UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSRS
Investment Company Act file number: 811-02671
Deutsche 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: (212) 250-3220
Paul Schubert
60 Wall Street
New York, NY 10005
(Name and Address of Agent for Service)
| Date of fiscal year end: | 5/31 |
| Date of reporting period: | 11/30/2016 |
| ITEM 1. | REPORT TO STOCKHOLDERS |
November 30, 2016
Semiannual Report
to Shareholders
Deutsche Strategic High Yield Tax-Free Fund
Contents
3 Letter to Shareholders 5 Performance Summary 9 Portfolio Management Team 9 Portfolio Summary 12 Investment Portfolio 38 Statement of Assets and Liabilities 40 Statement of Operations 41 Statement of Cash Flows 42 Statements of Changes in Net Assets 43 Financial Highlights 47 Notes to Financial Statements 58 Information About Your Fund's Expenses 60 Advisory Agreement Board Considerations and Fee Evaluation 65 Account Management Resources 67 Privacy Statement |
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, credit, liquidity and market risks to varying degrees. 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. Investments in lower-quality ("junk bonds") and non-rated securities present greater risk of loss than investments in higher-quality securities. The fund invests in inverse floaters, which are derivatives that involve leverage and could magnify the fund's gains or losses. Although the fund seeks income that is exempt from federal income taxes, 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.
Deutsche Asset Management represents the asset management activities conducted by Deutsche Bank AG or any of its subsidiaries.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Letter to Shareholders
Dear Shareholder:
Today’s low-return investment environment — punctuated by periods of short-term volatility and plenty of opinions in the financial media — can be a challenge for those of us just trying to keep our portfolios moving forward.
Let’s face it: a report about the obstacles to economic growth grabs more attention than an article about the slow, steady improvement of the economy. The fact is, we continue to see the U.S. economy remaining on a moderate expansionary path. Although net exports are still challenged by modest global growth, most metrics suggest the labor market here at home continues to heal, which, along with low interest rates, is supporting the consumer.
Is action necessary? Numerous studies have found that acting impulsively on negative financial news can actually reduce your overall investment returns over time. That’s because there is a good chance you’ll miss the gains to be achieved if the market or a specific security recovers from a brief setback. So, assuming you have built your portfolio based on long-term needs and an honest assessment of your risk tolerance, short-term fluctuations should not cause an extreme level of worry.
As a global asset manager with decades of experience in helping investors through multiple market cycles, we want you to know and trust that our global intelligence, expertise and resources are here to support you. As always, we appreciate the opportunity to help you meet your goals.
Best regards,
 |
Brian Binder President, Deutsche Funds |
Assumptions, estimates and opinions contained in this document constitute our judgment as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results.
Performance Summary November 30, 2016 (Unaudited)
| Class A | 6-Month‡ | 1-Year | 5-Year | 10-Year |
| Average Annual Total Returns as of 11/30/16 | ||||
| Unadjusted for Sales Charge | –3.13% | 0.98% | 4.50% | 3.99% |
| Adjusted for the Maximum Sales Charge (max 2.75% load) | –5.80% | –1.80% | 3.92% | 3.70% |
| Bloomberg Barclays Municipal Bond Index† | –3.52% | –0.22% | 3.43% | 4.09% |
| Average Annual Total Returns as of 9/30/16 (most recent calendar quarter end) | ||||
| Unadjusted for Sales Charge | 7.18% | 5.60% | 4.65% | |
| Adjusted for the Maximum Sales Charge (max 2.75% load) | 4.23% | 5.01% | 4.36% | |
| Bloomberg Barclays Municipal Bond Index† | 5.58% | 4.48% | 4.75% | |
| Class C | 6-Month‡ | 1-Year | 5-Year | 10-Year |
| Average Annual Total Returns as of 11/30/16 | ||||
| Unadjusted for Sales Charge | –3.42% | 0.30% | 3.73% | 3.22% |
| Adjusted for the Maximum Sales Charge (max 1.00% CDSC) | –4.37% | 0.30% | 3.73% | 3.22% |
| Bloomberg Barclays Municipal Bond Index† | –3.52% | –0.22% | 3.43% | 4.09% |
| Average Annual Total Returns as of 9/30/16 (most recent calendar quarter end) | ||||
| Unadjusted for Sales Charge | 6.29% | 4.80% | 3.86% | |
| Adjusted for the Maximum Sales Charge (max 1.00% CDSC) | 6.29% | 4.80% | 3.86% | |
| Bloomberg Barclays Municipal Bond Index† | 5.58% | 4.48% | 4.75% | |
| Class S | 6-Month‡ | 1-Year | 5-Year | 10-Year |
| Average Annual Total Returns as of 11/30/16 | ||||
| No Sales Charges | –3.00% | 1.23% | 4.77% | 4.25% |
| Bloomberg Barclays Municipal Bond Index† | –3.52% | –0.22% | 3.43% | 4.09% |
| Average Annual Total Returns as of 9/30/16 (most recent calendar quarter end) | ||||
| No Sales Charges | 7.44% | 5.86% | 4.90% | |
| Bloomberg Barclays Municipal Bond Index† | 5.58% | 4.48% | 4.75% | |
| Institutional Class | 6-Month‡ | 1-Year | 5-Year | 10-Year |
| Average Annual Total Returns as of 11/30/16 | ||||
| No Sales Charges | –2.99% | 1.24% | 4.75% | 4.26% |
| Bloomberg Barclays Municipal Bond Index† | –3.52% | –0.22% | 3.43% | 4.09% |
| Average Annual Total Returns as of 9/30/16 (most recent calendar quarter end) | ||||
| No Sales Charges | 7.44% | 5.86% | 4.92% | |
| Bloomberg Barclays Municipal Bond Index† | 5.58% | 4.48% | 4.75% | |
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 deutschefunds.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 October 1, 2016 are 0.97%, 1.73%, 0.78% and 0.75% for Class A, 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 taxes and the alternative minimum tax.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
| Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) |
■ Deutsche Strategic High Yield Tax-Free Fund — Class A ■ Bloomberg Barclays Municipal Bond Index† |
 |
| Yearly periods ended November 30 |
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 2.75%. This results in a net initial investment of $9,725.
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 Bloomberg Barclays Municipal Bond Index is an unmanaged, market-value-weighted measure of municipal bonds issued across the United States. Index issues have a credit rating of at least Baa and a maturity of at least two years.
‡ Total returns shown for periods less than one year are not annualized.
| Class A | Class C | Class S | Institutional Class | |
| Net Asset Value | ||||
| 11/30/16 | $ 11.96 | $ 11.97 | $ 11.97 | $ 11.97 |
| 5/31/16 | $ 12.59 | $ 12.59 | $ 12.60 | $ 12.60 |
| Distribution Information as of 11/30/16 | ||||
| Income Dividends, Six Months | $ .25 | $ .20 | $ .26 | $ .26 |
| November Income Dividend | $ .0398 | $ .0322 | $ .0424 | $ .0424 |
| SEC 30-day Yield‡‡ | 2.33% | 1.64% | 2.66% | 2.66% |
| Tax Equivalent Yield‡‡ | 4.12% | 2.90% | 4.70% | 4.70% |
| Current Annualized Distribution Rate‡‡ | 3.99% | 3.23% | 4.25% | 4.25% |
‡‡ The SEC yield is net investment income per share earned over the month ended November 30, 2016 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 yield would have been 2.28%, 1.57%, 2.51% and 2.59% for Classes A, C, S and Institutional shares, respectively, had certain expenses not been reduced. Tax equivalent yield is based on the Fund's yield and a marginal federal income rate of 43.4%. Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value on November 30, 2016. Distribution rate simply measures the level of dividends and is not a complete measure of performance. The current annualized distribution rate would have been 3.94%, 3.16%, 4.10% and 4.18% for Classes A, C, S and Institutional shares, respectively, had certain expenses not been reduced. Yields and distribution rates are historical, not guaranteed and will fluctuate.
Portfolio Management Team
Rebecca L. Flinn, Director
Co-Lead Portfolio Manager of the fund. Began managing the fund in 1998.
— Joined Deutsche Asset Management in 1986.
— BA, University of Redlands, California.
A. Gene Caponi, CFA, Managing Director
Co-Lead Portfolio Manager of the fund. Began managing the fund in 2009.
— Joined Deutsche Asset Management in 1998.
— BS, State University of New York, Oswego; MBA, State University of New York at Albany.
Ashton P. Goodfield, CFA, Managing Director
Co-Lead Portfolio Manager of the fund. Began managing the fund in 2014.
— Joined Deutsche Asset Management in 1986.
— Co-Head of Municipal Bonds.
— BA, Duke University.
Carol L. Flynn, CFA, Managing Director
Co-Lead Portfolio Manager of the fund. Began managing the fund in 2014.
— Joined Deutsche Asset Management in 1994.
— Co-Head of Municipal Bonds.
— BS from Duke University; MBA from University of Connecticut.
Portfolio Summary (Unaudited)
Investment Portfolio as of November 30, 2016 (Unaudited)
| Principal Amount ($) | Value ($) | ||
| Municipal Bonds and Notes 95.7% | |||
| Arizona 0.7% | |||
| Arizona, Salt Verde Financial Corp., Gas Revenue, 5.25%, 12/1/2025, GTY: Citigroup, Inc. | 4,000,000 | 4,546,520 | |
| Maricopa County, AZ, Pollution Control Corp. Revenue, El Paso Electric Co. Project, Series B, 7.25%, 4/1/2040 | 3,930,000 | 4,374,129 | |
| Tempe, AZ, Industrial Development Authority Revenue, Tempe Life Care Village, Inc.: | |||
| Series A, 6.25%, 12/1/2042 | 1,535,000 | 1,631,552 | |
| Series A, 6.25%, 12/1/2046 | 1,400,000 | 1,486,142 | |
| 12,038,343 | |||
| California 9.8% | |||
| California, Golden State Tobacco Securitization Corp., Tobacco Settlement, Series A-1, 5.75%, 6/1/2047 | 10,000,000 | 9,150,400 | |
| California, M-S-R Energy Authority, Series B, 7.0%, 11/1/2034, GTY: Citigroup, Inc. | 8,750,000 | 11,536,612 | |
| California, Metropolitan Water District of Southern California, Series D, 0.51%**, 7/1/2035 | 1,000,000 | 1,000,000 | |
| California, Morongo Band of Mission Indians, Enterprise Casino Revenue, Series B, 144A, 6.5%, 3/1/2028 | 5,000,000 | 5,259,150 | |
| California, State General Obligation: | |||
| 5.0%, 8/1/2034 | 5,185,000 | 5,441,657 | |
| 5.5%, 3/1/2040 | 5,130,000 | 5,670,651 | |
| California, State General Obligation, Various Purposes: | |||
| 5.0%, 11/1/2032 | 3,840,000 | 3,953,626 | |
| Prerefunded, 5.0%, 11/1/2032 | 6,160,000 | 6,395,127 | |
| 5.75%, 4/1/2031 | 23,360,000 | 25,586,442 | |
| California, State Health Facilities Financing Authority Revenue, Children's Hospital, Series C, 0.55%**, 11/1/2038, GTY: Children's Healthcare of California, LOC: U.S. Bank NA | 470,000 | 470,000 | |
| California, State Public Works Board, Lease Revenue, Series B, 5.0%, 10/1/2039 | 5,500,000 | 6,104,670 | |
| California, State Public Works Board, Lease Revenue, Capital Projects: | |||
| Series A-1, 6.0%, 3/1/2035 | 10,175,000 | 11,464,579 | |
| Series I-1, Prerefunded, 6.375%, 11/1/2034 | 5,000,000 | 5,706,450 | |
| California, Statewide Communities Development Authority Revenue, Loma Linda University Medical Center: | |||
| Series A, 5.25%, 12/1/2044 | 1,305,000 | 1,322,865 | |
| Series A, 144A, 5.25%, 12/1/2056 | 5,515,000 | 5,589,122 | |
| Series A, 5.5%, 12/1/2054 | 1,305,000 | 1,341,540 | |
| California, Statewide Communities Development Authority Revenue, Terraces At San Joaquin Gardens Project: | |||
| Series A, 5.625%, 10/1/2032 | 500,000 | 523,465 | |
| Series A, 6.0%, 10/1/2042 | 1,000,000 | 1,056,210 | |
| Series A, 6.0%, 10/1/2047 | 1,000,000 | 1,054,520 | |
| Long Beach, CA, Bond Finance Authority, Natural Gas Purchase Revenue, Series A, 5.25%, 11/15/2023, GTY: Merrill Lynch & Co., Inc. | 620,000 | 689,719 | |
| Los Angeles, CA, Department of Airports Revenue, Series A, AMT, 5.0%, 5/15/2042 | 1,875,000 | 2,018,363 | |
| Rancho, CA, Water District Community Facilities District No. 89-5, Special Tax, 0.5%**, 9/1/2028, LOC: Wells Fargo Bank NA | 1,215,000 | 1,215,000 | |
| Riverside County, CA, Transportation Commission Toll Revenue Senior Lien, Series A, 5.75%, 6/1/2048 | 2,850,000 | 3,157,173 | |
| San Bernardino County, CA, Multi-Family Housing Mortgage Revenue, Mortgage Mountain View Apartments LLC, Series A, 0.5%**, 2/15/2027, LIQ: Fannie Mae, LOC: Fannie Mae | 200,000 | 200,000 | |
| San Buenaventura, CA, Community Memorial Health Systems, 7.5%, 12/1/2041 | 3,250,000 | 3,780,335 | |
| San Diego, CA, Community College District, Election of 2006, Prerefunded, 5.0%, 8/1/2036 | 2,050,000 | 2,341,817 | |
| San Francisco, CA, City & County Airports Commission, International Airport Revenue, Series A, AMT, 5.0%, 5/1/2044 | 11,000,000 | 11,685,300 | |
| San Francisco, CA, City & County Public Utilities Commission, Water Revenue, Series A, Prerefunded, 5.125%, 11/1/2039 | 10,400,000 | 11,505,312 | |
| San Francisco, CA, City & County Redevelopment Agency, Maria Manor Apartments, Series F, AMT, 0.73%**, 12/1/2033, LOC: Citibank NA | 900,000 | 900,000 | |
| San Francisco, CA, City & County Redevelopment Financing Authority, Tax Allocation, Mission Bay South Redevelopment, Series D, Prerefunded, 7.0%, 8/1/2041 | 1,400,000 | 1,694,966 | |
| San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue, Series A, 5.0%, 1/15/2050 | 3,555,000 | 3,718,246 | |
| University of California, State Revenues, Series K, 4.0%, 5/15/2037 | 10,000,000 | 10,173,400 | |
| Vernon, CA, Electric Systems Revenue, Series A, 5.5%, 8/1/2041 | 2,240,000 | 2,453,987 | |
| 164,160,704 | |||
| Colorado 1.8% | |||
| Colorado, E-470 Public Highway Authority Revenue, Series C, 5.375%, 9/1/2026 | 2,000,000 | 2,165,700 | |
| Colorado, Health Facilities Authority Revenue, Christian Living Communities Project, Series A, 5.75%, 1/1/2037 | 1,000,000 | 1,004,160 | |
| Colorado, Health Facilities Authority Revenue, Valley View Hospital Association, 5.75%, 5/15/2036 | 2,000,000 | 2,084,880 | |
| Colorado, Park Creek Metropolitan District Revenue, Senior Ltd. Property Tax Supported, Series A, 5.0%, 12/1/2045 | 1,765,000 | 1,858,439 | |
| Colorado, Public Energy Authority, Natural Gas Purchased Revenue, 6.25%, 11/15/2028, GTY: Merrill Lynch & Co., Inc. | 6,365,000 | 7,528,968 | |
| Colorado, Regional Transportation District, Private Activity Revenue, Denver Transit Partners, 6.0%, 1/15/2041 | 2,000,000 | 2,223,100 | |
| Colorado, State Health Facilities Authority Revenue, Christian Living Community, 6.375%, 1/1/2041 | 1,615,000 | 1,745,960 | |
| Colorado, State Health Facilities Authority Revenue, Covenant Retirement Communities: | |||
| Series A, 5.0%, 12/1/2033 | 4,835,000 | 5,030,527 | |
| Series A, 5.0%, 12/1/2035 | 2,500,000 | 2,638,100 | |
| Colorado, State Health Facilities Authority, Hospital Revenue, Christian Living Neighborhoods Project, 5.0%, 1/1/2037 | 1,000,000 | 1,005,250 | |
| Denver, CO, Convention Center Hotel Authority Revenue, 5.0%, 12/1/2040 | 1,060,000 | 1,109,269 | |
| Montrose, CO, Memorial Hospital Revenue, 6.375%, 12/1/2023 | 2,355,000 | 2,365,103 | |
| 30,759,456 | |||
| Connecticut 1.8% | |||
| Connecticut, Harbor Point Infrastructure Improvement District, Special Obligation Revenue, Harbor Point Project, Series A, 7.875%, 4/1/2039 | 20,000,000 | 22,551,000 | |
| Connecticut, Mashantucket Western Pequot Tribe Bond, 6.05%, 7/1/2031* (PIK) | 16,835,270 | 655,734 | |
| Connecticut, Mohegan Tribe Indians Gaming Authority, Priority Distribution, 144A, 5.25%, 1/1/2033 | 3,000,000 | 2,712,570 | |
| Connecticut, State Health & Educational Facility Authority Revenue, Church Home of Hartford, Inc. Project: | |||
| Series A, 144A, 5.0%, 9/1/2046 | 1,000,000 | 931,240 | |
| Series A, 144A, 5.0%, 9/1/2053 | 1,500,000 | 1,366,755 | |
| Hamden, CT, Facility Revenue, Whitney Center Project, Series A, 7.625%, 1/1/2030 | 1,115,000 | 1,152,174 | |
| 29,369,473 | |||
| District of Columbia 1.7% | |||
| District of Columbia, Center for Internships & Academic Revenue, 0.55%**, 7/1/2036, LOC: Branch Banking & Trust | 1,500,000 | 1,500,000 | |
| District of Columbia, General Obligation, Series A, 4.0%, 6/1/2036 | 7,245,000 | 7,359,688 | |
| District of Columbia, Metropolitan Airport Authority Dulles Toll Road Revenue, Dulles Metrorail & Capital Important Project, Series A, 5.0%, 10/1/2053 | 7,000,000 | 7,247,660 | |
| District of Columbia, Metropolitan Airport Authority Systems Revenue, Series A, AMT, 4.0%, 10/1/2035 | 11,530,000 | 11,319,808 | |
| 27,427,156 | |||
| Florida 7.2% | |||
| Collier County, FL, Industrial Development Authority, Continuing Care Community Revenue, Arlington of Naples Project, Series A, 8.125%, 5/15/2044 | 4,000,000 | 4,563,240 | |
| Florida, Capital Region Community Development District, Capital Improvement Revenue, Series A, 7.0%, 5/1/2039 | 5,780,000 | 5,787,456 | |
| Florida, Central Expressway Authority Revenue, Senior Lien: | |||
| Series B, 4.0%, 7/1/2035 | 6,665,000 | 6,630,209 | |
| Series B, 4.0%, 7/1/2036 | 4,925,000 | 4,872,056 | |
| Florida, Halifax Hospital Medical Center, 5.0%, 6/1/2036 | 890,000 | 967,119 | |
| Florida, Middle Village Community Development District, Special Assessment, Series A, 6.0%, 5/1/2035 | 7,630,000 | 6,419,729 | |
| Florida, State Higher Educational Facilities Financial Authority Revenue, Nova Southeastern University Project, 5.0%, 4/1/2035 | 1,500,000 | 1,588,245 | |
| Florida, State Mid-Bay Bridge Authority, Series A, 5.0%, 10/1/2035 | 1,030,000 | 1,113,945 | |
| Florida, Village Community Development District No. 9, Special Assessment Revenue: | |||
| 5.5%, 5/1/2042 | 1,370,000 | 1,513,316 | |
| 7.0%, 5/1/2041 | 1,605,000 | 1,873,821 | |
| Greater Orlando, FL, Aviation Authority Airport Facilities Revenue, Jetblue Airways Corp. Project, AMT, 5.0%, 11/15/2026 | 1,500,000 | 1,563,360 | |
| Lee County, FL, Airport Revenue, Series A, AMT, 5.375%, 10/1/2032 | 1,750,000 | 1,929,148 | |
| Martin County, FL, Health Facilities Authority, Martin Memorial Medical Center, 5.5%, 11/15/2042 | 3,040,000 | 3,244,592 | |
| Miami Beach, FL, Health Facilities Authority, Mount Sinai Medical Center: | |||
| 5.0%, 11/15/2029 | 1,000,000 | 1,089,920 | |
| 5.0%, 11/15/2044 | 2,500,000 | 2,656,650 | |
| Miami-Dade County, FL, Aviation Revenue, Miami International Airport: | |||
| Series A, AMT, 5.25%, 10/1/2033, INS: AGC | 7,770,000 | 8,204,032 | |
| Series A, AMT, Prerefunded, 5.25%, 10/1/2033, INS: AGC | 2,230,000 | 2,392,009 | |
| Series A-1, 5.5%, 10/1/2041 | 5,000,000 | 5,515,850 | |
| Miami-Dade County, FL, Double Barreled Aviation, 5.0%, 7/1/2041 | 5,000,000 | 5,443,150 | |
| Miami-Dade County, FL, Expressway Authority, Toll Systems Revenue, Series A, 5.0%, 7/1/2044 | 2,500,000 | 2,725,275 | |
| Miami-Dade County, FL, Water & Sewer Systems Revenue, 5.0%, 10/1/2034 | 3,650,000 | 4,003,758 | |
| Orange County, FL, Health Facilities Authority Revenue, Orlando Health, Inc., Series A, 5.0%, 10/1/2034 | 2,500,000 | 2,750,650 | |
| Orange County, FL, School Board, Certificates of Participation, Series C, 5.0%, 8/1/2033 | 5,535,000 | 6,201,193 | |
| Palm Beach County, FL, Health Facilities Authority, Acts Retirement-Life Communities, Inc. Obligated Group: | |||
| 5.0%, 11/15/2032 | 7,500,000 | 8,181,750 | |
| Prerefunded, 5.5%, 11/15/2033 | 9,000,000 | 10,302,840 | |
| Seminole Tribe, FL, Special Obligation Revenue: | |||
| Series A, 144A, 5.5%, 10/1/2024 | 8,000,000 | 8,207,120 | |
| Series A, 144A, 5.75%, 10/1/2022 | 9,500,000 | 9,765,525 | |
| Tallahassee, FL, Health Facilities Revenue, Memorial Healthcare, Inc. Project, Series A, 5.0%, 12/1/2055 | 1,120,000 | 1,143,598 | |
| 120,649,556 | |||
| Georgia 2.9% | |||
| Americus-Sumter County, GA, Hospital Authority, Magnolia Manor Obligated Group, Series A, 6.375%, 5/15/2043 | 4,000,000 | 4,379,880 | |
| Atlanta, GA, Tax Allocation, Beltline Project, Series B, 7.375%, 1/1/2031 | 4,915,000 | 5,376,813 | |
| DeKalb County, GA, Hospital Authority Revenue, Anticipation Certificates, Dekalb Medical Center, Inc. Project, 6.125%, 9/1/2040 | 7,500,000 | 8,194,575 | |
| DeKalb County, GA, Water & Sewer Revenue, Series A, 5.25%, 10/1/2032 | 820,000 | 924,083 | |
| Fulton County, GA, Residential Care Facilities for Elderly Authority, Retirement Facilities Revenue, Lenbrook Square Foundation, Inc., 5.0%, 7/1/2042 | 4,500,000 | 4,731,435 | |
| Gainesville & Hall County, GA, Hospital Authority, Northeast Georgia Health System, Inc. Project: | |||
| Series A, 5.25%, 8/15/2049 | 500,000 | 557,025 | |
| Series A, 5.5%, 8/15/2054 | 1,820,000 | 2,071,961 | |
| Georgia, Glynn-Brunswick Memorial Hospital Authority, Anticipation Certificates, Southeast Georgia Health System Obligated Group, Series A, 5.625%, 8/1/2034 | 550,000 | 576,895 | |
| Georgia, Main Street Natural Gas, Inc., Gas Project Revenue: | |||
| Series A, 5.0%, 3/15/2019, GTY: JPMorgan Chase & Co. | 10,000,000 | 10,608,200 | |
| Series A, 5.5%, 9/15/2024, GTY: Merrill Lynch & Co., Inc. | 2,440,000 | 2,782,649 | |
| Richmond County, GA, Hospital Authority Revenue, Anticipation Certificates, University Health Services, Inc. Project: | |||
| 4.0%, 1/1/2035 | 5,000,000 | 5,047,500 | |
| 4.0%, 1/1/2036 | 3,000,000 | 3,021,330 | |
| 48,272,346 | |||
| Guam 1.0% | |||
| Government of Guam, General Obligation, Series A, Prerefunded, 7.0%, 11/15/2039 | 10,155,000 | 11,768,427 | |
| Guam, International Airport Authority, Series C, AMT, 6.375%, 10/1/2043 | 1,610,000 | 1,856,378 | |
| Guam, Power Authority Revenue, Series A, 5.5%, 10/1/2030 | 3,000,000 | 3,230,250 | |
| 16,855,055 | |||
| Hawaii 1.0% | |||
| Hawaii, State Department of Budget & Finance, Special Purpose Revenue, 15 Craigside Project, Series A, 9.0%, 11/15/2044 | 2,000,000 | 2,341,020 | |
| Hawaii, State Department of Budget & Finance, Special Purpose Revenue, Hawaiian Electric Co., Inc.: | |||
| Series B, AMT, 4.6%, 5/1/2026, INS: FGIC | 11,790,000 | 11,599,356 | |
| 6.5%, 7/1/2039, GTY: Sisters of Charity Health System | 2,500,000 | 2,695,575 | |
| 16,635,951 | |||
| Illinois 6.1% | |||
| Chicago, IL, General Obligation, Series A, 5.25%, 1/1/2029, INS: AGMC | 175,000 | 175,620 | |
| Chicago, IL, O'Hare International Airport Revenue, Senoir Lien, Series B, 5.0%, 1/1/2041 (a) | 2,125,000 | 2,283,610 | |
| Chicago, IL, O'Hare International Airport Revenue, Third Lien: | |||
| Series A, 5.75%, 1/1/2039 | 9,955,000 | 11,134,269 | |
| Series B, 6.0%, 1/1/2041 | 12,095,000 | 13,749,475 | |
| Cook County, IL, Forest Preservation District, Series C, 5.0%, 12/15/2037 | 1,845,000 | 1,943,357 | |
| Illinois, Finance Authority Revenue, Elmhurst Memorial Healthcare, Series A, 5.625%, 1/1/2037 | 5,500,000 | 5,672,095 | |
| Illinois, Finance Authority Revenue, Friendship Village of Schaumburg: | |||
| Series A, 5.625%, 2/15/2037 | 5,000,000 | 4,934,200 | |
| 7.25%, 2/15/2045 | 4,000,000 | 4,188,520 | |
| Illinois, Finance Authority Revenue, Rush University Medical Center, Series B, Prerefunded, 5.75%, 11/1/2028, INS: NATL | 1,250,000 | 1,357,750 | |
| Illinois, Finance Authority Revenue, Swedish Covenant Hospital, Series A, 6.0%, 8/15/2038 | 7,830,000 | 8,889,869 | |
| Illinois, Finance Authority Revenue, The Admiral at Lake Project: | |||
| Series A, 7.75%, 5/15/2030 | 1,675,000 | 1,877,843 | |
| Series A, 8.0%, 5/15/2040 | 1,000,000 | 1,122,240 | |
| Series A, 8.0%, 5/15/2046 | 3,500,000 | 3,895,885 | |
| Illinois, Finance Authority Revenue, Three Crowns Park Plaza: | |||
| Series A, 5.875%, 2/15/2026 | 1,225,000 | 1,226,286 | |
| Series A, 5.875%, 2/15/2038 | 500,000 | 500,310 | |
| Illinois, Metropolitan Pier & Exposition Authority, Dedicated State Tax Revenue, Series A, Zero Coupon, 12/15/2034, INS: NATL | 4,925,000 | 2,025,800 | |
| Illinois, Metropolitan Pier & Exposition Authority, Dedicated State Tax Revenue, Capital Appreciation-McCormick, Series A, Zero Coupon, 6/15/2038, INS: NATL | 20,075,000 | 6,791,573 | |
| Illinois, Railsplitter Tobacco Settlement Authority, 6.0%, 6/1/2028 | 6,405,000 | 7,292,861 | |
| Illinois, State Finance Authority Revenue, Edward Hospital Obligated Group, Series C, 0.57%**, 2/1/2029, LOC: JPMorgan Chase Bank NA | 1,390,000 | 1,390,000 | |
| Illinois, State Finance Authority Revenue, OSF Healthcare Systems, Series A, 5.0%, 5/15/2041 | 5,265,000 | 5,563,104 | |
| Illinois, State Finance Authority Revenue, Park Place of Elmhurst Project, Series C, 2.0%, 5/15/2055 | 900,000 | 111,852 | |
| Illinois, State Finance Authority Revenue, Presence Health Network: | |||
| Series C, 5.0%, 2/15/2036 | 1,000,000 | 1,024,850 | |
| Series C, 5.0%, 2/15/2041 | 1,000,000 | 1,016,730 | |
| Illinois, State Finance Authority Revenue, Trinity Health Corp., Series L, 5.0%, 12/1/2030 | 1,500,000 | 1,633,305 | |
| Illinois, State General Obligation: | |||
| 5.0%, 2/1/2029 | 2,275,000 | 2,310,809 | |
| 5.0%, 11/1/2041 | 6,000,000 | 5,865,960 | |
| Northern Illinois, Municipal Power Agency, Power Project Revenue, Series A, 5.0%, 12/1/2041 | 1,420,000 | 1,519,187 | |
| Springfield, IL, Electric Revenue, Senior Lien, 5.0%, 3/1/2040, INS: AGMC | 1,935,000 | 2,098,062 | |
| 101,595,422 | |||
| Indiana 1.2% | |||
| Indiana, State Finance Authority Revenue, Community Foundation of Northwest Indiana, Inc., 5.0%, 9/1/2036 (a) | 1,550,000 | 1,663,677 | |
| Indiana, State Finance Authority Revenue, Greencroft Obligation Group, Series A, 7.0%, 11/15/2043 | 2,290,000 | 2,583,532 | |
| Indiana, State Health & Educational Financing Authority, Hospital Revenue, Community Foundation of Northwest State: | |||
| 5.5%, 3/1/2037 | 850,000 | 860,030 | |
| Prerefunded, 5.5%, 3/1/2037 | 900,000 | 910,728 | |
| North Manchester, IN, Economic Development Revenue, Peabody Retirement Community Project, Series B, 1.0%, 12/1/2045* | 1,085,426 | 178,607 | |
| Valparaiso, IN, Exempt Facilities Revenue, Pratt Paper LLC Project, AMT, 7.0%, 1/1/2044, GTY: Pratt Industries (U.S.A.) | 6,220,000 | 7,441,795 | |
| Vigo County, IN, Hospital Authority Revenue, Union Hospital, Inc.: | |||
| 144A, Prerefunded, 5.5%, 9/1/2027 | 1,000,000 | 1,033,750 | |
| Prerefunded, 8.0%, 9/1/2041 | 4,000,000 | 5,079,960 | |
| 19,752,079 | |||
| Iowa 0.5% | |||
| Altoona, IA, Urban Renewal Tax Increment Revenue, Annual Appropriation: | |||
| Prerefunded, 6.0%, 6/1/2034 | 1,000,000 | 1,072,160 | |
| Prerefunded, 6.0%, 6/1/2039 | 2,000,000 | 2,144,320 | |
| Iowa, Finance Authority Retirement Community Revenue, Edgewater LLC Project, Prerefunded, 6.5%, 11/15/2027 | 5,000,000 | 5,263,350 | |
| 8,479,830 | |||
| Kansas 0.5% | |||
| Lenexa, KS, Health Care Facility Revenue, 5.5%, 5/15/2039 | 6,340,000 | 6,360,732 | |
| Lenexa, KS, Health Care Facility Revenue, Lakeview Village, Inc. Project, 7.25%, 5/15/2039 | 1,200,000 | 1,283,280 | |
| 7,644,012 | |||
| Kentucky 2.1% | |||
| Kentucky, Economic Development Finance Authority, Hospital Facilities Revenue, Owensboro Medical Health Systems, Series A, 6.5%, 3/1/2045 | 15,000,000 | 16,492,200 | |
| Kentucky, Economic Development Finance Authority, Louisville Arena Project Revenue, Series A-1, 6.0%, 12/1/2033, INS: AGC | 3,635,000 | 3,814,351 | |
| Kentucky, Public Transportation Infrastructure Authority Toll Revenue, 1st Tier-Downtown Crossing, Series A, 6.0%, 7/1/2053 | 7,195,000 | 7,963,426 | |
| Louisville & Jefferson County, KY, Metropolitan Government Health Systems Revenue, Norton Healthcare, Inc., Series A, 4.0%, 10/1/2035 | 6,000,000 | 5,829,360 | |
| 34,099,337 | |||
| Louisiana 1.8% | |||
| DeSoto Parish, LA, Environmental Improvement Revenue, International Paper Co. Project, Series A, AMT, 5.75%, 9/1/2031 | 5,000,000 | 5,092,700 | |
| Louisiana, Local Government Environmental Facilities & Community Development, Westlake Chemical Corp., Series A, 6.5%, 8/1/2029 | 6,055,000 | 6,769,551 | |
| Louisiana, Local Government Environmental Facilities, Community Development Authority Revenue, 6.75%, 11/1/2032 | 6,000,000 | 6,245,040 | |
| Louisiana, Public Facilities Authority Revenue, Ochsner Clinic Foundation Project, Prerefunded, 6.75%, 5/15/2041 | 2,500,000 | 3,027,025 | |
| Louisiana, Public Facilities Authority, Hospital Revenue, Lafayette General Medical Center, 5.5%, 11/1/2040 | 5,000,000 | 5,268,350 | |
| Louisiana, State Public Facilities Authority Revenue, Ochsner Clinic Foundation Project, 5.0%, 5/15/2047 | 1,000,000 | 1,057,890 | |
| Louisiana, Tobacco Settlement Financing Corp. Revenue, Series A, 5.25%, 5/15/2035 | 1,820,000 | 1,961,414 | |
| 29,421,970 | |||
| Maine 0.6% | |||
| Maine, Health & Higher Educational Facilities Authority Revenue, Maine General Medical Center, 6.75%, 7/1/2036 | 9,000,000 | 9,795,690 | |
| Maryland 0.9% | |||
| Anne Arundel County, MD, Special Obligation, National Business Park North Project, 6.1%, 7/1/2040 | 2,200,000 | 2,279,024 | |
| Maryland, State Health & Higher Educational Facilities Authority Revenue, Adventist Healthcare, Series A, 6.125%, 1/1/2036 | 3,250,000 | 3,679,780 | |
| Maryland, State Health & Higher Educational Facilities Authority Revenue, Doctors Community Hospital, Inc., 5.75%, 7/1/2038 | 6,250,000 | 6,776,875 | |
| Maryland, State Health & Higher Educational Facilities Authority Revenue, Mercy Medical Center, 6.25%, 7/1/2031 | 2,500,000 | 2,811,400 | |
| 15,547,079 | |||
| Massachusetts 2.2% | |||
| Massachusetts, State Development Finance Agency Revenue, Checon Corp., AMT, 0.65%**, 6/1/2025, LOC: Bank of America NA | 2,025,000 | 2,025,000 | |
| Massachusetts, State Development Finance Agency Revenue, Linden Ponds, Inc. Facility: | |||
| Series B, 11/15/2056* | 430,598 | 2,153 | |
| Series A, 4.68%, 11/15/2021 | 3,390,000 | 3,319,522 | |
| Series A-2, 5.5%, 11/15/2046 | 86,572 | 78,910 | |
| Series A-1, 6.25%, 11/15/2039 | 1,621,881 | 1,645,009 | |
| Massachusetts, State Development Finance Agency Revenue, South Shore Hospital, Series I, 5.0%, 7/1/2041 | 675,000 | 731,363 | |
| Massachusetts, State Development Finance Agency Revenue, Tufts Medical Center, Inc., Series I, 7.25%, 1/1/2032 | 2,250,000 | 2,626,402 | |
| Massachusetts, State Health & Educational Facilities Authority Revenue, Boston College, Series M2, 5.5%, 6/1/2035 | 8,600,000 | 10,766,684 | |
| Massachusetts, State Health & Educational Facilities Authority Revenue, Caregroup Healthcare System: | |||
| Series E-1, Prerefunded, 5.0%, 7/1/2028 | 1,500,000 | 1,590,735 | |
| Series E-1, Prerefunded, 5.125%, 7/1/2038 | 1,500,000 | 1,593,675 | |
| Massachusetts, State Health & Educational Facilities Authority Revenue, Suffolk University, Series A, 5.75%, 7/1/2039 | 7,145,000 | 7,680,089 | |
| Massachusetts, State Port Authority Special Facilities Revenue, Delta Air Lines, Inc. Project, Series A, AMT, 5.5%, 1/1/2018, INS: AMBAC | 4,000,000 | 4,009,320 | |
| Massachusetts, State Water Resources Authority, Series A-3, 0.57%**, 8/1/2037, SPA: Wells Fargo Bank NA | 300,000 | 300,000 | |
| 36,368,862 | |||
| Michigan 3.8% | |||
| Dearborn, MI, Economic Development Corp. Revenue, Limited Obligation, Henry Ford Village: | |||
| 7.0%, 11/15/2038 | 4,500,000 | 4,280,175 | |
| 7.125%, 11/15/2043 | 1,500,000 | 1,432,065 | |
| Detroit, MI, Water & Sewerage Department, Sewerage Disposal System Revenue, Series A, 5.25%, 7/1/2039 | 2,100,000 | 2,261,742 | |
| Detroit, MI, Water Supply Systems Revenue, Series A, 5.75%, 7/1/2037 | 7,590,000 | 8,223,841 | |
| Kalamazoo, MI, Economic Development Corp. Revenue, Limited Obligation, Heritage Community: | |||
| 5.375%, 5/15/2027 | 1,000,000 | 1,003,200 | |
| 5.5%, 5/15/2036 | 1,000,000 | 1,002,500 | |
| Kentwood, MI, Economic Development Corp., Limited Obligation, Holland Home, 5.625%, 11/15/2041 | 3,750,000 | 3,920,700 | |
| Michigan, Great Lakes Water Authority, Water Supply Systems Revenue, Series D, 5.0%, 7/1/2036 | 6,000,000 | 6,399,780 | |
| Michigan, State Finance Authority Revenue, Detroit Water & Sewer, Series C-3, 5.0%, 7/1/2033, INS: AGMC | 1,820,000 | 1,994,101 | |
| Michigan, State Finance Authority Revenue, Detroit Water & Sewer Department, Series C, 5.0%, 7/1/2035 | 910,000 | 972,817 | |
| Michigan, State Finance Authority Revenue, Henry Ford Health System, 5.0%, 11/15/2041 | 1,835,000 | 1,950,367 | |
| Michigan, State Finance Authority Revenue, Trinity Health Corp.: | |||
| 5.0%, 12/1/2031 | 10,910,000 | 12,256,076 | |
| 5.0%, 12/1/2038 | 5,525,000 | 6,069,931 | |
| Michigan, State Hospital Finance Authority Revenue, Henry Ford Health Hospital, Prerefunded, 5.75%, 11/15/2039 | 6,315,000 | 7,055,623 | |
| Michigan, State Housing Development Authority, Multi-Family Housing Revenue, Berrien Woods III, Series A, AMT, 0.68%**, 7/1/2032, LOC: Citibank NA | 1,105,000 | 1,105,000 | |
| Michigan, State Strategic Fund Limited Obligation Revenue, Holland Home, 5.0%, 11/15/2042 | 4,000,000 | 4,065,840 | |
| 63,993,758 | |||
| Mississippi 1.2% | |||
| Lowndes County, MS, Solid Waste Disposal & Pollution Control Revenue, Weyerhaeuser Co. Project, Series A, 6.8%, 4/1/2022 | 5,500,000 | 6,533,615 | |
| Mississippi, State Business Finance Commission, Gulf Opportunity Zone, Chevron U.S.A., Inc., Series A, 0.56%**, 12/1/2030, GTY: Chevron Corp. | 250,000 | 250,000 | |
| Warren County, MS, Gulf Opportunity Zone, International Paper Co.: | |||
| Series A, 5.375%, 12/1/2035 | 1,000,000 | 1,103,120 | |
| Series A, 5.5%, 9/1/2031 | 4,250,000 | 4,355,272 | |
| Series A, 5.8%, 5/1/2034, GTY: International Paper Co. | 4,000,000 | 4,461,240 | |
| Series A, 6.5%, 9/1/2032 | 2,620,000 | 2,810,291 | |
| 19,513,538 | |||
| Missouri 1.2% | |||
| Kansas City, MO, Industrial Development Authority, Health Facilities Revenue, First Mortgage, Bishop Spencer, Series A, 6.5%, 1/1/2035 | 1,000,000 | 1,001,380 | |
| Kirkwood, MO, Industrial Development Authority, Retirement Community Revenue, Aberdeen Heights: | |||
| Series A, 8.25%, 5/15/2039 | 1,000,000 | 1,114,020 | |
| Series A, 8.25%, 5/15/2045 | 2,850,000 | 3,168,231 | |
| Missouri, Lee's Summit Industrial Development Authority, Senior Living Facilities Revenue, John Knox Village Obligated Group, Series A, 5.0%, 8/15/2046 | 3,000,000 | 2,887,560 | |
| Missouri, State Health & Educational Facilities Authority Revenue, Lutheran Senior Services Projects, Series B, 5.0%, 2/1/2046 | 1,040,000 | 1,067,633 | |
| Missouri, State Health & Educational Facilities Authority Revenue, Medical Research, Lutheran Senior Services, Series A, 5.0%, 2/1/2046 | 665,000 | 682,669 | |
| Missouri, State Health & Educational Facilities Authority, Lutheran Senior Services, 6.0%, 2/1/2041 | 2,250,000 | 2,457,202 | |
| St. Louis County, MO, Industrial Development Authority, Senior Living Facilities, St. Andrews Resources for Seniors Obligated Group, Series A, 5.125%, 12/1/2045 | 3,635,000 | 3,570,370 | |
| St. Louis, MO, Lambert-St. Louis International Airport Revenue, Series A-1, 6.625%, 7/1/2034 | 4,085,000 | 4,500,036 | |
| 20,449,101 | |||
| Nebraska 0.6% | |||
| Douglas County, NE, Hospital Authority No. 002 Revenue, Health Facilities, Immanuel Obligation Group, 5.625%, 1/1/2040 | 1,500,000 | 1,591,980 | |
| Douglas County, NE, Hospital Authority No. 3, Health Facilities Revenue, State Methodist Health System, 5.0%, 11/1/2045 | 1,850,000 | 1,967,586 | |
| Lancaster County, NE, Hospital Authority No.1, Health Facilities Revenue, Immanuel Obligation Group, 5.625%, 1/1/2040 | 2,500,000 | 2,709,650 | |
| Scotts Bluff County, NE, Hospital Authority, Regional West Medical Center, Series A, 5.25%, 2/1/2037 | 4,000,000 | 4,175,960 | |
| 10,445,176 | |||
| Nevada 0.1% | |||
| Sparks, NV, Local Improvement Districts, Limited Obligation District No. 3, 6.75%, 9/1/2027 | 1,395,000 | 1,436,515 | |
| New Hampshire 1.2% | |||
| New Hampshire, Health & Education Facilities Authority Revenue, Wentworth-Douglas Hospital, Series A, 7.0%, 1/1/2038 | 5,325,000 | 6,138,181 | |
| New Hampshire, State Business Finance Authority Revenue, Elliot Hospital Obligation Group, Series A, Prerefunded, 6.125%, 10/1/2039 | 5,000,000 | 5,642,600 | |
| New Hampshire, State Health & Education Facilities Authority Revenue, Rivermead Retirement Community: | |||
| Series A, 6.625%, 7/1/2031 | 700,000 | 785,988 | |
| Series A, 6.875%, 7/1/2041 | 2,825,000 | 3,188,973 | |
| New Hampshire, State Health & Educational Facilities Authority Revenue, Elliot Hospital Obligation Group, 5.0%, 10/1/2038 | 3,835,000 | 4,029,396 | |
| 19,785,138 | |||
| New Jersey 3.0% | |||
| New Jersey, Health Care Facilities Financing Authority Revenue, St. Joseph's Health Care System, Prerefunded, 6.625%, 7/1/2038 | 5,785,000 | 6,269,841 | |
| New Jersey, State Economic Development Authority Revenue, 5.0%, 6/15/2028 | 450,000 | 471,227 | |
| New Jersey, State Economic Development Authority, Special Facilities Revenue, Continental Airlines, Inc. Project, Series B, AMT, 5.625%, 11/15/2030 | 2,500,000 | 2,760,175 | |
| New Jersey, State Health Care Facilities Financing Authority Revenue, Saint Barnabas Health, Series A, Prerefunded, 5.625%, 7/1/2032 | 3,500,000 | 4,083,345 | |
| New Jersey, State Health Care Facilities Financing Authority Revenue, University Hospital, Series A, 5.0%, 7/1/2046, INS: AGMC | 1,820,000 | 1,947,000 | |
| New Jersey, State Transportation Trust Fund Authority Revenue, Federal Highway Reimbursement Notes, Series A-1, 5.0%, 6/15/2030 | 1,830,000 | 1,908,964 | |
| New Jersey, Tobacco Settlement Financing Corp.: | |||
| Series 1A, 4.75%, 6/1/2034 | 16,240,000 | 13,834,531 | |
| Series 1-A, 5.0%, 6/1/2029 | 15,965,000 | 14,794,765 | |
| Series 1A, 5.0%, 6/1/2041 | 5,000,000 | 4,270,250 | |
| 50,340,098 | |||
| New Mexico 0.5% | |||
| Farmington, NM, Pollution Control Revenue, Public Service Co. of New Mexico, Series C, 5.9%, 6/1/2040 | 7,500,000 | 8,285,100 | |
| New York 7.5% | |||
| Albany, NY, Industrial Development Agency, Civic Facility Revenue, St. Peter's Hospital Project, Series A, Prerefunded, 5.75%, 11/15/2022 | 1,500,000 | 1,569,735 | |
| Hudson, NY, Yards Infrastructure Corp. Revenue: | |||
| Series A, 5.25%, 2/15/2047 | 5,000,000 | 5,504,850 | |
| Series A, 5.75%, 2/15/2047 | 7,000,000 | 7,898,660 | |
| Nassau, NY, Health Care Corp. Revenue, 0.54%**, 8/1/2029, LOC: TD Bank NA | 915,000 | 915,000 | |
| New York, Brooklyn Arena Local Development Corp., Pilot Revenue, Barclays Center Project, Series A, 4.0%, 7/15/2035, INS: AGMC | 455,000 | 461,425 | |
| New York, Metropolitan Transportation Authority, Dedicated Tax Fund, Green Bonds, Series B-1, 5.0%, 11/15/2036 | 10,000,000 | 11,243,000 | |
| New York, State Dormitory Authority Revenues, Non-State Supported Debt, Orange Regional Medical Center, 5.0%, 12/1/2045 | 1,000,000 | 1,053,780 | |
| New York, State Dormitory Authority Revenues, NYU Hospital Center, Series B, Prerefunded, 5.25%, 7/1/2024 | 600,000 | 615,288 | |
| New York, State Dormitory Authority Revenues, Orange Regional Medical Center, 6.125%, 12/1/2029 | 2,000,000 | 2,103,580 | |
| New York, State Energy Research & Development Authority Facilities Revenue, Consolidated Edison Co., Inc. Project, Series A-3, AMT, 0.57%**, 6/1/2036, LOC: Scotiabank | 750,000 | 750,000 | |
| New York, State Housing Finance Agency Revenue, 205 E 92nd Street Housing, Series A, 0.54%**, 11/1/2047, LOC: Wells Fargo Bank NA | 1,500,000 | 1,500,000 | |
| New York, State Housing Finance Agency Revenue, 625 West 57th Street, Series 2015-A-2, 0.57%**, 5/1/2049, LOC: Bank of New York Mellon | 1,500,000 | 1,500,000 | |
| New York, State Housing Finance Agency Revenue, Dock Street Rental LLC, Series A, 0.57%**, 11/1/2046, LOC: Wells Fargo Bank NA | 1,500,000 | 1,500,000 | |
| New York, State Housing Finance Agency, Historic Front Street, Series A, 0.56%**, 11/1/2036, LOC: Landesbank Hessen-Thuringen | 1,850,000 | 1,850,000 | |
| New York, State Liberty Development Corp. Revenue, World Trade Center Project, Class 1-3, 5.0%, 11/15/2044 | 10,000,000 | 10,163,200 | |
| New York, State Thruway Authority, General Revenue, Junior Indebtedness Obligation, Junior Lien, Series A, 5.0%, 1/1/2051 | 2,250,000 | 2,412,832 | |
| New York, State Transportation Development Corp., Special Facilities Revenue, American Airlines, Inc., John F. Kennedy International Airport Project, AMT, 5.0%, 8/1/2031, GTY: American Airlines Group | 1,555,000 | 1,580,315 | |
| New York, State Transportation Development Corp., Special Facilities Revenue, Laguardia Gateway Partners LLC, Series A, AMT, 5.0%, 7/1/2046 | 3,500,000 | 3,563,735 | |
| New York, State Transportation Development Corp., Special Facility Revenue, Laguardia Gateway Partners LLC, Redevelopment Project, Series A, AMT, 5.0%, 7/1/2041 | 1,500,000 | 1,531,065 | |
| New York & New Jersey Port Authority, AMT, 5.0%, 10/1/2035 | 6,825,000 | 7,409,834 | |
| New York & New Jersey Port Authority, Special Obligation Revenue, JFK International Air Terminal LLC, 6.0%, 12/1/2042 | 5,795,000 | 6,553,565 | |
| New York City, NY, Housing Development Corp., 90 Washington Street, Series A, 0.53%**, 2/15/2035, LIQ: Fannie Mae, LOC: Fannie Mae | 1,800,000 | 1,800,000 | |
| New York City, NY, Municipal Water Finance Authority, Water & Sewer Revenue, Second General Resolution, Series BB-1A, 0.61%**, 6/15/2049, SPA: State Street Bank & Trust Co. | 10,400,000 | 10,400,000 | |
| New York City, NY, Municipal Water Finance Authority, Water & Sewer Systems Revenue: | |||
| Series FF, 5.0%, 6/15/2039 | 7,500,000 | 8,341,875 | |
| Series EE, 5.0%, 6/15/2047 | 11,000,000 | 12,153,350 | |
| New York City, NY, Transitional Finance Authority Revenue, Future Tax Secured, Series B-1, 5.0%, 8/1/2039 | 11,595,000 | 13,130,294 | |
| New York, NY, General Obligation: | |||
| Series H-2, 0.56%**, 3/1/2034, LOC: CA Public Employees Retirement System | 500,000 | 500,000 | |
| Series A-1, 4.0%, 8/1/2036 | 4,415,000 | 4,510,850 | |
| Orange County, NY, Senior Care Revenue, Industrial Development Agency, The Glen Arden Project, 5.7%, 1/1/2028 | 1,250,000 | 1,072,238 | |
| Syracuse, NY, Industrial Development Agency, Carousel Center Project: | |||
| Series A, AMT, 5.0%, 1/1/2035 | 335,000 | 357,405 | |
| Series A, AMT, 5.0%, 1/1/2036 | 1,050,000 | 1,115,310 | |
| 125,061,186 | |||
| North Carolina 0.4% | |||
| Charlotte, NC, Airport Revenue, Series A, 5.0%, 7/1/2039 | 1,450,000 | 1,571,249 | |
| North Carolina, Medical Care Commission, Retirement Facilities Revenue, First Mortgage-Aldersgate, 5.0%, 7/1/2045 | 3,320,000 | 3,389,786 | |
| North Carolina, State Medical Care Commission, Retirement Facilities Revenue, Southminster, Inc., 5.0%, 10/1/2037 | 2,200,000 | 2,268,684 | |
| 7,229,719 | |||
| North Dakota 0.2% | |||
| Burleigh County, ND, Health Care Revenue, St. Alexius Medical Center Project, Series A, Prerefunded, 5.0%, 7/1/2035 | 1,200,000 | 1,363,752 | |
| Grand Forks, ND, Health Care System Revenue, Altru Health System, 5.0%, 12/1/2032 | 2,000,000 | 2,122,440 | |
| 3,486,192 | |||
| Ohio 0.9% | |||
| Cleveland, OH, Airport Systems Revenue, Series A, 5.0%, /1/2030 | 1,000,000 | 1,083,360 | |
| Hamilton County, OH, Health Care Facilities Revenue, Christ Hospital Project, 5.5%, 6/1/2042 | 3,100,000 | 3,453,834 | |
| Hamilton County, OH, Health Care Revenue, Life Enriching Communities Project: | |||
| 5.0%, 1/1/2036 | 380,000 | 392,597 | |
| 5.0%, 1/1/2046 | 1,090,000 | 1,111,484 | |
| Prerefunded, 6.125%, 1/1/2031 | 1,785,000 | 2,038,684 | |
| Prerefunded, 6.625%, 1/1/2046 | 2,500,000 | 2,969,825 | |
| Ohio, State Higher Educational Facility Commission Revenue, Summa Health Systems Project, Series 2010, 5.75%, 11/15/2040 | 3,000,000 | 3,224,100 | |
| 14,273,884 | |||
| Oklahoma 0.4% | |||
| Tulsa County, OK, Industrial Authority, Senior Living Community Revenue, Montereau, Inc. Project, Series A, 7.25%, 11/1/2045 | 6,500,000 | 6,939,400 | |
| Pennsylvania 5.3% | |||
| Centre County, PA, Hospital Authority, Mount Nittany Medical Center, Series A, 5.0%, 11/15/2041 | 1,000,000 | 1,089,580 | |
| Crawford County, PA, Industrial Development Authority, Allegheny College Revenue, Series B, 0.58%**, 11/1/2039, LOC: PNC Bank NA | 2,000,000 | 2,000,000 | |
| Cumberland County, PA, Municipal Authority Revenue, Asbury Obligation Group, 6.125%, 1/1/2045 | 4,350,000 | 4,552,014 | |
| Lancaster County, PA, Hospital Authority Revenue, Brethren Village Project, Series A, 6.375%, 7/1/2030 | 1,000,000 | 1,011,880 | |
| Lancaster County, PA, Hospital Authority Revenue, University of Pennsylvania Health System Obligated Group, 5.0%, 8/15/2042 | 900,000 | 977,049 | |
| Northampton County, PA, Hospital Authority Revenue, St. Luke's Hospital Project: | |||
| Series A, Prerefunded, 5.375%, 8/15/2028 | 3,500,000 | 3,744,930 | |
| Series A, Prerefunded, 5.5%, 8/15/2035 | 6,500,000 | 6,968,520 | |
| Pennsylvania, Commonwealth Financing Authority, Series A, 5.0%, 6/1/2035 | 3,125,000 | 3,357,688 | |
| Pennsylvania, Doylestown Hospital Authority Revenue, Series A, 5.0%, 7/1/2041, GTY: Doylestown Health Foundation | 2,750,000 | 2,875,620 | |
| Pennsylvania, Economic Development Finance Authority, U.S. Airways Group, Series B, 8.0%, 5/1/2029, GTY: American Airlines, Inc. | 985,000 | 1,119,620 | |
| Pennsylvania, Economic Development Financing Authority, Sewer Sludge Disposal Revenue, Philadelphia Biosolids Facility, 6.25%, 1/1/2032 | 1,500,000 | 1,603,080 | |
| Pennsylvania, State Economic Development Financing Authority Revenue, Bridges Finco LP, AMT, 5.0%, 12/31/2038 | 4,785,000 | 4,935,536 | |
| Pennsylvania, State Economic Development Financing Authority, Exempt Facilities Revenue, PPL Energy Supply, Series A, 6.4%, 12/1/2038 | 1,115,000 | 1,122,125 | |
| Pennsylvania, State General Obligation, Series 2, 4.0%, 9/15/2034 | 10,000,000 | 9,911,500 | |
| Pennsylvania, State Turnpike Commission Revenue: | |||
| Series A-1, 5.0%, 12/1/2041 | 4,355,000 | 4,624,008 | |
| Series C, 5.0%, 12/1/2043 | 7,000,000 | 7,628,950 | |
| Series C, 5.0%, 12/1/2044 | 1,615,000 | 1,755,780 | |
| Series A, Prerefunded, 6.5%, 12/1/2036 | 6,385,000 | 7,586,529 | |
| Pennsylvania, State Turnpike Commission Revenue, Turnpike Subordinate Revenue Refunding Bonds, 5.0%, 6/1/2036 | 10,000,000 | 10,661,900 | |
| Philadelphia, PA, Airport Revenue, Series A, 5.0%, 6/15/2035 | 7,085,000 | 7,656,689 | |
| Philadelphia, PA, Gas Works Revenue: | |||
| Series 9, 5.25%, 8/1/2040 | 1,835,000 | 2,001,104 | |
| Series 9, Prerefunded, 5.25%, 8/1/2040 | 1,165,000 | 1,312,151 | |
| Philadelphia, PA, Gas Works Revenue, 1998 General Ordinance: | |||
| Series 14, 4.0%, 10/1/2035 | 310,000 | 311,491 | |
| Series 14, 4.0%, 10/1/2037 | 255,000 | 254,990 | |
| 89,062,734 | |||
| Puerto Rico 0.9% | |||
| Puerto Rico, Sales Tax Financing Corp., Sales Tax Revenue: | |||
| Series C, 5.25%, 8/1/2041 | 3,065,000 | 1,541,419 | |
| Series A, 5.5%, 8/1/2042 | 7,650,000 | 3,894,692 | |
| Series A, 5.75%, 8/1/2037 | 2,130,000 | 1,089,495 | |
| Series A, 6.0%, 8/1/2042 | 4,570,000 | 2,348,477 | |
| Series A, 6.375%, 8/1/2039 | 2,295,000 | 1,210,980 | |
| Puerto Rico, Sales Tax Financing Corp., Sales Tax Revenue, Convertible Capital Appreciation, Series A, 6.75%, 8/1/2032 | 10,000,000 | 5,411,600 | |
| 15,496,663 | |||
| Rhode Island 0.4% | |||
| Rhode Island, Health & Educational Building Corp. Revenue, Hospital Financing Lifespan Obligaed Group, 5.0%, 5/15/2039 | 3,320,000 | 3,520,163 | |
| Rhode Island, Tobacco Settlement Financing Corp., Series A, 5.0%, 6/1/2040 | 2,345,000 | 2,393,846 | |
| 5,914,009 | |||
| South Carolina 3.2% | |||
| Greenwood County, SC, Hospital Revenue, Self Regional Healthcare, Series B, 5.0%, 10/1/2031 | 1,000,000 | 1,079,460 | |
| Hardeeville, SC, Assessment Revenue, Anderson Tract Municipal Improvement District, Series A, 7.75%, 11/1/2039 | 4,375,000 | 4,443,163 | |
| Lexington County, SC, Health Services District, Lexington Medical Center, 5.0%, 11/1/2041 | 8,205,000 | 8,917,276 | |
| South Carolina, Jobs Economic Development Authority, Hospital Facilities Revenue, Palmetto Health Alliance, 5.75%, 8/1/2039 | 3,595,000 | 3,782,371 | |
| South Carolina, State Jobs-Economic Development Authority, Hospital Revenue, AnMed Health Project, 5.0%, 2/1/2038 | 5,000,000 | 5,344,700 | |
| South Carolina, State Public Service Authority Revenue: | |||
| Series C, 5.0%, 12/1/2046 | 7,500,000 | 8,164,650 | |
| Series E, 5.25%, 12/1/2055 | 10,360,000 | 11,330,939 | |
| South Carolina, State Public Service Authority Revenue, Santee Cooper, Series A, 5.75%, 12/1/2043 | 8,890,000 | 10,466,819 | |
| 53,529,378 | |||
| South Dakota 0.5% | |||
| South Dakota, State Health & Educational Facilities Authority Revenue, Avera Health: | |||
| Series B, 5.25%, 7/1/2038 | 3,000,000 | 3,108,450 | |
| Series B, 5.5%, 7/1/2035 | 5,000,000 | 5,232,500 | |
| 8,340,950 | |||
| Tennessee 0.9% | |||
| Jackson, TN, Hospital Revenue, Jackson-Madison Project: | |||
| 5.625%, 4/1/2038 | 810,000 | 845,972 | |
| Prerefunded, 5.625%, 4/1/2038 | 2,190,000 | 2,321,049 | |
| Johnson City, TN, Health & Educational Facilities, Board Hospital Revenue, Mountain States Health Alliance, 6.5%, 7/1/2038 | 3,570,000 | 3,954,525 | |
| Tennessee, Energy Acquisition Corp., Gas Revenue, Series C, 5.0%, 2/1/2027, GTY: The Goldman Sachs Group, Inc. | 6,435,000 | 7,098,127 | |
| 14,219,673 | |||
| Texas 13.6% | |||
| Bexar County, TX, Health Facilities Development Corp. Revenue, Army Retirement Residence Funding Project, 5.0%, 7/15/2041 | 3,000,000 | 3,115,980 | |
| Bexar County, TX, Health Facilities Development Corp. Revenue, Army Retirement Residence Project, Prerefunded, 6.2%, 7/1/2045 | 6,000,000 | 6,939,900 | |
| Brazos River, TX, Harbor Navigation District, Brazoria County Environmental Health, Dow Chemical Co. Project: | |||
| Series B-2, 4.95%, 5/15/2033 | 4,000,000 | 4,119,600 | |
| Series A-3, AMT, 5.125%, 5/15/2033 | 9,000,000 | 9,274,680 | |
| Cass County, TX, Industrial Development Corp., Environmental Improvement Revenue, International Paper Co. Projects, Series A, 9.25%, 3/1/2024 | 2,000,000 | 2,310,040 | |
| Central Texas, Regional Mobility Authority Revenue, 5.0%, 1/1/2046 | 3,665,000 | 3,881,601 | |
| Central Texas, Regional Mobility Authority Revenue, Capital Appreciation: | |||
| Zero Coupon, 1/1/2030 | 5,000,000 | 2,823,500 | |
| Zero Coupon, 1/1/2032 | 3,500,000 | 1,784,020 | |
| Central Texas, Regional Mobility Authority Revenue, Senior Lien: | |||
| Series A, 5.0%, 1/1/2040 | 1,385,000 | 1,472,338 | |
| Series A, 5.0%, 1/1/2043 | 1,000,000 | 1,054,060 | |
| Prerefunded, 6.0%, 1/1/2041 | 5,455,000 | 6,337,183 | |
| Harris County, TX, Cultural Education Facilities Finance Corp. Revenue, 1st Mortgage-Brazos Presbyterian Homes, Inc. Project: | |||
| 5.0%, 1/1/2048 (a) | 7,000,000 | 7,217,350 | |
| Series B, Prerefunded, 7.0%, 1/1/2043 | 3,000,000 | 3,796,830 | |
| Series B, Prerefunded, 7.0%, 1/1/2048 | 4,000,000 | 5,062,440 | |
| Houston, TX, Airport System Revenue, United Airlines, Inc., Terminal E Project, AMT, 4.75%, 7/1/2024 | 3,385,000 | 3,638,740 | |
| Houston, TX, Airport Systems Revenue, Special Facilities Continental Airlines, Inc. Terminal Projects, AMT, 6.625%, 7/15/2038 | 2,000,000 | 2,241,520 | |
| Judson, TX, Independent School District Building, 4.0%, 2/1/2041 | 4,325,000 | 4,364,530 | |
| La Vernia, TX, Higher Education Finance Corp. Revenue, Lifeschools of Dallas: | |||
| Series A, Prerefunded, 7.25%, 8/15/2031 | 1,275,000 | 1,465,893 | |
| Series A, Prerefunded, 7.5%, 8/15/2041 | 1,785,000 | 2,064,031 | |
| Lewisville, TX, Combination Contract Revenue, 6.75%, 10/1/2032 | 13,030,000 | 13,417,512 | |
| Matagorda County, TX, Navigation District No. 1, Pollution Control Revenue, AEP Texas Central Co. Project, Series A, 4.4%, 5/1/2030, INS: AMBAC | 11,000,000 | 11,485,760 | |
| Matagorda County, TX, Navigation District No. 1, Pollution Control Revenue, Central Power & Light Co. Project, Series A, 6.3%, 11/1/2029 | 3,000,000 | 3,285,660 | |
| Mission, TX, Economic Development Corp. Revenue, Senior Lien, Natgasoline Project, Series B, AMT, 144A, 5.75%, 10/1/2031 | 750,000 | 783,135 | |
| North Texas, Tollway Authority Revenue: | |||
| Series A, 5.0%, 1/1/2034 | 4,285,000 | 4,727,769 | |
| Series A, 5.0%, 1/1/2039 | 11,770,000 | 12,998,553 | |
| Series B, 5.0%, 1/1/2045 | 3,335,000 | 3,652,592 | |
| First Tier, Series A, 5.625%, 1/1/2033 | 125,000 | 129,843 | |
| First Tier, Series A, Prerefunded, 5.625%, 1/1/2033 | 875,000 | 916,939 | |
| First Tier, 6.0%, 1/1/2043 | 5,000,000 | 5,667,300 | |
| First Tier, Series A, 6.25%, 1/1/2039 | 1,785,000 | 1,930,817 | |
| Red River, TX, Health Facilities Development Corp., Retirement Facilities Revenue, MRC Crossings Project, Series A, 8.0%, 11/15/2049 | 1,715,000 | 1,960,485 | |
| San Antonio, TX, Convention Center Hotel Finance Corp., Contract Revenue, Empowerment Zone, Series A, AMT, 5.0%, 7/15/2039, INS: AMBAC | 8,000,000 | 8,018,560 | |
| Tarrant County, TX, Cultural Education Facilities Finance Corp. Revenue, Trinity Terrace Project, The Cumberland Rest, Inc., Series A-1, 5.0%, 10/1/2044 | 1,575,000 | 1,596,294 | |
| Tarrant County, TX, Cultural Education Facilities Finance Corp., Retirement Facility, Mirador Project: | |||
| Series A, 8.125%, 11/15/2039 | 1,000,000 | 800,000 | |
| Series A, 8.25%, 11/15/2044 | 3,430,000 | 2,744,000 | |
| Texas, Dallas/Fort Worth International Airport Revenue: | |||
| Series D, 5.0%, 11/1/2035 | 2,715,000 | 2,982,645 | |
| Series A, 5.25%, 11/1/2038 | 15,000,000 | 16,564,950 | |
| Texas, Love Field Airport Modernization Corp., Special Facilities Revenue, Southwest Airlines Co. Project, 5.25%, 11/1/2040 | 7,445,000 | 8,133,662 | |
| Texas, Municipal Gas Acquisition & Supply Corp. I, Gas Supply Revenue, Series D, 6.25%, 12/15/2026, GTY: Merrill Lynch & Co., Inc. | 16,875,000 | 19,609,931 | |
| Texas, New Hope Cultural Education Facilities Finance Corp., Retirement Facilities Revenue, Westminster Manor Project, 4.0%, 11/1/2036 | 1,475,000 | 1,309,048 | |
| Texas, SA Energy Acquisition Public Facility Corp., Gas Supply Revenue, 5.5%, 8/1/2020, GTY: The Goldman Sachs Group, Inc. | 10,000,000 | 11,164,400 | |
| Texas, State Municipal Gas Acquisition & Supply Corp. III Gas Supply Revenue, 5.0%, 12/15/2030, GTY: Macquarie Group Ltd. | 1,670,000 | 1,745,133 | |
| Texas, State Private Activity Bond, Surface Transportation Corp. Revenue, Senior Lien, North Tarrant Express Mobility Partners Segments LLC, AMT, 6.75%, 6/30/2043 | 2,220,000 | 2,616,803 | |
| Texas, State Transportation Commission, Turnpike Systems Revenue, Series C, 5.0%, 8/15/2034 | 8,235,000 | 8,987,185 | |
| Texas, Uptown Development Authority, Tax Increment Contract Revenue, Infrastructure Improvement Facilities, Prerefunded, 5.5%, 9/1/2029 | 1,000,000 | 1,108,210 | |
| Travis County, TX, Health Facilities Development Corp. Revenue, Westminster Manor Health: | |||
| 7.0%, 11/1/2030 | 300,000 | 338,838 | |
| Prerefunded, 7.0%, 11/1/2030 | 1,230,000 | 1,449,998 | |
| Prerefunded, 7.125%, 11/1/2040 | 3,580,000 | 4,237,037 | |
| 227,327,295 | |||
| Virginia 1.6% | |||
| Fairfax County, VA, Economic Development Authority, Residential Care Facility Revenue, Goodwin House, Inc., Series A, 5.0%, 10/1/2042 | 1,635,000 | 1,733,999 | |
| King George County, VA, Industrial Development Authority, Exempt Facility Revenue, Birchwood Power Partner LP, AMT, 0.61%**, 3/1/2027, LOC: Mizuho Bank Ltd. | 4,600,000 | 4,600,000 | |
| Prince William County, VA, Industrial Development Authority, Residential Care Facilities, Westminster at Lake Ridge, 5.0%, 1/1/2046 (a) | 1,530,000 | 1,462,236 | |
| Stafford County, VA, Economic Development Authority, Hospital Facilities Revenue, Mary Washington Healthcare, 5.0%, 6/15/2036 | 600,000 | 648,678 | |
| Virginia, Chesapeake Bay Bridge & Tunnel District Revenue, First Tier General Resolution Revenue, 5.0%, 7/1/2051 | 5,000,000 | 5,329,000 | |
| Virginia, Marquis Community Development Authority Revenue: | |||
| Series C, Zero Coupon, 9/1/2041 | 7,906,000 | 1,006,196 | |
| Series B, 5.625%, 9/1/2041 | 5,332,000 | 4,147,283 | |
| Virginia, Marquis Community Development Authority Revenue, Convertible Cabs, Step-up Coupon, 0% to 9/1/2021, 7.5% to 9/1/2045 | 1,640,000 | 1,058,768 | |
| Virginia, Mosaic District Community Development Authority Revenue, Series A, 6.875%, 3/1/2036 | 2,000,000 | 2,215,540 | |
| Virginia, Peninsula Ports Authority, Residential Care Facility Revenue, Virginia Baptist Homes, Series C, 5.4%, 12/1/2033 | 2,600,000 | 2,600,338 | |
| Virginia, State Small Business Financing Authority Revenue, Elizabeth River Crossings LLC Project, AMT, 6.0%, 1/1/2037 | 1,640,000 | 1,844,574 | |
| 26,646,612 | |||
| Washington 2.6% | |||
| King County, WA, Water Sewer Revenue, Series B, 4.0%, 7/1/2041 | 10,000,000 | 10,047,200 | |
| Klickitat County, WA, Public Hospital District No. 2 Revenue, Skyline Hospital, 6.5%, 12/1/2038 | 3,205,000 | 3,239,902 | |
| Washington, Port of Seattle, Industrial Development Corp., Special Facilities- Delta Airlines, AMT, 5.0%, 4/1/2030 | 2,000,000 | 2,072,880 | |
| Washington, State Health Care Facilities Authority Revenue, Series C, 5.375%, 8/15/2028, INS: AGC | 2,970,000 | 3,022,005 | |
| Washington, State Health Care Facilities Authority Revenue, Virginia Mason Medical Center, Series A, 6.125%, 8/15/2037 | 16,000,000 | 16,417,760 | |
| Washington, State Housing Finance Commission, Presbyterian Retirement Communities Northwest Project, Series A, 144A, 5.0%, 1/1/2046 | 2,500,000 | 2,336,650 | |
| Washington, State Housing Finance Commission, Rockwood Retirement Communities Project, Series A, 7.375%, 1/1/2044 | 6,000,000 | 6,839,220 | |
| 43,975,617 | |||
| West Virginia 0.8% | |||
| West Virginia, State Hospital Finance Authority Revenue, Charleston Medical Center, Series A, 5.625%, 9/1/2032 | 3,080,000 | 3,287,715 | |
| West Virginia, State Hospital Finance Authority Revenue, Thomas Health Systems: | |||
| 6.5%, 10/1/2028 | 7,000,000 | 7,254,800 | |
| 6.5%, 10/1/2038 | 3,000,000 | 3,102,780 | |
| 13,645,295 | |||
| Wisconsin 1.1% | |||
| Wisconsin, Public Finance Authority, Apartment Facilities Revenue, Senior Obligation Group, AMT, 5.0%, 7/1/2042 | 3,500,000 | 3,556,770 | |
| Wisconsin, Public Finance Authority, Education Revenue, North Carolina Charter Educational Foundation Project, Series A, 5.0%, 6/15/2046 | 3,530,000 | 2,988,498 | |
| Wisconsin, State Health & Educational Facilities Authority Revenue, Aurora Health Care, Inc., Series A, 5.625%, 4/15/2039 | 8,160,000 | 8,801,539 | |
| Wisconsin, State Health & Educational Facilities Authority Revenue, St. John's Communities, Inc.: | |||
| Series B, 5.0%, 9/15/2045 | 1,000,000 | 1,029,800 | |
| Series A, Prerefunded, 7.625%, 9/15/2039 | 1,000,000 | 1,166,310 | |
| 17,542,917 | |||
| Other Territories 0.0% | |||
| Non-Profit Preferred Funding Trust I, Series A1, 144A, 4.22%, 9/15/2037 | 466,949 | 474,990 | |
| Total Municipal Bonds and Notes (Cost $1,532,743,366) | 1,596,287,259 | ||
| Other Municipal Related 0.0% | |||
| Texas 0.0% | |||
| Brazos River, TX, Pollution Control Authority Revenue, Series D-1, 144A, AMT, 5/1/2033* (Cost $0) | 7,000,000 | 0 | |
| Underlying Municipal Bonds of Inverse Floaters (b) 6.1% | |||
| Hawaii 0.6% | |||
| Hawaii, State General Obligation, Series 2015-DK, Prerefunded, 5.0%, 5/1/2027 (c) | 8,340,000 | 8,798,450 | |
| Hawaii, State General Obligation, Series DK, Prerefunded, 5.0%, 5/1/2027 (c) | 1,465,000 | 1,545,531 | |
| Hawaii, State General Obligation, Series DK, 5.0%, 5/1/2027 (c) | 195,000 | 205,719 | |
| Trust: Hawaii, State General Obligation, Series 2867, 144A, 16.55%, 11/1/2017, Leverage Factor at purchase date: 4 to 1 | |||
| 10,549,700 | |||
| Louisiana 0.7% | |||
| Louisiana, State Gas & Fuels Tax Revenue, Series B, 5.0%, 5/1/2033 (c) | 3,026,513 | 3,311,940 | |
| Louisiana, State Gas & Fuels Tax Revenue, Series B, 5.0%, 5/1/2034 (c) | 3,304,152 | 3,615,762 | |
| Louisiana, State Gas & Fuels Tax Revenue, Series B, 5.0%, 5/1/2035 (c) | 3,666,834 | 4,012,647 | |
| Trust: Louisiana, State Gas & Fuels Tax Revenue, Series 2016-XM0289, 144A, 8.768%, 5/1/2018, Leverage Factor at purchase date: 2 to 1 | |||
| 10,940,349 | |||
| Massachusetts 1.9% | |||
| Massachusetts, State School Building Authority, Sales Tax Revenue, Series C, 5.0%, 8/15/2037 (c) | 15,000,000 | 16,843,200 | |
| Trust: Massachusetts, State School Building Authority, Series 2016-XM0239, 144A, 16.34%, 8/15/2037, Leverage Factor at purchase date: 4 to 1 | |||
| Massachusetts, State General Obligation, Series E, 4.0%, 4/1/2038 (c) | 15,000,000 | 15,169,200 | |
| Trust: Massachusetts, State General Obligation, Series 2016-XM0334, 144A, 12.34%, 4/1/2023, Leverage Factor at purchase date: 4 to 1 | |||
| 32,012,400 | |||
| Michigan 0.7% | |||
| Michigan, State Building Authority Revenue, Facilities Program, Series I, 5.0%, 4/15/2034 (c) | 10,000,000 | 11,031,068 | |
| Trust: State Building Authority Revenue, Series 2015-XM0123, 144A, 12.226%, 10/15/2023, Leverage Factor at purchase date: 3 to 1 | |||
| New York 1.2% | |||
| New York, State Environmental Facilities Corp., Clean Drinking Water, Series A, 5.0%, 6/15/2025 (c) | 4,000,000 | 4,222,079 | |
| New York, State Environmental Facilities Corp., Clean Drinking Water, Series A, 5.0%, 6/15/2026 (c) | 3,000,000 | 3,166,560 | |
| New York, State Environmental Facilities Corp., Clean Drinking Water, Series A, 5.0%, 6/15/2027 (c) | 3,000,000 | 3,166,559 | |
| Trust: New York, State Environmental Facilities Corp., Clean Drinking Water, Series 2870, 144A, 15.15%, 6/15/2017, Leverage Factor at purchase date: 3.6 to 1 | |||
| New York City, NY, Transitional Finance Authority Revenue, Series C-1, 5.0%, 11/1/2027 (c) | 3,185,000 | 3,304,272 | |
| New York City, NY, Transitional Finance Authority Revenue, Series C-1, Prerefunded, 5.0%, 11/1/2027 (c) | 6,815,000 | 7,070,208 | |
| Trust: New York City, NY, Transitional Finance Authority Revenue, Series 2072, 144A, 10.64%, 11/1/2027, Leverage Factor at purchase date: 2.5 to 1 | |||
| 20,929,678 | |||
| Washington 1.0% | |||
| Washington, State General Obligation, Series A-1, 5.0%, 8/1/2037 (c) | 15,000,000 | 16,716,750 | |
| Trust: State General Obligation, Series XM0127, 144A, 16.34%, 8/1/2023, Leverage Factor at purchase date: 4 to 1 | |||
| Total Underlying Municipal Bonds of Inverse Floaters (Cost $103,531,741) | 102,179,945 | ||
| % of Net Assets | Value ($) | |
| Total Investment Portfolio (Cost $1,636,275,107)† | 101.8 | 1,698,467,204 |
| Floating Rate Notes (b) | (3.9) | (66,167,499) |
| Other Assets and Liabilities, Net | 2.1 | 35,500,321 |
| Net Assets | 100.0 | 1,667,800,026 |
The following table represents a bond that is in default:
| Security | Coupon | Maturity Date | Principal Amount ($) | Cost ($) | Value ($) |
| Connecticut, Mashantucket Western Pequot Tribe Bond* | 6.05% | 7/1/2031 | 16,835,270 | 11,882,192 | 655,734 |
* Non-income producing security.
** 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 November 30, 2016.
† The cost for federal income tax purposes was $1,564,362,001. At November 30, 2016, net unrealized appreciation for all securities based on tax cost was $67,937,704. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $123,471,111 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $55,533,407.
(a) When-issued security.
(b) Securities represent the underlying municipal obligations of inverse floating rate obligations held by the Fund. The Floating Rate Notes represent leverage to the Fund and is the amount owed to the floating rate note holders.
(c) Security forms part of the below inverse floater. The Fund accounts for these inverse floaters as a form of secured borrowing, by reflecting the value of the underlying bond in the investments of the Fund and the amount owed to the floating rate note holder as a liability.
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.
FGIC: Financial Guaranty Insurance Co.
GTY: Guaranty Agreement
INS: Insured
LIQ: Liquidity Facility
LOC: Letter of Credit
NATL: National Public Finance Guarantee Corp.
PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.
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 level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of November 30, 2016 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 Investments (d) | $ — | $ 1,698,467,204 | $ 0 | $ 1,698,467,204 |
| Total | $ — | $ 1,698,467,204 | $ 0 | $ 1,698,467,204 |
There have been no transfers between fair value measurement levels during the period ended November 30, 2016.
(d) See Investment Portfolio for additional detailed categorizations.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities
| as of November 30, 2016 (Unaudited) | |
| Assets | |
| Investments in non-affiliated securities, at value (cost $1,636,275,107) | $ 1,698,467,204 |
| Cash | 2,856,584 |
| Receivable for investments sold | 8,519,005 |
| Receivable for Fund shares sold | 32,389,954 |
| Interest receivable | 23,390,818 |
| Other assets | 73,999 |
| Total assets | 1,765,697,564 |
| Liabilities | |
| Payable for investments purchased | 6,620,132 |
| Payable for investments purchased — when-issued/delayed delivery securities | 13,444,224 |
| Payable for Fund shares redeemed | 8,846,698 |
| Payable for floating rate notes issued | 66,167,499 |
| Distributions payable | 1,118,404 |
| Accrued management fee | 465,069 |
| Accrued Trustees' fees | 31,193 |
| Other accrued expenses and payables | 1,204,319 |
| Total liabilities | 97,897,538 |
| Net assets, at value | $ 1,667,800,026 |
| Net Assets Consist of | |
| Undistributed net investment income | 3,826,928 |
| Net unrealized appreciation (depreciation) on investments | 62,192,097 |
| Accumulated net realized gain (loss) | (126,868,646) |
| Paid-in capital | 1,728,649,647 |
| Net assets, at value | $ 1,667,800,026 |
The accompanying notes are an integral part of the financial statements.
| Statement of Assets and Liabilities as of November 30, 2016 (Unaudited) (continued) | |
| Net Asset Value | |
Class A Net Asset Value and redemption price per share ($327,649,853 ÷ 27,398,805 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.96 |
| Maximum offering price per share (100 ÷ 97.25 of $11.96) | $ 12.30 |
Class C Net Asset Value offering and redemption price (subject to contingent deferred sales charge) per share ($121,622,515 ÷ 10,164,149 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.97 |
Class S Net Asset Value offering and redemption price per share ($1,038,672,539 ÷ 86,777,626 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.97 |
Institutional Class Net Asset Value offering and redemption price per share ($179,855,119 ÷ 15,021,610 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.97 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations
| for the six months ended November 30, 2016 (Unaudited) | |
| Investment Income | |
Income: Interest | $ 41,348,122 |
Expenses: Management fee | 3,742,484 |
| Administration fee | 835,147 |
| Services to shareholders | 982,453 |
| Distribution and service fees | 1,115,400 |
| Custodian fee | 5,811 |
| Professional fees | 100,115 |
| Reports to shareholders | 48,873 |
| Registration fees | 41,100 |
| Trustees' fees and expenses | 32,883 |
| Interest expense and fees on floating rate notes issued | 495,640 |
| Other | 39,897 |
| Total expenses before expense reductions | 7,439,803 |
| Expense reductions | (637,586) |
| Total expenses after expense reductions | 6,802,217 |
| Net investment income | 34,545,905 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from investments | (4,756,701) |
| Change in net unrealized appreciation (depreciation) on investments | (83,685,653) |
| Net gain (loss) | (88,442,354) |
| Net increase (decrease) in net assets resulting from operations | $ (53,896,449) |
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows
| for the six months ended November 30, 2016 (Unaudited) | |
Increase (Decrease) in Cash: Cash Flows from Operating Activities | |
| Net increase (decrease) in net assets resulting from operations | $ (53,896,449) |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: Purchases of long-term investments | (565,757,064) |
| Net amortization of premium/(accretion of discount) | 1,428,205 |
| Proceeds from sales and maturities of long-term investments | 443,906,303 |
| (Increase) decrease in interest receivable | (753,453) |
| (Increase) decrease in other assets | (26,831) |
| (Increase) decrease in receivable for investments sold | (8,519,005) |
| (Increase) decrease in payable for investments purchased | 5,619,819 |
| Increase (decrease) in payable for investments purchased — when-issued securities | (21,443,774) |
| Increase (decrease) in other accrued expenses and payables | (153,094) |
| Change in unrealized (appreciation) depreciation on investments | 83,685,653 |
| Net realized (gain) loss from investments | 4,756,701 |
| Cash provided by (used in) operating activities | (111,152,989) |
| Cash Flows from Financing Activities | |
| Proceeds from shares sold | 395,250,039 |
| Payments for shares redeemed | (249,695,489) |
| Distributions paid (net of reinvestment of distributions) | (3,954,723) |
| Increase (decrease) in payable for floating rate notes issued | (29,592,130) |
| Cash provided by (used in) financing activities | 112,007,697 |
| Increase (decrease) in cash | 854,708 |
| Cash at beginning of period | 2,001,876 |
| Cash at end of period | $ 2,856,584 |
| Supplemental Disclosure of Non-Cash Activities | |
| Reinvestment of distributions | $ 29,590,090 |
| Interest expense and fees on floating rate notes issued | $ (495,640) |
The accompanying notes are an integral part of the financial statements.
Statements of Changes in Net Assets
| Increase (Decrease) in Net Assets | Six Months Ended November 30, 2016 (Unaudited) | Year Ended May 31, 2016 | |
Operations: Net investment income | $ 34,545,905 | $ 70,048,235 | |
| Net realized gain (loss) | (4,756,701) | 20,385,005 | |
| Change in net unrealized appreciation (depreciation) | (83,685,653) | 1,229,038 | |
| Net increase (decrease) in net assets resulting from operations | (53,896,449) | 91,662,278 | |
Distributions to shareholders from: Net investment income: Class A | (6,919,817) | (16,036,470) | |
| Class B | — | (13,570)* | |
| Class C | (2,122,365) | (5,154,327) | |
| Class S | (20,419,730) | (37,933,145) | |
| Institutional Class | (3,954,939) | (9,443,121) | |
Net realized gains: Class A | — | (204,668) | |
| Class B | — | (146)* | |
| Class C | — | (79,382) | |
| Class S | — | (453,899) | |
| Institutional Class | — | (102,412) | |
| Total distributions | (33,416,851) | (69,421,140) | |
Fund share transactions: Proceeds from shares sold | 421,893,736 | 352,035,642 | |
| Reinvestment of distributions | 29,590,090 | 60,571,116 | |
| Payments for shares redeemed | (257,579,984) | (520,235,067) | |
| Net increase (decrease) in net assets from Fund share transactions | 193,903,842 | (107,628,309) | |
| Increase (decrease) in net assets | 106,590,542 | (85,387,171) | |
| Net assets at beginning of year | 1,561,209,484 | 1,646,596,655 | |
| Net assets at end of year (including undistributed net investment income of $3,826,928 and $2,697,874, respectively) | $ 1,667,800,026 | $ 1,561,209,484 |
* For the period from June 1, 2015 to February 10, 2016 (see Note A).
The accompanying notes are an integral part of the financial statements.
Financial Highlights
| Class A | Six Months Ended 11/30/16 (Unaudited) | Years Ended May 31, | |||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||
| Selected Per Share Data | |||||||
| Net asset value, beginning of period | $ 12.59 | $ 12.39 | $ 12.49 | $ 12.95 | $ 12.78 | $ 11.78 | |
Income from investment operations: Net investment income | .25 | .56 | .56 | .60 | .55 | .59 | |
| Net realized and unrealized gain (loss) | (.63) | .20 | (.11) | (.47) | .16 | 1.00 | |
| Total from investment operations | (.38) | .76 | .45 | .13 | .71 | 1.59 | |
Less distributions from: Net investment income | (.25) | (.55) | (.55) | (.59) | (.54) | (.59) | |
| Net realized gains | — | (.01) | — | — | — | (.00)*** | |
| Total distributions | (.25) | (.56) | (.55) | (.59) | (.54) | (.59) | |
| Net asset value, end of period | $ 11.96 | $ 12.59 | $ 12.39 | $ 12.49 | $ 12.95 | $ 12.78 | |
| Total Return (%)a,b | (3.13)** | 6.27 | 3.65 | 1.27 | 5.57 | 13.88 | |
| Ratios to Average Net Assets and Supplemental Data | |||||||
| Net assets, end of period ($ millions) | 328 | 361 | 378 | 447 | 618 | 569 | |
| Ratio of expenses before expense reductions (including interest expense) (%)c | .97* | .97 | 1.00 | 1.05 | 1.03 | 1.03 | |
| Ratio of expenses after expense reductions (including interest expense) (%)c | .93* | .91 | .93 | .95 | .97 | .99 | |
| Ratio of expenses after expense reductions (excluding interest expense) (%) | .87* | .87 | .87 | .88 | .91 | .92 | |
| Ratio of net investment income (%) | 4.02* | 4.54 | 4.51 | 4.94 | 4.18 | 4.92 | |
| Portfolio turnover rate (%) | 26** | 36 | 29 | 24 | 21 | 29 | |
a Total return does not reflect the effect of any sales charges. b Total return would have been lower had certain expenses not been reduced. c Interest expense represents interest and fees on short-term floating rate notes issued in conjunction with inverse floating rate securities. Interest income from such transactions is included in income from investment operations. * Annualized ** Not annualized *** Amount is less than $.005. | |||||||
| Class C | Six Months Ended 11/30/16 (Unaudited) | Years Ended May 31, | |||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||
| Selected Per Share Data | |||||||
| Net asset value, beginning of period | $ 12.59 | $ 12.40 | $ 12.50 | $ 12.96 | $ 12.79 | $ 11.79 | |
Income from investment operations: Net investment income | .21 | .47 | .47 | .51 | .45 | .50 | |
| Net realized and unrealized gain (loss) | (.63) | .19 | (.12) | (.47) | .16 | 1.00 | |
| Total from investment operations | (.42) | .66 | .35 | .04 | .61 | 1.50 | |
Less distributions from: Net investment income | (.20) | (.46) | (.45) | (.50) | (.44) | (.50) | |
| Net realized gains | — | (.01) | — | — | — | (.00)*** | |
| Total distributions | (.20) | (.47) | (.45) | (.50) | (.44) | (.50) | |
| Net asset value, end of period | $ 11.97 | $ 12.59 | $ 12.40 | $ 12.50 | $ 12.96 | $ 12.79 | |
| Total Return (%)a,b | (3.42)** | 5.40 | 2.88 | .52 | 4.78 | 13.03 | |
| Ratios to Average Net Assets and Supplemental Data | |||||||
| Net assets, end of period ($ millions) | 122 | 138 | 144 | 148 | 202 | 188 | |
| Ratio of expenses before expense reductions (including interest expense) (%)c | 1.74* | 1.73 | 1.76 | 1.80 | 1.78 | 1.77 | |
| Ratio of expenses after expense reductions (including interest expense) (%)c | 1.68* | 1.66 | 1.68 | 1.70 | 1.72 | 1.74 | |
| Ratio of expenses after expense reductions (excluding interest expense) (%) | 1.62* | 1.62 | 1.62 | 1.63 | 1.66 | 1.67 | |
| Ratio of net investment income (%) | 3.27* | 3.79 | 3.76 | 4.19 | 3.43 | 4.16 | |
| Portfolio turnover rate (%) | 26** | 36 | 29 | 24 | 21 | 29 | |
a Total return does not reflect the effect of any sales charges. b Total return would have been lower had certain expenses not been reduced. c Interest expense represents interest and fees on short-term floating rate notes issued in conjunction with inverse floating rate securities. Interest income from such transactions is included in income from investment operations. * Annualized ** Not annualized *** Amount is less than $.005. | |||||||
| Class S | Six Months Ended 11/30/16 (Unaudited) | Years Ended May 31, | |||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||
| Selected Per Share Data | |||||||
| Net asset value, beginning of period | $ 12.60 | $ 12.40 | $ 12.50 | $ 12.96 | $ 12.79 | $ 11.79 | |
Income from investment operations: Net investment income | .27 | .59 | .59 | .63 | .58 | .62 | |
| Net realized and unrealized gain (loss) | (.64) | .20 | (.11) | (.47) | .16 | 1.00 | |
| Total from investment operations | (.37) | .79 | .48 | .16 | .74 | 1.62 | |
Less distributions from: Net investment income | (.26) | (.58) | (.58) | (.62) | (.57) | (.62) | |
| Net realized gains | — | (.01) | — | — | — | (.00)*** | |
| Total distributions | (.26) | (.59) | (.58) | (.62) | (.57) | (.62) | |
| Net asset value, end of period | $ 11.97 | $ 12.60 | $ 12.40 | $ 12.50 | $ 12.96 | $ 12.79 | |
| Total Return (%)a | (3.00)** | 6.54 | 3.91 | 1.53 | 5.83 | 14.15 | |
| Ratios to Average Net Assets and Supplemental Data | |||||||
| Net assets, end of period ($ millions) | 1,039 | 873 | 824 | 884 | 1,128 | 1,023 | |
| Ratio of expenses before expense reductions (including interest expense) (%)b | .79* | .78 | .83 | .92 | .89 | .90 | |
| Ratio of expenses after expense reductions (including interest expense) (%)b | .68* | .66 | .68 | .70 | .72 | .74 | |
| Ratio of expenses after expense reductions (excluding interest expense) (%) | .62* | .62 | .62 | .63 | .66 | .67 | |
| Ratio of net investment income (%) | 4.27* | 4.79 | 4.76 | 5.20 | 4.43 | 5.17 | |
| Portfolio turnover rate (%) | 26** | 36 | 29 | 24 | 21 | 29 | |
a Total return would have been lower had certain expenses not been reduced. b Interest expense represents interest and fees on short-term floating rate notes issued in conjunction with inverse floating rate securities. Interest income from such transactions is included in income from investment operations. * Annualized ** Not annualized *** Amount is less than $.005. | |||||||
| Institutional Class | Six Months Ended 11/30/16 (Unaudited) | Years Ended May 31, | |||||
| 2016 | 2015 | 2014 | 2013 | 2012 | |||
| Selected Per Share Data | |||||||
| Net asset value, beginning of period | $ 12.60 | $ 12.40 | $ 12.50 | $ 12.97 | $ 12.79 | $ 11.79 | |
Income from investment operations: Net investment income | .27 | .59 | .59 | .63 | .58 | .63 | |
| Net realized and unrealized gain (loss) | (.64) | .20 | (.11) | (.48) | .17 | 1.00 | |
| Total from investment operations | (.37) | .79 | .48 | .15 | .75 | 1.63 | |
Less distributions from: Net investment income | (.26) | (.58) | (.58) | (.62) | (.57) | (.63) | |
| Net realized gains | — | (.01) | — | — | — | (.00)*** | |
| Total distributions | (.26) | (.59) | (.58) | (.62) | (.57) | (.63) | |
| Net asset value, end of period | $ 11.97 | $ 12.60 | $ 12.40 | $ 12.50 | $ 12.97 | $ 12.79 | |
| Total Return (%)a | (2.99)** | 6.51 | 3.91 | 1.45 | 5.93 | 14.17 | |
| Ratios to Average Net Assets and Supplemental Data | |||||||
| Net assets, end of period ($ millions) | 180 | 189 | 298 | 315 | 301 | 220 | |
| Ratio of expenses before expense reductions (including interest expense) (%)b | .68* | .75 | .75 | .81 | .79 | .79 | |
| Ratio of expenses after expense reductions (including interest expense) (%)b | .66* | .66 | .68 | .70 | .71 | .74 | |
| Ratio of expenses after expense reductions (excluding interest expense) (%) | .60* | .62 | .62 | .63 | .65 | .67 | |
| Ratio of net investment income (%) | 4.29* | 4.80 | 4.76 | 5.20 | 4.44 | 5.16 | |
| Portfolio turnover rate (%) | 26** | 36 | 29 | 24 | 21 | 29 | |
a Total return would have been lower had certain expenses not been reduced. b Interest expense represents interest and fees on short-term floating rate notes issued in conjunction with inverse floating rate securities. Interest income from such transactions is included in income from investment operations. * Annualized ** Not annualized *** Amount is less than $.005. | |||||||
Notes to Financial Statements (Unaudited)
A. Organization and Significant Accounting Policies
Deutsche Strategic High Yield Tax-Free Fund (the "Fund") is a diversified series of Deutsche Municipal Trust (the "Series"), 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 offers multiple classes of shares which provide investors with different purchase options. Class A shares are subject to an initial sales charge. Class B shares automatically converted to Class A shares on February 10, 2016 and are no longer offered. Class B shares were not subject to an initial sales charge and were subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class C shares are not subject to 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. Class S shares are not subject to initial or contingent deferred sales charges and are only available to a limited group of investors. Institutional Class shares are not subject to initial or contingent deferred sales charges and are generally available only to qualified institutions.
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 ("U.S. GAAP") which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. 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 level assigned to the securities valuations may not be an indication of the risk or liquidity 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. 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. 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. These securities are generally categorized as Level 2.
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 considered 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.
Inverse Floaters. The Fund invests in inverse floaters. Inverse floaters are debt instruments with a weekly floating rate of interest that bears an inverse relationship to changes in the short-term interest rate market. Inverse floaters are created by depositing a fixed-rate long-term municipal bond into a special purpose Tender Offer Bond trust (the "TOB Trust"). In turn the TOB Trust issues a short-term floating rate note and an inverse floater. The short-term floating rate note is issued in a face amount equal to some fraction of the underlying bond's par amount and is sold to a third party, usually a tax-exempt money market fund. The Fund receives the proceeds from the sale of the short-term floating rate note and uses the cash proceeds to make additional investments. The short-term floating rate note represents leverage to the Fund. The Fund, as the holder of the inverse floater, has full exposure to any increase or decrease in the value of the underlying bond. The income stream from the underlying bond in the TOB Trust is divided between the floating rate note and the inverse floater. The inverse floater earns all of the interest from the underlying long-term fixed-rate bond less the amount of interest paid on the floating rate note and the expenses of the TOB Trust. The floating rate notes issued by the TOB Trust are valued at cost, which approximates fair value.
By holding the inverse floater, the Fund has the right to collapse the TOB Trust by causing the holders of the floating rate instrument to tender their notes at par and have the broker transfer the underlying bond to the Fund. The floating rate note holder can also elect to tender the note for redemption at par at each reset date. The Fund accounts for these transactions as a form of secured borrowing, by reflecting the value of the underlying bond in the investments of the Fund and the amount owed to the floating rate note holder as a liability under the caption "Payable for floating rate notes issued" in the Statement of Assets and Liabilities. Income earned on the underlying bond is included in interest income, and interest paid on the floaters and the expenses of the TOB Trust are included in "Interest expense" in the Statement of Operations. The weighted average outstanding daily balance of the floating rate notes issued during the six months ended November 30, 2016 was approximately $81,854,000, with a weighted average interest rate of 1.21%.
The Fund may enter into shortfall and forbearance agreements by which the Fund agrees to reimburse the TOB Trust, in certain circumstances, for the difference between the liquidation value of the underlying bond held by the TOB Trust and the liquidation value of the floating rate notes plus any shortfalls in interest cash flows. This could potentially expose the Fund to losses in excess of the value of the Fund's inverse floater investments. In addition, the value of inverse floaters may decrease significantly when interest rates increase. The market for inverse floaters may be more volatile and less liquid than other municipal bonds of comparable maturity. The TOB Trust could be terminated outside of the Fund's control, resulting in a reduction of leverage and disposal of portfolio investments at inopportune times and prices. Investments in inverse floaters generally involve greater risk than in an investment in fixed-rate bonds.
The final rules implementing Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Volcker Rule") preclude banking entities from sponsoring and/or providing services to TOB Trusts. In response to these rules, investment market participants have developed and are developing new TOB Trust structures that are designed to ensure that banking entities do not sponsor TOB Trusts in violation of the Volcker Rule. The Fund currently participates in a number of pre-2014 TOB Trusts (each, a "Legacy TOB Trust") that will need to be restructured to conform to Volcker Rule requirements by the applicable compliance date, currently expected to be July 17, 2017, or unwound. Any new TOB Trust structures must currently comply with the Volcker Rule. Accordingly, to the extent the Fund wishes to restructure a Legacy TOB Trust or create a new TOB Trust, it must do so in a Volcker-compliant manner. A Volcker-compliant TOB Trust structure is substantially similar to traditional TOB Trust structures. The ultimate impact of the new rules on the inverse floater market and the municipal market generally is not yet certain. Such changes could make early unwinds of TOB Trusts more likely in adverse market scenarios, may make the use of TOB Trusts more expensive, and may make it more difficult to use TOB Trusts in general. The new rules may also expose the Fund to additional risks, including, but not limited to, compliance, securities law and operational risks.
When-Issued/Delayed Delivery Securities. The Fund may purchase 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 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.
Under the Regulated Investment Company Modernization Act of 2010, net capital losses incurred post-enactment may be carried forward indefinitely, and their character is retained as short-term and/or long-term. 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.
At May 31, 2016, the Fund had net tax basis capital loss carryforwards of approximately $128,449,000, including $26,412,000 of pre-enactment losses, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until May 31, 2017 ($3,436,000), May 31, 2018 ($19,508,000) and May 31, 2019 ($3,468,000), the respective expiration dates, whichever occurs first; and approximately $102,037,000 of post-enactment losses, which may be applied against realized net taxable capital gains indefinitely, including short-term losses ($69,585,000) and long-term losses ($32,452,000).
The Fund has reviewed the tax positions for the open tax years as of May 31, 2016 and has determined that no provision for income tax and/or uncertain tax provisions 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 Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain 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 investments in inverse floaters transactions, certain securities sold at a loss and accretion of market discount on debt securities. 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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses of the Series arising in connection with a specific fund are allocated to that fund. Other Series expenses which cannot be directly attributed to a fund are apportioned among the funds in the Series based upon the relative net assets or other appropriate measures.
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 financial reporting purposes, with the exception of securities in default of principal.
Statement of Cash Flows. Information on financial transactions which have been settled through the receipt and disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows represents the cash position at the Fund's custodian bank at November 30, 2016.
B. Purchases and Sales of Securities
During the six months ended November 30, 2016, purchases and sales of investment securities (excluding short-term investments) aggregated $565,757,064 and $443,906,303, 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.
Prior to October 1, 2016, under the Investment Management Agreement with the Advisor, the Fund paid 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 $300 million of the Fund's average daily net assets | .515% |
| Next $200 million of such net assets | .465% |
| Next $500 million of such net assets | .440% |
| Next $1 billion of such net assets | .420% |
| Over $2 billion of such net assets | .400% |
Effective October 1, 2016, 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 $300 million of the Fund's average daily net assets | .515% |
| Next $200 million of such net assets | .465% |
| Next $500 million of such net assets | .440% |
| Next $500 million of such net assets | .420% |
| Next $500 million of such net assets | .410% |
| Over $2 billion of such net assets | .400% |
Accordingly, for the six months ended November 30, 2016, the fee pursuant to the Investment Management Agreement was equivalent to an annualized rate (exclusive of any applicable waivers/reimbursements) of 0.45% of the Fund's average daily net assets.
For the period from June 1, 2016 through September 30, 2016, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of certain classes as follows:
| Class A | .87% |
| Class C | 1.62% |
| Class S | .62% |
| Institutional Class | .62% |
Effective October 1, 2016 through September 30, 2017, 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 total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of certain classes as follows:
| Class A | .88% |
| Class C | 1.63% |
| Class S | .63% |
| Institutional Class | .63% |
For the six months ended November 30, 2016, fees waived and/or expenses reimbursed for each class are as follows:
| Class A | $ 72,845 |
| Class C | 37,483 |
| Class S | 510,729 |
| Institutional Class | 16,529 |
| $ 637,586 |
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 six months ended November 30, 2016, the Administration Fee was $835,147, of which $138,026 is unpaid.
Service Provider Fees. Deutsche AM Service Company ("DSC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. ("DST"), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended November 30, 2016, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total Aggregated | Unpaid at November 30, 2016 |
| Class A | $ 9,195 | $ 5,227 |
| Class C | 2,859 | 1,803 |
| Class S | 47,286 | 25,888 |
| Institutional Class | 2,335 | 1,321 |
| $ 61,675 | $ 34,239 |
Distribution and Service Fees. Under the Fund's Class C 12b-1 Plan, Deutsche AM Distributors, Inc. ("DDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of Class C shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DDI enters into related selling group agreements with various firms at various rates for sales of Class C shares. For the six months ended November 30, 2016, the Distribution Fee was as follows:
| Distribution Fee | Total Aggregated | Unpaid at November 30, 2016 |
| Class C | $ 507,391 | $ 77,824 |
In addition, DDI provides information and administrative services for a fee ("Service Fee") to Class A and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DDI in turn has various agreements with financial services firms that provide these services and pay these fees based upon the assets of shareholder accounts the firms service. For the six months ended November 30, 2016, the Service Fee was as follows:
| Service Fee | Total Aggregated | Unpaid at November 30, 2016 | Annualized Rate |
| Class A | $ 439,008 | $ 220,852 | .25% |
| Class C | 169,001 | 82,737 | .25% |
| $ 608,009 | $ 303,589 |
Underwriting Agreement and Contingent Deferred Sales Charge. DDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the six months ended November 30, 2016 aggregated $13,239.
In addition, DDI receives any contingent deferred sales charge ("CDSC") from 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 1% for Class C, of the value of the shares redeemed. For the six months ended November 30, 2016, the CDSC for Class C shares aggregated $4,638. A deferred sales charge of up to 0.50% is assessed on certain redemptions of Class A shares. For the six months ended November 30, 2016, DDI received $3,550 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 six months ended November 30, 2016, the amount charged to the Fund by DIMA included in the Statement of Operations under "Reports to shareholders" aggregated $11,094, all of which is unpaid.
Trustees' Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and Vice Chairperson and to each committee Chairperson.
Transactions with Affiliates. The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is solely due to having a common investment adviser, common officers or common trustees. During the six months ended November 30, 2016, the Fund engaged in securities purchases of $144,227,000 and securities sales of $103,002,000 with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act.
D. Investing in High-Yield Debt Securities
High-yield debt securities or junk bonds are generally regarded as speculative with respect to the issuer’s continuing ability to meet principal and interest payments. The Fund’s performance could be hurt if an issuer of a debt security suffers an adverse change in financial condition that results in the issuer not making timely payments of interest or principal, a security downgrade or an inability to meet a financial obligation. High-yield debt securities’ total return and yield may generally be expected to fluctuate more than the total return and yield of investment-grade debt securities. A real or perceived economic downturn or an increase in market interest rates could cause a decline in the value of high-yield debt securities, and/or result in increased portfolio turnover, which could result in a decline in net asset value of the fund, reduce liquidity for certain investments and/or increase costs. High-yield debt securities are often thinly traded and can be more difficult to sell and value accurately than investment-grade debt securities as there may be no established secondary market. Investments in high yield debt securities could increase liquidity risk for the fund. In addition, the market for high-yield debt securities can experience sudden and sharp volatility which is generally associated more with investments in stocks.
E. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $400 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 the one-month 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 November 30, 2016.
F. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| Six Months Ended November 30, 2016 | Year Ended May 31, 2016 | |||
| Shares | Dollars | Shares | Dollars | |
| Shares sold | ||||
| Class A | 1,837,985 | $ 23,048,297 | 3,657,933 | $ 45,347,761 |
| Class B | — | — | 3* | 37* |
| Class C | 393,683 | 4,975,682 | 1,132,728 | 14,055,512 |
| Class S | 30,734,723 | 383,513,484 | 15,645,737 | 194,795,022 |
| Institutional Class | 822,110 | 10,356,273 | 7,925,912 | 97,837,310 |
| $ 421,893,736 | $ 352,035,642 | |||
| Shares issued to shareholders in reinvestment of distributions | ||||
| Class A | 498,005 | $ 6,262,519 | 1,170,071 | $ 14,495,074 |
| Class B | — | — | 991* | 12,209* |
| Class C | 133,673 | 1,682,308 | 326,286 | 4,043,935 |
| Class S | 1,406,902 | 17,690,324 | 2,619,769 | 32,484,030 |
| Institutional Class | 314,740 | 3,954,939 | 769,321 | 9,535,868 |
| $ 29,590,090 | $ 60,571,116 | |||
| Shares redeemed | ||||
| Class A | (3,640,214) | $ (45,624,667) | (6,659,391) | $ (82,343,541) |
| Class B | — | — | (92,736)* | (1,141,917)* |
| Class C | (1,323,288) | (16,623,665) | (2,153,347) | (26,702,865) |
| Class S | (14,698,983) | (181,837,787) | (15,399,994) | (190,700,564) |
| Institutional Class | (1,074,580) | (13,493,865) | (17,790,179) | (219,346,180) |
| $ (257,579,984) | $ (520,235,067) | |||
| Net increase (decrease) | ||||
| Class A | (1,304,224) | $ (16,313,851) | (1,831,387) | $ (22,500,706) |
| Class B | — | — | (91,742)* | (1,129,671)* |
| Class C | (795,932) | (9,965,675) | (694,333) | (8,603,418) |
| Class S | 17,442,642 | 219,366,021 | 2,865,512 | 36,578,488 |
| Institutional Class | 62,270 | 817,347 | (9,094,946) | (111,973,002) |
| $ 193,903,842 | $ (107,628,309) | |||
* For the period from June 1, 2015 to February 10, 2016 (see Note A).
Information About Your Fund's Expenses
As an investor of the Fund, 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 (June 1, 2016 to November 30, 2016).
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. Subject to certain exceptions, an account maintenance fee of $20.00 assessed once per calendar year for Classes A, C and S shares may apply for accounts with balances less than $10,000. This fee is not included in these tables. If it was, the estimate of expenses paid for Classes A, C and 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 November 30, 2016 (Unaudited) | ||||
| Actual Fund Return | Class A | Class C | Class S | Institutional Class |
| Beginning Account Value 6/1/16 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 11/30/16 | $ 968.70 | $ 965.80 | $ 970.00 | $ 970.10 |
| Expenses Paid per $1,000* | $ 4.59 | $ 8.28 | $ 3.36 | $ 3.26 |
| Hypothetical 5% Fund Return | Class A | Class C | Class S | Institutional Class |
| Beginning Account Value 6/1/16 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 11/30/16 | $ 1,020.41 | $ 1,016.65 | $ 1,021.66 | $ 1,021.76 |
| Expenses Paid per $1,000* | $ 4.71 | $ 8.49 | $ 3.45 | $ 3.35 |
* 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 183 (the number of days in the most recent six-month period), then divided by 365.
| Annualized Expense Ratios | Class A | Class C | Class S | Institutional Class |
| Deutsche Strategic High Yield Tax-Free Fund† | .93% | 1.68% | .68% | .66% |
† Includes interest expense and fees on short-term floating rate notes issued in conjunction with inverse floating rate securities of 0.06% for each class.
For more information, please refer to the Fund's prospectus.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to http://apps.finra.org/fundanalyzer/1/fa.aspx.
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the "Board" or "Trustees") approved the renewal of Deutsche Strategic High Yield Tax-Free Fund’s (the "Fund") investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2016.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
— During the entire process, all of the Fund’s Trustees were independent of DIMA and its affiliates (the "Independent Trustees").
— The Board 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 reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.
— The Independent Trustees regularly meet privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations.
— 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. 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 DIMA 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 DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG’s ("Deutsche Bank") Asset Management ("Deutsche AM") division. Deutsche AM is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. Deutsche Bank has advised the Board that the U.S. asset management business continues to be a critical and integral part of Deutsche Bank, and that Deutsche Bank will continue to invest in Deutsche AM and seek to enhance Deutsche AM’s investment platform. Deutsche Bank also has confirmed its commitment to maintaining strong legal and compliance groups within the Deutsche AM division.
As part of the contract review process, the Board carefully considered the fees and expenses of each Deutsche fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
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 DIMA’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, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. 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 index(es) and a peer universe compiled using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s 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, 2015, the Fund’s performance (Class A shares) was in the 4th quartile of the applicable Morningstar 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 five-year period, has underperformed its benchmark in the three-year period and has equaled its benchmark in the one-year period ended December 31, 2015. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board considered DIMA’s statements that the Fund had a lower risk profile than many of its peer funds. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the Deutsche fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. ("Broadridge") and the 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 DIMA under the Fund’s administrative services agreement, were higher than the median (4th quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2015). 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 (3rd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2015, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Broadridge Universe Expenses"). The Board also reviewed data comparing each share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board noted that, in connection with the 2014 contract renewal process, DIMA agreed to reduce the Fund’s contractual management fee rate by 0.05% and make corresponding adjustments to each management fee breakpoint. The Board further noted that, in connection with the 2016 contract renewal process, DIMA agreed to implement a new management fee breakpoint. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable Deutsche U.S. registered funds ("Deutsche Funds") and considered differences between the Fund and the comparable Deutsche Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors ("Deutsche Europe funds") managed by Deutsche AM. The Board noted that DIMA indicated that Deutsche AM does not manage any institutional accounts or Deutsche Europe funds comparable to the Fund.
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 DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs and pre-tax profits realized by DIMA from advising the Deutsche 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 DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’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 DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available 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), DIMA and its affiliates’ overall profitability with respect to the Deutsche Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most 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 investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA 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 DIMA related to Deutsche Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers; (ii) the large number of DIMA compliance personnel; and (iii) the substantial commitment of resources by DIMA 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 counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
Account Management Resources
| For More Information | The automated telephone system allows you to access personalized account information and obtain information on other Deutsche funds using either your voice or your telephone keypad. Certain account types within Classes A, 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 Shareholder Service representative by calling: (800) 728-3337 |
| Web Site | deutschefunds.com View your account transactions and balances, trade shares, monitor your asset allocation, subscribe to fund and account updates by e-mail, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about Deutsche funds, retirement planning information, and more. |
| Written Correspondence | Deutsche Asset Management PO Box 219151 |
| Proxy Voting | 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 most recent 12-month period ended June 30 are available on our Web site — deutschefunds.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 728-3337. |
| Portfolio Holdings | Following the fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at 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 deutschefunds.com from time to time. Please see the fund's current prospectus for more information. |
| Principal Underwriter | If you have questions, comments or complaints, contact: Deutsche AM Distributors, Inc. 222 South Riverside Plaza (800) 621-1148 |
| Investment Management | Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for the 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. Deutsche Asset Management is the retail brand name in the U.S. for the asset management activities of Deutsche Bank AG and DIMA. Deutsche Asset Management is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors. |
| Class A | Class C | Class S | Institutional Class | |
| Nasdaq Symbol | NOTAX | NOTCX | SHYTX | NOTIX |
| CUSIP Number | 25158T 103 | 25158T 301 | 25158T 400 | 25158T 509 |
| Fund Number | 152 | 352 | 2008 | 512 |
Privacy Statement
| FACTS | What Does Deutsche Asset Management Do With Your Personal Information? | ||
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do. | ||
| What? | The types of personal information we collect and share can include: — Social Security number — Account balances — Purchase and transaction history — Bank account information — Contact information such as mailing address, e-mail address and telephone number | ||
| How? | All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information, the reasons Deutsche Asset Management chooses to share and whether you can limit this sharing. | ||
| Reasons we can share your personal information | Does Deutsche Asset Management share? | Can you limit this sharing? | |
| For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders or legal investigations | Yes | No | |
| For our marketing purposes — to offer our products and services to you | Yes | No | |
| For joint marketing with other financial companies | No | We do not share | |
| For our affiliates' everyday business purposes — information about your transactions and experiences | No | We do not share | |
| For our affiliates' everyday business purposes — information about your creditworthiness | No | We do not share | |
| For non-affiliates to market to you | No | We do not share | |
| Questions? | Call (800) 728-3337 or e-mail us at service@db.com | ||
| Who we are | |
| Who is providing this notice? | Deutsche AM Distributors, Inc; Deutsche Investment Management Americas Inc.; Deutsche AM Investor Services, Inc.; Deutsche AM Trust Company; the Deutsche Funds |
| What we do | |
| How does Deutsche Asset Management protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. |
| How does Deutsche Asset Management collect my personal information? | We collect your personal information, for example, when you: — open an account — give us your contact information — provide bank account information for ACH or wire transactions — tell us where to send money — seek advice about your investments |
| Why can't I limit all sharing? | Federal law gives you the right to limit only — sharing for affiliates' everyday business purposes — information about your creditworthiness — affiliates from using your information to market to you — sharing for non-affiliates to market to you State laws and individual companies may give you additional rights to limit sharing. |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial or non-financial companies. Our affiliates include financial companies with the DWS or Deutsche Bank ("DB") name, such as DB AG Frankfurt. |
| Non-affiliates | Companies not related by common ownership or control. They can be financial and non-financial companies. Non-affiliates we share with include account service providers, service quality monitoring services, mailing service providers and verification services to help in the fight against money laundering and fraud. |
| Joint marketing | A formal agreement between non-affiliated financial companies that together market financial products or services to you. Deutsche Asset Management does not jointly market. |
| Rev. 09/2016 | |
| ITEM 2. | CODE OF ETHICS | |
| Not applicable. | ||
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT | |
| Not applicable | ||
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | |
| Not applicable | ||
| 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 US mail or courier service to Keith R. Fox, Deutsche Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. | ||
| 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) | Not applicable | |
| (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. | |
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: | Deutsche Strategic High Yield Tax-Free Fund, a series of Deutsche Municipal Trust |
| By: | /s/Brian E. Binder Brian E. Binder President |
| Date: | 1/27/2017 |
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/Brian E. Binder Brian E. Binder President |
| Date: | 1/27/2017 |
| By: | /s/Paul Schubert Paul Schubert Chief Financial Officer and Treasurer |
| Date: | 1/27/2017 |