UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number: 811-05002
Deutsche DWS Variable Series II
(Exact Name of Registrant as Specified in Charter)
875 Third Avenue
New York, NY 10022-6225
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (212) 454-4500
Diane Kenneally
100 Summer Street
Boston, MA 02110
(Name and Address of Agent for Service)
| Date of fiscal year end: | 12/31 |
| | |
| Date of reporting period: | 12/31/2021 |
| ITEM 1. | REPORT TO STOCKHOLDERS |
| | |
| | (a) |
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
DWS Alternative Asset Allocation VIP
Contents
| 3 | Performance Summary |
| 5 | Management Summary |
| 7 | Portfolio Summary |
| 8 | Investment Portfolio |
| 10 | Statement of Assets and Liabilities |
| 10 | Statement of Operations |
| 11 | Statements of Changes in Net Assets |
| 12 | Financial Highlights |
| 14 | Notes to Financial Statements |
| 18 | Report of Independent Registered Public Accounting Firm |
| 19 | Information About Your Fund's Expenses |
| 20 | Tax Information |
| 20 | Proxy Voting |
| 21 | Advisory Agreement Board Considerations and Fee Evaluation |
| 24 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Although allocation among different asset categories generally limits risk, portfolio management may favor an asset category that underperforms other assets or markets as a whole. The Fund expects to invest in underlying funds that emphasize alternatives or non-traditional asset categories or investment strategies, and as a result, it is subject to the risk factors of those underlying funds. Some of those risks include: stock market risk; the political, general economic, liquidity and currency risks of foreign investments, which may be particularly significant for emerging markets; credit and interest rate risk; floating rate loan risk; volatility, infrastructure and high-yield debt securities. Because Exchange Traded Funds (ETFs) trade on a securities exchange, their shares may trade at a premium or discount to their net asset value. ETFs also incur fees and expenses so they may not fully match the performance of the indexes they are designed to track. The Fund may use derivatives, including as part of its currency and interest-rate strategies. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The success of the Fund’s currency and interest-rate strategies are dependent, in part, on the effectiveness and implementation of portfolio management’s proprietary models. As part of these strategies, the Fund’s exposure to foreign currencies could cause lower returns or even losses because foreign currency rates may fluctuate significantly over short periods of time for a number of reasons. The risk of loss is heightened during periods of rapid rises in interest rates. In addition, the notional amount of the Fund’s aggregate currency and interest-rate exposure resulting from these strategies may significantly exceed the net assets of the Fund. Please read the prospectus for additional risks and specific details regarding the Fund's risk profile.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund 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 gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 are 0.80% and 1.18% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. These expense ratios include net expenses of the underlying funds in which the Fund invests.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
MSCI World Index is an unmanaged index representing large and mid-cap equity performance across 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with average maturities of one year or more.
The Blended Index consists of 70% MSCI World Index and 30% Bloomberg U.S. Aggregate Bond Index.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 3 |
| Comparative Results |
| DWS Alternative Asset Allocation VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $11,274 | $13,668 | $13,340 | $15,087 |
| Average annual total return | 12.74% | 10.98% | 5.93% | 4.20% |
| MSCI World Index | Growth of $10,000 | $12,182 | $18,026 | $20,141 | $33,050 |
| Average annual total return | 21.82% | 21.70% | 15.03% | 12.70% |
| Bloomberg U.S. Aggregate Bond Index | Growth of $10,000 | $9,846 | $11,508 | $11,916 | $13,307 |
| Average annual total return | –1.54% | 4.79% | 3.57% | 2.90% |
| Blended Index | Growth of $10,000 | $11,446 | $15,910 | $17,422 | $25,661 |
| Average annual total return | 14.46% | 16.74% | 11.74% | 9.88% |
| DWS Alternative Asset Allocation VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class B | Growth of $10,000 | $11,235 | $13,530 | $13,125 | $14,650 |
| Average annual total return | 12.35% | 10.60% | 5.59% | 3.89% |
| MSCI World Index | Growth of $10,000 | $12,182 | $18,026 | $20,141 | $33,050 |
| Average annual total return | 21.82% | 21.70% | 15.03% | 12.70% |
| Bloomberg U.S. Aggregate Bond Index | Growth of $10,000 | $9,846 | $11,508 | $11,916 | $13,307 |
| Average annual total return | –1.54% | 4.79% | 3.57% | 2.90% |
| Blended Index | Growth of $10,000 | $11,446 | $15,910 | $17,422 | $25,661 |
| Average annual total return | 14.46% | 16.74% | 11.74% | 9.88% |
| The growth of $10,000 is cumulative. |
| 4 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
| Management Summary | December 31, 2021 (Unaudited) |
The Fund returned 12.74% (Class A shares, unadjusted for contract charges) during the 12-month period ended December 31, 2021, trailing the 14.46% return of the Blended Index. Since the index captures the returns of traditional assets and not alternative assets, it is primarily used for references purposes.
Alternative asset classes generally performed well in 2021, reflecting the broad-based rally across the financial markets. Investors reacted favorably to the combination of COVID-19 vaccine rollouts, improving global growth, and — for most of the year — supportive central bank policies. In this favorable environment, all but one of the Fund’s underlying investments produced positive absolute returns.
The best results occurred in the Real Assets segment of the portfolio, which includes investments that typically perform well in times of rising inflation. Our allocation to real estate investment trusts (REITs) was a particularly strong performer. The category benefited from healthy property market fundamentals and investors’ ongoing demand for income. REITs also have historically performed well when inflation is rising, since they can pass costs along to their tenants. An allocation to commodities also delivered robust returns, as the reopening of the economy fueled increased demand at a time in which supply was relatively static. Infrastructure stocks also produced double-digit gains and were a top performing segment in the Fund in 2021.
The Alternative Equity portfolio, which holds exchange-traded funds that invest in convertible securities and preferred stocks, also made a robust contribution to performance. These segments offer exposure to the equity market and provide both attractive yields and lower interest-rate sensitivity than bonds.
The Absolute Return portfolio achieved its objective of positive returns, but it was somewhat of a drag compared to the sizable gains in other asset classes. Still, we view this as an essential part of diversification since it can act as a source of ballast during times of market turbulence. This portion of the Fund holds DWS Global Macro Fund, which pursues a go-anywhere strategy with a risk-management component.
The Alternative Fixed Income portfolio delivered a gain in absolute terms, but it was our weakest performing segment in a year in which bonds faced headwinds from rising inflation and the prospect of higher interest rates. An allocation to emerging-market bonds finished in the red due to slowing economic growth estimates and country-specific issues affecting major markets such as China and Brazil. On the other hand, our position in senior loans performed well as their floating-rate component fueled greater investor demand. We maintained a weighting in loans, both to provide both a source of income and to offset the potential for volatility in rate-sensitive assets. Expectations for tighter U.S. Federal Reserve policy may lead to more inflows into senior loans due to their floating rate nature and lower interest-rate risk relative to fixed-rate debt.
We were active shifting the portfolio’s weightings to capitalize on opportunities or reduce risk as appropriate. The Fund’s Real Assets allocation increased due to strong market performance, so we elected to reduce the position in order to rebalance the portfolio. Similarly, we decreased the weighting in Alternative Equity to lock in some of the gains convertibles and preferred stocks have experienced since their March 2020 lows. We redeployed the proceeds to the Absolute Return portfolio as well as to the emerging-market bond allocation in Alternative Fixed Income. We believe emerging-markets debt offers both attractive yields and the potential for better price performance following its weak showing in 2021.
Although risk rose considerably late in the period due to the potentially adverse combination of rising inflation, slowing growth, and tighter central bank polices, most major stock indexes closed the year near record highs. In addition, both government bond yields and yield spreads in many fixed-income credit sectors remain near the low end of the historical range. In this environment, we believe the Fund — by virtue of its exposure to a wide range of asset classes and strategies — could be an increasingly attractive source of portfolio diversification.
Dokyoung Lee, CFA, Regional Head of Multi Asset & Solutions
Darwei Kung, Head of Investment Strategy Liquid Real Assets
Fabian Degen, CFA, Portfolio Manager Multi Asset & Solutions
Portfolio Managers
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 5 |
Terms to Know
The Blended Index is calculated using the performance of two unmanaged indices, representative of stocks (the Morgan Stanley Capital International (MSCI) World Index, 70%) and bonds (the Bloomberg U.S. Aggregate Bond Index, 30%). These results are summed to produce the aggregate benchmark. Index returns do not reflect fees or expenses and it is not possible to invest directly into an index.
Convertible securities are bonds that are issued by corporations and that can be converted to shares of the issuing company’s stock at the bondholder’s discretion.
Contribution and detraction incorporate both an investment’s total return and its weighting in the Fund.
Preferred stocks are hybrid securities that offer some of the features of both stocks and bonds.
An exchange-traded fund (ETF) is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
Yield spread refers to differences between yields on differing debt instruments, calculated by deducting the yield of one instrument from another. The higher the yield spread, the greater the difference between the yields offered by each instrument.
| 6 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
| Portfolio Summary | (Unaudited) |
| Asset Allocation* (As a % of Investment Portfolio) | 12/31/21 | 12/31/20 |
| Real Asset | 44% | 41% |
| DWS Enhanced Commodity Strategy Fund | 16% | 12% |
| DWS RREEF Global Infrastructure Fund | 12% | 11% |
| DWS RREEF Real Estate Securities Fund | 11% | 10% |
| iShares Global Infrastructure ETF | 4% | 5% |
| DWS RREEF Global Real Estate Securities Fund | 1% | 1% |
| SPDR S&P Global Natural Resources ETF | — | 2% |
| Alternative Fixed Income | 20% | 19% |
| DWS Floating Rate Fund | 8% | 9% |
| DWS Emerging Markets Fixed Income Fund | 5% | 5% |
| iShares JP Morgan USD Emerging Markets Bond ETF | 5% | 5% |
| SPDR Blackstone Senior Loan ETF | 2% | — |
| Alternative Equity | 20% | 30% |
| SPDR Bloomberg Barclays Convertible Securities ETF | 14% | 21% |
| iShares Preferred & Income Securities ETF | 6% | 9% |
| Absolute Return | 7% | 5% |
| DWS Global Macro Fund | 7% | 5% |
| Cash Equivalents | 9% | 5% |
| DWS ESG Liquidity Fund | 7% | — |
| DWS Central Cash Management Government Fund | 2% | 5% |
| | 100% | 100% |
| * | During the periods indicated, asset categories and investment strategies represented in the Fund’s portfolio fell into the following categories: Real Assets, Alternative Fixed Income, Alternative Equity, and Absolute Return. Real Asset investments have a tangible or physical aspect such as real estate or commodities. Alternative Fixed Income investments seek to offer exposure to categories generally not included in investors’ allocations and to foreign investments, many of which are not denominated in US dollars. Alternative Equity investments are investments primarily in convertible and preferred instruments that offer equity exposure. Absolute Return investments seek positive returns in all market environments or seek to increase the diversification or liquidity of the Fund’s portfolio. |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 8.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 7 |
| Investment Portfolio | as of December 31, 2021 |
| | Shares | Value ($) |
| Mutual Funds 60.0% | | | |
| DWS Emerging Markets Fixed Income Fund "Institutional" (a) | | 2,765,811 | 24,615,718 |
| DWS Enhanced Commodity Strategy Fund "Institutional" (a) | | 9,522,257 | 79,225,180 |
| DWS Floating Rate Fund "Institutional" (a) | | 5,026,625 | 39,810,871 |
| DWS Global Macro Fund "Institutional" (a) | | 3,209,502 | 33,828,146 |
| DWS RREEF Global Infrastructure Fund "Institutional" (a) | | 3,427,302 | 61,417,258 |
| DWS RREEF Global Real Estate Securities Fund "Institutional" (a) | | 571,794 | 5,306,244 |
| DWS RREEF Real Estate Securities Fund "Institutional" (a) | | 1,917,820 | 52,375,661 |
| Total Mutual Funds (Cost $281,924,824) | 296,579,078 |
| Exchange-Traded Funds 31.4% |
| iShares Global Infrastructure ETF | | 411,223 | 19,570,103 |
| iShares JP Morgan USD Emerging Markets Bond ETF | | 210,018 | 22,904,563 |
| | Shares | Value ($) |
| iShares Preferred & Income Securities ETF | | 723,343 | 28,521,414 |
| SPDR Blackstone Senior Loan ETF | | 280,331 | 12,791,504 |
| SPDR Bloomberg Convertible Securities ETF | | 861,680 | 71,484,973 |
| Total Exchange-Traded Funds (Cost $123,838,858) | 155,272,557 |
| Cash Equivalents 8.7% |
| DWS Central Cash Management Government Fund, 0.05% (a) (b) | | 11,467,666 | 11,467,666 |
| DWS ESG Liquidity Fund "Institutional", (a) 0.09% | | 31,715,570 | 31,709,226 |
| Total Cash Equivalents (Cost $43,179,101) | 43,176,892 |
| | | % of
Net Assets | Value ($) |
| Total Investment Portfolio (Cost $448,942,783) | | 100.1 | 495,028,527 |
| Other Assets and Liabilities, Net | | (0.1) | (405,888) |
| Net Assets | | 100.0 | 494,622,639 |
A summary of the Fund’s transactions with affiliated Underlying DWS Funds during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Mutual Funds 60.0% |
| DWS Emerging Markets Fixed Income Fund "Institutional" (a) |
| 24,932,114 | 1,209,703 | — | — | (1,526,099) | 1,154,324 | — | 2,765,811 | 24,615,718 |
| DWS Enhanced Commodity Strategy Fund "Institutional" (a) |
| 53,979,797 | 37,432,857 | 4,808,000 | (2,836,040) | (4,543,434) | 24,176,556 | — | 9,522,257 | 79,225,180 |
| DWS Floating Rate Fund "Institutional" (a) |
| 40,691,313 | 1,425,056 | 2,442,607 | (340,883) | 477,992 | 1,413,344 | — | 5,026,625 | 39,810,871 |
| DWS Global Macro Fund "Institutional" (a) |
| 22,250,874 | 10,471,447 | — | — | 1,105,825 | 359,146 | — | 3,209,502 | 33,828,146 |
| DWS RREEF Global Infrastructure Fund "Institutional" (a) |
| 53,154,596 | 3,498,108 | 2,399,200 | 222,889 | 6,940,865 | 730,927 | 2,830,250 | 3,427,302 | 61,417,258 |
| DWS RREEF Global Real Estate Securities Fund "Institutional" (a) |
| 4,792,369 | 456,542 | 888,400 | 148,609 | 797,124 | 240,711 | 215,832 | 571,794 | 5,306,244 |
| DWS RREEF Real Estate Securities Fund "Institutional" (a) |
| 44,650,237 | 13,570,567 | 19,465,800 | 3,209,409 | 10,411,248 | 740,459 | 3,117,108 | 1,917,820 | 52,375,661 |
| Cash Equivalents 8.7% |
| DWS Central Cash Management Government Fund, 0.05% (a) (b) |
| 23,563,848 | 66,810,931 | 78,907,113 | — | — | 5,151 | — | 11,467,666 | 11,467,666 |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| DWS ESG Liquidity Fund, 0.09% (a) |
| — | 37,189,531 | 5,477,000 | (1,096) | (2,209) | 6,777 | — | 31,715,570 | 31,709,226 |
| 268,015,148 | 172,064,742 | 114,388,120 | 402,888 | 13,661,312 | 28,827,395 | 6,163,190 | 69,624,347 | 339,755,970 |
| (a) | Affiliated fund managed by DWS Investment Management Americas, Inc. |
| (b) | The rate shown is the annualized seven-day yield at period end. |
| SPDR: Standard & Poor's Depositary Receipt |
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Mutual Funds | $ 296,579,078 | $ — | $ — | $ 296,579,078 |
| Exchange-Traded Funds | 155,272,557 | — | — | 155,272,557 |
| Short-Term Investments | 43,176,892 | — | — | 43,176,892 |
| Total | $ 495,028,527 | $ — | $ — | $ 495,028,527 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 9 |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in non-affiliated Underlying Funds, at value (cost $123,838,858) | $ 155,272,557 |
| Investments in affiliated Underlying Funds, at value (cost $325,103,925) | 339,755,970 |
| Receivable for Fund shares sold | 176,171 |
| Interest receivable | 440 |
| Other assets | 8,328 |
| Total assets | 495,213,466 |
| Liabilities | |
| Payable for Fund shares redeemed | 221,971 |
| Accrued management fee | 41,852 |
| Accrued Trustees' fees | 4,383 |
| Other accrued expenses and payables | 322,621 |
| Total liabilities | 590,827 |
| Net assets, at value | $ 494,622,639 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 72,802,123 |
| Paid-in capital | 421,820,516 |
| Net assets, at value | $ 494,622,639 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($47,310,523 ÷ 3,126,054 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 15.13 |
| Class B | |
| Net Asset Value, offering and redemption price per share ($447,312,116 ÷ 29,598,447 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 15.11 |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Dividends | $ 4,938,975 |
| Income distributions from affiliated Underlying Funds | 28,827,395 |
| Total income | 33,766,370 |
| Expenses: | |
| Management fee | 482,189 |
| Administration fee | 467,723 |
| Services to shareholders | 1,448 |
| Record keeping fee (Class B) | 589,375 |
| Distribution service fee (Class B) | 1,099,974 |
| Custodian fee | 6,539 |
| Professional fees | 76,642 |
| Reports to shareholders | 34,272 |
| Trustees' fees and expenses | 17,827 |
| Other | 12,258 |
| Total expenses before expense reductions | 2,788,247 |
| Expense reductions | (43,984) |
| Total expenses after expense reductions | 2,744,263 |
| Net investment income | 31,022,107 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from: | |
| Sale of affiliated Underlying Funds | 402,888 |
| Sale of non-affiliated Underlying Funds | 9,618,535 |
| Capital gain distributions from affiliated Underlying Funds | 6,163,190 |
| | 16,184,613 |
| Change in net unrealized appreciation (depreciation) on: | |
| Affiliated Underlying Funds | 13,661,312 |
| Non-affiliated Underlying Funds | (5,127,767) |
| | 8,533,545 |
| Net gain (loss) | 24,718,158 |
| Net increase (decrease) in net assets resulting from operations | $55,740,265 |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 31,022,107 | $ 8,122,677 |
| Net realized gain (loss) | 16,184,613 | (8,427,570) |
Change in net unrealized appreciation
(depreciation) | 8,533,545 | 28,215,922 |
| Net increase (decrease) in net assets resulting from operations | 55,740,265 | 27,911,029 |
| Distributions to shareholders: | | |
| Class A | (808,613) | (873,617) |
| Class B | (7,405,682) | (8,977,130) |
| Total distributions | (8,214,295) | (9,850,747) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 8,392,486 | 5,411,306 |
| Reinvestment of distributions | 808,613 | 873,617 |
| Payments for shares redeemed | (2,937,240) | (4,249,598) |
| Net increase (decrease) in net assets from Class A share transactions | 6,263,859 | 2,035,325 |
| Class B | | |
| Proceeds from shares sold | 11,611,634 | 73,640,815 |
| Reinvestment of distributions | 7,405,682 | 8,977,130 |
| Payments for shares redeemed | (42,234,997) | (21,769,862) |
| Net increase (decrease) in net assets from Class B share transactions | (23,217,681) | 60,848,083 |
| Increase (decrease) in net assets | 30,572,148 | 80,943,690 |
| Net assets at beginning of period | 464,050,491 | 383,106,801 |
| Net assets at end of period | $494,622,639 | $464,050,491 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 2,699,800 | 2,541,554 |
| Shares sold | 573,373 | 433,052 |
| Shares issued to shareholders in reinvestment of distributions | 56,428 | 76,499 |
| Shares redeemed | (203,547) | (351,305) |
| Net increase (decrease) in Class A shares | 426,254 | 158,246 |
| Shares outstanding at end of period | 3,126,054 | 2,699,800 |
| Class B | | |
| Shares outstanding at beginning of period | 31,208,785 | 26,180,029 |
| Shares sold | 791,155 | 5,958,291 |
| Shares issued to shareholders in reinvestment of distributions | 516,435 | 785,401 |
| Shares redeemed | (2,917,928) | (1,714,936) |
| Net increase (decrease) in Class B shares | (1,610,338) | 5,028,756 |
| Shares outstanding at end of period | 29,598,447 | 31,208,785 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 11 |
Financial Highlights
| DWS Alternative Asset Allocation VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $13.70 | $13.35 | $12.10 | $13.61 | $12.97 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | 1.04 | .29 | .40 | .61 | .33 |
| Net realized and unrealized gain (loss) | .69 | .40 | 1.35 | (1.84) | .62 |
| Total from investment operations | 1.73 | .69 | 1.75 | (1.23) | .95 |
| Less distributions from: | | | | | |
| Net investment income | (.30) | (.34) | (.50) | (.28) | (.31) |
| Net asset value, end of period | $15.13 | $13.70 | $13.35 | $12.10 | $13.61 |
| Total Return (%)b | 12.74 | 5.71 | 14.68 c | (9.14) c | 7.41 c |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 47 | 37 | 34 | 26 | 27 |
| Ratio of expenses before expense reductions (%)d,e | .23 | .23 | .56 | .73 | .64 |
| Ratio of expenses after expense reductions (%)d,e | .23 | .23 | .23 | .16 | .19 |
| Ratio of net investment income (%) | 7.13 | 2.29 | 3.09 | 4.78 | 2.50 |
| Portfolio turnover rate (%) | 19 | 18 | 10 | 32 | 55 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower if the Advisor had not reduced some Underlying DWS Funds’ expenses. |
| c | Total return would have been lower had certain expenses not been reduced. |
| d | The Fund invests in other Funds and indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which the Fund is invested. This ratio does not include these indirect fees and expenses. |
| e | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
| DWS Alternative Asset Allocation VIP — Class B |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data | | | | | |
| Net asset value, beginning of period | $13.68 | $13.34 | $12.09 | $13.59 | $12.96 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .93 | .24 | .37 | .62 | .31 |
| Net realized and unrealized gain (loss) | .75 | .41 | 1.34 | (1.88) | .59 |
| Total from investment operations | 1.68 | .65 | 1.71 | (1.26) | .90 |
| Less distributions from: | | | | | |
| Net investment income | (.25) | (.31) | (.46) | (.24) | (.27) |
| Net asset value, end of period | $15.11 | $13.68 | $13.34 | $12.09 | $13.59 |
| Total Return (%)b,c | 12.35 | 5.32 | 14.35 | (9.35) | 7.01 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 447 | 427 | 349 | 208 | 157 |
| Ratio of expenses before expense reductions (%)d,e | .61 | .61 | .92 | 1.08 | .93 |
| Ratio of expenses after expense reductions (%)d,e | .60 | .59 | .52 | .45 | .48 |
| Ratio of net investment income (%) | 6.37 | 1.94 | 2.90 | 4.85 | 2.31 |
| Portfolio turnover rate (%) | 19 | 18 | 10 | 32 | 55 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower if the Advisor had not reduced some Underlying DWS Funds’ expenses. |
| c | Total return would have been lower had certain expenses not been reduced. |
| d | The Fund invests in other Funds and indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which the Fund is invested. This ratio does not include these indirect fees and expenses. |
| e | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 13 |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS Alternative Asset Allocation VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust. The Fund mainly invests in other affiliated DWS funds (i.e., mutual funds, exchange-traded funds and other pooled investment vehicles managed by DWS Investment Management Americas, Inc. or one of its affiliates, together the “Underlying DWS Funds”), non-affiliated exchange-traded funds (“Non-affiliated ETFs”), non-affiliated exchange-traded notes (“Non-affiliated ETNs”) and derivative investments. Non-affiliated ETFs, Non-affiliated ETNs and Underlying DWS Funds are collectively referred to as “Underlying Funds.” During the year ended December 31, 2021, the Fund primarily invested in Underlying DWS Funds and non-affiliated ETFs. Each Underlying DWS Fund’s accounting policies and investment holdings are outlined in the Underlying DWS Funds’ financial statements and are available upon request.
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of up to 0.25% and of up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping 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 Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Investments in mutual funds are valued at the net asset value per share of each class of the Underlying DWS Funds and are categorized as Level 1.
ETFs and ETNs are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. ETFs and ETNs 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. ETFs and ETNs securities are generally categorized as Level 1.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Federal Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
| 14 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and capital gain distributions from Underlying Funds. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income* | $ 32,017,106 |
| Undistributed long-term capital gains | $ 455,895 |
| Net unrealized appreciation (depreciation) on investments | $ 40,329,123 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $454,699,404. The net unrealized appreciation for all investments based on tax cost was $40,329,123. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $61,302,745 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $20,973,622.
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 8,214,295 | $ 9,850,747 |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend Income is recorded on the ex-dividend date. Distributions of income and capital gains from the Underlying Funds are recorded on the ex-dividend date. Realized gains and losses from investment transactions are recorded on an identified cost basis.
| B. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of affiliated Underlying Funds (excluding short-term investments) aggregated $68,064,280 and $30,004,007, respectively. Purchases and sales of Non-affiliated ETFs aggregated $17,830,914 and $63,579,789, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments in Underlying Funds to be purchased, sold or entered into by the Fund or delegates such responsibility to the Fund’s subadvisor.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 15 |
RREEF America L.L.C. (“RREEF”), an indirect, wholly owned subsidiary of DWS Group, acts as an investment subadvisor to the Fund. As an investment subadvisor to the Fund, RREEF provides investment management services to the portions of the Fund’s portfolio allocated to direct investments in global real estate and global infrastructure securities. RREEF is paid by the Advisor for the services RREEF provides to the Fund. As of the date of this report, the Fund obtained its exposure to global real estate and global infrastructure securities indirectly through investments in other Underlying Funds.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund’s average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:
| On assets invested in exchange-traded funds and mutual funds | .10% |
| On assets invested in all other assets not considered exchange-traded funds and mutual funds | 1.00% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.10% of the Fund’s average daily net assets.
In addition, the Advisor will receive management fees from managing the Underlying DWS Funds in which the Fund invests.
The Fund does not invest in the Underlying DWS Funds for the purpose of exercising management or control; however, investments within the set limits may represent 5% or more of an Underlying DWS Fund’s outstanding shares. At December 31, 2021, the Fund held approximately 33% of DWS Emerging Markets Fixed Income Fund, 6% of DWS ESG Liquidity Fund, 26% of DWS Floating Rate Fund and 15% of DWS Global Macro Fund.
For the period from January 1, 2021 through April 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse Fund expenses to the extent necessary to maintain the total annual operating expenses (including indirect expenses of Underlying Funds and excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
For the period from May 1, 2021 through September 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse Fund expenses to the extent necessary to maintain the total annual operating expenses (including indirect expenses of Underlying Funds and excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
| Class A | | 1.20% |
| Class B | | 1.58% |
Effective October 1, 2021 through September 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse Fund expenses to the extent necessary to maintain the total annual operating expenses (including indirect expenses of Underlying Funds and excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
| Class A | | | 1.03% |
| Class B | | | 1.41% |
For the year ended December 31, 2021, fees waived and/or expenses reimbursed for Class B are $43,984.
The Fund indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which it is invested.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $467,723, of which $40,000 is unpaid.
| 16 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
Service Provider Fees. DWS Service Company (“DSC”), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST”), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class A | $ 220 | $ 37 |
| Class B | 353 | 59 |
| | $ 573 | $ 96 |
Distribution Service Agreement. Under the Fund’s Class B 12b-1 plan, DWS Distributors, Inc. (“DDI”) received a fee (“Distribution Service Fee”) of up to 0.25% of the average daily net assets of Class B shares. For the year ended December 31, 2021, the Distribution Service Fee aggregated $1,099,974, of which $93,307 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $1,164, of which $112 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee.
At December 31, 2021, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 79% and 18%, respectively. Two participating insurance companies were the owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 83% and 11%, respectively.
| E. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 17 |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS Alternative Asset Allocation VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS Alternative Asset Allocation VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
| 18 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund’s shareholders indirectly bear the expense of the Underlying Funds in which the Fund invests. These expenses are not included in the Fund’s annualized expense ratios used to calculate the expense estimate in the tables. The examples in the table are based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,032.80 | $ 1,030.70 |
| Expenses Paid per $1,000* | $ 1.18 | $ 3.12 |
| Hypothetical 5% Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,024.05 | $ 1,022.13 |
| Expenses Paid per $1,000* | $ 1.17 | $ 3.11 |
| * | Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratios** | Class A | Class B |
| Deutsche DWS Variable Series II — DWS Alternative Asset Allocation VIP | .23% | .61% |
| ** | The Fund invests in other funds and indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which the Fund is invested. These ratios do not include these indirect fees and expenses. |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 19 |
| Tax Information | (Unaudited) |
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $502,000 as capital gain dividends for its year ended December 31, 2021.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
| 20 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Alternative Asset Allocation VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) and sub-advisory agreement (the “Sub-Advisory Agreement” and together with the Agreement, the “Agreements”) between DIMA and RREEF America L.L.C. (“RREEF”), an affiliate of DIMA, in September 2021.
In terms of the process that the Board followed prior to approving the Agreements, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreements, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA has managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA and RREEF are part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s and RREEF’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreements, including the scope of advisory services provided under the Agreements. The Board noted that, under the Agreements, DIMA and RREEF provide portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. Throughout the course of the year, the Board also received information regarding DIMA’s oversight of fund sub-advisors, including RREEF. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 21 |
noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 2nd quartile, 1st quartile and 1st quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2020.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, sub-advisory fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were equal to the median of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that, from inception through October 1, 2019, DIMA waived voluntarily a portion (0.15%) of the Fund’s management fee, and noted further that, effective October 1, 2019, in connection with the 2019 contract renewal process, DIMA agreed to reduce the Fund’s contractual management fee by 0.10% on assets invested in other funds and by 0.20% on assets invested in direct investments. With respect to any sub-advisory fee paid to RREEF, the Board noted that the fee is paid by DIMA out of its fee and not directly by the Fund. The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (1st quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020), and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees, but inclusive of acquired fund fees and expenses) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”) and considered differences between the Fund and the comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA and RREEF.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA from advising the DWS Funds along with the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality. The Board did not receive profitability information with respect to the Fund, but did receive such information with respect to the DWS Funds in which the Fund invests. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. In this regard, the Board observed that while the Fund’s current investment management fee schedule does not include breakpoints, the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public
| 22 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreements is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreements.
| Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP | | 23 |
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
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Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
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Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| 26 | | Deutsche DWS Variable Series II —DWS Alternative Asset Allocation VIP |
VS2AAA-2 (R-025824-11 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
Contents
| 3 | Performance Summary |
| 4 | Management Summary |
| 6 | Portfolio Summary |
| 7 | Investment Portfolio |
| 10 | Statement of Assets and Liabilities |
| 10 | Statement of Operations |
| 11 | Statements of Changes in Net Assets |
| 12 | Financial Highlights |
| 14 | Notes to Financial Statements |
| 20 | Report of Independent Registered Public Accounting Firm |
| 21 | Information About Your Fund's Expenses |
| 22 | Tax Information |
| 22 | Proxy Voting |
| 23 | Advisory Agreement Board Considerations and Fee Evaluation |
| 26 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Stocks may decline in value. The Fund will be managed using the CROCI® Investment Process which is based on portfolio management’s belief that, over time, stocks which display more favorable financial metrics (for example, the CROCI® Economic P/E Ratio) as generated by this process may outperform stocks which display less favorable metrics. This premise may not prove to be correct and prospective investors should evaluate this assumption prior to investing in the Fund. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund 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 gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 are 0.80% and 1.12% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
Russell 1000® Value Index is an unmanaged market capitalization-weighted index of value-oriented stocks of the largest U.S. domiciled companies that are included in the Russell 1000 Index. Value-oriented stocks tend to have lower price-to-book ratios and lower forecasted growth values. Russell 1000 Index is an unmanaged price-only index of the 1,000 largest capitalized companies that are domiciled in the U.S. and whose common stocks are traded.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Prior to May 1, 2017, the Fund operated with a different investment strategy. Prior to October 3, 2016, the Fund had a team that operated with a different investment strategy. Performance would have been different if the Fund’s current strategy had been in effect.
| Comparative Results |
| DWS CROCI® U.S. VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $12,669 | $14,795 | $16,272 | $23,053 |
| Average annual total return | 26.69% | 13.95% | 10.23% | 8.71% |
| Russell 1000® Value Index | Growth of $10,000 | $12,516 | $16,281 | $16,976 | $33,846 |
| Average annual total return | 25.16% | 17.64% | 11.16% | 12.97% |
| DWS CROCI® U.S. VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class B | Growth of $10,000 | $12,627 | $14,652 | $16,021 | $22,364 |
| Average annual total return | 26.27% | 13.58% | 9.88% | 8.38% |
| Russell 1000® Value Index | Growth of $10,000 | $12,516 | $16,281 | $16,976 | $33,846 |
| Average annual total return | 25.16% | 17.64% | 11.16% | 12.97% |
| The growth of $10,000 is cumulative. |
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 3 |
| Management Summary | December 31, 2021 (Unaudited) |
The Fund produced a robust gain of 26.69% (Class A shares, unadjusted for contract charges) in 2021 and outperformed the 25.16% return of its benchmark, the Russell 1000® Value Index.
Stocks performed well in 2021 thanks in part to the rollout of COVID-19 vaccines and the gradual re-opening of the economy that followed. Economic growth and corporate earnings came in well above expectations in the first half of the year as a result, propelling the market higher. U.S. Federal Reserve (Fed) policy was also supportive for most of the year, with near-zero interest rates and the continuation of the stimulative quantitative easing program. A series of fiscal stimulus packages enacted by the U.S. government provided additional momentum for both economic growth and investor sentiment. In combination, these developments helped investors look beyond risk factors such as rising inflation, worries about China’s economy, and the emergence of new variants of COVID-19. Value stocks slightly underperformed growth, largely as a result of the strong showing for a narrow group of mega-cap U.S. technology-related companies.
Our strategy tends to favor defensive companies and tilt away from those that are higher-beta and/or more economically sensitive. While this approach would typically be expected to weigh on relative performance during a year in which the market posted a double-digit gain, the Fund in fact outpaced the benchmark on the strength of individual stock selection. The Fund delivered its strongest results in information technology, where holdings in a number of semiconductor companies logged returns well in excess of both their sector peers and the market as a whole. Among these were Broadcom, Inc., QUALCOMM, Inc., KLA Corp., and Micron Technology, Inc. Positions in Cisco Systems, Inc. and Oracle Corp. added value, as well. Selection was also positive in communications services, with the largest contribution coming from an overweight position in Discovery, Inc.* The stock rebounded from its pandemic-driven sell-off of 2020 behind a robust recovery in advertising revenues. Consumer discretionary was another area of strength for the Fund, led by AutoZone, Inc., the homebuilder D.R. Horton, Inc., and eBay, Inc.
On the other hand, the health care company Viatris, Inc.* was the largest detractor. The stock suffered negative returns due to the combination of lower guidance, increased costs, and concerns that the company may have to reduce its dividend payment. The Fund lost ground through positions in a number of food producers, including Campbell Soup Co.* and Conagra Brands, Inc.,* that were pressured by worries that rising input costs will compel them either to raise prices or suffer a hit to their profit margins.
Sector allocation was a net detractor for the year, reducing the positive impact from stock selection. The Fund was hurt by its overweight position in the defensive consumer staples sector, as well as its underweights in energy and financials. The two sectors were the best and third-best sector performers, respectively, in 2021. A zero weighting in real estate, which finished with the second-best return, also detracted from results.
We adjusted our approach during the course of the year. While in the past we sought to maintain approximately equal weightings in all of the portfolio’s holdings, we have introduced a new portfolio optimization process. The goal of this shift was to preserve the potential benefit from stock selection, while using more disciplined risk controls to reduce performance divergences in relation to the benchmark. One result of this process is that the portfolio’s sector weightings moved closer to those of the index.
The outlook for economic growth, corporate earnings, and global central bank policy, after supporting market performance for an extended period, became more murky late in 2021. Together with the emergence of new risk factors and valuations that are above the historical average, these factors indicate that broad-based market strength may no longer act as the proverbial rising tide that lifts all boats. Instead, we believe investors will start to place a greater emphasis on the fundamentals and valuations of individual companies — a trend we think could work in favor of the types of stocks we hold in the Fund.
Di Kumble, CFA, Senior Portfolio Manager Equity
John Moody, Portfolio Manager Equity
Portfolio Managers
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
| 4 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
Terms to Know
Russell 1000 Value Index is an unmanaged market capitalization-weighted index of value-oriented stocks of the largest U.S. domiciled companies that are included in the Russell 1000® Index. Value-oriented stocks tend to have lower price-to-book ratios and lower forecasted growth values. Russell 1000 Index is an unmanaged price-only index of the 1,000 largest capitalized companies that are domiciled in the U.S. and whose common stocks are traded.
Stock selection refers to the performance of the Fund’s holdings in a given sector relative to the sector as a whole.
Contribution and detraction incorporate both a stock’s total return and its weighting in the index.
Overweight means the Fund holds a higher weighting in a given sector or security than the benchmark. Underweight means the Fund holds a lower weighting.
| * | Not held at December 31, 2021. |
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 5 |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 12/31/21 | 12/31/20 |
| Common Stocks | 100% | 100% |
| Cash Equivalents | 0% | 0% |
| | 100% | 100% |
Sector Diversification
(As a % of Investment Portfolio excluding Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| Information Technology | 30% | 16% |
| Health Care | 23% | 25% |
| Financials | 12% | 5% |
| Consumer Discretionary | 10% | 12% |
| Consumer Staples | 9% | 24% |
| Communication Services | 8% | 11% |
| Industrials | 5% | 7% |
| Materials | 2% | — |
| Energy | 1% | — |
| | 100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 7.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| 6 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
| Investment Portfolio | as of December 31, 2021 |
| | Shares | Value ($) |
| Common Stocks 99.7% | |
| Communication Services 8.0% | |
| Interactive Media & Services 6.5% | |
| Alphabet, Inc. "A"* | | 1,124 | 3,256,273 |
| Meta Platforms, Inc. "A"* | | 19,802 | 6,660,402 |
| | | | 9,916,675 |
| Media 1.5% | |
| Fox Corp. "A" | | 50,549 | 1,865,258 |
| ViacomCBS, Inc. "B" | | 12,365 | 373,176 |
| | | | 2,238,434 |
| Consumer Discretionary 9.7% | |
| Hotels, Restaurants & Leisure 0.6% | |
| Boyd Gaming Corp.* | | 12,776 | 837,722 |
| Household Durables 2.1% | |
| D.R. Horton, Inc. | | 30,125 | 3,267,056 |
| Internet & Direct Marketing Retail 1.1% | |
| eBay, Inc. | | 26,072 | 1,733,788 |
| Multiline Retail 2.4% | |
| Dollar General Corp. | | 15,554 | 3,668,100 |
| Specialty Retail 3.3% | |
| AutoNation, Inc.* | | 7,795 | 910,846 |
| AutoZone, Inc.* | | 679 | 1,423,449 |
| Bath & Body Works, Inc. | | 6,423 | 448,261 |
| Lowe's Companies, Inc. | | 8,352 | 2,158,825 |
| | | | 4,941,381 |
| Textiles, Apparel & Luxury Goods 0.2% | |
| Tapestry, Inc. | | 8,994 | 365,157 |
| Consumer Staples 8.6% | |
| Beverages 1.0% | |
| Constellation Brands, Inc. "A" | | 5,923 | 1,486,495 |
| Food & Staples Retailing 1.9% | |
| Kroger Co. | | 64,487 | 2,918,682 |
| Food Products 2.8% | |
| J M Smucker Co. | | 20,998 | 2,851,948 |
| Tyson Foods, Inc. "A" | | 15,839 | 1,380,527 |
| | | | 4,232,475 |
| Tobacco 2.9% | |
| Altria Group, Inc. | | 38,535 | 1,826,174 |
| Philip Morris International, Inc. | | 27,933 | 2,653,635 |
| | | | 4,479,809 |
| Energy 1.1% | |
| Oil, Gas & Consumable Fuels | |
| ONEOK, Inc. | | 7,191 | 422,543 |
| Pioneer Natural Resources Co. | | 4,415 | 803,000 |
| Williams Companies, Inc. | | 15,462 | 402,631 |
| | | | 1,628,174 |
| | Shares | Value ($) |
| Financials 11.7% | |
| Banks 4.8% | |
| Bank of America Corp. | | 40,852 | 1,817,506 |
| Citigroup, Inc. | | 9,940 | 600,277 |
| JPMorgan Chase & Co. | | 15,921 | 2,521,090 |
| U.S. Bancorp. | | 41,154 | 2,311,620 |
| | | | 7,250,493 |
| Capital Markets 3.6% | |
| Bank of New York Mellon Corp. | | 46,427 | 2,696,480 |
| Northern Trust Corp. | | 4,231 | 506,070 |
| State Street Corp. | | 24,340 | 2,263,620 |
| | | | 5,466,170 |
| Consumer Finance 3.3% | |
| Capital One Financial Corp. | | 16,486 | 2,391,954 |
| Discover Financial Services | | 9,269 | 1,071,125 |
| Synchrony Financial | | 33,928 | 1,573,920 |
| | | | 5,036,999 |
| Health Care 22.6% | |
| Biotechnology 5.9% | |
| AbbVie, Inc. | | 30,388 | 4,114,535 |
| Biogen, Inc.* | | 2,683 | 643,705 |
| Gilead Sciences, Inc. | | 5,503 | 399,573 |
| Regeneron Pharmaceuticals, Inc.* | | 6,043 | 3,816,276 |
| | | | 8,974,089 |
| Health Care Providers & Services 5.4% | |
| HCA Healthcare, Inc. | | 5,979 | 1,536,125 |
| Laboratory Corp. of America Holdings* | | 8,248 | 2,591,604 |
| McKesson Corp. | | 5,709 | 1,419,086 |
| Quest Diagnostics, Inc. | | 12,881 | 2,228,542 |
| Tenet Healthcare Corp.* | | 5,124 | 418,579 |
| | | | 8,193,936 |
| Pharmaceuticals 11.3% | |
| Bristol-Myers Squibb Co. | | 96,976 | 6,046,454 |
| Johnson & Johnson | | 37,643 | 6,439,588 |
| Pfizer, Inc. | | 80,568 | 4,757,540 |
| | | | 17,243,582 |
| Industrials 5.3% | |
| Air Freight & Logistics 3.0% | |
| Expeditors International of Washington, Inc. (a) | | 33,824 | 4,542,225 |
| Industrial Conglomerates 1.5% | |
| 3M Co. | | 12,910 | 2,293,203 |
| Machinery 0.6% | |
| Stanley Black & Decker, Inc. | | 4,597 | 867,086 |
| Professional Services 0.2% | |
| ManpowerGroup, Inc. | | 4,015 | 390,780 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 7 |
| | Shares | Value ($) |
| Information Technology 30.3% | |
| Communications Equipment 2.1% | |
| Cisco Systems, Inc. | | 50,043 | 3,171,225 |
| Electronic Equipment, Instruments & Components 1.1% | |
| Flex Ltd.* | | 22,165 | 406,284 |
| Jabil, Inc. | | 18,934 | 1,332,007 |
| | | | 1,738,291 |
| IT Services 6.3% | |
| Amdocs Ltd. | | 41,485 | 3,104,738 |
| Cognizant Technology Solutions Corp. "A" | | 35,264 | 3,128,622 |
| International Business Machines Corp. | | 24,735 | 3,306,080 |
| | | | 9,539,440 |
| Semiconductors & Semiconductor Equipment 10.4% | |
| Applied Materials, Inc. | | 17,129 | 2,695,420 |
| Broadcom, Inc. | | 6,213 | 4,134,192 |
| KLA Corp. | | 3,245 | 1,395,707 |
| Lam Research Corp. | | 1,936 | 1,392,274 |
| Micron Technology, Inc. | | 18,307 | 1,705,297 |
| QUALCOMM, Inc. | | 12,430 | 2,273,074 |
| Skyworks Solutions, Inc. | | 9,769 | 1,515,563 |
| Teradyne, Inc. | | 4,564 | 746,351 |
| | | | 15,857,878 |
| Software 7.2% | |
| Microsoft Corp. | | 2,798 | 941,023 |
| Oracle Corp. | | 29,990 | 2,615,428 |
| SS&C Technologies Holdings, Inc. | | 89,666 | 7,350,819 |
| | | | 10,907,270 |
| Technology Hardware, Storage & Peripherals 3.2% | |
| Apple, Inc. | | 21,453 | 3,809,409 |
| Hewlett Packard Enterprise Co. | | 25,227 | 397,830 |
| HP, Inc. | | 15,605 | 587,840 |
| | | | 4,795,079 |
| | Shares | Value ($) |
| Materials 2.4% | |
| Chemicals 0.6% | |
| Olin Corp. | | 16,421 | 944,536 |
| Containers & Packaging 0.6% | |
| Amcor PLC | | 44,845 | 538,588 |
| Westrock Co. | | 8,677 | 384,912 |
| | | | 923,500 |
| Metals & Mining 1.2% | |
| Nucor Corp. | | 15,138 | 1,728,003 |
| Total Common Stocks (Cost $130,981,233) | 151,577,733 |
| Securities Lending Collateral 0.5% |
DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (b) (c)
(Cost $763,000) | | 763,000 | 763,000 |
| Cash Equivalents 0.4% |
| DWS Central Cash Management Government Fund, 0.05% (b) (Cost $572,173) | | 572,173 | 572,173 |
| | | % of
Net Assets | Value ($) |
| Total Investment Portfolio (Cost $132,316,406) | | 100.6 | 152,912,906 |
| Other Assets and Liabilities, Net | | (0.6) | (900,307) |
| Net Assets | | 100.0 | 152,012,599 |
A summary of the Fund’s transactions with affiliated investments during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Securities Lending Collateral 0.5% |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (b) (c) |
| 4,309,705 | — | 3,546,705 (d) | — | — | 1,268 | — | 763,000 | 763,000 |
| Cash Equivalents 0.4% |
| DWS Central Cash Management Government Fund, 0.05% (b) |
| 621,226 | 13,463,621 | 13,512,674 | — | — | 255 | — | 572,173 | 572,173 |
| 4,930,931 | 13,463,621 | 17,059,379 | — | — | 1,523 | — | 1,335,173 | 1,335,173 |
| * | Non-income producing security. |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
| (a) | All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at December 31, 2021 amounted to $752,024, which is 0.5% of net assets. |
| (b) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
| (c) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
| (d) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the year ended December 31, 2021. |
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Common Stocks (a) | $ 151,577,733 | $ — | $ — | $ 151,577,733 |
| Short-Term Investments (a) | 1,335,173 | — | — | 1,335,173 |
| Total | $ 152,912,906 | $ — | $ — | $ 152,912,906 |
| (a) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 9 |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in non-affiliated securities, at value (cost $130,981,233) — including $752,024 of securities loaned | $ 151,577,733 |
| Investment in DWS Government & Agency Securities Portfolio (cost $763,000)* | 763,000 |
| Investment in DWS Central Cash Management Government Fund (cost $572,173) | 572,173 |
| Cash | 18,543 |
| Receivable for Fund shares sold | 2,959 |
| Dividends receivable | 152,685 |
| Interest receivable | 60 |
| Other assets | 3,017 |
| Total assets | 153,090,170 |
| Liabilities | |
| Payable upon return of securities loaned | 763,000 |
| Payable for Fund shares redeemed | 158,352 |
| Accrued management fee | 59,285 |
| Accrued Trustees' fees | 2,145 |
| Other accrued expenses and payables | 94,789 |
| Total liabilities | 1,077,571 |
| Net assets, at value | $ 152,012,599 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 24,696,553 |
| Paid-in capital | 127,316,046 |
| Net assets, at value | $ 152,012,599 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($148,770,985 ÷ 9,269,906 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 16.05 |
| Class B | |
| Net Asset Value, offering and redemption price per share ($3,241,614 ÷ 201,242 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 16.11 |
| * | Represents collateral on securities loaned. |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Dividends | $ 3,388,418 |
| Income distributions — DWS Central Cash Management Government Fund | 255 |
| Securities lending income, net of borrower rebates | 1,268 |
| Total income | 3,389,941 |
| Expenses: | |
| Management fee | 873,762 |
| Administration fee | 141,258 |
| Record keeping fee (Class B) | 1,994 |
| Distribution service fee (Class B) | 8,229 |
| Custodian fee | 4,004 |
| Professional fees | 75,842 |
| Reports to shareholders | 28,782 |
| Trustees' fees and expenses | 5,961 |
| Other | 6,428 |
| Total expenses before expense reductions | 1,146,260 |
| Expense reductions | (108,496) |
| Total expenses after expense reductions | 1,037,764 |
| Net investment income | 2,352,177 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from investments | 18,442,647 |
| Change in net unrealized appreciation (depreciation) on investments | 13,221,244 |
| Net gain (loss) | 31,663,891 |
| Net increase (decrease) in net assets resulting from operations | $34,016,068 |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 2,352,177 | $ 2,848,860 |
| Net realized gain (loss) | 18,442,647 | (16,282,685) |
Change in net unrealized appreciation
(depreciation) | 13,221,244 | (5,587,930) |
| Net increase (decrease) in net assets resulting from operations | 34,016,068 | (19,021,755) |
| Distributions to shareholders: | | |
| Class A | (2,764,720) | (9,467,191) |
| Class B | (57,047) | (221,204) |
| Total distributions | (2,821,767) | (9,688,395) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 2,809,896 | 6,978,119 |
| Reinvestment of distributions | 2,764,720 | 9,467,191 |
| Payments for shares redeemed | (16,851,304) | (11,817,632) |
| Net increase (decrease) in net assets from Class A share transactions | (11,276,688) | 4,627,678 |
| Class B | | |
| Proceeds from shares sold | 275,751 | 784,815 |
| Reinvestment of distributions | 57,047 | 221,204 |
| Payments for shares redeemed | (927,960) | (873,871) |
| Net increase (decrease) in net assets from Class B share transactions | (595,162) | 132,148 |
| Increase (decrease) in net assets | 19,322,451 | (23,950,324) |
| Net assets at beginning of period | 132,690,148 | 156,640,472 |
| Net assets at end of period | $152,012,599 | $132,690,148 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 10,025,875 | 9,489,452 |
| Shares sold | 195,672 | 567,975 |
| Shares issued to shareholders in reinvestment of distributions | 194,562 | 895,666 |
| Shares redeemed | (1,146,203) | (927,218) |
| Net increase (decrease) in Class A shares | (755,969) | 536,423 |
| Shares outstanding at end of period | 9,269,906 | 10,025,875 |
| Class B | | |
| Shares outstanding at beginning of period | 240,926 | 226,957 |
| Shares sold | 19,004 | 65,344 |
| Shares issued to shareholders in reinvestment of distributions | 3,989 | 20,809 |
| Shares redeemed | (62,677) | (72,184) |
| Net increase (decrease) in Class B shares | (39,684) | 13,969 |
| Shares outstanding at end of period | 201,242 | 240,926 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 11 |
Financial Highlights
| DWS CROCI® U.S. VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $12.92 | $16.12 | $13.46 | $16.64 | $13.75 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .24 | .28 | .31 | .29 | .24 |
| Net realized and unrealized gain (loss) | 3.17 | (2.47) | 3.92 | (1.89) | 2.88 |
| Total from investment operations | 3.41 | (2.19) | 4.23 | (1.60) | 3.12 |
| Less distributions from: | | | | | |
| Net investment income | (.28) | (.31) | (.30) | (.41) | (.23) |
| Net realized gains | — | (.70) | (1.27) | (1.17) | — |
| Total distributions | (.28) | (1.01) | (1.57) | (1.58) | (.23) |
| Net asset value, end of period | $16.05 | $12.92 | $16.12 | $13.46 | $16.64 |
| Total Return (%)b | 26.69 | (12.16) | 32.95 | (10.50) | 22.88 c |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 149 | 130 | 153 | 125 | 153 |
| Ratio of expenses before expense reductions (%)d | .78 | .84 | .84 | .84 | .82 |
| Ratio of expenses after expense reductions (%)d | .71 | .69 | .70 | .72 | .72 |
| Ratio of net investment income (%) | 1.62 | 2.28 | 2.13 | 1.89 | 1.59 |
| Portfolio turnover rate (%) | 99 | 122 | 111 | 100 | 97 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | The Fund’s total return includes a reimbursement by the Adviser for commission costs incurred in connection with purchases and sales of portfolio assets due to the change in investment strategy, which otherwise would have reduced total return by 0.03%. |
| d | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
| DWS CROCI® U.S. VIP — Class B |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data | | | | | |
| Net asset value, beginning of period | $12.97 | $16.17 | $13.50 | $16.67 | $13.78 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .19 | .24 | .27 | .24 | .20 |
| Net realized and unrealized gain (loss) | 3.19 | (2.47) | 3.92 | (1.88) | 2.87 |
| Total from investment operations | 3.38 | (2.23) | 4.19 | (1.64) | 3.07 |
| Less distributions from: | | | | | |
| Net investment income | (.24) | (.27) | (.25) | (.36) | (.18) |
| Net realized gains | — | (.70) | (1.27) | (1.17) | — |
| Total distributions | (.24) | (.97) | (1.52) | (1.53) | (.18) |
| Net asset value, end of period | $16.11 | $12.97 | $16.17 | $13.50 | $16.67 |
| Total Return (%)b | 26.27 | (12.41) | 32.49 | (10.71) | 22.45 c |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 3 | 3 | 4 | 3 | 4 |
| Ratio of expenses before expense reductions (%)d | 1.10 | 1.16 | 1.16 | 1.16 | 1.15 |
| Ratio of expenses after expense reductions (%)d | 1.02 | 1.00 | 1.02 | 1.04 | 1.03 |
| Ratio of net investment income (%) | 1.33 | 1.96 | 1.82 | 1.55 | 1.31 |
| Portfolio turnover rate (%) | 99 | 122 | 111 | 100 | 97 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | The Fund’s total return includes a reimbursement by the Adviser for commission costs incurred in connection with purchases and sales of portfolio assets due to the change in investment strategy, which otherwise would have reduced total return by 0.03%. |
| d | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 13 |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS CROCI® U.S. VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of up to 0.25% and of up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping 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 Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities are generally categorized as Level 1.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at
| 14 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. 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 acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best efforts to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. As of period end, any securities on loan were collateralized by cash. During the year ended December 31, 2021, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.04% annualized effective rate as of December 31, 2021) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of December 31, 2021, the Fund had securities on loan, which were classified as common stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements were overnight and continuous.
Federal Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 15 |
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income* | $ 2,815,712 |
| Undistributed long-term capital gains | $ 1,418,022 |
| Net unrealized appreciation (depreciation) on investments | $ 20,462,819 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $132,450,087. The net unrealized appreciation for all investments based on tax cost was $20,462,819. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $22,153,749 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $1,690,930.
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 2,821,767 | $ 9,688,395 |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
| B. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of investment securities (excluding short-term investments) aggregated $142,481,030 and $153,084,438, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
| 16 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the average daily net assets of the Fund, computed and accrued daily and payable monthly, at the following annual rates:
| First $250 million | .600% |
| Next $750 million | .575% |
| Next $1.5 billion | .550% |
| Next $2.5 billion | .525% |
| Next $2.5 billion | .500% |
| Next $2.5 billion | .475% |
| Next $2.5 billion | .450% |
| Over $12.5 billion | .425% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.60% of the Fund’s average daily net assets.
For the period from January 1, 2021 through April 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
For the period from May 1, 2021 through September 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
| Class A | | .75% |
| Class B | | 1.06% |
Effective October 1, 2021 through September 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
For the year ended December 31, 2021, fees waived and/or expenses reimbursed for each class are as follows:
| Class A | $ 105,833 |
| Class B | 2,663 |
| | $ 108,496 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $141,258, of which $12,244 is unpaid.
Service Provider Fees. DWS Service Company (“DSC”), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST”), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 17 |
shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class A | $ 497 | $ 83 |
| Class B | 300 | 50 |
| | $ 797 | $ 133 |
Distribution Service Agreement. Under the Fund’s Class B 12b-1 plan, DWS Distributors, Inc. (“DDI”) received a fee (“Distribution Service Fee”) of up to 0.25% of average daily net assets of Class B shares. For the year ended December 31, 2021, the Distribution Service Fee aggregated $8,229, of which $673 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $1,244, of which $362 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the year ended December 31, 2021, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $95.
At December 31, 2021, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 58% and 37%, respectively. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 54% and 19%, respectively.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
| F. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low
| 18 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 19 |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS CROCI® U.S. VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS CROCI® U.S. VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
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| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,099.30 | $ 1,097.40 |
| Expenses Paid per $1,000* | $ 3.70 | $ 5.39 |
| Hypothetical 5% Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,021.68 | $ 1,020.06 |
| Expenses Paid per $1,000* | $ 3.57 | $ 5.19 |
| * | Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratios | Class A | Class B |
| Deutsche DWS Variable Series II — DWS CROCI® U.S. VIP | .70% | 1.02% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
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| Tax Information | (Unaudited) |
For corporate shareholders, 100% of the ordinary dividends (i.e., income dividends plus short-term capital gains) paid during the Fund’s fiscal year ended December 31, 2021, qualified for the dividends received deduction.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $1,560,000 as capital gain dividends for its year ended December 31, 2021.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
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Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS CROCI® U.S. VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 4th quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 23 |
one-, three- and five-year periods ended December 31, 2020. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board noted changes in the Fund’s management process that were made effective May 25, 2021. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the DWS fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were higher than the median (3rd quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that, effective October 1, 2020, in connection with the 2020 contract renewal process, DIMA agreed to reduce the Fund’s contractual management fee at each breakpoint by 0.05%. The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”) and considered differences between the Fund and the comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board noted that DIMA pays a licensing fee to an affiliate related to the Fund’s use of the CROCI® strategy. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public
| 24 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
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Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
| 26 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
| Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP | | 27 |
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| 28 | | Deutsche DWS Variable Series II —DWS CROCI® U.S. VIP |
VS2CUS-2 (R-025833-11 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
DWS Global Income Builder VIP
Contents
| 3 | Performance Summary |
| 5 | Management Summary |
| 7 | Portfolio Summary |
| 8 | Investment Portfolio |
| 21 | Statement of Assets and Liabilities |
| 22 | Statement of Operations |
| 23 | Statements of Changes in Net Assets |
| 24 | Financial Highlights |
| 26 | Notes to Financial Statements |
| 35 | Report of Independent Registered Public Accounting Firm |
| 36 | Information About Your Fund's Expenses |
| 37 | Tax Information |
| 37 | Proxy Voting |
| 38 | Advisory Agreement Board Considerations and Fee Evaluation |
| 41 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Although allocation among different asset categories generally limits risk, fund management may favor an asset category that underperforms other assets or markets as a whole. Stocks may decline in value. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Emerging markets tend to be more volatile and less liquid than the markets of more mature economies, and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Bond investments are subject to interest-rate, credit, liquidity and market risks to varying degrees. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 are 0.64% and 1.10% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
MSCI All Country World Index is an unmanaged equity index which captures large and mid-capitalization representation across 23 developed markets and 27 emerging markets countries. It covers approximately 85% of the global investable equity opportunity set.
The Blended Index 60/40 consists of an equally weighted blend of 60% MSCI All Country World Index and 40% Bloomberg U.S. Universal Index (name changed from Bloomberg Barclays U.S. Universal Index, effective August 24, 2021).
Bloomberg U.S. Universal Index (name changed from Bloomberg Barclays U.S. Universal Index, effective August 24, 2021) measures the performance of U.S. dollar-denominated taxable bonds that are rated either investment grade or high yield. The index includes U.S. Treasury bonds, investment-grade and high yield U.S. corporate bonds, mortgage-backed securities, and Eurodollar bonds.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
| Comparative Results |
| DWS Global Income Builder VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $11,095 | $14,437 | $15,535 | $22,374 |
| Average annual total return | 10.95% | 13.02% | 9.21% | 8.39% |
| MSCI All Country World Index | Growth of $10,000 | $11,854 | $17,446 | $19,592 | $30,649 |
| Average annual total return | 18.54% | 20.38% | 14.40% | 11.85% |
| Blended Index 60/40 | Growth of $10,000 | $11,043 | $15,022 | $16,391 | $22,856 |
| Average annual total return | 10.43% | 14.53% | 10.39% | 8.62% |
| Bloomberg U.S. Universal Index | Growth of $10,000 | $9,890 | $11,627 | $12,072 | $13,846 |
| Average annual total return | –1.10% | 5.15% | 3.84% | 3.31% |
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 3 |
| Comparative Results |
| DWS Global Income Builder VIP | 1-Year | 3-Year | Life of Class* |
| Class B | Growth of $10,000 | $11,056 | $14,318 | $13,464 |
| Average annual total return | 10.56% | 12.71% | 8.45% |
| MSCI All Country World Index | Growth of $10,000 | $11,854 | $17,446 | $15,806 |
| Average annual total return | 18.54% | 20.38% | 13.30% |
| Blended Index 60/40 | Growth of $10,000 | $11,043 | $15,022 | $14,281 |
| Average annual total return | 10.43% | 14.53% | 13.84% |
| Bloomberg U.S. Universal Index | Growth of $10,000 | $9,890 | $11,627 | $11,842 |
| Average annual total return | –1.10% | 5.15% | 4.72% |
| The growth of $10,000 is cumulative. |
| * | Class B commenced operations on May 1, 2018. |
| 4 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| Management Summary | December 31, 2021 (Unaudited) |
The Fund returned 10.95% during the 12 months ended December 31, 2021 (Class A shares, unadjusted for contract charges), in line with the 10.43% return of its benchmark, the Blended Index 60/40. The index consists of a blend of 60% MSCI All Country World Index and 40% Bloomberg U.S. Universal Index. The two indexes returned 18.54% and -1.10%, respectively.
The wide gap between the returns for stocks and bonds reflects the impressive rebound in global growth. As the rollout of COVID-19 vaccines led to a gradual resumption of normal business conditions, economic growth and corporate earnings both accelerated from their depressed levels of 2020. While this environment boosted investors’ appetite for risk and led to strong gains for equities, it also contributed to increasing inflation and a shift toward tighter monetary policy by the world’s central banks. These developments weighed on the prices of global government bonds, but credit-oriented market segments — which tend to benefit from improving growth — held up reasonably well.
All segments of the Fund — equities, fixed income, and alternatives — posted positive absolute returns in 2021. In terms of relative performance, we generated the strongest results in the bond portfolio due to the combination of asset allocation and issuer selection. The portfolio was overweight in high-yield bonds, emerging-market debt, asset-backed securities, and commercial mortgage-backed securities, and it was underweight in U.S. Treasuries, investment-grade corporates and agency mortgage-backed securities. Overall, this positioning was well suited to capture the key trends in the bond market over the past year. Security selection in fixed income contributed, as well.
The stock portfolio slightly outperformed the equity benchmark, due largely to positive stock selection and an underweight position in China.
We retained a modest allocation to alternative assets through positions in preferred stocks and convertible securities. We invest in these categories as a way to generate income with lower interest-rate risk than bonds. While this aspect of our strategy was a small detractor in 2021, we see it as an important component of longer-term diversification.
The Fund used derivatives during the past 12 months, with a small, adverse effect on results. Derivatives are used to achieve the Fund’s risk and return objectives and should be evaluated within the context of the entire portfolio rather than as a standalone strategy.
We maintained the Fund's core positioning over the past 12 months, while making some modest changes at the margin. We reduced the extent of the overweight in stocks late in the period, and we brought the equity portfolio's geographic weightings more closely in line with the benchmark. Believing rising interest rates, higher inflation, supply-chain disruptions, and political uncertainty all represented sources of potential market volatility, we believe it was prudent to reduce overall portfolio risk. With respect to the bond portfolio, our concerns about the Fed also formed the basis for our decision to minimize interest-rate sensitivity and maintain a focus on the credit sectors. We remained underweight in bonds, since we hold the allocation to alternatives in lieu of fixed income.
We anticipate a low-return environment in the year ahead, reflecting stocks’ elevated valuations and the low yields in the bond market. We therefore see value in a flexible strategy that can seek opportunities across a wide range of asset classes and geographies, rather than one that is tied to the increasingly top-heavy U.S. equities indexes. In addition, we believe our approach allows us to use volatility to capture values and rotate away from areas where we see higher risk.
Dokyoung Lee, CFA, Regional Head of Multi Asset & Solutions
Di Kumble, CFA, Senior Portfolio Manager Equity
Thomas M. Farina, CFA, Head of Investment Strategy Fixed Income
Scott Agi, CFA, Head of Investment Strategy Fixed Income
Darwei Kung, Head of Investment Strategy Liquid Real Assets
Portfolio Managers
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 5 |
Terms to Know
Blended Index 60/40 consists of an equally weighted blend of 60% MSCI All Country World Index and 40% Bloomberg U.S. Universal Index.
MSCI All Country World Index is an unmanaged equity index which captures large and mid-capitalization representation across 23 developed markets and 27 emerging markets countries. It covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Universal Index (name changed from Bloomberg Barclays U.S. Universal Index, effective August 24, 2021)measures the performance of U.S. dollar-denominated taxable bonds that are rated either investment grade or high yield. The index includes U.S. Treasury bonds, investment-grade and high yield U.S. corporate bonds, mortgage-backed securities, and Eurodollar bonds.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Contribution and detraction incorporate both an investment's total return and its weighting in the Fund.
Convertible securities are bonds that can be exchanged for equity at a pre-stated price. Convertibles generally offer higher income than is available from a common stock, but more appreciation potential than bonds.
Overweight means the Fund holds a higher weighting in a given sector or security than the benchmark. Underweight means the Fund holds a lower weighting.
Derivatives are contracts whose value is based on the performance of an underlying financial asset. Derivatives afford leverage, but when used by investors who are able to handle the inherent risks, can enhance returns or protect a portfolio. Derivatives experience significant losses if the underlying security moves contrary to the investor’s expectations.
Duration is a measure of bond price volatility. Duration can be defined as the approximate percentage change in price for a 100 basis point (one single percentage point) change in market interest rate levels. A duration of 5, for example, means that the price of a bond should rise by approximately 5% for a one percentage point drop in interest rates, and fall by 5% for a one percentage point rise in interest rates.
| 6 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 12/31/21 | 12/31/20 |
| Equity | 65% | 64% |
| Common Stocks | 60% | 57% |
| Exchange-Traded Funds | 3% | 3% |
| Preferred Stocks | 2% | 4% |
| Warrants | 0% | 0% |
| Fixed Income | 32% | 34% |
| Corporate Bonds | 23% | 15% |
| Asset-Backed | 3% | 5% |
| Collateralized Mortgage Obligations | 2% | 3% |
| Commercial Mortgage-Backed Securities | 2% | 4% |
| Short-Term U.S. Treasury Obligations | 1% | 2% |
| Government & Agency Obligations | 1% | 1% |
| Mortgage-Backed Securities Pass-Throughs | 0% | 4% |
| Cash Equivalents | 3% | 2% |
| Cash Equivalents | 3% | 2% |
| | 100% | 100% |
| Sector Diversification (As a % of Equities, Preferred Securities, Warrants and Corporate Bonds) | 12/31/21 | 12/31/20 |
| Financials | 23% | 19% |
| Information Technology | 20% | 20% |
| Communication Services | 10% | 10% |
| Health Care | 9% | 9% |
| Consumer Discretionary | 8% | 9% |
| Industrials | 6% | 7% |
| Energy | 6% | 5% |
| Utilities | 5% | 6% |
| Consumer Staples | 5% | 6% |
| Materials | 4% | 5% |
| Real Estate | 4% | 4% |
| | 100% | 100% |
| Geographical Diversification (As a % of Investment Portfolio excluding Exchange-Traded Funds, Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| United States | 63% | 63% |
| Japan | 5% | 5% |
| United Kingdom | 4% | 3% |
| Canada | 4% | 3% |
| Switzerland | 3% | 3% |
| Germany | 2% | 2% |
| France | 2% | 1% |
| Netherlands | 2% | 1% |
| Ireland | 1% | 2% |
| Australia | 1% | 2% |
| Cayman Islands | 1% | 1% |
| Hong Kong | 0% | 2% |
| Other | 12% | 12% |
| | 100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 8.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 7 |
| Investment Portfolio | as of December 31, 2021 |
| | Shares | Value ($) |
| Common Stocks 61.1% | |
| Communication Services 5.6% | |
| Diversified Telecommunication Services 1.8% | |
| BCE, Inc. | | 4,450 | 231,515 |
| Deutsche Telekom AG (Registered) | | 11,803 | 218,531 |
| Koninklijke KPN NV | | 52,614 | 163,542 |
| Nippon Telegraph & Telephone Corp. | | 6,646 | 182,056 |
| Orange SA | | 17,750 | 190,056 |
| Swisscom AG (Registered) | | 425 | 239,734 |
| Telenor ASA | | 11,061 | 174,032 |
| Telia Co. AB | | 55,732 | 218,091 |
| Telstra Corp., Ltd. | | 70,452 | 214,046 |
| TELUS Corp. | | 7,778 | 183,175 |
| Verizon Communications, Inc. | | 6,894 | 358,212 |
| | | | 2,372,990 |
| Entertainment 0.8% | |
| Activision Blizzard, Inc. | | 1,136 | 75,578 |
| AMC Entertainment Holdings, Inc. "A"* | | 500 | 13,600 |
| Netflix, Inc.* | | 400 | 240,976 |
| Nintendo Co., Ltd. | | 556 | 259,336 |
| Sea Ltd. (ADR)* | | 900 | 201,339 |
| Walt Disney Co.* | | 1,500 | 232,335 |
| | | | 1,023,164 |
| Interactive Media & Services 2.1% | |
| Alphabet, Inc. "A"* | | 299 | 866,215 |
| Alphabet, Inc. "C"* | | 288 | 833,354 |
| Match Group, Inc.* | | 1,400 | 185,150 |
| Meta Platforms, Inc. "A"* | | 2,400 | 807,240 |
| Zillow Group, Inc. "A"* | | 900 | 55,998 |
| Zillow Group, Inc. "C"* (a) | | 1,000 | 63,850 |
| | | | 2,811,807 |
| Media 0.3% | |
| Comcast Corp. "A" | | 3,738 | 188,134 |
| Interpublic Group of Companies, Inc. | | 3,992 | 149,500 |
| | | | 337,634 |
| Wireless Telecommunication Services 0.6% | |
| KDDI Corp. | | 6,541 | 190,926 |
| SoftBank Corp. | | 15,101 | 191,221 |
| Tele2 AB "B" | | 15,678 | 223,724 |
| Vodafone Group PLC | | 169,457 | 256,440 |
| | | | 862,311 |
| Consumer Discretionary 5.3% | |
| Auto Components 0.4% | |
| Bridgestone Corp. | | 4,700 | 202,272 |
| | Shares | Value ($) |
| Denso Corp. | | 2,852 | 236,335 |
| Magna International, Inc. | | 2,000 | 161,825 |
| | | | 600,432 |
| Automobiles 0.7% | |
| Honda Motor Co., Ltd. | | 5,000 | 141,632 |
| Tesla, Inc.* | | 502 | 530,503 |
| Toyota Motor Corp. | | 11,090 | 203,572 |
| | | | 875,707 |
| Hotels, Restaurants & Leisure 0.9% | |
| Booking Holdings, Inc.* | | 3 | 7,198 |
| Evolution AB 144A | | 1,047 | 148,413 |
| McDonald's Corp. | | 1,110 | 297,558 |
| Restaurant Brands International, Inc. | | 1,812 | 109,870 |
| Starbucks Corp. | | 2,289 | 267,744 |
| Yum! Brands, Inc. | | 2,151 | 298,688 |
| | | | 1,129,471 |
| Household Durables 0.2% | |
| Garmin Ltd. | | 1,042 | 141,889 |
| Sekisui House Ltd. | | 6,626 | 142,170 |
| | | | 284,059 |
| Internet & Direct Marketing Retail 1.2% | |
| Amazon.com, Inc.* | | 487 | 1,623,824 |
| Prosus NV | | 163 | 13,604 |
| | | | 1,637,428 |
| Multiline Retail 0.4% | |
| Target Corp. | | 1,041 | 240,929 |
| Wesfarmers Ltd. | | 6,085 | 262,191 |
| | | | 503,120 |
| Specialty Retail 1.2% | |
| Best Buy Co., Inc. | | 1,475 | 149,860 |
| Home Depot, Inc. | | 1,112 | 461,491 |
| Industria de Diseno Textil SA | | 10,957 | 355,343 |
| Lowe's Companies, Inc. | | 1,139 | 294,409 |
| TJX Companies, Inc. | | 3,700 | 280,904 |
| | | | 1,542,007 |
| Textiles, Apparel & Luxury Goods 0.3% | |
| LVMH Moet Hennessy Louis Vuitton SE | | 209 | 172,857 |
| NIKE, Inc. "B" | | 1,400 | 233,338 |
| | | | 406,195 |
| Consumer Staples 3.8% | |
| Beverages 0.5% | |
| Coca-Cola Co. | | 5,382 | 318,668 |
| Diageo PLC | | 115 | 6,281 |
| PepsiCo, Inc. | | 2,006 | 348,463 |
| | | | 673,412 |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| | Shares | Value ($) |
| Food & Staples Retailing 1.2% | |
| Costco Wholesale Corp. | | 400 | 227,080 |
| J Sainsbury PLC | | 41,118 | 153,384 |
| Koninklijke Ahold Delhaize NV | | 5,133 | 175,928 |
| Sysco Corp. | | 2,400 | 188,520 |
| Tesco PLC | | 56,417 | 221,456 |
| Walgreens Boots Alliance, Inc. | | 3,920 | 204,467 |
| Walmart, Inc. | | 1,643 | 237,726 |
| Woolworths Group Ltd. | | 5,160 | 142,693 |
| | | | 1,551,254 |
| Food Products 0.8% | |
| General Mills, Inc. | | 2,762 | 186,103 |
| Kellogg Co. | | 2,270 | 146,233 |
| Kraft Heinz Co. | | 5,280 | 189,552 |
| Nestle SA (Registered) | | 2,278 | 318,818 |
| Wilmar International Ltd. | | 45,939 | 141,602 |
| | | | 982,308 |
| Household Products 0.5% | |
| Colgate-Palmolive Co. | | 1,255 | 107,102 |
| Kimberly-Clark Corp. | | 1,055 | 150,780 |
| Procter & Gamble Co. | | 2,240 | 366,419 |
| | | | 624,301 |
| Personal Products 0.2% | |
| L'Oreal SA | | 39 | 18,516 |
| Unilever PLC | | 5,427 | 290,528 |
| | | | 309,044 |
| Tobacco 0.6% | |
| Japan Tobacco, Inc. | | 21,200 | 428,155 |
| Philip Morris International, Inc. | | 4,002 | 380,190 |
| | | | 808,345 |
| Energy 2.5% | |
| Oil, Gas & Consumable Fuels | |
| Chevron Corp. | | 3,153 | 370,005 |
| Enbridge, Inc. | | 6,800 | 265,614 |
| Eni SpA | | 15,612 | 216,782 |
| Exxon Mobil Corp. | | 6,800 | 416,092 |
| Kinder Morgan, Inc. | | 13,900 | 220,454 |
| ONEOK, Inc. | | 3,200 | 188,032 |
| Pembina Pipeline Corp. | | 6,200 | 188,066 |
| Reliance Industries Ltd. 144A, (GDR) | | 917 | 58,642 |
| Repsol SA | | 11,610 | 137,934 |
| TC Energy Corp. | | 4,695 | 218,354 |
| TotalEnergies SE | | 11,989 | 609,357 |
| Valero Energy Corp. | | 2,500 | 187,775 |
| Williams Companies, Inc. | | 8,200 | 213,528 |
| | | | 3,290,635 |
| Financials 10.0% | |
| Banks 4.4% | |
| Bank of America Corp. | | 5,900 | 262,491 |
| | Shares | Value ($) |
| Bank of Montreal | | 2,184 | 235,139 |
| Bank of Nova Scotia | | 2,415 | 170,966 |
| BOC Hong Kong Holdings Ltd. | | 61,163 | 200,529 |
| Canadian Imperial Bank of Commerce | | 1,820 | 212,150 |
| Citigroup, Inc. | | 3,700 | 223,443 |
| Citizens Financial Group, Inc. | | 3,146 | 148,649 |
| Commonwealth Bank of Australia | | 3,160 | 232,125 |
| Credit Agricole SA | | 13,835 | 197,659 |
| Fifth Third Bancorp. | | 4,100 | 178,555 |
| Hang Seng Bank Ltd. | | 8,894 | 162,640 |
| HSBC Holdings PLC | | 61,019 | 370,519 |
| Huntington Bancshares, Inc. | | 10,776 | 166,166 |
| ICICI Bank Ltd. (ADR) | | 900 | 17,811 |
| Japan Post Bank Co., Ltd. | | 17,300 | 158,531 |
| JPMorgan Chase & Co. | | 2,545 | 403,001 |
| KeyCorp. | | 9,214 | 213,120 |
| Mediobanca Banca di Credito Finanziario SpA | | 13,646 | 156,780 |
| Mizuho Financial Group, Inc. | | 11,835 | 150,508 |
| Oversea-Chinese Banking Corp., Ltd. | | 17,967 | 152,063 |
| PNC Financial Services Group, Inc. | | 799 | 160,215 |
| Regions Financial Corp. | | 12,294 | 268,009 |
| Sumitomo Mitsui Financial Group, Inc. | | 5,373 | 183,876 |
| Toronto-Dominion Bank | | 4,610 | 353,435 |
| Truist Financial Corp. | | 2,980 | 174,479 |
| U.S. Bancorp. | | 4,120 | 231,420 |
| United Overseas Bank Ltd. | | 9,882 | 197,217 |
| Wells Fargo & Co. | | 2,000 | 95,960 |
| Westpac Banking Corp. | | 9,824 | 152,477 |
| | | | 5,829,933 |
| Capital Markets 2.0% | |
| Apollo Global Management, Inc. (a) | | 2,856 | 206,860 |
| BlackRock, Inc. | | 237 | 216,988 |
| Blackstone, Inc. | | 8,933 | 1,155,841 |
| Charles Schwab Corp. | | 400 | 33,640 |
| CME Group, Inc. | | 1,200 | 274,152 |
| Daiwa Securities Group, Inc. | | 27,400 | 154,473 |
| Franklin Resources, Inc. | | 5,018 | 168,053 |
| Nomura Holdings, Inc. | | 33,600 | 146,324 |
| Partners Group Holding AG | | 130 | 214,425 |
| | | | 2,570,756 |
| Consumer Finance 0.0% | |
| American Express Co. | | 100 | 16,360 |
| Diversified Financial Services 0.1% | |
| ORIX Corp. | | 8,439 | 171,797 |
| Insurance 3.5% | |
| Allianz SE (Registered) | | 1,253 | 295,511 |
| Assicurazioni Generali SpA | | 10,358 | 219,297 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 9 |
| | Shares | Value ($) |
| AXA SA | | 8,676 | 259,063 |
| Japan Post Holdings Co., Ltd. | | 15,400 | 120,125 |
| Legal & General Group PLC | | 60,553 | 243,337 |
| Manulife Financial Corp. | | 10,007 | 190,734 |
| MS&AD Insurance Group Holdings, Inc. | | 13,598 | 418,855 |
| Muenchener Rueckversicherungs-Gesellschaft AG (Registered) | | 3,333 | 985,642 |
| NN Group NV | | 2,842 | 154,590 |
| Progressive Corp. | | 2,800 | 287,420 |
| Prudential Financial, Inc. | | 2,164 | 234,231 |
| Sampo Oyj "A" | | 5,348 | 268,023 |
| Sompo Holdings, Inc. | | 2,982 | 125,697 |
| Swiss Re AG | | 2,694 | 266,364 |
| Tokio Marine Holdings, Inc. | | 3,200 | 177,792 |
| Zurich Insurance Group AG | | 674 | 295,544 |
| | | | 4,542,225 |
| Health Care 6.4% | |
| Biotechnology 1.0% | |
| AbbVie, Inc. | | 3,660 | 495,564 |
| Amgen, Inc. | | 1,292 | 290,661 |
| CSL Ltd. | | 65 | 13,754 |
| Gilead Sciences, Inc. | | 4,126 | 299,589 |
| Seagen, Inc.* | | 1,100 | 170,060 |
| | | | 1,269,628 |
| Health Care Equipment & Supplies 0.7% | |
| Abbott Laboratories | | 2,058 | 289,643 |
| Coloplast AS "B" | | 1,116 | 196,208 |
| Danaher Corp. | | 600 | 197,406 |
| Intuitive Surgical, Inc.* | | 100 | 35,930 |
| Medtronic PLC | | 1,489 | 154,037 |
| | | | 873,224 |
| Health Care Providers & Services 0.5% | |
| Anthem, Inc. | | 100 | 46,354 |
| CVS Health Corp. | | 2,169 | 223,754 |
| UnitedHealth Group, Inc. | | 894 | 448,913 |
| | | | 719,021 |
| Health Care Technology 0.1% | |
| M3, Inc. | | 1,914 | 96,238 |
| Life Sciences Tools & Services 0.1% | |
| Thermo Fisher Scientific, Inc. | | 300 | 200,172 |
| Pharmaceuticals 4.0% | |
| Astellas Pharma, Inc. | | 20,810 | 338,544 |
| AstraZeneca PLC | | 2,387 | 279,551 |
| Bayer AG (Registered) | | 4,474 | 239,465 |
| Bristol-Myers Squibb Co. | | 4,939 | 307,947 |
| Canopy Growth Corp.* | | 600 | 5,237 |
| Chugai Pharmaceutical Co., Ltd. | | 5,117 | 166,260 |
| Eisai Co., Ltd. | | 5,000 | 285,186 |
| Eli Lilly & Co. | | 1,279 | 353,285 |
| | Shares | Value ($) |
| GlaxoSmithKline PLC | | 17,076 | 370,803 |
| Johnson & Johnson | | 2,156 | 368,827 |
| Merck & Co., Inc. | | 4,786 | 366,799 |
| Novartis AG (Registered) | | 4,304 | 378,025 |
| Novo Nordisk AS "B" | | 2,990 | 336,650 |
| Pfizer, Inc. | | 9,167 | 541,311 |
| Roche Holding AG (Genusschein) | | 945 | 392,749 |
| Sanofi | | 2,520 | 253,744 |
| Takeda Pharmaceutical Co., Ltd. | | 7,873 | 214,833 |
| | | | 5,199,216 |
| Industrials 4.1% | |
| Aerospace & Defense 0.4% | |
| BAE Systems PLC | | 24,883 | 184,964 |
| Boeing Co.* | | 300 | 60,396 |
| Lockheed Martin Corp. | | 400 | 142,164 |
| Raytheon Technologies Corp. | | 2,115 | 182,017 |
| | | | 569,541 |
| Air Freight & Logistics 0.5% | |
| Deutsche Post AG (Registered) | | 3,765 | 241,556 |
| United Parcel Service, Inc. "B" | | 1,602 | 343,373 |
| | | | 584,929 |
| Building Products 0.1% | |
| Xinyi Glass Holdings Ltd. | | 52,525 | 131,275 |
| Commercial Services & Supplies 0.0% | |
| Quad Graphics, Inc.* | | 2 | 8 |
| Construction & Engineering 0.1% | |
| Bouygues SA | | 3,936 | 141,165 |
| Electrical Equipment 0.4% | |
| ABB Ltd. (Registered) | | 5,893 | 225,053 |
| Ballard Power Systems, Inc.* | | 500 | 6,281 |
| Eaton Corp. PLC | | 1,016 | 175,585 |
| Emerson Electric Co. | | 1,626 | 151,169 |
| Plug Power, Inc.* | | 300 | 8,469 |
| Sunrun, Inc.* | | 100 | 3,430 |
| | | | 569,987 |
| Industrial Conglomerates 0.4% | |
| 3M Co. | | 1,104 | 196,104 |
| Honeywell International, Inc. | | 699 | 145,748 |
| Siemens AG (Registered) | | 1,388 | 239,804 |
| | | | 581,656 |
| Machinery 0.9% | |
| Caterpillar, Inc. | | 1,300 | 268,762 |
| Cummins, Inc. | | 579 | 126,303 |
| Deere & Co. | | 100 | 34,289 |
| Kone Oyj "B" | | 7,734 | 553,737 |
| Sandvik AB | | 6,014 | 167,391 |
| | | | 1,150,482 |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| | Shares | Value ($) |
| Marine 0.1% | |
| SITC International Holdings Co., Ltd. | | 44,000 | 159,248 |
| Professional Services 0.2% | |
| Adecco Group AG (Registered) | | 2,572 | 131,075 |
| Thomson Reuters Corp. | | 1,373 | 164,191 |
| | | | 295,266 |
| Road & Rail 0.2% | |
| Union Pacific Corp. | | 941 | 237,066 |
| Trading Companies & Distributors 0.8% | |
| Fastenal Co. | | 4,518 | 289,423 |
| ITOCHU Corp. | | 5,771 | 176,617 |
| Mitsubishi Corp. | | 5,909 | 188,004 |
| Mitsui & Co., Ltd. | | 7,605 | 180,098 |
| Sumitomo Corp. | | 12,338 | 182,766 |
| | | | 1,016,908 |
| Information Technology 16.5% | |
| Communications Equipment 0.5% | |
| Cisco Systems, Inc. | | 7,724 | 489,470 |
| Telefonaktiebolaget LM Ericsson "B" | | 12,074 | 132,452 |
| | | | 621,922 |
| Electronic Equipment, Instruments & Components 0.4% | |
| Corning, Inc. | | 5,005 | 186,336 |
| Keyence Corp. | | 200 | 125,557 |
| TE Connectivity Ltd. | | 1,099 | 177,313 |
| | | | 489,206 |
| IT Services 3.0% | |
| Accenture PLC "A" | | 510 | 211,420 |
| Adyen NV 144A* | | 65 | 170,910 |
| Automatic Data Processing, Inc. | | 841 | 207,374 |
| Block, Inc. "A"* | | 1,358 | 219,331 |
| Cloudflare, Inc. "A"* | | 1,200 | 157,800 |
| Fujitsu Ltd. | | 839 | 143,380 |
| Infosys Ltd. (ADR) | | 11,700 | 296,127 |
| International Business Machines Corp. | | 2,602 | 347,783 |
| Mastercard, Inc. "A" | | 676 | 242,900 |
| MongoDB, Inc.* (a) | | 500 | 264,675 |
| Paychex, Inc. | | 3,695 | 504,367 |
| PayPal Holdings, Inc.* | | 965 | 181,980 |
| Shopify, Inc. "A"* | | 272 | 374,513 |
| Snowflake, Inc. "A"* | | 100 | 33,875 |
| Twilio, Inc. "A"* | | 607 | 159,847 |
| Visa, Inc. "A" | | 1,400 | 303,394 |
| Western Union Co. | | 4,064 | 72,502 |
| | | | 3,892,178 |
| | Shares | Value ($) |
| Semiconductors & Semiconductor Equipment 5.7% | |
| Advanced Micro Devices, Inc.* | | 3,100 | 446,090 |
| Analog Devices, Inc. | | 1,144 | 201,081 |
| Applied Materials, Inc. | | 1,609 | 253,192 |
| ASE Technology Holding Co., Ltd. (ADR) | | 30,800 | 240,548 |
| ASML Holding NV | | 274 | 219,479 |
| Broadcom, Inc. | | 949 | 631,474 |
| Enphase Energy, Inc.* | | 855 | 156,414 |
| Intel Corp. | | 6,271 | 322,957 |
| KLA Corp. | | 479 | 206,023 |
| Lam Research Corp. | | 256 | 184,102 |
| Lasertec Corp. | | 600 | 182,977 |
| Marvell Technology, Inc. | | 3,400 | 297,466 |
| Micron Technology, Inc. | | 3,000 | 279,450 |
| Monolithic Power Systems, Inc. | | 700 | 345,331 |
| NVIDIA Corp. | | 2,548 | 749,392 |
| QUALCOMM, Inc. | | 3,784 | 691,980 |
| Skyworks Solutions, Inc. | | 712 | 110,460 |
| Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | | 4,700 | 565,457 |
| Texas Instruments, Inc. | | 2,204 | 415,388 |
| Tokyo Electron Ltd. | | 626 | 359,192 |
| United Microelectronics Corp. (ADR) (a) | | 57,800 | 676,260 |
| | | | 7,534,713 |
| Software 3.7% | |
| Adobe, Inc.* | | 500 | 283,530 |
| Autodesk, Inc.* | | 800 | 224,952 |
| Crowdstrike Holdings, Inc. "A"* | | 961 | 196,765 |
| Intuit, Inc. | | 430 | 276,585 |
| Microsoft Corp. | | 7,766 | 2,611,861 |
| Oracle Corp. | | 2,614 | 227,967 |
| Palantir Technologies, Inc. "A"* | | 500 | 9,105 |
| salesforce.com, Inc.* | | 800 | 203,304 |
| SAP SE | | 1,056 | 149,167 |
| ServiceNow, Inc.* | | 458 | 297,292 |
| Trade Desk, Inc. "A"* | | 2,950 | 270,338 |
| Zoom Video Communications, Inc. "A"* | | 733 | 134,806 |
| | | | 4,885,672 |
| Technology Hardware, Storage & Peripherals 3.2% | |
| Apple, Inc. | | 16,509 | 2,931,503 |
| Canon, Inc. | | 7,300 | 177,627 |
| Hewlett Packard Enterprise Co. | | 10,653 | 167,998 |
| HP, Inc. | | 7,093 | 267,193 |
| NetApp, Inc. | | 2,251 | 207,069 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 11 |
| | Shares | Value ($) |
| Samsung Electronics Co., Ltd. (GDR) | | 133 | 219,317 |
| Seagate Technology Holdings PLC | | 2,212 | 249,912 |
| | | | 4,220,619 |
| Materials 2.7% | |
| Chemicals 1.0% | |
| Air Products & Chemicals, Inc. | | 488 | 148,479 |
| BASF SE | | 4,629 | 326,003 |
| Dow, Inc. | | 4,934 | 279,856 |
| Linde PLC | | 406 | 140,651 |
| LyondellBasell Industries NV "A" | | 2,200 | 202,906 |
| Nutrien Ltd. | | 3,170 | 238,273 |
| | | | 1,336,168 |
| Construction Materials 0.2% | |
| Holcim Ltd. | | 3,979 | 203,361 |
| Containers & Packaging 0.2% | |
| Amcor PLC | | 15,393 | 184,870 |
| International Paper Co. | | 3,031 | 142,396 |
| | | | 327,266 |
| Metals & Mining 1.1% | |
| Anglo American PLC | | 25,230 | 1,031,938 |
| Antofagasta PLC | | 10,011 | 181,803 |
| Freeport-McMoRan, Inc. | | 300 | 12,519 |
| Newmont Corp. | | 2,800 | 173,656 |
| | | | 1,399,916 |
| Paper & Forest Products 0.2% | |
| UPM-Kymmene Oyj | | 8,350 | 317,313 |
| Real Estate 1.7% | |
| Equity Real Estate Investment Trusts (REITs) 1.6% | |
| American Tower Corp. | | 100 | 29,250 |
| Ascendas Real Estate Investment Trust | | 39,765 | 87,109 |
| CapitaLand Integrated Commercial Trust | | 97,652 | 147,863 |
| Crown Castle International Corp. | | 873 | 182,230 |
| Digital Realty Trust, Inc. | | 1,200 | 212,244 |
| Iron Mountain, Inc. | | 4,300 | 225,019 |
| Medical Properties Trust, Inc. | | 10,492 | 247,926 |
| Prologis, Inc. | | 918 | 154,554 |
| Public Storage | | 489 | 183,160 |
| Realty Income Corp. | | 3,548 | 254,001 |
| VICI Properties, Inc. (a) | | 6,562 | 197,582 |
| WP Carey, Inc. | | 1,897 | 155,649 |
| | | | 2,076,587 |
| Real Estate Management & Development 0.1% | |
| Sun Hung Kai Properties Ltd. | | 12,190 | 147,821 |
| | Shares | Value ($) |
| Utilities 2.5% | |
| Electric Utilities 1.5% | |
| American Electric Power Co., Inc. | | 1,667 | 148,313 |
| EDP - Energias de Portugal SA | | 36,418 | 200,325 |
| Enel SpA | | 28,419 | 227,562 |
| Fortum Oyj | | 7,199 | 220,690 |
| Iberdrola SA | | 10,882 | 128,771 |
| NextEra Energy, Inc. | | 1,958 | 182,799 |
| PPL Corp. | | 7,335 | 220,490 |
| Red Electrica Corp. SA (a) | | 8,455 | 183,326 |
| Southern Co. | | 3,569 | 244,762 |
| SSE PLC | | 7,511 | 167,495 |
| | | | 1,924,533 |
| Gas Utilities 0.3% | |
| APA Group (Units) | | 24,431 | 178,638 |
| Snam SpA | | 34,781 | 209,631 |
| | | | 388,269 |
| Multi-Utilities 0.7% | |
| Consolidated Edison, Inc. | | 1,713 | 146,153 |
| Dominion Energy, Inc. | | 2,104 | 165,290 |
| E.ON SE | | 12,513 | 173,765 |
| National Grid PLC | | 13,756 | 198,191 |
| Public Service Enterprise Group, Inc. | | 2,469 | 164,757 |
| Sempra Energy | | 959 | 126,857 |
| | | | 975,013 |
| Total Common Stocks (Cost $59,627,173) | 80,292,282 |
| Preferred Stocks 2.4% | |
| Consumer Discretionary 0.1% | |
| Porsche Automobil Holding SE | | 1,575 | 149,248 |
| Financials 1.6% | |
| AGNC Investment Corp., 7.0% | | 14,427 | 370,919 |
| Fifth Third Bancorp., Series I, 6.625% | | 10,000 | 278,400 |
| KeyCorp., Series E, 6.125% | | 10,000 | 302,400 |
| Morgan Stanley, Series K, 5.85% | | 10,000 | 290,900 |
| The Goldman Sachs Group, Inc., Series J, 5.5% | | 17,000 | 449,650 |
| Wells Fargo & Co., Series Y, 5.625% | | 15,000 | 384,600 |
| | | | 2,076,869 |
| Real Estate 0.7% | |
| Kimco Realty Corp., Series L, 5.125% | | 15,000 | 383,100 |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| | Shares | Value ($) |
| Prologis, Inc., Series Q, 8.54% | | 164 | 10,106 |
| Simon Property Group, Inc., Series J, 8.375% | | 8,000 | 552,080 |
| | | | 945,286 |
| Total Preferred Stocks (Cost $3,144,188) | 3,171,403 |
| Warrants 0.0% | |
| Materials | |
| Hercules Trust II, Expiration Date 3/31/2029* (b) (Cost $30,284) | | 170 | 18,782 |
| | Principal
Amount ($) (c) | Value ($) |
| Corporate Bonds 23.4% | |
| Communication Services 3.0% | |
| America Movil SAB de CV, 4.375%, 4/22/2049 (a) | | 300,000 | 362,670 |
| AT&T, Inc.: | | | |
| 2.25%, 2/1/2032 | | 95,000 | 91,800 |
| 2.75%, 6/1/2031 | | 60,000 | 61,215 |
| 3.65%, 6/1/2051 | | 100,000 | 103,564 |
| CCO Holdings LLC, 144A, 4.75%, 3/1/2030 | | 100,000 | 104,000 |
| Charter Communications Operating LLC: | | | |
| 2.25%, 1/15/2029 | | 120,000 | 117,084 |
| 3.5%, 3/1/2042 | | 120,000 | 116,387 |
| 3.7%, 4/1/2051 | | 140,000 | 135,350 |
| 4.4%, 12/1/2061 | | 100,000 | 103,451 |
| CSC Holdings LLC: | | | |
| 144A, 3.375%, 2/15/2031 | | 200,000 | 187,250 |
| 144A, 4.125%, 12/1/2030 | | 200,000 | 195,250 |
| 144A, 4.5%, 11/15/2031 | | 200,000 | 197,500 |
| Discovery Communications LLC, 4.0%, 9/15/2055 | | 40,000 | 42,259 |
| Grupo Televisa SAB, 5.25%, 5/24/2049 (a) | | 300,000 | 376,011 |
| Match Group Holdings II LLC: | | | |
| 144A, 3.625%, 10/1/2031 | | 50,000 | 48,562 |
| 144A, 4.125%, 8/1/2030 | | 175,000 | 176,750 |
| Netflix, Inc.: | | | |
| 4.375%, 11/15/2026 | | 100,000 | 110,750 |
| 5.875%, 11/15/2028 | | 140,000 | 168,350 |
| Sirius XM Radio, Inc., 144A, 3.125%, 9/1/2026 | | 100,000 | 100,029 |
| Tencent Holdings Ltd., REG S, 2.39%, 6/3/2030 (a) | | 300,000 | 293,924 |
| T-Mobile U.S.A., Inc.: | | | |
| 2.625%, 4/15/2026 | | 90,000 | 90,450 |
| 3.3%, 2/15/2051 | | 125,000 | 122,081 |
| 3.375%, 4/15/2029 | | 115,000 | 117,178 |
| 3.6%, 11/15/2060 | | 25,000 | 24,763 |
| | Principal
Amount ($) (c) | Value ($) |
| 4.375%, 4/15/2040 | | 60,000 | 68,591 |
| Verizon Communications, Inc.: | | | |
| 2.55%, 3/21/2031 (a) | | 70,000 | 70,624 |
| 2.65%, 11/20/2040 | | 40,000 | 38,009 |
| 3.7%, 3/22/2061 | | 100,000 | 108,422 |
| ViacomCBS, Inc., 4.2%, 5/19/2032 | | 163,000 | 183,858 |
| Vodafone Group PLC, 5.125%, 6/4/2081 | | 80,000 | 81,800 |
| | | | 3,997,932 |
| Consumer Discretionary 1.5% | |
| 1011778 BC Unlimited Liability Co., 144A, 4.375%, 1/15/2028 | | 225,000 | 229,500 |
| Carnival Corp.: | | | |
| 144A, 5.75%, 3/1/2027 | | 80,000 | 80,000 |
| 144A, 7.625%, 3/1/2026 | | 97,000 | 101,680 |
| Dollar General Corp., 4.125%, 4/3/2050 | | 20,000 | 23,085 |
| Ford Motor Co., 3.25%, 2/12/2032 | | 210,000 | 215,040 |
| Ford Motor Credit Co. LLC: | | | |
| 2.7%, 8/10/2026 | | 230,000 | 232,012 |
| 2.9%, 2/16/2028 | | 200,000 | 200,500 |
| 3.625%, 6/17/2031 | | 240,000 | 252,644 |
| General Motors Co., 5.4%, 4/1/2048 | | 60,000 | 76,546 |
| General Motors Financial Co., Inc.: | | | |
| 2.35%, 1/8/2031 | | 80,000 | 77,873 |
| 2.7%, 6/10/2031 | | 90,000 | 89,679 |
| Hilton Domestic Operating Co., Inc.: | | | |
| 144A, 3.625%, 2/15/2032 | | 225,000 | 223,817 |
| 144A, 4.0%, 5/1/2031 | | 125,000 | 127,818 |
| Royal Caribbean Cruises Ltd.: | | | |
| 144A, 4.25%, 7/1/2026 | | 40,000 | 38,744 |
| 144A, 5.5%, 4/1/2028 | | 50,000 | 50,578 |
| | | | 2,019,516 |
| Consumer Staples 0.6% | |
| Altria Group, Inc.: | | | |
| 3.7%, 2/4/2051 | | 50,000 | 46,606 |
| 3.875%, 9/16/2046 | | 20,000 | 19,345 |
| Anheuser-Busch InBev Worldwide, Inc.: | | | |
| 4.439%, 10/6/2048 | | 50,000 | 59,761 |
| 5.55%, 1/23/2049 | | 121,000 | 167,399 |
| BAT Capital Corp.: | | | |
| 2.726%, 3/25/2031 (a) | | 60,000 | 58,225 |
| 3.734%, 9/25/2040 | | 61,000 | 58,593 |
| JBS Finance Luxembourg Sarl, 144A, 2.5%, 1/15/2027 | | 260,000 | 257,078 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 13 |
| | Principal
Amount ($) (c) | Value ($) |
| Keurig Dr Pepper, Inc., 3.8%, 5/1/2050 | | 15,000 | 16,609 |
| Sysco Corp., 3.15%, 12/14/2051 | | 30,000 | 29,528 |
| | | | 713,144 |
| Energy 2.4% | |
| Cenovus Energy, Inc., 3.75%, 2/15/2052 (a) | | 60,000 | 60,146 |
| Cheniere Corpus Christi Holdings LLC, 5.875%, 3/31/2025 | | 200,000 | 221,660 |
| Cheniere Energy Partners LP: | | | |
| 144A, 3.25%, 1/31/2032 | | 40,000 | 40,400 |
| 4.5%, 10/1/2029 | | 175,000 | 185,500 |
| DCP Midstream Operating LP, 3.25%, 2/15/2032 | | 70,000 | 70,525 |
| Ecopetrol SA, 6.875%, 4/29/2030 | | 300,000 | 334,878 |
| Energy Transfer, L.P., 5.5%, 6/1/2027 | | 100,000 | 114,065 |
| Enterprise Products Operating LLC: | | | |
| 3.3%, 2/15/2053 | | 90,000 | 89,513 |
| 4.2%, 1/31/2050 | | 172,000 | 192,811 |
| Hess Corp., 5.8%, 4/1/2047 | | 70,000 | 89,428 |
| MPLX LP, 2.65%, 8/15/2030 | | 35,000 | 34,840 |
| Petroleos Mexicanos, 144A, 6.7%, 2/16/2032 | | 622,000 | 628,220 |
| Plains All American Pipeline LP, 3.8%, 9/15/2030 | | 50,000 | 52,212 |
| Saudi Arabian Oil Co.: | | | |
| 144A, 2.25%, 11/24/2030 | | 625,000 | 607,781 |
| REG S, 3.5%, 4/16/2029 | | 300,000 | 320,625 |
| Southwestern Energy Co., 4.75%, 2/1/2032 | | 50,000 | 52,655 |
| Williams Companies, Inc., 3.5%, 10/15/2051 | | 50,000 | 50,512 |
| | | | 3,145,771 |
| Financials 8.2% | |
| AerCap Ireland Capital DAC: | | | |
| 3.0%, 10/29/2028 | | 150,000 | 152,120 |
| 3.15%, 2/15/2024 | | 150,000 | 154,710 |
| 3.4%, 10/29/2033 | | 150,000 | 152,717 |
| 4.625%, 10/15/2027 | | 150,000 | 165,931 |
| Air Lease Corp.: | | | |
| 3.0%, 2/1/2030 | | 142,000 | 141,730 |
| 4.125%, Perpetual (d) | | 400,000 | 397,000 |
| Aircastle Ltd., 144A, 5.25%, Perpetual (d) | | 130,000 | 132,600 |
| Ally Financial, Inc., 4.7%, Perpetual (d) | | 500,000 | 518,750 |
| American Express Co., 3.55%, Perpetual (d) | | 475,000 | 475,831 |
| Avolon Holdings Funding Ltd.: | | | |
| 144A, 2.528%, 11/18/2027 | | 10,000 | 9,714 |
| | Principal
Amount ($) (c) | Value ($) |
| 144A, 4.25%, 4/15/2026 | | 40,000 | 42,388 |
| Banco Nacional de Panama, 144A, 2.5%, 8/11/2030 | | 200,000 | 187,502 |
| Bank of America Corp.: | | | |
| 2.676%, 6/19/2041 | | 60,000 | 57,754 |
| 4.3%, Perpetual (d) | | 102,000 | 103,148 |
| Bank of New York Mellon Corp., 3.75%, Perpetual (d) | | 525,000 | 526,874 |
| Bank of Nova Scotia, 3.625%, 10/27/2081 | | 500,000 | 483,020 |
| Blackstone Secured Lending Fund: | | | |
| 144A, 2.85%, 9/30/2028 | | 110,000 | 107,237 |
| 3.625%, 1/15/2026 | | 155,000 | 161,717 |
| BNP Paribas SA, 144A, 4.625%, Perpetual (d) | | 200,000 | 200,600 |
| Capital One Financial Corp., 3.95%, Perpetual (d) | | 350,000 | 351,750 |
| Citigroup, Inc.: | | | |
| 2.561%, 5/1/2032 | | 40,000 | 40,207 |
| 4.0%, Perpetual (d) | | 700,000 | 705,250 |
| HSBC Holdings PLC: | | | |
| 4.0%, Perpetual (d) | | 240,000 | 238,500 |
| 4.6%, Perpetual (d) | | 250,000 | 249,795 |
| Intesa Sanpaolo SpA: | | | |
| 144A, 4.198%, 6/1/2032 | | 325,000 | 327,819 |
| 144A, 4.95%, 6/1/2042 | | 250,000 | 256,850 |
| Jefferies Group LLC, 2.625%, 10/15/2031 | | 50,000 | 49,178 |
| JPMorgan Chase & Co.: | | | |
| 3.328%, 4/22/2052 | | 27,000 | 28,891 |
| 3.65%, Perpetual (d) | | 320,000 | 319,200 |
| M&T Bank Corp, 3.5%, Perpetual (d) | | 170,000 | 166,566 |
| Morgan Stanley: | | | |
| 2.484%, 9/16/2036 | | 141,000 | 135,776 |
| 3.217%, 4/22/2042 | | 30,000 | 31,430 |
| Natwest Group PLC, 4.6%, Perpetual (d) | | 230,000 | 225,400 |
| OneMain Finance Corp., 3.5%, 1/15/2027 | | 250,000 | 247,188 |
| PNC Financial Services Group, Inc., 3.4%, Perpetual (d) | | 320,000 | 314,957 |
| REC Ltd., 144A, 4.75%, 5/19/2023 | | 200,000 | 207,738 |
| Societe Generale SA, 144A, 5.375%, Perpetual (d) | | 250,000 | 262,600 |
| Standard Chartered PLC, 144A, 4.75%, Perpetual (d) | | 200,000 | 198,500 |
| The Charles Schwab Corp.: | | | |
| Series H, 4.0%, Perpetual (d) | | 125,000 | 126,250 |
| Series I, 4.0%, Perpetual (a) (d) | | 265,000 | 270,300 |
| The Goldman Sachs Group, Inc.: | | | |
| 2.908%, 7/21/2042 | | 80,000 | 79,536 |
The accompanying notes are an integral part of the financial statements.
| 14 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| | Principal
Amount ($) (c) | Value ($) |
| 3.8%, Perpetual (d) | | 325,000 | 323,375 |
| Truist Financial Corp., 4.8%, Perpetual (d) | | 300,000 | 312,750 |
| U.S. Bancorp., 3.7%, Perpetual (d) | | 402,000 | 401,920 |
| UBS Group AG, 144A, 4.375%, Perpetual (d) | | 200,000 | 197,560 |
| Wells Fargo & Co., 3.9%, Perpetual (d) | | 265,000 | 272,288 |
| Westpac Banking Corp., 5.0%, Perpetual (d) | | 200,000 | 208,214 |
| | | | 10,721,131 |
| Health Care 1.7% | |
| Bausch Health Companies, Inc., 144A, 4.875%, 6/1/2028 | | 90,000 | 91,800 |
| Centene Corp.: | | | |
| 2.45%, 7/15/2028 | | 60,000 | 59,100 |
| 2.625%, 8/1/2031 | | 130,000 | 127,400 |
| Charles River Laboratories International, Inc., 144A, 3.75%, 3/15/2029 | | 300,000 | 303,000 |
| CVS Health Corp., 5.05%, 3/25/2048 | | 175,000 | 228,802 |
| DaVita, Inc., 144A, 4.625%, 6/1/2030 | | 140,000 | 143,325 |
| HCA, Inc., 5.25%, 6/15/2026 | | 300,000 | 337,372 |
| Mozart Debt Merger Sub, Inc., 144A, 3.875%, 4/1/2029 | | 110,000 | 109,612 |
| Teva Pharmaceutical Finance Netherlands III BV, 3.15%, 10/1/2026 | | 925,000 | 869,500 |
| | | | 2,269,911 |
| Industrials 1.2% | |
| Adani Ports & Special Economic Zone Ltd., 144A, 4.2%, 8/4/2027 | | 200,000 | 207,523 |
| American Airlines, Inc., 144A, 5.5%, 4/20/2026 | | 105,000 | 109,187 |
| Boeing Co.: | | | |
| 2.196%, 2/4/2026 | | 237,000 | 236,943 |
| 5.04%, 5/1/2027 | | 60,000 | 67,560 |
| Delta Air Lines, Inc.: | | | |
| 3.75%, 10/28/2029 (a) | | 135,000 | 138,354 |
| 144A, 4.5%, 10/20/2025 | | 30,000 | 31,530 |
| GFL Environmental, Inc., 144A, 4.0%, 8/1/2028 (a) | | 150,000 | 147,000 |
| Mileage Plus Holdings LLC, 144A, 6.5%, 6/20/2027 | | 200,000 | 213,500 |
| Prime Security Services Borrower LLC, 144A, 5.25%, 4/15/2024 | | 405,000 | 430,979 |
| | | | 1,582,576 |
| Information Technology 1.1% | |
| Block, Inc.: | | | |
| 144A, 2.75%, 6/1/2026 | | 30,000 | 30,036 |
| | Principal
Amount ($) (c) | Value ($) |
| 144A, 3.5%, 6/1/2031 | | 70,000 | 71,750 |
| Broadcom, Inc.: | | | |
| 144A, 2.6%, 2/15/2033 | | 70,000 | 68,243 |
| 144A, 3.187%, 11/15/2036 | | 70,000 | 69,878 |
| Dell International LLC: | | | |
| 144A, 3.45%, 12/15/2051 | | 150,000 | 144,016 |
| 8.35%, 7/15/2046 | | 15,000 | 24,938 |
| Micron Technology, Inc., 3.477%, 11/1/2051 | | 40,000 | 40,949 |
| MSCI, Inc.: | | | |
| 144A, 3.25%, 8/15/2033 | | 40,000 | 40,450 |
| 144A, 3.625%, 9/1/2030 | | 90,000 | 92,025 |
| NXP BV: | | | |
| 144A, 3.125%, 2/15/2042 | | 60,000 | 60,371 |
| 144A, 3.25%, 11/30/2051 | | 30,000 | 29,980 |
| Open Text Corp., 144A, 3.875%, 2/15/2028 | | 250,000 | 254,812 |
| Oracle Corp.: | | | |
| 3.6%, 4/1/2050 | | 25,000 | 24,478 |
| 3.65%, 3/25/2041 | | 150,000 | 151,670 |
| SK Hynix, Inc., 144A, 1.5%, 1/19/2026 | | 200,000 | 195,618 |
| Twilio, Inc., 3.625%, 3/15/2029 | | 160,000 | 161,413 |
| | | | 1,460,627 |
| Materials 1.0% | |
| AngloGold Ashanti Holdings PLC, 3.75%, 10/1/2030 | | 200,000 | 201,396 |
| Berry Global, Inc., 1.65%, 1/15/2027 | | 300,000 | 293,069 |
| Glencore Funding LLC, 144A, 3.875%, 4/27/2051 (a) | | 70,000 | 73,123 |
| MEGlobal Canada ULC, 144A, 5.0%, 5/18/2025 | | 256,000 | 279,158 |
| Newmont Corp., 2.6%, 7/15/2032 | | 130,000 | 130,278 |
| Novelis Corp., 144A, 4.75%, 1/30/2030 | | 250,000 | 262,813 |
| Suzano Austria GmbH, 2.5%, 9/15/2028 | | 80,000 | 77,200 |
| | | | 1,317,037 |
| Real Estate 0.6% | |
| American Tower Corp., (REIT), 2.95%, 1/15/2051 | | 35,000 | 33,153 |
| Boston Properties LP, (REIT), 2.55%, 4/1/2032 | | 75,000 | 74,439 |
| Crown Castle International Corp., (REIT), 2.9%, 4/1/2041 | | 120,000 | 116,703 |
| Equinix, Inc., (REIT), 2.15%, 7/15/2030 | | 34,000 | 33,051 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 15 |
| | Principal
Amount ($) (c) | Value ($) |
| MPT Operating Partnership LP, (REIT), 3.5%, 3/15/2031 | | 195,000 | 197,194 |
| SBA Communications Corp., 144A, (REIT), 3.125%, 2/1/2029 | | 400,000 | 384,000 |
| | | | 838,540 |
| Utilities 2.1% | |
| CMS Energy Corp., 3.75%, 12/1/2050 | | 400,000 | 393,000 |
| Duke Energy Corp., 3.25%, 1/15/2082 | | 250,000 | 243,675 |
| Edison International, 5.0%, Perpetual (d) | | 340,000 | 347,412 |
| Eskom Holdings SOC Ltd., REG S, 6.35%, 8/10/2028 | | 200,000 | 215,500 |
| NextEra Energy Operating Partners LP: | | | |
| 144A, 3.875%, 10/15/2026 | | 190,000 | 201,210 |
| 144A, 4.25%, 7/15/2024 | | 275,000 | 285,656 |
| Pacific Gas and Electric Co.: | | | |
| 2.5%, 2/1/2031 | | 20,000 | 19,051 |
| 3.25%, 6/1/2031 | | 80,000 | 80,264 |
| 3.3%, 8/1/2040 | | 70,000 | 64,891 |
| 3.5%, 8/1/2050 | | 25,000 | 23,159 |
| Perusahaan Listrik Negara PT, 144A, 2.875%, 10/25/2025 | EUR | 260,000 | 314,689 |
| Sempra Energy, 4.125%, 4/1/2052 | | 310,000 | 313,933 |
| Southern Co., 3.75%, 9/15/2051 | | 215,000 | 215,000 |
| | | | 2,717,440 |
| Total Corporate Bonds (Cost $30,588,348) | 30,783,625 |
| Asset-Backed 2.8% |
| Automobile Receivables 0.4% | |
| Avis Budget Rental Car Funding AESOP LLC, “C”, Series 2019-1A, 144A, 4.53%, 3/20/2023 | | 50,000 | 50,235 |
| JPMorgan Chase Bank NA, “E”, Series 2021-1, 144A, 2.365%, 9/25/2028 | | 405,451 | 403,892 |
| | | | 454,127 |
| Credit Card Receivables 0.6% | |
| Fair Square Issuance Trust, “A”, Series 2020-AA, 144A, 2.9%, 9/20/2024 | | 800,000 | 801,062 |
| Miscellaneous 1.8% | |
| CF Hippolyta LLC, “B1”, Series 2021-1A, 144A, 1.98%, 3/15/2061 | | 532,407 | 524,470 |
| DB Master Finance LLC, “A23”, Series 2021-1A, 144A, 2.791%, 11/20/2051 | | 1,125,000 | 1,122,156 |
| | Principal
Amount ($) (c) | Value ($) |
| Domino's Pizza Master Issuer LLC, “A23”, Series 2017-1A, 144A, 4.118%, 7/25/2047 | | 327,250 | 342,455 |
| Wendy's Funding LLC, “A2II”, Series 2021-1A, 144A, 2.775%, 6/15/2051 | | 419,890 | 418,869 |
| | | | 2,407,950 |
| Total Asset-Backed (Cost $3,659,962) | 3,663,139 |
| Mortgage-Backed Securities Pass-Throughs 0.0% | |
| Federal Home Loan Mortgage Corp., 6.0%, 3/1/2038 | | 1,721 | 1,992 |
| Federal National Mortgage Association: | | | |
| 4.5%, 9/1/2035 | | 2,976 | 3,288 |
| 6.0%, 1/1/2024 | | 2,118 | 2,183 |
| Total Mortgage-Backed Securities Pass-Throughs (Cost $6,723) | 7,463 |
| Commercial Mortgage-Backed Securities 1.6% | |
| Citigroup Commercial Mortgage Trust, “D”, Series 2019-PRM, 144A, 4.35%, 5/10/2036 | | 500,000 | 516,331 |
| Credit Suisse Commercial Mortgage Trust, “B”, Series 2020-TMIC, 144A, 1-month USD-LIBOR + 5.0%, 5.25% (e), 12/15/2035 | | 700,000 | 713,165 |
| Freddie Mac Multifamily Structured Credit Risk, “M2”, Series 2021-MN1, 144A, 30-day average SOFR + 3.75%, 3.8% (e), 1/25/2051 | | 194,000 | 199,054 |
| GMAC Commercial Mortgage Securities, Inc., “G”, Series 2004-C1, 144A, 5.455%, 3/10/2038 | | 394,448 | 241,982 |
The accompanying notes are an integral part of the financial statements.
| 16 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| | Principal
Amount ($) (c) | Value ($) |
| MTRO Commercial Mortgage Trust, “C”, Series 2019-TECH, 144A, 1-month USD-LIBOR + 1.3%, 1.41% (e), 12/15/2033 | | 250,000 | 244,463 |
| Multifamily Connecticut Avenue Securities Trust, “M7”, Series 2019-01, 144A, 1-month USD-LIBOR + 1.7%, 1.802% (e), 10/15/2049 | | 185,374 | 184,653 |
| Total Commercial Mortgage-Backed Securities (Cost $2,241,287) | 2,099,648 |
| Collateralized Mortgage Obligations 1.7% |
| Connecticut Avenue Securities Trust: | | | |
| “1M2”, Series 2019-R03, 144A, 1-month USD-LIBOR + 2.15%, 2.253% (e), 9/25/2031 | | 28,143 | 28,251 |
| “1M2”, Series 2019-R02, 144A, 1-month USD-LIBOR + 2.3%, 2.403% (e), 8/25/2031 | | 40,861 | 41,030 |
| Fannie Mae Connecticut Avenue Securities: | | | |
| “1M2”, Series 2018-C06, 1-month USD-LIBOR + 2.0%, 2.103% (e), 3/25/2031 | | 102,459 | 103,247 |
| “1M2”, Series 2018-C01, 1-month USD-LIBOR + 2.25%, 2.353% (e), 7/25/2030 | | 121,134 | 122,502 |
| Federal National Mortgage Association, “I”, Series 2003-84, Interest Only, 6.0%, 9/25/2033 | | 64,162 | 12,262 |
| Freddie Mac Structured Agency Credit Risk Debt Notes: | | | |
| “M2”, Series 2020-DNA2, 144A, 1-month USD-LIBOR + 1.85%, 1.953% (e), 2/25/2050 | | 698,641 | 701,052 |
| “M2”, Series 2019-DNA3, 144A, 1-month USD-LIBOR + 2.05%, 2.153% (e), 7/25/2049 | | 260,254 | 262,023 |
| “M2”, Series 2019-DNA2, 144A, 1-month USD-LIBOR + 2.45%, 2.553% (e), 3/25/2049 | | 367,855 | 371,601 |
| “M2”, Series 2019-DNA1, 144A, 1-month USD-LIBOR + 2.65%, 2.753% (e), 1/25/2049 | | 53,202 | 53,836 |
| | Principal
Amount ($) (c) | Value ($) |
| JPMorgan Mortgage Trust, “AM”, Series 2016-3, 144A, 3.249% (e), 10/25/2046 | | 188,054 | 186,966 |
| STACR Trust, “M2”, Series 2018-DNA3, 144A, 1-month USD-LIBOR + 2.1%, 2.203% (e), 9/25/2048 | | 324,324 | 327,905 |
| Total Collateralized Mortgage Obligations (Cost $2,189,382) | 2,210,675 |
| Government & Agency Obligations 1.0% |
| Sovereign Bonds | |
| Brazilian Government International Bond, 3.875%, 6/12/2030 | | 200,000 | 194,000 |
| Indonesia Government International Bond: | | | |
| 2.85%, 2/14/2030 | | 625,000 | 651,140 |
| 3.85%, 10/15/2030 (a) | | 300,000 | 337,231 |
| Perusahaan Penerbit SBSN Indonesia III, 144A, 2.8%, 6/23/2030 (a) | | 200,000 | 206,170 |
| Total Government & Agency Obligations (Cost $1,422,570) | 1,388,541 |
| Short-Term U.S. Treasury Obligation 1.3% |
| U.S. Treasury Bills, 0.058% (f), 5/19/2022 (g) (h) (Cost $1,699,658) | | 1,700,000 | 1,699,372 |
| | Shares | Value ($) |
| Exchange-Traded Funds 2.8% |
| SPDR Bloomberg Convertible Securities ETF (Cost $2,340,555) | | 43,880 | 3,640,285 |
| Securities Lending Collateral 3.1% |
DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (i) (j)
(Cost $4,062,127) | | 4,062,127 | 4,062,127 |
| Cash Equivalents 1.5% |
| DWS Central Cash Management Government Fund, 0.05% (i) (Cost $1,914,561) | | 1,914,561 | 1,914,561 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 17 |
| | | % of
Net Assets | Value ($) |
| Total Investment Portfolio (Cost $112,926,818) | | 102.7 | 134,951,903 |
| Other Assets and Liabilities, Net | | (2.7) | (3,559,876) |
| Net Assets | | 100.0 | 131,392,027 |
A summary of the Fund’s transactions with affiliated investments during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Securities Lending Collateral 3.1% |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (i) (j) |
| 693,562 | 3,368,565 (k) | — | — | — | 6,563 | — | 4,062,127 | 4,062,127 |
| Cash Equivalents 1.5% |
| DWS Central Cash Management Government Fund, 0.05% (i) |
| 2,394,743 | 43,735,759 | 44,215,941 | — | — | 949 | — | 1,914,561 | 1,914,561 |
| 3,088,305 | 47,104,324 | 44,215,941 | — | — | 7,512 | — | 5,976,688 | 5,976,688 |
| * | Non-income producing security. |
| (a) | All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at December 31, 2021 amounted to $3,951,544, which is 3.0% of net assets. |
| (b) | Investment was valued using significant unobservable inputs. |
| (c) | Principal amount stated in U.S. dollars unless otherwise noted. |
| (d) | Perpetual, callable security with no stated maturity date. |
| (e) | Variable or floating rate security. These securities are shown at their current rate as of December 31, 2021. For securities based on a published reference rate and spread, the reference rate and spread are indicated within the description above. Certain variable rate securities are not based on a published reference rate and spread but adjust periodically based on current market conditions, prepayment of underlying positions and/or other variables. Securities with a floor or ceiling feature are disclosed at the inherent rate, where applicable. |
| (f) | Annualized yield at time of purchase; not a coupon rate. |
| (g) | At December 31, 2021, this security has been pledged, in whole or in part, to cover initial margin requirements for open centrally cleared swap contracts. |
| (h) | At December 31, 2021, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts. |
| (i) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
| (j) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
| (k) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the year ended December 31, 2021. |
| 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 |
| 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. |
| MSCI: Morgan Stanley Capital International |
| REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. |
| REIT: Real Estate Investment Trust |
| S&P: Standard & Poor's |
| SBSN: Surat Berharga Syariah Negara (Islamic Based Government Securities) |
| SOC: State Owned Company |
| SOFR: Secured Overnight Financing Rate |
| SPDR: Standard & Poor's Depositary Receipt |
The accompanying notes are an integral part of the financial statements.
| 18 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
LIBOR: London Interbank Offered Rate, the benchmark rate for certain floating rate securities, was partially phased out at the end of 2021, with the US Dollar LIBOR phase out continuing until June of 2023 at the latest for certain existing contracts. The Fund or the instruments in which the Fund invests may be adversely affected by the phase out by, among other things, increased volatility or illiquidity. There remains uncertainty regarding the future use of LIBOR and the nature of any replacement reference rate and, accordingly, it is difficult to predict the impact to the Fund of the transition away from LIBOR.
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.
At December 31, 2021, open futures contracts purchased were as follows:
| Futures | Currency | Expiration
Date | Contracts | Notional
Amount ($) | Notional
Value ($) | Unrealized
Appreciation ($) |
| MSCI E-Mini Emerging Market Index | USD | 3/18/2022 | 79 | 4,800,279 | 4,843,885 | 43,606 |
| Ultra Long U.S. Treasury Bond | USD | 3/22/2022 | 24 | 4,655,854 | 4,731,000 | 75,146 |
| Total unrealized appreciation | 118,752 |
At December 31, 2021, open futures contracts sold were as follows:
| Futures | Currency | Expiration
Date | Contracts | Notional
Amount ($) | Notional
Value ($) | Unrealized
Appreciation/
(Depreciation) ($) |
| 5 Year U.S. Treasury Note | USD | 3/31/2022 | 29 | 3,519,303 | 3,508,320 | 10,983 |
| Euro Stoxx 50 Index | EUR | 3/18/2022 | 24 | 1,137,179 | 1,171,516 | (34,337) |
| Euro-Schatz | EUR | 3/8/2022 | 45 | 5,747,699 | 5,739,576 | 8,123 |
| S&P 500 E-Mini Index | USD | 3/18/2022 | 18 | 4,193,962 | 4,282,650 | (88,688) |
| TOPIX Index | JPY | 3/10/2022 | 4 | 680,178 | 692,689 | (12,511) |
| Ultra 10 Year U.S. Treasury Note | USD | 3/22/2022 | 17 | 2,501,199 | 2,489,437 | 11,762 |
| Total net unrealized depreciation | (104,668) |
At December 31, 2021, open interest rate swap contracts were as follows:
| Centrally Cleared Swaps |
Cash Flows
Paid by
the Fund/
Frequency | Cash Flows
Received by
the Fund/
Frequency | Effective/
Expiration
Date | Notional
Amount
($) | Currency | Value
($) | Upfront
Payments
Paid/
(Received)
($) | Unrealized
Appreciation/
(Depreciation)
($) |
Fixed — 0.25%
Semi-Annually | Floating — 3-Month LIBOR
Quarterly β | 3/16/2021/3/16/2023 | 3,200,000 | USD | 12,049 | 183 | 11,866 |
Fixed — 0.45%
Semi-Annually | Floating — 3-Month LIBOR
Quarterly β | 3/16/2021/3/16/2024 | 2,100,000 | USD | 22,242 | (37) | 22,279 |
Fixed — 1.3%
Semi-Annually | Floating — 3-Month LIBOR
Quarterly β | 3/16/2021/3/16/2028 | 400,000 | USD | 1,291 | 84 | 1,207 |
Fixed — 1.63%
Semi-Annually | Floating — 3-Month LIBOR
Quarterly β | 3/16/2021/3/16/2031 | 300,000 | USD | (4,010) | 329 | (4,339) |
| Total net unrealized appreciation | 31,013 |
| β | 3-month LIBOR rate as of December 31, 2021 is 0.209%. |
At December 31, 2021, the Fund had the following open forward foreign currency contracts:
| Contracts to Deliver | In Exchange For | Settlement
Date | Unrealized
Appreciation ($) | Counterparty |
| EUR | 170,000 | USD | 196,775 | 2/4/2022 | 3,110 | State Street Bank and Trust |
Currency Abbreviation(s)
| EUR | Euro |
| JPY | Japanese Yen |
| USD | United States Dollar |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 19 |
For information on the Fund’s policy and additional disclosures regarding futures contracts, interest rate swap contracts and forward foreign currency contracts, please refer to the Derivatives section of Note B in the accompanying Notes to Financial Statements.
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Common Stocks | | | | |
| Communication Services | $ 4,686,171 | $ 2,721,735 | $ — | $ 7,407,906 |
| Consumer Discretionary | 5,100,030 | 1,878,389 | — | 6,978,419 |
| Consumer Staples | 3,051,303 | 1,897,361 | — | 4,948,664 |
| Energy | 2,326,562 | 964,073 | — | 3,290,635 |
| Financials | 6,299,288 | 6,831,783 | — | 13,131,071 |
| Health Care | 4,795,489 | 3,562,010 | — | 8,357,499 |
| Industrials | 2,534,778 | 2,902,753 | — | 5,437,531 |
| Information Technology | 19,983,569 | 1,660,741 | — | 21,644,310 |
| Materials | 1,523,606 | 2,060,418 | — | 3,584,024 |
| Real Estate | 1,841,615 | 382,793 | — | 2,224,408 |
| Utilities | 1,399,421 | 1,888,394 | — | 3,287,815 |
| Preferred Stocks (a) | 3,022,155 | 149,248 | — | 3,171,403 |
| Warrants | — | — | 18,782 | 18,782 |
| Corporate Bonds (a) | — | 30,783,625 | — | 30,783,625 |
| Asset-Backed (a) | — | 3,663,139 | — | 3,663,139 |
| Mortgage-Backed Securities Pass-Throughs | — | 7,463 | — | 7,463 |
| Commercial Mortgage-Backed Securities | — | 2,099,648 | — | 2,099,648 |
| Collateralized Mortgage Obligations | — | 2,210,675 | — | 2,210,675 |
| Government & Agency Obligations | — | 1,388,541 | — | 1,388,541 |
| Short-Term U.S. Treasury Obligation | — | 1,699,372 | — | 1,699,372 |
| Exchange-Traded Funds | 3,640,285 | — | — | 3,640,285 |
| Short-Term Investments (a) | 5,976,688 | — | — | 5,976,688 |
| Derivatives (b) | | | | |
| Futures Contracts | 149,620 | — | — | 149,620 |
| Interest Rate Swap Contracts | — | 35,352 | — | 35,352 |
| Forward Foreign Currency Contracts | — | 3,110 | — | 3,110 |
| Total | $66,330,580 | $68,790,623 | $18,782 | $135,139,985 |
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Derivatives (b) | | | | |
| Futures Contracts | $ (135,536) | $ — | $ — | $ (135,536) |
| Interest Rate Swap Contracts | — | (4,339) | — | (4,339) |
| Total | $ (135,536) | $ (4,339) | $ — | $ (139,875) |
| (a) | See Investment Portfolio for additional detailed categorizations. |
| (b) | Derivatives include unrealized appreciation (depreciation) on open futures contracts, interest rate swap contracts and forward foreign currency contracts. |
The accompanying notes are an integral part of the financial statements.
| 20 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
Statement of Assets and Liabilities
as of December 31, 2021
| Assets | |
| Investments in non-affiliated securities, at value (cost $106,950,130) — including $3,951,544 of securities loaned | $ 128,975,215 |
| Investment in DWS Government & Agency Securities Portfolio (cost $4,062,127)* | 4,062,127 |
| Investment in DWS Central Cash Management Government Fund (cost $1,914,561) | 1,914,561 |
| Cash | 23,884 |
| Foreign currency, at value (cost $122,405) | 124,348 |
| Receivable for Fund shares sold | 126,608 |
| Dividends receivable | 125,704 |
| Interest receivable | 269,089 |
| Receivable for variation margin on futures contracts | 14,806 |
| Unrealized appreciation on forward foreign currency contracts | 3,110 |
| Foreign taxes recoverable | 81,484 |
| Other assets | 2,668 |
| Total assets | 135,723,604 |
| Liabilities | |
| Payable upon return of securities loaned | 4,062,127 |
| Payable for Fund shares redeemed | 85,454 |
| Payable for variation margin on centrally cleared swaps | 1,198 |
| Accrued management fee | 40,887 |
| Accrued Trustees' fees | 1,218 |
| Other accrued expenses and payables | 140,693 |
| Total liabilities | 4,331,577 |
| Net assets, at value | $ 131,392,027 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 34,517,777 |
| Paid-in capital | 96,874,250 |
| Net assets, at value | $ 131,392,027 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($131,378,561 ÷ 4,905,426 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 26.78 |
| Class B | |
| Net Asset Value, offering and redemption price per share ($13,466 ÷ 504 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)** | $ 26.70 |
| * | Represents collateral on securities loaned. |
| ** | Net asset value and redemption price per share may not recalculate due to rounding of net assets and/or shares outstanding. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 21 |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Dividends (net of foreign taxes withheld of $123,326) | $ 2,510,635 |
| Interest | 1,347,557 |
| Income distributions — DWS Central Cash Management Government Fund | 949 |
| Securities lending income, net of borrower rebates | 6,563 |
| Total income | 3,865,704 |
| Expenses: | |
| Management fee | 481,375 |
| Administration fee | 126,198 |
| Services to shareholders | 840 |
| Distribution service fee (Class B) | 32 |
| Custodian fee | 18,377 |
| Audit fee | 75,140 |
| Legal fees | 13,752 |
| Tax fees | 9,692 |
| Reports to shareholders | 42,308 |
| Trustees' fees and expenses | 4,836 |
| Other | 19,758 |
| Total expenses before expense reductions | 792,308 |
| Expense reductions | (12) |
| Total expenses after expense reductions | 792,296 |
| Net investment income | 3,073,408 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from: | |
| Investments | 10,546,423 |
| Swap contracts | (152,156) |
| Futures | (572,514) |
| Forward foreign currency contracts | (15,476) |
| Foreign currency | 4,202 |
| Payments by affiliates (see Note G) | 79 |
| | 9,810,558 |
| Change in net unrealized appreciation (depreciation) on: | |
| Investments | 156,503 |
| Swap contracts | 191,137 |
| Futures | 96,242 |
| Forward foreign currency contracts | 41,747 |
| Foreign currency | 69,210 |
| | 554,839 |
| Net gain (loss) | 10,365,397 |
| Net increase (decrease) in net assets resulting from operations | $13,438,805 |
The accompanying notes are an integral part of the financial statements.
| 22 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 3,073,408 | $ 2,995,370 |
| Net realized gain (loss) | 9,810,558 | 1,789,241 |
Change in net unrealized appreciation
(depreciation) | 554,839 | 4,431,654 |
| Net increase (decrease) in net assets resulting from operations | 13,438,805 | 9,216,265 |
| Distributions to shareholders: | | |
| Class A | (4,841,632) | (6,579,884) |
| Class B | (443) | (575) |
| Total distributions | (4,842,075) | (6,580,459) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 7,428,971 | 2,458,485 |
| Reinvestment of distributions | 4,841,632 | 6,579,884 |
| Payments for shares redeemed | (16,230,213) | (14,768,561) |
| Net increase (decrease) in net assets from Class A share transactions | (3,959,610) | (5,730,192) |
| Class B | | |
| Reinvestment of distributions | 443 | 575 |
| Net increase (decrease) in net assets from Class B share transactions | 443 | 575 |
| Increase (decrease) in net assets | 4,637,563 | (3,093,811) |
| Net assets at beginning of period | 126,754,464 | 129,848,275 |
| Net assets at end of period | $131,392,027 | $126,754,464 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 5,056,269 | 5,271,275 |
| Shares sold | 282,829 | 106,312 |
| Shares issued to shareholders in reinvestment of distributions | 189,422 | 324,451 |
| Shares redeemed | (623,094) | (645,769) |
| Net increase (decrease) in Class A shares | (150,843) | (215,006) |
| Shares outstanding at end of period | 4,905,426 | 5,056,269 |
| Class B | | |
| Shares outstanding at beginning of period | 487 | 458.6 |
| Shares issued to shareholders in reinvestment of distributions | 17 | 28.4 |
| Net increase (decrease) in Class B shares | 17 | 28.4 |
| Shares outstanding at end of period | 504 | 487 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 23 |
Financial Highlights
| DWS Global Income Builder VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $25.07 | $24.63 | $21.33 | $26.56 | $23.50 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .62 | .57 | .69 | .80 | .71 |
| Net realized and unrealized gain (loss) | 2.08 | 1.16 | 3.54 | (2.67) | 3.10 |
| Total from investment operations | 2.70 | 1.73 | 4.23 | (1.87) | 3.81 |
| Less distributions from: | | | | | |
| Net investment income | (.62) | (.74) | (.90) | (.98) | (.75) |
| Net realized gains | (.37) | (.55) | (.03) | (2.38) | — |
| Total distributions | (.99) | (1.29) | (.93) | (3.36) | (.75) |
| Net asset value, end of period | $26.78 | $25.07 | $24.63 | $21.33 | $26.56 |
| Total Return (%) | 10.95 | 8.28 | 20.16 | (7.66) b | 16.54 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 131 | 127 | 130 | 120 | 147 |
| Ratio of expenses before expense reductions (%)c | .61 | .64 | .68 | .69 | .63 |
| Ratio of expenses after expense reductions (%)c | .61 | .64 | .68 | .68 | .63 |
| Ratio of net investment income (%) | 2.36 | 2.51 | 2.96 | 3.34 | 2.85 |
| Portfolio turnover rate (%) | 104 | 137 | 182 | 70 | 122 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 24 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| DWS Global Income Builder VIP — Class B |
| | Years Ended December 31, | Period
Ended |
| | 2021 | 2020 | 2019 | 12/31/18 a |
| Selected Per Share Data | | | | |
| Net asset value, beginning of period | $25.01 | $24.61 | $21.30 | $22.65 |
| Income (loss) from investment operations: | | | | |
| Net investment incomeb | .52 | .50 | .65 | .50 |
| Net realized and unrealized gain (loss) | 2.08 | 1.15 | 3.55 | (1.85) |
| Total from investment operations | 2.60 | 1.65 | 4.20 | (1.35) |
| Less distributions from: | | | | |
| Net investment income | (.54) | (.70) | (.86) | — |
| Net realized gains | (.37) | (.55) | (.03) | — |
| Total distributions | (.91) | (1.25) | (.89) | — |
| Net asset value, end of period | $26.70 | $25.01 | $24.61 | $21.30 |
| Total Return (%)c | 10.56 | 7.90 | 20.01 | (5.96) * |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ thousands) | 13 | 12 | 11 | 9 |
| Ratio of expenses before expense reductions (%)d | 1.05 | 1.10 | 1.10 | 1.15 ** |
| Ratio of expenses after expense reductions (%)d | .96 | .93 | .86 | .86 ** |
| Ratio of net investment income (%) | 1.99 | 2.20 | 2.77 | 3.30 ** |
| Portfolio turnover rate (%) | 104 | 137 | 182 | 70 e |
| a | For the period from May 1, 2018 (commencement of operations) to December 31, 2018. |
| b | Based on average shares outstanding during the period. |
| c | Total return would have been lower had certain expenses not been reduced. |
| d | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
| e | Represents the Fund’s portfolio turnover rate for the year ended December 31, 2018. |
| * | Not annualized |
| ** | Annualized |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 25 |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS Global Income Builder VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of up to 0.25% and of up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution 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 Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities and exchange-traded funds (“ETFs”) are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Equity securities or ETFs 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. Equity securities or ETFs are generally categorized as Level 1. For certain 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, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.
Debt securities are valued at prices supplied by independent pricing services approved by the Fund's Board. 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, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers. These securities are generally categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect
| 26 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. 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 acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. As of period end, any securities on loan were collateralized by cash. During the year ended December 31, 2021, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.04% annualized effective rate as of December 31, 2021) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 27 |
As of December 31, 2021, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.
Remaining Contractual Maturity of the Agreements as of December 31, 2021
| | Overnight
and
Continuous | <30 days | Between 30
& 90 days | >90 days | Total |
| Securities Lending Transactions |
| Common Stocks | $ 1,623,905 | $ — | $ — | $ — | $ 1,623,905 |
| Corporate Bonds | 1,881,827 | — | — | — | 1,881,827 |
| Government & Agency Obligations | 556,395 | — | — | — | 556,395 |
| Total Borrowings | $ 4,062,127 | $ — | $ — | $ — | $ 4,062,127 |
| Gross amount of recognized liabilities for securities lending transactions: | $ 4,062,127 |
When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transactions 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. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies and to distribute all of its taxable income to its shareholders.
Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated, a portion of which may be recoverable based upon the current interpretation of the tax rules and regulations. Estimated tax liabilities and recoveries on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments, forward currency contracts, futures contracts, swap contracts, certain securities sold at a loss, income received from passive foreign investment companies, the realized tax character on distributions from certain securities and premium amortization on debt securities. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
| 28 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income* | $ 6,484,939 |
| Undistributed long-term capital gains | $ 6,388,303 |
| Net unrealized appreciation (depreciation) on investments | $ 21,572,287 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $113,406,188. The net unrealized appreciation for all investments based on tax cost was $21,572,287. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $23,981,200 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $2,408,913.
In addition, the tax character of distributions paid by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 3,017,227 | $ 4,875,936 |
| Distributions from long-term capital gains | $ 1,824,848 | $ 1,704,523 |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. 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 Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments. All premiums and discounts are amortized/accreted for both tax and financial reporting purposes, with the exception of securities in default of principal.
Swaps. A swap is a contract between two parties to exchange future cash flows at periodic intervals based on the notional amount of the swap. A bilateral swap is a transaction between the Fund and a counterparty where cash flows are exchanged between the two parties. A centrally cleared swap is a transaction executed between the Fund and a counterparty, then cleared by a clearing member through a central clearinghouse. The central clearinghouse serves as the counterparty, with whom the Fund exchanges cash flows.
The value of a swap is adjusted daily, and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Statement of Assets and Liabilities. Gains or losses are realized when the swap expires or is closed. Certain risks may arise when entering into swap transactions including counterparty default; liquidity; or unfavorable changes in interest rates or the value of the underlying reference security, commodity or index. In connection with bilateral swaps, securities and/or cash may be identified as collateral in accordance with the terms of the swap agreement to provide assets of value and recourse in the event of default. The maximum counterparty credit risk is the net present value of the cash flows to be received from or paid to the counterparty over the term of the swap, to the extent that this amount is beneficial to the Fund, in addition to any related collateral posted to the counterparty by the Fund. This risk may be partially reduced by a master netting arrangement between the Fund and the counterparty. Upon entering into a centrally cleared swap, the Fund is required to deposit with a financial intermediary cash or securities (“initial margin”) in an amount equal to a certain percentage of the notional amount of the swap. Subsequent payments (“variation margin”) are made or received by the Fund dependent upon the daily fluctuations in the
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 29 |
value of the swap. In a centrally cleared swap transaction, counterparty risk is minimized as the central clearinghouse acts as the counterparty.
An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations.
Interest Rate Swaps. Interest rate swaps are agreements in which the Fund agrees to pay to the counterparty a fixed rate payment in exchange for the counterparty agreeing to pay to the Fund a variable rate payment, or the Fund agrees to receive from the counterparty a fixed rate payment in exchange for the counterparty agreeing to receive from the Fund a variable rate payment. The payment obligations are based on the notional amount of the swap. For the year ended December 31, 2021, the Fund entered into interest rate swap agreements to gain exposure to different parts of the yield curve while managing overall duration.
A summary of the open interest rate swap contracts as of December 31, 2021 is included in a table following the Fund’s Investment Portfolio. For the year ended December 31, 2021, the investment in interest rate swap contracts had a notional amount generally indicative of a range from $1,800,000 to $6,000,000.
Credit Default Swaps. Credit default swaps are agreements between a buyer and a seller of protection against predefined credit events for the reference entity. The Fund may enter into credit default swaps to gain exposure to an underlying issuer’s credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller of a credit default swap, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the swap provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swaps, in which case the Fund functions as the counterparty referenced above. This involves the risk that the swap may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap, 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 reference entities for all outstanding credit default swaps sold by the Fund. For the year ended December 31, 2021, the Fund entered into credit default swap agreements to gain exposure to the underlying issuer’s credit quality characteristics and to hedge the risk of default or other specified credit events on portfolio assets.
Under the terms of a credit default swap, the Fund receives or makes periodic payments based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss in the Statement of Operations. Payments received or made as a result of a credit event or termination of the swap are recognized, net of a proportional amount of the upfront payment, as realized gains or losses in the Statement of Operations.
There were no open credit default swap contracts as of December 31, 2021. For the year ended December 31, 2021, the investment on the credit default swap contracts purchased had a total notional amount generally indicative of a range from $0 to $65,000.
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). For the year ended ended December 31, 2021, the Fund entered into interest rate futures to gain exposure to different parts of the yield curve while managing overall duration. The Fund also entered into interest rate futures contracts for non-hedging purposes to seek to enhance potential gains.In addition, the Fund entered into equity index futures as a means of gaining exposure to the equity asset class without investing directly into such asset class and to manage the risk of stock market volatility.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary cash or securities (“initial margin”) in an amount equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments (“variation margin”) are made or received by the Fund dependent upon the daily fluctuations in the value and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. Gains or losses are realized when the contract expires or is closed. Since all futures contracts are exchange-traded, counterparty risk is minimized as the exchange’s clearinghouse acts as the counterparty, and guarantees the futures against default.
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Certain risks may arise upon entering into futures contracts, including the risk that an illiquid market will limit the Fund's ability to close out a futures contract prior to the settlement date and the risk that the futures contract is not well correlated with the security, index or currency to which it relates. Risk of loss may exceed amounts recognized in the Statement of Assets and Liabilities.
A summary of the open futures contracts as of December 31, 2021, is included in a table following the Fund’s Investment Portfolio. For the year ended December 31, 2021, the investment in futures contracts purchased had a total notional value generally indicative of a range from approximately $9,575,000 to $13,196,000, and the investment in futures contracts sold had a total notional value generally indicative of a range from approximately $6,971,000 to $17,884,000.
Forward Foreign Currency Contracts. A forward foreign currency contract (“forward currency contract”) is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the year ended December 31, 2021, the Fund entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings, to facilitate transactions in foreign currency denominated securities and for non-hedging purposes to seek to enhance potential gains.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by the unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
A summary of the open forward currency contracts as of December 31, 2021, is included in the table following the Fund’s Investment Portfolio. For the year ended December 31, 2021, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $197,000 to $939,000, and the investment in forward currency contracts long vs. U.S. dollars had a total contract value generally indicative of a range from $0 to approximately $340,000.
The following tables summarize the value of the Fund's derivative instruments held as of December 31, 2021 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
| Assets Derivative | Forward
Contracts | Swap
Contracts | Futures
Contracts | Total |
| Equity Contracts (a) | $ — | $ — | $ 43,606 | $ 43,606 |
| Interest Rate Contracts (a) | — | 35,352 | 106,014 | 141,366 |
| Foreign Exchange Contracts (b) | 3,110 | — | — | 3,110 |
| | $ 3,110 | $ 35,352 | $ 149,620 | $ 188,082 |
| Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: |
| (a) | Includes cumulative appreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. |
| (b) | Unrealized appreciation on forward foreign currency contracts |
| Liability Derivative | Swap
Contracts | Futures
Contracts | Total |
| Equity Contracts (a) | $ — | $ (135,536) | $ (135,536) |
| Interest Rate Contracts (a) | (4,339) | — | (4,339) |
| | $ (4,339) | $ (135,536) | $ (139,875) |
| Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: |
| (a) | Includes cumulative depreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. |
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Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the year ended December 31, 2021 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
| Realized Gain (Loss) | Forward
Contracts | Swap
Contracts | Futures
Contracts | Total |
| Equity Contracts (a) | $ — | $ — | $ (622,052) | $ (622,052) |
| Interest Rate Contracts (a) | — | (151,833) | 49,538 | (102,295) |
| Credit Contracts (a) | — | (323) | — | (323) |
| Foreign Exchange Contracts (a) | (15,476) | — | — | (15,476) |
| | $(15,476) | $(152,156) | $ (572,514) | $ (740,146) |
| Each of the above derivatives is located in the following Statement of Operations accounts: |
| (a) | Net realized gain (loss) from forward foreign currency contracts, swap and futures contracts, respectively |
| Change in Net Unrealized Appreciation (Depreciation) | Forward
Contracts | Swap
Contracts | Futures
Contracts | Total |
| Equity Contracts (a) | $ — | $ — | $ (43,857) | $ (43,857) |
| Interest Rate Contracts (a) | — | 191,137 | 140,099 | 331,236 |
| Foreign Exchange Contracts (a) | 41,747 | — | — | 41,747 |
| | $ 41,747 | $ 191,137 | $ 96,242 | $ 329,126 |
| Each of the above derivatives is located in the following Statement of Operations accounts: |
| (a) | Change in net unrealized appreciation (depreciation) on forward foreign currency contracts, swap and futures contracts, respectively |
As of December 31, 2021, the Fund has transactions subject to enforceable master netting agreements which govern the terms of certain transactions, and reduce the counterparty risk associated with such transactions. Master netting agreements allow a Fund to close out and net total exposure to a counterparty in the event of a deterioration in the credit quality or contractual default with respect to all of the transactions with a counterparty. As defined by the master netting agreement, the Fund may have collateral agreements with certain counterparties to mitigate risk. For financial reporting purposes the Statement of Assets and Liabilities generally shows derivatives assets and liabilities on a gross basis, which reflects the full risks and exposures prior to netting. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by a counterparty, including any collateral exposure, is included in the following table:
| Counterparty | Gross Amount
of Assets
Presented
in the
Statement of
Assets and
Liabilities | Financial
Instruments
and
Derivatives
Available
for Offset | Collateral
Received | Net Amount
of Derivative
Assets |
| State Street Bank and Trust | $ 3,110 | $ — | $ — | $ 3,110 |
| C. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of investment securities (excluding short-term investments) aggregated $132,081,811 and $141,724,792, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund or delegates such responsibility to the Fund’s subadvisor.
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Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the average daily net assets of the Fund, computed and accrued daily and payable monthly, at the following annual rates:
| First $250 million | .370% |
| Next $750 million | .345% |
| Over $1 billion | .310% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.37% of the Fund’s average daily net assets.
For the period from January 1, 2021 through September 30, 2022 (through April 30, 2022 for Class B shares), the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
For the year ended December 31, 2021, fees waived and/or expenses reimbursed for Class B are $12.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $126,198, of which $10,719 is unpaid.
Distribution Service Agreement. DWS Distributors, Inc. (“DDI”), an affiliate of the Advisor, is the Fund’s distributor. In accordance with the Distribution Plan, DDI receives 12b-1 fees of up to 0.25% of the average daily net assets of Class B shares. For the year ended December 31, 2021, the Distribution Service Fee was as follows:
| Distribution Fee | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class B | $ 32 | $ 3 |
Service Provider Fees. DWS Service Company (“DSC”), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST”), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class A | $ 573 | $ 97 |
| Class B | 26 | 4 |
| | $ 599 | $ 101 |
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $1,504, of which $872 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money
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market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the year ended December 31, 2021, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $494.
At December 31, 2021, one participating insurance company was owner of record of 10% or more of the total outstanding Class A shares of the Fund, owning 66%.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
During the year ended December 31, 2021, the Advisor agreed to reimburse the Fund $79 for losses incurred on trades executed incorrectly. The amount reimbursed was less than 0.01% of the Fund’s average net assets, thus having no impact on the Fund’s total return.
| H. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| 34 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS Global Income Builder VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS Global Income Builder VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
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| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses for Class B shares; 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 (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,026.80 | $ 1,024.60 |
| Expenses Paid per $1,000* | $ 3.01 | $ 4.90 |
| Hypothetical 5% Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,022.23 | $ 1,020.37 |
| Expenses Paid per $1,000* | $ 3.01 | $ 4.89 |
| * | Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratios | Class A | Class B |
| Deutsche DWS Variable Series II — DWS Global Income Builder VIP | .59% | .96% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
| 36 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
| Tax Information | (Unaudited) |
The Fund paid distributions of $0.37 per share from net long-term capital gains during its year ended December 31, 2021.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $7,046,000 as capital gain dividends for its year ended December 31, 2021.
For corporate shareholders, 34% of the ordinary dividends (i.e., income dividends plus short-term capital gains) paid during the Fund’s fiscal year ended December 31, 2021, qualified for the dividends received deduction.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
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Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Global Income Builder VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 3rd quartile, 2nd quartile and 2nd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the
| 38 | | Deutsche DWS Variable Series II —DWS Global Income Builder VIP |
best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2020.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable DWS U.S. registered fund (“DWS Funds”) and considered differences between the Fund and the comparable DWS Fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 39 |
substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
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Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
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Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
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Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| Deutsche DWS Variable Series II —DWS Global Income Builder VIP | | 43 |
VS2GIB-2 (R-025825-11 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
DWS Government Money Market VIP
Contents
| 3 | Management Summary |
| 5 | Portfolio Summary |
| 6 | Investment Portfolio |
| 8 | Statement of Assets and Liabilities |
| 8 | Statement of Operations |
| 9 | Statements of Changes in Net Assets |
| 10 | Financial Highlights |
| 11 | Notes to Financial Statements |
| 15 | Report of Independent Registered Public Accounting Firm |
| 16 | Information About Your Fund's Expenses |
| 17 | Tax Information |
| 17 | Proxy Voting |
| 18 | Advisory Agreement Board Considerations and Fee Evaluation |
| 21 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. The credit quality of the Fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an adverse impact on the Fund’s share price. The Fund’s share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets. The actions of a few large investors in the Fund may have a significant adverse effect on the share price of the Fund. Please read the prospectus for specific details regarding the Fund’s risk profile.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
| Management Summary | December 31, 2021 (Unaudited) |
In light of the government’s fiscal stimulus enacted in the wake of the pandemic and strong monetary support from the U.S. Federal Reserve (Fed), short-term interest rates declined during the first quarter of the year. The U.S. Treasury’s decision to reduce the volume of Treasury bills outstanding also exerted downward pressure on short-term rates. Against this backdrop, money market yields approached their lowest levels since the 2008 financial crisis. In June, markets digested growing concern over COVID-19 variants and a surprisingly “hawkish” Fed Open Market Committee (FOMC) meeting. The updated Fed “dot plot” displaying FOMC member forecasts for fed funds signalled two hikes in the benchmark overnight lending rate in 2023, representing an acceleration of the previous timetable. In response, short-term Treasury yields moved higher while longer-term yields declined.
As the period drew to a close, markets remained focused on the shifting outlook for monetary policy. Inflation, once characterized by the Fed as transitory, remained high in part due to supply chain issues and rising commodity prices. With unemployment levels nearing their pre-COVID lows, the Fed indicated it was prepared to begin tapering the bond purchases that it has used to keep longer-term interest rates low. November saw the Fed officially launch tapering, even as the rapid emergence of the Omicron variant of COVID-19 introduced added uncertainty. The pace of the Fed’s tapering of asset purchases was stepped up in December as inflation data for November came in above expectations. Short-term Treasury yields drifted higher over the fourth quarter of 2021 as markets began to anticipate additional hikes in the fed funds rate in 2022, as opposed to the previously signaled 2023 rate lift-off.
As of December 31, 2021, yields for one-month, six-month and one-year Treasury bills were 0.06%, 0.19% and 0.39%, respectively, versus 0.08%, 0.09% and 0.10%, respectively, as of December 31, 2020 (source: U.S. Department of the Treasury). We were able to maintain what we believe to be a competitive yield for the Portfolio. During the period, the Portfolio held a large percentage of assets in agency and Treasury floating-rate securities to take advantage of incremental rises in SOFR (the Securities Overnight Financing Rate) and Treasury bill rates. At the same time, the Portfolio invested in overnight agency repurchase agreements for liquidity and looked for yield opportunities from three- to six-month agency and Treasury securities. The types of securities that we were investing in tended to have lower yields than issues carrying more risk. We preferred to be cautious during a time of market uncertainty. In the end, this cost the Portfolio some yield, but we believe that this represented a prudent approach to preserving principal.
We anticipate continued increases in money market rates as the Fed likely commences interest rate hikes at the end of the first quarter. Additionally, a rebound in the supply of short-term agency and Treasury securities should also contribute to higher money market rates. We therefore continue to look to shorten duration while taking advantage of expected higher yields on the front end of the yield curve.
A group of investment professionals is responsible for the day-to-day management of the Fund. These investment professionals have a broad range of experience managing money market funds.
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
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Fund Performance(as of December 31, 2021)
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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. The yield quotation more closely reflects the current earnings of the Fund than the total return quotation.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
| | 7-Day Current Yield |
| DWS Government Money Market VIP — Class A | 0.01%* |
| * | The 7-Day Current Yield would have been -.32% had certain expenses not been reduced. |
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 fund’s shares outstanding. Please visit our Web site at liquidity.dws.com/US/index.jsp for the product’s most recent month-end performance.
Terms to Know
Floating-Rate Securities are debt instruments with a variable interest rate, one that typically adjusts every six months, and is tied to a money market instrument such as Treasury bills.
Repurchase Agreements (Repos) are agreements between a seller and a buyer, usually of government securities, where the seller agrees to repurchase the securities at a given price and usually at a stated time. Repos are widely used money market instruments that serve as an interest-bearing, short-term "parking places" for large sums of money.
The yield curve is a graphical representation of how yields on bonds of different maturities compare. Normally, yield curves slant up, as bonds with longer maturities typically offer higher yields than short-term bonds.
Duration, which is expressed in years, measures the sensitivity of the price of a bond or bond fund to a change in interest rates.
| 4 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio ) | 12/31/21 | 12/31/20 |
| Government & Agency Obligations | 83% | 77% |
| Repurchase Agreements | 17% | 23% |
| | 100% | 100% |
| Weighted Average Maturity | 12/31/21 | 12/31/20 |
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | 33 days | 26 days |
| iMoneyNet Money Fund AverageTM— Gov’t & Agency Retail* | 35 days | 37 days |
| * | The Fund is compared to its respective iMoneyNet Money Fund Average category: Gov’t & Agency Retail — Category includes the most broadly based of the government retail funds. These funds may invest in U.S. Treasury securities, securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. |
Weighted average maturity, also known as effective maturity, is the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 6.
Each month, information about the Fund and its portfolio holdings is filed with the SEC on Form N-MFP. The SEC delays the public availability of the information filed on Form N-MFP for 60 days after the end of the reporting period included in the filing. These forms will be available on the SEC’s Web site at sec.gov. The Fund’s portfolio holdings are also posted on dws.com as of each month-end. Please see the Fund’s current prospectus for more information.
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 5 |
| Investment Portfolio | as of December 31, 2021 |
| | Principal
Amount ($) | Value ($) |
| Government & Agency Obligations 82.6% |
| U.S. Government Sponsored Agencies 20.0% |
| Federal Farm Credit Bank, SOFR + 0.07%, 0.12% (a), 8/11/2022 | | 500,000 | 500,015 |
| Federal Home Loan Bank: | | | |
| 0.044% (b), 1/5/2022 | | 5,000,000 | 4,999,976 |
| 0.046% (b), 1/14/2022 | | 10,000,000 | 9,999,838 |
| 0.051% (b), 2/18/2022 | | 1,000,000 | 999,933 |
| SOFR + 0.005%, 0.055% (a), 3/11/2022 | | 2,500,000 | 2,500,000 |
| SOFR + 0.005%, 0.055% (a), 3/14/2022 | | 1,500,000 | 1,500,000 |
| SOFR + 0.01%, 0.06% (a), 8/1/2022 | | 1,500,000 | 1,500,000 |
| SOFR + 0.01%, 0.06% (a), 8/15/2022 | | 1,000,000 | 1,000,000 |
| SOFR + 0.01%, 0.06% (a), 9/8/2022 | | 1,500,000 | 1,500,000 |
| SOFR + 0.01%, 0.06% (a), 9/30/2022 | | 1,000,000 | 1,000,000 |
| SOFR + 0.01%, 0.06% (a), 10/7/2022 | | 2,000,000 | 2,000,000 |
| SOFR + 0.01%, 0.06% (a), 11/4/2022 | | 1,000,000 | 1,000,000 |
| SOFR + 0.03%, 0.08% (a), 1/13/2023 | | 2,000,000 | 2,000,000 |
| SOFR + 0.12%, 0.17% (a), 2/28/2022 | | 1,000,000 | 1,000,000 |
| Federal Home Loan Mortgage Corp.: | | | |
| SOFR + 0.07%, 0.12% (a), 2/25/2022 | | 3,000,000 | 3,000,000 |
| SOFR + 0.095%, 0.145% (a), 8/19/2022 | | 1,500,000 | 1,500,000 |
| SOFR + 0.15%, 0.2% (a), 3/4/2022 | | 1,750,000 | 1,749,592 |
| Federal National Mortgage Association, SOFR + 0.30%, 0.35% (a), 1/7/2022 | | 1,500,000 | 1,500,000 |
| | | | 39,249,354 |
| U.S. Treasury Obligations 62.6% |
| U.S. Treasury Bills: | | | |
| 0.001% (b), 1/11/2022 | | 40,000,000 | 39,999,989 |
| 0.041% (b), 1/6/2022 | | 5,000,000 | 4,999,972 |
| 0.051% (b), 1/13/2022 | | 12,500,000 | 12,499,792 |
| | Principal
Amount ($) | Value ($) |
| 0.051% (b), 2/17/2022 | | 6,000,000 | 5,999,608 |
| 0.051% (b), 3/17/2022 | | 1,000,000 | 999,896 |
| 0.051% (b), 3/31/2022 | | 1,000,000 | 999,876 |
| 0.056% (b), 1/4/2022 | | 12,000,000 | 11,999,945 |
| 0.056% (b), 1/20/2022 | | 5,000,000 | 4,999,855 |
| 0.056% (b), 3/3/2022 | | 5,000,000 | 4,999,534 |
| 0.056% (b), 3/10/2022 | | 5,000,000 | 4,999,481 |
| 0.081% (b), 8/11/2022 | | 3,750,000 | 3,748,150 |
| 0.107% (b), 6/9/2022 | | 10,000,000 | 9,995,362 |
| 0.243% (b), 12/1/2022 | | 5,000,000 | 4,988,867 |
| U.S. Treasury Floating Rate Notes: | | | |
| 3-month U.S. Treasury Bill Money Market Yield + 0.055%, 0.14% (a), 7/31/2022 | | 3,500,000 | 3,500,750 |
| 3-month U.S. Treasury Bill Money Market Yield + 0.114%, 0.199% (a), 4/30/2022 | | 7,250,000 | 7,251,981 |
| 3-month U.S. Treasury Bill Money Market Yield + 0.154%, 0.239% (a), 1/31/2022 | | 1,250,000 | 1,250,152 |
| | | | 123,233,210 |
| Total Government & Agency Obligations (Cost $162,482,564) | 162,482,564 |
| Repurchase Agreements 17.4% |
| Citigroup Global Markets, Inc., 0.05%, dated 12/31/2021, to be repurchased at $34,200,143 on 1/3/2022 (c) (Cost $34,200,000) | | 34,200,000 | 34,200,000 |
| | | % of Net
Assets | Value ($) |
| Total Investment Portfolio (Cost $196,682,564) | | 100.0 | 196,682,564 |
| Other Assets and Liabilities, Net | | 0.0 | 49,777 |
| Net Assets | | 100.0 | 196,732,341 |
| (a) | Floating rate security. These securities are shown at their current rate as of December 31, 2021. |
| (b) | Annualized yield at time of purchase; not a coupon rate. |
The accompanying notes are an integral part of the financial statements.
| 6 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Principal
Amount ($) | Security | Rate (%) | Maturity Date | Collateral
Value ($) |
| 34,876,600 | U.S. Treasury Bills | Zero Coupon | 1/6/2022–3/3/2022 | 34,875,573 |
| 8,500 | U.S. Treasury Bonds | 1.85–2.0 | 8/15/2051–11/15/2051 | 8,431 |
| Total Collateral Value | 34,884,004 |
| SOFR: Secured Overnight Financing Rate |
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Securities held by the Fund are reflected as Level 2 because the securities are valued at amortized cost (which approximates fair value) and, accordingly, the inputs used to determine value are not quoted prices in an active market.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Investments in Securities (a) | $ — | $ 162,482,564 | $ — | $ 162,482,564 |
| Repurchase Agreements | — | 34,200,000 | — | 34,200,000 |
| Total | $ — | $ 196,682,564 | $ — | $ 196,682,564 |
| (a) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 7 |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in securities, valued at amortized cost | $ 162,482,564 |
| Repurchase agreements, valued at amortized cost | 34,200,000 |
| Cash | 56,044 |
| Receivable for Fund shares sold | 133,223 |
| Interest receivable | 6,519 |
| Other assets | 2,971 |
| Total assets | 196,881,321 |
| Liabilities | |
| Payable for Fund shares redeemed | 47,920 |
| Distributions payable | 857 |
| Accrued Trustees' fees | 1,716 |
| Other accrued expenses and payables | 98,487 |
| Total liabilities | 148,980 |
| Net assets, at value | $ 196,732,341 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 6,484 |
| Paid-in capital | 196,725,857 |
| Net assets, at value | $ 196,732,341 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($196,732,341 ÷ 196,801,073 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 1.00 |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Interest | $ 105,429 |
| Expenses: | |
| Management fee | 375,169 |
| Administration fee | 154,857 |
| Services to shareholders | 2,928 |
| Custodian fee | 4,932 |
| Professional fees | 50,942 |
| Reports to shareholders | 66,927 |
| Trustees' fees and expenses | 7,986 |
| Other | 9,763 |
| Total expenses before expense reductions | 673,504 |
| Expense reductions | (584,029) |
| Total expenses after expense reductions | 89,475 |
| Net investment income | 15,954 |
| Net realized gain (loss) from investments | (29) |
| Net increase (decrease) in net assets resulting from operations | $ 15,925 |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 15,954 | $ 308,578 |
| Net realized gain (loss) | (29) | 144 |
| Net increase (decrease) in net assets resulting from operations | 15,925 | 308,722 |
| Distributions to shareholders: | | |
| Class A | (15,954) | (308,575) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 187,035,970 | 180,940,347 |
| Reinvestment of distributions | 15,781 | 366,986 |
| Payments for shares redeemed | (143,576,595) | (150,319,848) |
| Net increase (decrease) in net assets from Class A share transactions | 43,475,156 | 30,987,485 |
| Increase (decrease) in net assets | 43,475,127 | 30,987,632 |
| Net assets at beginning of period | 153,257,214 | 122,269,582 |
| Net assets at end of period | $ 196,732,341 | $ 153,257,214 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 153,325,917 | 122,338,432 |
| Shares sold | 187,035,970 | 180,940,347 |
| Shares issued to shareholders in reinvestment of distributions | 15,781 | 366,986 |
| Shares redeemed | (143,576,595) | (150,319,848) |
| Net increase (decrease) in Class A shares | 43,475,156 | 30,987,485 |
| Shares outstanding at end of period | 196,801,073 | 153,325,917 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 9 |
Financial Highlights
| DWS Government Money Market VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income (loss) from investment operations: | | | | | |
| Net investment income | .000 * | .002 | .018 | .014 | .005 |
| Net realized gain (loss) | (.000) * | .000 * | .000 * | (.000) * | .000 * |
| Total from investment operations | .000 * | .002 | .018 | .014 | .005 |
| Less distributions from: | | | | | |
| Net investment income | (.000) | (.002) | (.018) | (.014) | (.005) |
| Net asset value, end of period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return (%) | .01 a | .24 a | 1.77 a | 1.39 a | .45 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 197 | 153 | 122 | 107 | 111 |
| Ratio of expenses before expense reductions (%)b | .42 | .42 | .47 | .50 | .48 |
| Ratio of expenses after expense reductions (%)b | .06 | .23 | .47 | .50 | .48 |
| Ratio of net investment income (%) | .01 | .20 | 1.74 | 1.37 | .45 |
| a | Total return would have been lower had certain expenses not been reduced. |
| b | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
| * | Amount is less than $.0005. |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS Government Money Market VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The Fund 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. Securities held by the Fund are reflected as Level 2 because the securities are valued at amortized cost (which approximates fair value) and, accordingly, the inputs used to determine value are not quoted prices in an active market.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Repurchase Agreements. The Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, with certain banks and broker/dealers whereby the Fund, through its custodian or a 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 market value is equal to at least the principal amount of the repurchase price plus accrued interest. The custodian bank or another designated sub-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 Fund has the right to sell the securities and recover any resulting loss from the financial institution. If the financial institution enters into bankruptcy, the Fund’s claim on the collateral may be subject to legal proceedings.
As of December 31, 2021, the Fund held repurchase agreements with a gross value of $34,200,000. The value of the related collateral exceeded the value of the repurchase agreements at period end. The detail of the related collateral is included in the footnotes following the Fund’s Investment Portfolio.
Federal Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
At December 31, 2021, the Fund had net tax basis capital loss carryforwards of approximately $29 of short-term losses, which may be applied against realized net taxable capital gains indefinitely.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and is distributed to shareholders monthly. The Fund may take into account capital gains and losses in its daily dividend declarations. The Fund may also make additional distributions for tax purposes if necessary.
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 11 |
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period. There were no significant book-to-tax differences for the Fund.
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income | $ 6,513 |
| Capital loss carryforwards | $ (29) |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes of $196,682,564.
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income | $ 15,954 | $ 308,575 |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for both tax and financial reporting purposes.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the average daily net assets of the Fund, computed and accrued daily and payable monthly, at the following annual rates:
| First $500 million | .235% |
| Next $500 million | .220% |
| Next $1.0 billion | .205% |
| Over $2.0 billion | .190% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.235% of the Fund’s average daily net assets.
For the period from January 1, 2021 through September 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) at 0.51%.
In addition, the Advisor has agreed to voluntarily waive additional expenses. This voluntary waiver may be changed or terminated at any time without notice. Under these arrangements, the Advisor waived certain expenses of the Fund.
For the year ended December 31, 2021, fees waived and/or expenses reimbursed were $584,029.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed
| 12 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $154,857, of which $16,161 is unpaid.
Service Provider Fees. DWS Service Company (“DSC“), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC aggregated $2,416, of which $449 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $744, of which $212 is unpaid.
Trustees' Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
At December 31, 2021, one participating insurance company was owner of record of 10% or more of the total outstanding Class A shares of the Fund, owning 69%.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
| E. | Money Market Fund Investments and Yield |
Rising interest rates could cause the value of the Fund’s investments — and therefore its share price as well — to decline. Conversely, any decline in interest rates is likely to cause the Fund’s yield to decline, and during periods of unusually low interest rates, the Fund’s yield may approach zero. A low interest rate environment may prevent the fund from providing a positive yield or paying fund expenses out of current income and, at times, could impair the fund’s ability to maintain a stable $1.00 share price. Over time, the total return of a money market fund may not keep pace with inflation, which could result in a net loss of purchasing power for long-term investors. Recent and potential future changes in monetary policy made by central banks or governments are likely to affect the level of interest rates. Money market funds try to minimize this risk by purchasing short-term securities.
If there is an insufficient supply of U.S. government securities to meet investor demand, it could result in lower yields on such securities and increase interest rate risk for the fund.
| F. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 13 |
implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| 14 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS Government Money Market VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS Government Money Market VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 15 |
| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A |
| Beginning Account Value 7/1/21 | $1,000.00 |
| Ending Account Value 12/31/21 | $1,000.05 |
| Expenses Paid per $1,000* | $ .25 |
| Hypothetical 5% Fund Return | Class A |
| Beginning Account Value 7/1/21 | $1,000.00 |
| Ending Account Value 12/31/21 | $1,024.95 |
| Expenses Paid per $1,000* | $ .26 |
| * | Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratio | Class A |
| Deutsche DWS Variable Series II — DWS Government Money Market VIP | .05% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
| 16 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
| Tax Information | (Unaudited) |
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 17 |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Government Money Market VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including a peer universe compiled using information supplied by iMoneyNet, an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one- and three-year periods ended December 31, 2020, the Fund’s gross performance (Class A shares) was in the 4th quartile and 3rd quartile, respectively, of the applicable iMoneyNet universe (the 1st quartile being the best performers and the 4th quartile being the worst performers).
| 18 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). Based on Broadridge data provided as of December 31, 2020, the Board noted that the Fund’s Class A shares total (net) operating expenses were lower than the median (1st quartile) of the applicable Broadridge expense universe (less any applicable 12b-1 fees). The Board noted the expense limitation agreed to by DIMA. The Board also noted the voluntary fee waivers implemented by DIMA from time to time in recent years to ensure the Fund maintained a positive yield. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”) and considered differences between the Fund and the comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund and any fees received by an affiliate of DIMA for transfer agency services provided to the Fund. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 19 |
Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
| 20 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 21 |
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
| 22 | | Deutsche DWS Variable Series II —DWS Government Money Market VIP |
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| Deutsche DWS Variable Series II —DWS Government Money Market VIP | | 23 |
VS2GMM-2 (R-025834-11 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
Contents
| 3 | Performance Summary |
| 4 | Management Summary |
| 6 | Portfolio Summary |
| 7 | Investment Portfolio |
| 16 | Statement of Assets and Liabilities |
| 16 | Statement of Operations |
| 17 | Statements of Changes in Net Assets |
| 18 | Financial Highlights |
| 20 | Notes to Financial Statements |
| 27 | Report of Independent Registered Public Accounting Firm |
| 28 | Information About Your Fund's Expenses |
| 29 | Tax Information |
| 29 | Proxy Voting |
| 30 | Advisory Agreement Board Considerations and Fee Evaluation |
| 33 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Bond investments are subject to interest-rate, credit, liquidity and market risks to varying degrees. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investments in lower-quality (“junk bonds”) and non-rated securities present greater risk of loss than investments in higher-quality securities. Investing in foreign securities presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund 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 gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 are 0.87% and 1.30% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
ICE BofA US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
| Comparative Results |
| DWS High Income VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $10,400 | $12,783 | $13,397 | $18,182 |
| Average annual total return | 4.00% | 8.53% | 6.02% | 6.16% |
| ICE BofA US High Yield Index | Growth of $10,000 | $10,535 | $12,785 | $13,430 | $19,149 |
| Average annual total return | 5.35% | 8.53% | 6.08% | 6.71% |
| DWS High Income VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class B | Growth of $10,000 | $10,379 | $12,661 | $13,200 | $17,634 |
| Average annual total return | 3.79% | 8.18% | 5.71% | 5.84% |
| ICE BofA US High Yield Index | Growth of $10,000 | $10,535 | $12,785 | $13,430 | $19,149 |
| Average annual total return | 5.35% | 8.53% | 6.08% | 6.71% |
| The growth of $10,000 is cumulative. |
| Deutsche DWS Variable Series II —DWS High Income VIP | | 3 |
| Management Summary | December 31, 2021 (Unaudited) |
The Fund returned 4.00% in 2021 (Class A shares, unadjusted for contract charges), underperforming the 5.35% return of its benchmark, the ICE BofA US High Yield Index.
High-yield bonds delivered strong returns over the past year. Economic conditions improved as the COVID-19 vaccines were rolled out, strengthening the credit outlook for high-yield companies. The policy backdrop was also supportive, with near-zero interest rates, continued quantitative easing, and multiple spending packages passed by the U.S. government. The rally in oil prices was another tailwind for performance, in that it enabled a larger number of high-yield energy companies to achieve profitability. This favorable environment facilitated robust new issuance, demonstrating the market’s accessibility to lower-rated issuers that are seeking to refinance maturing debt or acquire capital to take advantage of opportunities as the economy recovers.
In total, these factors gave investors confidence to take on higher risk in search of more attractive yields. Yield spreads fell as a result, offsetting the adverse impact of weakness in the U.S. Treasury market. The ICE BofA US High Yield Master II Option-Adjusted Spread — which measures the difference between yields on high-yield bonds and equivalent Treasuries — moved from 386 basis points (3.86 percentage points) at the beginning of the year to 315 by December 31, 2021.
Consistent with investors’ elevated appetite for risk, lower-rated bonds delivered the best performance. Bonds rated CCC and below produced the strongest returns, followed by those rated B and BB, respectively.
The Fund’s focus on higher-quality debt was a key detractor at a time in which lower-rated issues outperformed. Sector allocation contributed to performance, led by overweights in the strong performing automotive and energy exploration and production sectors. However, an underweight in the food and beverage sector detracted. Security selection was a net detractor. Among individual securities, an overweight in Ford Motor Co. and Ford Motor Credit Co. LLC helped performance, but an underweight in Kraft Heinz Foods* detracted.
We retained a constructive view on the U.S. high-yield market at the close of the period. We believe the market’s tight valuations can be sustained, supporting coupon-like returns and allowing for outperformance versus other fixed-income asset classes. While we anticipate that the U.S. economy will remain robust into 2022, we believe high-yield bonds may be vulnerable to a range of potentially disruptive factors. Among these are additional waves of COVID-19 variants, strained supply chains, and higher input costs in the form of elevated labor and energy prices. Legislative impasses and geopolitical issues could lead to volatility, as well. We also believe the Fed is likely to continue tightening monetary policy given the persistence of inflationary pressures. We expect the Fed will begin to reduce economic stimulus by ending its asset-purchase programs before mid-2022 and enacting at least two, and possibly more, quarter-point interest rate hikes in the coming year.
On the positive side, the robust refinancing activity by U.S. high-yield issuers in 2021 further strengthened issuer balance sheets and pushed default rates beneath long-term averages. Capital market conditions remained favorable for issuers to continue to refinance debt and extend maturities, supporting the low default rates and leading to continued rating upgrades across the U.S. high-yield universe. We view the price improvement and yield-spread compression gained from upgrades as an important component of portfolio total return. We also expect that readily accessible capital markets and healthy balance sheets could drive merger and acquisition activity, providing additional investment opportunities.
We continue to identify securities with the potential for attractive total returns. In particular, we seek issuers whose improving credit metrics could lead to ratings upgrades. We also remain on the lookout for opportunities where anticipated merger and acquisition activity could benefit the credit profiles of acquiring and target companies. Ultimately, we view credit analysis as critical for balancing risk and generating longer-term outperformance.
Gary Russell, CFA, Head of Investment Strategy Fixed Income
Thomas R. Bouchard, Senior Portfolio Manager & Team Lead Fixed Income
Lonnie Fox, Senior Portfolio Manager & Team Lead Fixed Income
Portfolio Managers
| 4 | | Deutsche DWS Variable Series II —DWS High Income VIP |
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
Terms to Know
The ICE BofA US High Yield Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
Yield spread refers to differences between yields on differing debt instruments, calculated by deducting the yield of one instrument from another. The higher the yield spread, the greater the difference between the yields offered by each instrument.
The ICE BofA US High Yield Option-Adjusted Spread (OAS) calculates the spread between a computed OAS index of bonds that are below investment grade (those rated BB or below) and a spot Treasury curve.
Credit quality measures 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. Credit quality does not remove market risk and is subject to change.
Overweight means a fund holds a higher weighting in a given sector or individual security compared with its benchmark index; underweight means a fund holds a lower weighting.
Contribution and detraction incorporate both an investment’s total return and its weighting in the Fund.
A default occurs when an issuer fails to make an interest or principal payment on a bond. The default rate is the percentage of issuers that default in a given year.
| * | Not held at December 31, 2021. |
| Deutsche DWS Variable Series II —DWS High Income VIP | | 5 |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 12/31/21 | 12/31/20 |
| Corporate Bonds | 93% | 98% |
| Cash Equivalents | 6% | 1% |
| Loan Participations and Assignments | 1% | 1% |
| Warrants | 0% | 0% |
| Common Stocks | 0% | 0% |
| | 100% | 100% |
| Sector Diversification (As a % of Investment Portfolio excluding Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| Consumer Discretionary | 20% | 22% |
| Energy | 19% | 13% |
| Industrials | 14% | 10% |
| Communication Services | 14% | 19% |
| Health Care | 10% | 8% |
| Materials | 9% | 11% |
| Real Estate | 5% | 5% |
| Utilities | 4% | 4% |
| Consumer Staples | 2% | 4% |
| Financials | 2% | 2% |
| Information Technology | 1% | 2% |
| | 100% | 100% |
| Quality (As a % of Investment Portfolio excluding Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| AA | 0% | — |
| BBB | 7% | 4% |
| BB | 56% | 61% |
| B | 30% | 30% |
| CCC | 7% | 5% |
| C | 0% | — |
| Not Rated | 0% | 0% |
| | 100% | 100% |
The quality ratings represent the higher of Moody’s Investors Service, Inc. (“Moody’s”), Fitch Ratings, Inc. (“Fitch”) or S&P Global Ratings (“S&P”) credit ratings. The ratings of Moody’s, Fitch and S&P represent their opinions as to the quality of the securities they rate. Credit quality measures a bond issuer’s ability to repay interest and principal in a timely manner. Ratings are relative and subjective and are not absolute standards of quality. Credit quality does not remove market risk and is subject to change.
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 7.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| 6 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| Investment Portfolio | as of December 31, 2021 |
| | Principal
Amount ($)(a) | Value ($) |
| Corporate Bonds 92.6% | |
| Communication Services 12.7% | |
| Altice France Holding SA: | | | |
| 144A, 6.0%, 2/15/2028 | | 200,000 | 191,000 |
| 144A, 10.5%, 5/15/2027 | | 200,000 | 215,000 |
| Altice France SA: | | | |
| 144A, 5.5%, 1/15/2028 | | 200,000 | 198,482 |
| 144A, 8.125%, 2/1/2027 | | 200,000 | 213,750 |
| Audacy Capital Corp.: | | | |
| 144A, 6.5%, 5/1/2027 | | 75,000 | 74,190 |
| 144A, 6.75%, 3/31/2029 (b) | | 55,000 | 53,733 |
| CCO Holdings LLC: | | | |
| 144A, 4.25%, 1/15/2034 | | 20,000 | 19,677 |
| 144A, 4.5%, 8/15/2030 | | 125,000 | 127,899 |
| 144A, 4.75%, 3/1/2030 | | 140,000 | 145,600 |
| 144A, 5.0%, 2/1/2028 | | 150,000 | 156,000 |
| 144A, 5.125%, 5/1/2027 | | 275,000 | 283,250 |
| Clear Channel Outdoor Holdings, Inc., 144A, 7.5%, 6/1/2029 | | 80,000 | 85,400 |
| Clear Channel Worldwide Holdings, Inc., 144A, 5.125%, 8/15/2027 | | 320,000 | 331,123 |
| CommScope Technologies LLC: | | | |
| 144A, 5.0%, 3/15/2027 (b) | | 75,000 | 70,125 |
| 144A, 6.0%, 6/15/2025 | | 55,000 | 55,000 |
| CommScope, Inc., 144A, 8.25%, 3/1/2027 | | 130,000 | 133,600 |
| Consolidated Communications, Inc., 144A, 6.5%, 10/1/2028 | | 155,000 | 164,300 |
| CSC Holdings LLC: | | | |
| 144A, 5.75%, 1/15/2030 | | 200,000 | 199,250 |
| 144A, 6.5%, 2/1/2029 | | 200,000 | 214,000 |
| Directv Financing LLC, 144A, 5.875%, 8/15/2027 | | 125,000 | 127,964 |
| DISH DBS Corp.: | | | |
| 5.875%, 11/15/2024 | | 96,000 | 98,617 |
| 7.375%, 7/1/2028 (b) | | 50,000 | 50,625 |
| 7.75%, 7/1/2026 | | 90,000 | 94,950 |
| Frontier Communications Holdings LLC: | | | |
| 144A, 5.0%, 5/1/2028 | | 165,000 | 169,950 |
| 144A, 5.875%, 10/15/2027 | | 75,000 | 79,312 |
| 144A, 6.0%, 1/15/2030 (b) | | 50,000 | 50,250 |
| iHeartCommunications, Inc.: | | | |
| 144A, 5.25%, 8/15/2027 | | 125,000 | 130,012 |
| 8.375%, 5/1/2027 | | 75,000 | 79,076 |
| Iliad Holding SASU, 144A, 6.5%, 10/15/2026 | | 200,000 | 210,146 |
| Lamar Media Corp., 4.875%, 1/15/2029 | | 80,000 | 83,500 |
| | Principal
Amount ($)(a) | Value ($) |
| LCPR Senior Secured Financing DAC, 144A, 6.75%, 10/15/2027 | | 189,000 | 198,450 |
| Outfront Media Capital LLC: | | | |
| 144A, 4.25%, 1/15/2029 | | 70,000 | 70,127 |
| 144A, 5.0%, 8/15/2027 | | 140,000 | 143,259 |
| Radiate Holdco LLC: | | | |
| 144A, 4.5%, 9/15/2026 | | 55,000 | 55,550 |
| 144A, 6.5%, 9/15/2028 | | 100,000 | 100,453 |
| Sirius XM Radio, Inc., 144A, 3.125%, 9/1/2026 | | 110,000 | 110,032 |
| Telecom Italia Capital SA, 6.375%, 11/15/2033 | | 155,000 | 166,905 |
| Uber Technologies, Inc.: | | | |
| 144A, 4.5%, 8/15/2029 | | 20,000 | 20,367 |
| 144A, 6.25%, 1/15/2028 | | 25,000 | 26,838 |
| 144A, 7.5%, 5/15/2025 | | 120,000 | 126,106 |
| 144A, 7.5%, 9/15/2027 | | 50,000 | 54,415 |
| Viasat, Inc., 144A, 5.625%, 4/15/2027 | | 120,000 | 123,684 |
| Virgin Media Secured Finance PLC, 144A, 5.5%, 5/15/2029 | | 345,000 | 364,282 |
| Vodafone Group PLC, 7.0%, 4/4/2079 | | 185,000 | 223,753 |
| Ziggo Bond Co. BV, 144A, 3.375%, 2/28/2030 | EUR | 370,000 | 410,208 |
| Ziggo BV, 144A, 4.875%, 1/15/2030 | | 290,000 | 297,424 |
| | | | 6,597,634 |
| Consumer Discretionary 18.5% | |
| Affinity Gaming, 144A, 6.875%, 12/15/2027 | | 160,000 | 166,400 |
| American Axle & Manufacturing, Inc., 6.875%, 7/1/2028 | | 75,000 | 80,879 |
| Arko Corp., 144A, 5.125%, 11/15/2029 | | 60,000 | 57,975 |
| Bath & Body Works, Inc.: | | | |
| 144A, 6.625%, 10/1/2030 | | 70,000 | 79,275 |
| 6.875%, 11/1/2035 | | 200,000 | 248,500 |
| 144A, 9.375%, 7/1/2025 | | 35,000 | 42,700 |
| Beacon Roofing Supply, Inc., 144A, 4.125%, 5/15/2029 (b) | | 30,000 | 29,984 |
| Beazer Homes U.S.A., Inc., 5.875%, 10/15/2027 | | 35,000 | 36,619 |
| Boyd Gaming Corp.: | | | |
| 4.75%, 12/1/2027 | | 130,000 | 132,600 |
| 144A, 4.75%, 6/15/2031 | | 90,000 | 91,800 |
| 144A, 8.625%, 6/1/2025 | | 60,000 | 64,291 |
| Caesars Entertainment, Inc.: | | | |
| 144A, 4.625%, 10/15/2029 | | 210,000 | 210,000 |
| 144A, 6.25%, 7/1/2025 | | 270,000 | 283,399 |
| 144A, 8.125%, 7/1/2027 | | 410,000 | 454,050 |
| Caesars Resort Collection LLC, 144A, 5.75%, 7/1/2025 | | 20,000 | 20,886 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 7 |
| | Principal
Amount ($)(a) | Value ($) |
| Carnival Corp.: | | | |
| 144A, 5.75%, 3/1/2027 | | 170,000 | 170,000 |
| 144A, 6.0%, 5/1/2029 | | 30,000 | 29,850 |
| 144A, 7.625%, 3/1/2026 | | 98,000 | 102,728 |
| 144A, 9.875%, 8/1/2027 | | 130,000 | 148,553 |
| REG S, 10.125%, 2/1/2026 | EUR | 100,000 | 128,599 |
| 144A, 10.5%, 2/1/2026 | | 80,000 | 91,320 |
| Clarios Global LP: | | | |
| 144A, 4.375%, 5/15/2026 | EUR | 100,000 | 116,647 |
| REG S, 4.375%, 5/15/2026 | EUR | 200,000 | 233,295 |
| 144A, 8.5%, 5/15/2027 | | 55,000 | 58,300 |
| Dana, Inc.: | | | |
| 5.375%, 11/15/2027 | | 55,000 | 57,678 |
| 5.625%, 6/15/2028 | | 25,000 | 26,563 |
| Empire Communities Corp., 144A, 7.0%, 12/15/2025 | | 80,000 | 82,800 |
| Ford Motor Co.: | | | |
| 4.346%, 12/8/2026 | | 160,000 | 174,520 |
| 4.75%, 1/15/2043 | | 22,000 | 24,283 |
| 5.291%, 12/8/2046 | | 68,000 | 79,917 |
| Ford Motor Credit Co. LLC: | | | |
| 3.375%, 11/13/2025 | | 209,000 | 217,134 |
| 3.625%, 6/17/2031 | | 240,000 | 252,644 |
| 5.113%, 5/3/2029 | | 200,000 | 227,250 |
| 5.125%, 6/16/2025 | | 230,000 | 250,125 |
| Forestar Group, Inc., 144A, 3.85%, 5/15/2026 | | 90,000 | 90,225 |
| Foundation Building Materials, Inc., 144A, 6.0%, 3/1/2029 | | 110,000 | 108,075 |
| Hilton Grand Vacations Borrower Escrow LLC: | | | |
| 144A, 4.875%, 7/1/2031 | | 30,000 | 30,000 |
| 144A, 5.0%, 6/1/2029 | | 90,000 | 92,250 |
| Jaguar Land Rover Automotive PLC, 144A, 5.875%, 1/15/2028 (b) | | 200,000 | 203,500 |
| M/I Homes, Inc., 4.95%, 2/1/2028 | | 130,000 | 135,200 |
| Macy's Retail Holdings LLC, 144A, 5.875%, 4/1/2029 | | 145,000 | 154,606 |
| MajorDrive Holdings IV LLC, 144A, 6.375%, 6/1/2029 | | 95,000 | 91,912 |
| Marriott Ownership Resorts, Inc.: | | | |
| 144A, 4.5%, 6/15/2029 | | 50,000 | 50,326 |
| 144A, 6.125%, 9/15/2025 | | 75,000 | 78,188 |
| Mattel, Inc.: | | | |
| 144A, 3.375%, 4/1/2026 | | 75,000 | 76,914 |
| 144A, 3.75%, 4/1/2029 (b) | | 50,000 | 51,813 |
| Meritage Homes Corp., 144A, 3.875%, 4/15/2029 | | 105,000 | 110,250 |
| Michaels Companies, Inc., 144A, 7.875%, 5/1/2029 (b) | | 25,000 | 24,625 |
| Midwest Gaming Borrower LLC, 144A, 4.875%, 5/1/2029 | | 100,000 | 100,500 |
| | Principal
Amount ($)(a) | Value ($) |
| NCL Corp. Ltd.: | | | |
| 144A, 3.625%, 12/15/2024 | | 100,000 | 94,375 |
| 144A, 5.875%, 3/15/2026 | | 250,000 | 248,892 |
| NCL Finance Ltd., 144A, 6.125%, 3/15/2028 | | 60,000 | 59,100 |
| Newell Brands, Inc.: | | | |
| 4.7%, 4/1/2026 | | 440,000 | 479,712 |
| 6.0%, 4/1/2046 | | 60,000 | 76,982 |
| Peninsula Pacific Entertainment LLC, 144A, 8.5%, 11/15/2027 | | 60,000 | 64,800 |
| Picasso Finance Sub, Inc., 144A, 6.125%, 6/15/2025 | | 97,000 | 101,365 |
| Raptor Acquisition Corp., 144A, 4.875%, 11/1/2026 | | 170,000 | 171,700 |
| Real Hero Merger Sub 2, Inc., 144A, 6.25%, 2/1/2029 | | 80,000 | 79,875 |
| Ritchie Bros Holdings, Inc., 144A, 4.75%, 12/15/2031 | | 10,000 | 10,438 |
| Royal Caribbean Cruises Ltd.: | | | |
| 3.7%, 3/15/2028 | | 55,000 | 51,556 |
| 144A, 4.25%, 7/1/2026 | | 10,000 | 9,686 |
| 144A, 5.5%, 8/31/2026 | | 30,000 | 30,504 |
| 144A, 5.5%, 4/1/2028 | | 110,000 | 111,272 |
| 144A, 9.125%, 6/15/2023 | | 210,000 | 222,075 |
| 144A, 10.875%, 6/1/2023 | | 110,000 | 120,176 |
| 144A, 11.5%, 6/1/2025 | | 30,000 | 33,600 |
| Scientific Games International, Inc., 144A, 7.0%, 5/15/2028 | | 235,000 | 250,275 |
| Staples, Inc., 144A, 7.5%, 4/15/2026 | | 110,000 | 113,025 |
| Taylor Morrison Communities, Inc.: | | | |
| 144A, 5.125%, 8/1/2030 | | 75,000 | 82,500 |
| 144A, 5.75%, 1/15/2028 | | 170,000 | 189,975 |
| Thor Industries, Inc., 144A, 4.0%, 10/15/2029 | | 80,000 | 79,200 |
| Travel & Leisure Co., 144A, 6.625%, 7/31/2026 | | 120,000 | 133,061 |
| Tri Pointe Homes, Inc.: | | | |
| 5.25%, 6/1/2027 | | 55,000 | 59,056 |
| 5.7%, 6/15/2028 | | 80,000 | 88,000 |
| Univar Solutions U.S.A., Inc., 144A, 5.125%, 12/1/2027 | | 160,000 | 166,955 |
| Vail Resorts, Inc., 144A, 6.25%, 5/15/2025 | | 100,000 | 104,000 |
| Viking Cruises Ltd.: | | | |
| 144A, 5.875%, 9/15/2027 | | 105,000 | 99,981 |
| 144A, 7.0%, 2/15/2029 | | 90,000 | 90,260 |
| Viking Ocean Cruises Ship VII Ltd., 144A, 5.625%, 2/15/2029 | | 15,000 | 14,981 |
| White Cap Parent LLC, 144A, 8.25%, 3/15/2026 | | 75,000 | 76,688 |
| Williams Scotsman International, Inc., 144A, 4.625%, 8/15/2028 | | 60,000 | 61,950 |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| | Principal
Amount ($)(a) | Value ($) |
| Wyndham Hotels & Resorts, Inc., 144A, 4.375%, 8/15/2028 | | 50,000 | 51,500 |
| Wynn Las Vegas LLC, 144A, 5.5%, 3/1/2025 | | 50,000 | 51,500 |
| Wynn Resorts Finance LLC, 144A, 5.125%, 10/1/2029 | | 60,000 | 60,900 |
| | | | 9,609,863 |
| Consumer Staples 2.0% | |
| Albertsons Companies, Inc.: | | | |
| 144A, 4.625%, 1/15/2027 | | 98,000 | 102,845 |
| 144A, 5.875%, 2/15/2028 | | 60,000 | 63,600 |
| Chobani LLC, 144A, 4.625%, 11/15/2028 | | 30,000 | 30,824 |
| Edgewell Personal Care Co., 144A, 5.5%, 6/1/2028 | | 70,000 | 74,301 |
| JBS U.S.A. LUX SA, 144A, 6.75%, 2/15/2028 | | 235,000 | 253,509 |
| Pilgrim's Pride Corp.: | | | |
| 144A, 4.25%, 4/15/2031 | | 245,000 | 257,250 |
| 144A, 5.875%, 9/30/2027 | | 230,000 | 242,866 |
| Post Holdings, Inc., 144A, 5.5%, 12/15/2029 | | 20,000 | 21,013 |
| | | | 1,046,208 |
| Energy 17.9% | |
| Antero Midstream Partners LP: | | | |
| 144A, 5.375%, 6/15/2029 | | 70,000 | 73,851 |
| 144A, 5.75%, 3/1/2027 | | 130,000 | 134,712 |
| 144A, 5.75%, 1/15/2028 | | 90,000 | 94,377 |
| Antero Resources Corp.: | | | |
| 144A, 5.375%, 3/1/2030 | | 50,000 | 53,450 |
| 144A, 7.625%, 2/1/2029 | | 138,000 | 153,180 |
| 144A, 8.375%, 7/15/2026 | | 42,000 | 47,820 |
| Apache Corp.: | | | |
| 4.875%, 11/15/2027 | | 55,000 | 59,950 |
| 5.1%, 9/1/2040 (b) | | 57,000 | 64,410 |
| Archrock Partners LP: | | | |
| 144A, 6.25%, 4/1/2028 | | 220,000 | 229,398 |
| 144A, 6.875%, 4/1/2027 | | 110,000 | 115,500 |
| Ascent Resources Utica Holdings LLC: | | | |
| 144A, 5.875%, 6/30/2029 | | 30,000 | 28,866 |
| 144A, 8.25%, 12/31/2028 | | 65,000 | 67,762 |
| Buckeye Partners LP, 144A, 4.5%, 3/1/2028 | | 80,000 | 80,600 |
| Cheniere Energy Partners LP: | | | |
| 144A, 3.25%, 1/31/2032 | | 30,000 | 30,300 |
| 4.5%, 10/1/2029 | | 272,000 | 288,320 |
| Cheniere Energy, Inc., 4.625%, 10/15/2028 | | 100,000 | 106,372 |
| Chesapeake Energy Corp., 144A, 5.875%, 2/1/2029 | | 75,000 | 80,231 |
| CNX Resources Corp.: | | | |
| 144A, 6.0%, 1/15/2029 | | 135,000 | 140,400 |
| 144A, 7.25%, 3/14/2027 | | 100,000 | 106,073 |
| | Principal
Amount ($)(a) | Value ($) |
| Colgate Energy Partners III LLC, 144A, 5.875%, 7/1/2029 | | 170,000 | 175,100 |
| Comstock Resources, Inc.: | | | |
| 144A, 5.875%, 1/15/2030 | | 30,000 | 30,750 |
| 144A, 6.75%, 3/1/2029 | | 155,000 | 168,113 |
| 144A, 7.5%, 5/15/2025 | | 18,000 | 18,563 |
| DCP Midstream Operating LP: | | | |
| 3.25%, 2/15/2032 | | 50,000 | 50,375 |
| 5.125%, 5/15/2029 | | 80,000 | 90,400 |
| 5.375%, 7/15/2025 | | 367,000 | 400,947 |
| 5.625%, 7/15/2027 | | 50,000 | 56,500 |
| DT Midstream, Inc.: | | | |
| 144A, 4.125%, 6/15/2029 | | 155,000 | 158,681 |
| 144A, 4.375%, 6/15/2031 | | 30,000 | 31,200 |
| Endeavor Energy Resources LP: | | | |
| 144A, 5.75%, 1/30/2028 | | 70,000 | 74,612 |
| 144A, 6.625%, 7/15/2025 | | 35,000 | 37,031 |
| EQM Midstream Partners LP: | | | |
| 144A, 4.5%, 1/15/2029 | | 50,000 | 52,000 |
| 144A, 4.75%, 1/15/2031 | | 75,000 | 79,312 |
| 5.5%, 7/15/2028 | | 55,000 | 60,088 |
| 144A, 6.0%, 7/1/2025 | | 140,000 | 152,250 |
| 144A, 6.5%, 7/1/2027 | | 80,000 | 89,600 |
| EQT Corp.: | | | |
| 144A, 3.625%, 5/15/2031 (b) | | 100,000 | 103,750 |
| 5.0%, 1/15/2029 | | 85,000 | 94,137 |
| 6.625%, 2/1/2025 | | 105,000 | 118,388 |
| 7.5%, 2/1/2030 | | 80,000 | 102,800 |
| Genesis Energy LP, 7.75%, 2/1/2028 | | 75,000 | 75,562 |
| Harvest Midstream I LP, 144A, 7.5%, 9/1/2028 | | 155,000 | 165,850 |
| Hess Midstream Operations LP, 144A, 4.25%, 2/15/2030 | | 110,000 | 109,175 |
| Hilcorp Energy I LP: | | | |
| 144A, 5.75%, 2/1/2029 | | 155,000 | 159,762 |
| 144A, 6.0%, 2/1/2031 | | 110,000 | 113,575 |
| 144A, 6.25%, 11/1/2028 | | 35,000 | 36,794 |
| Howard Midstream Energy Partners LLC, 144A, 6.75%, 1/15/2027 | | 40,000 | 40,988 |
| Murphy Oil U.S.A., Inc.: | | | |
| 4.75%, 9/15/2029 | | 55,000 | 57,888 |
| 5.625%, 5/1/2027 | | 65,000 | 67,600 |
| Nabors Industries, Inc., 144A, 7.375%, 5/15/2027 | | 105,000 | 108,695 |
| NuStar Logistics LP: | | | |
| 5.75%, 10/1/2025 | | 80,000 | 86,090 |
| 6.375%, 10/1/2030 | | 30,000 | 33,300 |
| Oasis Petroleum, Inc., 144A, 6.375%, 6/1/2026 | | 40,000 | 41,900 |
| Occidental Petroleum Corp.: | | | |
| 5.5%, 12/1/2025 | | 135,000 | 149,765 |
| 5.55%, 3/15/2026 | | 105,000 | 116,896 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 9 |
| | Principal
Amount ($)(a) | Value ($) |
| 6.125%, 1/1/2031 | | 255,000 | 309,825 |
| 6.45%, 9/15/2036 | | 105,000 | 133,876 |
| 6.625%, 9/1/2030 (b) | | 225,000 | 278,437 |
| 8.0%, 7/15/2025 | | 175,000 | 204,312 |
| 8.5%, 7/15/2027 | | 100,000 | 124,750 |
| Parkland Corp., 144A, 5.875%, 7/15/2027 | | 80,000 | 84,400 |
| Precision Drilling Corp., 144A, 6.875%, 1/15/2029 | | 30,000 | 30,577 |
| Range Resources Corp.: | | | |
| 8.25%, 1/15/2029 | | 280,000 | 312,200 |
| 9.25%, 2/1/2026 | | 50,000 | 53,890 |
| Rattler Midstream LP, 144A, 5.625%, 7/15/2025 | | 75,000 | 78,000 |
| Renewable Energy Group, Inc., 144A, 5.875%, 6/1/2028 | | 60,000 | 61,650 |
| Rockcliff Energy II LLC, 144A, 5.5%, 10/15/2029 | | 30,000 | 30,900 |
| SM Energy Co., 6.5%, 7/15/2028 | | 80,000 | 82,800 |
| Southwestern Energy Co.: | | | |
| 4.75%, 2/1/2032 | | 70,000 | 73,717 |
| 5.375%, 2/1/2029 | | 120,000 | 126,900 |
| 6.45%, 1/23/2025 | | 36,000 | 39,564 |
| 7.75%, 10/1/2027 (b) | | 100,000 | 107,875 |
| 8.375%, 9/15/2028 | | 50,000 | 55,813 |
| Suburban Propane Partners LP, 144A, 5.0%, 6/1/2031 | | 60,000 | 60,675 |
| Sunnova Energy Corp., 144A, 5.875%, 9/1/2026 | | 115,000 | 117,300 |
| Sunoco LP: | | | |
| 4.5%, 5/15/2029 | | 56,000 | 56,869 |
| 5.875%, 3/15/2028 | | 35,000 | 37,013 |
| 6.0%, 4/15/2027 | | 52,000 | 54,231 |
| Superior Plus LP, 144A, 4.5%, 3/15/2029 | | 30,000 | 30,835 |
| Targa Resources Partners LP: | | | |
| 4.875%, 2/1/2031 | | 30,000 | 32,579 |
| 5.0%, 1/15/2028 | | 265,000 | 279,230 |
| 5.5%, 3/1/2030 | | 90,000 | 98,325 |
| Transocean Poseidon Ltd., 144A, 6.875%, 2/1/2027 | | 175,000 | 169,094 |
| USA Compression Partners LP: | | | |
| 6.875%, 4/1/2026 | | 142,000 | 147,680 |
| 6.875%, 9/1/2027 | | 100,000 | 105,625 |
| Venture Global Calcasieu Pass LLC: | | | |
| 144A, 3.875%, 11/1/2033 | | 50,000 | 52,529 |
| 144A, 4.125%, 8/15/2031 | | 30,000 | 31,800 |
| Vine Energy Holdings LLC, 144A, 6.75%, 4/15/2029 | | 330,000 | 358,050 |
| Western Midstream Operating LP, 5.3%, 3/1/2048 | | 25,000 | 30,125 |
| | | | 9,315,455 |
| | Principal
Amount ($)(a) | Value ($) |
| Financials 1.4% | |
| Navient Corp., 6.125%, 3/25/2024 | | 393,000 | 419,036 |
| OneMain Finance Corp.: | | | |
| 5.375%, 11/15/2029 | | 80,000 | 86,984 |
| 8.875%, 6/1/2025 | | 50,000 | 53,500 |
| Rocket Mortgage LLC, 144A, 3.625%, 3/1/2029 | | 120,000 | 120,450 |
| Sabre GLBL, Inc., 144A, 7.375%, 9/1/2025 | | 30,000 | 31,350 |
| | | | 711,320 |
| Health Care 9.7% | |
| Acadia Healthcare Co., Inc., 144A, 5.0%, 4/15/2029 | | 250,000 | 256,875 |
| AdaptHealth LLC: | | | |
| 144A, 4.625%, 8/1/2029 | | 55,000 | 55,000 |
| 144A, 6.125%, 8/1/2028 | | 80,000 | 84,800 |
| AHP Health Partners, Inc., 144A, 5.75%, 7/15/2029 | | 145,000 | 143,550 |
| Bausch Health Americas, Inc.: | | | |
| 144A, 8.5%, 1/31/2027 | | 195,000 | 204,750 |
| 144A, 9.25%, 4/1/2026 | | 135,000 | 142,594 |
| Bausch Health Companies, Inc., 144A, 6.125%, 4/15/2025 | | 122,000 | 124,264 |
| Catalent Pharma Solutions, Inc.: | | | |
| 144A, 3.5%, 4/1/2030 | | 50,000 | 49,858 |
| 144A, 5.0%, 7/15/2027 | | 125,000 | 129,875 |
| Centene Corp., 4.625%, 12/15/2029 | | 275,000 | 296,576 |
| Charles River Laboratories International, Inc., 144A, 3.75%, 3/15/2029 | | 65,000 | 65,650 |
| Community Health Systems, Inc.: | | | |
| 144A, 4.75%, 2/15/2031 | | 115,000 | 116,006 |
| 144A, 5.625%, 3/15/2027 | | 60,000 | 63,500 |
| 144A, 6.0%, 1/15/2029 | | 65,000 | 69,306 |
| 144A, 6.125%, 4/1/2030 | | 50,000 | 49,466 |
| 144A, 6.875%, 4/15/2029 | | 140,000 | 142,625 |
| Encompass Health Corp.: | | | |
| 4.5%, 2/1/2028 | | 45,000 | 46,294 |
| 4.75%, 2/1/2030 | | 137,000 | 141,110 |
| Endo Luxembourg Finance Company I S.a r.l., 144A, 6.125%, 4/1/2029 | | 70,000 | 68,600 |
| HCA, Inc., 5.625%, 9/1/2028 | | 300,000 | 350,547 |
| IQVIA, Inc., 144A, 5.0%, 5/15/2027 | | 220,000 | 227,766 |
| Legacy LifePoint Health LLC, 144A, 4.375%, 2/15/2027 | | 75,000 | 75,563 |
| LifePoint Health, Inc., 144A, 5.375%, 1/15/2029 | | 225,000 | 223,875 |
| Molina Healthcare, Inc.: | | | |
| 144A, 3.875%, 11/15/2030 | | 75,000 | 77,812 |
| 144A, 4.375%, 6/15/2028 | | 100,000 | 103,000 |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| | Principal
Amount ($)(as) | Value ($) |
| Mozart Debt Merger Sub, Inc.: | | | |
| 144A, 3.875%, 4/1/2029 | | 40,000 | 39,859 |
| 144A, 5.25%, 10/1/2029 (b) | | 130,000 | 131,773 |
| Option Care Health, Inc., 144A, 4.375%, 10/31/2029 | | 130,000 | 130,325 |
| Organon & Co, 144A, 4.125%, 4/30/2028 | | 200,000 | 203,250 |
| Owens & Minor, Inc., 144A, 4.5%, 3/31/2029 (b) | | 55,000 | 56,375 |
| Prestige Brands, Inc., 144A, 5.125%, 1/15/2028 | | 90,000 | 93,712 |
| Prime Healthcare Services, Inc., 144A, 7.25%, 11/1/2025 | | 70,000 | 74,200 |
| RegionalCare Hospital Partners Holdings, Inc., 144A, 9.75%, 12/1/2026 | | 60,000 | 63,402 |
| Select Medical Corp., 144A, 6.25%, 8/15/2026 | | 125,000 | 132,406 |
| Syneos Health, Inc., 144A, 3.625%, 1/15/2029 | | 100,000 | 98,750 |
| Tenet Healthcare Corp.: | | | |
| 144A, 4.25%, 6/1/2029 | | 90,000 | 91,394 |
| 4.625%, 7/15/2024 | | 21,000 | 21,263 |
| 144A, 4.875%, 1/1/2026 | | 190,000 | 195,155 |
| 144A, 5.125%, 11/1/2027 | | 150,000 | 156,187 |
| 144A, 6.125%, 10/1/2028 | | 85,000 | 89,778 |
| 144A, 6.25%, 2/1/2027 | | 75,000 | 77,625 |
| 144A, 7.5%, 4/1/2025 | | 50,000 | 52,623 |
| | | | 5,017,339 |
| Industrials 12.5% | |
| ADT Security Corp., 144A, 4.875%, 7/15/2032 | | 50,000 | 51,050 |
| Allied Universal Holdco LLC, 144A, 6.0%, 6/1/2029 (b) | | 200,000 | 194,500 |
| American Airlines, Inc.: | | | |
| 144A, 5.5%, 4/20/2026 | | 275,000 | 285,966 |
| 144A, 5.75%, 4/20/2029 | | 135,000 | 144,277 |
| 144A, 11.75%, 7/15/2025 | | 120,000 | 148,050 |
| ATS Automation Tooling Systems, Inc., 144A, 4.125%, 12/15/2028 | | 30,000 | 30,225 |
| Bombardier, Inc.: | | | |
| 144A, 6.0%, 2/15/2028 (b) | | 200,000 | 200,606 |
| 144A, 7.5%, 3/15/2025 | | 95,000 | 96,781 |
| Brundage-Bone Concrete Pumping Holdings, Inc., 144A, 6.0%, 2/1/2026 | | 55,000 | 57,200 |
| Builders FirstSource, Inc., 144A, 4.25%, 2/1/2032 | | 80,000 | 82,816 |
| Cargo Aircraft Management, Inc., 144A, 4.75%, 2/1/2028 | | 100,000 | 101,772 |
| Cimpress PLC, 144A, 7.0%, 6/15/2026 | | 150,000 | 155,812 |
| Clark Equipment Co., 144A, 5.875%, 6/1/2025 | | 55,000 | 57,131 |
| Covanta Holding Corp., 5.0%, 9/1/2030 | | 100,000 | 102,000 |
| | Principal
Amount ($)(a) | Value ($) |
| Covert Mergeco, Inc., 144A, 4.875%, 12/1/2029 | | 20,000 | 20,300 |
| CP Atlas Buyer, Inc., 144A, 7.0%, 12/1/2028 | | 28,000 | 27,860 |
| Delta Air Lines, Inc.: | | | |
| 3.75%, 10/28/2029 (b) | | 51,000 | 52,267 |
| 144A, 7.0%, 5/1/2025 | | 71,000 | 81,182 |
| EnerSys, 144A, 4.375%, 12/15/2027 | | 90,000 | 93,375 |
| First Student Bidco, Inc., 144A, 4.0%, 7/31/2029 | | 90,000 | 87,480 |
| GFL Environmental, Inc.: | | | |
| 144A, 3.75%, 8/1/2025 | | 80,000 | 80,800 |
| 144A, 4.25%, 6/1/2025 | | 40,000 | 41,158 |
| 144A, 5.125%, 12/15/2026 | | 50,000 | 52,000 |
| Hawaiian Brand Intellectual Property Ltd., 144A, 5.75%, 1/20/2026 | | 125,000 | 130,781 |
| Hertz Corp., 144A, 4.625%, 12/1/2026 | | 140,000 | 140,875 |
| Howmet Aerospace, Inc., 6.875%, 5/1/2025 | | 140,000 | 160,959 |
| II-VI, Inc., 144A, 5.0%, 12/15/2029 | | 40,000 | 40,849 |
| Imola Merger Corp., 144A, 4.75%, 5/15/2029 | | 365,000 | 374,508 |
| JELD-WEN, Inc., 144A, 4.625%, 12/15/2025 | | 80,000 | 80,600 |
| LSB Industries, Inc., 144A, 6.25%, 10/15/2028 | | 100,000 | 104,000 |
| Madison IAQ LLC: | | | |
| 144A, 4.125%, 6/30/2028 | | 90,000 | 90,225 |
| 144A, 5.875%, 6/30/2029 | | 60,000 | 60,000 |
| Masonite International Corp., 144A, 5.375%, 2/1/2028 | | 74,000 | 77,608 |
| Metis Merger Sub LLC, 144A, 6.5%, 5/15/2029 | | 60,000 | 58,931 |
| Mileage Plus Holdings LLC, 144A, 6.5%, 6/20/2027 | | 130,000 | 138,775 |
| Moog, Inc., 144A, 4.25%, 12/15/2027 | | 160,000 | 161,200 |
| NESCO Holdings II, Inc., 144A, 5.5%, 4/15/2029 | | 95,000 | 98,088 |
| Nielsen Finance LLC, 144A, 5.625%, 10/1/2028 | | 265,000 | 273,612 |
| Patrick Industries, Inc., 144A, 4.75%, 5/1/2029 | | 135,000 | 134,325 |
| Prime Security Services Borrower LLC: | | | |
| 144A, 3.375%, 8/31/2027 | | 180,000 | 173,770 |
| 144A, 5.75%, 4/15/2026 | | 135,000 | 144,945 |
| 144A, 6.25%, 1/15/2028 | | 135,000 | 140,738 |
| Signature Aviation U.S. Holdings, Inc., 144A, 4.0%, 3/1/2028 | | 155,000 | 153,977 |
| Spirit Loyalty Cayman Ltd., 144A, 8.0%, 9/20/2025 | | 189,000 | 208,672 |
| Summit Materials LLC, 144A, 5.25%, 1/15/2029 | | 54,000 | 56,560 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 11 |
| | Principal
Amount ($)(a) | Value ($) |
| TK Elevator U.S. Newco, Inc., 144A, 5.25%, 7/15/2027 | | 200,000 | 210,250 |
| TransDigm, Inc.: | | | |
| 4.625%, 1/15/2029 | | 85,000 | 84,718 |
| 5.5%, 11/15/2027 | | 115,000 | 118,450 |
| 144A, 6.25%, 3/15/2026 | | 335,000 | 348,191 |
| United Airlines, Inc., 144A, 4.375%, 4/15/2026 | | 160,000 | 166,838 |
| United Rentals North America, Inc., 5.25%, 1/15/2030 | | 80,000 | 86,600 |
| Vertiv Group Corp., 144A, 4.125%, 11/15/2028 | | 90,000 | 90,900 |
| WESCO Distribution, Inc.: | | | |
| 144A, 7.125%, 6/15/2025 | | 40,000 | 42,400 |
| 144A, 7.25%, 6/15/2028 | | 105,000 | 115,106 |
| | | | 6,512,059 |
| Information Technology 1.3% | |
| Boxer Parent Co., Inc., 144A, 7.125%, 10/2/2025 | | 60,000 | 62,925 |
| Clarivate Science Holdings Corp.: | | | |
| 144A, 3.875%, 7/1/2028 | | 90,000 | 90,450 |
| 144A, 4.875%, 7/1/2029 | | 60,000 | 60,847 |
| Dun & Bradstreet Corp., 144A, 5.0%, 12/15/2029 | | 20,000 | 20,461 |
| Microchip Technology, Inc., 4.25%, 9/1/2025 | | 140,000 | 145,400 |
| NCR Corp., 144A, 5.125%, 4/15/2029 | | 190,000 | 196,688 |
| Presidio Holdings, Inc.: | | | |
| 144A, 4.875%, 2/1/2027 | | 50,000 | 51,500 |
| 144A, 8.25%, 2/1/2028 | | 30,000 | 31,950 |
| | | | 660,221 |
| Materials 8.7% | |
| Arconic Corp., 144A, 6.125%, 2/15/2028 | | 245,000 | 260,729 |
| Cascades, Inc., 144A, 5.125%, 1/15/2026 | | 10,000 | 10,400 |
| Chemours Co.: | | | |
| 5.375%, 5/15/2027 | | 95,000 | 101,650 |
| 144A, 5.75%, 11/15/2028 | | 290,000 | 303,447 |
| Clearwater Paper Corp.: | | | |
| 144A, 4.75%, 8/15/2028 | | 80,000 | 81,400 |
| 144A, 5.375%, 2/1/2025 | | 110,000 | 118,800 |
| Cleveland-Cliffs, Inc.: | | | |
| 144A, 4.625%, 3/1/2029 | | 31,000 | 31,620 |
| 144A, 4.875%, 3/1/2031 (b) | | 101,000 | 104,926 |
| 144A, 6.75%, 3/15/2026 | | 175,000 | 185,281 |
| EverArc Escrow Sarl, 144A, 5.0%, 10/30/2029 | | 90,000 | 90,067 |
| First Quantum Minerals Ltd.: | | | |
| 144A, 6.875%, 3/1/2026 | | 200,000 | 207,750 |
| 144A, 6.875%, 10/15/2027 | | 300,000 | 322,875 |
| Freeport-McMoRan, Inc.: | | | |
| 4.125%, 3/1/2028 | | 270,000 | 280,125 |
| 4.375%, 8/1/2028 | | 90,000 | 94,388 |
| | Principal
Amount ($)(a) | Value ($) |
| 4.625%, 8/1/2030 | | 90,000 | 96,525 |
| 5.0%, 9/1/2027 | | 105,000 | 109,200 |
| Hudbay Minerals, Inc.: | | | |
| 144A, 4.5%, 4/1/2026 | | 60,000 | 60,000 |
| 144A, 6.125%, 4/1/2029 | | 100,000 | 106,038 |
| Kaiser Aluminum Corp., 144A, 4.625%, 3/1/2028 | | 70,000 | 70,700 |
| Kraton Polymers LLC, 144A, 4.25%, 12/15/2025 | | 125,000 | 129,389 |
| LABL, Inc.: | | | |
| 144A, 5.875%, 11/1/2028 | | 30,000 | 30,919 |
| 144A, 6.75%, 7/15/2026 | | 100,000 | 103,060 |
| LSF11 A5 Holdco LLC, 144A, 6.625%, 10/15/2029 | | 160,000 | 157,600 |
| Mauser Packaging Solutions Holding Co., 144A, 7.25%, 4/15/2025 | | 105,000 | 105,266 |
| Methanex Corp.: | | | |
| 5.125%, 10/15/2027 | | 180,000 | 189,000 |
| 5.25%, 12/15/2029 (b) | | 50,000 | 52,726 |
| Novelis Corp., 144A, 4.75%, 1/30/2030 | | 375,000 | 394,219 |
| Resolute Forest Products, Inc., 144A, 4.875%, 3/1/2026 | | 55,000 | 55,825 |
| Roller Bearing Co. of America, Inc., 144A, 4.375%, 10/15/2029 | | 80,000 | 81,600 |
| SCIL IV LLC, 144A, 5.375%, 11/1/2026 | | 200,000 | 205,250 |
| Taseko Mines Ltd., 144A, 7.0%, 2/15/2026 | | 125,000 | 130,000 |
| Tronox, Inc.: | | | |
| 144A, 4.625%, 3/15/2029 | | 205,000 | 204,744 |
| 144A, 6.5%, 5/1/2025 | | 30,000 | 31,707 |
| | | | 4,507,226 |
| Real Estate 4.7% | |
| Cushman & Wakefield U.S. Borrower LLC, 144A, 6.75%, 5/15/2028 | | 120,000 | 128,400 |
| Iron Mountain Information Management Services, Inc., 144A, (REIT), 5.0%, 7/15/2032 | | 40,000 | 40,939 |
| Iron Mountain, Inc.: | | | |
| 144A, (REIT), 4.875%, 9/15/2029 | | 60,000 | 62,099 |
| 144A, (REIT), 5.0%, 7/15/2028 | | 75,000 | 77,062 |
| 144A, (REIT), 5.25%, 7/15/2030 | | 100,000 | 105,382 |
| iStar, Inc.: | | | |
| (REIT), 4.25%, 8/1/2025 | | 100,000 | 102,250 |
| (REIT), 4.75%, 10/1/2024 | | 170,000 | 176,375 |
| MGM Growth Properties Operating Partnership LP: | | | |
| 144A, (REIT), 3.875%, 2/15/2029 | | 90,000 | 94,500 |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| | Principal
Amount ($)(a) | Value ($) |
| 144A, (REIT), 4.625%, 6/15/2025 | | 233,000 | 248,399 |
| (REIT), 5.75%, 2/1/2027 | | 310,000 | 350,300 |
| MPT Operating Partnership LP: | | | |
| (REIT), 3.5%, 3/15/2031 | | 105,000 | 106,181 |
| (REIT), 4.625%, 8/1/2029 | | 140,000 | 147,700 |
| Realogy Group LLC: | | | |
| 144A, 5.75%, 1/15/2029 | | 240,000 | 246,000 |
| 144A, 7.625%, 6/15/2025 | | 185,000 | 196,100 |
| Service Properties Trust, (REIT), 7.5%, 9/15/2025 | | 160,000 | 173,350 |
| Uniti Group LP, 144A, (REIT), 6.0%, 1/15/2030 | | 105,000 | 101,046 |
| VICI Properties LP, 144A, (REIT), 3.5%, 2/15/2025 | | 10,000 | 10,150 |
| WeWork Companies, Inc., 144A, 7.875%, 5/1/2025 | | 65,000 | 62,133 |
| XHR LP, 144A, (REIT), 4.875%, 6/1/2029 | | 40,000 | 40,700 |
| | | | 2,469,066 |
| Utilities 3.2% | |
| AmeriGas Partners LP: | | | |
| 5.5%, 5/20/2025 | | 205,000 | 219,606 |
| 5.75%, 5/20/2027 | | 110,000 | 121,687 |
| Calpine Corp.: | | | |
| 144A, 4.5%, 2/15/2028 | | 200,000 | 207,500 |
| 144A, 4.625%, 2/1/2029 | | 30,000 | 29,588 |
| Clearway Energy Operating LLC, 144A, 4.75%, 3/15/2028 | | 115,000 | 120,894 |
| NextEra Energy Operating Partners LP, 144A, 4.25%, 7/15/2024 | | 210,000 | 218,137 |
| NRG Energy, Inc.: | | | |
| 144A, 3.625%, 2/15/2031 | | 145,000 | 141,375 |
| 144A, 5.25%, 6/15/2029 | | 157,000 | 168,207 |
| 5.75%, 1/15/2028 | | 200,000 | 211,422 |
| Pattern Energy Operations LP, 144A, 4.5%, 8/15/2028 | | 90,000 | 93,375 |
| PG&E Corp., 5.25%, 7/1/2030 | | 75,000 | 78,653 |
| Vistra Operations Co. LLC, 144A, 4.375%, 5/1/2029 | | 60,000 | 60,098 |
| | | | 1,670,542 |
| Total Corporate Bonds (Cost $46,494,212) | 48,116,933 |
| Loan Participations and Assignments 1.0% | |
| Senior Loans (c) | |
| Brand Energy & Infrastructure Services, Inc., Term Loan, 3-month USD-LIBOR + 4.25%, 5.25%, 6/21/2024 | | 167,803 | 164,541 |
| | Principal
Amount ($)(a) | Value ($) |
| Directv Financing LLC, Term Loan, 8/2/2027 (d) | | 195,500 | 195,932 |
| Flex Acquisition Co., Inc., Term Loan, 3-month USD-LIBOR + 3.5%, 4.0%, 3/2/2028 | | 80,224 | 80,162 |
| Penn National Gaming, Inc., Term Loan A, 10/19/2023 (d) | | 97,778 | 97,533 |
| Total Loan Participations and Assignments (Cost $539,449) | 538,168 |
| | Shares | Value ($) |
| Common Stocks 0.0% | |
| Industrials | |
| Quad Graphics, Inc.* (b) (Cost $0) | | 287 | 1,148 |
| Warrants 0.2% | |
| Materials | |
| Hercules Trust II, Expiration Date 3/31/2029* (e) (Cost $244,286) | | 1,100 | 121,530 |
| Securities Lending Collateral 3.6% | |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (f) (g) (Cost $1,857,630) | | 1,857,630 | 1,857,630 |
| Cash Equivalents 5.4% | |
| DWS Central Cash Management Government Fund, 0.05% (f) (Cost $2,785,992) | | 2,785,992 | 2,785,992 |
| | | % of Net
Assets | Value ($) |
| Total Investment Portfolio (Cost $51,921,569) | 102.8 | 53,421,401 |
| Other Assets and Liabilities, Net | (2.8) | (1,437,607) |
| Net Assets | 100.0 | 51,983,794 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 13 |
A summary of the Fund’s transactions with affiliated investments during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Securities Lending Collateral 3.6% |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (f) (g) |
| 633,205 | 1,224,425 (h) | — | — | — | 782 | — | 1,857,630 | 1,857,630 |
| Cash Equivalents 5.4% |
| DWS Central Cash Management Government Fund, 0.05% (f) |
| 843,071 | 21,096,475 | 19,153,554 | — | — | 552 | — | 2,785,992 | 2,785,992 |
| 1,476,276 | 22,320,900 | 19,153,554 | — | — | 1,334 | — | 4,643,622 | 4,643,622 |
| * | Non-income producing security. |
| (a) | Principal amount stated in U.S. dollars unless otherwise noted. |
| (b) | All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at December 31, 2021 amounted to $1,793,969, which is 3.5% of net assets. |
| (c) | Variable or floating rate security. These securities are shown at their current rate as of December 31, 2021. For securities based on a published reference rate and spread, the reference rate and spread are indicated within the description above. Certain variable rate securities are not based on a published reference rate and spread but adjust periodically based on current market conditions, prepayment of underlying positions and/or other variables. Securities with a floor or ceiling feature are disclosed at the inherent rate, where applicable. |
| (d) | All or a portion of the security represents unsettled loan commitments at December 31, 2021 where the rate will be determined at the time of settlement. |
| (e) | Investment was valued using significant unobservable inputs. |
| (f) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
| (g) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
| (h) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the year ended December 31, 2021. |
| 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. |
| REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. |
| REIT: Real Estate Investment Trust |
LIBOR: London Interbank Offered Rate, the benchmark rate for certain floating rate securities, was partially phased out at the end of 2021, with the US Dollar LIBOR phase out continuing until June of 2023 at the latest for certain existing contracts. The Fund or the instruments in which the Fund invests may be adversely affected by the phase out by, among other things, increased volatility or illiquidity. There remains uncertainty regarding the future use of LIBOR and the nature of any replacement reference rate and, accordingly, it is difficult to predict the impact to the Fund of the transition away from LIBOR.
At December 31, 2021, the Fund had the following open forward foreign currency contracts:
| Contracts to Deliver | In Exchange For | Settlement
Date | Unrealized
Depreciation ($) | Counterparty |
| EUR | 805,247 | USD | 912,263 | 1/31/2022 | (5,080) | State Street Bank and Trust |
Currency Abbreviation(s)
| EUR | Euro |
| USD | United States Dollar |
For information on the Fund’s policy and additional disclosures regarding forward foreign currency contracts, please refer to the Derivatives section of Note B in the accompanying Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
| 14 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Corporate Bonds (a) | $ — | $ 48,116,933 | $ — | $ 48,116,933 |
| Loan Participations and Assignments | — | 538,168 | — | 538,168 |
| Common Stocks | 1,148 | — | — | 1,148 |
| Warrants | — | — | 121,530 | 121,530 |
| Short-Term Investments (a) | 4,643,622 | — | — | 4,643,622 |
| Total | $4,644,770 | $ 48,655,101 | $121,530 | $ 53,421,401 |
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Derivatives (b) | | | | |
| Forward Foreign Currency Contracts | $ — | $ (5,080) | $ — | $ (5,080) |
| Total | $ — | $ (5,080) | $ — | $ (5,080) |
| (a) | See Investment Portfolio for additional detailed categorizations. |
| (b) | Derivatives include unrealized appreciation (depreciation) on open forward foreign currency contracts. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 15 |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in non-affiliated securities, at value (cost $47,277,947) — including $1,793,969 of securities loaned | $ 48,777,779 |
| Investment in DWS Government & Agency Securities Portfolio (cost $1,857,630)* | 1,857,630 |
| Investment in DWS Central Cash Management Government Fund (cost $2,785,992) | 2,785,992 |
| Cash | 117,864 |
| Foreign currency, at value (cost $17,301) | 17,311 |
| Receivable for investments sold | 439 |
| Receivable for Fund shares sold | 10,425 |
| Interest receivable | 740,556 |
| Other assets | 1,070 |
| Total assets | 54,309,066 |
| Liabilities | |
| Payable upon return of securities loaned | 1,857,630 |
| Payable for investments purchased | 293,767 |
| Payable for Fund shares redeemed | 41,915 |
| Unrealized depreciation on forward foreign currency contracts | 5,080 |
| Accrued management fee | 18,769 |
| Accrued Trustees' fees | 817 |
| Other accrued expenses and payables | 107,294 |
| Total liabilities | 2,325,272 |
| Net assets, at value | $ 51,983,794 |
| Net Assets Consist of | |
| Distributable earnings (loss) | (2,437,458) |
| Paid-in capital | 54,421,252 |
| Net assets, at value | $ 51,983,794 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($51,363,873 ÷ 8,311,044 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 6.18 |
| Class B | |
| Net Asset Value, offering and redemption price per share ($619,921 ÷ 100,035 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 6.20 |
| * | Represents collateral on securities loaned. |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Interest (net of foreign taxes withheld of $91) | $ 2,659,798 |
| Income distributions — DWS Central Cash Management Government Fund | 552 |
| Securities lending income, net of borrower rebates | 782 |
| Total income | 2,661,132 |
| Expenses: | |
| Management fee | 264,304 |
| Administration fee | 51,275 |
| Services to shareholders | 861 |
| Record keeping fee (Class B) | 481 |
| Distribution service fee (Class B) | 799 |
| Custodian fee | 3,825 |
| Audit fee | 70,236 |
| Legal fees | 12,302 |
| Tax fees | 7,206 |
| Reports to shareholders | 30,607 |
| Trustees' fees and expenses | 3,037 |
| Other | 2,889 |
| Total expenses before expense reductions | 447,822 |
| Expense reductions | (71,226) |
| Total expenses after expense reductions | 376,596 |
| Net investment income | 2,284,536 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from: | |
| Investments | 1,295,181 |
| Forward foreign currency contracts | 80,161 |
| Foreign currency | (4,968) |
| | 1,370,374 |
| Change in net unrealized appreciation (depreciation) on: | |
| Investments | (1,541,699) |
| Forward foreign currency contracts | (5,303) |
| Foreign currency | (403) |
| | (1,547,405) |
| Net gain (loss) | (177,031) |
| Net increase (decrease) in net assets resulting from operations | $ 2,107,505 |
The accompanying notes are an integral part of the financial statements.
| 16 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 2,284,536 | $ 2,533,908 |
| Net realized gain (loss) | 1,370,374 | (892,054) |
Change in net unrealized appreciation
(depreciation) | (1,547,405) | 1,341,265 |
| Net increase (decrease) in net assets resulting from operations | 2,107,505 | 2,983,119 |
| Distributions to shareholders: | | |
| Class A | (2,455,814) | (2,873,076) |
| Class B | (6,327) | (8,104) |
| Total distributions | (2,462,141) | (2,881,180) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 6,500,206 | 6,977,525 |
| Reinvestment of distributions | 2,455,814 | 2,873,076 |
| Payments for shares redeemed | (11,190,770) | (11,869,783) |
| Net increase (decrease) in net assets from Class A share transactions | (2,234,750) | (2,019,182) |
| Class B | | |
| Proceeds from shares sold | 481,262 | 9,694 |
| Reinvestment of distributions | 6,327 | 8,104 |
| Payments for shares redeemed | (21,374) | (29,136) |
| Net increase (decrease) in net assets from Class B share transactions | 466,215 | (11,338) |
| Increase (decrease) in net assets | (2,123,171) | (1,928,581) |
| Net assets at beginning of period | 54,106,965 | 56,035,546 |
| Net assets at end of period | $ 51,983,794 | $ 54,106,965 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 8,668,128 | 8,976,023 |
| Shares sold | 1,055,087 | 1,182,798 |
| Shares issued to shareholders in reinvestment of distributions | 408,621 | 536,022 |
| Shares redeemed | (1,820,792) | (2,026,715) |
| Net increase (decrease) in Class A shares | (357,084) | (307,895) |
| Shares outstanding at end of period | 8,311,044 | 8,668,128 |
| Class B | | |
| Shares outstanding at beginning of period | 23,669 | 25,470 |
| Shares sold | 78,794 | 1,573 |
| Shares issued to shareholders in reinvestment of distributions | 1,048 | 1,501 |
| Shares redeemed | (3,476) | (4,875) |
| Net increase (decrease) in Class B shares | 76,366 | (1,801) |
| Shares outstanding at end of period | 100,035 | 23,669 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 17 |
Financial Highlights
| DWS High Income VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $6.23 | $6.23 | $5.71 | $6.36 | $6.28 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .27 | .29 | .31 | .33 | .31 |
| Net realized and unrealized gain (loss) | (.03) | .04 | .56 | (.48) | .15 |
| Total from investment operations | .24 | .33 | .87 | (.15) | .46 |
| Less distributions from: | | | | | |
| Net investment income | (.29) | (.33) | (.35) | (.50) | (.38) |
| Net asset value, end of period | $6.18 | $6.23 | $6.23 | $5.71 | $6.36 |
| Total Return (%)b | 4.00 | 6.24 | 15.69 | (2.52) | 7.51 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 51 | 54 | 56 | 52 | 61 |
| Ratio of expenses before expense reductions (%)c | .84 | .87 | .96 | .94 | .78 |
| Ratio of expenses after expense reductions (%)c | .71 | .70 | .68 | .69 | .72 |
| Ratio of net investment income (%) | 4.32 | 4.86 | 5.09 | 5.41 | 4.98 |
| Portfolio turnover rate (%) | 56 | 94 | 82 | 62 | 71 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 18 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| DWS High Income VIP — Class B |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data | | | | | |
| Net asset value, beginning of period | $6.24 | $6.25 | $5.73 | $6.38 | $6.30 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .24 | .27 | .29 | .31 | .31 |
| Net realized and unrealized gain (loss) | (.01) | .04 | .57 | (.48) | .13 |
| Total from investment operations | .23 | .31 | .86 | (.17) | .44 |
| Less distributions from: | | | | | |
| Net investment income | (.27) | (.32) | (.34) | (.48) | (.36) |
| Net asset value, end of period | $6.20 | $6.24 | $6.25 | $5.73 | $6.38 |
| Total Return (%)b | 3.79 | 5.77 | 15.33 | (2.76) | 7.21 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | .6 | .1 | .2 | .1 | .1 |
| Ratio of expenses before expense reductions (%)c | 1.27 | 1.30 | 1.40 | 1.34 | 1.15 |
| Ratio of expenses after expense reductions (%)c | 1.10 | 1.05 | .94 | .96 | .98 |
| Ratio of net investment income (%) | 3.86 | 4.52 | 4.82 | 5.14 | 4.88 |
| Portfolio turnover rate (%) | 56 | 94 | 82 | 62 | 71 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 19 |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS High Income VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of up to 0.25% and of up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping 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 Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Debt securities and loan participations and assignments are valued at prices supplied by independent pricing services approved by the Fund’s Board. 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, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers and loan participations and assignments are valued at the mean of the most recent bid and ask quotations or evaluated prices, as applicable, obtained from broker-dealers. Certain securities may be valued on the basis of a price provided by a single source or broker-dealer. No active trading market may exist for some senior loans and they may be subject to restrictions on resale. The inability to dispose of senior loans in a timely fashion could result in losses. These securities are generally categorized as Level 2.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities are generally categorized as Level 1.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price
| 20 | | Deutsche DWS Variable Series II —DWS High Income VIP |
and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. 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 acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best efforts to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. As of period end, any securities on loan were collateralized by cash. During the year ended December 31, 2021, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.04% annualized effective rate as of December 31, 2021) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of December 31, 2021, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.
Remaining Contractual Maturity of the Agreements as of December 31, 2021
| | Overnight
and
Continuous | <30 days | Between 30
& 90 days | >90 days | Total |
| Securities Lending Transactions |
| Corporate Bonds | $ 1,856,580 | $ — | $ — | $ — | $ 1,856,580 |
| Common Stocks | 1,050 | — | — | — | 1,050 |
| Total Borrowings | $ 1,857,630 | $ — | $ — | $ — | $ 1,857,630 |
| Gross amount of recognized liabilities for securities lending transactions: | $ 1,857,630 |
| Deutsche DWS Variable Series II —DWS High Income VIP | | 21 |
When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transactions 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. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
At December 31, 2021, the Fund had net tax basis capital loss carryforwards of approximately $6,270,000, including short-term losses ($584,000) and long-term losses ($5,686,000), which may be applied against realized net taxable capital gains indefinitely.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to forward foreign currency exchange contracts, premium amortization on debt securities, and certain securities sold at a loss on investment transactions. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income* | $ 2,371,758 |
| Capital loss carryforwards | $ (6,270,000) |
| Net unrealized appreciation (depreciation) on investments | $ 1,460,494 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $51,960,907. The net unrealized appreciation for all investments based on tax cost was $1,460,494. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $1,771,657 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $311,163.
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 2,462,141 | $ 2,881,180 |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
| 22 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments. All premiums and discounts are amortized/accreted for both tax and financial reporting purposes for the Fund, with the exception of securities in default of principal.
A forward foreign currency contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the year ended December 31, 2021, the Fund entered 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.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by the unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
A summary of the open forward currency contracts as of December 31, 2021, is included in the table following the Fund’s Investment Portfolio. For the year ended December 31, 2021, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $816,000 to $1,197,000.
The following table summarize the value of the Fund's derivative instruments held as of December 31, 2021 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
| Liability Derivative | Forward
Contracts |
| Foreign Exchange Contracts (a) | $ (5,080) |
| The above derivative is located in the following Statement of Assets and Liabilities account: |
| (a) | Unrealized depreciation on forward foreign currency contracts |
Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the year ended December 31, 2021 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
| Realized Gain (Loss) | Forward
Contracts |
| Foreign Exchange Contracts (a) | $ 80,161 |
| The above derivative is located in the following Statement of Operations account: |
| (a) | Net realized gain (loss) from forward foreign currency contracts |
| Deutsche DWS Variable Series II —DWS High Income VIP | | 23 |
| Change in Net Unrealized Appreciation (Depreciation) | Forward
Contracts |
| Foreign Exchange Contracts (a) | $ (5,303) |
| The above derivative is located in the following Statement of Operations account: |
| (a) | Change in net unrealized appreciation (depreciation) on forward foreign currency contracts |
As of December 31, 2021, the Fund has transactions subject to enforceable master netting agreements which govern the terms of certain transactions, and reduce the counterparty risk associated with such transactions. Master netting agreements allow a Fund to close out and net total exposure to a counterparty in the event of a deterioration in the credit quality or contractual default with respect to all of the transactions with a counterparty. As defined by the master netting agreement, the Fund may have collateral agreements with certain counterparties to mitigate risk. For financial reporting purposes the Statement of Assets and Liabilities generally shows derivatives assets and liabilities on a gross basis, which reflects the full risks and exposures prior to netting. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by a counterparty, including any collateral exposure, is included in the following table:
| Counterparty | Gross Amount
of Liabilities
Presented
in the
Statement of
Assets and
Liabilities | Financial
Instruments
and
Derivatives
Available
for Offset | Collateral
Pledged | Net Amount
of Derivative
Liabilities |
| State Street Bank and Trust | $ 5,080 | $ — | $ — | $ 5,080 |
| C. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of investment securities (excluding short-term investments and U.S. Treasury securities) aggregated $28,425,737 and $32,167,592, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the average daily net assets of the Fund, computed and accrued daily and payable monthly, at the following annual rates:
| First $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% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.50% of the Fund’s average daily net assets.
For the period from January 1, 2021 through September 30, 2022, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of Class A shares to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) at 0.71%.
| 24 | | Deutsche DWS Variable Series II —DWS High Income VIP |
For the period from January 1, 2021 through April 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of Class B shares to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) at 1.10%.
For the period from May 1, 2021 through September 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of Class B shares to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) at 1.11%.
Effective October 1, 2021 through September 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of Class B shares to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) at 1.10%.
For the year ended December 31, 2021, fees waived and/or expenses reimbursed for each class are as follows:
| Class A | $ 70,704 |
| Class B | 522 |
| | $ 71,226 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $51,275, of which $4,250 is unpaid.
Service Provider Fees. DWS Service Company (“DSC”), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST”), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class A | $ 332 | $ 55 |
| Class B | 80 | 16 |
| | $ 412 | $ 71 |
Distribution Service Agreement. Under the Fund’s Class B 12b-1 plan, DWS Distributors, Inc. (“DDI”) received a fee (“Distribution Service Fee”) of up to 0.25% of average daily net assets of Class B shares. For the year ended December 31, 2021, the Distribution Service Fee aggregated $799, of which $114 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $1,244, of which $612 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will
| Deutsche DWS Variable Series II —DWS High Income VIP | | 25 |
waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the year ended December 31, 2021, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $59.
| E. | Investing in High-Yield Debt Securities |
High-yield debt securities or junk bonds are generally regarded as speculative with respect to the issuer’s continuing ability to meet principal and interest payments. The Fund’s performance could be hurt if an issuer of a debt security suffers an adverse change in financial condition that results in the issuer not making timely payments of interest or principal, a security downgrade or an inability to meet a financial obligation. High-yield debt securities’ total return and yield may generally be expected to fluctuate more than the total return and yield of investment-grade debt securities. A real or perceived economic downturn or an increase in market interest rates could cause a decline in the value of high-yield debt securities, result in increased redemptions and/or result in increased portfolio turnover, which could result in a decline in net asset value of the Fund, reduce liquidity for certain investments and/or increase costs. High-yield debt securities are often thinly traded and can be more difficult to sell and value accurately than investment-grade debt securities as there may be no established secondary market. Investments in high yield debt securities could increase liquidity risk for the Fund. In addition, the market for high-yield debt securities can experience sudden and sharp volatility which is generally associated more with investments in stocks.
At December 31, 2021, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 66% and 24%, respectively. Three participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 50%, 26% and 21%, respectively.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 20 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
| H. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| 26 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS High Income VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS High Income VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
| Deutsche DWS Variable Series II —DWS High Income VIP | | 27 |
| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,013.10 | $ 1,011.40 |
| Expenses Paid per $1,000* | $ 3.60 | $ 5.58 |
| Hypothetical 5% Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,021.63 | $ 1,019.66 |
| Expenses Paid per $1,000* | $ 3.62 | $ 5.60 |
| * | Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratios | Class A | Class B |
| Deutsche DWS Variable Series II — DWS High Income VIP | .71% | 1.10% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
| 28 | | Deutsche DWS Variable Series II —DWS High Income VIP |
| Tax Information | (Unaudited) |
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 29 |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS High Income VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 2nd quartile, 1st quartile and 2nd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the
| 30 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Fund has outperformed its benchmark in the one- and three-year periods and has underperformed its benchmark in the five-year period ended December 31, 2020.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be higher than the median (3rd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”) and considered differences between the Fund and the comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the
| Deutsche DWS Variable Series II —DWS High Income VIP | | 31 |
substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
| 32 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
| Deutsche DWS Variable Series II —DWS High Income VIP | | 33 |
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
| 34 | | Deutsche DWS Variable Series II —DWS High Income VIP |
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| Deutsche DWS Variable Series II —DWS High Income VIP | | 35 |
VS2HI-2 (R-025832-11 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
DWS International Growth VIP
Contents
| 3 | Performance Summary |
| 4 | Management Summary |
| 6 | Portfolio Summary |
| 7 | Investment Portfolio |
| 10 | Statement of Assets and Liabilities |
| 10 | Statement of Operations |
| 11 | Statements of Changes in Net Assets |
| 12 | Financial Highlights |
| 14 | Notes to Financial Statements |
| 19 | Report of Independent Registered Public Accounting Firm |
| 20 | Information About Your Fund's Expenses |
| 21 | Tax Information |
| 21 | Proxy Voting |
| 22 | Advisory Agreement Board Considerations and Fee Evaluation |
| 25 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Emerging markets tend to be more volatile and less liquid than the markets of more mature economies, and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. Stocks may decline in value. Smaller company stocks tend to be more volatile than medium-sized or large company stocks. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund 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 gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 are 1.50% and 1.81% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
MSCI All Country World ex-USA Index is an unmanaged equity index which captures large and mid-capitalization representation across 22 of 23 developed markets countries excluding the U.S. and 25 emerging markets countries. It covers approximately 85% of the global equity opportunity set outside of the U.S.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Prior to October 1, 2017, the fund was named Deutsche Global Growth VIP and operated with a different investment strategy. Performance would have been different if the fund’s current investment strategy had been in effect.
| Comparative Results |
| DWS International Growth VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $10,811 | $17,406 | $18,194 | $27,015 |
| Average annual total return | 8.11% | 20.29% | 12.72% | 10.45% |
MSCI All
Country World
ex-USA Index | Growth of $10,000 | $10,782 | $14,497 | $15,822 | $20,196 |
| Average annual total return | 7.82% | 13.18% | 9.61% | 7.28% |
| DWS International Growth VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class B | Growth of $10,000 | $10,788 | $17,260 | $17,962 | $26,208 |
| Average annual total return | 7.88% | 19.95% | 12.43% | 10.11% |
MSCI All
Country World
ex-USA Index | Growth of $10,000 | $10,782 | $14,497 | $15,822 | $20,196 |
| Average annual total return | 7.82% | 13.18% | 9.61% | 7.28% |
| The growth of $10,000 is cumulative. |
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 3 |
| Management Summary | December 31, 2021 (Unaudited) |
The Fund’s Class A shares returned 8.11% in 2021 (unadjusted for contract charges), outperforming the 7.82% return of the MSCI All-Country World ex-USA Index. Notably, the Fund exceeded the return of its benchmark despite the underperformance of the growth style relative to the broader market. The Fund also outpaced the index in the five-, and ten-year periods that ended on December 31, 2021.
The Fund’s outperformance in 2021 stemmed largely from its positioning in the information technology sector. In addition to benefiting from being overweight in this outperforming group, the Fund held positions in a wide range of stocks that outpaced the broader category thanks to the robust demand for digital transformation and IT services. Among these were EPAM Systems, Inc., Capgemini SE, and Globant SA. NVIDIA Corp., which capitalized on the strong global demand for chips, was another top performer in the category. Outside of technology, Brookfield Asset Management, Inc. — which executed well and was well positioned to benefit from the popularity of alternative investments — was the top contributor.
TeamViewer AG, a provider of connectivity solutions, was the largest detractor. The German-based company delivered excellent results in 2020 due to increased demand brought about by COVID-19. More recently, the company was compelled to reduce its growth expectations due to higher churn among customers who had signed up during the pandemic. Our holdings in several Chinese companies that were affected by the government’s regulatory measures, including Alibaba Group Holding Ltd., New Oriental Education & Technology Group Inc.,* Ping An Insurance Group Co. of China Ltd. were also key detractors. In addition, Magazine Luiza SA and Pagseguro Digital Ltd. were impacted by negative sentiment surrounding Brazilian technology stocks.
The combination of rising inflation, the persistence of COVID-19, and more hawkish central bank policy led to dramatic swings between growth stocks and cyclicals in 2021. We think this pattern may continue, which argues for balance in the portfolio. Balance, in this case, is represented by a mix of reasonably valued companies with resilient and adaptable business models, as well as both secular and stock-specific growth drivers.
Our bigger-picture view is that the world is still very much in the midst of a transformative wave of innovation. While this process was accelerated because of COVID-19, it can continue to provide a strong tailwind for faster-growing businesses at the forefront of inevitable technological change. This involves not just the innovators that are driving the change, but also other players that are quick to adopt new solutions and successfully transform their businesses through initiatives such as digitization, artificial intelligence, connectivity, and network effects. The resulting shift in competitive dynamics has led to an expanding range of investment opportunities around the world, particularly in the consumer, industrial, financial, and health care sectors.
We remained highly selective during the past year. We focused on attempting to take advantage of pullbacks in the stocks of growth businesses, especially during periods of style rotation. For example, we built positions in leading e-commerce operators and their enablers, including providers of logistics and warehousing automation solutions. We also sought emerging disruptors, as well as growers with leverage to the economic recovery.
In terms of broader positioning, we maintained underweights in sectors we believe are structurally challenged, such as energy, materials, and financials. However, we aimed to identify specific companies that are successfully advancing their business mix towards high value-added segments, as well as those digitally transforming their businesses for better resource planning, productivity, and customer engagement.
Western Europe has been a source of opportunity at the regional level, particularly with respect to secular growth areas led by digital transformation, the green energy transition, and consumers’ evolution toward online shopping. The emerging markets remain an area of interest, as well. Although many emerging countries continued to face challenges from macroeconomic and policy headwinds, we identified an increasing number of innovative companies in the category.
Sebastian P. Werner, PhD, Head of Investment Strategy Equity
Julia A. Merz, PhD, Portfolio Manager Equity
Portfolio Managers
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
| 4 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Terms to Know
MSCI All Country World ex USA Index is an unmanaged equity index which captures large and mid-capitalization representation across 22 of 23 developed markets countries excluding the U.S. and 25 emerging markets countries. It covers approximately 85% of the global equity opportunity set outside of the U.S.
Overweight means the Fund holds a higher weighting in a given sector or security than the benchmark. Underweight means the Fund holds a lower weighting.
Stock selection refers to the performance of the fund’s holdings in a given sector relative to the sector as a whole.
Contributors and detractors incorporate both a stock’s return and its weight. If two stocks have the same return but one has a larger weighting in the Fund, it will have a larger contribution to return in the period.
| * | Not held at December 31, 2021. |
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 5 |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 12/31/21 | 12/31/20 |
| Common Stocks | 98% | 96% |
| Preferred Stocks | 1% | 1% |
| Cash Equivalents | 1% | 2% |
| Exchange-Traded Funds | — | 1% |
| | 100% | 100% |
| Sector Diversification (As a % of Investment Portfolio excluding Exchange-Traded Funds, Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| Information Technology | 25% | 24% |
| Industrials | 22% | 15% |
| Financials | 14% | 13% |
| Health Care | 14% | 16% |
| Consumer Discretionary | 8% | 13% |
| Consumer Staples | 6% | 7% |
| Materials | 5% | 5% |
| Communication Services | 4% | 6% |
| Energy | 2% | 1% |
| | 100% | 100% |
| Geographical Diversification (As a % of Investment Portfolio excluding Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| Germany | 13% | 15% |
| France | 12% | 12% |
| Netherlands | 10% | 6% |
| Japan | 9% | 10% |
| Switzerland | 8% | 9% |
| United States | 8% | 8% |
| Canada | 8% | 7% |
| Ireland | 5% | 4% |
| China | 4% | 8% |
| Sweden | 4% | 3% |
| Argentina | 4% | 2% |
| United Kingdom | 4% | 4% |
| Singapore | 2% | 2% |
| Taiwan | 2% | 2% |
| Korea | 2% | 2% |
| Brazil | 1% | 2% |
| Other | 4% | 4% |
| | 100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 7.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| 6 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
| Investment Portfolio | as of December 31, 2021 |
| | Shares | Value ($) |
| Common Stocks 97.5% | |
| Argentina 3.5% | |
| Globant SA* | | 2,170 | 681,575 |
| MercadoLibre, Inc.* | | 79 | 106,524 |
| (Cost $315,297) | | | 788,099 |
| Brazil 1.0% | |
| Magazine Luiza SA | | 37,790 | 48,846 |
| Pagseguro Digital Ltd. "A"* (a) (b) | | 6,431 | 168,621 |
| (Cost $334,413) | | | 217,467 |
| Canada 7.8% | |
| Agnico Eagle Mines Ltd. | | 4,088 | 217,141 |
| Alimentation Couche-Tard, Inc. "B" | | 5,500 | 230,444 |
| Brookfield Asset Management, Inc. "A" | | 15,000 | 905,847 |
| Canadian National Railway Co. | | 2,843 | 349,220 |
| Nuvei Corp. 144A* | | 765 | 49,591 |
| (Cost $786,151) | | | 1,752,243 |
| China 4.4% | |
| Alibaba Group Holding Ltd. (ADR)* | | 1,445 | 171,651 |
| ANTA Sports Products Ltd. (b) | | 4,800 | 71,974 |
| Dada Nexus Ltd. (ADR)* | | 635 | 8,357 |
| Minth Group Ltd. | | 16,870 | 74,126 |
| Ping An Insurance (Group) Co. of China Ltd. "H" | | 41,000 | 295,414 |
| Tencent Holdings Ltd. | | 6,200 | 360,332 |
| (Cost $819,928) | | | 981,854 |
| France 11.5% | |
| Capgemini SE | | 1,387 | 340,186 |
| Cie de Saint-Gobain | | 2,491 | 175,503 |
| LVMH Moet Hennessy Louis Vuitton SE | | 729 | 602,932 |
| Orpea SA | | 1,248 | 125,133 |
| Schneider Electric SE | | 1,036 | 203,342 |
| Teleperformance | | 1,081 | 481,419 |
| TotalEnergies SE | | 6,560 | 333,421 |
| Vinci SA | | 3,117 | 329,303 |
| (Cost $1,599,268) | | | 2,591,239 |
| Germany 11.9% | |
| adidas AG | | 380 | 109,360 |
| Allianz SE (Registered) | | 1,542 | 363,669 |
| Auto1 Group SE 144A* | | 3,181 | 70,403 |
| BASF SE | | 2,214 | 155,924 |
| Brenntag SE | | 1,816 | 164,298 |
| Deutsche Boerse AG | | 2,601 | 434,906 |
| Deutsche Post AG (Registered) | | 3,711 | 238,092 |
| Evonik Industries AG | | 7,403 | 239,860 |
| Evotec SE* | | 4,555 | 219,393 |
| KION Group AG | | 1,230 | 135,037 |
| SAP SE | | 1,685 | 238,018 |
| | Shares | Value ($) |
| TeamViewer AG 144A* | | 7,806 | 104,796 |
| Wacker Chemie AG | | 541 | 80,908 |
| Zalando SE 144A* | | 1,518 | 122,712 |
| (Cost $2,629,656) | | | 2,677,376 |
| Hong Kong 1.6% | |
| Techtronic Industries Co., Ltd. (Cost $87,760) | | 18,597 | 370,394 |
| Ireland 4.7% | |
| Experian PLC | | 10,820 | 531,936 |
| ICON PLC* (c) | | 743 | 230,107 |
| Kerry Group PLC "A" | | 2,308 | 297,324 |
| (Cost $595,908) | | | 1,059,367 |
| Israel 1.1% | |
| Kornit Digital Ltd.* (c) (Cost $181,370) | | 1,671 | 254,410 |
| Japan 9.2% | |
| Daikin Industries Ltd. | | 1,900 | 429,845 |
| Fast Retailing Co., Ltd. | | 230 | 130,314 |
| Hoya Corp. | | 2,700 | 400,530 |
| Keyence Corp. | | 700 | 439,452 |
| Lasertec Corp. | | 500 | 152,481 |
| MISUMI Group, Inc. | | 4,511 | 185,288 |
| Shimadzu Corp. | | 4,900 | 206,604 |
| Shiseido Co., Ltd. (b) | | 2,300 | 128,261 |
| (Cost $1,110,944) | | | 2,072,775 |
| Korea 2.0% | |
| LG Chem Ltd. | | 92 | 47,632 |
| Samsung Electronics Co., Ltd. | | 6,104 | 401,249 |
| (Cost $349,120) | | | 448,881 |
| Luxembourg 1.0% | |
| Eurofins Scientific SE (Cost $122,199) | | 1,910 | 236,639 |
| Netherlands 9.5% | |
| Adyen NV 144A* | | 73 | 191,945 |
| Airbus SE* | | 1,316 | 168,565 |
| ASML Holding NV | | 599 | 479,810 |
| ING Groep NV | | 18,949 | 264,864 |
| Koninklijke DSM NV | | 1,378 | 310,460 |
| Koninklijke Philips NV | | 5,631 | 209,860 |
| NXP Semiconductors NV (c) | | 995 | 226,641 |
| Prosus NV | | 1,545 | 128,946 |
| Universal Music Group NV | | 5,969 | 167,925 |
| (Cost $1,567,148) | | | 2,149,016 |
| Singapore 2.3% | |
| DBS Group Holdings Ltd. (Cost $356,967) | | 21,300 | 516,047 |
| Sweden 3.5% | |
| Assa Abloy AB "B" | | 4,555 | 139,082 |
| Hexagon AB "B" | | 8,735 | 138,335 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 7 |
| | Shares | Value ($) |
| Nobina AB 144A | | 24,041 | 284,592 |
| Spotify Technology SA* (a) | | 1,011 | 236,604 |
| (Cost $480,434) | | | 798,613 |
| Switzerland 8.4% | |
| Alcon, Inc. | | 739 | 65,181 |
| Lonza Group AG (Registered) | | 855 | 713,179 |
| Nestle SA (Registered) | | 4,053 | 567,238 |
| Roche Holding AG (Genusschein) | | 888 | 369,059 |
| Sportradar Holding AG "A"* (b) (c) | | 3,517 | 61,794 |
| Zur Rose Group AG* | | 470 | 121,173 |
| (Cost $956,519) | | | 1,897,624 |
| Taiwan 2.3% | |
| Taiwan Semiconductor Manufacturing Co., Ltd. (Cost $180,425) | | 23,000 | 511,256 |
| United Kingdom 3.5% | |
| Clarivate PLC* (a) (b) | | 8,159 | 191,900 |
| Farfetch Ltd. "A"* (a) | | 3,114 | 104,101 |
| Halma PLC | | 4,488 | 194,184 |
| Rentokil Initial PLC | | 33,998 | 269,070 |
| VTEX "A"* (a) (b) | | 2,396 | 25,685 |
| (Cost $654,846) | | | 784,940 |
| United States 8.3% | |
| Activision Blizzard, Inc. | | 1,667 | 110,905 |
| EPAM Systems, Inc.* | | 833 | 556,819 |
| Marsh & McLennan Companies, Inc. | | 1,958 | 340,339 |
| Mastercard, Inc. "A" | | 618 | 222,060 |
| NVIDIA Corp. | | 1,125 | 330,874 |
| Schlumberger NV | | 3,003 | 89,940 |
| Thermo Fisher Scientific, Inc. | | 344 | 229,531 |
| (Cost $634,151) | | | 1,880,468 |
| Total Common Stocks (Cost $13,762,504) | | | 21,988,708 |
| | Shares | Value ($) |
| Preferred Stocks 1.3% | |
| Germany | |
| Sartorius AG (Cost $131,681) | | 437 | 295,796 |
| Securities Lending Collateral 2.8% | |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (d) (e) (Cost $631,412) | | 631,412 | 631,412 |
| Cash Equivalents 1.1% | |
| DWS Central Cash Management Government Fund, 0.05% (d) (Cost $236,102) | | 236,102 | 236,102 |
| | | % of
Net Assets | Value ($) |
| Total Investment Portfolio (Cost $14,761,699) | | 102.7 | 23,152,018 |
| Other Assets and Liabilities, Net | | (2.7) | (600,251) |
| Net Assets | | 100.0 | 22,551,767 |
A summary of the Fund’s transactions with affiliated investments during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Securities Lending Collateral 2.8% |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (d) (e) |
| — | 631,412 (f) | — | — | — | 16,403 | — | 631,412 | 631,412 |
| Cash Equivalents 1.1% |
| DWS Central Cash Management Government Fund, 0.05% (d) |
| 458,187 | 5,645,365 | 5,867,450 | — | — | 129 | — | 236,102 | 236,102 |
| 458,187 | 6,276,777 | 5,867,450 | — | — | 16,532 | — | 867,514 | 867,514 |
| * | Non-income producing security. |
| (a) | Listed on the New York Stock Exchange. |
| (b) | All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at December 31, 2021 amounted to $602,326, which is 2.7% of net assets. |
| (c) | Listed on the NASDAQ Stock Market, Inc. |
| (d) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
| (e) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
| (f) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the year ended December 31, 2021. |
| 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 |
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Common Stocks | | | | |
| Argentina | $ 788,099 | $ — | $ — | $ 788,099 |
| Brazil | 168,621 | 48,846 | — | 217,467 |
| Canada | 1,752,243 | — | — | 1,752,243 |
| China | 180,008 | 801,846 | — | 981,854 |
| France | — | 2,591,239 | — | 2,591,239 |
| Germany | — | 2,677,376 | — | 2,677,376 |
| Hong Kong | — | 370,394 | — | 370,394 |
| Ireland | 230,107 | 829,260 | — | 1,059,367 |
| Israel | 254,410 | — | — | 254,410 |
| Japan | — | 2,072,775 | — | 2,072,775 |
| Korea | — | 448,881 | — | 448,881 |
| Luxembourg | — | 236,639 | — | 236,639 |
| Netherlands | 226,641 | 1,922,375 | — | 2,149,016 |
| Singapore | — | 516,047 | — | 516,047 |
| Sweden | 236,604 | 562,009 | — | 798,613 |
| Switzerland | 61,794 | 1,835,830 | — | 1,897,624 |
| Taiwan | — | 511,256 | — | 511,256 |
| United Kingdom | 321,686 | 463,254 | — | 784,940 |
| United States | 1,880,468 | — | — | 1,880,468 |
| Preferred Stocks | — | 295,796 | — | 295,796 |
| Short-Term Investments (a) | 867,514 | — | — | 867,514 |
| Total | $6,968,195 | $16,183,823 | $ — | $23,152,018 |
| (a) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 9 |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in non-affiliated securities, at value (cost $13,894,185) — including $602,326 of securities loaned | $ 22,284,504 |
| Investment in DWS Government & Agency Securities Portfolio (cost $631,412)* | 631,412 |
| Investment in DWS Central Cash Management Government Fund (cost $236,102) | 236,102 |
| Foreign currency, at value (cost $73,550) | 71,127 |
| Receivable for investments sold | 29,632 |
| Receivable for Fund shares sold | 1,322 |
| Dividends receivable | 4,040 |
| Interest receivable | 101 |
| Foreign taxes recoverable | 24,036 |
| Other assets | 430 |
| Total assets | 23,282,706 |
| Liabilities | |
| Payable upon return of securities loaned | 631,412 |
| Payable for Fund shares redeemed | 11,988 |
| Accrued management fee | 4,625 |
| Accrued Trustees' fees | 509 |
| Other accrued expenses and payables | 82,405 |
| Total liabilities | 730,939 |
| Net assets, at value | $ 22,551,767 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 8,889,920 |
| Paid-in capital | 13,661,847 |
| Net assets, at value | $ 22,551,767 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($22,446,716 ÷ 1,193,724 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 18.80 |
| Class B | |
| Net Asset Value, offering and redemption price per share ($105,051 ÷ 5,576 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 18.84 |
| * | Represents collateral on securities loaned. |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Dividends (net of foreign taxes withheld of $40,585) | $ 257,228 |
| Income distributions — DWS Central Cash Management Government Fund | 129 |
| Securities lending income, net of borrower rebates | 16,403 |
| Total income | 273,760 |
| Expenses: | |
| Management fee | 128,631 |
| Administration fee | 20,124 |
| Services to shareholders | 732 |
| Record keeping fee (Class B) | 6 |
| Distribution service fee (Class B) | 365 |
| Custodian fee | 13,629 |
| Audit fee | 59,103 |
| Legal fees | 11,717 |
| Tax fees | 7,206 |
| Reports to shareholders | 23,703 |
| Trustees' fees and expenses | 2,194 |
| Other | 9,914 |
| Total expenses before expense reductions | 277,324 |
| Expense reductions | (89,307) |
| Total expenses after expense reductions | 188,017 |
| Net investment income | 85,743 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from: | |
| Investments | 451,935 |
| Foreign currency | 1,884 |
| | 453,819 |
| Change in net unrealized appreciation (depreciation) on: | |
| Investments | 993,705 |
| Foreign currency | (6,182) |
| | 987,523 |
| Net gain (loss) | 1,441,342 |
| Net increase (decrease) in net assets resulting from operations | $1,527,085 |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 85,743 | $ 68,931 |
| Net realized gain (loss) | 453,819 | 266,287 |
Change in net unrealized appreciation
(depreciation) | 987,523 | 3,136,891 |
| Net increase (decrease) in net assets resulting from operations | 1,527,085 | 3,472,109 |
| Distributions to shareholders: | | |
| Class A | (300,260) | (248,933) |
| Class B | (1,284) | (1,082) |
| Total distributions | (301,544) | (250,015) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 3,858,747 | 1,646,537 |
| Reinvestment of distributions | 300,260 | 248,933 |
| Payments for shares redeemed | (2,223,148) | (3,319,251) |
| Net increase (decrease) in net assets from Class A share transactions | 1,935,859 | (1,423,781) |
| Class B | | |
| Proceeds from shares sold | 69,880 | 1,708 |
| Reinvestment of distributions | 1,284 | 1,082 |
| Payments for shares redeemed | (79,732) | (73,265) |
| Net increase (decrease) in net assets from Class B share transactions | (8,568) | (70,475) |
| Increase (decrease) in net assets | 3,152,832 | 1,727,838 |
| Net assets at beginning of period | 19,398,935 | 17,671,097 |
| Net assets at end of period | $22,551,767 | $19,398,935 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 1,093,246 | 1,196,084 |
| Shares sold | 205,692 | 111,439 |
| Shares issued to shareholders in reinvestment of distributions | 16,498 | 20,388 |
| Shares redeemed | (121,712) | (234,665) |
| Net increase (decrease) in Class A shares | 100,478 | (102,838) |
| Shares outstanding at end of period | 1,193,724 | 1,093,246 |
| Class B | | |
| Shares outstanding at beginning of period | 6,025 | 10,737 |
| Shares sold | 3,808 | 134 |
| Shares issued to shareholders in reinvestment of distributions | 70 | 88 |
| Shares redeemed | (4,327) | (4,934) |
| Net increase (decrease) in Class B shares | (449) | (4,712) |
| Shares outstanding at end of period | 5,576 | 6,025 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 11 |
Financial Highlights
| DWS International Growth VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $17.65 | $14.64 | $11.47 | $13.90 | $11.12 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .08 | .06 | .22 | .16 | .08 |
| Net realized and unrealized gain (loss) | 1.34 | 3.17 | 3.32 | (2.46) | 2.75 |
| Total from investment operations | 1.42 | 3.23 | 3.54 | (2.30) | 2.83 |
| Less distributions from: | | | | | |
| Net investment income | (.06) | (.22) | (.17) | (.13) | (.05) |
| Net realized gains | (.21) | — | (.20) | — | — |
| Total distributions | (.27) | (.22) | (.37) | (.13) | (.05) |
| Net asset value, end of period | $18.80 | $17.65 | $14.64 | $11.47 | $13.90 |
| Total Return (%)b | 8.11 | 22.69 | 31.22 | (16.69) | 25.47 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 22 | 19 | 18 | 14 | 19 |
| Ratio of expenses before expense reductions (%)c | 1.33 | 1.50 | 1.64 | 1.72 | 1.56 |
| Ratio of expenses after expense reductions (%)c | .90 | .87 | .86 | .81 | .92 |
| Ratio of net investment income (%) | .41 | .42 | 1.63 | 1.21 | .61 |
| Portfolio turnover rate (%) | 20 | 10 | 16 | 38 | 62 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
| DWS International Growth VIP — Class B |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data | | | | | |
| Net asset value, beginning of period | $17.67 | $14.66 | $11.49 | $13.93 | $11.13 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .03 | .01 | .18 | .12 | .02 |
| Net realized and unrealized gain (loss) | 1.36 | 3.18 | 3.33 | (2.46) | 2.79 |
| Total from investment operations | 1.39 | 3.19 | 3.51 | (2.34) | 2.81 |
| Less distributions from: | | | | | |
| Net investment income | (.01) | (.18) | (.14) | (.10) | (.01) |
| Net realized gains | (.21) | — | (.20) | — | — |
| Total distributions | (.22) | (.18) | (.34) | (.10) | (.01) |
| Net asset value, end of period | $18.84 | $17.67 | $14.66 | $11.49 | $13.93 |
| Total Return (%)b | 7.88 | 22.29 | 30.84 | (16.92) | 25.26 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | .1 | .1 | .2 | .2 | .2 |
| Ratio of expenses before expense reductions (%)c | 1.62 | 1.81 | 1.95 | 2.07 | 1.90 |
| Ratio of expenses after expense reductions (%)c | 1.17 | 1.18 | 1.16 | 1.06 | 1.15 |
| Ratio of net investment income (%) | .18 | .07 | 1.31 | .92 | .12 |
| Portfolio turnover rate (%) | 20 | 10 | 16 | 38 | 62 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 13 |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS International Growth VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of up to 0.25% and of up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping 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 Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities and exchange-traded funds (“ETFs”) are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Equity securities or ETFs 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. Equity securities or ETFs are generally categorized as Level 1. For certain 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, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
| 14 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. 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 acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Securities Lending. Brown Brothers Harriman & Co., as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash and/or U.S. Treasury Securities having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best efforts to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. During the year ended December 31, 2021, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.04% annualized effective rate as of December 31, 2021) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of December 31, 2021, the Fund had securities on loan, which were classified as common stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements were overnight and continuous.
Taxes. The Fund's policy 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, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated, a portion of which may be recoverable. Based upon the current interpretation of the tax rules and regulations, estimated tax liabilities and recoveries on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 15 |
available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income* | $ 233,674 |
| Undistributed long-term capital gains | $ 300,447 |
| Net unrealized appreciation (depreciation) on investments | $ 8,358,482 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $14,793,536. The net unrealized appreciation for all investments based on tax cost was $8,358,482. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $9,219,066 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $860,584.
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 69,290 | $ 250,015 |
| Distributions from long-term capital gains | $ 232,254 | $ — |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
| B. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of investment securities (excluding short-term investments) aggregated $6,045,043 and $3,958,477, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
| 16 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the average daily net assets of the Fund, computed and accrued daily and payable monthly at the annual rate (exclusive of any applicable waivers/reimbursements) of 0.62%.
For the period from January 1, 2021 through April 30, 2021 (and through April 30, 2022 for Class B shares), the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
Effective May 1, 2021 through April 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of Class A shares to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) at 0.92%.
For the year ended December 31, 2021, fees waived and/or expenses reimbursed for each class are as follows:
| Class A | $ 88,655 |
| Class B | 652 |
| | $ 89,307 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $20,124, of which $1,832 is unpaid.
Service Provider Fees. DWS Service Company (“DSC”), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST”), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class A | $ 265 | $ 44 |
| Class B | 44 | 7 |
| | $ 309 | $ 51 |
Distribution Service Agreement. Under the Fund’s Class B 12b-1 plan, DWS Distributors, Inc. (“DDI”) received a fee (“Distribution Service Fee”) of up to 0.25% of the average daily net assets of Class B shares. For the year ended December 31, 2021, the Distribution Service Fee aggregated $365, of which $29 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $1,040, of which $408 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 17 |
proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
At December 31, 2021, one participating insurance company was owner of record of 10% or more of the total outstanding Class A shares of the Fund, owning 83%. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 87% and 13%, respectively.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
| F. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| 18 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS International Growth VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS International Growth VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 19 |
| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,021.70 | $ 1,020.60 |
| Expenses Paid per $1,000* | $ 4.69 | $ 5.96 |
| Hypothetical 5% Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,020.57 | $ 1,019.31 |
| Expenses Paid per $1,000* | $ 4.69 | $ 5.96 |
| * | Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratios | Class A | Class B |
| Deutsche DWS Variable Series II — DWS International Growth VIP | .92% | 1.17% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
| 20 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
| Tax Information | (Unaudited) |
The Fund paid distributions of $0.21 per share from net long-term capital gains during its year ended December 31, 2021.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $336,000 as capital gain dividends for its year ended December 31, 2021.
For corporate shareholders, 9% of the ordinary dividends (i.e., income dividends plus short-term capital gains) paid during the Fund’s fiscal year ended December 31, 2021, qualified for the dividends received deduction.
The Fund paid foreign taxes of $60,597 and earned $275,111 of foreign source income during the year ended December 31, 2021. Pursuant to Section 853 of the Internal Revenue Code, the Fund designates $0.05 per share as foreign taxes paid and $0.23 per share as income earned from foreign sources for the year ended December 31, 2021.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 21 |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS International Growth VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 2nd quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being
| 22 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one-, three- and five-year periods ended December 31, 2020.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be higher than the median (3rd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable DWS U.S. registered fund (“DWS Funds”) and considered differences between the Fund and the comparable DWS Fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. In this regard, the Board observed that while the Fund’s current investment management fee schedule does not include breakpoints, the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 23 |
substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
| 24 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 25 |
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
| 26 | | Deutsche DWS Variable Series II —DWS International Growth VIP |
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| Deutsche DWS Variable Series II —DWS International Growth VIP | | 27 |
VS2IG-2 (R-025830-12 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
DWS Small Mid Cap Growth VIP
Contents
| 3 | Performance Summary |
| 4 | Management Summary |
| 5 | Portfolio Summary |
| 6 | Investment Portfolio |
| 10 | Statement of Assets and Liabilities |
| 10 | Statement of Operations |
| 11 | Statements of Changes in Net Assets |
| 12 | Financial Highlights |
| 13 | Notes to Financial Statements |
| 17 | Report of Independent Registered Public Accounting Firm |
| 18 | Information About Your Fund's Expenses |
| 19 | Tax Information |
| 19 | Proxy Voting |
| 20 | Advisory Agreement Board Considerations and Fee Evaluation |
| 23 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Stocks may decline in value. Smaller and medium company stocks tend to be more volatile than large company stocks. Investing in foreign securities presents certain risks, such as currency fluctuations, political and economic changes, and market risks.The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns.
The gross expense ratio of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 is 0.82% for Class A shares and may differ from the expense ratio disclosed in the Financial Highlights table in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
The Russell 2500TM Growth Index is an unmanaged index that measures the performance of the small to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
| Comparative Results |
| DWS Small Mid Cap Growth VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $11,384 | $18,141 | $19,143 | $35,712 |
| Average annual total return | 13.84% | 21.96% | 13.87% | 13.57% |
| Russell 2500 Growth Index | Growth of $10,000 | $10,504 | $19,574 | $22,542 | $43,169 |
| Average annual total return | 5.04% | 25.09% | 17.65% | 15.75% |
| The growth of $10,000 is cumulative. |
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 3 |
| Management Summary | December 31, 2021 (Unaudited) |
During the 12-month period ended December 31, 2021, the portfolio provided a total return of 13.84% (Class A shares, unadjusted for contract charges) compared with the 5.04% return of its benchmark, the Russell 2500 Growth Index.
U.S. equities posted gains in 2021, although performance was largely led by larger-capitalization stocks. As vaccines allowed pandemic-related restrictions to be eased, economic growth and corporate earnings rebounded strongly. In addition, U.S. monetary and fiscal policy were highly supportive, with Congress passing massive spending packages and the U.S. Federal Reserve (Fed) maintaining short rates near zero while engaging in bond purchases to keep longer-term borrowing costs low. The fourth quarter saw the Fed adopt a more hawkish stance in response to persistently high inflation, leading to increased market volatility and weighing on performance for growth-oriented stocks.
The portfolio’s outperformance relative to the benchmark was driven by strong stock selection across all sectors, most notably health care, industrials and materials. In terms of individual contributors, positive contributions were led by Builders FirstSource, Inc., the nation’s largest supplier of structural building products, value-added components and services for new residential construction, repair and remodeling. The stock was supported as housing demand remained robust due to low interest rates. SiTime Corp. develops silicon-based timing solutions. The company saw its shares spike higher after reporting very strong second quarter revenue and earnings as semiconductor industry shortages have increased demand and pricing power for the company’s products. Kforce, Inc. is a professional staffing company operating in North America. With over 80% of revenue derived from technology staffing needs, Kforce benefited from high demand driven by accelerated IT spending. On the downside, Five9, Inc. is a cloud contact center software provider that enables businesses to improve customer relationship management. The stock suffered as a proposed merger collapsed. Another laggard was iRhythm Technologies, Inc.* which provides a cardiac monitoring device and related analytical services to diagnose arrhythmias and other heart conditions. The company’s shares declined after a large payer reduced the reimbursement rate for its devices to bring payments in line with older technologies, not appreciating the benefits of longer wear times, ease of use and the monitoring and analysis the company provides. We exited the position given reduced visibility. Emergent BioSolutions Inc.* is a global specialty biopharma company that manufactures biodefense drugs and treatments for infectious diseases. Early in the COVID-19 pandemic the company was contracted by multiple manufacturers for vaccine production. However, Emergent experienced manufacturing issues which resulted in lost sales and uncertainty of batch quality which caused its shares to decline, and we sold the position.
As the Fed begins to evaluate future rate hikes, we have begun to see companies with higher quality profiles lead the market. Small cap relative valuations appear attractive considering the solid growth expected in both revenue and earnings in 2022. We believe the small-cap universe remains a very compelling area for bottom-up investors to find long term growth companies across multiple sectors.
Peter Barsa, Senior Portfolio Manager Equity
Michael A. Sesser, CFA, Senior Portfolio Manager Equity
Portfolio Managers
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
Terms to Know
Russell 2500 Growth Index is an unmanaged index that measures the performance of the small to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values.
Contribution and detraction incorporate both an investment's total return and its weighting in the Fund.
| * | Not held as of December 31, 2021. |
| 4 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 12/31/21 | 12/31/20 |
| Common Stocks | 99% | 97% |
| Cash Equivalents | 1% | 2% |
| Exchange-Traded Funds | 0% | 1% |
| | 100% | 100% |
| Sector Diversification (As a % of Investment Portfolio excluding Exchange-Traded Funds, Cash Equivalents and Securities Lending) | 12/31/21 | 12/31/20 |
| Information Technology | 28% | 29% |
| Health Care | 26% | 29% |
| Industrials | 16% | 14% |
| Consumer Discretionary | 14% | 13% |
| Financials | 5% | 5% |
| Materials | 4% | 4% |
| Real Estate | 3% | 3% |
| Consumer Staples | 2% | 2% |
| Communication Services | 1% | 1% |
| Energy | 1% | 0% |
| | 100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 6.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 5 |
| Investment Portfolio | as of December 31, 2021 |
| | Shares | Value ($) |
| Common Stocks 98.5% | |
| Communication Services 1.0% | |
| Entertainment 0.5% | |
| Take-Two Interactive Software, Inc.* | | 2,174 | 386,363 |
| Interactive Media & Services 0.5% | |
| Cargurus, Inc.* | | 10,463 | 351,976 |
| Consumer Discretionary 13.8% | |
| Auto Components 0.9% | |
| Gentherm, Inc.* | | 7,364 | 639,932 |
| Diversified Consumer Services 1.1% | |
| Bright Horizons Family Solutions, Inc.* | | 5,598 | 704,676 |
| Terminix Global Holdings, Inc.* | | 3,418 | 154,596 |
| | | | 859,272 |
| Hotels, Restaurants & Leisure 2.1% | |
| Hilton Grand Vacations, Inc.* | | 12,491 | 650,906 |
| Jack in the Box, Inc. | | 7,892 | 690,392 |
| Scientific Games Corp. "A"* | | 3,937 | 263,110 |
| | | | 1,604,408 |
| Household Durables 4.3% | |
| Helen of Troy Ltd.* | | 2,963 | 724,365 |
| iRobot Corp.* (a) | | 6,273 | 413,265 |
| LGI Homes, Inc.* | | 3,489 | 538,981 |
| TopBuild Corp.* | | 5,673 | 1,565,237 |
| | | | 3,241,848 |
| Internet & Direct Marketing Retail 0.2% | |
| Just Eat Takeaway.com NV (ADR)* (a) | | 12,289 | 132,230 |
| Leisure Products 1.7% | |
| YETI Holdings, Inc.* | | 15,522 | 1,285,687 |
| Specialty Retail 3.5% | |
| Burlington Stores, Inc.* | | 2,883 | 840,423 |
| Camping World Holdings, Inc. "A" (a) | | 24,907 | 1,006,243 |
| Leslie's, Inc.* | | 2,799 | 66,224 |
| National Vision Holdings, Inc.* | | 7,865 | 377,441 |
| The Children's Place, Inc.* | | 4,788 | 379,641 |
| | | | 2,669,972 |
| Consumer Staples 2.1% | |
| Food & Staples Retailing 1.2% | |
| Casey's General Stores, Inc. | | 4,371 | 862,617 |
| Household Products 0.9% | |
| Spectrum Brands Holdings, Inc. | | 6,982 | 710,209 |
| Energy 0.7% | |
| Oil, Gas & Consumable Fuels | |
| Crescent Energy, Inc. "A"* (a) | | 6,384 | 80,949 |
| | Shares | Value ($) |
| Denbury, Inc.* | | 2,500 | 191,475 |
| Ovintiv, Inc. | | 6,811 | 229,531 |
| | | | 501,955 |
| Financials 4.7% | |
| Banks 2.7% | |
| Pinnacle Financial Partners, Inc. | | ��5,944 | 567,652 |
| South State Corp. | | 4,704 | 376,837 |
| SVB Financial Group* | | 742 | 503,254 |
| Synovus Financial Corp. | | 11,493 | 550,170 |
| | | | 1,997,913 |
| Capital Markets 1.7% | |
| FactSet Research Systems, Inc. | | 296 | 143,859 |
| Lazard Ltd. "A" | | 13,717 | 598,473 |
| Moelis & Co. "A" | | 9,136 | 571,091 |
| | | | 1,313,423 |
| Consumer Finance 0.3% | |
| Green Dot Corp. "A"* | | 6,162 | 223,311 |
| Health Care 25.2% | |
| Biotechnology 8.7% | |
| Amicus Therapeutics, Inc.* | | 7,094 | 81,936 |
| Apellis Pharmaceuticals, Inc.* | | 4,251 | 200,987 |
| Arena Pharmaceuticals, Inc.* | | 5,976 | 555,409 |
| Beam Therapeutics, Inc.* | | 1,093 | 87,101 |
| Biohaven Pharmaceutical Holding Co., Ltd.* | | 7,287 | 1,004,222 |
| Blueprint Medicines Corp.* | | 4,684 | 501,703 |
| Fate Therapeutics, Inc.* | | 3,846 | 225,030 |
| Global Blood Therapeutics, Inc.* | | 4,524 | 132,418 |
| Insmed, Inc.* | | 6,610 | 180,056 |
| Intellia Therapeutics, Inc.* | | 1,898 | 224,420 |
| Invitae Corp.* | | 5,038 | 76,930 |
| Kiniksa Pharmaceuticals Ltd. "A"* | | 8,769 | 103,211 |
| Ligand Pharmaceuticals, Inc.* | | 2,672 | 412,717 |
| Mirati Therapeutics, Inc.* | | 2,178 | 319,491 |
| Natera, Inc.* | | 4,935 | 460,880 |
| Neurocrine Biosciences, Inc.* | | 7,085 | 603,429 |
| TG Therapeutics, Inc.* | | 4,142 | 78,698 |
| Travere Therapeutics, Inc.* | | 23,478 | 728,757 |
| Turning Point Therapeutics, Inc.* | | 2,679 | 127,788 |
| Ultragenyx Pharmaceutical, Inc.* | | 3,057 | 257,063 |
| Veracyte, Inc.* | | 5,225 | 215,270 |
| | | | 6,577,516 |
| Health Care Equipment & Supplies 3.7% | |
| Axonics, Inc.* | | 4,613 | 258,328 |
| BioLife Solutions, Inc.* | | 8,451 | 314,969 |
| Globus Medical, Inc. "A"* | | 4,024 | 290,533 |
The accompanying notes are an integral part of the financial statements.
| 6 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
| | Shares | Value ($) |
| Haemonetics Corp.* | | 1,353 | 71,763 |
| Masimo Corp.* | | 2,727 | 798,411 |
| Nevro Corp.* | | 1,428 | 115,768 |
| Outset Medical, Inc.* | | 4,898 | 225,749 |
| STAAR Surgical Co.* | | 975 | 89,017 |
| Tandem Diabetes Care, Inc.* | | 4,219 | 635,044 |
| | | | 2,799,582 |
| Health Care Providers & Services 9.1% | |
| AMN Healthcare Services, Inc.* | | 13,141 | 1,607,539 |
| Clover Health Investments Corp.* | | 15,307 | 56,942 |
| HealthEquity, Inc.* | | 1,929 | 85,339 |
| ModivCare, Inc.* | | 9,473 | 1,404,751 |
| Molina Healthcare, Inc.* | | 4,119 | 1,310,172 |
| Option Care Health, Inc.* | | 26,064 | 741,260 |
| RadNet, Inc.* | | 55,477 | 1,670,412 |
| | | | 6,876,415 |
| Health Care Technology 1.0% | |
| Vocera Communications, Inc.* | | 11,330 | 734,637 |
| Life Sciences Tools & Services 0.6% | |
| Avantor, Inc.* | | 7,242 | 305,178 |
| NeoGenomics, Inc.* | | 3,100 | 105,772 |
| | | | 410,950 |
| Pharmaceuticals 2.1% | |
| Aclaris Therapeutics, Inc.* | | 12,953 | 188,337 |
| ANI Pharmaceuticals, Inc.* | | 8,521 | 392,648 |
| Arvinas, Inc.* | | 2,000 | 164,280 |
| Avadel Pharmaceuticals PLC (ADR)* (a) | | 18,916 | 152,841 |
| Pacira BioSciences, Inc.* | | 11,807 | 710,427 |
| | | | 1,608,533 |
| Industrials 15.7% | |
| Aerospace & Defense 1.0% | |
| HEICO Corp. | | 5,006 | 721,965 |
| Building Products 5.2% | |
| Advanced Drainage Systems, Inc. | | 3,825 | 520,697 |
| Allegion PLC | | 7,499 | 993,168 |
| Builders FirstSource, Inc.* | | 18,923 | 1,621,890 |
| Masonite International Corp.* | | 6,705 | 790,855 |
| | | | 3,926,610 |
| Commercial Services & Supplies 2.4% | |
| MSA Safety, Inc. | | 2,392 | 361,096 |
| Tetra Tech, Inc. | | 4,419 | 750,346 |
| The Brink's Co. | | 11,036 | 723,631 |
| | | | 1,835,073 |
| Construction & Engineering 0.6% | |
| MasTec, Inc.* | | 4,674 | 431,317 |
| Electrical Equipment 1.0% | |
| Generac Holdings, Inc.* | | 1,478 | 520,138 |
| | Shares | Value ($) |
| Plug Power, Inc.* | | 4,018 | 113,428 |
| Thermon Group Holdings, Inc.* | | 9,149 | 154,892 |
| | | | 788,458 |
| Machinery 0.8% | |
| IDEX Corp. | | 2,502 | 591,273 |
| Professional Services 2.0% | |
| Kforce, Inc. | | 20,225 | 1,521,324 |
| Trading Companies & Distributors 2.7% | |
| H&E Equipment Services, Inc. | | 16,406 | 726,294 |
| Rush Enterprises, Inc. "A" | | 16,590 | 923,067 |
| Titan Machinery, Inc.* | | 11,743 | 395,622 |
| | | | 2,044,983 |
| Information Technology 28.1% | |
| Communications Equipment 1.8% | |
| Calix, Inc.* | | 8,844 | 707,255 |
| Lumentum Holdings, Inc.* | | 6,080 | 643,081 |
| | | | 1,350,336 |
| Electronic Equipment, Instruments & Components 2.8% | |
| Advanced Energy Industries, Inc. | | 12,629 | 1,149,997 |
| Cognex Corp. | | 7,873 | 612,204 |
| IPG Photonics Corp.* | | 1,883 | 324,140 |
| | | | 2,086,341 |
| IT Services 2.8% | |
| Broadridge Financial Solutions, Inc. | | 5,482 | 1,002,219 |
| Maximus, Inc. | | 8,556 | 681,657 |
| WEX, Inc.* | | 2,932 | 411,623 |
| | | | 2,095,499 |
| Semiconductors & Semiconductor Equipment 6.8% | |
| CMC Materials, Inc. | | 2,531 | 485,168 |
| Entegris, Inc. | | 6,342 | 878,874 |
| Monolithic Power Systems, Inc. | | 2,547 | 1,256,512 |
| Semtech Corp.* | | 7,632 | 678,714 |
| SiTime Corp.* | | 4,087 | 1,195,611 |
| Ultra Clean Holdings, Inc.* | | 10,873 | 623,675 |
| | | | 5,118,554 |
| Software 13.9% | |
| Aspen Technology, Inc.* | | 9,339 | 1,421,396 |
| DocuSign, Inc.* | | 1,013 | 154,290 |
| Dynatrace, Inc.* | | 7,679 | 463,428 |
| Envestnet, Inc.* | | 9,852 | 781,658 |
| Five9, Inc.* | | 12,047 | 1,654,294 |
| LivePerson, Inc.* | | 7,263 | 259,434 |
| Rapid7, Inc.* | | 6,849 | 806,059 |
| Tenable Holdings, Inc.* | | 9,841 | 541,944 |
| Tyler Technologies, Inc.* | | 4,051 | 2,179,235 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 7 |
| | Shares | Value ($) |
| Varonis Systems, Inc.* | | 35,677 | 1,740,324 |
| Workiva, Inc.* | | 3,858 | 503,430 |
| | | | 10,505,492 |
| Materials 4.1% | |
| Construction Materials 1.3% | |
| Eagle Materials, Inc. | | 5,901 | 982,280 |
| Containers & Packaging 0.7% | |
| Berry Global Group, Inc.* | | 6,828 | 503,770 |
| Metals & Mining 2.1% | |
| Cleveland-Cliffs, Inc.* (a) | | 53,487 | 1,164,412 |
| First Quantum Minerals Ltd. | | 17,207 | 411,760 |
| | | | 1,576,172 |
| Real Estate 3.1% | |
| Equity Real Estate Investment Trusts (REITs) 2.7% | |
| Americold Realty Trust | | 10,299 | 337,704 |
| EastGroup Properties, Inc. | | 2,708 | 617,018 |
| Essential Properties Realty Trust, Inc. | | 21,678 | 624,977 |
| Four Corners Property Trust, Inc. | | 13,954 | 410,387 |
| | | | 1,990,086 |
| Real Estate Management & Development 0.4% | |
| Newmark Group, Inc. "A" | | 17,392 | 325,230 |
| Total Common Stocks (Cost $37,722,906) | 74,183,512 |
| | Shares | Value ($) |
| Exchange-Traded Funds 0.4% |
| SPDR S&P Biotech ETF (Cost $247,239) | | 2,719 | 304,419 |
| Securities Lending Collateral 3.8% |
DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (b) (c)
(Cost $2,874,385) | | 2,874,385 | 2,874,385 |
| Cash Equivalents 1.3% |
| DWS Central Cash Management Government Fund, 0.05% (b) (Cost $950,292) | | 950,292 | 950,292 |
| | | % of
Net Assets | Value ($) |
| Total Investment Portfolio (Cost $41,794,822) | | 104.0 | 78,312,608 |
| Other Assets and Liabilities, Net | | (4.0) | (3,001,985) |
| Net Assets | | 100.0 | 75,310,623 |
A summary of the Fund’s transactions with affiliated investments during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Securities Lending Collateral 3.8% |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (b) (c) |
| 5,457,727 | — | 2,583,342 (d) | — | — | 10,294 | — | 2,874,385 | 2,874,385 |
| Cash Equivalents 1.3% |
| DWS Central Cash Management Government Fund, 0.05% (b) |
| 1,738,142 | 10,071,908 | 10,859,758 | — | — | 408 | — | 950,292 | 950,292 |
| 7,195,869 | 10,071,908 | 13,443,100 | — | — | 10,702 | — | 3,824,677 | 3,824,677 |
| * | Non-income producing security. |
| (a) | All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at December 31, 2021 amounted to $2,798,221, which is 3.7% of net assets. |
| (b) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
| (c) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
| (d) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the year ended December 31, 2021. |
| ADR: American Depositary Receipt |
| S&P: Standard & Poor's |
| SPDR: Standard & Poor's Depositary Receipt |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Common Stocks (a) | $ 74,183,512 | $ — | $ — | $ 74,183,512 |
| Exchange-Traded Funds | 304,419 | — | — | 304,419 |
| Short-Term Investments (a) | 3,824,677 | — | — | 3,824,677 |
| Total | $ 78,312,608 | $ — | $ — | $ 78,312,608 |
| (a) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 9 |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in non-affiliated securities, at value (cost $37,970,145) — including $2,798,221 of securities loaned | $ 74,487,931 |
| Investment in DWS Government & Agency Securities Portfolio (cost $2,874,385)* | 2,874,385 |
| Investment in DWS Central Cash Management Government Fund (cost $950,292) | 950,292 |
| Foreign currency, at value (cost $224) | 232 |
| Dividends receivable | 26,990 |
| Interest receivable | 470 |
| Other assets | 1,283 |
| Total assets | 78,341,583 |
| Liabilities | |
| Payable upon return of securities loaned | 2,874,385 |
| Payable for Fund shares redeemed | 47,824 |
| Accrued management fee | 34,317 |
| Accrued Trustees' fees | 1,143 |
| Other accrued expenses and payables | 73,291 |
| Total liabilities | 3,030,960 |
| Net assets, at value | $ 75,310,623 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 43,448,345 |
| Paid-in capital | 31,862,278 |
| Net assets, at value | $ 75,310,623 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($75,310,623 ÷ 3,990,886 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 18.87 |
| * | Represents collateral on securities loaned. |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Dividends (net of foreign taxes withheld of $21) | $ 336,500 |
| Income distributions — DWS Central Cash Management Government Fund | 408 |
| Securities lending income, net of borrower rebates | 10,294 |
| Total income | 347,202 |
| Expenses: | |
| Management fee | 416,498 |
| Administration fee | 73,455 |
| Services to shareholders | 664 |
| Custodian fee | 3,403 |
| Audit fee | 38,433 |
| Legal fees | 13,830 |
| Tax fees | 8,316 |
| Reports to shareholders | 30,882 |
| Trustees' fees and expenses | 4,688 |
| Other | 3,870 |
| Total expenses | 594,039 |
| Net investment income (loss) | (246,837) |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from investments | 7,087,492 |
| Change in net unrealized appreciation (depreciation) on investments | 2,870,407 |
| Net gain (loss) | 9,957,899 |
| Net increase (decrease) in net assets resulting from operations | $9,711,062 |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income (loss) | $ (246,837) | $ (28,369) |
| Net realized gain (loss) | 7,087,492 | 3,757,624 |
Change in net unrealized appreciation
(depreciation) | 2,870,407 | 12,517,964 |
| Net increase (decrease) in net assets resulting from operations | 9,711,062 | 16,247,219 |
| Distributions to shareholders: | | |
| Class A | (3,804,844) | (959,731) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 2,680,334 | 3,372,258 |
| Reinvestment of distributions | 3,804,844 | 959,731 |
| Payments for shares redeemed | (10,049,938) | (10,851,170) |
| Net increase (decrease) in net assets from Class A share transactions | (3,564,760) | (6,519,181) |
| Increase (decrease) in net assets | 2,341,458 | 8,768,307 |
| Net assets at beginning of period | 72,969,165 | 64,200,858 |
| Net assets at end of period | $ 75,310,623 | $ 72,969,165 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 4,186,167 | 4,698,629 |
| Shares sold | 144,423 | 244,143 |
| Shares issued to shareholders in reinvestment of distributions | 211,028 | 90,115 |
| Shares redeemed | (550,732) | (846,720) |
| Net increase (decrease) in Class A shares | (195,281) | (512,462) |
| Shares outstanding at end of period | 3,990,886 | 4,186,167 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 11 |
Financial Highlights
| DWS Small Mid Cap Growth VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $17.43 | $13.66 | $12.68 | $21.94 | $18.96 |
| Income (loss) from investment operations: | | | | | |
| Net investment income (loss)a | (.06) | (.01) | .01 | (.01) | (.02) |
| Net realized and unrealized gain (loss) | 2.43 | 4.00 | 2.73 | (1.92) | 4.08 |
| Total from investment operations | 2.37 | 3.99 | 2.74 | (1.93) | 4.06 |
| Less distributions from: | | | | | |
| Net investment income | (.01) | (.01) | — | — | (.02) |
| Net realized gains | (.92) | (.21) | (1.76) | (7.33) | (1.06) |
| Total distributions | (.93) | (.22) | (1.76) | (7.33) | (1.08) |
| Net asset value, end of period | $18.87 | $17.43 | $13.66 | $12.68 | $21.94 |
| Total Return (%) | 13.84 | 30.18 b | 22.41 b | (13.59) b | 22.12 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 75 | 73 | 64 | 64 | 77 |
| Ratio of expenses before expense reductions (%)c | .78 | .82 | .82 | .81 | .75 |
| Ratio of expenses after expense reductions (%)c | .78 | .81 | .81 | .80 | .75 |
| Ratio of net investment income (loss) (%) | (.33) | (.05) | .11 | (.06) | (.08) |
| Portfolio turnover rate (%) | 16 | 12 | 10 | 32 | 32 |
| a | Based on average shares outstanding during the period. |
| b | Total return would have been lower had certain expenses not been reduced. |
| c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS Small Mid Cap Growth VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities and exchange-traded funds (“ETFs”) are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Equity securities or ETFs 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. Equity securities or ETFs are generally categorized as Level 1.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. 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 acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 13 |
continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best efforts to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. As of period end, any securities on loan were collateralized by cash. During the year ended December 31, 2021, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.04% annualized effective rate as of December 31, 2021) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of December 31, 2021, the Fund had securities on loan, which were classified as Common Stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements was overnight and continuous.
Federal Income Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss, the realized tax character on distributions from certain securities and investments in limited partnerships. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed long-term capital gains | $ 7,035,573 |
| Net unrealized appreciation (depreciation) on investments | $ 36,405,590 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $41,907,018. The net unrealized appreciation for all investments based on tax cost was $36,405,590. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $39,421,532 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $3,015,942.
| 14 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 753,322 | $ 27,637 |
| Distributions from long-term capital gains | $ 3,051,522 | $ 932,094 |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
| B. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of investment securities (excluding short-term investments) aggregated $11,792,618 and $18,374,956, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the average daily net assets of the Fund, computed and accrued daily and payable monthly, at the following annual rates:
| First $250 million of the Fund's average daily net assets | .550% |
| Next $750 million | .525% |
| Over $1 billion | .500% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.55% of the Fund’s average daily net assets.
For the period from January 1, 2021 through April 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of Class A at 0.81%.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $73,455, of which $6,052 is unpaid.
Service Provider Fees. DWS Service Company (“DSC“), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent,
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 15 |
dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC aggregated $484, of which $81 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $604, of which $82 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the year ended December 31, 2021, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $775.
At December 31, 2021, one participating insurance company was owner of record of 10% or more of the total outstanding Class A shares of the Fund, owning 92%.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
| F. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
| 16 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS Small Mid Cap Growth VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS Small Mid Cap Growth VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 17 |
| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A |
| Beginning Account Value 7/1/21 | $1,000.00 |
| Ending Account Value 12/31/21 | $1,038.00 |
| Expenses Paid per $1,000* | $ 4.01 |
| Hypothetical 5% Fund Return | Class A |
| Beginning Account Value 7/1/21 | $1,000.00 |
| Ending Account Value 12/31/21 | $1,021.27 |
| Expenses Paid per $1,000* | $ 3.97 |
| * | Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratio | Class A |
| Deutsche DWS Variable Series II — DWS Small Mid Cap Growth VIP | .78% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
| 18 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
| Tax Information | (Unaudited) |
The Fund paid distributions of $0.74 per share from net long-term capital gains during its year ended December 31, 2021.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $7,780,000 as capital gain dividends for its year ended December 31, 2021.
For corporate shareholders, 42% of the ordinary dividends (i.e., income dividends plus short-term capital gains) paid during the Fund’s fiscal year ended December 31, 2021, qualified for the dividends received deduction.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 19 |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Small Mid Cap Growth VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 3rd quartile, 4th quartile and 4th quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has
| 20 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2020. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board observed that the Fund had experienced improved relative performance during the first seven months of 2021. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the DWS fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (1st quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees). The Board noted that the expense limitation agreed to by DIMA was expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”), noting that DIMA indicated that it does not provide services to any other comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund and any fees received by an affiliate of DIMA for transfer agency services provided to the Fund. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 21 |
commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
| 22 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 23 |
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
| 24 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP |
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Growth VIP | | 25 |
VS2SMCG-2 (R-025835-11 2/22)
December 31, 2021
Annual Report
Deutsche DWS Variable Series II
DWS Small Mid Cap Value VIP
Contents
| 3 | Performance Summary |
| 4 | Management Summary |
| 6 | Portfolio Summary |
| 7 | Investment Portfolio |
| 11 | Statement of Assets and Liabilities |
| 11 | Statement of Operations |
| 12 | Statements of Changes in Net Assets |
| 13 | Financial Highlights |
| 15 | Notes to Financial Statements |
| 21 | Report of Independent Registered Public Accounting Firm |
| 22 | Information About Your Fund's Expenses |
| 23 | Tax Information |
| 23 | Proxy Voting |
| 24 | Advisory Agreement Board Considerations and Fee Evaluation |
| 27 | Board Members and Officers |
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Stocks may decline in value. Smaller and medium company stocks tend to be more volatile than large company stocks. The impact of the use of quantitative models and the analysis of specific metrics on a stock's performance can be difficult to predict, and stocks that previously possessed certain desirable quantitative characteristics may not continue to demonstrate those same characteristics in the future. Quantitative models also entail the risk that the models themselves may be limited or incorrect. Investing in foreign securities presents certain risks, such as currency fluctuations, political and economic changes, and market risks. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the ongoing pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
| 2 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
| Performance Summary | December 31, 2021 (Unaudited) |
Fund 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 Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund 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 gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2021 are 0.88% and 1.25% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Yearly periods ended December 31
Russell 2500™ Value Index is an unmanaged index measuring the small- to mid-cap U.S. equity value market.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
| Comparative Results |
| DWS Small Mid Cap Value VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class A | Growth of $10,000 | $13,050 | $15,731 | $14,602 | $27,181 |
| Average annual total return | 30.50% | 16.30% | 7.87% | 10.52% |
| Russell 2500 Value Index | Growth of $10,000 | $12,778 | $16,559 | $16,016 | $32,265 |
| Average annual total return | 27.78% | 18.31% | 9.88% | 12.43% |
| DWS Small Mid Cap Value VIP | 1-Year | 3-Year | 5-Year | 10-Year |
| Class B | Growth of $10,000 | $13,004 | $15,560 | $14,339 | $26,211 |
| Average annual total return | 30.04% | 15.88% | 7.47% | 10.12% |
| Russell 2500 Value Index | Growth of $10,000 | $12,778 | $16,559 | $16,016 | $32,265 |
| Average annual total return | 27.78% | 18.31% | 9.88% | 12.43% |
| The growth of $10,000 is cumulative. |
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 3 |
| Management Summary | December 31, 2021 (Unaudited) |
Class A shares of DWS Small Mid Cap Value VIP returned 30.50% in 2021 (unadjusted for contract charges) and outperformed the 27.78% gain of the Russell 2500TM Value Index.
Small- and mid-cap stocks performed very well in 2021. As business conditions gradually returned to normal, economic growth and corporate earnings both rebounded from their depressed levels of the previous year. Monetary policy also remained supportive for most of the period, with the U.S. Federal Reserve keeping interest rates near zero and continuing its stimulative quantitative easing program. Multiple rounds of fiscal stimulus provided further fuel for investor sentiment. This backdrop was highly favorable for small-cap value stocks, which finished well ahead of the 5.04% return for the Russell 2500TM Growth Index.
The Fund uses proprietary quantitative models that seek to identify the most attractive stocks in the index based on fundamental factors that have been effective sources of return over time, such as valuation, momentum, profitability, earnings, and sales growth. The models are dynamic and use specific factor weights for separate industry groups. This process worked well in 2021, helping the Fund outpace the strong return of its benchmark.
Consistent with our bottom-up approach, security selection was the primary driver of the Fund’s positive relative performance. Our portfolio holdings outpaced the corresponding benchmark components in all of the eleven major sectors except health care. Our stock picks outperformed by the widest margin in financials, led by a position in Donnelley Financial Solutions, Inc. The company consistently reported revenues and earnings that were ahead of expectations, helping the stock deliver a triple-digit gain and finish well ahead of its sector peers. Positions in Credit Acceptance Corp. and Brown & Brown, Inc. were also among our top performers in financials.
Real estate, where a number of our holdings registered gains north of 50%, was another area of strength for the Fund. Stag Industrial, Inc. and LXP Industrial Trust were the leading individual contributors in the sector. Our stock picking process was effective in information technology, as well. Verint Systems, Inc., a provider of cloud-based software used to facilitate customer engagement, produced strong gains due to a series of better-than-expected earnings reports. Communication services and consumer staples were also areas where our stock picks outperformed. Outside of these sectors, two energy stocks — Targa Resources Corp. and Devon Energy Corp. — were among the leading contributors in 2021.
On the other hand, our stock picks in health care underperformed considerably. Holdings in a number of smaller biotechnology and pharmaceutical companies lagged amid the broader weakness in these market segments. Invacare Corp.,* Bluebird Bio, Inc.,* and Athenex, Inc., were the largest individual detractors in health care. Elsewhere, Coeur Mining, Inc.* and Virgin Galactic Holdings, Inc. each cost the Fund some relative performance.
We continue to exercise discipline through the full range of market conditions. We seek to optimize the portfolio by emphasizing stocks with the most favorable combination of individual factors, rather than relying on a single factor — such as value or growth — to drive performance. In our view, this approach has enabled us to build a portfolio designed to navigate uncertain conditions and rapid shifts in market leadership. We believe the merits of this strategy may become increasingly evident as investors struggle to assess a shifting investment environment in the year ahead.
Pankaj Bhatnagar, PhD, Head of Investment Strategy Equity
Arno V. Puskar, Senior Portfolio Manager Equity
Portfolio Managers
The views expressed reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results. Current and future portfolio holdings are subject to risk.
| 4 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
Terms to Know
The Russell 2500 Value Index is an unmanaged index measuring the small- to mid-cap U.S. equity value market.
The Russell 2500 Growth Index is an unmanaged index that measures the performance of the small to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Contribution and detraction incorporate both a stock’s total return and its weighting in the Fund.
| * | Not held at December 31, 2021. |
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 5 |
| Portfolio Summary | (Unaudited) |
| Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 12/31/21 | 12/31/20 |
| Common Stocks | 99% | 100% |
| Cash Equivalents | 1% | 0% |
| | 100% | 100% |
| Sector Diversification (As a % of Investment Portfolio excluding Securities Lending Collateral and Cash Equivalents) | 12/31/21 | 12/31/20 |
| Financials | 22% | 20% |
| Industrials | 16% | 17% |
| Real Estate | 13% | 12% |
| Consumer Discretionary | 10% | 14% |
| Information Technology | 10% | 9% |
| Health Care | 8% | 7% |
| Materials | 6% | 7% |
| Energy | 5% | 4% |
| Utilities | 4% | 4% |
| Communication Services | 3% | 3% |
| Consumer Staples | 3% | 3% |
| | 100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 7.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is posted on dws.com, and is available free of charge by contacting your financial intermediary, or if you are a direct investor, by calling (800) 728-3337. In addition, the portfolio holdings listing is filed with the SEC on the Fund’s Form N-PORT and will be available on the SEC’s Web site at sec.gov. Additional portfolio holdings for the Fund are also posted on dws.com from time to time. Please see the Fund’s current prospectus for more information.
| 6 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
| Investment Portfolio | as of December 31, 2021 |
| | Shares | Value ($) |
| Common Stocks 99.5% | |
| Communication Services 3.3% | |
| Entertainment 1.1% | |
| Lions Gate Entertainment Corp. "A"* (a) | | 51,187 | 851,752 |
| Madison Square Garden Sports Corp.* | | 1,859 | 322,964 |
| | | | 1,174,716 |
| Media 1.8% | |
| Interpublic Group of Companies, Inc. | | 49,706 | 1,861,490 |
| Wireless Telecommunication Services 0.4% | |
| Telephone & Data Systems, Inc. | | 20,294 | 408,924 |
| Consumer Discretionary 10.0% | |
| Auto Components 1.7% | |
| Goodyear Tire & Rubber Co.* | | 47,305 | 1,008,543 |
| Lear Corp. | | 4,259 | 779,184 |
| | | | 1,787,727 |
| Automobiles 0.5% | |
| Winnebago Industries, Inc. | | 6,930 | 519,195 |
| Diversified Consumer Services 0.3% | |
| Vivint Smart Home, Inc.* | | 35,073 | 343,014 |
| Hotels, Restaurants & Leisure 1.7% | |
| Boyd Gaming Corp.* | | 10,704 | 701,861 |
| International Game Technology PLC (a) | | 19,871 | 574,471 |
| Red Rock Resorts, Inc. "A" (a) | | 8,611 | 473,691 |
| | | | 1,750,023 |
| Household Durables 2.2% | |
| Beazer Homes U.S.A., Inc.* | | 25,089 | 582,567 |
| PulteGroup, Inc. | | 29,095 | 1,663,070 |
| | | | 2,245,637 |
| Internet & Direct Marketing Retail 0.7% | |
| Overstock.com, Inc.* (a) | | 6,410 | 378,254 |
| Qurate Retail, Inc. "A" | | 49,172 | 373,707 |
| | | | 751,961 |
| Leisure Products 0.2% | |
| Nautilus, Inc.* (a) | | 36,693 | 224,928 |
| Specialty Retail 0.2% | |
| CarLotz, Inc.* (a) | | 74,380 | 168,843 |
| Textiles, Apparel & Luxury Goods 2.5% | |
| Columbia Sportswear Co. | | 16,694 | 1,626,663 |
| Under Armour, Inc. "A"* (a) | | 42,221 | 894,663 |
| | | | 2,521,326 |
| | Shares | Value ($) |
| Consumer Staples 3.2% | |
| Food & Staples Retailing 0.3% | |
| Performance Food Group Co.* | | 6,533 | 299,800 |
| Food Products 1.0% | |
| Darling Ingredients, Inc.* | | 10,608 | 735,028 |
| Hostess Brands, Inc.* | | 16,616 | 339,299 |
| | | | 1,074,327 |
| Household Products 1.9% | |
| Central Garden & Pet Co.* | | 18,763 | 987,497 |
| Spectrum Brands Holdings, Inc. | | 9,298 | 945,792 |
| | | | 1,933,289 |
| Energy 4.9% | |
| Energy Equipment & Services 0.4% | |
| NexTier Oilfield Solutions, Inc.* | | 107,725 | 382,424 |
| Oil, Gas & Consumable Fuels 4.5% | |
| Civitas Resources, Inc. | | 9,392 | 459,926 |
| Devon Energy Corp. | | 38,714 | 1,705,352 |
| Targa Resources Corp. | | 47,289 | 2,470,377 |
| | | | 4,635,655 |
| Financials 21.9% | |
| Banks 8.9% | |
| BankUnited, Inc. | | 40,550 | 1,715,670 |
| Commerce Bancshares, Inc. | | 5,630 | 387,006 |
| ConnectOne Bancorp., Inc. | | 10,908 | 356,801 |
| Eagle Bancorp., Inc. | | 28,111 | 1,639,996 |
| Hancock Whitney Corp. | | 26,974 | 1,349,239 |
| Hilltop Holdings, Inc. | | 25,784 | 906,050 |
| Primis Financial Corp. | | 24,193 | 363,863 |
| Simmons First National Corp. "A" | | 30,569 | 904,231 |
| UMB Financial Corp. | | 14,217 | 1,508,566 |
| | | | 9,131,422 |
| Capital Markets 1.8% | |
| Donnelley Financial Solutions, Inc.* | | 38,439 | 1,812,014 |
| Consumer Finance 1.8% | |
| Credit Acceptance Corp.* (a) | | 1,907 | 1,311,406 |
| Navient Corp. | | 24,093 | 511,253 |
| | | | 1,822,659 |
| Diversified Financial Services 1.4% | |
| Cannae Holdings, Inc.* | | 12,504 | 439,516 |
| Voya Financial, Inc. | | 15,823 | 1,049,223 |
| | | | 1,488,739 |
| Insurance 6.2% | |
| AMERISAFE, Inc. | | 9,923 | 534,155 |
| Assurant, Inc. | | 10,579 | 1,648,843 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 7 |
| | Shares | Value ($) |
| Athene Holding Ltd. "A"* | | 4,895 | 407,900 |
| Brown & Brown, Inc. | | 38,887 | 2,732,979 |
| Everest Re Group Ltd. | | 3,840 | 1,051,853 |
| | | | 6,375,730 |
| Mortgage Real Estate Investment Trusts (REITs) 1.4% | |
| Blackstone Mortgage Trust, Inc. "A" | | 8,173 | 250,257 |
| Ellington Financial, Inc. | | 38,132 | 651,676 |
| New Residential Investment Corp. | | 23,054 | 246,909 |
| Redwood Trust, Inc. | | 25,738 | 339,484 |
| | | | 1,488,326 |
| Thrifts & Mortgage Finance 0.4% | |
| Walker & Dunlop, Inc. | | 3,055 | 460,938 |
| Health Care 8.4% | |
| Biotechnology 3.0% | |
| Agios Pharmaceuticals, Inc.* | | 7,142 | 234,757 |
| Athenex, Inc.* (a) | | 176,355 | 239,843 |
| Gritstone bio, Inc.* (a) | | 23,967 | 308,216 |
| Jounce Therapeutics, Inc.* (a) | | 30,583 | 255,368 |
| Myriad Genetics, Inc.* | | 28,066 | 774,621 |
| Sage Therapeutics, Inc.* | | 24,674 | 1,049,632 |
| Sana Biotechnology, Inc.* (a) | | 16,472 | 254,986 |
| | | | 3,117,423 |
| Health Care Equipment & Supplies 1.0% | |
| ICU Medical, Inc.* | | 3,236 | 768,032 |
| Pulmonx Corp.* (a) | | 7,082 | 227,120 |
| | | | 995,152 |
| Health Care Providers & Services 1.3% | |
| Apria, Inc.* (a) | | 13,199 | 430,288 |
| Molina Healthcare, Inc.* | | 2,804 | 891,896 |
| | | | 1,322,184 |
| Life Sciences Tools & Services 2.4% | |
| Bruker Corp. | | 7,938 | 666,078 |
| PerkinElmer, Inc. | | 6,269 | 1,260,445 |
| Syneos Health, Inc.* | | 5,302 | 544,409 |
| | | | 2,470,932 |
| Pharmaceuticals 0.7% | |
| Atea Pharmaceuticals, Inc.* | | 31,135 | 278,347 |
| NGM Biopharmaceuticals, Inc.* (a) | | 19,262 | 341,130 |
| Reata Pharmaceuticals, Inc. "A"* (a) | | 2,689 | 70,909 |
| | | | 690,386 |
| Industrials 15.4% | |
| Aerospace & Defense 0.3% | |
| Virgin Galactic Holdings Inc.* (a) | | 24,193 | 323,702 |
| | Shares | Value ($) |
| Air Freight & Logistics 1.5% | |
| Atlas Air Worldwide Holdings, Inc.* | | 10,887 | 1,024,684 |
| GXO Logistics, Inc.* | | 5,515 | 500,928 |
| | | | 1,525,612 |
| Airlines 0.2% | |
| Mesa Air Group, Inc.* | | 46,861 | 262,422 |
| Building Products 2.6% | |
| Carlisle Companies, Inc. | | 9,343 | 2,318,185 |
| Resideo Technologies, Inc.* | | 13,293 | 346,017 |
| | | | 2,664,202 |
| Electrical Equipment 2.2% | |
| Encore Wire Corp. | | 5,483 | 784,617 |
| EnerSys | | 19,390 | 1,532,974 |
| | | | 2,317,591 |
| Machinery 4.1% | |
| Hillenbrand, Inc. | | 51,641 | 2,684,816 |
| Pentair PLC | | 6,786 | 495,581 |
| The Manitowoc Co., Inc.* (a) | | 56,618 | 1,052,529 |
| | | | 4,232,926 |
| Professional Services 2.0% | |
| Jacobs Engineering Group, Inc. | | 13,094 | 1,823,078 |
| Science Applications International Corp. | | 2,940 | 245,754 |
| | | | 2,068,832 |
| Road & Rail 1.1% | |
| Knight-Swift Transportation Holdings, Inc. | | 10,885 | 663,332 |
| XPO Logistics, Inc.* | | 5,515 | 427,026 |
| | | | 1,090,358 |
| Trading Companies & Distributors 1.4% | |
| MRC Global, Inc.* | | 67,641 | 465,370 |
| NOW, Inc.* | | 109,928 | 938,785 |
| | | | 1,404,155 |
| Information Technology 9.7% | |
| Communications Equipment 1.2% | |
| Ciena Corp.* | | 7,945 | 611,527 |
| CommScope Holding Co., Inc.* | | 54,708 | 603,976 |
| | | | 1,215,503 |
| Electronic Equipment, Instruments & Components 3.5% | |
| Arlo Technologies, Inc.* | | 102,322 | 1,073,358 |
| Avnet, Inc. | | 33,437 | 1,378,608 |
| SYNNEX Corp. | | 3,829 | 437,884 |
| Teledyne Technologies, Inc.* | | 1,727 | 754,509 |
| | | | 3,644,359 |
The accompanying notes are an integral part of the financial statements.
| 8 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
| | Shares | Value ($) |
| IT Services 1.4% | |
| Alliance Data Systems Corp. | | 12,940 | 861,416 |
| Concentrix Corp. | | 3,437 | 613,917 |
| | | | 1,475,333 |
| Semiconductors & Semiconductor Equipment 1.5% | |
| Cirrus Logic, Inc.* | | 11,969 | 1,101,387 |
| Ichor Holdings Ltd.* | | 8,469 | 389,828 |
| | | | 1,491,215 |
| Software 2.1% | |
| Cognyte Software Ltd.* | | 24,739 | 387,660 |
| NCR Corp.* | | 8,756 | 351,991 |
| Verint Systems, Inc.* | | 26,229 | 1,377,285 |
| | | | 2,116,936 |
| Materials 6.2% | |
| Chemicals 3.8% | |
| Albemarle Corp. | | 1,209 | 282,628 |
| Avient Corp. | | 10,901 | 609,911 |
| Chemours Co. | | 7,973 | 267,574 |
| H.B. Fuller Co. | | 6,184 | 500,904 |
| Kraton Corp.* | | 40,274 | 1,865,492 |
| The Mosaic Co. | | 9,339 | 366,929 |
| | | | 3,893,438 |
| Containers & Packaging 0.7% | |
| Graphic Packaging Holding Co. | | 33,885 | 660,757 |
| Metals & Mining 1.7% | |
| Steel Dynamics, Inc. | | 28,779 | 1,786,313 |
| Real Estate 12.9% | |
| Equity Real Estate Investment Trusts (REITs) 12.4% | |
| Agree Realty Corp. | | 12,759 | 910,482 |
| Duke Realty Corp. | | 16,051 | 1,053,588 |
| Gaming and Leisure Properties, Inc. | | 32,113 | 1,562,619 |
| Highwoods Properties, Inc. | | 27,146 | 1,210,440 |
| Iron Mountain, Inc. (a) | | 8,026 | 420,001 |
| LXP Industrial Trust (a) | | 155,012 | 2,421,287 |
| NexPoint Residential Trust, Inc. | | 10,300 | 863,449 |
| Safehold, Inc. | | 3,694 | 294,966 |
| SITE Centers Corp. | | 38,592 | 610,911 |
| | Shares | Value ($) |
| STAG Industrial, Inc. | | 52,479 | 2,516,893 |
| Urban Edge Properties | | 46,898 | 891,062 |
| | | | 12,755,698 |
| Real Estate Management & Development 0.5% | |
| Kennedy-Wilson Holdings, Inc. | | 11,176 | 266,883 |
| Opendoor Technologies Inc.* (a) | | 18,958 | 276,976 |
| | | | 543,859 |
| Utilities 3.6% | |
| Electric Utilities 2.7% | |
| IDACORP, Inc. | | 15,434 | 1,748,827 |
| Otter Tail Corp. | | 5,034 | 359,528 |
| PG&E Corp.* | | 32,722 | 397,245 |
| Pinnacle West Capital Corp. | | 3,738 | 263,865 |
| | | | 2,769,465 |
| Gas Utilities 0.9% | |
| UGI Corp. | | 20,014 | 918,843 |
| Total Common Stocks (Cost $73,345,464) | 102,420,703 |
| Securities Lending Collateral 6.3% |
DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (b) (c)
(Cost $6,453,827) | | 6,453,827 | 6,453,827 |
| Cash Equivalents 0.6% |
| DWS Central Cash Management Government Fund, 0.05% (b) (Cost $663,321) | | 663,321 | 663,321 |
| | | % of
Net Assets | Value ($) |
| Total Investment Portfolio (Cost $80,462,612) | | 106.4 | 109,537,851 |
| Other Assets and Liabilities, Net | | (6.4) | (6,567,332) |
| Net Assets | | 100.0 | 102,970,519 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 9 |
A summary of the Fund’s transactions with affiliated investments during the year ended December 31, 2021 are as follows:
Value ($) at
12/31/2020 | Purchases
Cost ($) | Sales
Proceeds ($) | Net Realized
Gain/
(Loss) ($) | Net Change in
Unrealized
Appreciation
(Depreciation) ($) | Income ($) | Capital Gain
Distributions ($) | Number
of Shares
at
12/31/2021 | Value ($) at
12/31/2021 |
| Securities Lending Collateral 6.3% |
| DWS Government & Agency Securities Portfolio "DWS Government Cash Institutional Shares", 0.01% (b) (c) |
| 2,438,401 | 4,015,426 (d) | — | — | — | 9,929 | — | 6,453,827 | 6,453,827 |
| Cash Equivalents 0.6% |
| DWS Central Cash Management Government Fund, 0.05% (b) |
| 259,282 | 14,377,338 | 13,973,299 | — | — | 287 | — | 663,321 | 663,321 |
| 2,697,683 | 18,392,764 | 13,973,299 | — | — | 10,216 | — | 7,117,148 | 7,117,148 |
| * | Non-income producing security. |
| (a) | All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at December 31, 2021 amounted to $6,304,202, which is 6.1% of net assets. |
| (b) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
| (c) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
| (d) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the year ended December 31, 2021. |
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2021 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Common Stocks (a) | $ 102,420,703 | $ — | $ — | $ 102,420,703 |
| Short-Term Investments (a) | 7,117,148 | — | — | 7,117,148 |
| Total | $ 109,537,851 | $ — | $ — | $ 109,537,851 |
| (a) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
| 10 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
| Statement of Assets and Liabilities | |
as of December 31, 2021
| Assets | |
| Investments in non-affiliated securities, at value (cost $73,345,464) — including $6,304,202 of securities loaned | $ 102,420,703 |
| Investment in DWS Government & Agency Securities Portfolio (cost $6,453,827)* | 6,453,827 |
| Investment in DWS Central Cash Management Government Fund (cost $663,321) | 663,321 |
| Receivable for Fund shares sold | 13,428 |
| Dividends receivable | 100,557 |
| Interest receivable | 503 |
| Other assets | 2,030 |
| Total assets | 109,654,369 |
| Liabilities | |
| Payable upon return of securities loaned | 6,453,827 |
| Payable for Fund shares redeemed | 91,046 |
| Accrued management fee | 55,482 |
| Accrued Trustees' fees | 1,187 |
| Other accrued expenses and payables | 82,308 |
| Total liabilities | 6,683,850 |
| Net assets, at value | $ 102,970,519 |
| Net Assets Consist of | |
| Distributable earnings (loss) | 30,854,297 |
| Paid-in capital | 72,116,222 |
| Net assets, at value | $ 102,970,519 |
| Net Asset Value | |
| Class A | |
| Net Asset Value, offering and redemption price per share ($81,748,634 ÷ 5,282,801 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 15.47 |
| Class B | |
| Net Asset Value, offering and redemption price per share ($21,221,885 ÷ 1,372,395 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized) | $ 15.46 |
| * | Represents collateral on securities loaned. |
for the year ended December 31, 2021
| Investment Income | |
| Income: | |
| Dividends | $ 1,563,385 |
| Income distributions — DWS Central Cash Management Government Fund | 287 |
| Securities lending income, net of borrower rebates | 9,929 |
| Total income | 1,573,601 |
| Expenses: | |
| Management fee | 642,036 |
| Administration fee | 95,812 |
| Services to shareholders | 2,276 |
| Record keeping fee (Class B) | 23,667 |
| Distribution service fee (Class B) | 49,662 |
| Custodian fee | 2,682 |
| Professional fees | 52,914 |
| Reports to shareholders | 32,646 |
| Trustees' fees and expenses | 4,282 |
| Other | 4,329 |
| Total expenses before expense reductions | 910,306 |
| Expense reductions | (15,809) |
| Total expenses after expense reductions | 894,497 |
| Net investment income | 679,104 |
| Realized and Unrealized Gain (Loss) | |
| Net realized gain (loss) from: | |
| Investments | 9,986,122 |
| Payments by affiliates (see Note F) | 8,938 |
| | 9,995,060 |
| Change in net unrealized appreciation (depreciation) on investments | 14,423,979 |
| Net gain (loss) | 24,419,039 |
| Net increase (decrease) in net assets resulting from operations | $25,098,143 |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 11 |
Statements of Changes in Net Assets
| | Years Ended December 31, |
| Increase (Decrease) in Net Assets | 2021 | 2020 |
| Operations: | | |
| Net investment income | $ 679,104 | $ 1,151,659 |
| Net realized gain (loss) | 9,995,060 | (8,657,454) |
Change in net unrealized appreciation
(depreciation) | 14,423,979 | 5,071,194 |
| Net increase (decrease) in net assets resulting from operations | 25,098,143 | (2,434,601) |
| Distributions to shareholders: | | |
| Class A | (986,559) | (6,015,690) |
| Class B | (171,519) | (1,399,898) |
| Total distributions | (1,158,078) | (7,415,588) |
| Fund share transactions: | | |
| Class A | | |
| Proceeds from shares sold | 10,833,180 | 5,262,531 |
| Reinvestment of distributions | 986,559 | 6,015,690 |
| Payments for shares redeemed | (19,477,705) | (11,188,291) |
| Net increase (decrease) in net assets from Class A share transactions | (7,657,966) | 89,930 |
| Class B | | |
| Proceeds from shares sold | 3,370,266 | 3,507,387 |
| Reinvestment of distributions | 171,519 | 1,399,898 |
| Payments for shares redeemed | (4,132,281) | (3,035,924) |
| Net increase (decrease) in net assets from Class B share transactions | (590,496) | 1,871,361 |
| Increase (decrease) in net assets | 15,691,603 | (7,888,898) |
| Net assets at beginning of period | 87,278,916 | 95,167,814 |
| Net assets at end of period | $102,970,519 | $ 87,278,916 |
| | |
| Other Information | | |
| Class A | | |
| Shares outstanding at beginning of period | 5,853,631 | 5,666,170 |
| Shares sold | 758,092 | 527,815 |
| Shares issued to shareholders in reinvestment of distributions | 67,758 | 725,656 |
| Shares redeemed | (1,396,680) | (1,066,010) |
| Net increase (decrease) in Class A shares | (570,830) | 187,461 |
| Shares outstanding at end of period | 5,282,801 | 5,853,631 |
| Class B | | |
| Shares outstanding at beginning of period | 1,418,467 | 1,216,620 |
| Shares sold | 230,525 | 321,995 |
| Shares issued to shareholders in reinvestment of distributions | 11,756 | 168,662 |
| Shares redeemed | (288,353) | (288,810) |
| Net increase (decrease) in Class B shares | (46,072) | 201,847 |
| Shares outstanding at end of period | 1,372,395 | 1,418,467 |
The accompanying notes are an integral part of the financial statements.
| 12 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
Financial Highlights
| DWS Small Mid Cap Value VIP — Class A |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data |
| Net asset value, beginning of period | $12.00 | $13.83 | $12.21 | $17.88 | $16.65 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .11 | .16 | .18 | .10 | .17 |
| Net realized and unrealized gain (loss) | 3.54 | (.90) | 2.53 b | (2.47) | 1.55 |
| Total from investment operations | 3.65 | (.74) | 2.71 | (2.37) | 1.72 |
| Less distributions from: | | | | | |
| Net investment income | (.18) | (.16) | (.10) | (.24) | (.12) |
| Net realized gains | — | (.93) | (.99) | (3.06) | (.37) |
| Total distributions | (.18) | (1.09) | (1.09) | (3.30) | (.49) |
| Net asset value, end of period | $15.47 | $12.00 | $13.83 | $12.21 | $17.88 |
| Total Return (%)c | 30.50 | (1.80) | 22.76 b | (16.01) | 10.52 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 82 | 70 | 78 | 70 | 96 |
| Ratio of expenses before expense reductions (%)d | .85 | .88 | .88 | .87 | .83 |
| Ratio of expenses after expense reductions (%)d | .83 | .82 | .83 | .81 | .83 |
| Ratio of net investment income (%) | .76 | 1.57 | 1.35 | .65 | .98 |
| Portfolio turnover rate (%) | 32 | 43 | 55 | 64 | 35 |
| a | Based on average shares outstanding during the period. |
| b | Includes proceeds from a non-recurring litigation payment amounting to $0.14 per share and 1.07% of average daily net assets, for the year ended December 31, 2019. |
| c | Total return would have been lower had certain expenses not been reduced. |
| d | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 13 |
| DWS Small Mid Cap Value VIP — Class B |
| | Years Ended December 31, |
| | 2021 | 2020 | 2019 | 2018 | 2017 |
| Selected Per Share Data | | | | | |
| Net asset value, beginning of period | $11.99 | $13.82 | $12.20 | $17.86 | $16.63 |
| Income (loss) from investment operations: | | | | | |
| Net investment incomea | .06 | .13 | .13 | .05 | .11 |
| Net realized and unrealized gain (loss) | 3.53 | (.90) | 2.53 b | (2.48) | 1.55 |
| Total from investment operations | 3.59 | (.77) | 2.66 | (2.43) | 1.66 |
| Less distributions from: | | | | | |
| Net investment income | (.12) | (.13) | (.05) | (.17) | (.06) |
| Net realized gains | — | (.93) | (.99) | (3.06) | (.37) |
| Total distributions | (.12) | (1.06) | (1.04) | (3.23) | (.43) |
| Net asset value, end of period | $15.46 | $11.99 | $13.82 | $12.20 | $17.86 |
| Total Return (%)c | 30.04 | (2.18) | 22.32 b | (16.32) | 10.13 |
| Ratios to Average Net Assets and Supplemental Data |
| Net assets, end of period ($ millions) | 21 | 17 | 17 | 15 | 19 |
| Ratio of expenses before expense reductions (%)d | 1.22 | 1.25 | 1.25 | 1.24 | 1.19 |
| Ratio of expenses after expense reductions (%)d | 1.20 | 1.19 | 1.19 | 1.16 | 1.19 |
| Ratio of net investment income (%) | .40 | 1.21 | .99 | .30 | .65 |
| Portfolio turnover rate (%) | 32 | 43 | 55 | 64 | 35 |
| a | Based on average shares outstanding during the period. |
| b | Includes proceeds from a non-recurring litigation payment amounting to $0.14 per share and 1.07% of average daily net assets, for the year ended December 31, 2019. |
| c | Total return would have been lower had certain expenses not been reduced. |
| d | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
The accompanying notes are an integral part of the financial statements.
| 14 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
Notes to Financial Statements
| A. | Organization and Significant Accounting Policies |
DWS Small Mid Cap Value VIP (the “Fund”) is a diversified series of Deutsche DWS Variable Series II (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company organized as a Massachusetts business trust.
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of up to 0.25% and of up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping 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 Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities are generally categorized as Level 1.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at
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the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. 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 acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Securities Lending. Brown Brothers Harriman & Co., as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash and/or U.S. Treasury Securities having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best efforts to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. During the year ended December 31, 2021, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.04% annualized effective rate as of December 31, 2021) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of December 31, 2021, the Fund had securities on loan, which were classified as Common Stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements was overnight and continuous.
Taxes. The Fund’s policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2021 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and the realized tax character on distributions from certain securities. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
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At December 31, 2021, the Fund's components of distributable earnings (accumulated losses) on a net tax basis were as follows:
| Undistributed ordinary income* | $ 626,692 |
| Undistributed long-term capital gains | $ 1,305,637 |
| Net unrealized appreciation (depreciation) on investments | $ 28,881,993 |
At December 31, 2021, the aggregate cost of investments for federal income tax purposes was $80,655,858. The net unrealized appreciation for all investments based on tax cost was $28,881,993. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $32,734,740 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $3,852,747.
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
| | Years Ended December 31, |
| | 2021 | 2020 |
| Distributions from ordinary income* | $ 1,158,078 | $ 1,300,909 |
| Distributions from long-term capital gains | $ — | $ 6,114,679 |
| * | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Real Estate Investment Trusts. The Fund at its fiscal year end recharacterizes 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 for financial reporting purposes and a recharacterization will be made to the accounting records 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.
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. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
| B. | Purchases and Sales of Securities |
During the year ended December 31, 2021, purchases and sales of investment securities (excluding short-term investments) aggregated $31,310,460 and $39,982,826, respectively.
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA” or the “Advisor”), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
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Pursuant to the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund’s average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:
| First $250 million | .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% |
Accordingly, for the year ended December 31, 2021, the fee pursuant to the Investment Management Agreement was equivalent to an annual rate (exclusive of any applicable waivers/reimbursements) of 0.65% of the Fund’s average daily net assets.
For the period from January 1, 2021 through April 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
For the period from May 1, 2021 through September 30, 2021, the Advisor had contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
| Class A | | .84% |
| Class B | | 1.21% |
Effective October 1, 2021 through September 30, 2022, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
| Class A | | | .83% |
| Class B | | | 1.20% |
For the year ended December 31, 2021, fees waived and/or expenses reimbursed for each class are as follows:
| Class A | $ 12,423 |
| Class B | 3,386 |
| | $ 15,809 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee (“Administration Fee”) of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the year ended December 31, 2021, the Administration Fee was $95,812, of which $8,295 is unpaid.
Service Provider Fees. DWS Service Company (“DSC”), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. (“DST”), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the
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shareholder servicing fee it receives from the Fund. For the year ended December 31, 2021, the amounts charged to the Fund by DSC were as follows:
| Services to Shareholders | Total
Aggregated | Unpaid at
December 31, 2021 |
| Class A | $ 862 | $ 143 |
| Class B | 657 | 109 |
| | $ 1,519 | $ 252 |
Distribution Service Agreement. Under the Fund’s Class B 12b-1 plan, DWS Distributors, Inc. (“DDI”) received a fee (“Distribution Service Fee”) of up to 0.25% of average daily net assets of Class B shares. For the year ended December 31, 2021, the Distribution Service Fee aggregated $49,662, of which $4,360 is unpaid.
Other Service Fees. Under an agreement with the Fund, DIMA is compensated for providing regulatory filing services to the Fund. For the year ended December 31, 2021, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders” aggregated $1,044, of which $412 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
At December 31, 2021, one participating insurance company was owner of record of 10% or more of the total outstanding Class A shares of the Fund, owning 68%. Five participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 26%, 17%, 15%, 15% and 11%, respectively.
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a daily fluctuating rate per annum equal to the sum of 0.10% plus the higher of the Federal Funds Effective Rate and the Overnight Bank Funding Rate, plus 1.25%. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at December 31, 2021.
During the year ended December 31, 2021, the Advisor agreed to reimburse the Fund $8,938 for commission costs incurred in connection with purchases and sales of portfolio assets. The amount reimbursed was less than 0.01% of the Fund’s average net assets, thus having no impact on the Fund’s total return.
| G. | Other — COVID-19 Pandemic |
A novel coronavirus known as COVID-19, declared a pandemic by the World Health Organization, has caused significant uncertainty, market volatility, decreased economic and other activity, increased government
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activity, including economic stimulus measures, and supply chain interruptions. The full effects, duration and costs of the COVID-19 pandemic are impossible to predict, and the circumstances surrounding the COVID-19 pandemic will continue to evolve, including the risk of future increased rates of infection due to low vaccination rates and/or the lack of effectiveness of current vaccines against new variants. The pandemic has affected and may continue to affect certain countries, industries, economic sectors, companies and investment products more than others, may exacerbate existing economic, political, or social tensions and may increase the probability of an economic recession or depression. The Fund and its investments may be adversely affected by the effects of the COVID-19 pandemic, and the pandemic may result in the Fund and its service providers experiencing operational difficulties in coordinating a remote workforce and implementing their business continuity plans, among others. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Deutsche DWS Variable Series II and Shareholders of DWS Small Mid Cap Value VIP:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of DWS Small Mid Cap Value VIP (the “Fund”) (one of the funds constituting Deutsche DWS Variable Series II) (the “Trust”), including the investment portfolio, as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Deutsche DWS Variable Series II) at December 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian and others. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the DWS family of funds since at least 1979, but we are unable to determine the specific year.
Boston, Massachusetts
February 15, 2022
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| Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (July 1, 2021 to December 31, 2021).
The tables illustrate your Fund’s expenses in two ways:
| — | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
| — | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended December 31, 2021
| Actual Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,048.10 | $ 1,046.00 |
| Expenses Paid per $1,000* | $ 4.28 | $ 6.19 |
| Hypothetical 5% Fund Return | Class A | Class B |
| Beginning Account Value 7/1/21 | $ 1,000.00 | $ 1,000.00 |
| Ending Account Value 12/31/21 | $ 1,021.02 | $ 1,019.16 |
| Expenses Paid per $1,000* | $ 4.23 | $ 6.11 |
| * | Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 365. |
| Annualized Expense Ratios | Class A | Class B |
| Deutsche DWS Variable Series II — DWS Small Mid Cap Value VIP | .83% | 1.20% |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
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| Tax Information | (Unaudited) |
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $1,436,000 as capital gain dividends for its year ended December 31, 2021.
For corporate shareholders, 100% of the ordinary dividends (i.e., income dividends plus short-term capital gains) paid during the Fund’s fiscal year ended December 31, 2021, qualified for the dividends received deduction.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please contact your insurance provider.
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 most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
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Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Small Mid Cap Value VIP's (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2021.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
| — | During the entire process, all of the Fund's Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
| — | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). |
| — | The Board also received extensive information throughout the year regarding performance of the Fund. |
| — | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
| — | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board also considered the risks to DIMA in sponsoring or managing the Fund, including financial, operational and reputational risks, the potential economic impact to DIMA from such risks and DIMA’s approach to addressing such risks. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2020, the Fund’s performance (Class A shares) was in the 4th quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the
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one-, three- and five-year periods ended December 31, 2020. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board noted certain changes in the Fund’s portfolio management team that were made effective February 14, 2019. The Board observed that the Fund had experienced improved relative performance during the first seven months of 2021. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the DWS fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.097% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (2nd quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2020). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2020, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable DWS U.S. registered fund (“DWS Funds”) and considered differences between the Fund and the comparable DWS Fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 25 |
products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
| 26 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
Board Members and Officers
The following table presents certain information regarding the Board Members and Officers of the Trust/Corporation. Each Board Member’s year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the Trust/Corporation. Because the Fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period.
The Board Members may also serve in similar capacities with other funds in the fund complex. The number of funds in the DWS fund complex shown in the table below includes all registered open- and closed-end funds (including all of their portfolios) advised by the Advisor and any registered funds that have an investment advisor that is an affiliated person of the Advisor.
Independent Board Members/Independent Advisory Board Members
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Keith R. Fox, CFA (1954)Chairperson since 2017, and Board Member since 1996 | Managing General Partner, Exeter Capital Partners (a series of private investment funds) (since 1986). Directorships: Progressive International Corporation (kitchen goods importer and distributor); former Chairman, National Association of Small Business Investment Companies; Former Directorships: ICI Mutual Insurance Company; BoxTop Media Inc. (advertising); Sun Capital Advisers Trust (mutual funds) | 70 | — |
| John W. Ballantine (1946)Board Member since 1999 | Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996–1998); Executive Vice President and Head of International Banking (1995–1996); Not-for-Profit Directorships: Palm Beach Civic Assn.; Window to the World Communications (public media); Life Director of Harris Theater for Music and Dance (Chicago); Life Director of Hubbard Street Dance Chicago; Former Directorships: Director and Chairman of the Board, Healthways, Inc.2 (population wellbeing and wellness services) (2003–2014); Stockwell Capital Investments PLC (private equity); Enron Corporation; FNB Corporation; Tokheim Corporation; First Oak Brook Bancshares, Inc.; Oak Brook Bank; Portland General Electric2 (utility company (2003–2021); and Prisma Energy International; Former Not-for-Profit Directorships: Public Radio International | 70 | — |
| Dawn-Marie Driscoll (1946)Board Member since 1987 | Advisory Board and former Executive Fellow, Hoffman Center for Business Ethics, Bentley University; formerly: Partner, Palmer & Dodge (law firm) (1988–1990); Vice President of Corporate Affairs and General Counsel, Filene’s (retail) (1978–1988); Directorships: Trustee and former Chairman of the Board, Southwest Florida Community Foundation (charitable organization); Former Directorships: ICI Mutual Insurance Company (2007–2015); Sun Capital Advisers Trust (mutual funds) (2007–2012), Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees) | 70 | — |
| Richard J. Herring (1946)Board Member since 1990 | Jacob Safra Professor of International Banking and Professor of Finance, The Wharton School, University of Pennsylvania (since July 1972); Director, The Wharton Financial Institutions Center (1994–2020); formerly: Vice Dean and Director, Wharton Undergraduate Division (1995–2000) and Director, The Lauder Institute of International Management Studies (2000–2006); Member FDIC Systemic Risk Advisory Committee since 2011, member Systemic Risk Council since 2012 and member of the Advisory Board at the Yale Program on Financial Stability since 2013; Former Directorships: Co-Chair of the Shadow Financial Regulatory Committee (2003–2015), Executive Director of The Financial Economists Roundtable (2008–2015), Director of The Thai Capital Fund (2007–2013), Director of The Aberdeen Singapore Fund (2007–2018), and Nonexecutive Director of Barclays Bank DE (2010–2018) | 70 | Director, Aberdeen Japan Fund (since 2007) |
| William McClayton (1944)Board Member since 2004 | Private equity investor (since October 2009); formerly: Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001–2009); Senior Partner, Arthur Andersen LLP (accounting) (1966–2001); Former Directorships: Board of Managers, YMCA of Metropolitan Chicago; Trustee, Ravinia Festival | 70 | — |
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 27 |
Name, Year of
Birth, Position
with the Trust/
Corporation
and Length of
Time Served1 | Business Experience and Directorships
During the Past Five Years | Number of
Funds in
DWS Fund
Complex
Overseen | Other
Directorships
Held by Board
Member |
| Chad D. Perry (1972)Board Member or Advisory Board Member since 20213 | Executive Vice President, General Counsel and Secretary, Tanger Factory Outlet Centers, Inc.2 (since 2011); formerly Executive Vice President and Deputy General Counsel, LPL Financial Holdings Inc.2 (2006–2011); Senior Corporate Counsel, EMC Corporation (2005–2006); Associate, Ropes & Gray LLP (1997–2005) | 21 4 | — |
| Rebecca W. Rimel (1951)Board Member since 1995 | Senior Advisor, The Pew Charitable Trusts (charitable organization) (since July 2020); Director, The Bridgespan Group (nonprofit organization) (since October 2020); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983–2004); Board Member, Investor Education (charitable organization) (2004–2005); Former Directorships: Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001–2007); Director, Viasys Health Care2 (January 2007–June 2007); Trustee, Thomas Jefferson Foundation (charitable organization) (1994–2012); President, Chief Executive Officer and Director, The Pew Charitable Trusts (charitable organization) (1994–2020); Director, BioTelemetry Inc.2 (acquired by Royal Philips in 2021) (healthcare) (2009–2021) | 70 | Director, Becton Dickinson and Company2 (medical technology company)
(2012–present) |
| Catherine Schrand (1964)Board Member or Advisory Board Member since 20213 | Celia Z. Moh Professor of Accounting (since 2016) and Professor of Accounting (since 1994), The Wharton School, University of Pennsylvania; formerly Vice Dean, Wharton Doctoral Programs (2016–2019) | 21 4 | — |
| William N. Searcy, Jr. (1946)Board Member since 1993 | Private investor since October 2003; formerly: Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989–September 2003); Former Directorships: Trustee, Sun Capital Advisers Trust (mutual funds) (1998–2012) | 70 | — |
Officers5
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Hepsen Uzcan7 (1974)President and Chief Executive Officer, 2017–present | Fund Administration (Head since 2017), DWS; Secretary, DWS USA Corporation (2018–present); Assistant Secretary, DWS Distributors, Inc. (2018–present); Director and Vice President, DWS Service Company (2018–present); Assistant Secretary, DWS Investment Management Americas, Inc. (2018–present); Director and President, DB Investment Managers, Inc. (2018–present); President and Chief Executive Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2017–present); formerly: Vice President for the Deutsche funds (2016–2017); Assistant Secretary for the DWS funds (2013–2019); Assistant Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2013–2020); Directorships: Interested Director, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since June 25, 2020); ICI Mutual Insurance Company (since October 16, 2020); and Episcopalian Charities of New York (2018–present) |
| John Millette8 (1962)Vice President and Secretary, 1999–present | Legal (Associate General Counsel), DWS; Chief Legal Officer, DWS Investment Management Americas, Inc. (2015–present); Director and Vice President, DWS Trust Company (2016–present); Secretary, DBX ETF Trust (2020–present); Vice President, DBX Advisors LLC (2021–present); Secretary, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. 2011–present); formerly: Secretary, Deutsche Investment Management Americas Inc. (2015–2017); and Assistant Secretary, DBX ETF Trust (2019–2020) |
| Ciara Crawford9 (1984)Assistant Secretary, (2019–present) | Fund Administration (Specialist), DWS (2015–present); formerly, Legal Assistant at Accelerated Tax Solutions. |
| Diane Kenneally8 (1966)Chief Financial Officer and Treasurer, 2018–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Treasurer, Chief Financial Officer and Controller, DBX ETF Trust (2019–present); Treasurer and Chief Financial Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present); formerly: Assistant Treasurer for the DWS funds (2007–2018) |
| Paul Antosca8 (1957)Assistant Treasurer, 2007–present | Fund Administration Tax (Head), DWS; and Assistant Treasurer, DBX ETF Trust (2019–present) |
| Sheila Cadogan8 (1966)Assistant Treasurer, 2017–present | Fund Administration Treasurer's Office (Co-Head since 2018), DWS; Director and Vice President, DWS Trust Company (2018–present); Assistant Treasurer, DBX ETF Trust (2019–present); Assistant Treasurer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2018–present) |
| Scott D. Hogan8 (1970)Chief Compliance Officer, 2016–present | Anti-Financial Crime & Compliance US (Senior Team Lead), DWS; Chief Compliance Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2016–present) |
| 28 | | Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP |
Name, Year of Birth, Position
with the Trust/Corporation
and Length of Time Served6 | Business Experience and Directorships During the
Past Five Years |
| Caroline Pearson8 (1962)Chief Legal Officer, 2010–present | Legal (Senior Team Lead), DWS; Assistant Secretary, DBX ETF Trust (2020–present); Chief Legal Officer, DBX Advisors LLC (2020–present); Chief Legal Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (2012–present); formerly: Secretary, Deutsche AM Distributors, Inc. (2002–2017); Secretary, Deutsche AM Service Company (2010–2017); and Chief Legal Officer, DBX Strategic Advisors LLC (2020–2021) |
Christian Rijs7 (1980)Anti-Money Laundering
Compliance Officer,
since October 6, 2021 | DWS Americas Head of Anti-Financial Crime and AML Officer, DWS; AML Officer, DWS Trust Company (since October 6, 2021); AML Officer, DBX ETF Trust (since October 6, 2021); AML Officer, The European Equity Fund, Inc., The New Germany Fund, Inc. and The Central and Eastern Europe Fund, Inc. (since October 6, 2021); formerly: DWS UK & Ireland Head of Anti-Financial Crime and MLRO |
| 1 | The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board. |
| 2 | A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. |
| 3 | Mr. Perry and Ms. Schrand are Advisory Board Members of Deutsche DWS Asset Allocation Trust, Deutsche DWS Equity 500 Index Portfolio, Deutsche DWS Global/International Fund, Inc., Deutsche DWS Income Trust, Deutsche DWS Institutional Funds, Deutsche DWS International Fund, Inc., Deutsche DWS Investment Trust, Deutsche DWS Investments VIT Funds, Deutsche DWS Money Market Trust, Deutsche DWS Municipal Trust, Deutsche DWS Portfolio Trust, Deutsche DWS Securities Trust, Deutsche DWS Tax Free Trust, Deutsche DWS Variable Series I and Government Cash Management Portfolio. Mr. Perry and Ms. Schrand are Board Members of each other Trust. |
| 4 | Mr. Perry and Ms. Schrand oversee 21 funds in the DWS Fund Complex as Board Members of various Trusts. Mr. Perry and Ms. Schrand are Advisory Board Members of various Trusts/Corporations comprised of 49 funds in the DWS Fund Complex. |
| 5 | As a result of their respective positions held with the Advisor or its affiliates, these individuals are considered “interested persons” of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the Fund. |
| 6 | The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds. |
| 7 | Address: 875 Third Avenue, New York, NY 10022. |
| 8 | Address: 100 Summer Street, Boston, MA 02110. |
| 9 | Address: 5201 Gate Parkway, Jacksonville, FL 32256. |
Certain officers hold similar positions for other investment companies for which DIMA or an affiliate serves as the Advisor.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 728-3337.
| Deutsche DWS Variable Series II —DWS Small Mid Cap Value VIP | | 29 |
VS2SMCV-2 (R-025829-11 2/22)
| | |
| | (b) Not applicable |
| | |
| ITEM 2. | CODE OF ETHICS |
| | |
| | As of the end of the period covered by this report, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR that applies to its Principal Executive Officer and Principal Financial Officer. There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2. A copy of the code of ethics is filed as an exhibit to this Form N-CSR. |
| | |
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
| | |
| | The fund’s audit committee is comprised solely of trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The fund’s Board of Trustees has determined that there are several "audit committee financial experts" (as such term has been defined by the Regulations) serving on the fund’s audit committee including Mr. William McClayton, the chair of the fund’s audit committee. An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an “audit committee financial expert” does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. |
| | |
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
| | |
Deutsche DWS Variable Series II
form n-csr disclosure re: AUDIT FEES
The following table shows the amount of fees that Ernst & Young LLP (“EY”), the Fund’s Independent Registered Public Accounting Firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that EY provided to the Fund.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
Fiscal Year
Ended
December 31, | Audit Fees Billed to Fund | Audit-Related
Fees Billed to Fund | Tax Fees Billed to Fund | All
Other Fees Billed to Fund |
| 2021 | $408,222 | $0 | $67,461 | $0 |
| 2020 | $462,762 | $0 | $68,453 | $0 |
The above “Tax Fees” were billed for professional services rendered for tax preparation.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by EY to DWS Investment Management Americas, Inc. (“DIMA” or the “Adviser”), and any entity controlling, controlled by or under common control with DIMA (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
Fiscal Year
Ended
December 31, | Audit-Related
Fees Billed to Adviser and Affiliated Fund Service Providers | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All
Other Fees Billed to Adviser and Affiliated Fund Service Providers |
| 2021 | $0 | $461,717 | $0 |
| 2020 | $0 | $650,763 | $0 |
The above “Tax Fees” were billed in connection with tax compliance services and agreed upon procedures.
Non-Audit Services
The following table shows the amount of fees that EY billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that EY provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from EY about any non-audit services that EY rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating EY’s independence.
Fiscal Year
Ended
December 31, | Total
Non-Audit Fees Billed to Fund
(A) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund)
(B) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements)
(C) | Total of
(A), (B) and (C) |
| 2021 | $67,461 | $461,717 | $0 | $529,178 |
| 2020 | $68,453 | $650,763 | $0 | $719,216 |
All other engagement fees were billed for services in connection with agreed upon procedures and tax compliance for DIMA and other related entities.
Audit Committee Pre-Approval Policies and Procedures. Generally, each Fund’s Audit Committee must pre approve (i) all services to be performed for a Fund by a Fund’s Independent Registered Public Accounting Firm and (ii) all non-audit services to be performed by a Fund’s Independent Registered Public Accounting Firm for the DIMA Entities with respect to operations and financial reporting of the Fund, except that the Chairperson or Vice Chairperson of each Fund’s Audit Committee may grant the pre-approval for non-audit services described in items (i) and (ii) above for non-prohibited services for engagements of less than $100,000. All such delegated pre approvals shall be presented to each Fund’s Audit Committee no later than the next Audit Committee meeting.
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
According to the registrant’s principal Independent Registered Public Accounting Firm, substantially all of the principal Independent Registered Public Accounting Firm's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal Independent Registered Public Accounting Firm.
***
In connection with the audit of the 2020 and 2021 financial statements, the Fund entered into an engagement letter with EY. The terms of the engagement letter required by EY, and agreed to by the Audit Committee, include a provision mandating the use of mediation and arbitration to resolve any controversy or claim between the parties arising out of or relating to the engagement letter or services provided thereunder.
***
Pursuant to PCAOB Rule 3526, EY is required to describe in writing to the Fund’s Audit Committee, on at least an annual basis, all relationships between EY, or any of its affiliates, and the DWS Funds, including the Fund, or persons in financial reporting oversight roles at the DWS Funds that, as of the date of the communication, may reasonably be thought to bear on EY’s independence. Pursuant to PCAOB Rule 3526, EY has reported the matters set forth below that may reasonably be thought to bear on EY’s independence. With respect to each reported matter in the aggregate, EY advised the Audit Committee that, after careful consideration of the facts and circumstances and the applicable independence rules, it concluded that the matters do not and will not impair EY’s ability to exercise objective and impartial judgement in connection with the audits of the financial statements for the Fund and a reasonable investor with knowledge of all relevant facts and circumstances would conclude that EY has been and is capable of exercising objective and impartial judgment on all issues encompassed within EY’s audit engagements. EY also confirmed to the Audit Committee that it can continue to act as the Independent Registered Public Accounting Firm for the Fund.
| · | EY advised the Fund’s Audit Committee that various covered persons within EY and EY’s affiliates held investments in, or had other financial relationships with, entities within the DWS Funds “investment company complex” (as defined in Regulation S-X) (the “DWS Funds Complex”). EY informed the Audit Committee that these investments and financial relationships were inconsistent with Rule 2-01(c)(1) of Regulation S-X. EY reported that all breaches have been resolved and that none of the breaches involved any professionals who were part of the audit engagement team for the Fund or in the position to influence the audit engagement team for the Fund. |
| | |
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
| | |
| | Not applicable |
| | |
| ITEM 6. | SCHEDULE OF INVESTMENTS |
| | |
| | Not applicable |
| | |
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
| | |
| | Not applicable |
| | |
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
| | |
| | Not applicable |
| | |
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
| | |
| | Not applicable |
| | |
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
| | |
| | There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. |
| | |
| ITEM 11. | CONTROLS AND PROCEDURES |
| | |
| | (a) | The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. |
| | |
| | (b) | There have been no changes in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. |
| | |
| ITEM 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies |
| | |
| | Not applicable |
| | |
| ITEM 13. | EXHIBITS |
| | |
| | (a)(1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
| | |
| | (a)(2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
| | |
| | (b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Registrant: | Deutsche DWS Variable Series II |
| | |
| | |
| By: | /s/Hepsen Uzcan Hepsen Uzcan President |
| | |
| Date: | 2/15/2022 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/Hepsen Uzcan Hepsen Uzcan President |
| | |
| Date: | 2/15/2022 |
| | |
| | |
| | |
| By: | /s/Diane Kenneally Diane Kenneally Chief Financial Officer and Treasurer |
| | |
| Date: | 2/15/2022 |
| | |
