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: 811-03162

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

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

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

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

Date of fiscal year end: June 30, 2006

Date of reporting period: December 31, 2005

Item 1 - Report to Shareholders

Welcome, Shareholder:

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

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED.

MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT A MUTUAL FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. AN
INVESTMENT IN A MONEY MARKET 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 AN INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE
TO LOSE MONEY BY INVESTING IN THE FUND. PLEASE SEE THE PROSPECTUS FOR MORE
COMPLETE INFORMATION ON INVESTMENT RISKS.

FUND REPORT

For the six months ended December 31, 2005

MARKET CONDITIONS

During the semiannual period ended December 31, 2005, the economy continued to
grow at a good pace, despite soaring oil prices and the Gulf Coast hurricanes.
Gains in employment were respectable, and consumer confidence and spending
remained largely intact. Against this backdrop, the Federal Open Market
Committee (the "Fed") continued to raise the federal funds target rate. Through
a series of four increases of 25 basis points each, the Fed brought the target
rate to 4.25 percent at the end of the period.

Despite the Fed's steady course, yields in the tax-free money markets fluctuated
during the period, with shorter-term variable rate demand obligations (VRDOs)
demonstrating greater volatility than one-year notes. For the overall period,
however, yields across the municipal money market sector ended sharply higher.

PERFORMANCE ANALYSIS

As of December 31, 2005, Active Assets Tax-Free Trust had net assets of
approximately $4 billion and an average portfolio maturity of 35 days. For the
six-month period ended December 31, 2005, the Fund provided a total return of
1.09 percent. For the seven-day period ended December 31, 2005, the Fund
provided an effective annualized yield of 2.84 percent and a current yield of
2.81 percent, while its 30-day moving average yield for December was 2.58
percent. Past performance is no guarantee of future results.

Throughout the period, we managed the portfolio according to our long-standing
conservative discipline. Based on our view that short-term rates would continue
to rise, the Fund was invested primarily in VRDOs. These securities offer daily
or weekly reset features, which allowed the Fund to quickly benefit from rising
short-term rates. To help offset the potential volatility associated with VRDOs
without committing to the uncertainty of longer-dated municipal notes, we
invested in fixed-rate tax-exempt commercial paper in the one- to three-month
range. This strategy afforded us with the flexibility to invest in
higher-yielding securities as they came to market.

We used our research-intensive approach to seek out investments that would add
value while meeting our conservative, risk-conscious criteria. These included
financings for rural schools with attractive debt characteristics and the issues
of certain smaller municipalities. Additionally, we were able to increase the
Fund's yield by taking advantage of seasonal imbalances in supply and demand.
Generally, we favored notes with maturities in the three- to six-month range,
while paring exposure to notes in the one-year range.

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

<Table>
<Caption>
PORTFOLIO COMPOSITION

Variable Rate Municipal obligations 83.2%
Tax-Exempt Commercial Paper 8.5
Municipal Notes & Bonds 8.3
</Table>

MATURITY SCHEDULE

1 - 30 Days 83.8%
31 - 60 Days 2.1
61 - 90 Days 1.9
91 - 120 Days 1.7
121 + Days 10.5
</Table>

Data as of December 31, 2005. Subject to change daily. All percentages for
portfolio composition and maturity schedule are as a percentage of total
investments. These data are provided for informational purposes only and should
not be deemed 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

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 "INVESTMENT ADVISER," 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.

FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO
DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE
REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN
STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC
FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES
NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS,
NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY,
HOWEVER,

OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY
ACCESSING THE SEC'S WEB SITE, HTTP://WWW.SEC.GOV. YOU MAY ALSO REVIEW AND COPY
THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE
OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC
AT (800) SEC-0330. 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) OR BY WRITING THE PUBLIC REFERENCE SECTION OF THE SEC,
WASHINGTON, DC 20549-0102.

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) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.

EXPENSE EXAMPLE

As a shareholder of the Fund, you incur ongoing costs, including advisory fees;
distribution and service (12b-1) 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.

The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 07/01/05 - 12/31/05.

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), and redemption fees, or exchange fees.

<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- ------------- ---------------
07/01/05 -
07/01/05 12/31/05 12/31/05
------------- ------------- ---------------

Actual (1.09% return)....................................... $1,000.00 $1,010.90 $2.47
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,022.61 $2.48
</Table>

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

* Expenses are equal to the Fund's annualized expense ratio of 0.49%
multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED)

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

Short-Term Variable Rate Municipal Obligations (86.5%)
Arizona
$ 15,000 McAllister Academic Village LLC, Arizona State University
Ser 2005 A (Ambac)..................................... 3.51% 01/09/06 $ 15,000,000
5,000 Pima County Industrial Development Authority, El Dorado
Hospital Ser 2004...................................... 3.55 01/09/06 5,000,000
8,805 Sun Devil Energy Center LLC, Arizona State University Ser
2004 (FGIC)............................................ 3.53 01/09/06 8,805,000
2,900 University of Arizona, Student Union Bookstore Ser 1999
COPs (Ambac)........................................... 3.38 01/09/06 2,900,000
California
1,700 East Bay Municipal Utility District, Water System
Sub Refg Ser 2005 B-1 (XLCA)........................... 3.43 01/09/06 1,700,000
4,000 Hacienda-La Puente Unified School District, 2000 Ser B
P-FLOATs PT-1988 (FSA)................................. 3.53 01/09/06 4,000,000
1,900 Los Angeles Department of Water & Power, Water System Ser
2001 B Subser B-1...................................... 3.55 01/09/06 1,900,000
5,800 Pittsburg Redevelopment Agency, Los Medanos Community
Development Sub 2004 Ser A (Ambac)..................... 3.75 01/03/06 5,800,000
Colorado
12,000 Broomfield Urban Renewal Authority, Broomfield Event
Center Ser 2005........................................ 3.53 01/09/06 12,000,000
Colorado Health Facilities Authority,
8,700 Catholic Health Initiatives Ser 2004 B-4............... 3.40 01/09/06 8,700,000
20,000 NCMC Inc Ser 2005 (FSA)................................ 3.48 01/09/06 20,000,000
1,100 Sisters of Charity of Leavenworth Health System Ser
2002................................................... 3.58 01/09/06 1,100,000
15,000 Colorado Student Obligation Bond Authority, Ser 1989 A
(Ambac) (AMT).......................................... 3.55 01/09/06 15,000,000
8,000 Denver Urban Renewal Authority, Stapleton Senior Tax
Increment Ser 2004 A-1 P-FLOATs PT 999................. 3.60 01/09/06 8,000,000
16,720 Midcities Metropolitan School District No 1, STARS BNP
Ser 2004-110........................................... 3.58 01/09/06 16,720,000
31,450 University of Colorado Hospital Authority, Ser 2004 A
(FSA).................................................. 3.48 01/09/06 31,450,000
14,010 Westminster, Multifamily Housing Camden Arbors Apartments
Ser 2004............................................... 3.52 01/09/06 14,010,000
Delaware
7,700 Delaware Economic Development Authority, St Andrew's
School Ser 2004........................................ 3.55 01/09/06 7,700,000
8,965 New Castle County, University Courtyard Apartments Ser
2005................................................... 3.54 01/09/06 8,965,000
2,745 University of Delaware, Ser 2001 B....................... 3.65 01/03/06 2,745,000
District of Columbia
3,500 District of Columbia, Public Welfare Foundation Ser
2000................................................... 3.55 01/09/06 3,500,000
</Table>

See Notes to Financial Statements
6

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

Florida
$ 24,500 Collier County Health Facilities Authority, The Moorings
Inc Ser 2005........................................... 3.40% 01/09/06 $ 24,500,000
22,250 Dade County Industrial Development Authority, Dolphins
Stadium Ser 1985 B & C................................. 3.55 01/09/06 22,250,000
7,325 Florida Housing Finance Corporation, Monterey Lakes
Apartments 2005 Ser C.................................. 3.59 01/09/06 7,325,000
11,100 Jacksonville Health Facilities Authority, Baptist Medical
Center Ser 2003 A...................................... 3.75 01/03/06 11,100,000
35,000 Miami-Dade County, Water & Sewer System Ser 2005 (FSA)... 3.51 01/09/06 35,000,000
12,735 Orange County Housing Finance Authority, Post Lakes
Apartments Ser 1997 F.................................. 3.54 01/09/06 12,735,000
18,300 Orlando Utilities Commission, Water & Electric Ser 2002
A...................................................... 3.33 01/09/06 18,300,000
4,180 Palm Beach County School Board, Ser 2004 A COPs ROCs II-R
Ser 6008 (FGIC)........................................ 3.55 01/09/06 4,180,000
9,690 Pasco County School Board, Ser 1996 COPs (Ambac)......... 3.51 01/09/06 9,690,000
1,070 Polk County School Board, Ser 2003 A COPs (FSA).......... 3.39 01/09/06 1,070,000
33,695 Port St Lucie, Utility System Ser 2005 (MBIA)............ 3.51 01/09/06 33,695,000
18,000 Tampa Bay Water, Utility Systems Ser 2002 (AMT).......... 3.60 01/09/06 18,000,000
Georgia
19,500 Albany-Dougherty County Hospital Authority, Phoebe Putney
Memorial Hospital Ser 1991 (Ambac)..................... 3.50 01/09/06 19,500,000
Atlanta,
11,625 Airport Ser 2003 RF B-2 (MBIA)......................... 3.52 01/09/06 11,625,000
3,990 Airport Ser 2004 A MERLOTs Ser C14 (FSA) (AMT)......... 3.59 01/09/06 3,990,000
7,900 Water & Wastewater Ser 2001 B (FSA).................... 3.40 01/09/06 7,900,000
10,430 Atlanta & Fulton County Recreation Authority, Park
Improvement Ser 2005 A TOCs Ser V V (MBIA)............. 3.55 01/09/06 10,430,000
13,000 DeKalb County Hospital Authority, DeKalb Medical Center
Ser 2005............................................... 3.55 01/09/06 13,000,000
2,600 Hapeville Development Authority, Hapeville Hotel Ltd Ser
1998................................................... 3.72 01/03/06 2,600,000
Hawaii
13,690 Hawaii, ROCs II-R Ser 6012............................... 3.56 01/09/06 13,690,000
Illinois
14,800 Bi-State Development Agency of the Missouri-Illinois
Metropolitan District, Metrolink Cross County Extension
Ser 2002 A (FSA)....................................... 3.40 01/09/06 14,800,000
Chicago,
9,960 2004 Ser A P-FLOATs PT-2361 (FSA)...................... 3.55 01/09/06 9,960,000
89,000 Chicago O'Hare International Airport Third Lien
Ser 2005 C & D (CIFG)................................ 3.51 01/09/06 89,000,000
8,910 Eagle Ser 20041002 Class A (FGIC)...................... 3.56 01/09/06 8,910,000
17,900 Neighborhoods Alive Ser 21 B (MBIA).................... 3.55 01/09/06 17,900,000
</Table>

See Notes to Financial Statements
7

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

$ 11,430 Chicago Board of Education, Ser 2005 MERLOTs Ser A-15
(Ambac)................................................ 3.54% 01/09/06 $ 11,430,000
30,500 Cook County, Ser 2002 B.................................. 3.52 01/09/06 30,500,000
12,400 Glendale Heights, Glendale Lakes Project Ser 2000........ 3.52 01/09/06 12,400,000
Illinois Health Facilities Authority,
76,250 Northwestern Memorial Hospital Ser 1995................ 3.58 01/09/06 76,250,000
2,000 Northwestern Memorial Hospital Ser 2004 B Subser
2004B-2................................................ 3.68 01/03/06 2,000,000
23,900 OSF Healthcare System Ser 2002......................... 3.70 01/03/06 23,900,000
11,595 Kane, Cook & DuPage Counties, School District #U-46
PUTTERs Ser 426 (Ambac)................................ 3.58 01/09/06 11,595,000
5,020 Metropolitan Pier & Exposition Authority, McCormick Place
Expansion Ser 2002 A Eagle #20040030 Class A (MBIA).... 3.56 01/09/06 5,020,000
17,500 Regional Transportation Authority, Refg Ser 2005 B....... 3.55 01/09/06 17,500,000
12,445 Roaring Fork Municipal Products, Cook County Class A
Certificates Ser 2004-1 (Ambac)........................ 3.59 01/09/06 12,445,000
9,000 University of Illinois, Auxiliary Facilities System Ser
2005 B (FSA)........................................... 3.48 01/09/06 9,000,000
Indiana
7,140 Franklin Community Multi-School Building Corporation, Ser
2004 ROCs II-R Ser 2140 (FGIC)......................... 3.56 01/09/06 7,140,000
19,000 Indiana Health Facilities Financing Authority, Ascension
Health Ser 2001 A...................................... 2.74 07/03/06 19,000,000
2,235 Indianapolis, Health Quest Realty XXI Ser 1994 A TOBs
(FHA).................................................. 3.69 01/09/06 2,235,000
15,000 Indianapolis Local Public Improvement Bond Bank, Ser 2005
E (Ambac).............................................. 3.53 01/09/06 15,000,000
1,300 Merrillville, Southlake Care Center Ser 1992 A TOBs
(FHA).................................................. 3.69 01/09/06 1,300,000
8,300 Purdue University, Student Facilities System Ser 2005
A...................................................... 3.37 01/09/06 8,300,000
2,250 South Bend, Fountainview Place Ser 1992 A TOBs (FHA)..... 3.69 01/09/06 2,250,000
5,765 University of Southern Indiana, Student Fee ROCs II-R Ser
2117 (Ambac)........................................... 3.56 01/09/06 5,765,000
11,060 Zionsville Community School Building Corporation, Boone
County Ser 2005A P-FLOATs PT-2870 (FSA)................ 3.55 01/09/06 11,060,000
Kansas
30,315 Kansas Department of Transportation, Highway Ser 2004
C-2.................................................... 3.48 01/09/06 30,315,000
11,300 Wichita, St Francis Regional Medical Center P-FLOATs
MT-170 (MBIA).......................................... 3.55 01/09/06 11,300,000
Kentucky
22,500 Kenton County Airport Board, Flight Safety International
Inc Ser 2001A (AMT).................................... 3.55 01/09/06 22,500,000
36,585 Ohio County, Big Rivers Electric Corp Ser 1983 (Ambac)... 3.57 01/09/06 36,585,000
Maryland
7,000 Maryland Health & Higher Educational Facilities
Authority, Catholic Health Initiatives Ser 1997 B...... 3.58 01/09/06 7,000,000
</Table>

See Notes to Financial Statements
8

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

Massachusetts
$ 24,100 Massachusetts, Ser 2005 A................................ 3.50% 01/09/06 $ 24,100,000
30,000 Massachusetts Bay Transportation Authority, Ser 2000..... 3.40 01/09/06 30,000,000
Massachusetts Development Finance Agency,
11,505 Dana Hall School Ser 2004.............................. 3.52 01/09/06 11,505,000
10,715 New Jewish High School Ser 2002........................ 3.51 01/09/06 10,715,000
67,040 Massachusetts Health & Educational Facilities Authority,
Partners Healthcare System Inc 2003 Ser D-4 & 2005 Ser
F-3.................................................... 3.52 01/09/06 67,040,000
29,100 Massachusetts Water Resources Authority, Multi-Modal Sub
2000 Ser C (FGIC)...................................... 3.54 01/09/06 29,100,000
Michigan
Detroit,
30,240 Sewage Disposal System Senior Lien Ser 2001 C-1
(FSA).................................................. 3.40 01/09/06 30,240,000
38,300 Water Supply System Refg Second Lien Ser 2001-C
(FGIC)................................................. 3.57 01/09/06 38,300,000
9,790 Water Supply System Refg Senior Lien Ser 2003-D
(MBIA)................................................. 3.58 01/09/06 9,790,000
10,850 Holt Public Schools, Ser 2002............................ 3.39 01/09/06 10,850,000
Kent Hospital Finance Authority,
21,500 Metropolitan Hospital Ser 2005B........................ 3.43 01/09/06 21,500,000
22,400 Spectrum Health Ser 2005 (FGIC)........................ 3.48 01/09/06 22,400,000
Michigan State University,
13,150 Ser 2002 A............................................. 3.70 01/03/06 13,150,000
27,200 Ser 2003 A............................................. 3.37 01/09/06 27,200,000
6,000 Michigan Strategic Fund, The Van Andel Research Institute
Ser 2001............................................... 3.58 01/09/06 6,000,000
11,110 Oakland University, Ser 2001 (FGIC)...................... 3.55 01/09/06 11,110,000
25,860 Saline Area Schools, Ser 2002 B.......................... 3.39 01/09/06 25,860,000
Minnesota
27,300 Minneapolis, Guthrie Theater on the River Ser 2003 A..... 3.51 01/09/06 27,300,000
11,600 University of Minnesota Regents, Ser 1999 A.............. 3.58 01/09/06 11,600,000
Mississippi
23,000 Mississippi Development Bank, MGAM Natural Gas Supply
2005 Ser............................................... 3.60 01/09/06 23,000,000
66,700 Perry County, Leaf River Forest Products Inc Ser 2002.... 3.40 01/09/06 66,700,000
Missouri
Missouri Health & Educational Facilities Authority,
9,700 SSM Health Care Ser 2005 C-1 (FSA)..................... 3.68 01/03/06 9,700,000
20,900 Stowers Institute Ser 2002 (MBIA)...................... 3.58 01/09/06 20,900,000
1,500 Washington University Ser 2000 B....................... 3.70 01/03/06 1,500,000
Nebraska
American Public Energy Agency,
50,000 Gas Supply Ser 2005A................................... 3.60 01/09/06 50,000,000
</Table>

See Notes to Financial Statements
9

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

$ 16,500 National Public Gas Agency 2003 Ser A.................. 3.41% 01/09/06 $ 16,500,000
7,000 Omaha, Eagle #2004001 Class A............................ 3.56 01/09/06 7,000,000
Nevada
Clark County,
16,000 Airport Improvement Refg 1993 Ser A (MBIA)............. 3.49 01/09/06 16,000,000
16,000 Las Vegas-McCarran International Airport Passenger
Facility 2005 Ser A (MBIA) (AMT)..................... 3.54 01/09/06 16,000,000
New Mexico
35,000 New Mexico Hospital Equipment Loan Council, Presbyterian
Healthcare Services Ser 2005 (FSA)..................... 3.60 01/09/06 35,000,000
New York
15,000 Metropolitan Transportation Authority, Ser 2002 D-1
(FSA).................................................. 3.48 01/09/06 15,000,000
5,100 Monroe County Industrial Development Agency, St John
Fisher College Ser 2005 (Radian)....................... 3.51 01/09/06 5,100,000
New York City,
4,150 Fiscal 2004 SubSer A-4................................. 3.34 01/09/06 4,150,000
22,000 Fiscal 2006 SubSer E-4................................. 3.51 01/09/06 22,000,000
37,000 New York City Industrial Development Agency,
One Bryant Park LLC Ser 2004 A......................... 3.52 01/09/06 37,000,000
21,930 New York City Municipal Water Finance Authority,
Fiscal 2003 Subser C-2................................. 3.50 01/09/06 21,930,000
30,265 New York State Dormitory Authority, Mental Health
Services Facilities Ser 2003D-2F....................... 3.54 01/09/06 30,265,000
1,100 Suffolk County Water Authority, Ser 2003 BANs............ 3.49 01/09/06 1,100,000
North Carolina
1,500 Durham, Ser 1993A COPs................................... 3.55 01/09/06 1,500,000
30,020 Guilford County, Ser 2005 A & B.......................... 3.55 01/09/06 30,020,000
8,290 Mecklenburg County, Ser 2004 COPs........................ 3.52 01/09/06 8,290,000
North Carolina,
15,295 Ser 2002 E............................................. 3.53 01/09/06 15,295,000
34,160 Ser 2002 E............................................. 3.50 01/09/06 34,160,000
North Carolina Capital Facilities Agency,
13,500 Capital Area YMCA Ser 2002............................. 3.52 01/09/06 13,500,000
9,800 Durham Academy Ser 2001................................ 3.52 01/09/06 9,800,000
North Carolina Medical Care Commission,
27,000 Firsthealth of the Carolinas Ser 2002.................. 3.49 01/09/06 27,000,000
31,700 North Carolina Baptist Hospitals Ser 2000.............. 3.52 01/09/06 31,700,000
6,450 Rowan Regional Medical Center Ser 2004 ROCs II-R
Ser 296 (FSA)........................................ 3.56 01/09/06 6,450,000
48,000 Raleigh, Downtown Improvement Ser 2005 B COPs............ 3.49 01/09/06 48,000,000
</Table>

See Notes to Financial Statements
10

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

Ohio
$ 4,000 Cincinnati City School District, Ser 2003 Eagle# 20040034
Class A (FSA).......................................... 3.55% 01/09/06 $ 4,000,000
60,605 Cleveland, Water 2004 Ser M (FSA)........................ 3.50 01/09/06 60,605,000
Ohio,
10,000 Common Schools Ser 2005 B.............................. 3.46 01/09/06 10,000,000
5,590 Ser 2004 P-FLOATs PT-2137.............................. 3.54 01/09/06 5,590,000
Oklahoma
13,600 Oklahoma Capital Improvement Authority, State Facilities
Ser 2005 F P-FLOATs PT-3286 (Ambac).................... 3.55 01/09/06 13,600,000
8,000 Oklahoma Student Loan Authority, Ser 2005A (MBIA)
(AMT).................................................. 3.55 01/09/06 8,000,000
Oklahoma Water Resources Board, State Loan Program
29,000 Ser 1994 A & 1999...................................... 2.80 03/01/06 29,000,000
6,830 Ser 1995............................................... 2.75 03/01/06 6,830,000
19,015 Ser 2001 & 2003 A...................................... 2.85 04/01/06 19,015,000
15,000 Tulsa County Industrial Authority, Capital Improvement
Ser 2003 A............................................. 3.13 05/15/06 15,000,000
Oregon
15,000 Clackamas County Hospital Facility Authority, Legacy
Health System Ser 2003................................. 3.50 01/09/06 15,000,000
4,500 Oregon Department of Administrative Services, Oregon
Appropriation Ser 2003 Eagle # 20041010 Class A
(FSA).................................................. 3.56 01/09/06 4,500,000
20,000 Oregon Health Sciences University, OHSU Medical Group Ser
2004 A................................................. 3.41 01/09/06 20,000,000
Pennsylvania
15,000 Dauphin County General Authority, Pinnacle Health System
Ser 2005 (FSA)......................................... 3.48 01/09/06 15,000,000
20,000 Easton Area School District, Ser 2005 (FSA).............. 3.53 01/09/06 20,000,000
32,300 Geisinger Authority, Geisinger Health System Ser 2005
C...................................................... 3.70 01/03/06 32,300,000
11,300 Northampton County Higher Education Authority, Lafayette
College Ser 1998 A..................................... 3.37 01/09/06 11,300,000
15,000 Pennsylvania Higher Education Assistance Agency, Student
Loan 2001 Ser A (Ambac) (AMT).......................... 3.60 01/09/06 15,000,000
29,900 Pennsylvania Turnpike Commission, 2002 Ser A-2........... 3.58 01/09/06 29,900,000
Philadelphia Hospitals & Higher Education Facilities
Authority,
5,700 Children's Hospital of Philadelphia Ser 2002 B......... 3.70 01/09/06 5,700,000
7,000 Temple University Health System 2005 Ser C............. 3.40 01/09/06 7,000,000
Philadelphia Industrial Development Authority,
28,600 Girard Estate Aramark Tower Ser 2002................... 3.58 01/09/06 28,600,000
16,500 New Courtland Elder Services Ser 2003.................. 3.65 01/03/06 16,500,000
22,300 York General Authority, Harrisburg School District SubSer
1996 B (Ambac)......................................... 3.52 01/09/06 22,300,000
</Table>

See Notes to Financial Statements
11

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

Rhode Island
$ 6,000 Rhode Island Convention Center Authority,
Refg 2001 Ser A (MBIA)................................. 3.40% 01/09/06 $ 6,000,000
Rhode Island Health & Educational Building Corporation,
20,000 Brown University 2005 Ser A............................ 3.50 01/09/06 20,000,000
10,000 Meeting Street Center Ser 2005......................... 3.40 01/09/06 10,000,000
South Carolina
25,000 Charleston Educational Excellence Finance Corporation,
Charleston County School District Ser 2005 ROCs II-R
Ser 471................................................ 3.56 01/09/06 25,000,000
13,100 Florence County, McLeod Regional Medical Center Ser 1985
A (FGIC)............................................... 3.40 01/09/06 13,100,000
5,000 Greenwood County, Fuji Photo Film Inc Ser 2004 (AMT)..... 3.69 01/09/06 5,000,000
11,000 South Carolina Jobs Economic Development Authority,
Borroughs & Chapin Business Park Ser 2002.............. 3.60 01/09/06 11,000,000
4,555 South Carolina Public Service Authority, ROCs II-R Ser
6007 (Ambac)........................................... 3.56 01/09/06 4,555,000
Tennessee
13,000 Chattanooga Health, Educational & Housing Facility Board,
The Baylor School Ser 2004............................. 3.55 01/09/06 13,000,000
10,200 Clarksville Public Building Authority, Pooled Financing
Ser 2001............................................... 3.75 01/03/06 10,200,000
16,700 Greeneville Health & Educational Facilities Board,
Laughlin Memorial Hospital Ser 2004.................... 3.55 01/09/06 16,700,000
9,955 Jackson Health, Educational & Housing Facility Board,
Union University Ser 2005.............................. 3.55 01/09/06 9,955,000
3,500 Memphis Airport, Refg Ser 1995 B (AMT)................... 3.65 01/09/06 3,500,000
Metropolitan Government of Nashville & Davidson County
Health & Educational Facilities Board,
7,600 Ensworth School Ser 2002............................... 3.55 01/09/06 7,600,000
7,395 Mary Queen of Angels Inc Ser 2000...................... 3.55 01/09/06 7,395,000
23,960 Vanderbilt University Ser 2005 A-2..................... 3.44 01/09/06 23,960,000
25,500 Montgomery County Public Building Authority, Pooled
Financing Ser 1999..................................... 3.55 01/09/06 25,500,000
9,000 Sevier County Public Building Authority, Local Government
Public Improvement Ser 6 A-1........................... 3.80 01/03/06 9,000,000
22,000 Shelby County Health, Educational & Housing Facilities
Board, Baptist Memorial Health Care Ser 2004 A P-FLOATs
PA-1277................................................ 3.56 01/09/06 22,000,000
Texas
6,800 Bell County Health Facilities Development Corporation,
Scott & White Memorial Hospital Ser 2001-1 (MBIA) &
Ser 2001-2 (MBIA).................................... 3.70 01/09/06 6,800,000
4,730 Bexar County Housing Finance Corporation, Multi-Family
P-FLOATs PT-2082....................................... 3.55 01/09/06 4,730,000
</Table>

See Notes to Financial Statements
12

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

$ 24,655 Coastal Bend Health Facilities Development Corporation,
Christus Health Ser 2005 Subser B-3 (Ambac)............ 3.49% 01/09/06 $ 24,655,000
4,500 Cypress-Fairbanks Indepedent School District, Ser 2004
MERLOTs Ser C16........................................ 3.54 01/09/06 4,500,000
10,000 Dallas, Ser 2005 ROCs II-R Ser 472....................... 3.56 01/09/06 10,000,000
6,155 Dallas Independent School District, Ser 2004A ROCs II-R
Ser 6038............................................... 3.56 01/09/06 6,155,000
8,605 El Paso Independent School District, Ser 2004 A ROCs II-R
Ser 2129............................................... 3.56 01/09/06 8,605,000
19,519 Garland Health Facilities Development Corporation,
Chambrel Club Hill Ser 2002............................ 3.54 01/09/06 19,519,000
Harris County Health Facilities Development Corporation,
11,900 Christus Health Ser 2005 Subser A-1 (Ambac)............ 3.49 01/09/06 11,900,000
76,200 Methodist Hospital System Ser 2005 B................... 3.70 01/03/06 76,200,000
117,840 St Luke's Episcopal Hospital Ser 2001 B................ 3.70 01/03/06 117,840,000
10,700 Young Men's Christian Association of Greater Houston
Area
Ser 1999............................................. 3.70 01/03/06 10,700,000
29,700 Harris County Industrial Development Corporation, Baytank
Inc Ser 1998........................................... 3.58 01/09/06 29,700,000
5,165 Houston, Combined Utility System Ser 2004 ROCs II-R Ser
4559 (FSA)............................................. 3.56 01/09/06 5,165,000
11,000 Lower Neches Valley Authority, Chevron USA Inc Ser
1987................................................... 2.83 02/15/06 11,000,000
Northside Independent School District,
5,345 Ser 2003 P-FLOATs PT-2254.............................. 3.55 01/09/06 5,345,000
43,000 Ser 2005............................................... 2.85 06/15/06 43,000,000
9,080 Roaring Fork Municipal Products, Dallas Indepedent School
District Class A Certificates Ser 2004-6............... 3.59 01/09/06 9,080,000
San Antonio,
5,985 ROCs II-R Ser 6003 (FSA)............................... 3.56 01/09/06 5,985,000
20,300 Water System Sub Lien Ser 2003 B (MBIA)................ 3.50 01/09/06 20,300,000
6,705 Texas Department of Housing & Community Affairs, High
Point III Development Ser 1993 A....................... 3.59 01/09/06 6,705,000
18,685 Texas Municipal Gas Corporation, Senior Lien Ser 1998
(FSA).................................................. 3.51 01/09/06 18,685,000
8,700 Texas Transportation Commission, Mobility Fund Ser
2005-B................................................. 3.37 01/09/06 8,700,000
2,980 Texas Water Development Board, Revolving Fund Senior Lien
Ser 2000 A P-FLOATs PT-2187............................ 3.53 01/09/06 2,980,000
Utah
Intermountain Power Agency,
24,600 1985 Ser E (Ambac) & 1985 F (Ambac).................... 3.20 06/01/06 24,600,000
35,900 1985 F (Ambac)......................................... 2.75 03/15/06 35,900,000
3,200 Murray City, IHC Health Services Inc Ser 2005 B.......... 3.70 01/03/06 3,200,000
</Table>

See Notes to Financial Statements
13

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

Various States
$ 18,900 Municipal Securities Pooled Trust Receipts, Various
States Ser 2004 SG P-18................................ 3.66% 01/09/06 $ 18,900,000
Vermont
11,000 Vermont Housing Finance Agency, West Block University of
Vermont Apartments Ser 2004 A.......................... 3.53 01/09/06 11,000,000
Virginia
16,000 Chesapeake Hospital Authority, Chesapeake General
Hospital Ser 2001A..................................... 3.55 01/09/06 16,000,000
34,700 Fairfax County Industrial Development Authority,
Inova Health System Foundation Ser 2005 A-2 & C-2...... 3.47 01/09/06 34,700,000
41,100 Loudoun County Industrial Development Authority, Howard
Hughes Medical Institute Ser 2003 F.................... 3.48 01/09/06 41,100,000
Washington
6,050 Bellevue, Ser 2004 Eagle# 20041011 Class A (MBIA)........ 3.56 01/09/06 6,050,000
4,165 Pierce County, Puyallup School District No 3 PUTTERs Ser
415 (FSA).............................................. 3.55 01/09/06 4,165,000
4,900 Washington Health Care Facilities Authority, Providence
Services Ser 2002 A (MBIA)............................. 3.70 01/03/06 4,900,000
Wisconsin
9,500 Brokaw, Wausau Paper Mills Co Ser 1995 (AMT)............. 3.76 01/09/06 9,500,000
6,260 Wisconsin Clean Water, 2004 Ser 1 ROCs II-R Ser 2165
(MBIA)................................................. 3.56 01/09/06 6,260,000
3,250 Wisconsin Health & Educational Facilities Authority,
Ministry Health Care PUTTERs Ser 399 (MBIA)............ 3.55 01/09/06 3,250,000
Wyoming
35,000 Campbell County, Elk Power Generation Station Ser 2005 B
(AMT).................................................. 3.35 11/30/06 35,000,000
Puerto Rico
11,795 Puerto Rico Public Improvement, Ser 2001-1 TOCs (FSA).... 3.53 01/09/06 11,795,000
--------------
Total Short-Term Variable Rate Municipal Obligations (Cost
$3,453,029,000)............................................................. 3,453,029,000
--------------
</Table>

See Notes to Financial Statements
14

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

Tax-Exempt Commercial Paper (8.8%)
Florida
Palm Beach County,
$ 11,500 Sales Tax Ser 2005....................... 2.82% 01/19/06 2.82% $ 11,500,000
18,000 Sales Tax Ser 2005....................... 3.08 02/22/06 3.08 18,000,000
Hawaii
9,000 Honolulu, Ser 2005 W....................... 2.85 01/19/06 2.85 9,000,000
22,300 Honolulu City & County, Ser H.............. 2.85 02/16/06 2.85 22,300,000
Illinois
8,100 Chicago, Water System 2004 Ser A........... 2.95 05/12/06 2.95 8,100,000
Kentucky
Kentucky Asset Liability Commission,
34,000 General Fund Second Ser 2005 A-1......... 3.15 10/12/06 3.15 34,000,000
15,000 General Fund Second Ser 2005 A-2......... 3.15 10/11/06 3.15 15,000,000
Maryland
25,500 Montgomery County, 2002 Ser BANs........... 3.13 01/30/06 3.13 25,500,000
Nevada
Clark County,
10,000 Flood Control Ser 2003 B................. 3.08 01/12/06 3.08 10,000,000
10,000 Sales Tax Ser 2004B...................... 3.10 01/24/06 3.10 10,000,000
26,000 Las Vegas Valley Water District, Water Ser
2004 B................................... 2.80 01/23/06 2.80 26,000,000
New York
35,000 New York City Municipal Water Finance
Authority, Ser 5-B....................... 3.15 01/09/06 3.15 35,000,000
North Carolina
20,000 Board of Governors of the University of
North Carolina, Chapel Hill Ser 2004 B... 2.80 01/26/06 2.80 20,000,000
Texas
24,000 Austin, Combined Utility Systems Ser A..... 3.10 01/24/06 3.10 24,000,000
8,600 Dallas Area Rapid Transit, Senior Sub Lien
Ser 2001................................. 3.15 01/31/06 3.15 8,600,000
25,000 Houston, 1993 Ser A........................ 2.82 01/25/06 2.82 25,000,000
15,000 Houston Water & Sewer, Ser A............... 2.77 01/12/06 2.77 15,000,000
10,000 Lower Colorado River Authority,
Transmission Service Corp Ser 2003....... 3.08 01/12/06 3.08 10,000,000
</Table>

See Notes to Financial Statements
15

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

$ 9,000 San Antonio, Water System Ser 2001 A....... 3.15% 03/09/06 3.15% $ 9,000,000
15,000 Texas Department of Transportation, Highway
Ser 2005 A............................... 2.82 01/11/06 2.82 15,000,000
--------------
Total Tax-Exempt Commercial Paper (Cost $351,000,000)...................... 351,000,000
--------------
Short-Term Municipal Notes & Bonds (8.7%)
Illinois
45,000 Illinois, Certificates Ser 2005, dtd
11/22/05................................. 4.50 04/28/06 3.14 45,196,504
Indiana
35,000 Indiana Bond Bank, Midyear Funding Notes
Ser 2005 A, dtd 06/16/05................. 3.50 01/27/06 2.50 35,025,368
12,000 Indianapolis Local Public Improvement Bond
Bank, Ser 2005 F Notes, dtd 07/14/05..... 4.00 01/06/06 2.60 12,002,725
Maryland
12,445 Maryland Community Development
Administration, Department of Housing &
Community Development Residential Notes
2005 Ser F, dtd 11/10/05................. 3.12 11/24/06 3.12 12,445,000
Massachusetts
6,200 Cape Cod Regional Transit Authority,
Ser 2005 RANs, dtd 07/28/05.............. 4.00 07/28/06 3.00 6,234,436
12,000 Montachusett Regional Transit Authority,
Ser 2005 RANs, dtd 06/17/05.............. 4.00 06/16/06 3.03 12,051,642
5,143 Nashoba Regional School District,
Ser 2005 BANs, dtd 09/02/05.............. 4.00 01/03/06 2.79 5,143,504
10,000 Pioneer Valley Transit Authority, Ser 2004
RANs, dtd 08/05/05....................... 4.00 08/03/06 3.05 10,054,253
4,000 Wachusett Regional School District,
Ser 2005 RANs, dtd 07/15/05.............. 3.75 06/30/06 2.77 4,018,927
Michigan
8,000 Michigan Municipal Bond Authority, Ser 2005
C, dtd 08/19/05.......................... 4.25 08/18/06 3.03 8,059,648
New Jersey
20,000 Barnegat Township Board of Education, 2005
Temporary Notes, dtd 07/07/05............ 3.50 07/07/06 2.75 20,075,097
10,900 Hudson County, Ser 2005 BANs, dtd
09/21/05................................. 4.00 09/20/06 3.00 10,975,721
21,000 New Jersey, Ser Fiscal 2005-6 A TRANs,
dtd 08/03/05............................. 4.00 06/23/06 3.23 21,071,618
</Table>

See Notes to Financial Statements
16

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

New York
Board of Cooperative Educational Services,
$ 6,000 Oswego County School District Ser 2005
RANs, dtd 06/23/05..................... 4.00% 06/23/06 2.85% $ 6,031,978
3,500 Suffolk County First Supervisory District
Ser 2005 RANs, dtd 07/01/05............ 3.75 06/29/06 2.84 3,515,273
8,574 Burnt Hills-Ballston Lake Central School
District, Ser 2005 B BANs, dtd
07/07/05................................. 3.75 07/07/06 2.74 8,617,411
10,000 Gloversville City School District, Ser 2005
BANs, dtd 12/01/05....................... 4.50 09/28/06 3.33 10,084,541
4,500 Hastings, Ser 2005 BANs, dtd 07/15/05...... 3.25 07/14/06 3.03 4,505,183
16,000 Hempstead Union Free School District, TANs
Ser 2005, dtd 08/17/05................... 4.25 06/29/06 3.15 16,084,486
8,000 Marlboro Central School District, Ser 2005
BANs, dtd 09/08/05....................... 4.25 04/13/06 3.05 8,026,695
8,000 Spencer-Van Etten Central School District,
Ser 2005 BANs, dtd 06/17/05.............. 4.25 06/15/06 2.83 8,050,230
7,000 Utica City School District, Ser 2005 RANs,
dtd 06/23/05............................. 4.00 06/23/06 3.00 7,032,369
4,000 Vestal, Ser 2005 BANs, dtd 07/14/05........ 3.75 07/14/06 2.77 4,020,365
South Carolina
9,000 Aiken County Consolidated School District,
Ser 2005 BANs, dtd 07/14/05.............. 3.25 07/14/06 2.55 9,002,206
18,000 Beaufort County School District, Ser 2005 A
BANs, dtd 07/14/05....................... 3.15 07/14/06 2.65 18,003,146
Texas
41,000 Texas, Ser 2005 TRANs, dtd 09/01/05........ 4.50 08/31/06 3.23 41,328,259
--------------
Total Short-Term Municipal Notes & Bonds (Cost $346,656,585)............... 346,656,585
--------------
</Table>

<Table>

Total Investments (Cost $4,150,685,585) (a)....................... 104.0% 4,150,685,585

Liabilities in Excess of Other Assets............................. (4.0) (158,702,105)
----- --------------
Net Assets........................................................ 100.0% $3,991,983,480
===== ==============
</Table>

See Notes to Financial Statements
17

Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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

<Table>

AMT Alternative Minimum Tax.
BANs Bond Anticipation Notes.
COPs Certificates of Participation.
MERLOTs Municipal Exempt Receipts-Liquidity Option Tender.
P-FLOATs Puttable Floating Option Tax-Exempt Receipts.
PUTTERs Puttable Tax-Exempt Receipts.
RANs Revenue Anticipation Notes.
ROCs Reset Option Certificates.
STARS Short Term Adjustable Rate Securities.
TANs Tax Anticipation Notes.
TOBs Tender Option Bonds.
TOCs Tender Option Certificates.
TRANs Tax and Revenue Anticipation Notes.
+ Rate shown is the rate in effect at December 31, 2005.
Date on which the principal amount can be recovered through
* demand.
(a) Cost is the same for federal income tax purposes.

Bond Insurance:
- ---------------
Ambac Ambac Assurance Corporation.
CIFG CIFG Assurance North America Inc.
FGIC Financial Guaranty Insurance Company.
FHA Federal Housing Administration.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
Radian Radian Asset Assurance Inc.
XLCA XL Capital Assurance Inc.
</Table>

See Notes to Financial Statements
18

Active Assets Tax-Free Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
December 31, 2005 (unaudited)

<Table>

Assets:
Investments in securities, at value (cost $4,150,685,585)... $4,150,685,585
Cash........................................................ 36,997
Receivable for:
Interest................................................ 18,987,770
Investments sold........................................ 801,955
Shares of beneficial interest........................... 77,478
Prepaid expenses and other assets........................... 114,194
--------------
Total Assets............................................ 4,170,703,979
--------------
Liabilities:
Payable for:
Investments purchased................................... 177,021,834
Investment advisory fee................................. 946,310
Distribution fee........................................ 339,594
Administration fee...................................... 169,797
Accrued expenses and other payables......................... 242,964
--------------
Total Liabilities....................................... 178,720,499
--------------
Net Assets.............................................. $3,991,983,480
==============
Composition of Net Assets:
Paid-in-capital............................................. $3,991,944,058
Accumulated undistributed net investment income............. 39,422
--------------
Net Assets.............................................. $3,991,983,480
==============
Net Asset Value Per Share
3,991,984,076 shares outstanding (unlimited shares
authorized of $.01 par value)............................... $1.00
==============
</Table>

See Notes to Financial Statements
19

Active Assets Tax-Free Trust
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended December 31, 2005 (unaudited)

<Table>

Net Investment Income:
Interest Income............................................. $45,176,473
-----------
Expenses
Investment advisory fee..................................... 4,991,426
Distribution fee............................................ 1,683,181
Administration fee.......................................... 841,591
Transfer agent fees and expenses............................ 252,764
Registration fees........................................... 179,994
Custodian fees.............................................. 60,921
Professional fees........................................... 44,044
Shareholder reports and notices............................. 29,278
Trustees' fees and expenses................................. 21,302
Other....................................................... 71,858
-----------
Total Expenses.......................................... 8,176,359
-----------
Net Investment Income....................................... $37,000,114
===========
</Table>

See Notes to Financial Statements
20

Active Assets 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, 2005 JUNE 30, 2005
----------------- --------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 37,000,114 $ 38,653,262
Dividends to shareholders from net investment income........ (37,000,805) (38,652,509)
Net increase (decrease) from transactions in shares of
beneficial interest....................................... 1,135,402,174 (1,080,404)
-------------- --------------
Net Increase (Decrease)................................. 1,135,401,483 (1,079,651)
Net Assets:
Beginning of period......................................... 2,856,581,997 2,857,661,648
-------------- --------------
End of Period
(Including accumulated undistributed net investment income
of $39,422 and $40,113, respectively)....................... $3,991,983,480 $2,856,581,997
============== ==============
</Table>

See Notes to Financial Statements
21

Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2005 (UNAUDITED)

1. Organization and Accounting Policies

Active Assets Tax-Free Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund's investment objective is to provide a
high level of daily income which is exempt from federal income tax consistent
with stability of principal and liquidity. The Fund was organized as a
Massachusetts business trust on March 30, 1981 and commenced operations on July
7, 1981.

The following is a summary of significant accounting policies:

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

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

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

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

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

2. Investment Advisory/ Administration Agreements

Pursuant to an Investment Advisory Agreement with Morgan Stanley Investment
Advisors Inc. (the "Investment Adviser"), the Fund pays the Investment Adviser
an advisory 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: 0.45% to the portion of the daily net assets not exceeding $500
million; 0.375% to the portion of the daily net assets exceeding $500 million
but not exceeding $750 million; 0.325% to the portion of the daily net assets
exceeding $750 million but not exceeding $1 billion; 0.30% to the portion of the
daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.275% to
the portion of the daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.25% to the portion of the daily net assets exceeding $2 billion but
not

Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

exceeding $2.5 billion; 0.225% to the portion of the daily net assets exceeding
$2.5 billion but not exceeding $3 billion; 0.20% to the portion of the daily net
assets exceeding $3 billion but not exceeding $15 billion; and 0.199% to the
portion of the daily net assets exceeding $15 billion.

Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, accrued daily and payable monthly, by applying the
annual rate of 0.05% to the Fund's daily net assets.

3. Plan of Distribution

Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the
Investment Adviser and Administrator, 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, 2005, 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, 2005, aggregated $6,148,095,889 and
$4,970,527,000, respectively.

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator 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. 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. Aggregate
pension costs for the six months ended December 31, 2005, included in Trustees'
fees and expenses in the Statement of Operations amounted to $3,698. At December
31, 2005, the Fund had an accrued pension liability of $63,307 which is included
in accrued expenses in the Statement of Assets and Liabilities.

Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

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 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
net asset value of the Fund.

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, 2005 JUNE 30, 2005
----------------- ---------------
(unaudited)

Shares sold................................................. 8,749,112,827 11,647,980,944
Shares issued in reinvestment of dividends.................. 37,000,805 38,652,509
-------------- ---------------
8,786,113,632 11,686,633,453
Shares redeemed............................................. (7,650,711,458) (11,687,713,857)
-------------- ---------------
Net increase (decrease) in shares outstanding............... 1,135,402,174 (1,080,404)
============== ===============
</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 Adviser, certain affiliates of the Investment Adviser, certain
officers of such affiliates and certain investment companies advised by the
Investment Adviser or its affiliates, including the Fund, are named as
defendants in a consolidated class action. This consolidated action also names
as defendants certain individual Trustees and Directors of the Morgan Stanley
funds. The consolidated amended complaint, filed in the United States District
Court Southern District of New York on April 16, 2004, generally alleges that
defendants, including the Fund, violated their statutory disclosure obligations
and fiduciary duties by failing properly to disclose (i) that the Investment
Adviser and certain affiliates of the Investment Adviser allegedly offered
economic incentives to brokers and others to recommend the funds advised by the
Investment Adviser or its affiliates to investors rather than funds managed by
other companies, and (ii) that the funds advised by the Investment Adviser or
its affiliates, including the Fund, allegedly paid excessive commissions to

Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 2005 (UNAUDITED) continued

brokers in return for their efforts to recommend these funds to investors. The
complaint seeks, among other things, unspecified compensatory damages,
rescissionary damages, fees and costs. The defendants have moved to dismiss the
action and intend to otherwise vigorously defend it. On March 9, 2005,
Plaintiffs sought leave to supplement their complaint to assert claims on behalf
of other investors. While the Fund and Adviser believe that each has meritorious
defenses, the ultimate outcome of this matter is not presently determinable at
this stage of the litigation, and no provision has been made in the Fund's
financial statements for the effect, if any, of this matter.

Active Assets 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, 2005 2005 2004 2003 2002 2001
----------------- -------- -------- -------- -------- --------
(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........... 0.011 0.013 0.005 0.008 0.014 0.033

Less dividends from net investment income....... (0.011) (0.013) (0.005) (0.008) (0.014) (0.033)
------- ------- ------- ------- ------- -------

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

Total Return.................................... 1.09%(1) 1.32% 0.50% 0.81% 1.38% 3.34%

Ratios to Average Net Assets:
Expenses (before expense offset)................ 0.49%(2) 0.49% 0.48% 0.48% 0.48%(3) 0.48%

Net investment income........................... 2.20%(2) 1.30% 0.50% 0.80% 1.38% 3.28%

Supplemental Data:
Net assets, end of period, in millions.......... $3,992 $2,857 $2,858 $3,116 $2,947 $3,075
</Table>

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

<Table>

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

See Notes to Financial Statements
26

(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
Fergus Reid

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
Vice President

Barry Fink
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

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 REGISTERED PUBLIC ACCOUNTING FIRM

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

INVESTMENT ADVISER

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 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) 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.

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Active Assets
Tax-Free Trust

Semiannual Report
December 31, 2005

[MORGAN STANLEY LOGO]

RA06-00099P-Y12/05

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.

Refer to Item 1.

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

Not applicable for semiannual reports.

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

Applicable only to 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

Not applicable.

Item 11. 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.

(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 12. 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.

Active Assets Tax-Free Trust

/s/ Ronald E. Robison
- -------------------------------------
Ronald E. Robison
Principal Executive Officer
February 9, 2006

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 9, 2006

/s/ Francis Smith
- -------------------------------------
Francis Smith
Principal Financial Officer
February 9, 2006