UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSRS
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: | 9/30/07 |
ITEM 1. REPORT TO STOCKHOLDERS
SEPTEMBER 30, 2007
Semiannual 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 Investment Management Agreement Approval
click here Summary of Management Fee Evaluation by Independent Fee Consultant
click here Account Management Resources
click here Privacy Statement
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 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 September 30, 2007
Institutional Class
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 ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated August 1, 2007 is 0.88% for Institutional Class shares. 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 period ended September 30, 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.
Average Annual Total Returns as of 9/30/07 | |||||
DWS Lifecycle Long Range Fund | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Institutional Class | 5.87% | 12.03% | 10.39% | 11.60% | 6.79% |
Russell 1000® Index+ | 7.99% | 16.90% | 13.77% | 15.98% | 6.86% |
S&P 500® Index++ | 8.44% | 16.44% | 13.14% | 15.45% | 6.57% |
Citigroup Broad Investment Grade Bond Index+++ | 2.42% | 5.25% | 3.95% | 4.23% | 6.01% |
Asset Allocation Index — Long Range++++ | 5.54% | 11.47% | 9.05% | 10.30% | 6.43% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
‡ Total returns shown for periods less than one year are not annualized.Net Asset Value and Distribution Information | |
| Institutional Class |
Net Asset Value: 9/30/07 | $ 11.56 |
3/31/07 | $ 12.29 |
Distribution Information: Six Months as of 9/30/07:Income Dividends | $ .23 |
Capital Gain Distributions | $ 1.19 |
Institutional Class Lipper Rankings — Mixed-Asset Target Allocation Moderate Funds Category as of 9/30/07 | ||||
Period | Rank |
| Number of Funds Tracked | Percentile Ranking (%) |
1-Year | 179 | of | 442 | 41 |
3-Year | 107 | of | 343 | 32 |
5-Year | 75 | of | 231 | 33 |
10-Year | 30 | of | 127 | 24 |
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 [] Russell 1000 Index+ [] S&P 500 Index++ [] Citigroup Broad Investment Grade Bond Index+++ [] Asset Allocation Index — Long Range++++ |
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Yearly periods ended September 30 |
Comparative Results as of 9/30/07 | |||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Institutional Class | Growth of $1,000,000 | $1,120,300 | $1,345,200 | $1,730,800 | $1,929,400 |
Average annual total return | 12.03% | 10.39% | 11.60% | 6.79% | |
Russell 1000 Index+ | Growth of $1,000,000 | $1,169,000 | $1,472,500 | $2,098,900 | $1,941,900 |
Average annual total return | 16.90% | 13.77% | 15.98% | 6.86% | |
S&P 500 Index++ | Growth of $1,000,000 | $1,164,400 | $1,448,100 | $2,051,300 | $1,889,600 |
Average annual total return | 16.44% | 13.14% | 15.45% | 6.57% | |
Citigroup Broad Investment Grade Bond Index+++ | Growth of $1,000,000 | $1,052,500 | $1,123,400 | $1,230,300 | $1,791,800 |
Average annual total return | 5.25% | 3.95% | 4.23% | 6.01% | |
Asset Allocation Index — Long Range++++ | Growth of $1,000,000 | $1,114,700 | $1,296,700 | $1,632,800 | $1,864,000 |
Average annual total return | 11.47% | 9.05% | 10.30% | 6.43% |
The growth of $1,000,000 is cumulative.
The minimum initial investment for the Institutional Class is $1,000,000.
+ The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Index replaced the S&P 500 as the Fund's benchmark index because the advisor believes that it more accurately reflects the Fund's investment strategy.++ 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 (Russell 1000 Index effective January 1, 2007, and S&P 500 Index until December 31, 2006), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-month US Treasury 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 Merrill Lynch 3-month US Treasury 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.
Class S
Class S shares are generally not available to new investors except under certain circumstances. (Please see the Fund's Statement of Additional Information.)
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 ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated August 1, 2007 is 0.93% for Class S shares. 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 period ended September 30, 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, Class S shares of the Fund were issued in conjunction with the combination of the Fund and Scudder Lifecycle Long Range Fund, each a feeder fund that had invested all of its investable assets in the same master portfolio. Returns shown for Class S shares for the period 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 Class S shares. Any difference in expenses will affect performance.
Average Annual Total Returns as of 9/30/07 | |||||
DWS Lifecycle Long Range Fund | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class S | 5.67% | 11.82% | 10.03% | 11.17% | 6.38% |
Russell 1000 Index+ | 7.99% | 16.90% | 13.77% | 15.98% | 6.86% |
S&P 500 Index++ | 8.44% | 16.44% | 13.14% | 15.45% | 6.57% |
Citigroup Broad Investment Grade Bond Index+++ | 2.42% | 5.25% | 3.95% | 4.23% | 6.01% |
Asset Allocation Index — Long Range++++ | 5.54% | 11.47% | 9.05% | 10.30% | 6.43% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
‡ Total returns shown for periods less than one year are not annualized.Net Asset Value and Distribution Information | |
| Class S |
Net Asset Value: 9/30/07 | $ 11.09 |
3/31/07 | $ 11.85 |
Distribution Information: Six Months as of 9/30/07:Income Dividends | $ .21 |
Capital Gain Distributions | $ 1.19 |
Class S Lipper Rankings — Mixed-Asset Target Allocation Moderate Funds Category as of 9/30/07 | ||||
Period | Rank |
| Number of Funds Tracked | Percentile Ranking (%) |
1-Year | 193 | of | 442 | 44 |
3-Year | 126 | of | 343 | 37 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Class S shares; other share classes may vary.
Growth of an Assumed $10,000 Investment |
[] DWS Lifecycle Long Range Fund — Class S [] Russell 1000 Index+ [] S&P 500 Index++ [] Citigroup Broad Investment Grade Bond Index+++ [] Asset Allocation Index — Long Range++++ |
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Yearly periods ended September 30 |
Comparative Results as of 9/30/07 | |||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Class S | Growth of $10,000 | $11,182 | $13,320 | $16,978 | $18,556 |
Average annual total return | 11.82% | 10.03% | 11.17% | 6.38% | |
Russell 1000 Index+ | Growth of $10,000 | $11,690 | $14,725 | $20,989 | $19,419 |
Average annual total return | 16.90% | 13.77% | 15.98% | 6.86% | |
S&P 500 Index++ | Growth of $10,000 | $11,644 | $14,481 | $20,513 | $18,896 |
Average annual total return | 16.44% | 13.14% | 15.45% | 6.57% | |
Citigroup Broad Investment Grade Bond Index+++ | Growth of $10,000 | $10,525 | $11,234 | $12,303 | $17,918 |
Average annual total return | 5.25% | 3.95% | 4.23% | 6.01% | |
Asset Allocation Index — Long Range++++ | Growth of $10,000 | $11,147 | $12,967 | $16,328 | $18,640 |
Average annual total return | 11.47% | 9.05% | 10.30% | 6.43% |
The growth of $10,000 is cumulative.
+ The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Index replaced the S&P 500 as the Fund's benchmark index because the advisor believes that it more accurately reflects the Fund's investment strategy.++ 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 (Russell 1000 Index effective January 1, 2007, and S&P 500 Index until December 31, 2006), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-month US Treasury 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 Merrill Lynch 3-month US Treasury 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 (April 1, 2007 to September 30, 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. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.
Expenses and Value of a $1,000 Investment for the six months ended September 30, 2007 | ||
Actual Fund Return | Class S | Institutional Class |
Beginning Account Value 4/1/07 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 9/30/07 | $ 1,056.70 | $ 1,058.70 |
Expenses Paid per $1,000* | $ 4.73 | $ 2.83 |
Hypothetical 5% Fund Return | Class S | Institutional Class |
Beginning Account Value 4/1/07 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 9/30/07 | $ 1,020.40 | $ 1,022.25 |
Expenses Paid per $1,000* | $ 4.65 | $ 2.78 |
Annualized Expense Ratios | Class S | Institutional Class |
DWS Lifecycle Long Range Fund | .92% | .55% |
For more information, please refer to the Fund's prospectus.
In the following interview, Portfolio Managers Thomas Picciochi, Inna Okounkova and Robert Wang address the markets, portfolio management strategy and resulting performance of DWS Lifecycle Long Range Fund for the six months ended September 30, 2007.
The views expressed in the following discussion 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.
Q: How would you describe market conditions over the last year?
A: It was a generally positive period for the US equity market, although with considerable volatility. After exhibiting weakness in strength in February and early March, markets rose through early summer, then drifted lower in late July. The market moved up again in August and rallied significantly in September, responding in part to the US Federal Reserve Board's (the Fed's) mid-September interest rate cut. The Russell 3000® Index, which is generally regarded as a good indicator of the broad US stock market, returned 7.40% for the six months ended September 30, 2007.1
1 Russell 3000 Index measures the performance of the 3,000 largest US companies based on total market capitalization, which represents approximately 98% of the investable US equity market.Foreign equity markets were also strong, but with considerable variation among markets: Return of the MSCI EAFE® Index, which measures performance of a broad range of international markets, was 8.72% for the six-month period ended September 30, 2007.2 Emerging markets were generally stronger than developed markets. The star performer for the period was Hong Kong's Hang Seng Index, which rose more than 40% for the past six months, benefiting from Asian growth.3
2 The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index is an unmanaged capitalization-weighted index that tracks international stock performance in the 21 developed markets of Europe, Australasia and the Far East. The index is calculated using closing local market prices and translates into US dollars using the London close foreign exchange rates.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.
Returns in the US fixed-income market were also positive, though considerably lower than equity returns. The Lehman Brothers US Aggregate Index, which measures return of the bond market as a whole, posted a return of 2.31% as of September 30, 2007.4 Treasury securities performed better than more credit-sensitive issues, particularly near the end of the period, as investors demonstrated a reduced tolerance for risk. For the same period, the return of the Merrill Lynch 1-5 US Year Treasury Bill Index was 3.50%.5 Returns on cash equivalents were slightly above bond returns; return of the Merrill Lynch 3-Month T-Bill Index was 2.61%.6
3 The Hang Seng Index is a free-float-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong. These 40 companies represent approximately 65% of the capitalization of the Hong Kong Stock Exchange.4 The Lehman Brothers US Aggregate Index is an unmanaged market value-weighted measure of Treasury issues, corporate bond issues and mortgage securities.
5 The Merrill Lynch 1-5 Year US Treasury Index is an unmanaged index of US Treasury securities with maturities of one to five years. It is constructed by Merrill Lynch & Co. and is frequently used as a measure of returns on US Treasury securities.
6 The Merrill Lynch 3-Month US Treasury 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 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: The fund invests in a mix of stocks, bonds and short-term investments, with a strategic allocation to each of the three principal asset classes. The investment in each asset class fluctuates depending on our perception of the opportunities available among the three asset classes and the relative risks associated with such opportunities. We regularly use derivatives to increase or decrease exposure to various asset risks.7 We can also take positions in foreign currencies to enhance potential returns or to hedge risks.
The equity strategy is 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.
7 A derivative is a financial arrangement that derives its value from a traditional security, asset, or index.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 (BIG) Bond Index.8
8 The Citigroup Broad Investment Grade (BIG) 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.
We employ a Global Asset Allocation (GAA) overlay, which offers a means to help 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 fund, which are maintained at the percentages specific to the fund and are rebalanced to these percentages each month.9
9 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 (Russell 1000® Index), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-Month US Treasury Bill Index) weighted by their corresponding proportion of the fund's target asset allocation to produce the aggregate benchmark.10 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.11
10 The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. 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.11 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 dividends. It is not possible to invest directly into a Lipper category.
The total return of the Russell 1000 Index for the six-month period ended September 30, 2007 was 7.99%. The total return, for the same period, of the Citigroup Broad Investment Grade Bond Index was 2.42%. The Merrill Lynch 3-Month US Treasury Bill Index had a return of 2.62%.
For the six months ended September 30, 2007, the DWS Lifecycle Long Range Fund had a return of 5.87% (Institutional Class), compared with 5.54% for its asset allocation benchmark. The fund outperformed the 4.93% average return of its Lipper peer group of Mixed-Asset Target Allocation Moderate Funds. (Past performance is no guarantee of future results. Please see pages 4 through 11 for the performance of other shares classes and more complete performance information.)
Q: Will you explain the sources of the fund's strong performance over the period?
A: The effectiveness of the Global Asset Allocation overlay was a major factor that enabled the fund to outperform its benchmark and peer group during the period.
The allocation to equities, which provided higher returns than bonds, and decisions regarding currency positions, were the main sources of positive absolute performance. Equity performance within the GAA was particularly positive in September, as investors became more tolerant of risk in response to the Fed's reduction in interest rates. A large long position in the Hang Seng Index was a significant driver of equity outperformance, as this index was among the strongest in the world.
Currency positions also contributed to performance, as the US dollar weakened versus most major currencies, weighed by ongoing credit woes, a reduced rate of economic growth and eroding interest rate differentials. The dollar's weakness helped our long positions in currencies of Great Britain, New Zealand and Canada. Strong oil and commodity prices have also benefited the currencies of Canada and New Zealand, as energy and commodities are important to the economies of these nations.
The portfolio's equity sleeve underperformed its benchmark, the Russell 1000 Index, largely because of weakness in the valuation factors used to select holdings.
The bond portion of the portfolio underperformed the Citigroup Broad Investment Grade Bond Index because our bond portfolio overweighted the credit sectors of the market (that is, corporate and other bonds that carry various degrees of credit risk) relative to US Treasury securities.12 As investors demonstrated concern about credit risk, the least risky securities performed best during this period.
12 "Overweight" means the fund holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the fund holds a lower weighting.Q: Do you have other comments for shareholders?
A: While the current environment involves risks, including a slowing in the US economy and political instability in many parts of the world, we believe there is potential for global economic growth and continued market strength.
For investors, a disciplined asset allocation fund such as DWS Lifecycle Long Range Fund offers the potential to take advantage of a wide range of investment opportunities with a moderate degree of risk.
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 9/30/07 | 3/31/07 |
|
|
|
Common Stocks | 55% | 53% |
Bonds | 36% | 35% |
Cash Equivalents | 9% | 12% |
| 100% | 100% |
Five Largest Equity Holdings at September 30, 2007 (6.7% of Net Assets) | |
1. Bank of America Corp. Provider of commercial banking services | 1.6% |
2. Microsoft Corp. Developer of computer software | 1.5% |
3. International Business Machines Corp. Manufacturer of computers and provider of information processing services | 1.2% |
4. Chevron Corp. Operator of petroleum exploration, delivery and refining facilities | 1.2% |
5. ExxonMobil Corp. Explorer and producer of oil and gas | 1.2% |
Five Largest Fixed Income Long-Term Securities at September 30, 2007 (6.0% of Net Assets) | |
1. US Treasury Note 4.125%, 8/31/2012 | 3.3% |
2. US Treasury Note 4.875%, 6/30/2012 | 0.9% |
3. US Treasury Bond 6.0%, 2/15/2026 | 0.8% |
4. Wells Fargo Mortgage Backed Securities Trust 5.095%, 3/25/2036 | 0.5% |
5. US Treasury Bond 5.0%, 5/15/2037 | 0.5% |
Asset allocation and Portfolio holdings are subject to change.
For more complete details about the Fund's investment portfolio, see page 21. 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 September 30, 2007 (Unaudited)
|
| Value ($) |
|
| |
Common Stocks 53.7% | ||
Consumer Discretionary 5.9% | ||
Auto Components 0.1% | ||
TRW Automotive Holdings Corp.* | 16,600 | 525,888 |
Hotels Restaurants & Leisure 1.3% | ||
Boyd Gaming Corp. | 15,600 | 668,460 |
Brinker International, Inc. | 27,200 | 746,368 |
Darden Restaurants, Inc. | 43,500 | 1,820,910 |
McDonald's Corp. | 81,500 | 4,439,305 |
Yum! Brands, Inc. | 86,400 | 2,922,912 |
| 10,597,955 | |
Household Durables 0.3% | ||
NVR, Inc.* | 5,100 | 2,398,275 |
Leisure Equipment & Products 0.1% | ||
Hasbro, Inc. | 31,600 | 881,008 |
Media 1.5% | ||
CBS Corp. "B" | 20,300 | 639,450 |
McGraw-Hill Companies, Inc. | 114,700 | 5,839,377 |
The DIRECTV Group, Inc.* | 237,500 | 5,766,500 |
| 12,245,327 | |
Multiline Retail 0.7% | ||
Big Lots, Inc.* | 28,900 | 862,376 |
Dollar Tree Stores, Inc.* | 57,500 | 2,331,050 |
Family Dollar Stores, Inc. | 87,000 | 2,310,720 |
| 5,504,146 | |
Specialty Retail 1.3% | ||
American Eagle Outfitters, Inc. | 74,700 | 1,965,357 |
AutoZone, Inc.* | 35,500 | 4,122,970 |
Dick's Sporting Goods, Inc.* | 38,500 | 2,585,275 |
RadioShack Corp. | 51,700 | 1,068,122 |
The Sherwin-Williams Co. | 8,100 | 532,251 |
| 10,273,975 | |
Textiles, Apparel & Luxury Goods 0.6% | ||
Coach, Inc.* | 19,400 | 917,038 |
NIKE, Inc. "B" | 14,300 | 838,838 |
Polo Ralph Lauren Corp. | 43,800 | 3,405,450 |
| 5,161,326 | |
Consumer Staples 3.8% | ||
Beverages 0.5% | ||
Coca-Cola Enterprises, Inc. | 94,500 | 2,288,790 |
PepsiCo, Inc. | 18,900 | 1,384,614 |
| 3,673,404 | |
Food & Staples Retailing 0.8% | ||
BJ's Wholesale Club, Inc.* | 59,200 | 1,963,072 |
Costco Wholesale Corp. | 30,700 | 1,884,059 |
Kroger Co. | 57,000 | 1,625,640 |
Safeway, Inc. | 32,700 | 1,082,697 |
| 6,555,468 | |
Food Products 0.9% | ||
Dean Foods Co. | 18,600 | 475,788 |
General Mills, Inc. | 77,100 | 4,472,571 |
H.J. Heinz Co. | 23,600 | 1,090,320 |
Kellogg Co. | 13,000 | 728,000 |
The J.M. Smucker Co. | 11,900 | 635,698 |
| 7,402,377 | |
Household Products 0.8% | ||
Colgate-Palmolive Co. | 58,500 | 4,172,220 |
Energizer Holdings, Inc.* | 10,000 | 1,108,500 |
Kimberly-Clark Corp. | 14,000 | 983,640 |
| 6,264,360 | |
Personal Products 0.1% | ||
Estee Lauder Companies, Inc. "A" | 15,900 | 675,114 |
Tobacco 0.7% | ||
Altria Group, Inc. | 64,900 | 4,512,497 |
Loews Corp. — Carolina Group | 16,900 | 1,389,687 |
| 5,902,184 | |
Energy 7.4% | ||
Energy Equipment & Services 2.5% | ||
ENSCO International, Inc. | 40,500 | 2,272,050 |
Global Industries Ltd.* | 103,400 | 2,663,584 |
GlobalSantaFe Corp. | 13,800 | 1,049,076 |
Noble Corp. | 49,900 | 2,447,595 |
Patterson-UTI Energy, Inc. | 72,800 | 1,643,096 |
Tidewater, Inc. | 45,700 | 2,871,788 |
Transocean, Inc.* | 49,400 | 5,584,670 |
Unit Corp.* | 27,100 | 1,311,640 |
| 19,843,499 | |
Oil, Gas & Consumable Fuels 4.9% | ||
Chesapeake Energy Corp. | 22,200 | 782,772 |
Chevron Corp. | 104,740 | 9,801,569 |
Devon Energy Corp. | 64,600 | 5,374,720 |
El Paso Corp. | 44,300 | 751,771 |
ExxonMobil Corp. | 102,500 | 9,487,400 |
Frontier Oil Corp. | 82,700 | 3,443,628 |
Marathon Oil Corp. | 72,700 | 4,145,354 |
Sunoco, Inc. | 57,200 | 4,048,616 |
Tesoro Corp. | 45,100 | 2,075,502 |
| 39,911,332 | |
Financials 9.2% | ||
Capital Markets 2.1% | ||
Morgan Stanley | 117,700 | 7,415,100 |
State Street Corp. | 12,500 | 852,000 |
The Goldman Sachs Group, Inc. | 38,500 | 8,344,490 |
| 16,611,590 | |
Commercial Banks 0.9% | ||
Wells Fargo & Co. | 199,100 | 7,091,942 |
Consumer Finance 0.2% | ||
Capital One Financial Corp. | 27,100 | 1,800,253 |
Diversified Financial Services 3.0% | ||
Bank of America Corp. | 250,852 | 12,610,330 |
Citigroup, Inc. | 140,000 | 6,533,800 |
JPMorgan Chase & Co. | 118,500 | 5,429,670 |
| 24,573,800 | |
Insurance 1.9% | ||
ACE Ltd. | 27,100 | 1,641,447 |
Arch Capital Group Ltd.* | 9,300 | 692,013 |
Genworth Financial, Inc. "A" | 37,200 | 1,143,156 |
Hartford Financial Services Group, Inc. | 9,000 | 832,950 |
MetLife, Inc. | 67,000 | 4,671,910 |
W.R. Berkley Corp. | 52,100 | 1,543,723 |
XL Capital Ltd. "A" | 57,800 | 4,577,760 |
| 15,102,959 | |
Real Estate Investment Trusts 0.8% | ||
AMB Property Corp. (REIT) | 4,100 | 245,221 |
AvalonBay Communities, Inc. (REIT) | 3,300 | 389,598 |
Equity Residential (REIT) | 23,200 | 982,752 |
Essex Property Trust, Inc. (REIT) | 700 | 82,299 |
Host Hotels & Resorts, Inc. (REIT) | 32,000 | 718,080 |
ProLogis (REIT) | 17,900 | 1,187,665 |
Public Storage (REIT) | 10,980 | 863,577 |
Simon Property Group, Inc. (REIT) | 10,700 | 1,070,000 |
The Macerich Co. (REIT) | 2,300 | 201,434 |
Vornado Realty Trust (REIT) | 9,800 | 1,071,630 |
| 6,812,256 | |
Real Estate Management & Development 0.2% | ||
Jones Lang LaSalle, Inc. | 12,800 | 1,315,328 |
Thrifts & Mortgage Finance 0.1% | ||
MGIC Investment Corp. | 35,300 | 1,140,543 |
Health Care 7.1% | ||
Biotechnology 0.8% | ||
Genzyme Corp.* | 9,000 | 557,640 |
Gilead Sciences, Inc.* | 146,000 | 5,967,020 |
| 6,524,660 | |
Health Care Equipment & Supplies 0.9% | ||
Advanced Medical Optics, Inc.* | 23,100 | 706,629 |
Baxter International, Inc. | 21,500 | 1,210,020 |
Becton, Dickinson & Co. | 52,100 | 4,274,805 |
Kinetic Concepts, Inc.* | 9,900 | 557,172 |
Zimmer Holdings, Inc.* | 9,900 | 801,801 |
| 7,550,427 | |
Health Care Providers & Services 2.0% | ||
Aetna, Inc. | 103,100 | 5,595,237 |
Coventry Health Care, Inc.* | 58,500 | 3,639,285 |
Health Net, Inc.* | 37,000 | 1,999,850 |
Humana, Inc.* | 53,100 | 3,710,628 |
Medco Health Solutions, Inc.* | 14,400 | 1,301,616 |
| 16,246,616 | |
Life Sciences Tools & Services 0.4% | ||
Invitrogen Corp.* | 35,400 | 2,893,242 |
Pharmaceuticals 3.0% | ||
Abbott Laboratories | 98,400 | 5,276,208 |
Bristol-Myers Squibb Co. | 152,700 | 4,400,814 |
Eli Lilly & Co. | 133,700 | 7,611,541 |
Endo Pharmaceuticals Holdings, Inc.* | 21,100 | 654,311 |
Johnson & Johnson | 32,400 | 2,128,680 |
Merck & Co., Inc. | 68,900 | 3,561,441 |
Sepracor, Inc.* | 35,700 | 981,750 |
| 24,614,745 | |
Industrials 5.4% | ||
Aerospace & Defense 3.1% | ||
Boeing Co. | 83,400 | 8,756,166 |
Honeywell International, Inc. | 122,200 | 7,267,234 |
Lockheed Martin Corp. | 74,100 | 8,039,109 |
Precision Castparts Corp. | 9,600 | 1,420,608 |
| 25,483,117 | |
Airlines 0.4% | ||
Continental Airlines, Inc. "B"* | 53,600 | 1,770,408 |
Delta Air Lines, Inc.* | 61,200 | 1,098,540 |
| 2,868,948 | |
Commercial Services & Supplies 0.3% | ||
Dun & Bradstreet Corp. | 14,200 | 1,400,262 |
The Brink's Co. | 10,800 | 603,504 |
| 2,003,766 | |
Construction & Engineering 0.2% | ||
Fluor Corp. | 13,400 | 1,929,332 |
Industrial Conglomerates 0.7% | ||
General Electric Co. | 129,800 | 5,373,720 |
Teleflex, Inc. | 6,200 | 483,104 |
| 5,856,824 | |
Machinery 0.5% | ||
PACCAR, Inc. | 50,100 | 4,271,025 |
Road & Rail 0.2% | ||
Ryder System, Inc. | 31,800 | 1,558,200 |
Information Technology 8.1% | ||
Communications Equipment 0.0% | ||
Cisco Systems, Inc.* | 11,500 | 380,765 |
Computers & Peripherals 3.3% | ||
Apple, Inc.* | 47,400 | 7,277,796 |
Hewlett-Packard Co. | 169,400 | 8,434,426 |
International Business Machines Corp. | 83,600 | 9,848,080 |
NCR Corp.* | 23,200 | 1,155,360 |
| 26,715,662 | |
Internet Software & Services 0.7% | ||
eBay, Inc.* | 54,400 | 2,122,688 |
Google, Inc. "A"* | 6,665 | 3,780,855 |
| 5,903,543 | |
IT Services 1.0% | ||
Accenture Ltd. "A" | 107,500 | 4,326,875 |
Computer Sciences Corp.* | 70,800 | 3,957,720 |
| 8,284,595 | |
Semiconductors & Semiconductor Equipment 1.4% | ||
Applied Materials, Inc. | 42,800 | 885,960 |
MEMC Electronic Materials, Inc.* | 35,700 | 2,101,302 |
National Semiconductor Corp. | 160,000 | 4,339,200 |
NVIDIA Corp.* | 61,700 | 2,236,008 |
Teradyne, Inc.* | 113,100 | 1,560,780 |
| 11,123,250 | |
Software 1.7% | ||
Microsoft Corp. | 423,058 | 12,463,288 |
Symantec Corp.* | 52,460 | 1,016,675 |
| 13,479,963 | |
Materials 2.5% | ||
Chemicals 0.5% | ||
Albemarle Corp. | 32,200 | 1,423,240 |
Celanese Corp. "A" | 67,600 | 2,635,048 |
Dow Chemical Co. | 8,400 | 361,704 |
| 4,419,992 | |
Containers & Packaging 0.4% | ||
Ball Corp. | 13,400 | 720,250 |
Packaging Corp. of America | 34,500 | 1,002,915 |
Pactiv Corp.* | 27,500 | 788,150 |
Sonoco Products Co. | 16,100 | 485,898 |
| 2,997,213 | |
Metals & Mining 1.6% | ||
Alcoa, Inc. | 150,000 | 5,868,000 |
Freeport-McMoRan Copper & Gold, Inc. | 47,900 | 5,024,231 |
Southern Copper Corp. | 19,200 | 2,377,536 |
| 13,269,767 | |
Telecommunication Services 2.7% | ||
Diversified Telecommunication Services 2.6% | ||
AT&T, Inc. | 118,259 | 5,003,538 |
CenturyTel, Inc. | 36,100 | 1,668,542 |
Citizens Communications Co. | 38,500 | 551,320 |
Embarq Corp. | 49,800 | 2,768,880 |
Verizon Communications, Inc. | 213,200 | 9,440,496 |
Windstream Corp. | 111,800 | 1,578,616 |
| 21,011,392 | |
Wireless Telecommunication Services 0.1% | ||
United States Cellular Corp.* | 6,100 | 599,020 |
Utilities 1.6% | ||
Electric Utilities 1.0% | ||
Edison International | 21,500 | 1,192,175 |
FirstEnergy Corp. | 38,000 | 2,406,920 |
Southern Co. | 129,200 | 4,687,376 |
| 8,286,471 | |
Multi-Utilities 0.6% | ||
Sempra Energy | 75,900 | 4,411,308 |
Total Common Stocks (Cost $418,380,335) | 434,948,152 |
| Principal Amount ($) | Value ($) |
|
| |
Corporate Bonds 6.0% | ||
Consumer Discretionary 0.5% | ||
TCI Communications, Inc., 8.75%, 8/1/2015 | 1,085,000 | 1,257,784 |
Time Warner Cable, Inc., 144A, 5.4%, 7/2/2012 | 1,981,000 | 1,956,638 |
Viacom, Inc., 5.75%, 4/30/2011 | 678,000 | 684,559 |
| 3,898,981 | |
Consumer Staples 0.2% | ||
CVS Caremark Corp.: |
|
|
6.25%, 6/1/2027 | 487,000 | 471,962 |
6.302%, 6/1/2037 | 1,336,000 | 1,298,417 |
| 1,770,379 | |
Energy 0.6% | ||
Canadian Natural Resources Ltd., 6.5%, 2/15/2037 | 510,000 | 508,754 |
Enterprise Products Operating LP, 7.5%, 2/1/2011 | 71,000 | 75,405 |
SPI Electricity Property Ltd., 144A, 7.25%, 12/1/2016 | 2,875,000 | 3,172,241 |
TransCanada PipeLines Ltd., 6.35%, 5/15/2067 | 745,000 | 715,009 |
XTO Energy, Inc., 6.75%, 8/1/2037 | 590,000 | 615,624 |
| 5,087,033 | |
Financials 2.7% | ||
American General Finance Corp.: |
|
|
Series H, 4.625%, 9/1/2010 | 1,305,000 | 1,279,235 |
Series J, 5.625%, 8/17/2011 | 895,000 | 894,543 |
Axa, 144A, 6.379%, 12/14/2049 | 710,000 | 640,160 |
Corp. Andina de Fomento: |
|
|
5.75%, 1/12/2017 | 570,000 | 559,163 |
6.875%, 3/15/2012 | 210,000 | 222,466 |
Erac USA Finance Co., 144A, 8.0%, 1/15/2011 | 1,180,000 | 1,272,222 |
Farmers Exchange Capital, 144A, 7.2%, 7/15/2048 | 760,000 | 741,414 |
FPL Group Capital, Inc., 6.65%, 6/15/2067 | 1,037,000 | 998,992 |
Goldman Sachs Capital II, 5.793%, 12/29/2049 | 850,000 | 804,312 |
ICICI Bank Ltd., 144A, 6.625%, 10/3/2012 | 450,000 | 450,535 |
Lloyds TSB Group PLC, 144A, 6.267%, 12/31/2049 | 440,000 | 402,458 |
Merrill Lynch & Co., Inc.: |
|
|
6.11%, 1/29/2037 | 520,000 | 489,428 |
6.22%, 9/15/2026 | 520,000 | 509,266 |
MUFG Capital Finance 1 Ltd., 6.346%, 7/29/2049 | 1,335,000 | 1,269,007 |
Oil Insurance Ltd., 144A, 7.558%, 12/29/2049 | 2,055,000 | 2,093,881 |
Royal Bank of Scotland Group PLC, 7.64%, 3/31/2049 | 485,000 | 485,000 |
SMFG Preferred Capital, 144A, 6.078%, 1/29/2049 | 1,195,000 | 1,105,004 |
StanCorp Financial Group, Inc., 6.9%, 5/29/2067 | 720,000 | 693,971 |
Stoneheath Re, 6.868%, 12/29/2049 | 1,460,000 | 1,407,002 |
The Travelers Cos., Inc.: |
|
|
6.25%, 3/15/2037 (a) | 285,000 | 275,554 |
6.25%, 6/15/2037 | 1,155,000 | 1,114,105 |
UDR, Inc., Series E, (REIT), 3.9%, 3/15/2010 | 305,000 | 297,753 |
Wachovia Capital Trust III, 5.8%, 3/15/2042 | 1,610,000 | 1,599,198 |
Woori Bank, 144A, 6.208%, 5/2/2037 | 670,000 | 631,874 |
XL Capital Ltd., Series E, 6.5%, 12/31/2049 | 1,095,000 | 1,022,759 |
Xstrata Finance Canada Ltd., 144A, 5.8%, 11/15/2016 | 711,000 | 707,025 |
| 21,966,327 | |
Health Care 0.1% | ||
Quest Diagnostics, Inc., 6.95%, 7/1/2037 | 336,000 | 345,832 |
Information Technology 0.1% | ||
Broadridge Financial Solutions, Inc., 6.125%, 6/1/2017 | 629,000 | 596,923 |
Seagate Technology HDD Holdings: |
|
|
6.375%, 10/1/2011 (a) | 315,000 | 309,487 |
6.8%, 10/1/2016 | 75,000 | 73,313 |
| 979,723 | |
Materials 0.2% | ||
Celulosa Arauco y Constitucion SA, 5.625%, 4/20/2015 (a) | 1,042,000 | 1,012,441 |
Sappi Papier Holding AG, 144A, 6.75%, 6/15/2012 | 499,000 | 489,778 |
| 1,502,219 | |
Telecommunication Services 0.2% | ||
Nextel Communications, Inc., Series D, 7.375%, 8/1/2015 | 354,000 | 359,772 |
Qwest Corp., 7.625%, 6/15/2015 | 913,000 | 956,368 |
SK Telecom Co., Ltd., 144A, 6.625%, 7/20/2027 | 350,000 | 354,867 |
| 1,671,007 | |
Utilities 1.4% | ||
Arizona Public Service Co., 6.875%, 8/1/2036 | 490,000 | 504,770 |
Commonwealth Edison Co., Series 98, 6.15%, 3/15/2012 | 265,000 | 272,055 |
Constellation Energy Group, 7.6%, 4/1/2032 | 290,000 | 323,536 |
Dominion Resources, Inc.: |
|
|
Series 06-B, 6.3%, 9/30/2066 | 400,000 | 396,299 |
7.5%, 6/30/2066 | 1,305,000 | 1,327,408 |
Energy East Corp.: |
|
|
6.75%, 6/15/2012 (a) | 970,000 | 1,018,820 |
6.75%, 7/15/2036 | 450,000 | 459,292 |
FPL Group Capital, Inc., Series D, 7.3%, 9/1/2067 | 170,000 | 175,067 |
Integrys Energy Group, Inc., 6.11%, 12/1/2066 | 795,000 | 738,565 |
Nevada Power Co., Series N, 6.65%, 4/1/2036 (a) | 1,100,000 | 1,091,934 |
Pedernales Electric Cooperative, Series 2002-A, 144A, 6.202%, 11/15/2032 | 1,730,000 | 1,738,373 |
PPL Capital Funding, Inc., Series A, 6.7%, 3/30/2067 | 1,135,000 | 1,090,508 |
Westar Energy, Inc., 5.95%, 1/1/2035 | 990,000 | 904,590 |
Wisconsin Energy Corp., Series A, 6.25%, 5/15/2067 | 1,200,000 | 1,131,337 |
| 11,172,554 | |
Total Corporate Bonds (Cost $48,850,968) | 48,394,055 | |
| ||
Asset Backed 0.6% | ||
Home Equity Loans | ||
Bayview Financial Acquisition Trust, "1A1", Series 2006-A, 5.614%, 2/28/2041 | 421,804 | 418,691 |
Countrywide Asset-Backed Certificates: |
|
|
"AF3", Series 2005-1, 4.575%, 7/25/2035 | 737,918 | 731,871 |
"A6", Series 2006-S6, 5.657%, 3/25/2034 | 1,320,000 | 1,287,118 |
"A6", Series 2006-15, 5.826%, 10/25/2046 | 450,000 | 432,881 |
"A1B", Series 2007-S1, 5.888%, 11/25/2036 | 738,605 | 734,826 |
"1AF6", Series 2006-11, 6.15%, 9/25/2046 | 1,295,000 | 1,277,128 |
Merrill Lynch Mortgage Investors Trust, Inc., "N1", Series 2005-NC1N, 144A, 5.0%, 10/25/2035 | 21,153 | 20,832 |
Total Asset Backed (Cost $4,971,112) | 4,903,347 | |
| ||
Commercial and Non-Agency Mortgage-Backed Securities 14.2% | ||
Adjustable Rate Mortgage Trust, "1A4", Series 2006-2, 5.762%**, 5/25/2036 | 1,345,000 | 1,342,583 |
Banc of America Commercial Mortgage, Inc.: |
|
|
"A4", Series 2005-5, 5.115%, 10/10/2045 | 1,240,000 | 1,212,157 |
"A2", Series 2007-2, 5.634%, 4/10/2049 | 1,160,000 | 1,172,978 |
"A2", Series 2007-3, 5.838%, 7/10/2012 | 940,000 | 954,124 |
Bear Stearns Adjustable Rate Mortgage Trust: |
|
|
"A1", Series 2006-1, 4.625%**, 2/25/2036 | 2,873,324 | 2,820,869 |
"2A1", Series 2006-4, 5.809%**, 10/25/2036 | 1,089,893 | 1,096,682 |
"22A1", Series 2007-4, 6.011%**, 6/25/2047 | 795,413 | 784,446 |
Bear Stearns Commercial Mortgage Securities, Inc., "AAB", Series 2007-PW16, 5.902%**, 10/11/2016 | 1,550,000 | 1,564,193 |
Chase Mortgage Finance Corp., "3A1", Series 2005-A1, 5.275%**, 12/25/2035 | 1,119,803 | 1,115,202 |
Citicorp Mortgage Securities, Inc., "1A1", Series 2004-8, 5.5%, 10/25/2034 | 897,729 | 898,649 |
Citigroup Commercial Mortgage Trust, "ASB", Series 2006-C5, 5.413%, 10/15/2049 | 1,000,000 | 991,530 |
Citigroup Mortgage Loan Trust, Inc.: |
|
|
"1A2", Series 2006-AR2, 5.535%**, 3/25/2036 | 2,139,283 | 2,144,247 |
"2A1A", Series 2007-AR8, 5.929%**, 7/25/2037 | 2,939,307 | 2,920,936 |
"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 1,155,082 | 1,176,018 |
Citigroup/Deutsche Bank Commercial Mortgage Trust, "F", Series 2007-CD4, 5.555%, 12/11/2049 | 690,000 | 613,294 |
CitiMortgage Alternative Loan Trust, "A1", Series 2006-A2, 6.0%, 5/25/2036 | 1,164,461 | 1,176,619 |
Countrywide Alternative Loan Trust: |
|
|
"A2", Series 2003-21T1, 5.25%, 12/25/2033 | 841,688 | 838,407 |
"A6", Series 2004-14T2, 5.5%, 8/25/2034 | 793,125 | 792,341 |
"1A1", Series 2004-J1, 6.0%, 2/25/2034 | 191,492 | 189,398 |
Countrywide Home Loans: |
|
|
"2A2C", Series 2006-HYB1, 5.219%**, 3/20/2036 | 1,315,000 | 1,311,973 |
"2A1", Series 2006-HYB1, 5.339%**, 3/20/2036 | 937,584 | 935,680 |
"1A1", Series 2007-HY1, 5.701%**, 4/25/2037 | 1,845,626 | 1,844,684 |
Credit Suisse Mortgage Capital Certificates: |
|
|
"3A1", Series 2006-9, 6.0%, 11/25/2036 | 498,631 | 488,191 |
"3A19", Series 2007-5, 6.0%, 7/25/2036 | 1,438,638 | 1,410,202 |
"5A14", Series 2007-1, 6.0%, 2/25/2037 | 1,361,751 | 1,371,880 |
First Horizon Mortgage Pass-Through Trust, "1A2", Series 2006-AR4, 5.505%**, 1/25/2037 | 1,975,144 | 1,974,467 |
GE Capital Commercial Mortgage Corp., "AJ", Series 2007-C1, 5.677%, 12/10/2049 | 820,000 | 794,792 |
GMAC Mortgage Corp. Loan Trust: |
|
|
"A2", Series 2004-J1, 5.25%, 4/25/2034 | 740,110 | 739,685 |
"4A1", Series 2005-AR6, 5.46%**, 11/19/2035 | 1,066,544 | 1,045,117 |
"A1", Series 2006-J1, 5.75%, 4/25/2036 | 1,704,641 | 1,712,821 |
Greenwich Capital Commercial Funding Corp., "A2", Series 2007-GG9, 5.381%, 3/10/2039 | 2,150,000 | 2,154,346 |
GS Mortgage Securities Corp. II: |
|
|
"A2", Series 2007-GG10, 5.778%, 8/10/2045 | 2,130,000 | 2,164,797 |
"AAB", Series 2007-GG10, 5.993%, 8/10/2045 | 2,100,000 | 2,126,423 |
"J", Series 2007-GG10, 144A, 5.993%, 8/10/2045 | 1,419,000 | 1,091,367 |
"K", Series 2007-GG10, 144A, 5.993%, 8/10/2045 | 993,000 | 721,524 |
GSR Mortgage Loan Trust: |
|
|
"2A1", Series 2007-AR2, 5.495%, 5/25/2047 | 1,995,521 | 1,994,217 |
"1A2", Series 2005-3F, 5.5%, 3/25/2035 | 1,955,000 | 1,952,679 |
"2A1", Series 2007-AR1, 6.01%**, 3/25/2037 | 1,799,951 | 1,816,332 |
IndyMac Inda Mortgage Loan Trust, "1A1", Series 2006-AR3, 5.36%**, 12/25/2036 | 1,387,568 | 1,382,959 |
JPMorgan Chase Commercial Mortgage Securities Corp.: |
|
|
"ASB", Series 2007-CB19, 5.92%**, 2/12/2049 | 1,280,000 | 1,292,565 |
"ASB", Series 2007-LD11, 6.007%**, 6/15/2049 | 2,140,000 | 2,169,997 |
JPMorgan Mortgage Trust: |
|
|
"6A1", Series 2007-A1, 4.78%**, 7/25/2035 | 2,023,980 | 2,000,777 |
"3A3", Series 2004-A3, 4.975%**, 7/25/2034 | 1,380,000 | 1,314,365 |
"2A1R", Series 2006-A7, 5.455%**, 1/25/2037 | 1,782,263 | 1,781,423 |
"1A1", Series 2007-A4, 5.487%**, 6/25/2037 | 2,035,186 | 2,027,246 |
"2A1" Series 2006-A5, 5.5%**, 8/25/2036 | 1,218,399 | 1,223,688 |
"2A4", Series 2006-A2, 5.755%**, 4/25/2036 | 2,000,000 | 1,991,962 |
Lehman Mortgage Trust: |
|
|
"3A3", Series 2006-1, 5.5%, 2/25/2036 | 1,253,775 | 1,253,571 |
"1A10", Series 2006-3, 6.0%, 7/25/2036 | 1,180,824 | 1,194,081 |
Master Adjustable Rate Mortgages Trust, "B1", Series 2004-13, 3.814%**, 12/21/2034 | 1,376,682 | 1,338,767 |
Master Alternative Loans Trust, "8A1", Series 2004-3, 7.0%, 4/25/2034 | 47,589 | 47,939 |
Master Asset Securitization Trust, "2A7", Series 2003-9, 5.5%, 10/25/2033 | 1,019,680 | 990,364 |
Merrill Lynch Mortgage Investors Trust, "A2", Series 2005-A5, 4.566%, 6/25/2035 | 175,000 | 171,212 |
Merrill Lynch/Countrywide Commercial Mortgage Trust, "ASB", Series 2007-7, 5.745%, 6/12/2050 | 700,000 | 704,482 |
Morgan Stanley Capital I: |
|
|
"A2", Series 2007-HQ11, 5.359%, 2/12/2044 | 2,200,000 | 2,201,992 |
"AAB", Series 2007-IQ14, 5.654%, 4/15/2049 | 1,410,000 | 1,410,527 |
New York Mortgage Trust, "2A3", Series 2006-1, 5.651%**, 5/25/2036 | 1,400,000 | 1,409,679 |
Residential Accredit Loans, Inc.: |
|
|
"A3", Series 2004-QS11, 5.5%, 8/25/2034 | 579,197 | 577,928 |
"CB", Series 2004-QS2, 5.75%, 2/25/2034 | 692,762 | 677,392 |
Residential Funding Mortgage Security I, "2A2", Series 2007-SA1, 5.623%**, 2/25/2037 | 641,509 | 639,488 |
Structured Adjustable Rate Mortgage Loan Trust: |
|
|
"6A3", Series 2005-21, 5.4%, 11/25/2035 | 1,190,000 | 1,124,154 |
"5A1", Series 2005-18, 5.529%**, 9/25/2035 | 943,925 | 945,443 |
"2A1", Series 2006-1, 5.613%**, 2/25/2036 | 568,032 | 564,905 |
Structured Asset Securities Corp., "4A1", Series 2005-6, 5.0%, 5/25/2035 | 351,928 | 330,592 |
Wachovia Bank Commercial Mortgage Trust: |
|
|
"A3", Series 2007-C30, 5.246%, 12/15/2043 | 1,000,000 | 994,736 |
"A5", Series 2007-C30, 5.342%, 12/15/2043 | 1,300,000 | 1,272,916 |
"A2", Series 2007-C31, 5.421%, 4/15/2047 | 3,510,000 | 3,513,385 |
"APB", Series 2005-C22, 5.445%**, 12/15/2044 | 1,300,000 | 1,293,790 |
"A2", Series 2007-C32, 5.924%**, 6/15/2049 | 1,420,000 | 1,442,079 |
"H", Series 2007-C32, 144A, 5.929%**, 6/15/2049 | 990,000 | 832,356 |
Washington Mutual Mortgage Pass-Through Certificates Trust: |
|
|
"1A3", Series 2005-AR14, 5.058%**, 12/25/2035 | 1,325,000 | 1,313,900 |
"1A3", Series 2005-AR16, 5.104%**, 12/25/2035 | 1,305,000 | 1,287,907 |
"1A1", Series 2006-AR18, 5.349%**, 1/25/2037 | 1,321,225 | 1,316,171 |
"2A2", Series 2006-AR18, 5.497%**, 1/25/2037 | 1,385,000 | 1,368,692 |
"1A1", Series 2007-HY4, 5.559%**, 4/25/2037 | 1,930,477 | 1,923,807 |
"1A1", Series 2006-AR16, 5.606%**, 12/25/2036 | 1,648,295 | 1,642,518 |
"4A1", Series 2007-HY7, 5.876%**, 7/25/2037 | 2,191,830 | 2,142,856 |
"1A3", Series 2006-AR8, 5.895%**, 8/25/2046 | 1,395,000 | 1,406,987 |
Wells Fargo Mortgage Backed Securities Trust: |
|
|
"2A5", Series 2006-AR2, 5.095%**, 3/25/2036 | 3,867,508 | 3,834,079 |
"3A2", Series 2006-AR8, 5.237%**, 4/25/2036 | 2,070,000 | 2,069,359 |
"A1", Series 2006-3, 5.5%, 3/25/2036 | 1,752,017 | 1,750,848 |
"A6", Series 2006-AR11, 5.52%**, 8/25/2036 | 1,995,000 | 1,964,298 |
"1A3", Series 2006-6, 5.75%, 5/25/2036 | 1,268,662 | 1,274,900 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $115,090,504) | 114,868,932 | |
| ||
Collateralized Mortgage Obligations 2.1% | ||
Federal Home Loan Mortgage Corp.: |
|
|
"LN", Series 3145, 4.5%, 10/15/2034 | 1,317,208 | 1,271,771 |
"BE" Series 3128, 5.0%, 5/15/2033 | 1,400,000 | 1,336,789 |
"BG", Series 2869, 5.0%, 7/15/2033 | 315,000 | 304,505 |
"KD", Series 2915, 5.0%, 9/15/2033 | 1,460,000 | 1,407,622 |
"NE", Series 2802, 5.0%, 2/15/2033 | 880,000 | 852,799 |
"NE", Series 2921, 5.0%, 9/15/2033 | 2,080,000 | 2,002,658 |
"PD", Series 2844, 5.0%, 12/15/2032 | 1,175,000 | 1,137,116 |
"PE", Series 2864, 5.0%, 6/15/2033 | 2,080,000 | 2,011,879 |
"TE", Series 2780, 5.0%, 1/15/2033 | 875,000 | 848,428 |
"XD", Series 2941, 5.0%, 5/15/2033 | 2,010,000 | 1,934,857 |
"PE", Series 2378, 5.5%, 11/15/2016 | 1,177,547 | 1,181,826 |
Federal National Mortgage Association: |
|
|
"YD", Series 2005-94, 4.5%, 8/25/2033 | 1,445,000 | 1,365,499 |
"HE", Series 2005-22, 5.0%, 10/25/2033 | 1,290,000 | 1,240,079 |
"A2", Series 1998-M1, 6.25%, 1/25/2008 | 41,492 | 41,375 |
Total Collateralized Mortgage Obligations (Cost $17,022,426) | 16,937,203 | |
| ||
Mortgage Backed Securities Pass-Throughs 4.5% | ||
Federal Home Loan Mortgage Corp.: |
|
|
4.5%, 6/1/2020 | 2,166,686 | 2,096,354 |
5.5%, 10/1/2023 | 919,250 | 907,615 |
6.0%, 12/1/2025 | 1,011,074 | 1,017,906 |
6.5%, 1/1/2035 | 900,941 | 923,570 |
Federal National Mortgage Association: |
|
|
4.5%, with various maturities from 6/1/2019 until 10/1/2033 | 9,502,182 | 9,130,072 |
5.5%, with various maturities from 11/1/2024 until 7/1/2037 | 15,276,086 | 15,010,363 |
6.0%, with various maturities from 1/1/2024 until 4/1/2024 | 1,876,922 | 1,888,726 |
6.5%, with various maturities from 5/1/2023 until 8/1/2036 | 5,322,059 | 5,440,715 |
9.0%, 11/1/2030 | 59,552 | 65,401 |
Total Mortgage Backed Securities Pass-Throughs (Cost $36,492,684) | 36,480,722 | |
| ||
Municipal Bonds and Notes 1.4% | ||
Arroyo Grande, CA, Redevelopment Agency, Tax Allocation, Redevelopment Project Area, 5.304%, 9/1/2019 (b) | 1,280,000 | 1,254,374 |
Hammond, IN, Redevelopment Authority Lease Rent Revenue, Hammond Marina Project: |
|
|
5.42%, 2/1/2010 (b) | 1,090,000 | 1,103,494 |
5.57%, 2/1/2014 (b) | 610,000 | 615,752 |
Los Angles, CA, Community Redevelopment Agency, Finance Authority Revenue, Pooled Financing, Series L, 6.15%, 9/1/2026 (b) | 640,000 | 654,285 |
Mount Laurel Township, NJ, Municipal Utilities Authority System Revenue, Series B, 3.9%, 7/1/2010 (b) | 950,000 | 928,577 |
San Diego, CA, Redevelopment Agency, Taxable Housing Allocation, 5.81%, 9/1/2019 (b) | 2,300,000 | 2,316,146 |
Suffolk, VA, Multi-Family Housing Revenue, Redevelopment & Housing Authority, Windsor at Potomac, Series T, 6.6%, 7/1/2015 | 1,740,000 | 1,829,593 |
Washington, State Economic Development Finance Authority Revenue, CSC Tacoma LLC Project, Series A, 3.8%, 10/1/2011 (b) | 1,105,000 | 1,056,977 |
Whittier, CA, Redevelopment Agency, Tax Allocation, Housing Projects, Series B, 6.09%, 11/1/2038 (b) | 1,400,000 | 1,404,606 |
Total Municipal Bonds and Notes (Cost $11,122,860) | 11,163,804 | |
| ||
Government and Agency Obligations 6.9% | ||
US Treasury Obligations | ||
US Treasury Bills: |
|
|
4.72%***, 10/18/2007 (c) | 110,000 | 109,755 |
4.73%***, 10/18/2007 (c) | 115,000 | 114,743 |
4.815%***, 10/18/2007 (c) | 1,000,000 | 998,467 |
4.815%***, 10/18/2007 (c) | 9,782,000 | 9,767,004 |
US Treasury Bonds: |
|
|
5.0%, 5/15/2037 (a) | 3,658,000 | 3,752,307 |
6.0%, 2/15/2026 (a) | 5,972,000 | 6,763,290 |
US Treasury Notes: |
|
|
4.0%, 2/15/2015 | 545,000 | 530,226 |
4.125%, 8/31/2012 (a) | 26,674,000 | 26,565,650 |
4.875%, 6/30/2012 (a) | 7,394,000 | 7,600,803 |
Total Government and Agency Obligations (Cost $55,932,688) | 56,202,245 |
|
| Value ($) |
|
| |
Preferred Stocks 0.0% | ||
Arch Capital Group Ltd., Series A, 8.0% (Cost $20,498) | 809 | 20,858 |
| ||
Securities Lending Collateral 4.4% | ||
Daily Assets Fund Institutional, 5.38% (d) (e) (Cost $35,605,795) | 35,605,795 | 35,605,795 |
| ||
Cash Equivalents 8.9% | ||
Cash Management QP Trust, 5.14% (d) (Cost $71,961,163) | 71,961,163 | 71,961,163 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $815,451,033)+ | 102.7 | 831,486,276 |
Other Assets and Liabilities, Net | (2.7) | (21,664,433) |
Net Assets | 100.0 | 809,821,843 |
** 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 September 30, 2007.
*** Annualized yield at time of purchase; not a coupon rate
+ The cost for federal income tax purposes was $820,191,282. At September 30, 2007, net unrealized appreciation for all securities based on tax cost was $11,294,994. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $29,360,592 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $18,065,598.
(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at September 30, 2007 amounted to $34,921,714 which is 4.3% of net assets.
(b) Bond is insured by one of these companies
Insurance Coverage | As a % of Total Investment Portfolio |
Financial Guaranty Insurance Company | 0.2 |
MBIA Corp. | 0.6 |
XL Capital Insurance | 0.3 |
(d) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
REIT: Real Estate Investment Trust
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
At September 30, 2007, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ |
10 Year US Treasury Note | 12/29/2007 | 204 | 22,315,308 | 22,293,375 | (21,933) |
EOE Dutch Stock Index | 10/19/2007 | 94 | 14,598,586 | 14,543,261 | (55,325) |
Hang Seng Index | 10/30/2007 | 253 | 43,222,167 | 44,231,919 | 1,009,752 |
S&P 500 Index | 12/20/2007 | 20 | 7,446,448 | 7,690,479 | 244,032 |
Share Price Index 200 | 12/20/2007 | 52 | 7,262,970 | 7,620,385 | 357,415 |
Total net unrealized appreciation | 1,533,941 |
At September 30, 2007, open futures contracts sold were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Depreciation ($) |
S&P 500 Index | 12/20/2007 | 115 | 42,835,571 | 44,220,375 | (1,384,804) |
As of September 30, 2007, the Fund had the following open forward foreign currency exchange contracts:
Contracts to Deliver |
| In Exchange For |
| Settlement Date | Unrealized Appreciation ($) | ||
USD | 474,266 | | AUD | 568,000 | | 12/18/2007 | 28,054 |
USD | 13,294,748 | | CAD | 13,805,000 | | 12/18/2007 | 597,440 |
USD | 38,969,725 | | GBP | 19,235,000 | | 12/18/2007 | 315,029 |
USD | 33,193,600 | | NZD | 47,150,000 | | 12/18/2007 | 2,266,811 |
Total unrealized appreciation | 3,207,334 |
Currency Abbreviations |
AUD Australian Dollar CAD Canadian Dollar GBP Pound Sterling NZD New Zealand Dollar USD United States Dollar |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of September 30, 2007 (Unaudited) | |
Assets | |
Investments: Investments in securities, at value (cost $707,884,075) — including $34,921,714 of securities loaned | $ 723,919,318 |
Investment in Daily Assets Fund Institutional (cost $35,605,795)* | 35,605,795 |
Investment in Cash Management QP Trust (cost $71,961,163) | 71,961,163 |
Total investments, at value (cost $815,451,033) | 831,486,276 |
Cash | 20,000 |
Foreign currency, at value (cost $14,879,226) | 15,234,159 |
Receivable for investments sold | 4,541,370 |
Dividends receivable | 317,634 |
Interest receivable | 2,471,649 |
Receivable for Fund shares sold | 1,113,925 |
Unrealized appreciation on forward foreign currency exchange contracts | 3,207,334 |
Receivable for daily variation margin on open futures contracts | 1,217,538 |
Due from Advisor | 134,737 |
Other assets | 40,309 |
Total assets | 859,784,931 |
Liabilities | |
Payable for investments purchased | 13,584,498 |
Payable upon return of securities loaned | 35,605,795 |
Payable for Fund shares redeemed | 1,355 |
Accrued management fee | 286,662 |
Other accrued expenses and payables | 484,778 |
Total liabilities | 49,963,088 |
Net assets, at value | $ 809,821,843 |
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of September 30, 2007 (Unaudited) (continued) | |
Net Assets consist of | |
Undistributed net investment income | 147,029 |
Net unrealized appreciation (depreciation) on: Investments | 16,035,243 |
Futures | 149,137 |
Foreign currency | 3,563,439 |
Accumulated net realized gain (loss) | 12,110,094 |
Paid-in capital | 777,816,901 |
Net assets, at value | $ 809,821,843 |
Net Asset Value | |
Class S Net Asset Value offering and redemption price(a) per share ($5,017,158 ÷ 452,584 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized) | $ 11.09 |
Institutional Class Net Asset Value offering and redemption price(a) per share ($804,804,685 ÷ 69,612,098 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized) | $ 11.56 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended September 30, 2007 (Unaudited) | |
Investment Income | |
Income: Dividends | $ 3,420,350 |
Interest (net of foreign taxes withheld of $6,379) | 7,485,277 |
Interest — Cash Management QP Trust | 2,125,368 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates | 46,971 |
Total Income | 13,077,966 |
Expenses: Management fee | 2,315,135 |
Administration fee | 397,197 |
Services to shareholders | 642,542 |
Auditing | 37,938 |
Legal | 17,975 |
Trustees' fees and expenses | 14,642 |
Custodian fee | 15,887 |
Reports to shareholders | 25,039 |
Registration fees | 16,487 |
Other | 29,445 |
Total expenses before expense reductions | 3,512,287 |
Expense reductions | (1,316,044) |
Total expenses after expense reductions | 2,196,243 |
Net investment income | 10,881,723 |
Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) from: Investments | 13,896,029 |
Futures | 13,893,465 |
Foreign currency | 2,188,461 |
| 29,977,955 |
Change in net unrealized appreciation (depreciation) on: Investments | 3,681,334 |
Futures | (2,181,813) |
Foreign currency | 2,828,432 |
| 4,327,953 |
Net gain (loss) | 34,305,908 |
Net increase (decrease) in net assets resulting from operations | $ 45,187,631 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Six Months Ended September 30, 2007 (Unaudited) | Year Ended March 31, 2007 |
Operations: Net investment income | $ 10,881,723 | $ 21,334,561 |
Net realized gain (loss) | 29,977,955 | 93,749,918 |
Change in net unrealized appreciation (depreciation) | 4,327,953 | (41,015,364) |
Net increase (decrease) in net assets resulting from operations | 45,187,631 | 74,069,115 |
Distributions to shareholders from: Net investment income Class S | (90,317) | (531,935) |
Institutional Class | (14,969,754) | (18,648,813) |
Net realized gains Class S | (494,435) | (899,280) |
Institutional Class | (74,807,873) | (19,732,118) |
Fund share transactions: Proceeds from shares sold | 53,017,738 | 62,454,436 |
Reinvestment of distributions | 90,356,748 | 39,808,921 |
Cost of shares redeemed | (54,056,040) | (128,188,418) |
Redemption fees | 25,816 | 63,097 |
Net increase (decrease) in net assets from Fund share transactions | 89,344,262 | (25,861,964) |
Increase (decrease) in net assets | 44,169,514 | 8,395,005 |
Net assets at beginning of period | 765,652,329 | 757,257,324 |
Net assets at end of period (including undistributed net investment income of $147,029 and $4,325,377, respectively) | $ 809,821,843 | $ 765,652,329 |
The accompanying notes are an integral part of the financial statements.
Class S+ Years Ended March 31, | 2007a | 2007 | 2006 | 2005 | 2004b |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.85 | $ 11.30 | $ 10.62 | $ 10.43 | $ 9.75 |
Income (loss) from investment operations: Net investment incomec | .14 | .33 | .22 | .21 | .11 |
Net realized and unrealized gain (loss) | .50 | .80 | .70 | .30 | .93 |
Total from investment operations | .64 | 1.13 | .92 | .51 | 1.04 |
Less distributions from: Net investment income | (.21) | (.25) | (.24) | (.32) | (.36) |
Net realized gains | (1.19) | (.33) | — | — | — |
Total distributions | (1.40) | (.58) | (.24) | (.32) | (.36) |
Redemption fees | .00*** | .00*** | .00*** | .00*** | — |
Net asset value, end of period | $ 11.09 | $ 11.85 | $ 11.30 | $ 10.62 | $ 10.43 |
Total Return (%)d | 5.67** | 10.16 | 8.77 | 4.92 | 10.79** |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 5 | 5 | 31 | 56 | 69 |
Ratio of expenses before expense reductions (%) | 1.09* | .93 | 1.41 | 1.33e | 1.41e* |
Ratio of expenses after expense reductions (%) | .92* | .71 | 1.00 | 1.00e | 1.00e* |
Ratio of net investment income (%) | 2.37* | 2.67 | 1.92 | 1.90 | 1.65* |
Portfolio turnover rate (%)g | 234** | 174 | 101 | 106f | 115e,f** |
+ On October 23, 2006, Investment Class was renamed Class S. a For the six months ended September 30, 2007 (Unaudited). b For the period from July 25, 2003 (commencement of operations of Investment Class shares) to March 31, 2004. c Based on average shares outstanding during the period. d Total return would have been lower had certain expenses not been reduced. e The ratio includes expenses allocated from the Asset Management Portfolio, the Fund's master portfolio through August 20, 2004. f 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. g The portfolio turnover rate including mortgage dollar roll transactions was 238%, 175%, 108%, 122% and 124% for the six months ended September 30, 2007 and 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, | 2007a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data | ||||||
Net asset value, beginning of period | $ 12.29 | $ 11.74 | $ 11.04 | $ 10.84 | $ 9.17 | $ 10.92 |
Income (loss) from investment operations: Net investment incomeb | .16 | .34 | .27 | .25 | .21 | .25 |
Net realized and unrealized gain (loss) | .53 | .85 | .74 | .33 | 1.94 | (1.53) |
Total from investment operations | .69 | 1.19 | 1.01 | .58 | 2.15 | (1.28) |
Less distributions from: Net investment income | (.23) | (.31) | (.31) | (.38) | (.48) | (.47) |
Net realized gain | (1.19) | (.33) | — | — | — | — |
Total distributions | (1.42) | (.64) | (.31) | (.38) | (.48) | (.47) |
Redemption fees | .00*** | .00*** | .00*** | .00*** | — | — |
Net asset value, end of period | $ 11.56 | $ 12.29 | $ 11.74 | $ 11.04 | $ 10.84 | $ 9.17 |
Total Return (%)c | 5.87** | 10.28 | 9.19 | 5.42 | 23.71 | (11.88) |
Ratios to Average Net Assets and Supplemental Data | ||||||
Net assets, end of period ($ millions) | 805 | 761 | 726 | 719 | 702 | 548 |
Ratio of expenses before expense reductions (%) | .88* | .89 | .91 | .83d | .91d | .93d |
Ratio of expenses after expense reductions (%) | .55* | .55 | .55 | .55d | .55d | .55d |
Ratio of net investment income (%) | 2.74* | 2.83 | 2.37 | 2.35 | 2.08 | 2.61 |
Portfolio turnover rate (%) | 234f** | 174f | 101f | 106e,f | 115e,f | 133e |
a For the six months ended September 30, 2007 (Unaudited). 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 and 2003 ratios represent the Asset Management Portfolio only. f The portfolio turnover rate including mortgage dollar roll transactions was 238%, 175%, 108%, 122% and 124% for the six months ended September 30, 2007 and the years ended March 31, 2007, 2006, 2005 and 2004, respectively. * Annualized ** Not annualized *** Amount is less than $.005. |
Notes to Financial Statements (Unaudited)
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.
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. Institutional Class shares have lower ongoing expenses than Class S shares. Class S shares are not subject to initial or contingent deferred sales charges and are generally not available to new investors except under certain circumstances.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of both classes of shares except that each class bears certain expenses unique to that class such as services to shareholders and certain other class specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. 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 September 30, 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 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.
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, subject to certain limitations under Sections 382-383 of the Internal Revenue Code.
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. Management has evaluated the application of FIN 48 and has determined there is no impact 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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
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 six months ended September 30, 2007, purchases and sales of investment securities (excluding short-term investments, US Treasury obligations and mortgage dollar roll transactions) aggregated $677,346,995 and $643,055,988, respectively. Purchases and sales of US Treasury obligations aggregated $173,751,623 and $171,744,727, respectively. Purchases and sales of mortgage dollar roll transactions aggregated $14,097,375 and $14,029,880, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund or delegates such responsibility to the Fund's subadvisor.
Pursuant to a written contract, Aberdeen Asset Management Inc. ("AAMI"), a direct, wholly owned subsidiary of Aberdeen Asset Management PLC, serves as subadvisor to the Fund with respect to the fixed income portion of the Fund's portfolio. AAMI is paid for its services by the Advisor from its fee as investment advisor to the Fund.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets computed and accrued daily and payable monthly, at the following annual rates:
First $250 million of the Fund's average daily net assets | .600% |
Next $750 million of such net assets | .575% |
Over $1 billion of such net assets | .550% |
For the period from April 1, 2007 through September 30, 2007, 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 Institutional Class at 1.03%.
Effective October 1, 2006, the Advisor has agreed to voluntarily waive a portion of its fees and reimburse or pay total operating expenses at 0.55% for Institutional Class (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, organization and offering expenses). This voluntary waiver or reimbursement may be terminated at any time at the option of the Advisor.
Accordingly, for the six months ended September 30, 2007, the Advisor waived a portion of its management fee pursuant to the Investment Management Agreement aggregating $681,267 and the amount charged aggregated $1,633,868 which was equivalent to an annualized effective rate of 0.41% of the Fund's average daily net assets.
In addition, for the six months ended September 30, 2007, the Advisor reimbursed $632,909 of services to shareholders from non-affiliated entities for the Institutional Class.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the six months ended September 30, 2007, the Advisor received an Administration Fee of $397,197, of which $64,900 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 the Fund. 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 fee it receives from the Fund. For the six months ended September 30, 2007, the amounts charged to the Fund by DWS-SISC were as follows:
Services to Shareholders | Total Aggregated | Waived | Unpaid at September 30, 2007 |
Class S | $ 1,025 | $ — | $ 347 |
Institutional Class | 243 | 243 | — |
| $ 1,268 | $ 243 | $ 347 |
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended September 30, 2007, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $22,232, of which $9,582 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 September 30, 2007, one or more shareholders individually held greater than 10% of the outstanding shares of the Fund. These shareholders held 64%, 21% and 10%, respectively, of the total shares outstanding of the Fund.
E. Fee Reductions
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 six months ended September 30, 2007, the Fund's custodian fees were reduced by $1,625 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 0.35 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:
| Six Months Ended | Year Ended | ||
| Shares | Dollars | Shares | Dollars |
Shares sold | ||||
Class S | 24,490 | $ 280,950 | 350,375 | $ 4,045,889 |
Institutional Class | 4,316,246 | 52,736,788 | 4,825,664 | 58,408,547 |
|
| $ 53,017,738 |
| $ 62,454,436 |
Shares issued to shareholders in reinvestment of distributions | ||||
Class S | 53,563 | $ 584,752 | 122,508 | $ 1,430,927 |
Institutional Class | 7,889,544 | 89,771,996 | 3,164,121 | 38,377,994 |
|
| $ 90,356,748 |
| $ 39,808,921 |
Shares redeemed | ||||
Class S | (58,789) | $ (677,920) | (2,814,416) | $ (33,157,167) |
Institutional Class | (4,487,216) | (53,378,120) | (7,919,157) | (95,031,251) |
|
| $ (54,056,040) |
| $ (128,188,418) |
Redemption fees | $ 25,816 |
| $ 63,097 | |
Net increase (decrease) | ||||
Class S | 19,264 | $ 187,782 | (2,341,533) | $ (27,680,311) |
Institutional Class | 7,718,574 | 89,156,480 | 70,628 | 1,818,347 |
|
| $ 89,344,262 |
| $ (25,861,964) |
Investment Management Agreement Approval
The Fund's Trustees approved the continuation of the Fund's current investment management agreement with DIMA and sub-advisory agreement between DIMA and Aberdeen Asset Management Inc. ("AAMI") in September 2007.
In terms of the process that the Trustees followed prior to approving the agreement, shareholders should know that:
At the present time, all but one of your Fund's Trustees are independent of DIMA and its affiliates.
The Trustees meet frequently to discuss fund matters. Each year, the Trustees dedicate part or all of several meetings to contract review matters. In connection with reviewing the Fund's investment management agreement, the Trustees also review the terms of the Fund's Rule 12b-1 plan, distribution agreement, administration agreement, transfer agency agreement and other material service agreements.
In connection with the Board's 2007 contract review, the Board formed a special committee to facilitate careful review of the funds' contractual arrangements. After reviewing the Fund's arrangements, that committee recommended that the Board vote to approve the continuation of the Fund's investment management agreement and sub-advisory agreement.
The Trustees regularly meet privately with their independent counsel to discuss contract review and other matters. In addition, the Trustees were also advised by two consultants, including the Fund's independent fee consultant, in the course of their 2007 review of the Fund's contractual arrangements. In particular, the Trustees considered the report prepared by the independent fee consultant in connection with their deliberations.
The sub-advisory fee paid to AAMI is paid by DIMA out of its fee and not directly by the Fund.
The Trustees believe that a long-term relationship with a capable, conscientious adviser is in the best interest of shareholders. As you may know, DIMA is part of Deutsche Bank, a major global banking institution that is engaged in a wide range of financial services. The Trustees believe that there are significant advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.
Shareholders may focus primarily on fund performance and fees, but the Fund's Trustees consider these and many other factors, including the quality and integrity of DIMA's and AAMI's personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.
In determining to approve the continuation of the Fund's current investment management agreement and sub-advisory agreement, the Board considered all factors that it believes relevant to the interests of Fund shareholders, including:
The investment management fee schedule for the Fund, including (i) comparative information provided by Lipper regarding investment management fee rates paid to other investment advisers by similar funds and (ii) fee rates paid to DIMA by similar funds and institutional accounts advised by DIMA (if any). With respect to management fees paid to other investment advisers by similar funds, the Trustees noted that the fee rates paid by the Fund were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2006). The Board gave a lesser weight to fees paid by similar institutional accounts advised by DIMA, in light of the material differences in the scope of services provided to mutual funds as compared to those provided to institutional accounts. Taking into account the foregoing, the Board concluded that the fee schedule in effect for the Fund represents reasonable compensation in light of the nature, extent and quality of the investment services being provided to the Fund.
The extent to which economies of scale would be realized as the Fund grows. In this regard, the Board noted that the Fund's investment management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between Fund shareholders and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
The total operating expenses of the Fund. In this regard, the Board noted that the total (net) operating expenses of the Fund (Class S shares) are expected to be lower than the median (1st quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2006). The Board considered the expenses of this class to be representative for purposes of evaluating other classes of shares. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would be competitive relative to the applicable Lipper universe.
The investment performance of the Fund and DIMA, both absolute and relative to various benchmarks and industry peer groups. The Board noted that the Fund's performance (Institutional Class shares) was in the 2nd quartile of the applicable Lipper universe for each of the one-, three- and five-year periods ended December 31, 2006. The Board also observed that the Fund has outperformed its benchmark in the one-, three- and five-year periods ended December 31, 2006. The Board recognized that DIMA has made significant changes in its investment personnel and processes in recent years in an effort to improve long-term performance.
The nature, extent and quality of the advisory services provided by DIMA and AAMI. The Board considered extensive information regarding DIMA, including DIMA's personnel (including particularly those personnel with responsibilities for providing services to the Fund), resources, policies and investment processes. The Board also considered the terms of the current investment management agreement and the sub-advisory agreement, including the scope of services provided under the agreement. In this regard, the Board concluded that the quality and range of services provided by DIMA and AAMI have benefited and should continue to benefit the Fund and its shareholders.
The costs of the services to, and profits realized by, DIMA and its affiliates from their relationships with the Fund. The Board reviewed information concerning the costs incurred and profits realized by DIMA during 2006 from providing investment management services to the Fund (and, separately, to the entire DWS Scudder fund complex), and reviewed with DIMA the cost allocation methodology used to determine DIMA's profitability. In analyzing DIMA's costs and profits, the Board also reviewed the fees paid to and services provided by DIMA and its affiliates with respect to administrative services, transfer agent services, shareholder servicing and distribution (including fees paid pursuant to 12b-1 plans), as well as information regarding other possible benefits derived by DIMA and its affiliates as a result of DIMA's relationship with the Fund. As part of this review, the Board considered information provided by an independent accounting firm engaged to review DIMA's cost allocation methodology and calculations. The Board concluded that the Fund's investment management fee schedule represented reasonable compensation in light of the costs incurred by DIMA and its affiliates in providing services to the Fund. The Board also reviewed information regarding the profitability of certain similar investment management firms. The Board noted that while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates' overall profitability with respect to the DWS Scudder fund complex (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.
The practices of DIMA and AAMI regarding the selection and compensation of brokers and dealers executing portfolio transactions for the Fund. The Board considered that a portion of the Fund's brokerage may be allocated to affiliates of DIMA or AAMI, subject to compliance with applicable SEC rules. The Board also considered that, subject to ongoing review by the Board, a limited portion of the Fund's brokerage may be allocated to brokers who acquire (and provide to DIMA and its affiliates) research services from third parties that are generally useful to DIMA and its affiliates in managing client portfolios. The Board indicated that it would continue to monitor the allocation of the Fund's brokerage to ensure that the principle of "best price and execution" remains paramount in the portfolio trading process.
DIMA's commitment to and record of compliance, including its written compliance policies and procedures. In this regard, the Board considered DIMA's commitment to indemnify the Fund against any costs and liabilities related to lawsuits or regulatory actions arising from allegations regarding market timing, revenue sharing, fund valuation or other subjects arising from or relating to pending regulatory inquiries. The Board also considered the significant attention and resources dedicated by DIMA to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of DIMA's chief compliance officer; (ii) the large number of compliance personnel who report to DIMA's chief compliance officer; and (iii) the substantial commitment of resources by DIMA and its affiliates to compliance matters.
Deutsche Bank's commitment to its US mutual fund business. The Board considered recent and ongoing efforts by Deutsche Bank to restructure its US mutual fund business to improve efficiency and competitiveness and to reduce compliance and operational risk. The Board considered assurances received from Deutsche Bank that it would commit the resources necessary to maintain high-quality services to the Fund and its shareholders. The Board also considered Deutsche Bank's strategic plans for its US mutual fund business, the potential benefits to Fund shareholders and Deutsche Bank's management of one of Europe's most successful fund groups.
Based on all of the foregoing, the Board determined to continue the Fund's current investment management agreement and the sub-advisory agreement, and concluded that the continuation of such agreements was in the best interests of the Fund's shareholders.
In reaching this conclusion the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, many of which were in executive session with only the Independent Trustees and their counsel present. It is possible that individual Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the current agreements.
Summary of Management Fee Evaluation by Independent Fee Consultant
October 26, 2007
Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Scudder Funds. My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2007, including my qualifications, the evaluation process for each of the DWS Scudder Funds, consideration of certain complex-level factors, and my conclusions.
Qualifications
For more than 30 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.
Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past several years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.
I hold a Master of Business Administration degree, with highest honors, from Harvard University; and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds, serve on the board of directors of a private market research company, and have served in various leadership and financial oversight capacities with non-profit organizations.
Evaluation of Fees for each DWS Scudder Fund
My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 136 Fund portfolios in the DWS Scudder Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).
In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper, Strategic Insight, and Morningstar databases and drew on my industry knowledge and experience.
To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.
In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.
Fees and Expenses Compared with Other Funds
The competitive fee and expense evaluation for each fund focused on two primary comparisons:
The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.
The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.
These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.
DeAM's Fees for Similar Services to Others
DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Scudder Fund. These similar products included the other DWS Scudder Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.
Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.
Costs and Profit Margins
DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.
Economies of Scale
Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Scudder Fund compares with this industry observation, I reviewed:
The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.
Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.
How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.
Quality of Service — Performance
The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.
In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.
I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.
Complex-Level Considerations
While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:
I reviewed DeAM's profitability analysis for all DWS Scudder funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.
I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.
I considered how aggregated DWS Scudder Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.
I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.
Findings
Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Scudder Funds are reasonable.
Thomas H. Mack
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For More Information | The automated telephone system allows you to access personalized account information and obtain information on other DWS funds using either your voice or your telephone keypad. Certain account types within Class S also have the ability to purchase, exchange or redeem shares using this system. For more information, contact your financial advisor. You may also access our automated telephone system or speak with a DWS Scudder representative by calling the appropriate number below: For shareholders of Institutional Class: (800) 621-1048For shareholders of Class S: (800) 728-3337 |
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. |
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 | Institutional Class |
Nasdaq Symbol | BTILX | BTAMX |
CUSIP Number | 23339E 517 | 23339E 525 |
Fund Number | 812 | 567 |
This privacy statement is issued by DWS Scudder Distributors, Inc., Deutsche Investment Management Americas Inc., DeAM Investor Services, Inc., DWS Trust Company and the DWS Funds.
We never sell customer lists or individual client information. We consider privacy fundamental to our client relationships and adhere to the policies and practices described below to protect current and former clients' information. Internal policies are in place to protect confidentiality, while allowing client needs to be served. Only individuals who need to do so in carrying out their job responsibilities may access client information. We maintain physical, electronic and procedural safeguards that comply with federal and state standards to protect confidentiality. These safeguards extend to all forms of interaction with us, including the Internet.
In the normal course of business, clients give us nonpublic personal information on applications and other forms, on our Web sites, and through transactions with us or our affiliates. Examples of the nonpublic personal information collected are name, address, Social Security number and transaction and balance information. To be able to serve our clients, certain of this client information is shared with affiliated and nonaffiliated third-party service providers such as transfer agents, custodians, and broker-dealers to assist us in processing transactions and servicing your account with us. In addition, we may disclose all of the information we collect to companies that perform marketing services on our behalf or to other financial institutions with which we have joint marketing agreements. The organizations described above that receive client information may only use it for the purpose designated by the DWS Scudder Companies listed in the first paragraph of this Privacy Statement.
We may also disclose nonpublic personal information about you to other parties as required or permitted by law. For example, we are required or we may provide information to government entities or regulatory bodies in response to requests for information or subpoenas, to private litigants in certain circumstances, to law enforcement authorities, or any time we believe it necessary to protect the firm.
Questions on this policy may be sent to:
DWS Scudder
Attention: Correspondence — Chicago
P.O. Box 219415
Kansas City, MO 64121-9415
September 2007
Notes
Notes
Notes
Notes
Notes
ITEM 2. | CODE OF ETHICS |
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| Not applicable. |
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ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
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| Not applicable. |
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ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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| Not applicable. |
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) 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-CSRS 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: | December 4, 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: | December 4, 2007 |
By: | /s/Paul Schubert |
| Paul Schubert |
Chief Financial Officer and Treasurer
Date: | December 4, 2007 |