UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number | 811-04760 |
DWS Advisor Funds
(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, MD 21202
(Address of principal executive offices) (Zip code)
Registrant’s Telephone Number, including Area Code: (212) 454-7190
Paul Schubert
345 Park Avenue
New York, NY 10154
(Name and Address of Agent for Service)
Date of fiscal year end: | 3/31 |
Date of reporting period: | 3/31/07 |
ITEM 1. REPORT TO STOCKHOLDERS
MARCH 31, 2007
Annual Report
to Shareholders
DWS Lifecycle Long Range Fund
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Contents
click here Performance Summary click here Information About Your Fund's Expenses click here Portfolio Management Review click here Portfolio Summary click here Investment Portfolio click here Financial Statements click here Financial Highlights click here Notes to Financial Statements click here Report of Independent Registered Public Accounting Firm click here Tax Information click here Shareholder Meeting Results click here Investment Management Agreement Approval click here Trustees and Officers click here Account Management Resources |
This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.
Investments in mutual funds involve risk. Some funds have more risk than others. Although asset allocation among different asset classes generally limits risk and exposure to any one class, the risk remains that the investment advisor may favor an asset class that performs poorly relative to the other asset classes. The fund is subject to stock market risk, meaning stocks of companies the fund holds may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the bond fund, can decline and the investor can lose principal value. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes and market risks. Additionally, derivatives may be more volatile and less liquid than traditional securities, and the fund could suffer losses on its derivatives positions. Please read this fund's prospectus for specific details regarding its investments and risk profile.
DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Performance Summary March 31, 2007
Institutional Class and Class S
All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-scudder.com for the Fund's most recent month-end performance.
The total annual fund operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated June 30, 2006 are 0.88% and 0.91% for Institutional Class and Class S shares, respectively. Please see the Information About Your Fund's Expenses, the Financial Highlights and Notes to the Financial Statements (Note C, Related Parties) sections of this report for gross and net expense related disclosure for the year ended March 31, 2007.
To discourage short-term trading, the Fund imposes a 2% redemption fee on shareholders redeeming shares held less than 15 days, which has the effect of lowering total return.
Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.
On July 25, 2003, the Investment Class of the Fund was issued in conjunction with the combination of Scudder Lifecycle Long Range Fund (the "Acquired Fund") and the Fund (formerly known as "Scudder Asset Management Fund"). The Acquired Fund and the Fund were each feeder funds investing all of their investable assets in the same master portfolio, the Asset Management Portfolio. Returns of the Investment Class shown prior to July 25, 2003 are derived from the historical performance of the Institutional Class of the DWS Lifecycle Long Range Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of the Investment Class. Any difference in expenses will affect performance. On October 23, 2006, Investment Class was renamed Class S.
Average Annual Total Returns as of 3/31/07 | ||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year |
Institutional Class | 10.28% | 8.28% | 6.72% | 8.07% |
Class S* | 10.16% | 7.92% | 6.31% | 7.64% |
S&P 500® Index+ | 11.83% | 10.06% | 6.27% | 8.20% |
Citigroup Broad Investment Grade Bond Index++ | 6.60% | 3.38% | 5.40% | 6.48% |
Asset Allocation Index — Long Range+++ | 9.34% | 7.08% | 5.83% | 7.49% |
Sources: Lipper Inc. and Deutsche Investment Management Americas, Inc.
* On October 23, 2006, Investment Class was renamed Class S.Net Asset Value and Distribution Information | ||
| Institutional Class | Class S* |
Net Asset Value: 3/31/07 | $ 12.29 | $ 11.85 |
3/31/06 | $ 11.74 | $ 11.30 |
Distribution Information: Twelve Months as of 3/31/07:Income Dividends | $ .31 | $ .25 |
Capital Gain Distributions | $ .33 | $ .33 |
Institutional Class Lipper Rankings — Mixed-Asset Target Allocation Moderate Funds Category as of 3/31/07 | ||||
Period | Rank |
| Number of Funds Tracked | Percentile Ranking (%) |
1-Year | 96 | of | 423 | 23 |
3-Year | 101 | of | 312 | 32 |
5-Year | 86 | of | 212 | 41 |
10-Year | 25 | of | 112 | 23 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Institutional Class shares; other share classes may vary.
Growth of an Assumed $1,000,000 Investment |
[] DWS Lifecycle Long Range Fund — Institutional Class [] S&P 500 Index+ [] Citigroup Broad Investment Grade Bond Index++ [] Asset Allocation Index — Long Range+++ |
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Yearly periods ended March 31 |
Comparative Results as of 3/31/07 | |||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Institutional Class | Growth of $1,000,000 | $1,102,800 | $1,269,500 | $1,384,000 | $2,173,200 |
Average annual total return | 10.28% | 8.28% | 6.72% | 8.07% | |
S&P 500 Index+ | Growth of $1,000,000 | $1,118,300 | $1,333,100 | $1,355,200 | $2,200,100 |
Average annual total return | 11.83% | 10.06% | 6.27% | 8.20% | |
Citigroup Broad Investment Grade Bond Index++ | Growth of $1,000,000 | $1,066,000 | $1,105,000 | $1,300,800 | $1,872,900 |
Average annual total return | 6.60% | 3.38% | 5.40% | 6.48% | |
Asset Allocation Index — Long Range+++ | Growth of $1,000,000 | $1,093,400 | $1,227,900 | $1,327,400 | $2,058,800 |
Average annual total return | 9.34% | 7.08% | 5.83% | 7.49% |
The growth of $1,000,000 is cumulative.
The minimum initial investment for the Institutional Class is $1,000,000.
Growth of an Assumed $10,000 Investment |
[] DWS Lifecycle Long Range Fund — Class S* [] S&P 500 Index+ [] Citigroup Broad Investment Grade Bond Index++ [] Asset Allocation Index — Long Range+++ |
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Yearly periods ended March 31 |
Comparative Results as of 3/31/07 | |||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Class S* | Growth of $10,000 | $11,016 | $12,571 | $13,580 | $20,882 |
Average annual total return | 10.16% | 7.92% | 6.31% | 7.64% | |
S&P 500 Index+ | Growth of $10,000 | $11,183 | $13,331 | $13,552 | $22,001 |
Average annual total return | 11.83% | 10.06% | 6.27% | 8.20% | |
Citigroup Broad Investment Grade Bond Index++ | Growth of $10,000 | $10,660 | $11,050 | $13,008 | $18,729 |
Average annual total return | 6.60% | 3.38% | 5.40% | 6.48% | |
Asset Allocation Index — Long Range+++ | Growth of $10,000 | $10,934 | $12,279 | $13,274 | $20,588 |
Average annual total return | 9.34% | 7.08% | 5.83% | 7.49% |
The growth of $10,000 is cumulative.
* On October 23, 2006, Investment Class was renamed Class S.+ The Standard & Poor's 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
++ The Citigroup Broad Investment Grade Bond Index is an unmanaged index which covers an all inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities.
+++ The Asset Allocation Index — Long Range is calculated using the performance of three unmanaged indices representative of stocks (S&P 500 Index), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-month T-bill Index) weighted by their corresponding proportion of the Fund's neutral position (stocks: 55%; bonds: 35%; cash: 10%). These results are summed to produce the aggregate benchmark. The S&P 500 Index measures the performance of 500 large US companies. The Citigroup Broad Investment Grade Bond Index covers an all inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities. The Merrill Lynch 3-month T-bill Index is representative of the 3-month Treasury market.
Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Information About Your Fund's Expenses
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (October 1, 2006 to March 31, 2007).
The tables illustrate your Fund's expenses in two ways:
Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended March 31, 2007 | ||
Actual Fund Return | Class S** | Institutional Class |
Beginning Account Value 10/1/06 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 3/31/07 | $ 1,058.20 | $ 1,058.20 |
Expenses Paid per $1,000* | $ 3.28 | $ 2.82 |
Hypothetical 5% Fund Return | Class S** | Institutional Class |
Beginning Account Value 10/1/06 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 3/31/07 | $ 1,021.74 | $ 1,022.19 |
Expenses Paid per $1,000* | $ 3.23 | $ 2.77 |
Annualized Expense Ratios | Class S** | Institutional Class |
DWS Lifecycle Long Range Fund | .64% | .55% |
For more information, please refer to the Fund's prospectus.
DWS Lifecycle Long Range Fund: A Team Approach to Investing
Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for DWS Lifecycle Long Range Fund. DIMA and its predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to institutional and retail clients.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Aberdeen Asset Management Inc. ("AAMI"), a US registered investment advisor, is a subadvisor for the fund. With respect to the core bond and active fixed income portions of the fund only, AAMI makes the investment decisions, buys and sells securities, and conducts the research that leads to these purchase and sale decisions. AAMI is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges. AAMI provides a full range of international investment advisory services to institutional and retail clients. AAMI is a direct, wholly owned subsidiary of Aberdeen Asset Management PLC, the parent company of an asset management group formed in 1983. As of March 31, 2007, AAMI had assets under management of $28 billion.
Portfolio Management Team
The following portfolio managers are responsible for the day-to-day management of the fund's investments, except for the passive equity, core bond and active fixed income portions of the fund.
Thomas Picciochi
Director of Deutsche Asset Management and Portfolio Manager of the fund.
Joined Deutsche Asset Management in 1999, formerly serving as portfolio manager for Absolute Return Strategies, after 13 years of experience in various research and analysis positions at State Street Global Advisors, FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial Management.
Senior portfolio manager for Quantitative StrategiesPortfolio Management: New York.
BA and MBA from University of Miami.
Joined the fund in 2005.
Robert Wang
Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.
Joined Deutsche Asset Management in 1995 as a portfolio manager for asset allocation after 13 years of experience in trading fixed income, foreign exchange and derivative products at J.P. Morgan.
Senior portfolio manager for global and tactical asset allocation portfolios, with a focus on quantitative asset allocation, portfolio risk control and derivatives trading management.
BS, University of Pennsylvania — The Wharton School.
Joined the fund in 2000.
Inna Okounkova
Director of Deutsche Asset Management and Portfolio Manager of the fund.
Global Asset Allocation portfolio manager: New York.
Joined Deutsche Asset Management in 1999 as a quantitative analyst, becoming an associate portfolio manager in 2001.
Joined the fund in 2007.
BS, MS, Moscow State University; MBA, University of Chicago.
Jin Chen, CFA
Director of Deutsche Asset Management and Portfolio Manager of the fund.
Senior portfolio manager for Global Strategies: New York.
Joined Deutsche Asset Management in 1999; prior to that, served as
portfolio manager for Absolute Return Strategies and as a fundamental
equity analyst and portfolio manager for Thomas White Asset Management.
Joined the fund in 2007.
BS, Nanjing University; MS, Michigan State University.
Julie Abbett
Director of Deutsche Asset Management and Portfolio Manager of the fund.
Senior portfolio manager for Global Quantitative Equity: New York.
Joined Deutsche Asset Management in 2000 after four years of combined experience as a consultant with equity trading services for BARRA, Inc. and a product developer for FactSet Research.
Joined the fund in 2007.
BA, University of Connecticut.
The following portfolio managers are responsible for the day-to-day management of the core bond and active fixed income portion of the fund.
Gary W. Bartlett, CFA
Head of US Fixed Income and senior portfolio manager specializing in taxable municipal, utility and government fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1992 after nine years of experience as an analyst and fixed income portfolio manager at PNC Financial and credit analyst at First Pennsylvania Bank.
BA from Bucknell University; MBA from Drexel University.
Warren S. Davis, III
Senior portfolio manager for mortgage- and asset-backed fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1995 after nine years of experience as a trader, analyst and developer of analytical and risk management systems for PaineWebber and Merrill Lynch.
BS from Pennsylvania State University; MBA from Drexel University.
Thomas J. Flaherty
Senior portfolio manager for corporate and taxable municipal fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1995 after 10 years of fixed income experience, including vice president for US taxable fixed income securities at Prudential Securities.
BA from SUNY Stony Brook.
J. Christopher Gagnier
Head of Core Plus Fixed Income product and senior portfolio manager for corporate and commercial mortgages: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1997 after 17 years of experience in fixed income investments at PaineWebber and Continental Bank.
BS from Wharton School of Business; MBA from University of Chicago.
Daniel R. Taylor, CFA
Senior portfolio manager for asset-backed and commercial mortgage fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1998 after six years of experience as fixed income portfolio manager and senior credit analyst for CoreStates Investment Advisors.
BS from Villanova University.
Timothy C. Vile, CFA
Senior portfolio manager for Core Fixed Income and Global Aggregate Fixed Income: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1991 as member of Core Fixed Income; seconded to the London office from January 1999 to June 2002 to design and develop the firm's European Credit and Global Aggregate capabilities; before joining Deutsche Asset Management, he had six years of experience that included portfolio manager for fixed income portfolios at Equitable Capital Management.
BS from Susquehanna University.
William T. Lissenden
Portfolio manager for Core Fixed Income: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Director of Deutsche Asset Management; joined Deutsche Asset Management in 2002 after 31 years of experience, including fixed income strategist and director of research at Conseco Capital Management, director of fixed income research and product management at Prudential Securities and national sales manager for fixed income securities at Prudential Securities.
BS from St. Peter's College; MBA from Baruch College.
In the following interview, Portfolio Managers Thomas Picciochi, Inna Okounkova and Robert Wang address the economy, markets, portfolio management strategy and resulting performance of DWS Lifecycle Long Range Fund for the 12 months ended March 31, 2007.
Q: How would you describe market conditions over the last year?
A: The global economy is in transition, moving from the early stages of an economic expansion to a more mature phase of the cycle, with the impetus to growth gradually shifting from the US to other regions. A key issue is how much the US housing slowdown spills over into other sectors of the US economy and ultimately, the rest of the world. For the most part, investors have looked past potential problems, choosing instead to focus on the positives of continued growth in the overall economy and in corporate profits, expanding profit margins and reasonable equity valuation levels.
US equities have been generally strong, except for periods of weakness in the late spring of 2006 and in February 2007: Return of the Standard & Poor's 500® (S&P 500) Index for the 12 months ended March 31, 2007 was 11.83%.1 The bond market has demonstrated somewhat less optimism about the economy than the stock market. Return of the Citigroup Broad Investment Grade (BIG) Bond Index for the 12-month period was 6.60%.2
1 The Standard & Poor's 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.2 The Citigroup Broad Investment Grade Bond Index is an unmanaged index that covers an all-inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities.
Index returns assume reinvestment of dividends and, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Q: How is DWS Lifecycle Long Range Fund managed?
A: We invest the fund in a mix of stocks, bonds and short-term investments. The fund has a strategic allocation in each of the three principal asset classes; equity 55%, fixed-income 35% and short-term instruments 10%.
The equity strategy changed on January 22, 2007, from an index strategy to an active quantitative strategy designed to achieve long-term outperformance by systematically exploring market efficiency. Our quantitative stock selection model uses a broad range of information from companies' balance sheets, income statements and cash flow statements. The signals are selected based on statistical evidence and economic intuition.
In managing the bond portion of the portfolio, we use a core fixed-income strategy to select bonds based on a number of characteristics in an effort to outperform the Citigroup Broad Investment Grade Bond Index.
We employ a Global Asset Allocation (GAA) overlay, which offers a means to capture gains when various assets and asset classes advance or decline. It utilizes stock and bond futures and currency forwards to take long and short positions in different asset classes without having to make dramatic shifts in the stock, bond and cash allocations of the underlying funds, which are maintained at the percentages specific to the fund and are rebalanced to these percentages each month.3 The GAA overlay strategy is expected to have a low correlation to the fund's main holdings.
3 Futures and options are used as a low-cost method for gaining exposure to a particular securities market without investing directly in those securities. Forward currency transactions are the purchase or sale of a foreign currency at an exchange rate established now, but with payment and delivery at a specified future time. Forward currency transactions are used as hedges and, where possible, to add to investment returns.The GAA strategy combines diverse macro investment views from various investment teams within Deutsche Asset Management. Since a single investment approach rarely works in all market conditions, the teams are chosen to diversify investment approaches, thereby enhancing the expected return for a given level of risk. The collective views are then used to determine GAA's positions using a disciplined risk-managed process. The result is a collection of long and short investment positions within global equity, bond and currency markets designed to generate excess returns that have little correlation to major markets. The positions are then implemented by the GAA portfolio managers using futures and forward contracts. The GAA portfolio managers consider factors such as liquidity, cost, margin requirement and credit quality when selecting the appropriate derivative instrument.
Q: How did the fund perform during the period?
A: In evaluating performance, we look at the fund's absolute returns and its return relative to its benchmark and peer group. Since the fund holds securities in three major asset classes — stocks, bonds and short-term securities — we have created an asset allocation benchmark. The asset allocation benchmark is calculated using the performance of three unmanaged indices representative of stocks (S&P 500 Index), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-month T-bill Index) weighted by their corresponding proportion of the fund's neutral position to produce the aggregate benchmark.4 We also compare returns to those of a peer group of funds that allocate assets among several asset classes, the Lipper Mixed-Asset Target Allocation Moderate Funds category.5
4 The Merrill Lynch 3-month T-bill Index is an unmanaged index of US Treasury securities with maturities of three months or less. It is constructed by Merrill Lynch & Co. and is frequently used as a measure of short-term returns on cash investments. Index returns assume reinvestment of dividends and, unlike fund returns, do no include fees pr expenses. It is not possible to invest directly into an Index.5 The Lipper Mixed-Asset Target Allocation Moderate Funds category is a group of mutual funds that, by portfolio practice, maintain a mix of 0% to 60% equity securities, with the remainder invested in bonds, cash and cash equivalents. Category returns assume reinvestment of all dividends. It is not possible to invest directly into a Lipper category.
The total return of the Standard & Poor's 500 Index for the 12-month period ended March 31, 2007 was 11.83%. The total return of the Citigroup Broad Investment Grade Bond Index was 6.60%. The Merrill Lynch 3-month T-bill Index had a return of 5.07%.
For the 12 months ended March 31, the DWS Lifecycle Long Range Fund had a return of 10.28% (Institutional Class), compared with 9.34% for its asset allocation benchmark. The asset allocation benchmark is a blend of 55% S&P 500 Index, 35% Citigroup Broad Investment Grade Bond Index, 10% Merrill Lynch 3-month T-bill Index. The fund's return was more than a percentage point above the midpoint of its Lipper Peer group of Mixed-Asset Target Allocation Moderate funds, which was 9.23%. This performance places the fund in the top quartile of the 423 funds in its peer group.
The effectiveness of the Global Asset Allocation overlay, which enhanced return by almost two percentage points over the 12-month period, was a major factor that enabled the fund to outperform its peer group. Within the GAA, equity positions were the predominant driver of the outperformance. Throughout the year, our positions emphasized international equity markets, particularly Hong Kong and Germany, with corresponding shorts in US equities; this positioning was positive, since other markets outperformed the US market. Our currency positions also contributed to positive performance, particularly long positions in Australia, New Zealand and Canada, which benefited from strong commodity pricing, driven by robust global economies. The impact of the fixed-income overlay strategy within the GAA was essentially neutral for the year. The British bond market underperformed during the year as the Bank of England hiked rates and inflation remains stubbornly high. Bond markets in the US and Canada performed well as concerns about economic growth and inflation heightened in the first quarter of 2007. In this environment our long Japanese bond position marginally outperformed our short US bond position.
The equity portion of the portfolio underperformed the S&P 500, while the bond strategy outperformed the Citigroup Broad Investment Grade Bond Index.
Q: Do you have other comments for shareholders?
A: While the current environment involves risks including a slowing US economy and political instability in many parts of the world, we believe there is potential for global economic growth and continued market strength. During times of uncertainty with regard to geopolitical risks, economic growth and inflation, this fund, with its investments in multiple asset classes, can be a good investment because of its relatively low volatility and good risk-adjusted returns.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The 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.
Asset Allocation (Excludes Securities Lending Collateral) | 3/31/07 | 3/31/06 |
|
|
|
Common Stocks | 53% | 57% |
Bonds | 35% | 36% |
Cash Equivalents | 12% | 7% |
| 100% | 100% |
Five Largest Equity Holdings at March 31, 2007 (6.6% of Net Assets) | |
1. Johnson & Johnson Provider of health care products | 1.5% |
2. Bank of America Corp. Provider of commercial banking services | 1.5% |
3. Wells Fargo & Co. Provider of various financial services | 1.2% |
4. International Business Machines Corp. Manufacturer of companies and provider of information processing services | 1.2% |
5. JPMorgan Chase & Co. Provider of global financial services | 1.2% |
Five Largest Fixed Income Long-Term Securities at March 31, 2007 (8.2% of Net Assets) | |
1. US Treasury Note 4.625%, 12/31/2011 | 3.2% |
2. Federal National Mortgage Association 5.5%, 11/1/2034 | 1.8% |
3. US Treasury Bond 6.0%, 2/15/2026 | 1.4% |
4. US Treasury Note 4.625%, 2/29/2012 | 1.0% |
5. Federal National Mortgage Association 6.5%, 8/1/2036 | 0.8% |
Asset allocation and Portfolio holdings are subject to change.
For more complete details about the Fund's investment portfolio, see page 19. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to www.dws-scudder.com on or after the last day of the following month. In addition, the Fund's top ten holdings and other information about the Fund is posted on www.dws-scudder.com as of the calendar quarter-end on or after the 15th day following quarter-end. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. 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.
Investment Portfolio as of March 31, 2007
|
| Value ($) |
|
| |
Common Stocks 52.8% | ||
Consumer Discretionary 7.9% | ||
Hotels Restaurants & Leisure 1.3% | ||
McDonald's Corp. | 131,300 | 5,915,065 |
Starbucks Corp.* | 80,500 | 2,524,480 |
Yum! Brands, Inc. | 27,500 | 1,588,400 |
| 10,027,945 | |
Household Durables 1.0% | ||
KB HOME | 74,900 | 3,195,983 |
Lennar Corp. "A" | 76,100 | 3,212,181 |
Snap-on, Inc. | 25,000 | 1,202,500 |
| 7,610,664 | |
Media 2.4% | ||
McGraw-Hill Companies, Inc. | 102,200 | 6,426,336 |
Omnicom Group, Inc. | 30,800 | 3,153,304 |
The DIRECTV Group, Inc.* | 179,800 | 4,147,986 |
Walt Disney Co. | 136,600 | 4,703,138 |
| 18,430,764 | |
Multiline Retail 1.7% | ||
Family Dollar Stores, Inc. | 60,100 | 1,780,162 |
Kohl's Corp.* | 68,400 | 5,240,124 |
Nordstrom, Inc. | 81,800 | 4,330,492 |
Saks, Inc. | 64,100 | 1,335,844 |
| 12,686,622 | |
Specialty Retail 1.5% | ||
Dick's Sporting Goods, Inc.* | 38,300 | 2,231,358 |
Office Depot, Inc.* | 77,300 | 2,716,322 |
Ross Stores, Inc. | 92,400 | 3,178,560 |
The Sherwin-Williams Co. | 33,100 | 2,185,924 |
TJX Companies, Inc. | 44,600 | 1,202,416 |
| 11,514,580 | |
Consumer Staples 3.6% | ||
Beverages 1.0% | ||
Anheuser-Busch Companies, Inc. | 84,600 | 4,268,916 |
PepsiCo, Inc. | 49,400 | 3,139,864 |
| 7,408,780 | |
Food & Staples Retailing 0.6% | ||
Safeway, Inc. | 132,800 | 4,865,792 |
Food Products 0.2% | ||
General Mills, Inc. | 21,100 | 1,228,442 |
McCormick & Co., Inc. | 12,200 | 469,944 |
| 1,698,386 | |
Household Products 0.9% | ||
Colgate-Palmolive Co. | 97,600 | 6,518,704 |
Tobacco 0.9% | ||
Altria Group, Inc. | 67,800 | 5,953,518 |
Loews Corp.-Carolina Group | 10,200 | 771,222 |
| 6,724,740 | |
Energy 5.6% | ||
Energy Equipment & Services 1.1% | ||
Patterson-UTI Energy, Inc. | 52,800 | 1,184,832 |
Tidewater, Inc. | 64,900 | 3,801,842 |
Todco* | 37,300 | 1,504,309 |
Unit Corp.* | 36,200 | 1,831,358 |
| 8,322,341 | |
Oil, Gas & Consumable Fuels 4.5% | ||
Chevron Corp. | 49,240 | 3,641,791 |
Devon Energy Corp. | 71,800 | 4,969,996 |
ExxonMobil Corp. | 96,900 | 7,311,105 |
Marathon Oil Corp. | 47,200 | 4,664,776 |
Newfield Exploration Co.* | 81,300 | 3,391,023 |
Plains Exploration & Production Co.* | 78,100 | 3,525,434 |
Tesoro Corp. | 34,200 | 3,434,706 |
Valero Energy Corp. | 60,200 | 3,882,298 |
| 34,821,129 | |
Financials 10.4% | ||
Capital Markets 2.8% | ||
Lehman Brothers Holdings, Inc. | 43,600 | 3,055,052 |
Morgan Stanley | 100,400 | 7,907,504 |
The Bear Stearns Companies, Inc. | 18,700 | 2,811,545 |
The Goldman Sachs Group, Inc. | 36,800 | 7,603,984 |
| 21,378,085 | |
Commercial Banks 1.4% | ||
National City Corp. | 36,800 | 1,370,800 |
Wells Fargo & Co. | 265,800 | 9,151,494 |
| 10,522,294 | |
Diversified Financial Services 3.0% | ||
Bank of America Corp. | 218,052 | 11,125,013 |
Citigroup, Inc. | 24,200 | 1,242,428 |
JPMorgan Chase & Co. | 187,700 | 9,080,926 |
Moody's Corp. | 19,100 | 1,185,346 |
| 22,633,713 | |
Insurance 1.7% | ||
Chubb Corp. | 11,800 | 609,706 |
CNA Financial Corp.* | 18,700 | 805,783 |
Genworth Financial, Inc. "A" | 88,500 | 3,092,190 |
Loews Corp. | 20,000 | 908,600 |
MetLife, Inc. | 62,400 | 3,940,560 |
Philadelphia Consolidated Holding Corp.* | 15,500 | 681,845 |
Principal Financial Group, Inc. | 34,400 | 2,059,528 |
W.R. Berkley Corp. | 38,400 | 1,271,808 |
| 13,370,020 | |
Real Estate Investment Trusts 1.1% | ||
AMB Property Corp. (REIT) | 3,900 | 229,281 |
Archstone-Smith Trust (REIT) | 11,200 | 607,936 |
AvalonBay Communities, Inc. (REIT) | 3,000 | 390,000 |
Equity Residential (REIT) | 12,100 | 583,583 |
Essex Property Trust, Inc. (REIT) | 700 | 90,636 |
Hospitality Properties Trust (REIT) | 4,100 | 191,880 |
Host Hotels & Resorts, Inc. (REIT) | 30,500 | 802,455 |
ProLogis (REIT) | 19,600 | 1,272,628 |
Public Storage, Inc. (REIT) | 11,480 | 1,086,812 |
Simon Property Group, Inc. (REIT) | 13,400 | 1,490,750 |
The Macerich Co. (REIT) | 2,200 | 203,192 |
Vornado Realty Trust (REIT) | 10,500 | 1,253,070 |
| 8,202,223 | |
Thrifts & Mortgage Finance 0.4% | ||
Fannie Mae | 27,500 | 1,500,950 |
IndyMac Bancorp, Inc. | 53,500 | 1,714,675 |
| 3,215,625 | |
Health Care 7.1% | ||
Biotechnology 1.3% | ||
Amgen, Inc.* | 109,497 | 6,118,692 |
Cephalon, Inc.* | 53,800 | 3,831,098 |
| 9,949,790 | |
Health Care Equipment & Supplies 1.7% | ||
Becton, Dickinson & Co. | 61,600 | 4,736,424 |
Dade Behring Holdings, Inc. | 21,400 | 938,390 |
Kinetic Concepts, Inc.* | 56,100 | 2,840,904 |
Zimmer Holdings, Inc.* | 53,900 | 4,603,599 |
| 13,119,317 | |
Health Care Providers & Services 0.4% | ||
Laboratory Corp. of America Holdings* | 32,700 | 2,375,001 |
WellCare Health Plans, Inc.* | 9,300 | 792,825 |
| 3,167,826 | |
Life Sciences Tools & Services 0.5% | ||
Applera Corp.-Applied Biosystems Group | 59,400 | 1,756,458 |
Covance, Inc.* | 16,700 | 990,978 |
Thermo Fisher Scientific, Inc.* | 13,300 | 621,775 |
| 3,369,211 | |
Pharmaceuticals 3.2% | ||
Abbott Laboratories | 28,900 | 1,612,620 |
Endo Pharmaceuticals Holdings, Inc.* | 34,300 | 1,008,420 |
Johnson & Johnson | 185,400 | 11,172,204 |
Merck & Co., Inc. | 26,400 | 1,166,088 |
Mylan Laboratories, Inc. | 121,000 | 2,557,940 |
Pfizer, Inc. | 27,300 | 689,598 |
Schering-Plough Corp. | 248,200 | 6,331,582 |
| 24,538,452 | |
Industrials 5.4% | ||
Aerospace & Defense 2.4% | ||
Boeing Co. | 86,500 | 7,690,715 |
Honeywell International, Inc. | 41,800 | 1,925,308 |
Lockheed Martin Corp. | 37,000 | 3,589,740 |
Raytheon Co. | 69,900 | 3,666,954 |
Rockwell Collins, Inc. | 23,900 | 1,599,627 |
| 18,472,344 | |
Airlines 0.3% | ||
US Airways Group, Inc.* | 51,700 | 2,351,316 |
Commercial Services & Supplies 1.0% | ||
Avery Dennison Corp. | 14,200 | 912,492 |
R.R. Donnelley & Sons Co. | 66,900 | 2,447,871 |
Waste Management, Inc. | 115,200 | 3,964,032 |
| 7,324,395 | |
Electrical Equipment 0.6% | ||
Emerson Electric Co. | 116,400 | 5,015,676 |
Industrial Conglomerates 0.6% | ||
General Electric Co. | 125,800 | 4,448,288 |
Machinery 0.1% | ||
Manitowoc Co., Inc. | 13,000 | 825,890 |
Road & Rail 0.4% | ||
Hertz Global Holdings, Inc.* | 18,400 | 436,080 |
Ryder System, Inc. | 47,800 | 2,358,452 |
| 2,794,532 | |
Trading Companies & Distributors 0.0% | ||
United Rentals, Inc.* | 8,300 | 228,250 |
Information Technology 6.4% | ||
Communications Equipment 0.1% | ||
Cisco Systems, Inc.* | 18,600 | 474,858 |
Computers & Peripherals 3.2% | ||
Hewlett-Packard Co. | 178,700 | 7,173,018 |
International Business Machines Corp. | 96,500 | 9,096,090 |
Lexmark International, Inc. "A"* | 56,900 | 3,326,374 |
Network Appliance, Inc.* | 63,700 | 2,326,324 |
Western Digital Corp.* | 166,700 | 2,802,227 |
| 24,724,033 | |
Internet Software & Services 0.7% | ||
eBay, Inc.* | 53,800 | 1,783,470 |
Google, Inc. "A"* | 6,165 | 2,824,556 |
Yahoo!, Inc.* | 14,200 | 444,318 |
| 5,052,344 | |
IT Services 0.4% | ||
Acxiom Corp. | 24,100 | 515,499 |
Computer Sciences Corp.* | 15,600 | 813,228 |
Convergys Corp.* | 31,800 | 808,038 |
Unisys Corp.* | 117,600 | 991,368 |
| 3,128,133 | |
Semiconductors & Semiconductor Equipment 0.8% | ||
Altera Corp.* | 18,800 | 375,812 |
Fairchild Semiconductor International, Inc.* | 59,500 | 994,840 |
MEMC Electronic Materials, Inc.* | 25,400 | 1,538,732 |
National Semiconductor Corp. | 147,600 | 3,563,064 |
| 6,472,448 | |
Software 1.2% | ||
Microsoft Corp. | 302,058 | 8,418,357 |
Symantec Corp.* | 48,960 | 847,008 |
| 9,265,365 | |
Materials 2.2% | ||
Chemicals 1.1% | ||
Celanese Corp. "A" | 27,000 | 832,680 |
FMC Corp. | 20,000 | 1,508,600 |
Huntsman Corp. | 53,200 | 1,015,588 |
Lyondell Chemical Co. | 130,500 | 3,911,085 |
Monsanto Co. | 21,000 | 1,154,160 |
Westlake Chemical Corp. | 14,000 | 380,100 |
| 8,802,213 | |
Containers & Packaging 0.1% | ||
Sonoco Products Co. | 14,800 | 556,184 |
Metals & Mining 0.5% | ||
Freeport-McMoRan Copper & Gold, Inc. | 61,900 | 4,097,161 |
Paper & Forest Products 0.5% | ||
International Paper Co. | 98,150 | 3,572,660 |
Telecommunication Services 2.3% | ||
Diversified Telecommunication Services 2.1% | ||
AT&T, Inc. | 132,759 | 5,234,687 |
Citizens Communications Co. | 177,300 | 2,650,635 |
Verizon Communications, Inc. | 227,000 | 8,607,840 |
| 16,493,162 | |
Wireless Telecommunication Services 0.2% | ||
SBA Communications Corp. "A"* | 14,700 | 434,385 |
Telephone & Data Systems, Inc. | 13,800 | 822,756 |
United States Cellular Corp.* | 2,500 | 183,625 |
| 1,440,766 | |
Utilities 1.9% | ||
Electric Utilities 1.6% | ||
Duke Energy Corp. | 334,432 | 6,785,625 |
Entergy Corp. | 22,600 | 2,371,192 |
Exelon Corp. | 48,600 | 3,339,306 |
| 12,496,123 | |
Multi — Utilities 0.3% | ||
KeySpan Corp. | 5,600 | 230,440 |
PG&E Corp. | 4,900 | 236,523 |
Sempra Energy | 21,600 | 1,317,816 |
| 1,784,779 | |
Total Common Stocks (Cost $392,385,356) | 403,917,923 |
| Principal Amount ($) | Value ($) |
|
| |
Corporate Bonds 3.9% | ||
Consumer Discretionary 0.6% | ||
TCI Communications, Inc., 8.75%, 8/1/2015 (a) | 1,529,000 | 1,805,922 |
Time Warner, Inc.: |
|
|
7.625%, 4/15/2031 (a) | 87,000 | 97,772 |
7.7%, 5/1/2032 | 585,000 | 663,238 |
Viacom, Inc.: |
|
|
5.75%, 4/30/2011 | 678,000 | 687,305 |
6.875%, 4/30/2036 | 428,000 | 431,417 |
Wal-Mart Stores, Inc., 5.875%, 4/5/2027 | 774,000 | 775,834 |
| 4,461,488 | |
Energy 0.1% | ||
Arizona Public Service Co., 6.875%, 8/1/2036 | 490,000 | 521,183 |
Chesapeake Energy Corp., 6.875%, 1/15/2016 (a) | 121,000 | 122,513 |
Enterprise Products Operating LP, 7.5%, 2/1/2011 | 535,000 | 573,742 |
| 1,217,438 | |
Financials 1.4% | ||
American General Finance Corp.: |
|
|
Series H, 4.625%, 9/1/2010 | 1,305,000 | 1,280,404 |
Series J, 5.625%, 8/17/2011 | 895,000 | 908,338 |
BAC Capital Trust XI, 6.625%, 5/23/2036 (a) | 255,000 | 269,825 |
Dresdner Funding Trust I, 144A, 8.151%, 6/30/2031 | 560,000 | 666,466 |
Erac USA Finance Co., 144A, 8.0%, 1/15/2011 | 1,180,000 | 1,288,784 |
Farmers Exchange Capital, 144A, 7.2%, 7/15/2048 | 760,000 | 783,543 |
Merrill Lynch & Co., Inc.: |
|
|
6.11%, 1/29/2037 | 620,000 | 601,068 |
6.22%, 9/15/2026 | 400,000 | 400,912 |
Morgan Stanley, 5.45%, 1/9/2017 | 1,370,000 | 1,347,466 |
OneAmerica Financial Partners, 144A, 7.0%, 10/15/2033 | 682,000 | 705,473 |
The Travelers Companies, Inc., 6.25%, 3/15/2037 | 750,000 | 740,698 |
UDR, Inc., Series E (REIT), 3.9%, 3/15/2010 | 305,000 | 295,053 |
Wachovia Capital Trust III, 5.8%, 3/15/2042 | 1,610,000 | 1,629,201 |
| 10,917,231 | |
Materials 0.1% | ||
Newmont Mining Corp., 5.875%, 4/1/2035 | 421,000 | 388,277 |
Telecommunication Services 0.2% | ||
Embarq Corp., 7.082%, 6/1/2016 (a) | 1,134,000 | 1,156,164 |
Sprint Nextel Corp., 6.0%, 12/1/2016 | 550,000 | 541,258 |
| 1,697,422 | |
Utilities 1.5% | ||
Commonwealth Edison Co., Series 98, 6.15%, 3/15/2012 | 265,000 | 263,997 |
Constellation Energy Group, 7.6%, 4/1/2032 | 290,000 | 328,330 |
Dominion Resources, Inc.: |
|
|
Series 06-B, 6.3%, 9/30/2066 | 400,000 | 407,502 |
7.5%, 6/30/2066 | 1,305,000 | 1,403,775 |
Energy East Corp.: |
|
|
6.75%, 6/15/2012 (a) | 970,000 | 1,029,050 |
6.75%, 9/15/2033 | 165,000 | 173,156 |
6.75%, 7/15/2036 | 450,000 | 475,545 |
Integrys Energy Group, Inc., 6.11%, 12/1/2066 | 530,000 | 522,742 |
Nevada Power Co., Series N, 6.65%, 4/1/2036 | 1,100,000 | 1,146,319 |
Old Dominion Electric Cooperative, Series A, 6.25%, 6/1/2011 | 1,557,000 | 1,620,839 |
Pedernales Electric Cooperative, Series 2002-A, 144A, 6.202%, 11/15/2032 | 1,730,000 | 1,808,369 |
PPL Capital Funding, Inc., Series A, 6.7%, 3/30/2067 | 1,135,000 | 1,115,591 |
Westar Energy, Inc., 5.95%, 1/1/2035 | 990,000 | 948,349 |
| 11,243,564 | |
Total Corporate Bonds (Cost $29,824,638) | 29,925,420 | |
| ||
Foreign Bonds — US$ Denominated 2.4% | ||
Energy 0.6% | ||
Canadian Natural Resources Ltd., 6.5%, 2/15/2037 (a) | 920,000 | 933,200 |
SPI Electricity Property Ltd., 144A, 7.25%, 12/1/2016 | 2,875,000 | 3,247,804 |
| 4,181,004 | |
Financials 1.5% | ||
ChinaTrust Commercial Bank, 144A, 5.625%, 12/29/2049 | 713,000 | 696,257 |
Corp. Andina de Fomento, 5.75%, 1/12/2017 | 755,000 | 758,285 |
Lloyds TSB Group PLC, 144A, 6.267%, 12/31/2049 | 925,000 | 909,058 |
Mizuho Financial Group (Cayman), 8.375%, 4/27/2049 | 1,340,000 | 1,416,246 |
MUFG Capital Finance 1 Ltd., 6.346%, 7/29/2049 | 2,230,000 | 2,277,860 |
Oil Insurance Ltd., 144A, 7.558%, 12/29/2049 | 2,055,000 | 2,162,805 |
SMFG Preferred Capital, 144A, 6.078%, 1/29/2049 | 1,195,000 | 1,197,318 |
Stoneheath Re, 6.868%, 12/29/2049 | 1,460,000 | 1,475,330 |
TNK-BP Finance SA: |
|
|
144A, 6.125%, 3/20/2012 | 165,000 | 163,763 |
144A, 6.625%, 3/20/2017 | 245,000 | 243,163 |
White Mountains RE Group, 144A, 6.375%, 3/20/2017 | 530,000 | 523,272 |
| 11,823,357 | |
Information Technology 0.0% | ||
Seagate Technology HDD Holdings: |
|
|
6.375%, 10/1/2011 | 115,000 | 115,000 |
6.8%, 10/1/2016 | 175,000 | 175,875 |
| 290,875 | |
Materials 0.2% | ||
Celulosa Arauco y Constitucion SA, 5.625%, 4/20/2015 (a) | 1,042,000 | 1,025,128 |
Sappi Papier Holding AG, 144A, 6.75%, 6/15/2012 | 499,000 | 503,272 |
| 1,528,400 | |
Telecommunication Services 0.1% | ||
Telecom Italia Capital: |
|
|
4.95%, 9/30/2014 | 166,000 | 156,371 |
5.25%, 11/15/2013 | 562,000 | 544,882 |
| 701,253 | |
Total Foreign Bonds — US$ Denominated (Cost $17,719,714) | 18,524,889 | |
| ||
Asset Backed 1.6% | ||
Home Equity Loans | ||
Advanta Mortgage Loan Trust, "A6", Series 2000-2, 7.72%, 3/25/2015 | 885,361 | 882,132 |
Bayview Financial Acquisition Trust, "1A1", Series 2006-A, 5.614%, 2/28/2041 | 571,394 | 568,872 |
Countrywide Asset-Backed Certificates: |
|
|
"AF3", Series 2005-1, 4.575%, 7/25/2035 | 1,248,505 | 1,240,087 |
"A6", Series 2006-S6, 5.657%, 3/25/2034 | 1,320,000 | 1,319,414 |
"A6", Series 2006-15, 5.826%, 10/25/2046 | 450,000 | 452,409 |
"A1B", Series 2007-S1, 5.888%, 11/25/2036 | 913,207 | 912,012 |
"1AF6", Series 2006-11, 6.15%, 9/25/2046 | 1,295,000 | 1,324,210 |
Credit-Based Asset Servicing and Securitization, "A2A", Series 2007-CB2, 5.891%, 2/25/2037 | 1,690,258 | 1,689,754 |
Household Home Equity Loan Trust: |
|
|
"A1F", Series 2006-4, 5.79%, 3/20/2036 | 1,208,887 | 1,207,206 |
"A1F", Series 2006-3, 5.98%, 3/20/2036 | 576,021 | 575,479 |
Merrill Lynch Mortgage Investors, Inc., "N1", Series 2005-NC1N, 144A, 5.0%, 10/25/2035 | 23,549 | 23,444 |
Novastar NIM Trust, "NOTE", Series 2005-N1, 144A, 4.777%, 10/26/2035 | 13,081 | 13,062 |
Renaissance Home Equity Loan Trust, "AF2", Series 2005-3, 4.723%, 11/25/2035 | 1,459,882 | 1,452,091 |
Residential Asset Securities Corp., "AI1", Series 2006-KS3, 5.39%**, 4/25/2036 | 697,177 | 697,324 |
Total Asset Backed (Cost $12,376,002) | 12,357,496 | |
| ||
US Government Agency Sponsored Pass-Throughs 3.8% | ||
Federal Home Loan Mortgage Corp.: |
|
|
5.5%, 10/1/2023 (g) | 988,780 | 986,059 |
6.0%, 12/1/2025 | 1,115,042 | 1,129,270 |
6.5%, 1/1/2035 | 970,114 | 997,130 |
Federal National Mortgage Association: |
|
|
4.5%, with various maturities from 6/1/2019 until 10/1/2033 | 3,837,796 | 3,671,414 |
5.5%, with various maturities from 11/1/2024 until 11/1/2034 (g) | 13,885,822 | 13,779,555 |
6.0%, with various maturities from 1/1/2024 until 4/1/2024 | 2,029,659 | 2,061,035 |
6.5%, with various maturities from 5/1/2023 until 8/1/2036 | 5,960,152 | 6,099,718 |
9.0%, 11/1/2030 | 59,984 | 65,465 |
Total US Government Agency Sponsored Pass-Throughs (Cost $28,843,793) | 28,789,646 | |
| ||
Commercial and Non-Agency Mortgage-Backed Securities 10.1% | ||
Adjustable Rate Mortgage Trust, "1A4", Series 2006-2, 5.768%**, 5/25/2036 | 1,345,000 | 1,369,873 |
Banc of America Commercial Mortgage, Inc., "A4", Series 2005-5, 5.115%, 10/10/2045 | 2,060,000 | 2,029,018 |
Banc of America Mortgage Securities, "1A11", Series 2003-2, 5.5%, 4/25/2033 | 1,265,000 | 1,264,729 |
Bear Stearns Adjustable Rate Mortgage Trust: |
|
|
"A1", Series 2006-1, 4.625%**, 2/25/2036 | 3,065,493 | 3,010,724 |
"2A1", Series 2006-4, 5.83%**, 10/25/2036 | 1,171,594 | 1,179,392 |
Chase Mortgage Finance Corp., "3A1", Series 2005-A1, 5.27%**, 12/25/2035 | 1,186,343 | 1,181,273 |
Citicorp Mortgage Securities, Inc.: |
|
|
"1A1", Series 2003-5, 5.5%, 4/25/2033 | 537,228 | 534,380 |
"1A1", Series 2004-8, 5.5%, 10/25/2034 | 969,526 | 968,827 |
Citigroup Commercial Mortgage Trust, "ASB", Series 2006-C5, 5.413%, 10/15/2049 | 1,000,000 | 1,005,340 |
Citigroup Mortgage Loan Trust, Inc.: |
|
|
"1A2", Series 2006-AR2, 5.54%**, 3/25/2036 | 2,360,598 | 2,361,693 |
"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 1,272,079 | 1,297,521 |
Citigroup/Deutsche Bank Commercial Mortgage Trust, "A4", Series 2007-CD4, 5.322%, 12/11/2049 | 1,300,000 | 1,306,411 |
CitiMortgage Alternative Loan Trust, "A1", Series 2006-A2, 6.0%, 5/25/2036 | 1,234,079 | 1,248,193 |
Countrywide Alternative Loan Trust: |
|
|
"A2", Series 2003-21T1, 5.25%, 12/25/2033 | 957,193 | 948,751 |
"A6", Series 2004-14T2, 5.5%, 8/25/2034 | 933,832 | 929,623 |
"1A1", Series 2004-J1, 6.0%, 2/25/2034 | 227,174 | 226,351 |
Countrywide Home Loans: |
|
|
"2A2C", Series 2006-HYB1, 5.247%**, 3/20/2036 | 1,315,000 | 1,314,762 |
"2A1", Series 2006-HYB1, 5.367%**, 3/20/2036 | 1,017,583 | 1,014,980 |
Credit Suisse Mortgage Capital Certificates, Inc., "3A1", Series 2006-9, 6.0%, 11/25/2036 | 517,558 | 524,361 |
First Horizon Mortgage Pass-Through Trust, "1A2", Series 2006-AR4, 5.522%**, 1/25/2037 | 2,208,216 | 2,207,885 |
GMAC Mortgage Corp. Loan Trust: |
|
|
"A2", Series 2004-J1, 5.25%, 4/25/2034 | 825,022 | 821,494 |
"A1", Series 2006-J1, 5.75%, 4/25/2036 | 1,829,907 | 1,837,650 |
GSR Mortgage Loan Trust, "1A2", Series 2005-3F, 5.5%, 3/25/2035 | 1,955,000 | 1,954,512 |
Indymac Inda Mortgage Loan Trust: |
|
|
"2A1", Series 2005-AR2, 4.999%**, 1/25/2036 | 1,306,552 | 1,292,853 |
"1A1", Series 2006-AR3, 5.386%**, 12/25/2036 | 1,483,555 | 1,478,803 |
JPMorgan Mortgage Trust: |
|
|
"3A3", Series 2004-A3, 4.981%**, 7/25/2034 | 1,380,000 | 1,352,954 |
"2A1R", Series 2006-A7, 5.483%**, 1/25/2037 | 1,988,587 | 1,987,755 |
"2A4", Series 2006-A2, 5.763%**, 4/25/2036 | 2,000,000 | 2,038,211 |
Lehman Mortgage Trust: |
|
|
"3A3", Series 2006-1, 5.5%, 2/25/2036 | 1,299,694 | 1,308,542 |
"1A10", Series 2006-3, 6.0%, 7/25/2036 | 1,240,683 | 1,254,395 |
Master Adjustable Rate Mortgages Trust, "B1", Series 2004-13, 3.814%**, 12/21/2034 | 1,382,951 | 1,339,783 |
Master Alternative Loans Trust, "8A1", Series 2004-3, 7.0%, 4/25/2034 | 83,188 | 83,983 |
Master Asset Securitization Trust, "2A7", Series 2003-9, 5.5%, 10/25/2033 | 1,080,026 | 1,058,932 |
Merrill Lynch Mortgage Investors Trust, "A2", Series 2005-A5, 4.566%, 6/25/2035 | 175,000 | 172,064 |
Mortgage Capital Funding, Inc.: |
|
|
"A2", Series 1998-MC3, 6.337%, 11/18/2031 | 720,203 | 724,577 |
"E", Series 1997-MC2, 7.214%, 11/20/2027 | 1,925,000 | 1,930,442 |
Residential Accredit Loans, Inc.: |
|
|
"A3", Series 2004-QS11, 5.5%, 8/25/2034 | 673,245 | 670,425 |
"CB", Series 2004-QS2, 5.75%, 2/25/2034 | 744,904 | 732,683 |
"CB1", Series 2002-QS17, 6.0%, 11/25/2032 | 869,892 | 872,285 |
Residential Funding Mortgage Security I, "2A2", Series 2007-SA1, 5.647%**, 2/25/2037 | 710,732 | 712,424 |
Structured Adjustable Rate Mortgage Loan Trust: |
|
|
"6A3", Series 2005-21, 5.4%, 11/25/2035 | 1,190,000 | 1,181,228 |
"5A1", Series 2005-18, 5.541%**, 9/25/2035 | 1,001,037 | 1,003,305 |
"2A1", Series 2006-1, 5.619%**, 2/25/2036 | 616,289 | 618,464 |
Structured Asset Securities Corp., "4A1", Series 2005-6, 5.0%, 5/25/2035 | 385,014 | 369,252 |
Wachovia Bank Commercial Mortgage Trust: |
|
|
"APB", Series 2005-C22, 5.271%**, 12/15/2044 | 1,300,000 | 1,307,307 |
"A5", Series 2007-C30, 5.342%, 12/15/2043 | 1,300,000 | 1,300,364 |
Washington Mutual: |
|
|
"1A3", Series 2005-AR14, 5.065%**, 12/25/2035 | 1,325,000 | 1,317,214 |
"1A3", Series 2005-AR16, 5.113%**, 12/25/2035 | 1,305,000 | 1,297,963 |
"1A1", Series 2006-AR18, 5.364%**, 1/25/2037 | 1,972,993 | 1,965,495 |
"2A2", Series 2006-AR18, 5.506%**, 1/25/2037 | 1,385,000 | 1,382,226 |
"1A1", Series 2006-AR16, 5.624%**, 12/25/2036 | 1,873,067 | 1,877,017 |
"1A2", Series 2006-AR12, 5.829%**, 10/25/2036 | 1,315,000 | 1,333,046 |
"1A4", Series 2006-AR8, 5.917%**, 8/25/2046 | 1,105,860 | 1,115,141 |
Wells Fargo Mortgage Backed Securities Trust: |
|
|
"4A4", Series 2005-AR16, 4.999%**, 10/25/2035 | 679,422 | 675,497 |
"2A5", Series 2006-AR2, 5.09%**, 3/25/2036 | 4,138,546 | 4,103,424 |
"3A2", Series 2006-AR8, 5.238%, 4/25/2036 | 2,070,000 | 2,067,190 |
"A1", Series 2006-3, 5.5%, 3/25/2036 | 1,874,131 | 1,874,132 |
"A6", Series 2006-AR11, 5.529%**, 8/25/2036 | 1,995,000 | 2,016,817 |
"1A3", Series 2006-6, 5.75%, 5/25/2036 | 1,340,305 | 1,347,320 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $77,477,802) | 77,701,256 | |
| ||
Collateralized Mortgage Obligations 3.9% | ||
Fannie Mae Whole Loan, "A23", Series 2004-W10, 5.0%, 8/25/2034 | 2,055,000 | 2,042,403 |
Federal Home Loan Mortgage Corp.: |
|
|
"LN", Series 3145, 4.5%, 10/15/2034 | 1,380,000 | 1,340,761 |
"BG", Series 2640, 5.0%, 2/15/2032 | 2,330,000 | 2,265,136 |
"BG", Series 2869, 5.0%, 7/15/2033 | 315,000 | 304,756 |
"DG", Series 2662, 5.0%, 10/15/2022 | 915,000 | 890,296 |
"KD", Series 2915, 5.0%, 9/15/2033 | 1,460,000 | 1,409,929 |
"NE", Series 2802, 5.0%, 2/15/2033 | 880,000 | 853,440 |
"NE", Series 2921, 5.0%, 9/15/2033 | 2,080,000 | 2,008,591 |
"PD", Series 2783, 5.0%, 1/15/2033 | 1,385,000 | 1,341,127 |
"PD", Series 2844, 5.0%, 12/15/2032 | 1,175,000 | 1,137,457 |
"PE", Series 2864, 5.0%, 6/15/2033 | 2,080,000 | 2,014,567 |
"TE", Series 2780, 5.0%, 1/15/2033 | 875,000 | 848,865 |
"XD", Series 2941, 5.0%, 5/15/2033 | 2,010,000 | 1,937,892 |
"PE", Series 2378, 5.5%, 11/15/2016 | 1,331,737 | 1,343,126 |
"PE", Series 2512, 5.5%, 2/15/2022 | 1,725,000 | 1,744,686 |
"YA", Series 2841, 5.5%, 7/15/2027 | 1,420,547 | 1,423,287 |
Federal National Mortgage Association: |
|
|
"YD", Series 2005-94, 4.5%, 8/25/2033 | 1,445,000 | 1,353,962 |
"HE", Series 2005-22, 5.0%, 10/25/2033 | 1,290,000 | 1,242,016 |
"PE", Series 2005-44, 5.0%, 7/25/2033 | 595,000 | 573,008 |
"VD", Series 2002-56, 6.0%, 4/25/2020 | 6,895 | 6,878 |
"A2", Series 1998-M1, 6.25%, 1/25/2008 | 266,745 | 266,874 |
Government National Mortgage Association: |
|
|
"JG", Series 2006-50, 5.0%, 9/20/2036 | 1,395,000 | 1,332,808 |
"QE", Series 2004-11, 5.0%, 12/16/2032 | 1,955,000 | 1,871,088 |
Total Collateralized Mortgage Obligations (Cost $29,779,746) | 29,552,953 | |
| ||
Municipal Bonds and Notes 1.8% | ||
California, Urban Industrial Development Agency, Tax Allocation Civic Recreation, Series 1A, 4.5%, 5/1/2010 (b) | 2,550,000 | 2,502,085 |
Gainesville, FL, Utilites Systems Revenue, Series B, 5.31%, 10/1/2021 (b) | 1,390,000 | 1,383,467 |
Hammond, IN, Redevelopment Authority Lease Rent Revenue, Hammond Marina Project: |
|
|
5.42%, 2/1/2010 (b) | 1,090,000 | 1,096,050 |
5.57%, 2/1/2014 (b) | 610,000 | 617,344 |
Hudson County, NJ, Improvement Authority Lease Revenue, Weehawken Pershing Road, 5.72%, 3/1/2034 (b) | 880,000 | 878,152 |
Los Angeles, CA, Community Redevelopment Agency, Finance Authority Revenue, Pooled Financing, Series L, 6.15%, 9/1/2026 (b) | 1,190,000 | 1,216,799 |
Mount Laurel Township, NJ, Municipal Utilities Authority System Revenue, Series B, 3.9%, 7/1/2010 (b) | 950,000 | 918,926 |
San Diego, CA, Redevelopment Agency, Taxable Housing Allocation, 5.81%, 9/1/2019 (b) | 2,300,000 | 2,343,539 |
Suffolk, VA, Multi-Family Housing Revenue, Redevelopment & Housing Authority, Windsor at Potomac, Series T, 6.6%, 7/1/2015 | 1,825,000 | 1,915,848 |
Washington, State Economic Development Finance Authority Revenue, CSC Tacoma LLC Project, Series A, 3.8%, 10/1/2011 (b) | 1,105,000 | 1,050,844 |
Total Municipal Bonds and Notes (Cost $13,872,515) | 13,923,054 | |
| ||
US Treasury Obligations 7.3% | ||
US Treasury Bills: |
|
|
4.487%***, 4/19/2007 (c) | 500,000 | 498,878 |
4.97%***, 4/19/2007 (c) | 6,280,000 | 6,264,394 |
5.025%***, 4/19/2007 (c) | 200,000 | 199,498 |
5.04%***, 4/19/2007 (c) | 300,000 | 299,244 |
US Treasury Bonds: |
|
|
6.0%, 2/15/2026 (a) | 9,652,000 | 10,909,019 |
8.125%, 8/15/2019 (a) | 2,007,000 | 2,621,018 |
US Treasury Notes: |
|
|
3.375%, 2/15/2008 (a) | 525,000 | 518,007 |
4.0%, 2/15/2015 (a) | 626,000 | 600,129 |
4.625%, 12/31/2011 (a) | 24,631,000 | 24,712,775 |
4.625%, 2/29/2012 (a) | 7,805,000 | 7,833,964 |
4.75%, 3/31/2011 (a) | 1,548,000 | 1,559,731 |
Total US Treasury Obligations (Cost $56,076,936) | 56,016,657 |
|
| Value ($) |
|
| |
Preferred Stocks 0.0% | ||
Arch Capital Group Ltd. Series A, 8.0% (Cost $20,498) | 809 | 21,615 |
| ||
Securities Lending Collateral 6.9% | ||
Daily Assets Fund Institutional, 5.35% (d) (e) (Cost $52,915,920) | 52,915,920 | 52,915,920 |
| ||
Cash Equivalents 11.4% | ||
Cash Management QP Trust, 5.33% (f) (Cost $87,035,685) | 87,035,685 | 87,035,685 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $798,328,605)+ | 105.9 | 810,682,514 |
Other Assets and Liabilities, Net | (5.9) | (45,030,185) |
Net Assets | 100.0 | 765,652,329 |
** Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of March 31, 2007.
*** Annualized yield at time of purchase; not a coupon rate
+ The cost for federal income tax purposes was $803,068,854. At March 31, 2007, net unrealized appreciation for all securities based on tax cost was $7,613,660. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $21,371,108 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $13,757,448.
(a) All or a portion of these securities were on loan (See Notes to Financial Statements). The value of all securities loaned at March 31, 2007 amounted to $51,740,142 which is 6.8% of net assets.
(b) Bond is insured by one of these companies
Insurance Coverage | As a % of Total Investment Portfolio | |
AMBAC | American Municipal Bond Assurance Corp. | 0.1 |
FSA | Financial Security Assurance, Inc. | 0.2 |
MBIA | Municipal Bond Insurance Association | 0.9 |
XLCA | XL Capital Assurance | 0.3 |
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
(f) Cash Management QP Trust, an affiliated fund, is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(g) Mortgage dollar rolls included.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
REIT: Real Estate Investment Trust
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association and Federal Home Loan Mortgage Corp. issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
At March 31, 2007, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ |
10 Year Japan Government Bond | 6/11/2007 | 32 | 36,462,406 | 36,429,056 | (33,350) |
CAC 40 10 Euro Index | 4/20/2007 | 1 | 73,248 | 75,423 | 2,175 |
DAX Index | 6/15/2007 | 21 | 4,715,414 | 4,887,508 | 172,094 |
DJ Euro Stock 50 Index | 6/15/2007 | 62 | 3,294,689 | 3,404,013 | 109,324 |
EOE Dutch Stock Index | 4/20/2007 | 291 | 37,815,399 | 39,747,885 | 1,932,486 |
Hang Seng Index | 4/27/2007 | 21 | 2,663,227 | 2,671,261 | 8,034 |
S&P/MIB 30 Index | 6/15/2007 | 15 | 3,992,137 | 4,110,444 | 118,307 |
S&P 500 Index | 6/14/2007 | 45 | 15,859,022 | 16,101,000 | 241,978 |
S&P/TSE 60 Index | 6/14/2007 | 172 | 22,391,808 | 22,532,075 | 140,267 |
Share Price Index 200 | 6/21/2007 | 17 | 2,037,471 | 2,074,897 | 37,426 |
Total net unrealized appreciation | 2,728,741 |
At March 31, 2007, open futures contracts sold were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Depreciation ($) |
10 Year US Treasury Note | 6/20/2007 | 621 | 66,815,783 | 67,145,626 | (329,843) |
S&P 500 Index | 6/14/2007 | 23 | 8,161,452 | 8,229,400 | (67,948) |
Total net unrealized depreciation | (397,791) |
As of March 31, 2007, the Fund had the following open forward foreign currency exchange contracts:
Contracts to Deliver |
| In Exchange For |
| Settlement Date | Unrealized Appreciation ($) | ||
USD | 6,983,528 | | AUD | 8,930,000 | | 6/20/2007 | 223,875 |
USD | 148,667 | | GBP | 77,000 | | 6/20/2007 | 2,801 |
USD | 834,306 | | HKD | 6,502,000 | | 6/20/2007 | 50 |
USD | 10,269,876 | | NZD | 15,014,000 | | 6/20/2007 | 395,459 |
USD | 227,456 | | SGD | 347,000 | | 6/20/2007 | 2,444 |
Total unrealized appreciation | 624,629 |
Currency Abbreviations |
AUD Australian Dollars GBP Pound Sterling HKD Hong Kong Dollar NZD New Zealand Dollar SGD Singapore Dollar USD US Dollars |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of March 31, 2007 | |
Assets | |
Investments: Investments in securities, at value (cost $658,377,000) — including $51,740,142 of securities loaned | $ 670,730,909 |
Investment in Daily Assets Fund Institutional (cost $52,915,920)* | 52,915,920 |
Investment in Cash Management QP Trust (cost $87,035,685) | 87,035,685 |
Total investments in securities, at value (cost $798,338,605) | 810,682,514 |
Cash | 2,646,757 |
Foreign currency, at value (cost $9,808,825) | 9,919,203 |
Receivable for investments sold | 22,746,022 |
Dividends receivable | 227,754 |
Interest receivable | 2,449,408 |
Receivable for Fund shares sold | 1,468,361 |
Unrealized appreciation on forward foreign currency exchange contracts | 624,629 |
Receivable for daily variation margin on open futures contracts | 7,574 |
Foreign taxes recoverable | 4,444 |
Due from Advisor | 70,963 |
Other assets | 49,389 |
Total assets | 850,897,018 |
Liabilities | |
Payable for investments purchased | 28,270,146 |
Payable upon return of securities loaned | 52,915,920 |
Payable for Fund shares redeemed | 1,273 |
Payable for investments purchased — mortgage dollar rolls | 3,094,988 |
Accrued management fee | 242,381 |
Other accrued expenses and payables | 719,981 |
Total liabilities | 85,244,689 |
Net assets, at value | $ 765,652,329 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of as of March 31, 2007 (continued) | |
Net Assets | |
Net assets consist of: Undistributed net investment income | 4,325,377 |
Net unrealized appreciation (depreciation) on: Investments | 12,353,909 |
Futures | 2,330,950 |
Foreign currency related transactions | 735,007 |
Accumulated net realized gain (loss) | 57,434,447 |
Paid-in capital | 688,472,639 |
Net assets, at value | $ 765,652,329 |
Net Asset Value | |
Class S* Net Asset Value and redemption price(a) per share ($5,136,315 ÷ 433,321 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized) | $ 11.85 |
Institutional Class Net Asset Value and redemption price(a) per share ($760,516,014 ÷ 61,893,524 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized) | $ 12.29 |
* On October 23, 2006, Investment Class was renamed Class S.
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the year ended March 31, 2007 | |
Investment Income | |
Income: Dividends | $ 7,758,167 |
Interest | 14,514,748 |
Interest — Cash Management QP Trust | 3,249,798 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates | 33,859 |
Total Income | 25,556,572 |
Expenses: Management fee | 4,499,191 |
Administration fee | 631,408 |
Services to shareholders | 955,498 |
Administrator service fee | 302,198 |
Auditing | 86,559 |
Legal | 54,276 |
Trustees' fees and expenses | 27,249 |
Custodian fees | 40,283 |
Reports to shareholders and shareholder meeting | 56,914 |
Registration fees | 36,396 |
Other | 64,370 |
Total expenses before expense reductions | 6,754,342 |
Expense reductions | (2,532,331) |
Total expenses after expense reductions | 4,222,011 |
Net investment income | 21,334,561 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 85,812,865 |
Futures | 6,918,048 |
Foreign currency related transactions | 1,019,005 |
| 93,749,918 |
Net unrealized appreciation (depreciation) during the period on: Investments | (43,064,729) |
Futures | 773,304 |
Foreign currency related transactions | 1,276,061 |
| (41,015,364) |
Net gain (loss) on investment transactions | 52,734,554 |
Net increase (decrease) in net assets resulting from operations | $ 74,069,115 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended March 31, | |
2007 | 2006 | |
Operations: Net investment income | $ 21,334,561 | $ 17,905,080 |
Net realized gain (loss) on investment transactions | 93,749,918 | 46,933,938 |
Net unrealized appreciation (depreciation) during the period on investment transactions | (41,015,364) | 2,248,088 |
Net increase (decrease) in net assets resulting from operations | 74,069,115 | 67,087,106 |
Distributions to shareholders from: Net investment income Class S* | (531,935) | (837,033) |
Institutional Class | (18,648,813) | (19,064,819) |
Net realized gains Class S* | (899,280) | — |
Institutional Class | (19,732,118) | — |
Fund share transactions: Proceeds from shares sold | 62,454,436 | 57,831,771 |
Reinvestment of distributions | 39,808,921 | 19,896,122 |
Cost of shares redeemed | (128,188,418) | (142,822,716) |
Redemption fees | 63,097 | 97,772 |
Net increase (decrease) in net assets from Fund share transactions | (25,861,964) | (64,997,051) |
Increase (decrease) in net assets | 8,395,005 | (17,811,797) |
Net assets at beginning of period | 757,257,324 | 775,069,121 |
Net assets at end of period (including undistributed net investment income of $4,325,377 and $591,995, respectively) | $ 765,652,329 | $ 757,257,324 |
The accompanying notes are an integral part of the financial statements.
Class S+ Years Ended March 31, | 2007 | 2006 | 2005 | 2004a |
Selected Per Share Data | ||||
Net asset value, beginning of period | $ 11.30 | $ 10.62 | $ 10.43 | $ 9.75 |
Income (loss) from investment operations: Net investment incomeb | .33 | .22 | .21 | .11 |
Net realized and unrealized gain (loss) on investment transactions | .80 | .70 | .30 | .93 |
Total from investment operations | 1.13 | .92 | .51 | 1.04 |
Less distributions from: Net investment income | (.25) | (.24) | (.32) | (.36) |
Net realized gains on investment transactions | (.33) | — | — | — |
Total distributions | (.58) | (.24) | (.32) | (.36) |
Redemption fees | .00*** | .00*** | .00*** | — |
Net asset value, end of period | $ 11.85 | $ 11.30 | $ 10.62 | $ 10.43 |
Total Return (%)c | 10.16 | 8.77 | 4.92 | 10.79** |
Ratios to Average Net Assets and Supplemental Data | ||||
Net assets, end of period ($ millions) | 5 | 31 | 56 | 69 |
Ratio of expenses before expense reductions (%) | .93 | 1.41 | 1.33d | 1.41d* |
Ratio of expenses after expense reductions (%) | .71 | 1.00 | 1.00d | 1.00d* |
Ratio of net investment income (%) | 2.67 | 1.92 | 1.90 | 1.65* |
Portfolio turnover rate (%)f | 174 | 101 | 106e | 115d,e** |
+ On October 23, 2006, Investment Class was renamed Class S. a For the period from July 25, 2003 (commencement of operations of Investment Class shares) to March 31, 2004. b Based on average shares outstanding during the period. c Total return would have been lower had certain expenses not been reduced. d The ratio includes expenses allocated from the Asset Management Portfolio, the Fund's master portfolio through August 20, 2004. e This ratio includes the purchase and sales of portfolio securities of the DWS Lifecycle Long Range Fund as a stand-alone fund in addition to the Asset Management Portfolio. The 2004 ratio represents the Asset Management Portfolio only. f The portfolio turnover rate including mortgage dollar roll transactions was 175%, 108%, 122% and 124% for the years ended March 31, 2007, 2006, 2005 and 2004, respectively. * Annualized ** Not annualized *** Amount is less than $.005. |
Institutional Class Years Ended March 31, | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.74 | $ 11.04 | $ 10.84 | $ 9.17 | $ 10.92 |
Income (loss) from investment operations: Net investment incomea | .34 | .27 | .25 | .21 | .25 |
Net realized and unrealized gain (loss) on investment transactions | .85 | .74 | .33 | 1.94 | (1.53) |
Total from investment operations | 1.19 | 1.01 | .58 | 2.15 | (1.28) |
Less distributions from: Net investment income | (.31) | (.31) | (.38) | (.48) | (.47) |
Net realized gain on investment transactions | (.33) | — | — | — | — |
Total distributions | (.64) | (.31) | (.38) | (.48) | (.47) |
Redemption fees | .00* | .00* | .00* | — | — |
Net asset value, end of period | $ 12.29 | $ 11.74 | $ 11.04 | $ 10.84 | $ 9.17 |
Total Return (%)b | 10.28 | 9.19 | 5.42 | 23.71 | (11.88) |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 761 | 726 | 719 | 702 | 548 |
Ratio of expenses before expense reductions (%) | .89 | .91 | .83c | .91c | .93c |
Ratio of expenses after expense reductions (%) | .55 | .55 | .55c | .55c | .55c |
Ratio of net investment income (%) | 2.83 | 2.37 | 2.35 | 2.08 | 2.61 |
Portfolio turnover rate (%) | 174e | 101e | 106d,e | 115d,e | 133d |
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. c The ratio includes expenses allocated from the Asset Management Portfolio, the Fund's master portfolio through August 20, 2004. d This ratio includes the purchase and sales of portfolio securities of the DWS Lifecycle Long Range Fund as a stand-alone fund in addition to the Asset Management Portfolio. The 2004 and 2003 ratios represent the Asset Management Portfolio only. e The portfolio turnover rate including mortgage dollar roll transactions was 175%, 108%, 122% and 124% for the years ended March 31, 2007, 2006, 2005 and 2004, respectively. * Amount is less than $.005. |
A. Significant Accounting Policies
DWS Lifecycle Long Range Fund (the "Fund") is a diversified series of DWS Advisor Funds (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. On July 10, 2006, the Fund became a series of the Trust, an open-end management investment company. Prior to July 10, 2006, the Fund was a series of DWS Advisor Funds III, an open-end management investment company.
The Fund offers two classes of shares: Class S and Institutional Class. Institutional Class shares are offered to a limited group of investors and are not subject to initial or contingent deferred sales charges. 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. Institutional Class shares have lower ongoing expenses than Class S shares. On October 23, 2006, Investment Class was renamed Class S.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of both classes of shares except that each class bears certain expenses unique to that class such as administrator service fees and services to shareholders. 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 values determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Debt securities are valued by independent pricing services approved by the Trustees of the Fund. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, obtained from a broker-dealer. 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.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Cash Management QP Trust are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.
In September 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007. As of March 31, 2007, management does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.
Securities Lending. The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to the lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
Foreign Currency Translations. The books and records of the Fund are maintained in US dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into US dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into US dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the disposition of forward foreign currency exchange contracts and foreign currencies, and the difference between the amount of net investment income accrued and the US dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may enter into futures contracts as a hedge against anticipated interest rate, currency or equity market changes, and for duration management, risk management and return enhancement purposes.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The Fund may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated Fund holdings, to facilitate transactions in foreign currency denominated securities and to enhance the total returns.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. Sales and purchases of forward currency contracts having the same settlement date and broker are offset and any gain (loss) is realized on the date of offset; otherwise, gain (loss) is realized on settlement date. Realized and unrealized gains and losses which represent the difference between the value of a forward currency contract to buy and a forward currency contract to sell are included in net realized and unrealized gain (loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
Mortgage Dollar Rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities at an agreed upon price and date. During the period between the sale and repurchase, the Fund will not be entitled to earn interest and receive principal payment on securities sold. The Fund receives compensation as consideration for entering into the commitment to repurchase. The compensation is paid in the form of a lower price for the security upon its repurchase or, alternatively, a fee. Mortgage dollar rolls may be renewed with a new sale and repurchase price and a cash settlement made at each renewal without physical delivery of the securities subject to the contract.
Certain risks may arise upon entering into mortgage dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of the securities sold by the Fund may decline below the repurchase price of those securities.
When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time the Fund enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
At March 31, 2007, the Fund had a net tax basis capital loss carryforward of approximately $12,916,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until March 31, 2010 ($6,029,000), March 31, 2011 ($4,331,000), March 31, 2012 ($2,301,000) and March 31, 2013 ($255,000), the respective expiration dates, whichever occurs first, which may be subject to certain limitations under Sections 382-383 of the Internal Revenue Code. During the year ended March 31, 2007 the Fund utilized approximately $2,590,000 of a prior year capital loss carryforward.
In July 2006, FASB issued Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109" (the "Interpretation"). The Interpretation establishes for the Fund a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether the Fund is taxable in certain jurisdictions), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal years beginning after December 15, 2006. On December 22, 2006, the SEC indicated that they would not object if a Fund implements FIN 48 in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006. Management has begun to evaluate the application of the Interpretation to the Fund and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements.
Distribution of Income and Gains. Net investment income of the Fund is declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments, forward foreign currency contracts, recognition of certain foreign currency gains (losses) as ordinary income (loss), futures and certain securities sold at a loss. As a result net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At March 31, 2007, each Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income* | $ 18,807,765 |
Undistributed net long-term capital gains | $ 61,332,679 |
Capital loss carryforward** | $ (12,916,000) |
Net unrealized appreciation (depreciation) on investments | $ 7,613,660 |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| Years Ended March 31, | |
| 2007 | 2006 |
Distributions from ordinary income* | $ 21,994,120 | $ 19,901,852 |
Distributions from long-term capital gains* | $ 17,818,026 | $ — |
** Subject to certain limitations under Section 382-384 of the Internal Revenue Code.
Redemption Fees. The Fund imposes a redemption fee of 2% of the total redemption amount on the Fund shares redeemed or exchanged within 15 days of buying them, either by purchase or exchange. This fee is assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee is accounted for as an addition to paid-in capital.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for financial reporting purposes.
B. Purchases and Sales of Securities
During the year ended March 31, 2007, purchases and sales of investment securities (excluding short-term investments, US Treasury obligations and mortgage dollar roll transactions) aggregated $792,293,550 and $840,314,090, respectively. Purchases and sales of US Treasury obligations aggregated $371,653,989 and $383,948,127, respectively. Purchases and sales of mortgage dollar roll transactions aggregated $7,248,938 and $4,161,352, respectively.
C. Related Parties
DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG. Deutsche Investment Management, Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, is the Advisor for the Fund. Prior to January 1, 2007, Deutsche Asset Management, Inc. ("DAMI"), an indirect, wholly owned subsidiary of Deutsche Bank AG, was the Advisor for the Fund. Effective January 1, 2007, DAMI merged with DIMA. The Board of the Fund approved a new investment management agreement between the Fund and DIMA. The new investment management agreement is identical in substance to the previous investment management agreement for the Fund, except for the named investment advisor.
For the period from April 1, 2006 through January 21, 2007, Northern Trust Investments, N.A. ("NTI") served as sub-advisor to the passive equity portion of the Fund's portfolio and was paid by the Advisor for its services. Effective January 22, 2007, NTI no longer serves as a subadvisor to the Fund. The management of the Fund's assets allocated to US equities was assumed by the Advisor and the Advisor changed the management of the US equity portion of the Fund from a passive equity strategy to an actively managed equity strategy. With respect thereto, the Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. Pursuant to a written contract, Aberdeen Asset Management Inc. ("AAMI"), a direct, wholly owned subsidiary of Aberdeen PLC, serves as a sub-advisor to the core bond and active fixed income portion of the Fund's portfolio and is responsible for the day to day management of that portion of the Fund. AAMI is paid for its services by the Advisor from its fee as Advisor to the Fund.
Management Agreement. Prior to June 1, 2006, the management fee payable under the Investment Management Agreement was equal to an annual rate of 0.65% of the Fund's average daily net assets, computed and accrued daily and payable monthly.
Effective June 1, 2006, under the Amended and Restated Investment Management Agreement, the Fund pays a monthly investment management fee based on the Fund's average daily net assets accrued daily and payable monthly, at the following annual rates:
First $250 million of the Fund's average daily net assets | .600% |
Next $750 million of such net assets | .575% |
Over $1 billion of such net assets | .550% |
For the period from April 1, 2006 through May 31, 2006, the Advisor and Administrator had contractually agreed to waive all or a portion of their fees and reimburse or pay certain operating expenses of the Fund (excluding certain expenses such as extraordinary expenses, proxy/shareholder meeting costs, taxes, brokerage, interest and organizational and offering expenses) to the extent necessary to maintain the total operating expenses at the following rates:
Class S (formerly Investment Class) | 1.00% |
Institutional Class | .60% |
For the period from June 1, 2006 through September 30, 2006, the Advisor had contractually agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the Fund (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, and organizational and offering expenses) to the extent necessary to maintain the total operating expenses of the class as follows:
Class S (formerly Investment Class) | 1.25% |
For the period from October 1, 2006 through September 30, 2007, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the Fund (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, and organizational and offering expenses) to the extent necessary to maintain the total operating expenses of the class as follows:
Institutional Class | 1.03% |
In addition, for the period from April 1, 2006 through September 30, 2007, the Advisor and Administrator had voluntarily agreed to waive all or a portion of their fees and reimburse expenses to the extent necessary to maintain the annualized expenses at 0.55% of the average daily net assets of the Institutional Class.
Accordingly, for the year ended March 31, 2007, the Advisor waived a portion of its management fee pursuant to the Investment Management Agreement aggregating $1,364,070 and the amount charged aggregated $3,135,121 which was equivalent to an annual effective rate of .41% of the Fund's average daily net assets.
In addition, for the year ended March 31, 2007, the Advisor reimbursed $908,099 of services to shareholders from non-affiliated entities for the Institutional Class.
Administrator Service Fee. Prior to June 1, 2006, Investment Company Capital Corp. ("ICCC" or the "Administrator"), an indirect, wholly owned subsidiary of Deutsche Bank AG, was the Fund's Administrator. For its services as Administrator, ICCC received a fee (the "Administrator Service Fee") of 0.72% of the Fund's Investment Class and 0.22% of the Fund's Institutional Class average daily net assets, computed and accrued daily and paid monthly.
For the period from April 1, 2006 through May 31, 2006, the Administrator Service Fee charged to the Fund was as follows:
Administrator Service Fee | Total Aggregated | Waived | Unpaid at March 31, 2007 | Annual Effective Rate |
Class S (formerly Investment Class) | $ 37,194 | $ 11,854 | $ — | .49% |
Institutional Class | 265,004 | 241,806 | — | .02% |
| $ 302,198 | $ 253,660 | $ — |
|
Administration Fee. Effective June 1, 2006, the Administrator agreement with ICCC was terminated and the Fund entered into an Administrative Services Agreement with the Advisor, pursuant to which the Advisor provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the period from June 1, 2006 through March 31, 2007, the Advisor received an Administration Fee of $631,408, of which $64,257 is unpaid.
Service Provider Fees. DWS Scudder Investments Service Company ("DWS-SISC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for Class S (formerly Investment Class) and Institutional Class shares. Pursuant to a sub-transfer agency agreement between DWS-SISC and DST Systems, Inc. ("DST"), DWS-SISC has delegated certain transfer agent and dividend-paying agent functions to DST. DWS-SISC compensates DST out of the shareholder servicing fees it receives from the Fund. Prior to June 1, 2006, the fees were paid under an Administrative Service Agreement with ICCC. For the period from June 1, 2006 through March 31, 2007, the amounts charged to the Fund by DWS-SISC were as follows:
Services to Shareholders | Total Aggregated | Waived | Unpaid at March 31, 2007 |
Class S (formerly Investment Class) | 3,316 | — | 521 |
Institutional Class | 2,584 | 2,584 | — |
| $ 5,900 | $ 2,584 | $ 521 |
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 March 31, 2007, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders and shareholder meeting expense" aggregated $37,800, of which $8,880 is unpaid.
Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregated annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each fund in the Fund Complex for which he or she serves. In addition, the Chairperson of the Board and the Chairperson of each committee of the Board receive additional compensation for their services. Payment of such fees and expenses is allocated among all such funds described above in direct proportion to their relative net assets.
Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.
D. Concentration of Ownership
From time to time the Fund may have a concentration of several shareholders holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Fund.
At March 31, 2007, one or more shareholders individually held greater than 10% of the outstanding shares of the Fund. These shareholders held 66%, 21% and 11%, respectively, of the total shares outstanding of the Fund.
E. Fee Reductions
For the year ended March 31, 2007, the Advisor reimbursed the Fund $1,769, which represented a portion of the expected fee savings for the Advisor through May 31, 2006, related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider.
In addition, the Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended March 31, 2007, the Fund's custodian fees were reduced by $2,149 for custody credits earned.
F. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $750 million revolving credit facility administered by JPMorgan Chase Bank N.A. for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
G. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| Year Ended March 31, 2007 | Year Ended March 31, 2006 | ||
| Shares | Dollars | Shares | Dollars |
Shares sold | ||||
Class S* | 350,375 | $ 4,045,889 | 691,561 | $ 7,548,185 |
Institutional Class | 4,825,664 | 58,408,547 | 4,392,889 | 50,283,586 |
|
| $ 62,454,436 |
| $ 57,831,771 |
Shares issued to shareholders in reinvestment of distributions | ||||
Class S* | 122,508 | $ 1,430,927 | 75,596 | $ 832,597 |
Institutional Class | 3,164,121 | 38,377,994 | 1,660,524 | 19,063,525 |
|
| $ 39,808,921 |
| $ 19,896,122 |
Shares redeemed | ||||
Class S* | (2,814,416) | $ (33,157,167) | (3,223,149) | $ (35,353,308) |
Institutional Class | (7,919,157) | (95,031,251) | (9,429,783) | (107,469,408) |
|
| $ (128,188,418) |
| $ (142,822,716) |
Redemption fees | $ 63,097 |
| $ 97,772 | |
Net increase (decrease) | ||||
Class S* | (2,341,533) | $ (27,680,311) | (2,455,992) | $ (26,972,526) |
Institutional Class | 70,628 | 1,818,347 | (3,376,370) | (38,024,525) |
|
| $ (25,861,964) |
| $ (64,997,051) |
H. Regulatory Matters and Litigation
Regulatory Settlements. On December 21, 2006, Deutsche Asset Management ("DeAM") settled proceedings with the Securities and Exchange Commission ("SEC") and the New York Attorney General on behalf of Deutsche Asset Management, Inc. ("DAMI") and Deutsche Investment Management Americas Inc. ("DIMA"), the investment advisors to many of the DWS Scudder funds, regarding allegations of improper trading of fund shares at DeAM and at the legacy Scudder and Kemper organizations prior to their acquisition by DeAM in April 2002. These regulators alleged that although the prospectuses for certain funds in the regulators' view indicated that the funds did not permit market timing, DAMI and DIMA breached their fiduciary duty to those funds in that their efforts to limit trading activity in the funds were not effective at certain times. The regulators also alleged that DAMI and DIMA breached their fiduciary duty to certain funds by entering into certain market timing arrangements with investors. These trading arrangements originated in businesses that existed prior to the currently constituted DeAM organization, which came together as a result of various mergers of the legacy Scudder, Kemper and Deutsche fund groups, and all of the arrangements were terminated prior to the start of the regulatory investigations that began in the summer of 2003. No current DeAM employee approved these trading arrangements. Under the terms of the settlements, DAMI and DIMA neither admitted nor denied any wrongdoing.
The terms of the SEC settlement, which identified improper trading in the legacy Deutsche and Kemper mutual funds only, provide for payment of disgorgement in the amount of $17.2 million. The terms of the settlement with the New York Attorney General provide for payment of disgorgement in the amount of $102.3 million, which is inclusive of the amount payable under the SEC settlement, plus a civil penalty in the amount of $20 million. The total amount payable by DeAM, approximately $122.3 million, would be distributed to funds in accordance with a distribution plan to be developed by a distribution consultant. The funds' investment advisors do not believe these amounts will have a material adverse financial impact on them or materially affect their ability to perform under their investment management agreements with the DWS funds. The above-described amounts are not material to Deutsche Bank, and have already been reserved.
Among the terms of the settled orders, DeAM is subject to certain undertakings regarding the conduct of its business in the future, including: formation of a Code of Ethics Oversight Committee to oversee all matters relating to issues arising under the advisors' Code of Ethics; establishment of an Internal Compliance Controls Committee having overall compliance oversight responsibility of the advisors; engagement of an Independent Compliance Consultant to conduct a comprehensive review of the advisors' supervisory compliance and other policies and procedures designed to prevent and detect breaches of fiduciary duty, breaches of the Code of Ethics and federal securities law violations by the advisors and their employees; and commencing in 2008, the advisors shall undergo a compliance review by an independent third party.
In addition, DeAM is subject to certain further undertakings relating to the governance of the mutual funds, including that: at least 75% of the members of the Boards of Trustees/Directors overseeing the DWS Funds continue to be independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors continue to be independent of DeAM; DeAM maintain existing management fee reductions for certain funds for a period of five years and not increase management fees for certain funds during this period; the funds retain a senior officer (or independent consultants) responsible for assisting in the review of fee arrangements and monitoring compliance by the funds and the investment advisors with securities laws, fiduciary duties, codes of ethics and other compliance policies, the expense of which shall be borne by DeAM; and periodic account statements, fund prospectuses and the mutual funds' web site contain additional disclosure and/or tools that assist investors in understanding the fees and costs associated with an investment in the funds and the impact of fees and expenses on fund returns.
DeAM has also settled proceedings with the Illinois Secretary of State regarding market timing matters. The terms of the Illinois settlement provide for investor education contributions totaling approximately $4 million and a payment in the amount of $2 million to the Securities Audit and Enforcement Fund.
On September 28, 2006, the SEC and the National Association of Securities Dealers ("NASD") announced final agreements in which Deutsche Investment Management Americas Inc. ("DIMA"), Deutsche Asset Management, Inc. ("DAMI") and Scudder Distributors, Inc. ("SDI") (now known as DWS Scudder Distributors, Inc.) settled administrative proceedings regarding disclosure of brokerage allocation practices in connection with sales of the Scudder Funds' (now known as the DWS Scudder Funds) shares during 2001-2003. The agreements with the SEC and NASD are reflected in orders which state, among other things, that DIMA and DAMI failed to disclose potential conflicts of interest to the fund Boards and to shareholders relating to SDI's use of certain funds' brokerage commissions to reduce revenue sharing costs to broker-dealer firms with whom it had arrangements to market and distribute Scudder Fund shares. These directed brokerage practices were discontinued in October 2003.
Under the terms of the settlements, in which DIMA, DAMI and SDI neither admitted nor denied any of the regulators' findings, DIMA, DAMI and SDI agreed to pay disgorgement, prejudgment interest and civil penalties in the total amount of $19.3 million. The portion of the settlements distributed to the funds was approximately $17.8 million and was paid to the funds as prescribed by the settlement orders based upon the amount of brokerage commissions from each fund used to satisfy revenue sharing agreements with broker-dealers who sold fund shares. Based on the prescribed settlement order, the Fund was not entitled to a portion of the settlement.
As part of the settlements, DIMA, DAMI and SDI also agreed to implement certain measures and undertakings relating to revenue sharing payments including making additional disclosures in the fund Prospectuses or Statements of Additional Information, adopting or modifying relevant policies and procedures and providing regular reporting to the fund Boards.
Private Litigation Matters. The matters alleged in the regulatory settlements described above also serve as the general basis of a number of private class action lawsuits involving the DWS funds. These lawsuits name as defendants various persons, including certain DWS funds, the funds' investment advisors and their affiliates, and certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each DWS fund's investment advisor has agreed to indemnify the applicable DWS funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making similar allegations.
Based on currently available information, the funds' investment advisors believe the likelihood that the pending lawsuits will have a material adverse financial impact on a DWS fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the DWS funds.
Report of Independent Registered Public Accounting Firm
To the Trustees of DWS Advisor Funds and Shareholders of DWS Lifecycle Long Range Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of DWS Lifecycle Long Range Fund (the "Fund") at March 31, 2007, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2007 by correspondence with the custodians and brokers, provide a reasonable basis for our opinion.
Boston, Massachusetts | PricewaterhouseCoopers LLP |
The Fund paid distributions of $.2850 per share from net long-term capital gains during its year ended March 31, 2007, of which 100% represents 15% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $67,833,000 as capital gain dividends for its the year ended March 31, 2007, of which 100% represents 15% rate gains.
For federal income tax purposes, the Fund designates $8,594,000, or the maximum amount allowable under tax law, as qualified dividend income.
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.
A Special Meeting of Shareholders (the "Meeting") of DWS Lifecycle Long Range Fund (the "Fund") was held on May 5, 2006, at the offices of Deutsche Asset Management, 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted upon by the shareholders (the resulting votes are presented below).
II-A. Approval of an Amended and Restated Investment Management Agreement with Deutsche Asset Management, Inc.
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
62,734,656.118 | 1,936.000 | .000 | 290,217.000 |
II-B. Approval of an Amended and Restated Investment Management Agreement with Deutsche Investment Management Americas Inc.
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
62,734,373.118 | 1,936.000 | 283.000 | 290,217.000 |
II-C. Approval of a Subadvisor Approval Policy:
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,026,857.450 | 53,709,734.668 | .000 | 290,217.000 |
III. Approval of revised fundamental investment restrictions on:
III-A. Borrowing Money
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-B. Pledging Assets
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-C. Senior Securities
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-D. Concentration
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-E. Underwriting of Securities
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-F. Real Estate Investments
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-G. Commodities
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-H. Lending
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-I Portfolio Diversification
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
III-J. Oil, Gas and Mineral Programs
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
9,025,724.450 | 53,710,867.668 | .000 | 290,217.000 |
V. Approval of Reorganization of the Fund as a series of Another Massachusetts Business Trust.
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
62,732,607.118 | 3,069.000 | .000 | 290,217.000 |
VI. Approval of an Amended and Restated Subadvisory Agreement between Deutsche Asset Management, Inc. and Northern Trust Investments, N.A.
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
62,736,295.118 | 297.000 | .000 | 290,217.000 |
The Meeting was reconvened on June 1, 2006, at which time the following matters were voted upon by the shareholders (the resulting votes are presented below):
I. Election of Board Members. ("Number of Votes" represents all funds that are series of DWS Advisor Funds III.)
| Number of Votes: | |
| For | Withheld |
Henry P. Becton, Jr. | 358,709,295.741 | 618,791.720 |
Dawn-Marie Driscoll | 358,709,295.741 | 618,791.720 |
Keith R. Fox | 358,709,295.741 | 618,791.720 |
Kenneth C. Froewiss | 358,709,295.741 | 618,791.720 |
Martin J. Gruber | 358,709,295.741 | 618,791.720 |
Richard J. Herring | 358,709,295.741 | 618,791.720 |
Graham E. Jones | 358,709,295.741 | 618,791.720 |
Rebecca W. Rimel | 358,709,295.741 | 618,791.720 |
Philip Saunders, Jr. | 358,709,295.741 | 618,791.720 |
William N. Searcy, Jr. | 358,709,295.741 | 618,791.720 |
Jean Gleason Stromberg | 358,709,295.741 | 618,791.720 |
Carl W. Vogt | 358,709,295.741 | 618,791.720 |
Axel Schwarzer | 358,709,295.741 | 618,791.720 |
IV. Approval of Amended and Restated Declaration of Trust. ("Number of Votes" represents all Funds that are series of DWS Advisor Funds III.)
Number of Votes: | |||
For | Against | Abstain | Broker Non-Votes* |
358,138,480.870 | 167,715.841 | 564,619.750 | 457,271.000 |
Investment Management Agreement Approval
In December 2006, the Board approved an amended and restated investment management agreement with DIMA in connection with the merger of DAMI into DIMA. In determining to approve this agreement, the Board considered Deutsche Bank's representations that this change was administrative in nature, and would not involve any change in operations or services provided to the fund, or to the personnel involved with providing such services. The Board also considered that the terms of the agreement with DIMA were substantially identical to the terms of the fund's prior agreement with DAMI. A discussion of factors considered by the Board in determining to approve the continuation the fund's prior investment management agreement with DAMI in September 2006 in connection with the Board's annual review of the fund's contractual arrangements is included in the fund's report for the period ended September 30, 2006.
The following table presents certain information regarding the Board Members and Officers of the Trust as of March 31, 2007. 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 Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the 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.
Independent Board Members | ||
Name, Year of Birth, Position with the Fund and Length of Time Served | Business Experience and Directorships During the Past Five Years | Number of Funds in Fund Complex Overseen |
Dawn-Marie Driscoll (1946) Chairperson since 2006 Board Member since 2006 | President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley College; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Advisory Board, Center for Business Ethics, Bentley College; Trustee, Southwest Florida Community Foundation (charitable organization). Former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 84 |
Henry P. Becton, Jr. (1943) Board Member since 2006 | President, WGBH Educational Foundation. Directorships: Association of Public Television Stations; Becton Dickinson and Company1 (medical technology company); Belo Corporation1 (media company); Boston Museum of Science; Public Radio International. Former Directorships: American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service | 82 |
Keith R. Fox (1954) Board Member since 2006 | Managing General Partner, Exeter Capital Partners (a series of private equity funds). Directorships: Progressive Holding Corporation (kitchen goods importer and distributor); Natural History, Inc. (magazine publisher); Box Top Media Inc. (advertising). Former Directorships: The Kennel Shop (retailer) | 84 |
Kenneth C. Froewiss (1945) Board Member since 2006 | Clinical Professor of Finance, NYU Stern School of Business (1997-present); 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) | 84 |
Martin J. Gruber (1937) Board Member since 1999 | Nomura Professor of Finance, Leonard N. Stern School of Business, New York University (since September 1965); Director, Japan Equity Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since January 2000), Singapore Fund, Inc. (since January 2000), National Bureau of Economic Research (since January 2006). Formerly, Trustee, TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen Mutual Funds (January 1985-January 2001) | 84 |
Richard J. Herring (1946) Board Member since 1999 | 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). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (since July 2000-June 2006) | 84 |
Graham E. Jones (1933) Board Member since 2002 | Senior Vice President, BGK Realty, Inc. (commercial real estate) (since 1995). Formerly, Trustee of various investment companies managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005) | 84 |
Rebecca W. Rimel (1951) Board Member since 2002 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable foundation) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001 to present); Director, Viasys Health Care1 (since January 2007). Formerly, Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983 to 2004); Board Member, Investor Education (charitable organization) (2004-2005) | 84 |
Philip Saunders, Jr. (1935) Board Member since 1986 | Principal, Philip Saunders Associates (economic and financial consulting) (since November 1988). Formerly, Director, Financial Industry Consulting, Wolf & Company (consulting) (1987-1988); President, John Hancock Home Mortgage Corporation (1984-1986); Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. (1982-1986) | 84 |
William N. Searcy, Jr. (1946) Board Member since 2002 | Private investor since October 2003; Trustee of eight open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998). Formerly, Pension & Savings Trust Officer, Sprint Corporation1 (telecommunications) (November 1989-September 2003) | 84 |
Jean Gleason Stromberg (1943) Board Member since 2006 | Retired. Formerly, Consultant (1997-2001); Director, US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; Service Source, Inc. Former Directorships: Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996) | 84 |
Carl W. Vogt (1936) Board Member since 2006 | Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm); formerly, President (interim) of Williams College (1999-2000); formerly, President of certain funds in the Deutsche Asset Management family of funds (formerly, Flag Investors family of funds) (registered investment companies) (1999-2000). Directorships: Yellow Corporation (trucking); American Science & Engineering (x-ray detection equipment). Former Directorships: ISI Family of Funds (registered investment companies, four funds overseen); National Railroad Passenger Corporation (Amtrak); Waste Management, Inc. (solid waste disposal). Formerly, Chairman and Member, National Transportation Safety Board | 82 |
Interested Board Member | ||
Name, Year of Birth, Position with the Fund and Length of Time Served | Business Experience and Directorships During the Past Five Years | Number of Funds in Fund Complex Overseen |
Axel Schwarzer2 (1958) Board Member since 2006 | Managing Director4, Deutsche Asset Management; Head of Deutsche Asset Management Americas; CEO of DWS Scudder; formerly, board member of DWS Investments, Germany (1999-2005); formerly, Head of Sales and Product Management for the Retail and Private Banking Division of Deutsche Bank in Germany (1997-1999); formerly, various strategic and operational positions for Deutsche Bank Germany Retail and Private Banking Division in the field of investment funds, tax driven instruments and asset management for corporates (1989-1996) | 83 |
Officers3 | |
Name, Year of Birth, Position with the Fund and Length of Time Served | Principal Occupation(s) During Past 5 Years and Other Directorships Held |
Michael G. Clark5 (1965) President, 2006-present | Managing Director4, Deutsche Asset Management (2006-present); President of DWS family of funds; formerly, Director of Fund Board Relations (2004-2006) and Director of Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations, Merrill Lynch Asset Management (1999-2000) |
John Millette6 (1962) Vice President and Secretary, 2003-present | Director4, Deutsche Asset Management |
Paul H. Schubert5 (1963) Chief Financial Officer, 2004-present Treasurer, 2005-present | Managing Director4, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998) |
Patricia DeFilippis5 (1963) Assistant Secretary, 2005-present | Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003) |
Elisa D. Metzger5 (1962) Assistant Secretary 2005-present | Director4, Deutsche Asset Management (since September 2005); formerly, Counsel, Morrison and Foerster LLP (1999-2005) |
Caroline Pearson6 (1962) Assistant Secretary, 2002-present | Managing Director4, Deutsche Asset Management |
Paul Antosca6 (1957) Assistant Treasurer, 2007-present | Director4, Deutsche Asset Management (since 2006); Vice President, The Manufacturers Life Insurance Company (U.S.A.) (1990-2006) |
Kathleen Sullivan D'Eramo6 (1957) Assistant Treasurer, 2003-present | Director4, Deutsche Asset Management |
Jason Vazquez4 (1972) Anti-Money Laundering Compliance Officer, 2007-present | Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations Manager for AXA Financial (1999-2004) |
Robert Kloby5 (1962) Chief Compliance Officer, 2006-present | Managing Director4, Deutsche Asset Management (2004-present); formerly, Chief Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company (1984-1988) |
J. Christopher Jackson5 (1951) Chief Legal Officer, 2006-present | Director4, Deutsche Asset Management (2006-present); formerly, Director, Senior Vice President, General Counsel and Assistant Secretary, Hansberger Global Investors, Inc. (1996-2006); Director, National Society of Compliance Professionals (2002-2005)(2006-2009) |
2 The mailing address of Axel Schwarzer is c/o Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. Mr. Schwarzer is an interested Board Member by virtue of his positions with Deutsche Asset Management.
3 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the funds.
4 Executive title, not a board directorship.
5 Address: 345 Park Avenue, New York, New York 10154.
6 Address: Two International Place, Boston, MA 02110.
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.
Automated Information Line | (800) 621-1048 Personalized account information, information on other DWS funds and services via touchtone telephone. |
Web Site | www.dws-scudder.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more. |
For More Information | (800) 621-1048 To speak with a DWS Scudder service representative. |
Written Correspondence | DWS Scudder PO Box 219151Kansas City, MO 64121-9151 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-scudder.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048. |
Principal Underwriter | If you have questions, comments or complaints, contact: DWS Scudder Distributors, Inc. 222 South Riverside PlazaChicago, IL 60606-5808 (800) 621-1148 |
| Institutional Class |
Nasdaq Symbol | BTAMX |
CUSIP Number | 23339E 525 |
Fund Number | 567 |
For shareholders of Class S | |
Automated Information Line | (800) 728-3337 Personalized account information, the ability to exchange or redeem shares, and information on other DWS funds and services via touchtone telephone. |
Web Site | www.dws-scudder.com |
| View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more. |
For More Information | (800) 728-3337 To speak with a DWS Scudder service representative. |
Written Correspondence | DWS Scudder PO Box 219151Kansas City, MO 64121-9151 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-scudder.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048. |
Principal Underwriter | If you have questions, comments or complaints, contact: DWS Scudder Distributors, Inc. 222 South Riverside PlazaChicago, IL 60606-5808 (800) 621-1148 |
| Class S |
Nasdaq Symbol | BTILX |
Fund Number | 812 |
ITEM 2. | CODE OF ETHICS |
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| As of the end of the period, March 31, 2007, DWS Lifecycle Long Range Fund has a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
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ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
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| The Funds’ audit committee is comprised solely of trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Funds’ Board of Trustees has determined that there are several “audit committee financial experts” serving on the Funds’ audit committee. The Board has determined that Keith R Fox, the chair of the Funds’ audit committee, qualifies as an “audit committee financial expert” (as such term has been defined by the Regulations) based on its review of Mr. Fox’s pertinent experience and education. The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. |
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ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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DWS LIFECYCLE LONG RANGE FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
Fiscal Year | Audit Fees Billed to Fund | Audit-Related | Tax Fees Billed to Fund | All |
2007 | $69,500 | $128 | $0 | $0 |
2006 | $64,850 | $0 | $0 | $0 |
The above “Audit- Related Fees” were billed for agreed upon procedures performed.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas, Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
Fiscal Year | Audit-Related | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All |
2007 | $192,500 | $11,930 | $0 |
2006 | $136,700 | $197,605 | $0 |
The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures related to fund mergers and additional costs related to annual audits and the above “Tax Fees” were billed in connection with tax consultation and agreed-upon procedures.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.
Fiscal Year | Total (A) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund) (B) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements) (C) | Total of (A), (B) |
2007 | $0 | $11,930 | $0 | $11,930 |
2006 | $0 | $197,605 | $30,654 | $228,259 |
All other engagement fees were billed for services in connection with industry updates and risk management initiatives for DeIM and other related entities that provide support for the operations of the fund.
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ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
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| Not Applicable |
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ITEM 6. | SCHEDULE OF INVESTMENTS |
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| Not Applicable |
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ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
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| Not applicable. |
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ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
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| Not applicable. |
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
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| Not Applicable. |
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
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| The Committee on Independent Trustees/Directors selects and nominates Independent Trustees/Directors. Fund shareholders may submit nominees that will be considered by the committee when a Board vacancy occurs. Submissions should be mailed to: c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33910. |
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ITEM 11. | CONTROLS AND PROCEDURES |
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| (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. |
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| (b) There have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last half-year (the registrant’s second fiscal half-year in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. |
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ITEM 12. | EXHIBITS |
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| (a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
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| (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. |
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| (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 Lifecycle Long Range Fund, a series of DWS Advisor Funds |
By: | /s/Michael G. Clark |
| Michael G. Clark |
President
Date: | May 29, 2007 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Registrant: | DWS Lifecycle Long Range Fund, a series of DWS Advisor Funds |
By: | /s/Michael G. Clark |
| Michael G. Clark |
President
Date: | May 29, 2007 |
By: | /s/Paul Schubert |
| Paul Schubert |
Chief Financial Officer and Treasurer
Date: | May 29, 2007 |