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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: 811-09713
Active Assets Institutional Money Trust
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: June 30, 2004
Date of reporting period: June 30, 2004
Item 1 - Report to Shareholders
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WELCOME, SHAREHOLDER:
IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN ACTIVE ASSETS
INSTITUTIONAL MONEY TRUST PERFORMED DURING THE ANNUAL PERIOD. WE WILL PROVIDE AN
OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED
PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE
FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES
OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
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Fund Report
For the year ended June 30, 2004
MARKET CONDITIONS
The Federal Open Market Committee (the "Fed") maintained its target rate for
federal funds at 1.00 percent, a 45-year low, for the entire fiscal period of
this report. However, on June 30, 2004 it raised that target to 1.25 percent,
the first increase in more than four years. This increase came on the heels of a
string of positive employment reports as well as rising costs for commodities.
The level of forward interest rates at the end of the review period indicated a
widespread expectation by investors that the Fed would continue to raise
interest rates by at least one percentage point. While it is impossible to
predict with any certainty, such a sustained increase in rates would provide
money market investors an opportunity to invest in securities with more
attractive yields than have been available for some time.
PERFORMANCE ANALYSIS
As of June 30, 2004, Active Assets Institutional Money Trust had net assets of
more than $936 million and an average portfolio maturity of 27 days. For the
12-month period ended June 30, 2004, the Fund provided a total return of 0.91
percent. For the seven-day period ended June 30, 2004, the Fund provided an
effective annualized yield and a current yield both of 0.97 percent; its 30-day
moving average yield for June was 0.92 percent. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
Our strategy in managing the Fund remained consistent with the Fund's long-term
focus on maintaining preservation of capital and very high liquidity. We adhered
to a conservative approach in managing the Fund that emphasized purchasing
high-quality money market obligations and avoided the use of derivatives that
might fluctuate excessively with changing interest rates.
2
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<Table>
PORTFOLIO COMPOSITION
Commercial Paper 60.0%
Floating Rate Notes 19.4
Repurchase Agreement 11.2
Certificates of Deposit 6.0
Promissory Note 3.4
MATURITY SCHEDULE
1 - 30 Days 67.1%
31 - 60 Days 21.3
61 - 90 Days 9.4
91 - 120 Days 1.0
121 + Days 1.2
</Table>
DATA AS OF JUNE 30, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR PORTFOLIO
COMPOSITION AND MATURITY SCHEDULE ARE AS A PERCENTAGE OF TOTAL INVESTMENTS.
PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED A
RECOMMENDATION TO BUY OR SELL THE SECURITIES MENTIONED. MORGAN STANLEY IS A
FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND BROKERAGE
ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND FINANCIAL
ADVISORY SERVICES.
INVESTMENT STRATEGY
THE FUND INVESTS IN HIGH QUALITY, SHORT-TERM DEBT OBLIGATIONS. IN SELECTING
INVESTMENTS, THE "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC.,
SEEKS TO MAINTAIN THE FUND'S SHARE PRICE AT $1.00. THE SHARE PRICE REMAINING
STABLE AT $1.00 MEANS THAT THE FUND WOULD PRESERVE THE PRINCIPAL VALUE OF YOUR
INVESTMENT.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO
PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE FUND.
ANNUAL HOUSEHOLDING NOTICE
TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
3
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ACTIVE ASSETS INSTITUTIONAL MONEY TRUST
PORTFOLIO OF INVESTMENTS - JUNE 30, 2004
<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE
- ----------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (60.0%)
ASSET-BACKED - AUTO (5.8%)
$ 4,086 DaimlerChrysler Revolving Auto Conduit
08/09/04 1.31% $ 4,080,201
10,000 DaimlerChrysler Revolving Auto Conduit Series II
07/28/04 1.32 9,990,100
40,000 FCAR Owner Trust
07/01/04 - 09/15/04 1.06 - 1.52 39,960,057
-------------
54,030,358
-------------
ASSET-BACKED - CONSUMER (10.4%)
6,000 Barton Capital Corp. - 144A*
07/08/04 1.08 5,998,740
27,000 Gemini Securitization Co. - 144A*
07/06/04 - 07/22/04 1.11 - 1.25 26,984,338
12,000 Mont Blanc Capital Corp. - 144A*
07/13/04 1.11 11,995,560
19,000 Old Line Funding Corp. - 144A*
08/10/04 1.30 - 1.33 18,972,222
33,009 Thames Asset Global Securitization - 144A*
07/16/04 - 07/19/04 1.13 - 1.24 32,991,087
-------------
96,941,947
-------------
ASSET-BACKED - CORPORATE (3.0%)
9,000 Amsterdam Funding Corp. - 144A*
07/06/04 1.10 8,998,625
19,000 Variable Funding Corp. - 144A*
07/07/04 - 07/09/04 1.09 - 1.10 18,995,920
-------------
27,994,545
-------------
ASSET-BACKED - DIVERSIFIED (0.5%)
5,000 Falcon Asset Securitization Corp. - 144A*
07/21/04 1.25 4,996,528
-------------
ASSET-BACKED - MORTGAGES (4.9%)
7,000 Mortgage Interest Networking Trust Series A1 P1
08/02/04 1.22 6,992,409
30,000 Mortgage Interest Networking Trust Series A1+P1
07/07/04 - 08/16/04 1.12 - 1.33 29,956,581
9,000 Sydney Capital Corp. - 144A*
07/26/04 - 09/13/04 1.30 - 1.51 8,983,152
-------------
45,932,142
-------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
4
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<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE
- ----------------------------------------------------------------------------------------------------------
ASSET-BACKED - SECURITIES (9.9%)
$ 12,038 Amstel Funding Corp. - 144A*
07/15/04 - 09/22/04 1.15 - 1.54% $ 12,012,149
11,325 Beta Finance - 144A*
07/20/04 - 10/08/04 1.15 - 1.20 11,301,017
13,000 Cancara Asset Securitization Ltd. - 144A*
07/27/04 - 08/18/04 1.09 - 1.21 12,983,983
11,233 CC USA Inc. - 144A*
07/20/04 - 10/20/04 1.10 - 1.28 11,216,230
18,000 Clipper Receivables Corp. - 144A*
07/07/04 - 07/12/04 1.07 - 1.10 17,995,528
27,000 Dorada Finance Inc. - 144A*
07/16/04 - 07/30/04 1.10 - 1.36 26,982,464
-------------
92,491,371
-------------
BANKING (4.1%)
32,000 Citicorp
07/06/04 - 07/12/04 1.10 - 1.14 31,991,200
6,000 Northern Trust Corp.
07/02/04 1.07 5,999,822
-------------
37,991,022
-------------
FINANCE - CORPORATE (2.1%)
20,000 CIT Group Inc.
07/01/04 - 07/13/04 1.08 - 1.15 19,996,167
-------------
FINANCIAL CONGLOMERATES (2.5%)
24,000 General Electric Capital Corp.
07/08/04 - 12/20/04 1.08 - 1.87 23,906,801
-------------
INTERNATIONAL BANKS (16.8%)
4,200 ANZ (DE) Inc.
07/07/04 1.15 4,199,195
35,000 Danske Corp.
08/06/04 - 09/28/04 1.07 - 1.11 34,931,089
12,000 Fortis Funding LLC
08/16/04 1.10 11,983,133
40,000 HBOS Treasury Services PLC
08/11/04 - 09/01/04 1.07 - 1.12 39,935,907
10,000 KBC Financial Products International Ltd. - 144A*
08/04/04 1.10 9,989,611
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
5
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<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE
- ----------------------------------------------------------------------------------------------------------
$ 30,000 KFW International Finance Inc.
08/19/04 - 09/07/04 1.07 - 1.15% $ 29,953,164
11,000 Natexis Banques Populaires U.S. Finance LLC
07/02/04 - 07/22/04 1.08 10,997,271
15,000 Westpac Capital Corp.
08/18/04 1.05 14,979,000
-------------
156,968,370
-------------
TOTAL COMMERCIAL PAPER
(COST $561,249,251) 561,249,251
-------------
FLOATING RATE NOTES (19.4%)
ASSET-BACKED - SECURITIES (1.1%)
10,000 CC USA Inc. - 144A*
07/26/04++ 1.24+ 9,998,164
-------------
BANKING (3.7%)
10,000 SunTrust Bank
07/01/04++ 1.18+ 9,999,240
25,000 Wells Fargo Bank, N.A.
07/01/04++ 1.05+ 25,000,000
-------------
34,999,240
-------------
FINANCE - AUTO (4.3%)
12,000 American Honda Finance Corp. - 144A*
08/11/04++ 1.30+ 12,005,984
28,000 Toyota Motor Credit Corp.
07/01/04++ 1.27+ 28,009,798
-------------
40,015,782
-------------
INSURANCE (4.3%)
30,000 AIG SunAmerica Global VIII - 144A*
07/15/04++ 1.36+ 30,019,388
10,000 Allstate Financial Global Funding - 144A*
07/01/04++ 1.47+ 10,024,057
-------------
40,043,445
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INTERNATIONAL BANKS (6.0%)
37,000 Barclays Bank PLC
07/26/04++ 1.22+ 36,994,469
9,700 Deutsche Bank AG
08/18/04++ 1.31+ 9,706,584
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
6
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<Table>
<Caption>
ANNUALIZED
PRINCIPAL YIELD
AMOUNT IN ON DATE OF
THOUSANDS DESCRIPTION AND MATURITY DATES PURCHASE VALUE
- ----------------------------------------------------------------------------------------------------------
$ 10,000 Westpac Banking Corp.
07/26/04++ 1.14+% $ 10,002,081
-------------
56,703,134
-------------
TOTAL FLOATING RATE NOTES
(COST $181,759,765) 181,759,765
-------------
REPURCHASE AGREEMENT (11.2%)
104,740 Goldman, Sachs & Co.
due 07/01/04 (dated 06/30/04; proceeds $104,744,510) (a)
(COST $104,740,000) 1.55 104,740,000
-------------
CERTIFICATES OF DEPOSIT (6.0%)
20,000 Fifth Third Bank
09/20/04 1.06 20,000,448
6,000 Fortis Bank, NY Branch
08/24/04 1.14 6,000,000
5,000 Natexis Banques Populaires, NY Branch
09/14/04 1.42 5,000,052
25,000 UBS AG, Stamford Branch
07/01/04 1.10 25,000,000
-------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $56,000,500) 56,000,500
-------------
PROMISSORY NOTE (3.4%)
INVESTMENTS BANKS/BROKERS
32,000 Goldman Sachs Group Inc. - 144A*
07/01/04++(COST $32,000,000) 1.27+ 32,000,000
-------------
TOTAL INVESTMENTS
(COST $935,749,516) (b) 100.0% 935,749,516
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0 308,523
----------- -------------
NET ASSETS 100.0% $ 936,058,039
=========== =============
</Table>
- ----------
* RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
+ RATE SHOWN IS THE RATE IN EFFECT AT JUNE 30, 2004.
++ DATE OF NEXT INTEREST RATE RESET.
(a) COLLATERALIZED BY FEDERAL NATIONAL MORTGAGE ASSOC. 8.00% DUE 06/01/31
VALUED AT $106,834,800.
(b) COST IS THE SAME FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS
7
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ACTIVE ASSETS INSTITUTIONAL MONEY TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004
<Table>
ASSETS:
Investments in securities, at value
(cost $935,749,516)
(including a repurchase agreement
of $104,740,000) $ 935,749,516
Cash 5,539
Interest receivable 475,668
Prepaid expenses and other assets 21,395
----------------
TOTAL ASSETS 936,252,118
----------------
LIABILITIES:
Payable for:
Investment management fee 105,741
Dividends to shareholders 27,193
Accrued expenses and other payables 61,145
----------------
TOTAL LIABILITIES 194,079
----------------
NET ASSETS $ 936,058,039
================
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 935,948,754
Accumulated undistributed net
investment income 109,285
----------------
NET ASSETS $ 936,058,039
================
NET ASSET VALUE PER SHARE,
936,058,054 SHARES OUTSTANDING
(UNLIMITED SHARES
AUTHORIZED OF $.01
PAR VALUE) $ 1.00
================
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2004
<Table>
NET INVESTMENT INCOME:
INTEREST INCOME $ 11,656,323
----------------
EXPENSES
Investment management fee 1,611,553
Shareholder reports and notices 64,459
Professional fees 63,661
Registration fees 57,162
Custodian fees 49,577
Trustees' fees and expenses 14,899
Transfer agent fees and expenses 2,936
Other 54,817
----------------
TOTAL EXPENSES 1,919,064
Less: amounts waived (550)
----------------
NET EXPENSES 1,918,514
----------------
NET INVESTMENT INCOME 9,737,809
NET REALIZED GAIN 1,245
----------------
NET INCREASE $ 9,739,054
================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
8
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STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 2004 JUNE 30, 2003
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 9,737,809 $ 16,141,230
Net realized gain 1,245 8,900
---------------- ----------------
NET INCREASE 9,739,054 16,150,130
---------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,737,824) (16,141,230)
Net realized gain (1,245) (8,900)
---------------- ----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS (9,739,069) (16,150,130)
---------------- ----------------
Net decrease from transactions in shares of beneficial interest (212,407,462) (4,293,399)
---------------- ----------------
NET DECREASE (212,407,477) (4,293,399)
NET ASSETS:
Beginning of period 1,148,465,516 1,152,758,915
---------------- ----------------
END OF PERIOD
(INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF
$109,285 AND $109,300, RESPECTIVELY) $ 936,058,039 $ 1,148,465,516
================ ================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
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ACTIVE ASSETS INSTITUTIONAL MONEY TRUST
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2004
1. ORGANIZATION AND ACCOUNTING POLICIES
Active Assets Institutional Money Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is high
current income, preservation of capital and liquidity. The Fund was organized as
a Massachusetts business trust on November 23, 1999 and commenced operations on
February 15, 2000.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued at amortized
cost, which approximates market value.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
C. REPURCHASE AGREEMENTS -- The Fund may invest directly with institutions in
repurchase agreements. The Fund's custodian receives the collateral, which is
marked-to-market daily to determine that the value of the collateral does not
decrease below the repurchase price plus accrued interest.
D. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to shareholders as of the close of each business day.
F. USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Investment
Advisors Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual rate
of 0.15% to the net assets of the Fund determined as of the close of each
business day.
10
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The Investment Manager has agreed to reimburse all operating expenses and to
waive the compensation provided for in its Investment Management Agreement to
the extent that such expenses and compensation on an annualized basis exceed
0.20% of the daily net assets of the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales/maturities of portfolio securities
for the year ended June 30, 2004, aggregated $38,657,857,958 and
$38,877,881,608, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager, is the Fund's
transfer agent.
Effective April 1, 2004, the Fund began an unfunded Deferred Compensation Plan
(the "Compensation Plan") which allows each independent Trustee to defer payment
of all, or a portion, of the fees he receives for serving on the Board of
Trustees. Each eligible Trustee generally may elect to have the deferred amounts
credited with a return equal to the total return on one or more of the Morgan
Stanley funds that are offered as investment options under the Compensation
Plan. Appreciation/depreciation and distributions received from these
investments are recorded with an offsetting increase/decrease in the deferred
compensation obligation and do not affect the net asset value of the Fund.
4. 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, 2004 JUNE 30, 2003
-------------- --------------
Shares sold 3,918,519,756 4,177,514,450
Shares issued in reinvestment of dividends and distributions 9,744,521 16,254,374
-------------- --------------
3,928,264,277 4,193,768,824
Shares redeemed (4,140,671,739) (4,198,062,223)
-------------- --------------
Net decrease in shares outstanding (212,407,462) (4,293,399)
============== ==============
</Table>
5. LEGAL MATTERS
The Investment Manager, certain affiliates of the Investment Manager, certain
officers of such affiliates and certain investment companies advised by the
Investment Manager or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the Morgan Stanley funds. The consolidated
amended complaint generally alleges that defendants, including the Fund,
violated their statutory disclosure obligations and fiduciary duties by failing
properly to disclose (i) that the Investment Manager and certain affiliates of
the Investment
11
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Manager allegedly offered economic incentives to brokers and others to recommend
the funds advised by the Investment Manager or its affiliates to investors
rather than funds managed by other companies, and (ii) that the funds advised by
the Investment Manager or its affiliates, including the Fund, allegedly paid
excessive commissions to brokers in return for their efforts to recommend these
funds to investors. The complaint seeks, among other things, unspecified
compensatory damages, rescissionary damages, fees and costs. The defendants have
moved to dismiss the action and intend to otherwise vigorously defend it. While
the Fund believes that it has meritorious defenses, the ultimate outcome of this
matter is not presently determinable at this early stage of the litigation, and
no provision has been made in the Fund's financial statements for the effect, if
any, of this matter.
12
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ACTIVE ASSETS INSTITUTIONAL MONEY TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE PERIOD
FOR THE YEAR ENDED JUNE 30, FEBRUARY 15, 2000*
------------------------------------------------------------ THROUGH
2004 2003 2002 2001 JUNE 30, 2000
------------ ------------ ------------ ------------ ------------------
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 0.014 0.024 0.058 0.023
Less dividends from net investment income (0.009)+ (0.014)+ (0.024)+ (0.058)+ (0.023)
------------ ------------ ------------ ------------ ------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ==================
TOTAL RETURN 0.91% 1.37% 2.45% 5.95% 2.31%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.18% 0.17% 0.17% 0.19% 0.20%(2)(3)
Net investment income 0.91% 1.36% 2.40% 5.61% 6.12%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in millions $ 936 $ 1,148 $ 1,153 $ 1,146 $ 813
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
+ INCLUDES CAPITAL GAIN DISTRIBUTION OF LESS THAN $0.001.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL OF ITS EXPENSES THAT WERE REIMBURSED OR WAIVED BY
THE INVESTMENT MANAGER, THE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
RATIOS WOULD HAVE BEEN 0.31% AND 6.01%, RESPECTIVELY.
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
ACTIVE ASSETS INSTITUTIONAL MONEY TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
ACTIVE ASSETS INSTITUTIONAL MONEY TRUST:
We have audited the accompanying statement of assets and liabilities of Active
Assets Institutional Money Trust (the "Fund"), including the portfolio of
investments, as of June 30, 2004, 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 periods
presented. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, 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 Institutional Money Trust as of June 30, 2004, 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 periods presented, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
AUGUST 13, 2004
2004 FEDERAL TAX NOTICE (UNAUDITED)
Of the Fund's ordinary income dividends paid during the fiscal year ended June
30, 2004, 1.84% 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.
14
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ACTIVE ASSETS INSTITUTIONAL MONEY 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 PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------- ----------- ------------ ----------------------------------- ------------- --------------------
Michael Bozic (63) Trustee Since Private Investor; Director or 208 Director of Weirton
c/o Kramer Levin Naftalis & April 1994 Trustee of the Retail Funds (since Steel Corporation.
Frankel LLP April 1994) and the Institutional
Counsel to the Independent Funds (since July 2003); formerly
Trustees Vice Chairman of Kmart Corporation
919 Third Avenue (December 1998-October 2000),
New York, NY Chairman and Chief Executive
Officer of 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 (71) Trustee Since Managing Director of Summit 208 Director of Franklin
c/o Summit Ventures LLC January 1993 Ventures LLC; Director or Trustee Covey (time
1 Utah Center of the Retail Funds (since January management systems),
201 S. Main Street 1993) and the Institutional Funds BMW Bank of North
Salt Lake City, UT (since July 2003); member of the America, Inc.
Utah Regional Advisory Board of (industrial loan
Pacific Corp.; formerly United corporation), United
States Senator (R-Utah) (1974-1992) Space Alliance
and Chairman, Senate Banking (joint venture
Committee (1980-1986), Mayor of between Lockheed
Salt Lake City, Utah (1971-1974), Martin and the
Astronaut, Space Shuttle Discovery Boeing Company) and
(April 12-19, 1985), and Vice Nuskin Asia Pacific
Chairman, Huntsman Corporation (multilevel
(chemical company). marketing); member
of the board of
various civic and
charitable
organizations.
Wayne E. Hedien (70) Trustee Since Retired; Director or Trustee of the 208 Director of The PMI
c/o Kramer Levin Naftalis & September Retail Funds (since September 1997) Group Inc. (private
Frankel LLP 1997 and the Institutional Funds (since mortgage insurance);
Counsel to the Independent July 2003); formerly associated Trustee and Vice
Trustees with the Allstate Companies Chairman of The
919 Third Avenue (1966-1994), most recently as Field Museum of
New York, NY Chairman of The Allstate Natural History;
Corporation (March 1993-December director of various
1994) and Chairman and Chief other business and
Executive Officer of its charitable
wholly-owned subsidiary, Allstate organizations.
Insurance Company (July 1989-
December 1994).
</Table>
15
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------- ----------- ------------ ----------------------------------- ------------- --------------------
Dr. Manuel H. Johnson (55) Trustee Since Senior Partner, Johnson Smick 208 Director of NVR,
c/o Johnson Smick July 1991 International, Inc., a consulting Inc. (home
International, Inc. firm; Chairman of the Audit construction);
2099 Pennsylvania Avenue, Committee and Director or Trustee Chairman and Trustee
N.W. of the Retail Funds (since of the Financial
Suite 950 July 1991) and the Institutional Accounting
Washington, D.C. Funds (since July 2003); Co-Chairman Foundation
and a founder of the Group of Seven (oversight
Council (G7C), an international organization of the
economic commission; formerly Vice Financial Accounting
Chairman of the Board of Governors Standards Board);
of the Federal Reserve System and Director of RBS
Assistant Secretary of the U.S. Greenwich Capital
Treasury. Holdings (financial
holding company).
Joseph J. Kearns (61) Trustee Since President, Kearns & Associates LLC 209 Director of Electro
PMB754 July 2003 (investment consulting); Deputy Rent Corporation
23852 Pacific Coast Highway Chairman of the Audit Committee and (equipment leasing),
Malibu, CA Director or Trustee of the Retail The Ford Family
Funds (since July 2003) and the Foundation, and the
Institutional Funds (since UCLA Foundation.
August 1994); previously Chairman
of the Audit Committee of the
Institutional Funds (October 2001-
July 2003); formerly CFO of the
J. Paul Getty Trust.
Michael E. Nugent (68) Trustee Since General Partner of Triumph Capital, 208 Director of various
c/o Triumph Capital, L.P. July 1991 L.P., a private investment business
445 Park Avenue partnership; Chairman of the organizations.
New York, NY Insurance Committee and Director or
Trustee of the Retail Funds (since
July 1991) and the Institutional
Funds (since July 2001); formerly
Vice President, Bankers Trust
Company and BT Capital Corporation
(1984-1988).
Fergus Reid (71) Trustee Since Chairman of Lumelite Plastics 209 Trustee and Director
c/o Lumelite Plastics July 2003 Corporation; Chairman of the of certain
Corporation Governance Committee and Director investment companies
85 Charles Colman Blvd. or Trustee of the Retail Funds in the JPMorgan Funds
Pawling, NY (since July 2003) and the complex managed by
Institutional Funds (since J.P. Morgan
June 1992). Investment
Management Inc.
</Table>
16
<Page>
INTERESTED TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN OTHER DIRECTORSHIPS
INTERESTED TRUSTEE REGISTRANT TIME SERVED* 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------- ----------- ------------ ----------------------------------- ------------- --------------------
Charles A. Fiumefreddo (71) Chairman of Since Chairman and Director or Trustee of 208 None
c/o Morgan Stanley Trust the Board July 1991 the Retail Funds (since July 1991)
Harborside Financial and Trustee and the Institutional Funds (since
Center, July 2003); formerly Chief
Plaza Two, Executive Officer of the Retail
Jersey City, NJ Funds (until September 2002).
James F. Higgins (56) Trustee Since Director or Trustee of the Retail 208 Director of AXA
c/o Morgan Stanley Trust June 2000 Funds (since June 2000) and the Financial, Inc. and
Harborside Financial Institutional Funds (since The Equitable Life
Center, July 2003); Senior Advisor of Morgan Assurance Society of
Plaza Two, Stanley (since August 2000); the United States
Jersey City, NJ Director of the Distributor and (financial
Dean Witter Realty Inc.; previously services).
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).
</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. 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.).
17
<Page>
OFFICERS:
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- --------------------------- ----------- -------------- --------------------------------------------------------
Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Director and
New York, NY Chief Executive Officer of the Investment Manager and
Morgan Stanley Services; Chairman and Director of the
Distributor; Chairman and Director of the Transfer
Agent; Director of various Morgan Stanley subsidiaries;
President of the Institutional Funds (since July 2003)
and President of the Retail Funds (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 (49) Vice Since General Counsel (since May 2000) and Managing Director
1221 Avenue of the Americas President February 1997 (since December 2000) of Morgan Stanley Investment
New York, NY Management; Managing Director (since December 2000),
Secretary (since February 1997) and Director (since July
1998) of the Investment Manager and Morgan Stanley
Services; Vice President of the Retail Funds; Assistant
Secretary of Morgan Stanley DW; Vice President of the
Institutional Funds (since July 2003); Managing
Director, Secretary and Director of the Distributor;
previously Secretary (February 1997-July 2003) and
General Counsel (February 1997-April 2004) of the Retail
Funds; Vice President and Assistant General Counsel of
the Investment Manager and Morgan Stanley Services
(February 1997-December 2001).
Ronald E. Robison (65) Executive Since Principal Executive Officer-Office of the Funds (since
1221 Avenue of the Americas Vice April 2003 November 2003); Managing Director of Morgan Stanley & Co.
New York, NY President Incorporated, Managing Director of Morgan Stanley;
and Managing Director, Chief Administrative Officer and
Principal Director of the Investment Manager and Morgan Stanley
Executive Services; Chief Executive Officer and Director of the
Officer Transfer Agent; Managing Director and Director of the
Distributor; Executive Vice President and Principal
Executive Officer of the Institutional Funds (since
July 2003) and the Retail Funds (since April 2003);
Director of Morgan Stanley SICAV (since May 2004);
previously President and Director of the Institutional
Funds (March 2001-July 2003) and Chief Global Operations
Officer and Managing Director of Morgan Stanley
Investment Management Inc.
Joseph J. McAlinden (61) Vice Since Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas President July 1995 Investment Manager and Morgan Stanley Investment
New York, NY Management Inc., 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 (37) Vice Since Executive Director of Morgan Stanley & Co. Incorporated,
1221 Avenue of the Americas President July 2003 Morgan Stanley Investment Management Inc., and the
New York, NY Investment Manager; 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 US LLP).
</Table>
18
<Page>
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- --------------------------- ----------- --------------- ------------------------------------------------------
Francis J. Smith (38) Treasurer Treasurer since Executive Director of the Investment Manager and
c/o Morgan Stanley Trust and Chief July 2003 and Morgan Stanley Services (since December 2001);
Harborside Financial Financial Chief Financial previously Vice President of the Retail Funds
Center, Officer Officer since (September 2002-July 2003), and Vice President of the
Plaza Two, September 2002 Investment Manager and Morgan Stanley Services (August
Jersey City, NJ 2000-November 2001) and Senior Manager at
PricewaterhouseCoopers LLP (January 1998-August 2000).
Thomas F. Caloia (58) Vice Since Executive Director (since December 2002) and Assistant
c/o Morgan Stanley Trust President July 2003 Treasurer of the Investment Manager, the Distributor
Harborside Financial and Morgan Stanley Services; previously Treasurer of
Center, the Retail Funds (April 1989-July 2003); formerly
Plaza Two, First Vice President of the Investment Manager, the
Jersey City, NJ Distributor and Morgan Stanley Services.
Mary E. Mullin (37) Secretary Since Executive Director of Morgan Stanley & Co.
1221 Avenue of the Americas July 2003 Incorporated, Morgan Stanley Investment Management
New York, NY Inc. and the Investment Manager; 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.
19
<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
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
Joseph McAlinden
VICE PRESIDENT
Stephanie V. Chang
VICE PRESIDENT
Francis J. Smith
TREASURER AND CHIEF FINANCIAL OFFICER
Thomas F. Caloia
VICE PRESIDENT
Mary E. Mullen
SECRETARY
TRANSFER AGENT
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT 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
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
(C) 2004 Morgan Stanley
[MORGAN STANLEY LOGO]
[GRAPHIC]
MORGAN STANLEY FUNDS
ACTIVE ASSETS
INSTITUTIONAL MONEY
TRUST
ANNUAL REPORT
JUNE 30, 2004
[MORGAN STANLEY LOGO]
RA04-00475P-Y06/04
<Page>
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
<Page>
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 25,647 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 452 (2) $ 3,225,276 (2)
TAX FEES $ 5,304 (3) $ 610,053 (4)
ALL OTHER FEES $ - $ -
TOTAL NON-AUDIT FEES $ 5,756 $ 3,835,329
TOTAL $ 31,403 $ 3,835,329
</Table>
2003
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 24,199 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 684 (2) $ 739,996 (2)
TAX FEES $ 4,607 (3) $ 187,500 (4)
ALL OTHER FEES $ - $ - (5)
TOTAL NON-AUDIT FEES $ 5,291 $ 927,496
TOTAL $ 29,490 $ 927,496
</Table>
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and
any entity controlling, controlled by or under common control with
the Adviser that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically data
verification and agreed-upon procedures related to asset
securitizations and agreed-upon procedures engagements.
(3) Tax Fees represent tax compliance, tax planning and tax advice
services provided in connection with the preparation and review of
the Registrant's tax returns.
(4) Tax Fees represent tax compliance, tax planning and tax advice
services provided in connection with the review of Covered
Entities' tax returns.
(5) All other fees represent project management for future business
applications and improving business and operational processes.
<Page>
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED JULY 31, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("GENERAL PRE-APPROVAL"); or require the specific pre-approval
of the Audit Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit
Committee believes that the combination of these two approaches in this Policy
will result in an effective and efficient procedure to pre-approve services
performed by the Independent Auditors. As set forth in this Policy, unless a
type of service has received general pre-approval, it will require specific
pre-approval by the Audit Committee (or by any member of the Audit Committee to
which pre-approval authority has been delegated) if it is to be provided by the
Independent Auditors. Any proposed services exceeding pre-approved cost levels
or budgeted amounts will also require specific pre-approval by the Audit
Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
- ----------
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and
Procedures (the "POLICY"), adopted as of the date above, supercedes and
replaces all prior versions that may have been adopted from time to time.
<Page>
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes
that implementation of the Policy will not adversely affect the Independent
Auditors' independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will approve, if necessary, any changes in terms, conditions and fees
resulting from changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1.
All other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
<Page>
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements and, to the extent they are Covered Services, the Covered
Entities or that are traditionally performed by the Independent Auditors.
Because the Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor and is consistent with
the SEC's rules on auditor independence, the Audit Committee may grant general
pre-approval to Audit-related services. Audit-related services include, among
others, accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "Audit services"; assistance with
understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities; agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in
Appendix B.2. All other Audit-related services not listed in Appendix B.2 must
be specifically pre-approved by the Audit Committee (or by any member of the
Audit Committee to which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide
Tax services to the Fund and, to the extent they are Covered Services, the
Covered Entities, such as tax compliance, tax planning and tax advice without
impairing the auditor's independence, and the SEC has stated that the
Independent Auditors may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
<Page>
The Audit Committee has pre-approved the All Other services in Appendix
B.4. Permissible All Other services not listed in Appendix B.4 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be
provided by the Independent Auditors will be established annually by the Audit
Committee. Any proposed services exceeding these levels or amounts will require
specific pre-approval by the Audit Committee. The Audit Committee is mindful of
the overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services.
8. PROCEDURES
All requests or applications for services to be provided by the
Independent Auditors that do not require specific approval by the Audit
Committee will be submitted to the Fund's Chief Financial Officer and must
include a detailed description of the services to be rendered. The Fund's Chief
Financial Officer will determine whether such services are included within the
list of services that have received the general pre-approval of the Audit
Committee. The Audit Committee will be informed on a timely basis of any such
services rendered by the Independent Auditors. Requests or applications to
provide services that require specific approval by the Audit Committee will be
submitted to the Audit Committee by both the Independent Auditors and the Fund's
Chief Financial Officer, and must include a joint statement as to whether, in
their view, the request or application is consistent with the SEC's rules on
auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an
annual basis to meet its responsibility to oversee the work of the Independent
Auditors and to assure the auditor's independence from the Fund, such as
reviewing a formal written statement from the Independent Auditors delineating
all relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No.
<Page>
1, and discussing with the Independent Auditors its methods and procedures for
ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
MORGAN STANLEY RETAIL FUNDS
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management
Morgan Stanley Investments LP
Van Kampen Asset Management Inc.
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investments LP
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and
<Page>
Covered Entities is compatible with maintaining the auditors' independence in
performing audit services.
Item 5. Audit Committee of Listed Registrants.
Applicable only for reports covering periods ending on or after the earlier of
(i) the first annual shareholder meeting after January 15, 2004 or (ii) October
31, 2004.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. [Reserved.]
Item 9 - Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10 Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Active Assets Institutional Money Trust
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
August 19, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
August 19, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
August 19, 2004