DWS RREEF Real Estate Securities Fund
Performance review 9/30/08
Portfolio managers Portfolio manager John F. Robertson, CFA, is a managing director of Deutsche Asset Management. Portfolio manager Jerry W. Ehlinger, CFA, is a managing director of Deutsche Asset Management. Portfolio manager John W. Vojticek is a managing director of Deutsche Asset Management. Share class A B C INST R S Nasdaq symbol RRRAX RRRBX RRRCX RRRRX RRRSX RRREX CUSIP number 23339E491 23339E483 23339E475 23339E442 23339E467 23339E459
Overview During an extremely challenging period for investors, US REITs significantly outperformed the broad stock market. DWS RREEF Real Estate Securities Fund (Class A shares, unadjusted for sales charges) returned 4.29% for the three months ended September 30, 2008, compared with the 5.41% return of the fund’s benchmark, the MSCI US REIT Index. Over the same period, the S&P 500 Index returned –8.37%.1 Although REITs posted solid returns in a time of unprecedented market turmoil, the quarter also featured significant volatility within the real estate securities market. The quarter featured seven of the best trading days ever for US REITs, as well as six of the all-time worst trading sessions for US commercial real estate securities. In the end, faltering commodity prices eased inflation concerns and helped boost REITs. Another dynamic that seemed to help REITs compared with other financial stocks was that REITs generally have a hard asset component (i.e., real property, such as office buildings, hotels, commercial space and apartment buildings) and reasonable dividend yields. A host of factors—the continuing turmoil in the financial markets, including the freezeup of credit and money markets and the growing unwillingness of banks to lend; the government takeover of Fannie Mae (0%) and Freddie Mac (0%); the collapse of Lehman Brothers (0%); the bailout of AIG (0%) and other financial institutions; as well as trouble for Wachovia (0%), Washington Mutual (0%) and a host of European banks—made for an extremely bumpy ride for all financial stocks, including REITs.2 Another important event was the marked variation in individual REIT performance over the period as investors punished REITs heavily burdened by debt and overly dependent on near-term rollovers of existing large bank loans. At the same time, they rewarded REITs that exhibit healthier balance sheets. Positive attribution
Not all share classes are available to all investors.
Past performance is no guarantee of future results. The opinions and forecasts expressed herein by the fund managers do not necessarily reflect those of DWS Investments, are as of 9/30/08 and may not come to pass. Percentages in parentheses represent percentages of the fund’s market value as of 8/29/08. Securities referenced do not represent all of the securities purchased or sold by the fund, may or may not be profitable, and should not be construed as a recommendation of any specific security. DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
One of the largest individual contributions to performance came from the health care REIT Ventas (4.95%). Health care REITs were perceived as relatively defensive real estate investment holdings in a period of intense market volatility. The sector was also helped by new legislation increasing government reimbursements for skilled nursing care. In addition, the fund’s overweight in the apartment REIT AvalonBay Communities (6.12%) added to performance.3 AvalonBay boasts a strong balance sheet, and the apartment sector in general has benefited from a gradual decline in home ownership since the onset of the mortgage crisis. Negative attribution Stock selection within the industrial sector was by far the largest detractor from performance. In addition, the fund’s overweight in regional malls subtracted from returns. The fund’s regional mall holding General Growth Properties Inc. (2.36%) declined dramatically as investors focused on the large amount of debt the company must refinance in the next two years in an environment of extremely tight credit. Stock selection in the industrial sector represented the largest drag on quarterly performance, and within the sector ProLogis (8.31%)—a manager and developer of commercial distribution facilities—represented by far the largest detractor. ProLogis was hurt by the darkening global economic outlook, as well as a perception that it might have difficulty obtaining continued financing to push through its development pipeline. (continued on next page) IMPORTANT RISK DISCLOSURE This fund is nondiversified and can take larger positions in fewer companies, increasing its overall potential risk. The fund involves additional risk due to its narrow focus. There are special risks associated with an investment in real estate, including credit risk, interest-rate fluctuations and the impact of varied economic conditions. This fund is subject to stock market risk, meaning stocks in the fund may decline in value for extended periods due to the activities and financial prospects of individual companies, or due to general market and economic conditions. See the prospectus for details regarding the fund’s risk profile.
DWS Investments Distributors, Inc. 222 South Riverside Plaza Chicago, IL 60606-5808 www.dws-investments.com e-mail inquiry.info@dws.com Tel (800) 621-1148
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DWS RREEF Real Estate Securities Fund
Performance review 9/30/08
Average annual total returns as of 9/30/08 (returns of less than one year are cumulative)
20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 -15.00 -20.00 1-year 3-year 5-year Since inception
1-month 3-month YT D 1-year 3-year 5-year Since inception Inception date
Class A, adjusted -5.96 -1.71 -4.90 -17.05 3.99 12.11 15.67 9/3/02
Class A, unadjusted -0.22 4.29 0.90 -11.99 6.06 13.45 15.28 9/3/02
Class INST -0.19 4.37 1.09 -11.68 6.42 13.80 16.83 12/1/99
Class S -0.22 4.33 0.97 -11.81 6.26 13.57 8.91 5/2/05
MSCI US REIT Index -0.14 5.41 2.71 -11.63 5.39 13.18 n/a n/a
Negative attribution Performance is historical and does not guarantee future results. Investment return and principal fluctuate so your shares may be worth more or less when redeemed. Current performance may differ from data shown. Please visit www.dws-investments.com for the fund’s most recent month-end performance. Adjusted returns include the maximum sales charge of 5.75%. Unadjusted returns do not reflect sales charges and would have been lower if they did. The fund may charge a 2% fee for redemptions within less than 15 days. Performance includes reinvestment of all distributions. The index is represented by the MSCI US REIT Index1 The hotel sector continued to face challenges in the third quarter as investors worried that a slowing economy would negatively affect consumer and business travel, and by extension, hotel occupancy. Starwood Hotels & Resorts Worldwide, Inc. (0.46%), which in previous years has been a solid performer for the fund, was hit especially hard as its international growth forecast dipped dramatically. Outlook With troubling financial news emerging almost daily, our outlook for the 0.00 REIT market remains guarded. It appears that cash flow and revenues for most-5.00 firms will remain under pressure indefinitely and that the REIT volatile-10.00 sessions that we have seen will most likely continue for trading -15.00 some time to come. We believe that economic data will continue to exhibit -20.00 declining growth and that the slowdown will persist into 2009.
-25.00 Along with continued market volatility and subdued to declining -30.00 economic growth, we also perceive some encouraging trends. If -35.00 commodity prices continue to fall, we believe the US Federal Reserve -40.00 Board and other central banks could continue to be accommodative in Since inception reducing interest rates to 1-year the economy where needed. Though we boost cannot predict the timing, when debt markets finally right themselves and global liquidity does reemerge, we believe the commercial real estate markets should be in a favorable position because of a relative lack of overall supply compared with previous downturns. However, for the fourth quarter of this year we anticipate additional financial market problems, more government intervention and, as we have stated, continued volatility.
1
Expense ratios as of latest prospectus Share class Gross Net A 0.97% 0.97% INST 0.57% 0.57% S 0.83% 0.83%
VIEW A PROSPECTUS To obtain a prospectus, download one from www.dwsinvestments.com, talk to your financial representative or call Shareholder Services at (800) 621-1048. We advise you to carefully consider the product’s objectives, risks, charges and expenses before investing. The prospectus contains this and other important information about the investment product. Read the prospectus carefully before you invest. NOT FDIC/NCUA INSURED MAY LOSE VALUE NO BANK GUARANTEE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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The MSCI US REIT Index tracks the most actively traded US REITs and designed to measure real estate equity performance. The S&P 500 Index is an unmanaged index widely regarded as representative of the equity market in general. Index assume reinvestment of any and all distributions. Index returns, unlike fund returns, do not reflect fees or expenses. It is not possible to invest directly in an index or category. Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation, are government-sponsored enterprises that purchase and/or guarantee certain mortgages. means the fund holds a higher weighting in a given sector or security than the benchmark. “Underweight” means the fund holds a lower weighting.
2
3 “Overweight”
© 2008 DWS Investments Distributors, Inc. All rights reserved. (10/08) R-3626-3 RREEF-PMQC