N-CSR 1 ar033108af_llr.htm ANNUAL REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

FORM N-CSR

 

Investment Company Act file number

811-04760

 

DWS Advisor Funds

(Exact Name of Registrant as Specified in Charter)

 

345 Park Avenue

New York, NY 10154-0004

(Address of principal executive offices)             (Zip code)

 

Registrant’s Telephone Number, including Area Code: (212) 454-7190

 

Paul Schubert

345 Park Avenue

New York, NY 10154-0004

(Name and Address of Agent for Service)

 

Date of fiscal year end:

03/31

 

Date of reporting period:

03/31/08

 

 

ITEM 1.           REPORT TO STOCKHOLDERS

 

 

 

MARCH 31, 2008

Annual Report
to Shareholders

 

 

DWS Lifecycle Long Range Fund
llr_cover2f0

Contents

click here Performance Summary

click here Information About Your Fund's Expenses

click here Portfolio Management Review

click here Portfolio Summary

click here Investment Portfolio

click here Financial Statements

click here Financial Highlights

click here Notes to Financial Statements

click here Report of Independent Registered Public Accounting Firm

click here Tax Information

click here Summary of Management Fee Evaluation by Independent Fee Consultant

click here Trustees and Officers

click here Account Management Resources

This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.

Investments in mutual funds involve risk. Some funds have more risk than others. Although asset allocation among different asset classes generally limits risk and exposure to any one class, the risk remains that the investment advisor may favor an asset class that performs poorly relative to the other asset classes. The fund is subject to stock market risk, meaning stocks of companies the fund holds may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Bond investments are subject to interest-rate risk such that when interest rates rise, the prices of the bonds, and thus the value of the fund, can decline and the investor can lose principal value. Investing in foreign securities presents certain risks, such as currency fluctuation, political and economic changes and market risks. Additionally, derivatives may be more volatile and less liquid than traditional securities, and the fund could suffer losses on its derivatives positions. Please read this fund's prospectus for specific details regarding its investments and risk profile.

DWS Scudder is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Performance Summary March 31, 2008

Institutional Class

All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-scudder.com for the Fund's most recent month-end performance.

The total annual fund operating expense ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated August 1, 2007 is 0.88% for Institutional Class shares. Please see the Information About Your Fund's Expenses, the Financial Highlights and Notes to the Financial Statements (Note C, Related Parties) sections of this report for gross and net expense related disclosure for the period ended March 31, 2008.

To discourage short-term trading, the Fund imposed a 2% redemption fee on shareholders redeeming shares held less than 15 days, which had the effect of lowering total return.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.

Average Annual Total Returns as of 3/31/08

DWS Lifecycle Long Range Fund

1-Year

3-Year

5-Year

10-Year

Institutional Class

-.40%

6.25%

9.36%

4.89%
Russell 1000® Index+

-5.40%

6.19%

11.86%

3.83%
S&P 500® Index+

-5.08%

5.85%

11.32%

3.50%
MSCI EAFE Index+

-2.70%

13.32%

21.40%

6.18%
Citigroup Broad Investment Grade
Bond Index+

8.41%

5.77%

4.80%

6.13%
Lehman Brothers US Aggregate Index+

7.67%

5.48%

4.58%

6.04%
Asset Allocation Index — Long Range+

-.37%

5.56%

8.16%

4.69%

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

Net Asset Value and Distribution Information

 

Institutional Class

Net Asset Value:

3/31/08

$ 10.22
3/31/07

$ 12.29

Distribution Information:

Twelve Months as of 3/31/08:

Income Dividends

$ .47

Capital Gain Distributions

$ 1.63

Institutional Class Lipper Rankings — Mixed-Asset Target Allocation Moderate Funds Category as of 3/31/08

Period

Rank

 

Number of Funds Tracked

Percentile Ranking (%)
1-Year

153

of

457

34
3-Year

86

of

331

26
5-Year

74

of

235

32
10-Year

43

of

135

31

Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Institutional Class shares; other share classes may vary.

Growth of an Assumed $1,000,000 Investment

[] DWS Lifecycle Long Range Fund — Institutional Class

[] Russell 1000 Index+

[] S&P 500 Index+

[] MSCI EAFE Index+

[] Citigroup Broad Investment Grade Bond Index+

[] Lehman Brothers US Aggregate Index+

[] Asset Allocation Index — Long Range+
llr_g10k270

Yearly periods ended March 31

Comparative Results as of 3/31/08

DWS Lifecycle Long Range Fund

1-Year

3-Year

5-Year

10-Year

Institutional Class

 Growth of $1,000,000

$996,000

$1,199,300

$1,564,200

$1,611,200
Average annual total return

-.40%

6.25%

9.36%

4.89%
Russell 1000 Index+
 Growth of $1,000,000

$946,000

$1,197,500

$1,751,300

$1,456,600
Average annual total return

-5.40%

6.19%

11.86%

3.83%
S&P 500 Index+
 Growth of $1,000,000

$949,200

$1,186,000

$1,709,800

$1,411,100
Average annual total return

-5.08%

5.85%

11.32%

3.50%

The growth of $1,000,000 is cumulative.

The minimum initial investment for the Institutional Class is $1,000,000.

Comparative Results as of 3/31/08

DWS Lifecycle Long Range Fund

1-Year

3-Year

5-Year

10-Year
MSCI EAFE Index+
 Growth of $1,000,000

$973,000

$1,455,000

$2,637,300

$1,822,300
Average annual total return

-2.70%

13.32%

21.40%

6.18%
Citigroup Broad Investment Grade Bond Index+
 Growth of $1,000,000

$1,084,100

$1,183,400

$1,264,000

$1,813,100
Average annual total return

8.41%

5.77%

4.80%

6.13%
Lehman Brothers US Aggregate Index+
 Growth of $1,000,000

$1,076,700

$1,173,500

$1,251,200

$1,797,100
Average annual total return

7.67%

5.48%

4.58%

6.04%
Asset Allocation Index — Long Range+
 Growth of $1,000,000

$996,300

$1,176,100

$1,480,300

$1,581,000
Average annual total return

-.37%

5.56%

8.16%

4.69%

The growth of $1,000,000 is cumulative.

The minimum initial investment for the Institutional Class is $1,000,000.

+ The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Index replaced the S&P 500 as the Fund's benchmark index because the advisor believes that it more accurately reflects the Fund's investment strategy.
The Standard & Poor's 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index is an unmanaged capitalization-weighted index that tracks international stock performance in the 21 developed markets of Europe, Australasia and the Far East. The index is calculated using closing local market prices and translates into US dollars using the London close foreign exchange rates.
The Citigroup Broad Investment Grade Bond Index is an unmanaged index which covers an all inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities.
The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of treasury issues, corporate bond issues and mortgage securities. The Lehman Brothers US Aggregate Index replaced the Citigroup Broad Investment Grade Bond Index because the advisor believes that it more accurately reflects the Fund's investment strategy.
The Asset Allocation Index — Long Range is calculated using the performance of six unmanaged indices representative of stocks (Russell 1000 Index effective January 1, 2007, S&P 500 Index until December 31, 2006, Russell 2000 Index, and MSCI EAFE Index), bonds (Citigroup Broad Investment Grade Bond Index until December 31, 2007, Lehman Brothers US Aggregate Index and Credit Suisse High Yield Index as of January 1, 2008) and cash (Merrill Lynch 3-month US Treasury Bill Index) weighted by their corresponding proportion of the Fund's neutral position (stocks: 60%; bonds: 35%; cash: 5%). These results are summed to produce the aggregate benchmark. The Russell 2000 Index is an unmanaged capitalization-weighted measure of approximately 2,000 small US stocks. Credit Suisse High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the global high-yield debt market. The Merrill Lynch 3-month US Treasury Bill Index is representative of the 3-month Treasury market.
Equity index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Class S

Class S shares are generally not available to new investors except under certain circumstances. (Please see the Fund's Statement of Additional Information.)

All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit www.dws-scudder.com for the Fund's most recent month-end performance.

The total annual fund operating expense ratio, gross of any fee waivers or expense reimbursements, as stated in the fee table of the prospectus dated August 1, 2007 is 0.93% for Class S shares. Please see the Information About Your Fund's Expenses, the Financial Highlights and Notes to the Financial Statements (Note C, Related Parties) sections of this report for gross and net expense related disclosure for the period ended March 31, 2008.

To discourage short-term trading, the Fund imposed a 2% redemption fee on shareholders redeeming shares held less than 15 days, which had the effect of lowering total return.

Returns and rankings during all periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.

Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns and rankings may differ by share class.

On July 25, 2003, Class S shares of the Fund were issued in conjunction with the combination of the Fund and Scudder Lifecycle Long Range Fund, each a feeder fund that had invested all of its investable assets in the same master portfolio. Returns shown for Class S shares for the period prior to July 25, 2003 are derived from the historical performance of the Institutional Class of the DWS Lifecycle Long Range Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of the Class S shares. Any difference in expenses will affect performance.

Average Annual Total Returns as of 3/31/08

DWS Lifecycle Long Range Fund

1-Year

3-Year

5-Year

10-Year

Class S

-.75%

5.94%

8.95%

4.48%
Russell 1000 Index+

-5.40%

6.19%

11.86%

3.83%
S&P 500 Index+

-5.08%

5.85%

11.32%

3.50%
MSCI EAFE Index+

-2.70%

13.32%

21.40%

6.18%
Citigroup Broad Investment Grade Bond Index+

8.41%

5.77%

4.80%

6.13%
Lehman Brothers US Aggregate Index+

7.67%

5.48%

4.58%

6.04%
Asset Allocation Index — Long Range+

-.37%

5.56%

8.16%

4.69%

Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.

Net Asset Value and Distribution Information

 

Class S

Net Asset Value:

3/31/08

$ 9.79
3/31/07

$ 11.85

Distribution Information:

Twelve Months as of 3/31/08:

Income Dividends

$ .42

Capital Gain Distributions

$ 1.63

Class S Lipper Rankings — Mixed-Asset Target Allocation Moderate Funds Category as of 3/31/08

Period

Rank

 

Number of Funds Tracked

Percentile Ranking (%)
1-Year

179

of

457

40
3-Year

105

of

331

32

Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return with distributions reinvested. Rankings are for Class S shares; other share classes may vary.

Growth of an Assumed $10,000 Investment

[] DWS Lifecycle Long Range Fund — Class S

[] Russell 1000 Index+

[] S&P 500 Index+

[] MSCI EAFE Index+

[] Citigroup Broad Investment Grade Bond Index+

[] Lehman Brothers US Aggregate Index+

[] Asset Allocation Index — Long Range+
llr_g10k260

Yearly periods ended March 31

Comparative Results as of 3/31/08

DWS Lifecycle Long Range Fund

1-Year

3-Year

5-Year

10-Year

Class S

 Growth of $10,000

$9,925

$11,891

$15,353

$15,502
Average annual total return

-.75%

5.94%

8.95%

4.48%

The growth of $10,000 is cumulative.

Comparative Results as of 3/31/08

DWS Lifecycle Long Range Fund

1-Year

3-Year

5-Year

10-Year
Russell 1000 Index+
 Growth of $10,000

$9,460

$11,975

$17,513

$14,566
Average annual total return

-5.40%

6.19%

11.86%

3.83%
S&P 500 Index+
 Growth of $10,000

$9,492

$11,860

$17,098

$14,111
Average annual total return

-5.08%

5.85%

11.32%

3.50%
MSCI EAFE Index+
 Growth of $10,000

$9,730

$14,550

$26,373

$18,223
Average annual total return

-2.70%

13.32%

21.40%

6.18%
Citigroup Broad Investment Grade Bond Index+
 Growth of $10,000

$10,841

$11,834

$12,640

$18,131
Average annual total return

8.41%

5.77%

4.80%

6.13%
Lehman Brothers US Aggregate Index+
 Growth of $10,000

$10,767

$11,735

$12,512

$17,971
Average annual total return

7.67%

5.48%

4.58%

6.04%
Asset Allocation Index — Long Range+
 Growth of $10,000

$9,963

$11,761

$14,803

$15,810
Average annual total return

-.37%

5.56%

8.16%

4.69%

The growth of $10,000 is cumulative.

+ The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Index replaced the S&P 500 as the Fund's benchmark index because the advisor believes that it more accurately reflects the Fund's investment strategy.
The Standard & Poor's 500 (S&P 500) Index is an unmanaged, capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index is an unmanaged capitalization-weighted index that tracks international stock performance in the 21 developed markets of Europe, Australasia and the Far East. The index is calculated using closing local market prices and translates into US dollars using the London close foreign exchange rates.
The Citigroup Broad Investment Grade Bond Index is an unmanaged index which covers an all inclusive universe of institutionally traded US Treasury, agency, mortgage and corporate securities.
The Lehman Brothers US Aggregate Index is an unmanaged, market value-weighted measure of treasury issues, corporate bond issues and mortgage securities. The Lehman Brothers US Aggregate Index replaced the Citigroup Broad Investment Grade Bond Index because the advisor believes that it more accurately reflects the Fund's investment strategy.
The Asset Allocation Index — Long Range is calculated using the performance of six unmanaged indices representative of stocks (Russell 1000 Index effective January 1, 2007, S&P 500 Index until December 31, 2006, Russell 2000 Index, and MSCI EAFE Index), bonds (Citigroup Broad Investment Grade Bond Index until December 31, 2007, Lehman Brothers US Aggregate Index and Credit Suisse High Yield Index as of January 1, 2008) and cash (Merrill Lynch 3-month US Treasury Bill Index) weighted by their corresponding proportion of the Fund's neutral position (stocks: 60%; bonds: 35%; cash: 5%). These results are summed to produce the aggregate benchmark. The Russell 2000 Index is an unmanaged capitalization-weighted measure of approximately 2,000 small US stocks. Credit Suisse High Yield Index is an unmanaged, trader-priced portfolio constructed to mirror the global high-yield debt market. The Merrill Lynch 3-month US Treasury Bill Index is representative of the 3-month Treasury market.
Equity index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Information About Your Fund's Expenses

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include 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 (October 1, 2007 to March 31, 2008).

The tables illustrate your Fund's expenses in two ways:

Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.

Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. An account maintenance fee of $6.25 per quarter for Class S shares may apply for certain accounts whose balances do not meet the applicable minimum initial investment. This fee is not included in these tables. If it was, the estimate of expenses paid for Class S shares during the period would be higher, and account value during the period would be lower, by this amount.

Expenses and Value of a $1,000 Investment for the six months ended March 31, 2008

Actual Fund Return

Class S

Institutional Class
Beginning Account Value 10/1/07

$ 1,000.00

$ 1,000.00
Ending Account Value 3/31/08

$ 939.20

$ 940.70
Expenses Paid per $1,000*

$ 3.98

$ 2.67

Hypothetical 5% Fund Return

Class S

Institutional Class
Beginning Account Value 10/1/07

$ 1,000.00

$ 1,000.00
Ending Account Value 3/31/08

$ 1,020.90

$ 1,022.25
Expenses Paid per $1,000*

$ 4.14

$ 2.78
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.

Annualized Expense Ratios

Class S

Institutional Class
DWS Lifecycle Long Range Fund

.82%

.55%

For more information, please refer to the Fund's prospectus.

Portfolio Management Review

DWS Lifecycle Long Range Fund: A Team Approach to Investing

Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for DWS Lifecycle Long Range 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 institutional and retail clients.

Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.

DIMA is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.

Aberdeen Asset Management Inc. ("AAMI"), a US registered investment advisor, is a subadvisor for the fund. With respect to the core bond and active fixed income portions of the fund only, AAMI makes the investment decisions, buys and sells securities, and conducts the research that leads to these purchase and sale decisions. AAMI is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges. AAMI provides a full range of international investment advisory services to institutional and retail clients. AAMI is a direct, wholly owned subsidiary of Aberdeen Asset Management PLC, the parent company of an asset management group formed in 1983.

Portfolio Management Team

The following portfolio managers are responsible for the day-to-day management of the fund's investments, except for the passive equity, core bond and active fixed-income portions of the fund.

Thomas Picciochi

Director of Deutsche Asset Management and Portfolio Manager of the fund.

Joined Deutsche Asset Management in 1999, formerly serving as portfolio manager for Absolute Return Strategies, after 13 years of experience in various research and analysis positions at State Street Global Advisors, FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial Management.

Senior portfolio manager for Quantitative Strategies Portfolio Management: New York.

BA and MBA from University of Miami.

Joined the fund in 2005.

Robert Wang

Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.

Joined Deutsche Asset Management in 1995 as a portfolio manager for asset allocation after 13 years of experience in trading fixed income, foreign exchange and derivative products at J.P. Morgan.

Senior portfolio manager for global and tactical asset allocation portfolios, with a focus on quantitative asset allocation, portfolio risk control and derivatives trading management.

BS, University of Pennsylvania — The Wharton School.

Joined the fund in 2000.

Inna Okounkova

Director of Deutsche Asset Management and Portfolio Manager of the fund.

Global Asset Allocation portfolio manager: New York.

Joined Deutsche Asset Management in 1999 as a quantitative analyst, becoming an associate portfolio manager in 2001.

Joined the fund in 2007.

BS, MS, Moscow State University; MBA, University of Chicago.

Jin Chen, CFA

Director of Deutsche Asset Management and Portfolio Manager of the fund.

Senior portfolio manager for Global Strategies: New York.

Joined Deutsche Asset Management in 1999; prior to that, served as
portfolio manager for Absolute Return Strategies and as a fundamental
equity analyst and portfolio manager for Thomas White Asset Management.

Joined the fund in 2007.

BS, Nanjing University; MS, Michigan State University.

Julie Abbett

Director of Deutsche Asset Management and Portfolio Manager of the fund.

Senior portfolio manager for Global Quantitative Equity: New York.

Joined Deutsche Asset Management in 2000 after four years of combined experience as a consultant with equity trading services for BARRA, Inc. and a product developer for FactSet Research.

Joined the fund in 2007.

BA, University of Connecticut.

Gary Sullivan, CFA

Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.

Joined Deutsche Asset Management in 1996 and the fund in 2007. Served as the head of the High Yield group in Europe and as an Emerging Markets portfolio manager.

Prior to that, four years at Citicorp as a research analyst and structurer of collateralized mortgage obligations. Prior to Citicorp, served as an officer in the US Army from 1988 to 1991.

BS, United States Military Academy (West Point); MBA, New York University, Stern School of Business.

Matthias Knerr, CFA

Managing Director, Deutsche Asset Management and Portfolio Manager of the fund.

Joined Deutsche Asset Management in 1995 as a member of the International Equity team, serving as portfolio manager and investment analyst, and joined the fund in 2007.

Senior portfolio manager for International Select Equity and International Equity Strategies: New York.

Previously served as portfolio manager for the Deutsche European Equity Fund and the Deutsche Global Select Equity Fund, and as head of global equity research team for Capital Goods sector: London.

BS, Pennsylvania State University.

The following portfolio managers are responsible for the day-to-day management of the core bond and active fixed-income portion of the fund.

Gary W. Bartlett, CFA

Head of US Fixed Income and senior portfolio manager specializing in taxable municipal, utility and government fixed income investments: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1992 after nine years of experience as an analyst and fixed income portfolio manager at PNC Financial and credit analyst at First Pennsylvania Bank.

BA from Bucknell University; MBA from Drexel University.

Warren S. Davis, III

Senior portfolio manager for mortgage- and asset-backed fixed income investments: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1995 after nine years of experience as a trader, analyst and developer of analytical and risk management systems for PaineWebber and Merrill Lynch.

BS from Pennsylvania State University; MBA from Drexel University.

Thomas J. Flaherty

Senior portfolio manager for corporate and taxable municipal fixed income investments: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1995 after 10 years of fixed income experience, including vice president for US taxable fixed income securities at Prudential Securities.

BA from SUNY Stony Brook.

J. Christopher Gagnier

Head of Core Plus Fixed Income product and senior portfolio manager for corporate and commercial mortgages: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1997 after 17 years of experience in fixed income investments at PaineWebber and Continental Bank.

BS from Wharton School of Business; MBA from University of Chicago.

Daniel R. Taylor, CFA

Senior portfolio manager for asset-backed and commercial mortgage fixed income investments: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1998 after six years of experience as fixed income portfolio manager and senior credit analyst for CoreStates Investment Advisors.

BS from Villanova University.

Timothy C. Vile, CFA

Senior portfolio manager for Core Fixed Income and Global Aggregate Fixed Income: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Managing Director of Deutsche Asset Management; joined Deutsche Asset Management in 1991 as member of Core Fixed Income; seconded to the London office from January 1999 to June 2002 to design and develop the firm's European Credit and Global Aggregate capabilities; before joining Deutsche Asset Management, he had six years of experience that included portfolio manager for fixed income portfolios at Equitable Capital Management.

BS from Susquehanna University.

William T. Lissenden

Portfolio manager for Core Fixed Income: Philadelphia.

Joined Aberdeen Asset Management Inc. and the fund in 2005.

Formerly, Director of Deutsche Asset Management; joined Deutsche Asset Management in 2002 after 31 years of experience, including fixed income strategist and director of research at Conseco Capital Management, director of fixed income research and product management at Prudential Securities and national sales manager for fixed income securities at Prudential Securities.

BS from St. Peter's College; MBA from Baruch College.

In the following interview, Portfolio Managers Thomas Picciochi, Inna Okounkova and Robert Wang address the economy, markets, portfolio management strategy and resulting performance of DWS Lifecycle Long Range Fund for the 12 months ended March 31, 2008.

The views expressed in the following discussion reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The management team's views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Past performance is no guarantee of future results.

Q: How would you describe market conditions over the last year?

A: The tone of the US equity market has changed considerably over the last 12 months. Except for a period of weakness in late February and early March, equity markets were quite strong during the first half of 2007. By the end of May, most indices were at or near their all-time highs. Following an increase in volatility during the summer, a September rally was sparked in part by the first of the US Federal Reserve Board's (the Fed's) series of interest rate reductions.

The last quarter of 2007 and the early months of 2008 represented a period of considerable economic uncertainty and significant turmoil throughout capital markets. What began as a correction in the US housing market accelerated into a crisis in the subprime mortgage market with profound implications for the entire economy. By early 2008, there had been pronounced changes in attitudes toward risk in financial markets, as demonstrated by wider credit spreads, severe dislocation in short-term credit markets, overall tightening of financial conditions and an increasingly volatile equity market. The Fed reduced interest rates six times between September 2007 and March 2008, striving to strike a balance between providing liquidity to financial markets and keeping inflation at a moderate level. Even with this stimulus, recent trends in employment, consumer spending and other indicators have led many economists to forecast that the US will experience a recession during 2008.

In this challenging economic environment, most US equity indices posted negative returns for the 12 months ended March 31, 2008. The Russell 3000® Index, which is generally regarded as a good indicator of the broad stock market, posted a negative return of -6.06% for the period.1 There was a change in market leadership in 2007: After a period of approximately seven years during which small-cap stocks generally outperformed large-cap stocks, large-cap stocks regained market leadership as investors became less comfortable with risk. The Russell 1000® Index, which measures performance of large-cap stocks, returned -5.40%, while the small-cap Russell 2000® Index returned -13.00%.2 Growth stocks performed better than value stocks: the Russell 3000® Growth Index returned -1.45%, while the Russell 3000® Value Index returned -10.60%.3 Most international markets performed better than the US market: return of the MSCI EAFE® Index, which measures performance of a broad range of international markets, was -2.70%.4 Emerging markets were much stronger than developed markets: return of the MSCI Emerging Markets Index was 21.33%.5

1 The Russell 3000 Index is an unmanaged index that measures the performance of the 3,000 largest US companies based on total market capitalization, which represents approximately 98% of the investable US equity market.
2 The Russell 1000 Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 2000 Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
3 The Russell 3000 Growth Index is an unmanaged index that measures the performance of those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 3000 Value Index is an unmanaged index that measures the performance of those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values.
4 The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index is an unmanaged capitalization-weighted index that tracks international stock performance in the 21 developed markets of Europe, Australasia and the Far East. The index is calculated using closing local market prices and translates into US dollars using the London close foreign exchange rates.
Equity index returns assume reinvestment of dividends and, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.
5 The MSCI Emerging Markets Index is a float-adjusted capitalization-weighted index created by Morgan Stanley Capital International to measure market performance in global emerging markets.
MSCI indices are calculated using closing market prices and translate to US dollars using the London close foreign exchange rates.

Returns in the US fixed-income market were positive, with the best returns from the least risky securities, particularly near the end of the period, as investors demonstrated a reduced tolerance for risk. In recent months, the market for non-government-backed bonds has experienced unprecedented volatility, as investors sought to avoid risk. The Lehman Brothers US Aggregate Index, which measures return of the bond market as a whole, posted a return of 7.67%.6 Return of the Merrill Lynch 1-5 Year Treasury Index was 10.58%.7 Returns on cash equivalents were less than bond returns; return of the Merrill Lynch 3-month T-bill index was 4.62%.8

6 The Lehman Brothers US Aggregate Index is an unmanaged, market-value-weighted measure of treasury issues, corporate bond issues and mortgage securities.
7 The Merrill Lynch 1-5 Year US Treasury index is an index of US Treasury securities with maturities of one to five years. It is constructed by Merrill Lynch & Co. and is frequently used as a measure of returns on US Treasury securities.
8 The Merrill Lynch 3-month T-bill index is an index of US Treasury securities with maturities of three months or less. It is constructed by Merrill Lynch & Co. and is frequently used as a measure of short-term returns on cash investments.
Equity index returns assume reinvestment of dividends and, unlike fund returns, do not reflect any fees or expenses. It is not possible to invest directly into an index.

Q: How is DWS Lifecycle Long Range Fund managed?

A: The fund invests in a mix of stocks, bonds and short-term investments, with a strategic allocation to each asset class. To derive the strategic asset allocation we use a proprietary methodology that consists of several steps. First, we derive long-term equilibrium return forecasts, taking into account long-term factors such as productivity rates and inflation expectations. Then we combine the equilibrium returns with medium-term views. Finally we use the medium-term forecasts to derive optimal asset allocation using a proprietary optimization system. The current target allocation is 43% in large-cap equities, 7% in small-cap equities, 10% in international equities, 32% in investment-grade bonds, 3% in high-yield bonds and 5% in cash equivalents. We review strategic asset allocation at least annually.

In the equity portion of the portfolio, we use several quantitative and qualitative security selection strategies designed to achieve long-term outperformance by systematically exploring market inefficiency. For US equities, our quantitative stock selection model uses a broad range of information from companies' balance sheets, income statements and cash flow statements. The signals are selected based on statistical evidence and economic intuition.

In managing the bond portion of the portfolio, we use a core fixed-income strategy to select bonds based on a number of characteristics, in an effort to outperform the Lehman Brothers US Aggregate Index. We have also allocated a smaller portion of the fixed-income to high-yield bonds since the end of 2007.

In addition to the main investment strategy, we employ a Global Tactical Asset Allocation (GTAA) overlay, which is designed to add value by benefiting from short-term mispricings within global equity, bond and currency markets. This strategy is expected to have a low correlation to the fund's security holdings. It utilizes stock and bond futures and currency forwards to take long and short positions in different asset classes without having to make dramatic shifts in the stock, bond and cash allocations of the underlying strategies, which are maintained at the percentages specific to the fund and are rebalanced to these percentages each month.9

9 Futures and options are used as a low-cost method for gaining exposure to a particular securities market without investing directly in those securities. Forward currency transactions are the purchase or sale of a foreign currency at an exchange rate established now, but with payment and delivery at a specified future time. Forward currency transactions are used as hedges and, where possible, to add to investment returns.

The GTAA strategy combines diverse macro investment views from various investment teams within Deutsche Asset Management. Since a single investment approach rarely works in all market conditions, the teams are chosen to diversify investment approaches, thereby enhancing the expected return for a given level of risk. The collective views are then used to determine GTAA's positions using a disciplined risk-managed process. The result is a collection of long and short investment positions within global equity, bond and currency markets designed to generate excess returns that have little correlation to major markets.10 The positions are then implemented by the GTAA portfolio managers using futures and forward contracts. The GTAA portfolio managers consider factors such as liquidity, cost, margin requirement and credit quality when selecting the appropriate derivative instrument.11

10 Long positions represent ownership of a security in the expectation that its price will rise. Short positions represent the sale of a contract on a security that is not owned.
11 Credit quality is a measure of a bond issuer's ability to repay interest and principal in a timely manner. Rating agencies assign letter designations such as AAA, AA, and so forth. The lower the rating, the higher the probability of default.

Q: How did the fund perform during the period?

A: We find that the best way to evaluate performance is to compare returns to those of a peer group of funds that allocate assets among several asset classes. For the 12 months ended March 31, 2008, DWS Lifecycle Long Range Fund had a return of -0.40% (Institutional Class). The fund outperformed its Lipper peer group of Mixed-Asset Target Allocation Moderate Funds, which had an average return of -1.68%.12

12 The Lipper Mixed-Asset Target Allocation Moderate Funds category is a group of mutual funds that, by portfolio practice, maintain a mix of 0% to 60% equity securities, with the remainder invested in bonds, cash and cash equivalents. Category returns assume reinvestment of dividends. It is not possible to invest directly into a Lipper category.

Q: What decisions had the greatest effect on the fund's performance over the period?

A: The fund's strategic asset allocation contributed to performance. During this fiscal year, we have implemented significant changes to the strategy of the fund. We diversified further its strategic asset allocation, adding three new asset classes: international equities, US small-cap equities and high-yield bonds. Because of these changes, turnover was higher than usual, as we adjusted the portfolio to reflect a wider range of investment options. Because of the new asset categories now included in the portfolio, there are far more holdings than in the past.

It is too early to analyze the impact of the new strategic asset allocation, as the transition was completed at the end of March. Prior to that, strategic asset allocation of the fund was static and it was represented by three major asset classes: US large cap equities with 55% allocation, investment grade bonds with 35% allocation and cash with a 10% allocation. The current target strategic mix is:

US large cap equities

43%

US small cap equities

7%

International equities

10%

Investment grade bonds

32%

High-Yield bonds

3%

Cash

5%

Asset allocation are subject to change.

Going forward strategic asset allocation of the fund will be reviewed periodically.

The Global Tactical Asset Allocation overlay made a positive contribution to return over the period and was a major factor that enabled the fund to outperform its peer group. Positive performance came mainly from the equity and currency positions. In equities, the major contributors were a long position in the Hang Seng Stock Index and a short position in the S&P 500® Index.13 Strength in Asian economies caused Asian equity markets to rally to new highs during 2007, while US equity markets struggled from credit concerns and weakening economic fundamentals. In currencies, long positions in the major G10 currencies contributed to performance, as the US dollar weakened significantly against most of these currencies.14 The New Zealand dollar, one of the fund's largest long currency positions, was the largest contributor as strength in carry trades during the latter half of 2007 helped this high-yielding currency.15 In fixed income, positive performance from the fund's net long fixed-income position was offset by a predominantly short US Treasury position.

13 The Hang Seng Stock Index is a free float-adjusted capitalization-weighted index used to measure performance of the Hong Kong stock market. Index returns assume reinvestment of dividends and, unlike fund returns, do not include fees or expenses. It is not possible to invest directly into an index.
14 The G10 currencies are currencies of a group of countries whose central banks have agreed to participate in a borrowing agreement under which financial resources are made available to all participants. Current members are Brazil, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.
15 Carry trade is a strategy in which an investor sells a certain currency with a relatively low interest rate and uses the proceeds to purchase a different currency yielding a higher interest rate. 

The major negative effect on performance was the core fixed-income strategy. During this period when the least risky bonds performed best, the portfolio's fixed-income sleeve was overweight relative to the Lehman Brothers US Aggregate Index in bonds that carry a greater degree of credit risk.16 In an extraordinarily volatile bond market, spreads between government-backed bonds and bonds that carry some degree of credit risk have widened dramatically. However, the fixed-income sleeve managers believe that technical trends cannot cause a bond to default, and the underlying credit quality of bonds will drive their returns over the long term. In managing the fixed-income sleeve of the portfolio, they continue to focus on fundamentals and to position the portfolio to benefit from a future recovery in the market.

16 "Overweight" means the fund holds a higher weighting in a given sector or security than the benchmark. "Underweight" means the fund holds a lower weighting.

Q: Do you have other comments for shareholders?

A: While the current environment involves risks including a slowing in the US economy and political instability in many parts of the world, we believe there is potential for global economic growth over the long term. During times of uncertainty with regard to geopolitical risks, economic growth and inflation, this fund, with its investments in multiple asset classes, could be a good investment because of its relatively low volatility and good risk-adjusted returns. Of course, past performance is no guarantee of future results.

We believe that a disciplined asset allocation fund such as DWS Lifecycle Long Range Fund offers investors the potential to take advantage of a wide range of investment opportunities with a moderate degree of risk.

Portfolio Summary

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)

3/31/08

3/31/07

 

 

 

Common Stocks

58%

53%

Bonds

35%

35%

Cash Equivalents

7%

12%

 

100%

100%

Geographical Diversification (As a % of Common Stocks)

3/31/08

3/31/07

 

 

 

United States

78%

100%

Europe (excluding United Kingdom)

9%

—

Japan

2%

—

Pacific Basin

3%

—

United Kingdom

2%

—

Other

6%

—

 

100%

100%

Asset allocation and geographical diversification are subject to change.

Five Largest Equity Holdings at March 31, 2008 (6.2% of Net Assets)
1. ExxonMobil Corp.
Explorer and producer of oil and gas

2.0%
2. Microsoft Corp.
Developer of computer software

1.3%
3. Pfizer, Inc.
Manufacturer of prescription pharmaceuticals and non-prescription self-medications

1.0%
4. Chevron Corp.
Operator of petroleum exploration, delivery and refining facilities

1.0%
5. Verizon Communications, Inc.
Provider of advanced communication and information technology services

0.9%

Five Largest Fixed-Income Long-Term Securities at March 31, 2008 (3.9% of Net Assets)
1. US Treasury Note
4.875%, 8/31/2008

1.4%
2. US Treasury Bond
4.75%, 2/15/2037

1.0%
3. US Treasury Note
3.5%, 2/15/2018

0.6%
4. Wells Fargo Mortgage Backed Securities Trust
5.109%, 3/25/2036

0.5%
5. SPI Electricity Property Ltd.
7.25%, 12/1/2016

0.4%

Portfolio holdings are subject to change.

For more complete details about the Fund's investment portfolio, see page 25. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end will be posted to www.dws-scudder.com on or after the last day of the following month. In addition, the Fund's top ten holdings and other information about the Fund is posted on www.dws-scudder.com as of the calendar quarter-end on or after the 15th day following quarter-end. Please see the Account Management Resources section for contact information.

Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.

Investment Portfolio as of March 31, 2008

 


Shares

Value ($)

 

 

Common Stocks 57.9%

Consumer Discretionary 6.1%

Auto Components 0.5%

Aftermarket Technology Corp.*

7,100

138,024

Aisin Seiki Co., Ltd.

100

3,749

American Axle & Manufacturing Holdings, Inc.

6,100

125,050

Amerigon, Inc.*

6,100

90,280

Autoliv, Inc.

38,100

1,912,620

Bridgestone Corp.

400

6,835

Compagnie Generale des Etablissements Michelin "B"

157

16,386

Continental AG

138

14,063

Cooper Tire & Rubber Co.

16,700

249,999

Denso Corp.

300

9,724

Lear Corp.*

10,600

274,646

Magna International, Inc. "A"

500

36,358

Nokian Renkaat Oyj

17,635

752,541

Rieter Holding AG (Registered)

24

9,182

Toyota Industries Corp.

200

7,219

 

3,646,676

Automobiles 0.1%

Daimler AG (Registered)

823

70,308

Fiat SpA

4,201

97,034

Honda Motor Co., Ltd.

900

25,794

Nissan Motor Co., Ltd.

1,400

11,619

PSA Peugeot Citroen

169

13,126

Renault SA

194

21,465

Suzuki Motor Corp.

26,000

658,247

Toyota Motor Corp.

1,500

75,595

Volkswagen AG

138

40,000

 

1,013,188

Distributors 0.0%

Li & Fung Ltd.

40,000

148,887

Diversified Consumer Services 0.1%

DeVry, Inc.

7,600

317,984

Sotheby's

3,900

112,749

 

430,733

Hotels Restaurants & Leisure 1.0%

Accor SA

229

16,721

AFC Enterprises, Inc.*

3,500

31,465

Aristocrat Leisure Ltd.

3,352

29,499

Bob Evans Farms, Inc.

10,700

295,213

Carnival PLC

221

8,856

CEC Entertainment, Inc.*

1,400

40,432

Chipotle Mexican Grill, Inc. "B"*

1,400

135,926

CKE Restaurants, Inc.

26,800

300,696

Compass Group PLC

2,073

13,256

Enterprise Inns PLC

717

5,705

InterContinental Hotel Group PLC

373

5,637

Lottomatica SpA

456

14,216

P.F. Chang's China Bistro, Inc.*

9,900

281,556

Premier Exhibitions, Inc.*

5,400

32,616

Royal Caribbean Cruises Ltd.

39,400

1,296,260

Shangri-La Asia Ltd.

22,000

59,689

Sodexho Alliance SA

129

7,941

TABCORP Holdings Ltd.

5,134

66,391

Tatts Group Ltd.

10,534

33,502

Town Sports International Holdings, Inc.*

14,500

92,945

TUI AG*

232

5,948

Whitbread PLC

338

7,827

WMS Industries, Inc.*

8,200

294,954

Yum! Brands, Inc.

126,200

4,695,902

 

7,773,153

Household Durables 0.5%

American Greetings Corp. "A"

11,300

209,615

Blyth, Inc.

7,100

140,012

CSS Industries, Inc.

7,500

262,200

Daiwa House Industry Co., Ltd.

1,000

10,018

Electrolux AB "B"

1,200

19,729

Garmin Ltd.

30,500

1,647,305

Hooker Furniture Corp.

9,700

216,698

Husqvarna AB "B"

1,300

15,673

La-Z-Boy, Inc.

1,900

15,846

Libbey, Inc.

8,000

134,720

Makita Corp.

7,000

220,508

Matsushita Electric Industrial Co., Ltd.

1,000

21,728

NVR, Inc.*

1,100

657,250

Persimmon PLC

383

5,814

Pioneer Corp.

16,100

160,414

Sekisui House Ltd.

1,000

9,287

Sharp Corp.

1,000

17,052

Sony Corp.

600

24,001

Taylor Wimpey PLC

1,575

5,859

Tupperware Brands Corp.

4,400

170,192

 

3,963,921

Internet & Catalog Retail 0.1%

FTD Group, Inc.

15,600

209,352

GSI Commerce, Inc.*

4,700

61,805

Home Retail Group PLC

1,046

5,423

Priceline.com, Inc.*

1,100

132,946

Systemax, Inc.

14,300

172,458

 

581,984

Leisure Equipment & Products 0.0%

Callaway Golf Co.

11,300

165,884

JAKKS Pacific, Inc.*

2,400

66,168

Sturm, Ruger & Co., Inc.*

900

7,416

 

239,468

Media 1.9%

British Sky Broadcasting Group PLC

1,175

13,021

DG Fastchannel, Inc.*

9,900

189,882

DISH Network Corp. "A"*

125,000

3,591,250

Fairfax Media Ltd.

11,534

36,689

Gestevision Telecinco SA

6,796

138,299

Global Sources Ltd.*

7,240

107,514

ITV PLC

4,753

5,970

Lagardere SCA

166

12,427

Liberty Global, Inc. "A"*

100,300

3,418,224

Mediaset SpA

4,231

39,234

Modern Times Group MTG AB "B"

250

17,439

Pearson PLC

966

13,053

Publicis Groupe

212

8,108

Reed Elsevier NV

1,844

35,181

Reed Elsevier PLC

1,235

15,739

Regal Entertainment Group "A"

21,100

407,019

Reuters Group PLC

1,263

14,536

Scholastic Corp.*

10,100

305,727

Seat Pagine Gialle SpA

27,435

4,760

Shaw Communications, Inc. "B"

1,700

31,103

Singapore Press Holdings Ltd.

293,000

982,943

The DIRECTV Group, Inc.*

174,000

4,313,460

Thomson Corp.

1,100

36,994

Vivendi

1,187

46,434

Wolters Kluwer NV

890

23,582

WPP Group PLC

1,283

15,300

Yell Group PLC

1,016

3,105

Yellow Pages Income Fund (Unit)

1,300

13,286

 

13,840,279

Multiline Retail 0.0%

Canadian Tire Corp. Ltd. "A"

400

25,817

Marks & Spencer Group PLC

1,707

13,116

Next PLC

252

5,695

PPR

86

12,770

 

57,398

Specialty Retail 1.6%

Best Buy Co., Inc.

80,700

3,345,822

Christopher & Banks Corp.

20,200

201,798

Esprit Holdings Ltd.

77,200

925,651

Hennes & Mauritz AB "B"

2,125

130,734

Hot Topic, Inc.*

20,800

89,648

Industria de Diseno Textil SA

15,074

837,454

Jo-Ann Stores, Inc.*

11,400

167,922

Kingfisher PLC

2,909

7,618

New York & Co., Inc.*

21,900

125,706

Office Depot, Inc.*

135,800

1,500,590

Rent-A-Center, Inc.*

16,200

297,270

RONA, Inc.*

700

9,732

Shoe Carnival, Inc.*

6,400

86,592

The Buckle, Inc.

5,700

254,961

TJX Companies, Inc.

106,900

3,535,183

West Marine, Inc.*

6,200

43,214

Yamada Denki Co., Ltd.

70

6,064

 

11,565,959

Textiles, Apparel & Luxury Goods 0.3%

Adidas AG

3,993

265,648

Billabong International Ltd.

1,725

20,604

Burberry Group PLC

630

5,632

Compagnie Financiere Richemont SA "A" (Unit)

9,176

515,295

Fossil, Inc.*

8,700

265,698

G-III Apparel Group Ltd.*

6,700

89,914

Gildan Activewear, Inc.*

600

22,633

Hermes International

82

10,238

Luxottica Group SpA

740

18,636

LVMH Moet Hennessy Louis Vuitton SA

250

27,870

Movado Group, Inc.

6,800

132,532

Oxford Industries, Inc.

3,900

87,867

Perry Ellis International, Inc.*

11,300

246,679

Swatch Group AG (Bearer)

143

38,222

Swatch Group AG (Registered)

241

12,374

The Warnaco Group, Inc.*

6,100

240,584

 

2,000,426

Consumer Staples 4.7%

Beverages 0.9%

Asahi Breweries Ltd.

1,100

22,757

Carlsberg AS "B"

3,925

502,139

Coca-Cola Amatil Ltd.

3,041

23,623

Diageo PLC

2,872

57,902

Foster's Group Ltd.

10,895

50,980

Heineken NV

1,014

58,925

InBev NV

6,320

557,210

Kirin Holdings Co., Ltd.

2,000

38,069

Pepsi Bottling Group, Inc.

82,200

2,787,402

PepsiAmericas, Inc.

2,100

53,613

PepsiCo, Inc.

40,000

2,888,000

Pernod Ricard SA

460

47,370

SABMiller PLC

1,041

22,804

Scottish & Newcastle PLC

992

15,555

 

7,126,349

Food & Staples Retailing 1.4%

Aeon Co., Ltd.

1,700

20,556

Alimentation Couche-Tard, Inc. "B"

1,800

28,216

BJ's Wholesale Club, Inc.*

29,200

1,042,148

Carrefour SA

1,564

120,648

Casino Guichard-Perrachon SA

123

14,760

Colruyt SA

122

31,501

Delhaize Group

731

57,474

George Weston Ltd.

700

32,202

Ingles Markets, Inc. "A"

4,500

110,655

J Sainsbury PLC

1,965

13,374

Kesko Oyj "B"

199

10,287

Koninklijke Ahold NV*

5,352

79,412

Kroger Co.

144,800

3,677,920

Loblaw Companies Ltd.

1,400

41,477

Metro AG

2,070

167,127

Olam International Ltd.

59,000

93,101

Ruddick Corp.

2,200

81,092

Safeway, Inc.

23,200

680,920

Seven & I Holdings Co., Ltd.

2,100

53,381

Shoppers Drug Mart Corp.

4,800

242,888

Tesco PLC

8,774

66,275

Wal-Mart Stores, Inc.

66,200

3,487,416

Wesfarmers Ltd.

2,182

80,098

Woolworths Ltd.

6,525

173,375

 

10,406,303

Food Products 0.5%

Ajinomoto Co., Inc.

2,000

20,469

Cadbury Schweppes PLC

2,401

26,372

Cal-Maine Foods, Inc.

6,600

220,308

Danisco AS

1,250

91,342

Darling International, Inc.*

1,600

20,720

Flowers Foods, Inc.

17,500

433,125

Fresh Del Monte Produce, Inc.*

9,600

349,440

Groupe Danone

1,115

99,803

IAWS Group PLC

3,674

86,362

Imperial Sugar Co.

7,800

146,796

Kerry Group PLC "A"

3,767

117,523

Nestle SA (Registered)

2,227

1,113,305

Nissin Food Products Co., Ltd.

200

6,751

Parmalat SpA

4,471

17,172

Saputo, Inc.

1,800

48,540

Tate & Lyle PLC

684

7,329

Unilever NV (CVA)

7,132

239,653

Unilever PLC

1,440

48,584

Wm. Wrigley Jr. Co.

6,300

395,892

Yakult Honsha Co., Ltd.

300

9,348

 

3,498,834

Household Products 0.6%

Colgate-Palmolive Co.

55,200

4,300,632

Kao Corp.

1,000

28,360

Procter & Gamble Co.

3,000

210,210

 

4,539,202

Personal Products 0.5%

Beiersdorf AG

1,136

95,549

Herbalife Ltd.

80,100

3,804,750

L'Oreal SA

650

82,667

Shiseido Co., Ltd.

1,000

26,461

 

4,009,427

Tobacco 0.8%

Altria Group, Inc.

54,500

1,209,900

British American Tobacco PLC

1,673

62,780

Imperial Tobacco Group PLC

4,963

228,307

Japan Tobacco, Inc.

165

827,297

Loews Corp. — Carolina Group

5,300

384,515

Philip Morris International, Inc.*

54,500

2,756,610

Swedish Match AB

18,600

405,307

 

5,874,716

Energy 7.4%

Energy Equipment & Services 1.6%

Acergy SA

500

10,693

Aker Kvaerner ASA

450

10,297

Atwood Oceanics, Inc.*

3,300

302,676

Bristow Group, Inc.*

5,900

316,653

Dawson Geophysical Co.*

2,200

148,500

FMC Technologies, Inc.*

17,000

967,130

Fugro NV (CVA)

1,167

90,613

Global Industries Ltd.*

131,500

2,115,835

Grey Wolf, Inc.*

35,700

242,046

Gulf Island Fabrication, Inc.

3,700

106,264

Oil States International, Inc.*

200

8,962

Petroleum Geo-Services ASA

450

11,191

Prosafe SE

500

7,882

SBM Offshore NV

2,847

91,812

Seadrill Ltd.

700

18,845

Superior Energy Services, Inc.*

68,400

2,710,008

Technip SA

115

8,900

Transocean, Inc.*

32,338

4,372,098

Union Drilling, Inc.*

11,700

204,633

WorleyParsons Ltd.

594

18,244

 

11,763,282

Oil, Gas & Consumable Fuels 5.8%

Alpha Natural Resources, Inc.*

6,200

269,328

BG Group PLC

22,315

516,767

Bois d'Arc Energy, Inc.*

13,600

292,264

BP PLC

5,924

59,983

Brigham Exploration Co.*

13,800

83,766

Caltex Australia Ltd.

620

7,391

Cameco Corp.

200

6,594

Canadian Natural Resources Ltd.

300

20,538

Canadian Oil Sands Trust (Unit)

200

8,086

Chevron Corp.

83,640

7,139,510

Clayton Williams Energy, Inc.*

5,900

309,691

Comstock Resources, Inc.*

9,600

386,880

ConocoPhillips

77,600

5,913,896

Enbridge, Inc.

200

8,248

EnCana Corp.

400

30,474

Eni SpA

4,950

168,733

ExxonMobil Corp.

180,200

15,241,316

Frontline Ltd.

39,600

1,822,392

Gazprom (ADR) (REG S)

14,750

752,838

Hess Corp.

41,800

3,685,924

Husky Energy, Inc.

200

7,831

Imperial Oil Ltd.

200

10,483

INPEX Holdings, Inc.

8

89,807

KazMunaiGas Exploration Production (GDR) 144A

11,500

288,075

Knightsbridge Tankers Ltd.

2,800

74,704

Mariner Energy, Inc.*

13,000

351,130

Nexen, Inc.

300

8,903

Nippon Mining Holdings, Inc.

9,500

50,596

Nippon Oil Corp.

13,000

82,096

OMV AG

2,431

160,633

Origin Energy Ltd.

2,837

23,798

Paladin Energy Ltd.*

2,182

10,216

Petro-Canada

300

13,070

Petroleo Brasileiro SA (ADR)

3,500

357,385

PetroQuest Energy, Inc.*

17,100

296,514

Repsol YPF SA

13,503

466,008

Royal Dutch Shell PLC "A"

1,131

39,020

Royal Dutch Shell PLC "B"

862

29,015

Santos Ltd.

2,378

31,821

St. Mary Land & Exploration Co.

2,600

100,100

StatoilHydro ASA

22,900

688,584

Suncor Energy, Inc.

200

19,331

Sunoco, Inc.

49,500

2,597,265

Swift Energy Co.*

6,600

296,934

Talisman Energy, Inc.

700

12,419

TonenGeneral Sekiyu KK

2,000

17,137

Total SA

8,550

635,769

Woodside Petroleum Ltd.

1,604

79,839

 

43,563,102

Financials 8.9%

Capital Markets 2.7%

3i Group PLC

36,920

608,077

Bank of New York Mellon Corp.

122,700

5,120,271

Charles Schwab Corp.

197,400

3,717,042

Credit Suisse Group (Registered)

847

43,103

Daiwa Securities Group, Inc.

1,000

8,705

GFI Group, Inc.

500

28,650

IGM Financial, Inc.

200

8,805

Janus Capital Group, Inc.

15,600

363,012

Lehman Brothers Holdings, Inc.

79,200

2,981,088

Mediobanca SpA

1,048

21,471

Nomura Holdings, Inc.

1,300

19,557

Northern Trust Corp.

75,000

4,985,250

Prospect Capital Corp.

17,396

264,767

Raymond James Financial, Inc.

17,200

395,256

The Goldman Sachs Group, Inc.

4,600

760,794

UBS AG (Registered)

1,659

48,287

Waddell & Reed Financial, Inc. "A"

12,400

398,412

 

19,772,547

Commercial Banks 2.2%

Allied Irish Banks PLC

7,336

155,278

Australia & New Zealand Banking Group Ltd.

1,305

27,006

Banca Monte dei Paschi di Siena SpA

1,361

6,021

Banca Popolare di Milano Scarl

596

6,538

Banco Bilbao Vizcaya Argentaria SA

4,032

88,799

Banco Bradesco SA (ADR) (Preferred)

12,700

352,552

Banco Comercial Portugues SA (Registered)

37,880

123,175

Banco Espirito Santo SA (Registered)

4,453

77,444

Banco Popular Espanol SA

820

14,888

Banco Santander SA

6,459

128,688

BanColombia SA (ADR) (REG S) (Preferred)

5,200

184,392

Bank of East Asia Ltd.

4,000

20,120

Bank of Ireland

8,336

123,417

Bank of Montreal

400

17,906

Bank of Nova Scotia

800

36,280

Barclays PLC

2,184

19,773

BB&T Corp.

5,500

176,330

BNP Paribas

3,411

344,698

BOC Hong Kong (Holdings) Ltd.

10,000

24,099

Boston Private Financial Holdings, Inc.

6,600

69,894

Canadian Imperial Bank of Commerce

300

19,319

Center Financial Corp.

2,300

20,838

Citizens Republic Bancorp., Inc.

1,800

22,374

City Holding Co.

2,900

115,710

Commerzbank AG

967

30,263

Commonwealth Bank of Australia

903

34,650

Community Bank System, Inc.

1,300

31,928

Credit Agricole SA

542

16,805

Danske Bank AS

5,200

192,163

DBS Group Holdings Ltd.

8,000

105,225

Deutsche Postbank AG

94

8,982

Dexia SA

985

28,062

DnB NOR ASA

8,400

128,025

Erste Bank der oesterreichischen Sparkassen AG

8,141

529,812

First Financial Bankshares, Inc.

800

32,784

FirstMerit Corp.

10,400

214,864

Grupo Financiero Banorte SAB de CV "O"

74,800

324,003

Hang Seng Bank Ltd.

1,900

34,572

HBOS PLC

1,192

13,244

HSBC Holdings PLC (Registered)

44,914

739,730

Hypo Real Estate Holding AG

213

5,543

ICICI Bank Ltd. (ADR)

1,400

53,466

Intesa Sanpaolo

89,515

632,578

Intesa Sanpaolo (RNC)

641

4,232

Jyske Bank AS (Registered)*

700

47,064

KBC Groep NV

2,558

331,652

Lloyds TSB Group PLC

1,913

17,163

Mitsubishi UFJ Financial Group, Inc.

5,300

46,131

Mizuho Financial Group, Inc.

6

22,113

National Australia Bank Ltd.

1,170

32,399

National Bank of Canada

200

9,321

National Bank of Greece SA

5,500

292,008

National Penn Bancshares, Inc.

8,600

156,434

NBT Bancorp., Inc.

1,400

31,080

Nordea Bank AB

6,000

97,386

Old National Bancorp.

9,800

176,400

Oriental Financial Group, Inc.

13,300

262,143

Oversea-Chinese Banking Corp., Ltd.

17,000

100,571

Raiffeisen International Bank-Holding AG

855

117,037

Resona Holdings, Inc.

4

6,788

Royal Bank of Canada

1,000

46,714

Royal Bank of Scotland Group PLC

3,121

20,883

Shinsei Bank Ltd.

2,000

6,624

Skandinaviska Enskilda Banken AB "A"

1,300

34,086

Societe Generale

4,295

419,819

Standard Chartered PLC

10,493

358,496

Sterling Bancshares, Inc.

19,900

197,806

Sumitomo Mitsui Financial Group, Inc.

4

26,411

Sumitomo Trust & Banking Co., Ltd.

1,000

6,903

Susquehanna Bancshares, Inc.

13,800

281,106

SVB Financial Group*

9,100

397,124

Svenska Handelsbanken AB "A"

1,300

37,901

Sydbank AS

750

27,310

Taylor Capital Group, Inc.

4,700

77,174

The Bank of Yokohama Ltd.

1,000

6,911

The Shizuoka Bank Ltd.

1,000

11,944

Tompkins Financial Corp.

1,500

73,800

UniCredito Italiano SpA

63,580

425,030

Unione di Banche Italiane ScpA

562

14,430

United Overseas Bank Ltd.

9,000

125,900

VTB Bank OJSC (GDR) 144A*

42,900

310,167

Wells Fargo & Co.

223,400

6,500,940

WesBanco, Inc.

4,400

108,724

Westpac Banking Corp.

1,312

28,592

 

16,626,955

Consumer Finance 0.1%

Dollar Financial Corp.*

10,500

241,500

EZCORP., Inc. "A"*

16,400

201,884

ORIX Corp.

70

9,574

 

452,958

Diversified Financial Services 0.9%

ASX Ltd.

175

6,012

Bank of America Corp.

19,000

720,290

Deutsche Boerse AG

2,686

433,140

Fortis

3,905

98,180

Groupe Bruxelles Lambert SA

164

20,009

Hong Kong Exchanges & Clearing Ltd.

3,500

60,662

ING Groep NV (CVA)

3,900

145,808

Interactive Brokers Group, Inc. "A"*

7,000

179,690

JPMorgan Chase & Co.

53,200

2,284,940

Nasdaq OMX Group, Inc.*

62,200

2,404,652

OMX AB

200

8,769

Singapore Exchange Ltd.

6,000

33,055

 

6,395,207

Insurance 1.8%

ACE Ltd.

94,600

5,208,676

Aegon NV

2,740

40,366

Allianz SE (Registered)

1,393

276,206

Allied World Assurance Co. Holdings Ltd.

16,300

647,110

AMP Ltd.

1,450

10,440

AmTrust Financial Services, Inc.

14,900

241,529

Aspen Insurance Holdings Ltd.

10,300

271,714

Assicurazioni Generali SpA

811

36,529

Aviva PLC

909

11,138

Axa

10,885

393,927

Fidelity National Financial, Inc. "A"

2,900

53,157

Great-West Lifeco, Inc.

200

6,032

Hallmark Financial Services, Inc.*

5,700

63,612

Insurance Australia Group Ltd.

1,711

5,723

IPC Holdings Ltd.

2,700

75,600

Irish Life & Permanent PLC

2,449

47,923

Legal & General Group PLC

3,476

8,718

Manulife Financial Corp.

1,200

45,933

Max Capital Group Ltd.

1,500

39,285

Millea Holdings, Inc.

500

18,501

Mitsui Sumitomo Insurance Co., Ltd.

1,000

10,102

Muenchener Rueckversicherungs-Gesellschaft AG (Registered)

192

37,532

National Interstate Corp.

1,500

35,025

Navigators Group, Inc.*

3,800

206,720

Old Mutual PLC

2,119

4,646

PartnerRe Ltd.

39,500

3,013,850

Platinum Underwriters Holdings Ltd.

6,000

194,760

Power Corp. of Canada

300

9,937

Power Financial Corp.

200

6,841

Prudential PLC

39,143

516,869

QBE Insurance Group Ltd.

15,712

319,810

Reinsurance Group of America, Inc.

13,800

751,272

Sampo Oyj "A"

6,514

176,528

SeaBright Insurance Holdings, Inc.*

12,800

188,544

Selective Insurance Group, Inc.

5,200

124,176

Sompo Japan Insurance, Inc.

1,000

8,957

Storebrand ASA

4,800

37,940

Sun Life Financial, Inc.

400

18,701

Suncorp-Metway Ltd.

731

8,628

Swiss Life Holding (Registered)*

29

8,067

Swiss Re (Registered)

287

25,093

T&D Holdings, Inc.

150

7,882

Topdanmark AS*

200

33,601

Zurich Financial Services AG (Registered)

116

36,565

 

13,284,165

Real Estate Investment Trusts 1.0%

Alexandria Real Estate Equities, Inc. (REIT)

2,100

194,712

AMB Property Corp. (REIT)

3,300

179,586

AvalonBay Communities, Inc. (REIT)

2,600

250,952

BioMed Realty Trust, Inc. (REIT)

6,600

157,674

CapitaMall Trust (REIT)

9,000

22,808

Corio NV (REIT)

101

8,848

Corporate Office Properties Trust (REIT)

3,800

127,718

Cousins Properties, Inc. (REIT)

5,700

140,847

Digital Realty Trust, Inc. (REIT)

5,100

181,050

EastGroup Properties, Inc. (REIT)

2,800

130,088

Equity Lifestyle Properties, Inc. (REIT)

2,900

143,173

Equity One, Inc. (REIT)

7,100

170,187

Equity Residential (REIT)

18,200

755,118

First Industrial Realty Trust, Inc. (REIT)

4,900

151,361

Glimcher Realty Trust (REIT)

6,100

72,956

Goodman Group (REIT)

1,533

6,073

GPT Group (REIT)

2,169

6,522

Healthcare Realty Trust, Inc. (REIT)

5,000

130,750

Home Properties, Inc. (REIT)

3,700

177,563

Host Hotels & Resorts, Inc. (REIT)

25,600

407,552

Land Securities Group PLC (REIT)

252

7,546

LaSalle Hotel Properties (REIT)

5,100

146,523

Link (REIT)

6,500

14,426

Maguire Properties, Inc. (REIT)

2,000

28,620

Mirvac Group (REIT)

1,210

4,488

National Retail Properties, Inc. (REIT)

6,500

143,325

Nationwide Health Properties, Inc. (REIT)

5,100

172,125

Newcastle Investment Corp. (REIT)

8,000

66,080

Pennsylvania Real Estate Investment Trust (REIT)

4,300

104,877

Potlatch Corp. (REIT)

700

28,889

ProLogis (REIT)

8,400

494,424

Public Storage (REIT)

8,780

778,084

Realty Income Corp. (REIT)

5,600

143,472

Redwood Trust, Inc. (REIT)

2,000

72,700

Simon Property Group, Inc. (REIT)

12,300

1,142,793

Sovran Self Storage, Inc. (REIT)

3,600

153,756

Stockland (REIT)

1,308

8,382

Sunstone Hotel Investors, Inc. (REIT)

3,900

62,439

Tanger Factory Outlet Centers, Inc. (REIT)

3,900

150,033

The Macerich Co. (REIT)

1,900

133,513

Unibail-Rodamco (REIT)

58

14,947

Vornado Realty Trust (REIT)

2,500

215,525

Washington Real Estate Investment Trust (REIT)

4,900

163,758

Wereldhave NV (REIT)

67

8,265

Westfield Group (REIT)

1,301

21,245

 

7,695,773

Real Estate Management & Development 0.1%

Brookfield Asset Management, Inc. "A"

400

10,779

CapitaLand Ltd.

13,000

60,639

Cheung Kong (Holdings) Ltd.

5,000

71,935

City Developments Ltd.

4,000

32,124

Emaar Properties PJSC*

73,261

218,431

Hang Lung Properties Ltd.

6,000

21,444

Henderson Land Development Co., Ltd.

3,000

21,641

Immoeast AG*

6,842

65,880

Immofinanz Immobilien Anlagen AG

5,907

63,980

Kerry Properties Ltd.

2,000

12,196

Lend Lease Corp., Ltd.

408

4,956

Meinl European Land Ltd. (Certificate)*

4,901

56,045

Mitsubishi Estate Co., Ltd.

1,000

24,353

Mitsui Fudosan Co., Ltd.

1,000

20,350

New World Development Ltd.

7,000

16,936

Sino Land Co.

4,000

8,728

Sun Hung Kai Properties Ltd.

4,000

62,532

Swire Pacific Ltd. "A"

2,500

28,364

Wharf Holdings Ltd.

70,000

333,219

 

1,134,532

Thrifts & Mortgage Finance 0.1%

Anchor BanCorp Wisconsin, Inc.

3,700

70,189

Corus Bankshares, Inc.

12,500

121,625

Dime Community Bancshares

5,500

96,140

Flagstar Bancorp, Inc.

11,200

80,864

Northwest Bancorp, Inc.

5,000

136,650

Ocwen Financial Corp.*

18,300

81,252

WSFS Financial Corp.

1,300

64,064

 

650,784

Health Care 6.6%

Biotechnology 0.7%

Alkermes, Inc.*

20,500

243,540

Alnylam Pharmaceuticals, Inc.*

7,300

178,120

Amgen, Inc.*

85,900

3,588,902

Applera Corp. — Celera Group*

4,100

60,270

CSL Ltd.

9,599

323,794

Cubist Pharmaceuticals, Inc.*

14,700

270,774

Isis Pharmaceuticals, Inc.*

4,400

62,084

Onyx Pharmaceuticals, Inc.*

6,600

191,598

OSI Pharmaceuticals, Inc.*

8,300

310,337

 

5,229,419

Health Care Equipment & Supplies 1.6%

Align Technology, Inc.*

12,300

136,653

Baxter International, Inc.

96,500

5,579,630

Cochlear Ltd.

1,100

55,274

Cutera, Inc.*

1,400

18,858

Essilor International SA

909

59,452

Getinge AB "B"

400

10,375

Hologic, Inc.*

1,300

72,280

Intuitive Surgical, Inc.*

9,000

2,919,150

Kinetic Concepts, Inc.*

45,400

2,098,842

Meridian Bioscience, Inc.

6,800

227,324

Merit Medical Systems, Inc.*

3,700

58,571

Nobel Biocare Holding AG (Bearer)

45

10,475

Olympus Corp.

1,000

30,401

Smith & Nephew PLC

2,003

26,492

Sonova Holding AG (Registered)

88

8,071

SurModics, Inc.*

6,400

268,032

Synthes, Inc.

109

15,244

Terumo Corp.

7,900

413,298

William Demant Holding AS*

150

12,004

 

12,020,426

Health Care Providers & Services 1.6%

Aetna, Inc.

84,200

3,543,978

Air Methods Corp.*

1,100

53,207

Alliance Imaging, Inc.*

9,900

85,140

Amedisys, Inc.*

6,700

263,578

Animal Health International, Inc.*

2,000

21,880

Apria Healthcare Group, Inc.*

16,100

317,975

Celesio AG

615

30,428

Centene Corp.*

13,000

181,220

Chemed Corp.

2,400

101,280

Corvel Corp.*

5,300

162,127

Fresenius Medical Care AG & Co. KGaA

9,754

490,508

Health Net, Inc.*

89,500

2,756,600

Healthspring, Inc.*

15,300

215,424

Humana, Inc.*

55,000

2,467,300

Kindred Healthcare, Inc.*

12,000

262,440

Magellan Health Services, Inc.*

5,100

202,419

MedCath Corp.*

900

16,380

Owens & Minor, Inc.

9,500

373,730

RehabCare Group, Inc.*

5,800

87,000

Sonic Healthcare Ltd.

6,162

77,615

 

11,710,229

Health Care Technology 0.1%

Agfa Gevaert NV

9,176

71,888

Eclipsys Corp.*

12,400

243,164

Phase Forward, Inc.*

2,600

44,408

TriZetto Group, Inc.*

7,600

126,844

 

486,304

Life Sciences Tools & Services 0.3%

Albany Molecular Research, Inc.*

1,400

16,996

Cambrex Corp.

24,300

168,399

Dionex Corp.*

4,500

346,455

eResearchTechnology, Inc.*

5,700

70,794

Lonza Group AG (Registered)

4,575

607,216

MDS, Inc.*

13,600

264,991

Nektar Therapeutics*

5,000

34,700

PAREXEL International Corp.*

11,500

300,150

PharmaNet Development Group, Inc.*

6,300

158,949

QIAGEN NV*

1,305

27,006

 

1,995,656

Pharmaceuticals 2.3%

Astellas Pharma, Inc.

2,300

89,260

AstraZeneca PLC

3,451

129,018

Biovail Corp.

16,000

172,244

Bristol-Myers Squibb Co.

16,300

347,190

Caraco Pharmaceutical Laboratories Ltd.*

7,200

129,240

Chugai Pharmaceutical Co., Ltd.

1,300

14,718

Daiichi Sankyo Co., Ltd.

3,300

97,647

Eisai Co., Ltd.

1,200

41,003

Elan Corp. PLC*

20,979

435,435

Eli Lilly & Co.

2,700

139,293

GlaxoSmithKline PLC

12,830

271,883

Kyowa Hakko Kogyo Co., Ltd.

1,000

9,562

Medicis Pharmaceutical Corp. "A"

15,000

295,350

Merck & Co., Inc.

57,000

2,163,150

Merck KGaA

467

57,576

Mitsubishi Tanabe Pharma Corp.

1,000

11,661

Novartis AG (Registered)

4,098

210,142

Novo Nordisk AS "B"

9,325

638,064

Obagi Medical Products, Inc.*

1,100

9,548

Perrigo Co.

11,100

418,803

Pfizer, Inc.

343,200

7,183,176

Roche Holding AG (Genusschein)

4,846

912,445

Salix Pharmaceuticals Ltd.*

35,200

221,056

Sanofi-Aventis

5,140

385,678

Sepracor, Inc.*

103,900

2,028,128

Shionogi & Co., Ltd.

1,000

17,103

Takeda Pharmaceutical Co., Ltd.

3,900

197,213

UCB SA

7,948

276,552

ViroPharma, Inc.*

17,600

157,344

Watson Pharmaceuticals, Inc.*

4,700

137,804

 

17,197,286

Industrials 7.4%

Aerospace & Defense 1.8%

BAE Systems PLC

28,481

274,245

Bombardier, Inc. "B"*

11,200

59,685

CAE, Inc.

2,200

24,927

Cobham PLC

1,695

6,727

European Aeronautic Defence & Space Co.

334

7,929

Finmeccanica SpA

314

10,697

General Dynamics Corp.

35,100

2,926,287

Honeywell International, Inc.

95,200

5,371,184

Meggitt PLC

1,213

6,637

Northrop Grumman Corp.

22,000

1,711,820

Rolls-Royce Group PLC*

1,916

15,322

Rolls-Royce Group PLC "B"*

171,673

341

Singapore Technologies Engineering Ltd.

22,000

54,115

Teledyne Technologies, Inc.*

7,300

343,100

United Technologies Corp.

34,000

2,339,880

 

13,152,896

Air Freight & Logistics 0.0%

Deutsche Post AG (Registered)

775

23,686

TNT NV

2,702

100,439

Toll Holdings Ltd.

2,318

21,227

 

145,352

Airlines 0.4%

Air France-KLM

402

11,320

Alaska Air Group, Inc.*

1,400

27,468

Allegiant Travel Co.*

1,100

29,062

Cathay Pacific Airways Ltd.

19,000

37,227

Deutsche Lufthansa AG (Registered)

303

8,200

Iberia Lineas Aereas de Espana SA

4,358

18,989

Northwest Airlines Corp.*

154,300

1,387,157

Pinnacle Airlines Corp.*

7,400

64,602

Qantas Airways Ltd.

4,271

15,383

Singapore Airlines Ltd.

9,000

102,384

US Airways Group, Inc.*

136,100

1,212,651

 

2,914,443

Building Products 0.1%

Apogee Enterprises, Inc.

17,100

263,340

Asahi Glass Co., Ltd.

1,000

11,090

Assa Abloy AB "B"

600

10,905

Compagnie de Saint-Gobain

270

22,063

Daikin Industries Ltd.

200

8,771

Geberit AG (Registered)

86

12,815

Gibraltar Industries, Inc.

2,000

23,460

Wienerberger AG

6,458

344,833

 

697,277

Commercial Services & Supplies 1.1%

Adecco SA (Registered)

270

15,608

Allied Waste Industries, Inc.*

149,600

1,617,176

American Ecology Corp.

300

7,599

Babcock International Group PLC

33,076

375,096

Bowne & Co., Inc.

1,500

22,875

Brambles Ltd.

5,824

53,286

COMSYS IT Partners, Inc.*

19,400

164,124

Consolidated Graphics, Inc.*

5,000

280,250

Deluxe Corp.

12,800

245,888

Diamond Management & Technology Consultants, Inc.

1,900

12,255

Experian Group Ltd.

1,147

8,353

G & K Services, Inc. "A"

200

7,122

G4S PLC

1,553

7,018

Herman Miller, Inc.

11,500

282,555

Hudson Highland Group, Inc.*

18,200

154,154

IKON Office Solutions, Inc.

11,400

86,640

Intertek Group PLC

18,496

378,765

PeopleSupport, Inc.*

7,700

70,224

Randstad Holding NV

371

17,441

Secom Co., Ltd.

100

4,914

Securitas AB "B"

600

7,937

Serco Group PLC

32,043

288,519

SGS SA (Registered)

10

14,388

The Advisory Board Co.*

300

16,482

The Brink's Co.

52,900

3,553,822

United Stationers, Inc.*

6,400

305,280

Vedior NV (CVA)

1,187

34,572

Volt Information Sciences, Inc.*

12,700

215,392

Watson Wyatt Worldwide, Inc. "A"

3,600

204,300

 

8,452,035

Construction & Engineering 0.5%

Acciona SA

265

70,960

ACS, Actividades de Construccion y Servicios SA

1,733

98,667

AMEC PLC

85,478

1,227,162

Balfour Beatty PLC

659

6,159

EMCOR Group, Inc.*

12,800

284,288

FLSmidth & Co. AS

250

24,797

Fomento de Construcciones y Contratas SA

398

26,197

Granite Construction, Inc.

9,000

294,390

Grupo Ferrovial SA

536

38,936

Hochtief AG

49

4,484

Leighton Holdings Ltd.

13,674

537,475

Michael Baker Corp.*

3,200

71,872

Orascom Construction Industries (GDR)

100

14,975

Orascom Construction Industries (GDR) (REG S)

3,550

531,824

Perini Corp.*

7,100

257,233

Sacyr Vallehermoso SA

722

25,072

Skanska AB "B"

600

12,034

SNC-Lavalin Group, Inc.

1,300

56,334

Vinci SA

385

27,880

YIT Oyj

2,870

81,520

 

3,692,259

Electrical Equipment 0.3%

ABB Ltd. (Registered)

16,448

442,928

Acuity Brands, Inc.

7,900

339,305

Alstom

98

21,288

AZZ, Inc.*

3,400

120,972

Encore Wire Corp.

2,600

47,346

Gamesa Corp. Tecnologica SA

1,492

68,074

GrafTech International Ltd.*

15,000

243,150

II-VI, Inc.*

8,500

322,830

LSI Industries, Inc.

8,800

116,248

Mitsubishi Electric Corp.

1,000

8,813

Renewable Energy Corp. AS*

150

4,215

Schneider Electric SA

201

26,003

Solarworld AG

89

4,245

Sumitomo Electric Industries Ltd.

600

7,613

Superior Essex, Inc.*

9,600

269,952

Vestas Wind Systems AS*

850

93,018

Woodward Governor Co.

11,000

293,920

 

2,429,920

Industrial Conglomerates 0.6%

CSR Ltd.

4,742

13,910

Fraser & Neave Ltd.

15,000

53,204

General Electric Co.

103,000

3,812,030

Hutchison Whampoa Ltd.

31,000

295,027

Keppel Corp., Ltd.

19,000

137,668

Koninklijke (Royal) Philips Electronics NV

3,402

130,249

Orkla ASA

900

11,454

SembCorp Industries Ltd.

15,000

44,469

Siemens AG (Registered)

917

99,516

Smiths Group PLC

609

11,360

 

4,608,887

Machinery 1.4%

Actuant Corp. "A"

6,600

199,386

Alfa Laval AB

175

10,653

Atlas Copco AB "A"

1,200

20,536

Atlas Copco AB "B"

800

12,578

Caterpillar, Inc.

66,700

5,221,943

China Infrastructure Machinery Holdings Ltd.

258,000

196,337

Columbus McKinnon Corp.*

7,500

232,350

FANUC Ltd.

100

9,678

KCI Konecranes Oyj

1,399

53,949

Komatsu Ltd.

20,200

572,858

Kone Oyj "B"

3,414

140,244

Kubota Corp.

1,000

6,304

MAN AG

116

15,394

Metso Corp.

2,690

145,423

Mitsubishi Heavy Industries Ltd.

2,000

8,704

Mueller Industries, Inc.

3,200

92,320

PACCAR, Inc.

58,400

2,628,000

Robbins & Myers, Inc.

7,400

241,610

Sandvik AB

1,600

27,854

Scania AB "B"

600

12,601

Schindler Holding AG

121

9,068

SKF AB "B"

800

16,116

SMC Corp.

100

10,581

Sulzer AG (Registered)

6

7,932

Sun Hydraulics Corp.

2,800

81,956

Trimas Corp.*

6,800

35,836

Twin Disc, Inc.

4,100

64,862

Vallourec SA

49

11,915

Volvo AB "A"

800

11,938

Volvo AB "B"

1,900

28,834

Wartsila Corp. "B"*

1,450

97,841

Xerium Technologies, Inc.

17,400

22,446

Zardoya Otis SA

998

27,727

 

10,275,774

Marine 0.1%

A P Moller-Maersk AS "B"

5

55,878

Kirby Corp.*

7,600

433,200

Kuehne & Nagel International AG (Registered)

117

11,737

Mitsui OSK Lines Ltd.

1,000

12,338

Nippon Yusen Kabushiki Kaisha

1,000

9,427

TBS International Ltd. "A"*

5,600

169,120

 

691,700

Road & Rail 0.8%

Burlington Northern Santa Fe Corp.

7,300

673,206

Canadian National Railway Co.

3,900

189,101

Canadian Pacific Railway Ltd.

1,300

83,589

Central Japan Railway Co.

1

10,413

ComfortDelgro Corp., Ltd.

33,000

43,902

Dollar Thrifty Automotive Group, Inc.*

4,100

55,924

DSV AS

1,000

21,909

East Japan Railway Co.

2

16,650

FirstGroup PLC

629

7,037

Kansas City Southern*

15,500

621,705

MTR Corp., Ltd.

19,500

66,847

Ryder System, Inc.

63,500

3,867,785

Tokyu Corp.

1,000

5,102

West Japan Railway Co.

2

8,799

 

5,671,969

Trading Companies & Distributors 0.2%

Applied Industrial Technologies, Inc.

10,100

301,889

Finning International, Inc.

1,600

45,313

Hagemeyer NV

3,992

30,505

Itochu Corp.

1,000

9,921

Marubeni Corp.

1,000

7,432

Mitsubishi Corp.

20,800

640,962

Mitsui & Co., Ltd.

10,000

207,030

Noble Group Ltd.

122,000

196,863

Sumitomo Corp.

800

10,747

Wolseley PLC

828

8,697

 

1,459,359

Transportation Infrastructure 0.1%

Abertis Infraestructuras SA

2,126

69,276

Atlantia SpA

277

8,385

Brisa

29,178

416,842

Cintra Concesiones de Infraestructuras de Transporte SA

1,891

27,968

DP World Ltd.*

110,139

104,632

Hopewell Holdings

9,000

34,377

Macquarie Infrastructure Group (Unit)

11,449

29,376

Novorossiysk Sea Trade Port (GDR) 144A*

5,800

87,000

Transurban Group (Unit)

4,660

27,682

 

805,538

Information Technology 8.2%

Communications Equipment 0.5%

Alcatel-Lucent

10,494

60,098

Anaren, Inc.*

3,600

45,576

Dycom Industries, Inc.*

12,200

146,522

Juniper Networks, Inc.*

86,700

2,167,500

MasTec, Inc.*

19,700

161,737

Nokia Oyj

23,681

753,376

Nortel Networks Corp.*

1,300

8,865

Plantronics, Inc.

4,300

83,033

Research In Motion Ltd.*

1,500

168,771

Tandberg ASA

1,300

19,537

Tekelec*

20,600

256,470

Telefonaktiebolaget LM Ericsson "B"

89,000

174,903

 

4,046,388

Computers & Peripherals 2.1%

Apple, Inc.*

41,800

5,998,300

Data Domain, Inc.*

8,000

190,400

Emulex Corp.*

20,800

337,792

Fujitsu Ltd.

2,000

13,133

Lexmark International, Inc. "A"*

87,500

2,688,000

Logitech International SA (Registered)*

5,470

138,438

NEC Corp.

2,000

7,662

Novatel Wireless, Inc.*

14,800

143,264

Rimage Corp.*

700

15,330

Sun Microsystems, Inc.*

209,400

3,251,982

Toshiba Corp.

2,000

13,415

Western Digital Corp.*

90,900

2,457,936

Wincor Nixdorf AG

127

10,163

 

15,265,815

Electronic Equipment & Instruments 1.0%

Arrow Electronics, Inc.*

4,800

161,520

Dolby Laboratories, Inc. "A"*

50,200

1,820,252

Electrocomponents PLC

5,671

20,452

Fujifilm Holdings Corp.

300

10,658

Hitachi Ltd.

3,000

17,844

Hoya Corp.

300

7,111

IBIDEN Co., Ltd.

100

3,954

Kingboard Chemical Holdings Ltd.

19,900

70,949

Kyocera Corp.

100

8,410

LoJack Corp.*

1,500

18,960

Multi-Fineline Electronix, Inc.*

8,300

155,791

Murata Manufacturing Co., Ltd.

200

10,080

Nidec Corp.

100

6,248

Omron Corp.

200

4,150

TDK Corp.

100

5,943

Tech Data Corp.*

37,400

1,226,720

Tyco Electronics Ltd.

111,700

3,833,544

 

7,382,586

Internet Software & Services 0.6%

Chordiant Software, Inc.*

6,300

37,989

CMGI, Inc.*

6,200

82,212

CNET Networks, Inc.*

15,800

112,180

Earthlink, Inc.*

15,900

120,045

eBay, Inc.*

43,200

1,289,088

Google, Inc. "A"*

5,865

2,583,357

Greenfield Online, Inc.*

2,100

24,906

InfoSpace, Inc.

5,100

59,007

j2 Global Communications, Inc.*

3,700

82,584

Tencent Holdings Ltd.

600

3,408

United Online, Inc.

8,500

89,760

ValueClick, Inc.*

4,400

75,900

Websense, Inc.*

2,700

50,625

Yahoo! Japan Corp.

13

6,840

 

4,617,901

IT Services 0.8%

Atos Origin SA*

266

14,804

Cap Gemini SA

633

36,114

CGI Group, Inc. "A"*

900

9,557

Computer Sciences Corp.*

31,300

1,276,727

CSG Systems International, Inc.*

29,100

330,867

Indra Sistemas SA

501

14,427

LogicaCMG PLC

18,023

37,820

MasterCard, Inc. "A"

13,800

3,077,262

MAXIMUS, Inc.

9,100

334,061

NTT Data Corp.

1

4,387

Redecard SA (GDR) 144A

9,400

312,744

SRA International, Inc. "A"*

4,400

106,964

 

5,555,734

Office Electronics 0.1%

Canon, Inc.

17,700

820,225

Konica Minolta Holdings, Inc.

500

6,894

Neopost SA

135

15,170

Ricoh Co., Ltd.

1,000

16,717

 

859,006

Semiconductors & Semiconductor Equipment 1.2%

Amkor Technology, Inc.*

16,800

179,760

ARM Holdings PLC

20,911

36,513

ASML Holding NV*

8,644

212,567

Cabot Microelectronics Corp.*

6,400

205,760

Cymer, Inc.*

3,100

80,724

Infineon Technologies AG*

2,595

18,248

Mattson Technology, Inc.*

28,800

175,392

NVIDIA Corp.*

94,400

1,868,176

OC Oerlikon Corp. AG (Registered)*

204

71,780

Pericom Semiconductor Corp.*

17,500

256,900

ROHM Co., Ltd.

100

6,209

Semtech Corp.*

23,100

331,023

Sigma Designs, Inc.*

7,500

170,025

Skyworks Solutions, Inc.*

16,800

122,304

Standard Microsystems Corp.*

7,300

213,014

STMicroelectronics NV

3,286

34,958

Tessera Technologies, Inc.*

12,600

262,080

Texas Instruments, Inc.

146,800

4,150,036

Tokyo Electron Ltd.

200

12,374

Zoran Corp.*

17,600

240,416

 

8,648,259

Software 1.9%

Advent Software, Inc.*

6,500

277,030

Ansoft Corp.*

11,300

344,876

Commvault Systems, Inc.*

5,300

65,720

Compuware Corp.*

109,400

802,996

Dassault Systemes SA

246

14,298

Jack Henry & Associates, Inc.

7,400

182,558

JDA Software Group, Inc.*

15,100

275,575

MICROS Systems, Inc.*

12,000

403,920

Microsoft Corp.

345,558

9,806,936

Misys PLC

6,246

17,165

Net 1 UEPS Technologies, Inc.*

7,900

178,145

Nintendo Co., Ltd.

1,300

673,447

Progress Software Corp.*

2,300

68,816

Renaissance Learning, Inc.

800

11,192

SAP AG

2,996

148,850

Secure Computing Corp.*

6,700

43,215

Solera Holdings, Inc.*

1,500

36,540

SPSS, Inc.*

1,200

46,536

Sybase, Inc.*

1,400

36,820

Symantec Corp.*

41,260

685,741

The Sage Group PLC

20,009

74,684

Ultimate Software Group, Inc.*

5,000

150,300

 

14,345,360

Materials 3.1%

Chemicals 1.7%

Agrium, Inc.

100

6,212

Akzo Nobel NV

1,715

137,715

Asahi Kasei Corp.

2,000

10,568

BASF SE

480

64,598

Bayer AG

8,825

706,862

CF Industries Holdings, Inc.

4,500

466,290

Ciba Specialty Chemicals AG (Registered)

254

9,262

Croda International PLC

1,255

16,511

Eastman Chemical Co.

8,500

530,825

Ferro Corp.

4,500

66,870

GenTek, Inc.*

3,600

108,288

Givaudan SA (Registered)

20

19,785

JSR Corp.

300

6,817

Koninklijke DSM NV

939

45,327

Kuraray Co., Ltd.

500

6,045

Linde AG

3,025

427,600

Mitsubishi Chemical Holdings Corp.

1,500

9,943

Mitsubishi Gas Chemical Co., Inc.

1,000

7,129

Mitsui Chemicals, Inc.

1,000

6,648

Monsanto Co.

39,800

4,437,700

NewMarket Corp.

2,300

173,535

Nitto Denko Corp.

200

8,580

Novozymes AS "B"

1,950

182,584

Orica Ltd.

303

8,090

Potash Corp. of Saskatchewan, Inc.

2,600

404,014

Rockwood Holdings, Inc.*

3,100

101,587

Scotts Miracle-Gro Co. "A"

14,700

476,574

Shin-Etsu Chemical Co., Ltd.

500

25,946

Showa Denko KK

2,000

6,759

Solvay SA

856

109,473

Stepan Co.

2,800

107,044

Sumitomo Chemical Co., Ltd.

2,000

12,846

Syngenta AG (Registered)

264

77,323

Teijin Ltd.

2,000

8,531

Terra Industries, Inc.*

8,700

309,111

The Mosaic Co.*

27,400

2,811,240

Toray Industries, Inc.

2,000

13,187

Umicore

1,685

87,894

Uralkali (GDR) 144A*

11,700

479,700

Yara International ASA

2,850

165,642

 

12,660,655

Construction Materials 0.1%

CRH PLC

4,758

179,947

Fletcher Building Ltd.

468

3,095

Holcim Ltd. (Registered)

596

62,585

Imerys SA

185

16,964

Lafarge SA

716

124,674

 

387,265

Containers & Packaging 0.6%

AEP Industries, Inc.*

2,300

69,667

AptarGroup, Inc.

5,200

202,436

Gerresheimer AG*

7,364

370,484

Greif, Inc. "A"

5,200

353,236

Owens-Illinois, Inc.*

59,000

3,329,370

Rock-Tenn Co. "A"

12,100

362,637

 

4,687,830

Metals & Mining 0.6%

Acerinox SA

6,732

186,630

Agnico-Eagle Mines Ltd.

100

6,783

AK Steel Holding Corp.

41,100

2,236,662

Alumina Ltd.

1,124

5,774

Anglo American PLC

7,093

426,140

Barrick Gold Corp.

600

26,234

BHP Billiton Ltd.

2,382

78,261

BHP Billiton PLC

1,249

37,048

BlueScope Steel Ltd.

707

6,442

Boliden AB

2,800

29,816

Compass Minerals International, Inc.

5,600

330,288

First Quantum Minerals Ltd.

100

8,109

Fording Canadian Coal Trust (Unit)

100

5,236

Fortescue Metal Group Ltd.*

1,040

6,227

Goldcorp, Inc.

500

19,431

Harry Winston Diamond Corp.

100

2,396

JFE Holdings, Inc.

700

31,546

Kinross Gold Corp.

400

8,924

Kobe Steel Ltd.

4,000

11,604

Mitsubishi Materials Corp.

2,000

8,825

Newcrest Mining Ltd.

392

11,982

Nippon Steel Corp.

7,000

36,010

Norsk Hydro ASA

1,700

24,882

Outokumpu Oyj

827

37,663

Rautaruukki Oyj

583

28,174

Rio Tinto Ltd.

231

25,832

Rio Tinto PLC

533

55,340

Salzgitter AG

47

8,165

SSAB Svenskt Stal AB "A"

1,700

47,886

Sumitomo Metal Industries Ltd.

5,000

19,238

Sumitomo Metal Mining Co., Ltd.

1,000

18,744

Teck Cominco Ltd. "B"

300

12,302

ThyssenKrupp AG

372

21,263

Universal Stainless & Alloy Products, Inc.*

2,800

83,188

Vedanta Resources PLC

8,997

374,154

voestalpine AG

556

38,747

Worthington Industries, Inc.

16,100

271,607

Xstrata PLC

6,437

450,764

Yamana Gold, Inc.

400

5,869

Zinifex Ltd.

479

4,389

 

5,048,575

Paper & Forest Products 0.1%

Buckeye Technologies, Inc.*

10,400

116,064

Oji Paper Co., Ltd.

2,000

9,095

Schweitzer-Mauduit International, Inc.

5,300

122,642

Stora Enso Oyj "R"

3,956

45,700

Svenska Cellulosa AB "B"

5,200

94,719

UPM-Kymmene Oyj

3,601

63,945

 

452,165

Telecommunication Services 3.3%

Diversified Telecommunication Services 2.9%

Alaska Communications Systems Group, Inc.

24,900

304,776

AT&T, Inc.

147,559

5,651,510

Atlantic Tele-Network, Inc.

4,400

148,852

BCE, Inc.

1,800

60,938

Belgacom

332

14,700

BT Group PLC

6,617

28,526

Cable & Wireless PLC

2,185

6,456

Cincinnati Bell, Inc.*

28,200

120,132

Deutsche Telekom AG (Registered)

8,950

148,804

Elisa Oyj

362

9,040

Embarq Corp.

73,000

2,927,300

France Telecom SA

12,955

435,579

Koninklijke (Royal) KPN NV

16,378

277,298

Nippon Telegraph & Telephone Corp.

41

178,351

PCCW Ltd.

439,000

274,894

Portugal Telecom, SGPS SA (Registered)

14,680

170,655

PT Telekomunikasi Indonesia (ADR)

13,400

561,996

Singapore Telecommunications Ltd.

139,000

398,368

Swisscom AG (Registered)

834

285,864

Tele2 AB "B"

3,700

69,968

Telecom Corp. of New Zealand Ltd.

114,954

338,288

Telecom Italia SpA

81,685

170,904

Telecom Italia SpA (RNC)

45,323

75,242

Telefonica SA

35,056

1,007,272

Telekom Austria AG

20,307

420,236

Telenor ASA*

9,500

182,577

TeliaSonera AB

28,500

228,966

Telstra Corp., Ltd.

63,819

257,186

Telstra Corp., Ltd. (Insurance Receipt)

32,245

83,084

Telus Corp.

400

17,419

Telus Corp. (Non-Voting Shares)

1,100

46,349

Verizon Communications, Inc.

187,200

6,823,440

 

21,724,970

Wireless Telecommunication Services 0.4%

America Movil SAB de CV "L" (ADR)

4,800

305,712

Bouygues SA

450

28,583

China Mobile Ltd.

20,500

306,662

Hutchison Telecommunications International Ltd.

157,000

224,649

KDDI Corp.

20

123,617

Mobistar SA

78

7,068

NTT DoCoMo, Inc.

127

192,851

Rogers Communications, Inc. "B"

3,400

122,293

Softbank Corp.

5,900

108,795

Syniverse Holdings, Inc.*

2,600

43,316

Telephone & Data Systems, Inc.

16,800

659,736

USA Mobility, Inc.*

24,100

172,074

Vodafone Group PLC

129,816

388,715

 

2,684,071

Utilities 2.2%

Electric Utilities 1.4%

American Electric Power Co., Inc.

36,100

1,502,843

Brookfield Infrastructure Partners LP

16

271

Chubu Electric Power Co., Inc.

3,700

92,908

CLP Holdings Ltd.

17,500

144,501

E.ON AG

5,248

971,083

Edison International

96,500

4,730,430

EDP — Energias de Portugal SA

28,967

175,586

Enel SpA

33,787

359,082

Fortis, Inc.

3,600

102,446

Fortum Oyj

578

23,548

Hokkaido Electric Power Co., Inc.

1,100

25,707

HongKong Electric Holdings Ltd.

20,000

127,434

Iberdrola SA

43,356

672,162

Kansai Electric Power Co., Inc.

3,800

94,892

Kyushu Electric Power Co., Inc.

2,100

51,521

Oesterreichische Elektrizitaetswirtschafts AG "A"

104

7,420

RWE AG

397

48,773

Scottish & Southern Energy PLC

3,150

87,794

Terna — Rate Elettrica Nationale SpA

9,810

41,831

Tohoku Electric Power Co., Inc.

2,400

58,747

Tokyo Electric Power Co., Inc.

6,300

169,470

Union Fenosa SA

3,762

252,834

Westar Energy, Inc.

12,300

280,071

 

10,021,354

Gas Utilities 0.2%

Centrica PLC

14,645

86,676

Gas Natural SDG SA

3,938

243,587

Gaz de France

252

15,230

Hong Kong & China Gas Co., Ltd.

53,000

160,115

New Jersey Resources Corp.

3,300

102,465

Osaka Gas Co., Ltd.

11,000

44,181

Snam Rete Gas SpA

6,997

44,458

South Jersey Industries, Inc.

900

31,599

Southwest Gas Corp.

4,300

120,228

The Laclede Group, Inc.

3,700

131,831

Tokyo Gas Co., Ltd.

13,000

52,676

WGL Holdings, Inc.

13,300

426,398

 

1,459,444

Independent Power Producers & Energy Traders 0.1%

Constellation Energy Group

9,700

856,219

Electric Power Development Co., Ltd.

900

32,450

International Power PLC

6,598

52,110

TransAlta Corp.

4,600

143,093

 

1,083,872

Multi-Utilities 0.5%

AGL Energy Ltd.

35,311

357,080

National Grid PLC

9,504

130,417

Sempra Energy

62,500

3,330,000

Suez SA

1,359

89,287

United Utilities PLC

2,574

35,269

Veolia Environnement

463

32,274

 

3,974,327

Water Utilities 0.0%

Severn Trent PLC

708

19,936

Total Common Stocks (Cost $454,629,611)

430,618,450

 

Principal Amount ($)

Value ($)

 

 

Corporate Bonds 7.6%

Consumer Discretionary 0.9%

AMC Entertainment, Inc., 8.0%, 3/1/2014

120,000

101,700

American Achievement Corp., 8.25%, 4/1/2012

20,000

17,850

American Achievement Group Holding Corp., 14.75%, 10/1/2012 (PIK)

35,000

27,475

Asbury Automotive Group, Inc.:

 

 

7.625%, 3/15/2017

45,000

35,550

8.0%, 3/15/2014

20,000

17,400

Burlington Coat Factory Warehouse Corp., 11.125%, 4/15/2014

40,000

30,900

Cablevision Systems Corp., Series B, 9.644%**, 4/1/2009

25,000

24,812

CanWest MediaWorks LP, 144A, 9.25%, 8/1/2015

35,000

32,200

Charter Communications Holdings LLC, 11.0%, 10/1/2015

70,000

48,650

Charter Communications, Inc., 144A, 10.875%, 9/15/2014

65,000

64,025

Cooper-Standard Automotive, Inc., 8.375%, 12/15/2014

25,000

18,938

CSC Holdings, Inc.:

 

 

7.25%, 7/15/2008

35,000

35,000

Series B, 8.125%, 7/15/2009

35,000

35,350

Series B, 8.125%, 8/15/2009

75,000

75,750

Denny's Holdings, Inc., 10.0%, 10/1/2012

10,000

9,200

EchoStar DBS Corp.:

 

 

6.375%, 10/1/2011

10,000

9,600

6.625%, 10/1/2014

55,000

50,050

7.125%, 2/1/2016

40,000

37,300

Fontainebleau Las Vegas Holdings LLC, 144A, 10.25%, 6/15/2015

55,000

38,775

Foot Locker, Inc., 8.5%, 1/15/2022

15,000

13,200

French Lick Resorts & Casino LLC, 144A, 10.75%, 4/15/2014

165,000

99,000

General Motors Corp.:

 

 

7.2%, 1/15/2011

150,000

125,250

7.4%, 9/1/2025

35,000

23,450

Great Canadian Gaming Corp., 144A, 7.25%, 2/15/2015

40,000

38,050

Group 1 Automotive, Inc., 8.25%, 8/15/2013

20,000

18,800

Hanesbrands, Inc., Series B, 8.204%**, 12/15/2014

60,000

53,250

Hertz Corp.:

 

 

8.875%, 1/1/2014

95,000

90,012

10.5%, 1/1/2016

20,000

18,725

Idearc, Inc., 8.0%, 11/15/2016

255,000

165,112

Indianapolis Downs LLC, 144A, 11.0%, 11/1/2012

25,000

21,750

Isle of Capri Casinos, Inc., 7.0%, 3/1/2014

45,000

32,062

Jarden Corp., 7.5%, 5/1/2017

30,000

26,250

Lamar Media Corp., Series C, 6.625%, 8/15/2015

25,000

22,000

Liberty Media LLC:

 

 

5.7%, 5/15/2013

10,000

8,756

8.25%, 2/1/2030

55,000

46,157

8.5%, 7/15/2029

70,000

59,810

Mediacom Broadband LLC, 8.5%, 10/15/2015

5,000

4,200

MGM MIRAGE:

 

 

6.75%, 9/1/2012

15,000

13,913

8.375%, 2/1/2011

35,000

35,087

MTR Gaming Group, Inc., Series B, 9.75%, 4/1/2010

65,000

62,725

Pinnacle Entertainment, Inc., 8.75%, 10/1/2013

40,000

39,400

Quebecor Media, Inc., 7.75%, 3/15/2016

25,000

22,812

Quiksilver, Inc., 6.875%, 4/15/2015

100,000

80,500

Shingle Springs Tribal Gaming Authority, 144A, 9.375%, 6/15/2015

30,000

26,550

Simmons Co.:

 

 

Step-up Coupon, 0% to 12/15/2009, 10.0% to 12/15/2014

125,000

80,625

7.875%, 1/15/2014

25,000

20,500

Sinclair Television Group, Inc., 8.0%, 3/15/2012

20,000

20,200

Station Casinos, Inc., 6.5%, 2/1/2014

75,000

45,000

TCI Communications, Inc., 8.75%, 8/1/2015

1,085,000

1,227,335

Time Warner Cable, Inc., 5.4%, 7/2/2012

1,981,000

1,946,396

Travelport LLC, 7.701%**, 9/1/2014

35,000

28,350

Trump Entertainment Resorts, Inc., 8.5%, 6/1/2015

85,000

57,375

United Components, Inc., 9.375%, 6/15/2013

5,000

4,581

Viacom, Inc.:

 

 

5.75%, 4/30/2011

678,000

685,221

6.75%, 10/5/2037

360,000

345,243

Vitro SAB de CV:

 

 

9.125%, 2/1/2017

140,000

116,200

11.75%, 11/1/2013

15,000

15,188

XM Satellite Radio, Inc., 9.75%, 5/1/2014

85,000

82,025

 

6,531,585

Consumer Staples 0.6%

Alliance One International, Inc., 8.5%, 5/15/2012

20,000

18,800

CVS Caremark Corp.:

 

 

6.25%, 6/1/2027

487,000

485,333

6.302%, 6/1/2037

1,336,000

1,225,144

Delhaize America, Inc., 9.0%, 4/15/2031

480,000

577,684

Kroger Co., 6.8%, 4/1/2011

590,000

627,443

Miller Brewing Co., 144A, 5.5%, 8/15/2013

765,000

813,057

Pilgrim's Pride Corp., 7.625%, 5/1/2015

15,000

14,437

Rite Aid Corp., 7.5%, 3/1/2017

65,000

58,500

Smithfield Foods, Inc., 7.75%, 7/1/2017

45,000

43,875

Tesco PLC, 144A, 6.15%, 11/15/2037

700,000

678,362

 

4,542,635

Energy 0.8%

Atlas Energy Resources LLC, 144A, 10.75%, 2/1/2018

15,000

15,188

Belden & Blake Corp., 8.75%, 7/15/2012

205,000

205,512

Bristow Group, Inc., 7.5%, 9/15/2017

35,000

35,175

Canadian Natural Resources Ltd., 6.5%, 2/15/2037 (a)

510,000

504,509

Chaparral Energy, Inc., 8.5%, 12/1/2015

45,000

39,150

Chesapeake Energy Corp.:

 

 

6.25%, 1/15/2018

25,000

23,875

6.875%, 1/15/2016

120,000

118,800

7.75%, 1/15/2015

15,000

15,450

Cimarex Energy Co., 7.125%, 5/1/2017

30,000

29,775

Delta Petroleum Corp., 7.0%, 4/1/2015

85,000

75,650

Dynegy Holdings, Inc.:

 

 

6.875%, 4/1/2011

15,000

14,738

8.375%, 5/1/2016

70,000

69,300

El Paso Corp., 9.625%, 5/15/2012

34,000

36,802

Energy Partners Ltd., 9.75%, 4/15/2014

35,000

28,875

EXCO Resources, Inc., 7.25%, 1/15/2011

30,000

29,175

Frontier Oil Corp., 6.625%, 10/1/2011

25,000

24,687

Mariner Energy, Inc.:

 

 

7.5%, 4/15/2013

25,000

24,000

8.0%, 5/15/2017

25,000

23,875

OPTI Canada, Inc., 8.25%, 12/15/2014

100,000

99,000

Pemex Project Funding Master Trust, 144A, 5.75%, 3/1/2018 (a)

236,000

240,810

Petrohawk Energy Corp., 9.125%, 7/15/2013

20,000

20,550

Quicksilver Resources, Inc., 7.125%, 4/1/2016

90,000

86,850

Sabine Pass LNG LP, 7.5%, 11/30/2016

105,000

101,325

Southwestern Energy Co., 144A, 7.5%, 2/1/2018

10,000

10,350

SPI Electricity Property Ltd., 144A, 7.25%, 12/1/2016

2,875,000

3,169,785

Stone Energy Corp.:

 

 

6.75%, 12/15/2014

130,000

118,300

8.25%, 12/15/2011

50,000

49,500

Tesoro Corp., 6.5%, 6/1/2017

20,000

17,900

TransCanada PipeLines Ltd., 6.35%, 5/15/2067

745,000

658,494

 

5,887,400

Financials 2.1%

Algoma Acquisition Corp., 144A, 9.875%, 6/15/2015

120,000

103,800

American Express Centurion Bank, 5.55%, 10/17/2012

700,000

706,339

American General Finance Corp.:

 

 

Series H, 4.625%, 9/1/2010

1,305,000

1,300,311

Series J, 5.625%, 8/17/2011

895,000

896,043

Ashton Woods USA LLC, 9.5%, 10/1/2015

100,000

53,500

Bank of New York Mellon Corp., Series G, 4.95%, 11/1/2012

1,440,000

1,475,392

Buffalo Thunder Development Authority, 144A, 9.375%, 12/15/2014

20,000

15,000

Corp. Andina de Fomento:

 

 

5.75%, 1/12/2017

570,000

557,292

6.875%, 3/15/2012

210,000

225,831

E*TRADE Financial Corp.:

 

 

7.375%, 9/15/2013

35,000

24,850

7.875%, 12/1/2015

80,000

56,800

Erac USA Finance Co.:

 

 

144A, 5.8%, 10/15/2012

420,000

400,290

144A, 7.0%, 10/15/2037

995,000

817,960

144A, 8.0%, 1/15/2011

1,180,000

1,258,823

Farmers Exchange Capital, 144A, 7.2%, 7/15/2048

760,000

690,500

Ford Motor Credit Co., LLC:

 

 

7.25%, 10/25/2011

260,000

213,570

7.375%, 10/28/2009

460,000

419,121

7.875%, 6/15/2010

125,000

108,992

FPL Group Capital, Inc., 6.65%, 6/15/2067

1,037,000

957,656

General Electric Capital Corp., 5.875%, 1/14/2038

480,000

462,652

GMAC LLC, 6.875%, 9/15/2011

500,000

382,682

Hawker Beechcraft Acquisition Co., LLC:

 

 

8.5%, 4/1/2015

65,000

66,787

9.75%, 4/1/2017

50,000

49,750

Hexion US Finance Corp., 9.75%, 11/15/2014

10,000

10,725

Inmarsat Finance PLC, Step-up Coupon, 0% to 11/15/2008, 10.375% to 11/15/2012

90,000

87,300

iPayment, Inc., 9.75%, 5/15/2014

40,000

35,500

Pinnacle Foods Finance LLC, 9.25%, 4/1/2015

25,000

22,125

Residential Capital LLC:

 

 

3.49%**, 6/9/2008

15,000

11,850

6.37%**, 11/21/2008

105,000

71,400

8.125%, 11/21/2008

65,000

44,850

StanCorp Financial Group, Inc., 6.9%, 5/29/2067

720,000

640,026

Symetra Financial Corp., 144A, 8.3%, 10/15/2037

340,000

320,215

The Travelers Cos., Inc., 6.25%, 3/15/2037

185,000

163,174

TNK-BP Finance SA:

 

 

Series 5, 144A, 7.5%, 3/13/2013

365,000

355,419

Series 6, 144A, 7.875%, 3/13/2018 (a)

330,000

304,837

UCI Holdco, Inc., 12.49%**, 12/15/2013 (PIK)

50,000

43,500

UDR, Inc., Series E, (REIT), 3.9%, 3/15/2010

305,000

293,232

Universal City Development Partners, 11.75%, 4/1/2010

160,000

164,400

Wells Fargo & Co., 5.25%, 10/23/2012

380,000

394,088

Woori Bank, 144A, 6.208%, 5/2/2037

670,000

530,895

Xstrata Finance Canada Ltd., 144A, 5.8%, 11/15/2016

711,000

686,665

 

15,424,142

Health Care 0.2%

Advanced Medical Optics, Inc., 7.5%, 5/1/2017

55,000

47,300

Bausch & Lomb, Inc., 144A, 9.875%, 11/1/2015

55,000

55,963

Boston Scientific Corp., 6.0%, 6/15/2011

35,000

34,125

Community Health Systems, Inc., 8.875%, 7/15/2015

260,000

260,975

HCA, Inc.:

 

 

9.125%, 11/15/2014

50,000

51,500

9.25%, 11/15/2016

175,000

181,562

9.625%, 11/15/2016 (PIK)

55,000

57,063

HEALTHSOUTH Corp., 10.75%, 6/15/2016

25,000

26,250

IASIS Healthcare LLC, 8.75%, 6/15/2014

50,000

49,750

Psychiatric Solutions, Inc., 7.75%, 7/15/2015

30,000

29,850

Quest Diagnostics, Inc., 6.95%, 7/1/2037

336,000

332,633

Schering-Plough Corp., 6.55%, 9/15/2037

390,000

375,586

Sun Healthcare Group, Inc., 9.125%, 4/15/2015

40,000

38,600

Surgical Care Affiliates, Inc., 144A, 8.875%, 7/15/2015 (PIK)

45,000

34,650

The Cooper Companies, Inc., 7.125%, 2/15/2015

75,000

71,250

Vanguard Health Holding Co. II, LLC, 9.0%, 10/1/2014

125,000

120,312

 

1,767,369

Industrials 0.2%

Actuant Corp., 144A, 6.875%, 6/15/2017

25,000

24,688

Allied Waste North America, Inc., 6.5%, 11/15/2010

25,000

25,000

American Railcar Industries, Inc., 7.5%, 3/1/2014

35,000

30,800

ARAMARK Corp., 6.739%**, 2/1/2015

45,000

39,712

Baldor Electric Co., 8.625%, 2/15/2017

30,000

29,700

Belden, Inc., 7.0%, 3/15/2017

30,000

28,950

Browning-Ferris Industries, Inc., 7.4%, 9/15/2035

105,000

95,550

Building Materials Corp. of America, 7.75%, 8/1/2014

45,000

32,400

Cenveo Corp., 7.875%, 12/1/2013

55,000

44,550

DRS Technologies, Inc.:

 

 

6.625%, 2/1/2016

15,000

14,663

6.875%, 11/1/2013

95,000

93,100

7.625%, 2/1/2018

110,000

110,000

Education Management LLC, 8.75%, 6/1/2014

30,000

25,350

Esco Corp.:

 

 

144A, 6.675%**, 12/15/2013

35,000

30,100

144A, 8.625%, 12/15/2013

65,000

63,050

General Cable Corp., 7.125%, 4/1/2017

5,000

4,775

Gibraltar Industries, Inc., Series B, 8.0%, 12/1/2015

30,000

24,300

Great Lakes Dredge & Dock Co., 7.75%, 12/15/2013

30,000

27,450

Harland Clarke Holdings Corp., 9.5%, 5/15/2015

35,000

25,725

K. Hovnanian Enterprises, Inc.:

 

 

6.25%, 1/15/2016

45,000

30,375

8.875%, 4/1/2012

145,000

80,475

Kansas City Southern de Mexico SA de CV, 144A, 7.375%, 6/1/2014

55,000

50,737

Navios Maritime Holdings, Inc., 9.5%, 12/15/2014

50,000

49,812

R.H. Donnelley Corp., 144A, 8.875%, 10/15/2017

125,000

78,125

Rainbow National Services LLC, 144A, 10.375%, 9/1/2014

5,000

5,300

RBS Global & Rexnord Corp., 9.5%, 8/1/2014

35,000

32,725

Titan International, Inc., 8.0%, 1/15/2012

130,000

127,400

United Rentals North America, Inc.:

 

 

6.5%, 2/15/2012

80,000

72,400

7.0%, 2/15/2014

95,000

74,575

Vought Aircraft Industries, Inc., 8.0%, 7/15/2011

25,000

22,938

 

1,394,725

Information Technology 0.4%

Alion Science & Technology Corp., 10.25%, 2/1/2015

25,000

14,125

Broadridge Financial Solutions, Inc., 6.125%, 6/1/2017

629,000

590,610

Computer Sciences Corp., 144A, 6.5%, 3/15/2018

295,000

299,718

Dun & Bradstreet Corp., 6.0%, 4/1/2013

725,000

727,158

Freescale Semiconductor, Inc., 8.875%, 12/15/2014

120,000

93,900

L-3 Communications Corp.:

 

 

5.875%, 1/15/2015

105,000

100,537

Series B, 6.375%, 10/15/2015

50,000

48,875

Lucent Technologies, Inc., 6.45%, 3/15/2029

145,000

103,675

MasTec, Inc., 7.625%, 2/1/2017

45,000

39,150

Seagate Technology HDD Holdings, 6.8%, 10/1/2016

60,000

57,150

SunGard Data Systems, Inc., 10.25%, 8/15/2015

95,000

95,475

Tyco Electronics Group SA, 144A, 6.0%, 10/1/2012

930,000

953,194

 

3,123,567

Materials 0.4%

Appleton Papers, Inc., Series B, 8.125%, 6/15/2011

20,000

19,250

Associated Materials, Inc., Step-up Coupon, 0% to 3/1/2009, 11.25% to 3/1/2014

75,000

51,188

Cascades, Inc., 7.25%, 2/15/2013

110,000

97,075

Celulosa Arauco y Constitucion SA, 5.625%, 4/20/2015

1,042,000

1,039,272

Chemtura Corp., 6.875%, 6/1/2016

60,000

53,400

CPG International I, Inc., 10.5%, 7/1/2013

45,000

37,800

Exopack Holding Corp., 11.25%, 2/1/2014

105,000

96,075

Freeport-McMoRan Copper & Gold, Inc., 8.375%, 4/1/2017

50,000

53,062

Georgia-Pacific LLC:

 

 

144A, 7.125%, 1/15/2017

25,000

23,125

9.5%, 12/1/2011

30,000

30,525

Hexcel Corp., 6.75%, 2/1/2015

135,000

130,612

Innophos, Inc., 8.875%, 8/15/2014

15,000

14,550

Koppers Holdings, Inc., Step-up Coupon, 0% to 11/15/2009, 9.875% to 11/15/2014

90,000

78,075

Millar Western Forest Products Ltd., 7.75%, 11/15/2013

15,000

10,125

Momentive Performance Materials, Inc., 9.75%, 12/1/2014

40,000

35,900

Mueller Water Products, Inc., 7.375%, 6/1/2017

20,000

17,250

NewMarket Corp., 7.125%, 12/15/2016

80,000

78,000

Sappi Papier Holding AG, 144A, 6.75%, 6/15/2012

499,000

452,788

Smurfit-Stone Container Enterprises, Inc.:

 

 

8.0%, 3/15/2017

65,000

54,600

8.25%, 10/1/2012

50,000

45,063

8.375%, 7/1/2012

30,000

27,150

Steel Dynamics, Inc., 144A, 7.375%, 11/1/2012

15,000

15,150

The Mosaic Co., 144A, 7.625%, 12/1/2014

60,000

64,200

Witco Corp., 6.875%, 2/1/2026

25,000

16,750

Xstrata Canada Corp., 6.0%, 10/15/2015

160,000

157,998

 

2,698,983

Telecommunication Services 0.4%

British Telecommunications PLC, 5.15%, 1/15/2013

700,000

689,815

Centennial Communications Corp.:

 

 

10.0%, 1/1/2013

90,000

83,700

10.125%, 6/15/2013

25,000

24,688

Cincinnati Bell, Inc.:

 

 

7.25%, 7/15/2013

75,000

73,687

8.375%, 1/15/2014

40,000

37,500

Cricket Communications, Inc., 144A, 9.375%, 11/1/2014

40,000

37,900

Embratel, Series B, 11.0%, 12/15/2008

15,000

15,675

Intelsat Jackson Holdings Ltd.:

 

 

9.25%, 6/15/2016

20,000

20,150

11.25%, 6/15/2016

70,000

70,962

Intelsat Corp., 9.0%, 6/15/2016

25,000

25,188

Intelsat Subsidiary Holding Co., Ltd., 8.25%, 1/15/2013

65,000

65,487

iPCS, Inc., 5.364%**, 5/1/2013

15,000

11,550

MetroPCS Wireless, Inc., 9.25%, 11/1/2014

70,000

64,400

Millicom International Cellular SA, 10.0%, 12/1/2013

155,000

164,300

Nortel Networks Ltd., 8.508%**, 7/15/2011

60,000

51,450

Qwest Corp.:

 

 

7.625%, 6/15/2015

913,000

890,175

7.875%, 9/1/2011

40,000

39,900

Rural Cellular Corp., 9.875%, 2/1/2010

70,000

71,925

SK Telecom Co., Ltd., 144A, 6.625%, 7/20/2027

250,000

245,751

SunCom Wireless Holdings, Inc., 8.5%, 6/1/2013

165,000

171,806

US Unwired, Inc., Series B, 10.0%, 6/15/2012

70,000

64,925

Verizon Communications, Inc., 6.4%, 2/15/2038

250,000

243,393

Virgin Media Finance PLC, 8.75%, 4/15/2014

80,000

71,800

 

3,236,127

Utilities 1.6%

AES Corp.:

 

 

8.0%, 10/15/2017

65,000

65,813

144A, 8.75%, 5/15/2013

205,000

213,200

Allegheny Energy Supply Co., LLC, 144A, 8.25%, 4/15/2012

245,000

264,600

Appalachian Power Co., 7.0%, 4/1/2038

480,000

470,397

Arizona Public Service Co., 6.875%, 8/1/2036

490,000

466,100

CMS Energy Corp., 8.5%, 4/15/2011

150,000

159,325

Commonwealth Edison Co.:

 

 

Series 98, 6.15%, 3/15/2012

265,000

276,583

5.8%, 3/15/2018

705,000

701,294

Dominion Resources, Inc.:

 

 

Series 06-B, 6.3%, 9/30/2066

400,000

365,812

7.5%, 6/30/2066

1,305,000

1,204,606

Edison Mission Energy, 7.0%, 5/15/2017

55,000

54,725

Energy East Corp.:

 

 

6.75%, 6/15/2012

970,000

1,036,600

6.75%, 7/15/2036

450,000

437,076

Energy Future Holdings Corp., 144A, 10.875%, 11/1/2017

100,000

101,000

FPL Group Capital, Inc., Series D, 7.3%, 9/1/2067

170,000

166,265

Integrys Energy Group, Inc., 6.11%, 12/1/2066

795,000

685,309

Mirant Americas Generation LLC, 8.3%, 5/1/2011

55,000

56,100

Mirant North America LLC, 7.375%, 12/31/2013

25,000

25,250

NRG Energy, Inc.:

 

 

7.25%, 2/1/2014

105,000

103,687

7.375%, 2/1/2016

215,000

210,700

Pedernales Electric Cooperative, Series 2002-A, 144A, 6.202%, 11/15/2032

1,730,000

1,643,552

PPL Capital Funding, Inc., Series A, 6.7%, 3/30/2067

1,135,000

965,170

Regency Energy Partners LP, 8.375%, 12/15/2013

45,000

45,900

Reliant Energy, Inc., 7.875%, 6/15/2017

60,000

59,700

Sierra Pacific Resources, 8.625%, 3/15/2014

10,000

10,501

Westar Energy, Inc., 5.95%, 1/1/2035

855,000

772,383

Wisconsin Energy Corp., Series A, 6.25%, 5/15/2067

1,200,000

1,070,759

 

11,632,407

Total Corporate Bonds (Cost $58,148,348)

56,238,940

 

Asset Backed 0.5%

Home Equity Loans

Bayview Financial Acquisition Trust, "1A1", Series 2006-A, 5.614%, 2/28/2041

310,234

306,904

Countrywide Asset-Backed Certificates:

 

 

"AF3", Series 2005-1, 4.575%, 7/25/2035

485,017

482,724

"A6", Series 2006-S6, 5.657%, 3/25/2034

1,320,000

1,084,875

"A6", Series 2006-15, 5.826%, 10/25/2046

450,000

392,354

"A1B", Series 2007-S1, 5.888%, 11/25/2036

604,872

576,299

"1AF6", Series 2006-11, 6.15%, 9/25/2046

1,295,000

1,172,341

Total Asset Backed (Cost $4,454,518)

4,015,497
 

Commercial and Non-Agency Mortgage-Backed Securities 12.5%

Adjustable Rate Mortgage Trust, "1A4", Series 2006-2, 5.758%**, 5/25/2036

1,345,000

1,099,884

Banc of America Commercial Mortgage, Inc.:

 

 

"A2", Series 2007-2, 5.634%, 4/10/2049

1,160,000

1,140,852

"A2", Series 2007-3, 5.659%**, 6/10/2049

940,000

929,664

"A4", Series 2007-3, 5.659%**, 6/10/2049

725,000

715,648

Bear Stearns Adjustable Rate Mortgage Trust, "2A1", Series 2006-4, 5.795%**, 10/25/2036

1,017,803

915,226

Bear Stearns Commercial Mortgage Securities, Inc., "AAB", Series 2007-PW16, 5.713%**, 6/11/2040

1,550,000

1,553,589

Chase Mortgage Finance Corp., "3A1", Series 2005-A1, 5.282%**, 12/25/2035

1,081,592

1,004,134

Citicorp Mortgage Securities, Inc., "1A1", Series 2004-8, 5.5%, 10/25/2034

853,308

819,792

Citigroup Commercial Mortgage Trust, "ASB", Series 2006-C5, 5.413%, 10/15/2049

1,000,000

991,414

Citigroup Mortgage Loan Trust, Inc.:

 

 

"2A1A", Series 2007-AR8, 5.92%**, 7/25/2037

2,745,826

2,596,666

"1CB2", Series 2004-NCM2, 6.75%, 8/25/2034

1,108,897

1,148,401

Citigroup/Deutsche Bank Commercial Mortgage Trust:

 

 

"A4", Series 2005-CD1, 5.225%**, 7/15/2044

825,000

823,538

"F", Series 2007-CD4, 5.555%**, 12/11/2049

690,000

404,768

Countrywide Alternative Loan Trust:

 

 

"A2", Series 2003-21T1, 5.25%, 12/25/2033

761,660

723,518

"A6", Series 2004-14T2, 5.5%, 8/25/2034

686,827

663,980

"1A1", Series 2004-J1, 6.0%, 2/25/2034

164,617

153,433

Countrywide Home Loans:

 

 

"2A2C", Series 2006-HYB1, 5.215%**, 3/20/2036

1,315,000

930,473

"1A1", Series 2007-HY1, 5.691%**, 4/25/2037

1,752,904

1,659,019

Credit Suisse Mortgage Capital Certificates, Inc.:

 

 

"10A2", Series 2007-5, 6.0%, 4/25/2029

1,031,571

1,015,453

"3A1", Series 2006-9, 6.0%, 11/25/2036

487,814

480,192

"3A19", Series 2007-5, 6.0%, 8/25/2037

1,391,659

1,369,914

"5A14", Series 2007-1, 6.0%, 2/25/2037

1,268,669

1,239,495

First Horizon Mortgage Pass-Through Trust, "1A2", Series 2006-AR4, 5.492%**, 1/25/2037

1,847,431

1,744,488

GE Capital Commercial Mortgage Corp., "AJ", Series 2007-C1, 5.677%, 12/10/2049

1,640,000

1,262,471

GMAC Mortgage Corp. Loan Trust:

 

 

"A2", Series 2004-J1, 5.25%, 4/25/2034

687,522

681,834

"4A1", Series 2005-AR6, 5.461%**, 11/19/2035

1,037,339

936,726

Greenwich Capital Commercial Funding Corp.:

 

 

"A2", Series 2007-GG9, 5.381%, 3/10/2039

2,150,000

2,105,263

"A4", Series 2007-GG11, 5.736%, 12/10/2049

600,000

592,297

GS Mortgage Securities Corp. II:

 

 

"A2", Series 2007-GG10, 5.778%, 8/10/2045

2,130,000

2,106,747

"A4", Series 2007-GG10, 5.799%**, 8/10/2045

675,000

673,925

"AAB", Series 2007-GG10, 5.799%**, 8/10/2045

2,100,000

2,112,707

"AM", Series 2007-GG10, 5.799%**, 8/10/2045

1,000,000

920,146

"J", Series 2007-GG10, 144A, 5.799%**, 8/10/2045

1,419,000

666,647

"K", Series 2007-GG10, 144A, 5.799%**, 8/10/2045

993,000

419,051

GSR Mortgage Loan Trust:

 

 

"2A1", Series 2007-AR2, 5.51%**, 5/25/2047

1,912,697

1,843,805

"1A1", Series 2007-AR2, 5.787%**, 5/25/2047

2,069,479

1,961,238

"2A1", Series 2007-AR1, 5.999%**, 3/25/2037

2,338,914

2,224,492

IndyMac Inda Mortgage Loan Trust, "1A1", Series 2006-AR3, 5.343%**, 12/25/2036

1,314,300

1,239,013

JPMorgan Chase Commercial Mortgage Securities Corp.:

 

 

"ASB", Series 2007-CB19, 5.73%**, 2/12/2049

1,280,000

1,285,554

"A4", Series 2007-LD11, 5.819%**, 6/15/2049

1,320,000

1,318,499

"ASB", Series 2007-LD11, 5.819%**, 6/15/2049

2,140,000

2,157,249

"F", Series 2007-LD11, 5.819%**, 6/15/2049

650,000

385,819

"A4", Series 2007-LD12, 5.882%, 7/15/2017

525,000

523,510

JPMorgan Mortgage Trust:

 

 

"3A3", Series 2004-A3, 4.972%**, 7/25/2034

1,380,000

1,068,089

"2A1R", Series 2006-A7, 5.446%**, 1/25/2037

1,697,159

1,613,770

"2A4", Series 2006-A2, 5.747%**, 4/25/2036

2,000,000

1,640,451

"2A1" Series 2006-A5, 5.829%**, 8/25/2036

1,139,055

1,093,726

LB-UBS Commercial Mortgage Trust, "A2", Series 2006-C6, 5.262%, 9/15/2039

960,000

943,983

Lehman Mortgage Trust:

 

 

"3A3", Series 2006-1, 5.5%, 2/25/2036

1,207,856

1,200,417

"1A10", Series 2006-3, 6.0%, 7/25/2036

1,105,603

1,060,360

Master Adjustable Rate Mortgages Trust, "B1", Series 2004-13, 3.814%**, 12/21/2034

1,370,280

1,039,496

Master Alternative Loans Trust, "8A1", Series 2004-3, 7.0%, 4/25/2034

38,361

39,162

Master Asset Securitization Trust, "2A7", Series 2003-9, 5.5%, 10/25/2033

988,484

989,101

Merrill Lynch Mortgage Investors Trust, "A2", Series 2005-A5, 4.566%, 6/25/2035

175,000

163,588

Merrill Lynch Mortgage Trust, "ASB", Series 2007-C1, 5.829%**, 6/12/2050

535,000

538,498

Merrill Lynch/Countrywide Commercial Mortgage Trust, "ASB", Series 2007-7, 5.745%, 6/12/2050

700,000

699,187

Morgan Stanley Capital I:

 

 

"A2", Series 2007-HQ11, 5.359%, 2/12/2044

2,200,000

2,150,393

"AAB", Series 2007-IQ14, 5.654%, 4/15/2049

1,410,000

1,401,655

New York Mortgage Trust, "2A3", Series 2006-1, 5.647%**, 5/25/2036

1,400,000

1,259,176

Residential Accredit Loans, Inc.:

 

 

"A3", Series 2004-QS11, 5.5%, 8/25/2034

509,782

490,892

"CB", Series 2004-QS2, 5.75%, 2/25/2034

649,438

613,313

Residential Funding Mortgage Securities I, "2A2", Series 2007-SA1, 5.619%**, 2/25/2037

605,447

573,212

Structured Adjustable Rate Mortgage Loan Trust:

 

 

"6A3", Series 2005-21, 5.4%, 11/25/2035

1,190,000

840,953

"5A1", Series 2005-18, 5.53%**, 9/25/2035

900,472

702,624

"2A1", Series 2006-1, 5.621%**, 2/25/2036

542,956

411,438

Structured Asset Securities Corp., "4A1", Series 2005-6, 5.0%, 5/25/2035

340,304

285,749

SunTrust Adjustable Rate Mortgage Loan Trust, "3A1", Series 2007-3, 6.047%**, 6/25/2037

2,060,657

2,088,558

Wachovia Bank Commercial Mortgage Trust:

 

 

"A3", Series 2007-C30, 5.246%, 12/15/2043

1,000,000

971,839

"APB", Series 2005-C22, 5.271%**, 12/15/2044

1,300,000

1,289,290

"A2", Series 2007-C32, 5.736%**, 6/15/2049

1,420,000

1,403,123

"APB", Series 2007-C32, 5.741%**, 6/15/2049

660,000

662,106

"H", Series 2007-C32, 144A, 5.741%**, 6/15/2049

990,000

514,577

Washington Mutual Mortgage Pass-Through Certificates Trust:

 

 

"1A3", Series 2005-AR14, 5.056%**, 12/25/2035

1,325,000

1,195,192

"1A3", Series 2005-AR16, 5.102%**, 12/25/2035

1,305,000

1,174,439

"1A1", Series 2006-AR18, 5.346%**, 1/25/2037

1,257,047

1,182,930

"2A2", Series 2006-AR18, 5.495%**, 1/25/2037

1,385,000

1,088,413

"1A1", Series 2006-AR16, 5.606%**, 12/25/2036

1,548,205

1,465,443

"1A3", Series 2006-AR8, 5.884%**, 8/25/2046

1,395,000

1,241,479

Wells Fargo Mortgage Backed Securities Trust:

 

 

"2A5", Series 2006-AR2, 5.109%**, 3/25/2036

3,669,828

3,516,124

"3A2", Series 2006-AR8, 5.238%**, 4/25/2036

2,070,000

1,855,786

"A6", Series 2006-AR11, 5.517%**, 8/25/2036

1,995,000

1,580,124

"1A3", Series 2006-6, 5.75%, 5/25/2036

1,178,418

1,178,499

Total Commercial and Non-Agency Mortgage-Backed Securities (Cost $100,092,616)

92,767,689

 

Collateralized Mortgage Obligations 1.6%

Federal Home Loan Mortgage Corp.:

 

 

"LN", Series 3145, 4.5%, 10/15/2034

1,253,181

1,251,159

"BE" Series 3128, 5.0%, 5/15/2033

1,400,000

1,382,325

"BG", Series 2869, 5.0%, 7/15/2033

315,000

311,385

"NE", Series 2802, 5.0%, 2/15/2033

880,000

874,995

"PE", Series 2864, 5.0%, 6/15/2033

2,080,000

2,058,262

"XD", Series 2941, 5.0%, 5/15/2033

2,010,000

1,974,132

Federal National Mortgage Association:

 

 

"QK", Series 2003-37, 4.0%, 7/25/2027

1,189,820

1,187,844

"YD", Series 2005-94, 4.5%, 8/25/2033

1,445,000

1,399,330

"HE", Series 2005-22, 5.0%, 10/25/2033

1,290,000

1,266,050

Total Collateralized Mortgage Obligations (Cost $11,419,727)

11,705,482
 

Mortgage-Backed Securities Pass-Throughs 5.7%

Federal Home Loan Mortgage Corp.:

 

 

4.5%, 6/1/2020

2,018,325

2,021,794

5.5%, 10/1/2023

853,063

866,692

5.524%**, 2/1/2038

730,009

734,096

6.5%, 1/1/2035

843,997

883,988

Federal National Mortgage Association:

 

 

4.5%, with various maturities from 6/1/2019 until 10/1/2033

8,921,179

8,879,169

5.0%, with various maturities from 2/1/2021 until 8/1/2034

4,360,532

4,359,281

5.5%, with various maturities from 1/1/2020 until 7/1/2037

16,335,722

16,571,722

6.0%, with various maturities from 1/1/2024 until 4/1/2024

1,741,218

1,796,531

6.5%, with various maturities from 5/1/2023 until 8/1/2036

4,953,522

5,163,461

7.0%, 4/1/2038

1,200,000

1,260,797

9.0%, 11/1/2030

59,098

67,098

Total Mortgage Backed Securities Pass-Throughs (Cost $41,517,307)

42,604,629

 

Municipal Bonds and Notes 1.2%

Arroyo Grande, CA, Redevelopment Agency, Tax Allocation, Redevelopment Project Area, 5.304%, 9/1/2019 (b)

1,280,000

1,299,558

Hammond, IN, Redevelopment Authority Lease Rent Revenue, Hammond Marina Project, 5.57%, 2/1/2014 (b)

610,000

650,236

San Diego, CA, Redevelopment Agency, Taxable Housing Allocation, 5.81%, 9/1/2019 (b)

2,300,000

2,373,715

Suffolk, VA, Multi-Family Housing Revenue, Redevelopment & Housing Authority, Windsor at Potomac, Series T, 6.6%, 7/1/2015

1,655,000

1,821,692

Texas, State General Obligation, Transportation Commission Mobility Fund, Series A, 4.5%, 4/1/2030 (b)

1,320,000

1,226,874

Whittier, CA, Redevelopment Agency, Tax Allocation, Housing Projects, Series B, 6.09%, 11/1/2038 (b)

1,400,000

1,406,468

Total Municipal Bonds and Notes (Cost $8,460,975)

8,778,543

 

Government & Agency Obligations 4.8%

US Treasury Obligations

US Treasury Bills:

 

 

1.5%***, 4/17/2008(c)

35,000

34,981

1.84%***, 4/17/2008(c)

87,000

86,954

1.842%***, 4/17/2008(c)

1,000

999

1.9%***, 4/17/2008(c)

119,000

118,937

1.929%***, 4/17/2008(c)

2,000

1,999

2.055%***, 4/17/2008(c)

23,000

22,988

2.1%***, 4/17/2008(c)

13,000

12,993

2.153%***, 4/17/2008(c)

1,000

999

2.2%***, 4/17/2008(c)

46,000

45,976

2.299%***, 4/17/2008(c)

1,000

999

2.3%***, 4/17/2008(c)

13,000

12,993

2.31%***, 4/17/2008(c)

3,000

2,998

3.03%***, 4/17/2008(c)

11,636,000

11,629,798

US Treasury Bond, 4.75%, 2/15/2037 (a)

6,870,000

7,389,008

US Treasury Notes:

 

 

3.5%, 2/15/2018 (a)

4,272,000

4,296,697

4.75%, 5/31/2012 (a)

803,000

880,790

4.875%, 8/31/2008 (a)

10,455,000

10,602,018

4.875%, 4/30/2011 (a)

635,000

691,852

Total Government & Agency Obligations (Cost $35,536,515)

35,833,979

 

Preferred Securities 1.2%

Axa SA, 144A, 6.379%, 12/14/2036****

180,000

145,093

Goldman Sachs Capital II, 5.793%, 6/1/2012****

850,000

566,185

MUFG Capital Finance 1 Ltd., 6.346%, 7/25/2016****

935,000

761,931

Oil Insurance Ltd., 144A, 7.558%, 6/30/2011****

2,055,000

1,792,330

Royal Bank of Scotland Group PLC, Series U, 7.64%, 9/29/2017****

900,000

775,071

Santander Perpetual SA, 144A, 6.671%, 10/24/2017****

600,000

540,697

SMFG Preferred Capital, 144A, 6.078%, 1/25/2017****

1,195,000

936,880

Stoneheath Re, 6.868%, 10/15/2011****

1,460,000

1,164,496

Wachovia Capital Trust III, 5.8%, 3/15/2011****

1,665,000

1,186,312

XL Capital Ltd., Series E, 6.5%, 4/15/2017****

1,095,000

820,751

Total Preferred Securities (Cost $10,801,777)

8,689,746

 


Shares

Value ($)

 

 

Preferred Stocks 0.1%

Consumer Discretionary 0.1%

Porsche Automobil Holding SE

3,008

552,020

Volkswagen AG

92

15,277

 

567,297

Consumer Staples 0.0%

Henkel KGaA

2,268

104,805

Financials 0.0%

Arch Capital Group Ltd., Series A, 8.0%*

809

20,554

Total Preferred Stocks (Cost $739,080)

692,656

 

Participatory Note 0.0%

Merrill Lynch Pioneers Index (issuer Merrill Lynch International), Expiration date 2/27/2009* (Cost $168,834)

1,700

157,488
 

Securities Lending Collateral 2.9%

Daily Assets Fund Institutional, 3.25% (d) (e) (Cost $21,841,115)

21,841,115

21,841,115
 

Cash Equivalents 7.2%

Cash Management QP Trust, 2.84% (d) (Cost $53,385,624)

53,385,624

53,385,624

 

% of Net Assets

Value ($)

 

 

Total Investment Portfolio (Cost $801,196,047)+

103.2

767,329,838

Other Assets and Liabilities, Net

(3.2)

(24,079,566)

Net Assets

100.0

743,250,272
* Non-income producing security
** Floating rate notes are securities whose yields vary with a designated market index or market rate, such as the coupon-equivalent of the US Treasury bill rate. These securities are shown at their current rate as of March 31, 2008.
*** Annualized yield at time of purchase; not a coupon rate
**** Date shown is call date; not a maturity date for the perpetual preferred securities
+ The cost for federal income tax purposes was $804,644,435. At March 31, 2008, net unrealized depreciation for all securities based on tax cost was $37,314,597. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $16,256,021 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $53,570,618.
(a) All or a portion of these securities were on loan (see Notes to Financial Statements). The value of all securities loaned at March 31, 2008 amounted to $21,292,947 which is 2.9% of net assets.
(b) Bond is insured by one of these companies:

Insurance Coverage

As a % of Total Investment Portfolio
Financial Guaranty Insurance Company

0.3
MBIA Corp.

0.3
XL Capital Insurance

0.3
(c) At March 31, 2008, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.
(d) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(e) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

144A: Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

PIK: Denotes that all or a portion of income is paid in kind.

REIT: Real Estate Investment Trust

Included in the portfolio are investments in mortgage or asset-backed securities which are interests in separate pools of mortgages or assets. Effective maturities of these investments may be shorter than stated maturities due to prepayments. Some separate investments in the Federal National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.

At March 31, 2008, open futures contracts purchased were as follows:

Futures

Expiration Date

Contracts

Aggregate Face Value ($)

Value ($)

Unrealized Appreciation ($)
DJ Euro Stoxx 50 Index

6/20/2008

5

269,276

280,149

10,873
Hang Seng Stock Index

4/29/2008

18

2,580,109

2,616,975

36,866
Nikkei 225 Index

6/12/2008

1

62,155

63,525

1,370
Russell 2000 Index

6/18/2008

1

339,030

345,000

5,970
Russell E Mini 2000 Index

6/20/2008

50

3,397,638

3,450,000

52,362
S&P 500 Index

6/19/2008

29

9,495,536

9,599,000

103,464
S&P/TSE 60 Index

6/19/2008

30

4,566,842

4,593,307

26,465
SPI 200 Index

6/19/2008

2

234,651

246,570

11,919
United Kingdom Treasury Bond

6/26/2008

77

16,876,766

17,008,655

131,889
10 Year US Treasury Note

6/19/2008

91

10,414,089

10,824,734

410,645

Total unrealized appreciation

791,823

As of March 31, 2008, the Fund had the following open forward foreign currency exchange contracts:

Contracts to Deliver

 

In Exchange For

 

Settlement Date

Unrealized Appreciation ($)
USD

19,242,435

  
 EUR

12,396,000

  

6/18/2008

258,083
USD

38,808,001

  
 SGD

53,335,000

  

6/18/2008

61,656

Total unrealized appreciation

319,739

Contracts to Deliver

 

In Exchange For

 

Settlement Date

Unrealized Depreciation ($)
USD

37,830,610

  
 AUD

40,890,000

  

6/18/2008

(859,519)
USD

24,961,013

  
 CAD

24,649,000

  

6/18/2008

(984,786)
USD

24,468,812

  
 NOK

125,295,000

  

6/18/2008

(38,216)
USD

14,266,497

  
 NZD

17,934,000

  

6/18/2008

(355,968)

Total unrealized depreciation

(2,238,489)

Currency Abbreviations
AUD Australian Dollar
CAD Canadian Dollar
EUR Euro Currency
NZD New Zealand Dollar
NOK Norwegian Krone
SGD Singapore Dollar
USD United States Dollar

The accompanying notes are an integral part of the financial statements.

Financial Statements

Statement of Assets and Liabilities as of March 31, 2008

Assets
Investments:

Investments in securities, at value (cost $725,969,308) — including $21,292,947 of securities loaned

$ 692,103,099

Investment in Daily Assets Fund Institutional (cost $21,841,115)*

21,841,115

Investment in Cash Management QP Trust (cost $53,385,624)

53,385,624
Total investments, at value (cost $801,196,047)

767,329,838
Cash

200,133
Foreign currency, at value (cost $236,695)

267,044
Receivable for investments sold

1,994,936
Dividends receivable

871,363
Interest receivable

2,297,385
Receivable for Fund shares sold

320,303
Receivable for daily variation margin on open futures contracts

221,121
Foreign taxes recoverable

24,444
Unrealized appreciation on forward foreign currency exchange contracts

319,739
Due from Advisor

109,787
Other assets

51,795
Total assets

774,007,888

Liabilities
Payable for investments purchased

5,215,590
Payable for Fund shares redeemed

718,923
Payable upon return of securities loaned

21,841,115
Unrealized depreciation on forward foreign currency exchange contracts

2,238,489
Accrued management fee

231,072
Other accrued expenses and payables

512,427
Total liabilities

30,757,616

Net assets, at value

$ 743,250,272
* Represents collateral on securities loaned.

The accompanying notes are an integral part of the financial statements.

Statement of Assets and Liabilities as of March 31, 2008 (continued)

Net Assets consist of
Undistributed net investment income

5,530,126
Net unrealized appreciation (depreciation) on:

Investments

(33,866,209)

Futures

791,823

Foreign currency

(1,893,297)
Accumulated net realized gain (loss)

(34,047,741)
Paid-in capital

806,735,570

Net assets, at value

$ 743,250,272

Net Asset Value

Class S

Net Asset Value offering and redemption price(a) per share ($4,751,387 ÷ 485,475 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 9.79

Institutional Class

Net Asset Value offering and redemption price(a) per share ($738,498,885 ÷ 72,263,136 outstanding shares of beneficial interest, $.001 par value, unlimited number of shares authorized)

$ 10.22
(a) Redemption price per share for shares held less than 15 days is equal to net asset value less a 2% redemption fee.

The accompanying notes are an integral part of the financial statements.

Statement of Operations for the year ended March 31, 2008

Investment Income
Income:
Dividends (net of foreign taxes withheld of $33,156)

$ 7,717,124
Interest (net of foreign taxes withheld of $2,490)

15,073,112
Interest — Cash Management QP Trust

3,551,653
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates

199,241
Total Income

26,541,130
Expenses:
Management fee

4,589,629
Administration fee

787,327
Services to shareholders

1,237,241
Professional fees

119,321
Trustees' fees and expenses

29,279
Custodian fee

74,612
Reports to shareholders

56,004
Registration fees

35,005
Other

50,833
Total expenses before expense reductions

6,979,251
Expense reductions

(2,628,512)
Total expenses after expense reductions

4,350,739

Net investment income

22,190,391

Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments

2,685,148
Futures

9,577,222
Foreign currency

13,404,722
Payments by affiliates (See Note H)

17,512
 

25,684,604
Change in net unrealized appreciation (depreciation) on:
Investments

(46,220,118)
Futures

(1,539,127)
Foreign currency

(2,628,304)
 

(50,387,549)

Net gain (loss)

(24,702,945)

Net increase (decrease) in net assets resulting from operations

$ (2,512,554)

The accompanying notes are an integral part of the financial statements.

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets

Years Ended March 31,

2008

2007
Operations:
Net investment income

$ 22,190,391

$ 21,334,561
Net realized gain (loss)

25,684,604

93,749,918
Change in net unrealized appreciation (depreciation)

(50,387,549)

(41,015,364)
Net increase (decrease) in net assets resulting from operations

(2,512,554)

74,069,115
Distributions to shareholders from:
Net investment income

Class S

(186,707)

(531,935)

Institutional Class

(31,654,117)

(18,648,813)
Net realized gains

Class S

(697,044)

(899,280)

Institutional Class

(105,625,464)

(19,732,118)
Total distributions

(138,163,332)

(39,812,146)
Fund share transactions:
Proceeds from shares sold

99,016,462

62,454,436
Reinvestment of distributions

138,155,019

39,808,921
Cost of shares redeemed

(118,987,404)

(128,188,418)
Redemption fees

89,752

63,097
Net increase (decrease) in net assets from Fund share transactions

118,273,829

(25,861,964)

Increase (decrease) in net assets

(22,402,057)

8,395,005
Net assets at beginning of period

765,652,329

757,257,324
Net assets at end of period (including undistributed net investment income of $5,530,126 and $4,325,377, respectively)

$ 743,250,272

$ 765,652,329

The accompanying notes are an integral part of the financial statements.

Financial Highlights

Class S+

Years Ended March 31,

2008

2007

2006

2005

2004a

Selected Per Share Data

Net asset value, beginning of period

$ 11.85

$ 11.30

$ 10.62

$ 10.43

$ 9.75

Income (loss) from investment operations:

Net investment incomeb

.29

.33

.22

.21

.11

Net realized and unrealized gain (loss)

(.30)

.80

.70

.30

.93

Total from investment operations

(.01)

1.13

.92

.51

1.04

Less distributions from:

Net investment income

(.42)

(.25)

(.24)

(.32)

(.36)

Net realized gains

(1.63)

(.33)

—

—

—

Total distributions

(2.05)

(.58)

(.24)

(.32)

(.36)
Redemption fees

.00***

.00***

.00***

.00***

—

Net asset value, end of period

$ 9.79

$ 11.85

$ 11.30

$ 10.62

$ 10.43
Total Return (%)c

(.75)

10.16

8.77

4.92

10.79**

Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)

5

5

31

56

69
Ratio of expenses before expense reductions (%)

1.05

.93

1.41

1.33d

1.41d*
Ratio of expenses after expense reductions (%)

.87

.71

1.00

1.00d

1.00d*
Ratio of net investment income (%)

2.50

2.67

1.92

1.90

1.65*
Portfolio turnover rate (%)f

262

174

101

106e

115d,e**
+ On October 23, 2006, Investment Class was renamed Class S.
a For the period from July 25, 2003 (commencement of operations of Investment Class shares) to March 31, 2004.
b Based on average shares outstanding during the period.
c Total return would have been lower had certain expenses not been reduced.
d The ratio includes expenses allocated from the Asset Management Portfolio, the Fund's master portfolio through August 20, 2004.
e This ratio includes the purchase and sales of portfolio securities of the DWS Lifecycle Long Range Fund as a stand-alone fund in addition to the Asset Management Portfolio. The 2004 ratio represents the Asset Management Portfolio only.
f The portfolio turnover rate including mortgage dollar roll transactions was 264%, 175%, 108%, 122% and 124% for the years ended March 31, 2008, 2007, 2006, 2005 and 2004, respectively.
* Annualized.
** Not annualized.
*** Amount is less than $.005.

Institutional Class

Years Ended March 31,

2008

2007

2006

2005

2004

Selected Per Share Data

Net asset value, beginning of period

$ 12.29

$ 11.74

$ 11.04

$ 10.84

$ 9.17

Income (loss) from investment operations:

Net investment incomea

.32

.34

.27

.25

.21

Net realized and unrealized gain (loss)

(.29)

.85

.74

.33

1.94

Total from investment operations

.03

1.19

1.01

.58

2.15

Less distributions from:

Net investment income

(.47)

(.31)

(.31)

(.38)

(.48)

Net realized gains

(1.63)

(.33)

—

—

—

Total distributions

(2.10)

(.64)

(.31)

(.38)

(.48)
Redemption fees

.00*

.00*

.00*

.00*

—

Net asset value, end of period

$ 10.22

$ 12.29

$ 11.74

$ 11.04

$ 10.84
Total Return (%)b

(.40)

10.28

9.19

5.42

23.71

Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)

738

761

726

719

702
Ratio of expenses before expense reductions (%)

.89

.89

.91

.83c

.91c
Ratio of expenses after expense reductions (%)

.55

.55

.55

.55c

.55c
Ratio of net investment income (%)

2.82

2.83

2.37

2.35

2.08
Portfolio turnover rate (%)e

262

174

101

106d

115d
a Based on average shares outstanding during the period.
b Total return would have been lower had certain expenses not been reduced.
c The ratio includes expenses allocated from the Asset Management Portfolio, the Fund's master portfolio through August 20, 2004.
d This ratio includes the purchase and sales of portfolio securities of the DWS Lifecycle Long Range Fund as a stand-alone fund in addition to the Asset Management Portfolio. The 2004 ratio represents the Asset Management Portfolio only.
e The portfolio turnover rate including mortgage dollar roll transactions was 264%, 175%, 108%, 122% and 124% for the years ended March 31, 2008, 2007, 2006, 2005 and 2004, respectively.
* Amount is less than $.005.

Notes to Financial Statements

A. Significant Accounting Policies

DWS Lifecycle Long Range Fund (the "Fund") is a diversified series of DWS Advisor Funds (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 two classes of shares: Class S and Institutional Class. Institutional Class shares are offered to a limited group of investors and are not subject to initial or contingent deferred sales charges. Institutional Class shares have lower ongoing expenses than Class S shares. 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 both classes of shares except that each class bears certain expenses unique to that class such as services to shareholders and certain other class specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.

The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.

Debt securities are valued by independent pricing services approved by the Trustees of the Fund. If the pricing services are unable to provide valuations, the securities are valued at the most recent bid quotation or evaluated price, obtained from a broker-dealer. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes.

Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Cash Management QP Trust are valued at their net asset value each business day.

Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees. The Fund may use a fair valuation model to value international equity securities in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange.

New Accounting Pronouncements. In September 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007. As of March 31, 2008, management does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

In addition, in March 2008, FASB issued Statement of Financial Accounting Standards No. 161 ("FAS 161") Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. FAS 161 requires enhanced disclosure about an entity's derivative and hedging activities. FAS 161 is effective for fiscal years beginning after November 15, 2008. Management is currently evaluating the impact the adoption of FAS 161 will have on the Fund's financial statement disclosures.

Securities Lending. The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of liquid, unencumbered assets having a value at least equal to the value of the securities loaned. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to the lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

Foreign Currency Translations. The books and records of the Fund are maintained in US dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into US dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into US dollars at the prevailing exchange rates on the respective dates of the transactions.

Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the disposition of forward foreign currency exchange contracts and foreign currencies, and the difference between the amount of net investment income accrued and the US dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may also invest in futures contracts to keep cash on hand to meet shareholder redemptions or other needs while maintaining exposure to the stock market.

Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.

Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.

Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The Fund may enter into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings, to facilitate transactions in foreign currency denominated securities and to enhance the total returns.

Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. Sales and purchases of forward currency contracts having the same settlement date and broker are offset and any gain (loss) is realized on the date of offset; otherwise, gain (loss) is realized on settlement date. Realized and unrealized gains and losses which represent the difference between the value of a forward currency contract to buy and a forward currency contract to sell are included in net realized and unrealized gain (loss) from foreign currency.

Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.

Mortgage Dollar Rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities at an agreed upon price and date. During the period between the sale and repurchase, the Fund will not be entitled to earn interest and receive principal payment on securities sold. The Fund receives compensation as consideration for entering into the commitment to repurchase. The compensation is paid in the form of a lower price for the security upon its repurchase or, alternatively, a fee. Mortgage dollar rolls may be renewed with a new sale and repurchase price and a cash settlement made at each renewal without physical delivery of the securities subject to the contract.

Certain risks may arise upon entering into mortgage dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of the securities sold by the Fund may decline below the repurchase price of those securities.

When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. No interest accrues to the Fund until payment takes place. At the time the Fund enters into this type of transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment.

Certain risks may arise upon entering into when-issued or delayed delivery securities from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.

Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders.

At March 31, 2008, the Fund had a net tax basis capital loss carryforward of approximately $10,326,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until March 31, 2010 $3,729,000, March 31, 2011 $4,041,000, March 31, 2012 $2,301,000 and March 31, 2013 $255,000, the respective expiration dates, whichever occurs first, subject to certain limitations under Sections 382-383 of the Internal Revenue Code. During the year ended March 31, 2008, the Fund utilized approximately $2,590,000 of prior year capital loss carryforwards.

In addition, from November 1, 2007 through March 31, 2008, the Fund incurred approximately $29,024,000 of net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ending March 31, 2009.

The Fund has reviewed the tax positions for each of the three open tax years as of March 31, 2008 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.

Distribution of Income and Gains. Net investment income of the Fund is declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards,

would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually.

The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments, investments in passive foreign investment companies, forward foreign currency exchange contracts, recognition of certain foreign currency gains (losses) as ordinary income (loss), futures and certain securities sold at a loss. As a result net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

At March 31, 2008, each Fund's components of distributable earnings (accumulated losses) on a tax-basis were as follows:

Undistributed ordinary income*

$ 3,560,708
Undistributed net long-term capital gains

$ 9,333,880
Capital loss carryforward**

$ (10,326,000)
Net unrealized appreciation (depreciation) on investments

$ (37,314,597)

In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:

 

Years Ended March 31,

 

2008

2007
Distributions from ordinary income*

$ 70,993,246

$ 21,994,120
Distributions from long-term capital gains*

$ 67,170,086

$ 17,818,026
* For tax purposes short-term capital gains distributions and gains from forward foreign currency exchange contracts are considered ordinary income distributions.
** Subject to certain limitations under Section 382-383 of the Internal Revenue Code.

Redemption Fees. During the year, the Fund imposed a redemption fee of 2% of the total redemption amount on the Fund shares redeemed or exchanged within 15 days of buying them, either by purchase or exchange. This fee was assessed and retained by the Fund for the benefit of the remaining shareholders. The redemption fee was accounted for as an addition to paid-in capital. Effective April 1, 2008, the Fund no longer imposes the 2% redemption fee on Fund shares acquired on or after that date.

Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust.

Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. All premiums and discounts are amortized/accreted for financial reporting purposes.

B. Purchases and Sales of Securities

During the year ended March 31, 2008, purchases and sales of investment securities (excluding short-term investments, US Treasury obligations and mortgage dollar roll transactions) aggregated $1,545,917,687 and $1,455,137,571, respectively. Purchases and sales of US Treasury obligations aggregated $352,503,171 and $379,795,257, respectively. Purchases and sales of mortgage dollar roll transactions aggregated $11,002,388 and $14,029,880, 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.

Pursuant to a written contract, Aberdeen Asset Management Inc. ("AAMI"), a direct, wholly owned subsidiary of Aberdeen Asset Management PLC, serves as subadvisor to the Fund with respect to the fixed income portion of the Fund's portfolio. AAMI is paid for its services by the Advisor from its fee as investment advisor to the Fund.

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 $250 million of the Fund's average daily net assets

.600%
Next $750 million of such net assets

.575%
Over $1 billion of such net assets

.550%

For the period from April 1, 2007 through September 30, 2007, the Advisor had contractually agreed to waive all or a portion of its management fee and reimburse or pay certain operating expenses of the Fund (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest and organizational and offering expenses) to the extent necessary to maintain the total operating expenses of Institutional Class at 1.03%.

Effective October 1, 2006, the Advisor has voluntarily agreed to waive a portion of its management fee and reimburse or pay certain operating expenses of the Fund (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expenses) to the extent necessary to maintain the total operating expenses of Institutional Class at 0.55%. This voluntary waiver or reimbursement may be terminated at any time at the option of the Advisor.

Accordingly, for the year ended March 31, 2008, the Advisor waived a portion of its management fee pursuant to the Investment Management Agreement aggregating $1,355,984 ($8,620 and $1,347,364 for Class S and Institutional Class, respectively) and the amount charged aggregated $3,233,645 which was equivalent to an annual effective rate of 0.41% of the Fund's average daily net assets.

In addition, for the year ended March 31, 2008, the Advisor reimbursed $1,250,980 of sub-recordkeeping expenses for Institutional Class shares.

Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the year ended March 31, 2008, the Advisor received an Administration Fee of $787,327 of which $63,100 is unpaid.

Service Provider Fees. DWS Scudder Investments Service Company ("DWS-SISC"), 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 DWS-SISC and DST Systems, Inc. ("DST"), DWS-SISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DWS-SISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended March 31, 2008 the amounts charged to the Fund by DWS-SISC were as follows:

Services to Shareholders

Total Aggregated

Waived

Unpaid at March 31, 2008
Class S

$ 2,050

$ —

$ 346
Institutional Class

358

358

—

 

$ 2,408

$ 358

$ 346

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 March 31, 2008, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $40,400, of which $8,160 is unpaid.

Trustees' Fees and Expenses. As compensation for his or her services, each Independent Trustee receives an aggregated annual fee, plus a fee for each meeting attended (plus reimbursement for reasonable out-of-pocket expenses incurred in connection with his or her attendance at board and committee meetings) from each fund in the Fund Complex for which he or she serves. In addition, the Chairperson of the Board and the Chairperson of each committee of the Board receive additional compensation for their services. Payment of such fees and expenses is allocated among all such funds described above in direct proportion to their relative net assets.

Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Cash Management QP Trust (the "QP Trust") and other affiliated funds managed by the Advisor. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated funds' investments in the QP Trust.

D. Concentration of Ownership

From time to time the Fund may have a concentration of several shareholders holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Fund.

At March 31, 2008, one or more shareholders individually held greater than 10% of the outstanding shares of the Fund. These shareholders held 64% and 21%, respectively, of the total shares outstanding of the Fund.

E. Fee Reductions

The Fund has entered into an arrangement with its custodian and transfer agent whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's custodian expenses. During the year ended March 31, 2008, the Fund's custodian fees were reduced by $4,944 and $16,246 for custody and transfer agent credits earned.

F. Line of Credit

The Fund and other affiliated funds (the "Participants") share in a $750 million revolving credit facility administered by JPMorgan Chase Bank N.A. for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.35 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.

G. Share Transactions

The following table summarizes share and dollar activity in the Fund:

 

Year Ended March 31, 2008

Year Ended March 31, 2007

 

Shares

Dollars

Shares

Dollars

Shares sold
Class S

53,768

$ 583,399

350,375

$ 4,045,889
Institutional Class

8,558,886

98,433,063

4,825,664

58,408,547
 

 

$ 99,016,462

 

$ 62,454,436

Shares issued to shareholders in reinvestment of distributions
Class S

82,668

$ 883,751

122,508

$ 1,430,927
Institutional Class

12,318,040

137,271,268

3,164,121

38,377,994
 

 

$ 138,155,019

 

$ 39,808,921

Shares redeemed
Class S

(84,282)

$ (1,031,482)

(2,814,416)

$ (33,157,167)
Institutional Class

(10,507,314)

(117,955,922)

(7,919,157)

(95,031,251)
 

 

$ (118,987,404)

 

$ (128,188,418)

Redemption fees

$ 89,752

 

$ 63,097

Net increase (decrease)
Class S

52,154

$ 525,420

(2,341,533)

$ (27,680,311)
Institutional Class

10,369,612

117,748,409

70,628

1,818,347
 

 

$ 118,273,829

 

$ (25,861,964)

H. Payments Made by Affiliates

During the year ended March 31, 2008, the Advisor fully reimbursed the Fund $17,512 for losses incurred on trades executed incorrectly. The amount of the loss was less than 0.01% of the Fund's average daily net assets, thus having no impact on the Fund's total return.

Report of Independent Registered Public Accounting Firm

To the Trustees of DWS Advisor Funds and Shareholders of DWS Lifecycle Long Range Fund:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of DWS Lifecycle Long Range Fund (the "Fund") at March 31, 2008, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at March 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

Boston, Massachusetts
May 30, 2008

PricewaterhouseCoopers LLP

Tax Information (Unaudited)

The Fund paid distributions of $1.05 per share from net long-term capital gains during its year ended March 31, 2008, of which 100% represents 15% rate gains.

Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $16,421,000 as capital gain dividends for its the year ended March 31, 2008, of which 100% represents 15% rate gains.

For federal income tax purposes, the Fund designates $8,488,836, or the maximum amount allowable under tax law, as qualified dividend income.

Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 621-1048.

Summary of Management Fee Evaluation by Independent Fee Consultant

October 26, 2007

Pursuant to an Order entered into by Deutsche Investment Management Americas and affiliates (collectively, "DeAM") with the Attorney General of New York, I, Thomas H. Mack, have been appointed the Independent Fee Consultant for the DWS Scudder Funds. My duties include preparing an annual written evaluation of the management fees DeAM charges the Funds, considering among other factors the management fees charged by other mutual fund companies for like services, management fees DeAM charges other clients for like services, DeAM's costs of supplying services under the management agreements and related profit margins, possible economies of scale if a Fund grows larger, and the nature and quality of DeAM's services, including fund performance. This report summarizes my evaluation for 2007, including my qualifications, the evaluation process for each of the DWS Scudder Funds, consideration of certain complex-level factors, and my conclusions.

Qualifications

For more than 30 years I have served in various professional capacities within the investment management business. I have held investment analysis and advisory positions, including securities analyst, portfolio strategist and director of investment policy with a large investment firm. I have also performed business management functions, including business development, financial management and marketing research and analysis.

Since 1991, I have been an independent consultant within the asset management industry. I have provided services to over 125 client organizations, including investment managers, mutual fund boards, product distributors and related organizations. Over the past several years I have completed a number of assignments for mutual fund boards, specifically including assisting boards with management contract renewal.

I hold a Master of Business Administration degree, with highest honors, from Harvard University; and Master of Science and Bachelor of Science (highest honors) degrees from the University of California at Berkeley. I am an independent director and audit committee financial expert for two closed-end mutual funds, serve on the board of directors of a private market research company, and have served in various leadership and financial oversight capacities with non-profit organizations.

Evaluation of Fees for each DWS Scudder Fund

My work focused primarily on evaluating, fund-by-fund, the fees charged to each of the 136 Fund portfolios in the DWS Scudder Fund family. For each Fund, I considered each of the key factors mentioned above, as well as any other relevant information. In doing so I worked closely with the Funds' Independent Directors in their annual contract renewal process, as well as in their approval of contracts for several new funds (documented separately).

In evaluating each Fund's fees, I reviewed comprehensive materials provided by or on behalf of DeAM, including expense information prepared by Lipper Analytical, comparative performance information, profitability data, manager histories, and other materials. I also accessed certain additional information from the Lipper, Strategic Insight, and Morningstar databases and drew on my industry knowledge and experience.

To facilitate evaluating this considerable body of information, I prepared for each Fund a document summarizing the key data elements in each area as well as additional analytics discussed below. This made it possible to consider each key data element in the context of the others.

In the course of contract renewal, DeAM agreed to implement a number of fee and expense adjustments requested by the Independent Directors which will favorably impact future fees and expenses, and my evaluation includes the effects of these changes.

Fees and Expenses Compared with Other Funds

The competitive fee and expense evaluation for each fund focused on two primary comparisons:

The Fund's contractual management fee (the advisory fee plus the administration fee where applicable) compared with those of a group of typically 12-15 funds in the same Lipper investment category (e.g. Large Capitalization Growth) having similar distribution arrangements and being of similar size.

The Fund's total expenses compared with a broader universe of funds from the same Lipper investment category and having similar distribution arrangements.

These two comparisons provide a view of not only the level of the fee compared with funds of similar scale but also the total expense the Fund bears for all the services it receives, in comparison with the investment choices available in the Fund's investment category and distribution channel. The principal figure-of-merit used in these comparisons was the subject Fund's percentile ranking against peers.

DeAM's Fees for Similar Services to Others

DeAM provided management fee schedules for all of its US domiciled fund and non-fund investment management accounts in any of the investment categories where there is a DWS Scudder Fund. These similar products included the other DWS Scudder Funds, non-fund pooled accounts, institutional accounts and sub-advisory accounts. Using this information, I calculated for each Fund the fee that would be charged to each similar product, at the subject Fund's asset level.

Evaluating information regarding non-fund products is difficult because there are varying levels of services required for different types of accounts, with mutual funds generally requiring considerably more regulatory and administrative types of service as well as having more frequent cash flows than other types of accounts. Also, while mutual fund fees for similar fund products can be expected to be similar, there will be some differences due to different pricing conditions in different distribution channels (e.g. retail funds versus those used in variable insurance products), differences in underlying investment processes and other factors.

Costs and Profit Margins

DeAM provided a detailed profitability analysis for each Fund. After making some adjustments so that the presentation would be more comparable to the available industry figures, I reviewed profit margins from investment management alone, from investment management plus other fund services (excluding distribution) provided to the Funds by DeAM (principally shareholder services), and DeAM profits from all sources, including distribution. A later section comments on overall profitability.

Economies of Scale

Economies of scale — an expected decline in management cost per dollar of fund assets as fund assets grow — are very rarely quantified and documented because of inherent difficulties in collecting and analyzing relevant data. However, in virtually every investment category that I reviewed, larger funds tend to have lower fees and lower total expenses than smaller funds. To see how each DWS Scudder Fund compares with this industry observation, I reviewed:

The trend in Fund assets over the last five years and the accompanying trend in total expenses. This shows if the Fund has grown and, if so, whether total expense (management fees as well as other expenses) have declined as a percent of assets.

Whether the Fund has break-points in its management fee schedule, the extent of the fee reduction built into the schedule and the asset levels where the breaks take effect, and in the case of a sub-advised Fund how the Fund's break-points compare with those of the sub-advisory fee schedule.

How the Fund's contractual fee schedule compares with trends in the industry data. To accomplish this, I constructed a chart showing how actual latest-fiscal-year contractual fees of the Fund and of other similar funds relate to average fund assets, with the subject Fund's contractual fee schedule superimposed.

Quality of Service — Performance

The quality-of-service evaluation focused on investment performance, which is the principal result of the investment management service. Each Fund's performance was reviewed over the past 1, 3, 5 and 10 years, as applicable, and compared with that of other funds in the same investment category and with a suitable market index.

In addition, I calculated and reviewed risk-adjusted returns relative to an index of similar mutual funds' returns and a suitable market index. The risk-adjusted returns analysis provides a way of determining the extent to which the Fund's return comparisons are mainly the product of investment value-added (or lack thereof) or alternatively taking considerably more or less risk than is typical in its investment category.

I also received and considered the history of portfolio manager changes for each Fund, as this provided an important context for evaluating the performance results.

Complex-Level Considerations

While this evaluation was conducted mainly at the individual fund level, there are some issues relating to the reasonableness of fees that can alternatively be considered across the whole fund complex:

I reviewed DeAM's profitability analysis for all DWS Scudder funds, with a view toward determining if the allocation procedures used were reasonable and how profit levels compared with public data for other investment managers.

I considered whether DeAM and affiliates receive any significant ancillary or "fall-out" benefits that should be considered in interpreting the direct profitability results. These would be situations where serving as the investment manager of the Funds is beneficial to another part of the Deutsche Bank organization.

I considered how aggregated DWS Scudder Fund expenses had varied over the years, by asset class and in the context of trends in asset levels.

I reviewed the structure of the DeAM organization, trends in staffing levels, and information on compensation of investment management and other professionals compared with industry data.

Findings

Based on the process and analysis discussed above, which included reviewing a wide range of information from management and external data sources and considering among other factors the fees DeAM charges other clients, the fees charged by other fund managers, DeAM's costs and profits associated with managing the Funds, economies of scale, possible fall-out benefits, and the nature and quality of services provided, in my opinion the management fees charged the DWS Scudder Funds are reasonable.

llr_m0

Thomas H. Mack

Trustees and Officers

The following table presents certain information regarding the Board Members and Officers of the Trust. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Board Member will hold office for an indeterminate period. The Board Members may also serve in similar capacities with other funds in the fund complex. The Length of Time Served represents the year in which the Board Member joined the board of one or more DWS funds now overseen by the Board.

Independent Board Members

Name, Year of Birth, Position with the Fund and Length of Time Served1

Business Experience and Directorships During the Past Five Years

Number of Funds in DWS Fund Complex Overseen
Dawn-Marie Driscoll (1946)
Chairperson since 20042
Board Member since 1987
 President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley College; formerly: Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Trustee of eight open-end mutual funds managed by Sun Capital Advisers, Inc. (since 2007); Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley College; Trustee, Southwest Florida Community Foundation (charitable organization). Former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees)

134
Paul K. Freeman (1950)
Vice Chairperson since 2008
Board Member since 19933
 Consultant, World Bank/Inter-American Development Bank; formerly: Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998)

132
John W. Ballantine (1946)
Board Member since 19993
 Retired; formerly: Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company); Stockwell Capital Investments PLC (private equity). Former Directorships: First Oak Brook Bancshares, Inc. and Oak Brook Bank

134
Henry P. Becton, Jr. (1943)
Board Member since 1990
 Vice Chair, WGBH Educational Foundation. Directorships: Association of Public Television Stations; Becton Dickinson and Company4 (medical technology company); Belo Corporation4 (media company); Boston Museum of Science; Public Radio International. Former Directorships: American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service

134
Keith R. Fox (1954)
Board Member since 1996
 Managing General Partner, Exeter Capital Partners (a series of private equity funds). Directorships: Progressive Holding Corporation (kitchen goods importer and distributor); Natural History, Inc. (magazine publisher); Box Top Media Inc. (advertising); The Kennel Shop (retailer)

134
Kenneth C. Froewiss (1945)
Board Member since 2001
 Clinical Professor of Finance, NYU Stern School of Business (1997-present); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996)

134
Richard J. Herring (1946)
Board Member since 1990
 Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center (since July 2000); Director, Japan Equity Fund, Inc. (since September 2007), Thai Capital Fund, Inc. (since September 2007), Singapore Fund, Inc. (since September 2007); formerly: Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (July 2000-June 2006)

134
William McClayton (1944)
Board Member since 20043
 Chief Administrative Officer, Diamond Management & Technology Consultants, Inc. (global management consulting firm) (2001-present); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966-2001); Trustee, Ravinia Festival

134
Rebecca W. Rimel (1951)
Board Member since 1995
 President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001-2007); Trustee, Pro Publica (2007-present) (charitable organization); formerly: Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983-2004); Board Member, Investor Education (charitable organization) (2004-2005); Director, Viasys Health Care4 (January 2007-June 2007)

134
William N. Searcy, Jr. (1946)
Board Member since 1993
 Private investor since October 2003; Trustee of eight open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998); formerly: Pension & Savings Trust Officer, Sprint Corporation4 (telecommunications) (November 1989-September 2003

134
Jean Gleason Stromberg (1943)
Board Member since 1997
 Retired; formerly: Consultant (1997-2001); Director, US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation; Service Source, Inc. Former Directorships: Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996)

134
Robert H. Wadsworth
(1940)
Board Member since 19993
 President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present).
 

137

Interested Board Member

Name, Year of Birth, Position with the Fund and Length of Time Served1

Business Experience and Directorships During the Past Five Years

Number of Funds in Fund Complex Overseen
Axel Schwarzer5 (1958)
Board Member since 2006
 Managing Director6, Deutsche Asset Management; Head of Deutsche Asset Management Americas; CEO of DWS Scudder; formerly: board member of DWS Investments, Germany (1999-2005); formerly: Head of Sales and Product Management for the Retail and Private Banking Division of Deutsche Bank in Germany (1997-1999); formerly: various strategic and operational positions for Deutsche Bank Germany Retail and Private Banking Division in the field of investment funds, tax driven instruments and asset management for corporates (1989-1996)

134

Officers7

Name, Year of Birth, Position with the Fund and Length of Time Served8

Principal Occupation(s) During Past 5 Years and Other Directorships Held
Michael G. Clark9 (1965)
President, 2006-present
 Managing Director6, Deutsche Asset Management (2006-present); President of DWS family of funds; Director, ICI Mutual Insurance Company (since October 2007); formerly: Director of Fund Board Relations (2004-2006) and Director of Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations, Merrill Lynch Asset Management (1999-2000)
John Millette10 (1962)
Vice President and Secretary, 1999-present
 Director6, Deutsche Asset Management
Paul H. Schubert9 (1963)
Chief Financial Officer, 2004-present
Treasurer, 2005-present
 Managing Director6, Deutsche Asset Management (since July 2004); formerly: Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998)
Patricia DeFilippis11 (1963)
Assistant Secretary, 2005-present
 Vice President, Deutsche Asset Management (since June 2005); formerly: Counsel, New York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co. LLC (1998-2003)
Elisa D. Metzger11 (1962)
Assistant Secretary 2005-present
 Director6, Deutsche Asset Management (since September 2005); formerly: Counsel, Morrison and Foerster LLP (1999-2005)
Caroline Pearson10 (1962)
Assistant Secretary, 1997-present
 Managing Director6, Deutsche Asset Management
Paul Antosca10 (1957)
Assistant Treasurer, 2007-present
 Director6, Deutsche Asset Management (since 2006); Vice President, The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
Jack Clark10 (1967)
Assistant Treasurer, 2007-present
 Director6, Deutsche Asset Management (since 2007); formerly: Vice President, State Street Corporation (2002-2007)
Kathleen Sullivan D'Eramo10 (1957)
Assistant Treasurer, 2003-present
 Director6, Deutsche Asset Management
Diane Kenneally10 (1966)
Assistant Treasurer, 2007-present
 Director6, Deutsche Asset Management
Jason Vazquez11 (1972)
Anti-Money Laundering Compliance Officer, 2007-present
 Vice President, Deutsche Asset Management (since 2006); formerly: AML Operations Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations Manager for AXA Financial (1999-2004)
Robert Kloby11 (1962)
Chief Compliance Officer, 2006-present
 Managing Director6, Deutsche Asset Management (2004-present); formerly: Chief Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company (1984-1988)
J. Christopher Jackson11 (1951)
Chief Legal Officer, 2006-present
 Director6, Deutsche Asset Management (2006-present); formerly: Director, Senior Vice President, General Counsel and Assistant Secretary, Hansberger Global Investors, Inc. (1996-2006); Director, National Society of Compliance Professionals (2002-2005) (2006-2009)
1 The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board.
2 Represents the year Ms. Driscoll was first appointed Chairperson of certain DWS funds.
3 Elected to the Board April 1, 2008.
4 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
5 The mailing address of Axel Schwarzer is c/o Deutsche Investment Management Americas Inc., 345 Park Avenue, New York, New York 10154. Mr. Schwarzer is an interested Board Member by virtue of his positions with Deutsche Asset Management. As an interested person, Mr. Schwarzer receives no compensation from the funds.
6 Executive title, not a board directorship.
7 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the funds.
8 The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds.
9 Address: 345 Park Avenue, New York, New York 10154.
10 Address: Two International Place, Boston, MA 02110.
11 Address: 280 Park Avenue, New York, New York 10017.

The fund's Statement of Additional Information ("SAI") includes additional information about the Board Members. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: (800) 621-1048.

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 Class 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 Scudder representative by calling the appropriate number below:

For shareholders of Institutional Class:

(800) 621-1048

For shareholders of Class S:

(800) 728-3337

Web Site

www.dws-scudder.com

View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.
Obtain prospectuses and applications, blank forms, interactive worksheets, news about DWS funds, subscription to fund updates by e-mail, retirement planning information, and more.

Written Correspondence

DWS Scudder

PO Box 219151
Kansas City, MO 64121-9151

Proxy Voting

 A description of the fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.dws-scudder.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.

Principal Underwriter

 If you have questions, comments or complaints, contact:

DWS Scudder Distributors, Inc.

222 South Riverside Plaza
Chicago, IL 60606-5808
(800) 621-1148

 

Class S

Institutional Class

Nasdaq Symbol

 BTILX
 BTAMX

CUSIP Number

 23339E 517
 23339E 525

Fund Number

 812
 567

llr_notesblank0Notes

llr_backcover0

 

ITEM 2.

CODE OF ETHICS

 

 

 

As of the end of the period, March 31, 2008, DWS Lifecycle Long Range Fund has a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.

 

There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.

 

A copy of the code of ethics is filed as an exhibit to this Form N-CSR.

 

 

 

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT

 

 

 

The Funds’ audit committee is comprised solely of trustees who are “independent” (as such term has been defined by the Securities and Exchange Commission (“SEC”) in regulations implementing Section 407 of the Sarbanes-Oxley Act (the “Regulations”)). The Funds’ Board of Trustees has determined that there are several “audit committee financial experts” (as such term has been defined by the Regulations) serving on the Funds’ audit committee including Mr. William McClayton, the chair of the Funds’ audit committee. The SEC has stated that an audit committee financial expert is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. In accordance with New York Stock Exchange requirements, the Board believes that all members of the Funds’ audit committee are financially literate, as such qualification is interpreted by the Board in its business judgment, and that at least one member of the audit committee has accounting or related financial management expertise.

 

 

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

 

 

DWS LIFECYCLE LONG RANGE FUND

FORM N-CSR DISCLOSURE RE: AUDIT FEES

The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.

The Audit Committee has delegated certain pre-approval responsibilities to its Chairman (or, in his absence, any other member of the Audit Committee).

Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund

 

Fiscal Year
Ended
March 31,

Audit Fees Billed to Fund

Audit-Related
Fees Billed to Fund

Tax Fees Billed to Fund

All
Other Fees Billed to Fund

2008

$68,025

$0

$0

$0

2007

$69,500

$128

$0

$0

 

 

The above “Audit- Related Fees” were billed for agreed upon procedures performed.

 

Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers

The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas, Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.

 

Fiscal Year
March 31,

Audit-Related
Fees Billed to Adviser and Affiliated Fund Service Providers

Tax Fees Billed to Adviser and Affiliated Fund Service Providers

All
Other Fees Billed to Adviser and Affiliated Fund Service Providers

2008

$21,500

$25,000

$0

2007

$192,500

$11,930

$0

 

The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures related to fund mergers and additional costs related to annual audits and the above “Tax Fees” were billed in connection with tax consultation and agreed-upon procedures.

Non-Audit Services

The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.

 

Fiscal Year
Ended
March 31,

Total
Non-Audit Fees Billed to Fund

(A)

Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund)

(B)

Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements)

(C)

Total of (A), (B)

and (C)

2008

$0

$25,000

$600,000

$625,000

2007

$0

$11,930

$0

$11,930

 

All other engagement fees were billed for services provided by PWC for services related to consulting on an IT project.

 

 

 

 

 

 

 

ITEM 5.

AUDIT COMMITTEE OF LISTED REGISTRANTS

 

 

 

Not Applicable

 

 

ITEM 6.

SCHEDULE OF INVESTMENTS

 

 

 

Not Applicable

 

 

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

 

 

 

Not applicable.

 

 

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

 

 

 

Not applicable.

 

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

 

 

 

Not Applicable.

 

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

 

 

The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Chairman of the Board, P.O. Box 100176, Cape Coral, FL 33910.

 

 

ITEM 11.

CONTROLS AND PROCEDURES

 

 

 

(a)          The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

 

 

 

(b)          There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.

 

 

ITEM 12.

EXHIBITS

 

 

 

(a)(1)     Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.

 

 

 

(a)(2)     Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

 

 

 

(b)         Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.

 

 

 

 

Form N-CSR Item F

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant:

DWS Lifecycle Long Range Fund, a series of DWS Advisor Funds

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

May 30, 2008

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Registrant:

DWS Lifecycle Long Range Fund, a series of DWS Advisor Funds

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

May 30, 2008

 

 

By:

/s/Paul Schubert

 

Paul Schubert

Chief Financial Officer and Treasurer

 

Date:

May 30, 2008