UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSRS
Investment Company Act file number 811-5002
DWS Variable Series II
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue
New York, NY 10154-0004
(Address of principal executive offices) (Zip code)
Registrant’s Telephone Number, including Area Code: (212) 454-7190
Paul Schubert
345 Park Avenue
New York, NY 10154-0004
(Name and Address of Agent for Service)
Date of fiscal year end: | 12/31 |
Date of reporting period: | 06/30/08 |
ITEM 1. REPORT TO STOCKHOLDERS
June 30, 2008
SEMIANNUAL REPORT
DWS VARIABLE SERIES II
DWS Balanced VIP DWS Blue Chip VIP DWS Conservative Allocation VIP DWS Core Fixed Income VIP DWS Davis Venture Value VIP DWS Dreman High Return Equity VIP DWS Dreman Small Mid Cap Value VIP DWS Global Thematic VIP DWS Government & Agency Securities VIP DWS Growth Allocation VIP DWS High Income VIP DWS International Select Equity VIP DWS Janus Growth & Income VIP DWS Large Cap Value VIP DWS Mid Cap Growth VIP DWS Moderate Allocation VIP DWS Money Market VIP DWS Small Cap Growth VIP DWS Strategic Income VIP DWS Technology VIP DWS Turner Mid Cap Growth VIP |
Contents
Information About Your Portfolio's Expenses, Management Summary, Portfolio Summary, Investment Portfolio, Financial Statements and Financial Highlights for:
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus, call (800) 778-1482 or your financial representative. We advise you to carefully consider the product's objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the product. Please read the prospectus carefully before you invest.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Investments in variable portfolios involve risk. Some portfolios have more risk than others. These include portfolios that allow exposure to or otherwise concentrate investments in certain sectors, geographic regions, security types, market capitalization or foreign securities (e.g., political or economic instability, which can be accentuated in Emerging Market countries). Please read the prospectus for specific details regarding its investments and risk profile.
DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
Performance Summary June 30, 2008
DWS Balanced VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.52% and 0.77% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. The Portfolio also invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the bond portfolio, can decline and the investor can lose principal value. The Portfolio invests in derivatives seeking to hedge positions in certain securities and to generate income in order to enhance the Portfolio's returns. Derivatives can be more volatile and less liquid than traditional fixed-income securities. In the current market environment, mortgage-backed securities are experiencing increased volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns for all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Balanced VIP |
[] DWS Balanced VIP — Class A [] Russell 1000® Index [] Lehman Brothers US Aggregate Index | 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 portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Balanced VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $9,552 | $9,587 | $11,427 | $13,290 | $13,565 |
Average annual total return
| -4.48% | -4.13% | 4.55% | 5.85% | 3.10% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $14,846 | $13,942 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 8.22% | 3.38% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $12,082 | $17,382 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 3.85% | 5.68% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.DWS Balanced VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,565 | $9,580 | $11,334 | $13,076 | $13,651 |
Average annual total return
| -4.35% | -4.20% | 4.26% | 5.51% | 5.32% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $14,846 | $14,987 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 8.22% | 6.98% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $12,082 | $13,339 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 3.85% | 4.92% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Balanced VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 955.20 | | $ 956.50 | |
Expenses Paid per $1,000*
| $ 2.87 | | $ 4.38 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,021.93 | | $ 1,020.39 | |
Expenses Paid per $1,000*
| $ 2.97 | | $ 4.52 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Balanced VIP
| .59% | | .90% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Balanced VIP
For the six months ended June 30, 2008, DWS Balanced VIP's Class A shares (unadjusted for contract charges) had a return of -4.48%. For the six-month period, the Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a return of -11.05%, and the Lehman Brothers US Aggregate Index, the Portfolio's bond benchmark, which is considered indicative of broad bond market trends, returned 1.13%. The Russell 1000® Index, the Portfolio's equity benchmark, returned -11.20%.
In December 2007, we made changes to enhance our investment process. We updated strategic asset allocation, adding international equities, among other changes, and we plan to update strategic allocation at least once a year in the future. We expanded the global portable alpha strategy, which is designed to take advantage of short-term mispricings in global bond and currency markets, to cover the entire Porfolio, and we expanded the strategy to include equity positions, as well as bonds and currency positions. Finally, we increased diversification by adding more managers and investment styles.
The underlying strategies as a group contributed positively to performance. Fixed-income strategies, in particular the Core Fixed Income component, detracted from performance due to a significant underperformance relative to the Lehman Brothers US Aggregate Index. The main reason for the Core Fixed Income underperformance was its emphasis on fixed-income sectors, such as corporate bonds, that carry some degree of credit risk during a period of market turmoil when Treasury securities were the best-performing asset category. Equity strategies more than compensated for underperformance in bonds, outperforming the respective indices with which each strategy is compared, although returns of the equity portion of the Portfolio were negative. Stock selection in the equity portions of the Portfolio contributed to performance, as the equity components collectively outperformed their respective benchmarks. The global portable alpha strategy also helped performance.
Julie Abbett James B. Francis, CFA William Chepolis, CFA John Brennan
Matthew F. MacDonald Inna Okounkova Thomas Picciochi J. Richard Robben, CFA
Gary Sullivan, CFA Robert Wang Julie M.VanCleave, CFA Matthias Knerr, CFA
Thomas Schuessler, PhD
Portfolio Managers, Deutsche Investment Management Americas Inc.
The 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. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
The Lehman Brothers US Aggregate Index is an unmanaged market-value-weighted measure of Treasury issues, corporate bond issues and mortgage securities. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
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 portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Balanced VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 57% | 59% |
Commercial and Non-Agency Mortgage Backed Securities | 12% | 16% |
Corporate Bonds | 12% | 7% |
Cash Equivalents | 7% | 5% |
Mortgage Backed Securities Pass-Throughs | 5% | 1% |
Government & Agency Obligations | 4% | 5% |
Collateralized Mortgage Obligations | 2% | 3% |
Asset Backed | 1% | 3% |
Senior Loans | — | 1% |
| 100% | 100% |
Sector Diversification (Excludes Cash Equivalents and Securities Lending) | 6/30/08 | 12/31/07 |
| | |
Financials | 17% | 18% |
Energy | 15% | 12% |
Industrials | 12% | 12% |
Information Technology | 11% | 12% |
Health Care | 11% | 12% |
Consumer Discretionary | 9% | 11% |
Consumer Staples | 8% | 8% |
Materials | 6% | 5% |
Utilities | 6% | 4% |
Telecommunication Services | 5% | 6% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 9. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Balanced VIP
|
Shares
| Value ($) |
| |
Common Stocks 57.3% |
Consumer Discretionary 5.1% |
Auto Components 0.4% |
Aisin Seiki Co., Ltd. | 100 | 3,264 |
American Axle & Manufacturing Holdings, Inc. | 10,300 | 82,297 |
Autoliv, Inc. | 23,400 | 1,090,908 |
Bridgestone Corp. | 300 | 4,566 |
Compagnie Generale des Etablissements Michelin "B" | 105 | 7,490 |
Continental AG | 94 | 9,630 |
Cooper Tire & Rubber Co. | 12,200 | 95,648 |
Denso Corp. | 200 | 6,846 |
GKN PLC | 897 | 3,976 |
Goodyear Tire & Rubber Co.* | 1,400 | 24,962 |
Lear Corp.* | 7,500 | 106,350 |
Magna International, Inc. "A" | 400 | 23,803 |
Nokian Renkaat Oyj | 10,292 | 491,132 |
Rieter Holding AG (Registered) | 16 | 5,188 |
Stoneridge, Inc.* | 6,000 | 102,360 |
Tenneco, Inc.* | 900 | 12,177 |
Toyota Industries Corp. | 100 | 3,183 |
| 2,073,780 |
Automobiles 0.2% |
Daimler AG (Registered) | 552 | 34,074 |
Fiat SpA | 4,214 | 68,796 |
Harley-Davidson, Inc. | 7,260 | 263,248 |
Honda Motor Co., Ltd. | 700 | 23,816 |
Isuzu Motors Ltd. | 1,000 | 4,802 |
Mazda Motor Corp. | 1,000 | 5,206 |
Mitsubishi Motors Corp.* | 2,000 | 3,630 |
Nissan Motor Co., Ltd. | 900 | 7,409 |
PSA Peugeot Citroen | 112 | 6,030 |
Renault SA | 129 | 10,554 |
Suzuki Motor Corp. | 10,600 | 250,106 |
Toyota Motor Corp. | 1,200 | 56,445 |
Volkswagen AG | 93 | 26,804 |
| 760,920 |
Distributors 0.1% |
Genuine Parts Co. | 13,702 | 543,695 |
Li & Fung Ltd. | 14,000 | 42,101 |
| 585,796 |
Diversified Consumer Services 0.0% |
DeVry, Inc. | 4,200 | 225,204 |
Hotels Restaurants & Leisure 0.9% |
Accor SA | 151 | 10,031 |
Bally Technologies, Inc.* | 400 | 13,520 |
Buffalo Wild Wings, Inc.* | 4,600 | 114,218 |
California Pizza Kitchen, Inc.* | 1,900 | 21,261 |
Carnival PLC | 148 | 4,702 |
CEC Entertainment, Inc.* | 5,200 | 145,652 |
Chipotle Mexican Grill, Inc. "B"* | 900 | 67,824 |
Compass Group PLC | 2,000 | 15,026 |
Crown Ltd. | 2,892 | 25,715 |
Darden Restaurants, Inc. | 7,600 | 242,744 |
Enterprise Inns PLC | 482 | 3,890 |
InterContinental Hotel Group PLC | 251 | 3,350 |
|
Shares
| Value ($) |
| |
Jack in the Box, Inc.* | 4,600 | 103,086 |
Ladbrokes PLC | 788 | 4,002 |
Lottomatica SpA | 307 | 9,148 |
McDonald's Corp. | 36,642 | 2,060,013 |
P.F. Chang's China Bistro, Inc.* | 6,900 | 154,146 |
Shangri-La Asia Ltd. | 8,000 | 18,653 |
Sodexo | 85 | 5,557 |
TABCORP Holding Ltd. | 3,956 | 37,160 |
Tatts Group Ltd. | 9,003 | 20,149 |
Town Sports International Holdings, Inc.* | 13,400 | 125,156 |
TUI AG | 155 | 3,586 |
Whitbread PLC | 229 | 5,584 |
WMS Industries, Inc.* | 5,900 | 175,643 |
Yum! Brands, Inc. | 23,000 | 807,070 |
| 4,196,886 |
Household Durables 0.3% |
CSS Industries, Inc. | 3,800 | 92,036 |
D.R. Horton, Inc. | 33,500 | 363,475 |
Electrolux AB "B" | 800 | 10,152 |
Furniture Brands International, Inc. | 4,600 | 61,456 |
Hooker Furniture Corp. | 7,900 | 136,828 |
Husqvarna AB "B" | 900 | 7,825 |
Lennar Corp. "A" | 1,800 | 22,212 |
Libbey, Inc. | 6,800 | 50,592 |
Makita Corp. | 4,000 | 163,149 |
Matsushita Electric Industrial Co., Ltd. | 1,000 | 21,445 |
NVR, Inc.* | 200 | 100,016 |
Persimmon PLC | 272 | 1,701 |
Snap-on, Inc. | 900 | 46,809 |
Sony Corp. | 400 | 17,186 |
Taylor Wimpey PLC | 1,128 | 1,384 |
Tupperware Brands Corp. | 6,000 | 205,320 |
| 1,301,586 |
Internet & Catalog Retail 0.1% |
Amazon.com, Inc.* | 1,100 | 80,663 |
Home Retail Group PLC | 703 | 3,036 |
Overstock.com, Inc.* | 4,800 | 124,560 |
Priceline.com, Inc.* | 500 | 57,730 |
Stamps.com, Inc.* | 1,100 | 13,728 |
| 279,717 |
Media 1.1% |
British Sky Broadcasting Group PLC | 1,232 | 11,569 |
CBS Corp. "B" | 31,600 | 615,884 |
Comcast Corp. "A" | 47,300 | 897,281 |
DG Fastchannel, Inc.* | 6,400 | 110,400 |
Fairfax Media Ltd. | 10,068 | 28,323 |
Gannett Co., Inc. | 20,953 | 454,052 |
Gestevision Telecinco SA | 345 | 4,388 |
Global Sources Ltd.* | 8,880 | 134,798 |
ITV PLC | 3,194 | 2,828 |
Lagardere SCA | 107 | 6,081 |
Mediaset SpA | 4,120 | 27,082 |
Modern Times Group MTG AB "B" | 175 | 10,259 |
Omnicom Group, Inc. | 25,020 | 1,122,898 |
Pearson PLC | 647 | 7,907 |
Publicis Groupe | 132 | 4,260 |
|
Shares
| Value ($) |
| |
Reed Elsevier NV | 3,446 | 57,802 |
Reed Elsevier PLC | 1,232 | 14,086 |
Seat Pagine Gialle SpA* | 18,242 | 1,892 |
SES "A" (FDR) | 184 | 4,636 |
Shaw Communications, Inc. "B" | 1,600 | 32,668 |
Singapore Press Holdings Ltd. | 91,000 | 283,221 |
The DIRECTV Group, Inc.* | 21,000 | 544,110 |
Thomson Reuters Corp. | 1,000 | 32,264 |
Thomson Reuters PLC | 285 | 7,617 |
United Business Media Ltd. | 388 | 4,208 |
Vivendi | 790 | 29,907 |
Walt Disney Co. | 18,800 | 586,560 |
Wolters Kluwer NV | 1,709 | 39,644 |
WPP Group PLC | 846 | 8,144 |
Yellow Pages Income Fund (Unit) | 400 | 3,472 |
| 5,088,241 |
Multiline Retail 0.5% |
Canadian Tire Corp. Ltd. "A" | 300 | 15,564 |
Kohl's Corp.* | 16,380 | 655,855 |
Macy's, Inc. | 20,800 | 403,936 |
Marks & Spencer Group PLC | 1,148 | 7,497 |
Next PLC | 169 | 3,258 |
PPR | 57 | 6,297 |
Sears Holdings Corp.* | 6,400 | 471,424 |
Target Corp. | 15,700 | 729,893 |
| 2,293,724 |
Specialty Retail 1.2% |
American Eagle Outfitters, Inc. | 19,500 | 265,785 |
AnnTaylor Stores Corp.* | 23,600 | 565,456 |
Best Buy Co., Inc. | 6,620 | 262,152 |
Build-A-Bear Workshop, Inc.* | 2,900 | 21,083 |
Dick's Sporting Goods, Inc.* | 9,600 | 170,304 |
Esprit Holdings Ltd. | 36,100 | 375,747 |
GameStop Corp. "A"* | 8,800 | 355,520 |
Gymboree Corp.* | 2,700 | 108,189 |
Hennes & Mauritz AB "B" | 1,525 | 82,311 |
Hot Topic, Inc.* | 10,500 | 56,805 |
Industria de Diseno Textil SA | 2,564 | 117,862 |
Jo-Ann Stores, Inc.* | 3,700 | 85,211 |
Jos. A. Bank Clothiers, Inc.* | 6,300 | 168,525 |
Kingfisher PLC | 1,961 | 4,376 |
Lowe's Companies, Inc. | 12,500 | 259,375 |
Office Depot, Inc.* | 24,694 | 270,152 |
RadioShack Corp. | 38,500 | 472,395 |
Rent-A-Center, Inc.* | 10,900 | 224,213 |
Staples, Inc. | 23,810 | 565,488 |
Systemax, Inc. | 7,100 | 125,315 |
Talbots, Inc. | 4,700 | 54,473 |
The Buckle, Inc. | 4,400 | 201,212 |
Tiffany & Co. | 7,800 | 317,850 |
TJX Companies, Inc. | 5,300 | 166,791 |
Tween Brands, Inc.* | 3,900 | 64,194 |
Yamada Denki Co., Ltd. | 50 | 3,555 |
| 5,364,339 |
Textiles, Apparel & Luxury Goods 0.3% |
Adidas AG | 2,229 | 140,343 |
Billabong International Ltd. | 204 | 2,109 |
Burberry Group PLC | 424 | 3,807 |
Compagnie Financiere Richemont SA "A" (Unit) | 3,517 | 194,227 |
Fossil, Inc.* | 6,200 | 180,234 |
|
Shares
| Value ($) |
| |
G-III Apparel Group Ltd.* | 2,500 | 30,850 |
Gildan Activewear, Inc.* | 600 | 15,422 |
Hermes International | 54 | 8,460 |
Luxottica Group SpA | 492 | 11,501 |
LVMH Moet Hennessy Louis Vuitton SA | 165 | 17,196 |
NIKE, Inc. "B" | 3,700 | 220,557 |
Perry Ellis International, Inc.* | 7,700 | 163,394 |
Swatch Group AG (Bearer) | 96 | 23,788 |
Swatch Group AG (Registered) | 162 | 7,532 |
UniFirst Corp. | 2,800 | 125,048 |
Wolverine World Wide, Inc. | 8,000 | 213,360 |
| 1,357,828 |
Consumer Staples 4.4% |
Beverages 1.1% |
Asahi Breweries Ltd. | 800 | 14,948 |
Carlsberg AS "B" | 5,375 | 518,595 |
Coca-Cola Amatil Ltd. | 1,393 | 9,352 |
Diageo PLC | 30,253 | 556,724 |
Dr. Pepper Snapple Group, Inc.* | 20,153 | 422,810 |
Foster's Group Ltd. | 4,320 | 20,970 |
Heineken NV | 577 | 29,328 |
InBev NV | 2,761 | 190,843 |
Kirin Holdings Co., Ltd. | 1,000 | 15,573 |
Pepsi Bottling Group, Inc. | 60,800 | 1,697,536 |
PepsiCo, Inc. | 23,960 | 1,523,616 |
Pernod Ricard SA | 266 | 27,282 |
SABMiller PLC | 698 | 15,983 |
| 5,043,560 |
Food & Staples Retailing 0.7% |
AEON Co., Ltd. | 1,200 | 14,782 |
Carrefour SA | 847 | 47,762 |
Casino Guichard-Perrachon SA | 82 | 9,258 |
Colruyt SA | 81 | 21,313 |
Costco Wholesale Corp. | 2,800 | 196,392 |
CVS Caremark Corp. | 24,932 | 986,559 |
Delhaize Group | 449 | 30,180 |
George Weston Ltd. | 400 | 18,488 |
Ingles Markets, Inc. "A" | 600 | 13,998 |
J Sainsbury PLC | 1,318 | 8,341 |
Kesko Oyj "B" | 133 | 4,278 |
Koninklijke Ahold NV | 2,426 | 32,498 |
Kroger Co. | 25,900 | 747,733 |
Lawson, Inc. | 100 | 4,872 |
Loblaw Companies Ltd. | 800 | 23,858 |
Metro AG | 770 | 49,065 |
Metro, Inc. "A" | 500 | 11,886 |
Nash Finch Co. | 800 | 27,416 |
Seven & I Holdings Co., Ltd. | 1,400 | 40,026 |
Shoppers Drug Mart Corp. | 7,300 | 400,115 |
Sysco Corp. | 2,400 | 66,024 |
Tesco PLC | 5,893 | 43,274 |
Wal-Mart Stores, Inc. | 1,400 | 78,680 |
Walgreen Co. | 12,410 | 403,449 |
Wesfarmers Ltd. | 1,325 | 47,304 |
Wesfarmers Ltd. (PPS) | 167 | 6,016 |
William Morrison Supermarkets PLC | 1,655 | 8,757 |
Winn-Dixie Stores, Inc.* | 600 | 9,612 |
Woolworths Ltd. | 2,545 | 59,571 |
| 3,411,507 |
|
Shares
| Value ($) |
| |
Food Products 1.1% |
Ajinomoto Co., Inc. | 1,000 | 9,446 |
Cadbury PLC | 1,029 | 12,912 |
Cal-Maine Foods, Inc. | 5,300 | 174,847 |
Chaoda Modern Agriculture (Holdings) Ltd. | 74,000 | 93,082 |
Danisco AS | 650 | 41,750 |
Darling International, Inc.* | 13,400 | 221,368 |
Dean Foods Co.* | 30,460 | 597,625 |
Flowers Foods, Inc. | 10,100 | 286,234 |
Fresh Del Monte Produce, Inc.* | 6,200 | 146,134 |
General Mills, Inc. | 9,471 | 575,553 |
Golden Agri-Resources Ltd. | 7,000 | 4,646 |
Groupe Danone | 6,642 | 466,253 |
IAWS Group PLC | 155 | 3,880 |
Imperial Sugar Co. | 5,700 | 88,521 |
Kellogg Co. | 9,310 | 447,066 |
Kerry Group PLC "A" (b) | 2,393 | 71,074 |
Kerry Group PLC "A" (b) | 1,500 | 44,387 |
Kraft Foods, Inc. "A" | 20,917 | 595,088 |
Nestle SA (Registered) | 13,319 | 601,835 |
Nissin Food Products Co., Ltd. | 100 | 3,350 |
Parmalat SpA | 2,981 | 7,771 |
Ralcorp Holdings, Inc.* | 1,300 | 64,272 |
Saputo, Inc. | 1,000 | 28,577 |
Tate & Lyle PLC | 461 | 3,644 |
Tyson Foods, Inc. "A" | 32,500 | 485,550 |
Unilever NV (CVA) | 3,277 | 92,931 |
Unilever PLC | 966 | 27,482 |
Wilmar International Ltd. | 1,000 | 3,728 |
Yakult Honsha Co., Ltd. | 200 | 5,625 |
| 5,204,631 |
Household Products 0.5% |
Colgate-Palmolive Co. | 15,670 | 1,082,797 |
Henkel AG & Co. KGaA | 557 | 20,852 |
Kao Corp. | 1,000 | 26,194 |
Procter & Gamble Co. | 16,790 | 1,021,000 |
Reckitt Benckiser Group PLC | 343 | 17,368 |
Unicharm Corp. | 100 | 7,097 |
| 2,175,308 |
Personal Products 0.1% |
American Oriental Bioengineering, Inc.* | 11,900 | 117,453 |
Beiersdorf AG | 570 | 41,929 |
L'Oreal SA | 362 | 39,321 |
Shiseido Co., Ltd. | 1,000 | 22,920 |
| 221,623 |
Tobacco 0.9% |
Alliance One International, Inc.* | 13,100 | 66,941 |
Altria Group, Inc. | 38,073 | 782,781 |
British American Tobacco PLC | 1,123 | 38,725 |
Imperial Tobacco Group PLC | 4,830 | 179,768 |
Japan Tobacco, Inc. | 8 | 34,047 |
Philip Morris International, Inc.* | 47,787 | 2,360,200 |
Reynolds American, Inc. | 9,399 | 438,651 |
Swedish Match AB | 8,600 | 175,192 |
| 4,076,305 |
Energy 10.0% |
Energy Equipment & Services 2.3% |
Acergy SA | 350 | 7,804 |
Aker Solutions ASA | 300 | 7,053 |
|
Shares
| Value ($) |
| |
AMEC PLC | 47,447 | 839,372 |
Baker Hughes, Inc. | 11,050 | 965,107 |
Compagnie Generale de Geophysique-Veritas* | 89 | 4,202 |
Dawson Geophysical Co.* | 2,400 | 142,704 |
ENSCO International, Inc. | 10,025 | 809,418 |
Fugro NV (CVA) | 607 | 51,757 |
Gulf Island Fabrication, Inc. | 1,000 | 48,930 |
Halliburton Co. | 39,414 | 2,091,701 |
Noble Corp. | 25,544 | 1,659,338 |
Petroleum Geo-Services ASA | 300 | 7,329 |
Prosafe Production Public Ltd.* | 300 | 1,738 |
ProSafe SE | 300 | 2,966 |
Saipem SpA | 231 | 10,821 |
SBM Offshore NV | 1,462 | 53,859 |
Schlumberger Ltd. | 16,060 | 1,725,326 |
Seadrill Ltd. | 400 | 12,223 |
Technip SA | 75 | 6,896 |
Transocean, Inc.* | 7,658 | 1,167,003 |
Union Drilling, Inc.* | 2,400 | 52,032 |
Weatherford International Ltd.* | 13,938 | 691,185 |
WorleyParsons Ltd. | 268 | 9,711 |
| 10,368,475 |
Oil, Gas & Consumable Fuels 7.7% |
Alpha Natural Resources, Inc.* | 7,100 | 740,459 |
Apache Corp. | 6,600 | 917,400 |
ATP Oil & Gas Corp.* | 300 | 11,841 |
Berry Petroleum Co. "A" | 4,300 | 253,184 |
BG Group PLC | 12,390 | 322,753 |
Bill Barrett Corp.* | 3,600 | 213,876 |
BP PLC | 3,970 | 46,056 |
Brigham Exploration Co.* | 9,700 | 153,551 |
Callon Petroleum Co.* | 6,500 | 177,840 |
Cameco Corp. (b) | 17,224 | 738,393 |
Cameco Corp. (b) | 100 | 4,295 |
Canadian Natural Resources Ltd. | 200 | 19,778 |
Canadian Oil Sands Trust (Unit) | 100 | 5,394 |
Chevron Corp. | 28,166 | 2,792,096 |
Cimarex Energy Co. | 1,900 | 132,373 |
Clayton Williams Energy, Inc.* | 1,700 | 186,915 |
CNOOC Ltd. | 175,200 | 303,888 |
Comstock Resources, Inc.* | 4,300 | 363,049 |
ConocoPhillips | 31,551 | 2,978,099 |
Denbury Resources, Inc.* | 3,600 | 131,400 |
Devon Energy Corp. | 21,205 | 2,547,993 |
El Paso Corp. | 400 | 8,696 |
Enbridge, Inc. | 100 | 4,321 |
EnCana Corp. | 200 | 18,311 |
Encore Acquisition Co.* | 4,500 | 338,355 |
Eni SpA | 2,945 | 109,664 |
EOG Resources, Inc. | 12,620 | 1,655,744 |
ExxonMobil Corp. | 23,800 | 2,097,494 |
Gazprom (ADR) REG S | 9,400 | 544,134 |
Hess Corp. | 15,400 | 1,943,326 |
Husky Energy, Inc. | 100 | 4,788 |
Imperial Oil Ltd. | 100 | 5,508 |
INPEX Holdings, Inc. | 3 | 38,005 |
KazMunaiGas Exploration Production (GDR) 144A | 7,700 | 240,240 |
Knightsbridge Tankers Ltd. | 3,100 | 99,851 |
Marathon Oil Corp. | 15,232 | 790,084 |
Mariner Energy, Inc.* | 26,200 | 968,614 |
McMoRan Exploration Co.* | 6,400 | 176,128 |
|
Shares
| Value ($) |
| |
Mongolia Energy Corp., Ltd.* | 11,000 | 21,246 |
Neste Oil Oyj | 113 | 3,310 |
Nexen, Inc. (b) | 19,088 | 758,748 |
Nexen, Inc. (b) | 200 | 7,975 |
Nippon Mining Holdings, Inc. | 3,500 | 21,969 |
Nippon Oil Corp. | 5,000 | 33,650 |
Noble Energy, Inc. | 22,648 | 2,277,483 |
Occidental Petroleum Corp. | 28,299 | 2,542,948 |
OMV AG | 1,327 | 103,586 |
Origin Energy Ltd. | 1,638 | 25,228 |
Paladin Energy Ltd.* | 597 | 3,645 |
Petro-Canada | 200 | 11,201 |
Petroleo Brasileiro SA (ADR) | 5,000 | 354,150 |
PetroQuest Energy, Inc.* | 8,000 | 215,200 |
PT Bumi Resources Tbk | 181,100 | 161,857 |
Repsol YPF SA | 5,721 | 225,096 |
Rosetta Resources, Inc.* | 2,600 | 74,100 |
Royal Dutch Shell PLC "A" | 756 | 31,030 |
Royal Dutch Shell PLC "B" | 575 | 23,110 |
Santos Ltd. | 1,160 | 23,900 |
StatoilHydro ASA | 11,050 | 412,541 |
Suncor Energy, Inc. (b) | 23,220 | 1,349,546 |
Suncor Energy, Inc. (b) | 200 | 11,611 |
Sunoco, Inc. | 12,000 | 488,280 |
Swift Energy Co.* | 4,200 | 277,452 |
Talisman Energy, Inc. (b) | 20,821 | 460,769 |
Talisman Energy, Inc. (b) | 500 | 11,072 |
TonenGeneral Sekiyu KK | 1,000 | 9,070 |
Total SA | 5,456 | 465,129 |
Valero Energy Corp. | 15,000 | 617,700 |
W&T Offshore, Inc. | 9,500 | 555,845 |
Whiting Petroleum Corp.* | 3,200 | 339,456 |
Woodside Petroleum Ltd. | 908 | 58,948 |
XTO Energy, Inc. | 15,820 | 1,083,828 |
| 35,144,575 |
Financials 7.0% |
Capital Markets 1.1% |
3i Group PLC | 27,017 | 441,417 |
Bank of New York Mellon Corp. | 23,300 | 881,439 |
BGC Partners, Inc. "A"* | 2,400 | 18,120 |
Credit Suisse Group (Registered) | 572 | 25,954 |
Daiwa Securities Group, Inc. | 1,000 | 9,151 |
FCStone Group, Inc.* | 5,000 | 139,650 |
IGM Financial, Inc. | 100 | 4,144 |
Julius Baer Holding AG (Registered) | 118 | 7,898 |
Lehman Brothers Holdings, Inc. | 21,500 | 425,915 |
Man Group PLC | 13,384 | 164,980 |
Mediobanca SpA | 349 | 5,896 |
Morgan Stanley | 17,729 | 639,485 |
Nomura Holdings, Inc. | 900 | 13,295 |
Prospect Capital Corp. | 10,208 | 134,541 |
State Street Corp. | 31,440 | 2,011,846 |
UBS AG (Registered)* | 1,768 | 36,552 |
| 4,960,283 |
Commercial Banks 2.1% |
Allied Irish Banks PLC | 3,784 | 58,139 |
Anglo Irish Bank Corp. PLC | 2,291 | 21,252 |
Australia & New Zealand Banking Group Ltd. | 888 | 15,898 |
Banca Monte dei Paschi di Siena SpA | 915 | 2,574 |
|
Shares
| Value ($) |
| |
Banca Popolare di Milano Scarl | 402 | 3,749 |
Banco Bilbao Vizcaya Argentaria SA | 2,168 | 41,298 |
Banco Bradesco SA (ADR) (Preferred) | 13,550 | 277,233 |
Banco Comercial Portugues SA (Registered) | 56,062 | 120,711 |
Banco Espirito Santo SA (Registered) | 5,226 | 81,166 |
Banco Latinoamericano de Exportaciones SA "E" | 2,000 | 32,380 |
Banco Popolare Societa Cooperativa | 263 | 4,639 |
Banco Popular Espanol SA | 560 | 7,738 |
Banco Santander SA | 2,899 | 52,896 |
Bank of East Asia Ltd. | 1,800 | 9,761 |
Bank of Ireland | 4,627 | 40,114 |
Bank of Montreal | 300 | 12,504 |
Bank of Nova Scotia | 500 | 22,884 |
Barclays PLC | 1,486 | 8,603 |
Barclays PLC* | 318 | 60 |
BB&T Corp. | 46,206 | 1,052,111 |
BNP Paribas | 1,635 | 146,483 |
BOC Hong Kong (Holdings) Ltd. | 4,500 | 11,901 |
Canadian Imperial Bank of Commerce (b) | 9,092 | 499,514 |
Canadian Imperial Bank of Commerce (b) | 200 | 11,003 |
Chuo Mitsui Trust Holdings, Inc. | 1,000 | 5,936 |
City Holding Co. | 1,600 | 65,232 |
Comerica, Inc. | 12,834 | 328,935 |
Commercial Bank of Qatar 144A (GDR)* | 43,200 | 367,200 |
Commerzbank AG | 406 | 11,996 |
Commonwealth Bank of Australia | 608 | 23,363 |
Credit Agricole SA | 364 | 7,376 |
Danske Bank AS | 2,700 | 77,456 |
DBS Group Holdings Ltd. | 3,000 | 41,678 |
Deutsche Postbank AG | 64 | 5,600 |
Dexia SA | 666 | 10,572 |
DnB NOR ASA | 5,600 | 70,991 |
Erste Bank der oesterreichischen Sparkassen AG | 4,086 | 252,756 |
First Financial Bankshares, Inc. | 1,400 | 64,134 |
First Merchants Corp. | 1,000 | 18,150 |
Grupo Financiero Banorte SAB de CV "O" | 39,300 | 184,818 |
Hang Seng Bank Ltd. | 1,100 | 23,181 |
HBOS PLC | 809 | 4,428 |
HSBC Holdings PLC (Registered) | 9,826 | 151,504 |
Hypo Real Estate Holding AG | 145 | 4,063 |
ICICI Bank Ltd. (ADR) | 5,200 | 149,552 |
Intesa Sanpaolo | 64,871 | 369,093 |
Intesa Sanpaolo (RNC) | 412 | 2,121 |
Jyske Bank AS (Registered)* | 375 | 22,282 |
KBC Groep NV | 927 | 102,229 |
Lakeland Bancorp., Inc. | 1,500 | 18,270 |
Lloyds TSB Group PLC | 1,300 | 7,967 |
Mitsubishi UFJ Financial Group, Inc. | 4,300 | 37,852 |
Mizuho Financial Group, Inc. | 4 | 18,523 |
National Australia Bank Ltd. | 790 | 20,014 |
National Bank of Canada | 100 | 4,966 |
National Bank of Greece SA | 2,792 | 125,761 |
National Penn Bancshares, Inc. | 8,200 | 108,896 |
Nordea Bank AB | 3,800 | 52,025 |
|
Shares
| Value ($) |
| |
Old National Bancorp. | 6,600 | 94,116 |
Oriental Financial Group, Inc. | 10,200 | 145,452 |
Oversea-Chinese Banking Corp., Ltd. | 7,000 | 42,102 |
Qatar National Bank* | 845 | 52,921 |
Raiffeisen International Bank-Holding AG | 352 | 44,607 |
Regions Financial Corp. | 39,400 | 429,854 |
Republic Bancorp., Inc. "A" | 1,400 | 34,440 |
Resona Holdings, Inc. | 3 | 4,594 |
Royal Bank of Canada | 700 | 31,461 |
Royal Bank of Scotland Group PLC | 2,125 | 9,063 |
Skandinaviska Enskilda Banken AB "A" | 900 | 16,565 |
Societe Generale | 195 | 16,787 |
Southside Bancshares, Inc. | 1,100 | 20,284 |
Standard Chartered PLC | 7,999 | 226,204 |
Sterling Bancshares, Inc. | 7,650 | 69,539 |
Sumitomo Mitsui Financial Group, Inc. | 3 | 22,507 |
Sumitomo Trust & Banking Co., Ltd. | 1,000 | 6,969 |
Susquehanna Bancshares, Inc. | 10,000 | 136,900 |
Svenska Handelsbanken AB "A" | 900 | 21,279 |
Swedbank AB "A" | 300 | 5,758 |
Sydbank AS | 400 | 15,223 |
Synovus Financial Corp. | 40,056 | 349,689 |
The Bank of Yokohama Ltd. | 1,000 | 6,897 |
Tompkins Financial Corp. | 1,100 | 40,920 |
Toronto-Dominion Bank | 200 | 12,602 |
U.S. Bancorp. | 39,000 | 1,087,710 |
UMB Financial Corp. | 5,400 | 276,858 |
UniCredit SpA | 46,837 | 285,309 |
Unione di Banche Italiane ScpA | 379 | 8,859 |
United Overseas Bank Ltd. | 3,000 | 41,187 |
VTB Bank OJSC (GDR) 144A* | 30,400 | 211,280 |
Wells Fargo & Co. | 8,900 | 211,375 |
Westpac Banking Corp. | 886 | 16,951 |
Zions Bancorp. | 6,817 | 214,667 |
| 9,504,460 |
Consumer Finance 0.2% |
Cash America International, Inc. | 4,800 | 148,800 |
Credit Saison Co., Ltd. | 200 | 4,193 |
Discover Financial Services | 18,000 | 237,060 |
Dollar Financial Corp.* | 3,700 | 55,907 |
EZCORP, Inc. "A"* | 10,500 | 133,875 |
ORIX Corp. | 50 | 7,225 |
World Acceptance Corp.* | 3,700 | 124,579 |
| 711,639 |
Diversified Financial Services 0.7% |
ASX Ltd. | 115 | 3,455 |
Bank of America Corp. | 12,600 | 300,762 |
CIT Group, Inc. | 37,600 | 256,056 |
Citigroup, Inc. | 12,900 | 216,204 |
CME Group, Inc. | 2,055 | 787,455 |
Compagnie Nationale a Portefeuille | 60 | 4,499 |
Deutsche Boerse AG | 1,725 | 193,544 |
Fortis | 3,268 | 51,868 |
Groupe Bruxelles Lambert SA | 108 | 12,790 |
Hong Kong Exchanges & Clearing Ltd. | 1,100 | 15,979 |
ING Groep NV (CVA) | 1,932 | 61,055 |
Interactive Brokers Group, Inc. "A"* | 1,500 | 48,195 |
|
Shares
| Value ($) |
| |
Investor AB "B" | 600 | 12,593 |
JPMorgan Chase & Co. | 32,400 | 1,111,644 |
KBC Ancora | 49 | 4,255 |
Singapore Exchange Ltd. | 2,000 | 10,191 |
The Nasdaq OMX Group, Inc.* | 6,533 | 173,451 |
| 3,263,996 |
Insurance 1.9% |
ACE Ltd. | 17,000 | 936,530 |
Aegon NV | 1,834 | 24,228 |
Aflac, Inc. | 11,680 | 733,504 |
Alleanza Assicurazioni SpA | 232 | 2,513 |
Alleghany Corp.* | 718 | 238,412 |
Allianz SE (Registered) | 1,275 | 224,032 |
Allied World Assurance Co. Holdings Ltd. | 8,400 | 332,808 |
Allstate Corp. | 10,293 | 469,258 |
American Physicians Capital, Inc. | 700 | 33,908 |
AMP Ltd. | 965 | 6,179 |
AmTrust Financial Services, Inc. | 11,700 | 147,420 |
Aspen Insurance Holdings Ltd. | 5,600 | 132,552 |
Assicurazioni Generali SpA | 525 | 20,093 |
Aviva PLC | 589 | 5,836 |
Axa | 4,470 | 131,751 |
AXA Asia Pacific Holdings Ltd. | 529 | 2,369 |
Chubb Corp. | 4,735 | 232,062 |
Cincinnati Financial Corp. | 7,186 | 182,524 |
CNP Assurances | 24 | 2,702 |
Darwin Professional Underwriters, Inc.* | 1,500 | 46,200 |
Endurance Specialty Holdings Ltd. | 100 | 3,079 |
Fidelity National Financial, Inc. "A" | 14,889 | 187,601 |
First American Corp. | 4,900 | 129,360 |
Genworth Financial, Inc. "A" | 23,692 | 421,955 |
Great-West Lifeco, Inc. | 100 | 2,860 |
Hallmark Financial Services, Inc.* | 4,500 | 43,515 |
Harleysville Group, Inc. | 900 | 30,447 |
Hartford Financial Services Group, Inc. | 2,800 | 180,796 |
Insurance Australia Group Ltd. | 1,063 | 3,511 |
Irish Life & Permanent PLC | 1,271 | 13,137 |
Legal & General Group PLC | 2,181 | 4,327 |
Loews Corp. | 11,422 | 535,692 |
Manulife Financial Corp. | 800 | 27,977 |
MetLife, Inc. | 25,258 | 1,332,865 |
Millea Holdings, Inc. | 300 | 11,677 |
Mitsui Sumitomo Insurance Group Holdings, Inc.* | 300 | 10,323 |
Muenchener Rueckversicherungs-Gesellschaft AG (Registered) | 128 | 22,404 |
Navigators Group, Inc.* | 3,200 | 172,960 |
Odyssey Re Holdings Corp. | 6,928 | 245,944 |
Old Mutual PLC | 1,347 | 2,467 |
Platinum Underwriters Holdings Ltd. | 5,200 | 169,572 |
Power Corp. of Canada | 200 | 6,123 |
Power Financial Corp. | 100 | 3,252 |
Prudential PLC | 28,575 | 302,661 |
QBE Insurance Group Ltd. | 10,787 | 229,077 |
Reinsurance Group of America, Inc. | 5,400 | 235,008 |
Sampo Oyj "A" | 4,306 | 108,228 |
Seabright Insurance Holdings* | 5,100 | 73,848 |
Sompo Japan Insurance, Inc. | 1,000 | 9,378 |
Storebrand ASA | 3,200 | 23,654 |
Sun Life Financial, Inc. | 300 | 12,342 |
|
Shares
| Value ($) |
| |
Suncorp-Metway Ltd. | 457 | 5,701 |
Swiss Life Holding (Registered)* | 19 | 5,046 |
Swiss Re (Registered) | 190 | 12,572 |
T&D Holdings, Inc. | 100 | 6,167 |
The Travelers Companies, Inc. | 1,900 | 82,460 |
Topdanmark AS* | 125 | 18,820 |
Unum Group | 14,790 | 302,456 |
Vienna Insurance Group | 173 | 11,416 |
Zurich Financial Services AG (Registered) | 77 | 19,661 |
| 8,925,220 |
Real Estate Investment Trusts 0.7% |
Alexandria Real Estate Equities, Inc. (REIT) | 900 | 87,606 |
Annaly Capital Management, Inc. (REIT) | 4,200 | 65,142 |
Apartment Investment & Management Co. "A" (REIT) | 1,659 | 56,505 |
AvalonBay Communities, Inc. (REIT) | 1,100 | 98,076 |
BioMed Realty Trust, Inc. (REIT) | 3,700 | 90,761 |
Boston Properties, Inc. (REIT) | 1,900 | 171,418 |
CapitaMall Trust (REIT) | 3,000 | 6,605 |
Corio NV (REIT) | 72 | 5,592 |
Corporate Office Properties Trust (REIT) | 2,700 | 92,691 |
Cousins Properties, Inc. (REIT) | 3,400 | 78,540 |
Digital Realty Trust, Inc. (REIT) | 2,800 | 114,548 |
Equity Lifestyle Properties, Inc. (REIT) | 1,700 | 74,800 |
Equity Residential (REIT) | 4,300 | 164,561 |
First Industrial Realty Trust, Inc. (REIT) | 3,800 | 104,386 |
Glimcher Realty Trust (REIT) | 3,400 | 38,012 |
Goodman Group (REIT) | 1,094 | 3,249 |
GPT Group (REIT) | 1,538 | 3,281 |
HCP, Inc. (REIT) | 1,800 | 57,258 |
Healthcare Realty Trust, Inc. (REIT) | 2,500 | 59,425 |
Home Properties, Inc. (REIT) | 2,100 | 100,926 |
Hospitality Properties Trust (REIT) | 3,000 | 73,380 |
Host Hotels & Resorts, Inc. (REIT) | 5,200 | 70,980 |
Kimco Realty Corp. (REIT) | 1,900 | 65,588 |
LaSalle Hotel Properties (REIT) | 2,500 | 62,825 |
Lexington Realty Trust (REIT) | 5,700 | 77,691 |
Link (REIT) | 2,500 | 5,687 |
Maguire Properties, Inc. (REIT) | 2,600 | 31,642 |
Mid-America Apartment Communities, Inc. (REIT) | 1,800 | 91,872 |
OMEGA Healthcare Investors, Inc. (REIT) | 2,700 | 44,955 |
Parkway Properties, Inc. (REIT) | 2,400 | 80,952 |
Pennsylvania Real Estate Investment Trust (REIT) | 2,200 | 50,908 |
Potlatch Corp. (REIT) | 1,700 | 76,704 |
ProLogis (REIT) | 500 | 27,175 |
Public Storage (REIT) | 1,100 | 88,869 |
Realty Income Corp. (REIT) | 3,900 | 88,764 |
Senior Housing Properties Trust (REIT) | 5,600 | 109,368 |
Simon Property Group, Inc. (REIT) | 3,300 | 296,637 |
Sovran Self Storage, Inc. (REIT) | 1,500 | 62,340 |
Stockland (REIT) | 923 | 4,761 |
Strategic Hotels & Resorts, Inc. (REIT) | 4,800 | 44,976 |
|
Shares
| Value ($) |
| |
Sunstone Hotel Investors, Inc. (REIT) | 4,500 | 74,700 |
Unibail-Rodamco (REIT) | 40 | 9,235 |
Vornado Realty Trust (REIT) | 1,600 | 140,800 |
Washington Real Estate Investment Trust (REIT) | 3,400 | 102,170 |
Wereldhave N.V. (REIT) | 48 | 5,054 |
Westfield Group (REIT) | 891 | 13,882 |
| 3,275,297 |
Real Estate Management & Development 0.1% |
Brookfield Asset Management, Inc. "A" | 300 | 9,738 |
Capitaland Ltd. | 4,000 | 16,801 |
Cheung Kong (Holdings) Ltd. | 1,000 | 13,448 |
City Developments Ltd. | 1,000 | 8,003 |
Hang Lung Properties Ltd. | 2,000 | 6,397 |
Henderson Land Development Co., Ltd. | 1,000 | 6,222 |
Immoeast AG* | 2,982 | 26,290 |
Immofinanz Immobilien Anlagen AG | 3,441 | 35,470 |
Kerry Properties Ltd. | 1,000 | 5,240 |
Lend Lease Corp., Ltd. | 287 | 2,624 |
Meinl European Land Ltd.* | 2,003 | 22,477 |
Mitsubishi Estate Co., Ltd. | 1,000 | 22,831 |
New World Development Co., Ltd. | 2,000 | 4,063 |
Sino Land Co., Ltd. | 2,000 | 3,966 |
Sun Hung Kai Properties Ltd. | 1,000 | 13,538 |
Swire Pacific Ltd. "A" | 1,000 | 10,275 |
Wharf Holdings Ltd. | 40,000 | 167,142 |
| 374,525 |
Thrifts & Mortgage Finance 0.2% |
Capitol Federal Financial | 6,405 | 240,892 |
Dime Community Bancshares | 10,100 | 166,751 |
Flagstar Bancorp., Inc. | 13,500 | 40,635 |
Flushing Financial Corp. | 5,000 | 94,750 |
New York Community Bancorp., Inc. | 13,430 | 239,591 |
Northwest Bancorp., Inc. | 1,200 | 26,184 |
People's United Financial, Inc. | 14,724 | 229,695 |
WSFS Financial Corp. | 800 | 35,680 |
| 1,074,178 |
Health Care 7.2% |
Biotechnology 0.9% |
Actelion Ltd. (Registered)* | 83 | 4,416 |
Alkermes, Inc.* | 9,900 | 122,364 |
Alnylam Pharmaceuticals, Inc.* | 5,000 | 133,650 |
Celgene Corp.* | 8,500 | 542,895 |
CSL Ltd. | 3,003 | 102,924 |
Cubist Pharmaceuticals, Inc.* | 7,200 | 128,592 |
Emergent Biosolutions, Inc.* | 1,900 | 18,867 |
Enzon Pharmaceuticals, Inc.* | 2,500 | 17,800 |
Genentech, Inc.* | 9,990 | 758,241 |
Gilead Sciences, Inc.* | 27,280 | 1,444,476 |
Grifols SA | 301 | 9,592 |
Isis Pharmaceuticals, Inc.* | 11,900 | 162,197 |
Onyx Pharmaceuticals, Inc.* | 4,500 | 160,200 |
OSI Pharmaceuticals, Inc.* | 6,000 | 247,920 |
| 3,854,134 |
Health Care Equipment & Supplies 1.7% |
Align Technology, Inc.* | 9,600 | 100,704 |
Analogic Corp. | 600 | 37,842 |
|
Shares
| Value ($) |
| |
Baxter International, Inc. | 45,437 | 2,905,242 |
C.R. Bard, Inc. | 5,550 | 488,123 |
Cochlear Ltd. | 314 | 13,154 |
Essilor International SA | 609 | 37,157 |
Getinge AB "B" | 200 | 4,882 |
Hologic, Inc.* | 10,400 | 226,720 |
Intuitive Surgical, Inc.* | 1,800 | 484,920 |
Medtronic, Inc. | 28,500 | 1,474,875 |
Meridian Bioscience, Inc. | 700 | 18,844 |
Merit Medical Systems, Inc.* | 5,100 | 74,970 |
Nobel Biocare Holding AG (Bearer) | 155 | 5,037 |
Olympus Corp. | 1,000 | 33,890 |
Quidel Corp.* | 900 | 14,868 |
Smith & Nephew PLC | 1,343 | 14,750 |
Sonova Holding AG (Registered) | 59 | 4,857 |
St. Jude Medical, Inc.* | 18,300 | 748,104 |
SurModics, Inc.* | 3,400 | 152,456 |
Synthes, Inc. | 73 | 10,017 |
Terumo Corp. | 5,800 | 295,534 |
William Demant Holding AS* | 50 | 3,287 |
Zimmer Holdings, Inc.* | 7,890 | 536,915 |
| 7,687,148 |
Health Care Providers & Services 1.2% |
Aetna, Inc. | 5,100 | 206,703 |
Alliance Imaging, Inc.* | 2,000 | 17,340 |
Apria Healthcare Group, Inc.* | 5,300 | 102,767 |
Celesio AG | 634 | 22,916 |
Centene Corp.* | 6,600 | 110,814 |
CorVel Corp.* | 4,600 | 155,802 |
Express Scripts, Inc.* | 11,600 | 727,552 |
Fresenius Medical Care AG & Co. KGaA | 7,278 | 400,762 |
Health Management Associates, Inc. "A"* | 125,700 | 818,307 |
Healthspring, Inc.* | 9,500 | 160,360 |
Kindred Healthcare, Inc.* | 6,300 | 181,188 |
Laboratory Corp. of America Holdings* | 6,100 | 424,743 |
Landauer, Inc. | 100 | 5,624 |
LifePoint Hospitals, Inc.* | 9,000 | 254,700 |
Magellan Health Services, Inc.* | 1,800 | 66,654 |
Mediceo Paltac Holdings Co., Ltd. | 400 | 7,355 |
Owens & Minor, Inc. | 6,200 | 283,278 |
RehabCare Group, Inc.* | 3,900 | 62,517 |
Res-Care, Inc.* | 3,100 | 55,118 |
Sonic Healthcare Ltd. | 1,874 | 26,105 |
Suzuken Co., Ltd. | 200 | 7,380 |
UnitedHealth Group, Inc. | 8,330 | 218,663 |
WellPoint, Inc.* | 22,997 | 1,096,037 |
| 5,412,685 |
Health Care Technology 0.0% |
Eclipsys Corp.* | 8,400 | 154,224 |
Phase Forward, Inc.* | 1,900 | 34,143 |
| 188,367 |
Life Sciences Tools & Services 0.5% |
Albany Molecular Research, Inc.* | 600 | 7,962 |
Cambrex Corp.* | 8,600 | 50,482 |
Dionex Corp.* | 800 | 53,096 |
eResearchTechnology, Inc.* | 12,800 | 223,232 |
Gerresheimer AG | 5,519 | 280,839 |
Invitrogen Corp.* | 1,500 | 58,890 |
Lonza Group AG (Registered) | 2,850 | 393,428 |
|
Shares
| Value ($) |
| |
PAREXEL International Corp.* | 3,400 | 89,454 |
Thermo Fisher Scientific, Inc.* | 20,056 | 1,117,721 |
| 2,275,104 |
Pharmaceuticals 2.9% |
Abbott Laboratories | 20,219 | 1,071,000 |
Astellas Pharma, Inc. | 1,500 | 63,719 |
AstraZeneca PLC | 2,082 | 88,545 |
Bristol-Myers Squibb Co. | 55,100 | 1,131,203 |
Caraco Pharmaceutical Laboratories Ltd.* | 5,300 | 69,960 |
Chugai Pharmaceutical Co., Ltd. | 900 | 14,419 |
Cypress Bioscience, Inc.* | 12,300 | 88,437 |
Daiichi Sankyo Co., Ltd. | 2,200 | 60,492 |
Eisai Co., Ltd. | 800 | 28,219 |
Elan Corp. PLC* (b) | 10,990 | 393,642 |
Elan Corp. PLC* (b) | 189 | 6,685 |
Eli Lilly & Co. | 34,120 | 1,574,979 |
GlaxoSmithKline PLC | 7,866 | 173,847 |
Hisamitsu Pharmaceutical Co., Inc. | 200 | 8,692 |
Johnson & Johnson | 21,182 | 1,362,850 |
Kyowa Hakko Kogyo Co., Ltd. | 1,000 | 10,233 |
Medicines Co.* | 9,300 | 184,326 |
Medicis Pharmaceutical Corp. "A" | 10,100 | 209,878 |
Merck & Co., Inc. | 35,318 | 1,331,135 |
Merck KGaA | 570 | 80,937 |
Mitsubishi Tanabe Pharma Corp. | 1,000 | 13,089 |
Novartis AG (Registered) | 2,484 | 136,214 |
Novo Nordisk AS "B" | 7,100 | 467,787 |
Ono Pharmaceutical Co., Ltd. | 300 | 16,547 |
Perrigo Co. | 7,400 | 235,098 |
Pfizer, Inc. | 131,415 | 2,295,820 |
Roche Holding AG (Genusschein) | 3,150 | 565,239 |
Sanofi-Aventis | 3,195 | 212,549 |
Shionogi & Co., Ltd. | 1,000 | 19,760 |
Shire Ltd. | 640 | 10,488 |
Takeda Pharmaceutical Co., Ltd. | 2,700 | 136,925 |
Teva Pharmaceutical Industries Ltd. (ADR) | 10,549 | 483,144 |
UCB SA | 4,368 | 160,653 |
Wyeth | 13,327 | 639,163 |
| 13,345,674 |
Industrials 6.8% |
Aerospace & Defense 1.8% |
BAE Systems PLC | 20,299 | 178,665 |
Boeing Co. | 17,300 | 1,136,956 |
Bombardier, Inc. "B"* | 3,500 | 25,434 |
CAE, Inc. | 700 | 7,908 |
Cobham PLC | 1,159 | 4,559 |
Esterline Technologies Corp.* | 3,700 | 182,262 |
European Aeronautic Defence & Space Co. | 222 | 4,167 |
Finmeccanica SpA | 206 | 5,383 |
Goodrich Corp. | 12,000 | 569,520 |
Honeywell International, Inc. | 41,843 | 2,103,866 |
Northrop Grumman Corp. | 8,900 | 595,410 |
Orbital Sciences Corp.* | 400 | 9,424 |
Precision Castparts Corp. | 7,600 | 732,412 |
Raytheon Co. | 9,657 | 543,496 |
Rolls-Royce Group PLC* | 1,977 | 13,424 |
Singapore Technologies Engineering Ltd. | 9,000 | 18,040 |
Teledyne Technologies, Inc.* | 4,400 | 214,676 |
Thales SA | 71 | 4,039 |
|
Shares
| Value ($) |
| |
Triumph Group, Inc. | 3,400 | 160,140 |
United Technologies Corp. | 29,682 | 1,831,380 |
| 8,341,161 |
Air Freight & Logistics 0.1% |
Deutsche Post AG (Registered) | 514 | 13,409 |
FedEx Corp. | 2,000 | 157,580 |
Hub Group, Inc. "A"* | 2,300 | 78,499 |
Pacer International, Inc. | 9,000 | 193,590 |
TNT NV | 791 | 26,868 |
Toll Holdings Ltd. | 1,558 | 9,016 |
| 478,962 |
Airlines 0.0% |
Air France-KLM | 113 | 2,693 |
Deutsche Lufthansa AG (Registered) | 185 | 3,973 |
Iberia Lineas Aereas de Espana SA | 855 | 2,035 |
Qantas Airways Ltd. | 2,776 | 8,086 |
Singapore Airlines Ltd. | 3,000 | 32,468 |
SkyWest, Inc. | 3,400 | 43,010 |
| 92,265 |
Building Products 0.2% |
AAON, Inc. | 1,200 | 23,112 |
Apogee Enterprises, Inc. | 7,100 | 114,736 |
Asahi Glass Co., Ltd. | 1,000 | 12,114 |
Assa Abloy AB "B" | 400 | 5,781 |
Compagnie de Saint-Gobain | 180 | 11,235 |
Daikin Industries Ltd. | 100 | 5,037 |
Geberit AG (Registered) | 59 | 8,641 |
Gibraltar Industries, Inc. | 4,400 | 70,268 |
Insteel Industries, Inc. | 6,500 | 119,015 |
Lennox International, Inc. | 10,600 | 306,976 |
Owens Corning, Inc.* | 5,100 | 116,025 |
Wienerberger AG | 68 | 2,850 |
| 795,790 |
Commercial Services & Supplies 0.5% |
Adecco SA (Registered) | 181 | 8,926 |
American Ecology Corp. | 1,900 | 56,107 |
Babcock International Group PLC | 24,830 | 302,087 |
Bowne & Co., Inc. | 600 | 7,650 |
Brambles Ltd. | 4,498 | 37,775 |
Capita Group PLC | 467 | 6,386 |
Clean Harbors, Inc.* | 1,400 | 99,484 |
Comfort Systems USA, Inc. | 3,100 | 41,664 |
COMSYS IT Partners, Inc.* | 12,900 | 117,648 |
Consolidated Graphics, Inc.* | 2,700 | 133,029 |
Experian Group Ltd. | 763 | 5,639 |
Exponent, Inc.* | 2,400 | 75,384 |
G4S PLC | 997 | 4,016 |
GeoEye, Inc.* | 4,500 | 79,695 |
Hudson Highland Group, Inc.* | 10,600 | 110,982 |
Intertek Group PLC | 9,578 | 188,167 |
Manpower, Inc. | 1,200 | 69,888 |
Randstad Holdings NV | 312 | 10,886 |
Rentokil Initial PLC | 1,774 | 3,503 |
Secom Co., Ltd. | 100 | 4,869 |
Securitas AB "B" | 400 | 4,640 |
Serco Group PLC | 451 | 4,003 |
SGS SA (Registered) | 7 | 9,986 |
Standard Register Co. | 1,300 | 12,259 |
The Brink's Co. | 10,500 | 686,910 |
Volt Information Sciences, Inc.* | 8,300 | 98,853 |
|
Shares
| Value ($) |
| |
Watson Wyatt Worldwide, Inc. "A" | 500 | 26,445 |
| 2,206,881 |
Construction & Engineering 0.6% |
Acciona SA | 141 | 33,265 |
ACS, Actividades de Construccion y Servicios SA | 951 | 47,494 |
Arabtec Holding Co.* | 214 | 944 |
Balfour Beatty PLC | 491 | 4,148 |
Boart Longyear Group | 3,671 | 7,838 |
Bouygues SA | 209 | 13,779 |
EMCOR Group, Inc.* | 8,100 | 231,093 |
FLSmidth & Co. AS | 1,750 | 191,827 |
Fluor Corp. | 3,600 | 669,888 |
Fomento de Construcciones y Contratas SA | 208 | 12,280 |
Granite Construction, Inc. | 700 | 22,071 |
Grupo Ferrovial SA | 303 | 18,713 |
Hochtief AG | 35 | 3,540 |
Leighton Holdings Ltd. | 9,181 | 442,478 |
MasTec, Inc.* | 16,100 | 171,626 |
Michael Baker Corp.* | 1,400 | 30,632 |
Orascom Construction Industries (GDR) (REG S) | 1,100 | 150,396 |
Perini Corp.* | 4,500 | 148,725 |
Shaw Group, Inc.* | 8,000 | 494,320 |
Skanska AB "B" | 600 | 8,569 |
SNC-Lavalin Group, Inc. | 400 | 21,975 |
Vinci SA | 266 | 16,230 |
YIT Oyj | 789 | 19,702 |
| 2,761,533 |
Electrical Equipment 0.4% |
ABB Ltd. (Registered)* | 2,468 | 69,654 |
Acuity Brands, Inc. | 2,300 | 110,584 |
Alstom | 65 | 14,903 |
Brady Corp. "A" | 1,000 | 34,530 |
Emerson Electric Co. | 14,340 | 709,113 |
Gamesa Corp. Tecnologica SA | 842 | 41,328 |
GrafTech International Ltd.* | 7,400 | 198,542 |
II-VI, Inc.* | 4,300 | 150,156 |
Mitsubishi Electric Corp. | 1,000 | 10,815 |
Polypore International, Inc.* | 1,400 | 35,462 |
Q-Cells AG* | 40 | 4,048 |
Renewable Energy Corp. AS* | 100 | 2,577 |
Schneider Electric SA | 133 | 14,335 |
Solarworld AG | 59 | 2,801 |
Sumitomo Electric Industries Ltd. | 400 | 5,094 |
Superior Essex, Inc.* | 3,700 | 165,131 |
Vestas Wind Systems AS* | 500 | 65,239 |
| 1,634,312 |
Industrial Conglomerates 0.6% |
CSR Ltd. | 3,192 | 7,456 |
Fraser & Neave Ltd. | 5,000 | 16,707 |
General Electric Co. | 96,748 | 2,582,204 |
Hutchison Whampoa Ltd. | 10,000 | 101,124 |
Keppel Corp., Ltd. | 6,000 | 49,472 |
Koninklijke (Royal) Philips Electronics NV | 2,098 | 70,846 |
Orkla ASA | 900 | 11,515 |
SembCorp Industries Ltd. | 5,000 | 15,363 |
Siemens AG (Registered) | 564 | 62,455 |
Smiths Group PLC | 412 | 8,896 |
| 2,926,038 |
|
Shares
| Value ($) |
| |
Machinery 1.3% |
Actuant Corp. "A" | 1,700 | 53,295 |
AGCO Corp.* | 19,900 | 1,042,959 |
Alfa Laval AB | 500 | 7,733 |
Ampco-Pittsburgh Corp. | 300 | 13,344 |
Atlas Copco AB "A" | 800 | 11,760 |
Atlas Copco AB "B" | 400 | 5,316 |
Badger Meter, Inc. | 2,300 | 116,219 |
Caterpillar, Inc. | 15,870 | 1,171,523 |
China Infrastructure Machinery Holdings Ltd. | 104,000 | 96,037 |
Columbus McKinnon Corp.* | 5,300 | 127,624 |
Dover Corp. | 14,333 | 693,287 |
EnPro Industries, Inc.* | 5,000 | 186,700 |
FANUC Ltd. | 100 | 9,744 |
Gorman-Rupp Co. | 500 | 19,920 |
Invensys PLC* | 823 | 4,262 |
KCI Konecranes Oyj | 84 | 3,465 |
Komatsu Ltd. | 12,300 | 342,021 |
Kone Oyj "B" | 968 | 33,818 |
Kubota Corp. | 1,000 | 7,172 |
MAN AG | 79 | 8,753 |
Metso Corp. | 793 | 35,877 |
Mitsubishi Heavy Industries Ltd. | 2,000 | 9,577 |
Mueller Industries, Inc. | 1,200 | 38,640 |
Parker Hannifin Corp. | 25,600 | 1,825,792 |
Sandvik AB | 1,200 | 16,395 |
Scania AB "B" | 400 | 5,474 |
Schindler Holding AG | 84 | 6,231 |
SembCorp. Marine Ltd. | 2,000 | 5,988 |
SKF AB "B" | 600 | 9,395 |
Sulzer AG (Registered) | 40 | 5,072 |
Twin Disc, Inc. | 1,100 | 23,023 |
Vallourec SA | 33 | 11,528 |
Valmont Industries, Inc. | 1,200 | 125,148 |
Volvo AB "A" | 300 | 3,524 |
Volvo AB "B" | 1,300 | 15,859 |
Wartsila Oyj | 519 | 32,486 |
Xerium Technologies, Inc. | 3,700 | 14,652 |
Zardoya Otis SA | 514 | 10,651 |
| 6,150,264 |
Marine 0.2% |
A P Moller-Maersk AS "A" | 1 | 12,201 |
A P Moller-Maersk AS "B" | 3 | 36,537 |
Alexander & Baldwin, Inc. | 3,000 | 136,650 |
Kirby Corp.* | 11,800 | 566,400 |
Kuehne & Nagel International AG (Registered) | 78 | 7,379 |
Mitsui O.S.K. Lines Ltd. | 1,000 | 14,362 |
Nippon Yusen Kabushiki Kaisha | 1,000 | 9,596 |
Pacific Basin Shipping Ltd. | 6,000 | 8,517 |
TBS International Ltd. "A"* | 2,700 | 107,865 |
| 899,507 |
Road & Rail 0.7% |
Arkansas Best Corp. | 4,800 | 175,872 |
Bayerische Motoren Werke (BMW) AG | 82 | 3,935 |
Burlington Northern Santa Fe Corp. | 3,700 | 369,593 |
Canadian National Railway Co. (b) | 14,400 | 692,352 |
Canadian National Railway Co. (b) | 1,200 | 57,641 |
Canadian Pacific Railway Ltd. | 400 | 26,557 |
Central Japan Railway Co. | 1 | 11,013 |
CSX Corp. | 3,300 | 207,273 |
|
Shares
| Value ($) |
| |
DSV AS | 700 | 16,748 |
East Japan Railway Co. | 1 | 8,139 |
FirstGroup PLC | 431 | 4,457 |
MTR Corp., Ltd. | 7,000 | 22,007 |
Norfolk Southern Corp. | 5,800 | 363,486 |
Ryder System, Inc. | 18,900 | 1,301,832 |
West Japan Railway Co. | 1 | 4,912 |
| 3,265,817 |
Trading Companies & Distributors 0.3% |
Applied Industrial Technologies, Inc. | 2,300 | 55,591 |
Bunzl PLC | 366 | 4,765 |
Finning International, Inc. | 500 | 12,504 |
Itochu Corp. | 1,000 | 10,615 |
Marubeni Corp. | 1,000 | 8,338 |
Mitsubishi Corp. | 11,500 | 378,396 |
Mitsui & Co., Ltd. | 12,000 | 264,933 |
Noble Group Ltd. | 101,600 | 177,542 |
Sumitomo Corp. | 500 | 6,554 |
United Rentals, Inc.* | 16,900 | 331,409 |
Wolseley PLC | 527 | 3,918 |
| 1,254,565 |
Transportation Infrastructure 0.1% |
Abertis Infraestructuras SA | 1,434 | 33,853 |
Atlantia SpA | 186 | 5,614 |
Brisa | 11,650 | 134,241 |
Cintra Concesiones de Infraestructuras de Transporte SA | 1,277 | 14,230 |
Hopewell Holdings Ltd. | 3,000 | 10,640 |
Macquarie Infrastructure Group (Unit) | 7,725 | 17,148 |
Novorossiysk Sea Trade Port (GDR) 144A* | 3,500 | 52,395 |
Transurban Group (Unit) | 3,144 | 12,680 |
| 280,801 |
Information Technology 7.4% |
Communications Equipment 0.9% |
Alcatel-Lucent* | 6,661 | 40,103 |
Anaren, Inc.* | 2,900 | 30,653 |
Avocent Corp.* | 1,300 | 24,180 |
Black Box Corp. | 1,100 | 29,909 |
Brocade Communications Systems, Inc.* | 86,890 | 715,974 |
Cisco Systems, Inc.* | 46,270 | 1,076,240 |
Corning, Inc. | 14,300 | 329,615 |
Harmonic, Inc.* | 14,800 | 140,748 |
Juniper Networks, Inc.* | 5,000 | 110,900 |
Nokia Oyj | 11,819 | 289,520 |
Nortel Networks Corp.* | 900 | 7,370 |
Oplink Communications, Inc.* | 5,100 | 48,960 |
Plantronics, Inc. | 5,200 | 116,064 |
QUALCOMM, Inc. | 15,930 | 706,814 |
Research In Motion Ltd.* (b) | 800 | 93,902 |
Research In Motion Ltd.* (b) | 1,100 | 128,590 |
Tandberg ASA | 100 | 1,638 |
Tekelec* | 10,200 | 150,042 |
Telefonaktiebolaget LM Ericsson "B" | 9,600 | 99,065 |
| 4,140,287 |
|
Shares
| Value ($) |
| |
Computers & Peripherals 2.2% |
Apple, Inc.* | 10,700 | 1,791,608 |
EMC Corp.* | 38,230 | 561,599 |
Fujitsu Ltd. | 1,000 | 7,394 |
Hewlett-Packard Co. | 46,900 | 2,073,449 |
International Business Machines Corp. | 21,440 | 2,541,283 |
Intevac, Inc.* | 5,800 | 65,424 |
Lexmark International, Inc. "A"* | 29,800 | 996,214 |
Logitech International SA (Registered)* | 8,420 | 224,448 |
NEC Corp. | 1,000 | 5,252 |
Seagate Technology | 54,600 | 1,044,498 |
Toshiba Corp. | 2,000 | 14,705 |
Western Digital Corp.* | 14,800 | 511,044 |
Wincor Nixdorf AG | 83 | 5,762 |
| 9,842,680 |
Electronic Equipment & Instruments 0.3% |
Arrow Electronics, Inc.* | 1,900 | 58,368 |
Avnet, Inc.* | 5,400 | 147,312 |
Benchmark Electronics, Inc.* | 600 | 9,804 |
Electro Rent Corp. | 4,900 | 61,446 |
Electrocomponents PLC | 2,281 | 6,650 |
Fujifilm Holdings Corp. | 200 | 6,848 |
Hitachi Ltd. | 2,000 | 14,384 |
Hoya Corp. | 200 | 4,635 |
IBIDEN Co., Ltd. | 100 | 3,618 |
Insight Enterprises, Inc.* | 6,300 | 73,899 |
Kyocera Corp. | 100 | 9,390 |
Mettler-Toledo International, Inc.* | 5,800 | 550,188 |
Multi-Fineline Electronix, Inc.* | 5,600 | 154,952 |
Murata Manufacturing Co., Ltd. | 100 | 4,743 |
Nidec Corp. | 100 | 6,645 |
ScanSource, Inc.* | 800 | 21,408 |
SYNNEX Corp.* | 2,700 | 67,743 |
TDK Corp. | 100 | 5,996 |
TTM Technologies, Inc.* | 5,200 | 68,692 |
Tyco Electronics Ltd. | 4,100 | 146,862 |
| 1,423,583 |
Internet Software & Services 0.6% |
CMGI, Inc.* | 5,700 | 60,420 |
EarthLink, Inc.* | 13,100 | 113,315 |
eBay, Inc.* | 11,200 | 306,096 |
Google, Inc. "A"* | 2,915 | 1,534,514 |
GSI Commerce, Inc.* | 2,700 | 36,801 |
InfoSpace, Inc. | 2,600 | 21,658 |
j2 Global Communications, Inc.* | 2,500 | 57,500 |
Marchex, Inc. "B" | 1,600 | 19,712 |
NIC, Inc. | 1,400 | 9,562 |
United Internet AG (Registered) | 218 | 4,292 |
United Online, Inc. | 7,200 | 72,216 |
ValueClick, Inc.* | 6,000 | 90,900 |
Websense, Inc.* | 5,000 | 84,200 |
Yahoo! Japan Corp. | 9 | 3,451 |
Yahoo!, Inc.* | 11,600 | 239,656 |
| 2,654,293 |
IT Services 1.0% |
Accenture Ltd. "A" | 18,510 | 753,727 |
Acxiom Corp. | 5,400 | 62,046 |
Atos Origin SA* | 177 | 9,740 |
Cap Gemini SA | 340 | 19,984 |
CGI Group, Inc. "A"* | 600 | 5,978 |
|
Shares
| Value ($) |
| |
Computer Sciences Corp.* | 11,200 | 524,608 |
CSG Systems International, Inc.* | 11,900 | 131,138 |
Fiserv, Inc.* | 8,000 | 362,960 |
Gartner, Inc.* | 9,900 | 205,128 |
iGATE Corp.* | 3,400 | 27,642 |
Indra Sistemas SA | 9,704 | 251,681 |
Integral Systems, Inc. | 600 | 23,220 |
Logica PLC | 19,836 | 42,597 |
MasterCard, Inc. "A" | 2,500 | 663,800 |
MAXIMUS, Inc. | 6,000 | 208,920 |
NTT Data Corp. | 1 | 3,901 |
Redecard SA (GDR) 144A | 6,200 | 239,708 |
SAIC, Inc.* | 13,700 | 285,097 |
Sapient Corp.* | 12,300 | 78,966 |
TNS, Inc.* | 1,500 | 35,940 |
Visa, Inc. "A"* | 10,400 | 845,624 |
| 4,782,405 |
Office Electronics 0.2% |
Canon, Inc. | 12,900 | 661,255 |
Konica Minolta Holdings, Inc. | 500 | 8,464 |
Neopost SA | 90 | 9,505 |
| 679,224 |
Semiconductors & Semiconductor Equipment 0.9% |
ANADIGICS, Inc.* | 10,800 | 106,380 |
ARM Holdings PLC | 1,833 | 3,088 |
ASML Holding NV | 4,336 | 105,604 |
Broadcom Corp. "A"* | 9,040 | 246,702 |
Elpida Memory, Inc.* | 100 | 3,211 |
Infineon Technologies AG* | 1,742 | 15,051 |
Intel Corp. | 54,700 | 1,174,956 |
Microsemi Corp.* | 6,500 | 163,670 |
Monolithic Power Systems, Inc.* | 5,400 | 116,748 |
Pericom Semiconductor Corp.* | 2,000 | 29,680 |
ROHM Co., Ltd. | 100 | 5,738 |
Semtech Corp.* | 12,100 | 170,247 |
Skyworks Solutions, Inc.* | 19,200 | 189,504 |
Standard Microsystems Corp.* | 3,100 | 84,165 |
STMicroelectronics NV | 1,681 | 17,343 |
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 67,123 | 732,312 |
Techwell, Inc.* | 1,300 | 16,016 |
Texas Instruments, Inc. | 22,700 | 639,232 |
Tokyo Electron Ltd. | 100 | 5,750 |
TriQuint Semiconductor, Inc.* | 26,700 | 161,802 |
Ultratech, Inc.* | 5,200 | 80,704 |
Volterra Semiconductor Corp.* | 8,500 | 146,710 |
Zoran Corp.* | 7,400 | 86,580 |
| 4,301,193 |
Software 1.3% |
Adobe Systems, Inc.* | 20,950 | 825,221 |
Advent Software, Inc.* | 3,300 | 119,064 |
Compuware Corp.* | 9,700 | 92,538 |
Dassault Systemes SA | 159 | 9,648 |
Electronic Arts, Inc.* | 8,500 | 377,655 |
JDA Software Group, Inc.* | 10,400 | 188,240 |
Microsoft Corp. | 119,550 | 3,288,821 |
Misys PLC | 1,295 | 3,833 |
Net 1 UEPS Technologies, Inc.* | 1,300 | 31,590 |
Nintendo Co., Ltd. | 1,100 | 619,082 |
Parametric Technology Corp.* | 1,400 | 23,338 |
Renaissance Learning, Inc. | 1,700 | 19,057 |
SAP AG | 2,011 | 105,123 |
|
Shares
| Value ($) |
| |
SPSS, Inc.* | 3,600 | 130,932 |
Sybase, Inc.* | 4,800 | 141,216 |
Symantec Corp.* | 2,300 | 44,505 |
The Sage Group PLC | 17,707 | 73,313 |
| 6,093,176 |
Materials 3.6% |
Chemicals 2.2% |
Agrium, Inc. (b) | 4,566 | 491,028 |
Agrium, Inc. (b) | 100 | 10,783 |
Air Liquide SA | 90 | 11,865 |
Air Products & Chemicals, Inc. | 9,114 | 901,010 |
Akzo Nobel NV | 890 | 60,931 |
Asahi Kasei Corp. | 1,000 | 5,248 |
Ashland, Inc. | 6,500 | 313,300 |
BASF SE | 638 | 43,938 |
Bayer AG | 5,945 | 499,343 |
Calgon Carbon Corp.* | 10,500 | 162,330 |
CF Industries Holdings, Inc. | 2,600 | 397,280 |
Ciba Holding AG (Registered) | 171 | 4,900 |
Cytec Industries, Inc. | 800 | 43,648 |
Dow Chemical Co. | 38,602 | 1,347,596 |
Eastman Chemical Co. | 2,900 | 199,694 |
Ecolab, Inc. | 11,650 | 500,833 |
GenTek, Inc.* | 2,300 | 61,847 |
Givaudan SA (Registered) | 8 | 7,125 |
Incitec Pivot Ltd. | 26 | 4,580 |
Innospec, Inc. | 500 | 9,410 |
JSR Corp. | 200 | 3,966 |
K+S AG | 14 | 8,032 |
Koninklijke DSM NV | 553 | 32,336 |
Kuraray Co., Ltd. | 500 | 5,976 |
Linde AG | 1,583 | 221,932 |
Mitsubishi Chemical Holdings Corp. | 1,000 | 5,803 |
Mitsubishi Gas Chemical Co., Inc. | 1,000 | 7,200 |
Mitsui Chemicals, Inc. | 1,000 | 4,919 |
Monsanto Co. | 8,800 | 1,112,672 |
NewMarket Corp. | 2,400 | 158,952 |
Nitto Denko Corp. | 200 | 7,662 |
Novozymes AS "B" | 1,650 | 148,178 |
Orica Ltd. | 199 | 5,582 |
Potash Corp. of Saskatchewan, Inc. | 1,701 | 394,581 |
Praxair, Inc. | 17,697 | 1,667,765 |
ShengdaTech, Inc.* | 1,300 | 12,909 |
Shin-Etsu Chemical Co., Ltd. | 400 | 24,684 |
Showa Denko KK | 2,000 | 5,301 |
Solvay SA | 830 | 107,932 |
Sumitomo Chemical Co., Ltd. | 2,000 | 12,575 |
Syngenta AG (Registered) | 177 | 57,281 |
Teijin Ltd. | 1,000 | 3,423 |
Terra Industries, Inc. | 5,700 | 281,295 |
Toray Industries, Inc. | 2,000 | 10,743 |
Ube Industries Ltd. | 1,000 | 3,534 |
Umicore | 1,794 | 88,504 |
Uralkali (GDR) 144A* | 5,800 | 421,660 |
Yara International ASA | 2,000 | 176,415 |
| 10,068,501 |
Construction Materials 0.1% |
CRH PLC (b) | 2,495 | 72,127 |
CRH PLC (b) | 5,136 | 149,481 |
Fletcher Building Ltd. | 324 | 1,567 |
Holcim Ltd. (Registered) | 403 | 32,585 |
|
Shares
| Value ($) |
| |
Imerys SA | 73 | 5,280 |
Lafarge SA | 142 | 21,724 |
| 282,764 |
Containers & Packaging 0.2% |
Amcor Ltd. | 605 | 2,926 |
Owens-Illinois, Inc.* | 11,900 | 496,111 |
Sonoco Products Co. | 19,377 | 599,718 |
Toyo Seikan Kaisha Ltd. | 300 | 5,307 |
| 1,104,062 |
Metals & Mining 1.0% |
A.M. Castle & Co. | 1,100 | 31,471 |
Acerinox SA | 4,664 | 106,962 |
Agnico-Eagle Mines Ltd. | 100 | 7,501 |
Alumina Ltd. | 739 | 3,343 |
Anglo American PLC | 4,721 | 334,384 |
ArcelorMittal | 561 | 55,378 |
Barrick Gold Corp. | 300 | 13,713 |
BHP Billiton Ltd. | 1,387 | 59,075 |
BHP Billiton PLC | 836 | 32,110 |
BlueScope Steel Ltd. | 470 | 5,102 |
Boliden AB | 1,900 | 15,344 |
Companhia Vale do Rio Doce (ADR) | 4,300 | 154,026 |
Compass Minerals International, Inc. | 3,100 | 249,736 |
Fording Canadian Coal Trust (Unit) | 100 | 9,562 |
Fortescue Metals Group Ltd.* | 700 | 7,935 |
Freeport-McMoRan Copper & Gold, Inc. | 8,700 | 1,019,553 |
Goldcorp, Inc. | 300 | 13,830 |
JFE Holdings, Inc. | 600 | 30,160 |
Kinross Gold Corp. | 400 | 9,454 |
Kobe Steel Ltd. | 3,000 | 8,568 |
Lonmin PLC | 70 | 4,413 |
Mitsubishi Materials Corp. | 1,000 | 4,267 |
Newcrest Mining Ltd. | 264 | 7,450 |
Nippon Steel Corp. | 6,000 | 32,413 |
Nisshin Steel Co., Ltd. | 1,000 | 3,393 |
Norsk Hydro ASA | 7,300 | 106,268 |
Nucor Corp. | 3,900 | 291,213 |
Olympic Steel, Inc. | 2,400 | 182,208 |
Outokumpu Oyj | 1,187 | 41,233 |
Oxiana Ltd.* | 1,031 | 2,580 |
Rautaruukki Oyj | 857 | 38,966 |
Reliance Steel & Aluminum Co. | 1,200 | 92,508 |
Rio Tinto Ltd. | 95 | 12,384 |
Rio Tinto PLC | 317 | 38,867 |
Salzgitter AG | 31 | 5,665 |
Schnitzer Steel Industries, Inc. "A" | 2,100 | 240,660 |
SSAB Svenskt Stal AB "A" | 1,200 | 38,537 |
Sumitomo Metal Industries Ltd. | 4,000 | 17,554 |
Sumitomo Metal Mining Co., Ltd. | 1,000 | 15,222 |
Teck Cominco Ltd. "B" | 300 | 14,466 |
ThyssenKrupp AG | 248 | 15,541 |
United States Steel Corp. | 3,800 | 702,164 |
Universal Stainless & Alloy Products, Inc.* | 1,400 | 51,856 |
Vedanta Resources PLC | 6,866 | 299,416 |
voestalpine AG | 124 | 10,170 |
Xstrata PLC | 4,276 | 339,832 |
Yamana Gold, Inc. | 300 | 4,990 |
| 4,781,443 |
|
Shares
| Value ($) |
| |
Paper & Forest Products 0.1% |
Buckeye Technologies, Inc.* | 12,200 | 103,212 |
Domtar Corp.* | 16,000 | 87,200 |
Oji Paper Co., Ltd. | 1,000 | 4,708 |
Schweitzer-Mauduit International, Inc. | 2,400 | 40,440 |
Stora Enso Oyj "R" | 5,842 | 54,386 |
Svenska Cellulosa AB "B" | 3,400 | 47,873 |
UPM-Kymmene Oyj | 5,192 | 84,405 |
| 422,224 |
Telecommunication Services 2.7% |
Diversified Telecommunication Services 2.2% |
AT&T, Inc. | 70,082 | 2,361,062 |
Atlantic Tele-Network, Inc. | 4,200 | 115,542 |
BCE, Inc. (b) | 25,079 | 873,000 |
BCE, Inc. (b) | 1,200 | 41,836 |
Belgacom SA | 541 | 23,191 |
BT Group PLC | 9,801 | 38,958 |
Cable & Wireless PLC | 3,199 | 9,579 |
Deutsche Telekom AG (Registered) | 8,760 | 143,226 |
Elisa Oyj | 491 | 10,232 |
Embarq Corp. | 8,900 | 420,703 |
FairPoint Communications, Inc. | 941 | 6,785 |
France Telecom SA | 7,108 | 208,656 |
Global Crossing Ltd.* | 6,400 | 114,816 |
Koninklijke (Royal) KPN NV | 8,852 | 151,327 |
Nippon Telegraph & Telephone Corp. | 28 | 136,479 |
NTELOS Holdings Corp. | 600 | 15,222 |
Portugal Telecom SGPS SA (Registered) | 12,213 | 137,653 |
Premiere Global Services, Inc.* | 4,900 | 71,442 |
PT Telekomunikasi Indonesia (ADR) | 6,700 | 216,075 |
Singapore Telecommunications Ltd. | 124,000 | 330,924 |
Swisscom AG (Registered) | 471 | 156,605 |
Tele2 AB "B" | 1,500 | 29,164 |
Telecom Corp. of New Zealand Ltd. | 107,665 | 292,092 |
Telecom Italia SpA | 49,605 | 99,332 |
Telecom Italia SpA (RNC) | 27,168 | 43,800 |
Telefonica SA | 27,638 | 730,443 |
Telekom Austria AG | 6,774 | 146,588 |
Telenor ASA | 12,500 | 234,266 |
TeliaSonera AB | 10,500 | 77,366 |
Telstra Corp., Ltd. | 55,630 | 225,938 |
Telus Corp. | 300 | 12,612 |
Telus Corp. (Non-Voting Shares) | 600 | 24,413 |
tw telecom, Inc.* | 9,700 | 155,491 |
Verizon Communications, Inc. | 42,300 | 1,497,420 |
Windstream Corp. | 60,100 | 741,634 |
| 9,893,872 |
Wireless Telecommunication Services 0.5% |
America Movil SAB de CV "L" (ADR) | 4,600 | 242,650 |
American Tower Corp. "A"* | 6,300 | 266,175 |
Centennial Communications Corp.* | 11,000 | 76,890 |
China Mobile Ltd. | 15,500 | 207,431 |
iPCS, Inc.* | 2,200 | 65,186 |
KDDI Corp. | 16 | 99,057 |
Millicom International Cellular SA (SDR) | 300 | 31,076 |
Mobistar SA | 53 | 4,305 |
NTT DoCoMo, Inc. | 87 | 127,588 |
|
Shares
| Value ($) |
| |
Rogers Communications, Inc. "B" | 2,000 | 77,591 |
Softbank Corp. | 4,300 | 72,359 |
Syniverse Holdings, Inc.* | 7,100 | 115,020 |
Telephone & Data Systems, Inc. | 7,900 | 373,433 |
USA Mobility, Inc.* | 9,000 | 67,950 |
Vodafone Group PLC | 127,373 | 375,304 |
| 2,202,015 |
Utilities 3.1% |
Electric Utilities 2.3% |
Allegheny Energy, Inc. | 20,290 | 1,016,732 |
American Electric Power Co., Inc. | 24,200 | 973,566 |
British Energy Group PLC | 2,200 | 31,101 |
Chubu Electric Power Co., Inc. | 2,500 | 60,947 |
Chugoku Electric Power Co., Inc. | 1,000 | 21,350 |
CLP Holdings Ltd. | 18,000 | 154,131 |
Duke Energy Corp. | 34,173 | 593,927 |
E.ON AG | 4,159 | 837,529 |
Edison International | 19,300 | 991,634 |
EDP — Energias de Portugal SA | 24,551 | 127,994 |
Electricite de France | 321 | 30,435 |
Enel SpA | 21,075 | 199,971 |
Entergy Corp. | 5,928 | 714,205 |
Exelon Corp. | 14,761 | 1,327,900 |
FirstEnergy Corp. | 15,075 | 1,241,125 |
Fortis, Inc. | 2,200 | 58,598 |
Fortum Oyj | 685 | 34,691 |
FPL Group, Inc. | 13,352 | 875,624 |
Hokkaido Electric Power Co., Inc. | 800 | 16,263 |
Hokuriku Electric Power Co. | 700 | 16,638 |
Hongkong Electric Holding Ltd. | 13,500 | 80,679 |
Iberdrola SA | 38,359 | 512,768 |
Kansai Electric Power Co., Inc. | 2,800 | 65,501 |
Kyushu Electric Power Co., Inc. | 1,400 | 29,253 |
Oesterreichische Elektrizitaetswirtschafts AG "A" | 68 | 6,084 |
Portland General Electric Co. | 1,900 | 42,788 |
Red Electrica Corporation SA | 229 | 14,880 |
RWE AG | 587 | 74,050 |
Scottish & Southern Energy PLC | 1,783 | 49,756 |
Shikoku Electric Power Co., Inc. | 700 | 19,242 |
Southern Co. | 2,800 | 97,776 |
Terna — Rete Elettrica Nationale SpA | 6,478 | 27,398 |
Tohoku Electric Power Co., Inc. | 1,600 | 34,826 |
Tokyo Electric Power Co., Inc. | 4,600 | 118,202 |
Union Fenosa SA | 478 | 27,819 |
Westar Energy, Inc. | 6,300 | 135,513 |
| 10,660,896 |
Gas Utilities 0.2% |
Centrica PLC | 8,869 | 54,714 |
Enagas | 311 | 8,793 |
Gas Natural SDG SA | 502 | 29,222 |
Gaz de France | 274 | 17,553 |
Hong Kong & China Gas Co., Ltd. | 38,500 | 92,342 |
New Jersey Resources Corp. | 550 | 17,958 |
ONEOK, Inc. | 2,800 | 136,724 |
Osaka Gas Co., Ltd. | 8,000 | 29,345 |
Snam Rete Gas SpA | 4,641 | 31,674 |
The Laclede Group, Inc. | 5,100 | 205,887 |
Tokyo Gas Co., Ltd. | 9,000 | 36,210 |
WGL Holdings, Inc. | 8,400 | 291,816 |
| 952,238 |
|
Shares
| Value ($) |
| |
Independent Power Producers & Energy Traders 0.2% |
Constellation Energy Group, Inc. | 9,100 | 747,110 |
Electric Power Development Co., Ltd. | 600 | 22,241 |
Iberdrola Renovables* | 1,405 | 10,846 |
International Power PLC | 4,087 | 34,970 |
TransAlta Corp. | 2,900 | 104,829 |
| 919,996 |
Multi-Utilities 0.4% |
A2A SpA | 4,548 | 16,706 |
AGL Energy Ltd. | 25,006 | 343,144 |
Alliant Energy Corp. | 1,500 | 51,390 |
Ameren Corp. | 3,400 | 143,582 |
Avista Corp. | 400 | 8,584 |
CH Energy Group, Inc. | 700 | 24,899 |
National Grid PLC | 5,608 | 73,491 |
PG&E Corp. | 24,017 | 953,235 |
Sempra Energy | 400 | 22,580 |
Suez SA | 1,664 | 113,011 |
United Utilities PLC | 1,724 | 23,516 |
Veolia Environnement | 587 | 32,705 |
| 1,806,843 |
Water Utilities 0.0% |
Severn Trent PLC | 474 | 11,989 |
Total Common Stocks (Cost $248,456,722) | 262,138,295 |
|
Preferred Stocks 0.1% |
Consumer Discretionary 0.1% |
Porsche Automobil Holding SE | 1,167 | 179,389 |
Volkswagen AG | 62 | 8,936 |
| 188,325 |
Consumer Staples 0.0% |
Henkel AG & Co. KGaA | 1,125 | 44,675 |
Health Care 0.0% |
Fresenius SE | 629 | 54,285 |
Utilities 0.0% |
RWE AG | 22 | 2,212 |
Total Preferred Stocks (Cost $353,710) | 289,497 |
|
Convertible Preferred Stocks 0.0% |
Consumer Discretionary |
ION Media Networks, Inc., 144A, 12.0%* (Cost $8,344) | 60,000 | 390 |
|
Participatory Notes 0.1% |
Aldar Properties PJSC, Commercial Bank of Qatar, Dubai Islamic Bank, National Central Cooling Co., and Qatar Electricity & Water Co. (issuer Merrill Lynch International & Co.), Expiration Date 4/24/2009* | 1,700 | 167,229 |
Arabtec Holding Co. (issuer Merrill Lynch International & Co.), Expiration Date 1/12/2010* | 1,800 | 7,898 |
|
Shares
| Value ($) |
| |
Merrill Lynch Pioneers Index (issuer Merrill Lynch International & Co.), Expiration Date 2/27/2009* | 1,100 | 101,123 |
Total Participatory Notes (Cost $287,968) | 276,250 |
|
Warrants 0.0% |
Materials |
New ASAT (Finance) Ltd., Expiration Date 2/1/2011* (Cost $0) | 24,700 | 4,881 |
|
Rights 0.0% |
HBOS PLC, Expiration Date 7/18/2008* (Cost $269) | 323 | 69 |
| Principal Amount ($)(a) | Value ($) |
| |
Corporate Bonds 11.6% |
Consumer Discretionary 1.0% |
AMC Entertainment, Inc., 8.0%, 3/1/2014 | 75,000 | 66,562 |
American Achievement Corp., 8.25%, 4/1/2012 | 15,000 | 14,700 |
American Achievement Group Holding Corp., 14.75%, 10/1/2012 (PIK) | 30,279 | 27,857 |
Asbury Automotive Group, Inc.: | | |
7.625%, 3/15/2017 | 35,000 | 28,175 |
8.0%, 3/15/2014 | 15,000 | 12,975 |
Burlington Coat Factory Warehouse Corp., 11.125%, 4/15/2014 | 15,000 | 12,150 |
Cablevision Systems Corp., Series B, 7.133%***, 4/1/2009 | 15,000 | 15,000 |
CanWest MediaWorks LP, 144A, 9.25%, 8/1/2015 | 25,000 | 20,375 |
Carrols Corp., 9.0%, 1/15/2013 | 15,000 | 13,050 |
Charter Communications Holdings LLC, 11.0%, 10/1/2015 | 21,000 | 15,566 |
Charter Communications Operating LLC, 144A, 10.875%, 9/15/2014 | 60,000 | 61,650 |
Comcast Corp., 6.4%, 5/15/2038 | 1,250,000 | 1,153,091 |
Cooper-Standard Automotive, Inc., 7.0%, 12/15/2012 | 20,000 | 16,700 |
CSC Holdings, Inc.: | | |
7.25%, 7/15/2008 | 30,000 | 30,000 |
Series B, 8.125%, 7/15/2009 | 25,000 | 25,188 |
Series B, 8.125%, 8/15/2009 | 55,000 | 55,412 |
Denny's Holdings, Inc., 10.0%, 10/1/2012 | 10,000 | 9,700 |
DIRECTV Holdings LLC, 144A, 7.625%, 5/15/2016 | 70,000 | 68,950 |
Dollarama Group LP, 8.883%***, 8/15/2012 | 24,000 | 22,440 |
EchoStar DBS Corp.: | | |
6.625%, 10/1/2014 | 40,000 | 37,000 |
7.125%, 2/1/2016 | 35,000 | 32,287 |
Fontainebleau Las Vegas Holdings LLC, 144A, 10.25%, 6/15/2015 | 25,000 | 16,250 |
General Motors Corp.: | | |
7.2%, 1/15/2011 | 95,000 | 73,150 |
7.4%, 9/1/2025 | 20,000 | 10,300 |
Great Canadian Gaming Corp., 144A, 7.25%, 2/15/2015 | 30,000 | 29,100 |
| Principal Amount ($)(a) | Value ($) |
| |
Group 1 Automotive, Inc., 8.25%, 8/15/2013 | 15,000 | 14,025 |
Hanesbrands, Inc., Series B, 6.508%***, 12/15/2014 | 45,000 | 41,850 |
Hertz Corp.: | | |
8.875%, 1/1/2014 | 70,000 | 64,050 |
10.5%, 1/1/2016 | 15,000 | 13,650 |
Idearc, Inc., 8.0%, 11/15/2016 | 105,000 | 66,019 |
Indianapolis Downs LLC, 144A, 11.0%, 11/1/2012 | 20,000 | 18,200 |
Isle of Capri Casinos, Inc., 7.0%, 3/1/2014 | 30,000 | 21,150 |
Jarden Corp., 7.5%, 5/1/2017 | 25,000 | 21,750 |
Lamar Media Corp., Series C, 6.625%, 8/15/2015 | 20,000 | 18,200 |
Liberty Media LLC: | | |
5.7%, 5/15/2013 | 5,000 | 4,481 |
8.25%, 2/1/2030 | 35,000 | 30,489 |
8.5%, 7/15/2029 | 50,000 | 44,724 |
MediMedia USA, Inc., 144A, 11.375%, 11/15/2014 | 15,000 | 15,000 |
MGM MIRAGE: | | |
6.75%, 9/1/2012 | 10,000 | 8,975 |
8.375%, 2/1/2011 | 20,000 | 19,300 |
MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010 | 50,000 | 50,000 |
Norcraft Holdings LP, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012 | 80,000 | 74,500 |
Penske Automotive Group, Inc., 7.75%, 12/15/2016 | 50,000 | 43,750 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 | 30,000 | 30,000 |
Quebecor Media, Inc., 7.75%, 3/15/2016 | 20,000 | 18,600 |
Quebecor World, Inc., 144A, 9.75%, 1/15/2015** | 25,000 | 12,125 |
Reader's Digest Association, Inc., 144A, 9.0%, 2/15/2017 | 25,000 | 18,250 |
Sabre Holdings Corp., 8.35%, 3/15/2016 | 25,000 | 18,938 |
Seminole Hard Rock Entertainment, Inc., 144A, 5.276%***, 3/15/2014 | 30,000 | 25,200 |
Shingle Springs Tribal Gaming Authority, 144A, 9.375%, 6/15/2015 | 25,000 | 20,313 |
Simmons Co.: | | |
Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 | 105,000 | 77,175 |
7.875%, 1/15/2014 | 5,000 | 4,300 |
Sinclair Television Group, Inc., 8.0%, 3/15/2012 | 16,000 | 16,120 |
Sirius Satellite Radio, Inc., 9.625%, 8/1/2013 | 40,000 | 32,400 |
Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013 | 30,000 | 27,750 |
Station Casinos, Inc., 6.5%, 2/1/2014 | 50,000 | 28,750 |
TCI Communications, Inc., 8.75%, 8/1/2015 | 135,000 | 152,601 |
Time Warner Cable, Inc.: | | |
5.4%, 7/2/2012 | 810,000 | 801,818 |
6.2%, 7/1/2013 | 500,000 | 508,433 |
Travelport LLC: | | |
7.307%***, 9/1/2014 | 20,000 | 16,000 |
9.875%, 9/1/2014 | 25,000 | 22,188 |
| Principal Amount ($)(a) | Value ($) |
| |
Trump Entertainment Resorts, Inc., 8.5%, 6/1/2015 | 60,000 | 37,350 |
United Components, Inc., 9.375%, 6/15/2013 | 5,000 | 4,675 |
Univision Communications, Inc., 144A, 9.75%, 3/15/2015 (PIK) | 20,000 | 14,700 |
Vitro SAB de CV: | | |
9.125%, 2/1/2017 | 40,000 | 31,700 |
11.75%, 11/1/2013 | 15,000 | 14,925 |
Young Broadcasting, Inc., 8.75%, 1/15/2014 | 130,000 | 70,200 |
| 4,442,252 |
Consumer Staples 0.9% |
Alliance One International, Inc., 8.5%, 5/15/2012 | 15,000 | 14,100 |
CVS Caremark Corp., 6.25%, 6/1/2027 | 750,000 | 734,492 |
Delhaize America, Inc.: | | |
8.05%, 4/15/2027 | 30,000 | 32,372 |
9.0%, 4/15/2031 | 56,000 | 65,923 |
General Nutrition Centers, Inc., 7.199%***, 3/15/2014 (PIK) | 15,000 | 12,675 |
Harry & David Holdings, Inc., 7.682%***, 3/1/2012 | 30,000 | 26,400 |
Kellogg Co., 4.25%, 3/6/2013 | 1,500,000 | 1,457,174 |
Kroger Co., 6.15%, 1/15/2020 | 1,250,000 | 1,236,769 |
North Atlantic Trading Co., 144A, 10.0%, 3/1/2012 | 108,750 | 91,350 |
Smithfield Foods, Inc., 7.75%, 7/1/2017 | 15,000 | 12,450 |
Viskase Companies, Inc., 11.5%, 6/15/2011 | 480,000 | 417,600 |
| 4,101,305 |
Energy 0.6% |
Atlas Energy Resources LLC, 144A, 10.75%, 2/1/2018 | 55,000 | 57,200 |
Belden & Blake Corp., 8.75%, 7/15/2012 | 130,000 | 132,925 |
Bristow Group, Inc., 7.5%, 9/15/2017 | 30,000 | 30,075 |
Chaparral Energy, Inc., 8.5%, 12/1/2015 | 40,000 | 34,700 |
Chesapeake Energy Corp.: | | |
6.25%, 1/15/2018 | 20,000 | 18,400 |
6.875%, 1/15/2016 | 90,000 | 86,850 |
7.75%, 1/15/2015 | 10,000 | 10,375 |
Cimarex Energy Co., 7.125%, 5/1/2017 | 25,000 | 24,563 |
Delta Petroleum Corp., 7.0%, 4/1/2015 | 65,000 | 55,575 |
Dynegy Holdings, Inc.: | | |
6.875%, 4/1/2011 | 10,000 | 9,888 |
8.375%, 5/1/2016 | 55,000 | 53,350 |
El Paso Corp., 7.25%, 6/1/2018 | 40,000 | 39,400 |
Forest Oil Corp., 144A, 7.25%, 6/15/2019 | 15,000 | 14,400 |
Frontier Oil Corp., 6.625%, 10/1/2011 | 20,000 | 19,700 |
KCS Energy, Inc., 7.125%, 4/1/2012 | 105,000 | 100,800 |
Kinder Morgan Energy Partners LP, 6.0%, 2/1/2017 | 381,000 | 376,464 |
Mariner Energy, Inc.: | | |
7.5%, 4/15/2013 | 25,000 | 24,250 |
8.0%, 5/15/2017 | 20,000 | 19,350 |
| Principal Amount ($)(a) | Value ($) |
| |
Newfield Exploration Co., 7.125%, 5/15/2018 | 40,000 | 37,900 |
OPTI Canada, Inc.: | | |
7.875%, 12/15/2014 | 35,000 | 34,562 |
8.25%, 12/15/2014 | 30,000 | 29,850 |
Petrohawk Energy Corp., 144A, 7.875%, 6/1/2015 | 30,000 | 29,287 |
Plains Exploration & Production Co., 7.0%, 3/15/2017 | 15,000 | 14,400 |
Quicksilver Resources, Inc., 7.125%, 4/1/2016 | 70,000 | 65,187 |
Range Resources Corp., 7.25%, 5/1/2018 | 10,000 | 9,925 |
SandRidge Energy, Inc., 144A, 8.0%, 6/1/2018 | 20,000 | 20,100 |
Southern Natural Gas Co., 144A, 5.9%, 4/1/2017 | 895,000 | 855,025 |
Stone Energy Corp.: | | |
6.75%, 12/15/2014 | 40,000 | 35,100 |
8.25%, 12/15/2011 | 75,000 | 73,125 |
Tennessee Gas Pipeline Co., 7.625%, 4/1/2037 | 25,000 | 26,020 |
Whiting Petroleum Corp.: | | |
7.0%, 2/1/2014 | 30,000 | 29,437 |
7.25%, 5/1/2012 | 50,000 | 49,625 |
7.25%, 5/1/2013 | 10,000 | 9,925 |
Williams Companies, Inc.: | | |
8.125%, 3/15/2012 | 85,000 | 89,250 |
8.75%, 3/15/2032 | 115,000 | 130,525 |
Williams Partners LP, 7.25%, 2/1/2017 | 25,000 | 25,000 |
| 2,672,508 |
Financials 4.6% |
Algoma Acquisition Corp., 144A, 9.875%, 6/15/2015 | 75,000 | 71,250 |
American Express Co., 8.15%, 3/19/2038 | 1,000,000 | 1,111,448 |
Ashton Woods USA LLC, 9.5%, 10/1/2015 | 70,000 | 40,600 |
Buffalo Thunder Development Authority, 144A, 9.375%, 12/15/2014 | 15,000 | 10,050 |
Caterpillar Financial Services Corp., 5.45%, 4/15/2018 | 1,500,000 | 1,487,050 |
Citigroup, Inc.: | | |
5.5%, 4/11/2013 | 1,500,000 | 1,463,965 |
6.875%, 3/5/2038 | 1,000,000 | 964,995 |
Conproca SA de CV, Series REG S, 12.0%, 6/16/2010 | 360,450 | 403,704 |
Countrywide Home Loans, Inc., Series H, 6.25%, 4/15/2009 | 125,000 | 123,135 |
Daimler Finance North America LLC, Series E, 3.403%***, 10/31/2008 | 389,000 | 388,214 |
FIA Card Services NA, 7.125%, 11/15/2012 | 1,250,000 | 1,333,830 |
Ford Motor Credit Co., LLC: | | |
7.25%, 10/25/2011 | 155,000 | 120,119 |
7.375%, 10/28/2009 | 340,000 | 309,665 |
7.875%, 6/15/2010 | 90,000 | 77,684 |
General Electric Capital Corp., Series A, 5.25%, 10/19/2012 | 1,250,000 | 1,262,185 |
GMAC LLC, 6.875%, 9/15/2011 | 365,000 | 262,279 |
Hawker Beechcraft Acquisition Co., LLC: | | |
8.5%, 4/1/2015 | 50,000 | 50,375 |
9.75%, 4/1/2017 | 55,000 | 55,000 |
| Principal Amount ($)(a) | Value ($) |
| |
Hexion US Finance Corp., 9.75%, 11/15/2014 | 20,000 | 18,100 |
Inmarsat Finance PLC, Step-up Coupon, 0% to 11/15/2008, 10.375% to 11/15/2012 | 30,000 | 30,300 |
International Lease Finance Corp., 6.375%, 3/25/2013 | 625,000 | 570,479 |
iPayment, Inc., 9.75%, 5/15/2014 | 25,000 | 21,125 |
JPMorgan Chase & Co., 4.75%, 5/1/2013 | 1,625,000 | 1,579,274 |
Lehman Brothers Holdings, Inc., 5.625%, 1/24/2013 | 625,000 | 591,566 |
Local TV Finance LLC, 144A, 9.25%, 6/15/2015 (PIK) | 25,000 | 19,500 |
Morgan Stanley, Series F, 5.75%, 8/31/2012 | 1,250,000 | 1,240,095 |
New ASAT (Finance) Ltd., 9.25%, 2/1/2011 | 95,000 | 60,800 |
Popular North America, Inc., Series E, 3.875%, 10/1/2008 | 1,000,000 | 997,898 |
Regions Financial Corp., 7.375%, 12/10/2037 | 1,000,000 | 900,760 |
Residential Capital LLC, 144A, 8.5%, 5/15/2010 | 25,000 | 21,000 |
Simon Property Group LP (REIT), 6.125%, 5/30/2018 | 850,000 | 826,877 |
SLM Corp., Series A, 4.5%, 7/26/2010 | 125,000 | 115,664 |
The Goldman Sachs Group, Inc., 6.15%, 4/1/2018 | 1,000,000 | 970,159 |
Travelers Companies, Inc., 5.8%, 5/15/2018 | 500,000 | 486,478 |
Tropicana Entertainment LLC, 9.625%, 12/15/2014** | 75,000 | 35,625 |
UCI Holdco, Inc., 10.276%***, 12/15/2013 (PIK) | 33,203 | 28,223 |
Universal City Development Partners, 11.75%, 4/1/2010 | 125,000 | 128,437 |
Wachovia Corp., Series G, 5.5%, 5/1/2013 | 1,625,000 | 1,555,289 |
Wells Fargo & Co., 4.375%, 1/31/2013 | 1,250,000 | 1,210,384 |
| 20,943,581 |
Health Care 0.3% |
Advanced Medical Optics, Inc., 7.5%, 5/1/2017 | 45,000 | 41,400 |
Bausch & Lomb, Inc., 144A, 9.875%, 11/1/2015 | 40,000 | 40,200 |
Boston Scientific Corp., 6.0%, 6/15/2011 | 25,000 | 24,438 |
Community Health Systems, Inc., 8.875%, 7/15/2015 | 185,000 | 186,156 |
HCA, Inc.: | | |
9.125%, 11/15/2014 | 35,000 | 35,788 |
9.25%, 11/15/2016 | 85,000 | 87,550 |
9.625%, 11/15/2016 (PIK) | 40,000 | 41,200 |
HEALTHSOUTH Corp., 10.75%, 6/15/2016 | 20,000 | 21,500 |
IASIS Healthcare LLC, 8.75%, 6/15/2014 | 30,000 | 30,300 |
Johnson & Johnson, 5.85%, 7/15/2038 | 500,000 | 508,513 |
Psychiatric Solutions, Inc., 7.75%, 7/15/2015 | 25,000 | 24,750 |
Surgical Care Affiliates, Inc., 144A, 8.875%, 7/15/2015 (PIK) | 30,000 | 26,250 |
The Cooper Companies, Inc., 7.125%, 2/15/2015 | 45,000 | 43,200 |
| Principal Amount ($)(a) | Value ($) |
| |
Vanguard Health Holding Co. I, LLC, Step-up Coupon, 0% to 10/1/2009, 11.25% to 10/1/2015 | 25,000 | 22,000 |
Vanguard Health Holding Co. II, LLC, 9.0%, 10/1/2014 | 75,000 | 74,250 |
| 1,207,495 |
Industrials 1.2% |
Actuant Corp., 6.875%, 6/15/2017 | 20,000 | 19,650 |
Allied Security Escrow Corp., 11.375%, 7/15/2011 | 35,000 | 30,100 |
American Color Graphics, Inc., 10.0%, 6/15/2010* | 140,000 | 46,200 |
American Color Graphics, Inc., Promissory Note due 9/15/2008 (c) | 8,400 | 0 |
ARAMARK Corp., 6.373%***, 2/1/2015 | 30,000 | 28,050 |
Baldor Electric Co., 8.625%, 2/15/2017 | 25,000 | 25,125 |
BE Aerospace, Inc., 8.5%, 7/1/2018 | 50,000 | 50,125 |
Belden, Inc., 7.0%, 3/15/2017 | 25,000 | 24,000 |
Browning-Ferris Industries, Inc., 7.4%, 9/15/2035 | 250,000 | 237,500 |
Building Materials Corp. of America, 7.75%, 8/1/2014 | 35,000 | 28,700 |
Cenveo Corp., 144A, 10.5%, 8/15/2016 | 10,000 | 9,900 |
Congoleum Corp., 8.625%, 8/1/2008** | 190,000 | 142,500 |
DRS Technologies, Inc.: | | |
6.625%, 2/1/2016 | 10,000 | 10,150 |
6.875%, 11/1/2013 | 65,000 | 65,000 |
7.625%, 2/1/2018 | 80,000 | 84,600 |
Education Management LLC, 8.75%, 6/1/2014 | 25,000 | 23,250 |
Esco Corp., 144A, 8.625%, 12/15/2013 | 45,000 | 45,450 |
General Cable Corp., 7.125%, 4/1/2017 | 15,000 | 14,288 |
Gibraltar Industries, Inc., Series B, 8.0%, 12/1/2015 | 75,000 | 62,625 |
Great Lakes Dredge & Dock Co., 7.75%, 12/15/2013 | 20,000 | 18,950 |
Harland Clarke Holdings Corp., 9.5%, 5/15/2015 | 25,000 | 20,500 |
Honeywell International, Inc., 4.25%, 3/1/2013 | 1,250,000 | 1,232,279 |
K. Hovnanian Enterprises, Inc.: | | |
8.875%, 4/1/2012 | 90,000 | 65,700 |
144A, 11.5%, 5/1/2013 | 10,000 | 10,375 |
Kansas City Southern de Mexico SA de CV: | | |
7.375%, 6/1/2014 | 20,000 | 19,400 |
9.375%, 5/1/2012 | 60,000 | 62,400 |
Kansas City Southern Railway Co., 7.5%, 6/15/2009 | 20,000 | 20,200 |
Lockheed Martin Corp., 4.121%, 3/14/2013 | 1,500,000 | 1,456,557 |
Mobile Services Group, Inc., 9.75%, 8/1/2014 | 25,000 | 24,000 |
Moog, Inc., 144A, 7.25%, 6/15/2018 | 10,000 | 9,900 |
Navios Maritime Holdings, Inc., 9.5%, 12/15/2014 | 35,000 | 35,787 |
R.H. Donnelley Corp., 144A, 8.875%, 10/15/2017 | 100,000 | 59,500 |
Rainbow National Services LLC, 144A, 10.375%, 9/1/2014 | 4,000 | 4,250 |
| Principal Amount ($)(a) | Value ($) |
| |
RBS Global & Rexnord Corp., 9.5%, 8/1/2014 | 20,000 | 19,300 |
Seitel, Inc., 9.75%, 2/15/2014 | 15,000 | 13,406 |
Titan International, Inc., 8.0%, 1/15/2012 | 85,000 | 83,300 |
TransDigm, Inc., 7.75%, 7/15/2014 | 15,000 | 14,813 |
U.S. Concrete, Inc., 8.375%, 4/1/2014 | 30,000 | 26,625 |
Union Pacific Corp., 5.7%, 8/15/2018 | 1,250,000 | 1,219,802 |
United Rentals North America, Inc.: | | |
6.5%, 2/15/2012 | 15,000 | 13,500 |
7.0%, 2/15/2014 | 65,000 | 50,375 |
Xerox Capital Trust I, 8.0%, 2/1/2027 | 15,000 | 14,641 |
| 5,442,773 |
Information Technology 0.7% |
Alion Science & Technology Corp., 10.25%, 2/1/2015 | 20,000 | 14,000 |
Freescale Semiconductor, Inc., 8.875%, 12/15/2014 | 60,000 | 48,750 |
Hewlett-Packard Co., 4.5%, 3/1/2013 | 1,250,000 | 1,238,030 |
L-3 Communications Corp.: | | |
5.875%, 1/15/2015 | 80,000 | 73,800 |
Series B, 6.375%, 10/15/2015 | 35,000 | 32,725 |
Lucent Technologies, Inc., 6.45%, 3/15/2029 | 90,000 | 68,850 |
MasTec, Inc., 7.625%, 2/1/2017 | 35,000 | 29,750 |
Seagate Technology HDD Holdings, 6.8%, 10/1/2016 | 45,000 | 41,063 |
SunGard Data Systems, Inc., 10.25%, 8/15/2015 | 60,000 | 60,300 |
Tyco Electronics Group SA, 6.55%, 10/1/2017 | 500,000 | 504,484 |
Vangent, Inc., 9.625%, 2/15/2015 | 15,000 | 13,050 |
Xerox Corp., 5.65%, 5/15/2013 | 1,300,000 | 1,287,075 |
| 3,411,877 |
Materials 0.4% |
Appleton Papers, Inc., Series B, 8.125%, 6/15/2011 | 15,000 | 14,175 |
ARCO Chemical Co., 9.8%, 2/1/2020 | 195,000 | 155,025 |
AMH Holdings, Inc., Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014 | 45,000 | 29,700 |
Cascades, Inc., 7.25%, 2/15/2013 | 67,000 | 58,290 |
Chemtura Corp., 6.875%, 6/1/2016 | 50,000 | 43,250 |
CPG International I, Inc., 10.5%, 7/1/2013 | 50,000 | 41,750 |
Exopack Holding Corp., 11.25%, 2/1/2014 | 80,000 | 74,200 |
Freeport-McMoRan Copper & Gold, Inc.: | | |
8.25%, 4/1/2015 | 45,000 | 47,306 |
8.375%, 4/1/2017 | 70,000 | 73,850 |
GEO Specialty Chemicals, Inc.: | | |
144A, 10.698%***, 12/31/2009 | 322,000 | 241,097 |
144A, 10.698%***, 3/31/2015 | 189,280 | 141,723 |
144A, 7.5%***, 3/31/2015 (PIK) | 3,203 | 2,398 |
Georgia-Pacific LLC, 144A, 7.125%, 1/15/2017 | 15,000 | 14,100 |
Hexcel Corp., 6.75%, 2/1/2015 | 95,000 | 92,387 |
Huntsman LLC, 11.625%, 10/15/2010 | 122,000 | 125,965 |
Innophos, Inc., 8.875%, 8/15/2014 | 10,000 | 10,000 |
| Principal Amount ($)(a) | Value ($) |
| |
Jefferson Smurfit Corp., 8.25%, 10/1/2012 | 35,000 | 30,538 |
Koppers Holdings, Inc., Step-up Coupon, 0% to 11/15/2009, 9.875% to 11/15/2014 | 70,000 | 63,350 |
Metals USA Holdings Corp., 8.698%***, 7/1/2012 (PIK) | 15,000 | 13,800 |
Millar Western Forest Products Ltd., 7.75%, 11/15/2013 | 15,000 | 9,750 |
Momentive Performance Materials, Inc., 9.75%, 12/1/2014 | 30,000 | 25,650 |
Monsanto Co.,
5.875%, 4/15/2038 | 500,000 | 481,268 |
NewMarket Corp., 7.125%, 12/15/2016 | 65,000 | 64,513 |
Radnor Holdings Corp., 11.0%, 3/15/2010** | 40,000 | 50 |
Smurfit-Stone Container Enterprises, Inc.: | | |
8.0%, 3/15/2017 | 20,000 | 16,000 |
8.375%, 7/1/2012 | 25,000 | 21,938 |
Steel Dynamics, Inc.: | | |
6.75%, 4/1/2015 | 35,000 | 33,513 |
144A, 7.375%, 11/1/2012 | 10,000 | 10,000 |
Terra Capital, Inc., Series B, 7.0%, 2/1/2017 | 50,000 | 49,000 |
The Mosaic Co., 144A, 7.375%, 12/1/2014 | 40,000 | 41,800 |
Witco Corp.,
6.875%, 2/1/2026 | 60,000 | 38,400 |
Wolverine Tube, Inc., 10.5%, 4/1/2009 | 40,000 | 37,200 |
| 2,101,986 |
Telecommunication Services 1.0% |
AT&T, Inc.: | | |
6.3%, 1/15/2038 | 375,000 | 354,283 |
6.4%, 5/15/2038 | 1,250,000 | 1,196,602 |
BCM Ireland Preferred Equity Ltd., 144A, 11.856%***, 2/15/2017 (PIK) EUR | 86,314 | 80,794 |
Centennial
Communications Corp.: | | |
10.0%, 1/1/2013 | 15,000 | 15,225 |
10.125%, 6/15/2013 | 40,000 | 41,200 |
Cincinnati Bell, Inc.: | | |
7.25%, 7/15/2013 | 50,000 | 48,750 |
8.375%, 1/15/2014 | 25,000 | 24,188 |
Cricket Communications, Inc.: | | |
9.375%, 11/1/2014 | 55,000 | 52,937 |
144A, 10.0%, 7/15/2015 | 50,000 | 49,000 |
Embratel, Series B, 11.0%, 12/15/2008 | 34,000 | 35,190 |
Intelsat Subsidiary Holding Co., Ltd., 144A, 8.875%, 1/15/2015 | 60,000 | 58,350 |
iPCS, Inc.,
4.998%***, 5/1/2013 | 10,000 | 9,000 |
MetroPCS Wireless, Inc., 9.25%, 11/1/2014 | 60,000 | 57,750 |
Nortel Networks Ltd.: | | |
6.963%***, 7/15/2011 | 45,000 | 42,525 |
144A, 10.75%, 7/15/2016 | 35,000 | 34,650 |
Qwest Corp.,
7.25%, 9/15/2025 | 10,000 | 8,850 |
| Principal Amount ($)(a) | Value ($) |
| |
Rural Cellular Corp., 9.875%, 2/1/2010 | 45,000 | 45,788 |
Sprint Nextel Corp., 6.0%, 12/1/2016 | 25,000 | 21,500 |
Stratos Global Corp., 9.875%, 2/15/2013 | 15,000 | 15,863 |
Telefonica Emisiones SAU, 6.221%, 7/3/2017 | 1,250,000 | 1,249,404 |
Telesat Canada, 144A, 11.0%, 11/1/2015 | 225,000 | 225,000 |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 | 60,000 | 61,350 |
Verizon Communications, Inc., 4.35%, 2/15/2013 | 750,000 | 721,534 |
Virgin Media Finance PLC: | | |
8.75%, 4/15/2014 | 55,000 | 51,700 |
8.75%, 4/15/2014 EUR | 45,000 | 64,828 |
West Corp.,
9.5%, 10/15/2014 | 30,000 | 27,000 |
| 4,593,261 |
Utilities 0.9% |
AES Corp.: | | |
8.0%, 10/15/2017 | 45,000 | 44,100 |
144A, 8.0%, 6/1/2020 | 50,000 | 48,250 |
144A, 8.75%, 5/15/2013 | 152,000 | 157,700 |
9.5%, 6/1/2009 | 25,000 | 25,688 |
Allegheny Energy Supply Co., LLC, 144A, 8.25%, 4/15/2012 | 190,000 | 198,075 |
American Electric Power Co., Inc., Series C, 5.375%, 3/15/2010 | 1,000,000 | 1,010,505 |
Appalachian Power Co., 7.0%, 4/1/2038 | 750,000 | 742,206 |
CenterPoint Energy, Inc., 6.5%, 5/1/2018 | 750,000 | 732,504 |
CMS Energy Corp., 8.5%, 4/15/2011 | 110,000 | 114,832 |
DPL, Inc., 6.875%, 9/1/2011 | 500,000 | 520,591 |
Edison Mission Energy, 7.0%, 5/15/2017 | 40,000 | 37,400 |
Energy Future Holdings Corp., 144A, 10.875%, 11/1/2017 | 70,000 | 70,700 |
Knight, Inc., 6.5%, 9/1/2012 | 15,000 | 14,625 |
Mirant Americas Generation LLC, 8.3%, 5/1/2011 | 45,000 | 46,462 |
Mirant North America LLC, 7.375%, 12/31/2013 | 20,000 | 19,825 |
NRG Energy, Inc.: | | |
7.25%, 2/1/2014 | 55,000 | 52,525 |
7.375%, 2/1/2016 | 40,000 | 37,650 |
Regency Energy Partners LP, 8.375%, 12/15/2013 | 31,000 | 31,697 |
Reliant Energy, Inc., 7.875%, 6/15/2017 | 55,000 | 53,762 |
Sierra Pacific Resources: | | |
6.75%, 8/15/2017 | 50,000 | 48,581 |
8.625%, 3/15/2014 | 8,000 | 8,387 |
Texas Competitive Electric Holdings Co., LLC, 144A, 10.25%, 11/1/2015 | 105,000 | 102,900 |
| 4,118,965 |
Total Corporate Bonds (Cost $55,076,841) | 53,036,003 |
| Principal Amount ($)(a) | Value ($) |
| |
Asset Backed 1.1% |
Automobile Receivables 0.2% |
Capital Auto Receivables Asset Trust, "B", Series 2006-1, 5.26%, 10/15/2010 | 566,000 | 570,560 |
Ford Credit Auto Owner Trust, "B", Series 2007-B, 5.69%, 11/15/2012 | 379,000 | 362,998 |
| 933,558 |
Home Equity Loans 0.5% |
Countrywide Asset-Backed Certificates, "1AF2", Series 2005-17, 5.363%, 5/25/2036 | 689,000 | 626,838 |
Credit-Based Asset Servicing and Securitization, "AF2", Series 2006-CB2, 5.501%, 12/25/2036 | 1,539,652 | 1,494,429 |
| 2,121,267 |
Miscellaneous 0.4% |
SLM Student Loan Trust, "A3", Series 2008-6, 3.714%***, 1/25/2019 | 2,000,000 | 1,977,188 |
Total Asset Backed (Cost $5,173,439) | 5,032,013 |
|
Mortgage-Backed Securities Pass-Throughs 5.2% |
Federal Home Loan Mortgage Corp.: | | |
5.0%, 10/1/2035 | 2,477,332 | 2,383,852 |
6.0%, with various maturities from 8/1/2035 until 3/1/2038 | 6,587,233 | 6,659,343 |
Federal National Mortgage Association: | | |
4.5%, with various maturities from 11/1/2028 until 9/1/2035 | 2,299,010 | 2,136,525 |
5.5%, 3/1/2035 (f) | 8,000,000 | 7,882,500 |
6.0%, with various maturities from 1/1/2024 until 5/1/2038 | 1,579,702 | 1,596,949 |
6.5%, with various maturities from 5/1/2017 until 1/1/2038 | 2,911,666 | 3,000,675 |
8.0%, 9/1/2015 | 135,208 | 143,710 |
Total Mortgage-Backed Securities Pass-Throughs (Cost $23,985,332) | 23,803,554 |
|
Commercial and Non-Agency Mortgage-Backed Securities 11.9% |
Adjustable Rate Mortgage Trust, "3A31", Series 2005-10, 5.417%***, 1/25/2036 | 1,000,000 | 855,996 |
Banc of America Mortgage Securities, "2A6", Series 2004-G, 4.655%***, 8/25/2034 | 2,275,000 | 2,273,669 |
Bear Stearns Adjustable Rate Mortgage Trust: | | |
"13A2", Series 2004-1, 4.274%***, 4/25/2034 | 2,302,642 | 2,224,951 |
"12A5", Series 2004-1, 4.368%***, 4/25/2034 | 1,696,608 | 1,505,788 |
| Principal Amount ($)(a) | Value ($) |
| |
Citigroup Mortgage Loan Trust, Inc.: | | |
"1A1A", Series 2007-AR5, 5.615%***, 4/25/2037 | 1,735,984 | 1,382,102 |
"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 270,964 | 262,666 |
Countrywide Alternative Loan Trust: | | |
"3A11", Series 2005-20CB, 2.783%***, 7/25/2035 | 1,333,354 | 1,310,113 |
"A1", Series 2004-1T1, 5.0%, 2/25/2034 | 392,129 | 374,467 |
"1A5", Series 2003-J1, 5.25%, 10/25/2033 | 407,956 | 396,937 |
"4A3", Series 2005-43, 5.714%***, 10/25/2035 | 674,702 | 460,216 |
"A1", Series 2004-35T2, 6.0%, 2/25/2035 | 442,687 | 428,904 |
"3A5", Series 2005-28CB, 6.0%, 8/25/2035 | 1,940,898 | 1,860,712 |
"1A4", Series 2006-43CB, 6.0%, 2/25/2037 | 1,094,695 | 1,052,452 |
Countrywide Home Loans, "A6", Series 2003-57, 5.5%, 1/25/2034 | 20,641 | 20,597 |
First Horizon Alternative Mortgage Securities, "1A7", Series 2006-FA8, 6.0%, 2/25/2037 | 1,825,000 | 1,632,137 |
First Horizon Mortgage Pass-Through Trust, "1A15", Series 2006-2, 6.0%, 8/25/2036 | 2,658,737 | 2,558,758 |
GS Mortgage Securities Corp. II, "AAB", Series 2006-GG8, 5.535%, 11/10/2039 | 1,800,000 | 1,743,070 |
JPMorgan Alternative Loan Trust, "2A4", Series 2006-S1, 5.5%, 2/25/2021 | 2,211,551 | 2,122,592 |
JPMorgan Chase Commercial Mortgage Securities Corp.: | | |
"ASB", Series 2007-CB20, 5.688%, 2/12/2051 | 3,750,000 | 3,589,453 |
"A4", Series 2008-C2, 6.068%, 2/12/2051 | 2,531,000 | 2,444,902 |
LB-UBS Commercial Mortgage Trust, "A2", Series 2005-C2, 4.821%, 4/15/2030 | 130,863 | 130,571 |
Master Adjustable Rate Mortgages Trust, "2A1", Series 2007-1, 5.962%***, 11/25/2036 | 2,696,377 | 2,575,932 |
MLCC Mortgage Investors, Inc., "2A", Series 2005-2, 4.25%***, 10/25/2035 | 2,804,253 | 2,681,123 |
Morgan Stanley Capital I Trust, "A4", Series 2007-IQ16, 5.809%, 12/12/2049 | 2,900,000 | 2,753,149 |
Structured Adjustable Rate Mortgage Loan Trust: | | |
"6A3", Series 2005-21, 5.4%, 11/25/2035 | 900,000 | 759,487 |
"1A1", Series 2005-17, 5.708%***, 8/25/2035 | 1,120,370 | 1,028,254 |
Structured Asset Securities Corp., "4A1", Series 2005-6, 5.0%, 5/25/2035 | 135,391 | 121,641 |
Wachovia Bank Commercial Mortgage Trust: | | |
"APB", Series 2006-C23, 5.446%, 1/15/2045 | 2,100,000 | 2,027,077 |
"APB", Series 2007-C34, 5.617%, 5/15/2046 | 2,875,000 | 2,740,847 |
| Principal Amount ($)(a) | Value ($) |
| |
Wachovia Mortgage Loan Trust LLC, "1A1", Series 2006-A, 5.465%***, 5/20/2036 | 2,609,491 | 2,413,776 |
Washington Mutual Mortgage Pass-Through Certificates Trust: | | |
"A6", Series 2004-AR4, 3.796%***, 6/25/2034 | 190,000 | 187,666 |
"A6", Series 2003-AR10, 4.056%***, 10/25/2033 | 1,620,000 | 1,618,759 |
"1A6", Series 2005-AR12, 4.833%***, 10/25/2035 | 1,880,000 | 1,783,723 |
"1A3", Series 2005-AR16, 5.099%***, 12/25/2035 | 1,005,000 | 947,274 |
Wells Fargo Mortgage Backed Securities Trust: | | |
"A1", Series 2005-6, 5.25%, 8/25/2035 | 2,219,275 | 2,113,323 |
"1A1", Series 2006-AR12, 6.025%***, 9/25/2036 | 1,956,771 | 1,899,764 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $57,130,694) | 54,282,848 |
|
Collateralized Mortgage Obligations 1.6% |
Fannie Mae Whole Loan, "1A1", Series 2004-W15, 6.0%, 8/25/2044 | 649,585 | 634,064 |
Federal Home Loan Mortgage Corp.: | | |
"OS", Series 3102, Principal Only, Zero Coupon, 1/15/2036 | 4,664,149 | 3,623,696 |
"H", Series 2278, 6.5%, 1/15/2031 | 22,502 | 23,287 |
Government National Mortgage Association, "CK", Series 2007-31, 5.0%, 5/16/2037 | 3,000,000 | 2,907,206 |
Total Collateralized Mortgage Obligations (Cost $6,953,440) | 7,188,253 |
|
Senior Loans*** 0.3% |
Advanced Medical Optics, Inc., Term Loan B, LIBOR plus 1.75%, 5.061%, 4/2/2014 | 15,682 | 14,466 |
Bausch & Lomb, Inc.: | | |
Term Delay Draw, LIBOR plus 3.25%, 6.561%, 4/11/2015 | 6,600 | 6,477 |
Term Loan B, LIBOR plus 3.25%, 6.561%, 4/11/2015 | 43,890 | 43,070 |
Buffets, Inc.: | | |
Letter of Credit, 9.73%, 5/1/2013 | 86,124 | 50,885 |
Term Loan B, 7.74%, 11/1/2013 | 143,104 | 84,551 |
Energy Future Holdings Corp.: | | |
Term Loan B1, LIBOR plus 3.5%, 6.811%, 10/10/2014 | 213,750 | 198,415 |
Term Loan B3, LIBOR plus 3.5%, 6.811%, 10/10/2014 | 139,175 | 129,045 |
General Nutrition Centers, Inc., Term Loan B, LIBOR plus 2.25%, 5.74%, 9/16/2013 | 14,887 | 13,771 |
Golden Nugget, Term Loan, 5.74%, 6/16/2014 | 35,000 | 24,850 |
Hawker Beechcraft, Inc.: | | |
Term Loan B, LIBOR plus 2.0%, 5.311%, 3/26/2014 | 22,925 | 21,589 |
Letter of Credit, LIBOR plus 2.0%, 5.311%, 3/26/2014 | 1,336 | 1,258 |
| Principal Amount ($)(a) | Value ($) |
| |
HCA, Inc., Term Loan A1, 4.301%, 11/18/2012 | 90,389 | 84,819 |
Hexion Specialty Chemicals: | | |
Term Loan C2, LIBOR plus 2.25%, 5.561%, 5/5/2013 | 30,982 | 28,299 |
Term Loan C1, LIBOR plus 2.25%, 5.561%, 5/5/2013 | 132,840 | 121,334 |
IASIS Healthcare, LLC, 8.131%, 6/15/2014 | 75,792 | 67,360 |
Intelstat Corp., Term Loan, LIBOR plus 9.25%, 12.561%, 8/15/2014 | 10,000 | 10,027 |
Longview Power LLC: | | |
Demand Draw, 5.063 4/1/2014 | 26,667 | 24,733 |
Letter of Credit, 5.063%, 4/1/2014 | 13,333 | 12,367 |
Term Loan B, 5.063%, 4/1/2014 | 25,000 | 23,188 |
Rail America, Inc., Term Loan, 5.32%, 10/2/2008 | 35,000 | 35,000 |
Sabre, Inc., Term Loan B, LIBOR plus 2.25%, 5.561%, 9/30/2014 | 23,027 | 18,978 |
Symbion, Inc.: | | |
Term Loan A, 6.149%, 8/23/2013 | 33,285 | 29,873 |
Term Loan B, 6.149%, 8/23/2014 | 33,285 | 29,873 |
Telesat Canada, Inc.: | | |
Term Loan, 5.9%, 9/1/2014 | 18,898 | 18,265 |
Term Loan B, LIBOR plus 3.0%, 6.311%, 10/31/2014 | 58,902 | 56,929 |
Tribune Co., Term Loan B, 5.482%, 5/24/2014 | 49,277 | 37,635 |
Total Senior Loans (Cost $1,336,772) | 1,187,057 |
|
Preferred Security 0.0% |
Farm Credit Bank of Texas, Series 1, 7.561%, 12/15/2013**** (Cost $230,727) | 218,000 | 207,839 |
|
Government & Agency Obligations 4.2% |
US Government Sponsored Agencies 1.4% |
Federal Home Loan Mortgage Corp.: | | |
4.75%, 11/3/2009 | 1,500,000 | 1,535,307 |
5.5%, 8/20/2012 | 1,250,000 | 1,322,610 |
Federal National Mortgage Association: | | |
4.875%, 5/18/2012 | 1,000,000 | 1,033,899 |
6.25%, 2/1/2011 | 2,500,000 | 2,621,363 |
| 6,513,179 |
US Treasury Obligations 2.8% |
US Treasury Bills: | | |
1.08%*****, 7/17/2008 (d) | 7,824,000 | 7,819,086 |
1.23%*****, 7/17/2008 (d) | 109,000 | 108,931 |
1.24%*****, 7/17/2008 (d) | 55,000 | 54,970 |
US Treasury Bond, 6.0%, 2/15/2026 | 2,000,000 | 2,342,344 |
US Treasury Inflation Indexed Note, 1.625%, 1/15/2018 | 2,306,745 | 2,343,328 |
| 12,668,659 |
Total Government & Agency Obligations (Cost $19,225,545) | 19,181,838 |
|
Units
| Value ($) |
| |
Other Investments 0.0% |
Hercules, Inc., (Bond Unit), 6.5%, 6/30/2029 (Cost $116,259) | 170,000 | 139,400 |
|
Shares
| Value ($) |
| |
Exchange Traded Funds 0.1% |
iShares MSCI Japan Index Fund (Cost $667,654) | 49,661 | 619,769 |
|
Shares
| Value ($) |
| |
Cash Equivalents 7.0% |
Cash Management QP Trust, 2.49%(e) (Cost $32,145,152) | 32,145,152 | 32,145,152 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $451,148,868)+ | 100.5 | 459,533,108 |
Other Assets and Liabilities, Net | (0.5) | (2,052,749) |
Net Assets | 100.0 | 457,480,359 |
* Non-income producing security.** Non-income producing security. Issuer has defaulted on the payment of principal or the interest or has filed for bankruptcy. The following table represents bonds that are in default:Securities | Coupon | Maturity Date | Principal Amount | Acquisition Cost ($) | Value ($) |
Congoleum Corp.
| 8.625% | 8/1/2008 | 190,000 | USD
| 190,156 | 142,500 |
Quebecor World, Inc.
| 9.75% | 1/15/2015 | 25,000 | USD
| 25,000 | 12,125 |
Radnor Holdings Corp.
| 11.0% | 3/15/2010 | 40,000 | USD
| 25,775 | 50 |
Tropicana Entertainment LLC
| 9.625% | 12/15/2014 | 75,000 | USD
| 55,245 | 35,625 |
| | | |
| 296,176 | 190,300 |
*** 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 June 30, 2008.**** Date shown is call date; not a maturity date for the perpetual preferred securities.*****Annualized yield at time of purchase; not a coupon rate.+ The cost for federal income tax purposes was $453,608,365. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $5,924,743. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $33,025,249 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $27,100,506.(a) Principal amount is stated in US dollars unless otherwise noted.(b) Securities with the same description are the same corporate entity but trade on different stock exchanges.(c) Security issued in lieu of interest payment due 12/15/2007, which has been deferred until 9/15/2008. This security is deemed to be non-income producing.(d) At June 30, 2008, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.(e) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(f) Mortgage dollar rolls included.144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
ADR: American Depositary Receipt
CVA: Certificaten van Aandelen
FDR: Fiduciary Depositary Receipt
GDR: Global Depositary Receipt
LIBOR: Represents the London InterBank Offered Rate.
MSCI: Morgan Stanley Capital International
PIK: Denotes that all or a portion of the income is paid in-kind.
Principal Only: Principal Only (PO) bonds represent the "principal only" portion of payments on a pool of underlying mortgage or mortgage-backed securities.
REIT: Real Estate Investment Trust
RNC: Riparmio Non-Convertible (Non-Convertible Savings Shares)
SDR: Swedish Depositary Receipt
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
At June 30, 2008, the Portfolio had unfunded loan commitments of $7,462 which could be extended at the option of the borrower, pursuant to the following loan agreement:
Borrower | Unfunded Loan Commitment ($) | Value ($) | Unrealized Depreciation ($) |
Bausch & Lomb, Inc., Term Delay Draw, 4/11/2015
| 5,486 | 5,397 | (89) |
Telesat Canada, Inc., Term Delay Draw 9/1/2014
| 1,976 | 1,949 | (27) |
Total | 7,462 | 7,346 | (116) |
At June 30, 2008, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregated Face Value ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) |
10 Year Australian Treasury Bond
| 9/15/2008 | 93 | 8,438,222 | 8,623,117 | 184,895 |
10 Year Canadian Government Bond
| 9/19/2008 | 61 | 7,069,143 | 7,027,234 | (41,909) |
10 Year US Treasury Note
| 9/19/2008 | 490 | 55,805,732 | 55,821,719 | 15,987 |
2 Year US Treasury Note
| 9/30/2008 | 74 | 15,637,332 | 15,629,031 | (8,301) |
DJ Euro Stoxx 50 Index
| 9/19/2008 | 10 | 549,601 | 532,164 | (17,437) |
EOE Dutch Stock Index
| 7/18/2008 | 4 | 585,714 | 536,699 | (49,015) |
FTSE 100 Index
| 9/19/2008 | 47 | 5,537,350 | 5,287,484 | (249,866) |
Hang Seng Stock Index
| 7/30/2008 | 30 | 4,386,623 | 4,255,346 | (131,277) |
Nikkei 225 Index
| 9/11/2008 | 1 | 72,803 | 67,675 | (5,128) |
Russell E Mini 2000 Index
| 9/19/2008 | 14 | 1,027,568 | 968,380 | (59,188) |
S&P 500 Index
| 9/18/2008 | 5 | 1,699,641 | 1,601,375 | (98,266) |
S&P Canada 60 Index
| 9/18/2008 | 35 | 6,142,016 | 5,946,259 | (195,757) |
S&P MIB 30 Index
| 9/19/2008 | 4 | 987,680 | 934,468 | (53,212) |
S&P Mini 500 Index
| 9/19/2008 | 139 | 9,333,691 | 8,903,645 | (430,046) |
Share Prices Index 200
| 9/18/2008 | 31 | 3,988,431 | 3,858,157 | (130,274) |
United Kingdom Treasury Bond
| 9/26/2008 | 188 | 39,720,656 | 39,090,681 | (629,975) |
Total net unrealized depreciation | (1,898,769) |
At June 30, 2008, open futures contracts sold were as follows:
Futures | Expiration Date | Contracts | Aggregated Face Value ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) |
10 Year Federal Republic of Germany Bond
| 9/8/2008 | 621 | 108,941,435 | 108,108,061 | 833,374 |
10 Year Japanese Government Bond
| 9/10/2008 | 7 | 8,856,559 | 8,929,227 | (72,668) |
CAC 40 10 Euro Index
| 7/18/2008 | 79 | 5,861,259 | 5,527,520 | 333,739 |
DAX Index
| 9/19/2008 | 16 | 4,360,221 | 4,080,977 | 279,244 |
DJ Euro Stoxx 50 Index
| 9/19/2008 | 44 | 2,484,405 | 2,341,524 | 142,881 |
IBEX 35 Index
| 7/18/2008 | 2 | 404,715 | 376,420 | 28,295 |
Russell E Mini 2000 Index
| 9/19/2008 | 84 | 6,204,463 | 5,810,280 | 394,183 |
TOPIX Index
| 9/12/2008 | 45 | 5,927,062 | 5,587,654 | 339,408 |
Total net unrealized appreciation | 2,278,456 |
At June 30, 2008, open credit default swap contracts sold were as follows:
Effective/Expiration Date | Notional Amount ($) | Cash Flows Received by the Portfolio | Underlying Debt Obligation | Unrealized Appreciation/ (Depreciation) ($) |
10/3/2007-12/20/2008 | 75,0001 | Fixed — 3.2% | General Motors Corp., 7.125%, 7/15/2013 | (1,884) |
10/4/2007-12/20/2008 | 80,0002 | Fixed — 2.6% | General Motors Corp., 7.125%, 7/15/2013 | (2,988) |
10/20/2007-12/20/2008 | 150,0003 | Fixed — 3.06% | General Motors Corp., 7.125%, 7/15/2013 | (4,015) |
10/9/2007-12/20/2008 | 75,0004 | Fixed — 3.1% | Ford Motor Co., 6.5%, 8/1/2018 | (1,883) |
10/5/2007-12/20/2008 | 45,0001 | Fixed — 3.15% | Ford Motor Co., 6.5%, 8/1/2018 | (755) |
10/20/2007-12/20/2008 | 150,0003 | Fixed — 3.05% | Ford Motor Co., 6.5%, 8/1/2018 | (2,397) |
12/15/2007-12/20/2008 | 70,0003 | Fixed — 2.9% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 1,323 |
1/28/2008-3/20/2009 | 35,0003 | Fixed — 2.65% | HCA, Inc., 7.7%, 3/20/2009 | 373 |
2/19/2008-3/20/2009 | 35,0005 | Fixed — 3.8% | HCA, Inc., 7.7%, 3/20/2009 | 679 |
2/26/2008-3/20/2009 | 25,0005 | Fixed — 5.0% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 955 |
10/23/2007-12/20/2009 | 85,0006 | Fixed — 4.65% | Ford Motor Co., 6.5%, 8/1/2018 | (8,524) |
12/13/2007-12/20/2009 | 25,0005 | Fixed — 5.05% | Ford Motor Co., 6.5%, 8/1/2018 | (1,505) |
1/29/2008-3/20/2013 | 20,0003 | Fixed — 3.0% | HCA, Inc., 7.7%, 3/20/2009 | 422 |
Total net unrealized depreciation | (20,199) |
At June 30, 2008, open credit default swap contract purchased was as follows:
Effective/Expiration Date | Notional Amount ($) | Cash Flows Paid by the Portfolio | Underlying Debt Obligation | Unrealized Appreciation ($) |
5/6/2008-6/20/2013 | 25,0005 | Fixed — 7.25% | Arco Chemical Co., 9.8%, 2/1/2020 | 896 |
Counterparties:
1 JP Morgan Chase Securities, Inc.
2 Citigroup Global Markets Inc.
3 Lehman Brothers, Inc.
4 Goldman Sachs & Co.
5 Merrill Lynch, Pierce, Fenner & Smith, Inc.
6 Morgan Stanley Co., Inc.
|
At June 30, 2008, the Portfolio had the following open forward foreign currency exchange contracts:
Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized Appreciation (US$) |
USD
| 3,589 |
| EUR
| 2,300 |
| 7/11/2008 |
| 30 |
CAD
| 1,580,000 |
| USD
| 1,553,375 |
| 9/17/2008 |
| 5,459 |
USD
| 26,089,918 |
| NOK
| 135,965,000 |
| 9/17/2008 |
| 396,607 |
USD
| 3,661,850 |
| NZD
| 4,923,000 |
| 9/17/2008 |
| 42,571 |
USD
| 49,487,021 |
| SGD
| 67,622,000 |
| 9/17/2008 |
| 403,174 |
Total unrealized appreciation | 847,841 |
Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized (Depreciation) (US$) |
EUR
| 103,000 |
| USD
| 158,687 |
| 7/11/2008 |
| (3,385) |
CHF
| 21,698,000 |
| USD
| 20,888,166 |
| 9/17/2008 |
| (366,803) |
DKK
| 2,544,000 |
| USD
| 526,708 |
| 9/17/2008 |
| (8,099) |
EUR
| 5,767,000 |
| USD
| 8,910,015 |
| 9/17/2008 |
| (133,665) |
GBP
| 3,463,000 |
| USD
| 6,737,267 |
| 9/17/2008 |
| (119,309) |
JPY
| 401,988,000 |
| USD
| 3,766,472 |
| 9/17/2008 |
| (35,443) |
SEK
| 3,472,000 |
| USD
| 572,559 |
| 9/17/2008 |
| (1,469) |
Total unrealized depreciation | (668,173) |
Currency Abbreviations |
CAD Canadian Dollar
CHF Swiss Franc
DKK Danish Krone
EUR Euro
GBP British Pound
JPY Japanese Yen
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
USD United States Dollar
|
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Appreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 254,231,876 | $ 379,687 |
Level 2 — Other Significant Observable Inputs
| 205,156,951 | 160,249 |
Level 3 — Significant Unobservable Inputs
| 144,281 | — |
Total | $ 459,533,108 | $ 539,936 |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as future contracts, forward foreign currency exchange contracts, unfunded loan commitments and credit default swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.The following is a reconciliation of the Portfolio's assets in which significant unobservable inputs (Level 3) were used in determining fair value at June 30, 2008:
| Investments in Securities at Market Value |
Balance as of January 1, 2008
| $ 148,070 |
Total realized gains or losses
| — |
Change in unrealized appreciation (depreciation)
| (4,145) |
Amortization Premium/Discount
| 356 |
Net purchases (sales)
| — |
Net transfers in (out) of Level 3
| — |
Balance as of June 30, 2008 | $ 144,281 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $419,003,716) | $ 427,387,956 |
Investment in Cash Management QP Trust (cost $32,145,152) | 32,145,152 |
Total investments, at value (cost $451,148,868)
| 459,533,108 |
Cash
| 255,219 |
Receivable for investments sold
| 9,474,440 |
Dividends receivable
| 396,718 |
Interest receivable
| 1,497,552 |
Foreign taxes recoverable
| 31,227 |
Receivable for Portfolio shares sold
| 8,430 |
Receivable for variation margin on open futures contracts
| 604,594 |
Unrealized appreciation on forward foreign currency exchange contracts
| 847,841 |
Due from Advisor
| 159 |
Other assets
| 8,965 |
Total assets
| 472,658,253 |
Liabilities |
Foreign cash overdraft
| 129,805 |
Payable for investments purchased
| 5,521,146 |
Payable for investment purchased — mortgage dollar roll
| 7,919,639 |
Unrealized depreciation on credit default swap contracts
| 19,303 |
Payable for Portfolio shares redeemed
| 369,778 |
Unrealized depreciation on forward foreign currency exchange contracts
| 668,173 |
Unrealized depreciation on unfunded loan commitments
| 116 |
Accrued management fee
| 150,108 |
Other accrued expenses and payables
| 399,826 |
Total liabilities
| 15,177,894 |
Net assets, at value | $ 457,480,359 |
Net Assets Consist of |
Undistributed net investment income
| 6,992,622 |
Net unrealized appreciation (depreciation) on:
Investments | 8,384,240 |
Futures | 379,687 |
Credit default swaps | (19,303) |
Unfunded loan commitments | (116) |
Foreign currency | 181,424 |
Accumulated net realized gain (loss)
| 5,857,614 |
Paid-in capital
| 435,704,191 |
Net assets, at value | $ 457,480,359 |
Class A Net Asset Value, offering and redemption price per share ($457,412,312 ÷ 20,044,241 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 22.82 |
Class B Net Asset Value, offering and redemption price per share ($68,047 ÷ 2,974 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 22.88 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $116,184)
| $ 3,283,121 |
Interest
| 4,627,634 |
Interest — Cash Management QP Trust
| 515,122 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 48,469 |
Total Income
| 8,474,346 |
Expenses:
Management fee
| 1,035,685 |
Administration fee
| 79,656 |
Custodian fee
| 205,084 |
Services to shareholders
| 516 |
Distribution and service fees (Class B)
| 5,497 |
Record keeping fees (Class B)
| 2,124 |
Professional fees
| 65,780 |
Trustees' fees and expenses
| 42,727 |
Reports to shareholders and shareholder meeting
| 107,478 |
Other
| 34,949 |
Total expenses before expense reductions
| 1,579,496 |
Expense reductions
| (77,203) |
Total expenses after expense reductions
| 1,502,293 |
Net investment income (loss) | 6,972,053 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 9,446,765 |
Futures
| 1,223,989 |
Credit default swaps
| (105,131) |
Foreign currency
| 700,762 |
Payments by affiliates (see Note I)
| 11,599 |
| 11,277,984 |
Change in net unrealized appreciation (depreciation) on:
Investments
| (41,377,756) |
Futures
| (265,669) |
Credit default swaps
| (13,485) |
Unfunded loan commitments
| 429 |
Foreign currency
| 74,563 |
| (41,581,918) |
Net gain (loss) | (30,303,934) |
Net increase (decrease) in net assets resulting from operations | $ (23,331,881) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 6,972,053 | $ 17,503,276 |
Net realized gain (loss)
| 11,277,984 | 51,427,436 |
Change in net unrealized appreciation (depreciation)
| (41,581,918) | (39,914,299) |
Net increase (decrease) in net assets resulting from operations
| (23,331,881) | 29,016,413 |
Distributions to shareholders from:
Net investment income:
Class A | (17,655,048) | (18,973,533) |
Class B | (219,769) | (849,365) |
Total distributions
| (17,874,817) | (19,822,898) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 9,700,088 | 13,218,397 |
Reinvestment of distributions
| 17,655,048 | 18,973,533 |
Cost of shares redeemed
| (57,064,468) | (113,345,811) |
Net increase (decrease) in net assets from Class A share transactions
| (29,709,332) | (81,153,881) |
Class B Proceeds from shares sold
| 106,595 | 575,499 |
Reinvestment of distributions
| 219,769 | 849,365 |
Cost of shares redeemed
| (7,150,398) | (25,041,162) |
Net increase (decrease) in net assets from Class B share transactions
| (6,824,034) | (23,616,298) |
Increase (decrease) in net assets | (77,740,064) | (95,576,664) |
Net assets at beginning of period
| 535,220,423 | 630,797,087 |
Net assets at end of period (including undistributed net investment income of $6,992,622 and $17,895,386, respectively)
| $ 457,480,359 | $ 535,220,423 |
Other Information |
Class A Shares outstanding at beginning of period
| 21,278,440 | 24,544,133 |
Shares sold
| 411,877 | 536,248 |
Shares issued to shareholders in reinvestment of distributions
| 782,235 | 792,545 |
Shares redeemed
| (2,428,311) | (4,594,486) |
Net increase (decrease) in Class A shares
| (1,234,199) | (3,265,693) |
Shares outstanding at end of period
| 20,044,241 | 21,278,440 |
Class B Shares outstanding at beginning of period
| 293,818 | 1,244,941 |
Shares sold
| 4,561 | 23,371 |
Shares issued to shareholders in reinvestment of distributions
| 9,716 | 35,405 |
Shares redeemed
| (305,121) | (1,009,899) |
Net increase (decrease) in Class B shares
| (290,844) | (951,123) |
Shares outstanding at end of period
| 2,974 | 293,818 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 24.81 | $ 24.46 | $ 22.75 | $ 22.37 | $ 21.32 | $ 18.66 |
Income (loss) from investment operations: Net investment incomeb | .34 | .74 | .69e | .59 | .47 | .37 |
Net realized and unrealized gain (loss) | (1.46) | .42 | 1.60 | .34 | .93 | 2.90 |
Total from investment operations | (1.12) | 1.16 | 2.29 | .93 | 1.40 | 3.27 |
Less distributions from: Net investment income | (.87) | (.81) | (.58) | (.55) | (.35) | (.61) |
Net asset value, end of period | $ 22.82 | $ 24.81 | $ 24.46 | $ 22.75 | $ 22.37 | $ 21.32 |
Total Return (%)
| (4.48)c** | 4.84c | 10.24c,e | 4.30c | 6.64 | 18.10 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 457 | 528 | 600 | 653 | 622 | 667 |
Ratio of expenses before expense reductions (%)
| .62* | .52 | .55 | .55 | .59 | .59 |
Ratio of expenses after expense reductions (%)
| .59* | .51 | .51 | .53 | .59 | .59 |
Ratio of net investment income (%)
| 2.88* | 3.00 | 2.99e | 2.66 | 2.18 | 1.88 |
Portfolio turnover rate (%)
| 134d** | 190d | 108 | 121d | 131d | 102d |
a For the six months ended June 30, 2008 (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 portfolio turnover rate including mortgage dollar roll transactions was 141%, 199%, 122%, 140% and 108% for the periods ended June 30, 2008, December 31, 2007, December 31, 2005, December 31, 2004 and December 31, 2003, respectively.
e Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.024 per share and an increase in the ratio of net investment income of 0.10%. Excluding this non-recurring income, total return would have been 0.10% lower.
* Annualized ** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 24.78 | $ 24.43 | $ 22.72 | $ 22.33 | $ 21.28 | $ 18.64 |
Income (loss) from investment operations: Net investment incomeb | .30 | .65 | .60e | .51 | .39 | .28 |
Net realized and unrealized gain (loss) | (1.42) | .41 | 1.60 | .35 | .92 | 2.92 |
Total from investment operations | (1.12) | 1.06 | 2.20 | .86 | 1.31 | 3.20 |
Less distributions from: Net investment income | (.78) | (.71) | (.49) | (.47) | (.26) | (.56) |
Net asset value, end of period | $ 22.88 | $ 24.78 | $ 24.43 | $ 22.72 | $ 22.33 | $ 21.28 |
Total Return (%)
| (4.35)c** | 4.43c | 9.82c,e | 3.90c | 6.26 | 17.66 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .07 | 7 | 30 | 34 | 33 | 21 |
Ratio of expenses before expense reductions (%)
| .93* | .89 | .93 | .95 | .97 | .99 |
Ratio of expenses after expense reductions (%)
| .90* | .88 | .89 | .91 | .97 | .99 |
Ratio of net investment income (%)
| 2.58* | 2.63 | 2.61e | 2.28 | 1.80 | 1.48 |
Portfolio turnover rate (%)
| 134d** | 190d | 108 | 121d | 131d | 102d |
a For the six months ended June 30, 2008 (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 portfolio turnover rate including mortgage dollar roll transactions was 141%, 199%, 122%, 140% and 108% for the periods ended June 30, 2008, December 31, 2007, December 31, 2005, December 31, 2004 and December 31, 2003, respectively.
e Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.024 per share and an increase in the ratio of net investment income of 0.10%. Excluding this non-recurring income, total return would have been 0.10% lower.
* Annualized ** Not annualized
|
Performance Summary June 30, 2008
DWS Blue Chip VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.71% and 0.96% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. It may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Derivatives may be more volatile and less liquid than traditional securities, and the Portfolio could suffer losses on its derivative positions. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Blue Chip VIP |
[] DWS Blue Chip VIP — Class A [] Russell 1000® Index | The Russell 1000® Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000® Index, which measures the performance of the 3,000 largest US companies based on total market capitalization. The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Blue Chip VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $8,891 | $8,701 | $11,584 | $15,916 | $13,562 |
Average annual total return
| -11.09% | -12.99% | 5.02% | 9.74% | 3.09% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $14,846 | $13,942 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 8.22% | 3.38% |
DWS Blue Chip VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $8,872 | $8,665 | $11,453 | $15,609 | $15,404 |
Average annual total return
| -11.28% | -13.35% | 4.63% | 9.31% | 7.47% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $14,846 | $14,987 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 8.22% | 6.98% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Blue Chip VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 889.10 | | $ 887.20 | |
Expenses Paid per $1,000*
| $ 3.52 | | $ 5.49 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,021.13 | | $ 1,019.05 | |
Expenses Paid per $1,000*
| $ 3.77 | | $ 5.87 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Blue Chip VIP
| .75% | | 1.17% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Blue Chip VIP
The first half of 2008 was a period of considerable economic uncertainty and significant turmoil throughout the capital markets. At mid-year 2008, the US economy is experiencing a number of interrelated problems including liquidity issues in financial markets, increased concern about rising prices for energy and food, and rising unemployment.
Essentially all equity indices posted negative returns for this period. The Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a negative return of -11.05% for the six months ended June 30, 2008. Growth stocks, as measured by the Russell 1000® Growth Index, performed somewhat better than value stocks, as measured by the Russell 1000® Value Index. With a return of -11.09% (Class A shares, unadjusted for contract charges), the Portfolio's return was quite close to that of its benchmark, the Russell 1000® Index, which posted a return of -11.20%.
For the first half of 2008, an underweight position and stock selection in the banks sector, which performed very poorly, contributed to performance relative to the Russell 1000 Index.1 Also positive was stock selection in the materials sector. Stock selection in the health care equipment & services and energy sectors detracted from performance.
In the banks sector, the Portfolio benefited from avoiding or significantly underweighting some of the large banks that were off sharply for the period. In the materials sector, a major positive was CF Industries Holdings, Inc., a fertilizer company that is benefiting from strong demand for agricultural products. Other positives in the materials sector were AK Steel Holding Corp.* and Alpha Natural Resources, Inc.*, an Appalachian coal supplier.
In the health care equipment and services sector, performance was hurt by positions in several managed care companies including Humana, Inc., Aetna, Inc. and Health Net, Inc.* In the energy sector, performance was hurt by positions in Frontier Oil Corp.* and Sunoco, Inc., which performed poorly; nonetheless, some of the Portfolio's best-performing issues, including ConocoPhillips and ENSCO International, Inc.*, were also in the energy sector.
Robert Wang, Julie Abbett and James B. Francis, CFA (joined the Portfolio on 7/1/2008)
Portfolio Managers, Deutsche Investment Management Americas Inc.
The 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.
The Russell 1000 Growth Index is an unmanaged, capitalization-weighted index consisting of those stocks in the Russell 1000 Index that have greater-than-average growth orientation.
The Russell 1000 Value Index is an unmanaged index that consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which measures the performance of the 3,000 largest US companies based on total market capitalization. The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index.
Index returns assume the reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.* As of June 30, 2008, the positions were sold.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Blue Chip VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 97% | 97% |
Cash Equivalents | 2% | 3% |
Government & Agency Obligation | 1% | — |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
|
| |
Information Technology | 16% | 15% |
Industrials | 15% | 13% |
Health Care | 14% | 14% |
Energy | 14% | 14% |
Financials | 12% | 15% |
Consumer Discretionary | 11% | 11% |
Consumer Staples | 7% | 9% |
Materials | 5% | 3% |
Telecommunication Services | 4% | 4% |
Utilities | 2% | 2% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 46. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Blue Chip VIP
|
Shares
| Value ($) |
| |
Common Stocks 97.7% |
Consumer Discretionary 10.6% |
Auto Components 0.8% |
Autoliv, Inc. | 10,500 | 489,510 |
Cooper Tire & Rubber Co. | 12,800 | 100,352 |
Johnson Controls, Inc. | 10,100 | 289,668 |
Lear Corp.* | 36,800 | 521,824 |
TRW Automotive Holdings Corp.* | 2,700 | 49,869 |
| 1,451,223 |
Hotels Restaurants & Leisure 1.8% |
McDonald's Corp. | 16,200 | 910,764 |
Yum! Brands, Inc. | 69,100 | 2,424,719 |
| 3,335,483 |
Household Durables 0.3% |
Leggett & Platt, Inc. | 20,000 | 335,400 |
NVR, Inc.* | 500 | 250,040 |
| 585,440 |
Leisure Equipment & Products 0.2% |
Hasbro, Inc. | 8,800 | 314,336 |
Media 3.7% |
Comcast Corp. "A" | 114,900 | 2,179,653 |
DISH Network Corp. "A"* | 24,500 | 717,360 |
Liberty Global, Inc. "A"* | 14,800 | 465,164 |
Omnicom Group, Inc. | 1,700 | 76,296 |
Scholastic Corp.* | 5,400 | 154,764 |
The DIRECTV Group, Inc.* | 108,200 | 2,803,462 |
The Walt Disney Co. | 14,400 | 449,280 |
| 6,845,979 |
Multiline Retail 0.2% |
Big Lots, Inc.* | 8,100 | 253,044 |
Dollar Tree, Inc.* | 1,900 | 62,111 |
| 315,155 |
Specialty Retail 3.3% |
AutoZone, Inc.* | 7,600 | 919,676 |
Best Buy Co., Inc. | 55,200 | 2,185,920 |
RadioShack Corp. | 83,700 | 1,026,999 |
Rent-A-Center, Inc.* | 4,800 | 98,736 |
The Gap, Inc. | 37,500 | 625,125 |
TJX Companies, Inc. | 44,000 | 1,384,680 |
| 6,241,136 |
Textiles, Apparel & Luxury Goods 0.3% |
Fossil, Inc.* | 14,400 | 418,608 |
Hanesbrands, Inc.* | 2,500 | 67,850 |
Quicksilver, Inc.* | 8,500 | 83,470 |
Wolverine World Wide, Inc. | 1,700 | 45,339 |
| 615,267 |
Consumer Staples 6.6% |
Beverages 1.9% |
Coca-Cola Enterprises, Inc. | 11,800 | 204,140 |
Pepsi Bottling Group, Inc. | 25,200 | 703,584 |
PepsiCo, Inc. | 41,300 | 2,626,267 |
| 3,533,991 |
|
Shares
| Value ($) |
| |
Food & Staples Retailing 0.8% |
Kroger Co. | 49,800 | 1,437,726 |
Food Products 0.4% |
Chiquita Brands International, Inc.* (a) | 18,500 | 280,645 |
Darling International, Inc.* | 6,900 | 113,988 |
Fresh Del Monte Produce, Inc.* | 15,700 | 370,049 |
| 764,682 |
Household Products 1.7% |
Colgate-Palmolive Co. | 46,200 | 3,192,420 |
Personal Products 0.2% |
Herbalife Ltd. | 7,000 | 271,250 |
Tobacco 1.6% |
Altria Group, Inc. | 63,200 | 1,299,392 |
Lorillard, Inc.* | 4,900 | 338,884 |
Philip Morris International, Inc.* | 27,400 | 1,353,286 |
| 2,991,562 |
Energy 13.6% |
Energy Equipment & Services 0.2% |
Transocean, Inc.* | 2,006 | 305,695 |
Oil, Gas & Consumable Fuels 13.4% |
Apache Corp. | 25,400 | 3,530,600 |
Chevron Corp. | 51,100 | 5,065,543 |
ConocoPhillips | 48,600 | 4,587,354 |
ExxonMobil Corp. | 16,940 | 1,492,922 |
Frontline Ltd. (a) | 6,900 | 481,482 |
Hess Corp. | 11,400 | 1,438,566 |
Marathon Oil Corp. | 38,700 | 2,007,369 |
Mariner Energy, Inc.* | 4,400 | 162,668 |
Murphy Oil Corp. | 2,400 | 235,320 |
Noble Energy, Inc. | 8,700 | 874,872 |
Occidental Petroleum Corp. | 39,200 | 3,522,512 |
Sunoco, Inc. | 35,000 | 1,424,150 |
W&T Offshore, Inc. | 1,800 | 105,318 |
| 24,928,676 |
Financials 11.7% |
Capital Markets 3.6% |
Bank of New York Mellon Corp. | 90,800 | 3,434,964 |
Investment Technology Group, Inc.* | 3,800 | 127,148 |
Morgan Stanley | 14,200 | 512,194 |
Northern Trust Corp. | 7,300 | 500,561 |
State Street Corp. | 21,300 | 1,362,987 |
The Goldman Sachs Group, Inc. | 4,400 | 769,560 |
| 6,707,414 |
Commercial Banks 1.6% |
Banco Santander SA (ADR) | 6,000 | 109,140 |
Barclays PLC (ADR) (a) | 6,500 | 150,475 |
Lloyds TSB Group PLC (ADR) | 2,900 | 71,543 |
PNC Financial Services Group, Inc. | 14,400 | 822,240 |
Susquehanna Bancshares, Inc. | 3,300 | 45,177 |
Wells Fargo & Co. | 72,300 | 1,717,125 |
| 2,915,700 |
|
Shares
| Value ($) |
| |
Consumer Finance 0.1% |
Cash America International, Inc. | 5,300 | 164,300 |
Diversified Financial Services 2.0% |
Interactive Brokers Group, Inc. "A"* | 2,000 | 64,260 |
JPMorgan Chase & Co. | 77,200 | 2,648,732 |
Leucadia National Corp. | 4,400 | 206,536 |
NYSE Euronext | 6,800 | 344,488 |
The Nasdaq OMX Group, Inc.* | 16,100 | 427,455 |
| 3,691,471 |
Insurance 4.1% |
ACE Ltd. | 42,200 | 2,324,798 |
Aflac, Inc. | 3,600 | 226,080 |
Allied World Assurance Co. Holdings Ltd. | 2,700 | 106,974 |
Berkshire Hathaway, Inc. "B"* | 100 | 401,200 |
China Life Insurance Co., Ltd. "H" (ADR) | 1,600 | 83,488 |
Endurance Specialty Holdings Ltd. | 2,000 | 61,580 |
Hartford Financial Services Group, Inc. | 1,600 | 103,312 |
Manulife Financial Corp. | 2,400 | 83,304 |
MetLife, Inc. | 52,800 | 2,786,256 |
PartnerRe Ltd. | 6,500 | 449,345 |
The Travelers Companies, Inc. | 22,600 | 980,840 |
| 7,607,177 |
Real Estate Investment Trusts 0.3% |
Boston Properties, Inc. (REIT) | 2,000 | 180,440 |
ProLogis (REIT) | 5,300 | 288,055 |
Simon Property Group, Inc. (REIT) | 2,000 | 179,780 |
| 648,275 |
Health Care 14.0% |
Biotechnology 2.3% |
Gilead Sciences, Inc.* | 64,200 | 3,399,390 |
OSI Pharmaceuticals, Inc.* | 18,700 | 772,684 |
| 4,172,074 |
Health Care Equipment & Supplies 1.9% |
Baxter International, Inc. | 14,500 | 927,130 |
Intuitive Surgical, Inc.* | 5,900 | 1,589,460 |
Kinetic Concepts, Inc.* | 8,900 | 355,199 |
St. Jude Medical, Inc.* | 13,600 | 555,968 |
| 3,427,757 |
Health Care Providers & Services 4.3% |
Aetna, Inc. | 66,700 | 2,703,351 |
Express Scripts, Inc.* | 17,700 | 1,110,144 |
Health Management Associates, Inc. "A"* | 34,300 | 223,293 |
Humana, Inc.* | 37,200 | 1,479,444 |
Kindred Healthcare, Inc.* | 5,000 | 143,800 |
LifePoint Hospitals, Inc.* | 1,900 | 53,770 |
Medco Health Solutions, Inc.* | 44,900 | 2,119,280 |
Owens & Minor, Inc. | 4,600 | 210,174 |
| 8,043,256 |
Life Sciences Tools & Services 0.5% |
Invitrogen Corp.* | 23,400 | 918,684 |
Pharmaceuticals 5.0% |
Bristol-Myers Squibb Co. | 118,300 | 2,428,699 |
Eli Lilly & Co. | 41,400 | 1,911,024 |
Johnson & Johnson | 5,900 | 379,606 |
Merck & Co., Inc. | 31,300 | 1,179,697 |
|
Shares
| Value ($) |
| |
Perrigo Co. | 1,400 | 44,478 |
Pfizer, Inc. | 29,100 | 508,377 |
Schering-Plough Corp. | 90,700 | 1,785,883 |
Sepracor, Inc.* | 53,700 | 1,069,704 |
Watson Pharmaceuticals, Inc.* | 1,100 | 29,887 |
| 9,337,355 |
Industrials 14.4% |
Aerospace & Defense 6.2% |
Boeing Co. | 49,500 | 3,253,140 |
Bombardier, Inc. "B"* | 32,500 | 236,172 |
General Dynamics Corp. | 12,400 | 1,044,080 |
Goodrich Corp. | 12,400 | 588,504 |
Honeywell International, Inc. | 51,900 | 2,609,532 |
Lockheed Martin Corp. | 24,300 | 2,397,438 |
Northrop Grumman Corp. | 8,900 | 595,410 |
Teledyne Technologies, Inc.* | 1,200 | 58,548 |
United Technologies Corp. | 10,400 | 641,680 |
| 11,424,504 |
Building Products 0.1% |
Armstrong World Industries, Inc. | 3,200 | 93,504 |
Commercial Services & Supplies 0.8% |
Allied Waste Industries, Inc.* | 28,200 | 355,884 |
IKON Office Solutions, Inc. | 4,900 | 55,272 |
Manpower, Inc. | 5,100 | 297,024 |
The Brink's Co. | 9,100 | 595,322 |
United Stationers, Inc.* | 2,300 | 84,985 |
| 1,388,487 |
Construction & Engineering 1.2% |
EMCOR Group, Inc.* | 14,300 | 407,979 |
Fluor Corp. | 4,700 | 874,576 |
Perini Corp.* | 15,900 | 525,495 |
Shaw Group, Inc.* | 8,200 | 506,678 |
| 2,314,728 |
Electrical Equipment 0.4% |
GrafTech International Ltd.* | 30,200 | 810,266 |
Industrial Conglomerates 0.8% |
General Electric Co. | 18,600 | 496,434 |
Walter Industries, Inc. | 9,600 | 1,044,192 |
| 1,540,626 |
Machinery 3.0% |
AGCO Corp.* | 36,200 | 1,897,242 |
Caterpillar, Inc. | 38,800 | 2,864,216 |
Flowserve Corp. | 1,000 | 136,700 |
Parker Hannifin Corp. | 8,900 | 634,748 |
| 5,532,906 |
Marine 0.2% |
Kirby Corp.* | 8,900 | 427,200 |
Road & Rail 1.7% |
Burlington Northern Santa Fe Corp. | 4,600 | 459,494 |
Norfolk Southern Corp. | 3,900 | 244,413 |
Ryder System, Inc. | 36,500 | 2,514,120 |
| 3,218,027 |
Information Technology 15.8% |
Communications Equipment 0.2% |
Cisco Systems, Inc.* | 16,800 | 390,768 |
Computers & Peripherals 6.2% |
Apple, Inc.* | 16,800 | 2,812,992 |
Hewlett-Packard Co. | 68,300 | 3,019,543 |
|
Shares
| Value ($) |
| |
International Business Machines Corp. | 17,800 | 2,109,834 |
Lexmark International, Inc. "A"* | 33,800 | 1,129,934 |
QLogic Corp.* | 13,200 | 192,588 |
Sun Microsystems, Inc.* | 47,800 | 520,064 |
Western Digital Corp.* | 51,800 | 1,788,654 |
| 11,573,609 |
Electronic Equipment & Instruments 0.6% |
Avnet, Inc.* | 23,800 | 649,264 |
Dolby Laboratories, Inc. "A"* | 11,700 | 471,510 |
Tyco Electronics Ltd. | 1,600 | 57,312 |
| 1,178,086 |
Internet Software & Services 1.4% |
eBay, Inc.* | 29,800 | 814,434 |
Google, Inc. "A"* | 3,300 | 1,737,186 |
| 2,551,620 |
IT Services 2.3% |
Accenture Ltd. "A" | 25,100 | 1,022,072 |
Computer Sciences Corp.* | 25,700 | 1,203,788 |
MasterCard, Inc. "A" | 7,900 | 2,097,608 |
| 4,323,468 |
Semiconductors & Semiconductor Equipment 1.8% |
Amkor Technology, Inc.* | 62,300 | 648,543 |
Analog Devices, Inc. | 14,500 | 460,665 |
Skyworks Solutions, Inc.* | 8,700 | 85,869 |
Texas Instruments, Inc. | 73,400 | 2,066,944 |
| 3,262,021 |
Software 3.3% |
Microsoft Corp. | 210,600 | 5,793,606 |
Symantec Corp.* | 14,300 | 276,705 |
| 6,070,311 |
Materials 4.7% |
Chemicals 3.1% |
Celanese Corp. "A" | 22,700 | 1,036,482 |
CF Industries Holdings, Inc. | 11,900 | 1,818,320 |
Monsanto Co. | 7,600 | 960,944 |
Terra Industries, Inc. | 39,900 | 1,969,065 |
| 5,784,811 |
Containers & Packaging 0.9% |
Owens-Illinois, Inc.* | 39,500 | 1,646,755 |
Metals & Mining 0.7% |
Southern Copper Corp. | 2,700 | 287,901 |
United States Steel Corp. | 5,200 | 960,856 |
| 1,248,757 |
|
Shares
| Value ($) |
| |
Telecommunication Services 4.6% |
Diversified Telecommunication Services 4.5% |
AT&T, Inc. | 73,000 | 2,459,370 |
Embarq Corp. | 42,000 | 1,985,340 |
Telus Corp. | 2,800 | 117,717 |
Verizon Communications, Inc. | 108,400 | 3,837,360 |
| 8,399,787 |
Wireless Telecommunication Services 0.1% |
Telephone & Data Systems, Inc. | 3,300 | 155,991 |
Utilities 1.7% |
Electric Utilities 0.2% |
Edison International | 5,800 | 298,004 |
Southern Co. | 5,100 | 178,092 |
| 476,096 |
Gas Utilities 0.2% |
ONEOK, Inc. | 8,100 | 395,523 |
Independent Power Producers & Energy Traders 0.6% |
Constellation Energy Group, Inc. | 12,600 | 1,034,460 |
Multi-Utilities 0.7% |
Ameren Corp. | 1,500 | 63,345 |
Dominion Resources, Inc. | 2,600 | 123,474 |
Sempra Energy | 18,500 | 1,044,325 |
| 1,231,144 |
Total Common Stocks (Cost $181,173,673) | 181,236,939 |
| Principal Amount ($) | Value ($) |
| |
Government & Agency Obligation 0.4% |
US Treasury Obligations |
US Treasury Bill, 1.08%**, 7/17/2008 (b) (Cost $838,595) | 839,000 | 838,473 |
|
Shares
| Value ($) |
| |
Securities Lending Collateral 0.5% |
Daily Assets Fund Institutional, 2.74% (c) (d) (Cost $868,705) | 868,705 | 868,705 |
|
Cash Equivalents 2.0% |
Cash Management QP Trust, 2.49% (c) (Cost $3,761,797) | 3,761,797 | 3,761,797 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $186,642,770)+ | 100.6 | 186,705,914 |
Other Assets and Liabilities, Net | (0.6) | (1,186,117) |
Net Assets | 100.0 | 185,519,797 |
* Non-income producing security.** Annualized yield at time of purchase; not a coupon rate.+ The cost for federal income tax purposes was $188,517,307. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $1,811,393. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $13,851,531 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $15,662,924.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $853,282 which is 0.5% of net assets.(b) At June 30, 2008, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.(c) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(d) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.ADR: American Depositary Receipt
REIT: Real Estate Investment Trust
At June 30, 2008, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Depreciation ($) |
S&P 500 Index
| 9/18/2008 | 15 | 5,098,923 | 4,804,125 | (294,798) |
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Depreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 185,867,441 | $ (294,798) |
Level 2 — Other Significant Observable Inputs
| 838,473 | — |
Level 3 — Significant Unobservable Inputs
| — | — |
Total | $ 186,705,914 | $ (294,798) |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as future contracts which are valued at the unrealized appreciation/depreciation on the instrument.The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $182,012,268 — including $853,282 of securities loaned) | $ 182,075,412 |
Investment in Daily Assets Fund Institutional (cost $868,705)* | 868,705 |
Investment in Cash Management QP Trust (cost $3,761,797) | 3,761,797 |
Total investments, at value (cost $186,642,770)
| 186,705,914 |
Cash
| 8,965 |
Foreign currency, at value (cost $1,150)
| 1,117 |
Dividends receivable
| 105,828 |
Interest receivable
| 8,625 |
Receivable for daily variation margin on open futures contracts
| 4,125 |
Other assets
| 5,251 |
Total assets
| 186,839,825 |
Liabilities |
Payable for Portfolio shares redeemed
| 243,120 |
Payable upon return of securities loaned
| 868,705 |
Accrued management fee
| 85,520 |
Other accrued expenses and payables
| 122,683 |
Total liabilities
| 1,320,028 |
Net assets, at value | $ 185,519,797 |
Net Assets Consist of |
Undistributed net investment income
| 943,028 |
Net unrealized appreciation (depreciation) on:
Investments | 63,144 |
Futures | (294,798) |
Foreign currency | (34) |
Accumulated net realized gain (loss)
| (17,935,942) |
Paid-in capital
| 202,744,399 |
Net assets, at value | $ 185,519,797 |
Class A Net Asset Value, offering and redemption price per share ($185,324,878 ÷ 17,682,142 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.48 |
Class B Net Asset Value, offering and redemption price per share ($194,919 ÷ 18,617 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.47 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $4,079)
| $ 1,649,751 |
Interest
| 8,344 |
Interest — Cash Management QP Trust
| 81,391 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 12,286 |
Total Income
| 1,751,772 |
Expenses:
Management fee
| 662,703 |
Administration fee
| 33,626 |
Custodian fee
| 12,499 |
Distribution and service fees (Class B)
| 8,047 |
Record keeping fees (Class B)
| 4,592 |
Services to shareholders
| 337 |
Professional fees
| 35,444 |
Trustees' fees and expenses
| 25,017 |
Reports to shareholders and shareholder meeting
| 87,328 |
Other
| 4,871 |
Total expenses before expense reductions
| 874,464 |
Expense reductions
| (11,211) |
Total expenses after expense reductions
| 863,253 |
Net investment income (loss) | 888,519 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| (11,789,654) |
Futures
| (573,651) |
Foreign currency
| (2) |
| (12,363,307) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (14,453,166) |
Futures
| (278,975) |
Foreign currency
| (46) |
| (14,732,187) |
Net gain (loss) | (27,095,494) |
Net increase (decrease) in net assets resulting from operations | $ (26,206,975) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 888,519 | $ 3,464,188 |
Net realized gain (loss)
| (12,363,307) | 33,055,813 |
Change in net unrealized appreciation (depreciation)
| (14,732,187) | (21,646,324) |
Net increase (decrease) in net assets resulting from operations
| (26,206,975) | 14,873,677 |
Distributions to shareholders from:
Net investment income:
Class A | (3,297,531) | (3,290,254) |
Class B | (117,139) | (315,334) |
Net realized gain:
Class A | (35,917,893) | (34,899,465) |
Class B | (1,664,515) | (5,204,548) |
Total distributions
| (40,997,078) | (43,709,601) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 2,785,204 | 16,482,598 |
Reinvestment of distributions
| 39,215,424 | 38,189,719 |
Cost of shares redeemed
| (33,933,887) | (100,561,920) |
Net increase (decrease) in net assets from Class A share transactions
| 8,066,741 | (45,889,603) |
Class B Proceeds from shares sold
| 234,187 | 5,401,154 |
Reinvestment of distributions
| 1,781,654 | 5,519,882 |
Cost of shares redeemed
| (10,415,496) | (42,573,159) |
Net increase (decrease) in net assets from Class B share transactions
| (8,399,655) | (31,652,123) |
Increase (decrease) in net assets | (67,536,967) | (106,377,650) |
Net assets at beginning of period
| 253,056,764 | 359,434,414 |
Net assets at end of period (including undistributed net investment income of $943,028 and $3,469,179, respectively)
| $ 185,519,797 | $ 253,056,764 |
Other Information |
Class A Shares outstanding at beginning of period
| 16,515,920 | 19,412,716 |
Shares sold
| 230,186 | 1,075,933 |
Shares issued to shareholders in reinvestment of distributions
| 3,731,249 | 2,657,601 |
Shares redeemed
| (2,795,213) | (6,630,330) |
Net increase (decrease) in Class A shares
| 1,166,222 | (2,896,796) |
Shares outstanding at end of period
| 17,682,142 | 16,515,920 |
Class B Shares outstanding at beginning of period
| 755,480 | 2,824,828 |
Shares sold
| 18,012 | 372,774 |
Shares issued to shareholders in reinvestment of distributions
| 169,520 | 384,392 |
Shares redeemed
| (924,395) | (2,826,514) |
Net increase (decrease) in Class B shares
| (736,863) | (2,069,348) |
Shares outstanding at end of period
| 18,617 | 755,480 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.65 | $ 16.17 | $ 14.88 | $ 13.65 | $ 11.84 | $ 9.37 |
Income (loss) from investment operations: Net investment incomeb | .05 | .17 | .17d | .14 | .13 | .08 |
Net realized and unrealized gain (loss) | (1.67) | .36 | 2.07 | 1.22 | 1.76 | 2.45 |
Total from investment operations | (1.62) | .53 | 2.24 | 1.36 | 1.89 | 2.53 |
Less distributions from: Net investment income | (.21) | (.18) | (.14) | (.13) | (.08) | (.06) |
Net realized gains | (2.34) | (1.87) | (.81) | — | — | — |
Total distributions | (2.55) | (2.05) | (.95) | (.13) | (.08) | (.06) |
Net asset value, end of period | $ 10.48 | $ 14.65 | $ 16.17 | $ 14.88 | $ 13.65 | $ 11.84 |
Total Return (%)
| (11.09)c** | 3.50 | 15.65d | 10.06 | 16.04 | 27.25 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 185 | 242 | 314 | 294 | 283 | 242 |
Ratio of expenses before expense reductions (%)
| .75* | .71 | .71 | .70 | .70 | .71 |
Ratio of expenses after expense reductions (%)
| .75* | .71 | .71 | .70 | .70 | .71 |
Ratio of net investment income (%)
| .89* | 1.13 | 1.12d | 1.00 | 1.08 | .82 |
Portfolio turnover rate (%)
| 66** | 275 | 226 | 288 | 249 | 182 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.003 per share and an increase in the ratio of net investment income of 0.02%. Excluding this non-recurring income, total return would have been 0.02% lower.
* Annualized ** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.61 | $ 16.12 | $ 14.83 | $ 13.60 | $ 11.80 | $ 9.35 |
Income (loss) from investment operations: Net investment incomeb | .02 | .11 | .11d | .09 | .09 | .04 |
Net realized and unrealized gain (loss) | (1.66) | .36 | 2.07 | 1.22 | 1.74 | 2.45 |
Total from investment operations | (1.64) | .47 | 2.18 | 1.31 | 1.83 | 2.49 |
Less distributions from: Net investment income | (.16) | (.11) | (.08) | (.08) | (.03) | (.04) |
Net realized gains | (2.34) | (1.87) | (.81) | — | — | — |
Total distributions | (2.50) | (1.98) | (.89) | (.08) | (.03) | (.04) |
Net asset value, end of period | $ 10.47 | $ 14.61 | $ 16.12 | $ 14.83 | $ 13.60 | $ 11.80 |
Total Return (%)
| (11.28)c** | 3.15 | 15.19d | 9.68 | 15.55 | 26.76 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .19 | 11 | 46 | 44 | 37 | 17 |
Ratio of expenses before expense reductions (%)
| 1.17* | 1.09 | 1.09 | 1.09 | 1.08 | 1.10 |
Ratio of expenses after expense reductions (%)
| 1.17* | 1.09 | 1.09 | 1.09 | 1.08 | 1.10 |
Ratio of net investment income (%)
| .47* | .75 | .74d | .61 | .70 | .43 |
Portfolio turnover rate (%)
| 66** | 275 | 226 | 288 | 249 | 182 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.003 per share and an increase in the ratio of net investment income of 0.02%. Excluding this non-recurring income, total return would have been 0.02% lower.
* Annualized ** Not annualized
|
Performance Summary June 30, 2008
DWS Conservative Allocation VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The total annual Portfolio direct operating expense ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 is 0.69% for Class B shares. The total Portfolio direct and estimated indirect Underlying DWS Portfolio operating expense ratio, gross of any fee waivers or expense reimbursements, as presented in the fee table of the prospectus dated May 1, 2008 is 1.33% for Class B shares. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual equity and bond funds whose yields and market values fluctuate, so that your investment may be worth more or less that its original cost. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the Portfolio 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. Investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the Portfolio could suffer losses on its derivative positions. 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 Portfolio, can decline and the investor can lose principal value. An investment in underlying money market investments is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any government agency. Although money market investments seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these investments. Please read this Portfolio's prospectus for specific details regarding its risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Conservative Allocation VIP from 8/16/2004 to 6/30/2008 |
[] DWS Conservative Allocation VIP — Class B [] Lehman Brothers US Aggregate Index [] Russell 1000® Index | The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. 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 Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
|
|
Comparative Results |
DWS Conservative Allocation VIP | 6-Month‡ | 1-Year | 3-Year | Life of Portfolio* |
Class B | Growth of $10,000
| $9,547 | $9,686 | $11,218 | $12,099 |
Average annual total return
| -4.53% | -3.14% | 3.91% | 5.05% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $11,702 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 4.19% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $12,814 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 6.68% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on August 16, 2004. Index returns began on August 31, 2004.Information About Your Portfolio's Expenses
DWS Conservative Allocation VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In addition to the ongoing expenses which the Portfolio bears directly, the Portfolio's shareholders indirectly bear the expense of the Underlying DWS Portfolios in which the Portfolio invests. The Portfolio's estimated indirect expense from investing in the Underlying DWS Portfolios is based on the expense ratios from the Underlying DWS Portfolio's most recent shareholder report. In the most recent six-month period, the Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Direct Portfolio Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 954.70 |
Expenses Paid per $1,000*
| | $ 3.50 |
Hypothetical 5% Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 1,021.28 |
Expenses Paid per $1,000*
| | $ 3.62 |
Direct Portfolio Expenses and Acquired Portfolios (Underlying Portfolios) Fees and Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 954.70 |
Expenses Paid per $1,000**
| | $ 6.76 |
Hypothetical 5% Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 1,017.95 |
Expenses Paid per $1,000**
| | $ 6.97 |
* Expenses are equal to the Portfolio's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.** Expenses are equal to the Portfolio's annualized expense ratio plus the Acquired Portfolios (Underlying Portfolios) Fees and Expenses, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | | Class B |
Direct Portfolio Expense Ratio
| | .72% |
Acquired Portfolios (Underlying Portfolios) Fees and Expenses
| | .67% |
Net Annual Portfolio and Acquired Portfolios (Underlying Portfolios) Operating Expenses
| | 1.39% |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Conservative Allocation VIP
For the six months ended June 30, 2008, the DWS Conservative Allocation VIP's Class B shares (unadjusted for contract charges) had a return of -4.53%. Since this Portfolio invests in stock and bond funds in several different categories, performance is analyzed by comparing the Portfolio's return with indexes that represent each asset class. For the six-month period, the Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a return of -11.05%, and the Lehman Brothers US Aggregate Index, which is considered indicative of broad bond market trends, returned 1.13%. The Portfolio's return was below that of its bond benchmark but above the returns of its equity benchmark, the Russell 1000® Index, which had a return of -11.20%.
There are three major determinants of the Portfolio's performance; strategic asset allocation, tactical asset allocation, and the performance of the underlying funds in which the Portfolio's assets are invested.
Strategic asset allocation refers to the longer-term allocation among asset classes. The Portfolio's allocation between equity and fixed income funds remained close to its target of 40% equity and 60% fixed income during the first half of 2008, but with equities overweighted throughout the period.1 This overweight in equities detracted from performance, as fixed-income securities, particularly short-term securities such as money market securities, performed better than stocks. Within equities the allocation was tilted toward the US large cap category and international equities. While the international equity overweight helped relative performance within the equity portion of the Portfolio, the large cap equity overweight detracted from performance.
Tactical allocation decisions are short-term underweights or overweights of particular asset classes relative to their longer-term strategic asset allocation targets. Overall tactical asset allocation slightly detracted from performance.
Performance of each of the underlying funds is compared to a suitable benchmark for that particular fund's asset class and management style. The underlying funds as a group slightly detracted from performance relative to their respective benchmarks. In particular, the DWS Core Fixed Income VIP significantly underperformed the Lehman Brothers US Aggregate Index. Although most of the equity funds had negative returns, equity funds overall added value by performing better than their respective benchmarks; performance of the DWS Large Cap Value VIP was especially strong.
Inna Okounkova Robert Wang
Portfolio Managers, Deutsche Investment Management Americas Inc.
The 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. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
The Lehman Brothers US Aggregate Index is an unmanaged market-value-weighted measure of Treasury issues, corporate bond issues and mortgage securities. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. It is not possible to invest directly into an index.
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 porotfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Conservative Allocation VIP
Asset Allocation (As a % of Investment Portfolio) | 6/30/08 | 12/31/07 |
| | |
Fixed Income — Bonds | 49% | 46% |
Equity | 38% | 43% |
Fixed Income — Money Market | 12% | 11% |
Exchange Traded Fund | 1% | — |
| 100% | 100% |
Target Allocation (As a % of Investment Portfolio) | 6/30/08 | 12/31/07 |
| | |
Fixed Income Portfolios | 60% | 60% |
Equity Portfolios | 40% | 40% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 59. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Conservative Allocation VIP
|
Shares
| Value ($) |
| |
Equity Funds 38.3% |
DWS Blue Chip VIP "A" | 3,478 | 36,450 |
DWS Capital Growth VIP "A" | 17,677 | 336,221 |
DWS Davis Venture Value VIP "A" | 65,759 | 730,578 |
DWS Dreman High Return Equity VIP "A" | 3,019 | 28,743 |
DWS Dreman Small Mid Cap Value VIP "A" | 32,629 | 351,741 |
DWS Global Opportunities VIP "A" | 2,310 | 31,946 |
DWS Global Thematic VIP "A" | 31,505 | 309,692 |
DWS Growth & Income VIP "A" | 125,613 | 929,536 |
DWS Health Care VIP "A" | 19,128 | 219,206 |
DWS International Select Equity VIP "A" | 1,050 | 11,995 |
DWS International VIP "A" | 72,596 | 850,827 |
DWS Janus Growth & Income VIP "A" | 13,380 | 137,147 |
DWS Large Cap Value VIP "A" | 136,560 | 1,850,392 |
DWS Mid Cap Growth VIP "A" | 725 | 8,893 |
DWS RREEF Global Real Estate Securities Fund "Institutional" | 2,376 | 21,198 |
DWS Small Cap Growth VIP "A" | 16,137 | 203,972 |
DWS Technology VIP "A" | 23,404 | 211,804 |
Total Equity Funds (Cost $7,475,868) | 6,270,341 |
|
|
Shares
| Value ($) |
| |
Fixed Income — Bond Funds 48.9% |
DWS Core Fixed Income VIP "A" | 692,970 | 7,470,219 |
DWS Government & Agency Securities VIP "A" | 464 | 5,567 |
DWS High Income VIP "A" | 76,118 | 525,212 |
Total Fixed Income — Bond Funds (Cost $8,542,291) | 8,000,998 |
|
Fixed Income — Money Market Fund 12.2% |
Cash Management QP Trust (Cost $1,993,653) | 1,993,653 | 1,993,653 |
|
Exchange Traded Fund 0.7% |
iShares MSCI United Kingdom Index Fund (Cost $118,252) | 5,265 | 109,723 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $18,130,064)+ | 100.1 | 16,374,715 |
Other Assets and Liabilities, Net | (0.1) | (21,444) |
Net Assets | 100.0 | 16,353,271 |
+ The cost for federal income tax purposes was $18,154,634. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $1,779,919. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $5,553 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,785,472.MSCI: Morgan Stanley Capital International
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 16,374,715 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 16,374,715 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in Underlying Affiliated Portfolios, at value (cost $16,018,159) | $ 14,271,339 |
Investment in Non-affiliated fund (cost $118,252) | 109,723 |
Investment in Cash Management QP Trust (cost $1,993,653) | 1,993,653 |
Total investments, at value (cost $18,130,064)
| 16,374,715 |
Interest receivable
| 3,842 |
Due from Advisor
| 5,733 |
Other assets
| 431 |
Total assets
| 16,384,721 |
Liabilities |
Other accrued expenses and payables
| 31,450 |
Total liabilities
| 31,450 |
Net assets, at value | $ 16,353,271 |
Net Assets Consist of: |
Undistributed net investment income
| 659,074 |
Net unrealized appreciation (depreciation) on investments
| (1,755,349) |
Accumulated net realized gain (loss)
| 954,343 |
Paid-in capital
| 16,495,203 |
Net assets, at value | $ 16,353,271 |
Class B Net Asset Value, offering and redemption price per share ($16,353,271 ÷ 2,054,335 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 7.96 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Income distributions from Underlying Affiliated Portfolios
| $ 697,535 |
Dividends
| 2,497 |
Interest — Cash Management QP Trust
| 28,703 |
Total Income
| 728,735 |
Expenses:
Management fee
| 10,590 |
Administration fee
| 2,926 |
Services to shareholders
| 82 |
Custodian and accounting fees
| 17,077 |
Distribution and service fees
| 21,795 |
Record keeping fees
| 9,335 |
Audit and tax fees
| 21,037 |
Legal
| 9,824 |
Trustees' fees and expenses
| 5,324 |
Reports to shareholders and shareholder meeting
| 5,317 |
Other
| 727 |
Total expenses before expense reductions
| 104,034 |
Expense reductions
| (40,304) |
Total expenses after expense reductions
| 63,730 |
Net investment income (loss) | 665,005 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| (395,422) |
Capital gain distributions from Underlying Affiliated Portfolios
| 1,373,157 |
| 977,735 |
Change in net unrealized appreciation (depreciation) on investments
| (2,429,242) |
Net gain (loss) | (1,451,507) |
Net increase (decrease) in net assets resulting from operations | $ (786,502) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 665,005 | $ 1,473,106 |
Net realized gain (loss)
| 977,735 | 3,969,944 |
Change in net unrealized appreciation (depreciation)
| (2,429,242) | (2,632,084) |
Net increase (decrease) in net assets resulting from operations
| (786,502) | 2,810,966 |
Distributions to shareholders from:
Net investment income:
Class B | (1,920,781) | (1,186,066) |
Net realized gains:
Class B | (3,261,704) | (1,601,633) |
Total distributions
| (5,182,485) | (2,787,699) |
Portfolio share transactions:
Class B Proceeds from shares sold
| 1,670,264 | 2,669,740 |
Reinvestment of distributions
| 5,182,485 | 2,787,699 |
Cost of shares redeemed
| (2,331,679) | (47,127,563) |
Net increase (decrease) in net assets from Class B share transactions
| 4,521,070 | (41,670,124) |
Increase (decrease) in net assets | (1,447,917) | (41,646,857) |
Net assets at beginning of period
| 17,801,188 | 59,448,045 |
Net assets at end of period (including undistributed net investment income of $659,074 and $1,914,850, respectively)
| $ 16,353,271 | $ 17,801,188 |
Other Information |
Class B Shares outstanding at beginning of period
| 1,504,098 | 5,014,229 |
Shares sold
| 156,118 | 226,057 |
Shares issued to shareholders in reinvestment of distributions
| 654,354 | 243,893 |
Shares redeemed
| (260,235) | (3,980,081) |
Net increase (decrease) in Class B shares
| 550,237 | (3,510,131) |
Shares outstanding at end of period
| 2,054,335 | 1,504,098 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004b |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.84 | $ 11.86 | $ 11.10 | $ 10.66 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)c | .39 | .31 | .22 | .19 | (.03) |
Net realized and unrealized gain (loss) | (.95) | .23 | .74 | .28 | .69 |
Total from investment operations | (.56) | .54 | .96 | .47 | .66 |
Less distributions from: Net investment income | (1.23) | (.24) | (.14) | — | — |
Net realized gain | (2.09) | (.32) | (.06) | (.03) | — |
Total distributions | (3.32) | (.56) | (.20) | (.03) | — |
Net asset value, end of period | $ 7.96 | $ 11.84 | $ 11.86 | $ 11.10 | $ 10.66 |
Total Return (%)d,e
| (4.53)** | 4.68 | 8.81 | 4.38 | 6.60** |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 16 | 18 | 59 | 46 | 14 |
Ratio of expenses before expense reductions (%)f
| 1.17* | .77 | .79 | .94 | 2.96* |
Ratio of expenses after expense reductions (%)f
| .72* | .71 | .74 | .75 | .75* |
Ratio of net investment income (loss) (%)
| 3.79g | 2.65 | 1.90 | 1.73 | (.67)* |
Portfolio turnover rate (%)
| 19** | 32 | 31 | 27 | 18 |
a For the six months ended June 30, 2008 (Unaudited).
b For the period from August 16, 2004 (commencement of operations) to December 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 Total return would have been lower if the Advisor had not reduced certain of the Underlying Portfolios' expenses.
f The Portfolio invests in other DWS Portfolios and indirectly bears its proportionate share of fees and expenses incurred by the Underlying DWS Portfolios in which the Portfolio is invested. This ratio does not include these indirect fees and expenses.
g The ratio for the six months ended June 30, 2008 has not been annualized since the Portfolio believes it would not be appropriate because the Portfolio's income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Core Fixed Income VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.66% and 0.91% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. 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 Portfolio, can decline and the investor can lose principal value. In the recent market environment, mortgage-backed securities are experiencing increased volatility. Investments by the Portfolio in lower-rated bonds present greater risk to principal and income than investments in higher-quality securities. Additionally, investing in foreign securities presents certain risks, such as currency fluctuation and changes in political/economic conditions and market risks. All of these factors may result in greater share price volatility. Please see this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Core Fixed Income VIP |
[] DWS Core Fixed Income VIP — Class A [] Lehman Brothers US Aggregate Index | The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Core Fixed Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $9,771 | $10,087 | $10,568 | $11,417 | $15,248 |
Average annual total return
| -2.29% | .87% | 1.86% | 2.69% | 4.31% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $12,082 | $17,382 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 3.85% | 5.68% |
DWS Core Fixed Income VIP | 6-Month‡ | 1-year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,747 | $10,045 | $10,435 | $11,186 | $12,286 |
Average annual total return
| -2.53% | .45% | 1.43% | 2.27% | 3.49% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $12,082 | $13,339 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 3.85% | 4.92% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Core Fixed Income VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 977.10 | | $ 974.70 | |
Expenses Paid per $1,000*
| $ 3.49 | | $ 5.40 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,021.33 | | $ 1,019.39 | |
Expenses Paid per $1,000*
| $ 3.57 | | $ 5.52 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Core Fixed Income VIP
| .71% | | 1.10% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Core Fixed Income VIP
The US Federal Reserve Board (the Fed) did its part to restore hope to the US financial markets in the first quarter of 2008, easing its benchmark fed funds rate (the overnight rate charged by banks when they borrow money from each other) by 200 basis points (or two percentage points), and staving off a financial meltdown by arranging the sale of Bear Stearns to JP Morgan. The Bear Stearns rescue, along with extraordinary measures to add liquidity, supported a rally in mortgage-backed securities and corporate bonds that lasted through most of the second quarter. However, assets that trade at a yield spread over Treasuries came under renewed stress near the end of the period.1 Inflation fears were reignited as oil threatened to breach the $150 per barrel level and another round of deterioration in financial sector fundamentals returned to haunt the markets. Downgrades of insurers, housing market declines, the threat of bank failures, and questions regarding the ongoing viability of Fannie Mae and Freddie Mac all pressured prices. The two-year Treasury yield fell from 3.05% to 2.62% over the period after having reached as low as 1.35%, and the 10-year yield fell from 4.04% to 3.97%.
During the six-month period ended June 30, 2008, the Portfolio provided a total return of -2.29% (Class A shares, unadjusted for contract charges) compared with the 1.13% return of its benchmark, the Lehman Brothers US Aggregate Index.
The Portfolio's focus on fixed-income sectors that trade at a yield spread to Treasuries detracted from performance for the full period, driven by the unprecedented flight to quality in the first quarter that boosted Treasuries. In particular, the Portfolio's exposure to commercial mortgage-backed securities and prime hybrid adjustable rate mortgages within the residential mortgage sector suffered from the lack of market liquidity.2 While the Portfolio was underweight corporate bonds, within the sector it was overweight financials, which underperformed duration-equivalent Treasuries by a wide margin.3 While further volatility can be expected, we remain focused on fundamental security level analysis to ensure that the Portfolio is comprised of holdings that we believe can maintain sound credit quality under difficult scenarios for the economy.
Gary W. Bartlett, CFA J. Christopher Gagnier Daniel R. Taylor, CFA
Warren S. Davis, III William T. Lissenden Timothy C. Vile, CFA
Thomas J. Flaherty
Portfolio Managers, Aberdeen Asset Management Inc., Subadvisor to the Portfolio
The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 The yield spread is the difference between the yield of a security and the yield of a comparable duration Treasury. A large spread indicates that investors require yields substantially above those of Treasuries in order to invest in lower-quality bonds. This is generally indicative of a higher-risk environment. A smaller spread generally indicates a more positive environment, since investors are less concerned about risk and therefore willing to accept lower yields. A drop in the yield spread is a positive.2 A prime hybrid ARM (adjustable rate mortgage) features an interest rate that is fixed for an initial period of time, then floats thereafter. The "hybrid" refers to the ARM's blend of fixed-rate and adjustable-rate characteristics.3 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Core Fixed Income VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Commercial and Non-Agency Mortgage Backed Securities | 40% | 37% |
Corporate Bonds | 20% | 17% |
Mortgage-Backed Securities Pass-Throughs | 15% | 17% |
Collateralized Mortgage Obligations | 8% | 7% |
Government & Agency Obligations | 8% | 14% |
Municipal Bonds and Notes | 4% | 2% |
Preferred Securities | 3% | 3% |
Asset Backed | 2% | 3% |
| 100% | 100% |
Bond Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Financials | 50% | 59% |
Utilities | 17% | 20% |
Consumer Staples | 5% | 6% |
Materials | 5% | 5% |
Consumer Discretionary | 5% | 2% |
Industrials | 5% | 2% |
Energy | 4% | 2% |
Telecommunication Services | 4% | 1% |
Information Technology | 3% | 3% |
Health Care | 2% | — |
| 100% | 100% |
Quality (Excludes Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
US Government and Agencies | 31% | 38% |
AAA* | 44% | 42% |
AA | 4% | 2% |
A | 6% | 7% |
BBB | 15% | 11% |
| 100% | 100% |
* Includes cash equivalentsEffective Maturity (Excludes Cash Equivalents and Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Under 1 year | 1% | 2% |
1-4.99 years | 36% | 48% |
5-9.99 years | 52% | 39% |
10-14.99 years | 2% | 1% |
15 years or greater | 9% | 10% |
| 100% | 100% |
Asset allocation, bond diversification, quality and effective maturity are subject to change.
Weighted average effective maturity: 7.6 years and 6.7 years, respectively.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Portfolio's quality does not remove market risk.
For more complete details about the Portfolio's investment portfolio, see page 69. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Core Fixed Income VIP
| Principal Amount ($) | Value ($) |
| |
Corporate Bonds 20.3% |
Consumer Discretionary 1.1% |
Comcast Cable Holdings LLC: | | |
9.875%, 6/15/2022 | 250,000 | 304,734 |
10.125%, 4/15/2022 | 363,000 | 449,655 |
Comcast Corp., 6.4%, 5/15/2038 | 120,000 | 110,697 |
Grupo Televisa SA, 144A, 6.0%, 5/15/2018 | 600,000 | 583,524 |
Time Warner Entertainment Co., LP, 10.15%, 5/1/2012 | 460,000 | 516,411 |
Viacom, Inc., 6.75%, 10/5/2037 | 550,000 | 526,784 |
| 2,491,805 |
Consumer Staples 1.3% |
CVS Caremark Corp., 6.302%, 6/1/2037 | 1,949,000 | 1,671,268 |
Kroger Co., 6.4%, 8/15/2017 (a) | 324,000 | 330,466 |
Miller Brewing Co., 144A, 5.5%, 8/15/2013 | 840,000 | 858,467 |
| 2,860,201 |
Energy 1.1% |
Northwest Pipelines Corp., 144A, 6.05%, 6/15/2018 | 585,000 | 577,618 |
Petro-Canada, 6.8%, 5/15/2038 | 705,000 | 690,553 |
TransCanada PipeLines Ltd., 6.35%, 5/15/2067 | 825,000 | 712,363 |
Valero Energy Corp., 7.5%, 4/15/2032 | 365,000 | 369,405 |
| 2,349,939 |
Financials 8.5% |
American International Group, Inc., 144A, 8.175%, 5/15/2058 | 360,000 | 338,799 |
Banco Mercantil del Norte SA, Series A, 144A, 6.862%, 10/13/2021 | 610,000 | 568,874 |
Bank of America Corp., 5.65%, 5/1/2018 | 1,165,000 | 1,087,629 |
Berkshire Hathaway Finance Corp., 144A, 4.6%, 5/15/2013 | 1,170,000 | 1,166,419 |
Corp. Andina de Fomento: | | |
5.75%, 1/12/2017 (a) | 295,000 | 286,723 |
6.875%, 3/15/2012 | 210,000 | 220,700 |
Dresdner Funding Trust I, 144A, 8.151%, 6/30/2031 | 400,000 | 333,787 |
Erac USA Finance Co.: | | |
144A, 5.8%, 10/15/2012 | 545,000 | 515,107 |
144A, 7.0%, 10/15/2037 | 1,285,000 | 1,068,839 |
144A, 8.0%, 1/15/2011 | 1,346,000 | 1,390,091 |
Farmers Insurance Exchange, 144A, 8.625%, 5/1/2024 | 940,000 | 983,150 |
FPL Group Capital, Inc.: | | |
6.65%, 6/15/2067 | 859,000 | 759,366 |
Series D, 7.3%, 9/1/2067 | 135,000 | 127,027 |
Glen Meadow Pass-Through Trust, 144A, 6.505%, 2/12/2067 | 445,000 | 384,201 |
HBOS PLC, 144A, 6.75%, 5/21/2018 (a) | 195,000 | 186,492 |
HSBC Finance Corp., 5.25%, 1/15/2014 | 390,000 | 380,489 |
International Lease Finance Corp.: | | |
| Principal Amount ($) | Value ($) |
| |
6.375%, 3/25/2013 | 355,000 | 324,032 |
Series R, 6.625%, 11/15/2013 | 90,000 | 80,864 |
Merrill Lynch & Co., Inc., 7.75%, 5/14/2038 | 410,000 | 384,365 |
Morgan Stanley: | | |
Series F, 6.0%, 4/28/2015 | 290,000 | 277,246 |
Series F, 6.625%, 4/1/2018 | 500,000 | 473,763 |
National Australia Bank Ltd., 144A, 5.35%, 6/12/2013 | 485,000 | 484,234 |
PartnerRe Finance II, 6.44%, 12/1/2066 | 697,000 | 553,675 |
Rio Tinto Finance (USA) Ltd.: | | |
5.875%, 7/15/2013 | 675,000 | 678,742 |
6.5%, 7/15/2018 | 315,000 | 315,956 |
7.125%, 7/15/2028 | 240,000 | 242,860 |
StanCorp. Financial Group, Inc., 6.9%, 5/29/2067 | 940,000 | 788,767 |
Standard Chartered PLC, 144A, 7.014%, 12/30/2049 | 900,000 | 775,132 |
TNK-BP Finance SA, Series 5, 144A, 7.5%, 3/13/2013 | 245,000 | 241,325 |
UDR, Inc., Series E, (REIT), 3.9%, 3/15/2010 | 345,000 | 331,869 |
Wells Fargo & Co., 5.25%, 10/23/2012 | 270,000 | 271,513 |
Woori Bank, 144A, 6.208%, 5/2/2037 | 165,000 | 133,914 |
Xstrata Finance Canada Ltd.: | | |
144A, 5.8%, 11/15/2016 | 940,000 | 886,508 |
144A, 6.9%, 11/15/2037 | 895,000 | 860,903 |
ZFS Finance USA Trust V, 144A, 6.5%, 5/9/2037 | 1,000,000 | 872,806 |
| 18,776,167 |
Health Care 0.4% |
GlaxoSmithKline Capital, Inc., 6.375%, 5/15/2038 | 550,000 | 545,948 |
Schering-Plough Corp., 6.55%, 9/15/2037 | 400,000 | 390,648 |
| 936,596 |
Industrials 1.1% |
General Electric Co., 5.25%, 12/6/2017 | 815,000 | 783,486 |
Rockies Express Pipeline LLC, 144A, 6.25%, 7/15/2013 | 1,175,000 | 1,187,929 |
United Technologies Corp., 6.125%, 7/15/2038 | 465,000 | 467,100 |
| 2,438,515 |
Information Technology 0.6% |
Broadridge Financial Solutions, Inc., 6.125%, 6/1/2017 | 823,000 | 692,170 |
Tyco Electronics Group SA, 6.0%, 10/1/2012 | 695,000 | 701,753 |
| 1,393,923 |
Materials 1.2% |
ArcelorMittal, 144A, 5.375%, 6/1/2013 | 790,000 | 777,899 |
Celulosa Arauco y Constitucion SA, 5.625%, 4/20/2015 | 1,295,000 | 1,256,998 |
| Principal Amount ($) | Value ($) |
| |
Nucor Corp., 6.4%, 12/1/2037 | 555,000 | 563,096 |
United States Steel Corp., 5.65%, 6/1/2013 | 4,000 | 3,894 |
| 2,601,887 |
Telecommunication Services 0.9% |
British Telecommunications PLC, 8.625%, 12/15/2010 | 848,000 | 910,540 |
Qwest Corp., 7.625%, 6/15/2015 | 234,000 | 225,225 |
Telecom Italia Capital, 7.721%, 6/4/2038 | 445,000 | 452,182 |
Verizon Communications, Inc., 6.9%, 4/15/2038 | 425,000 | 420,016 |
| 2,007,963 |
Utilities 4.1% |
Arizona Public Service Co., 6.875%, 8/1/2036 | 1,045,000 | 942,738 |
Columbus Southern Power Co., 6.05%, 5/1/2018 | 715,000 | 710,854 |
Commonwealth Edison Co., Series 98, 6.15%, 3/15/2012 | 980,000 | 1,001,098 |
Dominion Resources, Inc.: | | |
Series 06-B, 6.3%, 9/30/2066 | 560,000 | 512,542 |
7.5%, 6/30/2066 | 640,000 | 595,441 |
Entergy Gulf States Louisiana LLC, 144A, 6.0%, 5/1/2018 | 610,000 | 595,186 |
Integrys Energy Group, Inc., 6.11%, 12/1/2066 | 1,305,000 | 1,080,408 |
Pedernales Electric Cooperative, Series 2002-A, 144A, 6.202%, 11/15/2032 | 1,715,000 | 1,584,917 |
PPL Capital Funding, Inc., Series A, 6.7%, 3/30/2067 | 1,580,000 | 1,347,797 |
Union Electric Co., 6.7%, 2/1/2019 | 815,000 | 825,532 |
| 9,196,513 |
Total Corporate Bonds (Cost $48,329,012) | 45,053,509 |
|
Asset Backed 1.7% |
Home Equity Loans |
Countrywide Asset-Backed Certificates: | | |
"A6", Series 2006-S6, 5.657%, 3/25/2034 | 1,840,000 | 1,209,437 |
"A6", Series 2006-15, 5.826%, 10/25/2046 | 640,000 | 486,313 |
"A1B", Series 2007-S1, 5.888%, 11/25/2036 | 811,868 | 739,242 |
"1AF6", Series 2006-11, 6.15%, 9/25/2046 | 1,830,000 | 1,274,867 |
Securitized Asset Backed NIM Trust, "NIM", Series 2005-FR4, 144A, 6.0%, 1/25/2036 (e) | 459,930 | 46 |
Total Asset Backed (Cost $5,574,024) | 3,709,905 |
|
Mortgage-Backed Securities Pass-Throughs 14.8% |
Federal Home Loan Mortgage Corp., 6.0%, 12/1/2034 | 944,136 | 958,409 |
Federal National Mortgage Association: | | |
4.5%, with various maturities from 5/1/2019 until 10/1/2033 | 3,672,443 | 3,457,985 |
5.0%, 2/1/2034 | 547,690 | 528,136 |
| Principal Amount ($) | Value ($) |
| |
5.5%, with various maturities from 2/1/2024 until 7/1/2037 | 19,105,097 | 18,942,321 |
6.0%, 4/1/2024 | 1,272,518 | 1,299,062 |
6.5%, with various maturities from 3/1/2017 until 4/1/2037 | 7,391,954 | 7,631,205 |
8.0%, 9/1/2015 | 24,354 | 25,886 |
Total Mortgage-Backed Securities Pass-Throughs (Cost $32,742,834) | 32,843,004 |
|
Commercial and Non-Agency Mortgage-Backed Securities 40.4% |
Adjustable Rate Mortgage Trust: | | |
"3A31", Series 2005-10, 5.417%*, 1/25/2036 | 1,265,000 | 1,082,835 |
"1A4", Series 2006-2, 5.753%*, 5/25/2036 | 1,705,000 | 1,504,865 |
Banc of America Commercial Mortgage, Inc.: | | |
"A4", Series 2007-1, 5.451%, 1/15/2049 | 1,335,000 | 1,242,574 |
"A2", Series 2007-2, 5.634%, 4/10/2049 | 820,000 | 804,955 |
"A2", Series 2007-3, 5.838%*, 6/10/2049 | 660,000 | 651,369 |
"H", Series 2007-3, 144A, 5.838%*, 6/10/2049 | 1,050,000 | 464,830 |
"A4", Series 2007-2, 5.867%*, 4/10/2049 | 675,000 | 641,763 |
"AM", Series 2007-4, 6.003%*, 2/10/2051 | 545,000 | 498,451 |
Banc of America Mortgage Securities, Inc., "1A20", Series 2005-3, 5.5%, 4/25/2035 | 1,840,000 | 1,782,381 |
Bear Stearns Adjustable Rate Mortgage Trust: | | |
"A1", Series 2006-1, 4.625%*, 2/25/2036 | 2,520,823 | 2,406,976 |
"2A1", Series 2006-4, 5.794%*, 10/25/2036 | 1,380,412 | 1,223,834 |
"22A1", Series 2007-4, 6.001%*, 6/25/2047 | 1,277,269 | 1,175,800 |
Chase Mortgage Finance Corp., "3A1", Series 2005-A1, 5.281%*, 12/25/2035 | 2,325,428 | 2,238,650 |
Citicorp Mortgage Securities, Inc., "1A1", Series 2004-8, 5.5%, 10/25/2034 | 936,822 | 902,316 |
Citigroup Commercial Mortgage Trust, "ASB", Series 2006-C5, 5.413%, 10/15/2049 | 1,390,000 | 1,335,500 |
Citigroup Mortgage Loan Trust, Inc.: | | |
"2A1", Series 2006-AR1, 4.7%*, 3/25/2036 | 1,170,995 | 1,105,227 |
"1A1", Series 2006-AR1, 4.9%*, 10/25/2035 | 379,593 | 368,514 |
"1A2", Series 2006-AR2, 5.526%*, 3/25/2036 | 1,841,598 | 1,715,930 |
"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 940,286 | 911,490 |
Citigroup/Deutsche Bank Commercial Mortgage Trust: | | |
"A4", Series 2005-CD1, 5.4%*, 7/15/2044 | 900,000 | 867,860 |
"F", Series 2007-CD4, 5.555%, 12/11/2049 | 960,000 | 607,134 |
| Principal Amount ($) | Value ($) |
| |
Countrywide Alternative Loan Trust: | | |
"A2", Series 2003-6T2, 5.0%, 6/25/2033 | 51,169 | 51,097 |
"A2", Series 2003-21T1, 5.25%, 12/25/2033 | 931,440 | 856,386 |
"A6", Series 2004-14T2, 5.5%, 8/25/2034 | 836,382 | 800,191 |
"7A1", Series 2004-J2, 6.0%, 12/25/2033 | 219,575 | 188,560 |
"1A1", Series 2004-J1, 6.0%, 2/25/2034 | 131,796 | 122,405 |
GE Capital Commercial Mortgage Corp., "AJ", Series 2007-C1, 5.677%, 12/10/2049 | 2,090,000 | 1,653,772 |
Greenwich Capital Commercial Funding Corp.: | | |
"A4", Series 2007-GG9, 5.444%, 3/10/2039 | 1,800,000 | 1,677,227 |
"AM", Series 2007-GG9, 5.475%, 3/10/2039 | 600,000 | 535,720 |
"A4", Series 2007-GG11, 5.736%, 12/10/2049 | 775,000 | 732,589 |
GS Mortgage Securities Corp. II: | | |
"A2", Series 2006-GG8, 5.479%, 11/10/2039 | 1,870,000 | 1,854,396 |
"A4", Series 2007-GG10, 5.993%*, 8/10/2045 | 1,975,000 | 1,888,508 |
"AM", Series 2007-GG10, 5.993%*, 8/10/2045 | 1,375,000 | 1,259,445 |
"C", Series 1998-C1, 6.91%, 10/18/2030 | 1,260,000 | 1,258,317 |
GSR Mortgage Loan Trust, "2A1", Series 2007-AR1, 5.998%*, 3/25/2037 | 2,441,639 | 2,251,397 |
IndyMac Inda Mortgage Loan Trust, "1A1", Series 2006-AR3, 5.338%*, 12/25/2036 | 1,756,537 | 1,656,760 |
IndyMac Index Mortgage Loan Trust, "3A1", Series 2006-AR33, 5.768%*, 1/25/2037 | 1,224,780 | 1,153,882 |
JPMorgan Chase Commercial Mortgage Securities Corp.: | | |
"A4", Series 2007-LD12, 5.882%, 2/15/2051 | 650,000 | 620,613 |
"A2", Series 2007-LD11, 5.992%*, 6/15/2049 | 2,430,000 | 2,407,823 |
"ASB", Series 2007-LD11, 6.007%*, 6/15/2049 | 3,180,000 | 3,085,784 |
"H", Series 2007-LD11, 144A, 6.007%*, 6/15/2049 | 1,610,000 | 724,492 |
JPMorgan Mortgage Trust: | | |
"6A1", Series 2007-A1, 4.777%*, 7/25/2035 | 1,578,096 | 1,510,948 |
"2A4L", Series 2006-A6, 5.564%*, 10/25/2036 | 1,840,000 | 1,594,805 |
"2A4", Series 2006-A2, 5.755%*, 4/25/2036 | 2,565,000 | 2,226,136 |
LB-UBS Commercial Mortgage Trust, "A2", Series 2006-C6, 5.262%, 9/15/2039 | 1,030,000 | 1,017,011 |
Lehman Mortgage Trust, "3A3", Series 2006-1, 5.5%, 2/25/2036 | 1,680,339 | 1,595,634 |
Master Alternative Loans Trust: | | |
"5A1", Series 2005-1, 5.5%, 1/25/2020 | 494,626 | 447,946 |
| Principal Amount ($) | Value ($) |
| |
"5A1", Series 2005-2, 6.5%, 12/25/2034 | 143,653 | 119,142 |
"8A1", Series 2004-3, 7.0%, 4/25/2034 | 34,004 | 31,198 |
Master Asset Securitization Trust, "2A7", Series 2003-9, 5.5%,10/25/2033 | 1,059,542 | 1,001,929 |
Merrill Lynch Mortgage Investors Trust, "A2", Series 2005-A5, 4.566%, 6/25/2035 | 210,000 | 197,828 |
Merrill Lynch Mortgage Trust, "ASB", Series 2007-C1, 6.023%*, 6/12/2050 | 900,000 | 871,807 |
Morgan Stanley Capital I: | | |
"A2", Series 2007-HQ11, 5.359%, 2/12/2044 | 1,800,000 | 1,758,020 |
"AAB", Series 2007-IQ14, 5.654%, 4/15/2049 | 1,845,000 | 1,765,535 |
"AM", Series 2007-HQ12, 5.811%*, 4/12/2049 | 675,000 | 609,270 |
Residential Accredit Loans, Inc.: | | |
"3A1", Series 2006-QS18, 5.75%, 12/25/2021 | 1,319,130 | 1,249,542 |
"CB", Series 2004-QS2, 5.75%, 2/25/2034 | 628,426 | 539,661 |
Residential Funding Mortgage Securities I, "2A2", Series 2007-SA1, 5.613%*, 2/25/2037 | 2,213,729 | 2,096,209 |
Sequoia Mortgage Trust, "2A1", Series 2007-1, 5.762%*, 2/20/2047 | 2,268,507 | 2,163,120 |
Structured Adjustable Rate Mortgage Loan Trust, "6A3", Series 2005-21, 5.4%, 11/25/2035 | 1,485,000 | 1,253,153 |
Structured Asset Securities Corp., "4A1", Series 2005-6, 5.0%, 5/25/2035 | 653,842 | 587,436 |
Wachovia Bank Commercial Mortgage Trust: | | |
"A3", Series 2007-C30, 5.246%, 12/15/2043 | 1,310,000 | 1,272,218 |
"AJ", Series 2007-C30, 5.413%, 12/15/2043 | 1,850,000 | 1,438,833 |
Wachovia Mortgage Loan Trust LLC, "3A1", Series 2005-B, 5.157%*, 10/20/2035 | 2,167,982 | 2,107,015 |
Washington Mutual Mortgage Pass-Through Certificates Trust: | | |
"A1", Series 2003-S7, 4.5%, 8/25/2018 | 1,511,122 | 1,426,122 |
"1A3", Series 2005-AR16, 5.099%*, 12/25/2035 | 1,660,000 | 1,564,652 |
"1A1", Series 2007-HY4, 5.55%*, 4/25/2037 | 2,308,496 | 2,187,616 |
"1A1", Series 2006-AR16, 5.606%*, 12/25/2036 | 2,020,773 | 1,852,219 |
"1A1", Series 2007-HY2, 5.622%*, 12/25/2036 | 2,364,944 | 2,216,969 |
Wells Fargo Mortgage Backed Securities Trust: | | |
"A4", Series 2005-AR14, 5.387%*, 8/25/2035 | 1,700,000 | 1,432,133 |
"A1", Series 2006-3, 5.5%, 3/25/2036 | 1,794,134 | 1,742,578 |
| Principal Amount ($) | Value ($) |
| |
"2A5", Series 2006-AR1, 5.551%*, 3/25/2036 | 1,700,000 | 1,416,265 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $96,511,261) | 89,605,568 |
|
Collateralized Mortgage Obligations 7.9% |
Fannie Mae Whole Loan, "1A1", Series 2004-W15, 6.0%, 8/25/2044 | 951,475 | 928,742 |
Federal Home Loan Mortgage Corp.: | | |
"LN", Series 3145, 4.5%, 10/15/2034 | 1,689,651 | 1,662,701 |
"ME", Series 2775, 5.0%, 12/15/2032 | 1,165,000 | 1,144,264 |
"PD", Series 2890, 5.0%, 3/15/2033 | 1,485,000 | 1,452,807 |
"OG", Series 2889, 5.0%, 5/15/2033 | 1,770,000 | 1,727,561 |
"PE", Series 2898, 5.0%, 5/15/2033 | 860,000 | 840,638 |
"XD", Series 2941, 5.0%, 5/15/2033 | 1,055,000 | 1,027,266 |
"BG", Series 2869, 5.0%, 7/15/2033 | 335,000 | 328,060 |
"KD", Series 2915, 5.0%, 9/15/2033 | 1,341,000 | 1,309,099 |
"AC", Series R007, 5.875%, 5/15/2016 | 1,125,516 | 1,138,290 |
"PE", Series 2165, 6.0%, 6/15/2029 | 1,383,390 | 1,410,979 |
Federal National Mortgage Association: | | |
"QD", Series 2005-29, 5.0%, 8/25/2033 | 435,000 | 423,497 |
"HE", Series 2005-22, 5.0%, 10/25/2033 | 1,540,000 | 1,498,405 |
"PG", Series 2002-3, 5.5%, 2/25/2017 | 476,243 | 480,809 |
"PH", Series 1999-19, 6.0%, 5/25/2029 | 1,358,757 | 1,381,439 |
"Z", Series 2001-14, 6.0%, 5/25/2031 | 868,365 | 883,298 |
Total Collateralized Mortgage Obligations (Cost $17,620,972) | 17,637,855 |
|
Municipal Bonds and Notes 3.5% |
Glendale, AZ, Municipal Property Corp., Excise Tax Revenue, Series B, 6.157%, 7/1/2033 (b) | 920,000 | 927,507 |
Jicarilla, NM, Sales & Special Tax Revenue, Apache Nation Revenue, 144A, 5.2%, 12/1/2013 | 945,000 | 959,657 |
Miami-Dade County, FL, Educational Facilities Authority Revenue, University of Miami, Series B, 6.1%, 4/1/2015 | 1,145,000 | 1,146,305 |
Michigan, Western Michigan University Revenue, 4.41%, 11/15/2014 (b) | 1,010,000 | 1,001,102 |
New Jersey, Economic Development Authority Revenue, Series B, 6.5%, 11/1/2014 (b) | 1,085,000 | 1,145,901 |
| Principal Amount ($) | Value ($) |
| |
New Jersey, State Educational Facilities Authority Revenue, NJ City University, Series F, 6.85%, 7/1/2036 (b) | 845,000 | 866,142 |
Newark, NJ, Pension Obligation, 5.853%, 4/1/2022 (b) | 865,000 | 883,788 |
Rhode Island, Convention Center Authority Revenue, Civic Center, Series A, 6.03%, 5/15/2028 (b) | 880,000 | 883,881 |
Total Municipal Bonds and Notes (Cost $7,761,544) | 7,814,283 |
|
Government & Agency Obligations 7.5% |
US Treasury Obligations |
US Treasury Bonds: | | |
5.0%, 5/15/2037 (a) | 2,253,000 | 2,421,272 |
6.0%, 2/15/2026 (a) | 3,885,000 | 4,550,003 |
US Treasury Notes: | | |
3.375%, 6/30/2013 | 345,000 | 344,569 |
3.875%, 5/15/2018 (a) | 6,108,000 | 6,056,943 |
4.0%, 2/15/2015 (a) | 3,104,000 | 3,190,574 |
4.875%, 5/31/2011 (f) | 120,000 | 126,638 |
Total Government & Agency Obligations (Cost $16,631,887) | 16,689,999 |
|
Preferred Securities 3.1% |
Goldman Sachs Capital II, 5.793%, 6/1/2012** | 1,150,000 | 799,664 |
JPMorgan Chase & Co., Series 1, 7.9%, 4/30/2018** | 375,000 | 351,615 |
Mangrove Bay Pass-Through Trust, 144A, 6.102%, 7/15/2033 | 1,010,000 | 616,736 |
Oil Insurance Ltd., 144A, 7.558%, 6/30/2011** | 890,000 | 757,666 |
PNC Financial Services Group, Inc., Series K, 8.25%, 5/21/2013** | 1,040,000 | 1,037,780 |
Royal Bank of Scotland Group PLC: | | |
144A, 6.99%, 10/5/2017** | 630,000 | 567,018 |
Series U, 7.64%, 9/29/2017** | 600,000 | 548,597 |
Santander Perpetual SA, 144A, 6.671%, 10/24/2017** | 700,000 | 676,244 |
Stoneheath Re, 6.868%, 10/15/2011** | 250,000 | 165,075 |
Wachovia Capital Trust III, 5.8%, 3/15/2042 | 1,040,000 | 707,200 |
Wells Fargo Capital XIII, 7.7%, 3/26/2013** | 325,000 | 323,065 |
XL Capital Ltd., Series E, 6.5%, 4/15/2017** | 590,000 | 398,250 |
Total Preferred Securities (Cost $8,511,678) | 6,948,910 |
|
Shares
| Value ($) |
| |
Preferred Stocks 0.3% |
Arch Capital Group Ltd., 8.0% | 7,384 | 172,435 |
Delphi Financial Group, Inc., 7.376% | 22,600 | 430,812 |
Total Preferred Stocks (Cost $751,264) | 603,247 |
|
|
Shares
| Value ($) |
| |
Securities Lending Collateral 7.5% |
Daily Assets Fund Institutional, 2.74% (c) (d) (Cost $16,661,199) | 16,661,199 | 16,661,199 |
|
Cash Equivalents 0.0% |
Cash Management QP Trust, 2.49% (c) (Cost $63,506) | 63,506 | 63,506 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $251,159,181)+ | 107.0 | 237,630,985 |
Other Assets and Liabilities, Net (a) | (7.0) | (15,552,795) |
Net Assets | 100.0 | 222,078,190 |
* 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 June 30, 2008.** Date shown is call date; not a maturity date for the perpetual preferred securities.+ The cost for federal income tax purposes was $251,202,296. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $13,571,311. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $832,127 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $14,403,438.(a) All or a portion of these securities were on loan amounting to $13,510,812. In addition, included in other assets and liabilities, net are pending sales, amounting to $ 2,694,215, that are also on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $16,205,027 which is 7.3% of net assets.(b) Bond is insured by one of these companies:Insurance Coverage | As a % of Total Investment Portfolio |
Ambac Financial Group, Inc.
| 0.4 |
Assured Guaranty Corp.
| 0.9 |
Financial Security Assurance, Inc.
| 1.1 |
(c) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(d) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.(e) Non-income producing security.(f) At June 30, 2008, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
REIT: Real Estate Investment Trust
At June 30, 2008, open future contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregated Face Value ($) | Value ($) | Unrealized Appreciation ($) |
5 Year US Treasury Note
| 9/30/2008 | 111 | 12,170,360 | 12,271,570 | 101,210 |
At June 30, 2008, open future contracts sold were as follows:
Futures | Expiration Date | Contracts | Aggregated Face Value ($) | Value ($) | Unrealized Depreciation ($) |
10 Year US Treasury Note
| 9/19/2008 | 109 | 12,194,075 | 12,417,484 | (223,409) |
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 the investment portfolio.
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Depreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 17,327,952 | $ (122,199) |
Level 2 — Other Significant Observable Inputs
| 220,137,958 | — |
Level 3 — Significant Unobservable Inputs
| 165,075 | — |
Total | $ 237,630,985 | $ (122,199) |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as future contracts, which are valued at the unrealized appreciation/depreciation on the instrument.The following is a reconciliation of the Portfolio's assets in which significant unobservable inputs (Level 3) were used in determining fair value at June 30, 2008:
| Investments in Securities at Market Value |
Balance as of January 1, 2008
| $ 249,925 |
Total realized gains or losses
| — |
Change in unrealized appreciation (depreciation)
| (84,850) |
Net purchases (sales)
| — |
Net transfers in (out) of Level 3
| — |
Balance as of June 30, 2008 | $ 165,075 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $234,434,476) — including $13,510,812 of securities loaned | $ 220,906,280 |
Investment in Daily Assets Fund Institutional (cost $16,661,199)* | 16,661,199 |
Investment in Cash Management QP Trust (cost $63,506) | 63,506 |
Total investments, at value (cost $251,159,181)
| 237,630,985 |
Cash
| 23,212 |
Receivable for investments sold
| 6,122,144 |
Receivable for Portfolio shares sold
| 163,752 |
Interest receivable
| 1,621,711 |
Foreign taxes recoverable
| 4,421 |
Receivable for daily variation margin on open futures
| 2,789 |
Other assets
| 6,753 |
Total assets
| 245,575,767 |
Liabilities |
Payable upon return of securities loaned
| 16,661,199 |
Payable for investments purchased
| 5,693,846 |
Payable for Portfolio shares redeemed
| 805,544 |
Accrued management fee
| 95,005 |
Other accrued expenses and payables
| 241,983 |
Total liabilities
| 23,497,577 |
Net assets, at value | $ 222,078,190 |
Net Assets Consist of |
Undistributed net investment income
| 6,080,300 |
Net unrealized appreciation (depreciation) on investments
| (13,528,196) |
Futures
| (122,199) |
Accumulated net realized gain (loss)
| (6,337,278) |
Paid-in capital
| 235,985,563 |
Net assets, at value | $ 222,078,190 |
Class A Net Asset Value, offering and redemption price per share ($174,959,908 ÷ 16,230,469 outstanding shares of beneficial interest, $.01 par value, 24,742,586 shares authorized)
| $ 10.78 |
Class B Net Asset Value, offering and redemption price per share ($47,118,282 ÷ 4,369,145 outstanding shares of beneficial interest, $.01 par value, 7,316,641 shares authorized)
| $ 10.78 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends
| $ 28,221 |
Interest (net of foreign taxes withheld of $1,350)
| 6,840,803 |
Interest — Cash Management QP Trust
| 66,060 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 170,338 |
Total Income
| 7,105,422 |
Expenses:
Management fee
| 701,049 |
Administration fee
| 38,082 |
Services to shareholders
| 222 |
Custodian fee
| 10,163 |
Distribution and service fees (Class B)
| 75,319 |
Record keeping fees (Class B)
| 43,035 |
Professional fees
| 36,811 |
Trustees' fees and expenses
| 28,667 |
Reports to shareholders and shareholder meeting
| 86,526 |
Other
| 12,328 |
Total expenses before expense reductions
| 1,032,202 |
Expense reductions
| (13,689) |
Total expenses after expense reductions
| 1,018,513 |
Net investment income (loss) | 6,086,909 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| (1,790,534) |
Futures
| 76,023 |
| (1,714,511) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (10,531,874) |
Futures
| (122,199) |
| (10,654,073) |
Net gain (loss) | (12,368,584) |
Net increase (decrease) in net assets resulting from operations | $ (6,281,675) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income
| $ 6,086,909 | $ 16,962,355 |
Net realized gain (loss)
| (1,714,511) | (784,875) |
Change in net unrealized appreciation (depreciation)
| (10,654,073) | (1,784,782) |
Net increase (decrease) in net assets resulting from operations
| (6,281,675) | 14,392,698 |
Distributions to shareholders from:
Net investment income:
Class A | (12,658,879) | (12,441,885) |
Class B | (4,079,055) | (3,150,565) |
Total distributions
| (16,737,934) | (15,592,450) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 20,358,185 | 84,886,024 |
Reinvestment of distributions
| 12,658,879 | 12,441,885 |
Cost of shares redeemed
| (27,103,172) | (187,114,199) |
Net increase (decrease) in net assets from Class A share transactions
| 5,913,892 | (89,786,290) |
Class B Proceeds from shares sold
| 1,642,016 | 2,831,011 |
Reinvestment of distributions
| 4,079,055 | 3,150,565 |
Cost of shares redeemed
| (21,811,792) | (19,070,128) |
Net increase (decrease) in net assets from Class B share transactions
| (16,090,721) | (13,088,552) |
Increase (decrease) in net assets | (33,196,438) | (104,074,594) |
Net assets at beginning of period
| 255,274,628 | 359,349,222 |
Net assets at end of period (including undistributed net investment income of $6,080,300 and $16,731,325, respectively)
| $ 222,078,190 | $ 255,274,628 |
Other Information |
Class A Shares outstanding at beginning of period
| 15,754,867 | 23,346,010 |
Shares sold
| 1,741,923 | 7,294,758 |
Shares issued to shareholders in reinvestment of distributions
| 1,171,035 | 1,080,025 |
Shares redeemed
| (2,437,356) | (15,965,926) |
Net increase (decrease) in Class A shares
| 475,602 | (7,591,143) |
Shares outstanding at end of period
| 16,230,469 | 15,754,867 |
Class B Shares outstanding at beginning of period
| 5,850,161 | 6,968,915 |
Shares sold
| 140,899 | 242,748 |
Shares issued to shareholders in reinvestment of distributions
| 376,991 | 273,249 |
Shares redeemed
| (1,998,906) | (1,634,751) |
Net increase (decrease) in Class B shares
| (1,481,016) | (1,118,754) |
Shares outstanding at end of period
| 4,369,145 | 5,850,161 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Date |
Net asset value, beginning of period | $ 11.82 | $ 11.86 | $ 11.81 | $ 12.07 | $ 12.16 | $ 11.98 |
Income (loss) from investment operations: Net investment incomeb | .28 | .56 | .53 | .47 | .50 | .45 |
Net realized and unrealized gain (loss) | (.55) | (.08) | (.05) | (.21) | .05 | .14 |
Total from investment operations | (.27) | .48 | .48 | .26 | .55 | .59 |
Less distributions from: Net investment income | (.77) | (.52) | (.43) | (.41) | (.43) | (.41) |
Net realized gains | — | — | (.00)*** | (.11) | (.21) | — |
Total distributions | (.77) | (.52) | (.43) | (.52) | (.64) | (.41) |
Net asset value, end of period | $ 10.78 | $ 11.82 | $ 11.86 | $ 11.81 | $ 12.07 | $ 12.16 |
Total Return (%)
| (2.29)c** | 4.17 | 4.26 | 2.25 | 4.53 | 5.13 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 175 | 186 | 277 | 252 | 210 | 201 |
Ratio of expenses before expense reductions (%)
| .72* | .66 | .68 | .67 | .66 | .66 |
Ratio of expenses after expense reductions (%)
| .71* | .66 | .68 | .67 | .66 | .66 |
Ratio of net investment income (loss) (%)
| 5.05* | 4.78 | 4.56 | 3.96 | 4.18 | 3.75 |
Portfolio turnover rate (%)
| 137** | 197d | 183d | 164d | 185d | 229d |
a For the six months ended June 30, 2008 (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 portfolio turnover rate including mortgage dollar roll transactions was 209%, 198%, 241%, 176% and 204% for the years ended December 31, 2007, December 31, 2006, December 31, 2005, December 31, 2004 and December 31, 2003, respectively.
* Annualized ** Not annualized *** Amount is less than $.005.
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.80 | $ 11.84 | $ 11.78 | $ 12.04 | $ 12.13 | $ 11.96 |
Income (loss) from investment operations: Net investment incomeb | .26 | .51 | .49 | .42 | .45 | .40 |
Net realized and unrealized gain (loss) | (.56) | (.08) | (.05) | (.21) | .05 | .15 |
Total from investment operations | (.30) | .43 | .44 | .21 | .50 | .55 |
Less distributions from: Net investment income | (.72) | (.47) | (.38) | (.36) | (.38) | (.38) |
Net realized gains | — | — | (.00)*** | (.11) | (.21) | — |
Total distributions | (.72) | (.47) | (.38) | (.47) | (.59) | (.38) |
Net asset value, end of period | $ 10.78 | $ 11.80 | $ 11.84 | $ 11.78 | $ 12.04 | $ 12.13 |
Total Return (%)
| (2.53)c** | 3.75 | 3.89 | 1.85 | 4.10 | 4.76 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 47 | 69 | 82 | 89 | 88 | 45 |
Ratio of expenses before expense reductions (%)
| 1.11* | 1.05 | 1.07 | 1.07 | 1.03 | 1.05 |
Ratio of expenses after expense reductions (%)
| 1.10* | 1.05 | 1.07 | 1.07 | 1.03 | 1.05 |
Ratio of net investment income (loss) (%)
| 4.66* | 4.39 | 4.17 | 3.56 | 3.81 | 3.36 |
Portfolio turnover rate (%)
| 137** | 197d | 183d | 164d | 185d | 229d |
a For the six months ended June 30, 2008 (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 portfolio turnover rate including mortgage dollar roll transactions was 209%, 198%, 241%, 176% and 204% for the years ended December 31, 2007, December 31, 2006, December 31, 2005, December 31, 2004 and December 31, 2003, respectively.
* Annualized ** Not annualized *** Amount is less than $.005.
|
Performance Summary June 30, 2008
DWS Davis Venture Value VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 1.02% and 1.27% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The Portfolio is subject to stock market and equity risks, meaning stocks in the Portfolio 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. Additionally, investing in foreign securities presents certain risks such as currency fluctuation, political and economic changes and market risks. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Davis Venture Value VIP from 5/1/2001 to 6/30/2008 |
[] DWS Davis Venture Value VIP — Class A [] Russell 1000® Value Index | The Russell 1000® Value Index is an unmanaged index, which consists of those stocks in the Russell 1000® Index with lower price-to-book ratios and lower forecasted-growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Davis Venture Value VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000
| $8,842 | $8,641 | $11,481 | $15,134 | $13,509 |
Average annual total return
| -11.58% | -13.59% | 4.71% | 8.64% | 4.29% |
Russell 1000 Value Index
| Growth of $10,000
| $8,643 | $8,122 | $11,096 | $15,330 | $13,812 |
Average annual total return
| -13.57% | -18.78% | 3.53% | 8.92% | 4.61% |
DWS Davis Venture Value VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class** |
Class B | Growth of $10,000
| $8,780 | $8,562 | $11,297 | $14,777 | $15,422 |
Average annual total return
| -12.20% | -14.38% | 4.15% | 8.12% | 7.49% |
Russell 1000 Value Index
| Growth of $10,000
| $8,643 | $8,122 | $11,096 | $15,330 | $15,173 |
Average annual total return
| -13.57% | -18.78% | 3.53% | 8.92% | 7.20% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on May 1, 2001. Index returns began on April 30, 2001.** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Davis Venture Value VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 884.20 | | $ 878.00 | |
Expenses Paid per $1,000*
| $ 4.17 | | $ 6.02 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.44 | | $ 1,018.45 | |
Expenses Paid per $1,000*
| $ 4.47 | | $ 6.47 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Davis Venture Value VIP
| .89% | | 1.29% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Davis Venture Value VIP
For the six months ended June 30, 2008, the Class A shares of the DWS Davis Venture Value VIP returned - -11.58% (unadjusted for contract charges), compared to its benchmark, the Russell 1000® Value Index which returned -13.57%.
The energy sector was the top-performing sector of the Russell 1000 Value Index. Energy companies were also the most important contributors to the Portfolio's performance over the six-month period. The Portfolio's energy companies out-performed the corresponding sector within the Russell 1000 Value Index. ConocoPhillips, Occidental Petroleum Corp., Devon Energy Corp., EOG Resources and Canadian Natural Resources Ltd. were among the top contributors to performance.
The financial sector was the worst performing sector of the Russell 1000 Value Index. The Portfolio's financial companies outperformed the corresponding sector within the Russell 1000 Value Index, but were still the largest detractors from performance. Millea Holdings, Inc. (changed name to Tokio Marine Holdings in July 2008) and Visa Corp. (purchased in March) were among the top contributors to performance. American International Group, Inc., Wachovia, American Express Co., Berkshire Hathaway, Inc. and JPMorgan Chase & Co. were among the top detractors from performance.
Individual companies among the largest contributors to performance over the six month period included H&R Block (a consumer discretionary company) and Wal-Mart Stores (a consumer staples company). Individual companies among the largest detractors from performance over the six month period included Unitedhealth Group, Inc. (a health care company) and Microsoft Corp. (an information technology company). The Portfolio no longer owns Wal-Mart Stores.
The Portfolio held 14% of assets in foreign companies at the period ended June 30, 2008. As a whole these companies outperformed the domestic companies held by the Portfolio.
Christopher C. Davis
Kenneth Charles Feinberg
Portfolio Managers
Davis Selected Advisers, L.P., Subadvisor to the Portfolio
The Russell 1000 Value Index is an unmanaged index that consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Davis Venture Value VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 99% | 100% |
Cash Equivalents | 1% | — |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Financials | 30% | 33% |
Energy | 21% | 16% |
Consumer Staples | 15% | 16% |
Consumer Discretionary | 10% | 10% |
Information Technology | 10% | 9% |
Industrials | 6% | 7% |
Materials | 4% | 4% |
Health Care | 3% | 4% |
Telecommunication Services | 1% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 84. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Davis Venture Value VIP
|
Shares
| Value ($) |
| |
Common Stocks 98.7% |
Consumer Discretionary 10.2% |
Automobiles 1.1% |
Harley-Davidson, Inc. (a) | 75,280 | 2,729,653 |
Diversified Consumer Services 1.0% |
H&R Block, Inc. | 118,050 | 2,526,270 |
Household Durables 0.4% |
Garmin Ltd. (a) | 10,900 | 466,956 |
Hunter Douglas NV | 8,863 | 535,715 |
| 1,002,671 |
Internet & Catalog Retail 0.5% |
Amazon.com, Inc.* (a) | 10,210 | 748,699 |
Liberty Media Corp. — Interactive "A"* | 39,800 | 587,448 |
| 1,336,147 |
Media 5.6% |
Comcast Corp. Special "A" | 317,450 | 5,955,362 |
Grupo Televisa SA (ADR) | 116,900 | 2,761,178 |
Liberty Media Corp. — Capital "A"* | 7,960 | 114,624 |
Liberty Media Corp. — Entertainment "A"* | 32,040 | 776,329 |
News Corp. "A" | 214,350 | 3,223,824 |
Virgin Media, Inc. | 4,632 | 63,042 |
WPP Group PLC (ADR) (a) | 19,300 | 922,926 |
| 13,817,285 |
Multiline Retail 0.1% |
Sears Holdings Corp.* (a) | 2,500 | 184,150 |
Specialty Retail 1.5% |
Bed Bath & Beyond, Inc.* (a) | 54,600 | 1,534,260 |
CarMax, Inc.* (a) | 81,700 | 1,159,323 |
Lowe's Companies, Inc. | 42,840 | 888,930 |
| 3,582,513 |
Consumer Staples 14.4% |
Beverages 2.5% |
Diageo PLC (ADR) | 45,770 | 3,381,030 |
Heineken Holding NV | 60,200 | 2,750,953 |
| 6,131,983 |
Food & Staples Retailing 6.8% |
Costco Wholesale Corp. | 179,620 | 12,598,547 |
CVS Caremark Corp. | 98,819 | 3,910,268 |
Whole Foods Market, Inc. (a) | 18,200 | 431,158 |
| 16,939,973 |
Food Products 0.2% |
The Hershey Co. (a) | 11,860 | 388,771 |
Household Products 1.1% |
Procter & Gamble Co. | 45,000 | 2,736,450 |
Personal Products 0.3% |
Avon Products, Inc. | 20,800 | 749,216 |
Tobacco 3.5% |
Altria Group, Inc. | 124,400 | 2,557,664 |
Philip Morris International, Inc. | 124,000 | 6,124,360 |
| 8,682,024 |
|
Shares
| Value ($) |
| |
Energy 20.7% |
Energy Equipment & Services 1.2% |
Transocean, Inc.* | 18,856 | 2,873,466 |
Oil, Gas & Consumable Fuels 19.5% |
Canadian Natural Resources Ltd. | 49,600 | 4,972,400 |
China Coal Energy Co. "H" | 934,200 | 1,630,113 |
ConocoPhillips | 120,920 | 11,413,639 |
Devon Energy Corp. | 83,500 | 10,033,360 |
EOG Resources, Inc. | 71,300 | 9,354,560 |
Occidental Petroleum Corp. | 114,100 | 10,253,026 |
OGX Petroleo e Gas Participacoes SA* | 700 | 554,551 |
| 48,211,649 |
Financials 29.6% |
Capital Markets 4.5% |
Ameriprise Financial, Inc. | 37,420 | 1,521,871 |
Bank of New York Mellon Corp. | 81,850 | 3,096,386 |
E*TRADE Financial Corp.* (a) | 16,100 | 50,554 |
Merrill Lynch & Co., Inc. (a) | 177,500 | 5,628,525 |
Morgan Stanley | 7,800 | 281,346 |
State Street Corp. | 7,400 | 473,526 |
| 11,052,208 |
Commercial Banks 2.6% |
Toronto-Dominion Bank (a) | 18,453 | 1,149,068 |
Wachovia Corp. (a) | 86,657 | 1,345,783 |
Wells Fargo & Co. | 166,400 | 3,952,000 |
| 6,446,851 |
Consumer Finance 3.3% |
American Express Co. | 214,800 | 8,091,516 |
Discover Financial Services (a) | 12,100 | 159,357 |
| 8,250,873 |
Diversified Financial Services 4.2% |
Citigroup, Inc. | 53,300 | 893,308 |
JPMorgan Chase & Co. | 224,684 | 7,708,908 |
Moody's Corp. (a) | 51,300 | 1,766,772 |
| 10,368,988 |
Insurance 14.1% |
Ambac Financial Group, Inc. (a) | 40,160 | 53,815 |
American International Group, Inc. | 202,550 | 5,359,473 |
Aon Corp. | 38,900 | 1,787,066 |
Berkshire Hathaway, Inc. "B"* | 2,520 | 10,110,240 |
Loews Corp. (a) | 132,000 | 6,190,800 |
Markel Corp.* | 480 | 176,160 |
MBIA, Inc. (a) | 20,220 | 88,766 |
Millea Holdings, Inc. | 43,300 | 1,685,363 |
NIPPONKOA Insurance Co., Ltd. | 196,200 | 1,705,637 |
Principal Financial Group, Inc. | 14,950 | 627,452 |
Progressive Corp. | 231,400 | 4,331,808 |
Sun Life Financial, Inc. | 9,200 | 376,740 |
Transatlantic Holdings, Inc. (a) | 39,773 | 2,245,981 |
| 34,739,301 |
|
Shares
| Value ($) |
| |
Real Estate Management & Development 0.9% |
Brookfield Asset Management Inc. "A" | 41,200 | 1,340,648 |
Hang Lung Group Ltd. | 221,000 | 980,682 |
| 2,321,330 |
Health Care 3.4% |
Health Care Equipment & Supplies 0.9% |
Covidien Ltd. | 45,730 | 2,190,010 |
Health Care Providers & Services 2.1% |
Cardinal Health, Inc. | 36,500 | 1,882,670 |
Express Scripts, Inc.* | 28,060 | 1,759,923 |
UnitedHealth Group, Inc. | 59,400 | 1,559,250 |
| 5,201,843 |
Pharmaceuticals 0.4% |
Johnson & Johnson | 17,350 | 1,116,299 |
Industrials 6.2% |
Air Freight & Logistics 0.5% |
Toll Holdings Ltd. | 42,477 | 245,815 |
United Parcel Service, Inc. "B" | 16,900 | 1,038,843 |
| 1,284,658 |
Commercial Services & Supplies 1.1% |
Dun & Bradstreet Corp. | 32,000 | 2,804,480 |
Industrial Conglomerates 2.5% |
General Electric Co. | 109,600 | 2,925,224 |
Siemens AG (Registered) | 12,000 | 1,328,821 |
Tyco International Ltd. (a) | 45,910 | 1,838,236 |
| 6,092,281 |
Marine 1.0% |
China Shipping Development Co., Ltd. "H" | 380,000 | 1,137,390 |
Kuehne & Nagel International AG (Registered) | 13,720 | 1,298,013 |
| 2,435,403 |
Road & Rail 0.1% |
Asciano Group | 30,600 | 102,052 |
Transportation Infrastructure 1.0% |
China Merchants Holdings International Co., Ltd | 512,065 | 1,975,803 |
Cosco Pacific Ltd. | 320,600 | 524,829 |
| 2,500,632 |
Information Technology 9.4% |
Communications Equipment 0.5% |
Cisco Systems, Inc.* | 56,500 | 1,314,190 |
Computers & Peripherals 1.6% |
Dell, Inc.* | 94,700 | 2,072,036 |
Hewlett-Packard Co. | 41,900 | 1,852,399 |
| 3,924,435 |
|
Shares
| Value ($) |
| |
Electronic Equipment & Instruments 1.8% |
Agilent Technologies, Inc.* | 78,630 | 2,794,510 |
Tyco Electronics Ltd. | 47,380 | 1,697,152 |
| 4,491,662 |
Internet Software & Services 0.8% |
eBay, Inc.* | 22,900 | 625,857 |
Google, Inc. "A"* | 2,832 | 1,490,821 |
| 2,116,678 |
IT Services 1.5% |
Iron Mountain, Inc.* (a) | 121,449 | 3,224,471 |
Visa, Inc. "A"* | 6,540 | 531,767 |
| 3,756,238 |
Semiconductors & Semiconductor Equipment 1.0% |
Texas Instruments, Inc. | 84,900 | 2,390,784 |
Software 2.2% |
Microsoft Corp. | 195,500 | 5,378,205 |
Materials 4.2% |
Construction Materials 1.4% |
Martin Marietta Materials, Inc. (a) | 21,300 | 2,206,467 |
Vulcan Materials Co. (a) | 20,800 | 1,243,424 |
| 3,449,891 |
Containers & Packaging 1.4% |
Sealed Air Corp. (a) | 177,800 | 3,379,978 |
Metals & Mining 1.0% |
BHP Billiton PLC | 31,100 | 1,194,529 |
Rio Tinto PLC | 11,100 | 1,360,953 |
| 2,555,482 |
Paper & Forest Products 0.4% |
Sino-Forest Corp. "A"* | 61,100 | 1,070,164 |
Telecommunication Services 0.6% |
Wireless Telecommunication Services |
Sprint Nextel Corp. | 155,800 | 1,480,100 |
Total Common Stocks (Cost $178,034,963) | 244,107,237 |
|
Securities Lending Collateral 12.1% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $30,070,928) | 30,070,928 | 30,070,928 |
|
Cash Equivalents 1.4% |
Cash Management QP Trust, 2.49% (b) (Cost $3,476,363) | 3,476,363 | 3,476,363 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $211,582,254)+ | 112.2 | 277,654,528 |
Other Assets and Liabilities, Net | (12.2) | (30,259,643) |
Net Assets | 100.0 | 247,394,885 |
* Non-income producing security.+ The cost for federal income tax purposes was $211,797,548. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $65,856,980. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $86,500,078 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $20,643,098.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $28,710,772 which is 11.6% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.ADR: American Depositary Receipt
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 259,197,859 |
Level 2 — Other Significant Observable Inputs
| 18,456,669 |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 277,654,528 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $178,034,963) — including $28,710,772 of securities loaned | $ 244,107,237 |
Investment in Daily Assets Fund Institutional (cost $30,070,928)* | 30,070,928 |
Investment in Cash Management QP Trust (cost $3,476,363) | 3,476,363 |
Total investments in securities, at value (cost $211,582,254)
| 277,654,528 |
Receivable for investments sold
| 423,532 |
Dividends receivable
| 298,254 |
Interest receivable
| 35,381 |
Foreign taxes recoverable
| 9,938 |
Other assets
| 5,905 |
Total assets
| 278,427,538 |
Liabilities |
Due to custodian
| 42,007 |
Payable upon return of securities loaned
| 30,070,928 |
Payable for investments purchased
| 249,927 |
Payable for Portfolio shares redeemed
| 360,781 |
Accrued management fee
| 149,619 |
Other accrued expenses and payables
| 159,391 |
Total liabilities
| 31,032,653 |
Net assets, at value | $ 247,394,885 |
Net Assets Consist of |
Undistributed net investment income
| 1,232,845 |
Net unrealized appreciation (depreciation) on:
Investments | 66,072,274 |
Foreign currency | 664 |
Accumulated net realized gain (loss)
| 14,780,776 |
Paid-in capital
| 165,308,326 |
Net assets, at value | $ 247,394,885 |
Class A Net Asset Value, offering and redemption price per share ($247,027,082 ÷ 22,224,280 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 11.12 |
Class B Net Asset Value, offering and redemption price per share ($367,803 ÷ 33,274 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 11.05 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $23,477)
| $ 2,381,830 |
Interest — Cash Management QP Trust
| 47,447 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 159,837 |
Total Income
| 2,589,114 |
Expenses:
Management fee
| 1,312,440 |
Administrative fee
| 45,241 |
Custodian and accounting fees
| 55,513 |
Distribution and service fees (Class B)
| 16,636 |
Record keeping fees (Class B)
| 9,985 |
Services to shareholders
| 124 |
Professional fees
| 36,874 |
Trustees' fees and expenses
| 33,089 |
Reports to shareholders and shareholder meeting
| 92,249 |
Other
| 12,903 |
Total expenses before expense reductions
| 1,615,054 |
Expense reductions
| (281,547) |
Total expenses after expense reductions
| 1,333,507 |
Net investment income (loss) | 1,255,607 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 15,004,513 |
Foreign currency
| (23,516) |
| 14,980,997 |
Change in net unrealized appreciation (depreciation) on:
Investments
| (50,896,609) |
Foreign currency
| 993 |
| (50,895,616) |
Net gain (loss) | (35,914,619) |
Net increase (decrease) in net assets resulting from operations | $ (34,659,012) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 1,255,607 | $ 3,809,524 |
Net realized gain (loss)
| 14,980,997 | 36,053,016 |
Change in net unrealized appreciation (depreciation)
| (50,895,616) | (20,326,582) |
Net increase (decrease) in net assets resulting from operations
| (34,659,012) | 19,535,958 |
Distributions to shareholders from:
Net investment income:
Class A | (3,580,646) | (2,451,514) |
Class B | (190,630) | (255,608) |
Net realized gains:
Class A | (33,139,891) | (4,403,063) |
Class B | (2,425,280) | (989,328) |
Total distributions
| (39,336,447) | (8,099,513) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 2,025,866 | 14,075,726 |
Reinvestment of distributions
| 36,720,537 | 6,854,577 |
Cost of shares redeemed
| (28,320,724) | (68,408,104) |
Net increase (decrease) in net assets from Class A share transactions
| 10,425,679 | (47,477,801) |
Class B Proceeds from shares sold
| 985,969 | 4,124,041 |
Reinvestment of distributions
| 2,615,910 | 1,244,936 |
Cost of shares redeemed
| (22,457,236) | (65,157,088) |
Net increase (decrease) in net assets from Class B share transactions
| (18,855,357) | (59,788,111) |
Increase (decrease) in net assets | (82,425,137) | (95,829,467) |
Net assets at beginning of period
| 329,820,022 | 425,649,489 |
Net assets at end of period (including undistributed net investment income of $1,232,845 and $3,748,514, respectively)
| $ 247,394,885 | $ 329,820,022 |
Other Information |
Class A Shares outstanding at beginning of period
| 21,062,118 | 24,284,177 |
Shares sold
| 161,511 | 967,409 |
Shares issued to shareholders in reinvestment of distributions
| 3,209,837 | 490,313 |
Shares redeemed
| (2,209,186) | (4,679,781) |
Net increase (decrease) in Class A shares
| 1,162,162 | (3,222,059) |
Shares outstanding at end of period
| 22,224,280 | 21,062,118 |
Class B Shares outstanding at beginning of period
| 1,546,251 | 5,597,014 |
Shares sold
| 73,025 | 287,676 |
Shares issued to shareholders in reinvestment of distributions
| 228,265 | 88,987 |
Shares redeemed
| (1,814,267) | (4,427,426) |
Net increase (decrease) in Class B shares
| (1,512,977) | (4,050,763) |
Shares outstanding at end of period
| 33,274 | 1,546,251 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.59 | $ 14.25 | $ 12.49 | $ 11.48 | $ 10.31 | $ 7.99 |
Income (loss) from investment operations: Net investment income (loss)b | .06 | .15 | .10 | .09 | .08 | .06 |
Net realized and unrealized gain (loss) | (1.69) | .47 | 1.74 | 1.01 | 1.14 | 2.31 |
Total from investment operations | (1.63) | .62 | 1.84 | 1.10 | 1.22 | 2.37 |
Less distributions from: Net investment income | (.18) | (.10) | (.08) | (.09) | (.05) | (.05) |
Net realized gains | (1.66) | (.18) | — | — | — | — |
Total distributions | (1.84) | (.28) | (.08) | (.09) | (.05) | (.05) |
Net asset value, end of period | $ 11.12 | $ 14.59 | $ 14.25 | $ 12.49 | $ 11.48 | $ 10.31 |
Total Return (%)
| (11.58)c** | 4.46c | 14.84c | 9.64c | 11.83 | 29.84 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 247 | 307 | 346 | 309 | 268 | 220 |
Ratio of expenses before expense reductions (%)
| 1.09* | 1.02 | 1.02 | 1.02 | 1.05 | 1.01 |
Ratio of expenses after expense reductions (%)
| .89* | .88 | .85 | .96 | 1.05 | 1.01 |
Ratio of net investment income (%)
| .92* | 1.01 | .77 | .78 | .74 | .62 |
Portfolio turnover rate (%)
| 9** | 9 | 16 | 8 | 3 | 7 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.57 | $ 14.22 | $ 12.47 | $ 11.46 | $ 10.29 | $ 7.98 |
Income (loss) from investment operations: Net investment income (loss)b | .03 | .09 | .05 | .04 | .04 | .02 |
Net realized and unrealized gain (loss) | (1.76) | .49 | 1.73 | 1.01 | 1.13 | 2.32 |
Total from investment operations | (1.73) | .58 | 1.78 | 1.05 | 1.17 | 2.34 |
Less distributions from: Net investment income | (.13) | (.05) | (.03) | (.04) | (.00)*** | (.03) |
Net realized gains | (1.66) | (.18) | — | — | — | — |
Total distributions | (1.79) | (.23) | (.03) | (.04) | (.00)*** | (.03) |
Net asset value, end of period | $ 11.05 | $ 14.57 | $ 14.22 | $ 12.47 | $ 11.46 | $ 10.29 |
Total Return (%)
| (12.20)c** | 4.14c | 14.34c | 9.23c | 11.42 | 29.42 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .37 | 23 | 80 | 78 | 66 | 29 |
Ratio of expenses before expense reductions (%)
| 1.49* | 1.39 | 1.40 | 1.41 | 1.44 | 1.40 |
Ratio of expenses after expense reductions (%)
| 1.29* | 1.25 | 1.23 | 1.34 | 1.44 | 1.40 |
Ratio of net investment income (%)
| .52* | .64 | .39 | .40 | .36 | .23 |
Portfolio turnover rate (%)
| 9** | 9 | 16 | 8 | 3 | 7 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
*** Amount is less than $.005.
|
Performance Summary June 30, 2008
DWS Dreman High Return Equity VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.78% and 1.13% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. In addition, the Portfolio may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding this product's investments and risk profile.
Portfolio returns shown for all periods reflect a waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Dreman High Return Equity VIP |
[] DWS Dreman High Return Equity VIP — Class A [] S&P 500® Index | 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. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Dreman High Return Equity VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $8,282 | $7,739 | $10,166 | $13,812 | $15,963 |
Average annual total return
| -17.18% | -22.61% | .55% | 6.67% | 4.79% |
S&P 500 Index
| Growth of $10,000
| $8,809 | $8,688 | $11,381 | $14,413 | $13,287 |
Average annual total return
| -11.91% | -13.12% | 4.41% | 7.58% | 2.88% |
DWS Dreman High Return Equity VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $8,267 | $7,715 | $10,046 | $13,554 | $14,037 |
Average annual total return
| -17.33% | -22.85% | .15% | 6.27% | 5.82% |
S&P 500 Index
| Growth of $10,000
| $8,809 | $8,688 | $11,381 | $14,413 | $14,449 |
Average annual total return
| -11.91% | -13.12% | 4.41% | 7.58% | 6.33% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Dreman High Return Equity VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 828.20 | | $ 826.70 | |
Expenses Paid per $1,000*
| $ 3.64 | | $ 5.22 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.89 | | $ 1,019.14 | |
Expenses Paid per $1,000*
| $ 4.02 | | $ 5.77 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Dreman High Return Equity VIP
| .80% | | 1.15% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Dreman High Return Equity VIP
The first half of 2008 was a period of considerable economic uncertainty and significant turmoil throughout the capital markets. At mid-year 2008, the US economy is experiencing a number of interrelated problems including liquidity issues in financial markets, increased concern about rising prices for energy and food, and rising unemployment.
Essentially all equity indices posted negative returns for this period. The Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a negative return of -11.05% for the six months ended June 30, 2008. Growth stocks, as measured by the Russell 1000® Growth Index, performed somewhat better than value stocks, as measured by the Russell 1000® Value Index. With a return of -17.18% (Class A shares, unadjusted for contract charges), the DWS Dreman High Return Equity VIP underperformed its benchmark, the Standard & Poor's 500® (S&P 500) Index, which posted a return of -11.91%.
The Portfolio's underperformance relative to the benchmark resulted mainly from a significant overweight and stock selection in the financial sector.1 Large positions that performed poorly include Wachovia Corp., Washington Mutual, Inc., Fannie Mae and Freddie Mac. Severe liquidity problems throughout the industry have caused essentially all financial stocks to perform poorly, but we are confident that the large, well-capitalized industry leaders held in this Portfolio stand to emerge from this difficult period with even stronger market positions as weaker companies fail or are absorbed by stronger entities. Although holdings in the financial sector hurt performance temporarily, we believe they are significantly undervalued and can provide above-average returns over time. Another negative was a position in UnitedHealth Group, Inc., a diversified provider of health-related services that has come under pressure because of a major lawsuit.
An important positive was an overweight position in energy, a sector we find attractive because of rising world demand. Energy holdings that performed especially well were Devon Energy Corp., Apache Corp., ConocoPhillips and Anadarko Petroleum Corp. Also positive was an overweight position in Wyeth, which performed much better than most other pharmaceutical firms.
David N. Dreman F. James Hutchinson E. Clifton Hoover, Jr.
Lead Portfolio Manager Portfolio Managers
Dreman Value Management L.L.C., Subadvisor to the Portfolio
The 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.
The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
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.
Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Dreman High Return Equity VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 100% | 100% |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Energy | 31% | 26% |
Financials | 25% | 30% |
Health Care | 16% | 16% |
Consumer Discretionary | 9% | 6% |
Consumer Staples | 8% | 12% |
Industrials | 8% | 8% |
Telecommunication Services | 2% | 2% |
Materials | 1% | — |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 96. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Dreman High Return Equity VIP
|
Shares
| Value ($) |
| |
Common Stocks 99.9% |
Consumer Discretionary 9.0% |
Hotels Restaurants & Leisure 1.0% |
Carnival Corp. (Unit) | 179,800 | 5,926,208 |
Multiline Retail 0.8% |
Macy's, Inc. | 244,310 | 4,744,500 |
Specialty Retail 7.2% |
Borders Group, Inc. (a) | 390,100 | 2,340,600 |
Lowe's Companies, Inc. | 925,400 | 19,202,050 |
Staples, Inc. | 883,610 | 20,985,738 |
| 42,528,388 |
Consumer Staples 8.3% |
Tobacco |
Altria Group, Inc. | 1,226,597 | 25,218,834 |
Philip Morris International, Inc.* | 296,611 | 14,649,617 |
UST, Inc. | 167,744 | 9,160,500 |
| 49,028,951 |
Energy 31.0% |
Oil, Gas & Consumable Fuels |
Anadarko Petroleum Corp. | 378,300 | 28,311,972 |
Apache Corp. | 195,600 | 27,188,400 |
Chevron Corp. | 258,900 | 25,664,757 |
ConocoPhillips | 453,914 | 42,844,942 |
Devon Energy Corp. | 338,600 | 40,686,176 |
Occidental Petroleum Corp. | 113,600 | 10,208,096 |
Valero Energy Corp. | 213,000 | 8,771,340 |
| 183,675,683 |
Financials 24.5% |
Commercial Banks 8.8% |
KeyCorp. | 1,142,018 | 12,539,358 |
PNC Financial Services Group, Inc. | 312,494 | 17,843,407 |
US Bancorp. | 270,000 | 7,530,300 |
Wachovia Corp. (a) | 907,500 | 14,093,475 |
| 52,006,540 |
Diversified Financial Services 5.5% |
Bank of America Corp. | 792,119 | 18,907,881 |
CIT Group, Inc. | 536,000 | 3,650,160 |
Citigroup, Inc. | 516,000 | 8,648,160 |
JPMorgan Chase & Co. | 43,300 | 1,485,623 |
| 32,691,824 |
Insurance 2.5% |
Chubb Corp. | 194,010 | 9,508,430 |
Hartford Financial Services Group, Inc. | 78,388 | 5,061,513 |
| 14,569,943 |
Thrifts & Mortgage Finance 7.7% |
Fannie Mae | 845,473 | 16,495,178 |
Freddie Mac | 756,791 | 12,411,373 |
Sovereign Bancorp., Inc. (a) | 314,019 | 2,311,180 |
Washington Mutual, Inc. (a) | 2,984,254 | 14,712,372 |
| 45,930,103 |
|
Shares
| Value ($) |
| |
Health Care 16.4% |
Biotechnology 0.7% |
Amgen, Inc.* | 86,200 | 4,065,192 |
Health Care Providers & Services 7.0% |
Aetna, Inc. | 435,400 | 17,646,762 |
UnitedHealth Group, Inc. | 911,800 | 23,934,750 |
| 41,581,512 |
Pharmaceuticals 8.7% |
Eli Lilly & Co. | 84,900 | 3,918,984 |
Pfizer, Inc. | 1,090,491 | 19,050,878 |
Wyeth | 595,100 | 28,540,996 |
| 51,510,858 |
Industrials 8.2% |
Aerospace & Defense 3.4% |
Northrop Grumman Corp. | 114,700 | 7,673,430 |
United Technologies Corp. | 198,700 | 12,259,790 |
| 19,933,220 |
Air Freight & Logistics 1.0% |
FedEx Corp. | 75,540 | 5,951,797 |
Industrial Conglomerates 3.8% |
3M Co. | 185,316 | 12,896,140 |
General Electric Co. | 369,600 | 9,864,624 |
| 22,760,764 |
Information Technology 0.0% |
Communications Equipment |
Nortel Networks Corp.* | 6,151 | 50,561 |
Materials 0.4% |
Chemicals 0.0% |
Tronox, Inc. "B" | 490 | 1,480 |
Metals & Mining 0.4% |
BHP Billiton Ltd. (ADR) (a) | 30,100 | 2,564,218 |
Telecommunication Services 2.1% |
Diversified Telecommunication Services |
FairPoint Communications, Inc. | 6,566 | 47,341 |
Verizon Communications, Inc. | 347,500 | 12,301,500 |
| 12,348,841 |
Total Common Stocks (Cost $639,681,222) | 591,870,583 |
|
Securities Lending Collateral 4.8% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $28,433,335) | 28,433,335 | 28,433,335 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $668,114,557)+ | 104.7 | 620,303,918 |
Other Assets and Liabilities, Net | (4.7) | (27,689,207) |
Net Assets | 100.0 | 592,614,711 |
* Non-income producing security.+ The cost for federal income tax purposes was $671,125,254. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $50,821,336. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $152,453,317 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $203,274,653.(a) All or a portion of these securities were on loan (see Notes to Financial Statement). The value of all securities loaned at June 30, 2008 amounted to $25,437,336 which is 4.3% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.ADR: American Depositary Receipt
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 620,303,918 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 620,303,918 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $639,681,222) — including $25,437,336 of securities loaned | $ 591,870,583 |
Investment in Daily Assets Fund Institutional (cost $28,433,335)* | 28,433,335 |
Total investments at value (cost $668,114,557)
| 620,303,918 |
Cash
| 14,879 |
Dividends receivable
| 928,785 |
Receivable for investments sold
| 875,528 |
Receivable for Portfolio shares sold
| 110,158 |
Interest receivable
| 21,475 |
Due from Advisor
| 5,765 |
Other assets
| 2,073 |
Total assets
| 622,262,581 |
Liabilities |
Payable upon return of securities loaned
| 28,433,335 |
Payable for Portfolio shares redeemed
| 519,493 |
Accrued management fee
| 353,306 |
Note payable
| 50,000 |
Other accrued expenses and payables
| 291,736 |
Total liabilities
| 29,647,870 |
Net assets, at value | $ 592,614,711 |
Net Assets Consist of |
Undistributed net investment income
| 7,528,824 |
Net unrealized appreciation (depreciation) on investments
| (47,810,639) |
Accumulated net realized gain (loss)
| 64,466,251 |
Paid-in capital
| 568,430,275 |
Net assets, at value | $ 592,614,711 |
Class A Net Asset Value, offering and redemption price per share ($589,292,019 ÷ 61,888,668 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.52 |
Class B Net Asset Value, offering and redemption price per share ($3,322,692 ÷ 347,843 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.55 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $186)
| $ 10,460,682 |
Interest
| 91 |
Interest — Cash Management QP Trust
| 30,921 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 97,678 |
Total Income
| 10,589,372 |
Expenses:
Management fee
| 2,515,287 |
Administration fee
| 111,593 |
Custodian and accounting fees
| 55,216 |
Distribution and service fees (Class B)
| 28,207 |
Services to shareholders
| 526 |
Record keeping fees (Class B)
| 10,452 |
Professional fees
| 52,250 |
Trustees' fees and expenses
| 51,090 |
Reports to shareholders and shareholder meeting
| 186,699 |
Registration fees
| 4,011 |
Interest expense
| 3,800 |
Other
| 24,128 |
Total expenses before expense reductions
| 3,043,259 |
Expense reductions
| (41,330) |
Total expenses after expense reductions
| 3,001,929 |
Net investment income (loss) | 7,587,443 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 67,515,296 |
Futures
| (102,946) |
| 67,412,350 |
Change in net unrealized appreciation (depreciation) on:
Investments
| (204,748,663) |
| |
Net gain (loss) | (137,336,313) |
Net increase (decrease) in net assets resulting from operations | $ (129,748,870) |
* Represents collateral on securities loaned.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 June 30, 2008 (Unaudited) | Year Ended December 31 2007 |
Operations:
Net investment income (loss)
| $ 7,587,443 | $ 19,420,427 |
Net realized gain (loss)
| 67,412,350 | 122,846,409 |
Change in net unrealized appreciation (depreciation)
| (204,748,663) | (150,271,931) |
Net increase (decrease) in net assets resulting from operations
| (129,748,870) | (8,005,095) |
Distributions to shareholders from:
Net investment income:
Class A | (18,513,153) | (13,677,685) |
Class B | (745,822) | (1,939,768) |
Net realized gains:
Class A | (116,884,417) | (7,925,978) |
Class B | (5,393,183) | (1,537,591) |
Total distributions
| (141,536,575) | (25,081,022) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 9,297,927 | 30,297,612 |
Reinvestment of distributions
| 135,397,570 | 21,603,663 |
Cost of shares redeemed
| (84,091,385) | (218,373,492) |
Net increase (decrease) in net assets from Class A share transactions
| 60,604,112 | (166,472,217) |
Class B Proceeds from shares sold
| 869,741 | 4,409,581 |
Reinvestment of distributions
| 6,139,005 | 3,477,359 |
Cost of shares redeemed
| (32,244,587) | (163,138,034) |
Net increase (decrease) in net assets from Class B share transactions
| (25,235,841) | (155,251,094) |
Increase (decrease) in net assets | (235,917,174) | (354,809,428) |
Net assets at beginning of period
| 828,531,885 | 1,183,341,313 |
Net assets at end of period (including undistributed net investment income of $7,528,824 and $19,200,356, respectively)
| $ 592,614,711 | $ 828,531,885 |
Other Information |
Class A Shares outstanding at beginning of period
| 54,976,574 | 66,083,197 |
Shares sold
| 761,749 | 2,028,711 |
Shares issued to shareholders in reinvestment of distributions
| 13,132,645 | 1,492,997 |
Shares redeemed
| (6,982,300) | (14,628,331) |
Net increase (decrease) in Class A shares
| 6,912,094 | (11,106,623) |
Shares outstanding at end of period
| 61,888,668 | 54,976,574 |
Class B Shares outstanding at beginning of period
| 2,551,709 | 12,713,676 |
Shares sold
| 76,736 | 292,792 |
Shares issued to shareholders in reinvestment of distributions
| 593,141 | 239,488 |
Shares redeemed
| (2,873,743) | (10,694,247) |
Net increase (decrease) in Class B shares
| (2,203,866) | (10,161,967) |
Shares outstanding at end of period
| 347,843 | 2,551,709 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.40 | $ 15.02 | $ 13.41 | $ 12.65 | $ 11.29 | $ 8.76 |
Income (loss) from investment operations: Net investment income (loss)b | .13 | .29 | .27 | .24 | .23 | .20 |
Net realized and unrealized gain (loss) | (2.40) | (.56) | 2.21 | .75 | 1.32 | 2.53 |
Total from investment operations | (2.27) | (.27) | 2.48 | .99 | 1.55 | 2.73 |
Less distributions from: Net investment income | (.36) | (.22) | (.28) | (.23) | (.19) | (.20) |
Net realized gains | (2.25) | (.13) | (.59) | — | — | — |
Total distributions | (2.61) | (.35) | (.87) | (.23) | (.19) | (.20) |
Net asset value, end of period | $ 9.52 | $ 14.40 | $ 15.02 | $ 13.41 | $ 12.65 | $ 11.29 |
Total Return (%)
| (17.18)c** | (1.86) | 18.74 | 7.92 | 13.95 | 32.04 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 589 | 792 | 992 | 785 | 747 | 672 |
Ratio of expenses before expense reductions (%)
| .81* | .78 | .77 | .78 | .78 | .79 |
Ratio of expenses after expense reductions(%)
| .80* | .78 | .77 | .78 | .78 | .79 |
Ratio of net investment income (%)
| 2.16* | 1.94 | 1.87 | 1.84 | 1.96 | 2.14 |
Portfolio turnover rate (%)
| 14** | 27 | 20 | 10 | 9 | 18 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.41 | $ 15.02 | $ 13.39 | $ 12.63 | $ 11.27 | $ 8.75 |
Income (loss) from investment operations: Net investment income (loss)b | .10 | .24 | .22 | .19 | .18 | .16 |
Net realized and unrealized gain (loss) | (2.40) | (.56) | 2.19 | .75 | 1.33 | 2.53 |
Total from investment operations | (2.30) | (.32) | 2.41 | .94 | 1.51 | 2.69 |
Less distributions from: Net investment income | (.31) | (.16) | (.19) | (.18) | (.15) | (.17) |
Net realized gains | (2.25) | (.13) | (.59) | — | — | — |
Total distributions | (2.56) | (.29) | (.78) | (.18) | (.15) | (.17) |
Net asset value, end of period | $ 9.55 | $ 14.41 | $ 15.02 | $ 13.39 | $ 12.63 | $ 11.27 |
Total Return (%)
| (17.33)c** | (2.19)c | 18.21c | 7.51 | 13.53 | 31.60 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 3 | 37 | 191 | 135 | 117 | 66 |
Ratio of expenses before expense reduction (%)
| 1.18* | 1.15 | 1.16 | 1.17 | 1.16 | 1.18 |
Ratio of expenses after expense reduction (%)
| 1.15* | 1.13 | 1.16 | 1.17 | 1.16 | 1.18 |
Ratio of net investment income (%)
| 1.81* | 1.59 | 1.48 | 1.45 | 1.58 | 1.75 |
Portfolio turnover rate (%)
| 14** | 27 | 20 | 10 | 9 | 18 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Dreman Small Mid Cap Value VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.78% and 1.17% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk. Stocks of small and medium-sized companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be exposed to more erratic and abrupt market movements. Small and mid-cap company stocks tend to experience steeper price fluctuations — down as well as up — than stocks of larger companies. Small and mid-cap company stocks are typically less liquid than large company stocks. The Portfolio may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political, or regulatory development. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding this product's investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Dreman Small Mid Cap Value VIP |
[] DWS Dreman Small Mid Cap Value VIP — Class A [] Russell 2500™ Value Index | The Russell 2500™ Value Index is an unmanaged Index of those securities in the Russell 3000® Index with a lower price-to-book and lower forecasted growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Dreman Small Mid Cap Value VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $9,051 | $8,419 | $12,491 | $20,023 | $22,285 |
Average annual total return
| -9.49% | -15.81% | 7.70% | 14.90% | 8.34% |
Russell 2500 Value Index
| Growth of $10,000
| $9,163 | $8,009 | $10,672 | $16,783 | $21,824 |
Average annual total return
| -8.37% | -19.91% | 2.19% | 10.91% | 8.12% |
DWS Dreman Small Mid Cap Value VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,036 | $8,385 | $12,352 | $19,655 | $18,964 |
Average annual total return
| -9.64% | -16.15% | 7.29% | 14.47% | 11.26% |
Russell 2500 Value Index
| Growth of $10,000
| $9,163 | $8,009 | $10,672 | $16,783 | $16,683 |
Average annual total return
| -8.37% | -19.91% | 2.19% | 10.91% | 8.90% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Dreman Small Mid Cap Value VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 905.10 | | $ 903.60 | |
Expenses Paid per $1,000*
| $ 3.88 | | $ 5.58 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.79 | | $ 1,019.00 | |
Expenses Paid per $1,000*
| $ 4.12 | | $ 5.92 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Dreman Small Mid Cap Value VIP
| .82% | | 1.18% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Dreman Small Mid Cap Value VIP
The first half of 2008 was a period of considerable economic uncertainty and significant turmoil throughout the capital markets. At mid-year 2008, the US economy is experiencing a number of interrelated problems including liquidity issues in financial markets, increased concern about rising prices for energy and food, and rising unemployment.
Essentially all equity indices posted negative returns for this period. The Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a negative return of -11.05% for the six months ended June 30, 2008. Growth stocks, as measured by the Russell 1000® Growth Index, performed somewhat better than value stocks, as measured by the Russell 1000® Value Index. The DWS Dreman Small Mid Cap Value VIP (Class A shares, unadjusted for contract charges) returned -9.49% for the first half of 2008, underperforming its benchmark, the Russell 2500® Value Index, which had a negative return of -8.37%.
Stock selection and an overweight relative to the benchmark in the industrials sector was the most significant factor in the portfolio's relative performance.1 The greatest detractor was an overweight and stock selection in the consumer staples sector. Positions that performed particularly well include Walter Industries, Inc., a company with a diversified line of products and services, including coal and natural gas, furnace and foundry coke and slag fiber, mortgage financing, and home construction; and Superior Energy Services, Inc., a provider of specialized oilfield services and equipment. Positions that detracted from performance include Boston Private Financial Holdings, Inc., a bank holding company that is experiencing the liquidity problems pervasive in the financial services industry, and Pilgrim's Pride Corp., a poultry producer that reported losses in recent quarters because of soaring feed costs.
David N. Dreman E. Clifton Hoover, Jr. and Mark Roach
Lead Portfolio Manager Portfolio Managers, Dreman Value Management, L.L.C., Subadvisor to the Portfolio
The 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.
The Russell 1000 Growth Index is an unmanaged, capitalization-weighted index consisting of those stocks in the Russell 1000 Index that have greater-than-average growth orientation.
The Russell 1000 Value Index is an unmanaged index that consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values.
The Russell 2500 Value Index is an unmanaged Index of those securities in the Russell 3000 Index with a lower price-to-book and lower forecasted growth values.
Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Dreman Small Mid Cap Value VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 98% | 97% |
Cash Equivalents | 2% | 3% |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Industrials | 22% | 20% |
Financials | 20% | 25% |
Energy | 12% | 12% |
Consumer Staples | 11% | 12% |
Information Technology | 9% | 7% |
Health Care | 6% | 8% |
Consumer Discretionary | 6% | 7% |
Materials | 6% | 4% |
Utilities | 6% | 4% |
Telecommunications Services | 2% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 107. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Dreman Small Mid Cap Value VIP
| Shares | Value ($) |
| |
Common Stocks 97.5% |
Consumer Discretionary 5.9% |
Auto Components 1.9% |
Autoliv, Inc. | 103,300 | 4,815,846 |
Tenneco, Inc.* | 235,600 | 3,187,668 |
| 8,003,514 |
Diversified Consumer Services 1.3% |
Regis Corp. | 205,550 | 5,416,243 |
Specialty Retail 1.7% |
Penske Automotive Group, Inc. (a) | 286,200 | 4,218,588 |
The Men's Wearhouse, Inc. | 177,350 | 2,889,031 |
| 7,107,619 |
Textiles, Apparel & Luxury Goods 1.0% |
Hanesbrands, Inc.* | 153,400 | 4,163,276 |
Consumer Staples 11.1% |
Food & Staples Retailing 1.8% |
Ruddick Corp. | 172,050 | 5,903,035 |
Weis Markets, Inc. | 43,450 | 1,410,822 |
| 7,313,857 |
Food Products 7.4% |
Del Monte Foods Co. | 856,950 | 6,084,345 |
Hormel Foods Corp. | 180,900 | 6,260,949 |
Pilgrim's Pride Corp. (a) | 281,000 | 3,650,190 |
Ralcorp Holdings, Inc.* (a) | 156,350 | 7,729,944 |
The J.M. Smucker Co. | 180,300 | 7,327,392 |
| 31,052,820 |
Tobacco 1.9% |
Vector Group Ltd. (a) | 503,386 | 8,119,616 |
Energy 11.2% |
Energy Equipment & Services 6.2% |
Atwood Oceanics, Inc.* (a) | 64,400 | 8,007,496 |
Key Energy Services, Inc.* | 479,450 | 9,310,919 |
Superior Energy Services, Inc.* (a) | 150,250 | 8,284,785 |
| 25,603,200 |
Oil, Gas & Consumable Fuels 5.0% |
Cimarex Energy Co. | 112,500 | 7,837,875 |
Pinnacle Gas Resources, Inc. 144A* | 241,000 | 867,600 |
St. Mary Land & Exploration Co. | 164,150 | 10,610,656 |
Uranium Resources, Inc.* (a) | 431,983 | 1,594,017 |
| 20,910,148 |
Financials 19.4% |
Capital Markets 1.8% |
FBR Capital Markets Corp. 144A* | 95,600 | 480,868 |
Waddell & Reed Financial, Inc. "A" | 195,250 | 6,835,703 |
| 7,316,571 |
Commercial Banks 0.4% |
Boston Private Financial Holdings, Inc. (a) | 261,800 | 1,484,406 |
Diversified Financial Services 0.3% |
CIT Group, Inc. (a) | 182,300 | 1,241,463 |
CMET Finance Holdings, Inc. 144A* | 7,200 | 86,400 |
| 1,327,863 |
| Shares | Value ($) |
| |
Insurance 13.7% |
Arch Capital Group Ltd.* | 89,700 | 5,948,904 |
Argo Group International Holdings Ltd.* | 176,188 | 5,912,869 |
Endurance Specialty Holdings Ltd. | 251,650 | 7,748,303 |
Hanover Insurance Group, Inc. | 140,100 | 5,954,250 |
HCC Insurance Holdings, Inc. | 260,850 | 5,514,369 |
Hilb Rogal & Hobbs Co. | 171,000 | 7,431,660 |
IPC Holdings Ltd. (a) | 230,400 | 6,117,120 |
Platinum Underwriters Holdings Ltd. | 178,950 | 5,835,560 |
Protective Life Corp. | 175,500 | 6,677,775 |
| 57,140,810 |
Real Estate Investment Trusts 3.2% |
Gramercy Capital Corp. (REIT) (a) | 86,494 | 1,002,465 |
Hospitality Properties Trust (REIT) | 187,600 | 4,588,696 |
Ventas, Inc. (REIT) | 184,800 | 7,866,936 |
| 13,458,097 |
Health Care 6.3% |
Health Care Equipment & Supplies 3.0% |
Beckman Coulter, Inc. | 73,500 | 4,963,455 |
Kinetic Concepts, Inc.* | 190,900 | 7,618,819 |
| 12,582,274 |
Health Care Providers & Services 3.3% |
Healthspring, Inc.* | 441,800 | 7,457,584 |
Lincare Holdings, Inc.* | 218,400 | 6,202,560 |
| 13,660,144 |
Industrials 21.9% |
Aerospace & Defense 6.4% |
Alliant Techsystems, Inc.* | 106,200 | 10,798,416 |
Curtiss-Wright Corp. (a) | 224,400 | 10,039,656 |
DRS Technologies, Inc. | 76,150 | 5,994,528 |
| 26,832,600 |
Commercial Services & Supplies 2.0% |
Allied Waste Industries, Inc.* | 237,600 | 2,998,512 |
Kelly Services, Inc. "A" (a) | 277,150 | 5,357,310 |
| 8,355,822 |
Construction & Engineering 1.2% |
URS Corp.* | 124,700 | 5,233,659 |
Electrical Equipment 4.5% |
General Cable Corp.* | 90,100 | 5,482,585 |
Hubbell, Inc. "B" (a) | 143,700 | 5,729,319 |
Regal-Beloit Corp. (a) | 175,200 | 7,402,200 |
| 18,614,104 |
Industrial Conglomerates 1.6% |
Walter Industries, Inc. | 59,900 | 6,515,323 |
Machinery 4.8% |
Barnes Group, Inc. | 401,150 | 9,262,553 |
Kennametal, Inc. | 221,800 | 7,219,590 |
Mueller Water Products, Inc. "A" | 437,150 | 3,527,801 |
| 20,009,944 |
Trading Companies & Distributors 1.4% |
WESCO International, Inc.* (a) | 141,500 | 5,665,660 |
| Shares | Value ($) |
| |
Information Technology 8.8% |
Communications Equipment 3.1% |
CommScope, Inc.* | 248,200 | 13,097,514 |
Electronic Equipment & Instruments 2.3% |
Anixter International, Inc.* (a) | 158,900 | 9,452,961 |
IT Services 1.3% |
Affiliated Computer Services, Inc. "A"* | 100,000 | 5,349,000 |
Software 2.1% |
Jack Henry & Associates, Inc. | 400,950 | 8,676,558 |
Materials 5.6% |
Chemicals 3.7% |
CF Industries Holdings, Inc. | 54,300 | 8,297,040 |
Hercules, Inc. | 407,550 | 6,899,822 |
| 15,196,862 |
Metals & Mining 1.9% |
IAMGOLD Corp. | 739,800 | 4,475,790 |
RTI International Metals, Inc.* (a) | 100,150 | 3,567,343 |
| 8,043,133 |
Telecommunication Services 1.8% |
Diversified Telecommunication Services |
Windstream Corp. (a) | 595,600 | 7,349,704 |
| Shares | Value ($) |
| |
Utilities 5.5% |
Electric Utilities 3.4% |
ALLETE, Inc. | 182,450 | 7,662,900 |
IDACORP, Inc. (a) | 234,650 | 6,779,038 |
| 14,441,938 |
Independent Power Producers & Energy Traders 0.1% |
Dynegy, Inc. "A"* | 13,029 | 111,398 |
Mirant Corp.* | 9,069 | 355,051 |
| 466,449 |
Multi-Utilities 2.0% |
Integrys Energy Group, Inc. | 161,700 | 8,219,211 |
Total Common Stocks (Cost $423,069,463) | 406,180,900 |
|
Securities Lending Collateral 10.1% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $41,881,493) | 41,881,493 | 41,881,493 |
|
Cash Equivalents 2.4% |
Cash Management QP Trust, 2.49% (b) (Cost $10,187,714) | 10,187,714 | 10,187,714 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $475,138,670)+ | 110.0 | 458,250,107 |
Other Assets and Liabilities, Net | (10.0) | (41,735,900) |
Net Assets | 100.0 | 416,514,207 |
* Non-income producing security.+ The cost for federal income tax purposes was $475,138,670. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $16,888,563. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $58,590,103 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $75,478,666.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $39,945,478 which is 9.6% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.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
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 458,163,707 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| 86,400 |
Total | $ 458,250,107 |
The following is a reconciliation of the Portfolio's assets in which significant unobservable inputs (Level 3) were used in determining fair value at June 30, 2008:
| Investments in Securities at Market Value |
Balance as of January 1, 2008
| $ 86,400 |
Total realized gains or losses
| — |
Change in unrealized appreciation (depreciation)
| — |
Net purchases (sales)
| — |
Net transfers in (out) of Level 3
| — |
Balance as of June 30, 2008 | $ 86,400 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $423,069,463 — including $39,945,478 of securities loaned) | $ 406,180,900 |
Investment in Daily Assets Fund Institutional (cost $41,881,493)* | 41,881,493 |
Investment in Cash Management QP Trust (cost $10,187,714) | 10,187,714 |
Total investments, at value (cost $475,138,670)
| 458,250,107 |
Cash
| 10,000 |
Receivable for investments sold
| 617,794 |
Dividends receivable
| 361,418 |
Interest receivable
| 72,955 |
Receivable for Portfolio shares sold
| 618,817 |
Other assets
| 9,881 |
Total assets
| 459,940,972 |
Liabilities |
Payable upon return of securities loaned
| 41,881,493 |
Payable for Portfolio shares redeemed
| 1,082,230 |
Accrued management fee
| 249,305 |
Other accrued expenses and payables
| 213,737 |
Total liabilities
| 43,426,765 |
Net assets, at value | $ 416,514,207 |
Net Assets Consist of: |
Undistributed net investment income
| 2,336,544 |
Net unrealized appreciation (depreciation) on:
Investments | (16,888,563) |
Accumulated net realized gain (loss)
| (18,737,275) |
Paid-in capital
| 449,803,501 |
Net assets, at value | $ 416,514,207 |
Class A Net Asset Value, offering and redemption price per share ($378,544,489 ÷ 35,109,541 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.78 |
Class B Net Asset Value, offering and redemption price per share ($37,969,718 ÷ 3,517,661 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.79 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends
| $ 3,746,053 |
Interest — Cash Management QP Trust
| 304,521 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 215,358 |
Total Income
| 4,265,932 |
Expenses:
Management fee
| 1,568,753 |
Administration fee
| 76,095 |
Custodian fee
| 9,950 |
Distribution and service fees (Class B)
| 44,389 |
Record keeping fees (Class B)
| 19,544 |
Services to shareholders
| 799 |
Professional fees
| 44,202 |
Trustees' fees and expenses
| 30,156 |
Reports to shareholders and shareholder meeting
| 171,524 |
Other
| 6,116 |
Total expenses before expense reductions
| 1,971,528 |
Expense reductions
| (22,959) |
Total expenses after expense reductions
| 1,948,569 |
Net investment income (loss) | 2,317,363 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| (18,747,178) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (30,310,603) |
Foreign currency
| (452) |
| (30,311,055) |
Net gain (loss) | (49,058,233) |
Net increase (decrease) in net assets resulting from operations | $ (46,740,870) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 2,317,363 | $ 4,898,627 |
Net realized gain (loss)
| (18,747,178) | 173,994,914 |
Change in net unrealized appreciation (depreciation)
| (30,311,055) | (153,503,878) |
Net increase (decrease) in net assets resulting from operations
| (46,740,870) | 25,389,663 |
Distributions to shareholders from:
Net investment income:
Class A | (6,363,604) | (5,615,367) |
Class B | (427,114) | (521,975) |
Distributions to shareholders from:
Net realized gains:
Class A | (155,713,279) | (79,369,510) |
Class B | (13,714,537) | (12,524,743) |
Total distributions | (176,218,534) | (98,031,595) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 20,540,957 | 42,602,597 |
Reinvestment of distributions
| 162,076,883 | 84,984,877 |
Cost of shares redeemed
| (67,242,531) | (156,265,470) |
Net increase (decrease) in net assets from Class A share transactions
| 115,375,309 | (28,677,996) |
Class B Proceeds from shares sold
| 12,897,950 | 12,637,109 |
Reinvestment of distributions
| 14,141,651 | 13,046,718 |
Cost of shares redeemed
| (4,840,214) | (74,159,545) |
Net increase (decrease) in net assets from Class B share transactions
| 22,199,387 | (48,475,718) |
Increase (decrease) in net assets | (85,384,708) | (149,795,646) |
Net assets at beginning of period
| 501,898,915 | 651,694,561 |
Net assets at end of period (including undistributed net investment income of $2,336,544 and $6,809,899, respectively)
| $ 416,514,207 | $ 501,898,915 |
Other Information |
Class A Shares outstanding at beginning of period
| 23,283,418 | 24,500,577 |
Shares sold
| 1,559,938 | 1,968,230 |
Shares issued to shareholders in reinvestment of distributions
| 15,105,022 | 4,200,933 |
Shares redeemed
| (4,838,837) | (7,386,322) |
Net increase (decrease) in Class A shares
| 11,826,123 | (1,217,159) |
Shares outstanding at end of period
| 35,109,541 | 23,283,418 |
Class B Shares outstanding at beginning of period
| 1,669,556 | 3,927,983 |
Shares sold
| 899,745 | 603,769 |
Shares issued to shareholders in reinvestment of distributions
| 1,315,502 | 644,282 |
Shares redeemed
| (367,142) | (3,506,478) |
Net increase (decrease) in Class B shares
| 1,848,105 | (2,258,427) |
Shares outstanding at end of period
| 3,517,661 | 1,669,556 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 20.12 | $ 22.93 | $ 19.98 | $ 20.05 | $ 16.06 | $ 11.66 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | .18 | .15 | .19 | .17 | .19 |
Net realized and unrealized gain (loss) | (2.01) | .54 | 4.69 | 1.67 | 3.98 | 4.55 |
Total from investment operations | (1.94) | .72 | 4.84 | 1.86 | 4.15 | 4.74 |
Less distributions from: Net investment income | (.29) | (.23) | (.18) | (.15) | (.16) | (.15) |
Net realized gains | (7.11) | (3.30) | (1.71) | (1.78) | — | (.19) |
Total distributions | (7.40) | (3.53) | (1.89) | (1.93) | (.16) | (.34) |
Net asset value, end of period | $ 10.78 | $ 20.12 | $ 22.93 | $ 19.98 | $ 20.05 | $ 16.06 |
Total Return (%)
| (9.49)c** | 3.06 | 25.06 | 10.25 | 26.03 | 42.15 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 379 | 468 | 562 | 493 | 467 | 354 |
Ratio of expenses before expense reductions (%)
| .82* | .78 | .79 | .79 | .79 | .80 |
Ratio of expenses after expense reductions (%)
| .82* | .78 | .79 | .79 | .79 | .80 |
Ratio of net investment income (%)
| 1.09* | .85 | .71 | .96 | .96 | 1.46 |
Portfolio turnover rate (%)
| 21** | 110 | 52 | 61 | 73 | 71 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 20.08 | $ 22.88 | $ 19.93 | $ 20.01 | $ 16.03 | $ 11.65 |
Income (loss) from investment operations: Net investment income (loss)b | .05 | .10 | .07 | .11 | .10 | .13 |
Net realized and unrealized gain (loss) | (2.01) | .54 | 4.67 | 1.66 | 3.97 | 4.56 |
Total from investment operations | (1.96) | .64 | 4.74 | 1.77 | 4.07 | 4.69 |
Less distributions from: Net investment income | (.22) | (.14) | (.08) | (.07) | (.09) | (.12) |
Net realized gains | (7.11) | (3.30) | (1.71) | (1.78) | — | (.19) |
Total distributions | (7.33) | (3.44) | (1.79) | (1.85) | (.09) | (.31) |
Net asset value, end of period | $ 10.79 | $ 20.08 | $ 22.88 | $ 19.93 | $ 20.01 | $ 16.03 |
Total Return (%)
| (9.64)c** | 2.67 | 24.59 | 9.78 | 25.52 | 41.65 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 38 | 34 | 90 | 83 | 71 | 32 |
Ratio of expenses before expense reductions (%)
| 1.18* | 1.16 | 1.17 | 1.19 | 1.16 | 1.19 |
Ratio of expenses after expense reductions (%)
| 1.18* | 1.16 | 1.17 | 1.19 | 1.16 | 1.19 |
Ratio of net investment income (%)
| .73* | .47 | .33 | .56 | .59 | 1.07 |
Portfolio turnover rate (%)
| 21** | 110 | 52 | 61 | 73 | 71 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Global Thematic VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 1.33% and 1.68% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. Additionally, investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes and market risks. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Global Thematic VIP |
[] DWS Global Thematic VIP — Class A [] MSCI World Index | The Morgan Stanley Capital International (MSCI) World Index is an unmanaged, capitalization weighted measure of global stock markets including the US, Canada, Europe, Australia 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 Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Global Thematic VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $8,795 | $8,398 | $14,555 | $20,618 | $19,146 |
Average annual total return
| -12.05% | -16.02% | 13.33% | 15.57% | 6.71% |
MSCI World Index
| Growth of $10,000
| $8,943 | $8,932 | $12,908 | $17,616 | $15,081 |
Average annual total return
| -10.57% | -10.68% | 8.88% | 11.99% | 4.19% |
DWS Global Thematic VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $8,786 | $8,369 | $14,390 | $20,239 | $19,545 |
Average annual total return
| -12.14% | -16.31% | 12.90% | 15.14% | 11.82% |
MSCI World Index
| Growth of $10,000
| $8,943 | $8,932 | $12,908 | $17,616 | $17,198 |
Average annual total return
| -10.57% | -10.68% | 8.88% | 11.99% | 9.46% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Global Thematic VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 879.50 | | $ 878.60 | |
Expenses Paid per $1,000*
| $ 5.09 | | $ 6.73 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,019.44 | | $ 1,017.70 | |
Expenses Paid per $1,000*
| $ 5.47 | | $ 7.22 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Global Thematic VIP
| 1.09% | | 1.44% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Global Thematic VIP
The continued expansion of the global credit crisis caused the Portfolio's benchmark, the MSCI World Index, to decline -10.57% during the first half of 2008. Class A shares of the Portfolio (unadjusted for contract charges) returned -12.05%, underperforming its benchmark.
We look for long-term themes in the global economy, and then we use a combination of quantitative analysis and intensive fundamental research to identify companies that may benefit as these themes unfold. The top-performing theme in the Portfolio was Global Agribusiness, which made a strong contribution as food prices continued to skyrocket worldwide. SLC Agricola SA, a Brazilian producer of cotton, soybeans, corn, coffee and wheat, was a standout holding in this theme. On the negative side, a below-benchmark weighting in the strong-performing energy sector hurt relative performance. The Portfolio's top two individual contributors were Apple, Inc. and Petroleo Brasileiro SA ("Petrobras")*, while its most notable detractors were ICICI Bank Ltd. and Air Berlin PLC.
The longer one's investment horizon, the more interesting are the opportunities created by the market's recent weakness. Believing many fundamentally sound companies have been punished excessively amid the sell-off in the broader markets, we have used the past few months to add opportunistically to those positions that we believe have fallen to very inexpensive levels. Overall, we continue to believe that at a time of continued uncertainty in the markets, our emphasis on longer-term trends and extensive Portfolio diversification should hold the Portfolio in good stead relative to its peers.
Oliver Kratz
Portfolio Manager
Deutsche Investment Management Americas Inc.
The Morgan Stanley Capital International (MSCI) World Index is an unmanaged, capitalization-weighted measure of global stock markets around the world, including North America, Europe, Australia 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 portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
* As of June 30, 2008, the position was sold.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Global Thematic VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 95% | 92% |
Preferred Stocks | 2% | 2% |
Exchange Traded Funds | 1% | 2% |
Participatory Notes | 1% | — |
Cash Equivalents | 1% | 4% |
| 100% | 100% |
Sector Diversification (As a % of Common, Preferred Stocks and Participatory Notes) | 6/30/08 | 12/31/07 |
| | |
Industrials | 24% | 21% |
Financials | 20% | 24% |
Consumer Staples | 11% | 8% |
Health Care | 10% | 11% |
Consumer Discretionary | 9% | 13% |
Materials | 8% | 5% |
Energy | 8% | 4% |
Information Technology | 5% | 11% |
Telecommunication Services | 5% | 3% |
| 100% | 100% |
Geographical Diversification (As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Continental Europe | 35% | 39% |
United States | 23% | 28% |
Asia (excluding Japan) | 16% | 12% |
Latin America | 9% | 7% |
Japan | 6% | 6% |
United Kingdom | 5% | 3% |
Africa | 2% | 2% |
Canada | 1% | 1% |
Bermuda | 1% | — |
Middle East | 1% | 2% |
Other | 1% | — |
| 100% | 100% |
Asset allocation, sector and geographical diversifications are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 119. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Global Thematic VIP
| Shares | Value ($) |
| |
Common Stocks 94.2% |
Australia 0.6% |
Australian Wealth Management Ltd. (Cost $1,204,980) | 642,955 | 797,050 |
Austria 2.2% |
Flughafen Wien AG | 17,800 | 1,693,682 |
Wienerberger AG | 30,300 | 1,270,095 |
(Cost $3,407,215) | 2,963,777 |
Bermuda 1.3% |
Lazard Ltd. "A" (Cost $1,997,046) | 53,900 | 1,840,685 |
Brazil 5.4% |
All America Latina Logistica SA (Unit) | 108,300 | 1,393,693 |
Diagnosticos da America SA | 35,100 | 904,267 |
Gol-Linhas Aereas Inteligentes SA (ADR) (Preferred) (a) | 35,200 | 397,056 |
Marfrig Frigorificos e Comercio de Alimentos SA | 67,800 | 877,581 |
Santos Brasil Participacoes SA (Unit) | 149,800 | 2,158,555 |
SLC Agricola SA | 55,500 | 1,107,853 |
Tam SA (ADR) (Preferred) (a) | 25,100 | 479,912 |
(Cost $5,834,376) | 7,318,917 |
Canada 1.3% |
Coalcorp Mining, Inc.* | 42,435 | 74,075 |
Nexen, Inc. | 42,869 | 1,709,379 |
Viterra, Inc.* | 4,500 | 61,783 |
(Cost $1,500,705) | 1,845,237 |
Cayman Islands 0.7% |
Fresh Del Monte Produce, Inc.* (Cost $1,270,701) | 38,500 | 907,445 |
China 2.6% |
AgFeed Industries, Inc.* (a) | 16,200 | 242,514 |
Focus Media Holding Ltd. (ADR)* | 44,000 | 1,219,680 |
Shanghai Electric Group Co., Ltd. "H" | 3,408,200 | 1,659,494 |
Sunshine Holdings Ltd.* | 2,908,000 | 235,686 |
Want Want China Holdings Ltd. | 320,000 | 122,978 |
(Cost $4,778,251) | 3,480,352 |
Cyprus 0.5% |
Globaltrans Investment PLC (GDR) 144A* (Cost $539,478) | 39,500 | 643,850 |
Denmark 1.3% |
A P Moller-Maersk AS "B" (Cost $1,636,815) | 145 | 1,765,926 |
Egypt 0.0% |
Palm Hills Developments SAE (GDR) 144A* (Cost $14,217) | 700 | 11,151 |
France 0.4% |
Sanofi-Aventis (Cost $680,126) | 8,434 | 561,076 |
Germany 10.0% |
Air Berlin PLC* (a) | 43,990 | 261,471 |
Allianz SE (Registered) | 7,200 | 1,265,122 |
| Shares | Value ($) |
| |
Axel Springer AG | 10,845 | 1,171,072 |
BASF SE | 14,100 | 971,035 |
Commerzbank AG (a) | 20,700 | 611,619 |
Deutsche Boerse AG | 9,900 | 1,110,773 |
Deutsche Post AG (Registered) | 25,300 | 660,013 |
Deutsche Postbank AG | 17,000 | 1,487,473 |
Fraport AG | 14,900 | 1,009,653 |
Hamburger Hafen-und Logistik AG | 21,900 | 1,701,154 |
Siemens AG (Registered) | 9,912 | 1,097,606 |
Symrise AG | 101,799 | 2,209,895 |
(Cost $15,647,022) | 13,556,886 |
Hong Kong 6.1% |
China Water Affairs Group Ltd.* | 1,083,700 | 320,210 |
China Yurun Food Group Ltd. | 866,000 | 1,420,176 |
CNOOC Ltd. | 176,000 | 305,276 |
CNOOC Ltd. (ADR) | 6,000 | 1,041,240 |
GOME Electrical Appliances Holdings Ltd. | 3,799,000 | 1,796,788 |
Hongkong & Shanghai Hotels Ltd. | 631,242 | 956,395 |
Hutchison Whampoa Ltd. | 186,000 | 1,880,909 |
Swire Pacific Ltd. "A" | 62,500 | 642,207 |
(Cost $9,058,041) | 8,363,201 |
Hungary 0.5% |
OTP Bank Nyrt. (Cost $730,940) | 17,500 | 728,963 |
India 3.2% |
Bharti Airtel Ltd.* | 47,297 | 791,621 |
ICICI Bank Ltd. (ADR) | 126,000 | 3,623,760 |
(Cost $6,059,611) | 4,415,381 |
Indonesia 0.9% |
PT Telekomunikasi Indonesia (ADR) (Cost $1,713,702) | 39,200 | 1,264,200 |
Italy 0.9% |
Gemina SpA* (Cost $1,907,818) | 1,048,864 | 1,274,158 |
Japan 5.8% |
FANUC Ltd. | 15,000 | 1,461,562 |
Mitsubishi Heavy Industries Ltd. | 412,000 | 1,972,920 |
Mitsui Fudosan Co., Ltd. | 64,000 | 1,364,312 |
Mizuho Financial Group, Inc. | 339 | 1,569,830 |
Toyota Motor Corp. | 32,300 | 1,519,323 |
(Cost $7,232,853) | 7,887,947 |
Kazakhstan 1.1% |
Kazakhstan Kagazy PLC (GDR) 144A* | 181,200 | 630,576 |
Steppe Cement Ltd.* | 127,088 | 811,903 |
(Cost $1,597,277) | 1,442,479 |
Korea 0.6% |
CDNetworks Co., Ltd.* | 30,937 | 341,298 |
Daesang Corp. | 33,306 | 300,634 |
Kangwon Land, Inc. | 7,310 | 159,929 |
(Cost $1,426,169) | 801,861 |
Luxembourg 0.4% |
Ternium SA (ADR) (Cost $540,347) | 14,800 | 621,600 |
| Shares | Value ($) |
| |
Malaysia 0.7% |
AMMB Holdings Bhd. (Cost $811,785) | 955,700 | 932,665 |
Mexico 3.1% |
America Movil SAB de CV "L" (ADR) | 32,000 | 1,688,000 |
Grupo Aeroportuario del Pacifico SA de CV "B" (ADR) | 86,100 | 2,528,757 |
(Cost $5,193,571) | 4,216,757 |
Netherlands 2.0% |
European Aeronautic Defence & Space Co. (a) | 35,389 | 664,207 |
QIAGEN NV* (a) | 100,000 | 2,020,672 |
(Cost $2,588,947) | 2,684,879 |
Norway 0.5% |
Cermaq ASA (Cost $943,407) | 52,700 | 627,228 |
Portugal 0.5% |
Banco BPI SA (Registered) (Cost $1,012,401) | 152,725 | 629,101 |
Russia 6.0% |
Gazprom (ADR) (b) | 7,350 | 426,300 |
Gazprom (ADR) (b) | 63,432 | 3,671,860 |
LUKOIL (ADR) | 22,700 | 2,232,848 |
Novorossiysk Sea Trade Port (GDR) 144A* | 36,200 | 541,914 |
Vimpel-Communications (ADR) | 42,900 | 1,273,272 |
(Cost $7,645,571) | 8,146,194 |
Singapore 1.3% |
Food Empire Holdings Ltd. | 831,000 | 366,748 |
Singapore Airlines Ltd. | 133,300 | 1,442,666 |
(Cost $1,999,184) | 1,809,414 |
South Africa 2.2% |
AngloGold Ashanti Ltd. (ADR) | 7,200 | 244,368 |
Gold Fields Ltd. | 45,900 | 581,408 |
Gold Fields Ltd. (ADR) (a) | 66,600 | 842,490 |
Lewis Group Ltd. | 156,500 | 660,554 |
Standard Bank Group Ltd. | 74,400 | 722,058 |
(Cost $3,781,200) | 3,050,878 |
Sweden 1.0% |
Tele2 AB "B" (Cost $1,294,765) | 73,800 | 1,434,884 |
Switzerland 4.5% |
Petroplus Holdings AG* | 19,928 | 1,068,734 |
Roche Holding AG (Genusschein) | 15,357 | 2,755,673 |
SGS SA (Registered) | 782 | 1,115,608 |
UBS AG (Registered)* (b) | 42,608 | 880,884 |
UBS AG (Registered)* (b) | 11,900 | 245,854 |
(Cost $7,036,380) | 6,066,753 |
Thailand 0.4% |
Seamico Securities PCL (Foreign Registered)* | 2,354,200 | 176,028 |
Siam City Bank PCL (Foreign Registered)* | 664,600 | 322,014 |
(Cost $590,716) | 498,042 |
Turkey 0.7% |
Turkiye Is Bankasi (Isbank) "C" (Cost $1,224,168) | 298,739 | 978,287 |
| Shares | Value ($) |
| |
United Kingdom 4.5% |
BHP Billiton PLC | 31,796 | 1,221,262 |
G4S PLC | 354,270 | 1,427,153 |
GlaxoSmithKline PLC | 111,373 | 2,461,462 |
Lonmin PLC | 15,821 | 997,421 |
(Cost $6,320,386) | 6,107,298 |
United States 21.0% |
Apple, Inc.* | 13,300 | 2,226,952 |
Archer-Daniels-Midland Co. | 88,400 | 2,983,501 |
Bunge Ltd. | 24,300 | 2,616,867 |
Chiquita Brands International, Inc.* | 35,200 | 533,984 |
Cisco Systems, Inc.* | 37,950 | 882,717 |
Cogent, Inc.* | 93,800 | 1,066,506 |
CVS Caremark Corp. | 22,800 | 902,196 |
eBay, Inc.* | 75,500 | 2,063,415 |
General Mills, Inc. | 17,700 | 1,075,629 |
Johnson & Johnson | 32,450 | 2,087,833 |
JPMorgan Chase & Co. | 46,200 | 1,585,122 |
Mattel, Inc. | 73,300 | 1,254,896 |
Monster Worldwide, Inc.* | 40,100 | 826,461 |
Mylan, Inc. (a) | 92,200 | 1,112,854 |
New York Times Co. "A" (a) | 35,000 | 538,650 |
Newmont Mining Corp. | 29,000 | 1,512,640 |
Pfizer, Inc. | 53,475 | 934,208 |
Sotheby's (a) | 44,200 | 1,165,554 |
Stryker Corp. | 14,700 | 924,336 |
The Blackstone Group LP (Limited Partnership) | 53,500 | 974,235 |
The Goldman Sachs Group, Inc. | 7,200 | 1,259,280 |
Wachovia Corp. | 1,800 | 27,954 |
(Cost $29,741,446) | 28,555,790 |
Total Common Stocks (Cost $138,961,617) | 128,230,312 |
|
Preferred Stocks 2.1% |
Germany 1.0% |
Porsche Automobil Holding SE (Cost $1,505,019) | 8,583 | 1,319,367 |
Russia 1.1% |
Sberbank (Cost $1,943,673) | 794,923 | 1,558,049 |
Total Preferred Stocks (Cost $3,448,692) | 2,877,416 |
|
Participatory Note 0.7% |
United States |
Merrill Lynch Pioneers Index (issuer Merrill Lynch International & Co.), Expiration Date 2/1/2010* (Cost $1,023,048) | 10,000 | 919,300 |
|
Exchange Traded Fund 1.3% |
iShares Nasdaq Biotechnology Index Fund (a) (Cost $1,668,775) | 23,825 | 1,830,713 |
|
Call Options Purchased 0.1% |
General Electric Co., Expiration Date 1/16/2010, Strike Price $30.0 (Cost $212,772) | 510 | 109,650 |
| Shares | Value ($) |
| |
Securities Lending Collateral 5.6% |
Daily Assets Fund Institutional, 2.74% (c) (d) (Cost $7,584,885) | 7,584,885 | 7,584,885 |
|
Cash Equivalents 0.4% |
Cash Management QP Trust, 2.49% (c) (Cost $579,305) | 579,305 | 579,305 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $153,479,094)+ | 104.4 | 142,131,581 |
Other Assets and Liabilities, Net | (4.4) | (6,025,234) |
Net Assets | 100.0 | 136,106,347 |
* Non-income producing security.+ The cost for federal income tax purposes was $155,593,218. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $13,461,637. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $7,234,211 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $20,695,848.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $7,292,737 which is 5.4% of net assets.(b) Securities with the same description are the same corporate entity but trade on different stock exchanges.(c) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(d) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers.
ADR: American Depositary Receipt
GDR: Global Depositary Receipt
The Portfolio had the following open forward foreign currency exchange contracts at June 30, 2008:
Contracts to Deliver | | In Exchange For | | Settlement Date | Unrealized Appreciation ($) |
EUR
| 1,956,000 |
| USD
| 3,072,641 |
| 8/27/2008 | 2,121 |
Currency Abbreviations |
EUR Euro
USD United States Dollar
|
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Appreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 70,261,236 | $ — |
Level 2 — Other Significant Observable Inputs
| 71,870,345 | 2,121 |
Level 3 — Significant Unobservable Inputs
| — | — |
Total | $ 142,131,581 | $ 2,121 |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as forward foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $145,314,904) — including $7,292,737 of securities loaned | $ 133,967,391 |
Investment in Daily Assets Fund Institutional (cost $7,584,885)* | 7,584,885 |
Investment in Cash Management QP Trust (cost $579,305) | 579,305 |
Total investments, at value (cost $153,479,094)
| 142,131,581 |
Cash
| 79,304 |
Foreign currency, at value (cost $721,286)
| 721,208 |
Receivable for investments sold
| 4,763,786 |
Receivable for Portfolio shares sold
| 130,558 |
Dividends receivable
| 109,052 |
Interest receivable
| 28,584 |
Foreign taxes recoverable
| 81,915 |
Unrealized appreciation on forward currency exchange contracts
| 2,121 |
Due from Advisor
| 1,611 |
Other assets
| 3,263 |
Total assets
| 148,052,983 |
Liabilities |
Payable for investments purchased
| 3,658,928 |
Payable upon return of securities loaned
| 7,584,885 |
Payable for Portfolio shares redeemed
| 402,396 |
Accrued management fee
| 65,047 |
Other accrued expenses and payables
| 235,380 |
Total liabilities
| 11,946,636 |
Net assets, at value | $ 136,106,347 |
Net Assets Consist of |
Undistributed net investment income
| 645,061 |
Net unrealized appreciation (depreciation) on:
Investments | (11,347,513) |
Foreign currency | 8,490 |
Accumulated net realized gain (loss)
| (12,545,302) |
Paid-in capital
| 159,345,611 |
Net assets, at value | $ 136,106,347 |
Class A Net Asset Value, offering and redemption price per share ($128,062,359 ÷ 13,022,954 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.83 |
Class B Net Asset Value, offering and redemption price per share ($8,043,988 ÷ 815,793 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.86 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $142,883)
| $ 1,490,942 |
Interest
| 1,997 |
Interest — Cash Management QP Trust
| 56,685 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 134,343 |
Total Income
| 1,683,967 |
Expenses:
Management fee
| 706,967 |
Administration fee
| 24,879 |
Services to shareholders
| 248 |
Custodian and accounting fees
| 191,390 |
Distribution and service fees (Class B)
| 10,825 |
Record keeping fees (Class B)
| 4,321 |
Professional fees
| 34,218 |
Trustees' fees and expenses
| 19,167 |
Reports to shareholders and shareholder meeting
| 79,796 |
Other
| 26,910 |
Total expenses before expense reductions
| 1,098,721 |
Expense reductions
| (268,320) |
Total expenses after expense reductions
| 830,401 |
Net investment income (loss) | 853,566 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments (including foreign taxes of $924)
| (10,194,623) |
Foreign currency
| (348,391) |
| (10,543,014) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (9,377,998) |
Foreign currency
| 5,236 |
| (9,372,762) |
Net gain (loss) | (19,915,776) |
Net increase (decrease) in net assets resulting from operations | $ (19,062,210) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 853,566 | $ 1,371,727 |
Net realized gain (loss)
| (10,543,014) | 38,322,515 |
Change in net unrealized appreciation (depreciation)
| (9,372,762) | (28,184,790) |
Net increase (decrease) in net assets resulting from operations
| (19,062,210) | 11,509,452 |
Distributions to shareholders from:
Net investment income:
Class A | (1,766,760) | (976,630) |
Class B | (79,972) | (67,864) |
Net realized gains:
Class A | (36,684,662) | (22,498,351) |
Class B | (2,286,851) | (3,879,598) |
Total distributions
| (40,818,245) | (27,422,443) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 7,568,985 | 32,962,118 |
Reinvestment of distributions
| 38,451,422 | 23,474,981 |
Cost of shares redeemed
| (12,933,179) | (33,544,797) |
Net increase (decrease) in net assets from Class A share transactions
| 33,087,228 | 22,892,302 |
Class B Proceeds from shares sold
| 550,108 | 5,026,580 |
Reinvestment of distributions
| 2,366,823 | 3,947,462 |
Cost of shares redeemed
| (1,244,723) | (22,340,318) |
Net increase (decrease) in net assets from Class B share transactions
| 1,672,208 | (13,366,276) |
Increase (decrease) in net assets | (25,121,019) | (6,386,965) |
Net assets at beginning of period
| 161,227,366 | 167,614,331 |
Net assets at end of period (including undistributed net investment income of $645,061 and $1,638,227, respectively)
| $ 136,106,347 | $ 161,227,366 |
Other Information |
Class A Shares outstanding at beginning of period
| 9,660,413 | 8,197,243 |
Shares sold
| 627,396 | 1,983,290 |
Shares issued to shareholders in reinvestment of distributions
| 3,769,747 | 1,533,310 |
Shares redeemed
| (1,034,602) | (2,053,430) |
Net increase (decrease) in Class A shares
| 3,362,541 | 1,463,170 |
Shares outstanding at end of period
| 13,022,954 | 9,660,413 |
Class B Shares outstanding at beginning of period
| 632,933 | 1,443,479 |
Shares sold
| 44,766 | 302,846 |
Shares issued to shareholders in reinvestment of distributions
| 231,135 | 257,164 |
Shares redeemed
| (93,041) | (1,370,556) |
Net increase (decrease) in Class B shares
| 182,860 | (810,546) |
Shares outstanding at end of period
| 815,793 | 632,933 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 15.66 | $ 17.39 | $ 14.44 | $ 11.78 | $ 10.39 | $ 8.08 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | .14 | .15d | .12 | .04 | .09 |
Net realized and unrealized gain (loss) | (1.80) | .88 | 4.02 | 2.58 | 1.48 | 2.25 |
Total from investment operations | (1.73) | 1.02 | 4.17 | 2.70 | 1.52 | 2.34 |
Less distributions from: Net investment income | (.19) | (.11) | (.09) | (.04) | (.13) | (.03) |
Net realized gains | (3.91) | (2.64) | (1.13) | — | — | — |
Total distributions | (4.10) | (2.75) | (1.22) | (.04) | (.13) | (.03) |
Net asset value, end of period | $ 9.83 | $ 15.66 | $ 17.39 | $ 14.44 | $ 11.78 | $ 10.39 |
Total Return (%)c
| (12.05)** | 6.29 | 30.14d | 22.94 | 14.76 | 29.13 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 128 | 151 | 143 | 85 | 63 | 55 |
Ratio of expenses before expense reductions (%)
| 1.45* | 1.44 | 1.38 | 1.41 | 1.44 | 1.48 |
Ratio of expenses after expense reductions (%)
| 1.09* | 1.11 | 1.04 | 1.28 | 1.43 | 1.17 |
Ratio of net investment income (%)
| 1.23* | .82 | .92d | .98 | .38 | 1.02 |
Portfolio turnover rate (%)
| 96** | 191 | 136 | 95 | 81 | 65 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.004 per share and an increase in the ratio of net investment income of 0.03%. Excluding this non-recurring income, total return would have been 0.02% lower.
* Annualized ** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 15.66 | $ 17.38 | $ 14.43 | $ 11.78 | $ 10.38 | $ 8.06 |
Income (loss) from investment operations: Net investment income (loss)b | .05 | .07 | .09d | .07 | .00e | .04 |
Net realized and unrealized gain (loss) | (1.80) | .90 | 4.02 | 2.58 | 1.48 | 2.29 |
Total from investment operations | (1.75) | .97 | 4.11 | 2.65 | 1.48 | 2.33 |
Less distributions from: Net investment income | (.14) | (.05) | (.03) | — | (.08) | (.01) |
Net realized gains | (3.91) | (2.64) | (1.13) | — | — | — |
Total distributions | (4.05) | (2.69) | (1.16) | — | (.08) | (.01) |
Net asset value, end of period | $ 9.86 | $ 15.66 | $ 17.38 | $ 14.43 | $ 11.78 | $ 10.38 |
Total Return (%)c
| (12.14)** | 5.84 | 29.65d | 22.50 | 14.33 | 28.96 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 8 | 10 | 25 | 20 | 13 | 6 |
Ratio of expenses before expense reductions (%)
| 1.80* | 1.81 | 1.76 | 1.79 | 1.84 | 1.87 |
Ratio of expenses after expense reductions (%)
| 1.44* | 1.47 | 1.43 | 1.65 | 1.83 | 1.64 |
Ratio of net investment income (%)
| .88* | .46 | .53d | .61 | .02 | .55 |
Portfolio turnover rate (%)
| 96** | 191 | 136 | 95 | 81 | 65 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.004 per share and an increase in the ratio of net investment income of 0.03%. Excluding this non-recurring income, total return would have been 0.02% lower.
e Amount is less than $.005 per share.
* Annualized ** Not annualized
|
Performance Summary June 30, 2008
DWS Government & Agency Securities VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.66% and 1.04% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The government guarantee relates only to the prompt payment of principal and interest and does not remove market risks. Additionally, yields will fluctuate in response to changing interest rates and may be affected by the prepayment of mortgage-backed securities. 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 investment, can decline and the investor can lose principal value. In the current market environment, mortgage-backed securities are experiencing increased volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Government & Agency Securities VIP |
[] DWS Government & Agency Securities VIP — Class A [] Lehman Brothers GNMA Index | The Lehman Brothers GNMA Index is an unmanaged market-value-weighted measure of all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Government & Agency Securities VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $10,163 | $10,699 | $11,300 | $12,062 | $16,399 |
Average annual total return
| 1.63% | 6.99% | 4.16% | 3.82% | 5.07% |
Lehman Brothers GNMA Index
| Growth of $10,000
| $10,184 | $10,800 | $11,519 | $12,451 | $17,399 |
Average annual total return
| 1.84% | 8.00% | 4.83% | 4.48% | 5.69% |
DWS Government & Agency Securities VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $10,147 | $10,648 | $11,163 | $11,823 | $12,388 |
Average annual total return
| 1.47% | 6.48% | 3.74% | 3.41% | 3.63% |
Lehman Brothers GNMA Index
| Growth of $10,000
| $10,184 | $10,800 | $11,519 | $12,451 | $13,149 |
Average annual total return
| 1.84% | 8.00% | 4.83% | 4.48% | 4.67% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Government & Agency Securities VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (Janaury 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,016.30 | | $ 1,014.70 | |
Expenses Paid per $1,000*
| $ 3.31 | | $ 5.01 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,021.58 | | $ 1,019.89 | |
Expenses Paid per $1,000*
| $ 3.32 | | $ 5.02 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Government & Agency Securities VIP
| .66% | | 1.00% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Government & Agency Securities VIP
Entering 2008, the fixed-income markets continued to deal with the fallout from the crisis in subprime mortgages. All non-Treasury markets experienced weakness during most of the first quarter. As financial institutions were forced to recognize mortgage-related damage to their balance sheets, funding was removed from the system and leveraged participants were forced to seek buyers for their holdings. As a result, the market was flooded with bonds that trade at a yield spread versus Treasuries, causing prices of even AAA-rated issues to suffer.1 This was especially the case in mid-March as the collapse of Bear Stearns, a leading investment bank, caused already high levels of concern over counterparty risk to skyrocket and liquidity to deteriorate further. In response to the Bear Stearns crisis, the US Federal Reserve Board (the Fed) moved aggressively in providing additional funding mechanisms to market participants. The Fed's actions would prove to be something of a turning point, as trading of high-quality issues stabilized in the second quarter. Over the six-month period, the Fed cut the benchmark fed funds rate (the overnight rate banks charge when they borrow money from each other) from 4.25% to 2.0% as it sought to provide market participants with liquidity. Treasury yields rose late in the period on renewed inflation concerns, following an extended decline.
During the six-month period ended June 30, 2008, the Portfolio provided a total return of 1.63% (Class A shares, unadjusted for contract charges) compared with the 1.84% return of its benchmark, the Lehman Brothers GNMA Index.
The Portfolio's concentration on lower coupon mortgage backed securities hurt performance early in the period. We purchased these coupons because we expected lower rates with the weakening economy. As the period progressed, the Portfolio's exposure to mortgage-backed securities backed by seasoned loans began to help performance, as the market valued more highly the superior protection against prepayments offered by these issues. Performance also benefited from the Portfolio's position in structured mortgage-backed securities, in which principal payments on underlying mortgages are allocated to varying classes of investors. With the recent market turmoil the pricing on structured securities lagged that of pass-through securities. We had purchased some of these bonds at very attractive levels, and they outperformed dramatically as liquidity returned to the markets. Finally, the Portfolio's exposure to adjustable rate mortgages also helped performance. We have begun to reduce that position, as we now view other sectors as more attractive. We will continue to monitor the credit and interest rate environment closely as we seek to maintain an attractive dividend for investors.
William Chepolis, CFA and Matthew F. MacDonald
Co-Managers
Deutsche Investment Management Americas Inc.
The Lehman Brothers GNMA Index is an unmanaged, market-value-weighted measure of all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 The yield spread is the difference between the yield of a security and the yield of a comparable-duration Treasury. A large spread indicates that investors require yields substantially above those of Treasuries in order to invest in lower-quality bonds. This is generally indicative of a higher-risk environment. A smaller spread generally indicates a more positive environment, since investors are less concerned about risk and therefore willing to accept lower yields. A drop in the yield spread is a positive.Credit quality is a measure of a bond issuer's ability to repay interest and principal in a timely manner. Rating agencies assign letter designations such as AAA, AA, and so forth. The lower the rating, the higher the probability of default.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Government & Agency Securities VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Agencies Backed by the Full Faith and Credit of the US Government (GNMA) | 66% | 61% |
Agencies Not Backed by the Full Faith and Credit of the US Government (FNMA, FHLMC) | 34% | 36% |
Cash Equivalents | — | 2% |
US Treasury Obligations | — | 1% |
| 100% | 100% |
Quality | 6/30/08 | 12/31/07 |
| | |
AAA* | 100% | 100% |
* Includes cash equivalentsInterest Rate Sensitivity | 6/30/08 | 12/31/07 |
| | |
Effective Maturity | 8.1 years | 5.9 years |
Average Duration | 4.1 years | 3.5 years |
Asset allocation, quality and interest rate sensitivity are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Portfolio's quality does not remove market risk.
For more complete details about the Portfolio's investment portfolio, see page 131. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Government & Agency Securities VIP
| Principal Amount ($) | Value ($) |
| |
Agencies Backed by the Full Faith and Credit of the US Government 63.0% |
Government National Mortgage Association: | | |
5.0%, with various maturities from 5/20/2023 until 12/20/2036 (e) | 14,168,227 | 13,846,874 |
5.5%, with various maturities from 10/15/2032 until 3/15/2038 (e) | 44,024,675 | 43,986,545 |
6.0%, with various maturities from 4/15/2013 until 6/15/2038 (e) | 52,164,417 | 53,113,097 |
6.5%, with various maturities from 3/15/2014 until 6/15/2038 | 12,306,885 | 12,767,742 |
7.0%, with various maturities from 10/15/2026 until 5/20/2038 | 4,743,595 | 5,007,393 |
7.5%, with various maturities from 4/15/2026 until 1/15/2037 | 1,965,031 | 2,090,916 |
9.5%, with various maturities from 6/15/2013 until 12/15/2022 | 52,129 | 57,251 |
10.0%, with various maturities from 2/15/2016 until 3/15/2016 | 15,962 | 17,813 |
Total Agencies Backed by the Full Faith and Credit of the US Government (Cost $132,590,204) | 130,887,631 |
|
Agencies Not Backed by the Full Faith and Credit of the US Government 32.4% |
Federal Home Loan Bank, 3.625%, 5/29/2013 | 24,000,000 | 23,429,189 |
Federal Home Loan Mortgage Corp.: | | |
3.75%, 6/28/2013 | 20,000,000 | 19,593,744 |
4.5%, 5/1/2019 | 50,204 | 49,313 |
5.5%, 2/1/2017 | 42,854 | 43,572 |
5.865%*, 11/1/2036 | 1,191,516 | 1,219,292 |
5.874%*, 9/1/2036 | 997,391 | 1,019,211 |
6.5%, 9/1/2032 | 144,320 | 150,042 |
7.0%, with various maturities from 6/1/2032 until 8/1/2035 | 507,526 | 529,068 |
8.0%, 11/1/2030 | 725 | 771 |
8.5%, 7/1/2030 | 2,499 | 2,696 |
Federal National Mortgage Association: | | |
5.0%, 10/1/2033 | 609,386 | 587,629 |
5.375%, 6/12/2017 | 16,000,000 | 16,722,696 |
6.5%, 1/1/2038 | 1,878,352 | 1,934,996 |
7.0%, 9/1/2013 | 515 | 533 |
8.0%, 12/1/2024 | 11,863 | 12,688 |
8.45%*, 2/27/2023 | 2,000,000 | 2,000,000 |
Total Agencies Not Backed by the Full Faith and Credit of the US Government (Cost $66,955,637) | 67,295,440 |
| Principal Amount ($) | Value ($) |
| |
Collateralized Mortgage Obligations 17.3% |
Agencies Backed by the Full Faith and Credit of the US Government 11.7% |
Government National Mortgage Association: | | |
"JO", Series 2006-22, Principal Only, Zero Coupon, 4/20/2036 | 1,030,469 | 765,640 |
"OD", Series 2006-36, Principal Only, Zero Coupon, 7/16/2036 | 506,235 | 416,148 |
"FH", Series 1999-18, 2.721%*, 5/16/2029 | 2,422,481 | 2,354,823 |
"FE", Series 2003-57, 2.771%*, 3/16/2033 | 160,116 | 155,843 |
"FB", Series 2001-28, 2.971%*, 6/16/2031 | 719,069 | 712,152 |
"SA", Series 2002-65, Interest Only, 3.768%*, 9/20/2032 | 4,623,611 | 302,289 |
"SB", Series 2008-36, Interest Only, 3.788%*, 4/20/2038 | 2,927,670 | 233,921 |
"SP", Series 2005-61, Interest Only, 3.809%*, 8/16/2035 | 1,445,102 | 107,839 |
"NS", Series 2007-72, Interest Only, 4.048%*, 11/20/2037 | 823,068 | 52,427 |
"GS", Series 2006-16, Interest Only, 4.508%*, 4/20/2036 | 1,500,306 | 140,326 |
"KS", Series 2004-96, Interest Only, 4.518%*, 7/20/2034 | 777,038 | 72,565 |
"GD", Series 2004-26, 5.0%, 11/16/2032 | 2,184,000 | 2,140,081 |
"LG", Series 2003- 70, 5.0%, 8/20/2033 | 4,000,000 | 3,767,274 |
"KE", Series 2004-19, 5.0%, 3/16/2034 | 500,000 | 453,173 |
"ZM", Series 2004-24, 5.0%, 4/20/2034 | 1,846,636 | 1,664,593 |
"LE", Series 2004-87, 5.0%, 10/20/2034 | 1,000,000 | 917,531 |
"ZB", Series 2005-15, 5.0%, 2/16/2035 | 1,299,047 | 1,143,882 |
"CK", Series 2007-31, 5.0%, 5/16/2037 | 1,000,000 | 969,069 |
"SJ", Series 1999-43, Interest Only, 5.288%*, 11/16/2029 | 369,790 | 37,472 |
"ZB", Series 2003-85, 5.5%, 10/20/2033 | 2,468,737 | 2,265,383 |
"B", Series 2005-88, 5.5%, 11/20/2035 | 1,804,000 | 1,736,463 |
"ZA", Series 2006-7, 5.5%, 2/20/2036 | 1,932,218 | 1,770,899 |
"PH", Series 2002- 84, 6.0%, 11/16/2032 | 500,000 | 500,740 |
"PB", Series 2001-53, 6.5%, 11/20/2031 | 1,500,000 | 1,582,937 |
| 24,263,470 |
Agencies Not Backed by the Full Faith and Credit of the US Government 5.6% |
Federal Home Loan Mortgage Corp.: | | |
"MO", Series 3171, Principal Only, Zero Coupon, 6/15/2036 | 866,401 | 643,825 |
"AO", Series 3236, Principal Only, Zero Coupon, 11/15/2036 | 806,225 | 588,242 |
| Principal Amount ($) | Value ($) |
| |
"FT", Series 3346, 2.821%*, 10/15/2033 | 2,706,400 | 2,644,958 |
"SL", Series 2882, Interest Only, 4.729%*, 10/15/2034 | 1,305,348 | 132,795 |
"GZ", Series 2906, 5.0%, 9/15/2034 | 1,488,516 | 1,269,354 |
"ST", Series 2411, Interest Only, 6.279%*, 6/15/2021 | 4,799,046 | 407,557 |
"1A1", Series T-59, 6.5%, 10/25/2043 | 1,971,929 | 1,993,697 |
Federal National Mortgage Association: | | |
"LO", Series 2005-50, Principal Only, Zero Coupon, 6/25/2035 | 1,077,541 | 565,538 |
"ZA", Series 2008-24, 5.0%, 4/25/2038 | 529,389 | 433,995 |
"AN", Series 2007-108, 8.942%*, 11/25/2037 | 2,627,730 | 2,883,342 |
| 11,563,303 |
Total Collateralized Mortgage Obligations (Cost $36,158,352) | 35,826,773 |
| Principal Amount ($) | Value ($) |
| |
US Treasury Obligations 0.4% |
US Treasury Bill, 1.08%**, 7/17/2008 (a) (Cost $886,574) | 887,000 | 886,443 |
|
Shares
| Value ($) |
| |
Securities Lending Collateral 1.5% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $3,052,500) | 3,052,500 | 3,052,500 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $239,643,267)+ | 114.6 | 237,948,787 |
Other Assets and Liabilities, Net (d) | (14.6) | (30,269,265) |
Net Assets | 100.0 | 207,679,522 |
* 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 June 30, 2008.** Annualized yield at time of purchase; not a coupon rate.+ The cost for federal income tax purposes was $239,674,210. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $1,725,423. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $1,082,722 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,808,145.(a) At June 30, 2008, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.(d) Included in other assets and liabilities net is a pending sale, amounting to $3,008,700 that is on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $3,008,700 which is 1.4% of net assets.(e) Mortgage dollar rolls included.Interest Only: Interest Only (IO) bonds represent the "interest only" portion of payments on a pool of underlying mortgages or mortgage-backed securities. IO securities are subject to prepayment risk of the pool of underlying mortgages.
Principal Only: Principal Only (PO) bonds represent the "principal only" portion of payments on a pool of underlying mortgages or mortgage-backed securities.
At June 30, 2008, open futures contracts purchased were as follows:
Futures | Expiration
Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation ($) |
10 Year Interest Rate Swap
| 9/15/2008 | 19 | 2,052,741 | 2,089,110 | 36,369 |
At June 30, 2008, open futures contracts sold were as follows:
Futures | Expiration
Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Depreciation ($) |
10 Year US Treasury Note
| 9/19/2008 | 448 | 50,551,769 | 51,037,002 | (485,233) |
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 Home Loan Mortgage Corp., Federal National Mortgage Association and Government National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Depreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 3,052,500 | $ (448,864) |
Level 2 — Other Significant Observable Inputs
| 234,896,287 | — |
Level 3 — Significant Unobservable Inputs
| — | — |
Total | $ 237,948,787 | $ (448,864) |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as future contracts, which are valued at the unrealized appreciation/depreciation on the instrument.Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments
Investments in securities, at value (cost $236,590,767) — including $3,008,700 of securities loaned | $ 234,896,287 |
Investments in Daily Assets Fund Institutional (cost $3,052,500)* | 3,052,500 |
Total investments, at value (cost $239,643,267)
| 237,948,787 |
Cash
| 8,937 |
Receivable for investments sold
| 83,310,105 |
Receivable for Portfolio shares sold
| 9,745 |
Interest receivable
| 1,144,194 |
Other assets
| 3,508 |
Total assets
| 322,425,276 |
Liabilities |
Payable upon return of securities loaned
| 3,052,500 |
Payable for investments purchased
| 59,625,275 |
Payable for investments purchased — mortgage dollar rolls
| 50,462,846 |
Payable for Portfolio shares redeemed
| 837,194 |
Notes payable
| 450,000 |
Payable for daily variation margin on open futures contracts
| 34,839 |
Accrued management fee
| 80,632 |
Other accrued expenses and payables
| 202,468 |
Total liabilities
| 114,745,754 |
Net assets, at value | $ 207,679,522 |
Net Assets Consist of |
Undistributed net investment income
| 4,875,255 |
Net unrealized appreciation (depreciation) on:
Investments | (1,694,480) |
Futures | (448,864) |
Accumulated net realized gain (loss)
| (1,590,664) |
Paid-in capital
| 206,538,275 |
Net assets, at value | $ 207,679,522 |
Class A Net Asset Value, offering and redemption price per share ($200,416,837 ÷ 16,692,425 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 12.01 |
Class B Net Asset Value, offering and redemption price per share ($7,262,685 ÷ 605,123 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 12.00 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Interest
| $ 5,492,407 |
Interest — Cash Management QP Trust
| 149,016 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 10,348 |
Total Income
| 5,651,771 |
Expenses:
Management fee
| 561,015 |
Administration fee
| 35,710 |
Custodian fee
| 8,486 |
Distribution and service fees (Class B)
| 8,790 |
Services to shareholders
| 701 |
Record keeping fees (Class B)
| 3,359 |
Professional fees
| 40,699 |
Trustees' fees and expenses
| 22,936 |
Reports to shareholders and shareholder meeting
| 74,965 |
Interest expense
| 1,531 |
Other
| 6,839 |
Total expenses before expense reductions
| 765,031 |
Expense reductions
| (18,359) |
Total expenses after expense reductions
| 746,672 |
Net investment income | 4,905,099 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 714,163 |
Futures
| 376,223 |
| 1,090,386 |
Change in net unrealized appreciation (depreciation) on:
Investments
| (2,361,157) |
Futures
| (239,689) |
| (2,600,846) |
Net gain (loss) | (1,510,460) |
Net increase (decrease) in net assets resulting from operations | $ 3,394,639 |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income
| $ 4,905,099 | $ 10,439,394 |
Net realized gain (loss)
| 1,090,386 | (1,286,321) |
Change in net unrealized appreciation (depreciation)
| (2,600,846) | 3,273,665 |
Net increase (decrease) in net assets resulting from operations
| 3,394,639 | 12,426,738 |
Distributions to shareholders from:
Net investment income:
Class A | (9,943,580) | (10,212,645) |
Class B | (313,588) | (1,469,899) |
Total distributions
| (10,257,168) | (11,682,544) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 33,658,259 | 30,397,968 |
Reinvestment of distributions
| 9,943,580 | 10,212,645 |
Cost of shares redeemed
| (35,607,015) | (53,955,468) |
Net increase (decrease) in net assets from Class A share transactions
| 7,994,824 | (13,344,855) |
Class B Proceeds from shares sold
| 3,452,185 | 9,440,856 |
Reinvestment of distributions
| 313,588 | 1,469,899 |
Cost of shares redeemed
| (1,248,717) | (38,336,134) |
Net increase (decrease) in net assets from Class B share transactions
| 2,517,056 | (27,425,379) |
Increase (decrease) in net assets | 3,649,351 | (40,026,040) |
Net assets at beginning of period
| 204,030,171 | 244,056,211 |
Net assets at end of period (including undistributed net investment income of $4,875,255 and $10,227,324, respectively)
| $ 207,679,522 | $ 204,030,171 |
Other Information |
Class A Shares outstanding at beginning of period
| 16,080,508 | 17,174,275 |
Shares sold
| 2,709,292 | 2,509,518 |
Shares issued to shareholders in reinvestment of distributions
| 823,144 | 862,554 |
Shares redeemed
| (2,920,520) | (4,465,839) |
Net increase (decrease) in Class A shares
| 611,916 | (1,093,767) |
Shares outstanding at end of period
| 16,692,424 | 16,080,508 |
Class B Shares outstanding at beginning of period
| 403,813 | 2,706,547 |
Shares sold
| 277,543 | 788,569 |
Shares issued to shareholders in reinvestment of distributions
| 25,938 | 124,042 |
Shares redeemed
| (102,171) | (3,215,345) |
Net increase (decrease) in Class B shares
| 201,310 | (2,302,734) |
Shares outstanding at end of period
| 605,123 | 403,813 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.38 | $ 12.28 | $ 12.26 | $ 12.55 | $ 12.54 | $ 12.84 |
Income (loss) from investment operations: Net investment incomeb | .28 | .58 | .55 | .51 | .44 | .31 |
Net realized and unrealized gain (loss) | (.07) | .12 | (.06) | (.20) | .03 | (.04) |
Total from investment operations | .21 | .70 | .49 | .31 | .47 | .27 |
Less distributions from: Net investment income | (.58) | (.60) | (.47) | (.50) | (.35) | (.35) |
Net realized gains | — | — | — | (.10) | (.11) | (.22) |
Total distributions | (.58) | (.60) | (.47) | (.60) | (.46) | (.57) |
Net asset value, end of period | $ 12.01 | $ 12.38 | $ 12.28 | $ 12.26 | $ 12.55 | $ 12.54 |
Total Return (%)
| 1.63c** | 5.95c | 4.16 | 2.57 | 3.75 | 2.26 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 200 | 199 | 211 | 243 | 280 | 347 |
Ratio of expenses before expense reductions(%)
| .67* | .66 | .67 | .63 | .61 | .61 |
Ratio of expenses after expense reductions (%)
| .66* | .63 | .67 | .63 | .61 | .61 |
Ratio of net investment income (loss) (%)
| 4.55* | 4.77 | 4.56 | 4.17 | 3.59 | 2.50 |
Portfolio turnover rate (%)d
| 230** | 465 | 241 | 191 | 226 | 511 |
a For the six months ended June 30, 2008 (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 portfolio turnover rate including mortgage dollar roll transactions was 397%** for the period ended June 30, 2008 and 629%, 403%, 325%, 391% and 536% for the years ended December 31, 2007, December 31, 2006, December 31, 2005, December 31, 2004 and December 31, 2003, respectively.
* Annualized ** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.35 | $ 12.25 | $ 12.23 | $ 12.52 | $ 12.51 | $ 12.82 |
Income (loss) from investment operations: Net investment incomeb | .26 | .53 | .50 | .47 | .40 | .27 |
Net realized and unrealized gain (loss) | (.08) | .12 | (.06) | (.21) | .02 | (.04) |
Total from investment operations | .18 | .65 | .44 | .26 | .42 | .23 |
Less distributions from: Net investment income | (.53) | (.55) | (.42) | (.45) | (.30) | (.32) |
Net realized gains | — | — | — | (.10) | (.11) | (.22) |
Total distributions | (.53) | (.55) | (.42) | (.55) | (.41) | (.54) |
Net asset value, end of period | $ 12.00 | $ 12.35 | $ 12.25 | $ 12.23 | $ 12.52 | $ 12.51 |
Total Return (%)
| 1.47c** | 5.43c | 3.74 | 2.24 | 3.36 | 1.83 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 7 | 5 | 33 | 47 | 49 | 38 |
Ratio of expenses before expense reductions(%)
| 1.01* | 1.04 | 1.07 | 1.02 | 1.00 | .98 |
Ratio of expenses after expense reductions (%)
| 1.00* | 1.01 | 1.07 | 1.02 | 1.00 | .98 |
Ratio of net investment income (%)
| 4.21* | 4.39 | 4.16 | 3.78 | 3.21 | 2.13 |
Portfolio turnover rate (%)d
| 230** | 465 | 241 | 191 | 226 | 511 |
a For the six months ended June 30, 2008 (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 portfolio turnover rate including mortgage dollar roll transactions was 397%** for the period ended June 30, 2008 and 629%, 403%, 325%, 391% and 536% for the years ended December 31, 2007, December 31, 2006, December 31, 2005, December 31, 2004 and December 31, 2003, respectively.
* Annualized ** Not annualized
|
Performance Summary June 30, 2008
DWS Growth Allocation VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The total annual Portfolio direct operating expense ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 is 0.59% for Class B shares. The total Portfolio direct and estimated indirect Underlying DWS Portfolio operating expense ratio, gross of any fee waivers or expense reimbursements, as presented in the fee table of the prospectus dated May 1, 2008 is 1.32% for Class B shares. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual equity and bond funds whose yields and market values fluctuate, so that your investment may be worth more or less than its original cost. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the Portfolio 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. Investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the Portfolio could suffer losses on its derivative positions. 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 Portfolio, can decline and the investor can lose principal value. An investment in underlying money market investments is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any government agency. Although money market investments seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these investments. Please read this Portfolio's prospectus for specific details regarding its risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Growth Allocation VIP from 8/16/2004 to 6/30/2008 |
[] DWS Growth Allocation VIP — Class B [] Russell 1000® Index [] Lehman Brothers US Aggregate Index | 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 Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
|
|
Comparative Results |
DWS Growth Allocation VIP | 6-Month‡ | 1-Year | 3-Year | Life of Portfolio* |
Class B | Growth of $10,000
| $9,305 | $9,356 | $11,688 | $12,942 |
Average annual total return
| -6.95% | -6.44% | 5.34% | 6.89% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $12,814 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 6.68% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $11,702 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 4.19% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on August 16, 2004. Index returns began on August 31, 2004.Information About Your Portfolio's Expenses
DWS Growth Allocation VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In addition to the ongoing expenses which the Portfolio bears directly, the Portfolio's shareholders indirectly bear the expense of the Underlying DWS Portfolios in which the Portfolio invests. The Portfolio's estimated indirect expense from investing in the Underlying DWS Portfolios is based on the expense ratios from the Underlying DWS Portfolio's most recent shareholder report. In the most recent six-month period, the Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Direct Portfolio Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 930.50 |
Expenses Paid per $1,000*
| | $ 3.46 |
Hypothetical 5% Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 1,021.28 |
Expenses Paid per $1,000*
| | $ 3.62 |
Direct Portfolio Expenses and Acquired Portfolios (Underlying Portfolios) Fees and Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 930.50 |
Expenses Paid per $1,000**
| | $ 7.25 |
Hypothetical 5% Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 1,017.35 |
Expenses Paid per $1,000**
| | $ 7.57 |
* Expenses are equal to the Portfolio's annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.** Expenses are equal to the Portfolio's annualized expense ratio plus the Acquired Portfolios (Underlying Portfolios) Fees and Expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | | Class B |
Direct Portfolio Expense Ratio
| | .72% |
Acquired Portfolios (Underlying Portfolios) Fees and Expenses
| | .79% |
Net Annual Portfolio and Acquired Portfolios (Underlying Portfolios) Operating Expenses
| | 1.51% |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Growth Allocation VIP
For the six months ended June 30, 2008, the DWS Growth Allocation VIP's Class A shares (unadjusted for contract charges) had a return of -6.95%. Since this Portfolio invests in stock and bond funds in several different categories, performance is analyzed by comparing the Portfolio's return with indexes that represent each asset class. For the six-month period, the Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a return of -11.05%, and the Lehman Brothers US Aggregate Index, which is considered indicative of broad bond market trends, returned 1.13%. The Portfolio's return was below that of its bond benchmark but above the returns of its equity benchmark, the Russell 1000® Index, which had a return of -11.20%.
There are three major determinants of the Portfolio's performance; strategic asset allocation, tactical asset allocation, and the performance of the underlying funds in which the Portfolio's assets are invested.
Strategic asset allocation refers to the longer-term allocation among asset classes. The Portfolio's allocation between equity and fixed income funds remained close to its target of 75% equity and 25% fixed income during the first half of 2008, but with equities overweighted throughout the period.1 This overweight in equities detracted from performance, as fixed-income securities, particularly short-term securities such as money market securities, performed better than stocks. Within equities the allocation was tilted toward the US large cap category and international equities. While the international equity overweight helped relative performance within the equity portion of the Portfolio, the large cap equity overweight detracted from performance.
Tactical allocation decisions are short-term underweights or overweights of particular asset classes relative to their longer-term strategic asset allocation targets. Overall tactical asset allocation slightly detracted from performance.
Performance of each of the underlying funds is compared to a suitable benchmark for that particular fund's asset class and management style. The underlying funds as a group slightly detracted from performance relative to their respective benchmarks. In particular, the DWS Core Fixed Income VIP significantly underperformed the Lehman Brothers US Aggregate Index. Although most of the equity funds had negative returns, equity funds overall added value by performing better than their respective benchmarks; performance of the DWS Large Cap Value VIP was especially strong.
Inna Okounkova Robert Wang
Portfolio Managers, Deutsche Investment Management Americas Inc.
The 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. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
The Lehman Brothers US Aggregate Index is an unmanaged market-value-weighted measure of Treasury issues, corporate bond issues and mortgage securities. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. It is not possible to invest directly into an index.
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 portfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Growth Allocation VIP
Asset Allocation (As a % of Investment Portfolio) | 6/30/08 | 12/31/07 |
| | |
Equity | 74% | 79% |
Fixed Income — Bonds | 22% | 19% |
Fixed Income — Money Market | 3% | 2% |
Exchange Traded Fund | 1% | — |
| 100% | 100% |
Target Allocation (As a % of Investment Portfolio) | 6/30/08 | 12/31/07 |
| | |
Fixed Income Portfolios | 25% | 25% |
Equity Portfolios | 75% | 75% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 143. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Growth Allocation VIP
| Shares | Value ($) |
| |
Equity Funds 74.1% |
DWS Blue Chip VIP "A" | 2,917 | 30,567 |
DWS Capital Growth VIP "A" | 48,023 | 913,390 |
DWS Davis Venture Value VIP "A" | 228,182 | 2,535,105 |
DWS Dreman High Return Equity VIP "A" | 7,233 | 68,858 |
DWS Dreman Small Mid Cap Value VIP "A" | 104,777 | 1,129,495 |
DWS Equity 500 Index VIP "A" | 1,711 | 22,853 |
DWS Global Opportunities VIP "A" | 6,602 | 91,300 |
DWS Global Thematic VIP "A" | 78,611 | 772,751 |
DWS Growth & Income VIP "A" | 389,249 | 2,880,443 |
DWS Health Care VIP "A" | 72,145 | 826,778 |
DWS International Select Equity VIP "A" | 4,324 | 49,383 |
DWS International VIP "A" | 306,007 | 3,586,400 |
DWS Janus Growth & Income VIP "A" | 2,376 | 24,356 |
DWS Japan Equity Fund "S" | 3,791 | 42,915 |
DWS Large Cap Value VIP "A" | 479,946 | 6,503,270 |
DWS Mid Cap Growth VIP "A" | 1,913 | 23,469 |
DWS RREEF Global Real Estate Securities Fund "Institutional" | 4,278 | 38,156 |
DWS Small Cap Growth VIP "A" | 56,293 | 711,539 |
DWS Technology VIP "A" | 110,996 | 1,004,516 |
Total Equity Funds (Cost $25,867,322) | 21,255,544 |
| Shares | Value ($) |
| |
Fixed Income — Bond Funds 22.6% |
DWS Core Fixed Income VIP "A" | 569,002 | 6,133,839 |
DWS Government & Agency Securities VIP "A" | 313 | 3,757 |
DWS High Income VIP "A" | 49,014 | 338,195 |
Total Fixed Income — Bond Funds (Cost $6,941,517) | 6,475,791 |
|
Fixed Income — Money Market Fund 2.7% |
Cash Management QP Trust (Cost $785,113) | 785,113 | 785,113 |
|
Exchange Traded Fund 0.7% |
iShares MSCI United Kingdom Index Fund (Cost $216,807) | 9,653 | 201,169 |
|
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $33,810,759)+ | 100.1 | 28,717,617 |
Other Assets and Liabilities, Net | (0.1) | (42,033) |
Net Assets | 100.0 | 28,675,584 |
+ The cost for federal income tax purposes was $33,815,099. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $5,097,482. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $2,461 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $5,099,943.MSCI: Morgan Stanley Capital International
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Market Value |
Level 1 — Quoted Prices
| $ 28,717,617 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 28,717,617 |
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in Underlying Affiliated Portfolios, at value (cost $32,808,839) | $ 27,731,335 |
Investment in Non-affiliated fund (cost $216,807) | 201,169 |
Investment in Cash Management QP Trust (cost $785,113) | 785,113 |
Total investments, at value (cost $33,810,759)
| 28,717,617 |
Interest receivable
| 1,597 |
Receivable for Portfolio shares sold
| 523 |
Due from Advisor
| 7,326 |
Other assets
| 1,214 |
Total assets
| 28,728,277 |
Liabilities |
Accrued management fee
| 696 |
Other accrued expenses and payables
| 51,997 |
Total liabilities
| 52,693 |
Net assets, at value | $ 28,675,584 |
Net Assets Consist of |
Undistributed net investment income
| 4,526,750 |
Net unrealized appreciation (depreciation) on investments
| (5,093,142) |
Accumulated net realized gain (loss)
| 21,474,114 |
Paid-in capital
| 7,767,862 |
Net assets, at value | $ 28,675,584 |
Class B Net Asset Value, offering and redemption price per share ($28,675,584÷ 3,221,145 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 8.90 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Income distributions from Underlying Affiliated Portfolios
| $ 774,679 |
Dividends
| 4,579 |
Interest — Cash Management QP Trust
| 4,756 |
Total Income
| 784,014 |
Expenses:
Management fee
| 18,330 |
Administration fee
| 5,069 |
Services to shareholders
| 35 |
Custodian and accounting fees
| 17,906 |
Distribution and service fees
| 37,730 |
Record keeping fees
| 16,459 |
Audit and tax fees
| 21,905 |
Legal
| 12,308 |
Trustees' fees and expenses
| 7,767 |
Reports to shareholders and shareholder meeting
| 8,266 |
Other
| 2,245 |
Total expenses before expense reductions
| 148,020 |
Expense reductions
| (35,145) |
Total expenses after expense reductions
| 112,875 |
Net investment income (loss) | 671,139 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| (643,531) |
Capital gain distributions from Underlying Affiliated Portfolios
| 4,263,632 |
| 3,620,101 |
Change in net unrealized appreciation (depreciation) on investments
| (6,553,147) |
Net gain (loss) | (2,933,046) |
Net increase (decrease) in net assets resulting from operations | $ (2,261,907) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 671,139 | $ 3,174,829 |
Net realized gain (loss)
| 3,620,101 | 26,468,783 |
Change in net unrealized appreciation (depreciation)
| (6,553,147) | (16,832,031) |
Net increase (decrease) in net assets resulting from operations
| (2,261,907) | 12,811,581 |
Distributions to shareholders from:
Net investment income:
Class B | (1,288,633) | (4,126,872) |
Net realized gains:
Class B | (5,948,945) | (10,532,122) |
Total share distributions
| (7,237,578) | (14,658,994) |
Portfolio share transactions:
Class B Proceeds from shares sold
| 739,586 | 5,915,221 |
Reinvestment of distributions
| 7,237,578 | 14,658,994 |
Cost of shares redeemed
| (2,716,359) | (194,804,275) |
Net increase (decrease) in net assets from Class B share transactions
| 5,260,805 | (174,230,060) |
Increase (decrease) in net assets | (4,238,680) | (176,077,473) |
Net assets at beginning of period
| 32,914,264 | 208,991,737 |
Net assets at end of period (including undistributed net investment income of $4,526,750 and $5,144,244, respectively)
| $ 28,675,584 | $ 32,914,264 |
Other Information |
Class B Shares outstanding at beginning of period
| 2,590,950 | 16,154,379 |
Shares sold
| 70,078 | 462,860 |
Shares issued to shareholders in reinvestment of distributions
| 820,587 | 1,205,509 |
Shares redeemed
| (260,470) | (15,231,798) |
Net increase (decrease) in Class B shares
| 630,195 | (13,563,429) |
Shares outstanding at end of period
| 3,221,145 | 2,590,950 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004b |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.70 | $ 12.94 | $ 11.67 | $ 11.03 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)c | .27 | .21 | .14 | .11 | (.03) |
Net realized and unrealized gain (loss) | (1.18) | .47 | 1.33 | .55 | 1.06 |
Total from investment operations | (.91) | .68 | 1.47 | .66 | 1.03 |
Less distributions from: Net investment income | (.51) | (.26) | (.10) | — | — |
Net realized gains | (2.38) | (.66) | (.10) | (.02) | — |
Total distributions | (2.89) | (.92) | (.20) | (.02) | — |
Net asset value, end of period | $ 8.90 | $ 12.70 | $ 12.94 | $ 11.67 | $ 11.03 |
Total Return (%)d,e
| (6.95)** | 5.58 | 12.66 | 6.02 | 10.30** |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 29 | 33 | 209 | 197 | 47 |
Ratio of expenses before expense reductions (%)f
| .95* | .63 | .62 | .65 | 1.38* |
Ratio of expenses after expense reductions (%)f
| .72* | .58 | .57 | .60 | 0.75* |
Ratio of net investment income (loss) (%)
| 2.21g | 1.60 | 1.20 | 1.01 | (0.69)* |
Portfolio turnover rate (%)
| 17** | 31 | 45 | 20 | 15 |
a For the six months ended June 30, 2008 (Unaudited).
b For the period from August 16, 2004 (commencement of operations) to December 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 Total return would have been lower if the Advisor had not reduced certain of the Underlying Portfolios' expenses.
f The Portfolio invests in other DWS Portfolios and indirectly bears its proportionate share of fees and expenses incurred by the Underlying DWS Portfolios in which the Portfolio is invested. This ratio does not include these indirect fees and expenses.
g The ratio for the six months ended June 30, 2008 has not been annualized since the Portfolio believes it would not be appropriate because the Portfolio's income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS High Income VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.69% and 0.94% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
Investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes and market risks. Additionally, the Portfolio may invest in lower-quality and nonrated securities which present greater risk of loss of principal and interest than higher-quality securities. All of these factors may result in greater share price volatility. 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 investment, can decline and the investor can lose principal value. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in DWS High Income VIP |
[] DWS High Income VIP — Class A [] Credit Suisse High Yield Index | The Credit Suisse High Yield Index is an unmanaged index that is market-weighted, including publicly traded bonds having a rating below BBB by Standard & Poor's and Moody's. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS High Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $9,865 | $9,667 | $11,333 | $14,049 | $14,833 |
Average annual total return
| -1.35% | -3.33% | 4.26% | 7.04% | 4.02% |
Credit Suisse High Yield Index
| Growth of $10,000
| $9,886 | $9,788 | $11,525 | $14,179 | $17,129 |
Average annual total return
| -1.14% | -2.12% | 4.84% | 7.23% | 5.53% |
DWS High Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,837 | $9,627 | $11,175 | $13,767 | $16,060 |
Average annual total return
| -1.63% | -3.73% | 3.77% | 6.60% | 8.22% |
Credit Suisse High Yield Index
| Growth of $10,000
| $9,886 | $9,788 | $11,525 | $14,179 | $17,123 |
Average annual total return
| -1.14% | -2.12% | 4.84% | 7.23% | 9.37% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS High Income VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 986.50 | | $ 983.70 | |
Expenses Paid per $1,000*
| $ 3.95 | | $ 5.67 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.89 | | $ 1,019.14 | |
Expenses Paid per $1,000*
| $ 4.02 | | $ 5.77 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS High Income VIP
| .80% | | 1.15% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS High Income VIP
Concerns that problems in the housing and credit markets were beginning to spread to the broader economy pressured the performance of high-yield bonds during the first half of the year. The market was highly volatile, reflecting the rapid shifts in investor sentiment.
The total return of the Portfolio's Class A shares was -1.35% (unadjusted for contract charges) during the semiannual period. In comparison, the Credit Suisse High Yield Index returned -1.14%. The Portfolio's performance was helped by a position in DRS Technologies, a defense-related firm that was bid for by the investment-grade-rated company Finmeccanica. Also helping performance were bonds issued by Kansas City Southern Railway Co., K. Hovnanian Enterprises, Inc., French Lick Resort Casino Inc. (which were tendered at a premium) and Vanguard Health Holding Co. LLC. Notable detractors included Lyondell Chemical, Young Broadcasting Inc. and the Portfolio's lack of a position in two benchmark components that outperformed: Alltel and Dollar General.
While the past six months were characterized by an unstable environment for the high-yield market, we believe investors are being adequately compensated for the elevated level of risk given that yield spreads are above the historical average.1 However, given the ongoing uncertainty in the global financial markets, we continue to believe that the key to outperformance throughout 2008 will be the avoidance of individual credit defaults. We are confident that our bottom-up, research-driven strategy is well positioned to navigate this challenging environment.
Gary Sullivan, CFA
Portfolio Manager
Deutsche Investment Management Americas Inc.
The Credit Suisse High Yield Index is an unmanaged index that is market-weighted, including publicly traded bonds having a rating below BBB by Standard & Poor's and Moody's. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 The yield spread is the difference between the yield of a security and the yield of a comparable duration Treasury. A large spread indicates that investors require yields substantially above those of Treasuries in order to invest in lower quality bonds. This is generally indicative of a higher-risk environment. A smaller spread generally indicates a more positive environment, since investors are less concerned about risk and therefore willing to accept lower yields. A drop in the yield spread is a positive.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS High Income VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Corporate Bonds | 93% | 89% |
Senior Loans | 7% | 7% |
Cash Equivalents | — | 3% |
Other Investments | — | 1% |
| 100% | 100% |
Bond Diversification (Excludes Cash Equivalents and Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Consumer Discretionary | 18% | 22% |
Energy | 15% | 11% |
Materials | 13% | 11% |
Industrials | 12% | 13% |
Financials | 11% | 14% |
Telecommunication Services | 9% | 8% |
Utilities | 8% | 7% |
Health Care | 7% | 6% |
Information Technology | 4% | 4% |
Consumer Staples | 3% | 4% |
| 100% | 100% |
Quality | 6/30/08 | 12/31/07 |
| | |
Cash Equivalents | 1% | 3% |
BBB | 8% | 4% |
BB | 33% | 29% |
B | 51% | 51% |
CCC | 6% | 13% |
D | 1% | — |
| 100% | 100% |
Effective Maturity (Excludes Cash Equivalents and Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Under 1 year | 4% | 6% |
1-4.99 years | 39% | 32% |
5-9.99 years | 51% | 56% |
10-14.99 years | 2% | 2% |
15 years or greater | 4% | 4% |
| 100% | 100% |
Asset allocation, bond diversification and foreign bonds diversification, quality and effective maturity are subject to change.
Weighted average effective maturity: 6.0 years and 6.2 years, respectively.
Asset allocation, bond diversification and foreign bonds diversification and quality are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 153. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com as of each calendar quarter-end on or after the last day of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS High Income VIP
| Principal Amount ($)(a) | Value ($) |
| |
Corporate Bonds 90.2% |
Consumer Discretionary 16.4% |
AMC Entertainment, Inc., 8.0%, 3/1/2014 | 1,305,000 | 1,158,187 |
American Achievement Corp., 8.25%, 4/1/2012 | 255,000 | 249,900 |
American Achievement Group Holding Corp., 14.75%, 10/1/2012 (PIK) (b) | 524,410 | 482,457 |
Asbury Automotive
Group, Inc.: | | |
7.625%, 3/15/2017 | 590,000 | 474,950 |
8.0%, 3/15/2014 | 250,000 | 216,250 |
Ashtead Holdings PLC, 144A, 8.625%, 8/1/2015 (b) | 420,000 | 365,400 |
Burlington Coat Factory Warehouse Corp., 11.125%, 4/15/2014 | 230,000 | 186,300 |
Cablevision Systems Corp., Series B, 7.133%***, 4/1/2009 | 335,000 | 335,000 |
CanWest MediaWorks LP, 144A, 9.25%, 8/1/2015 | 380,000 | 309,700 |
Carrols Corp.,
9.0%, 1/15/2013 (b) | 250,000 | 217,500 |
Charter Communications Holdings LLC, 11.0%, 10/1/2015 (b) | 312,000 | 231,270 |
Charter Communications Operating LLC, 144A, 10.875%, 9/15/2014 | 930,000 | 955,575 |
Cirsa Capital Luxembourg, 144A, 7.875%, 7/15/2012 EUR | 220,000 | 287,495 |
Cooper-Standard Automotive, Inc., 7.0%, 12/15/2012 | 270,000 | 225,450 |
CSC Holdings, Inc.: | | |
Series B,
7.625%, 4/1/2011 | 355,000 | 347,900 |
Series B,
8.125%, 7/15/2009 | 450,000 | 453,375 |
Series B,
8.125%, 8/15/2009 | 765,000 | 770,737 |
Denny's Holdings, Inc., 10.0%, 10/1/2012 | 165,000 | 160,050 |
DIRECTV Holdings LLC, 144A, 7.625%, 5/15/2016 | 1,170,000 | 1,152,450 |
Dollarama Group LP, 8.883%***, 8/15/2012 | 387,000 | 361,845 |
EchoStar DBS Corp.: | | |
6.375%, 10/1/2011 | 555,000 | 535,575 |
6.625%, 10/1/2014 | 665,000 | 615,125 |
7.125%, 2/1/2016 | 465,000 | 428,962 |
Fontainebleau Las Vegas Holdings LLC, 144A, 10.25%, 6/15/2015 | 490,000 | 318,500 |
General Motors Corp.: | | |
7.2%, 1/15/2011 (b) | 1,480,000 | 1,139,600 |
7.4%, 9/1/2025 | 270,000 | 139,050 |
Great Canadian Gaming Corp., 144A, 7.25%, 2/15/2015 | 505,000 | 489,850 |
Group 1 Automotive, Inc., 8.25%, 8/15/2013 | 250,000 | 233,750 |
| Principal Amount ($)(a) | Value ($) |
| |
Hanesbrands, Inc., Series B, 6.508%***, 12/15/2014 | 755,000 | 702,150 |
Hertz Corp.: | | |
8.875%, 1/1/2014 | 1,180,000 | 1,079,700 |
10.5%, 1/1/2016 (b) | 310,000 | 282,100 |
Idearc, Inc., 8.0%, 11/15/2016 | 1,765,000 | 1,109,744 |
Indianapolis Downs LLC, 144A, 11.0%, 11/1/2012 | 330,000 | 300,300 |
Isle of Capri Casinos, Inc., 7.0%, 3/1/2014 | 475,000 | 334,875 |
Jarden Corp., 7.5%, 5/1/2017 (b) | 420,000 | 365,400 |
Kabel Deutschland GmbH, 10.625%, 7/1/2014 | 115,000 | 117,588 |
Lamar Media Corp., Series C, 6.625%, 8/15/2015 | 330,000 | 300,300 |
Liberty Media LLC: | | |
5.7%, 5/15/2013 | 95,000 | 85,137 |
8.25%, 2/1/2030 (b) | 765,000 | 666,404 |
8.5%, 7/15/2029 (b) | 735,000 | 657,445 |
Mediacom Broadband LLC, 8.5%, 10/15/2015 (b) | 40,000 | 35,750 |
MediMedia USA, Inc., 144A, 11.375%, 11/15/2014 | 255,000 | 255,000 |
MGM MIRAGE: | | |
6.75%, 9/1/2012 | 215,000 | 192,963 |
8.375%, 2/1/2011 (b) | 475,000 | 458,375 |
MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010 | 880,000 | 880,000 |
Norcraft Holdings LP, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012 (b) | 1,385,000 | 1,289,781 |
Penske Automotive Group, Inc., 7.75%, 12/15/2016 | 905,000 | 791,875 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 (b) | 525,000 | 525,000 |
Quebecor Media, Inc., 7.75%, 3/15/2016 | 325,000 | 302,250 |
Quebecor World, Inc., 144A, 9.75%, 1/15/2015** | 420,000 | 203,700 |
Quiksilver, Inc., 6.875%, 4/15/2015 | 560,000 | 476,000 |
Reader's Digest Association, Inc., 144A, 9.0%, 2/15/2017 | 350,000 | 255,500 |
Sabre Holdings Corp., 8.35%, 3/15/2016 | 460,000 | 348,450 |
Seminole Hard Rock Entertainment, Inc., 144A, 5.276%***, 3/15/2014 | 590,000 | 495,600 |
Shaw Communications, Inc., 8.25%, 4/11/2010 | 770,000 | 791,175 |
Shingle Springs Tribal Gaming Authority, 144A, 9.375%, 6/15/2015 | 410,000 | 333,125 |
Simmons Co.: | | |
Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 | 1,655,000 | 1,216,425 |
7.875%, 1/15/2014 | 155,000 | 133,300 |
Sinclair Television Group, Inc., 8.0%, 3/15/2012 (b) | 302,000 | 304,265 |
Sirius Satellite Radio, Inc., 9.625%, 8/1/2013 | 755,000 | 611,550 |
Sonic Automotive, Inc., Series B, 8.625%, 8/15/2013 (b) | 490,000 | 453,250 |
| Principal Amount ($)(a) | Value ($) |
| |
Station Casinos, Inc., 6.5%, 2/1/2014 | 805,000 | 462,875 |
Travelport LLC: | | |
7.307%***, 9/1/2014 | 390,000 | 312,000 |
9.875%, 9/1/2014 | 395,000 | 350,563 |
Trump Entertainment Resorts, Inc.,
8.5%, 6/1/2015 (b) | 855,000 | 532,237 |
United Components, Inc., 9.375%, 6/15/2013 | 80,000 | 74,800 |
Unity Media GmbH, 144A: 8.75%, 2/15/2015 EUR | 705,000 | 996,214 |
10.375%, 3/15/2015 | 255,000 | 250,856 |
Univision Communications, Inc., 144A, 9.75%,
3/15/2015 (PIK) | 345,000 | 253,575 |
UPC Holding BV: | | |
144A, 7.75%, 1/15/2014 EUR | 430,000 | 600,850 |
144A, 8.0%, 11/1/2016 EUR | 190,000 | 261,005 |
Vitro SAB de CV: | | |
9.125%, 2/1/2017 | 1,470,000 | 1,164,975 |
11.75%, 11/1/2013 | 215,000 | 213,925 |
Young Broadcasting, Inc., 8.75%, 1/15/2014 | 2,040,000 | 1,101,600 |
| 35,772,155 |
Consumer Staples 3.2% |
Alliance One International, Inc., 8.5%, 5/15/2012 | 250,000 | 235,000 |
Delhaize America, Inc.: | | |
8.05%, 4/15/2027 | 190,000 | 205,021 |
9.0%, 4/15/2031 | 1,017,000 | 1,197,215 |
General Nutrition Centers, Inc., 7.199%***, 3/15/2014 (PIK) | 280,000 | 236,600 |
Harry & David Holdings, Inc., 7.682%***, 3/1/2012 | 360,000 | 316,800 |
North Atlantic Trading Co., 144A, 10.0%, 3/1/2012 | 2,081,750 | 1,748,670 |
Smithfield Foods, Inc., 7.75%, 7/1/2017 | 285,000 | 236,550 |
Viskase Companies, Inc., 11.5%, 6/15/2011 | 3,100,000 | 2,697,000 |
| 6,872,856 |
Energy 12.9% |
Atlas Energy Resources LLC, 10.75%, 2/1/2018 | 845,000 | 878,800 |
Belden & Blake Corp., 8.75%, 7/15/2012 | 2,280,000 | 2,331,300 |
Bristow Group, Inc., 7.5%, 9/15/2017 | 500,000 | 501,250 |
Chaparral Energy, Inc., 8.5%, 12/1/2015 | 600,000 | 520,500 |
Chesapeake Energy Corp.: | | |
6.25%, 1/15/2018 | 325,000 | 299,000 |
6.875%, 1/15/2016 | 1,166,000 | 1,125,190 |
7.25%, 12/15/2018 | 800,000 | 778,000 |
7.75%, 1/15/2015 | 220,000 | 228,250 |
Cimarex Energy Co., 7.125%, 5/1/2017 | 410,000 | 402,825 |
Delta Petroleum Corp., 7.0%, 4/1/2015 | 1,115,000 | 953,325 |
Dynegy Holdings, Inc.: | | |
6.875%, 4/1/2011 (b) | 195,000 | 192,806 |
8.375%, 5/1/2016 | 830,000 | 805,100 |
El Paso Corp.: | | |
7.25%, 6/1/2018 | 535,000 | 526,975 |
9.625%, 5/15/2012 | 320,000 | 347,013 |
| Principal Amount ($)(a) | Value ($) |
| |
EXCO Resources, Inc., 7.25%, 1/15/2011 | 645,000 | 633,712 |
Forest Oil Corp., 144A, 7.25%, 6/15/2019 | 235,000 | 225,600 |
Frontier Oil Corp., 6.625%, 10/1/2011 | 365,000 | 359,525 |
KCS Energy, Inc., 7.125%, 4/1/2012 | 1,760,000 | 1,689,600 |
Mariner Energy, Inc.: | | |
7.5%, 4/15/2013 (b) | 390,000 | 378,300 |
8.0%, 5/15/2017 | 470,000 | 454,725 |
Newfield Exploration Co., 7.125%, 5/15/2018 | 710,000 | 672,725 |
OPTI Canada, Inc., 8.25%, 12/15/2014 | 955,000 | 950,225 |
Petrohawk Energy Corp.: | | |
144A, 7.875%, 6/1/2015 | 470,000 | 458,837 |
9.125%, 7/15/2013 | 450,000 | 461,250 |
Plains Exploration & Production Co.: | | |
7.0%, 3/15/2017 (b) | 245,000 | 235,200 |
7.625%, 6/1/2018 (b) | 800,000 | 800,000 |
Quicksilver Resources, Inc., 7.125%, 4/1/2016 | 1,040,000 | 968,500 |
Range Resources Corp., 7.25%, 5/1/2018 | 75,000 | 74,438 |
Sabine Pass LNG LP, 7.5%, 11/30/2016 | 1,370,000 | 1,233,000 |
SandRidge Energy, Inc., 144A, 8.0%, 6/1/2018 | 315,000 | 316,575 |
Southwestern Energy Co., 144A, 7.5%, 2/1/2018 | 585,000 | 601,912 |
Stone Energy Corp.: | | |
6.75%, 12/15/2014 | 800,000 | 702,000 |
8.25%, 12/15/2011 | 1,285,000 | 1,252,875 |
Tennessee Gas Pipeline Co., 7.625%, 4/1/2037 | 420,000 | 437,128 |
Whiting Petroleum Corp.: | | |
7.0%, 2/1/2014 | 500,000 | 490,625 |
7.25%, 5/1/2012 | 680,000 | 674,900 |
7.25%, 5/1/2013 | 165,000 | 163,763 |
Williams Companies, Inc.: | | |
8.125%, 3/15/2012 | 1,365,000 | 1,433,250 |
8.75%, 3/15/2032 | 1,885,000 | 2,139,475 |
Williams Partners LP, 7.25%, 2/1/2017 | 420,000 | 420,000 |
| 28,118,474 |
Financials 10.9% |
Algoma Acquisition Corp., 144A, 9.875%, 6/15/2015 | 1,125,000 | 1,068,750 |
Ashton Woods USA LLC, 9.5%, 10/1/2015 | 1,370,000 | 794,600 |
Buffalo Thunder Development Authority, 144A, 9.375%, 12/15/2014 | 250,000 | 167,500 |
Conproca SA de CV, Series REG S, 12.0%, 6/16/2010 | 2,122,650 | 2,377,368 |
Ford Motor Credit Co., LLC: | | |
7.25%, 10/25/2011 | 2,960,000 | 2,293,885 |
7.375%, 10/28/2009 | 3,240,000 | 2,950,924 |
7.875%, 6/15/2010 | 1,790,000 | 1,545,051 |
GMAC LLC, 6.875%, 9/15/2011 | 6,160,000 | 4,426,404 |
Hawker Beechcraft Acquisition Co., LLC: | | |
8.5%, 4/1/2015 | 610,000 | 614,575 |
8.875%, 4/1/2015 (PIK) | 895,000 | 899,475 |
9.75%, 4/1/2017 (b) | 830,000 | 830,000 |
| Principal Amount ($)(a) | Value ($) |
| |
Hexion US Finance Corp., 9.75%, 11/15/2014 | 230,000 | 208,150 |
Inmarsat Finance PLC, Step-up Coupon, 0% to 11/15/2008, 10.375% to 11/15/2012 | 910,000 | 919,100 |
iPayment, Inc., 9.75%, 5/15/2014 | 475,000 | 401,375 |
Local TV Finance LLC, 144A, 9.25%, 6/15/2015 (PIK) | 430,000 | 335,400 |
New ASAT (Finance) Ltd., 9.25%, 2/1/2011 | 575,000 | 368,000 |
Residential Capital LLC, 144A, 8.5%, 5/15/2010 | 345,000 | 289,800 |
Tropicana Entertainment LLC, 9.625%, 12/15/2014** | 1,220,000 | 579,500 |
UCI Holdco, Inc., 10.3%***, 12/15/2013 (PIK) | 608,065 | 516,855 |
Universal City Development Partners, 11.75%, 4/1/2010 | 2,125,000 | 2,183,437 |
| 23,770,149 |
Health Care 5.5% |
Advanced Medical Optics, Inc., 7.5%, 5/1/2017 (b) | 620,000 | 570,400 |
Bausch & Lomb, Inc., 144A, 9.875%, 11/1/2015 (b) | 665,000 | 668,325 |
Boston Scientific Corp., 6.0%, 6/15/2011 | 580,000 | 566,950 |
Community Health Systems, Inc., 8.875%, 7/15/2015 | 2,710,000 | 2,726,938 |
HCA, Inc.: | | |
9.125%, 11/15/2014 | 760,000 | 777,100 |
9.25%, 11/15/2016 | 1,785,000 | 1,838,550 |
9.625%, 11/15/2016 (PIK) | 670,000 | 690,100 |
HEALTHSOUTH Corp., 10.75%, 6/15/2016 (b) | 325,000 | 349,375 |
IASIS Healthcare LLC, 8.75%, 6/15/2014 | 490,000 | 494,900 |
Psychiatric Solutions, Inc., 7.75%, 7/15/2015 | 420,000 | 415,800 |
Surgical Care Affiliates, Inc., 144A, 8.875%, 7/15/2015 (PIK) | 515,000 | 450,625 |
The Cooper Companies, Inc., 7.125%, 2/15/2015 | 840,000 | 806,400 |
Vanguard Health Holding Co. I LLC, Step-up Coupon, 0% to 10/1/2009, 11.25% to 10/1/2015 | 505,000 | 444,400 |
Vanguard Health Holding Co. II, LLC, 9.0%, 10/1/2014 | 1,215,000 | 1,202,850 |
| 12,002,713 |
Industrials 11.0% |
Actuant Corp., 6.875%, 6/15/2017 | 335,000 | 329,138 |
Allied Security Escrow Corp., 11.375%, 7/15/2011 | 769,000 | 661,340 |
Allied Waste North America, Inc., 6.5%, 11/15/2010 | 280,000 | 280,000 |
American Color Graphics, Inc., 10.0%, 6/15/2010* | 850,000 | 280,500 |
American Color Graphics, Inc., 144A, Promissory Note due 9/15/2008 (e) | 51,000 | 0 |
American Railcar Industries, Inc., 7.5%, 3/1/2014 | 420,000 | 390,600 |
ARAMARK Corp., 6.373%***, 2/1/2015 | 585,000 | 546,975 |
Baldor Electric Co., 8.625%, 2/15/2017 (b) | 420,000 | 422,100 |
BE Aerospace, Inc., 8.5%, 7/1/2018 | 300,000 | 300,750 |
Belden, Inc., 7.0%, 3/15/2017 | 420,000 | 403,200 |
| Principal Amount ($)(a) | Value ($) |
| |
Browning-Ferris Industries, Inc., 7.4%, 9/15/2035 | 1,560,000 | 1,482,000 |
Building Materials Corp. of America, 7.75%, 8/1/2014 | 585,000 | 479,700 |
Congoleum Corp., 8.625%, 8/1/2008** | 1,200,000 | 900,000 |
DRS Technologies, Inc.: | | |
6.625%, 2/1/2016 | 45,000 | 45,675 |
6.875%, 11/1/2013 | 590,000 | 590,000 |
7.625%, 2/1/2018 | 1,450,000 | 1,533,375 |
Education Management LLC, 8.75%, 6/1/2014 | 430,000 | 399,900 |
Esco Corp.: | | |
144A, 6.651%***, 12/15/2013 | 430,000 | 404,200 |
144A, 8.625%, 12/15/2013 | 730,000 | 737,300 |
General Cable Corp.: | | |
5.073%***, 4/1/2015 | 505,000 | 448,187 |
7.125%, 4/1/2017 (b) | 500,000 | 476,250 |
Gibraltar Industries, Inc., Series B, 8.0%, 12/1/2015 | 435,000 | 363,225 |
Great Lakes Dredge & Dock Co., 7.75%, 12/15/2013 | 335,000 | 317,413 |
Harland Clarke Holdings Corp., 9.5%, 5/15/2015 | 420,000 | 344,400 |
K. Hovnanian Enterprises, Inc.: | | |
8.875%, 4/1/2012 | 1,495,000 | 1,091,350 |
144A, 11.5%, 5/1/2013 | 75,000 | 77,813 |
Kansas City Southern de Mexico SA de CV: | | |
7.375%, 6/1/2014 | 500,000 | 485,000 |
7.625%, 12/1/2013 | 1,085,000 | 1,052,450 |
9.375%, 5/1/2012 | 1,195,000 | 1,242,800 |
Kansas City Southern Railway Co., 8.0%, 6/1/2015 | 655,000 | 661,550 |
Mobile Services Group, Inc., 9.75%, 8/1/2014 | 465,000 | 446,400 |
Moog, Inc., 144A, 7.25%, 6/15/2018 | 155,000 | 153,450 |
Navios Maritime Holdings, Inc., 9.5%, 12/15/2014 | 675,000 | 690,187 |
Ply Gem Industries, Inc., 144A, 11.75%, 6/15/2013 | 280,000 | 256,900 |
R.H. Donnelley Corp., 144A, 8.875%, 10/15/2017 | 1,560,000 | 928,200 |
Rainbow National Services LLC, 144A, 10.375%, 9/1/2014 | 112,000 | 119,000 |
RBS Global, Inc. & Rexnord Corp., 9.5%, 8/1/2014 | 370,000 | 357,050 |
Seitel, Inc., 9.75%, 2/15/2014 | 235,000 | 210,031 |
Titan International, Inc., 8.0%, 1/15/2012 | 1,325,000 | 1,298,500 |
TransDigm, Inc., 7.75%, 7/15/2014 | 260,000 | 256,750 |
U.S. Concrete, Inc., 8.375%, 4/1/2014 | 470,000 | 417,125 |
United Rentals North America, Inc.: | | |
6.5%, 2/15/2012 (b) | 815,000 | 733,500 |
7.0%, 2/15/2014 | 1,095,000 | 848,625 |
Vought Aircraft Industries, Inc., 8.0%, 7/15/2011 | 250,000 | 232,500 |
Xerox Capital Trust I, 8.0%, 2/1/2027 | 315,000 | 307,459 |
| 24,002,868 |
Information Technology 4.1% |
Alion Science & Technology Corp., 10.25%, 2/1/2015 | 390,000 | 273,000 |
Freescale Semiconductor, Inc., 8.875%, 12/15/2014 (b) | 1,205,000 | 979,062 |
| Principal Amount ($)(a) | Value ($) |
| |
L-3 Communications Corp.: | | |
5.875%, 1/15/2015 | 1,280,000 | 1,180,800 |
Series B,
6.375%, 10/15/2015 | 705,000 | 659,175 |
7.625%, 6/15/2012 | 1,055,000 | 1,065,550 |
Lucent Technologies, Inc., 6.45%, 3/15/2029 (b) | 1,410,000 | 1,078,650 |
MasTec, Inc.,
7.625%, 2/1/2017 | 610,000 | 518,500 |
NXP BV / NXP Funding LLC, 7.497%***, 10/15/2013 EUR | 560,000 | 740,622 |
Sanmina-SCI Corp., 144A, 5.526%***, 6/15/2010 | 196,000 | 194,040 |
Seagate Technology HDD Holdings, 6.8%, 10/1/2016 | 800,000 | 730,000 |
SunGard Data Systems, Inc., 10.25%, 8/15/2015 | 1,090,000 | 1,095,450 |
Vangent, Inc.,
9.625%,2/15/2015 | 350,000 | 304,500 |
| 8,819,349 |
Materials 11.5% |
AMH Holdings, Inc., Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014 | 850,000 | 561,000 |
Appleton Papers, Inc., Series B, 8.125%, 6/15/2011 | 235,000 | 222,075 |
ARCO Chemical Co., 9.8%, 2/1/2020 | 3,270,000 | 2,599,650 |
Cascades, Inc.,
7.25%, 2/15/2013 | 1,246,000 | 1,084,020 |
Chemtura Corp.,
6.875%, 6/1/2016 | 825,000 | 713,625 |
Clondalkin Acquisition BV, 144A, 4.776%***, 12/15/2013 | 540,000 | 467,100 |
CPG International I, Inc., 10.5%, 7/1/2013 | 880,000 | 734,800 |
Exopack Holding Corp., 11.25%, 2/1/2014 | 1,415,000 | 1,312,413 |
Freeport-McMoRan Copper & Gold, Inc.: | | |
8.25%, 4/1/2015 | 780,000 | 819,975 |
8.375%, 4/1/2017 | 1,225,000 | 1,292,375 |
GEO Specialty Chemicals, Inc.: | | |
144A, 10.698%***, 12/31/2009 | 1,996,000 | 1,494,505 |
144A, 10.698%***, 3/31/2015 | 1,193,602 | 893,709 |
Georgia-Pacific LLC: | | |
144A, 7.125%, 1/15/2017 | 295,000 | 277,300 |
9.5%, 12/1/2011 | 330,000 | 335,363 |
Hexcel Corp., 6.75%, 2/1/2015 | 1,735,000 | 1,687,287 |
Huntsman LLC, 11.625%, 10/15/2010 | 1,277,000 | 1,318,502 |
Innophos, Inc., 8.875%, 8/15/2014 | 190,000 | 190,000 |
Jefferson Smurfit Corp., 8.25%, 10/1/2012 | 620,000 | 540,950 |
Koppers Holdings, Inc., Step-up Coupon, 0% to 11/15/2009, 9.875% to 11/15/2014 | 1,145,000 | 1,036,225 |
Metals USA Holdings Corp., 8.698%***, 7/1/2012 (PIK) | 255,000 | 234,600 |
Millar Western Forest Products Ltd., 7.75%, 11/15/2013 | 200,000 | 130,000 |
Momentive Performance Materials, Inc., 9.75%, 12/1/2014 (b) | 795,000 | 679,725 |
NewMarket Corp., 7.125%, 12/15/2016 | 1,005,000 | 997,463 |
| Principal Amount ($)(a) | Value ($) |
| |
OI European Group BV, 144A, 6.875%, 3/31/2017 EUR | 475,000 | 702,992 |
Pliant Corp., 11.625%, 6/15/2009 (PIK) | 11 | 11 |
Radnor Holdings Corp., 11.0%, 3/15/2010** | 265,000 | 331 |
Rhodia SA, 144A, 7.497%***, 10/15/2013 EUR | 475,000 | 662,795 |
Smurfit-Stone Container Enterprises, Inc.: | | |
8.0%, 3/15/2017 (b) | 395,000 | 316,000 |
8.375%, 7/1/2012 | 420,000 | 368,550 |
Steel Dynamics, Inc.: | | |
6.75%, 4/1/2015 | 675,000 | 646,313 |
144A, 7.375%, 11/1/2012 | 155,000 | 155,000 |
Terra Capital, Inc., Series B, 7.0%, 2/1/2017 | 905,000 | 886,900 |
The Mosaic Co., 144A, 7.375%, 12/1/2014 | 755,000 | 788,975 |
Witco Corp., 6.875%, 2/1/2026 | 360,000 | 230,400 |
Wolverine Tube, Inc., 10.5%, 4/1/2009 | 770,000 | 716,100 |
| 25,097,029 |
Telecommunication Services 6.9% |
BCM Ireland Preferred Equity Ltd., 144A, 11.856%***, 2/15/2017 (PIK) EUR | 508,182 | 475,681 |
Centennial Communications
Corp.: | | |
10.0%, 1/1/2013 | 290,000 | 294,350 |
10.125%, 6/15/2013 | 625,000 | 643,750 |
Cincinnati Bell, Inc.: | | |
7.25%, 7/15/2013 | 715,000 | 697,125 |
8.375%, 1/15/2014 (b) | 450,000 | 435,375 |
Cricket Communications, Inc.: | | |
9.375%, 11/1/2014 | 900,000 | 866,250 |
144A, 10.0%, 7/15/2015 | 780,000 | 764,400 |
Grupo Iusacell Celular SA de CV, 10.0%, 3/31/2012 | 274,071 | 265,849 |
Hellas Telecom III, 144A, 8.5%, 10/15/2013 EUR | 100,000 | 133,041 |
Hellas Telecom V, 144A, 8.247%***, 10/15/2012 EUR | 130,000 | 187,281 |
Intelsat Subsidiary Holding Co., Ltd., 144A, 8.875%, 1/15/2015 | 960,000 | 933,600 |
iPCS, Inc.,
4.998%***, 5/1/2013 | 200,000 | 180,000 |
MetroPCS Wireless, Inc., 9.25%, 11/1/2014 | 875,000 | 842,187 |
Millicom International Cellular SA, 10.0%, 12/1/2013 | 645,000 | 683,700 |
Nortel Networks Ltd.: | | |
6.963%***, 7/15/2011 | 780,000 | 737,100 |
144A, 10.75%, 7/15/2016 | 550,000 | 544,500 |
Orascom Telecom Finance, 144A, 7.875%, 2/8/2014 | 170,000 | 157,675 |
Qwest Corp.: | | |
7.25%, 9/15/2025 | 145,000 | 128,325 |
7.875%, 9/1/2011 | 735,000 | 735,000 |
Sprint Nextel Corp., 6.0%, 12/1/2016 | 390,000 | 335,400 |
Stratos Global Corp., 9.875%, 2/15/2013 | 330,000 | 348,975 |
Telesat Canada, 144A, 11.0%, 11/1/2015 | 1,285,000 | 1,285,000 |
| Principal Amount ($)(a) | Value ($) |
| |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 | 980,000 | 1,002,050 |
Virgin Media Finance PLC: | | |
8.75%, 4/15/2014 | 990,000 | 930,600 |
8.75%, 4/15/2014 EUR | 700,000 | 1,008,436 |
West Corp., 9.5%, 10/15/2014 | 500,000 | 450,000 |
| 15,065,650 |
Utilities 7.8% |
AES Corp.: | | |
8.0%, 10/15/2017 | 415,000 | 406,700 |
144A, 8.0%, 6/1/2020 | 790,000 | 762,350 |
144A, 8.75%, 5/15/2013 | 2,519,000 | 2,613,462 |
Allegheny Energy Supply Co., LLC, 144A, 8.25%, 4/15/2012 | 3,080,000 | 3,210,900 |
CMS Energy Corp., 8.5%, 4/15/2011 | 925,000 | 965,632 |
Edison Mission Energy, 7.0%, 5/15/2017 | 760,000 | 710,600 |
Energy Future Holdings Corp., 144A, 10.875%, 11/1/2017 | 1,115,000 | 1,126,150 |
Knight, Inc., 6.5%, 9/1/2012 | 215,000 | 209,625 |
Mirant Americas Generation LLC, 8.3%, 5/1/2011 | 610,000 | 629,825 |
Mirant North America LLC, 7.375%, 12/31/2013 | 300,000 | 297,375 |
NRG Energy, Inc.: | | |
7.25%, 2/1/2014 | 915,000 | 873,825 |
7.375%, 2/1/2016 | 665,000 | 625,931 |
Oncor Electric Delivery Co., 7.0%, 9/1/2022 | 320,000 | 312,037 |
Regency Energy Partners LP, 8.375%, 12/15/2013 | 575,000 | 587,937 |
Reliant Energy, Inc., 7.875%, 6/15/2017 (b) | 830,000 | 811,325 |
Sierra Pacific Resources: | | |
6.75%, 8/15/2017 | 975,000 | 947,325 |
8.625%, 3/15/2014 | 200,000 | 209,663 |
Texas Competitive Electric Holdings Co., LLC, 144A, 10.25%, 11/1/2015 | 1,820,000 | 1,783,600 |
| 17,084,262 |
Total Corporate Bonds (Cost $216,784,113) | 196,605,505 |
|
Senior Loans*** 7.6% |
Advanced Medical Optics, Inc., Term Loan B, LIBOR plus 1.75%, 5.061%, 4/2/2014 | 246,826 | 227,696 |
Alliance Mortgage Cycle Loan, Term Loan, LIBOR plus 7.25%, 10.561%, 6/4/2010** | 700,000 | 35,000 |
Bausch & Lomb, Inc.: | | |
Term Delay Draw, LIBOR plus 3.25%, 6.561%, 4/11/2015 | 98,400 | 96,562 |
Term Loan B, LIBOR plus 3.25%, 6.561%, 4/11/2015 | 659,348 | 647,028 |
Buffets, Inc.: | | |
Letter of Credit, 9.735%, 5/1/2013 | 471,811 | 278,759 |
Term Loan B, 7.74%, 11/1/2013 | 783,962 | 463,189 |
Charter Communications Operations: | | |
Term Loan, LIBOR plus 2.0%, 5.311%, 3/6/2014 | 755,000 | 751,931 |
Term Loan B, LIBOR plus 3.25%, 6.561%, 4/27/2011 | 708,225 | 623,992 |
| Principal Amount ($)(a) | Value ($) |
| |
Energy Future Holdings Corp.: | | |
Term Loan B1, LIBOR plus 3.5%, 6.811%, 10/10/2014 | 3,785,975 | 3,514,350 |
Term Loan B3, LIBOR plus 3.5%, 6.811%, 10/10/2014 | 2,467,600 | 2,287,996 |
General Nutrition Centers, Inc., Term Loan B, LIBOR plus 2.25%, 5.561%, 9/16/2013 | 250,025 | 231,273 |
Golden Nugget, Term Loan, 5.74%, 6/16/2014 | 460,000 | 326,600 |
Hawker Beechcraft, Inc.: | | |
Letter of Credit, LIBOR plus 2.0%, 5.311%, 3/26/2014 | 12,291 | 11,574 |
Term Loan B, LIBOR plus 2.0%, 5.311%, 3/26/2014 | 210,908 | 198,617 |
HCA, Inc., Term Loan A1, 4.301%, 11/18/2012 | 1,268,456 | 1,190,288 |
Hexion Specialty Chemicals: | | |
Term Loan C1, LIBOR plus 2.25%, 5.561%, 5/5/2013 | 1,437,015 | 1,312,555 |
Term Loan C2, LIBOR plus 2.25%, 5.561%, 5/5/2013 | 389,248 | 355,535 |
IASIS Healthcare LLC, 8.131%, 6/15/2014 | 491,444 | 436,771 |
Intelstat Corp., Term Loan, LIBOR plus 9.25%, 12.561%, 8/15/2014 | 160,000 | 160,434 |
Longview Power LLC: | | |
Demand Draw, 5.063%, 4/1/2014 | 105,000 | 97,388 |
Letter of Credit, 5.063%, 4/1/2014 | 30,000 | 27,825 |
Term Loan B, 5.063%, 4/1/2014 | 90,000 | 83,475 |
Rail America, Inc., Term Loan, 5.32%, 10/2/2008 | 720,000 | 720,000 |
Sabre, Inc., Term Loan B, LIBOR plus 2.25%, 5.561%, 9/30/2014 | 412,595 | 340,049 |
Symbion, Inc.: | | |
Term Loan A, 6.149%, 8/23/2013 | 192,600 | 172,858 |
Term Loan B, 6.149%, 8/23/2014 | 192,600 | 172,858 |
Telesat Canada, Inc.: | | |
Term Loan, 5.9%, 9/1/2014 | 292,913 | 283,107 |
Term Loan B, LIBOR plus 3.0%, 6.311%, 10/31/2014 | 915,843 | 885,181 |
Tribune Co., Term Loan B, 5.482%, 5/24/2014 | 833,625 | 636,681 |
Total Senior Loans (Cost $18,676,013) | 16,569,572 |
|
Shares
| Value ($) |
| |
Warrants 0.0% |
Dayton Superior Corp., 144A, Expiration Date 6/15/2009* | 95 | 0 |
DeCrane Aircraft Holdings, Inc., 144A, Expiration Date 9/30/2008* | 1,350 | 0 |
New ASAT (Finance) Ltd., Expiration Date 2/1/2011* | 149,500 | 29,540 |
Total Warrants (Cost $1) | 29,540 |
|
Units
| Value ($) |
| |
Other Investments 0.4% |
Hercules, Inc., (Bond Unit), 6.5%, 6/30/2029 (Cost $945,507) | 1,100,000 | 902,000 |
|
Shares
| Value ($) |
| |
Common Stocks 0.0% |
GEO Specialty Chemicals, Inc.* | 24,225 | 20,591 |
GEO Specialty Chemicals, Inc. 144A* | 2,206 | 1,875 |
Total Common Stocks (Cost $290,952) | 22,466 |
|
Preferred Stocks 0.0% |
ION Media Networks, Inc.: | | |
Series AI, 144A, 12.0%* | 30,000 | 195 |
Series B, 12.0%* | 5,000 | 33 |
144A, 12.0%* | 3 | 1,950 |
Total Preferred Stocks (Cost $46,019) | 2,178 |
|
Shares
| Value ($) |
| |
Securities Lending Collateral 7.1% |
Daily Assets Fund Institutional, 2.74% (c) (d) (Cost $15,381,160) | 15,381,160 | 15,381,160 |
|
Cash Equivalents 0.0% |
Cash Management QP Trust, 2.49% (c) (Cost $3,384) | 3,384 | 3,384 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $252,127,149)+ | 105.3 | 229,515,805 |
Other Assets and Liabilities, Net | (5.3) | (11,597,211) |
Net Assets | 100.0 | 217,918,594 |
* Non-income producing security.** Non-income producing security. Issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. The following table represents bonds that are in default:Securities | Coupon | Maturity Date | Principal Amount | Acquisition Cost ($) | Value ($) |
Alliance Mortgage Cycle Loan
| 10.561% | 6/4/2010 | 700,000 | USD
| 700,000 | 35,000 |
Congoleum Corp.
| 8.625% | 8/1/2008 | 1,200,000 | USD
| 1,021,050 | 900,000 |
Quebecor World, Inc.
| 9.75% | 1/15/2015 | 420,000 | USD
| 420,000 | 203,700 |
Radnor Holdings Corp.
| 11.0% | 3/15/2010 | 265,000 | USD
| 234,313 | 331 |
Tropicana Entertainment LLC
| 9.625% | 12/15/2014 | 1,220,000 | USD
| 959,601 | 579,500 |
| | | |
| 3,334,964 | 1,718,531 |
*** 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 June 30, 2008.+ The cost for federal income tax purposes was $252,194,193. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $22,678,388. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $870,210 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $23,548,598.(a) Principal amount stated in US dollars unless otherwise noted.(b) All or a portion of these securities were on loan amounting to $14,707,070. In addition, included in other assets and liabilities, net is a pending sale, amounting to $2,000, that is also on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $14,709,070 which is 6.7% of net assets.(c) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(d) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.(e) Security issued in lieu of interest payment due 12/15/2007, which has been deferred until 9/15/2008. This security is deemed to be non-income producing.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.
LIBOR: Represents the London InterBank Offered Rate.
PIK: Denotes that all or a portion of the income is paid in-kind.
At June 30, 2008, the Portfolio had unfunded loan commitments of $96,206 which could be extended at the option of the borrower, pursuant to the following loan agreement:
Borrower | Unfunded Loan Commitment ($) | Value ($) | Unrealized Depreciation ($) |
Bausch & Lomb, Inc., Term Delay Draw, 4/11/2015
| 65,436 | 64,374 | (1,062) |
Telesat Canada, Inc., Term Loan B, 10/31/2014
| 30,770 | 30,198 | (572) |
Total net unrealized depreciation | 96,206 | 94,572 | (1,634) |
At June 30, 2008, open credit default swap contracts sold, as follows:
Effective/
Expiration Date | Notional Amount ($) | Cash Flows Received by the Portfolio | Underlying Debt Obligation | Unrealized Appreciation/
(Depreciation) ($) |
10/3/2007-12/20/2008 | 430,0001 | Fixed — 3.2% | General Motors Corp., 7.125%, 7/15/2013 | (11,098) |
10/4/2007-12/20/2008 | 450,0002 | Fixed — 2.6% | General Motors Corp., 7.125%, 7/15/2013 | (14,110) |
10/22/2007-12/20/2008 | 845,0003 | Fixed — 3.06% | General Motors Corp., 7.125%, 7/15/2013 | (22,640) |
10/4/2007-12/20/2008 | 430,0004 | Fixed — 3.1% | Ford Motor Co., 6.5%, 8/1/2018 | (7,537) |
10/5/2007-12/20/2008 | 255,0001 | Fixed — 3.15% | Ford Motor Co., 6.5%, 8/1/2018 | (4,454) |
10/20/2007-12/20/2008 | 845,0003 | Fixed — 3.05% | Ford Motor Co., 6.5%, 8/1/2018 | (14,504) |
11/21/2007-12/20/2008 | 430,0005 | Fixed — 4.02% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 16,437 |
12/5/2007-12/20/2008 | 535,0003 | Fixed — 2.9% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 10,136 |
1/28/2008-3/20/2009 | 550,0003 | Fixed — 2.65% | HCA, Inc., 7.7%, 3/20/2009 | 3,272 |
2/19/2008-3/20/2009 | 405,0005 | Fixed — 3.8% | HCA, Inc., 7.7%, 3/20/2009 | 11,386 |
2/26/2008-3/20/2009 | 430,0005 | Fixed — 5.0% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 12,718 |
10/23/2007-12/20/2009 | 485,0006 | Fixed — 4.65% | Ford Motor Co., 6.5%, 8/1/2018 | (48,763) |
12/13/2007-12/20/2009 | 400,0005 | Fixed — 5.05% | Ford Motor Co., 6.5%, 8/1/2018 | (23,514) |
1/29/2008-3/20/2013 | 330,0003 | Fixed — 3.0% | HCA, Inc., 7.7%, 3/20/2009 | 6,960 |
Total net unrealized depreciation on credit default swaps | (85,711) |
At June 30, 2008, open credit default swap contracts purchased were as follows:
Effective/Expiration Date | Notional Amount ($) | Cash Flows Paid by the Portfolio | Underlying Debt Obligation | Unrealized Appreciation ($) |
5/6/2008-6/20/2013 | 400,0005 | Fixed — 7.25% | Arco Chemical Co., 9.8%, 2/1/2020 | 13,481 |
Counterparties:
1 JPMorgan Chase
2 Citigroup Global Markets, Inc.
3 Lehman Brothers, Inc.
4 Goldman Sachs & Co.
5 Merrill Lynch, Pierce, Fenner & Smith, Inc.
6 Morgan Stanley Co., Inc.
|
At June 30, 2008, the Portfolio had the following open forward foreign currency exchange contracts:
Contracts to Deliver | | In Exchange For | | Settlement Date | Unrealized Appreciation US ($) |
USD
| 287,797 |
| EUR
| 182,900 |
| 7/11/2008 | 2,365 |
Contracts to Deliver | | In Exchange For | | Settlement Date | Unrealized Depreciation US ($) |
EUR
| 3,297,000 |
| USD
| 5,079,523 |
| 7/11/2008 | (108,368) |
EUR
| 900,500 |
| USD
| 1,382,844 |
| 7/11/2008 | (34,110) |
Total unrealized depreciation | (142,478) |
Currency Abbreviations |
EUR Euro
USD United States Dollar
|
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Depreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 15,384,739 | $ — |
Level 2 — Other Significant Observable Inputs
| 213,177,060 | (213,977) |
Level 3 — Significant Unobservable Inputs
| 954,006 | — |
Total | $ 229,515,805 | $ (213,977) |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, forward foreign currency exchange contracts, unfunded loan commitments and credit default swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.The following is a reconciliation of the Portfolio's assets in which significant unobservable inputs (Level 3) were used in determining fair value at June 30, 2008:
| Investments in Securities at Market Value |
Balance as of January 1, 2008
| $ 979,506 |
Total realized gains (losses)
| — |
Change in unrealized appreciation (depreciation)
| (26,940) |
Amortization Premium/Discount
| 1,440 |
Net purchases (sales)
| — |
Net transfers in (out) of Level 3
| — |
Balance as of June 30, 2008 | $ 954,006 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $236,742,605) — including $14,707,070 of securities loaned | $ 214,131,261 |
Investment in Daily Assets Fund Institutional (cost $15,381,160)* | 15,381,160 |
Investment in Cash Management QP Trust (cost $3,384) | 3,384 |
Total investments, at value (cost $252,127,149)
| 229,515,805 |
Foreign currency, at value (cost $80)
| 81 |
Receivable for investments sold
| 5,172,515 |
Receivable for Portfolio shares sold
| 4,746 |
Interest receivable
| 4,340,434 |
Unrealized appreciation on forward foreign currency exchange contracts
| 2,365 |
Foreign taxes recoverable
| 3,658 |
Other assets
| 5,568 |
Total assets
| 239,045,172 |
Liabilities |
Cash overdraft
| 47,314 |
Note payable
| 2,850,000 |
Payable for investments purchased
| 1,402,114 |
Payable for Portfolio shares redeemed
| 853,395 |
Payable upon return of securities loaned
| 15,381,160 |
Unrealized depreciation on credit default swap contracts
| 72,230 |
Unrealized depreciation on forward foreign currency exchange contracts
| 142,478 |
Unrealized depreciation on unfunded loan commitments
| 1,634 |
Accrued management fee
| 95,903 |
Other accrued expenses and payables
| 280,350 |
Total liabilities
| 21,126,578 |
Net assets, at value | $ 217,918,594 |
Net Assets Consist of |
Undistributed net investment income
| 9,588,929 |
Net unrealized appreciation (depreciation) on:
Investments | (22,611,344) |
Credit default swap contracts | (72,230) |
Unfunded loan commitments | (1,634) |
Foreign currency | (137,065) |
Accumulated net realized gain (loss)
| (121,784,595) |
Paid-in capital
| 352,936,533 |
Net assets, at value | $ 217,918,594 |
Class A Net Asset Value, offering and redemption price per share ($217,674,086 ÷ 31,565,217 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 6.90 |
Class B Net Asset Value, offering and redemption price per share ($244,508 ÷ 35,377 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 6.91 |
* Represents collateral on securities loanedThe accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Interest (net of foreign taxes withheld of $288)
| $ 10,487,452 |
Dividends
| 1,283 |
Interest — Cash Management QP Trust
| 207,573 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 39,711 |
Total Income
| 10,736,019 |
Expenses:
Management fee
| 682,533 |
Administration fee
| 39,956 |
Custodian fee
| 13,323 |
Distribution and service fees (Class B)
| 7,739 |
Services to shareholders
| 359 |
Record keeping fees (Class B)
| 2,935 |
Professional fees
| 42,954 |
Trustees' fees and expenses
| 26,472 |
Reports to shareholders and shareholder meeting
| 217,547 |
Interest expense
| 2,010 |
Other
| 21,144 |
Total expenses before expense reductions
| 1,056,972 |
Expense reductions
| (13,404) |
Total expenses after expense reductions
| 1,043,568 |
Net investment income (loss) | 9,692,451 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| (7,566,516) |
Foreign currency
| (88,096) |
| (7,654,612) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (5,061,934) |
Credit default swap contracts
| (38,759) |
Unfunded loan commitments
| (1,139) |
Foreign currency
| (232,469) |
| (5,334,301) |
Net gain (loss) | (12,988,913) |
Net increase (decrease) in net assets resulting from operations | $ (3,296,462) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income
| $ 9,692,451 | $ 25,179,014 |
Net realized gain (loss)
| (7,654,612) | (2,365,006) |
Change in net unrealized appreciation (depreciation)
| (5,334,301) | (17,331,415) |
Net increase (decrease) in net assets resulting from operations
| (3,296,462) | 5,482,593 |
Distributions to shareholders from:
Net investment income:
Class A | (23,705,164) | (24,698,902) |
Class B | (925,651) | (3,765,571) |
Total distributions
| (24,630,815) | (28,464,473) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 17,630,035 | 39,622,315 |
Reinvestment of distributions
| 23,705,164 | 24,698,902 |
Cost of shares redeemed
| (44,350,567) | (117,470,499) |
Net increase (decrease) in net assets from Class A share transactions
| (3,015,368) | (53,149,282) |
Class B Proceeds from shares sold
| 76,589 | 3,273,156 |
Reinvestment of distributions
| 925,651 | 3,765,571 |
Cost of shares redeemed
| (9,618,265) | (48,245,391) |
Net increase (decrease) in net assets from Class B share transactions
| (8,616,025) | (41,206,664) |
Increase (decrease) in net assets | (39,558,670) | (117,337,826) |
Net assets at beginning of period
| 257,477,264 | 374,815,090 |
Net assets at end of period (including undistributed net investment income of $9,588,929 and $24,527,293 respectively)
| $ 217,918,594 | $ 257,477,264 |
Other Information |
Class A Shares outstanding at beginning of period
| 31,702,335 | 38,357,993 |
Shares sold
| 2,510,062 | 4,945,319 |
Shares issued to shareholders in reinvestment of distributions
| 3,511,876 | 3,110,693 |
Shares redeemed
| (6,159,056) | (14,711,670) |
Net increase (decrease) in Class A shares
| (137,118) | (6,655,658) |
Shares outstanding at end of period
| 31,565,217 | 31,702,335 |
Class B Shares outstanding at beginning of period
| 1,262,331 | 6,354,214 |
Shares sold
| 10,249 | 397,938 |
Shares issued to shareholders in reinvestment of distributions
| 136,729 | 473,062 |
Shares redeemed
| (1,373,932) | (5,962,883) |
Net increase (decrease) in Class B shares
| (1,226,954) | (5,091,883) |
Shares outstanding at end of period
| 35,377 | 1,262,331 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 7.81 | $ 8.38 | $ 8.23 | $ 8.78 | $ 8.43 | $ 7.40 |
Income (loss) from investment operations: Net investment incomeb | .29 | .63 | .62 | .68 | .67 | .67 |
Net realized and unrealized gain (loss) | (.41) | (.54) | .19 | (.38) | .31 | 1.03 |
Total from investment operations | (.12) | .09 | .81 | .30 | .98 | 1.70 |
Less distributions from: Net investment income | (.79) | (.66) | (.66) | (.85) | (.63) | (.67) |
Net asset value, end of period | $ 6.90 | $ 7.81 | $ 8.38 | $ 8.23 | $ 8.78 | $ 8.43 |
Total Return (%)
| (1.35) | .96 | 10.47 | 3.89 | 12.42 | 24.62 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 218 | 248 | 322 | 344 | 393 | 413 |
Ratio of expenses (%)
| .80* | .69 | .71 | .70 | .66 | .67 |
Ratio of net investment income (%)
| 8.11* | 7.84 | 7.73 | 8.27 | 8.11 | 8.62 |
Portfolio turnover rate (%)
| 28** | 61 | 93 | 100 | 162 | 165 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 7.81 | $ 8.38 | $ 8.22 | $ 8.77 | $ 8.41 | $ 7.39 |
Income (loss) from investment operations: Net investment incomeb | .28 | .60 | .59 | .65 | .64 | .64 |
Net realized and unrealized gain (loss) | (.42) | (.54) | .20 | (.39) | .32 | 1.03 |
Total from investment operations | (.14) | .06 | .79 | .26 | .96 | 1.67 |
Less distributions from: Net investment income | (.76) | (.63) | (.63) | (.81) | (.60) | (.65) |
Net asset value, end of period | $ 6.91 | $ 7.81 | $ 8.38 | $ 8.22 | $ 8.77 | $ 8.41 |
Total Return (%)
| (1.63) | .54 | 10.11 | 3.41 | 12.08 | 24.14 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .24 | 10 | 53 | 56 | 57 | 37 |
Ratio of expenses (%)
| 1.15* | 1.08 | 1.10 | 1.10 | 1.06 | 1.06 |
Ratio of net investment income (%)
| 7.76* | 7.45 | 7.34 | 7.87 | 7.71 | 8.23 |
Portfolio turnover rate (%)
| 28** | 61 | 93 | 100 | 162 | 165 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS International Select Equity VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.93% and 1.18% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. Additionally, investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes and market risks. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Growth of an Assumed $10,000 Investment in DWS International Select Equity VIP |
[] DWS International Select Equity VIP — Class A [] MSCI EAFE® + EMF Index | The MSCI EAFE® + EMF Index (Morgan Stanley Capital International Europe, Australasia, Far East and Emerging Markets Free Index) is an unmanaged index generally accepted as a benchmark for major overseas markets plus emerging markets. 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 portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS International Select Equity VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $9,398 | $9,888 | $15,924 | $23,266 | $17,504 |
Average annual total return
| -6.02% | -1.12% | 16.78% | 18.40% | 5.76% |
MSCI EAFE + EMF Index
| Growth of $10,000
| $8,919 | $9,246 | $15,433 | $23,839 | $20,364 |
Average annual total return
| -10.81% | -7.54% | 15.56% | 18.98% | 7.37% |
DWS International Select Equity VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,364 | $9,829 | $15,699 | $22,737 | $20,917 |
Average annual total return
| -6.36% | -1.71% | 16.22% | 17.85% | 13.09% |
MSCI EAFE + EMF Index
| Growth of $10,000
| $8,919 | $9,246 | $15,433 | $23,839 | $22,657 |
Average annual total return
| -10.81% | -7.54% | 15.56% | 18.98% | 14.60% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS International Select Equity VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 939.80 | | $ 936.40 | |
Expenses Paid per $1,000*
| $ 4.73 | | $ 6.50 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,019.19 | | $ 1,018.15 | |
Expenses Paid per $1,000*
| $ 4.92 | | $ 6.77 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS International Select Equity VIP
| .98% | | 1.35% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS International Select Equity VIP
The MSCI EAFE® + EMF Index (the Portfolio's benchmark) returned -10.81% during the first six months of 2008, a time in which rising oil prices and slower economic growth resulted in pressure on corporate profit margins and persistent downward revisions to analysts' earnings estimates. While Class A shares of the Portfolio produced a return of -6.02% (unadjusted for contract charges), this represented solid outperformance relative to the benchmark. We believe an important factor in the Portfolio's outperformance was its focus on companies that have the potential to perform well independent of broader economic cycles. We look for companies with competitive advantages, superior pricing power, and strong long-term earnings growth. At a time of slowing economic activity and declining profit margins, companies with favorable independent growth prospects and the ability to raise prices have been rewarded.
The Portfolio generated the best performance in the materials sector, where Potash Corp. of Saskatchewan, Inc. (Canada), Uralkali (Russia) and Xstrata PLC (Switzerland) all performed exceptionally well. The energy and industrials sectors were also sources of outperformance. On the negative side, an underweight in Japan weighed on performance relative to the benchmark.1 Additionally, the Portfolio's holdings in the communications services sector lagged due in part to the poor returns of China Mobile* and Bharti Airtel Ltd. (India).
While our overall outlook remains cautious, we believe the international markets offer a wealth of opportunities for those, such as DWS International Select Equity VIP, who focus on individual stock selection. We believe broader market turbulence provides an excellent environment in which to find the type of undervalued, fundamentally sound companies in which we seek to invest.
Matthias Knerr, CFA
Chris LaJaunie, CFA
Portfolio Managers
Deutsche Investment Management Americas Inc.
The MSCI EAFE + EMF Index (Morgan Stanley Capital International Europe, Australasia, Far East and Emerging Markets Free Index) is an unmanaged index generally accepted as a benchmark for major overseas markets plus emerging markets. The index is calculated using closing local market prices and translates into US dollars using the London close foreign exchange rates. Index returns assume reinvested dividends and, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.* As of June 30, 2008, the position was sold.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS International Select Equity VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 93% | 94% |
Cash Equivalents | 4% | 3% |
Exchange Traded Fund | 1% | — |
Preferred Stocks | 1% | 3% |
Participatory Notes | 1% | — |
| 100% | 100% |
Sector Diversification (As a % of Common, Preferred Stocks and Participatory Notes) | 6/30/08 | 12/31/07 |
| | |
Financials | 19% | 23% |
Energy | 17% | 5% |
Health Care | 12% | 5% |
Materials | 12% | 9% |
Industrials | 11% | 18% |
Consumer Discretionary | 8% | 16% |
Information Technology | 6% | 5% |
Telecommunications Services | 6% | 6% |
Consumer Staples | 5% | 7% |
Utilities | 4% | 6% |
| 100% | 100% |
Geographical Diversification (As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Continental Europe | 38% | 52% |
United Kingdom | 18% | 12% |
Japan | 13% | 15% |
Asia (excluding Japan) | 9% | 9% |
Russia | 7% | 4% |
Latin America | 5% | 2% |
Canada | 3% | — |
Middle East | 3% | 2% |
Australia | 2% | 2% |
United States | 2% | — |
Africa | — | 2% |
| 100% | 100% |
Asset allocation, geographical and sector diversifications are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 171. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS International Select Equity VIP
| Shares | Value ($) |
| |
Common Stocks 94.7% |
Australia 2.2% |
Leighton Holdings Ltd. (a) (Cost $3,462,548) | 95,100 | 4,583,342 |
Austria 0.8% |
Erste Bank der oesterreichischen Sparkassen AG (Cost $1,532,690) | 25,644 | 1,586,310 |
Belgium 0.5% |
KBC Groep NV (Cost $1,245,445) | 10,200 | 1,124,851 |
Brazil 3.8% |
Banco Bradesco SA (ADR) (Preferred) (a) | 167,350 | 3,423,981 |
Companhia Vale do Rio Doce (ADR) (a) | 24,700 | 884,754 |
Petroleo Brasileiro SA (ADR) | 51,200 | 3,626,496 |
(Cost $7,152,730) | 7,935,231 |
Canada 2.9% |
Potash Corp. of Saskatchewan, Inc. (Cost $3,361,315) | 26,014 | 6,035,257 |
China 0.8% |
China Infrastructure Machinery Holdings Ltd. (Cost $2,297,961) | 1,888,000 | 1,743,446 |
Denmark 3.6% |
Carlsberg AS "B" (a) | 47,775 | 4,609,465 |
Novo Nordisk AS "B" | 45,000 | 2,964,845 |
(Cost $8,147,910) | 7,574,310 |
Finland 4.0% |
Nokia Oyj | 70,200 | 1,719,631 |
Nokian Renkaat Oyj (a) | 139,500 | 6,656,907 |
(Cost $4,392,606) | 8,376,538 |
France 1.0% |
BNP Paribas (Cost $2,176,891) | 22,727 | 2,036,164 |
Germany 7.9% |
Bayer AG | 67,511 | 5,670,501 |
E.ON AG | 24,238 | 4,880,988 |
Gerresheimer AG* | 69,213 | 3,521,959 |
Linde AG | 18,200 | 2,551,592 |
(Cost $10,381,721) | 16,625,040 |
Greece 0.7% |
National Bank of Greece SA (Cost $1,313,323) | 34,656 | 1,561,019 |
Hong Kong 4.6% |
Chaoda Modern Agriculture (Holdings) Ltd. | 1,332,000 | 1,675,472 |
CNOOC Ltd. | 2,260,800 | 3,921,407 |
Esprit Holdings Ltd. | 343,700 | 3,577,406 |
Wharf Holdings Ltd. | 135,375 | 565,671 |
(Cost $10,109,778) | 9,739,956 |
India 2.3% |
Bharti Airtel Ltd.* | 175,347 | 2,934,824 |
ICICI Bank Ltd. | 127,200 | 1,878,234 |
(Cost $6,638,575) | 4,813,058 |
| Shares | Value ($) |
| |
Indonesia 1.2% |
PT Bumi Resources Tbk (Cost $2,357,451) | 2,846,400 | 2,543,958 |
Italy 1.7% |
Intesa Sanpaolo | 626,200 | 3,562,860 |
Intesa Sanpaolo (RNC) | 20,400 | 105,014 |
(Cost $4,526,262) | 3,667,874 |
Japan 12.7% |
Canon, Inc. | 127,700 | 6,545,906 |
Komatsu Ltd. | 162,700 | 4,524,135 |
Mitsubishi Corp. | 131,900 | 4,340,036 |
Nintendo Co., Ltd. | 8,700 | 4,896,379 |
Suzuki Motor Corp. | 130,700 | 3,083,851 |
Terumo Corp. | 62,100 | 3,164,254 |
(Cost $22,938,095) | 26,554,561 |
Kazakhstan 1.3% |
KazMunaiGas Exploration Production (GDR) 144A (Cost $1,514,687) | 86,100 | 2,686,320 |
Mexico 1.6% |
America Movil SAB de CV "L" (ADR) (Cost $3,523,415) | 61,800 | 3,259,950 |
Norway 1.7% |
StatoilHydro ASA (Cost $2,673,607) | 98,400 | 3,673,666 |
Qatar 2.4% |
Commercial Bank of Qatar (GDR) 144A* | 526,900 | 4,478,650 |
Qatar National Bank* | 7,861 | 492,325 |
(Cost $4,480,830) | 4,970,975 |
Russia 6.7% |
Gazprom (ADR) (b) | 72,250 | 4,182,303 |
Gazprom (ADR) (b) | 17,250 | 1,000,500 |
Sberbank* | 838,388 | 2,650,819 |
Uralkali (GDR) 144A* | 84,500 | 6,143,150 |
(Cost $10,136,092) | 13,976,772 |
Spain 4.8% |
Iberdrola SA | 301,949 | 4,036,337 |
Telefonica SA | 228,085 | 6,028,045 |
(Cost $9,042,109) | 10,064,382 |
Switzerland 8.0% |
Lonza Group AG (Registered) | 37,419 | 5,165,505 |
Nestle SA (Registered) | 86,650 | 3,915,387 |
Roche Holding AG (Genusschein) | 18,432 | 3,307,454 |
Xstrata PLC | 54,561 | 4,336,199 |
(Cost $11,900,006) | 16,724,545 |
United Arab Emirates 0.3% |
Arabtec Holding Co.* | 1,865 | 8,226 |
First Gulf Bank PJSC* | 87,936 | 648,797 |
(Cost $601,553) | 657,023 |
United Kingdom 17.2% |
3i Group PLC | 324,083 | 5,295,024 |
AMEC PLC | 476,726 | 8,433,630 |
Babcock International Group PLC | 314,251 | 3,823,244 |
BG Group PLC | 152,479 | 3,971,995 |
| Shares | Value ($) |
| |
HSBC Holdings PLC (Registered) | 68,017 | 1,048,733 |
Intertek Group PLC | 118,719 | 2,332,323 |
Man Group PLC | 121,393 | 1,496,369 |
Prudential PLC | 280,950 | 2,975,768 |
Standard Chartered PLC | 102,894 | 2,909,741 |
Vedanta Resources PLC | 85,040 | 3,708,461 |
(Cost $34,683,364) | 35,995,288 |
Total Common Stocks (Cost $170,590,964) | 198,509,836 |
|
Preferred Stocks 1.3% |
Germany |
Porsche Automobil Holding SE (Cost $1,600,290) | 17,130 | 2,633,199 |
|
Participatory Notes 0.5% |
United States |
Arabtec Holding Co. (issuer Merrill Lynch International & Co.), Expiration Date 1/12/2010* | 17,700 | 77,665 |
Merrill Lynch Pioneers Index (issuer Merrill Lynch International & Co.), Expiration Date 2/1/2010* | 10,200 | 937,686 |
Total Participatory Notes (Cost $1,091,250) | 1,015,351 |
| Shares | Value ($) |
| |
Exchange Traded Fund 1.5% |
United States |
iShares MSCI Japan Index Fund (Cost $3,285,155) | 251,674 | 3,140,892 |
|
Securities Lending Collateral 8.3% |
Daily Assets Fund Institutional, 2.74% (c) (d) (Cost $17,463,226) | 17,463,226 | 17,463,226 |
|
Cash Equivalents 4.0% |
Cash Management QP Trust, 2.49% (c) (Cost $8,339,608) | 8,339,608 | 8,339,608 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $202,370,493)+ | 110.3 | 231,102,112 |
Other Assets and Liabilities, Net | (10.3) | (21,627,563) |
Net Assets | 100.0 | 209,474,549 |
* Non-income producing security.+ The cost for federal income tax purposes was $203,216,908. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $27,885,204. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $39,934,089 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $12,048,885.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $16,606,425 which is 7.9% of net assets.(b) Securities with the same description are the same corporate entity but trade on different stock exchanges.(c) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(d) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.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.
ADR: American Depositary Receipt
GDR: Global Depositary Receipt
MSCI: Morgan Stanley Capital International
RNC: Riparmio Non-Convertible (Non-Convertible Savings Shares)
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 48,190,014 |
Level 2 — Other Significant Observable Inputs
| 182,912,098 |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 231,102,112 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $176,567,659) — including $16,606,425 of securities loaned | $ 205,299,278 |
Investment in Daily Assets Fund Institutional (cost $17,463,226)* | 17,463,226 |
Investment in Cash Management QP Trust (cost $8,339,608) | 8,339,608 |
Total investments, at value (cost $202,370,493)
| 231,102,112 |
Cash
| 67,994 |
Foreign currency, at value (cost $66,889)
| 67,004 |
Receivable for investments sold
| 120,213 |
Dividends receivable
| 493,646 |
Interest receivable
| 25,232 |
Foreign taxes recoverable
| 201,664 |
Other assets
| 4,292 |
Total assets
| 232,082,157 |
Liabilities |
Payable for investments purchased
| 4,288,828 |
Payable for Portfolio shares redeemed
| 488,279 |
Payable upon return of securities loaned
| 17,463,226 |
Accrued management fee
| 125,739 |
Other accrued expenses and payables
| 241,536 |
Total liabilities
| 22,607,608 |
Net assets, at value | $ 209,474,549 |
Net Assets Consist of |
Undistributed net investment income
| 4,947,209 |
Net unrealized appreciation (depreciation) on:
Investments | 28,731,619 |
Foreign currency | 50,598 |
Accumulated net realized gain (loss)
| (9,721,591) |
Paid-in capital
| 185,466,714 |
Net assets, at value | $ 209,474,549 |
Class A Net Asset Value, offering and redemption price per share ($209,290,390 ÷ 18,322,117 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 11.42 |
Class B Net Asset Value, offering and redemption price per share ($184,159 ÷ 16,093 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 11.44 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $361,026)
| $ 5,759,737 |
Interest
| 21,579 |
Interest — Cash Management QP Trust
| 92,428 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 200,860 |
Total Income
| 6,074,604 |
Expenses:
Management fee
| 794,872 |
Administration fee
| 36,420 |
Custodian fee
| 116,620 |
Distribution and service fees (Class B)
| 11,439 |
Services to shareholders
| 254 |
Record keeping fees (Class B)
| 5,887 |
Professional fees
| 41,137 |
Trustees' fees and expenses
| 23,550 |
Reports to shareholders and shareholder meeting
| 86,152 |
Other
| 17,659 |
Total expenses before expense reductions
| 1,133,990 |
Expense reductions
| (11,048) |
Total expenses after expense reductions
| 1,122,942 |
Net investment income (loss) | 4,951,662 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| (9,057,303) |
Foreign currency
| (174,328) |
Payments by affiliates (see Note I)
| 354,782 |
| (8,876,849) |
Change in net unrealized appreciation (depreciation) on:
Investments (including deferred foreign tax credit of $15,499)
| (10,838,263) |
Foreign currency
| 34,456 |
| (10,803,807) |
Net gain (loss) on investment transactions | (19,680.656) |
Net increase (decrease) in net assets resulting from operations | $ (14,728,994) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 4,951,662 | $ 3,970,300 |
Net realized gain (loss)
| (8,876,849) | 62,491,196 |
Change in net unrealized appreciation (depreciation)
| (10,803,807) | (23,087,118) |
Net increase (decrease) in net assets resulting from operations
| (14,728,994) | 43,374,378 |
Distributions to shareholders from:
Net investment income:
Class A | (1,777,801) | (6,153,181) |
Class B | (65,124) | (1,706,211) |
Net realized gains:
Class A | (55,032,003) | (21,172,091) |
Class B | (3,550,840) | (6,853,490) |
Total distributions
| (60,425,768) | (35,884,973) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 8,595,857 | 26,016,717 |
Reinvestment of distributions
| 56,809,804 | 27,325,272 |
Cost of shares redeemed
| (20,799,672) | (48,603,167) |
Net increase (decrease) in net assets from Class A share transactions
| 44,605,989 | 4,738,822 |
Class B Proceeds from shares sold
| 830,161 | 3,741,916 |
Reinvestment of distributions
| 3,615,964 | 8,559,701 |
Cost of shares redeemed
| (15,392,606) | (69,011,239) |
Net increase (decrease) in net assets from Class B share transactions
| (10,946,481) | (56,709,622) |
Increase (decrease) in net assets | (41,495,254) | (44,481,395) |
Net assets at beginning of period
| 250,969,803 | 295,451,198 |
Net assets at end of period (including undistributed net investment income of $4,947,209 and $1,838,472, respectively)
| $ 209,474,549 | $ 250,969,803 |
Other Information |
Class A Shares outstanding at beginning of period
| 14,064,172 | 13,653,834 |
Shares sold
| 668,113 | 1,594,102 |
Shares issued to shareholders in reinvestment of distributions
| 5,131,870 | 1,820,471 |
Shares redeemed
| (1,542,038) | (3,004,235) |
Net increase (decrease) in Class A shares
| 4,257,945 | 410,338 |
Shares outstanding at end of period
| 18,322,117 | 14,064,172 |
Class B Shares outstanding at beginning of period
| 912,661 | 4,475,081 |
Shares sold
| 60,348 | 229,248 |
Shares issued to shareholders in reinvestment of distributions
| 326,645 | 570,267 |
Shares redeemed
| (1,283,561) | (4,361,935) |
Net increase (decrease) in Class B shares
| (896,568) | (3,562,420) |
Shares outstanding at end of period
| 16,093 | 912,661 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 16.76 | $ 16.31 | $ 13.25 | $ 11.91 | $ 10.18 | $ 7.96 |
Income (loss) from investment operations: Net investment incomeb | .30d | .25 | .24c | .20 | .17 | .10 |
Net realized and unrealized gain (loss) | (1.44) | 2.24 | 3.11 | 1.48 | 1.67 | 2.23 |
Total from investment operations | (1.14) | 2.49 | 3.35 | 1.68 | 1.84 | 2.33 |
Less distributions from: Net investment income | (.13) | (.46) | (.29) | (.34) | (.11) | (.11) |
Net realized gains | (4.07) | (1.58) | — | — | — | — |
Total distributions | (4.20) | (2.04) | (.29) | (.34) | (.11) | (.11) |
Net asset value, end of period | $ 11.42 | $ 16.76 | $ 16.31 | $ 13.25 | $ 11.91 | $ 10.18 |
Total Return (%)
| (6.02)e** | 16.71 | 25.56 | 14.51 | 18.25 | 29.83 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 209 | 236 | 223 | 196 | 184 | 147 |
Ratio of expenses (%)
| .98* | .93 | .88 | .87 | .89 | .94 |
Ratio of net investment income (%)
| 1.75d** | 1.53 | 1.65c | 1.59 | 1.58 | 1.17 |
Portfolio turnover rate (%)
| 64** | 117 | 122 | 93 | 88 | 139 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Net investment income per share and the ratio of net investment income without non-recurring dividend income amounting to $0.20 per share and 1.39% of average daily net assets, respectively.
d Net investment income per share and the ratio of net investment income include non-recurring dividend income amounting to $0.15 per share and 1.20% of average daily net assets, respectively.
e Includes a reimbursement from the Advisor to reimburse the effect of losses incurred as the result of certain operation errors during the period. Excluding this reimbursement, total return would have been 0.16% lower.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 16.70 | $ 16.26 | $ 13.21 | $ 11.88 | $ 10.15 | $ 7.94 |
Income (loss) from investment operations: Net investment incomeb | .26d | .19 | .19c | .15 | .13 | .06 |
Net realized and unrealized gain (loss) | (1.38) | 2.22 | 3.09 | 1.47 | 1.67 | 2.24 |
Total from investment operations | (1.12) | 2.41 | 3.28 | 1.62 | 1.80 | 2.30 |
Less distributions from: Net investment income | (.07) | (.39) | (.23) | (.29) | (.07) | (.09) |
Net realized gains | (4.07) | (1.58) | — | — | — | — |
Total distributions | (4.14) | (1.97) | (.23) | (.29) | (.07) | (.09) |
Net asset value, end of period | $ 11.44 | $ 16.70 | $ 16.26 | $ 13.21 | $ 11.88 | $ 10.15 |
Total Return (%)
| (6.36)e** | 16.20 | 25.06 | 14.00 | 17.84 | 29.42 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .2 | 15 | 73 | 62 | 47 | 18 |
Ratio of expenses (%)
| 1.35* | 1.30 | 1.26 | 1.26 | 1.28 | 1.33 |
Ratio of net investment income (%)
| 1.38d** | 1.16 | 1.27c | 1.20 | 1.19 | .78 |
Portfolio turnover rate (%)
| 64** | 117 | 122 | 93 | 88 | 139 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Net investment income per share and the ratio of net investment income without non-recurring dividend income amounting to $0.15 per share and 1.01% of average daily net assets, respectively.
d Net investment income per share and the ratio of net investment income include non-recurring dividend income amounting to $0.15 per share and 1.20% of average daily net assets, respectively.
e Includes a reimbursement from the Advisor to reimburse the effect of losses incurred as the result of certain operation errors during the period. Excluding this reimbursement, total return would have been 0.16% lower.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Janus Growth & Income VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.90% and 1.15% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. The Portfolio also invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. 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 Portfolio, can decline and the investor can lose principal value. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Janus Growth & Income VIP from 10/29/1999 to 6/30/2008 |
[] DWS Janus Growth & Income VIP — Class A [] Russell 1000® Growth Index | The Russell 1000® Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvestment dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Janus Growth & Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000
| $8,862 | $8,933 | $11,330 | $14,583 | $11,634 |
Average annual total return
| -11.38% | -10.67% | 4.25% | 7.84% | 1.76% |
Russell 1000 Growth Index
| Growth of $10,000
| $9,094 | $9,404 | $11,880 | $14,239 | $8,341 |
Average annual total return
| -9.06% | -5.96% | 5.91% | 7.32% | -2.07% |
DWS Janus Growth & Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class** |
Class B | Growth of $10,000
| $8,391 | $8,438 | $10,633 | $13,571 | $13,334 |
Average annual total return
| -16.09% | -15.62% | 2.07% | 6.30% | 4.91% |
Russell 1000 Growth Index
| Growth of $10,000
| $9,094 | $9,404 | $11,880 | $14,239 | $14,658 |
Average annual total return
| -9.06% | -5.96% | 5.91% | 7.32% | 6.58% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations October 29, 1999. Index returns began on October 31, 1999. Total returns would have been lower for the Life of Portfolio period for Class A shares if the Portfolio's expenses were not maintained.** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Janus Growth & Income VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 886.20 | | $ 839.10 | |
Expenses Paid per $1,000*
| $ 4.36 | | $ 5.94 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.24 | | $ 1,018.40 | |
Expenses Paid per $1,000*
| $ 4.67 | | $ 6.52 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Janus Growth & Income VIP
| .93% | | 1.30% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Janus Growth & Income VIP
Continued turmoil in the credit markets, recession fears and concerns that inflation may be accelerating set the tone for equity markets. For the six months ended June 30, 2008, the Portfolio (Class A shares, unadjusted for contract charges) returned -11.38%, while its benchmark, the Russell 1000® Growth Index, returned -9.06%.
Our selections within the financials and industrials sectors were the primary detractors from relative returns during the period. Home-mortgage company Fannie Mae traded lower due to continued weakness in housing and credit markets. The mortgage portfolio for the government-sponsored enterprise has grown substantially, giving rise to the idea that the company may outgrow available capital. Internet company Google, Inc. traded lower during the period on concern over its valuation and the potential for a slowdown in advertising given the weakening US economy.
Valero Energy Corp. declined after preannouncing weaker-than-expected results due to refining outages caused by equipment issues, which will likely impact refining margins.
An overweight position in energy aided comparable results, as did stock selection within materials. Canada-based EnCana Corp. gained ground in the period, aided by an increase in natural gas prices and news of interesting projects in Canada and the US, including the Bakken Oil Shale and the Barnett Oil Shale fields, which may provide an upside to EnCana's oil reserves.1 Late in the period, the company announced plans to split itself into two entities, a natural-gas-focused company and an oil company. EOG Resources, Inc. posted solid gains during the period, benefiting from the improved outlook for natural gas production as prices moved higher.
Potash Corp. of Saskatchewan, Inc. was among the top individual contributors. A large global need to improve crop yields has led to strong industry pricing trends for key ingredients used in fertilizer.
As always, we will continue to emphasize bottom-up company analysis as our primary tool in our quest to add value for shareholders. Thank you for your continued investment.
Marc Pinto, CFA
Portfolio Manager
Janus Capital Management LLC, Subadvisor to the Portfolio
The Russell 1000 Growth Index is an unmanaged index composed of common stocks of larger US companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Janus Growth & Income VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 95% | 95% |
Preferred Stocks | 2% | 1% |
Government & Agency Obligations | 2% | — |
Corporate Bonds | 1% | — |
Participatory Notes | — | 2% |
Cash Equivalents | — | 1% |
Equity Linked Structured Notes | — | 1% |
| 100% | 100% |
Sector Diversification (As a % of Common and Preferred Stocks and Corporate Bonds) | 6/30/08 | 12/31/07 |
| | |
Information Technology | 30% | 25% |
Energy | 15% | 16% |
Consumer Staples | 15% | 14% |
Consumer Discretionary | 12% | 14% |
Financials | 10% | 10% |
Health Care | 9% | 11% |
Industrials | 6% | 8% |
Materials | 3% | 2% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 182. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Janus Growth & Income VIP
|
Shares
| Value ($) |
| |
Common Stocks 94.5% |
Consumer Discretionary 12.0% |
Automobiles 0.7% |
Bayerische Motoren Werke (BMW) AG | 21,970 | 1,054,332 |
Hotels Restaurants & Leisure 4.4% |
Crown Ltd. | 40,635 | 361,322 |
McDonald's Corp. | 19,345 | 1,087,576 |
MGM MIRAGE* (a) | 24,960 | 845,894 |
Starwood Hotels & Resorts Worldwide, Inc. | 29,005 | 1,162,230 |
Wynn Resorts Ltd. (a) | 32,505 | 2,644,282 |
| 6,101,304 |
Internet & Catalog Retail 0.4% |
Liberty Media Corp. — Interactive "A"* (a) | 36,485 | 538,519 |
Media 1.9% |
British Sky Broadcasting Group PLC | 108,740 | 1,021,096 |
Lamar Advertising Co. "A"* (a) | 20,915 | 753,567 |
News Corp. "B" (a) | 52,695 | 808,868 |
| 2,583,531 |
Multiline Retail 1.6% |
Nordstrom, Inc. (a) | 71,555 | 2,168,117 |
Specialty Retail 2.5% |
Esprit Holdings Ltd. | 151,415 | 1,576,005 |
Tiffany & Co. (a) | 45,820 | 1,867,165 |
| 3,443,170 |
Textiles, Apparel & Luxury Goods 0.5% |
NIKE, Inc. "B" | 12,090 | 720,685 |
Consumer Staples 14.1% |
Beverages 2.3% |
InBev NV | 46,605 | 3,221,391 |
Food & Staples Retailing 3.2% |
CVS Caremark Corp. | 110,665 | 4,379,014 |
Food Products 4.3% |
Archer- Daniels- Midland Co. | 14,095 | 475,706 |
Nestle SA (ADR) (Registered) | 19,325 | 2,183,725 |
Nestle SA (Registered) | 73,500 | 3,321,188 |
| 5,980,619 |
Household Products 1.1% |
Reckitt Benckiser Group PLC | 30,573 | 1,548,082 |
Personal Products 0.9% |
Avon Products, Inc. | 36,335 | 1,308,787 |
Tobacco 2.3% |
Altria Group, Inc. | 44,705 | 919,135 |
Philip Morris International, Inc.* | 44,705 | 2,207,980 |
| 3,127,115 |
Energy 14.4% |
Oil, Gas & Consumable Fuels |
ConocoPhillips | 12,100 | 1,142,119 |
EnCana Corp. | 55,453 | 5,042,341 |
EOG Resources, Inc. | 18,470 | 2,423,264 |
ExxonMobil Corp. | 19,275 | 1,698,706 |
|
Shares
| Value ($) |
| |
Hess Corp. | 51,989 | 6,560,492 |
Suncor Energy, Inc. | 23,914 | 1,388,358 |
Valero Energy Corp. | 41,155 | 1,694,763 |
| 19,950,043 |
Financials 7.8% |
Capital Markets 2.6% |
Goldman Sachs Group, Inc. | 20,550 | 3,594,195 |
Consumer Finance 2.5% |
American Express Co. | 90,685 | 3,416,104 |
Diversified Financial Services 1.2% |
JPMorgan Chase & Co. | 46,440 | 1,593,356 |
Real Estate Management & Development 0.4% |
Hang Lung Properties Ltd. | 178,725 | 571,654 |
Thrifts & Mortgage Finance 1.1% |
Fannie Mae (a) | 81,655 | 1,593,089 |
Health Care 9.3% |
Biotechnology 2.2% |
Celgene Corp.* | 12,135 | 775,062 |
Genentech, Inc.* | 30,615 | 2,323,679 |
| 3,098,741 |
Health Care Equipment & Supplies 2.9% |
Alcon, Inc. | 14,505 | 2,361,269 |
Medtronic, Inc. | 22,970 | 1,188,697 |
Nobel Biocare Holding AG (Bearer) | 12,065 | 392,095 |
| 3,942,061 |
Health Care Providers & Services 1.7% |
Coventry Health Care, Inc.* | 37,255 | 1,133,297 |
Pediatrix Medical Group, Inc.* (a) | 23,340 | 1,149,028 |
| 2,282,325 |
Pharmaceuticals 2.5% |
Merck & Co., Inc. | 48,860 | 1,841,534 |
Roche Holding AG (Genusschein) | 9,387 | 1,684,411 |
| 3,525,945 |
Industrials 4.7% |
Aerospace & Defense 2.3% |
BAE Systems PLC (ADR) (a) | 29,125 | 1,028,112 |
Boeing Co. | 20,120 | 1,322,286 |
Empresa Brasiliera de Aeronautica SA (ADR) | 34,943 | 925,990 |
| 3,276,388 |
Air Freight & Logistics 0.4% |
United Parcel Service, Inc. "B" | 8,900 | 547,083 |
Electrical Equipment 0.8% |
JA Solar Holdings Co., Ltd. (ADR)* (a) | 13,685 | 230,592 |
Suntech Power Holdings Co., Ltd. (ADR)* (a) | 23,947 | 897,055 |
| 1,127,647 |
Industrial Conglomerates 0.5% |
Siemens AG (Registered) | 6,045 | 669,394 |
Machinery 0.7% |
Danaher Corp. | 12,330 | 953,109 |
|
Shares
| Value ($) |
| |
Information Technology 28.9% |
Communications Equipment 7.3% |
Cisco Systems, Inc.* | 128,820 | 2,996,353 |
Corning, Inc. | 122,312 | 2,819,291 |
Nokia Oyj (ADR) | 76,118 | 1,864,891 |
QUALCOMM, Inc. | 38,045 | 1,688,057 |
Research In Motion Ltd.* | 6,060 | 708,414 |
| 10,077,006 |
Computers & Peripherals 3.9% |
Apple, Inc.* | 15,364 | 2,572,548 |
EMC Corp.* | 188,125 | 2,763,556 |
| 5,336,104 |
Internet Software & Services 4.2% |
eBay, Inc.* | 67,890 | 1,855,434 |
Google, Inc. "A"* | 7,654 | 4,029,218 |
| 5,884,652 |
IT Services 3.3% |
Infosys Technologies Ltd. (ADR) (a) | 26,624 | 1,157,079 |
Satyam Computer Services, Ltd. (ADR) (a) | 26,624 | 652,821 |
Visa, Inc. "A"* | 14,345 | 1,166,392 |
Western Union Co. | 65,800 | 1,626,576 |
| 4,602,868 |
Semiconductors & Semiconductor Equipment 5.5% |
ASML Holding NV (NY Registered Shares) | 55,607 | 1,356,811 |
KLA — Tencor Corp. (a) | 31,270 | 1,273,002 |
Samsung Electronics Co., Ltd. (GDR) 144A | 9,549 | 2,814,568 |
Texas Instruments, Inc. | 76,210 | 2,146,073 |
| 7,590,454 |
Software 4.7% |
Electronic Arts, Inc.* | 24,235 | 1,076,761 |
Microsoft Corp. | 86,315 | 2,374,526 |
Oracle Corp.* | 143,395 | 3,011,295 |
| 6,462,582 |
Materials 2.8% |
Chemicals |
Potash Corp. of Saskatchewan, Inc. | 6,070 | 1,387,420 |
Syngenta AG (ADR) | 39,455 | 2,552,738 |
| 3,940,158 |
Telecommunication Services 0.5% |
Diversified Telecommunication Services |
AT&T, Inc. | 19,345 | 651,733 |
Total Common Stocks (Cost $121,859,444) | 130,861,357 |
|
|
Shares
| Value ($) |
| |
Preferred Stocks 1.7% |
Citigroup, Inc. Series AA, 8.125% | 18,550 | 415,520 |
Fannie Mae: | | |
Series S, 8.25% (a) | 25,055 | 575,012 |
Series 08-I, 8.75%* | 24,550 | 940,265 |
Freddie Mac, Series Z, 8.375% | 19,750 | 479,925 |
Total Preferred Stocks (Cost $2,744,585) | 2,410,722 |
| Principal Amount ($) | Value ($) |
| |
Corporate Bonds 1.0% |
Consumer Discretionary 0.4% |
Harrah's Operating Co., Inc., 144A, 10.75%, 2/1/2016 | 365,000 | 302,950 |
Station Casinos, Inc., 6.5%, 2/1/2014 | 369,000 | 212,175 |
| 515,125 |
Energy 0.5% |
Suntech Power Holdings Co., Ltd., 144A, 3.0%, 3/15/2013 | 623,000 | 711,778 |
Financials 0.1% |
Ford Motor Credit Co., LLC, 9.875%, 8/10/2011 | 247,000 | 208,114 |
Total Corporate Bonds (Cost $1,412,062) | 1,435,017 |
|
Government & Agency Obligation 1.7% |
US Treasury Obligation |
US Treasury Note, 2.125%, 1/31/2010 (a) (Cost $2,328,397) | 2,326,000 | 2,314,007 |
|
Shares
| Value ($) |
| |
Securities Lending Collateral 11.9% |
Daily Assets Fund Institutional, 2.47% (b) (c) (Cost $16,435,649) | 16,435,649 | 16,435,649 |
|
Cash Equivalents 0.3% |
Cash Management QP Trust, 2.49% (b) (Cost $432,519) | 432,519 | 432,519 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $145,212,656)+ | 111.1 | 153,889,271 |
Other Assets and Liabilities, Net | (11.1) | (15,419,759) |
Net Assets | 100.0 | 138,469,512 |
* Non-income producing security.+ The cost for federal income tax purposes was $145,709,837. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $8,179,434. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $24,418,223 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $16,238,789.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $15,949,456 which is 11.5% of net assets.(b) Affiliated Fund is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
ADR: American Depositary Receipt
GDR: Global Depositary Receipt
At June 30, 2008, the Portfolio had the following open forward foreign currency exchange contracts:
Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized Depreciation ($) |
CHF
| 925,000 |
| USD
| 841,123 |
| 8/14/2008 |
| (64,810) |
CHF
| 1,355,000 |
| USD
| 1,303,386 |
| 10/23/2008 |
| (24,329) |
EUR
| 915,000 |
| USD
| 1,412,211 |
| 10/23/2008 |
| (19,992) |
CHF
| 1,500,000 |
| USD
| 1,447,611 |
| 11/12/2008 |
| (22,460) |
EUR
| 675,000 |
| USD
| 1,041,233 |
| 11/12/2008 |
| (14,213) |
Total unrealized depreciation | (145,804) |
Currency Abbreviations |
CHF Swiss Franc
EUR Euro
USD United States Dollar
|
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Depreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 134,719,279 | $ — |
Level 2 — Other Significant Observable Inputs
| 19,169,993 | (145,804) |
Level 3 — Significant Unobservable Inputs
| — | — |
Total | $ 153,889,271 | $ (145,804) |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as forward foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $128,344,488) — including $15,949,456 of securities loaned | $ 137,021,103 |
Investments in Daily Asset Fund Institutional, (cost $16,435,649)* | 16,435,649 |
Investment in Cash Management QP Trust (cost $432,519) | 432,519 |
Total investments, at value (cost $145,212,656)
| 153,889,271 |
Cash
| 27,134 |
Foreign currency, at value (cost $671,121)
| 678,058 |
Receivable for investments sold
| 1,044,529 |
Dividends receivable
| 60,067 |
Interest receivable
| 58,268 |
Foreign taxes recoverable
| 15,488 |
Other assets
| 3,605 |
Total assets
| 155,776,420 |
Liabilities |
Payable upon return of securities loaned
| 16,435,649 |
Payable for investments purchased
| 407,000 |
Payable for Portfolio shares redeemed
| 113,208 |
Unrealized depreciation on forward foreign currency exchange contracts
| 145,804 |
Accrued management fee
| 73,668 |
Other accrued expenses and payables
| 131,579 |
Total liabilities
| 17,306,908 |
Net assets, at value | $ 138,469,512 |
Net Assets Consist of |
Undistributed net investment income
| 858,414 |
Net unrealized appreciation (depreciation) on:
Investments | 8,676,615 |
Foreign currency | (140,362) |
Accumulated net realized gain (loss)
| 4,395,393 |
Paid-in capital
| 124,679,452 |
Net assets, at value | $ 138,469,512 |
Class A Net Asset Value, offering and redemption price per share ($138,469,161 ÷ 13,508,435 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.25 |
Class B Net Asset Value, offering and redemption price per share ($351 ÷ 35.53 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.88 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $84,899)
| $ 1,468,378 |
Interest — Cash Management QP Trust
| 32,058 |
Interest
| 30,647 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 100,953 |
Total Income
| 1,632,036 |
Expenses:
Management fee
| 555,003 |
Administration fee
| 25,424 |
Services to shareholders
| 160 |
Custodian and accounting fees
| 39,444 |
Distribution and service fees (Class B)
| 3,511 |
Record keeping fees (Class B)
| 1,388 |
Professional fees
| 34,394 |
Trustees' fees and expenses
| 18,774 |
Reports to shareholders and shareholder meeting
| 69,864 |
Other
| 8,128 |
Total expenses before expense reductions
| 756,090 |
Expense reductions
| (7,797) |
Total expenses after expense reductions
| 748,293 |
Net investment income (loss) | 883,743 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 5,108,479 |
Foreign currency
| (214,516) |
| 4,894,103 |
Change in net unrealized appreciation (depreciation) on:
Investments
| (24,411,132) |
Foreign currency
| (144,011) |
| (24,555,143) |
Net gain (loss) | (19,661,040) |
Net increase (decrease) in net assets resulting from operations | $ (18,777,297) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 883,743 | $ 1,783,281 |
Net realized gain (loss)
| 4,894,103 | 26,158,518 |
Change in net unrealized appreciation (depreciation)
| (24,555,143) | (14,652,159) |
Net increase (decrease) in net assets resulting from operations
| (18,777,297) | 13,289,640 |
Distributions to shareholders from:
Net investment income:
Class A | (1,498,719) | (1,085,636) |
Class B | (26,339) | (60,241) |
Net realized gains:
Class A | (10,758,388) | — |
Class B | (307,896) | — |
Total distributions
| (12,591,342) | (1,145,877) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 3,318,141 | 3,234,514 |
Reinvestment of distributions
| 12,257,107 | 1,085,636 |
Cost of shares redeemed
| (14,884,286) | (39,897,035) |
Net increase (decrease) in net assets from Class A share transactions
| 690,962 | (35,576,885) |
Class B Proceeds from shares sold
| 34,143 | 923,888 |
Reinvestment of distributions
| 334,235 | 60,241 |
Cost of shares redeemed
| (4,769,080) | (29,091,879) |
Net increase (decrease) in net assets from Class B share transactions
| (4,400,702) | (28,107,750) |
Increase (decrease) in net assets | (35,078,379) | (51,540,872) |
Net assets at beginning of period
| 173,547,891 | 225,088,763 |
Net assets at end of period (including undistributed net investment income of $858,414 and $1,499,729, respectively)
| $ 138,469,512 | $ 173,547,891 |
Other Information |
Class A Shares outstanding at beginning of period
| 13,362,156 | 16,236,105 |
Shares sold
| 295,952 | 261,428 |
Shares issued to shareholders in reinvestment of distributions
| 1,171,808 | 92,159 |
Shares redeemed
| (1,321,481) | (3,227,536) |
Net increase (decrease) in Class A shares
| 146,279 | (2,873,949) |
Shares outstanding at end of period
| 13,508,435 | 13,362,156 |
Class B Shares outstanding at beginning of period
| 392,971 | 2,676,871 |
Shares sold
| 3,098 | 77,171 |
Shares issued to shareholders in reinvestment of distributions
| 32,107 | 5,135 |
Shares redeemed
| (428,140) | (2,366,206) |
Net increase (decrease) in Class B shares
| (392,935) | (2,283,900) |
Shares outstanding at end of period
| 36 | 392,971 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.62 | $ 11.91 | $ 11.05 | $ 9.88 | $ 8.86 | $ 7.18 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | .12 | .07 | .05 | .03 | .03 |
Net realized and unrealized gain (loss) | (1.48) | .66 | .86 | 1.14 | .99 | 1.71 |
Total from investment operations | (1.41) | .78 | .93 | 1.19 | 1.02 | 1.74 |
Less distributions from: Net investment income | (.12) | (.07) | (.07) | (.02) | — | (.06) |
Net realized and unrealized gain (loss) on investment transactions | (.84) | — | — | — | — | — |
Total distributions | (.96) | (.07) | (.07) | (.02) | — | (.06) |
Net asset value, end of period | $ 10.25 | $ 12.62 | $ 11.91 | $ 11.05 | $ 9.88 | $ 8.86 |
Total Return (%)
| (11.38)c** | 6.59 | 8.43 | 12.11 | 11.51 | 24.37 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 138 | 169 | 193 | 195 | 187 | 189 |
Ratio of expenses before expense reductions (%)
| .94* | .90 | .85 | .92 | 1.06 | 1.07 |
Ratio of expenses after expense reductions (%)
| .93* | .90 | .85 | .92 | 1.06 | 1.07 |
Ratio of net investment income (loss) (%)
| 1.19* | .93 | .68 | .45 | .34 | .40 |
Portfolio turnover rate (%)
| 23** | 73 | 44 | 32 | 52 | 46 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.53 | $ 11.82 | $ 10.97 | $ 9.82 | $ 8.84 | $ 7.17 |
Income (loss) from investment operations: Net investment income (loss)b | .05 | .07 | .03 | .01 | (.01) | .00*** |
Net realized and unrealized gain (loss) | (1.79) | .66 | .85 | 1.14 | .99 | 1.71 |
Total from investment operations | (1.74) | .73 | .88 | 1.15 | .98 | 1.71 |
Less distributions from: Net investment income | (.07) | (.02) | (.03) | — | — | (.04) |
Net realized and unrealized gain (loss) on investment transactions | (.84) | — | — | — | — | — |
Total distributions | (.91) | (.02) | (.03) | — | — | (.04) |
Net asset value, end of period | $ 9.88 | $ 12.53 | $ 11.82 | $ 10.97 | $ 9.82 | $ 8.84 |
Total Return (%)
| (16.09)c** | 6.22 | 7.98 | 11.71c | 11.09 | 23.94 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .0004 | 5 | 32 | 32 | 27 | 15 |
Ratio of expenses before expense reductions (%)
| 1.31* | 1.29 | 1.24 | 1.32 | 1.44 | 1.47 |
Ratio of expenses after expense reductions (%)
| 1.30* | 1.29 | 1.24 | 1.30 | 1.44 | 1.47 |
Ratio of net investment income (loss) (%)
| .82* | .55 | .29 | .07 | (.04) | (.01) |
Portfolio turnover rate (%)
| 23** | 73 | 44 | 32 | 52 | 46 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
*** Amount is less than $.005 per share.
|
Performance Summary June 30, 2008
DWS Large Cap Value VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.83% and 1.08% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The Portfolio is subject to stock market risk. It focuses its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Large Cap Value VIP |
[] DWS Large Cap Value VIP — Class A [] Russell 1000® Value Index | The Russell 1000® Value Index is an unmanaged index, which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Large Cap Value VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $9,662 | $10,243 | $13,106 | $16,706 | $18,201 |
Average annual total return
| -3.38% | 2.43% | 9.43% | 10.81% | 6.17% |
Russell 1000 Value Index
| Growth of $10,000
| $8,643 | $8,122 | $11,096 | $15,330 | $16,156 |
Average annual total return
| -13.57% | -18.78% | 3.53% | 8.92% | 4.91% |
DWS Large Cap Value VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,638 | $10,201 | $12,954 | $16,395 | $16,177 |
Average annual total return
| -3.62% | 2.01% | 9.01% | 10.39% | 8.35% |
Russell 1000 Value Index
| Growth of $10,000
| $8,643 | $8,122 | $11,096 | $15,330 | $15,173 |
Average annual total return
| -13.57% | -18.78% | 3.53% | 8.92% | 7.20% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Large Cap Value VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 966.20 | | $ 963.80 | |
Expenses Paid per $1,000*
| $ 4.25 | | $ 5.96 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.54 | | $ 1,018.80 | |
Expenses Paid per $1,000*
| $ 4.37 | | $ 6.12 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Large Cap Value VIP
| .87% | | 1.22% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Large Cap Value VIP
The first half of 2008 was a period of considerable economic uncertainty and significant turmoil throughout the capital markets. At mid-year 2008, the US economy is experiencing a number of interrelated problems including liquidity issues in financial markets, increased concern about rising prices for energy and food, and rising unemployment.
Essentially all US equity indices posted negative returns for this period. The Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a negative return of -11.05% for the six months ended June 30, 2008. Growth stocks, as measured by the Russell 1000® Growth Index, performed somewhat better than value stocks, as measured by the Russell 1000® Value Index. With a return of -3.38% (Class A shares, unadjusted for contract charges), the Portfolio significantly outperformed its benchmark, the Russell 1000 Value Index, which had a negative return of -13.57%.
Approximately half of the portfolio's outperformance versus its benchmark can be attributed to asset allocation and half to stock selection. In terms of asset allocation, performance benefited from a significant overweight in energy, which performed very well, and an underweight in the financial sector, which was down sharply.1 In the energy sector, overweight positions in Halliburton Co., Noble Energy, Inc. and Devon Energy Corp. contributed to performance.
Performance relative to the benchmark was hurt by stock selection in the consumer discretionary sector, where an overweight in newspaper publisher Gannett Co., Inc. was the major negative.
Thomas Schuessler, Ph.D.
Portfolio Manager
Deutsche Asset Management International GmbH, Subadvisor to the Portfolio
The 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.
The Russell 1000 Growth Index is an unmanaged, capitalization-weighted index consisting of those stocks in the Russell 1000 Index that have greater-than-average growth orientation.
The Russell 1000 Value Index is an unmanaged, capitalization-weighted index which consists of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted-growth values.
Index returns assume the reinvestment of all dividends and, unlike portfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.Portfolio Summary
DWS Large Cap Value VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 97% | 100% |
Cash Equivalents | 3% | — |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Energy | 32% | 26% |
Utilities | 13% | 13% |
Financials | 13% | 20% |
Health Care | 9% | 8% |
Consumer Staples | 8% | 9% |
Materials | 7% | 4% |
Industrials | 7% | 6% |
Telecommunication Services | 4% | 4% |
Consumer Discretionary | 4% | 4% |
Information Technology | 3% | 6% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 194. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Large Cap Value VIP
|
Shares
| Value ($) |
| |
Common Stocks 97.2% |
Consumer Discretionary 4.0% |
Distributors 1.1% |
Genuine Parts Co. | 58,792 | 2,332,867 |
Hotels Restaurants & Leisure 1.4% |
McDonald's Corp. | 50,166 | 2,820,332 |
Media 0.9% |
Gannett Co., Inc. (a) | 89,718 | 1,944,189 |
Specialty Retail 0.6% |
Office Depot, Inc.* | 109,491 | 1,197,832 |
Consumer Staples 8.1% |
Beverages 0.8% |
Dr. Pepper Snapple Group, Inc.* | 85,392 | 1,791,524 |
Food & Staples Retailing 2.0% |
CVS Caremark Corp. | 106,426 | 4,211,277 |
Food Products 2.4% |
General Mills, Inc. | 40,534 | 2,463,251 |
Kraft Foods, Inc. "A" | 89,282 | 2,540,073 |
| 5,003,324 |
Tobacco 2.9% |
Altria Group, Inc. | 58,534 | 1,203,459 |
Philip Morris International, Inc.* | 58,534 | 2,890,994 |
Reynolds American, Inc. | 40,218 | 1,876,974 |
| 5,971,427 |
Energy 30.6% |
Energy Equipment & Services 10.1% |
ENSCO International, Inc. | 42,697 | 3,447,356 |
Halliburton Co. | 133,213 | 7,069,614 |
Noble Corp. | 72,713 | 4,723,436 |
Transocean, Inc.* | 19,402 | 2,956,671 |
Weatherford International Ltd.* | 59,862 | 2,968,557 |
| 21,165,634 |
Oil, Gas & Consumable Fuels 20.5% |
Cameco Corp. | 73,513 | 3,151,502 |
Chevron Corp. | 25,093 | 2,487,469 |
ConocoPhillips | 32,945 | 3,109,679 |
Devon Energy Corp. | 49,692 | 5,970,991 |
Hess Corp. | 28,129 | 3,549,599 |
Marathon Oil Corp. | 65,083 | 3,375,855 |
Nexen, Inc. | 81,222 | 3,228,574 |
Noble Energy, Inc. | 63,649 | 6,400,543 |
Occidental Petroleum Corp. | 41,433 | 3,723,169 |
Suncor Energy, Inc. | 98,898 | 5,747,952 |
Talisman Energy, Inc. | 87,146 | 1,928,541 |
| 42,673,874 |
Financials 12.7% |
Capital Markets 0.4% |
Morgan Stanley | 22,367 | 806,778 |
Commercial Banks 3.6% |
BB&T Corp. (a) | 66,814 | 1,521,355 |
Canadian Imperial Bank of Commerce | 38,883 | 2,136,232 |
|
Shares
| Value ($) |
| |
Comerica, Inc. | 54,905 | 1,407,215 |
Synovus Financial Corp. (a) | 171,963 | 1,501,237 |
Zions Bancorp. | 29,176 | 918,752 |
| 7,484,791 |
Diversified Financial Services 0.4% |
The Nasdaq OMX Group, Inc.* | 27,938 | 741,754 |
Insurance 6.9% |
Alleghany Corp.* | 2,976 | 988,181 |
Allstate Corp. | 44,026 | 2,007,145 |
Chubb Corp. | 20,257 | 992,796 |
Cincinnati Financial Corp. | 30,745 | 780,923 |
Fidelity National Financial, Inc. "A" | 63,701 | 802,633 |
Genworth Financial, Inc. "A" | 98,584 | 1,755,781 |
Loews Corp. | 48,869 | 2,291,956 |
MetLife, Inc. | 51,857 | 2,736,494 |
Odyssey Re Holdings Corp. | 29,509 | 1,047,569 |
Unum Group | 46,353 | 947,919 |
| 14,351,397 |
Thrifts & Mortgage Finance 1.4% |
Capitol Federal Financial | 27,083 | 1,018,592 |
New York Community Bancorp, Inc. | 57,455 | 1,024,997 |
People's United Financial, Inc. | 62,751 | 978,915 |
| 3,022,504 |
Health Care 8.6% |
Health Care Equipment & Supplies 1.1% |
Baxter International, Inc. | 35,551 | 2,273,131 |
Health Care Providers & Services 0.9% |
WellPoint, Inc.* | 40,621 | 1,935,997 |
Life Sciences Tools & Services 1.2% |
Thermo Fisher Scientific, Inc.* | 45,108 | 2,513,869 |
Pharmaceuticals 5.4% |
Abbott Laboratories | 40,935 | 2,168,327 |
Merck & Co., Inc. | 36,161 | 1,362,908 |
Pfizer, Inc. | 170,834 | 2,984,470 |
Teva Pharmaceutical Industries Ltd. (ADR) | 44,896 | 2,056,237 |
Wyeth | 56,969 | 2,732,233 |
| 11,304,175 |
Industrials 6.7% |
Aerospace & Defense 3.0% |
Honeywell International, Inc. | 29,655 | 1,491,053 |
Raytheon Co. | 41,081 | 2,312,039 |
United Technologies Corp. | 38,428 | 2,371,008 |
| 6,174,100 |
Industrial Conglomerates 2.3% |
General Electric Co. (a) | 178,167 | 4,755,277 |
Machinery 1.4% |
Dover Corp. | 60,938 | 2,947,571 |
Information Technology 3.0% |
Communications Equipment 1.5% |
Brocade Communications Systems, Inc.* | 371,474 | 3,060,946 |
|
Shares
| Value ($) |
| |
Semiconductors & Semiconductor Equipment 1.5% |
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 285,700 | 3,116,987 |
Materials 6.7% |
Chemicals 5.5% |
Agrium, Inc. | 19,539 | 2,101,224 |
Air Products & Chemicals, Inc. | 38,809 | 3,836,658 |
Dow Chemical Co. (a) | 57,928 | 2,022,267 |
Praxair, Inc. | 36,272 | 3,418,273 |
| 11,378,422 |
Containers & Packaging 1.2% |
Sonoco Products Co. | 82,451 | 2,551,858 |
Telecommunication Services 4.0% |
Diversified Telecommunication Services |
AT&T, Inc. | 135,618 | 4,568,970 |
BCE, Inc. | 108,833 | 3,788,477 |
| 8,357,447 |
Utilities 12.8% |
Electric Utilities 10.9% |
Allegheny Energy, Inc. | 66,825 | 3,348,601 |
Duke Energy Corp. | 145,735 | 2,532,874 |
Entergy Corp. | 25,750 | 3,102,360 |
|
Shares
| Value ($) |
| |
Exelon Corp. | 62,928 | 5,661,003 |
FirstEnergy Corp. | 52,616 | 4,331,875 |
FPL Group, Inc. | 56,907 | 3,731,961 |
| 22,708,674 |
Multi-Utilities 1.9% |
PG&E Corp. | 102,503 | 4,068,344 |
Total Common Stocks (Cost $183,137,969) | 202,666,302 |
|
Securities Lending Collateral 5.5% |
Daily Assets Fund institutional, 2.74% (b) (c) (Cost $11,481,750) | 11,481,750 | 11,481,750 |
|
Cash Equivalents 3.1% |
Cash Management QP Trust, 2.49% (b) (Cost $6,484,357) | 6,484,357 | 6,484,357 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $201,104,076)+ | 105.8 | 220,632,409 |
Other Assets and Liabilities, Net | (5.8) | (12,183,546) |
Net Assets | 100.0 | 208,448,863 |
* Non-income producing security.+ The cost for federal income tax purposes was $203,127,775. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $17,504,634. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $33,298,076 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $15,793,442.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $11,134,444 which is 5.3% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.ADR: American Depositary Receipt
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 220,632,409 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 220,632,409 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $183,137,969) — including $11,134,444 of securities loaned | $ 202,666,302 |
Investment in Daily Asset Fund Institutional (cost $11,481,750)* | 11,481,750 |
Investment in Cash Management QP Trust (cost $6,484,357) | 6,484,357 |
Total investments, at value (cost $201,104,076)
| 220,632,409 |
Cash
| 409,272 |
Foreign currency, at value (cost $4,374)
| 4,375 |
Dividends receivable
| 463,868 |
Interest receivable
| 21,487 |
Receivable for Portfolio shares sold
| 213,050 |
Other assets
| 3,350 |
Total assets
| 221,747,811 |
Liabilities |
Payable upon return of securities loaned
| 11,481,750 |
Payable for Portfolio shares redeemed
| 724,058 |
Payable for investments purchased
| 816,017 |
Accrued management fee
| 112,350 |
Other accrued expenses and payables
| 164,773 |
Total liabilities
| 13,298,948 |
Net assets, at value | $ 208,448,863 |
Net Assets Consist of |
Undistributed net investment income
| 1,459,540 |
Net unrealized appreciation (depreciation) on:
Investments | 19,528,333 |
Foreign currency | (244) |
Accumulated net realized gain (loss)
| 2,580,548 |
Paid-in capital
| 184,880,686 |
Net assets, at value | $ 208,448,863 |
Class A Net Asset Value, offering and redemption price per share ($208,248,308 ÷ 15,366,056 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 13.55 |
Class B Net Asset Value, offering and redemption price per share ($200,555 ÷ 14,778 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 13.57 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $16,108)
| $ 2,226,367 |
Interest — Cash Management QP Trust
| 217,360 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 15,084 |
Total Income
| 2,458,811 |
Expenses:
Management fee
| 699,216 |
Administration fee
| 107,572 |
Services to shareholders
| 388 |
Custodian fee
| 6,155 |
Professional fees
| 36,300 |
Distribution and service fees (Class B)
| 5,912 |
Record keeping fees (Class B)
| 2,289 |
Trustees' fees and expenses
| 27,556 |
Reports to shareholders and shareholder meeting
| 91,380 |
Other
| 3,030 |
Total expenses before expense reductions
| 979,798 |
Expense reductions
| (10,879) |
Total expenses after expense reductions
| 968,919 |
Net investment income (loss) | 1,489,892 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 4,730,717 |
Foreign currency
| (7,535) |
| 4,723,182 |
Change in net unrealized appreciation (depreciation) on:
Investments
| (14,173,993) |
Foreign currency
| (308) |
| (14,174,301) |
Net gain (loss) | (9,451,119) |
Net increase (decrease) in net assets resulting from operations | $ (7,961,227) |
The accompanying notes are an integral part of the financial statements.
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 1,489,892 | $ 4,055,644 |
Net realized gain (loss)
| 4,723,182 | 52,371,462 |
Change in net unrealized appreciation (depreciation)
| (14,174,301) | (20,593,300) |
Net increase (decrease) in net assets resulting from operations
| (7,961,227) | 35,833,806 |
Distributions to shareholders from:
Net investment income:
Class A | (3,899,692) | (4,770,707) |
Class B | (108,225) | (538,814) |
Net realized gains:
Class A | (50,886,890) | (9,924,139) |
Class B | (1,761,177) | (1,431,558) |
Total Distributions | $ (56,655,984) | $ (16,665,218) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 16,946,207 | 14,988,182 |
Reinvestment of distributions
| 54,786,582 | 14,694,846 |
Cost of shares redeemed
| (30,188,615) | (93,544,614) |
Net increase (decrease) in net assets from Class A share transactions
| 41,544,174 | (63,861,586) |
Class B Proceeds from shares sold
| 324,550 | 699,209 |
Reinvestment of distributions
| 1,869,402 | 1,970,372 |
Cost of shares redeemed
| (7,950,571) | (35,609,682) |
Net increase (decrease) in net assets from Class B share transactions
| (5,756,619) | (32,940,101) |
Increase (decrease) in net assets | (28,829,656) | (77,633,099) |
Net assets at beginning of period
| 237,278,519 | 314,911,618 |
Net assets at end of period (including undistributed net investment income of $1,459,540 and $3,977,565, respectively)
| $ 208,448,863 | $ 237,278,519 |
Other Information |
Class A Shares outstanding at beginning of period
| 11,941,625 | 15,303,964 |
Shares sold
| 1,101,077 | 804,074 |
Shares issued to shareholders in reinvestment of distributions
| 4,201,425 | 857,842 |
Shares redeemed
| (1,878,071) | (5,024,255) |
Net increase (decrease) in Class A shares
| 3,424,431 | (3,362,339) |
Shares outstanding at end of period
| 15,366,056 | 11,941,625 |
Class B Shares outstanding at beginning of period
| 412,771 | 2,232,310 |
Shares sold
| 19,582 | 38,354 |
Shares issued to shareholders in reinvestment of distributions
| 143,030 | 114,823 |
Shares redeemed
| (560,605) | (1,972,716) |
Net increase (decrease) in Class B shares
| (397,993) | (1,819,539) |
Shares outstanding at end of period
| 14,778 | 412,771 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 19.21 | $ 17.96 | $ 15.81 | $ 15.79 | $ 14.57 | $ 11.24 |
Income (loss) from investment operations: Net investment income (loss)b | .11 | .26 | .29d | .26 | .27 | .24 |
Net realized and unrealized gain (loss) | (.95) | 1.98 | 2.12 | .04 | 1.18 | 3.33 |
Total from investment operations | (.84) | 2.24 | 2.41 | .30 | 1.45 | 3.57 |
Less distributions from: Net investment income | (.34) | (.32) | (.26) | (.28) | (.23) | (.24) |
Net realized gains | (4.48) | (.67) | — | — | — | — |
Total Distributions | (4.82) | (.99) | (.26) | (.28) | (.23) | (.24) |
Net asset value, end of period | $ 13.55 | $ 19.21 | $ 17.96 | $ 15.81 | $ 15.79 | $ 14.57 |
Total Return (%)
| (3.38)c** | 13.15c,e | 15.41d | 1.97c | 10.07 | 32.60 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 208 | 229 | 275 | 268 | 274 | 263 |
Ratio of expenses before expense reductions (%)
| .87* | .83 | .83 | .80 | .80 | .80 |
Ratio of expenses after expense reductions (%)
| .87* | .82 | .83 | .80 | .80 | .80 |
Ratio of net investment income (loss) (%)
| 1.42* | 1.43 | 1.73d | 1.64 | 1.84 | 1.94 |
Portfolio turnover rate (%)
| 41** | 103 | 76 | 64 | 40 | 58 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.008 per share and an increase in the ratio of net investment income of 0.04%. Excluding this non-recurring income, total return would have been 0.04% lower.
e Includes a reimbursement from the Advisor for $92,456 for losses on certain operation errors during the period. Excluding this reimbursement, total return would have been 0.04% lower.
* Annualized ** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 19.20 | $ 17.94 | $ 15.79 | $ 15.77 | $ 14.55 | $ 11.23 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | .19 | .23d | .19 | .22 | .18 |
Net realized and unrealized gain (loss) | (.94) | 1.99 | 2.11 | .05 | 1.17 | 3.35 |
Total from investment operations | (.87) | 2.18 | 2.34 | .24 | 1.39 | 3.53 |
Less distributions from: Net investment income | (.28) | (.25) | (.19) | (.22) | (.17) | (.21) |
Net realized gains | (4.48) | (.67) | — | — | — | — |
Total Distributions | (4.76) | (.92) | (.19) | (.22) | (.17) | (.21) |
Net asset value, end of period | $ 13.57 | $ 19.20 | $ 17.94 | $ 15.79 | $ 15.77 | $ 14.55 |
Total Return (%)
| (3.62)c** | 12.77c,e | 14.96d | 1.58c | 9.65 | 32.19 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .20 | 8 | 40 | 40 | 40 | 18 |
Ratio of expenses before expense reductions (%)
| 1.23* | 1.21 | 1.21 | 1.21 | 1.18 | 1.19 |
Ratio of expenses after expense reductions (%)
| 1.22* | 1.20 | 1.21 | 1.20 | 1.18 | 1.19 |
Ratio of net investment income (loss) (%)
| 1.07* | 1.06 | 1.35d | 1.24 | 1.46 | 1.55 |
Portfolio turnover rate (%)
| 41** | 103 | 76 | 64 | 40 | 58 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.008 per share and an increase in the ratio of net investment income of 0.04%. Excluding this non-recurring income, total return would have been 0.04% lower.
e Includes a reimbursement from the Advisor for $92,456 for losses on certain operation errors during the period. Excluding this reimbursement, total return would have been 0.04% lower.
* Annualized ** Not annualized
|
Performance Summary June 30, 2008
DWS Mid Cap Growth VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are .95% and 1.20% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. Stocks of medium-sized companies involve greater risk than securities of larger, more established companies, as they often have limited product lines, markets or financial resources and may be subject to more-erratic and more-abrupt market movements. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Mid Cap Growth VIP from 5/1/1999 to 6/30/2008 |
[] DWS Mid Cap Growth VIP — Class A [] Russell Midcap® Growth Index | Russell Midcap® Growth Index is an unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000® Growth Index. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Mid Cap Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000
| $9,015 | $8,702 | $11,844 | $14,982 | $12,535 |
Average annual total return
| -9.85% | -12.98% | 5.80% | 8.42% | 2.50% |
Russell Midcap Growth Index
| Growth of $10,000
| $9,319 | $9,358 | $12,665 | $17,877 | $15,194 |
Average annual total return
| -6.81% | -6.42% | 8.19% | 12.32% | 4.67% |
DWS Mid Cap Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class** |
Class B | Growth of $10,000
| $9,034 | $8,680 | $11,725 | $14,725 | $16,191 |
Average annual total return
| -9.66% | -13.20% | 5.45% | 8.05% | 8.36% |
Russell Midcap Growth Index
| Growth of $10,000
| $9,319 | $9,358 | $12,665 | $17,877 | $19,191 |
Average annual total return
| -6.81% | -6.42% | 8.19% | 12.32% | 11.48% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on May 1, 1999. Index returns began on April 30, 1999.** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Mid Cap Growth VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 901.50 | | $ 903.40 | |
Expenses Paid per $1,000*
| $ 4.78 | | $ 6.53 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,019.84 | | $ 1,018.00 | |
Expenses Paid per $1,000*
| $ 5.07 | | $ 6.92 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Mid Cap Growth VIP
| 1.01% | | 1.38% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio of any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Mid Cap Growth VIP
A turbulent first quarter of 2008 for financial markets led to aggressive easing by the US Federal Reserve Board (the Fed) and agreement by Congress and the president on a $168 billion fiscal stimulus package. During the second quarter, the stock market began to recover and advanced during the months of April and May. However, stocks suffered another reversal in June amid continuing concern over the scope of the credit crisis, concerns over the uncertain future of one-time leaders in the financial and automotive sectors, and the continued escalation of oil prices. Following a nine-month trail of adjustments to interest rates, the Fed elected to take no action at the June 2008 Federal Open Market Committee (FOMC) meeting and left the key federal funds rate unchanged at 2%. (The federal funds rate is the overnight rate charged by banks when they borrow money from each other.) Chairman Bernanke is attempting to navigate a tightrope — spurring economic activity while keeping energy-cost-driven inflation in check.
For the six months ended June 30, 2008, the Portfolio returned -9.85% (Class A shares, unadjusted for contract charges), compared with the -6.81% return of the Russell Midcap® Growth Index.
During the period, detractors from performance included stock selection in the information technology and industrials sectors. Positive contributors to performance included stock selection in the consumer discretionary and materials sectors. An overweight in the telecom services and consumer discretionary sectors relative to the benchmark added to returns.1 We continue to maintain our long-term perspective, investing in what we feel are quality mid-cap growth stocks.
Robert S. Janis Joseph Axtell, CFA
Lead Portfolio Manager Portfolio Manager
Deutsche Investment Management Americas Inc.
The Russell Midcap Growth Index is an unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000 Growth Index. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.Portfolio Summary
DWS Mid Cap Growth VIP
Asset Allocation (As a% of Investment Portfolio Excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 99% | 99% |
Cash Equivalents | 1% | 1% |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Consumer Discretionary | 19% | 14% |
Information Technology | 18% | 26% |
Industrials | 15% | 18% |
Energy | 14% | 11% |
Health Care | 10% | 12% |
Financials | 9% | 9% |
Telecommunication Services | 7% | 5% |
Materials | 5% | 3% |
Consumer Staples | 3% | 2% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 205. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Mid Cap Growth VIP
|
Shares
| Value ($) |
| |
Common Stocks 99.6% |
Consumer Discretionary 19.0% |
Diversified Consumer Services 1.1% |
Strayer Education, Inc. (a) | 2,100 | 439,047 |
Hotels Restaurants & Leisure 2.1% |
Darden Restaurants, Inc. (a) | 14,700 | 469,518 |
Starwood Hotels & Resorts Worldwide, Inc. (a) | 8,900 | 356,623 |
| 826,141 |
Specialty Retail 13.5% |
American Eagle Outfitters, Inc. | 22,900 | 312,127 |
Chico's FAS, Inc.* (a) | 61,700 | 331,329 |
Children's Place Retail Stores, Inc.* | 22,800 | 823,080 |
Guess?, Inc. (a) | 38,100 | 1,426,845 |
Tiffany & Co. | 16,200 | 660,150 |
Urban Outfitters, Inc.* (a) | 57,000 | 1,777,830 |
| 5,331,361 |
Textiles, Apparel & Luxury Goods 2.3% |
Coach, Inc.* | 12,000 | 346,560 |
Phillips-Van Heusen Corp. (a) | 15,300 | 560,286 |
| 906,846 |
Consumer Staples 2.7% |
Food & Staples Retailing 0.9% |
Whole Foods Market, Inc. (a) | 14,700 | 348,243 |
Personal Products 1.8% |
Herbalife Ltd. (a) | 18,300 | 709,125 |
Energy 13.9% |
Energy Equipment & Services 6.0% |
Cameron International Corp.* | 9,000 | 498,150 |
FMC Technologies, Inc.* (a) | 13,200 | 1,015,476 |
Rowan Companies, Inc. (a) | 18,850 | 881,237 |
| 2,394,863 |
Oil, Gas & Consumable Fuels 7.9% |
Holly Corp. (a) | 13,100 | 483,652 |
Southwestern Energy Co.* | 26,700 | 1,271,187 |
Ultra Petroleum Corp.* (a) | 13,830 | 1,358,106 |
| 3,112,945 |
Financials 8.6% |
Capital Markets 7.8% |
Affiliated Managers Group, Inc.* (a) | 13,310 | 1,198,699 |
E*TRADE Financial Corp.* (a) | 112,700 | 353,878 |
T. Rowe Price Group, Inc. (a) | 15,400 | 869,638 |
Waddell & Reed Financial, Inc. "A" | 18,500 | 647,685 |
| 3,069,900 |
Real Estate Management & Development 0.8% |
Jones Lang LaSalle, Inc. (a) | 5,500 | 331,045 |
Health Care 9.5% |
Health Care Equipment & Supplies 1.4% |
Hologic, Inc.* (a) | 25,100 | 547,180 |
Health Care Providers & Services 2.0% |
Humana, Inc.* | 9,900 | 393,723 |
|
Shares
| Value ($) |
| |
WellCare Health Plans, Inc.* | 11,400 | 412,110 |
| 805,833 |
Life Sciences Tools & Services 4.3% |
Covance, Inc.* (a) | 8,800 | 756,976 |
Pharmaceutical Product Development, Inc. | 21,600 | 926,640 |
| 1,683,616 |
Pharmaceuticals 1.8% |
Mylan, Inc. (a) | 60,800 | 733,856 |
Industrials 15.3% |
Aerospace & Defense 2.4% |
BE Aerospace, Inc.* (a) | 22,700 | 528,683 |
Curtiss-Wright Corp. (a) | 9,200 | 411,608 |
| 940,291 |
Commercial Services & Supplies 2.2% |
Huron Consulting Group, Inc.* (a) | 9,700 | 439,798 |
Robert Half International, Inc. (a) | 17,600 | 421,872 |
| 861,670 |
Electrical Equipment 3.9% |
General Cable Corp.* (a) | 8,000 | 486,800 |
Roper Industries, Inc. (a) | 15,850 | 1,044,198 |
| 1,530,998 |
Industrial Conglomerates 1.9% |
McDermott International, Inc.* | 12,500 | 773,625 |
Machinery 4.9% |
Harsco Corp. | 9,100 | 495,131 |
Manitowoc Co., Inc. | 13,500 | 439,155 |
Oshkosh Truck Corp. (a) | 11,880 | 245,797 |
Terex Corp.* | 14,480 | 743,838 |
| 1,923,921 |
Information Technology 18.3% |
Communications Equipment 4.6% |
F5 Networks, Inc.* (a) | 38,300 | 1,088,486 |
Foundry Networks, Inc.* | 60,100 | 710,382 |
| 1,798,868 |
Computers & Peripherals 0.9% |
NetApp, Inc.* | 16,800 | 363,888 |
Internet Software & Services 3.6% |
Akamai Technologies, Inc.* | 14,900 | 518,371 |
Equinix, Inc.* (a) | 5,400 | 481,788 |
Omniture, Inc.* (a) | 23,800 | 441,966 |
| 1,442,125 |
IT Services 1.4% |
Cognizant Technology Solutions Corp. "A"* (a) | 16,800 | 546,168 |
Semiconductors & Semiconductor Equipment 3.2% |
MEMC Electronic Materials, Inc.* | 6,400 | 393,856 |
NVIDIA Corp.* | 17,900 | 335,088 |
Tessera Technologies, Inc.* (a) | 32,700 | 535,299 |
| 1,264,243 |
Software 4.6% |
Blackboard, Inc.* | 12,200 | 466,406 |
Citrix Systems, Inc.* (a) | 13,300 | 391,153 |
|
Shares
| Value ($) |
| |
FactSet Research Systems, Inc. (a) | 16,800 | 946,848 |
| 1,804,407 |
Materials 5.0% |
Chemicals 1.0% |
Intrepid Potash, Inc.* (a) | 6,100 | 401,258 |
Metals & Mining 4.0% |
Allegheny Technologies, Inc. (a) | 5,300 | 314,184 |
Gerdau Ameristeel Corp. | 66,000 | 1,273,800 |
| 1,587,984 |
Telecommunication Services 7.3% |
Wireless Telecommunication Services |
Crown Castle International Corp.* (a) | 19,900 | 770,727 |
NII Holdings, Inc.* (a) | 26,360 | 1,251,836 |
SBA Communications Corp. "A"* | 24,300 | 875,043 |
| 2,897,606 |
Total Common Stocks (Cost $35,536,711) | 39,377,053 |
|
Shares
| Value ($) |
| |
Securities Lending Collateral 31.1% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $12,283,473) | 12,283,473 | 12,283,473 |
|
Cash Equivalents 0.5% |
Cash Management QP Trust, 2.49% (b) (Cost $183,559) | 183,559 | 183,559 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $48,003,743)+ | 131.2 | 51,844,085 |
Other Assets and Liabilities, Net | (31.2) | (12,333,272) |
Net Assets | 100.0 | 39,510,813 |
* Non-income producing security.+ The cost for federal income tax purposes was $48,003,743. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $3,840,342. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $7,977,690 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,137,348.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $11,904,211 which is 30.1% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 51,844,085 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 51,844,085 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $35,536,711) — including $11,904,211 of securities loaned | $ 39,377,053 |
Investment in Daily Assets Fund Institutional (cost $12,283,473)* | 12,283,473 |
Investment in Cash Management QP Trust (cost $183,559) | 183,559 |
Total investments, at value (cost $48,003,743)
| 51,844,085 |
Receivable for Portfolio shares sold
| 47,408 |
Dividends receivable
| 7,767 |
Interest receivable
| 6,250 |
Other assets
| 906 |
Total assets
| 51,906,416 |
Liabilities |
Payable for Portfolio shares redeemed
| 32,080 |
Payable upon return of securities loaned
| 12,283,473 |
Accrued management fee
| 10,719 |
Other accrued expenses and payables
| 69,331 |
Total liabilities
| 12,395,603 |
Net assets, at value | $ 39,510,813 |
Net Assets Consist of |
Accumulated net investment loss
| (87,432) |
Net unrealized appreciation (depreciation) on
investments
| 3,840,342 |
Accumulated net realized gain (loss)
| (17,042,304) |
Paid-in capital
| 52,800,207 |
Net assets, at value | $ 39,510,813 |
Class A Net Asset Value, offering and redemption price per share ($39,472,222 ÷ 3,216,543 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 12.27 |
Class B Net Asset Value, offering and redemption price per share ($38,591 ÷ 3,200 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 12.06 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Dividends (net of foreign taxes withheld of $3,155)
| $ 96,597 |
Interest — Cash Management QP Trust
| 8,034 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 50,290 |
Total Income
| 154,921 |
Expenses:
Management fee
| 157,167 |
Administration fee
| 7,143 |
Services to shareholders
| 223 |
Custodian and accounting fees
| 24,753 |
Distribution and service fees (Class B)
| 1,376 |
Record keeping fees (Class B)
| 526 |
Legal fees
| 6,524 |
Audit and tax fees
| 23,850 |
Trustees' fees and expenses
| 7,551 |
Reports to shareholders and shareholder meeting
| 47,925 |
Other
| 1,719 |
Total expenses before expense reductions
| 278,757 |
Expense reductions
| (43,170) |
Total expenses after expense reductions
| 235,587 |
Net investment income (loss) | (80,666) |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| 3,511,744 |
Change in net unrealized appreciation (depreciation) on investments
| (8,445,788) |
Net gain (loss) | (4,934,044) |
Net increase (decrease) in net assets resulting from operations | $ (5,014,710) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ (80,666) | $ (238,874) |
Net realized gain (loss)
| 3,511,744 | 8,021,447 |
Change in net unrealized appreciation (depreciation)
| (8,445,788) | (2,652,715) |
Net increase (decrease) in net assets resulting from operations
| (5,014,710) | 5,129,858 |
Portfolio share transactions:
Class A Proceeds from shares sold
| 1,293,005 | 7,675,878 |
Cost of shares redeemed
| (7,547,425) | (14,497,003) |
Net increase (decrease) in net assets from Class A share transactions
| (6,254,420) | (6,821,125) |
Class B Proceeds from shares sold
| 46,809 | 1,053,940 |
Cost of shares redeemed
| (1,839,759) | (7,779,098) |
Net increase (decrease) in net assets from Class B share transactions
| (1,792,950) | (6,725,158) |
Increase (decrease) in net assets | (13,062,080) | (8,416,425) |
Net assets at beginning of period
| 52,572,893 | 60,989,318 |
Net assets at end of period (including accumulated net investment loss of $87,432 and $6,766, respectively)
| $ 39,510,813 | $ 52,572,893 |
Other Information |
Class A Shares outstanding at beginning of period
| 3,720,929 | 4,226,008 |
Shares sold
| 101,915 | 567,035 |
Shares redeemed
| (606,301) | (1,072,114) |
Net increase (decrease) in Class A shares
| (504,386) | (505,079) |
Shares outstanding at end of period
| 3,216,543 | 3,720,929 |
Class B Shares outstanding at beginning of period
| 145,552 | 640,328 |
Shares sold
| 4,043 | 79,290 |
Shares redeemed
| (146,395) | (574,066) |
Net increase (decrease) in Class B shares
| (142,352) | (494,776) |
Shares outstanding at end of period
| 3,200 | 145,552 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 13.61 | $ 12.56 | $ 11.32 | $ 9.84 | $ 9.46 | $ 7.06 |
Income (loss) from investment operations: Net investment income (loss)b | (.02) | (.05) | (.06)d | (.05) | (.01) | (.05) |
Net realized and unrealized gain (loss) | (1.32) | 1.10 | 1.30 | 1.53 | .39 | 2.45 |
Total from investment operations | (1.34) | 1.05 | 1.24 | 1.48 | .38 | 2.40 |
Net asset value, end of period | $ 12.27 | $ 13.61 | $ 12.56 | $ 11.32 | $ 9.84 | $ 9.46 |
Total Return (%)c
| (9.85)** | 8.36 | 10.95d | 15.04 | 4.02 | 33.99 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 39 | 51 | 53 | 57 | 53 | 56 |
Ratio of expenses before expense reductions (%)
| 1.20* | 1.05 | 1.03 | 1.01 | 1.02 | .98 |
Ratio of expenses after expense reductions (%)
| 1.01* | .90 | .93 | .95 | .95 | .95 |
Ratio of net investment income (loss) (%)
| (.29)* | (.38) | (.51)d | (.45) | (.11) | (.57) |
Portfolio turnover rate (%)
| 33** | 68 | 46 | 104 | 103 | 91 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.003 per share and an increase in the ratio of net investment income of 0.03%. Excluding this non-recurring income, total return would have been 0.03% lower.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 13.35 | $ 12.37 | $ 11.19 | $ 9.76 | $ 9.42 | $ 7.06 |
Income (loss) from investment operations: Net investment income (loss)b | (.04) | (.10) | (.10)d | (.09) | (.05) | (.09) |
Net realized and unrealized gain (loss) | (1.25) | 1.08 | 1.28 | 1.52 | .39 | 2.45 |
Total from investment operations | (1.29) | .98 | 1.18 | 1.43 | .34 | 2.36 |
Net asset value, end of period | $ 12.06 | $ 13.35 | $ 12.37 | $ 11.19 | $ 9.76 | $ 9.42 |
Total Return (%)c
| (9.66)** | 7.92 | 10.55d | 14.65 | 3.61 | 33.43 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .04 | 2 | 8 | 7 | 6 | 4 |
Ratio of expenses before expense reductions (%)
| 1.58* | 1.43 | 1.42 | 1.40 | 1.41 | 1.37 |
Ratio of expenses after expense reductions (%)
| 1.38* | 1.28 | 1.29 | 1.32 | 1.34 | 1.34 |
Ratio of net investment income (loss) (%)
| (.66)* | (.76) | (.87)d | (.82) | (.50) | (.96) |
Portfolio turnover rate (%)
| 33** | 68 | 46 | 104 | 103 | 91 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.003 per share and an increase in the ratio of net investment income of 0.03%. Excluding this non-recurring income, total return would have been 0.03% lower.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Moderate Allocation VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns.
The total annual Portfolio direct operating expense ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 is 0.59% for Class B shares. The total Portfolio direct and estimated indirect Underlying DWS Portfolio operating expense ratio, gross of any fee waivers or expense reimbursements, as presented in the fee table of the prospectus dated May 1, 2008 is 1.30% for Class B shares. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
Diversification does not eliminate risk. The underlying portfolios invest in individual bonds whose yields and market values fluctuate, so that your investment may be worth more or less than its original cost. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the bond investment, can decline and the investor can lose principal value. In addition, the underlying portfolios are subject to stock market risk, meaning stocks in the Portfolio 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. Investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes, and market risks. Derivatives may be more volatile and less liquid than traditional securities, and the Portfolio could suffer losses on its derivative positions. An investment in underlying money market investments is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any government agency. Although money market investments seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these investments. Please read this Portfolio's prospectus for specific details regarding its risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Moderate Allocation VIP from 8/16/2004 to 6/30/2008 |
[] DWS Moderate Allocation VIP — Class B [] Russell 1000® Index [] Lehman Brothers US Aggregate Index | 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 Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of Treasury issues, agency issues, corporate bond issues and mortgage securities. Index returns, unlike Portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
|
|
Comparative Results |
DWS Moderate Allocation VIP | 6-Month‡ | 1-Year | 3-Year | Life of Portfolio* |
Class B | Growth of $10,000
| $9,388 | $9,473 | $11,416 | $12,464 |
Average annual total return
| -6.12% | -5.27% | 4.51% | 5.85% |
Russell 1000 Index
| Growth of $10,000
| $8,880 | $8,764 | $11,513 | $12,814 |
Average annual total return
| -11.20% | -12.36% | 4.81% | 6.68% |
Lehman Brothers US Aggregate Index
| Growth of $10,000
| $10,113 | $10,712 | $11,276 | $11,702 |
Average annual total return
| 1.13% | 7.12% | 4.09% | 4.19% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on August 16, 2004. Index returns began on August 31, 2004.Information About Your Portfolio's Expenses
DWS Moderate Allocation VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In addition to the ongoing expenses which the Portfolio bears directly, the Portfolio's shareholders indirectly bear the expense of the Underlying DWS Portfolios in which the Portfolio invests. The Portfolio's estimated indirect expense from investing in the Underlying DWS Portfolios is based on the expense ratios from the Underlying DWS Portfolio's most recent shareholder report. In the most recent six-month period, the Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Direct Portfolio Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 938.80 |
Expenses Paid per $1,000*
| | $ 3.47 |
Hypothetical 5% Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 1,021.28 |
Expenses Paid per $1,000*
| | $ 3.62 |
Direct Portfolio Expenses and Acquired Portfolios (Underlying Portfolios) Fees and Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 938.80 |
Expenses Paid per $1,000**
| | $ 7.09 |
Hypothetical 5% Portfolio Return | | Class B |
Beginning Account Value 1/1/08
| | $ 1,000.00 |
Ending Account Value 6/30/08
| | $ 1,017.55 |
Expenses Paid per $1,000**
| | $ 7.37 |
* Expenses are equal to the Portfolio's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.** Expenses are equal to the Portfolio's annualized expense ratio plus the Acquired Portfolios (Underlying Portfolios) Fees and Expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | | Class B |
Direct Portfolio Expense Ratio
| | .72% |
Acquired Portfolios (Underlying Portfolios) Fees and Expenses
| | .75% |
Net Annual Portfolio and Acquired Portfolios (Underlying Portfolios) Operating Expenses
| | 1.47% |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Moderate Allocation VIP
For the six months ended June 30, 2008, the DWS Moderate Allocation VIP's Class B shares (unadjusted for contract charges) had a return of -6.12%. Since this Portfolio invests in stock and bond funds in several different categories, performance is analyzed by comparing the Portfolio's return with indexes that represent each asset class. For the six-month period, the Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a return of -11.05%, and the Lehman Brothers US Aggregate Index, which is considered indicative of broad bond market trends, returned 1.13%. The Portfolio's return was below that of its bond benchmark but above the returns of its equity benchmark, the Russell 1000® Index, which had a return of -11.20%.
There are three major determinants of the Portfolio's performance; strategic asset allocation, tactical asset allocation, and the performance of the underlying funds in which the Portfolio's assets are invested.
Strategic asset allocation refers to the longer-term allocation among asset classes. The Portfolio's allocation between equity and fixed income funds remained close to its target of 60% equity and 40% fixed income during the first half of 2008, but with equities overweighted throughout the period.1 This overweight in equities detracted from performance, as fixed-income securities, particularly short-term securities such as money market securities, performed better than stocks. Within equities the allocation was tilted toward the US large cap category and international equities. While the international equity overweight helped relative performance within the equity portion of the Portfolio, the large cap equity overweight detracted from performance.
Tactical allocation decisions are short-term underweights or overweights of particular asset classes relative to their longer-term strategic asset allocation targets. Overall tactical asset allocation slightly detracted from performance.
Performance of each of the underlying funds is compared to a suitable benchmark for that particular fund's asset class and management style. The underlying funds as a group slightly detracted from performance relative to their respective benchmarks. In particular, the DWS Core Fixed Income VIP significantly underperformed the Lehman Brothers US Aggregate Index. Although most of the equity funds had negative returns, equity funds overall added value by performing better than their respective benchmarks; performance of the DWS Large Cap Value VIP was especially strong.
Inna Okounkova Robert Wang
Portfolio Managers, Deutsche Investment Management Americas Inc.
The 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. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
The Lehman Brothers US Aggregate Index is an unmanaged market-value-weighted measure of Treasury issues, corporate bond issues and mortgage securities. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. It is not possible to invest directly into an index.
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 portfolio returns, do not include fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Moderate Allocation VIP
Asset Allocation (As a % of Investment Portfolio) | 6/30/08 | 12/31/07 |
| | |
Equity | 59% | 63% |
Fixed Income — Bonds | 37% | 33% |
Fixed Income — Money Market | 3% | 4% |
Exchange Traded Fund | 1% | — |
| 100% | 100% |
Target Allocation (As a % of Investment Portfolio) | 6/30/08 | 12/31/07 |
| | |
Fixed Income Portfolios | 40% | 40% |
Equity Portfolios | 60% | 60% |
Asset allocation is subject to change.
For more complete details about the Portfolio's investment portfolio, see page 217. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Moderate Allocation VIP
| Shares | Value ($) |
| |
Equity Funds 58.8% |
DWS Blue Chip VIP "A" | 3,203 | 33,563 |
DWS Capital Growth VIP "A" | 55,859 | 1,062,434 |
DWS Davis Venture Value VIP "A" | 213,896 | 2,376,383 |
DWS Dreman High Return Equity VIP "A" | 5,263 | 50,102 |
DWS Dreman Small Mid Cap Value VIP "A" | 95,684 | 1,031,470 |
DWS Equity 500 Index VIP "A" | 59,393 | 793,490 |
DWS Global Opportunities VIP "A" | 4,328 | 59,852 |
DWS Global Thematic VIP "A" | 111,998 | 1,100,940 |
DWS Growth & Income VIP "A" | 349,531 | 2,586,529 |
DWS Health Care VIP "A" | 81,641 | 935,602 |
DWS International Select Equity VIP "A" | 2,010 | 22,952 |
DWS International VIP "A" | 222,159 | 2,603,708 |
DWS Japan Equity Fund "S" | 3,270 | 37,021 |
DWS Large Cap Value VIP "A" | 395,989 | 5,365,645 |
DWS Mid Cap Growth VIP "A" | 1,310 | 16,078 |
DWS RREEF Global Real Estate Securities Fund "Institutional" | 7,588 | 67,682 |
DWS Small Cap Core Fund "S" | 3,341 | 56,669 |
DWS Small Cap Growth VIP "A" | 51,559 | 651,711 |
DWS Small Cap Index VIP "A" | 4,727 | 55,925 |
DWS Technology VIP "A" | 74,055 | 670,198 |
Total Equity Funds (Cost $23,429,377) | 19,577,954 |
| Shares | Value ($) |
| |
Fixed Income — Bond Funds 37.2% |
DWS Core Fixed Income VIP "A" | 981,703 | 10,582,757 |
DWS Government & Agency Securities VIP "A" | 58 | 691 |
DWS High Income VIP "A" | 161,605 | 1,115,076 |
DWS US Bond Index Fund "Institutional" | 69,349 | 704,588 |
Total Fixed Income — Bond Funds (Cost $13,274,754) | 12,403,112 |
|
Fixed Income — Money Market Fund 3.3% |
Cash Management QP Trust (Cost $1,087,579) | 1,087,579 | 1,087,579 |
|
Exchange Traded Fund 0.7% |
iShares MSCI United Kingdom Index Fund (Cost $266,084) | 11,847 | 246,892 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $38,057,794)+ | 100.0 | 33,315,537 |
Other Assets and Liabilities, Net | 0.0 | (2,029) |
Net Assets | 100.0 | 33,313,508 |
+ The cost for federal income tax purposes was $38,079,959. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $4,764,422. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $2,580 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,767,002.MSCI: Morgan Stanley Capital International
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 33,315,537 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 33,315,537 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in Underlying Affiliated Portfolios, at value (cost $36,704,131) | $ 31,981,066 |
Investment in Non-affiliated fund (cost $266,084) | 246,892 |
Investment in Cash Management QP Trust (cost $1,087,579) | 1,087,579 |
Total investments, at value (cost $38,057,794)
| 33,315,537 |
Dividends receivable
| 601 |
Interest receivable
| 2,460 |
Receivable for Portfolio shares sold
| 24,956 |
Due from Advisor
| 17,260 |
Other assets
| 1,028 |
Total assets
| 33,361,842 |
Liabilities |
Other accrued expenses and payables
| 48,334 |
Total liabilities
| 48,334 |
Net assets, at value | $ 33,313,508 |
Net Assets Consist of |
Undistributed net investment income
| 4,907,413 |
Net unrealized appreciation (depreciation) on investments
| (4,742,257) |
Accumulated net realized gain (loss)
| 15,181,107 |
Paid-in capital
| 17,967,245 |
Net assets, at value | $ 33,313,508 |
Class B Net Asset Value, offering and redemption price per share ($33,313,508 ÷ 3,412,504 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.76 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Income distributions from Underlying Affiliated Portfolios
| 1,196,028 |
Dividends
| 5,620 |
Interest — Cash Management QP Trust
| 10,759 |
Total Income
| 1,212,407 |
Expenses:
Management fee
| 21,080 |
Administration fee
| 5,657 |
Services to shareholders
| 36 |
Custodian and accounting fees
| 17,143 |
Distribution and service fees
| 43,147 |
Record keeping fees
| 18,733 |
Audit and tax fees
| 21,815 |
Legal
| 12,299 |
Trustees' fees and expenses
| 7,782 |
Reports to shareholders and shareholder meeting
| 6,980 |
Other
| 3,121 |
Total expenses before expense reductions
| 157,793 |
Expense reductions
| (30,221) |
Total expenses after expense reductions
| 127,572 |
Net investment income (loss) | 1,084,835 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| (927,192) |
Capital gain distributions from Underlying Affiliated Portfolios
| 4,026,772 |
| 3,099,580 |
Change in net unrealized appreciation (depreciation) on investments
| (6,374,963) |
Net gain (loss) | (3,275,383) |
Net increase (decrease) in net assets resulting from operations | $ (2,190,548) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ 1,084,835 | $ 3,570,896 |
Net realized gain (loss)
| 3,099,580 | 18,433,740 |
Change in net unrealized appreciation (depreciation)
| (6,374,963) | (12,317,475) |
Net increase (decrease) in net assets resulting from operations
| (2,190,548) | 9,687,161 |
Distributions to shareholders from:
Net investment income:
Class B | (1,275,845) | (3,955,828) |
Net realized gains:
Class B | (4,026,048) | (6,545,482) |
Total distributions
| (5,301,893) | (10,501,310) |
Portfolio share transactions:
Class B Proceeds from shares sold
| 6,940,043 | 4,472,231 |
Reinvestment of distributions
| 5,301,893 | 10,501,310 |
Cost of shares redeemed
| (5,646,911) | (158,853,998) |
Net increase (decrease) in net assets from Class B share transactions
| 6,595,025 | (143,880,457) |
Increase (decrease) in net assets | (897,416) | (144,694,606) |
Net assets at beginning of period
| 34,210,924 | 178,905,530 |
Net assets at end of period (including undistributed net investment income of $4,907,413 and $5,098,423, respectively)
| $ 33,313,508 | $ 34,210,924 |
Other Information |
Class B Shares outstanding at beginning of period
| 2,785,245 | 14,409,131 |
Shares sold
| 619,207 | 363,437 |
Shares issued to shareholders in reinvestment of distributions
| 546,587 | 888,436 |
Shares redeemed
| (538,535) | (12,875,759) |
Net increase (decrease) in Class B shares
| 627,259 | (11,623,886) |
Shares outstanding at end of period
| 3,412,504 | 2,785,245 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004b |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.28 | $ 12.42 | $ 11.37 | $ 10.84 | $ 10.00 |
Income (loss) from investment operations: Net investment income (loss)c | .38 | .26 | .19 | .12 | (.03) |
Net realized and unrealized gain (loss) | (1.15) | .34 | 1.04 | .43 | .87 |
Total from investment operations | (.77) | .60 | 1.23 | .55 | .84 |
Less distributions from: Net investment income | (.42) | (.28) | (.10) | — | — |
Net realized gains | (1.33) | (.46) | (.08) | (.02) | — |
Total distributions | (1.75) | (.74) | (.18) | (.02) | — |
Net asset value, end of period | $ 9.76 | $ 12.28 | $ 12.42 | $ 11.37 | $ 10.84 |
Total Return (%)d,e
| (6.12)** | 5.09 | 10.93 | 5.06 | 8.40** |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 33 | 34 | 179 | 171 | 39 |
Ratio of expenses before expense reductions (%)f
| .89* | .63 | .62 | .66 | 1.53* |
Ratio of expenses after expense reductions (%)f
| .72* | .58 | .57 | .61 | .75* |
Ratio of net investment income (loss) (%)
| 3.12g | 2.11 | 1.65 | 1.15 | (.68)* |
Portfolio turnover rate (%)
| 22** | 30 | 35 | 14 | 13 |
a For the six months ended June 30, 2008 (Unaudited).
b For the period from August 16, 2004 (commencement of operations) to December 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 Total return would have been lower if the Advisor had not reduced certain of the Underlying Portfolios' expenses.
f The Portfolio invests in other DWS Portfolios and indirectly bears its proportionate share of fees and expenses incurred by the Underlying DWS Portfolios in which the Portfolio is invested. This ratio does not include these indirect fees and expenses.
g The ratio for the six months ended June 30, 2008 has not been annualized since the Portfolio believes it would not be appropriate because the Portfolio's income is not earned ratably throughout the fiscal year.
* Annualized
** Not annualized
|
Information About Your Portfolio's Expenses
DWS Money Market VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio limited these expenses; had they 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,014.80 | | $ 1,013.00 | |
Expenses Paid per $1,000*
| $ 2.40 | | $ 4.15 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,022.48 | | $ 1,020.74 | |
Expenses Paid per $1,000*
| $ 2.41 | | $ 4.17 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Money Market VIP
| .48% | | .83% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Money Market VIP
At the start of 2008, pressures on the financial markets that had emerged during the previous year continued as economic data weakened significantly and investors tried to rid themselves of questionable credits. In response to the continuing "credit crunch," as well as to fears of an oncoming economic recession, the US Federal Reserve Board (the Fed) cut the federal funds rate (the overnight rate banks charge when they borrow money from each other) a total by two and three-quarter percentage points over six Federal Open Market Committee (FOMC) meetings and took a number of creative measures to restore liquidity in the financial system. During May and June, market conditions improved somewhat, and liquidity was largely restored at the short end of the money market yield curve.1 By the close of the period, worries over the slumping economy and weakness in the financial sector had created a more negative tone within the market and dampened speculation that the Fed would act aggressively to hike interest rates to battle inflationary pressures.
During the six-month period ended June 30, 2008, the Portfolio provided a total return of 1.48% (Class A shares, unadjusted for contract charges) compared with the 1.35% average return for the 108 funds in the Lipper Money Market Variable Annuity Funds category for the same period, according to Lipper Inc. The 7-day current yield for the period ending June 30, 2008 was 2.24%. The investment advisor has agreed to waive fees and reimburse expenses. Without such fee waivers/expense reimbursements, the 7-day current yield would have been 2.24% as of June 30, 2008.
Given the difficult situation throughout the investment markets during much of the period, our strategy for managing through the situation was to emphasize liquidity and high credit quality while looking for ways to maximize yield potential when opportunities presented themselves. As liquidity returned to the short end of the money market yield curve, we increased the portfolio's allocation to short-term commercial paper and certificates of deposit to take advantage of the wide spread between LIBOR and the fed funds rate.2 We also maintained a significant allocation to floating-rate securities because of their attractive yields. Going forward, we will continue to monitor investment markets, economic data and Fed statements carefully.
A group of investment professionals is responsible for the day-to-day management of the Portfolio. These investment professionals have a broad range of experience managing money market funds.
Deutsche Investment Management Americas Inc.
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. The yield quotation more closely reflects the current earnings of the Portfolio than the total return quotation.
Yields are historical, will fluctuate and do not guarantee future performance. The 7-day current yield refers to the income paid by the Portfolio over a 7-day period expressed as an annual percentage rate of the Portfolio's shares outstanding.
Risk Considerations
An investment in this Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any other government agency. Although the Portfolio seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Portfolio. Please read this Portfolio's prospectus for specific details regarding its investment and risk profile.
The Lipper Money Market Variable Annuity Funds category includes funds that invest in high-quality financial instruments rated in the top two grades with dollar-weighted average maturities of less than 90 days and that intend to keep a constant net asset value. It is not possible to invest directly in a Lipper category.
1 The yield curve is a graph with a left-to-right line that shows how high or low yields are, from the shortest to the longest maturities. Typically the line rises from left to right as investors who are willing to tie up their money for a longer period are rewarded with higher yields. When the yield curve is characterized as "steep," this is especially true.2 LIBOR, or the London Interbank Offered Rate, is the most widely used benchmark or reference rate for short-term interest rates. LIBOR is the rate of interest at which banks borrow funds from other banks, in large volume, in the international market.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Money Market VIP
Asset Allocation | 6/30/08 | 12/31/07 |
| | |
Commercial Paper | 44% | 46% |
Short-Term Notes | 27% | 22% |
Certificates of Deposit and Bank Notes | 17% | 20% |
Government & Agency Obligations | 5% | 4% |
Master Notes | 2% | 2% |
Time Deposit | 2% | 1% |
Repurchase Agreements | 2% | 2% |
Asset Backed | 1% | 1% |
Promissory Notes | — | 2% |
| 100% | 100% |
Weighted Average Maturity* | | |
| | |
DWS Variable Series II — DWS Money Market VIP | 42 days | 41 days |
First Tier Retail Money Fund Average | 45 days | 41 days |
* The Fund is compared to its respective iMoneyNet Category: First Tier Retail Money Fund Average — Category includes a widely-recognized composite of money market funds that invest in only first tier (highest rating) securities. Portfolio Holdings of First Tier funds include US Treasury, US Other, Repos, Time Deposits, Domestic Bank Obligations, Foreign Bank Obligations, First Tier Commercial Paper, Floating Rate Notes and Asset Backed Commercial Paper.Asset allocation and weighted average maturity are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 226. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the 14th day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 14th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Money Market VIP
| Principal Amount ($) | Value ($) |
| |
Certificates of Deposit and Bank Notes 16.4% |
ABN AMRO Bank NV, 2.805%, 10/17/2008 | 2,000,000 | 2,000,030 |
Banco Bilbao Vizcaya Argentaria SA, 3.005%, 10/28/2008 | 1,500,000 | 1,500,349 |
Banco Santander SA, 2.67%, 10/3/2008 | 1,800,000 | 1,799,662 |
Bank of Scotland PLC, 2.85%, 7/9/2008 | 4,000,000 | 4,000,000 |
Barclays Bank PLC: | | |
3.0%, 12/2/2008 | 3,000,000 | 3,000,000 |
3.15%, 7/30/2008 | 3,800,000 | 3,800,000 |
3.15%, 12/8/2008 | 3,000,000 | 3,000,000 |
Canadian Imperial Bank of Commerce, 2.76%, 7/7/2008 | 4,000,000 | 4,000,000 |
Credit Agricole SA: | | |
2.7%, 9/2/2008 | 3,000,000 | 3,000,000 |
2.9%, 12/1/2008 | 3,200,000 | 3,200,000 |
Credit Industriel et Commercial: | | |
2.925%, 7/17/2008 | 3,000,000 | 3,000,006 |
2.985%, 7/3/2008 | 2,000,000 | 2,000,000 |
3.1%, 9/25/2008 | 4,400,000 | 4,400,052 |
Intesa Sanpaolo SpA, 2.8%, 8/7/2008 | 3,600,000 | 3,600,000 |
KBC Bank NV, 2.52%, 7/22/2008 | 11,250,000 | 11,250,114 |
Metropolitan Life Global Funding I, 144A, 3.8%, 1/20/2009 | 750,000 | 750,000 |
Mizuho Corporate Bank Ltd., 2.95%, 7/31/2008 | 3,000,000 | 3,000,000 |
Societe Generale, 2.98%, 7/7/2008 | 3,000,000 | 3,000,000 |
Toronto-Dominion Bank, 2.68%, 8/18/2008 | 2,000,000 | 2,000,684 |
Total Certificates of Deposit and Bank Notes (Cost $62,300,897) | 62,300,897 |
|
Commercial Paper 43.9% |
Issued at Discount** 31.6% |
Abbey National North America LLC, 2.6%, 10/22/2008 | 7,000,000 | 6,942,872 |
AstraZeneca PLC: | | |
2.26%, 9/29/2008 | 2,200,000 | 2,187,570 |
2.35%, 10/15/2008 | 3,900,000 | 3,873,014 |
Bank of Scotland PLC: | | |
2.95%, 7/29/2008 | 3,000,000 | 2,993,117 |
2.65%, 8/22/2008 | 2,000,000 | 1,992,344 |
Caisse Nationale des Caisses Depargne et de Prevoyance, 2.96%, 8/12/2008 | 3,500,000 | 3,487,913 |
Chariot Funding LLC: | | |
2.45%, 7/10/2008 | 5,400,000 | 5,396,693 |
2.5%, 7/10/2008 | 4,000,000 | 3,997,500 |
Citibank Credit Card Issuance Trust, 2.8%, 8/1/2008 | 4,200,000 | 4,189,873 |
General Electric Capital Corp., 2.75%, 9/19/2008 | 2,000,000 | 1,987,778 |
Giro Balanced Funding Corp., 2.95%, 7/30/2008 | 3,450,000 | 3,441,802 |
| Principal Amount ($) | Value ($) |
| |
Gotham Funding Corp.: | | |
2.58%, 7/14/2008 | 4,000,000 | 3,996,273 |
2.57%, 7/22/2008 | 2,000,000 | 1,997,002 |
2.67%, 8/22/2008 | 4,000,000 | 3,984,573 |
Johnson & Johnson, 2.0%, 9/4/2008 | 1,250,000 | 1,245,486 |
JPMorgan Chase & Co., 2.49%, 9/29/2008 | 3,300,000 | 3,279,458 |
Kellogg Co., 2.75%, 7/17/2008 | 2,500,000 | 2,496,944 |
Liberty Street Funding LLC: | | |
2.95%, 7/2/2008 | 3,000,000 | 2,999,754 |
3.0%, 7/25/2008 | 5,000,000 | 4,990,000 |
2.65%, 8/25/2008 | 3,600,000 | 3,585,425 |
Nissan Motor Acceptance Corp.: | | |
2.85%, 7/8/2008 | 1,500,000 | 1,499,169 |
2.85%, 7/10/2008 | 2,000,000 | 1,998,575 |
Novartis Finance Corp., 2.5%, 10/6/2008 | 3,200,000 | 3,178,444 |
Pfizer, Inc., 2.27%, 9/23/2008 | 3,000,000 | 2,984,110 |
Salisbury Receivables Co., LLC, 2.67%, 7/25/2008 | 3,500,000 | 3,493,770 |
Scaldis Capital LLC: | | |
2.89%, 7/2/2008 | 2,000,000 | 1,999,839 |
2.58%, 7/7/2008 | 4,400,000 | 4,398,108 |
2.65%, 7/14/2008 | 2,000,000 | 1,998,086 |
2.69%, 7/18/2008 | 1,500,000 | 1,498,095 |
2.78%, 7/24/2008 | 2,500,000 | 2,495,560 |
Societe Generale North America, Inc.: | | |
3.15%, 7/22/2008 | 2,054,000 | 2,050,226 |
3.15%, 10/22/2008 | 3,000,000 | 2,970,338 |
Starbird Funding Corp., 2.6%, 7/2/2008 | 2,500,000 | 2,499,819 |
Toyota Motor Credit Corp.: | | |
2.25%, 10/3/2008 | 2,000,000 | 1,988,250 |
2.53%, 10/14/2008 | 4,000,000 | 3,970,483 |
Tulip Funding Corp.: | | |
2.625%, 7/9/2008 | 1,500,000 | 1,499,125 |
2.76%, 7/17/2008 | 2,245,000 | 2,242,246 |
Verizon Communications, Inc., 2.34%, 7/10/2008 | 1,500,000 | 1,499,123 |
Victory Receivables Corp., 2.62%, 8/4/2008 | 3,605,000 | 3,596,080 |
Volkswagen of America, 2.78%, 7/9/2008 | 2,000,000 | 1,998,764 |
Windmill Funding I Corp., 2.64%, 7/17/2008 | 1,000,000 | 998,827 |
| 119,922,428 |
Issued at Par 12.3% |
Cancara Asset Securitisation LLC, 2.52%, 7/1/2008 | 5,400,000 | 5,400,000 |
Giro Balanced Funding Corp.: | | |
2.835%, 7/1/2008 | 2,800,000 | 2,800,000 |
3.05%, 7/1/2008 | 8,400,000 | 8,400,000 |
Nieuw Amsterdam Receivables Corp., 3.04%, 7/1/2008 | 10,000,000 | 10,000,000 |
Perry Global Funding LLC, 3.64%, 7/1/2008 | 5,000,000 | 5,000,000 |
Romulus Funding Corp., 3.25%, 7/1/2008 | 5,000,000 | 5,000,000 |
| Principal Amount ($) | Value ($) |
| |
Starbird Funding Corp., 2.75%, 7/1/2008 | 2,000,000 | 2,000,000 |
Windmill Funding I Corp., 2.9%, 7/1/2008 | 8,000,000 | 8,000,000 |
| 46,600,000 |
Total Commercial Paper (Cost $166,522,428) | 166,522,428 |
|
Short-Term Notes* 27.2% |
Abbey National Treasury Services PLC: | | |
2.895%, 2/20/2009 | 2,000,000 | 2,000,000 |
2.901%, 4/24/2009 | 1,500,000 | 1,500,000 |
ANZ National (International) Ltd., 144A, 2.915%, 4/10/2009 | 1,000,000 | 1,000,000 |
Australia & New Zealand Banking Group Ltd., 144A, 2.891%, 7/2/2009 | 2,000,000 | 2,000,000 |
Banco Espanol de Credito SA, 2.733%, 8/11/2008 | 3,700,000 | 3,700,000 |
Bank of America NA, 3.208%, 7/2/2009 | 1,900,000 | 1,900,000 |
Bank of Nova Scotia, 3.134%, 5/6/2009 | 3,300,000 | 3,300,000 |
Bank of Scotland PLC, 2.994%, 6/5/2009 | 1,200,000 | 1,200,000 |
BNP Paribas: | | |
2.481%, 8/25/2008 | 3,000,000 | 3,000,000 |
2.895%, 5/13/2009 | 1,500,000 | 1,500,000 |
Caja de Ahorros y Monte de Piedad de Madrid, 2.967%, 8/12/2008 | 1,000,000 | 1,000,000 |
Commonwealth Bank of Australia, 2.752%, 12/18/2008 | 1,000,000 | 999,879 |
Credit Agricole SA: | | |
2.771%, 7/21/2008 | 3,000,000 | 3,000,000 |
144A, 3.031%, 7/22/2009 | 2,500,000 | 2,500,000 |
Danske Bank AS, 2.471%, 8/19/2008 | 3,200,000 | 3,199,971 |
DNB NOR Bank ASA, 2.492%, 9/24/2008 | 9,500,000 | 9,500,000 |
Fortis Bank SA, 2.787%, 7/18/2008 | 3,800,000 | 3,800,185 |
General Electric Capital Corp., 2.501%, 8/19/2011 | 10,000,000 | 10,000,000 |
ING Bank NV, 144A, 3.059%, 3/26/2009 | 750,000 | 750,000 |
Intesa Bank Ireland PLC, 2.492%, 8/22/2008 | 500,000 | 500,000 |
Intesa Sanpaolo SpA, 2.976%, 5/13/2009 | 2,800,000 | 2,800,000 |
JPMorgan Chase & Co., 2.723%, 4/3/2009 | 4,000,000 | 3,999,846 |
KBC Bank NV, 2.821%, 12/16/2008 | 3,500,000 | 3,500,000 |
Marshall & Ilsley Bank, 2.481%, 8/14/2008 | 4,000,000 | 4,000,000 |
Metropolitan Life Global Funding I, 144A, 2.96%, 6/9/2009 | 750,000 | 750,000 |
National Australia Bank Ltd.: | | |
2.918%, 2/19/2009 | 2,000,000 | 2,000,000 |
3.045%, 4/7/2009 | 1,250,000 | 1,250,000 |
Natixis, 2.921%, 4/6/2009 | 3,000,000 | 3,000,000 |
Northern Rock PLC, 2.481%, 8/4/2008 | 3,500,000 | 3,500,000 |
Procter & Gamble International Funding SCA, 2.788%, 2/19/2009 | 750,000 | 750,000 |
| Principal Amount ($) | Value ($) |
| |
Rabobank Nederland NV, 144A, 2.9%, 7/9/2009 | 2,000,000 | 2,000,000 |
Royal Bank of Canada, 144A, 2.871%, 7/15/2009 | 1,800,000 | 1,800,000 |
Royal Bank of Scotland PLC, 2.867%, 7/21/2008 | 4,000,000 | 4,000,557 |
Sanpaolo IMI SpA, 3.264%, 3/5/2009 | 3,000,000 | 3,000,000 |
Skandinaviska Enskilda Banken AB, 2.501%, 8/19/2008 | 4,000,000 | 4,000,000 |
Svenska Handelsbanken AB, 144A, 3.2%, 5/26/2009 | 1,500,000 | 1,500,000 |
UniCredito Italiano Bank (Ireland) PLC: | | |
2.468%, 8/8/2008 | 4,000,000 | 4,000,000 |
2.501%, 8/14/2008 | 1,000,000 | 1,000,000 |
Total Short-Term Notes (Cost $103,200,438) | 103,200,438 |
|
Asset Backed 0.7% |
Steers (Delaware) Business Trust, 144A, 2.502%*, 5/27/2048 (Cost $2,906,950) | 2,906,950 | 2,906,950 |
|
Master Notes 2.1% |
Citigroup Global Markets, Inc., 2.65%*, 7/1/2008 (a) (Cost $8,000,000) | 8,000,000 | 8,000,000 |
|
Time Deposit 2.1% |
BNP Paribas, 2.5%, 7/1/2008 (Cost $8,000,000) | 8,000,000 | 8,000,000 |
|
Government & Agency Obligations 5.4% |
US Government Sponsored Agencies 2.0% |
Federal Home Loan Bank: | | |
2.27%*, 4/3/2009 | 1,200,000 | 1,200,000 |
2.35%**, 2/11/2009 | 1,800,000 | 1,773,562 |
2.36%**, 5/12/2009 | 1,250,000 | 1,224,188 |
2.56%**, 11/17/2008 | 1,500,000 | 1,485,173 |
Federal National Mortgage Association, 2.575%**, 11/26/2008 | 2,000,000 | 1,978,828 |
| 7,661,751 |
US Treasury Obligations 3.4% |
US Treasury Bills: | | |
1.6%**, 10/23/2008 | 1,500,000 | 1,492,400 |
1.69%**, 11/6/2008 | 2,500,000 | 2,484,978 |
1.85%**, 11/20/2008 | 1,750,000 | 1,737,230 |
2.15%**, 6/4/2009 | 1,000,000 | 979,814 |
2.31%**, 7/2/2009 | 1,750,000 | 1,709,126 |
2.37%**, 6/4/2009 | 1,400,000 | 1,368,848 |
2.42%**, 6/4/2009 | 1,500,000 | 1,465,918 |
US Treasury Note, 4.875%, 5/15/2009 | 1,500,000 | 1,534,962 |
| 12,773,276 |
Total Government & Agency Obligations (Cost $20,435,027) | 20,435,027 |
| Principal Amount ($) | Value ($) |
| |
Repurchase Agreements 1.8% |
JPMorgan Securities, Inc., 2.3%, dated 6/30/2008, to be repurchased at $6,783,254 on 7/1/2008 (b) (Cost $6,782,821) | 6,782,821 | 6,782,821 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $378,148,561)+ | 99.6 | 378,148,561 |
Other Assets and Liabilities, Net | 0.4 | 1,339,309 |
Net Assets | 100.0 | 379,487,870 |
* 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 June 30, 2008.** Annualized yield at time of purchase; not a coupon rate.+ The cost for federal income tax purposes was $378,148,561.(a) Reset date; not a maturity date.(b) Collateralized by $7,076,934 Federal Home Loan Mortgage Corp., with various coupon rates from 4.5-5.0%, with various maturity dates of 2/1/2019-2/1/2023 with a value of $6,921,620.144A: 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.
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For example, securities held by a money market fund are generally high quality and liquid; however, they are reflected as Level 2 because the securities are valued at amortized cost (which approximates fair value) and accordingly, the inputs used to determine fair value are not quoted prices in an active market. For information on the Portfolio's policy regarding the valuation of investments and of the valuation inputs, and their aggregate level used in the table below, please refer to the Security Valuation section in the accompanying Notes to the Financial Statements.
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ — |
Level 2 — Other Significant Observable Inputs
| 378,148,561 |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 378,148,561 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investment in securities, valued at amortized cost | $ 378,148,561 |
Cash
| 35,932 |
Interest receivable
| 597,176 |
Receivable for Portfolio shares sold
| 2,995,763 |
Other assets
| 6,145 |
Total assets
| 381,783,577 |
Liabilities |
Payable for Portfolio shares redeemed
| 35,975 |
Payable for investments purchased
| 1,709,126 |
Distributions payable
| 310,049 |
Accrued management fee
| 83,308 |
Other accrued expenses and payables
| 157,249 |
Total liabilities
| 2,295,707 |
Net assets, at value | $ 379,487,870 |
Net Assets Consist of |
Distributions in excess of net investment income
| (23,878) |
Accumulated net realized gain (loss)
| (23,219) |
Paid-in capital
| 379,534,967 |
Net assets, at value | $ 379,487,870 |
Class A Net Asset Value, offering and redemption price per share ($379,434,497 ÷ 379,462,996 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 1.00 |
Class B Net Asset Value, offering and redemption price per share ($53,373 ÷ 53,287 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 1.00 |
The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Interest
| $ 6,611,820 |
Total income
| 6,611,820 |
Expenses:
Management fee
| 667,344 |
Administration fee
| 60,204 |
Services to shareholders
| 829 |
Custodian fee
| 14,783 |
Distribution and service fees (Class B)
| 10,265 |
Professional fees
| 34,369 |
Record keeping fees (Class B)
| 4,081 |
Trustees' fee and expenses
| 33,029 |
Reports to shareholders and shareholder meeting
| 202,368 |
Other
| 3,809 |
Total expenses, before expense reductions
| 1,031,081 |
Expense reductions
| (21,109) |
Total expenses, after expense reductions
| 1,009,972 |
Net investment income | 5,601,848 |
Net realized gain (loss) | (23,219) |
Net increase (decrease) in net assets resulting from operations | $ 5,578,629 |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income
| $ 5,601,848 | $ 17,547,804 |
Net realized gain (loss)
| (23,219) | 15,068 |
Net increase (decrease) in net assets resulting from operations
| 5,578,629 | 17,562,872 |
Distributions to shareholders from:
Net investment income:
Class A | (5,474,506) | (15,932,890) |
Class B | (127,342) | (1,617,257) |
Total Distributions
| $ (5,601,848) | $ (17,550,147) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 126,243,214 | 266,620,495 |
Reinvestment of distributions
| 5,474,506 | 15,863,609 |
Cost of shares redeemed
| (107,493,475) | (221,020,237) |
Net increase (decrease) in net assets from Class A share transactions
| 24,224,245 | 61,463,867 |
Class B Proceeds from shares sold
| 4,057,273 | 36,113,440 |
Reinvestment of distributions
| 127,342 | 1,612,484 |
Cost of shares redeemed
| (28,384,088) | (71,843,157) |
Net increase (decrease) in net assets from Class B share transactions
| (24,199,473) | (34,117,233) |
Increase (decrease) in net assets | 1,553 | 27,359,359 |
Net assets at beginning of period
| 379,486,317 | 352,126,958 |
Net assets at end of period (including distributions in excess of net investment income of $23,878 and $23,878, respectively)
| $ 379,487,870 | $ 379,486,317 |
Other Information |
Class A Shares outstanding at beginning of period
| 355,238,751 | 293,774,884 |
Shares sold
| 126,243,214 | 266,620,495 |
Shares issued to shareholders in reinvestment of distributions
| 5,474,506 | 15,863,609 |
Shares redeemed
| (107,493,475) | (221,020,237) |
Net increase (decrease) in Class A shares
| 24,224,245 | 61,463,867 |
Shares outstanding at end of period
| 379,462,996 | 355,238,751 |
Class B Shares outstanding at beginning of period
| 24,259,126 | 58,376,359 |
Shares sold
| 4,057,273 | 36,113,440 |
Shares issued to shareholders in reinvestment of distributions
| 127,342 | 1,612,484 |
Shares redeemed
| (28,390,454) | (71,843,157) |
Net increase (decrease) in Class B shares
| (24,205,839) | (34,117,233) |
Shares outstanding at end of period
| 53,287 | 24,259,126 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 |
Income from investment operations: Net investment income | .015 | .049 | .046 | .028 | .009 | .007 |
Total from investment operations | .015 | .049 | .046 | .028 | .009 | .007 |
Less distributions from: Net investment income | (.015) | (.049) | (.046) | (.028) | (.009) | (.007) |
Net asset value, end of period | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 |
Total Return (%)
| 1.48b** | 5.00b | 4.65b | 2.80 | .91 | .72 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 379 | 355 | 294 | 235 | 241 | 326 |
Ratio of expenses before expense reductions (%)
| .49* | .46 | .52 | .52 | .53 | .54 |
Ratio of expenses after expense reductions (%)
| .48* | .45 | .51 | .52 | .53 | .54 |
Ratio of net investment income (%)
| 3.02* | 4.88 | 4.58 | 2.77 | .88 | .73 |
a For the six months ended June 30, 2008 (Unaudited).
b Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 |
Income from investment operations: Net investment income | .013 | .046 | .042 | .024 | .005 | .004 |
Total from investment operations | .013 | .046 | .042 | .024 | .005 | .004 |
Less distributions from: Net investment income | (.013) | (.046) | (.042) | (.024) | (.005) | (.004) |
Net asset value, end of period | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 | $ 1.000 |
Total Return (%)
| 1.30b** | 4.65b | 4.25b | 2.42 | .52 | .42b |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .05 | 24 | 58 | 58 | 53 | 66 |
Ratio of expenses before expense reductions (%)
| .84* | .82 | .90 | .89 | .91 | .93 |
Ratio of expenses after expense reductions (%)
| .83* | .80 | .89 | .89 | .91 | .92 |
Ratio of net investment income (%)
| 2.67* | 4.53 | 4.20 | 2.40 | .50 | .35 |
a For the six months ended June 30, 2008 (Unaudited).
b Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Small Cap Growth VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.75% and 1.00% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. Additionally, stocks of small companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be subject to more erratic and abrupt market movements. Finally, derivatives may be more volatile and less liquid than traditional securities and the Portfolio could suffer losses on its derivatives positions. Please read this Portfolio's prospectus for specific details regarding this product's investments and risk profile.
Portfolio returns during the period reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Small Cap Growth VIP |
[] DWS Small Cap Growth VIP — Class A [] Russell 2000® Growth Index | The Russell 2000® Growth Index is an unmanaged, capitalization-weighted index of those securities in the Russell 2000 Index with a higher price-to-book ratio and higher forecasted growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Small Cap Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $8,388 | $8,005 | $9,937 | $12,653 | $8,819 |
Average annual total return
| -16.12% | -19.95% | -.21% | 4.82% | -1.25% |
Russell 2000 Growth Index
| Growth of $10,000
| $9,107 | $8,917 | $11,936 | $16,375 | $13,180 |
Average annual total return
| -8.93% | -10.83% | 6.08% | 10.37% | 2.80% |
DWS Small Cap Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $8,294 | $7,898 | $9,730 | $12,287 | $13,046 |
Average annual total return
| -17.06% | -21.02% | -.91% | 4.20% | 4.53% |
Russell 2000 Growth Index
| Growth of $10,000
| $9,107 | $8,917 | $11,936 | $16,375 | $16,488 |
Average annual total return
| -8.93% | -10.83% | 6.08% | 10.37% | 8.69% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Small Cap Growth VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 838.80 | | $ 829.40 | |
Expenses Paid per $1,000*
| $ 3.79 | | $ 5.46 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.74 | | $ 1,018.90 | |
Expenses Paid per $1,000*
| $ 4.17 | | $ 6.02 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Small Cap Growth VIP
| .83% | | 1.20% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Small Cap Growth VIP
A turbulent first quarter of 2008 for financial markets led to aggressive easing by the US Federal Reserve Board (the Fed) as well as an agreement by Congress and the President on a $168 billion fiscal stimulus package. During the second quarter, the stock market began to recover and advanced during the months of April and May. However, stocks suffered another reversal in June amid continuing concern over the scope of the credit crisis, concerns of the uncertain future of one-time leaders in the financial and automotive sectors, plus the continued escalation of oil prices. Following a nine-month trail of adjustments to interest rates, the Fed elected to take no action at the most recent Federal Open Market Committee (FOMC) meeting and left the key federal funds target rate unchanged at 2%. (The federal funds rate is the overnight rate banks charge when they borrow money from each other.) Chairman Bernanke is attempting to navigate a tightrope — spurring economic activity while keeping energy-cost-driven inflation in check.
For the six months ended June 30, 2008, the Portfolio returned -16.12% (Class A shares, unadjusted for contract charges), compared with the -8.93% return of the Russell 2000® Growth Index.
During the period, detractors from performance included stock selection in the health care and industrial sectors and an overweight of the information technology sector relative to the benchmark.1 Positive contributors to performance included stock selection in the consumer discretionary sector. An overweight in the energy sector and an underweight in the telecom services sector compared with the benchmark added to performance.
The largest individual contributors to performance over the six-month period included EXCO Resources, Inc., which explores for oil and natural gas, and Carrizo Oil & Gas, Inc., which explores for and produces natural gas and crude oil. The largest individual detractors from performance included BE Aerospace, Inc., a maker of aircraft seating and cabin interiors, and NightHawk Radiology Holdings, Inc.*, a provider of nighttime and weekend emergency radiology services to radiology groups, clinics and hospitals across the United States.
We continue to maintain a long-term perspective, investing in quality small-cap growth stocks.
Robert S. Janis Joseph Axtell, CFA
Lead Portfolio Manager Portfolio Manager
Deutsche Investment Management Americas Inc.
The Russell 2000 Growth Index is an unmanaged, capitalization-weighted index of those securities in the Russell 2000 Index with a higher price-to-book ratio and higher forecasted growth values.
Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.* As of June 30, 2008, the position was sold.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Small Cap Growth VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 98% | 98% |
Cash Equivalents | 2% | 2% |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Information Technology | 28% | 29% |
Consumer Discretionary | 25% | 20% |
Energy | 13% | 11% |
Industrials | 11% | 15% |
Health Care | 11% | 13% |
Financials | 7% | 8% |
Consumer Staples | 4% | 2% |
Materials | 1% | 2% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 238. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Small Cap Growth VIP
|
Shares
| Value ($) |
| |
Common Stocks 99.1% |
Consumer Discretionary 24.3% |
Diversified Consumer Services 0.8% |
Capella Education Co.* | 18,000 | 1,073,700 |
Hotels Restaurants & Leisure 8.5% |
Buffalo Wild Wings, Inc.* (a) | 143,900 | 3,573,037 |
McCormick & Schmick's Seafood Restaurants, Inc.* | 103,600 | 998,704 |
Orient-Express Hotels Ltd. "A" | 99,600 | 4,326,624 |
Pinnacle Entertainment, Inc.* (a) | 109,900 | 1,152,851 |
Red Robin Gourmet Burgers, Inc.* (a) | 46,400 | 1,287,136 |
| 11,338,352 |
Specialty Retail 12.9% |
bebe stores, inc. (a) | 211,900 | 2,036,359 |
Cabela's, Inc.* (a) | 111,600 | 1,228,716 |
Children's Place Retail Stores, Inc.* | 72,300 | 2,610,030 |
Citi Trends, Inc.* (a) | 109,400 | 2,479,004 |
Guess?, Inc. | 191,700 | 7,179,165 |
Zumiez, Inc.* (a) | 93,800 | 1,555,204 |
| 17,088,478 |
Textiles, Apparel & Luxury Goods 2.1% |
Volcom, Inc.* | 116,300 | 2,783,059 |
Consumer Staples 3.8% |
Food Products 1.3% |
Green Mountain Coffee Roasters, Inc.* (a) | 46,700 | 1,754,519 |
Personal Products 2.5% |
American Oriental Bioengineering, Inc.* (a) | 327,000 | 3,227,490 |
Energy 13.0% |
Energy Equipment & Services 5.9% |
Atwood Oceanics, Inc.* | 39,100 | 4,861,694 |
Dril-Quip, Inc.* | 40,900 | 2,576,700 |
Tesco Corp.* | 13,500 | 431,325 |
| 7,869,719 |
Oil, Gas & Consumable Fuels 7.1% |
Carrizo Oil & Gas, Inc.* | 59,800 | 4,071,782 |
EXCO Resources, Inc.* (a) | 99,000 | 3,654,090 |
Holly Corp. | 44,800 | 1,654,016 |
| 9,379,888 |
Financials 7.5% |
Capital Markets 4.3% |
E*TRADE Financial Corp.* (a) | 370,300 | 1,162,742 |
FCStone Group, Inc.* | 38,900 | 1,086,477 |
Waddell & Reed Financial, Inc. "A" | 99,800 | 3,493,998 |
| 5,743,217 |
Diversified Financial Services 1.5% |
Portfolio Recovery Associates, Inc.* (a) | 52,670 | 1,975,125 |
Insurance 1.7% |
eHealth, Inc.* (a) | 124,300 | 2,195,138 |
|
Shares
| Value ($) |
| |
Health Care 10.8% |
Health Care Providers & Services |
Air Methods Corp.* | 42,000 | 1,050,000 |
Centene Corp.* | 80,000 | 1,343,200 |
Genoptix, Inc.* | 41,000 | 1,293,550 |
Gentiva Health Services, Inc.* | 76,900 | 1,464,945 |
inVentiv Health, Inc.* | 96,400 | 2,678,956 |
Providence Service Corp.* (a) | 162,900 | 3,438,819 |
Psychiatric Solutions, Inc.* (a) | 48,500 | 1,835,240 |
WellCare Health Plans, Inc.* | 35,600 | 1,286,940 |
| 14,391,650 |
Industrials 10.9% |
Aerospace & Defense 3.3% |
BE Aerospace, Inc.* | 125,300 | 2,918,237 |
Curtiss-Wright Corp. | 30,800 | 1,377,992 |
| 4,296,229 |
Commercial Services & Supplies 5.9% |
Heidrick & Struggles International, Inc. | 57,400 | 1,586,536 |
Hill International, Inc.* | 139,300 | 2,290,092 |
Huron Consulting Group, Inc.* | 56,700 | 2,570,778 |
Korn/Ferry International* | 90,000 | 1,415,700 |
| 7,863,106 |
Electrical Equipment 1.7% |
Baldor Electric Co. (a) | 65,900 | 2,305,182 |
Information Technology 27.5% |
Communications Equipment 2.0% |
Foundry Networks, Inc.* (a) | 219,600 | 2,595,672 |
Electronic Equipment & Instruments 3.4% |
Itron, Inc.* (a) | 46,100 | 4,533,935 |
Internet Software & Services 7.6% |
Bankrate, Inc.* (a) | 31,100 | 1,215,077 |
DealerTrack Holdings, Inc.* (a) | 103,100 | 1,454,741 |
Equinix, Inc.* (a) | 18,100 | 1,614,882 |
LoopNet, Inc.* (a) | 243,200 | 2,748,160 |
Omniture, Inc.* | 80,300 | 1,491,171 |
Perficient, Inc.* | 156,000 | 1,506,960 |
| 10,030,991 |
IT Services 4.1% |
CyberSource Corp.* | 205,100 | 3,431,323 |
Forrester Research, Inc.* | 65,000 | 2,007,200 |
| 5,438,523 |
Semiconductors & Semiconductor Equipment 6.1% |
Atheros Communications* | 96,500 | 2,895,000 |
Cavium Networks, Inc.* (a) | 60,700 | 1,274,700 |
Netlogic Microsystems, Inc.* (a) | 60,600 | 2,011,920 |
Tessera Technologies, Inc.* | 120,000 | 1,964,400 |
| 8,146,020 |
Software 4.3% |
Blackboard, Inc.* | 81,700 | 3,123,391 |
FalconStor Software, Inc.* (a) | 190,300 | 1,347,324 |
Informatica Corp.* | 83,300 | 1,252,832 |
| 5,723,547 |
|
Shares
| Value ($) |
| |
Materials 1.3% |
Chemicals |
Flotek Industries, Inc.* (a) | 82,400 | 1,699,088 |
Total Common Stocks (Cost $130,770,555) | 131,452,628 |
|
Securities Lending Collateral 33.0% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $43,825,175) | 43,825,175 | 43,825,175 |
|
Shares
| Value ($) |
| |
Cash Equivalents 1.6% |
Cash Management QP Trust, 2.49% (b) (Cost $2,159,590) | 2,159,590 | 2,159,590 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $176,755,320) | 133.7 | 177,437,393 |
Other Assets and Liabilities, Net (a) | (33.7) | (44,724,162) |
Net Assets | 100.0 | 132,713,231 |
* Non-income producing security.+ The cost for federal income tax purposes was $176,798,845. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $638,548. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $24,478,633 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $23,840,085.(a) All or a portion of these securities were on loan amounting to $41,749,303. In addition, included in other assets and liabilities, net is a pending sale, amounting to $231,750, that is also on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $41,981,053 which is 31.6% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 177,437,393 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 177,437,393 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $130,770,555) — including $41,749,303 of securities loaned | $ 131,452,628 |
Investment in Daily Assets Fund Institutional (cost $43,825,175)* | 43,825,175 |
Investment in Cash Management QP Trust (cost $2,159,590) | 2,159,590 |
Total investments, at value (cost $176,755,320)
| 177,437,393 |
Receivable for investments sold
| 387,096 |
Dividends receivable
| 22,056 |
Interest receivable
| 63,750 |
Receivable for Portfolio shares sold
| 828 |
Other assets
| 3,469 |
Total assets
| 177,914,592 |
Liabilities |
Cash overdraft
| 239,261 |
Payable for Portfolio shares redeemed
| 300,673 |
Payable upon return of securities loaned
| 43,825,175 |
Payable for investments purchased
| 610,240 |
Accrued management fee
| 66,704 |
Other accrued expenses and payables
| 159,308 |
Total liabilities
| 45,201,361 |
Net assets, at value | $ 132,713,231 |
Net Assets Consist of |
Accumulated net investment loss
| (166,787) |
Net unrealized appreciation (depreciation) on investments
| 682,073 |
Accumulated net realized gain (loss)
| (85,329,996) |
Paid-in capital
| 217,527,941 |
Net assets, at value | $ 132,713,231 |
Class A Net Asset Value, offering and redemption price per share ($132,691,123 ÷ 10,499,913 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 12.64 |
Class B Net Asset Value, offering and redemption price per share ($22,108 ÷ 1,804 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 12.25 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends
| $ 141,627 |
Interest — Cash Management QP Trust
| 44,283 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 339,317 |
Total Income
| 525,227 |
Expenses:
Management fee
| 458,699 |
Administration fee
| 24,388 |
Services to shareholders
| 623 |
Custodian fee
| 7,028 |
Distribution and service fees (Class B)
| 4,718 |
Record keeping fees (Class B)
| 2,687 |
Professional fees
| 40,189 |
Trustees' fees and expenses
| 20,567 |
Reports to shareholders and shareholder meeting
| 150,995 |
Other
| 2,854 |
Total expenses before expense reductions
| 712,748 |
Expense reductions
| (37,609) |
Total expenses after expense reductions
| 675,139 |
Net investment income (loss) | (149,912) |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| 2,047,737 |
Change in net unrealized appreciation (depreciation) on investments
| (30,303,763) |
Net gain (loss) | (28,256,026) |
Net increase (decrease) in net assets resulting from operations | $ (28,405,938) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ (149,912) | $ (266,680) |
Net realized gain (loss)
| 2,047,737 | 29,911,986 |
Change in net unrealized appreciation (depreciation)
| (30,303,763) | (13,909,833) |
Net increase (decrease) in net assets resulting from operations
| (28,405,938) | 15,735,473 |
Portfolio share transactions:
Class A Proceeds from shares sold
| 2,999,522 | 7,088,648 |
Cost of shares redeemed
| (16,530,146) | (54,833,999) |
Net increase (decrease) in net assets from Class A share transactions
| (13,530,624) | (47,745,351) |
Class B Proceeds from shares sold
| 210,075 | 890,860 |
Cost of shares redeemed
| (6,249,671) | (33,397,002) |
Net increase (decrease) in net assets from Class B share transactions
| (6,039,596) | (32,506,142) |
Increase (decrease) in net assets | (47,976,158) | (64,516,020) |
Net assets at beginning of period
| 180,689,389 | 245,205,409 |
Net assets at end of period (including accumulated net investment loss of $166,787 and $16,875, respectively)
| $ 132,713,231 | $ 180,689,389 |
Other Information |
Class A Shares outstanding at beginning of period
| 11,529,906 | 14,686,087 |
Shares sold
| 224,589 | 469,331 |
Shares redeemed
| (1,254,582) | (3,625,512) |
Net increase (decrease) in Class A shares
| (1,029,993) | (3,156,181) |
Shares outstanding at end of period
| 10,499,913 | 11,529,906 |
Class B Shares outstanding at beginning of period
| 468,018 | 2,636,495 |
Shares sold
| 16,750 | 59,404 |
Shares redeemed
| (482,964) | (2,227,881) |
Net increase (decrease) in Class B shares
| (466,214) | (2,168,477) |
Shares outstanding at end of period
| 1,804 | 468,018 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 15.07 | $ 14.19 | $ 13.48 | $ 12.59 | $ 11.34 | $ 8.53 |
Income (loss) from investment operations: Net investment income (loss)b | (.01) | (.01) | (.04)e | (.06) | (.05) | (.04) |
Net realized and unrealized gain (loss) | (2.42) | .89 | .75 | .95 | 1.30 | 2.85 |
Total from investment operations | (2.43) | .88 | .71 | .89 | 1.25 | 2.81 |
Less distributions from: Net investment income | — | (.01) | (.04)e | (.06) | (.05) | (.04) |
Net realized and unrealized gain (loss) | — | .89 | .75 | .95 | 1.30 | 2.85 |
Total distributions | — | .88 | .71 | .89 | 1.25 | 2.81 |
Net asset value, end of period | $ 12.64 | $ 15.07 | $ 14.19 | $ 13.48 | $ 12.59 | $ 11.34 |
Total Return (%)
| (16.12)c** | 6.20c | 5.27c,e | 7.07d | 11.02 | 32.94 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 133 | 174 | 208 | 243 | 210 | 210 |
Ratio of expenses before expense reductions (%)
| .87* | .75 | .73 | .72 | .71 | .69 |
Ratio of expenses after expense reductions (%)
| .83* | .72 | .72 | .72 | .71 | .69 |
Ratio of net investment income (loss) (%)
| (.12)* | (.09) | (.32)e | (.47) | (.47) | (.41) |
Portfolio turnover rate (%)
| 33** | 67 | 73 | 94 | 117 | 123 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses been reduced.
d In 2005, the Portfolio realized a gain of $49,496 on the disposal of an investment not meeting the Portfolio's investment restrictions. This violation had no negative impact on the total return.
e Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.008 per share and an increase in the ratio of net investment income of 0.06%. Excluding this non-recurring income, total return would have been 0.06% lower.
* Annualized ** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 14.77 | $ 13.96 | $ 13.32 | $ 12.48 | $ 11.29 | $ 8.52 |
Income (loss) from investment operations: Net investment income (loss)b | (.04) | (.07) | (.09)e | (.11) | (.10) | (.09) |
Net realized and unrealized gain (loss) | (2.48) | .88 | .73 | .95 | 1.29 | 2.86 |
Total from investment operations | (2.52) | .81 | .64 | .84 | 1.19 | 2.77 |
Less distributions from: Net investment income | — | (.01) | (.04)e | (.06) | (.05) | (.04) |
Net realized and unrealized gain (loss) | — | .89 | .75 | .95 | 1.30 | 2.85 |
Total distributions | — | .88 | .71 | .89 | 1.25 | 2.81 |
Net asset value, end of period | $ 12.25 | $ 14.77 | $ 13.96 | $ 13.32 | $ 12.48 | $ 11.29 |
Total Return (%)
| (17.06)c** | 5.80c | 4.80c,e | 6.73c,d | 10.54c | 32.51 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .02 | 7 | 37 | 39 | 28 | 15 |
Ratio of expenses before expense reductions (%)
| 1.28* | 1.13 | 1.12 | 1.12 | 1.10 | 1.08 |
Ratio of expenses after expense reductions (%)
| 1.20* | 1.09 | 1.09 | 1.09 | 1.09 | 1.08 |
Ratio of net investment income (loss) (%)
| (.49)* | (.46) | (.69)e | (.84) | (.85) | (.80) |
Portfolio turnover rate (%)
| 33** | 67 | 73 | 94 | 117 | 123 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d In 2005, the Portfolio realized a gain of $49,496 on the disposal of an investment not meeting the Portfolio's investment restrictions. This violation had no negative impact on the total return.
e Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.008 per share and an increase in the ratio of net investment income of 0.06%. Excluding this non-recurring income, total return would have been 0.06% lower.
* Annualized ** Not annualized
|
Performance Summary June 30, 2008
DWS Strategic Income VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.89% and 1.14% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The Portfolio invests in individual bonds whose yields and market values fluctuate so that your investment may be worth more or less than its original cost. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the bond investment, can decline and the investor can lose principal value. Additionally, investments by the Portfolio in lower-rated bonds present greater risk to principal and income than investments in higher-quality securities. The Portfolio invests in derivatives seeking to hedge positions in certain securities and to generate income in order to enhance the Portfolio's returns. Derivatives can be more volatile and less liquid than traditional fixed-income securities. Finally, investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes and market risks. All of these factors may result in greater share price volatility. Please read this Portfolio's prospectus for specific details regarding its investments and risk profile.
Portfolio returns for all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Strategic Income VIP |
[] DWS Strategic Income VIP — Class A [] Citigroup World Government Bond Index [] JP Morgan Emerging Markets Bond Index Plus [] Credit Suisse High Yield Index [] Lehman Brothers US Treasury Index | The Citigroup World Government Bond Index is an unmanaged index comprised of government bonds from 22 developed countries (including the US) with maturities greater than one year. The JP Morgan Emerging Markets Bond Index Plus is an unmanaged foreign securities index of US dollar- and other external-currency-denominated Brady bonds, loans, Eurobonds and local market debt instruments traded in emerging markets. The Credit Suisse High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the global high-yield debt market. The Lehman Brothers US Treasury Index is an unmanaged index reflecting the performance of all public obligations and does not focus on one particular segment of the Treasury market. Index returns, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Strategic Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $10,018 | $10,382 | $11,622 | $12,941 | $16,869 |
Average annual total return
| .18% | 3.82% | 5.14% | 5.29% | 5.37% |
Citigroup World Government Bond Index
| Growth of $10,000
| $10,502 | $11,700 | $11,991 | $13,633 | $18,847 |
Average annual total return
| 5.02% | 17.00% | 6.24% | 6.39% | 6.54% |
JP Morgan Emerging Markets Bond Index Plus
| Growth of $10,000
| $9,936 | $10,516 | $12,389 | $15,755 | $26,914 |
Average annual total return
| -.64% | 5.16% | 7.40% | 9.52% | 10.41% |
Credit Suisse High Yield Index
| Growth of $10,000
| $9,886 | $9,788 | $11,525 | $14,179 | $17,129 |
Average annual total return
| -1.14% | -2.12% | 4.84% | 7.23% | 5.53% |
Lehman Brothers US Treasury Index
| Growth of $10,000
| $10,223 | $11,033 | $11,442 | $12,049 | $17,423 |
Average annual total return
| 2.23% | 10.33% | 4.59% | 3.80% | 5.71% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.Comparative Results |
DWS Strategic Income VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Class B | Growth of $10,000
| $9,994 | $10,340 | $11,499 | $12,720 | $12,975 |
Average annual total return
| -.06% | 3.40% | 4.77% | 4.93% | 5.17% |
Citigroup World Government Bond Index
| Growth of $10,000
| $10,502 | $11,700 | $11,991 | $13,633 | $13,994 |
Average annual total return
| 5.02% | 17.00% | 6.24% | 6.39% | 6.72% |
JP Morgan Emerging Markets Bond Index Plus
| Growth of $10,000
| $9,936 | $10,516 | $12,389 | $15,755 | $16,468 |
Average annual total return
| -.64% | 5.16% | 7.40% | 9.52% | 10.13% |
Credit Suisse High Yield Index
| Growth of $10,000
| $9,886 | $9,788 | $11,525 | $14,179 | $14,804 |
Average annual total return
| -1.14% | -2.12% | 4.84% | 7.23% | 7.89% |
Lehman Brothers US Treasury Index
| Growth of $10,000
| $10,223 | $11,033 | $11,442 | $12,049 | $12,320 |
Average annual total return
| 2.23% | 10.33% | 4.59% | 3.80% | 4.12% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced offering Class B shares on May 1, 2003. Index returns began on April 30, 2003.Information About Your Portfolio's Expenses
DWS Strategic Income VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,001.80 | | $ 999.40 | |
Expenses Paid per $1,000*
| $ 4.33 | | $ 6.06 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.54 | | $ 1,018.80 | |
Expenses Paid per $1,000*
| $ 4.37 | | $ 6.12 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Strategic Income VIP
| .87% | | 1.22% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Strategic Income VIP
The first half of the year brought high volatility for the global fixed-income markets, reflecting investors' struggles to weigh the growth-dampening effects of the US credit crisis against the persistent rise in inflation. With this as the backdrop, the Portfolio's Class A shares (unadjusted for contract charges) returned 0.18%. This compares to returns of -0.64% for the JP Morgan Emerging Markets Bond Index Plus, -1.14% for the Credit Suisse High Yield Index, 2.23% for the Lehman Brothers US Treasury Index and 5.02% for the Citigroup World Government Bond Index.
The Portfolio's weightings in investment-grade corporate debt and high-yield bonds weighed on performance amid the environment of elevated investor risk aversion, but we used market turmoil to add to the corporate sector in order to take advantage of higher yields. We also added to the Portfolio's weighting in the developed overseas markets, based on our view that foreign central banks would be compelled to become more aggressive in cutting interest rates. This shift was a positive for performance given that the US market lagged. In the emerging-markets portion of the Portfolio, we continue to focus on the more stable countries in the asset class.
We believe our ability to invest across a wide range of asset classes, geographic regions and yield curve positions provides us with the flexibility to find opportunities or avoid risk.1 Overall, we seek to add value through a measured approach that emphasizes security selection, a search for value and a long-term view rather than "swinging for the fences."
Gary Sullivan, CFA William Chepolis, CFA
Matthew F. MacDonald Thomas Picciochi
Robert Wang
Portfolio Managers, Deutsche Investment Management Americas Inc.
The Citigroup World Government Bond Index is an unmanaged index comprised of government bonds from 22 developed countries, including the US, with maturities greater than one year.
The JP Morgan Emerging Markets Bond Index Plus is an unmanaged, foreign securities index of US dollar and other external-currency-denominated Brady bonds, loans, Eurobonds and local market debt instruments traded in emerging markets.
Credit Suisse High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the global high-yield debt market.
The Lehman Brothers US Treasury Index is an unmanaged index reflecting the performance of all public obligations and does not focus on one particular segment of the Treasury market.
Index returns, unlike portfolio returns, do not reflect fees or expenses. It is not possible to invest directly into an index.
1 The yield curve is a graph with a left-to-right line that shows how high or low yields are, from the shortest to the longest maturities. Typically the line rises from left to right as investors who are willing to tie up their money for a longer period are rewarded with higher yields. When the yield curve is characterized as "steep," this is especially true.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Strategic Income VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Government & Agency Obligations | 51% | 44% |
Corporate Bonds | 39% | 34% |
Cash Equivalents | 4% | 13% |
Commercial and Non-Agency Mortgage-Backed Securities | 2% | 5% |
Senior Loans | 2% | 2% |
Sovereign Loans | 1% | 1% |
Asset Backed | 1% | 1% |
Other | — | — |
| 100% | 100% |
Quality (Excludes Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
AAA* | 36% | 32% |
AA | — | 1% |
A | 9% | 5% |
BBB | 7% | 7% |
BB | 18% | 20% |
B | 20% | 16% |
CCC | 5% | 4% |
Not Rated | 5% | 15% |
| 100% | 100% |
* Includes cash equivalentsInterest Rate Sensitivity | 6/30/08 | 12/31/07 |
| | |
Effective maturity | 7.5 years | 6.6 years |
Average duration | 4.8 years | 3.5 years |
Asset allocation, quality and interest rate sensitivity are subject to change.
The quality ratings represent the lower of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality. The Portfolio's credit quality does not remove market risk.
For more complete details about the Portfolio's investment portfolio, see page 250. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Strategic Income VIP
| Principal Amount ($)(a) | Value ($) |
| |
Corporate Bonds 38.7% |
Consumer Discretionary 4.9% |
AMC Entertainment, Inc., 8.0%, 3/1/2014 | 145,000 | 128,687 |
American Achievement Corp., 8.25%, 4/1/2012 | 30,000 | 29,400 |
American Achievement Group Holding Corp., 14.75%, 10/1/2012 (PIK) (b) | 51,048 | 46,964 |
Asbury Automotive Group, Inc.: | | |
7.625%, 3/15/2017 | 65,000 | 52,325 |
8.0%, 3/15/2014 | 30,000 | 25,950 |
Ashtead Holdings PLC, 144A, 8.625%, 8/1/2015 (b) | 120,000 | 104,400 |
Burlington Coat Factory Warehouse Corp., 11.125%, 4/15/2014 | 30,000 | 24,300 |
Cablevision Systems Corp., Series B, 7.133%***, 4/1/2009 | 25,000 | 25,000 |
CanWest MediaWorks LP, 144A, 9.25%, 8/1/2015 | 50,000 | 40,750 |
Carrols Corp., 9.0%, 1/15/2013 (b) | 30,000 | 26,100 |
Charter Communications Holdings LLC, 11.0%, 10/1/2015 (b) | 41,000 | 30,391 |
Charter Communications Operating LLC, 144A, 10.875%, 9/15/2014 | 140,000 | 143,850 |
Comcast Corp., 6.4%, 5/15/2038 | 500,000 | 461,236 |
Cooper-Standard Automotive, Inc., 7.0%, 12/15/2012 (b) | 40,000 | 33,400 |
CSC Holdings, Inc.: | | |
7.25%, 7/15/2008 | 50,000 | 50,000 |
Series B, 7.625%, 4/1/2011 | 55,000 | 53,900 |
Series B, 8.125%, 7/15/2009 | 55,000 | 55,412 |
Series B, 8.125%, 8/15/2009 | 110,000 | 110,825 |
Denny's Holdings, Inc., 10.0%, 10/1/2012 | 20,000 | 19,400 |
DirecTV Holdings LLC, 144A, 7.625%, 5/15/2016 | 145,000 | 142,825 |
Dollarama Group LP, 8.883%***, 8/15/2012 | 52,000 | 48,620 |
EchoStar DBS Corp.: | | |
6.375%, 10/1/2011 | 100,000 | 96,500 |
6.625%, 10/1/2014 | 65,000 | 60,125 |
7.125%, 2/1/2016 | 80,000 | 73,800 |
Fontainebleau Las Vegas Holdings LLC, 144A, 10.25%, 6/15/2015 | 65,000 | 42,250 |
General Motors Corp.: | | |
7.2%, 1/15/2011 (b) | 200,000 | 154,000 |
7.4%, 9/1/2025 | 40,000 | 20,600 |
Great Canadian Gaming Corp., 144A, 7.25%, 2/15/2015 | 55,000 | 53,350 |
Group 1 Automotive, Inc., 8.25%, 8/15/2013 | 30,000 | 28,050 |
Hanesbrands, Inc., Series B, 6.508%***, 12/15/2014 | 100,000 | 93,000 |
Hertz Corp.: | | |
8.875%, 1/1/2014 | 80,000 | 73,200 |
10.5%, 1/1/2016 (b) | 35,000 | 31,850 |
Idearc, Inc., 8.0%, 11/15/2016 | 230,000 | 144,612 |
Indianapolis Downs LLC, 144A, 11.0%, 11/1/2012 | 40,000 | 36,400 |
Isle of Capri Casinos, Inc., 7.0%, 3/1/2014 | 70,000 | 49,350 |
| Principal Amount ($)(a) | Value ($) |
| |
Jarden Corp.,
7.5%, 5/1/2017 (b) | 50,000 | 43,500 |
Kabel Deutschland GmbH, 10.625%, 7/1/2014 | 75,000 | 76,687 |
Lamar Media Corp., Series C, 6.625%, 8/15/2015 | 40,000 | 36,400 |
Liberty Media LLC: | | |
5.7%, 5/15/2013 | 10,000 | 8,962 |
8.25%, 2/1/2030 (b) | 50,000 | 43,556 |
8.5%, 7/15/2029 (b) | 95,000 | 84,976 |
Mediacom Broadband LLC, 8.5%, 10/15/2015 (b) | 5,000 | 4,469 |
MediMedia USA, Inc., 144A, 11.375%, 11/15/2014 | 30,000 | 30,000 |
MGM MIRAGE: | | |
6.75%, 9/1/2012 | 35,000 | 31,413 |
8.375%, 2/1/2011 (b) | 65,000 | 62,725 |
MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010 | 95,000 | 95,000 |
Norcraft Holdings LP, Step-up Coupon, 0% to 9/1/2008, 9.75% to 9/1/2012 (b) | 155,000 | 144,344 |
Penske Automotive Group, Inc., 7.75%, 12/15/2016 | 125,000 | 109,375 |
Pinnacle Entertainment, Inc., 8.75%, 10/1/2013 (b) | 60,000 | 60,000 |
Quebecor Media, Inc., 7.75%, 3/15/2016 | 40,000 | 37,200 |
Quebecor World, Inc., 144A, 9.75%, 1/15/2015** | 45,000 | 21,825 |
Reader's Digest Association, Inc., 144A, 9.0%, 2/15/2017 | 50,000 | 36,500 |
Sabre Holdings Corp., 8.35%, 3/15/2016 | 50,000 | 37,875 |
Seminole Hard Rock Entertainment, Inc., 144A, 5.276%***, 3/15/2014 | 65,000 | 54,600 |
Shingle Springs Tribal Gaming Authority, 144A, 9.375%, 6/15/2015 | 50,000 | 40,625 |
Simmons Co.: | | |
Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014 | 185,000 | 135,975 |
7.875%, 1/15/2014 | 20,000 | 17,200 |
Sinclair Television Group, Inc., 8.0%, 3/15/2012 (b) | 29,000 | 29,218 |
Sirius Satellite Radio, Inc., 9.625%, 8/1/2013 | 85,000 | 68,850 |
Sonic Automotive, Inc., Series B, 8.625%,
8/15/2013 (b) | 55,000 | 50,875 |
Station Casinos, Inc., 6.5%, 2/1/2014 | 120,000 | 69,000 |
Travelport LLC: | | |
7.307%***, 9/1/2014 | 45,000 | 36,000 |
9.875%, 9/1/2014 | 55,000 | 48,813 |
Trump Entertainment Resorts, Inc., 8.5%, 6/1/2015 (b) | 150,000 | 93,375 |
United Components, Inc., 9.375%, 6/15/2013 | 10,000 | 9,350 |
Unity Media GmbH, 144A, 8.75%, 2/15/2015 EUR | 100,000 | 141,307 |
| Principal Amount ($)(a) | Value ($) |
| |
Univision Communications, Inc., 144A, 9.75%, 3/15/2015 (PIK) | 45,000 | 33,075 |
UPC Holding BV: | | |
144A, 7.75%, 1/15/2014 EUR | 100,000 | 139,733 |
144A, 8.0%, 11/1/2016 EUR | 50,000 | 68,685 |
Vitro SAB de CV: | | |
9.125%, 2/1/2017 | 220,000 | 174,350 |
11.75%, 11/1/2013 | 35,000 | 34,825 |
Young Broadcasting, Inc., 8.75%, 1/15/2014 | 275,000 | 148,500 |
| 4,969,985 |
Consumer Staples 1.6% |
Alliance One International, Inc., 8.5%, 5/15/2012 | 20,000 | 18,800 |
Delhaize America, Inc.: | | |
8.05%, 4/15/2027 | 20,000 | 21,581 |
9.0%, 4/15/2031 | 132,000 | 155,391 |
General Nutrition Centers, Inc., 7.199%***,
3/15/2014 (PIK) | 40,000 | 33,800 |
Harry & David Holdings, Inc., 7.682%***, 3/1/2012 | 50,000 | 44,000 |
North Atlantic Trading Co., 144A, 10.0%, 3/1/2012 | 223,000 | 187,320 |
Philip Morris International, Inc., 6.375%, 5/16/2038 | 340,000 | 331,339 |
Reynolds American, Inc., 6.75%, 6/15/2017 | 600,000 | 596,873 |
Smithfield Foods, Inc., 7.75%, 7/1/2017 | 40,000 | 33,200 |
Viskase Companies, Inc., 11.5%, 6/15/2011 | 225,000 | 195,750 |
| 1,618,054 |
Energy 5.0% |
Atlas Energy Resources LLC, 144A, 10.75%, 2/1/2018 | 115,000 | 119,600 |
Belden & Blake Corp., 8.75%, 7/15/2012 | 310,000 | 316,975 |
Bristow Group, Inc., 7.5%, 9/15/2017 | 70,000 | 70,175 |
Chaparral Energy, Inc., 8.5%, 12/1/2015 | 110,000 | 95,425 |
Chesapeake Energy Corp.: | | |
6.25%, 1/15/2018 | 35,000 | 32,200 |
6.875%, 1/15/2016 | 170,000 | 164,050 |
7.25%, 12/15/2018 | 110,000 | 106,975 |
7.75%, 1/15/2015 | 25,000 | 25,938 |
Cimarex Energy Co., 7.125%, 5/1/2017 | 45,000 | 44,213 |
Delta Petroleum Corp., 7.0%, 4/1/2015 | 125,000 | 106,875 |
Dynegy Holdings, Inc.: | | |
6.875%, 4/1/2011 (b) | 15,000 | 14,831 |
8.375%, 5/1/2016 | 105,000 | 101,850 |
El Paso Corp.: | | |
7.25%, 6/1/2018 | 90,000 | 88,650 |
9.625%, 5/15/2012 | 50,000 | 54,221 |
EXCO Resources, Inc., 7.25%, 1/15/2011 | 95,000 | 93,337 |
Forest Oil Corp., 144A, 7.25%, 6/15/2019 | 35,000 | 33,600 |
Frontier Oil Corp., 6.625%, 10/1/2011 | 40,000 | 39,400 |
GAZ Capital (Gazprom), 144A, 6.51%, 3/7/2022 | 230,000 | 206,425 |
| Principal Amount ($)(a) | Value ($) |
| |
KCS Energy, Inc., 7.125%, 4/1/2012 | 240,000 | 230,400 |
Mariner Energy, Inc.: | | |
7.5%, 4/15/2013 (b) | 60,000 | 58,200 |
8.0%, 5/15/2017 | 95,000 | 91,913 |
Newfield Exploration Co., 7.125%, 5/15/2018 | 90,000 | 85,275 |
OPTI Canada, Inc.: | | |
7.875%, 12/15/2014 | 90,000 | 88,875 |
8.25%, 12/15/2014 | 160,000 | 159,200 |
Pemex Project Funding Master Trust, 144A, 5.75%, 3/1/2018 | 460,000 | 454,250 |
Petrobras International Finance Co., 5.875%, 3/1/2018 | 95,000 | 91,385 |
Petrohawk Energy Corp.: | | |
144A, 7.875%, 6/1/2015 | 60,000 | 58,575 |
9.125%, 7/15/2013 | 65,000 | 66,625 |
Petronas Capital Ltd., Series REG S, 7.875%, 5/22/2022 | 115,000 | 137,181 |
Plains Exploration & Production Co.: | | |
7.0%, 3/15/2017 | 60,000 | 57,600 |
7.625%, 6/1/2018 (b) | 110,000 | 110,000 |
Quicksilver Resources, Inc., 7.125%, 4/1/2016 | 170,000 | 158,312 |
Range Resources Corp., 7.25%, 5/1/2018 | 10,000 | 9,925 |
Sabine Pass LNG LP: | | |
7.25%, 11/30/2013 (b) | 100,000 | 91,000 |
7.5%, 11/30/2016 | 200,000 | 180,000 |
SandRidge Energy, Inc., 144A, 8.0%, 6/1/2018 | 45,000 | 45,225 |
Southwestern Energy Co., 144A, 7.5%, 2/1/2018 | 85,000 | 87,457 |
Stone Energy Corp.: | | |
6.75%, 12/15/2014 | 105,000 | 92,137 |
8.25%, 12/15/2011 (b) | 160,000 | 156,000 |
Tennessee Gas Pipeline Co., 7.625%, 4/1/2037 | 45,000 | 46,835 |
Whiting Petroleum Corp.: | | |
7.0%, 2/1/2014 | 70,000 | 68,688 |
7.25%, 5/1/2012 | 125,000 | 124,062 |
7.25%, 5/1/2013 | 30,000 | 29,775 |
Williams Companies, Inc.: | | |
8.125%, 3/15/2012 | 180,000 | 189,000 |
8.75%, 3/15/2032 | 265,000 | 300,775 |
Williams Partners LP, 7.25%, 2/1/2017 | 45,000 | 45,000 |
| 5,028,410 |
Financials 12.4% |
Algoma Acquisition Corp., 144A, 9.875%, 6/15/2015 | 160,000 | 152,000 |
Ashton Woods USA LLC, 9.5%, 10/1/2015 | 145,000 | 84,100 |
Buffalo Thunder Development Authority, 144A, 9.375%, 12/15/2014 | 30,000 | 20,100 |
CIT Group, Inc., 5.4%, 2/13/2012 | 400,000 | 317,529 |
Conproca SA de CV, Series REG S, 12.0%, 6/16/2010 | 267,000 | 299,040 |
Ford Motor Credit Co., LLC: | | |
7.25%, 10/25/2011 | 125,000 | 96,870 |
7.375%, 10/28/2009 | 690,000 | 628,438 |
7.875%, 6/15/2010 | 205,000 | 176,947 |
GMAC LLC, 6.875%, 9/15/2011 | 765,000 | 549,708 |
| Principal Amount ($)(a) | Value ($) |
| |
Hawker Beechcraft Acquisition Co., LLC: | | |
8.5%, 4/1/2015 (b) | 115,000 | 115,863 |
8.875%, 4/1/2015 (PIK) | 100,000 | 100,500 |
9.75%, 4/1/2017 (b) | 120,000 | 120,000 |
Hexion US Finance Corp., 9.75%, 11/15/2014 | 35,000 | 31,675 |
Inmarsat Finance PLC, Step-up Coupon, 0% to 11/15/2008, 10.375% to 11/15/2012 | 135,000 | 136,350 |
iPayment, Inc.,
9.75%, 5/15/2014 | 45,000 | 38,025 |
iStar Financial, Inc., (REIT), 8.625%, 6/1/2013 | 250,000 | 228,750 |
Kreditanstalt fuer
Wiederaufbau: | | |
2.05%, 2/16/2026 JPY | 560,000,000 | 5,111,908 |
5.0%, 1/4/2009 EUR | 2,000,000 | 3,150,766 |
Local TV Finance LLC, 144A, 9.25%, 6/15/2015 (PIK) | 50,000 | 39,000 |
New ASAT (Finance) Ltd., 9.25%, 2/1/2011 | 90,000 | 57,600 |
Residential Capital LLC, 144A, 8.5%, 5/15/2010 | 50,000 | 42,000 |
Rio Tinto Finance (USA) Ltd., 6.5%, 7/15/2018 | 600,000 | 601,820 |
Tropicana Entertainment LLC, 9.625%, 12/15/2014** | 150,000 | 71,250 |
UCI Holdco, Inc., 10.276%***, 12/15/2013 (PIK) | 65,988 | 56,090 |
Universal City Development Partners, 11.75%, 4/1/2010 | 235,000 | 241,462 |
| 12,467,791 |
Health Care 1.7% |
Advanced Medical Optics, Inc., 7.5%, 5/1/2017 (b) | 90,000 | 82,800 |
Bausch & Lomb, Inc., 144A, 9.875%, 11/1/2015 (b) | 80,000 | 80,400 |
Boston Scientific Corp., 6.0%, 6/15/2011 | 75,000 | 73,313 |
Community Health Systems, Inc., 8.875%, 7/15/2015 (b) | 390,000 | 392,437 |
HCA, Inc.: | | |
9.125%, 11/15/2014 | 95,000 | 97,137 |
9.25%, 11/15/2016 | 270,000 | 278,100 |
9.625%, 11/15/2016 (PIK) | 145,000 | 149,350 |
HEALTHSOUTH Corp., 10.75%, 6/15/2016 (b) | 50,000 | 53,750 |
IASIS Healthcare LLC, 8.75%, 6/15/2014 | 75,000 | 75,750 |
Psychiatric Solutions, Inc., 7.75%, 7/15/2015 | 50,000 | 49,500 |
Surgical Care Affiliates, Inc., 144A, 8.875%, 7/15/2015 (PIK) | 55,000 | 48,125 |
The Cooper Companies, Inc., 7.125%, 2/15/2015 (b) | 95,000 | 91,200 |
Vanguard Health Holding Co. I LLC, Step-up Coupon, 0% to 10/1/2009, 11.25% to 10/1/2015 | 75,000 | 66,000 |
Vanguard Health Holding Co. II, LLC, 9.0%, 10/1/2014 | 150,000 | 148,500 |
| 1,686,362 |
| Principal Amount ($)(a) | Value ($) |
| |
Industrials 3.4% |
Actuant Corp., 6.875%, 6/15/2017 (b) | 40,000 | 39,300 |
Allied Security Escrow Corp., 11.375%, 7/15/2011 | 85,000 | 73,100 |
Allied Waste North America, Inc., 6.5%, 11/15/2010 | 40,000 | 40,000 |
American Color Graphics, Inc., 10.0%, 6/15/2010* | 80,000 | 26,400 |
American Color Graphics, Inc., Promissory Note due 9/15/2008 (c) | 4,800 | 0 |
ARAMARK Corp., 6.373%***, 2/1/2015 | 65,000 | 60,775 |
Baldor Electric Co., 8.625%, 2/15/2017 (b) | 45,000 | 45,225 |
BE Aerospace, Inc., 8.5%, 7/1/2018 | 105,000 | 105,262 |
Belden, Inc., 7.0%, 3/15/2017 | 45,000 | 43,200 |
Bombardier, Inc., 144A, 6.75%, 5/1/2012 | 100,000 | 97,750 |
Browning-Ferris Industries, Inc., 7.4%, 9/15/2035 | 165,000 | 156,750 |
Building Materials Corp. of America, 7.75%, 8/1/2014 | 65,000 | 53,300 |
Cenveo Corp., 144A, 10.5%, 8/15/2016 | 55,000 | 54,450 |
Congoleum Corp., 8.625%, 8/1/2008** | 125,000 | 93,750 |
DRS Technologies, Inc.: | | |
6.625%, 2/1/2016 | 25,000 | 25,375 |
6.875%, 11/1/2013 | 195,000 | 195,000 |
7.625%, 2/1/2018 | 165,000 | 174,487 |
Education Management LLC, 8.75%, 6/1/2014 | 45,000 | 41,850 |
Esco Corp., 144A, 8.625%, 12/15/2013 | 95,000 | 95,950 |
General Cable Corp.: | | |
5.073%***, 4/1/2015 | 55,000 | 48,813 |
7.125%, 4/1/2017 (b) | 55,000 | 52,388 |
Gibraltar Industries, Inc., Series B, 8.0%, 12/1/2015 | 45,000 | 37,575 |
Great Lakes Dredge & Dock Co., 7.75%, 12/15/2013 | 50,000 | 47,375 |
Harland Clarke Holdings Corp., 9.5%, 5/15/2015 | 45,000 | 36,900 |
K. Hovnanian Enterprises, Inc.: | | |
8.875%, 4/1/2012 | 170,000 | 124,100 |
144A, 11.5%, 5/1/2013 | 10,000 | 10,375 |
Kansas City Southern de Mexico SA de CV: | | |
7.375%, 6/1/2014 | 95,000 | 92,150 |
7.625%, 12/1/2013 | 155,000 | 150,350 |
9.375%, 5/1/2012 | 150,000 | 156,000 |
Kansas City Southern Railway Co.: | | |
7.5%, 6/15/2009 | 45,000 | 45,450 |
8.0%, 6/1/2015 | 100,000 | 101,000 |
Mobile Services Group, Inc., 9.75%, 8/1/2014 | 65,000 | 62,400 |
Moog, Inc., 144A, 7.25%, 6/15/2018 | 20,000 | 19,800 |
Navios Maritime Holdings, Inc., 9.5%, 12/15/2014 | 75,000 | 76,687 |
Ply Gem Industries, Inc., 144A, 11.75%, 6/15/2013 | 40,000 | 36,700 |
R.H. Donnelley Corp., 144A, 8.875%, 10/15/2017 | 310,000 | 184,450 |
| Principal Amount ($)(a) | Value ($) |
| |
Rainbow National Services LLC, 144A, 10.375%, 9/1/2014 | 13,000 | 13,813 |
RBS Global & Rexnord Corp., 9.5%, 8/1/2014 | 45,000 | 43,425 |
Seitel, Inc., 9.75%, 2/15/2014 | 35,000 | 31,281 |
Titan International, Inc., 8.0%, 1/15/2012 | 195,000 | 191,100 |
TransDigm, Inc.,
7.75%, 7/15/2014 | 30,000 | 29,625 |
U.S. Concrete, Inc., 8.375%, 4/1/2014 (b) | 55,000 | 48,813 |
United Rentals North
America, Inc.: | | |
6.5%, 2/15/2012 (b) | 125,000 | 112,500 |
7.0%, 2/15/2014 (b) | 175,000 | 135,625 |
Vought Aircraft Industries, Inc., 8.0%, 7/15/2011 | 35,000 | 32,550 |
Xerox Capital Trust I, 8.0%, 2/1/2027 | 35,000 | 34,162 |
| 3,377,331 |
Information Technology 1.2% |
Alion Science & Technology Corp., 10.25%, 2/1/2015 | 40,000 | 28,000 |
Freescale Semiconductor, Inc., 8.875%, 12/15/2014 | 160,000 | 130,000 |
L-3 Communications Corp.: | | |
5.875%, 1/15/2015 | 160,000 | 147,600 |
Series B, 6.375%,
10/15/2015 | 80,000 | 74,800 |
7.625%, 6/15/2012 | 195,000 | 196,950 |
Lucent Technologies, Inc., 6.45%, 3/15/2029 (b) | 205,000 | 156,825 |
MasTec, Inc., 7.625%,
2/1/2017 | 65,000 | 55,250 |
NXP BV / NXP Funding LLC, 7.497%***, 10/15/2013 EUR | 100,000 | 132,254 |
Sanmina-SCI Corp., 144A, 5.526%***, 6/15/2010 | 24,000 | 23,760 |
Seagate Technology HDD Holdings, 6.8%, 10/1/2016 | 90,000 | 82,125 |
SunGard Data Systems, Inc., 10.25%, 8/15/2015 (b) | 135,000 | 135,675 |
Vangent, Inc., 9.625%,
2/15/2015 | 35,000 | 30,450 |
| 1,193,689 |
Materials 3.2% |
Appleton Papers, Inc., Series B, 8.125%,
6/15/2011 (b) | 25,000 | 23,625 |
ARCO Chemical Co., 9.8%, 2/1/2020 | 405,000 | 321,975 |
AMH Holdings, Inc., Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014 | 95,000 | 62,700 |
Cascades, Inc.,
7.25%, 2/15/2013 | 140,000 | 121,800 |
Chemtura Corp.,
6.875%, 6/1/2016 | 115,000 | 99,475 |
Clondalkin Acquisition BV, 144A, 4.776%***,
12/15/2013 | 75,000 | 64,875 |
CPG International I, Inc., 10.5%, 7/1/2013 | 130,000 | 108,550 |
Exopack Holding Corp., 11.25%, 2/1/2014 (b) | 160,000 | 148,400 |
| Principal Amount ($)(a) | Value ($) |
| |
Freeport-McMoRan Copper & Gold, Inc.: | | |
8.25%, 4/1/2015 | 110,000 | 115,638 |
8.375%, 4/1/2017 | 205,000 | 216,275 |
GEO Specialty Chemicals, Inc.: | | |
144A, 10.698%***,
12/31/2009 | 186,000 | 139,267 |
144A, 10.698%***,
3/31/2015 | 108,691 | 81,382 |
144A, 7.5%***,
3/31/2015 (PIK) | 1,838 | 1,376 |
Georgia-Pacific LLC: | | |
144A, 7.125%, 1/15/2017 | 35,000 | 32,900 |
9.5%, 12/1/2011 | 50,000 | 50,813 |
Hexcel Corp.,
6.75%, 2/1/2015 | 195,000 | 189,637 |
Huntsman LLC, 11.625%, 10/15/2010 | 243,000 | 250,897 |
Innophos, Inc.,
8.875%, 8/15/2014 | 35,000 | 35,000 |
Jefferson Smurfit Corp., 8.25%, 10/1/2012 | 75,000 | 65,438 |
Koppers Holdings, Inc., Step-up Coupon, 0% to 11/15/2009, 9.875% to 11/15/2014 | 130,000 | 117,650 |
Metals USA Holdings Corp., 8.698%***, 7/1/2012 (PIK) | 35,000 | 32,200 |
Millar Western Forest Products Ltd., 7.75%, 11/15/2013 | 35,000 | 22,750 |
Momentive Performance Materials, Inc., 9.75%, 12/1/2014 (b) | 105,000 | 89,775 |
NewMarket Corp., 7.125%, 12/15/2016 | 110,000 | 109,175 |
NewPage Corp., 10.0%, 5/1/2012 (b) | 110,000 | 111,375 |
OI European Group BV, 144A, 6.875%, 3/31/2017 EUR | 65,000 | 96,199 |
Pliant Corp., 11.625%, 6/15/2009 (PIK) | 10 | 10 |
Radnor Holdings Corp., 11.0%, 3/15/2010** | 25,000 | 31 |
Smurfit-Stone Container Enterprises, Inc.: | | |
8.0%, 3/15/2017 (b) | 55,000 | 44,000 |
8.375%, 7/1/2012 | 55,000 | 48,263 |
Steel Dynamics, Inc.: | | |
6.75%, 4/1/2015 | 75,000 | 71,813 |
144A, 7.375%, 11/1/2012 | 20,000 | 20,000 |
Terra Capital, Inc., Series B, 7.0%, 2/1/2017 | 110,000 | 107,800 |
The Mosaic Co., 144A, 7.375%, 12/1/2014 | 85,000 | 88,825 |
Witco Corp., 6.875%, 2/1/2026 | 35,000 | 22,400 |
Wolverine Tube, Inc., 10.5%, 4/1/2009 | 85,000 | 79,050 |
| 3,191,339 |
Telecommunication Services 2.4% |
BCM Ireland Preferred Equity Ltd., 144A, 11.856%***, 2/15/2017 (PIK) EUR | 63,296 | 59,248 |
Centennial Communications
Corp.: | | |
10.0%, 1/1/2013 | 40,000 | 40,600 |
10.125%, 6/15/2013 | 80,000 | 82,400 |
Cincinnati Bell, Inc.: | | |
| Principal Amount ($)(a) | Value ($) |
| |
7.25%, 7/15/2013 | 100,000 | 97,500 |
8.375%, 1/15/2014 (b) | 55,000 | 53,213 |
Cricket Communications, Inc.: | | |
9.375%, 11/1/2014 | 120,000 | 115,500 |
144A, 10.0%, 7/15/2015 | 100,000 | 98,000 |
Embratel, Series B, 11.0%, 12/15/2008 | 20,000 | 20,700 |
Grupo Iusacell Celular SA de CV, 10.0%, 3/31/2012 | 28,848 | 27,982 |
Hellas Telecom III, 144A, 8.5%, 10/15/2013 EUR | 100,000 | 133,041 |
Hellas Telecom V, 144A, 8.247%***, 10/15/2012 EUR | 100,000 | 144,062 |
Intelsat Subsidiary Holding Co., Ltd., 144A, 8.875%, 1/15/2015 | 130,000 | 126,425 |
iPCS, Inc.,
4.998%***, 5/1/2013 | 35,000 | 31,500 |
MetroPCS Wireless, Inc., 9.25%, 11/1/2014 (b) | 150,000 | 144,375 |
Millicom International Cellular SA, 10.0%, 12/1/2013 | 265,000 | 280,900 |
Nortel Networks Ltd.: | | |
6.963%***, 7/15/2011 | 85,000 | 80,325 |
144A, 10.75%, 7/15/2016 | 75,000 | 74,250 |
Qwest Corp.: | | |
7.25%, 9/15/2025 | 20,000 | 17,700 |
7.875%, 9/1/2011 (b) | 105,000 | 105,000 |
Rural Cellular Corp., 9.875%, 2/1/2010 | 85,000 | 86,488 |
Sprint Nextel Corp., 6.0%, 12/1/2016 | 55,000 | 47,300 |
Stratos Global Corp., 9.875%, 2/15/2013 (b) | 30,000 | 31,725 |
Telesat Canada, Inc., 144A, 11.0%, 11/1/2015 | 150,000 | 150,000 |
US Unwired, Inc., Series B, 10.0%, 6/15/2012 (b) | 110,000 | 112,475 |
Virgin Media Finance PLC: | | |
8.75%, 4/15/2014 EUR | 85,000 | 122,453 |
8.75%, 4/15/2014 (b) | 120,000 | 112,800 |
West Corp., 9.5%, 10/15/2014 | 55,000 | 49,500 |
| 2,445,462 |
Utilities 2.9% |
AES Corp.: | | |
8.0%, 10/15/2017 | 100,000 | 98,000 |
144A, 8.0%, 6/1/2020 | 110,000 | 106,150 |
144A, 8.75%, 5/15/2013 | 315,000 | 326,812 |
9.5%, 6/1/2009 | 60,000 | 61,650 |
Allegheny Energy Supply Co., LLC, 144A, 8.25%, 4/15/2012 | 470,000 | 489,975 |
CMS Energy Corp., 8.5%, 4/15/2011 (b) | 225,000 | 234,883 |
Edison Mission Energy, 7.0%, 5/15/2017 | 85,000 | 79,475 |
Energy Future Holdings Corp., 144A, 10.875%, 11/1/2017 | 150,000 | 151,500 |
Intergas Finance BV,
Series REG S, 6.875%, 11/4/2011 (b) | 375,000 | 368,906 |
Knight, Inc., 6.5%, 9/1/2012 | 30,000 | 29,250 |
Mirant Americas Generation LLC, 8.3%, 5/1/2011 | 130,000 | 134,225 |
Mirant North America LLC, 7.375%, 12/31/2013 | 60,000 | 59,475 |
| Principal Amount ($)(a) | Value ($) |
| |
NRG Energy, Inc.: | | |
7.25%, 2/1/2014 | 125,000 | 119,375 |
7.375%, 2/1/2016 | 90,000 | 84,713 |
Oncor Electric Delivery Co., 7.0%, 9/1/2022 | 45,000 | 43,880 |
Regency Energy Partners LP, 8.375%, 12/15/2013 | 80,000 | 81,800 |
Reliant Energy, Inc., 7.875%, 6/15/2017 (b) | 125,000 | 122,188 |
Sierra Pacific Resources: | | |
6.75%, 8/15/2017 | 105,000 | 102,020 |
8.625%, 3/15/2014 | 25,000 | 26,208 |
Texas Competitive Electric Holdings Co., LLC, 144A, 10.25%, 11/1/2015 | 220,000 | 215,910 |
| 2,936,395 |
Total Corporate Bonds (Cost $41,174,230) | 38,914,818 |
|
Commercial and Non-Agency Mortgage-Backed Securities 2.4% |
Credit Suisse Mortgage Capital Certificates Trust, "A2", Series 2007-C1, 5.268%, 2/15/2040 | 814,000 | 794,681 |
JPMorgan Chase Commercial Mortgage Securities Corp., "F", Series 2004-LN2, 144A, 5.631%***, 7/15/2041 | 500,000 | 396,051 |
Morgan Stanley Capital I Trust, "A4", Series 2007-HQ11, 5.447%, 2/12/2044 | 500,000 | 464,370 |
Wachovia Bank Commercial Mortgage Trust, "A2", Series 2007-C32, 5.924%***, 6/15/2049 | 780,000 | 769,112 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $2,456,382) | 2,424,214 |
|
Asset Backed 0.8% |
Credit Card Receivables |
Washington Mutual Master Note Trust, "C1", Series 2007-C1, 144A, 2.871%***, 5/15/2014 (Cost $954,140) | 1,000,000 | 838,594 |
|
Government & Agency Obligations 50.1% |
Sovereign Bonds 37.0% |
Aries Vermogensverwaltung GmbH, Series C, REG S, 9.6%, 10/25/2014 | 250,000 | 318,385 |
Dominican Republic, Series REG S, 9.5%, 9/27/2011 | 198,271 | 204,219 |
Federal Republic of Germany: | | |
Series 06, 4.0%, 7/4/2016 EUR | 500,000 | 753,658 |
Series 98, 4.125%,
7/4/2008 EUR | 1,000,000 | 1,574,057 |
Federative Republic of Brazil: | | |
6.0%, 1/17/2017 (b) | 1,560,000 | 1,590,420 |
7.125%, 1/20/2037 | 310,000 | 342,085 |
7.875%, 3/7/2015 | 275,000 | 308,000 |
8.75%, 2/4/2025 | 305,000 | 381,708 |
8.875%, 10/14/2019 | 715,000 | 895,180 |
| Principal Amount ($)(a) | Value ($) |
| |
11.0%, 8/17/2040 (b) | 765,000 | 1,011,712 |
12.5%, 1/5/2016 BRL | 250,000 | 145,622 |
Government of Canada, 4.25%, 12/1/2008 CAD | 500,000 | 492,915 |
Government of Ukraine: | | |
144A, 6.75%,
11/14/2017 | 250,000 | 224,125 |
Series REG S,
7.65%, 6/11/2013 | 150,000 | 145,875 |
Kingdom of Spain, 3.15%, 1/31/2016 EUR | 1,300,000 | 1,827,964 |
Province of Quebec, Series PO, 1.6%, 5/9/2013 JPY | 450,000,000 | 4,277,443 |
Republic of Argentina: | | |
3.092%***, 8/3/2012 (PIK) | 606,250 | 514,208 |
5.83%, 12/31/2033 (PIK) ARS | 423 | 126 |
Republic of Colombia: | | |
7.375%, 1/27/2017 (b) | 205,000 | 222,220 |
8.25%, 12/22/2014 | 170,000 | 193,375 |
10.0%, 1/23/2012 (b) | 340,000 | 393,890 |
Republic of El Salvador, 144A, 7.65%, 6/15/2035 | 676,000 | 699,660 |
Republic of Ghana, 144A, 8.5%, 10/4/2017 | 100,000 | 102,750 |
Republic of Greece: | | |
3.6%, 7/20/2016 EUR | 1,400,000 | 1,979,246 |
4.5%, 9/20/2037 EUR | 1,500,000 | 2,007,236 |
Republic of Indonesia, 144A, 6.875%, 3/9/2017 | 440,000 | 419,100 |
Republic of Panama: | | |
7.125%, 1/29/2026 | 166,000 | 175,130 |
9.375%, 1/16/2023 | 670,000 | 859,275 |
Republic of Peru: | | |
6.55%, 3/14/2037 (b) | 470,000 | 475,875 |
7.35%, 7/21/2025 (b) | 1,140,000 | 1,271,100 |
Republic of Philippines: | | |
7.75%, 1/14/2031 (b) | 100,000 | 103,620 |
8.0%, 1/15/2016 (b) | 640,000 | 684,800 |
8.375%, 2/15/2011 | 25,000 | 26,500 |
9.375%, 1/18/2017 | 175,000 | 202,563 |
Republic of Turkey: | | |
7.0%, 9/26/2016 | 525,000 | 502,687 |
7.25%, 3/15/2015 | 80,000 | 78,900 |
11.75%, 6/15/2010 | 475,000 | 529,031 |
Republic of Uruguay: | | |
7.625%, 3/21/2036 | 101,000 | 103,424 |
8.0%, 11/18/2022 | 265,000 | 282,888 |
9.25%, 5/17/2017 | 105,000 | 127,575 |
Republic of Venezuela, 10.75%, 9/19/2013 | 760,000 | 790,400 |
Russian Federation, Series REG S, 7.5%, 3/31/2030 | 1,649,875 | 1,850,978 |
Russian Ministry of Finance, Series VII, 3.0%, 5/14/2011 | 290,000 | 276,655 |
Socialist Republic of Vietnam, 144A, 6.875%, 1/15/2016 | 640,000 | 608,000 |
United Kingdom Treasury Bond, 5.75%, 12/7/2009 GBP | 3,250,000 | 6,522,062 |
United Mexican States: | | |
5.625%, 1/15/2017 (b) | 595,000 | 601,247 |
Series A, 6.75%, 9/27/2034 | 98,000 | 103,978 |
| 37,201,867 |
| Principal Amount ($)(a) | Value ($) |
| |
US Government Sponsored Agencies 0.7% |
Federal Home Loan Bank, Series HF-15, 7.869%***, 6/26/2015 | 500,000 | 477,400 |
Federal National Mortgage Association,
8.45%***, 2/27/2023 | 250,000 | 250,000 |
| 727,400 |
US Treasury Obligations 12.4% |
US Treasury Bill, 1.08%****, 7/17/2008 (d) | 890,000 | 889,441 |
US Treasury Bond, 5.25%, 11/15/2028 | 1,150,000 | 1,246,582 |
US Treasury Notes: | | |
2.0%, 2/28/2010 | 4,550,000 | 4,516,940 |
3.5%, 5/31/2013 | 3,830,000 | 3,858,426 |
3.875%, 5/15/2018 | 1,950,000 | 1,933,700 |
| 12,445,089 |
Total Government & Agency Obligations (Cost $49,838,119) | 50,374,356 |
|
Loan Participations and Assignments 2.9% |
Senior Loans*** 2.1% |
Advanced Medical Optics, Inc., Term Loan B, LIBOR plus 1.75%, 5.061%, 4/2/2014 | 29,624 | 27,329 |
Algoma Steel, Inc., Term Loan, LIBOR plus 2.5%, 5.811%, 6/30/2013 | 17,760 | 16,872 |
Bausch & Lomb, Inc.: | | |
Term Delay Draw, LIBOR plus 3.25%, 6.561%, 4/11/2015 | 12,000 | 11,775 |
Term Loan B, LIBOR plus 3.25%, 6.561%, 4/11/2015 | 79,600 | 78,113 |
Buffets, Inc.: | | |
Letter of Credit, 9.733%, 5/1/2013 | 59,912 | 35,398 |
Term Loan B, 7.74%, 11/1/2013 | 99,551 | 58,817 |
Charter Communications Operations: | | |
Term Loan, LIBOR plus 2.0%, 5.311%, 3/6/2014 | 115,000 | 114,532 |
Term Loan B, LIBOR plus 3.25%, 6.561%, 4/27/2011 | 104,738 | 92,280 |
Energy Future Holdings Corp.: | | |
Term Loan B1, LIBOR plus 3.5%, 6.811%, 10/10/2014 | 462,675 | 429,480 |
Term Loan B3, LIBOR plus 3.5%, 6.811%, 10/10/2014 | 298,500 | 276,774 |
General Nutrition Centers, Inc., Term Loan B, LIBOR plus 2.25%, 5.561%, 9/16/2013 | 29,774 | 27,541 |
Golden Nugget, Term Loan, 5.74%, 6/16/2014 | 55,000 | 39,050 |
Hawker Beechcraft, Inc.: | | |
Letter of Credit, LIBOR plus 2.0%, 5.311%, 3/26/2014 | 2,405 | 2,265 |
Term Loan B, LIBOR plus 2.0%, 5.311%, 3/26/2014 | 41,265 | 38,860 |
HCA, Inc., Term Loan A1, 4.301%, 11/18/2012 | 162,900 | 152,861 |
| Principal Amount ($)(a) | Value ($) |
| |
Hexion Specialty Chemicals: | | |
Term Loan C1, LIBOR plus 2.25%, 5.611%, 5/5/2013 | 193,039 | 176,320 |
Term Loan C2, LIBOR plus 2.25%, 5.611%, 5/5/2013 | 51,403 | 46,951 |
IASIS Healthcare LLC, 8.131%, 6/15/2014 | 70,000 | 62,212 |
Intelstat Corp., Term Loan, LIBOR plus 9.25%, 12.561%, 8/15/2014 | 25,000 | 25,068 |
Longview Power LLC: | | |
Demand Draw, 5.063%, 4/1/2014 | 14,000 | 12,985 |
Letter of Credit, 5.063%, 4/1/2014 | 4,000 | 3,710 |
Term Loan B, 5.063%, 4/1/2014 | 12,000 | 11,130 |
NewPage Corp., Term Loan B, LIBOR plus 3.0%, 6.311%, 11/5/2014 | 14,925 | 14,854 |
Sabre, Inc., Term Loan B, LIBOR plus 2.25%, 5.561%, 9/30/2014 | 48,590 | 40,047 |
Symbion, Inc.: | | |
Term Loan A, 6.149%, 8/23/2013 | 23,713 | 21,282 |
Term Loan B, 6.149%, 8/23/2014 | 23,713 | 21,282 |
Telesat Canada, Inc.: | | |
Term Loan, 5.9%, 9/1/2014 | 35,431 | 34,245 |
Term Loan B, LIBOR plus 3.0%, 6.311%, 10/31/2014 | 110,442 | 106,746 |
Tribune Co., Term Loan B, 5.482%, 5/24/2014 | 89,100 | 68,050 |
| 2,046,829 |
Sovereign Loans 0.8% |
Credit Suisse (City of Kyiv Ukraine), 144A, 8.25%, 11/26/2012 | 630,000 | 641,812 |
CSFB International (Exim Ukraine), 6.8%, 10/4/2012 | 205,000 | 188,805 |
| 830,617 |
Total Loan Participations and Assignments (Cost $3,049,042) | 2,877,446 |
|
Shares
| Value ($) |
| |
Warrants 0.0% |
Dayton Superior Corp., 144A, Expiration Date 6/15/2009* | 10 | 0 |
New ASAT (Finance) Ltd., Expiration Date 2/1/2011* | 15,600 | 3,083 |
Total Warrants (Cost $0) | 3,083 |
|
Units
| Value ($) |
| |
Other Investments 0.1% |
Hercules, Inc., (Bond Unit), 6.5%, 6/30/2029 (Cost $67,308) | 85,000 | 69,700 |
|
Shares
| Value ($) |
| |
Common Stocks 0.0% |
GEO Specialty Chemicals, Inc.* (Cost $19,822) | 2,058 | 1,749 |
|
Convertible Preferred Stock 0.0% |
Consumer Discretionary |
ION Media Networks, Inc.: | | |
144A, 12.0%* | 10,000 | 65 |
Series AI, 144A, 12.0%* | 20,000 | 130 |
Total Convertible Preferred Stocks (Cost $4,191) | 195 |
|
Securities Lending Collateral 9.1% |
Daily Assets Fund Institutional, 2.74% (e) (f) (Cost $9,166,123) | 9,166,123 | 9,166,123 |
|
Cash Equivalents 4.2% |
Cash Management QP Trust, 2.49% (e) (Cost $4,271,307) | 4,271,307 | 4,271,307 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $111,000,664)+ | 108.3 | 108,941,585 |
Other Assets and Liabilities, Net | (8.3) | (8,370,895) |
Net Assets | 100.0 | 100,570,690 |
* Non-income producing security.** Non-income producing security. Issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. The following table represents bonds that are in default:Securities | Coupon | Maturity Date | Principal Amount | Acquisition Cost ($) | Value ($) |
Congoleum Corp.
| 8.625% | 8/1/2008 | 125,000 | USD
| 105,994 | 93,750 |
Quebecor World, Inc.
| 9.75% | 1/15/2015 | 45,000 | USD
| 45,000 | 21,825 |
Radnor Holdings Corp.
| 11.0% | 3/15/2010 | 25,000 | USD
| 17,152 | 31 |
Tropicana Entertainment LLC
| 9.625% | 12/15/2014 | 150,000 | USD
| 122,979 | 71,250 |
| | | |
| 291,125 | 186,856 |
*** 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 June 30, 2008.**** Annualized yield at time of purchase; not a coupon rate.+ The cost for federal income tax purposes was $111,088,908. At June 30, 2008, net unrealized depreciation for all securities based on tax cost was $2,147,323. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $1,413,110 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,560,433.(a) Principal amount stated in US dollars unless otherwise noted.(b) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $8,760,870 which is 8.7% of net assets.(c) Security issued in lieu of interest payment due 12/15/2007, which has been deferred until 9/15/2008. This security is deemed to be non-income producing.(d) At June 30, 2008, this security has been pledged, in whole or in part, to cover initial margin requirements for open future contracts.(e) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(f) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.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.
LIBOR: Represents the London InterBank Offered Rate.
PIK: Denotes that all or a portion of the income is paid in-kind.
REIT: Real Estate Investment Trust
At June 30, 2008, the Portfolio had unfunded loan commitments of $11,703 which could be extended at the option of the borrower, pursuant to the following loan agreement:
Borrower | Unfunded Loan Commitment ($) | Value ($) | Unrealized Depreciation ($) |
Bausch & Lomb, Inc., Term Delay Draw, 4/11/2015
| 7,980 | 7,851 | (129) |
Telesat Canada, Inc., Term Loan B, 10/31/2014
| 3,723 | 3,653 | (70) |
Total | 11,703 | 11,504 | (199) |
At June 30, 2008, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) |
10 Year Australian Treasury Bond
| 9/15/2008 | 1 | 90,734 | 92,722 | 1,988 |
10 Year Canadian Government Bond
| 9/19/2008 | 34 | 3,940,172 | 3,916,819 | (23,353) |
10 Year US Treasury Note
| 9/19/2008 | 119 | 13,562,802 | 13,556,703 | (6,099) |
United Kingdom Treasury Bond
| 9/26/2008 | 34 | 7,183,981 | 7,069,591 | (114,390) |
Total net unrealized depreciation | (141,854) |
At June 30, 2008, open futures contracts sold were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ (Depreciation) ($) |
10 Year Federal Republic of Germany Bond
| 9/8/2008 | 77 | 13,507,959 | 13,404,703 | 103,256 |
10 Year Japanese Government Bond
| 9/10/2008 | 7 | 8,856,841 | 8,929,227 | (72,386) |
Total net unrealized appreciation | 30,870 |
At June 30, 2008, open credit default swap contracts sold were as follows:
Effective/Expiration Date | Notional Amount ($) | Cash Flows Received by the Portfolio | Underlying Debt Obligation | Unrealized Appreciation/ (Depreciation) ($) |
10/3/2007-12/20/2008 | 50,0001 | Fixed — 3.2% | General Motors Corp., 7.125%, 7/15/2013 | (1,269) |
10/4/2007-12/20/2008 | 55,0002 | Fixed — 2.6% | General Motors Corp., 7.125%, 7/15/2013 | (1,717) |
10/23/2007-12/20/2008 | 100,0003 | Fixed — 3.0% | General Motors Corp., 7.125%, 7/15/2013 | (2,732) |
10/4/2007-12/20/2008 | 50,0004 | Fixed — 3.1% | Ford Motor Co., 6.5%, 8/1/2018 | (889) |
10/5/2007-12/20/2008 | 30,0001 | Fixed — 3.15% | Ford Motor Co., 6.5%, 8/1/2018 | (519) |
10/23/2007-12/20/2008 | 110,0003 | Fixed — 3.4% | Ford Motor Co., 6.5%, 8/1/2018 | (1,634) |
11/21/2007-12/20/2008 | 55,0005 | Fixed — 4.02% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 1,627 |
2/19/2008-3/20/2009 | 190,0005 | Fixed — 3.8% | HCA, Inc., 7.7%, 3/20/2009 | 5,018 |
2/26/2008-3/20/2009 | 150,0005 | Fixed — 5.0% | Tenet Healthcare Corp., 7.375%, 2/1/2013 | 5,734 |
10/23/2007-12/20/2009 | 55,0005 | Fixed — 4.65% | Ford Motor Co., 6.5%, 8/1/2018 | (5,516) |
12/11/2007-12/20/2009 | 60,0005 | Fixed — 5.05% | Ford Motor Co., 6.5%, 8/1/2018 | (3,594) |
Total net unrealized depreciation | (5,491) |
At June 30, 2008, open credit default swap contracts purchased were as follows:
Effective/Expiration Date | Notional Amount ($) | Cash Flows Paid by the Portfolio | Underlying Debt Obligation | Unrealized Appreciation ($) |
5/6/2008-6/20/2013 | 50,0005 | Fixed — 7.25% | Arco Chemical Co., 9.8%, 2/1/2020 | 1,793 |
Counterparty:
1 JP Morgan Chase Securities, Inc.
2 Citigroup Global Markets, Inc.
3 Morgan Stanley Co., Inc.
4 Goldman Sachs & Co.
5 Merrill Lynch, Pierce, Fenner & Smith, Inc.
|
At June 30, 2008, the Portfolio had the following open forward foreign currency exchange contracts:
Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized Appreciation ($) |
CAD
| 5,780 |
| USD
| 5,724 |
| 7/2/2008 |
| 56 |
USD
| 20,756 |
| EUR
| 13,300 |
| 7/11/2008 |
| 172 |
USD
| 278,386 |
| JPY
| 30,000,000 |
| 7/14/2008 |
| 4,352 |
CAD
| 21,000 |
| USD
| 20,646 |
| 9/17/2008 |
| 73 |
USD
| 4,113,522 |
| EUR
| 2,668,000 |
| 9/17/2008 |
| 70,375 |
USD
| 1,363,823 |
| JPY
| 145,539,000 |
| 9/17/2008 |
| 12,653 |
USD
| 7,908,240 |
| NOK
| 41,213,000 |
| 9/17/2008 |
| 120,217 |
USD
| 9,563,706 |
| SGD
| 13,070,000 |
| 9/17/2008 |
| 77,926 |
Total unrealized appreciation | 285,824 |
Contracts to Deliver | | In Exchange For | | Settlement Date | | Unrealized Depreciation ($) |
EUR
| 704,000 |
| USD
| 1,083,205 |
| 7/11/2008 |
| (24,553) |
GBP
| 2,400,000 |
| USD
| 4,676,326 |
| 7/14/2008 |
| (96,056) |
AUD
| 3,788,000 |
| USD
| 3,540,985 |
| 9/17/2008 |
| (53,284) |
CHF
| 3,594,000 |
| USD
| 3,459,861 |
| 9/17/2008 |
| (60,756) |
GBP
| 1,016,000 |
| USD
| 1,976,628 |
| 9/17/2008 |
| (35,004) |
SEK
| 4,427,000 |
| USD
| 730,046 |
| 9/17/2008 |
| (1,874) |
Total unrealized depreciation | (271,527) |
Currency Abbreviations |
ARS Argentina Peso
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
NOK Norwegian Krone
SEK Swedish Krona
SGD Singapore Dollar
USD United States Dollar
|
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value | Net Unrealized Depreciation on Other Financial Instruments++ |
Level 1 — Quoted Prices
| $ 13,437,430 | $ (110,984) |
Level 2 — Other Significant Observable Inputs
| 94,952,223 | 10,400 |
Level 3 — Significant Unobservable Inputs
| 551,932 | — |
Total | $ 108,941,585 | $ (100,584) |
++ Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures contracts, forward foreign currency exchange contracts, unfunded loan commitments and credit default swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.The following is a reconciliation of the Portfolio's assets in which significant unobservable inputs (Level 3) were used in determining fair value at June 30, 2008:
| Investments in Securities at Market Value |
Balance as of January 1, 2008
| $ 76,475 |
Total realized gains or losses
| — |
Change in unrealized appreciation (depreciation)
| (24,692) |
Amortization Premium/Discount
| 149 |
Net purchases (sales)
| 500,000 |
Net transfers in (out) of Level 3
| — |
Balance as of June 30, 2008 | $ 551,932 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $97,563,234) — including $8,760,870 of securities loaned | $ 95,504,155 |
Investment in Daily Assets Fund Institutional (cost $9,166,123)* | 9,166,123 |
Investment in Cash Management QP Trust (cost $4,271,307) | 4,271,307 |
Total investments, at value (cost $111,000,664)
| 108,941,585 |
Foreign currency, at value (cost $197,274)
| 226,509 |
Receivable for investments sold
| 88,465 |
Interest receivable
| 1,567,686 |
Receivable for Portfolio shares sold
| 48,803 |
Net receivable on closed forward currency exchange contracts
| 14,442 |
Open credit default swap contract receivable
| 3,851 |
Foreign taxes recoverable
| 1,011 |
Unrealized appreciation on forward foreign currency exchange contracts
| 285,824 |
Other assets
| 1,838 |
Total assets
| 111,180,014 |
Liabilities |
Cash overdraft
| 261,580 |
Payable upon return of securities loaned
| 9,166,123 |
Payable for investments purchased
| 421,330 |
Payable for Portfolio shares redeemed
| 320,821 |
Payable for variation margin on open futures contracts
| 16,466 |
Unrealized depreciation on forward foreign currency exchange contracts
| 271,527 |
Unrealized depreciation on credit default swap contracts
| 3,698 |
Unrealized depreciation on unfunded loan commitments
| 199 |
Accrued management fee
| 36,208 |
Other accrued expenses and payables
| 111,372 |
Total liabilities
| 10,609,324 |
Net assets, at value | $ 100,570,690 |
Net Assets Consist of |
Undistributed net investment income
| 2,736,300 |
Net unrealized appreciation (depreciation) on:
Investments | (2,059,079) |
Unfunded loan commitments | (199) |
Credit default swaps | (3,698) |
Futures | (110,984) |
Foreign currency | 78,683 |
Accumulated net realized gain (loss)
| (180,334) |
Paid-in capital
| 100,110,001 |
Net assets, at value | $ 100,570,690 |
Class A Net Asset Value, offering and redemption price per share ($100,519,944 ÷ 9,249,896 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.87 |
Class B Net Asset Value, offering and redemption price per share ($50,746 ÷ 4,675 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 10.85 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Interest
| $ 2,859,524 |
Interest — Cash Management QP Trust
| 215,915 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 30,260 |
Total Income
| 3,105,699 |
Expenses:
Management fee
| 332,483 |
Administration fee
| 17,546 |
Services to shareholders
| 235 |
Custodian fee
| 10,337 |
Distribution and service fees (Class B)
| 7,057 |
Legal fees
| 10,542 |
Audit fees
| 29,859 |
Record keeping fees (Class B)
| 2,761 |
Trustees' fees and expenses
| 18,203 |
Reports to shareholders and shareholder meeting
| 58,753 |
Other
| 20,455 |
Total expenses before expense reductions
| 508,231 |
Expense reductions
| (9,801) |
Total expenses after expense reductions
| 498,430 |
Net investment income (loss) | 2,607,269 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments
| 30,642 |
Credit default swaps
| 11,513 |
Futures
| (89,794) |
Foreign currency
| (142,271) |
Payments by affiliates (see Note I)
| 81 |
| (189,829) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (2,259,645) |
Unfunded loan commitments
| (178) |
Credit default swaps
| 279 |
Futures
| (249,788) |
Foreign currency
| 202,361 |
| (2,306,971) |
Net gain (loss) | (2,496,800) |
Net increase (decrease) in net assets resulting from operations | $ 110,469 |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income
| $ 2,607,269 | $ 5,848,274 |
Net realized gain (loss)
| (189,829) | 2,363,743 |
Change in net unrealized appreciation (depreciation)
| (2,306,971) | (2,405,723) |
Net increase (decrease) in net assets resulting from operations
| 110,469 | 5,806,294 |
Distributions to shareholders from:
Net investment income:
Class A | (6,041,956) | (5,451,249) |
Class B | (489,657) | (1,430,805) |
Net realized gains:
Class A | (1,320,099) | — |
Class B | (114,923) | — |
Total distributions
| (7,966,635) | (6,882,054) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 15,684,577 | 27,023,346 |
Reinvestment of distributions
| 7,362,055 | 5,451,249 |
Cost of shares redeemed
| (15,399,119) | (17,567,946) |
Net increase (decrease) in net assets from Class A share transactions
| 7,647,513 | 14,906,649 |
Class B Proceeds from shares sold
| 755,481 | 2,524,276 |
Reinvestment of distributions
| 604,580 | 1,430,805 |
Cost of shares redeemed
| (9,329,089) | (19,503,873) |
Net increase (decrease) in net assets from Class B share transactions
| (7,969,028) | (15,548,792) |
Increase (decrease) in net assets | (8,177,681) | (1,717,903) |
Net assets at beginning of period
| 108,748,371 | 110,466,274 |
Net assets at end of period (including undistributed net investment income of $2,736,300 and $6,660,644, respectively)
| $ 100,570,690 | $ 108,748,371 |
Other Information |
Class A Shares outstanding at beginning of period
| 8,561,326 | 7,267,545 |
Shares sold
| 1,389,833 | 2,337,780 |
Shares issued to shareholders in reinvestment of distributions
| 674,181 | 483,267 |
Shares redeemed
| (1,375,444) | (1,527,266) |
Net increase (decrease) in Class A shares
| 688,570 | 1,293,781 |
Shares outstanding at end of period
| 9,249,896 | 8,561,326 |
Class B Shares outstanding at beginning of period
| 737,068 | 2,104,567 |
Shares sold
| 66,046 | 219,518 |
Shares issued to shareholders in reinvestment of distributions
| 55,517 | 127,295 |
Shares redeemed
| (853,956) | (1,714,312) |
Net increase (decrease) in Class B shares
| (732,393) | (1,367,499) |
Shares outstanding at end of period
| 4,675 | 737,068 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.70 | $ 11.80 | $ 11.50 | $ 12.25 | $ 11.82 | $ 11.10 |
Income (loss) from investment operations: Net investment incomeb | .27 | .63 | .62 | .65 | .58 | .41 |
Net realized and unrealized gain (loss) | (.26) | (.01) | .36 | (.39) | .39 | .47 |
Total from investment operations | .01 | .62 | .98 | .26 | .97 | .88 |
Less distributions from: Net investment income | (.69) | (.72) | (.57) | (.98) | — | (.15) |
Net realized gains | (.15) | — | (.11) | (.03) | (.54) | (.01) |
Total distributions | (.84) | (.72) | (.68) | (1.01) | (.54) | (.16) |
Net asset value, end of period | $ 10.87 | $ 11.70 | $ 11.80 | $ 11.50 | $ 12.25 | $ 11.82 |
Total Return (%)
| .18c** | 5.43c | 8.98 | 2.38 | 8.60 | 7.85 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 101 | 100 | 86 | 71 | 62 | 62 |
Ratio of expenses before expense reductions (%)
| .88* | .84 | .85 | .88 | .84 | .83 |
Ratio of expenses after expense reductions (%)
| .87* | .83 | .85 | .88 | .84 | .83 |
Ratio of net investment income (loss) (%)
| 4.90* | 5.50 | 5.47 | 5.61 | 4.99 | 3.60 |
Portfolio turnover rate (%)
| 90** | 147 | 143 | 120 | 210 | 160 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003b |
Selected Per Share Data |
Net asset value, beginning of period | $ 11.64 | $ 11.74 | $ 11.44 | $ 12.17 | $ 11.78 | $ 11.44 |
Income (loss) from investment operations: Net investment incomec | .25 | .59 | .59 | .61 | .53 | .17 |
Net realized and unrealized gain (loss) | (.24) | (.01) | .35 | (.38) | .40 | .17 |
Total from investment operations | .01 | .58 | .94 | .23 | .93 | .34 |
Less distributions from: Net investment income | (.65) | (.68) | (.53) | (.93) | — | — |
Net realized gains | (.15) | — | (.11) | (.03) | (.54) | — |
Total distributions | (.80) | (.68) | (.64) | (.96) | (.54) | — |
Net asset value, end of period | $ 10.85 | $ 11.64 | $ 11.74 | $ 11.44 | $ 12.17 | $ 11.78 |
Total Return (%)
| (.06)d** | 5.07d | 8.75d | 1.92d | 8.27 | 2.97** |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .05 | 9 | 25 | 26 | 21 | 8 |
Ratio of expenses before expense reductions (%)
| 1.24* | 1.21 | 1.24 | 1.25 | 1.22 | 1.26* |
Ratio of expenses after expense reductions (%)
| 1.22* | 1.20 | 1.18 | 1.21 | 1.22 | 1.26* |
Ratio of net investment income (loss) (%)
| 4.55* | 5.13 | 5.14 | 5.28 | 4.61 | 1.80* |
Portfolio turnover rate (%)
| 90** | 147 | 143 | 120 | 210 | 160 |
a For the six months ended June 30, 2008 (Unaudited).
b For the period from May 1, 2003 (commencement of operations of Class B shares) to December 31, 2003.
c Based on average shares outstanding during the period.
d Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Technology VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual Portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.91% and 1.29% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
This Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. Investments by the Portfolio in small companies present greater risk of loss than investments in larger, more established companies. Concentration of the Portfolio's investment in technology stocks may present a greater risk than investments in a more diversified portfolio. Investments by the Portfolio in emerging technology companies present greater risk than investments in more established technology companies. This Portfolio is non-diversified and can take larger positions in fewer companies, increasing its overall potential risk. Please read this Portfolio's prospectus for specific details regarding this product's investments and risk profile.
Growth of an Assumed $10,000 Investment in DWS Technology VIP from 5/1/1999 to 6/30/2008 |
[] DWS Technology VIP — Class A [] Russell 1000® Growth Index [] S&P® Goldman Sachs Technology Index | The Russell 1000® Growth Index is an unmanaged index that consists of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. The S&P® Goldman Sachs Technology Index is an unmanaged capitalization-weighted index based on a universe of technology-related stocks. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Technology VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000
| $8,459 | $8,934 | $10,774 | $12,757 | $9,165 |
Average annual total return
| -15.41% | -10.66% | 2.52% | 4.99% | -.95% |
Russell 1000 Growth Index
| Growth of $10,000
| $9,094 | $9,404 | $11,880 | $14,239 | $8,964 |
Average annual total return
| -9.06% | -5.96% | 5.91% | 7.32% | -1.19% |
S&P Goldman Sachs Technology Index
| Growth of $10,000
| $8,784 | $9,304 | $12,325 | $14,875 | $7,936 |
Average annual total return
| -12.16% | -6.96% | 7.22% | 8.27% | -2.49% |
DWS Technology VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class** |
Class B | Growth of $10,000
| $8,443 | $8,908 | $10,659 | $12,537 | $14,084 |
Average annual total return
| -15.57% | -10.92% | 2.15% | 4.63% | 5.88% |
Russell 1000 Growth Index
| Growth of $10,000
| $9,094 | $9,404 | $11,880 | $14,239 | $14,658 |
Average annual total return
| -9.06% | -5.96% | 5.91% | 7.32% | 6.58% |
S&P Goldman Sachs Technology Index
| Growth of $10,000
| $8,784 | $9,304 | $12,325 | $14,875 | $16,155 |
Average annual total return
| -12.16% | -6.96% | 7.22% | 8.27% | 8.31% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on May 1, 1999. Index returns began on April 30, 1999.** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Technology VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 845.00 | | $ 844.30 | |
Expenses Paid per $1,000*
| $ 4.68 | | $ 6.28 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,019.79 | | $ 1,018.05 | |
Expenses Paid per $1,000*
| $ 5.12 | | $ 6.87 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Technology VIP
| 1.02% | | 1.37% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Technology VIP
Technology stocks produced a negative return in the first half of the year, reflecting investors' concerns that slower economic growth would lead to reduced spending by both consumers and businesses. The Russell 1000® Growth Index, the Portfolio's primary benchmark, had a total return of -9.06%. The S&P® Goldman Sachs Technology Index — the Portfolio's secondary benchmark — had a total return of -12.16% during the semiannual period, slightly underperforming the -11.91% return of the Standard and Poor's 500® (S&P 500) Index. The Class A shares of DWS Technology VIP (unadjusted for contract charges) returned -15.41%.
We added the most value in the IT services group, where our approach is to hold a smaller number of positions to focus on our highest-conviction holdings. Top performers in the sector were Visa, Inc., which we purchased at its initial public offering on March 19, and Global Payments, Inc., a transaction processing company that reported strong earnings results. We also generated positive returns in semiconductors, where the top positions were MKS Instruments, Inc., Microchip Technology, Inc. and Atheros Communications, Inc., and in software, where the Portfolio benefited from an underweight in Microsoft Inc.1 These positives were offset by positions in the hardware, Internet and communications equipment subsectors. The most notable shortfall from an individual position was an underweight in International Business Machines Corp., which performed very well despite the difficult market environment.
We remain cautious in our overall outlook. We believe much of the technology sector's performance in the coming months is likely to be determined by macroeconomic indicators and the direction of analysts' revisions to earnings estimates. However, we welcome volatility as an opportunity to purchase discounted shares in companies whose strong organic growth and/or geographic diversification helps insulate their earnings from broader trends in the global economy.
Kelly P. Davis
Portfolio Manager
Deutsche Investment Management Americas Inc.
The Russell 1000 Growth Index is an unmanaged index that consists of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values.
The S&P Goldman Sachs Technology Index is an unmanaged, capitalization-weighted index based on a universe of technology-related stocks.
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.
Index returns assume reinvestment of all dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Technology VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 99% | 99% |
Cash Equivalents | 1% | 1% |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Information Technology: | | |
Communications Equipment | 21% | 16% |
Semiconductors & Semiconductor Equipment | 21% | 16% |
Software | 18% | 21% |
Computers & Peripherals | 15% | 24% |
Internet Software & Services | 13% | 14% |
IT Services | 7% | 5% |
Electronic Equipment & Instruments | 1% | 2% |
Industrials | 2% | 1% |
Consumer Discretionary | 2% | 1% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 269. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
The accompanying notes are an integral part of the financial statements.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Technology VIP
|
Shares
| Value ($) |
| |
Common Stocks 98.0% |
Consumer Discretionary 1.7% |
Media |
Focus Media Holding Ltd. (ADR)* (a) | 34,200 | 948,024 |
Grupo Televisa SA (ADR) | 44,100 | 1,041,642 |
| 1,989,666 |
Financials 0.6% |
Real Estate Investment Trusts |
DuPont Fabros Technology, Inc. (REIT) (a) | 38,000 | 708,320 |
Industrials 1.9% |
Commercial Services & Supplies 0.9% |
Manpower, Inc. | 18,500 | 1,077,440 |
Electrical Equipment 1.0% |
First Solar, Inc.* (a) | 2,800 | 763,896 |
Yingli Green Energy Holding Co., Ltd. (ADR)* (a) | 26,700 | 425,064 |
| 1,188,960 |
Information Technology 93.8% |
Communications Equipment 20.8% |
Ciena Corp.* (a) | 62,500 | 1,448,125 |
Cisco Systems, Inc.* | 167,900 | 3,905,354 |
F5 Networks, Inc.* (a) | 25,600 | 727,552 |
Foundry Networks, Inc.* | 159,900 | 1,890,018 |
Infinera Corp.* (a) | 29,200 | 257,544 |
Juniper Networks, Inc.* (a) | 138,600 | 3,074,148 |
NICE Systems Ltd. (ADR)* | 40,800 | 1,206,456 |
Nokia Oyj (ADR) | 67,900 | 1,663,550 |
Nortel Networks Corp.* | 15,905 | 130,739 |
Polycom, Inc.* | 122,900 | 2,993,844 |
QUALCOMM, Inc. | 84,116 | 3,732,227 |
Research In Motion Ltd.* | 19,400 | 2,267,860 |
Riverbed Technology, Inc.* (a) | 16,900 | 231,868 |
Sonus Networks, Inc.* (a) | 256,400 | 876,888 |
| 24,406,173 |
Computers & Peripherals 14.5% |
Apple, Inc.* | 27,700 | 4,638,088 |
Asustek Computer, Inc. | 270,309 | 730,246 |
Dell, Inc.* | 64,400 | 1,409,072 |
EMC Corp.* | 76,200 | 1,119,378 |
Hewlett-Packard Co. | 61,200 | 2,705,652 |
International Business Machines Corp. | 34,000 | 4,030,020 |
SanDisk Corp.* | 22,700 | 424,490 |
Seagate Technology (a) | 43,800 | 837,894 |
Synaptics, Inc.* (a) | 29,600 | 1,116,808 |
| 17,011,648 |
Electronic Equipment & Instruments 1.3% |
Hon Hai Precision Industry Co., Ltd. | 311,240 | 1,530,674 |
Internet Software & Services 12.6% |
Akamai Technologies, Inc.* (a) | 57,700 | 2,007,383 |
eBay, Inc.* | 71,200 | 1,945,896 |
|
Shares
| Value ($) |
| |
Google, Inc. "A"* | 13,300 | 7,001,386 |
SINA Corp.* (a) | 14,100 | 599,955 |
Yahoo!, Inc.* | 158,800 | 3,280,808 |
| 14,835,428 |
IT Services 6.8% |
Cognizant Technology Solutions Corp. "A"* | 53,500 | 1,739,285 |
Fiserv, Inc.* | 29,200 | 1,324,804 |
Global Payments, Inc. | 67,500 | 3,145,500 |
Visa, Inc. "A"* | 22,100 | 1,796,951 |
| 8,006,540 |
Semiconductors & Semiconductor Equipment 20.1% |
Advanced Semiconductor Engineering, Inc. | 1,153,671 | 1,036,128 |
Applied Materials, Inc. | 29,900 | 570,791 |
ASML Holding NV (NY Registered Shares) | 32,300 | 788,120 |
Atheros Communications* (a) | 32,700 | 981,000 |
Broadcom Corp. "A"* | 37,800 | 1,031,562 |
Cymer, Inc.* (a) | 17,900 | 481,152 |
FormFactor, Inc.* (a) | 22,600 | 416,518 |
Integrated Device Technology, Inc.* | 55,700 | 553,658 |
Intel Corp. | 283,289 | 6,085,048 |
Intersil Corp. "A" | 36,800 | 894,976 |
KLA-Tencor Corp. (a) | 22,200 | 903,762 |
MediaTek, Inc. | 58,700 | 675,939 |
MEMC Electronic Materials, Inc.* | 9,100 | 560,014 |
Microchip Technology, Inc. (a) | 57,900 | 1,768,266 |
Microsemi Corp.* (a) | 29,800 | 750,364 |
MKS Instruments, Inc.* | 26,900 | 589,110 |
National Semiconductor Corp. (a) | 67,700 | 1,390,558 |
NVIDIA Corp.* | 61,050 | 1,142,856 |
PMC-Sierra, Inc.* (a) | 103,200 | 789,480 |
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 59,706 | 651,392 |
Texas Instruments, Inc. | 31,200 | 878,592 |
Varian Semiconductor Equipment Associates, Inc.* (a) | 20,900 | 727,738 |
| 23,667,024 |
Software 17.7% |
Activision, Inc.* | 48,600 | 1,655,802 |
Adobe Systems, Inc.* | 75,200 | 2,962,128 |
Citrix Systems, Inc.* | 95,600 | 2,811,596 |
Electronic Arts, Inc.* | 31,800 | 1,412,874 |
McAfee, Inc.* | 39,800 | 1,354,394 |
Microsoft Corp. | 123,400 | 3,394,734 |
Nintendo Co., Ltd. | 1,300 | 731,643 |
Oracle Corp.* | 129,500 | 2,719,500 |
Salesforce.com, Inc.* (a) | 20,800 | 1,419,184 |
Symantec Corp.* | 64,500 | 1,248,075 |
THQ, Inc.* (a) | 29,600 | 599,696 |
VanceInfo Technologies Inc. (ADR)* | 51,600 | 434,472 |
| 20,744,098 |
Total Common Stocks (Cost $106,222,823) | 115,165,971 |
|
|
Shares
| Value ($) |
| |
Securities Lending Collateral 15.2% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $17,925,994) | 17,925,994 | 17,925,994 |
|
Cash Equivalents 0.8% |
Cash Management QP Trust, 2.49% (b) (Cost $936,146) | 936,146 | 936,146 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $125,084,963)+ | 114.0 | 134,028,111 |
Other Assets and Liabilities, Net | (14.0) | (16,480,457) |
Net Assets | 100.0 | 117,547,654 |
* Non-income producing security.+ The cost for federal income tax purposes was $133,378,024. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $650,087. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $18,397,941 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $17,747,854.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $17,276,968 which is 14.7% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.ADR: American Depositary Receipt
REIT: Real Estate Investment Trust
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 129,323,481 |
Level 2 — Other Significant Observable Inputs
| 4,704,630 |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 134,028,111 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $106,222,823) — including $17,276,968 of securities loaned | $ 115,165,971 |
Investment in Daily Assets Fund Institutional (cost $17,925,994)* | 17,925,994 |
Investment in Cash Management QP Trust (cost $936,146) | 936,146 |
Total investments, at value (cost $125,084,963)
| 134,028,111 |
Foreign currency, at value (cost $1,585,667)
| 1,608,354 |
Interest receivable
| 13,848 |
Dividends receivable
| 16,293 |
Receivable for Portfolio shares sold
| 21,665 |
Foreign taxes recoverable
| 274 |
Other assets
| 3,217 |
Total assets
| 135,691,762 |
Liabilities |
Payable for Portfolio shares redeemed
| 26,517 |
Payable upon return of securities loaned
| 17,925,994 |
Accrued management fee
| 68,686 |
Other accrued expenses and payables
| 122,911 |
Total liabilities
| 18,144,108 |
Net assets, at value | $ 117,547,654 |
Net Assets Consist of |
Accumulated net investment loss
| (142,563) |
Net unrealized appreciation (depreciation) on:
Investments | 8,943,148 |
Foreign currency | 22,687 |
Accumulated net realized gain (loss)
| (250,322,752) |
Paid-in capital
| 359,047,134 |
Net assets, at value | $ 117,547,654 |
Class A Net Asset Value, offering and redemption price per share ($114,813,658 ÷ 12,679,425 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.06 |
Class B Net Asset Value, offering and redemption price per share ($2,733,996 ÷ 307,683 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 8.89 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $7,603)
| $ 406,748 |
Interest
| 970 |
Interest — Cash Management QP Trust
| 58,612 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 82,638 |
Total Income
| 548,968 |
Expenses:
Management fee
| 462,607 |
Administration fee
| 21,621 |
Custodian and accounting fees
| 36,555 |
Distribution and service fees (Class B)
| 3,558 |
Record keeping fees (Class B)
| 1,321 |
Services to shareholders
| 233 |
Professional fees
| 31,781 |
Trustees' fees and expenses
| 16,419 |
Reports to shareholders and shareholder meeting
| 107,292 |
Other
| 11,259 |
Total expenses before expense reductions
| 692,646 |
Expense reductions
| (6,350) |
Total expenses after expense reductions
| 686,296 |
Net investment income (loss) | (137,328) |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments (net of foreign tax of $4,535)
| (3,980,292) |
Written options
| 139,325 |
Foreign currency
| (25,105) |
| (3,866,072) |
Change in net unrealized appreciation (depreciation) on:
Investments
| (19,688,385) |
Foreign currency
| 22,696 |
| (19,665,689) |
Net gain (loss) | (23,531,761) |
Net increase (decrease) in net assets resulting from operations | $ (23,669,089) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ (137,328) | $ (274,509) |
Net realized gain (loss)
| (3,866,072) | 19,041,595 |
Net unrealized appreciation (depreciation)
| (19,665,689) | 2,725,297 |
Net increase (decrease) in net assets resulting from operations
| (23,669,089) | 21,492,383 |
Portfolio share transactions:
Class A Proceeds from shares sold
| 2,255,710 | 10,492,529 |
Cost of shares redeemed
| (17,363,159) | (42,815,094) |
Net increase (decrease) in net assets from Class A share transactions
| (15,107,449) | (32,322,565) |
Class B Proceeds from shares sold
| 311,630 | 1,326,815 |
Cost of shares redeemed
| (473,556) | (12,807,358) |
Net increase (decrease) in net assets from Class B share transactions
| (161,926) | (11,480,543) |
Increase (decrease) in net assets | (38,938,464) | (22,310,725) |
Net assets at beginning of period
| 156,486,118 | 178,796,843 |
Net assets at end of period (including accumulated net investment loss of $142,563 and $5,235, respectively)
| $ 117,547,654 | $ 156,486,118 |
Other Information |
Class A Shares outstanding at beginning of period
| 14,290,167 | 17,575,288 |
Shares sold
| 241,409 | 994,111 |
Shares redeemed
| (1,852,151) | (4,279,232) |
Net increase (decrease) in Class A shares
| (1,610,742) | (3,285,121) |
Shares outstanding at end of period
| 12,679,425 | 14,290,167 |
Class B Shares outstanding at beginning of period
| 325,361 | 1,525,054 |
Shares sold
| 33,384 | 127,903 |
Shares redeemed
| (51,062) | (1,327,596) |
Net increase (decrease) in Class B shares
| (17,678) | (1,199,693) |
Shares outstanding at end of period
| 307,683 | 325,361 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 10.71 | $ 9.37 | $ 9.30 | $ 9.01 | $ 8.84 | $ 6.02 |
Income (loss) from investment operations: Net investment income (loss)b | (.01) | (.02) | (.01)c | (.03) | .04 | (.04) |
Net realized and unrealized gain (loss) | (1.64) | 1.36 | .08 | .36 | .13 | 2.86 |
Total from investment operations | (1.65) | 1.34 | .07 | .33 | .17 | 2.82 |
Less distributions from: Net investment income | — | — | — | (.04) | — | — |
Net asset value, end of period | $ 9.06 | $ 10.71 | $ 9.37 | $ 9.30 | $ 9.01 | $ 8.84 |
Total Return (%)
| (15.41)** | 14.30 | .75c | 3.74 | 1.92 | 46.84 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 115 | 153 | 165 | 199 | 230 | 257 |
Ratio of expenses (%)
| 1.02* | .91 | .89 | .86 | .83 | .86 |
Ratio of net investment income (loss) (%)
| (.16)* | (.15) | (.12)c | (.36) | .43 | (.50) |
Portfolio turnover rate (%)
| 45** | 91 | 49 | 135 | 112 | 66 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.017 per share and an increase in the ratio of net investment income of 0.18%. Excluding this non-recurring income, total return would have been 0.19% lower.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 10.53 | $ 9.25 | $ 9.21 | $ 8.93 | $ 8.80 | $ 6.01 |
Income (loss) from investment operations: Net investment income (loss)b | (.03) | (.05) | (.04)d | (.07) | .01 | (.07) |
Net realized and unrealized gain (loss) | (1.61) | 1.33 | .08 | .36 | .12 | 2.86 |
Total from investment operations | (1.64) | 1.28 | .04 | .29 | .13 | 2.79 |
Less distributions from: Net investment income | — | — | — | (.01) | — | — |
Net asset value, end of period | $ 8.89 | $ 10.53 | $ 9.25 | $ 9.21 | $ 8.93 | $ 8.80 |
Total Return (%)
| (15.57)** | 13.84 | .43d | 3.27 | 1.48c | 46.42 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 3 | 3 | 14 | 16 | 16 | 11 |
Ratio of expenses before expense reductions (%)
| 1.37* | 1.29 | 1.28 | 1.26 | 1.22 | 1.25 |
Ratio of expenses after expense reductions (%)
| 1.37* | 1.29 | 1.28 | 1.26 | 1.21 | 1.25 |
Ratio of net investment income (loss) (%)
| (.51)* | (.53) | (.51)d | (.76) | .05 | (.89) |
Portfolio turnover rate (%)
| 45** | 91 | 49 | 135 | 112 | 66 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d Includes non-recurring income from the Advisor recorded as a result of an administrative proceeding regarding disclosure of brokerage allocation practices in connection with sales of DWS Funds. The non-recurring income resulted in an increase in net investment income of $0.017 per share and an increase in the ratio of net investment income of 0.18%. Excluding this non-recurring income, total return would have been 0.19% lower.
* Annualized
** Not annualized
|
Performance Summary June 30, 2008
DWS Turner Mid Cap Growth VIP
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 data quoted. Please contact your participating insurance company for the Portfolio's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The total annual portfolio operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated May 1, 2008 are 0.91% and 1.16% for Class A and Class B shares, respectively. Please see the Information About Your Portfolio'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 June 30, 2008.
Risk Considerations
The Portfolio is subject to stock market risk, meaning stocks in the Portfolio 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. Stocks of medium-sized companies involve greater risk than securities of larger, more established companies, as they often have limited product lines, markets or financial resources and may be subject to more-erratic and more-abrupt market movements. Please read this Portfolio's prospectus for specific details regarding this product's investments and risk profile.
Portfolio returns shown for all periods reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Growth of an Assumed $10,000 Investment in DWS Turner Mid Cap Growth VIP from 5/1/2001 to 6/30/2008 |
[] DWS Turner Mid Cap Growth VIP — Class A [] Russell Midcap® Growth Index | The Russell Midcap® Growth Index is an unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly in an index. |
 | |
Yearly periods ended June 30 |
|
Comparative Results |
DWS Turner Mid Cap Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Portfolio* |
Class A | Growth of $10,000
| $9,084 | $9,992 | $13,531 | $18,598 | $13,409 |
Average annual total return
| -9.16% | -.08% | 10.60% | 13.21% | 4.18% |
Russell Midcap Growth Index
| Growth of $10,000
| $9,319 | $9,358 | $12,665 | $17,877 | $14,078 |
Average annual total return
| -6.81% | -6.42% | 8.19% | 12.32% | 4.89% |
DWS Turner Mid Cap Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class** |
Class B | Growth of $10,000
| $9,131 | $10,022 | $13,472 | $18,363 | $20,004 |
Average annual total return
| -8.69% | .22% | 10.44% | 12.92% | 12.25% |
Russell Midcap Growth Index
| Growth of $10,000
| $9,319 | $9,358 | $12,665 | $17,877 | $19,191 |
Average annual total return
| -6.81% | -6.42% | 8.19% | 12.32% | 11.48% |
The growth of $10,000 is cumulative.
‡ Total returns shown for periods less than one year are not annualized.* The Portfolio commenced operations on May 1, 2001. Index returns began on April 30, 2001.** The Portfolio commenced offering Class B shares on July 1, 2002. Index returns began on June 30, 2002.Information About Your Portfolio's Expenses
DWS Turner Mid Cap Growth VIP
As an investor of the Portfolio, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Portfolio expenses. Examples of transaction costs include contract charges, 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 Portfolio 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 Portfolio 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 (January 1, 2008 to June 30, 2008).
The tables illustrate your Portfolio's expenses in two ways:
• Actual Portfolio Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Portfolio using the Portfolio'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% Portfolio Return. This helps you to compare your Portfolio's ongoing expenses (but not transaction costs) with those of other mutual funds using the Portfolio's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Portfolio return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2008 |
Actual Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 908.40 | | $ 913.10 | |
Expenses Paid per $1,000*
| $ 4.60 | | $ 6.42 | |
Hypothetical 5% Portfolio Return | Class A | | Class B | |
Beginning Account Value 1/1/08
| $ 1,000.00 | | $ 1,000.00 | |
Ending Account Value 6/30/08
| $ 1,020.04 | | $ 1,018.15 | |
Expenses Paid per $1,000*
| $ 4.87 | | $ 6.77 | |
* Expenses are equal to the Portfolio's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | | Class B | |
DWS Variable Series II — DWS Turner Mid Cap Growth VIP
| .97% | | 1.35% | |
For more information, please refer to the Portfolio's prospectus.
These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Portfolio or any variable life insurance policy or variable annuity contract for which the Portfolio is an investment option.
Management Summary June 30, 2008
DWS Turner Mid Cap Growth VIP
It has been a volatile and primarily downward ride for the stock market in the first half of 2008. Surging crude oil and energy prices, declining consumer confidence, and a financial system under severe pressure have put negative pressure on stocks. During this period, the DWS Turner Mid Cap Growth VIP underperformed its primary benchmark, the Russell Midcap® Growth Index, returning -9.16% for Class A shares (unadjusted for contract charges) versus -6.81% for the index. The majority of underperformance came in the month of January when stocks with the highest growth rates were among the worst performers.
During the six-month period, four of the Portfolio's 10 sector positions beat their corresponding index sectors. Adding the most value were the materials/processing and auto/transportation sectors. In materials/processing, overweight positions in Steel Dynamics, Inc. and The Mosaic Co. were strong performers.1 In the auto/transportation sector, the avoidance of select airline companies helped generate positive relative performance.
The largest detractors from the Portfolio's performance occurred in the technology and consumer discretionary sectors. In technology, Omniture, Inc. and Juniper Networks Inc. were the biggest relative detractors. In consumer discretionary, VistaPrint Ltd. and Gamestop Corp.* were the largest underperformers.
Although there are many hurdles facing both the equity market and the economy, it is our belief that the accommodative actions taken by the US Federal Reserve Board (the Fed) and the US Treasury, as well as significant cash on corporate balance sheets, improving trade balances and tax rebate spending will provide enough support to keep the economy out of an official recession. However, even with this optimistic stance the ever higher ascent of the price of oil remains a serious concern. Regardless of market conditions, our focus remains on owning stocks that we believe have superior earnings prospects.
Christopher K. McHugh Tara Hedlund
Lead Manager Jason Schrotberger
Portfolio Managers
Turner Investment Partners, Inc., Subadvisor to the Portfolio
The Russell Midcap Growth Index is an unmanaged index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values.
Index returns assume reinvestment of dividends and, unlike portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
1 "Overweight" means the Portfolio holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the Portfolio holds a lower weighting.* As of June 30, 2008, the position was sold.Portfolio management market commentary is as of June 30, 2008, and may not come to pass. This information is subject to change at any time based on market and other conditions. Past performance does not guarantee future results.
Portfolio Summary
DWS Turner Mid Cap Growth VIP
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/08 | 12/31/07 |
| | |
Common Stocks | 98% | 100% |
Cash Equivalents | 2% | — |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 6/30/08 | 12/31/07 |
| | |
Information Technology | 22% | 23% |
Industrials | 16% | 19% |
Energy | 14% | 12% |
Consumer Discretionary | 12% | 11% |
Health Care | 10% | 12% |
Financials | 8% | 9% |
Materials | 8% | 5% |
Consumer Staples | 4% | 4% |
Telecommunication Services | 3% | 2% |
Utilities | 3% | 3% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
For more complete details about the Portfolio's investment portfolio, see page 280. Information concerning portfolio holdings of the Portfolio as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Portfolio's top ten holdings and other information about the Portfolio is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end.
Following the Portfolio's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio June 30, 2008 (Unaudited)
DWS Turner Mid Cap Growth VIP
| Shares | Value ($) |
| |
Common Stocks 99.1% |
Consumer Discretionary 11.8% |
Hotels Restaurants & Leisure 2.9% |
Darden Restaurants, Inc. | 35,790 | 1,143,133 |
WMS Industries, Inc.* (a) | 36,015 | 1,072,167 |
Wynn Resorts Ltd. (a) | 14,010 | 1,139,713 |
| 3,355,013 |
Household Durables 0.4% |
Pulte Homes, Inc. (a) | 45,740 | 440,476 |
Internet & Catalog Retail 1.0% |
Priceline.com, Inc.* (a) | 9,760 | 1,126,890 |
Media 2.0% |
Central European Media Enterprises Ltd. "A"* | 11,040 | 999,451 |
Discovery Holding Co. "A"* | 60,490 | 1,328,360 |
| 2,327,811 |
Multiline Retail 1.1% |
Big Lots, Inc.* (a) | 38,950 | 1,216,798 |
Specialty Retail 2.3% |
Guess?, Inc. (a) | 40,900 | 1,531,705 |
Urban Outfitters, Inc.* (a) | 36,390 | 1,135,004 |
| 2,666,709 |
Textiles, Apparel & Luxury Goods 2.1% |
Coach, Inc.* | 35,670 | 1,030,149 |
Lululemon Athletica, Inc.* | 22,180 | 644,551 |
The Warnaco Group, Inc.* | 18,280 | 805,600 |
| 2,480,300 |
Consumer Staples 4.4% |
Beverages 2.1% |
Central European Distribution Corp.* (a) | 14,530 | 1,077,400 |
Molson Coors Brewing Co. "B" | 24,850 | 1,350,100 |
| 2,427,500 |
Household Products 0.4% |
Church & Dwight Co., Inc. (a) | 8,000 | 450,800 |
Personal Products 1.9% |
Alberto-Culver Co. | 50,370 | 1,323,220 |
Estee Lauder Companies, Inc. "A" (a) | 18,290 | 849,570 |
| 2,172,790 |
Energy 13.8% |
Energy Equipment & Services 3.7% |
Cameron International Corp.* | 17,650 | 976,928 |
Diamond Offshore Drilling, Inc. (a) | 9,030 | 1,256,434 |
Nabors Industries Ltd.* (a) | 28,540 | 1,405,024 |
National-Oilwell Varco, Inc.* | 7,140 | 633,461 |
| 4,271,847 |
Oil, Gas & Consumable Fuels 10.1% |
Alpha Natural Resources, Inc.* | 8,350 | 870,821 |
CONSOL Energy, Inc. | 23,610 | 2,653,056 |
Denbury Resources, Inc.* | 35,650 | 1,301,225 |
EXCO Resources, Inc.* (a) | 23,880 | 881,411 |
Pioneer Natural Resources Co. | 14,310 | 1,120,187 |
| Shares | Value ($) |
| |
Range Resources Corp. | 24,634 | 1,614,512 |
Southwestern Energy Co.* | 33,820 | 1,610,170 |
Ultra Petroleum Corp.* | 16,210 | 1,591,822 |
| 11,643,204 |
Financials 8.4% |
Capital Markets 3.7% |
BlackRock, Inc. (a) | 5,220 | 923,940 |
Northern Trust Corp. | 18,630 | 1,277,459 |
T. Rowe Price Group, Inc. (a) | 36,340 | 2,052,120 |
| 4,253,519 |
Diversified Financial Services 1.4% |
Interactive Brokers Group, Inc. "A"* (a) | 31,270 | 1,004,705 |
IntercontinentalExchange, Inc.* | 5,640 | 642,960 |
| 1,647,665 |
Insurance 1.5% |
Aon Corp. | 17,860 | 820,488 |
Assurant, Inc. | 14,750 | 972,910 |
| 1,793,398 |
Real Estate Investment Trusts 0.7% |
Public Storage (REIT) | 10,440 | 843,448 |
Thrifts & Mortgage Finance 1.1% |
Hudson City Bancorp., Inc. | 73,780 | 1,230,650 |
Health Care 10.5% |
Biotechnology 1.5% |
Alexion Pharmaceuticals, Inc.* (a) | 12,050 | 873,625 |
BioMarin Pharmaceutical, Inc.* (a) | 1,600 | 46,368 |
United Therapeutics Corp.* | 8,970 | 876,818 |
| 1,796,811 |
Health Care Equipment & Supplies 2.7% |
C.R. Bard, Inc. | 7,700 | 677,215 |
DENTSPLY International, Inc. | 24,390 | 897,552 |
Intuitive Surgical, Inc.* | 5,630 | 1,516,722 |
| 3,091,489 |
Health Care Providers & Services 2.6% |
Express Scripts, Inc.* | 28,980 | 1,817,625 |
Henry Schein, Inc.* | 22,180 | 1,143,823 |
| 2,961,448 |
Life Sciences Tools & Services 3.0% |
Charles River Laboratories International, Inc.* | 17,260 | 1,103,259 |
Covance, Inc.* | 16,240 | 1,396,965 |
Illumina, Inc.* (a) | 10,880 | 947,757 |
| 3,447,981 |
Pharmaceuticals 0.7% |
Allergan, Inc. | 16,720 | 870,276 |
Industrials 15.4% |
Air Freight & Logistics 1.6% |
C.H. Robinson Worldwide, Inc. | 10,400 | 570,336 |
Expeditors International of Washington, Inc. | 29,590 | 1,272,370 |
| 1,842,706 |
| Shares | Value ($) |
| |
Commercial Services & Supplies 1.6% |
Covanta Holding Corp.* | 32,520 | 867,959 |
Stericycle, Inc.* | 19,270 | 996,259 |
| 1,864,218 |
Construction & Engineering 1.6% |
Fluor Corp. | 10,080 | 1,875,686 |
Electrical Equipment 2.9% |
American Superconductor Corp.* (a) | 10,480 | 375,708 |
AMETEK, Inc. | 32,090 | 1,515,290 |
First Solar, Inc.* | 5,200 | 1,418,664 |
| 3,309,662 |
Industrial Conglomerates 0.6% |
Walter Industries, Inc. | 6,520 | 709,180 |
Machinery 6.5% |
AGCO Corp.* (a) | 21,030 | 1,102,182 |
Cummins, Inc. | 13,570 | 889,106 |
Flowserve Corp. | 13,420 | 1,834,514 |
Harsco Corp. | 20,090 | 1,093,097 |
Joy Global, Inc. | 16,550 | 1,254,987 |
SPX Corp. | 10,050 | 1,323,887 |
| 7,497,773 |
Road & Rail 0.6% |
Ryder System, Inc. (a) | 11,020 | 759,058 |
Information Technology 21.8% |
Communications Equipment 0.9% |
Juniper Networks, Inc.* | 46,530 | 1,032,035 |
Internet Software & Services 4.8% |
Akamai Technologies, Inc.* (a) | 29,680 | 1,032,567 |
Baidu.com, Inc. (ADR)* (a) | 2,410 | 754,234 |
MercadoLibre, Inc.* (a) | 16,890 | 582,536 |
Omniture, Inc.* (a) | 38,160 | 708,631 |
VeriSign, Inc.* (a) | 39,510 | 1,493,478 |
VistaPrint Ltd.* (a) | 34,560 | 924,826 |
| 5,496,272 |
IT Services 1.6% |
Fiserv, Inc.* | 19,720 | 894,697 |
MasterCard, Inc. "A" (a) | 3,760 | 998,355 |
| 1,893,052 |
Semiconductors & Semiconductor Equipment 9.5% |
Altera Corp. | 77,260 | 1,599,282 |
Atheros Communications* (a) | 35,410 | 1,062,300 |
Broadcom Corp. "A"* | 43,160 | 1,177,836 |
Cavium Networks, Inc.* (a) | 39,450 | 828,450 |
Lam Research Corp.* | 23,800 | 860,370 |
Marvell Technology Group Ltd.* | 98,050 | 1,731,563 |
NVIDIA Corp.* | 74,510 | 1,394,827 |
PMC-Sierra, Inc.* (a) | 128,610 | 983,867 |
Varian Semiconductor Equipment Associates, Inc.* (a) | 40,460 | 1,408,817 |
| 11,047,312 |
| Shares | Value ($) |
| |
Software 5.0% |
Activision, Inc.* | 53,730 | 1,830,581 |
Informatica Corp.* | 29,200 | 439,168 |
McAfee, Inc.* | 46,050 | 1,567,081 |
Salesforce.com, Inc.* | 27,960 | 1,907,711 |
| 5,744,541 |
Materials 7.9% |
Chemicals 3.8% |
Air Products & Chemicals, Inc. | 17,510 | 1,731,039 |
Celanese Corp. "A" | 23,420 | 1,069,357 |
CF Industries Holdings, Inc. | 4,900 | 748,720 |
The Mosaic Co.* | 6,090 | 881,223 |
| 4,430,339 |
Containers & Packaging 1.1% |
Owens-Illinois, Inc.* | 29,140 | 1,214,846 |
Metals & Mining 3.0% |
Agnico-Eagle Mines Ltd. | 13,880 | 1,032,256 |
Cleveland-Cliffs, Inc. | 9,320 | 1,110,851 |
Steel Dynamics, Inc. (a) | 34,720 | 1,356,510 |
| 3,499,617 |
Telecommunication Services 2.6% |
Wireless Telecommunication Services |
Crown Castle International Corp.* | 29,580 | 1,145,633 |
Millicom International Cellular SA | 9,810 | 1,015,335 |
SBA Communications Corp. "A"* | 22,150 | 797,622 |
| 2,958,590 |
Utilities 2.5% |
Electric Utilities 0.9% |
PPL Corp. | 20,070 | 1,049,059 |
Gas Utilities 1.0% |
Questar Corp. | 15,830 | 1,124,563 |
Independent Power Producers & Energy Traders 0.6% |
Dynegy, Inc. "A"* | 89,610 | 766,166 |
Total Common Stocks (Cost $96,067,559) | 114,631,498 |
|
Securities Lending Collateral 22.2% |
Daily Assets Fund Institutional, 2.74% (b) (c) (Cost $25,684,033) | 25,684,033 | 25,684,033 |
|
Cash Equivalents 1.6% |
Cash Management QP Trust, 2.49% (b) (Cost $1,874,603) | 1,874,603 | 1,874,603 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $123,626,195)+ | 122.9 | 142,190,134 |
Other Assets and Liabilities, Net | (22.9) | (26,518,171) |
Net Assets | 100.0 | 115,671,963 |
* Non-income producing security.+ The cost for federal income tax purposes was $123,752,412. At June 30, 2008, net unrealized appreciation for all securities based on tax cost was $18,437,722. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $22,101,275 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,663,553.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at June 30, 2008 amounted to $24,908,200 which is 21.5% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Portfolio is net of borrower rebates.ADR: American Depositary Receipt
REIT: Real Estate Investment Trust
The following is a summary of the inputs used as of June 30, 2008 in valuing the Portfolio's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
Level 1 — Quoted Prices
| $ 142,190,134 |
Level 2 — Other Significant Observable Inputs
| — |
Level 3 — Significant Unobservable Inputs
| — |
Total | $ 142,190,134 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of June 30, 2008 (Unaudited)
|
Assets |
Investments:
Investments in securities, at value (cost $96,067,559) — including $24,908,200 of securities loaned | $ 114,631,498 |
Investment in Daily Assets Fund Institutional (cost $25,684,033)* | 25,684,033 |
Investment in Cash Management QP Trust (cost $1,874,603) | 1,874,603 |
Total investments, at value (cost $123,626,195)
| 142,190,134 |
Cash
| 262,523 |
Receivable for investments sold
| 3,515,374 |
Dividends receivable
| 30,429 |
Interest receivable
| 20,968 |
Receivable for Portfolio shares sold
| 3,409 |
Other assets
| 2,553 |
Total assets
| 146,025,390 |
Liabilities |
Payable upon return of securities loaned
| 25,684,033 |
Payable for investments purchased
| 4,452,267 |
Payable for Portfolio shares redeemed
| 45,310 |
Accrued management fee
| 74,138 |
Other accrued expenses and payables
| 97,679 |
Total liabilities
| 30,353,427 |
Net assets, at value | $ 115,671,963 |
Net Assets Consist of |
Accumulated net investment loss
| (158,824) |
Net unrealized appreciation (depreciation) on investments
| 18,563,939 |
Accumulated net realized gain (loss)
| 3,670,327 |
Paid-in capital
| 93,596,521 |
Net assets, at value | $ 115,671,963 |
Class A Net Asset Value, offering and redemption price per share ($115,652,776 ÷ 12,708,204 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 9.10 |
Class B Net Asset Value, offering and redemption price per share ($19,187 ÷ 2,170 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized)
| $ 8.84 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended June 30, 2008 (Unaudited)
|
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $3,576)
| $ 302,875 |
Interest — Cash Management QP Trust
| 28,857 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 112,521 |
Total Income
| 444,253 |
Expenses:
Management fee
| 453,883 |
Administration fee
| 19,877 |
Services to shareholders
| 149 |
Custodian and accounting fees
| 35,432 |
Distribution and service fees (Class B)
| 3,792 |
Record keeping fees (Class B)
| 1,485 |
Professional fees
| 33,287 |
Trustees' fees and expenses
| 17,139 |
Reports to shareholders and shareholder meeting
| 52,235 |
Other
| 3,384 |
Total expenses before expense reductions
| 620,663 |
Expense reductions
| (21,884) |
Total expenses after expense reductions
| 598,779 |
Net investment income (loss) | (154,526) |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from investments
| 3,807,467 |
Change in net unrealized appreciation (depreciation) on investments
| (15,917,736) |
Net gain (loss) | (12,110,269) |
Net increase (decrease) in net assets resulting from operations | $ (12,264,795) |
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 June 30, 2008 (Unaudited) | Year Ended December 31, 2007 |
Operations:
Net investment income (loss)
| $ (154,526) | $ (528,074) |
Net realized gain (loss)
| 3,807,467 | 23,736,292 |
Change in net unrealized appreciation (depreciation)
| (15,917,736) | 7,277,206 |
Net increase (decrease) in net assets resulting from operations
| (12,264,795) | 30,485,424 |
Distributions to shareholders from:
Net realized gains:
Class A | (22,235,250) | (9,828,253) |
Class B | (923,484) | (2,183,905) |
Total distributions
| (23,158,734) | (12,012,158) |
Portfolio share transactions:
Class A Proceeds from shares sold
| 9,749,884 | 17,681,217 |
Reinvestment of distributions
| 22,235,250 | 9,828,253 |
Cost of shares redeemed
| (10,947,861) | (33,144,770) |
Net increase (decrease) in net assets from Class A share transactions
| 21,037,273 | (5,635,300) |
Class B Proceeds from shares sold
| 232,481 | 706,509 |
Reinvestment of distributions
| 923,484 | 2,183,905 |
Cost of shares redeemed
| (5,162,641) | (24,376,442) |
Net increase (decrease) in net assets from Class B share transactions
| (4,006,676) | (21,486,028) |
Increase (decrease) in net assets | (18,392,932) | (8,648,062) |
Net assets at beginning of period
| 134,064,895 | 142,712,957 |
Net assets at end of period (including accumulated net investment loss of $158,824 and $4,298, respectively)
| $ 115,671,963 | $ 134,064,895 |
Other Information |
Class A Shares outstanding at beginning of period
| 10,261,710 | 10,696,292 |
Shares sold
| 973,660 | 1,504,234 |
Shares issued to shareholders in reinvestment of distributions
| 2,558,717 | 950,508 |
Shares redeemed
| (1,085,883) | (2,889,324) |
Net increase (decrease) in Class A shares
| 2,446,494 | (434,582) |
Shares outstanding at end of period
| 12,708,204 | 10,261,710 |
Class B Shares outstanding at beginning of period
| 432,386 | 2,410,110 |
Shares sold
| 21,793 | 61,336 |
Shares issued to shareholders in reinvestment of distributions
| 109,547 | 215,587 |
Shares redeemed
| (561,556) | (2,254,647) |
Net increase (decrease) in Class B shares
| (430,216) | (1,977,724) |
Shares outstanding at end of period
| 2,170 | 432,386 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.55 | $ 10.92 | $ 11.02 | $ 9.86 | $ 8.88 | $ 5.98 |
Income (loss) from investment operations: Net investment income (loss)b | (.01) | (.04) | (.01) | (.05) | (.07) | (.06) |
Net realized and unrealized gain (loss) | (1.24) | 2.64 | .77 | 1.21 | 1.05 | 2.96 |
Total from investment operations | (1.25) | 2.60 | .76 | 1.16 | .98 | 2.90 |
Less distributions from:
Net realized gains | (2.20) | (.97) | (.86) | — | — | — |
Net asset value, end of period | $ 9.10 | $ 12.55 | $ 10.92 | $ 11.02 | $ 9.86 | $ 8.88 |
Total Return (%)
| (9.16)c** | 25.75 | 6.52 | 11.76 | 11.04 | 48.49 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 116 | 129 | 117 | 122 | 118 | 110 |
Ratio of expenses before expense reductions (%)
| 1.01* | .95 | .97 | 1.11 | 1.19 | 1.18 |
Ratio of expenses after expense reductions (%)
| .97* | .95 | .97 | 1.11 | 1.19 | 1.18 |
Ratio of net investment income (loss) (%)
| (.22)* | (.36) | (.06) | (.56) | (.82) | (.90) |
Portfolio turnover rate (%)
| 75** | 133 | 148 | 151 | 174 | 155 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Class B Years Ended December 31, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 12.26 | $ 10.73 | $ 10.88 | $ 9.78 | $ 8.84 | $ 5.97 |
Income (loss) from investment operations: Net investment income (loss)b | (.03) | (.08) | (.05) | (.09) | (.10) | (.09) |
Net realized and unrealized gain (loss) | (1.19) | 2.58 | .76 | 1.19 | 1.04 | 2.96 |
Total from investment operations | (1.22) | 2.50 | .71 | 1.10 | .94 | 2.87 |
Less distributions from:
Net realized gains | (2.20) | (.97) | (.86) | — | — | — |
Net asset value, end of period | $ 8.84 | $ 12.26 | $ 10.73 | $ 10.88 | $ 9.78 | $ 8.84 |
Total Return (%)
| (8.69)c** | 25.13 | 6.21 | 11.25c | 10.63 | 48.07 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| .02 | 5 | 26 | 27 | 23 | 13 |
Ratio of expenses before expense reductions (%)
| 1.39* | 1.34 | 1.37 | 1.51 | 1.56 | 1.57 |
Ratio of expenses after expense reductions (%)
| 1.35* | 1.34 | 1.37 | 1.48 | 1.56 | 1.57 |
Ratio of net investment income (loss) (%)
| (.60)* | (.75) | (.46) | (.93) | (1.19) | (1.29) |
Portfolio turnover rate (%)
| 75** | 133 | 148 | 151 | 174 | 155 |
a For the six months ended June 30, 2008 (Unaudited).
b Based on an average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
|
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
DWS Variable Series II (the "Trust") 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 Trust offers twenty-one portfolios (hereinafter referred to individually as "Portfolio" or collectively as "Portfolios"), including three portfolios that invest primarily in existing DWS Portfolios ("Underlying Portfolios"). Each Portfolio (except DWS Technology VIP) is classified as a diversified open-end management investment company. DWS Technology VIP is classified as a non-diversified, open-end management investment company. Each Underlying Portfolio's accounting policies and investment holdings are outlined in the Underlying Portfolio's financials statements and are available upon request.
Multiple Classes of Shares of Beneficial Interest. The Trust offers two classes of shares (Class A shares and Class B shares), except DWS Moderate Allocation VIP, DWS Growth Allocation VIP and DWS Conservative Allocation VIP, which offer Class B shares only. Sales of Class B shares are subject to record keeping fees up to 0.15% and Rule 12b-1 fees under the 1940 Act equal to an annual rate of 0.25%, of the average daily net assets of the Class B shares of the applicable Portfolio. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain portfolio-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable 12b-1 fee and record keeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.
The Trust'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 Trust in the preparation of its financial statements.
Security Valuation. DWS Money Market VIP values all securities utilizing the amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act and certain conditions therein. Under this method, which does not take into account unrealized capital gains or losses on securities, an instrument is initially valued at its cost and thereafter assumes a constant accretion/amortization rate to maturity of any discount or premium.
Investments in securities 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 Portfolios. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, as applicable, 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.
Investments in the Underlying Portfolios are valued at the net asset value per share of each class of the Underlying Portfolios as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
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. Certain Portfolios may use a fair valuation model to value international equity securities in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange.
The Portfolios adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), which governs the application of generally accepted accounting principles that require fair value measurements of the Portfolios' assets and liabilities. Fair value is an estimate of the price the Portfolios would receive upon selling a security in a timely transaction to an independent buyer in the principal or most advantageous market of the security. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Various inputs are used in determining the value of the Portfolios' investments. These inputs are summarized in the three broad levels as follows:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 — significant unobservable inputs (including the Portfolios' own assumptions in determining the fair value of investments)
For Level 1 inputs, the Portfolios use unadjusted quoted prices in active markets for assets or liabilities with sufficient frequency and volume to provide pricing information as the most reliable evidence of fair value. The Portfolios' Level 2 valuation techniques include inputs other than quoted prices within Level 1 that are observable for an asset or liability, either directly or indirectly. Level 2 observable inputs may include quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active in which there are few transactions, the prices are not current, or price quotations vary substantially over time or among market participants. Inputs that are observable for the asset or liability in Level 2 include such factors as interest rates, yield curves, prepayment speeds, credit risk, and default rates for similar liabilities. For Level 3 valuation techniques, the Portfolios use unobservable inputs that reflect assumptions market participants would be expected to use in pricing the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available and are developed based on the best information available under the circumstances. In developing unobservable inputs, market participant assumptions are used if they are reasonably available without undue cost and effort.
The Portfolios may record changes to valuations based on the amount that might reasonably be expected to receive for a security upon its current sale consistent with the fair value measurement objective. Each determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to the type of the security, the existence of any contractual restrictions on the security's disposition, the price and extent of public trading in similar securities of the issue or of comparable companies, quotations or evaluated prices from broker-dealers and/or pricing services, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company's financial statements, an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold, and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value determined upon sale of those investments.
New Accounting Pronouncement. In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 161 ("FAS 161") Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. FAS 161 requires enhanced disclosure about an entity's derivative and hedging activities. FAS 161 is effective for fiscal years beginning after November 15, 2008. Management is currently evaluating the impact the adoption of FAS 161 will have on the Portfolios' financial statement disclosures.
Foreign Currency Translations. The books and records of the Trust 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.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with certain banks and broker/dealers whereby each Portfolio, through its custodian or sub-custodian bank, receives delivery of the underlying securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the value is equal to at least the principal amount of the repurchase price plus accrued interest. The custodian bank holds the collateral in a separate account until the agreement matures. If the value of the securities falls below the principal amount of the repurchase agreement plus accrued interest, the financial institution deposits additional collateral by the following business day. If the financial institution either fails to deposit the required additional collateral or fails to repurchase the securities as agreed, the Portfolio has the right to sell the securities and recover any resulting loss from the financial institution. If the financial institution enters into bankruptcy, the Portfolio's claim on the collateral may be subject to legal proceedings.
Securities Lending. Each Portfolio, except DWS Money Market VIP, DWS Moderate Allocation VIP, DWS Growth Allocation VIP and DWS Conservative Allocation VIP, may lend securities to financial institutions. The Portfolio retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their market value. The Portfolio requires the borrowers of the securities to maintain collateral with the Portfolio consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The Portfolio 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 Portfolio 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 a lending agent. Either the Portfolio or the borrower may terminate the loan. The Portfolio 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.
Interest Rate Swap Contracts. DWS Balanced VIP, DWS Government & Agency Securities VIP and DWS Strategic Income VIP may enter into interest rate swap transactions to reduce the interest rate risk inherent in the Portfolio's underlying investments. The use of interest rate swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an interest rate swap, the Portfolio would agree to pay to the other party to the interest rate swap (which is known as the "counterparty") a fixed rate payment in exchange for the counterparty agreeing to pay to the Portfolio a variable rate payment, or the Portfolio would agree to receive from the counterparty a fixed rate payment in exchange for the counterparty agreeing to receive from the Portfolio a variable rate payment. The payment obligations would be based on the notional amount of the swap. Certain risks may arise when entering into swap transactions including counterparty default, liquidity or unfavorable changes in interest rates. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations. The value of the swap is adjusted daily based upon a price supplied by the counterparty and the change in value is recorded as unrealized appreciation or depreciation.
Credit Default Swap Contracts. A credit default swap is a contract between a buyer and a seller of protection against a pre-defined credit event. DWS Balanced VIP, DWS High Income VIP and DWS Strategic Income VIP may buy or sell credit default swap contracts to seek to increase the Portfolio's income, to add leverage to the Portfolio, or to hedge the risk of default on portfolio securities. As a seller in the credit default swap contract, the Portfolio would be required to pay the par (or other agreed-upon) value of the referenced debt obligation to the counterparty in the event of a default by a third party, such as a US or foreign corporate issuer, on the debt obligation, which would likely result in a loss to the Portfolio. In return, the Portfolio would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the Portfolio would keep the stream of payments and would have no payment obligations. The Portfolio may also buy credit default swap contracts in order to hedge against the risk of default of debt securities, in which case the Portfolio would function as the counterparty referenced above. This would involve the risk that the contract may expire worthless. It would also involve credit risk — that the seller may fail to satisfy its payment obligations to the Portfolio in the event of a default. When the Portfolio sells a credit default swap contract it will "cover" its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the underlying debt obligations for all outstanding credit default swap contracts sold by the Portfolio.
Credit default swap contracts are marked to market daily based upon quotations from the counterparty and the change in value, if any, is recorded daily as unrealized gain or loss. An upfront payment made by the Portfolio is recorded as an asset on the statement of assets and liabilities. An upfront payment received by the Portfolio is recorded as a liability on the statement of assets and liabilities. Under the terms of the credit default swap contracts, the Portfolio receives or makes payments semi-annually based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss on the statement of operations. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
Options. An option contract is a contract in which the writer of the option grants the buyer of the option the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. Certain options, including options on indices, will require cash settlement by the Portfolio if the option is exercised. Each Portfolio, except for DWS Money Market VIP, may enter into option contracts in order to hedge against potential adverse price movements in the value of portfolio assets; as a temporary substitute for selling selected investments; to lock in the purchase price of a security or currency which it expects to purchase in the near future; as a temporary substitute for purchasing selected investments; and to enhance potential gain.
The liability representing the Portfolio's obligation under an exchange traded written option or investment in a purchased option is valued at the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices or at the most recent asked price (bid for purchased options) if no bid and asked price are available. Over-the-counter written or purchased options are valued using dealer-supplied quotations. Gain or loss is recognized when the option contract expires or is closed.
If the Portfolio writes a covered call option, the Portfolio foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Portfolio writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The Portfolio's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Portfolio's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.
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). Each Portfolio, except for DWS Money Market VIP, 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. DWS Balanced VIP and DWS Strategic Income VIP may enter into futures contracts as part of each Portfolio's global tactical asset allocation strategy.
Upon entering into a futures contract, the Portfolio 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 Portfolio 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 Portfolio. When entering into a closing transaction, the Portfolio 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 Portfolio'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 Portfolio 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. Each Portfolio, except for DWS Money Market VIP, may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities. DWS Balanced VIP and DWS Strategic Income VIP may enter into forward currency contracts as part of each Portfolio's global tactical asset allocation strategy.
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 Portfolio gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
Loan Participations and Assignments. DWS Balanced VIP, DWS High Income VIP and DWS Strategic Income VIP may invest in Loan Participations and Assignments. Loan Participations and Assignments are portions of loans originated by banks and sold in pieces to investors. These US dollar-denominated fixed and floating rate loans ("Loans") in which the Portfolio invests, are arranged between the borrower and one or more financial institutions ("Lenders"). These Loans may take the form of Senior Loans, which are corporate obligations often issued in connection with recapitalizations, acquisitions, leveraged buy-outs and refinancings, and Sovereign Loans, which are debt instruments between a foreign sovereign entity and one or more financial institutions. The Portfolio invests in such Loans in the form of participations in Loans ("Participations") or assignments of all or a portion of Loans from third parties ("Assignments"). Participations typically result in the Portfolio having a contractual relationship only with the Lender, not with the borrower. The Portfolio has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Portfolio generally has no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, or any rights of set-off against the borrower, and the Portfolio will not benefit directly from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Portfolio assumes the credit risk of both the borrower and the Lender that is selling the Participation. Assignments typically result in the Portfolio having a direct contractual relationship with the borrower, and the Portfolio may enforce compliance by the borrower with the terms of the loan agreement. All Loan Participations and Assignments involve interest rate risk, liquidity risk and credit risk, including the potential default or insolvency of the borrower.
Mortgage Dollar Rolls. DWS Core Fixed Income VIP, DWS Government & Agency Securities VIP and DWS Balanced VIP may enter into mortgage dollar rolls in which the Portfolio sells to a bank or broker/dealer (the "counterparty") mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities on a fixed date. The counterparty receives all principal and interest payments, including prepayments, made on the security while it is the holder. The Portfolio 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 such securities may change adversely before the Portfolio is able to repurchase them. There can be no assurance that the Portfolio's use of the cash that it receives from a mortgage dollar roll will provide a return that exceeds its costs.
When-Issued/Delayed Delivery Securities. DWS Balanced VIP, DWS Core Fixed Income VIP, DWS Government & Agency Securities VIP, DWS High Income VIP and DWS Strategic Income VIP may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Portfolios enter 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 Portfolios until payment takes place. At the time the Portfolios enter 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.
Taxes. Each Portfolio'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.
Additionally, based on the Portfolios' understanding of the tax rules and rates related to income, gains and transactions for the foreign jurisdictions in which they invest, the Portfolios will provide for foreign taxes, and where appropriate, deferred foreign taxes.
At December 31, 2007, the following Portfolios had an approximate net tax basis capital loss carryforward which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until the following expiration dates, whichever occurs first:
Portfolio | Capital Loss Carryforward ($) | Expiration
Date |
DWS Balanced VIP*
| 1,788,000 | 12/31/2009 |
| 1,388,000 | 12/31/2011 |
DWS Core Fixed Income VIP
| 3,813,000 | 12/31/2014 |
| 50,000 | 12/31/2015 |
DWS Government & Agency Securities VIP
| 14,000 | 12/31/2013 |
| 1,337,000 | 12/31/2014 |
| 924,000 | 12/31/2015 |
DWS High Income VIP
| 16,114,000 | 12/31/2008 |
| 22,935,000 | 12/31/2009 |
| 55,108,000 | 12/31/2010 |
| 13,877,000 | 12/31/2011 |
| 3,844,000 | 12/31/2014 |
| 858,000 | 12/31/2015 |
DWS Mid Cap Growth VIP
| 20,155,000 | 12/31/2011 |
DWS Small Cap Growth VIP
| 11,300,000 | 12/31/2009 |
| 72,000,000 | 12/31/2010 |
| 4,100,000 | 12/31/2011 |
DWS Technology VIP
| 73,056,000 | 12/31/2009 |
| 93,499,000 | 12/31/2010 |
| 71,517,000 | 12/31/2011 |
* Certain of these losses may be subject to limitations under sections 381-384 of the Internal Revenue Code.The Portfolios have reviewed the tax positions for the open tax years as of December 31, 2007 and have determined that no provision for income tax is required in the Portfolios' financial statements. The Portfolios' federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions of net investment income, if any, for each Portfolio, except DWS Money Market VIP, are made annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to each Portfolio if not distributed and, therefore, will be distributed to shareholders at least annually. Net investment income of DWS Money Market VIP is declared as a daily dividend and is distributed to shareholders monthly. DWS Money Market VIP may take into account capital gains and losses in its daily dividend declarations. DWS Money Market VIP may also make additional distributions for tax purposes if necessary.
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 net operating losses, investments in foreign denominated investments, investments in forward foreign currency exchange contracts, investments in futures, income received from Passive Foreign Investment Companies and Real Estate Investment Trusts 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, each Portfolio may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Portfolio.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses arising in connection with a specific Portfolio are allocated to that Portfolio. Trust expenses are allocated between each Portfolio in proportion to its relative net assets.
Contingencies. In the normal course of business, each Portfolio may enter into contracts with service providers that contain general indemnification clauses. The Portfolios' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Portfolios that have not yet been made. However, based on experience, the Portfolios expect the risk of loss to be remote.
Real Estate Investment Trusts. DWS Dreman Small Mid Cap VIP and DWS Small Cap Growth VIP periodically recharacterize distributions received from a Real Estate Investment Trust ("REIT") investment based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from a REIT, the recharacterization will be estimated and a recharacterization will be made in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains. The Portfolios distinguish between dividends on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a tax return of capital.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Portfolio is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes for each Portfolio, with the exception of securities in default of principal.. Distributions of income and capital gains from the Underlying Portfolios are recorded on the ex-dividend date.
B. Purchases and Sales of Securities
During the six months ended June 30, 2008, purchases and sales of investment transactions (excluding short-term investments) were as follows:
Portfolio | Purchases ($) | Sales ($) |
DWS Balanced VIP
excluding US Treasury Obligations and mortgage dollar roll transactions | 482,852,310 | 518,892,158 |
US Treasury Obligations | 129,144,512 | 147,027,202 |
mortgage dollar roll transactions | 32,010,000 | 24,043,516 |
DWS Blue Chip VIP
| 137,792,804 | 175,500,715 |
DWS Conservative Allocation VIP
| 4,248,943 | 2,889,336 |
DWS Core Fixed Income VIP
excluding US Treasury Obligations | 69,282,526 | 66,122,780 |
US Treasury Obligations | 263,937,362 | 282,659,991 |
DWS Davis Venture Value VIP
| 25,003,109 | 74,566,756 |
DWS Dreman High Return Equity VIP
| 97,230,070 | 194,251,142 |
DWS Dreman Small Mid Cap Value VIP
| 89,726,731 | 118,691,858 |
DWS Global Thematic VIP
| 137,741,267 | 140,372,880 |
DWS Government & Agency Securities VIP
excluding US Treasury Obligations and mortgage dollar roll transactions | 545,627,694 | 493,140,327 |
US Treasury Obligations | 49,272,668 | 37,713,140 |
mortgage dollar roll transactions | 359,207,292 | 396,772,858 |
DWS Growth Allocation VIP
| 7,870,117 | 5,110,882 |
DWS High Income VIP
| 63,238,748 | 82,618,861 |
DWS International Select Equity VIP
| 137,955,901 | 152,864,216 |
DWS Janus Growth & Income VIP
excluding US Treasury Obligations | 32,973,117 | 49,270,517 |
US Treasury Obligations | 2,328,908 | — |
DWS Large Cap Value VIP
| 83,952,028 | 91,998,532 |
DWS Mid Cap Growth VIP
| 14,197,301 | 21,930,354 |
DWS Moderate Allocation VIP
| 13,768,282 | 7,380,676 |
DWS Small Cap Growth VIP
| 48,390,263 | 64,878,792 |
DWS Strategic Income VIP
excluding US Treasury Securities | 45,367,089 | 36,118,859 |
US Treasury Securities | 44,821,533 | 48,627,745 |
DWS Technology VIP
| 56,864,675 | 74,228,916 |
DWS Turner Mid Cap Growth VIP
| 88,379,252 | 96,097,124 |
For the six months ended June 30, 2008, transactions for written options on securities were as follows for DWS Technology VIP:
| Number of Contracts | Premium |
Outstanding, beginning of period
| — | $ — |
Options written
| 1,271 | 139,325 |
Options closed
| — | — |
Options expired
| 1,271 | 139,325 |
Outstanding, end of period
| — | $ — |
C. Related Parties
Management Agreement. Under the Amended and Restated 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 each Portfolio 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 each Portfolio or delegates such responsibility to each Portfolio's subadvisor.
Prior to May 1, 2008, in addition to portfolio management services, the Advisor provided certain administrative services in accordance with the Investment Management Agreement. For the period from January 1, 2008 through April 30, 2008, the fees pursuant to the Investment Management Agreement were equivalent to the annual rates shown below of each Portfolio's average daily net assets, computed and accrued daily and payable monthly:
Portfolio | Annual Management Fee Rate |
DWS Balanced VIP
$0-$250 million | .470% |
next $750 million | .445% |
over $1 billion | .410% |
DWS Blue Chip VIP
$0-$250 million | .650% |
next $750 million | .620% |
next $1.5 billion | .600% |
next $2.5 billion | .580% |
next $2.5 billion | .550% |
next $2.5 billion | .530% |
next $2.5 billion | .510% |
over $12.5 billion | .490% |
DWS Conservative Allocation VIP
$0-$500 million | .150% |
next $500 million | .140% |
next $500 million | .130% |
next $1 billion | .120% |
over $2.5 billion | .110% |
DWS Core Fixed Income VIP
$0-$250 million | .600% |
next $750 million | .570% |
next $1.5 billion | .550% |
next $2.5 billion | .530% |
next $2.5 billion | .500% |
next $2.5 billion | .480% |
next $2.5 billion | .460% |
over $12.5 billion | .440% |
DWS Davis Venture Value VIP
$0-$250 million | .950% |
next $250 million | .925% |
next $500 million | .900% |
next $1.5 billion | .875% |
over $2.5 billion | .850% |
DWS Dreman High Return Equity VIP
$0-$250 million | .750% |
next $750 million | .720% |
next $1.5 billion | .700% |
next $2.5 billion | .680% |
next $2.5 billion | .650% |
next $2.5 billion | .640% |
next $2.5 billion | .630% |
over $12.5 billion | .620% |
DWS Dreman Small Mid Cap Value VIP
$0-$250 million | .750% |
next $750 million | .720% |
next $1.5 billion | .700% |
next $2.5 billion | .680% |
next $2.5 billion | .650% |
next $2.5 billion | .640% |
next $2.5 billion | .630% |
over $12.5 billion | .620% |
DWS Global Thematic VIP
$0-$250 million | 1.000% |
next $500 million | .950% |
next $750 million | .900% |
next $1.5 billion | .850% |
over $3 billion | .800% |
DWS Government & Agency Securities VIP
$0-$250 million | .550% |
next $750 million | .530% |
next $1.5 billion | .510% |
next $2.5 billion | .500% |
next $2.5 billion | .480% |
next $2.5 billion | .460% |
next $2.5 billion | .440% |
over $12.5 billion | .420% |
DWS Growth Allocation VIP
$0-$500 million | .150% |
next $500 million | .140% |
next $500 million | .130% |
next $1 billion | .120% |
over $2.5 billion | .110% |
DWS High Income VIP
$0-$250 million | .600% |
next $750 million | .570% |
next $1.5 billion | .550% |
next $2.5 billion | .530% |
next $2.5 billion | .500% |
next $2.5 billion | .480% |
next $2.5 billion | .460% |
over $12.5 billion | .440% |
DWS International Select Equity VIP
$0-$1.5 billion | .750% |
next $1.75 billion | .735% |
next $1.75 billion | .720% |
over $5 billion | .705% |
DWS Janus Growth & Income VIP
$0-$250 million | .750% |
next $750 million | .725% |
next $1.5 billion | .700% |
over $2.5 billion | .675% |
DWS Mid Cap Growth VIP
$0-$250 million | .750% |
next $750 million | .720% |
next $1.5 billion | .700% |
next $2.5 billion | .680% |
next $2.5 billion | .650% |
next $2.5 billion | .640% |
next $2.5 billion | .630% |
over $12.5 billion | .620% |
DWS Moderate Allocation VIP
$0-$500 million | .150% |
next $500 million | .140% |
next $500 million | .130% |
next $1 billion | .120% |
over $2.5 billion | .110% |
DWS Money Market VIP
$0-$500 million | .385% |
next $500 million | .370% |
next $1.0 billion | .355% |
over $2.0 billion | .340% |
DWS Small Cap Growth VIP
$0-$250 million | .650% |
next $750 million | .625% |
over $1 billion | .600% |
DWS Strategic Income VIP
$0-$250 million | .650% |
next $750 million | .620% |
next $1.5 billion | .600% |
next $2.5 billion | .580% |
next $2.5 billion | .550% |
next $2.5 billion | .530% |
next $2.5 billion | .510% |
over $12.5 billion | .490% |
DWS Technology VIP
$0-$250 million | .750% |
next $750 million | .720% |
next $1.5 billion | .700% |
next $2.5 billion | .680% |
next $2.5 billion | .650% |
next $2.5 billion | .640% |
next $2.5 billion | .630% |
over $12.5 billion | .620% |
DWS Turner Mid Cap Growth VIP
$0-$250 million | .800% |
next $250 million | .785% |
next $500 million | .770% |
over $1 billion | .755% |
Effective May 1, 2008, under the Amended and Restated Investment Management Agreement with the Advisor, the fees were equivalent to the annual rates shown below of each Portfolio's average daily net assets, computed and accrued daily and payable monthly:
Portfolio | Annual Management Fee Rate |
DWS Balanced VIP
$0-$250 million | .370% |
next $750 million | .345% |
over $1 billion | .310% |
DWS Blue Chip VIP
$0-$250 million | .550% |
next $750 million | .520% |
next $1.5 billion | .500% |
next $2.5 billion | .480% |
next $2.5 billion | .450% |
next $2.5 billion | .430% |
next $2.5 billion | .410% |
over $12.5 billion | .390% |
DWS Conservative Allocation VIP
$0-$500 million | .065% |
next $500 million | .055% |
next $500 million | .045% |
next $1 billion | .035% |
over $2.5 billion | .025% |
DWS Core Fixed Income VIP
$0-$250 million | .500% |
next $750 million | .470% |
next $1.5 billion | .450% |
next $2.5 billion | .430% |
next $2.5 billion | .400% |
next $2.5 billion | .380% |
next $2.5 billion | .360% |
over $12.5 billion | .340% |
DWS Davis Venture Value VIP
$0-$250 million | .865% |
next $250 million | .840% |
next $500 million | .815% |
next $1.5 billion | .790% |
over $2.5 billion | .765% |
DWS Dreman High Return Equity VIP
$0-$250 million | .665% |
next $750 million | .635% |
next $1.5 billion | .615% |
next $2.5 billion | .595% |
next $2.5 billion | .565% |
next $2.5 billion | .555% |
next $2.5 billion | .545% |
over $12.5 billion | .535% |
DWS Dreman Small Mid Cap Value VIP
$0-$250 million | .650% |
next $750 million | .620% |
next $1.5 billion | .600% |
next $2.5 billion | .580% |
next $2.5 billion | .550% |
next $2.5 billion | .540% |
next $2.5 billion | .530% |
over $12.5 billion | .520% |
DWS Global Thematic VIP
$0-$250 million | .915% |
next $500 million | .865% |
next $750 million | .815% |
next $1.5 billion | .765% |
over $3 billion | .715% |
DWS Government & Agency Securities VIP
$0-$250 million | .450% |
next $750 million | .430% |
next $1.5 billion | .410% |
next $2.5 billion | .400% |
next $2.5 billion | .380% |
next $2.5 billion | .360% |
next $2.5 billion | .340% |
over $12.5 billion | .320% |
DWS Growth Allocation VIP
$0-$500 million | .065% |
next $500 million | .055% |
next $500 million | .045% |
next $1 billion | .035% |
over $2.5 billion | .025% |
DWS High Income VIP
$0-$250 million | .500% |
next $750 million | .470% |
next $1.5 billion | .450% |
next $2.5 billion | .430% |
next $2.5 billion | .400% |
next $2.5 billion | .380% |
next $2.5 billion | .360% |
over $12.5 billion | .340% |
DWS International Select Equity VIP
$0-$1.5 billion | .650% |
next $1.75 billion | .635% |
next $1.75 billion | .620% |
over $5 billion | .605% |
DWS Janus Growth & Income VIP
$0-$250 million | .665% |
next $750 million | .640% |
next $1.5 billion | .615% |
over $2.5 billion | .590% |
DWS Mid Cap Growth VIP
$0-$250 million | .665% |
next $750 million | .635% |
next $1.5 billion | .615% |
next $2.5 billion | .595% |
next $2.5 billion | .565% |
next $2.5 billion | .555% |
next $2.5 billion | .545% |
over $12.5 billion | .535% |
DWS Moderate Allocation VIP
$0-$500 million | .065% |
next $500 million | .055% |
next $500 million | .045% |
next $1 billion | .035% |
over $2.5 billion | .025% |
DWS Money Market VIP
$0-$500 million | .285% |
next $500 million | .270% |
next $1.0 billion | .255% |
over $2.0 billion | .240% |
DWS Small Cap Growth VIP
$0-$250 million | .550% |
next $750 million | .525% |
over $1 billion | .500% |
DWS Strategic Income VIP
$0-$250 million | .550% |
next $750 million | .520% |
next $1.5 billion | .500% |
next $2.5 billion | .480% |
next $2.5 billion | .450% |
next $2.5 billion | .430% |
next $2.5 billion | .410% |
over $12.5 billion | .390% |
DWS Technology VIP
$0-$250 million | .665% |
next $750 million | .635% |
next $1.5 billion | .615% |
next $2.5 billion | .595% |
next $2.5 billion | .565% |
next $2.5 billion | .555% |
next $2.5 billion | .545% |
over $12.5 billion | .535% |
DWS Turner Mid Cap Growth VIP
$0-$250 million | .715% |
next $250 million | .700% |
next $500 million | .685% |
over $1 billion | .670% |
The fee pursuant to the Investment Management Agreement was equivalent to the annual rates shown below of DWS Large Cap Value VIP's average daily net assets, accrued daily and payable monthly:
| Annual Management Fee Rate |
$0-$250 million | .650% |
next $750 million | .625% |
next $1.5 billion | .600% |
next $2.5 billion | .575% |
next $2.5 billion | .550% |
next $2.5 billion | .525% |
next $2.5 billion | .500% |
over $12.5 billion | .475% |
Aberdeen Asset Management Inc. serves as subadvisor to DWS Core Fixed Income VIP and is paid by the Advisor for its services.
Dreman Value Management, L.L.C. serves as subadvisor to DWS Dreman High Return Equity VIP and DWS Dreman Small Mid Cap Value VIP and is paid by the Advisor for its services.
Janus Capital Management, LLC serves as subadvisor to DWS Janus Growth & Income VIP and is paid by the Advisor for its services.
Turner Investment Partners, Inc. serves as subadvisor to DWS Turner Mid Cap Growth VIP and is paid by the Advisor for its services.
Davis Selected Advisers, L.P., serves as subadvisor to DWS Davis Venture Value VIP and is paid by the Advisor for its services.
Deutsche Asset Management International GmbH ("DeAMi") serves as subadvisor to DWS Large Cap Value VIP and is paid by the Advisor for its services.
For the six months ended June 30, 2008, the Advisor has agreed to waive 0.05% of the monthly management fee based on average daily net assets of Class B of DWS Conservative Allocation VIP, DWS Growth Allocation VIP and DWS Moderate Allocation VIP.
For the period from January 1, 2008 through April 30, 2008, the Advisor, the underwriter and accounting agent contractually agreed to waive all or a portion of their respective fees and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) as follows:
Portfolio | Annual Rate |
DWS Balanced VIP
Class A | .51% |
Class B | .89% |
DWS Davis Venture Value VIP
Class A | .86% |
Class B | 1.26% |
DWS Government & Agency Securities VIP
Class A | .63% |
DWS Small Cap Growth VIP
Class A | .72% |
Class B | 1.09% |
For the period from January 1, 2008 through September 30, 2008, the Advisor, the underwriter and accounting agent have contractually agreed to waive all or a portion of their respective fees and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) as follows:
Portfolio | Annual Rate |
DWS Conservative Allocation VIP
Class B | .70% |
DWS Core Fixed Income VIP
Class A | .70% |
DWS Government & Agency Securities VIP
| |
Class B | 1.04% |
DWS Growth Allocation VIP
Class B | .70% |
DWS Mid Cap Growth VIP
Class B | 1.34% |
DWS Moderate Allocation VIP
Class B | .70% |
DWS Strategic Income VIP
Class A | .83% |
Class B | 1.23% |
DWS Turner Mid Cap Growth VIP
Class A | .94% |
Class B | 1.34% |
For the period from January 1, 2008 through April 30, 2009, the Advisor, the underwriter and accounting agent have contractually agreed to waive all or a portion of their respective fees and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) as follows:
Portfolio | Annual Rate |
DWS Global Thematic VIP
Class A | 1.05% |
Class B | 1.45% |
DWS Mid Cap Growth VIP
Class A | .94% |
For the period from January 1, 2008 through April 30, 2010, the Advisor, the underwriter and accounting agent contractually agreed to waive all or a portion of their respective fees and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expenses) as follows:
Portfolio | Annual Rate |
DWS Dreman High Return Equity VIP
Class A | .78% |
Class B | 1.11% |
DWS Money Market VIP
Class A | .44% |
Class B | .79% |
Effective May 1, 2008 through September 30, 2008, the Advisor, the underwriter and accounting agent have contractually agreed to waive all or a portion of their respective fees and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) as follows:
Portfolio | Annual Rate |
DWS Davis Venture Value VIP
Class B | 1.29% |
DWS Government & Agency Securities VIP
| |
Class A | .64% |
Effective May 1, 2008 through April 30, 2009, the Advisor, the underwriter and accounting agent have contractually agreed to waive all or a portion of their respective fees and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) as follows:
Portfolio | Annual Rate |
DWS Davis Venture Value VIP
Class A | .89% |
Effective April 29, 2008 through September 30, 2008, the Advisor and Administrator have voluntarily agreed to waive their fees or and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and organizational and offering expenses) as follows:
Portfolio | Annual Rate |
DWS Janus Growth & Income VIP
Class B | 1.15% |
Effective May 1, 2008 through June 30, 2008, the Advisor and Administrator have voluntarily agreed to waive their fees or and reimburse or pay certain operating expenses to the extent necessary to maintain the operating expenses of each class for the period (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and organizational and offering expenses) as follows:
Portfolio | Annual Rate |
DWS Small Cap Growth VIP
Class B | 1.09% |
Accordingly, for the six months ended June 30, 2008, the total management fees charged, management fees waived and effective management fees are as follows:
Portfolio | Total Aggregated ($) | Waived ($) | Annualized Effective Rate |
DWS Balanced VIP
| 1,035,685 | 48,196 | .41% |
DWS Blue Chip VIP
| 662,703 | — | .62% |
DWS Conservative Allocation VIP
| 10,590 | 8,276 | .03% |
DWS Core Fixed Income VIP
| 701,049 | — | .57% |
DWS Davis Venture Value VIP
| 1,312,440 | 266,455 | .73% |
DWS Dreman High Return Equity VIP
| 2,515,287 | — | .70% |
DWS Dreman Small Mid Cap Value VIP
| 1,568,753 | — | .70% |
DWS Global Thematic VIP
| 706,967 | 261,047 | .61% |
DWS Government & Agency Securities VIP
| 561,015 | 6,769 | .51% |
DWS Growth Allocation VIP
| 18,330 | 7,546 | .07% |
DWS High Income VIP
| 682,533 | — | .57% |
DWS International Select Equity VIP
| 794,872 | — | .72% |
DWS Janus Growth & Income VIP
| 555,003 | — | .72% |
DWS Large Cap Value VIP
| 699,216 | — | .65% |
DWS Mid Cap Growth VIP
| 157,167 | 40,788 | .53% |
DWS Moderate Allocation VIP
| 21,080 | 8,629 | .07% |
DWS Money Market VIP
| 667,344 | 839 | .35% |
DWS Small Cap Growth VIP
| 458,699 | 28,876 | .58% |
DWS Strategic Income VIP
| 332,483 | 3,428 | .61% |
DWS Technology VIP
| 462,607 | — | .72% |
DWS Turner Mid Cap Growth VIP
| 453,883 | 15,827 | .74% |
In addition, for the six months ended June 30, 2008, the Advisor waived record keeping expenses of Class B shares of each Portfolio as follows:
Portfolio | Waived ($) |
DWS Conservative Allocation VIP
| 9,335 |
DWS Dreman High Return Equity VIP
| 2,605 |
DWS Growth Allocation VIP
| 16,459 |
DWS Moderate Allocation VIP
| 18,733 |
DWS Money Market VIP
| 74 |
DWS Small Cap Growth VIP
| 645 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to DWS Large Cap Value VIP. For all services provided under the Administrative Services Agreement, the Portfolio pays DIMA an annual fee ("Administration Fee") of 0.10% of the Portfolio's average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2008, DIMA received an Administration Fee of $107,572, of which $17,599 is unpaid.
Effective May 1, 2008, the Portfolios noted below entered into an Administrative Services Agreement with DIMA, pursuant to which the Advisor provides most administrative services to the Portfolio. For all services provided under the Administrative Services Agreement, the Portfolios pay DIMA an annual fee ("Administration Fee") of 0.10% of the Portfolios' average daily net assets, computed and accrued daily and payable monthly. For the period from May 1, 2008 through June 30, 2008, the Administration Fee was as follows:
Portfolio | Total Aggregated ($) | Unpaid at June 30, 2008 ($) |
DWS Balanced VIP
| 79,656 | 38,567 |
DWS Blue Chip VIP
| 33,626 | 16,135 |
DWS Conservative Allocation VIP
| 2,926 | 1,391 |
DWS Core Fixed Income VIP
| 38,082 | 18,425 |
DWS Davis Venture Value VIP
| 45,241 | 21,632 |
DWS Dreman High Return Equity VIP
| 111,593 | 52,544 |
DWS Dreman Small Mid Cap Value VIP
| 76,095 | 37,019 |
DWS Global Thematic VIP
| 24,879 | 11,867 |
DWS Government & Agency Securities VIP
| 35,710 | 17,206 |
DWS Growth Allocation VIP
| 5,069 | 2,443 |
DWS High Income VIP
| 39,956 | 19,289 |
DWS International Select Equity VIP
| 36,420 | 17,630 |
DWS Janus Growth & Income VIP
| 25,424 | 12,180 |
DWS Mid Cap Growth VIP
| 7,143 | 3,474 |
DWS Moderate Allocation VIP
| 5,657 | 2,777 |
DWS Money Market VIP
| 60,204 | 29,600 |
DWS Small Cap Growth VIP
| 24,388 | 11,797 |
DWS Strategic Income VIP
| 17,546 | 8,501 |
DWS Technology VIP
| 21,621 | 10,429 |
DWS Turner Mid Cap Growth VIP
| 19,877 | 9,804 |
Service Provider Fees. DWS Investments Fund Accounting Corporation ("DIFA"), a subsidiary of the Advisor, is responsible for determining the daily net asset value per share and maintaining the portfolio and general accounting records of each Portfolio. DIFA receives no fee for its services to each Portfolio, other than the Portfolios noted below. In turn, DIFA has delegated certain fund accounting functions to a third-party service provider. Effective May 1, 2008, these fees are now paid under the Administrative Services Agreement. For the period from January 1, 2008 through April 30, 2008, DIFA received a fee for its services as follows:
Portfolio | Total Aggregated ($) |
DWS Conservative Allocation VIP
| 13,409 |
DWS Davis Venture Value VIP
| 35,807 |
DWS Dreman High Return Equity VIP
| 41,598 |
DWS Growth Allocation VIP
| 13,885 |
DWS Global Thematic VIP
| 69,798 |
DWS Janus Growth & Income VIP
| 26,015 |
DWS Mid Cap Growth VIP
| 19,890 |
DWS Moderate Allocation VIP
| 13,489 |
DWS Technology VIP
| 28,837 |
DWS Turner Mid Cap Growth VIP
| 25,773 |
DWS Investments Service Company ("DISC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for each Portfolio. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from each Portfolio. For the six months ended June 30, 2008, the amounts charged to each Portfolio by DISC were as follows:
Portfolio | Total Aggregated ($) | Waived ($) | Unpaid at June 30, 2008 ($) |
DWS Balanced VIP Class A
| 236 | 236 | — |
DWS Balanced VIP Class B
| 66 | — | 66 |
DWS Blue Chip VIP Class A
| 207 | — | 146 |
DWS Blue Chip VIP Class B
| 39 | — | 39 |
DWS Conservative Allocation VIP Class B
| 36 | 36 | — |
DWS Core Fixed Income VIP Class A
| 111 | — | 92 |
DWS Core Fixed Income VIP Class B
| 84 | — | 70 |
DWS Davis Venture Value VIP Class A
| 96 | 96 | — |
DWS Davis Venture Value VIP Class B
| 39 | — | 39 |
DWS Dreman High Return Equity VIP Class A
| 357 | — | 357 |
DWS Dreman High Return Equity VIP Class B
| 169 | 160 | — |
DWS Dreman Small Mid Cap Value VIP Class A
| 372 | — | 308 |
DWS Dreman Small Mid Cap Value VIP Class B
| 143 | — | 136 |
DWS Global Thematic VIP Class A
| 183 | 183 | — |
DWS Global Thematic VIP Class B
| 65 | — | 65 |
DWS Government & Agency Securities VIP Class A
| 525 | 525 | — |
DWS Government & Agency Securities VIP Class B
| 44 | — | 38 |
DWS Growth Allocation VIP Class B
| 35 | 35 | — |
DWS High Income VIP Class A
| 224 | — | 162 |
DWS High Income VIP Class B
| 67 | — | 67 |
DWS International Select Equity VIP Class A
| 102 | — | 102 |
DWS International Select Equity VIP Class B
| 37 | — | 37 |
DWS Janus Growth & Income VIP Class A
| 72 | — | 61 |
DWS Janus Growth & Income VIP Class B
| 36 | 7 | 22 |
DWS Large Cap Value VIP Class A
| 178 | — | 148 |
DWS Large Cap Value VIP Class B
| 67 | — | 65 |
DWS Mid Cap Growth VIP Class A
| 121 | 121 | — |
DWS Mid Cap Growth VIP Class B
| 39 | — | 39 |
DWS Moderate Allocation VIP Class B
| 36 | 36 | — |
DWS Money Market VIP Class A
| 361 | 361 | — |
DWS Money Market VIP Class B
| 42 | 42 | — |
DWS Small Cap Growth VIP Class A
| 273 | 273 | — |
DWS Small Cap Growth VIP Class B
| 108 | 108 | — |
DWS Strategic Income VIP Class A
| 145 | 145 | — |
DWS Strategic Income VIP Class B
| 43 | — | 39 |
DWS Technology VIP Class A
| 137 | — | 119 |
DWS Technology VIP Class B
| 105 | — | 105 |
DWS Turner Mid Cap Growth VIP Class A
| 55 | 55 | — |
DWS Turner Mid Cap Growth VIP Class B
| 41 | — | 34 |
Distribution Service Agreement. Under the Portfolios' Class B 12b-1 plans, DWS Investments Distributors, Inc. ("DIDI") receives a fee ("Distribution Service Fee") of 0.25% of average daily net assets of Class B shares. For the six months ended June 30, 2008, the Distribution Service Fee was as follows:
Portfolio | Total Aggregated ($) | Waived ($) | Unpaid at June 30, 2008 ($) |
DWS Balanced VIP
| 5,497 | — | — |
DWS Blue Chip VIP
| 8,047 | — | — |
DWS Conservative Allocation VIP
| 21,795 | 21,795 | — |
DWS Core Fixed Income VIP
| 75,319 | — | 9,795 |
DWS Davis Venture Value VIP
| 16,636 | — | — |
DWS Dreman High Return Equity VIP
| 28,207 | — | 260 |
DWS Dreman Small Mid Cap Value VIP
| 44,389 | — | 7,729 |
DWS Global Thematic VIP
| 10,825 | — | 1,631 |
DWS Government & Agency Securities VIP
| 8,790 | — | 1,625 |
DWS Growth Allocation VIP
| 37,730 | 9,591 | 6,248 |
DWS High Income VIP
| 7,739 | — | — |
DWS International Select Equity VIP
| 11,439 | — | 68 |
DWS Janus Growth & Income VIP
| 3,511 | — | — |
DWS Large Cap Value VIP
| 5,912 | — | — |
DWS Mid Cap Growth VIP
| 1,376 | — | 45 |
DWS Moderate Allocation VIP
| 43,147 | 1,054 | 7,239 |
DWS Money Market VIP
| 10,265 | — | — |
DWS Small Cap Growth VIP
| 4,718 | — | — |
DWS Strategic Income VIP
| 7,057 | — | — |
DWS Technology VIP
| 3,558 | — | 593 |
DWS Turner Mid Cap Growth VIP
| 3,792 | — | — |
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to each Portfolio. For the six months ended June 30, 2008, the amount charged to each Portfolio by DIMA included in the Statement of Operations under "reports to shareholders and shareholder meeting" was as follows:
Portfolio | Amount ($) | Unpaid at June 30, 2008 ($) |
DWS Balanced VIP
| 1,911 | — |
DWS Blue Chip VIP
| 4,302 | 1,534 |
DWS Conservative Allocation VIP
| 3,215 | 1,617 |
DWS Core Fixed Income VIP
| 4,613 | 923 |
DWS Davis Venture Value VIP
| 3,442 | 670 |
DWS Dreman High Return Equity VIP
| 4,138 | 1,227 |
DWS Dreman Small Mid Cap Value VIP
| 3,028 | 640 |
DWS Global Thematic VIP
| 5,725 | 3,364 |
DWS Government & Agency Securities VIP
| 2,498 | — |
DWS Growth Allocation VIP
| 3,196 | 1,613 |
DWS High Income VIP
| 11,661 | 9,735 |
DWS International Select Equity VIP
| 1,380 | 310 |
DWS Janus Growth & Income VIP
| 1,910 | 1,910 |
DWS Large Cap Value VIP
| 7,969 | 87 |
DWS Mid Cap Growth VIP
| 2,722 | 304 |
DWS Moderate Allocation VIP
| 3,169 | 1,604 |
DWS Money Market VIP
| 1,824 | 1,824 |
DWS Small Cap Growth VIP
| 1,936 | 1,936 |
DWS Strategic Income VIP
| 3,500 | 3,500 |
DWS Technology VIP
| 3,542 | 1,080 |
DWS Turner Mid Cap Growth VIP
| 4,214 | 937 |
Trustees' Fees and Expenses. The Portfolios paid each Trustee not affiliated with the Advisor retainer fees plus specified amounts for various committee services and for the Board Chairperson and Vice Chairperson.
In connection with the board consolidation on April 1, 2008, of the two DWS Funds Boards of Trustees, certain Independent Board Members retired prior to their normal retirement date, and received a one-time retirement benefit. DIMA has agreed to reimburse the Portfolios for the cost of this benefit. During the period ended June 30, 2008, each Portfolio paid its allocated portion, as follows, of the retirement benefit to the non-continuing Independent Board Members, and each Portfolio was reimbursed by DIMA for this payment.
Portfolio | Amount ($) |
DWS Balanced VIP
| 24,750 |
DWS Blue Chip VIP
| 11,186 |
DWS Conservative Allocation VIP
| 862 |
DWS Core Fixed Income VIP
| 12,990 |
DWS Davis Venture Value VIP
| 14,728 |
DWS Dreman High Return Equity VIP
| 37,816 |
DWS Dreman Small Mid Cap Value VIP
| 22,361 |
DWS Global Thematic VIP
| 7,090 |
DWS Government & Agency Securities VIP
| 10,950 |
DWS Growth Allocation VIP
| 1,514 |
DWS High Income VIP
| 11,933 |
DWS International Select Equity VIP
| 11,048 |
DWS Janus Growth & Income VIP
| 7,668 |
DWS Large Cap Value VIP
| 10,691 |
DWS Mid Cap Growth VIP
| 2,215 |
DWS Moderate Allocation VIP
| 1,769 |
DWS Money Market VIP
| 19,388 |
DWS Small Cap Growth VIP
| 7,592 |
DWS Strategic Income VIP
| 5,355 |
DWS Technology VIP
| 6,311 |
DWS Turner Mid Cap Growth VIP
| 5,807 |
Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, each Portfolio 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. Investing in High Yield Securities
Investing in high yield securities may involve greater risks and considerations not typically associated with investing in US Government bonds and other high quality fixed-income securities. These securities are non-investment grade securities, often referred to as "junk bonds." Economic downturns may disrupt the high yield market and impair the ability of issuers to repay principal and pay interest. Also, an increase in interest rates would likely have an adverse impact on the value of such obligations. Moreover, high yield securities may be less liquid due to the extent that there is no established retail secondary market and because of a decline in the value of such securities.
E. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not typically associated with investing in the United States of America. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and future adverse political, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls or delayed settlements and may have prices more volatile than those of comparable securities of issuers in the United States of America.
F. Fee Reductions
The Portfolios have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Portfolios' expenses. During the six months ended June 30, 2008, the Portfolios' custodian fee was reduced under the arrangement as follows:
Portfolio | Amount ($) |
DWS Balanced VIP
| 4,021 |
DWS Blue Chip VIP
| 25 |
DWS Core Fixed Income VIP
| 699 |
DWS Davis Venture Value VIP
| 268 |
DWS Dreman High Return Equity VIP
| 749 |
DWS Dreman Small Mid Cap Value VIP
| 598 |
DWS Government & Agency Securities VIP
| 115 |
DWS High Income VIP
| 1,471 |
DWS Janus Growth & Income VIP
| 122 |
DWS Large Cap Value VIP
| 188 |
DWS Mid Cap Growth VIP
| 46 |
DWS Money Market VIP
| 405 |
DWS Small Cap Growth VIP
| 115 |
DWS Strategic Income VIP
| 873 |
DWS Technology VIP
| 39 |
DWS Turner Mid Cap Growth VIP
| 195 |
G. Ownership of the Portfolios
At June 30, 2008, the beneficial ownership in each Portfolio was as follows:
DWS Balanced VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 40%, 24% and 17%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Blue Chip VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 61% and 30%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Conservative Allocation VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 61% and 39%.
DWS Core Fixed Income VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 43%, 32% and 10%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Davis Venture Value VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 77% and 20%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Dreman High Return Equity VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 66% and 24%. Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 27%, 26% and 15%.
DWS Dreman Small Mid Cap Value VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 57%, 23% and 12%. Five Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 22%, 20%, 18%, 17% and 10%.
DWS Global Thematic VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 71% and 26%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 52% and 48%.
DWS Government & Agency Securities VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 40%, 33% and 13%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 50% and 46%.
DWS Growth Allocation VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 54% and 46%.
DWS High Income VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 34%, 32% and 27%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS International Select Equity VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 55%, 24% and 21%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Janus Growth & Income VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 73% and 26%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Large Cap Value VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 45%, 28% and 16%. Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 54% and 46%.
DWS Mid Cap Growth VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 68% and 31%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Moderate Allocation VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class B shares of the Portfolio, each owning 51% and 49%.
DWS Money Market VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 42%, 21% and 12%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Small Cap Growth VIP: Three Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 50%, 23% and 20%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
DWS Strategic Income VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 66% and 32%. One Participating Insurance Company was the owner of record of 10% or more of the outstanding Class B shares of the Portfolio, owning 100%.
DWS Technology VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 63% and 31%. Two Participating Insurance Companies were owners of record of 10% or more of the outstanding Class B shares of the Portfolio, each owning 53% and 39%.
DWS Turner Mid Cap Growth VIP: Two Participating Insurance Companies were owners of record of 10% or more of the total outstanding Class A shares of the Portfolio, each owning 84% and 16%. One Participating Insurance Company was the owner of record of 10% or more of the total outstanding Class B shares of the Portfolio, owning 100%.
H. Line of Credit
The Series and other affiliated funds (the "Participants") share in a $490 million revolving credit facility provided by a syndication of banks. The Portfolios may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.35 percent. Each Portfolio may borrow up to a maximum of 33 percent of its net assets under the agreement.
Portfolio | Facility Borrowing Limit |
DWS Balanced VIP
| 33% |
DWS Blue Chip VIP
| 33% |
DWS Conservative Allocation VIP
| 33% |
DWS Core Fixed Income VIP
| 33% |
DWS Davis Venture Value VIP
| 33% |
DWS Dreman High Return Equity VIP
| 33% |
DWS Dreman Small Mid Cap Value VIP
| 33% |
DWS Global Thematic VIP
| 33% |
DWS Government & Agency Securities VIP
| 33% |
DWS Growth Allocation VIP
| 33% |
DWS High Income VIP
| 33% |
DWS International Select Equity VIP
| 33% |
DWS Janus Growth & Income VIP
| 33% |
DWS Large Cap Value VIP
| 33% |
DWS Mid Cap Growth VIP
| 33% |
DWS Moderate Allocation VIP
| 33% |
DWS Money Market VIP
| 33% |
DWS Small Cap Growth VIP
| 33% |
DWS Strategic Income VIP
| 33% |
DWS Technology VIP
| 5% |
DWS Turner Mid Cap Growth VIP
| 33% |
At June 30, 2008, Dreman High Return Equity VIP had a $50,000 outstanding loan. Interest expense incurred on the borrowing was $3,800 for the six months ended June 30, 2008. The average dollar amount of the borrowings was $865,000, the weighted average interest rate on these borrowings was 2.84% and the Portfolio had a loan outstanding for fifty days throughout the period.
At June 30, 2008, DWS Government & Agency Securities VIP had a $450,000 outstanding loan. Interest expense incurred on the borrowing was $1,531 for the six months ended June 30, 2008. The average dollar amount of the borrowings was $2,862,500, the weighted average interest rate on these borrowings was 2.41% and the Portfolio had a loan outstanding for eight days throughout the period.
At June 30, 2008, DWS High Income VIP had a $2,850,000 outstanding loan. Interest expense incurred on the borrowing was $2,010 for the six months ended June 30, 2008. The average dollar amount of the borrowings was $3,762,500, the weighted average interest rate on these borrowings was 2.40% and the Portfolio had a loan outstanding for eight days throughout the period.
I. Payments Made by Affiliates
During the six months ended June 30, 2008, the Advisor fully reimbursed DWS Balanced VIP and DWS Strategic Income VIP $11,599 and $81, respectively, for losses incurred on trades executed incorrectly. The amounts of the losses were less than 0.01% of each Portfolio's average net assets, thus having no impact on each Portfolio's total return.
In addition, during the six months ended June 30, 2008, the Advisor fully reimbursed DWS International Select Equity VIP $354,782 for losses incurred on trades executed incorrectly.
Proxy Voting
The Trust's policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the Trust's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.
Shareholder Meeting Results
DWS Balanced VIP
A Special Meeting of Shareholders of the DWS Balanced VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 20,770,789.0534 | 774,684.6944 |
Henry P. Becton, Jr.
| 20,713,588.4670 | 831,885.2808 |
Dawn-Marie Driscoll
| 20,753,641.1835 | 791,832.5643 |
Keith R. Fox
| 20,761,299.5516 | 784,147.1962 |
Paul K. Freeman
| 20,770,140.6943 | 775,333.0535 |
Kenneth C. Froewiss
| 20,731,381.4223 | 814,092.3255 |
Richard J. Herring
| 20,739,766.1693 | 805,707.5785 |
William McClayton
| 20,762,059.7812 | 783,413.9666 |
Rebecca W. Rimel
| 20,765,038.8049 | 780,434.9429 |
William N. Searcy, Jr.
| 20,756,377.7680 | 789,095.9798 |
Jean Gleason Stromberg
| 20,748,961.9276 | 796,511.8202 |
Robert H. Wadsworth
| 20,760,073.4291 | 785,400.3187 |
Axel Schwarzer
| 20,737,621.1281 | 807,852.6197 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 19,149,806.1204 | 623,849.4496 | 1,771,818.1777 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 19,145,257.8074 | 662,095.2581 | 1,738,120.6823 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 19,051,257.7275 | 715,391.7517 | 1,778,824.2686 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 19,168,014.0748 | 597,404.4285 | 1,780,055.2444 |
5. Approval of the Sub-Advisory Agreement Between DIMA and DeAMi.
Number of Votes: | Affirmative | Against | Abstain |
| 18,992,143.2708 | 691,370.1346 | 1,861,960.3423 |
DWS Blue Chip VIP
A Special Meeting of Shareholders of the DWS Blue Chip VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 16,564,183.3641 | 680,802.8757 |
Henry P. Becton, Jr.
| 16,565,532.3622 | 679,453.8776 |
Dawn-Marie Driscoll
| 16,567,006.0584 | 677,980.1814 |
Keith R. Fox
| 16,544,046.3018 | 700,939.9380 |
Paul K. Freeman
| 16,567,772.0617 | 677,214.1781 |
Kenneth C. Froewiss
| 16,567,146.6861 | 677,839.5537 |
Richard J. Herring
| 16,565,756.1793 | 679,230.0605 |
William McClayton
| 16,547,811.0670 | 697,145.1728 |
Rebecca W. Rimel
| 16,566,326.9431 | 678,659.2967 |
William N. Searcy, Jr.
| 16,563,547.8619 | 681,438.3779 |
Jean Gleason Stromberg
| 16,566,855.7292 | 678,130.5106 |
Robert H. Wadsworth
| 16,560,293.7802 | 684,692.4596 |
Axel Schwarzer
| 16,562,156.5509 | 682,829.2398 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 15,738,417.8481 | 436,721.4020 | 1,069,846.9896 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 15,773,981.6516 | 410,037.8081 | 1,060,966.7801 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 15,735,064.4375 | 470,136.1702 | 1,039,785.6321 |
4. Approval of anAmended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 15,739,399.7509 | 478,247.2811 | 1,027,339.2078 |
DWS Conservative Allocation VIP
A Special Meeting of Shareholders of the DWS Conservative Allocation VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 1,447,301.7223 | 56,268.0496 |
Henry P. Becton, Jr.
| 1,447,301.7223 | 56,268.0496 |
Dawn-Marie Driscoll
| 1,447,301.7223 | 56,268.0496 |
Keith R. Fox
| 1,447,301.7223 | 56,268.0496 |
Paul K. Freeman
| 1,447,301.7223 | 56,268.0496 |
Kenneth C. Froewiss
| 1,447,301.7223 | 56,268.0496 |
Richard J. Herring
| 1,447,301.7223 | 56,268.0496 |
William McClayton
| 1,447,301.7223 | 56,268.0496 |
Rebecca W. Rimel
| 1,447,301.7223 | 56,268.0496 |
William N. Searcy, Jr.
| 1,447,301.7223 | 56,268.0496 |
Jean Gleason Stromberg
| 1,447,301.7223 | 56,268.0496 |
Robert H. Wadsworth
| 1,447,301.7223 | 56,268.0496 |
Axel Schwarzer
| 1,447,301.7223 | 56,268.0496 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 1,275,419.3881 | 62,065.7195 | 166,084.6642 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 1,281,217.0580 | 56,268.0496 | 166,084.6642 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 1,256,551.8220 | 62,065.7195 | 184,952.2303 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 1,275,419.3881 | 62,065.7195 | 166,084.6642 |
DWS Core Fixed Income VIP
A Special Meeting of Shareholders of the DWS Core Fixed Income VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 21,305,521.0327 | 465,641.3861 |
Henry P. Becton, Jr.
| 21,271,470.0126 | 499,692.4062 |
Dawn-Marie Driscoll
| 21,311,752.7307 | 459,409.6881 |
Keith R. Fox
| 21,287,685.4860 | 483,476.9328 |
Paul K. Freeman
| 21,312,609.2358 | 458,553.1830 |
Kenneth C. Froewiss
| 21,312,609.2358 | 458,553.1830 |
Richard J. Herring
| 21,304,806.7206 | 466,355.6982 |
William McClayton
| 21,287,653.3731 | 483,509.0457 |
Rebecca W. Rimel
| 21,286,899.0512 | 484,263.3676 |
William N. Searcy, Jr.
| 21,304,781.5605 | 466,380.8583 |
Jean Gleason Stromberg
| 21,298,530.1126 | 472,632.3062 |
Robert H. Wadsworth
| 21,277,282.0220 | 493,880.3968 |
Axel Schwarzer
| 21,287,076.7705 | 484,085.6483 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 20,575,836.2847 | 244,105.0285 | 951,221.1055 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 20,528,630.1799 | 299,424.2022 | 943,108.0365 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 20,543,681.9187 | 298,620.0678 | 928,890.4323 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 20,584,050.7533 | 270,645.0076 | 916,466.6578 |
DWS Davis Venture Value VIP
A Special Meeting of Shareholders of the DWS Davis Venture Value VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 22,345,200.4010 | 169,408.5698 |
Henry P. Becton, Jr.
| 22,346,100.6236 | 168,508.3472 |
Dawn-Marie Driscoll
| 22,321,725.3799 | 192,883.5909 |
Keith R. Fox
| 22,346,100.6236 | 168,508.3472 |
Paul K. Freeman
| 22,345,670.6536 | 168,938.3172 |
Kenneth C. Froewiss
| 22,346,100.6236 | 168,508.3472 |
Richard J. Herring
| 22,346,100.6236 | 168,508.3472 |
William McClayton
| 22,327,720.8118 | 186,888.1590 |
Rebecca W. Rimel
| 22,345,402.9910 | 169,205.9798 |
William N. Searcy, Jr.
| 22,338,247.4109 | 176,361.5599 |
Jean Gleason Stromberg
| 22,345,402.9910 | 169,205.9798 |
Robert H. Wadsworth
| 22,343,145.8423 | 171,463.1285 |
Axel Schwarzer
| 22,338,774.9991 | 175,833.9717 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 22,065,099.9828 | 98,677.9852 | 350,831.0027 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 22,085,037.0033 | 104,821.7237 | 324,750.2438 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 22,043,076.7904 | 112,511.5849 | 359,020.5954 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 22,064,424.1604 | 134,374.1346 | 315,810.6758 |
DWS Dreman High Return Equity VIP
A Special Meeting of Shareholders of the DWS Dreman High Return Equity VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 55,277,580.3160 | 2,180,238.7498 |
Henry P. Becton, Jr.
| 55,262,926.8699 | 2,194,892.1959 |
Dawn-Marie Driscoll
| 55,211,171.0565 | 2,246,648.0093 |
Keith R. Fox
| 55,262,029.0061 | 2,195,790.0597 |
Paul K. Freeman
| 55,241,287.0825 | 2,216,531.9833 |
Kenneth C. Froewiss
| 55,260,155.5549 | 2,197,663.5109 |
Richard J. Herring
| 55,280,310.9392 | 2,117,508.1266 |
William McClayton
| 55,251,289.8348 | 2,206,529.2310 |
Rebecca W. Rimel
| 55,256,005.2554 | 2,201,813.8104 |
William N. Searcy, Jr.
| 55,254,443.9716 | 2,203,375.0942 |
Jean Gleason Stromberg
| 55,222,912.7356 | 2,234,906.3302 |
Robert H. Wadsworth
| 55,256,416.6909 | 2,201,402.3749 |
Axel Schwarzer
| 55,224,843.0373 | 2,232,976.0285 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 52,414,273.4185 | 1,440,368.7753 | 3,603,176.8720 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 52,263,476.2613 | 1,523,232.1584 | 3,671,110.6459 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 52,317,611.3012 | 1,483,771.0252 | 3,656,436.7393 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 52,539,975.1413 | 1,360,937.4019 | 3,556,906.5225 |
DWS Dreman Small Mid Cap Value VIP
A Special Meeting of Shareholders of the DWS Dreman Small Mid Cap Value VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 24,071,835.9263 | 842,159.1915 |
Henry P. Becton, Jr.
| 24,059,978.4146 | 854,016.7032 |
Dawn-Marie Driscoll
| 24,044,025.7515 | 869,969.3663 |
Keith R. Fox
| 24,076,141.1788 | 837,853.9390 |
Paul K. Freeman
| 24,084,989.7974 | 829,005.3204 |
Kenneth C. Froewiss
| 24,078,113.8262 | 835,881.2916 |
Richard J. Herring
| 24,081,524.3657 | 832,470.7521 |
William McClayton
| 24,082,766.7348 | 831,228.3830 |
Rebecca W. Rimel
| 24,083,275.0289 | 830,720.0889 |
William N. Searcy, Jr.
| 24,060,850.7272 | 853,144.3906 |
Jean Gleason Stromberg
| 24,077,332.4359 | 836,662.6819 |
Robert H. Wadsworth
| 24,071,395.4430 | 842,599.6748 |
Axel Schwarzer
| 24,059,995.7945 | 853,999.3233 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 22,922,212.2487 | 660,466.7247 | 1,331,316.1444 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 22,865,363.2306 | 723,315.1720 | 1,325,316.7152 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 22,831,901.5082 | 766,393.8175 | 1,315,699.7921 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 22,889,821.2485 | 729,374.9453 | 1,294,798.9239 |
DWS Global Thematic VIP
A Special Meeting of Shareholders of the DWS Global Thematic VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 9,758,690.0477 | 522,199.9141 |
Henry P. Becton, Jr.
| 9,743,085.9168 | 537,804.0450 |
Dawn-Marie Driscoll
| 9,743,085.9168 | 537,804.0450 |
Keith R. Fox
| 9,760,859.0996 | 520,030.8622 |
Paul K. Freeman
| 9,773,612.4808 | 507,277.4810 |
Kenneth C. Froewiss
| 9,763,925.7220 | 516,964.2398 |
Richard J. Herring
| 9,763,925.7220 | 516,964.2398 |
William McClayton
| 9,763,925.7220 | 516,964.2398 |
Rebecca W. Rimel
| 9,763,123.7702 | 517,766.1916 |
William N. Searcy, Jr.
| 9,768,376.8064 | 512,513.1554 |
Jean Gleason Stromberg
| 9,772,810.5289 | 508,079.4329 |
Robert H. Wadsworth
| 9,766,471.5080 | 514,418.4538 |
Axel Schwarzer
| 9,768,376.8064 | 512,513.1554 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 9,231,554.4017 | 364,777.9064 | 684,557.6537 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 9,259,314.9536 | 380,887.2147 | 640,687.7934 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 9,181,918.6906 | 446,156.9364 | 652,814.3347 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 9,280,055.4863 | 385,618.9100 | 615,215.5653 |
DWS Government & Agency Securities VIP
A Special Meeting of Shareholders of the DWS Government & Agency Securities VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 16,041,830.4109 | 404,184.0999 |
Henry P. Becton, Jr.
| 16,039,509.7993 | 406,504.7115 |
Dawn-Marie Driscoll
| 16,044,321.4110 | 401,693.0998 |
Keith R. Fox
| 16,044,040.8568 | 401,973.6540 |
Paul K. Freeman
| 16,043,847.1512 | 402,167.3596 |
Kenneth C. Froewiss
| 16,043,936.0691 | 402,078.4417 |
Richard J. Herring
| 16,043,913.8117 | 402,100.6991 |
William McClayton
| 16,043,951.9389 | 402,062.5719 |
Rebecca W. Rimel
| 16,041,693.1139 | 404,321.3969 |
William N. Searcy, Jr.
| 16,043,929.8202 | 402,084.6906 |
Jean Gleason Stromberg
| 16,044,130.6028 | 401,883.9080 |
Robert H. Wadsworth
| 16,042,053.6442 | 403,960.8666 |
Axel Schwarzer
| 16,041,812.9728 | 404,201.5380 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 15,758,048.0114 | 77,679.9359 | 610,286.5634 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 15,766,013.6150 | 79,494.2529 | 600,506.6429 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 15,729,689.3928 | 99,477.8871 | 616,847.2309 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 15,741,330.2015 | 81,433.1608 | 623,251.1485 |
DWS Growth Allocation VIP
A Special Meeting of Shareholders of the DWS Growth Allocation VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 2,559,258.4706 | 31,436.9913 |
Henry P. Becton, Jr.
| 2,533,470.4798 | 57,224.9821 |
Dawn-Marie Driscoll
| 2,559,258.4706 | 31,436.9913 |
Keith R. Fox
| 2,559,258.4706 | 31,436.9913 |
Paul K. Freeman
| 2,559,258.4706 | 31,436.9913 |
Kenneth C. Froewiss
| 2,559,258.4706 | 31,436.9913 |
Richard J. Herring
| 2,559,258.4706 | 31,436.9913 |
William McClayton
| 2,559,258.4706 | 31,436.9913 |
Rebecca W. Rimel
| 2,533,470.4798 | 57,224.9821 |
William N. Searcy, Jr.
| 2,559,258.4706 | 31,436.9913 |
Jean Gleason Stromberg
| 2,559,258.4706 | 31,436.9913 |
Robert H. Wadsworth
| 2,559,258.4706 | 31,436.9913 |
Axel Schwarzer
| 2,559,258.4706 | 31,436.9913 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 2,362,661.7821 | 97,143.7789 | 130,889.9009 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 2,223,585.8263 | 236,219.7347 | 130,889.9009 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 2,389,173.2317 | 70,632.3293 | 130,889.9009 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 2,298,979.7470 | 134,314.3645 | 157,401.3504 |
DWS High Income VIP
A Special Meeting of Shareholders of the DWS High Income VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 31,955,608.7284 | 982,452.4984 |
Henry P. Becton, Jr.
| 31,955,799.1197 | 982,262.1071 |
Dawn-Marie Driscoll
| 31,954,089.4533 | 983,971.7735 |
Keith R. Fox
| 31,959,054.7311 | 979,006.4957 |
Paul K. Freeman
| 31,960,966.1188 | 977,095.1080 |
Kenneth C. Froewiss
| 31,962,337.7230 | 975,723.5038 |
Richard J. Herring
| 31,963,817.4211 | 974,243.8057 |
William McClayton
| 31,960,932.8549 | 977,128.3719 |
Rebecca W. Rimel
| 31,963,577.6945 | 974,483.5323 |
William N. Searcy, Jr.
| 31,958,575.2633 | 979,485.9635 |
Jean Gleason Stromberg
| 31,954,476.7835 | 983,584.4433 |
Robert H. Wadsworth
| 31,954,465.8483 | 983,595.3785 |
Axel Schwarzer
| 31,955,872.7676 | 982,188.4592 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 31,037,960.0377 | 538,196.7746 | 1,361,904.4143 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 31,035,404.3161 | 550,266.8393 | 1,352,390.0713 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 31,144,102.6096 | 470,697.7689 | 1,323,260.8483 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 31,223,972.0991 | 447,233.2250 | 1,266,855.9026 |
DWS International Select Equity VIP
A Special Meeting of Shareholders of the DWS International Select Equity VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 14,659,218.9885 | 300,984.1063 |
Henry P. Becton, Jr.
| 14,647,676.4108 | 312,526.6840 |
Dawn-Marie Driscoll
| 14,648,637.3172 | 311,565.7776 |
Keith R. Fox
| 14,648,842.3756 | 311,360.7192 |
Paul K. Freeman
| 14,658,930.8484 | 301,272.2464 |
Kenneth C. Froewiss
| 14,648,842.3756 | 311,360.7192 |
Richard J. Herring
| 14,648,842.3756 | 311,360.7192 |
William McClayton
| 14,659,218.9885 | 300,984.1063 |
Rebecca W. Rimel
| 14,644,983.8953 | 315,219.1995 |
William N. Searcy, Jr.
| 14,653,873.9150 | 306,329.1798 |
Jean Gleason Stromberg
| 14,653,173.6973 | 307,029.3975 |
Robert H. Wadsworth
| 14,653,332.2296 | 306,870.8652 |
Axel Schwarzer
| 14,656,478.3773 | 303,724.7175 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 14,290,440.9923 | 190,913.6931 | 478,848.4093 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 14,303,131.2567 | 174,288.6003 | 482,783.2376 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 14,287,273.2134 | 200,782.5330 | 472,147.3484 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 14,312,309.9114 | 155,967.0381 | 155,967.0381 |
DWS Janus Growth & Income VIP
A Special Meeting of Shareholders of the DWS Janus Growth & Income VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 13,652,399.6179 | 84,893.8819 |
Henry P. Becton, Jr.
| 13,652,612.7041 | 84,680.7957 |
Dawn-Marie Driscoll
| 13,659,193.0650 | 78,100.4348 |
Keith R. Fox
| 13,659,193.0650 | 78,100.4348 |
Paul K. Freeman
| 13,659,193.0650 | 78,100.4348 |
Kenneth C. Froewiss
| 13,659,193.0650 | 78,100.4348 |
Richard J. Herring
| 13,659,193.0650 | 78,100.4348 |
William McClayton
| 13,659,193.0650 | 78,100.4348 |
Rebecca W. Rimel
| 13,658,533.5209 | 78,759.9789 |
William N. Searcy, Jr.
| 13,658,353.9869 | 78,939.5129 |
Jean Gleason Stromberg
| 13,651,867.6295 | 85,425.8703 |
Robert H. Wadsworth
| 13,652,612.7041 | 84,680.7957 |
Axel Schwarzer
| 13,658,820.0746 | 78,473.4252 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 13,489,276.0169 | 60,792.1999 | 187,225.2829 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 13,490,652.2294 | 64,272.4094 | 182,368.8609 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 13,486,783.1120 | 66,907.2116 | 183,603.1761 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 13,483,952.1478 | 68,818.5964 | 184,522.7556 |
DWS Large Cap Value VIP
A Special Meeting of Shareholders of the DWS Large Cap Value VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 12,191,893.5400 | 146,637.5368 |
Henry P. Becton, Jr.
| 12,172,381.1893 | 166,149.8875 |
Dawn-Marie Driscoll
| 12,175,845.2539 | 162,685.8229 |
Keith R. Fox
| 12,176,827.2173 | 161,703.8595 |
Paul K. Freeman
| 12,191,893.5400 | 146,637.5368 |
Kenneth C. Froewiss
| 12,180,597.5570 | 157,933.5198 |
Richard J. Herring
| 12,180,597.5570 | 157,933.5198 |
William McClayton
| 12,191,531.0332 | 147,000.0436 |
Rebecca W. Rimel
| 12,178,887.7318 | 159,643.3450 |
William N. Searcy, Jr.
| 12,190,754.5733 | 147,776.5035 |
Jean Gleason Stromberg
| 12,188,678.0016 | 149,853.0752 |
Robert H. Wadsworth
| 12,188,733.0485 | 149,798.0283 |
Axel Schwarzer
| 12,190,842.8283 | 147,688.2485 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 12,039,146.1800 | 80,950.8189 | 218,434.0779 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 12,009,152.2902 | 109,588.0857 | 219,790.7009 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 12,032,671.8472 | 83,388.2273 | 222,471.0022 |
DWS Mid Cap Growth VIP
A Special Meeting of Shareholders of the DWS Mid Cap Growth VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 3,615,261.1602 | 245,776.1536 |
Henry P. Becton, Jr.
| 3,615,261.1602 | 245,776.1536 |
Dawn-Marie Driscoll
| 3,611,269.1166 | 249,768.1972 |
Keith R. Fox
| 3,607,782.3143 | 253,254.9995 |
Paul K. Freeman
| 3,612,152.9307 | 248,884.3831 |
Kenneth C. Froewiss
| 3,612,152.9307 | 248,884.3831 |
Richard J. Herring
| 3,615,261.1602 | 245,776.1536 |
William McClayton
| 3,607,782.3143 | 253,254.9995 |
Rebecca W. Rimel
| 3,615,261.1602 | 245,776.1536 |
William N. Searcy, Jr.
| 3,610,890.5438 | 250,146.7700 |
Jean Gleason Stromberg
| 3,612,152.9307 | 248,884.3831 |
Robert H. Wadsworth
| 3,610,581.3171 | 250,455.9967 |
Axel Schwarzer
| 3,611,269.1166 | 249,768.1972 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 3,503,758.0070 | 54,254.1880 | 303,025.1187 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 3,502,502.2790 | 58,384.6134 | 300,150.4213 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 3,508,398.7103 | 50,057.8332 | 302,580.7703 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 3,497,770.5700 | 51,636.1877 | 311,630.5560 |
DWS Moderate Allocation VIP
A Special Meeting of Shareholders of the DWS Moderate Allocation VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 2,626,308.4827 | 158,134.1082 |
Henry P. Becton, Jr.
| 2,626,308.4827 | 158,134.1082 |
Dawn-Marie Driscoll
| 2,626,308.4827 | 158,134.1082 |
Keith R. Fox
| 2,626,308.4827 | 158,134.1082 |
Paul K. Freeman
| 2,626,308.4827 | 158,134.1082 |
Kenneth C. Froewiss
| 2,626,308.4827 | 158,134.1082 |
Richard J. Herring
| 2,626,308.4827 | 158,134.1082 |
William McClayton
| 2,626,308.4827 | 158,134.1082 |
Rebecca W. Rimel
| 2,626,308.4827 | 158,134.1082 |
William N. Searcy, Jr.
| 2,626,308.4827 | 158,134.1082 |
Jean Gleason Stromberg
| 2,626,308.4827 | 158,134.1082 |
Robert H. Wadsworth
| 2,626,308.4827 | 158,134.1082 |
Axel Schwarzer
| 2,626,308.4827 | 158,134.1082 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 2,513,763.6411 | 4,464.6228 | 266,214.3270 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 2,435,289.2232 | 78,474.4179 | 270,678.9498 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 2,398,695.8047 | 78,474.4179 | 307,272.3683 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 2,440,006.4004 | 73,757.2407 | 270,678.9498 |
DWS Money Market VIP
A Special Meeting of Shareholders of the DWS Money Market VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 368,173,604.7206 | 9,340,411.7093 |
Henry P. Becton, Jr.
| 367,791,257.4032 | 9,722,759.0267 |
Dawn-Marie Driscoll
| 367,693,056.2173 | 9,820,960.2126 |
Keith R. Fox
| 368,288,472.7061 | 9,225,543.7238 |
Paul K. Freeman
| 368,173,643.1866 | 9,340,373.2433 |
Kenneth C. Froewiss
| 367,938,697.9977 | 9,575,318.4322 |
Richard J. Herring
| 368,289,291.6725 | 9,224,724.7574 |
William McClayton
| 367,746,231.9706 | 9,767,784.4593 |
Rebecca W. Rimel
| 367,134,869.8581 | 10,379,146.5718 |
William N. Searcy, Jr.
| 368,293,018.6970 | 9,220,997.7329 |
Jean Gleason Stromberg
| 367,533,885.3126 | 9,980,131.1173 |
Robert H. Wadsworth
| 367,536,550.1058 | 9,977,466.3241 |
Axel Schwarzer
| 368,365,750.2746 | 9,148,266.1553 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 356,253,936.3587 | 7,686,421.4399 | 13,573,658.6311 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 353,798,958.5146 | 9,954,851.6659 | 13,760,206.2492 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 355,048,722.8171 | 8,391,953.9347 | 14,073,339.6781 |
3.B. Approval of a Revised Fundamental Investment Policy Regarding Concentration.
Number of Votes: | Affirmative | Against | Abstain |
| 353,973,911.1784 | 7,997,337.9357 | 15,542,767.3157 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 355,389,609.5977 | 8,345,317.5207 | 13,779,089.3113 |
DWS Small Cap Growth VIP
A Special Meeting of Shareholders of the DWS Small Cap Growth VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 11,534,253.6411 | 459,031.3537 |
Henry P. Becton, Jr.
| 11,534,238.5056 | 459,046.4892 |
Dawn-Marie Driscoll
| 11,534,253.6411 | 459,031.3537 |
Keith R. Fox
| 11,532,112.8381 | 461,172.1567 |
Paul K. Freeman
| 11,534,238.5056 | 459,046.4892 |
Kenneth C. Froewiss
| 11,534,253.6411 | 459,031.3537 |
Richard J. Herring
| 11,534,253.6411 | 459,031.3537 |
William McClayton
| 11,527,455.4273 | 465,829.5675 |
Rebecca W. Rimel
| 11,531,892.9405 | 461,392.0543 |
William N. Searcy, Jr.
| 11,532,105.1210 | 461,179.8738 |
Jean Gleason Stromberg
| 11,527,235.5298 | 466,049.4650 |
Robert H. Wadsworth
| 11,526,943.8218 | 466,341.1730 |
Axel Schwarzer
| 11,534,238.5056 | 459,046.4892 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 11,051,570.7171 | 250,248.9283 | 691,465.3494 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 11,034,348.8589 | 267,661.8981 | 691,274.2377 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 10,995,040.0712 | 307,497.6241 | 690,747.2995 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 11,062,773.7617 | 256,419.4074 | 674,091.8257 |
DWS Strategic Income VIP
A Special Meeting of Shareholders of the DWS Strategic Income VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 9,222,824.1650 | 60,600.3018 |
Henry P. Becton, Jr.
| 9,221,122.0002 | 62,302.4666 |
Dawn-Marie Driscoll
| 9,223,014.8986 | 60,409.5682 |
Keith R. Fox
| 9,223,014.8986 | 60,409.5682 |
Paul K. Freeman
| 9,223,014.8986 | 60,409.5682 |
Kenneth C. Froewiss
| 9,223,014.8986 | 60,409.5682 |
Richard J. Herring
| 9,223,014.8986 | 60,409.5682 |
William McClayton
| 9,223,014.8986 | 60,409.5682 |
Rebecca W. Rimel
| 9,220,974.3987 | 62,450.0681 |
William N. Searcy, Jr.
| 9,222,676.5634 | 60,747.9034 |
Jean Gleason Stromberg
| 9,221,988.5528 | 61,435.9140 |
Robert H. Wadsworth
| 9,222,136.1544 | 61,288.3124 |
Axel Schwarzer
| 9,222,824.1650 | 60,600.3018 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 9,119,389.0560 | 23,978.2651 | 140,057.1457 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 9,114,239.0814 | 28,251.2148 | 140,934.1706 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 9,108,253.3362 | 32,973.7632 | 142,197.3674 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 9,127,757.9814 | 17,410.4613 | 138,256.0240 |
DWS Technology VIP
A Special Meeting of Shareholders of the DWS Technology VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 13,864,287.3408 | 730,785.5220 |
Henry P. Becton, Jr.
| 13,864,288.7133 | 730,784.1495 |
Dawn-Marie Driscoll
| 13,858,771.2668 | 736,301.5960 |
Keith R. Fox
| 13,864,594.1272 | 730,478.7356 |
Paul K. Freeman
| 13,858,972.4940 | 736,100.3688 |
Kenneth C. Froewiss
| 13,862,631.7906 | 732,441.0722 |
Richard J. Herring
| 13,866,414.1881 | 728,658.6747 |
William McClayton
| 13,864,757.2654 | 730,315.5974 |
Rebecca W. Rimel
| 13,852,319.9013 | 742,752.9615 |
William N. Searcy, Jr.
| 13,869,069.9088 | 726,002.9540 |
Jean Gleason Stromberg
| 13,848,469.8160 | 746,603.0468 |
Robert H. Wadsworth
| 13,863,726.6512 | 731,346.2116 |
Axel Schwarzer
| 13,861,650.3623 | 733,422.5005 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 13,267,449.2591 | 436,789.5820 | 890,834.0217 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 13,163,581.2151 | 474,121.1433 | 957,370.5044 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 13,034,711.3760 | 612,897.0924 | 947,464.3943 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 13,113,337.6446 | 532,416.1935 | 949,319.0245 |
DWS Turner Mid Cap Growth VIP
A Special Meeting of Shareholders of the DWS Turner Mid Cap Growth VIP of DWS Variable Series II (the "Portfolio") was held on March 31, 2008 at the offices of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. At the Meeting, the following matters were voted on by the Shareholders (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 10,089,936.2723 | 593,232.5105 |
Henry P. Becton, Jr.
| 10,089,936.2723 | 593,232.5105 |
Dawn-Marie Driscoll
| 10,089,936.2723 | 593,232.5105 |
Keith R. Fox
| 10,086,300.2831 | 596,868.4997 |
Paul K. Freeman
| 10,089,936.2723 | 593,232.5105 |
Kenneth C. Froewiss
| 10,089,936.2723 | 593,232.5105 |
Richard J. Herring
| 10,089,936.2723 | 593,232.5105 |
William McClayton
| 10,089,936.2723 | 593,232.5105 |
Rebecca W. Rimel
| 10,089,530.6316 | 593,638.1512 |
William N. Searcy, Jr.
| 10,089,936.2723 | 593,232.5105 |
Jean Gleason Stromberg
| 10,089,530.6316 | 593,638.1512 |
Robert H. Wadsworth
| 10,087,288.7366 | 595,880.0462 |
Axel Schwarzer
| 10,037,601.8293 | 645,566.9535 |
2.A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: | Affirmative | Against | Abstain |
| 9,551,074.4437 | 308,842.2801 | 823,252.0588 |
2.B. Approval of a Subadviser Approval Policy.
Number of Votes: | Affirmative | Against | Abstain |
| 9,647,669.9233 | 226,620.7944 | 808,878.0649 |
3.A. Approval of a Revised Fundamental Investment Policy Regarding Commodities.
Number of Votes: | Affirmative | Against | Abstain |
| 9,657,233.9697 | 210,311.8476 | 815,622.9653 |
4. Approval of an Amended and Restated Declaration of Trust.
Number of Votes: | Affirmative | Against | Abstain |
| 9,659,514.4854 | 193,369.6241 | 830,284.6731 |
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
Notes
DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by individual investors.
DWS Investment Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606
(800) 778-1482
vsII-3 (R-4328-1 8/08)
