UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number | 811-3043 |
DWS U.S. Treasury Money Fund
(Exact Name of Registrant as Specified in Charter)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (212) 454-7190
Paul Schubert
345 Park Avenue
New York, NY 10154
(Name and Address of Agent for Service)
Date of fiscal year end: | 05/31 |
Date of reporting period: | 05/31/06 |
ITEM 1. REPORT TO STOCKHOLDERS
MAY 31, 2006
Annual Report
to Shareholders
DWS U.S. Treasury Money Fund
(formerly Scudder U.S. Treasury Money Fund)
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Contents
Click Here Portfolio Management Review
Click Here Information About Your Fund's Expenses
Click Here Portfolio Summary
Click Here Investment Portfolio
Click Here Financial Statements
Click Here Financial Highlights
Click Here Notes to Financial Statements
Click Here Report of Independent Registered Public Accounting Firm
Click Here Tax Information
Click Here Other Information
Click Here Shareholder Meeting Results
Click Here Investment Management Agreement Approval
Click Here Trustees and Officers
Click Here Account Management Resources
This report must be preceded or accompanied by a prospectus. To obtain a 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 prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.
An investment in this fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Please read this fund's prospectus for specific details regarding its risk profile.
DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Asset Management, Inc., Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
DWS U.S. Treasury Money Fund: A Team Approach to Investing
Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for DWS U.S. Treasury Money Fund. DeIM and its predecessors have more than 80 years of experience managing mutual funds and DeIM provides a full range of investment advisory services to institutional and retail clients. DeIM is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Portfolio Management Team
A group of investment professionals is responsible for the day-to-day management of the fund. These investment professionals have a broad range of experience in managing money market funds.
In the following interview, Lead Portfolio Manager Darlene Rasel and other members of the fund's investment team discuss the market environment and the team's approach to managing DWS US Treasury Money Fund during the 12-month period ended May 31, 2006.
Q: Will you discuss the market environment for the fund during its most recent fiscal year?
A: During the 12-month period ended May 31, 2006, US economic performance was generally strong, despite a devastating 2005 hurricane season and continual increases in energy and commodity prices. Monthly job growth was the most important economic indicator for the money markets as the period began, but the market's focus gradually shifted to a careful watch for signs of increasing inflation.
Over the period, the US Federal Reserve Board (the Fed) continued to increase short-term interest rates in an attempt to undo the easing of monetary policy that occurred up until June 2004. The Fed raised the federal funds rate — the overnight rate charged by banks when they borrow money from each other, which guides other interest rates — to 5.00% in eight quarter-percentage-point increments over the 12-month period. Despite the rate increases, longer-term yields remained low for most of the period, creating a relatively flat yield curve.1
1 The yield curve is a graph with a left to right line that shows how high or low yields are, from the shortest to the longest maturities. Typically, the line rises from left to right as investors who are willing to tie up their money for a longer period of time are rewarded with higher yields.
2 The LIBOR — the rate of interest at which banks borrow funds from other banks, in large volume, in the international market — is the most widely used benchmark of short-term interest rates.
At the end of May 2006, the one-year London Interbank Offered Rate (LIBOR), an industry standard for measuring one-year money market rates, stood at 5.43% compared with 3.78% 12 months earlier.2 The premium level of the LIBOR (which is set by the market) over the federal funds rate (which is targeted by the Fed)
Money market yield curve 5/31/05 versus 5/31/06 |
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Length of maturity (in months) |
This chart is not intended to represent the yield of any DWS fund. Past performance is no guarantee of future results.
Source: Bloomberg, L.P.
of 5.00% demonstrated the market's assumption that the Fed will raise short-term interest rates at least one more time in order to stave off any resurgence of inflation.
At the same time, there is a sense within the market that 2006 will be a year of transition. Throughout 2005 and early 2006, the Fed repeated its statements that additional rate increases might be needed going forward to keep the risks to economic growth and price stability in balance. But the Fed's May 2006 statement, which left the door open for further interest rate hikes by indicating that "further policy firming may yet be needed," also noted that "the extent and timing of any such firming" is dependent on the data.
From this statement and other testimony by Fed Chairman Ben Bernanke, concern has grown that the Fed is considering a pause in interest rate increases. Bernanke has hinted that even in the face of inflationary pressures, if indicators seem to show that the economy is slowing, the Fed may adopt a "forward-looking" approach and assume that inflation will recede as economic growth subsides. Therefore, the market will be watching Fed statements and actions extremely closely over the remainder of this year to see whether Bernanke will remain as committed to fighting inflation as his predecessor. This concern could translate into additional market volatility over the coming months.
Q: How did the fund perform over its most recent fiscal year?
A: We were able to maintain a competitive yield in the fund. (All performance is historical and does not guarantee future results. Yields fluctuate and are not guaranteed.)
Q: In light of market conditions during the period, what has been the fund's strategy?
A: During the fund's most recent fiscal year, except for the period immediately following the hurricane season, when yields declined briefly, the Treasury yield curve was relatively flat. This was due in part to large-volume purchases of short-term Treasury instruments by foreign central banks. These purchases kept even the yields of six-month issues at relatively depressed levels. Because the fund would not be rewarded with higher yields by extending maturity, our strategy for the fund was to limit the fund's purchases to repurchase agreements and issues with
Performance is historical and does not guarantee future results. Current performance may be lower or higher than the performance data quoted.
Fund's Class S Share Yields | |
| 7-day current yield |
May 31, 2006* | 4.22% |
May 31, 2005 | 2.36% |
* The investment advisor has agreed to waive fees/reimburse expenses. Without such fee waivers/expense reimbursements the 7-day current yield would have been 4.08% as of May 31, 2006.
Yields are historical, will fluctuate and do not guarantee future performance. The 7-day current yield refers to the income paid by the fund over a 7-day period expressed as an annual percentage rate of the fund's shares outstanding. For the most current yield information, please visit our Web site: www.dws-scudder.com.
maturities of three months or less, and extend maturity opportunistically, as market conditions warranted.3
Q: What detracted from performance during the period?
A: Following Hurricanes Katrina and Wilma, there was concern that the economy might pull back and the Fed might halt its series of interest-rate increases, at least temporarily, so as not to further restrain growth. With this scenario in mind, we extended the fund's maturity slightly in early fall 2005. Instead of faltering, the economy continued to perform well, however, and the Fed kept raising interest rates. For this reason, our decision to briefly extend maturity detracted somewhat from the fund's yield and total return during the period.
Q: Will you describe your investment philosophy?
A: We continue our insistence on the highest credit quality within the fund. We also plan to maintain our conservative investment strategies and standards. We continue to apply a careful approach to investing on behalf of the fund and to seek competitive yield for the fund's shareholders.
3 Repurchase Agreements (Repos) — an agreement between a seller and a buyer, usually of government securities, where the seller agrees to repurchase the securities at a given price and usually at a stated time. Repos are widely used money market instruments that serve as an interest bearing, short-term ``parking place'' for large sums of money.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results.
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 and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees 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 they not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended May 31, 2006.
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. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended May 31, 2006 | ||
Actual Fund Return | Class AARP | Class S |
Beginning Account Value 12/1/05 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/06 | $ 1,019.10 | $ 1,019.10 |
Expenses Paid per $1,000* | $ 3.37 | $ 3.37 |
Hypothetical 5% Fund Return | Class AARP | Class S |
Beginning Account Value 12/1/05 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/06 | $ 1,021.59 | $ 1,021.59 |
Expenses Paid per $1,000* | $ 3.38 | $ 3.38 |
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class AARP | Class S |
DWS U.S. Treasury Money Fund | .67% | .67% |
For more information, please refer to the Fund's prospectus.
Portfolio Composition | 5/31/06 | 5/31/05 |
|
|
|
US Treasury Obligations | 12% | 35% |
Repurchase Agreements | 88% | 65% |
| 100% | 100% |
Weighted Average Maturity |
|
|
|
|
|
DWS U.S. Treasury Money Fund | 12 days | 31 days |
Treasury and Repo Retail Money Fund Average* | 17 days | 24 days |
* The Fund is compared to its respective iMoney Net Category: Treasury and Repo Retail Money Fund Average — Category includes only retail government funds that hold US Treasuries and repurchase agreements backed by the US Treasury.
Portfolio composition is subject to change. For more complete details about the Fund's holdings, see page 11. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to www.dws-scudder.com on or after the last day of the following month. In addition, the Fund's top ten holdings and other information about the Fund is posted on www.dws-scudder.com as of the calendar quarter-end on or after the 15th day following quarter-end. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio as of May 31, 2006
| Principal Amount ($) | Value ($) |
|
| |
US Treasury Obligations 12.4% | ||
US Treasury Bills: |
|
|
4.38%*, 8/3/2006 | 5,000,000 | 4,961,675 |
4.385%*, 8/3/2006 | 12,000,000 | 11,907,915 |
US Treasury Note, 2.375%, 8/15/2006 | 5,500,000 | 5,484,383 |
Total US Treasury Obligations (Cost $22,353,973) | 22,353,973 | |
| ||
Repurchase Agreements 87.6% | ||
Bank of America Securities LLC, 4.9%, dated 5/31/2006, to be repurchased at $20,002,722 on 6/1/2006 (a) | 20,000,000 | 20,000,000 |
BNP Paribas, 4.91%, dated 5/31/2006, to be repurchased at $40,005,456 on 6/1/2006 (b) | 40,000,000 | 40,000,000 |
Credit Suisse First Boston LLC, 4.92%, dated 5/31/2006, to be repurchased at $40,005,467 on 6/1/2006 (c) | 40,000,000 | 40,000,000 |
JPMorgan Securities, Inc., 4.91%, dated 5/31/2006, to be repurchased at $40,005,456 on 6/1/2006 (d) | 40,000,000 | 40,000,000 |
Merrill Lynch & Co., Inc., 4.95%, dated 5/12/2006, to be repurchased at $17,112,200 on 6/29/2006 (e) | 17,000,000 | 17,000,000 |
State Street Bank and Trust Co., 4.58%, dated 5/31/2006, to be repurchased at $798,102 on 6/1/2006 (f) | 798,000 | 798,000 |
Total Repurchase Agreements (Cost $157,798,000) | 157,798,000 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $180,151,973)+ | 100.0 | 180,151,973 |
Other Assets and Liabilities, Net | 0.0 | 29,317 |
Net Assets | 100.0 | 180,181,290 |
* Annualized yield at time of purchase; not a coupon rate.
+ The cost for federal income tax purposes was $180,151,973.
(a) Collateralized by $20,579,000 US Treasury Note., 4.0%, maturing on 6/15/2009 with a value of $20,400,408.
(b) Collateralized by:
Principal Amount ($) | Security | Rate (%) | Maturity Date | Collateral Value ($) |
26,209,000 | US Treasury Bond | 8.0 | 11/15/2021 | 33,640,779 |
7,184,000 | US Treasury Note | 4.75 | 11/15/2008 | 7,160,402 |
Total Collateral Value | $ 40,801,181 |
(c) Collateralized by $40,880,000 US Treasury Note., 4.875%, maturing on 5/31/2008 with a value of $40,800,283.
(d) Collateralized by $43,224,000 US Treasury STRIPS, with various maturities from 2/15/2007-2/15/2008 with a value of $40,801,604.
(e) Collateralized by $51,370,000 US Treasury STRIPS, maturing on 11/15/2026 with a value of $17,341,484.
(f) Collateralized by $825,000 US Treasury Bill, 4.72%, maturing on 8/24/2006 with a value of $815,719.
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of May 31, 2006 | |
Assets | |
Investments: Investments in securities, at amortized cost | $ 22,353,973 |
Repurchase agreements, at amortized cost | 157,798,000 |
Total investments in securities, at amortized cost | 180,151,973 |
Cash | 15,530 |
Interest receivable | 104,489 |
Receivable for Fund shares sold | 286,354 |
Other assets | 8,945 |
Total assets | 180,567,291 |
Liabilities | |
Dividends payable | 17,060 |
Payable for Fund shares redeemed | 154,761 |
Accrued management fee | 60,013 |
Other accrued expenses and payables | 154,167 |
Total liabilities | 386,001 |
Net assets, at value | $ 180,181,290 |
Net Assets | |
Net assets consist of: Undistributed net investment income | 18,343 |
Accumulated net realized gain (loss) | (35,461) |
Paid-in capital | 180,198,408 |
Net assets, at value | $ 180,181,290 |
Net Asset Value | |
Class AARP Net Asset Value, offering and redemption price per share ($14,113,018 ÷ 14,114,650 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 1.00 |
Class S Net Asset Value, offering and redemption price per share ($166,068,272 ÷ 166,121,195 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 1.00 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the year ended May 31, 2006 | |
Investment Income | |
Income: Interest | $ 7,498,836 |
Expenses: Management fee | 760,866 |
Services to shareholders | 477,666 |
Custodian and accounting fees | 75,213 |
Auditing | 43,800 |
Legal | 20,779 |
Reports to shareholders | 35,861 |
Trustees' fees and expenses | 9,855 |
Registration fees | 43,253 |
Other | 43,771 |
Total expenses before expense reductions | 1,511,064 |
Expense reductions | (238,978) |
Total expenses after expense reductions | 1,272,086 |
Net investment income | 6,226,750 |
Net realized gain (loss) on investment transactions | (17,771) |
Net increase (decrease) in net assets resulting from operations | $ 6,208,979 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended May 31, | |
2006 | 2005 | |
Operations: Net investment income | $ 6,226,750 | $ 2,762,220 |
Net realized gain (loss) on investment transactions | (17,771) | (13,954) |
Net increase (decrease) in net assets resulting from operations | 6,208,979 | 2,748,266 |
Distributions to shareholders from: Net investment income: Class AARP | (461,494) | (191,997) |
Class S | (5,786,542) | (2,772,345) |
Fund share transactions: Proceeds from shares sold | 64,498,170 | 92,404,530 |
Reinvestment of distributions | 6,024,736 | 2,882,128 |
Cost of shares redeemed | (94,271,494) | (129,403,709) |
Net increase (decrease) in net assets from Fund share transactions | (23,748,588) | (34,117,051) |
Increase (decrease) in net assets | (23,787,645) | (34,333,127) |
Net assets at beginning of period | 203,968,935 | 238,302,062 |
Net assets at end of period (including undistributed net investment income of $18,343 and $39,629, respectively) | $ 180,181,290 | $ 203,968,935 |
The accompanying notes are an integral part of the financial statements.
Class AARP Years Ended May 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income (loss) from investment operations: Net investment income | .033 | .014 | .003 | .008 | .018 |
Less distributions from: Net investment income and net realized gain on investment transactions | (.033) | (.014) | (.003) | (.008) | (.018) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%) | 3.36a | 1.41a | .29a | .77 | 1.76 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 14 | 14 | 14 | 15 | 8 |
Ratio of expenses before expense reductions (%) | .81 | .77 | .81 | .81 | .80 |
Ratio of expenses after expense reductions (%) | .67 | .65 | .71 | .81 | .80 |
Ratio of net investment income (%) | 3.27 | 1.30 | .36 | .77 | 1.76 |
a Total return would have been lower had certain expenses not been reduced. |
Class S Years Ended May 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income (loss) from investment operations: Net investment income | .033 | .014 | .003 | .008 | .018 |
Less distributions from: Net investment income and realized gain on investment transactions | (.033) | (.014) | (.003) | (.008) | (.018) |
Net asset value, end of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Total Return (%) | 3.36a | 1.43a | .29a | .77 | 1.76 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 166 | 190 | 224 | 302 | 326 |
Ratio of expenses before expense reductions (%) | .79 | .74 | .81 | .81 | .80 |
Ratio of expenses after expense reductions (%) | .67 | .65 | .71 | .81 | .80 |
Ratio of net investment income (%) | 3.27 | 1.30 | .36 | .77 | 1.76 |
a Total return would have been lower had certain expenses not been reduced. |
A. Significant Accounting Policies
DWS U.S. Treasury Money Fund (formerly Scudder U.S. Treasury Money Fund) (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified management investment company organized as a Massachusetts business trust.
The Fund offers multiple classes of shares. Shares of Class AARP were designed for members of AARP (please see Note B, under the caption Other Related Parties). Class AARP and S shares are not subject to initial or contingent deferred sales charges. Class S shares are no longer available to new investors except under certain circumstances. (Please refer to the Fund's Statement of Additional Information.)
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 both classes of shares. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities are valued utilizing the amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act and certain conditions therein. Under this method, which does not take into account unrealized capital gains or losses on securities, an instrument is initially valued at its cost and thereafter assumes a constant accretion/amortization to maturity of any discount or premium.
Repurchase Agreements. The Fund may enter into repurchase agreements with certain banks and broker/dealers whereby the Fund, through its custodian or sub-custodian bank, receives delivery of the underlying securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the value is equal to at least the principal amount of the repurchase price plus accrued interest. The custodian bank holds the collateral in a separate account until the agreement matures. If the value of the securities falls below the principal amount of the repurchase agreement plus accrued interest, the financial institution deposits additional collateral by the following business day. If the financial institution either fails to deposit the required additional collateral or fails to repurchase the securities as agreed, the Fund has the right to sell the securities and recover any resulting loss from the financial institution. If the financial institution enters into bankruptcy, the Fund's claims on the collateral may be subject to legal proceedings.
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 income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
At May 31, 2006, the Fund had a net tax basis capital loss carryforward of approximately $27,800, which may be applied against any realized net taxable gains of each succeeding year until fully utilized or until May 31, 2012 ($1,300), May 31, 2013 ($15,800) and May 31, 2014 ($10,700), the respective expiration dates, whichever occurs first.
In addition, from October 1, 2005 through May 31, 2006, the Fund incurred approximately $7,700 of net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending May 31, 2007.
Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and is distributed to shareholders monthly.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Temporary book and tax basis differences will reverse in a subsequent period. There were no significant book-to-tax differences for the Fund.
At May 31, 2006, the Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income* | $ 35,403 |
Capital loss carryforwards | $ 27,800 |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| Years Ended May 31, | |
| 2006 | 2005 |
Distributions from ordinary income | $ 6,248,036 | $ 2,964,342 |
* For tax purposes short-term capital gains distributions are considered ordinary income distributions.
Other. Investment transactions are accounted for 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 discounts and premiums are amortized/accreted for both tax and financial reporting purposes.
B. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" 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. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 0.40% of the first $500,000,000 of the Fund's average daily net assets, 0.385% of the next $500,000,000 of such net assets and 0.37% of such net assets in excess of $1,000,000,000, computed and accrued daily and payable monthly. Accordingly, for the year ended May 31, 2006, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.40% of the Fund's average daily net assets.
For the period from June 1, 2005 through September 30, 2006, the Advisor has contractually agreed to waive all or a portion of its management fee and/or reimburse or pay certain operating expenses of the Fund to the extent necessary to maintain total operating expenses of each class at 0.65% of average daily net assets (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and trustee and trustee counsel fees).
Service Provider Fees. DWS Scudder Service Corporation ("DWS-SSC"), a subsidiary of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for Class AARP and Class S shares of the Fund. Pursuant to a sub-transfer agency agreement between DWS-SSC and DST Systems, Inc. ("DST"), DWS-SSC has delegated certain transfer agent and dividend-paying agent functions to DST. The costs and expenses of such delegation are borne by DWS-SSC, not by the Fund. For the year ended May 31, 2006, the amounts charged to the Fund by DWS-SSC were as follows:
Services to Shareholders | Total Aggregated | Waived | Unpaid at May 31, 2006 |
Class AARP | $ 34,228 | $ 18,551 | $ 4,264 |
Class S | 412,370 | 215,050 | 47,036 |
| $ 446,598 | $ 233,601 | $ 51,300 |
DWS Scudder Fund Accounting Corporation ("DWS-SFAC"), an affiliate of the Advisor, is responsible for computing the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. DWS-SFAC has retained State Street Bank and Trust Company to provide certain administrative, fund accounting and record-keeping services to the Fund. For the year ended May 31, 2006, the amount charged to the Fund by DWS-SFAC for accounting services aggregated $45,873, of which $4,163 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with DeIM, the Advisor is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended May 31, 2006, the amount charged to the Fund by DeIM included in reports to shareholders aggregated $7,830, of which $3,000 is unpaid.
Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregated annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each Fund in the Fund Complex for which he or she serves. In addition, the Lead Trustee of the Board and the Chairman of each committee of the Board receives additional compensation for their services. Payment of such fees and expenses is allocated among all such Funds described above in direct proportion to their relative net assets.
Other Related Parties. Through December 31, 2005, AARP through its affiliate, AARP Services, Inc., monitored and approved the AARP Investment Program from DWS Scudder, but did not act as an investment advisor or recommend specific mutual funds. The contractual relationship between DWS Scudder and AARP ended on December 31, 2005. As a result, the funds are no longer part of the AARP Investment Program and the AARP name and logo will be phased out in 2006. The funds will continue to be managed by Deutsche Asset Management and its affiliates. (Please see Note G.)
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.
C. Expense Reductions
For the year ended May 31, 2006, the Advisor agreed to reimburse the Fund $4,507, which represents a portion of the fee savings expected to be realized by the Advisor related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider.
In addition, the Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended May 31, 2006, the custodian fee was reduced by $870 for custodian credits earned.
D. Line of Credit
The Fund and several other affiliated funds (the "Participants") share in a $750 million revolving credit facility administered by JPMorgan Chase Bank 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 upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| Year Ended May 31, 2006 | Year Ended May 31, 2005 | ||
| Shares | Dollars | Shares | Dollars |
Shares sold | ||||
Class AARP | 5,942,240 | $ 5,942,240 | 8,722,150 | $ 8,722,150 |
Class S | 58,555,930 | 58,555,930 | 83,682,381 | 83,682,380 |
|
| $ 64,498,170 |
| $ 92,404,530 |
Shares issued to shareholders in reinvestment of distributions | ||||
Class AARP | 445,430 | $ 445,430 | 185,456 | $ 185,456 |
Class S | 5,579,306 | 5,579,306 | 2,696,672 | 2,696,672 |
|
| $ 6,024,736 |
| $ 2,882,128 |
Shares redeemed | ||||
Class AARP | (6,316,318) | $ (6,316,318) | (9,034,645) | $ (9,034,646) |
Class S | (87,955,176) | (87,955,176) | (120,369,034) | (120,369,063) |
|
| $ (94,271,494) |
| $ (129,403,709) |
Net increase (decrease) | ||||
Class AARP | 71,352 | $ 71,352 | (127,039) | $ (127,040) |
Class S | (23,819,940) | (23,819,940) | (33,989,981) | (33,990,011) |
|
| $ (23,748,588) |
| $ (34,117,051) |
F. Regulatory Matters and Litigation
Market Timing Related Regulatory and Litigation Matters. Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including DWS Scudder. The DWS funds' advisors have been cooperating in connection with these inquiries and are in discussions with the regulators concerning proposed settlements. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the DWS funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain DWS funds, the funds' investment advisors and their affiliates, and certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each DWS fund's investment advisor has agreed to indemnify the applicable DWS funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. It is not possible to determine with certainty what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors.
With respect to the lawsuits, based on currently available information, the funds' investment advisors believe the likelihood that the pending lawsuits will have a material adverse financial impact on a DWS fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the DWS funds.
With respect to the regulatory matters, Deutsche Asset Management ("DeAM") has advised the funds as follows:
DeAM expects to reach final agreements with regulators in 2006 regarding allegations of improper trading in the DWS funds. DeAM expects that it will reach settlement agreements with the Securities and Exchange Commission, the New York Attorney General and the Illinois Secretary of State providing for payment of disgorgement, penalties, and investor education contributions totaling approximately $134 million. Approximately $127 million of this amount would be distributed to shareholders of the affected DWS funds in accordance with a distribution plan to be developed by an independent distribution consultant. DeAM does not believe that any of the DWS funds will be named as respondents or defendants in any proceedings. The funds' investment advisors do not believe these amounts will have a material adverse financial impact on them or materially affect their ability to perform under their investment management agreements with the DWS funds. The above-described amounts are not material to Deutsche Bank, and they have already been reserved.
Based on the settlement discussions thus far, DeAM believes that it will be able to reach a settlement with the regulators on a basis that is generally consistent with settlements reached by other advisors, taking into account the particular facts and circumstances of market timing at DeAM and at the legacy Scudder and Kemper organizations prior to their acquisition by DeAM in April 2002. Among the terms of the expected settled orders, DeAM would be subject to certain undertakings regarding the conduct of its business in the future, including maintaining existing management fee reductions for certain funds for a period of five years. DeAM expects that these settlements would resolve regulatory allegations that it violated certain provisions of federal and state securities laws (i) by entering into trading arrangements that permitted certain investors to engage in market timing in certain DWS funds and (ii) by failing more generally to take adequate measures to prevent market timing in the DWS funds, primarily during the 1999-2001 period. With respect to the trading arrangements, DeAM expects that the settlement documents will include allegations related to one legacy DeAM arrangement, as well as three legacy Scudder and six legacy Kemper arrangements. All of these trading arrangements originated in businesses that existed prior to the current DeAM organization, which came together in April 2002 as a result of the various mergers of the legacy Scudder, Kemper and Deutsche fund groups, and all of the arrangements were terminated prior to the start of the regulatory investigations that began in the summer of 2003. No current DeAM employee approved the trading arrangements.
There is no certainty that the final settlement documents will contain the foregoing terms and conditions. The independent Trustees/Directors of the DWS funds have carefully monitored these regulatory investigations with the assistance of independent legal counsel and independent economic consultants.
Other Regulatory Matters. DeAM is also engaged in settlement discussions with the Enforcement Staffs of the SEC and the NASD regarding DeAM's practices during 2001-2003 with respect to directing brokerage commissions for portfolio transactions by certain DWS funds to broker-dealers that sold shares in the DWS funds and provided enhanced marketing and distribution for shares in the DWS funds. In addition, DWS Scudder Distributors, Inc. is in settlement discussions with the Enforcement Staff of the NASD regarding DWS Scudder Distributors' payment of non-cash compensation to associated persons of NASD member firms, as well as DWS Scudder Distributors' procedures regarding non-cash compensation regarding entertainment provided to such associated persons.
G. Subsequent Event
On June 28, 2006, the Board of the Fund approved the conversion of the Class AARP shares of the Fund into the Class S shares of the Fund. This conversion was completed on July 14, 2006, and Class AARP shares are no longer offered.
Report of Independent Registered Public Accounting Firm
To the Trustees and the Shareholders of DWS U.S. Treasury Money Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights, present fairly, in all material respects, the financial position of DWS U.S. Treasury Money Fund (formerly Scudder U.S. Treasury Money Fund) (the "Fund") at May 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
Boston, Massachusetts | PricewaterhouseCoopers LLP |
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 621-1048.
Additional information announced by Deutsche Asset Management regarding the terms of the expected settlements referred to in the Market Timing Related Regulatory and Litigation Matters and Other Regulatory Matters in the Notes to Financial Statements will be made available at www.dws-scudder.com/regulatory_settlements, which will also disclose the terms of any final settlement agreements once they are announced.
A Special Meeting of shareholders (the "Meeting") of DWS U.S. Treasury Money Fund (the "Fund") was held on May 5, 2006, at the offices of Deutsche Asset Management, 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted upon by the shareholders (the resulting votes are presented below).
I Election of Trustees.
| Number of Votes: | |
| For | Withheld |
Henry P. Becton, Jr. | 92,255,746.018 | 5,525,491.955 |
Dawn-Marie Driscoll | 92,329,618.068 | 5,451,619.905 |
Keith R. Fox | 92,349,502.288 | 5,431,735.685 |
Kenneth C. Froewiss | 92,221,057.558 | 5,560,180.415 |
Martin J. Gruber | 92,303,328.748 | 5,477,909.225 |
Richard J. Herring | 92,514,502.818 | 5,266,735.155 |
Graham E. Jones | 92,425,344.528 | 5,355,893.445 |
Rebecca W. Rimel | 92,099,995.628 | 5,681,242.345 |
Philip Saunders, Jr. | 92,339,643.668 | 5,441,594.305 |
William N. Searcy, Jr. | 92,407,263.658 | 5,373,974.315 |
Jean Gleason Stromberg | 91,979,290.278 | 5,801,947.695 |
Carl W. Vogt | 92,312,746.148 | 5,468,491.825 |
Axel Schwarzer | 92,207,090.438 | 5,574,147.535 |
II-A. Approval of an Amended and Restated Investment Management Agreement:
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
87,192,181.348 | 6,022,450.800 | 4,368,326.825 | 198,279.000 |
II-B. Approval of a Subadvisor Approval Policy:
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
86,290,975.463 | 7,058,694.710 | 4,233,288.800 | 198,279.000 |
III. Approval of a Revised Fundamental Investment Restriction Regarding Commodities:
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
85,130,591.113 | 7,617,352.650 | 4,835,015.210 | 198,279.000 |
The Meeting was reconvened on June 1, 2006, at which time the following matter was voted upon by the shareholders (the resulting votes are presented below):
V-A. Approval of Amended and Restated Declaration of Trust.
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
95,694,464.508 | 7,313,513.210 | 4,905,042.965 | 191,020.000 |
The Meeting was adjourned until a future date, at which time the following matter will be voted upon by the shareholders:
V-B. Approval of Further Amendments to Amended and Restated Declaration of Trust.
* Broker non-votes are proxies received by the fund from brokers or nominees when the broker or nominee neither has received instructions from the beneficial owner or other persons entitled to vote nor has discretionary power to vote on a particular matter.
Investment Management Agreement Approval
Background and Board Considerations
DeIM proposed to the Board the separation of the investment management services and general administrative services provided by DeIM pursuant to its management agreement into two separate contracts, an investment management agreement and a related administrative services agreement. The investment management agreement and administrative services agreement were presented to the Board and considered by it as part of a broader program initiated by DeIM and intended to, among other things:
1. Reduce DeIM's operational, business and compliance risk while increasing efficiency in its mutual funds operations; and
2. Standardize and simplify the expenses and cap structures for DeIM's mutual fund products.
The Board, consisting solely of Independent Board Members at the time they considered the investment management agreement, conducted a thorough review of the potential implications of the investment management agreement and related administrative services agreement for the Fund's shareholders. They were assisted in this review by a special committee of the Board formed to review this proposal, by their independent legal counsel and by independent industry consultants. In the subsequent months, the Board and its committee met on numerous occasions to review and discuss the investment management agreement and related administrative services agreement, both among themselves and with representatives of DeIM. In the course of their review, the Board requested and received substantial additional information and negotiated changes to DeIM's initial proposal.
In March 2006, the Board, consisting solely of Independent Board Members at such time, approved the investment management agreement and related administrative services agreement with respect to the Fund. The Board also unanimously agreed to recommend that the investment management agreement be approved by the Fund's shareholders.
In approving the investment management agreement and the administrative services agreement, the Board considered the following factors, among other things:
The separation of the investment management services and general administrative services provided by DeIM into two separate contracts would provide greater flexibility in the future to adjust the administrative services arrangements of the Fund without the cost of a shareholder meeting.
The standardization and simplification of contract provisions and fees charged to the Fund would reduce the risks of operational and compliance errors.
The overall scope of the services being provided by DeIM and the standard of care applicable to those services would not be reduced as a result of this restructuring.
The fees paid by all DWS Funds overseen by the Board to DeIM in the aggregate under the proposed new contracts would not increase.
The Fund would experience a modest decrease in the total fees paid to DeIM as a result of the effort to standardize fee arrangements.
The expense limitation adopted by the Board would maintain Fund expenses at current levels through September 30, 2006, the normal contract renewal period for the Funds, and would be reconsidered as part of the Board's consideration of the future continuance of the agreements.
In reaching this conclusion, the Board did not give any particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, many of which were in executive session with only the Independent Board Members and their counsel present. It is possible that individual Board Members may have weighed these factors differently in reaching their individual conclusions to approve the new agreements.
The Board evaluated the restructuring of these contracts in conjunction with its broader annual review of all contractual arrangements between the Fund and DeIM and its affiliates in 2005. At the conclusion of this review, the Board unanimously voted to continue the current contractual arrangements between the Fund and DeIM in September 2005. The factors considered by the Board in connection with its general contract review, which are also pertinent to its approval of the new agreements, are described in the Fund's semiannual report for the period ended November 30, 2005.
The following table presents certain information regarding the Board Members and Officers of the Trust as of May 31, 2006. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each Board Member is c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex.
Independent Board Members | ||
Name, Year of Birth, Position with the Fund and Length of Time Served | Business Experience and Directorships During the Past Five Years | Number of Funds in Fund Complex Overseen |
Henry P. Becton, Jr. (1943) Board Member since 1990 | President, WGBH Educational Foundation. Directorships: Becton Dickinson and Company (medical technology company); Belo Corporation (media company); Concord Academy; Boston Museum of Science; Public Radio International; DWS Global High Income Fund, Inc. (since October 2005); DWS Global Commodities Stock Fund, Inc. (since October 2005). Former Directorships: American Public Television; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service | 86 |
Dawn-Marie Driscoll (1946) Chairman since 2004 Board Member since 1987 | President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley College; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Advisory Board, Center for Business Ethics, Bentley College; Member, Southwest Florida Community Foundation (charitable organization); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Former Directorships: Investment Company Institute. Former Memberships: Executive Committee of the Independent Directors Council of the Investment Company Institute | 88 |
Keith R. Fox (1954) Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private equity funds). Directorships: Progressive Holding Corporation (kitchen goods importer and distributor); Cloverleaf Transportation Inc. (trucking); Natural History, Inc. (magazine publisher); Box Top Media Inc. (advertising), DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005), and DWS RREEF Real Estate Fund II, Inc. (since April 2005) | 88 |
Kenneth C. Froewiss (1945) Board Member since 2005 | Clinical Professor of Finance, NYU Stern School of Business (1997-present); Director, DWS Global High Income Fund, Inc. (since 2001) and DWS Global Commodities Stock Fund, Inc. (since 2004); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996) | 86 |
Martin J. Gruber (1937) Board Member since 2006 | Nomura Professor of Finance, Leonard N. Stern School of Business, New York University (since September 1965); Director, Japan Equity Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since January 2000), Singapore Fund, Inc. (since January 2000), DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Formerly, Trustee, TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen Mutual Funds (January 1985-January 2001) | 88 |
Richard J. Herring (1946) Board Member since 2006 | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Director, Lauder Institute of International Management Studies (since July 2000); Co-Director, Wharton Financial Institutions Center (since July 2000); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000) | 88 |
Graham E. Jones (1933) Board Member since 2006 | Senior Vice President, BGK Realty, Inc. (commercial real estate) (since 1995); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Formerly, Trustee of various investment companies managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005) | 88 |
Rebecca W. Rimel (1951) Board Member since 2006 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable foundation) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001 to present); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Formerly, Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983 to 2004); Board Member, Investor Education (charitable organization) (2004-2005) | 88 |
Philip Saunders, Jr. (1935) Board Member since 2006 | Principal, Philip Saunders Associates (economic and financial consulting) (since November 1988); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005). Formerly, Director, Financial Industry Consulting, Wolf & Company (consulting) (1987-1988); President, John Hancock Home Mortgage Corporation (1984-1986); Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. (1982-1986) | 88 |
William N. Searcy, Jr. (1946) Board Member since 2006 | Private investor since October 2003; Trustee of seven open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Formerly, Pension & Savings Trust Officer, Sprint Corporation1 (telecommunications) (November 1989-October 2003) | 88 |
Jean Gleason Stromberg (1943) Board Member since 1999 | Retired. Formerly, Consultant (1997-2001); Director, US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; Service Source, Inc.; DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005), DWS RREEF Real Estate Fund, Inc. (since April 2005) and DWS RREEF Real Estate Fund II, Inc. (since April 2005). Former Directorships: Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996) | 88 |
Carl W. Vogt (1936) Board Member since 2002 | Senior Partner, Fulbright & Jaworski, L.L.P. (law firm); formerly, President (interim) of Williams College (1999-2000); President, certain funds in the Deutsche Asset Management Family of Funds (formerly, Flag Investors Family of Funds) (registered investment companies) (1999-2000). Directorships: Yellow Corporation (trucking); American Science & Engineering (x-ray detection equipment); ISI Family of Funds (registered investment companies, four funds overseen); National Railroad Passenger Corporation (Amtrak); DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005); formerly, Chairman and Member, National Transportation Safety Board | 86 |
Interested Board Member | ||
Name, Year of Birth, Position with the Fund and Length of Time Served | Name, Year of Birth, Position with the Fund and Length of Time Served | Number of Funds in Fund Complex Overseen |
Axel Schwarzer2 (1958) Board Member since 2006 | Managing Director4, Deutsche Asset Management; Head of Deutsche Asset Management Americas; CEO of DWS Scudder; formerly, board member of DWS Investments, Germany (1999-2005); formerly, Head of Sales and Product Management for the Retail and Private Banking Division of Deutsche Bank in Germany (1997-1999); formerly, various strategic and operational positions for Deutsche Bank Germany Retail and Private Banking Division in the field of investment funds, tax driven instruments and asset management for corporates (1989-1996) | 84 |
Officers3 | |
Name, Year of Birth, Position with the Fund and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held |
Michael G. Clark5,7 (1965) President, 2006-present | Managing Director4, Deutsche Asset Management (2006-present); President, The Central Europe and Russia Fund, Inc. (since June 2006), The European Equity Fund, Inc. (since June 2006), The New Germany Fund, Inc. (since June 2006), DWS Global High Income Fund, Inc. (since June 2006), DWS Global Commodities Stock Fund, Inc. (since June 2006), DWS RREEF Real Estate Fund, Inc. (since June 2006), DWS RREEF Real Estate Fund II, Inc. (since June 2006); formerly, Director of Fund Board Relations (2004-2006) and Director of Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations, Merrill Lynch Asset Management (1997-2000) |
John Millette6 (1962) Vice President and Secretary, 1999-present | Director4, Deutsche Asset Management |
Paul H. Schubert5 (1963) Chief Financial Officer, 2004-present Treasurer, 2005-present | Managing Director4, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998) |
Patricia DeFilippis5 (1963) Assistant Secretary, 2005-present | Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003) |
Elisa D. Metzger5 (1962) Assistant Secretary 2005-present | Director4, Deutsche Asset Management (since September 2005); formerly, Counsel, Morrison and Foerster LLP (1999-2005) |
Caroline Pearson6 (1962) Assistant Secretary, 1997-present | Managing Director4, Deutsche Asset Management |
Scott M. McHugh6 (1971) Assistant Treasurer, 2005-present | Director4, Deutsche Asset Management |
Kathleen Sullivan D'Eramo6 (1957) Assistant Treasurer, 2003-present | Director4, Deutsche Asset Management |
John Robbins5 (1966) Anti-Money Laundering Compliance Officer, 2005-present | Managing Director4, Deutsche Asset Management (since 2005); formerly, Chief Compliance Officer and Anti-Money Laundering Compliance Officer for GE Asset Management (1999-2005) |
Philip Gallo5 (1962) Chief Compliance Officer, 2004-present | Managing Director4, Deutsche Asset Management (2003-present); formerly, Co-Head of Goldman Sachs Asset Management Legal (1994-2003) |
A. Thomas Smith5 (1956) Chief Legal Officer, 2005-present | Managing Director4, Deutsche Asset Management (2004-present); formerly, General Counsel, Morgan Stanley and Van Kampen and Investments (1999-2004); Vice President and Associate General Counsel, New York Life Insurance Company (1994-1999); senior attorney, The Dreyfus Corporation (1991-1993); senior attorney, Willkie Farr & Gallagher (1989-1991); staff attorney, US Securities & Exchange Commission and the Illinois Securities Department (1986-1989) |
1 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
2 The mailing address of Axel Schwarzer is c/o Deutsche Investment Management Americas, Inc., 345 Park Avenue, New York, New York 10154. Mr. Schwarzer is an interested Board Member by virtue of his positions with Deutsche Asset Management.
3 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the funds.
4 Executive title, not a board directorship.
5 Address: 345 Park Avenue, New York, New York 10154.
6 Address: Two International Place, Boston, MA 02110.
7 Elected June 27, 2006.
The fund's Statement of Additional Information ("SAI") includes additional information about the Trustees. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: 1-800-621-1048.
For shareholders of Class AARP and Class S | |
Automated Information Lines | SAILTM (800) 343-2890 |
| Personalized account information, the ability to exchange or redeem shares, and information on other DWS funds and services via touchtone telephone. |
Web Site | www.dws-scudder.com |
| View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more. |
For More Information | (800) 728-3337 To speak with a DWS Scudder service representative. |
Written Correspondence | DWS Scudder PO Box 219669 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-scudder.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at 1-800-621-1048. |
Principal Underwriter | If you have questions, comments or complaints, contact: DWS Scudder Distributors, Inc. 222 South Riverside Plaza (800) 621-1148 |
| Class AARP | Class S |
Nasdaq Symbol | SUSXX | SCGXX |
Fund Number | 2159 | 2059 |
Notes
Notes
| ITEM 2. | CODE OF ETHICS. |
As of the end of the period, May 31, 2006, DWS U.S. Treasury Money Fund has a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Funds’ audit committee is comprised solely of trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Funds’ Board of Trustees has determined that there are several “audit committee financial experts” serving on the Funds’ audit committee. The Board has determined that Keith R Fox, the chair of the Funds’ audit committee, qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on its review of Mr. Fox’s pertinent experience and education. The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
DWS U.S. TREASURY MONEY FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
Fiscal Year | Audit Fees Billed to Fund | Audit-Related | Tax Fees Billed to Fund | All |
2006 | $40,200 | $0 | $0 | $0 |
2005 | $39,500 | $225 | $3,500 | $0 |
The above “Audit- Related Fees” were billed for agreed upon procedures performed and the above "Tax Fees" were billed for professional services rendered for tax return preparation.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas, Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
Fiscal Year | Audit-Related | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All |
2006 | $45,200 | $197,605 | $0 |
2005 | $581,822 | $0 | $0 |
The “Audit-Related Fees” were billed for services in connection with the assessment of internal controls, agreed-upon procedures and additional related procedures and the above “Tax Fees” were billed in connection with consultation services and agreed-upon procedures.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.
Fiscal Year | Total (A) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund) (B) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements) (C) | Total of (A), (B) |
2006 | $0 | $197,605 | $15,000 | $212,605 |
2005 | $3,500 | $0 | $207,146 | $210,646 |
All other engagement fees were billed for services in connection with risk management, tax services and process improvement/integration initiatives for DeIM and other related entities that provide support for the operations of the fund.
| 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. |
The Nominating and Governance Committee evaluates and nominates Board member candidates. Fund shareholders may also submit nominees that will be considered by the Committee when a Board vacancy occurs. Submissions should be mailed to the attention of the Secretary of the Fund, Two International Place, 10th Floor, Boston, MA 02110.
| 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 registrant’s last half-year (the registrant’s second fiscal half-year in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. |
| ITEM 12. | EXHIBITS. |
(a)(1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a)(2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | DWS U.S. Treasury Money Fund |
By: | /s/Michael G. Clark | |
| Michael G. Clark |
|
President
Date: | July 28, 2006 |
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.
Registrant: | DWS U.S. Treasury Money Fund |
By: | /s/Michael G. Clark | |
| Michael G. Clark |
|
President
Date: | July 28, 2006 |
By: | /s/Paul Schubert | |
| Paul Schubert |
|
Chief Financial Officer and Treasurer
Date: | July 28, 2006 |