N-CSR 1 ar53112mmb.htm DWS MANAGED MUNICIPAL BOND FUND ar53112mmb.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM N-CSR

Investment Company Act file number:  811-02671

 
DWS Municipal Trust
 (Exact Name of Registrant as Specified in Charter)

345 Park Avenue
New York, NY 10154-0004
 (Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, including Area Code: (212) 250-3220

Paul Schubert
60 Wall Street
New York, NY 10005
(Name and Address of Agent for Service)

Date of fiscal year end:
5/31
   
Date of reporting period:
5/31/2012

ITEM 1.
REPORT TO STOCKHOLDERS
 
MAY 31, 2012
Annual Report
to Shareholders
 
DWS Managed Municipal Bond Fund
 
Contents
4 Portfolio Management Review
9 Performance Summary
12 Investment Portfolio
43 Statement of Assets and Liabilities
45 Statement of Operations
46 Statement of Cash Flows
47 Statement of Changes in Net Assets
48 Financial Highlights
53 Notes to Financial Statements
64 Report of Independent Registered Public Accounting Firm
65 Information About Your Fund's Expenses
67 Tax Information
68 Summary of Management Fee Evaluation by Independent Fee Consultant
72 Board Members and Officers
77 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. Investments in lower-quality and non-rated securities present greater risk of loss than investments in higher-quality securities. The fund invests in inverse floaters, which are derivatives that involve leverage and could magnify the fund's gains or losses. Although the fund seeks income that is federally tax-free, a portion of the fund's distributions may be subject to federal, state and local taxes, including the alternative minimum tax. See the prospectus for details.
 
DWS Investments is part of Deutsche Bank's Asset Management division and, within the U.S., represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
 
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
 
Portfolio Management Review (Unaudited)
 
Overview of Market and Fund Performance
 
All performance information below is historical and does not guarantee future results. Returns shown are for Class A shares, unadjusted for sales charges. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit www.dws-investments.com for the most recent month-end performance of all share classes. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had. Please refer to pages 9 through 11 for more complete performance information.
 
The municipal market overall provided exceptionally strong returns over the fund's most recent fiscal period. DWS Managed Municipal Bond Fund posted a return of 11.48% over the 12 months ended May 31, 2012. The overall municipal bond market, as measured by the unmanaged Barclays Municipal Bond Index, delivered a total return of 10.40% for the same period.
 
"The municipal market overall provided exceptionally strong returns over the fund's most recent fiscal period."
 
Throughout the period, the U.S. Federal Reserve Board (the Fed) kept short-term rates anchored near zero, in keeping with its announced intentions through at least late 2014. By contrast, longer-term U.S. Treasury rates were quite volatile as they responded to headlines surrounding the sovereign debt crisis in Europe and investors eagerly followed the stream of U.S. economic data. However, the overall trend with U.S. Treasury rates was downward, and taxable rates reached all-time lows late in the period as concerns over the viability of the euro heightened. Municipals overall benefited from the declining rate environment, as well as from relatively low new issue supply. Mutual fund flows were consistently positive beginning in late 2011, and retail buyers were supportive of municipals as well for most of the period. Along the municipal yield curve, the two-year bond yield decreased 11 basis points from 0.44% to 0.33%, while the 30-year yield fell 122 basis points from 4.30% to 3.08%, resulting in a total flattening of 111 basis points. (See the Municipal Bond Yield Curve graph on the following page for municipal bond yield changes from the beginning to the end of the period.) Credit spreads — the yield differential provided by lower quality issues vs. AAA-rated issues — generally narrowed for the 12 months as investors sought incremental yield and fears of a municipal credit crisis continued to dissipate.
 
 
About Municipal Bonds
A municipal bond is a bond issued by a state or local government, or one of its agencies. Issuers may include cities, counties, public utility districts and school districts, as well as publicly owned airports or seaports, redevelopment agencies and special purpose districts.
For most municipal bonds, interest income received by holders is exempt from the federal income tax and from the income tax of the state in which it is issued. For general obligation bonds, payments of principal and interest are secured by the full faith and credit of the issuer and usually supported by the issuer's taxing power. For revenue bonds, principal and interest are secured by revenues from tolls, rents or other fees gained from the facility that was built with the bond issue proceeds. Projects financed by revenue bonds may include toll roads, bridges, airports, water and sewage treatment facilities, hospitals, and subsidized housing. Many of these bonds are issued by special authorities created for that particular purpose.
The historical default rate for municipal bonds is significantly lower than that of corporate bonds. As with corporate bonds, municipal bonds are graded by ratings agencies such as Standard & Poor's and Moody's Investors Service, on a scale from "AAA", or the highest quality, down to more speculative levels.
 

Municipal Bond Yield Curve (as of 5/31/11 and 5/31/12)
 
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.
 
Positive and Negative Contributors to Fund Performance
 
With a relatively steep yield curve as the period began, we had a tilt in the portfolio towards longer-term issues in the 20-to-30-year maturity range. This exposure added to relative performance, as longer-term issues benefited the most from the declining interest rate environment over the period. In addition, with credit spreads at attractive levels, we have maintained significant exposure to lower-quality issues in the BBB or A range. This helped performance relative to the benchmark as credit spreads narrowed and prices rose for many of these issues. In particular, exposure to health-care-related issues added to performance.
 
 
During the period, we hedged a portion of the fund's assets against interest rate changes using LIBOR (London Interbank Offered Rate, a benchmark for the taxable interest rates) swaps. With a LIBOR swap, we in effect take a short position against the taxable market in order to manage the fund's overall duration and interest rate sensitivity. This hurt fund returns as taxable market, as reflected by LIBOR, outperformed municipals across most maturities during the period, meaning that the value of the short position declined.
 
Outlook and Positioning
 
Municipal bond yields are at attractive levels on a historical basis vs. U.S. Treasury bonds. To illustrate, at the end of May, the 10-year municipal bond yield of 1.79% was 113% of the comparable-maturity U.S. Treasury bond yield before taking into account the tax advantage of municipals. The 30-year municipal yield of 3.08% was 116% of the comparable U.S. Treasury yield. While the municipal yield curve has flattened in recent quarters, longer-term issues continue to carry a substantial yield advantage and we are continuing to focus purchases on bonds with maturities in the 20-to-25-year range. By the same token, while credit spreads have narrowed some, we continue to see opportunities among issues in the A- and BBB-quality ranges.
 
 
While the economic climate remains uncertain, many state and local governments have shown progress in enacting necessary spending cuts and tax increases. Nonetheless, the expertise we bring to researching municipal sectors and individual issues continues to be of critical importance. We monitor the fund's holdings and will not hesitate to take appropriate action if there are signs of credit deterioration. 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 gain distributions.
 
Portfolio Management Team
 
Philip G. Condon, Managing Director
 
Co-Lead Portfolio Manager of the fund. Joined the fund in 1990.
 
• Head of US Retail Fixed Income Funds.
 
• Joined Deutsche Asset Management in 1983.
 
• Over 34 years of investment industry experience.
 
• BA and MBA, University of Massachusetts at Amherst.
 
Ashton P. Goodfield, CFA, Managing Director
 
Co-Lead Portfolio Manager of the fund. Joined the fund in 1998.
 
• Joined Deutsche Asset Management in 1986.
 
• Over 24 years of investment industry experience.
 
• BA, Duke University.
 
Matthew J. Caggiano, CFA, Managing Director
 
Portfolio Manager of the fund. Joined the fund in 1999.
 
• Joined Deutsche Asset Management in 1989.
 
• Over 18 years of investment industry experience.
 
• BS, Pennsylvania State University; MS, Boston College.
 
Michael J. Generazo, Director
 
Portfolio Manager of the fund. Joined the fund in 2010.
 
• Joined Deutsche Asset Management in 1999.
 
• Over 17 years of investment industry experience.
 
• BS, Bryant College; MBA, Suffolk University.
 
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
 
Terms to Know
 
The Barclays Municipal Bond Index is an unmanaged, market-value-weighted measure of municipal bonds issued across the United States. Index issues have a credit rating of at least Baa and a maturity of at least two years.
 
Index returns do not reflect fees or expenses and it is not possible to invest directly into an index.
 
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.
 
Sovereign debt is debt that is issued by a national government.
 
One basis point equals 1/100 of a percentage point.
 
Performance Summary May 31, 2012 (Unaudited)
Average Annual Total Returns as of 5/31/12
  
Unadjusted for Sales Charge
  
1-Year
    
3-Year
    
5-Year
    
10-Year
        
Class A
     11.48 %     7.64 %     5.85 %     5.16 %      
Class B
     10.57 %     6.76 %     5.01 %     4.34 %      
Class C
     10.77 %     6.82 %     5.06 %     4.36 %      
Barclays Municipal Bond Index+
     10.40 %     7.32 %     5.87 %     5.40 %      
Adjusted for the Maximum Sales Charge
                                      
Class A (max 2.75% load)
     8.42 %     6.64 %     5.26 %     4.87 %      
Class B (max 4.00% CDSC)
     7.57 %     6.17 %     4.84 %     4.34 %      
Class C (max 1.00% CDSC)
     10.77 %     6.82 %     5.06 %     4.36 %      
Barclays Municipal Bond Index+
     10.40 %     7.32 %     5.87 %     5.40 %      
No Sales Charges
                                  
Life of Institutional Class*
  
Class S
     11.67 %     7.83 %     6.06 %     5.38 %     N/A  
Institutional Class
     11.79 %     7.92 %     6.12 %     N/A       5.17 %
Barclays Municipal Bond Index+
     10.40 %     7.32 %     5.87 %     5.40 %     5.16 %
 
* Institutional Class shares commenced operations on August 19, 2002. The performance shown for the index is for the time period of August 31, 2002 through May 31, 2012, which is based on the performance period of the life of Institutional Class.
 
Performance in the Average Annual Total Returns table(s) above and the Growth of an Assumed $10,000 Investment line graph that follows is historical and does not guarantee future results. Investment return and principal fluctuate, so your shares may be worth more or less when redeemed. Current performance may differ from performance data shown. Please visit www.dws-investments.com for the Fund's most recent month-end performance. Fund performance includes reinvestment of all distributions. Unadjusted returns do not reflect sales charges and would have been lower if they had.
 
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated October 1, 2011 are 0.83%, 1.64%, 1.61%, 0.64% and 0.59% for Class A, Class B, Class C, Class S and Institutional Class shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
 
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
 
Performance figures do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
 
A portion of the Fund's distributions may be subject to federal, state and local taxes and the alternative minimum tax.
 
Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge)
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 Municipal Bond Index is an unmanaged, market-value-weighted measure of municipal bonds issued across the United States. Index issues have a credit rating of at least Baa and a maturity of at least two years.
 
Net Asset Value and Distribution Information
  
   
Class A
    
Class B
    
Class C
    
Class S
    
Institutional Class
  
Net Asset Value:
5/31/12
   $ 9.40     $ 9.40     $ 9.40     $ 9.41     $ 9.40  
5/31/11
   $ 8.82     $ 8.82     $ 8.81     $ 8.83     $ 8.82  
Distribution Information:
Twelve Months as of 5/31/12:
Income Dividends
   $ .41     $ .33     $ .34     $ .42     $ .43  
Capital Gain Distributions
   $ .002     $ .002     $ .002     $ .002     $ .002  
May Income Dividend
   $ .0323     $ .0257     $ .0260     $ .0336     $ .0343  
SEC 30-day Yield++ as of 5/31/12
     2.29 %     1.54 %     1.56 %     2.51 %     2.61 %
Tax Equivalent Yield++ as of 5/31/12
     3.52 %     2.37 %     2.40 %     3.86 %     4.02 %
Current Annualized Distribution Rate++ as of 5/31/12
     4.12 %     3.28 %     3.32 %     4.28 %     4.38 %
 
++ The SEC yield is net investment income per share earned over the month ended May 31, 2012, 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 a percentage of net asset value on May 31, 2012. 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.
 
Morningstar Rankings — Municipal National Long Funds Category as of 5/31/12
Period
Rank
  
Number of Fund Classes Tracked
Percentile Ranking (%)
Class A
1-Year
141
of
233
61
3-Year
119
of
216
55
5-Year
27
of
201
13
10-Year
46
of
173
26
Class B
1-Year
201
of
233
86
3-Year
185
of
216
85
5-Year
101
of
201
50
10-Year
123
of
173
71
Class C
1-Year
189
of
233
81
3-Year
180
of
216
83
5-Year
98
of
201
49
10-Year
119
of
173
68
Class S
1-Year
125
of
233
54
3-Year
106
of
216
49
5-Year
17
of
201
8
10-Year
30
of
173
17
Institutional Class
1-Year
119
of
233
51
3-Year
102
of
216
47
5-Year
15
of
201
7
 
Source: Morningstar, Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable.
 
Investment Portfolio as of May 31, 2012
   
Principal Amount ($)
    
Value ($)
  
       
Municipal Bonds and Notes 94.0%
  
Alabama 0.9%
  
Alabama, State Public School & College Authority, Capital Improvement, 5.0%, 12/1/2023
     35,000,000       40,573,400  
Phoenix County, AL, Industrial Development Revenue, Industrial Development Board, AMT, 6.35%, 5/15/2035
     4,000,000       4,038,600  
        44,612,000  
Alaska 0.2%
  
Alaska, State Industrial Development & Export Authority Revenue, Providence Health Services, Series A, 5.5%, 10/1/2041
     11,000,000       12,489,620  
Arizona 1.6%
  
Arizona, Health Facilities Authority Revenue, Banner Health System, Series D, 5.375%, 1/1/2032
     12,000,000       13,096,800  
Arizona, Salt Verde Financial Corp., Gas Revenue:
  
5.0%, 12/1/2032
     1,600,000       1,643,856  
5.0%, 12/1/2037
     8,405,000       8,600,921  
Arizona, Water Infrastructure Finance Authority Revenue, Water Quality, Series A, 5.0%, 10/1/2030
     6,250,000       7,636,875  
Phoenix, AZ, Civic Improvement Corp., Airport Revenue:
  
Series A, 5.0%, 7/1/2040
     22,775,000       24,620,003  
Series A, 5.25%, 7/1/2033
     20,885,000       23,105,075  
        78,703,530  
Arkansas 0.2%
  
North Little Rock, AR, Electric Revenue, Series A, 6.5%, 7/1/2015, INS: NATL
     10,780,000       11,431,974  
California 16.6%
  
Banning, CA, Water & Sewer Revenue, 1989 Water System Improvement Project, ETM, 8.0%, 1/1/2019, INS: AMBAC
     585,000       694,173  
Banning, CA, Water & Sewer Revenue, Water System Reference & Improvement Project, ETM, 8.0%, 1/1/2019, INS: AMBAC
     320,000       396,332  
California, Bay Area Toll Authority, Toll Bridge Revenue, San Francisco Bay Area:
                
Series E-1, 0.13%**, 4/1/2045, LOC: Bank of Tokyo-Mitsubishi UFJ
     2,000,000       2,000,000  
Series F-1, 5.5%, 4/1/2043
     13,000,000       14,458,340  
Series F-1, 5.625%, 4/1/2044
     11,500,000       13,066,760  
California, Educational Facilities Authority Revenue, University of Southern California, Series A, 5.0%, 10/1/2038
     6,925,000       7,860,913  
California, Golden State Tobacco Securitization Corp., Tobacco Settlement Revenue, Series A, 5.0%, 6/1/2045, INS: AGC
     10,275,000       10,479,781  
California, Health Facilities Financing Authority Revenue, Adventist Health System, Series A, 5.75%, 9/1/2039
     5,000,000       5,634,400  
California, Health Facilities Financing Authority Revenue, Catholic Healthcare West:
                
Series A, 6.0%, 7/1/2034
     10,000,000       11,703,000  
Series A, 6.0%, 7/1/2039
     7,500,000       8,746,350  
California, Infrastructure & Economic Development Bank Revenue, California Independent Systems Operator Corp., Series A, 6.25%, 2/1/2039
     7,800,000       8,586,864  
California, M-S-R Energy Authority, Series B, 7.0%, 11/1/2034
     15,315,000       19,988,679  
California, State General Obligation:
  
5.0%, 2/1/2032
     35,000,000       38,984,050  
5.0%, 9/1/2032
     10,000,000       10,744,500  
5.0%, 2/1/2033
     8,000,000       8,841,760  
5.25%, 4/1/2035
     15,340,000       17,237,098  
6.0%, 4/1/2038
     22,915,000       26,755,096  
6.25%, 11/1/2034
     20,655,000       25,004,323  
California, State General Obligation, Various Purposes:
  
5.0%, 6/1/2023, INS: AGMC
     25,000,000       28,711,000  
5.0%, 12/1/2031, INS: NATL
     1,045,000       1,096,602  
5.125%, 11/1/2024
     5,000,000       5,266,450  
5.25%, 9/1/2026
     18,765,000       22,016,787  
5.25%, 9/1/2030
     5,000,000       5,726,450  
5.25%, 10/1/2032
     25,000,000       28,382,000  
6.0%, 11/1/2039
     50,000,000       58,977,500  
6.5%, 4/1/2033
     58,440,000       71,171,154  
California, State Public Works Board, Lease Revenue, Capital Projects, Series I-1, 6.375%, 11/1/2034
     10,000,000       11,993,500  
California, State Public Works Board, Lease Revenue, Department of Corrections, Series C, Prerefunded, 5.5%, 6/1/2021
     2,500,000       2,694,725  
California, State Public Works Board, Lease Revenue, Department of General Services, Buildings 8 & 9, Series A, 6.125%, 4/1/2029
     2,000,000       2,349,700  
California, State Public Works Board, Lease Revenue, Department of Mental Health:
                
Series A, 5.5%, 6/1/2021
     5,275,000       5,687,030  
Series A, 5.5%, 6/1/2022
     1,400,000       1,505,322  
California, State Revenue Lease, Public Works Board, Department of Corrections:
                
Series C, 5.0%, 6/1/2025
     2,500,000       2,622,525  
Series C, Prerefunded, 5.5%, 6/1/2020
     5,000,000       5,389,450  
California, State University Revenue, Series A, 5.25%, 11/1/2038
     10,000,000       11,167,300  
California, Statewide Communities Development Authority Revenue, Health Facility, Community Hospital Monterey Penninsula, Series B, 0.15%**, 6/1/2033, LOC: U.S. Bank NA
     1,850,000       1,850,000  
California, Statewide Communities Development Authority Revenue, Kaiser Permanente, Kaiser Foundation Hospitals, Series A, 5.0%, 4/1/2042
     5,295,000       5,737,397  
East Bay, CA, Municipal Utility District, Wastewater Systems Revenue, Series A, 5.0%, 6/1/2037, INS: AMBAC
     13,085,000       14,581,662  
Foothill, CA, Eastern Corridor Agency, Toll Road Revenue:
  
Series A, ETM, Zero Coupon, 1/1/2015
     10,000,000       9,878,200  
Series A, ETM, Zero Coupon, 1/1/2017
     5,000,000       4,797,300  
Series A, ETM, Zero Coupon, 1/1/2018
     21,890,000       20,447,230  
Los Angeles County, CA, Multi-Family Housing Authority Revenue, Canyon Country Villas Project, Series H, 0.17%**, 12/1/2032, LIQ: Freddie Mac
     3,450,000       3,450,000  
Los Angeles, CA, Community College District, Election of 2008, Series C, 5.25%, 8/1/2039
     12,000,000       13,890,480  
Los Angeles, CA, Department of Airports Revenue, Series A, 5.25%, 5/15/2039
     5,000,000       5,573,500  
Los Angeles, CA, Department of Airports Revenue, Los Angeles International Airport, Series A, 5.0%, 5/15/2040
     25,000,000       27,703,000  
Murrieta Valley, CA, School District General Obligation, Unified School District, Series A, Zero Coupon, 9/1/2014, INS: FGIC, NATL
     4,235,000       4,116,166  
Oakland, CA, Special Assessment Revenue, Oakland Convention Centers, 5.5%, 10/1/2014, INS: AMBAC
     2,000,000       2,116,880  
Orange County, CA, Airport Revenue:
  
Series A, 5.25%, 7/1/2039
     16,000,000       17,896,960  
Series B, 5.25%, 7/1/2039
     12,000,000       13,422,720  
Roseville, CA, School District General Obligation, Junior High, Series B, Zero Coupon, 8/1/2015, INS: FGIC, NATL
     1,000,000       963,850  
Sacramento, CA, Municipal Utility District, Electric Revenue:
  
Series U, 5.0%, 8/15/2026, INS: AGMC
     10,455,000       11,870,502  
Series U, 5.0%, 8/15/2028, INS: AGMC
     8,175,000       9,210,037  
San Diego County, CA, Regional Airport Authority Revenue, Series A, 5.0%, 7/1/2034
     7,000,000       7,633,150  
San Diego, CA, Community College District General Obligation, Election of 2002, 5.25%, 8/1/2033
     5,000,000       5,799,050  
San Diego, CA, Community College District, Election of 2006, 5.0%, 8/1/2036
     6,100,000       6,906,542  
San Diego, CA, School District General Obligation, Series A, Zero Coupon, 7/1/2014, INS: FGIC, NATL
     1,000,000       984,010  
San Francisco, CA, City & County Airports Commission, International Airport Revenue:
                
Series 32-G, 5.0%, 5/1/2026, INS: FGIC, NATL
     8,565,000       9,577,983  
Series F, 5.0%, 5/1/2035
     27,500,000       30,061,350  
Series E, 6.0%, 5/1/2039
     35,000,000       41,000,750  
San Francisco, CA, City & County Certificates of Participation, Multiple Capital Improvement Projects, Series A, 5.25%, 4/1/2031
     7,860,000       8,767,516  
San Joaquin County, CA, County General Obligation Lease, Facilities Project, 5.5%, 11/15/2013, INS: NATL
     2,680,000       2,740,354  
San Joaquin Hills, CA, Transportation/Tolls Revenue, Transportation Corridor Agency, Toll Road Revenue:
                
Series A, Zero Coupon, 1/15/2013, INS: NATL
     35,295,000       34,515,686  
Series A, Zero Coupon, 1/15/2014, INS: NATL
     14,905,000       13,972,990  
Ukiah, CA, School District General Obligation Lease, Zero Coupon, 8/1/2015, INS: FGIC, NATL
     2,000,000       1,887,840  
Walnut, CA, Energy Center Authority Revenue, Series A, 5.0%, 1/1/2040
     10,000,000       10,712,400  
        838,005,419  
Colorado 3.6%
  
Colorado, E-470 Public Highway Authority Revenue:
  
Series B, Zero Coupon, 9/1/2016, INS: NATL
     5,000,000       4,499,900  
Series A-1, 5.5%, 9/1/2024, INS: NATL
     4,000,000       4,335,040  
Colorado, Health Facilities Authority Revenue, Covenant Retirement Communities, Inc., 5.0%, 12/1/2035
     15,000,000       14,409,000  
Colorado, Public Energy Authority, Natural Gas Purchase Revenue, 6.5%, 11/15/2038, GTY: Merrill Lynch & Co., Inc.
     30,000,000       37,475,700  
Colorado, State Building Excellent Schools Today, Certificates of Participation, Series G, 5.0%, 3/15/2032
     8,630,000       9,681,479  
Colorado, Transportation/Tolls Revenue:
  
Series B, Zero Coupon, 9/1/2014, INS: NATL
     6,380,000       6,094,942  
Series B, Zero Coupon, 9/1/2015, INS: NATL
     17,120,000       15,933,584  
Series B, Zero Coupon, 9/1/2017, INS: NATL
     8,000,000       6,932,000  
Series B, Zero Coupon, 9/1/2018, INS: NATL
     20,560,000       16,968,990  
Series B, Zero Coupon, 9/1/2019, INS: NATL
     36,500,000       28,528,035  
Series B, Zero Coupon, 9/1/2020, INS: NATL
     7,000,000       5,159,560  
Series A, 5.75%, 9/1/2014, INS: NATL
     14,700,000       15,822,051  
Douglas County, CO, School District General Obligation, 7.0%, 12/15/2013, INS: NATL
     2,500,000       2,743,075  
University of Colorado, Enterprise Revenue, 5.25%, 6/1/2036
     11,500,000       13,404,285  
        181,987,641  
Connecticut 0.8%
  
Connecticut, Harbor Point Infrastructure Improvement District, Special Obligation Revenue, Harbor Point Project, Series A, 7.875%, 4/1/2039
     13,000,000       14,712,360  
Connecticut, State Health & Educational Facilities Authority Revenue, Hartford Healthcare, Series A, 5.0%, 7/1/2041
     20,000,000       21,329,600  
Greenwich, CT, Multi-Family Housing Revenue, 6.35%, 9/1/2027
     2,640,000       2,607,739  
        38,649,699  
District of Columbia 0.9%
  
District of Columbia, Core City General Obligation, Series B3, 5.5%, 6/1/2012, INS: NATL
     340,000       340,000  
District of Columbia, Income Tax Secured Revenue, Series G, 5.0%, 12/1/2036
     27,475,000       31,632,517  
District of Columbia, National Public Radio Revenue, Series A, 5.0%, 4/1/2035
     5,000,000       5,464,950  
District of Columbia, Water & Sewer Revenue, Public Utility Revenue, 5.5%, 10/1/2023, INS: AGMC
     5,000,000       6,567,650  
        44,005,117  
Florida 4.8%
  
Clearwater, FL, Water & Sewer Revenue, Series A, 5.25%, 12/1/2039
     2,000,000       2,256,540  
Florida, Jacksonville Electric Authority, Water & Sewer Revenue, Series A, 5.0%, 10/1/2032
     5,000,000       5,722,750  
Florida, Village Center Community Development District, Utility Revenue, ETM, 6.0%, 11/1/2018, INS: FGIC
     1,250,000       1,513,788  
Fort Pierce, FL, Utilities Authority Revenue, Series B, Zero Coupon, 10/1/2018, INS: AMBAC
     2,000,000       1,721,680  
Hillsborough County, FL, Industrial Development Authority Revenue, University Community Hospital, ETM, 6.5%, 8/15/2019, INS: NATL
     1,000,000       1,250,680  
Jacksonville, FL, Health Facilities Authority, ETM, 11.5%, 10/1/2012
     85,000       88,173  
Lee County, FL, Airport Revenue, Series A, AMT, 5.375%, 10/1/2032
     1,750,000       1,897,892  
Marco Island, FL, Utility Systems Revenue:
  
Series A, 5.0%, 10/1/2034
     1,000,000       1,102,620  
Series A, 5.0%, 10/1/2040
     1,000,000       1,092,070  
Melbourne, FL, Water & Sewer Revenue, ETM, Zero Coupon, 10/1/2016, INS: FGIC
     1,350,000       1,298,309  
Miami-Dade County, FL, Aviation Revenue:
  
Series B, 5.0%, 10/1/2035, INS: AGMC
     15,000,000       16,180,200  
Series A, 5.5%, 10/1/2041
     30,000,000       33,818,700  
Miami-Dade County, FL, Aviation Revenue, Miami International Airport:
                
Series C, AMT, 5.25%, 10/1/2022, INS: AGMC
     20,000,000       22,165,400  
Series A-1, 5.375%, 10/1/2035
     1,000,000       1,127,150  
Series A-1, 5.375%, 10/1/2041
     19,290,000       21,565,834  
Miami-Dade County, FL, Double Barreled Aviation, 5.0%, 7/1/2041
     6,700,000       7,409,530  
Miami-Dade County, FL, Sales & Special Tax Revenue:
  
Series A, Zero Coupon, 10/1/2014, INS: NATL
     2,195,000       1,980,483  
Series A, Zero Coupon, 10/1/2022, INS: NATL
     7,000,000       4,045,860  
Miami-Dade County, FL, Water & Sewer Systems Revenue, 5.0%, 10/1/2034
     17,800,000       19,789,506  
North Brevard County, FL, Hospital District Revenue, Parrish Medical Center Project, 5.75%, 10/1/2043
     10,000,000       10,798,700  
Orange County, FL, Health Facilities Authority Revenue:
  
Series 2006-A, 6.25%, 10/1/2016, INS: NATL
     1,100,000       1,233,221  
Series 2006-A, ETM, 6.25%, 10/1/2016, INS: NATL
     70,000       82,396  
Orange County, FL, Health Facilities Authority Revenue, Orlando Regional Healthcare System:
                
Series B, 5.25%, 12/1/2029, INS: AGMC
     6,500,000       7,173,790  
Series A, 6.25%, 10/1/2018, INS: NATL
     500,000       610,650  
Series C, 6.25%, 10/1/2021, INS: NATL
     6,000,000       7,575,180  
Orange County, FL, Health Facilities Authority, Orlando Regional Facilities, Series A, ETM, 6.25%, 10/1/2016, INS: NATL
     2,830,000       3,331,165  
Orlando & Orange County, FL, Expressway Authority Revenue:
                
Series C, 5.0%, 7/1/2035
     16,215,000       17,836,176  
Series A, 5.0%, 7/1/2040
     11,895,000       12,979,586  
6.5%, 7/1/2012, INS: FGIC, NATL
     1,000,000       1,004,910  
Orlando, FL, Special Assessment Revenue, Conroy Road Interchange Project, Series A, 5.8%, 5/1/2026
     460,000       461,352  
Palm Beach County, FL, Airport Systems Revenue:
  
5.75%, 10/1/2013, INS: NATL
     3,770,000       3,999,631  
5.75%, 10/1/2014, INS: NATL
     755,000       830,983  
Palm Beach County, FL, Criminal Justice Facilities Revenue, 7.2%, 6/1/2015, INS: FGIC, NATL
     110,000       128,358  
Port St. Lucie, FL, Utility System Revenue:
  
5.0%, 9/1/2035, INS: AGC
     2,600,000       2,819,362  
5.25%, 9/1/2035, INS: AGC
     3,000,000       3,314,430  
Sunrise, FL, Water & Sewer Revenue, Utility Systems, ETM, 5.5%, 10/1/2018, INS: AMBAC
     12,500,000       14,958,500  
Tallahassee, FL, Energy System Revenue, 5.5%, 10/1/2016, INS: AMBAC
     1,005,000       1,190,292  
Tampa, FL, Sports Authority Revenue, Sales Tax-Tampa Bay Arena Project, 5.75%, 10/1/2020, INS: NATL
     2,075,000       2,310,927  
Tampa, FL, Utility Tax Revenue, Zero Coupon, 10/1/2014, INS: AMBAC
     3,165,000       3,058,656  
        241,725,430  
Georgia 5.2%
  
Atlanta, GA, Airport Revenue:
  
Series A, 5.0%, 1/1/2035
     2,470,000       2,698,475  
Series B, 5.0%, 1/1/2037
     720,000       797,681  
Atlanta, GA, Metropolitan Rapid Transit Authority, Sales Tax Revenue, 5.0%, 7/1/2039
     5,000,000       5,521,250  
Atlanta, GA, Water & Sewer Revenue, Series A, 5.5%, 11/1/2019, INS: FGIC, NATL
     13,000,000       16,198,650  
Atlanta, GA, Water & Wastewater Revenue, Series B, 5.375%, 11/1/2039, INS: AGMC
     40,000,000       45,153,200  
Burke County, GA, Development Authority Pollution Control Revenue, Oglethorpe Power Corp. Vogtle Project:
                
Series A, 5.3%, 1/1/2033, INS: AGMC
     10,000,000       10,927,200  
Series B, 5.5%, 1/1/2033
     4,000,000       4,342,200  
De Kalb County, GA, Water & Sewer Revenue:
  
Series A, 5.25%, 10/1/2032
     2,180,000       2,519,949  
Series A, 5.25%, 10/1/2033
     3,635,000       4,179,777  
Series A, 5.25%, 10/1/2036
     11,115,000       12,609,190  
Series A, 5.25%, 10/1/2041
     13,000,000       14,648,530  
Gainesville & Hall County, GA, Hospital Authority Revenue, Anticipation Certificates, Northeast Georgia Healthcare:
                
Series A, 5.375%, 2/15/2040
     8,225,000       8,936,874  
Series A, 5.5%, 2/15/2045
     20,000,000       21,950,400  
Georgia, Main Street Natural Gas, Inc., Gas Project Revenue:
                
Series A, 5.0%, 3/15/2019
     17,440,000       19,818,293  
Series B, 5.0%, 3/15/2019
     5,000,000       5,444,850  
Series A, 5.0%, 3/15/2020
     2,700,000       3,065,823  
Series B, 5.0%, 3/15/2020
     5,000,000       5,323,500  
Series A, 5.0%, 3/15/2022
     17,340,000       19,731,880  
Series A, 5.5%, 9/15/2023
     5,000,000       5,535,500  
Series A, 5.5%, 9/15/2024
     4,635,000       5,131,223  
Series A, 5.5%, 9/15/2027
     5,000,000       5,589,750  
Series A, 5.5%, 9/15/2028
     5,000,000       5,602,850  
Georgia, Medical Center Hospital Authority Revenue, Anticipation Certificates, Columbus Regional Healthcare Systems, 6.5%, 8/1/2038, INS: AGC
     18,700,000       21,456,754  
Georgia, Municipal Electric Authority Power Revenue:
  
Series 2005-Y, 6.4%, 1/1/2013, INS: AMBAC
     1,045,000       1,075,012  
Series Y, ETM, 6.4%, 1/1/2013, INS: AMBAC
     75,000       77,513  
Series W, 6.6%, 1/1/2018, INS: NATL
     11,035,000       12,419,341  
Georgia, Water & Sewer Revenue, Municipal Electric Authority Power Revenue, Series W, ETM, 6.6%, 1/1/2018, INS: NATL
     190,000       227,616  
        260,983,281  
Hawaii 0.7%
  
Hawaii, State Airports Systems Revenue, Series A, 5.0%, 7/1/2039
     16,800,000       18,173,064  
Hawaii, State Department of Budget & Finance, Special Purpose Revenue, Hawaiian Electric Co., Inc., 6.5%, 7/1/2039, GTY: Hawaiian Electric Co., Inc.
     6,000,000       6,965,220  
Honolulu City & County, HI, Wastewater Systems Revenue, Series A, 5.25%, 7/1/2036
     10,285,000       12,028,102  
        37,166,386  
Idaho 0.2%
  
Idaho, Health Facilities Authority Revenue, St. Luke's Regional Medical Center, 6.75%, 11/1/2037
     10,060,000       11,813,659  
Illinois 10.8%
  
Chicago, IL, Core City General Obligation:
  
Zero Coupon, 1/1/2017, INS: FGIC, NATL
     20,000,000       18,030,200  
Series A, 5.375%, 1/1/2013, INS: NATL
     5,605,000       5,769,451  
Chicago, IL, General Obligation:
  
Series B, 5.125%, 1/1/2015, INS: AMBAC
     1,960,000       2,104,099  
Series A, 5.25%, 1/1/2035
     10,125,000       11,195,314  
Chicago, IL, O'Hare International Airport Revenue:
  
Series A-2, AMT, 5.75%, 1/1/2019, INS: AGMC
     12,975,000       13,745,066  
Third Lien, Series A, 5.75%, 1/1/2039
     13,650,000       15,860,208  
Third Lien, Series B, 6.0%, 1/1/2041
     25,000,000       29,466,500  
Series C, 6.5%, 1/1/2041
     26,700,000       32,361,735  
Chicago, IL, Sales & Special Tax Revenue, 5.375%, 1/1/2014, INS: AMBAC
     2,155,000       2,248,247  
Chicago, IL, School District General Obligation Lease, Board of Education:
                
Series A, 6.0%, 1/1/2016, INS: NATL
     11,025,000       12,864,962  
Series A, 6.0%, 1/1/2020, INS: NATL
     46,340,000       54,870,267  
Series A, 6.25%, 1/1/2015, INS: NATL
     22,180,000       23,681,808  
Chicago, IL, Water & Sewer Revenue:
  
Zero Coupon, 11/1/2012, INS: FGIC, NATL
     6,350,000       6,337,871  
Zero Coupon, 11/1/2018, INS: AMBAC
     5,165,000       4,339,633  
Chicago, IL, Water Revenue, 5.0%, 11/1/2023, INS: AGMC
     10,000,000       11,465,800  
Cook County, IL, County General Obligation, 6.5%, 11/15/2014, INS: FGIC, NATL
     18,560,000       21,059,475  
Illinois, Finance Authority Revenue, Advocate Health Care Network:
                
Series B, 5.375%, 4/1/2044
     5,500,000       5,983,945  
Series A, 5.5%, 4/1/2044
     5,500,000       6,038,670  
Series D, 6.5%, 11/1/2038
     4,085,000       4,767,113  
Illinois, Finance Authority Revenue, Elmhurst Memorial Healthcare, Series A, 5.625%, 1/1/2037
     16,000,000       16,988,800  
Illinois, Finance Authority Revenue, Memorial Health Systems:
                
5.5%, 4/1/2034
     12,100,000       13,103,695  
5.5%, 4/1/2039
     4,800,000       5,150,832  
Illinois, Finance Authority Revenue, Northwest Community Hospital, Series A, 5.5%, 7/1/2038
     22,990,000       24,802,761  
Illinois, Finance Authority Revenue, Park Place of Elmhurst, Series D-3, 6.25%, 8/15/2015
     5,000,000       4,999,600  
Illinois, Finance Authority Revenue, Roosevelt University Project, 6.5%, 4/1/2044
     10,000,000       10,974,900  
Illinois, Higher Education Revenue, Zero Coupon, 4/1/2015, INS: NATL
     3,300,000       3,179,352  
Illinois, Hospital & Healthcare Revenue, Health Facilities Authority:
                
5.2%, 9/1/2012
     1,000,000       1,002,790  
6.25%, 8/15/2013, INS: NATL
     1,275,000       1,309,361  
Series A, 6.25%, 1/1/2015, INS: AMBAC
     7,355,000       7,853,007  
Illinois, Metropolitan Pier & Exposition Authority, Dedicated State Tax Revenue, McCormick Capital Appreciation:
                
Zero Coupon, 6/15/2013, INS: NATL
     4,045,000       3,984,163  
ETM, Zero Coupon, 6/15/2013, INS: NATL
     3,520,000       3,505,322  
Illinois, Municipal Electric Agency Power Supply:
  
Series A, 5.25%, 2/1/2023, INS: FGIC, NATL
     3,500,000       3,987,235  
Series A, 5.25%, 2/1/2024, INS: FGIC, NATL
     2,500,000       2,829,100  
Illinois, Pollution Control Revenue, Development Finance Authority, 5.85%, 1/15/2014, INS: AMBAC
     5,000,000       5,333,850  
Illinois, Project Revenue, Zero Coupon, 1/1/2014, INS: AGMC
     17,975,000       17,534,073  
Illinois, Project Revenue, Metropolitan Pier and Exposition Authority, Zero Coupon, 6/15/2016, INS: FGIC, NATL
     10,000,000       9,139,600  
Illinois, Railsplitter Tobacco Settlement Authority, 6.0%, 6/1/2028
     17,315,000       19,903,766  
Illinois, Regional Transportation Authority:
  
Series B, 5.75%, 6/1/2033, INS: NATL
     7,000,000       8,897,700  
Series A, 6.7%, 11/1/2021, INS: FGIC, NATL
     25,800,000       31,213,356  
Illinois, Sales & Special Tax Revenue:
  
6.25%, 12/15/2020, INS: AMBAC
     6,975,000       8,002,766  
Series P, 6.5%, 6/15/2013
     405,000       415,534  
Illinois, Special Assessment Revenue, Metropolitan Pier and Exposition Authority, Series A, Zero Coupon, 12/15/2018, INS: NATL
     6,660,000       5,510,351  
Illinois, State Finance Authority Revenue, Ascension Health Credit Group:
                
Series A, 5.0%, 11/15/2032
     2,435,000       2,725,788  
Series A, 5.0%, 11/15/2037
     1,715,000       1,876,450  
Joliet, IL, Higher Education Revenue, College Assistance Corp., North Campus Extension Center Project, 6.7%, 9/1/2012, INS: NATL
     645,000       651,876  
Kane Cook & Du Page Counties, IL, School District General Obligation, Series B, Zero Coupon, 1/1/2013, INS: AGMC
     1,095,000       1,089,569  
Lake Cook Kane & McHenry Counties, IL, School District General Obligation, 6.3%, 12/1/2017, INS: AGMC
     1,885,000       2,394,855  
Lake County, IL, Higher Education Revenue, District No. 117:
  
Series B, Zero Coupon, 12/1/2013, INS: FGIC, NATL
     5,880,000       5,635,216  
Series B, Zero Coupon, 12/1/2014, INS: FGIC, NATL
     5,985,000       5,564,255  
Will County, IL, County General Obligation:
  
Series B, Zero Coupon, 12/1/2012, INS: FGIC, NATL
     2,480,000       2,476,478  
Series B, Zero Coupon, 12/1/2013, INS: FGIC, NATL
     12,030,000       11,913,309  
Series B, Zero Coupon, 12/1/2014, INS: FGIC, NATL
     10,255,000       10,040,568  
Will County, IL, School District General Obligation, Community Unit School District No. 365-U, Series B, ETM, Zero Coupon, 11/1/2015, INS: AGMC
     8,000,000       7,778,880  
        543,959,522  
Indiana 1.3%
  
Indiana, Electric Revenue, Municipal Power Agency, Series B, 5.5%, 1/1/2016, INS: NATL
     10,160,000       11,147,044  
Indiana, Finance Authority Hospital Revenue, Deaconess Hospital Obligation, Series A, 6.75%, 3/1/2039
     5,230,000       6,115,178  
Indiana, Hospital & Healthcare Revenue, Health Facilities Finance Authority, Greenwood Village South Project, 5.625%, 5/15/2028
     2,100,000       1,905,540  
Indiana, Hospital & Healthcare Revenue, Health Facilities Financing Authority:
                
Series D, 5.75%, 11/15/2012
     4,580,000       4,598,549  
ETM, 6.0%, 7/1/2012, INS: NATL
     1,535,000       1,542,031  
ETM, 6.0%, 7/1/2013, INS: NATL
     1,620,000       1,712,523  
ETM, 6.0%, 7/1/2014, INS: NATL
     1,720,000       1,904,797  
ETM, 6.0%, 7/1/2015, INS: NATL
     1,825,000       2,110,714  
6.0%, 7/1/2016, INS: NATL
     465,000       526,729  
ETM, 6.0%, 7/1/2016, INS: NATL
     1,470,000       1,790,710  
6.0%, 7/1/2017, INS: NATL
     490,000       562,672  
ETM, 6.0%, 7/1/2017, INS: NATL
     1,560,000       1,968,174  
6.0%, 7/1/2018, INS: NATL
     520,000       606,928  
ETM, 6.0%, 7/1/2018, INS: NATL
     1,655,000       2,141,620  
Indiana, State Finance Authority, Wastewater Utility Revenue, First Lien, Series A, 5.25%, 10/1/2038
     8,000,000       9,068,640  
Indiana, State Transportation Finance Authority, Series A, 5.75%, 6/1/2012, INS: AMBAC
     2,570,000       2,570,000  
Indiana, Transportation/Tolls Revenue, Series A, 7.25%, 6/1/2015
     1,960,000       2,130,598  
St. Joseph County, IN, Educational Facilities Revenue, Notre Dame du Lac Project, 5.0%, 3/1/2036
     10,000,000       11,208,500  
        63,610,947  
Kansas 0.1%
  
Kansas, Pollution Control Revenue, Development Financing Authority, Series II, 5.5%, 11/1/2017
     1,000,000       1,245,650  
Wichita, KS, Hospital Revenue, Facilities Improvement, Series III-A, 5.0%, 11/15/2034
     3,590,000       3,839,685  
        5,085,335  
Kentucky 1.8%
  
Kentucky, Economic Development Finance Authority, Health Systems Revenue, Norton Healthcare:
                
Series C, 5.6%, 10/1/2012, INS: NATL
     9,110,000       9,249,748  
Series C, 5.7%, 10/1/2013, INS: NATL
     5,495,000       5,807,061  
Series C, ETM, 5.7%, 10/1/2013, INS: NATL
     2,750,000       2,933,480  
Series C, 5.8%, 10/1/2014, INS: NATL
     3,420,000       3,643,087  
Series C, Prerefunded, 5.8%, 10/1/2014, INS: NATL
     1,710,000       1,851,229  
Series C, 5.85%, 10/1/2015, INS: NATL
     3,490,000       3,710,812  
Series C, Prerefunded, 5.85%, 10/1/2015, INS: NATL
     1,745,000       1,890,289  
Series C, 5.9%, 10/1/2016, INS: NATL
     4,330,000       4,589,280  
Series C, Prerefunded, 5.9%, 10/1/2016, INS: NATL
     2,170,000       2,352,106  
Kentucky, Economic Development Finance Authority, Hospital Facilities Revenue, Owensboro Medical Health Systems, Series A, 6.5%, 3/1/2045
     11,000,000       12,789,260  
Kentucky, Economic Development Finance Authority, Louisville Arena Project Revenue, Series A-1, 6.0%, 12/1/2038, INS: AGC
     4,500,000       4,911,975  
Louisville & Jefferson County, KY, Metropolitan Government Health Systems Revenue, Norton Healthcare, Inc., 5.0%, 10/1/2030
     15,000,000       15,479,100  
Louisville & Jefferson County, KY, Metropolitan Government Revenue, Catholic Health Initiatives, Series A, 5.0%, 12/1/2035
     20,770,000       22,854,685  
        92,062,112  
Louisiana 0.6%
  
East Baton Rouge, LA, Sewer Commission Revenue, Series A, 5.25%, 2/1/2039
     10,000,000       11,116,800  
Louisiana, Public Facilities Authority, Hospital Revenue, Lafayette General Medical Center, 5.5%, 11/1/2040
     5,000,000       5,404,050  
Louisiana, St. John Baptist Parish Revenue, Marathon Oil Corp., Series A, 5.125%, 6/1/2037
     12,000,000       12,516,840  
        29,037,690  
Maine 0.2%
  
Maine, Health & Higher Educational Facilities Authority Revenue, Series A, 5.0%, 7/1/2040
     9,650,000       10,396,910  
Maine, State Housing Authority, Mortgage Revenue, Series B-3, AMT, 0.23%**, 11/15/2038, SPA: State Street Bank & Trust Co.
     1,000,000       1,000,000  
        11,396,910  
Maryland 0.5%
  
Baltimore, MD, Project Revenue, Waste Water Projects, Series A, 5.0%, 7/1/2036
     2,770,000       3,184,974  
Baltimore, MD, Sales & Special Tax Revenue, Series A, 5.9%, 7/1/2012, INS: FGIC
     3,100,000       3,113,950  
Maryland, State Economic Development Corp. Revenue, Senior Lien Project, Chesapeake Bay:
                
Series A, 5.0%, 12/1/2016
     1,000,000       890,970  
Series A, 5.0%, 12/1/2031
     20,000,000       13,396,200  
Maryland, State Health & Higher Educational Facilities Authority Revenue, Anne Arundel Health Systems, Series A, 6.75%, 7/1/2039
     3,400,000       4,070,106  
        24,656,200  
Massachusetts 4.9%
  
Massachusetts, Bay Transportation Authority Revenue, Series B, 6.2%, 3/1/2016
     10,000,000       10,990,300  
Massachusetts, Higher Education Revenue, College Building Authority Project, Series A, 7.5%, 5/1/2014
     3,800,000       4,138,732  
Massachusetts, Hospital & Healthcare Revenue, Health & Educational Facilities Authority, Massachusetts General Hospital, Series F, ETM, 6.25%, 7/1/2012, INS: AMBAC
     170,000       170,864  
Massachusetts, Industrial Development Revenue, Development Finance Agency, Series A, 7.1%, 7/1/2032
     4,420,000       4,129,385  
Massachusetts, Port Authority Revenue, ETM, 13.0%, 7/1/2013
     235,000       252,134  
Massachusetts, Project Revenue, Prerefunded, 9.2%, 12/15/2031, GTY: Harvard Pilgrim HealthCare, Inc.
     17,000,000       18,147,500  
Massachusetts, Project Revenue, Health & Educational Facilities Authority, Series B, Prerefunded, 9.15%, 12/15/2023, GTY: Harvard Pilgrim HealthCare, Inc.
     3,000,000       3,201,720  
Massachusetts, Sales & Special Tax Revenue, Federal Highway Grant, Series A, ETM, Zero Coupon, 12/15/2014
     27,680,000       27,296,078  
Massachusetts, State College Building Authority Revenue:
  
Series B, 5.0%, 5/1/2037
     4,500,000       5,136,255  
Series B, 5.0%, 5/1/2043
     4,125,000       4,689,548  
Massachusetts, State Department of Transportation, Metropolitan Highway Systems Revenue, Series B, 5.0%, 1/1/2032
     28,800,000       31,684,896  
Massachusetts, State Development Finance Agency Revenue, Linden Ponds, Inc. Facility:
                
Series B, 11/15/2056*
     314,524       1,623  
Series A-2, 5.5%, 11/15/2046
     63,235       39,163  
Series A-1, 6.25%, 11/15/2031
     1,182,967       922,466  
Massachusetts, State Development Finance Agency Revenue, Masonic Nursing Home, Series B, 0.12%**, 7/1/2032, LOC: TD Bank NA
     6,894,000       6,894,000  
Massachusetts, State Development Finance Agency Revenue, Partners Healthcare System, Inc., Series L, 5.0%, 7/1/2036
     13,680,000       15,146,633  
Massachusetts, State Development Finance Agency, Resource Recovery Revenue, SEMASS Partnership:
                
Series A, 5.625%, 1/1/2015, INS: NATL
     4,000,000       4,049,760  
Series A, 5.625%, 1/1/2016, INS: NATL
     2,750,000       2,784,265  
Massachusetts, State Health & Educational Facilities Authority Revenue, Massachusetts Institute of Technology, Series K, 5.5%, 7/1/2022
     9,000,000       12,112,110  
Massachusetts, State Health & Educational Facilities Authority Revenue, Suffolk University, Series A, 5.75%, 7/1/2039
     14,285,000       15,688,501  
Massachusetts, State Port Authority Special Facilities Revenue, Delta Air Lines, Inc. Project:
                
Series A, AMT, 5.5%, 1/1/2014, INS: AMBAC
     3,000,000       2,991,780  
Series A, AMT, 5.5%, 1/1/2015, INS: AMBAC
     3,000,000       2,987,040  
Series A, AMT, 5.5%, 1/1/2016, INS: AMBAC
     3,000,000       2,999,970  
Massachusetts, State School Building Authority, Sales Tax Revenue, Series B, 5.25%, 10/15/2035
     12,000,000       14,229,000  
Massachusetts, State Water Resource Authority:
  
Series B, 5.0%, 8/1/2041
     5,500,000       6,231,830  
Series J, 5.5%, 8/1/2021, INS: AGMC
     5,685,000       7,414,206  
Massachusetts, Transportation/Tolls Revenue, Turnpike Authority, Series C, Zero Coupon, 1/1/2018, INS: NATL
     10,000,000       8,823,200  
Massachusetts, Water & Sewer Revenue, Water Authority, Series J, 5.5%, 8/1/2020, INS: AGMC (a)
     14,315,000       18,467,638  
Massachusetts, Water & Sewer Revenue, Water Resource Authority, Series A, ETM, 6.5%, 7/15/2019 (a)
     13,710,000       16,649,424  
        248,270,021  
Michigan 2.2%
  
Detroit, MI, School District General Obligation, Series C, 5.25%, 5/1/2014, INS: FGIC
     1,000,000       1,078,390  
Detroit, MI, Sewer Disposal Revenue:
  
Series D, 0.914%***, 7/1/2032, INS: AGMC
     6,355,000       4,606,358  
Series B, 7.5%, 7/1/2033, INS: AGMC
     10,000,000       12,629,600  
Detroit, MI, State General Obligation:
  
Series A-1, 5.375%, 4/1/2016, INS: NATL
     2,760,000       2,762,843  
Series A-1, 5.375%, 4/1/2018, INS: NATL
     3,000,000       3,001,560  
Detroit, MI, Water & Sewer Revenue, Series A, Zero Coupon, 7/1/2015, INS: FGIC, NATL
     8,710,000       8,045,601  
Detroit, MI, Water Supply Systems Revenue, Series A, 5.75%, 7/1/2037
     11,410,000       12,405,637  
Michigan, State Building Authority Revenue, Facilities Program:
                
Series H, 5.125%, 10/15/2033
     9,755,000       10,733,524  
Series I, 6.0%, 10/15/2038
     9,000,000       10,321,740  
Michigan, State Grant Anticipation Bonds, 5.25%, 9/15/2023, INS: AGMC
     7,500,000       8,487,375  
Michigan, State Hospital Finance Authority Revenue, MidMichigan Health Obligation Group, Series A, 6.125%, 6/1/2039
     4,000,000       4,589,400  
Michigan, State Hospital Finance Authority Revenue, Trinity Health, Series A, 6.5%, 12/1/2033
     10,000,000       11,977,900  
Michigan, State Hospital Finance Authority, Trinity Health Credit Group, Series C, 5.0%, 12/1/2034
     9,900,000       11,068,596  
Royal Oak, MI, Hospital Finance Authority Revenue, William Beaumont Hospital, 8.25%, 9/1/2039
     7,200,000       9,218,448  
Tawas City, MI, Hospital Finance Authority, St. Joseph Health Services, Series A, ETM, 5.6%, 2/15/2013
     290,000       294,512  
        111,221,484  
Minnesota 0.6%
  
Minneapolis, MN, Health Care Systems Revenue, Fairview Health Services, Series A, 6.75%, 11/15/2032
     6,440,000       7,774,175  
Minnesota, Tobacco Securitization Authority, Tobacco Settlement Revenue, Series B, 5.25%, 3/1/2031
     9,000,000       10,042,830  
University of Minnesota, Higher Education Revenue:
  
Series A, ETM, 5.75%, 7/1/2017
     3,240,000       3,990,935  
Series A, ETM, 5.75%, 7/1/2018 (a)
     6,760,000       8,525,238  
        30,333,178  
Mississippi 0.6%
  
Mississippi, Development Bank Special Obligation, Department of Corrections, Series C, 5.25%, 8/1/2027
     13,890,000       15,905,439  
Mississippi, State Business Finance Commission, Gulf Opportunity Zone, Chevron U.S.A., Inc. Project, Series C, 0.18%**, 12/1/2030, GTY: Chevron Corp.
     3,000,000       3,000,000  
Warren County, MS, Gulf Opportunity Zone, International Paper Co.:
                
Series A, 5.5%, 9/1/2031
     5,000,000       5,234,700  
Series A, 6.5%, 9/1/2032
     7,420,000       8,333,847  
        32,473,986  
Missouri 0.4%
  
Cape Girardeau County, MO, Industrial Development Authority, Health Care Facilities Revenue, St. Francis Medical Center, Series A, 5.75%, 6/1/2039
     2,150,000       2,375,685  
Missouri, State Health & Educational Facilities Authority Revenue, Lutheran Senior Services, Series C, 5.0%, 2/1/2042
     8,240,000       8,275,185  
St. Louis, MO, Industrial Development Authority Revenue, Convention Center Hotel, Zero Coupon, 7/15/2016, INS: AMBAC
     6,895,000       5,545,304  
St. Louis, MO, State General Obligation Lease, Industrial Development Authority, Convention Center Hotel, Zero Coupon, 7/15/2015, INS: AMBAC
     4,200,000       3,572,016  
        19,768,190  
Nebraska 0.1%
  
Omaha, NE, Public Power District Electric Revenue:
  
Series A, 5.5%, 2/1/2033
     1,000,000       1,143,070  
Series A, 5.5%, 2/1/2035
     1,000,000       1,134,640  
Series A, 5.5%, 2/1/2039
     1,000,000       1,125,740  
        3,403,450  
Nevada 0.1%
  
Clark County, NV, Airport Revenue, Series B, 5.125%, 7/1/2036
     5,000,000       5,431,050  
Nevada, Director State Department of Business & Industry, Las Vegas Monorail Project, Second Tier, 7.375%, 1/1/2040*
     15,000,000       150  
        5,431,200  
New Hampshire 0.2%
  
New Hampshire, Health & Education Facilities Authority Revenue, Wentworth-Douglas Hospital, Series A, 6.5%, 1/1/2031
     10,000,000       11,788,800  
New Jersey 3.2%
  
New Jersey, Economic Development Authority Revenue, Cigarette Tax:
                
Prerefunded, 5.5%, 6/15/2031
     3,000,000       3,312,240  
Prerefunded, 5.75%, 6/15/2034
     2,455,000       2,720,312  
New Jersey, Economic Development Authority Revenue, Motor Vehicle Surplus Revenue:
                
Series A, 5.0%, 7/1/2022, INS: NATL
     7,140,000       7,665,076  
Series A, 5.0%, 7/1/2023, INS: NATL
     8,845,000       9,495,461  
New Jersey, Garden State Preservation Trust, Open Space & Farm Land, Series 2005-A, Prerefunded, 5.8%, 11/1/2023, INS: AGMC
     5,000,000       5,883,750  
New Jersey, Industrial Development Revenue, Economic Development Authority, Harrogate, Inc., Series A, 5.875%, 12/1/2026
     1,000,000       1,000,100  
New Jersey, State Economic Development Authority Revenue, 5.0%, 6/15/2028
     1,050,000       1,146,537  
New Jersey, State Transportation Trust Fund Authority, Series A, 5.75%, 6/15/2020, INS: AMBAC
     11,000,000       13,419,560  
New Jersey, State Transportation Trust Fund Authority, Capital Appreciation, Transportation Systems:
                
Series A, Zero Coupon, 12/15/2026
     54,000,000       29,236,680  
Series A, Zero Coupon, 12/15/2028
     30,000,000       14,382,300  
New Jersey, State Transportation Trust Fund Authority, Transportation Systems:
                
Series B, 5.25%, 6/15/2036
     15,940,000       18,158,210  
Series B, 5.5%, 6/15/2031
     13,200,000       15,447,828  
Series A, 6.0%, 6/15/2035
     6,000,000       7,317,420  
Series A, 6.0%, 12/15/2038
     11,075,000       12,831,273  
Series A, Prerefunded, 6.0%, 12/15/2038
     5,925,000       7,799,552  
New Jersey, State Turnpike Authority Revenue:
  
Series A, 5.0%, 1/1/2035 (b)
     6,025,000       6,737,035  
Series E, 5.25%, 1/1/2040
     5,250,000       5,846,295  
Series C-2005, 6.5%, 1/1/2016, INS: AMBAC
     1,210,000       1,434,491  
Series C-2005, ETM, 6.5%, 1/1/2016, INS: AMBAC
     425,000       515,699  
        164,349,819  
New York 4.2%
  
Nassau, NY, Health Care Corp. Revenue, 0.16%**, 8/1/2029, LOC: TD Bank NA
     540,000       540,000  
New York, Higher Education Revenue, Dormitory Authority, Series B, 5.25%, 5/15/2019, INS: FGIC
     6,000,000       6,920,280  
New York, Higher Education Revenue, Dormitory Authority, City University, Series B, 6.0%, 7/1/2014, INS: FGIC
     3,660,000       3,826,933  
New York, School District General Obligation, Dormitory Authority, City University, Series A, 5.5%, 5/15/2019
     1,500,000       1,802,715  
New York, Senior Care Revenue, Dormitory Authority, City University, Series A, 5.25%, 5/15/2021
     2,000,000       2,414,060  
New York, State Agency General Obligation Lease, Urban Development Corp., 5.7%, 4/1/2020
     3,600,000       4,403,304  
New York, State Dormitory Authority Revenues, Non-State Supported Debt, New York Law School, 0.15%**, 7/1/2038, LOC: TD Bank NA
     2,050,000       2,050,000  
New York, State Dormitory Authority, Personal Income Tax Revenue:
                
Series F, 5.0%, 2/15/2035
     5,000,000       5,696,100  
Series A, 5.0%, 3/15/2038 (a)
     8,750,000       9,831,588  
Series C, 5.0%, 3/15/2041
     10,000,000       11,250,800  
New York, State General Obligation Lease, Urban Development Corp., State Facilities, 5.6%, 4/1/2015
     4,655,000       5,032,195  
New York, State General Obligation, Tobacco Settlement Financing Corp., Series A-1, 5.25%, 6/1/2022, INS: AMBAC
     12,600,000       13,201,776  
New York, State Liberty Development Corp. Revenue, World Trade Center Port Authority Construction, 5.25%, 12/15/2043
     40,000,000       45,582,800  
New York, State Mortgage Agency, Homeowner Mortgage Revenue, Series 142, AMT, 0.2%**, 10/1/2037, SPA: Barclays Bank
     7,000,000       7,000,000  
New York, State Thruway Authority, Second Generation Highway & Bridge Trust Funding Authority:
                
Series A, 5.0%, 4/1/2031
     5,250,000       6,170,010  
Series A, 5.0%, 4/1/2032
     4,000,000       4,682,320  
New York, Transportation/Tolls Revenue, Transportation Authority, Series E, 5.5%, 11/15/2021, INS: NATL
     6,000,000       6,115,140  
New York, Triborough Bridge & Tunnel Authority Revenues, Series B-2, 0.15%**, 1/1/2033, LOC : California State Teacher's Retirement System
     900,000       900,000  
New York, Water & Sewer Revenue, Environmental Facilities Corp., State Water Pollution Control, Series E, 6.875%, 6/15/2014
     2,430,000       2,443,389  
New York City, NY, Municipal Water Finance Authority, Water & Sewer Revenue, Series FF-2, 5.0%, 6/15/2040
     2,270,000       2,496,387  
New York City, NY, Municipal Water Finance Authority, Water & Sewer Revenue, Second General Resolution, Series EE, 5.375%, 6/15/2043
     11,250,000       12,997,237  
New York City, NY, Transitional Finance Authority Revenue, Future Tax Secured, Series D-1, 5.0%, 11/1/2038
     10,000,000       11,327,200  
New York, NY, General Obligation:
  
Series D-1, 5.0%, 10/1/2033
     25,000,000       28,681,250  
Series D-1, 5.0%, 10/1/2034
     5,000,000       5,710,150  
Series I-1, 5.375%, 4/1/2036
     7,000,000       8,008,350  
Onondaga County, NY, Trust Cultural Resource Revenue, Syracuse University Project, Series A, 0.22%**, 12/1/2029, LOC: Bank of America NA
     450,000       450,000  
Troy, NY, Capital Resource Corp. Revenue, Rensselaer Polytechnic Institute, Series A, 5.125%, 9/1/2040
     2,000,000       2,182,360  
        211,716,344  
North Carolina 1.4%
  
Charlotte, NC, Airport Revenue, Series A, 5.5%, 7/1/2034
     1,500,000       1,723,815  
Charlotte, NC, Core City General Obligation, 5.5%, 8/1/2018
     4,165,000       4,432,477  
North Carolina, Electric Revenue, 5.25%, 1/1/2020, INS: NATL
     4,000,000       4,108,240  
North Carolina, Electric Revenue, Eastern Municipal Power Agency:
                
6.0%, 1/1/2018, INS: AMBAC
     8,775,000       10,795,005  
Series B, 6.0%, 1/1/2022, INS: NATL
     18,775,000       24,315,878  
North Carolina, Medical Care Commission, Health Care Facilities Revenue, University Health System, Series D, 6.25%, 12/1/2033
     17,000,000       19,809,760  
North Carolina, Municipal Power Agency, No. 1 Catawba Electric Revenue, Series A, 5.0%, 1/1/2030
     5,410,000       5,978,699  
        71,163,874  
North Dakota 0.2%
  
Fargo, ND, Sanford Health Systems Revenue, 6.25%, 11/1/2031
     9,260,000       11,135,057  
Ohio 1.5%
  
Akron, OH, Project Revenue, Economic Development, ETM, 6.0%, 12/1/2012, INS: NATL
     350,000       359,758  
Avon, OH, School District General Obligation, 6.5%, 12/1/2015, INS: AMBAC
     940,000       1,109,341  
Beavercreek, OH, School District General Obligation, Local School District, 6.6%, 12/1/2015, INS: FGIC, NATL
     1,500,000       1,668,705  
Big Walnut, OH, School District General Obligation, Local School District, Zero Coupon, 12/1/2012, INS: AMBAC
     420,000       417,417  
Cleveland, OH, Airport Systems Revenue, Series A, 5.0%, 1/1/2030
     1,000,000       1,080,160  
Cleveland, OH, Sales & Special Tax Revenue, Urban Renewal Tax Increment, Rock & Roll Hall of Fame and Museum Project, 6.75%, 3/15/2018
     885,000       886,124  
Cuyahoga County, OH, Cleveland Clinic, Health System Revenue, Series B3, 0.19%**, 1/1/2039, SPA: U.S. Bank NA
     4,000,000       4,000,000  
Cuyahoga County, OH, County General Obligation, 5.65%, 5/15/2018
     500,000       582,670  
Fayette County, OH, School District General Obligation, Rattlesnake Improvement Area Project, 5.9%, 12/1/2013
     15,000       15,000  
Finneytown, OH, Other General Obligation, Local School District, 6.2%, 12/1/2017, INS: FGIC, NATL
     320,000       372,534  
Franklin County, OH, Healthcare Facilities Revenue, Presbyterian Services, 5.5%, 7/1/2017
     1,000,000       1,002,150  
Franklin County, OH, School District General Obligation, 6.5%, 12/1/2013
     270,000       285,393  
Hancock County, OH, Hospital Revenue, Blanchard Valley Regional Health Center, 6.5%, 12/1/2030
     14,425,000       17,146,276  
Hilliard, OH, School District General Obligation, Series A, Zero Coupon, 12/1/2012, INS: FGIC, NATL
     1,655,000       1,652,782  
Huber Heights, OH, Water & Sewer Revenue, Zero Coupon, 12/1/2012, INS: NATL
     1,005,000       1,001,965  
Liberty Benton, OH, School District General Obligation, Zero Coupon, 12/1/2014, INS: AMBAC
     570,000       547,360  
Liberty, OH, School District General Obligation, Zero Coupon, 12/1/2012, INS: FGIC, NATL
     255,000       254,003  
Lorain County, OH, Lakeland Community Hospital, Inc., ETM, 6.5%, 11/15/2012
     120,000       122,401  
Lucas County, OH, Hospital Revenue, Promedica Healthcare, Series A, 6.5%, 11/15/2037
     6,000,000       7,392,060  
Ohio, Higher Education Revenue, Case Western Reserve University:
                
6.0%, 10/1/2014
     1,000,000       1,120,700  
Series B, 6.5%, 10/1/2020
     2,250,000       2,780,145  
Ohio, School District General Obligation, 6.0%, 12/1/2019, INS: AMBAC
     475,000       566,832  
Ohio, State Higher Educational Facility Commission Revenue, Summa Health Systems Project:
                
Series 2010, 5.25%, 11/15/2035, INS: AGMC
     7,500,000       8,200,050  
Series 2010, 5.5%, 11/15/2030, INS: AGMC
     4,000,000       4,487,800  
Ohio, State Hospital Facility Revenue, Cleveland Clinic Health System, Series B, 5.5%, 1/1/2039
     13,600,000       15,106,336  
Toledo, OH, Other General Obligation, Macy's Project, Series A, AMT, 6.35%, 12/1/2025, INS: NATL
     1,000,000       1,002,280  
Wayne, OH, School District General Obligation, 6.6%, 12/1/2016, INS: AMBAC
     200,000       228,676  
Wooster, OH, School District General Obligation, Zero Coupon, 12/1/2013, INS: AGMC
     930,000       917,389  
        74,306,307  
Oklahoma 0.7%
  
Oklahoma, State Municipal Power Authority, Supply System Revenue, Series A, 6.0%, 1/1/2038
     8,625,000       9,867,173  
Oklahoma, Water & Sewer Revenue, McGee Creek Authority, 6.0%, 1/1/2023, INS: NATL
     23,125,000       27,000,287  
        36,867,460  
Pennsylvania 3.1%
  
Allegheny County, PA, Airport Revenue, Pittsburgh International Airport:
                
Series A, AMT, 5.75%, 1/1/2013, INS: NATL
     9,400,000       9,612,910  
Series A-1, AMT, 5.75%, 1/1/2014, INS: NATL
     10,500,000       11,053,980  
Allegheny County, PA, Hospital Development Authority Revenue, University of Pittsburgh Medical, 5.625%, 8/15/2039
     11,800,000       13,165,260  
Berks County, PA, Hospital & Healthcare Revenue, Municipal Authority, Reading Hospital & Medical Center Project, 5.7%, 10/1/2014, INS: NATL
     540,000       569,506  
Crawford County, PA, Industrial Development Authority Revenue, Allegheny College, Series B, 0.18%**, 11/1/2039, LOC: PNC Bank NA
     2,000,000       2,000,000  
Exter Township, PA, School District General Obligation, Zero Coupon, 5/15/2017, INS: FGIC, NATL
     3,700,000       3,371,181  
Latrobe, PA, Higher Education Revenue, Industrial Development Authority, 5.375%, 5/1/2013
     220,000       228,512  
Pennsylvania, Central Bradford Progress Authority Revenue, Guthrie Healthcare System, 5.375%, 12/1/2041
     12,550,000       14,076,707  
Pennsylvania, Sales & Special Tax Revenue, Convention Center Authority, Series A, ETM, 6.0%, 9/1/2019, INS: FGIC
     2,200,000       2,850,474  
Pennsylvania, State Turnpike Commission Revenue, Series B, 5.75%, 6/1/2039
     32,000,000       35,897,920  
Pennsylvania, State Turnpike Commission Revenue, Capital Appreciation, Series E, Step-up Coupon, 0% to 12/1/2017, 6.375% to 12/1/2038
     40,000,000       37,422,000  
Pennsylvania, State Turnpike Commission Revenue, Motor License Fund, Series A, 6.0%, 12/1/2036
     3,000,000       3,654,510  
Pennsylvania, Water & Sewer Revenue, 5.25%, 11/1/2014, INS: NATL
     1,130,000       1,199,291  
Philadelphia, PA, Airport Revenue, Series A, 5.0%, 6/15/2035
     7,080,000       7,565,051  
Philadelphia, PA, Water & Wastewater Revenue:
  
Series A, 5.25%, 1/1/2032
     3,000,000       3,292,350  
Series A, 5.25%, 1/1/2036
     2,500,000       2,725,250  
Pittsburgh, PA, Core City General Obligation, Series A, 5.5%, 9/1/2014, INS: AMBAC
     810,000       842,214  
Pittsburgh, PA, Water & Sewer System, ETM, 7.25%, 9/1/2014, INS: FGIC
     55,000       59,480  
Westmoreland County, PA, Project Revenue, Zero Coupon, 8/15/2017, INS: NATL
     6,230,000       5,610,551  
        155,197,147  
Puerto Rico 2.4%
  
Puerto Rico, Sales Tax Financing Corp., Sales Tax Revenue:
  
Series A, 5.375%, 8/1/2039
     13,650,000       14,621,880  
Series A, 6.5%, 8/1/2044
     35,000,000       41,322,750  
Puerto Rico, Sales Tax Financing Corp., Sales Tax Revenue, Convertible Capital Appreciation:
                
Series A, Step-up Coupon, 0% to 8/1/2016, 6.75% to 8/1/2032
     55,000,000       56,511,950  
Series A, Step-up Coupon, 0% to 8/1/2019, 6.25% to 8/1/2033
     11,975,000       10,454,055  
        122,910,635  
Rhode Island 1.0%
  
Rhode Island, Health & Educational Building Corp., Higher Education Facility Revenue, Brown University, Series A, 5.0%, 9/1/2039 (a)
     13,000,000       14,418,430  
Rhode Island, Health & Educational Building Corp., Higher Education Facility Revenue, University of Rhode Island, Series A, 6.25%, 9/15/2034
     10,000,000       11,582,500  
Rhode Island, Project Revenue, Convention Center Authority, Series B, 5.25%, 5/15/2015, INS: NATL
     13,870,000       14,635,902  
Rhode Island, State Health & Educational Building Corp., Higher Education Facility Revenue, Rhode Island School of Design, Series B, 0.18%**, 8/15/2036, LOC: TD Bank NA
     3,800,000       3,800,000  
Rhode Island, Tobacco Settlement Financing Corp., Series A, 6.125%, 6/1/2032
     7,750,000       7,897,250  
        52,334,082  
South Carolina 0.9%
  
Greenwood County, SC, Hospital Revenue, Self Regional Healthcare, 5.375%, 10/1/2039
     7,500,000       8,053,275  
South Carolina, Jobs Economic Development Authority, Hospital Facilities Revenue, Palmetto Health Alliance:
                
5.75%, 8/1/2039
     1,910,000       2,099,510  
Series C, Prerefunded, 7.0%, 8/1/2030
     6,885,000       7,414,870  
South Carolina, Piedmont Municipal Power Agency, Electric Revenue:
                
Series A, ETM, 6.5%, 1/1/2016, INS: FGIC
     430,000       517,509  
6.75%, 1/1/2019, INS: FGIC, NATL
     2,065,000       2,678,264  
ETM, 6.75%, 1/1/2019, INS: FGIC
     1,460,000       1,946,866  
South Carolina, State Ports Authority Revenue, 5.25%, 7/1/2040
     10,195,000       11,316,348  
South Carolina, State Public Service Authority Revenue, Santee Cooper:
                
Series E, 5.0%, 1/1/2040
     10,000,000       11,022,700  
Series A, 5.375%, 1/1/2028
     2,500,000       2,986,825  
        48,036,167  
South Dakota 0.1%
  
South Dakota, State Health & Educational Facilities Authority Revenue, Sanford Health, 5.5%, 11/1/2040
     3,000,000       3,319,680  
Tennessee 1.0%
  
Jackson, TN, Hospital Revenue, Jackson-Madison Project:
  
5.5%, 4/1/2033
     3,000,000       3,252,180  
5.625%, 4/1/2038
     4,550,000       4,949,535  
5.75%, 4/1/2041
     8,675,000       9,502,248  
Knox County, TN, Hospital & Healthcare Revenue, Sanders Alliance:
                
5.75%, 1/1/2014, INS: NATL
     2,000,000       2,152,300  
6.25%, 1/1/2013, INS: NATL
     4,000,000       4,125,320  
Shelby County, TN, General Obligation:
  
Zero Coupon, 8/1/2014
     4,920,000       4,848,906  
ETM, Zero Coupon, 8/1/2014
     45,000       44,494  
Sullivan County, TN, Health, Educational & Housing Facilities Board, Hospital Revenue, Wellmont Health Systems Project, Series C, 5.25%, 9/1/2036
     10,000,000       10,284,500  
Tennessee, Energy Acquisition Corp., Gas Revenue:
  
Series A, 5.25%, 9/1/2019
     7,000,000       7,835,310  
Series A, 5.25%, 9/1/2021
     2,000,000       2,243,140  
        49,237,933  
Texas 9.7%
  
Abilene, TX, Senior Care Revenue, Sears Methodist Retirement, Health Facilities Development, Series A, 5.875%, 11/15/2018
     2,583,000       2,231,609  
Austin, TX, Austin-Bergstrom Landhost Enterprises, Inc., Airport Hotel Project, Series A, 3.375%, 4/1/2027 (c)
     21,335,000       11,982,589  
Austin, TX, Water & Sewer Revenue, Utility Systems, Zero Coupon, 11/15/2012, INS: AMBAC
     13,520,000       13,495,123  
Cypress and Fairbanks, TX, School District General Obligation, Cypress-Fairbanks Texas Independent School District:
                
Series A, Zero Coupon, 2/15/2013
     4,840,000       4,829,255  
Series A, Zero Coupon, 2/15/2014
     6,000,000       5,945,400  
Dallas, TX, Waterworks & Sewer Systems Revenue, 5.0%, 10/1/2037
     4,600,000       5,072,466  
Harris County, TX, County General Obligation, Zero Coupon, 10/1/2017, INS: NATL
     3,910,000       3,681,930  
Harris County, TX, Health Facilities Development Corp., Hospital Revenue, Memorial Hermann Healthcare System, Series B, 7.25%, 12/1/2035
     5,000,000       6,015,600  
Harris County, TX, Port Houston Authority, Series D-1, 5.0%, 10/1/2035
     18,290,000       21,268,892  
Houston, TX, Airport Systems Revenue:
  
Series B, 5.0%, 7/1/2027, INS: FGIC, NATL
     21,030,000       22,931,533  
Series B, 5.0%, 7/1/2032
     3,510,000       3,930,217  
Series A, 5.5%, 7/1/2039
     10,000,000       11,130,500  
Houston, TX, Higher Education Finance Corp. Revenue, Rice University Project, Series A, 5.0%, 5/15/2040
     11,185,000       12,795,976  
Houston, TX, Utility Systems Revenue, First Lien, Series D, 5.0%, 11/15/2036
     7,000,000       7,968,870  
Houston, TX, Water & Sewer Revenue, Series C, Zero Coupon, 12/1/2012, INS: AMBAC
     4,350,000       4,344,040  
North Texas, Tollway Authority Revenue:
  
Series C, 5.25%, 1/1/2044
     20,000,000       21,487,600  
First Tier, Series A, 5.625%, 1/1/2033
     6,500,000       7,196,540  
Second Tier, Series F, 5.75%, 1/1/2033
     12,210,000       13,387,654  
Second Tier, Series F, 5.75%, 1/1/2038
     16,500,000       17,961,570  
First Tier, 6.0%, 1/1/2043
     30,000,000       34,687,200  
North Texas, Tollway Authority Revenue, Special Project Systems:
                
Series D, 5.0%, 9/1/2032
     8,000,000       9,113,760  
Series A, 6.0%, 9/1/2041
     6,675,000       8,086,429  
Tarrant County, TX, Cultural Education Facilities Finance Corp., Hospital Revenue, Scott & White Healthcare, 5.625%, 8/15/2035
     10,000,000       11,204,500  
Tarrant County, TX, Cultural Education Facilities Finance Corp., State Health Resources, 5.0%, 11/15/2040
     19,325,000       20,937,478  
Texas, Dallas/Fort Worth International Airport Revenue:
  
Series B, 5.0%, 11/1/2035
     11,470,000       12,535,334  
Series D, 5.0%, 11/1/2035
     24,425,000       26,693,594  
Series A, 5.25%, 11/1/2038
     20,000,000       22,262,000  
Series A, AMT, 5.5%, 11/1/2019, INS: NATL
     20,000,000       21,099,000  
Texas, Electric Revenue:
  
Zero Coupon, 9/1/2017, INS: NATL
     5,880,000       5,422,712  
ETM, Zero Coupon, 9/1/2017, INS: NATL
     120,000       113,473  
Texas, Electric Revenue, Municipal Power Agency, Zero Coupon, 9/1/2016, INS: NATL
     18,300,000       17,379,510  
Texas, Grapevine-Colleyville Independent School District Building:
                
5.0%, 8/15/2034
     6,080,000       7,070,128  
5.0%, 8/15/2035
     6,130,000       7,096,149  
5.0%, 8/15/2036
     3,350,000       3,860,540  
Texas, Lower Colorado River Authority, Transmission Contract Revenue, LCRA Transmission Services, 5.0%, 5/15/2040
     20,000,000       21,655,600  
Texas, Lower Neches Valley Authority, Industrial Developement Corp., Exxon Capital Ventures, Inc., Series B3, AMT, 0.16%**, 4/1/2026, GTY: Exxon Mobil Corp.
     4,740,000       4,740,000  
Texas, Municipal Gas Acquisition & Supply Corp. I, Gas Supply Revenue:
                
Series B, 1.017%***, 12/15/2026
     19,800,000       14,889,996  
Series D, 6.25%, 12/15/2026
     20,000,000       23,831,400  
Texas, Municipal Power Agency, ETM, Zero Coupon, 9/1/2016, INS: NATL
     375,000       362,044  
Texas, SA Energy Acquisition Public Facility Corp., Gas Supply Revenue:
                
5.5%, 8/1/2021
     5,575,000       6,329,632  
5.5%, 8/1/2025
     2,750,000       3,112,698  
Texas, Southwest Higher Education Authority, Inc., Southern Methodist University Project, 5.0%, 10/1/2035
     2,400,000       2,727,816  
Texas, State Technical University Revenue, Series A, 8/15/2037
     5,400,000       6,116,526  
        488,984,883  
Utah 0.0%
  
Provo, UT, Electric Revenue, Series A, ETM, 10.375%, 9/15/2015, INS: AMBAC
     735,000       856,422  
Salt Lake City, UT, Core City General Obligation, 5.75%, 6/15/2014
     25,000       25,114  
Utah, Electric Revenue, Intermountain Power Agency, Series A, ETM, 5.0%, 7/1/2012, INS: NATL
     280,000       281,134  
        1,162,670  
Virginia 0.5%
  
Roanoke, VA, Hospital & Healthcare Revenue, Industrial Development Authority, Roanoke Memorial Hospital, Series B, ETM, 6.125%, 7/1/2017, INS: NATL
     5,500,000       6,478,835  
Virginia Beach, VA, Hospital & Healthcare Revenue, Development Authority Hospital Facility First Mortgage, 5.125%, 2/15/2018, INS: AMBAC
     3,000,000       3,536,550  
Washington County, VA, Industrial Development Authority, Hospital Facility Revenue, Mountain States Health Alliance, Series C, 7.75%, 7/1/2038
     7,760,000       9,568,313  
Winchester, VA, Hospital & Healthcare Revenue, Industrial Development Authority, 5.5%, 1/1/2015, INS: AMBAC
     3,610,000       3,833,206  
        23,416,904  
Washington 2.6%
  
Chelan County, WA, Electric Revenue, Public Utilities, Columbia River Rock, Zero Coupon, 6/1/2014, INS: NATL
     12,685,000       12,440,179  
Clark County, WA, School District General Obligation, Zero Coupon, 12/1/2017, INS: FGIC, NATL
     6,725,000       6,099,441  
Port of Seattle, WA, Airport Revenue:
  
Series A, 5.0%, 8/1/2031
     2,000,000       2,303,680  
Series A, 5.0%, 8/1/2032
     2,500,000       2,863,275  
Series B, AMT, 6.0%, 2/1/2014, INS: NATL
     4,000,000       4,334,960  
Washington, State General Obligation:
  
Series 5, Zero Coupon, 1/1/2017, INS: FGIC, NATL
     4,535,000       4,268,659  
Series B, 5.0%, 2/1/2033
     5,000,000       5,735,400  
Series 2011A, 5.0%, 8/1/2033
     20,000,000       23,745,200  
Series A, 5.0%, 8/1/2035
     12,190,000       13,894,771  
Washington, State Health Care Facilities Authority Revenue, Series C, 5.375%, 8/15/2028, INS: Radian
     5,240,000       5,451,539  
Washington, State Health Care Facilities Authority Revenue, Virginia Mason Medical Center, Series A, 6.125%, 8/15/2037
     7,035,000       7,568,183  
Washington, State Health Care Facilities Authority, Swedish Health Services, Series A, 6.75%, 11/15/2041
     12,175,000       16,159,756  
Washington, State Motor Vehicle Tax-Senior 520, Corridor Toll Program:
                
Series C, 5.0%, 6/1/2032
     7,725,000       8,985,334  
Series C, 5.0%, 6/1/2033
     6,000,000       6,937,800  
Series C, 5.0%, 6/1/2041
     11,000,000       12,350,250  
        133,138,427  
Wisconsin 1.4%
  
Milwaukee County, WI, Airport Revenue, Series A, 5.0%, 12/1/2034
     7,000,000       7,560,350  
Wisconsin, Hospital & Healthcare Revenue, Health & Education Facilities Authority:
                
Series B, ETM, 6.25%, 1/1/2022, INS: AMBAC
     3,510,000       4,371,670  
Series C, ETM, 6.25%, 1/1/2022, INS: AMBAC
     6,135,000       7,708,505  
Series AA, ETM, 6.5%, 6/1/2012, INS: NATL
     3,000,000       3,000,000  
Wisconsin, Hospital & Healthcare Revenue, Health & Educational Facilities Authority, Aurora Health Care, Inc., 6.875%, 4/15/2030
     14,000,000       14,392,420  
Wisconsin, State Health & Educational Facilities Authority Revenue, Ministry Health Care, Inc., Series C, 5.0%, 8/15/2032
     6,940,000       7,549,818  
Wisconsin, State Health & Educational Facilities Authority Revenue, ProHealth Care, Inc., 6.625%, 2/15/2039
     7,335,000       8,473,465  
Wisconsin, State Health & Educational Facilities Authority Revenue, SSM Health Care Corp., Series A, 5.25%, 6/1/2034
     2,000,000       2,199,160  
Wisconsin, State Health & Educational Facilities Authority Revenue, Thedacare, Inc., Series A, 5.5%, 12/15/2038
     13,235,000       14,359,049  
        69,614,437  
Total Municipal Bonds and Notes (Cost $4,236,282,780)
       4,750,964,607  
   
Municipal Inverse Floating Rate Notes (d) 12.7%
  
California 2.6%
  
California, San Francisco Bay Area Toll Authority, Toll Bridge Revenue, Series F, 5.0%, 4/1/2031 (e)
     10,700,000       12,052,709  
Trust: California, Bay Area Toll Authority, Toll Bridge Revenue, Series 1962-4, 144A, 13.568%, 4/1/2014, Leverage Factor at purchase date: 3 to 1
                
California, State Department of Water Resources Revenue, Central Valley Project, Series AE, 5.0%, 12/1/2023 (e)
     5,236,056       6,233,937  
California, State Department of Water Resources Revenue, Central Valley Project, Series AE, 5.0%, 12/1/2024 (e)
     3,742,268       4,455,464  
California, State Department of Water Resources Revenue, Central Valley Project, Series AE, 5.0%, 12/1/2025 (e)
     3,118,557       3,712,887  
Trust: California, State Department of Water Resources Revenue, Series 2705, 144A, 12.611%, 12/1/2023, Leverage Factor at purchase date: 3 to 1
                
California, University of California Revenues, Series O, 5.25%, 5/15/2039 (e)
     15,620,000       17,617,954  
Trust: California, University of California Revenues, Series 3368-2, 144A, 18.81%, 11/15/2016, Leverage Factor at purchase date: 4 to 1
                
Los Angeles, CA, Waste Water System Revenue, Series A, 5.375%, 6/1/2039 (e)
     30,000,000       33,872,700  
Trust: Los Angeles, CA, Series 3371-2, 144A, 19.31%, 12/1/2016, Leverage Factor at purchase date: 4 to 1
                
Los Angeles, CA, Community College District, Election of 2008, Series A, 6.0%, 8/1/2033 (e)
     30,000,000       35,881,200  
Trust: Los Angeles, CA, Community College District, Series R-11728, 144A, 27.24%, 8/1/2033, Leverage Factor at purchase date: 5 to 1
                
San Francisco, CA, Bay Area Rapid Transportation District, Election of 2004, Series B, 5.0%, 8/1/2032 (e)
     14,997,001       17,143,501  
Trust: San Francisco, CA, Bay Area Rapid Transportation District, Series 3161, 144A, 13.517%, 8/1/2015, Leverage Factor at purchase date: 3 to 1
                
        130,970,352  
District of Columbia 0.5%
  
District of Columbia, Income Tax Revenue, Series A, 5.5%, 12/1/2030 (e)
     22,000,000       27,191,340  
Trust: District of Columbia, Series 3369, 144A, 19.81%, 6/1/2017, Leverage Factor at purchase date: 4 to 1
                
Florida 1.4%
  
Florida, State Turnpike Authority Revenue, Department of Transportation, Series A, 5.0%, 7/1/2021 (e)
     30,130,000       34,902,264  
Trust: Florida, State Turnpike Authority Revenue, Series 2514, 144A, 43.241%, 7/1/2015, Leverage Factor at purchase date: 10 to 1
                
Miami-Dade County, FL, Transit Sales Surtax Revenue, 5.0%, 7/1/2023, INS: AGMC (e)
     3,740,000       4,102,687  
Miami-Dade County, FL, Transit Sales Surtax Revenue, 5.0%, 7/1/2024, INS: AGMC (e)
     3,915,000       4,294,657  
Miami-Dade County, FL, Transit Sales Surtax Revenue, 5.0%, 7/1/2025, INS: AGMC (e)
     4,122,500       4,522,280  
Miami-Dade County, FL, Transit Sales Surtax Revenue, 5.0%, 7/1/2026, INS: AGMC (e)
     4,317,500       4,736,190  
Miami-Dade County, FL, Transit Sales Surtax Revenue, 5.0%, 7/1/2032, INS: AGMC (e)
     16,470,000       18,067,180  
Trust: Miami-Dade County, FL, Series 2008-1160, 144A, 9.201%, 1/1/2016, Leverage Factor at purchase date: 2 to 1
                
        70,625,258  
Louisiana 0.2%
  
Louisiana, State Gas & Fuels Tax Revenue, Series B, 5.0%, 5/1/2033 (e)
     3,023,487       3,504,402  
Louisiana, State Gas & Fuels Tax Revenue, Series B, 5.0%, 5/1/2034 (e)
     3,300,848       3,825,880  
Louisiana, State Gas & Fuels Tax Revenue, Series B, 5.0%, 5/1/2035 (e)
     3,663,166       4,245,829  
Trust: Louisiana, State Gas & Fuels Tax Revenue, Series 3806, 144A, 9.288%, 5/1/2018, Leverage Factor at purchase date: 2 to 1
                
        11,576,111  
Massachusetts 1.7%
  
Massachusetts, State Development Finance Agency Revenue, Harvard University, Series B-2, 5.25%, 2/1/2034 (e)
     20,000,000       24,079,600  
Trust: Massachusetts, State Development Finance Agency Revenue, Harvard University, Series 4691, 144A, 9.92%, 1/17/2019, Leverage Factor at purchase date: 2 to 1
                
Massachusetts, State General Obligation, Series A, 5.0%, 8/1/2027 (e)
     7,825,000       8,897,597  
Massachusetts, State General Obligation, Series A, 5.0%, 8/1/2033 (e)
     3,000,000       3,411,219  
Massachusetts, State General Obligation, Series A, 5.0%, 8/1/2038 (e)
     2,750,000       3,126,951  
Trust: Massachusetts, State General Obligation, Series 2008-1203, 144A, 14.698%, 8/1/2038, Leverage Factor at purchase date: 3 to 1
                
Massachusetts, State General Obligation, Series C, 5.0%, 8/1/2026, INS: AGMC (e)
     20,000,000       23,138,200  
Trust: Massachusetts, State General Obligation, Series 2022-1, 144A, 42.89%, 8/1/2015, Leverage Factor at purchase date: 10 to 1
                
Massachusetts, State General Obligation, Series C, 5.0%, 8/1/2027, INS: AGMC (e)
     20,000,000       23,138,200  
Trust: Massachusetts, State General Obligation, Series 2022-2, 144A, 42.89%, 8/1/2015, Leverage Factor at purchase date: 10 to 1
                
        85,791,767  
Nevada 1.4%
  
Clark County, NV, General Obligation, 5.0%, 6/1/2028 (e)
     6,252,645       6,906,636  
Clark County, NV, General Obligation, 5.0%, 6/1/2029 (e)
     6,565,277       7,251,967  
Clark County, NV, General Obligation, 5.0%, 6/1/2030 (e)
     6,372,122       7,038,609  
Trust: Clark County, NV, General Obligation, Series 3158, 144A, 13.513%, 6/1/2016, Leverage Factor at purchase date: 3 to 1
                
Clark County, NV, School District, Series C, 5.0%, 6/15/2021 (e)
     16,118,519       18,803,130  
Clark County, NV, School District, Series C, 5.0%, 6/15/2022 (e)
     16,841,398       19,646,408  
Clark County, NV, School District, Series C, 5.0%, 6/15/2023 (e)
     10,876,807       12,688,387  
Trust: Clark County, NV, School Improvements, Series 2008-1153, 144A, 9.201%, 6/15/2015, Leverage Factor at purchase date: 2 to 1
                
        72,335,137  
New York 1.1%
  
New York, State Dormitory Authority Revenues, Columbia University, 5.0%, 7/1/2038 (e)
     27,925,000       31,679,857  
Trust: New York, State Dormitory Authority Revenues, Secondary Issues, Series R-11722-1, 144A, 17.921%, 7/1/2016, Leverage Factor at purchase date: 4 to 1
                
New York, NY, General Obligation, Series C-1, 5.0%, 10/1/2024, INS: AGMC (e)
     19,425,000       22,741,548  
Trust: New York, NY, Series 2008-1131, 144A, 9.162%, 10/1/2015, Leverage Factor at purchase date: 2 to 1
                
        54,421,405  
North Carolina 0.4%
  
North Carolina, Capital Facilities Finance Agency Revenue, Duke University Project, Series B, 5.0%, 10/1/2038, INS: AGMC (e)
     20,000,000       22,632,200  
Trust: North Carolina, Capital Facilities Finance Agency Revenue, Duke University Project, Series 3333, 144A, 17.78%, 10/1/2016, Leverage Factor at purchase date: 4 to 1
                
Ohio 0.8%
  
Columbus, OH, General Obligation, Series A, 5.0%, 9/1/2021 (e)
     8,725,000       10,242,536  
Columbus, OH, General Obligation, Series A, 5.0%, 9/1/2022 (e)
     8,725,000       10,242,536  
Trust: Columbus, OH, General Obligation, Series 2365, 144A, 17.86%, 9/1/2015, Leverage Factor at purchase date: 4 to 1
                
Ohio, State Higher Educational Facilities Community Revenue, Cleveland Clinic Health, Series A, 5.125%, 1/1/2028 (e)
     6,032,233       6,618,417  
Ohio, State Higher Educational Facilities Community Revenue, Cleveland Clinic Health, Series A, 5.25%, 1/1/2033 (e)
     10,287,087       11,286,737  
Trust: Ohio, State Higher Educational Revenue, Series 3139, 144A, 14.379%, 1/1/2016, Leverage Factor at purchase date: 3 to 1
                
        38,390,226  
Tennessee 1.5%
  
Nashville & Davidson County, TN, Metropolitan Government, 5.0%, 1/1/2026 (e)
     20,800,000       24,203,712  
Trust: Nashville & Davidson County, TN, Metropolitan Government, Series 2631-2, 144A, 17.87%, 1/1/2016, Leverage Factor at purchase date: 4 to 1
                
Nashville & Davidson County, TN, Metropolitan Government, 5.0%, 1/1/2028 (e)
     21,610,075       24,401,443  
Trust: Nashville & Davidson County, TN, Metropolitan Government, Series 2631-4, 144A, 17.878%, 1/1/2016, Leverage Factor at purchase date: 4 to 1
                
Nashville & Davidson County, TN, Metropolitan Government, 5.0%, 1/1/2027 (e)
     21,793,305       25,236,615  
Trust: Nashville & Davidson County, TN, Metropolitan Government, Series 2631-3, 144A, 17.865%, 1/1/2016, Leverage Factor at purchase date: 4 to 1
                
        73,841,770  
Texas 1.1%
  
Dallas, TX, Water Works & Sewer Systems Revenue, 5.0%, 10/1/2035 (e)
     10,000,000       11,405,200  
Trust: Dallas, TX, Water Works & Sewer Systems Revenue, Series 3742, 144A, 9.29%, 4/1/2018, Leverage Factor at purchase date: 2 to 1
                
Harris County, TX, Flood Control District, Series A, 5.0%, 10/1/2034 (e)
     5,500,000       6,298,985  
Trust: Texas, Puttable Floating Option Tax Exempt Receipts, Series 4692, 144A, 9.38%, 10/1/2018, Leverage Factor at purchase date: 2 to 1
                
San Antonio, TX, Electric & Gas Revenue, 5.0%, 2/1/2022 (e)
     3,000,000       3,415,968  
San Antonio, TX, Electric & Gas Revenue, 5.0%, 2/1/2027 (e)
     7,425,000       8,454,521  
San Antonio, TX, Electric & Gas Revenue, 5.0%, 2/1/2028 (e)
     6,540,000       7,446,811  
San Antonio, TX, Electric & Gas Revenue, 5.0%, 2/1/2029 (e)
     7,000,000       7,970,593  
Trust: San Antonio, TX, Series 2008-1150, 144A, 9.202%, 8/1/2015, Leverage Factor at purchase date: 2 to 1
                
Texas, Water Development Board Revenue, Series B, 5.25%, 7/15/2026 (e)
     10,000,000       11,720,800  
Trust: Texas, Water Development Board, Series 2008-1173, 144A, 18.48%, 7/15/2015, Leverage Factor at purchase date: 4 to 1
                
        56,712,878  
Total Municipal Inverse Floating Rate Notes (Cost $576,175,006)
       644,488,444  
 

   
% of Net Assets
    
Value ($)
  
       
Total Investment Portfolio (Cost $4,812,457,786)+
     106.7       5,395,453,051  
Other Assets and Liabilities, Net
     (6.7 )     (339,275,237 )
Net Assets
     100.0       5,056,177,814  
 
The following table represents bonds that are in default:
Securities
  
Coupon
  
Maturity Date
  
Principal Amount ($)
    
Acquisition Cost ($)
    
Value ($)
  
Austin, TX, Austin-Bergstrom Landhost Enterprises, Inc., Airport Hotel Project, Series A (c)
     3.375 %
4/1/2027
     21,335,000       21,337,200       11,982,589  
Nevada, Director State Department of Business & Industry, Las Vegas Monorail Project, Second Tier*
     7.375 %
1/1/2040
     15,000,000       14,314,437       150  
                        35,651,637       11,982,739  
 
* Non-income producing security.
 
** Variable rate demand notes are securities whose interest rates are reset periodically at market levels. These securities are often payable on demand and are shown at their current rates as of May 31, 2012.
 
*** Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the U.S. Treasury Bill rate. These securities are shown at their current rate as of May 31, 2012.
 
+ The cost for federal income tax purposes was $4,804,265,321. At May 31, 2012, net unrealized appreciation for all securities based on tax cost was $591,187,730. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $627,008,718 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $35,820,988.
 
(a) At May 31, 2012, this security has been pledged, in whole or in part, as collateral for open interest rate swaps.
 
(b) When-issued security.
 
(c) Partial interest paying security. The rate shown represents 50% of the original coupon rate.
 
(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.
 
AGC: Assured Guaranty Corp.
 
AGMC: Assured Guaranty Municipal Corp.
 
AMBAC: Ambac Financial Group, Inc.
 
AMT: Subject to alternative minimum tax.
 
ETM: Bonds bearing the description ETM (escrow to maturity) are collateralized usually by U.S. Treasury securities which are held in escrow and used to pay principal and interest on bonds so designated.
 
FGIC: Financial Guaranty Insurance Co.
 
GTY: Guaranty Agreement
 
INS: Insured
 
LIQ: Liquidity Facility
 
LOC: Letter of Credit
 
NATL: National Public Finance Guarantee Corp.
 
Prerefunded: Bonds which are prerefunded are collateralized usually by U.S. Treasury securities which are held in escrow and used to pay principal and interest on tax-exempt issues and to retire the bonds in full at the earliest refunding date.
 
Radian: Radian Asset Assurance, Inc.
 
SPA: Standby Bond Purchase Agreement
 
At May 31, 2012, open interest rate swap contracts were as follows:
Effective/
Expiration Date
  
Notional Amount ($)
  
Cash Flows Paid by the Fund
Cash Flows Received by the Fund
  
Value ($)
    
Upfront Payments Paid/ (Received) ($)
    
Unrealized Depreciation ($)
  
8/3/2012
8/3/2029
     9,650,000 1
Fixed — 3.99%
Floating — LIBOR
     (2,450,347 )     —       (2,450,347 )
4/22/2013
4/22/2031
     21,300,000 2
Fixed — 2.816%
Floating — LIBOR
     (1,428,585 )     —       (1,428,585 )
5/7/2013
5/7/2033
     49,500,000 3
Fixed — 2.824%
Floating — LIBOR
     (3,325,242 )     —       (3,325,242 )
5/7/2013
5/7/2033
     49,600,000 4
Fixed — 2.817%
Floating — LIBOR
     (3,275,877 )     —       (3,275,877 )
5/13/2013
5/13/2033
     31,200,000 3
Fixed — 2.775%
Floating — LIBOR
     (1,838,039 )     —       (1,838,039 )
5/13/2013
5/13/2033
     51,900,000 1
Fixed — 2.81%
Floating — LIBOR
     (3,350,731 )     —       (3,350,731 )
5/14/2013
5/14/2033
     30,600,000 1
Fixed — 2.67%
Floating — LIBOR
     (1,282,272 )     —       (1,282,272 )
5/7/2013
5/7/2034
     11,400,000 4
Fixed — 2.816%
Floating — LIBOR
     (751,434 )     —       (751,434 )
Total unrealized depreciation
       (17,702,527 )
 
Counterparties:
 
1 JPMorgan Chase Securities, Inc.
 
2 Citigroup, Inc.
 
3 Barclays Bank PLC
 
4 Merrill Lynch & Co., Inc.
 
LIBOR: London Interbank Offered Rate
 
For information on the Fund's policy and additional disclosures regarding interest rate swap contracts, please refer to Note B in the accompanying Notes to Financial Statements.
 
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, 2012 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets
  
Level 1
    
Level 2
    
Level 3
    
Total
  
   
Municipal Investments (f)
   $ —     $ 5,395,453,051     $ —     $ 5,395,453,051  
Total
   $ —     $ 5,395,453,051     $ —     $ 5,395,453,051  
Liabilities
  
Derivatives (g)
   $ —     $ (17,702,527 )   $ —     $ (17,702,527 )
Total
   $ —     $ (17,702,527 )   $ —     $ (17,702,527 )
 
There have been no transfers between Level 1 and Level 2 fair value measurements during the year ended May 31, 2012.
 
(f) See Investment Portfolio for additional detailed categorizations.
 
(g) Derivatives include unrealized appreciation (depreciation) on open interest rate swap contracts.
 
The accompanying notes are an integral part of the financial statements.
 
Statement of Assets and Liabilities
as of May 31, 2012
  
Assets
  
Investments in securities, at value (cost $4,812,457,786)
   $ 5,395,453,051  
Cash
     63,564  
Receivable for investments sold
     2,270,000  
Receivable for Fund shares sold
     8,868,623  
Interest receivable
     69,057,097  
Other assets
     117,791  
Total assets
     5,475,830,126  
Liabilities
  
Payable for investments purchased — when-issued securities
     6,692,762  
Payable for Fund shares redeemed
     3,863,659  
Payable for floating rate notes issued
     383,135,816  
Unrealized depreciation on swap contracts
     17,702,527  
Distributions payable
     3,869,382  
Accrued management fee
     1,383,449  
Accrued Trustees' fees
     12,240  
Other accrued expenses and payables
     2,992,477  
Total liabilities
     419,652,312  
Net assets, at value
   $ 5,056,177,814  
Net Assets Consist of:
  
Undistributed net investment income
     3,063,543  
Net unrealized appreciation (depreciation) on:
Investments
     582,995,265  
Swap contracts
     (17,702,527 )
Accumulated net realized gain (loss)
     (81,325,909 )
Paid-in capital
     4,569,147,442  
Net assets, at value
   $ 5,056,177,814  
 
The accompanying notes are an integral part of the financial statements.
 
Statement of Assets and Liabilities as of May 31, 2012 (continued)
  
Net Asset Value
  
Class A
Net Asset Value and redemption price per share ($2,149,152,521 ÷ 228,637,121 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
   $ 9.40  
Maximum offering price per share (100 ÷ 97.25 of $9.40)
   $ 9.67  
Class B
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($3,431,028 ÷ 364,955 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
   $ 9.40  
Class C
Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($237,400,031 ÷ 25,256,396 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
   $ 9.40  
Class S
Net Asset Value, offering and redemption price per share ($2,548,914,917 ÷ 270,797,817 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
   $ 9.41  
Institutional Class
Net Asset Value, offering and redemption price per share ($117,279,317 ÷ 12,472,256 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
   $ 9.40  
 
The accompanying notes are an integral part of the financial statements.
 
Statement of Operations
for the year ended May 31, 2012
  
Investment Income
  
Income:
Interest
   $ 249,145,600  
Expenses:
Management fee
     15,143,773  
Administration fee
     4,648,982  
Services to shareholders
     4,629,006  
Distribution and service fees
     6,656,814  
Custodian fee
     47,307  
Professional fees
     135,137  
Reports to shareholders
     197,905  
Registration fees
     246,740  
Trustees' fees and expenses
     149,677  
Interest expense and fees on floating rate notes issued
     2,787,524  
Other
     277,060  
Total expenses
     34,919,925  
Net investment income
     214,225,675  
Realized and Unrealized Gain (Loss)
  
Net realized gain (loss) from:
Investments
     17,344,994  
Swap contracts
     (71,280,620 )
      (53,935,626 )
Change in net unrealized appreciation (depreciation) on:
Investments
     363,997,736  
Swap contracts
     (12,081,746 )
      351,915,990  
Net gain (loss)
     297,980,364  
Net increase (decrease) in net assets resulting from operations
   $ 512,206,039  
 
The accompanying notes are an integral part of the financial statements.
 
Statement of Cash Flows
for the year ended May 31, 2012
  
Increase (Decrease) in Cash:
Cash Flows from Operating Activities
  
Net increase (decrease) in net assets resulting from operations
   $ 512,206,039  
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided (used) by operating activities:
Purchases of long-term investments
     (1,719,966,133 )
Net amortization of premium (discount)
     (24,448,950 )
Proceeds from sales and maturities of long-term investments
     1,373,886,956  
(Increase) decrease in interest receivable
     (3,607,962 )
(Increase) decrease in other assets
     16,877  
(Increase) decrease in receivable for investments sold
     2,147,952  
Increase (decrease) in payable for investments purchased — when-issued securities
     6,692,762  
Increase (decrease) in accrued expenses and payables
     117,413  
Change in net unrealized (appreciation) depreciation on investments
     (363,997,736 )
Change in net unrealized (appreciation) depreciation on swap contracts
     12,081,746  
Net realized (gain) loss from investments
     (17,344,994 )
Cash provided (used) by operating activities
   $ (222,216,030 )
Cash Flows from Financing Activities
  
Proceeds from shares sold
     997,068,884  
Payments for shares redeemed
     (706,128,457 )
Distributions paid (net of reinvestment of distributions)
     (69,572,016 )
Cash provided (used) by financing activities
     221,368,411  
Increase (decrease) in cash
     (847,619 )
Cash at beginning of period
     911,183  
Cash at end of period
   $ 63,564  
Supplemental Disclosure of Non-Cash Financing Activities
  
Reinvestment of distributions
   $ 142,962,372  
Interest expense and fees on floating rate notes issued
   $ (2,787,524 )
 
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
  
2012
    
2011
  
Operations:
Net investment income
   $ 214,225,675     $ 207,852,413  
Net realized gain (loss)
     (53,935,626 )     (25,266,552 )
Change in net unrealized appreciation (depreciation)
     351,915,990       (105,044,003 )
Net increase (decrease) in net assets resulting from operations
     512,206,039       77,541,858  
Distributions to shareholders from:
Net investment income:
Class A
     (88,251,470 )     (89,676,621 )
Class B
     (135,652 )     (194,993 )
Class C
     (6,706,011 )     (5,620,447 )
Class S
     (112,146,159 )     (106,316,285 )
Institutional Class
     (4,210,985 )     (2,124,100 )
Net realized gains:
Class A
     (473,931 )     (263,258 )
Class B
     (888 )     (680 )
Class C
     (43,010 )     (20,490 )
Class S
     (582,403 )     (283,193 )
Institutional Class
     (24,028 )     (7,180 )
Total distributions
     (212,574,537 )     (204,507,247 )
Fund share transactions:
Proceeds from shares sold
     1,001,083,822       1,123,680,958  
Reinvestment of distributions
     142,962,372       135,876,018  
Payments for shares redeemed
     (706,492,889 )     (939,146,431 )
Net increase (decrease) in net assets from Fund share transactions
     437,553,305       320,410,545  
Increase from regulatory settlements (see Note G)
     —       262,613  
Increase (decrease) in net assets
     737,184,807       193,707,769  
Net assets at beginning of period
     4,318,993,007       4,125,285,238  
Net assets at end of period (including undistributed net investment income of $3,063,543 and $1,546,884, respectively)
   $ 5,056,177,814     $ 4,318,993,007  
 
The accompanying notes are an integral part of the financial statements.
 
Financial Highlights
   
Years Ended May 31,
  
Class A
    
2012
    
2011
    
2010
    
2009
    
2008
  
Selected Per Share Data
  
Net asset value, beginning of period
   $ 8.82     $ 9.08     $ 8.68     $ 8.85     $ 8.99  
Income from investment operations:
Net investment income
     .41       .42       .43       .41       .40  
Net realized and unrealized gain (loss)
     .58       (.26 )     .41       (.14 )     (.13 )
Total from investment operations
     .99       .16       .84       .27       .27  
Less distributions from:
Net investment income
     (.41 )     (.42 )     (.43 )     (.41 )     (.40 )
Net realized gains
     (.00 )*     (.00 )*     (.01 )     (.03 )     (.01 )
Total distributions
     (.41 )     (.42 )     (.44 )     (.44 )     (.41 )
Net asset value, end of period
   $ 9.40     $ 8.82     $ 9.08     $ 8.68     $ 8.85  
Total Return (%)a
     11.48       1.88       9.80       3.38 b     3.08 b
Ratios to Average Net Assets and Supplemental Data
  
Net assets, end of period ($ millions)
     2,149       1,833       1,881       1,627       1,745  
Ratio of expenses before expense reductions (including interest expense) (%)c
     .82       .83       .81       1.11       1.16  
Ratio of expenses after expense reductions (including interest expense) (%)c
     .82       .83       .81       1.10       1.14  
Ratio of expenses after expense reductions (excluding interest expense) (%)
     .76       .75       .74       .74       .73  
Ratio of net investment income (%)
     4.54       4.86       4.86       4.95       4.52  
Portfolio turnover rate (%)
     27       24       37       77       55  
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.
  
 

   
Years Ended May 31,
  
Class B
    
2012
    
2011
    
2010
    
2009
    
2008
  
Selected Per Share Data
  
Net asset value, beginning of period
   $ 8.82     $ 9.08     $ 8.68     $ 8.86     $ 8.99  
Income from investment operations:
Net investment income
     .33       .35       .35       .34       .34  
Net realized and unrealized gain (loss)
     .58       (.26 )     .41       (.15 )     (.13 )
Total from investment operations
     .91       .09       .76       .19       .21  
Less distributions from:
Net investment income
     (.33 )     (.35 )     (.35 )     (.34 )     (.33 )
Net realized gains
     (.00 )*     (.00 )*     (.01 )     (.03 )     (.01 )
Total distributions
     (.33 )     (.35 )     (.36 )     (.37 )     (.34 )
Net asset value, end of period
   $ 9.40     $ 8.82     $ 9.08     $ 8.68     $ 8.86  
Total Return (%)a
     10.57       1.05       8.90       2.45 b     2.42 b
Ratios to Average Net Assets and Supplemental Data
  
Net assets, end of period ($ millions)
     3       4       6       7       12  
Ratio of expenses before expense reductions (including interest expense) (%)c
     1.63       1.64       1.64       1.92       1.98  
Ratio of expenses after expense reductions (including interest expense) (%)c
     1.63       1.64       1.64       1.89       1.89  
Ratio of expenses after expense reductions (excluding interest expense) (%)
     1.57       1.56       1.57       1.53       1.48  
Ratio of net investment income (%)
     3.74       4.04       4.03       4.16       3.77  
Portfolio turnover rate (%)
     27       24       37       77       55  
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.
  
 

   
Years Ended May 31,
  
Class C
    
2012
    
2011
    
2010
    
2009
    
2008
  
Selected Per Share Data
  
Net asset value, beginning of period
   $ 8.81     $ 9.08     $ 8.68     $ 8.85     $ 8.99  
Income from investment operations:
Net investment income
     .34       .35       .36       .34       .34  
Net realized and unrealized gain (loss)
     .59       (.27 )     .41       (.14 )     (.13 )
Total from investment operations
     .93       .08       .77       .20       .21  
Less distributions from:
Net investment income
     (.34 )     (.35 )     (.36 )     (.34 )     (.34 )
Net realized gains
     (.00 )*     (.00 )*     (.01 )     (.03 )     (.01 )
Total distributions
     (.34 )     (.35 )     (.37 )     (.37 )     (.35 )
Net asset value, end of period
   $ 9.40     $ 8.81     $ 9.08     $ 8.68     $ 8.85  
Total Return (%)a
     10.77       .98       8.98       2.61 b     2.32 b
Ratios to Average Net Assets and Supplemental Data
  
Net assets, end of period ($ millions)
     237       143       121       59       32  
Ratio of expenses before expense reductions (including interest expense) (%)c
     1.59       1.61       1.60       1.88       1.92  
Ratio of expenses after expense reductions (including interest expense) (%)c
     1.59       1.61       1.60       1.87       1.90  
Ratio of expenses after expense reductions (excluding interest expense) (%)
     1.53       1.53       1.53       1.52       1.49  
Ratio of net investment income (%)
     3.76       4.08       4.07       4.18       3.76  
Portfolio turnover rate (%)
     27       24       37       77       55  
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.
  
 

   
Years Ended May 31,
  
Class S
    
2012
    
2011
    
2010
    
2009
    
2008
  
Selected Per Share Data
  
Net asset value, beginning of period
   $ 8.83     $ 9.09     $ 8.69     $ 8.87     $ 9.00  
Income from investment operations:
Net investment income
     .42       .44       .44       .43       .42  
Net realized and unrealized gain (loss)
     .58       (.26 )     .41       (.15 )     (.12 )
Total from investment operations
     1.00       .18       .85       .28       .30  
Less distributions from:
Net investment income
     (.42 )     (.44 )     (.44 )     (.43 )     (.42 )
Net realized gains
     (.00 )*     (.00 )*     (.01 )     (.03 )     (.01 )
Total distributions
     (.42 )     (.44 )     (.45 )     (.46 )     (.43 )
Net asset value, end of period
   $ 9.41     $ 8.83     $ 9.09     $ 8.69     $ 8.87  
Total Return (%)
     11.67       2.07       10.00       3.48 a     3.42 a
Ratios to Average Net Assets and Supplemental Data
  
Net assets, end of period ($ millions)
     2,549       2,301       2,081       1,818       1,873  
Ratio of expenses before expense reductions (including interest expense) (%)b
     .64       .64       .62       .90       .95  
Ratio of expenses after expense reductions (including interest expense) (%)b
     .64       .64       .62       .89       .93  
Ratio of expenses after expense reductions (excluding interest expense) (%)
     .58       .56       .55       .54       .52  
Ratio of net investment income (%)
     4.72       5.05       5.05       5.16       4.74  
Portfolio turnover rate (%)
     27       24       37       77       55  
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.
  
 

   
Years Ended May 31,
  
Institutional Class
    
2012
    
2011
    
2010
    
2009
    
2008
  
Selected Per Share Data
  
Net asset value, beginning of period
   $ 8.82     $ 9.08     $ 8.68     $ 8.85     $ 8.99  
Income from investment operations:
Net investment income
     .43       .44       .45       .43       .43  
Net realized and unrealized gain (loss)
     .58       (.26 )     .41       (.14 )     (.13 )
Total from investment operations
     1.01       .18       .86       .29       .30  
Less distributions from:
Net investment income
     (.43 )     (.44 )     (.45 )     (.43 )     (.43 )
Net realized gains
     (.00 )*     (.00 )*     (.01 )     (.03 )     (.01 )
Total distributions
     (.43 )     (.44 )     (.46 )     (.46 )     (.44 )
Net asset value, end of period
   $ 9.40     $ 8.82     $ 9.08     $ 8.68     $ 8.85  
Total Return (%)
     11.79       2.13       10.09       3.61 a     3.35  
Ratios to Average Net Assets and Supplemental Data
  
Net assets, end of period ($ millions)
     117       38       36       6       5  
Ratio of expenses before expense reductions (including interest expense) (%)b
     .56       .59       .57       .90       .90  
Ratio of expenses after expense reductions (including interest expense) (%)b
     .56       .59       .57       .89       .90  
Ratio of expenses after expense reductions (excluding interest expense) (%)
     .50       .51       .50       .54       .49  
Ratio of net investment income (%)
     4.78       5.09       5.09       5.16       4.77  
Portfolio turnover rate (%)
     27       24       37       77       55  
a Total returns 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.
  
 
Notes to Financial Statements
 
A. Organization and Significant Accounting Policies
 
DWS Managed Municipal Bond Fund (the "Fund") is a diversified series of DWS Municipal Trust (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.
 
The Fund 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 services fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
 
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
 
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
 
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
 
Municipal debt securities are valued at prices supplied by independent pricing services approved by the Fund's Board, whose valuations are intended to reflect the mean between the bid and asked prices. If the pricing services are unable to provide valuations, the securities are valued at the mean of the most recent bid and asked quotations or evaluated prices, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. These securities are generally categorized as Level 2.
 
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
 
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors 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.
 
Inverse Floaters. The Fund invests in inverse floaters. Inverse floaters are debt instruments with a weekly floating rate of interest that bears an inverse relationship to changes in the short-term interest rate market. Inverse floaters are created by depositing a fixed-rate municipal bond into a special purpose trust (the "Trust"). In turn the Trust issues a short-term floating rate note and an inverse floater. The income stream from the underlying bond in the Trust is divided between the floating rate note and the inverse floater. The income provided by the inverse floater bears an inverse relationship with the short-term rate paid to the floating rate note holder. The short-term floating rate note is issued in a face amount equal to some fraction of the underlying bond's par amount and is paid to a third party, usually a tax-exempt money market fund, at rates that generally reset weekly. The inverse floater earns all of the interest from the underlying fixed-rate bond less the amount of interest paid on the floating rate note and the expenses of the Trust. The inverse floater represents an investment in the underlying bond on a leveraged basis; the Fund bears all of the price risk of the underlying bond in the Trust and receives all the benefits from any potential appreciation of the underlying bond's value. The floating rate notes issued by the Trust are valued at cost, which approximates fair value.
 
By holding the inverse floater, the Fund has the right to collapse the Trust by causing the holders of the floating rate instrument to tender their notes at par and have the broker transfer the underlying bond to the Fund. The floating rate note holder can also elect to tender the note for redemption at par at each reset date. The Fund accounts for these transactions as a form of secured borrowing, by reflecting the value of the underlying bond in the investments of the Fund and the amount owed to the floating rate note holder as a liability under the caption "Payable for floating rate notes issued" in the Statement of Assets and Liabilities. Income earned on the underlying bond is included in interest income, and interest paid on the floaters and the expenses of the Trust are included in "Interest expense and fees on floating rate notes issued" in the Statement of Operations.
 
The Fund may enter into shortfall and forbearance agreements by which the Fund agrees to reimburse the Trust, in certain circumstances, for the difference between the liquidation value of the underlying bond held by the Trust and the liquidation value of the floating rate notes plus any shortfalls in interest cash flows. This could potentially expose the Fund to losses in excess of the value of the Fund's inverse floater investments. In addition, the value of inverse floaters may decrease significantly when interest rates increase. The market for inverse floaters may be more volatile and less liquid than other municipal bonds of comparable maturity. The Trust could be terminated outside of the Fund's control, resulting in a reduction of leverage and disposal of portfolio investments at inopportune times and prices. Investments in inverse floaters generally involve greater risk than in an investment in fixed-rate bonds.
 
The weighted average outstanding daily balance of the floating rate notes issued during the year ended May 31, 2012 was $383,135,816, with a weighted average interest rate of 0.73%.
 
When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
 
Certain risks may arise upon entering into when-issued or delayed delivery transaction from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
 
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable and tax-exempt income to its shareholders.
 
Under the Regulated Investment Company Modernization Act of 2010, net capital losses may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
 
At May 31, 2012, the Fund had net tax basis capital loss carryforwards of approximately $83,294,000, including $1,746,000 of pre-enactment losses which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until May 31, 2019, the expiration date, whichever occurs first, and approximately $81,548,000 of post-enactment short-term losses which may be applied against realized net taxable capital gains indefinitely.
 
The Fund has reviewed the tax positions for the open tax years as of May 31, 2012 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 gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in swap contracts, 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, 2012, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed tax-exempt income
   $ 4,993,966  
Undistributed ordinary income*
   $ 2,287,817  
Capital loss carryforward
   $ (83,294,000 )
Net unrealized appreciation (depreciation) on investments
   $ 591,187,730  
 
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
   
Years Ended May 31,
  
   
2012
    
2011
  
Distributions from tax-exempt income
   $ 211,450,277     $ 203,937,446  
Distributions from ordinary income*
   $ 1,124,260     $ 481,765  
Distributions from long-term capital gains
   $ —     $ 88,036  
 
* For tax purposes, short-term capital gain distributions are considered ordinary income distributions.
 
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust.
 
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
 
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis and may include proceeds from litigation. All premiums and discounts are amortized/accreted for financial reporting purposes, with the exception of securities in default of principal.
 
Statement of Cash Flows. Information on financial transactions which have been settled through the receipt and disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows represents the cash position at the Fund's custodian bank at May 31, 2012.
 
B. Derivative Instruments
 
Interest Rate Swap Contracts. For the year ended May 31, 2012, the Fund invested into interest rate swap contracts to manage the duration of the Investment Portfolio. The use of interest rate swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an interest rate swap, the Fund agrees to pay to the other party to the interest rate swap (which is known as the "counterparty") a fixed rate payment in exchange for the counterparty agreeing to pay to the Fund a variable rate payment, or the Fund agrees to receive from the counterparty a fixed rate payment in exchange for the counterparty agreeing to receive from the Fund a variable rate payment, the accruals for which would begin at a specified date in the future (the "effective date"). The payment obligations are based on the notional amount of the swap. Certain risks may arise when entering into swap transactions including counterparty default, liquidity or unfavorable changes in interest rates. In connection with these agreements, securities and or cash may be identified as collateral in accordance with the terms of the swap agreements to provide assets of value and recourse in the event of default. The maximum counterparty credit risk is the net present value of the cash flows to be received from or paid to the counterparty over the term of the interest rate swap contract, to the extent that this amount is beneficial to the Fund, in addition to any related collateral posted to the counterparty by the Fund. This risk may be partially reduced by a master netting arrangement between the Fund and the counterparty. The Fund generally intends, but is not obligated, to terminate its interest rate swaps before the effective date. Payments received or made are recorded as realized gain or loss in the Statement of Operations. The value of the swap is adjusted daily based upon a price supplied by a Board approved pricing vendor and the change in value is recorded as unrealized appreciation or depreciation. An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations.
 
A summary of the open interest rate swap contracts as of May 31, 2012, is included in a table following the Fund's Investment Portfolio. For the year ended May 31, 2012, the investment in interest rate swap contracts had a total notional amount generally indicative of a range from $225,550,000 to $290,750,000.
 
The following tables summarize the value of the Fund's derivative instruments held as of May 31, 2012 and the related location in the accompanying Statements of Assets and Liabilities presented by the primary underlying risk exposure:
Liability Derivative
  
Swap Contracts
  
Interest Rate Contracts (a)
   $ (17,702,527 )
 
The above derivative is located in the following Statement of Assets and Liabilities account:
 
(a) Unrealized depreciation on swap contracts
 
Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the period ended May 31, 2012 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
Realized Gain (Loss)
  
Swap Contracts
  
Interest Rate Contracts (a)
   $ (71,280,620 )
 
The above derivative is located in the following Statement of Operations account:
 
(a) Net realized gain (loss) from swap contracts
Change in Net Unrealized Appreciation (Depreciation)
  
Swap Contracts
  
Interest Rate Contracts (a)
   $ (12,081,746 )
 
The above derivative is located in the following Statement of Operations account:
 
(a) Change in net unrealized appreciation (depreciation) on swap contracts
 
C. Purchases and Sales of Securities
 
During the year ended May 31, 2012, purchases and sales of investment securities (excluding short-term investments) aggregated $1,719,966,133 and $1,373,886,956, respectively.
 
D. Related Parties
 
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
 
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:
First $250 million of the Fund's average daily net assets
     .365 %
Next $750 million of such net assets
     .345 %
Next $1.5 billion of such net assets
     .325 %
Next $2.5 billion of such net assets
     .315 %
Next $2.5 billion of such net assets
     .295 %
Next $2.5 billion of such net assets
     .275 %
Next $2.5 billion of such net assets
     .255 %
Over $12.5 billion of such net assets
     .235 %
 
For the year ended May 31, 2012, the fee pursuant to the Investment Management Agreement was equivalent to an annual effective rate of 0.33% of the Fund's average daily net assets.
 
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor a 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, 2012, the Administration Fee was $4,648,982, of which $425,911 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, 2012, the amounts charged to the Fund by DISC were as follows:
Services to Shareholders
  
Total Aggregated
    
Unpaid at May 31, 2012
  
Class A
   $ 327,456     $ 80,821  
Class B
     1,500       356  
Class C
     19,410       5,535  
Class S
     745,714       183,084  
Institutional Class
     4,148       1,189  
    $ 1,098,228     $ 270,985  
 
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 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, 2012, the Distribution Fee was as follows:
Distribution Fee
  
Total Aggregated
    
Unpaid at May 31, 2012
  
Class B
   $ 27,661     $ 2,193  
Class C
     1,360,797       146,896  
    $ 1,388,458     $ 149,089  
 
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, 2012, the Service Fee was as follows:
Service Fee
  
Total Aggregated
    
Unpaid at May 31, 2012
    
Annual Effective Rate
  
Class A
   $ 4,805,926     $ 891,588       .24 %
Class B
     9,218       1,456       .25 %
Class C
     453,212       94,289       .25 %
    $ 5,268,356     $ 987,333          
 
Underwriting Agreement and Contingent Deferred Sales Charge. DIDI is the principal underwriter for the Fund. Underwriting commissions paid to DIDI in connection with the distribution of Class A shares for the year ended May 31, 2012 aggregated $222,080.
 
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, 2012, the CDSC for Class B and C shares aggregated $5,034 and $33,889, respectively. A deferred sales charge of up to 0.50% is assessed on certain redemptions of Class A shares. For the year ended May 31, 2012, DIDI received $31,580 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, 2012, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $25,610, of which $10,411 is unpaid.
 
Trustees' Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
 
E. Line of Credit
 
The Fund and other affiliated funds (the "Participants") share in a $375 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus, if LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at May 31, 2012.
 
F. Share Transactions
 
The following table summarizes share and dollar activity in the Fund:
   
Year Ended May 31, 2012
    
Year Ended May 31, 2011
  
   
Shares
    
Dollars
    
Shares
    
Dollars
  
Shares sold
  
Class A
     40,664,159     $ 370,789,938       35,208,434     $ 314,241,082  
Class B
     8,787       80,838       70,937       635,839  
Class C
     11,913,160       108,777,602       7,272,129       65,065,253  
Class S
     44,986,024       410,020,474       80,796,184       704,215,793  
Institutional Class
     12,280,424       111,414,970       4,396,620       39,522,991  
            $ 1,001,083,822             $ 1,123,680,958  
Shares issued to shareholders in reinvestment of distributions
  
Class A
     7,835,641     $ 71,302,377       7,616,416     $ 67,468,927  
Class B
     13,258       120,422       17,801       157,919  
Class C
     572,413       5,216,355       461,008       4,079,289  
Class S
     6,867,551       62,576,708       7,041,085       62,519,098  
Institutional Class
     409,859       3,746,510       186,041       1,650,785  
            $ 142,962,372             $ 135,876,018  
Shares redeemed
  
Class A
     (27,833,329 )   $ (253,023,678 )     (41,985,518 )   $ (367,547,981 )
Class B
     (129,115 )     (1,164,342 )     (224,507 )     (1,978,020 )
Class C
     (3,482,289 )     (31,588,550 )     (4,840,588 )     (42,341,898 )
Class S
     (41,692,110 )     (379,578,940 )     (56,072,613 )     (490,067,299 )
Institutional Class
     (4,488,471 )     (41,137,379 )     (4,288,010 )     (37,211,233 )
            $ (706,492,889 )           $ (939,146,431 )
Net increase (decrease)
  
Class A
     20,666,471     $ 189,068,637       839,332     $ 14,162,028  
Class B
     (107,070 )     (963,082 )     (135,769 )     (1,184,262 )
Class C
     9,003,284       82,405,407       2,892,549       26,802,644  
Class S
     10,161,465       93,018,242       31,764,656       276,667,592  
Institutional Class
     8,201,812       74,024,101       294,651       3,962,543  
            $ 437,553,305             $ 320,410,545  
 
G. Regulatory Settlements
 
On December 21, 2006, the Advisor settled proceedings with the SEC and the New York Attorney General regarding alleged improper trading of fund shares. In accordance with the distribution plan, developed by a distribution consultant, settlement proceeds were distributed to affected shareholders of the Fund, and unclaimed proceeds were then paid to the Fund in the amount of $258,220. In addition, the Fund received $4,393 of non-affiliated regulatory settlements. These payments are included in "Increase from regulatory settlements" in the Statement of Changes in Net Assets for the year ended May 31, 2011. The amounts of the payments were less than 0.01% of the Fund's average net assets, thus having no impact on total return.
 
Report of Independent Registered Public Accounting Firm
 
To the Trustees of DWS Municipal Trust and the Shareholders of DWS Managed Municipal Bond 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 Managed Municipal Bond Fund (the "Fund") at May 31, 2012, 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, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
 
Boston, Massachusetts
July 25, 2012
PricewaterhouseCoopers LLP
 
Information About Your Fund's Expenses
 
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads) and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. 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, 2011 to May 31, 2012).
 
The tables illustrate your Fund's expenses in two ways:
 
•Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
 
•Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
 
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.
 
Expenses and Value of a $1,000 Investment for the six months ended May 31, 2012 (Unaudited)
  
Actual Fund Return
  
Class A
    
Class B
    
Class C
    
Class S
    
Institutional Class
  
Beginning Account Value 12/1/11
   $ 1,000.00     $ 1,000.00     $ 1,000.00     $ 1,000.00     $ 1,000.00  
Ending Account Value 5/31/12
   $ 1,077.00     $ 1,072.60     $ 1,072.90     $ 1,077.80     $ 1,078.30  
Expenses Paid per $1,000*
   $ 4.26     $ 8.45     $ 8.34     $ 3.43     $ 2.91  
Hypothetical 5% Fund Return
  
Class A
    
Class B
    
Class C
    
Class S
    
Institutional Class
  
Beginning Account Value 12/1/11
   $ 1,000.00     $ 1,000.00     $ 1,000.00     $ 1,000.00     $ 1,000.00  
Ending Account Value 5/31/12
   $ 1,020.90     $ 1,016.85     $ 1,016.95     $ 1,021.70     $ 1,022.20  
Expenses Paid per $1,000*
   $ 4.14     $ 8.22     $ 8.12     $ 3.34     $ 2.83  
 
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 183 (the number of days in the most recent six-month period), then divided by 366.
 
Annualized Expense Ratios
Class A
Class B
Class C
Class S
Institutional Class
DWS Managed Municipal Bond Fund+
.82%
1.63%
1.61%
.66%
.56%
 
+ Includes interest expense and fees on short-term floating rate notes issued in conjunction with inverse floating rate securities of 0.06% for each class.
 
For more information, please refer to the Fund's prospectus.
 
Tax Information (Unaudited)
 
Of the dividends paid from net investment income for the taxable year ended May 31, 2012, 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
 
September 26, 2011
 
Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Funds (formerly the DWS Scudder Funds). My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2011, including my qualifications, the evaluation process for each of the DWS Funds, consideration of certain complex-level factors, and my conclusions. I served in substantially the same capacity in 2007, 2008, 2009 and 2010.
 
Qualifications
 
For more than 35 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.
 
Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past ten years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.
 
I hold a Master of Business Administration degree, with highest honors, from Harvard University and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds and have served in various leadership and financial oversight capacities with non-profit organizations.
 
Evaluation of Fees for each DWS Fund
 
My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 109 mutual fund portfolios in the DWS Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).
 
In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper and Morningstar databases and drew on my industry knowledge and experience.
 
To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.
 
In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.
 
Fees and Expenses Compared with Other Funds
 
The competitive fee and expense evaluation for each fund focused on two primary comparisons:
 
The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.
 
The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.
 
These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.
 
DeAM's Fees for Similar Services to Others
 
DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Fund. These similar products included the other DWS Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.
 
Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.
 
Costs and Profit Margins
 
DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.
 
Economies of Scale
 
Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Fund compares with this industry observation, I reviewed:
 
The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.
 
Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.
 
How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.
 
Quality of Service — Performance
 
The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.
 
In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.
 
I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.
 
Complex-Level Considerations
 
While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:
 
I reviewed DeAM's profitability analysis for all DWS Funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.
 
I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.
 
I considered how aggregated DWS Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.
 
I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.
 
Findings
 
Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Funds are reasonable.
 
Thomas H. Mack
 
President, Thomas H. Mack & Co., Inc.
 
Board Members and Officers
 
The following table presents certain information regarding the Board Members and Officers of the fund as of May 31, 2012. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Paul K. Freeman, Independent Chairman, DWS Funds, PO Box 101833, Denver, CO 80250-1833. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex. The Length of Time Served represents the year in which the Board Member joined the Board of one or more DWS funds now overseen by the Board.
 
Independent Board Members
Name, Year of Birth, Position with the Fund and Length of Time Served1
  
Business Experience and Directorships During the Past Five Years
Number of Funds in DWS Fund Complex Overseen
 
 
Other Directorships Held by Board Member
Paul K. Freeman (1950)
Chairperson since 2009
Board Member since 1993
  
Consultant, World Bank/Inter-American Development Bank; Executive and Governing Council of the Independent Directors Council (Chairman of Education Committee); formerly: Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998)
105
—
John W. Ballantine (1946)
Board Member since 1999
  
Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: Chairman of the Board, Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company); Stockwell Capital Investments PLC (private equity); former Directorships: First Oak Brook Bancshares, Inc. and Oak Brook Bank; Prisma Energy International
105
—
Henry P. Becton, Jr. (1943)
Board Member since 1990
  
Vice Chair and former President, WGBH Educational Foundation. Directorships: Public Radio International; Public Radio Exchange (PRX); The PBS Foundation; North Bennett Street School (Boston); former Directorships: Association of Public Television Stations; Boston Museum of Science; American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service; Connecticut College
105
Lead Director, Becton Dickinson and Company2 (medical technology company); Lead Director, Belo Corporation2 (media company)
Dawn-Marie Driscoll (1946)
Board Member since 1987
  
President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley University; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley University; Trustee, Southwest Florida Community Foundation (charitable organization); former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees)
105
Trustee, Sun Capital Advisers, Inc. (22 open-end mutual funds advised by Sun Capital Advisers, Inc.) (since 2007)
Keith R. Fox, CFA (1954)
Board Member since 1996
  
Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); BoxTop Media Inc. (advertising); The Kennel Shop (retailer); former Chairman, National Association of Small Business Investment Companies
105
Trustee, Sun Capital Advisers, Inc. (22 open-end mutual funds advised by Sun Capital Advisers, Inc.) (since 2011)
Kenneth C. Froewiss (1945)
Board Member since 2001
  
Adjunct Professor of Finance, NYU Stern School of Business (September 2009-present; Clinical Professor from 1997-September 2009); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996)
105
—
Richard J. Herring (1946)
Board Member since 1990
  
Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center (since July 2000); Co-Chair, U.S. Shadow Financial Regulatory Committee; Executive Director, Financial Economists Roundtable; formerly: Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (July 2000-June 2006)
105
Director, Japan Equity Fund, Inc. (since September 2007), Thai Capital Fund, Inc. (since September 2007), Singapore Fund, Inc. (since September 2007), Independent Director of Barclays Bank Delaware (since September 2010)
William McClayton (1944)
Board Member since 2004
  
Private equity investor (since October 2009); previously, Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001-2009); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966-2001); Trustee, Ravinia Festival
105
—
Rebecca W. Rimel (1951)
Board Member since 1995
  
President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); Trustee, Washington College (2011 to present); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983-2004); Board Member, Investor Education (charitable organization) (2004-2005); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001-2007); Trustee, Pro Publica (charitable organization) (2007-2010); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to 2012)
105
Director, CardioNet, Inc.2 (health care) (2009- present); Director, Viasys Health Care2 (January 2007- June 2007)
William N. Searcy, Jr. (1946)
Board Member since 1993
  
Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989-September 2003)
105
Trustee, Sun Capital Advisers, Inc. (22 open-end mutual funds advised by Sun Capital Advisers, Inc.) (since 1998)
Jean Gleason Stromberg (1943)
Board Member since 1997
  
Retired. Formerly, Consultant (1997-2001); Director, Financial Markets U.S. 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)
105
—
Robert H. Wadsworth
(1940)
Board Member since 1999
  
President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present); Director, National Horizon, Inc. (non-profit organization); Director and Treasurer, The Phoenix Boys Choir Association
108
—
 

Officers4
Name, Year of Birth, Position with the Fund and Length of Time Served5
  
Principal Occupation(s) During Past 5 Years and Other Directorships Held
W. Douglas Beck, CFA6 (1967)
President, 2011-present
  
Managing Director3, Deutsche Asset Management (2006-present); President of DWS family of funds and Head of Product Management, U.S. for DWS Investments; formerly, Executive Director, Head of Product Management (2002-2006) and President (2005-2006) of the UBS Funds at UBS Global Asset Management; Co-Head of Manager Research/Managed Solutions Group, Merrill Lynch (1998-2002)
John Millette7 (1962)
Vice President and Secretary, 1999-present
  
Director3, Deutsche Asset Management
Paul H. Schubert6 (1963)
Chief Financial Officer, 2004-present
Treasurer, 2005-present
  
Managing Director3, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998)
Caroline Pearson7 (1962)
Chief Legal Officer, 2010-present
  
Managing Director3, Deutsche Asset Management; formerly, Assistant Secretary for DWS family of funds (1997-2010)
Melinda Morrow6 (1970)
Vice President, May 2012-present
  
Director3, Deutsche Asset Management
Rita Rubin6 (1970)
Assistant Secretary, 2009-2012*
  
Director3 and Senior Counsel, Deutsche Asset Management (since October 2007); formerly, Vice President, Morgan Stanley Investment Management (2004-2007)
Paul Antosca7 (1957)
Assistant Treasurer, 2007-present
  
Director3, Deutsche Asset Management
Jack Clark7 (1967)
Assistant Treasurer, 2007-present
  
Director3, Deutsche Asset Management
Diane Kenneally7 (1966)
Assistant Treasurer, 2007-present
  
Director3, Deutsche Asset Management
John Caruso6 (1965)
Anti-Money Laundering Compliance Officer, 2010-present
  
Managing Director3, Deutsche Asset Management
Robert Kloby6 (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: 60 Wall Street, New York, NY 10005.
 
7 Address: One Beacon Street, Boston, MA 02108.
 
* Effective May 18, 2012, Rita Rubin no longer serves as Assistant Secretary to the fund.
 
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.
Portfolio Holdings
  
Following the fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The fund's portfolio holdings are also posted on www.dws-investments.com from time to time. Please see the fund's current prospectus for more information.
Principal Underwriter
  
If you have questions, comments or complaints, contact:
DWS Investments Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148
Investment Management
  
Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for the fund. DIMA and its predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to both institutional and retail clients.
DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution engaged in a wide variety of financial services, including investment management, retail, private and commercial banking, investment banking and insurance.
DWS Investments is the retail brand name in the U.S. for the asset management activities of Deutsche Bank AG and DIMA. As such, DWS is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors.
 

   
Class A
Class B
Class C
Class S
Institutional Class
Nasdaq Symbol
  
SMLAX
SMLBX
SMLCX
SCMBX
SMLIX
CUSIP Number
  
23337W-709
23337W-808
23337W-881
23337W-865
23337W-857
Fund Number
  
466
666
766
2066
544
 
 
   
ITEM 2.
CODE OF ETHICS
   
 
As of the end of the period covered by this report, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.
 
There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.
 
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
   
ITEM 3.
AUDIT COMMITTEE FINANCIAL EXPERT
   
 
The fund’s audit committee is comprised solely of trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The fund’s Board of Trustees has determined that there are several "audit committee financial experts" (as such term has been defined by the Regulations) serving on the fund’s audit committee including Mr. William McClayton, the chair of the fund’s audit committee. An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an “audit committee financial expert” does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.
   
ITEM 4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
   
 
DWS MANAGED MUNICIPAL BOND FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
 
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years.  The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
 
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
 
Fiscal Year Ended May 31,
  
Audit Fees Billed to Fund
    
Audit-Related
Fees Billed to Fund
    
Tax Fees Billed to Fund
    
All
Other Fees Billed to Fund
  
2012
   $ 96,896     $ 0     $ 0     $ 0  
2011
   $ 96,896     $ 0     $ 0     $ 0  

Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
 
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
 
Fiscal Year Ended 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
  
2012
   $ 0     $ 56,300     $ 0  
2011
   $ 0     $ 0     $ 0  

The “Tax Fees Billed to the Advisor” were billed for services associated with foreign tax filings.
 
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)
  
2012
   $ 0     $ 56,300     $ 0     $ 56,300  
2011
   $ 0     $ 0     $ 0     $ 0  


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, substantially all of the principal Independent Registered Public Accounting Firm's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal Independent Registered Public Accounting Firm.

***
PwC advised the Fund's Audit Committee that it had identified one matter that it determined could be inconsistent with the SEC's auditor independence rules (Rule 2-01(c) of Regulation S-X). As part of a "Global Migration Support" engagement in which PwC's UK network affiliate ("PwC-UK") provided assistance to Deutsche Bank ("DB") with respect to processing internship applications for DB employees seeking short term assignments with DB in the UK, PwC-UK paid application fees on behalf of DB for six applicants at 170 pounds each (1,020 pounds in total).  PwC advised the Committee that it believes that this matter did not affect its objectivity or its impartial judgment in conducting its audit and issuing a report on the financial statements of the Fund as the Fund's independent auditor and confirmed its independence under the SEC’s auditor independence rules. In reaching this conclusion, PwC noted that the engagement team was not aware of the payment of the application fees by PwC-UK and that DB reimbursed PwC-UK for the fees.
 
   
ITEM 5.
AUDIT COMMITTEE OF LISTED REGISTRANTS
   
 
Not applicable
   
ITEM 6.
SCHEDULE OF INVESTMENTS
   
 
Not applicable
   
ITEM 7.
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
   
 
Not applicable
   
ITEM 8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
   
 
Not applicable
   
ITEM 9.
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
   
 
Not applicable
   
ITEM 10.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   
 
There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board.  The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Paul K. Freeman, Independent Chairman, DWS Funds, P.O. Box 101833, Denver, CO 80250-1833.
   
ITEM 11.
CONTROLS AND PROCEDURES
   
 
(a)
The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
   
 
(b)
There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.
   
ITEM 12.
EXHIBITS
   
 
(a)(1)
Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.
   
 
(a)(2)
Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.
   
 
(b)
Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.

Form N-CSR Item F

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Registrant:
DWS Managed Municipal Bond Fund, a series of DWS Municipal Trust
   
   
By:
/s/W. Douglas Beck
W. Douglas Beck
President
   
Date:
July 30, 2012


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By:
/s/W. Douglas Beck
W. Douglas Beck
President
   
Date:
July 30, 2012
   
   
   
By:
/s/Paul Schubert
Paul Schubert
Chief Financial Officer and Treasurer
   
Date:
July 30, 2012