UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number 811-21172
DWS RREEF Real Estate Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue
New York, NY 10154-0004
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (201) 593-6408
Paul Schubert
100 Plaza One
Jersey City, NJ 07311
(Name and Address of Agent for Service)
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Date of fiscal year end:
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12/31
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Date of reporting period:
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12/31/2010
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ITEM 1.
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REPORT TO STOCKHOLDERS
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DECEMBER 31, 2010
Annual Report
to Stockholders
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DWS RREEF Real Estate Fund, Inc.
Ticker Symbol: SRQ
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Contents
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5 Consolidated Investment Portfolio
7 Consolidated Statement of Assets and Liabilities — Liquidation Basis
8 Consolidated Statement of Operations — Liquidation Basis
10 Consolidated Statement of Cash Flows— Liquidation Basis
11 Consolidated Statement of Changes in Net Assets
12 Consolidated Financial Highlights
14 Notes to Consolidated Financial Statements
23 Report of Independent Registered Public Accounting Firm
24 Tax Information
25 Investment Management Agreement Approval
27 Board Members and Officers
32 Additional Information
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Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are traded in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the fund's shares is determined by a number of factors, several of which are beyond the control of the fund. Therefore, the fund cannot predict whether its shares will trade at, below or above net asset value.
Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. There are special risks associated with an investment in real estate, including REITS. These risks include credit risk, interest rate fluctuations and the impact of varied economic conditions.
This report is sent to the stockholders of DWS RREEF Real Estate Fund, Inc. for their information. It is not a prospectus, circular, or representation intended for use in the purchase or sale of shares of the fund or of any securities mentioned in the report.
DWS Investments is part of Deutsche Bank's Asset Management division and, within the US, represents the retail asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWS Trust Company.
NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
(Ratios are shown as a percentage of Net Assets)
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Shares
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Value ($)
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|||||||
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Units 98.8%
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||||||||
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Hotels
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||||||||
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Canyon Ranch Holdings LLC (a) (Cost $5,760,000)*
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230,400 | 1,555,200 | ||||||
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% of Net Assets
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Value ($)
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|||||||
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Total Consolidated Investment Portfolio (Cost $5,760,000)+
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98.8 | 1,555,200 | ||||||
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Other Assets and Liabilities, Net
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1.2 | 19,262 | ||||||
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Net Assets Applicable to Common Shareholders
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100.0 | 1,574,462 | ||||||
* Non-income producing security.
+ The cost for federal income tax purposes was $5,760,000. At December 31, 2010, net unrealized depreciation for securities based on tax cost was $4,204,800. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $0 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,204,800.
(a) Restricted securities are subject to legal or contractual restrictions on resale ("restricted securities") and have not been registered with the Securities and Exchange Commission under the Securities Act of 1933. The Fund may be unable to sell a restricted security and it may be more difficult to determine a market value for a restricted security. Moreover, if adverse market conditions were to develop during the period between the Fund's decision to sell a restricted security and the point at which the Fund is permitted or able to sell such security, the Fund might obtain a price less favorable than the price that prevailed when it decided to sell. This investment practice, therefore, could have the effect of increasing the level of illiquidity of the Fund. The future value of this security is uncertain and there may be changes in the estimated value of this security.
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Restricted Securities
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Acquisition Date
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Acquisition Cost ($)
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Value ($)
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Value as % of Net Assets
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|||||||||
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Canyon Ranch Holdings LLC
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January 2005
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5,760,000 | 1,555,200 | 98.8 | |||||||||
Fair Value Measurements
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2010 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Consolidated Financial Statements.
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Assets
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Level 1
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Level 2
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Level 3
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Total
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Units
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$ | — | $ | — | $ | 1,555,200 | $ | 1,555,200 | ||||||||
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Total
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$ | — | $ | — | $ | 1,555,200 | $ | 1,555,200 | ||||||||
There have been no transfers in and out of Level 1 and level 2 fair value measurements during the year ended December 31, 2010.
Level 3 Reconciliation
The following is a reconciliation of the Fund's Level 3 investments for which significant unobservable inputs were used in determining value:
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Units
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||||
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Balance as of December 31, 2009
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$ | 744,192 | ||
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Realized gain (loss)
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— | |||
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Change in unrealized appreciation (depreciation)
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811,008 | |||
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Amortization premium/discount
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— | |||
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Net purchases (sales)
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— | |||
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Transfers into Level 3
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— | |||
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Transfers (out) of Level 3
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— | |||
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Balance as of December 31, 2010
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$ | 1,555,200 | ||
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Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2010
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$ | 811,008 | ||
The accompanying notes are an integral part of the consolidated financial statements.
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as of December 31, 2010
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||||
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Assets
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||||
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Investment, at value (cost $5,760,000)
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$ | 1,555,200 | ||
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Cash
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92,796 | |||
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Total assets
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1,647,996 | |||
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Liabilities
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||||
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Other accrued expenses and payables
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73,534 | |||
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Total liabilities
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73,534 | |||
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Net assets applicable to common shareholders, at value
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$ | 1,574,462 | ||
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Net Assets Applicable to Common Shareholders Consist of
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||||
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Net unrealized depreciation
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(4,204,800 | ) | ||
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Accumulated net realized gain (loss)
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(131,568,605 | ) | ||
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Cost of 434,160 shares held in Treasury
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(9,966,770 | ) | ||
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Paid-in capital
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147,314,637 | |||
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Net assets applicable to common shareholders, at value
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$ | 1,574,462 | ||
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Net Asset Value
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||||
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Net Asset Value per common share ($1,574,462 ÷ 15,715,597 shares of common stock outstanding, $.01 par value, 240,000,000 common shares authorized)
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$ | .10 | ||
The accompanying notes are an integral part of the consolidated financial statements.
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for the year ended December 31, 2010
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Investment Income
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||||
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Income:
Dividends
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$ | 906,386 | ||
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Income distributions — Central Cash Management Fund
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14,709 | |||
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Other
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21,053 | |||
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Total income
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942,148 | |||
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Expenses:
Management fee*
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227,873 | |||
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Administration fee
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12,000 | |||
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Services to shareholders
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10,850 | |||
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Custodian and accounting fees
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26,777 | |||
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Legal fees
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102,979 | |||
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Audit and tax fees
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22,354 | |||
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Directors' fees and expenses
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608 | |||
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Reports to shareholders
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14,777 | |||
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Stock exchange listing fee
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15,347 | |||
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Auction service fee
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19,938 | |||
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Total expenses
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453,503 | |||
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Net investment income
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488,645 | |||
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Realized and Unrealized Gain (Loss)
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Net realized gain (loss) from:
Investments
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17,860,104 | |||
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Capital gain dividends received
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249,518 | |||
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Interest rate swap contracts
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(1,909,349 | ) | ||
| 16,200,273 | ||||
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Changes in net unrealized appreciation (depreciation) on:
Investments
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(14,118,997 | ) | ||
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Interest rate swap contracts
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952,862 | |||
| (13,166,135 | ) | |||
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Net gain (loss)
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3,034,138 | |||
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Net increase (decrease) in net assets resulting from operations
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3,522,783 | |||
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Distributions to Preferred Shareholders
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(218,350 | ) | ||
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Net increase (decrease) in net assets, applicable to common shareholders
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$ | 3,304,433 | ||
* For the period January 1, 2010 through June 17, 2010. Commencing on June 18, 2010, the date of the Fund's first liquidation payment, the Fund is no longer assessed the management fee.
The accompanying notes are an integral part of the consolidated financial statements.
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for the year ended December 31, 2010
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Increase (Decrease) in Cash:
Cash Flows from Operating Activities
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Net increase (decrease) in net assets resulting from operations
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$ | 3,522,783 | ||
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Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:
Net purchases, sales and maturities of short-term investments
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2,358,309 | |||
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Proceeds from sales and maturities of long-term investments
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90,549,347 | |||
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(Increase) decrease in interest receivable
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325 | |||
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(Increase) decrease in dividends receivable
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475,566 | |||
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(Increase) decrease in other assets
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6,164 | |||
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(Increase) decrease in receivable for investments sold
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58,966 | |||
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Increase (decrease) in accrued expenses and payables
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(220,878 | ) | ||
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Change in net unrealized (appreciation) depreciation on investments
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14,118,997 | |||
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Change in unrealized (appreciation) depreciation on interest rate swap contracts
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(952,862 | ) | ||
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Net realized (gain) loss from investments
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(17,860,104 | ) | ||
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Cash provided (used) by operating activities
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$ | 92,056,613 | ||
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Cash Flows from Financing Activities
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Net increase (decrease) in cash overdraft
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$ | (11,483 | ) | |
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Redemption of Preferred Shares
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(22,000,000 | ) | ||
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Distributions paid
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(69,952,334 | ) | ||
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Cash provided (used) by financing activities
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(91,963,817 | ) | ||
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Increase (decrease) in cash
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92,796 | |||
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Cash at beginning of period
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— | |||
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Cash at end of period
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$ | 92,796 | ||
The accompanying notes are an integral part of the consolidated financial statements.
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Years Ended December 31,
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||||||||
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Increase (Decrease) in Net Assets
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2010 | a | 2009 | |||||
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Operations:
Net investment income
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$ | 488,645 | $ | 3,104,699 | ||||
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Net realized gain (loss)
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16,200,273 | (44,901,366 | ) | |||||
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Change in net unrealized appreciation (depreciation)
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(13,166,135 | ) | 65,784,854 | |||||
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Net increase (decrease) in net assets resulting from operations
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3,522,783 | 23,988,187 | ||||||
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Distributions to Preferred Shareholders
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(218,350 | ) | (674,220 | ) | ||||
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Net increase (decrease) in net assets, applicable to common shareholders
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3,304,433 | 23,313,967 | ||||||
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Distributions to common shareholders:
Net investment income
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(942,936 | ) | — | |||||
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Liquidation distribution
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(68,787,167 | ) | — | |||||
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Total distributions to common shareholders
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(69,730,103 | ) | — | |||||
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Increase (decrease) in net assets
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(66,425,670 | ) | 23,313,967 | |||||
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Net assets at beginning of period applicable to common shareholders
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68,000,132 | 44,686,165 | ||||||
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Net assets at end of period applicable to common shareholders (including undistributed net investment income of $0 and $1,312,750, respectively)
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$ | 1,574,462 | $ | 68,000,132 | ||||
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Other Information
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||||||||
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Common shares outstanding at beginning of period
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15,715,597 | 15,715,597 | ||||||
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Common shares outstanding at end of period
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15,715,597 | 15,715,597 | ||||||
a Liquidation basis
The accompanying notes are an integral part of the consolidated financial statements.
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Years Ended December 31,
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2010 | + | 2009 | 2008 | 2007 | 2006 | ||||||||||||||
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Selected Per Share Data Applicable to Common Shareholders
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||||||||||||||||||||
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Net asset value, beginning of period
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$ | 4.33 | $ | 2.84 | $ | 19.33 | $ | 29.11 | $ | 24.19 | ||||||||||
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Income (loss) from investment operations:
Net investment incomea
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.03 | .20 | 1.09 | 1.07 | 1.15 | |||||||||||||||
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Net realized and unrealized gain (loss)
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.19 | 1.33 | (14.06 | ) | (8.16 | ) | 7.42 | |||||||||||||
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Total from investment operations
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.22 | 1.53 | (12.97 | ) | (7.09 | ) | 8.57 | |||||||||||||
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Distributions to Preferred Shareholders from net investment income (common share equivalent)
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(.01 | ) | (.04 | ) | (.43 | ) | (.55 | ) | (.49 | ) | ||||||||||
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Net increase (decrease) in net assets resulting from operations applicable to common shareholders
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.21 | 1.49 | (13.40 | ) | (7.64 | ) | 8.08 | |||||||||||||
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Less distributions from:
Net investment income
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(.06 | ) | — | (.88 | ) | (1.86 | ) | (1.58 | ) | |||||||||||
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Net realized gains
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— | — | (1.35 | ) | (.32 | ) | (1.59 | ) | ||||||||||||
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Return of capital
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— | — | (.86 | ) | — | — | ||||||||||||||
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Liquidation distribution
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(4.38 | ) | — | — | — | — | ||||||||||||||
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Total distributions to common shareholders
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(4.44 | ) | — | (3.09 | ) | (2.18 | ) | (3.17 | ) | |||||||||||
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NAV accretion resulting from repurchases of shares at valuea
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— | — | — | .04 | .01 | |||||||||||||||
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Net asset value, end of period
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$ | .10 | $ | 4.33 | $ | 2.84 | $ | 19.33 | $ | 29.11 | ||||||||||
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Market price, end of period
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N/A | $ | 4.05 | $ | 1.95 | $ | 17.54 | $ | 25.21 | |||||||||||
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Total Return
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||||||||||||||||||||
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Based on net asset value (%)c
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4.83 | 52.46 | b | (81.47 | )b | (26.51 | )b | 36.79 | b | |||||||||||
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Based on market price (%)c
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N/Ah
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107.69 | b | (86.41 | )b | (22.97 | )b | 39.27 | b | |||||||||||
The accompanying notes are an integral part of the financial statements.
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Years Ended December 31,
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2010 | + | 2009 | 2008 | 2007 | 2006 | ||||||||||||||
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Ratios to Average Net Assets and Supplemental Data
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||||||||||||||||||||
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Net assets, end of period ($ millions)
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2 | 68 | 45 | 304 | 463 | |||||||||||||||
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Ratio of expenses before expense reductions (%) (based on net assets of common shares)e
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1.34 | i | 3.98 | d | 1.79 | 1.38 | 1.36 | |||||||||||||
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Ratio of expenses after expense reductions (%) (based on net assets of common shares)f
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1.34 | i | 3.84 | d | 1.47 | 1.04 | 1.02 | |||||||||||||
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Ratio of net investment income (%) (based on net assets of common shares)g
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1.44 | 6.49 | 7.08 | 4.01 | 4.26 | |||||||||||||||
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Ratio of net investment income (%) (based on net assets of common and preferred shares)
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1.16 | 4.26 | 4.38 | 2.91 | 3.11 | |||||||||||||||
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Portfolio turnover rate (%)
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0 | 97 | 31 | 28 | 13 | |||||||||||||||
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Preferred Share information at period end:
Aggregate amount outstanding ($ millions)
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N/A | 22 | 35 | 160 | 160 | |||||||||||||||
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Asset coverage per share ($)j
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N/A | 102,273 | 56,919 | 72,473 | 97,409 | |||||||||||||||
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Liquidation value per share ($)
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N/A | 25,000 | 25,000 | 25,000 | 25,000 | |||||||||||||||
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a Based on average common shares outstanding during the period.
b Total return would have been lower had certain expenses not been reduced.
c Total return based on net asset value reflects changes in the Fund's net asset value during the period. Total return based on market value reflects changes in market value. Each figure includes reinvestments of distributions. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares trade during the period.
d Increase in expense ratios is the result of significant reduction of assets and the addition of certain expenses related to proxy costs.
e The ratio of expenses before expense reductions (based on net assets of common and preferred shares) was 1.07%, 2.61%, 1.11%, 1.00% and 0.99% for the years ended December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
f The ratio of expenses after expense reductions (based on net assets of common and preferred shares) was 1.07%, 2.52%, 0.91%, 0.75%, 0.74%, and 0.75% for the years ended December 31, 2010, 2009, 2008, 2007 and 2006, respectively.
g Net investment income ratios for the years ended December 31, 2010, 2009, 2008, 2007 and 2006 do not reflect distributions to Preferred Shareholders. Ratios reflecting such payments are 0.80%, 5.08%, 4.25%, 1.97% and 2.45%, respectively.
h Total return based on the closing price of $4.47 on the last day of trading is 11.82%.
i Includes management fee for the period January 1, 2010 through June 17, 2010. Commencing on June 18, 2010, the date of the Fund's first liquidation payment, the Fund is no longer assessed the management fee.
j Asset coverage per share equals net assets of common shares plus the liquidation value of the Preferred Shares divided by the total number of Preferred Shares outstanding at the end of the period.
+ Liquidation basis
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The accompanying notes are an integral part of the financial statements.
A. Organization and Significant Accounting Policies
DWS RREEF Real Estate Fund, Inc. (the ``Fund'') is registered under the Investment Company Act of 1940, as amended (the ``1940 Act''), as a closed-end, diversified management investment company organized as a Maryland corporation. The Fund is authorized to issue 250,000,000 shares, of which 240,000,000 shares are classified as Common Shares, $0.01 par value per share, and 10,000,000 shares are classified as Preferred Shares, $0.01 par value per share.
On January 29, 2010, the Fund's stockholders approved a proposal to liquidate and dissolve the Fund. For more information regarding the Fund's liquidation, see Note F. Fund Liquidation.
Accordingly, the accompanying 2010 financial statements are prepared on the liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at estimable net realizable values and liabilities are stated at their anticipated settlement amounts. Fund assets and liabilities historically were carried at values that approximated fair value. Accordingly, the use of the liquidation basis of accounting is substantially similar to the basis of accounting that the Fund had applied prior to the use of the liquidation basis of accounting.
The Fund's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its consolidated financial statements.
Principles of Consolidation. The Fund invested indirectly in Canyon Ranch Holdings LLC through its wholly owned subsidiary, DWS Real Estate Fund I, Inc., a corporation organized under the laws of the state of Delaware (the "Subsidiary"). The consolidated financial statements include accounts of the Fund and the Subsidiary. All inter-company transactions and balances have been eliminated.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which they trade and are categorized as Level 1 securities. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost, which approximates value, and 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.
Swap contracts are valued daily based upon prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer. Swap contracts are generally categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. The Fund owns membership units of Canyon Ranch Holdings LLC, a Delaware limited liability company, which represents a convertible preferred issue with a 10-year mandatory period. It is a privately placed security. Canyon Ranch owns destination health resorts, spas and consumer brands. The price of the Canyon Ranch Holdings LLC units reflects a bid received during the period that did not settle and is deemed to reflect fair value for purposes of this report. The amount ultimately realized for the Canyon Ranch Holdings LLC units may be significantly greater or less than the amount indicated in this report to stockholders. For more information regarding the Canyon Ranch Holdings LLC units and the Fund's liquidation, see Note F. Fund Liquidation.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies and to distribute all of its taxable income to its shareholders.
At December 31, 2010, the Fund had a net tax basis capital loss carryforward of approximately $131,569,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2017, the expiration date, whichever occurs first. Upon final liquidation, these capital loss carryforwards will no longer be available (see Note F. Fund Liquidation).
During the year ended December 31, 2010, the Fund utilized approximately $15,912,000 of prior year capital loss carryforward.
The Fund has reviewed the tax positions for the open tax years as of December 31, 2010 and has determined that no provision for income tax is required in the Fund's consolidated financial statements. The Fund's federal tax returns for the prior three years remain open subject to examination by the Internal Revenue Service.
Distribution of Income and Gains. Net investment income of the Fund was usually declared and distributed to shareholders quarterly. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, would be distributed to shareholders at least annually. For more information regarding the Fund's liquidation distribution and the Fund's liquidation, see Note F. Fund Liquidation.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to interest rate swap contracts and certain securities sold at a loss. As a result, net investment income and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly,the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At December 31, 2010, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
|
Undistributed ordinary income
|
$ | — | ||
|
Capital loss carryforwards
|
$ | (131,569,000 | ) | |
|
Unrealized appreciation (depreciation) on investments
|
$ | (4,204,800 | ) |
In addition, the tax character of distributions paid to common and Preferred Shareholders by the Fund is summarized as follows:
|
Years Ended December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Distributions from ordinary income (common)
|
$ | 942,936 | $ | — | ||||
|
Distributions from ordinary income (Preferred)
|
$ | 218,350 | $ | 674,220 | ||||
|
Initial liquidation distribution
|
$ | 68,787,167 | $ | — | ||||
Preferred Shares. In connection with the Fund's liquidation, the Fund's Board of Directors authorized the redemption of all of the Fund's outstanding Preferred Shares (see Note F. Fund Liquidation). In May 2010, the Fund redeemed all of its outstanding Preferred Shares (i.e., 880 Preferred Shares, 440 shares each of Series A and B Preferred Shares) at their liquidation preference of $25,000 per share, aggregating to $22,000,000. The Fund redeemed the Preferred Shares with the proceeds from sales of portfolio assets. The Fund incurred brokerage expenses as the result of such sales.
The Preferred Shares were senior to, and had certain class-specific preferences over, the Fund's common shares.
During the period from January 1, 2010 to May 21, 2010, the dividend rates ranged from 2.590% to 2.761% for Series A and 2.570% to 2.801% for Series B. The Fund was subject to certain limitations and restrictions while the Preferred Shares were outstanding. Under its Articles Supplementary, the Fund was required to maintain asset coverage of at least 200% with respect to the Preferred Shares as of the last business day of each month in which any Preferred Shares were outstanding.
Statement of Cash Flows. Information on financial transactions which have been settled through the receipt and disbursement of cash is presented in the Consolidated Statement of Cash Flows. The cash amount shown in the Consolidated Statement of Cash Flows represents the cash position at the Fund's custodian bank at December 31, 2010.
Contingencies. In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet been made. However, based on experience, the Fund expects the risk of loss to be remote.
Real Estate Investment Trusts. The Fund periodically recharacterizes distributions received from a Real Estate Investment Trust ("REIT") investment based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from a REIT, the recharacterization will be estimated for financial reporting purposes and a recharacterization will be made to the accounting records in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains. The Fund distinguishes between dividends on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the consolidated financial statements as a return of capital.
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. Other income reflects a cash payment made by the buyer in connection with the failed sale of the Canyon Ranch Holdings LLC units. Realized gains and losses from investment transactions are recorded on an identified cost basis. For more information regarding Canyon Ranch LLC and the Fund's liquidation, see Note F. Fund Liquidation.
B. Derivative Instruments
Interest Rate Swap Contracts. For the year ended December 31, 2010, the Fund entered into interest rate swap transactions to reduce the interest rate risk inherent in the Fund's underlying investments and issued preferred shares. The use of interest rate swap contracts is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an interest rate swap contract, the Fund agrees to pay to the other party to the interest rate swap contract (which is known as the "counterparty") a fixed rate payment in exchange for the counterparty agreeing to pay to the Fund a variable rate payment, or the Fund agrees to receive from the counterparty a fixed rate payment in exchange for the counterparty agreeing to receive from the Fund a variable rate payment. The payment obligations are based on the notional amount of the swap contract. Certain risks may arise when entering into swap transactions including counterparty default, liquidity or unfavorable changes in interest rates. In connection with these agreements, securities and or cash may be identified as collateral in accordance with the terms of the swap agreements 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 interest rate swap contract, 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. The value of the swap contract is adjusted daily and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Consolidated 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 Consolidated Statement of Operations.
There are no open interest rate swap contracts as of December 31, 2010. For the year ended December 31, 2010, the investment in interest rate swap contracts had a total notional amount of $22,000,000.
The amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the year ended December 31, 2010 and the related location in the accompanying Consolidated Statement of Operations is summarized in the following tables by primary underlying risk exposure:
|
Realized Gain (Loss)
|
Swap Contracts
|
|||
|
Interest Rate Contracts (a)
|
$ | (1,909,349 | ) | |
The above derivative is located in the following Consolidated Statement of Operations account:
(a) Net realized gain (loss) from interest rate swap contracts
|
Change in Net Unrealized Appreciation (Depreciation)
|
Swap Contracts
|
|||
|
Interest Rate Contracts (a)
|
$ | 952,862 | ||
The above derivative is located in the following Consolidated Statement of Operations account:
(a) Change in net unrealized appreciation (depreciation) on interest rate swap contracts
C. Purchases and Sales of Securities
During the year ended December 31, 2010, purchases and sales of investment securities (excluding short-term investments) aggregated $0 and $90,549,347, respectively.
D. Related Parties
Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Investment Manager"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Investment Manager is responsible for managing the Fund's affairs and supervising all aspects of the Fund's operations, subject at all times to the general supervision of the Fund's Board of Directors (the "Board").
Pursuant to the Investment Management Agreement, the Investment Manager has delegated the day-to-day management of the Fund's Investment Portfolio to RREEF America, L.L.C. (the "Investment Advisor"), also an indirect, wholly owned subsidiary of Deutsche Bank AG and an affiliate of DB Real Estate, the real estate investment management group of Deutsche Asset Management. Subject to the general supervision of the Board and the Investment Manager, the Investment Advisor is responsible for managing the investment operations of the Fund and the composition of the Fund's holdings of securities and other investments. The Investment Manager, not the Fund, compensated the Investment Advisor for its services. The investment management fee payable under the Investment Management Agreement was equal to an annual rate of 0.55% of the Fund's average daily total managed assets, computed and accrued daily and payable monthly. Total managed assets equal the net asset value of the common shares plus the liquidation preference of any Preferred Shares plus the principal amount of any borrowings used for leverage. Commencing as of June 18, 2010, the date of the Fund's first liquidation payment to stockholders, the Fund is no longer assessed the investment management fee.
Service Provider Fees. DWS Investments Service Company ("DISC"), an affiliate of the Investment Manager and Investment Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. ("DST"), DISC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2010, the amount charged to the Fund by DISC aggregated $10,850, of which $2,901 is unpaid.
DWS Investments Fund Accounting Corporation ("DIFA"), an affiliate of the Investment Manager and Investment Advisor, is responsible for determining the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. Pursuant to a sub-accounting agreement between DIFA and State Street Bank and Trust Company ("SSB"), DIFA has delegated certain fund accounting functions to SSB. DIFA compensates SSB for the accounting service fee it receives from the Fund. The amount charged to the Fund for the year ended December 31, 2010 by DIFA aggregated $21,243, all of which was paid.
Deutsche Bank Trust Company Americas ("DBTCA"), an affiliate of the Investment Manager and the Investment Advisor, was the auction agent with respect to the Preferred Shares. The auction agent paid each broker dealer a service charge from funds provided by the Fund (the "Auction Service Fee"). The Auction Service Fee charged to the Fund for the year ended December 31, 2010 aggregated $19,938, all of which was paid.
In addition, DBTCA, as auction agent, was paid an administration fee. The amount charged to the Fund for the year ended December 31, 2010 aggregated $12,000, all of which was paid.
Directors' Fees and Expenses. The Fund paid each Director not affiliated with the Investment Manager retainer fees plus specified amounts for various committee services and for the Board Chairperson.
Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the year ended December 31, 2010, the amount charged to the Fund by DIMA included in the Consolidated Statement of Operations under "reports to shareholders" aggregated $9,983, of which $2,980 is unpaid.
Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in Central Cash Management Fund, which is managed by the Investment Manager. The Fund indirectly bears its proportionate share of the expenses of the underlying money market funds. Central Cash Management Fund does not pay the Investment Manager an investment management fee. Central Cash Management Fund seeks a high level of current income consistent with liquidity and the preservation of capital.
E. Real Estate Concentration Risk
Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. Any market price movements, regulatory or technological changes, or economic conditions affecting real estate securities, including REITs, will have a significant impact on the fund's performance. In particular, real estate companies can be affected by the risks associated with direct ownership of real estate, such as general or local economic conditions, increases in property taxes and operating expenses, liability or losses owing to environmental problems, falling rents (whether owing to poor demand, increased competition, overbuilding, or limitations on rents), zoning changes, rising interest rates, and losses from casualty or condemnation. In addition, many real estate companies, including REITs, utilize leverage (and some may be highly leveraged), which increases investment risk. Further, REITs are dependent upon management skills and may not be diversified.
F. Fund Liquidation
On January 29, 2010, the Fund's stockholders approved a proposal to liquidate and dissolve the Fund. As provided in the Fund's Plan of Liquidation and Dissolution, at the close of business on June 11, 2010 (the Fund's "Cessation Date") (i) the Fund ceased its business as an investment company, except for the purpose of liquidating and winding up its affairs; (ii) the Fund's books were closed with respect to its common stockholders and the proportionate interests of common stockholders in the Fund's assets were fixed on the basis of their respective stockholdings at such time; and (iii) further trading of the Fund's common stock on NYSE Amex ceased (except for certain settlement transactions). The Fund paid its first liquidating distribution to stockholders on June 18, 2010, which payment was equal to $4.38 per share and represented the Fund's distributable assets as of that date. As of December 31, 2010, the Fund's net asset value per share was $0.10.
Consistent with its responsibility to maximize the value of its shares for all stockholders, the Fund is actively seeking a buyer for its position in Canyon Ranch Holdings LLC units, so that the liquidation and dissolution of the Fund can be completed and stockholders can receive their final liquidating distribution.
In addition, in May 2010, in connection with its liquidation, the Fund redeemed all of its outstanding auction rate preferred shares. See Note A Preferred Shares.
G. Subsequent Event
Subsequent to December 31, 2010, the Fund received $113,424 in a class-action litigation settlement. This amount will be included in the Fund's next liquidation distribution.
To the Board of Directors and Shareholders of DWS RREEF Real Estate Fund, Inc.:
In our opinion, the accompanying consolidated statement of assets and liabilities, including the consolidated investment portfolio, and the related consolidated statements of operations, of cash flows and of changes in net assets and the consolidated financial highlights present fairly, in all material respects, the financial position of DWS RREEF Real Estate Fund, Inc. (the "Fund") and its subsidiary at December 31, 2010, and the results of their operations, their cash flows, the changes in their net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
As discussed in Note F to the consolidated financial statements, on January 29, 2010, the stockholders approved the Board's proposal to liquidate and dissolve the Fund.
As discussed in Note A to the consolidated financial statements, the Fund has adopted the liquidation basis of accounting.
|
Boston, Massachusetts
February 28, 2011
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PricewaterhouseCoopers LLP
|
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call (800) 294-4366.
The Board of Directors, including the Independent Directors, approved the renewal of your Fund's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DWS") and sub-advisory agreement (the "Sub-Advisory Agreement" and together with the Agreement, the "Agreements") between DWS and RREEF America, L.L.C. ("RREEF"), an affiliate of DWS, in September 2010.
As previously announced, in 2010 the shareholders approved the liquidation of the Fund. The liquidation process is not yet complete, as the Fund continues to seek a buyer for its sole remaining portfolio investment (Canyon Ranch Holdings LLC). Following the sale of this asset, the Fund will make a final distribution to shareholders. DWS and RREEF have agreed to waive all advisory fees through the Fund's final liquidation. The Board considered the Fund's pending liquidation and DWS's and RREEF's agreement to waive their advisory fees in determining to approve the continuation of the Agreements.
In terms of the process that the Board followed prior to approving the Agreements, shareholders should know that:
• In September 2010, all of the Fund's Directors were independent of DWS and its affiliates.
• The Directors meet frequently to discuss fund matters. Each year, the Directors dedicate substantial time to contract review matters.
• The Independent Directors regularly meet privately with their independent counsel to discuss contract review and other matters.
• In connection with reviewing the Agreements, the Board also reviewed the terms of the Fund's other material service agreements.
• Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Independent Directors as a group. The Independent Directors reviewed the Contract Committee's findings and recommendations and presented their recommendations to the full Board.
In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DWS and its predecessors have managed the Fund since its inception, and the Board believes that a relationship with a capable, conscientious advisor is in the best interests of the Fund. DWS and RREEF are part of Deutsche Bank, a major global banking institution that is engaged in a wide range of financial services.
Nature, Quality and Extent of Services. The Board considered the terms of the Agreements, including the scope of advisory services provided under the Agreements. The Board noted that, under the Agreements, DWS and RREEF provide portfolio management services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DWS to attract and retain high-quality personnel, and the organizational depth and stability of DWS.
In light of the Fund's pending liquidation and limited investment portfolio, the Board did not separately consider the Fund's investment performance. The Board noted that ensuring continuity of investment management arrangements pending the liquidation is in the best interest of the Fund.
Fees and Expenses. The Board noted that DWS agreed to waive its entire management fee through the date of the Fund's final liquidation. As such, the Board did not separately engage in a comparison of the Fund's fees and expenses versus peer funds.
Compliance. The Board considered the significant attention and resources dedicated by DWS to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of both DWS's chief compliance officer and the Fund's chief compliance officer; (ii) the large number of DWS compliance personnel; and (iii) the substantial commitment of resources by DWS and its affiliates to compliance matters.
In light of the Fund's pending liquidation, limited portfolio and DWS's management fee waiver, the Board did not consider DWS's profitability under the Agreement, benefits from achieving economies of scale and incidental benefits to DWS and RREEF from managing the Fund.
Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreements pending final liquidation of the Fund is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Directors and their counsel present. It is possible that individual Directors may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreements.
The following table presents certain information regarding the Board Members and Officers of the Corporation as of December 31, 2010. Each Board Member's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Board Member has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity; and (ii) the address of each Independent Board Member is c/o Paul K. Freeman, Independent Chairman, DWS Funds, PO Box 101833, Denver, CO 80250-1833. Except as otherwise noted below, the term of office for each Board Member is until the election and qualification of a successor, or until such Board Member sooner dies, resigns, is removed or as otherwise provided in the governing documents of the fund. The Board Members may also serve in similar capacities with other funds in the fund complex. The Length of Time Served represents the year in which the Board Member joined the board of one or more DWS funds now overseen by the Board.
|
Independent Board Members
|
||
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Name, Year of Birth, Position with the Fund and Length of Time Served1
|
Business Experience and Directorships During the Past Five Years
|
Number of Funds in DWS Fund Complex Overseen
|
|
Paul K. Freeman (1950)
Chairperson since 2009
Board Member since 1993
|
Consultant, World Bank/Inter-American Development Bank; Executive and Governing Council of the Independent Directors Council (education committees); formerly, Project Leader, International Institute for Applied Systems Analysis (1998-2001); Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998)
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122
|
|
John W. Ballantine (1946)
Board Member since 1999
|
Retired; formerly, Executive Vice President and Chief Risk Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); Executive Vice President and Head of International Banking (1995-1996). Directorships: Healthways, Inc. (provider of disease and care management services); Portland General Electric (utility company); Stockwell Capital Investments PLC (private equity). Former Directorships: First Oak Brook Bancshares, Inc. and Oak Brook Bank; Prisma Energy International
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122
|
|
Henry P. Becton, Jr. (1943)
Board Member since 1990
|
Vice Chair and former President, WGBH Educational Foundation. Directorships: Association of Public Television Stations; Lead Director, Becton Dickinson and Company3 (medical technology company); Lead Director, Belo Corporation3 (media company); Public Radio International; Public Radio Exchange (PRX); The PBS Foundation. Former Directorships: Boston Museum of Science; American Public Television; Concord Academy; New England Aquarium; Mass. Corporation for Educational Telecommunications; Committee for Economic Development; Public Broadcasting Service
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122
|
|
Dawn-Marie Driscoll (1946)
Board Member since 1987
|
President, Driscoll Associates (consulting firm); Executive Fellow, Center for Business Ethics, Bentley University; formerly, Partner, Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and General Counsel, Filene's (1978-1988). Directorships: Trustee of 22 open-end mutual funds managed by Sun Capital Advisers, Inc. (since 2007); Director of ICI Mutual Insurance Company (since 2007); Advisory Board, Center for Business Ethics, Bentley University; Trustee, Southwest Florida Community Foundation (charitable organization). Former Directorships: Investment Company Institute (audit, executive, nominating committees) and Independent Directors Council (governance, executive committees)
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122
|
|
Keith R. Fox (1954)
Board Member since 1996
|
Managing General Partner, Exeter Capital Partners (a series of private investment funds). Directorships: Progressive International Corporation (kitchen goods importer and distributor); BoxTop Media Inc. (advertising); The Kennel Shop (retailer); former Chairman, National Association of Small Business Investment Companies
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122
|
|
Kenneth C. Froewiss (1945)
Board Member since 2001
|
Adjunct Professor of Finance, NYU Stern School of Business (September 2009-present; Clinical Professor from 1997-September 2009); Member, Finance Committee, Association for Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group (US) (2004-present); prior thereto, Managing Director, J.P. Morgan (investment banking firm) (until 1996)
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122
|
|
Richard J. Herring (1946)
Board Member since 1990
|
Jacob Safra Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since July 1972); Co-Director, Wharton Financial Institutions Center (since July 2000); Co-Chair, U.S. Shadow Financial Regulatory Committee; Executive Director, Financial Economists Roundtable; Director, Japan Equity Fund, Inc. (since September 2007), Thai Capital Fund, Inc. (since September 2007), Singapore Fund, Inc. (since September 2007); Independent Director of Barclays Bank Delaware (since September 2010). Formerly, Vice Dean and Director, Wharton Undergraduate Division (July 1995-June 2000); Director, Lauder Institute of International Management Studies (July 2000-June 2006)
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122
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William McClayton (1944)
Board Member since 2004+
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Private equity investor (since October 2009); previously, Managing Director, Diamond Management & Technology Consultants, Inc. (global consulting firm) (2001-2009); Directorship: Board of Managers, YMCA of Metropolitan Chicago; formerly: Senior Partner, Arthur Andersen LLP (accounting) (1966-2001); Trustee, Ravinia Festival
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122
|
|
Rebecca W. Rimel (1951)
Board Member since 1995
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President and Chief Executive Officer, The Pew Charitable Trusts (charitable organization) (1994 to present); Trustee, Thomas Jefferson Foundation (charitable organization) (1994 to present); Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001-2007); Director, CardioNet, Inc.2 (2009-present) (health care). Formerly, Executive Vice President, The Glenmede Trust Company (investment trust and wealth management) (1983-2004); Board Member, Investor Education (charitable organization) (2004-2005); Director, Viasys Health Care2 (January 2007-June 2007); Trustee, Pro Publica (charitable organization) (2007-2010)
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122
|
|
William N. Searcy, Jr. (1946)
Board Member since 1993
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Private investor since October 2003; Trustee of 22 open-end mutual funds managed by Sun Capital Advisers, Inc. (since October 1998). Formerly, Pension & Savings Trust Officer, Sprint Corporation2 (telecommunications) (November 1989-September 2003)
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122
|
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Jean Gleason Stromberg (1943)
Board Member since 1997
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Retired. Formerly, Consultant (1997-2001); Director, Financial Markets US Government Accountability Office (1996-1997); Partner, Fulbright & Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and Flora Hewlett Foundation. Former Directorships: Service Source, Inc., Mutual Fund Directors Forum (2002-2004), American Bar Retirement Association (funding vehicle for retirement plans) (1987-1990 and 1994-1996)
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122
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Robert H. Wadsworth
(1940)
Board Member since 1999
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President, Robert H. Wadsworth & Associates, Inc. (consulting firm) (1983 to present); Director, The Phoenix Boys Choir Association
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125
|
|
Officers4
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Name, Year of Birth, Position with the Fund and Length of Time Served5
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Principal Occupation(s) During Past 5 Years and Other Directorships Held
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Michael G. Clark6 (1965)
President, 2006-present
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Managing Director3, Deutsche Asset Management (2006-present); President of DWS family of funds; Director, ICI Mutual Insurance Company (since October 2007); formerly, Director of Fund Board Relations (2004-2006) and Director of Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President Operations, Merrill Lynch Asset Management (1999-2000)
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Ingo Gefeke7 (1967)
Executive Vice President since 2010
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Managing Director3, Deutsche Asset Management; Global Head of Distribution and Product Management, DWS Global Head of Trading and Securities Lending. Member of the Board of Directors of DWS Investment GmbH Frankfurt (since July 2009) and DWS Holding & Service GmbH Frankfurt (since January 2010); formerly, Global Chief Administrative Officer, Deutsche Asset Management (2004-2009); Global Chief Operating Officer, Global Transaction Banking, Deutsche Bank AG, New York (2001-2004); Chief Operating Officer, Global Banking Division Americas, Deutsche Bank AG, New York (1999-2001); Central Management, Global Banking Services, Deutsche Bank AG, Frankfurt (1998-1999); Relationship Management, Deutsche Bank AG, Tokyo, Japan (1997-1998)
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|
John Millette8 (1962)
Vice President and Secretary, 1999-present
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Director3, Deutsche Asset Management
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Paul H. Schubert6 (1963)
Chief Financial Officer, 2004-present
Treasurer, 2005-present
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Managing Director3, Deutsche Asset Management (since July 2004); formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset Management (1994-1998)
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Caroline Pearson8 (1962)
Chief Legal Officer, April 2010-present
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Managing Director3, Deutsche Asset Management; formerly, Assistant Secretary for DWS family of funds (1997-2010)
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Rita Rubin9 (1970)
Assistant Secretary, 2009-present
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Vice President and Counsel, Deutsche Asset Management (since October 2007); formerly, Vice President, Morgan Stanley Investment Management (2004-2007)
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Paul Antosca8 (1957)
Assistant Treasurer, 2007-present
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Director3, Deutsche Asset Management (since 2006); Vice President, The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
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Jack Clark8 (1967)
Assistant Treasurer, 2007-present
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Director3, Deutsche Asset Management (since 2007); formerly, Vice President, State Street Corporation (2002-2007)
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Diane Kenneally8 (1966)
Assistant Treasurer, 2007-present
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Director3, Deutsche Asset Management
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John Caruso9 (1965)
Anti-Money Laundering Compliance Officer, 2010-present
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Managing Director3, Deutsche Asset Management
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Robert Kloby9 (1962)
Chief Compliance Officer, 2006-present
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Managing Director3, Deutsche Asset Management
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1 The length of time served represents the year in which the Board Member joined the board of one or more DWS funds currently overseen by the Board.
2 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
3 Executive title, not a board directorship.
4 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act. Interested persons receive no compensation from the fund.
5 The length of time served represents the year in which the officer was first elected in such capacity for one or more DWS funds.
6 Address: 100 Plaza One, Jersey City, NJ 07311.
7 Effective January 11, 2011, Mr. Gefeke, Executive Vice President, resigned as an officer of the fund.
The mailing address of Mr. Gefeke is 345 Park Avenue, New York, New York 10154. Mr. Gefeke was an interested Board Member of certain DWS funds by virtue of his positions with Deutsche Asset Management. As an interested person, Mr. Gefeke received no compensation from the fund.
8 Address: One Beacon Street, Boston, MA 02108.
9 Address: 60 Wall Street, New York, New York 10005.
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Automated Information Line
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DWS Investments Closed-End Fund Info Line
(800) 349-4281
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|
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Web Site
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www.dws-investments.com
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|
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Written Correspondence
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Deutsche Investment Management Americas Inc.
345 Park Avenue
New York, NY 10154
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Proxy Voting
|
The fund's policies and procedures for voting proxies for portfolio securities and information about how the fund voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — www.dws-investments.com (click on "proxy voting"at the bottom of the page) — or on the SEC's Web site — www.sec.gov. To obtain a written copy of the fund's policies and procedures without charge, upon request, call us toll free at (800) 621-1048.
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Legal Counsel
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Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199-3600
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Dividend Reinvestment Plan Agent
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Computershare Inc.
P.O. Box 43078
Providence, RI 02940-3078
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Shareholder Service Agent
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DWS Investments Service Company
P.O. Box 219066
Kansas City, MO 64121-9066
(800) 294-4366
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Custodian and Transfer Agent
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State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
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Independent Registered Public Accounting Firm
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PricewaterhouseCoopers LLP
125 High Street
Boston, MA 02110
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NYSE Amex Symbol
|
SRQ
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CUSIP Numbers
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Common Shares
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233384 106
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Notes
Notes
Notes
Notes
Notes
Notes
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ITEM 2.
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CODE OF ETHICS
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|
As of the end of the period covered by this report, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of ethics during the period covered by this report that would require disclosure under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
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ITEM 3.
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AUDIT COMMITTEE FINANCIAL EXPERT
|
|
The fund’s audit committee is comprised solely of trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The fund’s Board of Trustees has determined that there are several "audit committee financial experts" (as such term has been defined by the Regulations) serving on the fund’s audit committee including Mr. William McClayton, the chair of the fund’s audit committee. An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933 and the designation or identification of a person as an “audit committee financial expert” does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. In accordance with New York Stock Exchange requirements, the Board believes that all members of the fund’s audit committee are financially literate, as such qualification is interpreted by the Board in its business judgment, and that at least one member of the audit committee has accounting or related financial management expertise.
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ITEM 4.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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DWS RREEF REAL ESTATE FUND, INC
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP (“PWC”), the Fund’s independent registered public accounting firm, billed to the Fund during the Fund’s last two fiscal years. The Audit Committee approved in advance all audit services and non-audit services that PWC provided to the Fund.
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Fund
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Fiscal Year Ended December 31,
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Audit Fees Billed to Fund
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Audit-Related
Fees Billed to Fund
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Tax Fees Billed to Fund
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All
Other Fees Billed to Fund
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2010
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$ | 26,000 | $ | 0 | $ | 0 | $ | 0 | ||||||||
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2009
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$ | 57,921 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Services that the Fund’s Independent Registered Public Accounting Firm Billed to the Adviser and Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche Investment Management Americas Inc. (“DeIM” or the “Adviser”), and any entity controlling, controlled by or under common control with DeIM (“Control Affiliate”) that provides ongoing services to the Fund (“Affiliated Fund Service Provider”), for engagements directly related to the Fund’s operations and financial reporting, during the Fund’s last two fiscal years.
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Fiscal Year December 31,
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Audit-Related
Fees Billed to Adviser and Affiliated Fund Service Providers
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Tax Fees Billed to Adviser and Affiliated Fund Service Providers
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All
Other Fees Billed to Adviser and Affiliated Fund Service Providers
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2010
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$ | 7,500 | $ | 0 | $ | 0 | ||||||
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2009
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$ | 2,000 | $ | 0 | $ | 0 | ||||||
The “Audit-Related Fees” were billed for services in connection with the agreed-upon procedures.
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund’s last two fiscal years for non-audit services. The Audit Committee pre-approved all non-audit services that PWC provided to the Adviser and any Affiliated Fund Service Provider that related directly to the Fund’s operations and financial reporting. The Audit Committee requested and received information from PWC about any non-audit services that PWC rendered during the Fund’s last fiscal year to the Adviser and any Affiliated Fund Service Provider. The Committee considered this information in evaluating PWC’s independence.
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Fiscal Year Ended December 31,
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Total
Non-Audit Fees Billed to Fund
(A)
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Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (engagements related directly to the operations and financial reporting of the Fund)
(B)
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Total Non-Audit Fees billed to Adviser and Affiliated Fund Service Providers (all other engagements)
(C)
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Total of (A), (B)
and (C)
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2010
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$ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
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2009
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$ | 0 | $ | 0 | $ | 100,000 | $ | 100,000 | ||||||||
All other engagement fees were billed for services in connection with an internal control review of a subadvisor.
Audit Committee Pre-Approval Policies and Procedures. Generally, each Fund’s Audit Committee must pre approve (i) all services to be performed for a Fund by a Fund’s Independent Registered Public Accounting Firm and (ii) all non-audit services to be performed by a Fund’s Independent Registered Public Accounting Firm for the DIMA Entities with respect to operations and financial reporting of the Fund, except that the Chairperson or Vice Chairperson of each Fund’s Audit Committee may grant the pre-approval for non-audit services described in items (i) and (ii) above for non-prohibited services for engagements of less than $100,000. All such delegated pre approvals shall be presented to each Fund’s Audit Committee no later than the next Audit Committee meeting.
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception under Rule 2-01 of Regulation S-X.
According to the registrant’s principal Independent Registered Public Accounting Firm, all of the principal Independent Registered Public Accounting Firm's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal Independent Registered Public Accounting Firm.
***
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ITEM 5.
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AUDIT COMMITTEE OF LISTED REGISTRANTS
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The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The registrant's audit committee consists of William McClayton (Chairman), Keith R. Fox, Kenneth C. Froewiss, Henry P. Becton, Jr., Richard J. Herring and William N. Searcy.
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ITEM 6.
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SCHEDULE OF INVESTMENTS
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Not applicable
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ITEM 7.
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DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
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Proxy Voting and Guidelines
I. INTRODUCTION
Deutsche Asset Management (“AM”) has adopted and implemented the following policies and procedures, which it believes are reasonably designed to ensure that proxies are voted in the best economic interest of clients, in accordance with its fiduciary duties and local regulation. These Proxy Voting Policies, Procedures and Guidelines shall apply to all accounts managed by US domiciled advisers and to all US client accounts managed by non US regional offices. Non US regional offices are required to maintain procedures and to vote proxies as may be required by law on behalf of their non US clients. In addition, AM’s proxy policies reflect the fiduciary standards and responsibilities for ERISA accounts.
The attached guidelines represent a set of global recommendations that were determined by the Global Proxy Voting Sub-Committee (“the GPVSC”). These guidelines were developed to provide AM with a comprehensive list of recommendations that represent how AM will generally vote proxies for its clients. The recommendations derived from the application of these guidelines are not intended to influence the various AM legal entities either directly or indirectly by parent or affiliated companies. In addition, the organizational structures and documents of the various AM legal entities allows, where necessary or appropriate, the execution by individual AM subsidiaries of the proxy voting rights independently of any DB parent or affiliated company. This applies in particular to non U.S. fund management companies. The individuals that make proxy voting decisions are also free to act independently, subject to the normal and customary supervision by the management/boards of these AM legal entities.
II. AM’S PROXY VOTING RESPONSIBILITIES
Proxy votes are the property of AM’s advisory clients.1 As such, AM’s authority and responsibility to vote such proxies depend upon its contractual relationships with its clients. AM has delegated responsibility for effecting its advisory clients’ proxy votes to Institutional Shareholder Services (“ISS”), an independent third-party proxy voting specialist. ISS votes AM’s advisory clients’ proxies in accordance with AM’s proxy guidelines or AM’s specific instructions. Where a client has given specific instructions as to how a proxy should be voted, AM will notify ISS to carry out those instructions. Where no specific instruction exists, AM will follow the procedures in voting the proxies set forth in this document. Certain Taft-Hartley clients may direct AM to have ISS vote their proxies in accordance with Taft Hartley voting Guidelines
Clients may in certain instances contract with their custodial agent and notify AM that they wish to engage in securities lending transactions. In such cases, it is the responsibility of the custodian to deduct the number of shares that are on loan so that they do not get voted twice.
III. POLICIES
1. Proxy voting activities are conducted in the best economic interest of clients
AM has adopted the following policies and procedures to ensure that proxies are voted in accordance with the best economic interest of its clients, as determined by AM in good faith after appropriate review.
2. The Global Proxy Voting Sub-Committee
The Global Proxy Voting Sub-Committee (the “GPVSC”) is an internal working group established by the applicable AM’s Investment Risk Oversight Committee pursuant to a written charter. The GPVSC is responsible for overseeing AM’s proxy voting activities, including:
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(i)
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adopting, monitoring and updating guidelines, attached as Exhibit A (the “Guidelines”), that provide how AM will generally vote proxies pertaining to a comprehensive list of common proxy voting matters;
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(ii)
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voting proxies where (A) the issues are not covered by specific client instruction or the Guidelines; (B) the Guidelines specify that the issues are to be determined on a case-by-case basis; or (C) where an exception to the Guidelines may be in the best economic interest of AM’s clients; and
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(iii)
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monitoring the Proxy Vendor Oversight’s proxy voting activities (see below).
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AM’s Proxy Vendor Oversight, a function of AM’s Operations Group, is responsible for coordinating with ISS to administer AM’s proxy voting process and for voting proxies in accordance with any specific client instructions or, if there are none, the Guidelines, and overseeing ISS’ proxy responsibilities in this regard.
3. Availability of Proxy Voting Policies and Procedures and proxy voting record
Copies of these Policies and Procedures, as they may be updated from time to time, are made available to clients as required by law and otherwise at AM’s discretion. Clients may also obtain information on how their proxies were voted by AM as required by law and otherwise at AM’s discretion; however, AM must not selectively disclose its investment company clients’ proxy voting records. The Proxy Vendor Oversight will make proxy voting reports available to advisory clients upon request. The investment companies’ proxy voting records will be disclosed to shareholders by means of publicly-available annual filings of each company’s proxy voting record for 12-month periods ended June 30 (see “Recordkeeping” below), if so required by relevant law.
IV. PROCEDURES
The key aspects of AM’s proxy voting process are as follows:
1. The GPVSC’s Proxy Voting Guidelines
The Guidelines set forth the GPVSC’s standard voting positions on a comprehensive list of common proxy voting matters. The GPVSC has developed, and continues to update the Guidelines based on consideration of current corporate governance principles, industry standards, client feedback, and the impact of the matter on issuers and the value of the investments.
The GPVSC will review the Guidelines as necessary to support the best economic interests of AM’s clients and, in any event, at least annually. The GPVSC will make changes to the Guidelines, whether as a result of the annual review or otherwise, taking solely into account the best economic interests of clients. Before changing the Guidelines, the GPVSC will thoroughly review and evaluate the proposed change and the reasons therefore, and the GPVSC Chair will ask GPVSC members whether anyone outside of the AM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a AM advisory client has requested or attempted to influence the proposed change and whether any member has a conflict of interest with respect to the proposed change. If any such matter is reported to the GPVSC Chair, the Chair will promptly notify the Conflicts of Interest Management Sub-Committee (see below) and will defer the approval, if possible. Lastly, the GPVSC will fully document its rationale for approving any change to the Guidelines.
The Guidelines may reflect a voting position that differs from the actual practices of the public company(ies) within the Deutsche Bank organization or of the investment companies for which AM or an affiliate serves as investment adviser or sponsor. Investment companies, particularly closed-end investment companies, are different from traditional operating companies. These differences may call for differences in voting positions on the same matter. Further, the manner in which AM votes investment company proxies may differ from proposals for which a AM-advised or sponsored investment company solicits proxies from its shareholders. As reflected in the Guidelines, proxies solicited by closed-end (and open-end) investment companies are generally voted in accordance with the pre-determined guidelines of ISS. See Section IV.3.B.
Funds (“Underlying Funds”) in which Topiary Fund Management Fund of Funds (each, a “Fund”) invest, may from time to time seek to revise their investment terms (i.e. liquidity, fees, etc.) or investment structure. In such event, the Underlying Funds may require approval/consent from its investors to effect the relevant changes. Topiary Fund Management has adopted Proxy Voting Procedures which outline the process for these approvals.
2. Specific proxy voting decisions made by the GPVSC
The Proxy Vendor Oversight will refer to the GPVSC all proxy proposals (i) that are not covered by specific client instructions or the Guidelines; or (ii) that, according to the Guidelines, should be evaluated and voted on a case-by-case basis.
Additionally, if, the Proxy Vendor Oversight, the GPVSC Chair or any member of the GPVSC, a portfolio manager, a research analyst or a sub-adviser believes that voting a particular proxy in accordance with the Guidelines may not be in the best economic interests of clients, that individual may bring the matter to the attention of the GPVSC Chair and/or the Proxy Vendor Oversight.2
If the Proxy Vendor Oversight refers a proxy proposal to the GPVSC or the GPVSC determines that voting a particular proxy in accordance with the Guidelines is not in the best economic interests of clients, the GPVSC will evaluate and vote the proxy, subject to the procedures below regarding conflicts.
The GPVSC endeavors to hold meetings to decide how to vote particular proxies sufficiently before the voting deadline so that the procedures below regarding conflicts can be completed before the GPVSC’s voting determination.
3. Certain proxy votes may not be cast
In some cases, the GPVSC may determine that it is in the best economic interests of its clients not to vote certain proxies. If the conditions below are met with regard to a proxy proposal, AM will abstain from voting:
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Neither the Guidelines nor specific client instructions cover an issue;
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ISS does not make a recommendation on the issue;
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The GPVSC cannot convene on the proxy proposal at issue to make a determination as to what would be in the client’s best interest. (This could happen, for example, if the Conflicts of Interest Management Sub-committee found that there was a material conflict or if despite all best efforts being made, the GPVSC quorum requirement could not be met).
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In addition, it is AM’s policy not to vote proxies of issuers subject to laws of those jurisdictions that impose restrictions upon selling shares after proxies are voted, in order to preserve liquidity. In other cases, it may not be possible to vote certain proxies, despite good faith efforts to do so. For example, some jurisdictions do not provide adequate notice to shareholders so that proxies may be voted on a timely basis. Voting rights on securities that have been loaned to third-parties transfer to those third-parties, with loan termination often being the only way to attempt to vote proxies on the loaned securities. Lastly, the GPVSC may determine that the costs to the client(s) associated with voting a particular proxy or group of proxies outweighs the economic benefits expected from voting the proxy or group of proxies.
The Proxy Vendor Oversight will coordinate with the GPVSC Chair regarding any specific proxies and any categories of proxies that will not or cannot be voted. The reasons for not voting any proxy shall be documented.
4. Conflict of Interest Procedures
A. Procedures to Address Conflicts of Interest and Improper Influence
Overriding Principle. In the limited circumstances where the GPVSC votes proxies,3 the GPVSC will vote those proxies in accordance with what it, in good faith, determines to be the best economic interests of AM’s clients.4
Independence of the GPVSC. As a matter of Compliance policy, the GPVSC and the Proxy Vendor Oversight are structured to be independent from other parts of Deutsche Bank. Members of the GPVSC and the employee responsible for Proxy Vendor Oversight are employees of AM. As such, they may not be subject to the supervision or control of any employees of Deutsche Bank Corporate and Investment Banking division (“CIB”). Their compensation cannot be based upon their contribution to any business activity outside of AM without prior approval of Legal and Compliance. They can have no contact with employees of Deutsche Bank outside of the Private Client and Asset Management division (“PCAM”) regarding specific clients, business matters or initiatives without the prior approval of Legal and Compliance. They furthermore may not discuss proxy votes with any person outside of AM (and within AM only on a need to know basis).
Conflict Review Procedures. There will be a committee (the “Conflicts of Interest Management Sub-Committee”) established within AM that will monitor for potential material conflicts of interest in connection with proxy proposals that are to be evaluated by the GPVSC. Promptly upon a determination that a vote shall be presented to the GPVSC, the GPVSC Chair shall notify the Conflicts of Interest Management Sub-Committee. The Conflicts of Interest Management Sub-Committee shall promptly collect and review any information deemed reasonably appropriate to evaluate, in its reasonable judgment, if AM or any person participating in the proxy voting process has, or has the appearance of, a material conflict of interest. For the purposes of this policy, a conflict of interest shall be considered “material” to the extent that a reasonable person could expect the conflict to influence, or appear to influence, the GPVSC’s decision on the particular vote at issue. GPVSC should provide the Conflicts of Interest Management Sub-Committee a reasonable amount of time (no less than 24 hours) to perform all necessary and appropriate reviews. To the extent that a conflicts review can not be sufficiently completed by the Conflicts of Interest Management Sub-Committee the proxies will be voted in accordance with the standard guidelines.
The information considered by the Conflicts of Interest Management Sub-Committee may include without limitation information regarding (i) AM client relationships; (ii) any relevant personal conflict known by the Conflicts of Interest Management Sub-Committee or brought to the attention of that sub-committee; (iii) and any communications with members of the GPVSC (or anyone participating or providing information to the GPVSC) and any person outside of the AM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a AM advisory client regarding the vote at issue. In the context of any determination, the Conflicts of Interest Management Sub-Committee may consult with, and shall be entitled to rely upon, all applicable outside experts, including legal counsel.
Upon completion of the investigation, the Conflicts of Interest Management Sub-Committee will document its findings and conclusions. If the Conflicts of Interest Management Sub-Committee determines that (i) AM has a material conflict of interest that would prevent it from deciding how to vote the proxies concerned without further client consent or (ii) certain individuals should be recused from participating in the proxy vote at issue, the Conflicts of Interest Management Sub-Committee will so inform the GPVSC chair.
If notified that AM has a material conflict of interest as described above, the GPVSC chair will obtain instructions as to how the proxies should be voted either from (i) if time permits, the effected clients, or (ii) in accordance with the standard guidelines. If notified that certain individuals should be recused from the proxy vote at issue, the GPVSC Chair shall do so in accordance with the procedures set forth below.
Note: Any AM employee who becomes aware of a potential, material conflict of interest in respect of any proxy vote to be made on behalf of clients shall notify Compliance. Compliance shall call a meeting of the conflict review committee to evaluate such conflict and determine a recommended course of action.
Procedures to be followed by the GPVSC. At the beginning of any discussion regarding how to vote any proxy, the GPVSC Chair (or his or her delegate) will inquire as to whether any GPVSC member (whether voting or ex officio) or any person participating in the proxy voting process has a personal conflict of interest or has actual knowledge of an actual or apparent conflict that has not been reported to the Conflicts of Interest Management Sub-Committee.
The GPVSC Chair also will inquire of these same parties whether they have actual knowledge regarding whether any director, officer or employee outside of the AM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a AM advisory client, has: (i) requested that AM, the Proxy Vendor Oversight (or any member thereof) or a GPVSC member vote a particular proxy in a certain manner; (ii) attempted to influence AM, the Proxy Vendor Oversight (or any member thereof), a GPVSC member or any other person in connection with proxy voting activities; or (iii) otherwise communicated with a GPVSC member or any other person participating or providing information to the GPVSC regarding the particular proxy vote at issue, and which incident has not yet been reported to the Conflicts of Interest Management Sub- Committee.
If any such incidents are reported to the GPVSC Chair, the Chair will promptly notify the Conflicts of Interest Management Sub-Committee and, if possible, will delay the vote until the Conflicts of Interest Management Sub-Committee can complete the conflicts report. If a delay is not possible, the Conflicts of Interest Management Sub-Committee will instruct the GPVSC whether anyone should be recused from the proxy voting process, or whether AM should vote the proxy in accordance with the standard guidelines, seek instructions as to how to vote the proxy at issue from ISS or, if time permits, the effected clients. These inquiries and discussions will be properly reflected in the GPVSC’s minutes.
Duty to Report. Any AM employee, including any GPVSC member (whether voting or ex officio), that is aware of any actual or apparent conflict of interest relevant to, or any attempt by any person outside of the AM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a AM advisory client to influence, how AM votes its proxies has a duty to disclose the existence of the situation to the GPVSC Chair (or his or her designee) and the details of the matter to the Conflicts of Interest Management Sub-Committee. In the case of any person participating in the deliberations on a specific vote, such disclosure should be made before engaging in any activities or participating in any discussion pertaining to that vote.
Recusal of Members. The GPVSC will recuse from participating in a specific proxy vote any GPVSC members (whether voting or ex officio) and/or any other person who (i) are personally involved in a material conflict of interest; or (ii) who, as determined by the Conflicts of Interest Management Sub-Committee, have actual knowledge of a circumstance or fact that could effect their independent judgment, in respect of such vote. The GPVSC will also exclude from consideration the views of any person (whether requested or volunteered) if the GPVSC or any member thereof knows, or if the Conflicts of Interest Management Sub-Committee has determined, that such other person has a material conflict of interest with respect to the particular proxy, or has attempted to influence the vote in any manner prohibited by these policies.
If, after excluding all relevant GPVSC voting members pursuant to the paragraph above, there are three or more GPVSC voting members remaining, those remaining GPVSC members will determine how to vote the proxy in accordance with these Policies and Procedures. If there are fewer than three GPVSC voting members remaining, the GPVSC Chair will vote the proxy in accordance with the standard guidelines, will obtain instructions as to how to have the proxy voted from, if time permits, the effected clients and otherwise from ISS.
B. Investment Companies and Affiliated Public Companies
Investment Companies. As reflected in the Guidelines, all proxies solicited by open-end and closed-end investment companies are voted in accordance with the pre-determined guidelines of ISS, unless the investment company client directs AM to vote differently on a specific proxy or specific categories of proxies. However, regarding investment companies for which AM or an affiliate serves as investment adviser or principal underwriter, such proxies are voted in the same proportion as the vote of all other shareholders (i.e., “mirror” or “echo” voting). Master fund proxies solicited from feeder funds are voted in accordance with applicable provisions of Section 12 of the Investment Company Act of 1940.
Subject to participation agreements with certain Exchange Traded Funds ("ETF") issuers that have received exemptive orders from the U.S. Securities and Exchange Commission allowing investing DWS funds to exceed the limits set forth in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of outstanding voting shares globally when required to do so by participation agreements and SEC orders.
Affiliated Public Companies. For proxies solicited by non-investment company issuers of or within the Deutsche Bank organization, e.g., Deutsche bank itself, these proxies will be voted in the same proportion as the vote of other shareholders (i.e., “mirror” or “echo” voting).
Note: With respect to the Central Cash Management Fund (registered under the Investment Company Act of 1940), the Fund is not required to engage in echo voting and the investment adviser will use these Guidelines, and may determine, with respect to the Central Cash Management Fund, to vote contrary to the positions in the Guidelines, consistent with the Fund’s best interest.
C. Other Procedures That Limit Conflicts of Interest
AM and other entities in the Deutsche Bank organization have adopted a number of policies, procedures and internal controls that are designed to avoid various conflicts of interest, including those that may arise in connection with proxy voting, including:
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Deutsche Bank Americas Restricted Activities Policy. This policy provides for, among other things, independence of AM employees from CIB, and information barriers between AM and other affiliates. Specifically, no AM employee may be subject to the supervision or control of any employee of CIB. No AM employee shall have his or her compensation based upon his or her contribution to any business activity within the Bank outside of the business of AM, without the prior approval of Legal or Compliance. Further, no employee of CIB shall have any input into the compensation of a AM employee without the prior approval of Legal or Compliance. Under the information barriers section of this policy, as a general rule, AM employees who are associated with the investment process should have no contact with employees of Deutsche Bank or its affiliates, outside of PCAM, regarding specific clients, business matters, or initiatives. Further, under no circumstances should proxy votes be discussed with any Deutsche Bank employee outside of AM (and should only be discussed on a need-to-know basis within AM).
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Other relevant internal policies include the Deutsche Bank Americas Code of Professional Conduct, the Deutsche Asset Management Information Sharing Procedures, the Deutsche Asset Management Code of Ethics, the Sarbanes-Oxley Senior Officer Code of Ethics, and the Deutsche Bank Group Code of Conduct. The GPVSC expects that these policies, procedures and internal controls will greatly reduce the chance that the GPVSC (or, its members) would be involved in, aware of or influenced by, an actual or apparent conflict of interest.
V. RECORDKEEPING
At a minimum, the following types of records must be properly maintained and readily accessible in order to evidence compliance with this policy.
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AM will maintain a record of each vote cast by AM that includes among other things, company name, meeting date, proposals presented, vote cast and shares voted.
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The Proxy Vendor Oversight maintains records for each of the proxy ballots it votes. Specifically, the records include, but are not limited to:
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The proxy statement (and any additional solicitation materials) and relevant portions of annual statements.
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Any additional information considered in the voting process that may be obtained from an issuing company, its agents or proxy research firms.
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Analyst worksheets created for stock option plan and share increase analyses.
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Proxy Edge print-screen of actual vote election.
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AM will retain these Policies and Procedures and the Guidelines; will maintain records of client requests for proxy voting information; and will retain any documents the Proxy Vendor Oversight or the GPVSC prepared that were material to making a voting decision or that memorialized the basis for a proxy voting decision.
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The GPVSC also will create and maintain appropriate records documenting its compliance with these Policies and Procedures, including records of its deliberations and decisions regarding conflicts of interest and their resolution.
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With respect to AM’s investment company clients, ISS will create and maintain records of each company’s proxy voting record for 12-month periods ended June 30. AM will compile the following information for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and with respect to which the company was entitled to vote:
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The name of the issuer of the portfolio security;
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The exchange ticker symbol of the portfolio security (if symbol is available through reasonably practicable means);
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The Council on Uniform Securities Identification Procedures number for the portfolio security (if the number is available through reasonably practicable means);
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The shareholder meeting date;
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A brief identification of the matter voted on;
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Whether the matter was proposed by the issuer or by a security holder;
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Whether the company cast its vote on the matter;
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How the company cast its vote (e.g., for or against proposal, or abstain; for or withhold regarding election of directors); and
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Whether the company cast its vote for or against management.
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Note: This list is intended to provide guidance only in terms of the records that must be maintained in accordance with this policy. In addition, please note that records must be maintained in accordance with the applicable AM Records Management Policy.
With respect to electronically stored records, “properly maintained” is defined as complete, authentic (unalterable) usable and backed-up. At a minimum, records should be retained for a period of not less than six years (or longer, if necessary to comply with applicable regulatory requirements), the first three years in an appropriate AM office.
VI. THE GPVSC’S OVERSIGHT ROLE
In addition to adopting the Guidelines and making proxy voting decisions on matters referred to it as set forth above, the GPVSC will monitor the proxy voting process by reviewing summary proxy information presented by ISS. The GPVSC will use this review process to determine, among other things, whether any changes should be made to the Guidelines. This review will take place at least quarterly and will be documented in the GPVSC’s minutes.
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For purposes of these Policies and Procedures, “clients” refers to persons or entities: for which AM serves as investment adviser or sub-adviser; for which AM votes proxies; and that have an economic or beneficial ownership interest in the portfolio securities of issuers soliciting such proxies.
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The Proxy Vendor Oversight generally monitors upcoming proxy solicitations for heightened attention from the press or the industry and for novel or unusual proposals or circumstances, which may prompt the Proxy Vendor Oversight to bring the solicitation to the attention of the GPVSC Chair. AM portfolio managers, AM research analysts and sub-advisers also may bring a particular proxy vote to the attention of the GPVSC Chair, as a result of their ongoing monitoring of portfolio securities held by advisory clients and/or their review of the periodic proxy voting record reports that the GPVSC Chair distributes to AM portfolio managers and AM research analysts.
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As mentioned above, the GPVSC votes proxies (i) where neither a specific client instruction nor a Guideline directs how the proxy should be voted, (ii) where the Guidelines specify that an issue is to be determined on a case by case basis or (iii) where voting in accordance with the Guidelines may not be in the best economic interests of clients.
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The Proxy Vendor Oversight, who serves as the non-voting secretary of the GPVSC, may receive routine calls from proxy solicitors and other parties interested in a particular proxy vote. Any contact that attempts to exert improper pressure or influence shall be reported to the Conflicts of Interest Management Sub-Committee.
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Attachment A – Global Proxy Voting Guidelines
Deutsche Asset Management
Global Proxy Voting Guidelines
As Amended October 2010
[GRAPHIC OMITTED]
Table of contents
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I
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Board Of Directors And Executives
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A
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Election Of Directors
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B
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Classified Boards Of Directors
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C
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Board And Committee Independence
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D
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Liability And Indemnification Of Directors
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E
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Qualifications Of Directors
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F
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Removal Of Directors And Filling Of Vacancies
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G
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Proposals To Fix The Size Of The Board
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H
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Proposals to Restrict Chief Executive Officer’s Service on Multiple Boards
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I
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Proposals to Restrict Supervisory Board Members Service on Multiple Boards
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J
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Proposals to Establish Audit Committees
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II
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Capital Structure
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A
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Authorization Of Additional Shares
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B
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Authorization Of “Blank Check” Preferred Stock
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C
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Stock Splits/Reverse Stock Splits
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D
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Dual Class/Supervoting Stock
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E
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Large Block Issuance
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F
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Recapitalization Into A Single Class Of Stock
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G
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Share Repurchases
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|
H
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Reductions In Par Value
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III
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Corporate Governance Issues
|
|
A
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Confidential Voting
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B
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Cumulative Voting
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C
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Supermajority Voting Requirements
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D
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Shareholder Right To Vote
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IV
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Compensation
|
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A
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Establishment of a Remuneration Committee
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B
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Executive And Director Stock Option Plans
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C
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Employee Stock Option/Purchase Plans
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D
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Golden Parachutes
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E
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Proposals To Limit Benefits Or Executive Compensation
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F
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Option Expensing
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|
G
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Management board election and motion
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H
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Remuneration (variable pay)
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I
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Long-term incentive plans
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J
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Shareholder Proposals Concerning “Pay For Superior Performance”
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K
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Executive Compensation Advisory
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V
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Anti-Takeover Related Issues
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|
A
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Shareholder Rights Plans (“Poison Pills”)
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B
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Reincorporation
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C
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Fair-Price Proposals
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D
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Exemption From State Takeover Laws
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E
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Non-Financial Effects Of Takeover Bids
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VI
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Mergers & Acquisitions
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|
VII
|
Social & Political Issues
|
|
A
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Labor & Human Rights
|
|
B
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Diversity & Equality
|
|
C
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Health & Safety
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|
D
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Government/Military
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|
E
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Tobacco
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|
F
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Principles for Responsible Investment (“PRI”)Environmental Issues
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VIII
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Miscellaneous Items
|
|
A
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Ratification Of Auditors
|
|
B
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Limitation Of Non-Audit Services Provided By Independent Auditor
|
|
C
|
Audit Firm Rotation
|
|
D
|
Transaction Of Other Business
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|
E
|
Motions To Adjourn The Meeting
|
|
F
|
Bundled Proposals
|
|
G
|
Change Of Company Name
|
|
H
|
Proposals Related To The Annual Meeting
|
|
I
|
Reimbursement Of Expenses Incurred From Candidate Nomination
|
|
J
|
Investment Company Proxies
|
|
K
|
International Proxy Voting
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These Guidelines may reflect a voting position that differs from the actual practices of the public company(ies) within the Deutsche Bank organization or of the investment companies for which AM or an affiliate serves as investment adviser or sponsor.
NOTE: Because of the unique structure and regulatory scheme applicable to closed-end investment companies, the voting guidelines (particularly those related to governance issues) generally will be inapplicable to holdings of closed-end investment companies. As a result, determinations on the appropriate voting recommendation for closed-end investment company shares will be made on a case-by-case basis.
I. Board of Directors and Executives
A. Election of Directors
Routine: AM Policy is to vote “for” the uncontested election of directors. Votes for a director in an uncontested election will be withheld in cases where a director has shown an inability to perform his/her duties in the best interests of the shareholders.
Proxy contest: In a proxy contest involving election of directors, a case-by-case voting decision will be made based upon analysis of the issues involved and the merits of the incumbent and dissident slates of directors. AM will incorporate the decisions of a third party proxy research vendor, currently, Institutional Shareholder Services (“ISS”) subject to review by the Proxy Voting Sub-Committee (GPVSC) as set forth in the AM’s Proxy Voting Policies and Procedures.
Rationale: The large majority of corporate directors fulfill their fiduciary obligation and in most cases support for management’s nominees is warranted. As the issues relevant to a contested election differ in each instance, those cases must be addressed as they arise.
B. Classified Boards of Directors
AM policy is to vote against proposals to classify the board and for proposals to repeal classified boards and elect directors annually.
Rationale: Directors should be held accountable on an annual basis. By entrenching the incumbent board, a classified board may be used as an anti-takeover device to the detriment of the shareholders in a hostile take-over situation.
C. Board and Committee Independence
AM policy is to vote:
|
1.
|
“For” proposals that require that a certain percentage (majority up to 66 2/3%) of members of a board of directors be comprised of independent or unaffiliated directors.
|
|
2.
|
“For” proposals that require all members of a company's compensation, audit, nominating, or other similar committees be comprised of independent or unaffiliated directors.
|
|
3.
|
“Against” shareholder proposals to require the addition of special interest, or constituency, representatives to boards of directors.
|
|
4.
|
“For” separation of the Chairman and CEO positions.
|
|
5.
|
“Against” proposals that require a company to appoint a Chairman who is an independent director.
|
Rationale: Board independence is a cornerstone of effective governance and accountability. A board that is sufficiently independent from management assures that shareholders' interests are adequately represented. However, the Chairman of the board must have sufficient involvement in and experience with the operations of the company to perform the functions required of that position and lead the company.
No director qualifies as 'independent' unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company).
Whether a director is in fact not "independent" will depend on the laws and regulations of the primary market for the security and the exchanges, if any, on which the security trades.
D. Liability and Indemnification of Directors
AM policy is to vote “for” management proposals to limit directors' liability and to broaden the indemnification of directors, unless broader indemnification or limitations on directors' liability would effect shareholders' interests in pending litigation.
Rationale: While shareholders want directors and officers to be responsible for their actions, it is not in the best interests of the shareholders for them to be to risk averse. If the risk of personal liability is too great, companies may not be able to find capable directors willing to serve. We support expanding coverage only for actions taken in good faith and not for serious violations of fiduciary obligation or negligence.
E. Qualifications of Directors
AM policy is to follow management’s recommended vote on either management or shareholder proposals that set retirement ages for directors or require specific levels of stock ownership by directors.
Rationale: As a general rule, the board of directors, and not the shareholders, is most qualified to establish qualification policies.
F. Removal of Directors and Filling of Vacancies
AM policy is to vote “against” proposals that include provisions that directors may be removed only for cause or proposals that include provisions that only continuing directors may fill board vacancies.
Rationale: Differing state statutes permit removal of directors with or without cause. Removal of directors for cause usually requires proof of self-dealing, fraud or misappropriation of corporate assets, limiting shareholders' ability to remove directors except under extreme circumstances. Removal without cause requires no such showing.
Allowing only incumbent directors to fill vacancies can serve as an anti-takeover device, precluding shareholders from filling the board until the next regular election.
G. Proposals to Fix the Size of the Board
AM policy is to vote:
|
1.
|
“For” proposals to fix the size of the board unless: (a) no specific reason for the proposed change is given; or (b) the proposal is part of a package of takeover defenses.
|
|
2.
|
“Against” proposals allowing management to fix the size of the board without shareholder approval.
|
Rationale: Absent danger of anti-takeover use, companies should be granted a reasonable amount of flexibility in fixing the size of its board.
H. Proposals to Restrict Chief Executive Officer’s Service on Multiple Boards
AM policy is to vote “For” proposals to restrict a Chief Executive Officer from serving on more than three outside boards of directors.
Rationale: Chief Executive Officer must have sufficient time to ensure that shareholders’ interests are represented adequately.
Note: A director’s service on multiple closed-end fund boards within a fund complex are treated as service on a single Board for the purpose of the proxy voting guidelines.
I. Proposals to Restrict Supervisory Board Members Service on Multiple Boards (For FFT Securities)
AM policy is to vote “for” proposals to restrict a Supervisory Board Member from serving on more than five supervisory boards.
Rationale: We consider a strong, independent and knowledgeable supervisory board as important counter-balance to executive management to ensure that the interests of shareholders are fully reflected by the company.
Full information should be disclosed in the annual reports and accounts to allow all shareholders to judge the success of the supervisory board controlling their company.
Supervisory Board Member must have sufficient time to ensure that shareholders’ interests are represented adequately.
Note: A director’s service on multiple closed-end fund boards within a fund complex are treated as service on a single Board for the purpose of the proxy voting guidelines.
J. Proposals to Establish Audit Committees (For FFT and U.S. Securities)
AM policy is to vote “for” proposals that require the establishment of audit committees.
Rationale: The audit committee should deal with accounting and risk management related questions, verifies the independence of the auditor with due regard to possible conflicts of interest. It also should determine the procedure of the audit process.
II. Capital Structure
A. Authorization of Additional Shares (For U.S. Securities)
AM policy is to vote “for” proposals to increase the authorization of existing classes of stock that do not exceed a 3:1 ratio of shares authorized to shares outstanding for a large cap company, and do not exceed a 4:1 ratio of shares authorized to shares outstanding for a small-midcap company (companies having a market capitalization under one billion U.S. dollars.).
Rationale: While companies need an adequate number of shares in order to carry on business, increases requested for general financial flexibility must be limited to protect shareholders from their potential use as an anti-takeover device. Requested increases for specifically designated, reasonable business purposes (stock split, merger, etc.) will be considered in light of those purposes and the number of shares required.
B. Authorization of “Blank Check” Preferred Stock (For U.S. Securities)
AM policy is to vote:
|
1.
|
“Against” proposals to create blank check preferred stock or to increase the number of authorized shares of blank check preferred stock unless the company expressly states that the stock will not be used for anti-takeover purposes and will not be issued without shareholder approval.
|
|
2.
|
“For” proposals mandating shareholder approval of blank check stock placement.
|
Rationale: Shareholders should be permitted to monitor the issuance of classes of preferred stock in which the board of directors is given unfettered discretion to set voting, dividend, conversion and other rights for the shares issued.
C. Stock Splits/Reverse Stock Splits
AM policy is to vote “for” stock splits if a legitimate business purpose is set forth and the split is in the shareholders' best interests. A vote is cast “for” a reverse stock split only if the number of shares authorized is reduced in the same proportion as the reverse split or if the effective increase in authorized shares (relative to outstanding shares) complies with the proxy guidelines for common stock increases (see, Section II.A, above.)
Rationale: Generally, stock splits do not detrimentally effect shareholders. Reverse stock splits, however, may have the same result as an increase in authorized shares and should be analyzed accordingly.
D. Dual Class/Supervoting Stock
AM policy is to vote “against” proposals to create or authorize additional shares of super-voting stock or stock with unequal voting rights.
Rationale: The “one share, one vote” principal ensures that no shareholder maintains a voting interest exceeding their equity interest in the company.
E. Large Block Issuance (For U.S. Securities)
AM policy is to address large block issuances of stock on a case-by-case basis, incorporating the recommendation of an independent third party proxy research firm (currently ISS) subject to review by the GPVSC as set forth in AM’s Proxy Policies and Procedures.
Additionally, AM supports proposals requiring shareholder approval of large block issuances.
Rationale: Stock issuances must be reviewed in light of the business circumstances leading to the request and the potential impact on shareholder value.
F. Recapitalization into a Single Class of Stock
AM policy is to vote “for” recapitalization plans to provide for a single class of common stock, provided the terms are fair, with no class of stock being unduly disadvantaged.
Rationale: Consolidation of multiple classes of stock is a business decision that may be left to the board and/management if there is no adverse effect on shareholders.
G. Share Repurchases
AM policy is to vote “for” share repurchase plans provided all shareholders are able to participate on equal terms.
Rationale: Buybacks are generally considered beneficial to shareholders because they tend to increase returns to the remaining shareholders.
H. Reductions in Par Value
AM policy is to vote “for” proposals to reduce par value, provided a legitimate business purpose is stated (e.g., the reduction of corporate tax responsibility.)
Rationale: Usually, adjustments to par value are a routine financial decision with no substantial impact on shareholders.
III. Corporate Governance Issues
A. Confidential Voting
AM policy is to vote “for” proposals to provide for confidential voting and independent tabulation of voting results and to vote “against” proposals to repeal such provisions.
Rationale: Confidential voting protects the privacy rights of all shareholders. This is particularly important for employee-shareholders or shareholders with business or other affiliations with the company, who may be vulnerable to coercion or retaliation when opposing management. Confidential voting does not interfere with the ability of corporations to communicate with all shareholders, nor does it prohibit shareholders from making their views known directly to management.
B. Cumulative Voting (For U.S. Securities)
AM policy is to vote “against” shareholder proposals requesting cumulative voting and “for”management proposals to eliminate it. The protections afforded shareholders by cumulative voting are not necessary when a company has a history of good performance and does not have a concentrated ownership interest. Accordingly, a vote is cast “against” cumulative voting and “for” proposals to eliminate it if:
|
a)
|
The company has a five year return on investment greater than the relevant industry index,
|
|
b)
|
All directors and executive officers as a group beneficially own less than 10% of the outstanding stock, and
|
|
c)
|
No shareholder (or voting block) beneficially owns 15% or more of the company.
|
Thus, failure of any one of the three criteria results in a vote for cumulative voting in accordance with the general policy.
Rationale: Cumulative voting is a tool that should be used to ensure that holders of a significant number of shares may have board representation; however, the presence of other safeguards may make their use unnecessary.
C. Supermajority Voting Requirements
AM policy is to vote “against” management proposals to require a supermajority vote to amend the charter or bylaws and to vote “for” shareholder proposals to modify or rescind existing supermajority requirements.
*Exception made when company holds a controlling position and seeks to lower threshold to maintain control and/or make changes to corporate by-laws.
Rationale: Supermajority voting provisions violate the democratic principle that a simple majority should carry the vote. Setting supermajority requirements may make it difficult or impossible for shareholders to remove egregious by-law or charter provisions. Occasionally, a company with a significant insider held position might attempt to lower a supermajority threshold to make it easier for management to approve provisions that may be detrimental to shareholders. In that case, it may not be in the shareholders interests to lower the supermajority provision.
D. Shareholder Right to Vote
AM policy is to vote “against” proposals that restrict the right of shareholders to call special meetings, amend the bylaws, or act by written consent. Policy is to vote “for” proposals that remove such restrictions.
Rationale: Any reasonable means whereby shareholders can make their views known to management or effect the governance process should be supported.
IV. Compensation
Annual Incentive Plans or Bonus Plans are often submitted to shareholders for approval. These plans typically award cash to executives based on company performance. Deutsche Bank believes that the responsibility for executive compensation decisions rest with the board of directors and/or the compensation committee, and its policy is not to second-guess the board’s award of cash compensation amounts to executives unless a particular award or series of awards is deemed excessive. If stock options are awarded as part of these bonus or incentive plans, the provisions must meet Deutsche Bank’s criteria regarding stock option plans, or similar stock-based incentive compensation schemes, as set forth below.
A. Establishment of a Remuneration Committee (For FFT Securities)
AM policy is to vote “for” proposals that require the establishment of a remuneration committee.
Rationale: Corporations should disclose in each annual report or proxy statement their policies on remuneration. Essential details regarding executive remuneration including share options, long-term incentive plans and bonuses, should be disclosed in the annual report, so that investors can judge whether corporate pay policies and practices meet the standard.
The remuneration committee shall not comprise any board members and should be sensitive to the wider scene on executive pay. It should ensure that performance-based elements of executive pay are designed to align the interests of shareholders.
B. Executive and Director Stock Option Plans
AM policy is to vote “for” stock option plans that meet the following criteria:
|
(1)
|
The resulting dilution of existing shares is less than (a) 15 percent of outstanding shares for large capital corporations or (b) 20 percent of outstanding shares for small-mid capital companies (companies having a market capitalization under one billion U.S. dollars.)
|
|
(2)
|
The transfer of equity resulting from granting options at less than FMV is no greater than 3% of the over-all market capitalization of large capital corporations, or 5% of market cap for small-mid capital companies.
|
|
(3)
|
The plan does not contain express repricing provisions and, in the absence of an express statement that options will not be repriced; the company does not have a history of repricing options.
|
|
(4)
|
The plan does not grant options on super-voting stock.
|
AM will support performance-based option proposals as long as a) they do not mandate that all options granted by the company must be performance based, and b) only certain high-level executives are subject to receive the performance based options.
AM will support proposals to eliminate the payment of outside director pensions.
Rationale: Determining the cost to the company and to shareholders of stock-based incentive plans raises significant issues not encountered with cash-based compensation plans. These include the potential dilution of existing shareholders' voting power, the transfer of equity out of the company resulting from the grant and execution of options at less than FMV and the authority to reprice or replace underwater options. Our stock option plan analysis model seeks to allow reasonable levels of flexibility for a company yet still protect shareholders from the negative impact of excessive stock compensation. Acknowledging that small mid-capital corporations often rely more heavily on stock option plans as their main source of executive compensation and may not be able to compete with their large capital competitors with cash compensation, we provide slightly more flexibility for those companies.
C. Employee Stock Option/Purchase Plans
AM policy is to vote for employee stock purchase plans (ESPP's) when the plan complies with Internal Revenue Code 423, allowing non-management employees to purchase stock at 85% of FMV.
AM policy is to vote “for” employee stock option plans (ESOPs) provided they meet the standards for stock option plans in general. However, when computing dilution and transfer of equity, ESOPs are considered independently from executive and director option plans.
Rationale: ESOPs and ESPP’s encourage rank-and-file employees to acquire an ownership stake in the companies they work for and have been shown to promote employee loyalty and improve productivity.
D. Golden Parachutes
AM policy is to vote “for” proposals to require shareholder approval of golden parachutes and for proposals that would limit golden parachutes to no more than three times base compensation. Policy is to vote “against” more restrictive shareholder proposals to limit golden parachutes.
Rationale: In setting a reasonable limitation, AM considers that an effective parachute should be less attractive than continued employment and that the IRS has opined that amounts greater than three times annual salary, are excessive.
E. Proposals to Limit Benefits or Executive Compensation
AM policy is to vote “against”
|
1.
|
Proposals to limit benefits, pensions or compensation and
|
|
2.
|
Proposals that request or require disclosure of executive compensation greater than the disclosure required by Securities and Exchange Commission (SEC) regulations.
|
Rationale: Levels of compensation and benefits are generally considered to be day-to-day operations of the company, and are best left unrestricted by arbitrary limitations proposed by shareholders.
F. Option Expensing
AM policy is to support proposals requesting companies to expense stock options.
Rationale: Although companies can choose to expense options voluntarily, the Financial Accounting Standards Board (FASB) does not yet require it, instead allowing companies to disclose the theoretical value of options as a footnote. Because the expensing of stock options lowers earnings, most companies elect not to do so. Given the fact that options have become an integral component of compensation and their exercise results in a transfer of shareholder value, AM agrees that their value should not be ignored and treated as “no cost” compensation. The expensing of stock options would promote more modest and appropriate use of stock options in executive compensation plans and present a more accurate picture of company operational earnings.
G. Management board election and motion (For FFT Securities)
AM policy is to vote “against”:
|
•
|
the election of board members with positions on either remuneration or audit committees;
|
|
•
|
the election of supervisory board members with too many supervisory board mandates;
|
|
•
|
“automatic” election of former board members into the supervisory board.
|
Rationale: Management as an entity, and each of its members, are responsible for all actions of the company, and are - subject to applicable laws and regulations - accountable to the shareholders as a whole for their actions.
Sufficient information should be disclosed in the annual company report and account to allow shareholders to judge the success of the company.
H. Remuneration (variable pay): (For FFT Securities)
Executive remuneration for Management Board
AM policy is to vote “for” remuneration for Management Board that is transparent and linked to results.
Rationale: Executive compensation should motivate management and align the interests of management with the shareholders. The focus should be on criteria that prevent excessive remuneration; but enable the company to hire and retain first-class professionals.
Shareholder interests are normally best served when management is remunerated to optimize long-term returns. Criteria should include suitable measurements like return on capital employed or economic value added.
Interests should generally also be correctly aligned when management own shares in the company – even more so if these shares represent a substantial portion of their own wealth.
Its disclosure shall differentiate between fixed pay, variable (performance related) pay and long-term incentives, including stock option plans with valuation ranges as well as pension and any other significant arrangements.
Executive remuneration for Supervisory Board
AM policy is to vote “for” remuneration for Supervisory Board that is at least 50% in fixed form.
Rationale: It would normally be preferable if performance linked compensation were not based on dividend payments, but linked to suitable result based parameters. Consulting and procurement services should also be published in the company report.
I. Long-term incentive plans (For FFT Securities)
AM policy is to vote “for” long-term incentive plans for members of a management board that reward for above average company performance.
Rationale: Incentive plans will normally be supported if they:
|
•
|
directly align the interests of members of management boards with those of shareholders;
|
|
•
|
establish challenging performance criteria to reward only above average performance;
|
|
•
|
measure performance by total shareholder return in relation to the market or a range of comparable companies;
|
|
•
|
are long-term in nature and encourage long-term ownership of the shares once exercised through minimum holding periods;
|
|
•
|
do not allow a repricing of the exercise price in stock option plans.
|
J. Shareholder Proposals Concerning “Pay for Superior Performance”
AM policy is to address pay for superior performance proposals on a case-by-case basis, incorporating the recommendation of an independent third party proxy research firm (currently ISS) subject to review by the GPVSC as set forth in AM’s Proxy Policies and Procedures.
Rationale: While AM agrees that compensation issues are better left to the discretion of management, they appreciate the need to monitor for excessive compensation practices on a case by case basis. If, after a review of the ISS metrics, AM is comfortable with ISS’s applying this calculation and will vote according to their recommendation.
K. Executive Compensation Advisory
AM policy is to follow management’s recommended vote on shareholder proposals to propose an advisory resolution seeking to ratify the compensation of the company’s named executive officers (NEOs) on an annual basis.
Rationale: AM believes that controls exist within senior management and corporate compensation committees, ensuring fair compensation to executives. This might allow shareholders to require approval for all levels of management’s compensation.
V. Anti-Takeover Related Issues
A. Shareholder Rights Plans (“Poison Pills”)
AM policy is to vote “for” proposals to require shareholder ratification of poison pills or that request boards to redeem poison pills, and to vote “against” the adoption of poison pills if they are submitted for shareholder ratification.
Rationale: Poison pills are the most prevalent form of corporate takeover defenses and can be (and usually are) adopted without shareholder review or consent. The potential cost of poison pills to shareholders during an attempted takeover outweighs the benefits.
B. Reincorporation
AM policy is to examine reincorporation proposals on a case-by-case basis. The voting decision is based on: (1) differences in state law between the existing state of incorporation and the proposed state of incorporation; and (2) differences between the existing and the proposed charter/bylaws/articles of incorporation and their effect on shareholder rights. If changes resulting from the proposed reincorporation violate the corporate governance principles set forth in these guidelines, the reincorporation will be deemed contrary to shareholder’s interests and a vote cast “against.”
Rationale: Reincorporations can be properly analyzed only by looking at the advantages and disadvantages to their shareholders. Care must be taken that anti-takeover protection is not the sole or primary result of a proposed change.
C. Fair-Price Proposals
AM policy is to vote “for” management fair-price proposals, provided that: (1) the proposal applies only to two-tier offers; (2) the proposal sets an objective fair-price test based on the highest price that the acquirer has paid for a company's shares; (3) the supermajority requirement for bids that fail the fair-price test is no higher than two-thirds of the outstanding shares; (4) the proposal contains no other anti-takeover provisions or provisions that restrict shareholders rights.
A vote is cast for shareholder proposals that would modify or repeal existing fair-price requirements that do not meet these standards.
Rationale: While fair price provisions may be used as anti-takeover devices, if adequate provisions are included, they provide some protection to shareholders who have some say in their application and the ability to reject those protections if desired.
D. Exemption from state takeover laws
AM policy is to vote “for” shareholder proposals to opt out of state takeover laws and to vote “against” management proposals requesting to opt out of state takeover laws.
Rationale: Control share statutes, enacted at the state level, may harm long-term share value by entrenching management. They also unfairly deny certain shares their inherent voting rights.
E. Non-financial Effects of Takeover Bids
Policy is to vote “against” shareholder proposals to require consideration of non-financial effects of merger or acquisition proposals.
Rationale: Non-financial effects may often be subjective and are secondary to AM’s stated purpose of acting in its client’s best economic interest.
VI. Mergers & Acquisitions
Evaluation of mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) are performed on a case-by-case basis incorporating information from an independent proxy research source (currently ISS.) Additional resources including portfolio management and research analysts may be considered as set forth in AM’s Policies and Procedures.
VII. Social, Environmental & Political Issues
Social and environmental issues are becoming increasingly important to corporate success. We incorporate social and environmental considerations into both our investment decisions and our proxy voting decisions – particularly if the financial performance of the company could be impacted. In addition, AM has incorporated the Principles for Responsible Investment (PRI) in these Proxy Voting Guidelines.
A. Labor & Human Rights
AM policy is to vote “against” adopting global codes of conduct or workplace standards exceeding those mandated by law.
Rationale: Additional requirements beyond those mandated by law are deemed unnecessary and potentially burdensome to companies
B. Diversity & Equality
|
1.
|
AM policy is to vote “against” shareholder proposals to force equal employment opportunity, affirmative action or board diversity.
|
Rationale: Compliance with State and Federal legislation along with information made available through filings with the EEOC provides sufficient assurance that companies act responsibly and make information public.
|
2.
|
AM policy is also to vote “against” proposals to adopt the Mac Bride Principles. The Mac Bride Principles promote fair employment, specifically regarding religious discrimination.
|
Rationale: Compliance with the Fair Employment Act of 1989 makes adoption of the Mac Bride Principles redundant. Their adoption could potentially lead to charges of reverse discrimination.
C. Health & Safety
|
1.
|
AM policy is to vote “against” adopting a pharmaceutical price restraint policy or reporting pricing policy changes.
|
Rationale: Pricing is an integral part of business for pharmaceutical companies and should not be dictated by shareholders (particularly pursuant to an arbitrary formula.) Disclosing pricing policies may also jeopardize a company’s competitive position in the marketplace.
|
2.
|
AM policy is to vote “against” shareholder proposals to control the use or labeling of and reporting on genetically engineered products.
|
Rationale: Additional requirements beyond those mandated by law are deemed unnecessary and potentially burdensome to companies.
D. Government/Military
|
1.
|
AM policy is to vote against shareholder proposals regarding the production or sale of military arms or nuclear or space-based weapons, including proposals seeking to dictate a company's interaction with a particular foreign country or agency.
|
Rationale: Generally, management is in a better position to determine what products or industries a company can and should participate in. Regulation of the production or distribution of military supplies is, or should be, a matter of government policy.
|
2.
|
AM policy is to vote “against” shareholder proposals regarding political contributions and donations.
|
Rationale: The Board of Directors and Management, not shareholders, should evaluate and determine the recipients of any contributions made by the company.
|
3.
|
AM policy is to vote “against” shareholder proposals regarding charitable contributions and donations.
|
Rationale: The Board of Directors and Management, not shareholders, should evaluate and determine the recipients of any contributions made by the company.
E. Tobacco
|
1.
|
AM policy is to vote “against” shareholder proposals requesting additional standards or reporting requirements for tobacco companies as well as “against” requesting companies to report on the intentional manipulation of nicotine content.
|
Rationale: Where a tobacco company’s actions meet the requirements of legal and industry standards, imposing additional burdens may detrimentally effect a company's ability to compete. The disclosure of nicotine content information could affect the company's rights in any pending or future litigation.
|
2.
|
Shareholder requests to spin-off or restructure tobacco businesses will be opposed.
|
Rationale: These decisions are more appropriately left to the Board and management, and not to shareholder mandate.
F. Principles for Responsible Investment
AM policy is to engage actively with companies on ESG issues and participate in collaborative engagement initiatives. In this context, AM is willing to participate in the development of policy, regulation and standard setting (such as promoting and protecting shareholder rights). AM could support shareholder initiatives and also file shareholder resolutions with long term ESG considerations and improved ESG disclosure, when applicable. In addition, AM could ask for standardized ESG reporting and issues to be integrated within annual financial reports.
G. Environmental Issues
AM policy is to vote “for” increased disclosure on CERES Principles, ESG issues or other similar environmental mandates (e.g., those relating to Greenhouse gas emissions or the use of nuclear power) and to follow management's recommended vote on all other matters related to the above issues.
Rationale: Environmental issues are extensively regulated by outside agencies and compliance with additional requirements often involves significant cost to companies.
VIII. Miscellaneous Items
A. Ratification of Auditors
AM policy is to vote “for” a) the management recommended selection of auditors and b) proposals to require shareholder approval of auditors.
Rationale: Absent evidence that auditors have not performed their duties adequately, support for management’s nomination is warranted.
B. Limitation of non-audit services provided by independent auditor
AM policy is to support proposals limiting non-audit fees to 50% of the aggregate annual fees earned by the firm retained as a company's independent auditor.
Rationale: In the wake of financial reporting problems and alleged audit failures at a number of companies, AM supports the general principle that companies should retain separate firms for audit and consulting services to avoid potential conflicts of interest. However, given the protections afforded by the recently enacted Sarbanes-Oxley Act of 2002 (which requires Audit Committee pre-approval for non-audit services and prohibits auditors from providing specific types of services), and the fact that some non-audit services are legitimate audit-related services, complete separation of audit and consulting fees may not be warranted. A reasonable limitation is appropriate to help ensure auditor independence and it is reasonable to expect that audit fees exceed non-audit fees.
C. Audit firm rotation
AM policy is to support proposals seeking audit firm rotation unless the rotation period sought is less than five years.
Rationale: While the Sarbanes-Oxley Act mandates that the lead audit partner be switched every five years, AM believes that rotation of the actual audit firm would provide an even stronger system of checks and balances on the audit function.
D. Transaction of Other Business
AM policy is to vote against “transaction of other business” proposals.
Rationale: This is a routine item to allow shareholders to raise other issues and discuss them at the meeting. As the nature of these issues may not be disclosed prior to the meeting, we recommend a vote against these proposals. This protects shareholders voting by proxy (and not physically present at a meeting) from having action taken at the meeting that they did not receive proper notification of or sufficient opportunity to consider.
E. Motions to Adjourn the Meeting
AM Policy is to vote against proposals to adjourn the meeting.
Rationale: Management may seek authority to adjourn the meeting if a favorable outcome is not secured. Shareholders should already have had enough information to make a decision. Once votes have been cast, there is no justification for management to continue spending time and money to press shareholders for support.
F. Bundled Proposals
AM policy is to vote against bundled proposals if any bundled issue would require a vote against it if proposed individually.
Rationale: Shareholders should not be forced to “take the good with the bad” in cases where the proposals could reasonably have been submitted separately.
G. Change of Company Name
AM policy is to support management on proposals to change the company name.
Rationale: This is generally considered a business decision for a company.
H. Proposals Related to the Annual Meeting
AM Policy is to vote in favor of management for proposals related to the conduct of the annual meeting (meeting time, place, etc.)
Rationale: These are considered routine administrative proposals.
I. Reimbursement of Expenses Incurred from Candidate Nomination
AM policy is to follow management’s recommended vote on shareholder proposals related to the amending of company bylaws to provide for the reimbursement of reasonable expenses incurred in connection with nominating one or more candidates in a contested election of directors to the corporation’s board of directors.
Rationale: Corporations should not be liable for costs associated with shareholder proposals for directors.
J. Investment Company Proxies
Proxies solicited by investment companies are voted in accordance with the recommendations of an independent third party, currently ISS. However, regarding investment companies for which AM or an affiliate serves as investment adviser or principal underwriter, such proxies are voted in the same proportion as the vote of all other shareholders. Proxies solicited by master funds from feeder funds will be voted in accordance with applicable provisions of Section 12 of the Investment Company Act of 1940.
Investment companies, particularly closed-end investment companies, are different from traditional operating companies. These differences may call for differences in voting positions on the same matter. For example, AM could vote “for” staggered boards of closed-end investment companies, although AM generally votes “against” staggered boards for operating companies. Further, the manner in which AM votes investment company proxies may differ from proposals for which a AM-advised investment company solicits proxies from its shareholders. As reflected in the Guidelines, proxies solicited by closed-end (and open-end) investment companies are voted in accordance with the pre-determined guidelines of an independent third-party.
Subject to participation agreements with certain Exchange Traded Funds ("ETF") issuers that have received exemptive orders from the U.S. Securities and Exchange Commission allowing investing DWS funds to exceed the limits set forth in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of outstanding voting shares globally when required to do so by participation agreements and SEC orders.
Note: With respect to the Central Cash Management Fund (registered under the Investment Company Act of 1940), the Fund is not required to engage in echo voting and the investment adviser will use these Guidelines, and may determine, with respect to the Central Cash Management Fund, to vote contrary to the positions in the Guidelines, consistent with the Fund’s best interest.
K. International Proxy Voting
The above guidelines pertain to issuers organized in the United States, Canada and Germany. Proxies solicited by other issuers are voted in accordance with international guidelines or the recommendation of ISS and in accordance with applicable law and regulation.
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ITEM 8.
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PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
|
Portfolio Manager Team Disclosure
The Fund is managed by a Team of investment professionals who collaborate to develop and implement the Fund’s investment strategy. Each Portfolio Manager on the Team has authority over all aspects of the Fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings.
The following individuals handle the day-to-day management of the Fund.
John F. Robertson, CFA
Managing Director of Deutsche Asset Management and of RREEF and Co-Manager of the Fund.
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·
|
Joined RREEF in 1997, Deutsche Asset Management 2002 and the Fund in 2002.
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|
·
|
Prior to that, Assistant Vice President of Lincoln Investment Management responsible for REIT research.
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·
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Global Head of RREEF Real Estate Securities with over 18 years of investment industry experience.
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|
·
|
BA, Wabash College; MBA, Indiana University.
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Jerry W. Ehlinger, CFA
Managing Director of Deutsche Asset Management and of RREEF and Co-Manager of the Fund.
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·
|
Joined RREEF and Deutsche Asset Management in 2004 and the Fund in 2005.
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·
|
Prior to that, Senior Vice President at Heitman Real Estate Investment Management from 2000-2004.
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|
·
|
Prior to that, Senior Research Associate at Morgan Stanley Asset Management from 1996-2000.
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·
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Over 13 years of investment industry experience.
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·
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BA, University of Wisconsin-Whitewater, MS, University of Wisconsin-Madison.
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John W. Vojticek
Managing Director of Deutsche Asset Management and of RREEF and Co-Manager of the Fund.
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·
|
Joined RREEF and Deutsche Asset Management in 2004 and the Fund in 2004.
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·
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Prior to that, Principal at KG Redding and Associates, March 2004–September 2004.
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·
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Prior to that, Managing Director of RREEF from 1996–March 2004 and Deutsche Asset Management from 2002–March 2004.
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·
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Over 13 years of investment industry experience.
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|
·
|
BS, University of Southern California.
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Compensation of Portfolio Managers
Portfolio managers are paid on a Total Compensation basis, which includes: (i) fixed pay (base salary), which is linked to job function, responsibilities and internal and external peer comparison, and (ii) variable pay , which is linked to investment performance, individual contributions to the team, and the overall financial results of both Deutsche Asset Management and Deutsche Bank AG. Variable pay can be delivered via a short-term and/or long-term vehicle, namely cash, restricted equity awards, and/or restricted incentive awards. Variable pay comprises a greater proportion of total compensation as the portfolio manager’s seniority and total compensation level increase. The proportion of variable pay delivered via a long-term incentive award, which is subject to clawback, will increase significantly as the amount of variable pay increases. All variable pay delivered via a long-term incentive award is subject to clawback.
To evaluate its investment professionals, Deutsche Asset Management reviews investment performance for all accounts managed in relation to both account peer group and benchmark related data (i.e., appropriate Morningstar and Lipper peer group universes and/or benchmark index(es) with respect to each account). The ultimate goal of this process is to evaluate the degree to which investment professionals deliver investment performance that meets or exceeds their clients’ risk and return objectives. When determining Total Compensation, Deutsche Asset Management considers a number of quantitative and qualitative factors:
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·
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Quantitative measures (e.g. one-, three- and five-year pre-tax returns versus the benchmark and appropriate peer group, taking risk targets into account) are utilized to measure performance.
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·
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Qualitative measures (e.g. adherence to, as well as contributions to, the enhancement of the investment process) are included in the performance review.
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·
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Other factors (e.g. teamwork, adherence to compliance rules, risk management and "living the values" of Deutsche Asset Management) are included as part of a discretionary component of the review process, giving management the ability to consider additional markers of performance on a subjective basis.
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Fund Ownership of Portfolio Managers
The following table shows the dollar range of shares owned beneficially and of record by each member of the Fund’s portfolio management team in the Fund as well as in all DWS Funds as a group (i.e. those funds advised by Deutsche Asset Management or its affiliates), including investments by their immediate family members sharing the same household and amounts invested through retirement and deferred compensation plans. This information is provided as of the Fund’s most recent fiscal year end.
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Name of Portfolio Manager
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Dollar Range of
Fund Shares Owned
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Dollar Range of All DWS Fund Shares Owned
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||||||
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John F. Robertson
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- |
Over $1,000,000
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||||||
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Jerry W. Ehlinger
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- | $ | 100,001 - $500,000 | |||||
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John W. Vojticek
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- | $ | 100,001 - $500,000 | |||||
Conflicts of Interest
In addition to managing the assets of the Fund, the Fund’s portfolio managers may have responsibility for managing other client accounts of the Advisor or its affiliates. The tables below show, for each portfolio manager, the number and asset size of (1) SEC registered investment companies (or series thereof) other than the Fund, (2) pooled investment vehicles that are not registered investment companies and (3) other accounts (e.g., accounts managed for individuals or organizations) managed by each portfolio manager. Total assets attributed to each portfolio manager in the tables below include total assets of each account managed by them, although the manager may only manage a portion of such account’s assets. For Funds subadvised by subadvisors unaffiliated with DIMA, total assets of Funds managed may only include assets allocated to the portfolio manager and not the total assets of each Fund managed. The tables also show the number of performance based fee accounts, as well as the total assets of the accounts for which the advisory fee is based on the performance of the account. This information is provided as of the Fund’s most recent fiscal year end.
Other SEC Registered Investment Companies Managed:
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Name of Portfolio Manager
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Number of Registered Investment Companies
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Total Assets of Registered Investment Companies
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Number of Investment Company Accounts with Performance Based Fee
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Total Assets of Performance- Based Fee Accounts
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||||||||||||
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John F. Robertson
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7 | $ | 3,689,774,475 | - | - | |||||||||||
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Jerry W. Ehlinger
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6 | $ | 3,578,024,532 | - | - | |||||||||||
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John W. Vojticek
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7 | $ | 3,689,774,475 | - | - | |||||||||||
Other Pooled Investment Vehicles Managed:
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Name of Portfolio Manager
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Number of Pooled Investment Vehicles
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Total Assets of Pooled Investment Vehicles
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Number of Pooled Investment Vehicle Accounts with Performance-Based Fee
|
Total Assets of Performance- Based Fee Accounts
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||||||||||||
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John F. Robertson
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12 | $ | 4,227,878,424 | - | - | |||||||||||
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Jerry W. Ehlinger
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11 | $ | 1,962,027,649 | - | - | |||||||||||
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John W. Vojticek
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12 | $ | 4,227,878,424 | - | - | |||||||||||
Other Accounts Managed:
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Name of Portfolio Manager
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Number of Other Accounts
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Total Assets of Other Accounts
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Number of Other Accounts with Performance- Based Fee
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Total Assets of Performance- Based Fee Accounts
|
||||||||||||
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John F. Robertson
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39 | $ | 4,485,535,632 | 4 | $ | 339,874,729 | ||||||||||
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Jerry W. Ehlinger
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39 | $ | 4,485,535,632 | 4 | $ | 339,874,729 | ||||||||||
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John W. Vojticek
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39 | $ | 4,485,535,632 | 4 | $ | 339,874,729 | ||||||||||
In addition to the accounts above, an investment professional may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the Funds. The Advisor has in place a Code of Ethics that is designed to address conflicts of interest and that, among other things, imposes restrictions on the ability of portfolio managers and other “access persons” to invest in securities that may be recommended or traded in the Funds and other client accounts.
Real, potential or apparent conflicts of interest may arise when a portfolio manager has day-to-day portfolio management responsibilities with respect to more than one fund or account, including the following:
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·
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Certain investments may be appropriate for the Fund and also for other clients advised by the Advisor, including other client accounts managed by the Fund’s portfolio management team. Investment decisions for the Fund and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. A particular security may be bought or sold for only one client or in different amounts and at different times for more than one but less than all clients. Likewise, because clients of the Advisor may have differing investment strategies, a particular security may be bought for one or more clients when one or more other clients are selling the security. The investment results achieved for the Fund may differ from the results achieved for other clients of the Advisor. In addition, purchases or sales of the same security may be made for two or more clients on the same day. In such event, such transactions will be allocated among the clients in a manner believed by the Advisor to be most equitable to each client, generally utilizing a pro rata allocation methodology. In some cases, the allocation procedure could potentially have an adverse effect or positive effect on the price or amount of the securities purchased or sold by the Fund. Purchase and sale orders for the Fund may be combined with those of other clients of the Advisor in the interest of achieving the most favorable net results to the Fund and the other clients.
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·
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To the extent that a portfolio manager has responsibilities for managing multiple client accounts, a portfolio manager will need to divide time and attention among relevant accounts. The Advisor attempts to minimize these conflicts by aligning its portfolio management teams by investment strategy and by employing similar investment models across multiple client accounts.
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·
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In some cases, an apparent conflict may arise where the Advisor has an incentive, such as a performance-based fee, in managing one account and not with respect to other accounts it manages. The Advisor will not determine allocations based on whether it receives a performance-based fee from the client. Additionally, the Advisor has in place supervisory oversight processes to periodically monitor performance deviations for accounts with like strategies.
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·
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The Advisor and its affiliates and the investment team of each Fund may manage other mutual funds and separate accounts on a long only or a long-short basis. The simultaneous management of long and short portfolios creates potential conflicts of interest including the risk that short sale activity could adversely affect the market value of the long positions (and vice versa), the risk arising from sequential orders in long and short positions, and the risks associated with receiving opposing orders at the same time. The Advisor has adopted procedures that it believes are reasonably designed to mitigate these and other potential conflicts of interest. Included in these procedures are specific guidelines developed to provide fair and equitable treatment for all clients whose accounts are managed by each Fund’s portfolio management team. The Advisor and the portfolio management team have established monitoring procedures, a protocol for supervisory reviews, as well as compliance oversight to ensure that potential conflicts of interest relating to this type of activity are properly addressed.
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The Advisor is owned by Deutsche Bank AG, a multi-national financial services company. Therefore, the Advisor is affiliated with a variety of entities that provide, and/or engage in commercial banking, insurance, brokerage, investment banking, financial advisory, broker-dealer activities (including sales and trading), hedge funds, real estate and private equity investing, in addition to the provision of investment management services to institutional and individual investors. Since Deutsche Bank AG, its affiliates, directors, officers and employees (the “Firm”) are engaged in businesses and have interests in addition to managing asset management accounts, such wide ranging activities involve real, potential or apparent conflicts of interest. These interests and activities include potential advisory, transactional and financial activities and other interests in securities and companies that may be directly or indirectly purchased or sold by the Firm for its clients’ advisory accounts. The Advisor may take investment positions in securities in which other clients or related persons within the Firm have different investment positions. There may be instances in which the Advisor is purchasing or selling for its client accounts, or pursuing an outcome in the context of a workout or restructuring with respect to, securities in which the Firm is undertaking the same or differing strategy in other businesses or other client accounts. These are considerations of which advisory clients should be aware and which may cause conflicts that could be to the disadvantage of the Advisor’s advisory clients, including the Fund. The Advisor has instituted business and compliance policies, procedures and disclosures that are designed to identify, monitor and mitigate conflicts of interest and, as appropriate, to report them to a Fund’s Board.
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ITEM 9.
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PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
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|
DWS RREEF Real Estate Fund, Inc.
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||||||||||||||||
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Item 9 of Form N-CSR - Repurchase Disclosure
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||||||||||||||||
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Period
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(a)
|
(b)
|
(c)
|
(d)
|
||||||||||||
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Shares Purchased
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Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
|
|||||||||||||
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January 1 through January 31
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0 | $ | 0 | n/a | n/a | |||||||||||
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February 1 through February 28
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0 | $ | 0 | n/a | n/a | |||||||||||
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March 1 through March 31
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0 | $ | 0 | n/a | n/a | |||||||||||
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April 1 through April 30
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0 | $ | 0 | n/a | n/a | |||||||||||
|
May 1 through May 31
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0 | $ | 0 | n/a | n/a | |||||||||||
|
June 1 through June 30
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0 | $ | 0 | n/a | n/a | |||||||||||
|
July 1 through July 31
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0 | $ | 0 | n/a | n/a | |||||||||||
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August 1 through August 31
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0 | $ | 0 | n/a | n/a | |||||||||||
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September 1 through September 30
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0 | $ | 0 | n/a | n/a | |||||||||||
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October 1 through October 31
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0 | $ | 0 | n/a | n/a | |||||||||||
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November 1 through November 30
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0 | $ | 0 | n/a | n/a | |||||||||||
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December 1 through December 31
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0 | $ | 0 | n/a | n/a | |||||||||||
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Total
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0 | $ | 0 | n/a | n/a | |||||||||||
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ITEM 10.
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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|
|
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 Paul K. Freeman, Independent Chairman, DWS Funds, P.O. Box 101833, Denver, CO 80250-1833.
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||
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ITEM 11.
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CONTROLS AND PROCEDURES
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|
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(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.
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|
|
(b)
|
There have been no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.
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|
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ITEM 12.
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EXHIBITS
|
|
|
(a)(1)
|
Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.
|
|
|
(a)(2)
|
Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.
|
|
|
(b)
|
Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.
|
|
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Registrant:
|
DWS RREEF Real Estate Fund, Inc.
|
|
By:
|
/s/Michael G. Clark
Michael G. Clark
President
|
|
Date:
|
March 1, 2011
|
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/Michael G. Clark
Michael G. Clark
President
|
|
Date:
|
March 1, 2011
|
|
By:
|
/s/Paul Schubert
Paul Schubert
Chief Financial Officer and Treasurer
|
|
Date:
|
March 1, 2011
|