 0.55% 0.56%
Net investment income.................................. 2.86%(2) 2.68% 3.05% 2.98% 3.08% 3.05%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions................. $2,376 $2,290 $1,869 $1,634 $1,542 $1,499
</TABLE>
- ---------------------
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE> 20
TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ----------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Katherine H. Stromberg
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Trust without examination by the independent accountants and accordingly they
do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Trust. For more detailed information about the Trust, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Trust.
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
- ---------
ACTIVE
.........
ASSETS(R)
.........
ACCOUNT
- ---------
ACTIVE ASSETS
TAX-FREE TRUST
Semiannual Report
December 31, 1999