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

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-06530

Active Assets California Tax-Free Trust
(Exact name of registrant as specified in charter)

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

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

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

Date of fiscal year end: June 30, 2004

Date of reporting period: December 31, 2003

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Active Assets
California Tax-Free Trust performed during the semiannual period. We will
provide an overview of the market conditions, and discuss some of the factors
that affected performance during the reporting period. In addition, this report
includes the Fund's financial statements and a list of Fund investments.

This material must be preceded or accompanied by a prospectus for the fund being
offered. Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the Fund will achieve its investment objective.
The Fund is subject to market risk, which is the possibility that market values
of securities owned by the Fund will decline and, therefore, the value of the
Fund's shares may be less than what you paid for them. Accordingly, you can lose
money investing in this Fund.

FUND REPORT

For the six-month period ended December 31, 2003

MARKET CONDITIONS

The six months ended December 31, 2003, was a period of record low yields in the
municipal money market. After its latest cut in the federal funds rate target on
June 25, 2003, the Federal Reserve Open Market Committee (the "Fed") indicated
that it intended to remain in an accommodative stance for a considerable period
in an attempt to get the economy back onto a solid footing. The short end of the
tax-free money market yield curve was largely flat through much of the year,
though it inverted in the last quarter as seasonal redemptions pushed yields for
the shortest maturities higher. Yields on municipal money market paper were
highly attractive relative to taxable instruments. Among one-year maturities the
ratio of municipals to taxable yields exceeded 90 percent for much of the year
and for overnight paper the ratio at times rose above 100 percent.

The accommodative monetary policy appeared to be having a positive effect as
corporate profits and overall GDP growth began to show signs of life. As the
year drew to a close, these improvements were reflected in better prospects for
most municipalities, with tax receipts on the rise and the general trend toward
widespread credit downgrades slowing. Many states worked to close budget gaps
through a combination of increased fees and service cuts as well as one-time
measures such as tobacco bond receipts and long-term refinancing. New York and
California continued to lead the country in both issuance and deficits, with
California experiencing downgrades in its general obligation bond ratings by
both Standard & Poor's and Moody's.

Against this backdrop, the issuance of traditional notes rose considerably in
2003. Rising deficits led many issuers to turn to the capital markets for
temporary borrowing to meet shortfalls in cash flow. Long-term bond issuance
also rose as many states and local issuers moved to lock in low financing rates
for capital expenditures and to refinance higher-cost debt. Overall municipal
issuance for calendar year 2003 exceeded the record levels of 2002, setting a
new all-time high.

PERFORMANCE ANALYSIS

As of December 31, 2003, Active Assets California Tax-Free Trust had net assets
of more than $762 million. For the six-month period ended December 31, 2003, the
Fund provided a total return of 0.16 percent. For the seven-day period ended
December 31, 2003, the Fund provided an effective annualized yield of 0.53
percent and a current yield of 0.53 percent, while its 30-day moving average
yield for December was 0.44 percent. Past performance is no guarantee of future
results.

The general shape of the yield curve and the very low level of interest rates
reduced incentives for extending the portfolio's maturity structure. As a
result, Active Assets California Tax-Free Trust spent the period with an
emphasis on the short-to-intermediate maturity range within the municipal money
market. This approach had the added benefit of positioning the Fund defensively
against any potential increases in interest rates at the short end of the curve.
The uncertain state of the economy also made us largely unwilling to introduce
added interest-rate risk into the Fund's portfolio.

Our general caution was reflected in the Fund's composition. By the end of the
period, the portfolio was comprised of 75 to 80 percent short-term variable rate
paper, with the remainder in short-term tax-exempt commercial paper and
fixed-rate municipal notes. As always, we remained highly selective in our
security selection and thoroughly screened potential purchases to ensure that
they met the Fund's credit criteria. We were especially cautious in our
purchases of longer fixed-rate paper, given California's ongoing budgetary
difficulties.

<Table>
<Caption>
PORTFOLIO COMPOSITION

Variable Rate Municipal Obligations 75.8%
Commercial Paper 14.5
Municipal Notes 9.7
</Table>

<Table>
<Caption>
MATURITY SCHEDULE

1-30 Days 80.1%
31-60 Days 5.6
61-90 Days 0.0
91-120 Days 0.0
121+ Days 14.3
</Table>

Subject to change daily. All percentages are as a percentage of total
investments. Provided for informational purposes only and should not be deemed
as a recommendation to buy or sell the securities mentioned. Morgan Stanley is a
full-service securities firm engaged in securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.

INVESTMENT STRATEGY

1. THE FUND WILL INVEST IN HIGH QUALITY, SHORT-TERM SECURITIES THAT ARE NORMALLY
MUNICIPAL OBLIGATIONS THAT PAY INTEREST EXEMPT FROM FEDERAL AND CALIFORNIA
INCOME TAXES.

2. THE FUND'S "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC.
SEEKS TO MAINTAIN THE FUND'S SHARE PRICE AT $1.00. THE SHARE PRICE REMAINING
STABLE AT $1.00 MEANS THAT THE FUND WOULD PRESERVE THE PRINCIPAL VALUE OF
YOUR INVESTMENT.*

- ----------------------------------------------------
* An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks
to preserve the value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.

Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- ---------------------------------------------------------------------------------------------------------

California Tax-Exempt Short-Term Variable Rate Municipal
Obligations (78.6%)
ABAG Finance Authority for Nonprofit Corporations,
$ 3,600 Computer History Museum Ser 2002........................ 1.18% 01/08/04 $ 3,600,000
8,400 Episcopal Homes Foundation Ser 2000 COPs................ 1.28 01/08/04 8,400,000
7,000 Lease Purchase 2003 Ser A............................... 1.30 01/08/04 7,000,000
12,800 Antelope Valley Union High School District, School
Facility Bridge Funding 2002 Ser C (FSA)................ 1.04 01/08/04 12,800,000
15,300 Bay Area Toll Authority, San Francisco Bay Area Toll
Bridge Ser B (Ambac).................................... 1.16 01/08/04 15,300,000
20,000 Big Bear Lake, Southwest Gas Corp 1993 Ser A (AMT)........ 1.12 01/08/04 20,000,000
11,970 California Alternative Energy Source Finance Authority,
General Electric Capital Corp-Arroyo Energy 1993 Ser B
(AMT)................................................... 1.15 01/08/04 11,970,000
8,400 California Department of Water Resources,
Power Supply Ser B Subser B-1 & B-6..................... 1.27 01/02/04 8,400,000
California Educational Facilities Authority,
5,000 California Institute of Technology Ser 1994............. 1.10 01/08/04 5,000,000
15,165 Stanford University Ser L-5............................. 1.05 01/08/04 15,165,000
4,220 California Health Facilities Financing Authority,
Adventist Health System/West 1998 Ser B (MBIA).......... 1.27 01/02/04 4,220,000
California Housing Finance Agency,
5,000 Home Mortgage 2002 Ser M (AMT).......................... 1.29 01/02/04 5,000,000
15,000 Home Mortgage 2003 Ser F (AMT) (FSA).................... 1.11 01/08/04 15,000,000
California Pollution Control Financing Authority,
10,485 Chevron USA Inc Ser 1984 B.............................. 1.10 06/15/04 10,486,309
5,000 Solid Waste Disposal Waste Management Inc Ser 2002 A
(AMT)................................................... 1.29 01/08/04 5,000,000
2,000 California Statewide Communities Development Authority,
Sutter Health Ser 1995 COPs (Ambac)..................... 1.27 01/02/04 2,000,000
32,015 California Transit Finance Authority, Ser 1997 (FSA)...... 1.25 01/08/04 32,015,000
10,000 Chino Basin Financing Authority, Inland Empire Utilities
Agency Ser 2002 A (Ambac)............................... 1.03 01/08/04 10,000,000
15,000 Contra Costa County, Multifamily The Park Regency
Ser 2003 Ser F (AMT).................................... 1.20 01/08/04 15,000,000
9,000 Eastern Municipal Water District, Water & Sewer Ser 1993 B
COPs (FGIC)............................................. 1.20 01/08/04 9,000,000
21,000 Elsinore Valley Municipal Water District, Ser 2000 A COPs
(FGIC).................................................. 1.10 01/08/04 21,000,000
10,900 Fremont, Creekside Village Multifamily Ser 1985 D......... 1.16 01/08/04 10,900,000
9,000 Fresno, Sewer System Sub Lien Ser 2000 A (FGIC)........... 1.10 01/08/04 9,000,000
7,000 Glendale Financing Authority, 2000 Police Building COPs... 1.25 01/08/04 7,000,000
8,000 Golden Empire Schools Financing Authority, Kern High
School District Ser 2001................................ 1.12 01/08/04 8,000,000
</Table>

4
See Notes to Financial Statements

Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- ---------------------------------------------------------------------------------------------------------

Irvine Assessment District,
$ 7,150 No 87-8, Improvement Bond Act 1915...................... 1.27% 01/02/04 $ 7,150,000
8,550 No 93-14, Improvement Bond Act 1915..................... 1.26 01/02/04 8,550,000
2,600 Kern Water Bank Authority, Ser 2003 A..................... 1.10 01/08/04 2,600,000
11,700 Lancaster, Antelope Pines Apartment Ser 2001 A............ 1.25 01/08/04 11,700,000
Los Angeles, Multifamily
30,000 1985 Ser K.............................................. 1.20 01/08/04 30,000,000
2,025 1994 Ser A (AMT)........................................ 1.35 01/02/04 2,025,000
16,100 Los Angeles, Wastewater System Ser 2001 A & B (FGIC)...... 1.15 12/09/04 16,100,000
22,100 Los Angeles Community Redevelopment Agency, Grand
Promenade Ser 2002...................................... 1.20 01/08/04 22,100,000
10,000 Los Angeles Convention and Exhibition Center Authority,
Ser 2003 F (Ambac)...................................... 0.97 06/16/04 10,000,000
16,095 Los Angeles County Metropolitan Transportation Authority,
Sales Tax Ser 1993-A (MBIA)............................. 1.10 01/08/04 16,095,000
Los Angeles Department of Water & Power,
12,000 Power System 2001 Ser B Subser B-1...................... 1.20 01/08/04 12,000,000
15,000 Water System 2001 Ser B Subser B-1...................... 1.25 01/08/04 15,000,000
6,500 Water System 2001 Ser B Subser B-6...................... 1.27 01/02/04 6,500,000
Metropolitan Water District of Southern California,
8,000 Water 1999 Ser C........................................ 1.25 01/08/04 8,000,000
13,700 Water 2000 Ser B-2...................................... 1.07 01/08/04 13,700,000
2,000 Water 2000 Ser B-3...................................... 1.26 01/02/04 2,000,000
15,600 Monterey Peninsula Water Management District, Wastewater
Ser 1992 COPs........................................... 1.25 01/08/04 15,600,000
5,150 Newport Beach, Hoag Memorial Hospital Presbyterian Ser
1996 B & C.............................................. 1.30 01/02/04 5,150,000
27,700 Oakland-Alameda County Coliseum Authority, Oakland
Coliseum 2000 Refg Ser C-1.............................. 1.20 01/08/04 27,700,000
3,000 Orange County Housing Authority, Oasis Martinique Refg
1998 Issue I............................................ 1.24 01/08/04 3,000,000
5,000 Pasadena, City Hall & Park Improvement Ser 2003 COPs
(Ambac)................................................. 1.20 01/08/04 5,000,000
4,500 Pomona Redevelopment Agency, Park & Plaza Apartments Ser
1998 A.................................................. 1.20 01/08/04 4,500,000
11,700 Rancho Mirage Joint Powers Financing Authority, Eisenhower
Medical Center Ser 1997 B COPs (MBIA)................... 1.11 01/08/04 11,700,000
6,950 Redlands, Orange Village Apartments 1988 Ser A (AMT)...... 1.15 01/08/04 6,950,000
15,000 San Bernardino County, Medical Center Financing Ser 1998
COPs (MBIA)............................................. 1.11 01/08/04 15,000,000
11,275 San Francisco City & County, Folsom-Dore Apartments Ser
2002 A (AMT)............................................ 1.33 01/08/04 11,275,000
</Table>

5
See Notes to Financial Statements

Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN COUPON DEMAND
THOUSANDS RATE+ DATE* VALUE
- ---------------------------------------------------------------------------------------------------------

$ 3,400 San Francisco City & County Finance Corporation, Moscone
Center Ser 2000-1 (Ambac)............................... 1.25% 01/08/04 $ 3,400,000
7,500 San Francisco City & County Redevelopment Agency, Bayside
Village Multifamily Ser 1985 A.......................... 1.22 01/08/04 7,500,000
13,400 San Jose Redevelopment Agency, Merged Area 1996 Ser B..... 1.15 01/08/04 13,400,000
9,000 Southern California Public Power Authority, Transmission
Refg Ser 2001 A (FSA)................................... 1.10 01/08/04 9,000,000
5,120 Turlock Irrigation District, Ser 1988 A................... 1.12 01/08/04 5,120,000
------------
Total California Tax-Exempt Short-Term Variable Rate Municipal Obligations
(Cost $599,071,309)........................................................ 599,071,309
------------
</Table>

<Table>
<Caption>
YIELD TO
MATURITY
COUPON MATURITY ON DATE OF
RATE DATE PURCHASE
------ -------- ----------

California Tax-Exempt Commercial Paper (15.0%)
5,404 California Department of Water Resources Ser
1......................................... 1.05% 01/22/04 1.05% 5,404,000
10,000 California Infrastructure & Economic
Development Bank, Salvation Army Western
Territory Ser 2001........................ 1.08 01/28/04 1.08 10,000,000
East Bay Municipal Utility District,
10,000 Water System Ser 1997..................... 0.97 02/10/04 0.97 10,000,000
10,000 Water System Ser 1997..................... 1.05 01/14/04 1.05 10,000,000
11,500 Water System Ser 1997..................... 1.05 02/18/04 1.05 11,500,000
10,000 Los Angeles County Metropolitan
Transportation Authority, 2nd Sub Sales
Tax Ser A 0.90 01/13/04.. 0.90 10,000,000
San Diego County Water Authority,
7,500 Ser 1..................................... 0.96 01/27/04 0.96 7,500,000
8,000 Ser 1..................................... 1.02 02/10/04 1.02 8,000,000
8,000 Ser 1..................................... 1.02 02/13/04 1.02 8,000,000
6,400 San Gabriel Valley Council of Governments,
Alameda Corridor-East GANs................ 0.97 02/10/04 0.97 6,400,000
University of California Regents,
12,000 Ser A..................................... 0.88 01/08/04 0.88 12,000,000
10,000 Ser A..................................... 1.05 01/13/04 1.05 10,000,000
6,000 Ser A..................................... 1.05 01/14/04 1.05 6,000,000
------------
Total California Tax-Exempt Commercial Paper
(Cost $114,804,000)....................................................... 114,804,000
------------
</Table>

6
See Notes to Financial Statements

Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued

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

California Tax-Exempt Short-Term Municipal Notes
(10.1%)
$30,000 California School Cash Reserve Program
Authority, 2003 Pool Ser A (Ambac), dtd
07/03/03.................................. 2.00% 07/06/04 0.90% $ 30,167,388
14,795 California Statewide Communities Development
Authority, 2003 Ser A-1 TRANs (FSA), dtd
07/01/03.................................. 2.00 06/30/04 0.88 14,876,217
8,540 Los Angeles County, 2003-2004 Ser A TRANs,
dtd 07/01/03.............................. 2.00 06/30/04 0.85 8,588,151
15,000 Santa Cruz County, 2003-2004 TRANs, dtd
07/02/03.................................. 2.00 07/01/04 0.91 15,080,554
Puerto Rico
8,000 Puerto Rico, Ser 2004 TRANs, dtd 10/15/03... 2.00 07/30/04 1.00 8,045,850
------------
Total California Tax-Exempt Short-Term Municipal Notes
(Cost $76,758,160)........................................................ 76,758,160
------------
Total Investments
(Cost $790,633,469) (a)(b)...................................... 103.7% 790,633,469

Liabilities in Excess of Other Assets............................. (3.7) (28,534,234)
----- ------------
Net Assets........................................................ 100.0% $762,099,235
===== ============
</Table>

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

<Table>

AMT Alternative Minimum Tax.
COPs Certificates of Participation.
GANs Grant Anticipation Notes.
TRANs Tax and Revenue Anticipation Notes.
+ Rate shown is rate in effect at December 31, 2003.
* Date on which the principal amount can be recovered through
demand.
(a) Securities have been designated as collateral in an amount
equal to $29,797,686 in connection with the purchase of
delayed delivery securities.
(b) Cost is the same for federal income tax purposes.

Bond Insurance:
- ---------------
Ambac Ambac Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</Table>

7
See Notes to Financial Statements

Active Assets California Tax-Free Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
December 31, 2003 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $790,633,469)....................................... $790,633,469
Cash........................................................ 123,486
Interest receivable......................................... 1,595,995
Prepaid expenses............................................ 19,591
------------
Total Assets............................................ 792,372,541
------------
Liabilities:
Payable for:
Investments purchased................................... 29,797,686
Investment management fee............................... 323,532
Distribution fee........................................ 68,246
Accrued expenses and other payables......................... 83,842
------------
Total Liabilities....................................... 30,273,306
------------
Net Assets.............................................. $762,099,235
============
Composition of Net Assets:
Paid-in-capital............................................. $762,094,569
Accumulated undistributed net investment income............. 4,666
------------
Net Assets.............................................. $762,099,235
============
Net Asset Value Per Share,
762,075,243 shares outstanding (unlimited authorized
shares of $.01 par value)................................... $1.00
============
</Table>

8
See Notes to Financial Statements

Active Assets California Tax-Free Trust
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended December 31, 2003 (unaudited)

<Table>

Net Investment Income:
Interest Income............................................. $3,516,494
----------
Expenses
Investment management fee................................... 1,810,958
Distribution fee............................................ 382,494
Transfer agent fees and expenses............................ 44,867
Professional fees........................................... 27,773
Shareholder reports and notices............................. 20,306
Custodian fees.............................................. 16,504
Registration fees........................................... 10,349
Trustees' fees and expenses................................. 8,227
Other....................................................... 10,598
----------
Total Expenses.......................................... 2,332,076

Less: expense offset........................................ (16,445)
----------
Net Expenses............................................ 2,315,631
----------
Net Investment Income....................................... $1,200,863
==========
</Table>

9
See Notes to Financial Statements

Active Assets California Tax-Free Trust
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 2003 JUNE 30, 2003
----------------- -------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 1,200,863 $ 4,959,218
Dividends to shareholders from net investment income........ (1,200,762) (4,959,654)
Net decrease from transactions in shares of beneficial
interest.................................................. (348,575) (207,445)
------------ ------------
Net Decrease............................................ (348,474) (207,881)
Net Assets:
Beginning of period......................................... 762,447,709 762,655,590
------------ ------------
End of Period
(Including accumulated undistributed net investment income
of $4,666 and $4,565, respectively)......................... $762,099,235 $762,447,709
============ ============
</Table>

10
See Notes to Financial Statements

Active Assets California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED)

1. Organization and Accounting Policies

Active Assets California Tax-Free Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is to
provide a high level of daily income which is exempt from federal and California
income tax consistent with stability of principal and liquidity. The Fund was
organized as a Massachusetts business trust on July 10, 1991 and commenced
operations on November 12, 1991.

The following is a summary of significant accounting policies:

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

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

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

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

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

2. Investment Management Agreement

Pursuant to an Investment Management Agreement with Morgan Stanley Investment
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million; 0.425% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.375% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.35% to the portion of the
daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.325% to
the portion of the daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.30% to the portion of the daily net assets exceeding $2 billion but
not

Active Assets California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED) continued

exceeding $2.5 billion; 0.275% to the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.25% to the portion of the daily
net assets exceeding $3 billion.

3. Plan of Distribution

Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and in accordance
with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act,
finances certain expenses in connection with the promotion of sales of Fund
shares.

Reimbursements for these expenses are made in monthly payments by the Fund to
the Distributor, which will in no event exceed an amount equal to a payment at
the annual rate of 0.15% of the Fund's average daily net assets during the
month. Expenses incurred by the Distributor pursuant to the Plan in any fiscal
year will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the six months ended December 31, 2003, the
distribution fee was accrued at the annual rate of 0.10%.

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales/maturities of portfolio securities
for the six months ended December 31, 2003, aggregated $726,159,800 and
$791,980,000, respectively.

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

The Fund has an unfunded noncontributory defined benefit pension plan covering
certain independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on factors which include years of service and compensation.
Aggregate pension costs for the six months ended December 31, 2003, included in
Trustees' fees and expenses in the Statement of Operations amounted to $3,283.
At December 31, 2003, the Fund had an accrued pension liability of $53,228 which
is included in accrued expenses in the Statement of Assets and Liabilities.

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

Active Assets California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED) continued

5. Shares of Beneficial Interest

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

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
DECEMBER 31, 2003 JUNE 30, 2003
----------------- --------------
(unaudited)

Shares sold................................................. 1,190,582,630 2,216,990,398
Shares issued in reinvestment of dividends.................. 1,200,762 4,959,654
-------------- --------------
1,191,783,392 2,221,950,052
Shares redeemed............................................. (1,192,131,967) (2,222,157,497)
-------------- --------------
Net decrease in shares outstanding.......................... (348,575) (207,445)
============== ==============
</Table>

6. Expense Offset

The expense offset represents a reduction of the custodian fees for earnings on
cash balances maintained by the Fund.

7. Legal Matters

The Investment Manager, certain affiliates of the Investment Manager and certain
investment companies advised by the Investment Manager or its affiliates,
including the Fund, are named as defendants in a number of recently filed,
similar class action complaints. These complaints generally allege that
defendants, including the Fund, violated their statutory disclosure obligations
and fiduciary duties by failing properly to disclose (i) that the Investment
Manager and certain affiliates of the Investment Manager allegedly offered
economic incentives to brokers and others to steer investors to the funds
advised by the Investment Manager or its affiliates rather than funds managed by
other companies, and (ii) that the funds advised by the Investment Manager or
its affiliates, including the Fund, allegedly paid excessive commissions to
brokers in return for their alleged efforts to steer investors to these funds.
The complaints seek, among other things, unspecified compensatory damages,
rescissionary damages, fees and costs. The defendants intend to move to dismiss
these actions and otherwise vigorously to defend them. While the Fund believes
that it has meritorious defenses, the ultimate outcome of these matters is not
presently determinable at this early stage of the litigation, and no provision
has been made in the Fund's financial statements for the effect, if any, of
these matters.

Active Assets California Tax-Free Trust
FINANCIAL HIGHLIGHTS

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

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JUNE 30,
MONTHS ENDED ---------------------------------------------------------
DECEMBER 31, 2003 2003 2002 2001 2000 1999
----------------- --------- --------- --------- --------- ---------
(unaudited)

Selected Per Share Data:

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

Net income from investment operations.... 0.002 0.006 0.011 0.026 0.026 0.023

Less dividends from net investment
income.................................. (0.002) (0.006) (0.011) (0.026) (0.026) (0.023)
------- ------- ------- ------- ------- --------

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

Total Return............................. 0.16%(2) 0.63% 1.15% 2.68% 2.60% 2.31%

Ratios to Average Net Assets:
Expenses (before expense offset)......... 0.61%(3) 0.60% 0.60% 0.59% 0.61% 0.63%(1)

Net investment income.................... 0.31%(3) 0.63% 1.14% 2.64% 2.55% 2.28%

Supplemental Data:
Net assets, end of period, in
thousands............................... $762,099 $762,448 $762,656 $759,089 $697,703 $625,753
</Table>

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

<Table>

(1) Does not reflect the effect of expense offset of 0.01%.
(2) Not annualized.
(3) Annualized.
</Table>

14
See Notes to Financial Statements

(This Page Intentionally Left Blank)

TRUSTEES

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

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Mitchell M. Merin
President

Ronald E. Robison
Executive Vice President and Principal Executive Officer

Barry Fink
Vice President and General Counsel

Joseph J. McAlinden
Vice President

Stefanie V. Chang
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Thomas F. Caloia
Vice President

Mary E. Mullin
Secretary

TRANSFER AGENT

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

INDEPENDENT AUDITORS

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

INVESTMENT ADVISOR

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

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

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

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

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

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MORGAN STANLEY FUNDS

Active Assets
California
Tax-Free Trust

Semiannual Report
December 31, 2003

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13676B04-AP-2/04

Item 2. Code of Ethics.