|
|
|
Years Ended October 31,
|
|
|
Class A
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Selected Per Share Data
|
|
|
Net asset value, beginning of period
|
|
$
|
10.20
|
|
|
$
|
11.41
|
|
|
$
|
10.23
|
|
|
$
|
7.96
|
|
|
$
|
12.49
|
|
|
Income (loss) from investment operations:
Net investment income
a
|
|
|
.49
|
|
|
|
.54
|
|
|
|
.57
|
|
|
|
.62
|
|
|
|
.77
|
|
|
Net realized and unrealized gain (loss)
|
|
|
.90
|
|
|
|
(1.28
|
)
|
|
|
1.16
|
|
|
|
2.64
|
|
|
|
(4.64
|
)
|
|
Total from investment operations
|
|
|
1.39
|
|
|
|
(.74
|
)
|
|
|
1.73
|
|
|
|
3.26
|
|
|
|
(3.87
|
)
|
|
Less distributions from:
Net investment income
|
|
|
(.43
|
)
|
|
|
(.47
|
)
|
|
|
(.55
|
)
|
|
|
(.41
|
)
|
|
|
(.66
|
)
|
|
Net realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.18
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.40
|
)
|
|
|
—
|
|
|
Total distributions
|
|
|
(.43
|
)
|
|
|
(.47
|
)
|
|
|
(.55
|
)
|
|
|
(.99
|
)
|
|
|
(.66
|
)
|
|
Redemption fees
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
Net asset value, end of period
|
|
$
|
11.16
|
|
|
$
|
10.20
|
|
|
$
|
11.41
|
|
|
$
|
10.23
|
|
|
$
|
7.96
|
|
|
Total Return (%)
b
|
|
|
14.03
|
c
|
|
|
(6.53
|
)
c
|
|
|
17.41
|
|
|
|
44.31
|
c
|
|
|
(32.54
|
)
c
|
|
Ratios to Average Net Assets and Supplemental Data
|
|
|
Net assets, end of period ($ millions)
|
|
|
16
|
|
|
|
17
|
|
|
|
27
|
|
|
|
24
|
|
|
|
19
|
|
|
Ratio of expenses before expense reductions (%)
|
|
|
1.24
|
|
|
|
1.22
|
|
|
|
1.22
|
|
|
|
1.34
|
|
|
|
1.34
|
|
|
Ratio of expenses after expense reductions (%)
|
|
|
1.20
|
|
|
|
1.22
|
|
|
|
1.22
|
|
|
|
1.29
|
|
|
|
1.34
|
|
|
Ratio of net investment income (%)
|
|
|
4.68
|
|
|
|
5.05
|
|
|
|
5.31
|
|
|
|
6.95
|
|
|
|
6.59
|
|
|
Portfolio turnover rate (%)
|
|
|
211
|
|
|
|
134
|
|
|
|
42
|
|
|
|
110
|
|
|
|
99
|
|
|
a
Based on average shares outstanding during the period.
b
Total return does not reflect the effect of any sales charges.
c
Total return would have been lower had certain expenses not been reduced.
*
Amount is less than $.005.
|
|
|
|
|
Years Ended October 31,
|
|
|
Class B
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Selected Per Share Data
|
|
|
Net asset value, beginning of period
|
|
$
|
10.23
|
|
|
$
|
11.45
|
|
|
$
|
10.28
|
|
|
$
|
7.99
|
|
|
$
|
12.53
|
|
|
Income (loss) from investment operations:
Net investment income
a
|
|
|
.42
|
|
|
|
.45
|
|
|
|
.47
|
|
|
|
.56
|
|
|
|
.68
|
|
|
Net realized and unrealized gain (loss)
|
|
|
.91
|
|
|
|
(1.29
|
)
|
|
|
1.17
|
|
|
|
2.65
|
|
|
|
(4.66
|
)
|
|
Total from investment operations
|
|
|
1.33
|
|
|
|
(.84
|
)
|
|
|
1.64
|
|
|
|
3.21
|
|
|
|
(3.98
|
)
|
|
Less distributions from:
Net investment income
|
|
|
(.35
|
)
|
|
|
(.38
|
)
|
|
|
(.47
|
)
|
|
|
(.34
|
)
|
|
|
(.56
|
)
|
|
Net realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.18
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.40
|
)
|
|
|
—
|
|
|
Total distributions
|
|
|
(.35
|
)
|
|
|
(.38
|
)
|
|
|
(.47
|
)
|
|
|
(.92
|
)
|
|
|
(.56
|
)
|
|
Redemption fees
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
Net asset value, end of period
|
|
$
|
11.21
|
|
|
$
|
10.23
|
|
|
$
|
11.45
|
|
|
$
|
10.28
|
|
|
$
|
7.99
|
|
|
Total Return (%)
b,c
|
|
|
13.16
|
|
|
|
(7.31
|
)
|
|
|
16.43
|
|
|
|
43.17
|
|
|
|
(33.07
|
)
|
|
Ratios to Average Net Assets and Supplemental Data
|
|
|
Net assets, end of period ($ millions)
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
Ratio of expenses before expense reductions (%)
|
|
|
2.04
|
|
|
|
2.04
|
|
|
|
2.10
|
|
|
|
2.24
|
|
|
|
2.21
|
|
|
Ratio of expenses after expense reductions (%)
|
|
|
2.00
|
|
|
|
2.04
|
|
|
|
2.10
|
|
|
|
2.03
|
|
|
|
2.12
|
|
|
Ratio of net investment income (%)
|
|
|
3.99
|
|
|
|
4.23
|
|
|
|
4.43
|
|
|
|
6.21
|
|
|
|
5.80
|
|
|
Portfolio turnover rate (%)
|
|
|
211
|
|
|
|
134
|
|
|
|
42
|
|
|
|
110
|
|
|
|
99
|
|
|
a
Based on average shares outstanding during the period.
b
Total return does not reflect the effect of any sales charges.
c
Total return would have been lower had certain expenses not been reduced.
*
Amount is less than $.005.
|
|
|
|
|
Years Ended October 31,
|
|
|
Class C
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Selected Per Share Data
|
|
|
Net asset value, beginning of period
|
|
$
|
10.22
|
|
|
$
|
11.44
|
|
|
$
|
10.26
|
|
|
$
|
7.98
|
|
|
$
|
12.51
|
|
|
Income (loss) from investment operations:
Net investment income
a
|
|
|
.42
|
|
|
|
.46
|
|
|
|
.48
|
|
|
|
.56
|
|
|
|
.68
|
|
|
Net realized and unrealized gain (loss)
|
|
|
.90
|
|
|
|
(1.29
|
)
|
|
|
1.17
|
|
|
|
2.64
|
|
|
|
(4.65
|
)
|
|
Total from investment operations
|
|
|
1.32
|
|
|
|
(.83
|
)
|
|
|
1.65
|
|
|
|
3.20
|
|
|
|
(3.97
|
)
|
|
Less distributions from:
Net investment income
|
|
|
(.35
|
)
|
|
|
(.39
|
)
|
|
|
(.47
|
)
|
|
|
(.34
|
)
|
|
|
(.56
|
)
|
|
Net realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.18
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.40
|
)
|
|
|
—
|
|
|
Total distributions
|
|
|
(.35
|
)
|
|
|
(.39
|
)
|
|
|
(.47
|
)
|
|
|
(.92
|
)
|
|
|
(.56
|
)
|
|
Redemption fees
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
Net asset value, end of period
|
|
$
|
11.19
|
|
|
$
|
10.22
|
|
|
$
|
11.44
|
|
|
$
|
10.26
|
|
|
$
|
7.98
|
|
|
Total Return (%)
b
|
|
|
13.25
|
c
|
|
|
(7.31
|
)
c
|
|
|
16.60
|
|
|
|
43.09
|
c
|
|
|
(33.07
|
)
c
|
|
Ratios to Average Net Assets and Supplemental Data
|
|
|
Net assets, end of period ($ millions)
|
|
|
8
|
|
|
|
9
|
|
|
|
11
|
|
|
|
10
|
|
|
|
6
|
|
|
Ratio of expenses before expense reductions (%)
|
|
|
1.97
|
|
|
|
1.99
|
|
|
|
1.99
|
|
|
|
2.13
|
|
|
|
2.13
|
|
|
Ratio of expenses after expense reductions (%)
|
|
|
1.93
|
|
|
|
1.98
|
|
|
|
1.99
|
|
|
|
2.04
|
|
|
|
2.11
|
|
|
Ratio of net investment income (%)
|
|
|
3.97
|
|
|
|
4.29
|
|
|
|
4.54
|
|
|
|
6.20
|
|
|
|
5.81
|
|
|
Portfolio turnover rate (%)
|
|
|
211
|
|
|
|
134
|
|
|
|
42
|
|
|
|
110
|
|
|
|
99
|
|
|
a
Based on average shares outstanding during the period.
b
Total return does not reflect the effect of any sales charges.
c
Total return would have been lower had certain expenses not been reduced.
*
Amount is less than $.005.
|
|
|
|
|
Years Ended October 31,
|
|
|
Class S
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Selected Per Share Data
|
|
|
Net asset value, beginning of period
|
|
$
|
10.19
|
|
|
$
|
11.41
|
|
|
$
|
10.24
|
|
|
$
|
7.96
|
|
|
$
|
12.49
|
|
|
Income (loss) from investment operations:
Net investment income
a
|
|
|
.52
|
|
|
|
.57
|
|
|
|
.59
|
|
|
|
.65
|
|
|
|
.80
|
|
|
Net realized and unrealized gain (loss)
|
|
|
.91
|
|
|
|
(1.29
|
)
|
|
|
1.16
|
|
|
|
2.64
|
|
|
|
(4.65
|
)
|
|
Total from investment operations
|
|
|
1.43
|
|
|
|
(.72
|
)
|
|
|
1.75
|
|
|
|
3.29
|
|
|
|
(3.85
|
)
|
|
Less distributions from:
Net investment income
|
|
|
(.46
|
)
|
|
|
(.50
|
)
|
|
|
(.58
|
)
|
|
|
(.43
|
)
|
|
|
(.68
|
)
|
|
Net realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.18
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.40
|
)
|
|
|
—
|
|
|
Total distributions
|
|
|
(.46
|
)
|
|
|
(.50
|
)
|
|
|
(.58
|
)
|
|
|
(1.01
|
)
|
|
|
(.68
|
)
|
|
Redemption fees
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
|
.00
|
*
|
|
Net asset value, end of period
|
|
$
|
11.16
|
|
|
$
|
10.19
|
|
|
$
|
11.41
|
|
|
$
|
10.24
|
|
|
$
|
7.96
|
|
|
Total Return (%)
|
|
|
14.32
|
b
|
|
|
(6.31
|
)
b
|
|
|
17.70
|
|
|
|
44.65
|
b
|
|
|
(32.41
|
)
b
|
|
Ratios to Average Net Assets and Supplemental Data
|
|
|
Net assets, end of period ($ millions)
|
|
|
119
|
|
|
|
111
|
|
|
|
149
|
|
|
|
143
|
|
|
|
112
|
|
|
Ratio of expenses before expense reductions (%)
|
|
|
.98
|
|
|
|
.98
|
|
|
|
.99
|
|
|
|
1.06
|
|
|
|
1.12
|
|
|
Ratio of expenses after expense reductions (%)
|
|
|
.93
|
|
|
|
.98
|
|
|
|
.99
|
|
|
|
1.04
|
|
|
|
1.10
|
|
|
Ratio of net investment income (%)
|
|
|
4.92
|
|
|
|
5.29
|
|
|
|
5.54
|
|
|
|
7.20
|
|
|
|
6.82
|
|
|
Portfolio turnover rate (%)
|
|
|
211
|
|
|
|
134
|
|
|
|
42
|
|
|
|
110
|
|
|
|
99
|
|
|
a
Based on average shares outstanding during the period.
b
Total return would have been lower had certain expenses not been reduced.
*
Amount is less than $.005.
|
|
|
|
|
Years Ended October 31,
|
|
|
|
|
|
Institutional Class
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Period Ended 10/31/08
a
|
|
|
Selected Per Share Data
|
|
|
Net asset value, beginning of period
|
|
$
|
10.20
|
|
|
$
|
11.41
|
|
|
$
|
10.24
|
|
|
$
|
7.97
|
|
|
$
|
12.11
|
|
|
Income (loss) from investment operations:
Net investment income
b
|
|
|
.53
|
|
|
|
.58
|
|
|
|
.61
|
|
|
|
.66
|
|
|
|
.56
|
|
|
Net realized and unrealized gain (loss)
|
|
|
.91
|
|
|
|
(1.27
|
)
|
|
|
1.16
|
|
|
|
2.64
|
|
|
|
(4.18
|
)
|
|
Total from investment operations
|
|
|
1.44
|
|
|
|
(.69
|
)
|
|
|
1.77
|
|
|
|
3.30
|
|
|
|
(3.62
|
)
|
|
Less distributions from:
Net investment income
|
|
|
(.48
|
)
|
|
|
(.52
|
)
|
|
|
(.60
|
)
|
|
|
(.45
|
)
|
|
|
(.52
|
)
|
|
Net realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.18
|
)
|
|
|
—
|
|
|
Return of capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(.40
|
)
|
|
|
—
|
|
|
Total distributions
|
|
|
(.48
|
)
|
|
|
(.52
|
)
|
|
|
(.60
|
)
|
|
|
(1.03
|
)
|
|
|
(.52
|
)
|
|
Redemption fees
|
|
|
.00
|
***
|
|
|
.00
|
***
|
|
|
.00
|
***
|
|
|
.00
|
***
|
|
|
.00
|
***
|
|
Net asset value, end of period
|
|
$
|
11.16
|
|
|
$
|
10.20
|
|
|
$
|
11.41
|
|
|
$
|
10.24
|
|
|
$
|
7.97
|
|
|
Total Return (%)
|
|
|
14.51
|
c
|
|
|
(6.13
|
)
c
|
|
|
17.88
|
|
|
|
44.68
|
|
|
|
(31.15
|
)
**
|
|
Ratios to Average Net Assets and Supplemental Data
|
|
|
Net assets, end of period ($ millions)
|
|
|
112
|
|
|
|
96
|
|
|
|
107
|
|
|
|
68
|
|
|
|
36
|
|
|
Ratio of expenses before expense reductions (%)
|
|
|
.82
|
|
|
|
.83
|
|
|
|
.81
|
|
|
|
.89
|
|
|
|
.96
|
*
|
|
Ratio of expenses after expense reductions (%)
|
|
|
.78
|
|
|
|
.83
|
|
|
|
.81
|
|
|
|
.89
|
|
|
|
.96
|
*
|
|
Ratio of net investment income (%)
|
|
|
5.06
|
|
|
|
5.44
|
|
|
|
5.72
|
|
|
|
7.35
|
|
|
|
7.57
|
*
|
|
Portfolio turnover rate (%)
|
|
|
211
|
|
|
|
134
|
|
|
|
42
|
|
|
|
110
|
|
|
|
99
|
|
|
a
For the period from March 3, 2008 (commencement of operations of Institutional Class shares) to October 31, 2008.
b
Based on average shares outstanding during the period.
c
Total return would have been lower had certain expenses not been reduced.
*
Annualized
**
Not annualized
***
Amount is less than $.005.
|
|
Notes to Financial Statements
A. Organization and Significant Accounting Policies
DWS Enhanced Emerging Markets Fixed Income Fund (the "Fund") is a non-diversified series of DWS Global/International Fund, Inc. (the "Corporation"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Maryland corporation.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares of the Fund are closed to new purchases, except exchanges or the reinvestment of dividends or other distributions. Class B shares were offered to investors without an initial sales charge and are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Class C shares do not automatically convert into another class. Institutional Class shares are offered to a limited group of investors, are not subject to initial or contingent deferred sales charges and generally have lower ongoing expenses than other classes. Class S shares are not subject to initial or contingent deferred sales charges and are generally not available to new investors except under certain circumstances.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution and service fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation.
Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Debt securities are valued at prices supplied by independent pricing services approved by the Fund's Board. If the pricing services are unable to provide valuations, securities are valued at the most recent bid quotation or evaluated price, as applicable, obtained from one or more broker-dealers. 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. These securities are generally categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors used in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security's disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company's or issuer's financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold and with respect to debt securities; the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.
New Accounting Pronouncement.
In December 2011, Accounting Standards Update 2011-11 (ASU 2011-11), Disclosures about Offsetting Assets and Liabilities, was issued and is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Management is currently evaluating the application of ASU 2011-11 and its impact, if any, on the Fund's financial statements.
Loan Participations and Assignments.
Loan Participations and Assignments are portions of loans originated by banks and sold in pieces to investors. These U.S. dollar-denominated fixed and floating rate loans ("Loans") in which the Fund invests, are arranged between the borrower and one or more financial institutions ("Lenders"). These Loans may take the form of Senior Loans, which are corporate obligations often issued in connection with recapitalizations, acquisitions, leveraged buy-outs and refinancings, and Sovereign Loans, which are debt instruments between a foreign sovereign entity and one or more financial institutions. The Fund invests in such Loans in the form of participations in Loans ("Participations") or assignments of all or a portion of Loans from third parties ("Assignments"). Participations typically result in the Fund having a contractual relationship only with the Lender, not with the borrower. The Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, or any rights of set-off against the borrower, and the Fund will not benefit directly from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. Assignments typically result in the Fund having a direct contractual relationship with the borrower, and the Fund may enforce compliance by the borrower with the terms of the loan agreement. Loans held by the Fund are generally in the form of Assignments but the Fund may also invest in Participations. All Loan Participations and Assignments involve interest rate risk, liquidity risk and credit risk, including the potential default or insolvency of the borrower.
Securities Lending.
The Fund lends securities to certain financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
Foreign Currency Translations.
The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
When-Issued/Delayed Delivery Securities.
The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transactions from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Taxes.
The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated. Estimated tax liabilities on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
Under the Regulated Investment Company Modernization Act of 2010, net capital losses may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At October 31, 2012, the Fund had a net tax basis capital loss carryforward of approximately $15,458,000 of pre-enactment losses, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized, or until October 31, 2017, the expiration date, whichever occurs first.
The Fund has reviewed the tax positions for each of the three open tax years as of October 31, 2012 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains.
Net investment income of the Fund is declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments, forward currency contracts, recognition of certain foreign currency gains (losses) as ordinary income (loss), investments in futures contracts, swap contracts and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investments 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 October 31, 2012, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
|
Capital loss carryforwards
|
|
$
|
(15,458,000
|
)
|
|
Unrealized appreciation (depreciation) on investments
|
|
$
|
9,711,049
|
|
In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
|
|
|
Years Ended October 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Distributions from ordinary income*
|
|
$
|
10,564,672
|
|
|
$
|
12,188,705
|
|
* For tax purposes, short-term capital gain distributions are considered ordinary income distributions.
Redemption Fees.
The Fund imposes a redemption fee of 2% of the total redemption amount on all Fund shares redeemed or exchanged within 15 days of buying them, either by purchase or exchange. This fee is assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee is accounted for as an addition to paid-in capital.
Expenses.
Expenses of the Corporation arising in connection with a specific fund are allocated to that fund. Other Corporation expenses which cannot be directly attributed to a fund are apportioned among the funds in the Corporation based upon the relative net assets or other appropriate measures.
Contingencies.
In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other.
Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis and may include proceeds from litigation. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes with the exception of securities in default or purchased in default.
B. Derivative Instruments
Credit Default Swap Contracts.
A credit default swap is a contract between a buyer and a seller of protection against pre-defined credit events for the reference entity. The Fund may enter into credit default swap contracts to gain exposure to an underlying issuer's credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller in the credit default swap contract, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swap contracts, in which case the Fund functions as the counterparty referenced above. This involves the risk that the contract may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap contract it will cover its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the reference entities for all outstanding credit default swap contracts sold by the Fund. For the year ended October 31, 2012, the Fund entered into credit default swap contracts to gain exposure to the underlying issuer's credit quality characteristics.
The value of the credit default swap is adjusted daily and the change in value, if any, is recorded daily as unrealized appreciation or depreciation in the Statement of Assets and Liabilities. An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Under the terms of the credit default swap contracts, the Fund receives or makes quarterly payments based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss in the Statement of Operations. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses in the Statement of Operations.
A summary of the open credit default swap contract as of October 31, 2012 is included in a table following the Fund's Investment Portfolio. For the year ended October 31, 2012, the investment in credit default swap contracts purchased had a total notional value generally indicative of a range from $0 to $3,900,000, and the investment in credit default swap contracts sold had a total notional value generally indicative of a range from $0 to $3,900,000.
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. For the year ended October 31, 2012, the Fund entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities. As part of its currency strategy, the Fund also entered into forward currency contracts for non-hedging purposes to seek to enhance potential gains.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
A summary of the open forward currency contracts as of October 31, 2012, is included in a table following the Fund's Investment Portfolio. For the year ended October 31, 2012, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $68,715,00 to $204,440,000, and the investment in forward currency contracts long vs. U.S. dollars had a total contract value generally indicative of a range from approximately $58,000,000 to $151,996,000. The investment in forward currency contracts long vs. other foreign currencies sold had a total contract value generally indicative of a range from $0 to approximately $6,351,000.
The following tables summarize the value of the Fund's derivative instruments held as of October 31, 2012 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
|
Asset Derivatives
|
|
Forward Contracts
|
|
|
Swap Contracts
|
|
|
Total
|
|
|
Credit Contracts (a)
|
|
$
|
—
|
|
|
$
|
135,886
|
|
|
$
|
135,886
|
|
|
Foreign Exchange Contracts (b)
|
|
|
613,274
|
|
|
|
—
|
|
|
|
613,274
|
|
|
|
|
$
|
613,274
|
|
|
$
|
135,886
|
|
|
$
|
749,160
|
|
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts:
(a) Unrealized appreciation on swap contracts
(b) Unrealized appreciation on forward foreign currency exchange contracts
|
Liability Derivatives
|
|
Forward Contracts
|
|
|
Swap Contracts
|
|
|
Total
|
|
|
Credit Contracts (a)
|
|
$
|
—
|
|
|
$
|
(126,689
|
)
|
|
$
|
(126,689
|
)
|
|
Foreign Exchange Contracts (b)
|
|
|
(358,943
|
)
|
|
|
—
|
|
|
|
(358,943
|
)
|
|
|
|
$
|
(358,943
|
)
|
|
$
|
(126,689
|
)
|
|
$
|
(485,632
|
)
|
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts:
(a) Unrealized depreciation on swap contracts
(b) Unrealized depreciation on forward foreign currency exchange contracts
Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the year ended October 31, 2012 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
|
Realized Gain (Loss)
|
|
Forward Contracts
|
|
|
Foreign Exchange Contracts (a)
|
|
$
|
(2,068,111
|
)
|
The above derivative is located in the following Statement of Operations account:
(a) Net realized gain (loss) from foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)
|
Change in Net Unrealized Appreciation (Depreciation)
|
|
Forward Contracts
|
|
|
Swap Contracts
|
|
|
Total
|
|
|
Credit Contracts (a)
|
|
$
|
—
|
|
|
$
|
9,197
|
|
|
$
|
9,197
|
|
|
Foreign Exchange Contracts (b)
|
|
|
1,297,471
|
|
|
|
—
|
|
|
|
1,297,471
|
|
|
|
|
$
|
1,297,471
|
|
|
$
|
9,197
|
|
|
$
|
1,306,668
|
|
Each of the above derivatives is located in the following Statement of Operations accounts:
(a) Change in net unrealized appreciation (depreciation) from swaps contracts
(b) Change in net unrealized appreciation (depreciation) on foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)
C. Purchases and Sales of Securities
During the year ended October 31, 2012, purchases and sales of investment securities (excluding short-term investments and U.S. Treasury obligations) aggregated $454,599,909 and $455,386,705, respectively. Purchases and sales of U.S. Treasury obligations aggregated $2,557,800 and $11,553,362, respectively.
D. Related Parties
Management Agreement.
Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund.
Under the Investment Management Agreement, the Fund pays a monthly management fee equal to an annual rate of 0.59% of the Fund's average daily net assets, computed and accrued daily and payable monthly.
For the period from November 1, 2011 through September 30, 2012, the Advisor had contractually agreed to waive a portion of its management fee in the amount of 0.05% of the Fund's average daily net assets.
Accordingly, for the year ended October 31, 2012, the Advisor waived a portion of its management fee pursuant to the Investment Management Agreement aggregating $109,612, and the amount charged aggregated $1,311,511, which was equivalent to an annual effective rate of 0.54% of the Fund's average daily net assets.
For the period from November 1, 2011 through September 30, 2012, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of Class B shares to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) at 2.01%.
Effective October 1, 2012 through September 30, 2013, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
|
Class A
|
1.23%
|
|
Class B
|
1.98%
|
|
Class C
|
1.98%
|
|
Class S
|
.98%
|
|
Institutional Class
|
.98%
|
Administration Fee.
Pursuant to the Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the year ended October 31, 2012, the Administration Fee was $240,869, of which $21,644 is unpaid.
Service Provider Fees.
DWS Investments Service Company ("DISC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended October 31, 2012, the amounts charged to the Fund by DISC were as follows:
|
Services to Shareholders
|
|
Total Aggregated
|
|
|
Waived
|
|
|
Unpaid at October 31, 2012
|
|
|
Class A
|
|
$
|
10,783
|
|
|
$
|
—
|
|
|
$
|
1,736
|
|
|
Class B
|
|
|
884
|
|
|
|
5
|
|
|
|
333
|
|
|
Class C
|
|
|
4,130
|
|
|
|
—
|
|
|
|
698
|
|
|
Class S
|
|
|
103,820
|
|
|
|
—
|
|
|
|
16,863
|
|
|
Institutional Class
|
|
|
2,927
|
|
|
|
—
|
|
|
|
495
|
|
|
|
|
$
|
122,544
|
|
|
$
|
5
|
|
|
$
|
20,125
|
|
Distribution and Service Fees.
Under the Fund's Class B and Class C 12b-1 Plans, DWS Investments Distributors, Inc. ("DIDI"), an affiliate of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of each of Class B and C shares. In accordance with the Fund's Underwriting and Distribution Services Agreement, DIDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended October 31, 2012, the Distribution Fee was as follows:
|
Distribution Fee
|
|
Total Aggregated
|
|
|
Unpaid at October 31, 2012
|
|
|
Class B
|
|
$
|
5,826
|
|
|
$
|
401
|
|
|
Class C
|
|
|
58,095
|
|
|
|
4,825
|
|
|
|
|
$
|
63,921
|
|
|
$
|
5,226
|
|
In addition, DIDI provides information and administrative services for a fee ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DIDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the year ended October 31, 2012, the Service Fee was as follows:
|
Service Fee
|
|
Total Aggregated
|
|
|
Unpaid at October 31, 2012
|
|
|
Annual Effective Rate
|
|
|
Class A
|
|
$
|
37,247
|
|
|
$
|
7,268
|
|
|
|
.24
|
%
|
|
Class B
|
|
|
1,930
|
|
|
|
270
|
|
|
|
.25
|
%
|
|
Class C
|
|
|
19,240
|
|
|
|
3,234
|
|
|
|
.25
|
%
|
|
|
|
$
|
58,417
|
|
|
$
|
10,772
|
|
|
|
|
|
Underwriting Agreement and Contingent Deferred Sales Charge.
DIDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the year ended October 31, 2012, aggregated $890.
In addition, DIDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates, ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the year ended October 31, 2012, the CDSC for Class B and C shares aggregated $1,860 and $3,081, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the year ended October 31, 2012, DIDI received $336 for Class A shares.
Typesetting and Filing Service Fees.
Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended October 31, 2012, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $18,890, of which $8,190 is unpaid.
Directors' Fees and Expenses.
The Fund paid retainer fees to each Director not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicle.
The Fund may invest uninvested cash balances in Central Cash Management Fund, which is managed by the Advisor. The Fund indirectly bears its proportionate share of the expenses of Central Cash Management Fund. Central Cash Management Fund does not pay the Advisor an investment management fee. Central Cash Management Fund seeks a high level of current income consistent with liquidity and the preservation of capital.
E. Investing in High-Yield Securities
The Fund's performance could be hurt if a security declines in credit quality or goes into default, or if an issuer does not make timely payments of interest or principal. Because the issuers of high-yield debt securities or junk bonds (debt securities rated below the fourth-highest category) may be in uncertain financial health, the risk of loss from default by the issuer is significantly greater. Prices and yields of high-yield securities will fluctuate over time and, during periods of economic uncertainty, volatility of high-yield securities may adversely affect a fund's net asset value. Because the Fund may invest in securities not paying current interest or in securities already in default, these risks may be more pronounced.
F. Investing in Emerging Markets
Investing in emerging markets may involve special risks and considerations not typically associated with investing in developed markets. These risks include revaluation of currencies, high rates of inflation or deflation, repatriation restrictions on income and capital, and future adverse political, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls or delayed settlements, and may have prices that are more volatile or less easily assessed than those of comparable securities of issuers in developed markets.
G. Line of Credit
The Fund and other affiliated funds (the "Participants") share in a $375 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 25 percent of its net assets under the agreement. The Fund had no outstanding loans at October 31, 2012.
H. Concentration of Ownership
From time to time, the Fund may have a concentration of several shareholders, including affiliated DWS Funds, holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Fund. As of October 31, 2012, DWS Alternative Asset Allocation Fund and DWS Select Alternative Allocation Fund held 22% and 18% of the total shares outstanding of the Fund, respectively.
I. Share Transactions
The following table summarizes share and dollar activity in the Fund:
|
|
|
Year Ended October 31, 2012
|
|
|
Year Ended October 31, 2011
|
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares sold
|
|
|
Class A
|
|
|
565,550
|
|
|
$
|
5,946,065
|
|
|
|
1,389,836
|
|
|
$
|
14,965,267
|
|
|
Class B
|
|
|
2,892
|
|
|
|
30,448
|
|
|
|
8,794
|
|
|
|
95,377
|
|
|
Class C
|
|
|
100,982
|
|
|
|
1,070,656
|
|
|
|
338,333
|
|
|
|
3,670,258
|
|
|
Class S
|
|
|
2,062,024
|
|
|
|
21,686,699
|
|
|
|
565,562
|
|
|
|
6,131,077
|
|
|
Institutional Class
|
|
|
1,429,356
|
|
|
|
14,960,814
|
|
|
|
2,997,203
|
|
|
|
32,373,814
|
|
|
|
|
|
|
|
|
$
|
43,694,682
|
|
|
|
|
|
|
$
|
57,235,793
|
|
|
Shares issued to shareholders in reinvestment of distributions
|
|
|
Class A
|
|
|
58,034
|
|
|
$
|
603,906
|
|
|
|
83,142
|
|
|
$
|
877,417
|
|
|
Class B
|
|
|
1,935
|
|
|
|
20,155
|
|
|
|
2,836
|
|
|
|
30,065
|
|
|
Class C
|
|
|
22,099
|
|
|
|
230,426
|
|
|
|
28,916
|
|
|
|
305,713
|
|
|
Class S
|
|
|
422,786
|
|
|
|
4,406,886
|
|
|
|
481,722
|
|
|
|
5,076,048
|
|
|
Institutional Class
|
|
|
444,277
|
|
|
|
4,632,743
|
|
|
|
476,420
|
|
|
|
5,020,851
|
|
|
|
|
|
|
|
|
$
|
9,894,116
|
|
|
|
|
|
|
$
|
11,310,094
|
|
|
Shares redeemed
|
|
|
Class A
|
|
|
(888,811
|
)
|
|
$
|
(9,291,697
|
)
|
|
|
(2,165,034
|
)
|
|
$
|
(23,268,201
|
)
|
|
Class B
|
|
|
(44,500
|
)
|
|
|
(468,713
|
)
|
|
|
(45,042
|
)
|
|
|
(483,123
|
)
|
|
Class C
|
|
|
(285,926
|
)
|
|
|
(2,981,090
|
)
|
|
|
(474,827
|
)
|
|
|
(5,087,277
|
)
|
|
Class S
|
|
|
(2,692,335
|
)
|
|
|
(28,303,671
|
)
|
|
|
(3,241,700
|
)
|
|
|
(34,767,659
|
)
|
|
Institutional Class
|
|
|
(1,230,875
|
)
|
|
|
(12,912,467
|
)
|
|
|
(3,497,706
|
)
|
|
|
(37,746,697
|
)
|
|
|
|
|
|
|
|
$
|
(53,957,638
|
)
|
|
|
|
|
|
$
|
(101,352,957
|
)
|
|
Redemption fees
|
|
|
|
|
|
$
|
1,587
|
|
|
|
|
|
|
$
|
8,461
|
|
|
Net increase (decrease)
|
|
|
Class A
|
|
|
(265,227
|
)
|
|
$
|
(2,740,503
|
)
|
|
|
(692,056
|
)
|
|
$
|
(7,418,947
|
)
|
|
Class B
|
|
|
(39,673
|
)
|
|
|
(418,110
|
)
|
|
|
(33,412
|
)
|
|
|
(357,347
|
)
|
|
Class C
|
|
|
(162,845
|
)
|
|
|
(1,679,967
|
)
|
|
|
(107,578
|
)
|
|
|
(1,111,306
|
)
|
|
Class S
|
|
|
(207,525
|
)
|
|
|
(2,209,763
|
)
|
|
|
(2,194,416
|
)
|
|
|
(23,558,997
|
)
|
|
Institutional Class
|
|
|
642,758
|
|
|
|
6,681,090
|
|
|
|
(24,083
|
)
|
|
|
(352,012
|
)
|
|
|
|
|
|
|
|
$
|
(367,253
|
)
|
|
|
|
|
|
$
|
(32,798,609
|
)
|
Report of Independent Registered Public Accounting Firm
To the Board of Directors of DWS Global/International Fund, Inc. and the Shareholders of DWS Enhanced Emerging Markets Fixed Income 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 Enhanced Emerging Markets Fixed Income Fund (the "Fund") at October 31, 2012, 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 October 31, 2012
by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
|
Boston, Massachusetts
December 21, 2012
|
PricewaterhouseCoopers LLP
|
Information About Your Fund's Expenses
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2012 to October 31, 2012).
The tables illustrate your Fund's expenses in two ways:
•
Actual Fund Return.
This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
•
Hypothetical 5% Fund Return.
This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.
|
Expenses and Value of a $1,000 Investment
for the six months ended October 31, 2012 (Unaudited)
|
|
|
Actual Fund Return
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class S
|
|
|
Institutional Class
|
|
|
Beginning Account Value 5/1/12
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
Ending Account Value 10/31/12
|
|
$
|
1,080.80
|
|
|
$
|
1,077.20
|
|
|
$
|
1,076.60
|
|
|
$
|
1,082.30
|
|
|
$
|
1,083.10
|
|
|
Expenses Paid per $1,000*
|
|
$
|
6.07
|
|
|
$
|
10.39
|
|
|
$
|
9.92
|
|
|
$
|
4.87
|
|
|
$
|
4.03
|
|
|
Hypothetical 5% Fund Return
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class S
|
|
|
Institutional Class
|
|
|
Beginning Account Value 5/1/12
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
Ending Account Value 10/31/12
|
|
$
|
1,019.30
|
|
|
$
|
1,015.13
|
|
|
$
|
1,015.58
|
|
|
$
|
1,020.46
|
|
|
$
|
1,021.27
|
|
|
Expenses Paid per $1,000*
|
|
$
|
5.89
|
|
|
$
|
10.08
|
|
|
$
|
9.63
|
|
|
$
|
4.72
|
|
|
$
|
3.91
|
|
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 184 (the number of days in the most recent six-month period), then divided by 366.
|
Annualized Expense Ratios
|
Class A
|
Class B
|
Class C
|
Class S
|
Institutional Class
|
|
DWS Enhanced Emerging Markets Fixed Income Fund
|
1.16%
|
1.99%
|
1.90%
|
.93%
|
.77%
|
For more information, please refer to the Fund's prospectus.
Tax Information
(Unaudited)
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 728-3337.
Investment Management Agreement Approval
The Board of Directors, including the Independent Directors, approved the renewal of DWS Enhanced Emerging Markets Fixed Income Fund's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DWS") in September 2012.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
•
In September 2012, all of the Fund's Directors were independent of DWS and its affiliates.
•
The Directors met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Fixed Income and Quant Oversight Committee, reviewed comprehensive materials received from DWS, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by the Fund's independent fee consultant. The Board also received extensive information throughout the year regarding performance of the Fund.
•
The Independent Directors regularly meet privately with their independent counsel to discuss contract review and other matters. In addition, the Independent Directors were also advised by the Fund's independent fee consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the independent fee consultant in connection with their deliberations (the "IFC Report").
•
In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement,
administrative services agreement, transfer agency agreement and other material service agreements.
•
Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee's findings and recommendations.
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DWS and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DWS managed the Fund, and that the Agreement was approved by the Fund's shareholders. DWS is part of Deutsche Bank, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund's performance. In many cases, this led to a negotiation with DWS of lower expense caps for the coming year than had previously been in place. As part of these negotiations, the Board indicated that it would consider relaxing these new lower caps in future years following sustained improvements in performance, among other considerations.
In June 2012, Deutsche Bank ("DB"), DWS's parent company, announced that DB's new management team had concluded the strategic review of its global asset management business announced in late 2011 by DB's prior management team, and would combine its Asset Management (of which DWS is a part) and Wealth Management divisions. Prior to approving the investment management agreements, the Independent Directors were apprised of the expected management and structure of the new combined Asset & Wealth Management division ("AWM") and DWS. DB also advised the Independent Directors that the U.S. asset management business is a critical and integral part of DB and AWM, and that DB would be reinvesting a significant portion of the substantial savings it expects to realize by combining its Asset Management and Wealth Management divisions into a combined AWM division, including enhancements to its investment capabilities. DB also confirmed its commitment to maintaining strong legal and compliance groups within the combined division.
While shareholders may focus primarily on fund performance and fees, the Fund's Board considers these and many other factors, including the quality and integrity of DWS's personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services.
The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DWS provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DWS provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DWS to attract and retain high-quality personnel, and the organizational depth and stability of DWS. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the independent fee consultant using information supplied by Lipper Inc. ("Lipper"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DWS regarding such funds, along with DWS's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for each of the one-, three- and five-year periods ended December 31, 2011, the Fund's performance (Class A shares) was in the 4th quartile of the applicable Lipper universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in each of the one-, three- and five-year periods ended December 31, 2011. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DWS the factors contributing to such underperformance and actions being taken to improve performance. The Board recognized that DWS has made changes to its investment personnel and processes in recent years in an effort to improve long-term performance.
Fees and Expenses.
The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper and the independent fee consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DWS under the Fund's administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2011). The Board noted that the Fund's Class A shares total (net) operating expenses (excluding 12b-1 fees) were expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2011, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DWS and certain of its affiliates for comparable mutual funds and considered differences in fund and fee structures between the DWS Funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size).
The Board also noted that the expense limitations agreed to by DWS helped to ensure that the Fund's total (net) operating expenses would remain competitive.
The information considered by the Board as part of its review of management fees included information regarding fees charged by DWS and its affiliates to similar institutional accounts and to similar funds offered primarily to European investors ("DWS Europe funds"), in each case as applicable. The Board observed that advisory fee rates for institutional accounts generally were lower than the management fees charged by similarly managed DWS U.S. mutual funds ("DWS Funds"), but also took note of the differences in services provided to DWS Funds as compared to institutional accounts. In the case of DWS Europe funds, the Board observed that fee rates for DWS Europe funds generally were higher than for similarly managed DWS Funds, but noted that differences in the types of services provided to DWS Funds relative to DWS Europe funds made it difficult to compare such fees.
The Board noted that DWS agreed to reduce the Fund's contractual management fee effective December 1, 2008.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DWS.
Profitability.
The Board reviewed detailed information regarding revenues received by DWS under the Agreement. The Board considered the estimated costs and pre-tax profits realized by DWS from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DWS and its affiliates with respect to all fund services in totality and by fund. The Board and the independent fee consultant reviewed DWS's methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DWS in connection with the management of the Fund were not unreasonable. The Board also reviewed information regarding the profitability of certain similar investment management firms. The Board noted that while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DWS and its affiliates' overall profitability with respect to the DWS fund complex (after taking into account distribution and other services provided to the funds by DWS and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.
Economies of Scale.
The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DWS of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DWS and Its Affiliates.
The Board also considered the character and amount of other incidental benefits received by DWS and its affiliates, including any fees received by DWS for administrative services provided to the Fund and any fees received by an affiliate of DWS for distribution services. The Board also considered benefits to DWS related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities, along with the incidental public relations benefits to DWS related to DWS Funds advertising and cross-selling opportunities among DWS products and services. The Board concluded that management fees were reasonable in light of these fallout benefits.
Compliance.
The Board considered the significant attention and resources dedicated by DWS to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of both DWS's chief compliance officer and the Fund's chief compliance officer; (ii) the large number of DWS compliance personnel; and (iii) the substantial commitment of resources by DWS and its affiliates to compliance matters.
Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Directors and their counsel present. It is possible that individual Directors may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
Summary of Management Fee Evaluation by Independent Fee Consultant
September 17, 2012
Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Funds (formerly the DWS Scudder Funds). My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2012, including my qualifications, the evaluation process for each of the DWS Funds, consideration of certain complex-level factors, and my conclusions. I served in substantially the same capacity in 2007, 2008, 2009, 2010 and 2011.
Qualifications
For more than 35 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.
Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past ten years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.
I hold a Master of Business Administration degree, with highest honors, from Harvard University and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds and have served in various leadership and financial oversight capacities with non-profit organizations.
Evaluation of Fees for each DWS Fund
My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 103 mutual fund portfolios in the DWS Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).
In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper and Morningstar databases and drew on my industry knowledge and experience.
To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.
In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.
Fees and Expenses Compared with Other Funds
The competitive fee and expense evaluation for each fund focused on two primary comparisons:
The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.
The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.
These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.
DeAM's Fees for Similar Services to Others
DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Fund. These similar products included the other DWS Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.
Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.
Costs and Profit Margins
DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.
Economies of Scale
Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Fund compares with this industry observation, I reviewed:
The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.
Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.
How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.
Quality of Service — Performance
The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.
In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.
I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.
Complex-Level Considerations
While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:
I reviewed DeAM's profitability analysis for all DWS Funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.
I considered whether DeAM and affiliates receive any significant ancillary or "fallout" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.
I considered how aggregated DWS Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.
I considered how aggregated DWS Fund performance measures relative to appropriate peers had varied by asset class and over time.
I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.
Findings
Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Funds are reasonable.
Thomas H. Mack
President, Thomas H. Mack & Co., Inc.