<Page>

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: 811-03159
811-03162
811-06530
811-03165

Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities 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, 2003

Date of reporting period: June 30, 2003

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Item 1 - Report to Shareholders
<Page>

WELCOME, SHAREHOLDER:

THIS ANNUAL REPORT INCLUDES EACH FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND
INVESTMENTS, AS WELL AS OTHER INFORMATION.

AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH MONEY
MARKET FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE,
IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THESE FUNDS.

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUNDS
BEING OFFERED. THERE IS NO ASSURANCE THAT THE FUNDS WILL ACHIEVE THEIR
INVESTMENT OBJECTIVES. THE FUNDS ARE SUBJECT TO MARKET RISK, WHICH IS THE
POSSIBILITY THAT THE MARKET VALUES OF SECURITIES OWNED BY THE FUNDS WILL DECLINE
AND, THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID FOR
THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THESE FUNDS.

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Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
ANNUAL HOUSEHOLDING NOTICE

To reduce printing and mailing costs, the Funds attempt to eliminate duplicate
mailings to the same address. The Funds deliver a single copy of certain
shareholder documents including shareholder reports, prospectuses and proxy
materials, to investors with the same last name and 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 am to 8:00 pm, ET.
Once our Customer Service Center has received your instructions, we will begin
sending individual copies for each account within 30 days.

2
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Active Assets Money Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003

<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE

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

U.S. Government & Agency Obligations (49.2%)
$2,499,300 Federal Home Loan Banks
07/07/03 - 09/03/03............... 0.89 - 1.24% $ 2,497,829,412
4,714,775 Federal National Mortgage Assoc.
07/07/03 - 04/30/04............... 0.91 - 1.24 4,703,517,316
1,355,600 Freddie Mac
07/30/03 - 12/31/03............... 1.14 - 1.24 1,351,904,043
2,900,000 U.S. Treasury Bills
09/11/03 - 12/26/03............... 0.79 - 1.17 2,891,563,972
---------------
Total U.S. Government & Agency Obligations
(COST $11,444,814,743)........................... 11,444,814,743
---------------
Commercial Paper (37.6%)
BANKING (2.1%)
500,000 Citicorp
07/02/03 - 08/18/03............... 1.02 - 1.20 499,646,333
---------------
FINANCE - CONSUMER (7.6%)
72,650 American Express Credit Corp.
07/08/03.......................... 0.95 72,636,580
220,000 DaimlerChrysler Revolving Auto
Conduit
07/18/03 - 07/25/03............... 0.99 - 1.18 219,867,133
495,300 FCAR Owner Trust
07/08/03 - 07/22/03............... 0.97 - 1.24 495,068,964
980,000 New Center Asset Trust
07/14/03 - 07/29/03............... 0.95 - 1.24 979,435,856
---------------
1,767,008,533
---------------
FINANCE - CORPORATE (0.2%)
51,650 CIESCO, LLC
07/09/03.......................... 1.23 51,635,882
---------------
FINANCIAL CONGLOMERATES (7.8%)
1,092,800 General Electric Capital Corp.
07/16/03 - 08/29/03............... 1.18 - 1.26 1,091,391,978
735,000 Mortgage Interest Networking Trust
07/18/03 - 08/13/03............... 0.95 - 1.24 734,377,939
---------------
1,825,769,917
---------------
INTERNATIONAL BANKS (18.5%)
50,000 ANZ (DE) Inc.
07/23/03.......................... 0.96 49,970,667
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

3
<Page>
Active Assets Money Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE

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

$ 383,600 Abbey National North America LLC
07/07/03 - 07/08/03............... 1.05 % $ 383,524,120
500,000 Barclays U.S. Funding Corp.
08/21/03 - 08/29/03............... 1.18 - 1.21 499,066,014
57,935 CBA (Delaware) Finance Inc.
07/31/03.......................... 1.03 57,885,272
240,000 Canadian Imperial Holdings Inc.
07/08/03 - 07/14/03............... 1.23 - 1.24 239,913,394
181,400 ING (US) Funding LLC
08/14/03 - 08/19/03............... 1.19 - 1.20 181,115,072
228,200 National Australia Funding (DE)
Inc.
07/02/03 - 07/03/03............... 0.96 - 1.09 228,189,363
1,000,000 Royal Bank of Scotland PLC
07/03/03 - 07/15/03............... 1.21 - 1.24 999,648,431
808,900 Societe Generale N.A. Inc.
07/07/03 - 10/03/03............... 0.98 - 1.24 807,670,114
850,000 UBS Finance (Delaware) LLC
07/01/03 - 07/03/03............... 0.94 - 1.24 849,959,389
---------------
4,296,941,836
---------------
INVESTMENT BANKS/BROKERS (1.4%)
322,000 Goldman Sachs Group, Inc. (The)
07/17/03 - 07/21/03............... 1.00 - 1.23 321,822,889
---------------
Total Commercial Paper
(COST $8,762,825,390)............................ 8,762,825,390
---------------
Certificates of Deposit (10.6%)
1,075,000 Bank of America, N.A.
07/16/03 - 08/20/03............... 1.00 - 1.24 1,075,000,000
400,000 Branch Banking & Trust Co., N.C.
07/01/03.......................... 1.01 400,000,000
750,000 State Street Bank & Trust Co.
07/16/03 - 07/18/03............... 1.03 - 1.18 750,000,000
250,000 Wells Fargo Bank, N.A.
07/23/03 - 08/27/03............... 1.03 - 1.23 250,000,000
---------------
Total Certificates of Deposit
(COST $2,475,000,000)............................ 2,475,000,000
---------------
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

4
<Page>
Active Assets Money Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE

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

Short-Term Bank Notes (2.6%)
$ 600,000 Standard Federal Bank, N.A.
07/24/03 - 08/01/03
(COST $600,000,000)............... 1.04 - 1.23% $ 600,000,000
---------------
</Table>

<Table>

Total Investments
(COST $23,282,640,133) (a)........ 100.0% 23,282,640,133

Liabilities in Excess of Other
Assets............................ (0.0) (4,980,368)
----- ---------------
Net Assets......................... 100.0% $23,277,659,765
===== ===============
</Table>

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

(A) COST IS THE SAME FOR FEDERAL INCOME TAX PURPOSES.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

5
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Active Assets Money Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
JUNE 30, 2003

<Table>

Assets:
Investments in securities, at value (cost
$23,282,640,133)................................. $23,282,640,133
Cash.............................................. 15,326
Interest receivable............................... 2,413,521
Prepaid expenses and other assets................. 320,243
---------------
Total Assets.................................. 23,285,389,223
---------------
Liabilities:
Payable for:
Investment management fee....................... 5,193,835
Distribution fee................................ 1,971,857
Shares of beneficial interest redeemed.......... 2,006
Accrued expenses and other payables............... 561,760
---------------
Total Liabilities............................. 7,729,458
---------------
Net Assets.................................... $23,277,659,765
===============
Composition of Net Assets:
Paid-in-capital................................... $23,277,594,670
Accumulated undistributed net investment income... 65,095
---------------
Net Assets.................................... $23,277,659,765
===============
Net Asset Value Per Share,
23,277,636,469 shares outstanding (UNLIMITED
SHARES AUTHORIZED OF $.01 PAR VALUE)........... $ 1.00
===============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

6
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Active Assets Money Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Operations
FOR THE YEAR ENDED JUNE 30, 2003

<Table>

Net Investment Income:

Interest Income................................... $374,034,919
------------
Expenses
Investment management fee......................... 64,385,989
Distribution fee.................................. 24,205,951
Transfer agent fees and expenses.................. 9,434,779
Custodian fees.................................... 994,374
Shareholder reports and notices................... 521,277
Registration fees................................. 196,324
Professional fees................................. 52,801
Trustees' fees and expenses....................... 20,889
Other............................................. 411,604
------------
Total Expenses................................ 100,223,988
------------

Net Investment Income......................... 273,810,931

Net Realized Gain............................. 1,905
------------

Net Increase...................................... $273,812,836
============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

7
<Page>
Active Assets Money Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
--------------- ---------------

Increase (Decrease) in Net Assets:
Operations:
Net investment income................... $ 273,810,931 $ 621,446,735
Net realized gain....................... 1,905 84,074
--------------- ---------------

Net Increase........................ 273,812,836 621,530,809
--------------- ---------------

Dividends and Distributions to
Shareholders from:
Net investment income................... (273,802,951) (621,446,027)
Net realized gain....................... (1,905) (84,074)
--------------- ---------------

Total Dividends and Distributions... (273,804,856) (621,530,101)
--------------- ---------------

Net decrease from transactions in shares
of beneficial interest................. (1,760,025,590) (1,174,174,409)
--------------- ---------------

Net Decrease........................ (1,760,017,610) (1,174,173,701)

Net Assets:
Beginning of period..................... 25,037,677,375 26,211,851,076
--------------- ---------------

End of Period
(INCLUDING ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME OF $65,095 AND
$15,316, RESPECTIVELY)................. $23,277,659,765 $25,037,677,375
=============== ===============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

8
<Page>
Active Assets Money Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003

1. Organization and Accounting Policies
Active Assets 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 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. 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.

ACTIVE ASSETS MONEY TRUST

9
<Page>
Active Assets Money Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

the portion of daily net assets exceeding $500 million but not exceeding $750
million; 0.375% to the portion of daily net assets exceeding $750 million but
not exceeding $1 billion; 0.35% to the portion of daily net assets exceeding $1
billion but not exceeding $1.5 billion; 0.325% to the portion of daily net
assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion
of daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.275%
to the portion of daily net assets exceeding $2.5 billion but not exceeding $3
billion; 0.25% to the portion of daily net assets exceeding $3 billion but not
exceeding $15 billion; 0.249% to the portion of daily net assets exceeding $15
billion but not exceeding $17.5 billion; 0.248% to the portion of daily net
assets exceeding $17.5 billion but not exceeding $25 billion; 0.247% to the
portion of daily net assets exceeding $25 billion but not exceeding $30 billion;
and 0.246% to the portion of daily net assets exceeding $30 billion.

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

Reimbursements for these expenses are made in monthly payments by the Fund to
the Distributor, which will in no event exceed an amount equal to a payment at
the annual rate of 0.15% of the Fund's average daily net assets during the
month. Expenses incurred by the Distributor pursuant to the Plan in any fiscal
year will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the year ended June 30, 2003, the distribution fee
was accrued at the annual rate of 0.10%.

4. Security Transactions and Transactions with Affiliates
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended June 30, 2003 aggregated $125,309,994,181 and
$127,407,917,039, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent. At June 30, 2003, the Fund had transfer agent fees
and expenses payable of approximately $136,500.

ACTIVE ASSETS MONEY TRUST

10
<Page>
Active Assets Money Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

expenses in the Statement of Operations amounted to $7,265. At June 30, 2003,
the Fund had an accrued pension liability of $58,087 which is included in
accrued expenses in the Statement of Assets and Liabilities.

5. Shares of Beneficial Interest
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
--------------- ---------------

Shares sold............................. 70,079,943,853 77,921,269,151
Shares issued in reinvestment of
dividends and distributions............ 273,033,113 620,058,475
--------------- ---------------
70,352,976,966 78,541,327,626
Shares redeemed......................... (72,113,002,556) (79,715,502,035)
--------------- ---------------
Net decrease in shares outstanding...... (1,760,025,590) (1,174,174,409)
=============== ===============
</Table>

ACTIVE ASSETS MONEY TRUST

11
<Page>
Active Assets Money Trust
FINANCIAL HIGHLIGHTS

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

<Table>
<Caption>
FOR THE YEAR ENDED JUNE 30,
-------------------------------------------------------------------------
2003 2002 2001 2000 1999
------------- ------------- ------------- ------------- -------------

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... 0.011 0.023 0.056 0.054 0.048
Less dividends from net
investment income....... (0.011)+ (0.023)+ (0.056)+ (0.054) (0.048)
------- ------- ------- ------- -------

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

Total Return............. 1.13% 2.33% 5.76% 5.50% 4.92%

Ratios to Average Net
Assets:
Expenses................. 0.41% 0.40% 0.41% 0.42% 0.43%
Net investment income.... 1.12% 2.32% 5.58% 5.38% 4.78%
Supplemental Data:
Net assets, end of
period, in millions..... $23,278 $25,038 $26,212 $20,972 $15,989
</Table>

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

+ INCLUDES CAPITAL GAIN DISTRIBUTION OF LESS THAN $0.001.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS MONEY TRUST

12
<Page>
Active Assets Money Trust
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Trustees of
Active Assets Money Trust:

We have audited the accompanying statement of assets and liabilities of Active
Assets Money Trust (the "Fund"), including the portfolio of investments, as of
June 30, 2003, and the related statements of operations for the year then ended
and changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2003, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Active
Assets Money Trust as of June 30, 2003, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.

Deloitte & Touche LLP
NEW YORK, NEW YORK
AUGUST 7, 2003

2003 FEDERAL TAX NOTICE (UNAUDITED)

Of the Fund's ordinary income dividends paid during the fiscal
year ended June 30, 2003, 13.40% was attributable to qualifying
Federal obligations. Please consult your tax advisor to determine
if any portion of the dividends you received is exempt from state
income tax.

ACTIVE ASSETS MONEY TRUST

13
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003

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

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

Short-Term Variable Rate Municipal Obligations (76.3%)
ALABAMA
$21,160 University of Alabama,
Hospital Ser 2000............ 0.97% 07/08/03 $ 21,160,000
ARIZONA
2,400 Pinal County Industrial
Development Authority,
Newmont Mining Co Ser 1984... 0.95 07/01/03 2,400,000
CALIFORNIA
10,020 California Housing Finance
Agency, Home Mortgage 2001
Ser U (MBIA) (AMT)........... 0.95 07/01/03 10,020,000
4,300 Golden Empire Schools
Financing Authority, Kern
High School District
Ser 2001..................... 1.00 07/08/03 4,300,000
1,500 Orange County Sanitation
District, Ser 2000 A COPs.... 0.85 07/01/03 1,500,000
COLORADO
15,000 Colorado Student Obligation
Bond Authority, Ser 1989A
(Ambac) (AMT)................ 1.00 07/08/03 15,000,000
DELAWARE
14,000 Delaware Economic Development
Authority, Delaware Clean
Power Ser 1997 C (AMT)....... 1.16 07/08/03 14,000,000
DISTRICT OF COLUMBIA
16,000 District of Columbia, George
Washington University
Ser 1999 C (MBIA)............ 1.05 07/08/03 16,000,000
FLORIDA
22,250 Dade County Industrial
Development Authority,
Dolphins Stadium
Ser 1985 B & C............... 1.00 07/08/03 22,250,000
Orlando-Orange County
Expressway Authority,
25,000 Ser 2003 C3 (FSA)............ 0.90 07/08/03 25,000,000
19,150 Ser 2003 C4 (FSA)............ 0.90 07/08/03 19,150,000
23,100 Pasco County School Board,
Ser 1996 COPs (Ambac)........ 1.00 07/08/03 23,100,000
18,600 Tampa Bay Water, Utility
System Ser 2002 (AMT)........ 1.05 07/08/03 18,600,000
16,840 Volusia County Health
Facilities Authority, Pooled
Hospital Loan (FGIC)......... 1.03 07/08/03 16,840,000
GEORGIA
21,000 Albany-Dougherty County
Hospital Authority,
Phoebe-Putney Memorial
Hospital Ser 1991 (Ambac).... 1.00 07/08/03 21,000,000
50,000 Atlanta, Water & Wastewater
Ser 2001 B (FSA)............. 0.90 07/08/03 50,000,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

14
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

$26,285 Burke County Development
Authority, Oglethorpe Power
Co Ser 1994 A (FGIC)......... 0.95% 07/08/03 $ 26,285,000
13,700 Clayton County Hospital
Authority, Southern Regional
Medical Center Ser 1998B..... 1.00 07/08/03 13,700,000
9,900 Georgia Municipal Electric
Authority, Subser 2000 D..... 0.85 07/08/03 9,900,000
20,000 Metropolitan Atlanta Rapid
Transit Authority,
Ser 2000 A................... 1.05 07/08/03 20,000,000
15,250 Private Colleges &
Universities Authority, Emory
University 2001 Ser B........ 0.90 07/08/03 15,250,000
ILLINOIS
15,000 Chicago, Ser 2002 B (FGIC).... 0.95 07/08/03 15,000,000
75,000 Chicago Metropolitan Water
Reclamation District,
2002 Ser A & E............... 0.90 07/08/03 75,000,000
30,500 Cook County, Ser 2002 B....... 1.09 07/08/03 30,500,000
8,000 Illinois Development Finance
Authority, Palos Community
Hospital Ser 1998............ 1.00 07/08/03 8,000,000
9,400 Illinois Health Facilities
Authority, Northwestern
Memorial Hospital
Ser 1995 & Ser 2002 B........ 1.00 07/01/03 9,400,000
19,900 Illinois Toll Highway
Authority, Refg 1993 Ser B
(MBIA)....................... 0.90 07/08/03 19,900,000
KENTUCKY
19,375 Breckinridge County,
Association of Counties
Leasing Trust 2002 Ser A..... 1.00 07/01/03 19,375,000
22,500 Kenton County Airport Board,
Flight Safety International
Inc Ser 2001 A (AMT)......... 1.08 07/08/03 22,500,000
36,780 Louisville & Jefferson County
Regional Airport Authority,
United Parcel Service of
America Ser 1999 A (AMT)..... 0.95 07/01/03 36,780,000
LOUISIANA
13,000 New Orleans Aviation Board,
Ser 1993 B (MBIA)............ 1.05 07/08/03 13,000,000
MASSACHUSETTS
50,280 Massachusetts, Refg 1998 Ser
B............................ 0.90 07/08/03 50,280,000
37,000 Massachusetts Bay
Transportation Authority,
Ser 2000..................... 0.95 07/08/03 37,000,000
Massachusetts Health &
Educational Facilities
Authority,
20,000 Amherst College 2003 Ser H... 0.88 06/09/04 20,000,000
20,000 Bentley College Ser K........ 1.00 07/08/03 20,000,000
Massachusetts Water Resources
Authority,
11,100 Multi-Modal Sub 1999 Ser B... 0.90 07/08/03 11,100,000
22,500 Multi-Modal Sub 2001 Ser A
(FGIC)....................... 0.90 07/08/03 22,500,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

15
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

MICHIGAN
Detroit,
$20,000 Sewage Disposal System Second
Lien Ser 2000 E (FGIC)....... 1.50% 10/02/03 $ 20,000,000
50,000 Sewage Disposal System Senior
Lien Ser 2001 C-1 (FSA)...... 0.90 07/08/03 50,000,000
25,000 Detroit, Water Supply System
Refg Second Lien Ser 2001-C
(FGIC)....................... 0.95 07/08/03 25,000,000
25,710 Holt Public Schools, Ser
2002......................... 0.90 07/08/03 25,710,000
43,750 Michigan Building Authority,
2002 Multi-Modal Ser II...... 0.90 07/08/03 43,750,000
22,325 Michigan Housing Development
Authority, Rental Housing
2002 Ser B (MBIA)............ 0.90 07/08/03 22,325,000
11,000 Oakland University, Ser 2001
(FGIC)....................... 1.05 07/08/03 11,000,000
MINNESOTA
7,465 University of Minnesota
Regents, Ser
1999A & 2001A................ 1.10 07/08/03 7,465,000
MISSISSIPPI
12,900 Perry County, Leaf River
Forest Products Inc Ser
2002......................... 0.90 07/08/03 12,900,000
MISSOURI
25,000 Lee's Summit, Multifamily
Housing Ser 2001 A........... 1.54 07/08/03 25,000,000
Missouri Health & Educational
Facilities Authority,
180 Cox Health System Ser 2002... 1.10 07/01/03 180,000
38,600 Stowers Institute Ser 2002... 0.95 07/08/03 38,600,000
38,855 University of Missouri,
Ser 2000 B................... 0.98 07/01/03 38,855,000
NEVADA
Clark County,
9,000 Airport Sub Lien Ser 1999B-1
(AMT)........................ 0.98 07/08/03 9,000,000
16,370 Airport Sub Lien Ser 2001A
(FGIC) (AMT)................. 1.06 07/01/03 16,370,000
47,000 Airport Sub Lien Ser 2001C
(FGIC)....................... 0.90 07/08/03 47,000,000
NEW HAMPSHIRE
16,000 New Hampshire Higher
Educational & Health
Facilities Authority,
Dartmouth College
Ser 2002..................... 1.00 07/08/03 16,000,000
NEW JERSEY
34,800 New Jersey Turnpike Authority,
Ser 1991 D (FGIC)............ 0.90 07/08/03 34,800,000
NEW MEXICO
19,900 Farmington, Arizona Public
Service Co 1994 Ser C
(AMT)........................ 0.90 07/01/03 19,900,000
NEW YORK
10,000 Long Island Power Authority,
Electric Ser 2 Subser 2A..... 0.95 07/08/03 10,000,000
6,000 New York City, 1992 Ser D
(FGIC)....................... 0.95 07/08/03 6,000,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

16
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

$ 500 New York State Energy
Research & Development
Authority, New York State
Electric & Gas Corp
Ser 1994 C................... 0.95% 07/01/03 $ 500,000
45,200 Triborough Bridge & Tunnel
Authority, Ser 2002 F........ 1.00 07/08/03 45,200,000
NORTH CAROLINA
10,800 Charlotte, Fiscal 2002 Ser
C............................ 1.00 07/08/03 10,800,000
50,100 Charlotte-Mecklenburg Hospital
Authority, Health Care System
Ser C & D.................... 0.90 07/08/03 50,100,000
3,500 Durham, Ser 1993A COPs........ 1.10 07/08/03 3,500,000
13,355 Mecklenburg County, Ser 2001
COPs......................... 1.00 07/08/03 13,355,000
North Carolina,
25,700 Ser 2002 C................... 0.90 07/08/03 25,700,000
15,000 Ser 2002 F................... 0.92 07/08/03 15,000,000
North Carolina Medical Care
Commission,
25,000 Firsthealth of the Carolinas
Ser 2002..................... 0.95 07/08/03 25,000,000
43,100 North Carolina Baptist
Hospitals Ser 2000........... 0.97 07/08/03 43,100,000
27,825 University of North Carolina
at Chapel Hill,
Ser 2001 C................... 0.90 07/08/03 27,825,000
OHIO
9,200 Columbus, Unlimited Tax Ser
1995-1....................... 0.90 07/08/03 9,200,000
OKLAHOMA
Oklahoma Water Resources
Board, State Loan Program
44,165 Ser 1994A & 1999............. 1.10 09/02/03 44,165,000
16,905 Ser 2001..................... 1.10 10/01/03 16,905,000
5,000 Tulsa County Industrial
Authority, Montereau in
Warren Woods Ser 2002 A...... 0.95 07/01/03 5,000,000
OREGON
29,000 Oregon, Veterans Ser 73 G..... 1.00 07/08/03 29,000,000
PENNSYLVANIA
Pennsylvania Higher Education
Assistance Agency,
25,000 Student Loan 1988 Ser B
(Ambac) (AMT)................ 1.00 07/08/03 25,000,000
40,000 Student Loan 1997 Ser A &
2001 Ser A (Ambac) (AMT)..... 1.05 07/08/03 40,000,000
25,000 Pennsylvania Turnpike
Commission, 2002 Ser A-2..... 0.95 07/08/03 25,000,000
14,800 Philadelphia, Water &
Wastewater Ser 2003.......... 0.90 07/08/03 14,800,000
23,700 York General Authority,
Harrisburg School District
Subser 1996 B (Ambac)........ 1.00 07/08/03 23,700,000
RHODE ISLAND
22,000 Rhode Island Convention
Center, Ser 2001............. 0.90 07/08/03 22,000,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

17
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

SOUTH CAROLINA
$24,000 Greenwood County, Fuji Photo
Film Inc Ser 2001............ 1.10% 07/08/03 $ 24,000,000
Piedmont Municipal Power
Agency,
21,000 Electric Refg Ser 1997 A
(MBIA)....................... 0.95 07/08/03 21,000,000
15,900 Electric Refg Ser 2002 B
(FGIC)....................... 0.85 07/08/03 15,900,000
TENNESSEE
Clarksville Public Building
Authority,
26,925 Pooled Financing Ser 1995.... 1.00 07/08/03 26,925,000
10,765 Pooled Financing Ser 2001.... 1.00 07/01/03 10,765,000
7,900 Memphis, GO Airport Refg Ser
1995 B (AMT)................. 1.05 07/08/03 7,900,000
Metropolitan Nashville &
Davidson County Health &
Educational Facilities Board,
10,000 Ensworth School Ser 2002..... 1.00 07/08/03 10,000,000
7,400 Vanderbilt University 2002
Ser B........................ 0.93 07/01/03 7,400,000
Montgomery County Public
Building Authority,
53,370 Pool Financing Ser 1997 &
1999......................... 1.00 07/08/03 53,370,000
1,890 Pool Financing Ser 2002...... 1.00 07/01/03 1,890,000
TEXAS
23,000 Brownsville, Utilities System
Sub Lien Ser 2001B (MBIA).... 0.95 07/08/03 23,000,000
2,800 Gulf Coast Waste Disposal
Authority, Exxon Corp
Ser 1995..................... 0.90 07/01/03 2,800,000
Harris County,
15,000 Toll Road Unlimited Tax Sub
Lien Ser 1994 B.............. 1.00 07/08/03 15,000,000
17,735 Toll Road Unlimited Tax Sub
Lien Ser 1994 D.............. 1.10 07/08/03 17,735,000
42,700 Harris County Health
Facilities Development
Corporation, Methodist
Hospital Ser 2002............ 0.95 07/01/03 42,700,000
19,000 Harris County Industrial
Development Corporation,
Baytank Inc Ser 1998......... 0.95 07/08/03 19,000,000
7,100 Lower Neches Valley Authority,
Exxon Oil Refining Ser 1999
(AMT)........................ 0.95 07/01/03 7,100,000
San Antonio, Water System
7,000 Ser 2003 A (MBIA)............ 0.90 07/08/03 7,000,000
16,500 Ser 2003 B (MBIA)............ 1.00 07/08/03 16,500,000
9,300 Texas, Veterans' Housing
Assistance Fund II
Ser 2003 A (AMT)............. 0.98 07/08/03 9,300,000
62,520 Texas Municipal Gas
Corporation, Senior Lien
Ser 1998..................... 1.00 07/08/03 62,520,000
UTAH
18,600 Eagle Mountain, Gas & Electric
Ser 2001..................... 1.00 07/08/03 18,600,000
Intermountain Power Agency,
30,000 1985 Ser E (Ambac)........... 0.97 12/01/03 30,000,000
35,900 1985 Ser F (Ambac)........... 1.00 09/15/03 35,900,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

18
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

$34,575 Salt Lake County, Service
Station Holdings British
Petroleum Ser 1994B.......... 0.98% 07/01/03 $ 34,575,000
VIRGINIA
15,000 Chesapeake Hospital Authority,
Chesapeake General Hospital
Ser 2001 A................... 1.00 07/08/03 15,000,000
29,000 Loudoun County Industrial
Development Authority, Howard
Hughes Medical Institute
Ser 2003 B & F............... 0.90 07/08/03 29,000,000
WASHINGTON
15,000 Port of Seattle, 1997 Ser
A (AMT)...................... 1.15 07/08/03 15,000,000
18,800 Washington, Ser VR - 96 A..... 0.93 07/08/03 18,800,000
WISCONSIN
9,500 Brokaw, Wausau Paper Mills Co
Ser 1995 (AMT)............... 1.35 07/08/03 9,500,000
--------------
Total Short-Term Variable Rate Municipal
Obligations
(COST $2,378,675,000)............................
2,378,675,000
--------------
</Table>

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

Tax-Exempt Commercial Paper (18.5%)
ALABAMA
Montgomery County
Industrial Development
Board,
7,000 General Electric Co Ser
1990.................... 1.00% 08/11/03 1.00% 7,000,000
20,000 General Electric Co Ser
1990.................... 0.95 08/12/03 0.95 20,000,000
COLORADO
7,500 Regional Transportation
District, Sub Lien Sales
Tax Ser 2001 A.......... 1.00 08/11/03 1.00 7,500,000
DISTRICT OF COLUMBIA
20,000 District of Columbia, The
American National Red
Cross Ser 2000.......... 0.90 09/09/03 0.90 20,000,000
FLORIDA
15,000 Hillsborough County, Ser
2002 A.................. 0.95 08/26/03 0.95 15,000,000
HAWAII
6,500 Honolulu City & County,
Ser 2001 Notes.......... 1.05 08/06/03 1.05 6,500,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

19
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

INDIANA
$25,160 Indiana State Office
Building Commission,
Hoosier Notes Ser A..... 0.95% 09/10/03 0.95% $ 25,160,000
MARYLAND
Maryland Health & Higher
Educational Facilities
Authority,
19,000 The Johns Hopkins
Hospital Ser C.......... 1.05 07/10/03 1.05 19,000,000
15,000 The Johns Hopkins
Hospital Ser C.......... 1.00 08/11/03 1.00 15,000,000
MASSACHUSETTS
Massachusetts,
20,000 Ser E................... 0.85 07/24/03 0.85 20,000,000
20,000 Ser E................... 0.85 07/28/03 0.85 20,000,000
19,000 Massachusetts Port
Authority,
Ser 2003 A.............. 0.95 07/21/03 0.95 19,000,000
Massachusetts Water
Resources Authority,
11,000 Ser 1999................ 1.05 07/22/03 1.05 11,000,000
8,500 Ser 1999................ 1.05 08/13/03 1.05 8,500,000
MICHIGAN
12,530 Michigan, Multi-Modal
School Loan
Ser 2003 A.............. 1.06 10/06/03 1.06 12,530,000
MINNESOTA
Rochester, Mayo
Foundation/Mayo Medical
Center
15,000 Ser 1992 C.............. 1.05 08/20/03 1.05 15,000,000
13,100 Ser 2000 C.............. 1.03 07/22/03 1.03 13,100,000
17,250 Ser 2000 C.............. 1.05 08/13/03 1.05 17,250,000
10,000 Ser 2001 D.............. 1.00 07/29/03 1.00 10,000,000
NEBRASKA
10,000 Omaha Public Power
District, Ser A......... 1.05 07/07/03 1.05 10,000,000
NEVADA
12,000 Clark County, Motor
Vehicle Fuel Tax
Ser A................... 1.05 07/14/03 1.05 12,000,000
PENNSYLVANIA
Montgomery County
Industrial Development
Authority,
12,000 Exelon Generation Co
Ser 2001 B.............. 1.00 08/14/03 1.00 12,000,000
16,400 PECO Energy 1994
Ser A................... 1.05 07/15/03 1.05 16,400,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

20
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

SOUTH CAROLINA
South Carolina Public
Service Authority,
$12,000 Santee Cooper Ser
1998.................... 1.05% 07/14/03 1.05% $ 12,000,000
12,972 Santee Cooper Ser
1998.................... 0.95 07/29/03 0.95 12,972,000
TEXAS
15,000 Dallas Area Rapid
Transit, Ser 2001....... 0.95 08/14/03 0.95 15,000,000
15,000 Harris County, Notes
Ser D................... 1.05 07/11/03 1.05 15,000,000
Houston,
10,000 Water & Sewer
Ser 1994 A.............. 1.10 07/08/03 1.10 10,000,000
25,000 Water & Sewer
Ser 1994 A.............. 1.15 07/08/03 1.15 25,000,000
15,000 Water & Sewer
Ser 1994 A.............. 1.10 07/09/03 1.10 15,000,000
12,600 Irving, Water and Sewer
Ser A................... 1.10 07/17/03 1.10 12,600,000
North Central Texas
Health Facilities
Development Corporation,
20,000 Methodist Hospitals of
Dallas Ser 1998
(Ambac)................. 1.05 07/09/03 1.05 20,000,000
11,000 Methodist Hospitals of
Dallas Ser 1998
(Ambac)................. 0.95 08/13/03 0.95 11,000,000
9,000 Methodist Hospitals of
Dallas Ser 1998
(Ambac)................. 1.05 08/14/03 1.05 9,000,000
24,300 San Antonio, Electric &
Gas Ser 1995 A.......... 1.05 07/23/03 1.05 24,300,000
19,000 Texas Municipal Power
Agency, Ser 1991........ 1.05 08/07/03 1.05 19,000,000
10,000 Texas Public Finance
Authority, Ser 2003..... 1.03 07/18/03 1.03 10,000,000
10,000 University of Texas
System Board of Regents,
Permanent University
Fund Ser A.............. 0.93 11/07/03 0.93 10,000,000
WASHINGTON
23,600 King County, Sewer Ser
A....................... 1.00 08/06/03 1.00 23,600,000
--------------
Total Tax-Exempt Commercial Paper
(COST $576,412,000)................................... 576,412,000
--------------
Short-Term Municipal Notes & Bonds (8.3%)
CALIFORNIA
California School Cash
Reserve Program
Authority,
28,000 2002 Pool Ser A (Ambac),
dtd 07/03/02............ 3.00 07/03/03 1.67 28,002,007
22,500 2003 Pool Ser A (Ambac),
dtd 07/03/03 (WI)....... 2.00 07/06/04 0.90 22,747,725
ILLINOIS
25,000 Illinois, Revenue
Anticipation
Certificates Ser 2002,
dtd 05/22/03............ 2.00 04/15/04 0.96 25,203,134
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

21
<Page>
Active Assets Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

INDIANA
$40,000 Indiana Bond Bank,
Advance Funding
Ser 2003 A,
dtd 06/12/03............ 1.25% 04/15/04 0.93% $ 40,100,212
Indianapolis Local Public
Improvement Bond Bank,
10,000 Ser 2003 B, dtd
01/14/03................ 2.00 07/08/03 1.13 10,001,656
15,000 Ser 2003 F, dtd
06/26/03................ 1.25 01/08/04 0.88 15,028,796
KENTUCKY
50,000 Kentucky Association of
Counties Advance Revenue
Program, Ser 2003 A
COPs,
dtd 07/01/03 (WI)....... 2.00 06/30/04 0.90 50,543,500
NEW YORK
17,500 Erie County, Ser 2003 A
RANs,
dtd 06/24/03............ 1.50 06/23/04 0.90 17,601,785
TEXAS
30,000 Texas, Ser 2002 TRANs,
dtd 08/29/02............ 2.75 08/29/03 1.39 30,065,029
WISCONSIN
19,000 Milwaukee, Ser 2002 B
RANs, dtd 09/04/02...... 2.75 08/28/03 1.43 19,039,401
--------------
Total Short-Term Municipal Notes & Bonds
(COST $258,333,245)................................... 258,333,245
--------------
</Table>

<Table>

Total Investments
(COST $3,213,420,245) (A) (B).................... 103.1% 3,213,420,245
Liabilities in Excess of Other Assets............. (3.1) (97,761,382)
------ --------------
Net Assets........................................ 100.0% $3,115,658,863
====== ==============
</Table>

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

AMT ALTERNATIVE MINIMUM TAX.
COPS CERTIFICATES OF PARTICIPATION.
RANS REVENUE ANTICIPATION NOTES.
TRANS TAX AND REVENUE ANTICIPATION NOTES.
WI SECURITY PURCHASED ON A WHEN-ISSUED BASIS.
+ RATE SHOWN IS THE RATE IN EFFECT AT JUNE 30, 2003.
* DATE ON WHICH THE PRINCIPAL AMOUNT CAN BE RECOVERED THROUGH DEMAND.
(a) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$109,391,499 IN CONNECTION WITH THE PURCHASE OF WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES.
(b) COST IS THE SAME FOR FEDERAL INCOME TAX PURPOSES.

BOND INSURANCE:

AMBAC AMBAC ASSURANCE CORPORATION.
FGIC FINANCIAL GUARANTY INSURANCE COMPANY.
FSA FINANCIAL SECURITY ASSURANCE INC.
MBIA MBIA INSURANCE CORPORATION.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

22
<Page>
Active Assets Tax-Free Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
JUNE 30, 2003

<Table>

Assets:
Investments in securities, at value (cost
$3,213,420,245).................................. $3,213,420,245
Cash.............................................. 6,931,369
Interest receivable............................... 5,940,373
Prepaid expenses and other assets................. 75,663
--------------
Total Assets.................................. 3,226,367,650
--------------
Liabilities:
Payable for:
Investments purchased........................... 109,391,499
Investment management fee....................... 946,690
Distribution fee................................ 268,265
Accrued expenses and other payables............... 102,333
--------------
Total Liabilities............................. 110,708,787
--------------
Net Assets.................................... $3,115,658,863
==============
Composition of Net Assets:
Paid-in-capital................................... $3,115,627,425
Accumulated undistributed net investment income... 41,528
Accumulated net realized loss..................... (10,090)
--------------
Net Assets.................................... $3,115,658,863
==============
Net Asset Value Per Share,
3,115,668,159 shares outstanding (UNLIMITED
SHARES AUTHORIZED OF $.01 PAR VALUE)........... $ 1.00
==============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

23
<Page>
Active Assets Tax-Free Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Operations
FOR THE YEAR ENDED JUNE 30, 2003

<Table>

Net Investment Income:

Interest Income................................... $39,570,026
----------
Expenses
Investment management fee......................... 11,034,476
Distribution fee.................................. 3,059,388
Transfer agent fees and expenses.................. 378,724
Custodian fees.................................... 128,560
Registration fees................................. 94,710
Shareholder reports and notices................... 65,648
Professional fees................................. 47,215
Trustees' fees and expenses....................... 20,805
Other............................................. 59,020
----------
Total Expenses................................ 14,888,546

Less: expense offset.............................. (128,147)
----------

Net Expenses.................................. 14,760,399
----------

Net Investment Income............................. $24,809,627
==========
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

24
<Page>
Active Assets Tax-Free Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
-------------- --------------

Increase (Decrease) in Net Assets:
Operations:
Net investment income................... $ 24,809,627 $ 43,103,831

Dividends to shareholders from net
investment income...................... (24,808,438) (43,102,764)

Net increase (decrease) from
transactions in shares of beneficial
interest............................... 169,007,069 (128,761,190)
-------------- --------------

Net Increase (Decrease)............. 169,008,258 (128,760,123)

Net Assets:
Beginning of period..................... 2,946,650,605 3,075,410,728
-------------- --------------

End of Period
(INCLUDING ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME OF $41,528 AND
$40,054, RESPECTIVELY)................. $3,115,658,863 $2,946,650,605
============== ==============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

25
<Page>
Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003

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.

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

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

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

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

ACTIVE ASSETS TAX-FREE TRUST

26
<Page>
Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion
of daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.275%
to the portion of daily net assets exceeding $2.5 billion but not exceeding $3
billion; 0.25% to the portion of daily net assets exceeding $3 billion but not
exceeding $15 billion; and 0.249% to the portion of daily net assets exceeding
$15 billion.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all 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 years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended June 30, 2003 included in
Trustees' fees and expenses in the Statement of Operations amounted to $7,265.
At June 30, 2003, the Fund had an accrued pension liability of $58,087 which is
included in accrued expenses in the Statement of Assets and Liabilities.

ACTIVE ASSETS TAX-FREE TRUST

27
<Page>
Active Assets Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

5. Shares of Beneficial Interest
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
-------------- --------------

Shares sold............................. 9,532,821,650 9,459,188,018
Shares issued in reinvestment of
dividends.............................. 24,808,438 43,102,764
-------------- --------------
9,557,630,088 9,502,290,782
Shares redeemed......................... (9,388,623,019) (9,631,051,972)
-------------- --------------
Net increase (decrease) in shares
outstanding............................ 169,007,069 (128,761,190)
============== ==============
</Table>

6. Federal Income Tax Status
At June 30, 2003, the Fund had a net capital loss carryover of approximately
$10,000 which will be available through June 30, 2009 to offset future capital
gains to the extent provided by regulations.

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

ACTIVE ASSETS TAX-FREE TRUST

28
<Page>
Active Assets Tax-Free Trust
FINANCIAL HIGHLIGHTS

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

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... 0.008 0.014 0.033 0.031 0.027
Less dividends from net
investment income....... (0.008) (0.014) (0.033) (0.031) (0.027)
------- ------- ------- ------- -------

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

Total Return............. 0.81% 1.38% 3.34% 3.15% 2.73%

Ratios to Average Net
Assets:
Expenses (before expense
offset)................. 0.48% 0.48%(1) 0.48% 0.50% 0.52%
Net investment income.... 0.80% 1.38% 3.28% 3.11% 2.68%
Supplemental Data:
Net assets, end of
period, in millions..... $3,116 $2,947 $3,075 $2,660 $2,290
</Table>

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

(1) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS TAX-FREE TRUST

29
<Page>
Active Assets Tax-Free Trust
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Trustees of
Active Assets Tax-Free Trust:

We have audited the accompanying statement of assets and liabilities of Active
Assets Tax-Free Trust (the "Fund"), including the portfolio of investments, as
of June 30, 2003, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2003, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Active
Assets Tax-Free Trust as of June 30, 2003, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.

Deloitte & Touche LLP
NEW YORK, NEW YORK
AUGUST 7, 2003

2003 FEDERAL TAX NOTICE (UNAUDITED)

For the year ended June 30, 2003, all of the Fund's dividends from
net investment income were exempt interest dividends, excludable
from gross income for Federal income tax purposes.

ACTIVE ASSETS TAX-FREE TRUST

30
<Page>
Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003

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

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

California Tax-Exempt Short-Term Variable Rate Municipal
Obligations (81.0%)
ABAG Finance Authority for
Nonprofit Corporations,
$ 4,000 Computer History Museum Ser
2002......................... 0.90% 07/08/03 $ 4,000,000
8,400 Episcopal Homes Foundation
Ser 2000 COPs................ 1.05 07/08/03 8,400,000
7,000 Lease Purchase 2003 Ser A.... 1.05 07/08/03 7,000,000
12,800 Antelope Valley Union High
School District, School
Facility Bridge Funding 2002
Ser C (FSA).................. 0.85 07/08/03 12,800,000
17,800 Bay Area Toll Authority, San
Francisco Bay Area Toll
Bridge Ser B (Ambac)......... 0.85 07/08/03 17,800,000
20,000 Big Bear Lake, Southwest Gas
Corp 1993 Ser A (AMT)........ 0.95 07/08/03 20,000,000
11,970 California Alternative Energy
Source Finance Authority,
General Electric Capital
Corp-Arroyo Energy 1993 Ser B
(AMT)........................ 1.00 07/08/03 11,970,000
California Educational
Facilities Authority,
5,000 California Institute of
Technology Ser 1994.......... 0.90 07/08/03 5,000,000
15,165 Stanford University Ser
L-5.......................... 0.85 07/08/03 15,165,000
California Housing Finance
Agency,
12,030 Home Mortgage 2001 Ser J
(AMT) (FSA).................. 0.95 07/01/03 12,030,000
3,400 Home Mortgage 2001 Ser U
(AMT) (MBIA)................. 0.95 07/01/03 3,400,000
8,300 Home Mortgage 2002 Ser J
(AMT) (MBIA)................. 0.95 07/01/03 8,300,000
12,000 Home Mortgage 2002 Ser M
(AMT)........................ 0.95 07/01/03 12,000,000
15,000 Home Mortgage 2003 Ser F
(AMT) (FSA).................. 0.95 07/08/03 15,000,000
California Pollution Control
Financing Authority,
10,485 Chevron USA Inc Ser 1984B.... 1.10 06/15/04 10,486,763
2,300 Shell Oil Co Ser 1991 A...... 0.85 07/01/03 2,300,000
5,000 Solid Waste Disposal Waste
Management Inc Ser 2002 A
(AMT)........................ 0.96 07/08/03 5,000,000
California Statewide
Communities Development
Authority,
1,515 Chevron USA Inc Ser 2002..... 0.92 07/01/03 1,515,000
10,000 Children's Hospital of Los
Angeles Ser 2002 A (Ambac)... 0.85 07/08/03 10,000,000
32,570 California Transit Finance
Authority, Ser 1997 (FSA).... 1.00 07/08/03 32,570,000
14,655 Chino Basin Financing
Authority, Inland Empire
Utilities Agency Ser 2002 A
(Ambac)...................... 0.85 07/08/03 14,655,000
23,600 Contra Costa County,
Multifamily The Park Regency
Ser 1992 A (AMT)............. 0.97 07/08/03 23,600,000
6,900 Eastern Municipal Water
District, Water & Sewer Ser
1993 B COPs (FGIC)........... 0.85 07/08/03 6,900,000
17,500 Elsinore Valley Municipal
Water District, Ser 2000 A
COPs (FGIC).................. 0.95 07/08/03 17,500,000
10,500 Fremont, Creekside Village
Multifamily Ser 1985 D....... 0.85 07/08/03 10,500,000
14,600 Fresno, Sewer System Sub Lien
Ser 2000 A (FGIC)............ 0.95 07/08/03 14,600,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

31
<Page>
Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

$ 8,000 Golden Empire Schools
Financing Authority, Kern
High School District Ser
2001......................... 1.00% 07/08/03 $ 8,000,000
7,274 Irvine Assessment District, No
00-18, Improvement Bond Act
1915......................... 0.85 07/01/03 7,274,000
8,700 Lancaster, Antelope Pines
Apartment Ser 2001 A......... 0.87 07/08/03 8,700,000
Los Angeles, Multifamily
30,000 1985 Ser K................... 0.88 07/08/03 30,000,000
3,150 1994 Ser A (AMT)............. 1.00 07/01/03 3,150,000
22,100 Los Angeles Community
Redevelopment Agency, Grand
Promenade Ser 2002........... 0.88 07/08/03 22,100,000
10,000 Los Angeles Convention and
Exhibition Center Authority,
Ser 2003 F (Ambac)........... 0.97 06/16/04 10,000,000
Los Angeles Department of
Water & Power,
12,000 Power System 2001 Ser B
Subser B-1................... 0.85 07/08/03 12,000,000
15,000 Water System 2001 Ser B
Subser B-1................... 1.05 07/08/03 15,000,000
4,000 Water System 2001 Ser B
Subser B-2................... 0.85 07/01/03 4,000,000
Metropolitan Water District of
Southern California,
8,000 Water 1999 Ser C............. 0.90 07/08/03 8,000,000
10,000 Water 2000 Ser B-4........... 0.85 07/08/03 10,000,000
9,395 Waterworks 1996 Ser A
(Ambac)...................... 0.80 07/08/03 9,395,000
16,100 Monterey Peninsula Water
Management District,
Wastewater Ser 1992 COPs..... 1.05 07/08/03 16,100,000
9,200 Newport Beach, Hoag Memorial
Hospital Presbyterian
Ser 1996 B & C............... 1.00 07/01/03 9,200,000
27,700 Oakland-Alameda County
Coliseum Authority, Oakland
Coliseum 2000 Refg Ser C-1... 1.00 07/08/03 27,700,000
3,000 Orange County Housing
Authority, Oasis Martinique
Refg 1998 Issue I............ 0.92 07/08/03 3,000,000
5,140 Orange County Sanitation
District, Ser 2000 A & Ser
2000 B COPs.................. 0.85 07/01/03 5,140,000
5,000 Pasadena, City Hall & Park
Improvement Ser 2003 COPs
(Ambac)...................... 0.95 07/08/03 5,000,000
4,500 Pomona Redevelopment Agency,
Park & Plaza Apartments
Ser 1998 A................... 0.87 07/08/03 4,500,000
13,000 Rancho Mirage Joint Powers
Financing Authority,
Eisenhower Medical Center Ser
1997 B COPs (MBIA)........... 0.97 07/08/03 13,000,000
6,950 Redlands, Orange Village
Apartments 1988 Ser A
(AMT)........................ 1.05 07/08/03 6,950,000
6,940 Sacramento County,
Administration Center &
Courthouse Ser 1990 COPs..... 1.00 07/08/03 6,940,000
15,000 San Bernardino County, Medical
Center Financing Ser 1998
COPs (MBIA).................. 1.05 07/08/03 15,000,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

32
<Page>
Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

$11,275 San Francisco City & County,
Folsom-Dore Apartments Ser
2002 A (AMT)................. 1.10% 07/08/03 $ 11,275,000
7,500 San Francisco City & County
Redevelopment Agency, Bayside
Village Multifamily Ser 1985
A............................ 1.02 07/08/03 7,500,000
13,400 San Jose Redevelopment Agency,
Merged Area 1996 Ser B....... 0.90 07/08/03 13,400,000
5,300 San Jose-Santa Clara Clean
Water Financing Authority,
Sewer Ser 1995 B (FGIC)...... 0.85 07/08/03 5,300,000
12,500 Southern California Public
Power Authority, Transmission
Refg Ser 2001 A (FSA)........ 0.95 07/08/03 12,500,000
5,120 Turlock Irrigation District,
Ser 1988 A................... 1.00 07/08/03 5,120,000
------------
Total California Tax-Exempt Short-Term Variable
Rate Municipal Obligations
(COST $617,735,763)..............................
617,735,763
------------
</Table>

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

California Tax-Exempt Commercial Paper (15.8%)
10,000 California
Infrastructure &
Economic Development
Bank, Salvation Army
Western Territory Ser
2001.................... 1.08% 01/28/04 1.08% 10,000,000
East Bay Municipal
Utility District,
11,000 Water System Ser 1997... 1.05 07/23/03 1.05 11,000,000
10,000 Water System Ser 1997... 1.00 08/13/03 1.00 10,000,000
10,000 Los Angeles County
Metropolitan
Transportation
Authority, 2nd Sub Sales
Tax Ser A............... 1.05 08/20/03 1.05 10,000,000
15,000 San Diego County Regional
Transportation
Commission, Sub Sales
Tax Ser A............... 1.05 08/12/03 1.05 15,000,000
San Diego County Water
Authority,
16,000 Ser 1................... 1.00 08/14/03 1.00 16,000,000
10,000 Ser 1................... 0.98 09/24/03 0.98 10,000,000
6,400 San Gabriel Valley
Council of Governments,
Alameda Corridor-East
GANs.................... 0.95 08/13/03 0.95 6,400,000
University of California
Regents,
11,700 Ser A................... 0.95 07/29/03 0.95 11,700,000
10,000 Ser A................... 0.95 08/07/03 0.95 10,000,000
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

33
<Page>
Active Assets California Tax-Free Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003 CONTINUED

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

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

Puerto Rico
$ 9,923 Puerto Rico Government
Development Bank,
Ser 1986................ 1.00% 07/10/03 1.00% $ 9,923,000
-------------
Total California Tax-Exempt Commercial Paper
(COST $120,023,000)................................... 120,023,000
-------------
California Tax-Exempt Short-Term Municipal Notes (15.6%)
California School Cash
Reserve Program
Authority,
35,000 2002 Pool Ser A (Ambac),
dtd 07/03/02............ 3.00 07/03/03 1.67 35,002,508
30,000 2003 Pool Set A (Ambac),
dtd 07/03/03 (WI)....... 2.00 07/06/04 0.90 30,330,300
14,795 California Statewide
Communities Development
Authority, 2003 Ser A-1
TRANs (FSA),
dtd 07/01/03 (WI)....... 2.00 06/30/04 0.88 14,958,781
8,540 Los Angeles County,
2003-2004 Ser A TRANs,
dtd 07/01/03 (WI)....... 2.00 06/30/04 0.85 8,637,100
Santa Cruz,
15,000 2002-2003 TRANs, dtd
07/02/02................ 3.00 07/01/03 1.65 15,000,000
15,000 2003-2004 TRANs, dtd
07/02/03 (WI)........... 2.00 07/01/04 0.91 15,161,550
-------------
Total California Tax-Exempt Short-Term Municipal Notes
(COST $119,090,239)................................... 119,090,239
-------------
</Table>

<Table>

Total Investments
(COST $856,849,002) (A) (B)...................... 112.4% 856,849,002

Liabilities in Excess of Other Assets............. (12.4) (94,401,293)
------ ------------
Net Assets........................................ 100.0% $762,447,709
====== ============
</Table>

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

AMT ALTERNATIVE MINIMUM TAX.
COPS CERTIFICATES OF PARTICIPATION.
GANS GRANT ANTICIPATION NOTES.
TRANS TAX AND REVENUE ANTICIPATION NOTES.
WI SECURITY PURCHASED ON A WHEN-ISSUED BASIS.
+ RATE SHOWN IS THE RATE IN EFFECT AT JUNE 30, 2003.
* DATE ON WHICH THE PRINCIPAL AMOUNT CAN BE RECOVERED THROUGH DEMAND.
(a) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$97,587,731 IN CONNECTION WITH THE PURCHASE OF WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES.
(b) COST IS THE SAME FOR FEDERAL INCOME TAX PURPOSES.
BOND
INSURANCE:
AMBAC AMBAC ASSURANCE CORPORATION.
FGIC FINANCIAL GUARANTY INSURANCE COMPANY.
FSA FINANCIAL SECURITY ASSURANCE INC.
MBIA MBIA INSURANCE CORPORATION.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

34
<Page>
Active Assets California Tax-Free Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
JUNE 30, 2003

<Table>

Assets:
Investments in securities, at value (cost
$856,849,002).................................... $856,849,002
Cash.............................................. 1,212,854
Interest receivable............................... 2,412,236
Prepaid expenses.................................. 22,354
-----------
Total Assets.................................. 860,496,446
-----------
Liabilities:
Payable for:
Investments purchased........................... 97,587,731
Investment management fee....................... 307,129
Distribution fee................................ 64,918
Accrued expenses and other payables............... 88,959
-----------
Total Liabilities............................. 98,048,737
-----------
Net Assets.................................... $762,447,709
===========
Composition of Net Assets:
Paid-in-capital................................... $762,443,144
Accumulated undistributed net investment income... 4,565
-----------
Net Assets.................................... $762,447,709
===========
Net Asset Value Per Share,
762,423,818 shares outstanding (UNLIMITED SHARES
AUTHORIZED OF $.01 PAR VALUE).................. $ 1.00
===========
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

35
<Page>
Active Assets California Tax-Free Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Operations
FOR THE YEAR ENDED JUNE 30, 2003

<Table>

Net Investment Income:

Interest Income................................... $9,700,871
---------
Expenses
Investment management fee......................... 3,723,198
Distribution fee.................................. 782,245
Transfer agent fees and expenses.................. 94,566
Professional fees................................. 47,660
Shareholder reports and notices................... 42,086
Custodian fees.................................... 36,079
Trustees' fees and expenses....................... 19,995
Registration fees................................. 12,645
Other............................................. 19,101
---------

Total Expenses................................ 4,777,575

Less: expense offset.............................. (35,922)
---------

Net Expenses.................................. 4,741,653
---------

Net Investment Income............................. $4,959,218
=========
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

36
<Page>
Active Assets California Tax-Free Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
------------- -------------

Increase (Decrease) in Net Assets:
Operations:
Net investment income................... $ 4,959,218 $ 9,180,749

Dividends to shareholders from net
investment income...................... (4,959,654) (9,180,575)

Net increase (decrease) from
transactions in shares of beneficial
interest............................... (207,445) 3,566,660
------------ ------------

Net Increase (Decrease)............. (207,881) 3,566,834

Net Assets:
Beginning of period..................... 762,655,590 759,088,756
------------ ------------

End of Period
(INCLUDING ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME OF $4,565 AND
$603, RESPECTIVELY).................... $762,447,709 $762,655,590
============ ============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

37
<Page>
Active Assets California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003

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

The following is a summary of significant accounting policies:

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

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

ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

38
<Page>
Active Assets California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

assets exceeding $1.5 billion but not exceeding $2 billion; 0.30% to the portion
of daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.275%
to the portion of daily net assets exceeding $2.5 billion but not exceeding $3
billion; and 0.25% to the portion of daily net assets exceeding $3 billion.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all 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 years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended June 30, 2003 included in
Trustees' fees and expenses in the Statement of Operations amounted to $6,486.
At June 30, 2003, the Fund had an accrued pension liability of $51,102 which is
included in accrued expenses in the Statement of Assets and Liabilities.

ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

39
<Page>
Active Assets California Tax-Free Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

5. Shares of Beneficial Interest
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
-------------- --------------

Shares sold............................. 2,216,990,398 2,296,072,907
Shares issued in reinvestment of
dividends.............................. 4,959,654 9,180,575
-------------- --------------
2,221,950,052 2,305,253,482
Shares redeemed......................... (2,222,157,497) (2,301,686,822)
-------------- --------------
Net increase (decrease) in shares
outstanding............................ (207,445) 3,566,660
============== ==============
</Table>

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

ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

40
<Page>
Active Assets California Tax-Free Trust
FINANCIAL HIGHLIGHTS

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

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

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

Total Return............. 0.63% 1.15% 2.68% 2.60% 2.31%

Ratios to Average Net
Assets:
Expenses (before expense
offset)................. 0.60% 0.60% 0.59% 0.61% 0.63%(1)
Net investment income.... 0.63% 1.14% 2.64% 2.55% 2.28%
Supplemental Data:
Net assets, end of
period, in thousands.... $762,448 $762,656 $759,089 $697,703 $625,753
</Table>

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

(1) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

41
<Page>
Active Assets California Tax-Free Trust
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Trustees of
Active Assets California Tax-Free Trust:

We have audited the accompanying statement of assets and liabilities of Active
Assets California Tax-Free Trust (the "Fund"), including the portfolio of
investments, as of June 30, 2003, and the related statements of operations for
the year then ended and changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2003, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Active
Assets California Tax-Free Trust as of June 30, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.

Deloitte & Touche LLP
NEW YORK, NEW YORK
AUGUST 7, 2003

2003 FEDERAL TAX NOTICE (UNAUDITED)

For the year ended June 30, 2003, all of the Fund's dividends from
net investment income were exempt interest dividends, excludable
from gross income for Federal income tax purposes.

ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST

42
<Page>
Active Assets Government Securities Trust
PORTFOLIO OF INVESTMENTS / / JUNE 30, 2003

<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE

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

U.S. Government Agencies (92.7%)
$680,000 Federal Home Loan Banks
07/02/03 - 09/03/03............... 0.91 - 1.18% $ 679,439,459
290,000 Federal National Mortgage Assoc.
07/09/03 - 08/27/03............... 0.96 - 1.20 289,700,044
120,000 Freddie Mac
07/17/03 - 08/07/03............... 1.14 - 1.21 119,904,150
50,000 Student Loan Marketing Assoc.
08/12/03.......................... 0.96 49,944,000
--------------
Total U.S. Government Agencies
(COST $1,138,987,653)............................. 1,138,987,653
--------------
U.S. Government Obligation (0.8%)
10,000 U.S. Treasury Bill
07/03/03
(COST $9,999,467)................. 0.96 9,999,467
--------------
Repurchase Agreement (6.6%)
80,330 Goldman, Sachs & Co.
due 07/01/03 (dated 06/30/03;
proceeds $80,332,678) (a)
(COST $80,330,000)................ 1.20 80,330,000
--------------
</Table>

<Table>

Total Investments
(COST $1,229,317,120) (B)......... 100.1% 1,229,317,120

Liabilities in Excess of Other
Assets............................ (0.1) (623,362)
----- --------------

Net Assets......................... 100.0% $1,228,693,758
===== ==============
</Table>

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

(a) COLLATERALIZED BY FEDERAL NATIONAL MORTGAGE ASSOC. 6.00% - 6.63% DUE
08/01/09 - 03/01/33 VALUED AT $81,936,600.
(b) COST IS THE SAME FOR FEDERAL INCOME TAX PURPOSES.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

43
<Page>
Active Assets Government Securities Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
JUNE 30, 2003

<Table>

Assets:
Investments in securities, at value (cost
$1,229,317,120).................................. $1,229,317,120
Cash.............................................. 2,237
Interest receivable............................... 2,678
Prepaid expenses and other assets................. 46,503
-------------
Total Assets.................................. 1,229,368,538
-------------
Liabilities:
Payable for:
Investment management fee....................... 451,449
Distribution fee................................ 104,719
Accrued expenses and other payables............... 118,612
-------------
Total Liabilities............................. 674,780
-------------
Net Assets.................................... $1,228,693,758
=============
Composition of Net Assets:
Paid-in-capital................................... $1,228,648,915
Accumulated undistributed net investment income... 44,843
-------------
Net Assets.................................... $1,228,693,758
=============
Net Asset Value Per Share,
1,228,693,220 shares outstanding (UNLIMITED
SHARES AUTHORIZED OF $.01 PAR VALUE)........... $ 1.00
=============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

44
<Page>
Active Assets Government Securities Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Operations
FOR THE YEAR ENDED JUNE 30, 2003

<Table>

Net Investment Income:

Interest Income................................... $21,644,780
----------
Expenses
Investment management fee......................... 6,025,221
Distribution fee.................................. 1,435,837
Transfer agent fees and expenses.................. 137,171
Registration fees................................. 78,942
Professional fees................................. 45,505
Custodian fees.................................... 38,848
Shareholder reports and notices................... 37,441
Trustees' fees and expenses....................... 20,762
Other............................................. 23,598
----------
Total Expenses................................ 7,843,325
----------

Net Investment Income......................... 13,801,455

Net Realized Gain............................. 1,458
----------

Net Increase...................................... $13,802,913
==========
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

45
<Page>
Active Assets Government Securities Trust
FINANCIAL STATEMENTS CONTINUED

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
-------------- --------------

Increase (Decrease) in Net Assets:
Operations:
Net investment income................... $ 13,801,455 $ 31,931,759
Net realized gain....................... 1,458 400,942
-------------- --------------

Net Increase........................ 13,802,913 32,332,701
-------------- --------------

Dividends and Distributions to
Shareholders from:
Net Investment income................... (13,801,110) (31,931,695)
Net realized gain....................... (1,458) (400,942)
-------------- --------------

Total Dividends and Distributions... (13,802,568) (32,332,637)
-------------- --------------

Net decrease from transactions in shares
of beneficial interest................. (198,302,159) (176,378,521)
-------------- --------------

Net Decrease........................ (198,301,814) (176,378,457)

Net Assets:
Beginning of period..................... 1,426,995,572 1,603,374,029
-------------- --------------

End of Period
(INCLUDING ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME OF $44,843 AND
$193, RESPECTIVELY).................... $1,228,693,758 $1,426,995,572
============== ==============
</Table>

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

46
<Page>
Active Assets Government Securities Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003

1. Organization and Accounting Policies
Active Assets Government Securities 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 objectives are
high current income, preservation of capital 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.

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

ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

47
<Page>
Active Assets Government Securities Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

close of each business day: 0.50% to the portion of daily net assets not
exceeding $500 million; 0.425% to the portion of daily net assets exceeding $500
million but not exceeding $750 million; 0.375% to the portion of daily net
assets exceeding $750 million but not exceeding $1 billion; 0.35% to the portion
of daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.325%
to the portion of daily net assets exceeding $1.5 billion but not exceeding $2
billion; 0.30% to the portion of daily net assets exceeding $2 billion but not
exceeding $2.5 billion; 0.275% to the portion of daily net assets exceeding
$2.5 billion but not exceeding $3 billion; and 0.25% to the portion of daily net
assets exceeding $3 billion.

The Fund has an unfunded noncontributory defined benefit pension plan covering
all 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 years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended June 30, 2003 included in
Trustees' fees and expenses in the Statement of Operations amounted to $7,265.
At June 30, 2003, the Fund had an accrued pension liability of $58,098 which is
included in accrued expenses in the Statement of Assets and Liabilities.

ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

48
<Page>
Active Assets Government Securities Trust
NOTES TO FINANCIAL STATEMENTS / / JUNE 30, 2003 CONTINUED

5. Shares of Beneficial Interest
Transactions in shares of beneficial interest, at $1.00 per share, were as
follows:

<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 JUNE 30, 2002
-------------- --------------

Shares sold............................. 6,396,600,275 5,669,833,665
Shares issued in reinvestment of
dividends and distributions............ 13,784,355 32,300,420
-------------- --------------
6,410,384,630 5,702,134,085
Shares redeemed......................... (6,608,686,789) (5,878,512,606)
-------------- --------------
Net decrease in shares outstanding...... (198,302,159) (176,378,521)
============== ==============
</Table>

ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

49
<Page>
Active Assets Government Securities Trust
FINANCIAL HIGHLIGHTS

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

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... 0.009 0.020 0.053 0.050 0.045
Less dividends from net
investment income....... (0.009)+ (0.020)+ (0.053) (0.050) (0.045)
------- ------- ------- ------- -------

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

Total Return............. 0.95% 2.01% 5.48% 5.17% 4.64%

Ratios to Average Net
Assets:
Expenses................. 0.55% 0.53% 0.56% 0.59% 0.61%
Net investment income.... 0.96% 1.96% 5.24% 5.03% 4.50%
Supplemental Data:
Net assets, end of
period, in thousands.... $1,228,694 $1,426,996 $1,603,374 $932,466 $995,448
</Table>

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

+ INCLUDES CAPITAL GAIN DISTRIBUTION OF LESS THAN $0.001.

SEE NOTES TO FINANCIAL STATEMENTS
ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

50
<Page>
Active Assets Government Securities Trust
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Trustees of
Active Assets Government Securities Trust:

We have audited the accompanying statement of assets and liabilities of Active
Assets Government Securities Trust (the "Fund"), including the portfolio of
investments, as of June 30, 2003, and the related statements of operations for
the year then ended and changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Active
Assets Government Securities Trust as of June 30, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.

Deloitte & Touche LLP
NEW YORK, NEW YORK
AUGUST 7, 2003

2003 FEDERAL TAX NOTICE (UNAUDITED)

Of the Fund's ordinary income dividends paid during the fiscal
year ended June 30, 2003, 55.32% was attributable to qualifying
Federal obligations. Please consult your tax advisor to determine
if any portion of the dividends you received is exempt from state
income tax.

ACTIVE ASSETS GOVERNMENT SECURITIES TRUST

51
<Page>
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
TRUSTEE AND OFFICER INFORMATION

Independent Trustees:
<Table>
<Caption>
Number of
Portfolios
Term of in Fund
Position(s) Office and Complex
Name, Age and Address of Held with Length of Overseen
Independent Trustee Registrant Time Served* Principal Occupation(s) During Past 5 Years** by Trustee***
- ------------------------- ----------- --------------- --------------------------------------------- -------------------------

Michael Bozic (62) Trustee Since April Retired; Director or Trustee of the Retail 216
c/o Mayer, Brown, Rowe & 1994 Funds and TCW/DW Term Trust 2003 (since April
Maw LLP 1994) and the Institutional Funds (since July
Counsel to the 2003); formerly Vice Chairman of Kmart
Independent Directors Corporation (December 1998-October 2000),
1675 Broadway Chairman and Chief Executive Officer of
New York, NY Levitz Furniture Corporation (November
1995-November 1998) and President and Chief
Executive Officer of Hills Department Stores
(May 1991-July 1995); formerly variously
Chairman, Chief Executive Officer, President
and Chief Operating Officer (1987-1991) of
the Sears Merchandise Group of Sears, Roebuck
& Co.
Edwin J. Garn (70) Trustee Since January Director or Trustee of the Retail Funds and 216
c/o Summit Ventures LLC 1993 TCW/DW Term Trust 2003 (since January 1993)
1 Utah Center and the Institutional Funds (since July
201 S. Main Street 2003); member of the Utah Regional Advisory
Salt Lake City, UT Board of Pacific Corp.; formerly United
States Senator (R-Utah) (1974-1992) and
Chairman, Senate Banking Committee
(1980-1986), Mayor of Salt Lake City, Utah
(1971-1974), Astronaut, Space Shuttle
Discovery (April 12-19, 1985), and Vice
Chairman, Huntsman Corporation (chemical
company).
Wayne E. Hedien (69) Trustee Since September Retired; Director or Trustee of the Retail 216
c/o Mayer, Brown, Rowe & 1997 Funds and TCW/DW Term Trust 2003; (Since
Maw LLP September 1997) and the Institutional Funds
Counsel to the (since July 2003); formerly associated with
Independent Directors the Allstate Companies (1966-1994), most
1675 Broadway recently as Chairman of The Allstate
New York, NY Corporation (March 1993-December 1994) and
Chairman and Chief Executive Officer of its
wholly-owned subsidiary, Allstate Insurance
Company (July 1989-December 1994).

Name, Age and Address of
Independent Trustee Other Directorships Held by Trustee
- ------------------------- -----------------------------------

Michael Bozic (62) Director of Weirton Steel
c/o Mayer, Brown, Rowe & Corporation.
Maw LLP
Counsel to the
Independent Directors
1675 Broadway
New York, NY
Edwin J. Garn (70) Director of Franklin Covey (time
c/o Summit Ventures LLC management systems), BMW Bank of
1 Utah Center North America, Inc. (industrial
201 S. Main Street loan corporation), United Space
Salt Lake City, UT Alliance (joint venture between
Lockheed Martin and the Boeing
Company) and Nuskin Asia Pacific
(multilevel marketing); member of
the board of various civic and
charitable organizations.
Wayne E. Hedien (69) Director of The PMI Group Inc.
c/o Mayer, Brown, Rowe & (private mortgage insurance);
Maw LLP Trustee and Vice Chairman of The
Counsel to the Field Museum of Natural History;
Independent Directors director of various other business
1675 Broadway and charitable organizations.
New York, NY
</Table>

52
<Page>
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
TRUSTEE AND OFFICER INFORMATION CONTINUED
<Table>
<Caption>
Number of
Portfolios
Term of in Fund
Position(s) Office and Complex
Name, Age and Address of Held with Length of Overseen
Independent Trustee Registrant Time Served* Principal Occupation(s) During Past 5 Years** by Trustee***
- ------------------------- ----------- -------------- --------------------------------------------- -------------------------

Dr. Manuel H. Johnson Trustee Since July Chairman of the Audit Committee and Director 216
(54) 1991 or Trustee of the Retail Funds and TCW/DW
c/o Johnson Smick Term Trust 2003 (since July 1991) and the
International, Inc. Institutional Funds (since July 2003); Senior
2099 Pennsylvania Avenue, Partner, Johnson Smick International, Inc., a
N.W. consulting firm; Co-Chairman and a founder of
Suite 950 the Group of Seven Council (G7C), an
Washington, D.C. international economic commission; formerly
Vice Chairman of the Board of Governors of
the Federal Reserve System and Assistant
Secretary of the U.S. Treasury.
Joseph J. Kearns (60) Trustee Since July Deputy Chairman of the Audit Committee and 217
PMB754 2003 Director or Trustee of the Retail Funds and
23852 Pacific TCW/DW Term Trust 2003 (since July 2003) and
Coast Highway the Institutional Funds (since August 1994);
Malibu, CA previously Chairman of the Audit Committee of
the Institutional Funds (October 2001-July
2003); President, Kearns & Associates LLC
(investment consulting); formerly CFO of the
J. Paul Getty Trust.
Michael E. Nugent (67) Trustee Since July Chairman of the Insurance Committee and 216
c/o Triumph Capital, L.P. 1991 Director or Trustee of the Retail Funds and
445 Park Avenue TCW/DW Term Trust 2003 (since July 1991) and
New York, NY the Institutional Funds (since July 2001);
General Partner of Triumph Capital, L.P., a
private investment partnership; formerly Vice
President, Bankers Trust Company and BT
Capital Corporation (1984-1988).
Fergus Reid (71) Trustee Since July Chairman of the Governance Committee and 217
85 Charles Colman Blvd. 2003 Director or Trustee of the Retail Funds and
Pawling, NY TCW/DW Term Trust 2003 (since July 2003) and
the Institutional Funds (since June 1992);
Chairman of Lumelite Plastics Corporation.

Name, Age and Address of
Independent Trustee Other Directorships Held by Trustee
- ------------------------- -----------------------------------

Dr. Manuel H. Johnson Director of NVR, Inc. (home
(54) construction); Chairman and Trustee
c/o Johnson Smick of the Financial Accounting
International, Inc. Foundation (oversight organization
2099 Pennsylvania Avenue, of the Financial Accounting
N.W. Standards Board); Director of RBS
Suite 950 Greenwich Capital Holdings
Washington, D.C. (financial holding company).

Joseph J. Kearns (60) Director of Electro Rent
PMB754 Corporation (equipment leasing),
23852 Pacific The Ford Family Foundation, and the
Coast Highway UCLA Foundation.
Malibu, CA

Michael E. Nugent (67) Director of various business
c/o Triumph Capital, L.P. organizations.
445 Park Avenue
New York, NY

Fergus Reid (71) Trustee and Director of certain
85 Charles Colman Blvd. investment companies in the
Pawling, NY JPMorgan Funds complex managed by
JP Morgan Investment Management
Inc.
</Table>

53
<Page>
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
TRUSTEE AND OFFICER INFORMATION CONTINUED

Interested Trustees:
<Table>
<Caption>

Term of
Position(s) Office and
Name, Age and Address of Held with Length of
Interested Trustee Registrant Time Served* Principal Occupation(s) During Past 5 Years**
- ------------------------- ------------------- --------------- ---------------------------------------------

Charles A. Fiumefreddo Chairman of the Since July 1991 Chairman and Director or Trustee of the
(70) Board and Trustee Retail Funds and TCW/DW Term Trust 2003
c/o Morgan Stanley Trust (since July 1991) and the Institutional Funds
Harborside Financial (since July 2003); formerly Chief Executive
Center, Officer of the Retail Funds and the TCW/DW
Plaza Two, Term Trust 2003 (until September 2002).
Jersey City, NJ
James F. Higgins (55) Trustee Since June 2000 Director or Trustee of the Retail Funds and
c/o Morgan Stanley Trust TCW/DW Term Trust 2003 (since June 2000) and
Harborside Financial the Institutional Funds (since July 2003);
Center, Senior Advisor of Morgan Stanley (since
Plaza Two, August 2000); Director of the Distributor and
Jersey City, NJ Dean Witter Realty Inc.; previously President
and Chief Operating Officer of the Private
Client Group of Morgan Stanley (May
1999-August 2000), and President and Chief
Operating Officer of Individual Securities of
Morgan Stanley (February 1997-May 1999).
Philip J. Purcell (59) Trustee Since April Director or Trustee of the Retail Funds and
1585 Broadway 1994 TCW/DW Term Trust 2003 (since April 1994) and
New York, NY the Institutional Funds (since July 2003);
Chairman of the Board of Directors and Chief
Executive Officer of Morgan Stanley and
Morgan Stanley DW Inc.; Director of the
Distributor; Chairman of the Board of
Directors and Chief Executive Officer of
Novus Credit Services Inc.; Director and/or
officer of various Morgan Stanley
subsidiaries.

<Caption>
Number of
Portfolios
in Fund
Complex
Name, Age and Address of Overseen
Interested Trustee by Trustee*** Other Directorships Held by Trustee
- ------------------------- ------------------------- -----------------------------------

Charles A. Fiumefreddo 216 None
(70)
c/o Morgan Stanley Trust
Harborside Financial
Center,
Plaza Two,
Jersey City, NJ
James F. Higgins (55) 216 Director of AXA Financial, Inc. and
c/o Morgan Stanley Trust The Equitable Life Assurance
Harborside Financial Society of the United States
Center, (financial services).
Plaza Two,
Jersey City, NJ
Philip J. Purcell (59) 216 Director of American Airlines, Inc.
1585 Broadway and its parent company, AMR
New York, NY Corporation.
</Table>

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

* THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY
MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER") (THE
"RETAIL FUNDS").
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS
DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN
STANLEY INVESTMENT MANAGEMENT INC., MORGAN STANLEY INVESTMENTS LP AND
MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE
EARLIEST DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR
INSTITUTIONAL FUNDS AS APPLICABLE.
*** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING
ALL OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS
THAT HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE
INVESTMENT MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY
INVESTMENT MANAGEMENT INC. AND MORGAN STANLEY INVESTMENTS LP).

54
<Page>
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
TRUSTEE AND OFFICER INFORMATION CONTINUED

Officers:
<Table>
<Caption>

Term of
Position(s) Office and
Name, Age and Address of Held with Length of
Executive Officer Registrant Time Served*
- ----------------------------------- ----------------------------------- -----------------------------------

Mitchell M. Merin (49) President Since May 1999
1221 Avenue of the Americas
New York, NY
Barry Fink (48) Vice President and General Counsel Since February 1997
1221 Avenue of the Americas
New York, NY
Ronald E. Robison (64) Executive Vice President and Since April 2003
1221 Avenue of the Americas Principal Executive Officer
New York, NY
Joseph J. McAlinden (60) Vice President Since July 1995
1221 Avenue of the Americas
New York, NY
Stefanie V. Chang (36) Vice President Since July 2003
1221 Avenue of the Americas
New York, NY

Name, Age and Address of
Executive Officer Principal Occupation(s) During Past 5 Years**
- ----------------------------------- ---------------------------------------------

Mitchell M. Merin (49) President and Chief Operating Officer of
1221 Avenue of the Americas Morgan Stanley Investment Management Inc.;
New York, NY President, Director and Chief Executive
Officer of the Investment Manager and Morgan
Stanley Services; Chairman, Chief Executive
Officer and Director of the Distributor;
Chairman and Director of the Transfer Agent;
Director of various Morgan Stanley
subsidiaries; President Morgan Stanley
Investments LP (since February 2003);
President of the Institutional Funds (since
July 2003) and President of the Retail Funds
and TCW/DW Term Trust 2003 (since May 1999);
Trustee (since July 2003) and President
(since December 2002) of the Van Kampen
Closed-End Funds; Trustee (since May 1999)
and President (since October 2002) of the Van
Kampen Open-End Funds.
Barry Fink (48) General Counsel (since May 2000) and Managing
1221 Avenue of the Americas Director (since December 2000) of Morgan
New York, NY Stanley Investment Management; Managing
Director (since December 2000), Secretary
(since February 1997) and Director (since
July 1998) of the Investment Manager and
Morgan Stanley Services; Assistant Secretary
of Morgan Stanley DW; Chief Legal Officer of
Morgan Stanley Investments LP (since July
2002); Vice President of the Institutional
Funds (since July 2003); Vice President and
Secretary of the Distributor; previously
Secretary of the Retail Funds (February
1997-July 2003); previously Vice President
and Assistant General Counsel of the
Investment Manager and Morgan Stanley
Services (February 1997-December 2001).
Ronald E. Robison (64) Chief Global Operations Officer and Managing
1221 Avenue of the Americas Director of Morgan Stanley Investment
New York, NY Management Inc.; Managing DIrector of Morgan
Stanley & Co. Incorporated; Managing DIrector
of Morgan Stanley; Managing Director, Chief
Administrative Officer and Director of the
Investment Manager and Morgan Stanley
Services; Chief Executive Officer and
Director of the Transfer Agent; Executive
Vice President and Principal Executive
Officer of the Institutional Funds (since
July 2003); and the TCW/DW Term Trust 2003
(since April 2003); previously President of
the Institutional Funds (March 2001-July
2003) and Director of the Institutional Funds
(March 2001-July 2003).
Joseph J. McAlinden (60) Managing Director and Chief Investment
1221 Avenue of the Americas Officer of the Investment Manager, Morgan
New York, NY Stanley Investment Management Inc. and Morgan
Stanley Investments LP; Director of the
Transfer Agent, Chief Investment Officer of
the Van Kampen Funds; Vice President of the
Institutional Funds (since July 2003) and the
Retail Funds (since July 1995).
Stefanie V. Chang (36) Executive Director of Morgan Stanley & Co.
1221 Avenue of the Americas and Morgan Stanley Investment Management Inc.
New York, NY and Vice President of the Institutional Funds
(since December 1997) and the Retail Funds
(since July 2003); formerly practiced law
with the New York law firm of Rogers & Wells
(now Clifford Chance LLP).
</Table>

55
<Page>
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
TRUSTEE AND OFFICER INFORMATION CONTINUED
<Table>
<Caption>

Francis Smith (37) Treasurer and Chief Financial Treasurer since July 2003 and Chief
c/o Morgan Stanley Trust Officer Financial Officer since September
Harborside Financial Center, 2002
Plaza Two,
Jersey City, NJ
Thomas F. Caloia (57) Vice President Since July 2003
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ
Mary E. Mullin (36) Secretary Since July 2003
1221 Avenue of the Americas
New York, NY

Name, Age and Address of
Executive Officer Principal Occupation(s) During Past 5 Years**
- ----------------------------------- ---------------------------------------------

Francis Smith (37) Executive Director of the Investment Manager
c/o Morgan Stanley Trust and Morgan Stanley Services (since December
Harborside Financial Center, 2001); previously Vice President of the
Plaza Two, Retail Funds (September 2002-July 2003);
Jersey City, NJ previously Vice President of the Investment
Manager and Morgan Stanley Services (August
2000-November 2001) and Senior Manager at
PricewaterhouseCoopers LLP (January
1998-August 2000).
Thomas F. Caloia (57) Executive Director (since December 2002) and
c/o Morgan Stanley Trust Assistant Treasurer of the Investment
Harborside Financial Center, Manager, the Distributor and Morgan Stanley
Plaza Two, Services; previously Treasurer of the Retail
Jersey City, NJ Funds (April 1989-July 2003); formerly First
Vice President of the Investment Manager, the
Distributor and Morgan Stanley Services.
Mary E. Mullin (36) Vice President of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated and Morgan Stanley Investment
New York, NY Management Inc.; Secretary of the
Institutional Funds (since June 1999) and the
Retail Funds (since July 2003); formerly
practiced law with the New York law firms of
McDermott, Will & Emery and Skadden, Arps,
Slate, Meagher & Flom LLP.
</Table>

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

* THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS.
EACH OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS
ELECTED.
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN
OFFICER FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE
THE OFFICER BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS
APPLICABLE.

56
<Page>

MONEY MARKET

ACTIVE ASSETS --
MONEY TRUST
TAX-FREE TRUST
CALIFORNIA TAX-FREE TRUST
GOVERNMENT SECURITIES TRUST

ANNUAL REPORT
JUNE 30, 2003

[MORGAN STANLEY LOGO]

<Page>

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

This report is submitted for the general information of the shareholders of the
Funds. For more detailed information about the Funds, their fees and expenses
and other pertinent information, please read their Prospectuses. The Funds'
Statement of Additional Information contains additional information about the
Funds, 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
Funds 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]

37829RPT

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Item 9 - Controls and Procedures

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 Funds 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.

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Item 10b Exhibits
A separate certification for each principal executive officer and principal
financial officer of the registrants are attached hereto as part of EX-99.CERT.

Items 2 - 8 and Item 10a are not applicable

SIGNATURES

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

Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust

Ronald E. Robison
Principal Executive Officer
August 19, 2003

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 registrants and in the capacities and on the dates
indicated.

Ronald E. Robison
Principal Executive Officer
August 19, 2003

Francis Smith
Principal Financial Officer
August 19, 2003