UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number: 811-02671
DWS Municipal Trust
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue
New York, NY 10154-0004
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (201) 593-6408
Paul Schubert
100 Plaza One
Jersey City, NJ 07311
(Name and Address of Agent for Service)
Date of fiscal year end: | 10/31 |
Date of reporting period: | 10/31/2011 |
ITEM 1. | REPORT TO STOCKHOLDERS |
OCTOBER 31, 2011 Annual Report to Shareholders |
DWS Short-Term Municipal Bond Fund |
![]() |
Contents
4 Portfolio Management Review 8 Performance Summary 11 Information About Your Fund's Expenses 13 Portfolio Summary 14 Investment Portfolio 27 Statement of Assets and Liabilities 29 Statement of Operations 30 Statement of Changes in Net Assets 31 Financial Highlights 36 Notes to Financial Statements 44 Report of Independent Registered Public Accounting Firm 45 Tax Information 46 Investment Management Agreement Approval 50 Summary of Management Fee Evaluation by Independent Fee Consultant 54 Board Members and Officers 59 Account Management Resources |
This report must be preceded or accompanied by a prospectus. To obtain a summary prospectus, if available, or prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the fund. Please read the prospectus carefully before you invest.
Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Although the fund seeks income that is federally tax-free, a portion of the fund's distributions may be subject to federal, state and local taxes, including the alternative minimum tax. See the prospectus for details.
DWS Investments is part of Deutsche Bank's Asset Management division and, within the U.S., represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Overview of Market and Fund Performance
Performance is historical and does not guarantee future results. Returns shown are for Class A shares, unadjusted for sales charges. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit www.dws-investments.com for the most recent month-end performance of all share classes. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had.
DWS Short-Term Municipal Bond Fund posted a total return for the 12 months ended October 31, 2011 of 1.42%. This compared to a return of 1.19% for its benchmark, the Barclays Capital 1-Year General Obligation Bond Index.1
Returns for the broad municipal bond market were positive for the period. The municipal bond market, as measured by the Barclays Capital Municipal Bond Index, returned 3.78% for the 12-month period.2 Municipals overall underperformed the broad taxable bond market, as measured by the Barclays Capital U.S Aggregate Bond Index, which returned 5.00% for the same period.3
As the period opened, budget struggles continued to affect the municipal market, with California, New York and Illinois providing many of the headlines. In addition, speculation that the November congressional election results could mean reduced federal aid for states and localities impacted municipal markets. In November, the U.S. Federal Reserve Board (the Fed) initiated a second round of bond purchases designed to keep market interest rates low. Nonetheless, the bond markets including municipals, traded down once the size and duration of the program were confirmed and in part on fears of future inflation. Adding to the pressure on municipal prices was an increased issuance of bonds in late 2010, as bond issuers anticipated higher future supply and interest rates with the expiration of the Build America Bonds program that was created under the American Recovery and Reinvestment Act.
As 2011 progressed, the municipal market rebounded, helped in large part by a sharp drop in supply. In addition, given very low U.S. Treasury bond rates, demand from hedge fund and mutual fund buyers crossing over from the taxable market contributed at times to support for municipal prices.4 These factors helped to counteract outflows from tax-free mutual funds. Higher-quality municipals also benefited as market interest rate levels led by U.S. Treasuries dropped on broader concerns over global growth and European sovereign debt.5
Given moderate inflation and concerns over growth and employment, the Fed kept the target for its benchmark short-term interest rate between 0% and 0.25% for the entire period. Municipal yields opened the period near historical lows. While the ride was anything but smooth, for the full 12 months, changes in municipal yields were relatively modest. With short rates anchored by the Fed, the municipal yield curve remained quite steep during the period. (When the yield curve is steep, it means that longer-term bonds provide a greater yield advantage versus short-term bonds.) For the full 12 months, yields on two-year municipal issues fell by 2 basis points from 0.46% to 0.44%, while bonds with 30-year maturities experienced a yield decline of 11 basis points, from 3.86% to 3.75%, resulting in a modest flattening of 9 basis points. (100 basis points equals one percentage point. See the graph on the following page for municipal bond yield changes from the beginning to the end of the period.) For the 12 months, most municipal market credit spreads — the incremental yield offered by lower-quality issues versus AAA-rated issues — widened, reflecting broader credit market concerns.6
Municipal Bond Yield Curve (as of 10/31/10 and 10/31/11) |
![]() |
Source: Thompson Reuters
Chart is for illustrative purposes only and does not represent any DWS fund.
Past performance is no guarantee of future results.
Positive Contributors to Performance
Given a steep yield curve, the fund maintained short-term holdings with positions in bonds with maturities in the 8-to-10-year range (barbelled positioning). This allowed the fund to maintain an overall effective maturity of under three years while benefiting from higher yields available on longer-term issues.
The fund's exposure to hospital and other health-care-related bonds rated in the A or AA range helped returns, as investors were attracted to the sector's yield profile relative to other similarly rated issues. In addition, some of these issues were in the 10-year maturity range and benefited more from declining rates than shorter-term issues.
Holdings of single-family housing-related bonds aided performance over the fiscal period. These bonds, while high quality, normally trade at a generous yield spread vs. other AAA-rated issues, as their income stream is impacted by the level of prepayments on underlying mortgages. Spreads narrowed and prices rose for the sector over the period as investors sought higher-yielding alternatives in a low interest rate environment.
Negative Contributors to Performance
The fund's holdings of issues with maturities under two years constrained returns as prices in this segment benefited less from falling interest rates. In addition, yields on shorter-term issues were very low during the period.
Outlook and Positioning
Tax-free yields ended the period at attractive levels vs. U.S. Treasuries. At period-end, the 2.39% yield on 10-year municipals was 113% of the 2.12% comparable-maturity Treasury yield, before taking into account the tax advantage of municipals. The municipal yield curve remains historically steep and there is significant income to be gained by going out on the curve. In addition, the interest rate on municipal cash equivalents, as reflected in the average 7-day variable rate demand note yield, remains near historic lows, ending October at 0.14%. We are continuing to evaluate opportunities among bonds in the 8-to-10-year maturity range, focusing on higher coupons that should provide favorable risk/reward characteristics in the event that interest rates rise.
We continue to be encouraged that many states and localities have begun to directly address the difficult trade-offs that will be required to bring budgets into balance. From a credit perspective, we continue to closely scrutinize existing holdings for any concerns and make changes as our analysis indicates. For new purchases, we are favoring essential service revenue bonds and taking a very cautious approach with respect to general obligation bonds issued by localities, given uncertain levels of state support going forward. We continue to see attractive valuation opportunities among sectors in the A credit range.
Investment Advisor
Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for DWS Short-Term Municipal Bond Fund. DIMA and its predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to both institutional and retail clients.
DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution engaged in a wide variety of financial services, including investment management, retail, private and commercial banking, investment banking and insurance.
DWS Investments is the retail brand name in the U.S. for the asset management activities of Deutsche Bank AG and DIMA. As such, DWS is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors.
Portfolio Management Team
Philip G. Condon
Ashton P. Goodfield, CFA
Co-Lead Portfolio Managers
Shelly L. Deitert
Portfolio Manager
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
1 The Barclays Capital 1-Year General Obligation Bond Index is an unmanaged index including bonds with a minimum credit rating of BAA3, issued as part of a deal of at least $75 million, having an amount outstanding of at least $7 million, a maturity of one to two years, backed by the full faith and credit of an issuer with taxing power, and issued after December 31, 1990.
2 The Barclays Capital Municipal Bond Index tracks the performance of investment-grade, fixed-rate municipal bonds with maturities greater than two years.
3 The Barclays Capital U.S. Aggregate Bond Index tracks the performance of the broad U.S. investment-grade, fixed-rate bond market, including both government and corporate bonds.
Index returns do not reflect fees or expenses and it is not possible to invest directly into an index.
4 Hedge funds use an offsetting investment to reduce the risk of adverse price movements in an asset or security.
5 "Sovereign debt" refers to bonds issued in a foreign currency.
6 Credit quality represents the lower rating of either Moody's Investors Service, Inc. or Standard & Poor's Corporation and is their opinion as to the quality of the securities they rate. Credit quality does not remove market risk and is subject to change.
Average Annual Total Returns as of 10/31/11 | ||||
Unadjusted for Sales Charge | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | 1.42% | 3.70% | 2.45% | 2.65% |
Class B | 0.66% | 2.91% | 1.68% | 1.88% |
Class C | 0.66% | 2.95% | 1.69% | 1.88% |
Adjusted for the Maximum Sales Charge | ||||
Class A (max 2.00% load) | -0.61% | 3.00% | 2.04% | 2.45% |
Class B (max 4.00% CDSC) | -2.33% | 2.28% | 1.49% | 1.88% |
Class C (max 1.00% CDSC) | 0.66% | 2.95% | 1.69% | 1.88% |
No Sales Charges | ||||
Class S | 1.57% | 3.88% | 2.66% | 2.81% |
Institutional Class | 1.67% | 3.94% | 2.71% | 2.92% |
Barclays Capital 1-Year G.O. Bond Index+ | 1.19% | 2.43% | 3.08% | 2.68% |
Performance in the Average Annual Total Returns table(s) above and the Growth of an Assumed $10,000 Investment line graph that follows is historical and does not guarantee future results. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit www.dws-investments.com for the Fund's most recent month-end performance. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated February 1, 2011 are 0.86%, 1.68%, 1.65%, 0.78% and 0.60% for Class A, Class B, Class C, Class S and Institutional Class shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. A portion of the fund's distributions may be subject to federal, state and local tax and the alternative minimum tax.
Returns shown for Class A, B and C for the period prior to their inception on February 28, 2003 and for Class S shares for the period prior to its inception on February 28, 2005 are derived from the historical performance of Institutional Class shares of DWS Short-Term Municipal Bond Fund during such periods and have been adjusted to reflect the higher total annual operating expenses of each specific class. Any difference in expenses will affect performance.
Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) |
[] DWS Short-Term Municipal Bond Fund — Class A [] Barclays Capital 1-Year G.O. Bond Index+ |
![]() |
Yearly periods ended October 31 |
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 2.00%. This results in a net initial investment of $9,800.
The growth of $10,000 is cumulative.
Performance of other share classes will vary based on the sales charges and the fee structure of those classes.
+ The Barclays Capital 1-Year General Obligation Bond Index is an unmanaged index including bonds with a minimum credit rating of BAA3, issued as part of a deal of at least $75 million, having an amount outstanding of at least $7 million, a maturity of one to two years, backed by the full faith and credit of an issuer with taxing power, and issued after December 31, 1990.
Net Asset Value and Distribution Information | ||||||||||||||||||||
Class A | Class B | Class C | Class S | Institutional Class | ||||||||||||||||
Net Asset Value: 10/31/11 | $ | 10.24 | $ | 10.24 | $ | 10.24 | $ | 10.23 | $ | 10.24 | ||||||||||
10/31/10 | $ | 10.27 | $ | 10.27 | $ | 10.27 | $ | 10.26 | $ | 10.27 | ||||||||||
Distribution Information: Twelve Months as of 10/31/11: Income Dividends | $ | .17 | $ | .10 | $ | .10 | $ | .19 | $ | .20 | ||||||||||
October Income Dividend | $ | .0130 | $ | .0065 | $ | .0065 | $ | .0143 | $ | .0153 | ||||||||||
SEC 30-day Yield as of 10/31/11++ | .52 | % | .00 | % | .00 | % | .67 | % | .78 | % | ||||||||||
Tax Equivalent Yield as of 10/31/11++ | .80 | % | .00 | % | .00 | % | 1.03 | % | 1.20 | % | ||||||||||
Current Annualized Distribution Rate as of 10/31/11++ | 1.52 | % | .76 | % | .76 | % | 1.68 | % | 1.79 | % |
++ The SEC yield is net investment income per share earned over the month ended October 31, 2011, shown as an annualized percentage of the maximum offering price per share on the last day of the period. The SEC yield is computed in accordance with a standardized method prescribed by the Securities and Exchange Commission. The SEC yields would have been 0.44%, 0.59% and 0.72% for Class A, S and Institutional shares, respectively, had certain expenses not been reduced. Tax equivalent yield is based on the Fund's yield and a marginal income tax rate of 35%. Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value on October 31, 2011. Distribution rate simply measures the level of dividends and is not a complete measure of performance. The current annualized distribution rates would have been 1.44%, 0.46%, 0.50%, 1.60% and 1.73%, for Class A, B, C, S and Institutional shares, respectively, had certain expenses not been reduced. Yields and distribution rates are historical, not guaranteed, and will fluctuate.
Morningstar Rankings — Municipal Short Funds Category as of 10/31/11 | ||||
Period | Rank | Number of Fund Classes Tracked | Percentile Ranking (%) | |
Class A 1-Year | 99 | of | 181 | 54 |
3-Year | 80 | of | 155 | 51 |
5-Year | 119 | of | 143 | 83 |
Class B 1-Year | 159 | of | 181 | 87 |
3-Year | 104 | of | 155 | 67 |
5-Year | 137 | of | 143 | 95 |
Class C 1-Year | 158 | of | 181 | 87 |
3-Year | 100 | of | 155 | 64 |
5-Year | 136 | of | 143 | 95 |
Class S 1-Year | 87 | of | 181 | 48 |
3-Year | 70 | of | 155 | 45 |
5-Year | 104 | of | 143 | 72 |
Institutional Class 1-Year | 79 | of | 181 | 43 |
3-Year | 61 | of | 155 | 39 |
5-Year | 99 | of | 143 | 69 |
10-Year | 43 | of | 86 | 49 |
Source: Morningstar, Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.
As an investor, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads) and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2011 to October 31, 2011).
The tables illustrate your Fund's expenses in two ways:
•Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
• Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.
Expenses and Value of a $1,000 Investment for the six months ended October 31, 2011 | ||||||||||||||||||||
Actual Fund Return | Class A | Class B | Class C | Class S | Institutional Class | |||||||||||||||
Beginning Account Value 5/1/11 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||
Ending Account Value 10/31/11 | $ | 1,013.20 | $ | 1,009.40 | $ | 1,009.40 | $ | 1,014.00 | $ | 1,014.50 | ||||||||||
Expenses Paid per $1,000* | $ | 3.81 | $ | 7.60 | $ | 7.60 | $ | 3.05 | $ | 2.54 | ||||||||||
Hypothetical 5% Fund Return | Class A | Class B | Class C | Class S | Institutional Class | |||||||||||||||
Beginning Account Value 5/1/11 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||||
Ending Account Value 10/31/11 | $ | 1,021.42 | $ | 1,017.64 | $ | 1,017.64 | $ | 1,022.18 | $ | 1,022.68 | ||||||||||
Expenses Paid per $1,000* | $ | 3.82 | $ | 7.63 | $ | 7.63 | $ | 3.06 | $ | 2.55 |
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B | Class C | Class S | Institutional Class |
DWS Short-Term Municipal Bond Fund | .75% | 1.50% | 1.50% | .60% | .50% |
For more information, please refer to the Fund's prospectus.
Asset Allocation (As a % of Investment Portfolio) | 10/31/11 | 10/31/10 |
Revenue Bonds | 61% | 55% |
General Obligation Bonds | 21% | 23% |
ETM/Prerefunded Bonds | 9% | 9% |
Lease Obligations | 7% | 9% |
Open End Investment Companies | 2% | 4% |
100% | 100% |
Quality | 10/31/11 | 10/31/10 |
AAA | 19% | 22% |
AA | 51% | 51% |
A | 25% | 19% |
BBB | 4% | 7% |
Not Rated | 1% | 1% |
100% | 100% |
Interest Rate Sensitivity | 10/31/11 | 10/31/10 |
Effective Maturity | 2.3 years | 2.4 years |
Effective Duration | 2.0 years | 2.2 years |
Top Five State Allocations | 10/31/11 | 10/31/10 |
Texas | 14% | 10% |
Florida | 8% | 9% |
New York | 7% | 3% |
Ohio | 6% | 7% |
California | 6% | 6% |
Effective maturity is the weighted average of the bonds held by the Fund taking into consideration any available maturity shortening features.
Effective duration is an approximate measure of the Fund's sensitivity to interest rate changes taking into consideration any maturity shortening features.
Asset allocation, interest rate sensitivity and state allocations are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk and is subject to change.
For more complete details about the Fund's investment portfolio, see page 14. A quarterly Fact Sheet is available upon request. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The Fund's portfolio holdings are also posted on www.dws-investments.com from time to time. Please see the Fund's current prospectus for more information.
Principal Amount ($) | Value ($) | |||||||
Municipal Bonds and Notes 98.1% | ||||||||
Alabama 1.4% | ||||||||
Jefferson County, AL, Sewer Revenue, Capital Improvement Warrants, Prerefunded 8/1/2012 @ 100, 5.0%, 2/1/2041, INS: FGIC | 8,000,000 | 8,280,080 | ||||||
Alaska 0.4% | ||||||||
Alaska, State Housing Finance Corp., Home Mortgage, Series A, AMT, 5.0%, 6/1/2036, INS: NATL | 2,350,000 | 2,442,285 | ||||||
Arizona 2.1% | ||||||||
Arizona, Health Facilities Authority Revenue, Banner Health: | ||||||||
Series A, 5.0%, 1/1/2019 | 2,000,000 | 2,177,560 | ||||||
Series D, 5.5%, 1/1/2019 | 5,000,000 | 5,676,150 | ||||||
Arizona, State Department of Administration, Certificates of Participation, Series A, 5.0%, 10/1/2012, INS: AGMC | 1,000,000 | 1,039,640 | ||||||
Maricopa County, AZ, Industrial Development Authority, Single Family Mortgage Revenue, Series 2B, AMT, 5.55%, 3/1/2028 | 10,000 | 10,078 | ||||||
Scottsdale, AZ, Municipal Property Corp., Excise Tax Revenue, 5.0%, 7/1/2014 | 3,320,000 | 3,682,942 | ||||||
Snowflake, AZ, Sales & Special Tax Revenue, 4.0%, 7/1/2013 | 180,000 | 185,809 | ||||||
12,772,179 | ||||||||
Arkansas 0.3% | ||||||||
Rogers, AR, Sales & Use Tax Revenue, 4.0%, 11/1/2013 (a) | 1,450,000 | 1,539,639 | ||||||
California 5.8% | ||||||||
California, Health Facilities Financing Authority Revenue, Catholic Healthcare, Series C, 0.13%**, 7/1/2020, INS: NATL, LOC: JPMorgan Chase Bank | 7,890,000 | 7,890,000 | ||||||
California, State Department of Water Resources Power Supply Revenue: | ||||||||
Series M, 5.0%, 5/1/2013 | 2,205,000 | 2,353,859 | ||||||
Series G-4, 5.0%, 5/1/2016 | 2,500,000 | 2,879,275 | ||||||
California, State General Obligation, 5.25%, 4/1/2022 | 1,615,000 | 1,785,173 | ||||||
California, State Pollution Control Financing Authority, Solid Waste Disposal Revenue, Series A, AMT, 1.45%, Mandatory Put 2/1/2012 @ 100, 8/1/2023 | 1,500,000 | 1,500,000 | ||||||
California, Statewide Communities Development Authority Revenue, Proposition 1A Receivables Program, 5.0%, 6/15/2013 | 3,500,000 | 3,727,570 | ||||||
California, Statewide Communities Development Authority, Multi-Family Housing Revenue, AMT, 4.7%, 10/15/2012, LIQ: Fannie Mae | 170,000 | 173,910 | ||||||
California, Statewide Communities Development Authority, Multi-Family Housing Revenue, Citrus Gardens Apartments Project, 4.25%, 7/1/2012 | 220,000 | 220,493 | ||||||
Carlsbad, CA, Multi-Family Housing Revenue, Series A, AMT, 3.7%, 2/1/2013, LIQ: Fannie Mae | 155,000 | 156,919 | ||||||
Delta Counties, CA, Home Mortgage Finance Authority, Single Family Mortgage Revenue, Pacific Mortgage-Backed Securities, Series A, AMT, 6.7%, 6/1/2024, INS: NATL | 5,000 | 5,044 | ||||||
Orange County, CA, Water District, Certificates of Participation, Series A, 0.11%**, 8/1/2042, LOC: Citibank NA | 3,500,000 | 3,500,000 | ||||||
Placer County, CA, Water Agency, Middle Fork Project, 3.75%, 7/1/2012 | 30,000 | 29,976 | ||||||
Port of Oakland, CA, Series O, AMT, 5.0%, 5/1/2020 | 3,000,000 | 3,261,450 | ||||||
San Francisco, CA, City & County Airports Commission, International Airport Revenue, Governmental Purpose: | ||||||||
Series C, 5.0%, 5/1/2019 | 2,300,000 | 2,659,697 | ||||||
Series C, 5.0%, 5/1/2020 | 2,000,000 | 2,306,100 | ||||||
San Joaquin County, CA, Certificates of Participation, General Hospital Project, 5.25%, 9/1/2014, INS: NATL | 2,475,000 | 2,480,940 | ||||||
34,930,406 | ||||||||
Colorado 1.7% | ||||||||
Aurora, CO, Industrial Development Revenue, Series A, 5.375%, 12/1/2011 | 365,000 | 366,142 | ||||||
Colorado, Housing Finance Authority, Single Family Program, Series B-2, AMT, 6.4%, 11/1/2024 | 10,000 | 10,000 | ||||||
Colorado, Single Family Housing Revenue, Housing & Finance Authority, Class III, Series B-4, AMT, 5.0%, 5/1/2032, INS: NATL | 35,000 | 35,290 | ||||||
Denver, CO, City & County Airport Revenue, Series D, AMT, 7.75%, 11/15/2013 | 3,335,000 | 3,559,779 | ||||||
Denver, CO, City & County Certificates of Participation, Wastewater/Rosyn Properties, Series B, 2.0%, 12/1/2011 | 700,000 | 700,973 | ||||||
Douglas County, CO, School District No. 1, Douglas & Elbert Counties, Prerefunded 12/15/2011 @ 100, 5.0%, 12/15/2012, INS: NATL | 5,320,000 | 5,351,335 | ||||||
El Paso County, CO, Public Housing Revenue, Series A, AMT, 4.1%, 12/20/2012 | 120,000 | 122,650 | ||||||
10,146,169 | ||||||||
Connecticut 2.0% | ||||||||
Connecticut, State Economic Recovery, Series A, 5.0%, 1/1/2012 | 6,000,000 | 6,048,420 | ||||||
Connecticut, State Special Tax Obligation Revenue, Transportation Infrastructure, Series B, 3.0%, 12/1/2011 | 6,000,000 | 6,014,160 | ||||||
12,062,580 | ||||||||
Delaware 0.1% | ||||||||
Delaware, State Housing Authority Revenue, Single Family Mortgage, Series D, AMT, 5.875%, 1/1/2038 | 830,000 | 880,431 | ||||||
District of Columbia 0.5% | ||||||||
District of Columbia, Bond Anticipation Notes, Pilot Arthur Revenue, 4.0%, 12/1/2012 | 2,895,000 | 2,996,875 | ||||||
Florida 7.9% | ||||||||
Broward County, FL, Airport Systems Revenue, Series E, AMT, 5.25%, 10/1/2012, INS: NATL | 6,000,000 | 6,023,220 | ||||||
Florida, Housing Finance Corp. Revenue, Homeowner Mortgage Special Program, Series A, 5.0%, 7/1/2028 | 1,320,000 | 1,422,749 | ||||||
Florida, Jacksonville Electric Authority Revenue, Series 23, 5.0%, 10/1/2013 | 5,000,000 | 5,403,300 | ||||||
Florida, State Board of Public Education, Series C, 5.0%, 6/1/2015 | 2,675,000 | 2,770,684 | ||||||
Florida, State Board of Public Education, Capital Outlay, Series 2008-C, 4.0%, 6/1/2012 | 3,985,000 | 4,072,590 | ||||||
Florida, State Department Environmental Protection Preservation Revenue, Series C, 4.0%, 7/1/2012 | 4,490,000 | 4,601,442 | ||||||
Hillsborough County, FL, Special Assessment Revenue, 5.0%, 3/1/2014, INS: FGIC, NATL | 2,135,000 | 2,279,433 | ||||||
Lee County, FL, Airport Revenue: | ||||||||
Series A, AMT, 5.0%, 10/1/2012, INS: AGMC | 1,500,000 | 1,559,535 | ||||||
Series A, AMT, 5.5%, 10/1/2023 | 1,250,000 | 1,341,850 | ||||||
Miami-Dade County, FL, Expressway Authority, Toll Systems Revenue, Series B, 2.0%, 7/1/2012, INS: AGC | 1,000,000 | 1,008,390 | ||||||
Orange County, FL, Sales Tax Revenue, Series A, 5.125%, 1/1/2018, INS: FGIC, NATL | 4,000,000 | 4,190,600 | ||||||
Palm Beach County, FL, Community Foundation, Palm Beach Project Revenue, 0.15%**, 3/1/2034, LOC: Northern Trust Co. | 4,750,000 | 4,750,000 | ||||||
South Miami, FL, Health Facilities Authority, Hospital Revenue, Baptist Health South Florida Group, 5.0%, 8/15/2021 | 2,500,000 | 2,724,375 | ||||||
Tampa, FL, Solid Waste Systems Revenue, AMT, 5.0%, 10/1/2019, INS: AGMC | 5,000,000 | 5,404,250 | ||||||
47,552,418 | ||||||||
Georgia 4.7% | ||||||||
Atlanta, GA, Airport Revenue, Series B, AMT, 5.0%, 1/1/2022 | 1,000,000 | 1,074,070 | ||||||
Cobb County, GA, Housing Authority, Multi-Family Housing Revenue, Oakley Run Apartments Project, 4.75%, Mandatory Put 3/1/2012 @ 100, 3/1/2032, LIQ: Fannie Mae | 2,545,000 | 2,574,700 | ||||||
Gainesville & Hall County, GA, Hospital Authority Revenue, Anticipation Certificates, Northeast Georgia Healthcare: | ||||||||
Series A, 5.0%, 2/15/2018 | 2,000,000 | 2,179,840 | ||||||
Series A, 5.0%, 2/15/2019 | 1,500,000 | 1,627,500 | ||||||
Georgia, Main Street Natural Gas, Inc., Gas Project Revenue, Series A, 0.14%**, 8/1/2040, SPA: Royal Bank of Canada | 4,000,000 | 4,000,000 | ||||||
Georgia, Municipal Electric Authority, Series A, 5.0%, 1/1/2021 | 1,580,000 | 1,807,710 | ||||||
Georgia, Municipal Electric Authority Power Revenue, Series 2005-Y, 6.4%, 1/1/2013, INS: AMBAC | 280,000 | 288,599 | ||||||
Georgia, State General Obligation: | ||||||||
Series G, 4.0%, 11/1/2011 | 5,000,000 | 5,000,000 | ||||||
Series A, 4.0%, 7/1/2013 | 7,420,000 | 7,867,723 | ||||||
Muscogee County, GA, School District, 3.0%, 12/1/2011 | 1,950,000 | 1,954,543 | ||||||
28,374,685 | ||||||||
Hawaii 1.4% | ||||||||
Hawaii, State Airport Systems Revenue, AMT: | ||||||||
4.0%, 7/1/2013 | 1,355,000 | 1,420,989 | ||||||
Series B, 5.0%, 7/1/2012 | 1,850,000 | 1,906,647 | ||||||
Hawaii, State General Obligation, Series DK, 5.0%, 5/1/2012 | 4,000,000 | 4,095,760 | ||||||
Hawaii, State Housing Finance & Development Corp., Single Family Mortgage Revenue, Series A, AMT, 5.2%, 7/1/2012 | 765,000 | 771,984 | ||||||
8,195,380 | ||||||||
Idaho 0.2% | ||||||||
Idaho, Housing Agency, Single Family Mortgage: | ||||||||
Series H-2, AMT, 5.1%, 7/1/2020 | 70,000 | 71,301 | ||||||
Class III, AMT, 5.1%, 7/1/2023 | 140,000 | 141,007 | ||||||
Class III, AMT, 5.15%, 7/1/2023 | 340,000 | 347,051 | ||||||
Class III, AMT, 5.4%, 7/1/2021 | 70,000 | 71,970 | ||||||
Series G-2, AMT, 5.75%, 1/1/2014 | 5,000 | 5,064 | ||||||
Series H-2, AMT, 5.85%, 1/1/2014 | 25,000 | 25,336 | ||||||
Class III, AMT, 5.95%, 7/1/2019 | 350,000 | 361,256 | ||||||
Series E, AMT, 5.95%, 7/1/2020 | 35,000 | 35,504 | ||||||
1,058,489 | ||||||||
Illinois 4.4% | ||||||||
Chicago, IL, Board of Education, Series A, 5.25%, 12/1/2018, INS: NATL | 1,830,000 | 1,907,043 | ||||||
Chicago, IL, O'Hare International Airport Revenue: | ||||||||
Series A, 5.0%, 1/1/2015, INS: AGMC | 4,500,000 | 4,960,935 | ||||||
Series D, AMT, 5.25%, 1/1/2019 | 1,000,000 | 1,099,720 | ||||||
Chicago, IL, Public Building Commission Revenue, Chicago Transit Authority, ETM, 5.0%, 3/1/2012, INS: AMBAC | 250,000 | 254,005 | ||||||
Illinois, Finance Authority Revenue, University of Chicago, Series B, 5.0%, 7/1/2017 | 5,000,000 | 5,805,500 | ||||||
Illinois, Health Facilities Authority Revenue, 5.25%, 11/15/2013, INS: NATL | 665,000 | 666,144 | ||||||
Illinois, Railsplitter Tobacco Settlement Authority, 4.0%, 6/1/2013 | 2,250,000 | 2,341,980 | ||||||
Lake County, IL, Forest Preserve District, Series A, 0.713%*, 12/15/2020 | 5,000,000 | 4,557,850 | ||||||
McLean & Woodford Counties, IL, Community Unit School District No. 5, Prerefunded 12/1/2011 @ 100, 6.375%, 12/1/2016, INS: AGMC | 4,820,000 | 4,844,871 | ||||||
26,438,048 | ||||||||
Indiana 2.6% | ||||||||
Indiana, Finance Authority Health Systems Revenue, Sisters of St. Francis Health, Series C, 5.0%, 11/1/2014 | 2,000,000 | 2,199,520 | ||||||
Indiana, Finance Authority, Water Utility Revenue, Citizens Energy, 3.0%, 10/1/2014 | 1,200,000 | 1,240,728 | ||||||
Indiana, Health Facilities Funding Authority, Series A, ETM, 5.75%, 9/1/2015 | 2,930,000 | 2,990,270 | ||||||
Indiana, Health Facility Financing Authority Revenue, Ascension Health, Series A-1, 5.0%, Mandatory Put 5/1/2013 @ 100, 11/1/2027 | 1,000,000 | 1,063,100 | ||||||
Indiana, State Finance Authority, Economic Development Revenue, Republic Services, Inc. Project, Series A, AMT, 1.05%, Mandatory Put 12/1/2011 @ 100, 5/1/2034 | 2,500,000 | 2,500,050 | ||||||
Indiana, State Transportation Finance Authority, Highway Revenue, Series A, Prerefunded 6/1/2013 @ 100, 5.25%, 6/1/2016, INS: AGMC | 5,000,000 | 5,383,850 | ||||||
Tipton, IN, School District General Obligation, School Building Corp., 5.55%, 7/15/2012, INS: AGMC | 90,000 | 91,697 | ||||||
15,469,215 | ||||||||
Kansas 0.6% | ||||||||
Kansas, State Department of Transportation Highway Revenue, Series C-3, 0.09%**, 9/1/2023, SPA: JPMorgan Chase Bank | 3,000,000 | 3,000,000 | ||||||
Wichita, KS, Hospital Revenue, Facilities Improvement, Series III A, 3.0%, 11/15/2011 | 500,000 | 500,470 | ||||||
3,500,470 | ||||||||
Kentucky 0.2% | ||||||||
Kentucky, Housing Corp. Revenue, Series G, AMT, 5.0%, 7/1/2030 | 895,000 | 906,993 | ||||||
Louisiana 0.6% | ||||||||
Louisiana, Local Government Environmental Facilities & Community Development Authority, LCTCS Facilities Corp. Project, Series A, 4.0%, 10/1/2012 | 1,500,000 | 1,543,530 | ||||||
Louisiana, Regional Transit Authority, Sales Tax Revenue, 3.0%, 12/1/2012, INS: AGMC | 500,000 | 512,090 | ||||||
Louisiana, State Offshore Terminal Authority, Deepwater Port Revenue, Loop LLC Project, Series B-1, 1.875%, Mandatory Put 10/1/2013 @ 100, 10/1/2040 | 1,750,000 | 1,766,993 | ||||||
3,822,613 | ||||||||
Maine 0.1% | ||||||||
Maine, State Housing Authority Mortgage Purchase, Series D-2, AMT, 5.0%, 11/15/2027 | 540,000 | 540,740 | ||||||
Maryland 2.3% | ||||||||
Maryland, State & Local Facilities Loan, Capital Improvement, Series A, 5.0%, 3/1/2012 | 1,000,000 | 1,016,080 | ||||||
Maryland, State Community Development Administration, Department of Housing & Community Development, Series E, AMT, 5.5%, 3/1/2032 | 1,275,000 | 1,314,601 | ||||||
Maryland, State Department of Transportation & Conservation, 5.0%, 2/15/2018 | 5,000,000 | 5,974,450 | ||||||
Maryland, University of Maryland, Systems Auxiliary Facility & Tuition Revenue, Series A, 5.0%, 4/1/2012 | 5,000,000 | 5,101,050 | ||||||
Prince Georges County, MD, Housing Authority, Single Family Mortgage Revenue: | ||||||||
Series A, AMT, 3.9%, 8/20/2012 | 70,000 | 70,501 | ||||||
Series A, AMT, 5.6%, 12/1/2034 | 50,000 | 50,918 | ||||||
Series A, AMT, 7.0%, 8/1/2033 | 50,000 | 51,798 | ||||||
13,579,398 | ||||||||
Massachusetts 2.7% | ||||||||
Massachusetts, State Development Finance Agency Revenue, Northfield Mount Hermon School, 0.15%**, 10/1/2042, LOC: JPMorgan Chase Bank | 4,700,000 | 4,700,000 | ||||||
Massachusetts, State General Obligation, Series A, 0.1%**, 9/1/2016, SPA: JPMorgan Chase Bank | 4,950,000 | 4,950,000 | ||||||
Massachusetts, State Water Resources Authority Revenue, Series C-1, 0.16%**, 11/1/2026, SPA: Bank of America NA | 6,730,000 | 6,730,000 | ||||||
16,380,000 | ||||||||
Michigan 2.1% | ||||||||
Detroit, MI, Sewer Disposal Revenue, Series D, 0.849%*, 7/1/2032, INS: AGMC | 4,090,000 | 2,751,834 | ||||||
Detroit, MI, Water Supply System, ETM, 6.25%, 7/1/2012, INS: FGIC | 30,000 | 31,056 | ||||||
Michigan, Finance Authority, Trinity Health Corp., Series A, 3.0%, 12/1/2012 | 210,000 | 215,307 | ||||||
Michigan, State Hospital Finance Authority Revenue, Ascension Health Senior Credit Group, Series B, 5.0%, 11/15/2020 | 3,000,000 | 3,357,270 | ||||||
Michigan, Strategic Fund, Limited Obligation Revenue, United Jewish Project, 5.75%, 1/1/2012, LOC: Bank One NA | 200,000 | 199,814 | ||||||
Wayne County, MI, Airport Authority Revenue, Detroit Metropolitan Airport, Series A, AMT, 3.0%, 12/1/2012 | 6,190,000 | 6,296,901 | ||||||
12,852,182 | ||||||||
Minnesota 0.5% | ||||||||
Coon Rapids, MN, Multi-Family Housing Revenue, Brown Meadow Manor, Series A, AMT, 3.875%, 7/1/2014 | 340,000 | 345,712 | ||||||
Minneapolis & St. Paul, MN, Metropolitan Airports Commission, Airport Revenue, Series B, AMT, 5.0%, 1/1/2012 | 1,500,000 | 1,511,460 | ||||||
Minnesota, Single Family Housing Revenue, Housing Finance Agency, 5.2%, 1/1/2017 | 885,000 | 898,434 | ||||||
2,755,606 | ||||||||
Mississippi 0.9% | ||||||||
Mississippi, Development Bank Special Obligation, Department of Corrections, Series D, 5.0%, 8/1/2021 | 3,695,000 | 4,150,039 | ||||||
Mississippi, Development Bank Special Obligation, DeSoto County Highway, Series A, 3.0%, 1/1/2012 | 1,250,000 | 1,255,538 | ||||||
5,405,577 | ||||||||
Missouri 1.4% | ||||||||
Missouri, State Highways & Transit Commission, State Road Revenue, Series A, Prerefunded 2/1/2012 @ 100, 5.0%, 2/1/2014 | 5,000,000 | 5,060,150 | ||||||
Missouri, State Housing Development Commission, Single Family Mortgage Revenue, Homeownership Loan Program: | ||||||||
Series D, 4.8%, 3/1/2040 | 1,295,000 | 1,382,413 | ||||||
Series C, AMT, 5.6%, 9/1/2035 | 1,110,000 | 1,145,897 | ||||||
Missouri, State Housing Development Commission, Single Family Mortgage Revenue, Special Homeownership Loan Program Market Bonds, Series E-1, 5.0%, 11/1/2027 | 590,000 | 639,678 | ||||||
8,228,138 | ||||||||
Nevada 2.0% | ||||||||
Clark County, NV, Airport Systems Revenue, Series E-2, 5.0%, 7/1/2012 | 1,930,000 | 1,984,233 | ||||||
Clark County, NV, School District General Obligation, 5.5%, 6/15/2013, INS: AGMC | 4,700,000 | 5,060,537 | ||||||
Las Vegas Valley, NV, Water District Improvement, Series A, Prerefunded 12/01/2012 @ 100, 5.25%, 6/1/2017, INS: FGIC, NATL | 4,585,000 | 4,829,793 | ||||||
Nevada, Housing Division, Single Family Mortgage, Series A, AMT, 5.15%, 10/1/2014 | 30,000 | 30,052 | ||||||
11,904,615 | ||||||||
New Jersey 1.4% | ||||||||
Livingston, NJ, School District Revenue, Board of Education, 144A, 3.8%, 8/1/2014 | 421,277 | 423,290 | ||||||
New Jersey, Economic Development Authority Revenue, School Facilities Construction: | ||||||||
Series W, ETM, 5.0%, 3/1/2012 | 2,375,000 | 2,412,739 | ||||||
Series J-4, 5.0%, Mandatory Put 9/1/2014 @ 100, 9/1/2029, INS: AGMC | 5,000,000 | 5,474,050 | ||||||
8,310,079 | ||||||||
New Mexico 1.5% | ||||||||
Farmington, NM, Pollution Control Revenue, Arizona Public Service Co., Series C, AMT, 2.875%, Mandatory Put 10/10/2013 @ 100, 9/1/2024 | 2,500,000 | 2,544,450 | ||||||
New Mexico, Mortgage Finance Authority, Second Mortgage Program, 144A, AMT, 6.5%, 1/1/2018 | 60,500 | 60,930 | ||||||
New Mexico, Mortgage Finance Authority, Single Family Mortgage, "I", Series D, 5.35%, 9/1/2040 | 1,035,000 | 1,124,124 | ||||||
University of New Mexico, Systems Improvement Revenues, 0.16%**, 6/1/2026, SPA: JPMorgan Chase Bank | 5,560,000 | 5,560,000 | ||||||
9,289,504 | ||||||||
New York 6.5% | ||||||||
New York, State Dormitory Authority Revenues, Non State Supported Debt, University of Rochester, Series A-1, 0.17%**, 7/1/2027, LOC: Bank of America NA | 10,000,000 | 10,000,000 | ||||||
New York, State Dormitory Authority Revenues, Non-State Supported Debt, Mount Sinai School of Medicine, Series A, 5.0%, 7/1/2012 | 1,000,000 | 1,028,710 | ||||||
New York, State Local Government Assistance Corp., Series 8V, 0.11%**, 4/1/2019, SPA: JPMorgan Chase Bank | 6,000,000 | 6,000,000 | ||||||
New York, State Tollway Authority, State Personal Income Tax Revenue, Series A, 5.0%, 3/15/2012 | 1,000,000 | 1,017,750 | ||||||
New York, Tobacco Settlement Financing Corp., Series B, 4.0%, 6/1/2013 | 3,750,000 | 3,940,913 | ||||||
New York City, NY, Municipal Water Finance Authority, Series F-2, 0.11%**, 6/15/2033, SPA: JPMorgan Chase Bank | 5,000,000 | 5,000,000 | ||||||
New York City, NY, Municipal Water Finance Authority, Water & Sewer Systems Revenue, Series B-1, 0.1%**, 6/15/2024, SPA: JPMorgan Chase Bank | 4,000,000 | 4,000,000 | ||||||
New York City, NY, Transitional Finance Authority, Future Tax Secured, Series A, Prerefunded 8/1/2013 @ 100, 5.0%, 8/1/2018 | 2,125,000 | 2,295,871 | ||||||
New York, NY, General Obligation, Series H-2, 0.18%**, 8/1/2014, INS: NATL, SPA: Wachovia Bank NA | 5,400,000 | 5,400,000 | ||||||
New York, NY, Higher Education Revenue, Dormitory Authority, Series A, 5.25%, 5/15/2013 | 585,000 | 624,148 | ||||||
39,307,392 | ||||||||
North Carolina 2.3% | ||||||||
Mecklenburg County, NC, Public Facilities Corp., Limited Obligation Bond, Annual Appropriation, 5.0%, 3/1/2015 | 5,000,000 | 5,667,400 | ||||||
North Carolina, East Carolina University Revenue, Series A, 4.0%, 10/1/2012 | 610,000 | 630,099 | ||||||
North Carolina, Eastern Municipal Power Agency, Power Systems Revenue, Series B, 5.0%, 1/1/2017 | 1,500,000 | 1,702,845 | ||||||
North Carolina, Housing Finance Agency, Home Ownership, Series 22-A, AMT, 5.5%, 7/1/2036 | 1,285,000 | 1,352,398 | ||||||
North Carolina, Municipal Power Agency, Number 1 Catawba Electric Revenue, Series A, 5.25%, 1/1/2013 | 2,500,000 | 2,630,850 | ||||||
North Carolina, State Grant Anticipation Revenue, Department of State Treasurer, 5.0%, 3/1/2012 | 1,545,000 | 1,569,195 | ||||||
13,552,787 | ||||||||
North Dakota 0.2% | ||||||||
Fargo, ND, Sanford Health Systems Revenue, 4.0%, 11/1/2011 | 1,000,000 | 1,000,000 | ||||||
Ohio 6.3% | ||||||||
Allen Country, OH, Hospital Facilities Revenue, Catholic Healthcare Partners, Series D, 0.13%**, 6/1/2034, LOC: JPMorgan Chase Bank | 10,000,000 | 10,000,000 | ||||||
Mason, OH, Health Care Facilities, MCV Health Care Facilities Project, 5.25%, 2/20/2020 | 40,000 | 40,065 | ||||||
Montgomery County, OH, Catholic Health Revenue, Series C-2, 4.1%, Mandatory Put 11/10/2011 @ 100, 10/1/2041 | 1,135,000 | 1,136,067 | ||||||
Ohio, State Building Facilities Authority, Administration Building Fund Project, Series B, 5.0%, 10/1/2013 | 4,880,000 | 5,260,786 | ||||||
Ohio, State Common Schools, Series C, 4.0%, 9/15/2017 | 3,835,000 | 4,313,340 | ||||||
Ohio, State Higher Education, Series A, 5.0%, 8/1/2021 | 5,000,000 | 5,986,000 | ||||||
Ohio, State Higher Educational Facility Commission Revenue, Cleveland Clinic Health, Series A, 5.25%, 1/1/2019 | 2,500,000 | 2,845,350 | ||||||
Ohio, State Highway Capital Improvement, Series P, 5.0%, 5/1/2013 | 3,000,000 | 3,204,390 | ||||||
Ohio, State Housing Finance Agency, Residential Mortgage Revenue, Mortgage-Backed Securities Program, Series E, 5.0%, 9/1/2039 | 995,000 | 1,067,575 | ||||||
Ohio, State Water Development Authority Revenue, Fresh Water Development: | ||||||||
5.375%, 12/1/2016 | 125,000 | 128,311 | ||||||
Prerefunded 6/1/2012 @ 100, 5.375%, 12/1/2016 | 1,925,000 | 1,982,866 | ||||||
Ohio, State Water Development Authority, Solid Waste Revenue, Waste Management, Inc. Project, 1.75%, 6/1/2013 | 2,000,000 | 2,012,960 | ||||||
37,977,710 | ||||||||
Oregon 0.9% | ||||||||
Oregon, State Department of Administrative Services, Certificates of Participation, Series A, 5.0%, 5/1/2012 | 625,000 | 639,800 | ||||||
Oregon, State Housing & Community Services Department, Mortgage Revenue, Single Family Mortgage Program, Series B, AMT, 5.0%, 7/1/2030 | 4,180,000 | 4,467,375 | ||||||
5,107,175 | ||||||||
Pennsylvania 3.9% | ||||||||
Langhorne, PA, Hospital Revenue, Franciscan Health, St. Mary's Hospital Authority, Series A, 7.0%, 6/15/2015, INS: NATL | 1,260,000 | 1,260,000 | ||||||
Pennsylvania, Housing Finance Agency, Single Family Mortgage, Series 90A, AMT, 5.0%, 10/1/2035 | 725,000 | 727,095 | ||||||
Pennsylvania, State General Obligation: | ||||||||
Series A, 5.0%, 2/15/2012 | 5,000,000 | 5,069,650 | ||||||
5.0%, 7/1/2013 | 7,500,000 | 8,073,150 | ||||||
Pennsylvania, State Industrial Development Authority Revenue, Economic Development, 5.5%, 7/1/2018, INS: AMBAC | 4,650,000 | 4,810,751 | ||||||
Philadelphia, PA, Airport Revenue, Series C, AMT, 4.0%, 6/15/2012 | 2,780,000 | 2,826,843 | ||||||
Philadelphia, PA, Industrial Development Revenue, Authority for Individual Development Senior Living Revenue: | ||||||||
Series A, 4.7%, 7/1/2013 | 100,000 | 100,952 | ||||||
Series C, 4.7%, 7/1/2013 | 90,000 | 90,857 | ||||||
Series E, 4.7%, 7/1/2013 | 110,000 | 111,047 | ||||||
Philadelphia, PA, Multi-Family Housing Revenue, Series B, AMT, 4.5%, 10/1/2013 | 360,000 | 365,004 | ||||||
Pittsburgh, PA, Industrial Development Revenue, Urban Redevelopment Authority, Series A, 144A, 6.0%, 12/1/2011, LOC: PNC Bank NA | 160,000 | 160,501 | ||||||
23,595,850 | ||||||||
Puerto Rico 1.3% | ||||||||
Commonwealth of Puerto Rico, Public Improvement: | ||||||||
Series A, 5.25%, 7/1/2012, INS: FGIC | 3,790,000 | 3,889,222 | ||||||
Series A, 5.5%, 7/1/2012, INS: FGIC | 2,000,000 | 2,055,680 | ||||||
Puerto Rico, Electric Power Authority Revenue, Series WW, 5.5%, 7/1/2021 | 1,495,000 | 1,620,909 | ||||||
7,565,811 | ||||||||
South Carolina 0.8% | ||||||||
Beaufort-Jasper, SC, Water & Sewer Authority, Waterworks & Sewer Systems Revenue, Series B, 4.0%, 3/1/2012 | 745,000 | 754,439 | ||||||
South Carolina, Jobs-Economic Development Authority, Hospital Improvement Revenue, Palmetto Health Alliance, 5.0%, 8/1/2015 | 500,000 | 540,230 | ||||||
South Carolina, State Public Service Authority Revenue: | ||||||||
Series D, Prerefunded 1/1/2013 @ 100, 5.25%, 1/1/2014, INS: AGMC | 1,440,000 | 1,521,264 | ||||||
Series D, 5.25%, 1/1/2014, INS: AGMC | 2,060,000 | 2,170,313 | ||||||
4,986,246 | ||||||||
South Dakota 0.1% | ||||||||
South Dakota, Hospital & Healthcare Revenue, 5.4%, 8/1/2013, INS: AMBAC | 285,000 | 287,582 | ||||||
Tennessee 1.0% | ||||||||
Jackson, TN, Hospital Revenue, Jackson-Madison County Project, 5.25%, 4/1/2014 | 1,290,000 | 1,384,918 | ||||||
Nashville, TN, Metropolitan Nashville Airport Authority Revenue, Series B, 4.0%, 7/1/2013, INS: AGMC | 2,000,000 | 2,104,020 | ||||||
Rutherford County, TN, Capital Outlay Notes, 4.0%, 4/1/2012 | 1,000,000 | 1,015,220 | ||||||
Tennessee, Housing Development Agency, Homeownership Program, Series 2006-3, AMT, 5.75%, 7/1/2037 | 1,475,000 | 1,526,256 | ||||||
6,030,414 | ||||||||
Texas 13.4% | ||||||||
Allen, TX, Independent School District, 5.0%, 2/15/2024 | 1,000,000 | 1,164,400 | ||||||
Dallas, TX, General Obligation, Series A, 5.0%, 2/15/2012 | 1,700,000 | 1,723,562 | ||||||
Dallas, TX, Waterworks & Sewer Systems Revenue: | ||||||||
5.0%, 10/1/2020 | 3,000,000 | 3,602,700 | ||||||
5.0%, 10/1/2021 | 2,000,000 | 2,388,200 | ||||||
Fort Worth, TX, General Obligation, 5.0%, 3/1/2016 | 4,260,000 | 4,930,737 | ||||||
Houston, TX, Airport Systems Revenue: | ||||||||
Series A, AMT, 5.0%, 7/1/2013 | 3,000,000 | 3,169,890 | ||||||
Series A, 5.0%, 7/1/2016 | 625,000 | 712,769 | ||||||
Lubbock, TX, Electric Light & Power Systems Revenue, 4.0%, 4/15/2012 | 1,000,000 | 1,016,430 | ||||||
North Texas, Tollway Authority Revenue: | ||||||||
Series E-2, 5.25%, Mandatory Put 1/1/2012 @ 100, 1/1/2038 | 5,000,000 | 5,040,100 | ||||||
Series L-2, 6.0%, Mandatory Put 1/1/2013 @ 100, 1/1/2038 | 2,000,000 | 2,117,960 | ||||||
San Antonio, TX, Electric & Gas Revenue, Series A, 5.5%, 2/1/2013 | 4,000,000 | 4,254,920 | ||||||
Spring Branch, TX, Independent School District, 5.0%, 2/1/2012 | 5,440,000 | 5,506,422 | ||||||
Tarrant County, TX, Cultural Education Facilities Finance Corp., Hospital Revenue, Baylor Health Care System Project, Series E, 0.12%**, 11/15/2050, LOC: Wells Fargo Bank NA | 5,000,000 | 5,000,000 | ||||||
Tarrant County, TX, Cultural Education Facilities Finance Corp., Hospital Revenue, Scott & White Healthcare, 5.25%, 8/15/2021 | 2,435,000 | 2,738,401 | ||||||
Texas, Dallas-Fort Worth International Airport Revenue: | ||||||||
Series A, 5.0%, 11/1/2016 | 4,000,000 | 4,614,600 | ||||||
Series D, 5.0%, 11/1/2022 | 1,485,000 | 1,670,343 | ||||||
Series D, 5.0%, 11/1/2023, INS: NATL | 2,890,000 | 3,214,663 | ||||||
Texas, Lower Colorado River Authority Revenue, Series A, 5.0%, 5/15/2016 | 3,500,000 | 4,023,600 | ||||||
Texas, Midtown Redevelopment Authority, Tax Increment Contract Revenue, 4.0%, 1/1/2014 | 625,000 | 652,787 | ||||||
Texas, Multi-Family Housing Revenue, Wintergreen Project, AMT, 4.85%, 9/20/2012 | 30,000 | 30,728 | ||||||
Texas, Municipal Gas Acquisition & Supply Corp. II, Gas Supply Revenue, 0.933%*, 9/15/2017 | 5,325,000 | 5,130,265 | ||||||
Texas, State General Obligation, College Student Loan, Series B, AMT, 5.0%, 8/1/2013 | 1,000,000 | 1,072,270 | ||||||
Texas, State Public Finance Authority Revenue, Unemployment Compensation: | ||||||||
Series A, 5.0%, 7/1/2012 | 5,000,000 | 5,158,600 | ||||||
Series A, 5.0%, 1/1/2013 | 825,000 | 869,368 | ||||||
Texas, Trinity River Authority, Regional Wastewater Systems Revenue: | ||||||||
5.0%, 8/1/2013 | 2,000,000 | 2,157,160 | ||||||
5.0%, 8/1/2014 | 4,805,000 | 5,356,518 | ||||||
West Harris County, TX, Regional Water Authority, Water Systems Revenue: | ||||||||
5.0%, 12/15/2015 | 1,605,000 | 1,816,539 | ||||||
5.0%, 12/15/2017 | 1,270,000 | 1,469,542 | ||||||
80,603,474 | ||||||||
Utah 1.7% | ||||||||
Intermountain Power Agency, UT, Power Supply Revenue, Series A, ETM, 6.15%, 7/1/2014, INS: NATL | 175,000 | 185,220 | ||||||
Salt Lake County, UT, General Obligation, 4.25%, 6/15/2013 | 5,000,000 | 5,315,050 | ||||||
Utah, Housing Finance Agency, Single Family Mortgage: | ||||||||
Series A-2, Class II, AMT, 5.4%, 7/1/2016 | 30,000 | 30,041 | ||||||
Series C, Class III, AMT, 6.25%, 7/1/2014 | 20,000 | 20,418 | ||||||
Utah, Single Family Housing Revenue, Series D-2, AMT, 5.0%, 7/1/2018 | 450,000 | 452,524 | ||||||
Utah, Single Family Housing Revenue, Mortgage Revenue, Series G, AMT, 4.875%, 1/1/2019 | 850,000 | 866,235 | ||||||
Utah, Single Family Housing Revenue, Single Family Mortgage, AMT, 3.875%, 7/1/2014 | 305,000 | 305,290 | ||||||
Utah, State General Obligation, Series A, 4.0%, 7/1/2013 | 3,000,000 | 3,181,530 | ||||||
10,356,308 | ||||||||
Vermont 0.0% | ||||||||
Vermont, Housing Finance Agency, Single Family, Series 23, AMT, 5.0%, 5/1/2034, INS: AGMC | 270,000 | 272,219 | ||||||
Virginia 2.8% | ||||||||
Hampton, VA, Public Improvement, Series A, 4.0%, 1/15/2012 | 500,000 | 503,945 | ||||||
King George County, VA, Industrial Development Authority, Solid Waste Disposal Facility Revenue, Waste Management, Inc., Series A, AMT, 3.5%, Mandatory Put 5/1/2013 @ 100, 6/1/2023, GTY: Waste Management, Inc. | 2,500,000 | 2,575,200 | ||||||
Norfolk, VA, Capital Improvement, Series A, 5.0%, 3/1/2012 | 7,000,000 | 7,113,120 | ||||||
Virginia, State Resource Authority Infrastructure Revenue, Pooled Financing Program: | ||||||||
Series B, ETM, 5.0%, 11/1/2016 | 240,000 | 280,999 | ||||||
Series B, 5.0%, 11/1/2016 | 1,060,000 | 1,243,709 | ||||||
Virginia, Upper Occoquan Sewer Authority, Regional Sewer Revenue, 5.0%, 7/1/2017, INS: AGMC | 4,320,000 | 4,676,270 | ||||||
Virginia, Water & Sewer Systems Revenue, Series B, 8.7%, 11/1/2011 | 275,000 | 275,000 | ||||||
16,668,243 | ||||||||
Washington 4.3% | ||||||||
King County, WA, Limited Tax, Series D, 4.0%, 12/1/2011 | 1,535,000 | 1,539,897 | ||||||
King County, WA, School District No. 410, Snoqualmie Valley: | ||||||||
Series A, Prerefunded 12/1/2013 @ 100, 5.0%, 12/1/2015, INS: AGMC | 4,360,000 | 4,767,137 | ||||||
Series A, 5.0%, 12/1/2015, INS: AGMC | 1,820,000 | 1,975,701 | ||||||
Pierce County, WA, Peninsula School District No. 401, Prerefunded 12/1/2013 @ 100, 5.0%, 12/1/2015, INS: AGMC | 5,000,000 | 5,462,550 | ||||||
Port Seattle, WA, Passenger Facility Charge Revenue, Series B, AMT, 5.0%, 12/1/2012 | 1,000,000 | 1,049,030 | ||||||
Seattle, WA, Port Revenue, Series B, AMT, 5.625%, 4/1/2016, INS: FGIC, NATL | 1,805,000 | 1,811,371 | ||||||
Washington, Energy Northwest Electric Revenue, Columbia Generating Station, Series A, 5.75%, 7/1/2018, INS: NATL | 3,500,000 | 3,617,425 | ||||||
Washington, Energy Northwest Electric Revenue, Project 1, Series A, 5.0%, 7/1/2013 (a) | 1,740,000 | 1,816,160 | ||||||
Washington, Energy Northwest Electric Revenue, Project No. 3, Series A, 5.5%, 7/1/2013 | 3,500,000 | 3,795,260 | ||||||
25,834,531 | ||||||||
Wisconsin 0.8% | ||||||||
Milwaukee County, WI, Airport Revenue, Series B, AMT, 5.0%, 12/1/2012 | 485,000 | 507,717 | ||||||
Wisconsin, Housing & Economic Development Authority, Home Ownership Revenue, Series D, AMT, 4.875%, 3/1/2036 | 1,020,000 | 1,060,749 | ||||||
Wisconsin, State Clean Water Revenue, Series 2, 5.0%, 6/1/2019 | 1,000,000 | 1,200,210 | ||||||
Wisconsin, State Health & Educational Facilities Authority Revenue, Aurora Health Care, Inc., Series B, 4.75%, Mandatory Put 8/15/2014 @ 100, 8/15/2025 | 2,000,000 | 2,138,280 | ||||||
4,906,956 | ||||||||
Total Municipal Bonds and Notes (Cost $577,814,113) | 588,667,492 |
Shares | Value ($) | |||||||
Open-End Investment Companies 1.7% | ||||||||
BlackRock MuniCash, 0.055%*** | 10,281,622 | 10,281,622 | ||||||
BlackRock MuniFund, 0.025%*** | 59,990 | 59,990 | ||||||
Total Open-End Investment Companies (Cost $10,341,612) | 10,341,612 |
% of Net Assets | Value ($) | |||||||
Total Investment Portfolio (Cost $588,155,725)+ | 99.8 | 599,009,104 | ||||||
Other Assets and Liabilities, Net | 0.2 | 1,494,943 | ||||||
Net Assets | 100.0 | 600,504,047 |
* Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the U.S. Treasury Bill rate. These securities are shown at their current rate as of October 31, 2011.
** Variable rate demand notes are securities whose interest rates are reset periodically at market levels. These securities are often payable on demand and are shown at their current rates as of October 31, 2011.
*** Current yield; not a coupon rate.
+ The cost for federal income tax purposes was $588,155,725. At October 31, 2011, net unrealized appreciation for all securities based on tax cost was $10,853,379. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $12,906,076 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,052,697.
(a) When-issued security.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
AGC: Assured Guaranty Corp.
AGMC: Assured Guaranty Municipal Corp.
AMBAC: Ambac Financial Group, Inc.
AMT: Subject to alternative minimum tax.
ETM: Bonds bearing the description ETM (escrow to maturity) are collateralized usually by U.S. Treasury securities which are held in escrow and used to pay principal and interest on bonds so designated.
FGIC: Financial Guaranty Insurance Co.
GTY: Guaranty Agreement
INS: Insured
LIQ: Liquidity
LOC: Letter of Credit
NATL: National Public Finance Guarantee Corp.
Prerefunded: Bonds which are prerefunded are collateralized usually by U.S. Treasury securities which are held in escrow and used to pay principal and interest on tax-exempt issues and to retire the bonds in full at the earliest refunding date.
SPA: Standby Bond Purchase Agreement
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of October 31, 2011 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Municipal Bonds and Notes (b) | $ | — | $ | 588,667,492 | $ | — | $ | 588,667,492 | ||||||||
Open-End Investment Companies | 10,341,612 | — | — | 10,341,612 | ||||||||||||
Total | $ | 10,341,612 | $ | 588,667,492 | $ | — | $ | 599,009,104 |
There have been no transfers between Level 1 and Level 2 fair value measurements during the year ended October 31, 2011.
(b) See Investment Portfolio for additional detailed categorizations.
The accompanying notes are an integral part of the financial statements.
as of October 31, 2011 | ||||
Assets | ||||
Investments in securities, at value (cost $588,155,725) | $ | 599,009,104 | ||
Receivable for investments sold | 1,995,300 | |||
Receivable for Fund shares sold | 1,052,218 | |||
Interest receivable | 6,625,837 | |||
Due from Advisor | 4,228 | |||
Other assets | 47,695 | |||
Total assets | 608,734,382 | |||
Liabilities | ||||
Payable for investments purchased | 1,500,000 | |||
Payable for investments purchased — when-issued securities | 3,354,108 | |||
Payable for Fund shares redeemed | 2,498,687 | |||
Distributions payable | 149,217 | |||
Accrued management fee | 180,991 | |||
Other accrued expenses and payables | 547,332 | |||
Total liabilities | 8,230,335 | |||
Net assets, at value | $ | 600,504,047 | ||
Net Assets Consist of | ||||
Accumulated distributions in excess of net investment income | (99,880 | ) | ||
Net unrealized appreciation (depreciation) on investments | 10,853,379 | |||
Accumulated net realized gain (loss) | (15,505,364 | ) | ||
Paid-in capital | 605,255,912 | |||
Net assets, at value | $ | 600,504,047 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of October 31, 2011 (continued) | ||||
Net Asset Value | ||||
Class A Net Asset Value and redemption price per share ($335,537,688 ÷ 32,765,805 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 10.24 | ||
Maximum offering price per share (100 ÷ 98.00 of $10.24) | $ | 10.45 | ||
Class B Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($754,935 ÷ 73,745 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 10.24 | ||
Class C Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($52,022,385 ÷ 5,081,739 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 10.24 | ||
Class S Net Asset Value, offering and redemption price per share ($161,037,195 ÷ 15,743,907 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 10.23 | ||
Institutional Class Net Asset Value, offering and redemption price per share ($51,151,844 ÷ 4,994,565 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 10.24 |
The accompanying notes are an integral part of the financial statements.
for the year ended October 31, 2011 | ||||
Investment Income | ||||
Income: Interest | $ | 15,972,736 | ||
Expenses: Management fee | 2,566,403 | |||
Administration fee | 650,340 | |||
Services to shareholders | 562,983 | |||
Distribution and service fees | 1,471,239 | |||
Custodian fee | 18,294 | |||
Professional fees | 104,320 | |||
Reports to shareholders | 57,822 | |||
Registration fees | 118,138 | |||
Trustees' fees and expenses | 23,508 | |||
Other | 67,483 | |||
Total expenses before expense reductions | 5,640,530 | |||
Expense reductions | (731,224 | ) | ||
Total expenses after expense reductions | 4,909,306 | |||
Net investment income | 11,063,430 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) from investments | 554,535 | |||
Change in net unrealized appreciation (depreciation) on investments | (3,810,780 | ) | ||
Net gain (loss) | (3,256,245 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | 7,807,185 |
The accompanying notes are an integral part of the financial statements.
Years Ended October 31, | ||||||||
Increase (Decrease) in Net Assets | 2011 | 2010 | ||||||
Operations: Net investment income | $ | 11,063,430 | $ | 11,661,265 | ||||
Net realized gain (loss) | 554,535 | (1,049,017 | ) | |||||
Change in net unrealized appreciation (depreciation) | (3,810,780 | ) | 9,688,818 | |||||
Net increase (decrease) in net assets resulting from operations | 7,807,185 | 20,301,066 | ||||||
Distributions to shareholders from: Net investment income: Class A | (6,261,835 | ) | (6,243,349 | ) | ||||
Class B | (7,824 | ) | (12,487 | ) | ||||
Class C | (534,795 | ) | (568,163 | ) | ||||
Class S | (3,173,022 | ) | (3,290,009 | ) | ||||
Institutional Class | (1,085,954 | ) | (1,508,798 | ) | ||||
Total distributions | (11,063,430 | ) | (11,622,806 | ) | ||||
Fund share transactions: Proceeds from shares sold | 200,598,659 | 409,543,109 | ||||||
Reinvestment of distributions | 7,705,333 | 7,568,541 | ||||||
Payments for shares redeemed | (347,561,699 | ) | (238,859,963 | ) | ||||
Net increase (decrease) in net assets from Fund share transactions | (139,257,707 | ) | 178,251,687 | |||||
Increase (decrease) in net assets | (142,513,952 | ) | 186,929,947 | |||||
Net assets at beginning of period | 743,017,999 | 556,088,052 | ||||||
Net assets at end of period (including accumulated distributions in excess of net investment income of $99,880 and $99,880, respectively) | $ | 600,504,047 | $ | 743,017,999 |
The accompanying notes are an integral part of the financial statements.
Years Ended October 31, | |||||||||||||||||||||
Class A | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Selected Per Share Data | |||||||||||||||||||||
Net asset value, beginning of period | $ | 10.27 | $ | 10.14 | $ | 9.77 | $ | 10.25 | $ | 10.30 | |||||||||||
Income (loss) from investment operations: Net investment incomea | .17 | .17 | .28 | .33 | .33 | ||||||||||||||||
Net realized and unrealized gain (loss) | (.03 | ) | .13 | .37 | (.48 | ) | (.04 | ) | |||||||||||||
Total from investment operations | .14 | .30 | .65 | (.15 | ) | .29 | |||||||||||||||
Less distributions from: Net investment income | (.17 | ) | (.17 | ) | (.28 | ) | (.33 | ) | (.34 | ) | |||||||||||
Net asset value, end of period | $ | 10.24 | $ | 10.27 | $ | 10.14 | $ | 9.77 | $ | 10.25 | |||||||||||
Total Return (%)b | 1.42 | c | 3.03 | c | 6.72 | c | (1.53 | )c | 2.81 | ||||||||||||
Ratios to Average Net Assets and Supplemental Data | |||||||||||||||||||||
Net assets, end of period ($ millions) | 336 | 424 | 273 | 108 | 63 | ||||||||||||||||
Ratio of expenses before expense reductions (%) | .86 | .85 | .87 | .88 | .88 | ||||||||||||||||
Ratio of expenses after expense reductions (%) | .75 | .82 | .84 | .85 | .88 | ||||||||||||||||
Ratio of net investment income (%) | 1.71 | 1.70 | 2.71 | 3.23 | 3.25 | ||||||||||||||||
Portfolio turnover rate (%) | 26 | 24 | 30 | 33 | 39 | ||||||||||||||||
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c Total return would have been lower had certain expenses not been reduced. |
Years Ended October 31, | |||||||||||||||||||||
Class B | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Selected Per Share Data | |||||||||||||||||||||
Net asset value, beginning of period | $ | 10.27 | $ | 10.14 | $ | 9.77 | $ | 10.25 | $ | 10.30 | |||||||||||
Income (loss) from investment operations: Net investment incomea | .10 | .10 | .20 | .25 | .26 | ||||||||||||||||
Net realized and unrealized gain (loss) | (.03 | ) | .13 | .37 | (.48 | ) | (.05 | ) | |||||||||||||
Total from investment operations | .07 | .23 | .57 | (.23 | ) | .21 | |||||||||||||||
Less distributions from: Net investment income | (.10 | ) | (.10 | ) | (.20 | ) | (.25 | ) | (.26 | ) | |||||||||||
Net asset value, end of period | $ | 10.24 | $ | 10.27 | $ | 10.14 | $ | 9.77 | $ | 10.25 | |||||||||||
Total Return (%)b,c | .66 | 2.26 | 5.88 | (2.29 | ) | 2.07 | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data | |||||||||||||||||||||
Net assets, end of period ($ millions) | 1 | 1 | 1 | 3 | 3 | ||||||||||||||||
Ratio of expenses before expense reductions (%) | 1.67 | 1.67 | 1.76 | 1.69 | 1.69 | ||||||||||||||||
Ratio of expenses after expense reductions (%) | 1.50 | 1.58 | 1.59 | 1.60 | 1.60 | ||||||||||||||||
Ratio of net investment income (%) | .96 | .94 | 1.96 | 2.48 | 2.53 | ||||||||||||||||
Portfolio turnover rate (%) | 26 | 24 | 30 | 33 | 39 | ||||||||||||||||
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c Total return would have been lower had certain expenses not been reduced. |
Years Ended October 31, | |||||||||||||||||||||
Class C | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Selected Per Share Data | |||||||||||||||||||||
Net asset value, beginning of period | $ | 10.27 | $ | 10.13 | $ | 9.76 | $ | 10.25 | $ | 10.29 | |||||||||||
Income (loss) from investment operations: Net investment incomea | .10 | .10 | .20 | .25 | .25 | ||||||||||||||||
Net realized and unrealized gain (loss) | (.03 | ) | .14 | .37 | (.49 | ) | (.04 | ) | |||||||||||||
Total from investment operations | .07 | .24 | .57 | (.24 | ) | .21 | |||||||||||||||
Less distributions from: Net investment income | (.10 | ) | (.10 | ) | (.20 | ) | (.25 | ) | (.25 | ) | |||||||||||
Net asset value, end of period | $ | 10.24 | $ | 10.27 | $ | 10.13 | $ | 9.76 | $ | 10.25 | |||||||||||
Total Return (%)b | .66 | c | 2.35 | c | 5.90 | c | (2.40 | )c | 2.11 | ||||||||||||
Ratios to Average Net Assets and Supplemental Data | |||||||||||||||||||||
Net assets, end of period ($ millions) | 52 | 64 | 49 | 25 | 29 | ||||||||||||||||
Ratio of expenses before expense reductions (%) | 1.63 | 1.64 | 1.66 | 1.66 | 1.65 | ||||||||||||||||
Ratio of expenses after expense reductions (%) | 1.50 | 1.57 | 1.59 | 1.60 | 1.65 | ||||||||||||||||
Ratio of net investment income (%) | .96 | .95 | 1.96 | 2.48 | 2.47 | ||||||||||||||||
Portfolio turnover rate (%) | 26 | 24 | 30 | 33 | 39 | ||||||||||||||||
a Based on average shares outstanding during the period. b Total return does not reflect the effect of any sales charges. c Total return would have been lower had certain expenses not been reduced. |
Years Ended October 31, | |||||||||||||||||||||
Class S | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Selected Per Share Data | |||||||||||||||||||||
Net asset value, beginning of period | $ | 10.26 | $ | 10.13 | $ | 9.76 | $ | 10.24 | $ | 10.29 | |||||||||||
Income (loss) from investment operations: Net investment incomea | .19 | .19 | .30 | .35 | .36 | ||||||||||||||||
Net realized and unrealized gain (loss) | (.03 | ) | .13 | .37 | (.48 | ) | (.05 | ) | |||||||||||||
Total from investment operations | .16 | .32 | .67 | (.13 | ) | .31 | |||||||||||||||
Less distributions from: Net investment income | (.19 | ) | (.19 | ) | (.30 | ) | (.35 | ) | (.36 | ) | |||||||||||
Net asset value, end of period | $ | 10.23 | $ | 10.26 | $ | 10.13 | $ | 9.76 | $ | 10.24 | |||||||||||
Total Return (%)b | 1.57 | 3.17 | 6.96 | (1.32 | ) | 3.09 | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data | |||||||||||||||||||||
Net assets, end of period ($ millions) | 161 | 182 | 165 | 141 | 260 | ||||||||||||||||
Ratio of expenses before expense reductions (%) | .72 | .77 | .74 | .89 | .80 | ||||||||||||||||
Ratio of expenses after expense reductions (%) | .60 | .67 | .57 | .60 | .60 | ||||||||||||||||
Ratio of net investment income (%) | 1.86 | 1.85 | 2.98 | 3.48 | 3.53 | ||||||||||||||||
Portfolio turnover rate (%) | 26 | 24 | 30 | 33 | 39 | ||||||||||||||||
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. |
Years Ended October 31, | |||||||||||||||||||||
Institutional Class | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||
Selected Per Share Data | |||||||||||||||||||||
Net asset value, beginning of period | $ | 10.27 | $ | 10.14 | $ | 9.77 | $ | 10.25 | $ | 10.30 | |||||||||||
Income (loss) from investment operations: Net investment incomea | .20 | .20 | .30 | .35 | .36 | ||||||||||||||||
Net realized and unrealized gain (loss) | (.03 | ) | .13 | .37 | (.48 | ) | (.04 | ) | |||||||||||||
Total from investment operations | .17 | .33 | .67 | (.13 | ) | .32 | |||||||||||||||
Less distributions from: Net investment income | (.20 | ) | (.20 | ) | (.30 | ) | (.35 | ) | (.37 | ) | |||||||||||
Net asset value, end of period | $ | 10.24 | $ | 10.27 | $ | 10.14 | $ | 9.77 | $ | 10.25 | |||||||||||
Total Return (%) | 1.67 | b | 3.28 | b | 6.94 | b | (1.31 | )b | 3.11 | ||||||||||||
Ratios to Average Net Assets and Supplemental Data | |||||||||||||||||||||
Net assets, end of period ($ millions) | 51 | 72 | 66 | 75 | 94 | ||||||||||||||||
Ratio of expenses before expense reductions (%) | .59 | .59 | .60 | .60 | .58 | ||||||||||||||||
Ratio of expenses after expense reductions (%) | .50 | .57 | .58 | .60 | .58 | ||||||||||||||||
Ratio of net investment income (%) | 1.96 | 1.95 | 2.97 | 3.48 | 3.54 | ||||||||||||||||
Portfolio turnover rate (%) | 26 | 24 | 30 | 33 | 39 | ||||||||||||||||
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. |
A. Organization and Significant Accounting Policies
DWS Short-Term Municipal Bond Fund (the "Fund") is a diversified series of DWS Municipal Trust (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust. The Fund is the successor to DWS Short-Term Municipal Bond Fund, a series of DWS Advisor Funds (the "Predecessor Fund"). On February 1, 2011, the Predecessor Fund transferred all of its assets and liabilities to the Trust, while retaining the same fund name. The transaction had no material effect on an investment in the Fund. All financial and other information contained herein for periods prior to February 1, 2011, is that of the Predecessor Fund.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares of the Fund are closed to new purchases, except exchanges or the reinvestment of dividends or other distributions. Class B shares were offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not automatically convert into another class. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes. Class S shares are not subject to initial or contingent deferred sales charges and are generally not available to new investors except under certain circumstances.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution and service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Municipal debt securities are valued at prices supplied by independent pricing services approved by the Fund's Board, whose valuations are intended to reflect the mean between the bid and asked prices. If the pricing services are unable to provide valuations, the securities are valued at the mean of the most recent bid and asked quotations or evaluated prices, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. These securities are generally categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors used in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security's disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company's or issuer's financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold and with respect to debt securities; the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
New Accounting Pronouncement. In May 2011, Accounting Standards Update 2011-04 (ASU 2011-04), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, was issued and is effective during interim and annual periods beginning after December 15, 2011. ASU 2011-04 amends Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement. The amendments are the result of the work by the Financial Accounting Standards Board and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. Management is currently evaluating the application of ASU 2011-04 and its impact, if any, on the Fund's financial statements.
When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transaction from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable and tax-exempt income to its shareholders.
At October 31, 2011, the Fund had a net tax basis capital loss carryforward of approximately $15,505,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until October 31, 2012 ($1,898,000), October 31, 2013 ($711,000), October 31, 2015 ($631,000), October 31, 2016 ($5,651,000), October 31, 2017 ($5,603,000) and October 31, 2018 ($1,011,000), the respective expiration dates, whichever occurs first.
During the year ended October 31, 2011, the Fund utilized $555,000 and lost, through expiration, $1,471,000 of prior year capital loss carryforward.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the "Act") was enacted. Under the Act, net capital losses may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. As a result of this ordering rule, pre-enactment capital loss carryforwards may expire unused, whereas under the previous rules these losses may have been utilized. This change is effective for fiscal years beginning after the date of enactment.
The Fund has reviewed the tax positions for the open tax years as of October 31, 2011 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and is distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At October 31, 2011, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed tax-exempt income* | $ | 49,338 | ||
Capital loss carryforwards | $ | (15,505,000 | ) | |
Net unrealized appreciation (depreciation) on investments | $ | 10,853,379 |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
Years Ended October 31, | ||||||||
2011 | 2010 | |||||||
Tax-exempt income | $ | 11,062,384 | $ | 11,119,740 | ||||
Ordinary income* | $ | 1,046 | $ | 40,824 |
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions.
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for both tax and financial reporting purposes with the exception of securities in default of principal.
B. Purchases and Sales of Securities
During the year ended October 31, 2011, purchases and sales of investment securities (excluding short-term investments) aggregated $166,143,381 and $259,481,953 , respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:
First $500 million of the Fund's average daily net assets | .400 | % | ||
Next $500 million of such net assets | .385 | % | ||
Next $1.0 billion of such net assets | .370 | % | ||
Over $2.0 billion of such net assets | .355 | % |
For the period from November 1, 2010 through September 20, 2012, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class follows:
Class A | .75% |
Class B | 1.50% |
Class C | 1.50% |
Class S | .60% |
Institutional Class | .50% |
Accordingly, for the year ended October 31, 2011, the Advisor waived a portion of its management fee pursuant to the Investment Management Agreement aggregating $374,422, and the amount charged aggregated $2,191,981, which was equivalent to an annual effective rate of 0.34% of the Fund's average daily managed assets.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the year ended October 31, 2011, the Administration Fee was $650,340, of which $51,424 is unpaid.
Service Provider Fees. DWS Investments Service Company ("DISC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent of the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended October 31, 2011, the amounts charged to the Fund by DISC were as follows:
Services to Shareholders | Total Aggregated | Waived | ||||||
Class A | $ | 21,801 | $ | 21,801 | ||||
Class B | 486 | 486 | ||||||
Class C | 7,928 | 7,928 | ||||||
Class S | 73,953 | 73,953 | ||||||
Institutional Class | 2,187 | 2,187 | ||||||
$ | 106,355 | $ | 106,355 |
In addition, for the year ended October 31, 2011, the Advisor reimbursed the Fund $35,599 and $13,129 of non-affiliated sub-recordkeeping expenses for Class S and Institutional Class shares, respectively.
Distribution and Service Fees. Under the Fund's Class B and Class C 12b-1 Plans, DWS Investments Distributors, Inc. ("DIDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DIDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended October 31, 2011, the Distribution Fee was as follows:
Distribution Fee | Total Aggregated | Unpaid at October 31, 2011 | ||||||
Class B | $ | 6,145 | $ | 527 | ||||
Class C | 419,700 | 34,156 | ||||||
$ | 425,845 | $ | 34,683 |
In addition, DIDI provides information and administrative services for a fee ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets. DIDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended October 31, 2011, the Service Fee was as follows:
Service Fee | Total Aggregated | Waived | Unpaid at October 31, 2011 | Annual Effective Rate | ||||||||||||
Class A | $ | 903,454 | $ | 169,567 | $ | 151,539 | .20 | % | ||||||||
Class B | 2,046 | 421 | 391 | .20 | % | |||||||||||
Class C | 139,894 | 31,731 | 27,717 | .19 | % | |||||||||||
$ | 1,045,394 | $ | 201,719 | $ | 179,647 |
Underwriting Agreement and Contingent Deferred Sales Charge. DIDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the year ended October 31, 2011, aggregated $31,248.
In addition, DIDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C of the value of the shares redeemed. For the year ended October 31, 2011, the CDSC for Class B and C shares was $8,632 and $10,381, respectively. A deferred sales charge of up to 0.50% is assessed on certain redemptions of Class A shares. For the year ended October 31, 2011, DIDI received $81,233 for Class A shares.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended October 31, 2011, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $23,235, of which $8,524 is unpaid.
Trustees' Fees and Expenses. The Fund paid each Trustee not affiliated with the Advisor retainer fees plus specified amounts for various committee services and for the Board Chairperson.
D. Share Transactions
The following table summarizes share and dollar activity in the Fund:
Year Ended October 31, 2011 | Year Ended October 31, 2010 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Shares sold | ||||||||||||||||
Class A | 9,790,897 | $ | 99,986,622 | 25,183,685 | $ | 257,440,427 | ||||||||||
Class B | 15,239 | 155,363 | 30,868 | 314,493 | ||||||||||||
Class C | 981,439 | 10,029,902 | 2,567,884 | 26,234,397 | ||||||||||||
Class S | 7,372,117 | 75,158,018 | 8,235,167 | 84,070,282 | ||||||||||||
Institutional Class | 1,493,964 | 15,268,754 | 4,060,616 | 41,483,510 | ||||||||||||
$ | 200,598,659 | $ | 409,543,109 | |||||||||||||
Shares issued to shareholders in reinvestment of distributions | ||||||||||||||||
Class A | 489,527 | $ | 4,996,616 | 434,546 | $ | 4,448,955 | ||||||||||
Class B | 652 | 6,643 | 1,017 | 10,398 | ||||||||||||
Class C | 36,421 | 371,568 | 34,999 | 358,100 | ||||||||||||
Class S | 166,429 | 1,696,653 | 168,302 | 1,720,718 | ||||||||||||
Institutional Class | 62,116 | 633,853 | 100,692 | 1,030,370 | ||||||||||||
$ | 7,705,333 | $ | 7,568,541 | |||||||||||||
Shares redeemed | ||||||||||||||||
Class A | (18,766,149 | ) | $ | (191,372,882 | ) | (11,341,215 | ) | $ | (116,026,214 | ) | ||||||
Class B | (34,854 | ) | (356,068 | ) | (86,778 | ) | (886,666 | ) | ||||||||
Class C | (2,169,301 | ) | (22,094,684 | ) | (1,252,977 | ) | (12,834,195 | ) | ||||||||
Class S | (9,544,123 | ) | (97,223,288 | ) | (6,988,580 | ) | (71,381,361 | ) | ||||||||
Institutional Class | (3,578,322 | ) | (36,514,777 | ) | (3,682,884 | ) | (37,731,527 | ) | ||||||||
$ | (347,561,699 | ) | $ | (238,859,963 | ) | |||||||||||
Net increase (decrease) | ||||||||||||||||
Class A | (8,485,725 | ) | $ | (86,389,644 | ) | 14,277,016 | $ | 145,863,168 | ||||||||
Class B | (18,963 | ) | (194,062 | ) | (54,893 | ) | (561,775 | ) | ||||||||
Class C | (1,151,441 | ) | (11,693,214 | ) | 1,349,906 | 13,758,302 | ||||||||||
Class S | (2,005,577 | ) | (20,368,617 | ) | 1,414,889 | 14,409,639 | ||||||||||
Institutional Class | (2,022,242 | ) | (20,612,170 | ) | 478,424 | 4,782,353 | ||||||||||
$ | (139,257,707 | ) | $ | 178,251,687 |
E. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $450 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at October 31, 2011.
To the Trustees of DWS Municipal Trust and Shareholders of DWS Short-Term Municipal Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of DWS Short-Term Municipal Bond Fund (the "Fund") at October 31, 2011, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2011 by correspondence with the custodian and brokers provide a reasonable basis for our opinion.
Boston, Massachusetts December 22, 2011 | PricewaterhouseCoopers LLP |
Of the dividends paid from net investment income for the taxable year ended October 31, 2011, 100% are designated as exempt interest dividends for federal income tax purposes.
Please contact a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 621-1048.
The Board of Trustees, including the Independent Trustees, approved the renewal of your Fund's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DWS") in September 2011.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
• In September 2011, all of the Fund's Trustees were independent of DWS and its affiliates.
• The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Fixed Income and Quant Oversight Committee, reviewed comprehensive materials received from DWS, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by the Fund's independent fee consultant. The Board also received extensive information throughout the year regarding performance of the Fund.
• The Independent Trustees regularly meet privately with their independent counsel to discuss contract review and other matters. In addition, the Independent Trustees were also advised by the Fund's independent fee consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the independent fee consultant in connection with their deliberations (the "IFC Report").
• In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements.
• Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board, which consists of all Independent Trustees. The Board then reviewed the Contract Committee's findings and recommendations.
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DWS and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DWS managed the Fund, and that the Agreement was approved by the Fund's shareholders. DWS is part of Deutsche Bank, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are significant advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.
While shareholders may focus primarily on fund performance and fees, the Fund's Board considers these and many other factors, including the quality and integrity of DWS's personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DWS provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DWS provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DWS to attract and retain high-quality personnel, and the organizational depth and stability of DWS. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the independent fee consultant using information supplied by Lipper Inc. ("Lipper"). The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DWS regarding such funds, along with DWS's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2010, the Fund's performance (Class A shares) was in the 2nd quartile, 4th quartile and 4th quartile, respectively, of the applicable Lipper universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one-year period and has underperformed its benchmark in the three- and five-year periods ended December 31, 2010.
On the basis of this evaluation and the ongoing review of investment results by the Board, the Board concluded that the nature, quality and extent of services provided by DWS historically have been and continue to be satisfactory.
Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses, and total expense ratios, and comparative information provided by Lipper and the independent fee consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DWS under the Fund's administrative services agreement, were higher than the median (3rd quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2010). The Board noted that the Fund's Class A shares total (net) operating expenses (excluding 12b-1 fees) were expected to be higher than the median (4th quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2010, and analyzing Lipper expense universe Class A expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DWS and certain of its affiliates for comparable mutual funds and considered differences in fund and fee structures between the DWS Funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DWS helped to ensure that the Fund's total (net) operating expenses would remain competitive.
The information considered by the Board as part of their review of management fees included information regarding fees charged by DWS and its affiliates to similar institutional accounts and to similar funds offered primarily to European investors ("DWS Europe funds"), in each case as applicable. The Board observed that advisory fee rates for institutional accounts generally were lower than the management fees charged by similarly managed DWS U.S. mutual funds ("DWS Funds"), but also took note of the differences in services provided to DWS Funds as compared to institutional accounts. In the case of DWS Europe funds, the Board observed that fee rates for DWS Europe funds generally were higher than for similarly managed DWS Funds, but noted that differences in the types of services provided to DWS Funds relative to DWS Europe funds made it difficult to compare such fees.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DWS.
Profitability. The Board reviewed detailed information regarding revenues received by DWS under the Agreement. The Board considered the estimated costs and pre-tax profits realized by DWS from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DWS and its affiliates with respect to all fund services in totality and by fund. The Board and the independent fee consultant reviewed DWS's methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DWS in connection with the management of the Fund were not unreasonable. The Board also reviewed information regarding the profitability of certain similar investment management firms. The Board noted that while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DWS and its affiliates' overall profitability with respect to the DWS fund complex (after taking into account distribution and other services provided to the funds by DWS and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DWS of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DWS and Its Affiliates. The Board also considered the character and amount of other incidental benefits received by DWS and its affiliates, including any fees received by DWS for administrative services provided to the Fund and any fees received by an affiliate of DWS for distribution services. The Board also considered benefits to DWS related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities, along with the incidental public relations benefits to DWS related to DWS Funds advertising and cross-selling opportunities among DWS products and services. The Board concluded that management fees were reasonable in light of these fallout benefits.
Compliance. The Board considered the significant attention and resources dedicated by DWS to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of both DWS's chief compliance officer and the Fund's chief compliance officer; (ii) the large number of DWS compliance personnel; and (iii) the substantial commitment of resources by DWS and its affiliates to compliance matters.
Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and their counsel present. It is possible that individual Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
September 26, 2011
Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Funds (formerly the DWS Scudder Funds). My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2011, including my qualifications, the evaluation process for each of the DWS Funds, consideration of certain complex-level factors, and my conclusions. I served in substantially the same capacity in 2007, 2008, 2009 and 2010.
Qualifications
For more than 35 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.
Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past ten years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.
I hold a Master of Business Administration degree, with highest honors, from Harvard University and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds and have served in various leadership and financial oversight capacities with non-profit organizations.
Evaluation of Fees for each DWS Fund
My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 109 mutual fund portfolios in the DWS Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).
In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper and Morningstar databases and drew on my industry knowledge and experience.
To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.
In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.
Fees and Expenses Compared with Other Funds
The competitive fee and expense evaluation for each fund focused on two primary comparisons:
The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.
The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.
These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.
DeAM's Fees for Similar Services to Others
DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Fund. These similar products included the other DWS Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.
Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.
Costs and Profit Margins
DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.
Economies of Scale
Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Fund compares with this industry observation, I reviewed:
The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.
Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.
How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.
Quality of Service — Performance
The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.
In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.
I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.
Complex-Level Considerations
While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:
I reviewed DeAM's profitability analysis for all DWS Funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.
I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.
I considered how aggregated DWS Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.
I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.
Findings
Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Funds are reasonable.
![](https://capedge.com/proxy/N-CSR/0000088053-12-000018/sigmack0.gif)
Thomas H. Mack
President, Thomas H. Mack & Co., Inc.
The following table presents certain information regarding the Board Members and Officers of the fund as of October 31, 2011. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Paul K. Freeman, Independent Chairman, DWS Funds, PO Box 101833, Denver, CO 80250-1833. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex. The Length of Time Served represents the year in which the Board Member joined the Board of one or more DWS funds now overseen by the Board.
Independent Board Members | |||
Name, Year of Birth, Position with the Fund and Length of Time Served1 | Business Experience and Directorships During the Past Five Years | Number of Funds in DWS Fund Complex Overseen | Other Directorships Held by Board Member |
Paul K. Freeman (1950) Chairperson since 2009 Board Member since 1993 | Consultant, World Bank/Inter-American Development Bank; Executive and Governing Council of the Independent Directors Council (education committees); formerly: Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998) | 112 | — |
John W. Ballantine (1946) Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: Chairman of the Board, Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company); Stockwell Capital Investments PLC (private equity); former Directorships: First Oak Brook Bancshares, Inc. and Oak Brook Bank; Prisma Energy International | 112 | — |
Henry P. Becton, Jr. (1943) Board Member since 1990 | Vice Chair and former President, WGBH Educational Foundation. Directorships: Association of Public Television Stations; Public Radio International; Public Radio Exchange (PRX); The PBS Foundation; former Directorships: Boston Museum of Science; American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service | 112 | Lead Director, Becton Dickinson and Company2 (medical technology company); Lead Director, Belo Corporation2 (media company) |
Dawn-Marie Driscoll (1946) Board Member since 1987 | President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley University; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley University; Trustee, Southwest Florida Community Foundation (charitable organization); former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 112 | Trustee, Sun Capital Advisers, Inc. (22 open-end mutual funds advised by Sun Capital Advisers, Inc.) (since 2007) |
Keith R. Fox, CFA (1954) Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); BoxTop Media Inc. (advertising); The Kennel Shop (retailer); former Chairman, National Association of Small Business Investment Companies | 112 | Trustee, Sun Capital Advisers, Inc. (22 open-end mutual funds advised by Sun Capital Advisers, Inc.) (since 2011) |
Kenneth C. Froewiss (1945) Board Member since 2001 | Adjunct Professor of Finance, NYU Stern School of Business (September 2009-present; Clinical Professor from 1997-September 2009); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996) | 112 | — |
Richard J. Herring (1946) Board Member since 1990 | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center (since July 2000); Co-Chair, U.S. Shadow Financial Regulatory Committee; Executive Director, Financial Economists Roundtable; formerly: Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (July 2000-June 2006) | 112 | Director, Japan Equity Fund, Inc. (since September 2007), Thai Capital Fund, Inc. (since September 2007), Singapore Fund, Inc. (since September 2007), Independent Director of Barclays Bank Delaware (since September 2010) |
William McClayton (1944) Board Member since 2004 | Private equity investor (since October 2009); previously, Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001-2009); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966-2001); Trustee, Ravinia Festival | 112 | — |
Rebecca W. Rimel (1951) Board Member since 1995 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001-2007); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983-2004); Board Member, Investor Education (charitable organization) (2004-2005); Trustee, Pro Publica (charitable organization) (2007-2010) | 112 | Director, CardioNet, Inc. (health care) (2009- present); Director, Viasys Health Care2 (January 2007- June 2007) |
William N. Searcy, Jr. (1946) Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989-September 2003) | 112 | Trustee, Sun Capital Advisers, Inc. (22 open-end mutual funds advised by Sun Capital Advisers, Inc.) (since 1998) |
Jean Gleason Stromberg (1943) Board Member since 1997 | Retired. Formerly, Consultant (1997-2001); Director, Financial Markets US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; former Directorships: Service Source, Inc., Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996) | 112 | — |
Robert H. Wadsworth (1940) Board Member since 1999 | President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present); Director, The Phoenix Boys Choir Association | 115 | — |
Officers4 | |
Name, Year of Birth, Position with the Fund and Length of Time Served5 | Principal Occupation(s) During Past 5 Years and Other Directorships Held |
W. Douglas Beck, CFA9 (1967) President, 2011-present | Managing Director3, Deutsche Asset Management (2006-present); President of DWS family of funds and Head of Product Management, U.S. for DWS Investments; formerly, Executive Director, Head of Product Management (2002-2006) and President (2005-2006) of the UBS Funds at UBS Global Asset Management; Co-Head of Manager Research/Managed Solutions Group, Merrill Lynch (1998-2002) |
John Millette7 (1962) Vice President and Secretary, 1999-present | Director3, Deutsche Asset Management |
Paul H. Schubert6 (1963) Chief Financial Officer, 2004-present Treasurer, 2005-present | Managing Director3, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998) |
Caroline Pearson7 (1962) Chief Legal Officer, 2010-present | Managing Director3, Deutsche Asset Management; formerly, Assistant Secretary for DWS family of funds (1997-2010) |
Rita Rubin8 (1970) Assistant Secretary, 2009-present | Director3 and Senior Counsel, Deutsche Asset Management (since October 2007); formerly, Vice President, Morgan Stanley Investment Management (2004-2007) |
Paul Antosca7 (1957) Assistant Treasurer, 2007-present | Director3, Deutsche Asset Management (since 2006); Vice President, The Manufacturers Life Insurance Company (U.S.A.) (1990-2006) |
Jack Clark7 (1967) Assistant Treasurer, 2007-present | Director3, Deutsche Asset Management (since 2007); formerly, Vice President, State Street Corporation (2002-2007) |
Diane Kenneally7 (1966) Assistant Treasurer, 2007-present | Director3, Deutsche Asset Management |
John Caruso8 (1965) Anti-Money Laundering Compliance Officer, 2010-present | Managing Director3, Deutsche Asset Management |
Robert Kloby8 (1962) Chief Compliance Officer, 2006-present | Managing Director3, Deutsche Asset Management |
1 The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board.
2 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
3 Executive title, not a board directorship.
4 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the fund.
5 The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds.
6 Address: 100 Plaza One, Jersey City, NJ 07311.
7 Address: One Beacon Street, Boston, MA 02108.
8 Address: 60 Wall Street, New York, NY 10005.
9 Address: 345 Park Avenue, New York, NY 10154.
The fund's Statement of Additional Information ("SAI") includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 621-1048.
For More Information | The automated telephone system allows you to access personalized account information and obtain information on other DWS funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system. For more information, contact your financial advisor. You may also access our automated telephone system or speak with a DWS Investments representative by calling the appropriate number below: For shareholders of Classes A, B, C and Institutional Class: (800) 621-1048 For shareholders of Class S: (800) 728-3337 | |
Web Site | www.dws-investments.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more. | |
Written Correspondence | DWS Investments PO Box 219151 Kansas City, MO 64121-9151 | |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048. | |
Principal Underwriter | If you have questions, comments or complaints, contact: DWS Investments Distributors, Inc. 222 South Riverside Plaza Chicago, IL 60606-5808 (800) 621-1148 |
Class A | Class B | Class C | Class S | Institutional Class | ||
Nasdaq Symbol | SRMAX | SRMBX | SRMCX | SRMSX | MGSMX | |
CUSIP Number | 23337W 840 | 23337W 832 | 23337W 824 | 23337W 816 | 23337W 790 | |
Fund Number | 436 | 636 | 736 | 2336 | 536 |
![](https://capedge.com/proxy/N-CSR/0000088053-12-000018/stmb_backcover0.jpg)
ITEM 2. | CODE OF ETHICS |
As of the end of the period covered by this report, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer. There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2. A copy of the code of ethics is filed as an exhibit to this Form N-CSR. | |
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
The fund’s audit committee is comprised solely of trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The fund’s Board of Trustees has determined that there are several "audit committee financial experts" (as such term has been defined by the Regulations) serving on the fund’s audit committee including Mr. William McClayton, the chair of the fund’s audit committee. An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an “audit committee financial expert” does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. | |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
DWS SHORT-TERM MUNICIPAL BOND FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
Fiscal Year Ended October 31, | Audit Fees Billed to Fund | Audit-Related Fees Billed to Fund | Tax Fees Billed to Fund | All Other Fees Billed to Fund | ||||||||||||
2011 | $ | 66,371 | $ | 0 | $ | 0 | $ | 0 | ||||||||
2010 | $ | 66,371 | $ | 0 | $ | 0 | $ | 0 |
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
Fiscal Year Ended October 31, | Audit-Related Fees Billed to Adviser and Affiliated Fund Service Providers | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All Other Fees Billed to Adviser and Affiliated Fund Service Providers | |||||||||
2011 | $ | 0 | $ | 0 | $ | 0 | ||||||
2010 | $ | 7,500 | $ | 0 | $ | 0 |
The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.
Fiscal Year Ended October 31, | Total Non-Audit Fees Billed to Fund (A) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund) (B) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements) (C) | Total of (A), (B) and (C) | ||||||||||||
2011 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
2010 | $ | 0 | $ | 0 | $ | 100,000 | $ | 100,000 |
All other engagement fees were billed for services in connection with an internal control review of a subadvisor.
Audit Committee Pre-Approval Policies and Procedures. Generally, each Fund’s Audit Committee must pre approve (i) all services to be performed for a Fund by a Fund’s Independent Registered Public Accounting Firm and (ii) all non-audit services to be performed by a Fund’s Independent Registered Public Accounting Firm for the DIMA Entities with respect to operations and financial reporting of the Fund, except that the Chairperson or Vice Chairperson of each Fund’s Audit Committee may grant the pre-approval for non-audit services described in items (i) and (ii) above for non-prohibited services for engagements of less than $100,000. All such delegated pre approvals shall be presented to each Fund’s Audit Committee no later than the next Audit Committee meeting.
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
According to the registrant’s principal Independent Registered Public Accounting Firm, all of the principal Independent Registered Public Accounting Firm's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal Independent Registered Public Accounting Firm.
***
PwC advised the Fund's Audit Committee that it had identified one matter that it determined could be inconsistent with the SEC's auditor independence rules (Rule 2-01(c) of Regulation S-X). As part of a "Global Migration Support" engagement in which PwC's UK network affiliate ("PwC-UK") provided assistance to Deutsche Bank ("DB") with respect to processing internship applications for DB employees seeking short term assignments with DB in the UK, PwC-UK paid application fees on behalf of DB for six applicants at 170 pounds each (1,020 pounds in total). PwC advised the Committee that it believes that this matter did not affect its objectivity or its impartial judgment in conducting its audit and issuing a report on the financial statements of the Fund as the Fund's independent auditor and confirmed its independence under the SEC’s auditor independence rules. In reaching this conclusion, PwC noted that the engagement team was not aware of the payment of the application fees by PwC-UK and that DB reimbursed PwC-UK for the fees.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS | |
Not applicable | ||
ITEM 6. | SCHEDULE OF INVESTMENTS | |
Not applicable | ||
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES | |
Not applicable | ||
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES | |
Not applicable | ||
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS | |
Not applicable | ||
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | |
There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Paul K. Freeman, Independent Chairman, DWS Funds, P.O. Box 101833, Denver, CO 80250-1833. | ||
ITEM 11. | CONTROLS AND PROCEDURES | |
(a) | The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. | |
(b) | There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. | |
ITEM 12. | EXHIBITS | |
(a)(1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. | |
(a)(2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. | |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
Form N-CSR Item F
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.
Registrant: | DWS Short-Term Municipal Bond Fund, a series of DWS Municipal Trust |
By: | /s/W. Douglas Beck W. Douglas Beck President |
Date: | December 28, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/W. Douglas Beck W. Douglas Beck President |
Date: | December 28, 2011 |
By: | /s/Paul Schubert Paul Schubert Chief Financial Officer and Treasurer |
Date: | December 28, 2011 |