UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number | 811-03632 |
DWS Tax Free 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) 454-7190
Paul Schubert
345 Park Avenue
New York, NY 10154-0004
(Name and Address of Agent for Service)
Date of fiscal year end: | 5/31 |
Date of reporting period: | 5/31/2010 |
ITEM 1. | REPORT TO STOCKHOLDERS |
MAY 31, 2010 Annual Report
to Shareholders |
|
DWS Intermediate Tax/AMT Free Fund |
 |
Contents
4 Performance Summary 7 Information About Your Fund's Expenses 9 Portfolio Management Review 14 Portfolio Summary 16 Investment Portfolio 31 Statement of Assets and Liabilities 33 Statement of Operations 34 Statement of Cash Flows 35 Statement of Changes in Net Assets 36 Financial Highlights 41 Notes to Financial Statements 49 Report of Independent Registered Public Accounting Firm 50 Tax Information 51 Summary of Management Fee Evaluation by Independent Fee Consultant 56 Board Members and Officers 60 Account Management Resources |
This report must be preceded or accompanied by a prospectus. To obtain a summary prospectus, if available, or prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the fund. Please read the prospectus carefully before you invest.
Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Although the fund seeks income that is federally tax-free, a portion of the fund's distributions may be subject to federal, state and local taxes, including the alternative minimum tax. See the prospectus for details.
DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Performance Summary May 31, 2010
Average Annual Total Returns as of 5/31/10 |
Unadjusted for Sales Charge | 1-Year | 3-Year | 5-Year | 10-Year | |
Class A | 6.58% | 5.36% | 4.07% | 4.77% | |
Class B | 5.68% | 4.51% | 3.24% | 3.95% | |
Class C | 5.76% | 4.57% | 3.28% | 3.98% | |
Adjusted for the Maximum Sales Charge | | | | | |
Class A (max 2.75% load) | 3.65% | 4.39% | 3.49% | 4.48% | |
Class B (max 4.00% CDSC) | 2.68% | 3.90% | 3.07% | 3.95% | |
Class C (max 1.00% CDSC) | 5.76% | 4.57% | 3.28% | 3.98% | |
No Sales Charges | | | | | Life of Institutional Class* |
Class S | 6.81% | 5.57% | 4.27% | 5.05% | N/A |
Institutional Class | 6.95% | 5.69% | 4.35% | N/A | 4.29% |
Barclays Capital 7-Year Municipal Bond Index+ | 6.87% | 6.66% | 5.00% | 5.82% | 4.83% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
* Institutional Class shares commenced operations on December 20, 2004. Index returns began on December 31, 2004.
Performance in the Average Annual Total Returns table above and the Growth of an Assumed $10,000 Investment line graph that follows is historical and does not guarantee future results. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit www.dws-investments.com for the Fund's most recent month-end performance. 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, 2009 are 0.84%, 1.64%, 1.61%, 0.65% and 0.55% for Class A, Class B, Class C, Class S and Institutional Class shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Index returns, unlike Fund returns, do not reflect any fees or expenses. 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.
Returns shown for Class A, B and C shares for the period prior to their inception on June 11, 2001 are derived from the historical performance of Class S shares of DWS Intermediate Tax/AMT Free Fund during such periods and have been adjusted to reflect the higher total annual operating expenses of each specific class. Any difference in expenses will affect performance.
Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) |
[] DWS Intermediate Tax/AMT Free Fund — Class A [] Barclays Capital 7-Year Municipal Bond Index+ |
 |
Yearly periods ended May 31 |
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 Barclays Capital 7-Year Municipal Bond Index is an unmanaged, total return subset of the Barclays Capital Municipal Bond Index. It includes maturities of six to eight years.
Net Asset Value and Distribution Information |
| Class A | Class B | Class C | Class S | Institutional Class |
Net Asset Value: 5/31/10 | $ 11.46 | $ 11.47 | $ 11.46 | $ 11.47 | $ 11.47 |
5/31/09 | $ 11.15 | $ 11.16 | $ 11.15 | $ 11.15 | $ 11.15 |
Distribution Information: Twelve Months as of 5/31/10: Income Dividends | $ .40 | $ .30 | $ .31 | $ .41 | $ .43 |
Capital Gain Distributions | $ .01 | $ .01 | $ .01 | $ .01 | $ .01 |
May Income Dividend | $ .0311 | $ .0235 | $ .0234 | $ .0323 | $ .0336 |
SEC 30-day Yield‡‡ as of 5/31/10 | 2.31% | 1.61% | 1.59% | 2.50% | 2.65% |
Tax Equivalent Yield‡‡ as of 5/31/10 | 3.55% | 2.48% | 2.45% | 3.85% | 4.08% |
Current Annualized Distribution Rate‡‡ as of 5/31/10 | 3.20% | 2.41% | 2.40% | 3.32% | 3.45% |
‡‡ The SEC yield is net investment income per share earned over the month ended May 31, 2010, 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. Tax equivalent yield is based on the Fund's yield and a marginal federal income tax rate of 35%. Current annualized distribution rate is the latest monthly dividend shown as an annualized percentage of net asset value on May 31, 2010. Distribution rate simply measures the level of dividends and is not a complete measure of performance. Yields and distribution rates are historical, not guaranteed, and will fluctuate.
Lipper Rankings — Intermediate Municipal Debt Funds Category as of 5/31/10 |
Period | Rank | | Number of Fund Classes Tracked | Percentile Ranking (%) |
Class A 1-Year | 96 | of | 155 | 62 |
3-Year | 21 | of | 139 | 15 |
5-Year | 34 | of | 121 | 28 |
Class B 1-Year | 126 | of | 155 | 81 |
3-Year | 84 | of | 139 | 60 |
5-Year | 89 | of | 121 | 73 |
Class C 1-Year | 123 | of | 155 | 79 |
3-Year | 81 | of | 139 | 58 |
5-Year | 87 | of | 121 | 72 |
Class S 1-Year | 89 | of | 155 | 58 |
3-Year | 13 | of | 139 | 10 |
5-Year | 19 | of | 121 | 16 |
10-Year | 23 | of | 74 | 31 |
Institutional Class 1-Year | 83 | of | 155 | 54 |
3-Year | 12 | of | 139 | 9 |
5-Year | 16 | of | 121 | 14 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.
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), 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. 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 (December 1, 2009 to May 31, 2010).
The tables illustrate your Fund's expenses in two ways:
• Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
• Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.
Expenses and Value of a $1,000 Investment (Including Interest Expense)* for the six months ended May 31, 2010 |
Actual Fund Return | Class A | Class B | Class C | Class S | Institutional Class |
Beginning Account Value 12/1/09 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/10 | $ 1,027.10 | $ 1,022.90 | $ 1,024.00 | $ 1,028.60 | $ 1,029.30 |
Expenses Paid per $1,000** | $ 3.99 | $ 7.97 | $ 7.92 | $ 3.24 | $ 2.63 |
Hypothetical 5% Fund Return | Class A | Class B | Class C | Class S | Institutional Class |
Beginning Account Value 12/1/09 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/10 | $ 1,020.99 | $ 1,017.05 | $ 1,017.10 | $ 1,021.74 | $ 1,022.34 |
Expenses Paid per $1,000** | $ 3.98 | $ 7.95 | $ 7.90 | $ 3.23 | $ 2.62 |
Annualized Expense Ratios | Class A | Class B | Class C | Class S | Institutional Class |
DWS Intermediate Tax/AMT Free Fund | .79% | 1.58% | 1.57% | .64% | .52% |
Expenses and Value of a $1,000 Investment (Excluding Interest Expense)* for the six months ended May 31, 2010 |
Actual Fund Return | Class A | Class B | Class C | Class S | Institutional Class |
Beginning Account Value 12/1/09 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/10 | $ 1,027.10 | $ 1,022.90 | $ 1,024.00 | $ 1,028.60 | $ 1,029.30 |
Expenses Paid per $1,000** | $ 3.89 | $ 7.87 | $ 7.82 | $ 3.14 | $ 2.53 |
Hypothetical 5% Fund Return | Class A | Class B | Class C | Class S | Institutional Class |
Beginning Account Value 12/1/09 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/10 | $ 1,021.09 | $ 1,017.15 | $ 1,017.20 | $ 1,021.84 | $ 1,022.44 |
Expenses Paid per $1,000** | $ 3.88 | $ 7.85 | $ 7.80 | $ 3.13 | $ 2.52 |
* 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.
** Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 365.
Annualized Expense Ratios | Class A | Class B | Class C | Class S | Institutional Class |
DWS Intermediate Tax/AMT Free Fund | .77% | 1.56% | 1.55% | .62% | .50% |
For more information, please refer to the Fund's prospectus.
Portfolio Management Review
A Team Approach to Investing
Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for DWS Intermediate Tax/AMT Free 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 institutional and retail clients. DIMA 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.
DIMA 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
Philip G. Condon
Ashton P. Goodfield, CFA
Co-Lead Portfolio Managers
Shelly L. Deitert
Portfolio Manager
Overview of Market and Fund Performance
The views expressed in the following discussion reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
DWS Intermediate Tax/AMT Free Fund Class A shares posted a return of 6.58% over the 12 months ended May 31, 2010. The overall municipal bond market, as measured by the unmanaged Barclays Capital Municipal Bond Index, delivered a total return of 8.52% for the same period.1 The Barclays Capital 7-Year Municipal Bond Index returned 6.87%.2 The broad taxable bond market, as measured by the Barclays Capital Aggregate Bond Index, provided a total return of 8.42% for the same period.3 The fund's average peer in the Lipper Intermediate Municipal Debt Funds category returned 7.04%.4 (Returns are unadjusted for sales charges. If sales charges had been included, returns would have been lower. Past performance is no guarantee of future results. Please see pages 4 through 6 for complete performance information.)
For much of the period, the credit markets showed signs of ebullience. Investors focused on economic numbers that were less dire than those in the immediate aftermath of the financial crisis precipitated in September of 2008. The municipal market continued to be dogged by concerns over the finances of states and localities, with California generating many of the negative headlines. Still, municipals as an asset class continued to be viewed as high quality and as providing an attractive alternative to the very low yields available on Treasuries and cash equivalents. In addition, with the federal budget deficit climbing as the government seeks to stimulate the economy, municipals likely have benefited from investors' anticipating income tax increases going forward to fund these efforts.
During the period, new tax-free supply was reduced as municipal issuers took advantage of the American Recovery and Reinvestment Act to issue taxable Build America Bonds with interest rates in effect subsidized by the federal government. The reduced supply of new tax-free bonds helped increase demand for existing long-term issues. Retail investors provided significant support for municipals over the 12 months, and mutual fund flows were consistently positive through the period.
The US Federal Reserve Board (the Fed) maintained its zero interest rate policy over the 12 months, keeping the benchmark federal funds rate within the unprecedented target range of 0% to 0.25%.5 Rates fell along the entire municipal yield curve and the curve flattened as declines were the greatest on longer maturities.6 Since a bond's yield moves in the opposite direction of its price, this meant that performance of long-term municipal bonds was generally better than among shorter issues. Specifically, the two-year bond yield decreased 36 basis points (one basis point equals 0.01%), from 0.94% to 0.58%, while the 30-year yield fell 55 basis points, from 4.55% to 4.00%, resulting in a total flattening of 19 basis points. (See the graph below for municipal bond yield changes from the beginning to the end of the period.)
Municipal Bond Yield Curve (as of 5/31/09 and 5/31/10) |
 |
Source: Municipal Market Data, AAA-rated universe
This chart is for illustrative purposes only and is not intended to represent the yield of any DWS fund. Performance is historical and does not guarantee future results.
As municipalities came under pressure with the national economic downturn, the trend was in the direction of declining credit quality.7 Among the more significant issuers, California and Illinois were subjected to downgrades during the period. Despite this backdrop, municipal credit spreads — the yield advantage provided by lower-quality issues — generally narrowed over the 12 months.8 Lower-rated issues benefited in particular from individual investors seeking incremental yield, with airline-, tobacco- and hospital-related issues all outperforming the broader municipal market. In addition, tax-free industrial development revenue and pollution control revenue bonds, which rely on a private issuer's credit rather than that of a municipality, provided strong returns.
Late in the period, two of the three leading rating services, Moody's and Fitch, recalibrated their ratings of municipal bonds to better reflect the likelihood of default for the asset class relative to corporate issues. As a result, many municipal issues received a ratings upgrade.
Positive Contributors to Fund Performance
With credit spreads at very attractive levels entering the period, we focused on increasing exposure to lower-quality issues. As the period progressed and credit spreads narrowed, this helped performance. In particular, the fund had exposure to newly issued airport and single family housing bonds which have been exempted from the alternative minimum tax starting in 2010, adding to the fund's yield.
Given a steep yield curve, we looked throughout the period to increase exposure to bonds with final maturities between 15 and 25 years. This added to relative performance as the yield curve flattened through significant rate declines among longer maturities.
Among lower-quality holdings, our exposure to higher-yielding prepaid gas utility bonds and Puerto Rico bonds added to returns.
Negative Contributors to Fund Performance
While we were focused on adding to the fund's longer-term positions, we did have significant exposure to shorter-term issues with final maturities under two years in order to maintain overall intermediate portfolio duration.9 These holdings constrained returns to a degree as interest rate declines and price increases lagged for shorter-term issues.
The fund's holding of prerefunded bonds, which are of AAA quality, held back relative performance as credit spreads narrowed and lower-quality issues outperformed over the period.10
Outlook and Positioning
Municipal yields are close to normal historical levels (approximately 82%) versus US Treasury bonds. At the end of May, the 10-year municipal bond was yielding approximately 85% of the comparable maturity US Treasury bond. Given a continued steep yield curve and attractive credit spreads, we believe bonds rated AA or A with final maturities in the 15-to-25-year range could offer opportunities.
As we enter a new fiscal period, we will be closely monitoring at least two regulatory issues with the potential to impact prices in the municipal market. As part of government efforts to stimulate the economy, new issuance for several higher-yielding municipal sectors traditionally subject to the alternative minimum tax (AMT) were exempted from the AMT in 2010.11 If this exemption is extended, it could continue to provide opportunities for the fund to add yield. It is also possible that the subsidized issuance of taxable Build America Bonds will continue for at least another calendar year. In that event, we could continue to see reduced supply of new long-term tax-free bonds, potentially leading to increased price support for existing issues.
State and local governments continue to be challenged to find spending cuts necessary to balance their budgets. With this backdrop and with the greatly decreased role of bond insurance in the municipal market, the expertise we bring to researching municipal sectors and individual issues has never been more important. We will continue to take a prudent approach to investing in the municipal market that emphasizes careful security selection and broad diversification, while seeking to maintain an attractive dividend and minimize capital gains distributions.
1 The Barclays Capital Municipal Bond Index is an unmanaged, broad-based, total-return index comprising more than 40,000 investment-grade, fixed-rate municipal bonds with maturities of at least two years.
2 The Barclays Capital 7-Year Municipal Bond Index is an unmanaged, total-return subset of the Barclays Capital Municipal Bond Index. It includes maturities of six to eight years.
3 The Barclays Capital Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with average maturities of one year or more.
Index returns, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
4 The Lipper Intermediate Municipal Debt Funds category includes funds that invest in municipal debt issues with dollar-weighted average maturities of 5 to 10 years. Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper Inc. as falling into the Intermediate Municipal Debt Funds category. For the 1-, 5- and 10-year periods, this category's average return was 7.04% (155 funds), 3.71% (121 funds) and 4.76% (74 funds), respectively, as of 5/31/10. Category returns assume reinvestment of dividends. It is not possible to invest directly into a Lipper category.
5 The federal funds rate is the interest rate, set by the US Federal Reserve, at which banks lend money to each other, usually on an overnight basis.
6 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 (and when the yield curve is characterized as "steep," this is especially true), the line rises from left to right as investors who are willing to tie up their money for a longer period are rewarded with higher yields.
7 Credit quality is a measure of a bond issuer's ability to repay interest and principal on time. Rating agencies assign letter designations such as AAA and AA. The lower the rating, the higher the probability of default.
8 Credit spread is the additional yield provided by municipal bonds rated AA and below versus municipals rated AAA with comparable effective maturity.
9 Duration is a measure of a fund's sensitivity to interest rate changes, i.e., the longer a fund's duration, the more sensitive it is to changes in interest rates.
10 Prerefunded bonds have their principal cash amount already held in escrow until the maturity date.
11 Alternative minimum tax (AMT) uses a separate set of rules to calculate taxable income after allowed deductions. It is a tax calculation that adds certain tax preference items back into adjusted gross income.
Portfolio Summary
Asset Allocation (As a % of Investment Portfolio) | 5/31/10 | 5/31/09 |
| | |
Revenue Bonds | 67% | 60% |
General Obligation Bonds | 20% | 23% |
Lease Obligations | 8% | 6% |
ETM/Prerefunded | 5% | 11% |
| 100% | 100% |
Quality | 5/31/10 | 5/31/09 |
| | |
AAA | 21% | 17% |
AA | 45% | 46% |
A | 26% | 30% |
BBB | 6% | 6% |
Not Rated | 2% | 1% |
| 100% | 100% |
Effective Maturity | 5/31/10 | 5/31/09 |
| | |
Less than 1 year | 15% | 12% |
1-4.99 years | 29% | 35% |
5-9.99 years | 47% | 45% |
10-14.99 years | 8% | 7% |
15-20 years | 1% | 1% |
| 100% | 100% |
Effective maturity is the weighted average of the bonds held by the Fund taking into consideration any maturity shortening features.
Weighted average effective maturity: 5.8 years and 5.5 years, respectively.
Asset allocation, quality and effective maturity are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Fund's credit quality does not remove market risk.
Top Five State Allocations (As a % of Investment Portfolio) | 5/31/10 | 5/31/09 |
| | |
Texas | 17% | 21% |
California | 15% | 14% |
Florida | 7% | 4% |
Illinois | 5% | 7% |
New York | 5% | 7% |
Top five state allocations are subject to change.
For more complete details about the Fund's investment portfolio, see page 16. A quarterly Fact Sheet is available upon request. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A complete list of the Fund's portfolio holdings is also posted on www.dws-investments.com from time to time. Please see the Fund's current prospectus for more information.
Investment Portfolio as of May 31, 2010
| Principal Amount ($) | Value ($) |
| |
Municipal Bonds and Notes 98.1% |
Alabama 0.3% |
Alabama, State Public School & College Authority Revenue, Series A, 5.0%, 5/1/2024 | 3,000,000 | 3,273,330 |
Arizona 2.9% |
Arizona, Health Facilities Authority Revenue, Banner Health, Series A, 5.0%, 1/1/2020 | 3,000,000 | 3,135,060 |
Arizona, Health Facilities Authority, Hospital System Revenue, Phoenix Baptist Hospital & Medical Center, ETM, 6.25%, 9/1/2011 (a) | 65,000 | 66,878 |
Arizona, State Transportation Board Excise Tax Revenue, Maricopa County Regional Area Road, 5.0%, 7/1/2025 | 3,000,000 | 3,331,710 |
Arizona, Water Infrastructure Finance Authority Revenue, Series A, 5.0%, 10/1/2024 | 4,000,000 | 4,482,880 |
Maricopa County, AZ, Industrial Development Authority, Hospital Facility Revenue, Samaritan Health Services, Series B, ETM, 6.0%, 12/1/2019 (a) | 3,590,000 | 4,222,235 |
Phoenix, AZ, Civic Improvement Corp., 0.28%*, 6/3/2010 | 4,000,000 | 4,000,000 |
Phoenix, AZ, Civic Improvement Corp., Wastewater System Revenue, 5.5%, 7/1/2022 | 2,545,000 | 2,918,275 |
Phoenix, AZ, General Obligation, Series B, 5.0%, 7/1/2018 | 10,000,000 | 11,569,500 |
| 33,726,538 |
Arkansas 0.0% |
Jefferson County, AR, Health Care Facilities, 1978 Conventional Series, ETM, 7.4%, 12/1/2010 (a) | 90,000 | 93,232 |
California 15.2% |
California, Bay Area Toll Authority, Toll Bridge Revenue, San Francisco Bay Area: | |
| Series D-1, 0.22%*, 4/1/2045 | 3,500,000 | 3,500,000 |
| Series F-1, 5.0%, 4/1/2028 | 10,000,000 | 10,661,300 |
| Series F-1, 5.25%, 4/1/2029 | 2,500,000 | 2,699,725 |
California, Department of Water Resources Power Supply Revenue, Series A, Prerefunded, 5.5%, 5/1/2015 (a) | 10,000,000 | 11,038,900 |
California, Electric Revenue, Department of Water Resources & Power Supply, Series A, Prerefunded, 5.875%, 5/1/2016 | 7,000,000 | 7,777,420 |
California, General Obligation, Economic Recovery, Series A, 5.25%, 7/1/2014 (a) | 10,000,000 | 11,363,300 |
California, Health Facilities Financing Authority Revenue, Catholic Healthcare West, Series A, 6.0%, 7/1/2029 | 4,000,000 | 4,340,880 |
California, Infrastructure & Economic Development Bank Revenue, Clean Water, State Revolving Fund, 5.0%, 10/1/2017 | 6,735,000 | 7,323,302 |
California, Pollution Control Financing Authority, Solid Waste Disposal Revenue, USA Waste Services, Inc. Project, Series B, 4.0%, Mandatory Put 6/1/2011 @ 100, 6/1/2018 | 4,100,000 | 4,101,845 |
California, State Department Water Resources Center, Valley Project Revenue: | |
| Series Y, Prerefunded, 5.25%, 12/1/2016 (a) | 45,000 | 50,833 |
| Series Y, 5.25%, 12/1/2016 (a) | 2,955,000 | 3,297,160 |
California, State Economic Recovery, Series A, 5.25%, 7/1/2021 | 5,000,000 | 5,620,250 |
California, State General Obligation, Various Purposes: |
| 5.25%, 10/1/2025 | 10,000,000 | 10,581,900 |
| 5.75%, 4/1/2027 | 5,000,000 | 5,402,200 |
| 6.0%, 4/1/2018 | 1,700,000 | 1,994,372 |
| 6.0%, 3/1/2033 | 3,765,000 | 4,135,890 |
California, State Public Works Board, Lease Revenue, Capital Projects, Series I-1, 6.25%, 11/1/2021 | 7,000,000 | 7,862,470 |
California, State Public Works Board, Lease Revenue, Department of General Services, Buildings 8 & 9, Series A, 6.125%, 4/1/2028 | 2,000,000 | 2,138,400 |
California, Statewide Communities Development Authority Revenue, Series 2089, 144A, 0.29%*, 10/1/2036 | 3,715,000 | 3,715,000 |
Emeryville, CA, Redevelopment Agency, Residential Mortgage, ETM, 7.5%, 9/1/2011 | 45,000 | 46,959 |
Los Angeles, CA, Department of Airports Revenue, Los Angeles International Airport, Series A, 5.0%, 5/15/2031 | 10,000,000 | 10,496,100 |
Los Angeles, CA, General Obligation: |
| Series A, 5.0%, 9/1/2019 (a) | 6,340,000 | 7,083,429 |
| Series A, 5.0%, 9/1/2020 (a) | 5,915,000 | 6,558,552 |
Los Angeles, CA, School District General Obligation, Prerefunded, 5.5%, 7/1/2015 (a) | 4,000,000 | 4,559,080 |
Orange County, CA, Airport Revenue, Series A, 5.25%, 7/1/2025 | 3,000,000 | 3,221,820 |
Orange County, CA, Water District, 0.36%*, 6/3/2010 | 400,000 | 400,000 |
Sacramento, CA, Municipal Utility District, Electric Revenue, Series U, 5.0%, 8/15/2023 (a) | 7,000,000 | 7,702,100 |
San Diego, CA, Public Facilities Financing Authority, Sewer Revenue, Series A, 5.125%, 5/15/2029 | 4,000,000 | 4,292,480 |
San Francisco, CA, City & County Airports Commission, International Airport Revenue, Series E, 5.25%, 5/1/2024 | 9,000,000 | 9,794,880 |
San Francisco, CA, City & County Airports Commission, International Airport Revenue, Governmental Purpose: | |
| Series C, 5.0%, 5/1/2025 | 2,000,000 | 2,138,760 |
| Series C, 5.0%, 5/1/2026 | 2,850,000 | 3,031,032 |
San Joaquin Hills, CA, Transportation/Tolls Revenue, Transportation Corridor Agency, Toll Road Revenue, Series A, Zero Coupon, 1/15/2012 (a) | 825,000 | 752,639 |
South Orange County, CA, Public Finance Authority, Special Tax Revenue, Foothill Area, Series A, 5.25%, 8/15/2016 (a) | 6,260,000 | 6,640,796 |
Turlock, CA, Public Financing Authority Revenue, 5.25%, 9/1/2015 | 30,000 | 30,635 |
Ventura County, CA, Certificates of Participation, Public Financing Authority III, 6.0%, 8/15/2026 | 3,370,000 | 3,758,359 |
| 178,112,768 |
Colorado 2.3% |
Aurora, CO, Water Improvement Revenue, First Lien, Series A, 5.0%, 8/1/2021 (a) | 7,000,000 | 7,687,820 |
Colorado, E-470 Public Highway Authority Revenue, Series C2, 5.0%, Mandatory Put 9/2/2013 @ 100, 9/1/2039 (a) | 8,000,000 | 8,543,040 |
Colorado, Educational & Cultural Facilities Authority Revenue, Fremont Christian School Project, 0.27%*, 6/1/2038, US Bank NA (b) | 2,610,000 | 2,610,000 |
Colorado, Health Facilities Authority Revenue, Catholic Health Initiatives, Series C-6, 3.95%, Mandatory Put 11/10/2010 @ 100, 9/1/2036 | 2,680,000 | 2,719,074 |
Colorado, Health Facilities Authority Revenue, Sisters Leavenworth, Series A, 5.25%, 1/1/2025 | 2,500,000 | 2,624,775 |
Colorado, Housing & Finance Authority Revenue, Single Family Mortgage, "I", Series B3, 0.27%*, 11/1/2021 | 2,000,000 | 2,000,000 |
Colorado, Housing Finance Authority, Multi-Family Insured Mortgage, Series C-3, 5.7%, 10/1/2021 | 70,000 | 70,075 |
Colorado, Housing Finance Authority, Single Family Program: |
| Series A-3, 6.5%, 5/1/2016 | 20,000 | 20,903 |
| Series B-3, 6.55%, 5/1/2025 | 12,000 | 12,462 |
Colorado, University Enterprise System Revenue, Series A, 5.5%, 6/1/2023 | 1,000,000 | 1,156,480 |
| 27,444,629 |
Connecticut 0.3% |
Connecticut, State General Obligation, Series C, 5.0%, 6/1/2017 (a) | 3,170,000 | 3,652,537 |
District of Columbia 0.7% |
District of Columbia, Bond Anticipation Notes, Pilot Arthur Revenue, 4.0%, 12/1/2012 | 3,705,000 | 3,876,875 |
District of Columbia, Water & Sewer Revenue, Public Utility Revenue, 6.0%, 10/1/2013 (a) | 3,630,000 | 4,214,285 |
| 8,091,160 |
Florida 7.3% |
Broward County, FL, Water & Sewer Utility Revenue, Series A, 5.0%, 10/1/2024 | 2,745,000 | 2,969,294 |
Dade County, FL, Health Facilities Authority Hospital Revenue, Baptist Hospital of Miami Project, Series A, ETM, 5.75%, 5/1/2021 (a) | 4,005,000 | 4,741,960 |
Florida, Citizens Property Insurance Corp., High Risk Senior Secured Notes: | |
| Series A2, 2.0%, 4/21/2011 | 5,295,000 | 5,338,737 |
| Series A, 5.0%, 3/1/2011 (a) | 4,000,000 | 4,119,080 |
Florida, Housing Finance Corp. Revenue, Homeowner Mortgage Special Program, Series A, 5.0%, 7/1/2028 (c) | 2,665,000 | 2,852,216 |
Florida, Hurricane Catastrophe Fund Finance Corp. Revenue, Series A, 5.0%, 7/1/2012 | 7,200,000 | 7,611,480 |
Florida, Lee Memorial Health Systems, Hospital Revenue, Series C, 0.25%*, 4/1/2033, Northern Trust Co. (b) | 1,980,000 | 1,980,000 |
Florida, State Department of Environmental Protection Preservation Revenue, Series C, 4.0%, 7/1/2012 | 6,740,000 | 7,179,920 |
Florida, State Department of Environmental Protection Preservation Revenue, Florida Forever Program, Series A, 5.0%, 7/1/2011 (a) | 1,820,000 | 1,909,871 |
Miami-Dade County, FL, Aviation Revenue, Series A, 5.75%, 10/1/2026 | 8,000,000 | 8,660,080 |
Miami-Dade County, FL, Aviation Revenue, Miami International Airport: | |
| Series A-1, 5.5%, 10/1/2025 | 3,000,000 | 3,232,830 |
| Series A-1, 5.5%, 10/1/2026 | 4,400,000 | 4,715,216 |
Miami-Dade County, FL, School Board, Certificates of Participation, Series A, 5.0%, 5/1/2019 (a) | 3,000,000 | 3,138,060 |
Miami-Dade County, FL, Water & Sewer Systems Revenue, 5.0%, 10/1/2027 (a) | 10,000,000 | 10,596,000 |
Orlando & Orange County, FL, Expressway Authority Revenue, Series A, 5.0%, 7/1/2028 | 7,500,000 | 7,850,775 |
Orlando, FL, Utilities Commission, Utility System Revenue, Series C, 5.0%, 10/1/2011 | 1,000,000 | 1,058,490 |
South Florida, Water Management District, Certificates of Participation, 5.0%, 10/1/2018 (a) | 4,000,000 | 4,422,720 |
South Miami, FL, Health Facilities Authority, Hospital Revenue, Baptist Health South Florida Group, 5.0%, 8/15/2021 | 2,500,000 | 2,601,100 |
St. John's County, FL, Industrial Development Authority Revenue, Series A, 5.5%, 3/1/2017 (a) | 185,000 | 185,187 |
| 85,163,016 |
Georgia 4.2% |
Atlanta, GA, Water & Wastewater Revenue, Series B, 5.25%, 11/1/2027 (a) | 10,000,000 | 10,898,800 |
Columbus, GA, Water & Sewer Revenue, 5.25%, 5/1/2015 (a) | 1,000,000 | 1,107,550 |
Fulton Dekalb, GA, Hospital Authority, Hospital Revenue Certificates, 5.25%, 1/1/2016 (a) | 8,500,000 | 9,350,255 |
Gainesville & Hall County, GA, Hospital Authority Revenue, Anticipation Certificates, Northeast Georgia Healthcare, Series B, 5.5%, 2/15/2029 | 8,900,000 | 9,329,158 |
Georgia, Main Street Natural Gas, Inc., Gas Project Revenue, Series A, 5.5%, 9/15/2024 | 1,705,000 | 1,709,876 |
Georgia, Municipal Electric Authority Power Revenue, Series 2005-Y, 6.4%, 1/1/2013 (a) | 3,190,000 | 3,428,325 |
Georgia, Municipal Electric Authority, Comb Cycle Project: |
| Series A, 5.0%, 11/1/2027 | 1,000,000 | 1,061,740 |
| Series A, 5.0%, 11/1/2028 | 1,500,000 | 1,584,840 |
Georgia, Municipal Electric Authority, General Resolution Projects, Series A, 5.25%, 1/1/2019 | 2,500,000 | 2,858,025 |
Georgia, State General Obligation, 6.75%, 9/1/2010 | 5,370,000 | 5,458,444 |
Georgia, State Road & Tollway Authority Revenue, Federal Highway Grant Anticipation Bonds, Series A, 5.0%, 6/1/2021 | 2,500,000 | 2,853,325 |
| 49,640,338 |
Guam 0.1% |
Guam, Government Limited Obligation Revenue, Section 30, Series A, 5.375%, 12/1/2024 | 1,000,000 | 1,024,300 |
Hawaii 1.8% |
Hawaii, State Airports Systems Revenue: |
| Series A, 5.25%, 7/1/2027 | 2,335,000 | 2,483,483 |
| Series A, 5.25%, 7/1/2028 | 5,010,000 | 5,299,378 |
| Series A, 5.25%, 7/1/2029 | 3,155,000 | 3,321,552 |
Hawaii, State General Obligation, Series DK, 5.0%, 5/1/2021 | 9,000,000 | 10,178,370 |
| 21,282,783 |
Illinois 5.4% |
Chicago, IL, Core City General Obligation, Capital Appreciation Project, Series A, Step-up Coupon, 0% to 1/1/2011, 5.3% to 1/1/2016 (a) | 1,100,000 | 1,196,206 |
Chicago, IL, Higher Education Revenue, City Colleges, Zero Coupon, 1/1/2014 (a) | 11,570,000 | 10,574,749 |
Chicago, IL, O'Hare International Airport Revenue, Series C, 5.25%, 1/1/2030 (a) | 10,000,000 | 10,491,200 |
Chicago, IL, Water & Sewer Revenue, Zero Coupon, 11/1/2011 (a) | 5,000,000 | 4,920,350 |
Du Page County, IL, Special Services Area No. 11, 6.75%, 1/1/2014 | 415,000 | 448,038 |
Du Page County, IL, Special Services Area No. 26, Bruce Lake Subdivision, General Obligation: | |
| 5.0%, 1/1/2013 | 65,000 | 65,204 |
| 5.15%, 1/1/2014 | 65,000 | 65,209 |
| 5.25%, 1/1/2016 | 150,000 | 148,421 |
| 5.375%, 1/1/2011 | 60,000 | 60,290 |
| 5.5%, 1/1/2012 | 35,000 | 35,563 |
| 5.5%, 1/1/2019 | 255,000 | 247,852 |
| 5.75%, 1/1/2022 | 300,000 | 282,087 |
Illinois, Municipal Electric Agency Power Supply, Series A, 5.25%, 2/1/2018 (a) | 2,000,000 | 2,239,340 |
Illinois, Regional Transportation Authority, Series A, 5.5%, 7/1/2024 (a) | 5,000,000 | 5,831,200 |
Illinois, State Building Revenue, Series B, 5.0%, 6/15/2011 | 1,420,000 | 1,479,654 |
Illinois, State General Obligation, 5.0%, 1/1/2024 | 5,000,000 | 5,280,600 |
Illinois, Transportation/Tolls Revenue, State Toll Highway Authority, Series A, 5.5%, 1/1/2013 (a) | 2,200,000 | 2,452,032 |
Illinois, Will, Grundy Etc. Counties, Community College District Number 525, Joliet Jr. College, 6.25%, 6/1/2021 | 1,000,000 | 1,197,100 |
Rockford-Concord Commons, IL, Housing Facility, Concord Commons Project, Series A, 6.15%, 11/1/2022 | 1,200,000 | 1,201,512 |
Rosemont, IL, Core City General Obligation: |
| Series A, Zero Coupon, 12/1/2013 (a) | 3,865,000 | 3,562,834 |
| Series A, Zero Coupon, 12/1/2014 (a) | 4,000,000 | 3,545,720 |
University of Illinois, Higher Education Revenue, Auxiliary Facilities System: | |
| Series A, 5.5%, 4/1/2015 (a) | 3,860,000 | 4,437,070 |
| Series A, 5.5%, 4/1/2016 (a) | 3,580,000 | 4,139,160 |
| 63,901,391 |
Indiana 1.1% |
Indiana, Health Facility Authority Revenue, Memorial Hospital, 5.125%, 2/15/2017 (a) | 1,250,000 | 1,250,875 |
Indianapolis, IN, City Core General Obligation, Local Improvements, Series B, 6.0%, 1/10/2013 | 1,905,000 | 2,028,901 |
Indianapolis, IN, State Agency Revenue Lease, Local Improvements, Series D, 6.75%, 2/1/2014 | 6,760,000 | 7,411,056 |
Jasper County, IN, Pollution Control Revenue, Northern Indiana Public Service, Series C, 5.85%, 4/1/2019 (a) | 2,000,000 | 2,201,320 |
| 12,892,152 |
Kansas 2.3% |
Johnson County, KS, School District General Obligation, Unified School District No. 231, Series A, 5.25%, 10/1/2014 (a) | 2,220,000 | 2,552,978 |
Kansas, State Department of Transportation Highway Revenue: | |
| Series A-2, 0.22%*, 9/1/2014 | 4,600,000 | 4,600,000 |
| Series C-2, 0.25%*, 9/1/2022 | 7,000,000 | 7,000,000 |
Kansas, State Development Finance Authority Hospital Revenue, Adventist Health, 5.5%, 11/15/2022 | 4,470,000 | 4,938,277 |
Kansas, State Development Finance Authority Revenue, Sisters Leavenworth, Series A, 5.25%, 1/1/2025 | 7,500,000 | 7,916,025 |
| 27,007,280 |
Kentucky 0.2% |
Kentucky, Asset/Liability Commission Agency Revenue, Federal Highway Trust, First Series, 5.25%, 9/1/2019 (a) | 1,000,000 | 1,179,510 |
Kentucky, Economic Development Finance Authority Revenue, Catholic Health, Series 04-D, 3.5%, Mandatory Put 11/10/2010 @ 100, 5/1/2034 | 1,030,000 | 1,043,596 |
| 2,223,106 |
Louisiana 0.7% |
Louisiana, Local Government Environmental Facilities & Community Development Authority, LCTCS Facilities Corp. Project, Series B, 5.0%, 10/1/2027 (a) | 1,365,000 | 1,430,302 |
Louisiana, Sales & Special Tax Revenue, Regional Transportation Authority, Series A, 144A, 7.95%, 12/1/2013 (a) | 2,815,000 | 3,258,757 |
New Orleans, LA, Home Mortgage Authority, Special Obligation, ETM, 6.25%, 1/15/2011 | 3,544,000 | 3,657,053 |
| 8,346,112 |
Maine 0.7% |
Maine, Health & Higher Educational Facilities Authority Revenue, Series A, 5.25%, 7/1/2031 | 8,040,000 | 8,497,717 |
Maryland 0.5% |
Maryland, General Obligation, State & Local Facilities Loan, Series 2, 5.0%, 8/1/2019 | 5,000,000 | 5,779,950 |
Massachusetts 2.5% |
Boston, MA, Deutsches Altenheim, Inc., Series A, 5.95%, 10/1/2018 | 360,000 | 375,005 |
Massachusetts, Bay Transportation Authority Revenue, Series A, Prerefunded, 5.75%, 7/1/2015 | 85,000 | 85,423 |
Massachusetts, Development Finance Agency, Human Services Provider, Seven Hills Foundation & Affiliates, 4.85%, 9/1/2013 (a) | 255,000 | 256,428 |
Massachusetts, Municipal Wholesale Electric Co., Power Supply Systems Revenue, Nuclear Project No. 4, Series A, 5.25%, 7/1/2014 (a) | 5,915,000 | 6,191,704 |
Massachusetts, State Development Finance Agency Revenue, Babson College, Series A, 0.23%*, 10/1/2032, Citizens Bank (b) | 3,075,000 | 3,075,000 |
Massachusetts, State Federal Highway, Grant Anticipation Notes, Series A, 5.25%, 12/15/2012 | 5,050,000 | 5,612,115 |
Massachusetts, State General Obligation, Series D, 5.5%, 11/1/2015 (a) | 1,000,000 | 1,184,380 |
Massachusetts, State Health & Educational Facilities Authority Revenue, Amherst College, Series I, 0.21%*, 11/1/2028 | 1,995,000 | 1,995,000 |
Massachusetts, State Health & Educational Facilities Authority Revenue, Suffolk University, Series A, 6.0%, 7/1/2024 | 5,000,000 | 5,449,150 |
Massachusetts, State Water Resources Authority, Series B, 5.0%, 8/1/2031 | 3,675,000 | 4,006,816 |
Somerville, MA, Housing Authority Revenue, Clarendon Project, 4.6%, 11/20/2015 | 1,535,000 | 1,580,022 |
| 29,811,043 |
Michigan 4.1% |
Brighton, MI, School District General Obligation, Series II, Zero Coupon, 5/1/2016 (a) | 5,000,000 | 4,140,250 |
Detroit, MI, Sewer Disposal Revenue, Series C-1, 7.0%, 7/1/2027 (a) | 10,000,000 | 11,725,700 |
Michigan, Municipal Bond Authority Revenue, State Aid Revenue Notes, Series B, 5.0%, 3/21/2011 | 10,000,000 | 10,010,600 |
Michigan, State Building Authority Revenue, Facilities Program, Series H, 3.0%, 10/15/2011 | 750,000 | 768,338 |
Michigan, State Hospital Finance Authority Revenue, Ascension Health Senior Credit Group, Series B, 5.0%, 11/15/2025 | 5,920,000 | 6,267,622 |
Michigan, State Trunk Line, 5.0%, 11/1/2024 | 3,000,000 | 3,258,090 |
Michigan, State University Revenues, Series 2000-A, 0.25%*, 8/15/2030 | 4,800,000 | 4,800,000 |
Michigan, Water & Sewer Revenue, Municipal Bond Authority, 5.375%, 10/1/2016 | 6,670,000 | 7,303,717 |
Saginaw, MI, Hospital Finance Authority, Saint Luke Hospital, ETM, 7.5%, 11/1/2010 | 35,000 | 36,065 |
| 48,310,382 |
Minnesota 0.4% |
Minnesota, State General Obligation, 5.0%, 6/1/2020 | 4,535,000 | 5,096,025 |
Mississippi 2.0% |
Corinth & Alcorn Counties, MS, Hospital Revenue, Magnolia Regional Health Center Project, Series B, 5.125%, 10/1/2010 | 100,000 | 100,140 |
Lincoln County, MS, Hospital & Healthcare Revenue, Kings Daughters Hospital, Series B, 5.5%, 4/1/2018 (a) | 1,130,000 | 1,130,237 |
Mississippi, Business Finance Corp., Solid Waste Disposal Revenue, Waste Management, Inc. Project, 1.8%, Mandatory Put 11/1/2010 @ 100, 7/1/2017 | 4,000,000 | 3,999,120 |
Mississippi, Business Financial Corp., Mississippi Retirement Facilities Revenue, Wesley Manor, Series A, 5.45%, 5/20/2034 | 2,575,000 | 2,601,342 |
Mississippi, Development Bank Special Obligation, Desoto County Highway, Series A, 3.0%, 1/1/2011 | 5,760,000 | 5,843,578 |
Mississippi, Home Corp., Single Family Mortgage Revenue, Series C-1, 5.6%, 6/1/2038 | 5,615,000 | 5,988,285 |
Mississippi, State University Educational Building Corp. Revenue, Residence Hall & Refunding Project, Series A, 3.5%, 8/1/2011 (a) | 1,000,000 | 1,030,830 |
Rankin County, MS, School District General Obligation, 5.25%, 2/1/2015 (a) | 2,845,000 | 3,227,055 |
| 23,920,587 |
Missouri 1.0% |
Bridgeton, MO, Industrial Development Authority, Facilities Revenue, Mizpah Assisted Living, Series A, 5.25%, 12/20/2019 | 120,000 | 123,742 |
Florissant, MO, Industrial Development Authority, Mortgage Revenue, Desmet RHF Acquisition, Series A, Prerefunded, 8.5%, 8/15/2030 | 3,830,000 | 3,962,595 |
Missouri, Hospital & Healthcare Revenue, Health & Educational Facilities Authority, Washington University, Series A, 5.5%, 6/15/2016 | 3,200,000 | 3,795,232 |
Missouri, State Housing Development Commission, Single Family Mortgage Revenue, Homeownership Loan Program, Series D, 4.8%, 3/1/2040 | 2,310,000 | 2,465,324 |
Missouri, State Housing Development Commission, Single Family Mortgage Revenue, Special Homeownership Loan Program Market Bonds, Series E-1, 5.0%, 11/1/2027 (c) | 1,335,000 | 1,438,609 |
Springfield, MO, Law Enforcement Communication, Certificates of Participation, 5.5%, 6/1/2010 | 60,000 | 60,023 |
| 11,845,525 |
Nebraska 0.2% |
Omaha, NE, School District General Obligation, Series A, ETM, 6.5%, 12/1/2013 | 1,500,000 | 1,776,585 |
Nevada 1.5% |
Clark County, NV, Airport Revenue, Series 08-E, 5.0%, 7/1/2012 | 1,975,000 | 2,115,739 |
Clark County, NV, Airport Systems Revenue, Series E-2, 5.0%, 7/1/2012 | 2,570,000 | 2,742,961 |
Clark County, NV, Board Bank: |
| 5.0%, 6/1/2024 | 3,040,000 | 3,239,606 |
| 5.0%, 6/1/2025 | 3,190,000 | 3,379,773 |
Clark County, NV, General Obligation, Series A, 5.0%, 12/1/2026 | 3,025,000 | 3,210,644 |
Clark County, NV, School District, Series A, 4.5%, 6/15/2012 (a) | 2,200,000 | 2,353,604 |
Nevada, Housing Division, Single Family Mortgage, Series B-1, 4.95%, 4/1/2012 | 15,000 | 15,134 |
| 17,057,461 |
New Hampshire 0.0% |
New Hampshire, Senior Care Revenue, Higher Educational & Health Facilities Revenue, Catholic Charities, Series A, 5.75%, 8/1/2011 | 425,000 | 425,765 |
New Jersey 1.5% |
New Jersey, Economic Development Authority Revenue, Cigarette Tax, 5.375%, 6/15/2014 | 2,280,000 | 2,413,494 |
New Jersey, Economic Development Authority Revenue, School Facilities Construction: | |
| Series O, 5.0%, 3/1/2017 | 3,300,000 | 3,665,310 |
| Series W, 5.0%, 3/1/2019 | 3,000,000 | 3,314,850 |
New Jersey, Sales & Special Tax Revenue, Transportation Trust Fund, Series B, 6.5%, 6/15/2011 (a) | 140,000 | 148,635 |
New Jersey, State Transit Corp., Certificates of Participation, Federal Transit Administration Grants, Series A, 5.0%, 9/15/2016 (a) | 7,000,000 | 7,490,770 |
New Jersey, State Transportation Trust Fund Authority, Transportation System, Series B, ETM, 6.5%, 6/15/2011 (a) | 85,000 | 90,440 |
| 17,123,499 |
New Mexico 0.4% |
New Mexico, Mortgage Finance Authority, Single Family Mortgage: | |
| Class I, Series E, 5.3%, 9/1/2040 | 1,885,000 | 2,048,147 |
| Class I, Series D, 5.35%, 9/1/2040 | 1,845,000 | 2,012,600 |
| Series I-B-2, 5.65%, 9/1/2039 | 990,000 | 1,090,861 |
| 5,151,608 |
New York 4.6% |
Albany, NY, Industrial Development Agency, Civic Facility Revenue, Albany College of Pharmacy, Series A, 0.27%*, 7/1/2038, TD Bank NA (b) | 1,000,000 | 1,000,000 |
Cohoes, NY, Industrial Development Agency, Urban Cultural Park Facility Revenue, Eddy Cohoes Project, 0.3%*, 12/1/2033, Bank of America NA (b) | 1,000,000 | 1,000,000 |
Erie County, NY, Industrial Development Agency, School Facility Revenue, Buffalo City School District, Series A, 5.25%, 5/1/2023 | 7,500,000 | 8,439,075 |
New York, Dormitory Authority, Lutheran Nursing Home: |
| 5.125%, 2/1/2018 (a) | 135,000 | 135,501 |
| 6.1%, 8/1/2041 (a) | 1,000,000 | 1,066,930 |
New York, Dormitory Authority, St. Joseph's Hospital, 5.25%, 7/1/2018 (a) | 450,000 | 450,234 |
New York, Metropolitan Transportation Authority Revenue, Series A, 5.5%, 11/15/2014 (a) | 5,000,000 | 5,706,300 |
New York, State Dormitory Authority Revenues, Non-State Supported Debt, Royal Charter Properties-East, Inc., Series A, 0.26%*, 11/15/2036 | 1,600,000 | 1,600,000 |
New York, Tobacco Settlement Financing Corp., Series C-1, 5.5%, 6/1/2015 | 8,000,000 | 8,029,040 |
New York City, NY, Municipal Water Finance Authority, Water & Sewer Revenue, Series AA, 5.0%, 6/15/2021 | 10,000,000 | 11,276,300 |
New York, NY, General Obligation, Series J, 5.25%, 5/15/2015 (a) | 4,000,000 | 4,494,000 |
New York, NY, State Agency General Obligation Lease, Tobacco Settlement Funding Corp., Series A-1, 5.5%, 6/1/2018 | 10,000,000 | 10,668,900 |
Oneida County, NY, Industrial Development Agency Revenue, Civic Facilities, 5.0%, 3/1/2014, HSBC Bank PLC (b) | 490,000 | 493,925 |
| 54,360,205 |
North Carolina 1.0% |
Charlotte, NC, Airport Revenue, Series A, 5.5%, 7/1/2034 | 1,000,000 | 1,071,960 |
North Carolina, Eastern Municipal Power Agency Systems Revenue, Series B, 5.0%, 1/1/2026 | 4,200,000 | 4,415,334 |
North Carolina, Electric Revenue, Catawba Municipal Power Agency No. 1, Series A, 5.25%, 1/1/2020 | 2,000,000 | 2,234,340 |
North Carolina, Electric Revenue, Municipal Power Agency, Series F, 5.5%, 1/1/2016 | 1,000,000 | 1,073,500 |
North Carolina, Municipal Power Agency, No. 1 Catawba Electric Revenue, Series A, 5.0%, 1/1/2030 | 2,420,000 | 2,507,072 |
| 11,302,206 |
North Dakota 0.1% |
Fargo, ND, Health Systems Revenue, Series A, 5.6%, 6/1/2013 (a) | 1,250,000 | 1,268,887 |
Ohio 2.7% |
Buckeye, OH, Tobacco Settlement Financing Authority: |
| Series A-2, 5.125%, 6/1/2024 | 5,185,000 | 4,650,219 |
| Series A-2, 5.375%, 6/1/2024 | 1,775,000 | 1,632,982 |
Cleveland, OH, Water Revenue, Series R, 0.21%*, 1/1/2033, BNP Paribas (b) | 1,200,000 | 1,200,000 |
Franklin County, OH, Hospital & Healthcare Revenue, Ohio Presbyterian Services, 5.4%, 7/1/2010 | 750,000 | 751,073 |
Montgomery County, OH, Catholic Health Revenue, Series C-2, 4.1%, 10/1/2041 | 1,895,000 | 1,968,640 |
Ohio, Capital Housing Corp. Mortgage, Georgetown Section 8, Series A, 6.625%, 7/1/2022 | 665,000 | 666,111 |
Ohio, Industrial Development Revenue, Building Authority, Adult Correction Facilities, Series A, 5.5%, 10/1/2013 (a) | 1,140,000 | 1,214,442 |
Ohio, State Higher Educational Facility Commission Revenue, Cleveland Clinic Health, Series A, 5.25%, 1/1/2021 | 2,150,000 | 2,364,269 |
Ohio, State Higher Educational Facility Commission Revenue, Summa Health Systems 2010 Project, 5.5%, 11/15/2030 (a) | 5,000,000 | 5,170,400 |
Ohio, State Housing Finance Agency, Residential Mortgage Revenue, Mortgage-Backed Securities Program, Series E, 5.0%, 9/1/2039 | 1,615,000 | 1,736,351 |
Ohio, Water & Sewer Revenue, Water Development Authority, Pure Water Improvement Project, Series B, 5.5%, 6/1/2015 (a) | 2,280,000 | 2,693,318 |
Ross County, OH, Hospital Revenue, Adena Health System, 5.75%, 12/1/2022 | 5,750,000 | 6,194,475 |
Stark County, OH, Health Care Facility, Rose Land, Inc. Project: | |
| 5.3%, 7/20/2018 | 850,000 | 865,546 |
| 5.35%, 7/20/2023 | 940,000 | 952,587 |
| 32,060,413 |
Oklahoma 0.1% |
Oklahoma, Ordinance Works Authority, Ralston Purina Project, 6.3%, 9/1/2015 | 1,500,000 | 1,503,960 |
Oregon 0.7% |
Clackamas County, OR, North Clackamas School District No. 12, Convertible Deferred Interest, Series B, Step-up Coupon, 0% to 6/15/2011, 5.0% to 6/15/2027 (a) | 6,535,000 | 6,578,981 |
Oregon, State Department of Administrative Services, Certificates of Participation, Series A, 5.0%, 5/1/2012 | 1,875,000 | 2,023,987 |
| 8,602,968 |
Pennsylvania 1.2% |
Allegheny County, PA, Airport Revenue, San Authority, 5.375%, 12/1/2015 (a) | 3,370,000 | 3,495,330 |
Allegheny County, PA, Hospital Development Authority Revenue, University of Pittsburgh Medical Center, Series A, 3.0%, 5/15/2011 | 1,635,000 | 1,669,875 |
Chester County, PA, Health & Education Facility, Immaculata College, 5.3%, 10/15/2011 | 280,000 | 280,232 |
Erie, PA, Higher Education Building Authority, Gannon University Project, Series E, 5.2%, 7/15/2016 | 800,000 | 800,848 |
Lancaster, PA, Sewer Authority Revenue, ETM, 6.0%, 4/1/2012 | 20,000 | 21,230 |
Montgomery County, PA, Redevelopment Authority, Multifamily Housing Revenue, Forge Gate Apartments Project, Series A, 0.275%*, 8/15/2031 | 1,510,000 | 1,510,000 |
Pennsylvania, Commonwealth Systems of Higher Education, University of Pittsburgh Capital Project, Series B, 5.5%, 9/15/2024 | 1,000,000 | 1,161,850 |
Pennsylvania, Delaware River Junction Toll Bridge, Commonwealth of Pennsylvania Bridge Revenue, 5.25%, 7/1/2013 | 1,000,000 | 1,105,510 |
Pennsylvania, Delaware River Port Authority, ETM, 6.5%, 1/15/2011 | 25,000 | 25,840 |
Pennsylvania, Higher Educational Facilities Authority, College & University Revenue, University of the Arts, 5.5%, 3/15/2013 (a) | 800,000 | 801,600 |
Pennsylvania, Higher Educational Facility Authority, Health Services Revenue, Allegheny Delaware Valley Obligation, Series C, 5.875%, 11/15/2018 (a) | 1,450,000 | 1,439,966 |
Philadelphia, PA, Industrial Development Authority, Jeanes Physicians' Office, Series A, 9.375%, 7/1/2010 | 90,000 | 90,362 |
Philadelphia, PA, Redevelopment Authority, Multi-Family Housing Revenue, Woodstock, 5.45%, 2/1/2023 | 580,000 | 605,068 |
Westmoreland County, PA, Industrial Development Authority Revenue, Health Care Facilities, Redstone Highlands Senior Living Communities, Series B, Prerefunded, 8.125%, 11/15/2030 | 1,000,000 | 1,045,700 |
Williamsport, PA, Multi-Family Housing Authority, Series A, 5.25%, 1/1/2015 (a) | 485,000 | 485,989 |
| 14,539,400 |
Puerto Rico 3.0% |
Commonwealth of Puerto Rico, Public Improvement, Series A, 5.25%, 7/1/2012 | 2,000,000 | 2,127,580 |
Puerto Rico, Electric Power Authority Revenue, Series UU, 5.0%, 7/1/2019 (a) | 3,000,000 | 3,275,670 |
Puerto Rico, Public Buildings Authority Revenue, Government Facilities, Series M, 6.0%, 7/1/2020 | 3,045,000 | 3,439,754 |
Puerto Rico, Sales Tax Financing Corp., Sales Tax Revenue: |
| Series A, 5.0%, Mandatory Put 8/1/2011 @ 100, 8/1/2039 | 3,000,000 | 3,119,640 |
| Series A, 5.25%, 8/1/2027 | 11,965,000 | 12,651,073 |
| Series A, 5.5%, 8/1/2028 | 5,000,000 | 5,348,850 |
| Series A, 5.5%, 8/1/2037 | 5,000,000 | 5,252,200 |
| 35,214,767 |
Rhode Island 0.5% |
Rhode Island, State & Providence Plantations, Construction Capital Development Loan, Series A, 5.0%, 8/1/2017 (a) | 5,000,000 | 5,672,400 |
South Carolina 1.1% |
Columbia, SC, Waterworks & Sewer Systems Revenue, ETM, 7.75%, 1/1/2011 | 615,000 | 638,401 |
South Carolina, Jobs Economic Development Authority Revenue, Waste Management, Inc., 1.8%, Mandatory Put 11/1/2010 @ 100, 2/1/2015 | 4,000,000 | 3,999,120 |
South Carolina, Water & Sewer Revenue, Grand Strand Water & Sewer Authority: | |
| 5.375%, 6/1/2015 (a) | 3,705,000 | 4,007,809 |
| 5.375%, 6/1/2016 (a) | 3,900,000 | 4,218,747 |
| 12,864,077 |
Tennessee 1.0% |
Johnson City, TN, Hospital & Healthcare Revenue, Medical Center Hospital, ETM, 5.5%, 7/1/2013 (a) | 3,305,000 | 3,744,168 |
Memphis & Shelby Counties, TN, Sports, Expo & Entertainment Revenue, Sports Authority Memphis Arena Project, Series A, Prerefunded, 5.5%, 11/1/2015 (a) | 3,545,000 | 3,936,262 |
Nashville & Davidson Counties, TN, Water & Sewer Revenue, Series B, 5.25%, 1/1/2013 (a) | 3,310,000 | 3,678,900 |
| 11,359,330 |
Texas 15.9% |
Brownsville, TX, Electric Revenue, ETM, 6.25%, 9/1/2014 (a) | 5,145,000 | 5,724,430 |
Comal, TX, Independent School District, School Building Improvements, 5.25%, 2/1/2020 | 2,330,000 | 2,708,066 |
Cypress-Fairbanks, TX, Independent School District, School House Building Improvements: | |
| 5.0%, 2/15/2019 | 1,300,000 | 1,479,426 |
| 5.0%, 2/15/2021 | 1,850,000 | 2,068,985 |
Dallas County, TX, Community College District, 5.0%, 2/15/2028 | 1,140,000 | 1,243,706 |
El Paso, TX, Independent School District, School Building Improvements, 5.0%, 8/15/2022 | 4,885,000 | 5,531,725 |
Fort Bend, TX, Independent School District, 5.0%, 8/15/2026 | 2,000,000 | 2,207,200 |
Harris County, TX, Permanent Improvement, Series A, 5.0%, 10/1/2028 | 10,000,000 | 11,076,500 |
Houston, TX, Airport System Revenue, Series A, 5.25%, 7/1/2029 | 8,000,000 | 8,639,280 |
Houston, TX, Public Improvement, Series A, 5.0%, 3/1/2026 | 8,000,000 | 8,780,960 |
Houston, TX, Utility System Revenue, First Lien, Series C-2A, 5.0%, Mandatory Put 5/15/2011 @ 100, 5/15/2034 (a) | 2,285,000 | 2,362,416 |
Houston, TX, Water & Sewer Revenue: |
| Series A, 5.5%, 12/1/2015 (a) | 8,250,000 | 8,833,027 |
| Series B, Prerefunded, 5.75%, 12/1/2016 (a) | 1,000,000 | 1,118,380 |
Houston, TX, Water & Sewer Revenue, Water Conveyance Systems Contract, Series J, 6.25%, 12/15/2013 (a) | 2,500,000 | 2,793,750 |
Jefferson County, TX, Health Facilities Development Corp., Baptist Hospitals, 5.2%, 8/15/2021 (a) | 365,000 | 372,939 |
Longview, TX, Independent School District, School Building Improvements, 5.0%, 2/15/2022 | 2,000,000 | 2,267,860 |
McAllen, TX, General Obligation Certificates, 4.0%, 2/15/2012 | 600,000 | 633,858 |
North Texas, Tollway Authority Revenue, First Tier: |
| Series E-3, 5.75%, Mandatory Put 1/1/2016 @ 100, 1/1/2038 | 4,900,000 | 5,518,919 |
| Series A, 6.0%, 1/1/2022 | 7,000,000 | 7,797,090 |
| Series L-2, 6.0%, Mandatory Put 1/1/2013 @ 100, 1/1/2038 | 6,000,000 | 6,606,300 |
Northern Texas, Health Facilities Development Corp., United Regional Health Care Systems Project, 5.0%, 9/1/2014 (a) | 5,750,000 | 5,759,372 |
Plano, TX, General Obligation, 5.0%, 9/1/2029 | 1,635,000 | 1,794,331 |
Plano, TX, Independent School District, 5.25%, 2/15/2014 | 1,570,000 | 1,622,061 |
San Antonio, TX, Electric & Gas Revenue, Series A, 5.25%, 2/1/2026 | 7,000,000 | 7,861,980 |
San Antonio, TX, General Improvement, Series 2006, 5.5%, 8/1/2014 (a) | 3,000,000 | 3,500,100 |
Tarrant County, TX, Cultural Education Facilities Finance Corp. Revenue, Texas Health Resources: | |
| Series A, 5.0%, 2/15/2018 | 2,000,000 | 2,156,920 |
| Series A, 5.0%, 2/15/2020 | 5,385,000 | 5,698,999 |
Texas, Dallas-Fort Worth International Airport Revenue: |
| Series A, 5.0%, 11/1/2018 | 1,000,000 | 1,118,740 |
| Series A, 5.0%, 11/1/2019 | 1,250,000 | 1,391,538 |
Texas, Lower Colorado River Authority Revenue, Series A, 5.875%, 5/15/2014 (a) | 540,000 | 542,203 |
Texas, Lower Colorado River Authority, Transmission Contract Revenue, LCRA Transmission Services, 5.0%, 5/15/2030 | 5,000,000 | 5,252,150 |
Texas, Municipal Gas Acquisition & Supply Corp. I, Gas Supply Revenue, Series A, 5.0%, 12/15/2012 | 5,000,000 | 5,297,900 |
Texas, Municipal Power Agency Revenue: |
| ETM, Zero Coupon, 9/1/2014 (a) | 40,000 | 37,008 |
| Zero Coupon, 9/1/2014 (a) | 1,760,000 | 1,592,184 |
Texas, SA Energy Acquisition Public Facility Corp., Gas Supply Revenue: | |
| 5.25%, 8/1/2017 | 5,690,000 | 5,866,788 |
| 5.5%, 8/1/2020 | 3,790,000 | 3,918,329 |
Texas, State Department of Housing & Community Affairs, Residential Mortgage Revenue, Series A, 5.375%, 1/1/2039 | 10,000,000 | 10,830,700 |
Texas, State Veterans' Housing Assistance Program, Fund II, Series A, 5.25%, 12/1/2023 | 4,000,000 | 4,595,840 |
Texas, Water & Sewer Revenue, 5.375%, 3/1/2015 (a) | 3,710,000 | 4,129,601 |
Texas, Water & Sewer Revenue, State Revenue Revolving Funds Project: | |
| Series A, 5.625%, 7/15/2013 | 2,290,000 | 2,305,228 |
| Series A, 5.75%, 7/15/2013 | 1,380,000 | 1,385,796 |
| Series B, 5.75%, 7/15/2014 | 3,555,000 | 3,569,931 |
Texas, Water Development Board Revenue, State Revolving Fund: | |
| Series B, 5.0%, 7/15/2017 | 3,000,000 | 3,336,750 |
| Series A, 5.0%, 7/15/2020 | 3,150,000 | 3,569,769 |
| Series B, 5.25%, 7/15/2021 | 3,000,000 | 3,431,130 |
West Harris County, TX, Regional Water Authority, Water Systems Revenue: | |
| 5.0%, 12/15/2026 | 2,640,000 | 2,783,405 |
| 5.0%, 12/15/2027 | 2,770,000 | 2,904,982 |
| 5.0%, 12/15/2028 | 2,905,000 | 3,034,999 |
| 187,053,551 |
Utah 0.8% |
Intermountain Power Agency, UT, Power Supply Revenue, Series A, ETM, 6.15%, 7/1/2014 (a) | 765,000 | 798,714 |
Riverton, UT, Hospital Revenue, IHC Health Services, Inc., 5.0%, 8/15/2020 | 2,825,000 | 3,074,843 |
Utah, Transit Authority, Sales Tax Revenue, Series B, 0.27%*, 6/15/2036, Fortis Bank SA (b) | 5,000,000 | 5,000,000 |
| 8,873,557 |
Virgin Islands 0.2% |
Virgin Islands, Public Finance Authority Revenue, Series B, 5.0%, 10/1/2019 | 1,250,000 | 1,334,312 |
Virgin Islands, Water & Power Authority, Electric Systems Revenue, Series A, 4.0%, 7/1/2012 | 1,000,000 | 1,039,500 |
| 2,373,812 |
Virginia 0.2% |
Newport News, VA, Industrial Development Authority, Mennowood Communities, Series A, 7.25%, 8/1/2016 | 560,000 | 561,714 |
Richmond, VA, Metro Expressway Authority, ETM, 7.0%, 10/15/2013 (a) | 980,000 | 1,078,000 |
| 1,639,714 |
Washington 2.1% |
King County, WA, General Obligation, Series A, 4.0%, 12/1/2011 | 1,610,000 | 1,695,120 |
Seattle, WA, Water System Revenue, 5.0%, 2/1/2020 | 3,870,000 | 4,400,345 |
Washington, Electric Revenue, Public Power Supply System, Nuclear Project No. 2, Series A, 6.3%, 7/1/2012 | 1,000,000 | 1,112,590 |
Washington, Health Care, Nursing Home Revenue, Grays Harbor Community Hospital, Prerefunded, 5.85%, 7/1/2012 (a) | 400,000 | 405,976 |
Washington, State Health Care Facilities Authority Revenue, Multicare Health Systems, Series B, 0.25%*, 8/15/2044, Wells Fargo Bank NA (b) | 6,850,000 | 6,850,000 |
Washington, State Housing Finance Commission, Nonprofit Revenue, YMCA Tacoma-Pierce County Project, 0.27%*, 12/1/2032, US Bank NA (b) | 1,100,000 | 1,100,000 |
Washington, State Motor Vehicle Fuel Tax: |
| Series B, 5.0%, 7/1/2025 (a) | 2,000,000 | 2,182,300 |
| Series 2010-B, 5.0%, 8/1/2027 | 6,000,000 | 6,589,620 |
| 24,335,951 |
West Virginia 0.3% |
West Virginia, Transportation/Tolls Revenue, 5.25%, 5/15/2015 (a) | 2,940,000 | 3,362,743 |
Wisconsin 3.0% |
University of Wisconsin, Hospitals & Clinics Authority Revenue, Series A, 0.25%*, 4/1/2032, US Bank NA (b) | 6,640,000 | 6,640,000 |
Wisconsin, Health & Educational Facilities, Viterbo College, Inc. Project: | |
| Series A, 5.75%, 2/1/2012, US Bank NA (b) | 125,000 | 125,827 |
| Series A, 6.0%, 2/1/2017, US Bank NA (b) | 405,000 | 406,584 |
Wisconsin, State Clean Water Revenue: |
| Series 1, 5.0%, 6/1/2031 | 2,500,000 | 2,712,050 |
| Series 3, 5.5%, 6/1/2025 | 5,000,000 | 5,710,000 |
Wisconsin, State General Appropriation Revenue, Series A, 6.0%, 5/1/2026 | 5,000,000 | 5,740,150 |
Wisconsin, State General Obligation: |
| Series C, Prerefunded, 5.25%, 5/1/2016 (a) | 7,705,000 | 8,366,089 |
| Series D, Prerefunded, 5.75%, 5/1/2015 | 4,000,000 | 4,200,000 |
Wisconsin, State Health & Educational Facilities Authority Revenue, Children`s Hospital of Wisconsin, Series B, 5.375%, 8/15/2024 | 1,000,000 | 1,083,730 |
| 34,984,430 |
Total Municipal Bonds and Notes (Cost $1,101,281,252) | 1,152,043,190 |
|
Municipal Inverse Floating Rate Notes (d) 2.4% |
Indiana 1.0% |
Indiana, Transportation Finance Authority Highway Revenue, Series A, 5.5%, 12/1/2022 (e) | 10,000,000 | 11,617,100 |
| Trust: Indiana, State Transportation, Series 1157, 144A, 19.45%, 12/1/2022, Leverage Factor at purchase date: 4 to 1 | |
New York 0.5% |
New York, State Dormitory Authority Personal Income Tax Revenues, Series A, 5.0%, 3/15/2019 (e) | 5,000,000 | 5,661,150 |
| Trust: New York, State Dormitory Authority Revenues, Secondary Issues, Series 1955-1, 144A, 17.54%, 3/15/2019, Leverage Factor at purchase date: 4 to 1 | |
Texas 0.9% |
Texas, State Transportation Commission Revenue, First Tier, 5.0%, 4/1/2022 (e) | 10,000,000 | 11,130,250 |
| Trust: Texas, State Transportation Commission Revenue, Series 2214, 144A, 18.14%, 4/1/2022, Leverage Factor at purchase date: 4 to 1 | |
Total Municipal Inverse Floating Rate Notes (Cost $27,717,026) | 28,408,500 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $1,128,998,278)+ | 100.5 | 1,180,451,690 |
Other Assets and Liabilities, Net | (0.5) | (5,575,627) |
Net Assets | 100.0 | 1,174,876,063 |
* 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 May 31, 2010.
+ The cost for federal income tax purposes was $1,128,829,010. At May 31, 2010, net unrealized appreciation for all securities based on tax cost was $51,622,680. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $53,350,543 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,727,863.
(a) Bond is insured by one of these companies:
Insurance Coverage | As a % of Total Investment Portfolio |
Ambac Financial Group, Inc. | 5.0 |
Assured Guaranty Corp. | 0.6 |
Assured Guaranty Municipal Corp. | 10.9 |
Financial Guaranty Insurance Co. | 6.0 |
National Public Finance Guarantee Corp. | 7.9 |
Radian Asset Assurance, Inc. | 0.3 |
Many insurers who have traditionally guaranteed payment of municipal issues have been downgraded by the major rating agencies.
(b) Security incorporates a letter of credit from the bank listed.
(c) When-issued security.
(d) Securities represent the underlying municipal obligations of inverse floating rate obligations held by the Fund.
(e) Security forms part of the below tender option bond trust. Principal Amount and Value shown take into account the leverage factor.
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.
ETM: Bonds bearing the description ETM (escrow to maturity) are collateralized usually by US Treasury securities which are held in escrow and used to pay principal and interest on bonds so designated.
Prerefunded: Bonds which are prerefunded are collateralized usually by US 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.
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of May 31, 2010 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total |
|
Municipal Bonds and Notes (f) | $ — | $ 1,180,451,690 | $ — | $ 1,180,451,690 |
Total | $ — | $ 1,180,451,690 | $ — | $ 1,180,451,690 |
(f) 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 May 31, 2010 |
Assets |
Investments in securities, at value (cost $1,128,998,278) | $ 1,180,451,690 |
Cash | 1,101,904 |
Receivable for investments sold | 1,786,743 |
Receivable for Fund shares sold | 9,717,781 |
Interest receivable | 14,849,280 |
Other assets | 80,052 |
Total assets | 1,207,987,450 |
Liabilities |
Payable for investments purchased | 7,492,610 |
Payable for investments purchased — when-issued securities | 4,269,691 |
Payable for Fund shares redeemed | 998,673 |
Payable for floating rate notes issued | 18,750,000 |
Distributions payable | 713,169 |
Accrued management fee | 307,908 |
Other accrued expenses and payables | 579,336 |
Total liabilities | 33,111,387 |
Net assets, at value | $ 1,174,876,063 |
Net Assets Consist of |
Undistributed net investment income | 691,117 |
Net unrealized appreciation (depreciation) on investments | 51,453,412 |
Accumulated net realized gain (loss) | (2,031,788) |
Paid-in capital | 1,124,763,322 |
Net assets, at value | $ 1,174,876,063 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of May 31, 2010 (continued) |
Net Asset Value |
Class A Net Asset Value and redemption price per share ($295,543,893 ÷ 25,781,726 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.46 |
Maximum offering price per share (100 ÷ 97.25 of $11.46) | $ 11.78 |
Class B Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($1,802,192 ÷ 157,088 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.47 |
Class C Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($57,135,791 ÷ 4,986,160 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.46 |
Class S Net Asset Value, offering and redemption price per share ($590,090,902 ÷ 51,467,409 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.47 |
Institutional Class Net Asset Value, offering and redemption price per share ($230,303,285 ÷ 20,083,328 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ 11.47 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations
for the year ended May 31, 2010 |
Investment Income |
Income: Interest | $ 38,593,408 |
Expenses: Management fee | 2,828,320 |
Administration fee | 897,879 |
Services to shareholders | 944,929 |
Custodian fee | 28,246 |
Distribution and service fees | 914,355 |
Professional fees | 110,233 |
Trustees' fees and expenses | 24,648 |
Reports to shareholders | 79,098 |
Registration fees | 156,071 |
Interest expense and fees on floating rate notes issued | 142,084 |
Other | 79,101 |
Total expenses | 6,204,964 |
Net investment income | 32,388,444 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments | (734,737) |
Change in net unrealized appreciation (depreciation) on investments | 25,890,173 |
Net gain (loss) | 25,155,436 |
Net increase (decrease) in net assets resulting from operations | $ 57,543,880 |
The accompanying notes are an integral part of the financial statements.
Statement of Cash Flows
for the year ended May 31, 2010 |
Increase (Decrease) in Cash: Cash Flows from Operating Activities |
Net increase (decrease) in net assets resulting from operations | $ 57,543,880 |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) in operating activities: Purchases of long-term investments | (994,094,159) |
Net amortization/accretion of premium (discount) | 2,755,528 |
Net purchases, sales and maturities of short-term investments | (4,400,000) |
Proceeds from sales and maturities of long-term investments | 542,942,432 |
(Increase) decrease in interest receivable | (4,923,563) |
(Increase) decrease in other assets | 10,836 |
(Increase) decrease in receivable for investments sold | (1,236,743) |
Increase (decrease) in payable for investments and when-issued securities purchased | 10,710,501 |
Increase (decrease) in accrued expenses and payables | 359,355 |
Change in net unrealized (appreciation) depreciation on investments | (25,890,173) |
Net realized (gain) loss from investments | 734,737 |
Cash provided (used) by operating activities | (415,487,369) |
Cash Flows from Financing Activities: |
Net increase (decrease) in cash overdraft | (379,972) |
Proceeds from shares sold | 681,795,672 |
Cost of shares redeemed | (254,546,403) |
Distributions paid (net of reinvestment of distributions) | (10,280,024) |
Cash provided (used) by financing activities | 416,589,273 |
Increase (decrease) in cash | 1,101,904 |
Cash at end of period | 1,101,904 |
Supplemental Disclosure of Non-Cash Financing Activities: |
Reinvestment of distributions | $ 22,634,836 |
Interest expense on floating rate notes issued | (142,084) |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets
| Years Ended May 31, |
Increase (Decrease) in Net Assets | 2010 | 2009 |
Operations: Net investment income | $ 32,388,444 | $ 26,435,583 |
Net realized gain (loss) | (734,737) | 24,893 |
Change in net unrealized appreciation (depreciation) | 25,890,173 | 6,066,898 |
Net increase (decrease) in net assets resulting from operations | 57,543,880 | 32,527,374 |
Distributions to shareholders from: Net investment income: Class A | (7,433,969) | (4,884,818) |
Class B | (55,215) | (79,282) |
Class C | (1,063,859) | (440,259) |
Class S | (17,682,946) | (15,496,399) |
Institutional Class | (6,039,002) | (5,456,723) |
Net realized gains: Class A | (227,117) | (324,068) |
Class B | (2,037) | (7,191) |
Class C | (40,464) | (38,673) |
Class S | (491,189) | (1,110,302) |
Institutional Class | (159,276) | (370,910) |
Total distributions | (33,195,074) | (28,208,625) |
Fund share transactions: Proceeds from shares sold | 689,883,216 | 282,066,689 |
Reinvestment of distributions | 22,634,836 | 19,428,362 |
Cost of shares redeemed | (254,656,473) | (273,490,869) |
Redemption fees | — | 16,202 |
Net increase (decrease) in net assets from Fund share transactions | 457,861,579 | 28,020,384 |
Increase (decrease) in net assets | 482,210,385 | 32,339,133 |
Net assets at beginning of period | 692,665,678 | 660,326,545 |
Net assets at end of period (including undistributed net investment income of $691,117 and $1,071,094, respectively) | $ 1,174,876,063 | $ 692,665,678 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended May 31, | 2010 | 2009 | 2008 | 2007 | 2006 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.15 | $ 11.06 | $ 11.00 | $ 11.06 | $ 11.40 |
Income from investment operations: Net investment income | .40 | .42 | .42 | .43 | .42 |
Net realized and unrealized gain (loss) | .32 | .12 | .06 | (.05) | (.32) |
Total from investment operations | .72 | .54 | .48 | .38 | .10 |
Less distributions from: Net investment income | (.40) | (.42) | (.42) | (.43) | (.42) |
Net realized gains | (.01) | (.03) | (.00)* | (.01) | (.02) |
Total distributions | (.41) | (.45) | (.42) | (.44) | (.44) |
Redemption fees | — | .00* | .00* | .00* | .00* |
Net asset value, end of period | $ 11.46 | $ 11.15 | $ 11.06 | $ 11.00 | $ 11.06 |
Total Return (%)a | 6.58 | 5.06 | 4.46b | 3.41b | .90 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 296 | 152 | 119 | 80 | 106 |
Ratio of expenses before expense reductions (including interest expense) (%)c | .79 | .84 | .93 | .79 | .78 |
Ratio of expenses after expense reductions (including interest expense) (%)c | .79 | .84 | .93 | .79 | .78 |
Ratio of expenses after expense reductions (excluding interest expense) (%) | .77 | .78 | .80 | .79 | .78 |
Ratio of net investment income (%) | 3.51 | 3.84 | 3.83 | 3.87 | 3.80 |
Portfolio turnover rate (%) | 59 | 61 | 59 | 45 | 41 |
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. * Amount is less than $.005. |
Class B Years Ended May 31, | 2010 | 2009 | 2008 | 2007 | 2006 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.16 | $ 11.07 | $ 11.01 | $ 11.07 | $ 11.41 |
Income from investment operations: Net investment income | .30 | .33 | .34 | .35 | .34 |
Net realized and unrealized gain (loss) | .32 | .12 | .06 | (.06) | (.32) |
Total from investment operations | .62 | .45 | .40 | .29 | .02 |
Less distributions from: Net investment income | (.30) | (.33) | (.34) | (.34) | (.34) |
Net realized gains | (.01) | (.03) | (.00)* | (.01) | (.02) |
Total distributions | (.31) | (.36) | (.34) | (.35) | (.36) |
Redemption fees | — | .00* | .00* | .00* | .00* |
Net asset value, end of period | $ 11.47 | $ 11.16 | $ 11.07 | $ 11.01 | $ 11.07 |
Total Return (%)a | 5.68 | 4.22 | 3.65b | 2.62b | .13b |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 2 | 2 | 3 | 5 | 6 |
Ratio of expenses before expense reductions (including interest expense) (%)c | 1.61 | 1.64 | 1.72 | 1.58 | 1.57 |
Ratio of expenses after expense reductions (including interest expense) (%)c | 1.61 | 1.64 | 1.70 | 1.54 | 1.55 |
Ratio of expenses after expense reductions (excluding interest expense) (%) | 1.59 | 1.58 | 1.57 | 1.54 | 1.55 |
Ratio of net investment income (%) | 2.69 | 3.04 | 3.06 | 3.12 | 3.03 |
Portfolio turnover rate (%) | 59 | 61 | 59 | 45 | 41 |
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. * Amount is less than $.005. |
Class C Years Ended May 31, | 2010 | 2009 | 2008 | 2007 | 2006 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.15 | $ 11.06 | $ 11.00 | $ 11.06 | $ 11.40 |
Income from investment operations: Net investment income | .31 | .34 | .34 | .35 | .34 |
Net realized and unrealized gain (loss) | .32 | .12 | .06 | (.06) | (.32) |
Total from investment operations | .63 | .46 | .40 | .29 | .02 |
Less distributions from: Net investment income | (.31) | (.34) | (.34) | (.34) | (.34) |
Net realized gains | (.01) | (.03) | (.00)* | (.01) | (.02) |
Total distributions | (.32) | (.37) | (.34) | (.35) | (.36) |
Redemption fees | — | .00* | .00* | .00* | .00* |
Net asset value, end of period | $ 11.46 | $ 11.15 | $ 11.06 | $ 11.00 | $ 11.06 |
Total Return (%)a | 5.76 | 4.27 | 3.69b | 2.62b | .14b |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 57 | 22 | 11 | 9 | 11 |
Ratio of expenses before expense reductions (including interest expense) (%)c | 1.57 | 1.61 | 1.69 | 1.57 | 1.55 |
Ratio of expenses after expense reductions (including interest expense) (%)c | 1.57 | 1.61 | 1.68 | 1.54 | 1.54 |
Ratio of expenses after expense reductions (excluding interest expense) (%) | 1.55 | 1.55 | 1.55 | 1.54 | 1.54 |
Ratio of net investment income (%) | 2.73 | 3.07 | 3.08 | 3.12 | 3.04 |
Portfolio turnover rate (%) | 59 | 61 | 59 | 45 | 41 |
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. * Amount is less than $.005. |
Class S Years Ended May 31, | 2010 | 2009 | 2008 | 2007 | 2006 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.15 | $ 11.07 | $ 11.00 | $ 11.06 | $ 11.41 |
Income from investment operations: Net investment income | .41 | .44 | .44 | .46 | .45 |
Net realized and unrealized gain (loss) | .33 | .11 | .07 | (.06) | (.33) |
Total from investment operations | .74 | .55 | .51 | .40 | .12 |
Less distributions from: Net investment income | (.41) | (.44) | (.44) | (.45) | (.45) |
Net realized gains | (.01) | (.03) | (.00)* | (.01) | (.02) |
Total distributions | (.42) | (.47) | (.44) | (.46) | (.47) |
Redemption fees | — | .00* | .00* | .00* | .00* |
Net asset value, end of period | $ 11.47 | $ 11.15 | $ 11.07 | $ 11.00 | $ 11.06 |
Total Return (%) | 6.81 | 5.16 | 4.75a | 3.65a | 1.06 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 590 | 397 | 381 | 389 | 398 |
Ratio of expenses before expense reductions (including interest expense) (%)b | .64 | .65 | .75 | .57 | .55 |
Ratio of expenses after expense reductions (including interest expense) (%)b | .64 | .65 | .74 | .55 | .55 |
Ratio of expenses after expense reductions (excluding interest expense) (%) | .62 | .59 | .61 | .55 | .55 |
Ratio of net investment income (%) | 3.66 | 4.03 | 4.02 | 4.11 | 4.03 |
Portfolio turnover rate (%) | 59 | 61 | 59 | 45 | 41 |
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. * Amount is less than $.005. |
Institutional Class Years Ended May 31, | 2010 | 2009 | 2008 | 2007 | 2006 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.15 | $ 11.07 | $ 11.00 | $ 11.07 | $ 11.41 |
Income (loss) from investment operations: Net investment income | .43 | .45 | .46 | .46 | .45 |
Net realized and unrealized gain (loss) | .33 | .11 | .07 | (.06) | (.32) |
Total from investment operations | .76 | .56 | .53 | .40 | .13 |
Less distributions from: Net investment income | (.43) | (.45) | (.46) | (.46) | (.45) |
Net realized gains | (.01) | (.03) | (.00)* | (.01) | (.02) |
Total distributions | (.44) | (.48) | (.46) | (.47) | (.47) |
Redemption fees | — | .00* | .00* | .00* | .00* |
Net asset value, end of period | $ 11.47 | $ 11.15 | $ 11.07 | $ 11.00 | $ 11.07 |
Total Return (%) | 6.95 | 5.27 | 4.88 | 3.61 | 1.16 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions) | 230 | 119 | 147 | 150 | 151 |
Ratio of expenses (including interest expense) (%)a | .51 | .55 | .62 | .50 | .53 |
Ratio of expenses (excluding interest expense) (%) | .49 | .49 | .49 | .50 | .53 |
Ratio of net investment income (%) | 3.79 | 4.13 | 4.14 | 4.16 | 4.05 |
Portfolio turnover rate (%) | 59 | 61 | 59 | 45 | 41 |
a 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. * Amount is less than $.005. |
Notes to Financial Statements
A. Organization and Significant Accounting Policies
DWS Intermediate Tax/AMT Free Fund (the "Fund") is a diversified series of DWS Tax Free Trust (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares of the Fund are closed to new purchases, except exchanges or the reinvestment of dividends or other distributions. Class B shares were offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not automatically convert into another class. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes. Class S shares are not subject to initial or contingent deferred sales charges and are generally not available to new investors except under certain circumstances.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution and service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Debt securities are valued by independent pricing services approved by the Trustees of the Fund, whose valuations are intended to reflect the mean between the bid and asked prices. If the pricing services are unable to provide valuations, the securities are valued at the mean of the most recent bid and asked quotations or evaluated prices, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes.
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 Trustees. In accordance with the Fund's valuation procedures, factors used in determining value may include, but are not limited to, the type of the security, the size of the holding, the initial cost of the security, the existence of any contractual restrictions on the security's disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies, quotations or evaluated prices from broker-dealers and/or pricing services, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company's or issuer's financial statements, an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
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 security 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. No interest accrues to the Fund until payment takes place. At the time the Fund enters into this type of 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 securities 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.
Inverse Floaters. Inverse floating rate notes are debt instruments with a weekly floating rate of interest that bears an inverse relationship to changes in short-term market interest rates. Investments in this type of instrument involve special risks as compared to investments in a fixed rate municipal security. The debt instrument in which the Fund may invest is a tender option bond trust (the "trust") which can be established by the Fund, a financial institution, or a broker consisting of underlying municipal obligations with intermediate to long maturities and a fixed interest rate ("underlying bond"). Other investors in the trust usually consist of money market fund investors receiving weekly floating interest rate payments who have put options with the financial institutions. The Fund may enter into shortfall and forbearance agreements by which a Fund agrees to reimburse the trust, in certain circumstances, for the difference between the liquidation value of the fixed rate municipal security held by the trust and the liquidation value of the floating rate notes. Certain inverse floating rate securities held by the Fund have been created with bonds purchased by the Fund and subsequently transferred to the trust. These transactions are considered a form of financing for accounting purposes. As a result, the Fund includes the underlying bond in its investment portfolio and a corresponding liability in the statement of assets and liabilities equal to the floating rate note issued. When a trust is terminated and/or collapsed by either party, the related fixed rate securities held by the trust are delivered back to the Fund where they are either held or sold, and the related liability of the floating rate note issued is adjusted. The Fund does not consider the Fund's investment in inverse floaters borrowing within the meaning of the 1940 Act. Inverse floating rate notes exhibit added interest rate sensitivity compared to other bonds with a similar maturity. Moreover, since these securities are in a trust form, a sale may take longer to settle than the standard two days after the trade date.
The weighted average outstanding daily balance of the floating rate notes issued during the year ended May 31, 2010 was approximately $18,750,000, with a weighted average interest rate of 0.76%.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable and tax-exempt income to its shareholders.
At May 31, 2010, the Fund had a net tax basis capital loss carryforward of approximately $1,369,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until May 31, 2018, the expiration date, whichever occurs first.
In addition, from November 1, 2009 through May 31, 2010, the Fund incurred approximately $832,000 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, 2011.
The Fund has reviewed the tax positions for the open tax years as of May 31, 2010 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and is distributed to shareholders monthly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss 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.
At May 31, 2010, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed tax-exempt income | $ 1,404,286 |
Capital loss carryforward | $ (1,369,000) |
Net unrealized appreciation (depreciation) on investments | $ 51,622,680 |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| Years Ended May 31, |
| 2010 | 2009 |
Distributions from tax-exempt income | $ 32,284,838 | $ 26,357,481 |
Distributions from ordinary income | $ 486,015 | $ — |
Distributions from long-term capital gains | $ 424,221 | $ 1,851,144 |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security 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.
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 May 31, 2010.
B. Purchases and Sales of Securities
During the year ended May 31, 2010, purchases and sales of investment securities (excluding short-term investments) aggregated $994,094,159 and $542,942,432, 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.
The management fee payable under the Investment Management Agreement is at an annual rate of 0.315% of the Fund's average daily net assets, computed and accrued daily and payable monthly.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the year ended May 31, 2010, the Administration Fee was $897,879, of which $96,007 is unpaid.
Service Provider Fees. DWS Investments Service Company ("DISC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent of the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended May 31, 2010, the amounts charged to the Fund by DISC were as follows:
Services to Shareholders | Total Aggregated | Unpaid at May 31, 2010 |
Class A | $ 39,871 | $ 10,136 |
Class B | 1,122 | 279 |
Class C | 9,215 | 2,353 |
Class S | 172,798 | 44,639 |
Institutional Class | 21,719 | 11,632 |
| $ 244,725 | $ 69,039 |
Distribution and Service Fees. Under the Fund's Class B and Class C 12b-1 Plans, DWS Investments Distributors, Inc. ("DIDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DIDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended May 31, 2010, the Distribution Fee was as follows:
Distribution Fee | Total Aggregated | Unpaid at May 31, 2010 |
Class B | $ 15,362 | $ 1,214 |
Class C | 294,723 | 35,458 |
| $ 310,085 | $ 36,672 |
In addition DIDI provides information and administrative services for a fee ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DIDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended May 31, 2010, the Service Fee was as follows:
Service Fee | Total Aggregated | Unpaid at May 31, 2010 | Annual Effective Rate |
Class A | $ 501,430 | $ 116,795 | .24% |
Class B | 5,060 | 612 | .25% |
Class C | 97,780 | 21,470 | .25% |
| $ 604,270 | $ 138,877 | |
Underwriting Agreement and Contingent Deferred Sales Charge. DIDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the year ended May 31, 2010 aggregated $2,495.
In addition, DIDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the year ended May 31, 2010, the CDSC for Class B and C shares aggregated $2,526 and $8,986, respectively. A deferred sales charge of up to 2.75% is assessed on certain redemptions of Class A shares. For the year ended May 31, 2010, DIDI received $27,461 for Class A shares.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended May 31, 2010, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $18,584, of which $8,056 is unpaid.
Trustees' Fees and Expenses. The Fund paid each Trustee not affiliated with the Advisor retainer fees plus specified amounts for various committee services and for the Board Chairperson.
D. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $450 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| Year Ended May 31, 2010 | Year Ended May 31, 2009 |
| Shares | Dollars | Shares | Dollars |
Shares sold |
Class A | 20,974,332 | $ 237,420,510 | 8,865,556 | $ 96,451,301 |
Class B | 34,046 | 383,772 | 138,095 | 1,494,562 |
Class C | 3,405,140 | 38,574,840 | 1,208,368 | 13,173,751 |
Class S | 24,007,803 | 271,644,242 | 11,831,299 | 128,442,221 |
Institutional Class | 12,493,668 | 141,859,852 | 3,905,044 | 42,504,854 |
| | $ 689,883,216 | | $ 282,066,689 |
Shares issued to shareholders in reinvestment of distributions |
Class A | 490,274 | $ 5,557,244 | 240,543 | $ 2,624,455 |
Class B | 3,308 | 37,463 | 3,472 | 37,783 |
Class C | 50,988 | 577,882 | 19,226 | 209,782 |
Class S | 963,763 | 10,909,433 | 1,032,667 | 11,245,065 |
Institutional Class | 490,074 | 5,552,814 | 487,894 | 5,311,277 |
| | $ 22,634,836 | | $ 19,428,362 |
Shares redeemed |
Class A | (9,348,011) | $ (105,201,235) | (6,176,619) | $ (67,388,465) |
Class B | (89,826) | (1,012,835) | (198,332) | (2,145,272) |
Class C | (459,064) | (5,209,029) | (221,326) | (2,406,794) |
Class S | (9,075,808) | (102,765,639) | (11,731,861) | (126,369,093) |
Institutional Class | (3,574,014) | (40,467,735) | (6,958,477) | (75,181,245) |
| | $ (254,656,473) | | $ (273,490,869) |
Redemption fees | | $ — | | $ 16,202 |
Net increase (decrease) |
Class A | 12,116,595 | $ 137,776,519 | 2,929,480 | $ 31,688,536 |
Class B | (52,472) | (591,600) | (56,765) | (612,927) |
Class C | 2,997,064 | 33,943,693 | 1,006,268 | 10,977,397 |
Class S | 15,895,758 | 179,788,036 | 1,132,105 | 13,325,009 |
Institutional Class | 9,409,728 | 106,944,931 | (2,565,539) | (27,357,631) |
| | $ 457,861,579 | | $ 28,020,384 |
F. Review for Subsequent Events
Management has evaluated the events and transactions subsequent to year end through the date the financial statements were available to be issued, and has determined that there were no material events that would require disclosure in the Fund's financial statements.
Report of Independent Registered Public Accounting Firm
To the Trustees of DWS Tax-Free Trust and the Shareholders of DWS Intermediate Tax/AMT Free Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations, of cash flows and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of DWS Intermediate Tax/AMT Free Fund (the "Fund") at May 31, 2010, and the results of its operations, its cash flows, 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, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
Boston, Massachusetts
July 23, 2010 | PricewaterhouseCoopers LLP |
Tax Information (Unaudited)
The Fund paid distributions of $0.0054 per share from net long-term capital gains during its year ended May 31, 2010, of which 100% represents 15% rate gains.
Of the dividends paid from net investment income for the taxable year ended May 31, 2010, 100% are designated as exempt interest dividends for federal income tax purposes.
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.
Summary of Management Fee Evaluation by Independent Fee Consultant
October 9, 2009, As Revised November 20, 2009
Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Funds (formerly the DWS Scudder Funds). My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2009, including my qualifications, the evaluation process for each of the DWS Funds, consideration of certain complex-level factors, and my conclusions. I served in substantially the same capacity in 2007 and 2008.
Qualifications
For more than 35 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.
Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past ten years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.
I hold a Master of Business Administration degree, with highest honors, from Harvard University and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds and serve in various leadership and financial oversight capacities with non-profit organizations.
Evaluation of Fees for each DWS Fund
My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 124 publicly offered Fund portfolios in the DWS Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).
In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper, Strategic Insight, and Morningstar databases and drew on my industry knowledge and experience.
To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.
In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.
Fees and Expenses Compared with Other Funds
The competitive fee and expense evaluation for each fund focused on two primary comparisons:
The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.
The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.
These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.
DeAM's Fees for Similar Services to Others
DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Fund. These similar products included the other DWS Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.
Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.
Costs and Profit Margins
DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.
Economies of Scale
Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Fund compares with this industry observation, I reviewed:
The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.
Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.
How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.
Quality of Service — Performance
The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.
In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.
I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.
Complex-Level Considerations
While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:
I reviewed DeAM's profitability analysis for all DWS Funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.
I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.
I considered how aggregated DWS Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.
I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.
Findings
Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Funds are reasonable.
Thomas H. Mack
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust as of May 31, 2010. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Paul K. Freeman, Independent Chairman, DWS Funds, PO Box 101833, Denver, CO 80250-1833. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex. The Length of Time Served represents the year in which the Board Member joined the board of one or more DWS funds now overseen by the Board.
Independent Board Members |
Name, Year of Birth, Position with the Fund and Length of Time Served1 | Business Experience and Directorships During the Past Five Years | Number of Funds in DWS Fund Complex Overseen |
Paul K. Freeman (1950) Chairperson since 2009 Board Member since 1993 | Consultant, World Bank/Inter-American Development Bank; Governing Council of the Independent Directors Council (governance, education committees); formerly, Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998) | 126 |
John W. Ballantine (1946) Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company); Stockwell Capital Investments PLC (private equity). Former Directorships: First Oak Brook Bancshares, Inc. and Oak Brook Bank; Prisma Energy International | 126 |
Henry P. Becton, Jr. (1943) Board Member since 1990 | Vice Chair and former President, WGBH Educational Foundation. Directorships: Association of Public Television Stations; Lead Director, Becton Dickinson and Company3 (medical technology company); Lead Director, Belo Corporation3 (media company); Public Radio International; Public Radio Exchange (PRX); The PBS Foundation. Former Directorships: Boston Museum of Science; American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service | 126 |
Dawn-Marie Driscoll (1946) Board Member since 1987 | President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley University; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Trustee of 20 open-end mutual funds managed by Sun Capital Advisers, Inc. (since 2007); Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley University; Trustee, Southwest Florida Community Foundation (charitable organization). Former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 126 |
Keith R. Fox (1954) Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds). Directorships: Progressive Holding Corporation (kitchen goods importer and distributor); Box Top Media Inc. (advertising); The Kennel Shop (retailer); former Chairman, National Association of Small Business Investment Companies | 126 |
Kenneth C. Froewiss (1945) Board Member since 2001 | Adjunct Professor of Finance, NYU Stern School of Business (September 2009-present; Clinical Professor from 1997-September 2009); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996) | 126 |
Richard J. Herring (1946) Board Member since 1990 | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center (since July 2000); Director, Japan Equity Fund, Inc. (since September 2007), Thai Capital Fund, Inc. (since September 2007), Singapore Fund, Inc. (since September 2007). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (July 2000-June 2006) | 126 |
William McClayton (1944) Board Member since 2004 | Private equity investor (since October 2009); previously, Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001-2009); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966-2001); Trustee, Ravinia Festival | 126 |
Rebecca W. Rimel (1951) Board Member since 1995 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001-2007); Trustee, Pro Publica (2007-present) (charitable organization); Director, CardioNet, Inc.2 (2009-present) (health care). Formerly, Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983-2004); Board Member, Investor Education (charitable organization) (2004-2005); Director, Viasys Health Care2 (January 2007-June 2007) | 126 |
William N. Searcy, Jr. (1946) Board Member since 1993 | Private investor since October 2003; Trustee of 20 open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998). Formerly, Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989-September 2003) | 126 |
Jean Gleason Stromberg (1943) Board Member since 1997 | Retired. Formerly, Consultant (1997-2001); Director, Financial Markets US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation. Former Directorships: Service Source, Inc., Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996) | 126 |
Robert H. Wadsworth (1940) Board Member since 1999 | President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present); Director, The Phoenix Boys Choir Association | 129 |
Officers4 |
Name, Year of Birth, Position with the Fund and Length of Time Served5 | Principal Occupation(s) During Past 5 Years and Other Directorships Held |
Michael G. Clark6 (1965) President, 2006-present | Managing Director3, Deutsche Asset Management (2006-present); President of DWS family of funds; Director, ICI Mutual Insurance Company (since October 2007); 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 (1999-2000) |
Ingo Gefeke7 (1967) Executive Vice President since 2010 | Managing Director3, Deutsche Asset Management; Global Head of Distribution and Product Management, DWS Global Head of Trading and Securities Lending. Member of the Board of Directors of DWS Investment GmbH Frankfurt (since July 2009) and DWS Holding & Service GmbH Frankfurt (since January 2010); formerly, Global Chief Administrative Officer, Deutsche Asset Management (2004-2009); Global Chief Operating Officer, Global Transaction Banking, Deutsche Bank AG, New York (2001-2004); Chief Operating Officer, Global Banking Division Americas, Deutsche Bank AG, New York (1999-2001); Central Management, Global Banking Services, Deutsche Bank AG, Frankfurt (1998-1999); Relationship Management, Deutsche Bank AG, Tokyo, Japan (1997-1998) |
John Millette8 (1962) Vice President and Secretary, 1999-present | Director3, Deutsche Asset Management |
Paul H. Schubert6 (1963) Chief Financial Officer, 2004-present Treasurer, 2005-present | Managing Director3, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998) |
Caroline Pearson8 (1962) Chief Legal Officer, April 2010-present | Managing Director3, Deutsche Asset Management; formerly, Assistant Secretary for DWS family of funds (1997-2010) |
Rita Rubin9 (1970) Assistant Secretary, 2009-present | Vice President and Counsel, Deutsche Asset Management (since October 2007); formerly, Vice President, Morgan Stanley Investment Management (2004-2007); Attorney, Shearman & Sterling LLP (2004); Director and Associate General Counsel, UBS Global Asset Management (US) Inc. (2001-2004) |
Paul Antosca8 (1957) Assistant Treasurer, 2007-present | Director3, Deutsche Asset Management (since 2006); Vice President, The Manufacturers Life Insurance Company (U.S.A.) (1990-2006) |
Jack Clark8 (1967) Assistant Treasurer, 2007-present | Director3, Deutsche Asset Management (since 2007); formerly, Vice President, State Street Corporation (2002-2007) |
Diane Kenneally8 (1966) Assistant Treasurer, 2007-present | Director3, Deutsche Asset Management |
John Caruso10 (1965) Anti-Money Laundering Compliance Officer, 2010-present | Managing Director3, Deutsche Asset Management |
Robert Kloby9 (1962) Chief Compliance Officer, 2006-present | Managing Director3, Deutsche Asset Management |
1 The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board.
2 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
3 Executive title, not a board directorship.
4 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the fund.
5 The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds.
6 Address: 345 Park Avenue, New York, New York 10154.
7 The mailing address of Mr. Gefeke is 345 Park Avenue, New York, New York 10154. In addition, Mr. Gefeke is an interested Board Member of certain DWS funds by virtue of his positions with Deutsche Asset Management. As an interested person, Mr. Gefeke receives no compensation from the fund.
8 Address: One Beacon Street, Boston, MA 02108.
9 Address: 280 Park Avenue, New York, New York 10017.
10 Address: 60 Wall Street, New York, New York 10005.
The fund's Statement of Additional Information ("SAI") includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 621-1048.
Account Management Resources
|
For More Information | The automated telephone system allows you to access personalized account information and obtain information on other DWS funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system. For more information, contact your financial advisor. You may also access our automated telephone system or speak with a DWS Investments representative by calling the appropriate number below: For shareholders of Classes A, B, C and Institutional Class: (800) 621-1048 For shareholders of Class S: (800) 728-3337 |
Web Site | www.dws-investments.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more. |
Written Correspondence | DWS Investments PO Box 219151
Kansas City, MO 64121-9151 |
Proxy Voting | 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 are available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048. |
Principal Underwriter | If you have questions, comments or complaints, contact: DWS Investments Distributors, Inc. 222 South Riverside Plaza
Chicago, IL 60606-5808 (800) 621-1148 |
| Class A | Class B | Class C | Class S | Institutional Class |
Nasdaq Symbol | SZMAX | SZMBX | SZMCX | SCMTX | SZMIX |
CUSIP Number | 23337X-103 | 23337X-202 | 23337X-301 | 23337X-509 | 23337X-707 |
Fund Number | 445 | 645 | 745 | 2045 | 1445 |
| |
ITEM 2. | CODE OF ETHICS |
| |
| As of the end of the period, May 31, 2010, DWS Intermediate Tax/AMT Free 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 fund’s audit committee is comprised solely of trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The fund’s Board of Trustees has determined that there are several "audit committee financial experts" (as such term has been defined by the Regulations) serving on the fund’s audit committee including Mr. William McClayton, the chair of the fund’s audit committee. An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an “audit committee financial expert” does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. |
| |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
| |
DWS INTERMEDIATE TAX/AMT FREE FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
Fiscal Year
Ended
May 31, | Audit Fees Billed to Fund | Audit-Related
Fees Billed to Fund | Tax Fees Billed to Fund | All
Other Fees Billed to Fund |
2010 | $72,432 | $0 | $0 | $0 |
2009 | $72,875 | $0 | $0 | $0 |
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
Fiscal Year
May 31, | Audit-Related
Fees Billed to Adviser and Affiliated Fund Service Providers | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All
Other Fees Billed to Adviser and Affiliated Fund Service Providers |
2010 | $9,500 | $0 | $0 |
2009 | $0 | $19,000 | $0 |
The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures and the above “Tax Fees” were billed in connection with tax compliance.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.
Fiscal Year
Ended
May 31, | Total
Non-Audit Fees Billed to Fund (A) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund) (B) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements) (C) | Total of (A), (B)
and (C) |
2010 | $0 | $0 | $100,000 | $100,000 |
2009 | $0 | $19,000 | $0 | $19,000 |
All other engagement fees were billed for services in connection with an internal control review of a subadvisor.
Audit Committee Pre-Approval Policies and Procedures. Generally, each Fund’s Audit Committee must pre approve (i) all services to be performed for a Fund by a Fund’s Independent Registered Public Accounting Firm and (ii) all non-audit services to be performed by a Fund’s Independent Registered Public Accounting Firm for the DIMA Entities with respect to operations and financial reporting of the Fund, except that the Chairperson or Vice Chairperson of each Fund’s Audit Committee may grant the pre-approval for non-audit services described in items (i) and (ii) above for non-prohibited services for engagements of less than $100,000. All such delegated pre approvals shall be presented to each Fund’s Audit Committee no later than the next Audit Committee meeting.
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
According to the registrant’s principal Independent Registered Public Accounting Firm, all of the principal Independent Registered Public Accounting Firm's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal Independent Registered Public Accounting Firm.
***
PwC advised the Fund's Audit Committee that PwC has identified two matters that it determined to be inconsistent with the SEC's auditor independence rules. In the first instance, an employee of PwC had power of attorney over an account which included DWS funds. The employee did not perform any audit services for the DWS Funds, but did work on a non audit project for Deutsche Bank AG. In the second instance, an employee of PwC served as a nominee shareholder (effectively equivalent to a Trustee) of various companies/trusts since 2001. Some of these companies held shares of Aberdeen, a sub advisor to certain DWS Funds, and of certain funds sponsored by subsidiaries of Deutsche Bank AG. The trustee relationship has ceased. PwC informed the Audit Committee that these matters could have constituted an investment in an affiliate of an audit client in violation of the Rule 2-01(c)(1) of Regulation S-X. PwC advised the Audit Committee that PwC believes its independence had not been impacted as it related to the audits of the Fund. In reaching this conclusion, PwC noted that during the time of its audit, the engagement team was not aware of the investment and that PwC does not believe these situations affected PwC's ability to act objectively and impartially and to issue a report on financial statements as the funds' independent auditor.
| |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
| |
| Not Applicable |
| |
ITEM 6. | SCHEDULE OF INVESTMENTS |
| |
| Not Applicable |
| |
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
| |
| Not applicable. |
| |
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
| |
| Not applicable. |
| |
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
| |
| Not Applicable. |
| |
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
| |
| There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Paul K. Freeman, Independent Chairman, DWS Funds, P.O. Box 101833, Denver, CO 80250-1833. |
| |
ITEM 11. | CONTROLS AND PROCEDURES |
| |
| (a) The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. |
| |
| (b) There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. |
| |
ITEM 12. | EXHIBITS |
| |
| (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
| |
| (a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
| |
| (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | DWS Intermediate Tax/AMT Free Fund, a series of DWS Tax Free Trust |
| |
| |
By: | /s/Michael G. Clark Michael G. Clark President |
| |
Date: | July 30, 2010 |
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 Intermediate Tax/AMT Free Fund, a series of DWS Tax Free Trust |
| |
| |
By: | /s/Michael G. Clark Michael G. Clark President |
| |
Date: | July 30, 2010 |
| |
| |
By: | /s/Paul Schubert Paul Schubert Chief Financial Officer and Treasurer |
| |
Date: | July 30, 2010 |
