UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSRS
Investment Company Act file number: 811-04257
Deutsche DWS Variable Series I
(Exact Name of Registrant as Specified in Charter)
875 Third Avenue
New York, NY 10022-6225
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (212) 454-4500
Diane Kenneally
One International Place
Boston, MA 02110
(Name and Address of Agent for Service)
Date of fiscal year end: | 12/31 |
Date of reporting period: | 6/30/2020 |
ITEM 1. | REPORT TO STOCKHOLDERS |
June 30, 2020
Semiannual Report
Deutsche DWS Variable Series I
DWS Bond VIP
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Fund’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from your insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site, and your insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from your insurance company electronically by following the instructions provided by your insurance company.
You may elect to receive all future reports in paper free of charge from your insurance company. If your insurance company informs you that future reports will be delivered via Web access, you can inform your insurance company that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by your insurance company.
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Bond investments are subject to interest-rate, credit, liquidity and market risks to varying degrees. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investments in lower-quality (“junk bonds”) and non-rated securities present greater risk of loss than investments in higher-quality securities. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Emerging markets tend to be more volatile and less liquid than the markets of more mature economies, and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the recent pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
2 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Performance Summary | June 30, 2020 (Unaudited) |
Fund 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 data quoted. Please contact your participating insurance company for the Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns.
The gross expense ratio of the Fund, as stated in the fee table of the prospectus dated May 1, 2020 is 0.81% for Class A shares and may differ from the expense ratio disclosed in the Financial Highlights table in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with an average maturity of one year or more.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index. |
Comparative Results | ||||||||||||
DWS Bond VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class A | Growth of $10,000 | $10,509 | $10,678 | $11,581 | $12,710 | $15,193 | ||||||
Average annual total return | 5.09% | 6.78% | 5.01% | 4.91% | 4.27% | |||||||
Bloomberg Barclays U.S. Aggregate Bond Index | Growth of $10,000 | $10,614 | $10,874 | $11,683 | $12,345 | $14,555 | ||||||
Average annual total return | 6.14% | 8.74% | 5.32% | 4.30% | 3.82% |
The growth of $10,000 is cumulative.
‡ | Total returns shown for periods less than one year are not annualized. |
Deutsche DWS Variable Series I — DWS Bond VIP | | | 3 |
Portfolio Summary | (Unaudited) |
Asset Allocation (As a % of Total Net Assets) | 6/30/20 | 12/31/19 | ||||||
Corporate Bonds | 49% | 44% | ||||||
Government & Agency Obligations | 11% | 13% | ||||||
Collateralized Mortgage Obligations | 10% | 12% | ||||||
Mortgage-Backed Securities Pass-Throughs | 9% | 18% | ||||||
Asset-Backed | 7% | 8% | ||||||
Commercial Mortgage-Backed Securities | 7% | 7% | ||||||
Short-Term U.S. Treasury Obligations | 3% | 2% | ||||||
Cash Equivalents, Securities Lending Collateral and other Assets and Liabilities, net | 4% | –4% | ||||||
100% | 100% | |||||||
Quality (Excludes Cash Equivalents and Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
AAA | 23% | 33% | ||||||
AA | 13% | 12% | ||||||
A | 17% | 16% | ||||||
BBB | 31% | 27% | ||||||
BB | 14% | 9% | ||||||
B | 2% | 1% | ||||||
Not Rated | 0% | 2% | ||||||
100% | 100% | |||||||
Interest Rate Sensitivity | 6/30/20 | 12/31/19 | ||||||
Effective Maturity | 7.8 years | 8.6 years | ||||||
Effective Duration | 6.0 years | 5.9 years |
The quality ratings represent the higher of Moody’s Investors Service, Inc. (“Moody’s”), Fitch Ratings, Inc. (“Fitch”) or S&P Global Ratings (“S&P”) credit ratings. The ratings of Moody’s, Fitch and S&P represent their opinions as to the quality of the securities they rate. Credit quality measures a bond issuer’s ability to repay interest and principal in a timely manner. Ratings are relative and subjective and are not absolute standards of quality. Credit quality does not remove market risk and is subject to change.
Effective maturity is the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.
Effective duration is an approximate measure of the Fund’s sensitivity to interest rate changes taking into consideration any maturity shortening features.
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 5.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-PORT. The Fund’s Form N-PORT will be available on the SEC’s Web site at sec.gov. The Fund’s portfolio holdings are also posted on dws.com from time to time. Please read the Fund’s current prospectus for more information.
Thomas M. Farina, CFA, Managing Director
Gregory M. Staples, CFA, Managing Director
Kelly L. Beam, CFA, Director
Portfolio Managers
4 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Investment Portfolio | as of June 30, 2020 (Unaudited) |
Principal Amount ($)(a) | Value ($) | |||||||
Corporate Bonds 49.2% |
| |||||||
Communication Services 7.3% |
| |||||||
Amazon.com, Inc.: |
| |||||||
2.5%, 6/3/2050 | 20,000 | 20,532 | ||||||
4.25%, 8/22/2057 | 45,000 | 60,064 | ||||||
AT&T, Inc.: |
| |||||||
3-month USD-LIBOR + 1.180%, 1.498%*, 6/12/2024 | 207,000 | 207,410 | ||||||
2.75%, 6/1/2031 | 125,000 | 130,149 | ||||||
3.65%, 6/1/2051 | 100,000 | 104,702 | ||||||
CCO Holdings LLC: |
| |||||||
144A, 4.5%, 8/15/2030 | 225,000 | 229,500 | ||||||
144A, 4.75%, 3/1/2030 | 100,000 | 102,319 | ||||||
Charter Communications Operating LLC: |
| |||||||
3.7%, 4/1/2051 | 35,000 | 34,329 | ||||||
3.75%, 2/15/2028 | 75,000 | 81,758 | ||||||
5.05%, 3/30/2029 | 60,000 | 70,824 | ||||||
Comcast Corp.: |
| |||||||
1.95%, 1/15/2031 | 45,000 | 45,511 | ||||||
2.8%, 1/15/2051 | 40,000 | 41,019 | ||||||
CSC Holdings LLC, 144A, 4.125%, 12/1/2030 | 200,000 | 198,250 | ||||||
Discovery Communications LLC, 5.3%, 5/15/2049 | 25,000 | 29,921 | ||||||
Empresa Nacional de Telecomunicaciones SA, REG S, 4.75%, 8/1/2026 | 250,000 | 265,638 | ||||||
Expedia Group, Inc., 144A, | 80,000 | 85,222 | ||||||
Lamar Media Corp., 144A, | 100,000 | 94,280 | ||||||
Match Group, Inc., 144A, | 135,000 | 132,173 | ||||||
Netflix, Inc.: |
| |||||||
144A, 3.625%, 6/15/2025 (b) | 45,000 | 45,338 | ||||||
5.5%, 2/15/2022 | 125,000 | 130,344 | ||||||
5.875%, 11/15/2028 | 125,000 | 142,344 | ||||||
NortonLifeLock, Inc., | 225,000 | 228,094 | ||||||
Sirius XM Radio, Inc., 144A, 4.125%, 7/1/2030 | 145,000 | 143,399 | ||||||
T-Mobile U.S.A., Inc.: |
| |||||||
144A, 3.875%, 4/15/2030 | 75,000 | 83,472 | ||||||
144A, 4.375%, 4/15/2040 | 70,000 | 80,970 | ||||||
144A, 4.5%, 4/15/2050 | 110,000 | 130,925 | ||||||
VeriSign, Inc.: |
| |||||||
4.625%, 5/1/2023 | 250,000 | 251,562 | ||||||
5.25%, 4/1/2025 | 250,000 | 276,875 | ||||||
Verizon Communications, Inc., 4.329%, 9/21/2028 | 70,000 | 84,247 | ||||||
ViacomCBS, Inc., 4.2%, 5/19/2032 | 50,000 | 56,220 | ||||||
Vodafone Group PLC, | 55,000 | 65,493 | ||||||
Walt Disney Co.: |
| |||||||
2.65%, 1/13/2031 | 45,000 | 47,685 | ||||||
3.6%, 1/13/2051 | 50,000 | 55,697 | ||||||
|
| |||||||
3,756,266 | ||||||||
Consumer Discretionary 5.7% |
| |||||||
1011778 BC Unlimited Liability Co., 144A, 4.375%, 1/15/2028 | 210,000 | 205,840 |
Principal Amount ($)(a) | Value ($) | |||||||
Dollar General Corp., | 20,000 | 23,932 | ||||||
Ford Motor Co.: |
| |||||||
8.5%, 4/21/2023 | 60,000 | 63,450 | ||||||
9.0%, 4/22/2025 | 110,000 | 119,042 | ||||||
Ford Motor Credit Co. LLC: |
| |||||||
4.271%, 1/9/2027 | 200,000 | 186,438 | ||||||
5.584%, 3/18/2024 | 206,000 | 207,998 | ||||||
General Motors Co., | 30,000 | 32,438 | ||||||
General Motors Financial Co., Inc.: |
| |||||||
3.15%, 6/30/2022 | 265,000 | 269,603 | ||||||
3.95%, 4/13/2024 | 120,000 | 124,140 | ||||||
4.35%, 4/9/2025 | 84,000 | 88,510 | ||||||
5.2%, 3/20/2023 | 40,000 | 42,749 | ||||||
Hasbro, Inc., 3.55%, 11/19/2026 | 70,000 | 73,971 | ||||||
Home Depot, Inc.: |
| |||||||
3.125%, 12/15/2049 | 80,000 | 87,820 | ||||||
3.35%, 4/15/2050 | 50,000 | 57,127 | ||||||
Lowe’s Companies, Inc.: |
| |||||||
4.05%, 5/3/2047 | 40,000 | 47,148 | ||||||
5.0%, 4/15/2040 | 35,000 | 45,635 | ||||||
5.125%, 4/15/2050 | 25,000 | 34,119 | ||||||
McDonald’s Corp.: |
| |||||||
2.125%, 3/1/2030 | 35,000 | 35,887 | ||||||
4.2%, 4/1/2050 | 50,000 | 60,622 | ||||||
NIKE, Inc., 3.375%, 3/27/2050 | 29,000 | 33,522 | ||||||
O’Reilly Automotive, Inc., | 35,000 | 40,987 | ||||||
Prime Security Services Borrower LLC: |
| |||||||
144A, 5.25%, 4/15/2024 | 195,000 | 199,387 | ||||||
144A, 6.25%, 1/15/2028 | 70,000 | 65,975 | ||||||
QVC, Inc., 4.75%, 2/15/2027 | 172,000 | 166,324 | ||||||
Ralph Lauren Corp., | 20,000 | 20,537 | ||||||
RELX Capital, Inc., | 15,000 | 16,167 | ||||||
Sabre GLBL, Inc., 144A, | 130,000 | 121,360 | ||||||
Sands China Ltd., 4.6%, 8/8/2023 | 200,000 | 210,560 | ||||||
Target Corp., 2.65%, 9/15/2030 | 30,000 | 32,965 | ||||||
Walmart, Inc., 3.4%, 6/26/2023 | 175,000 | 190,639 | ||||||
William Carter Co, 144A, | 40,000 | 41,250 | ||||||
|
| |||||||
2,946,142 | ||||||||
Consumer Staples 1.9% |
| |||||||
Altria Group, Inc., 4.8%, 2/14/2029 | 25,000 | 29,188 | ||||||
Anheuser-Busch InBev Worldwide, Inc.: |
| |||||||
4.35%, 6/1/2040 | 50,000 | 56,957 | ||||||
5.55%, 1/23/2049 | 55,000 | 73,325 | ||||||
Aramark Services, Inc., 144A, 6.375%, 5/1/2025 | 30,000 | 30,979 | ||||||
Archer-Daniels-Midland Co., 2.75%, 3/27/2025 | 30,000 | 32,554 | ||||||
BAT Capital Corp., | 65,000 | 76,019 | ||||||
Cargill, Inc., 144A, | 100,000 | 101,726 | ||||||
Constellation Brands, Inc., 2.875%, 5/1/2030 | 40,000 | 42,381 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 5 |
Principal Amount ($)(a) | Value ($) | |||||||
Estee Lauder Companies, Inc.: |
| |||||||
2.375%, 12/1/2029 | 26,000 | 27,841 | ||||||
2.6%, 4/15/2030 | 15,000 | 16,319 | ||||||
General Mills, Inc., | 65,000 | 70,771 | ||||||
Hormel Foods Corp., | 40,000 | 40,721 | ||||||
Keurig Dr Pepper, Inc.: |
| |||||||
3.2%, 5/1/2030 | 25,000 | 27,812 | ||||||
3.8%, 5/1/2050 | 30,000 | 33,899 | ||||||
4.057%, 5/25/2023 | 90,000 | 98,083 | ||||||
4.597%, 5/25/2028 | 70,000 | 83,961 | ||||||
PepsiCo, Inc.: |
| |||||||
3.375%, 7/29/2049 | 55,000 | 63,085 | ||||||
3.5%, 3/19/2040 | 25,000 | 29,475 | ||||||
Philip Morris International, Inc., 2.1%, 5/1/2030 | 60,000 | 61,824 | ||||||
|
| |||||||
996,920 | ||||||||
Energy 2.3% |
| |||||||
BP Capital Markets America, Inc., 3.543%, 4/6/2027 | 75,000 | 83,055 | ||||||
Devon Energy Corp., | 100,000 | 88,922 | ||||||
Energy Transfer Operating LP: |
| |||||||
4.25%, 3/15/2023 | 350,000 | 369,736 | ||||||
5.0%, 5/15/2050 | 20,000 | 18,995 | ||||||
Exxon Mobil Corp.: |
| |||||||
2.44%, 8/16/2029 | 87,000 | 92,269 | ||||||
3.482%, 3/19/2030 | 100,000 | 113,806 | ||||||
Hess Corp., 5.8%, 4/1/2047 | 100,000 | 108,687 | ||||||
Marathon Petroleum Corp.: |
| |||||||
4.5%, 5/1/2023 | 110,000 | 118,548 | ||||||
4.7%, 5/1/2025 | 100,000 | 111,946 | ||||||
Plains All American Pipeline LP, 3.8%, 9/15/2030 | 50,000 | 48,989 | ||||||
Total Capital International SA, 3.127%, 5/29/2050 | 60,000 | 61,558 | ||||||
|
| |||||||
1,216,511 | ||||||||
Financials 11.1% |
| |||||||
Air Lease Corp., 3.0%, 2/1/2030 | 125,000 | 115,862 | ||||||
Aircastle Ltd., 4.4%, 9/25/2023 | 109,000 | 105,740 | ||||||
ANZ New Zealand Int’l Ltd., 144A, 3.4%, 3/19/2024 | 200,000 | 216,386 | ||||||
ASB Bank Ltd., 144A, | 200,000 | 215,935 | ||||||
Avolon Holdings Funding Ltd.: |
| |||||||
144A, 3.25%, 2/15/2027 | 59,000 | 47,656 | ||||||
144A, 5.125%, 10/1/2023 | 167,000 | 154,451 | ||||||
Banco De Credito Del Peru, 144A, 3.125%, 7/1/2030 (c) | 97,000 | 96,175 | ||||||
Banco del Estado de Chile, 144A, 2.704%, 1/9/2025 | 200,000 | 205,300 | ||||||
Banco Santander SA, | 200,000 | 210,213 | ||||||
Bank of America Corp.: |
| |||||||
2.592%, 4/29/2031 | 160,000 | 169,303 | ||||||
2.676%, 6/19/2041 | 60,000 | 61,620 | ||||||
4.3%, Perpetual (d) | 204,000 | 183,070 | ||||||
Barclays PLC, 2.852%, 5/7/2026 | 200,000 | 208,973 | ||||||
Citigroup, Inc.: |
| |||||||
2.572%, 6/3/2031 | 125,000 | 129,282 | ||||||
3.2%, 10/21/2026 | 170,000 | 186,342 | ||||||
4.412%, 3/31/2031 | 80,000 | 94,922 |
Principal Amount ($)(a) | Value ($) | |||||||
Equinix, Inc., (REIT), | 34,000 | 33,702 | ||||||
Global Payments, Inc., | 120,000 | 128,548 | ||||||
Hartford Financial Services Group, Inc., 2.8%, 8/19/2029 | 40,000 | 42,353 | ||||||
HSBC Holdings PLC, | 250,000 | 259,304 | ||||||
Intercontinental Exchange, Inc.: |
| |||||||
2.1%, 6/15/2030 | 52,000 | 52,837 | ||||||
3.0%, 6/15/2050 | 33,000 | 34,136 | ||||||
JPMorgan Chase & Co, | 50,000 | 53,029 | ||||||
JPMorgan Chase & Co.: |
| |||||||
2.522%, 4/22/2031 | 150,000 | 158,416 | ||||||
2.739%, 10/15/2030 | 100,000 | 107,284 | ||||||
Kookmin Bank, 144A, | 200,000 | 204,361 | ||||||
Morgan Stanley: |
| |||||||
2.188%, 4/28/2026 | 105,000 | 109,327 | ||||||
3.622%, 4/1/2031 | 150,000 | 171,356 | ||||||
PayPal Holdings, Inc.: |
| |||||||
2.65%, 10/1/2026 | 84,000 | 91,285 | ||||||
2.85%, 10/1/2029 | 25,000 | 27,194 | ||||||
Progressive Corp., | 15,000 | 17,063 | ||||||
Prudential Financial, Inc., | 25,000 | 30,018 | ||||||
REC Ltd., 144A, 4.75%, 5/19/2023 | 200,000 | 205,362 | ||||||
Santander Holdings U.S.A., Inc., 3.244%, 10/5/2026 | 270,000 | 280,509 | ||||||
Societe Generale SA, 144A, 2.625%, 1/22/2025 | 200,000 | 204,109 | ||||||
State Street Corp., | 102,000 | 109,694 | ||||||
Swiss Re Treasury U.S. Corp., 144A, 4.25%, 12/6/2042 | 70,000 | 85,581 | ||||||
Synchrony Financial, | 40,000 | 41,868 | ||||||
The Allstate Corp., | 30,000 | 35,952 | ||||||
The Goldman Sachs Group, Inc.: |
| |||||||
3.5%, 4/1/2025 | 100,000 | 109,651 | ||||||
4.4%, Perpetual (d) | 63,000 | 56,070 | ||||||
Visa, Inc., 2.05%, 4/15/2030 | 95,000 | 99,546 | ||||||
Wells Fargo & Co.: |
| |||||||
2.188%, 4/30/2026 | 295,000 | 305,020 | ||||||
2.393%, 6/2/2028 | 168,000 | 173,580 | ||||||
3.196%, 6/17/2027 | 90,000 | 97,587 | ||||||
|
| |||||||
5,725,972 | ||||||||
Health Care 4.5% |
| |||||||
AbbVie, Inc.: |
| |||||||
144A, 3.2%, 11/21/2029 | 50,000 | 55,020 | ||||||
144A, 4.25%, 11/21/2049 | 30,000 | 36,365 | ||||||
4.45%, 5/14/2046 | 20,000 | 24,405 | ||||||
144A, 4.75%, 3/15/2045 | 25,000 | 31,069 | ||||||
Amgen, Inc.: |
| |||||||
3.375%, 2/21/2050 | 50,000 | 55,755 | ||||||
4.563%, 6/15/2048 | 40,000 | 52,088 | ||||||
Anthem, Inc.: |
| |||||||
2.25%, 5/15/2030 | 80,000 | 82,071 | ||||||
2.875%, 9/15/2029 | 40,000 | 43,348 |
The accompanying notes are an integral part of the financial statements.
6 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Principal Amount ($)(a) | Value ($) | |||||||
Biogen, Inc., 3.15%, 5/1/2050 | 50,000 | 48,143 | ||||||
Boston Scientific Corp., | 75,000 | 85,817 | ||||||
Bristol-Myers Squibb Co., 144A, 4.25%, 10/26/2049 | 85,000 | 112,132 | ||||||
Centene Corp.: |
| |||||||
3.375%, 2/15/2030 | 58,000 | 58,563 | ||||||
4.25%, 12/15/2027 | 90,000 | 92,872 | ||||||
Cigna Corp.: |
| |||||||
2.4%, 3/15/2030 | 30,000 | 31,128 | ||||||
3.2%, 3/15/2040 | 15,000 | 15,890 | ||||||
CVS Health Corp.: |
| |||||||
4.25%, 4/1/2050 | 20,000 | 23,899 | ||||||
5.05%, 3/25/2048 | 45,000 | 58,945 | ||||||
DH Europe Finance II Sarl, | EUR 200,000 | 216,166 | ||||||
HCA, Inc.: |
| |||||||
3.5%, 9/1/2030 | 360,000 | 346,742 | ||||||
5.25%, 6/15/2026 | 130,000 | 150,192 | ||||||
5.375%, 9/1/2026 | 115,000 | 125,206 | ||||||
Merck & Co., Inc., | 80,000 | 80,408 | ||||||
Molina Healthcare, Inc., 144A, 4.375%, 6/15/2028 | 90,000 | 89,887 | ||||||
Pfizer, Inc., 4.2%, 9/15/2048 | 60,000 | 78,196 | ||||||
Stryker Corp., 2.9%, 6/15/2050 | 60,000 | 60,161 | ||||||
Teleflex, Inc., 144A, | 25,000 | 25,625 | ||||||
Thermo Fisher Scientific, Inc., 2.6%, 10/1/2029 | 110,000 | 118,782 | ||||||
UnitedHealth Group, Inc.: |
| |||||||
2.875%, 8/15/2029 | 54,000 | 60,286 | ||||||
2.9%, 5/15/2050 | 50,000 | 52,801 | ||||||
|
| |||||||
2,311,962 | ||||||||
Industrials 4.1% |
| |||||||
3M Co., 3.7%, 4/15/2050 | 26,000 | 30,970 | ||||||
Agilent Technologies, Inc., | 45,000 | 46,114 | ||||||
Boeing Co.: |
| |||||||
2.3%, 8/1/2021 (b) | 150,000 | 151,445 | ||||||
2.7%, 5/1/2022 | 125,000 | 126,563 | ||||||
4.508%, 5/1/2023 | 140,000 | 147,900 | ||||||
4.875%, 5/1/2025 | 93,000 | 101,352 | ||||||
5.04%, 5/1/2027 | 130,000 | 143,365 | ||||||
Carrier Global Corp., 144A, 2.722%, 2/15/2030 | 70,000 | 70,304 | ||||||
Delta Air Lines, Inc., | 94,000 | 77,356 | ||||||
Empresa de Transporte de Pasajeros Metro SA, 144A, 3.65%, 5/7/2030 | 200,000 | 215,750 | ||||||
FedEx Corp.: |
| |||||||
3.8%, 5/15/2025 | 245,000 | 272,345 | ||||||
4.05%, 2/15/2048 | 114,000 | 117,160 | ||||||
General Electric Co.: |
| |||||||
3.45%, 5/1/2027 | 50,000 | 51,176 | ||||||
3.625%, 5/1/2030 | 35,000 | 35,039 | ||||||
Mileage Plus Holdings LLC, 144A, 6.5%, 6/20/2027 (c) | 39,000 | 39,097 | ||||||
Otis Worldwide Corp., 144A, 2.565%, 2/15/2030 | 60,000 | 63,040 | ||||||
Roper Technologies, Inc., | 40,000 | 40,030 |
Principal Amount ($)(a) | Value ($) | |||||||
Westinghouse Air Brake Technologies Corp., | 70,000 | 71,330 | ||||||
WRKCo., Inc., 3.0%, 6/15/2033 | 30,000 | 31,247 | ||||||
XPO Logistics, Inc., 144A, | 260,000 | 272,350 | ||||||
|
| |||||||
2,103,933 | ||||||||
Information Technology 3.8% |
| |||||||
Apple, Inc.: |
| |||||||
2.05%, 9/11/2026 | 77,000 | 82,271 | ||||||
3.75%, 9/12/2047 | 100,000 | 119,948 | ||||||
Broadcom, Inc.: |
| |||||||
144A, 4.11%, 9/15/2028 | 212,000 | 230,979 | ||||||
144A, 5.0%, 4/15/2030 | 70,000 | 80,456 | ||||||
Dell International LLC: |
| |||||||
144A, 4.9%, 10/1/2026 | 198,000 | 218,474 | ||||||
144A, 5.875%, 6/15/2021 | 159,000 | 159,048 | ||||||
HP, Inc., 2.2%, 6/17/2025 | 125,000 | 129,020 | ||||||
Intel Corp., 3.25%, 11/15/2049 | 60,000 | 67,706 | ||||||
International Business Machines Corp., 3.5%, 5/15/2029 | 100,000 | 115,344 | ||||||
KLA Corp., 3.3%, 3/1/2050 | 31,000 | 32,019 | ||||||
Lam Research Corp., | 24,000 | 24,725 | ||||||
Microchip Technology, Inc., 144A, 2.67%, 9/1/2023 | 50,000 | 51,464 | ||||||
Micron Technology, Inc., | 70,000 | 72,748 | ||||||
Microsoft Corp., 3.7%, 8/8/2046 | 86,000 | 107,095 | ||||||
NVIDIA Corp.: |
| |||||||
3.5%, 4/1/2040 | 14,000 | 16,329 | ||||||
3.5%, 4/1/2050 | 22,000 | 25,136 | ||||||
NXP BV: |
| |||||||
144A, 2.7%, 5/1/2025 | 15,000 | 15,724 | ||||||
144A, 3.875%, 9/1/2022 | 200,000 | 211,427 | ||||||
Open Text Corp., 144A, | 175,000 | 168,492 | ||||||
Oracle Corp.: |
| |||||||
3.6%, 4/1/2050 | 25,000 | 27,822 | ||||||
4.0%, 11/15/2047 | 35,000 | 40,833 | ||||||
|
| |||||||
1,997,060 | ||||||||
Materials 0.9% |
| |||||||
Air Products and Chemicals, Inc., 2.05%, 5/15/2030 | 30,000 | 31,488 | ||||||
AngloGold Ashanti Holdings PLC, 5.125%, 8/1/2022 | 110,000 | 115,505 | ||||||
EI du Pont de Nemours & Co., 2.3%, 7/15/2030 | 25,000 | 25,969 | ||||||
MEGlobal Canada ULC, 144A, 5.0%, 5/18/2025 | 237,000 | 254,877 | ||||||
Newmont Corp., | 40,000 | 40,539 | ||||||
Nucor Corp., 2.7%, 6/1/2030 | 10,000 | 10,499 | ||||||
|
| |||||||
478,877 | ||||||||
Real Estate 2.6% |
| |||||||
American Tower Corp.: |
| |||||||
(REIT), 2.1%, 6/15/2030 | 55,000 | 55,135 | ||||||
(REIT), 3.8%, 8/15/2029 | 55,000 | 62,248 | ||||||
Crown Castle International Corp., (REIT), 3.8%, 2/15/2028 | 50,000 | 56,200 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 7 |
Principal Amount ($)(a) | Value ($) | |||||||
Equinix, Inc.: |
| |||||||
(REIT), 2.625%, 11/18/2024 | 74,000 | 78,782 | ||||||
(REIT), 3.2%, 11/18/2029 | 81,000 | 88,092 | ||||||
Host Hotels & Resorts LP, (REIT), 3.875%, 4/1/2024 | 135,000 | 138,109 | ||||||
Iron Mountain, Inc.: |
| |||||||
144A, 5.0%, 7/15/2028 | 55,000 | 53,883 | ||||||
144A, 5.25%, 7/15/2030 | 105,000 | 103,425 | ||||||
Office Properties Income Trust, (REIT), 4.15%, 2/1/2022 | 80,000 | 79,519 | ||||||
Omega Healthcare Investors, Inc., (REIT), 5.25%, 1/15/2026 | 50,000 | 53,495 | ||||||
SBA Communications Corp.: |
| |||||||
144A (REIT), 3.875%, 2/15/2027 | 155,000 | 154,419 | ||||||
(REIT), 4.0%, 10/1/2022 | 190,000 | 191,900 | ||||||
(REIT), 4.875%, 9/1/2024 | 125,000 | 127,969 | ||||||
Welltower, Inc.: |
| |||||||
(REIT), 2.75%, 1/15/2031 | 40,000 | 39,954 | ||||||
(REIT), 3.1%, 1/15/2030 | 80,000 | 82,979 | ||||||
|
| |||||||
1,366,109 | ||||||||
Utilities 5.0% |
| |||||||
Abu Dhabi National Energy Co. PJSC, 144A, 4.375%, 4/23/2025 | 210,000 | 233,872 | ||||||
American Electric Power Co., Inc.: |
| |||||||
3.2%, 11/13/2027 | 50,000 | 54,933 | ||||||
4.3%, 12/1/2028 | 20,000 | 23,519 | ||||||
Calpine Corp., 144A, | 210,000 | 204,750 | ||||||
Dominion Energy, Inc., | 110,000 | 121,421 | ||||||
Duke Energy Corp.: |
| |||||||
3.4%, 6/15/2029 | 30,000 | 33,728 | ||||||
4.2%, 6/15/2049 | 30,000 | 36,599 | ||||||
Duke Energy Indiana LLC, | 50,000 | 50,325 | ||||||
Edison International, | 370,000 | 424,839 | ||||||
EDP Finance BV, 144A, | 200,000 | 214,753 | ||||||
NextEra Energy Capital Holdings, Inc.: |
| |||||||
3.25%, 4/1/2026 | 36,000 | 40,298 | ||||||
3.5%, 4/1/2029 | 58,000 | 65,610 | ||||||
NextEra Energy Operating Partners LP: |
| |||||||
144A, 3.875%, 10/15/2026 | 175,000 | 174,746 | ||||||
144A, 4.25%, 7/15/2024 | 250,000 | 252,812 | ||||||
Oncor Electric Delivery Co. LLC, 144A, 2.75%, 5/15/2030 | 25,000 | 27,285 | ||||||
Pacific Gas and Electric Co.: |
| |||||||
2.5%, 2/1/2031 | 20,000 | 19,567 | ||||||
3.3%, 8/1/2040 | 60,000 | 58,480 | ||||||
3.5%, 8/1/2050 | 50,000 | 48,324 | ||||||
Perusahaan Listrik Negara PT, 144A, 2.875%, 10/25/2025 | EUR 222,000 | 259,394 | ||||||
Sempra Energy, 4.0%, 2/1/2048 | 55,000 | 60,710 | ||||||
Southern California Edison Co., 4.875%, 3/1/2049 | 50,000 | 65,394 | ||||||
Southern Power Co., Series F, 4.95%, 12/15/2046 | 87,000 | 96,384 | ||||||
|
| |||||||
2,567,743 | ||||||||
Total Corporate Bonds (Cost $24,295,710) |
| 25,467,495 |
Principal Amount ($)(a) | Value ($) | |||||||
Mortgage-Backed Securities Pass-Throughs 8.8% |
| |||||||
Federal Home Loan Mortgage Corp.: |
| |||||||
4.0%, 8/1/2039 | 259,922 | 285,595 | ||||||
5.5%, 10/1/2023 | 7,216 | 7,567 | ||||||
Federal National Mortgage Association: |
| |||||||
3.5%, with various maturities from 12/1/2045 until 10/1/2048 | 2,349,844 | 2,543,182 | ||||||
4.0%, 4/1/2047 | 1,516,358 | 1,669,878 | ||||||
12-month USD-LIBOR + 1.750%, 4.375% *, 9/1/2038 | 25,632 | 26,236 | ||||||
Total Mortgage-Backed Securities Pass-Throughs (Cost $4,282,274) |
| 4,532,458 | ||||||
Asset-Backed 7.1% |
| |||||||
Automobile Receivables 3.1% |
| |||||||
AmeriCredit Automobile Receivables Trust, “C”, Series 2019-2, | 660,000 | 679,376 | ||||||
Avis Budget Rental Car Funding AESOP LLC, “C”, Series 2015-1A, 144A, | 83,333 | 82,966 | ||||||
GMF Floorplan Owner Revolving Trust, “C”, Series 2019-1, 144A, 3.06%, 4/15/2024 | 230,000 | 228,073 | ||||||
Hertz Vehicle Financing II LP, “A”, Series 2017-1A, 144A, | 604,370 | 598,842 | ||||||
|
| |||||||
1,589,257 | ||||||||
Credit Card Receivables 3.2% |
| |||||||
Fair Square Issuance Trust, “A”, Series 2020-AA, 144A, | 300,000 | 299,033 | ||||||
Master Credit Card Trust II, “A”, Series 2020-1A, 144A, | 350,000 | 360,840 | ||||||
World Financial Network Credit Card Master Trust, “M”, Series 2016-A, | 1,000,000 | 1,000,284 | ||||||
|
| |||||||
1,660,157 | ||||||||
Miscellaneous 0.8% |
| |||||||
Hilton Grand Vacations Trust, “B”, Series 2014-AA, 144A, | 39,309 | 39,070 | ||||||
MVW Owner Trust, “A”, Series 2019-1A, 144A, | 357,293 | 363,439 | ||||||
|
| |||||||
402,509 | ||||||||
Total Asset-Backed (Cost $3,620,157) |
| 3,651,923 | ||||||
Commercial Mortgage-Backed Securities 6.9% |
| |||||||
Bank, “B”, Series 2018-BN13, 4.699%*, 8/15/2061 | 500,000 | 523,926 | ||||||
BXP Trust, “B”, Series 2017-CQHP, 144A, 1-month USD-LIBOR + 1.100%, | 280,000 | 261,457 |
The accompanying notes are an integral part of the financial statements.
8 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Principal Amount ($)(a) | Value ($) | |||||||
CFK Trust, “A”, Series 2020-MF2, 144A, 2.387%, 3/15/2039 | 450,000 | 451,997 | ||||||
Citigroup Commercial Mortgage Trust: |
| |||||||
“A”, Series 2020-555, 144A, 2.647%, 12/10/2041 | 500,000 | 514,542 | ||||||
“D”, Series 2019-PRM, 144A, 4.35%, 5/10/2036 | 600,000 | 606,980 | ||||||
FHLMC Multifamily Structured Pass-Through Certificates: | ||||||||
“X1”, Series K043, Interest Only, 0.661%*, 12/25/2024 | 4,835,965 | 101,361 | ||||||
“X1”, Series K054, Interest Only, 1.31%*, 1/25/2026 | 1,806,762 | 101,064 | ||||||
GS Mortgage Securities Corp. II, “B”, Series 2018-GS10, 4.519%*, 7/10/2051 | 500,000 | 522,227 | ||||||
Morgan Stanley Capital Barclays Bank Trust, “C”, Series 2016-MART, 144A, | 500,000 | 487,704 | ||||||
Total Commercial Mortgage-Backed Securities (Cost $3,583,867) |
| 3,571,258 | ||||||
Collateralized Mortgage Obligations 9.8% |
| |||||||
Connecticut Avenue Securities Trust, “1M2”, Series 2019-R05, 144A, 1-month USD-LIBOR + 2.000%, 2.185%*, 7/25/2039 | 379,398 | 371,082 | ||||||
Fannie Mae Connecticut Avenue Securities, “1M2”, Series 2018-C03, 1-month USD-LIBOR + 2.150%, 2.335%*, 10/25/2030 | 470,073 | 461,957 | ||||||
Federal Home Loan Mortgage Corp.: |
| |||||||
“PI”, Series 4485, Interest Only, 3.5%, 6/15/2045 | 1,111,593 | 99,123 | ||||||
“PI”, Series 3940, Interest Only, 4.0%, 2/15/2041 | 178,424 | 15,587 | ||||||
“C31”, Series 303, Interest Only, 4.5%, 12/15/2042 | 899,376 | 146,133 | ||||||
Federal National Mortgage Association, “JL”, Series 2019-81, 2.5%, 1/25/2050 | 1,164,214 | 1,160,900 | ||||||
Freddie Mac Structured Agency Credit Risk Debt Notes: | ||||||||
“M2”, Series 2020-DNA2, 144A, 1-month USD-LIBOR + 1.850%, 2.035%*, 2/25/2050 | 600,000 | 568,863 | ||||||
“M2”, Series 2019-DNA4, 144A, 1-month USD-LIBOR + 1.950%, | 187,652 | 183,916 | ||||||
Government National Mortgage Association: | ||||||||
“PI”, Series 2015-40, Interest Only, 4.0%, 4/20/2044 | 162,111 | 8,671 | ||||||
“IN”, Series 2009-69, Interest Only, 5.5%, 8/20/2039 | 43,607 | 4,498 | ||||||
“IV”, Series 2009-69, Interest Only, 5.5%, 8/20/2039 | 83,712 | 8,282 | ||||||
“IJ”, Series 2009-75, Interest Only, 6.0%, 8/16/2039 | 31,976 | 5,290 | ||||||
JPMorgan Mortgage Trust: |
| |||||||
“A11”, Series 2020-2, 144A, 1-month USD-LIBOR + 0.800%, 0.968%*, 7/25/2050 | 911,913 | 901,707 |
Principal Amount ($)(a) | Value ($) | |||||||
“A11”, Series 2019-9, 144A, 1-month USD-LIBOR + 0.900%, 1.068%*, 5/25/2050 | 252,540 | 250,647 | ||||||
“A3”, Series 2019-INV3, 144A, 3.5%, 5/25/2050 | 389,073 | 396,976 | ||||||
“A3”, Series 2020-INV1, 144A, 3.5%, 8/25/2050 | 236,011 | 245,057 | ||||||
New Residential Mortgage Loan, “A1”, Series 2019-NQM2, 144A, 3.6%, 4/25/2049 | 148,188 | 151,110 | ||||||
STACR Trust, “M2”, Series 2018-DNA3, 144A, 1-month USD-LIBOR + 2.100%, | 108,108 | 104,043 | ||||||
Total Collateralized Mortgage Obligations (Cost $5,369,482) |
| 5,083,842 | ||||||
Government & Agency Obligations 11.0% |
| |||||||
Other Government Related (e) 0.6% |
| |||||||
Novatek OAO, 144A, | 300,000 | 308,834 | ||||||
Sovereign Bonds 1.9% |
| |||||||
Abu Dhabi Government International Bond, 144A, 3.125%, 4/16/2030 | 200,000 | 219,863 | ||||||
Perusahaan Penerbit SBSN Indonesia III, 144A, | 200,000 | 200,250 | ||||||
Republic of Kazakhstan, 144A, 1.55%, 11/9/2023 | EUR 290,000 | 328,830 | ||||||
Republic of Philippines, | 200,000 | 209,510 | ||||||
Uruguay Government International Bond, 4.375%, 1/23/2031 | 49,383 | 57,717 | ||||||
|
| |||||||
1,016,170 | ||||||||
U.S. Treasury Obligations 8.5% |
| |||||||
U.S. Treasury Bonds, | 1,221,200 | 1,508,373 | ||||||
U.S. Treasury Note: |
| |||||||
0.25%, 6/15/2023 | 450,000 | 450,949 | ||||||
0.625%, 5/15/2030 | 1,340,000 | 1,336,283 | ||||||
1.5%, 2/15/2030 | 1,008,000 | 1,089,664 | ||||||
|
| |||||||
4,385,269 | ||||||||
Total Government & Agency Obligations |
| 5,710,273 | ||||||
Short-Term U.S. Treasury Obligations 3.5% |
| |||||||
U.S. Treasury Bills: |
| |||||||
0.001%**, 9/10/2020 | 250,000 | 249,934 | ||||||
0.022%**, 9/10/2020 | 250,000 | 249,934 | ||||||
1.131%**, 9/10/2020 | 150,000 | 149,960 | ||||||
1.564%**, 9/10/2020 | 250,000 | 249,933 | ||||||
1.595%**, 9/10/2020 | 90,000 | 89,976 | ||||||
1.763%**, 7/16/2020 (f) | 804,000 | 803,957 | ||||||
Total Short-Term U.S. Treasury Obligations (Cost $1,792,010) |
| 1,793,694 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 9 |
Shares | Value ($) | |||||||
Securities Lending Collateral 0.4% |
| |||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (g) (h) (Cost $195,633) | 195,633 | 195,633 |
Shares | Value ($) | |||||||
Cash Equivalents 4.4% |
| |||||||
DWS Central Cash Management Government Fund, 0.12% (g) (Cost $2,258,142) | 2,258,142 | 2,258,142 | ||||||
% of Net Assets | Value ($) | |||||||
Total Investment Portfolio | 101.1 | 52,264,718 | ||||||
Other Assets and Liabilities, Net | (1.1 | ) | (549,551 | ) | ||||
Net Assets | 100.0 | 51,715,167 |
A summary of the Fund’s transactions with affiliated investments during the period ended June 30, 2020 are as follows:
Value ($) at 12/31/2019 | Purchases Cost ($) | Sales Proceeds ($) | Net Realized Gain/ (Loss) ($) | Net Change in Unrealized Appreciation (Depreciation) ($) | Income ($) | Capital Gain Distributions ($) | Number of Shares at 6/30/2020 | Value ($) at 6/30/2020 | ||||||||||||||||||||||||
Securities Lending Collateral 0.4% |
| |||||||||||||||||||||||||||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (g) (h) |
| |||||||||||||||||||||||||||||||
3,030,000 | — | 2,834,367 | (i) | — | — | 2,647 | — | 195,633 | 195,633 | |||||||||||||||||||||||
Cash Equivalents 4.4% |
| |||||||||||||||||||||||||||||||
DWS Central Cash Management Government Fund, 0.12% (g) |
| |||||||||||||||||||||||||||||||
163,542 | 24,373,070 | 22,278,470 | — | — | 5,940 | — | 2,258,142 | 2,258,142 | ||||||||||||||||||||||||
3,193,542 | 24,373,070 | 25,112,837 | — | — | 8,587 | — | 2,453,775 | 2,453,775 |
* | Variable or floating rate security. These securities are shown at their current rate as of June 30, 2020. For securities based on a published reference rate and spread, the reference rate and spread are indicated within the description above. Certain variable rate securities are not based on a published reference rate and spread but adjust periodically based on current market conditions, prepayment of underlying positions and/or other variables. |
** | Annualized yield at time of purchase; not a coupon rate. |
(a) | Principal amount stated in U.S. dollars unless otherwise noted. |
(b) | All or a portion of these securities were on loan. In addition, “Other Assets and Liabilities, Net” may include pending sales that are also on loan. The value of securities loaned at June 30, 2020 amounted to $188,714, which is 0.4% of net assets. |
(c) | When-issued security. |
(d) | Perpetual, callable security with no stated maturity date. |
(e) | Government-backed debt issued by financial companies or government sponsored enterprises. |
(f) | At June 30, 2020, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts. |
(g) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
(h) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
(i) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the period ended June 30, 2020. |
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.
Interest Only: Interest Only (IO) bonds represent the “interest only” portion of payments on a pool of underlying mortgages or mortgage-backed securities. IO securities are subject to prepayment risk of the pool of underlying mortgages.
LIBOR: London Interbank Offered Rate
PJSC: Public Joint Stock Company
REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
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 Home Loan Mortgage Corp. and Federal National Mortgage Association issues which have similar coupon rates have been aggregated for presentation purposes in this investment portfolio.
The accompanying notes are an integral part of the financial statements.
10 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
At June 30, 2020 open futures contracts purchased were as follows:
Futures | Currency | Expiration Date | Contracts | Notional Amount ($) | Notional Value ($) | Unrealized Appreciation ($) | ||||||||||||||||||
2 Year U.S. Treasury Note | USD | 9/30/2020 | 16 | 3,532,289 | 3,533,251 | 962 | ||||||||||||||||||
Ultra 10 Year U.S. Treasury Note | USD | 9/21/2020 | 11 | 1,722,058 | 1,732,328 | 10,270 | ||||||||||||||||||
Total net unrealized appreciation |
| 11,232 |
At June 30, 2020, open futures contracts sold were as follows:
Futures | Currency | Expiration Date | Contracts | Notional Amount ($) | Notional Value ($) | Unrealized (Depreciation) ($) | ||||||||||||||||||
Ultra Long U.S. Treasury Bond | USD | 9/21/2020 | 2 | 435,495 | 436,313 | (818 | ) | |||||||||||||||||
Total net unrealized depreciation |
| (818 | ) |
At June 30, 2020, the Fund had the following open forward foreign currency contracts:
Contracts to Deliver | In Exchange For | Settlement Date | Unrealized Depreciation ($) | Counterparty | ||||||||||||||||||
EUR | 750,000 | USD | 811,954 | 8/18/2020 | (31,589 | ) | State Street Bank and Trust |
Currency Abbreviations
EUR | Euro |
USD | United States Dollar |
For information on the Fund’s policy and additional disclosures regarding future contracts, credit default swap contracts and forward foreign currency contracts, please refer to the Derivatives section of Note B in the accompanying Notes to Financial Statements.
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of June 30, 2020 in valuing the Fund’s investments. For information on the Fund’s policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Fixed Income Investments (j) | ||||||||||||||||
Corporate Bonds | $ | — | $ | 25,467,495 | $ | — | $ | 25,467,495 | ||||||||
Mortgage-Backed Securities Pass-Throughs | — | 4,532,458 | — | 4,532,458 | ||||||||||||
Asset-Backed | — | 3,651,923 | — | 3,651,923 | ||||||||||||
Commercial Mortgage-Backed Securities | — | 3,571,258 | — | 3,571,258 | ||||||||||||
Collateralized Mortgage Obligations | — | 5,083,842 | — | 5,083,842 | ||||||||||||
Government & Agency Obligations | — | 5,710,273 | — | 5,710,273 | ||||||||||||
Short-Term U.S. Treasury Obligations | — | 1,793,694 | — | 1,793,694 | ||||||||||||
Short-Term Investments (j) | 2,453,775 | — | — | 2,453,775 | ||||||||||||
Derivatives (k) | ||||||||||||||||
Futures Contracts | 11,232 | — | — | 11,232 | ||||||||||||
Total | $ | 2,465,007 | $ | 49,810,943 | $ | — | $ | 52,275,950 | ||||||||
Liabilities | ||||||||||||||||
Derivatives (k) | ||||||||||||||||
Futures Contracts | $ | (818 | ) | $ | — | $ | — | $ | (818 | ) | ||||||
Forward Foreign Currency Contracts | — | (31,589 | ) | — | (31,589 | ) | ||||||||||
Total | $ | (818 | ) | $ | (31,589 | ) | $ | — | $ | (32,407 | ) |
(j) | See Investment Portfolio for additional detailed categorizations. |
(k) | Derivatives include unrealized appreciation (depreciation) on open futures contracts and forward foreign currency contracts. |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 11 |
Statement of Assets and Liabilities
as of June 30, 2020 (Unaudited) | ||||
Assets | ||||
Investments in non-affiliated securities, at value (cost $48,676,631) — including $188,714 of securities loaned | $ | 49,810,943 | ||
Investment in DWS Government & Agency Securities Portfolio (cost $195,633)* | 195,633 | |||
Investment in DWS Central Cash Management Government Fund (cost $2,258,142) | 2,258,142 | |||
Cash | 10,000 | |||
Receivable for investments sold | 174,494 | |||
Receivable for Fund shares sold | 22,097 | |||
Interest receivable | 281,727 | |||
Foreign taxes recoverable | 920 | |||
Other assets | 654 | |||
Total assets | 52,754,610 | |||
Liabilities | ||||
Payable for securities loaned | 195,633 | |||
Payable for investments purchased | 596,996 | |||
Payable for investments purchased — when-issued securities | 134,789 | |||
Payable for Fund shares redeemed | 942 | |||
Payable for variation margin on futures contracts | 432 | |||
Unrealized depreciation on forward foreign currency contracts | 31,589 | |||
Accrued management fee | 14,079 | |||
Accrued Trustees’ fees | 716 | |||
Other accrued expenses and payables | 64,267 | |||
Total liabilities | 1,039,443 | |||
Net assets, at value | $ | 51,715,167 | ||
Net Assets Consist of | ||||
Distributable earnings (loss) | 1,666,910 | |||
Paid-in capital | 50,048,257 | |||
Net assets, at value | $ | 51,715,167 | ||
Net Asset Value | ||||
Net asset value, offering and redemption price per share ($51,715,167 ÷ 8,915,027 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 5.80 |
* | Represents collateral on securities loaned. |
for the six months ended June 30, 2020 (Unaudited) |
| |||
Investment Income | ||||
Income: | ||||
Interest (net of foreign taxes withheld of $69) | $ | 754,080 | ||
Income distributions — DWS Central Cash Management Government Fund | 5,940 | |||
Securities lending income, net of borrower rebates | 2,647 | |||
Total income | 762,667 | |||
Expenses: | ||||
Management fee | 96,799 | |||
Administration fee | 24,321 | |||
Services to shareholders | 1,586 | |||
Custodian fee | 4,142 | |||
Professional fees | 37,830 | |||
Reports to shareholders | 18,800 | |||
Trustees’ fees and expenses | 2,124 | |||
Other | 7,636 | |||
Total expenses before expense reductions | 193,238 | |||
Expense reductions | (29,424 | ) | ||
Total expenses after expense reductions | 163,814 | |||
Net investment income | 598,853 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) from: Investments | 1,020,384 | |||
Swap contracts | 922,383 | |||
Futures | 120,638 | |||
Forward foreign currency contracts | 13,356 | |||
Foreign currency | 7,656 | |||
2,084,417 | ||||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (116,526 | ) | ||
Swap contracts | (6,388 | ) | ||
Futures | (43,856 | ) | ||
Forward foreign currency contracts | (23,732 | ) | ||
Foreign currency | 98 | |||
(190,404 | ) | |||
Net gain (loss) | 1,894,013 | |||
Net increase (decrease) in net assets resulting from operations | $ | 2,492,866 |
The accompanying notes are an integral part of the financial statements.
12 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets | Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | ||||||
Operations: |
| |||||||
Net investment income | $ | 598,853 | $ | 1,427,830 | ||||
Net realized gain (loss) | 2,084,417 | 951,699 | ||||||
Change in net unrealized appreciation (depreciation) | (190,404 | ) | 2,416,257 | |||||
Net increase (decrease) in net assets resulting from operations | 2,492,866 | 4,795,786 | ||||||
Distributions to shareholders: |
| |||||||
Class A | (1,393,009 | ) | (1,466,158 | ) | ||||
Fund share transactions: | ||||||||
Class A | ||||||||
Proceeds from shares sold | 4,914,629 | 5,436,154 | ||||||
Reinvestment of distributions | 1,393,009 | 1,466,158 | ||||||
Payments for shares redeemed | (4,639,813 | ) | (7,080,322 | ) | ||||
Net increase (decrease) in net assets from Class A share transactions | 1,667,825 | (178,010 | ) | |||||
Increase (decrease) in net assets | 2,767,682 | 3,151,618 | ||||||
Net assets at beginning of period | 48,947,485 | 45,795,867 | ||||||
Net assets at end of period | $ | 51,715,167 | $ | 48,947,485 | ||||
Other Information: | ||||||||
Class A | ||||||||
Shares outstanding at beginning of period | 8,618,016 | 8,635,826 | ||||||
Shares sold | 860,979 | 984,384 | ||||||
Shares issued to shareholders in reinvestment of distributions | 248,752 | 271,511 | ||||||
Shares redeemed | (812,720 | ) | (1,273,705 | ) | ||||
Net increase (decrease) in Class A shares | 297,011 | (17,810 | ) | |||||
Shares outstanding at end of period | 8,915,027 | 8,618,016 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 13 |
Six Months Ended 6/30/20 (Unaudited) | Years Ended December 31, | |||||||||||||||||||||||
Class A | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $5.68 | $5.30 | $5.70 | $ | 5.52 | $ | 5.49 | $ | 5.67 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment incomea | .07 | .16 | .17 | .17 | .15 | .14 | ||||||||||||||||||
Net realized and unrealized gain (loss) | .21 | .39 | (.32 | ) | .15 | .17 | (.15 | ) | ||||||||||||||||
Total from investment operations | .28 | .55 | (.15 | ) | .32 | .32 | (.01 | ) | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.16 | ) | (.17 | ) | (.25 | ) | (.14 | ) | (.29 | ) | (.17 | ) | ||||||||||||
Net asset value, end of period | $5.80 | $5.68 | $5.30 | $ | 5.70 | $ | 5.52 | $ | 5.49 | |||||||||||||||
Total Return (%)b | 5.09 | ** | 10.62 | (2.65 | ) | 5.83 | 5.93 | (.29 | ) | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 52 | 49 | 46 | 51 | 77 | 80 | ||||||||||||||||||
Ratio of expenses before expense reductions (%)c | .78 | * | .81 | .87 | .74 | .78 | .69 | |||||||||||||||||
Ratio of expenses after expense reductions (%)c | .66 | * | .66 | .69 | .65 | .64 | .64 | |||||||||||||||||
Ratio of net investment income (%) | 2.41 | * | 2.95 | 3.19 | 2.99 | 2.68 | 2.54 | |||||||||||||||||
Portfolio turnover rate (%) | 94 | ** | 223 | 260 | 205 | 236 | 197 |
a | Based on average shares outstanding during the period. |
b | Total return would have been lower had certain expenses not been reduced. |
c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
The accompanying notes are an integral part of the financial statements.
14 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Notes to Financial Statements | (Unaudited) |
A. Organization and Significant Accounting Policies
Deutsche DWS Variable Series I (the “Trust“) is registered under the Investment Company Act of 1940, as amended (the “1940 Act“), as an open-end, registered management investment company organized as a Massachusetts business trust. The Trust consists of five diversified funds: DWS Bond VIP, DWS Capital Growth VIP, DWS Core Equity VIP, DWS CROCI® International VIP and DWS Global Small Cap VIP (individually or collectively hereinafter referred to as a “Fund“ or the “Funds“). These financial statements report on DWS Bond VIP. The Trust is intended to be the underlying investment vehicle for variable annuity contracts and variable life insurance policies to be offered by the separate accounts of certain life insurance companies (“Participating Insurance Companies“).
The Fund’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Debt securities are valued at prices supplied by independent pricing services approved by the Trustees of the Series. 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, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers. These securities are generally categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 15 |
Disclosure about the classification of fair value measurements is included in a table following the Fund’s Investment Portfolio.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. As of period end, any securities on loan were collateralized by cash. During the six months ended June 30, 2020, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.11% annualized effective rate as of June 30, 2020) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of June 30, 2020, the Fund had securities on loan, which were classified as corporate bonds in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements was overnight and continuous.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.
Certain risks may arise upon entering into when-issued or delayed delivery transactions from the potential inability of counterparties to meet the terms of their contracts or if the issuer does not issue the securities due to political, economic, or other factors. Additionally, losses may arise due to changes in the value of the underlying securities.
Taxes. The Fund is treated as a separate taxpayer as provided for in the Internal Revenue Code, as amended. It is the Fund’s policy 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 the separate accounts of the Participating Insurance Companies which hold its shares.
Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated. Estimated tax liabilities on
16 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
At December 31, 2019, the Fund had a net tax basis capital loss carryforward of approximately $2,042,000 which may be applied against realized net taxable capital gains indefinitely, including short-term losses ($5,000) and long-term losses ($2,037,000).
At June 30, 2020, the aggregate cost of investments for federal income tax purposes was $51,133,025. The net unrealized appreciation for all investments based on tax cost was $1,131,693. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $1,732,423 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $600,730.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2019 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated currencies, investments in forward foreign currency exchange contracts, futures contracts, swap contracts 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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes.
B. Derivative Instruments
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). For the six months ended June 30, 2020, the Fund invested in interest rate futures to gain exposure to different parts of the yield curve while managing the overall duration. The Fund also entered into interest rate futures contracts for non-hedging purposes to seek to enhance potential gains.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary cash or securities (“initial margin”) in an amount 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 and are recorded for financial reporting purposes as unrealized gains
Deutsche DWS Variable Series I — DWS Bond VIP | | | 17 |
or losses by the Fund. Gains or losses are realized when the contract expires or is closed. Since all futures contracts are exchange traded, counterparty risk is minimized as the exchange’s clearinghouse acts as the counterparty, and guarantees the futures against default.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid market will limit the Fund’s ability to close out a futures contract prior to the settlement date and the risk that the futures contract is not well correlated with the security, index or currency to which it relates. Risk of loss may exceed amounts disclosed in the Statement of Assets and Liabilities.
A summary of the open futures contracts as of June 30, 2020, is included in a table following the Fund’s Investment Portfolio. For the six months ended June 30, 2020, the investment in futures contracts purchased had a total notional value generally indicative of a range from approximately $5,059,000 to $6,189,000, and the investment in futures contracts sold had a total notional value generally indicative of a range from approximately $436,000 to $1,998,000.
Swaps. A swap is a contract between two parties to exchange future cash flows at periodic intervals based on the notional amount of the swap. A bilateral swap is a transaction between the fund and a counterparty where cash flows are exchanged between the two parties. A centrally cleared swap is a transaction executed between the fund and a counterparty, then cleared by a clearing member through a central clearinghouse. The central clearinghouse serves as the counterparty, with whom the fund exchanges cash flows.
The value of a swap is adjusted daily, and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Statement of Assets and Liabilities. Gains or losses are realized when the swap expires or is closed. Certain risks may arise when entering into swap transactions including counterparty default; liquidity; or unfavorable changes in interest rates or the value of the underlying reference security, commodity or index. In connection with bilateral swaps, securities and/or cash may be identified as collateral in accordance with the terms of the swap agreement to provide assets of value and recourse in the event of default. The maximum counterparty credit risk is the net present value of the cash flows to be received from or paid to the counterparty over the term of the swap, to the extent that this amount is beneficial to the Fund, in addition to any related collateral posted to the counterparty by the Fund. This risk may be partially reduced by a master netting arrangement between the Fund and the counterparty. Upon entering into a centrally cleared swap, the Fund is required to deposit with a financial intermediary cash or securities (“initial margin”) in an amount equal to a certain percentage of the notional amount of the swap. Subsequent payments (“variation margin”) are made or received by the Fund dependent upon the daily fluctuations in the value of the swap. In a cleared swap transaction, counterparty risk is minimized as the central clearinghouse acts as the counterparty.
An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations.
Credit default swaps are agreements between a buyer and a seller of protection against predefined credit events for the reference entity. The Fund may enter into credit default swaps to gain exposure to an underlying issuer’s credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller of a credit default swap, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the swap provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swaps, in which case the Fund functions as the counterparty referenced above. This involves the risk that the swap may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap, it will cover its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the reference entities for all outstanding credit default swaps sold by the Fund. For the six months ended June 30, 2020, the Fund entered into credit default swap agreements to gain exposure to the underlying issuer’s credit quality characteristics, or to hedge the risk of default or other specified credit events on portfolio assets.
Under the terms of a credit default swap, the Fund receives or makes periodic payments based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss in
18 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
the Statement of Operations. Payments received or made as a result of a credit event or termination of the swap are recognized, net of a proportional amount of the upfront payment, as realized gains or losses in the Statement of Operations.
There were no open credit default swap contracts as of June 30, 2020. For the six months ended June 30, 2020, the investment in credit default swap contracts purchased had a total notional amount generally indicative of a range from $0 to approximately $235,000.
Forward Foreign Currency Contracts. A forward foreign currency contract (“forward currency contract“) is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. The Fund is subject to foreign exchange rate risk in its securities denominated in foreign currencies. Changes in exchange rates between foreign currencies and the U.S. dollar may affect the U.S. dollar value of foreign securities or the income or gains received on these securities. To reduce the effect of currency fluctuations, the Fund may enter into forward currency contracts. For the six months ended June 30, 2020, the Fund invested in forward currency contracts to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated securities. In addition, the Fund also engaged in forward currency contracts for non-hedging purposes to seek to enhance potential gains.
Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by the unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.
A summary of the open forward currency contracts as of June 30, 2020, is included in a table following the Fund’s Investment Portfolio. For the six months ended June 30, 2020, the investment in forward currency contracts U.S. dollars purchased had a total contract value generally indicative of a range from approximately $812,000 to $1,975,000 and the investment in forward currency contracts U.S. dollars sold had a total contract value generally indicative of a range from $0 to approximately $1,791,000.
The following tables summarize the value of the Fund’s derivative instruments held as of June 30, 2020 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
Asset Derivatives | Futures Contracts | |||
Interest Rate Contracts (a) | $ | 11,232 |
The above derivative is located in the following Statement of Assets and Liabilities accounts:
(a) | Includes cumulative appreciation of futures contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. |
Liability Derivatives | Futures Contracts | Forward Contracts | Total | |||||||||
Interest Rate Contracts (b) | $ | (818 | ) | $ | — | $ | (818 | ) | ||||
Foreign Exchange Contracts (c) | — | (31,589 | ) | (31,589 | ) | |||||||
$ | (818 | ) | $ | (31,589 | ) | $ | (32,407 | ) |
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts:
(b) | Includes cumulative depreciation of futures contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. |
(c) | Unrealized depreciation on forward foreign currency contracts |
Deutsche DWS Variable Series I — DWS Bond VIP | | | 19 |
Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the six months ended June 30, 2020 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:
Realized Gain (Loss) | Forward Contracts | Swap Contracts | Futures Contracts | Total | ||||||||||||
Interest Rate Contract (d) | $ | — | $ | — | $ | 120,638 | $ | 120,638 | ||||||||
Credit Contracts (d) | — | 922,383 | — | 922,383 | ||||||||||||
Foreign Exchange Contracts (e) | 13,356 | — | — | 13,356 | ||||||||||||
$ | 13,356 | $ | 922,383 | $ | 120,638 | $ | 1,056,377 |
Each of the above derivatives is located in the following Statement of Operations accounts:
(d) | Net realized gain (loss) from swap contracts and futures, respectively |
(e) | Net realized gain (loss) from forward foreign currency contracts |
Change in Net Unrealized Appreciation (Depreciation) | Forward Contracts | Swap Contracts | Futures Contracts | Total | ||||||||||||
Interest Rate Contracts (f) | $ | — | $ | — | $ | (43,856 | ) | $ | (43,856 | ) | ||||||
Credit Contracts (f) | — | (6,388 | ) | — | (6,388 | ) | ||||||||||
Foreign Exchange Contracts (g) | (23,732 | ) | — | — | (23,732 | ) | ||||||||||
$ | (23,732 | ) | $ | (6,388 | ) | $ | (43,856 | ) | $ | (73,976 | ) |
Each of the above derivatives is located in the following Statement of Operations accounts:
(f) | Change in net unrealized appreciation (depreciation) on swap contracts and futures, respectively |
(g) | Change in net unrealized appreciation (depreciation) on forward foreign currency contracts |
As of June 30, 2020, the Fund has transactions subject to enforceable master netting agreements which govern the terms of certain transactions, and reduce the counterparty risk associated with such transactions. Master netting agreements allow a Fund to close out and net total exposure to a counterparty in the event of a deterioration in the credit quality or contractual default with respect to all of the transactions with a counterparty. As defined by the master netting agreement, the Fund may have collateral agreements with certain counterparties to mitigate risk. For financial reporting purposes the Statement of Assets and Liabilities generally shows derivatives assets and liabilities on a gross basis, which reflects the full risks and exposures prior to netting. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by a counterparty, including any collateral exposure, is included in the following tables:
Counterparty | Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities | Financial Instruments and Derivatives Available for Offset | Collateral Pledged | Net Amount of Derivative Liabilities | ||||||||||||
State Street Bank and Trust | $ | 31,589 | $ | — | $ | — | $ | 31,589 |
C. Purchases and Sales of Securities
During the six months ended June 30, 2020, purchases and sales of investment securities, excluding short-term investments, were as follows:
Purchases | Sales | |||||||
Non-U.S. Treasury Obligations | $ | 31,429,411 | $ | 32,296,563 | ||||
U.S. Treasury Obligations | $ | 13,834,030 | $ | 15,702,596 |
D. Related Parties
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA“ or the “Advisor“), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), 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.
20 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Pursuant to 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 average daily net assets | .390 | % | ||
Next $750 million of average daily net assets | .365 | % | ||
Over $1 billion of average daily net assets | .340 | % |
Accordingly, for the six months ended June 30, 2020, the fee pursuant to the Investment Management Agreement was equivalent to an annualized rate (exclusive of any applicable waivers/reimbursements) of 0.39% of the Fund’s average daily net assets.
For the period from January 1, 2020 through April 30, 2021, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of Class A at 0.66%.
For the six months ended June 30, 2020, fees waived and/or expenses reimbursed were $29,424.
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. Prior to March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund paid 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. Effective March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual Administration Fee of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2020, the Administration Fee was $24,321, of which $4,098 is unpaid.
Service Provider Fees. DWS Service Company (“DSC“), 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 DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended June 30, 2020, the amounts charged to the Fund by DSC aggregated $282, of which $93 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with the Fund, DIMA is compensated for providing certain pre-press and regulatory filing services to the Fund. For the six months ended June 30, 2020, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders“ aggregated $5,370, of which $2,945 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the six months ended June 30, 2020, the Fund incurred lending agent fees to Deutsche Bank AG in the amount of $200.
E. Ownership of the Fund
At June 30, 2020, three participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 47%, 22% and 15%, respectively.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 21 |
F. Line of Credit
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if the one-month LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2020.
G. Other - COVID-19 Pandemic
A novel strain of coronavirus (COVID-19) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. The situation is evolving with various cities and countries around the world responding in different ways to address the pandemic. There are direct and indirect economic effects developing for various industries and individual companies throughout the world. The recent pandemic spread of the novel coronavirus and related geopolitical events could lead to increased financial market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments. A prolonged disruption may result in the Fund and its service providers experiencing operational difficulties in implementing their business continuity plans. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund’s accounting and financial reporting.
H. Other - Deutsche Bank AG Consent Order
On June 17, 2020, Deutsche Bank AG (“DB”), an affiliate of DWS Group, resolved with the Commodity Futures Trading Commission (“CFTC”) charges stemming from alleged violations of various swap data
reporting requirements and corresponding supervision and other failures. The matter, which was resolved by the issuance of a federal court order (“Consent Order”), involved unintentional conduct that resulted from a system outage that prevented DB from reporting data in accordance with applicable CFTC requirements for a period of five days in April 2016.
The matter giving rise to the Consent Order did not arise out of any investment advisory, fund management activities or distribution activities of DIMA, DWS Distributors, Inc. or their advisory affiliates (the “DWS Service Providers”). DWS Group, of which the DWS Service Providers are wholly-owned subsidiaries, is a separate publicly traded company but continues to be an affiliate of DB due to, among other things, DB’s 79.49% ownership interest in DWS Group. Under the provisions of the Investment Company Act of 1940, as a result of the Consent Order, the DWS Service Providers would not be eligible to continue to provide investment advisory and underwriting services to the Fund absent an order from the Securities and Exchange Commission (the “SEC”). DB and the DWS Service Providers are seeking temporary and permanent orders from the SEC to permit the DWS Service Providers to continue to provide investment advisory and underwriting services to the Fund and other registered investment companies notwithstanding the Consent Order. While there can be no assurance that the requested exemptive orders will be granted, the SEC has granted this type of relief in the past. Consistent with their fiduciary and other relationships with the Fund, and in accordance with the desire of the Board of the Fund, the DWS Service Providers continue to provide investment advisory and distribution services to the Fund. Subject to the receipt of the temporary and permanent exemptive orders, the DWS Service Providers have informed the Fund that they do not believe the Consent Order will have any material impact on the Fund or the ability of the Service Providers to provide services for the Fund.
22 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Information About Your Fund’s Expenses | (Unaudited) |
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 contract charges, 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 (January 1, 2020 to June 30, 2020).
The tables illustrate your Fund’s expenses in two ways:
– | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
– | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2020 | ||||
Actual Fund Return | Class A | |||
Beginning Account Value 1/1/20 | $ | 1,000.00 | ||
Ending Account Value 6/30/20 | $ | 1,050.90 | ||
Expenses Paid per $1,000* | $ | 3.37 | ||
Hypothetical 5% Fund Return | Class A | |||
Beginning Account Value 1/1/20 | $ | 1,000.00 | ||
Ending Account Value 6/30/20 | $ | 1,021.58 | ||
Expenses Paid per $1,000* | $ | 3.32 |
* | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182 (the number of days in the most recent six-month period), then divided by 366. |
Annualized Expense Ratio | Class A | |||
Deutsche DWS Variable Series I — DWS Bond VIP | .66 | % |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 23 |
Liquidity Risk Management |
In accordance with Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act of 1940 (the “1940 Act”), your Fund has adopted a liquidity risk management program (the “Program”), and the Board has designated DWS Investment Management Americas, Inc. (“DIMA”) as Program administrator. The Program is designed to assess and manage your Fund’s liquidity risk (the risk that the Fund would be unable to meet requests to redeem shares of the Fund without significant dilution of remaining investors’ interests in the Fund). DIMA has designated a committee (the “Committee”) composed of personnel from multiple departments within DIMA and its affiliates that is responsible for the implementation and ongoing administration of the Program, which includes assessing the Fund’s liquidity risk under both normal and reasonably foreseeable stressed conditions. Under the Program, every investment held by a Fund is classified on a daily basis into one of four liquidity categories based on estimations of the investment’s ability to be sold during designated timeframes in current market conditions without significantly changing the investment’s market value.
In February 2020, as required by the Program and the Liquidity Rule, DIMA provided the Board with an annual written report (the “Report”) addressing the operation of the Program and assessing the adequacy and effectiveness of its implementation during the period from December 1, 2018 through November 30, 2019 (the “Reporting Period”). During the Reporting Period, your Fund was primarily invested in highly liquid investments (investments that the Fund anticipates can be converted to cash within three business days or less in current market conditions without significantly changing their market value). As a result, your Fund is not required to adopt, and has not adopted, a “Highly Liquid Investment Minimum” as defined in the Liquidity Rule. During the Reporting Period, the Fund did not approach the 15% limit imposed by the Liquidity Rule on holdings in illiquid investments (investments that cannot be sold or disposed of in seven days or less in current market conditions without the sale of the investment significantly changing the market value of the investment). Your Fund did not experience any issues meeting investor redemptions at any time during the Reporting Period. In the Report, DIMA stated that it believes the Program has operated adequately and effectively to manage the Fund’s liquidity risk during the Reporting Period. DIMA also reported on a material change made to the Program in May 2019 to address Securities and Exchange Commission guidance relating to extended foreign market holidays.
The Trust’s policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
24 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Bond VIP’s (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2019.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
– | During the entire process, all of the Fund’s Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
– | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board’s Contract Committee reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations. |
– | The Board also received extensive information throughout the year regarding performance of the Fund. |
– | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
– | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board
Deutsche DWS Variable Series I — DWS Bond VIP | | | 25 |
believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2018, the Fund’s performance (Class A shares) was in the 4th quartile, 1st quartile and 1st quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the three- and five-year periods and has underperformed its benchmark in the one-year period ended December 31, 2018. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board noted certain changes in the Fund’s portfolio management team made effective February 12, 2018. The Board observed that the Fund had experienced improved relative performance during the first eight months of 2019. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the DWS fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (2nd quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2018). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be higher than the median (3rd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2018, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board noted that the expense limitation agreed to by DIMA was expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable DWS U.S. registered fund (“DWS Funds”) and considered differences between the Fund and the comparable DWS Fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund and any fees received by an affiliate of DIMA for transfer agency
26 | | | Deutsche DWS Variable Series I — DWS Bond VIP |
services provided to the Fund. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
Deutsche DWS Variable Series I — DWS Bond VIP | | | 27 |
VS1bond-3 (R-028373-9 8/20) |
June 30, 2020
Semiannual Report
Deutsche DWS Variable Series I
DWS Capital Growth VIP
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Fund’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from your insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site, and your insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from your insurance company electronically by following the instructions provided by your insurance company.
You may elect to receive all future reports in paper free of charge from your insurance company. If your insurance company informs you that future reports will be delivered via Web access, you can inform your insurance company that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by your insurance company.
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Stocks may decline in value. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the recent pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
2 | | | Deutsche DWS Variable Series I — DWS Capital Growth VIP |
Performance Summary | June 30, 2020 (Unaudited) |
Fund 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 data quoted. Please contact your participating insurance company for the Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2020 are 0.50% and 0.76% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
Russell 1000® Growth Index is an unmanaged index that consists of those stocks in the Russell 1000® Index that have higher price-to-book ratios and higher forecasted growth values. Russell 1000® Index is an unmanaged price-only index of the 1,000 largest capitalized companies that are domiciled in the U.S. and whose common stocks are traded.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index. |
Comparative Results | ||||||||||||
DWS Capital Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class A | Growth of $10,000 | $11,328 | $12,460 | $16,926 | $20,423 | $46,741 | ||||||
Average annual total return | 13.28% | 24.60% | 19.18% | 15.35% | 16.67% | |||||||
Russell 1000 Growth Index | Growth of $10,000 | $10,981 | $12,328 | $16,849 | $20,904 | $49,029 | ||||||
Average annual total return | 9.81% | 23.28% | 18.99% | 15.89% | 17.23% | |||||||
DWS Capital Growth VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class B | Growth of $10,000 | $11,315 | $12,430 | $16,794 | $20,162 | $45,430 | ||||||
Average annual total return | 13.15% | 24.30% | 18.86% | 15.06% | 16.34% | |||||||
Russell 1000 Growth Index | Growth of $10,000 | $10,981 | $12,328 | $16,849 | $20,904 | $49,029 | ||||||
Average annual total return | 9.81% | 23.28% | 18.99% | 15.89% | 17.23% |
The growth of $10,000 is cumulative.
‡ | Total returns shown for periods less than one year are not annualized. |
Deutsche DWS Variable Series I — DWS Capital Growth VIP | | | 3 |
Portfolio Summary | (Unaudited) |
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Common Stocks | 99% | 98% | ||||||
Cash Equivalents | 1% | 2% | ||||||
Rights | 0% | — | ||||||
100% | 100% | |||||||
Sector Diversification (As of % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/20 | �� | 12/31/19 | |||||
Information Technology | 41% | 38% | ||||||
Consumer Discretionary | 15% | 14% | ||||||
Communication Services | 13% | 13% | ||||||
Health care | 13% | 13% | ||||||
Industrials | 7% | 10% | ||||||
Financials | 5% | 6% | ||||||
Consumer Staples | 3% | 3% | ||||||
Real Estate | 2% | 2% | ||||||
Materials | 1% | 1% | ||||||
Energy | 0% | 0% | ||||||
100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 5.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-PORT. The Fund’s Form N-PORT will be available on the SEC’s Web site at sec.gov. The Fund’s portfolio holdings are also posted on dws.com from time to time. Please read the Fund’s current prospectus for more information.
Sebastian P. Werner, PhD, Director
4 | | | Deutsche DWS Variable Series I — DWS Capital Growth VIP |
Investment Portfolio | as of June 30, 2020 (Unaudited) |
Shares | Value ($) | |||||||
Common Stocks 99.2% |
| |||||||
Communication Services 12.7% |
| |||||||
Entertainment 5.8% |
| |||||||
Activision Blizzard, Inc. | 189,927 | 14,415,459 | ||||||
Live Nation Entertainment, Inc.* | 74,499 | 3,302,541 | ||||||
Netflix, Inc.* | 29,143 | 13,261,231 | ||||||
Spotify Technology SA* | 68,691 | 17,735,329 | ||||||
Walt Disney Co. | 61,314 | 6,837,124 | ||||||
|
| |||||||
55,551,684 | ||||||||
Interactive Media & Services 5.5% |
| |||||||
Alphabet, Inc. “A”* | 12,400 | 17,583,820 | ||||||
Alphabet, Inc. “C”* | 14,342 | 20,273,995 | ||||||
Facebook, Inc. “A”* | 43,039 | 9,772,866 | ||||||
Match Group, Inc.* | 55,266 | 5,916,225 | ||||||
|
| |||||||
53,546,906 | ||||||||
Wireless Telecommunication Services 1.4% |
| |||||||
T-Mobile U.S., Inc.* | 128,749 | 13,409,208 | ||||||
Consumer Discretionary 14.8% |
| |||||||
Diversified Consumer Services 0.4% |
| |||||||
Chegg, Inc.* | 65,070 | 4,376,608 | ||||||
Hotels, Restaurants & Leisure 2.1% |
| |||||||
Las Vegas Sands Corp. | 64,617 | 2,942,658 | ||||||
McDonald’s Corp. | 70,250 | 12,959,018 | ||||||
Planet Fitness, Inc. “A”* | 72,285 | 4,378,302 | ||||||
|
| |||||||
20,279,978 | ||||||||
Internet & Direct Marketing Retail 5.8% |
| |||||||
Amazon.com, Inc.* | 20,166 | 55,634,364 | ||||||
Multiline Retail 1.4% |
| |||||||
Dollar General Corp. | 69,031 | 13,151,096 | ||||||
Specialty Retail 4.3% |
| |||||||
Burlington Stores, Inc.* | 41,038 | 8,081,613 | ||||||
CarMax, Inc.* (a) | 102,245 | 9,156,040 | ||||||
Home Depot, Inc. | 98,245 | 24,611,355 | ||||||
|
| |||||||
41,849,008 | ||||||||
Textiles, Apparel & Luxury Goods 0.8% |
| |||||||
Lululemon Athletica, Inc.* | 23,695 | 7,393,077 | ||||||
Consumer Staples 2.8% |
| |||||||
Food & Staples Retailing 1.1% |
| |||||||
Costco Wholesale Corp. | 35,135 | 10,653,283 | ||||||
Food Products 1.2% |
| |||||||
Mondelez International, Inc. “A” | 220,430 | 11,270,586 | ||||||
Personal Products 0.5% |
| |||||||
Estee Lauder Companies, Inc. “A” | 28,291 | 5,337,946 | ||||||
Energy 0.2% |
| |||||||
Oil, Gas & Consumable Fuels |
| |||||||
Concho Resources, Inc. | 36,468 | 1,878,102 | ||||||
Financials 4.7% |
| |||||||
Capital Markets 1.4% |
| |||||||
Intercontinental Exchange, Inc. | 151,632 | 13,889,491 | ||||||
Consumer Finance 0.7% |
| |||||||
American Express Co. | 71,393 | 6,796,614 | ||||||
Insurance 2.6% |
| |||||||
Progressive Corp. | 309,106 | 24,762,482 |
Shares | Value ($) | |||||||
Health Care 12.5% |
| |||||||
Biotechnology 1.5% |
| |||||||
BioMarin Pharmaceutical, Inc.* | 61,340 | 7,565,676 | ||||||
Exact Sciences Corp.* (a) | 74,617 | 6,487,202 | ||||||
|
| |||||||
14,052,878 | ||||||||
Health Care Equipment & Supplies 6.1% |
| |||||||
Becton, Dickinson & Co. | 71,498 | 17,107,326 | ||||||
Danaher Corp. | 88,018 | 15,564,223 | ||||||
DexCom, Inc.* | 32,839 | 13,312,931 | ||||||
Hologic, Inc.* | 167,462 | 9,545,334 | ||||||
The Cooper Companies, Inc. | 13,257 | 3,760,215 | ||||||
|
| |||||||
59,290,029 | ||||||||
Life Sciences Tools & Services 2.9% |
| |||||||
Thermo Fisher Scientific, Inc. | 77,722 | 28,161,789 | ||||||
Pharmaceuticals 2.0% |
| |||||||
Bristol-Myers Squibb Co. | 134,010 | 7,879,788 | ||||||
Zoetis, Inc. | 86,065 | 11,794,348 | ||||||
|
| |||||||
19,674,136 | ||||||||
Industrials 6.9% |
| |||||||
Aerospace & Defense 0.7% |
| |||||||
Boeing Co. | 16,160 | 2,962,128 | ||||||
TransDigm Group, Inc. | 7,516 | 3,322,448 | ||||||
|
| |||||||
6,284,576 | ||||||||
Building Products 0.5% |
| |||||||
Trex Co., Inc.* (a) | 37,158 | 4,833,141 | ||||||
Electrical Equipment 1.3% | ||||||||
AMETEK, Inc. | 143,759 | 12,847,742 | ||||||
Industrial Conglomerates 1.3% |
| |||||||
Roper Technologies, Inc. | 33,489 | 13,002,439 | ||||||
Professional Services 2.5% |
| |||||||
TransUnion | 139,201 | 12,116,055 | ||||||
Verisk Analytics, Inc. | 68,027 | 11,578,195 | ||||||
|
| |||||||
23,694,250 | ||||||||
Road & Rail 0.6% | ||||||||
Norfolk Southern Corp. | 31,816 | 5,585,935 | ||||||
Information Technology 40.9% |
| |||||||
IT Services 7.9% |
| |||||||
Fiserv, Inc.* | 152,990 | 14,934,884 | ||||||
FleetCor Technologies, Inc.* | 17,467 | 4,393,474 | ||||||
Global Payments, Inc. | 77,984 | 13,227,646 | ||||||
Twilio, Inc. “A”* (a) | 39,519 | 8,671,259 | ||||||
Visa, Inc. “A” (a) | 183,805 | 35,505,612 | ||||||
|
| |||||||
76,732,875 | ||||||||
Semiconductors & Semiconductor Equipment 3.1% |
| |||||||
Analog Devices, Inc. | 37,775 | 4,632,726 | ||||||
Applied Materials, Inc. | 75,401 | 4,557,990 | ||||||
MKS Instruments, Inc. | 29,824 | 3,377,270 | ||||||
NVIDIA Corp. | 44,635 | 16,957,283 | ||||||
|
| |||||||
29,525,269 | ||||||||
Software 21.6% |
| |||||||
Adobe, Inc.* | 49,961 | 21,748,523 | ||||||
Avalara, Inc.* | 23,640 | 3,146,248 | ||||||
DocuSign, Inc.* | 47,870 | 8,243,693 | ||||||
Dynatrace, Inc.* | 95,919 | 3,894,311 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Capital Growth VIP | | | 5 |
Shares | Value ($) | |||||||
Intuit, Inc. | 33,192 | 9,831,139 | ||||||
Microsoft Corp. | 452,357 | 92,059,173 | ||||||
Nuance Communications, Inc.* | 362,715 | 9,178,503 | ||||||
Proofpoint, Inc.* | 73,982 | 8,220,880 | ||||||
RingCentral, Inc. “A”* | 10,339 | 2,946,718 | ||||||
Salesforce.com, Inc.* | 65,877 | 12,340,738 | ||||||
ServiceNow, Inc.* | 36,271 | 14,691,931 | ||||||
Slack Technologies, Inc. “A”* (a) | 88,394 | 2,748,170 | ||||||
Synopsys, Inc.* | 59,991 | 11,698,245 | ||||||
VMware, Inc. “A”* | 51,737 | 8,011,992 | ||||||
|
| |||||||
208,760,264 | ||||||||
Technology Hardware, Storage & Peripherals 8.3% |
| |||||||
Apple, Inc. | 210,939 | 76,950,547 | ||||||
Pure Storage, Inc. “A”* | 157,166 | 2,723,687 | ||||||
|
| |||||||
79,674,234 | ||||||||
Materials 1.2% |
| |||||||
Chemicals 0.7% |
| |||||||
Ecolab, Inc. | 33,242 | 6,613,496 | ||||||
Construction Materials 0.5% |
| |||||||
Vulcan Materials Co. | 41,305 | 4,785,184 | ||||||
Real Estate 2.5% |
| |||||||
Equity Real Estate Investment Trusts (REITs) |
| |||||||
Crown Castle International Corp. | 37,776 | 6,321,814 | ||||||
Equinix, Inc. | 14,953 | 10,501,492 | ||||||
Prologis, Inc. | 83,077 | 7,753,576 | ||||||
|
| |||||||
24,576,882 | ||||||||
Total Common Stocks (Cost $404,862,646) |
| 957,875,552 |
Shares | Value ($) | |||||||
Rights 0.0% |
| |||||||
Communication Services |
| |||||||
T-Mobile U.S., Inc. Expiration Date 07/27/2020* (Cost $47,637) | 128,749 | 21,630 | ||||||
Securities Lending Collateral 6.0% |
| |||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (b) (c) (Cost $58,160,545) | 58,160,545 | 58,160,545 | ||||||
Cash Equivalents 0.8% |
| |||||||
DWS Central Cash Management Government Fund, 0.12% (b) (Cost $7,441,008) | 7,441,008 | 7,441,008 | ||||||
% of Net Assets | Value ($) | |||||||
Total Investment Portfolio (Cost $470,511,836) | 106.0 | 1,023,498,735 | ||||||
Other Assets and Liabilities, Net | (6.0 | ) | (58,295,753 | ) | ||||
Net Assets | 100.0 | 965,202,982 |
A summary of the Fund’s transactions with affiliated investments during the period ended June 30, 2020 are as follows:
Value ($) at 12/31/2019 | Purchases Cost ($) | Sales Proceeds ($) | Net Realized Gain/ (Loss) ($) | Net Change in Unrealized Appreciation (Depreciation) ($) | Income ($) | Capital Gain Distributions ($) | Number of Shares at 6/30/2020 | Value ($) at 6/30/2020 | ||||||||||||||||||||||||
Securities Lending Collateral 6.0% |
| |||||||||||||||||||||||||||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (b) (c) |
| |||||||||||||||||||||||||||||||
— | 58,160,545 | (d) | — | — | — | 8,588 | — | 58,160,545 | 58,160,545 | |||||||||||||||||||||||
Cash Equivalents 0.8% |
| |||||||||||||||||||||||||||||||
DWS Central Cash Management Government Fund, 0.12% (b) |
| |||||||||||||||||||||||||||||||
16,868,479 | 62,026,944 | 71,454,415 | — | — | 49,990 | — | 7,441,008 | 7,441,008 | ||||||||||||||||||||||||
16,868,479 | 120,187,489 | 71,454,415 | — | — | 58,578 | — | 65,601,553 | 65,601,553 |
* | Non-income producing security. |
(a) | All or a portion of these securities were on loan. In addition, “Other Assets and Liabilities, Net” may include pending sales that are also on loan. The value of securities loaned at June 30, 2020 amounted to $57,716,657, which is 6.0% of net assets. |
(b) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
(c) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
(d) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the period ended June 30, 2020. |
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of June 30, 2020 in valuing the Fund’s investments. For information on the Fund’s policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks (e) | $ | 957,875,552 | $ | — | $ | — | $ | 957,875,552 | ||||||||
Rights | 21,630 | — | — | 21,630 | ||||||||||||
Short-Term Investments (e) | 65,601,553 | — | — | 65,601,553 | ||||||||||||
Total | $ | 1,023,498,735 | $ | — | $ | — | $ | 1,023,498,735 |
(e) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
6 | | | Deutsche DWS Variable Series I — DWS Capital Growth VIP |
Assets and Liabilities
as of June 30, 2020 (Unaudited) | ||||
Assets | ||||
Investments in non-affiliated securities, at value (cost $404,910,283) — including $57,716,657 of securities loaned | $ | 957,897,182 | ||
Investment in DWS Government & Agency Securities Portfolio (cost $58,160,545)* | 58,160,545 | |||
Investment in DWS Central Cash Management Government Fund (cost $7,441,008) | 7,441,008 | |||
Cash | 3,034,994 | |||
Receivable for Fund shares sold | 416,770 | |||
Dividends receivable | 111,388 | |||
Interest receivable | 5,609 | |||
Other assets | 8,491 | |||
Total assets | 1,027,075,987 | |||
Liabilities | ||||
Payable upon return of securities loaned | 58,160,545 | |||
Payable for investments purchased | 3,034,994 | |||
Payable for Fund shares redeemed | 219,606 | |||
Accrued management fee | 286,922 | |||
Accrued Trustees’ fees | 11,723 | |||
Other accrued expenses and payables | 159,215 | |||
Total liabilities | 61,873,005 | |||
Net assets, at value | $ | 965,202,982 | ||
Net Assets Consist of | ||||
Distributable earnings (loss) | 575,700,735 | |||
Paid-in capital | 389,502,247 | |||
Net assets, at value | $ | 965,202,982 | ||
Net Asset Value | ||||
Class A | ||||
Net Asset Value, offering and redemption price per share ($960,779,977 ÷ 27,843,000 outstanding shares of beneficial interest, $0.01 par value, unlimited number of shares authorized) | $ | 34.51 | ||
Class B | ||||
Net Asset Value, offering and redemption price per share ($4,423,005 ÷ 128,557 outstanding shares of beneficial interest, $0.01 par value, unlimited number of shares authorized) | $ | 34.41 |
* | Represents collateral on securities loaned. |
for the six months ended June 30, 2020 (Unaudited) |
| |||
Investment Income | ||||
Income: | ||||
Dividends | $ | 3,771,161 | ||
Income distributions — DWS Central Cash Management Government Fund | 49,990 | |||
Securities lending income, net of borrower rebates | 8,588 | |||
Total income | 3,829,739 | |||
Expenses: | ||||
Management fee | 1,600,310 | |||
Administration fee | 421,504 | |||
Services to Shareholders | 1,019 | |||
Record keeping fee (Class B) | 118 | |||
Distribution service fee (Class B) | 5,044 | |||
Custodian fee | 3,230 | |||
Professional fees | 44,814 | |||
Reports to shareholders | 25,030 | |||
Trustees’ fees and expenses | 19,158 | |||
Other | 23,678 | |||
Total expenses | 2,143,905 | |||
Net investment income | 1,685,834 | |||
Realized and Unrealized gain (loss) | ||||
Net realized gain (loss) from investments | 21,262,138 | |||
Change in net unrealized appreciation (depreciation) on investments | 86,663,047 | |||
Net gain (loss) | 107,925,185 | |||
Net increase (decrease) in net assets resulting from operations | $ | 109,611,019 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Capital Growth VIP | | | 7 |
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets | Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | ||||||
Operations: | ||||||||
Net investment income (loss) | $ | 1,685,834 | $ | 4,570,151 | ||||
Net realized gain (loss) | 21,262,138 | 63,513,110 | ||||||
Change in net unrealized appreciation (depreciation) | 86,663,047 | 189,217,615 | ||||||
Net increase (decrease) in net assets resulting from operations | 109,611,019 | 257,300,876 | ||||||
Distributions to shareholders: | ||||||||
Class A | (67,556,274 | ) | (97,006,648 | ) | ||||
Class B | (308,190 | ) | (448,501 | ) | ||||
Total distributions | (67,864,464 | ) | (97,455,149 | ) | ||||
Fund share transactions: | ||||||||
Class A | ||||||||
Proceeds from shares sold | 46,001,900 | 33,974,927 | ||||||
Reinvestment of distributions | 67,556,274 | 97,006,648 | ||||||
Payments for shares redeemed | (56,280,678 | ) | (152,665,013 | ) | ||||
Net increase (decrease) in net assets from Class A share transactions | 57,277,496 | (21,683,438 | ) | |||||
Class B | ||||||||
Proceeds from shares sold | 279,059 | 340,905 | ||||||
Reinvestment of distributions | 308,190 | 448,501 | ||||||
Payments for shares redeemed | (608,910 | ) | (824,586 | ) | ||||
Net increase (decrease) in net assets from Class B share transactions | (21,661 | ) | (35,180 | ) | ||||
Increase (decrease) in net assets | 99,002,390 | 138,127,109 | ||||||
Net assets at beginning of period | 866,200,592 | 728,073,483 | ||||||
Net assets at end of period | $ | 965,202,982 | $ | 866,200,592 | ||||
Other Information | ||||||||
Class A | ||||||||
Shares outstanding at beginning of period | 25,934,145 | 26,575,319 | ||||||
Shares sold | 1,384,913 | 1,101,903 | ||||||
Shares issued to shareholders in reinvestment of distributions | 2,306,462 | 3,253,073 | ||||||
Shares redeemed | (1,782,520 | ) | (4,996,150 | ) | ||||
Net increase (decrease) in Class A shares | 1,908,855 | (641,174 | ) | |||||
Shares outstanding at end of period | 27,843,000 | 25,934,145 | ||||||
Class B | ||||||||
Shares outstanding at beginning of period | 127,162 | 127,775 | ||||||
Shares sold | 9,179 | 11,255 | ||||||
Shares issued to shareholders in reinvestment of distributions | 10,547 | 15,076 | ||||||
Shares redeemed | (18,331 | ) | (26,944 | ) | ||||
Net increase (decrease) in Class B shares | 1,395 | (613 | ) | |||||
Shares outstanding at end of period | 128,557 | 127,162 |
The accompanying notes are an integral part of the financial statements.
8 | | | Deutsche DWS Variable Series I — DWS Capital Growth VIP |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class A | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $33.24 | $ | 27.27 | $ | 30.86 | $ | 26.70 | $ | 28.22 | $ | 29.95 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)a | .06 | .17 | .14 | .20 | .21 | .20 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 3.87 | 9.53 | (.53 | ) | 6.47 | .83 | 2.34 | |||||||||||||||||
Total from investment operations | 3.93 | 9.70 | (.39 | ) | 6.67 | 1.04 | 2.54 | |||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.18 | ) | (.14 | ) | (.23 | ) | (.22 | ) | (.22 | ) | (.22 | ) | ||||||||||||
Net realized gains | (2.48 | ) | (3.59 | ) | (2.97 | ) | (2.29 | ) | (2.34 | ) | (4.05 | ) | ||||||||||||
Total distributions | (2.66 | ) | (3.73 | ) | (3.20 | ) | (2.51 | ) | (2.56 | ) | (4.27 | ) | ||||||||||||
Net asset value, end of period | $34.51 | $ | 33.24 | $ | 27.27 | $ | 30.86 | $ | 26.70 | $ | 28.22 | |||||||||||||
Total Return (%) | 13.28 | ** | 37.14 | (1.60 | ) | 26.30 | 4.25 | 8.62 | ||||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 961 | 862 | 725 | 776 | 745 | 849 | ||||||||||||||||||
Ratio of expenses (%)b | .50 | * | .50 | .50 | .50 | .50 | .49 | |||||||||||||||||
Ratio of net investment income (loss) (%) | .39 | * | .55 | .46 | .70 | .82 | .70 | |||||||||||||||||
Portfolio turnover rate (%) | 8 | ** | 11 | 26 | 15 | 35 | 35 |
a | Based on average shares outstanding during the period. |
b | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class B | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $33.10 | $ | 27.16 | $ | 30.75 | $ | 26.61 | $ | 28.12 | $ | 29.84 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)a | .02 | .09 | .07 | .13 | .15 | .13 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 3.87 | 9.49 | (.54 | ) | 6.44 | .83 | 2.32 | |||||||||||||||||
Total from investment operations | 3.89 | 9.58 | (.47 | ) | 6.57 | .98 | 2.45 | |||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.10 | ) | (.05 | ) | (.15 | ) | (.14 | ) | (.15 | ) | (.12 | ) | ||||||||||||
Net realized gains | (2.48 | ) | (3.59 | ) | (2.97 | ) | (2.29 | ) | (2.34 | ) | (4.05 | ) | ||||||||||||
Total distributions | (2.58 | ) | (3.64 | ) | (3.12 | ) | (2.43 | ) | (2.49 | ) | (4.17 | ) | ||||||||||||
Net asset value, end of period | $34.41 | $ | 33.10 | $ | 27.16 | $ | 30.75 | $ | 26.61 | $ | 28.12 | |||||||||||||
Total Return (%) | 13.15 | ** | 36.79 | (1.87 | ) | 25.96 | 4.00 | 8.33 | ||||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 4 | 4 | 3 | 6 | 5 | 4 | ||||||||||||||||||
Ratio of expenses (%)b | .76 | * | .76 | .76 | .75 | .76 | .76 | |||||||||||||||||
Ratio of net investment income (loss) (%) | .13 | * | .29 | .21 | .45 | .58 | .44 | |||||||||||||||||
Portfolio turnover rate (%) | 8 | ** | 11 | 26 | 15 | 35 | 35 |
a | Based on average shares outstanding during the period. |
b | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Capital Growth VIP | | | 9 |
Notes to Financial Statements | (Unaudited) |
A. Organization and Significant Accounting Policies
Deutsche DWS Variable Series I (the “Trust“) 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 Trust consists of five diversified funds: DWS Bond VIP, DWS Capital Growth VIP, DWS Core Equity VIP, DWS CROCI® International VIP and DWS Global Small Cap VIP (individually or collectively hereinafter referred to as a “Fund“ or the “Funds“). These financial statements report on DWS Capital Growth VIP. The Trust is intended to be the underlying investment vehicle for variable annuity contracts and variable life insurance policies to be offered by the separate accounts of certain life insurance companies (“Participating Insurance Companies“).
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Sales of Class B shares are subject to recordkeeping fees up to 0.15% and Rule 12b-1 fees under the 1940 Act equal to an annual rate of up to 0.25% of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares 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 (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities are generally categorized as Level 1.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
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Disclosure about the classification of fair value measurements is included in a table following the Fund’s Investment Portfolio.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. During the six months ended June 30, 2020, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.11% annualized effective rate as of June 30, 2020) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of June 30, 2020, the Fund had securities on loan, which were classified as common stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements were overnight and continuous.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Federal Income Taxes. The Fund is treated as a separate taxpayer as provided for in the Internal Revenue Code, as amended. It is the Fund’s policy 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 the separate accounts of the Participating Insurance Companies which hold its shares.
At June 30, 2020, the aggregate cost of investments for federal income tax purposes was $470,587,009. The net unrealized appreciation for all investments based on tax cost was $552,911,726. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $559,550,488 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $6,638,762.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2019 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
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The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income (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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Real Estate Investment Trusts. The Fund at its fiscal year end recharacterizes distributions received from a Real Estate Investment Trust (“REIT”) investment based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from a REIT, the recharacterization will be estimated for financial statement purposes and a recharacterization will be made within the accounting records in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
B. Purchases and Sales of Securities
During the six months ended June 30, 2020, purchases and sales of investment securities (excluding short-term investments) aggregated $69,357,625 and $68,618,155, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA“ or the “Advisor“), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), 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.
Pursuant to 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 average daily net assets | .390 | % | ||
Next $750 million of average daily net assets | .365 | % | ||
Over $1 billion of average daily net assets | .340 | % |
Accordingly, for the six months ended June 30, 2020, the fee pursuant to the Investment Management Agreement was equivalent to an annualized rate (exclusive of any applicable waivers/reimbursements) of 0.37% of the Fund’s average daily net assets.
For the period from January 1, 2020 through September 30, 2020, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of each class as follows:
Class A | .75 | % | ||
Class B | 1.00 | % |
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Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. Prior to March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund paid 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. Effective March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual Administration Fee of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2020, the Administration Fee was $421,504, of which $74,889 is unpaid.
Service Provider Fees. DWS Service Company (“DSC“), 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 DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended June 30, 2020, the amounts charged to the Fund by DSC were as follows:
Services to Shareholders | Total Aggregated | Unpaid at June 30, 2020 | ||||||
Class A | $ | 397 | $ | 129 | ||||
Class B | 106 | 35 | ||||||
$ | 503 | $ | 164 |
Distribution Service Agreement. DWS Distributors, Inc. (“DDI“), also an affiliate of the Advisor, is the Trust’s Distributor. In accordance with the Master Distribution Plan, DDI receives 12b-1 fees of up to 0.25% of the average daily net assets of Class B shares. Pursuant to the Master Distribution Plan, DDI remits these fees to the Participating Insurance Companies for various costs incurred or paid by these companies in connection with marketing and distribution of Class B shares. For the six months ended June 30, 2020, the Distribution Service Fee aggregated $5,044, of which $889 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with the Fund, DIMA is compensated for providing certain pre-press and regulatory filing services to the Fund. For the six months ended June 30, 2020, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders“ aggregated $4,520, of which $1,939 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Securities Lending Agent Fees. Deutsche Bank AG serves as lending agent for the Fund. For the six months ended June 30, 2020, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $647.
D. Ownership of the Fund
At June 30, 2020, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 63% and 21%, respectively. Two participating insurance companies were the owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 45% and 35%, respectively.
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E. Line of Credit
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if the one-month LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2020.
F. Other — COVID-19 Pandemic
A novel strain of coronavirus (COVID-19) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. The situation is evolving with various cities and countries around the world responding in different ways to address the pandemic. There are direct and indirect economic effects developing for various industries and individual companies throughout the world. The recent pandemic spread of the novel coronavirus and related geopolitical events could lead to increased financial market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments. A prolonged disruption may result in the Fund and its service providers experiencing operational difficulties in implementing their business continuity plans. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund’s accounting and financial reporting.
G. Other — Deutsche Bank AG Consent Order
On June 17, 2020, Deutsche Bank AG (“DB”), an affiliate of DWS Group, resolved with the Commodity Futures Trading Commission (“CFTC”) charges stemming from alleged violations of various swap data reporting requirements and corresponding supervision and other failures. The matter, which was resolved by the issuance of a federal court order (“Consent Order”), involved unintentional conduct that resulted from a system outage that prevented DB from reporting data in accordance with applicable CFTC requirements for a period of five days in April 2016.
The matter giving rise to the Consent Order did not arise out of any investment advisory, fund management activities or distribution activities of DIMA, DWS Distributors, Inc. or their advisory affiliates (the “DWS Service Providers”). DWS Group, of which the DWS Service Providers are wholly-owned subsidiaries, is a separate publicly traded company but continues to be an affiliate of DB due to, among other things, DB’s 79.49% ownership interest in DWS Group. Under the provisions of the Investment Company Act of 1940, as a result of the Consent Order, the DWS Service Providers would not be eligible to continue to provide investment advisory and underwriting services to the Fund absent an order from the Securities and Exchange Commission (the “SEC”). DB and the DWS Service Providers are seeking temporary and permanent orders from the SEC to permit the DWS Service Providers to continue to provide investment advisory and underwriting services to the Fund and other registered investment companies notwithstanding the Consent Order. While there can be no assurance that the requested exemptive orders will be granted, the SEC has granted this type of relief in the past. Consistent with their fiduciary and other relationships with the Fund, and in accordance with the desire of the Board of the Fund, the DWS Service Providers continue to provide investment advisory and distribution services to the Fund. Subject to the receipt of the temporary and permanent exemptive orders, the DWS Service Providers have informed the Fund that they do not believe the Consent Order will have any material impact on the Fund or the ability of the Service Providers to provide services for the Fund.
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Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2020 to June 30, 2020).
The tables illustrate your Fund’s expenses in two ways:
– | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
– | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2020 | ||||||||
Actual Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/2020 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 1,132.80 | $ | 1,131.50 | ||||
Expenses Paid per $1,000* | $ | 2.65 | $ | 4.03 | ||||
Hypothetical 5% Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 1,022.38 | $ | 1,021.08 | ||||
Expenses Paid per $1,000* | $ | 2.51 | $ | 3.82 |
* | 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 182 (the number of days in the most recent six-month period), then divided by 366. |
Annualized Expense Ratios | Class A | Class B | ||||||
Deutsche DWS Variable Series I — DWS Capital Growth VIP | .50 | % | .76 | % |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
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In accordance with Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act of 1940 (the “1940 Act”), your Fund has adopted a liquidity risk management program (the “Program”), and the Board has designated DWS Investment Management Americas, Inc. (“DIMA”) as Program administrator. The Program is designed to assess and manage your Fund’s liquidity risk (the risk that the Fund would be unable to meet requests to redeem shares of the Fund without significant dilution of remaining investors’ interests in the Fund). DIMA has designated a committee (the “Committee”) composed of personnel from multiple departments within DIMA and its affiliates that is responsible for the implementation and ongoing administration of the Program, which includes assessing the Fund’s liquidity risk under both normal and reasonably foreseeable stressed conditions. Under the Program, every investment held by a Fund is classified on a daily basis into one of four liquidity categories based on estimations of the investment’s ability to be sold during designated timeframes in current market conditions without significantly changing the investment’s market value.
In February 2020, as required by the Program and the Liquidity Rule, DIMA provided the Board with an annual written report (the “Report”) addressing the operation of the Program and assessing the adequacy and effectiveness of its implementation during the period from December 1, 2018 through November 30, 2019 (the “Reporting Period”). During the Reporting Period, your Fund was primarily invested in highly liquid investments (investments that the Fund anticipates can be converted to cash within three business days or less in current market conditions without significantly changing their market value). As a result, your Fund is not required to adopt, and has not adopted, a “Highly Liquid Investment Minimum” as defined in the Liquidity Rule. During the Reporting Period, the Fund did not approach the 15% limit imposed by the Liquidity Rule on holdings in illiquid investments (investments that cannot be sold or disposed of in seven days or less in current market conditions without the sale of the investment significantly changing the market value of the investment). Your Fund did not experience any issues meeting investor redemptions at any time during the Reporting Period. In the Report, DIMA stated that it believes the Program has operated adequately and effectively to manage the Fund’s liquidity risk during the Reporting Period. DIMA also reported on a material change made to the Program in May 2019 to address Securities and Exchange Commission guidance relating to extended foreign market holidays.
The Trust’s policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
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Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Capital Growth VIP’s (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2019.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
– | During the entire process, all of the Fund’s Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
– | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board’s Contract Committee reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations. |
– | The Board also received extensive information throughout the year regarding performance of the Fund. |
– | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
– | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on
Deutsche DWS Variable Series I — DWS Capital Growth VIP | | | 17 |
the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2018, the Fund’s performance (Class A shares) was in the 3rd quartile, 3rd quartile and 2nd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2018.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2018). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (1st quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2018, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”) and considered differences between the Fund and the comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
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Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
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VS1capgro-3 (R-028374-9 8/20) |
June 30, 2020
Semiannual Report
Deutsche DWS Variable Series I
DWS Core Equity VIP
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Fund’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from your insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site, and your insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from your insurance company electronically by following the instructions provided by your insurance company.
You may elect to receive all future reports in paper free of charge from your insurance company. If your insurance company informs you that future reports will be delivered via Web access, you can inform your insurance company that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by your insurance company.
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Stocks may decline in value. Fund management could be wrong in its analysis of industries, companies, economic trends and favor a security that underperforms the market. The Fund may lend securities to approved institutions. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the recent pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
2 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
Performance Summary | June 30, 2020 (Unaudited) |
Fund 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 data quoted. Please contact your participating insurance company for the Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2020 are 0.62% and 0.94% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
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.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index. |
Comparative Results | ||||||||||||
DWS Core Equity VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class A | Growth of $10,000 | $9,439 | $10,405 | $12,934 | $15,474 | $35,290 | ||||||
Average annual total return | –5.61% | 4.05% | 8.95% | 9.12% | 13.44% | |||||||
Russell 1000® Index | Growth of $10,000 | $9,719 | $10,748 | $13,544 | $16,455 | $36,975 | ||||||
Average annual total return | –2.81% | 7.48% | 10.64% | 10.47% | 13.97% | |||||||
DWS Core Equity VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class B | Growth of $10,000 | $9,415 | $10,360 | $12,799 | $15,237 | $34,284 | ||||||
Average annual total return | –5.85% | 3.60% | 8.57% | 8.79% | 13.11% | |||||||
Russell 1000® Index | Growth of $10,000 | $9,719 | $10,748 | $13,544 | $16,455 | $36,975 | ||||||
Average annual total return | –2.81% | 7.48% | 10.64% | 10.47% | 13.97% |
The growth of $10,000 is cumulative.
‡ | Total returns shown for periods less than one year are not annualized. |
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 3 |
Portfolio Summary | (Unaudited) |
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Common Stocks | 99% | 99% | ||||||
Cash Equivalents | 1% | 1% | ||||||
Rights | 0% | — | ||||||
100% | 100% | |||||||
Sector Diversification (As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Information Technology | 26% | 22% | ||||||
Health Care | 15% | 16% | ||||||
Consumer Discretionary | 12% | 9% | ||||||
Financials | 10% | 12% | ||||||
Communication Services | 10% | 11% | ||||||
Industrials | 9% | 10% | ||||||
Consumer Staples | 6% | 7% | ||||||
Real Estate | 3% | 3% | ||||||
Utilities | 3% | 4% | ||||||
Energy | 3% | 4% | ||||||
Materials | 3% | 2% | ||||||
100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 5.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-PORT. The Fund’s Form N-PORT will be available on the SEC’s Web site at sec.gov. The Fund’s portfolio holdings are also posted on dws.com from time to time. Please read the Fund’s current prospectus for more information.
Pankaj Bhatnagar, PhD, Managing Director
Di Kumble, CFA, Managing Director
Arno V. Puskar, Director
Portfolio Managers
4 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
Investment Portfolio | as of June 30, 2020 (Unaudited) |
Shares | Value ($) | |||||||
Common Stocks 99.2% |
| |||||||
Communication Services 9.7% |
| |||||||
Diversified Telecommunication Services 0.7% |
| |||||||
Verizon Communications, Inc. | 11,617 | 640,445 | ||||||
Entertainment 2.0% | ||||||||
Activision Blizzard, Inc. | 5,167 | 392,175 | ||||||
Live Nation Entertainment, Inc.* | 4,711 | 208,839 | ||||||
Netflix, Inc.* | 513 | 233,435 | ||||||
Roku, Inc.* | 5,824 | 678,671 | ||||||
Spotify Technology SA* | 1,547 | 399,420 | ||||||
|
| |||||||
1,912,540 | ||||||||
Interactive Media & Services 4.2% |
| |||||||
Alphabet, Inc. “A”* | 1,173 | 1,663,373 | ||||||
Alphabet, Inc. “C”* | 1,415 | 2,000,258 | ||||||
TripAdvisor, Inc.* | 18,959 | 360,411 | ||||||
|
| |||||||
4,024,042 | ||||||||
Media 1.0% | ||||||||
Interpublic Group of Companies, Inc. | 23,627 | 405,439 | ||||||
Omnicom Group, Inc. | 9,490 | 518,154 | ||||||
|
| |||||||
923,593 | ||||||||
Wireless Telecommunication Services 1.8% |
| |||||||
T-Mobile U.S., Inc.* | 16,370 | 1,704,936 | ||||||
Consumer Discretionary 11.8% |
| |||||||
Auto Components 1.0% | ||||||||
Gentex Corp. | 35,372 | 911,537 | ||||||
Hotels, Restaurants & Leisure 1.6% |
| |||||||
Marriott International, Inc. “A” | 3,628 | 311,028 | ||||||
Wyndham Hotels & Resorts, Inc. | 17,297 | 737,198 | ||||||
Yum China Holdings, Inc. | 9,696 | 466,087 | ||||||
|
| |||||||
1,514,313 | ||||||||
Household Durables 1.9% | ||||||||
D.R. Horton, Inc. | 24,827 | 1,376,657 | ||||||
PulteGroup, Inc. | 13,070 | 444,772 | ||||||
|
| |||||||
1,821,429 | ||||||||
Internet & Direct Marketing Retail 6.5% |
| |||||||
Amazon.com, Inc.* | 2,257 | 6,226,657 | ||||||
Specialty Retail 0.4% | ||||||||
Best Buy Co., Inc. | 4,271 | 372,730 | ||||||
Textiles, Apparel & Luxury Goods 0.4% |
| |||||||
NIKE, Inc. “B” | 3,925 | 384,846 | ||||||
Consumer Staples 5.8% | ||||||||
Beverages 3.5% | ||||||||
Coca-Cola Co. | 5,258 | 234,927 | ||||||
Keurig Dr Pepper, Inc. | 8,267 | 234,783 | ||||||
Molson Coors Beverage Co. “B” | 30,633 | 1,052,550 | ||||||
PepsiCo, Inc. | 13,338 | 1,764,084 | ||||||
|
| |||||||
3,286,344 | ||||||||
Food & Staples Retailing 1.5% | ||||||||
Costco Wholesale Corp. | 2,550 | 773,186 | ||||||
U.S. Foods Holding Corp.* | 18,806 | 370,854 | ||||||
Walmart, Inc. | 2,083 | 249,502 | ||||||
|
| |||||||
1,393,542 |
Shares | Value ($) | |||||||
Personal Products 0.8% | ||||||||
Herbalife Nutrition Ltd.* | 17,679 | 795,201 | ||||||
Energy 2.8% | ||||||||
Energy Equipment & Services 0.6% |
| |||||||
National Oilwell Varco, Inc. | 31,479 | 385,618 | ||||||
Schlumberger Ltd. | 13,146 | 241,755 | ||||||
|
| |||||||
627,373 | ||||||||
Oil, Gas & Consumable Fuels 2.2% |
| |||||||
Cheniere Energy, Inc.* | 16,267 | 786,022 | ||||||
Kinder Morgan, Inc. | 24,732 | 375,184 | ||||||
Marathon Petroleum Corp. | 12,443 | 465,119 | ||||||
Targa Resources Corp. | 22,294 | 447,441 | ||||||
|
| |||||||
2,073,766 | ||||||||
Financials 10.1% | ||||||||
Banks 2.9% | ||||||||
Bank of America Corp. | 27,935 | 663,456 | ||||||
JPMorgan Chase & Co. | 16,590 | 1,560,456 | ||||||
Popular, Inc. | 8,528 | 316,986 | ||||||
Wells Fargo & Co. | 10,029 | 256,742 | ||||||
|
| |||||||
2,797,640 | ||||||||
Capital Markets 3.7% | ||||||||
Ameriprise Financial, Inc. | 6,106 | 916,144 | ||||||
Ares Capital Corp. | 27,191 | 392,910 | ||||||
CME Group, Inc. | 3,988 | 648,209 | ||||||
Intercontinental Exchange, Inc. | 6,278 | 575,065 | ||||||
MSCI, Inc. | 1,945 | 649,280 | ||||||
The Goldman Sachs Group, Inc. | 1,897 | 374,885 | ||||||
|
| |||||||
3,556,493 | ||||||||
Insurance 3.5% | ||||||||
Arthur J. Gallagher & Co. | 6,610 | 644,409 | ||||||
Chubb Ltd. | 4,137 | 523,827 | ||||||
Everest Re Group Ltd. | 1,843 | 380,027 | ||||||
MetLife, Inc. | 33,893 | 1,237,772 | ||||||
Progressive Corp. | 6,246 | 500,367 | ||||||
|
| |||||||
3,286,402 | ||||||||
Health Care 14.7% | ||||||||
Biotechnology 4.2% | ||||||||
Alexion Pharmaceuticals, Inc.* | 8,230 | 923,735 | ||||||
Amgen, Inc. | 7,151 | 1,686,635 | ||||||
Biogen, Inc.* | 2,856 | 764,123 | ||||||
Gilead Sciences, Inc. | 8,503 | 654,221 | ||||||
|
| |||||||
4,028,714 | ||||||||
Health Care Equipment & Supplies 1.9% |
| |||||||
Baxter International, Inc. | 6,144 | 528,998 | ||||||
Hill-Rom Holdings, Inc. | 7,473 | 820,386 | ||||||
Medtronic PLC | 4,677 | 428,881 | ||||||
|
| |||||||
1,778,265 | ||||||||
Health Care Providers & Services 4.7% |
| |||||||
Anthem, Inc. | 1,296 | 340,822 | ||||||
Centene Corp.* | 7,101 | 451,269 | ||||||
Cigna Corp.* | 2,728 | 511,909 | ||||||
DaVita, Inc.* | 12,663 | 1,002,150 | ||||||
Guardant Health, Inc.* | 12,464 | 1,011,204 | ||||||
HCA Healthcare, Inc. | 6,824 | 662,338 | ||||||
Molina Healthcare, Inc.* | 2,543 | 452,603 | ||||||
|
| |||||||
4,432,295 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 5 |
Shares | Value ($) | |||||||
Pharmaceuticals 3.9% | ||||||||
Bristol-Myers Squibb Co. | 15,670 | 921,396 | ||||||
Johnson & Johnson | 3,320 | 466,891 | ||||||
Merck & Co., Inc. | 16,661 | 1,288,395 | ||||||
Pfizer, Inc. | 31,611 | 1,033,680 | ||||||
|
| |||||||
3,710,362 | ||||||||
Industrials 9.1% | ||||||||
Aerospace & Defense 3.8% | ||||||||
Howmet Aerospace, Inc. | 19,189 | 304,146 | ||||||
L3Harris Technologies, Inc. | 7,744 | 1,313,924 | ||||||
Lockheed Martin Corp. | 2,365 | 863,036 | ||||||
Teledyne Technologies, Inc.* | 3,470 | 1,078,996 | ||||||
|
| |||||||
3,560,102 | ||||||||
Building Products 0.5% | ||||||||
Owens Corning | 8,775 | 489,294 | ||||||
Commercial Services & Supplies 1.5% |
| |||||||
Waste Management, Inc. | 13,793 | 1,460,817 | ||||||
Industrial Conglomerates 0.6% | ||||||||
Honeywell International, Inc. | 4,199 | 607,133 | ||||||
Machinery 0.9% | ||||||||
Ingersoll Rand, Inc.* | 8,976 | 252,405 | ||||||
Parker-Hannifin Corp. | 3,343 | 612,672 | ||||||
|
| |||||||
865,077 | ||||||||
Professional Services 0.6% | ||||||||
Equifax, Inc. | 3,273 | 562,563 | ||||||
Road & Rail 1.2% | ||||||||
Norfolk Southern Corp. | 2,554 | 448,406 | ||||||
Union Pacific Corp. | 3,858 | 652,272 | ||||||
|
| |||||||
1,100,678 | ||||||||
Information Technology 26.2% |
| |||||||
IT Services 3.9% | ||||||||
Gartner, Inc.* | 7,227 | 876,852 | ||||||
Visa, Inc. “A” (a) | 14,421 | 2,785,704 | ||||||
|
| |||||||
3,662,556 | ||||||||
Semiconductors & Semiconductor Equipment 4.5% |
| |||||||
Intel Corp. | 22,495 | 1,345,876 | ||||||
NVIDIA Corp. | 636 | 241,623 | ||||||
QUALCOMM., Inc. | 14,074 | 1,283,689 | ||||||
Teradyne, Inc. | 16,586 | 1,401,683 | ||||||
|
| |||||||
4,272,871 | ||||||||
Software 10.3% | ||||||||
ANSYS, Inc.* | 909 | 265,183 | ||||||
Intuit, Inc. | 791 | 234,286 | ||||||
Microsoft Corp. | 33,562 | 6,830,203 | ||||||
Oracle Corp. | 36,256 | 2,003,869 | ||||||
Splunk, Inc.* | 2,185 | 434,159 | ||||||
|
| |||||||
9,767,700 | ||||||||
Technology Hardware, Storage & Peripherals 7.5% |
| |||||||
Apple, Inc. | 19,641 | 7,165,037 | ||||||
Materials 2.8% |
| |||||||
Chemicals 0.8% |
| |||||||
Air Products & Chemicals, Inc. | 1,756 | 424,004 | ||||||
Westlake Chemical Corp. | 6,686 | 358,704 | ||||||
|
| |||||||
782,708 |
Shares | Value ($) | |||||||
Containers & Packaging 0.5% |
| |||||||
International Paper Co. | 5,940 | 209,147 | ||||||
Sonoco Products Co. | 4,445 | 232,429 | ||||||
|
| |||||||
441,576 | ||||||||
Metals & Mining 1.5% |
| |||||||
Arconic Corp.* | 26,211 | 365,119 | ||||||
Steel Dynamics, Inc. | 39,715 | 1,036,165 | ||||||
|
| |||||||
1,401,284 | ||||||||
Real Estate 3.3% |
| |||||||
Equity Real Estate Investment Trusts (REITs) |
| |||||||
AvalonBay Communities, Inc. | 3,488 | 539,384 | ||||||
Digital Realty Trust, Inc. | 7,104 | 1,009,550 | ||||||
Iron Mountain, Inc. (a) | 15,598 | 407,108 | ||||||
Prologis, Inc. | 10,567 | 986,218 | ||||||
Public Storage | 1,071 | 205,514 | ||||||
|
| |||||||
3,147,774 | ||||||||
Utilities 2.9% |
| |||||||
Electric Utilities 0.9% |
| |||||||
Evergy, Inc. | 7,617 | 451,612 | ||||||
Pinnacle West Capital Corp. | 5,056 | 370,554 | ||||||
|
| |||||||
822,166 | ||||||||
Gas Utilities 0.3% |
| |||||||
UGI Corp. | 9,910 | 315,138 | ||||||
Multi-Utilities 0.5% |
| |||||||
WEC Energy Group, Inc. | 5,926 | 519,414 | ||||||
Water Utilities 1.2% |
| |||||||
American Water Works Co., Inc. | 8,552 | 1,100,300 | ||||||
Total Common Stocks (Cost $68,292,881) |
| 94,247,653 | ||||||
Rights 0.0% | ||||||||
Communication Services |
| |||||||
T-Mobile U.S., Inc. Expiration Date 7/27/2020* | 18,186 | 3,055 | ||||||
Securities Lending Collateral 3.4% |
| |||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (b) (c) | 3,224,926 | 3,224,926 | ||||||
Cash Equivalents 0.8% |
| |||||||
DWS Central Cash Management Government Fund, 0.12% (b) | 775,080 | 775,080 | ||||||
% of Net Assets | Value ($) | |||||||
Total Investment Portfolio | 103.4 | 98,250,714 | ||||||
Other Assets and Liabilities, Net | (3.4 | ) | (3,250,802 | ) | ||||
Net Assets | 100.0 | 94,999,912 |
The accompanying notes are an integral part of the financial statements.
6 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
A summary of the Fund’s transactions with affiliated investments during the period ended June 30, 2020 are as follows:
Value ($) at 12/31/2019 | Purchases Cost ($) | Sales Proceeds ($) | Net (Loss) ($) | Net Change in Unrealized Appreciation (Depreciation) ($) | Income ($) | Capital Gain Distributions ($) | Number of Shares at 6/30/2020 | Value ($) at 6/30/2020 | ||||||||||||||||||||||||||
Securities Lending Collateral 3.4% | ||||||||||||||||||||||||||||||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (b) (c) | ||||||||||||||||||||||||||||||||||
1,076,250 | 2,148,676 | (d) | — | — | — | 790 | — | 3,224,926 | 3,224,926 | |||||||||||||||||||||||||
Cash Equivalents 0.8% | ||||||||||||||||||||||||||||||||||
DWS Central Cash Management Government Fund, 0.12% (b) | ||||||||||||||||||||||||||||||||||
568,188 | 7,938,761 | 7,731,869 | — | — | 2,681 | — | 775,080 | 775,080 | ||||||||||||||||||||||||||
1,644,438 | 10,087,437 | 7,731,869 | — | — | 3,471 | — | 4,000,006 | 4,000,006 |
* | Non-income producing security. |
(a) | All or a portion of these securities were on loan. In addition, “Other Assets and Liabilities, Net” may include pending sales that are also on loan. The value of securities loaned at June 30, 2020 amounted to $3,192,593, which is 3.4% of net assets. |
(b) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
(c) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
(d) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the period ended June 30, 2020. |
MSCI: Morgan Stanley Capital International
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of June 30, 2020 in valuing the Fund’s investments. For information on the Fund’s policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks (e) | $ | 94,247,653 | $ | — | $ | — | $ | 94,247,653 | ||||||||
Rights | 3,055 | — | — | 3,055 | ||||||||||||
Short-Term Investments (e) | 4,000,006 | — | — | 4,000,006 | ||||||||||||
Total | $ | 98,250,714 | $ | — | $ | — | $ | 98,250,714 |
(e) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 7 |
Assets and Liabilities
as of June 30, 2020 (Unaudited) |
| |||
Assets |
| |||
Investments in non-affiliated securities, at value (cost $68,299,610) — including $3,192,593 of securities loaned | $ | 94,250,708 | ||
Investment in DWS Government & Agency Securities Portfolio (cost $3,224,926)* | 3,224,926 | |||
Investment in DWS Central Cash Management Government Fund (cost $775,080) | 775,080 | |||
Cash | 1,410 | |||
Receivable for Fund shares sold | 6,940 | |||
Dividends receivable | 73,829 | |||
Interest receivable | 226 | |||
Other assets | 1,004 | |||
Total assets | 98,334,123 | |||
Liabilities | ||||
Payable upon return of securities loaned | 3,224,926 | |||
Payable for Fund shares redeemed | 12,937 | |||
Accrued management fee | 30,474 | |||
Accrued Trustees’ fees | 1,037 | |||
Other accrued expenses and payables | 64,837 | |||
Total liabilities | 3,334,211 | |||
Net assets, at value | $ | 94,999,912 | ||
Net Assets Consist of | ||||
Distributable earnings (loss) | 29,941,281 | |||
Paid-in capital | 65,058,631 | |||
Net assets, at value | $ | 94,999,912 | ||
Net Asset Value | ||||
Class A | ||||
Net Asset Value, offering and redemption price per share ($92,074,981 ÷ 9,267,005 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 9.94 | ||
Class B | ||||
Net Asset Value, offering and redemption price per share ($2,924,931 ÷ 294,408 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 9.93 |
* | Represents collateral on securities loaned. |
for the six months ended June 30, 2020 (Unaudited) |
| |||
Investment Income |
| |||
Income: | ||||
Dividends (net of foreign taxes withheld of $1,143) | $ | 858,648 | ||
Income distributions — DWS Central Cash Management Government Fund | 2,681 | |||
Securities lending income, net of borrower rebates | 790 | |||
Total income | 862,119 | |||
Expenses: | ||||
Management fee | 187,703 | |||
Administration fee | 47,233 | |||
Services to Shareholders | 741 | |||
Recordkeeping fee (Class B) | 983 | |||
Distribution service fee (Class B) | 3,666 | |||
Custodian fee | 3,030 | |||
Professional fees | 39,648 | |||
Reports to shareholders | 17,598 | |||
Trustees’ fees and expenses | 3,398 | |||
Other | 4,320 | |||
Total expenses | 308,320 | |||
Net investment income | 553,799 | |||
Realized and Unrealized gain (loss) | ||||
Net realized gain (loss) from investments | 3,704,717 | |||
Change in net unrealized appreciation (depreciation) on investments | (10,854,915 | ) | ||
Net gain (loss) | (7,150,198 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (6,596,399 | ) |
The accompanying notes are an integral part of the financial statements.
8 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets | Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | ||||||
Operations: | ||||||||
Net investment income | $ | 553,799 | $ | 1,378,690 | ||||
Net realized gain (loss) | 3,704,717 | 4,633,506 | ||||||
Change in net unrealized appreciation (depreciation) | (10,854,915 | ) | 21,368,817 | |||||
Net increase (decrease) in net assets resulting from operations | (6,596,399 | ) | 27,381,013 | |||||
Distributions to shareholders : | ||||||||
Class A | (5,813,005 | ) | (12,354,795 | ) | ||||
Class B | (175,513 | ) | (374,998 | ) | ||||
Total distributions | (5,988,518 | ) | (12,729,793 | ) | ||||
Fund share transactions: | ||||||||
Class A | ||||||||
Proceeds from shares sold | 1,363,119 | 2,580,344 | ||||||
Reinvestment of distributions | 5,813,005 | 12,354,795 | ||||||
Payments of shares redeemed | (9,621,400 | ) | (14,245,198 | ) | ||||
Net increase (decrease) in net assets from Class A share transactions | (2,445,276 | ) | 689,941 | |||||
Class B | ||||||||
Proceeds from shares sold | 121,806 | 20,736 | ||||||
Reinvestment of distributions | 175,513 | 374,998 | ||||||
Payments of shares redeemed | (339,498 | ) | (345,789 | ) | ||||
Net increase (decrease) in net assets from Class B share transactions | (42,179 | ) | 49,945 | |||||
Increase (decrease) in net assets | (15,072,372 | ) | 15,391,106 | |||||
Net assets at beginning of period | 110,072,284 | 94,681,178 | ||||||
Net assets at end of period | $ | 94,999,912 | $ | 110,072,284 | ||||
Other Information | ||||||||
Class A | ||||||||
Shares outstanding at beginning of period | 9,438,162 | 9,343,340 | ||||||
Shares sold | 138,023 | 247,017 | ||||||
Shares issued to shareholders in reinvestment of distributions | 652,414 | 1,204,171 | ||||||
Shares redeemed | (961,594 | ) | (1,356,366 | ) | ||||
Net increase (decrease) in Class A shares | (171,157 | ) | 94,822 | |||||
Shares outstanding at end of period | 9,267,005 | 9,438,162 | ||||||
Class B | ||||||||
Shares outstanding at beginning of period | 295,485 | 289,832 | ||||||
Shares sold | 10,926 | 2,008 | ||||||
Shares issued to shareholders in reinvestment of distributions | 19,676 | 36,549 | ||||||
Shares redeemed | (31,679 | ) | (32,904 | ) | ||||
Net increase (decrease) in Class B shares | (1,077 | ) | 5,653 | |||||
Shares outstanding at end of period | 294,408 | 295,485 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 9 |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class A | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $11.31 | $9.83 | $14.64 | $13.16 | $13.29 | $12.76 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment incomea | .06 | .14 | .14 | .17 | .17 | .15 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (.77 | ) | 2.70 | (.71 | ) | 2.44 | 1.09 | .52 | ||||||||||||||||
Total from investment operations | (.71 | ) | 2.84 | (.57 | ) | 2.61 | 1.26 | .67 | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.15 | ) | (.12 | ) | (.27 | ) | (.17 | ) | (.19 | ) | (.11 | ) | ||||||||||||
Net realized gains | (.51 | ) | (1.24 | ) | (3.97 | ) | (.96 | ) | (1.20 | ) | (.03 | ) | ||||||||||||
Total distributions | (.66 | ) | (1.36 | ) | (4.24 | ) | (1.13 | ) | (1.39 | ) | (.14 | ) | ||||||||||||
Net asset value, end of period | $9.94 | $11.31 | $9.83 | $14.64 | $13.16 | $13.29 | ||||||||||||||||||
Total Return (%) | (5.61 | )** | 30.30 | (5.69 | ) | 21.02 | 10.48 | 5.25 | ||||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 92 | 107 | 92 | 105 | 163 | 176 | ||||||||||||||||||
Ratio of expenses (%)b | .63 | * | .62 | .61 | .57 | .57 | .56 | |||||||||||||||||
Ratio of net investment income (%) | 1.16 | * | 1.32 | 1.14 | 1.22 | 1.34 | 1.11 | |||||||||||||||||
Portfolio turnover rate (%) | 21 | ** | 40 | 43 | 39 | 43 | 27 |
a | Based on average shares outstanding during the period. |
b | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class B | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $11.29 | $9.81 | $14.62 | $13.14 | $13.26 | $12.74 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment incomea | .04 | .11 | .10 | .13 | .13 | .11 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (.77 | ) | 2.70 | (.72 | ) | 2.44 | 1.10 | .52 | ||||||||||||||||
Total from investment operations | (.73 | ) | 2.81 | (.62 | ) | 2.57 | 1.23 | .63 | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.12 | ) | (.09 | ) | (.22 | ) | (.13 | ) | (.15 | ) | (.08 | ) | ||||||||||||
Net realized gains | (.51 | ) | (1.24 | ) | (3.97 | ) | (.96 | ) | (1.20 | ) | (.03 | ) | ||||||||||||
Total distributions | (.63 | ) | (1.33 | ) | (4.19 | ) | (1.09 | ) | (1.35 | ) | (.11 | ) | ||||||||||||
Net asset value, end of period | $9.93 | $11.29 | $9.81 | $14.62 | $13.14 | $13.26 | ||||||||||||||||||
Total Return (%) | (5.85 | )** | 29.92 | (6.02 | ) | 20.68 | 10.25 | 4.91 | ||||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 3 | 3 | 3 | 3 | 2 | 2 | ||||||||||||||||||
Ratio of expenses (%)b | .95 | * | .94 | .93 | .86 | .86 | .83 | |||||||||||||||||
Ratio of net investment income (%) | .84 | * | 1.00 | .82 | .94 | 1.06 | .84 | |||||||||||||||||
Portfolio turnover rate (%) | 21 | ** | 40 | 43 | 39 | 43 | 27 |
a | Based on average shares outstanding during the period. |
b | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
The accompanying notes are an integral part of the financial statements.
10 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
Notes to Financial Statements | (Unaudited) |
A. Organization and Significant Accounting Policies
Deutsche DWS Variable Series I (the “Trust“) 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 Trust consists of five diversified funds: DWS Bond VIP, DWS Capital Growth VIP, DWS Core Equity VIP, DWS CROCI® International VIP and DWS Global Small Cap VIP (individually or collectively hereinafter referred to as a “Fund“ or the “Funds“). These financial statements report on DWS Core Equity VIP. The Trust is intended to be the underlying investment vehicle for variable annuity contracts and variable life insurance policies to be offered by the separate accounts of certain life insurance companies (“Participating Insurance Companies“).
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of 0.25% and up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares 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 (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities and exchange-traded funds (“ETF’s”) are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities and ETF’s are generally categorized as Level 1.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors used in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 11 |
Disclosure about the classification of fair value measurements is included in a table following the Fund’s Investment Portfolio.
Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. During the six months ended June 30, 2020, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.11% annualized effective rate as of June 30, 2020) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of June 30, 2020, the Fund had securities on loan, which were classified as common stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements was overnight and continuous.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Federal Income Taxes. The Fund is treated as a separate taxpayer as provided for in the Internal Revenue Code, as amended. It is the Fund’s policy 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 the separate accounts of the Participating Insurance Companies which hold its shares.
At June 30, 2020, the aggregate cost of investments for federal income tax purposes was $72,500,344. The net unrealized appreciation for all investments based on tax cost was $25,750,370. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $31,516,969 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $5,766,599.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2019 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
12 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income (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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
B. Purchases and Sales of Securities
During the six months ended June 30, 2020, purchases and sales of investment securities (excluding short-term investments) aggregated $20,401,824 and $28,549,258, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA“ or the “Advisor“), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), 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.
Pursuant to 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 average daily net assets | .390 | % | ||
Next $750 million of average daily net assets | .365 | % | ||
Over $1 billion of average daily net assets | .340 | % |
Accordingly, for the six months ended June 30, 2020, the fee pursuant to the Investment Management Agreement was equivalent to an annualized rate (exclusive of any applicable waivers/reimbursements) of 0.39% of the Fund’s average daily net assets.
For the period from January 1, 2020 through September 30, 2020, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
Class A | .72 | % | ||
Class B | 1.03 | % |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. Prior to March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund paid 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. Effective March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual Administration Fee of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2020, the Administration Fee was $47,233, of which $7,579 is unpaid.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 13 |
Service Provider Fees. DWS Service Company (“DSC“), 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 DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended June 30, 2020, the amounts charged to the Fund by DSC were as follows:
Services to Shareholders | Total Aggregated | Unpaid at June 30, 2020 | ||||||
Class A | $ | 317 | $ | 106 | ||||
Class B | 60 | 20 | ||||||
$ | 377 | $ | 126 |
Distribution Service Agreement. DWS Distributors, Inc. (“DDI“), also an affiliate of the Advisor, is the Trust’s Distributor. In accordance with the Master Distribution Plan, DDI receives 12b-1 fees of up to 0.25% of average daily net assets of Class B shares. Pursuant to the Master Distribution Plan, DDI remits these fees to the Participating Insurance Companies for various costs incurred or paid by these companies in connection with marketing and distribution of Class B shares. For the six months ended June 30, 2020, the Distribution Service Fee aggregated $3,666, of which $599 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with the Fund, DIMA is compensated for providing certain pre-press and regulatory filing services to the Fund. For the six months ended June 30, 2020, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders“ aggregated $4,520, of which $1,710 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
Security Lending Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the six months ended June 30, 2020, the Fund incurred lending agent fees to Deutsche Bank AG for the amount of $60.
D. Ownership of the Fund
At June 30, 2020, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 49% and 17%, respectively. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 48% and 38%, respectively.
E. Line of Credit
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if the one-month LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2020.
14 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
F. Other — COVID-19 Pandemic
A novel strain of coronavirus (COVID-19) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. The situation is evolving with various cities and countries around the world responding in different ways to address the pandemic. There are direct and indirect economic effects developing for various industries and individual companies throughout the world. The recent pandemic spread of the novel coronavirus and related geopolitical events could lead to increased financial market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments. A prolonged disruption may result in the Fund and its service providers experiencing operational difficulties in implementing their business continuity plans. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund’s accounting and financial reporting.
G. Other — Deutsche Bank AG Consent Order
On June 17, 2020, Deutsche Bank AG (“DB”), an affiliate of DWS Group, resolved with the Commodity Futures Trading Commission (“CFTC”) charges stemming from alleged violations of various swap data reporting requirements and corresponding supervision and other failures. The matter, which was resolved by the issuance of a federal court order (“Consent Order”), involved unintentional conduct that resulted from a
system outage that prevented DB from reporting data in accordance with applicable CFTC requirements for a period of five days in April 2016.
The matter giving rise to the Consent Order did not arise out of any investment advisory, fund management activities or distribution activities of DIMA, DWS Distributors, Inc. or their advisory affiliates (the “DWS Service Providers”). DWS Group, of which the DWS Service Providers are wholly-owned subsidiaries, is a separate publicly traded company but continues to be an affiliate of DB due to, among other things, DB’s 79.49% ownership interest in DWS Group. Under the provisions of the Investment Company Act of 1940, as a result of the Consent Order, the DWS Service Providers would not be eligible to continue to provide investment advisory and underwriting services to the Fund absent an order from the Securities and Exchange Commission (the “SEC”). DB and the DWS Service Providers are seeking temporary and permanent orders from the SEC to permit the DWS Service Providers to continue to provide investment advisory and underwriting services to the Fund and other registered investment companies notwithstanding the Consent Order. While there can be no assurance that the requested exemptive orders will be granted, the SEC has granted this type of relief in the past. Consistent with their fiduciary and other relationships with the Fund, and in accordance with the desire of the Board of the Fund, the DWS Service Providers continue to provide investment advisory and distribution services to the Fund. Subject to the receipt of the temporary and permanent exemptive orders, the DWS Service Providers have informed the Fund that they do not believe the Consent Order will have any material impact on the Fund or the ability of the Service Providers to provide services for the Fund.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 15 |
Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2020 to June 30, 2020).
The tables illustrate your Fund’s expenses in two ways:
– | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
– | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2020 | ||||||||
Actual Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 943.90 | $ | 941.50 | ||||
Expenses Paid per $1,000* | $ | 3.04 | $ | 4.59 | ||||
Hypothetical 5% Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 1,021.73 | $ | 1,020.14 | ||||
Expenses Paid per $1,000* | $ | 3.17 | $ | 4.77 |
* | Expenses are equal to the Fund’s annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 182 (the number of days in the most recent six-month period), then divided by 366. |
Annualized Expense Ratios | Class A | Class B | ||||||
Deutsche DWS Variable Series I — DWS Core Equity VIP | .63 | % | .95 | % |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
16 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
In accordance with Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act of 1940 (the “1940 Act”), your Fund has adopted a liquidity risk management program (the “Program”), and the Board has designated DWS Investment Management Americas, Inc. (“DIMA”) as Program administrator. The Program is designed to assess and manage your Fund’s liquidity risk (the risk that the Fund would be unable to meet requests to redeem shares of the Fund without significant dilution of remaining investors’ interests in the Fund). DIMA has designated a committee (the “Committee”) composed of personnel from multiple departments within DIMA and its affiliates that is responsible for the implementation and ongoing administration of the Program, which includes assessing the Fund’s liquidity risk under both normal and reasonably foreseeable stressed conditions. Under the Program, every investment held by a Fund is classified on a daily basis into one of four liquidity categories based on estimations of the investment’s ability to be sold during designated timeframes in current market conditions without significantly changing the investment’s market value.
In February 2020, as required by the Program and the Liquidity Rule, DIMA provided the Board with an annual written report (the “Report”) addressing the operation of the Program and assessing the adequacy and effectiveness of its implementation during the period from December 1, 2018 through November 30, 2019 (the “Reporting Period”). During the Reporting Period, your Fund was primarily invested in highly liquid investments (investments that the Fund anticipates can be converted to cash within three business days or less in current market conditions without significantly changing their market value). As a result, your Fund is not required to adopt, and has not adopted, a “Highly Liquid Investment Minimum” as defined in the Liquidity Rule. During the Reporting Period, the Fund did not approach the 15% limit imposed by the Liquidity Rule on holdings in illiquid investments (investments that cannot be sold or disposed of in seven days or less in current market conditions without the sale of the investment significantly changing the market value of the investment). Your Fund did not experience any issues meeting investor redemptions at any time during the Reporting Period. In the Report, DIMA stated that it believes the Program has operated adequately and effectively to manage the Fund’s liquidity risk during the Reporting Period. DIMA also reported on a material change made to the Program in May 2019 to address Securities and Exchange Commission guidance relating to extended foreign market holidays.
The Trust’s policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 17 |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Core Equity VIP’s (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2019.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
– | During the entire process, all of the Fund’s Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
– | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board’s Contract Committee reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations. |
– | The Board also received extensive information throughout the year regarding performance of the Fund. |
– | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
– | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board
18 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2018, the Fund’s performance (Class A shares) was in the 3rd quartile, 3rd quartile and 1st quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the five-year period and has underperformed its benchmark in the one- and three-year periods ended December 31, 2018.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund’s administrative services agreement, were lower than the median (1st quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2018). The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2018, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable DWS U.S. registered fund (“DWS Funds”) and considered differences between the Fund and the comparable DWS Fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public
Deutsche DWS Variable Series I — DWS Core Equity VIP | | | 19 |
relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
20 | | | Deutsche DWS Variable Series I — DWS Core Equity VIP |
Notes
Notes
Notes
VS1coreq-3 (R-028376-9 8/20) |
June 30, 2020
Semiannual Report
Deutsche DWS Variable Series I
DWS CROCI® International VIP
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Fund’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from your insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site, and your insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from your insurance company electronically by following the instructions provided by your insurance company.
You may elect to receive all future reports in paper free of charge from your insurance company. If your insurance company informs you that future reports will be delivered via Web access, you can inform your insurance company that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by your insurance company.
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Investing in foreign securities, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Stocks may decline in value. The Fund will be managed on the premise that stocks with lower CROCI® Economic P/E Ratios may outperform stocks with higher CROCI® Economic P/E Ratios over time. This premise may not always be correct and prospective investors should evaluate this assumption prior to investing in the Fund. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the recent pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
In June 2016, citizens of the United Kingdom approved a referendum to leave the European Union and in March 2017, the United Kingdom initiated the formal process of withdrawing from the EU and the withdrawal is expected to take effect on January 31, 2020. Significant uncertainty exists regarding any adverse economic and political effects the United Kingdom’s withdrawal may have on the United Kingdom, other EU countries and the global economy.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
2 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Performance Summary | June 30, 2020 (Unaudited) |
Fund 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 data quoted. Please contact your participating insurance company for the Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2020 are 1.01% and 1.29% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
MSCI EAFE (Europe, Australasia and the Far East) Value Index captures large and mid-capitalization securities exhibiting overall value style characteristics across developed markets countries around the world, excluding the U.S. and Canada. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.
Comparative Results | ||||||||||||
DWS CROCI® International VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class A | Growth of $10,000 | $8,787 | $9,845 | $9,744 | $10,009 | $13,714 | ||||||
Average annual total return | –12.13% | –1.55% | –0.86% | 0.02% | 3.21% | |||||||
MSCI EAFE Value Index | Growth of $10,000 | $8,073 | $8,552 | $8,729 | $9,228 | $14,152 | ||||||
Average annual total return | –19.27% | –14.48% | –4.43% | –1.59% | 3.53% | |||||||
DWS CROCI® International VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class B | Growth of $10,000 | $8,781 | $9,822 | $9,673 | $9,873 | $13,374 | ||||||
Average annual total return | –12.19% | -1.78% | –1.10% | –0.26% | 2.95% | |||||||
MSCI EAFE Value Index | Growth of $10,000 | $8,073 | $8,552 | $8,729 | $9,228 | $14,152 | ||||||
Average annual total return | –19.27% | –14.48% | –4.43% | –1.59% | 3.53% |
The growth of $10,000 is cumulative.
‡ | Total returns shown for periods less than one year are not annualized. |
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 3 |
Portfolio Summary | (Unaudited) |
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Common Stocks | 96% | 97% | ||||||
Preferred Stocks | 3% | 3% | ||||||
Cash Equivalents | 1% | 0% | ||||||
100% | 100% | |||||||
Geographical Diversification (As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Japan | 31% | 30% | ||||||
France | 14% | 9% | ||||||
United Kingdom | 11% | 19% | ||||||
Germany | 9% | 5% | ||||||
Switzerland | 9% | 9% | ||||||
Australia | 8% | 7% | ||||||
Netherlands | 5% | 7% | ||||||
Belgium | 4% | 4% | ||||||
Sweden | 3% | 0% | ||||||
Singapore | 2% | 2% | ||||||
Spain | 2% | 3% | ||||||
Ireland | 1% | — | ||||||
Finland | 1% | 0% | ||||||
Italy | — | 3% | ||||||
Hong Kong | — | 1% | ||||||
New Zealand | — | 1% | ||||||
100% | 100% | |||||||
Sector Diversification (As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Consumer Discretionary | 20% | 28% | ||||||
Health Care | 19% | 16% | ||||||
Materials | 12% | 11% | ||||||
Industrials | 11% | 15% | ||||||
Financials | 11% | 14% | ||||||
Consumer Staples | 11% | 4% | ||||||
Information Technology | 8% | 4% | ||||||
Communication Services | 5% | 4% | ||||||
Energy | 2% | 4% | ||||||
Utilities | 1% | — | ||||||
100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 5.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-PORT. The Fund’s Form N-PORT will be available on the SEC’s Web site at sec.gov. The Fund’s portfolio holdings are also posted on dws.com from time to time. Please read the Fund’s current prospectus for more information.
Di Kumble, CFA, Managing Director
John Moody, Vice President
Portfolio Managers
4 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Investment Portfolio | as of June 30, 2020 (Unaudited) |
Shares | Value ($) | |||||||
Common Stocks 96.1% | ||||||||
Australia 7.9% |
| |||||||
Aristocrat Leisure Ltd. | 18,497 | 330,103 | ||||||
Australia & New Zealand Banking Group Ltd. | 81,221 | 1,055,125 | ||||||
BHP Group Ltd. | 128,710 | 3,207,276 | ||||||
Commonwealth Bank of Australia | 9,108 | 439,684 | ||||||
National Australia Bank Ltd. | 16,131 | 204,926 | ||||||
Orica Ltd. | 24,474 | 283,828 | ||||||
|
| |||||||
(Cost $5,796,517) |
| 5,520,942 | ||||||
Belgium 3.6% |
| |||||||
UCB SA (Cost $1,674,267) | 21,455 | 2,493,762 | ||||||
Finland 0.8% |
| |||||||
Nokia Oyj (Cost $415,357) | 119,388 | 525,131 | ||||||
France 14.0% |
| |||||||
Arkema SA | 5,212 | 500,835 | ||||||
Atos SE* | 10,594 | 909,105 | ||||||
BNP Paribas SA* | 11,150 | 445,791 | ||||||
Capgemini SE | 5,062 | 584,188 | ||||||
Credit Agricole SA* | 65,776 | 631,211 | ||||||
Engie SA* | 80,513 | 999,479 | ||||||
Kering SA | 1,414 | 772,845 | ||||||
Sanofi | 31,326 | 3,211,164 | ||||||
Television Francaise 1* | 98,360 | 536,400 | ||||||
TOTAL SA (a) | 30,552 | 1,180,673 | ||||||
|
| |||||||
(Cost $10,266,654) |
| 9,771,691 | ||||||
Germany 6.4% |
| |||||||
adidas AG* | 1,781 | 470,613 | ||||||
Bayer AG (Registered) | 6,438 | 479,498 | ||||||
Beiersdorf AG | 20,141 | 2,293,176 | ||||||
Brenntag AG | 14,650 | 772,740 | ||||||
Fresenius SE & Co. KGaA | 9,518 | 475,611 | ||||||
|
| |||||||
(Cost $4,321,521) |
| 4,491,638 | ||||||
Ireland 1.3% |
| |||||||
CRH PLC | 9,143 | 315,221 | ||||||
DCC PLC | 3,917 | 328,006 | ||||||
James Hardie Industries PLC | 13,194 | 255,252 | ||||||
|
| |||||||
(Cost $738,237) |
| 898,479 | ||||||
Japan 30.5% |
| |||||||
Bridgestone Corp. | 76,591 | 2,462,167 | ||||||
Central Japan Railway Co. | 15,974 | 2,471,141 | ||||||
Nintendo Co., Ltd. | 2,500 | 1,117,368 | ||||||
Ono Pharmaceutical Co., Ltd. | 36,100 | 1,051,946 | ||||||
Sekisui House Ltd. | 96,333 | 1,833,372 | ||||||
Shin-Etsu Chemical Co., Ltd. | 5,609 | 656,471 | ||||||
Shionogi & Co., Ltd. | 19,600 | 1,227,041 | ||||||
Sony Corp. | 6,134 | 422,057 | ||||||
Subaru Corp. | 19,657 | 408,808 | ||||||
Sumitomo Electric Industries Ltd. | 112,649 | 1,295,236 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 112,556 | 3,165,738 | ||||||
Tokyo Electron Ltd. | 4,472 | 1,103,795 | ||||||
Toyota Industries Corp. | 42,932 | 2,271,943 | ||||||
Toyota Motor Corp. | 24,346 | 1,526,569 | ||||||
Z Holdings Corp. | 49,000 | 239,253 | ||||||
|
| |||||||
(Cost $21,738,438) |
| 21,252,905 |
Shares | Value ($) | |||||||
Netherlands 5.4% |
| |||||||
Koninklijke Ahold Delhaize NV | 53,185 | 1,455,597 | ||||||
Koninklijke KPN NV | 390,340 | 1,037,868 | ||||||
Randstad NV | 28,495 | 1,280,612 | ||||||
|
| |||||||
(Cost $3,914,725) |
| 3,774,077 | ||||||
Singapore 2.1% |
| |||||||
Venture Corp., Ltd. | 128,083 | 1,494,879 | ||||||
Spain 1.9% |
| |||||||
Banco Bilbao Vizcaya Argentaria SA (Cost $2,122,601) | 388,626 | 1,343,668 | ||||||
Sweden 2.5% |
| |||||||
Alfa Laval AB* | 11,366 | 251,671 | ||||||
Telefonaktiebolaget LM Ericsson “B” | 123,402 | 1,144,399 | ||||||
Volvo AB “B”* | 22,429 | 353,155 | ||||||
|
| |||||||
(Cost $1,595,518) |
| 1,749,225 | ||||||
Switzerland 8.4% |
| |||||||
Adecco Group AG (Registered) | 30,374 | 1,437,185 | ||||||
LafargeHolcim Ltd. (Registered)* | 32,265 | 1,431,941 | ||||||
Roche Holding AG (Genusschein) | 8,660 | 3,016,456 | ||||||
|
| |||||||
(Cost $5,884,081) |
| 5,885,582 | ||||||
United Kingdom 11.3% |
| |||||||
BAE Systems PLC | 80,353 | 483,015 | ||||||
British American Tobacco PLC | 32,246 | 1,244,419 | ||||||
Bunzl PLC | 9,250 | 249,398 | ||||||
GlaxoSmithKline PLC | 65,899 | 1,341,012 | ||||||
HSBC Holdings PLC | 64,886 | 304,264 | ||||||
Imperial Brands PLC | 24,299 | 464,744 | ||||||
Mondi PLC | 13,090 | 246,548 | ||||||
Pearson PLC | 27,127 | 193,955 | ||||||
Persimmon PLC* | 50,788 | 1,444,897 | ||||||
Rio Tinto PLC | 18,154 | 1,030,396 | ||||||
Smiths Group PLC | 10,782 | 189,405 | ||||||
Taylor Wimpey PLC | 387,639 | 689,422 | ||||||
|
| |||||||
(Cost $7,660,554) |
| 7,881,475 | ||||||
Total Common Stocks (Cost $67,606,623) |
| 67,083,454 | ||||||
Preferred Stocks 2.7% | ||||||||
Germany |
| |||||||
Henkel AG & Co. KGaA (Cost $2,313,723) | 20,354 | 1,897,343 | ||||||
Securities Lending Collateral 1.1% |
| |||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (b) (c) (Cost $734,400) | 734,400 | 734,400 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 5 |
Shares | Value ($) | |||||||
Cash Equivalents 0.6% | ||||||||
DWS Central Cash Management Government Fund, 0.12% (b) (Cost $443,626) | 443,626 | 443,626 |
% of Net Assets | Value ($) | |||||||
Total Investment Portfolio | 100.5 | 70,158,823 | ||||||
Other Assets and Liabilities, Net | (0.5 | ) | (380,183 | ) | ||||
Net Assets | 100.0 | 69,778,640 |
A summary of the Fund’s transactions with affiliated investments during the period ended June 30, 2020 are as follows:
Value ($) at 12/31/2019 | Purchases Cost ($) | Sales Proceeds ($) | Net Realized Gain/ (Loss) ($) | Net Change in Unrealized Appreciation (Depreciation) ($) | Income ($) | Capital Gain Distributions ($) | Number of Shares at 6/30/2020 | Value ($) at 6/30/2020 | ||||||||||||||||||||||||
Securities Lending Collateral 1.1% |
| |||||||||||||||||||||||||||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (b) (c) |
| |||||||||||||||||||||||||||||||
— | 734,400 | (d) | — | — | — | 1,225 | — | 734,400 | 734,400 | |||||||||||||||||||||||
Cash Equivalents 0.6% |
| |||||||||||||||||||||||||||||||
DWS Central Cash Management Government Fund, 0.12% (b) |
| |||||||||||||||||||||||||||||||
226,563 | 5,094,256 | 4,877,193 | — | — | 2,193 | — | 443,626 | 443,626 | ||||||||||||||||||||||||
226,563 | 5,828,656 | 4,877,193 | — | — | 3,418 | — | 1,178,026 | 1,178,026 |
* | Non-income producing security. |
(a) | All or a portion of these securities were on loan. In addition, “Other Assets and Liabilities, Net” may include pending sales that are also on loan. The value of securities loaned at June 30, 2020 amounted to $695,605, which is 1.0% of net assets. |
(b) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
(c) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. |
(d) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the period ended June 30, 2020. |
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of June 30, 2020 in valuing the Fund’s investments. For information on the Fund’s policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | ||||||||||||||||
Australia | $ | — | $ | 5,520,942 | $ | — | $ | 5,520,942 | ||||||||
Belgium | — | 2,493,762 | — | 2,493,762 | ||||||||||||
Finland | — | 525,131 | — | 525,131 | ||||||||||||
France | — | 9,771,691 | — | 9,771,691 | ||||||||||||
Germany | — | 4,491,638 | — | 4,491,638 | ||||||||||||
Ireland | — | 898,479 | — | 898,479 | ||||||||||||
Japan | — | 21,252,905 | — | 21,252,905 | ||||||||||||
Netherlands | — | 3,774,077 | — | 3,774,077 | ||||||||||||
Singapore | — | 1,494,879 | — | 1,494,879 | ||||||||||||
Spain | — | 1,343,668 | — | 1,343,668 | ||||||||||||
Sweden | — | 1,749,225 | — | 1,749,225 | ||||||||||||
Switzerland | — | 5,885,582 | — | 5,885,582 | ||||||||||||
United Kingdom | — | 7,881,475 | — | 7,881,475 | ||||||||||||
Preferred Stocks | — | 1,897,343 | — | 1,897,343 | ||||||||||||
Short-Term Investments (e) | 1,178,026 | — | — | 1,178,026 | ||||||||||||
Total | $ | 1,178,026 | $ | 68,980,797 | $ | — | $ | 70,158,823 |
(e) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
6 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Assets and Liabilities
as of June 30, 2020 (Unaudited) | ||||
Assets | ||||
Investments in non-affiliated securities, at value (cost $69,920,346 — including $695,605 of securities loaned) | $ | 68,980,797 | ||
Investment in DWS Government & Agency Securities Portfolio (cost $734,400)* | 734,400 | |||
Investment in DWS Central Cash Management Government Fund (cost $443,626) |
| 443,626 |
| |
Foreign currency, at value (cost $167,289) | 168,236 | |||
Receivable for Fund shares sold | 13,038 | |||
Dividends receivable | 89,990 | |||
Interest receivable | 46 | |||
Foreign taxes recoverable | 217,989 | |||
Other assets | 1,080 | |||
Total assets | 70,649,202 | |||
Liabilities | ||||
Payable upon return of securities loaned | 734,400 | |||
Payable for Fund shares redeemed | 26,887 | |||
Accrued management fee | 38,338 | |||
Accrued Trustees’ fees | 1,522 | |||
Other accrued expenses and payables | 69,415 | |||
Total liabilities | 870,562 | |||
Net assets, at value | $ | 69,778,640 | ||
Net Assets Consist of | ||||
Distributable earnings (loss) | (34,105,898 | ) | ||
Paid-in capital | 103,884,538 | |||
Net assets, at value | $ | 69,778,640 | ||
Net Asset Value | ||||
Class A | ||||
Net Asset Value, offering and redemption price per share ($69,479,704 ÷ 11,214,978 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 6.20 | ||
Class B | ||||
Net Asset Value, offering and redemption price per share ($298,936 ÷ 48,096 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 6.22 |
* | Represents collateral on securities loaned. |
for the six months ended June 30, 2020 (Unaudited) |
| |||
Investment Income | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $119,513) | $ | 1,126,583 | ||
Income distributions — DWS Central Cash Management Government Fund | 2,193 | |||
Securities lending income, net of borrower rebates | 1,225 | |||
Total income | 1,130,001 | |||
Expenses: | ||||
Management fee | 226,377 | |||
Administration fee | 34,182 | |||
Services to shareholders | 3,393 | |||
Distribution service fee (Class B) | 362 | |||
Custodian fee | 10,690 | |||
Professional fees | 41,924 | |||
Reports to shareholders | 22,318 | |||
Trustees’ fees and expenses | 2,702 | |||
Other | 7,246 | |||
Total expenses before expense reductions | 349,194 | |||
Expense reductions | (45,834 | ) | ||
Total expenses after expense reductions | 303,360 | |||
Net investment income | 826,641 | |||
Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) from: | ||||
Investments | (2,745,768 | ) | ||
Foreign currency | (48,541 | ) | ||
(2,794,309 | ) | |||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (7,937,565 | ) | ||
Foreign currency | 125 | |||
(7,937,440 | ) | |||
Net gain (loss) | (10,731,749 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (9,905,108 | ) |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 7 |
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets | Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | ||||||
Operations: | ||||||||
Net investment income (loss) | $ | 826,641 | $ | 2,461,031 | ||||
Net realized gain (loss) | (2,794,309 | ) | (2,705,026 | ) | ||||
Change in net unrealized appreciation (depreciation) | (7,937,440 | ) | 15,303,338 | |||||
Net increase (decrease) in net assets resulting from operations | (9,905,108 | ) | 15,059,343 | |||||
Distributions to shareholders: | ||||||||
Class A | (2,471,928 | ) | (2,300,083 | ) | ||||
Class B | (9,620 | ) | (8,223 | ) | ||||
Total distributions | (2,481,548 | ) | (2,308,306 | ) | ||||
Fund share transactions: | ||||||||
Class A | ||||||||
Proceeds from shares sold | 1,997,487 | 3,060,066 | ||||||
Reinvestment of distributions | 2,471,928 | 2,300,083 | ||||||
Payments for shares redeemed | (3,998,432 | ) | (9,141,481 | ) | ||||
Net increase (decrease) in net assets from Class A share transactions | 470,983 | (3,781,332 | ) | |||||
Class B | ||||||||
Proceeds from shares sold | 14,678 | 14,796 | ||||||
Reinvestment of distributions | 9,620 | 8,223 | ||||||
Payments for shares redeemed | (7,360 | ) | (17,636 | ) | ||||
Net increase (decrease) in net assets from Class B share transactions | 16,938 | 5,383 | ||||||
Increase (decrease) in net assets | (11,898,735 | ) | 8,975,088 | |||||
Net assets at beginning of period | 81,677,375 | 72,702,287 | ||||||
Net assets at end of period | $ | 69,778,640 | $ | 81,677,375 | ||||
Other Information | ||||||||
Class A | ||||||||
Shares outstanding at beginning of period | 11,073,845 | 11,634,868 | ||||||
Shares sold | 332,338 | 460,287 | ||||||
Shares issued to shareholders in reinvestment of distributions | 453,565 | 345,358 | ||||||
Shares redeemed | (644,770 | ) | (1,366,668 | ) | ||||
Net increase (decrease) in Class A shares | 141,133 | (561,023 | ) | |||||
Shares outstanding at end of period | 11,214,978 | 11,073,845 | ||||||
Class B | ||||||||
Shares outstanding at beginning of period | 45,067 | 44,210 | ||||||
Shares sold | 2,400 | 2,213 | ||||||
Shares issued to shareholders in reinvestment of distributions | 1,759 | 1,231 | ||||||
Shares redeemed | (1,130 | ) | (2,587 | ) | ||||
Net increase (decrease) in Class B shares | 3,029 | 857 | ||||||
Shares outstanding at end of period | 48,096 | 45,067 |
The accompanying notes are an integral part of the financial statements.
8 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class A | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $7.35 | $6.22 | $7.34 | $6.47 | $7.15 | $7.86 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)a | .07 | .22 | .20 | .16 | .16 | .21 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (.99 | ) | 1.11 | (1.25 | ) | 1.21 | (.13 | ) | (.59 | ) | ||||||||||||||
Total from investment operations | (.92 | ) | 1.33 | (1.05 | ) | 1.37 | .03 | (.38 | ) | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.23 | ) | (.20 | ) | (.07 | ) | (.50 | ) | (.71 | ) | (.33 | ) | ||||||||||||
Net asset value, end of period | $6.20 | $7.35 | $6.22 | $7.34 | $6.47 | $7.15 | ||||||||||||||||||
Total Return (%)b | (12.13 | )** | 21.77 | (14.39 | ) | 21.96 | .74 | (5.48 | ) | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 69 | 81 | 72 | 92 | 94 | 105 | ||||||||||||||||||
Ratio of expenses before expense reductions (%)c | 1.00 | * | 1.11 | 1.13 | 1.10 | 1.12 | 1.05 | |||||||||||||||||
Ratio of expenses after expense reductions (%)c | .87 | * | .87 | .87 | .84 | .84 | .98 | |||||||||||||||||
Ratio of net investment income (loss) (%) | 2.37 | * | 3.22 | 2.78 | 2.24 | 2.46 | 2.74 | |||||||||||||||||
Portfolio turnover rate (%) | 36 | ** | 101 | 59 | 73 | 67 | 99 |
a | Based on average shares outstanding during the period. |
b | Total return would have been lower had certain expenses not been reduced. |
c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class B | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $7.36 | $6.24 | $7.36 | $6.48 | $7.16 | $7.87 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)a | .07 | .20 | .18 | .13 | .14 | .19 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (1.00 | ) | 1.11 | (1.24 | ) | 1.23 | (.13 | ) | (.59 | ) | ||||||||||||||
Total from investment operations | (.93 | ) | 1.31 | (1.06 | ) | 1.36 | .01 | (.40 | ) | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.21 | ) | (.19 | ) | (.06 | ) | (.48 | ) | (.69 | ) | (.31 | ) | ||||||||||||
Net asset value, end of period | $6.22 | $7.36 | $6.24 | $7.36 | $6.48 | $7.16 | ||||||||||||||||||
Total Return (%)b | (12.19 | )** | 21.24 | (14.57 | ) | 21.76 | .48 | (5.71 | ) | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | .30 | .33 | .28 | .33 | .27 | .27 | ||||||||||||||||||
Ratio of expenses before expense reductions (%)c | 1.28 | * | 1.39 | 1.41 | 1.38 | 1.40 | 1.33 | |||||||||||||||||
Ratio of expenses after expense reductions (%)c | 1.12 | * | 1.12 | 1.12 | 1.09 | 1.10 | 1.23 | |||||||||||||||||
Ratio of net investment income (loss) (%) | 2.13 | * | 2.96 | 2.54 | 1.86 | 2.18 | 2.47 | |||||||||||||||||
Portfolio turnover rate (%) | 36 | ** | 101 | 59 | 73 | 67 | 99 |
a | Based on average shares outstanding during the period. |
b | Total return would have been lower had certain expenses not been reduced. |
c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 9 |
Notes to Financial Statements | (Unaudited) |
A. Organization and Significant Accounting Policies
Deutsche DWS Variable Series I (the “Trust“) 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 Trust consists of five diversified funds: DWS Bond VIP, DWS Capital Growth VIP, DWS Core Equity VIP, DWS CROCI® International VIP and DWS Global Small Cap VIP (individually or collectively hereinafter referred to as a “Fund“ or the “Funds“). These financial statements report on DWS CROCI® International VIP. The Trust is intended to be the underlying investment vehicle for variable annuity contracts and variable life insurance policies to be offered by the separate accounts of certain life insurance companies (“Participating Insurance Companies“).
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of 0.25% and up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares 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 (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities are generally categorized as Level 1 securities. For certain 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, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
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 and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or
10 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund’s Investment Portfolio.
Securities Lending. Brown Brothers Harriman & Co., as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. During the six months ended June 30, 2020, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.11% annualized effective rate as of June 30, 2020) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of June 30, 2020, the Fund had securities on loan, which were classified as common stocks in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end. As of period end, the remaining contractual maturity of the collateral agreements were overnight and continuous.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Taxes. The Fund is treated as a separate taxpayer as provided for in the Internal Revenue Code, as amended. It is the Fund’s policy 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 the separate accounts of the Participating Insurance Companies which hold its shares.
Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated, a portion of which may be recoverable. Based upon the current interpretation of the tax rules and regulations, estimated tax liabilities and recoveries on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
At December 31, 2019, the Fund had a net tax basis capital loss carryforward of approximately $30,763,000, which may be applied against realized net taxable capital gains indefinitely, including short-term losses ($7,950,000) and long-term losses ($22,813,000).
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 11 |
At June 30, 2020, the aggregate cost of investments for federal income tax purposes was $71,494,025. The net unrealized depreciation for all investments based on tax cost was $1,335,202. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $5,845,169 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $7,180,371.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2019 and has determined that no provisions for income tax and/or uncertain tax positions is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments, passive foreign investment companies 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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis net of foreign withholding taxes. 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. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
B. Purchases and Sales of Securities
During the six months ended June 30, 2020, purchases and sales of investment securities (excluding short-term investments) aggregated $25,549,166 and $25,387,215, respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA“ or the “Advisor“), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), 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.
Pursuant to 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 $500 million of average daily net assets | .650 | % | ||
Over $500 million of average daily net assets | .600 | % |
12 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Accordingly, for the six months ended June 30, 2020, the fee pursuant to the Investment Management Agreement was equivalent to an annualized rate (exclusive of any applicable waivers/reimbursements) of 0.65% of the Fund’s average daily net assets.
For the period from January 1, 2020 through April 30, 2021, the Advisor has contractually agreed to waive all or a portion of its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
Class A | .87 | % | ||
Class B | 1.12 | % |
For the six months ended June 30, 2020, fees waived and/or expenses reimbursed for each class are as follows:
Class A | $ | 45,606 | ||
Class B | 228 | |||
$ | 45,834 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. Prior to March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund paid 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. Effective March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual Administration Fee of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2020, the Administration Fee was $34,182, of which $5,563 is unpaid.
Service Provider Fees. DWS Service Company (“DSC“), 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 DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended June 30, 2020, the amounts charged to the Fund by DSC were as follows:
Services to Shareholders | Total Aggregated | Unpaid at June 30, 2020 | ||||||
Class A | $ | 311 | $ | 103 | ||||
Class B | 40 | 13 | ||||||
$ | 351 | $ | 116 |
Distribution Service Agreement. DWS Distributors, Inc. (“DDI“), also an affiliate of the Advisor, is the Trusts’ Distributor. In accordance with the Master Distribution Plan, DDI receives 12b-1 fees of up to 0.25% of the average daily net assets of Class B shares. Pursuant to the Master Distribution Plan, DDI remits these fees to the Participating Insurance Companies for various costs incurred or paid by these companies in connection with marketing and distribution of Class B shares. For the six months ended June 30, 2020, the Distribution Service Fee aggregated $362, of which $61 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with the Fund, DIMA is compensated for providing certain pre-press and regulatory filing services to the Fund. For the six months ended June 30, 2020, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders“ aggregated $4,974, of which $1,721 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 13 |
that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
D. Ownership of the Fund
At June 30, 2020, five participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 26%, 17%, 13%, 11% and 11%, respectively. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 85% and 10%, respectively.
E. Line of Credit
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if the one-month LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2020.
F. Other — COVID-19 Pandemic
A novel strain of coronavirus (COVID-19) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. The situation is evolving with various cities and countries around the world responding in different ways to address the pandemic. There are direct and indirect economic effects developing for various industries and individual companies throughout the world. The recent pandemic spread of the novel coronavirus and related geopolitical events could lead to increased financial market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments. A prolonged disruption may result in the Fund and its service providers experiencing operational difficulties in implementing their business continuity plans. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund’s accounting and financial reporting.
G. Other — Deutsche Bank AG Consent Order
On June 17, 2020, Deutsche Bank AG (“DB”), an affiliate of DWS Group, resolved with the Commodity Futures Trading Commission (“CFTC”) charges stemming from alleged violations of various swap data reporting requirements and corresponding supervision and other failures. The matter, which was resolved by the issuance of a federal court order (“Consent Order”), involved unintentional conduct that resulted from a system outage that prevented DB from reporting data in accordance with applicable CFTC requirements for a period of five days in April 2016.
The matter giving rise to the Consent Order did not arise out of any investment advisory, fund management activities or distribution activities of DIMA, DWS Distributors, Inc. or their advisory affiliates (the “DWS Service Providers”). DWS Group, of which the DWS Service Providers are wholly-owned subsidiaries, is a separate publicly traded company but continues to be an affiliate of DB due to, among other things, DB’s 79.49% ownership interest in DWS Group. Under the provisions of the Investment Company Act of 1940, as a result of the Consent Order, the DWS Service Providers would not be eligible to continue to provide investment advisory and underwriting services to the Fund absent an order from the Securities and Exchange Commission (the “SEC”). DB and the DWS Service Providers are seeking temporary and permanent orders from the SEC to permit the DWS Service Providers to continue to provide investment advisory and underwriting services to the Fund and other registered investment companies notwithstanding the Consent Order. While there can be no assurance that the requested exemptive orders will be granted, the SEC has granted this type of relief in the past. Consistent with their fiduciary and other relationships with the Fund, and in accordance with the desire of the Board of the Fund, the DWS Service Providers continue to provide investment advisory and distribution services to the Fund. Subject to the receipt of the temporary and permanent exemptive orders, the DWS Service Providers have informed the Fund that they do not believe the Consent Order will have any material impact on the Fund or the ability of the Service Providers to provide services for the Fund.
14 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, 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 (January 1, 2020 to June 30, 2020).
The tables illustrate your Fund’s expenses in two ways:
– | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
– | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2020 | ||||||||
Actual Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 878.70 | $ | 878.10 | ||||
Expenses Paid per $1,000* | $ | 4.06 | $ | 5.23 | ||||
Hypothetical 5% Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 1,020.54 | $ | 1,019.29 | ||||
Expenses Paid per $1,000* | $ | 4.37 | $ | 5.62 |
* | 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 182 (the number of days in the most recent six-month period), then divided by 366. |
Annualized Expense Ratios | Class A | Class B | ||||||
Deutsche DWS Variable Series I — DWS CROCI® International VIP | .87 | % | 1.12 | % |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 15 |
In accordance with Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act of 1940 (the “1940 Act”), your Fund has adopted a liquidity risk management program (the “Program”), and the Board has designated DWS Investment Management Americas, Inc. (“DIMA”) as Program administrator. The Program is designed to assess and manage your Fund’s liquidity risk (the risk that the Fund would be unable to meet requests to redeem shares of the Fund without significant dilution of remaining investors’ interests in the Fund). DIMA has designated a committee (the “Committee”) composed of personnel from multiple departments within DIMA and its affiliates that is responsible for the implementation and ongoing administration of the Program, which includes assessing the Fund’s liquidity risk under both normal and reasonably foreseeable stressed conditions. Under the Program, every investment held by a Fund is classified on a daily basis into one of four liquidity categories based on estimations of the investment’s ability to be sold during designated timeframes in current market conditions without significantly changing the investment’s market value.
In February 2020, as required by the Program and the Liquidity Rule, Advisors provided the Board with an annual written report (the “Report”) addressing the operation of the Program and assessing the adequacy and effectiveness of its implementation during the period from December 1, 2018 through November 30, 2019 (the “Reporting Period”). During the Reporting Period, your Fund was primarily invested in highly liquid investments (investments that the Fund anticipates can be converted to cash within three business days or less in current market conditions without significantly changing their market value). As a result, your Fund is not required to adopt, and has not adopted, a “Highly Liquid Investment Minimum” as defined in the Liquidity Rule. During the Reporting Period, the Fund did experience a temporary breach of the 15% limit imposed by the Liquidity Rule on holdings in illiquid investments (investments that cannot be sold or disposed of in seven days or less in current market conditions without the sale of the investment significantly changing the market value of the investment). The breach was caused by the temporary reclassification of Japanese securities as illiquid due to an extended Japanese holiday market closure. The temporary reclassification of Japanese securities caused the Fund to exceed the 15% limit on illiquid investments for a two day period. Because the holiday closure was anticipated in advance, no actions were needed to rebalance the Fund’s portfolio. Your Fund did not experience any issues meeting investor redemptions at any time during the Reporting Period. In the Report, Advisors stated that it believes the Program has operated adequately and effectively to manage the Fund’s liquidity risk during the Reporting Period. Advisors also reported on a material change made to the Program in May 2019 to address Securities and Exchange Commission guidance relating to extended foreign market holidays.
The Trusts’ policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trusts’ policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
16 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS CROCI® International VIP’s (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2019.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
– | During the entire process, all of the Fund’s Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
– | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board’s Contract Committee reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations. |
– | The Board also received extensive information throughout the year regarding performance of the Fund. |
– | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
– | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 17 |
believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2018, the Fund’s performance (Class A shares) was in the 2nd quartile, 3rd quartile and 4th quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three-, and five-year periods ended December 31, 2018.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund’s administrative services agreement, were higher than the median (3rd quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2018). The Board noted that, effective October 1, 2019, in connection with the 2019 contract renewal process, DIMA agreed to reduce the Fund’s contractual management fee at each breakpoint by 0.14% and 0.04%, respectively. The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be higher than the median (3rd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2018, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to comparable DWS U.S. registered funds (“DWS Funds”) and considered differences between the Fund and the comparable DWS Funds. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group does not manage any institutional accounts or DWS Europe Funds comparable to the Fund.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund’s investment management fee schedule includes fee breakpoints. The Board concluded that the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board noted that DIMA pays a licensing fee to an affiliate related to the Fund’s use of the CROCI® strategy. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which
18 | | | Deutsche DWS Variable Series I — DWS CROCI® International VIP |
pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
Deutsche DWS Variable Series I — DWS CROCI® International VIP | | | 19 |
VS1cint-3 (R-028378-9 8/20) |
June 30, 2020
Semiannual Report
Deutsche DWS Variable Series I
DWS Global Small Cap VIP
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Fund’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from your insurance company or from your financial intermediary. Instead, the shareholder reports will be made available on a Web site, and your insurance company will notify you by mail each time a report is posted and provide you with a Web site link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from your insurance company electronically by following the instructions provided by your insurance company.
You may elect to receive all future reports in paper free of charge from your insurance company. If your insurance company informs you that future reports will be delivered via Web access, you can inform your insurance company that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by your insurance company.
This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund’s objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.
Stocks may decline in value. Smaller company stocks tend to be more volatile than medium-sized or large company stocks. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Emerging markets tend to be more volatile and less liquid than the markets of more mature economies, and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. The Fund may lend securities to approved institutions. Please read the prospectus for details.
War, terrorism, economic uncertainty, trade disputes, public health crises (including the recent pandemic spread of the novel coronavirus) and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.
The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services.
DWS Distributors, Inc., 222 South Riverside Plaza, Chicago, IL 60606, (800) 621-1148
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
2 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
Performance Summary | June 30, 2020 (Unaudited) |
Fund 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 data quoted. Please contact your participating insurance company for the Fund’s most recent month-end performance. Performance does not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.
The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2020, are 1.11% and 1.40% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.
Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes only, and as such, the total return based on the unadjusted net asset value per share may differ from the total return reported in the financial highlights.
Growth of an Assumed $10,000 Investment
S&P Developed SmallCap Index comprises the stocks representing the lowest 15% of float-adjusted market cap in each developed country. It is a subset of the S&P Global BMI, a comprehensive, rules-based index measuring global stock market performance.
Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index. |
Comparative Results | ||||||||||||
DWS Global Small Cap VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class A | $8,876 | $9,488 | $9,340 | $9,814 | $18,732 | |||||||
–11.24% | –5.12% | –2.25% | –0.37% | 6.48% | ||||||||
S&P Developed SmallCap Index | $8,738 | $9,449 | $10,620 | $12,332 | $24,994 | |||||||
–12.62% | –5.51% | 2.02% | 4.28% | 9.59% | ||||||||
DWS Global Small Cap VIP | 6-Month‡ | 1-Year | 3-Year | 5-Year | 10-Year | |||||||
Class B | $8,860 | $9,468 | $9,268 | $9,687 | $18,259 | |||||||
–11.40% | –5.32% | –2.50% | –0.63% | 6.21% | ||||||||
S&P Developed SmallCap Index | $8,738 | $9,449 | $10,620 | $12,332 | $24,994 | |||||||
–12.62% | –5.51% | 2.02% | 4.28% | 9.59% |
The growth of $10,000 is cumulative.
‡ | Total returns shown for periods less than one year are not annualized. |
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 3 |
Portfolio Summary | (Unaudited) |
Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Common Stocks | 92% | 94% | ||||||
Cash Equivalents | 6% | 5% | ||||||
Exchange-Traded Funds | 1% | 1% | ||||||
Convertible Preferred Stock | 1% | 0% | ||||||
100% | 100% | |||||||
Geographical Diversification (As of % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
United States | 61% | 59% | ||||||
Japan | 11% | 10% | ||||||
United Kingdom | 5% | 6% | ||||||
Germany | 4% | 3% | ||||||
Canada | 3% | 3% | ||||||
Italy | 3% | 3% | ||||||
Luxembourg | 2% | 2% | ||||||
France | 2% | 3% | ||||||
Austria | 2% | 2% | ||||||
Others | 7% | 9% | ||||||
100% | 100% | |||||||
Sector Diversification (As of % of Investment Portfolio excluding Exchange-Traded Funds, Cash Equivalents and Securities Lending Collateral) | 6/30/20 | 12/31/19 | ||||||
Industrials | 19% | 20% | ||||||
Health Care | 18% | 14% | ||||||
Information Technology | 17% | 17% | ||||||
Consumer Discretionary | 12% | 11% | ||||||
Real Estate | 11% | 11% | ||||||
Financials | 10% | 12% | ||||||
Materials | 5% | 6% | ||||||
Consumer Staples | 3% | 3% | ||||||
Communication Services | 3% | 3% | ||||||
Energy | 1% | 3% | ||||||
Utilities | 1% | — | ||||||
100% | 100% |
Portfolio holdings and characteristics are subject to change.
For more complete details about the Fund’s investment portfolio, see page 5.
Following the Fund’s fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-PORT. The Fund’s Form N-PORT will be available on the SEC’s Web site at sec.gov. The Fund’s portfolio holdings are also posted on dws.com from time to time. Please read the Fund’s current prospectus for more information.
Peter Barsa, Director
4 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
Investment Portfolio | as of June 30, 2020 (Unaudited) |
Shares | Value ($) | |||||||
Common Stocks 91.7% | ||||||||
Austria 1.5% |
| |||||||
Lenzing AG* | 3,467 | 161,402 | ||||||
Wienerberger AG TI | 34,903 | 762,955 | ||||||
|
| |||||||
(Cost $1,341,795) |
| 924,357 | ||||||
Bermuda 0.8% |
| |||||||
Lazard Ltd. “A” (a) (Cost $354,232) | 16,265 | 465,667 | ||||||
Canada 3.0% |
| |||||||
First Quantum Minerals Ltd. | 17,977 | 143,275 | ||||||
Linamar Corp. | 12,569 | 339,778 | ||||||
Pan American Silver Corp. | 16,342 | 496,303 | ||||||
Quebecor, Inc. “B” | 39,795 | 855,053 | ||||||
|
| |||||||
(Cost $1,630,801) |
| 1,834,409 | ||||||
France 1.5% |
| |||||||
Alten SA* | 3,084 | 267,019 | ||||||
SMCP SA 144A* (b) | 24,421 | 120,100 | ||||||
SPIE SA | 37,270 | 557,751 | ||||||
|
| |||||||
(Cost $1,916,812) |
| 944,870 | ||||||
Germany 3.7% |
| |||||||
Deutz AG* | 77,387 | 366,929 | ||||||
PATRIZIA AG | 50,939 | 1,234,192 | ||||||
United Internet AG (Registered) | 16,617 | 708,320 | ||||||
|
| |||||||
(Cost $1,234,450) |
| 2,309,441 | ||||||
Hong Kong 0.8% |
| |||||||
Techtronic Industries Co., Ltd. (Cost $58,410) | 48,041 | 473,942 | ||||||
India 0.7% |
| |||||||
WNS Holdings Ltd. (ADR)* (Cost $209,098) | 7,785 | 428,019 | ||||||
Ireland 1.4% |
| |||||||
Avadel Pharmaceuticals PLC (ADR)* (b) | 21,583 | 174,391 | ||||||
Dalata Hotel Group PLC | 129,550 | 418,120 | ||||||
Ryanair Holdings PLC* | 21,445 | 258,515 | ||||||
|
| |||||||
(Cost $897,941) |
| 851,026 | ||||||
Italy 2.4% |
| |||||||
Buzzi Unicem SpA | 40,866 | 884,996 | ||||||
Cerved Group SpA* | 23,914 | 172,169 | ||||||
Moncler SpA* | 10,749 | 408,851 | ||||||
|
| |||||||
(Cost $1,414,344) |
| 1,466,016 | ||||||
Japan 10.3% |
| |||||||
Ai Holdings Corp. | 34,117 | 491,936 | ||||||
Anicom Holdings, Inc. | 23,200 | 982,566 | ||||||
BML, Inc. | 27,700 | 721,587 | ||||||
Daikyonishikawa Corp. | 39,500 | 176,685 | ||||||
Kura Sushi, Inc. | 4,800 | 234,704 | ||||||
Kusuri No Aoki Holdings Co., Ltd. | 12,458 | 976,137 | ||||||
Optex Group Co., Ltd. | 17,000 | 193,098 | ||||||
Sawai Pharmaceutical Co., Ltd. | 12,600 | 647,139 | ||||||
Syuppin Co., Ltd. | 49,200 | 332,086 | ||||||
Topcon Corp. | 26,500 | 213,678 |
Shares | Value ($) | |||||||
UT Group Co., Ltd.* | 25,024 | 575,812 | ||||||
Zenkoku Hosho Co., Ltd. | 22,400 | 842,492 | ||||||
|
| |||||||
(Cost $4,882,891) |
| 6,387,920 | ||||||
Korea 0.6% |
| |||||||
i-SENS, Inc. (Cost $569,030) | 18,843 | 396,962 | ||||||
Luxembourg 1.9% |
| |||||||
B&M European Value Retail SA (Cost $1,049,420) | 233,639 | 1,153,406 | ||||||
Spain 1.2% |
| |||||||
Talgo SA 144A* (Cost $769,471) | 154,313 | 738,340 | ||||||
Sweden 1.3% |
| |||||||
Mips Ab | 4,677 | 161,979 | ||||||
Nobina AB 144A* | 110,870 | 665,428 | ||||||
|
| |||||||
(Cost $644,796) |
| 827,407 | ||||||
Switzerland 0.4% |
| |||||||
Landis & Gyr Group AG* (Cost $366,154) | 4,139 | 269,617 | ||||||
United Kingdom 4.9% |
| |||||||
Arrow Global Group PLC | 95,792 | 105,925 | ||||||
Clinigen Group PLC | 36,498 | 367,305 | ||||||
Domino’s Pizza Group PLC | 106,754 | 411,241 | ||||||
Electrocomponents PLC | 132,047 | 1,102,594 | ||||||
Johnson Service Group PLC | 265,435 | 382,311 | ||||||
Scapa Group PLC | 249,121 | 305,611 | ||||||
Ultra Electronics Holdings PLC | 13,329 | 332,034 | ||||||
|
| |||||||
(Cost $3,028,898) |
| 3,007,021 | ||||||
United States 55.3% |
| |||||||
Advanced Disposal Services, Inc.* | 17,600 | 530,992 | ||||||
Affiliated Managers Group, Inc. | 4,203 | 313,376 | ||||||
Agilysys, Inc.* | 13,712 | 245,993 | ||||||
Americold Realty Trust (REIT) | 23,601 | 856,716 | ||||||
Amicus Therapeutics, Inc.* | 13,338 | 201,137 | ||||||
Arena Pharmaceuticals, Inc.* | 8,271 | 520,659 | ||||||
AZEK Co., Inc.* | 2,537 | 80,829 | ||||||
Blucora, Inc.* | 8,810 | 100,610 | ||||||
Cabot Microelectronics Corp. | 3,793 | 529,275 | ||||||
Cardiovascular Systems, Inc.* | 16,253 | 512,782 | ||||||
Casey’s General Stores, Inc. | 6,638 | 992,514 | ||||||
Cleveland-Cliffs, Inc. (b) | 46,669 | 257,613 | ||||||
Contango Oil & Gas Co.* (b) | 121,885 | 279,119 | ||||||
Cornerstone OnDemand, Inc.* | 11,453 | 441,628 | ||||||
Dril-Quip, Inc.* | 6,783 | 202,066 | ||||||
Ducommun, Inc.* | 26,024 | 907,457 | ||||||
EastGroup Properties, Inc. (REIT) | 4,060 | 481,557 | ||||||
Envestnet, Inc.* | 9,277 | 682,231 | ||||||
Essential Properties Realty Trust, Inc. (REIT) | 26,858 | 398,573 | ||||||
Five9, Inc.* | 14,096 | 1,560,004 | ||||||
Four Corners Property Trust, Inc. (REIT) | 27,967 | 682,395 | ||||||
Fox Factory Holding Corp.* | 12,182 | 1,006,355 | ||||||
Green Dot Corp. “A”* | 5,528 | 271,314 | ||||||
H&E Equipment Services, Inc. | 14,014 | 258,979 | ||||||
Heron Therapeutics, Inc.* (b) | 19,877 | 292,391 | ||||||
Hillenbrand, Inc. | 10,258 | 277,684 | ||||||
Hudson Pacific Properties, Inc. (REIT) | 21,914 | 551,356 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 5 |
Shares | Value ($) | |||||||
Hyster-Yale Materials Handling, Inc. | 10,133 | 391,742 | ||||||
Inphi Corp.* | 12,756 | 1,498,830 | ||||||
iRhythm Technologies, Inc.* | 4,424 | 512,697 | ||||||
Jack in the Box, Inc. | 5,411 | 400,901 | ||||||
Jefferies Financial Group, Inc. | 28,273 | 439,645 | ||||||
Lumentum Holdings, Inc.* | 8,748 | 712,350 | ||||||
Masonite International Corp.* | 7,831 | 609,095 | ||||||
Mistras Group, Inc.* | 3,278 | 12,948 | ||||||
Molina Healthcare, Inc.* | 4,652 | 827,963 | ||||||
National Storage Affiliates Trust (REIT) | 26,139 | 749,144 | ||||||
Neurocrine Biosciences, Inc.* | 11,283 | 1,376,526 | ||||||
Option Care Health, Inc.* (b) | 29,553 | 410,196 | ||||||
Pacira BioSciences, Inc.* | 12,803 | 671,773 | ||||||
Physicians Realty Trust (REIT) | 38,643 | 677,025 | ||||||
PNM Resources, Inc. | 10,996 | 422,686 | ||||||
Providence Service Corp.* | 8,958 | 706,876 | ||||||
QAD, Inc. “A” | 17,187 | 709,479 | ||||||
QTS Realty Trust, Inc. “A”, (REIT) (b) | 9,867 | 632,376 | ||||||
Quidel Corp.* | 1,819 | 406,983 | ||||||
Retrophin, Inc.* | 26,114 | 532,987 | ||||||
Rush Enterprises, Inc. “A” | 34,541 | 1,432,070 | ||||||
SEACOR Marine Holdings, Inc.* | 17,130 | 43,681 | ||||||
Sinclair Broadcast Group, Inc. “A” (b) | 15,935 | 294,160 | ||||||
South State Corp. | 12,960 | 617,674 | ||||||
Synovus Financial Corp. | 22,074 | 453,179 | ||||||
Tandem Diabetes Care, Inc.* | 3,297 | 326,139 | ||||||
Tenneco, Inc. “A”* (b) | 14,372 | 108,652 | ||||||
Thermon Group Holdings, Inc.* | 37,080 | 540,256 | ||||||
Titan Machinery, Inc.* (b) | 33,491 | 363,712 | ||||||
TopBuild Corp.* | 6,429 | 731,427 | ||||||
Trinseo SA | 3,023 | 66,990 | ||||||
TriState Capital Holdings, Inc.* | 27,098 | 425,710 | ||||||
Varonis Systems, Inc.* | 10,791 | 954,788 | ||||||
Vroom, Inc.* (b) | 1,119 | 58,345 | ||||||
WEX, Inc.* | 2,214 | 365,332 | ||||||
YETI Holdings, Inc.* (b) | 21,295 | 909,935 |
Shares | Value ($) | |||||||
Zions Bancorp. NA | 10,965 | 372,810 | ||||||
|
| |||||||
(Cost $27,125,040) |
| 34,202,687 | ||||||
Total Common Stocks (Cost $47,493,583) |
| 56,681,107 | ||||||
Convertible Preferred Stocks 0.6% |
| |||||||
United States |
| |||||||
Providence Service Corp. (c) (Cost $196,900) | 1,969 | 389,603 | ||||||
Exchange-Traded Funds 1.6% |
| |||||||
United States |
| |||||||
iShares Russell 2000 ETF (b) (Cost $990,476) | 6,798 | 973,337 | ||||||
Securities Lending Collateral 6.6% |
| |||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (d) (e) (Cost $4,099,962) | 4,099,962 | 4,099,962 | ||||||
Cash Equivalents 6.1% | ||||||||
DWS Central Cash Management Government Fund, 0.12% (d) (Cost $3,794,947) | 3,794,947 | 3,794,947 | ||||||
% of Net Assets | Value ($) | |||||||
Total Investment Portfolio | 106.6 | 65,938,956 | ||||||
Other Assets and Liabilities, Net | (6.6 | ) | (4,068,514 | ) | ||||
Net Assets | 100.0 | 61,870,442 |
A summary of the Fund’s transactions with affiliated investments during the period ended June 30, 2020 are as follows:
Value ($) at 12/31/2019 | Purchases Cost ($) | Sales Proceeds ($) | Net Realized Gain/ (Loss) ($) | Net Change in Unrealized Appreciation (Depreciation) ($) | Income ($) | Capital Gain Distributions ($) | Number of Shares at 6/30/2020 | Value ($) at 6/30/2020 | ||||||||||||||||||||||||
Securities Lending Collateral 6.6% |
| |||||||||||||||||||||||||||||||
DWS Government & Agency Securities Portfolio “DWS Government Cash Institutional Shares”, 0.05% (d) (e) |
| |||||||||||||||||||||||||||||||
1,799,761 | 2,300,201 | (f) | — | — | — | 17,293 | — | 4,099,962 | 4,099,962 | |||||||||||||||||||||||
Cash Equivalents 6.1% |
| |||||||||||||||||||||||||||||||
DWS Central Cash Management Government Fund, 0.12% (d) |
| |||||||||||||||||||||||||||||||
3,272,911 | 4,120,045 | 3,598,009 | — | — | 13,019 | — | 3,794,947 | 3,794,947 | ||||||||||||||||||||||||
5,072,672 | 6,420,246 | 3,598,009 | — | — | 30,312 | — | 7,894,909 | 7,894,909 |
* | Non-income producing security. |
(a) | Listed on the NASDAQ Stock Market, Inc. |
(b) | All or a portion of these securities were on loan. In addition, “Other Assets and Liabilities, Net” may include pending sales that are also on loan. The value of securities loaned at June 30, 2020 amounted to $4,214,132, which is 6.8% of net assets. |
(c) | Investment was valued using significant unobservable inputs. |
(d) | Affiliated fund managed by DWS Investment Management Americas, Inc. The rate shown is the annualized seven-day yield at period end. |
The accompanying notes are an integral part of the financial statements.
6 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
(e) | Represents cash collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates. In addition, the Fund held non-cash U.S. Treasury securities collateral having a value of $215,516. |
(f) | Represents the net increase (purchase cost) or decrease (sales proceeds) in the amount invested in cash collateral for the period ended June 30, 2020. |
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.
ADR: American Depositary Receipt
REIT: Real Estate Investment Trust
Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
The following is a summary of the inputs used as of June 30, 2020 in valuing the Fund’s investments. For information on the Fund’s policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | ||||||||||||||||
Austria | $ | — | $ | 924,357 | $ | — | $ | 924,357 | ||||||||
Bermuda | 465,667 | — | — | 465,667 | ||||||||||||
Canada | 1,834,409 | — | — | 1,834,409 | ||||||||||||
France | — | 944,870 | — | 944,870 | ||||||||||||
Germany | — | 2,309,441 | — | 2,309,441 | ||||||||||||
Hong Kong | — | 473,942 | — | 473,942 | ||||||||||||
India | 428,019 | — | — | 428,019 | ||||||||||||
Ireland | 174,391 | 676,635 | — | 851,026 | ||||||||||||
Italy | — | 1,466,016 | — | 1,466,016 | ||||||||||||
Japan | — | 6,387,920 | — | 6,387,920 | ||||||||||||
Korea | — | 396,962 | — | 396,962 | ||||||||||||
Luxembourg | — | 1,153,406 | — | 1,153,406 | ||||||||||||
Spain | — | 738,340 | — | 738,340 | ||||||||||||
Sweden | — | 827,407 | — | 827,407 | ||||||||||||
Switzerland | — | 269,617 | — | 269,617 | ||||||||||||
United Kingdom | — | 3,007,021 | — | 3,007,021 | ||||||||||||
United States | 34,202,687 | — | — | 34,202,687 | ||||||||||||
Convertible Preferred Stocks | — | — | 389,603 | 389,603 | ||||||||||||
Exchange-Traded Funds | 973,337 | — | — | 973,337 | ||||||||||||
Short-Term Investments (g) | 7,894,909 | — | — | 7,894,909 | ||||||||||||
Total | $ | 45,973,419 | $ | 19,575,934 | $ | 389,603 | $ | 65,938,956 |
(g) | See Investment Portfolio for additional detailed categorizations. |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 7 |
Statement of Assets and Liabilities
as of June 30, 2020 (Unaudited) | ||||
Assets | ||||
Investments in non-affiliated securities, at value (cost $48,680,959) including — $4,214,132 of securities loaned | $ | 58,044,047 | ||
Investment in DWS Government & Agency Securities Portfolio (cost $4,099,962)* | 4,099,962 | |||
Investment in DWS Central Cash Management Government Fund (cost $3,794,947) | 3,794,947 | |||
Foreign currency, at value (cost $124,007) | 123,904 | |||
Receivable for Fund shares sold | 1,261 | |||
Dividends receivable | 44,668 | |||
Interest receivable | 2,200 | |||
Foreign taxes recoverable | 20,381 | |||
Other assets | 1,001 | |||
Total assets | 66,132,371 | |||
Liabilities | ||||
Payable upon return of securities loaned | 4,099,962 | |||
Payable for Fund shares redeemed | 71,187 | |||
Accrued management fee | 31,609 | |||
Accrued Trustees’ fees | 1,477 | |||
Other accrued expenses and payables | 57,694 | |||
Total liabilities | 4,261,929 | |||
Net assets, at value | $ | 61,870,442 | ||
Net Assets Consist of | ||||
Distributable earnings (loss) | 7,572,815 | |||
Paid-in capital | 54,297,627 | |||
Net assets, at value | $ | 61,870,442 | ||
Net Asset Value | ||||
Class A | ||||
Net Asset Value, offering and redemption price per share ($59,811,087 ÷ 6,643,296 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 9.00 | ||
Class B | ||||
Net Asset Value, offering and redemption price per share ($2,059,355 ÷ 238,599 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) | $ | 8.63 |
* | Represents collateral on securities loaned. In addition, the Fund held non-cash collateral having a value of $215,516. |
for the six months ended June 30, 2020 (Unaudited) |
| |||
Investment Income | ||||
Income: | ||||
Dividends (net of foreign taxes withheld of $11,723) | $ | 365,328 | ||
Income distributions — DWS Central Cash Management Government Fund | 13,019 | |||
Securities lending income, net of borrower rebates | 17,293 | |||
Total income | 395,640 | |||
Expenses: | ||||
Management fee | 245,742 | |||
Administration fee | 30,150 | |||
Services to shareholders | 2,415 | |||
Recordkeeping fee (Class B) | 302 | |||
Distribution service fee (Class B) | 2,480 | |||
Custodian fee | 3,132 | |||
Professional fees | 32,458 | |||
Reports to shareholders | 18,054 | |||
Trustees’ fees and expenses | 2,520 | |||
Other | 9,158 | |||
Total expenses before expense reductions | 346,411 | |||
Expense reductions | (94,820 | ) | ||
Total expenses after expense reductions | 251,591 | |||
Net investment income | 144,049 | |||
Realized and Unrealized gain (loss) | ||||
Net realized gain (loss) from: | ||||
Investments | (828,539 | ) | ||
Foreign currency | (3,215 | ) | ||
�� | (831,754 | ) | ||
Change in net unrealized appreciation (depreciation) on: | ||||
Investments | (7,488,632 | ) | ||
Foreign currency | (1,540 | ) | ||
(7,490,172 | ) | |||
Net gain (loss) | (8,321,926 | ) | ||
Net increase (decrease) in net assets resulting from operations | $ | (8,177,877) |
The accompanying notes are an integral part of the financial statements.
8 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
Statements of Changes in Net Assets
Six Months Ended June 30, 2020 | Year Ended December 31, | |||||||
Increase (Decrease) in Net Assets | (Unaudited) | 2019 | ||||||
Operations: | ||||||||
Net investment income (loss) | $ | 144,049 | $ | 378,623 | ||||
Net realized gain (loss) | (831,754 | ) | (695,460 | ) | ||||
Change in net unrealized appreciation (depreciation) | (7,490,172 | ) | 13,801,763 | |||||
Net increase (decrease) in net assets resulting from operations | (8,177,877 | ) | 13,484,926 | |||||
Distributions to shareholders: | ||||||||
Class A | (509,172 | ) | (3,709,915 | ) | ||||
Class B | (12,523 | ) | (121,306 | ) | ||||
Total distributions | (521,695 | ) | (3,831,221 | ) | ||||
Fund share transactions: | ||||||||
Class A | ||||||||
Proceeds from shares sold | 1,429,796 | 2,668,513 | ||||||
Reinvestment of distributions | 509,172 | 3,709,915 | ||||||
Payments for shares redeemed | (4,465,175 | ) | (8,101,927 | ) | ||||
Net increase (decrease) in net assets from Class A share transactions | (2,526,207 | ) | (1,723,499 | ) | ||||
Class B | ||||||||
Proceeds from shares sold | 80,774 | 254,888 | ||||||
Reinvestment of distributions | 12,523 | 121,306 | ||||||
Payments for shares redeemed | (115,101 | ) | (426,683 | ) | ||||
Net increase (decrease) in net assets from Class B share transactions | (21,804 | ) | (50,489 | ) | ||||
Increase (decrease) in net assets | (11,247,583 | ) | 7,879,717 | |||||
Net assets at beginning of period | 73,118,025 | 65,238,308 | ||||||
Net assets at end of period | $ | 61,870,442 | $ | 73,118,025 | ||||
Other Information | ||||||||
Class A | ||||||||
Shares outstanding at beginning of period | 6,910,961 | 7,090,435 | ||||||
Shares sold | 167,953 | 278,893 | ||||||
Shares issued to shareholders in reinvestment of distributions | 66,298 | 383,652 | ||||||
Shares redeemed | (501,916 | ) | (842,019 | ) | ||||
Net increase (decrease) in Class A shares | (267,665 | ) | (179,474 | ) | ||||
Shares outstanding at end of period | 6,643,296 | 6,910,961 | ||||||
Class B | ||||||||
Shares outstanding at beginning of period | 238,523 | 244,229 | ||||||
Shares sold | 11,349 | 27,955 | ||||||
Shares issued to shareholders in reinvestment of distributions | 1,701 | 13,086 | ||||||
Shares redeemed | (12,974 | ) | (46,747 | ) | ||||
Net increase (decrease) in Class B shares | 76 | (5,706 | ) | |||||
Shares outstanding at end of period | 238,599 | 238,523 |
The accompanying notes are an integral part of the financial statements.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 9 |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class A | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.24 | $8.91 | $12.90 | $11.78 | $13.17 | $14.61 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)a | .02 | .05 | .02 | .00 | *** | .03 | .06 | |||||||||||||||||
Net realized and unrealized gain (loss) | (1.18 | ) | 1.82 | (2.32 | ) | 2.21 | .15 | .21 | ||||||||||||||||
Total from investment operations | (1.16 | ) | 1.87 | (2.30 | ) | 2.21 | .18 | .27 | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.08 | ) | — | (.04 | ) | — | (.05 | ) | (.14 | ) | ||||||||||||||
Net realized gains | — | (.54 | ) | (1.65 | ) | (1.09 | ) | (1.52 | ) | (1.57 | ) | |||||||||||||
Total distributions | (.08 | ) | (.54 | ) | (1.69 | ) | (1.09 | ) | (1.57 | ) | (1.71 | ) | ||||||||||||
Net asset value, end of period | $9.00 | $10.24 | $8.91 | $12.90 | $11.78 | $13.17 | ||||||||||||||||||
Total Return (%)b | (11.24 | )** | 21.29 | (20.51 | ) | 20.02 | 1.57 | 1.16 | ||||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 60 | 71 | 63 | 85 | 89 | 104 | ||||||||||||||||||
Ratio of expenses before expense reductions (%)c | 1.12 | * | 1.11 | 1.10 | 1.15 | 1.17 | 1.12 | |||||||||||||||||
Ratio of expenses after expense reductions (%)c | .81 | * | .82 | .78 | .94 | 1.02 | .99 | |||||||||||||||||
Ratio of net investment income (loss) (%) | .48 | * | .54 | .21 | .03 | .22 | .41 | |||||||||||||||||
Portfolio turnover rate (%) | 3 | ** | 23 | 32 | 42 | 41 | 27 |
a | Based on average shares outstanding during the period. |
b | Total return would have been lower had certain expenses not been reduced. |
c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
*** | Amount is less than $.005. |
Six Months Ended 6/30/20 | Years Ended December 31, | |||||||||||||||||||||||
Class B | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||
Selected Per Share Data | ||||||||||||||||||||||||
Net asset value, beginning of period | $9.81 | $8.57 | $12.47 | $11.45 | $12.85 | $14.29 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)a | .01 | .03 | (.01 | ) | (.03 | ) | (.03 | ) | .02 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.14 | ) | 1.75 | (2.24 | ) | 2.14 | .17 | .21 | ||||||||||||||||
Total from investment operations | (1.13 | ) | 1.78 | (2.25 | ) | 2.11 | .14 | .23 | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (.05 | ) | — | — | — | (.02 | ) | (.10 | ) | |||||||||||||||
Net realized gains | — | (.54 | ) | (1.65 | ) | (1.09 | ) | (1.52 | ) | (1.57 | ) | |||||||||||||
Total distributions | (.05 | ) | (.54 | ) | (1.65 | ) | (1.09 | ) | (1.54 | ) | (1.67 | ) | ||||||||||||
Net asset value, end of period | $8.63 | $9.81 | $8.57 | $12.47 | $11.45 | $12.85 | ||||||||||||||||||
Total Return (%)b | (11.40 | )** | 21.08 | (20.74 | ) | 19.60 | 1.34 | .86 | ||||||||||||||||
Ratios to Average Net Assets and Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period ($ millions) | 2 | 2 | 2 | 3 | 3 | 3 | ||||||||||||||||||
Ratio of expenses before expense reductions (%)c | 1.41 | * | 1.40 | 1.39 | 1.44 | 1.47 | 1.41 | |||||||||||||||||
Ratio of expenses after expense reductions (%)c | 1.09 | * | 1.09 | 1.06 | 1.22 | 1.30 | 1.24 | |||||||||||||||||
Ratio of net investment income (loss) (%) | .20 | * | .27 | (.08 | ) | (.26 | ) | (.23 | ) | .15 | ||||||||||||||
Portfolio turnover rate (%) | 3 | ** | 23 | 32 | 42 | 41 | 27 |
a | Based on average shares outstanding during the period. |
b | Total return would have been lower had certain expenses not been reduced. |
c | Expense ratio does not reflect charges and fees associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. |
* | Annualized |
** | Not annualized |
The accompanying notes are an integral part of the financial statements.
10 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
Notes to Financial Statements | (Unaudited) |
A. Organization and Significant Accounting Policies
Deutsche DWS Variable Series I (the “Trust“) 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 Trust consists of five diversified funds: DWS Bond VIP, DWS Capital Growth VIP, DWS Core Equity VIP, DWS CROCI® International VIP and DWS Global Small Cap VIP (individually or collectively hereinafter referred to as a “Fund“ or the “Funds“). These financial statements report on DWS Global Small Cap VIP. The Trust is intended to be the underlying investment vehicle for variable annuity contracts and variable life insurance policies to be offered by the separate accounts of certain life insurance companies (“Participating Insurance Companies“).
Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Class B shares are subject to Rule 12b-1 distribution fees under the 1940 Act and recordkeeping fees equal to an annual rate of 0.25% and up to 0.15%, respectively, of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class (including the applicable 12b-1 distribution fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares 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 (“U.S. GAAP”) which require the use of management estimates. Actual results could differ from those estimates. The Fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of U.S. GAAP. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. 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. Equity securities are generally categorized as Level 1 securities. For certain 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, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.
Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.
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 and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 11 |
purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Disclosure about the classification of fair value measurements is included in a table following the Fund’s Investment Portfolio.
Securities Lending. Brown Brothers Harriman & Co., as lending agent, lends securities of the Fund to certain financial institutions under the terms of its securities lending agreement. During the term of the loans, the Fund continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash and/or U.S. Treasury Securities having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the securities lending agreement. During the six months ended June 30, 2020, the Fund invested the cash collateral into a joint trading account in DWS Government & Agency Securities Portfolio, an affiliated money market fund managed by DWS Investment Management Americas, Inc. DWS Investment Management Americas, Inc. receives a management/administration fee (0.11% annualized effective rate as of June 30, 2020) on the cash collateral invested in DWS Government & Agency Securities Portfolio. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan at any time, and the borrower, after notice, is required to return borrowed securities within a standard time period. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.
As of June 30, 2020, the Fund had securities on loan, which were classified as common stock and Exchange-Traded Funds in the Investment Portfolio. The value of the related collateral exceeded the value of the securities loaned at period end.
Remaining Contractual Maturity of the Agreements as of June 30, 2020 | ||||||||||||||||||||
Overnight and Continuous | <30 days | Between 30 & 90 days | >90 days | Total | ||||||||||||||||
Securities Lending Transactions | ||||||||||||||||||||
Common Stocks | $ | 3,134,643 | $ | — | $ | — | $ | 215,516 | $ | 3,350,159 | ||||||||||
Exchange-Traded Funds | $ | 965,319 | $ | — | $ | — | $ | — | $ | 965,319 | ||||||||||
Total Borrowings | $ | 4,099,962 | $ | — | $ | — | $ | 215,516 | $ | 4,315,478 | ||||||||||
Gross amount of recognized liabilities for securities lending transactions: |
| $ | 4,315,478 |
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The 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.
Taxes. The Fund is treated as a separate taxpayer as provided for in the Internal Revenue Code, as amended. It is the Fund’s policy 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 the separate accounts of the Participating Insurance Companies which hold its shares.
Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated, a portion of which may be
12 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
recoverable. Based upon the current interpretation of the tax rules and regulations, estimated tax liabilities and recoveries on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.
At December 31, 2019, the Fund had a net tax basis short-term capital loss carryforward of approximately $763,000 which may be applied against realized net taxable capital gains indefinitely.
At June 30, 2020, the aggregate cost of investments for federal income tax purposes was $56,896,484. The net unrealized appreciation for all investments based on tax cost was $9,042,472. This consisted of aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost of $17,670,259 and aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value of $8,627,787.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2019 and has determined that no provision for income tax and/or uncertain tax positions is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.
The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to income received from passive foreign investment companies 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.
The tax character of current year distributions will be determined at the end of the current fiscal year.
Expenses. Expenses of the Trust arising in connection with a specific Fund are allocated to that Fund. Other Trust expenses which cannot be directly attributed to a Fund are apportioned among the Funds in the Trust based upon the relative net assets or other appropriate measures.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis net of foreign withholding taxes. 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. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.
B. Purchases and Sales of Securities
During the six months ended June 30, 2020, purchases and sales of investment securities (excluding short-term investments) aggregated $1,615,998 and $4,992,940 respectively.
C. Related Parties
Management Agreement. Under the Investment Management Agreement with DWS Investment Management Americas, Inc. (“DIMA“ or the “Advisor“), an indirect, wholly owned subsidiary of DWS Group GmbH & Co. KGaA (“DWS Group”), 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.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 13 |
Pursuant to the Investment Management Agreement with the Advisor, the Fund pays the Advisor an annual fee based on its average daily net assets, computed and accrued daily and payable monthly at the annual rate (exclusive of any applicable waivers/reimbursements) of 0.80%.
For the period from January 1, 2020 through April 30, 2021, the Advisor has contractually agreed to waive all or a portion of its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the total annual operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:
Class A | .81 | % | ||
Class B | 1.09 | % |
For the six months ended June 30, 2020, fees waived and/or expenses reimbursed for each class are as follows:
Class A | $ | 91,688 | ||
Class B | 3,132 | |||
$ | 94,820 |
Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. Prior to March 1. 2020, for all services provided under the Administrative Services Agreement, the Fund paid 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. Effective March 1, 2020, for all services provided under the Administrative Services Agreement, the Fund pays the Advisor an annual Administration Fee of 0.097% of the Fund’s average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2020, the Administration Fee was $30,150, of which $4,963 is unpaid.
Service Provider Fees. DWS Service Company (“DSC“), 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 DSC and DST Systems, Inc. (“DST“), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended June 30, 2020, the amounts charged to the Fund by DSC were as follows:
Services to Shareholders | Total Aggregated | Unpaid at June 30, 2020 | ||||||
Class A | $ | 257 | $ | 83 | ||||
Class B | 80 | 26 | ||||||
$ | 337 | $ | 109 |
Distribution Service Agreement. DWS Distributors, Inc. (“DDI“), also an affiliate of the Advisor, is the Trust’s Distributor. In accordance with the Master Distribution Plan, DDI receives 12b-1 fees of up to 0.25% of the average daily net assets of Class B shares. Pursuant to the Master Distribution Plan, DDI remits these fees to the Participating Insurance Companies for various costs incurred or paid by these companies in connection with marketing and distribution of Class B shares. For the six months ended June 30, 2020, the Distribution Service Fee aggregated $2,480, of which $424 is unpaid.
Typesetting and Filing Service Fees. Under an agreement with the Fund, DIMA is compensated for providing certain pre-press and regulatory filing services to the Fund. For the six months ended
June 30, 2020, the amount charged to the Fund by DIMA included in the Statement of Operations under “Reports to shareholders“ aggregated $4,884, of which $2,278 is unpaid.
Trustees’ Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and to each committee Chairperson.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in DWS Central Cash Management Government Fund and DWS ESG Liquidity Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the 1940 Act, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. DWS Central Cash Management Government Fund seeks to maintain a stable net asset value, and DWS ESG Liquidity Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. DWS Central Cash Management Government Fund does not pay the Advisor an investment management fee. To the extent
14 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
that DWS ESG Liquidity Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund’s assets invested in DWS ESG Liquidity Fund.
D. Ownership of the Fund
At June 30, 2020, three participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 33%, 26% and 14%, respectively. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 74% and 16%, respectively.
E. Line of Credit
The Fund and other affiliated funds (the “Participants”) share in a $350 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee, which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if the one-month LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2020.
F. Other — COVID-19 Pandemic
A novel strain of coronavirus (COVID-19) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. The situation is evolving with various cities and countries around the world responding in different ways to address the pandemic. There are direct and indirect economic effects developing for various industries and individual companies throughout the world. The recent pandemic spread of the novel coronavirus and related geopolitical events could lead to increased financial market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments. A prolonged disruption may result in the Fund and its service providers experiencing operational difficulties in implementing their business continuity plans. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund’s accounting and financial reporting.
G. Other — Deutsche Bank AG Consent Order
On June 17, 2020, Deutsche Bank AG (“DB”), an affiliate of DWS Group, resolved with the Commodity Futures Trading Commission (“CFTC”) charges stemming from alleged violations of various swap data reporting requirements and corresponding supervision and other failures. The matter, which was resolved by the issuance of a federal court order (“Consent Order”), involved unintentional conduct that resulted from a system outage that prevented DB from reporting data in accordance with applicable CFTC requirements for a period of five days in April 2016.
The matter giving rise to the Consent Order did not arise out of any investment advisory, fund management activities or distribution activities of DIMA, DWS Distributors, Inc. or their advisory affiliates (the “DWS Service Providers”). DWS Group, of which the DWS Service Providers are wholly-owned subsidiaries, is a separate publicly traded company but continues to be an affiliate of DB due to, among other things, DB’s 79.49% ownership interest in DWS Group. Under the provisions of the Investment Company Act of 1940, as a result of the Consent Order, the DWS Service Providers would not be eligible to continue to provide investment advisory and underwriting services to the Fund absent an order from the Securities and Exchange Commission (the “SEC”). DB and the DWS Service Providers are seeking temporary and permanent orders from the SEC to permit the DWS Service Providers to continue to provide investment advisory and underwriting services to the Fund and other registered investment companies notwithstanding the Consent Order. While there can be no assurance that the requested exemptive orders will be granted, the SEC has granted this type of relief in the past. Consistent with their fiduciary and other relationships with the Fund, and in accordance with the desire of the Board of the Fund, the DWS Service Providers continue to provide investment advisory and distribution services to the Fund. Subject to the receipt of the temporary and permanent exemptive orders, the DWS Service Providers have informed the Fund that they do not believe the Consent Order will have any material impact on the Fund or the ability of the Service Providers to provide services for the Fund.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 15 |
Information About Your Fund’s Expenses | (Unaudited) |
As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, 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 (January 1, 2020 to June 30, 2020).
The tables illustrate your Fund’s expenses in two ways:
– | Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses (but not transaction costs) paid on a $1,000 investment in the Fund using the Fund’s actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid per $1,000” line under the share class you hold. |
– | Hypothetical 5% Fund Return. This helps you to compare your Fund’s ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund’s actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical Fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. |
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The “Expenses Paid per $1,000” line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
Expenses and Value of a $1,000 Investment for the six months ended June 30, 2020 | ||||||||
Actual Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 887.60 | $ | 886.00 | ||||
Expenses Paid per $1,000* | $ | 3.80 | $ | 5.11 | ||||
Hypothetical 5% Fund Return | Class A | Class B | ||||||
Beginning Account Value 1/1/20 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 6/30/20 | $ | 1,020.84 | $ | 1,019.44 | ||||
Expenses Paid per $1,000* | $ | 4.07 | $ | 5.47 |
* | 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 182 (the number of days in the most recent six-month period), then divided by 366. |
Annualized Expense Ratios | Class A | Class B | ||||||
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | .81 | % | 1.09 | % |
For more information, please refer to the Fund’s prospectus.
These tables do not reflect charges and fees (“contract charges”) associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.
For an analysis of the fees associated with an investment in the Fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at dws.com/calculators.
16 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
In accordance with Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act of 1940 (the “1940 Act”), your Fund has adopted a liquidity risk management program (the “Program”), and the Board has designated DWS Investment Management Americas, Inc. (“DIMA”) as Program administrator. The Program is designed to assess and manage your Fund’s liquidity risk (the risk that the Fund would be unable to meet requests to redeem shares of the Fund without significant dilution of remaining investors’ interests in the Fund). DIMA has designated a committee (the “Committee”) composed of personnel from multiple departments within DIMA and its affiliates that is responsible for the implementation and ongoing administration of the Program, which includes assessing the Fund’s liquidity risk under both normal and reasonably foreseeable stressed conditions. Under the Program, every investment held by a Fund is classified on a daily basis into one of four liquidity categories based on estimations of the investment’s ability to be sold during designated timeframes in current market conditions without significantly changing the investment’s market value.
In February 2020, as required by the Program and the Liquidity Rule, DIMA provided the Board with an annual written report (the “Report”) addressing the operation of the Program and assessing the adequacy and effectiveness of its implementation during the period from December 1, 2018 through November 30, 2019 (the “Reporting Period”). During the Reporting Period, your Fund was primarily invested in highly liquid investments (investments that the Fund anticipates can be converted to cash within three business days or less in current market conditions without significantly changing their market value). As a result, your Fund is not required to adopt, and has not adopted, a “Highly Liquid Investment Minimum” as defined in the Liquidity Rule. During the Reporting Period, the Fund did not approach the 15% limit imposed by the Liquidity Rule on holdings in illiquid investments (investments that cannot be sold or disposed of in seven days or less in current market conditions without the sale of the investment significantly changing the market value of the investment). Your Fund did not experience any issues meeting investor redemptions at any time during the Reporting Period. In the Report, DIMA stated that it believes the Program has operated adequately and effectively to manage the Fund’s liquidity risk during the Reporting Period. DIMA also reported on a material change made to the Program in May 2019 to address Securities and Exchange Commission guidance relating to extended foreign market holidays.
The Trust’s policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 are available on our Web site — dws.com/en-us/resources/proxy-voting — or on the SEC’s Web site — sec.gov. To obtain a written copy of the Trust’s policies and procedures without charge, upon request, call us toll free at (800) 728-3337.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 17 |
Advisory Agreement Board Considerations and Fee Evaluation
The Board of Trustees (hereinafter referred to as the “Board” or “Trustees”) approved the renewal of DWS Global Small Cap VIP’s (the “Fund”) investment management agreement (the “Agreement”) with DWS Investment Management Americas, Inc. (“DIMA”) in September 2019.
In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:
– | During the entire process, all of the Fund’s Trustees were independent of DIMA and its affiliates (the “Independent Trustees”). |
– | The Board met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board���s Contract Committee reviewed extensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund’s performance, fees and expenses, and profitability from a fee consultant retained by the Fund’s Independent Trustees (the “Fee Consultant”). Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee’s findings and recommendations. |
– | The Board also received extensive information throughout the year regarding performance of the Fund. |
– | The Independent Trustees regularly met privately with counsel to discuss contract review and other matters. In addition, the Independent Trustees were advised by the Fee Consultant in the course of their review of the Fund’s contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations. |
– | In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund’s Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements. |
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA is part of DWS Group GmbH & Co. KGaA (“DWS Group”). DWS Group is a global asset management business that offers a wide range of investing expertise and resources, including research capabilities in many countries throughout the world. In 2018, approximately 20% of DWS Group’s shares were sold in an initial public offering, with Deutsche Bank AG owning the remaining shares.
As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund’s performance. In many cases, this led to the negotiation and implementation of expense caps. As part of these negotiations, the Board indicated that it would consider relaxing these caps in future years following sustained improvements in performance, among other considerations.
While shareholders may focus primarily on fund performance and fees, the Fund’s Board considers these and many other factors, including the quality and integrity of DIMA’s personnel and administrative support services provided by DIMA, such as back-office operations, fund valuations, and compliance policies and procedures.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel and the resources made available to such personnel. The Board reviewed the Fund’s performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market index(es) and a peer universe compiled using information supplied by Morningstar Direct (“Morningstar”), an independent fund data service. The Board also noted that it has put into place a process of identifying “Funds in Review” (e.g., funds performing poorly relative to a peer universe), and receives additional reporting from DIMA regarding such funds and, where appropriate, DIMA’s plans to address underperformance. The Board
18 | | | Deutsche DWS Variable Series I — DWS Global Small Cap VIP |
believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that, for the one-, three- and five-year periods ended December 31, 2018, the Fund’s performance (Class A shares) was in the 4th quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three-, and five-year periods ended December 31, 2018. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board noted changes in the portfolio management team, effective April 19, 2018. The Board recognized the efforts by DIMA in recent years to enhance its investment platform and improve long-term performance across the DWS fund complex.
Fees and Expenses. The Board considered the Fund’s investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund’s administrative services agreement, were higher than the median (4th quartile) of the applicable Broadridge peer group (based on Broadridge data provided as of December 31, 2018). The Board noted that, effective October 1, 2017, in connection with the 2017 contract renewal process, DIMA agreed to reduce the Fund’s contractual management fee rate to an annual rate of 0.80%. The Board noted that the Fund’s Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Broadridge expense universe (based on Broadridge data provided as of December 31, 2018, and analyzing Broadridge expense universe Class A (net) expenses less any applicable 12b-1 fees) (“Broadridge Universe Expenses”). The Board also reviewed data comparing each other operational share class’s total (net) operating expenses to the applicable Broadridge Universe Expenses. The Board noted that the expense limitations agreed to by DIMA were expected to help the Fund’s total (net) operating expenses remain competitive. The Board considered the Fund’s management fee rate as compared to fees charged by DIMA to a comparable DWS U.S. registered fund (“DWS Funds”) and considered differences between the Fund and the comparable DWS Fund. The information requested by the Board as part of its review of fees and expenses also included information about institutional accounts (including any sub-advised funds and accounts) and funds offered primarily to European investors (“DWS Europe Funds”) managed by DWS Group. The Board noted that DIMA indicated that DWS Group manages an institutional account comparable to the Fund, but that DWS Group does not manage any comparable DWS Europe Funds. The Board took note of the differences in services provided to DWS Funds as compared to institutional accounts and that such differences made comparison difficult.
On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.
Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs to DIMA, and pre-tax profits realized by DIMA, from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DIMA and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA’s methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed certain publicly available information regarding the profitability of certain similar investment management firms. The Board noted that, while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates’ overall profitability with respect to the DWS Funds (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of most comparable firms for which such data was available.
Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. In this regard, the Board observed that while the Fund’s current investment management fee schedule does not include breakpoints, the Fund’s fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.
Deutsche DWS Variable Series I — DWS Global Small Cap VIP | | | 19 |
Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental or “fall-out” benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund, any fees received by an affiliate of DIMA for transfer agency services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities. In addition, the Board considered the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board considered these benefits in reaching its conclusion that the Fund’s management fees were reasonable.
Compliance. The Board considered the significant attention and resources dedicated by DIMA to its compliance processes in recent years. The Board noted in particular (i) the experience, seniority and time commitment of the individuals serving as DIMA’s and the Fund’s chief compliance officers and (ii) the substantial commitment of resources by DIMA and its affiliates to compliance matters, including the retention of compliance personnel.
Based on all of the information considered and the conclusions reached, the Board determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and counsel present. It is possible that individual Independent Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.
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Notes
Notes
Notes
VS1glosc-3 (R-028377-9 8/20) |
ITEM 2. | CODE OF ETHICS | |
Not applicable. | ||
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT | |
Not applicable | ||
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | |
Not applicable | ||
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 | |
There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. 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 Keith R. Fox, DWS Funds Board Chair, c/o Thomas R. Hiller, Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199-3600. | ||
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 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. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. | |
Not applicable | ||
ITEM 13. | EXHIBITS | |
(a)(1) | Not applicable | |
(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. |
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: | Deutsche DWS Variable Series I |
By: | /s/Hepsen Uzcan Hepsen Uzcan President |
Date: | 8/14/2020 |
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.
By: | /s/Hepsen Uzcan Hepsen Uzcan President |
Date: | 8/14/2020 |
By: | /s/Diane Kenneally Diane Kenneally Chief Financial Officer and Treasurer |
Date: | 8/14/2020 |