Notes to Financial Statements
(Unaudited)
A. Organization and Significant Accounting Policies
DWS RREEF Real Estate Securities Fund (the "Fund") is a non-diversified series of DWS Securities Trust (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.
The Fund 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 and 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 generally available only to qualified institutions, are not subject to initial or contingent deferred sales charges and generally have lower ongoing expenses than other classes. Institutional Class is generally closed to new investors. Class R shares are only available to participants in certain retirement plans and are offered to investors without an initial sales charge or contingent deferred sales charge. Class S shares are not subject to initial or contingent deferred sales charges and are only available to a limited group of investors.
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.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade and are categorized as Level 1 securities. 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.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors 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.
Securities Lending.
Brown Brothers Harriman & Co., as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains the benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the 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. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of June 30, 2013, the Fund had securities on loan with a gross value of $226,328,197. The value of the related collateral, $232,081,403, exceeded the value of the securities loaned at period end.
Federal Income Taxes.
The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.
The Fund has reviewed the tax positions for the open tax years as of December 31, 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 years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains.
Distributions from net investment income of the Fund are 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 Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Redemption Fees.
The Fund imposes a redemption fee of 2% of the total redemption amount on all Fund shares redeemed or exchanged within 15 days of buying them, either by purchase or exchange. This fee is assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee is accounted for as an addition to paid-in capital.
Expenses.
Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies.
In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Real Estate Investment Trusts.
The Fund periodically recharacterizes distributions received from a Real Estate Investment Trust ("REIT") investment based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from a REIT, the recharacterization will be estimated for financial reporting purposes and a recharacterization will be made to the accounting records in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains. The Fund distinguishes between dividends received on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital.
Other.
Investment transactions are accounted for on the trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis and may include proceeds from litigation.
B. Purchases and Sales of Securities
During the six months ended June 30, 2013, purchases and sales of investment securities (excluding short-term investments) aggregated $1,039,371,770 and $932,322,578, respectively.
C. Related Parties
Management Agreement.
Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund or delegates such responsibility to the Fund's subadvisor.
RREEF America L.L.C. ("RREEF"), also an indirect, wholly owned subsidiary of Deutsche Bank AG, is the subadvisor for the Fund. While DIMA is the investment advisor to the Fund, the day-to-day activities of managing the Fund's portfolio have been delegated to RREEF. RREEF is responsible for decisions to buy and sell securities for the Fund and conducts the research that leads to the purchase and sale decisions. DIMA compensates RREEF out of its management fee.
Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:
|
First $100 million of the Fund's average daily net assets
|
|
|
.565
|
%
|
|
Next $100 million of such net assets
|
|
|
.465
|
%
|
|
Next $100 million of such net assets
|
|
|
.415
|
%
|
|
Over $300 million of such net assets
|
|
|
.365
|
%
|
Accordingly, for the six months ended June 30, 2013, the fee pursuant to the management agreement was equivalent to an annualized effective rate of 0.39% of the Fund's average daily net assets.
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 six months ended June 30, 2013, the Administration Fee was $810,631, of which $133,275 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 six months ended June 30, 2013, the amounts charged to the Fund by DISC were as follows:
|
Services to Shareholders
|
|
Total Aggregated
|
|
|
Unpaid at June 30, 2013
|
|
|
Class A
|
|
$
|
120,699
|
|
|
$
|
34,409
|
|
|
Class B
|
|
|
1,105
|
|
|
|
470
|
|
|
Class C
|
|
|
8,126
|
|
|
|
2,689
|
|
|
Class R
|
|
|
3,763
|
|
|
|
939
|
|
|
Class S
|
|
|
32,956
|
|
|
|
7,523
|
|
|
Institutional Class
|
|
|
85,068
|
|
|
|
25,311
|
|
|
|
|
$
|
251,717
|
|
|
$
|
71,341
|
|
Distribution and Service Fees.
Under the Fund's Class B, Class C and Class R 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 and 0.25% of average daily net assets of Class R 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, C and R shares. For the six months ended June 30, 2013, the Distribution Fee was as follows:
|
Distribution Fee
|
|
Total Aggregated
|
|
|
Unpaid at June 30, 2013
|
|
|
Class B
|
|
$
|
3,892
|
|
|
$
|
581
|
|
|
Class C
|
|
|
183,637
|
|
|
|
31,621
|
|
|
Class R
|
|
|
30,384
|
|
|
|
5,164
|
|
|
|
|
$
|
217,913
|
|
|
$
|
37,366
|
|
In addition, DIDI provides information and administrative services for a fee ("Service Fee") to Class A, B, C and R shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. DIDI in turn has various agreements with financial services firms that provide these services and pays these fees based upon the assets of shareholder accounts the firms service. For the six months ended June 30, 2013, the Service Fee was as follows:
|
Service Fee
|
|
Total Aggregated
|
|
|
Unpaid at June 30, 2013
|
|
|
Annualized Effective Rate
|
|
|
Class A
|
|
$
|
512,880
|
|
|
$
|
238,787
|
|
|
|
.20
|
%
|
|
Class B
|
|
|
1,250
|
|
|
|
420
|
|
|
|
.24
|
%
|
|
Class C
|
|
|
61,213
|
|
|
|
22,080
|
|
|
|
.25
|
%
|
|
Class R
|
|
|
28,505
|
|
|
|
9,449
|
|
|
|
.23
|
%
|
|
|
|
$
|
603,848
|
|
|
$
|
270,736
|
|
|
|
|
|
Underwriting Agreement and Contingent Deferred Sales Charge.
DIDI is the principal underwriter for the Fund. Underwriting commissions paid in connection with the distribution of Class A shares for the six months ended June 30, 2013 aggregated $20,118.
In addition, DIDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the six months ended June 30, 2013, the CDSC for Class B and C shares aggregated $393 and $2,328, respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of Class A shares. For the six months ended June 30, 2013, DIDI received $1,440 for Class A shares.
Typesetting and Filing Service Fees.
Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended June 30, 2013, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $7,818, of which $7,448 is unpaid.
Trustees' Fees and Expenses.
The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and Vice Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles.
The Fund may invest uninvested cash balances in Central Cash Management Fund and DWS Variable NAV Money Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund seeks to provide a high level of current income consistent with liquidity and the preservation of capital. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the Investment Company Act of 1940, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. Central Cash Management Fund seeks to maintain a stable net asset value, and DWS Variable NAV Money Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. Central Cash Management Fund does not pay the Advisor an investment management fee. To the extent that DWS Variable NAV Money Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund's assets invested in DWS Variable NAV Money Fund.
D. 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 20 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2013.
E. Share Transactions
The following table summarizes share and dollar activity in the Fund:
|
|
|
Six Months Ended June 30, 2013
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares
|
|
|
Dollars
|
|
|
Shares sold
|
|
|
Class A
|
|
|
4,730,337
|
|
|
$
|
105,924,292
|
|
|
|
6,092,795
|
|
|
$
|
127,347,503
|
|
|
Class B
|
|
|
2,952
|
|
|
|
65,569
|
|
|
|
9,091
|
|
|
|
193,776
|
|
|
Class C
|
|
|
470,113
|
|
|
|
10,710,116
|
|
|
|
683,636
|
|
|
|
14,442,708
|
|
|
Class R
|
|
|
344,519
|
|
|
|
7,758,750
|
|
|
|
590,609
|
|
|
|
12,438,435
|
|
|
Class S
|
|
|
2,657,924
|
|
|
|
60,007,464
|
|
|
|
3,373,727
|
|
|
|
70,988,313
|
|
|
Institutional Class
|
|
|
6,579,146
|
|
|
|
146,488,776
|
|
|
|
12,947,253
|
|
|
|
272,203,370
|
|
|
|
|
|
|
|
|
$
|
330,954,967
|
|
|
|
|
|
|
$
|
497,614,105
|
|
|
Shares issued to shareholders in reinvestment of distributions
|
|
|
Class A
|
|
|
184,433
|
|
|
$
|
3,955,901
|
|
|
|
943,335
|
|
|
$
|
19,719,194
|
|
|
Class B
|
|
|
178
|
|
|
|
3,843
|
|
|
|
1,634
|
|
|
|
34,419
|
|
|
Class C
|
|
|
10,445
|
|
|
|
225,495
|
|
|
|
68,096
|
|
|
|
1,436,004
|
|
|
Class R
|
|
|
7,228
|
|
|
|
154,993
|
|
|
|
39,631
|
|
|
|
828,958
|
|
|
Class S
|
|
|
60,048
|
|
|
|
1,293,482
|
|
|
|
235,667
|
|
|
|
4,949,589
|
|
|
Institutional Class
|
|
|
347,571
|
|
|
|
7,456,870
|
|
|
|
1,549,572
|
|
|
|
32,373,532
|
|
|
|
|
|
|
|
|
$
|
13,090,584
|
|
|
|
|
|
|
$
|
59,341,696
|
|
|
Shares redeemed
|
|
|
Class A
|
|
|
(3,090,039
|
)
|
|
$
|
(69,366,166
|
)
|
|
|
(8,412,658
|
)
|
|
$
|
(177,698,566
|
)
|
|
Class B
|
|
|
(12,891
|
)
|
|
|
(288,004
|
)
|
|
|
(62,808
|
)
|
|
|
(1,318,237
|
)
|
|
Class C
|
|
|
(163,724
|
)
|
|
|
(3,705,148
|
)
|
|
|
(365,557
|
)
|
|
|
(7,727,922
|
)
|
|
Class R
|
|
|
(222,535
|
)
|
|
|
(4,975,621
|
)
|
|
|
(498,095
|
)
|
|
|
(10,589,790
|
)
|
|
Class S
|
|
|
(1,095,939
|
)
|
|
|
(24,719,213
|
)
|
|
|
(1,701,678
|
)
|
|
|
(36,057,997
|
)
|
|
Institutional Class
|
|
|
(5,310,911
|
)
|
|
|
(118,966,849
|
)
|
|
|
(12,237,868
|
)
|
|
|
(256,140,446
|
)
|
|
|
|
|
|
|
|
$
|
(222,021,001
|
)
|
|
|
|
|
|
$
|
(489,532,958
|
)
|
|
Redemption fees
|
|
|
|
|
|
$
|
20,559
|
|
|
|
|
|
|
$
|
23,693
|
|
|
Net increase (decrease)
|
|
|
Class A
|
|
|
1,824,731
|
|
|
$
|
40,516,795
|
|
|
|
(1,376,528
|
)
|
|
$
|
(30,631,253
|
)
|
|
Class B
|
|
|
(9,761
|
)
|
|
|
(218,592
|
)
|
|
|
(52,083
|
)
|
|
|
(1,090,042
|
)
|
|
Class C
|
|
|
316,834
|
|
|
|
7,230,463
|
|
|
|
386,175
|
|
|
|
8,150,867
|
|
|
Class R
|
|
|
129,212
|
|
|
|
2,938,297
|
|
|
|
132,145
|
|
|
|
2,677,744
|
|
|
Class S
|
|
|
1,622,033
|
|
|
|
36,584,325
|
|
|
|
1,907,716
|
|
|
|
39,882,886
|
|
|
Institutional Class
|
|
|
1,615,806
|
|
|
|
34,993,821
|
|
|
|
2,258,957
|
|
|
|
48,456,334
|
|
|
|
|
|
|
|
|
$
|
122,045,109
|
|
|
|
|
|
|
$
|
67,446,536
|
|
F. Real Estate Concentration Risk
Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. Any market price movements, regulatory or technological changes, or economic conditions affecting real estate securities, including REITs, will have a significant impact on the fund's performance. In particular, real estate companies can be affected by the risks associated with direct ownership of real estate, such as general or local economic conditions, increases in property taxes and operating expenses, liability or losses owing to environmental problems, falling rents (whether owing to poor demand, increased competition, overbuilding, or limitations on rents), zoning changes, rising interest rates, and losses from casualty or condemnation. In addition, many real estate companies, including REITs, utilize leverage (and some may be highly leveraged), which increases investment risk. Further, REITs are dependent upon management skills and may not be diversified.
G. Concentration of Ownership
From time to time, the Fund may have a concentration of several shareholder accounts holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Fund.
At June 30, 2013, there were two shareholder accounts that held approximately 21% and 12% of the outstanding shares of the Fund.
Information About Your Fund's Expenses
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2013 to June 30, 2013).
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. Subject to certain exceptions, an account maintenance fee of $20.00 assessed once per calendar year for Classes A, B, C and S shares may apply for accounts with balances less than $10,000. This fee is not included in these tables. If it was, the estimate of expenses paid for Classes A, B, C and 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 June 30, 2013 (Unaudited)
|
|
|
Actual Fund Return
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class R
|
|
|
Class S
|
|
|
Institutional Class
|
|
|
Beginning Account Value 1/1/13
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
Ending Account Value 6/30/13
|
|
$
|
1,044.90
|
|
|
$
|
1,039.90
|
|
|
$
|
1,041.10
|
|
|
$
|
1,042.90
|
|
|
$
|
1,045.40
|
|
|
$
|
1,046.50
|
|
|
Expenses Paid per $1,000*
|
|
$
|
4.61
|
|
|
$
|
9.21
|
|
|
$
|
8.30
|
|
|
$
|
6.23
|
|
|
$
|
3.60
|
|
|
$
|
2.99
|
|
|
Hypothetical 5% Fund Return
|
|
Class A
|
|
|
Class B
|
|
|
Class C
|
|
|
Class R
|
|
|
Class S
|
|
|
Institutional Class
|
|
|
Beginning Account Value 1/1/13
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
Ending Account Value 6/30/13
|
|
$
|
1,020.28
|
|
|
$
|
1,015.77
|
|
|
$
|
1,016.66
|
|
|
$
|
1,018.70
|
|
|
$
|
1,021.27
|
|
|
$
|
1,021.87
|
|
|
Expenses Paid per $1,000*
|
|
$
|
4.56
|
|
|
$
|
9.10
|
|
|
$
|
8.20
|
|
|
$
|
6.16
|
|
|
$
|
3.56
|
|
|
$
|
2.96
|
|
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 181 (the number of days in the most recent six-month period), then divided by 365.
|
Annualized Expense Ratios
|
Class A
|
Class B
|
Class C
|
Class R
|
Class S
|
Institutional Class
|
|
DWS RREEF Real Estate Securities Fund
|
.91%
|
1.82%
|
1.64%
|
1.23%
|
.71%
|
.59%
|
For more information, please refer to the Fund's prospectuses.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to http://apps.finra.org/fundanalyzer/1/fa.aspx.
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.
Account Management Resources
|
|
|
For More Information
|
|
The automated telephone system allows you to access personalized account information and obtain information on other DWS funds using either your voice or your telephone keypad. Certain account types within Classes A, B, C and S also have the ability to purchase, exchange or redeem shares using this system.
For more information, contact your financial advisor. You may also access our automated telephone system or speak with a DWS Investments representative by calling:
(800) 728-3337
|
|
Web Site
|
|
www.dws-investments.com
View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.
Obtain prospectuses and applications,
blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more.
|
|
Written Correspondence
|
|
DWS Investments
PO Box 219151
Kansas City, MO 64121-9151
|
|
Proxy Voting
|
|
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 are available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
|
|
Portfolio Holdings
|
|
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 (800) SEC-0330. The fund's portfolio holdings are also posted on www.dws-investments.com from time to time. Please see the fund's current prospectus for more information.
|
|
Principal Underwriter
|
|
If you have questions, comments or complaints, contact:
DWS Investments Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148
|
|
Investment Management
|
|
Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset & Wealth Management, is the investment advisor for the fund. DIMA and its predecessors have more than 80 years of experience managing mutual funds and DIMA provides a full range of investment advisory services to both institutional and retail clients. RREEF America L.L.C. ("RREEF"), which is also part of Deutsche Asset Management, is an indirect, wholly owned subsidiary of Deutsche Bank AG, is the subadvisor for the fund.
DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution engaged in a wide variety of financial services, including investment management, retail, private and commercial banking, investment banking and insurance.
DWS Investments is the retail brand name in the U.S. for the asset management activities of Deutsche Bank AG and DIMA. As such, DWS is committed to delivering the investing expertise, insight and resources of this global investment platform to American investors.
|
|
|
|
Class A
|
Class B
|
Class C
|
Class S
|
Institutional Class
|
|
Nasdaq Symbol
|
|
RRRAX
|
RRRBX
|
RRRCX
|
RRREX
|
RRRRX
|
|
CUSIP Number
|
|
23337G 167
|
23337G 175
|
23337G 183
|
23337G 217
|
23337G 829
|
|
Fund Number
|
|
425
|
625
|
725
|
2325
|
595
|
|
For shareholders of Class R
|
|
Automated Information Line
|
|
DWS Investments Flex Plan Access (800) 728-3337
24-hour access to your retirement plan account.
|
|
Web Site
|
|
www.dws-investments.com
Click "Retirement Plans" to reallocate assets, process transactions and review your funds through our secure online account access.
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) 728-3337
To speak with a service representative.
|
|
Written Correspondence
|
|
DWS Investments Service Company
222 South Riverside Plaza
Chicago, IL 60606-5806
|
|
Nasdaq Symbol
|
|
RRRSX
|
|
CUSIP Number
|
|
23337G 191
|
|
Fund Number
|
|
1502
|
|
FACTS
|
|
What Does Deutsche Asset & Wealth Management Do With Your Personal Information?
|
|
Why?
|
|
Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share and protect your personal information. Please read this notice carefully to understand what we do.
|
|
What?
|
|
The types of personal information we collect and share can include:
•
Social Security number
• Account balances
•
Purchase and transaction history
•
Bank account information
•
Contact information such as mailing address, e-mail address and telephone number
|
|
How?
|
|
All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information, the reasons Deutsche Asset & Wealth Management chooses to share and whether you can limit this sharing.
|
|
Reasons we can share your personal information
|
Does Deutsche Asset & Wealth Management share?
|
Can you limit this sharing?
|
|
For our everyday business purposes —
such as to process your transactions, maintain your account(s), respond to court orders or legal investigations
|
Yes
|
No
|
|
For our marketing purposes —
to offer our products and services to you
|
Yes
|
No
|
|
For joint marketing with other financial companies
|
No
|
We do not share
|
|
For our affiliates' everyday business purposes —
information about your transactions and experiences
|
No
|
We do not share
|
|
For our affiliates' everyday business purposes —
information about your creditworthiness
|
No
|
We do not share
|
|
For non-affiliates to market to you
|
No
|
We do not share
|
|
Questions?
|
Call (800) 728-3337 or e-mail us at dws-investments.info@dws.com
|
|
Who we are
|
|
Who is providing this notice?
|
|
DWS Investments Distributors, Inc.; Deutsche Investment Management Americas Inc.; DeAM Investor Services, Inc.; DWS Trust Company; the DWS Funds
|
|
What we do
|
|
How does Deutsche Asset & Wealth Management protect my personal information?
|
|
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
|
|
How does Deutsche Asset & Wealth Management collect my personal information?
|
|
We collect your personal information, for example. When you:
•
open an account
•
give us your contact information
•
provide bank account information for ACH or wire transactions
•
tell us where to send money
•
seek advice about your investments
|
|
Why can't I limit all sharing?
|
|
Federal law gives you the right to limit only
•
sharing for affiliates' everyday business purposes — information about your creditworthiness
•
affiliates from using your information to market to you
•
sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing.
|
|
Definitions
|
|
Affiliates
|
|
Companies related by common ownership or control. They can be financial or non-financial companies. Our affiliates include financial companies with the DWS or Deutsche Bank ("DB") name, such as DB AG Frankfurt and DB Alex Brown.
|
|
Non-affiliates
|
|
Companies not related by common ownership or control. They can be financial and non-financial companies.
Non-affiliates we share with include account service providers, service quality monitoring services, mailing service providers and verification services to help in the fight against money laundering and fraud.
|
|
Joint marketing
|
|
A formal agreement between non-affiliated financial companies that together market financial products or services to you. Deutsche Asset & Wealth Management does not jointly market.
|
Notes
Notes
Notes
Notes
Notes
Notes