Morgan Stanley Tax Free Daily Income Trust N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-03031
Morgan Stanley Tax-Free Daily Income Trust
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York					10036
(Address of principal executive offices)					(Zip code)
John H. Gernon 522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant’s telephone number, including area code:				212-296-0289
Date of fiscal year end:	December 31,
Date of reporting period:		June 30, 2019

Item 1 - Report to Shareholders

INVESTMENT MANAGEMENT

Morgan Stanley Tax-Free Daily Income Trust

Semi-Annual Report

June 30, 2019

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission ("SEC"), paper copies of the Fund's Annual and Semi-Annual Reports to Shareholders ("Shareholder Reports") will no longer be sent by mail, unless you specifically request paper copies of the Shareholder Reports from the Fund or from your financial intermediary, such as a broker-dealer or a bank. Instead, the Shareholder Reports will be made available on the Fund's website, https://www.morganstanley.com/im/moneymarketfundsshareholderreports and you will be notified by mail each time a Shareholder Report is posted and provided with a website link to access the Shareholder Report. If you already elected to receive Shareholder Reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive Shareholder Reports and other communications from the Fund electronically anytime by contacting your financial intermediary or, if you are a direct investor, please follow the instructions on the envelope.

Beginning on January 1, 2019, you may elect to receive all future Shareholder Reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your Shareholder Reports. If you invest directly with the Fund, please follow the instructions on the envelope to let the Fund know you wish to continue receiving paper copies of your Shareholder Reports. Your election to receive Shareholder Reports in paper will apply to all funds held in your account if you invest through your financial intermediary or all funds held with the fund complex if you invest directly with a fund.

Morgan Stanley Tax-Free Daily Income Trust

Table of Contents

Welcome Shareholder		3
Fund Report		4
Expense Example		7
Portfolio of Investments		8
Statement of Assets and Liabilities		12
Statement of Operations		13
Statements of Changes in Net Assets		14
Notes to Financial Statements		15
Financial Highlights		22
Investment Advisory Agreement Approval		24
Privacy Notice		27
Trustee and Officer Information	Back Cover

2

Welcome Shareholder,

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

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

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

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

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

3

Fund Report (unaudited)

For the six months ended June 30, 2019

Market Conditions

Interest rates at the long end of the municipal money market maturity range have shifted lower over the first half of 2019 as trade tensions and signs of a slowing global economy have led market participants to price in a shift to easing in Federal Reserve (Fed) monetary policy.

In the wake of federal tax reform, municipals have become more attractive investments, particularly for high earners in high tax states. This has led to strong asset inflows into municipal bond funds and separately managed accounts and kept the appetite hearty for shorter-duration issues. The Municipal Market Data (MMD) One-Year Note Index stood at 1.30 percent at the end of June 2019, down from 1.90 percent at the end of 2018.⁽ⁱ⁾

The Securities Industry and Financial Markets Association ("SIFMA") Municipal Swap Index ("SIFMA Index"), on the other hand, rose over the same period. The SIFMA Index rose 0.19 percent over the first six-months of 2019 and has experienced significant bouts of volatility year to date.⁽ⁱⁱ⁾

The SIFMA Index saw a significant surge during the March-April 2019 tax payment period as tax bills came due and investors realized the impact of the federal government's cap on state and local tax deductions. Municipal money market funds lost assets during the months of March and April as investors made tax liability payments. With dealer inventories on the rise, volatility returned to the market as dealers sought to recruit additional crossover buyers in the form of separately

managed accounts and short-bond fund investors. This led to a spike in the SIFMA Index from 1.50 percent at the end of March 2019 to 2.30 percent on April 24, 2019.

The nation's broad economic expansion had a beneficial impact on state tax revenue collections in 2019. In its Spring 2019 Fiscal Survey of the States, the National Association of State Budget Officers noted that most states have made upward revisions to their revenue estimates compared to budget projections. The survey predated April tax collections, which produced further positive variances for state tax collections.

In a recently published report, Moody's Investors Service noted strong revenue collections have allowed states to limit the amount of debt issued to fund capital investments, opting to utilize pay-as-you-go financing for capital investments rather than issuing bonds. Moody's cited steady revenue growth since the last recession as the principal reason for this shift in funding priorities. It also pointed to the growing trend of taxpayer aversion to increased debt or taxes as contributing factors as well.

(i)  Source: Municipal Market Data.

(ii)  Source for SIFMA data: Bloomberg L.P., data as of June 30, 2019. The SIFMA Index is issued weekly and is compiled from the weekly interest rate resets of tax-exempt variable rate issues included in a database maintained by Municipal Market Data which meet specific criteria established from time to time by the Securities Industry and Financial Markets Association. The index performance is provided for illustrative purposes only and is not meant to depict the performance of a specific investment.

4

In the period ahead, we will maintain our emphasis on high levels of liquidity and short duration as we watch to see how monetary policy unfolds and determine what impact it may have on municipal yields.

Performance Analysis

As of June 30, 2019, Morgan Stanley Tax-Free Daily Income Trust had net assets of approximately $48.6 million and an average portfolio maturity of 20 days. For the six-month period ended June 30, 2019, the Fund's Class R and Class S shares provided a total return of 0.71 percent. For the seven-day period ended June 30, 2019, each of the Fund's Class R and Class S shares provided an effective annualized yield of 1.67 percent (subsidized) and 1.15 percent (non-subsidized) and a current yield of 1.66 percent (subsidized) and 1.14 percent (non-subsidized), while the 30-day moving average yield for June was 1.51 percent (subsidized) and 1.01 percent (non-subsidized). Yield quotations more closely reflect the current earnings of the Fund. The non-subsidized yield reflects what the yield would have been had a fee and/or expense waiver not been in place during the period. Past performance is no guarantee of future results.

Our investment philosophy emphasizes risk management and a disciplined credit research process to assist in our ability to respond to market and economic developments. Ongoing market volatility and uncertainty have called for a defensive strategy with shorter duration and higher portfolio liquidity.

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

PORTFOLIO COMPOSITION as of 06/30/19
Weekly Variable Rate Bonds	63.5	%
Commercial Paper	15.0
Daily Variable Rate Bonds	8.2
Municipal Bonds & Notes	5.2
Closed-End Investment Companies	5.1
Floating Rate Notes	3.0
MATURITY SCHEDULE as of 06/30/19
1 - 30 Days	77.9	%
31 - 60 Days	13.7
61 - 90 Days	3.0
91 - 120 Days	3.7
121 + Days	1.7

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

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

5

Investment Strategy

The Fund will invest in high quality, short-term securities that are normally municipal obligations that pay interest exempt from federal income taxes. The Fund's "Adviser," Morgan Stanley Investment Management 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.

For More Information About Portfolio Holdings

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the Semi-Annual and Annual Reports to fund shareholders and makes these reports available on its public website, www.morganstanley.com/im/moneymarketfundsshareholderreports. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT and monthly holdings for each money market fund on Form N-MFP. Morgan Stanley does not deliver these reports to shareholders, nor are the first and third fiscal quarter

reports posted to the Morgan Stanley public website. However, the holdings for each money market fund are posted to the Morgan Stanley public website. You may obtain the N-PORT filings (as well as the Form N-CSR, N-CSRS and N-MFP filings) by accessing the SEC's website, http://www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov).

Householding Notice

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

6

Expense Example (unaudited)

As a shareholder of the Fund, you incur ongoing costs, including advisory fees, administration fees, shareholder services fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 01/01/19 – 06/30/19.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds that have transactional costs, such as sales charges (loads) or exchange fees.

	Beginning Account Value		Ending Account Value		Expenses Paid During Period(1)
	01/01/19		06/30/19		01/01/19 – 06/30/19
Class R
Actual (0.71% return)	$	1,000.00	$	1,007.10	$	0.99
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,023.67	$	1.00
Class S
Actual (0.71% return)	$	1,000.00	$	1,007.10	$	0.99
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,023.67	$	1.00

  (1)  Expenses are equal to the Fund's annualized expense ratios of 0.20% and 0.20% for Class R and Class S shares, respectively, multiplied by the average account value over the period and multiplied by 180**/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 0.77% and 0.77% for Class R and Class S shares, respectively.

  **  Adjusted to reflect non-business day accruals.

7

Morgan Stanley Tax-Free Daily Income Trust

Portfolio of Investments  nJune 30, 2019 (unaudited)

PRINCIPAL AMOUNT (000)			COUPON RATE			DEMAND DATE (a)	MATURITY DATE	VALUE
		Weekly Variable Rate Bonds (b)(63.3%)
$	965	Austin, TX, Water & Wastewater System Ser 2008		1.89	%	07/05/19	05/15/31	$	965,000
	1,000	Colorado Springs, CO, Utilities System Sub Lien Ser 2005 A		1.91		07/05/19	11/01/35		1,000,000
	1,500	Columbia, SC, Waterworks & Sewer System Ser 2009		1.90		07/05/19	02/01/38		1,500,000
	1,365	Delaware Health Facilities Authority, Christiana Care Health Services Ser 2010 B		1.93		07/05/19	10/01/40		1,365,000
	1,540	District of Columbia, The Pew Charitable Trusts Ser 2008 A		1.90		07/05/19	04/01/38		1,540,000
		District of Columbia Water & Sewer Authority,
	800	Public Utility Ser 2014 B-2		1.94		07/05/19	10/01/50		800,000
	500	Public Utility Ser B-1		1.95		07/05/19	10/01/50		500,000
	1,300	Gainesville, FL, Utilities System 2012 Ser B		1.95		07/05/19	10/01/42		1,300,000
	500	Hennepin County, MN, Ser 2018 B		1.87		07/05/19	12/01/38		500,000
		Houston, TX,
	1,300	Airport Sub Lien Ser 2010 (AMT)		1.85		07/05/19	07/01/30		1,300,000
	700	Combined Utility System First Lien Ser 2004 B-2		1.85		07/05/19	05/15/34		700,000
	700	Combined Utility System First Lien Ser 2004 B-5		1.85		07/05/19	05/15/34		700,000
	1,400	Indiana Finance Authority, Trinity Health Ser 2008 D-1		1.87		07/05/19	12/01/34		1,400,000
	1,850	King County, WA, Junior Lein Sewer Ser 2001 B		1.95		07/05/19	01/01/32		1,850,000
	2,000	Miami-Dade County, FL, Seaport Revenue Ser 2014 A		1.95		07/05/19	10/01/50		2,000,000
	1,550	Nebraska Investment Finance Authority, Single Family Housing Bonds Ser 2017 C		1.90		07/05/19	09/01/47		1,550,000
	1,000	New York State Energy Research & Development Authority Facilities, NY, Consolidated Edison Co. Ser 2005 Subser A-2		1.88		07/05/19	05/01/39		1,000,000
	600	New York State Housing Finance Agency, 10 Barclay Street 2004 Ser A		1.95		07/05/19	11/15/37		600,000
	800	Orlando Utilities Commission, FL, Utility System Ser 2008-2		1.90		07/05/19	10/01/33		800,000

See Notes to Financial Statements
8

Morgan Stanley Tax-Free Daily Income Trust

Portfolio of Investments  nJune 30, 2019 (unaudited) continued

PRINCIPAL AMOUNT (000)			COUPON RATE			DEMAND DATE (a)	MATURITY DATE	VALUE
$	1,000	RBC Municipal Products Trust Inc, MA, Partners Healthcare System Adjustable Ser 2019 T-2 Floater Certificates Ser 2018-E-130 (c)		1.93	%	07/05/19	11/01/23	$	1,000,000
		RBC Municipal Products Trust Inc, NY,
	2,000	New York City Municipal Water Finance Authority Adjustable Ser 2019-CC Floater Certificates Ser 2018-E-129 (c)		1.93		07/05/19	11/15/22		2,000,000
	500	New York City Variable Ser 2006 Subser I-5 Floater Certificates Ser 2019-E133 (c)		1.93		07/05/19	05/01/23		500,000
	1,000	RBC Municipal Products Trust Inc, OH, Kettering Health Network Obligation Group Adjustable Ser 2019 B Floater Certificates Ser 2019-E-132 (c)		1.93		07/05/19	10/01/24		1,000,000
	500	RBC Municipal Products Trust Inc, SC, South Carolina Transportation Infrastructure Bank Ser 2017 A, Floater Certificates Ser 2019-G109 (c)		1.79		07/05/19	10/01/25		500,000
	1,600	Tender Option Bond Trust, DC, District of Columbia Housing Finance Agency, Multi-Family Housing Ser 2014 A Puttable Floating Rate Receipts Ser 2019 (c)		2.00		07/05/19	08/01/47		1,600,000
		Tender Option Bond Trust, TX,
	500	Harris County Cultural Education Facilities Financing Corporation Baylor College of Medicine Ser B Puttable Floating Rate Receipts Ser 2019-BAML 5012 (c)		1.94		07/05/19	11/15/46		500,000
	500	Harris County Cultural Education Facilities Financing Corporation Baylor College of Medicine Ser B Puttable Floating Rate Receipts Ser 2019-BAML 5013 (c)		1.94		07/05/19	11/15/46		500,000
	500	Texas Transportation Commission, State Highway Fund First Tier Revenue Bonds, Ser 2014 B-1		1.97		07/05/19	04/01/32		500,000
	325	University of Texas Regents, Permanent University Fund Ser 2008 A		1.85		07/05/19	07/01/38		325,000
	970	Utah Water Finance Agency, Ser 2008 B		1.94		07/05/19	10/01/37		970,000
		Total Weekly Variable Rate Bonds(Cost $30,765,000)							30,765,000

See Notes to Financial Statements
9

Morgan Stanley Tax-Free Daily Income Trust

Portfolio of Investments  nJune 30, 2019 (unaudited) continued

PRINCIPAL AMOUNT (000)			COUPON RATE			YIELD TO MATURITY ON DATE OF PURCHASE			MATURITY DATE	VALUE
		Commercial Paper (14.9%)
		Harris County, TX,
$	1,071	Notes Ser A-1		1.37	%		1.37	%	08/08/19	$	1,071,000
	580	Notes Ser D		1.39			1.39		08/14/19		580,000
	1,000	Omaha Public Power District, NE, Ser A		1.44			1.44		08/07/19		1,000,000
		San Antonio, TX,
	1,000	Electric & Gas Systems Ser A		1.52			1.52		10/02/19		1,000,000
	1,000	Electric & Gas Systems Ser A		1.53			1.53		09/05/19		1,000,000
	1,000	Water System Ser 2019 A-1		1.80			1.80		08/05/19		1,000,000
		Texas A&M Tax-Exempt Revenue Financing System,
	800	Ser B		1.56			1.56		10/03/19		800,000
	800	Ser B		1.58			1.58		11/05/19		800,000
		Total Commercial Paper(Cost $7,251,000)									7,251,000
						DEMAND DATE (a)
		Daily Variable Rate Bonds (b)(8.2%)
	2,000	East Baton Rouge Parish, LA, Exxon Mobil Corp Ser 2010 A		1.99		07/01/19			08/01/35		2,000,000
	1,200	JP Morgan Chase & Co., NY, Battery Park City Authority Junior Ser C PUTTERs Ser 5012 (c)		1.98		07/01/19			11/01/42		1,200,000
	800	Mississippi Business Finance Corp., Chevron USA Ser 2010 G		1.93		07/01/19			11/01/35		800,000
		Total Daily Variable Rate Bonds(Cost $4,000,000)									4,000,000
						YIELD TO MATURITY ON DATE OF PURCHASE
		Municipal Bonds & Notes (5.2%)
	500	Baltimore County, MD, Ser 2014 B, dtd 05/16/19		5.00			5.00	%	08/01/19		501,470
	2,000	Texas, Veterans Ser 2012, dtd 04/16/19		4.00			4.00		08/29/19		2,007,150
		Total Municipal Bonds & Notes(Cost $2,508,620)									2,508,620

See Notes to Financial Statements
10

Morgan Stanley Tax-Free Daily Income Trust

Portfolio of Investments  nJune 30, 2019 (unaudited) continued

PRINCIPAL AMOUNT (000)			COUPON RATE			DEMAND DATE (a)	MATURITY DATE			VALUE
		Closed-End Investment Company (b)(5.1%)
$	2,500	Western Asset Managed Municipals Fund, Inc., OT, VRDP Ser 1 (AMT)(c) (Cost $2,500,000)		2.05	%	07/05/19	03/04/45			$	2,500,000
		Floating Rate Notes (b)(3.0%)
	500	Franklin County, OH, CHE Trinity Health Credit Group Window Ser 2013 OH		1.75		08/01/19	12/01/46				500,000
	500	Kansas Department of Transportation, Highway Ser 2014 B-5		2.03		07/01/19	09/01/19				500,160
	450	Montgomery County, MD, CHE Trinity Health Credit Group Ser 2013		1.43		09/03/19	12/01/41				450,000
		Total Floating Rate Notes(Cost $1,450,160)									1,450,160
		Total Investments(Cost $48,474,780) (d)						99.7	%		48,474,780
		Other Assets in Excess of Liabilities						0.3			139,207
		Net Assets						100.0	%	$	48,613,987

  AMT  Alternative Minimum Tax.

  PUTTERs  Puttable Tax-Exempt Receipts.

  VRDP  Variable Rate Demand Preferred.

  (a)  Date on which the principal amount can be recovered through demand.

  (b)  Floating or Variable rate securities: The rates disclosed are as of June 30, 2019. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description in the Portfolio of Investments. Certain variable rate securities may not be based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description in the Portfolio of Investments.

  (c)  144A security - Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.

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

See Notes to Financial Statements
11

Morgan Stanley Tax-Free Daily Income Trust

Financial Statements

Statement of Assets and Liabilities June 30, 2019 (unaudited)

Assets:
Investments in securities, at value (cost $48,474,780)	$	48,474,780
Cash		53,021
Receivable for:
Interest		149,790
Prepaid expenses and other assets		48,244
Total Assets		48,725,835
Liabilities:
Payable for:
Trustees' fees		43,735
Dividends to shareholders		3,710
Transfer agent fees		2,193
Shares of beneficial interest redeemed		343
Accrued expenses and other payables		61,867
Total Liabilities		111,848
Net Assets	$	48,613,987
Composition of Net Assets:
Paid-in-capital	$	48,669,174
Total Accumulated Loss		(55,187	)
Net Assets	$	48,613,987
Class R Shares:
Net Assets	$	23,297,731
Shares Outstanding (unlimited shares authorized, $0.01 par value)		23,307,122
Net Asset Value Per Share	$	1.00
Class S Shares:
Net Assets	$	25,316,256
Shares Outstanding (unlimited shares authorized, $0.01 par value)		25,317,990
Net Asset Value Per Share	$	1.00

See Notes to Financial Statements
12

Morgan Stanley Tax-Free Daily Income Trust

Financial Statements continued

Statement of Operations For the six months ended June 30, 2019 (unaudited)

Net Investment Income:
Interest Income	$	347,889
Expenses
Professional fees		53,847
Advisory fee (Note 3)		31,852
Shareholder services fee (Note 4)		21,235
Registration fees		18,029
Administration fee (Note 3)		10,617
Shareholder reports and notices		9,396
Transfer agent fees (Note 5)		5,899
Custodian fees		3,110
Trustees' fees and expenses		2,532
Other		7,735
Total Expenses		164,252
Less: amounts waived/reimbursed (Note 3 & 4)		(121,783	)
Net Expenses		42,469
Net Investment Income		305,420
Net Increase	$	305,420

See Notes to Financial Statements
13

Morgan Stanley Tax-Free Daily Income Trust

Financial Statements continued

Statements of Changes in Net Assets

	FOR THE SIX MONTHS ENDED JUNE 30, 2019			FOR THE YEAR ENDED DECEMBER 31, 2018
	(unaudited)
Increase (Decrease) in Net Assets: Operations:
Net investment income	$	305,420		$	380,584
Net Increase		305,420			380,584
Dividends and Distributions to Shareholders:
Class R shares		(177,499	)		(294,603	)
Class S shares		(128,073	)		(46,421	)
Paid-in-capital
Class R shares		—			(37,471	)
Class S shares		—			(2,089	)
Total Dividends and Distributions to Shareholders		(305,572	)		(380,584	)
Net increase (decrease) from transactions in shares of beneficial interest		12,712,850			(14,117,084	)
Net Increase (Decrease)		12,712,698			(14,117,084	)
Net Assets:
Beginning of period		35,901,289			50,018,373
End of Period	$	48,613,987		$	35,901,289

See Notes to Financial Statements
14

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited)

1. Organization and Accounting Policies

Morgan Stanley Tax-Free Daily Income Trust (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund applies investment company accounting and reporting guidance. The Fund's investment 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 incorporated in Maryland on March 24, 1980, commenced operations on February 20, 1981 and reorganized as a Massachusetts business trust on April 30, 1987.

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

The Securities and Exchange Commission ("SEC") has adopted changes to the rules that govern money market funds. The Fund operates as a "retail money market fund," which allows the Fund to continue to seek a stable net asset value ("NAV"). The Fund will be permitted to impose a liquidity fee on redemptions from the Fund or temporarily restrict redemptions from the Fund for up to 10 business days.

The following is a summary of significant accounting policies:

A. Valuation of Investments — Portfolio securities are valued at amortized cost, which approximates fair value, in accordance with Rule 2a-7 under the Act. The amortized cost of an instrument is determined by valuing it at its original cost and thereafter amortizing any discount or premium from its face value at a constant rate until maturity. Investments in mutual funds are valued at the NAV as of the close of each business day.

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

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

D. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the close of each business day. Dividends from net investment income, if any, are declared and paid daily. Net realized capital gains, if any, are distributed at least annually.

E. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates

15

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited) continued

and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

F. Indemnifications — The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

2. Fair Valuation Measurements

Financial Accounting Standards Board ("FASB") Accounting Standards Codification^TM ("ASC") 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs); and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:

•  Level 1 — unadjusted quoted prices in active markets for identical investments

•  Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•  Level 3 — significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

16

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited) continued

The following is a summary of the inputs used to value the Fund's investments as of June 30, 2019:

INVESTMENT TYPE	LEVEL 1 UNADJUSTED QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS		TOTAL
Assets:
Weekly Variable Rate Bonds	$	—	$	30,765,000	$	—	$	30,765,000
Commercial Paper		—		7,251,000		—		7,251,000
Daily Variable Rate Bonds		—		4,000,000		—		4,000,000
Municipal Bonds & Notes		—		2,508,620		—		2,508,620
Closed-End Investment Company		—		2,500,000		—		2,500,000
Floating Rate Notes		—		1,450,160		—		1,450,160
Total Assets	$	—	$	48,474,780	$	—	$	48,474,780

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

3. Advisory/Administration Agreements

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

The Adviser also serves as the Administrator to the Fund and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.05% of the Fund's average daily net assets.

Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.

The Adviser/Administrator has agreed to assume all operating expenses of the Fund and to waive the advisory fee and administration fee, as applicable, to the extent that such expenses and fees excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), on an annualized basis exceeds 0.60% of the average daily net assets of the Fund. For the six months ended June 30, 2019, the Adviser waived $31,852 and the Administrator waived $10,617. For the same period, the Adviser reimbursed additional expenses in the amount of $58,079. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's

17

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited) continued

prospectus or until such time that the Fund's Board of Trustees (the "Trustees") act to discontinue all or a portion of such waivers and/or expense reimbursements when they deem such action is appropriate.

In addition, the Adviser may make additional voluntary fee waivers and/or expense reimbursements. The ratios of expenses to average net assets disclosed in the Fund's Financial Highlights may be lower than the maximum expense cap of 0.60% due to these additional fee waivers and/or expense reimbursements.

4. Shareholder Services Plan

Pursuant to a Shareholder Services Plan (the "Plan"), the Fund may pay Morgan Stanley Distribution, Inc. (the "Distributor"), an affiliate of the Adviser/Administrator, as compensation for the provision of services to shareholders a service fee up to the rate of 0.15% on an annualized basis of the average daily net assets of the Fund for Class R and Class S shares.

Reimbursements for these expenses are made in monthly payments by the Fund to the Distributor, which will in no event exceed an amount equal to a payment at the annual rate of 0.15% of the Fund's average daily net assets during the month. Expenses incurred by the Distributor pursuant to the Plan in any fiscal year will not be reimbursed by the Fund through payments accrued in any subsequent fiscal year. For the six months ended June 30, 2019, the distribution fee was accrued at the annual rate of 0.10%. Effective October 10, 2018, the Distributor has agreed to waive all of the Fund's shareholder services fee. For the six months ended June 30, 2019, the Distributor waived $21,235. The fee waivers will continue for at least one year or until such time that the Fund's Trustees act to discontinue all or a portion of such waivers when they deem such action is appropriate.

The Distributor and Adviser/Administrator have agreed to waive all or a portion of the Fund's shareholder services fee, advisory fee and administration fee, respectively, and/or reimburse expenses, to the extent that total expenses exceed total income of the Fund on a daily basis. These fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time that the Trustees act to discontinue all or a portion of such waivers and/or expense reimbursements when they deem such action is appropriate. This arrangement had no effect during the most recent reporting period.

5. Dividend Disbursing and Transfer Agent

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

18

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited) continued

6. Custodian Fees

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

7. Transactions with Affiliates

The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley Funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Trustees in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2019, the Fund engaged in cross-trade purchases of $4,100,000 and sales of $5,200,000 which resulted in no net realized gains or losses.

The Fund has an unfunded noncontributory defined benefit pension plan covering certain independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on factors which include years of service and compensation. The Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003. At June 30, 2019, the Fund had an accrued pension liability of $43,735, which is reflected as "Trustees' fees" in the Statement of Assets and Liabilities.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.

19

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited) continued

8. Shares of Beneficial Interest

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

	FOR THE SIX MONTHS ENDED JUNE 30, 2019			FOR THE YEAR ENDED DECEMBER 31, 2018
	(unaudited)
CLASS R SHARES
Shares sold		411,467			2,611,104
Shares issued in reinvestment of dividends		177,499			332,074
Shares redeemed		(4,641,971	)		(25,200,215	)
Net decrease — Class R		(4,053,005	)		(22,257,037	)
CLASS S SHARES
Shares sold		27,820,153			21,070,432
Shares issued in reinvestment of dividends		128,073			48,510
Shares redeemed		(11,182,371	)		(12,978,989	)
Net increase — Class S		16,765,855			8,139,953
Net increase (decrease) in Fund		12,712,850			(14,117,084	)

9. Federal Income Tax Status

It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.

FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended December 31, 2018 remains subject to examination by taxing authorities.

20

Morgan Stanley Tax-Free Daily Income Trust

Notes to Financial Statements  nJune 30, 2019 (unaudited) continued

The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2018 and 2017 was as follows:

2018 DISTRIBUTIONS PAID FROM:				2017 DISTRIBUTIONS PAID FROM:
TAX-EXEMPT INCOME		PAID-IN- CAPITAL		TAX-EXEMPT INCOME		ORDINARY INCOME		LONG-TERM CAPITAL GAIN
$	341,024	$	39,560	$	146,865	$	754	$	990

The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.

Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.

At December 31, 2018, the Fund had no distributable earnings on a tax basis.

10. Other

At June 30, 2019, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 96.5%.

21

Morgan Stanley Tax-Free Daily Income 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 DECEMBER 31,
	MONTHS ENDED
	JUNE 30, 2019			2018			2017			2016(1)			2015			2014
	(unaudited)
Class R Shares(2)
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		0.007			0.009			0.003			0.001			0.000	(3)		0.000	(3)
Less dividends and distributions from net investment income		(0.007	)		(0.009	)(4)		(0.003	)		(0.001	)(4)		(0.000	)(3)		(0.000	)(3)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00		$	1.00		$	1.00
Total Return		0.71	%(8)		0.94	%		0.27	%		0.05	%		0.01	%		0.01	%
Ratios to Average Net Assets:
Net expenses		0.20	%(5)(9)		0.52	%(5)		0.60	%(5)		0.25	%(5)(6)		0.04	%(5)(6)		0.07	%(5)(6)
Net investment income		1.44	%(5)(9)		0.91	%(5)		0.25	%(5)		0.01	%(5)(6)		0.01	%(5)(6)		0.01	%(5)(6)
Rebate from Morgan Stanley affiliate		N/A			N/A			N/A			0.01	%		0.00	%(7)		0.00	%(7)
Supplemental Data:
Net assets, end of period, in millions	$	23		$	27		$	50		$	58		$	1,455		$	1,547

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

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

  (3)  Amount is less than $0.001.

  (4)  Includes capital gain and paid-in-capital distributions of less than $0.001.

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

PERIOD ENDED	EXPENSE RATIO			NET INVESTMENT INCOME (LOSS) RATIO
June 30, 2019		0.77	%		0.87	%
December 31, 2018		0.79			0.64
December 31, 2017		0.95			(0.10	)
December 31, 2016		0.59			(0.33	)
December 31, 2015		0.56			(0.51	)
December 31, 2014		0.55			(0.47	)

  (6)  The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."

  (7)  Amount is less than 0.005%.

  (8)  Not annualized.

  (9)  Annualized.

See Notes to Financial Statements
22

Morgan Stanley Tax-Free Daily Income Trust

Financial Highlights continued

	FOR THE SIX MONTHS ENDED			FOR THE YEAR ENDED DECEMBER 31,						PERIOD FROM JUNE 28, 2016(1) TO
	JUNE 30, 2019			2018			2017			DECEMBER 31, 2016(2)
	(unaudited)
Class S Shares
Selected Per Share Data:
Net asset value, beginning of period	$	1.00		$	1.00		$	1.00		$	1.00
Net income from investment operations		0.007			0.009			0.003			0.001
Less dividends from net investment income		(0.007	)		(0.009	)(3)		(0.003	)		(0.001	)(3)
Net asset value, end of period	$	1.00		$	1.00		$	1.00		$	1.00
Total Return		0.71	%(6)		0.94	%		0.27	%		0.05	%(6)
Ratios to Average Net Assets:
Net expenses		0.20	%(4)(7)		0.52	%(4)		0.60	%(4)		0.25	%(4)(5)(7)
Net investment income		1.44	%(4)(7)		0.91	%(4)		0.25	%(4)		0.01	%(4)(5)(7)
Rebate from Morgan Stanley affiliate		N/A			N/A			N/A			0.01	%(7)
Supplemental Data:
Net assets, end of period, in thousands	$	25,316		$	8,551		$	412		$	50

  (1)  Commencement of Offering.

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

  (3)  Includes capital gain and paid-in-capital distributions of less than $0.001.

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

PERIOD ENDED	EXPENSE RATIO			NET INVESTMENT INCOME (LOSS) RATIO
June 30, 2019		0.77	%		0.87	%
December 31, 2018		0.79			0.64
December 31, 2017		0.95			(0.10	)
December 31, 2016		0.59			(0.33	)

  (5)  The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."

  (6)  Not annualized.

  (7)  Annualized.

See Notes to Financial Statements
23

Morgan Stanley Tax-Free Daily Income Trust

Investment Advisory Agreement Approval (unaudited)

Nature, Extent and Quality of Services

The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").

The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.

Performance, Fees and Expenses of the Fund

The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2018, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. When a fund's management fee and/or its total expense ratio are higher than its peers, the Board and the Adviser discuss the reasons for this and,

24

Morgan Stanley Tax-Free Daily Income Trust

Investment Advisory Agreement Approval (unaudited) continued

where appropriate, they discuss possible waivers and/or caps. The Board noted that the Fund's management fee was lower than its peer group average and its total expense ratio was higher than its peer group average. After discussion, the Board concluded that the Fund's (i) performance was acceptable, (ii) management fee was competitive with its peer group average and (iii) total expense ratio was acceptable.

Economies of Scale

The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which does not include breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.

Profitability of the Adviser and Affiliates

The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.

Other Benefits of the Relationship

The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.

Resources of the Adviser and Historical Relationship Between the Fund and the Adviser

The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the

25

Morgan Stanley Tax-Free Daily Income Trust

Investment Advisory Agreement Approval (unaudited) continued

historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.

Other Factors and Current Trends

The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.

General Conclusion

After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.

26

Privacy Notice (unaudited)

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

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

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

27

Privacy Notice (unaudited) continued

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

28

Privacy Notice (unaudited) continued

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

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

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

29

Trustee and Officer Information (unaudited)

Trustees

Frank L. Bowman
Kathleen A. Dennis
Nancy C. Everett
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia Maleski
Michael E. Nugent, Chair of the Board
W. Allen Reed

Transfer Agent

DST Asset Manager Solutions, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02169

Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111

Independent Registered Public Accounting Firm

Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

Officers

John H. Gernon
President and Principal Executive Officer
Timothy J. Knierim
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President

Legal Counsel

Dechert LLP
1095 Avenue of the Americas
New York, New York 10036

Counsel to the Independent Trustees

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

Adviser and Administrator

Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036

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 the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 548-7786.

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

Morgan Stanley Distribution, Inc., member FINRA.

© 2019 Morgan Stanley

DSTSAN
2660958 EXP 08.31.2020

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.

(a) Refer to Item 1.

(b) Not applicable.

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

Not applicable.

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

Applicable only to annual reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable to reports filed by closed-end funds.

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

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

Item 11. Controls and Procedures

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

(b)  There were no changes in the registrant’s internal control over financial reporting that occurred during the most recent fiscal half-year period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

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

Not Applicable.

Item 13. Exhibits

(a) 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.

SIGNATURES

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

Morgan Stanley Tax-Free Daily Income Trust

/s/ John H. Gernon

John H. Gernon

Principal Executive Officer

August 15, 2019

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

/s/ John H. Gernon

John H. Gernon

Principal Executive Officer

August 15, 2019

/s/ Francis Smith

Francis Smith

Principal Financial Officer

August 15, 2019