UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number | 811-06576 |
DWS Advisor Funds III
(Exact Name of Registrant as Specified in Charter)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (212) 454-7190
Paul Schubert
345 Park Avenue
New York, NY 10154
(Name and Address of Agent for Service)
Date of fiscal year end: | 03/31 |
Date of reporting period: | 03/31/06 |
ITEM 1. REPORT TO STOCKHOLDERS
MARCH 31, 2006
Annual Report
to Shareholders
DWS Lifecycle Long Range Fund
(formerly Scudder Lifecycle Long Range Fund)
Contents
Click Here Performance Summary
Click Here Information About Your Fund's Expenses
Click Here Portfolio Management Review
Click Here Portfolio Summary
Click Here Investment Portfolio
Click Here Financial Statements
Click Here Financial Highlights
Click Here Notes to Financial Statements
Click Here Report of Independent Registered Public Accounting Firm
Click Here Tax Information
Click Here Other Information
Click Here Shareholder Meeting Results
Click Here Investment Management Agreement Approval
Click Here Trustees and Officers
Click Here Account Management Resources
This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.
Investments in mutual funds involve risk. Some funds have more risk than others. Although asset allocation among different asset classes generally limits risk and exposure to any one class, the risk remains that the investment advisor may favor an asset class that performs poorly relative to the other asset classes. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the bond fund, can decline and the investor can lose principal value. Additionally, derivatives may be more volatile and less liquid than traditional securities, and the fund could suffer losses on its derivatives positions. Please read this fund's prospectus for specific details regarding its investments and risk profile.
DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Asset Management, Inc., Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
Performance Summary March 31, 2006
All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-scudder.com for the Fund's most recent month-end performance.
To discourage short-term trading, shareholders redeeming shares held less than 15 days will have a lower total return due to the effect of the 2% short-term redemption fee.
Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.
On July 25, 2003, the Investment Class of the Fund was issued in conjunction with the combination of Scudder Lifecycle Long Range Fund (the "Acquired Fund") and the Fund (formerly known as "Scudder Asset Management Fund"). The Acquired Fund and the Fund were each feeder funds investing all of its investable assets in the same master portfolio, the Asset Management Portfolio. Returns of the Investment Class shown prior to July 25, 2003 are derived from the historical performance of the Institutional Class of the DWS Lifecycle Long Range Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of the Investment Class. Any difference in expenses will affect performance.
Average Annual Total Returns as of 3/31/06 | ||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year |
Institutional Class | 9.19% | 12.51% | 5.09% | 8.46% |
Investment Class | 8.77% | 11.98% | 4.63% | 8.00% |
S&P 500 Index+ | 11.73% | 17.22% | 3.97% | 8.95% |
Citigroup Broad Investment Grade Bond Index++ | 2.40% | 3.03% | 5.15% | 6.31% |
Asset Allocation Index — Long Range+++ | 7.63% | 10.65% | 4.52% | 7.85% |
Sources: Lipper Inc. and Deutsche Asset Management, Inc.
Net Asset Value and Distribution Information | ||
| Investment Class | Institutional Class |
Net Asset Value: 3/31/06 | $ 11.30 | $ 11.74 |
3/31/05 | $ 10.62 | $ 11.04 |
Distribution Information: Twelve Months: Income Dividends as of 3/31/06 | $ .24 | $ .31 |
Institutional Class Lipper Rankings — Flexible Portfolio Funds Category as of 3/31/06 | ||||
Period | Rank |
| Number of Funds Tracked | Percentile Ranking (%) |
1-Year | 261 | of | 382 | 69 |
3-Year | 177 | of | 259 | 68 |
5-Year | 100 | of | 210 | 48 |
10-Year | 25 | of | 88 | 29 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Institutional Class shares; other share classes may vary.
Growth of an Assumed $1,000,000 Investment |
[] DWS Lifecycle Long Range Fund — Institutional Class [] S&P 500 Index+ [] Citigroup Broad Investment Grade Bond Index++ [] Asset Allocation Index — Long Range+++ |
Yearly periods ended March 31 |
Comparative Results as of 3/31/06 | |||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Institutional Class | Growth of $1,000,000 | $1,091,900 | $1,424,100 | $1,281,700 | $2,252,500 |
Average annual total return | 9.19% | 12.51% | 5.09% | 8.46% | |
S&P 500 Index+ | Growth of $1,000,000 | $1,117,300 | $1,610,700 | $1,214,800 | $2,357,400 |
Average annual total return | 11.73% | 17.22% | 3.97% | 8.95% | |
Citigroup Broad Investment Grade Bond Index++ | Growth of $1,000,000 | $1,024,000 | $1,093,800 | $1,285,500 | $1,843,300 |
Average annual total return | 2.40% | 3.03% | 5.15% | 6.31% | |
Asset Allocation Index — Long Range+++ | Growth of $1,000,000 | $1,076,300 | $1,354,700 | $1,247,200 | $2,129,800 |
Average annual total return | 7.63% | 10.65% | 4.52% | 7.85% |
The growth of $1,000,000 is cumulative.
The minimum initial investment for the Institutional Class is $1,000,000.
Growth of an Assumed $10,000 Investment |
[] DWS Lifecycle Long Range Fund — Investment Class [] S&P 500 Index+ [] Citigroup Broad Investment Grade Bond Index++ [] Asset Allocation Index — Long Range+++ |
Yearly periods ended March 31 |
Comparative Results as of 3/31/06 | |||||
DWS Lifecycle Long Range Fund | 1-Year | 3-Year | 5-Year | 10-Year | |
Investment Class | Growth of $10,000 | $10,877 | $14,043 | $12,538 | $21,587 |
Average annual total return | 8.77% | 11.98% | 4.63% | 8.00% | |
S&P 500 Index+ | Growth of $10,000 | $11,173 | $16,107 | $12,148 | $23,574 |
Average annual total return | 11.73% | 17.22% | 3.97% | 8.95% | |
Citigroup Broad Investment Grade Bond Index++ | Growth of $10,000 | $10,240 | $10,938 | $12,855 | $18,433 |
Average annual total return | 2.40% | 3.03% | 5.15% | 6.31% | |
Asset Allocation Index — Long Range+++ | Growth of $10,000 | $10,763 | $13,547 | $12,472 | $21,298 |
Average annual total return | 7.63% | 10.65% | 4.52% | 7.85% |
The growth of $10,000 is cumulative.
+ The Standard & Poor's 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
++ The Citigroup Broad Investment Grade Bond Index covers an all inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities.
+++ The Asset Allocation Index — Long Range is calculated using the performance of three unmanaged indices representative of stocks (S&P 500 Index), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-month T-bill Index) weighted by their corresponding proportion of the Fund's neutral position (stocks: 55%; bonds: 35%; cash: 10%). These results are summed to produce the aggregate benchmark. The S&P 500 Index measures the performance of 500 large US companies. The Citigroup Broad Investment Grade Bond Index covers an all inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities. The Merrill Lynch 3-month T-bill Index is representative of the 3-month Treasury market.
Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Information About Your Fund's Expenses
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include 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. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The tables are based on an investment of $1,000 made at the beginning of the six-month period ended March 31, 2006.
The tables illustrate your Fund's expenses in two ways:
Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended March 31, 2006 | ||
Actual Fund Return | Investment Class | Institutional Class |
Beginning Account Value 10/1/05 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 3/31/06 | $ 1,040.50 | $ 1,042.60 |
Expenses Paid per $1,000* | $ 5.09 | $ 2.80 |
Hypothetical 5% Fund Return | Investment Class | Institutional Class |
Beginning Account Value 10/1/05 | $ 1,000.00 | $ 1,000.00 |
Ending Account Value 3/31/06 | $ 1,019.95 | $ 1,022.19 |
Expenses Paid per $1,000* | $ 5.04 | $ 2.77 |
* 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 365.
Annualized Expense Ratios | Investment Class | Institutional Class |
DWS Lifecycle Long Range Fund | 1.00% | .55% |
For more information, please refer to the Fund's prospectus.
DWS Lifecycle Long Range Fund: A Team Approach to Investing
Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for the fund. DeAM, Inc. provides a full range of investment advisory services to institutional and retail clients. DeAM, Inc. is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DeAM, Inc. is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Effective December 2, 2005, Aberdeen Asset Management Inc. ("AAMI"), a US registered investment advisor, is a subadvisor for the fund. With respect to the core bond and active fixed income portions of the fund only, AAMI makes the investment decisions, buys and sells securities, and conducts the research that leads to these purchase and sale decisions. AAMI is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges. AAMI provides a full range of international investment advisory services to institutional and retail clients. AAMI is a direct, wholly owned subsidiary of Aberdeen Asset Management PLC, the parent company of an asset management group formed in 1983. As of March 31, 2006, AAMI had assets under management of $129 billion.
Northern Trust Investments, N.A. ("NTI"), an indirect subsidiary of Northern Trust Corporation, is a subadvisor for the fund. As of March 31, 2006, NTI and its affiliates had assets under custody of $3.1 trillion, and assets under investment management of $653 billion. With respect to only the passive equity portion of the fund, a group of investment professionals at NTI makes the investment decisions, buys and sells securities, and conducts the research that leads to the purchase and sale decisions.
Portfolio Management Team
The following portfolio managers are responsible for the day-to-day management of the fund's investments, except for the passive equity, core bond and active fixed income portions of the fund.
Thomas Picciochi
Director of Deutsche Asset Management and Portfolio Manager of the fund.
Joined Deutsche Asset Management in 1999, formerly serving as portfolio manager for Absolute Return Strategies, after 13 years of experience in various research and analysis positions at State Street Global Advisors, FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial Management.
Senior portfolio manager for Quantitative strategies: New York.
BA and MBA from University of Miami.
Joined the fund in 2005.
Robert Wang
Managing Director of Deutsche Asset Management and Co-Manager of the fund.
Joined Deutsche Asset Management in 1995 after 13 years of experience in fixed income trading at J.P. Morgan.
Senior portfolio manager for global and tactical asset allocation portfolios, with a focus on quantitative asset allocation, portfolio risk control and derivatives trading management.
BS, University of Pennsylvania — The Wharton School.
Joined the fund in 2000.
The following portfolio managers are responsible for the day-to-day management of the core bond and active fixed income portion of the fund.
Gary W. Bartlett, CFA
CIO for Active Fixed Income and senior portfolio manager specializing in taxable municipal, utility and government fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1992 after nine years of experience as an analyst and fixed income portfolio manager at PNC Financial and credit analyst at First Pennsylvania Bank.
BA from Bucknell University; MBA from Drexel University.
Warren S. Davis, III
Senior portfolio manager for mortgage- and asset-backed fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1995 after nine years of experience as a trader, analyst and developer of analytical and risk management systems for PaineWebber and Merrill Lynch.
BS from Pennsylvania State University; MBA from Drexel University.
Thomas J. Flaherty
Senior portfolio manager for corporate and taxable municipal fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1995 after 10 years of fixed income experience, including vice president for US taxable fixed income securities at Prudential Securities.
BA from SUNY Stony Brook.
J. Christopher Gagnier
Head of Core Plus Fixed Income product and senior portfolio manager for corporate and commercial mortgages: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1997 after 17 years of experience in fixed income investments at PaineWebber and Continental Bank.
BS from Wharton School of Business; MBA from University of Chicago.
Daniel R. Taylor, CFA
Senior portfolio manager for asset-backed and commercial mortgage fixed income investments: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1998 after six years of experience as fixed income portfolio manager and senior credit analyst for CoreStates Investment Advisors.
BS from Villanova University.
Timothy C. Vile, CFA
Senior portfolio manager for Core Fixed Income and Global Aggregate Fixed Income: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1991 as member of Core Fixed Income; seconded to the London office from January 1999 to June 2002 to design and develop the firm's European Credit and Global Aggregate capabilities; before joining Deutsche Asset Management, he had six years of experience that included portfolio manager for fixed income portfolios at Equitable Capital Management.
BS from Susquehanna University.
William T. Lissenden
Portfolio manager for Core Fixed Income: Philadelphia.
Joined Aberdeen Asset Management Inc. and the fund in 2005.
Formerly, Director of Deutsche Asset Management; joined Deutsche Asset Management in 2002 after 31 years of experience, including fixed income strategist and director of research at Conseco Capital Management, director of fixed income research and product management at Prudential Securities and national sales manager for fixed income securities at Prudential Securities.
BS from St. Peter's College; MBA from Baruch College.
The following portfolio manager is responsible for the day-to-day management of the passive equity portion of the fund.
Robert H. Bergson, CFA
Senior Vice President of NTI.
Joined NTI in 1997 and during the past five years has managed various equity portfolios.
Managed the fund since April 2004.
BA from Carnegie-Mellon University; MS from Massachusetts Institute of Technology.
In the following interview, Portfolio Managers Thomas Picciochi and Robert Wang address the economy, markets, portfolio management strategy and resulting performance of DWS Lifecycle Long Range Fund for the 12 months ended March 31, 2006.
Q: How would you describe global, economic and political conditions and their effect on the markets over the last year?
A: The US economy continued to expand at a healthy pace over the last 12 months. Although the unusually rapid pace of growth in the first quarter of 2006 is likely transitory, in that it reflects payback for weakness in the fourth quarter and a mild winter, the underlying pace remains slightly above the long-term trend, as it has been for the past three years.
Both consumers and businesses contributed to economic growth. Even with higher interest rates and rising energy prices, consumers have continued to buy goods and services, benefiting in part from increased household wealth. Healthy corporate finances, strong productivity and favorable relative prices for capital goods provide a positive backdrop for business investment. In this economic environment, corporations have reported strong profit growth, based on increased revenue and improving margins.
Labor markets continue to firm, with employment rising faster than trend growth in the labor force, reducing unemployment and supporting consumer income and confidence, but without creating major pressure on wage rates. Business investment in plants and equipment continues to expand briskly. Although consumer spending seems likely to moderate after a surge in the first quarter, the underlying trend remains solid. As mortgage rates creep up, housing activity shows signs of cresting, but without strong evidence of cooling prices.
The US equity market has been fairly strong, although market sentiment has tended to reflect a struggle between positive and negative influences. While economic trends and corporate earnings reports were generally positive, there has been concern that continued tightening by the Federal Reserve would result in a slowdown in economic growth. The Fed has been raising short-term interest rates steadily since June 2004, and long-term rates are finally beginning to respond to the tightening, creating a more normal yield curve.1
Most international markets have performed better than the United States, and emerging markets were particularly strong. In the United States, small-cap stocks were stronger than large-cap issues, and growth-oriented stocks outperformed value stocks in both large-cap and small-cap categories.
The US dollar performed well vs. the euro, as the interest rate differential between the United States and Europe widened. The US dollar weakened vs. the Canadian dollar as prices of energy and basic commodities continue to rise.2
1 The yield curve is a graph with a left-to-right line that shows how high or low yields are, from the shortest to the longest maturities. Typically, the line rises from left to right as investors who are willing to tie up their money for a longer period are rewarded with higher yields.
2 The Canadian and Australian dollars are referred to as commodity currencies because both countries' currencies are generally supported in periods of rising commodity prices given that these countries are large producers and exporters of raw materials.
Q: What is the current outlook for US and world economies and markets?
A: With slack in the economy greatly diminished by three years of above-trend growth, inflation may become more of a problem unless aggregate demand moderates to a pace more in line with the economy's long-term potential. We believe that the necessary moderation is likely to emerge, perhaps by the second half of 2006 or in 2007. The cumulative effect of the Fed's rate increases should begin to have the intended impact on inflation and economic growth, especially now that real long-term interest rates have begun to increase. Appreciation in housing prices is likely to slow, moderating overall economic activity.
While we believe the rate of economic growth will slow from the torrid pace of the first quarter, we do not anticipate significant weakness. Although financial conditions have tightened, they are not restrictive.
Rising long-term rates make it seem more likely that the Fed will end its series of rate increases in the near future, and that should be positive for equity markets. The Fed's decisions will be influenced by reports over the next few months on the pace of economic activity, rates of resource utilization and inflation.
For some time we have expected long-term interest rates to increase as the US economy proved resilient, the Fed continued to raise rates and the global economy firmed. Now that long-term rates have begun to rise, pushing bond prices down, we believe the increase in interest rates from this point will be limited, held in check by tame inflation and the moderation in economic activity we anticipate.
Q: How is DWS Lifecycle Long Range Fund managed?
A: We invest the fund in a mix of US and foreign bonds and short-term investments. The fund has a target percentage of each of the three principal asset classes: equity, fixed-income and short-term instruments. The investment in each asset class fluctuates depending on our perception of the opportunities and risks associated with each class at a given time. We regularly use derivatives to increase or decrease exposure to the various asset classes.3 We also take positions in foreign currencies to enhance returns and to hedge risks.
3 A derivative is a financial arrangement that derives its value from a traditional security (such as a stock or bond), asset or index.
We employ a Global Asset Allocation (GAA) overlay, which offers a means to capture gains when various assets and asset classes advance or decline. It utilizes stock and bond futures and currency forwards to adjust exposure to the different asset classes without having to make dramatic shifts in the stock, bond and cash allocations of the fund, which are normally maintained at the percentages specific to the fund.4
4 Futures and options are used as a low-cost method for gaining exposure to a particular securities market without investing directly in those securities. Forward currency transactions are the purchase or sale of a foreign currency at an exchange rate established now, but with payment and delivery at a specified future time. Forward currency transactions are used as hedges and, where possible, to add to investment returns.
5 The Citigroup Broad Investment Grade Bond Index covers an all-inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities.
6 The Standard & Poor's 500 (S&P 500) Index is an unmanaged capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Index returns assume reinvestment of dividends and, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
Here's another way of thinking about GAA: It represents the view of Deutsche Asset Management investment teams around the world regarding currencies, equities and bonds. These views are combined to provide a "house view" that is risk-adjusted for the specific needs of these portfolios. This view is then executed through futures and currency forwards in the fund.
We also incorporate into our equity asset management a strategy that seeks to keep pace with a given benchmark index by investing in a similar portfolio of stocks. This strategy aims to achieve total returns of one-quarter to one-half of 1% above the index — in this case the S&P 500 Index — on an annual basis.
In managing the bond portion of the portfolio, we use a core fixed-income strategy to select bonds based on a number of characteristics in an effort to outperform the Citigroup Broad Investment Grade Bond Index.5
Q: How did the fund perform during the period?
A: In evaluating performance, we look at the fund's absolute returns and its return relative to several benchmarks. The primary benchmark is the Standard & Poor's 500 Index.6 A secondary benchmark is the Citigroup Broad Investment Grade Bond Index. Since the fund holds securities in three major asset classes — stocks, bonds and short-term securities — we have created an asset allocation benchmark. The asset allocation benchmark is calculated using the performance of three unmanaged indices representative of stocks (S&P 500 Index), bonds (Citigroup Broad Investment Grade Bond Index) and cash (Merrill Lynch 3-Month T-Bill Index), weighted by their corresponding proportion of the fund's neutral position to produce the aggregate benchmark.7
We also compare returns with those of a peer group of funds that allocate assets among several asset classes, the Lipper Flexible Portfolio Funds category.8
7 The Merrill Lynch 3-month T-bill index is an index of US Treasury securities with maturities of three months or less constructed by Merrill Lynch & Co. It is frequently used as a measure of short-term returns on cash investments.
Index returns assume reinvestment of dividends and, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
8 The Lipper Flexible Portfolio Funds category is a group of mutual funds that invest in several different asset classes, changing allocation to asset classes. It is not possible to invest directly into a Lipper category.
The total return of the Standard & Poor's 500 Index for the 12-month period ended March 2006 was 11.73%. The total return of the Citigroup Broad Investment Grade Bond Index was 2.40%. The Merrill Lynch 3-Month T-Bill Index had a return of 3.47%.
For the 12 months ended March 2006, DWS Lifecycle Long Range Fund had a return of 9.19% (Institutional Class), compared with 7.63% for its asset allocation benchmark. (Past performance is no guarantee of future results. Please see pages 4 through 6 for the performance of other share classes and more complete performance information.) The asset allocation benchmark is a blend of 55% S&P 500 Index, 35% Citigroup Broad Investment Grade Bond Index, 10% Merrill Lynch 3-month T-bill index. The fund finished below the average 11.66% return of its Lipper Peer group. When stock prices are rising, this fund tends to underperform its peer group because many of the funds in the peer group are permitted to allocate a higher percentage of assets to equities. However, the bond allocation in this fund can contribute to stability of returns over time.
Q: What were the main factors that affected the fund's performance?
A: An overweight in equities relative to the target throughout the period, balanced by a corresponding underweight in bonds, was positive for the fund's performance, since equity returns were higher than bond returns.9 Also positive was representation in foreign equities, particularly European stocks, throughout the year, since most of these markets had higher returns than the US market.
9 "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.
In the fixed-income portion of the portfolio, we increased exposure to foreign bonds during the last half of the year. Early in the period, we took a large short position in US dollars. As interest rates in the United States increased and the dollar gained strength, we decreased this short position, and that was positive for performance. We took long positions in the Canadian and Australian dollars as a way of taking advantage of rising commodity prices, and this stance also contributed to performance. Because both countries are large producers and exporters of raw materials, their currencies are generally supported in periods of rising commodity prices.
Q: Do you have other comments for shareholders?
A: The positioning of this fund has remained fairly constant over the past year, with an equity position above the benchmark because we believe that stocks offer good value.
While the current environment certainly involves risks, including a slowing in the US economy and political instability in many parts of the world, we believe there is potential for global economic growth and continued market strength. During times of uncertainty with regard to geopolitical risks, economic growth and inflation, this fund, with its investments in multiple asset classes, can be a good investment because of its relatively low volatility and good risk-adjusted returns.
For investors, a disciplined asset allocation fund such as Lifecycle offers the potential to take advantage of a wide range of investment opportunities with a moderate degree of risk.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
Asset Allocation (Excludes Securities Lending Collateral) | 3/31/06 | 3/31/05 |
|
|
|
Common Stocks | 57% | 56% |
Bonds | 36% | 35% |
Cash Equivalents | 7% | 9% |
| 100% | 100% |
Five Largest Equity Holdings at March 31, 2006 (6.5% of Net Assets) | |
1. General Electric Co. Industrial conglomerate | 1.7% |
2. ExxonMobil Corp. Explorer and producer of oil and gas | 1.7% |
3. Citigroup, Inc. Provider of diversified financial services | 1.1% |
4. Microsoft Corp. Developer of computer software | 1.0% |
5. Bank of America Corp. Provider of commercial banking services | 1.0% |
Five Largest Fixed Income Long-Term Securities at March 31, 2006 (5.0% of Net Assets) | |
1. US Treasury Note 4.5%, 11/15/2010 | 2.0% |
2. US Treasury Bond 6.0%, 2/15/2026 | 1.4% |
3. Wells Fargo Mortgage Backed Securities Trust "2A5", Series 2006-AR2, 5.095%, 3/25/2006 | 0.6% |
4. Federal Home Loan Mortgage Corp. "JD", Series 2778, 5.00%, 12/15/2032 | 0.5% |
5. US Treasury Bond 7.25%, 5/15/2016 | 0.5% |
Asset allocation and Portfolio holdings are subject to change.
For more complete details about the Fund's investment portfolio, see page 20. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to www.dws-scudder.com on or after the last day of the following month. In addition, the Fund's top ten holdings and other information about the Fund is posted on www.dws-scudder.com as of the calendar quarter-end on or after the 15th day following quarter-end. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (202) 551-5850.
Investment Portfolio as of March 31, 2006
|
| Value ($) |
|
| |
Common Stocks 54.9% | ||
Consumer Discretionary 5.7% | ||
Auto Components 0.1% | ||
Cooper Tire & Rubber Co. | 2,200 | 31,548 |
Goodyear Tire & Rubber Co.* | 24,300 | 351,864 |
Johnson Controls, Inc. | 6,900 | 523,917 |
907,329 | ||
Automobiles 0.2% | ||
Ford Motor Co. | 97,700 | 777,692 |
General Motors Corp. | 20,200 | 429,856 |
1,207,548 | ||
Diversified Consumer Services 0.0% | ||
Apollo Group, Inc. "A"* | 5,000 | 262,550 |
Hotels Restaurants & Leisure 0.9% | ||
Carnival Corp. | 15,500 | 734,235 |
Darden Restaurants, Inc. | 4,700 | 192,841 |
Harrah's Entertainment, Inc. | 6,600 | 514,536 |
Hilton Hotels Corp. | 11,800 | 300,428 |
International Game Technology | 12,100 | 426,162 |
Marriott International, Inc. "A" | 5,800 | 397,880 |
McDonald's Corp. | 44,900 | 1,542,764 |
Starbucks Corp.* | 36,400 | 1,370,096 |
Starwood Hotels & Resorts Worldwide, Inc. | 7,700 | 521,521 |
Wendy's International, Inc. | 4,000 | 248,240 |
YUM! Brands, Inc. | 9,800 | 478,828 |
6,727,531 | ||
Household Durables 0.4% | ||
Black & Decker Corp. | 2,800 | 243,292 |
Centex Corp. | 4,400 | 272,756 |
Fortune Brands, Inc. | 5,200 | 419,276 |
Harman International Industries, Inc. | 2,400 | 266,712 |
KB Home | 2,700 | 175,446 |
Leggett & Platt, Inc. | 6,600 | 160,842 |
Lennar Corp. "A" | 5,000 | 301,900 |
Maytag Corp. | 2,800 | 59,724 |
Newell Rubbermaid, Inc. | 9,800 | 246,862 |
Pulte Homes, Inc. | 7,600 | 291,992 |
Snap-on, Inc. | 2,100 | 80,052 |
The Stanley Works | 2,600 | 131,716 |
Whirlpool Corp. | 2,400 | 219,528 |
2,870,098 | ||
Internet & Catalog Retail 0.1% | ||
Amazon.com, Inc.* | 20,500 | 748,455 |
Leisure Equipment & Products 0.1% | ||
Brunswick Corp. | 3,400 | 132,124 |
Eastman Kodak Co. | 10,300 | 292,932 |
Hasbro, Inc. | 6,300 | 132,930 |
Mattel, Inc. | 32,500 | 589,225 |
1,147,211 | ||
Media 1.8% | ||
CBS Corp. "B" | 27,650 | 663,047 |
Clear Channel Communications, Inc. | 18,500 | 536,685 |
Comcast Corp. "A"* | 76,400 | 1,998,624 |
Dow Jones & Co., Inc. | 2,100 | 82,530 |
E.W. Scripps Co. "A" | 3,100 | 138,601 |
Gannett Co., Inc. | 8,500 | 509,320 |
Interpublic Group of Companies, Inc.* | 15,300 | 146,268 |
Knight Ridder, Inc. | 2,400 | 151,704 |
McGraw-Hill Companies, Inc. | 13,100 | 754,822 |
Meredith Corp. | 1,500 | 83,685 |
New York Times Co. "A" | 5,200 | 131,612 |
News Corp. "A" | 85,700 | 1,423,477 |
Omnicom Group, Inc. | 6,300 | 524,475 |
Time Warner, Inc. | 160,900 | 2,701,511 |
Tribune Co. | 9,300 | 255,192 |
Univision Communications, Inc. "A"* | 8,000 | 275,760 |
Viacom, Inc. "B"* | 27,550 | 1,068,940 |
Walt Disney Co. | 68,800 | 1,918,832 |
13,365,085 | ||
Multiline Retail 0.6% | ||
Big Lots, Inc.* | 4,000 | 55,840 |
Dillard's, Inc. "A" | 2,200 | 57,288 |
Dollar General Corp. | 11,300 | 199,671 |
Family Dollar Stores, Inc. | 5,500 | 146,300 |
Federated Department Stores, Inc. | 9,700 | 708,100 |
Kohl's Corp.* | 17,200 | 911,772 |
Nordstrom, Inc. | 7,800 | 305,604 |
Sears Holdings Corp.* | 4,817 | 637,000 |
Target Corp. | 31,400 | 1,633,114 |
4,654,689 | ||
Specialty Retail 1.3% | ||
AutoNation, Inc.* | 6,500 | 140,075 |
AutoZone, Inc.* | 4,500 | 448,605 |
Bed Bath & Beyond, Inc.* | 10,000 | 384,000 |
Best Buy Co., Inc. | 14,500 | 810,985 |
Circuit City Stores, Inc. | 5,500 | 134,640 |
Home Depot, Inc. | 75,800 | 3,206,340 |
Lowe's Companies, Inc. | 27,900 | 1,797,876 |
Office Depot, Inc.* | 10,500 | 391,020 |
OfficeMax, Inc. | 2,500 | 75,425 |
RadioShack Corp. | 17,600 | 338,624 |
Staples, Inc. | 26,000 | 663,520 |
The Gap, Inc. | 20,500 | 382,940 |
The Sherwin-Williams Co. | 4,000 | 197,760 |
Tiffany & Co. | 5,100 | 191,454 |
TJX Companies, Inc. | 16,500 | 409,530 |
9,572,794 | ||
Textiles, Apparel & Luxury Goods 0.2% | ||
Coach, Inc.* | 20,900 | 722,722 |
Jones Apparel Group, Inc. | 4,000 | 141,480 |
Liz Claiborne, Inc. | 3,800 | 155,762 |
NIKE, Inc. "B" | 6,800 | 578,680 |
VF Corp. | 3,100 | 176,421 |
1,775,065 | ||
Consumer Staples 5.0% | ||
Beverages 1.1% | ||
Anheuser-Busch Companies, Inc. | 27,800 | 1,189,006 |
Brown-Forman Corp. "B" | 2,900 | 223,213 |
Coca-Cola Co. | 73,600 | 3,081,632 |
Coca-Cola Enterprises, Inc. | 10,900 | 221,706 |
Constellation Brands, Inc. "A"* | 7,000 | 175,350 |
Molson Coors Brewing Co. "B" | 2,000 | 137,240 |
Pepsi Bottling Group, Inc. | 4,900 | 148,911 |
PepsiCo, Inc. | 59,100 | 3,415,389 |
8,592,447 | ||
Food & Staples Retailing 1.2% | ||
Albertsons, Inc. | 13,300 | 341,411 |
Costco Wholesale Corp. | 16,900 | 915,304 |
CVS Corp. | 29,200 | 872,204 |
Kroger Co.* | 25,900 | 527,324 |
Safeway, Inc. | 16,000 | 401,920 |
Sysco Corp. | 2,700 | 86,535 |
Wal-Mart Stores, Inc. | 89,200 | 4,213,808 |
Walgreen Co. | 36,100 | 1,556,993 |
Whole Foods Market, Inc. | 5,000 | 332,200 |
9,247,699 | ||
Food Products 0.5% | ||
Archer-Daniels-Midland Co. | 23,400 | 787,410 |
Campbell Soup Co. | 6,600 | 213,840 |
ConAgra Foods, Inc. | 18,600 | 399,156 |
General Mills, Inc. | 12,700 | 643,636 |
H.J. Heinz Co. | 11,900 | 451,367 |
Sara Lee Corp. | 27,100 | 484,548 |
The Hershey Co. | 6,400 | 334,336 |
Tyson Foods, Inc. "A" | 9,100 | 125,034 |
William Wrigley Jr. Co. | 6,300 | 403,200 |
3,842,527 | ||
Household Products 1.2% | ||
Clorox Co. | 5,400 | 323,190 |
Colgate-Palmolive Co. | 18,400 | 1,050,640 |
Kimberly-Clark Corp. | 16,500 | 953,700 |
Procter & Gamble Co. | 117,437 | 6,766,720 |
9,094,250 | ||
Personal Products 0.2% | ||
Alberto-Culver Co. | 2,700 | 119,421 |
Avon Products, Inc. | 16,100 | 501,837 |
Estee Lauder Companies, Inc. "A" | 11,000 | 409,200 |
1,030,458 | ||
Tobacco 0.8% | ||
Altria Group, Inc. | 74,500 | 5,279,070 |
Reynolds American, Inc. | 3,100 | 327,050 |
UST, Inc. | 5,900 | 245,440 |
5,851,560 | ||
Energy 5.4% | ||
Energy Equipment & Services 1.2% | ||
Baker Hughes, Inc. | 12,200 | 834,480 |
BJ Services Co. | 11,600 | 401,360 |
Halliburton Co. | 9,700 | 708,294 |
Nabors Industries Ltd.* | 9,300 | 665,694 |
National-Oilwell Varco, Inc.* | 10,300 | 660,436 |
Noble Corp. | 4,900 | 397,390 |
Rowan Companies, Inc. | 9,800 | 430,808 |
Schlumberger Ltd. | 21,100 | 2,670,627 |
Transocean, Inc.* | 14,800 | 1,188,440 |
Weatherford International Ltd.* | 18,300 | 837,225 |
8,794,754 | ||
Oil, Gas & Consumable Fuels 4.2% | ||
Anadarko Petroleum Corp. | 8,200 | 828,282 |
Apache Corp. | 11,800 | 773,018 |
Burlington Resources, Inc. | 13,600 | 1,249,976 |
Chesapeake Energy Corp. | 13,300 | 417,753 |
Chevron Corp. | 79,440 | 4,605,137 |
ConocoPhillips | 49,200 | 3,106,980 |
Devon Energy Corp. | 15,800 | 966,486 |
El Paso Corp. | 23,500 | 283,175 |
EOG Resources, Inc. | 12,100 | 871,200 |
ExxonMobil Corp. | 207,800 | 12,646,708 |
Kerr-McGee Corp. | 4,113 | 392,709 |
Kinder Morgan, Inc. | 3,800 | 349,562 |
Marathon Oil Corp. | 16,300 | 1,241,571 |
Murphy Oil Corp. | 5,900 | 293,938 |
Occidental Petroleum Corp. | 15,300 | 1,417,545 |
Sunoco, Inc. | 4,700 | 364,579 |
Valero Energy Corp. | 22,200 | 1,327,116 |
Williams Companies, Inc. | 21,200 | 453,468 |
XTO Energy, Inc. | 13,000 | 566,410 |
32,155,613 | ||
Financials 11.3% | ||
Banks 3.4% | ||
AmSouth Bancorp. | 12,300 | 332,715 |
Bank of America Corp. | 165,852 | 7,552,900 |
BB&T Corp. | 19,100 | 748,720 |
Comerica, Inc. | 5,800 | 336,226 |
Compass Bancshares, Inc. | 4,500 | 227,745 |
Fifth Third Bancorp. | 19,900 | 783,264 |
First Horizon National Corp. | 4,500 | 187,425 |
Golden West Financial Corp. | 9,100 | 617,890 |
Huntington Bancshares, Inc. | 8,900 | 214,757 |
KeyCorp. | 14,400 | 529,920 |
M&T Bank Corp. | 2,900 | 331,006 |
Marshall & Ilsley Corp. | 7,500 | 326,850 |
National City Corp. | 19,500 | 680,550 |
North Fork Bancorp., Inc. | 16,900 | 487,396 |
PNC Financial Services Group, Inc. | 10,400 | 700,024 |
Regions Financial Corp. | 16,300 | 573,271 |
Sovereign Bancorp, Inc. | 12,800 | 280,448 |
SunTrust Banks, Inc. | 13,300 | 967,708 |
Synovus Financial Corp. | 11,200 | 303,408 |
US Bancorp. | 64,400 | 1,964,200 |
Wachovia Corp. | 58,000 | 3,250,900 |
Wells Fargo & Co. | 59,800 | 3,819,426 |
Zions Bancorp. | 3,700 | 306,101 |
25,522,850 | ||
Capital Markets 1.9% | ||
Ameriprise Financial, Inc. | 8,960 | 403,738 |
Bank of New York Co., Inc. | 27,500 | 991,100 |
Bear Stearns Companies, Inc. | 4,300 | 596,410 |
Charles Schwab Corp. | 36,800 | 633,328 |
E*TRADE Financial Corp.* | 24,700 | 666,406 |
Federated Investors, Inc. "B" | 3,100 | 121,055 |
Franklin Resources, Inc. | 5,400 | 508,896 |
Janus Capital Group, Inc. | 7,700 | 178,409 |
Lehman Brothers Holdings, Inc. | 9,600 | 1,387,488 |
Mellon Financial Corp. | 14,800 | 526,880 |
Merrill Lynch & Co., Inc. | 32,800 | 2,583,328 |
Morgan Stanley | 38,400 | 2,412,288 |
State Street Corp. | 11,900 | 719,117 |
T. Rowe Price Group, Inc. | 4,700 | 367,587 |
The Goldman Sachs Group, Inc. | 15,600 | 2,448,576 |
14,544,606 | ||
Consumer Finance 0.4% | ||
American Express Co. | 44,100 | 2,317,455 |
Capital One Financial Corp. | 600 | 48,312 |
SLM Corp. | 14,900 | 773,906 |
3,139,673 | ||
Diversified Financial Services 2.7% | ||
CIT Group, Inc. | 7,100 | 379,992 |
Citigroup, Inc. | 178,200 | 8,416,386 |
Countrywide Financial Corp. | 21,600 | 792,720 |
Fannie Mae | 34,500 | 1,773,300 |
Freddie Mac | 24,700 | 1,506,700 |
JPMorgan Chase & Co. | 124,400 | 5,180,016 |
MGIC Investment Corp. | 3,100 | 206,553 |
Moody's Corp. | 8,600 | 614,556 |
Washington Mutual, Inc. | 35,354 | 1,506,788 |
20,377,011 | ||
Insurance 2.5% | ||
ACE Ltd. | 11,500 | 598,115 |
AFLAC, Inc. | 17,800 | 803,314 |
Allstate Corp. | 23,000 | 1,198,530 |
Ambac Financial Group, Inc. | 3,800 | 302,480 |
American International Group, Inc. | 92,700 | 6,126,543 |
Aon Corp. | 11,500 | 477,365 |
Chubb Corp. | 7,100 | 677,624 |
Cincinnati Financial Corp. | 6,205 | 261,044 |
Genworth Financial, Inc. "A" | 13,500 | 451,305 |
Hartford Financial Services Group, Inc. | 300 | 24,165 |
Jefferson-Pilot Corp. | 4,800 | 268,512 |
Lincoln National Corp. | 6,200 | 338,458 |
Loews Corp. | 4,800 | 485,760 |
Marsh & McLennan Companies, Inc. | 19,500 | 572,520 |
MBIA, Inc. | 4,700 | 282,611 |
MetLife, Inc. | 27,100 | 1,310,827 |
Principal Financial Group, Inc. | 10,000 | 488,000 |
Progressive Corp. | 7,000 | 729,820 |
Prudential Financial, Inc. | 17,600 | 1,334,256 |
Safeco Corp. | 4,400 | 220,924 |
The St. Paul Travelers Companies, Inc. | 24,800 | 1,036,392 |
Torchmark Corp. | 3,700 | 211,270 |
UnumProvident Corp. | 10,700 | 219,136 |
XL Capital Ltd. "A" | 6,200 | 397,482 |
18,816,453 | ||
Real Estate 0.4% | ||
Apartment Investment & Management Co. "A" (REIT) | 3,400 | 159,460 |
Archstone-Smith Trust (REIT) | 7,600 | 370,652 |
Equity Office Properties Trust (REIT) | 14,500 | 486,910 |
Equity Residential (REIT) | 10,400 | 486,616 |
Plum Creek Timber Co., Inc. (REIT) | 6,600 | 243,738 |
ProLogis (REIT) | 8,700 | 465,450 |
Public Storage, Inc. (REIT) | 2,900 | 235,567 |
Simon Property Group, Inc. (REIT) | 6,600 | 555,324 |
Vornado Realty Trust (REIT) | 4,300 | 412,800 |
3,416,517 | ||
Health Care 7.2% | ||
Biotechnology 0.8% | ||
Amgen, Inc.* | 41,700 | 3,033,675 |
Applera Corp. - Applied Biosystems Group | 6,600 | 179,124 |
Biogen Idec, Inc.* | 12,300 | 579,330 |
Chiron Corp.* | 3,900 | 178,659 |
Genzyme Corp.* | 9,300 | 625,146 |
Gilead Sciences, Inc.* | 16,500 | 1,026,630 |
MedImmune, Inc.* | 18,400 | 673,072 |
6,295,636 | ||
Health Care Equipment & Supplies 1.1% | ||
Bausch & Lomb, Inc. | 1,900 | 121,030 |
Baxter International, Inc. | 23,200 | 900,392 |
Becton, Dickinson & Co. | 8,900 | 548,062 |
Boston Scientific Corp.* | 31,900 | 735,295 |
C.R. Bard, Inc. | 3,700 | 250,897 |
Fisher Scientific International, Inc.* | 8,064 | 548,755 |
Guidant Corp. | 12,100 | 944,526 |
Hospira, Inc.* | 5,700 | 224,922 |
Medtronic, Inc. | 31,000 | 1,573,250 |
Millipore Corp.* | 1,900 | 138,814 |
PerkinElmer, Inc. | 4,700 | 110,309 |
St. Jude Medical, Inc.* | 21,000 | 861,000 |
Stryker Corp. | 10,400 | 461,136 |
Thermo Electron Corp.* | 5,800 | 215,122 |
Waters Corp.* | 3,800 | 163,970 |
Zimmer Holdings, Inc.* | 8,900 | 601,640 |
8,399,120 | ||
Health Care Providers & Services 1.7% | ||
Aetna, Inc. | 20,200 | 992,628 |
AmerisourceBergen Corp. | 7,500 | 362,025 |
Cardinal Health, Inc. | 15,100 | 1,125,252 |
Caremark Rx, Inc.* | 16,000 | 786,880 |
CIGNA Corp. | 4,300 | 561,666 |
Coventry Health Care, Inc.* | 10,300 | 555,994 |
Express Scripts, Inc.* | 5,200 | 457,080 |
HCA, Inc. | 14,600 | 668,534 |
Health Management Associates, Inc. "A" | 8,600 | 185,502 |
Humana, Inc.* | 5,900 | 310,635 |
IMS Health, Inc. | 16,900 | 435,682 |
Laboratory Corp. of America Holdings* | 4,500 | 263,160 |
Manor Care, Inc. | 2,900 | 128,615 |
Medco Health Solutions, Inc.* | 10,900 | 623,698 |
Patterson Companies, Inc.* | 5,000 | 176,000 |
Quest Diagnostics, Inc. | 5,800 | 297,540 |
Tenet Healthcare Corp.* | 16,800 | 123,984 |
UnitedHealth Group, Inc. | 48,400 | 2,703,624 |
WellPoint, Inc.* | 23,600 | 1,827,348 |
12,585,847 | ||
Pharmaceuticals 3.6% | ||
Abbott Laboratories | 55,000 | 2,335,850 |
Allergan, Inc. | 5,400 | 585,900 |
Barr Pharmaceuticals, Inc.* | 3,800 | 239,324 |
Bristol-Myers Squibb Co. | 70,000 | 1,722,700 |
Eli Lilly & Co. | 40,300 | 2,228,590 |
Forest Laboratories, Inc.* | 11,600 | 517,708 |
Johnson & Johnson | 106,200 | 6,289,164 |
King Pharmaceuticals, Inc.* | 8,700 | 150,075 |
Merck & Co., Inc. | 78,000 | 2,747,940 |
Mylan Laboratories, Inc. | 18,300 | 428,220 |
Pfizer, Inc. | 262,700 | 6,546,484 |
Schering-Plough Corp. | 52,900 | 1,004,571 |
Watson Pharmaceuticals, Inc.* | 12,400 | 356,376 |
Wyeth | 48,000 | 2,328,960 |
27,481,862 | ||
Industrials 6.0% | ||
Aerospace & Defense 1.2% | ||
Boeing Co. | 28,600 | 2,228,798 |
General Dynamics Corp. | 14,300 | 914,914 |
Goodrich Corp. | 4,400 | 191,884 |
Honeywell International, Inc. | 29,600 | 1,265,992 |
L-3 Communications Holdings, Inc. | 4,300 | 368,897 |
Lockheed Martin Corp. | 4,500 | 338,085 |
Northrop Grumman Corp. | 12,500 | 853,625 |
Raytheon Co. | 15,900 | 728,856 |
United Technologies Corp. | 36,300 | 2,104,311 |
8,995,362 | ||
Air Freight & Logistics 0.6% | ||
FedEx Corp. | 10,800 | 1,219,752 |
Ryder System, Inc. | 7,700 | 344,806 |
United Parcel Service, Inc. "B" | 39,000 | 3,095,820 |
4,660,378 | ||
Airlines 0.1% | ||
Southwest Airlines Co. | 25,200 | 453,348 |
Building Products 0.1% | ||
American Standard Companies, Inc. | 6,300 | 270,018 |
Commercial Services & Supplies 0.4% | ||
Allied Waste Industries, Inc.* | 7,900 | 96,696 |
Avery Dennison Corp. | 3,900 | 228,072 |
Cendant Corp. | 36,100 | 626,335 |
Cintas Corp. | 5,000 | 213,100 |
Equifax, Inc. | 4,600 | 171,304 |
Monster Worldwide, Inc.* | 4,500 | 224,370 |
Pitney Bowes, Inc. | 8,100 | 347,733 |
R.R. Donnelley & Sons Co. | 7,700 | 251,944 |
Robert Half International, Inc. | 6,100 | 235,582 |
Waste Management, Inc. | 19,700 | 695,410 |
3,090,546 | ||
Electrical Equipment 0.2% | ||
American Power Conversion Corp. | 6,100 | 140,971 |
Cooper Industries Ltd. "A" | 3,300 | 286,770 |
Emerson Electric Co. | 14,600 | 1,220,998 |
1,648,739 | ||
Industrial Conglomerates 2.2% | ||
3M Co. | 26,900 | 2,036,061 |
General Electric Co. | 372,200 | 12,945,116 |
Tyco International Ltd. | 72,000 | 1,935,360 |
16,916,537 | ||
Machinery 0.8% | ||
Caterpillar, Inc. | 23,900 | 1,716,259 |
Cummins, Inc. | 1,700 | 178,670 |
Danaher Corp. | 8,400 | 533,820 |
Deere & Co. | 500 | 39,525 |
Dover Corp. | 7,300 | 354,488 |
Eaton Corp. | 5,300 | 386,741 |
Illinois Tool Works, Inc. | 7,300 | 703,063 |
Ingersoll-Rand Co., Ltd. "A" | 11,700 | 488,943 |
ITT Industries, Inc. | 8,500 | 477,870 |
Navistar International Corp.* | 11,000 | 303,380 |
PACCAR, Inc. | 6,100 | 429,928 |
Pall Corp. | 4,500 | 140,355 |
Parker Hannifin Corp. | 4,300 | 346,623 |
6,099,665 | ||
Road & Rail 0.4% | ||
Burlington Northern Santa Fe Corp. | 13,300 | 1,108,289 |
CSX Corp. | 7,800 | 466,440 |
Norfolk Southern Corp. | 14,700 | 794,829 |
Union Pacific Corp. | 9,500 | 886,825 |
3,256,383 | ||
Trading Companies & Distributors 0.0% | ||
W.W. Grainger, Inc. | 2,700 | 203,445 |
Information Technology 9.1% | ||
Communications Equipment 1.8% | ||
ADC Telecommunications, Inc.* | 4,214 | 107,836 |
Andrew Corp.* | 5,700 | 69,996 |
Avaya, Inc.* | 35,900 | 405,670 |
Ciena Corp.* | 68,800 | 358,448 |
Cisco Systems, Inc.* | 219,600 | 4,758,732 |
Comverse Technologies, Inc.* | 7,200 | 169,416 |
Corning, Inc.* | 67,300 | 1,811,043 |
JDS Uniphase Corp.* | 59,900 | 249,783 |
Lucent Technologies, Inc.* | 159,600 | 486,780 |
Motorola, Inc. | 89,300 | 2,045,863 |
QUALCOMM, Inc. | 59,100 | 2,991,051 |
Tellabs, Inc.* | 16,000 | 254,400 |
13,709,018 | ||
Computers & Peripherals 2.1% | ||
Apple Computer, Inc.* | 30,400 | 1,906,688 |
Dell, Inc.* | 84,000 | 2,499,840 |
EMC Corp.* | 84,900 | 1,157,187 |
Gateway, Inc.* | 9,500 | 20,805 |
Hewlett-Packard Co. | 101,000 | 3,322,900 |
International Business Machines Corp. | 55,900 | 4,610,073 |
Lexmark International, Inc. "A"* | 9,300 | 422,034 |
NCR Corp.* | 12,800 | 534,912 |
Network Appliance, Inc.* | 13,300 | 479,199 |
QLogic Corp.* | 18,900 | 365,715 |
Sun Microsystems, Inc.* | 123,600 | 634,068 |
15,953,421 | ||
Electronic Equipment & Instruments 0.2% | ||
Agilent Technologies, Inc.* | 15,300 | 574,515 |
Jabil Circuit, Inc.* | 12,100 | 518,606 |
Molex, Inc. | 5,200 | 172,640 |
Sanmina-SCI Corp.* | 19,000 | 77,900 |
Solectron Corp.* | 32,700 | 130,800 |
Symbol Technologies, Inc. | 9,100 | 96,369 |
Tektronix, Inc. | 2,900 | 103,559 |
1,674,389 | ||
Internet Software & Services 0.5% | ||
eBay, Inc.* | 41,200 | 1,609,272 |
VeriSign, Inc.* | 23,000 | 551,770 |
Yahoo!, Inc.* | 45,100 | 1,454,926 |
3,615,968 | ||
IT Consulting & Services 0.6% | ||
Affiliated Computer Services, Inc. "A"* | 8,400 | 501,144 |
Automatic Data Processing, Inc. | 20,700 | 945,576 |
Computer Sciences Corp.* | 6,600 | 366,630 |
Convergys Corp.* | 23,800 | 433,398 |
Electronic Data Systems Corp. | 18,300 | 490,989 |
First Data Corp. | 27,400 | 1,282,868 |
Fiserv, Inc.* | 6,600 | 280,830 |
Paychex, Inc. | 11,900 | 495,754 |
Sabre Holdings Corp. | 4,700 | 110,591 |
Unisys Corp.* | 12,300 | 84,747 |
4,992,527 | ||
Office Electronics 0.1% | ||
Xerox Corp.* | 33,300 | 506,160 |
Semiconductors & Semiconductor Equipment 1.9% | ||
Advanced Micro Devices, Inc.* | 26,600 | 882,056 |
Altera Corp.* | 28,800 | 594,432 |
Analog Devices, Inc. | 13,000 | 497,770 |
Applied Materials, Inc. | 56,700 | 992,817 |
Applied Micro Circuits Corp.* | 10,500 | 42,735 |
Broadcom Corp. "A"* | 21,550 | 930,098 |
Freescale Semiconductor, Inc. "B"* | 14,612 | 405,775 |
Intel Corp. | 210,000 | 4,063,500 |
KLA-Tencor Corp. | 7,100 | 343,427 |
Linear Technology Corp. | 11,000 | 385,880 |
LSI Logic Corp.* | 36,700 | 424,252 |
Maxim Integrated Products, Inc. | 11,400 | 423,510 |
Micron Technology, Inc.* | 39,100 | 575,552 |
National Semiconductor Corp. | 12,100 | 336,864 |
Novellus Systems, Inc.* | 14,900 | 357,600 |
NVIDIA Corp.* | 6,100 | 349,286 |
PMC-Sierra, Inc.* | 26,900 | 330,601 |
Teradyne, Inc.* | 7,100 | 110,121 |
Texas Instruments, Inc. | 57,100 | 1,854,037 |
Xilinx, Inc. | 12,300 | 313,158 |
14,213,471 | ||
Software 1.9% | ||
Adobe Systems, Inc.* | 21,400 | 747,288 |
Autodesk, Inc.* | 8,200 | 315,864 |
BMC Software, Inc.* | 7,700 | 166,782 |
CA, Inc. | 16,300 | 443,523 |
Citrix Systems, Inc.* | 6,400 | 242,560 |
Compuware Corp.* | 13,700 | 107,271 |
Electronic Arts, Inc.* | 15,600 | 853,632 |
Intuit, Inc.* | 6,300 | 335,097 |
Microsoft Corp. | 294,000 | 7,999,740 |
Novell, Inc.* | 13,900 | 106,752 |
Oracle Corp.* | 134,500 | 1,841,305 |
Parametric Technology Corp.* | 4,020 | 65,647 |
Symantec Corp.* | 52,960 | 891,317 |
14,116,778 | ||
Materials 1.5% | ||
Chemicals 0.9% | ||
Air Products & Chemicals, Inc. | 8,000 | 537,520 |
Dow Chemical Co. | 34,600 | 1,404,760 |
E.I. du Pont de Nemours & Co. | 32,900 | 1,388,709 |
Eastman Chemical Co. | 7,900 | 404,322 |
Ecolab, Inc. | 6,600 | 252,120 |
Engelhard Corp. | 4,400 | 174,284 |
Hercules, Inc.* | 4,000 | 55,200 |
International Flavors & Fragrances, Inc. | 2,900 | 99,528 |
Monsanto Co. | 9,600 | 813,600 |
PPG Industries, Inc. | 5,900 | 373,824 |
Praxair, Inc. | 11,600 | 639,740 |
Rohm & Haas Co. | 5,200 | 254,124 |
Sigma-Aldrich Corp. | 2,400 | 157,896 |
Tronox, Inc. "B"* | 1,354 | 22,998 |
6,578,625 | ||
Construction Materials 0.0% | ||
Vulcan Materials Co. | 3,600 | 311,976 |
Containers & Packaging 0.1% | ||
Ball Corp. | 3,700 | 162,171 |
Pactiv Corp.* | 5,100 | 125,154 |
Sealed Air Corp. | 2,900 | 167,823 |
455,148 | ||
Metals & Mining 0.3% | ||
Alcoa, Inc. | 31,100 | 950,416 |
Freeport-McMoRan Copper & Gold, Inc. "B" | 6,600 | 394,482 |
Newmont Mining Corp. | 16,000 | 830,240 |
Nucor Corp. | 5,500 | 576,345 |
2,751,483 | ||
Paper & Forest Products 0.2% | ||
International Paper Co. | 17,600 | 608,432 |
Louisiana-Pacific Corp. | 3,800 | 103,360 |
MeadWestvaco Corp. | 6,500 | 177,515 |
Weyerhaeuser Co. | 8,600 | 622,898 |
1,512,205 | ||
Telecommunication Services 1.9% | ||
Diversified Telecommunication Services 1.4% | ||
AT&T, Inc. | 138,504 | 3,745,148 |
BellSouth Corp. | 64,200 | 2,224,530 |
CenturyTel, Inc. | 4,700 | 183,864 |
Citizens Communications Co. | 11,700 | 155,259 |
Qwest Communications International, Inc.* | 55,400 | 376,720 |
Verizon Communications, Inc. | 104,500 | 3,559,270 |
10,244,791 | ||
Wireless Telecommunication Services 0.5% | ||
ALLTEL Corp. | 13,900 | 900,025 |
Sprint Nextel Corp. | 105,975 | 2,738,394 |
3,638,419 | ||
Utilities 1.8% | ||
Electric Utilities 0.8% | ||
Allegheny Energy, Inc.* | 5,800 | 196,330 |
American Electric Power Co., Inc. | 14,000 | 476,280 |
Cinergy Corp. | 7,200 | 326,952 |
Edison International | 11,600 | 477,688 |
Entergy Corp. | 7,400 | 510,156 |
Exelon Corp. | 23,800 | 1,259,020 |
FirstEnergy Corp. | 11,800 | 577,020 |
FPL Group, Inc. | 14,400 | 578,016 |
Pinnacle West Capital Corp. | 3,600 | 140,760 |
PPL Corp. | 13,600 | 399,840 |
Progress Energy, Inc. | 9,000 | 395,820 |
Southern Co. | 26,500 | 868,405 |
6,206,287 | ||
Gas Utilities 0.1% | ||
Nicor, Inc. | 7,800 | 308,568 |
Peoples Energy Corp. | 1,400 | 49,896 |
358,464 | ||
Independent Power Producers & Energy Traders 0.3% | ||
AES Corp.* | 23,500 | 400,910 |
Constellation Energy Group | 6,300 | 344,673 |
Duke Energy Corp. | 33,200 | 967,780 |
Dynegy, Inc. "A"* | 10,700 | 51,360 |
TXU Corp. | 16,500 | 738,540 |
2,503,263 | ||
Multi-Utilities 0.6% | ||
Ameren Corp. | 7,300 | 363,686 |
CenterPoint Energy, Inc. | 11,200 | 133,616 |
CMS Energy Corp.* | 27,100 | 350,945 |
Consolidated Edison, Inc. | 8,800 | 382,800 |
Dominion Resources, Inc. | 12,400 | 855,972 |
DTE Energy Co. | 6,300 | 252,567 |
KeySpan Corp. | 6,200 | 253,394 |
NiSource, Inc. | 9,800 | 198,156 |
PG&E Corp. | 12,300 | 478,470 |
Public Service Enterprise Group, Inc. | 8,900 | 569,956 |
Sempra Energy | 9,200 | 427,432 |
TECO Energy, Inc. | 7,500 | 120,900 |
Xcel Energy, Inc. | 14,400 | 261,360 |
4,649,254 | ||
Total Common Stocks (Cost $356,612,966) | 416,013,306 |
| Principal Amount ($) | Value ($) |
|
| |
Corporate Bonds 4.3% | ||
Consumer Discretionary 0.9% | ||
Auburn Hills Trust, 12.375%, 5/1/2020 | 168,000 | 244,101 |
Comcast Cable Communications Holdings, Inc., 9.455%, 11/15/2022 | 87,000 | 109,750 |
Comcast Corp., 6.45%, 3/15/2037 | 589,000 | 566,737 |
Comcast MO of Delaware, Inc., 9.0%, 9/1/2008 | 195,000 | 209,507 |
DaimlerChrysler NA Holding Corp.: |
|
|
4.75%, 1/15/2008 | 978,000 | 964,295 |
Series E, 5.21%**, 10/31/2008 (a) | 513,000 | 514,952 |
Harrah's Operating Co., Inc.: |
|
|
5.625%, 6/1/2015 | 1,133,000 | 1,085,611 |
5.75%, 10/1/2017 | 298,000 | 282,176 |
News America, Inc., 144A, 6.4%, 12/15/2035 | 199,000 | 190,271 |
TCI Communications, Inc., 8.75%, 8/1/2015 | 1,529,000 | 1,789,074 |
Time Warner, Inc., 7.625%, 4/15/2031 | 814,000 | 886,725 |
6,843,199 | ||
Energy 0.2% | ||
Chesapeake Energy Corp., 6.375%, 6/15/2015 | 285,000 | 280,369 |
Enterprise Products Operating LP: |
|
|
Series B, 5.0%, 3/1/2015 (a) | 457,000 | 424,010 |
7.5%, 2/1/2011 | 535,000 | 571,101 |
1,275,480 | ||
Financials 1.9% | ||
Agfirst Farm Credit Bank, 8.393%, 12/15/2016 | 2,810,000 | 3,074,455 |
American General Finance Corp.: |
|
|
Series H, 4.0%, 3/15/2011 | 860,000 | 801,970 |
Series H, 4.625%, 9/1/2010 | 1,305,000 | 1,256,984 |
ASIF Global Finance XVIII, 144A, 3.85%, 11/26/2007 | 1,272,000 | 1,243,481 |
Duke Capital LLC, 4.302%, 5/18/2006 | 1,357,000 | 1,356,172 |
Erac USA Finance Co., 144A, 8.0%, 1/15/2011 | 1,180,000 | 1,292,617 |
ERP Operating LP, 6.95%, 3/2/2011 | 94,000 | 99,359 |
Farmers Exchange Capital, 144A, 7.2%, 7/15/2048 | 760,000 | 754,962 |
Ford Motor Credit Co., 6.5%, 1/25/2007 | 856,000 | 852,723 |
OneAmerica Financial Partners, 144A, 7.0%, 10/15/2033 | 682,000 | 725,424 |
Pennsylvania Mutual Life Insurance Co., 144A, 6.65%, 6/15/2034 | 335,000 | 351,288 |
Reinsurance Group of America, Inc., 6.75%, 12/15/2065 | 665,000 | 630,885 |
The Goldman Sachs Group, Inc., 4.75%, 7/15/2013 | 322,000 | 304,200 |
United Dominion Realty Trust, Inc., Series E, (REIT), 3.9%, 3/15/2010 | 305,000 | 287,776 |
Verizon Global Funding Corp., 7.75%, 12/1/2030 | 863,000 | 953,398 |
Wachovia Bank NA, 5.6%, 3/15/2016 | 860,000 | 851,587 |
14,837,281 | ||
Industrials 0.3% | ||
D.R. Horton, Inc., 5.375%, 6/15/2012 (a) | 1,104,000 | 1,049,140 |
K. Hovnanian Enterprises, Inc., 6.25%, 1/15/2015 | 495,000 | 453,516 |
Pulte Homes, Inc., 7.875%, 8/1/2011 | 726,000 | 784,286 |
Standard Pacific Corp., 6.5%, 8/15/2010 | 200,000 | 191,000 |
2,477,942 | ||
Materials 0.1% | ||
Georgia-Pacific Corp., 8.875%, 5/15/2031 | 448,000 | 481,600 |
Newmont Mining Corp., 5.875%, 4/1/2035 | 504,000 | 471,185 |
952,785 | ||
Telecommunication Services 0.1% | ||
Anixter International, Inc., 5.95%, 3/1/2015 | 246,000 | 228,276 |
Verizon New England, Inc., 6.5%, 9/15/2011 (a) | 188,000 | 190,858 |
419,134 | ||
Utilities 0.8% | ||
Entergy Louisiana LLC, 6.3%, 9/1/2035 | 250,000 | 238,932 |
Nevada Power Co., 144A, 6.65%, 4/1/2036 | 660,000 | 656,423 |
Old Dominion Electric Cooperative, Series A, 6.25%, 6/1/2011 | 1,557,000 | 1,612,781 |
Pedernales Electric Cooperative, Series 2002-A, 144A, 6.202%, 11/15/2032 | 1,730,000 | 1,785,861 |
TXU Energy Co., 7.0%, 3/15/2013 | 515,000 | 536,407 |
Westar Energy, Inc., 5.95%, 1/1/2035 | 990,000 | 919,198 |
5,749,602 | ||
Total Corporate Bonds (Cost $33,281,217) | 32,555,423 | |
| ||
Foreign Bonds — US$ Denominated 1.8% | ||
Energy 0.4% | ||
TXU Electricity Ltd., 144A, 7.25%, 12/1/2016 | 2,875,000 | 3,216,688 |
Financials 0.1% | ||
Mizuho Financial Group, (Cayman), 8.375%, 4/27/2049 | 900,000 | 958,500 |
Industrials 0.7% | ||
Autopista Del Maipo, 144A, 7.373%, 6/15/2022 | 2,690,000 | 3,006,506 |
Tyco International Group SA: |
|
|
6.75%, 2/15/2011 | 1,784,000 | 1,855,497 |
6.875%, 1/15/2029 | 82,000 | 85,618 |
7.0%, 6/15/2028 | 248,000 | 260,929 |
5,208,550 | ||
Materials 0.2% | ||
Celulosa Arauco y Constitucion SA, 5.625%, 4/20/2015 | 1,042,000 | 1,001,524 |
Sappi Papier Holding AG, 144A, 6.75%, 6/15/2012 | 499,000 | 474,692 |
1,476,216 | ||
Telecommunication Services 0.4% | ||
British Telecommunications PLC, 8.875%, 12/15/2030 | 862,000 | 1,102,740 |
Telecom Italia Capital: |
|
|
4.95%, 9/30/2014 | 385,000 | 354,277 |
5.25%, 11/15/2013 | 1,115,000 | 1,056,469 |
2,513,486 | ||
Total Foreign Bonds — US$ Denominated (Cost $12,808,437) | 13,373,440 | |
| ||
Asset Backed 2.0% | ||
Automobile Receivables 0.1% | ||
MMCA Automobile Trust: |
|
|
"A4", Series 2002-3, 3.57%, 8/17/2009 | 225,745 | 225,449 |
"A4", Series 2002-2, 4.3%, 3/15/2010 | 452,100 | 450,859 |
"B", Series 2002-1, 5.37%, 1/15/2010 | 314,460 | 313,511 |
989,819 | ||
Home Equity Loans 1.9% | ||
Advanta Mortgage Loan Trust, "A6", Series 2000-2, 7.72%, 3/25/2015 | 1,105,983 | 1,117,982 |
Aegis Asset Backed Securities Trust, "N1", Series 2005-5N, 144A, 4.5%, 12/25/2023 | 876,654 | 865,745 |
Bayview Financial Acquisition Trust, "1A1", Series 2006-A, 5.614%, 2/28/2041 | 1,034,298 | 1,030,402 |
Centex Home Equity, "AF6", Series 2004-D, 4.67%, 9/25/2034 | 1,260,000 | 1,215,461 |
First Franklin Mortgage Loan NIM: |
|
|
"N1", Series 2004-FFH4, 144A, 4.212%, 1/21/2035 | 363,981 | 363,307 |
"A", Series 2005-FFH2, 144A, 4.75%, 4/27/2035 | 483,742 | 480,351 |
JPMorgan Mortgage Acquisition Corp., "A2F1", Series 2005-FRE1, 5.375%, 10/25/2035 | 979,212 | 974,615 |
Master ABS NIM Trust, "N1", Series 2005-CI8A, 144A, 4.702%, 2/26/2035 | 568,507 | 567,333 |
Meritage Asset Holdings NIM, "N1", Series 2005-1, 144A, 4.581%, 5/25/2035 | 547,640 | 542,643 |
Merrill Lynch Mortgage Investors, Inc.: |
|
|
"N1", Series 2005-NC1N, 144A, 5.0%, 10/25/2035 | 588,182 | 585,006 |
"A1A", Series 2005-NCB, 5.451%, 7/25/2036 | 995,794 | 991,876 |
Novastar NIM Trust, "NOTE", Series 2005-N1, 144A, 4.777%, 10/26/2035 | 431,009 | 429,108 |
Ownit Mortgage Loan Asset-Backed Certificates, "AF1", Series 2006-1, 5.424%, 12/25/2036 | 1,304,362 | 1,297,198 |
Renaissance Home Equity Loan Trust, "AF2", Series 2005-3, 4.723%, 11/25/2035 | 1,925,000 | 1,897,713 |
Residential Asset Mortgage Products, Inc., "AI3", Series 2004-RS6, 4.54%, 8/25/2028 | 2,040,000 | 2,029,022 |
14,387,762 | ||
Total Asset Backed (Cost $15,539,004) | 15,377,581 |
| Principal Amount ($) | Value ($) |
|
| |
US Government Agency Sponsored Pass-Throughs 2.9% | ||
Federal Home Loan Mortgage Corp.: |
|
|
5.5%, 10/1/2023 | 1,201,164 | 1,184,131 |
6.0%, with various maturities from 12/1/2025 until 10/1/2033 | 1,912,805 | 1,920,807 |
6.5%, 1/1/2035 | 1,113,445 | 1,137,433 |
Federal National Mortgage Association: |
|
|
4.5%, 10/1/2033 (b) | 2,065,920 | 1,914,727 |
5.5%, with various maturities from 11/1/2024 until 2/1/2025 | 2,928,035 | 2,884,316 |
6.0%, with various maturities from 1/1/2024 until 6/1/2035 | 4,776,997 | 4,791,485 |
6.26%, 6/1/2009 | 1,786,431 | 1,815,345 |
6.5%, with various maturities from 5/1/2023 until 3/1/2036 | 4,835,713 | 4,942,805 |
7.13%, 1/1/2012 | 1,105,184 | 1,108,705 |
9.0%, 11/1/2030 | 70,616 | 77,218 |
Total US Government Agency Sponsored Pass-Throughs (Cost $22,172,191) | 21,776,972 | |
| ||
Commercial and Non-Agency Mortgage-Backed Securities 10.8% | ||
Banc of America Commercial Mortgage, Inc., "A4", Series 2005-5, 5.115%, 10/10/2045 | 2,060,000 | 1,992,371 |
Banc of America Mortgage Securities, "1A11", Series 2003-2, 5.5%, 4/25/2033 | 1,265,000 | 1,253,115 |
Bear Stearns Adjustable Rate Mortgage Trust: |
|
|
"2A3", Series 2005-4, 4.45%**, 8/25/2035 | 980,000 | 945,958 |
"A1", Series 2006-1, 4.625%**, 2/25/2036 | 3,350,652 | 3,264,791 |
Chase Mortgage Finance Corp., "3A1", Series 2005-A1, 5.281%**, 12/25/2035 | 1,297,599 | 1,275,657 |
Citicorp Mortgage Securities, Inc.: |
|
|
"1A1", Series 2003-5, 5.5%, 4/25/2033 | 864,722 | 861,488 |
"1A1", Series 2004-8, 5.5%, 10/25/2034 | 1,130,482 | 1,114,898 |
Citigroup Mortgage Loan Trust, Inc.: "1A2", Series 2006-AR2, 5.57%, 3/25/2036 | 1,990,000 | 1,980,672 |
"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034 | 1,541,904 | 1,572,261 |
Countrywide Alternative Loan Trust: |
|
|
"A2", Series 2003-21T1, 5.25%, 12/25/2033 | 1,225,995 | 1,211,479 |
"2A1", Series 2005-J6, 5.5%, 7/25/2025 | 1,784,319 | 1,744,399 |
"A6", Series 2004-14T2, 5.5%, 8/25/2034 | 1,229,728 | 1,208,534 |
"1A1", Series 2004-J1, 6.0%, 2/25/2034 | 320,157 | 318,426 |
"A1", Series 2004-35T2, 6.0%, 2/25/2035 | 882,204 | 882,504 |
Countrywide Home Loans: |
|
|
"2A2C", Series 2006-HYB1, 5.315%**, 3/20/2036 | 1,315,000 | 1,291,154 |
"2A1", Series 2006-HYB1, 5.435%**, 3/20/2036 | 1,289,954 | 1,280,172 |
GMAC Mortgage Corp. Loan Trust: |
|
|
"A2", Series 2003-GH2, 3.69%, 7/25/2020 | 334,938 | 333,362 |
"A2", Series 2004-J1, 5.25%, 4/25/2034 | 992,363 | 981,759 |
"A1", Series 2006-J1, 5.75%, 4/25/2036 | 1,995,000 | 1,988,766 |
GS Mortgage Securities Corp. II: |
|
|
"A4", Series 2005-GG4, 4.761%, 7/10/2039 | 2,115,000 | 1,993,331 |
"AJ", Series 2005-GG4, 4.782%, 7/10/2039 | 2,602,000 | 2,436,180 |
JPMorgan Chase Commercial Mortgage Securities Corp., "A4", Series 2005-LDP5, 5.179%**, 12/15/2044 | 2,580,000 | 2,520,567 |
JPMorgan Mortgage Trust: |
|
|
"2A1", Series 2005-A8, 4.962%**, 11/25/2035 | 1,161,938 | 1,148,851 |
"2A4", Series 2006-A2, 5.773%, 4/25/2036 | 2,000,000 | 2,006,094 |
LB-UBS Commercial Mortgage Trust: |
|
|
"A2", Series 2005-C2, 4.821%, 4/15/2030 | 1,345,000 | 1,317,726 |
"A4", Series 2005-C5, 4.954%, 9/15/2030 | 2,080,000 | 1,991,588 |
"A4", Series 2005-C7, 5.197%, 11/15/2030 | 2,110,000 | 2,053,003 |
Master Adjustable Rate Mortgages Trust: |
|
|
"B1", Series 2004-13, 3.814%**, 12/21/2034 | 1,395,059 | 1,333,242 |
"5A1", Series 2004-6, 4.727%**, 7/25/2034 | 1,068,019 | 1,048,379 |
Master Alternative Loans Trust, "8A1", Series 2004-3, 7.0%, 4/25/2034 | 170,583 | 170,702 |
Master Asset Securitization Trust: |
|
|
"8A1", Series 2003-6, 5.5%, 7/25/2033 | 740,643 | 717,730 |
"2A7", Series 2003-9, 5.5%, 10/25/2033 | 1,173,235 | 1,134,739 |
Merrill Lynch Mortgage Trust, "D", Series 2005-CKI1, 5.245%**, 11/12/2037 | 805,000 | 774,405 |
Morgan Stanley Capital I, "C", Series 1997-ALIC, 6.84%, 1/15/2028 | 127,456 | 127,184 |
Mortgage Capital Funding, Inc.: |
|
|
"A2", Series 1998-MC3, 6.337%, 11/18/2031 | 1,239,541 | 1,257,368 |
"E", Series 1997-MC2, 7.214%, 11/20/2027 | 1,925,000 | 1,967,320 |
Residential Accredit Loans, Inc.: |
|
|
"A3", Series 2004-QS11, 5.5%, 8/25/2034 | 925,362 | 916,230 |
"CB", Series 2004-QS2, 5.75%, 2/25/2034 | 951,409 | 936,543 |
"CB1", Series 2002-QS17, 6.0%, 11/25/2032 | 1,185,577 | 1,180,019 |
Structured Adjustable Rate Mortgage Loan: |
|
|
"6A3", Series 2005-21, 5.4%, 11/25/2035 | 1,190,000 | 1,162,854 |
"5A1", Series 2005-18, 5.594%**, 9/25/2035 | 1,242,055 | 1,233,534 |
"2A1", Series 2006-1, 5.663%**, 2/25/2036 | 722,424 | 715,990 |
Structured Asset Securities Corp., "4A1", Series 2005-6, 5.0%, 5/25/2035 | 430,738 | 408,259 |
Wachovia Bank Commercial Mortgage Trust, "E", Series 2005-C20, 144A, 5.224%**, 7/15/2042 | 1,370,000 | 1,309,995 |
Washington Mutual: |
|
|
"A6", Series 2004-AR4, 3.804%**, 6/25/2034 | 1,410,000 | 1,342,206 |
"A6", Series 2004-AR5, 3.85%**, 6/25/2034 | 1,475,000 | 1,409,555 |
"A6", Series 2003-AR11, 3.985%, 10/25/2033 | 1,315,000 | 1,270,611 |
"A6", Series 2003-AR10, 4.065%**, 10/25/2033 | 2,130,000 | 2,066,720 |
"1A6", Series 2005-AR12, 4.843%**, 10/25/2035 | 2,745,000 | 2,666,646 |
"1A1", Series 2005-AR14, 5.08%**, 12/25/2035 | 1,243,587 | 1,230,561 |
"1A3", Series 2005-AR14, 5.08%**, 12/25/2035 | 1,325,000 | 1,307,538 |
"1A3", Series 2005-AR16, 5.123%**, 12/25/2035 | 1,305,000 | 1,270,340 |
Wells Fargo Mortgage Backed Securities Trust: |
|
|
"2A17", Series 2005-AR10, 3.5%**, 6/25/2035 | 315,000 | 299,507 |
"A6", Series 2004-N, 4.0%, 8/25/2034 | 2,060,000 | 1,981,365 |
"2A14", Series 2005-AR10, 4.11%**, 6/25/2035 | 2,010,000 | 1,941,108 |
"4A2", Series 2005-AR16, 4.994%**, 10/25/2035 | 2,080,000 | 2,028,682 |
"4A4", Series 2005-AR16, 4.994%**, 10/25/2035 | 1,082,973 | 1,073,440 |
"2A5", Series 2006-AR2, 5.095%, 3/25/2036 | 4,652,457 | 4,579,762 |
Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $83,178,393) | 81,831,640 | |
| ||
Collateralized Mortgage Obligations 6.0% | ||
Fannie Mae Whole Loan: |
|
|
"1A3", Series 2003-W18, 4.732%, 8/25/2043 | 188,552 | 187,818 |
"1A3", Series 2003-W19, 4.783%, 11/25/2033 | 188,598 | 187,680 |
"A2", Series 2004-W4, 5.0%, 6/25/2034 | 1,875,000 | 1,850,101 |
"A23", Series 2004-W10, 5.0%, 8/25/2034 | 2,055,000 | 2,043,959 |
Federal Home Loan Mortgage Corp.: |
|
|
"TG", Series 2690, 4.5%, 4/15/2032 | 1,220,000 | 1,133,638 |
"PG", Series 2700, 4.5%, 5/15/2032 | 1,380,000 | 1,281,554 |
"LC", Series 2682, 4.5%, 7/15/2032 | 900,000 | 836,645 |
"PE", Series 2727, 4.5%, 7/15/2032 | 2,080,000 | 1,927,752 |
"PC", Series 3026, 4.5%, 1/15/2034 | 635,000 | 579,686 |
"MD", Series 3057, 4.5%, 8/15/2034 | 800,000 | 731,679 |
"HG", Series 2543, 4.75%, 9/15/2028 | 644,730 | 638,310 |
"BG", Series 2640, 5.0%, 2/15/2032 | 2,330,000 | 2,232,663 |
"JD", Series 2778, 5.0%, 12/15/2032 | 4,015,000 | 3,814,977 |
"EG", Series 2836, 5.0%, 12/15/2032 | 2,685,000 | 2,551,055 |
"PD", Series 2844, 5.0%, 12/15/2032 | 1,300,000 | 1,235,152 |
"PD", Series 2783, 5.0%, 1/15/2033 | 1,385,000 | 1,317,907 |
"PE", Series 2864, 5.0%, 6/15/2033 | 2,080,000 | 1,977,212 |
"BG", Series 2869, 5.0%, 7/15/2033 | 315,000 | 298,630 |
"NE", Series 2921, 5.0%, 9/15/2033 | 2,080,000 | 1,969,634 |
"KD", Series 2915, 5.0%, 9/15/2033 | 1,460,000 | 1,380,309 |
"ND", Series 3036, 5.0%, 5/15/2034 | 1,290,000 | 1,216,968 |
"QD", Series 3113, 5.0%, 6/15/2034 | 1,390,000 | 1,309,084 |
"PE", Series 2378, 5.5%, 11/15/2016 | 1,495,000 | 1,493,688 |
"PE", Series 2512, 5.5%, 2/15/2022 | 1,725,000 | 1,731,861 |
"YA", Series 2841, 5.5%, 7/15/2027 | 1,805,128 | 1,803,321 |
"GE", Series 2809, 6.0%, 5/15/2030 | 1,345,000 | 1,350,124 |
Federal National Mortgage Association: |
|
|
"NE", Series 2004-52, 4.5%, 7/25/2033 | 1,309,000 | 1,207,458 |
"YD", Series 2005-94, 4.5%, 8/25/2033 | 1,445,000 | 1,323,407 |
"PE", Series 2005-44, 5.0%, 7/25/2033 | 595,000 | 560,888 |
"HE", Series 2005-22, 5.0%, 10/25/2033 | 1,290,000 | 1,217,551 |
"VD", Series 2002-56, 6.0%, 4/25/2020 | 21,191 | 21,198 |
"A2", Series 1998-M1, 6.25%, 1/25/2008 | 826,565 | 832,218 |
Government National Mortgage Association: |
|
|
"GD", Series 2004-26, 5.0%, 11/16/2032 | 1,304,000 | 1,232,357 |
"QE", Series 2004-11, 5.0%, 12/16/2032 | 1,955,000 | 1,843,428 |
Total Collateralized Mortgage Obligations (Cost $46,372,452) | 45,319,912 | |
| ||
Municipal Bonds and Notes 2.4% | ||
California, Urban Industrial Development Agency, Tax Allocation Civic Recreation, Series 1A, 4.5%, 5/1/2010 (b) | 2,550,000 | 2,462,000 |
Delaware River, DE, Port Authority, Port District Project, Series A, 7.27%, 1/1/2007 (b) | 930,000 | 943,838 |
Hudson County, NJ, Improvement Authority Lease Revenue, Weehawken Pershing Road, 5.72%, 3/1/2034 (b) | 880,000 | 869,915 |
Illinois, State General Obligation, 4.95%, 6/1/2023 | 1,670,000 | 1,574,159 |
Lansing, MI, Water & Sewer Revenue, Board Water & Light Supply Steam, Series B, 7.3%, 7/1/2006 (b) | 3,155,000 | 3,173,457 |
Mount Laurel Township, NJ, Municipal Utilities Authority System Revenue, Series B, 3.9%, 7/1/2010 (b) | 950,000 | 897,845 |
San Diego, CA, Redevelopment Agency, Taxable Housing Allocation, 5.81%, 9/1/2019 (b) | 2,300,000 | 2,308,211 |
Suffolk, VA, Multi-Family Housing Revenue, Redevelopment & Housing Authority, Windsor at Potomac, Series T, 6.6%, 7/1/2015 | 1,985,000 | 2,071,705 |
Washington, State Economic Development Finance Authority Revenue, CSC Tacoma LLC Project: |
|
|
Series A, 2.5%, 10/1/2007 (b) | 3,130,000 | 3,010,371 |
Series A, 3.8%, 10/1/2011 (b) | 1,105,000 | 1,028,313 |
Total Municipal Bonds and Notes (Cost $18,651,302) | 18,339,814 | |
| ||
US Treasury Obligations 4.9% | ||
US Treasury Bills: |
|
|
4.23%***, 4/6/2006 (c) | 5,000 | 4,997 |
4.24%***, 4/20/2006 (c) | 6,965,000 | 6,949,414 |
4.287%***, 4/6/2006 (c) | 35,000 | 34,979 |
4.353%***, 4/6/2006 (c) | 15,000 | 14,991 |
4.36%***, 4/6/2006 (c) | 15,000 | 14,991 |
US Treasury Bonds: |
|
|
6.0%, 2/15/2026 (a) | 9,162,000 | 10,222,785 |
7.25%, 5/15/2016 (a) | 2,929,000 | 3,463,999 |
US Treasury Notes: |
|
|
2.875%, 11/30/2006 | 1,366,000 | 1,348,391 |
4.5%, 11/15/2010 (a) | 14,964,000 | 14,762,914 |
5.0%, 8/15/2011 (a) | 272,000 | 274,391 |
Total US Treasury Obligations (Cost $37,569,055) | 37,091,852 |
|
| Value ($) |
|
| |
Preferred Stocks 0.5% | ||
Arch Capital Group Ltd., 8.0% | 5,809 | 149,401 |
Axis Capital Holdings Ltd., Series B, 7.5% | 2,021 | 203,805 |
Dresdner Funding Trust I, 144A, 8.151% (a) | 560,000 | 653,336 |
Farm Credit Bank of Texas, Series 1, 7.561% | 116,000 | 124,213 |
MUFG Capital Finance 1 Ltd., 6.346% | 1,670,000 | 1,643,343 |
Washington Mutual Preferred Funding Cayman, Series A-1, 144A, 7.25% (a) | 400,000 | 390,724 |
ZFS Finance USA Trust II 144A, 6.45% | 500,000 | 481,114 |
Total Preferred Stocks (Cost $3,722,221) | 3,645,936 | |
| ||
Securities Lending Collateral 4.5% | ||
Daily Assets Fund Institutional, 4.73%(d) (e) (Cost $33,805,331) | 33,805,331 | 33,805,331 |
| ||
Cash Equivalents 6.4% | ||
Cash Management QP Trust, 4.64%(f) (Cost $48,741,428) | 48,741,428 | 48,741,428 |
| % of Net Assets | Value ($) |
|
| |
Total Investment Portfolio (Cost $712,453,997)+ | 101.4 | 767,872,635 |
Other Assets and Liabilities, Net | (1.4) | (10,615,311) |
Net Assets | 100.0 | 757,257,324 |
* Non-income producing security.
** Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of March 31, 2006.
*** Annualized yield at time of purchase; not a coupon rate.
+ The cost for federal income tax purposes was $727,758,576. At March 31, 2006, net unrealized appreciation for all securities based on tax cost was $40,114,059. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $67,647,671 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $27,533,612.
(a) All or a portion of these securities were on loan (See Notes to Financial Statements). The value of all securities loaned at March 31, 2006 amounted to $25,333,896 which is 3.3% of net assets.
(b) Bond is insured by one of these companies.
Insurance Coverage | As a % of Total Investment Portfolio | |
AMBAC | American Municipal Bond Assurance Corp. | 0.1 |
FSA | Financial Security Assurance, Inc. | 0.1 |
MBIA | Municipal Bond Insurance Association | 1.4 |
XLCA | XL Capital Assurance | 0.3 |
(c) At March 31, 2006, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.
(d) Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending.
(f) Cash Management QP Trust, an affiliated fund, is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
REIT: Real Estate Investment Trust
Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association and Federal Home Loan Mortgage Corp. issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
At March 31, 2006, open futures contracts purchased were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ |
10 Year Japan Government Bond | 6/9/2006 | 33 | 37,758,732 | 37,418,692 | (340,040) |
10 Year Republic of Germany Bond | 6/8/2006 | 147 | 21,108,297 | 20,872,883 | (235,414) |
CAC40 Index | 4/21/2006 | 695 | 43,113,737 | 43,947,842 | 834,105 |
DAX Index | 6/16/2006 | 36 | 6,434,500 | 6,545,623 | 111,123 |
EOE Dutch Stock Index | 4/21/2006 | 114 | 12,729,633 | 12,947,497 | 217,864 |
S&P 500 Index | 6/15/2006 | 1 | 324,380 | 325,825 | 1,445 |
Total net unrealized appreciation | 589,083 |
At March 31, 2006, open futures contracts sold short were as follows:
Futures | Expiration Date | Contracts | Aggregate Face Value ($) | Value ($) | Unrealized Appreciation/ |
10 Year US Treasury Note | 6/21/2006 | 623 | 67,316,333 | 66,281,359 | 1,034,974 |
S&P 500 Index | 6/15/2006 | 26 | 8,405,039 | 8,471,450 | (66,411) |
Total net unrealized appreciation | 968,563 |
Statement of Assets and Liabilities as of March 31, 2006 | |
Assets | |
Investments: Investments in securities, at value (cost $629,907,238) — including $25,333,896 of securities loaned | $ 685,325,876 |
Investment in Daily Assets Fund Institutional (cost $33,805,331)* | 33,805,331 |
Investment in Cash Management QP Trust (cost $48,741,428) | 48,741,428 |
Total investments in securities, at value (cost $712,453,997) | 767,872,635 |
Cash | 176,107 |
Foreign currency, at value (cost $23,090,749) | 22,978,672 |
Receivable for investments sold | 58,496,241 |
Dividends receivable | 481,354 |
Interest receivable | 2,370,977 |
Receivable for Fund shares sold | 183,531 |
Receivable for daily variation margin on open futures contracts | 333,663 |
Unrealized appreciation on forward foreign currency exchange contracts | 43,912 |
Other assets | 54,160 |
Total assets | 852,991,252 |
Liabilities | |
Payable upon return of securities loaned | 33,805,331 |
Payable for investments purchased | 60,382,829 |
Payable for Fund shares redeemed | 612,109 |
Unrealized depreciation on forward foreign currency exchange contracts | 472,889 |
Accrued management fee | 282,919 |
Other accrued expenses and payables | 177,851 |
Total liabilities | 95,733,928 |
Net assets, at value | $ 757,257,324 |
* Represents collateral on securities loaned.
Statement of Assets and Liabilities as of March 31, 2006 (continued) | |
Net Assets | |
Net assets consist of: Undistributed net investment income | 591,995 |
Net unrealized appreciation (depreciation) on: Investments | 55,418,638 |
Futures | 1,557,646 |
Foreign currency related transactions | (541,054) |
Accumulated net realized gain (loss) | (14,095,785) |
Paid-in capital | 714,325,884 |
Net assets, at value | $ 757,257,324 |
Net Asset Value | |
Investment Class Net Asset Value and redemption price(a) per share ($31,363,841 ÷ 2,774,854 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized) | $ 11.30 |
Institutional Class Net Asset Value and redemption price(a) per share ($725,893,483 ÷ 61,822,896 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized) | $ 11.74 |
(a) Redemption price per share for shares held less than 15 days is equal to net asset value less a 2% redemption fee.
Statement of Operations for the year ended March 31, 2006 | |
Investment Income | |
Income: Dividends | $ 7,578,772 |
Interest | 12,833,123 |
Interest — Cash Management QP Trust | 1,820,463 |
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates | 39,238 |
Total Income | 22,271,596 |
Expenses: Investment advisory fee | 4,952,295 |
Administrative fee | 1,889,850 |
Auditing | 83,204 |
Legal | 32,749 |
Trustees' fees and expenses | 33,691 |
Reports to shareholders | 35,662 |
Registration fees | 30,900 |
Other | 77,801 |
Total expenses before expense reductions | 7,136,152 |
Expense reductions | (2,769,636) |
Total expenses after expense reductions | 4,366,516 |
Net investment income | 17,905,080 |
Realized and Unrealized Gain (Loss) on Investment Transactions | |
Net realized gain (loss) from: Investments | 34,204,454 |
Futures | 13,161,648 |
Foreign currency related transactions | (432,164) |
| 46,933,938 |
Net unrealized appreciation (depreciation) during the period on: Investments | 1,344,114 |
Futures | 1,280,323 |
Foreign currency related transactions | (376,349) |
| 2,248,088 |
Net gain (loss) on investment transactions | 49,182,026 |
Net increase (decrease) in net assets resulting from operations | $ 67,087,106 |
Statement of Changes in Net Assets | ||
Increase (Decrease) in Net Assets | Years Ended March 31, | |
2006 | 2005a | |
Operations: Net investment income | $ 17,905,080 | $ 17,712,090 |
Net realized gain (loss) on investment transactions | 46,933,938 | 32,987,413 |
Net unrealized appreciation (depreciation) during the period on investment transactions | 2,248,088 | (10,846,722) |
Net increase (decrease) in net assets resulting from operations | 67,087,106 | 39,852,781 |
Distributions to shareholders from: Net investment income Investment Class | (837,033) | (1,740,310) |
Institutional Class | (19,064,819) | (24,628,733) |
Fund share transactions: Proceeds from shares sold | 57,831,771 | 91,324,510 |
Reinvestment of distributions | 19,896,122 | 26,364,356 |
Cost of shares redeemed | (142,822,716) | (127,175,929) |
Redemption fees | 97,772 | 58 |
Net increase (decrease) in net assets from Fund share transactions | (64,997,051) | (9,487,005) |
Increase (decrease) in net assets | (17,811,797) | 3,996,733 |
Net assets at beginning of period | 775,069,121 | 771,072,388 |
Net assets at end of period (including undistributed net investment income of $591,995 and $4,215,503, respectively) | $ 757,257,324 | $ 775,069,121 |
a On August 20, 2004, the Asset Management Portfolio, a master portfolio for a master-feeder structure, closed. The Statement of Changes in Net Assets includes the Lifecycle Long Range Fund's information as a stand-alone and feeder fund for the respective periods (see Note A in the Notes to Financial Statements).
Investment Class Years Ended March 31, | 2006 | 2005 | 2004a |
Selected Per Share Data | |||
Net asset value, beginning of period | $ 10.62 | $ 10.43 | $ 9.75 |
Income (loss) from investment operations: Net investment income (loss)b | .22 | .21 | .11 |
Net realized and unrealized gain (loss) on investment transactions | .70 | .30 | .93 |
Total from investment operations | .92 | .51 | 1.04 |
Less distributions from: Net investment income | (.24) | (.32) | (.36) |
Redemption fees | .00*** | .00*** | — |
Net asset value, end of period | $ 11.30 | $ 10.62 | $ 10.43 |
Total Return (%)c | 8.77 | 4.92 | 10.79** |
Ratios to Average Net Assets and Supplemental Data | |||
Net assets, end of period ($ millions) | 31 | 56 | 69 |
Ratio of expenses before expense reductions (%) | 1.41 | 1.33d | 1.41d* |
Ratio of expenses after expense reductions (%) | 1.00 | 1.00d | 1.00d* |
Ratio of net investment income (loss) (%) | 1.92 | 1.90 | 1.65* |
Portfolio turnover rate (%) | 101f | 106e,f | 115f** |
a For the period July 25, 2003 (commencement of operations of Investment Class shares) to March 31, 2004. b Based on average shares outstanding during the period. c Total return would have been lower had certain expenses not been reduced. d The ratio includes expenses allocated from the Asset Management Portfolio. e On August 20, 2004, the Asset Management Portfolio was closed (see Note A in the Notes to Financial Statements). This ratio includes the purchase and sales of portfolio securities of the Scudder Lifecycle Long Range Fund as a stand-alone fund in addition to the Asset Management Portfolio. f The portfolio turnover rates including mortgage dollar roll transactions were 108%, 122% and 124% for the periods ended March 31, 2006, March 31, 2005 and March 31, 2004, respectively. * Annualized ** Not annualized *** Amount is less than $.005. |
Institutional Class Years Ended March 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per Share Data | |||||
Net asset value, beginning of period | $ 11.04 | $ 10.84 | $ 9.17 | $ 10.92 | $ 10.98 |
Income (loss) from investment operations: Net investment income (loss) | .27a | .25a | .21a | .25a | .31 |
Net realized and unrealized gain (loss) on investment transactions | .74 | .33 | 1.94 | (1.53) | (.08) |
Total from investment operations | 1.01 | .58 | 2.15 | (1.28) | .23 |
Less distributions from: Net investment income | (.31) | (.38) | (.48) | (.47) | (.28) |
Net realized gain on investment transactions | — | — | — | — | (.01) |
Total distributions | (.31) | (.38) | (.48) | (.47) | (.29) |
Redemption fees | .00* | .00* | — | — | — |
Net asset value, end of period | $ 11.74 | $ 11.04 | $ 10.84 | $ 9.17 | $ 10.92 |
Total Return (%)b | 9.19 | 5.42 | 23.71 | (11.88) | 2.13 |
Ratios to Average Net Assets and Supplemental Data | |||||
Net assets, end of period ($ millions) | 726 | 719 | 702 | 548 | 438 |
Ratio of expenses before expense reductions (%) | .91 | .83c | .91c | .93c | .91c |
Ratio of expenses after expense reductions (%) | .55 | .55c | .55c | .55c | .55c |
Ratio of net investment income (loss) (%) | 2.37 | 2.35 | 2.08 | 2.61 | 2.84 |
Portfolio turnover rate (%) | 101e | 106d,e | 115e | 133 | 90 |
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. c The ratio includes expenses allocated from the Asset Management Portfolio. d On August 20, 2004, the Asset Management Portfolio was closed (see Note A in the Notes to Financial Statements). This ratio includes the purchase and sales of portfolio securities of the Scudder Lifecycle Long Range Fund as a stand-alone fund in addition to the Asset Management Portfolio. e The portfolio turnover rates including mortgage dollar roll transactions were 108%, 122% and 124% for the periods ended March 31, 2006, March 31, 2005 and March 31, 2004, respectively. * Amount is less than $.005. |
A. Significant Accounting Policies
DWS Lifecycle Long Range Fund (formerly Scudder Lifecycle Long Range Fund) (the "Fund") is a diversified series of DWS Advisor Funds III (formerly Scudder Advisor Funds III) (the "Trust") which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.
On June 3, 2004, the Board of Trustees approved dissolving the Lifecycle master-feeder structure, and converted the Fund to a stand-alone fund. On August 20, 2004, the Fund received net assets with a value of $741,748,706, which was equal to the Fund's investment in Asset Management Portfolio, the Lifecycle master. This included net unrealized appreciation (depreciation) of $41,590,486 for Scudder Lifecycle Long Range Fund from Asset Management Portfolio in a tax-free exchange for its beneficial ownership in the Portfolio. Activities prior to this conversion are included in the Financial Statements.
The Fund offers two classes of shares: Investment Class and Institutional Class. Investment Class and Institutional Class shares are not subject to initial or contingent deferred sales charges. Institutional Class shares are offered to a limited group of investors and have lower ongoing expenses than the Investment Class.
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 the administrative service fee. 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 and were also applied to the portfolio prior to dissolution of the master-feeder structure.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Debt securities are valued by independent pricing services approved by the Trustees of the Fund. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, as applicable, obtained from a broker-dealer. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and affiliated funds are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees. The Fund may use a fair valuation model to value international equity securities in order to adjust for certain events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange.
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 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 fees paid to the lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
Foreign Currency Translations. The books and records of the Fund are maintained in US dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into US dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into US dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the disposition of forward foreign currency exchange contracts and foreign currencies, and the difference between the amount of net investment income accrued and the US dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gains and losses on investment securities.
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may enter into futures contracts as a hedge against anticipated interest rate, currency or equity market changes, and for duration management, risk management and return enhancement purposes.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The Fund may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated Fund holdings, to facilitate transactions in foreign currency denominated securities and to enhance the total returns.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. Sales and purchases of forward currency contracts having the same settlement date and broker are offset and any gain (loss) is realized on the date of offset; otherwise, gain (loss) is realized on settlement date. Realized and unrealized gains and losses which represent the difference between the value of a forward currency contract to buy and a forward currency contract to sell are included in net realized and unrealized gain (loss) from foreign currency related transactions.
Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
Mortgage Dollar Rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells to a bank or broker/dealer (the "counterparty") mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities on a fixed date. The counterparty receives all principal and interest payments, including prepayments, made on the security while it is the holder. The Fund receives compensation as consideration for entering into the commitment to repurchase. The compensation is paid in the form of a lower price for the security upon its repurchase, or alternatively, a fee. Mortgage dollar rolls may be renewed with a new sale and repurchase price and a cash settlement made at each renewal without physical delivery of the securities subject to the contract.
Mortgage dollar rolls may be treated for purposes of the 1940 Act as borrowings by the Fund because they involve the sale of a security coupled with an agreement to repurchase. A mortgage dollar roll involves costs to the Fund. For example, while the Fund receives compensation as consideration for agreeing to repurchase the security, the Fund forgoes the right to receive all principal and interest payments while the counterparty holds the security. These payments to the counterparty may exceed the compensation received by the Fund, thereby effectively charging the Fund interest on its borrowing. Further, although the Fund can estimate the amount of expected principal prepayment over the term of the mortgage dollar roll, a variation in the actual amount of prepayment could increase or decrease the cost of the Fund's borrowing.
Certain risks may arise upon entering into mortgage dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of such securities may change adversely before the Fund is able to repurchase them. There can be no assurance that the Fund's use of the cash that it receives from a mortgage dollar roll will provide a return that exceeds its borrowing costs.
When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time the Fund enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
During the year ended March 31, 2006, the Fund utilized approximately $27,444,500 of its capital loss carryforwards. At March 31, 2006, the Fund had a net tax basis capital loss carryforward of approximately $15,505,500, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until March 31, 2010 ($8,330,000), March 31, 2011 ($4,620,000), March 31, 2012 ($2,300,600) and March 31, 2013 ($254,900), the respective expiration dates, whichever occurs first, which may be subject to certain limitations under Sections 382-383 of the Internal Revenue Code.
Distribution of Income and Gains. Net investment income of the Fund, if any, is declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss, futures and foreign currency related transactions. As a result net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At March 31, 2006, each Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income* | $ 158,320 |
Undistributed net long-term capital gains | $ 17,688,967 |
Capital loss carryforward** | $ (15,505,500) |
Net unrealized appreciation (depreciation) on investments | $ 40,114,059 |
In addition, the tax character of distributions paid to shareholders by each Fund is summarized as follows:
| Years Ended March 31, | |
| 2006 | 2005 |
Distributions from ordinary income* | 19,901,852 | $ 26,369,043 |
* For tax purposes short-term capital gains distributions and gains from forward foreign currency exchange contracts are considered ordinary income distributions.
** Subject to certain limitations under Section 381-384 of the Internal Revenue Code.
Redemption Fees. The Fund imposes a redemption fee of 2% of the total redemption amount on the Fund shares redeemed or exchanged within 15 days of buying them, either by purchase or exchange. This fee is assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee is accounted for as an addition to paid-in capital.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as each Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for financial reporting purposes.
B. Purchases and Sales of Securities
During the year ended March 31, 2006, purchases and sales of investment securities (excluding short-term investments, US Treasury obligations and mortgage dollar roll transactions) aggregated $571,987,225 and $584,077,028, respectively. Purchases and sales of US Treasury obligations aggregated $115,342,923 and $117,983,419, respectively. Purchases and sales of mortgage dollar roll transactions aggregated $46,163,046 and $46,165,673, respectively.
C. Related Parties
DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG. Deutsche Asset Management, Inc. ("DeAM, Inc." or the "Advisor") is the Advisor for the Fund and Investment Company Capital Corp. ("ICCC" or the "Administrator") is the Administrator for the Fund, both are indirect, wholly owned subsidiaries of Deutsche Bank AG. Northern Trust Investments, N.A. ("NTI") serves as sub-advisor to the passive equity portion of the Fund's portfolio and is paid by the Advisor for its services.
On December 1, 2005, Aberdeen Asset Management PLC ("Aberdeen PLC") acquired from Deutsche Bank AG, the parent company of the Advisor, parts of its asset management business and related assets based in London and Philadelphia. Effective December 2, 2005, and pursuant to a written contract with the Advisor, Aberdeen Asset Management Inc. ("AAMI"), a direct, wholly owned subsidiary of Aberdeen PLC, serves as a sub-advisor to the core bond and active fixed income portion of the Fund's portfolio and is paid by the Advisor for its services.
Investment Advisory Agreement. Under the Investment Advisory Agreement, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The investment advisory fee payable under the Investment Advisory Agreement is equal to an annual rate of 0.65% of the Fund's average daily net assets, computed and accrued daily and payable monthly.
Effective April 1, 2005 through July 31, 2006, the Advisor and Administrator have contractually agreed to waive a portion of their fees and reimburse or pay certain operating expenses of the Fund to the extent necessary to maintain the operating expenses at 1.00% of average daily net assets for Investment Class and 0.60% for Institutional Class. In addition, for the year ended March 31, 2006, the Advisor and Administrator have voluntarily agreed to waive their fees and reimburse expenses to the extent necessary to maintain the annualized expenses of average daily net assets of the Fund at 0.55% for Institutional Class.
Accordingly, for the year ended March 31, 2006, the Advisor waived a portion of its advisory fee pursuant to the Investment Advisory Agreement aggregating $1,366,352 and the amount charged aggregated $3,585,943 which was equivalent to an annual effective rate of 0.47% of the Fund's average daily net assets.
Administrator Service Fee. ICCC serves as Administrator and receives a fee (the "Administrator Service Fee") of 0.72% for the Fund's Investment Class and 0.22% for the Fund's Institutional Class average net assets, computed and accrued daily and payable monthly. For the year ended March 31, 2006, the Administrator Service Fee was as follows:
Administrator Service Fee | Total Aggregated | Waived | Unpaid at March 31, 2006 | Annual |
Investment Class | 307,712 | 97,302 | 29,724 | .49% |
Institutional Class | 1,582,138 | 1,290,202 | 56,340 | .04% |
| $ 1,889,850 | $ 1,387,504 | $ 86,064 |
|
DWS Scudder Investments Service Company ("DWS-SISC"), an affiliate of the Advisor, is the Fund's transfer agent, dividend-paying agent and shareholder service agent. Pursuant to a sub-transfer agency agreement between DWS-SISC and DST Systems, Inc. ("DST"), DWS-SISC has delegated certain transfer agent and dividend paying agent functions to DST. DWS-SISC compensates DST out of the shareholder servicing fees it receives from the Fund. ICCC compensates DWS-SISC out of the Administrator Service Fee it receives from the Fund.
Typesetting and Filing Service Fees. Under an agreement with Deutsche Investment Management Americas Inc. ("DeIM"), an indirect, wholly owned subsidiary of Deutsche Bank AG, DeIM, is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended March 31, 2006, the amount charged to the Fund by DeIM included in reports to shareholders aggregated $26,040, of which $8,520 is unpaid.
Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregate annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each Fund in the Fund Complex for which he or she serves. In addition, the Lead Trustee of the Board and the Chairman of each committee of the Board receive additional compensation for their services. Payment of such fees and expenses is allocated among all such Funds described above in direct proportion to their relative net assets.
Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.
D. Forward Foreign Currency Exchange Contracts
As of March 31, 2006, the Funds had the following open forward foreign currency exchange contracts:
Contracts to Deliver |
| In Exchange For |
| Settlement Date | Unrealized Appreciation (US$) | ||
AUD | 1,588,000 |
| USD | 1,166,824 |
| 6/21/2006 | $ 31,446 |
JPY | 571,272,000 |
| USD | 4,920,220 |
| 6/21/2006 | 11,995 |
GBP | 2,058,000 |
| USD | 3,579,788 |
| 6/21/2006 | 471 |
Total unrealized appreciation | $ 43,912 |
Contracts to Deliver |
| In Exchange For |
| Settlement Date | Unrealized Depreciation (US$) | ||
EUR | 10,062,000 |
| USD | 12,061,319 |
| 6/21/2006 | $ (193,277) |
USD | 32,832,139 |
| CAD | 37,929,000 |
| 6/21/2006 | (279,612) |
Total unrealized depreciation | $ (472,889) |
Currency Abbreviations |
AUD Australian Dollar EUR Euro GBP British Pound JPY Japanese Yen USD US Dollar CAD Canadian Dollar |
E. Expense Reductions
For the year ended March 31, 2006, the Advisor agreed to reimburse the Fund $15,780, which represents a portion of the fee savings expected to be realized by the Advisor related to the outsourcing by the Advisor of certain administrative services to an affiliated service provider.
F. Line of Credit
The Fund and several other affiliated funds (the "Participants") share in a $1.1 billion revolving credit facility administered by J.P. Morgan Chase Bank for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
G. Share Transactions
The following table summarizes share and dollar activity in the Fund:
| Year Ended March 31, 2006 | Year Ended March 31, 2005 | ||
| Shares | Dollars | Shares | Dollars |
Shares sold | ||||
Investment Class | 691,561 | $ 7,548,185 | 1,169,155 | $ 12,048,398 |
Institutional Class | 4,392,889 | 50,283,586 | 7,261,514 | 79,276,112 |
|
| $ 57,831,771 |
| $ 91,324,510 |
Shares issued to shareholders in reinvestment of distributions | ||||
Investment Class | 75,596 | $ 832,597 | 164,686 | $ 1,736,373 |
Institutional Class | 1,660,524 | 19,063,525 | 2,248,893 | 24,627,983 |
|
| $ 19,896,122 |
| $ 26,364,356 |
Shares redeemed | ||||
Investment Class | (3,223,149) | $ (35,353,308) | (2,682,373) | $ (27,917,936) |
Institutional Class | (9,429,783) | (107,469,408) | (9,117,440) | (99,257,993) |
|
| $ (142,822,716) |
| $ (127,175,929) |
Redemption fees |
|
|
| |
|
| $ 97,772 |
| $ 58 |
Net increase (decrease) | ||||
Investment Class | (2,455,992) | $ (26,972,526) | (1,348,532) | $ (14,133,164) |
Institutional Class | (3,376,370) | (38,024,525) | 392,967 | 4,646,159 |
|
| $ (64,997,051) |
| $ (9,487,005) |
H. Regulatory Matters and Litigation
Market Timing Related Regulatory and Litigation Matters. Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including DWS Scudder. The DWS funds' advisors have been cooperating in connection with these inquiries and are in discussions with the regulators concerning proposed settlements. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the DWS funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain DWS funds, the funds' investment advisors and their affiliates, and certain individuals, including in some cases fund Trustees/Directors, officers, and other parties. Each DWS fund's investment advisor has agreed to indemnify the applicable DWS funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding market timing, revenue sharing, fund valuation or other subjects arising from or related to the pending inquiries. It is not possible to determine with certainty what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors.
With respect to the lawsuits, based on currently available information, the funds' investment advisors believe the likelihood that the pending lawsuits will have a material adverse financial impact on a DWS fund is remote and such actions are not likely to materially affect their ability to perform under their investment management agreements with the DWS funds.
With respect to the regulatory matters, Deutsche Asset Management ("DeAM") has advised the funds as follows:
DeAM expects to reach final agreements with regulators in 2006 regarding allegations of improper trading in the DWS funds. DeAM expects that it will reach settlement agreements with the Securities and Exchange Commission, the New York Attorney General and the Illinois Secretary of State providing for payment of disgorgement, penalties, and investor education contributions totaling approximately $134 million. Approximately $127 million of this amount would be distributed to shareholders of the affected DWS funds in accordance with a distribution plan to be developed by an independent distribution consultant. DeAM does not believe that any of the DWS funds will be named as respondents or defendants in any proceedings. The funds' investment advisors do not believe these amounts will have a material adverse financial impact on them or materially affect their ability to perform under their investment management agreements with the DWS funds. The above-described amounts are not material to Deutsche Bank, and they have already been reserved.
Based on the settlement discussions thus far, DeAM believes that it will be able to reach a settlement with the regulators on a basis that is generally consistent with settlements reached by other advisors, taking into account the particular facts and circumstances of market timing at DeAM and at the legacy Scudder and Kemper organizations prior to their acquisition by DeAM in April 2002. Among the terms of the expected settled orders, DeAM would be subject to certain undertakings regarding the conduct of its business in the future, including maintaining existing management fee reductions for certain funds for a period of five years. DeAM expects that these settlements would resolve regulatory allegations that it violated certain provisions of federal and state securities laws (i) by entering into trading arrangements that permitted certain investors to engage in market timing in certain DWS funds and (ii) by failing more generally to take adequate measures to prevent market timing in the DWS funds, primarily during the 1999-2001 period. With respect to the trading arrangements, DeAM expects that the settlement documents will include allegations related to one legacy DeAM arrangement, as well as three legacy Scudder and six legacy Kemper arrangements. All of these trading arrangements originated in businesses that existed prior to the current DeAM organization, which came together in April 2002 as a result of the various mergers of the legacy Scudder, Kemper and Deutsche fund groups, and all of the arrangements were terminated prior to the start of the regulatory investigations that began in the summer of 2003. No current DeAM employee approved the trading arrangements.
There is no certainty that the final settlement documents will contain the foregoing terms and conditions. The independent Trustees/Directors of the DWS funds have carefully monitored these regulatory investigations with the assistance of independent legal counsel and independent economic consultants.
Other Regulatory Matters. DeAM is also engaged in settlement discussions with the Enforcement Staffs of the SEC and the NASD regarding DeAM's practices during 2001-2003 with respect to directing brokerage commissions for portfolio transactions by certain DWS funds to broker-dealers that sold shares in the DWS funds and provided enhanced marketing and distribution for shares in the DWS funds. In addition, on January 13, 2006, DWS Scudder Distributors, Inc. received a Wells notice from the Enforcement Staff of the NASD regarding DWS Scudder Distributors' payment of non-cash compensation to associated persons of NASD member firms, as well as DWS Scudder Distributors' procedures regarding non-cash compensation regarding entertainment provided to such associated persons.
Report of Independent Registered Public Accounting Firm
To the Trustees of DWS Advisor Funds III and Shareholders of DWS Lifecycle Long Range Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of DWS Lifecycle Long Range Fund (formerly Scudder Lifecycle Long Range Fund) (the "Fund") at March 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2006 by correspondence with the custodians and brokers, provide a reasonable basis for our opinion.
Boston, Massachusetts | PricewaterhouseCoopers LLP |
For federal income tax purposes, the Fund designates $8,337,000, or the maximum amount allowable under tax law, as qualified dividend income.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call 1-800-621-1048.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $19,457,800 as capital gain dividends for its year ended March 31, 2006, of which 100% represents 15% rate gains.
Additional information announced by Deutsche Asset Management regarding the terms of the expected settlements referred to in the Market Timing Related Regulatory and Litigation Matters and Other Regulatory Matters in the Notes to Financial Statements will be made available at www.dws-scudder.com/regulatory_settlements, which will also disclose the terms of any final settlement agreements once they are announced.
A Special Meeting of Shareholders (the "Meeting") of DWS Lifecycle Long Range Fund (the "Fund") was held on November 18, 2005, at the Offices of Deutsche Asset Management, 345 Park Avenue, New York, New York 10154. At the Meeting, the following matter was voted on by the shareholders (the resulting votes are presented below).
1. To approve a new Sub-Advisory Agreement between Deutsche Asset Management, Inc. and Aberdeen Asset Management Inc., on behalf of the Fund.
Number of Votes: | ||
For | Against | Abstain |
54,697,272.670 | 2,126.177 | 2,430,177.097 |
Investment Management Agreement Approval
The Board of Trustees of the DWS Advisor Funds III approved the continuation of the current investment management agreement with Deutsche Asset Management, Inc. (the "Advisor") and the current sub-advisory agreement between the Advisor and Northern Trust Investments, N.A. ("NTI") for investment advisory services for the DWS Lifecycle Long Range Fund (the "Fund") in September 2005. The factors considered by the Board in connection with its general contract review were set forth in the Fund's Semi-Annual Report to shareholders for the period ending September 30, 2005. On February 4, 2005, the Board approved an amended and restated sub-advisory agreement with NTI in connection with a change to the Fund's US equity strategy. This sub-advisory agreement was approved by shareholders at a meeting held on May 5, 2006.
The Board also approved in September 2005, subject to shareholder approval, a proposed "AAMI Sub-Advisory Agreement" between the Advisor and Aberdeen Asset Management Inc. ("AAMI") for investment advisory services for the Fund. The AAMI Sub-Advisory Agreement was approved by shareholders on November 18, 2005. By way of background, on December 1, 2005, Aberdeen PLC had acquired from Deutsche Bank AG, the parent company of the Advisor, parts of its asset management business and related assets based in London and Philadelphia (the "Aberdeen Transaction"). Aberdeen PLC and its asset management subsidiaries, including AAMI, are known as "Aberdeen". Effective December 2, 2005, following the shareholder approval, AAMI, which is a direct wholly-owned subsidiary of Aberdeen Asset Management PLC ("Aberdeen PLC") and a registered investment advisor under the Investment Advisors Act of 1940, as amended, became a sub-advisor to the Fund pursuant to the AAMI Sub-Advisory Agreement with the Advisor.
In approving the terms of the AAMI Sub-Advisory Agreement, the Board considered the following factors, among others:
The London-based and/or Philadelphia-based fixed income team that managed the Fund prior to the Aberdeen Transaction would become employees of Aberdeen and would continue to manage the Fund as employees of Aberdeen. In this regard, the Board also considered Aberdeen PLC's assurances regarding the arrangements and incentives that had been established to ensure continued employment with Aberdeen of key members of this investment team. The Board concluded that continued access to the services provided by this team was in the best interests of the Fund and its shareholders.
The advisory fees paid by the Fund would not change as a result of implementing the AAMI Sub-Advisory Agreement, and the overall scope of services provided to the Fund and the standard of care applicable to those services would not be adversely affected. In this regard, the Board also considered the Advisor's and Aberdeen PLC's representations that they do not expect any diminution in the nature or quality of services provided to the Fund after the Aberdeen Transaction.
The terms of the AAMI Sub-Advisory Agreement are consistent with other sub-advisory agreements considered by the Board and determined to be in the best interests of shareholders. The Board considered the fees payable to AAMI by the Advisor under the AAMI Sub-Advisory Agreement, including how they related to the fees paid to sub-advisors of other similar funds, and concluded that they were fair and reasonable. The Board also considered the portion of the fees retained by the Advisor under the current investment management agreement in light of the services the Advisor would continue to provide and its estimated costs of providing those services and concluded that the fees were fair and reasonable.
The benefits to the Advisor, Aberdeen PLC and their respective affiliates from the Aberdeen Transaction, including the Advisor's conflicts of interest in recommending to the Board that they approve the AAMI Sub-Advisory Agreement.
The resources and operations of Aberdeen, including the experience and professional qualifications of Aberdeen personnel that would be providing compliance and other services to the Fund. The Board noted that the Advisor will oversee the management of the Fund's portfolio by AAMI, and will continue to provide the same administrative services.
The Advisor's commitment to pay all costs associated with obtaining shareholder approval of the AAMI Sub-Advisory Agreement.
The factors considered by the Board in connection with its general contract review set forth in the Fund's Semi-Annual Report dated September 30, 2005, were also pertinent to its approval of the AAMI Sub-Advisory Agreement.
Based on all of the foregoing, the Board concluded that the AAMI Sub-Advisory Agreement was in the best interests of Fund shareholders. In reaching this conclusion the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, many of which were in executive session with only the Independent Trustees and their counsel present. It is possible that individual Trustees may have weighed these factors differently in reaching their individual decisions to approve the agreement.
The following information is provided for each Trustee and Officer of the fund's Board as of March 31, 2006. The first section of the table lists information for each Trustee who is not an "interested person" of the fund. Information for the Non-Independent Trustee ("Interested Trustee") follows. The Interested Trustee is considered to be an interested person as defined by the 1940 Act because of his employment with either the fund's advisor and/or underwriter. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity. The mailing address for the Trustees and Officers with respect to the fund's operations is One South Street, Baltimore, Maryland 21202. Each Trustee holds office until he or she resigns, is removed or a successor is appointed or elected and qualified. Each officer is elected to serve until he or she resigns, is removed or a successor has been duly appointed and qualified.
Independent Trustees | ||
Name, Date of Birth, Position with the Fund and Length of Time Served1,2 | Business Experience and Directorships During the Past 5 Years | Number of Funds in the Fund Complex Overseen |
Martin J. Gruber 7/15/37 Trustee since 1992 for Scudder Advisor Funds III | Nomura Professor of Finance, Leonard N. Stern School of Business, New York University (since September 1965); Director, Japan Equity Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since January 2000) and Singapore Fund, Inc. (since January 2000) (registered investment companies), DWS Global High Income Fund, Inc. (since 2005), DWS Global Commodities Stock Fund, Inc. (since 2005). Formerly, Trustee, TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF Mutual Funds, (February 2004-March 2005) and Director, S.G. Cowen Mutual Funds (January 1985-January 2001). | 51 |
Richard J. Herring 2/18/46 Trustee since 1999 | Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Director, Lauder Institute of International Management Studies (since July 2000); Co-Director, Wharton Financial Institutions Center (since July 2000); Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000). | 51 |
Graham E. Jones 1/31/33 Trustee since 2002 | Senior Vice President, BGK Realty, Inc. (commercial real estate) (since 1995); Director, DWS Global High Income Fund, Inc. (since 2005), DWS Global Commodities Stock Fund, Inc. (since 2005). Formerly, Trustee, Morgan Stanley Asset Management, various funds (1985-2001); Trustee, Weiss, Peck and Greer, various funds (1985-2005); Trustee of various investment companies managed by Sun Capital Advisers, Inc. (1998-2005). | 51 |
Rebecca W. Rimel 4/10/51 Trustee since 2002 | President and Chief Executive Officer, The Pew Charitable Trusts (charitable foundation) (1994-present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994-present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001-present); Director, DWS Global High Income Fund, Inc. (since 2005), DWS Global Commodities Stock Fund, Inc. (since 2005). Formerly, Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983-2004); Board Member, Investor Education (charitable organization) (2004-2005). | 51 |
Philip Saunders, Jr. 10/11/35 Trustee since 1999 for Scudder Advisor Funds III | Principal, Philip Saunders Associates (economic and financial consulting) (since November 1988). Director, DWS Global High Income Fund, Inc. (since October 2005), DWS Global Commodities Stock Fund, Inc. (since October 2005). Formerly, Director, Financial Industry Consulting, Wolf & Company (consulting) (1987-1988); President, John Hancock Home Mortgage Corporation (1984-1986); Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. (1982-1986). | 51 |
William N. Searcy, Jr. 9/3/46 Trustee since 2002 | Private investor (since October 2003); Trustee of 7 open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998). Director, DWS Global High Income Fund, Inc. (since October 2005, DWS Global Commodities Stock Fund, Inc. (since October 2005). Formerly, Pension & Savings Trust Officer, Sprint Corporation (telecommunications) (November 1989-October 2003). | 51 |
Interested Trustee | ||
Name, Date of Birth, Position with the Fund and Length of Time Served1,2 | Business Experience and Directorships During the Past 5 Years | Number of Funds in the Fund Complex Overseen |
William N. Shiebler3 2/6/42 Trustee since 2004 | Vice Chairman, Deutsche Asset Management ("DeAM") and a member of the DeAM Global Executive Committee (since 2002). Formerly, Vice Chairman of Putnam Investments, Inc. (1999); Director and Senior Managing Director of Putnam Investments, Inc. and President, Chief Executive Officer, and Director of Putnam Mutual Funds Inc. (1990-1999). | 51 |
Officers | |
Name, Date of Birth, Position with the Fund and Length of Time Served1,2 | Business Experience and Directorships During the Past 5 Years |
Michael Colon5 12/9/69 President since April 2006 | Managing Director4 and Chief Operating Officer, Deutsche Asset Management (since March 2005); President, DWS Global High Income Fund, Inc. (since April 2006), DWS Global Commodities Stock Fund, Inc. (since April 2006), The Brazil Fund, Inc. (since April 2006), The Korea Fund, Inc. (since April 2006); Chief Operating Officer, Deutsche Bank Alex. Brown (2002-2005); Chief Operating Officer, US Equities Division of Deutsche Bank (2000-2002) |
Paul H. Schubert5 1/11/63 Chief Financial Officer since 2004 Treasurer since 2005 | Managing Director4, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998). |
John Millette6 8/23/62 Secretary since 2003 | Director4, Deutsche Asset Management. |
Patricia DeFilippis5 6/21/63 Assistant Secretary since 2005 | Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003). |
Elisa D. Metzger5 9/15/62 Assistant Secretary since 2005 | Director4, Deutsche Asset Management (since September 2005); formerly, Counsel, Morrison and Foerster LLP (1999-2005). |
Caroline Pearson6 4/1/62 Assistant Secretary since 2002 | Managing Director4, Deutsche Asset Management. |
Scott M. McHugh6 9/13/71 Assistant Treasurer since 2005 | Director4, Deutsche Asset Management. |
Kathleen Sullivan D'Eramo6 1/25/57 Assistant Treasurer since 2003 | Director4, Deutsche Asset Management. |
John Robbins5 4/8/66 Anti-Money Laundering Compliance Officer since 2005 | Managing Director4, Deutsche Asset Management (since 2005); formerly, Chief Compliance Officer and Anti-Money Laundering Compliance Officer for GE Asset Management (1999-2005). |
Philip Gallo5 8/2/62 Chief Compliance Officer since 2004 | Managing Director4, Deutsche Asset Management (2003-present). Formerly, Co-Head of Goldman Sachs Asset Management Legal (1994-2003). |
A. Thomas Smith5 12/14/56 Chief Legal Officer | Managing Director4, Deutsche Asset Management (2004-present); formerly, General Counsel, Morgan Stanley and Van Kampen and Investments (1999-2004); Vice President and Associate General Counsel, New York Life Insurance Company (1994-1999); senior attorney, The Dreyfus Corporation (1991-1993); senior attorney, Willkie Farr & Gallagher (1989-1991); staff attorney, US Securities & Exchange Commission and the Illinois Securities Department (1986-1989). |
1 Unless otherwise indicated, the mailing address of each Trustee and officer with respect to fund operations is One South Street, Baltimore, MD 21202.
2 Length of time served represents the date that each Trustee or officer first began serving in that position with DWS Advisor Funds III of which this fund is a series.
3 Mr. Shiebler is a Trustee who is an "interested person" within the meaning of Section 2(a)(19) of the 1940 Act. Mr. Shiebler is a Managing Director of Deutsche Asset Management, the US asset management unit of Deutsche Bank AG and its affiliates. Mr. Shiebler's business address is 345 Park Avenue, New York, New York 10154.
4 Executive title, not a board directorship
5 Address: 345 Park Avenue, New York, New York 10154
6 Address: Two International Place, Boston, Massachusetts 02110
The fund's Statement of Additional Information includes additional information about the fund's Trustees. To receive your free copy of the Statement of Additional Information, call toll-free: 1-800-621-1048.
Automated Information Lines | InvestorACCESS (800) 972-3060 Personalized account information, information on other DWS funds and services via touchtone telephone and for Classes A, B, and C only, the ability to exchange or redeem shares. |
Web Site | www.dws-scudder.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more. |
For More Information | (800) 621-1048 To speak with a DWS Scudder service representative. |
Written Correspondence | DWS Scudder PO Box 219356 |
Proxy Voting | A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-scudder.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at 1-800-621-1048. |
Principal Underwriter | If you have questions, comments or complaints, contact: DWS Scudder Distributors, Inc. 222 South Riverside Plaza (800) 621-1148 |
| Investment Class | Institutional Class |
Nasdaq Symbol | BTILX | BTAMX |
CUSIP Number | 233371 202 | 233371 103 |
Fund Number | 812 | 567 |
Notes
Notes
Notes
| ITEM 2. | CODE OF ETHICS. |
As of the end of the period, March 31, 2006, DWS Advisor Funds III has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Fund’s Board of Directors/Trustees has determined that the Fund has at least one “audit committee financial expert” serving on its audit committee: Mr. Graham E. Jones. This audit committee member is “independent,” meaning that he is not an “interested person” of the Fund (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940) and he does not accept any consulting, advisory, or other compensatory fee from the Fund (except in the capacity as a Board or committee member).
An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an “audit committee financial expert.” Further, the designation of a person as an “audit committee financial expert” does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the “audit committee financial expert” designation. Similarly, the designation of a person as an “audit committee financial expert” does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
DWS LIFECYCLE LONG RANGE FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
Fiscal Year | Audit Fees Billed to Fund | Audit-Related | Tax Fees Billed to Fund | All |
2006 | $64,850 | $0 | $0 | $0 |
2005 | $63,600 | $225 | $7,895 | $0 |
The above “Audit- Related Fees” were billed for agreed upon procedures performed and the above "Tax Fees" were billed for professional services rendered for tax compliance and tax return preparation.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas, Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control
Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
Fiscal Year | Audit-Related | Tax Fees Billed to Adviser and Affiliated Fund Service Providers | All |
2006 | $136,700 | $197,605 | $0 |
2005 | $490,322 | $0 | $0 |
The “Audit-Related Fees” were billed for services in connection with the assessment of internal controls, agreed-upon procedures and additional related procedures and the above “Tax Fees” were billed in connection with consultation services and agreed-upon procedures.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.
Fiscal Year | Total (A) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund) (B) | Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements) (C) | Total of (A), (B) |
2006 | $0 | $197,605 | $30,654 | $228,259 |
2005 | $7,895 | $0 | $236,994 | $244,889 |
All other engagement fees were billed for services in connection with risk management, tax services and process improvement/integration initiatives for DeIM and other related entities that provide support for the operations of the fund.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS |
| Not Applicable |
| ITEM 6. | SCHEDULE OF INVESTMENTS |
| Not Applicable |
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
| Not Applicable |
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
| Not applicable. |
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
| Not Applicable. |
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
The Nominating and Governance Committee evaluates and nominates Board member candidates. Fund shareholders may also submit nominees that will be considered by the Committee when a Board vacancy occurs. Submissions should be mailed to the attention of the Secretary of the Fund, One South Street, Baltimore, MD 21202.
| ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. |
(b) | There have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last half-year (the registrant’s second fiscal half-year in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting. |
| ITEM 12. | EXHIBITS. |
(a)(1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a)(2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | DWS Lifecycle Long Range Fund, a series of DWS Advisor Funds III |
By: | /s/Michael Colon | |
| Michael Colon |
|
President
Date: | May 30, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Registrant: | DWS Lifecycle Long Range Fund, a series of DWS Advisor Funds III |
By: | /s/Michael Colon | |
| Michael Colon |
|
President
Date: | May 30, 2006 |
By: | /s/Paul Schubert | |
| Paul Schubert |
|
Chief Financial Officer and Treasurer
Date: | May 30, 2006 |