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: 811-09713
Active Assets Institutional Money 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
Institutional Money 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 Federal Open Market Committee (the "Fed") lowered its target rate for
federal funds to 1.00 percent, a 45-year low, on June 25, 2003. It maintained
that target throughout the second half of the year to encourage a faster pace of
economic activity. By the second half of 2003 the combination of this highly
accommodative monetary posture and stimulative fiscal policies in the form of
tax cuts appeared to begin to have an effect, with many companies reporting
improved second-half earnings and the third-quarter GDP increasing to 8.2
percent. The Fed's sustained emphasis on low interest rates had a marked impact
on money market fund yields, which reached record low levels during the period.
PERFORMANCE ANALYSIS
As of December 31, 2003, Active Assets Institutional Money Trust had net assets
of more than $1.0 billion and the average maturity of the Fund's portfolio was
45 days. For the six-month period ended December 31, 2003, the Fund returned
0.46 percent. For the seven-day period ended December 31, 2003, the Fund
provided an effective annualized yield, and a current yield, both of 0.92
percent, while its 30-day moving average yield for December was likewise 0.92
percent. Past performance is no guarantee of future results.
Our strategy in managing the Fund remained consistent with our long-term focus
on maintaining preservation of capital and very high liquidity.* As we have in
the past, we adhered to a conservative approach that avoided the use of
derivatives or structured notes that might fluctuate excessively with changing
interest rates. On December 31, 2003, approximately 55 percent of the Fund's
portfolio was invested in high-quality commercial paper, 15 percent in federal
agency obligations, 18 percent in certificates of deposit issued by financially
strong commercial banks and the remaining 12 percent in an overnight repurchase
agreement. At the end of the fiscal period, approximately 85 percent of the
Fund's holdings were due to mature in less than four months.
- ----------------------------------------------------
* 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.
2
<Table>
<Caption>
PORTFOLIO COMPOSITION
Commercial Paper 55.6%
Certificates of Deposit 17.7
U.S. Government Agencies 14.7
Repurchase Agreement 12.0
</Table>
<Table>
<Caption>
MATURITY SCHEDULE
1 - 30 Days 60.1%
31 - 60 Days 14.8
61 - 90 Days 7.7
91 - 120 Days 3.1
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 INVESTS IN HIGH QUALITY, SHORT-TERM DEBT OBLIGATIONS.
2) IN SELECTING INVESTMENTS, THE FUND'S "INVESTMENT MANAGER," MORGAN STANLEY
INVESTMENT ADVISORS INC., SEEKS TO MAINTAIN THE FUND'S SHARE PRICE AT $1.00.
THE SHARE PRICE REMAINING STABLE AT $1.00 MEANS THAT THE FUND WOULD PRESERVE
THE PRINCIPAL VALUE OF YOUR INVESTMENT.
3
Active Assets Institutional Money Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
<Table>
<Caption>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------
Commercial Paper (55.6%)
Banking (4.9%)
$ 20,000 Bank of America Corp.
05/05/04.................................................. 1.14% $ 19,922,156
30,000 Citicorp
01/14/04.................................................. 1.08 29,989,200
--------------
49,911,356
--------------
Finance - Automotive (5.4%)
15,000 DaimlerChrysler Revolving Auto Conduit
01/21/04.................................................. 1.10 14,991,292
40,000 New Center Asset Trust
01/08/04 - 03/17/04....................................... 1.08 - 1.09 39,961,708
--------------
54,953,000
--------------
Finance - Consumer (7.4%)
15,000 Barton Capital Corp. - 144A*
01/09/04.................................................. 1.09 14,996,821
18,000 Old Line Funding Corp. - 144A*
01/05/04.................................................. 1.09 17,998,365
41,900 Sheffield Rec. Corp. - 144A*
01/05/04 - 01/22/04....................................... 1.07 - 1.09 41,885,165
--------------
74,880,351
--------------
Finance - Corporate (4.0%)
40,000 CAFCO, LLC - 144A*
01/23/04.................................................. 1.08 39,974,800
--------------
Financial Conglomerates (12.7%)
51,000 General Electric Capital Corp.
01/27/04 - 05/06/04....................................... 1.08 - 1.18 50,908,750
45,000 Mortgage Interest Networking Trust
01/05/04 - 02/20/04....................................... 1.08 - 1.09 44,964,553
21,000 Preferred Receivables Funding Corp. - 144A*
01/05/04.................................................. 1.09 20,998,092
12,000 Yorktown Capital LLC - 144A*
01/16/04.................................................. 1.09 11,994,913
--------------
128,866,308
--------------
Integrated Oil (2.0%)
20,000 Shell Finance Oil (U.K.) PLC
03/08/04.................................................. 1.11 19,959,667
--------------
</Table>
4
See Notes to Financial Statements
Active Assets Institutional Money Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
<Table>
<Caption>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------
International Banks (19.2%)
$ 20,000 BNP Paribas Finance Inc.
01/15/04.................................................. 1.09% $ 19,992,164
25,000 Canadian Imperial Holdings Inc.
02/04/04.................................................. 1.09 24,975,021
40,000 CBA (Delaware) Finance Inc.
01/07/04.................................................. 1.07 39,994,055
20,000 Dexia Delaware LLC
01/21/04.................................................. 1.08 19,988,600
15,000 ING (U.S.) Funding LLC
01/12/04.................................................. 1.08 14,995,500
30,000 Societe Generale N.A. Inc.
02/05/04.................................................. 1.08 29,969,400
45,000 Toronto-Dominion Holdings (U.S.A.), Inc.
01/02/04 - 02/02/04....................................... 1.08 - 1.09 44,971,842
--------------
194,886,582
--------------
Total Commercial Paper (Cost $563,432,064)............................... 563,432,064
--------------
Certificates of Deposit (17.7%)
25,000 BNP Paribas, New York Branch
01/20/04.................................................. 1.09 25,000,000
15,000 Bank of America, N.A.
03/15/04.................................................. 1.10 15,000,000
20,000 Citibank, N.A.
02/19/04.................................................. 1.10 20,000,000
25,000 Lloyds TSB Bank PLC, New York Branch
01/30/04.................................................. 1.07 25,000,193
47,000 Rabobank Nederland, New York Branch
06/21/04 - 06/22/04....................................... 1.10 - 1.11 47,000,000
22,000 Royal Bank of Scotland PLC, New York Branch
05/07/04.................................................. 1.12 22,001,478
25,000 UBS AG, Stamford Branch
07/01/04.................................................. 1.10 25,000,000
--------------
Total Certificates of Deposit (Cost $179,001,671)........................ 179,001,671
--------------
</Table>
5
See Notes to Financial Statements
Active Assets Institutional Money Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
<Table>
<Caption>
ANNUALIZED
PRINCIPAL DESCRIPTION YIELD
AMOUNT IN AND ON DATE OF
THOUSANDS MATURITY DATES PURCHASE VALUE
- -------------------------------------------------------------------------------------------------------
U.S. Government Agencies (14.7%)
$ 25,000 Federal Home Loan Banks
01/30/04.................................................. 1.09% $ 24,979,000
62,841 Federal National Mortgage Assoc.
01/07/04 - 06/02/04....................................... 1.01 - 1.10 62,713,088
62,000 Freddie Mac
01/09/04 - 04/22/04....................................... 1.06 - 1.15 61,860,251
--------------
Total U.S. Government Agencies (Cost $149,552,339)....................... 149,552,339
--------------
Repurchase Agreement (12.0%)
121,240 Goldman, Sachs & Co.
due 01/02/04 (dated 12/31/03; proceeds $121,246,870) (a)
(Cost $121,240,000)....................................... 1.02 121,240,000
--------------
Total Investments (Cost $1,013,226,074) (b).................. 100.0% 1,013,226,074
Other Assets in Excess of Liabilities........................ 0.0 85,527
----- --------------
Net Assets................................................... 100.0% $1,013,311,601
===== ==============
</Table>
- ---------------------
<Table>
* Resale is restricted to qualified institutional investors.
(a) Collateralized by Federal National Mortgage Assoc. 5.50% due
11/01/33 valued at $123,664,801.
(b) Cost is the same for federal income tax purposes.
</Table>
6
See Notes to Financial Statements
Active Assets Institutional Money Trust
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
December 31, 2003 (unaudited)
<Table>
Assets:
Investments in securities, at
value (including a repurchase
agreement of $121,240,000)
(cost $1,013,226,074)........... $1,013,226,074
Cash.............................. 3,212
Interest receivable............... 231,684
Prepaid expenses.................. 73,899
--------------
Total Assets.................. 1,013,534,869
--------------
Liabilities:
Payable for:
Investment management fee..... 137,456
Dividends to shareholders..... 50,731
Accrued expenses.................. 35,081
--------------
Total Liabilities............. 223,268
--------------
Net Assets.................... $1,013,311,601
==============
Composition of Net Assets:
Paid-in-capital................... $1,013,202,301
Accumulated undistributed net
investment income............... 109,300
--------------
Net Assets.................... $1,013,311,601
==============
Net Asset Value Per Share,
1,013,311,601 shares outstanding
(unlimited authorized shares of
$.01 par value)................... $1.00
==============
</Table>
Statement of Operations
For the six months ended December 31, 2003 (unaudited)
<Table>
Net Investment Income:
Interest Income....................... $6,610,304
----------
Expenses
Investment management fee............. 915,855
Shareholder reports and notices....... 35,650
Custodian fees........................ 24,376
Professional fees..................... 23,009
Registration fees..................... 14,194
Trustees' fees and expenses........... 7,449
Transfer agent fees and expenses...... 1,553
Other................................. 21,504
----------
Total Expenses.................... 1,043,590
----------
Net Investment Income............. 5,566,714
Net Realized Gain................. 746
----------
Net Increase.......................... $5,567,460
==========
</Table>
7
See Notes to Financial Statements
Active Assets Institutional Money 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....................................... $ 5,566,714 $ 16,141,230
Net realized gain........................................... 746 8,900
-------------- --------------
Net Increase............................................ 5,567,460 16,150,130
-------------- --------------
Dividends and Distributions to Shareholders from:
Net investment income....................................... (5,566,714) (16,141,230)
Net realized gain........................................... (746) (8,900)
-------------- --------------
Total Dividends and Distributions....................... (5,567,460) (16,150,130)
-------------- --------------
Net decrease from transactions in shares of beneficial
interest.................................................. (135,153,915) (4,293,399)
-------------- --------------
Net Decrease............................................ (135,153,915) (4,293,399)
Net Assets:
Beginning of period......................................... 1,148,465,516 1,152,758,915
-------------- --------------
End of Period
(Including accumulated undistributed net investment income
of $109,300 and $109,300, respectively)..................... $1,013,311,601 $1,148,465,516
============== ==============
</Table>
8
See Notes to Financial Statements
Active Assets Institutional Money Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED)
1. Organization and Accounting Policies
Active Assets Institutional Money 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 high
current income, preservation of capital and liquidity. The Fund was organized as
a Massachusetts business trust on November 23, 1999 and commenced operations on
February 15, 2000.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued at amortized
cost, which approximates market value.
B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
C. Repurchase Agreements -- The Fund may invest directly with institutions in
repurchase agreements. The Fund's custodian receives the collateral, which is
marked-to-market daily to determine that the value of the collateral does not
decrease below the repurchase price plus accrued interest.
D. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
E. Dividends and Distributions to Shareholders -- The Fund records dividends and
distributions to shareholders as of the close of each business day.
F. Use of Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. Investment Management Agreement
Pursuant to an Investment Management Agreement with Morgan Stanley Investment
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual rate
of 0.15% to the net assets of the Fund determined as of the close of each
business day.
The Investment Manager has agreed to reimburse all operating expenses and to
waive the compensation provided for in its Investment Management Agreement to
the extent that such
9
Active Assets Institutional Money Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2003 (UNAUDITED) continued
expenses and compensation on an annualized basis exceed 0.20% of the daily net
assets of the Fund.
3. 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 $23,093,772,650, and
$23,233,536,276, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager, is the Fund's
transfer agent.
4. 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................................................. 1,901,189,827 4,177,514,450
Shares issued in reinvestment of dividends and
distributions............................................. 5,550,486 16,254,374
-------------- --------------
1,906,740,313 4,193,768,824
Shares redeemed............................................. (2,041,894,228) (4,198,062,223)
-------------- --------------
Net decrease in shares outstanding.......................... (135,153,915) (4,293,399)
============== ==============
</Table>
5. 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.
10
Active Assets Institutional Money Trust
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED JUNE 30, FEBRUARY 15, 2000*
MONTHS ENDED ------------------------------------ THROUGH
DECEMBER 31, 2003 2003 2002 2001 JUNE 30, 2000
----------------- -------- -------- -------- ------------------
(unaudited)
Selected Per Share Data:
Net asset value, beginning of
period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- ------- -------
Net income from investment
operations.......................... 0.005 0.014 0.024 0.058 0.023
Less dividends from net investment
income.............................. (0.005)+ (0.014)+ (0.024)+ (0.058)+ (0.023)
------ ------ ------- ------- -------
Net asset value, end of period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= ======= =======
Total Return......................... 0.46%(1) 1.37% 2.45% 5.95% 2.31%(1)
Ratios to Average Net Assets:
Expenses............................. 0.17%(2) 0.17% 0.17% 0.19% 0.20%(2)(3)
Net investment income................ 0.91%(2) 1.36% 2.40% 5.61% 6.12%(2)(3)
Supplemental Data:
Net assets, end of period, in
millions............................ $1,013 $1,148 $1,153 $1,146 $813
</Table>
- ---------------------
<Table>
* Commencement of operations.
+ Includes capital gain distribution of less than $0.001.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were
reimbursed or waived by the Investment Manager, the
annualized expense and net investment income ratios would
have been 0.31% and 6.01%, respectively.
</Table>
11
See Notes to Financial Statements
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. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
(c) 2003 Morgan Stanley
[MORGAN STANLEY LOGO]
MORGAN STANLEY FUNDS
Active Assets
Institutional
Money Trust
Semiannual Report
December 31, 2003
[MORGAN STANLEY LOGO]
13678B04-AP-2/04
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
Item 8. [Reserved.]
Item 9 - Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10 Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Active Assets Institutional Money Trust
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
February 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
February 18, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
February 18, 2004
3