UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSRS
Investment Company Act file number 811-5385
DWS Value Series, Inc.
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue
New York, NY 10154-0004
(Address of principal executive offices) (Zip code)
Registrant’s Telephone Number, including Area Code: (212) 454-7190
Paul Schubert
345 Park Avenue
New York, NY 10154-0004
(Name and Address of Agent for Service)
Date of fiscal year end: | 11/30 |
Date of reporting period: | 05/31/08 |
ITEM 1. REPORT TO STOCKHOLDERS
MAY 31, 2008 Semiannual Report
to Shareholders |
|
DWS Dreman Small Cap Value Fund |
 |
Contents
This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.
Investments in mutual funds involve risk. Some funds have more risk than others. This fund is subject to stock market risk. Stocks of small companies involve greater risk, as they often have limited product lines, markets or financial resources and may be exposed to more erratic and abrupt market movements than securities of larger, more-established companies. The fund may focus its investments on certain economic sectors, thereby increasing its vulnerability to any single economic, political or regulatory development. This may result in greater share price volatility and increase its overall potential risk. The Fund is no longer available to new investors except under certain circumstances. Please read this fund's prospectus for specific details regarding its investments and risk profile.
DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Performance Summary May 31, 2008
Class A, B, C and Institutional Class
All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-investments.com for the Fund's most recent month-end performance.
The maximum sales charge for Class A shares is 5.75%. For Class B shares, the maximum contingent deferred sales charge (CDSC) is 4% within the first year after purchase, declining to 0% after six years. Class C shares have no front-end sales charge but redemptions within one year of purchase may be subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and would have been lower if they had. Institutional Class shares are not subject to sales charges.
The total annual fund operating expense ratios, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated March 1, 2008 are 1.21%, 2.03%, 1.96% and 0.87% for Class A, Class B, Class C and Institutional Class shares, respectively. Please see the Information About Your Fund's Expenses, the Financial Highlights and Notes to the Financial Statements (Note C, Related Parties) sections of this report for gross and net expense related disclosure for the period ended May 31, 2008.
To discourage short-term trading, the Fund imposes a 2% redemption fee on shareholders redeeming shares held less than 15 days, which has the effect of lowering total return.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.
Average Annual Total Returns (Unadjusted for Sales Charge) as of 5/31/08 |
DWS Dreman Small Cap Value Fund | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | .62% | -6.17% | 12.90% | 17.52% | 7.77% |
Class B | .20% | -6.94% | 11.92% | 16.52% | 6.87% |
Class C | .25% | -6.87% | 12.04% | 16.64% | 6.98% |
Russell 2000® Index+
| -1.87% | -10.54% | 7.95% | 12.47% | 6.40% |
Russell 2000® Value Index++
| -1.12% | -15.33% | 6.38% | 12.64% | 8.50% |
| 6-Month‡ | 1-Year | 3-Year | 5-Year | Life of Class* |
Institutional Class | .83% | -5.78% | 13.29% | 17.96% | 16.53% |
Russell 2000 Index+
| -1.87% | -10.54% | 7.95% | 12.47% | 13.33% |
Russell 2000 Value Index++
| -1.12% | -15.33% | 6.38% | 12.64% | 13.04% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
‡ Total returns shown for periods less than one year are not annuallized.* Institutional Class commenced operations on August 19, 2002. Index returns began on August 31, 2002.Net Asset Value and Distribution Information |
| Class A | Class B | Class C | Institutional Class |
Net Asset Value: 5/31/08
| $ 34.76 | $ 31.52 | $ 32.03 | $ 35.35 |
11/30/07
| $ 39.01 | $ 35.59 | $ 36.11 | $ 39.64 |
Distribution Information: Six Months as of 5/31/08:
Income Dividends | $ .36 | $ .04 | $ .07 | $ .48 |
Capital Gain Distributions | $ 3.97 | $ 3.97 | $ 3.97 | $ 3.97 |
Class A Lipper Rankings — Small-Cap Core Funds Category as of 5/31/08 |
Period | Rank | | Number of Funds Tracked | Percentile Ranking (%) |
1-Year
| 161 | of | 783 | 21 |
3-Year
| 54 | of | 622 | 9 |
5-Year
| 28 | of | 480 | 6 |
10-Year
| 86 | of | 188 | 46 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable. Rankings are for Class A shares; other share classes may vary.
Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) |
[] DWS Dreman Small Cap Value Fund — Class A [] Russell 2000 Index+ [] Russell 2000 Value Index++ |
 |
Yearly periods ended May 31 |
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net initial investment of $9,425.
Comparative Results (Adjusted for Maximum Sales Charge) as of 5/31/08 |
DWS Dreman Small Cap Value Fund | 1-Year | 3-Year | 5-Year | 10-Year |
Class A | Growth of $10,000
| $8,844 | $13,563 | $21,127 | $19,927 |
Average annual total return
| -11.56% | 10.69% | 16.14% | 7.14% |
Class B | Growth of $10,000
| $9,059 | $13,818 | $21,375 | $19,442 |
Average annual total return
| -9.41% | 11.38% | 16.41% | 6.87% |
Class C | Growth of $10,000
| $9,313 | $14,065 | $21,590 | $19,632 |
Average annual total return
| -6.87% | 12.04% | 16.64% | 6.98% |
Russell 2000 Index+
| Growth of $10,000
| $8,946 | $12,580 | $18,000 | $18,589 |
Average annual total return
| -10.54% | 7.95% | 12.47% | 6.40% |
Russell 2000 Value Index++
| Growth of $10,000
| $8,467 | $12,040 | $18,129 | $22,604 |
Average annual total return
| -15.33% | 6.38% | 12.64% | 8.50% |
The growth of $10,000 is cumulative.
+ The Russell 2000 Index is an unmanaged, capitalization-weighted measure of approximately 2,000 smallest companies in the Russell 3000 Index.++ The Russell 2000 Value Index is an unmanaged index measuring the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.Growth of an Assumed $1,000,000 Investment |
[] DWS Dreman Small Cap Value Fund — Institutional Class [] Russell 2000 Index+ [] Russell 2000 Value Index++ |
 |
Yearly periods ended May 31 |
Comparative Results as of 5/31/08 |
DWS Dreman Small Cap Value Fund | 1-Year | 3-Year | 5-Year | Life of Class* |
Institutional Class | Growth of $1,000,000
| $942,200 | $1,454,100 | $2,283,500 | $2,420,900 |
Average annual total return
| -5.78% | 13.29% | 17.96% | 16.53% |
Russell 2000 Index+
| Growth of $1,000,000
| $894,600 | $1,258,000 | $1,800,000 | $2,053,600 |
Average annual total return
| -10.54% | 7.95% | 12.47% | 13.33% |
Russell 2000 Value Index++
| Growth of $1,000,000
| $846,700 | $1,204,000 | $1,812,900 | $2,023,300 |
Average annual total return
| -15.33% | 6.38% | 12.64% | 13.04% |
The growth of $1,000,000 is cumulative.
The minimum initial investment for Institutional Class shares is $1,000,000.
* Institutional Class commenced operations on August 19, 2002. Index returns began on August 31, 2002.+ The Russell 2000 Index is an unmanaged, capitalization-weighted measure of approximately 2,000 smallest companies in the Russell 3000 Index.++ The Russell 2000 Value Index is an unmanaged index measuring the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.Class S
Class S shares are generally not available to new investors except under certain circumstances. (Please refer to the Fund's Statement of Additional Information.)
All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-investments.com for the Fund's most recent month-end performance.
The total annual fund operating expense ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated March 1, 2008 is 1.06% for Class S shares. Please see the Information About Your Fund's Expenses, the Financial Highlights and Notes to the Financial Statements (Note C, Related Parties) sections of this report for gross and net expense related disclosure for the period ended May 31, 2008.
To discourage short-term trading, the Fund imposes a 2% redemption fee on shareholders redeeming shares held less than 15 days, which has the effect of lowering total return.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares. Returns and rankings may differ by share class.
Average Annual Total Returns as of 5/31/08 |
DWS Dreman Small Cap Value Fund | 6-Month‡ | 1-Year | 3-Year | Life of Class* |
Class S | .72% | -5.94% | 13.18% | 11.16% |
Russell 2000 Index+
| -1.87% | -10.54% | 7.95% | 6.51% |
Russell 2000 Value Index++
| -1.12% | -15.33% | 6.38% | 5.41% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
‡ Total returns shown for periods less than one year are not annuallized.* Class S commenced operations on February 28, 2005. Index returns began on February 28, 2005.Net Asset Value and Distribution Information |
| Class S |
Net Asset Value: 5/31/08
| $ 35.14 |
11/30/07
| $ 39.39 |
Distribution Information: Six Months as of 5/31/08:
Income Dividends | $ .40 |
Capital Gain Distributions | $ 3.97 |
Class S Lipper Rankings — Small-Cap Core Funds Category as of 5/31/08 |
Period | Rank | | Number of Funds Tracked | Percentile Ranking (%) |
1-Year
| 157 | of | 783 | 21 |
3-Year
| 52 | of | 622 | 9 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Class S shares; other share classes may vary.
Growth of an Assumed $10,000 Investment |
[] DWS Dreman Small Cap Value Fund — Class S [] Russell 2000 Index+ [] Russell 2000 Value Index++ |
 |
|
Comparative Results as of 5/31/08 |
DWS Dreman Small Cap Value Fund | 1-Year | 3-Year | Life of Class* |
Class S | Growth of $10,000
| $9,406 | $14,497 | $14,104 |
Average annual total return
| -5.94% | 13.18% | 11.16% |
Russell 2000 Index+
| Growth of $10,000
| $8,946 | $12,580 | $12,274 |
Average annual total return
| -10.54% | 7.95% | 6.51% |
Russell 2000 Value Index++
| Growth of $10,000
| $8,467 | $12,040 | $11,866 |
Average annual total return
| -15.33% | 6.38% | 5.41% |
The growth of $10,000 is cumulative.
* Class S commenced operations on February 28, 2005. Index returns began on February 28, 2005.+ The Russell 2000 Index is an unmanaged, capitalization-weighted measure of approximately 2,000 smallest companies in the Russell 3000 Index.++ The Russell 2000 Value Index is an unmanaged index measuring the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.Index returns assume reinvestment of all dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.Information About Your Fund's Expenses
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (December 1, 2007 to May 31, 2008).
The tables illustrate your Fund's expenses in two ways:
• Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
• Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.
Expenses and Value of a $1,000 Investment for the six months ended May 31, 2008 |
Actual Fund Return | Class A | Class B | Class C | Class S | Institutional Class |
Beginning Account Value 12/1/07
| $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/08
| $ 1,006.20 | $ 1,002.00 | $ 1,002.50 | $ 1,007.20 | $ 1,008.30 |
Expenses Paid per $1,000*
| $ 6.52 | $ 10.76 | $ 10.21 | $ 5.57 | $ 4.42 |
Hypothetical 5% Fund Return | Class A | Class B | Class C | Class S | Institutional Class |
Beginning Account Value 12/1/07
| $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 5/31/08
| $ 1,018.50 | $ 1,014.25 | $ 1014.80 | $ 1019.45 | $ 1,020.60 |
Expenses Paid per $1,000*
| $ 6.56 | $ 10.83 | $ 10.28 | $ 5.60 | $ 4.45 |
* 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 the number of days in the most recent six-month period, then divided by 366.Annualized Expense Ratios | Class A | Class B | Class C | Class S | Institutional Class |
DWS Dreman Small Cap Value Fund
| 1.30% | 2.15% | 2.04% | 1.11% | .88% |
For more information, please refer to the Fund's prospectus.
Portfolio Management Review
In the following interview, the portfolio management team discusses the market environment and performance of DWS Dreman Small Cap Value Fund for the six months ended May 31, 2008.
The views expressed in the following discussion 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.
Q: How would you describe the market environment over the last six months?
A: This has been an extraordinarily challenging time for all investors, with considerable economic uncertainty and significant turmoil throughout capital markets. In the last few months of 2007, what began as a correction in the US housing market accelerated into a crisis in the subprime mortgage market with profound implications for the entire US economy and related effects on global markets and economies. By early 2008, financial markets had become very uncomfortable with risk, as demonstrated by wider credit spreads, severe dislocation in short-term credit markets, overall tightening of financial conditions and a highly volatile equity market. Because of a few rather dramatic trading excesses and business failures, banks became fearful of lending to one another, and there has been an extreme degree of risk aversion throughout credit markets. As midyear 2008 approached, US markets were faced with additional bad news, including liquidity problems experienced by major financial institutions, increased concern about rising prices for energy and food, and rising unemployment.
Essentially all equity indices posted negative returns for this period. The Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, had a negative return of -3.63% for the six months ended May 2008.1 The large-cap Russell 1000® Index posted a return of -3.78% for the six-month period, while the small-cap Russell 2000® Index returned -1.87%.2
In the small cap category, value stocks performed better than growth stocks: the return of the Russell 2000® Value Index was - -1.12%, compared with -2.55% for the Russell 2000® Growth Index.3 By far the strongest industry sector within the Russell 2000 Value Index was energy, which posted a return above 30% for the period. The only other sector with a positive return was industrials. The weakest sectors were telecommunications and health care.
1 The Russell 3000 Index is an unmanaged index that measures the performance of the 3,000 largest US companies based on total market capitalization, which represents approximately 98% of the investable US equity market.2 The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 2000 Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.3 The Russell 2000 Value Index is an unmanaged index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.Index returns assume reinvestment of dividends and, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.Q: How did the fund perform over this period?
A: The fund's return for the six months ended May 31, 2008, (Class A shares) was 0.62%, compared with a negative return of -1.12 for the Russell 2000 Value Index. This return places the fund above the average of its peer group of Lipper Small Cap Core Funds, which had an average return of -2.16%.4 (Returns are unadjusted for sales charges. If sales charges had been included, returns would have been lower. Past performance is no guarantee of future results. Please see pages 4 through 9 for the performance of other share classes and more complete performance information.)
4 Lipper Small Cap Core Funds are funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index.Category returns assume reinvestment of dividends. It is not possible to invest directly into a Lipper category.Q: How is DWS Dreman Small Cap Value fund managed?
A: Management of the fund is based on the value-oriented principles that guide all the funds that Dreman manages. The fund seeks long-term growth of capital by investing primarily in the common stocks of small-cap companies that we believe are undervalued but have favorable prospects for appreciation. We define small-cap companies as those that have a market capitalization similar to the Russell 2000 Index, which has median market capitalization of $541 million as of May 31, 2008.
We begin the selection process by identifying small-cap stocks with below market price-to-earnings ratios. We then compare the stock price of each company under consideration with its book value, cash flow and dividend yield to identify those companies that are financially sound and appear to have a strong potential for long-term capital appreciation and dividend growth. We assemble a portfolio of the most attractive stocks, drawing on analysis of the outlook for the economy as a whole and for various industries and sectors. We may favor securities from different sectors and industries at different times, while maintaining variety in terms of industries and companies represented.
We will normally sell a stock when it no longer qualifies as a small-cap company, when its price-earnings ratio rises above that of the Russell 2000 Index, or when fundamental factors change or we believe other investments offer better opportunities.
Q: What strategies or holdings contributed most to performance over this period?
A: A major positive was a significant underweight relative to the Russell 2000 Value Index in the financials sector, which represents more than 30% of the index.5 Regional banks, thrifts and real estate investment trusts make up a significant portion of the small-cap financial sector. These stocks performed quite poorly, as investors demonstrated concern about the impact of the financial crisis and weakness in the housing market on these relatively undiversified businesses. While the US Federal Reserve Board (the Fed) has demonstrated a determination to keep the largest financial institutions from failing, it would not bail out a troubled small bank, and we believe that failures are quite possible.
5 "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.One of the best performing stocks in the portfolio, surprisingly, was a participant in the home building industry, Walter Industries, Inc. However, this company's main business is Appalachian coal, and earnings have benefited from soaring coal prices.
Also positive was a position in STEC, Inc., which makes solid state disk drives that were specified as a component of Apple's new MacBook Air. These drives require less power and run at a cooler temperature than normal disk drives. As one of the very few companies with this technology, STEC is benefiting from very strong demand.
A significant overweight in the industrials sector contributed to performance, and stocks of companies that participate in world economic growth providing elements of key infrastructure were among the fund's best performing holdings. One of these was Gardner Denver, Inc., which manufactures a variety of pumps, compressors and other equipment components. Continued international growth in industrial markets as well as a very active mining industry are fueling significant growth for Gardner Denver. Another holding in this group is CommScope Inc., a manufacturer of fiber optic cable. CommScope stock was weak early in the period but has bounced back nicely in recent months.
Other positives include Genesee & Wyoming, Inc., an operator of short-line railroads to coal mines and manufacturing plants, and several energy companies including Superior Energy Services, Inc. and PetroQuest Energy, Inc.
Q: What were some of the negatives?
A: The single biggest negative was a significant position in RTI International Metals, Inc., a titanium processor; this stock has been in the portfolio for some time and has been a major contributor in past periods. The stock has experienced what we consider to be a temporary decline; we believe that increasing demand in the aerospace industry for lightweight materials that can be used to build more energy-efficient aircraft has the potential to fuel solid long-term growth for RTI.
Several holdings in the materials sector performed poorly. These include Uranium Resources, Inc. and IAMGOLD Corp. We continue to hold these stocks because we believe world demand for their products will continue to expand.
Q: Do you have other comments for shareholders?
A: We are pleased that the fund has been able to provide shareholders a positive return in a very difficult period for investors. The small-cap market can be quite volatile because many of these stocks do not trade in great volume, and that volatility often creates opportunities for our contrarian investment philosophy. We seek small-cap companies with positive earnings momentum, positive cash flow and solid balance sheets that are currently priced below what we see as their intrinsic value. We believe the portfolio is well positioned for a market that may continue to be challenging, and we will view any correction as an opportunity to find pockets of market inefficiency and buy quality stocks that offer good value because investors have overreacted to bad news.
As always, we thank the fund's shareholders for their continued support and interest. We believe that our time-tested contrarian approach, with a focus on companies with solid long-term earnings-growth prospects and below-market price-earnings ratios, can help shareholders achieve their long-term investment goals.
Portfolio Summary
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 5/31/08 | 11/30/07 |
| | |
Common Stocks | 92% | 90% |
Cash Equivalents | 7% | 9% |
Closed End Investment Companies | 1% | 1% |
| 100% | 100% |
Sector Diversification (As a % of Common Stocks) | 5/31/08 | 11/30/07 |
| | |
Industrials | 23% | 22% |
Financials | 15% | 15% |
Information Technology | 12% | 12% |
Energy | 10% | 12% |
Health Care | 10% | 10% |
Consumer Staples | 8% | 8% |
Materials | 8% | 9% |
Utilities | 6% | 6% |
Consumer Discretionary | 6% | 4% |
Telecommunication Services | 2% | 2% |
| 100% | 100% |
Asset allocation and sector diversification are subject to change.
Ten Largest Equity Holdings at May 31, 2008 (12.7% of Net Assets) |
1. Anixter International, Inc.
Provider of cabling solutions for private network infrastructure requirements
| 1.5% |
2. EMCOR Group, Inc.
Provider of mechanical and electrical construction services
| 1.4% |
3. The J.M. Smucker Co.
Manufacturers and markets food products on a worldwide basis
| 1.3% |
4. URS Corp.
Provider of infrastructure projects involving transportation, pollution control and hazardous waste
| 1.3% |
5. Pan American Silver Corp.
Explorer and developer of silver mines
| 1.3% |
6. LifePoint Hospitals, Inc.
Provider of health care services through its hospitals
| 1.3% |
7. Ralcorp Holdings, Inc.
Manufacturer of private label and branded ready-to-eat cereal products and snacks
| 1.2% |
8. CommScope, Inc.
Manufacturer of coaxial television cables
| 1.2% |
9. Genesee & Wyoming, Inc.
Operator of short line and regional freight railroads
| 1.1% |
10. Southern Union Co.
Distributor of natural gas and electricity
| 1.1% |
Portfolio holdings are subject to change.
For more complete details about the Fund's investment portfolio, see page 19. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to www.dws-investments.com on or after the last day of the following month. In addition, the Fund's top ten holdings and other information about the Fund is posted on www.dws-investments.com as of the calendar quarter-end on or after the 15th day following quarter-end. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
Investment Portfolio as of May 31, 2008 (Unaudited)
|
Shares
| Value ($) |
| |
Common Stocks 91.5% |
Consumer Discretionary 5.3% |
Auto Components 0.2% |
Tenneco, Inc.* | 153,200 | 3,673,736 |
Diversified Consumer Services 0.6% |
Regis Corp. | 433,450 | 13,150,873 |
Hotels Restaurants & Leisure 0.2% |
International Speedway Corp. "A" | 107,100 | 4,753,098 |
Household Durables 0.7% |
Helen of Troy Ltd.* | 739,500 | 13,214,865 |
Leisure Equipment & Products 0.4% |
Callaway Golf Co. | 631,500 | 8,020,050 |
Media 0.3% |
DreamWorks Animation SKG, Inc. "A"* | 166,800 | 5,265,876 |
Specialty Retail 1.3% |
Aaron Rents, Inc. | 200,600 | 4,491,434 |
Conn's, Inc.* (a) | 338,850 | 5,851,939 |
Penske Automotive Group, Inc. (a) | 229,000 | 4,783,810 |
The Men's Wearhouse, Inc. (a) | 478,500 | 9,919,305 |
| 25,046,488 |
Textiles, Apparel & Luxury Goods 1.6% |
Hanesbrands, Inc.* | 148,600 | 4,903,800 |
Phillips-Van Heusen Corp. | 340,764 | 15,480,909 |
Wolverine World Wide, Inc. | 396,900 | 11,394,999 |
| 31,779,708 |
Consumer Staples 7.6% |
Food & Staples Retailing 2.4% |
Nash Finch Co. (a) | 370,200 | 14,156,448 |
Ruddick Corp. | 481,400 | 17,104,142 |
Weis Markets, Inc. | 460,400 | 15,888,404 |
| 47,148,994 |
Food Products 4.2% |
Del Monte Foods Co. | 1,575,300 | 13,720,863 |
Pilgrim's Pride Corp. | 692,500 | 18,005,000 |
Ralcorp Holdings, Inc.* | 406,650 | 24,399,000 |
The J.M. Smucker Co. | 500,150 | 26,402,919 |
| 82,527,782 |
Tobacco 1.0% |
Vector Group Ltd. (a) | 1,110,707 | 19,404,051 |
Energy 8.8% |
Energy Equipment & Services 5.8% |
Atwood Oceanics, Inc.* | 116,950 | 11,918,375 |
Helix Energy Solutions Group, Inc.* | 312,850 | 12,085,395 |
Hercules Offshore, Inc.* (a) | 421,152 | 14,285,476 |
Hornbeck Offshore Services, Inc.* (a) | 97,900 | 5,159,330 |
Key Energy Services, Inc.* | 790,700 | 13,647,482 |
Matrix Service Co.* (a) | 252,950 | 6,098,625 |
NATCO Group, Inc. "A"* | 117,400 | 5,549,498 |
Oil States International, Inc.* | 313,600 | 18,320,512 |
RPC, Inc. (a) | 811,700 | 12,151,149 |
Superior Energy Services, Inc.* (a) | 278,900 | 14,974,141 |
| 114,189,983 |
Oil, Gas & Consumable Fuels 3.0% |
Parallel Petroleum Corp.* | 609,350 | 12,802,443 |
Petrohawk Energy Corp.* | 595,400 | 17,492,852 |
PetroQuest Energy, Inc.* (a) | 686,474 | 15,205,399 |
Pinnacle Gas Resources, Inc. 144A* | 459,000 | 1,133,730 |
St. Mary Land & Exploration Co. | 116,800 | 5,952,128 |
Uranium Resources, Inc.* (a) | 1,611,446 | 7,170,935 |
| 59,757,487 |
Financials 14.0% |
Capital Markets 0.7% |
FBR Capital Markets Corp. 144A* | 204,400 | 1,048,572 |
MCG Capital Corp. | 258,650 | 1,482,065 |
Waddell & Reed Financial, Inc. "A" | 331,250 | 11,713,000 |
| 14,243,637 |
Commercial Banks 1.6% |
Citizens Republic Bancorp., Inc. (a) | 797,050 | 4,415,657 |
City Holding Co. | 109,300 | 4,702,086 |
Columbia Banking System, Inc. (a) | 499,600 | 13,354,308 |
FirstMerit Corp. | 208,300 | 4,209,743 |
MB Financial, Inc. (a) | 164,550 | 4,684,738 |
| 31,366,532 |
Diversified Financial Services 0.3% |
CMET Finance Holdings, Inc. 144A* | 10,800 | 129,600 |
Financial Federal Corp. (a) | 198,000 | 4,809,420 |
| 4,939,020 |
Insurance 10.4% |
Allied World Assurance Co. Holdings Ltd. | 328,850 | 14,995,560 |
Amerisafe, Inc.* | 632,350 | 10,048,042 |
Argo Group International Holdings Ltd.* | 382,794 | 14,772,020 |
CastlePoint Holdings Ltd. | 70,600 | 761,774 |
CastlePoint Holdings Ltd. 144A* | 343,900 | 3,710,681 |
Endurance Specialty Holdings Ltd. | 503,200 | 16,937,712 |
Hanover Insurance Group, Inc. | 401,500 | 18,509,150 |
Hilb Rogal & Hobbs Co. | 307,400 | 9,517,104 |
IPC Holdings Ltd. (a) | 591,400 | 16,795,760 |
Odyssey Re Holdings Corp. (a) | 567,650 | 21,309,581 |
Platinum Underwriters Holdings Ltd. | 438,950 | 15,569,556 |
Safety Insurance Group, Inc. | 126,100 | 4,875,026 |
Selective Insurance Group, Inc. | 481,000 | 10,524,280 |
StanCorp Financial Group, Inc. | 300,300 | 16,513,497 |
Tower Group, Inc. | 467,700 | 12,192,939 |
United Fire & Casualty Co. (a) | 536,800 | 19,373,112 |
| 206,405,794 |
Real Estate Investment Trusts 1.0% |
Ashford Hospitality Trust (REIT) | 1,456,800 | 8,944,752 |
CapLease, Inc. (REIT) (a) | 1,244,050 | 10,313,175 |
| 19,257,927 |
Health Care 9.3% |
Health Care Equipment & Supplies 1.6% |
Kinetic Concepts, Inc.* | 263,000 | 11,422,090 |
Syneron Medical Ltd.* | 290,900 | 4,721,307 |
The Cooper Companies, Inc. (a) | 382,150 | 15,457,968 |
| 31,601,365 |
Health Care Providers & Services 5.3% |
Amedisys, Inc.* (a) | 283,861 | 14,422,977 |
AmSurg Corp.* | 185,200 | 5,052,256 |
Apria Healthcare Group, Inc.* | 572,000 | 9,638,200 |
Centene Corp.* (a) | 564,100 | 11,908,151 |
Healthspring, Inc.* | 1,096,250 | 20,368,325 |
Kindred Healthcare, Inc.* | 352,300 | 9,719,957 |
LifePoint Hospitals, Inc.* | 776,300 | 24,833,837 |
Odyssey HealthCare, Inc.* (a) | 864,800 | 9,434,968 |
| 105,378,671 |
Life Sciences Tools & Services 1.3% |
Charles River Laboratories International, Inc.* | 182,150 | 11,708,602 |
PerkinElmer, Inc. | 482,250 | 13,638,030 |
| 25,346,632 |
Pharmaceuticals 1.1% |
Perrigo Co. | 458,300 | 16,778,363 |
Sciele Pharma, Inc.* (a) | 212,800 | 4,662,448 |
| 21,440,811 |
Industrials 21.3% |
Aerospace & Defense 2.4% |
CAE, Inc. | 1,372,050 | 18,193,383 |
Curtiss-Wright Corp. | 104,900 | 5,403,399 |
DRS Technologies, Inc. | 210,900 | 16,614,702 |
Triumph Group, Inc. (a) | 112,400 | 6,990,156 |
| 47,201,640 |
Air Freight & Logistics 0.1% |
Air Transport Services Group, Inc.* | 1,129,950 | 1,864,418 |
Commercial Services & Supplies 2.9% |
Administaff, Inc. | 354,750 | 9,904,620 |
American Ecology Corp. (a) | 404,750 | 11,624,420 |
Deluxe Corp. | 421,100 | 9,487,383 |
Ennis, Inc. | 743,500 | 14,044,715 |
Kelly Services, Inc. "A" | 601,750 | 12,636,750 |
| 57,697,888 |
Construction & Engineering 5.0% |
Chicago Bridge & Iron Co. NV (New York Shares) | 210,150 | 9,603,855 |
EMCOR Group, Inc.* | 951,700 | 27,932,395 |
Granite Construction, Inc. | 314,250 | 11,492,122 |
Northwest Pipe Co.* | 203,750 | 9,574,213 |
Sterling Construction Co., Inc.* | 649,050 | 12,909,604 |
URS Corp.* | 551,300 | 26,357,653 |
| 97,869,842 |
Electrical Equipment 3.9% |
General Cable Corp.* | 190,700 | 13,501,560 |
Hubbell, Inc. "B" | 396,750 | 18,555,997 |
Regal-Beloit Corp. | 414,650 | 19,281,225 |
Superior Essex, Inc.* | 427,250 | 18,585,375 |
Thomas & Betts Corp.* | 162,250 | 6,890,758 |
| 76,814,915 |
Industrial Conglomerates 1.0% |
Walter Industries, Inc. | 214,400 | 19,990,656 |
Machinery 4.1% |
Barnes Group, Inc. | 189,200 | 6,043,048 |
Blount International, Inc.* | 332,600 | 4,659,726 |
Gardner Denver, Inc.* | 399,200 | 21,181,552 |
Harsco Corp. | 292,350 | 18,511,602 |
Kennametal, Inc. | 144,300 | 5,577,195 |
Mueller Water Products, Inc. "A" | 769,550 | 7,795,542 |
Mueller Water Products, Inc. "B" | 340,846 | 3,374,375 |
Watts Water Technologies, Inc. "A" (a) | 508,500 | 14,421,060 |
| 81,564,100 |
Road & Rail 1.1% |
Genesee & Wyoming, Inc.* (a) | 553,350 | 22,587,747 |
Trading Companies & Distributors 0.8% |
GATX Corp. | 109,000 | 5,374,790 |
WESCO International, Inc.* | 213,100 | 9,442,461 |
| 14,817,251 |
Information Technology 11.1% |
Communications Equipment 2.0% |
Black Box Corp. | 588,000 | 16,875,600 |
CommScope, Inc.* | 412,700 | 22,636,595 |
| 39,512,195 |
Computers & Peripherals 1.3% |
Avid Technology, Inc.* (a) | 370,800 | 7,957,368 |
STEC, Inc.* (a) | 1,469,600 | 18,737,400 |
| 26,694,768 |
Electronic Equipment & Instruments 4.0% |
Anixter International, Inc.* (a) | 448,000 | 29,124,480 |
Mettler-Toledo International, Inc.* | 190,500 | 19,754,850 |
Park Electrochemical Corp. | 580,182 | 17,144,378 |
ScanSource, Inc.* (a) | 409,750 | 12,276,110 |
| 78,299,818 |
IT Services 0.9% |
CACI International, Inc. "A"* | 359,050 | 18,300,778 |
Semiconductors & Semiconductor Equipment 0.8% |
MKS Instruments, Inc.* | 644,800 | 15,191,488 |
Software 2.1% |
Jack Henry & Associates, Inc. | 861,900 | 20,513,220 |
Sybase, Inc.* | 636,150 | 20,369,523 |
| 40,882,743 |
Materials 6.7% |
Chemicals 1.4% |
Hercules, Inc. | 729,200 | 15,043,396 |
OM Group, Inc.* | 261,000 | 11,348,280 |
| 26,391,676 |
Construction Materials 0.7% |
Headwaters, Inc.* (a) | 396,450 | 4,309,411 |
Texas Industries, Inc. (a) | 137,850 | 10,049,265 |
| 14,358,676 |
Metals & Mining 4.6% |
Century Aluminum Co.* | 259,100 | 18,914,300 |
IAMGOLD Corp. | 2,014,250 | 11,904,218 |
Pan American Silver Corp.* | 749,450 | 24,844,267 |
RTI International Metals, Inc.* (a) | 506,200 | 21,807,096 |
Sims Group Ltd. (ADR) | 256,660 | 9,465,621 |
Worthington Industries, Inc. (a) | 233,200 | 4,650,008 |
| 91,585,510 |
Telecommunication Services 1.7% |
Diversified Telecommunication Services |
Alaska Communications Systems Group, Inc. (a) | 1,201,300 | 15,544,822 |
Iowa Telecommunications Services, Inc. (a) | 977,600 | 18,789,472 |
| 34,334,294 |
Utilities 5.7% |
Electric Utilities 2.0% |
ALLETE, Inc. | 406,550 | 18,058,951 |
IDACORP, Inc. (a) | 489,950 | 15,021,867 |
Sierra Pacific Resources | 451,150 | 6,122,105 |
| 39,202,923 |
Gas Utilities 2.3% |
Southern Union Co. | 843,900 | 22,447,740 |
Suburban Propane Partners, LP | 435,350 | 18,023,490 |
Vectren Corp. | 165,300 | 4,876,350 |
| 45,347,580 |
Multi-Utilities 1.4% |
CMS Energy Corp. | 231,250 | 3,605,188 |
Integrys Energy Group, Inc. | 337,250 | 17,317,787 |
TECO Energy, Inc. | 357,250 | 7,277,183 |
| 28,200,158 |
Total Common Stocks (Cost $1,612,982,465) | 1,806,624,444 |
|
Closed End Investment Companies 1.4% |
Apollo Investment Corp. (a) | 944,500 | 17,048,225 |
Tortoise Energy Infrastructure Corp. (a) | 345,857 | 11,274,938 |
Total Closed End Investment Companies (Cost $28,381,715) | 28,323,163 |
|
Securities Lending Collateral 12.1% |
Daily Assets Fund Institutional, 2.76% (b) (c) (Cost $238,124,759) | 238,124,759 | 238,124,759 |
|
Cash Equivalents 7.0% |
Cash Management QP Trust, 2.48% (b) (Cost $138,770,591) | 138,770,591 | 138,770,591 |
| % of Net Assets | Value ($) |
| |
Total Investment Portfolio (Cost $2,018,259,530)+ | 112.0 | 2,211,842,957 |
Other Assets and Liabilities, Net | (12.0) | (236,138,700) |
Net Assets | 100.0 | 1,975,704,257 |
* Non-income producing security.+ The cost for federal income tax purposes was $2,020,266,167. At May 31, 2008, net unrealized appreciation for all securities based on tax cost was $191,576,790. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $356,884,373 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $165,307,583.(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at May 31, 2008 amounted to $230,617,776 which is 11.7% of net assets.(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.(c) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
ADR: American Depositary Receipt
REIT: Real Estate Investment Trust
The following is a summary of the inputs used as of May 31, 2008 in valuing the Fund's assets carried at fair value:
Valuation Inputs | Investments in Securities at Value |
| |
Level 1 — Quoted Prices | $ 2,202,247,736 |
Level 2 — Other Significant Observable Inputs | 9,465,621 |
Level 3 — Significant Unobservable Inputs | 129,600 |
Total | $ 2,211,842,957 |
The following is a reconciliation of the Fund's assets in which significant unobservable inputs (Level 3) were used in determining fair value at May 31, 2008:
| Investments in Securities at Market Value |
| |
Balance as of December 1, 2007 | $ 129,600 |
Total realized gains or losses | — |
Change in unrealized appreciation (depreciation) | — |
Net purchases (sales) | — |
Net transfers in (out) of Level 3 | — |
Balance as of May 31, 2008 | $ 129,600 |
The accompanying notes are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities as of May 31, 2008 (Unaudited) |
Assets |
Investments:
Investments in securities, at value (cost $1,641,364,180) — including $230,617,776 of securities loaned | $ 1,834,947,607 |
Investment in Daily Assets Fund Institutional (cost $238,124,759)* | 238,124,759 |
Investment in Cash Management QP Trust (cost $138,770,591) | 138,770,591 |
Total investments at value (cost $2,018,259,530)
| 2,211,842,957 |
Cash
| 10,000 |
Receivable for investments sold
| 4,545,828 |
Dividends receivable
| 1,636,472 |
Interest receivable
| 476,096 |
Receivable for Fund shares sold
| 3,699,904 |
Foreign taxes recoverable
| 87 |
Other assets
| 96,764 |
Total assets
| 2,222,308,108 |
Liabilities |
Payable for investments purchased
| 480,907 |
Payable upon return of securities loaned
| 238,124,759 |
Payable for Fund shares redeemed
| 4,355,989 |
Accrued management fee
| 1,113,568 |
Other accrued expenses and payables
| 2,528,628 |
Total liabilities
| 246,603,851 |
Net assets, at value | $ 1,975,704,257 |
Net Assets Consist of |
Undistributed net investment income
| 2,147,339 |
Net unrealized appreciation (depreciation) on investments
| 193,583,427 |
Accumulated net realized gain (loss)
| 39,294,172 |
Paid-in capital
| 1,740,679,319 |
Net assets, at value | $ 1,975,704,257 |
* Represents collateral on securities loaned.The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities as of May 31, 2008 (Unaudited) (continued) |
Net Asset Value |
Class A Net Asset Value and redemption price(a) per share ($1,327,777,335 ÷ 38,195,086 shares of capital stock outstanding, $.01 par value, 320,000,000 shares authorized)
| $ 34.76 |
Maximum offering price per share (100 ÷ 94.25 of $34.76)
| $ 36.88 |
Class B Net Asset Value, offering and redemption price(a) (subject to contingent deferred sales charge) per share ($65,079,710 ÷ 2,064,972 shares of capital stock outstanding, $.01 par value, 320,000,000 shares authorized)
| $ 31.52 |
Class C Net Asset Value, offering and redemption price(a) (subject to contingent deferred sales charge) per share ($210,282,358 ÷ 6,564,516 shares of capital stock outstanding, $.01 par value, 80,000,000 shares authorized)
| $ 32.03 |
Class S Net Asset Value, offering and redemption price(a) per share ($231,456,099 ÷ 6,586,410 shares of capital stock outstanding, $.01 par value, 150,000,000 shares authorized)
| $ 35.14 |
Institutional Class Net Asset Value, offering and redemption price(a) per share ($141,108,755 ÷ 3,991,220 shares of capital stock outstanding, $.01 par value, 100,000,000 shares authorized)
| $ 35.35 |
(a) Redemption price per share for shares held less than 15 days is equal to net asset value less a 2% redemption fee.The accompanying notes are an integral part of the financial statements.
Statement of Operations for the six months ended May 31, 2008 (Unaudited) |
Investment Income |
Income:
Dividends (net of foreign taxes withheld of $20,791)
| $ 12,995,180 |
Interest — Cash Management QP Trust
| 2,071,533 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates
| 1,464,410 |
Total Income
| 16,531,123 |
Expenses:
Management fee
| 6,752,696 |
Services to shareholders
| 2,206,710 |
Distribution and service fees
| 2,974,277 |
Custodian fee
| 17,432 |
Professional fees
| 80,157 |
Directors' fees and expenses
| 134,630 |
Reports to shareholders and shareholder meeting
| 1,236,273 |
Registration fees
| 82,068 |
Other
| 61,157 |
Total expenses before expense reductions
| 13,545,400 |
Expense reductions
| (100,975) |
Total expenses after expense reductions
| 13,444,425 |
Net investment income (loss) | 3,086,698 |
Realized and Unrealized Gain (Loss) |
Net realized gain (loss) from:
Investments — Unaffiliated issuers
| 37,116,930 |
Investments — Affiliated issuers
| 3,987,029 |
Foreign currency
| (185) |
| 41,103,774 |
Change in net unrealized appreciation (depreciation) on investments
| (40,479,699) |
Net gain (loss) | 624,075 |
Net increase (decrease) in net assets resulting from operations | $ 3,710,773 |
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets |
Increase (Decrease) in Net Assets | Six Months Ended May 31, 2008 (Unaudited) | Year Ended November 30, 2007 |
Operations:
Net investment income (loss)
| $ 3,086,698 | $ 6,602,032 |
Net realized gain (loss)
| 41,103,774 | 229,762,235 |
Change in net unrealized appreciation (depreciation)
| (40,479,699) | (179,896,628) |
Net increase (decrease) in net assets resulting from operations
| 3,710,773 | 56,467,639 |
Distributions to shareholders from:
Net investment income:
Class A | (12,859,574) | — |
Class B | (106,385) | — |
Class C | (458,760) | — |
Class S | (2,167,104) | (110,064) |
Institutional Class | (1,561,901) | (145,285) |
Net realized gains:
Class A | (142,209,411) | (64,992,461) |
Class B | (9,956,508) | (6,561,222) |
Class C | (26,935,921) | (15,492,464) |
Class S | (21,961,095) | (8,175,029) |
Institutional Class | (13,006,344) | (6,178,505) |
Total distributions
| (231,223,003) | (101,655,030) |
Fund share transactions:
Proceeds from shares sold
| 297,861,632 | 791,477,692 |
Reinvestment of distributions
| 191,534,633 | 81,984,950 |
Cost of shares redeemed
| (369,855,466) | (600,584,469) |
Redemption fees
| 15,660 | 35,505 |
Net increase (decrease) in net assets from Fund share transactions
| 119,556,459 | 272,913,678 |
Increase (decrease) in net assets | (107,955,771) | 227,726,287 |
Net assets at beginning of period
| 2,083,660,028 | 1,855,933,741 |
Net assets at end of period (including undistributed net investment income of $2,147,339 and $16,214,365, respectively)
| $ 1,975,704,257 | $ 2,083,660,028 |
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Class A Years Ended November 30, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 39.01 | $ 40.05 | $ 35.36 | $ 31.98 | $ 25.27 | $ 18.46 |
Income (loss) from investment operations: Net investment income (loss)b | .07 | .16 | .13 | .17 | .09 | .17 |
Net realized and unrealized gain (loss) | .01 | .91 | 8.09 | 3.50 | 6.79 | 6.73 |
Total from investment operations | .08 | 1.07 | 8.22 | 3.67 | 6.88 | 6.90 |
Less distributions from: Net investment income | (.36) | — | (.39) | — | (.17) | (.09) |
Net realized gains | (3.97) | (2.11) | (3.14) | (.29) | — | — |
Total distributions | (4.33) | (2.11) | (3.53) | (.29) | (.17) | (.09) |
Redemption fees
| .00*** | .00*** | .00*** | .00*** | — | — |
Net asset value, end of period | $ 34.76 | $ 39.01 | $ 40.05 | $ 35.36 | $ 31.98 | $ 25.27 |
Total Return (%)c
| .62** | 2.79 | 25.45 | 11.55 | 27.37 | 37.49 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 1,328 | 1,405 | 1,206 | 703 | 579 | 351 |
Ratio of expenses (%)
| 1.30* | 1.20 | 1.19 | 1.27 | 1.29 | 1.43 |
Ratio of net investment income (loss) (%)
| .40* | .42 | .39 | .52 | .35 | .91 |
Portfolio turnover rate (%)
| 16** | 60 | 48 | 67 | 64 | 67 |
a For the six months ended May 31, 2008 (Unaudited).
b Based on average shares outstanding during period.
c Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
*** Amount is less than $.005.
|
Class B Years Ended November 30, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 35.59 | $ 37.03 | $ 32.84 | $ 30.01 | $ 23.76 | $ 17.41 |
Income (loss) from investment operations: Net investment income (loss)b | (.07) | (.10) | (.13) | (.09) | (.12) | .03 |
Net realized and unrealized gain (loss) | .01 | .77 | 7.46 | 3.21 | 6.37 | 6.32 |
Total from investment operations | (.06) | .67 | 7.33 | 3.12 | 6.25 | 6.35 |
Less distributions from: Net investment income | (.04) | ��� | — | — | — | — |
Net realized gains | (3.97) | (2.11) | (3.14) | (.29) | — | — |
Total distributions | (4.01) | (2.11) | (3.14) | (.29) | — | — |
Redemption fees
| .00*** | .00*** | .00*** | .00*** | — | — |
Net asset value, end of period | $ 31.52 | $ 35.59 | $ 37.03 | $ 32.84 | $ 30.01 | $ 23.76 |
Total Return (%)c
| .20** | 1.92 | 24.39 | 10.50 | 26.30 | 36.47 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 65 | 92 | 117 | 109 | 125 | 133 |
Ratio of expenses (%)
| 2.15* | 2.02 | 2.06 | 2.19 | 2.16 | 2.27 |
Ratio of net investment income (loss) (%)
| (.46)* | (.40) | (.48) | (.40) | (.52) | .07 |
Portfolio turnover rate (%)
| 16** | 60 | 48 | 67 | 64 | 67 |
a For the six months ended May 31, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
*** Amount is less than $.005.
|
Class C Years Ended November 30, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 36.11 | $ 37.51 | $ 33.19 | $ 30.28 | $ 23.94 | $ 17.54 |
Income (loss) from investment operations: Net investment income (loss)b | (.05) | (.08) | (.09) | (.05) | (.09) | .04 |
Net realized and unrealized gain (loss) | .01 | .79 | 7.55 | 3.25 | 6.43 | 6.36 |
Total from investment operations | (.04) | .71 | 7.46 | 3.20 | 6.34 | 6.40 |
Less distributions from: Net investment income | (.07) | — | — | — | — | — |
Net realized gains | (3.97) | (2.11) | (3.14) | (.29) | — | — |
Total distributions | (4.04) | (2.11) | (3.14) | (.29) | — | — |
Redemption fees
| .00*** | .00*** | .00*** | .00*** | — | — |
Net asset value, end of period | $ 32.03 | $ 36.11 | $ 37.51 | $ 33.19 | $ 30.28 | $ 23.94 |
Total Return (%)c
| .25** | 2.00 | 24.54 | 10.64 | 26.48 | 36.49 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 210 | 249 | 270 | 152 | 106 | 71 |
Ratio of expenses (%)
| 2.04* | 1.95 | 1.93 | 2.05 | 2.04 | 2.21 |
Ratio of net investment income (loss) (%)
| (.35)* | (.33) | (.35) | (.26) | (.40) | .13 |
Portfolio turnover rate (%)
| 16** | 60 | 48 | 67 | 64 | 67 |
a For the six months ended May 31, 2008 (Unaudited).
b Based on average shares outstanding during the period.
c Total return does not reflect the effect of any sales charges.
* Annualized
** Not annualized
*** Amount is less than $.005.
|
Class S Years Ended November 30, | 2008a | 2007 | 2006 | 2005b |
Selected Per Share Data |
Net asset value, beginning of period | $ 39.39 | $ 40.37 | $ 35.44 | $ 33.09 |
Income (loss) from investment operations: Net investment income (loss)c | .10 | .21 | .23 | .25 |
Net realized and unrealized gain (loss) | .02 | .94 | 8.14 | 2.39 |
Total from investment operations | .12 | 1.15 | 8.37 | 2.64 |
Less distributions from: Net investment income | (.40) | (.02) | (.30) | — |
Net realized gains | (3.97) | (2.11) | (3.14) | (.29) |
Total distributions | (4.37) | (2.13) | (3.44) | (.29) |
Redemption fees
| .00*** | .00*** | .00*** | .00*** |
Net asset value, end of period | $ 35.14 | $ 39.39 | $ 40.37 | $ 35.44 |
Total Return (%)
| .72** | 2.99 | 25.84 | 8.05** |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 231 | 216 | 154 | 4 |
Ratio of expenses (%)
| 1.11* | 1.05 | .89 | .98* |
Ratio of net investment income (loss) (%)
| .59* | .56 | .69 | .97* |
Portfolio turnover rate (%)
| 16** | 60 | 48 | 67 |
a For the six months ended May 31, 2008 (Unaudited).
b For the period from February 28, 2005 (commencement of operations of Class S shares) to November 30, 2005.
c Based on average shares outstanding during the period.
* Annualized
** Not annualized
*** Amount is less than $.005.
|
Institutional Class Years Ended November 30, | 2008a | 2007 | 2006 | 2005 | 2004 | 2003 |
Selected Per Share Data |
Net asset value, beginning of period | $ 39.64 | $ 40.58 | $ 35.61 | $ 32.10 | $ 25.31 | $ 18.48 |
Income (loss) from investment operations: Net investment income (loss)b | .14 | .28 | .25 | .27 | .20 | .26 |
Net realized and unrealized gain (loss) | .02 | .93 | 8.18 | 3.53 | 6.81 | 6.71 |
Total from investment operations | .16 | 1.21 | 8.43 | 3.80 | 7.01 | 6.97 |
Less distributions from: Net investment income | (.48) | (.04) | (.32) | — | (.22) | (.14) |
Net realized gains | (3.97) | (2.11) | (3.14) | (.29) | — | — |
Total distributions | (4.45) | (2.15) | (3.46) | (.29) | (.22) | (.14) |
Redemption fees
| .00*** | .00*** | .00*** | .00*** | — | — |
Net asset value, end of period | $ 35.35 | $ 39.64 | $ 40.58 | $ 35.61 | $ 32.10 | $ 25.31 |
Total Return (%)
| .83** | 3.14 | 25.88 | 11.91 | 27.91 | 38.07 |
Ratios to Average Net Assets and Supplemental Data |
Net assets, end of period ($ millions)
| 141 | 123 | 109 | 34 | 15 | .619 |
Ratio of expenses (%)
| .88* | .86 | .85 | .95 | .88 | .85 |
Ratio of net investment income (loss) (%)
| .82* | .75 | .73 | .84 | .76 | 1.49 |
Portfolio turnover rate (%)
| 16** | 60 | 48 | 67 | 64 | 67 |
a For the six months ended May 31, 2008 (Unaudited).
b Based on average shares outstanding during the period.
* Annualized
** Not annualized
*** Amount is less than $.005.
|
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
DWS Dreman Small Cap Value Fund (the ``Fund'') is a diversified series of DWS Value Series, Inc. (the ``Corporation'') 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 Maryland corporation.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not convert into another class. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and have lower ongoing expenses than other classes. Class S shares are not subject to initial or contingent deferred sales charges and are generally not available to new investors except under certain circumstances. Effective December 29, 2006, the Fund is no longer available to new investors except under certain circumstances.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution and service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Cash Management QP Trust are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Directors.
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective December 1, 2007, which governs the application of generally accepted accounting principles that require fair value measurements of the Fund's assets and liabilities. Fair value is an estimate of the price the Fund would receive upon selling a security in a timely transaction to an independent buyer in the principal or most advantageous market of the security. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels as follows:
• Level 1 — quoted prices in active markets for identical securities
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
For Level 1 inputs, the Fund uses unadjusted quoted prices in active markets for assets or liabilities with sufficient frequency and volume to provide pricing information as the most reliable evidence of fair value. The Fund's Level 2 valuation techniques include inputs other than quoted prices within Level 1 that are observable for an asset or liability, either directly or indirectly. Level 2 observable inputs may include quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active in which there are few transactions, the prices are not current, or price quotations vary substantially over time or among market participants. Inputs that are observable for the asset or liability in Level 2 include such factors as interest rates, yield curves, prepayment speeds, credit risk, and default rates for similar liabilities. For Level 3 valuation techniques, the Fund uses unobservable inputs that reflect assumptions market participants would be expected to use in pricing the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available and are developed based on the best information available under the circumstances. In developing unobservable inputs, market participant assumptions are used if they are reasonably available without undue cost and effort.
The Fund may record changes to valuations based on the amount that might reasonably be expected to receive for a security upon its current sale consistent with the fair value measurement objective. Each determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to the type of the security, the existence of any contractual restrictions on the security's disposition, the price and extent of public trading in similar securities of the issue or of comparable companies, quotations or evaluated prices from broker-dealers and/or pricing services, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company's financial statements, an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold, and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value determined upon sale of those investments.
Securities Lending. The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to the lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
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 November 30, 2007 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Net investment income of the Fund, if any, is 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 timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss and passive foreign investment companies. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Redemption Fees. The Fund imposes a redemption fee of 2% of the total redemption amount on all Fund shares redeemed or exchanged within 15 days of buying them, either by purchase or exchange. This fee is assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee is accounted for as an addition to paid-in-capital.
Expenses. Expenses of the Corporation arising in connection with a specific fund are allocated to that fund. Other Corporation expenses which cannot be directly attributed to a fund are apportioned among the funds in the Corporation.
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 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 and a recharacterization will be made in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains. The Fund distinguishes between dividends on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a tax return of capital.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset valuation calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date 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. Distributions received from Real Estate Investment Trusts in excess of income are recorded as a reduction of cost of investments and/or realized gain.
B. Purchases and Sales of Securities
During the six months ended May 31, 2008, purchases and sales of investment securities (excluding short-term investments) aggregated $289,979,954 and $337,530,620, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund or delegates such responsibilities to the Fund's subadvisor. In addition to portfolio management services, the Advisor provides certain administrative services in accordance with the Investment Management Agreement.
Dreman Value Management, L.L.C. ("DVM" or the "Subadvisor") serves as subadvisor with respect to the investment and reinvestment of assets of the Fund, and is paid by the Advisor for its services.
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 of the Fund's average daily net assets
| .750% |
Next $750 million of such net assets
| .720% |
Next $1.5 billion of such net assets
| .700% |
Next $2.5 billion of such net assets
| .680% |
Next $2.5 billion of such net assets
| .650% |
Next $2.5 billion of such net assets
| .640% |
Next $2.5 billion of such net assets
| .630% |
Over $12.5 billion of such net assets
| .620% |
For the six months ended May 31, 2008, the fee pursuant to the Investment Management Agreement was equivalent to an annualized effective rate of 0.71% of the Fund's average daily net assets.
Service Provider Fees. DWS Investments Service Company ("DISC"), 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 DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended May 31, 2008, the amounts charged to the Fund by DISC were as follows:
Services to Shareholders | Total Aggregated | Unpaid at May 31, 2008 |
Class A
| $ 943,292 | $ 618,463 |
Class B
| 97,594 | 68,454 |
Class C
| 145,493 | 99,589 |
Class S
| 177,857 | 116,776 |
Institutional Class
| 13,708 | 10,265 |
| $ 1,377,944 | $ 913,547 |
Distribution and Service Fees. Under the Fund's Class B and Class C 12b-1 Plans, DWS Investments Distributors, Inc. ("DIDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DIDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the six months ended May 31, 2008, the Distribution Fee was as follows:
Distribution Fee | Total Aggregated | Unpaid at May 31, 2008 |
Class B
| $ 279,856 | $ 43,641 |
Class C
| 802,122 | 129,986 |
| $ 1,081,978 | $ 173,627 |
In addition, DIDI provides information and administrative services for a fee ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DIDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the six months ended May 31, 2008, the Service Fee was as follows:
Service Fee | Total Aggregated | Unpaid at May 31, 2008 | Annualized Effective Rate |
Class A
| $ 1,532,625 | $ 469,253 | .24% |
Class B
| 92,511 | 26,581 | .25% |
Class C
| 267,163 | 66,154 | .25% |
| $ 1,892,299 | $ 561,988 | |
Underwriting Agreement and Contingent Deferred Sales Charge. DIDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the six months ended May 31, 2008, aggregated $10,947.
In addition, DIDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates, ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the six months ended May 31, 2008, the CDSC for Class B and C shares aggregated $87,375 and $6,877 respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the six months ended May 31, 2008, DIDI received $1,117 for Class A shares.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended May 31, 2008, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders and shareholder meeting" aggregated $12,718, of which $7,211 is unpaid.
Directors' Fees and Expenses. The Fund paid each Director not affiliated with the Advisor retainer fees plus specified amounts for various committee services and for the Board Chairperson.
In connection with the board consolidation on April 1, 2008, of the two DWS Funds Boards of Directors, certain Independent Board Members retired prior to their normal retirement date, and received a one-time retirement benefit. DIMA has agreed to reimburse the Funds for the cost of this benefit. During the period ended May 31, 2008, the Fund paid its allocated portion of the retirement benefit of $91,419 to the non-continuing Independent Board Members, and the Fund was reimbursed by DIMA for this payment.
Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.
D. Fee Reductions
For the six months ended May 31, 2008, the Advisor agreed to reimburse the Fund $1,895, which represents a portion of the expected fee savings for the Advisor through December 31, 2007, related to the outsourcing by the Advisor of certain administrative services to an unaffiliated service provider.
In addition, the Fund has entered into an arrangement with its custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's custodian expenses. During the six months ended May 31, 2008, the custodian fee was reduced by $275 and $7,386, respectively, for custodian and transfer agent credits earned.
E. Transactions in Securities of Affiliated Issuers
An affiliated issuer includes any company in which the Fund has ownership of at least 5% of the outstanding voting securities. A summary of the Fund's transactions during the six months ended May 31, 2008 with companies which were affiliates is as follows:
Affiliate
| Value ($) at 11/30/2007 | Purchases Cost ($) | Sales
Cost ($) | Realized
Gain/
(Loss) ($) | Dividend
Income($) | Shares at 5/31/ 2008 | Value ($) at 5/31/ 2008 |
STEC Inc.*
| 25,759,548 | 147,003 | 14,756,876 | 3,987,029 | — | 1,469,600 | 18,737,400 |
Sterling Construction Co., Inc.*
| 14,745,878 | 829,484 | — | — | — | 649,050 | 12,909,604 |
| 40,505,426 | 976,487 | 14,756,876 | 3,987,029 | — | 2,118,650 | 31,647,004 |
* Not an affiliate at May 31, 2008F. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $490 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 the Federal Funds Rate plus 0.35 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
G. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| Six Months Ended May 31, 2008 | Year Ended November 30, 2007 |
| Shares | Dollars | Shares | Dollars |
Shares sold |
Class A
| 5,873,648 | $ 195,326,425 | 14,564,983 | $ 571,165,526 |
Class B
| 40,270 | 1,217,075 | 153,749 | 5,510,008 |
Class C
| 324,068 | 10,102,155 | 1,072,206 | 38,718,980 |
Class S
| 1,446,652 | 48,235,570 | 2,281,823 | 90,572,633 |
Institutional Class
| 1,252,718 | 42,980,407 | 2,162,005 | 85,510,545 |
| | $ 297,861,632 | | $ 791,477,692 |
Shares issued to shareholders in reinvestment of distributions |
Class A
| 3,848,090 | $ 130,678,729 | 1,426,209 | $ 53,865,875 |
Class B
| 292,438 | 9,048,161 | 169,272 | 5,879,114 |
Class C
| 610,009 | 19,161,840 | 302,726 | 10,663,129 |
Class S
| 694,815 | 23,819,363 | 216,346 | 8,244,708 |
Institutional Class
| 256,263 | 8,826,540 | 86,929 | 3,332,124 |
| | $ 191,534,633 | | $ 81,984,950 |
Shares redeemed |
Class A
| (7,543,728) | $ (250,979,919) | (10,082,606) | $ (396,802,847) |
Class B
| (842,063) | (25,302,754) | (898,564) | (32,521,458) |
Class C
| (1,255,774) | (38,525,576) | (1,690,191) | (61,912,893) |
Class S
| (1,031,402) | (34,413,396) | (832,918) | (33,014,936) |
Institutional Class
| (615,077) | (20,633,821) | (1,846,366) | (76,332,335) |
| | $ (369,855,466) | | $ (600,584,469) |
Redemption fees | | $ 15,660 | | $ 35,505 |
Net increase (decrease) |
Class A
| 2,178,010 | $ 75,037,055 | 5,908,586 | $ 228,256,223 |
Class B
| (509,355) | (15,037,267) | (575,543) | (21,131,788) |
Class C
| (321,697) | (9,261,487) | (315,259) | (12,529,999) |
Class S
| 1,110,065 | 37,643,438 | 1,665,251 | 65,805,822 |
Institutional Class
| 893,904 | 31,174,720 | 402,568 | 12,513,420 |
| | $ 119,556,459 | | $ 272,913,678 |
Shareholder Meeting Results
The Special Meeting of Shareholders of DWS Dreman Small Cap Value Fund (the "Fund") was held on March 31, 2008 at the offices of Deutsche Asset Management, 345 Park Avenue, New York, NY 10154. The following matter was voted upon by the shareholders of said Fund (the resulting votes are presented below):
1. Election of the Board of Trustees.
| Number of Votes: |
Trustee | For | Withheld |
John W. Ballantine
| 31,711,033.9047 | 662,689.5473 |
Henry P. Becton, Jr.
| 31,697,901.8271 | 675,821.6249 |
Dawn-Marie Driscoll
| 31,678,716.6917 | 695,006.7603 |
Keith R. Fox
| 31,711,076.3788 | 662,647.0732 |
Paul K. Freeman
| 31,703,639.6167 | 670,083.8353 |
Kenneth C. Froewiss
| 31,716,774.0512 | 656,949.4008 |
Richard J. Herring
| 31,714,463.6505 | 659,259.8015 |
William McClayton
| 31,711,232.7483 | 662,490.7037 |
Rebecca W. Rimel
| 31,675,226.3746 | 698,497.0774 |
William N. Searcy, Jr.
| 31,714,008.1021 | 659,715.3499 |
Jean Gleason Stromberg
| 31,670,632.2129 | 703,091.2391 |
Robert H. Wadsworth
| 31,697,897.2441 | 675,826.2079 |
Axel Schwarzer
| 31,667,324.1575 | 696,399.2945 |
The meeting was reconvened on May 1, 2008, at which time the following matters were not approved by shareholders because each matter failed to receive sufficient shareholder votes:
2-A. Approval of an Amended and Restated Investment Management Agreement.
Number of Votes: |
For | Against | Abstain |
18,317,734.1944 | 1,340,603.9790 | 1,043,034.0966 |
2-B. Approval of a Subadvisor Approval Policy.
Number of Votes: |
For | Against | Abstain |
18,643,649.8234 | 742,282.2842 | 1,315,448.1624 |
3. Approval of a Revised Fundamental Investment Policy regarding Commodities.
Number of Votes: |
For | Against | Abstain |
18,816,826.1290 | 843,421.7446 | 1,041,121.3963 |
4-C. Approval of Articles of Amendment and Restatement.
Number of Votes: |
For | Against | Abstain |
18,596,489.5690 | 934,698.4581 | 1,170,188.2429 |
Summary of Management Fee Evaluation by Independent Fee Consultant
October 26, 2007
Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Scudder Funds. My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2007, including my qualifications, the evaluation process for each of the DWS Scudder Funds, consideration of certain complex-level factors, and my conclusions.
Qualifications
For more than 30 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.
Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past several years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.
I hold a Master of Business Administration degree, with highest honors, from Harvard University; and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds, serve on the board of directors of a private market research company, and have served in various leadership and financial oversight capacities with non-profit organizations.
Evaluation of Fees for each DWS Scudder Fund
My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 136 Fund portfolios in the DWS Scudder Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).
In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper, Strategic Insight, and Morningstar databases and drew on my industry knowledge and experience.
To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.
In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.
Fees and Expenses Compared with Other Funds
The competitive fee and expense evaluation for each fund focused on two primary comparisons:
The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.
The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.
These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.
DeAM's Fees for Similar Services to Others
DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Scudder Fund. These similar products included the other DWS Scudder Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.
Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.
Costs and Profit Margins
DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.
Economies of Scale
Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Scudder Fund compares with this industry observation, I reviewed:
The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.
Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.
How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.
Quality of Service — Performance
The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.
In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.
I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.
Complex-Level Considerations
While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:
I reviewed DeAM's profitability analysis for all DWS Scudder funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.
I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.
I considered how aggregated DWS Scudder Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.
I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.
Findings
Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Scudder Funds are reasonable.
Thomas H. Mack
Account Management Resources
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For More Information | The automated telephone system allows you to access personalized account information and obtain information on other DWS funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system.
For more information, contact your financial advisor. You may also access our automated telephone system or speak with a DWS Investments representative by calling the appropriate number below:
For shareholders of Classes A, B, C and Institutional Class: (800) 621-1048
For shareholders of Class S: (800) 728-3337
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Web Site | www.dws-investments.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more.
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Written Correspondence | DWS Investments PO Box 219151
Kansas City, MO 64121-9151
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Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.
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Principal Underwriter | If you have questions, comments or complaints, contact:
DWS Investments Distributors, Inc. 222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148
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| Class A | Class B | Class C | Class S | Institutional Class |
Nasdaq Symbol | KDSAX
| KDSBX
| KDSCX
| KDSSX
| KDSIX
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CUSIP Number | 23338F-820
| 23338F-812
| 23338F-796
| 23338F-762
| 23338F-754
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Fund Number | 088
| 288
| 388
| 2389
| 545
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Privacy Statement
This privacy statement is issued by DWS Investments Distributors, Inc., Deutsche Investment Management Americas Inc., DeAM Investor Services, Inc., DWS Trust Company and the DWS Funds.
We never sell customer lists or individual client information. We consider privacy fundamental to our client relationships and adhere to the policies and practices described below to protect current and former clients' information. Internal policies are in place to protect confidentiality, while allowing client needs to be served. Only individuals who need to do so in carrying out their job responsibilities may access client information. We maintain physical, electronic and procedural safeguards that comply with federal and state standards to protect confidentiality. These safeguards extend to all forms of interaction with us, including the Internet.
In the normal course of business, clients give us nonpublic personal information on applications and other forms, on our Web sites, and through transactions with us or our affiliates. Examples of the nonpublic personal information collected are name, address, Social Security number and transaction and balance information. To be able to serve our clients, certain of this client information is shared with affiliated and nonaffiliated third-party service providers such as transfer agents, custodians, and broker-dealers to assist us in processing transactions and servicing your account with us. In addition, we may disclose all of the information we collect to companies that perform marketing services on our behalf or to other financial institutions with which we have joint marketing agreements. The organizations described above that receive client information may only use it for the purpose designated by the DWS Investments Companies listed in the first paragraph of this Privacy Statement.
We may also disclose nonpublic personal information about you to other parties as required or permitted by law. For example, we are required or we may provide information to government entities or regulatory bodies in response to requests for information or subpoenas, to private litigants in certain circumstances, to law enforcement authorities, or any time we believe it necessary to protect the firm.
Questions on this policy may be sent to:
DWS Investments
Attention: Correspondence — Chicago
P.O. Box 219415
Kansas City, MO 64121-9415
September 2007
Notes
Notes
Notes
Notes
Notes
Notes
ITEM 2. | CODE OF ETHICS |
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| Not applicable. |
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ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT |
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| Not applicable. |
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ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
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| Not applicable. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
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| Not Applicable |
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ITEM 6. | SCHEDULE OF INVESTMENTS |
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| Not Applicable |
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ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
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| Not applicable. |
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ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
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| Not applicable. |
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
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| Not Applicable. |
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
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| The 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 Chairman of the Board, P.O. Box 100176, Cape Coral, FL 33910. |
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ITEM 11. | CONTROLS AND PROCEDURES |
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| (a) The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. |
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| (b) There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. |
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ITEM 12. | EXHIBITS |
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| (a)(1) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
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| (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
Form N-CSRS Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | DWS Dreman Small Cap Value Fund, a series of DWS Value Series, Inc. |
President
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Registrant: | DWS Dreman Small Cap Value Fund, a series of DWS Value Series, Inc. |
President
Chief Financial Officer and Treasurer
