SEC Info - Deutsche Variable Series II - ‘N-CSRS’ for 6/30/14

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Alternative Asset Allocation VIP

(formerly DWS Alternative Asset Allocation VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

6 Portfolio Summary

6 Portfolio Management

7 Investment Portfolio

8 Statement of Assets and Liabilities

8 Statement of Operations

9 Statement of Changes in Net Assets

10 Financial Highlights

12 Notes to Financial Statements

16 Information About Your Fund's Expenses

17 Proxy Voting

18 Advisory Agreement Board Considerations and Fee Evaluation

This report must be preceded or accompanied by a prospectus. To obtain an additional prospectus or summary prospectus, if available, call (800) 728-3337 or your financial representative. We advise you to consider the Fund's objectives, risks, charges and expenses carefully before investing. The summary prospectus and prospectus contain this and other important information about the Fund. Please read the prospectus carefully before you invest.

Although allocation among different asset categories generally limits risk, Fund management may favor an asset category that underperforms other assets or markets as a whole. The Fund expects to invest in underlying funds that emphasize alternatives or non-traditional asset categories or investment strategies, and as a result, it is subject to the risk factors of those underlying funds. Some of those risks include stock market risk, credit and interest rate risk, volatility in commodity prices and high-yield debt securities, market direction risk (market advances when short, market declines when long), short sales risk and the political, general economic, liquidity and currency risks of foreign investments, which may be particularly significant for emerging markets. Because Exchange Traded Funds (ETFs) trade on a securities exchange, their shares may trade at a premium or discount to their net asset value. ETFs also incur fees and expenses so they may not fully match the performance of the indexes they are designed to track. Short sales — which involve selling borrowed securities in anticipation of a price decline, then returning an equal number of the securities at some point in the future — could magnify losses and increase volatility. The Fund may use derivatives, including as part of its currency and interest-rate strategies. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The success of the Fund's currency and interest-rate strategies are dependent, in part, on the effectiveness and implementation of portfolio management's proprietary models. As part of these strategies, the Fund's exposure to foreign currencies could cause lower returns or even losses because foreign currency rates may fluctuate significantly over short periods of time for a number of reasons. The risk of loss is heightened during periods of rapid rises in interest rates. In addition, the notional amount of the Fund's aggregate currency and interest-rate exposure resulting from these strategies may significantly exceed the net assets of the Fund. See the prospectus for additional risks and specific details regarding the Fund's risk profile.

Deutsche Asset & Wealth Management represents the asset management and wealth management activities conducted by Deutsche Bank AG or any of its subsidiaries, including the Advisor and DeAWM Distributors, Inc.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

I am very pleased to tell you that the DWS funds have been renamed Deutsche funds, aligning more closely with the Deutsche Asset & Wealth Management brand. We are proud to adopt the Deutsche name — a brand that fully represents the global access, discipline and intelligence that support all of our products and services.

Deutsche Asset & Wealth Management combines the asset management and wealth management divisions of Deutsche Bank to deliver a comprehensive suite of active, passive and alternative investment capabilities. Your investment in the Deutsche funds means you have access to the thought leadership and resources of one of the world’s largest and most influential financial institutions.

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

These changes have no effect on the day-to-day management of your investment, and there is no action required on your part. You will continue to experience the benefits that come from our decades of experience, in-depth research and worldwide network of investment professionals.

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Graphic -- Picture -- binderphoto225.jpg

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

Fund performance shown is historical, assumes reinvestment of all dividend and capital gain distributions and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please contact your participating insurance company for the Fund's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. While all share classes have the same underlying portfolio, their performance will differ.

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 are 1.87% and 2.16% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report. These expense ratios include net expenses of the underlying funds in which the Fund invests.

Growth of an Assumed $10,000 Investment in Deutsche Alternative Asset Allocation VIP from 2/2/09 to 6/30/14
	The Morgan Stanley Capital International (MSCI) World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The index consists of 24 developed market country indices. The index is calculated using closing local market prices and translates into U.S. dollars using the London close foreign exchange rates. The Barclays U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with an average maturity of one year or more. The Blended Index is calculated using the performance of two unmanaged indices, representative of stocks (the MSCI World Index (70%)) and bonds (the Barclays U.S. Aggregate Bond Index (30%)). These results are summed to produce the aggregate benchmark. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Alternative Asset Allocation VIP		6-Month‡			1-Year			3-Year			5-Year			Life of Fund*
Class A	Growth of $10,000	$	10,596		$	10,914		$	11,122		$	14,508		$	16,191
Class A	Average annual total return		5.96	%		9.14	%		3.61	%		7.73	%		9.31	%
MSCI World Index	Growth of $10,000	$	10,618		$	12,405		$	13,977		$	20,103		$	23,432
MSCI World Index	Average annual total return		6.18	%		24.05	%		11.81	%		14.99	%		17.03	%
Barclays U.S. Aggregate Bond Index	Growth of $10,000	$	10,393		$	10,437		$	11,140		$	12,674		$	13,030
Barclays U.S. Aggregate Bond Index	Average annual total return		3.93	%		4.37	%		3.66	%		4.85	%		5.01	%
Blended Index	Growth of $10,000	$	10,555		$	11,790		$	13,170		$	17,769		$	20,023
Blended Index	Average annual total return		5.55	%		17.90	%		9.61	%		12.18	%		13.68	%

The growth of $10,000 is cumulative.

* The Fund commenced offering Class A shares on February 2, 2009. The performance shown for each index is for the time period of January 31, 2009 through June 30, 2014, which is based on the performance period of the life of the Fund.

Comparative Results
Deutsche Alternative Asset Allocation VIP		6-Month‡			1-Year			3-Year			5-Year			Life of Class**
Class B	Growth of $10,000	$	10,584		$	10,885		$	11,044		$	14,330		$	14,699
Class B	Average annual total return		5.84	%		8.85	%		3.37	%		7.46	%		7.82	%
MSCI World Index	Growth of $10,000	$	10,618		$	12,405		$	13,977		$	20,103		$	20,012
MSCI World Index	Average annual total return		6.18	%		24.05	%		11.81	%		14.99	%		14.62	%
Barclays U.S. Aggregate Bond Index	Growth of $10,000	$	10,393		$	10,437		$	11,140		$	12,674		$	12,746
Barclays U.S. Aggregate Bond Index	Average annual total return		3.93	%		4.37	%		3.66	%		4.85	%		4.89	%
Blended Index	Growth of $10,000	$	10,555		$	11,790		$	13,170		$	17,769		$	17,751
Blended Index	Average annual total return		5.55	%		17.90	%		9.61	%		12.18	%		11.95	%

The growth of $10,000 is cumulative.

** The Fund commenced offering Class B shares on May 18, 2009. The performance shown for each index is for the time period of May 31, 2009 through June 30, 2014, which is based on the performance period of the life of Class B.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation* (As a % of Investment Portfolio excluding Cash Equivalents)	6/30/14	12/31/13

Commodities	12%	13%
Deutsche Enhanced Commodity Strategy Fund	12%	13%
Real Return	32%	29%
Deutsche Global Infrastructure Fund	19%	16%
Deutsche Global Inflation Fund	7%	6%
Deutsche Real Estate Securities Fund	3%	—
Deutsche Global Real Estate Securities Fund	3%	3%
Deutsche Real Estate Securities Income Fund	0%	—
SPDR Barclays Short Term High Yield Bond ETF	—	4%
Hedge Strategy	12%	16%
Deutsche Diversified Market Neutral Fund	12%	16%
Currency	15%	13%
Deutsche Enhanced Emerging Markets Fixed Income Fund	14%	11%
WisdomTree Emerging Markets Local Debt Fund	1%	—
PowerShares DB U.S. Dollar Index Bullish ETF	—	2%
Opportunistic	29%	29%
Deutsche Floating Rate Fund	16%	16%
SPDR Barclays Convertible Securities ETF	13%	13%
	100%	100%

* Investment strategies will fall into the following categories: Commodities, Real-Return, Hedge Strategy, Currency and Opportunistic. Commodities investments seek to provide exposure to hard assets. Real-Return investments seek to provide a measure of inflation protection. Hedge Strategy investments seek to generate returns independent of the broader markets. Currency investments seek to offer exposure to foreign investments, many of which are not denominated in U.S. dollars. Opportunistic investments seek to offer exposure to categories generally not included in investors' allocations.

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 7.

Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The Fund's portfolio holdings are also posted on deutschefunds.com from time to time. Please see the Fund's current prospectus for more information.

Portfolio Management

Pankaj Bhatnagar, PhD

Darwei Kung

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Mutual Funds 84.3%
Deutsche Diversified Market Neutral Fund "Institutional" (a)		1,473,302		12,788,261
Deutsche Enhanced Commodity Strategy Fund "Institutional" (a)		782,293		12,594,916
Deutsche Enhanced Emerging Markets Fixed Income Fund "Institutional" (a)		1,351,442		14,622,604
Deutsche Floating Rate Fund "Institutional" (a)		1,742,804		16,469,494
Deutsche Global Inflation Fund "Institutional" (a)		726,343		7,459,547
Deutsche Global Infrastructure Fund "Institutional" (a)		1,337,045		20,416,682
Deutsche Global Real Estate Securities Fund "Institutional" (a)		357,802		3,202,325
Deutsche Real Estate Securities Fund "Institutional" (a)		152,168		3,467,916
Deutsche Real Estate Securities Income Fund "Institutional" (a)		28,717		313,011
Total Mutual Funds (Cost $86,005,326)				91,334,756
	Shares		Value ($)

Exchange-Traded Funds 13.4%
SPDR Barclays Convertible Securities		265,714		13,418,557
WisdomTree Emerging Markets Local Debt Fund		22,500		1,069,650
Total Exchange-Traded Funds (Cost $12,669,866)				14,488,207

Cash Equivalents 3.3%
Central Cash Management Fund, 0.06% (a) (b) (Cost $3,608,351)		3,608,351		3,608,351

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $102,283,543)†		101.0			109,431,314
Other Assets and Liabilities, Net		(1.0	)		(1,098,665	)
Net Assets		100.0			108,332,649

† The cost for federal income tax purposes was $103,460,245. At June 30, 2014, net unrealized depreciation for all securities based on tax cost was $5,971,069. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $8,300,074 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,329,005.

(a) Affiliated fund managed by Deutsche Investment Management Americas Inc.

(b) The rate shown is the annualized seven-day yield at period end.

SPDR: Standard & Poor's Depositary Receipt

Fair Value Measurements

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.

The following is a summary of the inputs used as of June 30, 2014 in valuing the Fund's investments. For information on the Fund's policy regarding the valuation of investments, please refer to the Security Valuation section of Note A in the accompanying Notes to Financial Statements.

Assets	Level 1		Level 2		Level 3		Total

Mutual Funds	$	91,334,756	$	—	$	—	$	91,334,756
Exchange-Traded Funds		14,488,207		—		—		14,488,207
Short-Term Investments		3,608,351		—		—		3,608,351
Total	$	109,431,314	$	—	$	—	$	109,431,314

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in affiliated Underlying Funds, at value (cost $89,613,677)	$	94,943,107
Investments in non-affiliated Underlying Funds, at value (cost $12,669,866)		14,488,207
Total investments in securities, at value (cost $102,283,543)		109,431,314
Receivable for Fund shares sold		108,013
Dividends receivable		3,073
Other assets		987
Total assets		109,543,387
Liabilities
Payable for investments purchased		1,068,806
Payable for Fund shares redeemed		51,028
Accrued management fee		6,013
Accrued Trustees' fees		35
Other accrued expenses and payables		84,856
Total liabilities		1,210,738
Net assets, at value	$	108,332,649
Net Assets Consist of
Undistributed net investment income		679,038
Net unrealized appreciation (depreciation) on investments		7,147,771
Accumulated net realized gain (loss)		(2,225,512	)
Paid-in capital		102,731,352
Net assets, at value	$	108,332,649
Class A Net Asset Value, offering and redemption price per share ($18,005,669 ÷ 1,267,242 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	14.21
Class B Net Asset Value, offering and redemption price per share ($90,326,980 ÷ 6,353,933 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	14.22

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Income distributions from affiliated Underlying Funds	$	846,777
Dividends		133,612
Total income		980,389
Expenses: Management fee		169,938
Administration fee		50,364
Services to shareholders		1,252
Record keeping fees (Class B)		17,811
Distribution service fee (Class B)		105,962
Custodian fee		7,608
Professional fees		31,994
Reports to shareholders		23,982
Trustees' fees and expenses		3,223
Other		1,142
Total expenses before expense reductions		413,276
Expense reductions		(146,149	)
Total expenses after expense reductions		267,127
Net investment income (loss)		713,262
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Sale of affiliated Underlying Funds		(1,153,444	)
Sale of non-affiliated Underlying Funds		45,145
Capital gain distributions from affiliated Underlying Funds		36,995
		(1,071,304	)
Change in net unrealized appreciation (depreciation) on investments		6,141,193
Net gain (loss)		5,069,889
Net increase (decrease) in net assets resulting from operations	$	5,783,151

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	713,262		$	1,387,313
Operations: Net investment income	$	713,262		$	1,387,313
Net realized gain (loss)		(1,071,304	)		993,026
Change in net unrealized appreciation (depreciation)		6,141,193			(1,638,087	)
Net increase (decrease) in net assets resulting from operations		5,783,151			742,252
Distributions to shareholders from: Net investment income: Class A		(310,914	)		(218,625	)
Class B		(1,375,733	)		(1,281,892	)
Net realized gains: Class A		(99,727	)		—
Class B		(510,421	)		—
Total distributions		(2,296,795	)		(1,500,517	)
Fund share transactions: Class A Proceeds from shares sold		2,700,280			6,694,957
Reinvestment of distributions		410,641			218,625
Payments for shares redeemed		(376,648	)		(2,104,739	)
Net increase (decrease) in net assets from Class A share transactions		2,734,273			4,808,843
Class B Proceeds from shares sold		6,933,984			31,914,829
Reinvestment of distributions		1,886,154			1,281,892
Payments for shares redeemed		(5,469,899	)		(10,503,907	)
Net increase (decrease) in net assets from Class B share transactions		3,350,239			22,692,814
Increase (decrease) in net assets		9,570,868			26,743,392
Net assets at beginning of period		98,761,781			72,018,389
Net assets at end of period (including undistributed net investment income of $679,038 and $1,652,423, respectively)	$	108,332,649		$	98,761,781
Other Information
Class A Shares outstanding at beginning of period		1,072,115			720,220
Shares sold		192,454			490,282
Shares issued to shareholders in reinvestment of distributions		29,692			15,638
Shares redeemed		(27,019	)		(154,025	)
Net increase (decrease) in Class A shares		195,127			351,895
Shares outstanding at end of period		1,267,242			1,072,115
Class B Shares outstanding at beginning of period		6,114,865			4,466,071
Shares sold		494,775			2,327,269
Shares issued to shareholders in reinvestment of distributions		136,283			91,629
Shares redeemed		(391,990	)		(770,104	)
Net increase (decrease) in Class B shares		239,068			1,648,794
Shares outstanding at end of period		6,353,933			6,114,865

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			Period Ended 12/31/09a
Selected Per Share Data
Net asset value, beginning of period	$	13.75		$	13.90		$	13.24		$	13.85		$	12.63		$	10.00
Income (loss) from investment operations: Net investment incomeb		.12			.26			.33			.64			.46			.57
Net realized and unrealized gain (loss)		.70			(.13	)		.93			(1.02	)		1.09			2.06
Total from investment operations		.82			.13			1.26			(.38	)		1.55			2.63
Less distributions from: Net investment income		(.27	)		(.28	)		(.49	)		(.19	)		(.18	)		—
Net realized gains		(.09	)		—			(.11	)		(.04	)		(.15	)		—
Total distributions		(.36	)		(.28	)		(.60	)		(.23	)		(.33	)		—
Net asset value, end of period	$	14.21		$	13.75		$	13.90		$	13.24		$	13.85		$	12.63
Total Return (%)c,d		5.96	**		.93			9.72			(2.87	)		12.46			26.30
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		18			15			10			7			5			1
Ratio of expenses before expense reductions (%)e		.58	*		.64			.63			.61			.94			11.67
Ratio of expenses after expense reductions (%)e		.32	*		.27			.30			.30			.21			.21
Ratio of net investment income (%)		1.66	*		1.86			2.46			4.72			3.51			5.39
Portfolio turnover rate (%)		18	**		40			22			39			6			155
a For the period from February 2, 2009 (commencement of operations of Class A shares) to December 31, 2009. b Based on average shares outstanding during the period. c Total return would have been lower had certain expenses not been reduced. d Total return would have been lower if the Advisor had not reduced some Underlying Deutsche Funds' expenses. e The Fund invests in other Funds and indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which the Fund is invested. This ratio does not include these indirect fees and expenses. * Annualized ** Not annualized

				Years Ended December 31,
Class B	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			Period Ended 12/31/09a
Selected Per Share Data
Net asset value, beginning of period	$	13.74		$	13.88		$	13.23		$	13.84		$	12.61		$	10.87
Income (loss) from investment operations: Net investment incomeb		.09			.22			.30			.61			.42			.35
Net realized and unrealized gain (loss)		.71			(.11	)		.91			(1.03	)		1.09			1.39
Total from investment operations		.80			.11			1.21			(.42	)		1.51			1.74
Less distributions from: Net investment income		(.23	)		(.25	)		(.45	)		(.15	)		(.13	)		—
Net realized gains		(.09	)		—			(.11	)		(.04	)		(.15	)		—
Total distributions		(.32	)		(.25	)		(.56	)		(.19	)		(.28	)		—
Net asset value, end of period	$	14.22		$	13.74		$	13.88		$	13.23		$	13.84		$	12.61
Total Return (%)c,d		5.84	**		.75			9.36			(3.12	)		12.15			16.01
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		90			84			62			41			23			3
Ratio of expenses before expense reductions (%)e		.87	*		.93			.88			.86			1.19			5.37
Ratio of expenses after expense reductions (%)e		.57	*		.52			.55			.55			.46			.61
Ratio of net investment income (%)		1.37	*		1.57			2.25			4.47			3.26			4.66
Portfolio turnover rate (%)		18	**		40			22			39			6			155
a For the period from May 18, 2009 (commencement of operations of Class B shares) to December 31, 2009. b Based on average shares outstanding during the period. c Total return would have been lower had certain expenses not been reduced. d Total return would have been lower if the Advisor had not reduced some Underlying Deutsche Funds' expenses. e The Fund invests in other Funds and indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which the Fund is invested. This ratio does not include these indirect fees and expenses. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Alternative Asset Allocation VIP (formerly DWS Alternative Asset Allocation VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust. The Fund mainly invests in other affiliated Deutsche funds (i.e. mutual funds, exchange-traded funds and other pooled investment vehicles managed by Deutsche Investment Management Americas Inc. or one of its affiliates, together the "Underlying Deutsche Funds"), non-affiliated exchange-traded funds ("Non-affiliated ETFs") and derivative investments. Non-affiliated ETFs and Underlying Deutsche Funds are collectively referred to as "Underlying Funds." During the six months ended June 30, 2014, the Fund primarily invested in underlying Deutsche Funds and non-affiliated ETFs. Each Underlying Deutsche Fund's accounting policies and investment holdings are outlined in the Underlying Deutsche Funds' financial statements and are available upon request.

Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Sales of Class B shares are subject to recordkeeping fees up to 0.15% and Rule 12b-1 fees under the 1940 Act equal to an annual rate of 0.25% of the average daily net assets of the Class B shares of the Fund. Class A shares are not subject to such fees.

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable Rule 12b-1 fee). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.

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

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.

Investments in mutual funds are valued at the net asset value per share of each class of the Underlying Deutsche Funds and are categorized as Level 1.

ETFs are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. ETFs for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1 securities.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

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

The Fund has reviewed the tax positions for the open tax years as of December 31, 2013 and has determined that no provision for income tax and/or uncertain tax provisions is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.

Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, are declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures.

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

B. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of affiliated Underlying Funds (excluding money market funds) aggregated $16,922,645 and $10,683,238, respectively. Purchases and sales of Non-affiliated ETFs aggregated $4,064,562 and $6,905,641, respectively.

C. Related Parties

Management Agreement. Under the Investment Management Agreement with Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), an indirect, wholly owned subsidiary of Deutsche Bank AG, the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor determines the securities, instruments and other contracts relating to investments in Underlying Funds to be purchased, sold or entered into by the Fund or delegates such responsibility to the Fund's subadvisors.

RREEF America L.L.C. ("RREEF") acts as an investment subadvisor to the Fund. As an investment subadvisor to the Fund, RREEF provides investment management services to the portions of the Fund's portfolio allocated to direct investments in global real estate and global infrastructure securities. RREEF is paid by the Advisor for the services RREEF provides to the Fund. As of the date of this report, the Fund obtained its exposure to global real estate and global infrastructure securities indirectly through investments in other Underlying Deutsche Funds.

The Fund does not invest in the Underlying Deutsche Funds for the purpose of exercising management or control; however, investments within the set limits may represent 5% or more of an Underlying Deutsche Fund's outstanding shares. For the six months ended June 30, 2014, the Fund held 6% of Deutsche Enhanced Emerging Markets Fixed Income Fund.

Pursuant to the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:

On assets invested in other Deutsche Funds	.20%
On assets invested in all other assets not considered Deutsche Funds	1.20%

In addition, the Advisor will receive management fees from managing the Underlying Deutsche Funds in which the Fund invests.

Accordingly, for the six months ended June 30, 2014, the fee pursuant to the Investment Management Agreement was equivalent to an annualized effective rate (exclusive of any applicable waivers/reimbursements) of 0.34% of the Fund's average daily net assets.

For the period from January 1, 2014 through April 30, 2015, the Advisor has contractually agreed to waive its fee and/or reimburse certain operating expenses to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest expense and Underlying Funds) of each class as follows:

Class A	.32%
Class B	.57%

For the six months ended June 30, 2014, the Advisor agreed to waive 0.15% of the monthly management fee based on average daily net assets for the Fund.

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed for each class are as follows:

Class A	$	20,356
Class B		125,793
	$	146,149

The Fund indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which it is invested.

Administration Fee. Pursuant to an Administrative Services Agreement, DIMA provides most administrative services to the Fund. For all services provided under the Administrative Services Agreement, the Fund pays DIMA an annual fee ("Administration Fee") of 0.10% of the Fund's average daily net assets, computed and accrued daily and payable monthly. For the six months ended June 30, 2014, the Administration Fee was $50,364, of which $8,747 is unpaid.

Service Provider Fees. DeAWM Service Company ("DSC"), an affiliate of the Advisor, is the transfer agent, dividend-paying agent and shareholder service agent for the Fund. Pursuant to a sub-transfer agency agreement between DSC and DST Systems, Inc. ("DST"), DSC has delegated certain transfer agent, dividend-paying agent and shareholder service agent functions to DST. DSC compensates DST out of the shareholder servicing fee it receives from the Fund. For the six months ended June 30, 2014, the amounts charged to the Fund by DSC were as follows:

Services to Shareholders	Total Aggregated		Unpaid at June 30, 2014
Class A	$	56	$	23
Class B		56		20
	$	112	$	43

Distribution Service Agreement. Under the Fund's Class B 12b-1 plans, DeAWM Distributors, Inc. ("DDI") received a fee ("Distribution Service Fee") of 0.25% of average daily net assets of Class B shares. For the six months ended June 30, 2014, the Distribution Service Fee aggregated $105,962, of which $18,256 is unpaid.

Typesetting and Filing Service Fees. Under an agreement with DIMA, DIMA is compensated for providing typesetting and certain regulatory filing services to the Fund. For the six months ended June 30, 2014, the amount charged to the Fund by DIMA included in the Statement of Operations under "reports to shareholders" aggregated $13,011, of which $3,536 is unpaid.

Trustees' Fees and Expenses. The Fund paid retainer fees to each Trustee not affiliated with the Advisor, plus specified amounts to the Board Chairperson and Vice Chairperson and to each committee Chairperson.

Affiliated Cash Management Vehicles. The Fund may invest uninvested cash balances in Central Cash Management Fund and Deutsche Variable NAV Money Fund, affiliated money market funds which are managed by the Advisor. Each affiliated money market fund seeks to provide a high level of current income consistent with liquidity and the preservation of capital. Each affiliated money market fund is managed in accordance with Rule 2a-7 under the Investment Company Act of 1940, which governs the quality, maturity, diversity and liquidity of instruments in which a money market fund may invest. Central Cash Management Fund seeks to maintain a stable net asset value, and Deutsche Variable NAV Money Fund maintains a floating net asset value. The Fund indirectly bears its proportionate share of the expenses of each affiliated money market fund in which it invests. Central Cash Management Fund does not pay the Advisor an investment management fee. To the extent that Deutsche Variable NAV Money Fund pays an investment management fee to the Advisor, the Advisor will waive an amount of the investment management fee payable to the Advisor by the Fund equal to the amount of the investment management fee payable on the Fund's assets invested in Deutsche Variable NAV Money Fund.

D. Ownership of the Fund

At June 30, 2014, one participating insurance company was the owner of record of 10% or more of the total outstanding Class A shares of the Fund, owning 98%. Two participating insurance companies were the owner of record of 10% or more of the total outstanding Class B shares of the Fund, owning 64% and 31%, respectively.

E. Transactions with Affiliates

The Fund mainly invest in Underlying Deutsche Funds and Non-affiliated ETFs. The Underlying Deutsche Funds in which the Fund invests are considered to be affiliated investments. A summary of the Fund's transactions with affiliated Underlying Deutsche Funds during the six months ended June 30, 2014 is as follows:

Affiliate	Value ($) at 12/31/2013		Purchases Cost ($)		Sales Cost ($)		Realized Gain/ (Loss) ($)			Income Distributions ($)		Capital Gain Distributions ($)		Value ($) at 6/30/2014
Deutsche Diversified Market Neutral Fund		15,082,780		295,000		2,438,000		(297,270	)		—		—		12,788,261
Deutsche Enhanced Commodity Strategy Fund		12,886,360		1,919,226		2,882,000		(719,744	)		25,226		—		12,594,916
Deutsche Enhanced Emerging Markets Fixed Income Fund		10,792,537		3,617,095		295,000		(6,071	)		249,095		—		14,622,604
Deutsche Floating Rate Fund		15,542,833		2,592,802		1,628,000		(7,242	)		336,801		—		16,469,494
Deutsche Global Inflation Fund		6,138,642		1,761,087		748,000		(60,991	)		97,087		—		7,459,547
Deutsche Global Infrastructure Fund		15,685,285		2,627,813		288,000		(341	)		127,757		28,056		20,416,682
Deutsche Global Real Estate Securities Fund		2,972,636		269,000		383,000		2,126			—		—		3,202,325
Deutsche Real Estate Securities Fund		—		3,446,176		—		—			8,572		7,604		3,467,916
Deutsche Real Estate Securities Income Fund		—		311,000		—		—			1,738		1,335		313,011
PowerShares DB US Dollar Index Bullish ETF		1,951,369		83,446		2,021,238		(63,911	)		—		—		—
Central Cash Management Fund		978,747		18,023,591		15,393,987		—			501		—		3,608,351
Total		82,031,189		34,946,236		26,077,225		(1,153,444	)		846,777		36,995		94,943,107

F. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expense of the Underlying Funds in which the Fund invests. These expenses are not included in the Fund's annualized expense ratios used to calculate the expense estimate in the tables. In the most recent six-month period, the Fund limited the ongoing expenses the Fund bears directly; had it not done so, expenses would have been higher. The examples in the table are based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

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

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

Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,059.60	$	1,058.40
Expenses Paid per $1,000*	$	1.63	$	2.91
Hypothetical 5% Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,023.21	$	1,021.97
Expenses Paid per $1,000*	$	1.61	$	2.86

* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by 181 (the number of days in the most recent six-month period), then divided by 365.

Annualized Expense Ratios**		Class A		Class B
Deutsche Variable Series II — Deutsche Alternative Asset Allocation VIP		.32%		.57%

** The Fund invests in other funds and indirectly bears its proportionate share of fees and expenses incurred by the Underlying Funds in which the Fund is invested. These ratios do not include these indirect fees and expenses.

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

These tables do not reflect charges and fees ("contract charges") associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option.

For an analysis of the fees associated with an investment in the fund or similar funds, please refer to the current and hypothetical expense calculators for Variable Insurance Products which can be found at deutschefunds.com/EN/resources/calculators.jsp.

Proxy Voting

The Trust's policies and procedures for voting proxies for portfolio securities and information about how the Trust voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our Web site — deutschefunds.com (click on "proxy voting" at the bottom of the page) — or on the SEC's Web site — sec.gov. To obtain a written copy of the Trust's policies and procedures without charge, upon request, call us toll free at (800) 728-3337.

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Alternative Asset Allocation VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") and sub-advisory agreement (the "Sub-Advisory Agreement" and together with the Agreement, the "Agreements") between DIMA and RREEF America L.L.C. ("RREEF"), an affiliate of DIMA, in September 2013.

In terms of the process that the Board followed prior to approving the Agreements, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

— The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Fixed Income and Asset Allocation Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund's Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.

— The Independent Trustees regularly meet privately with their independent counsel to discuss contract review and other matters. In addition, the Independent Trustees were also advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations.

— In connection with reviewing the Agreements, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements.

— Based on its evaluation of the information provided, the Contract Committee presented its findings and recommendations to the Board. The Board then reviewed the Contract Committee's findings and recommendations.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund. DIMA and RREEF are part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

As part of the contract review process, the Board carefully considered the fees and expenses of each DWS fund overseen by the Board in light of the fund's performance. In many cases, this led to a negotiation with DIMA of lower expense caps as part of the 2012 and 2013 contract review processes than had previously been in place. As part of these negotiations, the Board indicated that it would consider relaxing these new lower caps in future years following sustained improvements in performance, among other considerations.

In June 2012, Deutsche Bank AG ("DB"), DIMA's parent company, announced that DB would combine its Asset Management (of which DIMA was a part) and Wealth Management divisions. DB has advised the Independent Trustees that the U.S. asset management business is a critical and integral part of DB, and that it has, and will continue to, reinvest a significant portion of the substantial savings it expects to realize by combining its Asset Management and Wealth Management divisions into the new Asset and Wealth Management ("AWM") division, including ongoing enhancements to its investment capabilities. DB also has confirmed its commitment to maintaining strong legal and compliance groups within the AWM division.

While shareholders may focus primarily on fund performance and fees, the Fund's Board considers these and many other factors, including the quality and integrity of DIMA's and RREEF's personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.

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, DIMA and RREEF provide portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one- and three-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 1st quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one- and three-year periods ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, sub-advisory fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were equal to the median (2nd quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). With respect to the sub-advisory fee paid to RREEF, the Board noted that the fee is paid by DIMA out of its fee and not directly by the Fund. The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be lower than the median (1st quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

The information considered by the Board as part of its review of management fees included information regarding fees charged by DIMA and its affiliates to similar institutional accounts and to similar funds offered primarily to European investors ("DWS Europe funds"), in each case as applicable. The Board observed that advisory fee rates for institutional accounts generally were lower than the management fees charged by similarly managed DWS U.S. mutual funds ("DWS Funds"), but also took note of the differences in services provided to DWS Funds as compared to institutional accounts. In the case of DWS Europe funds, the Board observed that fee rates for DWS Europe funds generally were higher than for similarly managed DWS Funds, but noted that differences in the types of services provided to DWS Funds relative to DWS Europe funds made it difficult to compare such fees.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA and RREEF.

Profitability. The Board reviewed detailed information regarding revenues received by DIMA from advising the DWS Funds along with the estimated costs and pre-tax profits realized by DIMA from advising the DWS Funds. The Board also received information regarding the estimated enterprise-wide profitability of DWS and its affiliates with respect to all fund services in totality. The Board did not receive profitability information with respect to the Fund, but did receive such information with respect to the funds in which the Fund invests. The Board also reviewed information regarding the profitability of certain similar investment management firms. The Board noted that while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates' overall profitability with respect to the DWS fund complex (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. In this regard, the Board noted that while the Fund's current investment management fee schedule does not include breakpoints, the Board intends to consider implementation of one or more breakpoints once the Fund reaches an efficient operating size. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Other Benefits to DIMA and Its Affiliates. The Board also considered the character and amount of other incidental benefits received by DIMA and its affiliates, including any fees received by DIMA for administrative services provided to the Fund and any fees received by an affiliate of DIMA for distribution services. The Board also considered benefits to DIMA related to brokerage and soft-dollar allocations, including allocating brokerage to pay for research generated by parties other than the executing broker dealers, which pertain primarily to funds investing in equity securities, along with the incidental public relations benefits to DIMA related to DWS Funds advertising and cross-selling opportunities among DIMA products and services. The Board concluded that management fees were reasonable in light of these fallout benefits.

Compliance. The Board considered the significant attention and resources dedicated by DIMA to documenting and enhancing its compliance processes in recent years. The Board noted in particular (i) the experience and seniority of both DIMA's chief compliance officer and the Fund's chief compliance officer; (ii) the large number of DIMA compliance personnel; and (iii) the substantial commitment of resources by DIMA and its affiliates to compliance matters.

Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreements is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and their independent counsel present. It is possible that individual Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreements.

Notes

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2AAA-3 (R-028379-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Global Equity VIP

(formerly DWS Global Equity VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

9 Statement of Assets and Liabilities

9 Statement of Operations

10 Statement of Changes in Net Assets

11 Financial Highlights

12 Notes to Financial Statements

17 Information About Your Fund's Expenses

18 Proxy Voting

19 Advisory Agreement Board Considerations and Fee Evaluation

Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. The Fund may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratio of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 is 1.08% for Class A shares and may differ from the expense ratio disclosed in the Financial Highlights table in this report.

Growth of an Assumed $10,000 Investment in Deutsche Global Equity VIP
		The MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The index consists of 45 country indices comprising 24 developed and 21 emerging market country indices. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Global Equity VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,421		$	12,136		$	12,226		$	17,409		$	18,321
Class A	Average annual total return		4.21	%		21.36	%		6.93	%		11.73	%		6.24	%
MSCI All Country World Index	Growth of $10,000	$	10,618		$	12,295		$	13,402		$	19,493		$	20,541
MSCI All Country World Index	Average annual total return		6.18	%		22.95	%		10.25	%		14.28	%		7.46	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Common Stocks	97%	96%
Cash Equivalents	2%	3%
Participatory Notes	1%	1%
	100%	100%

Sector Diversification (As a % of Common Stocks and Participatory Notes)	6/30/14	12/31/13

Industrials	19%	9%
Health Care	16%	13%
Financials	14%	12%
Information Technology	12%	9%
Consumer Staples	11%	10%
Energy	10%	7%
Consumer Discretionary	9%	9%
Materials	9%	9%
Telecommunication Services	—	13%
Utilities	—	9%
	100%	100%

Geographical Diversification(As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral)	6/30/14	12/31/13

United States	52%	46%
Continental Europe	25%	32%
United Kingdom	11%	6%
Canada	6%	6%
Asia (excluding Japan)	4%	5%
Latin America	1%	1%
Other	1%	4%
	100%	100%

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

Nils E. Ernst, PhD

Martin Berberich, CFA

Sebastian P. Werner, PhD

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Common Stocks 94.9%
Belgium 2.3%
Anheuser-Busch InBev NV (Cost $1,166,385)		15,000		1,723,264
Brazil 0.8%
CCR SA (Cost $532,266)		72,000		586,558
Canada 5.7%
Agnico Eagle Mines Ltd.		11,000		421,300
Brookfield Asset Management, Inc. "A"		35,000		1,541,962
Canadian Oil Sands Ltd.		35,000		793,121
Canadian Pacific Railway Ltd.		8,000		1,449,304
(Cost $3,290,049)				4,205,687
Denmark 0.2%
DS Norden AS (Cost $154,594)		3,910		131,199
Finland 0.7%
Nokia Oyj (a) (Cost $534,657)		70,000		530,056
France 1.3%
Pernod Ricard SA (a) (Cost $882,001)		8,000		960,701
Germany 2.8%
BASF SE		7,000		815,021
Fresenius Medical Care AG & Co. KGaA		19,000		1,277,160
(Cost $1,814,353)				2,092,181
Indonesia 0.8%
PT Indofood CBP Sukses Makmur Tbk (Cost $786,372)		700,000		590,468
Ireland 2.9%
Accenture PLC "A" (b)		10,000		808,400
Alkermes PLC* (c)		4,500		226,485
Shire PLC		14,000		1,094,954
(Cost $1,285,819)				2,129,839
Italy 2.7%
Sorin SpA*		165,000		484,404
Unipol Gruppo Finanziario SpA		200,000		1,130,494
World Duty Free SpA*		28,400		346,104
(Cost $1,494,315)				1,961,002
Luxembourg 1.3%
Eurofins Scientific (a) (Cost $712,011)		3,000		922,635
Malaysia 0.6%
IHH Healthcare Bhd. (Cost $390,629)		300,000		409,218
Mexico 0.5%
Alsea SAB de CV* (Cost $335,642)		96,000		345,196
Netherlands 1.1%
Yandex NV "A"* (c) (Cost $690,140)		22,000		784,080
Norway 2.3%
DNO ASA*		207,000		796,095
Norsk Hydro ASA		168,000		899,181
(Cost $1,168,397)				1,695,276
	Shares		Value ($)

Philippines 2.4%
Metropolitan Bank & Trust Co.		520,000		1,041,191
Puregold Price Club, Inc.		730,000		725,819
(Cost $1,754,673)				1,767,010
Spain 1.1%
Atresmedia Corp. de Medios de Comunicaion SA (Cost $885,741)		56,000		802,081
Sweden 4.6%
Assa Abloy AB "B"		7,500		381,648
Atlas Copco AB "A"		38,000		1,098,218
Svenska Cellulosa AB "B"		34,000		885,932
Swedish Match AB		30,000		1,041,675
(Cost $3,175,780)				3,407,473
Switzerland 2.0%
Nestle SA (Registered)		12,515		969,531
Novartis AG (Registered)		5,500		498,027
(Cost $649,478)				1,467,558
Thailand 0.2%
Siam Cement PCL (NVDR) (Cost $109,174)		8,700		121,165
United Kingdom 8.8%
Aberdeen Asset Management PLC		100,000		776,804
Anglo American PLC		50,000		1,223,651
Aon PLC (b)		7,000		630,630
Aveva Group PLC		22,000		767,323
British American Tobacco PLC		14,500		863,076
Halma PLC		40,000		403,548
IMI PLC		15,000		381,728
Intertek Group PLC		17,000		799,789
Rolls-Royce Holdings PLC*		13,000		237,833
Spirax-Sarco Engineering PLC		8,000		374,181
(Cost $6,389,788)				6,458,563
United States 49.8%
Allergan, Inc.		4,500		761,490
Alliance Data Systems Corp.* (a)		5,500		1,546,875
Amgen, Inc.		9,000		1,065,330
Amphenol Corp. "A"		17,000		1,637,780
Bristol-Myers Squibb Co.		14,000		679,140
CBRE Group, Inc. "A"*		30,000		961,200
Cerner Corp.*		17,000		876,860
Colfax Corp.*		18,000		1,341,720
Cynosure, Inc. "A"*		17,000		361,250
Danaher Corp.		13,000		1,023,490
DIRECTV*		12,200		1,037,122
Discovery Communications, Inc. "A"*		11,000		817,080
Eaton Corp. PLC		13,000		1,003,340
Ecolab, Inc.		9,000		1,002,060
Express Scripts Holding Co.*		16,000		1,109,280
Exxon Mobil Corp.		11,000		1,107,480
Fastenal Co. (a)		16,000		791,840
Google, Inc. "C"*		1,000		575,280
JPMorgan Chase & Co.		22,000		1,267,640
Kansas City Southern		3,500		376,285
L Brands, Inc.		13,000		762,580
Las Vegas Sands Corp.		15,000		1,143,300
MasTec, Inc.* (a)		16,000		493,120
	Shares		Value ($)

MasterCard, Inc. "A"		21,000		1,542,870
McDonald's Corp.		9,000		906,660
Mead Johnson Nutrition Co.		9,000		838,530
Monster Beverage Corp.*		12,000		852,360
National Oilwell Varco, Inc.		9,000		741,150
Noble Energy, Inc.		20,000		1,549,200
Pall Corp.		14,000		1,195,460
Praxair, Inc.		12,000		1,594,080
ResMed, Inc. (a)		14,000		708,820
Schlumberger Ltd.		8,500		1,002,575
The Travelers Companies, Inc.		12,000		1,128,840
United Technologies Corp.		9,000		1,039,050
W.R. Grace & Co.*		4,000		378,120
Yelp, Inc.*		6,000		460,080
Zoetis, Inc.		25,000		806,750
(Cost $31,903,672)				36,486,087
Total Common Stocks (Cost $60,105,936)				69,577,297

	Shares		Value ($)

Participatory Note 0.6%
Nigeria
Zenith Bank PLC (issuer Merrill Lynch International) Expiration Date 8/21/2015 (Cost $405,600)		3,000,000		461,184

Securities Lending Collateral 7.6%
Daily Assets Fund Institutional, 0.08% (d) (e) (Cost $5,570,286)		5,570,286		5,570,286

Cash Equivalents 1.8%
Central Cash Management Fund, 0.06% (d) (Cost $1,293,263)		1,293,263		1,293,263

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $$67,375,085)†		104.9			76,902,030
Other Assets and Liabilities, Net		(4.9	)		(3,605,994	)
Net Assets		100.0			73,296,036

* Non-income producing security.

† The cost for federal income tax purposes was $67,375,119. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $9,526,911. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $10,315,107 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $788,196.

(a) All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at June 30, 2014 amounted to $5,361,623, which is 7.3% of net assets.

(b) Listed on the New York Stock Exchange.

(d) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(e) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

ADR: American Depositary Receipt

Fair Value Measurements

Assets	Level 1		Level 2		Level 3		Total

Common Stocks (f)
Belgium	$	—	$	1,723,264	$	—	$	1,723,264
Brazil		586,558		—		—		586,558
Canada		4,205,687		—		—		4,205,687
Denmark		—		131,199		—		131,199
Finland		—		530,056		—		530,056
France		—		960,701		—		960,701
Germany		—		2,092,181		—		2,092,181
Indonesia		—		590,468		—		590,468
Ireland		1,034,885		1,094,954		—		2,129,839
Italy		—		1,961,002		—		1,961,002
Luxembourg		—		922,635		—		922,635
Malaysia		—		409,218		—		409,218
Mexico		345,196		—		—		345,196
Netherlands		784,080		—		—		784,080
Norway		—		1,695,276		—		1,695,276
Philippines		—		1,767,010		—		1,767,010
Spain		—		802,081		—		802,081
Sweden		—		3,407,473		—		3,407,473
Switzerland		—		1,467,558		—		1,467,558
Thailand		—		121,165		—		121,165
United Kingdom		630,630		5,827,933		—		6,458,563
United States		36,486,087		—		—		36,486,087
Participatory Notes (f)		—		461,184		—		461,184
Short-Term Investments (f)		6,863,549		—		—		6,863,549
Total	$	50,936,672	$	25,965,358	$	—	$	76,902,030

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(f) See Investment Portfolio for additional detailed categorizations.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $60,511,536) — including $5,361,623 of securities loaned	$	70,038,481
Investment in Daily Assets Fund Institutional (cost $5,570,286)*		5,570,286
Investment in Central Cash Management Fund (cost $1,293,263)		1,293,263
Total investments in securities, at value (cost $67,375,085)		76,902,030
Foreign currency, at value (cost $564,942)		569,231
Receivable for investments sold		1,678,411
Receivable for Fund shares sold		524
Dividends receivable		94,173
Interest receivable		7,512
Foreign taxes recoverable		74,399
Other assets		465
Total assets		79,326,745
Liabilities
Payable upon return of securities loaned		5,570,286
Payable for investments purchased		292,172
Payable for Fund shares redeemed		27,434
Accrued management fee		46,358
Accrued Trustees' fees		192
Other accrued expenses and payables		94,267
Total liabilities		6,030,709
Net assets, at value	$	73,296,036
Net Assets Consist of
Undistributed net investment income		349,476
Net unrealized appreciation (depreciation) on: Investments		9,526,945
Foreign currency		7,421
Accumulated net realized gain (loss)		(45,382,583	)
Paid-in capital		108,794,777
Net assets, at value	$	73,296,036
Class A Net Asset Value, offering and redemption price per share ($73,296,036 ÷ 7,722,167 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	9.49

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Dividends (net of foreign taxes withheld of $66,477)	$	721,265
Income distributions — Central Cash Management Fund		820
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		24,364
Total income		746,449
Expenses: Management fee		232,387
Administration fee		35,752
Services to shareholders		554
Custodian fee		23,254
Professional fees		36,189
Reports to shareholders		14,972
Trustees' fees and expenses		2,277
Other		13,626
Total expenses before expense reductions		359,011
Expense reductions		(1,266	)
Total expenses after expense reductions		357,745
Net investment income		388,704
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		2,064,510
Futures		91,460
Foreign currency		(15,631	)
		2,140,339
Change in net unrealized appreciation (depreciation) on: Investments		414,784
Foreign currency		7,999
		422,783
Net gain (loss)		2,563,122
Net increase (decrease) in net assets resulting from operations	$	2,951,826

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	388,704		$	1,174,893
Operations: Net investment income	$	388,704		$	1,174,893
Net realized gain (loss)		2,140,339			17,352,793
Change in net unrealized appreciation (depreciation)		422,783			(6,262,438	)
Net increase (decrease) in net assets resulting from operations		2,951,826			12,265,248
Distributions to shareholders from: Net investment income: Class A		(1,256,998	)		(1,676,904	)
Fund share transactions: Class A Proceeds from shares sold		1,087,663			3,395,869
Reinvestment of distributions		1,256,998			1,676,904
Payments for shares redeemed		(3,730,928	)		(9,660,444	)
Net increase (decrease) in net assets from Class A share transactions		(1,386,267	)		(4,587,671	)
Increase (decrease) in net assets		308,561			6,000,673
Net assets at beginning of period		72,987,475			66,986,802
Net assets at end of period (including undistributed net investment income of $349,476 and $1,217,770, respectively)	$	73,296,036		$	72,987,475
Other Information
Class A Shares outstanding at beginning of period		7,869,570			8,411,945
Shares sold		117,523			404,553
Shares issued to shareholders in reinvestment of distributions		138,132			202,770
Shares redeemed		(403,058	)		(1,149,698	)
Net increase (decrease) in Class A shares		(147,403	)		(542,375	)
Shares outstanding at end of period		7,722,167			7,869,570

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	9.27		$	7.96		$	6.98		$	8.08		$	7.45		$	6.22
Income (loss) from investment operations: Net investment incomea		.05			.14			.18			.19			.14			.12
Net realized and unrealized gain (loss)		.33			1.37			1.01			(1.14	)		.66			1.51
Total from investment operations		.38			1.51			1.19			(.95	)		.80			1.63
Less distributions from: Net investment income		(.16	)		(.20	)		(.21	)		(.15	)		(.17	)		(.40	)
Net asset value, end of period	$	9.49		$	9.27		$	7.96		$	6.98		$	8.08		$	7.45
Total Return (%)		4.21	b**		19.31	b		17.34			(12.07	)		10.93			29.36
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		73			73			67			65			83			86
Ratio of expenses before expense reductions (%)		1.00	*		1.06			1.02			1.03			.99			.94
Ratio of expenses after expense reductions (%)		1.00	*		.99			1.02			1.03			.99			.94
Ratio of net investment income (%)		1.09	*		1.69			2.46			2.44			1.90			1.89
Portfolio turnover rate (%)		39	**		139			18			26			14			139
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reimbursed. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Global Equity VIP (formerly DWS Global Equity VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.

Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1. For certain international equity securities, in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), futures contracts and certain indices and these securities are categorized as Level 2.

Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.

Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund's valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security's disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company's or issuer's financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

Participatory Notes. The Fund invests in Participatory Notes (P-Notes). P-Notes are promissory notes designed to offer a return linked to the performance of a particular underlying equity security or market. P-Notes are issued by banks or broker-dealers and allow the Fund to gain exposure to local shares in foreign markets. Investments in P-Notes involve the same risks associated with a direct investment in the underlying foreign companies or foreign markets that they seek to replicate. Although each participation note is structured with a defined maturity date, early redemption may be possible. Risks associated with participation notes include the possible failure of a counterparty to perform in accordance with the terms of the agreement and potential delays or an inability to redeem before maturity under certain market conditions.

Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains the benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

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

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

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.

Additionally, the Fund may be subject to taxes imposed by the governments of countries in which it invests and are generally based on income and/or capital gains earned or repatriated. Estimated tax liabilities on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized gain/loss on investments. Tax liabilities realized as a result of security sales are reflected as a component of net realized gain/loss on investments.

Under the Regulated Investment Company Modernization Act of 2010, net capital losses incurred post-enactment may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

At December 31, 2013, the Fund had a net tax basis capital loss carryforward of approximately $47,342,000 of pre-enactment losses, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2016 ($8,178,000) and December 31, 2017 ($39,164,000), the respective expiration dates, whichever occurs first.

In addition, from November 1, 2013 through December 31, 2013, the Fund elected to defer qualified late year losses of approximately $36,000 of net long-term realized capital losses and $145,000 of net short-term capital losses and treat them as arising in the fiscal year ending December 31, 2014.

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments.

B. Derivative Instruments

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). For the six months ended June 30, 2014, the Fund entered into futures contracts as a means of gaining exposure to a particular asset class or to keep cash on hand to meet shareholder redemptions or other needs while maintaining exposure to the market.

Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. Gains or losses are realized when the contract expires or is closed. Since all futures contracts are exchange-traded, counterparty risk is minimized as the exchange's clearinghouse acts as the counterparty, and guarantees the futures against default.

Certain risks may arise upon entering into futures contracts, including the risk that an illiquid market will limit the Fund's ability to close out a futures contract prior to the settlement date and the risk that the futures contract is not well correlated with the security, index or currency to which it relates. Risk of loss may exceed amounts disclosed in the Statement of Assets and Liabilities.

There are no open futures contracts as of June 30, 2014. For the six months ended June 30, 2014, the investment in futures contracts purchased had a total notional value from $0 to $2,239,000.

The amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the six months ended June 30, 2014 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:

Realized Gain (Loss)	Futures Contracts
Equity Contracts (a)	$	91,460
The above derivative is located in the following Statement of Operations account: (a) Net realized gain (loss) from futures

C. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments) aggregated $26,830,837 and $29,630,539, respectively.

D. Related Parties

First $1.5 billion	.650	%
Next $1.75 billion	.635	%
Next $1.75 billion	.620	%
Over $5 billion	.605	%

For the period from January 1, 2014 through September 30, 2014, the Advisor has contractually agreed to waive its fee and/or reimburse certain operating expenses to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of Class A shares at 1.00%.

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed for Class A amounted to $1,266.

Securities Lending Fees. Deutsche Bank AG serves as lending agent for the Fund. For the six months ended June 30, 2014, the Fund incurred lending agent fees to Deutsche Bank AG in the amount of $2,121.

E. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 76% and 23%.

F. Line of Credit

The Fund and other affiliated funds (the "Participants") share in a $400 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement. The Fund had no outstanding loans at June 30, 2014.

G. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses, had it not done so, expenses would have ben higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,042.10
Expenses Paid per $1,000*	$	5.06
Hypothetical 5% Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,019.84
Expenses Paid per $1,000*	$	5.01

* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 (the number of days in the most recent six-month period), then divided by 365.

Annualized Expense Ratio	Class A
Deutsche Variable Series II — Deutsche Global Equity VIP	1.00%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Global Equity VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

— In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

While shareholders may focus primarily on fund performance and fees, the Fund's Board considers these and many other factors, including the quality and integrity of DIMA's personnel and such other issues as back-office operations, fund valuations, and compliance policies and procedures.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 3rd quartile, 2nd quartile and 4th quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one- and three-year periods and has underperformed its benchmark in the five-year period ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be higher than the median (3rd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitation agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Profitability. The Board reviewed detailed information regarding revenues received by DIMA under the Agreement. The Board considered the estimated costs and pre-tax profits realized by DIMA from advising the DWS Funds, as well as estimates of the pre-tax profits attributable to managing the Fund in particular. The Board also received information regarding the estimated enterprise-wide profitability of DWS and its affiliates with respect to all fund services in totality and by fund. The Board and the Fee Consultant reviewed DIMA's methodology in allocating its costs to the management of the Fund. Based on the information provided, the Board concluded that the pre-tax profits realized by DIMA in connection with the management of the Fund were not unreasonable. The Board also reviewed information regarding the profitability of certain similar investment management firms. The Board noted that while information regarding the profitability of such firms is limited (and in some cases is not necessarily prepared on a comparable basis), DIMA and its affiliates' overall profitability with respect to the DWS fund complex (after taking into account distribution and other services provided to the funds by DIMA and its affiliates) was lower than the overall profitability levels of many comparable firms for which such data was available.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Based on all of the information considered and the conclusions reached, the Board unanimously determined that the continuation of the Agreement is in the best interests of the Fund. In making this determination, the Board did not give particular weight to any single factor identified above. The Board considered these factors over the course of numerous meetings, certain of which were in executive session with only the Independent Trustees and their independent counsel present. It is possible that individual Trustees may have weighed these factors differently in reaching their individual decisions to approve the continuation of the Agreement.

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2GE-3 (R-028380-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Global Growth VIP

(formerly DWS Global Growth VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

10 Statement of Assets and Liabilities

10 Statement of Operations

11 Statement of Changes in Net Assets

12 Financial Highlights

14 Notes to Financial Statements

19 Information About Your Fund's Expenses

20 Proxy Voting

21 Advisory Agreement Board Considerations and Fee Evaluation

Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. The fund may lend securities to approved institutions. Smaller company stocks tend to be more volatile than medium-sized or large company stocks. Stocks may decline in value. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 are 1.45% and 1.81% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.

Growth of an Assumed $10,000 Investment in Deutsche Global Growth VIP
		The Morgan Stanley Capital International (MSCI) World Index is an unmanaged index that tracks the performance of stocks in select developed markets around the world, including the U.S. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Global Growth VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,465		$	12,210		$	12,494		$	18,351		$	21,549
Class A	Average annual total return		4.65	%		22.10	%		7.71	%		12.91	%		7.98	%
MSCI World Index	Growth of $10,000	$	10,618		$	12,405		$	13,977		$	20,103		$	20,134
MSCI World Index	Average annual total return		6.18	%		24.05	%		11.81	%		14.99	%		7.25	%
Deutsche Global Growth VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class B	Growth of $10,000	$	10,455		$	12,170		$	12,380		$	18,039		$	20,800
Class B	Average annual total return		4.55	%		21.70	%		7.38	%		12.52	%		7.60	%
MSCI World Index	Growth of $10,000	$	10,618		$	12,405		$	13,977		$	20,103		$	20,134
MSCI World Index	Average annual total return		6.18	%		24.05	%		11.81	%		14.99	%		7.25	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Common Stocks	96%	96%
Cash Equivalents	3%	3%
Participatory Notes	1%	1%
	100%	100%

Sector Diversification(As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral)	6/30/14	12/31/13

Industrials	18%	20%
Health Care	14%	14%
Financials	14%	15%
Information Technology	13%	14%
Consumer Discretionary	13%	14%
Consumer Staples	12%	12%
Energy	8%	7%
Materials	8%	4%
	100%	100%

Geographical Diversification(As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral)	6/30/14	12/31/13

United States	48%	45%
Europe	26%	30%
United Kingdom	11%	9%
Asia (excluding Japan)	6%	6%
Canada	5%	6%
Japan	2%	2%
Latin America	1%	1%
Africa	1%	1%
	100%	100%

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

Joseph Axtell, CFA

Lead Portfolio Manager

Rafaelina M. Lee

Nils E. Ernst, PhD

Martin Berberich, CFA

Sebastien P. Werner, PhD

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Common Stocks 96.3%
Belgium 2.0%
Anheuser-Busch InBev NV (Cost $877,251)		9,200		1,056,935
Bermuda 0.3%
Lazard Ltd. "A" (Cost $59,462)		2,531		130,498
Brazil 0.8%
CCR SA (Cost $379,260)		49,000		399,185
Canada 5.2%
Brookfield Asset Management, Inc. "A"		19,000		837,065
Canadian Oil Sands Ltd.		20,000		453,212
Canadian Pacific Railway Ltd.		4,500		815,233
Goldcorp, Inc.		12,000		334,920
Quebecor, Inc. "B"		5,040		121,956
SunOpta, Inc.*		11,711		164,891
(Cost $2,333,446)				2,727,277
China 0.2%
Minth Group Ltd. (Cost $115,171)		65,770		127,969
Cyprus 0.2%
Prosafe SE (Cost $124,216)		12,961		106,919
Denmark 0.8%
Coloplast AS "B"		3,200		289,389
GN Store Nord AS		4,730		135,519
(Cost $350,367)				424,908
Finland 1.0%
Cramo Oyj		3,851		93,704
Nokia Oyj (a)		55,000		416,473
(Cost $494,770)				510,177
France 1.1%
Pernod Ricard SA (Cost $567,369)		4,600		552,403
Germany 3.4%
BASF SE		4,100		477,370
Bayer AG (Registered)		2,000		282,487
Fresenius Medical Care AG & Co. KGaA		10,000		672,190
Patrizia Immobilien AG		4,667		61,988
United Internet AG (Registered)		4,323		190,459
Vib Vermoegen AG		4,650		88,186
(Cost $1,604,983)				1,772,680
Hong Kong 1.3%
Hong Kong Television Network Ltd.*		94,719		29,820
K Wah International Holdings Ltd.		244,564		170,713
Playmates Toys Ltd.		226,681		86,280
REXLot Holdings Ltd. (a)		1,447,591		169,966
Sun Hung Kai & Co., Ltd.		101,067		80,458
Techtronic Industries Co.		41,213		132,141
(Cost $563,715)				669,378
Indonesia 1.0%
PT Arwana Citramulia Tbk		1,118,618		95,302
PT Indofood CBP Sukses Makmur Tbk		380,000		320,540
	Shares		Value ($)

PT Multipolar Tbk		1,697,639		96,660
(Cost $647,416)				512,502
Ireland 2.7%
Accenture PLC "A" (b)		5,500		444,620
C&C Group PLC		12,120		75,428
Paddy Power PLC		1,574		103,453
Ryanair Holdings PLC (ADR)* (a)		2,796		156,017
Shire PLC		7,700		602,225
(Cost $961,550)				1,381,743
Italy 1.9%
Prysmian SpA		4,738		107,048
Sorin SpA*		100,000		293,578
Unipol Gruppo Finanziario SpA		108,000		610,467
(Cost $782,484)				1,011,093
Japan 1.5%
Ai Holdings Corp.		5,242		95,365
Avex Group Holdings, Inc.		5,967		105,139
Kusuri No Aoki Co., Ltd.		3,880		140,562
MISUMI Group, Inc.		2,238		61,570
Nippon Seiki Co., Ltd.		7,919		152,978
United Arrows Ltd.		2,032		81,938
Universal Entertainment Corp.		4,911		87,114
UT Holdings Co., Ltd.		10,080		62,984
(Cost $776,014)				787,650
Luxembourg 1.0%
Eurofins Scientific (a) (Cost $394,249)		1,700		522,826
Malaysia 0.8%
Hartalega Holdings Bhd.		59,558		115,184
IHH Healthcare Bhd.		150,000		204,609
Tune Ins Holdings Bhd.		110,328		77,996
(Cost $381,743)				397,789
Netherlands 2.7%
Brunel International NV		4,058		118,440
Chicago Bridge & Iron Co. NV (b)		1,016		69,291
Constellium NV "A"* (b)		5,856		187,743
ING Groep NV (CVA)*		36,000		505,765
SBM Offshore NV*		7,196		116,123
Yandex NV "A"* (b)		12,000		427,680
(Cost $1,242,047)				1,425,042
Norway 1.8%
DNO ASA*		105,000		403,817
Norsk Hydro ASA		95,000		508,465
(Cost $621,064)				912,282
Panama 0.2%
Banco Latinoamericano de Comercio Exterior SA "E" (Cost $96,167)		4,277		126,899
Philippines 1.6%
Alliance Global Group, Inc.		181,474		120,982
Century Properties Group, Inc.		143,180		4,461
House of Investments, Inc.		6,983		960
Metropolitan Bank & Trust Co.		350,000		700,802
(Cost $880,612)				827,205
	Shares		Value ($)

Singapore 0.4%
Lian Beng Group Ltd.		262,007		146,038
UE E&C Ltd.		66,923		63,869
(Cost $160,580)				209,907
Spain 0.9%
Mediaset Espana Communication SA* (Cost $478,060)		41,000		478,212
Sweden 4.0%
Assa Abloy AB "B"		5,000		254,432
Atlas Copco AB "A"		20,000		578,010
Svenska Cellulosa AB "B"		23,000		599,307
Swedish Match AB		18,500		642,366
(Cost $2,021,471)				2,074,115
Switzerland 2.7%
Dufry AG (Registered)*		679		123,427
Nestle SA (Registered)		9,200		712,720
Novartis AG (Registered)		2,700		244,486
Swatch Group AG (Bearer)		500		301,928
(Cost $1,279,311)				1,382,561
Taiwan 0.1%
Kinpo Electronics, Inc. (Cost $58,427)		145,443		67,953
Thailand 0.1%
Malee Sampran PCL (Foreign Registered) (Cost $82,517)		47,499		65,493
United Kingdom 9.8%
Aberdeen Asset Management PLC		54,000		419,474
Anglo American PLC		26,500		648,535
Arrow Global Group PLC*		25,631		100,889
Aveva Group PLC		13,000		453,418
Babcock International Group PLC		8,246		163,984
British American Tobacco PLC		8,500		505,941
Clinigen Healthcare Ltd.		7,944		51,357
Crest Nicholson Holdings PLC		19,578		115,528
Domino's Pizza Group PLC		9,411		84,395
Halma PLC		22,000		221,952
Hargreaves Lansdown PLC		5,254		111,317
HellermannTyton Group PLC		16,957		90,369
Howden Joinery Group PLC		15,355		81,358
IG Group Holdings PLC		8,745		87,927
IMI PLC		14,000		356,279
Intertek Group PLC		9,000		423,418
Jardine Lloyd Thompson Group PLC		4,191		74,594
John Wood Group PLC		7,650		105,589
Monitise PLC*		59,456		52,657
Polypipe Group PLC*		21,583		92,343
Reckitt Benckiser Group PLC		5,000		436,407
Rolls-Royce Holdings PLC*		12,000		219,538
Rotork PLC		2,254		102,995
Spirax-Sarco Engineering PLC		2,518		117,773
(Cost $4,946,668)				5,118,037
United States 46.8%
Advance Auto Parts, Inc.		945		127,499
Affiliated Managers Group, Inc.*		573		117,694
Agilent Technologies, Inc.		5,000		287,200
Alliance Data Systems Corp.* (a)		3,200		900,000
Altra Industrial Motion Corp. (a)		2,692		97,962
Amgen, Inc.		5,000		591,850
	Shares		Value ($)

Amphenol Corp. "A" (a)		9,500		915,230
BE Aerospace, Inc.*		1,162		107,473
Biogen Idec, Inc.*		600		189,186
BorgWarner, Inc.		1,707		111,279
Bristol-Myers Squibb Co.		10,000		485,100
Cardtronics, Inc.* (a)		2,673		91,096
CBRE Group, Inc. "A"*		14,000		448,560
Cerner Corp.* (a)		10,000		515,800
Colfax Corp.* (a)		10,700		797,578
Danaher Corp.		6,700		527,491
DIRECTV*		7,500		637,575
Discovery Communications, Inc. "A"*		7,500		557,100
Dresser-Rand Group, Inc.*		1,442		91,899
Dril-Quip, Inc.*		900		98,316
Eaton Corp. PLC (a)		8,500		656,030
Ecolab, Inc.		5,200		578,968
Encore Capital Group, Inc.* (a)		2,592		117,729
Express Scripts Holding Co.* (a)		10,000		693,300
Exxon Mobil Corp.		6,000		604,080
Fox Factory Holding Corp.* (a)		5,575		98,064
Gentherm, Inc.*		1,298		57,696
Google, Inc. "A"*		400		233,868
Google, Inc. "C"*		400		230,112
Hain Celestial Group, Inc.* (a)		929		82,439
HeartWare International, Inc.* (a)		853		75,490
Jack in the Box, Inc.		1,368		81,861
JPMorgan Chase & Co.		13,000		749,060
Kansas City Southern		3,200		344,032
Kindred Healthcare, Inc.		4,237		97,875
L Brands, Inc.		7,500		439,950
Las Vegas Sands Corp.		9,000		685,980
Manitowoc Co., Inc. (a)		3,394		111,527
MasterCard, Inc. "A"		12,500		918,375
McDonald's Corp.		5,000		503,700
Middleby Corp.* (a)		1,473		121,847
Molina Healthcare, Inc.* (a)		2,183		97,427
Monster Beverage Corp.*		8,000		568,240
National Oilwell Varco, Inc. (a)		5,700		469,395
Noble Energy, Inc. (a)		11,500		890,790
NOW, Inc.*		1,670		60,471
Oaktree Capital Group LLC		2,438		121,876
Oasis Petroleum, Inc.* (a)		1,968		109,992
Ocwen Financial Corp.* (a)		2,829		104,956
Oil States International, Inc.*		980		62,808
Pacira Pharmaceuticals, Inc.* (a)		696		63,935
Pall Corp.		8,100		691,659
Polaris Industries, Inc. (a)		816		106,276
Praxair, Inc. (a)		7,000		929,880
Primoris Services Corp.		1,822		52,546
Providence Service Corp.*		753		27,552
PTC, Inc.*		2,057		79,812
ResMed, Inc. (a)		9,000		455,670
Retrophin, Inc.*		4,363		51,222
Roadrunner Transportation Systems, Inc.* (a)		3,718		104,476
Schlumberger Ltd. (a)		5,500		648,725
Sinclair Broadcast Group, Inc. "A" (a)		3,152		109,532
Synta Pharmaceuticals Corp.*		8,416		34,421
Tenneco, Inc.*		1,972		129,560
The Bancorp., Inc.* (a)		3,261		38,839
The Travelers Companies, Inc. (a)		6,800		639,676
Thermon Group Holdings, Inc.*		3,340		87,909
Thoratec Corp.*		3,300		115,038
	Shares		Value ($)

TIBCO Software, Inc.*		3,208		64,705
TiVo, Inc.*		5,065		65,389
TriNet Group, Inc.*		2,617		62,991
Tristate Capital Holdings, Inc.*		6,208		87,719
United Rentals, Inc.*		1,586		166,102
United Technologies Corp.		5,300		611,885
Urban Outfitters, Inc.* (a)		3,108		105,237
VeriFone Systems, Inc.*		3,409		125,281
W.R. Grace & Co.*		2,500		236,325
WABCO Holdings, Inc.*		1,270		135,661
Waddell & Reed Financial, Inc. "A"		2,376		148,714
Western Digital Corp.		2,503		231,027
Yelp, Inc.* (a)		2,700		207,036
Zoe's Kitchen, Inc.*		1,635		56,211
(Cost $20,372,209)				24,334,837
Total Common Stocks (Cost $43,652,599)				50,114,475
	Shares		Value ($)

Participatory Note 0.4%
Nigeria
Zenith Bank PLC (issuer Merrill Lynch International), Expiration Date 8/21/2015 (Cost $195,000)		1,500,000		230,592

Securities Lending Collateral 20.3%
Daily Assets Fund Institutional, 0.08% (c) (d) (Cost $10,578,615)		10,578,615		10,578,615

Cash Equivalents 3.5%
Central Cash Management Fund, 0.06% (c) (Cost $1,796,885)		1,796,885		1,796,885

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $56,223,099)†		120.5			62,720,567
Other Assets and Liabilities, Net		(20.5	)		(10,664,254	)
Net Assets		100.0			52,056,313

* Non-income producing security.

† The cost for federal income tax purposes was $56,334,198. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $6,386,369. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $7,395,225 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,008,856.

(b) Listed on the New York Stock Exchange.

(c) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(d) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

ADR: American Depositary Receipt

CVA: Certificaten Van Aandelen (Certificate of Stock)

Fair Value Measurements

Assets	Level 1		Level 2		Level 3		Total

Common Stocks
Belgium	$	—	$	1,056,935	$	—	$	1,056,935
Bermuda		130,498		—		—		130,498
Brazil		399,185		—		—		399,185
Canada		2,727,277		—		—		2,727,277
China		—		127,969		—		127,969
Cyprus		—		106,919		—		106,919
Denmark		—		424,908		—		424,908
Finland		—		510,177		—		510,177
France		—		552,403		—		552,403
Germany		—		1,772,680		—		1,772,680
Hong Kong		—		669,378		—		669,378
Indonesia		—		512,502		—		512,502
Ireland		600,637		781,106		—		1,381,743
Italy		—		1,011,093		—		1,011,093
Japan		—		787,650		—		787,650
Luxembourg		—		522,826		—		522,826
Malaysia		—		397,789		—		397,789
Netherlands		684,714		740,328		—		1,425,042
Norway		—		912,282		—		912,282
Panama		126,899		—		—		126,899
Philippines		—		827,205		—		827,205
Singapore		—		209,907		—		209,907
Spain		—		478,212		—		478,212
Sweden		—		2,074,115		—		2,074,115
Switzerland		—		1,382,561		—		1,382,561
Taiwan		—		67,953		—		67,953
Thailand		—		65,493		—		65,493
United Kingdom		—		5,118,037		—		5,118,037
United States		24,334,837		—		—		24,334,837
Participatory Notes (e)		—		230,592		—		230,592
Short-Term Investments (e)		12,375,500		—		—		12,375,500
Total	$	41,379,547	$	21,341,020	$	—	$	62,720,567

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(e) See Investment Portfolio for additional detailed categorizations.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $43,847,599) — including $10,243,981 of securities loaned	$	50,345,067
Investment in Daily Assets Fund Institutional (cost $10,578,615)*		10,578,615
Investment in Central Cash Management Fund (cost $1,796,885)		1,796,885
Total investments in securities, at value (cost $56,223,099)		62,720,567
Cash		52,217
Foreign currency, at value (cost $340,311)		338,840
Receivable for investments sold		724,431
Receivable for Fund shares sold		8,620
Dividends receivable		51,219
Interest receivable		4,229
Foreign taxes recoverable		36,396
Other assets		766
Total assets		63,937,285
Liabilities
Payable upon return of securities loaned		10,578,615
Payable for investments purchased		1,051,815
Payable for Fund shares redeemed		166,810
Accrued management fees		13,390
Other accrued expenses and payables		70,342
Total liabilities		11,880,972
Net assets, at value		52,056,313
Net Assets Consist of
Undistributed net investment income		266,782
Net unrealized appreciation (depreciation) on: Investments		6,497,468
Foreign currency		(716	)
Accumulated net realized gain (loss)		(42,549,845	)
Paid-in capital		87,842,624
Net assets, at value		52,056,313
Class A Net Asset Value, offering and redemption price per share ($51,942,977 ÷ 4,505,150 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	11.53
Class B Net Asset Value, offering and redemption price per share ($113,336 ÷ 9,801 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	11.56

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Dividends (net of foreign taxes withheld of $46,535)	$	510,230
Income distributions — Central Cash Management Fund		427
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		15,077
Total income		525,734
Expenses: Management fee		239,018
Administration fee		26,122
Services to shareholders		735
Record keeping fees (Class B)		817
Distribution service fee (Class B)		2,110
Custodian fee		35,776
Professional fees		37,702
Reports to shareholders		14,521
Trustees' fees and expenses		2,087
Other		15,896
Total expenses before expense reductions		374,784
Expense reductions		(162,853	)
Total expenses after expense reductions		211,931
Net investment income (loss)		313,803
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		1,723,280
Foreign currency		(3,636	)
		1,719,644
Change in net unrealized appreciation (depreciation) on: Investments		284,834
Foreign currency		1,945
		286,779
Net gain (loss)		2,006,423
Net increase (decrease) in net assets resulting from operations	$	2,320,226

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Years Ended December 31, 2013
Operations: Net investment income (loss)	$	313,803		$	518,403
Operations: Net investment income (loss)	$	313,803		$	518,403
Net realized gain (loss)		1,719,644			9,003,948
Change in net unrealized appreciation (depreciation)		286,779			1,089,980
Net increase (decrease) in net assets resulting from operations		2,320,226			10,612,331
Distributions to shareholders from: Net investment income: Class A		(509,707	)		(689,482	)
Class B		(15,999	)		(27,740	)
Total distributions		(525,706	)		(717,222	)
Fund share transactions: Class A Proceeds from shares sold		2,061,203			4,242,450
Reinvestment of distributions		509,707			689,482
Payments for shares redeemed		(3,649,897	)		(16,663,817	)
Net increase (decrease) in net assets from Class A share transactions		(1,078,987	)		(11,731,885	)
Class B Proceeds from shares sold		26,121			147,425
Reinvestment of distributions		15,999			27,740
Payments for shares redeemed		(2,655,611	)		(823,023	)
Net increase (decrease) in net assets from Class B share transactions		(2,613,491	)		(647,858	)
Increase (decrease) in net assets		(1,897,958	)		(2,484,634	)
Net assets at beginning of period		53,954,271			56,438,905
Net assets at end of period (including undistributed net investment income of $266,782 and $478,685, respectively)	$	52,056,313		$	53,954,271
Other Information
Class A Shares outstanding at beginning of period		4,601,327			5,793,732
Shares sold		184,507			422,826
Shares issued to shareholders in reinvestment of distributions		46,464			71,746
Shares redeemed		(327,148	)		(1,686,977	)
Net increase (decrease) in Class A shares		(96,177	)		(1,192,405	)
Shares outstanding at end of period		4,505,150			4,601,327
Class B Shares outstanding at beginning of period		246,555			311,300
Shares sold		2,394			14,554
Shares issued to shareholders in reinvestment of distributions		1,453			2,878
Shares redeemed		(240,601	)		(82,177	)
Net increase (decrease) in Class B shares		(236,754	)		(64,745	)
Shares outstanding at end of period		9,801			246,555

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	11.13		$	9.24		$	7.90		$	9.28		$	8.24		$	5.84
Income (loss) from investment operations: Net investment incomea		.07			.10			.12			.11			.06			.08
Net realized and unrealized gain (loss)		.44			1.92			1.34			(1.43	)		1.06			2.42
Total from investment operations		.51			2.02			1.46			(1.32	)		1.12			2.50
Less distributions from: Net investment income		(.11	)		(.13	)		(.12	)		(.06	)		(.08	)		(.10	)
Total distributions		(.11	)		(.13	)		(.12	)		(.06	)		(.08	)		(.10	)
Net asset value, end of period	$	11.53		$	11.13		$	9.24		$	7.90		$	9.28		$	8.24
Total Return (%)b		4.65	**		22.08			18.60			(14.39	)		13.65			43.82
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		52			51			54			49			68			66
Ratio of expenses before expense reductions (%)		1.42	*		1.45			1.42			1.37			1.41			1.38
Ratio of expenses after expense reductions (%)		.80	*		.88			.99			1.03			1.05			1.04
Ratio of net investment income (%)		1.24	*		1.00			1.40			1.24			.77			1.23
Portfolio turnover rate (%)		31	**		171			107			127			165			190
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

				Years Ended December 31,
Class B	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	11.14		$	9.25		$	7.91		$	9.29		$	8.25		$	5.85
Income (loss) from investment operations: Net investment incomea		.01			.07			.09			.08			.04			.06
Net realized and unrealized gain (loss)		.48			1.92			1.34			(1.44	)		1.05			2.42
Total from investment operations		.49			1.99			1.43			(1.36	)		1.09			2.48
Less distributions from: Net investment income		(.07	)		(.10	)		(.09	)		(.02	)		(.05	)		(.08	)
Total distributions		(.07	)		(.10	)		(.09	)		(.02	)		(.05	)		(.08	)
Net asset value, end of period	$	11.56		$	11.14		$	9.25		$	7.91		$	9.29		$	8.25
Total Return (%)b		4.55	**		21.62			18.16			(14.67	)		13.24			43.23
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		.1			3			3			3			5			5
Ratio of expenses before expense reductions (%)		1.77	*		1.81			1.76			1.72			1.76			1.73
Ratio of expenses after expense reductions (%)		1.15	*		1.23			1.34			1.38			1.40			1.39
Ratio of net investment income (%)		.16	*		.66			1.04			.88			.42			.88
Portfolio turnover rate (%)		31	**		171			107			127			165			190
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Global Growth VIP (formerly DWS Global Growth VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Multiple Classes of Shares of Beneficial Interest. The Fund offers two classes of shares (Class A shares and Class B shares). Sales of Class B shares are subject to recordkeeping fees up to 0.15% and Rule 12b-1 fees under the 1940 Act equal to an annual rate of 0.25% of the average daily net assets for Class B shares of the Fund. Class A shares are not subject to such fees.

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable Rule 12b-1 fee and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.

Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1. For certain international equity securities, in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

Securities Lending. Brown Brothers Harriman & Co., as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains the benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

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.

Under the Regulated Investment Company Modernization Act of 2010, net capital losses incurred post-enactment may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previously, net capital losses were carried forward for eight years and treated as short-term. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

At December 31, 2013, the Fund had a net tax basis capital loss carryforward of approximately $44,211,000 of pre-enactment losses, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2016 ($26,421,000) and December 31, 2017 ($17,790,000), the respective expiration dates, whichever occurs first.

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

B. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments) aggregated $15,780,080 and $19,619,448, respectively.

C. Related Parties

First $250 million	.915	%
Next $500 million	.865	%
Next $750 million	.815	%
Next $1.5 billion	.765	%
Over $3 billion	.715	%

Class A	.80%
Class B	1.15%

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed for each class are as follows:

Class A	$	157,586
Class B		5,267
	$	162,853

Services to Shareholders	Total Aggregated		Unpaid at June 30, 2014
Class A	$	149	$	73
Class B		43		27
	$	192	$	100

Distribution Service Agreement. Under the Fund's Class B 12b-1 plan, DeAWM Distributors, Inc. ("DDI") received a fee ("Distribution Service Fee") of 0.25% of average daily net assets of Class B shares. For the six months ended June 30, 2014, the Distribution Service Fee aggregated $2,110, of which $23 is unpaid.

D. Investing in Emerging Markets

Investing in emerging markets may involve special risks and considerations not typically associated with investing in developed markets. These risks include revaluation of currencies, high rates of inflation or deflation, repatriation restrictions on income and capital, and future adverse political, social and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls or delayed settlements, and may have prices that are more volatile or less easily assessed than those of comparable securities of issuers in developed markets.

E. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 72% and 23%. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, owning 53% and 39%.

F. Line of Credit

G. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,046.50	$	1,045.50
Expenses Paid per $1,000*	$	4.06	$	5.83
Hypothetical 5% Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,020.83	$	1,019.09
Expenses Paid per $1,000*	$	4.01	$	5.76

Annualized Expense Ratios	Class A		Class B
Deutsche Variable Series II — Deutsche Global Growth VIP	.80%		1.15%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Global Growth VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

— The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Equity Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund's Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.

— In connection with reviewing the Agreement, the Board also reviewed the terms of the Fund's Rule 12b-1 plan, distribution agreement, administrative services agreement, transfer agency agreement and other material service agreements.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 3rd quartile, 4th quartile and 4th quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one-year period and has underperformed its benchmark in the three- and five-year periods ended December 31, 2012. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board recognized that DIMA has made changes to its investment personnel and processes in recent years in an effort to enhance its investment platform and improve long-term performance across the DWS fund complex.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were higher than the median (4th quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Notes

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2GG-3 (R-028383-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Global Income Builder VIP

(formerly DWS Global Income Builder VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

27 Statement of Assets and Liabilities

28 Statement of Operations

29 Statement of Changes in Net Assets

30 Financial Highlights

31 Notes to Financial Statements

39 Information About Your Fund's Expenses

40 Proxy Voting

41 Advisory Agreement Board Considerations and Fee Evaluation

Although allocation among different asset categories generally limits risk, Fund management may favor an asset category that underperforms other assets or markets as a whole. Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Dividends are not guaranteed. If the dividend-paying stocks held by the Fund reduce or stop paying dividends, the Fund's ability to generate income may be adversely affected. Preferred stocks, a type of dividend-paying stock, present certain additional risks. Because Exchange Traded Funds (ETFs) trade on a securities exchange, their shares may trade at a premium or discount to their net asset value. ETFs also incur fees and expenses so they may not fully match the performance of the indexes they are designed to track. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. The Fund may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratio of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 is 0.60% for Class A shares and may differ from the expense ratio disclosed in the Financial Highlights table in this report.

Growth of an Assumed $10,000 Investment in Deutsche Global Income Builder VIP
		The Russell 1000® Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index. The Barclays U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with an average maturity of one year or more. The S&P® Target Risk Moderate Index is designed to measure the performance of S&P's proprietary moderate target risk allocation model. The S&P® Target Risk Moderate Index seeks to provide significant exposure to fixed income, while also allocating a smaller portion of exposure to equities in order to seek current income, some capital preservation, and an opportunity for moderate to low capital appreciation. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Global Income Builder VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,539		$	11,724		$	13,210		$	17,532		$	17,201
Class A	Average annual total return		5.39	%		17.24	%		9.73	%		11.88	%		5.57	%
Russell 1000® Index	Growth of $10,000	$	10,727		$	12,535		$	15,863		$	24,117		$	21,967
Russell 1000® Index	Average annual total return		7.27	%		25.35	%		16.63	%		19.25	%		8.19	%
Barclays U.S. Aggregate Bond Index	Growth of $10,000	$	10,393		$	10,437		$	11,140		$	12,674		$	16,187
Barclays U.S. Aggregate Bond Index	Average annual total return		3.93	%		4.37	%		3.66	%		4.85	%		4.93	%
S&P® Target Risk Moderate Index	Growth of $10,000	$	10,442		$	11,254		$	12,367		$	15,443		$	17,301
S&P® Target Risk Moderate Index	Average annual total return		4.42	%		12.54	%		7.34	%		9.08	%		5.64	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Equity	55%	63%
Common Stocks	55%	63%

Fixed Income	37%	33%
Corporate Bonds	27%	23%
Government & Agency Obligations	7%	5%
Collateralized Mortgage Obligations	1%	2%
Asset-Backed	1%	0%
Commercial Mortgage-Backed Securities	1%	1%
Municipal Bonds and Notes	0%	1%
Mortgage-Backed Securities Pass-Throughs	0%	1%
Loan Participations and Assignments	—	0%

Cash Equivalents	8%	4%
	100%	100%

Sector Diversification(As a % of Equities, Corporate Bonds, Preferred Securities, Convertible Bonds and Other Investments)	6/30/14	12/31/13

Financials	21%	22%
Consumer Discretionary	12%	13%
Energy	12%	9%
Information Technology	10%	12%
Industrials	10%	11%
Telecommunication Services	10%	9%
Consumer Staples	7%	7%
Health Care	7%	6%
Materials	6%	5%
Utilities	5%	6%
	100%	100%

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

Di Kumble, CFA

William Chepolis, CFA

Philip G. Condon

Gary Russell, CFA

John D. RyanDarwei Kung

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Common Stocks 54.8%
Consumer Discretionary 5.4%
Auto Components 0.4%
Aisin Seiki Co., Ltd.		2,664		105,976
Bridgestone Corp.		3,605		126,151
Cie Generale des Etablissements Michelin		243		29,035
Delphi Automotive PLC		1,254		86,200
Denso Corp.		79		3,770
Johnson Controls, Inc.		1,959		97,813
Magna International, Inc.		1,176		126,588
Sumitomo Rubber Industries Ltd.		12,693		183,181
Toyota Industries Corp.		79		4,078
TRW Automotive Holdings Corp.*		236		21,127
Yokohama Rubber Co., Ltd.		23,087		199,637
				983,556
Automobiles 1.3%
Bayerische Motoren Werke (BMW) AG		1,177		149,273
Daimler AG (Registered)		1,727		161,751
Fiat SpA*		11,828		116,774
Ford Motor Co.		13,868		239,084
Fuji Heavy Industries Ltd.		4,153		114,991
General Motors Co.		16,140		585,882
Honda Motor Co., Ltd. (a)		5,250		183,300
Isuzu Motors Ltd.		7,052		46,640
Mitsubishi Motors Corp.		21,938		242,107
Nissan Motor Co., Ltd.		40,585		384,998
Renault SA		4,500		406,867
Toyota Motor Corp.		6,190		371,748
Volkswagen AG		1,470		380,030
				3,383,445
Diversified Consumer Services 0.0%
H&R Block, Inc.		3,134		105,052
Hotels, Restaurants & Leisure 0.7%
Carnival Corp.		4,858		182,904
Chipotle Mexican Grill, Inc.*		79		46,808
Compass Group PLC		9,203		160,178
Crown Resorts Ltd.		4,907		69,961
Dawn Holdings, Inc.* (b)		1		1,940
Galaxy Entertainment Group Ltd.		10,969		87,464
McDonald's Corp.		3,056		307,861
Royal Caribbean Cruises Ltd.		2,899		161,184
Sands China Ltd.		26,326		199,558
SJM Holdings Ltd.		26,583		66,471
Starbucks Corp.		2,821		218,289
Tatts Group Ltd.		27,230		83,962
Trump Entertainment Resorts, Inc.*		2		0
TUI Travel PLC		10,382		70,716
Whitbread PLC		134		10,111
Yum! Brands, Inc.		1,959		159,071
				1,826,478
Household Durables 0.3%
Leggett & Platt, Inc. (a)		3,448		118,197
Mohawk Industries, Inc.*		784		108,459
Newell Rubbermaid, Inc.		2,351		72,858
PulteGroup, Inc.		2,351		47,396
Sekisui Chemical Co., Ltd.		5,485		63,510
	Shares		Value ($)

Sekisui House Ltd.		13,454		184,469
Whirlpool Corp.		1,646		229,156
				824,045
Leisure Products 0.1%
Bandai Namco Holdings, Inc.		2,508		58,723
Hasbro, Inc. (a)		2,821		149,654
Mattel, Inc.		784		30,553
				238,930
Media 1.6%
British Sky Broadcasting Group PLC		10,533		162,957
CBS Corp. "B" (a)		1,176		73,077
Comcast Corp. Special "A"		7,914		422,054
Comcast Corp. "A"		6,974		374,364
DIRECTV*		4,545		386,370
Discovery Communications, Inc. "A"*		314		23,324
Discovery Communications, Inc. "C"*		1,019		73,969
Liberty Global PLC "A"*		2,978		131,687
Liberty Global PLC "C"*		3,420		144,700
Liberty Media Corp. "A"*		1,411		192,856
News Corp. "A"*		5,485		98,401
Omnicom Group, Inc.		627		44,655
Reed Elsevier PLC		4,714		75,835
Scripps Networks Interactive, Inc. "A"		2,273		184,431
SES SA		5		190
Shaw Communications, Inc. "B"		7,444		190,870
Thomson Reuters Corp.		4,231		154,046
Time Warner Cable, Inc.		1,254		184,714
Time Warner, Inc.		6,347		445,877
Time, Inc.*		793		19,206
Twenty-First Century Fox, Inc. "A"		3,056		107,418
Twenty-First Century Fox, Inc. "B"		4,701		160,915
Viacom, Inc. "B"		1,881		163,139
Walt Disney Co.		3,683		315,780
WPP PLC		4,538		98,943
				4,229,778
Multiline Retail 0.3%
Canadian Tire Corp., Ltd. "A"		157		15,062
Dollar General Corp.*		1,959		112,368
Kohl's Corp.		3,291		173,370
Macy's, Inc.		2,194		127,296
Nordstrom, Inc.		1,097		74,519
Target Corp. (a)		3,683		213,430
				716,045
Specialty Retail 0.3%
AutoZone, Inc.*		314		168,379
Bed Bath & Beyond, Inc.*		941		53,995
GameStop Corp. "A" (a)		392		15,864
Home Depot, Inc.		2,038		164,997
Lowe's Companies, Inc.		1,332		63,923
O'Reilly Automotive, Inc.*		314		47,288
PetSmart, Inc. (a)		1,097		65,601
Staples, Inc.		8,500		92,140
The Gap, Inc.		862		35,833
TJX Companies, Inc.		1,567		83,286
				791,306
	Shares		Value ($)

Textiles, Apparel & Luxury Goods 0.4%
Christian Dior SA		933		185,629
Cie Financiere Richemont SA (Registered)		1,534		160,959
Michael Kors Holdings Ltd.*		706		62,587
NIKE, Inc. "B"		2,664		206,593
Swatch Group AG (Bearer)		205		123,791
Swatch Group AG (Registered)		1,724		191,491
VF Corp.		2,642		166,446
Yue Yuen Industrial (Holdings) Ltd.		18,804		63,688
				1,161,184
Consumer Staples 4.7%
Beverages 0.6%
Anheuser-Busch InBev NV		450		51,698
Carlsberg AS "B"		1,729		186,242
Coca-Cola Co.		6,268		265,512
Diageo PLC		2,821		90,088
Dr. Pepper Snapple Group, Inc.		2,586		151,488
Heineken Holding NV		1,747		114,860
Heineken NV		355		25,486
Molson Coors Brewing Co. "B"		2,899		214,990
PepsiCo, Inc.		3,567		318,676
SABMiller PLC		1,353		78,450
				1,497,490
Food & Staples Retailing 1.7%
Aeon Co., Ltd.		12,615		155,158
Alimentation Couche-Tard, Inc. "B"		7,052		193,177
Casino Guichard-Perrachon SA		524		69,477
Costco Wholesale Corp.		1,332		153,393
CVS Caremark Corp.		5,642		425,238
Empire Co., Ltd. "A"		3,134		213,114
George Weston Ltd.		3,448		254,339
J Sainsbury PLC		65,372		352,974
Jeronimo Martins, SGPS, SA		3,507		57,698
Koninklijke Ahold NV		4,417		82,921
Kroger Co.		5,877		290,500
Lawson, Inc.		862		64,668
Loblaw Companies Ltd.		1,756		78,366
Metro, Inc.		1,332		82,350
Safeway, Inc.		2,899		99,552
Seven & I Holdings Co., Ltd.		1,567		66,018
Sysco Corp. (a)		3,761		140,849
Tesco PLC		70,901		344,848
Wal-Mart Stores, Inc.		6,112		458,828
Walgreen Co.		4,545		336,921
Wesfarmers Ltd.		5,098		201,131
WM Morrison Supermarkets PLC		77,061		241,872
Woolworths Ltd.		4,247		141,046
				4,504,438
Food Products 1.2%
Archer-Daniels-Midland Co.		5,328		235,018
Aryzta AG*		1,318		124,845
Bunge Ltd.		3,996		302,258
ConAgra Foods, Inc.		4,466		132,551
General Mills, Inc.		4,780		251,141
Hormel Foods Corp.		2,038		100,575
Kellogg Co.		2,899		190,464
Kerry Group PLC "A"		2,837		213,076
Kraft Foods Group, Inc.		2,116		126,854
Lindt & Spruengli AG		23		117,075
McCormick & Co., Inc.		941		67,366
Mondelez International, Inc. "A"		7,679		288,807
	Shares		Value ($)

Nestle SA (Registered)		4,850		375,728
Tate & Lyle PLC		6,434		75,371
The Hershey Co.		706		68,743
The JM Smucker Co.		1,567		166,995
Tyson Foods, Inc. "A"		7,052		264,732
Wilmar International Ltd.		61,112		156,346
				3,257,945
Household Products 0.5%
Church & Dwight Co., Inc.		1,803		126,120
Clorox Co.		784		71,658
Colgate-Palmolive Co.		2,429		165,609
Energizer Holdings, Inc.		1,411		172,184
Kimberly-Clark Corp.		2,038		226,666
Procter & Gamble Co.		4,566		358,842
Reckitt Benckiser Group PLC		1,733		151,259
				1,272,338
Tobacco 0.7%
Altria Group, Inc.		8,110		340,133
British American Tobacco PLC		4,589		273,149
Imperial Tobacco Group PLC		7,662		344,865
Japan Tobacco, Inc.		5,877		214,242
Lorillard, Inc.		3,134		191,080
Philip Morris International, Inc.		3,918		330,326
Reynolds American, Inc.		4,623		278,998
				1,972,793
Energy 5.0%
Energy Equipment & Services 0.5%
Baker Hughes, Inc.		1,254		93,360
Ensco PLC "A"		8,070		448,450
Halliburton Co.		1,254		89,047
National Oilwell Varco, Inc.		1,254		103,267
Noble Corp. PLC		10,969		368,120
Schlumberger Ltd.		2,273		268,100
				1,370,344
Oil, Gas & Consumable Fuels 4.5%
Apache Corp.		1,567		157,672
BG Group PLC		6,894		145,710
BP PLC		76,166		671,175
Cabot Oil & Gas Corp.		3,996		136,423
Canadian Natural Resources Ltd.		1,646		75,632
Chesapeake Energy Corp. (a)		11,155		346,697
Chevron Corp.		4,780		624,029
ConocoPhillips		6,336		543,185
Devon Energy Corp.		2,038		161,817
Enbridge, Inc.		392		18,600
Eni SpA		9,313		254,791
EQT Corp.		1,332		142,391
Exxon Mobil Corp.		4,701		473,297
Hess Corp.		3,134		309,921
HollyFrontier Corp. (a)		5,789		252,921
Husky Energy, Inc.		6,056		195,576
Idemitsu Kosan Co., Ltd.		12,627		274,340
Imperial Oil Ltd.		6,974		367,507
JX Holdings, Inc.		90,885		486,251
Kinder Morgan, Inc.		7,835		284,097
Marathon Oil Corp.		6,503		259,600
Marathon Petroleum Corp.		3,621		282,692
Murphy Oil Corp.		2,806		186,543
Neste Oil Oyj (a)		9,505		185,467
Occidental Petroleum Corp.		3,369		345,761
OMV AG		9,145		413,234
Origin Energy Ltd.		152		2,095
	Shares		Value ($)

Pacific Rubiales Energy Corp.		4,623		93,929
Phillips 66		4,075		327,752
Repsol SA		5,901		155,625
Royal Dutch Shell PLC "A"		18,660		772,341
Royal Dutch Shell PLC "B"		14,953		650,640
Showa Shell Sekiyu KK		28,239		320,844
Spectra Energy Corp. (a)		3,448		146,471
Statoil ASA		6,006		184,473
Suncor Energy, Inc.		4,780		203,824
Tesoro Corp.		5,015		294,230
TonenGeneral Sekiyu KK (a)		16,463		156,334
Total SA		7,515		543,122
TransCanada Corp.		2,273		108,490
Valero Energy Corp.		6,863		343,836
Woodside Petroleum Ltd.		2,606		100,922
				12,000,257
Financials 13.6%
Banks 6.3%
Aozora Bank Ltd.		141,174		464,053
Australia & New Zealand Banking Group Ltd.		8,236		258,923
Banco Bilbao Vizcaya Argentaria SA		9,682		123,415
Bank Hapoalim BM		63,913		369,528
Bank Leumi Le-Israel BM*		98,723		385,225
Bank of America Corp.		31,653		486,507
Bank of East Asia Ltd.		21,938		91,003
Bank of Montreal (a)		5,328		392,366
Bank of Nova Scotia (a)		5,646		376,418
Barclays PLC		83,709		304,856
BB&T Corp.		6,190		244,072
Bendigo & Adelaide Bank Ltd.		5,567		64,043
BNP Paribas SA		4,637		314,583
BOC Hong Kong (Holdings) Ltd.		93,627		271,202
Canadian Imperial Bank of Commerce (a)		4,075		370,819
CIT Group, Inc.		6,582		301,192
Citigroup, Inc.		11,048		520,361
Comerica, Inc.		1,097		55,025
Commonwealth Bank of Australia		2,037		155,353
Credit Agricole SA		14,547		205,168
Danske Bank AS		11,160		315,440
DBS Group Holdings Ltd.		20,371		273,650
Fifth Third Bancorp.		14,103		301,099
First Republic Bank		1,332		73,247
Fukuoka Financial Group, Inc.		21,710		104,794
Hang Seng Bank Ltd.		16,924		277,103
HSBC Holdings PLC		66,333		673,074
JPMorgan Chase & Co.		9,167		528,202
KeyCorp		12,301		176,273
Lloyds Banking Group PLC*		166,742		211,881
M&T Bank Corp. (a)		1,959		243,014
Mitsubishi UFJ Financial Group, Inc.		36,354		222,850
Mizrahi Tefahot Bank Ltd.		15,580		201,498
Mizuho Financial Group, Inc.		162,573		333,796
National Australia Bank Ltd.		6,869		212,320
National Bank of Canada (a)		8,305		352,265
Natixis		31,878		204,372
Nordea Bank AB		21,868		308,634
Oversea-Chinese Banking Corp., Ltd.		25,855		198,023
PNC Financial Services Group, Inc.		4,780		425,659
Raiffeisen Bank International AG		2,759		88,082
Regions Financial Corp.		31,810		337,822
	Shares		Value ($)

Resona Holdings, Inc.		47,156		274,636
Royal Bank of Canada		4,858		347,283
Royal Bank of Scotland Group PLC*		10,278		57,765
Skandinaviska Enskilda Banken AB "A"		23,014		307,586
Societe Generale		6,354		332,839
Standard Chartered PLC		11,679		238,650
Sumitomo Mitsui Financial Group, Inc.		5,407		226,517
SunTrust Banks, Inc.		5,877		235,433
Svenska Handelsbanken AB "A"		1,488		72,846
Swedbank AB "A"		13,741		364,422
The Bank of Yokohama Ltd.		27,744		159,664
The Chiba Bank Ltd.		10,186		71,892
The Chugoku Bank Ltd.		7,600		116,883
The Gunma Bank Ltd.		14,167		83,767
The Hachijuni Bank Ltd.		18,804		116,382
The Iyo Bank Ltd.		6,738		68,108
The Toronto-Dominion Bank (a)		8,229		423,616
U.S. Bancorp.		8,070		349,592
United Overseas Bank Ltd.		9,402		169,808
Wells Fargo & Co.		10,969		576,531
Westpac Banking Corp.		6,452		206,123
Yamaguchi Financial Group, Inc.		18,021		189,985
				16,807,538
Capital Markets 0.5%
3i Group PLC		33,208		228,409
Ameriprise Financial, Inc.		627		75,240
Bank of New York Mellon Corp.		3,369		126,270
BlackRock, Inc.		314		100,354
Credit Suisse Group AG (Registered)*		6,854		196,005
Morgan Stanley		8,070		260,903
State Street Corp.		1,724		115,956
The Goldman Sachs Group, Inc.		1,097		183,682
UBS AG (Registered)*		913		16,751
				1,303,570
Consumer Finance 0.2%
American Express Co.		549		52,084
Capital One Financial Corp.		3,526		291,247
Discover Financial Services		1,959		121,419
				464,750
Diversified Financial Services 0.5%
Berkshire Hathaway, Inc. "B"*		3,134		396,639
CME Group, Inc.		2,038		144,596
EXOR SpA		1,762		72,357
ING Groep NV (CVA)*		3,416		47,992
Intercontinental Exchange, Inc.		314		59,315
Investor AB "B"		6,167		231,393
Leucadia National Corp.		627		16,440
The NASDAQ OMX Group, Inc.		1,176		45,417
Voya Financial, Inc.		4,800		174,432
				1,188,581
Insurance 5.0%
ACE Ltd.		3,526		365,646
Aegon NV		25,449		222,117
Aflac, Inc.		4,578		284,980
Alleghany Corp.*		471		206,355
Allianz SE (Registered)		1,307		217,803
Allstate Corp.		6,582		386,495
American International Group, Inc.		7,444		406,294
Aon PLC		471		42,432
	Shares		Value ($)

Arch Capital Group Ltd.*		2,586		148,540
Assurant, Inc.		3,134		205,434
AXA SA		10,958		261,909
Axis Capital Holdings Ltd.		7,914		350,432
Baloise Holding AG (Registered)		3,543		417,505
Chubb Corp.		3,213		296,142
CNP Assurances		6,858		142,362
Delta Lloyd NV		4,442		112,768
Direct Line Insurance Group PLC		87,683		404,864
Everest Re Group Ltd.		3,369		540,691
Friends Life Group Ltd.		61,783		333,384
Great-West Lifeco, Inc.		4,466		126,314
Hannover Rueck SE		3,802		342,612
Hartford Financial Services Group, Inc.		6,626		237,277
Insurance Australia Group Ltd.		2,518		13,866
Intact Financial Corp.		3,134		216,110
Legal & General Group PLC		1,991		7,680
Lincoln National Corp.		4,351		223,815
Loews Corp.		5,877		258,647
Manulife Financial Corp.		4,100		81,497
Mapfre SA		24,168		96,334
Marsh & McLennan Companies, Inc.		1,097		56,847
MetLife, Inc.		6,836		379,808
Muenchener Rueckversicherungs- Gesellschaft AG (Registered)		1,302		288,640
Old Mutual PLC		66,684		225,621
PartnerRe Ltd.		3,706		404,732
Power Corp. of Canada		2,429		67,494
Power Financial Corp.		4,075		126,827
Principal Financial Group, Inc.		1,097		55,377
Progressive Corp.		4,936		125,177
Prudential Financial, Inc.		2,351		208,698
RenaissanceRe Holdings Ltd. (a)		3,526		377,282
Sampo Oyj "A"		3,489		176,528
SCOR SE		8,888		305,719
Suncorp Group Ltd.		22,938		292,862
Swiss Life Holding AG (Registered)*		2,090		495,633
Swiss Re AG.*		7,110		632,588
The Travelers Companies, Inc.		3,918		368,566
Torchmark Corp.		1,881		154,092
Unum Group		7,757		269,633
W.R. Berkley Corp.		5,015		232,245
XL Group PLC		11,204		366,707
Zurich Insurance Group AG*		2,086		628,764
				13,190,145
Real Estate Investment Trusts 0.4%
CFS Retail Property Trust (REIT)		49,808		95,812
Crown Castle International Corp. (REIT)		1,091		81,018
Dexus Property Group (REIT)		77,801		81,432
Federation Centres Ltd. (REIT)		44,060		103,450
GPT Group (REIT)		19,958		72,266
H&R Real Estate Investment Trust (REIT) (Units)		14,386		312,244
RioCan Real Estate Investment Trust (REIT)		4,858		124,335
Scentre Group (REIT)*		47,536		143,437
Stockland (REIT)		26,778		97,971
Westfield Corp. (REIT)		3,020		20,361
				1,132,326
	Shares		Value ($)

Real Estate Management & Development 0.5%
Cheung Kong (Holdings) Ltd.		15,670		277,800
First Capital Realty, Inc.		6,425		112,116
Henderson Land Development Co., Ltd.		14,774		86,543
New World Development Co., Ltd.		47,793		54,389
Sun Hung Kai Properties Ltd.		12,536		172,098
Swire Pacific Ltd. "A"		13,320		163,870
Swiss Prime Site AG (Registered)*		3,231		267,793
Wharf Holdings Ltd.		7,835		56,611
Wheelock & Co., Ltd.		14,103		59,320
				1,250,540
Thrifts & Mortgage Finance 0.2%
New York Community Bancorp., Inc. (a)		10,499		167,774
Ocwen Financial Corp.*		5,935		220,189
People's United Financial, Inc.		14,025		212,759
				600,722
Health Care 4.2%
Biotechnology 1.0%
Actelion Ltd. (Registered)*		2,771		350,593
Alexion Pharmaceuticals, Inc.*		941		147,031
Amgen, Inc.		3,683		435,957
Biogen Idec, Inc.*		627		197,699
Celgene Corp.*		5,642		484,535
CSL Ltd.		4,391		275,550
Gilead Sciences, Inc.*		7,914		656,150
				2,547,515
Health Care Equipment & Supplies 0.4%
Abbott Laboratories		5,642		230,758
Baxter International, Inc.		2,664		192,607
Becton, Dickinson & Co.		862		101,975
CareFusion Corp.*		2,116		93,845
Covidien PLC		2,273		204,979
Medtronic, Inc.		3,683		234,828
Stryker Corp.		1,190		100,341
Zimmer Holdings, Inc.		549		57,019
				1,216,352
Health Care Providers & Services 1.1%
Aetna, Inc.		3,918		317,672
AmerisourceBergen Corp.		1,411		102,523
Cardinal Health, Inc.		1,959		134,309
CIGNA Corp.		2,508		230,661
Express Scripts Holding Co.*		3,134		217,280
HCA Holdings, Inc.*		3,213		181,149
Humana, Inc.		2,194		280,218
Laboratory Corp. of America Holdings*		862		88,269
McKesson Corp.		1,019		189,748
Omnicare, Inc. (a)		941		62,642
Quest Diagnostics, Inc. (a)		4,231		248,317
UnitedHealth Group, Inc.		4,701		384,307
WellPoint, Inc.		4,153		446,904
				2,883,999
Life Sciences Tools & Services 0.1%
Thermo Fisher Scientific, Inc.		2,038		240,484
Pharmaceuticals 1.6%
AbbVie, Inc.		2,741		154,702
Actavis PLC* (a)		1,019		227,288
AstraZeneca PLC		1,718		127,619
Bristol-Myers Squibb Co.		3,369		163,430
Eli Lilly & Co.		3,213		199,752
	Shares		Value ($)

GlaxoSmithKline PLC		11,399		305,109
Johnson & Johnson		3,605		377,155
Merck & Co., Inc.		5,563		321,819
Mylan, Inc.*		1,176		60,635
Novartis AG (Registered)		5,595		506,629
Novo Nordisk AS ''B"		3,854		177,381
Otsuka Holdings Co., Ltd.		6,895		213,714
Perrigo Co. PLC		392		57,138
Pfizer, Inc.		13,555		402,312
Roche Holding AG (Genusschein)		1,112		331,669
Sanofi		1,531		162,639
Teva Pharmaceutical Industries Ltd.		7,856		415,293
				4,204,284
Industrials 5.9%
Aerospace & Defense 1.1%
Airbus Group NV		2,936		196,752
BAE Systems PLC		42,925		318,016
Boeing Co.		1,489		189,445
General Dynamics Corp.		1,567		182,634
Honeywell International, Inc.		2,821		262,212
L-3 Communications Holdings, Inc.		1,881		227,131
Lockheed Martin Corp.		1,567		251,864
Meggitt PLC		8,369		72,473
Northrop Grumman Corp.		2,038		243,806
Precision Castparts Corp.		627		158,255
Raytheon Co.		2,664		245,754
Rockwell Collins, Inc.		941		73,530
Rolls-Royce Holdings PLC*		7,501		137,230
Safran SA		1,352		88,519
Thales SA		506		30,607
United Technologies Corp.		2,586		298,554
				2,976,782
Air Freight & Logistics 0.2%
FedEx Corp.		784		118,682
Royal Mail PLC*		23,937		204,419
United Parcel Service, Inc. "B"		1,176		120,728
				443,829
Airlines 1.1%
American Airlines Group, Inc.*		2,600		111,696
Cathay Pacific Airways Ltd.		123,791		231,277
Delta Air Lines, Inc.		12,144		470,216
Deutsche Lufthansa AG (Registered)		22,684		487,040
easyJet PLC		9,936		232,111
Japan Airlines Co., Ltd.		7,365		407,127
Singapore Airlines Ltd.		34,474		286,431
Southwest Airlines Co.		14,253		382,835
United Continental Holdings, Inc.*		5,109		209,827
				2,818,560
Building Products 0.0%
Congoleum Corp.*		3,800		0
Commercial Services & Supplies 0.2%
Babcock International Group PLC		5,273		104,861
Cintas Corp.		1,567		99,567
G4S PLC		30		131
Republic Services, Inc.		5,171		196,343
Societe BIC SA		577		78,945
Tyco International Ltd.		2,351		107,206
Waste Management, Inc.		2,194		98,138
				685,191
	Shares		Value ($)

Construction & Engineering 0.0%
Jacobs Engineering Group, Inc.*		549		29,251
Electrical Equipment 0.3%
ABB Ltd. (Registered)*		8,638		198,904
AMETEK, Inc.		1,332		69,637
Eaton Corp. PLC		2,821		217,725
Emerson Electric Co.		2,273		150,836
Sumitomo Electric Industries Ltd.		3,605		50,710
				687,812
Industrial Conglomerates 0.6%
3M Co. (a)		1,724		246,946
Danaher Corp.		2,664		209,737
General Electric Co.		14,338		376,803
Hutchison Whampoa Ltd.		18,021		246,235
Koninklijke Philips NV		2,934		93,106
Roper Industries, Inc.		862		125,861
Sembcorp Industries Ltd.		21,938		94,480
Siemens AG (Registered)		1,248		164,822
Smiths Group PLC		250		5,549
Toshiba Corp.		10,031		46,835
				1,610,374
Machinery 0.4%
AGCO Corp.		3,761		211,443
Caterpillar, Inc.		862		93,673
Deere & Co.		3,996		361,838
Illinois Tool Works, Inc.		549		48,070
PACCAR, Inc.		1,254		78,789
Parker Hannifin Corp.		627		78,833
Schindler Holding AG (Registered)		503		75,836
SKF AB "B"		29		740
Stanley Black & Decker, Inc.		1,332		116,976
Yangzijiang Shipbuilding Holdings Ltd.		141,107		122,220
				1,188,418
Marine 0.3%
A P Moller-Maersk AS "A"		149		350,550
A P Moller-Maersk AS "B"		118		293,220
Nippon Yusen Kabushiki Kaisha		83,050		239,382
				883,152
Professional Services 0.2%
Adecco SA (Registered)*		393		32,351
Equifax, Inc.		1,411		102,354
Nielsen NV		4,545		220,023
SGS SA (Registered)		46		110,228
				464,956
Road & Rail 0.4%
Canadian National Railway Co.		236		15,349
Central Japan Railway Co.		1,411		201,263
CSX Corp.		3,840		118,310
East Japan Railway Co.		1,097		86,402
MTR Corp., Ltd.		27,814		107,303
Norfolk Southern Corp.		862		88,812
Union Pacific Corp.		2,194		218,852
West Japan Railway Co.		3,761		165,580
				1,001,871
Trading Companies & Distributors 1.1%
ITOCHU Corp.		41,839		537,314
Marubeni Corp.		78,349		573,087
Mitsubishi Corp.		28,128		585,023
Mitsui & Co., Ltd.		29,851		478,535
Sumitomo Corp.		39,566		534,290
	Shares		Value ($)

W.W. Grainger, Inc. (a)		627		159,427
				2,867,676
Information Technology 6.9%
Communications Equipment 1.0%
Cisco Systems, Inc.		25,699		638,620
Harris Corp.		3,369		255,202
Juniper Networks, Inc.*		7,764		190,529
Motorola Solutions, Inc.		6,190		412,068
QUALCOMM, Inc.		8,070		639,144
Telefonaktiebolaget LM Ericsson "B"		29,658		358,432
				2,493,995
Electronic Equipment, Instruments & Components 0.7%
Amphenol Corp. "A"		784		75,531
Arrow Electronics, Inc.*		5,328		321,864
Avnet, Inc.		6,660		295,105
Corning, Inc.		16,140		354,273
Flextronics International Ltd.*		30,008		332,188
FUJIFILM Holdings Corp.		2,821		78,667
Hitachi Ltd.		5,485		40,174
Kyocera Corp.		2,429		115,282
Murata Manufacturing Co., Ltd.		706		66,074
TE Connectivity Ltd.		4,388		271,354
				1,950,512
Internet Software & Services 0.6%
Dena Co., Ltd.		7,900		106,836
eBay, Inc.*		5,642		282,438
Facebook, Inc. "A"*		3,369		226,700
Google, Inc. "A"*		392		229,191
Google, Inc. "C"*		784		451,019
LinkedIn Corp. "A"*		127		21,777
VeriSign, Inc.* (a)		2,821		137,693
Yahoo!, Inc.*		6,347		222,970
				1,678,624
IT Services 1.7%
Accenture PLC "A"		4,075		329,423
Alliance Data Systems Corp.*		549		154,406
AtoS		1,677		139,708
Automatic Data Processing, Inc.		3,232		256,233
CGI Group, Inc. "A"*		4,701		166,620
Cognizant Technology Solutions Corp. "A"*		3,291		160,963
Computer Sciences Corp.		3,840		242,688
Fidelity National Information Services, Inc.		5,798		317,382
Fiserv, Inc.*		3,761		226,863
FleetCor Technologies, Inc.*		784		103,331
International Business Machines Corp.		3,056		553,961
Itochu Techno-Solutions Corp.		627		27,264
MasterCard, Inc. "A"		3,134		230,255
Nomura Research Institute Ltd.		1,803		56,775
Paychex, Inc.		3,056		127,007
Total System Services, Inc.		5,250		164,902
Vantiv, Inc. "A"*		3,369		113,266
Visa, Inc. "A"		1,646		346,829
Western Union Co. (a)		12,458		216,022
Xerox Corp.		34,004		423,010
				4,356,908
Semiconductors & Semiconductor Equipment 0.8%
Analog Devices, Inc.		2,586		139,825
ASML Holding NV		15		1,397
	Shares		Value ($)

Avago Technologies Ltd.		1,646		118,627
Broadcom Corp. "A"		7,209		267,598
Intel Corp.		21,473		663,516
KLA-Tencor Corp.		3,056		221,988
Lam Research Corp.		2,664		180,033
Marvell Technology Group Ltd.		4,623		66,248
Maxim Integrated Products, Inc.		4,388		148,358
Microchip Technology, Inc. (a)		3,291		160,634
Micron Technology, Inc.*		5,093		167,814
Texas Instruments, Inc.		1,646		78,662
				2,214,700
Software 1.2%
Activision Blizzard, Inc.		15,827		352,942
ANSYS, Inc.*		784		59,443
CA, Inc.		12,536		360,285
GungHo Online Entertainment, Inc. (a)		10,734		69,296
Intuit, Inc.		3,134		252,381
Microsoft Corp.		14,249		594,183
Nexon Co., Ltd.		17,394		166,033
NICE Systems Ltd.		2,086		85,227
Oracle Corp.		10,813		438,251
SAP AG		2,389		184,499
Symantec Corp.		13,241		303,219
Synopsys, Inc.*		5,407		209,900
The Sage Group PLC		1,325		8,710
VMware, Inc. "A"*		784		75,899
				3,160,268
Technology Hardware, Storage & Peripherals 0.9%
Apple, Inc.		8,778		815,739
Canon, Inc. (a)		6,974		226,902
EMC Corp.		12,458		328,144
Hewlett-Packard Co.		13,006		438,042
NetApp, Inc.		2,586		94,441
Ricoh Co., Ltd.		12,047		143,534
Seagate Technology PLC		3,683		209,268
Western Digital Corp.		1,959		180,816
				2,436,886
Materials 2.0%
Chemicals 0.5%
Agrium, Inc.		1,176		107,731
Asahi Kasei Corp.		19,219		147,028
Ashland, Inc.		862		93,734
BASF SE		8		931
CF Industries Holdings, Inc.		236		56,765
Dow Chemical Co.		784		40,345
E.I. du Pont de Nemours & Co.		1,489		97,440
Ecolab, Inc.		392		43,645
LyondellBasell Industries NV "A"		2,273		221,958
Mitsubishi Chemical Holdings Corp.		38,235		169,464
Monsanto Co.		1,019		127,110
Praxair, Inc.		549		72,929
Syngenta AG (Registered)		306		113,974
				1,293,054
Construction Materials 0.1%
Fletcher Building Ltd.		8,805		67,918
Holcim Ltd. (Registered)*		3,225		283,479
				351,397
Containers & Packaging 0.1%
Rock-Tenn Co. "A"		2,978		314,447
	Shares		Value ($)

Metals & Mining 1.2%
Anglo American PLC		6,850		167,640
Barrick Gold Corp.		15,984		292,702
BHP Billiton Ltd.		1,942		65,740
BHP Billiton PLC		3,311		107,068
Boliden AB		21,615		313,636
Fortescue Metals Group Ltd.		54,098		221,901
Freeport-McMoRan Copper & Gold, Inc.		7,600		277,400
Glencore PLC		26,125		145,555
Goldcorp, Inc.		5,485		153,079
JFE Holdings, Inc.		3,600		74,306
Mitsubishi Materials Corp.		18,804		65,894
Newmont Mining Corp.		7,383		187,824
Nucor Corp.		4,075		200,694
Rio Tinto PLC		5,732		304,936
Silver Wheaton Corp.		9,011		237,129
Yamana Gold, Inc.		37,843		311,383
				3,126,887
Paper & Forest Products 0.1%
International Paper Co.		6,974		351,978
Telecommunication Services 3.4%
Diversified Telecommunication Services 2.9%
AT&T, Inc.		18,726		662,151
BCE, Inc.		7,365		334,067
Bell Aliant, Inc.		4,153		108,549
BT Group PLC		57,981		381,931
CenturyLink, Inc.		10,891		394,254
Deutsche Telekom AG (Registered)		10,731		188,083
Elisa Oyj		5,325		162,893
Frontier Communications Corp. (a)		19,300		112,712
HKT Trust & HKT Ltd.		147,000		172,408
Iliad SA		47		14,207
Nippon Telegraph & Telephone Corp.		11,283		703,677
Orange SA		19,399		306,139
PCCW Ltd.		254,633		151,786
Singapore Telecommunications Ltd.		76,045		234,801
Swisscom AG (Registered)		606		352,270
TDC AS		29,141		301,587
Telecom Corp. of New Zealand Ltd.		113,327		265,919
Telecom Italia SpA (RSP)		204,986		202,516
Telefonica SA		14,181		243,114
Telenor ASA		8,848		201,516
TeliaSonera AB		52,444		383,113
Telstra Corp., Ltd.		66,244		325,441
TELUS Corp.		7,287		271,594
Verizon Communications, Inc. (c)		13,851		677,729
Verizon Communications, Inc. (c)		2,351		115,199
Vivendi SA*		4,103		100,398
Ziggo NV		3,186		147,325
				7,515,379
Wireless Telecommunication Services 0.5%
KDDI Corp.		4,780		291,552
NTT DoCoMo, Inc.		26,169		447,408
Rogers Communications, Inc. "B"		6,503		261,692
Softbank Corp.		471		35,070
Vodafone Group PLC		112,387		375,061
				1,410,783
	Shares		Value ($)

Utilities 3.7%
Electric Utilities 2.1%
American Electric Power Co., Inc.		4,388		244,719
Cheung Kong Infrastructure Holdings Ltd.		30,556		211,515
CLP Holdings Ltd.		10,969		89,729
Duke Energy Corp.		5,407		401,145
E.ON SE		13,270		274,013
Edison International		3,056		177,584
EDP — Energias de Portugal SA		90,266		452,875
Electricite de France SA (a)		4,493		141,502
Enel SpA		13,335		77,676
Entergy Corp.		5,171		424,487
Exelon Corp.		6,503		237,229
FirstEnergy Corp.		4,936		171,378
Fortum Oyj		9,387		252,060
Iberdrola SA		33,374		255,138
NextEra Energy, Inc.		2,743		281,103
Northeast Utilities		3,369		159,253
OGE Energy Corp.		6,660		260,273
Pinnacle West Capital Corp.		5,955		344,437
Power Assets Holdings Ltd.		26,247		229,946
PPL Corp.		6,112		217,159
Southern Co.		6,245		283,398
SSE PLC		7,389		198,155
Tokyo Electric Power Co., Inc.*		17,300		72,066
Xcel Energy, Inc.		6,738		217,166
				5,674,006
Gas Utilities 0.0%
Enagas SA (a)		22		708
Independent Power & Renewable Eletricity Producers 0.2%
AES Corp.		7,914		123,063
Electric Power Development Co., Ltd.		9,402		305,341
				428,404
Multi-Utilities 1.3%
AGL Energy Ltd.		3,971		57,964
Alliant Energy Corp.		2,508		152,637
Ameren Corp.		5,955		243,440
Centrica PLC		42,247		226,015
CMS Energy Corp.		2,664		82,984
Consolidated Edison, Inc.		4,310		248,859
Dominion Resources, Inc.		3,291		235,372
DTE Energy Co.		2,194		170,847
GDF Suez		5,853		161,132
Integrys Energy Group, Inc. (a)		4,545		323,286
National Grid PLC		19,631		282,210
NiSource, Inc.		5,250		206,535
PG&E Corp.		6,738		323,559
Public Service Enterprise Group, Inc.		5,720		233,319
SCANA Corp.		3,605		193,985
Sempra Energy		1,567		164,081
Wisconsin Energy Corp.		1,332		62,497
				3,368,722
Water Utilities 0.1%
American Water Works Co., Inc.		6,503		321,573
Total Common Stocks (Cost $128,838,971)				145,273,333

	Shares		Value ($)

Preferred Stocks 0.4%
Consumer Discretionary 0.4%
Bayerische Motoren Werke (BMW) AG		2,391		229,213
Porsche Automobil Holding SE		3,859		402,069
Volkswagen AG		1,322		347,199
				978,481
Financials 0.0%
Ally Financial, Inc. Series G, 144A, 7.0%		75		75,565
Total Preferred Stocks (Cost $921,217)				1,054,046

Rights 0.0%
Telecommunication Services
HKT Trust & HKT Ltd., Expiration Date 7/15/2014* (Cost $0)		26,460		7,818

Warrants 0.0%
Materials
GEO Specialty Chemicals, Inc., Expiration Date 3/31/2015*		19,324		14,792
Hercules Trust II, Expiration Date 3/31/2029*		170		1,094
Total Warrants (Cost $30,283)				15,886

		Principal Amount ($)(d)		Value ($)

Corporate Bonds 26.6%
Consumer Discretionary 3.8%
AmeriGas Finance LLC:
6.75%, 5/20/2020			110,000		119,350
7.0%, 5/20/2022			195,000		215,962
APX Group, Inc.:
6.375%, 12/1/2019 (e)			50,000		51,875
144A, 8.75%, 12/1/2020			50,000		50,750
Asbury Automotive Group, Inc., 8.375%, 11/15/2020			15,000		16,650
Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022			80,000		87,400
Ashton Woods U.S.A. LLC, 144A, 6.875%, 2/15/2021			80,000		80,000
Avis Budget Car Rental LLC, 5.5%, 4/1/2023			50,000		51,125
BC Mountain LLC, 144A, 7.0%, 2/1/2021			50,000		48,375
Block Communications, Inc., 144A, 7.25%, 2/1/2020			20,000		21,300
Boyd Gaming Corp., 9.0%, 7/1/2020 (a)			40,000		44,100
CCO Holdings LLC:
6.5%, 4/30/2021			420,000		447,300
6.625%, 1/31/2022			705,000		757,875
7.375%, 6/1/2020			10,000		10,900
Cequel Communications Holdings I LLC:
144A, 5.125%, 12/15/2021			385,000		383,556
144A, 6.375%, 9/15/2020			285,000		302,812
Clear Channel Communications, Inc.:
9.0%, 12/15/2019			250,000		266,562
11.25%, 3/1/2021			70,000		79,363
		Principal Amount ($)(d)		Value ($)

Clear Channel Worldwide Holdings, Inc.:
Series A, 6.5%, 11/15/2022			65,000		69,388
Series B, 6.5%, 11/15/2022			370,000		398,675
Series A, 7.625%, 3/15/2020			10,000		10,700
Series B, 7.625%, 3/15/2020			255,000		275,081
Cogeco Cable, Inc., 144A, 4.875%, 5/1/2020			5,000		5,063
Columbus International, Inc., 144A, 7.375%, 3/30/2021			500,000		538,750
Cumulus Media Holdings, Inc., 7.75%, 5/1/2019 (a)			50,000		52,688
Delphi Corp., 5.0%, 2/15/2023			70,000		75,250
DISH DBS Corp.:
4.25%, 4/1/2018			70,000		72,800
5.0%, 3/15/2023			715,000		728,406
7.875%, 9/1/2019			270,000		320,625
Getty Images, Inc., 144A, 7.0%, 10/15/2020 (a)			60,000		54,975
Harron Communications LP, 144A, 9.125%, 4/1/2020			45,000		50,175
Hot Topic, Inc., 144A, 9.25%, 6/15/2021			40,000		44,400
Isle of Capri Casinos, Inc., 5.875%, 3/15/2021			35,000		35,394
Jo-Ann Stores Holdings, Inc., 144A, 9.75%, 10/15/2019 (PIK)			40,000		40,900
Johnson Controls, Inc., 4.95%, 7/2/2064			100,000		101,301
Live Nation Entertainment, Inc., 144A, 7.0%, 9/1/2020			90,000		98,550
MDC Partners, Inc., 144A, 6.75%, 4/1/2020			40,000		42,200
Mediacom Broadband LLC, 6.375%, 4/1/2023			35,000		36,925
MGM Resorts International:
6.625%, 12/15/2021 (a)			250,000		278,125
6.75%, 10/1/2020			130,000		145,112
8.625%, 2/1/2019			240,000		285,900
Numericable Group SA:
144A, 6.0%, 5/15/2022			200,000		208,000
144A, 6.25%, 5/15/2024			350,000		365,312
Pinnacle Entertainment, Inc., 6.375%, 8/1/2021			70,000		73,850
Quebecor Media, Inc., 5.75%, 1/15/2023			50,000		51,375
RCI Banque SA, 144A, 3.5%, 4/3/2018			100,000		104,253
Schaeffler Finance BV, 144A, 7.75%, 2/15/2017			845,000		952,737
Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021			35,000		35,088
Serta Simmons Holdings LLC, 144A, 8.125%, 10/1/2020			55,000		59,675
Sirius XM Radio, Inc., 144A, 5.875%, 10/1/2020			60,000		63,450
Springs Industries, Inc., 6.25%, 6/1/2021			85,000		86,700
Starz LLC, 5.0%, 9/15/2019			40,000		41,650
Taylor Morrison Communities, Inc., 144A, 5.25%, 4/15/2021			65,000		65,975
The Men's Wearhouse, Inc., 144A, 7.0%, 7/1/2022 (a)			50,000		51,750
Time Warner Cable, Inc., 7.3%, 7/1/2038			45,000		60,535
Travelport LLC, 144A, 6.352%**, 3/1/2016			11,826		11,915
		Principal Amount ($)(d)		Value ($)

Unitymedia Hessen GmbH & Co., KG:
144A, 5.5%, 1/15/2023			200,000		207,000
144A, 7.5%, 3/15/2019	EUR		400,000		586,061
Unitymedia KabelBW GmbH, 144A, 9.625%, 12/1/2019	EUR		110,000		161,584
Viking Cruises Ltd., 144A, 8.5%, 10/15/2022			50,000		55,250
Weyerhaeuser Real Estate Co.:
144A, 4.375%, 6/15/2019			50,000		50,125
144A, 5.875%, 6/15/2024			20,000		20,575
					10,109,498
Consumer Staples 1.5%
Ajecorp BV, 144A, 6.5%, 5/14/2022			500,000		460,000
Big Heart Pet Brands, 7.625%, 2/15/2019			66,000		68,779
BRF SA, 144A, 5.875%, 6/6/2022			200,000		216,500
Chiquita Brands International, Inc., 7.875%, 2/1/2021			44,000		47,905
Controladora Mabe SA de CV, 144A, 7.875%, 10/28/2019			100,000		114,500
Cott Beverages, Inc., 144A, 5.375%, 7/1/2022			85,000		85,213
JBS Investments GmbH, 144A, 7.75%, 10/28/2020			250,000		267,500
JBS U.S.A. LLC:
144A, 7.25%, 6/1/2021			145,000		155,512
144A, 8.25%, 2/1/2020			370,000		401,450
Marfrig Overseas Ltd., 144A, 9.5%, 5/4/2020			100,000		107,500
Minerva Luxembourg SA, 144A, 12.25%, 2/10/2022			250,000		282,500
Pilgrim's Pride Corp., 7.875%, 12/15/2018			430,000		455,284
Post Holdings, Inc., 144A, 6.0%, 12/15/2022			50,000		51,000
Reynolds Group Issuer, Inc., 5.75%, 10/15/2020			1,145,000		1,207,975
Smithfield Foods, Inc., 6.625%, 8/15/2022			90,000		98,550
					4,020,168
Energy 4.5%
Access Midstream Partners LP, 6.125%, 7/15/2022			15,000		16,575
Afren PLC, 144A, 10.25%, 4/8/2019			340,000		385,475
Baytex Energy Corp.:
144A, 5.125%, 6/1/2021			35,000		35,219
144A, 5.625%, 6/1/2024			35,000		35,131
Berry Petroleum Co., LLC:
6.375%, 9/15/2022			50,000		53,250
6.75%, 11/1/2020			50,000		52,625
BreitBurn Energy Partners LP, 7.875%, 4/15/2022			350,000		378,875
Chaparral Energy, Inc., 7.625%, 11/15/2022			85,000		91,800
DCP Midstream LLC, 144A, 9.75%, 3/15/2019			200,000		257,873
Delek & Avner Tamar Bond Ltd., 144A, 3.839%, 12/30/2018			500,000		501,782
Ecopetrol SA, 5.875%, 5/28/2045			500,000		517,140
Endeavor Energy Resources LP, 144A, 7.0%, 8/15/2021			85,000		90,738
EP Energy LLC:
6.875%, 5/1/2019			15,000		15,956
7.75%, 9/1/2022			290,000		326,975
		Principal Amount ($)(d)		Value ($)

EV Energy Partners LP, 8.0%, 4/15/2019			335,000		351,750
Halcon Resources Corp.:
8.875%, 5/15/2021			635,000		682,625
9.75%, 7/15/2020			65,000		70,931
Hilcorp Energy I LP, 144A, 5.0%, 12/1/2024 (e)			65,000		65,000
Holly Energy Partners LP, 6.5%, 3/1/2020			10,000		10,775
Kodiak Oil & Gas Corp., 5.5%, 1/15/2021			100,000		104,250
Linn Energy LLC, 6.25%, 11/1/2019			515,000		539,462
MEG Energy Corp., 144A, 7.0%, 3/31/2024			375,000		413,437
Memorial Resource Development Corp., 144A, 5.875%, 7/1/2022 (e)			65,000		65,488
Midstates Petroleum Co., Inc.:
9.25%, 6/1/2021 (a)			300,000		329,250
10.75%, 10/1/2020			150,000		170,250
Murphy Oil U.S.A., Inc., 6.0%, 8/15/2023			85,000		89,463
Northern Oil & Gas, Inc., 8.0%, 6/1/2020			140,000		149,450
Nostrum Oil & Gas Finance BV, 144A, 6.375%, 2/14/2019			200,000		209,000
Oasis Petroleum, Inc.:
6.5%, 11/1/2021			375,000		403,125
144A, 6.875%, 3/15/2022			115,000		125,350
6.875%, 1/15/2023			35,000		38,150
7.25%, 2/1/2019			60,000		63,600
Offshore Drilling Holding SA, 144A, 8.375%, 9/20/2020 (a)			200,000		221,500
Offshore Group Investment Ltd.:
7.125%, 4/1/2023			300,000		304,500
7.5%, 11/1/2019			140,000		148,050
Pacific Rubiales Energy Corp., 144A, 7.25%, 12/12/2021			500,000		555,000
Petrobras Global Finance BV, 6.25%, 3/17/2024			500,000		532,200
Petroleos de Venezuela SA, 144A, 9.0%, 11/17/2021			250,000		212,475
PT Pertamina Persero:
144A, 5.625%, 5/20/2043			200,000		179,500
144A, 6.45%, 5/30/2044			500,000		496,250
Reliance Holding U.S.A., Inc., 144A, 5.4%, 2/14/2022			250,000		269,940
Rowan Companies, Inc., 4.75%, 1/15/2024			100,000		105,803
Sabine Pass Liquefaction LLC:
5.625%, 2/1/2021			175,000		185,062
144A, 5.75%, 5/15/2024			200,000		208,500
SandRidge Energy, Inc, 8.125%, 10/15/2022			420,000		462,525
SandRidge Energy, Inc., 7.5%, 3/15/2021			240,000		260,100
SESI LLC, 7.125%, 12/15/2021			380,000		428,450
Seventy Seven Energy, Inc., 144A, 6.5%, 7/15/2022			15,000		15,375
Talisman Energy, Inc., 3.75%, 2/1/2021			120,000		124,058
Talos Production LLC, 144A, 9.75%, 2/15/2018			95,000		100,700
Transocean, Inc., 3.8%, 10/15/2022			370,000		366,198
Whiting Petroleum Corp., 5.0%, 3/15/2019			75,000		78,938
					11,895,894
		Principal Amount ($)(d)		Value ($)

Financials 3.8%
AerCap Ireland Capital Ltd., 144A, 3.75%, 5/15/2019			80,000		80,600
Assured Guaranty U.S. Holdings, Inc., 5.0%, 7/1/2024			135,000		134,196
Banco de Bogota SA, 144A, 5.375%, 2/19/2023			500,000		517,500
Banco de Credito del Peru, 144A, 6.875%, 9/16/2026			100,000		111,750
Banco do Brasil SA, 144A, 9.0%, 12/31/2049			500,000		495,604
Banco Nacional de Costa Rica, 144A, 4.875%, 11/1/2018			500,000		512,500
Banco Santander Brasil SA, 144A, 8.0%, 3/18/2016	BRL		300,000		129,667
Barclays Bank PLC, 7.625%, 11/21/2022			250,000		285,375
BBVA Bancomer SA, 144A, 6.5%, 3/10/2021			500,000		563,750
CIT Group, Inc.:
5.0%, 5/15/2017			935,000		996,359
5.25%, 3/15/2018			10,000		10,738
Citigroup, Inc., 4.05%, 7/30/2022			145,000		148,552
Country Garden Holdings Co., Ltd., 144A, 7.25%, 4/4/2021			200,000		195,000
Development Bank of Kazakhstan JSC, Series 3, 6.5%, 6/3/2020			500,000		535,600
E*TRADE Financial Corp.:
6.375%, 11/15/2019			140,000		151,550
6.75%, 6/1/2016			745,000		808,325
Everest Reinsurance Holdings, Inc., 4.868%, 6/1/2044			305,000		305,866
Hospitality Properties Trust, (REIT), 5.0%, 8/15/2022			230,000		243,322
International Lease Finance Corp.:
3.875%, 4/15/2018			100,000		102,500
6.25%, 5/15/2019			410,000		459,200
8.75%, 3/15/2017			40,000		46,500
Intesa Sanpaolo SpA:
3.875%, 1/16/2018			200,000		210,787
144A, 5.017%, 6/26/2024			235,000		237,777
Jefferies Group LLC, 5.125%, 1/20/2023			60,000		64,324
Macquarie Group Ltd., 144A, 6.0%, 1/14/2020			235,000		266,217
Morgan Stanley:
3.75%, 2/25/2023			125,000		127,160
4.1%, 5/22/2023			85,000		86,225
MPT Operating Partnership LP, (REIT), 6.375%, 2/15/2022			40,000		42,900
Navient Corp., 5.5%, 1/25/2023			125,000		123,906
Neuberger Berman Group LLC, 144A, 5.625%, 3/15/2020			10,000		10,575
Omega Healthcare Investors, Inc., (REIT), 144A, 4.95%, 4/1/2024			130,000		132,777
Popular, Inc., 7.0%, 7/1/2019 (e)			50,000		50,750
		Principal Amount ($)(d)		Value ($)

Royal Bank of Scotland Group PLC, 6.1%, 6/10/2023			100,000		109,459
Schahin II Finance Co. SPV Ltd., 144A, 5.875%, 9/25/2022 (a)			185,733		182,947
Trust F/1401, (REIT), 144A, 5.25%, 12/15/2024			500,000		525,000
Turkiye Is Bankasi:
144A, 3.875%, 11/7/2017			250,000		250,725
144A, 6.0%, 10/24/2022			250,000		250,125
UniCredit SpA, 8.0%, 4/3/2049			200,000		213,000
Wells Fargo & Co., 5.375%, 11/2/2043			70,000		77,003
Woori Bank Co., Ltd., 144A, 4.75%, 4/30/2024			200,000		201,901
Yapi ve Kredi Bankasi AS, 144A, 5.25%, 12/3/2018			200,000		204,600
					10,202,612
Health Care 1.7%
Aviv Healthcare Properties LP, 7.75%, 2/15/2019			10,000		10,650
Biomet, Inc.:
6.5%, 8/1/2020			85,000		91,587
6.5%, 10/1/2020			25,000		26,688
Community Health Systems, Inc.:
5.125%, 8/15/2018			290,000		304,137
144A, 6.875%, 2/1/2022			620,000		657,200
7.125%, 7/15/2020			170,000		184,025
Endo Finance LLC, 144A, 5.375%, 1/15/2023			80,000		79,900
Fresenius Medical Care U.S. Finance II, Inc., 144A, 5.625%, 7/31/2019			10,000		10,900
Fresenius Medical Care U.S. Finance, Inc., 144A, 6.5%, 9/15/2018			10,000		11,300
HCA, Inc.:
6.5%, 2/15/2020			880,000		990,000
7.5%, 2/15/2022			725,000		836,469
Hologic, Inc., 6.25%, 8/1/2020			40,000		42,200
IMS Health, Inc., 144A, 6.0%, 11/1/2020			60,000		63,000
Mallinckrodt International Finance SA, 4.75%, 4/15/2023			110,000		106,975
Par Pharmaceutical Companies, Inc., 7.375%, 10/15/2020			90,000		96,750
Physio-Control International, Inc., 144A, 9.875%, 1/15/2019			14,000		15,470
Tenet Healthcare Corp., 6.25%, 11/1/2018			230,000		255,300
Valeant Pharmaceuticals International, Inc., 144A: 6.375%, 10/15/2020			90,000		95,625
7.5%, 7/15/2021			450,000		498,375
					4,376,551
Industrials 2.2%
ADT Corp.:
3.5%, 7/15/2022			50,000		45,500
6.25%, 10/15/2021 (a)			45,000		47,700
Alphabet Holding Co., Inc., 7.75%, 11/1/2017 (PIK)			50,000		51,625
Artesyn Escrow, Inc., 144A, 9.75%, 10/15/2020			70,000		68,775
BE Aerospace, Inc., 6.875%, 10/1/2020			185,000		200,956
Belden, Inc., 144A, 5.5%, 9/1/2022			85,000		87,975
		Principal Amount ($)(d)		Value ($)

Bombardier, Inc., 144A, 5.75%, 3/15/2022			328,000		336,200
Cemex Finance LLC, 144A, 9.375%, 10/12/2022			200,000		235,250
DigitalGlobe, Inc., 5.25%, 2/1/2021			35,000		34,650
FTI Consulting, Inc., 6.0%, 11/15/2022			50,000		51,438
Gates Global LLC, 144A, 6.0%, 7/15/2022			65,000		65,000
GenCorp, Inc., 7.125%, 3/15/2021			120,000		131,100
Grupo KUO SAB de CV, 144A, 6.25%, 12/4/2022			400,000		419,000
Huntington Ingalls Industries, Inc., 6.875%, 3/15/2018			560,000		592,200
KazAgro National Management Holding JSC, 144A, 4.625%, 5/24/2023			500,000		483,700
Kenan Advantage Group, Inc., 144A, 8.375%, 12/15/2018			100,000		107,000
Meritor, Inc., 6.75%, 6/15/2021			55,000		59,158
Navios Maritime Holdings, Inc., 144A, 7.375%, 1/15/2022			450,000		463,500
Nortek, Inc., 8.5%, 4/15/2021			155,000		171,275
Odebrecht Offshore Drilling Finance Ltd., 144A, 6.75%, 10/1/2022			192,840		206,435
Titan International, Inc., 6.875%, 10/1/2020			170,000		172,550
TransDigm, Inc.:
144A, 6.0%, 7/15/2022			210,000		215,775
7.5%, 7/15/2021			150,000		166,125
United Rentals North America, Inc.:
6.125%, 6/15/2023			10,000		10,725
7.375%, 5/15/2020			25,000		27,625
7.625%, 4/15/2022			620,000		695,950
Votorantim Cimentos SA, 144A, 7.25%, 4/5/2041			500,000		528,125
Watco Companies LLC, 144A, 6.375%, 4/1/2023			40,000		40,800
					5,716,112
Information Technology 1.2%
ACI Worldwide, Inc., 144A, 6.375%, 8/15/2020			30,000		31,575
Activision Blizzard, Inc., 144A, 5.625%, 9/15/2021			330,000		355,575
Alliance Data Systems Corp., 144A, 5.25%, 12/1/2017			60,000		62,700
Audatex North America, Inc., 144A, 6.0%, 6/15/2021			15,000		16,013
BMC Software Finance, Inc., 144A, 8.125%, 7/15/2021			100,000		102,875
CDW LLC, 8.5%, 4/1/2019			610,000		660,325
CyrusOne LP, 6.375%, 11/15/2022			25,000		26,938
EarthLink Holdings Corp., 7.375%, 6/1/2020			70,000		74,637
Equinix, Inc., 5.375%, 4/1/2023			175,000		178,937
First Data Corp.:
144A, 6.75%, 11/1/2020			237,000		256,552
144A, 7.375%, 6/15/2019			725,000		778,469
Hughes Satellite Systems Corp.:
6.5%, 6/15/2019			60,000		66,900
7.625%, 6/15/2021			190,000		217,550
NXP BV, 144A, 3.75%, 6/1/2018			90,000		90,225
Tencent Holdings Ltd., 144A, 3.375%, 5/2/2019			200,000		204,474
					3,123,745
		Principal Amount ($)(d)		Value ($)

Materials 2.6%
ALROSA Finance SA, 144A, 7.75%, 11/3/2020			700,000		777,411
Anglo American Capital PLC:
144A, 4.125%, 4/15/2021			200,000		204,718
144A, 4.125%, 9/27/2022 (a)			250,000		251,881
Berry Plastics Corp., 5.5%, 5/15/2022			320,000		321,800
BOE Intermediate Holding Corp., 144A, 9.0%, 11/1/2017 (PIK)			87,717		91,993
BOE Merger Corp., 144A, 9.5%, 11/1/2017 (PIK)			100,000		105,375
Braskem Finance Ltd., 6.45%, 2/3/2024			200,000		213,750
Cascades, Inc., 144A, 5.5%, 7/15/2022			50,000		49,875
Cliffs Natural Resources, Inc., 3.95%, 1/15/2018 (a)			235,000		238,132
First Quantum Minerals Ltd.:
144A, 6.75%, 2/15/2020			259,000		266,770
144A, 7.0%, 2/15/2021			129,000		132,709
FMG Resources (August 2006) Pty Ltd., 144A, 6.0%, 4/1/2017 (a)			195,000		201,338
Fresnillo PLC, 144A, 5.5%, 11/13/2023			500,000		522,500
Glencore Funding LLC, 144A, 4.125%, 5/30/2023			50,000		50,217
GTL Trade Finance, Inc., 144A, 5.893%, 4/29/2024 (a)			600,000		629,400
Hexion U.S. Finance Corp.:
6.625%, 4/15/2020			385,000		408,100
8.875%, 2/1/2018 (a)			90,000		93,600
IAMGOLD Corp., 144A, 6.75%, 10/1/2020			75,000		69,375
Kaiser Aluminum Corp., 8.25%, 6/1/2020			40,000		45,000
Metalloinvest Finance Ltd., 144A, 5.625%, 4/17/2020			200,000		194,000
Novelis, Inc., 8.75%, 12/15/2020			955,000		1,060,050
Plastipak Holdings, Inc., 144A, 6.5%, 10/1/2021			70,000		73,850
Polymer Group, Inc., 7.75%, 2/1/2019			229,000		243,312
Samarco Mineracao SA, 144A, 5.75%, 10/24/2023			200,000		209,940
Sealed Air Corp.:
144A, 8.125%, 9/15/2019			10,000		11,013
144A, 8.375%, 9/15/2021			10,000		11,450
Tronox Finance LLC, 6.375%, 8/15/2020			55,000		56,788
Turkiye Sise ve Cam Fabrikalari AS, 144A, 4.25%, 5/9/2020			200,000		193,000
Yamana Gold, Inc., 144A, 4.95%, 7/15/2024			250,000		251,644
					6,978,991
Telecommunication Services 4.5%
Bharti Airtel International Netherlands BV, 144A, 5.35%, 5/20/2024			500,000		518,775
CC Holdings GS V LLC, 3.849%, 4/15/2023			120,000		120,466
CenturyLink, Inc., Series V, 5.625%, 4/1/2020			25,000		26,375
Cincinnati Bell, Inc.:
8.375%, 10/15/2020			775,000		849,594
8.75%, 3/15/2018			430,000		450,962
		Principal Amount ($)(d)		Value ($)

Colombia Telecomunicaciones SA ESP, 144A, 5.375%, 9/27/2022			200,000		199,700
Digicel Group Ltd.:
144A, 7.125%, 4/1/2022			250,000		260,625
144A, 8.25%, 9/30/2020			200,000		218,000
Digicel Ltd., 144A, 8.25%, 9/1/2017			750,000		771,600
Frontier Communications Corp.:
7.125%, 1/15/2023			390,000		413,400
8.5%, 4/15/2020			290,000		342,200
Intelsat Jackson Holdings SA:
5.5%, 8/1/2023			265,000		263,675
7.25%, 10/15/2020			690,000		743,475
7.5%, 4/1/2021			340,000		372,300
Intelsat Luxembourg SA:
7.75%, 6/1/2021			165,000		174,694
8.125%, 6/1/2023			25,000		27,031
Level 3 Communications, Inc., 8.875%, 6/1/2019			205,000		224,219
Level 3 Financing, Inc.:
144A, 6.125%, 1/15/2021			100,000		107,125
7.0%, 6/1/2020			185,000		202,112
8.625%, 7/15/2020			450,000		504,000
MetroPCS Wireless, Inc., 6.625%, 11/15/2020			655,000		699,212
Millicom International Cellular SA, 144A, 4.75%, 5/22/2020			200,000		200,000
Oi SA, 144A, 5.75%, 2/10/2022			200,000		199,600
SBA Communications Corp., 5.625%, 10/1/2019			50,000		52,938
Sprint Communications, Inc.:
6.0%, 11/15/2022			85,000		86,700
144A, 7.0%, 3/1/2020			85,000		97,750
144A, 9.0%, 11/15/2018			420,000		509,250
9.125%, 3/1/2017			15,000		17,569
Sprint Corp., 144A, 7.125%, 6/15/2024			175,000		185,500
T-Mobile U.S.A., Inc., 6.625%, 4/1/2023 (a)			70,000		75,950
tw telecom holdings, Inc.:
5.375%, 10/1/2022			90,000		98,437
6.375%, 9/1/2023			70,000		79,625
UPCB Finance III Ltd., 144A, 6.625%, 7/1/2020			370,000		394,050
UPCB Finance V Ltd., 144A, 7.25%, 11/15/2021			280,000		308,000
Verizon Communications, Inc., 6.55%, 9/15/2043			225,000		283,149
VimpelCom Holdings BV, 144A, 7.504%, 3/1/2022			200,000		215,750
Wind Acquisition Finance SA, 144A, 6.5%, 4/30/2020			50,000		54,188
Windstream Corp.:
6.375%, 8/1/2023			60,000		60,825
7.5%, 4/1/2023			20,000		21,650
7.75%, 10/15/2020			1,075,000		1,165,031
7.75%, 10/1/2021			185,000		202,113
7.875%, 11/1/2017			130,000		149,663
					11,947,278
Utilities 0.8%
AES Corp.:
8.0%, 10/15/2017			6,000		6,990
8.0%, 6/1/2020			30,000		36,075
		Principal Amount ($)(d)		Value ($)

Calpine Corp.:
144A, 7.5%, 2/15/2021			676,000		733,460
144A, 7.875%, 7/31/2020			36,000		39,060
Electricite de France SA, 144A, 5.25%, 1/29/2049			100,000		102,013
Empresa de Energia de Bogota SA ESP, 144A, 6.125%, 11/10/2021			500,000		546,250
FirstEnergy Transmission LLC, 144A, 4.35%, 1/15/2025			140,000		141,445
NGL Energy Partners LP, 144A, 5.125%, 7/15/2019 (e)			65,000		65,162
NRG Energy, Inc., 144A, 6.25%, 5/1/2024			360,000		376,200
					2,046,655
Total Corporate Bonds (Cost $68,241,756)					70,417,504

Asset-Backed 0.7%
Automobile Receivables 0.2%
AmeriCredit Automobile Receivables Trust, "E", Series 2011-2, 144A, 5.48%, 9/10/2018			528,181		549,501
Miscellaneous 0.5%
ARES CLO Ltd., "D", Series 2012-3A, 144A, 4.876%**, 1/17/2024			250,000		250,544
Hilton Grand Vacations Trust, "B", Series 2014-AA, 144A, 2.07%, 11/25/2026			500,000		499,972
VOLT XXIV LLC, "A1", Series 2014-NPL3, 144A, 3.25%, 11/25/2053			486,786		487,965
					1,238,481
Total Asset-Backed (Cost $1,784,644)					1,787,982

Mortgage-Backed Securities Pass-Throughs 0.0%
Federal Home Loan Mortgage Corp., 6.0%, 3/1/2038			9,489		10,655
Federal National Mortgage Association:
4.5%, 9/1/2035			26,078		28,405
6.0%, 1/1/2024			31,609		35,692
6.5%, with various maturities from 5/1/2017 until 1/1/2038			6,338		6,781
Total Mortgage-Backed Securities Pass-Throughs (Cost $73,321)					81,533

Commercial Mortgage-Backed Securities 0.5%
Del Coronado Trust, "M", Series 2013-HDMZ, 144A, 5.152%**, 3/15/2018			120,000		120,756
JPMorgan Chase Commercial Mortgage Securities Corp.:
"C", Series 2012-HSBC, 144A, 4.021%, 7/5/2032			380,000		395,419
"A4", Series 2007-C1, 5.716%, 2/15/2051			225,000		247,762
LB-UBS Commercial Mortgage Trust, "A4", Series 2007-C6, 5.858%, 7/15/2040			245,347		262,888
		Principal Amount ($)(d)		Value ($)

Prudential Commercial Mortgage Trust, "F", Series 2003-PWR1, 144A, 5.233%**, 2/11/2036			400,000		400,625
Total Commercial Mortgage-Backed Securities (Cost $1,409,937)					1,427,450

Collateralized Mortgage Obligations 1.3%
Federal Home Loan Mortgage Corp.:
"HI", Series 3979, Interest Only, 3.0%, 12/15/2026			661,874		72,410
"IK", Series 4048, Interest Only, 3.0%, 5/15/2027			748,877		96,737
"ZB", Series 4183, 3.0%, 3/15/2043			1,036,155		879,664
"ZG", Series 4213, 3.5%, 6/15/2043			108,429		108,521
"LI", Series 3720, Interest Only, 4.5%, 9/15/2025			1,289,697		188,851
"PI", Series 3843, Interest Only, 4.5%, 5/15/2038			680,938		86,773
"H", Series 2278, 6.5%, 1/15/2031			141		157
Federal National Mortgage Association:
"WO", Series 2013-27, Principal Only, Zero Coupon, 12/25/2042			220,000		98,314
"I", Series 2003-84, Interest Only, 6.0%, 9/25/2033			232,817		45,518
"PI", Series 2006-20, Interest Only, 6.528%***, 11/25/2030			419,504		72,558
Government National Mortgage Association:
"ZJ", Series 2013-106, 3.5%, 7/20/2043			141,571		137,858
"QI", Series 2011-112, Interest Only, 4.0%, 5/16/2026			769,490		79,721
"NI", Series 2011-80, Interest Only, 4.5%, 5/16/2038			1,067,046		86,681
"BI", Series 2010-30, Interest Only, 4.5%, 7/20/2039			130,268		19,364
"ND", Series 2010-130, 4.5%, 8/16/2039			600,000		648,150
"MI", Series 2009-76, Interest Only, 5.0%, 3/20/2035			18,207		22
"IQ", Series 2011-18, Interest Only, 5.5%, 1/16/2039			327,800		37,930
"IV", Series 2009-69, Interest Only, 5.5%, 8/20/2039			571,474		100,549
"IN", Series 2009-69, Interest Only, 5.5%, 8/20/2039			575,580		96,899
"IJ", Series 2009-75, Interest Only, 6.0%, 8/16/2039			422,168		77,582
"AI", Series 2007-38, Interest Only, 6.308%***, 6/16/2037			98,515		15,023
Residential Funding Mortgage Securities I, Inc., "M1", Series 2003-S17, 5.5%, 9/25/2033			474,675		404,870
Total Collateralized Mortgage Obligations (Cost $3,184,283)					3,354,152

Government & Agency Obligations 6.8%
Other Government Related (f) 1.2%
Banco de Costa Rica, 144A, 5.25%, 8/12/2018			200,000		205,000
Bank of Moscow, 144A, 6.699%, 3/11/2015			250,000		257,027
		Principal Amount ($)(d)		Value ($)

MMC Norilsk Nickel OJSC, 144A, 5.55%, 10/28/2020			200,000		201,000
Queensland Treasury Corp., Series 33, 6.5%, 3/14/2033	AUD		1,225,000		1,447,504
Sberbank of Russia, 144A, 5.25%, 5/23/2023			500,000		468,750
TMK OAO, 144A, 6.75%, 4/3/2020			450,000		438,750
VTB Bank OJSC, 144A, 6.0%, 4/12/2017 (a)			250,000		263,500
					3,281,531
Sovereign Bonds 2.4%
Government of France, 0.7%, 7/25/2030	EUR		1,119,099		1,554,143
Kingdom of Morocco, 144A, 4.25%, 12/11/2022			250,000		250,312
Perusahaan Penerbit SBSN, 144A, 6.125%, 3/15/2019			500,000		555,625
Province of New Brunswick Canada, 3.55%, 6/3/2043	CAD		900,000		806,926
Republic of Belarus, REG S, 8.75%, 8/3/2015			100,000		102,880
Republic of Croatia, 144A, 6.75%, 11/5/2019			500,000		560,625
Republic of El Salvador, 144A, 7.65%, 6/15/2035			200,000		216,300
Republic of Ghana, 144A, 8.5%, 10/4/2017			200,000		210,000
Republic of Hungary, 4.125%, 2/19/2018			50,000		52,125
Republic of Romania, 4.875%, 11/7/2019	EUR		100,000		155,203
Republic of Singapore, 3.375%, 9/1/2033	SGD		1,575,000		1,333,425
Republic of South Africa:
5.875%, 9/16/2025			250,000		277,875
Series R204, 8.0%, 12/21/2018	ZAR		800,000		76,440
Republic of Sri Lanka, 144A, 5.125%, 4/11/2019			200,000		203,250
					6,355,129
U.S. Government Sponsored Agency 0.4%
Federal National Mortgage Association, 3.0%, 11/15/2027			1,000,000		928,596
U.S. Treasury Obligations 2.8%
U.S. Treasury Bills:
0.015%****, 8/14/2014 (g)			658,000		657,982
0.03%****, 12/11/2014 (g)			85,000		84,981
0.055%****, 12/11/2014 (g)			156,000		155,965
0.065%****, 8/14/2014 (g)			355,000		354,990
0.07%****, 8/14/2014 (g)			314,000		313,992
U.S. Treasury Bond, 5.375%, 2/15/2031			1,071,000		1,406,190
U.S. Treasury Notes:
1.0%, 8/31/2016 (h)			3,000,000		3,030,936
1.0%, 9/30/2016			1,200,000		1,211,626
1.5%, 5/31/2019			102,000		101,490
2.5%, 5/15/2024			233,000		232,672
					7,550,824
Total Government & Agency Obligations (Cost $17,838,512)					18,116,080

		Principal Amount ($)(d)		Value ($)

Municipal Bonds and Notes 0.1%
Kentucky, Asset/Liability Commission, General Fund Revenue, 3.165%, 4/1/2018 (Cost $323,760)			323,761		336,242

Convertible Bond 0.2%
Materials
GEO Specialty Chemicals, Inc., 7.5%, 3/31/2015 (PIK) (Cost $207,614)			209,283		421,391

Preferred Security 0.0%
Materials
Hercules, Inc., 6.5%, 6/30/2029 (Cost $20,415)			40,000		36,200

	Shares		Value ($)

Securities Lending Collateral 3.0%
Daily Assets Fund Institutional, 0.08% (i) (j) (Cost $7,981,988)		7,981,988		7,981,988

Cash Equivalents 8.2%
Central Cash Management Fund, 0.06% (i) (Cost $21,611,026)		21,611,026		21,611,026

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $252,467,727)†		102.6			271,922,631
Other Assets and Liabilities, Net		(2.6	)		(6,846,113	)
Net Assets		100.0			265,076,518

* Non-income producing security.

** Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the U.S. Treasury Bill rate. These securities are shown at their current rate as of June 30, 2014.

*** Current yield; not a coupon rate

****Annualized yield at time of purchase; not a coupon rate.

† The cost for federal income tax purposes was $252,802,480. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $19,120,151. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $21,386,942 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $2,266,791.

(b) The Fund may purchase securities that are subject to legal or contractual restrictions on resale ("restricted securities"). Restricted securities are securities which 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 these securities is uncertain and there may be changes in the estimated value of these securities.

Schedule of Restricted Securities

Acquisition Date

Cost ($)

Value ($)

Value as % of Net Assets

Dawn Holdings, Inc.*

August 2013

2,342

1,940

0.00

(d) Principal amount stated in U.S. dollars unless otherwise noted.

(e) When-issued security.

(f) Government-backed debt issued by financial companies or government sponsored enterprises.

(g) At June 30, 2014, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.

(h) At June 30, 2014, this security has been pledged, in whole or in part, as collateral for open over-the-counter derivatives and initial margin requirements for centrally cleared swap contracts.

(i) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(j) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

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

CLO: Collateralized Loan Obligation

CVA: Certificaten Van Aandelen (Certificate of Stock)

Interest Only: Interest Only (IO) bonds represent the "interest only" portion of payments on a pool of underlying mortgages or mortgage-backed securities. IO securities are subject to prepayment risk of the pool of underlying mortgages.

PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.

Principal Only: Principal Only (PO) bonds represent the "principal only" portion of payments on a pool of underlying mortgages or mortgage-backed securities.

REG S: Securities sold under Regulation S may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.

REIT: Real Estate Investment Trust

RSP: Risparmio (Convertible Savings Shares)

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

At June 30, 2014, open futures contracts purchased were as follows:

Futures

Currency

Expiration Date

Contracts

Notional Value ($)

Unrealized Appreciation ($)

10 Year U.S. Treasury Note

USD

9/19/2014

183

22,906,453

78,200

5 Year U.S. Treasury Note

USD

9/30/2014

7,884,422

46,161

U.S. Treasury Long Bond

USD

9/19/2014

1,920,625

9,993

Total unrealized appreciation

134,354

At June 30, 2014, open futures contracts sold were as follows:

Futures	Currency	Expiration Date	Contracts		Notional Value ($)		Unrealized Depreciation ($)
10 Year Canadian Government Bond	CAD	9/19/2014		27		3,440,757		(36,564	)
Euro-BTP Italian Government Bond	EUR	9/8/2014		13		2,246,118		(40,254	)
Euro-OAT French Government Bond	EUR	9/8/2014		24		4,618,266		(67,697	)
U.S. Treasury Long Bond	USD	9/19/2014		8		1,097,500		(1,263	)
Ultra Long U.S. Treasury Bond	USD	9/19/2014		13		1,949,188		(24,942	)
Total unrealized depreciation								(170,720	)

At June 30, 2014, open written options contracts were as follows:

Options on Interest Rate Swap Contracts	Swap Effective/ Expiration Date	Contract Amount			Option Expiration Date	Premiums Received ($)		Value ($) (k)
Call Options Receive Fixed — 4.48% – Pay Floating — LIBOR	5/11/2016 5/11/2026		2,100,000	1	5/5/2016		23,572		(18,120	)
Receive Fixed — 5.132% – Pay Floating — LIBOR	3/17/2016 3/17/2026		2,100,000	1	3/15/2016		15,173		(5,543	)
Receive Fixed — 5.132% – Pay Floating — LIBOR	3/17/2016 3/17/2026		2,100,000	2	3/15/2016		24,780		(5,543	)
Total Call Options							63,525		(29,206	)
Put Options Pay Fixed — 1.132% – Receive Floating — LIBOR	3/17/2016 3/17/2026		2,100,000	1	3/15/2016		15,172		(591	)
Pay Fixed — 1.132% – Receive Floating — LIBOR	3/17/2016 3/17/2026		2,100,000	2	3/15/2016		5,355		(591	)
Pay Fixed — 2.48% – Receive Floating — LIBOR	5/11/2016 5/11/2026		2,100,000	1	5/5/2016		23,573		(22,027	)
Pay Fixed — 2.796% – Receive Floating — LIBOR	6/5/2015 6/5/2045		1,900,000	2	6/3/2015		20,330		(16,260	)
Pay Fixed — 3.005% – Receive Floating — LIBOR	3/6/2015 3/6/2045		1,900,000	1	3/4/2015		19,950		(21,925	)
Pay Fixed — 3.033% – Receive Floating — LIBOR	10/24/2014 10/24/2044		4,900,000	3	10/22/2014		62,230		(27,586	)
Pay Fixed — 3.035% – Receive Floating — LIBOR	2/15/2015 2/3/2045		1,900,000	2	1/30/2015		23,465		(21,675	)
Pay Fixed — 3.088% – Receive Floating — LIBOR	1/28/2015 1/28/2045		2,100,000	4	1/26/2015		21,184		(27,677	)
Pay Fixed — 3.093% – Receive Floating — LIBOR	10/21/2014 10/21/2044		4,900,000	2	10/17/2014		67,620		(36,419	)
Total Put Options							258,879		(174,751	)
Total							322,404		(203,957	)

(k) Unrealized appreciation on written options on interest rate swap contracts at June 30, 2014 was $118,447.

As of June 30, 2014, open credit default swap contracts sold were as follows:

Bilateral Swaps
Effective/ Expiration Dates	Notional Amount ($) (l)			Fixed Cash Flows Received			Underlying Debt Obligation/ Quality Rating (m)	Value ($)		Upfront Payments Paid/ (Received) ($)		Unrealized Appreciation ($)
9/20/2012 12/20/2017		125,000	5		5.0	%	General Motors Corp., 3.3%, 12/20/2017, BB+		17,876		6,453		11,423

(l) The maximum potential amount of future undiscounted payments that the Fund could be required to make under a credit default swap contract would be the notional amount of the contract. These potential amounts would be partially offset by any recovery values of the referenced debt obligation or net amounts received from the settlement of buy protection credit default swap contracts entered into by the Fund for the same referenced debt obligation, if any.

(m) The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings and are unaudited.

At June 30, 2014, open interest rate swap contracts were as follows:

Centrally Cleared Swaps
Effective/ Expiration Dates	Notional Amount ($)		Cash Flows Paid by the Fund	Cash Flows Received by the Fund	Value ($)			Unrealized Appreciation/ (Depreciation) ($)
12/30/2014 12/30/2019		100,000	Floating — LIBOR	Fixed — 2.522%		2,536			2,622
12/30/2014 12/30/2016		2,100,000	Floating — LIBOR	Fixed — 1.173%		10,784			11,063
12/30/2014 12/30/2024		3,800,000	Fixed — 3.524%	Floating —- LIBOR		(243,556	)		(243,182	)
12/30/2014 12/30/2044		300,000	Floating —- LIBOR	Fixed — 4.081%		39,959			40,331
5/11/2015 5/11/2045		2,100,000	Fixed — 3.56%	Floating —- LIBOR		(44,167	)		(42,977	)
6/3/2013 6/3/2025		2,100,000	Fixed — 3.0%	Floating —- LIBOR		(63,185	)		(60,121	)
Total net unrealized depreciation									(292,264	)

Bilateral Swap

Effective/

Expiration Dates

Notional Amount ($)

Cash Flows Paid

by the Fund

Cash Flows Received

by the Fund

Value ($)

Upfront Payment Paid/(Received) ($)

Unrealized Depreciation ($)

6/3/2013

6/3/2025

2,100,000

Floating — LIBOR

Fixed — 3.0%

(12,686

)

—

(12,686

)

Counterparties:

1 Nomura International PLC

2 BNP Paribas

3 Citigroup, Inc.

4 Barclays Bank PLC

5 UBS AG

LIBOR: London Interbank Offered Rate

As of June 30, 2014, the Fund had the following open forward foreign currency exchange contracts:

Contracts to Deliver

In Exchange For

Settlement Date

Unrealized Appreciation ($)

Counterparty

USD

3,541,624

EUR

2,600,000

7/21/2014

18,812

Australia & New Zealand Banking Group Ltd.

USD

1,004,953

CAD

1,096,000

7/23/2014

21,655

Canadian Imperial Bank of Commerce

USD

3,452,838

JPY

350,000,000

8/4/2014

2,925

Macquarie Bank Ltd.

USD

403,942

MXN

5,300,000

8/18/2014

3,265

Commonwealth Bank of Australia

USD

864,732

ZAR

9,400,000

8/18/2014

12,300

Commonwealth Bank of Australia

ZAR

9,400,000

USD

877,527

8/18/2014

495

Commonwealth Bank of Australia

ZAR

810,000

USD

75,969

8/18/2014

395

Nomura International PLC

RUB

19,550,000

USD

567,746

9/30/2014

4,100

Societe Generale

Total unrealized appreciation

63,947

Contracts to Deliver		In Exchange For		Settlement Date	Unrealized Depreciation ($)			Counterparty
USD	2,929,527	NOK	17,700,000	7/21/2014		(45,918	)	Societe Generale
USD	1,158,691	NOK	7,000,000	7/21/2014		(18,280	)	Citigroup. Inc.
USD	4,024,310	NZD	4,600,000	7/21/2014		(3,727	)	Citigroup. Inc.
NZD	3,300,000	USD	2,862,011	7/21/2014		(22,320	)	Australia & New Zealand Banking Group Ltd.
NOK	12,300,000	USD	2,002,002	7/21/2014		(1,863	)	Barclays Bank PLC
NOK	12,300,000	USD	2,002,173	7/21/2014		(1,692	)	Societe Generale
NZD	1,300,000	USD	1,128,615	7/21/2014		(7,637	)	Citigroup. Inc.
SGD	2,334,490	USD	1,868,096	7/23/2014		(4,149	)	Commonwealth Bank of Australia
AUD	1,411,800	USD	1,312,673	7/23/2014		(16,584	)	Nomura International PLC
CAD	852,544	USD	773,795	7/23/2014		(24,771	)	Barclays Bank PLC
EUR	1,121,400	USD	1,521,999	7/23/2014		(13,656	)	Australia & New Zealand Banking Group Ltd.
EUR	548,000	USD	743,611	7/25/2014		(6,831	)	JPMorgan Chase Securities, Inc.
Total unrealized depreciation						(167,428	)

Currency Abbreviations

AUD Australian Dollar

BRL Brazilian Real

CAD Canadian Dollar

EUR Euro

JPY Japanese Yen

MXN Mexican Peso

NOK Norwegian Krone

NZD New Zealand Dollar

RUB Russian Ruble

SGD Singapore Dollar

USD United States Dollar

ZAR South African Rand

For information on the Fund's policy and additional disclosures regarding futures contracts, credit default swap contracts, interest rate swap contracts, forward foreign currency exchange contracts and written options contracts, please refer to Note B in the accompanying Notes to Financial Statements.

Fair Value Measurements

Assets	Level 1			Level 2			Level 3		Total

Common Stocks
Consumer Discretionary	$	8,928,966		$	5,328,913		$	1,940	$	14,259,819
Consumer Staples		8,134,413			4,370,591			—		12,505,004
Energy		8,053,237			5,317,364			—		13,370,601
Financials		18,081,811			17,856,361			—		35,938,172
Health Care		8,226,438			2,866,196			—		11,092,634
Industrials		7,387,968			8,269,904			0		15,657,872
Information Technology		16,417,083			1,874,810			—		18,291,893
Materials		3,188,293			2,249,470			—		5,437,763
Telecommunication Services		2,822,748			6,103,414			—		8,926,162
Utilities		6,505,368			3,288,045			—		9,793,413
Preferred Stocks (n)		—			1,054,046			—		1,054,046
Rights (n)		7,818			—			—		7,818
Warrants (n)		—			—			15,886		15,886
Fixed Income Investments (n)
Corporate Bonds		—			70,417,504			—		70,417,504
Asset-Backed		—			1,787,982			—		1,787,982
Mortgage-Backed Securities Pass-Throughs		—			81,533			—		81,533
Commercial Mortgage-Backed Securities		—			1,427,450			—		1,427,450
Collateralized Mortgage Obligations		—			3,354,152			—		3,354,152
Government & Agency Obligations		—			18,116,080			—		18,116,080
Municipal Bonds and Notes		—			336,242			—		336,242
Convertible Bond		—			—			421,391		421,391
Preferred Security		—			36,200			—		36,200
Short-Term Investments (n)		29,593,014			—			—		29,593,014
Derivatives (o)
Futures Contracts		134,354			—			—		134,354
Credit Default Swap Contracts		—			11,423			—		11,423
Interest Rate Swap Contracts		—			54,016			—		54,016
Forward Foreign Currency Exchange Contracts		—			63,947			—		63,947
Total	$	117,481,511		$	154,265,643		$	439,217	$	272,186,371
Liabilities	Level 1			Level 2			Level 3		Total

Derivatives (o)
Futures Contracts	$	(170,720	)	$	—		$	—	$	(170,720	)
Written Options		—			(203,957	)		—		(203,957	)
Interest Rate Swap Contracts		—			(358,966	)		—		(358,966	)
Forward Foreign Currency Exchange Contracts		—			(167,428	)		—		(167,428	)
Total	$	(170,720	)	$	(730,351	)	$	—	$	(901,071	)

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(n) See Investment Portfolio for additional detailed categorizations.

(o) Derivatives include value of unrealized appreciation (depreciation) on open futures contracts, credit default swap contracts, interest rate swap contracts and forward foreign currency exchange contracts, and written options, at value.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $222,874,713) — including $7,727,752 of securities loaned	$	242,329,617
Investment in Daily Assets Fund Institutional (cost $7,981,988)*		7,981,988
Investment in Central Cash Management Fund (cost $21,611,026)		21,611,026
Total investments in securities, at value (cost $252,467,727)		271,922,631
Foreign currency, at value (cost $501,880)		503,550
Receivable for investments sold		1,103,677
Receivable for investments sold — when-issued/delayed delivery securities		84,313
Receivable for Fund shares sold		375,894
Dividends receivable		293,894
Interest receivable		1,211,027
Receivable for variation margin on futures contracts		79,159
Unrealized appreciation on bilateral swap contracts		11,423
Unrealized appreciation on forward foreign currency exchange contracts		63,947
Upfront payments paid on bilateral swap contracts		6,453
Foreign taxes recoverable		125,910
Other assets		1,722
Total assets		275,783,600
Liabilities
Cash overdraft		758,170
Payable upon return of securities loaned		7,981,988
Payable for investments purchased		889,653
Payable for investments purchased — when-issued/delayed delivery securities		391,247
Payable for Fund shares redeemed		61,978
Options written, at value (premium received $322,404)		203,957
Unrealized depreciation on bilateral swap contracts		12,686
Unrealized depreciation on forward foreign currency exchange contracts		167,428
Payable for variation margin on centrally cleared swaps		20,111
Accrued management fee		80,377
Accrued Trustees' fees		22
Other accrued expenses and payables		139,465
Total liabilities		10,707,082
Net assets, at value	$	265,076,518
Net Assets Consist of
Undistributed net investment income		3,924,017
Net unrealized appreciation (depreciation) on: Investments		19,454,904
Swap contracts		(293,527	)
Futures		(36,366	)
Foreign currency		(94,346	)
Written options		118,447
Accumulated net realized gain (loss)		4,194,458
Paid-in capital		237,808,931
Net assets, at value	$	265,076,518
Class A Net Asset Value, offering and redemption price per share ($265,076,518 ÷ 10,607,493 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	24.99

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Dividends (net of foreign taxes withheld of $168,242)	$	2,946,645
Interest		2,128,103
Income distributions — Central Cash Management Fund		3,947
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		45,913
Total income		5,124,608
Expenses: Management fee		484,030
Administration fee		131,319
Services to shareholders		767
Custodian fee		58,149
Professional fees		47,394
Reports to shareholders		34,201
Trustees' fees and expenses		6,331
Other		34,443
Total expenses		796,634
Net investment income		4,327,974
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		4,225,697
Swap contracts		(225,496	)
Futures		891,504
Written options		89,880
Foreign currency		413,621
		5,395,206
Change in net unrealized appreciation (depreciation) on: Investments		5,715,502
Swap contracts		(217,751	)
Futures		(1,029,258	)
Written options		2,060
Foreign currency		(320,812	)
		4,149,741
Net gain (loss)		9,544,947
Net increase (decrease) in net assets resulting from operations	$	13,872,921

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	4,327,974		$	8,106,989
Operations: Net investment income	$	4,327,974		$	8,106,989
Net realized gain (loss)		5,395,206			30,650,529
Change in net unrealized appreciation (depreciation)		4,149,741			1,922,701
Net increase (decrease) in net assets resulting from operations		13,872,921			40,680,219
Distributions to shareholders from: Net investment income: Class A		(8,047,271	)		(5,498,634	)
Net realized gains: Class A		(26,528,998	)		—
Total distributions		(34,576,269	)		(5,498,634	)
Fund share transactions: Class A Proceeds from shares sold		2,949,911			7,161,669
Shares issued to shareholders in reinvestment of distributions		34,576,269			5,498,634
Payments for shares redeemed		(20,829,088	)		(39,157,373	)
Net increase (decrease) in net assets from Class A share transactions		16,697,092			(26,497,070	)
Increase (decrease) in net assets		(4,006,256	)		8,684,515
Net assets at beginning of period		269,082,774			260,398,259
Net assets at end of period (including undistributed net investment income of $3,924,017 and $7,643,314, respectively)	$	265,076,518		$	269,082,774
Other Information
Class A Shares outstanding at beginning of period		9,857,478			10,896,924
Shares sold		111,533			284,532
Shares issued to shareholders in reinvestment of distributions		1,433,510			220,917
Shares redeemed		(795,028	)		(1,544,895	)
Net increase (decrease) in Class A shares		750,015			(1,039,446	)
Shares outstanding at end of period		10,607,493			9,857,478

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	27.30		$	23.90		$	21.49		$	22.13		$	20.52		$	17.35
Income (loss) from investment operations: Net investment incomea		.43			.78			.57			.46			.39			.44
Net realized and unrealized gain (loss)		.91			3.14			2.20			(.75	)		1.88			3.43
Total from investment operations		1.34			3.92			2.77			(.29	)		2.27			3.87
Less distributions from: Net investment income		(.85	)		(.52	)		(.36	)		(.35	)		(.66	)		(.70	)
Net realized gains		(2.80	)		—			—			—			—			—
Total distributions		(3.65	)		(.52	)		(.36	)		(.35	)		(.66	)		(.70	)
Net asset value, end of period	$	24.99		$	27.30		$	23.90		$	21.49		$	22.13		$	20.52
Total Return (%)		5.39	**		16.63			12.98			(1.42	)		11.22			23.43
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		265			269			260			264			308			319
Ratio of expenses (%)		.61	*		.60			.59			.58			.65			.60
Ratio of net investment income (%)		3.30	*		3.07			2.48			2.09			1.89			2.40
Portfolio turnover rate (%)		53	**		182			188			109			203			207
a Based on average shares outstanding during the period. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Global Income Builder VIP (formerly DWS Global Income Builder VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.

Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1. For certain international equity securities, in order to adjust for events which may occur between the close of the foreign exchanges and the close of the New York Stock Exchange, a fair valuation model may be used. This fair valuation model takes into account comparisons to the valuation of American Depository Receipts (ADRs), exchange-traded funds, futures contracts and certain indices and these securities are categorized as Level 2.

Debt securities are valued at prices supplied by independent pricing services approved by the Fund's Board. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers. These securities are generally categorized as Level 2.

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.

Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.

Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.

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.

Exchange-traded options are valued at the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices or at the most recent asked price (bid for purchased options) if no bid or asked price are available. Exchange-traded options are categorized as Level 1. Over-the-counter written or purchased options are valued at prices supplied by a Board approved pricing vendor, if available, and otherwise are valued at the price provided by the broker-dealer with which the option was traded. Over-the-counter written or purchased options are generally categorized as Level 2.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.

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

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

B. Derivative Instruments

Swaps. A swap is a contract between two parties to exchange future cash flows at periodic intervals based on the notional amount of the swap. A bilateral swap is a transaction between the fund and a counterparty where cash flows are exchanged between the two parties. A centrally cleared swap is a transaction executed between the fund and a counterparty, then cleared by a clearing member through a central clearinghouse. The central clearinghouse serves as the counterparty, with whom the fund exchanges cash flows.

The value of a swap is adjusted daily, and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Statement of Assets and Liabilities. Gains or losses are realized when the swap expires or is closed. Certain risks may arise when entering into swap transactions including counterparty default; liquidity; or unfavorable changes in interest rates or the value of the underlying reference security, commodity or index. In connection with bilateral swaps, securities and/or cash may be identified as collateral in accordance with the terms of the swap agreement to provide assets of value and recourse in the event of default. The maximum counterparty credit risk is the net present value of the cash flows to be received from or paid to the counterparty over the term of the swap, to the extent that this amount is beneficial to the Fund, in addition to any related collateral posted to the counterparty by the Fund. This risk may be partially reduced by a master netting arrangement between the Fund and the counterparty. Upon entering into a centrally cleared swap, the Fund is required to deposit with a financial intermediary cash or securities ("initial margin") in an amount equal to a certain percentage of the notional amount of the swap. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the swap. In a cleared swap transaction, counterparty risk is minimized as the central clearinghouse acts as the counterparty.

An upfront payment, if any, made by the Fund is recorded as an asset in the Statement of Assets and Liabilities. An upfront payment, if any, received by the Fund is recorded as a liability in the Statement of Assets and Liabilities. Payments received or made at the end of the measurement period are recorded as realized gain or loss in the Statement of Operations.

Interest Rate Swaps. Interest rate swaps are agreements in which the Fund agrees to pay to 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. For the six months ended June 30, 2014, the Fund entered into interest rate swap agreements to gain exposure to different parts of the yield curve while managing overall duration.

A summary of the open interest rate swap contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in interest rate swap contracts had a total notional amount generally indicative of a range from $10,500,000 to $12,600,000.

Credit Default Swaps. Credit default swaps are agreements between a buyer and a seller of protection against predefined credit events for the reference entity. The Fund may enter into credit default swaps to gain exposure to an underlying issuer's credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller of a credit default swap, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the swap provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swaps, in which case the Fund functions as the counterparty referenced above. This involves the risk that the swap may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap, it will cover its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the reference entities for all outstanding credit default swaps sold by the Fund. For the six months ended June 30, 2014, the Fund entered into credit default swap agreements to gain exposure to the underlying issuer's credit quality characteristics.

Under the terms of a credit default swap, the Fund receives or makes periodic payments based on a specified interest rate on a fixed notional amount. These payments are recorded as a realized gain or loss in the Statement of Operations. Payments received or made as a result of a credit event or termination of the swap are recognized, net of a proportional amount of the upfront payment, as realized gains or losses in the Statement of Operations.

A summary of the open credit default swap contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in credit default swap contracts sold had a total notional value of $125,000.

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). For the six months ended June 30, 2014, the Fund entered into interest rate futures to gain exposure to different parts of the yield curve while managing overall duration. The Fund also entered into interest rate futures contracts for non-hedging purposes to seek to enhance potential gains.

A summary of the open futures contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in futures contracts purchased had a total notional value generally indicative of a range from approximately $7,994,000 to $32,712,000, and the investment in futures contracts sold had a total notional value generally indicative of a range from approximately $5,641,000 to $57,469,000.

Options. An option contract is a contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. The Fund may write or purchase interest rate swaption agreements which are options to enter into a pre-defined swap agreement. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer upon exercise. Certain options, including options on indices and interest rate options, will require cash settlement by the Fund if exercised. For the six months ended June 30, 2014, the Fund entered into options on interest rate swaps in order to hedge against potential adverse interest rate movements of portfolio assets.

If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. For exchange traded contracts, the counterparty risk is minimized as the exchange's clearinghouse acts as the counterparty, and guarantees the futures against default. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.

A summary of open written option contracts is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in written option contracts had a total value generally indicative of a range from approximately $133,000 to $204,000.

Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the six months ended June 30, 2014, the Fund entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings, to facilitate transactions in foreign currency denominated securities and to enhance total returns.

Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and unrealized gain (loss) is recorded daily. On the settlement date of the forward currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was closed. Certain risks may arise upon entering into forward currency contracts from the potential inability of counterparties to meet the terms of their contracts. The maximum counterparty credit risk to the Fund is measured by the unrealized gain on appreciated contracts. Additionally, when utilizing forward currency contracts to hedge, the Fund gives up the opportunity to profit from favorable exchange rate movements during the term of the contract.

A summary of the open forward currency contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $12,710,000 to $30,883,000, and the investment in forward currency contracts long vs. U.S. dollars had a total contract value generally indicative of a range from approximately $4,127,000 to $29,316,000. The investment in forward currency contracts long vs. other foreign currencies sold had a total contract value generally indicative of a range from $0 to approximately $7,981,000.

The following tables summarize the value of the Fund's derivative instruments held as of June 30, 2014 and the related location in the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:

Asset Derivatives	Forward Contracts		Swap Contracts		Futures Contracts		Total
Interest Rate Contracts (a)	$	—	$	54,016	$	134,354	$	188,370
Credit Contracts (b)		—		11,423		—		11,423
Foreign Exchange Contracts (b)		63,947		—		—		63,947
	$	63,947	$	65,439	$	134,354	$	263,740
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Includes cumulative appreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. (b) Unrealized appreciation on swap contracts and forward foreign currency exchange contracts

Liability Derivatives	Written Options			Forward Contracts			Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a) (b)	$	(203,957	)	$	—		$	(358,966	)	$	(170,720	)	$	(733,643	)
Foreign Exchange Contracts (c)		—			(167,428	)		—			—			(167,428	)
	$	(203,957	)	$	(167,428	)	$	(358,966	)	$	(170,720	)	$	(901,071	)
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Includes cumulative depreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. (b) Options written, at value and unrealized depreciation on bilateral swap contracts, respectively (c) Unrealized depreciation on forward foreign currency exchange contracts

Additionally, the amount of unrealized and realized gains and losses on derivative instruments recognized in Fund earnings during the six months ended June 30, 2014 and the related location in the accompanying Statement of Operations is summarized in the following tables by primary underlying risk exposure:

Realized Gain (Loss)	Written Options		Forward Contracts		Swap Contracts			Futures Contracts		Total
Interest Rate Contracts (a)	$	89,880	$	—	$	(225,496	)	$	891,504	$	755,888
Foreign Exchange Contracts (b)		—		471,015		—			—		471,015
	$	89,880	$	471,015	$	(225,496	)	$	891,504	$	1,226,903
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Net realized gain (loss) from written options, swap contracts and futures, respectively (b) Net realized gain (loss) from foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)

Change in Net Unrealized Appreciation (Depreciation)	Written Options		Forward Contracts			Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a)	$	2,060	$	—		$	(218,167	)	$	(1,029,258	)	$	(1,245,365	)
Credit Contracts (a)		—		—			416			—			416
Foreign Exchange Contracts (b)		—		(327,074	)		—			—			(327,074	)
	$	2,060	$	(327,074	)	$	(217,751	)	$	(1,029,258	)	$	(1,572,023	)
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Change in net unrealized appreciation (depreciation) on written options, swap contracts and futures, respectively (b) Change in net unrealized appreciation (depreciation) on foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)

As of June 30, 2014, the Fund has transactions subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statement of Assets and Liabilities to the net amounts by derivative type, including any collateral exposure, is included in the following tables:

Counterparty	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Cash Collateral Received		Non-Cash Collateral Received			Net Amount of Derivative Assets
Australia & New Zealand Banking Group Ltd	$	18,812	$	(18,812	)	$	—	$	—		$	—
Canadian Imperial Bank of Commerce		21,655		—			—		—			21,655
Commonwealth Bank of Australia		16,060		(4,149	)		—		—			11,911
Macquarie Bank Ltd.		2,925		—			—		—			2,925
Nomura International PLC		395		(395	)		—		—			—
Societe Generale		4,100		(4,100	)		—		—			—
UBS AG		11,423		—			—		—			11,423
	$	75,370	$	(27,456	)	$	—	$	—		$	47,914
Counterparty	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Cash Collateral Pledged		Non-Cash Collateral Pledged (a)			Net Amount of Derivative Liabilities
Australia & New Zealand Banking Group Ltd	$	35,976	$	(18,812	)	$	—	$	—		$	17,164
Barclays Bank PLC		54,311		—			—		—			54,311
BNP Paribas		80,489		—			—		—			80,489
Citigroup. Inc.		57,230		—			—		—			57,230
Commonwealth Bank of Australia		4,149		(4,149	)		—		—			—
JPMorgan Chase Securities, Inc.		6,831		—			—		—			6,831
Nomura International PLC		97,475		(395	)		—		(97,080	)		—
Societe Generale		47,610		(4,100	)		—		—			43,510
	$	384,071	$	(27,456	)	$	—	$	(97,080	)	$	259,535

(a) The actual collateral pledged may be more than the amount shown.

C. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments and U.S. Treasury obligations) aggregated $122,953,106 and $149,623,066, respectively. Purchases and sales of U.S. Treasury obligations aggregated $7,226,065 and $5,474,811, respectively.

For the six months ended June 30, 2014, transactions for written options on interest rate swap contracts were as follows:

	Contract Amount			Premium
Outstanding, beginning of period		26,600,000		$	280,210
Options written		12,000,000			132,074
Options closed		(6,300,000	)		(74,392	)
Options expired		(2,100,000	)		(15,488	)
Outstanding, end of period		30,200,000		$	322,404

D. Related Parties

Under the Investment Management Agreement, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:

First $250 million	.370	%
Next $750 million	.345	%
Over $1 billion	.310	%

For the period from January 1, 2014 through September 30, 2014, the Advisor has contractually agreed to waive its fees and/or reimburse certain operating expenses to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest expense) of class A shares at 0.71%.

Securities Lending Agent Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the six months ended June 30, 2014, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $4,041.

E. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding shares of the Fund, each owning 60% and 21%.

F. Line of Credit

G. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges, redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,053.90
Expenses Paid per $1,000*	$	3.11
Hypothetical 5% Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,021.77
Expenses Paid per $1,000*	$	3.06

Annualized Expense Ratio	Class A
Deutsche Variable Series II — Deutsche Global Income Builder VIP	.61%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Global Income Builder VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 2nd quartile, 2nd quartile and 3rd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one- and three-year periods and has underperformed its benchmark in the five-year period ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be lower than the median (1st quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board considered the Fund's management fee rate as compared to fees charged by DIMA to a comparable fund and considered differences between the Fund and the comparable fund. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitation agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Notes

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2GIB-3 (R-028382-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Government & Agency Securities VIP

(formerly DWS Government & Agency Securities VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

11 Statement of Assets and Liabilities

12 Statement of Operations

13 Statement of Changes in Net Assets

14 Financial Highlights

16 Notes to Financial Statements

23 Information About Your Fund's Expenses

24 Proxy Voting

25 Advisory Agreement Board Considerations and Fee Evaluation

Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The Fund may lend securities to approved institutions. The "full faith and credit" guarantee of the U.S. government applies to the timely repayment of interest, and does not eliminate market risk. Because of the rising U.S. government debt burden, it is possible that the U.S. government may not be able to meet its financial obligations or that securities issued by the U.S. government may experience credit downgrades. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 are 0.71% and 1.06% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.

Growth of an Assumed $10,000 Investment in Deutsche Government & Agency Securities VIP
		The Barclays GNMA Index is an unmanaged, market-value-weighted measure of all fixed-rate securities backed by mortgage pools of the Government National Mortgage Association. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Government & Agency Securities VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,396		$	10,377		$	10,709		$	12,319		$	15,775
Class A	Average annual total return		3.96	%		3.77	%		2.31	%		4.26	%		4.66	%
Barclays GNMA Index	Growth of $10,000	$	10,414		$	10,474		$	10,881		$	12,360		$	16,352
Barclays GNMA Index	Average annual total return		4.14	%		4.74	%		2.86	%		4.33	%		5.04	%
Deutsche Government & Agency Securities VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class B	Growth of $10,000	$	10,371		$	10,335		$	10,598		$	12,104		$	15,208
Class B	Average annual total return		3.71	%		3.35	%		1.95	%		3.89	%		4.28	%
Barclays GNMA Index	Growth of $10,000	$	10,414		$	10,474		$	10,881		$	12,360		$	16,352
Barclays GNMA Index	Average annual total return		4.14	%		4.74	%		2.86	%		4.33	%		5.04	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Net Assets)	6/30/14	12/31/13

Mortgage-Backed Securities Pass-Throughs	89%	89%
Collateralized Mortgage Obligations	20%	15%
Government & Agency Obligations	17%	21%
Cash Equivalents and Other Assets and Liabilities, net	–26%	–25%
	100%	100%

Coupons*	6/30/14	12/31/13

Less than 4.5%	33%	32%
4.5%–5.49%	45%	43%
5.5%–6.49%	19%	21%
6.5%–7.49%	2%	3%
7.5% and Greater	1%	1%
	100%	100%

Interest Rate Sensitivity	6/30/14	12/31/13

Effective Maturity	6.6 years	10.0 years
Effective Duration	6.4 years	6.3 years

* Excludes Cash Equivalents, Securities Lending Collateral, U.S. Treasury Bills and Options Purchased.

Effective maturity is the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.

Effective duration is an approximate measure of the Fund's sensitivity to interest rate changes taking into consideration any maturity shortening features.

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

William Chepolis, CFA

Scott Agi, CFA

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Principal Amount ($)		Value ($)

Mortgage-Backed Securities Pass-Throughs 89.0%
Federal Home Loan Mortgage Corp.,
4.0%, 8/1/2041 (a)		9,000,000		9,534,726
Federal National Mortgage Association, 4.5%, 1/1/2040 (a)		8,000,000		8,665,000
Government National Mortgage Association:
3.5%, with various maturities from 2/15/2043 until 3/20/2043		4,563,172		4,758,914
4.0%, with various maturities from 9/20/2040 until 6/20/2043 (a)		13,251,002		14,193,652
4.5%, with various maturities from 6/20/2033 until 2/20/2043 (a)		11,420,181		12,482,195
4.55%, 1/15/2041		386,519		423,839
4.625%, 5/15/2041		194,030		213,796
5.0%, with various maturities from 11/20/2032 until 4/15/2042		14,184,328		15,735,637
5.5%, with various maturities from 10/15/2032 until 7/20/2040		7,644,729		8,594,265
6.0%, with various maturities from 2/15/2034 until 5/15/2040		7,697,683		8,703,536
6.5%, with various maturities from 9/15/2036 until 2/15/2039		945,659		1,069,613
7.0%, with various maturities from 2/20/2027 until 11/15/2038		222,687		258,708
7.5%, 10/20/2031		7,524		9,040
Total Mortgage-Backed Securities Pass-Throughs (Cost $82,974,335)				84,642,921

Collateralized Mortgage Obligations 19.6%
Federal Home Loan Mortgage Corp.:
"OA", Series 3179, Principal Only, Zero Coupon, 7/15/2036		192,964		180,262
"KO", Series 4180, Principal Only, Zero Coupon, 1/15/2043		1,367,587		813,590
"KB", Series 4144, 2.5%, 12/15/2042		214,837		181,527
"YI", Series 3936, Interest Only, 3.0%, 6/15/2025		109,073		8,278
"AI", Series 4016, Interest Only, 3.0%, 9/15/2025		1,204,739		115,723
"WI", Series 3939, Interest Only, 3.0%, 10/15/2025		435,107		34,744
"EI", Series 3953, Interest Only, 3.0%, 11/15/2025		620,642		58,116
"IO", Series 3974, Interest Only, 3.0%, 12/15/2025		194,322		17,741
"DI", Series 4010, Interest Only, 3.0%, 2/15/2027		157,342		15,684
"IK", Series 4048, Interest Only, 3.0%, 5/15/2027		1,497,754		193,474
"PZ", Series 4094, 3.0%, 8/15/2042		408,574		358,956
"IK", Series 3754, Interest Only, 3.5%, 6/15/2025		919,360		94,064
	Principal Amount ($)		Value ($)

"DZ", Series 4199, 3.5%, 5/15/2043		242,880		225,647
"ZG", Series 4213, 3.5%, 6/15/2043		361,429		361,736
"KZ", Series 4328, 4.0%, 4/15/2044		336,007		347,449
"UA", Series 4298, 4.0%, 2/15/2054		483,677		495,558
"22", Series 243, Interest Only, 4.482%*, 6/15/2021		474,322		26,662
"NI", Series 3657, Interest Only, 4.5%, 8/15/2027		260,262		5,657
"PI", Series 2535, Interest Only, 6.0%, 9/15/2032		82,020		1,745
"MI", Series 3871, Interest Only, 6.0%, 4/15/2040		143,404		20,559
"A", Series 172, Interest Only, 6.5%, 1/1/2024		20,172		3,722
"DS", Series 3199, Interest Only, 6.998%*, 8/15/2036		2,037,385		416,711
"S", Series 2416, Interest Only, 7.948%*, 2/15/2032		273,416		60,994
"ST", Series 2411, Interest Only, 8.598%*, 6/15/2021		698,057		70,183
"KS", Series 2064, Interest Only, 9.998%*, 5/15/2022		276,598		64,985
Federal National Mortgage Association:
"DI", Series 2011-136, Interest Only, 3.0%, 1/25/2026		182,705		17,581
"LZ", Series 2013-45, 3.0%, 5/25/2043		1,035,574		879,652
"DZ", Series 2013-136, 3.0%, 1/25/2044		812,075		667,377
"HI", Series 2010-123, Interest Only, 3.5%, 3/25/2024		326,241		23,688
"KI", Series 2011-72, Interest Only, 3.5%, 3/25/2025		994,175		69,401
''IO", Series 2012-146, Interest Only, 3.5%, 1/25/2043		2,057,103		476,296
"ZB", Series 2010-136, 4.0%, 12/25/2040		375,182		391,203
"AZ", Series 2012-29, 4.0%, 4/25/2042		1,452,740		1,455,430
"HZ", Series 2013-20, 4.0%, 3/25/2043		1,522,709		1,504,726
"25", Series 351, Interest Only, 4.5%, 5/1/2019		146,271		11,158
"HI", Series 2009-77, Interest Only, 4.5%, 9/25/2027		36,889		132
"IN", Series 2003-49, Interest Only, 4.75%, 3/25/2018		696,299		22,209
"21", Series 334, Interest Only, 5.0%, 3/1/2018		62,734		4,157
"20", Series 334, Interest Only, 5.0%, 3/1/2018		99,208		6,725
''23", Series 339, Interest Only, 5.0%, 6/25/2018		141,233		9,572
"26", Series 381, Interest Only, 5.0%, 12/25/2020		47,051		4,451
"ZA", Series 2008-24, 5.0%, 4/25/2038		717,131		776,597
"30", Series 381, Interest Only, 5.5%, 11/25/2019		273,138		27,516
"PI", Series 2009-14, Interest Only, 5.5%, 3/25/2024		464,976		63,981
"PJ", Series 2004-46, Interest Only, 5.848%*, 3/25/2034		341,369		45,217
	Principal Amount ($)		Value ($)

"WI", Series 2011-59, Interest Only, 6.0%, 5/25/2040		295,990		31,946
"101", Series 383, Interest Only, 6.5%, 9/25/2022		936,928		144,892
"SJ", Series 2007-36, Interest Only, 6.618%*, 4/25/2037		191,610		30,665
"KI", Series 2005-65, Interest Only, 6.848%*, 8/25/2035		93,199		17,957
"SA", Series G92-57, IOette, 83.384%*, 10/25/2022		34,789		69,627
Government National Mortgage Association:
"BI", Series 2014-22, Interest Only, 4.0%, 2/20/2029		1,161,602		160,057
"JY", Series 2010-20, 4.0%, 12/20/2033		2,054,453		2,178,783
"LI", Series 2009-104, Interest Only, 4.5%, 12/16/2018		190,053		12,875
"NI", Series 2010-44, Interest Only, 4.5%, 10/20/2037		522,423		45,497
"CI", Series 2010-87, Interest Only, 4.5%, 11/20/2038		1,251,588		323,859
"MI", Series 2010-169, Interest Only, 4.5%, 8/20/2040		725,049		107,639
"GZ", Series 2005-24, 5.0%, 3/20/2035		531,482		599,552
"MI", Series 2009-76, Interest Only, 5.0%, 3/20/2035		45,517		56
"ZA", Series 2005-75, 5.0%, 10/16/2035		597,909		673,452
"MZ", Series 2009-98, 5.0%, 10/16/2039		1,072,862		1,272,690
"Z", Series 2009-112, 5.0%, 11/20/2039		1,256,953		1,391,542
"AI", Series 2008-46, Interest Only, 5.5%, 5/16/2023		195,880		16,661
"GI", Series 2003-19, Interest Only, 5.5%, 3/16/2033		749,773		151,183
"IB", Series 2010-130, Interest Only, 5.5%, 2/20/2038		226,173		40,855
"BS", Series 2011-93, Interest Only, 5.948%*, 7/16/2041		1,147,962		171,363
"MS", Series 2012-118, Interest Only, 5.997%, 9/20/2042*		597,978		80,797
"DI", Series 2009-10, Interest Only, 6.0%, 4/16/2038		293,729		50,904
"SA", Series 2012-84, Interest Only, 6.147%*, 12/20/2038		1,347,793		203,045
"QA", Series 2007-57, Interest Only, 6.347%*, 10/20/2037		287,137		41,828
"IP", Series 2009-118, Interest Only, 6.5%, 12/16/2039		83,079		15,733
"IC", Series 1997-4, Interest Only, 7.5%, 3/16/2027		543,621		139,137
"SK", Series 2003-11, Interest Only, 7.548%*, 2/16/2033		457,050		79,420
Total Collateralized Mortgage Obligations (Cost $17,272,133)				18,682,851

	Principal Amount ($)		Value ($)

Government & Agency Obligations 17.4%
U.S. Government Sponsored Agency 10.5%
Federal Home Loan Bank, 0.875%, 5/24/2017		10,000,000		10,003,989
U.S. Treasury Obligations 6.9%
U.S. Treasury Bill, 0.065%**, 8/14/2014 (b)		1,045,000		1,044,972
U.S. Treasury Notes:
1.0%, 8/31/2016 (c)		3,450,000		3,485,576
1.0%, 9/30/2016		2,000,000		2,019,376
				6,549,924
Total Government & Agency Obligations (Cost $16,529,962)				16,553,913

	Contract Amount		Value ($)

Call Options Purchased 0.2%
Options on Interest Rate Swap Contracts
Pay Fixed Rate — 3.72% – Receive Floating — LIBOR, Swap Expiration Date 4/22/2026, Option Expiration Date 4/20/20161		2,600,000		56,132
Pay Fixed Rate — 4.32% – Receive Floating — LIBOR, Swap Expiration Date 2/3/2027, Option Expiration Date 2/1/20172		6,000,000		120,378
Total Call Options Purchased (Cost $390,446)				176,510

Put Options Purchased 0.1%
Options on Interest Rate Swap Contracts
Receive Fixed Rate — 2.32% – Pay Floating — LIBOR, Swap Expiration Date 2/3/2027, Option Expiration Date 2/1/20172 (Cost $203,884)		6,000,000		57,642

	Shares		Value ($)

Securities Lending Collateral 8.5%
Daily Assets Fund Institutional, 0.08% (d) (e) (Cost $8,080,000)		8,080,000		8,080,000

Cash Equivalents 0.4%
Central Cash Management Fund, 0.06% (d) (Cost $412,815)		412,815		412,815

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $125,863,575)†		135.2			128,606,652
Other Assets and Liabilities, Net (f)		(35.2	)		(33,492,429	)
Net Assets		100.0			95,114,223

* These securities are shown at their current rate as of June 30, 2014.

** Annualized yield at time of purchase; not a coupon rate.

† The cost for federal income tax purposes was $125,926,867. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $2,679,785. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $4,151,015 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,471,230.

(a) When-issued or delayed delivery securities included.

(b) At June 30, 2014, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.

(c) At June 30, 2014, this security has been pledged, in whole or in part, as collateral for open over-the-counter derivatives.

(d) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(e) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

(f) All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at June 30, 2014 amounted to $7,939,230, which is 8.3% of net assets.

IOettes: These securities represent the right to receive interest payments on an underlying pool of mortgages with similar features as those associated with IO securities. Unlike IO's, a nominal amount of principal is assigned to an IOette which is small in relation to the interest flow that constitutes almost all of the IOette cash flow. The effective yield of this security is lower than the stated interest rate.

LIBOR: London Interbank Offered Rate

Principal Only: Principal Only (PO) bonds represent the "principal only" portion of payments on a pool of underlying mortgages or mortgage-backed securities.

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

At June 30, 2014, open futures contracts purchased were as follows:

Futures

Currency

Expiration Date

Contracts

Notional Value ($)

Unrealized Appreciation ($)

10 Year Interest Rate Swap

USD

9/15/2014

3,675,547

35,124

10 Year U.S. Treasury Note

USD

9/19/2014

625,859

1,406

5 Year U.S. Treasury Note

USD

9/30/2014

4,300,594

12,026

Total unrealized appreciation

48,556

At June 30, 2014, open futures contracts sold were as follows:

Futures

Currency

Expiration Date

Contracts

Notional Value ($)

Unrealized Depreciation ($)

U.S. Treasury Long Bond

USD

9/19/2014

8,917,188

(97,868

)

Currency Abbreviation

USD United States Dollar

At June 30, 2014, open written options contracts were as follows:

Options on Interest Rate Swap Contracts	Swap Effective/ Expiration Dates	Contract Amount			Option Expiration Date	Premiums Received ($)		Value ($) (g)
Call Options Receive Fixed — 4.48% – Pay Floating — LIBOR	5/11/2016 5/11/2026		2,400,000	1	5/5/2016		26,940		(20,708	)
Receive Fixed — 3.32% – Pay Floating — LIBOR	2/3/2017 2/3/2027		3,000,000	2	2/1/2017		216,990		(152,311	)
Receive Fixed — 4.22% – Pay Floating — LIBOR	4/22/2016 4/22/2026		2,600,000	1	4/20/2016		92,690		(29,790	)
Receive Fixed — 5.132% – Pay Floating — LIBOR	3/17/2016 3/17/2026		2,400,000	1	3/15/2016		17,340		(6,335	)
Receive Fixed — 5.132% – Pay Floating — LIBOR	3/17/2016 3/17/2026		2,400,000	2	3/15/2016		28,320		(6,335	)
Total Call Options							382,280		(215,479	)
Put Options Pay Fixed — 1.132% – Receive Floating — LIBOR	3/17/2016 3/17/2026		2,400,000	1	3/15/2016		17,341		(676	)
Pay Fixed — 1.132% – Receive Floating — LIBOR	3/17/2016 3/17/2026		2,400,000	2	3/15/2016		6,120		(676	)
Pay Fixed — 2.480% – Receive Floating — LIBOR	5/11/2016 5/11/2026		2,400,000	1	5/5/2016		26,940		(25,173	)
Pay Fixed — 2.796% – Receive Floating — LIBOR	6/5/2015 6/5/2045		2,200,000	2	6/3/2015		23,540		(18,827	)
Pay Fixed — 3.005% – Receive Floating — LIBOR	3/6/2015 3/6/2045		2,200,000	1	3/4/2015		23,100		(25,386	)
Pay Fixed — 3.033% – Receive Floating — LIBOR	10/24/2014 10/24/2044		1,900,000	3	10/22/2014		24,130		(10,697	)
Pay Fixed — 3.035% – Receive Floating — LIBOR	2/15/2015 2/3/2045		2,200,000	2	1/30/2015		27,170		(25,098	)
Pay Fixed — 3.088% – Receive Floating — LIBOR	1/28/2015 1/28/2045		2,400,000	4	1/26/2015		24,210		(31,631	)
Pay Fixed — 3.093% – Receive Floating — LIBOR	10/21/2014 10/21/2044		1,900,000	2	10/17/2014		26,220		(14,122	)
Pay Fixed — 3.32% – Receive Floating — LIBOR	2/3/2017 2/3/2027		3,000,000	2	2/1/2017		216,990		(110,081	)
Total Put Options							415,761		(262,367	)
Total							798,041		(477,846	)

(g) Unrealized appreciation on written options on interest rate swap contracts at June 30, 2014 was $320,195.

At June 30, 2014, open interest rate swap contracts were as follows:

Centrally Cleared Swaps
Effective/ Expiration Dates	Notional Amount ($)		Cash Flows Paid by the Fund	Cash Flows Received by the Fund	Value ($)			Unrealized Depreciation ($)
6/3/2014 6/3/2025		2,300,000	Fixed — 3.0%	Floating —- LIBOR		(69,202	)		(65,846	)
12/30/2014 12/30/2016		23,200,000	Fixed — 1.173%	Floating — LIBOR		(119,146	)		(121,564	)
12/30/2014 12/30/2019		400,000	Fixed — 2.522%	Floating —- LIBOR		(10,146	)		(10,489	)
12/30/2014 12/30/2034		1,600,000	Fixed — 4.01%	Floating —- LIBOR		(171,149	)		(171,624	)
12/30/2014 12/30/2044		1,400,000	Fixed — 4.081%	Floating — LIBOR		(186,471	)		(211,067	)
5/11/2015 5/11/2045		2,400,000	Fixed — 3.56%	Floating —- LIBOR		(50,476	)		(49,116	)
Total unrealized depreciation									(629,706	)

Bilateral Swaps

Effective/

Expiration Dates

Notional Amount ($)

Cash Flows Paid by the Fund

Cash Flows Received by the Fund

Value ($)

Upfront Payments Paid/

(Received) ($)

Unrealized Depreciation ($)

6/3/2013

6/3/2025

2,300,000

Floating — LIBOR

Fixed — 3.0%

(13,895

)

—

(13,895

)

Counterparties:

1 Nomura International PLC

2 BNP Paribas

3 Citigroup, Inc.

4 Barclays Bank PLC

For information on the Fund's policy and additional disclosures regarding futures contracts, purchased and written options contracts, and interest rate swap contracts, please refer to the Derivatives section of Note B in the accompanying Notes to Financial Statements.

Fair Value Measurements

Assets	Level 1			Level 2			Level 3		Total

Fixed-Income Investments (h)
Mortgage-Backed Securities Pass-Throughs	$	—		$	84,642,921		$	—	$	84,642,921
Collateralized Mortgage Obligations		—			18,682,851			—		18,682,851
Government & Agency Obligations		—			16,553,913			—		16,553,913
Short-Term Investments		8,492,815			—			—		8,492,815
Derivatives (i)
Purchased Options		—			234,152			—		234,152
Futures Contracts		48,556			—			—		48,556
Total	$	8,541,371		$	120,113,837		$	—	$	128,655,208
Liabilities	Level 1			Level 2			Level 3		Total

Derivatives (i)
Futures Contracts	$	(97,868	)	$	—		$	—	$	(97,868	)
Written Options		—			(477,846	)		—		(477,846	)
Interest Rate Swap Contracts		—			(643,601	)		—		(643,601	)
Total	$	(97,868	)	$	(1,121,447	)	$	—	$	(1,219,315	)

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(h) See Investment Portfolio for additional detailed categorizations.

(i) Derivatives include value of purchased options, unrealized appreciation (depreciation) on open futures contracts and interest rate swap contracts, and written options, at value.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments Investments in non-affiliated securities, at value (cost $117,370,760) — including $7,939,230 of securities loaned	$	120,113,837
Investment in Daily Assets Fund Institutional (cost $8,080,000)*		8,080,000
Investment in Central Cash Management Fund (cost $412,815)		412,815
Total investments in securities, at value (cost $125,863,575)		128,606,652
Receivable for investments sold		14,209,193
Receivable for investments sold — when-issued/delayed delivery securities		28,556,219
Receivable for Fund shares sold		2,049
Interest receivable		420,173
Other assets		1,394
Total assets		171,795,680
Liabilities
Payable upon return of securities loaned		8,080,000
Payable for investments purchased		9,993,625
Payable for investments purchased — when-issued/delayed delivery securities		57,886,045
Payable for Fund shares redeemed		75,231
Payable for variation margin on centrally cleared swaps		36,842
Payable for variation margin on futures contracts		8,251
Options written, at value (premium received $798,041)		477,846
Unrealized depreciation on bilateral swap contracts		13,895
Accrued management fee		35,304
Accrued Trustees' fees		751
Other accrued expenses and payables		73,667
Total liabilities		76,681,457
Net assets, at value	$	95,114,223
Net Assets Consist of
Undistributed net investment income		1,142,061
Unrealized appreciation (depreciation) on: Investments		2,743,077
Swap contracts		(643,601	)
Futures		(49,312	)
Written options		320,195
Accumulated net realized gain (loss)		500,459
Paid-in capital		91,101,344
Net assets, at value	$	95,114,223
Class A Net Asset Value, offering and redemption price per share ($91,796,470 ÷ 7,878,280 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	11.65
Class B Net Asset Value, offering and redemption price per share ($3,317,753 ÷ 284,654 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	11.66

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Interest	$	1,530,649
Income distributions — Central Cash Management Fund		2,428
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		3,112
Total income		1,536,189
Expenses: Management fee		219,931
Administration fee		48,874
Services to shareholders		695
Distribution service fees (Class B)		4,273
Record keeping fees (Class B)		1,575
Custodian fee		18,464
Professional fees		40,444
Reports to shareholders		16,626
Trustees' fees and expenses		3,107
Other		5,464
Total expenses before expense reductions		359,453
Expense reductions		(18,239	)
Total expenses after expense reductions		341,214
Net investment income		1,194,975
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		1,279,998
Swap contracts		(292,770	)
Futures		(479,573	)
Written options		102,720
		610,375
Change in net unrealized appreciation (depreciation) on: Investments		2,115,269
Swap contracts		(522,151	)
Futures		214,266
Written options		226,931
		2,034,315
Net gain (loss)		2,644,690
Net increase (decrease) in net assets resulting from operations	$	3,839,665

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	1,194,975		$	2,293,792
Operations: Net investment income	$	1,194,975		$	2,293,792
Net realized gain (loss)		610,375			(119,888	)
Change in net unrealized appreciation (depreciation)		2,034,315			(5,696,113	)
Net increase (decrease) in net assets resulting from operations		3,839,665			(3,522,209	)
Distributions to shareholders from: Net investment income: Class A		(2,179,180	)		(3,325,537	)
Class B		(66,035	)		(119,146	)
Net realized gain: Class A		—			(4,523,083	)
Class B		—			(185,024	)
Total distributions		(2,245,215	)		(8,152,790	)
Fund share transactions: Class A Proceeds from shares sold		5,901,523			9,306,924
Reinvestment of distributions		2,179,180			7,848,620
Payments for shares redeemed		(13,352,904	)		(31,059,765	)
Net increase (decrease) in net assets from Class A share transactions		(5,272,201	)		(13,904,221	)
Class B Proceeds from shares sold		169,269			311,619
Reinvestment of distributions		66,035			304,170
Payments for shares redeemed		(614,425	)		(1,961,191	)
Net increase (decrease) in net assets from Class B share transactions		(379,121	)		(1,345,402	)
Increase (decrease) in net assets		(4,056,872	)		(26,924,622	)
Net assets at beginning of period		99,171,095			126,095,717
Net assets at end of period (including undistributed net investment income of $1,142,061 and $2,192,301, respectively)	$	95,114,223		$	99,171,095
Other Information
Class A Shares outstanding at beginning of period		8,328,640			9,511,241
Shares sold		505,374			782,217
Shares issued to shareholders in reinvestment of distributions		189,659			660,658
Shares redeemed		(1,145,393	)		(2,625,476	)
Net increase (decrease) in Class A shares		(450,360	)		(1,182,601	)
Shares outstanding at end of period		7,878,280			8,328,640
Class B Shares outstanding at beginning of period		317,145			428,962
Shares sold		14,600			26,355
Shares issued to shareholders in reinvestment of distributions		5,742			25,582
Shares redeemed		(52,833	)		(163,754	)
Net increase (decrease) in Class B shares		(32,491	)		(111,817	)
Shares outstanding at end of period		284,654			317,145

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	11.47		$	12.69		$	13.12		$	12.98		$	12.78		$	12.40
Income (loss) from investment operations: Net investment incomea		.14			.24			.34			.48			.50			.52
Net realized and unrealized gain (loss)		.31			(.59	)		.03			.45			.32			.45
Total from investment operations		.45			(.35	)		.37			.93			.82			.97
Less distributions from: Net investment income		(.27	)		(.37	)		(.52	)		(.57	)		(.62	)		(.59	)
Net realized gains		—			(.50	)		(.28	)		(.22	)		—			—
Total distributions		(.27	)		(.87	)		(.80	)		(.79	)		(.62	)		(.59	)
Net asset value, end of period	$	11.65		$	11.47		$	12.69		$	13.12		$	12.98		$	12.78
Total Return (%)		3.96	b**		(3.04	)b		2.93	b		7.46			6.61			8.08
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		92			96			121			146			157			169
Ratio of expenses before expense reductions (%)		.72	*		.71			.68			.67			.64			.58
Ratio of expenses after expense reductions (%)		.69	*		.67			.66			.67			.64			.58
Ratio of net investment income (%)		2.46	*		2.05			2.65			3.68			3.86			4.16
Portfolio turnover rate (%)		301	**		794			796			673			423			390
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

				Years Ended December 31,
Class B	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	11.46		$	12.67		$	13.10		$	12.95		$	12.75		$	12.37
Income (loss) from investment operations: Net investment incomea		.12			.20			.29			.43			.46			.48
Net realized and unrealized gain (loss)		.31			(.59	)		.03			.46			.31			.45
Total from investment operations		.43			(.39	)		.32			.89			.77			.93
Less distributions from: Net investment income		(.23	)		(.32	)		(.47	)		(.52	)		(.57	)		(.55	)
Net realized gains		—			(.50	)		(.28	)		(.22	)		—			—
Total distributions		(.23	)		(.82	)		(.75	)		(.74	)		(.57	)		(.55	)
Net asset value, end of period	$	11.66		$	11.46		$	12.67		$	13.10		$	12.95		$	12.75
Total Return (%)		3.71	b**		(3.25	)b		2.48	b		7.15			6.24			7.70
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		3			4			5			7			6			7
Ratio of expenses before expense reductions (%)		1.07	*		1.06			1.03			1.01			.99			.92
Ratio of expenses after expense reductions (%)		1.01	*		.99			1.01			1.01			.99			.92
Ratio of net investment income (%)		2.13	*		1.71			2.29			3.34			3.51			3.81
Portfolio turnover rate (%)		301	**		794			796			673			423			390
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Government & Agency Securities VIP (formerly DWS Government & Agency Securities VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable Rule 12b-1 fee and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.

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.

Debt securities are valued at prices supplied by independent pricing services approved by the Fund's Board. If the pricing services are unable to provide valuations, securities are valued at the average of the most recent reliable bid quotation or evaluated price, as applicable, obtained from broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. These securities are generally categorized as Level 2.

Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities on loan at period end.

Mortgage Dollar Rolls. The Fund may enter into mortgage dollar rolls in which the Fund sells to a bank or broker/dealer (the "counterparty") mortgage-backed securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities on a fixed date. The counterparty receives all principal and interest payments, including prepayments, made on the security while it is the holder. The Fund receives compensation as consideration for entering into the commitment to repurchase. The compensation is paid in the form of a lower price for the security upon its repurchase, or alternatively, a fee. Mortgage dollar rolls may be renewed with a new sale and repurchase price and a cash settlement made at each renewal without physical delivery of the securities subject to the contract.

Certain risks may arise upon entering into mortgage dollar rolls from the potential inability of counterparties to meet the terms of their commitments. Additionally, the value of such securities may change adversely before the Fund is able to repurchase them. There can be no assurance that the Fund's use of the cash that it receives from a mortgage dollar roll will provide a return that exceeds its costs.

At December 31, 2013, the Fund had a net tax basis capital loss carryforward of $310,000 of short-term losses, which may be applied against any realized net taxable capital gains indefinitely.

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

B. Derivative Instruments

Interest rate swaps are agreements in which the Fund agrees to pay to 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. For the six months ended June 30, 2014, the Fund entered into interest rate swap agreements to gain exposure to different parts of the yield curve while managing overall duration.

For the six months ended June 30, 2014, the investment in interest rate swap contracts had a total notional amount generally indicative of a range from $31,300,000 to $33,600,000.

Options. An option contract is a contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. The Fund may write or purchase interest rate swaption agreements which are options to enter into a pre-defined swap agreement. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer upon exercise. Certain options, including options on indices and interest rate options, will require cash settlement by the Fund if exercised. For the six months ended June 30, 2014, the Fund entered into options on interest rate swap contracts in order to hedge against potential adverse interest rate movements of portfolio assets.

If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. For exchange-traded contracts, the counterparty risk is minimized as the exchange's clearinghouse acts as the counterparty, and guarantees the futures against default. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities or currencies hedged.

A summary of the open purchased option contracts as of June 30, 2014 is included in the Fund's Investment Portfolio. A summary of open written option contracts is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in written option contracts had a total value generally indicative of a range from approximately $472,000 to $656,000, and purchased option contracts had a total value generally indicative of a range from approximately $234,000 to $551,000.

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). For the six months ended June 30, 2014, the Fund entered into interest rate futures to gain exposure to different parts of the yield curve while managing overall duration.

A summary of the open futures contracts as of June 30, 2014, is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in futures contracts purchased had a total notional value generally indicative of a range from approximately $8,602,000 to $22,313,000, and the investment in futures contracts sold had a total notional value generally indicative of a range from approximately $5,608,000 to $10,835,000.

Asset Derivatives	Purchased Options		Futures Contracts		Total
Interest Rate Contracts (a) (b)	$	234,152	$	48,556	$	282,708
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Investments in securities, at value (includes purchased options) (b) Includes cumulative appreciation of futures contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities.

Liability Derivatives	Written Options			Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a) (b)	$	(477,846	)	$	(643,601	)	$	(97,868	)	$	(1,219,315	)
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Options written, at value and unrealized depreciation on swap contracts. Unsettled variation margin for centrally cleared swaps is disclosed separately within the Statement of Assets and Liabilities. (b) Includes cumulative depreciation of futures contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities.

Realized Gain (Loss)	Written Options		Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a)	$	102,720	$	(292,770	)	$	(479,573	)	$	(669,623	)
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Net realized gain (loss) from written options, swap contracts and futures, respectively

Change in Net Unrealized Appreciation (Depreciation)	Purchased Options			Written Options		Swap Contracts			Futures Contracts		Total
Interest Rate Contracts (a)	$	(317,287	)	$	226,931	$	(522,151	)	$	214,266	$	(398,241	)
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Change in net unrealized appreciation (depreciation) from investments (includes purchased options), written options, swap contracts and futures, respectively

Counterparty	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Cash Collateral Received		Non-Cash Collateral Received			Net Amount of Derivative Assets
BNP Paribas	$	178,020	$	(178,020	)	$	—	$	—		$	—
Nomura International PLC		56,132		(56,132	)		—		—			—
	$	234,152	$	(234,152	)	$	—	$	—		$	—
Counterparty	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Cash Collateral Pledged		Non-Cash Collateral Pledged (a)			Net Amount of Derivative Liabilities
Barclays Bank PLC	$	31,631	$	—		$	—	$	—		$	31,631
BNP Paribas		327,450		(178,020	)		—		—			149,430
Citigroup, Inc.		10,697		—			—		—			10,697
Nomura International PLC		121,963		(56,132	)		—		(60,619	)		5,212
	$	491,741	$	(234,152	)	$	—	$	(60,619	)	$	196,970

(a) The actual collateral received and/or pledged may be more than the amount shown.

C. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment securities (excluding short-term investments and U.S. Treasury securities) aggregated $343,648,130 and $345,992,361, respectively. Purchases and sales of U.S. Treasury securities aggregated $14,876,121 and $19,451,597, respectively.

For the six months ended June 30, 2014, transactions for written options on futures and interest rate swap contracts were as follows:

	Contract Amount			Premiums
Outstanding, beginning of period		31,600,000		$	748,861
Options written		13,800,000			151,900
Options closed		(7,200,000	)		(85,020	)
Options expired		(2,400,000	)		(17,700	)
Outstanding, end of period		35,800,000		$	798,041

D. Related Parties

First $250 million	.450	%
Next $750 million	.430	%
Next $1.5 billion	.410	%
Next $2.5 billion	.400	%
Next $2.5 billion	.380	%
Next $2.5 billion	.360	%
Next $2.5 billion	.340	%
Over $12.5 billion	.320	%

For the period from January 1, 2014 through April 30, 2014, the Advisor had contractually agreed to waive all or a portion of its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:

Class A	.67%
Class B	.99%

Effective May 1, 2014 through September 30, 2014, the Advisor has contractually agreed to waive all or a portion of its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:

Class A	.75%
Class B	1.10%

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed for each class are as follows:

Class A	$	17,280
Class B		959
	$	18,239

	Total Aggregated		Unpaid at June 30, 2014
Class A	$	148	$	72
Class B		34		17
	$	182	$	89

E. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 60% and 32%. One participating insurance company was the owner of record of 10% or more of the total outstanding Class B shares of the Fund, owning 95%.

F. Line of Credit

G. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,039.60	$	1,037.10
Expenses Paid per $1,000*	$	3.49	$	5.10
Hypothetical 5% Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,021.37	$	1,019.79
Expenses Paid per $1,000*	$	3.46	$	5.06

Annualized Expense Ratios	Class A		Class B
Deutsche Variable Series II — Deutsche Government & Agency Securities VIP	.69%		1.01%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Government & Agency Securities VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 3rd quartile, 1st quartile and 1st quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one- and three-year periods and has underperformed its benchmark in the five-year period ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were higher than the median (3rd quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be equal to the median of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DIMA to a comparable fund and considered differences between the Fund and the comparable fund. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2GAS-3 (R-028384-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche High Income VIP

(formerly DWS High Income VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Manager

6 Investment Portfolio

18 Statement of Assets and Liabilities

19 Statement of Operations

20 Statement of Changes in Net Assets

21 Financial Highlights

23 Notes to Financial Statements

30 Information About Your Fund's Expenses

31 Proxy Voting

32 Advisory Agreement Board Considerations and Fee Evaluation

Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investments in lower-quality ("junk bonds") and non-rated securities present greater risk of loss than investments in higher-quality securities. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The Fund may lend securities to approved institutions. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 are 0.73% and 1.10% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.

Growth of an Assumed $10,000 Investment in Deutsche High Income VIP
		The Credit Suisse High Yield Index tracks the performance of the global high-yield debt market. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche High Income VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,501		$	11,124		$	13,002		$	18,126		$	21,028
Class A	Average annual total return		5.01	%		11.24	%		9.14	%		12.63	%		7.72	%
Credit Suisse High Yield Index	Growth of $10,000	$	10,555		$	11,181		$	13,098		$	19,048		$	22,961
Credit Suisse High Yield Index	Average annual total return		5.55	%		11.81	%		9.41	%		13.76	%		8.67	%
Deutsche High Income VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class B	Growth of $10,000	$	10,504		$	11,091		$	12,905		$	17,900		$	20,384
Class B	Average annual total return		5.04	%		10.91	%		8.87	%		12.35	%		7.38	%
Credit Suisse High Yield Index	Growth of $10,000	$	10,555		$	11,181		$	13,098		$	19,048		$	22,961
Credit Suisse High Yield Index	Average annual total return		5.55	%		11.81	%		9.41	%		13.76	%		8.67	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Corporate Bonds	89%	82%
Cash Equivalents	6%	10%
Convertible Bonds	1%	2%
Loan Participations and Assignments	1%	—
Preferred Stocks	1%	1%
Government & Agency Obligations	1%	4%
Preferred Securities	1%	1%
	100%	100%

Sector Diversification (As a % of Investment Portfolio excluding Government & Agency Obligations, Cash Equivalents and Securities Lending Collateral)	6/30/14	12/31/13

Telecommunication Services	20%	20%
Consumer Discretionary	17%	19%
Energy	15%	15%
Industrials	11%	10%
Materials	9%	10%
Financials	7%	6%
Information Technology	7%	6%
Health Care	6%	5%
Consumer Staples	5%	7%
Utilities	3%	2%
	100%	100%

Quality (As a % of Investment Portfolio excluding Cash Equivalents and Securities Lending Collateral)	6/30/14	12/31/13

AAA	1%	4%
BBB	1%	2%
BB	40%	36%
B	44%	44%
CCC	12%	12%
Not Rated	2%	2%
	100%	100%

The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings. The ratings of Moody's and S&P represent their opinions as to the quality of the securities they rate. Credit quality measures a bond issuer's ability to repay interest and principal in a timely manner. Ratings are relative and subjective and are not absolute standards of quality. Credit quality does not remove market risk and is subject to change.

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Manager

Gary Russell, CFA

Portfolio Manager

Investment Portfolio June 30, 2014 (Unaudited)

		Principal Amount ($)(a)		Value ($)

Corporate Bonds 88.0%
Consumer Discretionary 16.2%
AMC Entertainment, Inc., 5.875%, 2/15/2022			220,000		228,800
AMC Networks, Inc., 7.75%, 7/15/2021			80,000		89,500
AmeriGas Finance LLC:
6.75%, 5/20/2020			460,000		499,100
7.0%, 5/20/2022			350,000		387,625
APX Group, Inc.:
6.375%, 12/1/2019			205,000		212,688
144A, 8.75%, 12/1/2020 (c)			145,000		147,175
8.75%, 12/1/2020			25,000		25,375
Asbury Automotive Group, Inc., 8.375%, 11/15/2020			505,000		560,550
Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022			330,000		360,525
Ashton Woods U.S.A. LLC, 144A, 6.875%, 2/15/2021			350,000		350,000
Avis Budget Car Rental LLC, 5.5%, 4/1/2023			205,000		209,613
BC Mountain LLC, 144A, 7.0%, 2/1/2021 (b)			210,000		203,175
Block Communications, Inc., 144A, 7.25%, 2/1/2020			375,000		399,375
Boyd Gaming Corp., 9.0%, 7/1/2020 (b)			155,000		170,888
Cablevision Systems Corp.:
5.875%, 9/15/2022			110,000		112,063
8.0%, 4/15/2020 (b)			65,000		73,816
Carlson Wagonlit BV, 144A, 6.875%, 6/15/2019			215,000		231,125
CCO Holdings LLC:
6.5%, 4/30/2021			655,000		697,575
6.625%, 1/31/2022			650,000		698,750
7.0%, 1/15/2019 (b)			120,000		126,600
7.375%, 6/1/2020			50,000		54,500
8.125%, 4/30/2020			150,000		162,375
Cequel Communications Holdings LLC:
144A, 5.125%, 12/15/2021			602,000		599,742
144A, 6.375%, 9/15/2020			1,215,000		1,290,937
Clear Channel Communications, Inc.:
9.0%, 12/15/2019			530,000		565,112
11.25%, 3/1/2021			280,000		317,450
Clear Channel Worldwide Holdings, Inc.:
Series A, 6.5%, 11/15/2022			250,000		266,875
Series B, 6.5%, 11/15/2022			365,000		393,287
Series A, 7.625%, 3/15/2020			110,000		117,700
Series B, 7.625%, 3/15/2020			1,115,000		1,202,806
Cogeco Cable, Inc., 144A, 4.875%, 5/1/2020			20,000		20,250
CSC Holdings LLC, 144A, 5.25%, 6/1/2024			510,000		501,712
Cumulus Media Holdings, Inc., 7.75%, 5/1/2019 (b)			375,000		395,156
DISH DBS Corp.:
4.25%, 4/1/2018			270,000		280,800
5.0%, 3/15/2023			1,225,000		1,247,969
6.75%, 6/1/2021			50,000		57,000
7.875%, 9/1/2019			270,000		320,625
		Principal Amount ($)(a)		Value ($)

Getty Images, Inc., 144A, 7.0%, 10/15/2020 (b)			305,000		279,456
Group 1 Automotive, Inc., 144A, 5.0%, 6/1/2022			205,000		205,000
Harron Communications LP, 144A, 9.125%, 4/1/2020			395,000		440,425
Hertz Corp., 6.75%, 4/15/2019			305,000		323,300
Hot Topic, Inc., 144A, 9.25%, 6/15/2021			140,000		155,400
Isle of Capri Casinos, Inc., 5.875%, 3/15/2021			100,000		101,125
Jo-Ann Stores Holdings, Inc., 144A, 9.75%, 10/15/2019 (PIK)			160,000		163,600
Live Nation Entertainment, Inc.:
144A, 5.375%, 6/15/2022			50,000		50,625
144A, 7.0%, 9/1/2020			345,000		377,775
MDC Partners, Inc., 144A, 6.75%, 4/1/2020			370,000		390,350
Mediacom Broadband LLC:
144A, 5.5%, 4/15/2021			50,000		50,625
6.375%, 4/1/2023			425,000		448,375
Mediacom LLC, 7.25%, 2/15/2022			110,000		119,900
MGM Resorts International:
6.75%, 10/1/2020			526,000		587,147
8.625%, 2/1/2019			510,000		607,537
Numericable Group SA:
144A, 4.875%, 5/15/2019			520,000		533,650
144A, 6.0%, 5/15/2022			775,000		806,000
144A, 6.25%, 5/15/2024			225,000		234,844
Petco Animal Supplies, Inc., 144A, 9.25%, 12/1/2018			315,000		338,231
Pinnacle Entertainment, Inc., 6.375%, 8/1/2021			245,000		258,475
Quebecor Media, Inc., 5.75%, 1/15/2023			205,000		210,638
Schaeffler Finance BV, 144A, 7.75%, 2/15/2017			420,000		473,550
Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021			125,000		125,313
Seminole Tribe of Florida, Inc., 144A, 7.804%, 10/1/2020			345,000		388,125
Serta Simmons Holdings LLC, 144A, 8.125%, 10/1/2020 (b)			230,000		249,550
Sirius XM Radio, Inc., 144A, 5.875%, 10/1/2020 (b)			195,000		206,213
Springs Industries, Inc., 6.25%, 6/1/2021 (b)			295,000		300,900
Starz LLC, 5.0%, 9/15/2019			175,000		182,219
Taylor Morrison Communities, Inc., 144A, 5.25%, 4/15/2021			250,000		253,750
The Men's Wearhouse, Inc., 144A, 7.0%, 7/1/2022 (b)			145,000		150,075
Travelport LLC:
144A, 6.352%**, 3/1/2016			230,641		232,371
144A, 13.875%, 3/1/2016 (PIK)			51,848		53,403
UCI International, Inc., 8.625%, 2/15/2019			310,000		294,500
Unitymedia Hessen GmbH & Co., KG:
144A, 5.5%, 1/15/2023			945,000		978,075
144A, 7.5%, 3/15/2019			435,000		464,362
		Principal Amount ($)(a)		Value ($)

Unitymedia KabelBW GmbH, 144A, 9.625%, 12/1/2019	EUR		550,000		807,918
Univision Communications, Inc., 144A, 7.875%, 11/1/2020			140,000		154,000
Viking Cruises Ltd., 144A, 8.5%, 10/15/2022			205,000		226,525
Visant Corp., 10.0%, 10/1/2017 (b)			460,000		428,950
Weyerhaeuser Real Estate Co.:
144A, 4.375%, 6/15/2019			145,000		145,363
144A, 5.875%, 6/15/2024			45,000		46,294
					26,422,548
Consumer Staples 4.6%
Big Heart Pet Brands, 7.625%, 2/15/2019			284,000		295,956
Chiquita Brands International, Inc., 7.875%, 2/1/2021			195,000		212,306
Cott Beverages, Inc., 144A, 5.375%, 7/1/2022			240,000		240,600
FAGE Dairy Industry SA, 144A, 9.875%, 2/1/2020 (b)			810,000		866,700
JBS Investments GmbH:
144A, 7.25%, 4/3/2024			525,000		543,375
144A, 7.75%, 10/28/2020			405,000		433,350
JBS U.S.A. LLC:
144A, 7.25%, 6/1/2021			485,000		520,163
144A, 8.25%, 2/1/2020			160,000		173,600
Pilgrim's Pride Corp., 7.875%, 12/15/2018			290,000		307,052
Post Holdings, Inc.:
144A, 6.0%, 12/15/2022			200,000		204,000
144A, 6.75%, 12/1/2021			450,000		478,125
Reynolds Group Issuer, Inc.:
5.75%, 10/15/2020			1,390,000		1,466,450
6.875%, 2/15/2021			540,000		582,727
8.25%, 2/15/2021 (b)			225,000		244,688
Roundy's Supermarkets, Inc., 144A, 10.25%, 12/15/2020			220,000		232,375
Smithfield Foods, Inc., 6.625%, 8/15/2022			190,000		208,050
U.S. Foods, Inc., 8.5%, 6/30/2019			400,000		428,200
					7,437,717
Energy 13.7%
Access Midstream Partners LP, 6.125%, 7/15/2022			325,000		359,125
Antero Resources Finance Corp., 5.375%, 11/1/2021			110,000		114,125
Baytex Energy Corp.:
144A, 5.125%, 6/1/2021			95,000		95,594
144A, 5.625%, 6/1/2024			95,000		95,356
Berry Petroleum Co., LLC:
6.375%, 9/15/2022			205,000		218,325
6.75%, 11/1/2020			680,000		715,700
BreitBurn Energy Partners LP:
7.875%, 4/15/2022			700,000		757,750
8.625%, 10/15/2020			225,000		247,500
Chaparral Energy, Inc.:
7.625%, 11/15/2022			465,000		502,200
8.25%, 9/1/2021			300,000		329,250
Chesapeake Energy Corp., 3.479%,** 4/15/2019			300,000		303,375
Chesapeake Oilfield Operating LLC, 6.625%, 11/15/2019			150,000		161,250
		Principal Amount ($)(a)		Value ($)

CONSOL Energy, Inc., 144A, 5.875%, 4/15/2022			105,000		109,988
Crestwood Midstream Partners LP:
144A, 6.125%, 3/1/2022			165,000		173,663
7.75%, 4/1/2019			325,000		348,562
Dresser-Rand Group, Inc., 6.5%, 5/1/2021			420,000		449,400
Endeavor Energy Resources LP, 144A, 7.0%, 8/15/2021			545,000		581,787
EP Energy LLC:
6.875%, 5/1/2019			330,000		351,037
7.75%, 9/1/2022			285,000		321,338
9.375%, 5/1/2020			150,000		171,750
EV Energy Partners LP, 8.0%, 4/15/2019			835,000		876,750
EXCO Resources, Inc., 8.5%, 4/15/2022			155,000		167,400
Halcon Resources Corp.:
8.875%, 5/15/2021 (b)			1,513,500		1,627,012
9.75%, 7/15/2020			500,000		545,625
Hilcorp Energy I LP, 144A, 5.0%, 12/1/2024 (c)			195,000		195,000
Holly Energy Partners LP, 6.5%, 3/1/2020			105,000		113,138
Kodiak Oil & Gas Corp., 5.5%, 1/15/2021 (b)			400,000		417,000
Linn Energy LLC, 6.25%, 11/1/2019			490,000		513,275
MEG Energy Corp.:
144A, 6.5%, 3/15/2021			235,000		249,100
144A, 7.0%, 3/31/2024			470,000		518,175
Memorial Resource Development Corp., 144A, 5.875%, 7/1/2022 (c)			195,000		196,463
Midstates Petroleum Co., Inc.:
9.25%, 6/1/2021 (b)			590,000		647,525
10.75%, 10/1/2020			585,000		663,975
Murphy Oil U.S.A., Inc., 6.0%, 8/15/2023			290,000		305,225
Northern Oil & Gas, Inc., 8.0%, 6/1/2020			595,000		635,162
Oasis Petroleum, Inc.:
6.5%, 11/1/2021			175,000		188,125
144A, 6.875%, 3/15/2022			385,000		419,650
6.875%, 1/15/2023			130,000		141,700
7.25%, 2/1/2019			665,000		704,900
Offshore Group Investment Ltd.:
7.125%, 4/1/2023			410,000		416,150
7.5%, 11/1/2019			745,000		787,837
Regency Energy Partners LP, 5.875%, 3/1/2022			25,000		27,156
Sabine Pass Liquefaction LLC:
5.625%, 2/1/2021			690,000		729,675
5.625%, 4/15/2023			155,000		161,588
144A, 5.75%, 5/15/2024			175,000		182,438
Samson Investment Co., 144A, 10.75%, 2/15/2020			155,000		163,331
SandRidge Energy, Inc., 7.5%, 3/15/2021			1,935,000		2,097,056
SESI LLC, 6.375%, 5/1/2019			235,000		250,863
Seventy Seven Energy, Inc., 144A, 6.5%, 7/15/2022			50,000		51,250
Swift Energy Co., 7.875%, 3/1/2022 (b)			290,000		303,050
Talos Production LLC, 144A, 9.75%, 2/15/2018			410,000		434,600
Welltec AS, 144A, 8.0%, 2/1/2019			400,000		426,000
		Principal Amount ($)(a)		Value ($)

Whiting Petroleum Corp., 5.0%, 3/15/2019			240,000		252,600
WPX Energy, Inc., 5.25%, 1/15/2017			510,000		543,150
					22,359,019
Financials 6.0%
AerCap Aviation Solutions BV, 6.375%, 5/30/2017			470,000		518,175
CIT Group, Inc.:
3.875%, 2/19/2019			2,810,000		2,853,836
5.25%, 3/15/2018			540,000		579,825
Credit Agricole SA, 144A, 7.875%, 1/29/2049 (b)			330,000		360,525
Credit Suisse Group AG, 144A, 6.25%, 12/29/2049 (b)			230,000		231,495
E*TRADE Financial Corp.:
6.375%, 11/15/2019			585,000		633,262
6.75%, 6/1/2016			710,000		770,350
Hellas Telecommunications Finance, 144A, 8.328%*, 7/15/2015 (PIK)	EUR		322,107		0
International Lease Finance Corp.:
3.875%, 4/15/2018			385,000		394,625
6.25%, 5/15/2019			320,000		358,400
8.75%, 3/15/2017			245,000		284,813
Morgan Stanley, Series H, 5.45%, 7/29/2049			155,000		157,827
MPT Operating Partnership LP:
(REIT), 6.375%, 2/15/2022			290,000		311,025
(REIT), 6.875%, 5/1/2021			295,000		321,550
Neuberger Berman Group LLC, 144A, 5.625%, 3/15/2020			160,000		169,200
Popular, Inc., 7.0%, 7/1/2019 (c)			145,000		147,175
Societe Generale SA, 144A, 7.875%, 12/29/2049 (b)			825,000		879,656
The Goldman Sachs Group, Inc., Series L, 5.7%, 12/29/2049			260,000		268,613
UniCredit SpA, 8.0%, 4/3/2049			500,000		532,500
					9,772,852
Health Care 5.7%
Aviv Healthcare Properties LP:
6.0%, 10/15/2021			100,000		106,000
7.75%, 2/15/2019			500,000		532,500
Biomet, Inc.:
6.5%, 8/1/2020			355,000		382,512
6.5%, 10/1/2020			100,000		106,750
Community Health Systems, Inc.:
5.125%, 8/15/2018			1,155,000		1,211,306
144A, 5.125%, 8/1/2021			55,000		56,375
144A, 6.875%, 2/1/2022			220,000		233,200
7.125%, 7/15/2020 (b)			635,000		687,387
Crimson Merger Sub, Inc., 144A, 6.625%, 5/15/2022			525,000		521,062
Endo Finance LLC:
144A, 5.375%, 1/15/2023			215,000		214,731
144A, 5.75%, 1/15/2022			220,000		224,400
Fresenius Medical Care U.S. Finance II, Inc., 144A, 5.625%, 7/31/2019			220,000		239,800
		Principal Amount ($)(a)		Value ($)

Fresenius U.S. Finance II, Inc., 144A, 9.0%, 7/15/2015			420,000		452,550
HCA, Inc.:
6.5%, 2/15/2020			890,000		1,001,250
7.5%, 2/15/2022			305,000		351,894
Hologic, Inc., 6.25%, 8/1/2020			200,000		211,000
IMS Health, Inc., 144A, 6.0%, 11/1/2020			250,000		262,500
LifePoint Hospitals, Inc., 144A, 5.5%, 12/1/2021			275,000		288,063
Par Pharmaceutical Companies, Inc., 7.375%, 10/15/2020			345,000		370,875
Physio-Control International, Inc., 144A, 9.875%, 1/15/2019			299,000		330,395
Salix Pharmaceuticals Ltd., 144A, 6.0%, 1/15/2021			165,000		176,963
Valeant Pharmaceuticals International, Inc. 144A: 6.375%, 10/15/2020			245,000		260,313
7.5%, 7/15/2021			1,050,000		1,162,875
					9,384,701
Industrials 9.5%
ADT Corp.:
3.5%, 7/15/2022			150,000		136,500
4.125%, 4/15/2019			45,000		45,281
6.25%, 10/15/2021 (b)			145,000		153,700
Aguila 3 SA, 144A, 7.875%, 1/31/2018			480,000		506,400
Alphabet Holding Co., Inc., 7.75%, 11/1/2017 (PIK)			480,000		495,600
Armored Autogroup, Inc., 9.25%, 11/1/2018 (b)			610,000		642,025
Artesyn Escrow, Inc., 144A, 9.75%, 10/15/2020			245,000		240,713
AWAS Aviation Capital Ltd., 144A, 7.0%, 10/17/2016			341,960		352,219
BakerCorp International, Inc., 8.25%, 6/1/2019			335,000		345,887
BE Aerospace, Inc., 6.875%, 10/1/2020			180,000		195,525
Belden, Inc., 144A, 5.5%, 9/1/2022			355,000		367,425
Bombardier, Inc.:
144A, 4.75%, 4/15/2019			160,000		162,800
144A, 5.75%, 3/15/2022 (b)			225,000		230,625
144A, 6.0%, 10/15/2022			265,000		271,625
Casella Waste Systems, Inc., 7.75%, 2/15/2019			275,000		287,375
Covanta Holding Corp., 5.875%, 3/1/2024			220,000		227,425
CTP Transportation Products LLC, 144A, 8.25%, 12/15/2019			275,000		296,313
Darling Ingredients, Inc., 144A, 5.375%, 1/15/2022			220,000		228,250
DigitalGlobe, Inc., 5.25%, 2/1/2021			160,000		158,400
Ducommun, Inc., 9.75%, 7/15/2018			305,000		339,407
Florida East Coast Holdings Corp., 144A, 6.75%, 5/1/2019			470,000		496,437
FTI Consulting, Inc., 6.0%, 11/15/2022			205,000		210,894
Garda World Security Corp., 144A, 7.25%, 11/15/2021			290,000		304,863
		Principal Amount ($)(a)		Value ($)

Gates Global LLC, 144A, 6.0%, 7/15/2022			190,000		190,000
GenCorp, Inc., 7.125%, 3/15/2021			535,000		584,487
Huntington Ingalls Industries, Inc.:
6.875%, 3/15/2018			280,000		296,100
7.125%, 3/15/2021			60,000		65,550
Interactive Data Corp., 144A, 5.875%, 4/15/2019			260,000		263,900
Kenan Advantage Group, Inc., 144A, 8.375%, 12/15/2018			575,000		615,250
Meritor, Inc.:
6.25%, 2/15/2024			215,000		225,213
6.75%, 6/15/2021			300,000		322,680
Navios Maritime Holdings, Inc.:
144A, 7.375%, 1/15/2022			830,000		854,900
8.125%, 2/15/2019			410,000		431,012
Nortek, Inc., 8.5%, 4/15/2021			440,000		486,200
Oshkosh Corp., 5.375%, 3/1/2022			165,000		169,950
Ply Gem Industries, Inc., 144A, 6.5%, 2/1/2022 (b)			275,000		266,063
Spirit AeroSystems, Inc.:
144A, 5.25%, 3/15/2022			285,000		289,275
6.75%, 12/15/2020			205,000		220,375
Titan International, Inc., 6.875%, 10/1/2020			590,000		598,850
TransDigm, Inc.:
144A, 6.0%, 7/15/2022			260,000		267,150
144A, 6.5%, 7/15/2024			155,000		161,394
7.5%, 7/15/2021			470,000		520,525
Triumph Group, Inc., 144A, 5.25%, 6/1/2022			130,000		130,325
United Rentals North America, Inc.:
5.75%, 7/15/2018			365,000		385,987
6.125%, 6/15/2023			25,000		26,813
7.375%, 5/15/2020			595,000		657,475
7.625%, 4/15/2022			595,000		667,887
Watco Companies LLC, 144A, 6.375%, 4/1/2023			155,000		158,100
					15,551,150
Information Technology 5.8%
ACI Worldwide, Inc., 144A, 6.375%, 8/15/2020			105,000		110,513
Activision Blizzard, Inc., 144A, 5.625%, 9/15/2021			805,000		867,387
Alliance Data Systems Corp., 144A, 5.25%, 12/1/2017			255,000		266,475
Audatex North America, Inc., 144A, 6.0%, 6/15/2021			200,000		213,500
BMC Software Finance, Inc., 144A, 8.125%, 7/15/2021			450,000		462,938
Boxer Parent Co., Inc., 144A, 9.0%, 10/15/2019 (PIK)			320,000		312,000
CDW LLC, 8.5%, 4/1/2019			1,180,000		1,277,350
CyrusOne LP, 6.375%, 11/15/2022			105,000		113,138
eAccess Ltd., 144A, 8.25%, 4/1/2018			335,000		361,800
EarthLink Holdings Corp., 7.375%, 6/1/2020			245,000		261,231
Entegris, Inc., 144A, 6.0%, 4/1/2022			160,000		164,800
Equinix, Inc.:
5.375%, 4/1/2023			725,000		741,312
7.0%, 7/15/2021			215,000		237,575
		Principal Amount ($)(a)		Value ($)

First Data Corp.:
144A, 6.75%, 11/1/2020			611,000		661,407
144A, 7.375%, 6/15/2019			250,000		268,438
144A, 8.75%, 1/15/2022 (PIK)			910,000		1,004,412
144A, 8.875%, 8/15/2020			495,000		547,594
Freescale Semiconductor, Inc., 144A, 6.0%, 1/15/2022			275,000		292,875
Hughes Satellite Systems Corp.:
6.5%, 6/15/2019			445,000		496,175
7.625%, 6/15/2021			230,000		263,350
Micron Technology, Inc., 144A, 5.875%, 2/15/2022			110,000		117,975
NCR Corp.:
144A, 5.875%, 12/15/2021			55,000		58,025
144A, 6.375%, 12/15/2023			135,000		146,475
NXP BV, 144A, 3.75%, 6/1/2018			250,000		250,625
Sanmina Corp., 144A, 4.375%, 6/1/2019			25,000		24,969
					9,522,339
Materials 5.7%
Ardagh Packaging Finance PLC, 144A, 3.211%, 12/15/2019 (c)			310,000		309,225
AuRico Gold, Inc., 144A, 7.75%, 4/1/2020			155,000		153,450
Berry Plastics Corp.:
5.5%, 5/15/2022			435,000		437,447
9.75%, 1/15/2021			460,000		524,400
BOE Intermediate Holding Corp., 144A, 9.0%, 11/1/2017 (PIK)			317,975		333,476
BOE Merger Corp., 144A, 9.5%, 11/1/2017 (PIK)			410,000		432,037
Cascades, Inc., 144A, 5.5%, 7/15/2022			145,000		144,638
Clearwater Paper Corp., 7.125%, 11/1/2018			390,000		409,500
Crown Americas LLC, 6.25%, 2/1/2021			50,000		53,500
Exopack Holding Corp., 144A, 10.0%, 6/1/2018			230,000		247,250
Exopack Holdings SA, 144A, 7.875%, 11/1/2019			275,000		294,250
First Quantum Minerals Ltd.:
144A, 6.75%, 2/15/2020			551,000		567,530
144A, 7.0%, 2/15/2021			551,000		566,841
FMG Resources (August 2006) Pty Ltd.:
144A, 6.0%, 4/1/2017 (b)			315,000		325,237
144A, 8.25%, 11/1/2019 (b)			270,000		293,963
Hexion U.S. Finance Corp.:
6.625%, 4/15/2020			505,000		535,300
8.875%, 2/1/2018			270,000		280,800
IAMGOLD Corp., 144A, 6.75%, 10/1/2020			310,000		286,750
Kaiser Aluminum Corp., 8.25%, 6/1/2020			260,000		292,500
Packaging Dynamics Corp., 144A, 8.75%, 2/1/2016			535,000		549,445
Perstorp Holding AB, 144A, 8.75%, 5/15/2017 (b)			455,000		487,987
Plastipak Holdings, Inc., 144A, 6.5%, 10/1/2021			250,000		263,750
Polymer Group, Inc., 7.75%, 2/1/2019			270,000		286,875
Rain CII Carbon LLC:
144A, 8.0%, 12/1/2018			270,000		283,500
144A, 8.25%, 1/15/2021 (b)			200,000		210,000
		Principal Amount ($)(a)		Value ($)

Sealed Air Corp.:
144A, 8.125%, 9/15/2019			150,000		165,188
144A, 8.375%, 9/15/2021			150,000		171,750
Signode Industrial Group Lux SA, 144A, 6.375%, 5/1/2022			210,000		212,625
Tronox Finance LLC, 6.375%, 8/15/2020 (b)			200,000		206,500
					9,325,714
Telecommunication Services 18.5%
Altice Financing SA:
144A, 7.875%, 12/15/2019			235,000		257,208
144A, 6.5%, 1/15/2022			200,000		213,000
Altice Finco SA, 144A, 9.875%, 12/15/2020			235,000		270,838
Altice SA, 144A, 7.75%, 5/15/2022			245,000		261,538
B Communications Ltd., 144A, 7.375%, 2/15/2021			270,000		290,250
CenturyLink, Inc.:
Series V, 5.625%, 4/1/2020			105,000		110,775
Series W, 6.75%, 12/1/2023			280,000		305,900
Cincinnati Bell, Inc.:
8.375%, 10/15/2020			1,505,000		1,649,856
8.75%, 3/15/2018			640,000		671,200
CommScope, Inc., 144A, 5.0%, 6/15/2021			260,000		265,200
CPI International, Inc., 8.75%, 2/15/2018			260,000		272,350
Digicel Group Ltd.:
144A, 7.125%, 4/1/2022			265,000		276,263
144A, 8.25%, 9/30/2020			1,560,000		1,700,400
Digicel Ltd.:
144A, 7.0%, 2/15/2020			200,000		211,000
144A, 8.25%, 9/1/2017			1,090,000		1,121,392
Frontier Communications Corp.:
7.125%, 1/15/2023			1,370,000		1,452,200
8.25%, 4/15/2017			348,000		404,115
8.5%, 4/15/2020			100,000		118,000
Intelsat Jackson Holdings SA:
5.5%, 8/1/2023			465,000		462,675
7.25%, 10/15/2020			1,230,000		1,325,325
7.5%, 4/1/2021			1,270,000		1,390,650
8.5%, 11/1/2019			580,000		616,250
Intelsat Luxembourg SA:
7.75%, 6/1/2021			670,000		709,362
8.125%, 6/1/2023			105,000		113,531
Level 3 Communications, Inc., 8.875%, 6/1/2019			55,000		60,156
Level 3 Financing, Inc.:
144A, 6.125%, 1/15/2021			165,000		176,756
7.0%, 6/1/2020			1,260,000		1,376,550
8.125%, 7/1/2019			670,000		731,137
8.625%, 7/15/2020			510,000		571,200
MetroPCS Wireless, Inc.:
6.625%, 11/15/2020			705,000		752,587
7.875%, 9/1/2018			420,000		441,126
Millicom International Cellular SA, 144A, 4.75%, 5/22/2020			720,000		720,000
Pacnet Ltd., 144A, 9.0%, 12/12/2018			200,000		216,500
SBA Communications Corp., 5.625%, 10/1/2019			200,000		211,750
Sprint Communications, Inc.:
144A, 7.0%, 3/1/2020			245,000		281,750
144A, 9.0%, 11/15/2018			845,000		1,024,562
9.125%, 3/1/2017			310,000		363,087
		Principal Amount ($)(a)		Value ($)

Sprint Corp., 144A, 7.125%, 6/15/2024			770,000		816,200
T-Mobile U.S.A., Inc.:
6.125%, 1/15/2022			110,000		116,738
6.5%, 1/15/2024			110,000		117,563
6.625%, 4/1/2023 (b)			245,000		265,825
tw telecom holdings, Inc.:
5.375%, 10/1/2022			320,000		360,938
6.375%, 9/1/2023			245,000		278,688
UPCB Finance III Ltd., 144A, 6.625%, 7/1/2020			185,000		197,025
UPCB Finance V Ltd., 144A, 7.25%, 11/15/2021			1,480,000		1,628,000
UPCB Finance VI Ltd., 144A, 6.875%, 1/15/2022			300,000		327,750
Wind Acquisition Finance SA:
144A, 6.5%, 4/30/2020			195,000		211,331
144A, 7.25%, 2/15/2018			410,000		433,165
Windstream Corp.:
6.375%, 8/1/2023			265,000		268,644
7.5%, 4/1/2023			420,000		454,650
7.75%, 10/15/2020			1,880,000		2,037,450
7.75%, 10/1/2021			675,000		737,437
7.875%, 11/1/2017			495,000		569,869
					30,217,712
Utilities 2.3%
AES Corp.:
3.229%,** 6/1/2019			175,000		176,313
8.0%, 10/15/2017			51,000		59,415
8.0%, 6/1/2020			525,000		631,312
Calpine Corp.:
144A, 7.5%, 2/15/2021			387,000		419,895
144A, 7.875%, 7/31/2020			428,000		464,380
Enel SpA, 144A, 8.75%**, 9/24/2073			360,000		423,900
Energy Future Holdings Corp., Series Q, 6.5%, 11/15/2024*			550,000		415,250
NGL Energy Partners LP, 144A, 5.125%, 7/15/2019 (c)			190,000		190,475
NRG Energy, Inc.:
144A, 6.25%, 5/1/2024			770,000		804,650
7.875%, 5/15/2021			215,000		238,379
					3,823,969
Total Corporate Bonds (Cost $137,003,693)					143,817,721

Government & Agency Obligation 0.6%
U.S. Treasury Obligation
U.S. Treasury Note, 1.0%, 8/31/2016 (d) (Cost $1,060,442)			1,050,000		1,060,828

Loan Participations and Assignments 1.3%
Senior Loans**
Alliance Mortgage Cycle Loan, Term Loan A, 9.5%, 6/15/2010*			700,000		0
Ardagh Holdings U.S.A., Inc., Term Loan B, 4.25%, 12/17/2019			438,897		441,092
Asurion LLC, Second Lien Term Loan, 8.5%, 3/3/2021			310,000		322,206
DaVita HealthCare Partners, Inc., Term Loan B, Zero Coupon, 6/24/2021			470,000		472,698
		Principal Amount ($)(a)		Value ($)

Freescale Semiconductor, Inc., Term Loan B4, 4.25%, 2/28/2020			309,223		309,674
Ply Gem Industries, Inc., Term Loan, 4.0%, 2/1/2021			309,225		307,756
Spansion LLC, Term Loan, Zero Coupon, 12/19/2019			190,000		190,791
Travelport LLC, Second Lien Term Loan, 9.5%, 1/29/2016			36,284		37,463
Total Loan Participations and Assignments (Cost $2,767,723)					2,081,680

Convertible Bonds 1.7%
Consumer Discretionary 0.1%
Live Nation Entertainment, Inc., 144A, 2.5%, 5/15/2019			145,000		150,981
Materials 1.6%
GEO Specialty Chemicals, Inc., 144A, 7.5%, 3/31/2015 (PIK)			1,297,793		2,613,106
Total Convertible Bonds (Cost $1,433,710)					2,764,087

Preferred Security 0.6%
Materials
Hercules, Inc., 6.5%, 6/30/2029 (Cost $767,119)			1,135,000		1,027,175

	Shares		Value ($)

Common Stocks 0.0%
Consumer Discretionary 0.0%
Dawn Holdings, Inc.* (e)		15		44,160
Trump Entertainment Resorts, Inc.*		45		0
				44,160
Industrials 0.0%
Congoleum Corp.*		24,000		0
	Shares		Value ($)

Materials 0.0%
GEO Specialty Chemicals, Inc.*		24,225		18,726
GEO Specialty Chemicals, Inc. 144A*		2,206		1,705
				20,431
Total Common Stocks (Cost $345,217)				64,591

Preferred Stock 0.7%
Financials
Ally Financial, Inc. Series G, 144A, 7.0% (Cost $1,058,296)		1,134		1,142,541

Warrants 0.1%
Materials
GEO Specialty Chemicals, Inc., Expiration Date 3/31/2015*		119,802		91,708
Hercules Trust II, Expiration Date 3/31/2029*		1,100		7,077
Total Warrants (Cost $244,286)				98,785

Securities Lending Collateral 5.6%
Daily Assets Fund Institutional, 0.08% (f) (g) (Cost $9,098,382)		9,098,382		9,098,382

Cash Equivalents 5.8%
Central Cash Management Fund, 0.06% (f) (Cost $9,427,233)		9,427,233		9,427,233

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $163,206,101)†		104.4			170,583,023
Other Assets and Liabilities, Net		(4.4	)		(7,241,952	)
Net Assets		100.0			163,341,071

The following table represents bonds and senior loans that are in default:

Security	Coupon			Maturity Date	Principal Amount		Cost ($)		Value ($)
Alliance Mortgage Cycle Loan*		9.5%	%	6/15/2010	USD	700,000		700,000		0
Energy Future Holdings Corp.*		6.5	%	11/15/2024	USD	550,000		322,434		415,250
Hellas Telecommunications Finance*		8.328	%	7/15/2015	EUR	322,107		92,199		0
								1,114,633		415,250

* Non-income producing security.

† The cost for federal income tax purposes was $163,206,101. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $7,376,922. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $8,876,751 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,499,829.

(a) Principal amount stated in U.S. dollars unless otherwise noted.

(b) All or a portion of these securities were on loan. In addition, "Other Assets and Liabilities, Net" may include pending sales that are also on loan. The value of securities loaned at June 30, 2014 amounted to $8,762,305, which is 5.4% of net assets.

(d) At June 30, 2014, this security has been pledged, in whole or in part, as collateral for open over-the-counter derivatives.

(e) The Fund may purchase securities that are subject to legal or contractual restrictions on resale ("restricted securities"). Restricted securities are securities which 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 these securities is uncertain and there may be changes in the estimated value of these securities.

Schedule of Restricted Securities

Acquisition Date

Cost ($)

Value ($)

Value as % of Net Assets

Dawn Holdings, Inc.

August 2013

53,353

44,160

0.03

(f) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(g) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.

REIT: Real Estate Investment Trust

At June 30, 2014, open credit default swap contracts sold were as follows:

Centrally Cleared Swaps

Effective/

Expiration Dates

Notional Amount ($) (h)

Fixed Cash Flows Received

Underlying Debt Obligation/Quality Rating (i)

Value ($)

Unrealized Appreciation ($)

10/19/2013

12/20/2018

11,880,000

5.0

Markit Dow Jones CDX North America High Yield Index

1,106,046

378,802

Bilateral Swaps
Effective/ Expiration Dates	Notional Amount ($) (h)			Fixed Cash Flows Received			Underlying Debt Obligation/ Quality Rating (i)	Value ($)		Upfront Payments Paid/ (Received) ($)			Unrealized Appreciation/ (Depreciation) ($)
12/20/2011 3/20/2017		370,000	1		5.0	%	CIT Group, Inc., 5.5%, 2/15/2019, BB–		41,093		8,486			32,607
9/30/2013 12/20/2018		300,000	2		5.0	%	CSC Holdings LLC, 7.625%, 7/15/2018, BB		38,566		25,265			13,301
9/30/2013 12/20/2018		1,125,000	3		5.0	%	CSC Holdings LLC, 7.625%, 7/15/2018, BB		144,624		100,063			44,561
6/20/2013 9/20/2018		245,000	1		5.0	%	DISH DBS Corp., 6.75%, 6/1/2021, BB–		37,264		18,485			18,779
6/21/2010 9/20/2015		215,000	1		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		13,159		(19,350	)		32,509
6/21/2010 9/20/2015		105,000	1		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		6,426		(8,400	)		14,826
6/21/2010 9/20/2015		560,000	4		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		34,276		(9,983	)		44,259
6/21/2010 9/20/2015		175,000	3		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		10,711		(16,625	)		27,336
6/21/2010 9/20/2015		100,000	5		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		6,121		(6,896	)		13,017
6/20/2011 9/20/2016		575,000	4		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		61,378		23,641			37,737
3/21/2011 6/20/2016		1,085,000	2		5.0	%	Ford Motor Credit Co., LLC, 5.0%, 5/15/2018, BBB–		103,702		51,299			52,403
6/20/2011 9/20/2016		440,000	2		5.0	%	Forest Oil Corp., 7.25%, 6/15/2019, CCC+		5,393		7,292			(1,899	)
9/20/2012 12/20/2017		485,000	6		5.0	%	General Motors Corp., 3.3%, 12/20/2017, BB+		69,361		25,038			44,323
6/20/2011 9/20/2015		1,145,000	5		5.0	%	HCA, Inc., 6.375%, 1/15/2015, B–		65,704		17,820			47,884
3/21/2011 6/20/2016		610,000	3		5.0	%	HCA, Inc., 6.375%, 1/15/2015, B–		52,704		9,005			43,699
6/20/2013 9/20/2018		470,000	5		5.0	%	HCA, Inc., 8.0%, 10/1/2018, B–		64,730		31,728			33,002
6/20/2013 9/20/2018		730,000	4		5.0	%	Sprint Communications, Inc., 6.0%, 12/1/2016, BB–		89,956		36,625			53,331
12/20/2013 3/20/2019		3,000,000	5		5.0	%	Sprint Communications, Inc., 6.0%, 12/1/2016, BB–		363,340		293,847			69,493
Total net unrealized appreciation														621,168

(h) The maximum potential amount of future undiscounted payments that the Fund could be required to make under a credit default swap contract would be the notional amount of the contract. These potential amounts would be partially offset by any recovery values of the referenced debt obligation or net amounts received from the settlement of buy protection credit default swap contracts entered into by the Fund for the same referenced debt obligation, if any.

(i) The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings and are unaudited.

Counterparties:

1 Credit Suisse

2 Barclays Bank PLC

3 JPMorgan Chase Securities, Inc.

4 Bank of America

5 Goldman Sachs & Co.

6 UBS AG

At June 30, 2014, the Fund had the following open forward foreign currency exchange contracts:

Contracts to Deliver

In Exchange For

Settlement Date

Unrealized Depreciation ($)

Counterparty

EUR

593,00

USD

804,674

7/25/2014

(7,405

)

JPMorgan Chase Securities, Inc.

Currency Abbreviations

EUR Euro

USD United States Dollar

For information on the Fund's policy and additional disclosures regarding credit default swap contracts and forward foreign currency exchange contracts, please refer to Note B in the accompanying Notes to Financial Statements.

Fair Value Measurements

Assets	Level 1		Level 2			Level 3		Total

Fixed Income Investments (j)
Corporate Bonds	$	—	$	143,817,721		$	0	$	143,817,721
Government & Agency Obligation		—		1,060,828			—		1,060,828
Loan Participations and Assignments		—		2,081,680			0		2,081,680
Convertible Bonds		—		150,981			2,613,106		2,764,087
Preferred Security		—		1,027,175			—		1,027,175
Common Stocks (j)		—		—			64,591		64,591
Preferred Stocks		—		1,142,541			—		1,142,541
Warrants (j)		—		—			98,785		98,785
Short-Term Investments (j)		18,525,615		—			—		18,525,615
Derivatives (k)
Credit Default Swap Contracts		—		1,001,869			—		1,001,869
Total	$	18,525,615	$	150,282,795		$	2,776,482	$	171,584,892
Liabilities	Level 1		Level 2			Level 3		Total

Derivatives (k)
Credit Default Swap Contracts	$	—	$	(1,899	)	$	—	$	(1,899	)
Forward Foreign Currency Exchange Contracts		—		(7,405	)		—		(7,405	)
Total	$	—	$	(9,304	)	$	—	$	(9,304	)

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(j) See Investment Portfolio for additional detailed categorizations.

(k) Derivatives include unrealized appreciation (depreciation) on credit default swap contracts and forward foreign currency exchange contracts.

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:

	Corporate Bonds			Loan Participations and Assignments		Convertible Bonds		Common Stocks			Warrants			Total
Balance as of December 31, 2013	$	0		$	0	$	2,514,085	$	289,546		$	99,821		$	2,903,452
Realized gains (loss)		(965,174	)		—		—		44,875			—			(920,299	)
Change in unrealized appreciation (depreciation)		965,174			—		93,214		(42,629	)		(1,036	)		1,014,723
Amortization of premium/accretion of discount		—			—		5,807		—			—			5,807
Purchases		—			—		—		—			—			—
(Sales)		—			—		—		(227,201	)		—			(227,201	)
Transfer into Level 3		—			—		—		—			—			—
Balance as of June 30, 2014	$	0		$	0	$	2,613,106	$	64,591		$	98,785		$	2,776,482
Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2014	$	0		$	0	$	93,214	$	2,246		$	(1,036	)	$	94,424

Quantitative Disclosure About Significant Unobservable Inputs
Asset Class	Fair Value at 6/30/14		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Common Stocks
Consumer Discretionary	$	44,160	Asset Valuation	Book Value of Equity	$3,753 per share
Consumer Discretionary	$	44,160	Asset Valuation	Discount for lack of marketability		20	%
	$	0	Asset Valuation	Book Value of Equity		0	%
Industrials	$	0	Asset Valuation	Book Value of Equity		0	%
Materials	$	20,431	Market Approach	EV/EBITDA Multiple		6.37
				Discount to public comparables		20	%
				Discount for lack of marketability		25	%
Warrants
Materials	$	7,077	Black Scholes Option Pricing Model	Implied Volatility		25.6	%
	$	7,077	Black Scholes Option Pricing Model	Discount for lack of marketability		20	%
	$	91,708	Market Approach	EV/EBITDA Multiple		6.37
				Discount to public comparables		20	%
				Discount for lack of marketability		25	%
Loan Participations & Assignments
Senior Loans	$	0	Market Approach	Evaluated Price		0
Corporate Bonds
Finance	$	0	Asset Valuation	Book Value		0
Convertible Bonds
Consumer Discretionary	$	2,613,106	Convertible Bond Methodology	EV/EBITDA Multiple		6.37
				Discount to public comparable		20	%
				Discount for lack of marketability		25	%

Qualitative Disclosure About Unobservable Inputs

Significant unobservable inputs developed by the Pricing Committee and used in the fair value measurement of the Fund’s equity investments include enterprise value (EV) to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio with a discount for lack of marketability. A significant change in the EV to EBITDA ratio may result in a significant change in the fair value measurement, while a significant change in the discount for lack of marketability is unlikely to result in a materially higher or lower fair value measurement.

Significant unobservable inputs developed by the Pricing Committee and used in the fair value measurement of the Fund’s fixed income investments include the convertible bond methodology. A significant change in the EV to EBITDA ratio could have a material change on the fair value measurement, while a significant change in the discount for lack of marketability is unlikely to result in a materially higher or lower fair value measurement. Generally, there is an inverse relationship between the EV to EBITDA ratio and the fair value measurement of a fixed income investment.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $144,680,486) — including $8,762,305 of securities loaned	$	152,057,408
Investment in Daily Assets Fund Institutional (cost $9,098,382)*		9,098,382
Investment in Central Cash Management Fund (cost $9,427,233)		9,427,233
Total investments in securities, at value (cost $163,206,101)		170,583,023
Cash		21,804
Foreign currency, at value (cost $637)		642
Receivable for investments sold		755,066
Receivable for investments sold — when-issued/delayed delivery security		268,138
Receivable for Fund shares sold		7,923
Interest receivable		2,389,685
Unrealized appreciation on bilateral swap contracts		623,067
Upfront payments paid on bilateral swap contracts		648,594
Other assets		1,017
Total assets		175,298,959
Liabilities
Payable upon return of securities loaned		9,098,382
Payable for investments purchased		877,476
Payable for investments purchased — when-issued/delayed delivery security		1,453,881
Payable for Fund shares redeemed		276,898
Unrealized depreciation on bilateral swap contracts		1,899
Unrealized depreciation on forward foreign currency exchange contracts		7,405
Upfront payments received on swap contracts		61,253
Accrued management fee		67,242
Payable for variation margin on centrally cleared swaps		12,788
Accrued Trustees' fees		9
Other accrued expenses and payables		100,655
Total liabilities		11,957,888
Net assets, at value	$	163,341,071
Net Assets Consist of
Undistributed net investment income		3,054,494
Net unrealized appreciation (depreciation) on: Investments		7,376,922
Swap contracts		999,970
Foreign currency		(7,360	)
Accumulated net realized gain (loss)		(40,241,113	)
Paid-in capital		192,158,158
Net assets, at value	$	163,341,071
Class A Net Asset Value, offering and redemption price per share ($160,221,247 ÷ 23,447,650 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	6.83
Class B Net Asset Value, offering and redemption price per share ($3,119,824 ÷ 453,335 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	6.88

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Interest	$	4,716,740
Dividends		35,730
Income distributions — Central Cash Management Fund		3,743
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		18,254
Total income		4,774,467
Expenses: Management fee		407,316
Administration fee		81,463
Distribution service fee (Class B)		1,741
Recordkeeping fees (Class B)		954
Services to shareholders		892
Custodian fee		15,585
Professional fees		44,391
Reports to shareholders		20,732
Trustees' fees and expenses		4,305
Other		21,526
Total expenses before expense reductions		598,905
Expense reductions		(10,629	)
Total expenses after expense reductions		588,276
Net investment income (loss)		4,186,191
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		421,661
Swap contracts		487,614
Foreign currency		6,059
		915,334
Change in net unrealized appreciation (depreciation) on: Investments		3,133,624
Swap contracts		(15,161	)
Foreign currency		(4,568	)
		3,113,895
Net gain (loss)		4,029,229
Net increase (decrease) in net assets resulting from operations	$	8,215,420

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	4,186,191		$	9,500,105
Operations: Net investment income	$	4,186,191		$	9,500,105
Net realized gain (loss)		915,334			3,917,069
Change in net unrealized appreciation (depreciation)		3,113,895			(804,655	)
Net increase (decrease) in net assets resulting from operations		8,215,420			12,612,519
Distributions to shareholders from: Net investment income: Class A		(10,554,088	)		(12,380,542	)
Class B		(119,183	)		(6,491	)
Total distributions		(10,673,271	)		(12,387,033	)
Fund share transactions: Class A Proceeds from shares sold		4,131,186			37,136,318
Reinvestment of distributions		10,554,088			12,380,542
Payments for shares redeemed		(17,083,757	)		(63,021,014	)
Net increase (decrease) in net assets from Class A share transactions		(2,398,483	)		(13,504,154	)
Class B Proceeds from shares sold		3,059,469			674,207
Reinvestment of distributions		119,183			6,491
Payments for shares redeemed		(333,255	)		(452,620	)
Net increase (decrease) in net assets from Class B share transactions		2,845,397			228,078
Increase (decrease) in net assets		(2,010,937	)		(13,050,590	)
Net assets at beginning of period		165,352,008			178,402,598
Net assets at end of period (including undistributed net investment income of $3,054,494 and $9,541,574, respectively)	$	163,341,071		$	165,352,008
Other Information
Class A Shares outstanding at beginning of period		23,727,813			25,717,511
Shares sold		590,798			5,481,259
Shares issued to shareholders in reinvestment of distributions		1,575,237			1,834,154
Shares redeemed		(2,446,198	)		(9,305,111	)
Net increase (decrease) in Class A shares		(280,163	)		(1,989,698	)
Shares outstanding at end of period		23,447,650			23,727,813
Class B Shares outstanding at beginning of period		46,339			13,214
Shares sold		436,688			98,852
Shares issued to shareholders in reinvestment of distributions		17,657			955
Shares redeemed		(47,349	)		(66,682	)
Net increase (decrease) in Class B shares		406,996			33,125
Shares outstanding at end of period		453,335			46,339

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	6.96		$	6.93		$	6.56		$	6.90		$	6.55		$	5.30
Income (loss) from investment operations: Net investment incomea		.18			.39			.45			.51			.52			.51
Net realized and unrealized gain (loss)		.16			.14			.48			(.24	)		.36			1.40
Total from investment operations		.34			.53			.93			.27			.88			1.91
Less distributions from: Net investment income		(.47	)		(.50	)		(.56	)		(.61	)		(.53	)		(.66	)
Net asset value, end of period	$	6.83		$	6.96		$	6.93		$	6.56		$	6.90		$	6.55
Total Return (%)		5.01	b**		7.91	b		14.91			3.84			14.00			39.99
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		160			165			178			169			195			197
Ratio of expenses before expense reductions (%)		.73	*		.73			.72			.72			.72			.67
Ratio of expenses after expense reductions (%)		.72	*		.72			.72			.72			.72			.67
Ratio of net investment income (%)		5.14	*		5.69			6.68			7.59			7.90			8.81
Portfolio turnover rate (%)		45	**		58			58			59			93			66
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

				Years Ended December 31,
Class B	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	6.99		$	6.97		$	6.59		$	6.93		$	6.58		$	5.31
Income (loss) from investment operations: Net investment incomea		.17			.36			.43			.49			.50			.49
Net realized and unrealized gain (loss)		.17			.15			.49			(.24	)		.36			1.42
Total from investment operations		.34			.51			.92			.25			.86			1.91
Less distributions from: Net investment income		(.45	)		(.49	)		(.54	)		(.59	)		(.51	)		(.64	)
Net asset value, end of period	$	6.88		$	6.99		$	6.97		$	6.59		$	6.93		$	6.58
Total Return (%)		5.04	b**		7.44	b		14.70	b		3.57			13.64			39.64
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		3			.3			.1			.1			.1			.2
Ratio of expenses before expense reductions (%)		1.12	*		1.10			.99			.99			.99			.94
Ratio of expenses after expense reductions (%)		.97	*		.97			.99			.99			.99			.94
Ratio of net investment income (%)		4.97	*		5.29			6.42			7.33			7.63			8.54
Portfolio turnover rate (%)		45	**		58			58			59			93			66
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche High Income VIP (formerly DWS High Income VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable Rule 12b-1 fee and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.

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.

Debt securities and loan participations and assignments are valued at prices supplied by independent pricing services approved by the Fund's Board. If the pricing services are unable to provide valuations, debt securities are valued at the average of most recent reliable bid quotation or evaluated price, as applicable, obtained from broker-dealers and loan the participations and assignments are valued at the mean of the most recent bid and ask quotations or evaluated prices, as applicable, obtained from one or more broker-dealers. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. These securities are generally categorized as Level 2.

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.

Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

Loan Participations and Assignments. Loan Participations and Assignments are portions of loans originated by banks and sold in pieces to investors. These floating-rate loans ("Loans") in which the Fund invests are arranged between the borrower and one or more financial institutions ("Lenders"). These Loans may take the form of Senior Loans, which are corporate obligations often issued in connection with recapitalizations, acquisitions, leveraged buy outs and refinancing. The Fund invests in such Loans in the form of participations in Loans ("Participations") or assignments of all or a portion of Loans from third parties ("Assignments"). Participations typically result in the Fund having a contractual relationship with only the Lender, not with the borrower. The Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In connection with purchasing Participations, the Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, or any rights of set off against the borrower, and the Fund will not benefit directly from any collateral supporting the Loan in which it has purchased the Participation. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. Assignments typically result in the Fund having a direct contractual relationship with the borrower, and the Fund may enforce compliance by the borrower with the terms of the loan agreement. Loans held by the Fund are generally in the form of Assignments, but the Fund may also invest in Participations. All Loans involve interest rate risk, liquidity risk and credit risk, including the potential default or insolvency of the borrower.

When-Issued/Delayed Delivery Securities. The Fund may purchase securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into a purchase transaction it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.

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

At December 31, 2013, the Fund had a net tax basis capital loss carryforward of approximately $41,157,000, including $39,235,000 of pre-enactment losses, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2014 ($3,844,000), December 31, 2015 ($858,000), December 31, 2016 ($17,301,000) and December 31, 2017 ($17,232,000), the respective expiration dates, whichever occurs first; and approximately $1,922,000 of post-enactment long-term losses, which may be applied against realized net taxable capital gains indefinitely.

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

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 ex-dividend date. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes for the Fund, with the exception of securities in default of principal.

B. Derivative Instruments

Credit default swaps are agreements between a buyer and a seller of protection against predefined credit events for the reference entity. The Fund may enter into credit default swaps to gain exposure to an underlying issuer's credit quality characteristics without directly investing in that issuer or to hedge against the risk of a credit event on debt securities. As a seller of a credit default swap, the Fund is required to pay the par (or other agreed-upon) value of the referenced entity to the counterparty with the occurrence of a credit event by a third party, such as a U.S. or foreign corporate issuer, on the reference entity, which would likely result in a loss to the Fund. In return, the Fund receives from the counterparty a periodic stream of payments over the term of the swap provided that no credit event has occurred. If no credit event occurs, the Fund keeps the stream of payments with no payment obligations. The Fund may also buy credit default swaps, in which case the Fund functions as the counterparty referenced above. This involves the risk that the swap may expire worthless. It also involves counterparty risk that the seller may fail to satisfy its payment obligations to the Fund with the occurrence of a credit event. When the Fund sells a credit default swap, it will cover its commitment. This may be achieved by, among other methods, maintaining cash or liquid assets equal to the aggregate notional value of the reference entities for all outstanding credit default swaps sold by the Fund. For the six months ended June 30, 2014, the Fund entered into credit default swap agreements to gain exposure to the underlying issuer's credit quality characteristics.

A summary of the open credit default swap contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the Fund's investment in credit default swap contracts sold had a total notional value generally indicative of a range from $23,615,000 to $26,735,000.

Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the six months ended June 30, 2014, the Fund entered into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign currency denominated portfolio holdings and to facilitate transactions in foreign currency denominated securities.

A summary of the open forward currency contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the Fund's investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $805,000 to $1,634,000.

Asset Derivative	Swap Contracts
Credit Contract (a)	$	1,001,869
The above derivative is located in the following Statement of Assets and Liabilities account: (a) Unrealized appreciation on swap contracts. Unsettled variation margin for centrally cleared swaps is disclosed separately within the Statement of Assets and Liabilities.

Liability Derivative	Forward Contracts			Swap Contracts			Total
Credit Contracts (a)	$	—		$	(1,899	)	$	(1,899	)
Foreign Exchange Contracts (b)		(7,405	)		—			(7,405	)
	$	(7,405	)	$	(1,899	)	$	(9,304	)
Each of the above derivatives is located in the following Statement of Assets and Liabilities account: (a) Unrealized depreciation on swap contracts (b) Unrealized appreciation on forward foreign currency exchange contracts

Realized Gain (Loss)	Forward Contracts		Swap Contracts		Total
Credit Contracts (a)	$	—	$	487,614	$	487,614
Foreign Exchange Contracts (b)		14,619		—		14,619
	$	14,619	$	487,614	$	502,233
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Net realized gain (loss) from swap contracts (b) Net realized gain (loss) from foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)

Change in Net Unrealized Appreciation (Depreciation)	Forward Contracts			Swap Contracts			Total
Credit Contracts (a)	$	—		$	(15,161	)	$	(15,161	)
Foreign Exchange Contracts (b)		(4,552	)		—			(4,552	)
	$	(4,552	)	$	(15,161	)	$	(19,713	)
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Change in net unrealized appreciation (depreciation) on swap contracts (b) Change in net unrealized appreciation (depreciation) on foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)

Counterparty	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Collateral Received		Net Amount of Derivative Assets
Bank of America	$	135,327	$	—		$	—	$	135,327
Barclays Bank PLC		65,704		(1,899	)		—		63,805
Credit Suisse		98,721		—			—		98,721
Goldman Sachs & Co.		163,396		—			—		163,396
JPMorgan Chase Securities, Inc.		115,596		(7,405	)		—		108,191
UBS AG		44,323		—			—		44,323
	$	623,067	$	(9,304	)	$	—	$	613,763
Counterparty	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Collateral Pledged		Net Amount of Derivative Liabilities
Barclays Bank PLC	$	1,899	$	(1,899	)	$	—	$	—
JPMorgan Chase Securities, Inc.		7,405		(7,405	)		—		—
	$	9,304	$	(9,304	)	$	—	$	—

C. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments and U.S. Treasury securities) aggregated $68,556,490 and $60,116,213, respectively. Purchases and sales of U.S. Treasury obligations aggregated $1,062,179 and $5,838,862, respectively.

D. Related Parties

First $250 million	.500	%
Next $750 million	.470	%
Next $1.5 billion	.450	%
Next $2.5 billion	.430	%
Next $2.5 billion	.400	%
Next $2.5 billion	.380	%
Next $2.5 billion	.360	%
Over $12.5 billion	.340	%

For the period from January 1, 2014 through September 30, 2014, the Advisor has contractually agreed to waive all or a portion of its fees and/or reimburse certain operating expenses of the Fund to the extent necessary to maintain the operating expenses (excluding certain expenses such as extraordinary expenses, taxes, brokerage and interest) of each class as follows:

Class A	.72%
Class B	.97%

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed for each class are as follows:

Class A	$	9,583
Class B		1,046
	$	10,629

Services to Shareholders	Total Aggregated		Unpaid at June 30, 2014
Class A	$	147	$	72
Class B		20		5
	$	167	$	77

Security Lending Fees. Deutsche Bank AG serves as lending agent for the Fund. For the six months ended June 30, 2014, the Fund incurred lending agent fees to Deutsche Bank AG for the amount of $1,608.

E. Investing in High-Yield Securities

The Fund's performance could be hurt if a security declines in credit quality or goes into default, or if an issuer does not make timely payments of interest or principal. Because the issuers of high-yield debt securities or junk bonds (debt securities rated below the fourth-highest category) may be in uncertain financial health, the risk of loss from default by the issuer is significantly greater. Prices and yields of high-yield securities will fluctuate over time and, during periods of economic uncertainty, volatility of high-yield securities may adversely affect a fund's net asset value. Because the Fund may invest in securities not paying current interest or in securities already in default, these risks may be more pronounced.

F. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 61% and 29%. One participating insurance company was the owner of record of 10% or more of the total outstanding Class B shares of the Fund, owning 97%.

G. Line of Credit

H. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges, redemption fees and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,050.10	$	1,050.40
Expenses Paid per $1,000*	$	3.66	$	4.93
Hypothetical 5% Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,021.22	$	1.019.98
Expenses Paid per $1,000*	$	3.61	$	4.86

Annualized Expense Ratios	Class A		Class B
Deutsche Variable Series II — Deutsche High Income VIP	.72%		.97%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS High Income VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

—The Independent Trustees regularly meet privately with their independent counsel to discuss contract review and other matters. In addition, the Independent Trustees were also advised by the Fee Consultant in the course of their review of the Fund's contractual arrangements and considered a comprehensive report prepared by the Fee Consultant in connection with their deliberations.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 2nd quartile, 3rd quartile and 3rd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one-year period and has underperformed its benchmark in the three- and five-year periods ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be equal to the median of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Notes

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2HI-3 (R-028385-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Large Cap Value VIP

(formerly DWS Large Cap Value VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

9 Statement of Assets and Liabilities

9 Statement of Operations

10 Statement of Changes in Net Assets

11 Financial Highlights

13 Notes to Financial Statements

17 Information About Your Fund's Expenses

18 Proxy Voting

19 Advisory Agreement Board Considerations and Fee Evaluation

Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. The Fund may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 are 0.78% and 1.09% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.

Growth of an Assumed $10,000 Investment in Deutsche Large Cap Value VIP
		The Russell 1000® Value Index is an unmanaged index that consists of those stocks in the Russell 1000® Index with less-than-average growth orientation. The Russell 1000® Index is an unmanaged price-only index of the 1,000 largest capitalized companies that are domiciled in the U.S. and whose common stocks are traded. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Large Cap Value VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,753		$	12,293		$	14,499		$	20,017		$	19,495
Class A	Average annual total return		7.53	%		22.93	%		13.18	%		14.89	%		6.90	%
Russell 1000® Value Index	Growth of $10,000	$	10,828		$	12,381		$	15,982		$	24,095		$	21,641
Russell 1000® Value Index	Average annual total return		8.28	%		23.81	%		16.92	%		19.23	%		8.03	%
Deutsche Large Cap Value VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class B	Growth of $10,000	$	10,731		$	12,257		$	14,362		$	19,716		$	18,842
Class B	Average annual total return		7.31	%		22.57	%		12.83	%		14.54	%		6.54	%
Russell 1000® Value Index	Growth of $10,000	$	10,828		$	12,381		$	15,982		$	24,095		$	21,641
Russell 1000® Value Index	Average annual total return		8.28	%		23.81	%		16.92	%		19.23	%		8.03	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Common Stocks	96%	99%
Cash Equivalents	4%	1%
	100%	100%

Sector Diversification (As a % of Common Stocks)	6/30/14	12/31/13

Financials	22%	24%
Health Care	18%	14%
Energy	16%	14%
Information Technology	13%	11%
Consumer Staples	8%	11%
Consumer Discretionary	6%	8%
Industrials	6%	7%
Utilities	6%	5%
Telecommunication Services	3%	2%
Materials	2%	4%
	100%	100%

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

Thomas Schuessler, PhD

Lead Portfolio Manager

Peter Steffen, CFA

Oliver Pfeil, PhD

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Common Stocks 96.4%
Consumer Discretionary 6.3%
Automobiles 0.8%
Ford Motor Co.		200,000		3,448,000
Hotels, Restaurants & Leisure 0.9%
McDonald's Corp.		40,000		4,029,600
Household Durables 0.9%
Jarden Corp.*		30,000		1,780,500
MDC Holdings, Inc. (a)		75,000		2,271,750
				4,052,250
Media 3.4%
Comcast Corp. "A"		170,000		9,125,600
News Corp. "A"*		100,000		1,794,000
Time Warner, Inc.		30,000		2,107,500
Walt Disney Co.		27,500		2,357,850
				15,384,950
Textiles, Apparel & Luxury Goods 0.3%
Columbia Sportswear Co.		13,615		1,125,280
Consumer Staples 7.6%
Beverages 1.3%
PepsiCo, Inc.		67,500		6,030,450
Food & Staples Retailing 2.0%
CVS Caremark Corp.		55,000		4,145,350
Sysco Corp. (a)		50,000		1,872,500
Walgreen Co.		37,500		2,779,875
				8,797,725
Food Products 1.0%
Kellogg Co.		40,000		2,628,000
Tyson Foods, Inc. "A"		45,000		1,689,300
				4,317,300
Household Products 2.5%
Energizer Holdings, Inc.		20,000		2,440,600
Procter & Gamble Co.		112,500		8,841,375
				11,281,975
Tobacco 0.8%
Altria Group, Inc.		90,000		3,774,600
Energy 15.4%
Energy Equipment & Services 1.1%
Diamond Offshore Drilling, Inc. (a)		50,000		2,481,500
National Oilwell Varco, Inc.		32,500		2,676,375
				5,157,875
Oil, Gas & Consumable Fuels 14.3%
Apache Corp.		55,000		5,534,100
ARC Resources Ltd. (a)		49,896		1,519,255
Canadian Oil Sands Ltd.		180,000		4,078,909
Chevron Corp.		82,500		10,770,375
ConocoPhillips		42,500		3,643,525
Devon Energy Corp.		40,000		3,176,000
Exxon Mobil Corp.		165,000		16,612,200
Hess Corp. (a)		25,000		2,472,250
Occidental Petroleum Corp.		87,500		8,980,125
Parkland Fuel Corp. (a)		57,100		1,100,207
Phillips 66		35,000		2,815,050
Suncor Energy, Inc.		75,000		3,197,250
				63,899,246
	Shares		Value ($)

Financials 20.9%
Banks 10.8%
Bank of America Corp.		350,000		5,379,500
Canadian Imperial Bank of Commerce (a)		40,000		3,639,942
Citigroup, Inc.		200,000		9,420,000
JPMorgan Chase & Co.		200,000		11,524,000
PNC Financial Services Group, Inc.		90,000		8,014,500
U.S. Bancorp.		75,000		3,249,000
Wells Fargo & Co.		135,000		7,095,600
				48,322,542
Capital Markets 2.4%
Bank of New York Mellon Corp.		70,000		2,623,600
BlackRock, Inc.		7,000		2,237,200
Franklin Resources, Inc.		62,500		3,615,000
Legg Mason, Inc. (a)		47,500		2,437,225
				10,913,025
Consumer Finance 1.3%
Capital One Financial Corp.		70,000		5,782,000
Insurance 6.0%
ACE Ltd.		20,000		2,074,000
Allstate Corp.		47,500		2,789,200
American International Group, Inc.		52,500		2,865,450
Fidelity National Financial, Inc. "A"		65,000		2,129,400
First American Financial Corp.		77,500		2,153,725
PartnerRe Ltd.		27,500		3,003,275
Prudential Financial, Inc.		75,000		6,657,750
The Travelers Companies, Inc.		42,500		3,997,975
Unum Group		29,260		1,017,078
				26,687,853
Real Estate Management & Development 0.4%
Brookfield Asset Management, Inc. "A" (a)		40,000		1,760,800
Health Care 17.4%
Biotechnology 1.1%
Amgen, Inc.		40,000		4,734,800
Health Care Equipment & Supplies 2.9%
Abbott Laboratories		50,000		2,045,000
C.R. Bard, Inc.		35,000		5,005,350
Medtronic, Inc.		95,000		6,057,200
				13,107,550
Health Care Providers & Services 3.7%
Aetna, Inc.		27,500		2,229,700
Cardinal Health, Inc.		57,500		3,942,200
UnitedHealth Group, Inc.		35,000		2,861,250
WellPoint, Inc.		70,000		7,532,700
				16,565,850
Life Sciences Tools & Services 0.6%
Agilent Technologies, Inc.		45,000		2,584,800
Pharmaceuticals 9.1%
Eli Lilly & Co.		80,000		4,973,600
Johnson & Johnson		82,500		8,631,150
Merck & Co., Inc.		155,000		8,966,750
Pfizer, Inc.		517,500		15,359,400
Questcor Pharmaceuticals, Inc. (a)		32,500		3,005,925
				40,936,825
	Shares		Value ($)

Industrials 6.2%
Aerospace & Defense 0.8%
Raytheon Co.		37,500		3,459,375
Airlines 0.5%
Southwest Airlines Co. (a)		80,000		2,148,800
Commercial Services & Supplies 0.8%
ABM Industries, Inc.		42,877		1,156,821
Republic Services, Inc.		65,000		2,468,050
				3,624,871
Industrial Conglomerates 3.2%
Danaher Corp.		35,000		2,755,550
General Electric Co.		450,000		11,826,000
				14,581,550
Machinery 0.9%
AGCO Corp.		70,000		3,935,400
Information Technology 12.1%
Communications Equipment 2.2%
Brocade Communications Systems, Inc.		137,500		1,265,000
Cisco Systems, Inc.		350,000		8,697,500
				9,962,500
Electronic Equipment, Instruments & Components 0.8%
Tech Data Corp.*		56,514		3,533,255
IT Services 0.4%
Xerox Corp.		125,000		1,555,000
Semiconductors & Semiconductor Equipment 2.3%
Analog Devices, Inc.		60,000		3,244,200
Intel Corp.		150,000		4,635,000
Texas Instruments, Inc.		55,000		2,628,450
				10,507,650
Software 3.5%
Activision Blizzard, Inc.		125,000		2,787,500
Microsoft Corp.		160,000		6,672,000
Oracle Corp.		150,000		6,079,500
				15,539,000
Technology Hardware, Storage & Peripherals 2.9%
Apple, Inc.		49,000		4,553,570
EMC Corp.		82,500		2,173,050
Hewlett-Packard Co.		107,500		3,620,600
Western Digital Corp.		30,000		2,769,000
				13,116,220
Materials 1.8%
Chemicals 1.5%
Celanese Corp. "A"		35,000		2,249,800
CF Industries Holdings, Inc.		7,500		1,803,975
LyondellBasell Industries NV "A"		25,000		2,441,250
				6,495,025
	Shares		Value ($)

Paper & Forest Products 0.3%
Western Forest Products, Inc.		675,000		1,410,665
Telecommunication Services 3.2%
Diversified Telecommunication Services
AT&T, Inc.		140,000		4,950,400
BCE, Inc.		60,460		2,742,466
Verizon Communications, Inc.		140,000		6,850,200
				14,543,066
Utilities 5.5%
Electric Utilities 3.0%
American Electric Power Co., Inc.		42,500		2,370,225
Duke Energy Corp.		27,500		2,040,225
Entergy Corp.		25,000		2,052,250
Pinnacle West Capital Corp.		30,000		1,735,200
PPL Corp.		62,500		2,220,625
Southern Co. (a)		65,000		2,949,700
				13,368,225
Gas Utilities 0.8%
UGI Corp.		70,000		3,535,000
Independent Power & Renewable Electricity Producers 0.5%
AES Corp.		150,000		2,332,500
Multi-Utilities 1.2%
Public Service Enterprise Group, Inc.		80,000		3,263,200
Wisconsin Energy Corp.		50,000		2,346,000
				5,609,200
Total Common Stocks (Cost $328,855,658)				431,952,598

Securities Lending Collateral 4.6%
Daily Assets Fund Institutional, 0.08% (b) (c) (Cost $20,493,704)		20,493,704		20,493,704

Cash Equivalents 4.3%
Central Cash Management Fund, 0.06% (b) (Cost $19,448,993)		19,448,993		19,448,993

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $368,798,355)†		105.3			471,895,295
Other Assets and Liabilities, Net		(5.3	)		(23,749,392	)
Net Assets		100.0			448,145,903

* Non-income producing security.

† The cost for federal income tax purposes was $369,960,994. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $101,934,301. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $103,192,767 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $1,258,466.

(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(c) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

Fair Value Measurements

Assets	Level 1		Level 2		Level 3		Total

Common Stocks (d)	$	431,952,598	$	—	$	—	$	431,952,598
Short-Term Investments		39,942,697		—		—		39,942,697
Total	$	471,895,295	$	—	$	—	$	471,895,295

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(d) See Investment Portfolio for additional detailed categorizations.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $328,855,658) — including $19,964,910 of securities loaned	$	431,952,598
Investment in Daily Assets Fund Institutional (cost $20,493,704)*		20,493,704
Investment in Central Cash Management Fund (cost $19,448,993)		19,448,993
Total investments in securities, at value (cost $368,798,355)		471,895,295
Cash		47,441
Foreign currency, at value (cost $50,531)		52,013
Receivable for investments sold		32,664,997
Receivable for Fund shares sold		47,594
Dividends receivable		553,196
Interest receivable		23,110
Foreign taxes recoverable		3,840
Other assets		2,527
Total assets		505,290,013
Liabilities
Payable upon return of securities loaned		20,493,704
Payable for investments purchased		35,766,063
Payable for Fund shares redeemed		567,426
Accrued management fee		218,519
Accrued Trustees' fees		994
Other accrued expenses and payables		97,404
Total liabilities		57,144,110
Net assets, at value	$	448,145,903
Net Assets Consist of
Undistributed net investment income		3,485,826
Net unrealized appreciation (depreciation) on: Investments		103,096,940
Foreign currency		2,641
Accumulated net realized gain (loss)		(57,506,818	)
Paid-in capital		399,067,314
Net assets, at value	$	448,145,903
Class A Net Asset Value, offering and redemption price per share ($442,899,036 ÷ 26,242,841 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	16.88
Class B Net Asset Value, offering and redemption price per share ($5,246,867 ÷ 310,056 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	16.92

* Represents collateral on securities loaned.

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

Statement of Operations

for the year ended June 30, 2014 (Unaudited)
Investment Income
Income: Dividends (net of foreign taxes withheld of $48,860)	$	5,095,765
Income distributions — Central Cash Management Fund		3,858
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		81,697
Total income		5,181,320
Expenses: Management fee		1,379,701
Administration fee		215,793
Services to shareholders		2,903
Record keeping fees (Class B)		1,345
Distribution and service fee (Class B)		5,900
Custodian fee		7,364
Professional fees		35,241
Reports to shareholders		19,346
Trustees' fees and expenses		9,039
Other		8,345
Total expenses before expense reductions		1,684,977
Expense reductions		(102,370	)
Total expenses after expense reductions		1,582,607
Net investment income	$	3,598,713
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		40,359,549
Foreign currency		23,672
		40,383,221
Change in net unrealized appreciation (depreciation) on: Investments		(12,384,413	)
Foreign currency		1,924
		(12,382,489	)
Net gain (loss)		28,000,732
Net increase (decrease) in net assets resulting from operations		31,599,445

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	3,598,713		$	7,492,381
Operations: Net investment income	$	3,598,713		$	7,492,381
Net realized gain (loss)		40,383,221			43,142,013
Change in net unrealized appreciation (depreciation)		(12,382,489	)		59,914,889
Net increase (decrease) in net assets resulting from operations		31,599,445			110,549,283
Distributions to shareholders from: Net investment income: Class A		(7,350,279	)		(8,048,782	)
Class B		(66,263	)		(66,664	)
Total distributions		(7,416,542	)		(8,115,446	)
Fund share transactions: Class A Proceeds from shares sold		5,906,580			7,515,770
Reinvestment of distributions		7,350,279			8,048,782
Payments for shares redeemed		(26,691,245	)		(61,510,110	)
Net increase (decrease) in net assets from Class A share transactions		(13,434,386	)		(45,945,558	)
Class B Proceeds from shares sold		625,828			822,748
Reinvestment of distributions		66,263			66,664
Payments for shares redeemed		(357,644	)		(844,581	)
Net increase (decrease) in net assets from Class B share transactions		334,447			44,831
Increase (decrease) in net assets		11,082,964			56,533,110
Net assets at beginning of period		437,062,939			380,529,829
Net assets at end of period (including undistributed net investment income of $3,485,826 and $7,303,655, respectively)	$	448,145,903		$	437,062,939
Other Information
Class A Shares outstanding at beginning of period		27,072,074			30,284,545
Shares sold		367,175			520,949
Shares issued to shareholders in reinvestment of distributions		455,690			590,520
Shares redeemed		(1,652,098	)		(4,323,940	)
Net increase (decrease) in Class A shares		(829,233	)		(3,212,471	)
Shares outstanding at end of period		26,242,841			27,072,074
Class B Shares outstanding at beginning of period		289,672			286,965
Shares sold		38,271			55,598
Shares issued to shareholders in reinvestment of distributions		4,095			4,877
Shares redeemed		(21,982	)		(57,768	)
Net increase (decrease) in Class B shares		20,384			2,707
Shares outstanding at end of period		310,056			289,672

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	15.97		$	12.45		$	11.56		$	11.80		$	10.86		$	8.92
Income (loss) from investment operations: Net investment income (loss)a		.13			.26			.25			.25			.23			.21
Net realized and unrealized gain (loss)		1.06			3.54			.87			(.24	)		.93			1.97
Total from investment operations		1.19			3.80			1.12			.01			1.16			2.18
Less distributions from: Net investment income		(.28	)		(.28	)		(.23	)		(.25	)		(.22	)		(.24	)
Total distributions		(.28	)		(.28	)		(.23	)		(.25	)		(.22	)		(.24	)
Net asset value, end of period	$	16.88		$	15.97		$	12.45		$	11.56		$	11.80		$	10.86
Total Return (%)		7.53	b**		30.89	b		9.79	b		(.07	)		10.77			25.37
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		443			432			377			396			206			214
Ratio of expenses before expense reductions (%)		.78	*		.78			.78			.79			.82			.76
Ratio of expenses after expense reductions (%)		.73	*		.74			.77			.79			.82			.76
Ratio of net investment income (loss) (%)		1.67	*		1.82			2.04			2.15			2.13			2.22
Portfolio turnover rate (%)		34	**		54			63			28			32			76
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

				Years Ended December 31,
Class B	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	15.99		$	12.46		$	11.57		$	11.81		$	10.86		$	8.92
Income (loss) from investment operations: Net investment income (loss)a		.11			.22			.21			.22			.20			.19
Net realized and unrealized gain (loss)		1.05			3.55			.88			(.25	)		.93			1.96
Total from investment operations		1.16			3.77			1.09			(.03	)		1.13			2.15
Less distributions from: Net investment income		(.23	)		(.24	)		(.20	)		(.21	)		(.18	)		(.21	)
Total distributions		(.23	)		(.24	)		(.20	)		(.21	)		(.18	)		(.21	)
Net asset value, end of period	$	16.92		$	15.99		$	12.46		$	11.57		$	11.81		$	10.86
Total Return (%)		7.31	b**		30.54	b		9.44	b		(.36	)		10.53			24.86
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		5			5			4			3			1			1
Ratio of expenses before expense reductions (%)		1.09	*		1.09			1.09			1.10			1.11			1.06
Ratio of expenses after expense reductions (%)		1.04	*		1.05			1.08			1.10			1.11			1.06
Ratio of net investment income (loss) (%)		1.36	*		1.52			1.73			1.84			1.84			1.92
Portfolio turnover rate (%)		34	**		54			63			28			32			76
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Large Cap Value VIP (formerly DWS Large Cap Value VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable Rule 12b-1 fee and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.

Equity securities and exchange traded funds ("ETFs") are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities and ETFs are generally categorized as Level 1.

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains the benefits of owning securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

At December 31, 2013, the Fund had a net tax basis capital loss carryforward of approximately $96,728,000 of pre-enactment losses, including approximately $88,212,000 inherited from its merger with an affiliated fund in previous years, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2016 ($88,418,000) and December 31, 2017 ($8,310,000), the respective expiration dates, whichever occurs first, and which may be subject to certain limitations under Section 382–384 of the Internal Revenue Code.

Distribution of Income and Gains. Distributions from net investment income of the Fund, if any, is declared and distributed to shareholders annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, will be distributed to shareholders at least annually. The Fund may also make additional distributions for tax purposes if necessary.

The tax character of current year distributions will be determined at the end of the current fiscal year.

B. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments) aggregated $145,742,150 and $173,459,667, respectively.

C. Related Parties

Under the Investment Management Agreement with the Advisor, the Fund pays a monthly management fee based on the Fund's average daily net assets, computed and accrued daily and payable monthly, at the following annual rates:

First $250 million	.650	%
Next $750 million	.625	%
Next $1.5 billion	.600	%
Next $2.5 billion	.575	%
Next $2.5 billion	.550	%
Next $2.5 billion	.525	%
Next $2.5 billion	.500	%
Over $12.5 billion	.475	%

Class A	.73%
Class B	1.04%

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed for each class are as follows:

Class A	$	101,196
Class B		1,174
	$	102,370

Services to Shareholders	Total Aggregated		Unpaid at June 30, 2014
Class A	$	187	$	92
Class B		117		63
	$	304	$	155

D. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 60% and 26%. Two participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 62% and 13%.

E. Line of Credit

F. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

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

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include contract charges and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,075.30	$	1,073.10
Expenses Paid per $1,000*	$	3.76	$	5.35
Hypothetical 5% Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,021.17	$	1,019.64
Expenses Paid per $1,000*	$	3.66	$	5.21

Annualized Expense Ratios	Class A		Class B
Deutsche Variable Series II — Deutsche Large Cap Value VIP	.73%		1.04%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Large Cap Value VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

— The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Equity Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund's Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 4th quartile of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2012. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board recognized that DIMA has made changes to its investment personnel and processes in recent years in an effort to enhance its investment platform and improve long-term performance across the DWS fund complex.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were higher than the median (3rd quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Notes

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2LCV-3 (R-028386-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Money Market VIP

(formerly DWS Money Market VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

6 Investment Portfolio

10 Statement of Assets and Liabilities

10 Statement of Operations

11 Statement of Changes in Net Assets

12 Financial Highlights

13 Notes to Financial Statements

16 Information About Your Fund's Expenses

17 Other Information

18 Advisory Agreement Board Considerations and Fee Evaluation

An investment in this Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or by any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. The share price of money market funds can fall below the $1.00 share price. You should not rely on or expect the Advisor to enter into support agreements or take other actions to maintain the Fund's $1.00 share price. The credit quality of the Fund's holdings can change rapidly in certain markets, and the default of a single holding could have an adverse impact on the Fund's share price. The Fund's share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets. The actions of a few large investors in the Fund may have a significant adverse effect on the share price of the Fund. See the prospectus for specific details regarding the Fund's risk profile.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

Deutsche Money Market VIP

All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please contact your participating insurance company for the Fund's most recent month-end performance. Performance doesn't reflect charges and fees ("contract charges") associated with the separate account that invests in the Fund or any variable life insurance policy or variable annuity contract for which the Fund is an investment option. These charges and fees will reduce returns. The yield quotation more closely reflects the current earnings of the Fund than the total return quotation.

	7-Day Current Yield
June 30, 2014	0.01%*
December 31, 2013	0.01%*

* The investment advisor has agreed to waive fees/reimburse expenses. Without such fee waivers/expense reimbursements, the 7-day current yield would have been lower.

Yields are historical, will fluctuate and do not guarantee future performance. The 7-day current yield refers to the income paid by the Fund over a 7-day period expressed as an annual percentage rate of the Fund's shares outstanding.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio)	6/30/14	12/31/13

Commercial Paper	54%	50%
Repurchase Agreements	17%	7%
Short-Term Notes	9%	16%
Certificates of Deposit and Bank Notes	9%	15%
Time Deposit	6%	4%
Government & Agency Obligations	5%	8%
	100%	100%

Weighted Average Maturity*	6/30/14	12/31/13

Deutsche Variable Series II — Deutsche Money Market VIP	40 days	43 days
First Tier Retail Money Fund Average	44 days	43 days

* The Fund is compared to its respective iMoneyNet Category: First Tier Retail Money Fund Average — Category includes a widely recognized composite of money market funds that invest in only first tier (highest rating) securities. Portfolio Holdings of First Tier funds include U.S. Treasury, U.S. Other, Repos, Time Deposits, Domestic Bank Obligations, Foreign Bank Obligations, First Tier Commercial Paper, Floating Rate Notes and Asset Backed Commercial Paper.

Weighted average maturity, also known as effective maturity, is the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. In addition, each month, information about the Fund and its portfolio holdings is filed with the SEC on Form N-MFP. The SEC delays the public availability of the information filed on Form N-MFP for 60 days after the end of the reporting period included in the filing. These forms will be available on the SEC's Web site at sec.gov, and they may also be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. The Fund's portfolio holdings are also posted on deutschefunds.com from time to time. Please see the Fund's current prospectus for more information.

Investment Portfolio June 30, 2014 (Unaudited)

	Principal Amount ($)		Value ($)

Certificates of Deposit and Bank Notes 8.8%
Banco del Estado de Chile, 0.24%, 11/4/2014		1,200,000		1,200,000
Bank of America NA, 0.17%, 7/31/2014		1,500,000		1,500,000
Bank of Montreal, 0.17%, 9/10/2014		1,000,000		1,000,000
China Construction Bank Corp., 0.37%, 7/14/2014		1,500,000		1,500,000
DNB Bank ASA, 0.23%, 10/9/2014		1,000,000		1,000,000
DZ Bank AG:
0.25%, 9/10/2014		1,000,000		1,000,000
0.26%, 8/25/2014		1,000,000		1,000,000
0.27%, 11/7/2014		750,000		750,000
Fortis Bank SA, 0.22%, 7/1/2014		2,000,000		2,000,000
Industrial & Commercial Bank of China Ltd., 0.37%, 7/29/2014		750,000		750,000
Natixis, 0.223%, 7/14/2014		850,000		850,000
Nordea Bank Finland PLC, 0.21%, 7/7/2014		1,500,000		1,500,000
Wal-Mart Stores, Inc., 5.319%, 6/1/2015		500,000		523,525
Total Certificates of Deposit and Bank Notes (Cost $14,573,525)				14,573,525

Commercial Paper 53.8%
Issued at Discount** 41.5%
Albion Capital Corp. SA, 0.13%, 7/7/2014		4,000,000		3,999,913
Alpine Securitzation, 144A, 0.02%, 7/1/2014		7,000,000		7,000,000
Apple, Inc., 0.07%, 7/7/2014		500,000		499,994
Bank Nederlandse Gemeenten, 0.255%, 10/20/2014		1,500,000		1,498,821
Bedford Row Funding Corp.:
144A, 0.3%, 4/14/2015		1,000,000		997,608
144A, 0.31%, 10/27/2014		750,000		749,238
144A, 0.32%, 12/17/2014		1,000,000		998,498
BNZ International Funding Ltd., 144A, 0.155%, 7/23/2014		800,000		799,924
Chevron Corp., 144A, 0.12%, 9/16/2014		750,000		749,807
CNPC Finance HK Ltd.:
144A, 0.38%, 8/21/2014		500,000		499,731
144A, 0.4%, 7/2/2014		440,000		439,995
Coca-Cola Co., 0.1%, 8/1/2014		722,000		721,938
Collateralized Commercial Paper Co., LLC, 0.21%, 9/25/2014		1,500,000		1,499,247
Collateralized Commercial Paper II Co., LLC, 144A, 0.2%, 8/25/2014		2,000,000		1,999,389
CPPIB Capital, Inc., 0.3%, 2/11/2015		750,000		748,594
DBS Bank Ltd., 144A, 0.235%, 9/10/2014		1,000,000		999,537
Dexia Credit Local:
0.27%, 9/4/2014		1,000,000		999,512
0.33%, 8/18/2014		1,000,000		999,560
DNB Bank ASA, 0.24%, 10/6/2014		1,750,000		1,748,868
Erste Abwicklungsanstalt:
144A, 0.12%, 7/7/2014		3,000,000		2,999,940
144A, 0.16%, 9/8/2014		1,500,000		1,499,540
144A, 0.16%, 9/18/2014		1,000,000		999,649
	Principal Amount ($)		Value ($)

Gotham Funding Corp., 144A, 0.15%, 7/11/2014		3,000,000		2,999,875
Hannover Funding Co., LLC:
0.18%, 8/4/2014		3,000,000		2,999,490
0.18%, 8/11/2014		500,000		499,897
MetLife Short Term Funding LLC, 144A, 0.2%, 8/6/2014		600,000		599,880
Nordea Bank AB:
0.165%, 7/28/2014		1,000,000		999,876
0.22%, 11/12/2014		500,000		499,591
Old Line Funding LLC, 144A, 0.22%, 9/10/2014		1,500,000		1,499,349
Oversea-Chinese Banking Corp., Ltd., 0.245%, 9/16/2014		2,000,000		1,998,952
Philip Morris International, Inc.:
144A, 0.1%, 7/8/2014		2,000,000		1,999,961
144A, 0.12%, 7/21/2014		500,000		499,967
Regency Markets No. 1 LLC, 144A, 0.12%, 7/3/2014		4,500,000		4,499,970
Siemens Capital Co., LLC, 144A, 0.13%, 9/19/2014		1,000,000		999,711
Sinopec Century Bright Capital Investment Ltd., 0.37%, 7/17/2014		1,000,000		999,836
Skandinaviska Enskilda Banken AB, 0.235%, 9/2/2014		1,500,000		1,499,383
Standard Chartered Bank:
0.28%, 11/3/2014		1,500,000		1,498,542
0.28%, 11/19/2014		1,500,000		1,498,355
Swedbank AB:
0.175%, 8/19/2014		1,000,000		999,762
0.255%, 10/16/2014		1,300,000		1,299,015
Sydney Capital Corp., 144A, 0.19%, 7/24/2014		3,000,000		2,999,636
United Overseas Bank Ltd., 0.26%, 1/5/2015		1,000,000		998,642
Victory Receivables Corp., 144A, 0.17%, 8/5/2014		1,000,000		999,835
Wal-Mart Stores, Inc., 0.1%, 7/28/2014		1,600,000		1,599,880
Walt Disney Co., 0.1%, 7/31/2014		1,000,000		999,917
				68,938,625
Issued at Par 12.3%
ANZ New Zealand International Ltd., 144A, 0.213%*, 1/12/2015		1,300,000		1,300,000
ASB Finance Ltd.:
144A, 0.243%*, 5/22/2015		1,250,000		1,250,000
144A, 0.264%*, 10/9/2014		1,250,000		1,249,976
Atlantic Asset Securitization LLC, 144A, 0.181%*, 8/7/2014		500,000		500,000
Bank of Montreal:
0.181%*, 8/14/2014		1,000,000		999,994
0.22%*, 9/5/2014		1,000,000		1,000,050
Bank of Nova Scotia, 0.28%*, 1/13/2015		800,000		800,000
BNZ International Funding Ltd.:
144A, 0.243%*, 2/2/2015		1,000,000		1,000,000
144A, 0.247%*, 1/20/2015		1,250,000		1,250,000
Caisse Centrale Desjardins, 144A, 0.227%*, 1/26/2015		800,000		799,954
Canadian Imperial Bank of Commerce, 0.223%*, 5/8/2015		500,000		500,000
	Principal Amount ($)		Value ($)

Kells Funding LLC:
144A, 0.223%*, 10/28/2014		1,200,000		1,200,000
144A, 0.23%*, 1/27/2015		1,250,000		1,249,963
144A, 0.233%*, 2/13/2015		2,000,000		2,000,111
Nederlandse Waterschapsbank NV, 144A, 0.265%*, 8/15/2014		800,000		800,000
Old Line Funding LLC, 144A, 0.183%*, 10/10/2014		1,200,000		1,200,000
PNC Bank NA, 0.27%, 9/5/2014		1,000,000		1,000,000
Royal Bank of Canada, 0.27%*, 12/11/2014		1,000,000		1,000,000
Westpac Banking Corp., 144A, 0.225%*, 2/19/2015		1,250,000		1,250,004
				20,350,052
Total Commercial Paper (Cost $89,288,677)				89,288,677

Short-Term Notes* 9.1%
Australia & New Zealand Banking Group Ltd., 144A, 0.327%, 5/18/2015		800,000		800,000
Bank of Nova Scotia:
0.28%, 9/3/2014		1,000,000		1,000,000
0.294%, 6/24/2015		1,000,000		1,000,000
Canadian Imperial Bank of Commerce, 0.34%, 7/17/2015		1,800,000		1,800,000
Commonwealth Bank of Australia, 144A, 0.241%, 7/10/2015		1,200,000		1,200,000
JPMorgan Chase Bank NA, 0.347%, 6/22/2015		1,000,000		1,000,000
Rabobank Nederland NV:
0.265%, 7/23/2014		1,000,000		1,000,000
0.277%, 12/1/2014		1,500,000		1,500,000
0.307%, 7/6/2015		1,500,000		1,500,000
Svenska Handelsbanken AB, 144A, 0.308%, 10/3/2014		1,500,000		1,500,000
Wells Fargo Bank NA:
0.25%, 6/16/2015		1,000,000		1,000,000
0.27%, 12/10/2014		1,000,000		1,000,000
Westpac Banking Corp., 0.231%, 5/11/2015		800,000		800,000
Total Short-Term Notes (Cost $15,100,000)				15,100,000

Time Deposits 6.2%
Citibank NA, 0.08%, 7/2/2014		4,000,000		4,000,000
Credit Agricole Corporate & Investment Bank, 0.07%, 7/1/2014		6,344,418		6,344,418
Total Time Deposits (Cost $10,344,418)				10,344,418

	Principal Amount ($)		Value ($)

Government & Agency Obligations 5.6%
U.S. Government Sponsored Agencies 4.4%
Federal Farm Credit Bank:
0.113%*, 10/29/2014		500,000		500,025
0.133%*, 10/20/2014		1,000,000		1,000,017
Federal Home Loan Mortgage Corp.:
0.068%**, 8/7/2014		2,500,000		2,499,820
0.08%**, 11/26/2014		1,200,000		1,199,606
0.094%**, 10/2/2014		500,000		499,877
0.099%**, 10/24/2014		1,500,000		1,499,521
				7,198,866
U.S. Treasury Obligation 1.2%
U.S. Treasury Note, 0.5%, 8/15/2014		2,000,000		2,000,864
Total Government & Agency Obligations (Cost $9,199,730)				9,199,730

Repurchase Agreements 16.5%
Barclays Capital, 0.07%, dated 6/30/2014, to be repurchased at $7,000,014 on 7/1/2014 (a)		7,000,000		7,000,000
BNP Paribas, 0.08%, dated 6/30/2014, to be repurchased at $8,000,622 on 8/4/2014 (b)		8,000,000		8,000,000
BNP Paribas, 0.23%***, dated 12/23/2013, to be repurchased at $1,502,147 on 8/4/2014 (c)		1,500,000		1,500,000
JPMorgan Securities, Inc., 0.36%***, dated 3/18/2014, to be repurchased at $2,503,725 on 8/14/2014 (d)		2,500,000		2,500,000
JPMorgan Securities, Inc., 0.39%***, dated 2/13/2014, to be repurchased at $1,253,087 on 9/29/2014 (e)		1,250,000		1,250,000
Nomura Securities International, 0.11%, dated 6/30/2014, to be repurchased at $5,000,015 on 7/1/2014 (f)		5,000,000		5,000,000
The Toronto-Dominion Bank, 0.11%, dated 6/30/2014, to be repurchased at $1,000,003 on 7/1/2014 (g)		1,000,000		1,000,000
Wells Fargo Bank, 0.38%, dated 5/8/2014, to be repurchased at $1,201,140 on 8/6/2014 (h)		1,200,000		1,200,000
Total Repurchase Agreements (Cost $27,450,000)				27,450,000

	% of Net Assets		Value ($)

Total Investment Portfolio (Cost $165,956,350)†		100.0		165,956,350
Other Assets and Liabilities, Net		0.0		67,338
Net Assets		100.0		166,023,688

* Floating rate securities' yields vary with a designated market index or market rate, such as the coupon-equivalent of the U.S. Treasury Bill rate. These securities are shown at their current rate as of June 30, 2014.

** Annualized yield at time of purchase; not a coupon rate.

*** Open maturity repurchase agreement whose interest rate resets periodically and is shown at the current rate as of June 30, 2014. The dated date is the original day the repurchase agreement was entered into, the maturity date represents the next repurchase date. Upon notice, both the Fund and counterparty have the right to terminate the repurchase agreement at any time.

† The cost for federal income tax purposes was $165,956,350.

(a) Collateralized by $7,145,600 U.S. Treasury Note, 1.625%, maturing on 6/30/2019 with a value of $7,140,019.

(b) Collateralized by:

Principal Amount ($)

Security

Rate (%)

Maturity Date

Collateral Value ($)

1,092,900

Federal Home Loan Mortgage Corp.

4.0–6.0

10/1/2031–8/1/2038

1,224,897

4,306,281

Federal National Mortgage Association

4.0–7.0

4/1/2015–6/1/2041

4,737,894

2,000,334

Government National Mortgage Association

2.5–5.5

5/15/2037–12/15/2042

2,197,209

Total Collateral Value

8,160,000

Principal Amount ($)		Security	Rate (%)		Maturity Date	Collateral Value ($)
	1,372,004	Bank of America Corp.		6.0	9/1/2017		1,578,564
	254	Petroleos Mexicanos		6.5	6/2/2041		296
Total Collateral Value							1,578,860

(d) Collateralized by $2,560,000 Bank of America Corp., 1.05%, maturing on 3/22/2016 with a value of $2,579,695.

(e) Collateralized by $1,280,000 Bank of America Corp., 1.05%, maturing on 3/22/2016 with a value of $1,289,847.

(f) Collateralized by:

Principal Amount ($)

Security

Rate (%)

Maturity Date

Collateral Value ($)

1,000

Federal National Mortgage Association

4.0

7/1/2044

1,065

4,735,519

Government National Mortgage Association

2.49–6.0

10/15/2033–6/20/2044

5,098,937

Total Collateral Value

5,100,002

(g) Collateralized by:

Principal Amount ($)		Security	Rate (%)		Maturity Date	Collateral Value ($)
	604,659	Apple, Inc.		2.85	5/6/2021		613,297
	702	Bank of Nova Scotia		1.75	3/22/2017		719
	1,683	Citigroup, Inc.		3.75	6/16/2024		1,689
	416,250	MasterCard, Inc.		3.375	4/1/2024		421,170
	679	Westpac Banking Corp.		2.0	5/21/2019		680
Total Collateral Value							1,037,555

(h) Collateralized by $901,495 Wells Fargo Bank NA, 6.6%, maturing on 1/15/2038 with a value of $1,241,187.

Fair Value Measurements

Assets	Level 1		Level 2		Level 3		Total

Investments in Securities (i)	$		$	138,506,350	$	—	$	138,506,350
Repurchase Agreements		—		27,450,000		—		27,450,000
Total	$	—	$	165,956,350	$	—	$	165,956,350

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(i) See Investment Portfolio for additional detailed categorizations.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments in non-affiliated securities, valued at amortized cost	$	138,506,350
Repurchase agreements, valued at amortized cost		27,450,000
Total investments, valued at amortized cost		165,956,350
Cash		35
Receivable for Fund shares sold		314,058
Interest receivable		26,763
Due from Advisor		8
Other assets		1,329
Total assets		166,298,543
Liabilities
Payable for Fund shares redeemed		185,182
Distributions payable		636
Accrued Trustees' fees		27
Other accrued expenses and payables		89,010
Total liabilities		274,855
Net assets, at value	$	166,023,688
Net Assets Consist of
Undistributed net investment income		712
Accumulated net realized gain (loss)		(81	)
Paid-in capital		166,023,057
Net assets, at value	$	166,023,688
Class A Net Asset Value, offering and redemption price per share ($166,023,688 ÷ 166,106,772 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	1.00

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Interest	$	158,452
Expenses: Management fee		239,350
Administration fee		83,983
Services to shareholders		1,066
Custodian fee		12,961
Professional fees		25,803
Reports to shareholders		40,406
Trustees' fee and expenses		4,344
Other		4,726
Total expenses before expense reductions		412,639
Expense reductions		(262,592	)
Total expenses after expense reductions		150,047
Net investment income		8,405
Net realized gain (loss)		(81	)
Net increase (decrease) in net assets resulting from operations	$	8,324

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	8,405		$	18,768
Operations: Net investment income	$	8,405		$	18,768
Net realized gain (loss)		(81	)		509
Net increase (decrease) in net assets resulting from operations		8,324			19,277
Distributions to shareholders from: Net investment income Class A		(8,405	)		(18,768	)
Total distributions		(8,405	)		(18,768	)
Fund share transactions: Class A Proceeds from shares sold		29,657,906			93,469,677
Reinvestment of distributions		8,485			18,849
Cost of shares redeemed		(37,322,402	)		(115,953,059	)
Net increase (decrease) in net assets from Class A share transactions		(7,656,011	)		(22,464,533	)
Increase (decrease) in net assets		(7,656,092	)		(22,464,024	)
Net assets at beginning of period		173,679,780			196,143,804
Net assets at end of period (including undistributed net investment income of $712 and $712, respectively)	$	166,023,688		$	173,679,780
Other Information
Class A Shares outstanding at beginning of period		173,762,783			196,227,316
Shares sold		29,657,906			93,469,677
Shares issued to shareholders in reinvestment of distributions		8,485			18,849
Shares redeemed		(37,322,402	)		(115,953,059	)
Net increase (decrease) in Class A shares		(7,656,011	)		(22,464,533	)
Shares outstanding at end of period		166,106,772			173,762,783

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	1.000		$	1.000		$	1.000		$	1.000		$	1.000		$	1.000
Income from investment operations: Net investment income		.000	***		.000	***		.000	***		.000	***		.000	***		.003
Net realized gain (loss)		(.000	)***		.000	***		.000	***		.000	***		.000	***		.000	***
Total from investment operations		.000	***		.000	***		.000	***		.000	***		.000	***		.003
Less distributions from: Net investment income		(.000	)***		(.000	)***		(.000	)***		(.000	)***		(.000	)***		(.003	)
Net asset value, end of period	$	1.000		$	1.000		$	1.000		$	1.000		$	1.000		$	1.000
Total Return (%)		.00	a,b**		.01	a		.01	a		.01	a		.01	a		.34
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		166			174			196			217			220			270
Ratio of expenses before expense reductions (%)		.49	*		.49			.45			.51			.46			.43
Ratio of expenses after expense reductions (%)		.18	*		.20			.31			.25			.34			.43
Ratio of net investment income (%)		.01	*		.01			.01			.01			.01			.37
a Total return would have been lower had certain expenses not been reduced. b Amount is less than .005%. * Annualized Not annualized * Amount is less than $.0005.

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Money Market VIP (formerly DWS Money Market VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Security Valuation. Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.

The Fund values all securities utilizing the amortized cost method permitted in accordance with Rule 2a-7 under the 1940 Act and certain conditions therein. Under this method, which does not take into account unrealized capital gains or losses on securities, an instrument is initially valued at its cost and thereafter assumes a constant accretion/amortization rate to maturity of any discount or premium. Securities held by the Fund are reflected as Level 2 because the securities are valued at amortized cost (which approximates fair value) and, accordingly, the inputs used to determine value are not quoted prices in an active market.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

Repurchase Agreements. The Fund may enter into repurchase agreements, under the terms of a Master Repurchase Agreement, with certain banks and broker/dealers whereby the Fund, through its custodian or a sub-custodian bank, receives delivery of the underlying securities, the amount of which at the time of purchase and each subsequent business day is required to be maintained at such a level that the value is equal to at least the principal amount of the repurchase price plus accrued interest. The custodian bank or another designated sub-custodian holds the collateral in a separate account until the agreement matures. If the value of the securities falls below the principal amount of the repurchase agreement plus accrued interest, the financial institution deposits additional collateral by the following business day. If the financial institution either fails to deposit the required additional collateral or fails to repurchase the securities as agreed, the Fund has the right to sell the securities and recover any resulting loss from the financial institution. If the financial institution enters into bankruptcy, the Fund's claim on the collateral may be subject to legal proceedings.

As of June 30, 2014, the Fund held repurchase agreements with a gross value of $27,450,000. The value of the related collateral exceeded the value of the repurchase agreements at period end. The detail of the related collateral is included in the footnotes following the Fund's Investment Portfolio.

Distribution of Income and Gains. Net investment income of the Fund is declared as a daily dividend and is distributed to shareholders monthly. The Fund may take into account capital gains and losses in its daily dividend declarations. The Fund may also make additional distributions for tax purposes if necessary.

Permanent book and tax differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax differences will reverse in a subsequent period. There were no significant book to tax differences for the Fund.

The tax character of current year distributions will be determined at the end of the current fiscal year.

Other. Investment transactions are accounted for on a trade date. Interest income is recorded on the accrual basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes.

B. Related Parties

First $500 million	.285	%
Next $500 million	.270	%
Next $1.0 billion	.255	%
Over $2.0 billion	.240	%

In addition, the Advisor has agreed to voluntarily waive additional expenses for the Fund. The waiver may be changed or terminated at any time without notice. Under this arrangement, the Advisor waived certain expenses of the Fund.

Accordingly, for the six months ended June 30, 2014, the fee pursuant to the Investment Management Agreement aggregated $239,350, all of which was waived, resulting in an annualized effective rate of 0.00% of the Fund's average daily net assets.

C. Ownership of the Fund

At June 30, 2014, three participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 52%, 20% and 12%.

D. Line of Credit

The Fund and other affiliated funds (the "Participants") share in a $400 million revolving credit facility provided by a syndication of banks. The Fund may borrow for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Participants are charged an annual commitment fee which is allocated based on net assets, among each of the Participants. Interest is calculated at a rate per annum equal to the sum of the Federal Funds Rate, plus 1.25 percent plus if LIBOR exceeds the Federal Funds Rate, the amount of such excess. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement: The Fund had no outstanding loans at June 30, 2014.

E. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,000.05
Expenses Paid per $1,000*	$	.89
Hypothetical 5% Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,023.90
Expenses Paid per $1,000*	$	.90

Annualized Expense Ratio	Class A
Deutsche Variable Series II — Deutsche Money Market VIP	.18%

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

Other Information

Proxy Voting

Money Market Fund Reform

In July 2014,the SEC adopted money market fund reform to address potential systemic risks associated with money market funds and to improve transparency for money market fund investors. The fund is required to comply with money market reform over the next two years. As a result, the fund may be required to take certain steps that will impact its structure and/or operations, which could impact the return potential of the fund.

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Money Market VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including a peer universe compiled by the Fee Consultant using information supplied by iMoneyNet, an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one- and three-year periods ended December 31, 2012, the Fund's gross performance (Class A shares) was in the 1st quartile and 2nd quartile, respectively, of the applicable iMoneyNet universe (the 1st quartile being the best performers and the 4th quartile being the worst performers).

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were lower than the median (2nd quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were higher than the median (4th quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012). The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board noted the expense limitation agreed to by DIMA. The Board also noted the significant voluntary fee waivers implemented by DIMA to ensure the Fund maintained a positive yield.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2MM-3 (R-028387-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Small Mid Cap Growth VIP

(formerly DWS Small Mid Cap Growth VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

9 Statement of Assets and Liabilities

9 Statement of Operations

10 Statement of Changes in Net Assets

11 Financial Highlights

12 Notes to Financial Statements

16 Information About Your Fund's Expenses

17 Proxy Voting

18 Advisory Agreement Board Considerations and Fee Evaluation

Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Smaller and medium company stocks tend to be more volatile than large company stocks. The Fund may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratio of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 is 0.72% for Class A shares and may differ from the expense ratio disclosed in the Financial Highlights table in this report.

Growth of an Assumed $10,000 Investment in Deutsche Small Mid Cap Growth VIP
		The Russell 2500™ Growth Index is an unmanaged index that measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-to-book ratios and higher forecasted growth values. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Small Mid Cap Growth VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,181		$	12,787		$	14,460		$	26,057		$	18,389
Class A	Average annual total return		1.81	%		27.87	%		13.08	%		21.11	%		6.28	%
Russell 2500 Growth Index	Growth of $10,000	$	10,397		$	12,626		$	15,161		$	26,643		$	25,788
Russell 2500 Growth Index	Average annual total return		3.97	%		26.26	%		14.88	%		21.65	%		9.94	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Common Stocks	97%	97%
Cash Equivalents	2%	2%
Exchange-Traded Fund	1%	1%
Warrants	0%	—
	100%	100%

Sector Diversification (As a % of Common Stocks, Exchange-Traded Fund and Warrants)	6/30/14	12/31/13

Consumer Discretionary	21%	20%
Information Technology	20%	23%
Industrials	19%	16%
Health Care	16%	16%
Financials	7%	10%
Energy	6%	5%
Materials	6%	4%
Consumer Staples	3%	5%
Telecommunication Services	2%	1%
	100%	100%

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

Joseph Axtell, CFA

Rafaelina M. Lee

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Common Stocks 96.6%
Consumer Discretionary 19.8%
Auto Components 2.7%
American Axle & Manufacturing Holdings, Inc.*		91,630		1,730,891
Gentherm, Inc.*		20,569		914,292
Tenneco, Inc.*		32,782		2,153,777
				4,798,960
Hotels, Restaurants & Leisure 2.9%
Jack in the Box, Inc.		34,893		2,087,997
Life Time Fitness, Inc.* (a)		26,743		1,303,454
Panera Bread Co. "A"*		11,769		1,763,349
				5,154,800
Household Durables 2.3%
Jarden Corp.*		42,198		2,504,451
Ryland Group, Inc. (a)		40,629		1,602,408
				4,106,859
Leisure Products 1.3%
Polaris Industries, Inc. (a)		16,804		2,188,553
Media 0.8%
Cinemark Holdings, Inc.		40,900		1,446,224
Specialty Retail 7.4%
Advance Auto Parts, Inc.		12,291		1,658,302
Ascena Retail Group, Inc.*		74,530		1,274,463
DSW, Inc. "A"		42,345		1,183,119
Outerwall, Inc.* (a)		24,026		1,425,943
Penske Automotive Group, Inc.		27,392		1,355,904
PetSmart, Inc. (a)		24,023		1,436,576
The Children's Place, Inc. (a)		33,610		1,668,064
Ulta Salon, Cosmetics & Fragrance, Inc.*		19,007		1,737,430
Urban Outfitters, Inc.*		37,243		1,261,048
				13,000,849
Textiles, Apparel & Luxury Goods 2.4%
Carter's, Inc.		17,868		1,231,641
Hanesbrands, Inc.		31,125		3,063,945
				4,295,586
Consumer Staples 3.5%
Food & Staples Retailing 1.0%
United Natural Foods, Inc.*		28,232		1,837,903
Food Products 1.5%
Hain Celestial Group, Inc.*		19,720		1,749,953
The WhiteWave Foods Co.*		30,260		979,516
				2,729,469
Household Products 1.0%
Church & Dwight Co., Inc. (a)		23,957		1,675,792
Energy 5.7%
Energy Equipment & Services 2.3%
Dresser-Rand Group, Inc.*		17,075		1,088,190
Dril-Quip, Inc.*		16,577		1,810,871
RPC, Inc.		52,767		1,239,497
				4,138,558
Oil, Gas & Consumable Fuels 3.4%
Diamondback Energy, Inc.*		19,917		1,768,630
Goodrich Petroleum Corp.* (a)		60,043		1,657,187
	Shares		Value ($)

Oasis Petroleum, Inc.*		29,199		1,631,932
Western Refining, Inc.		24,540		921,477
				5,979,226
Financials 7.1%
Banks 1.2%
Signature Bank*		16,921		2,135,092
Capital Markets 3.1%
Financial Engines, Inc. (a)		39,619		1,793,948
Lazard Ltd. "A"		37,921		1,955,207
Oaktree Capital Group LLC		34,742		1,736,753
				5,485,908
Consumer Finance 2.0%
Encore Capital Group, Inc.* (a)		33,531		1,522,978
Portfolio Recovery Associates, Inc.*		33,827		2,013,721
				3,536,699
Thrifts & Mortgage Finance 0.8%
Ocwen Financial Corp.*		36,283		1,346,099
Health Care 14.9%
Biotechnology 4.4%
Alkermes PLC*		23,937		1,204,749
Cubist Pharmaceuticals, Inc.*		11,690		816,196
Isis Pharmaceuticals, Inc.* (a)		35,226		1,213,536
Momenta Pharmaceuticals, Inc.*		35,575		429,746
Orexigen Therapeutics, Inc.* (a)		141,597		875,070
Puma Biotechnology, Inc.*		11,422		753,852
Retrophin, Inc.*		70,883		832,166
Spectrum Pharmaceuticals, Inc.* (a)		121,106		984,592
Sunesis Pharmaceuticals, Inc.* (a)		31,537		205,621
Synta Pharmaceuticals Corp.*		123,326		504,403
				7,819,931
Health Care Equipment & Supplies 3.9%
HeartWare International, Inc.*		17,274		1,528,749
SurModics, Inc.*		67,578		1,447,521
Thoratec Corp.*		56,331		1,963,699
Zeltiq Aesthetics, Inc.* (a)		129,287		1,963,869
				6,903,838
Health Care Providers & Services 4.9%
Catamaran Corp.*		33,508		1,479,713
Centene Corp.*		33,658		2,544,881
Kindred Healthcare, Inc.		68,707		1,587,132
Molina Healthcare, Inc.* (a)		39,939		1,782,477
Providence Service Corp.*		33,662		1,231,693
				8,625,896
Life Sciences Tools & Services 0.6%
PAREXEL International Corp.*		21,889		1,156,615
Pharmaceuticals 1.1%
Pacira Pharmaceuticals, Inc.*		11,034		1,013,583
Questcor Pharmaceuticals, Inc. (a)		10,256		948,578
				1,962,161
Industrials 18.6%
Aerospace & Defense 2.1%
BE Aerospace, Inc.*		18,848		1,743,251
HEICO Corp.*		36,222		1,881,371
				3,624,622
	Shares		Value ($)

Building Products 0.8%
Fortune Brands Home & Security, Inc.		34,821		1,390,403
Commercial Services & Supplies 1.7%
Interface, Inc. (a)		74,389		1,401,489
Team, Inc.*		40,219		1,649,783
				3,051,272
Construction & Engineering 1.0%
Primoris Services Corp.		63,365		1,827,447
Electrical Equipment 3.0%
Acuity Brands, Inc.		9,303		1,286,139
AZZ, Inc.		40,373		1,860,388
Thermon Group Holdings, Inc.*		80,490		2,118,497
				5,265,024
Machinery 6.4%
Altra Industrial Motion Corp.		52,647		1,915,824
Chart Industries, Inc.* (a)		19,919		1,648,098
Manitowoc Co., Inc. (a)		82,944		2,725,540
Middleby Corp.*		15,240		1,260,653
Valmont Industries, Inc. (a)		8,530		1,296,134
WABCO Holdings, Inc.*		23,970		2,560,475
				11,406,724
Professional Services 0.6%
Huron Consulting Group, Inc.*		65		4,603
TriNet Group, Inc.*		40,684		979,264
				983,867
Road & Rail 1.3%
Swift Transportation Co.* (a)		94,328		2,379,896
Trading Companies & Distributors 1.7%
NOW, Inc.*		26,570		962,100
United Rentals, Inc.* (a)		18,821		1,971,123
				2,933,223
Information Technology 19.7%
Communications Equipment 2.0%
Harris Corp.		30,982		2,346,887
Palo Alto Networks, Inc.*		13,799		1,157,046
				3,503,933
Electronic Equipment, Instruments & Components 2.3%
Cognex Corp.*		65,096		2,499,686
IPG Photonics Corp.* (a)		24,459		1,682,779
				4,182,465
Internet Software & Services 1.7%
Cornerstone OnDemand, Inc.*		27,675		1,273,604
CoStar Group, Inc.*		11,084		1,753,156
				3,026,760
IT Services 4.9%
Cardtronics, Inc.*		64,591		2,201,261
MAXIMUS, Inc.		45,192		1,944,160
VeriFone Systems, Inc.*		69,916		2,569,413
Virtusa Corp.*		53,949		1,931,374
				8,646,208
Semiconductors & Semiconductor Equipment 1.7%
Advanced Energy Industries, Inc.*		108,432		2,087,316
Ultra Clean Holdings, Inc.*		97,325		880,791
				2,968,107
	Shares		Value ($)

Software 5.9%
Aspen Technology, Inc.*		35,546		1,649,334
Imperva, Inc.*		36,830		964,209
PTC, Inc.*		65,897		2,556,804
Splunk, Inc.*		32,011		1,771,169
Tyler Technologies, Inc.*		27,373		2,496,691
Ultimate Software Group, Inc.*		7,250		1,001,733
				10,439,940
Technology Hardware, Storage & Peripherals 1.2%
Western Digital Corp.		23,146		2,136,376
Materials 5.6%
Chemicals 2.0%
A. Schulman, Inc.		46,359		1,794,093
Minerals Technologies, Inc.		26,308		1,725,279
				3,519,372
Construction Materials 1.4%
Eagle Materials, Inc.		26,276		2,477,301
Containers & Packaging 0.7%
Crown Holdings, Inc.*		26,354		1,311,375
Metals & Mining 1.5%
Constellium NV "A"*		49,879		1,599,121
Haynes International, Inc.		19,129		1,082,510
				2,681,631
Telecommunication Services 1.7%
Diversified Telecommunication Services 0.8%
inContact, Inc.*		149,568		1,374,530
Wireless Telecommunication Services 0.9%
SBA Communications Corp. "A"*		15,663		1,602,325
Total Common Stocks (Cost $124,499,601)				171,057,819

Exchange-Traded Fund 1.0%
SPDR S&P Biotech (a) (Cost $1,281,707)		11,388		1,754,321

Warrants 0.1%
Health Care
Sunesis Pharmaceuticals, Inc.:
Series A, Expiration Date 3/31/2016*		31,537		89,881
Series B, Expiration Date 3/31/2016*		31,537		63,862
Total Warrants (Cost $86,096)				153,743

Securities Lending Collateral 18.6%
Daily Assets Fund Institutional, 0.08% (b) (c) (Cost $32,938,265)		32,938,265		32,938,265

Cash Equivalents 2.3%
Central Cash Management Fund, 0.06% (b) (Cost $4,045,999)		4,045,999		4,045,999

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $162,851,668)†		118.6			209,950,147
Other Assets and Liabilities, Net		(18.6	)		(32,858,536	)
Net Assets		100.0			177,091,611

* Non-income producing security.

† The cost for federal income tax purposes was $163,106,674. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $46,843,473. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $50,055,202 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,211,729.

(b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(c) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

S&P: Standard & Poor's

SPDR: Standard & Poor's Depositary Receipt

Fair Value Measurements

Assets	Level 1		Level 2		Level 3		Total

Common Stocks (d)	$	171,057,819	$	—	$	—	$	171,057,819
Exchange-Traded Fund		1,754,321		—		—		1,754,321
Warrant		153,743		—		—		153,743
Short-Term Investments (d)		36,984,264		—		—		36,984,264
Total	$	209,950,147	$	—	$	—	$	209,950,147

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(d) See Investment Portfolio for additional detailed categorizations.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $125,867,404) — including $31,905,100 of securities loaned	$	172,965,883
Investment in Daily Assets Fund Institutional (cost $32,938,265)*		32,938,265
Investment in Central Cash Management Fund (cost $4,045,999)		4,045,999
Total investments in securities, at value (cost $162,851,668)		209,950,147
Cash		367,141
Receivable for investments sold		2,086,629
Receivable for Fund shares sold		3,330
Dividends receivable		34,265
Interest receivable		13,858
Other assets		1,093
Total assets		212,456,463
Liabilities
Payable upon return of securities loaned		32,938,265
Payable for investments purchased		2,083,874
Payable for Fund shares redeemed		186,369
Accrued management fee		78,586
Accrued Trustees' fees		234
Other accrued expenses and payables		77,524
Total liabilities		35,364,852
Net assets, at value	$	177,091,611
Net Assets Consist of
Net investment income (loss)		(99,060	)
Net unrealized appreciation (depreciation) on investments		47,098,479
Accumulated net realized gain (loss)		9,187,532
Paid-in capital		120,904,660
Net assets, at value	$	177,091,611
Class A Net Asset Value, offering and redemption price per share ($177,091,611 ÷ 8,057,925 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	21.98

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Dividends	$	422,094
Income distributions — Central Cash Management Fund		1,044
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		122,330
Total income		545,468
Expenses: Management fee		487,813
Administration fee		88,693
Services to shareholders		1,440
Custodian fee		6,001
Professional fees		35,868
Reports to shareholders		16,297
Trustees' fees and expenses		4,222
Other		4,194
Total expenses		644,528
Net investment income (loss)		(99,060	)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from investments		17,013,722
Change in net unrealized appreciation (depreciation) on investments		(13,883,645	)
Net gain (loss)		3,130,077
Net increase (decrease) in net assets resulting from operations	$	3,031,017

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income (loss)	$	(99,060	)	$	(363,396	)
Operations: Net investment income (loss)	$	(99,060	)	$	(363,396	)
Net realized gain (loss)		17,013,722			23,261,132
Change in net unrealized appreciation (depreciation)		(13,883,645	)		35,857,105
Net increase (decrease) in net assets resulting from operations		3,031,017			58,754,841
Distributions to shareholders from: Net investment income: Class A		—			(194,886	)
Total distributions		—			(194,886	)
Fund share transactions: Class A Proceeds from shares sold		3,139,745			5,697,979
Reinvestment of distributions		—			194,886
Cost of shares redeemed		(16,356,558	)		(22,634,498	)
Net increase (decrease) in net assets from Class A share transactions		(13,216,813	)		(16,741,633	)
Increase (decrease) in net assets		(10,185,796	)		41,818,322
Net assets at beginning of period		187,277,407			145,459,085
Net assets at end of period (including net investment loss and undistributed net investment income of $99,060 and $0, respectively)	$	177,091,611		$	187,277,407
Other Information
Class A Shares outstanding at beginning of period		8,676,171			9,604,576
Shares sold		145,187			313,223
Shares issued to shareholders in reinvestment of distributions		—			11,761
Shares redeemed		(763,433	)		(1,253,389	)
Net increase (decrease) in Class A shares		(618,246	)		(928,405	)
Shares outstanding at end of period		8,057,925			8,676,171

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012		2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	21.59		$	15.14		$	13.24	$	13.85		$	10.70		$	7.61
Income (loss) from investment operations: Net investment income (loss)a		(.01	)		(.04	)		.02		(.03	)		(.01	)		(.02	)
Net realized and unrealized gain (loss)		.40			6.51			1.88		(.50	)		3.16			3.11
Total from investment operations		.39			6.47			1.90		(.53	)		3.15			3.09
Less distributions from: Net investment income		—			(.02	)		—		(.08	)		—			—
Net asset value, end of period	$	21.98		$	21.59		$	15.14	$	13.24		$	13.85		$	10.70
Total Return (%)		1.81	**		42.78			14.35		(3.91	)		29.44			40.60
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		177			187			145		147			88			80
Ratio of expenses (%)		.73	*		.72			.74		.73			.78			.77
Ratio of net investment income (loss) (%)		(.11	)*		(.22	)		.11		(.23	)		(.12	)		(.22	)
Portfolio turnover rate (%)		25	**		56			57		84			64			93
a Based on average shares outstanding during the period. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Small Mid Cap Growth VIP (formerly DWS Small Mid Cap Growth VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading.

Equity securities and exchange-traded funds ("ETFs") are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities or ETFs for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity and ETF securities are generally categorized as Level 1.

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

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

At December 31, 2013, the Fund had a net tax basis capital loss carryforward of approximately $7,570,000 of pre-enactment losses, including approximately $2,020,000 inherited from its mergers with affiliated funds in previous years, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2016 ($2,020,000) and December 31, 2017 ($5,550,000), the respective expiration dates, whichever occurs first, and which may be subject to certain limitations under Section 382–384 of Internal Revenue Code.

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

B. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments) aggregated $43,761,766 and $58,252,497, respectively.

C. Related Parties

First $250 million	.550	%
Next $750 million	.525	%
Over $1 billion	.500	%

D. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 75% and 22%.

E. Line of Credit

F. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,018.10
Expenses Paid per $1,000*	$	3.65
Hypothetical 5% Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,021.17
Expenses Paid per $1,000*	$	3.66

Annualized Expense Ratio	Class A
Deutsche Variable Series II — Deutsche Small Mid Cap Growth VIP	.73%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Small Mid Cap Growth VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

— The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Equity Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund's Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 3rd quartile, 2nd quartile and 3rd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be lower than the median (1st quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board considered the Fund's management fee rate as compared to fees charged by DIMA to a comparable fund and considered differences between the Fund and the comparable fund. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitation agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

Notes

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2SMCG-3 (R-028388-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Small Mid Cap Value VIP

(formerly DWS Small Mid Cap Value VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Manager

6 Investment Portfolio

8 Statement of Assets and Liabilities

8 Statement of Operations

9 Statement of Changes in Net Assets

10 Financial Highlights

12 Notes to Financial Statements

16 Information About Your Fund's Expenses

17 Proxy Voting

18 Advisory Agreement Board Considerations and Fee Evaluation

Any fund that focuses in a particular segment of the market will generally be more volatile than a fund that invests more broadly. Smaller and medium company stocks tend to be more volatile than large company stocks. The fund may lend securities to approved institutions. Stocks may decline in value. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratios of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 are 0.82% and 1.17% for Class A and Class B shares, respectively, and may differ from the expense ratios disclosed in the Financial Highlights tables in this report.

Growth of an Assumed $10,000 Investment in Deutsche Small Mid Cap Value VIP
		The Russell 2500™ Value Index is an unmanaged Index of those securities in the Russell 3000® Index with lower price-to-book ratios and lower forecasted growth values. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Small Mid Cap Value VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,523		$	12,430		$	14,551		$	23,965		$	26,233
Class A	Average annual total return		5.23	%		24.30	%		13.32	%		19.10	%		10.12	%
Russell 2500 Value Index	Growth of $10,000	$	10,787		$	12,494		$	15,616		$	26,570		$	24,563
Russell 2500 Value Index	Average annual total return		7.87	%		24.94	%		16.02	%		21.58	%		9.40	%
Deutsche Small Mid Cap Value VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class B	Growth of $10,000	$	10,497		$	12,375		$	14,386		$	23,535		$	25,301
Class B	Average annual total return		4.97	%		23.75	%		12.89	%		18.67	%		9.73	%
Russell 2500 Value Index	Growth of $10,000	$	10,787		$	12,494		$	15,616		$	26,570		$	24,563
Russell 2500 Value Index	Average annual total return		7.87	%		24.94	%		16.02	%		21.58	%		9.40	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Common Stocks	96%	96%
Cash Equivalents	4%	4%
	100%	100%

Sector Diversification (As a % of Common Stocks)	6/30/14	12/31/13

Industrials	23%	29%
Information Technology	21%	14%
Financials	15%	16%
Consumer Discretionary	13%	12%
Materials	9%	7%
Energy	8%	5%
Health Care	7%	10%
Consumer Staples	2%	2%
Utilities	2%	5%
	100%	100%

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Manager

Richard Glass, CFA

Portfolio Manager

Investment Portfolio June 30, 2014 (Unaudited)

	Shares		Value ($)

Common Stocks 95.2%
Consumer Discretionary 12.1%
Auto Components 2.0%
Visteon Corp.*		50,570		4,905,796
Diversified Consumer Services 1.4%
Ascent Capital Group, Inc. "A"*		51,303		3,386,511
Hotels, Restaurants & Leisure 1.5%
The Wendy's Co.		421,696		3,597,067
Household Durables 3.1%
Newell Rubbermaid, Inc.		245,170		7,597,818
Media 1.5%
Scripps Networks Interactive, Inc. "A"		44,420		3,604,239
Specialty Retail 1.4%
Ross Stores, Inc.		52,295		3,458,268
Textiles, Apparel & Luxury Goods 1.2%
Hanesbrands, Inc.		28,238		2,779,749
Consumer Staples 2.3%
Food Products
Ingredion, Inc.		73,603		5,523,169
Energy 7.1%
Energy Equipment & Services 3.4%
Superior Energy Services, Inc.		124,276		4,491,335
TETRA Technologies, Inc.*		316,162		3,724,388
				8,215,723
Oil, Gas & Consumable Fuels 3.7%
Cimarex Energy Co.		29,351		4,210,694
QEP Resources, Inc.		140,350		4,842,075
				9,052,769
Financials 14.3%
Banks 3.6%
Capital Bank Financial Corp. "A"*		150,950		3,563,929
Investors Bancorp., Inc.		470,281		5,196,605
				8,760,534
Capital Markets 2.4%
Lazard Ltd. "A"		114,296		5,893,102
Insurance 6.7%
Axis Capital Holdings Ltd.		52,977		2,345,822
CNO Financial Group, Inc.		368,608		6,561,222
PartnerRe Ltd.		33,313		3,638,113
Reinsurance Group of America, Inc.		46,427		3,663,090
				16,208,247
Real Estate Investment Trusts 1.6%
Plum Creek Timber Co., Inc. (REIT)		86,738		3,911,884
Health Care 6.9%
Health Care Equipment & Supplies 1.9%
CareFusion Corp.*		104,820		4,648,767
Health Care Providers & Services 3.7%
HealthSouth Corp.		148,405		5,323,287
Omnicare, Inc.		55,065		3,665,677
				8,988,964
	Shares		Value ($)

Life Sciences Tools & Services 1.3%
PerkinElmer, Inc.		65,050		3,046,942
Industrials 21.8%
Aerospace & Defense 1.4%
Curtiss-Wright Corp.		53,300		3,494,348
Air Freight & Logistics 0.2%
Forward Air Corp.		7,431		355,573
Building Products 2.1%
Owens Corning, Inc.		130,702		5,055,553
Commercial Services & Supplies 3.4%
Covanta Holding Corp.		186,540		3,844,589
The Brink's Co.		158,544		4,474,112
				8,318,701
Electrical Equipment 2.1%
The Babcock & Wilcox Co.		158,183		5,134,620
Machinery 8.6%
Harsco Corp.		220,691		5,877,001
ITT Corp.		85,280		4,101,968
Snap-on, Inc.		25,653		3,040,394
Stanley Black & Decker, Inc.		39,090		3,432,884
Xylem, Inc.		111,667		4,363,946
				20,816,193
Marine 2.0%
Kirby Corp.*		42,382		4,964,628
Trading Companies & Distributors 2.0%
AerCap Holdings NV*		104,598		4,790,589
Information Technology 20.3%
Communications Equipment 3.0%
Harris Corp.		49,741		3,767,881
Juniper Networks, Inc.*		144,586		3,548,140
				7,316,021
Electronic Equipment, Instruments & Components 6.0%
Belden, Inc.		69,500		5,432,120
Dolby Laboratories, Inc. "A"*		106,600		4,605,120
Zebra Technologies Corp. "A"*		54,513		4,487,510
				14,524,750
IT Services 7.8%
Amdocs Ltd.		96,752		4,482,520
Convergys Corp.		271,794		5,827,263
Global Payments, Inc.		65,730		4,788,431
NeuStar, Inc. "A"*		150,621		3,919,159
				19,017,373
Software 3.5%
ACI Worldwide, Inc.*		53,993		3,014,429
Verint Systems, Inc.*		109,912		5,391,184
				8,405,613
Materials 8.9%
Chemicals 5.2%
Ashland, Inc.		44,523		4,841,431
Celanese Corp. "A"		60,868		3,912,595
Cytec Industries, Inc.		37,243		3,926,157
				12,680,183
	Shares		Value ($)

Containers & Packaging 2.6%
Sealed Air Corp.		184,770		6,313,591
Metals & Mining 1.1%
Materion Corp.		75,204		2,781,796
Utilities 1.5%
Electric Utilities 0.5%
Northeast Utilities		26,316		1,243,957
Gas Utilities 0.5%
UGI Corp.		24,877		1,256,289
Multi-Utilities 0.5%
CMS Energy Corp.		40,953		1,275,687
Total Common Stocks (Cost $192,884,395)				231,325,014
	Shares		Value ($)

Cash Equivalents 3.7%
Central Cash Management Fund, 0.06% (a) (Cost $9,066,705)		9,066,705		9,066,705

	% of Net Assets		Value ($)

Total Investment Portfolio (Cost $201,951,100)†		98.9		240,391,719
Other Assets and Liabilities, Net		1.1		2,619,910
Net Assets		100.0		243,011,629

* Non-income producing security.

† The cost for federal income tax purposes was $201,951,100. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $38,440,619. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $42,936,064 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $4,495,445.

(a) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

REIT: Real Estate Investment Trust

Fair Value Measurements

Assets	Level 1		Level 2		Level 3		Total

Common Stocks (b)	$	231,325,014	$	—	$	—	$	231,325,014
Short-Term Investments		9,066,705		—		—		9,066,705
Total	$	240,391,719	$	—	$	—	$	240,391,719

There have been no transfers between fair value measurement levels during the period ended June 30, 2014.

(b) See Investment Portfolio for additional detailed categorizations.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $192,884,395)	$	231,325,014
Investment in Central Cash Management Fund (cost $9,066,705)		9,066,705
Total investments in securities, at value (cost $201,951,100)		240,391,719
Receivable for investments sold		4,274,757
Receivable for Fund shares sold		55,545
Dividends receivable		167,628
Interest receivable		444
Other assets		1,625
Total assets		244,891,718
Liabilities
Payable for investments purchased		829,342
Payable for Fund shares redeemed		816,250
Accrued management fee		129,511
Accrued Trustees' fees		686
Other accrued expenses and payables		104,300
Total liabilities		1,880,089
Net assets, at value	$	243,011,629
Net Assets Consist of
Undistributed net investment income		431,249
Net unrealized appreciation (depreciation) on investments		38,440,619
Accumulated net realized gain (loss)		8,915,203
Paid-in capital		195,224,558
Net assets, at value	$	243,011,629
Class A Net Asset Value, offering and redemption price per share ($224,966,496 ÷ 12,683,655 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	17.74
Class B Net Asset Value, offering and redemption price per share ($18,045,133 ÷ 1,016,345 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	17.75

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Dividends	$	1,467,450
Income distributions — Central Cash Management Fund		2,481
Total income		1,469,931
Expenses: Management fee		786,497
Administration fee		121,021
Services to shareholders		3,823
Record keeping fees (Class B)		9,359
Distribution service fee (Class B)		23,167
Custodian fee		6,157
Professional fees		33,696
Reports to shareholders		27,157
Trustees' fees and expenses		5,595
Other		4,753
Total expenses		1,021,225
Net investment income (loss)		448,706
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from investments		9,038,541
Change in net unrealized appreciation (depreciation) on investments		2,349,037
Net gain (loss)		11,387,578
Net increase (decrease) in net assets resulting from operations	$	11,836,284

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income (loss)	$	448,706		$	1,914,959
Operations: Net investment income (loss)	$	448,706		$	1,914,959
Net realized gain (loss)		9,038,541			72,681,616
Change in net unrealized appreciation (depreciation)		2,349,037			(601,679	)
Net increase (decrease) in net assets resulting from operations		11,836,284			73,994,896
Distributions to shareholders from: Net investment income: Class A		(1,782,045	)		(2,660,096	)
Class B		(85,579	)		(150,280	)
Net realized gains: Class A		(1,065,847	)		—
Class B		(91,018	)		—
Total distributions		(3,024,489	)		(2,810,376	)
Fund share transactions: Class A Proceeds from shares sold		4,703,220			17,897,526
Reinvestment of distributions		2,847,892			2,660,096
Payments for shares redeemed		(30,612,559	)		(65,359,482	)
Net increase (decrease) in net assets from Class A share transactions		(23,061,447	)		(44,801,860	)
Class B Proceeds from shares sold		1,754,326			4,288,905
Reinvestment of distributions		176,597			150,280
Payments for shares redeemed		(4,367,974	)		(6,805,298	)
Net increase (decrease) in net assets from Class B share transactions		(2,437,051	)		(2,366,113	)
Increase (decrease) in net assets		(16,686,703	)		24,016,547
Net assets at beginning of period		259,698,332			235,681,785
Net assets at end of period (including undistributed net investment income of $431,249 and $1,850,167, respectively)	$	243,011,629		$	259,698,332
Other Information
Class A Shares outstanding at beginning of period		14,042,897			17,113,875
Shares sold		276,727			1,211,679
Shares issued to shareholders in reinvestment of distributions		170,839			190,143
Shares redeemed		(1,806,808	)		(4,472,800	)
Net increase (decrease) in Class A shares		(1,359,242	)		(3,070,978	)
Shares outstanding at end of period		12,683,655			14,042,897
Class B Shares outstanding at beginning of period		1,160,889			1,321,925
Shares sold		103,397			288,710
Shares issued to shareholders in reinvestment of distributions		10,581			10,719
Shares redeemed		(258,522	)		(460,465	)
Net increase (decrease) in Class B shares		(144,544	)		(161,036	)
Shares outstanding at end of period		1,016,345			1,160,889

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	17.08		$	12.78		$	11.36		$	12.21		$	10.04		$	7.93
Income (loss) from investment operations: Net investment incomea		.03			.12			.14			.13			.12			.16
Net realized and unrealized gain (loss)		.85			4.35			1.42			(.85	)		2.19			2.11
Total from investment operations		.88			4.47			1.56			(.72	)		2.31			2.27
Less distributions from: Net investment income		(.14	)		(.17	)		(.14	)		(.13	)		(.14	)		(.16	)
Net realized gains on investment transactions		(.08	)		—			—			—			—			—
Total distributions		(.22	)		(.17	)		(.14	)		(.13	)		(.14	)		(.16	)
Net asset value, end of period	$	17.74		$	17.08		$	12.78		$	11.36		$	12.21		$	10.04
Total Return (%)		5.23	**		35.24			13.77			(6.08	)		23.07			29.70
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		225			240			219			216			247			235
Ratio of expenses (%)		.82	*		.82			.82			.81			.82			.79
Ratio of net investment income (%)		.40	*		.81			1.18			1.08			1.14			1.92
Portfolio turnover rate (%)		20	**		115			11			36			38			72
a Based on average shares outstanding during the period. * Annualized ** Not annualized

				Years Ended December 31,
Class B	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	17.07		$	12.78		$	11.36		$	12.20		$	10.03		$	7.92
Income (loss) from investment operations: Net investment incomea		.00	***		.07			.10			.09			.08			.13
Net realized and unrealized gain (loss)		.84			4.34			1.42			(.85	)		2.19			2.12
Total from investment operations		.84			4.41			1.52			(.76	)		2.27			2.25
Less distributions from: Net investment income		(.08	)		(.12	)		(.10	)		(.08	)		(.10	)		(.14	)
Net realized gains on investment transactions		(.08	)		—			—			—			—			—
Total distributions		(.16	)		(.12	)		(.10	)		(.08	)		(.10	)		(.14	)
Net asset value, end of period	$	17.75		$	17.07		$	12.78		$	11.36		$	12.20		$	10.03
Total Return (%)		4.97	**		34.70			13.38			(6.33	)		22.66			29.28
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		18			20			17			20			26			23
Ratio of expenses (%)		1.17	*		1.17			1.16			1.15			1.17			1.14
Ratio of net investment income (%)		.04	*		.45			.81			.74			.79			1.57
Portfolio turnover rate (%)		20	**		115			11			36			38			72
a Based on average shares outstanding during the period. * Annualized Not annualized * Amount is less than $.005.

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Small Mid Cap Value VIP (formerly DWS Small Mid Cap Value VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares except that each class bears certain expenses unique to that class (including the applicable Rule 12b-1 fee and recordkeeping fees). Differences in class-level expenses may result in payment of different per share dividends by class. All shares have equal rights with respect to voting subject to class-specific arrangements.

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.

Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

The timing and characterization of certain income and capital gain distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to income received from Real Estate Investment Trusts and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.

The tax character of current year distributions will be determined at the end of the current fiscal year.

Real Estate Investment Trusts. The Fund periodically recharacterizes distributions received from a Real Estate Investment Trust ("REIT") investment based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from a REIT, the recharacterization will be estimated for financial reporting purposes and a recharacterization will be made to the accounting records in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains. The Fund distinguishes between dividends received on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital.

B. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments) aggregated $46,992,074 and $75,808,036, respectively.

C. Related Parties

First $250 million	.650	%
Next $750 million	.620	%
Next $1.5 billion	.600	%
Next $2.5 billion	.580	%
Next $2.5 billion	.550	%
Next $2.5 billion	.540	%
Next $2.5 billion	.530	%
Over $12.5 billion	.520	%

Class A	.83%
Class B	1.19%

Service to Shareholders	Total Aggregated		Unpaid at June 30, 2014
Class A	$	298	$	147
Class B		296		145
	$	594	$	292

D. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 58% and 21%. Three participating insurance companies were owners of record of 10% or more of the total outstanding Class B shares of the Fund, each owning 41%, 24% and 17%.

E. Line of Credit

F. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,052.30	$	1,049.70
Expenses Paid per $1,000*	$	4.17	$	5.95
Hypothetical 5% Fund Return	Class A		Class B
Beginning Account Value 1/1/14	$	1,000.00	$	1,000.00
Ending Account Value 6/30/14	$	1,020.73	$	1,018.99
Expenses Paid per $1,000*	$	4.11	$	5.86

Annualized Expense Ratios	Class A		Class B
Deutsche Variable Series II — Deutsche Small Mid Cap Value VIP	.82%		1.17%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Small Mid Cap Value VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

— The Trustees met frequently during the past year to discuss fund matters and dedicated a substantial amount of time to contract review matters. Over the course of several months, the Board's Contract Committee, in coordination with the Board's Equity Oversight Committee, reviewed comprehensive materials received from DIMA, independent third parties and independent counsel. These materials included an analysis of the Fund's performance, fees and expenses, and profitability compiled by a fee consultant retained by the Fund's Independent Trustees (the "Fee Consultant"). The Board also received extensive information throughout the year regarding performance of the Fund.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 4th quartile, 4th quartile and 3rd quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has underperformed its benchmark in the one-, three- and five-year periods ended December 31, 2012. The Board noted the disappointing investment performance of the Fund in recent periods and continued to discuss with senior management of DIMA the factors contributing to such underperformance and actions being taken to improve performance. The Board recognized that DIMA has made changes to its investment personnel and processes in recent years in an effort to enhance its investment platform and improve long-term performance across the DWS fund complex.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were lower than the median (1st quartile) of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be lower than the median (2nd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board also reviewed data comparing each share class's total (net) operating expenses to the applicable Lipper Universe Expenses. The Board considered the Fund's management fee rate as compared to fees charged by DIMA to a comparable fund and considered differences between the Fund and the comparable fund. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitations agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2SMCV-3 (R-028381-3 8/14)

June 30, 2014

Semiannual Report

Deutsche Variable Series II

(formerly DWS Variable Series II)

Deutsche Unconstrained Income VIP

(formerly DWS Unconstrained Income VIP)

Contents

3 Letter to Shareholders

4 Performance Summary

5 Portfolio Summary

5 Portfolio Management Team

6 Investment Portfolio

21 Statement of Assets and Liabilities

22 Statement of Operations

23 Statement of Changes in Net Assets

24 Financial Highlights

25 Notes to Financial Statements

34 Information About Your Fund's Expenses

35 Proxy Voting

36 Advisory Agreement Board Considerations and Fee Evaluation

Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investments in lower-quality ("junk bonds") and non-rated securities present greater risk of loss than investments in higher-quality securities. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market risks. The Fund may lend securities to approved institutions. See the prospectus for details.

NOT FDIC/NCUA INSURED NO BANK GUARANTEE MAY LOSE VALUE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

Letter to Shareholders

Dear Shareholder:

In conjunction with your fund’s name change, please note that the Deutsche funds’ Web address has changed as well. The former dws-investments.com is now deutschefunds.com.

In addition, key service providers have been renamed as follows:

Former Name	New name, effective August 11, 2014
DWS Investments Distributors, Inc.	DeAWM Distributors, Inc.
DWS Trust Company	DeAWM Trust Company
DWS Investments Service Company	DeAWM Service Company

Thanks for your continued support. We appreciate your trust and the opportunity to put our capabilities to work for you.

Best regards,

Brian Binder

President, Deutsche Funds

Performance Summary June 30, 2014 (Unaudited)

The gross expense ratio of the Fund, as stated in the fee table of the prospectus dated May 1, 2014 is 1.02% for Class A shares and may differ from the expense ratio disclosed in the Financial Highlights table in this report.

Growth of an Assumed $10,000 Investment in Deutsche Unconstrained Income VIP
		The Barclays U.S. Universal Index represents the union of the U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index and the non-ERISA portion of the CMBS Index. The Barclays U.S. Aggregate Bond Index is an unmanaged index representing domestic taxable investment-grade bonds, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities with an average maturity of one year or more. Index returns do not reflect any fees or expenses and it is not possible to invest directly into an index.

Yearly periods ended June 30

Comparative Results
Deutsche Unconstrained Income VIP		6-Month‡			1-Year			3-Year			5-Year			10-Year
Class A	Growth of $10,000	$	10,487		$	10,796		$	12,018		$	15,285		$	19,955
Class A	Average annual total return		4.87	%		7.96	%		6.32	%		8.86	%		7.15	%
Barclays U.S. Universal Index	Growth of $10,000	$	10,419		$	10,520		$	11,321		$	13,120		$	16,705
Barclays U.S. Universal Index	Average annual total return		4.19	%		5.20	%		4.22	%		5.58	%		5.27	%
Barclays U.S. Aggregate Bond Index	Growth of $10,000	$	10,393		$	10,437		$	11,140		$	12,674		$	16,187
Barclays U.S. Aggregate Bond Index	Average annual total return		3.93	%		4.37	%		3.66	%		4.85	%		4.93	%

The growth of $10,000 is cumulative.

‡ Total returns shown for periods less than one year are not annualized.

Portfolio Summary (Unaudited)

Asset Allocation (As a % of Investment Portfolio excluding Securities Lending Collateral)	6/30/14	12/31/13

Corporate Bonds	56%	60%
Government & Agency Obligations	14%	19%
Cash Equivalents	10%	2%
Loan Participations and Assignments	5%	5%
Exchange-Traded Fund	5%	1%
Commercial Mortgage-Backed Securities	3%	3%
Collateralized Mortgage Obligations	3%	5%
Asset-Backed	2%	1%
Municipal Bonds and Notes	2%	2%
Mortgage-Backed Securities Pass-Throughs	—	2%
	100%	100%

Quality (Excludes Cash Equivalents and Securities Lending Collateral)	6/30/14	12/31/13

AAA	8%	20%
AA	5%	3%
A	4%	3%
BBB	17%	18%
BB	31%	25%
B	20%	19%
CCC or Below	6%	4%
Not Rated	9%	8%
	100%	100%

Interest Rate Sensitivity	6/30/14	12/31/13

Effective Maturity	6.3 years	6.6 years
Effective Duration	3.9 years	4.3 years

Effective maturity is the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.

Effective duration is an approximate measure of the Fund's sensitivity to interest rate changes taking into consideration any maturity shortening features.

Portfolio holdings and characteristics are subject to change.

For more complete details about the Fund's investment portfolio, see page 6.

Portfolio Management Team

Gary Russell, CFA

William Chepolis, CFA

John D. Ryan

Philip G. Condon

Darwei Kung

Portfolio Managers

Investment Portfolio June 30, 2014 (Unaudited)

		Principal Amount ($)(a)		Value ($)

Corporate Bonds 56.1%
Consumer Discretionary 6.8%
Ally Financial, Inc., 8.3%, 2/12/2015			135,000		140,653
AMC Entertainment, Inc., 5.875%, 2/15/2022 (b)			30,000		31,200
AMC Networks, Inc., 7.75%, 7/15/2021			15,000		16,781
AmeriGas Finance LLC:
6.75%, 5/20/2020			70,000		75,950
7.0%, 5/20/2022			60,000		66,450
APX Group, Inc.:
8.75%, 12/1/2020			5,000		5,075
144A, 8.75%, 12/1/2020			20,000		20,300
Asbury Automotive Group, Inc., 8.375%, 11/15/2020			85,000		94,350
Ashtead Capital, Inc., 144A, 6.5%, 7/15/2022			45,000		49,162
Ashton Woods U.S.A. LLC, 144A, 6.875%, 2/15/2021			50,000		50,000
Avis Budget Car Rental LLC, 5.5%, 4/1/2023			30,000		30,675
BC Mountain LLC, 144A, 7.0%, 2/1/2021			30,000		29,025
Block Communications, Inc., 144A, 7.25%, 2/1/2020			65,000		69,225
Boyd Gaming Corp., 9.0%, 7/1/2020 (b)			25,000		27,562
Cablevision Systems Corp.:
5.875%, 9/15/2022			15,000		15,281
8.0%, 4/15/2020 (b)			10,000		11,356
CCO Holdings LLC:
6.5%, 4/30/2021			120,000		127,800
6.625%, 1/31/2022			70,000		75,250
7.0%, 1/15/2019 (b)			20,000		21,100
7.25%, 10/30/2017			90,000		94,950
7.375%, 6/1/2020			10,000		10,900
8.125%, 4/30/2020			25,000		27,063
Cequel Communications Holdings I LLC:
144A, 5.125%, 12/15/2021			89,000		88,666
144A, 6.375%, 9/15/2020			160,000		170,000
Clear Channel Communications, Inc.:
9.0%, 12/15/2019			70,000		74,637
11.25%, 3/1/2021			40,000		45,350
Clear Channel Worldwide Holdings, Inc.:
Series A, 6.5%, 11/15/2022			15,000		16,013
Series A, 7.625%, 3/15/2020			20,000		21,400
Series B, 7.625%, 3/15/2020			185,000		199,569
Cogeco Cable, Inc., 144A, 4.875%, 5/1/2020			5,000		5,063
Columbus International, Inc., 144A, 7.375%, 3/30/2021			200,000		215,500
Crown Media Holdings, Inc., 10.5%, 7/15/2019			55,000		61,944
CSC Holdings LLC, 144A, 5.25%, 6/1/2024			75,000		73,781
Cumulus Media Holdings, Inc., 7.75%, 5/1/2019 (b)			65,000		68,494
Delphi Corp., 5.0%, 2/15/2023			40,000		43,000
DISH DBS Corp.:
4.25%, 4/1/2018			40,000		41,600
5.0%, 3/15/2023			50,000		50,937
6.625%, 10/1/2014			65,000		65,812
		Principal Amount ($)(a)		Value ($)

6.75%, 6/1/2021			10,000		11,400
7.125%, 2/1/2016			155,000		167,594
General Motors Financial Co., Inc., 3.25%, 5/15/2018			15,000		15,225
Getty Images, Inc., 144A, 7.0%, 10/15/2020			50,000		45,812
Group 1 Automotive, Inc., 144A, 5.0%, 6/1/2022			25,000		25,000
Harron Communications LP, 144A, 9.125%, 4/1/2020			60,000		66,900
Hertz Corp., 6.75%, 4/15/2019			50,000		53,000
Hot Topic, Inc., 144A, 9.25%, 6/15/2021			20,000		22,200
Isle of Capri Casinos, Inc., 5.875%, 3/15/2021			15,000		15,169
Jo-Ann Stores Holdings, Inc., 144A, 9.75%, 10/15/2019 (PIK)			25,000		25,563
Johnson Controls, Inc., 4.95%, 7/2/2064			40,000		40,521
L Brands, Inc., 7.0%, 5/1/2020			20,000		22,975
Live Nation Entertainment, Inc.:
144A, 5.375%, 6/15/2022			5,000		5,063
144A, 7.0%, 9/1/2020			50,000		54,750
MDC Partners, Inc., 144A, 6.75%, 4/1/2020			30,000		31,650
Mediacom Broadband LLC:
144A, 5.5%, 4/15/2021			5,000		5,063
6.375%, 4/1/2023			65,000		68,575
Mediacom LLC, 7.25%, 2/15/2022			20,000		21,800
MGM Resorts International:
6.75%, 10/1/2020			76,000		84,835
8.625%, 2/1/2019			85,000		101,256
Numericable Group SA, 144A, 4.875%, 5/15/2019			70,000		71,837
Pinnacle Entertainment, Inc., 6.375%, 8/1/2021			35,000		36,925
Quebecor Media, Inc., 5.75%, 1/15/2023			30,000		30,825
RCI Banque SA, 144A, 3.5%, 4/3/2018			200,000		208,506
Sabre Holdings Corp., 8.35%, 3/15/2016			55,000		60,844
Seminole Hard Rock Entertainment, Inc., 144A, 5.875%, 5/15/2021			15,000		15,038
Seminole Tribe of Florida, Inc., 144A, 7.804%, 10/1/2020			70,000		78,750
Serta Simmons Holdings LLC, 144A, 8.125%, 10/1/2020			35,000		37,975
Sirius XM Radio, Inc., 144A, 5.875%, 10/1/2020			30,000		31,725
Springs Industries, Inc., 6.25%, 6/1/2021			35,000		35,700
Starz LLC, 5.0%, 9/15/2019			25,000		26,031
Taylor Morrison Communities, Inc., 144A, 5.25%, 4/15/2021			40,000		40,600
The Men's Wearhouse, Inc., 144A, 7.0%, 7/1/2022 (b)			20,000		20,700
Time Warner Cable, Inc., 7.3%, 7/1/2038			35,000		47,083
Travelport LLC, 144A, 13.875%, 3/1/2016 (PIK)			6,912		7,119
UCI International, Inc., 8.625%, 2/15/2019			20,000		19,000
Univision Communications, Inc., 144A, 7.875%, 11/1/2020			25,000		27,500
		Principal Amount ($)(a)		Value ($)

Viking Cruises Ltd., 144A, 8.5%, 10/15/2022			30,000		33,150
Weyerhaeuser Real Estate Co.:
144A, 4.375%, 6/15/2019			20,000		20,050
144A, 5.875%, 6/15/2024			10,000		10,288
					4,075,871
Consumer Staples 3.2%
Ajecorp BV, 144A, 6.5%, 5/14/2022 (b)			150,000		138,000
Big Heart Pet Brands, 7.625%, 2/15/2019			55,000		57,315
BRF SA, 144A, 5.875%, 6/6/2022			200,000		216,500
Chiquita Brands International, Inc., 7.875%, 2/1/2021			24,000		26,130
Controladora Mabe SA de CV, 144A, 7.875%, 10/28/2019			100,000		114,500
Cott Beverages, Inc., 144A, 5.375%, 7/1/2022			35,000		35,088
Delhaize Group SA, 4.125%, 4/10/2019			140,000		147,015
FAGE Dairy Industry SA, 144A, 9.875%, 2/1/2020			85,000		90,950
JBS Investments GmbH:
144A, 7.25%, 4/3/2024			70,000		72,450
144A, 7.75%, 10/28/2020			200,000		214,000
JBS U.S.A. LLC:
144A, 7.25%, 6/1/2021			80,000		85,800
144A, 8.25%, 2/1/2020			25,000		27,125
Marfrig Overseas Ltd., 144A, 9.5%, 5/4/2020			100,000		107,500
Pilgrim's Pride Corp., 7.875%, 12/15/2018			45,000		47,646
Post Holdings, Inc.:
144A, 6.0%, 12/15/2022			30,000		30,600
144A, 6.75%, 12/1/2021			60,000		63,750
Reynolds Group Issuer, Inc.:
5.75%, 10/15/2020			235,000		247,925
6.875%, 2/15/2021			100,000		107,912
Roundy's Supermarkets, Inc., 144A, 10.25%, 12/15/2020			30,000		31,688
Smithfield Foods, Inc., 6.625%, 8/15/2022			30,000		32,850
					1,894,744
Energy 9.3%
Access Midstream Partners LP, 6.125%, 7/15/2022			55,000		60,775
Afren PLC, 144A, 10.25%, 4/8/2019			140,000		158,725
Antero Resources Finance Corp., 5.375%, 11/1/2021			15,000		15,563
Baytex Energy Corp.:
144A, 5.125%, 6/1/2021			15,000		15,094
144A, 5.625%, 6/1/2024			15,000		15,056
Berry Petroleum Co., LLC:
6.375%, 9/15/2022			30,000		31,950
6.75%, 11/1/2020			140,000		147,350
BreitBurn Energy Partners LP:
7.875%, 4/15/2022			95,000		102,837
8.625%, 10/15/2020			35,000		38,500
Chaparral Energy, Inc., 7.625%, 11/15/2022			20,000		21,600
Chesapeake Energy Corp., 3.479%**, 4/15/2019			40,000		40,450
Chesapeake Oilfield Operating LLC, 6.625%, 11/15/2019			25,000		26,875
		Principal Amount ($)(a)		Value ($)

CITGO Petroleum Corp., 144A, 11.5%, 7/1/2017			105,000		111,300
CONSOL Energy, Inc., 144A, 5.875%, 4/15/2022			15,000		15,713
Crestwood Midstream Partners LP:
144A, 6.125%, 3/1/2022			20,000		21,050
7.75%, 4/1/2019			65,000		69,713
Dresser-Rand Group, Inc., 6.5%, 5/1/2021			75,000		80,250
Ecopetrol SA, 5.875%, 5/28/2045			250,000		258,570
EDC Finance Ltd., 144A, 4.875%, 4/17/2020			200,000		195,500
El Paso LLC, 7.25%, 6/1/2018			55,000		62,631
Endeavor Energy Resources LP, 144A, 7.0%, 8/15/2021			75,000		80,063
EP Energy LLC:
6.875%, 5/1/2019			60,000		63,825
7.75%, 9/1/2022			40,000		45,100
9.375%, 5/1/2020			25,000		28,625
EV Energy Partners LP, 8.0%, 4/15/2019			140,000		147,000
EXCO Resources, Inc., 8.5%, 4/15/2022			20,000		21,600
Halcon Resources Corp.:
8.875%, 5/15/2021			95,000		102,125
9.75%, 7/15/2020			80,000		87,300
Hilcorp Energy I LP, 144A, 5.0%, 12/1/2024 (c)			25,000		25,000
Holly Energy Partners LP, 6.5%, 3/1/2020			20,000		21,550
Kodiak Oil & Gas Corp., 5.5%, 1/15/2021 (b)			60,000		62,550
Linn Energy LLC, 6.25%, 11/1/2019			95,000		99,512
MEG Energy Corp.:
144A, 6.5%, 3/15/2021			40,000		42,400
144A, 7.0%, 3/31/2024			75,000		82,688
Memorial Resource Development Corp., 144A, 5.875%, 7/1/2022 (c)			25,000		25,188
Midstates Petroleum Co., Inc.:
9.25%, 6/1/2021			85,000		93,287
10.75%, 10/1/2020			85,000		96,475
Murphy Oil U.S.A., Inc., 6.0%, 8/15/2023			40,000		42,100
Northern Oil & Gas, Inc., 8.0%, 6/1/2020			90,000		96,075
Nostrum Oil & Gas Finance BV, 144A, 6.375%, 2/14/2019			200,000		209,000
Oasis Petroleum, Inc.:
6.5%, 11/1/2021			25,000		26,875
144A, 6.875%, 3/15/2022			60,000		65,400
6.875%, 1/15/2023			25,000		27,250
7.25%, 2/1/2019			40,000		42,400
Offshore Drilling Holding SA, 144A, 8.375%, 9/20/2020			200,000		221,500
Offshore Group Investment Ltd.:
7.125%, 4/1/2023			60,000		60,900
7.5%, 11/1/2019			20,000		21,150
Pacific Rubiales Energy Corp., 144A, 7.25%, 12/12/2021			250,000		277,500
Pertamina Persero PT, 144A, 5.625%, 5/20/2043			200,000		179,500
Petrobras Global Finance BV, 4.875%, 3/17/2020			200,000		205,420
Petroleos de Venezuela SA, 144A, 9.0%, 11/17/2021			300,000		254,970
		Principal Amount ($)(a)		Value ($)

Regency Energy Partners LP, 5.875%, 3/1/2022			5,000		5,431
Reliance Holding U.S.A., Inc., 144A, 5.4%, 2/14/2022			250,000		269,940
Rowan Companies, Inc., 4.75%, 1/15/2024			80,000		84,642
Sabine Pass Liquefaction LLC, 5.625%, 2/1/2021			105,000		111,037
Samson Investment Co., 144A, 10.75%, 2/15/2020			20,000		21,075
SandRidge Energy, Inc., 7.5%, 3/15/2021			105,000		113,794
SESI LLC:
6.375%, 5/1/2019			40,000		42,700
7.125%, 12/15/2021			115,000		129,662
Seventy Seven Energy, Inc., 144A, 6.5%, 7/15/2022			5,000		5,125
Swift Energy Co., 7.875%, 3/1/2022			55,000		57,475
Talos Production LLC, 144A, 9.75%, 2/15/2018			60,000		63,600
Tesoro Corp., 4.25%, 10/1/2017			35,000		36,575
Transocean, Inc., 3.8%, 10/15/2022			145,000		143,510
Whiting Petroleum Corp., 5.0%, 3/15/2019			40,000		42,100
WPX Energy, Inc., 5.25%, 1/15/2017			40,000		42,600
					5,513,096
Financials 9.9%
Assured Guaranty U.S. Holdings, Inc., 5.0%, 7/1/2024			65,000		64,613
Banco do Brasil SA, 144A, 9.0%, 12/31/2049			200,000		198,241
Banco Nacional de Costa Rica, 144A, 4.875%, 11/1/2018			200,000		205,000
Banco Santander Brasil SA, 144A, 8.0%, 3/18/2016	BRL		400,000		172,890
Barclays Bank PLC, 7.625%, 11/21/2022			400,000		456,600
BBVA Bancomer SA, 144A, 6.5%, 3/10/2021			200,000		225,500
CIT Group, Inc.:
3.875%, 2/19/2019			145,000		147,262
5.0%, 5/15/2017			80,000		85,250
5.25%, 3/15/2018			90,000		96,637
Citigroup, Inc., 4.05%, 7/30/2022			70,000		71,715
Country Garden Holdings Co., Ltd., 144A, 11.125%, 2/23/2018			200,000		218,240
Development Bank of Kazakhstan JSC, Series 3, 6.5%, 6/3/2020			500,000		535,600
E*TRADE Financial Corp., 6.75%, 6/1/2016			130,000		141,050
Everest Reinsurance Holdings, Inc., 4.868%, 6/1/2044			150,000		150,426
Hellas Telecommunications Finance, 144A, 8.328%*, 7/15/2015 (PIK)	EUR		109,187		0
Hospitality Properties Trust, (REIT), 5.0%, 8/15/2022			110,000		116,372
ING Bank NV, 144A, 2.0%, 9/25/2015			200,000		203,218
		Principal Amount ($)(a)		Value ($)

International Lease Finance Corp.:
3.875%, 4/15/2018			65,000		66,625
5.75%, 5/15/2016			20,000		21,425
6.25%, 5/15/2019			50,000		56,000
8.625%, 9/15/2015			40,000		43,300
8.75%, 3/15/2017			120,000		139,500
Intesa Sanpaolo SpA:
3.875%, 1/16/2018			240,000		252,945
144A, 5.017%, 6/26/2024			200,000		202,363
Jefferies Group LLC, 5.125%, 1/20/2023			60,000		64,324
Macquarie Group Ltd., 144A, 6.0%, 1/14/2020			200,000		226,568
Morgan Stanley:
3.75%, 2/25/2023			85,000		86,469
4.1%, 5/22/2023			85,000		86,225
Series H, 5.45%, 7/29/2049			20,000		20,365
MPT Operating Partnership LP:
(REIT), 6.375%, 2/15/2022			45,000		48,262
(REIT), 6.875%, 5/1/2021			50,000		54,500
Navient Corp., 5.5%, 1/25/2023			125,000		123,906
Neuberger Berman Group LLC:
144A, 5.625%, 3/15/2020			25,000		26,438
144A, 5.875%, 3/15/2022			45,000		48,038
Omega Healthcare Investors, Inc., (REIT), 144A, 4.95%, 4/1/2024			130,000		132,777
Popular, Inc., 7.0%, 7/1/2019 (c)			20,000		20,300
Royal Bank of Scotland Group PLC, 6.1%, 6/10/2023			100,000		109,459
Schahin II Finance Co. SPV Ltd., 144A, 5.875%, 9/25/2023 (b)			185,733		182,947
Societe Generale SA, 144A, 7.875%, 12/29/2049 (b)			110,000		117,287
The Goldman Sachs Group, Inc., Series L, 5.7%, 12/29/2049			35,000		36,159
Trust F/1401, (REIT), 144A, 5.25%, 12/15/2024			200,000		210,000
Turkiye Is Bankasi, 144A, 6.0%, 10/24/2022			250,000		250,125
Yapi ve Kredi Bankasi AS, 144A, 5.5%, 12/6/2022			200,000		189,860
					5,904,781
Health Care 2.9%
Aviv Healthcare Properties LP:
6.0%, 10/15/2021			15,000		15,900
7.75%, 2/15/2019			85,000		90,525
Biomet, Inc.:
6.5%, 8/1/2020			55,000		59,262
6.5%, 10/1/2020			15,000		16,013
Community Health Systems, Inc.:
5.125%, 8/15/2018			185,000		194,019
144A, 5.125%, 8/1/2021			5,000		5,125
144A, 6.875%, 2/1/2022			30,000		31,800
7.125%, 7/15/2020			60,000		64,950
Crimson Merger Sub, Inc., 144A, 6.625%, 5/15/2022			70,000		69,475
Endo Finance LLC:
144A, 5.375%, 1/15/2023			35,000		34,956
144A, 5.75%, 1/15/2022			35,000		35,700
Fresenius Medical Care U.S. Finance II, Inc., 144A, 5.625%, 7/31/2019			35,000		38,150
Fresenius Medical Care U.S. Finance, Inc., 144A, 6.5%, 9/15/2018			20,000		22,600
		Principal Amount ($)(a)		Value ($)

HCA, Inc.:
6.5%, 2/15/2020			210,000		236,250
7.5%, 2/15/2022			80,000		92,300
Hologic, Inc., 6.25%, 8/1/2020			30,000		31,650
LifePoint Hospitals, Inc., 144A, 5.5%, 12/1/2021			35,000		36,663
Mallinckrodt International Finance SA, 4.75%, 4/15/2023			75,000		72,937
Par Pharmaceutical Companies, Inc., 7.375%, 10/15/2020			55,000		59,125
Physio-Control International, Inc., 144A, 9.875%, 1/15/2019			48,000		53,040
Salix Pharmaceuticals Ltd., 144A, 6.0%, 1/15/2021			30,000		32,175
Tenet Healthcare Corp., 6.25%, 11/1/2018			80,000		88,800
Valeant Pharmaceuticals International, Inc.:
144A, 6.375%, 10/15/2020			35,000		37,187
144A, 6.75%, 8/15/2018			70,000		75,425
144A, 7.5%, 7/15/2021			140,000		155,050
Warner Chilcott Co., LLC, 7.75%, 9/15/2018			75,000		78,847
					1,727,924
Industrials 5.5%
ADT Corp.:
3.5%, 7/15/2022			20,000		18,200
4.125%, 4/15/2019			5,000		5,031
6.25%, 10/15/2021 (b)			25,000		26,500
Alphabet Holding Co., Inc., 7.75%, 11/1/2017 (PIK)			65,000		67,113
Armored Autogroup, Inc., 9.25%, 11/1/2018			105,000		110,512
Artesyn Escrow, Inc., 144A, 9.75%, 10/15/2020			40,000		39,300
BE Aerospace, Inc., 6.875%, 10/1/2020			25,000		27,156
Belden, Inc., 144A, 5.5%, 9/1/2022			55,000		56,925
Bombardier, Inc.:
144A, 4.75%, 4/15/2019			20,000		20,350
144A, 5.75%, 3/15/2022			55,000		56,375
144A, 6.0%, 10/15/2022			35,000		35,875
144A, 7.75%, 3/15/2020			45,000		50,857
Casella Waste Systems, Inc., 7.75%, 2/15/2019			90,000		94,050
Cemex Finance LLC, 144A, 9.375%, 10/12/2022			200,000		235,250
Covanta Holding Corp., 5.875%, 3/1/2024			30,000		31,013
CTP Transportation Products LLC, 144A, 8.25%, 12/15/2019			35,000		37,713
Darling Ingredients, Inc., 144A, 5.375%, 1/15/2022			30,000		31,125
DigitalGlobe, Inc., 5.25%, 2/1/2021			25,000		24,750
Ducommun, Inc., 9.75%, 7/15/2018			65,000		72,333
Florida East Coast Holdings Corp., 144A, 6.75%, 5/1/2019			65,000		68,656
FTI Consulting, Inc., 6.75%, 10/1/2020			145,000		154,787
Garda World Security Corp., 144A, 7.25%, 11/15/2021			45,000		47,306
Gates Global LLC, 144A, 6.0%, 7/15/2022			30,000		30,000
GenCorp, Inc., 7.125%, 3/15/2021			80,000		87,400
Grupo KUO SAB De CV, 144A, 6.25%, 12/4/2022			200,000		209,500
		Principal Amount ($)(a)		Value ($)

Huntington Ingalls Industries, Inc.:
6.875%, 3/15/2018			50,000		52,875
7.125%, 3/15/2021			10,000		10,925
Interactive Data Corp., 144A, 5.875%, 4/15/2019			35,000		35,525
KazAgro National Management Holding JSC, 144A, 4.625%, 5/24/2023			200,000		193,480
Kenan Advantage Group, Inc., 144A, 8.375%, 12/15/2018			25,000		26,750
Meritor, Inc.:
6.25%, 2/15/2024			30,000		31,425
6.75%, 6/15/2021			40,000		43,024
Navios Maritime Holdings, Inc.:
144A, 7.375%, 1/15/2022			110,000		113,300
8.125%, 2/15/2019			75,000		78,844
Nortek, Inc., 8.5%, 4/15/2021			75,000		82,875
Odebrecht Offshore Drilling Finance Ltd., 144A, 6.75%, 10/1/2022			192,840		206,435
Oshkosh Corp., 5.375%, 3/1/2022			22,500		23,175
Ply Gem Industries, Inc., 144A, 6.5%, 2/1/2022 (b)			40,000		38,700
Spirit AeroSystems, Inc.:
144A, 5.25%, 3/15/2022			40,000		40,600
6.75%, 12/15/2020			75,000		80,625
Titan International, Inc., 6.875%, 10/1/2020			90,000		91,350
TransDigm, Inc.:
144A, 6.0%, 7/15/2022			40,000		41,100
144A, 6.5%, 7/15/2024			25,000		26,031
7.5%, 7/15/2021			75,000		83,063
Triumph Group, Inc., 144A, 5.25%, 6/1/2022			20,000		20,050
United Rentals North America, Inc.:
5.75%, 7/15/2018			60,000		63,450
7.375%, 5/15/2020			95,000		104,975
7.625%, 4/15/2022			95,000		106,637
Watco Companies LLC, 144A, 6.375%, 4/1/2023			25,000		25,500
					3,258,791
Information Technology 2.3%
ACI Worldwide, Inc., 144A, 6.375%, 8/15/2020			15,000		15,788
Activision Blizzard, Inc., 144A, 5.625%, 9/15/2021			130,000		140,075
Audatex North America, Inc., 144A, 6.0%, 6/15/2021			25,000		26,688
BMC Software Finance, Inc., 144A, 8.125%, 7/15/2021			65,000		66,869
Boxer Parent Co., Inc., 144A, 9.0%, 10/15/2019 (PIK)			40,000		39,000
CDW LLC, 8.5%, 4/1/2019			45,000		48,712
eAccess Ltd., 144A, 8.25%, 4/1/2018			60,000		64,800
EarthLink Holdings Corp., 7.375%, 6/1/2020			30,000		31,988
Entegris, Inc., 144A, 6.0%, 4/1/2022			20,000		20,600
Equinix, Inc.:
5.375%, 4/1/2023			105,000		107,362
7.0%, 7/15/2021			40,000		44,200
First Data Corp.:
144A, 6.75%, 11/1/2020			72,000		77,940
144A, 7.375%, 6/15/2019			45,000		48,319
		Principal Amount ($)(a)		Value ($)

144A, 8.75%, 1/15/2022 (PIK)			60,000		66,225
144A, 8.875%, 8/15/2020			85,000		94,031
Freescale Semiconductor, Inc., 144A, 6.0%, 1/15/2022			40,000		42,600
Hughes Satellite Systems Corp.:
6.5%, 6/15/2019			70,000		78,050
7.625%, 6/15/2021			40,000		45,800
Jabil Circuit, Inc., 7.75%, 7/15/2016			30,000		33,937
Micron Technology, Inc., 144A, 5.875%, 2/15/2022			15,000		16,088
NCR Corp.:
144A, 5.875%, 12/15/2021			10,000		10,550
144A, 6.375%, 12/15/2023			20,000		21,700
NXP BV, 144A, 3.75%, 6/1/2018			35,000		35,087
Sanmina Corp., 144A, 4.375%, 6/1/2019			5,000		4,994
Tencent Holdings Ltd., 144A, 3.375%, 5/2/2019			200,000		204,474
					1,385,877
Materials 6.7%
ALROSA Finance SA, 144A, 7.75%, 11/3/2020			200,000		221,260
Anglo American Capital PLC, 144A, 4.125%, 9/27/2022			250,000		251,881
Ashland, Inc., 3.875%, 4/15/2018			20,000		20,575
AuRico Gold, Inc., 144A, 7.75%, 4/1/2020			20,000		19,800
Berry Plastics Corp., 5.5%, 5/15/2022			60,000		60,337
BOE Intermediate Holding Corp., 144A, 9.0%, 11/1/2017 (PIK)			43,858		45,996
Braskem Finance Ltd., 6.45%, 2/3/2024			200,000		213,750
Cascades, Inc., 144A, 5.5%, 7/15/2022			20,000		19,950
Clearwater Paper Corp., 7.125%, 11/1/2018			65,000		68,250
Cliffs Natural Resources, Inc., 3.95%, 1/15/2018			115,000		116,533
Crown Americas LLC, 6.25%, 2/1/2021			10,000		10,700
Exopack Holding Corp., 144A, 10.0%, 6/1/2018			40,000		43,000
First Quantum Minerals Ltd.:
144A, 6.75%, 2/15/2020			70,000		72,100
144A, 7.0%, 2/15/2021			70,000		72,012
FMG Resources (August 2006) Pty Ltd.:
144A, 6.0%, 4/1/2017			55,000		56,787
144A, 8.25%, 11/1/2019			45,000		48,994
Fresnillo PLC, 144A, 5.5%, 11/13/2023			200,000		209,000
Glencore Funding LLC, 144A, 4.125%, 5/30/2023			110,000		110,478
Greif, Inc., 7.75%, 8/1/2019			195,000		224,250
GTL Trade Finance, Inc., 144A, 5.893%, 4/29/2024 (b)			200,000		209,800
Hexion U.S. Finance Corp.:
6.625%, 4/15/2020			70,000		74,200
8.875%, 2/1/2018			60,000		62,400
Huntsman International LLC:
8.625%, 3/15/2020			60,000		64,950
8.625%, 3/15/2021			25,000		27,625
IAMGOLD Corp., 144A, 6.75%, 10/1/2020			40,000		37,000
		Principal Amount ($)(a)		Value ($)

Kaiser Aluminum Corp., 8.25%, 6/1/2020			40,000		45,000
KGHM International Ltd., 144A, 7.75%, 6/15/2019			115,000		123,481
Metalloinvest Finance Ltd., 144A, 5.625%, 4/17/2020			200,000		194,000
Novelis, Inc., 8.75%, 12/15/2020			215,000		238,650
Owens-Brockway Glass Container, Inc., 7.375%, 5/15/2016			30,000		33,000
Packaging Dynamics Corp., 144A, 8.75%, 2/1/2016			90,000		92,430
Plastipak Holdings, Inc., 144A, 6.5%, 10/1/2021			40,000		42,200
Polymer Group, Inc., 7.75%, 2/1/2019			49,000		52,063
Rain CII Carbon LLC, 144A, 8.0%, 12/1/2018			45,000		47,250
Samarco Mineracao SA, 144A, 5.75%, 10/24/2023			200,000		209,940
Sealed Air Corp.:
144A, 8.125%, 9/15/2019			30,000		33,038
144A, 8.375%, 9/15/2021			30,000		34,350
Signode Industrial Group Lux SA, 144A, 6.375%, 5/1/2022			30,000		30,375
Tronox Finance LLC, 6.375%, 8/15/2020			30,000		30,975
Turkiye Sise ve Cam Fabrikalari AS, 144A, 4.25%, 5/9/2020			300,000		289,500
Yamana Gold, Inc., 144A, 4.95%, 7/15/2024			120,000		120,789
					3,978,669
Telecommunication Services 7.9%
B Communications Ltd., 144A, 7.375%, 2/15/2021			35,000		37,625
CC Holdings GS V LLC, 3.849%, 4/15/2023			70,000		70,272
CenturyLink, Inc.:
Series V, 5.625%, 4/1/2020			15,000		15,825
Series W, 6.75%, 12/1/2023			35,000		38,238
Cincinnati Bell, Inc.:
8.375%, 10/15/2020			235,000		257,619
8.75%, 3/15/2018 (b)			210,000		220,237
Colombia Telecomunicaciones SA ESP, 144A, 5.375%, 9/27/2022			200,000		199,700
CommScope, Inc., 144A, 5.0%, 6/15/2021			35,000		35,700
CPI International, Inc., 8.75%, 2/15/2018			45,000		47,138
Digicel Group Ltd.:
144A, 7.125%, 4/1/2022			35,000		36,488
144A, 8.25%, 9/30/2020			105,000		114,450
Digicel Ltd., 144A, 8.25%, 9/1/2017			300,000		308,640
Frontier Communications Corp.:
7.125%, 1/15/2023			200,000		212,000
8.25%, 4/15/2017			62,000		71,997
8.5%, 4/15/2020			20,000		23,600
Intelsat Jackson Holdings SA:
5.5%, 8/1/2023			55,000		54,725
7.25%, 10/15/2020			195,000		210,112
7.5%, 4/1/2021			215,000		235,425
8.5%, 11/1/2019			100,000		106,250
Intelsat Luxembourg SA:
7.75%, 6/1/2021			95,000		100,581
8.125%, 6/1/2023			10,000		10,813
		Principal Amount ($)(a)		Value ($)

Level 3 Communications, Inc., 8.875%, 6/1/2019			10,000		10,938
Level 3 Financing, Inc.:
144A, 6.125%, 1/15/2021			20,000		21,425
7.0%, 6/1/2020			75,000		81,937
8.125%, 7/1/2019			75,000		81,844
8.625%, 7/15/2020			50,000		56,000
MetroPCS Wireless, Inc.:
6.625%, 11/15/2020			65,000		69,387
7.875%, 9/1/2018			75,000		78,772
Millicom International Cellular SA, 144A, 4.75%, 5/22/2020			200,000		200,000
SBA Communications Corp., 5.625%, 10/1/2019			30,000		31,763
SBA Telecommunications, Inc., 8.25%, 8/15/2019			16,000		16,768
Sprint Communications, Inc.:
144A, 7.0%, 3/1/2020			40,000		46,000
144A, 9.0%, 11/15/2018			175,000		212,187
9.125%, 3/1/2017			50,000		58,563
Sprint Corp., 144A, 7.125%, 6/15/2024			110,000		116,600
T-Mobile U.S.A., Inc.:
6.125%, 1/15/2022			15,000		15,919
6.5%, 1/15/2024			15,000		16,031
6.625%, 4/1/2023 (b)			35,000		37,975
tw telecom holdings, Inc.:
5.375%, 10/1/2022			40,000		43,750
6.375%, 9/1/2023			35,000		39,813
UPCB Finance V Ltd., 144A, 7.25%, 11/15/2021			30,000		33,000
UPCB Finance VI Ltd., 144A, 6.875%, 1/15/2022			10,000		10,925
Verizon Communications, Inc., 6.55%, 9/15/2043			200,000		251,688
VimpelCom Holdings BV, 144A, 7.504%, 3/1/2022			200,000		215,750
Wind Acquisition Finance SA, 144A, 6.5%, 4/30/2020			30,000		32,513
Windstream Corp.:
6.375%, 8/1/2023			40,000		40,550
7.5%, 4/1/2023			75,000		81,187
7.75%, 10/15/2020			20,000		21,675
7.75%, 10/1/2021			55,000		60,087
7.875%, 11/1/2017			205,000		236,006
8.125%, 9/1/2018			70,000		73,500
					4,699,988
Utilities 1.6%
AES Corp.:
3.229%**, 6/1/2019			20,000		20,150
8.0%, 10/15/2017			2,000		2,330
8.0%, 6/1/2020			175,000		210,437
Calpine Corp.:
144A, 7.5%, 2/15/2021			64,000		69,440
144A, 7.875%, 7/31/2020			70,000		75,950
Electricite de France SA, 144A, 5.25%, 1/29/2049			100,000		102,013
Energy Future Holdings Corp., Series Q, 6.5%, 11/15/2024*			100,000		75,500
FirstEnergy Transmission LLC, 144A, 4.35%, 1/15/2025			100,000		101,032
IPALCO Enterprises, Inc., 5.0%, 5/1/2018			145,000		154,787
NGL Energy Partners LP, 144A, 5.125%, 7/15/2019 (c)			30,000		30,075
		Principal Amount ($)(a)		Value ($)

NRG Energy, Inc.:
144A, 6.25%, 5/1/2024			100,000		104,500
7.875%, 5/15/2021			30,000		33,263
					979,477
Total Corporate Bonds (Cost $31,913,830)					33,419,218

Asset-Backed 1.6%
Home Equity Loans 0.4%
CIT Group Home Equity Loan Trust, "AF6", Series 2002-1, 6.2%, 2/25/2030			52,609		52,467
Citifinancial Mortgage Securities, Inc., "AFS", Series 2003-4, 5.826%**, 10/25/2033			190,000		198,205
					250,672
Miscellaneous 1.2%
ARES CLO Ltd., "D", Series 2012-3A, 144A, 4.876%**, 1/17/2024			250,000		250,544
Domino's Pizza Master Issuer LLC, "A2", Series 2012-1A, 144A, 5.216%, 1/25/2042			144,938		155,753
Hilton Grand Vacations Trust, "B", Series 2014-AA, 144A, 2.07%, 11/25/2026			300,000		299,983
					706,280
Total Asset-Backed (Cost $923,823)					956,952

Commercial Mortgage-Backed Securities 3.3%
Commercial Mortgage Trust, "AM", Series 2007-GG11, 5.867%, 12/10/2049			290,000		320,482
Del Coronado Trust, "M", Series 2013-HDMZ, 144A, 5.152%**, 3/15/2018			80,000		80,504
JPMorgan Chase Commercial Mortgage Securities Corp., "C", Series 2012-HSBC, 144A, 4.021%, 7/5/2032			150,000		156,087
Prudential Commercial Mortgage Trust, "F", Series 2003-PWR1, 144A, 5.233%**, 2/11/2036			500,000		500,782
Wachovia Bank Commercial Mortgage Trust, "A4", Series 2005-C22, 5.455%**, 12/15/2044			140,000		146,814
WFRBS Commercial Mortgage Trust, "A5", Series 2013-C14, 3.337%, 6/15/2046			750,000		757,990
Total Commercial Mortgage-Backed Securities (Cost $1,903,454)					1,962,659

Collateralized Mortgage Obligations 3.2%
Banc of America Mortgage Securities, "2A2", Series 2004-A, 2.680%**, 2/25/2034			100,950		101,187
Bear Stearns Adjustable Rate Mortgage Trust, "2A1", Series 2005-11, 2.999%**, 12/25/2035			126,765		127,680
Countrywide Home Loans, "2A5", Series 2004-13, 5.75%, 8/25/2034			90,126		93,197
		Principal Amount ($)(a)		Value ($)

Federal Home Loan Mortgage Corp.:
"AI", Series 4016, Interest Only, 3.0%, 9/15/2025			1,204,739		115,723
"ZG", Series 4213, 3.5%, 6/15/2043			108,429		108,521
"JI", Series 3558, Interest Only, 4.5%, 12/15/2023			44,781		1,657
"PI", Series 3843, Interest Only, 4.5%, 5/15/2038			431,567		54,995
"HI", Series 2934, Interest Only, 5.0%, 2/15/2020			118,217		11,844
"WI", Series 3010, Interest Only, 5.0%, 7/15/2020			186,375		17,659
"JS", Series 3572, Interest Only, 6.648%***, 9/15/2039			700,892		112,143
Federal National Mortgage Association:
"BI", Series 2010-13, Interest Only, 5.0%, 12/25/2038			79,076		6,267
"PI", Series 2006-20, Interest Only, 6.528%***, 11/25/2030			419,504		72,558
"SI", Series 2007-23, Interest Only, 6.618%***, 3/25/2037			277,830		39,284
Government National Mortgage Association:
"ZJ", Series 2013-106, 3.5%, 7/20/2043			353,928		344,646
"MI", Series 2009-76, Interest Only, 5.0%, 3/20/2035			18,207		22
"IV", Series 2009-69, Interest Only, 5.5%, 8/20/2039			380,982		67,033
"IN", Series 2009-69, Interest Only, 5.5%, 8/20/2039			383,720		64,599
"IJ", Series 2009-75, Interest Only, 6.0%, 8/16/2039			353,566		64,975
"AI", Series 2007-38, Interest Only, 6.308%***, 6/16/2037			98,515		15,023
JPMorgan Mortgage Trust, "2A1", Series 2006-A2, 2.657%**, 4/25/2036			292,866		267,337
Merrill Lynch Mortgage Investors Trust, "2A", Series 2003-A6, 2.654%**, 10/25/2033			80,061		80,815
Wells Fargo Mortgage-Backed Securities Trust, "2A3", Series 2004-EE, 2.612%**, 12/25/2034			114,076		114,722
Total Collateralized Mortgage Obligations (Cost $1,729,312)					1,881,887

Government & Agency Obligations 14.6%
Other Government Related (d) 3.0%
Bank of Moscow, 144A, 6.699%, 3/11/2015			250,000		257,028
MMC Norilsk Nickel OJSC, 144A, 5.55%, 10/28/2020			200,000		201,000
Queensland Treasury Corp., Series 33, 6.5%, 3/14/2033	AUD		828,000		978,394
Sberbank of Russia, 144A, 5.25%, 5/23/2023			200,000		187,500
TMK OAO, 144A, 6.75%, 4/3/2020			200,000		195,000
					1,818,922
Sovereign Bonds 8.1%
Federative Republic of Brazil:
4.25%, 1/7/2025			200,000		202,700
12.5%, 1/5/2016	BRL		250,000		118,522
		Principal Amount ($)(a)		Value ($)

Government of France, 0.7%, 7/25/2030	EUR		566,085		786,148
Kingdom of Morocco, 144A, 4.25%, 12/11/2022			250,000		250,313
Province of New Brunswick Canada, 3.55%, 6/3/2043	CAD		900,000		806,926
Republic of Argentina-Inflation Linked Bond, 5.83%, 12/31/2033	ARS		375		122
Republic of Belarus, REG S, 8.75%, 8/3/2015			145,000		149,176
Republic of Croatia, 144A, 6.75%, 11/5/2019			400,000		448,500
Republic of El Salvador, 144A, 7.65%, 6/15/2035			200,000		216,300
Republic of Ghana, 144A, 8.5%, 10/4/2017			100,000		105,000
Republic of Hungary, 4.125%, 2/19/2018			50,000		52,125
Republic of Romania, 4.875%, 11/7/2019	EUR		100,000		155,203
Republic of Singapore, 3.375%, 9/1/2033	SGD		1,243,000		1,052,347
Republic of Slovenia, 144A, 4.75%, 5/10/2018			200,000		215,500
Republic of South Africa, Series R204, 8.0%, 12/21/2018	ZAR		550,000		52,553
Republic of Sri Lanka, 144A, 5.125%, 4/11/2019			200,000		203,250
					4,814,685
U.S. Treasury Obligations 3.5%
U.S. Treasury Bills:
0.03%****, 12/11/2014 (e)			57,000		56,987
0.055%****, 8/14/2014 (e)			15,000		15,000
0.055%****, 12/11/2014 (e)			150,000		149,966
0.065%****, 8/14/2014			239,000		238,993
U.S. Treasury Notes:
1.0%, 8/31/2016 (f)			500,000		505,156
1.0%, 9/30/2016			500,000		504,844
1.5%, 5/31/2019			232,600		231,437
2.5%, 5/15/2024			360,000		359,494
					2,061,877
Total Government & Agency Obligations (Cost $8,440,245)					8,695,484

Loan Participations and Assignments 5.0%
Senior Loans**
American Rock Salt Holdings LLC:
First Lien Term Loan, 4.75%, 5/20/2021			84,635		84,725
Term Delay Draw, 4.75%, 5/20/2021			20,365		20,387
Avis Budget Car Rental LLC, Term Loan B, 3.0%, 3/15/2019			59,548		59,567
Buffalo Gulf Coast Terminals LLC, Term Loan, 5.25%, 10/31/2017			73,875		74,337
Burger King Corp., Term Loan B, 3.75%, 9/28/2019			68,775		69,162
Calpine Corp., Term Loan B1, 4.0%, 4/1/2018			192,513		193,455
Crown Castle International Corp., Term Loan B, 2.4%, 1/31/2019			49,005		49,112
CSC Holdings, Inc., Term Loan B, 2.65%, 4/17/2020			128,256		127,075
		Principal Amount ($)(a)		Value ($)

Cumulus Media Holdings, Inc., Term Loan, 4.25%, 12/23/2020			29,539		29,687
DaVita HealthCare Partners, Inc., Term Loan B, 3.75%, 6/24/2021			70,000		70,402
Goodyear Tire & Rubber Co., Second Lien Term Loan, 4.75%, 4/30/2019			220,000		221,616
HJ Heinz Co., Term Loan B2, 3.5%, 6/5/2020			247,500		249,637
MacDermid, Inc., First Lien Term Loan, 4.0%, 6/7/2020			54,450		54,552
MEG Energy Corp., Term Loan, 3.75%, 3/31/2020			256,710		257,433
NRG Energy, Inc., Term Loan B, 2.75%, 7/2/2018			117,827		117,753
Par Pharmaceutical Companies, Inc., Term Loan B2, 4.0%, 9/30/2019			117,324		117,324
Pilot Travel Centers LLC:
Term Loan B, 3.75%, 3/30/2018			89,374		89,652
Term Loan B2, 4.25%, 8/7/2019			334,050		335,511
Quebecor Media, Inc., Term Loan B1, 3.25%, 8/17/2020			89,325		88,339
Samson Investment Co., Second Lien Term Loan, 5.0%, 9/25/2018			175,000		175,066
Tallgrass Operations LLC:
Term Loan B, 4.25%, 11/13/2018			161,008		162,450
Term Delay Draw, 4.75%, 11/13/2017			50,000		50,344
Travelport LLC, Second Lien Term Loan, 9.5%, 1/29/2016			5,040		5,204
Valeant Pharmaceuticals International, Inc.:
Term Loan B, 3.75%, 2/13/2019			157,990		158,237
Term Loan B, 3.75%, 12/11/2019			133,304		133,373
Total Loan Participations and Assignments (Cost $2,989,135)					2,994,400

Municipal Bonds and Notes 1.6%
Chicago, IL, Airport Revenue, O'Hare International Airport, Series B, 6.0%, 1/1/2041			145,000		166,237
Massachusetts, State School Building Authority, Sales Tax Revenue, Qualified School Construction Bond, Series A, 4.885%, 7/15/2028			300,000		318,540
Orlando & Orange County, FL, Expressway Authority Revenue, Series C, 5.0%, 7/1/2040			145,000		154,782
Port Authority of New York & New Jersey, 4.926%, 10/1/2051			260,000		289,190
Total Municipal Bonds and Notes (Cost $850,516)					928,749

Convertible Bond 0.4%
Materials
GEO Specialty Chemicals, Inc., 144A, 7.5%, 3/31/2015 (Cost $119,305)			120,175		241,972
		Principal Amount ($)(a)		Value ($)

Preferred Security 0.1%
Materials
Hercules, Inc., 6.5%, 6/30/2029 (Cost $59,811)			95,000		85,975

	Shares		Value ($)

Common Stocks 0.0%
Consumer Discretionary 0.0%
Dawn Holdings, Inc.* (g)		1		4,366
Trump Entertainment Resorts, Inc.*		6		0
				4,366
Industrials 0.0%
Congoleum Corp.*		2,500		0
Materials 0.0%
GEO Specialty Chemicals, Inc.*		2,058		1,590
Total Common Stocks (Cost $25,217)				5,956

Preferred Stock 0.2%
Financials
Ally Financial, Inc., Series G, 144A, 7.0% (Cost $85,127)		89		89,670

Warrants 0.0%
Materials
GEO Specialty Chemicals, Inc., Expiration Date 3/31/2015*		11,138		8,526
Hercules Trust II, Expiration Date 3/31/2029*		85		547
Total Warrants (Cost $17,432)				9,073

Exchange-Traded Fund 4.9%
SPDR Barclays Convertible Securities (Cost $2,777,628)		58,300		2,944,150

	Contract Amount		Value ($)

Call Options Purchased 0.2%
Options on Interest Rate Swap Contracts
Pay Fixed Rate — 3.72% – Receive Floating — LIBOR, Swap Expiration Date 4/22/2026, Option Expiration Date 4/20/20161		1,300,000		28,066
Pay Fixed Rate — 4.19% – Receive Floating — LIBOR, Swap Expiration Date 2/3/2027, Option Expiration Date 2/1/20172		1,500,000		34,213
Pay Fixed Rate — 4.32% – Receive Floating — LIBOR, Swap Expiration Date 2/3/2027, Option Expiration Date 2/1/20173		1,400,000		28,088
Total Call Options Purchased (Cost $191,320)				90,367
	Contract Amount		Value ($)

Put Options Purchased 0.0%
Options on Interest Rate Swap Contracts
Receive Fixed Rate — 2.19% – Pay Floating — LIBOR, Swap Expiration Date 2/3/2027, Option Expiration Date 2/1/20172		1,500,000		11,638
Receive Fixed Rate — 2.32% – Pay Floating — LIBOR, Swap Expiration Date 2/3/2027, Option Expiration Date 2/1/20173		1,400,000		13,450
Total Put Options Purchased (Cost $98,573)				25,088

	Shares		Value ($)

Securities Lending Collateral 2.1%
Daily Assets Fund Institutional, 0.08% (h) (i) (Cost $1,252,899)		1,252,899		1,252,899

Cash Equivalents 9.9%
Central Cash Management Fund, 0.06% (h) (Cost $5,887,663)		5,887,663		5,887,663

	% of Net Assets			Value ($)

Total Investment Portfolio (Cost $59,265,290)†		103.2			61,472,162
Other Assets and Liabilities, Net (b)		(3.2	)		(1,921,405	)
Net Assets		100.0			59,550,757

The following table represents bonds that are in default:

Security	Coupon			Maturity Date	Principal Amount		Cost ($)		Value ($)
Energy Future Holdings Corp.*		6.5	%	11/15/2024	USD	100,000		58,139		75,500
Hellas Telecommunications Finance*		8.328	%	7/15/2015	EUR	109,187		32,169		0
								90,308		75,500

* Non-income producing security.

*** These securities are shown at their current rate as of June 30, 2014.

****Annualized yield at time of purchase; not a coupon rate.

† The cost for federal income tax purposes was $59,272,071. At June 30, 2014, net unrealized appreciation for all securities based on tax cost was $2,200,091. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $2,615,207 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $415,116.

(a) Principal amount stated in U.S. dollars unless otherwise noted.

(d) Government-backed debt issued by financial companies or government-sponsored enterprises.

(e) At June 30, 2014, this security has been pledged, in whole or in part, to cover initial margin requirements for open futures contracts.

(f) At June 30, 2014, this security has been pledged, in whole or in part, to cover initial margin requirements for open centrally cleared swaps.

(g) The Fund may purchase securities that are subject to legal or contractual restrictions on resale ("restricted securities"). Restricted securities are securities which 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 these securities is uncertain and there may be changes in the estimated value of these securities.

Schedule of Restricted Securities

Acquisition Date

Cost ($)

Value ($)

Value as % of Net Assets

Dawn Holdings, Inc.*

August 2013

5,273

4,366

.01

(h) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

(i) Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

CLO: Collateralized Loan Obligation

LIBOR: London Interbank Offered Rate

PIK: Denotes that all or a portion of the income is paid in-kind in the form of additional principal.

REIT: Real Estate Investment Trust

SPDR: Standard & Poor's Depositary Receipt

At June 30, 2014, open futures contracts purchased were as follows:

Futures

Currency

Expiration Date

Contracts

Notional Value ($)

Unrealized Appreciation ($)

10 Year U.S. Treasury Note

USD

9/19/2014

2,753,781

25,202

5 Year U.S. Treasury Note

USD

9/30/2014

5,734,125

33,415

Total unrealized appreciation

58,617

At June 30, 2014, open futures contracts sold were as follows:

Futures	Currency	Expiration Date	Contracts		Notional Value ($)		Unrealized Depreciation ($)
10 Year Canadian Government Bond	CAD	9/19/2014		19		2,421,274		(25,713	)
10 Year U.S. Treasury Note	USD	9/19/2014		26		3,254,469		(7,313	)
Euro-BTP Italian Government Bond	EUR	9/8/2014		9		1,555,005		(27,868	)
Euro-OAT French Government Bond	EUR	9/8/2014		14		2,693,989		(39,563	)
U.S. Treasury Long Bond	USD	9/19/2014		7		960,313		(2,695	)
Ultra Long U.S. Treasury Bond	USD	9/19/2014		9		1,349,438		(17,267	)
Total unrealized depreciation								(120,419	)

At June 30, 2014, open written options contracts were as follows:

Options on Interest Rate Swap Contracts	Swap Effective/ Expiration Date	Contract Amount			Option Expiration Date	Premiums Received ($)		Value ($) (j)
Call Options Receive Fixed — 3.19% – Pay Floating — LIBOR	2/3/2017 2/3/2027		700,000	2	2/1/2017		50,400		(39,614	)
Receive Fixed — 3.32% – Pay Floating — LIBOR	2/3/2017 2/3/2027		700,000	3	2/1/2017		50,631		(35,539	)
Receive Fixed — 4.22% – Pay Floating — LIBOR	4/22/2016 4/22/2026		1,300,000	1	4/20/2016		46,345		(14,895	)
Total Call Options							147,376		(90,048	)
Put Options Pay Fixed — 3.19% – Receive Floating — LIBOR	2/3/2017 2/3/2027		700,000	2	2/1/2017		50,400		(22,203	)
Pay Fixed — 3.32% – Receive Floating — LIBOR	2/3/2017 2/3/2027		700,000	3	2/1/2017		50,631		(25,686	)
Total Put Options							101,031		(47,889	)
Total							248,407		(137,937	)

(j) Unrealized appreciation on written options on interest rate swap contracts at June 30, 2014 was $110,470.

At June 30, 2014, open credit default swap contracts sold were as follows:

Bilateral Swaps
Effective/ Expiration Dates	Notional Amount ($) (k)			Fixed Cash Flows Received			Underlying Debt Obligation/ Quality Rating (l)	Value ($)		Upfront Payments Paid/ (Received) ($)			Unrealized Appreciation ($)
6/21/2010 9/20/2015		90,000	4		5.0	%	Ford Motor Co., 6.5%, 8/1/2018, BBB–		5,509		(391	)		5,900
3/21/2011 6/20/2016		120,000	2		5.0	%	HCA, Inc., 6.375%, 1/15/2015, B–		10,368		1,772			8,596
12/20/2011 3/20/2017		60,000	5		5.0	%	CIT Group, Inc., 5.5%, 2/15/2019, BB–		6,664		1,376			5,288
9/20/2012 12/20/2017		75,000	6		5.0	%	General Motors Corp., 3.3%, 12/20/2017, BB+		10,727		3,872			6,855
6/20/2013 9/20/2018		40,000	5		5.0	%	DISH DBS Corp., 6.75%, 6/1/2021, BB–		6,084		3,018			3,066
6/20/2013 9/20/2018		125,000	7		5.0	%	HCA, Inc., 8.0%, 10/1/2018, B–		17,215		8,438			8,777
6/20/2013 9/20/2018		100,000	4		5.0	%	Sprint Communications, Inc., 6.0%, 12/1/2016, BB–		12,322		5,016			7,306
Total unrealized appreciation														45,788

(k) The maximum potential amount of future undiscounted payments that the Fund could be required to make under a credit default swap contract would be the notional amount of the contract. These potential amounts would be partially offset by any recovery values of the referenced debt obligation or net amounts received from the settlement of buy protection credit default swap contracts entered into by the Fund for the same referenced debt obligation, if any.

(l) The quality ratings represent the higher of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") credit ratings and are unaudited.

At June 30, 2014, open interest rate swap contracts were as follows:

Centrally Cleared Swaps
Effective/ Expiration Dates	Notional Amount ($)		Cash Flows Paid by the Fund	Cash Flows Received by the Fund	Value ($)			Unrealized Appreciation/ (Depreciation) ($)
12/30/2014 12/30/2016		1,900,000	Fixed — 1.173%	Floating — LIBOR		(9,758	)		(9,956	)
12/30/2014 12/30/2019		500,000	Floating — LIBOR	Fixed — 2.522%		12,683			13,111
12/30/2014 12/30/2024		2,300,000	Fixed — 3.524%	Floating — LIBOR		(147,415	)		(147,188	)
12/30/2014 12/30/2034		100,000	Floating — LIBOR	Fixed — 4.01%		10,697			11,394
12/30/2014 12/30/2044		200,000	Floating — LIBOR	Fixed — 4.081%		26,639			26,887
Total net unrealized depreciation									(105,752	)

Counterparties:

1 Nomura International PLC

2 JPMorgan Chase Securities, Inc.

3 BNP Paribas

4 Bank of America

5 Credit Suisse

6 UBS AG

7 Goldman Sachs & Co.

At June 30, 2014, the Fund had the following open forward foreign currency exchange contracts:

Contracts to Deliver

In Exchange For

Settlement Date

Unrealized Appreciation ($)

Counterparty

USD

1,770,812

EUR

1,300,000

7/21/2014

9,406

Australia & New Zealand Banking Group Ltd.

USD

689,530

CAD

752,000

7/23/2014

14,859

Canadian Imperial Bank of Commerce

USD

1,775,745

JPY

180,000,000

8/4/2014

1,504

Macquarie Bank Ltd.

USD

289,619

MXN

3,800,000

8/18/2014

2,341

Commonwealth Bank of Australia

USD

570,355

ZAR

6,200,000

8/18/2014

8,113

Commonwealth Bank of Australia

ZAR

6,200,000

USD

578,794

8/18/2014

326

Commonwealth Bank of Australia

ZAR

560,000

USD

52,522

8/18/2014

273

Nomura International PLC

RUB

10,050,000

USD

291,859

9/30/2014

2,108

Societe Generale

Total unrealized appreciation

38,930

Contracts to Deliver		In Exchange For		Settlement Date	Unrealized Depreciation ($)			Counterparty
USD	1,473,039	NOK	8,900,000	7/21/2014		(23,089	)	Societe Generale
USD	595,898	NOK	3,600,000	7/21/2014		(9,401	)	Citigroup. Inc.
USD	2,099,640	NZD	2,400,000	7/21/2014		(1,945	)	Citigroup. Inc.
NZD	1,700,000	USD	1,474,369	7/21/2014		(11,498	)	Australia & New Zealand Banking Group Ltd.
NOK	6,300,000	USD	1,025,416	7/21/2014		(954	)	Barclays Bank PLC
NOK	6,300,000	USD	1,025,503	7/21/2014		(866	)	Societe Generale
NZD	700,000	USD	607,716	7/21/2014		(4,112	)	Citigroup. Inc.
AUD	1,154,230	USD	1,073,188	7/23/2014		(13,559	)	Nomura International PLC
SGD	1,641,500	USD	1,313,554	7/23/2014		(2,918	)	Commonwealth Bank of Australia
CAD	2,095,672	USD	1,902,096	7/23/2014		(60,891	)	Barclays Bank PLC
EUR	567,300	USD	769,957	7/23/2014		(6,908	)	Australia & New Zealand Banking Group Ltd.
Total unrealized depreciation						(136,141	)

Currency Abbreviations

ARS Argentine Peso

AUD Australian Dollar

BRL Brazilian Real

CAD Canadian Dollar

EUR Euro

JPY Japanese Yen

MXN Mexican Peso

NOK Norwegian Krone

NZD New Zealand Dollar

RUB Russian Ruble

SGD Singapore Dollar

USD United States Dollar

ZAR South African Rand

For information on the Fund's policy and additional disclosures regarding options purchased, futures contracts, credit default swap contracts, interest rate swap contracts, forward foreign currency exchange contracts and written option contracts, please refer to Note B in the accompanying Notes to Financial Statements.

Fair Value Measurements

Assets	Level 1			Level 2			Level 3		Total

Fixed Income Investments (m)
Corporate Bonds	$	—		$	33,419,218		$	0	$	33,419,218
Asset-Backed		—			956,952			—		956,952
Commercial Mortgage-Backed Securities		—			1,962,659			—		1,962,659
Collateralized Mortgage Obligations		—			1,881,887			—		1,881,887
Government & Agency Obligations		—			8,695,484			—		8,695,484
Loan Participations and Assignments		—			2,920,063			74,337		2,994,400
Municipal Bonds and Notes		—			928,749			—		928,749
Convertible Bond		—			—			241,972		241,972
Preferred Security		—			85,975			—		85,975
Common Stocks (m)		—			—			5,956		5,956
Preferred Stock		—			89,670			—		89,670
Warrants		—			—			9,073		9,073
Exchange-Traded Fund		2,944,150			—			—		2,944,150
Short-Term Investments (m)		7,140,562			—			—		7,140,562
Derivatives (n) Purchased Options		—			115,455			—		115,455
Futures Contracts		58,617			—			—		58,617
Credit Default Swap Contracts		—			45,788			—		45,788
Interest Rate Swap Contracts		—			51,392			—		51,392
Forward Foreign Currency Exchange Contracts		—			38,930			—		38,930
Total	$	10,143,329		$	51,192,222		$	331,338	$	61,666,889
Liabilities	Level 1			Level 2			Level 3		Total

Derivatives (n) Futures Contracts	$	(120,419	)	$	—		$	—	$	(120,419	)
Written Options		—			(137,937	)		—		(137,937	)
Interest Rate Swap Contracts		—			(157,144	)		—		(157,144	)
Forward Foreign Currency Exchange Contracts		—			(136,141	)		—		(136,141	)
Total	$	(120,419	)	$	(431,222	)	$	—	$	(551,641	)

During the period ended June 30, 2014, the amount of transfers between Level 2 and Level 3 was $74,337. The investment was transferred from Level 2 to Level 3 because of the lack of observable market data due to a decrease in market activity.

Transfers between price levels are recognized at the beginning of the reporting period.

(m) See Investment Portfolio for additional detailed categorizations.

(n) Derivatives include value of options purchased, unrealized appreciation (depreciation) on futures contracts, credit default swap contracts, interest rate swap contracts and forward foreign currency exchange contracts; and written options, at value.

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

Statement of Assets and Liabilities

as of June 30, 2014 (Unaudited)
Assets
Investments: Investments in non-affiliated securities, at value (cost $52,124,728) — including $1,197,256 of securities loaned	$	54,331,600
Investment in Daily Assets Fund Institutional (cost $1,252,899)*		1,252,899
Investment in Central Cash Management Fund (cost $5,887,663)		5,887,663
Total investments in securities, at value (cost $59,265,290)		61,472,162
Foreign currency, at value (cost $423,279)		424,572
Receivable for investments sold		1,046,928
Receivable for investments sold — when-issued/delayed delivery securities		39,744
Receivable for Fund shares sold		128
Interest receivable		639,328
Receivable for variation margin on futures contracts		4,180
Receivable for variation margin on centrally cleared swaps		6,654
Unrealized appreciation on bilateral swap contracts		45,788
Unrealized appreciation on forward foreign currency exchange contracts		38,930
Upfront payments paid on bilateral swap contracts		23,492
Other assets		605
Total assets	$	63,742,511
Liabilities
Cash overdraft		143,206
Payable upon return of securities loaned		1,252,899
Payable for investments purchased		2,229,489
Payable for investments purchased — when-issued/delayed delivery securities		139,906
Payable for Fund shares redeemed		51,581
Options written, at value (premiums received $248,407)		137,937
Unrealized depreciation on forward foreign currency exchange contracts		136,141
Upfront payments received on bilateral swap contracts		391
Accrued management fee		13,489
Accrued Trustees' fees		573
Other accrued expenses and payables		86,142
Total liabilities		4,191,754
Net assets, at value	$	59,550,757
Net Assets Consist of
Undistributed net investment income		988,899
Net unrealized appreciation (depreciation) on: Investments		2,206,872
Swap contracts		(59,964	)
Futures		(61,802	)
Foreign currency		(95,255	)
Written options		110,470
Accumulated net realized gain (loss)		(1,105,169	)
Paid-in capital		57,566,706
Net assets, at value	$	59,550,757
Class A Net Asset Value, offering and redemption price per share ($59,550,757 ÷ 5,183,668 outstanding shares of beneficial interest, no par value, unlimited number of shares authorized)	$	11.49

* Represents collateral on securities loaned.

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

Statement of Operations

for the six months ended June 30, 2014 (Unaudited)
Investment Income
Income: Interest	$	1,491,595
Dividends		21,026
Income distributions — Central Cash Management Fund		705
Securities lending income, including income from Daily Assets Fund Institutional, net of borrower rebates		2,031
Total income		1,515,357
Expenses: Management fee		161,443
Administration fee		29,353
Services to shareholders		424
Custodian fee		35,067
Professional fees		40,952
Reports to shareholders		13,941
Pricing fee		25,645
Trustees' fees and expenses		2,293
Other		1,779
Total expenses before expense reductions		310,897
Expense reductions		(87,682	)
Total expenses after expense reductions		223,215
Net investment income		1,292,142
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from: Investments		(426,572	)
Swap contracts		15,275
Futures		(70,584	)
Foreign currency		413,907
		(67,974	)
Change in net unrealized appreciation (depreciation) on: Investments		1,974,254
Swap contracts		(109,289	)
Unfunded loan commitment		125
Futures		(57,685	)
Written options		99,763
Foreign currency		(346,572	)
		1,560,596
Net gain (loss)		1,492,622
Net increase (decrease) in net assets resulting from operations	$	2,784,764

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

Statement of Changes in Net Assets

Increase (Decrease) in Net Assets	Six Months Ended June 30, 2014 (Unaudited)			Year Ended December 31, 2013
Operations: Net investment income	$	1,292,142		$	2,911,005
Operations: Net investment income	$	1,292,142		$	2,911,005
Net realized gain (loss)		(67,974	)		(1,186,626	)
Change in net unrealized appreciation (depreciation)		1,560,596			(2,619,441	)
Net increase (decrease) in net assets resulting from operations		2,784,764			(895,062	)
Distributions to shareholders from: Net investment income: Class A		(2,905,554	)		(3,703,120	)
Net realized gains: Class A		—			(2,113,421	)
Total distributions		(2,905,554	)		(5,816,541	)
Fund share transactions: Class A Proceeds from shares sold		1,959,692			8,233,284
Reinvestment of distributions		2,905,554			5,816,541
Payments for shares redeemed		(6,150,708	)		(19,881,192	)
Net increase (decrease) in net assets from Class A share transactions		(1,285,462	)		(5,831,367	)
Increase (decrease) in net assets		(1,406,252	)		(12,542,970	)
Net assets at beginning of period		60,957,009			73,499,979
Net assets at end of period (including undistributed net investment income of $988,899 and $2,602,311, respectively)	$	59,550,757		$	60,957,009
Other Information
Class A Shares outstanding at beginning of period		5,284,551			5,832,490
Shares sold		171,230			666,814
Shares issued to shareholders in reinvestment of distributions		258,501			491,677
Shares redeemed		(530,614	)		(1,706,430	)
Net increase (decrease) in Class A shares		(100,883	)		(547,939	)
Shares outstanding at end of period		5,183,668			5,284,551

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

Financial Highlights

				Years Ended December 31,
Class A	Six Months Ended 6/30/14 (Unaudited)			2013			2012			2011			2010			2009
Selected Per Share Data
Net asset value, beginning of period	$	11.53		$	12.60		$	11.90		$	11.96		$	11.61		$	10.03
Income (loss) from investment operations: Net investment incomea		.25			.49			.57			.63			.66			.63
Net realized and unrealized gain (loss)		.30			(.59	)		.92			(.01	)		.47			1.50
Total from investment operations		.55			(.10	)		1.49			.62			1.13			2.13
Less distributions from: Net investment income		(.59	)		(.62	)		(.76	)		(.68	)		(.78	)		(.55	)
Net realized gains		—			(.35	)		(.03	)		—			—			—
Total distributions		(.59	)		(.97	)		(.79	)		(.68	)		(.78	)		(.55	)
Net asset value, end of period	$	11.49		$	11.53		$	12.60		$	11.90		$	11.96		$	11.61
Total Return (%)b		4.87	**		(1.04	)		13.08			5.31			10.05			22.73
Ratios to Average Net Assets and Supplemental Data
Net assets, end of period ($ millions)		60			61			73			69			76			74
Ratio of expenses before expense reductions (%)		1.06	*		1.02			.99			.99			.95			.86
Ratio of expenses after expense reductions (%)		.76	*		.74			.77			.79			.86			.80
Ratio of net investment income (%)		4.40	*		4.16			4.72			5.38			5.62			5.96
Portfolio turnover rate (%)		59	**		183			164			144			167			370
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. * Annualized ** Not annualized

Notes to Financial Statements (Unaudited)

A. Organization and Significant Accounting Policies

Deutsche Unconstrained Income VIP (formerly DWS Unconstrained Income VIP) (the "Fund") is a diversified series of Deutsche Variable Series II (formerly DWS Variable Series II) (the "Trust"), which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.

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.

Debt securities and loan participations and assignments are valued at prices supplied by independent pricing services approved by the Fund's Board. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers and loan participations and assignments are valued at the mean of the most recent bid and ask quotations or evaluated prices, as applicable, obtained from one or more broker-dealers. These securities are generally categorized as Level 2.

Equity securities and exchange-traded funds ("ETFs") are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities or ETFs for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities and ETFs are generally categorized as Level 1.

Futures contracts are generally valued at the settlement prices established each day on the exchange on which they are traded and are categorized as Level 1.

Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies and are categorized as Level 2.

Disclosure about the classification of fair value measurements is included in a table following the Fund's Investment Portfolio.

Securities Lending. Deutsche Bank AG, as lending agent, lends securities of the Fund to certain financial institutions under the terms of the Security Lending Agreement. The Fund retains benefits of owning the securities it has loaned and continues to receive interest and dividends generated by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value at least equal to the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. If the Fund is not able to recover securities lent, the Fund may sell the collateral and purchase a replacement investment in the market, incurring the risk that the value of the replacement security is greater than the value of the collateral. The Fund is also subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

As of June 30, 2014, the Fund had securities on loan. The value of the related collateral exceeded the value of the securities loaned at period end.

When-Issued/Delayed Delivery Securities. The Fund may purchase or sell securities with delivery or payment to occur at a later date beyond the normal settlement period. At the time the Fund enters into a commitment to purchase or sell a security, the transaction is recorded and the value of the transaction is reflected in the net asset value. The price of such security and the date when the security will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the security may vary with market fluctuations. At the time the Fund enters into this type of transaction, it is required to segregate cash or other liquid assets at least equal to the amount of the commitment. Additionally, the Fund may be required to post securities and/or cash collateral in accordance with the terms of the commitment.

At December 31, 2013, the Fund had net tax basis capital loss carryforwards of approximately $1,042,000, which may be applied against realized net taxable capital gains indefinitely, including short-term losses ($671,000) and long-term losses ($371,000).

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

The tax character of current year distributions will be determined at the end of the current fiscal year.

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

Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Proceeds from litigation payments, if any, are included in net realized gain (loss) from investments. All discounts and premiums are accreted/amortized for both tax and financial reporting purposes for the Fund, with the exception of securities in default of principal.

B. Derivative Instruments

Options. An option contract is a contract in which the writer (seller) of the option grants the buyer of the option, upon payment of a premium, the right to purchase from (call option), or sell to (put option), the writer a designated instrument at a specified price within a specified period of time. The Fund may write or purchase interest rate swaption agreements which are options to enter into a pre-defined swap agreement. The interest rate swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer upon exercise. Certain options, including options on indices, will require cash settlement by the Fund if the option is exercised. For the six months ended June 30, 2014, the Fund entered into options on interest rate swaps in order to hedge against potential adverse interest rate movements of portfolio assets.

If the Fund writes a covered call option, the Fund foregoes, in exchange for the premium, the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price. If the Fund writes a put option it accepts the risk of a decline in the value of the underlying security below the exercise price. Over-the-counter options have the risk of the potential inability of counterparties to meet the terms of their contracts. The Fund's maximum exposure to purchased options is limited to the premium initially paid. In addition, certain risks may arise upon entering into option contracts including the risk that an illiquid secondary market will limit the Fund's ability to close out an option contract prior to the expiration date and that a change in the value of the option contract may not correlate exactly with changes in the value of the securities.

A summary of the open purchased option contracts as of June 30, 2014 is included in the Fund's Investment Portfolio. A summary of open written option contracts is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in written option contracts had a total value generally indicative of a range from approximately $138,000 to $238,000, and purchased option contracts had a total value generally indicative of a range from approximately $115,000 to $276,000.

Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). For the six months ended June 30, 2014, the Fund entered into interest rate futures to gain exposure to different parts of the yield curve while managing overall duration and for non-hedging purposes to seek to enhance potential gains.

A summary of the open futures contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in futures contracts purchased had a total notional value generally indicative of a range from approximately $357,000 to $8,488,000, and the investment in futures contracts sold had a total notional value generally indicative of a range from approximately $5,598,000 to $12,234,000.

Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract ("forward currency contract") is a commitment to purchase or sell a foreign currency at the settlement date at a negotiated rate. For the six months ended June 30, 2014, the Fund entered into forward currency contracts in order to hedge against anticipated currency market changes and for non-hedging purposes to seek to enhance potential gains.

A summary of the open forward currency contracts as of June 30, 2014 is included in a table following the Fund's Investment Portfolio. For the six months ended June 30, 2014, the investment in forward currency contracts short vs. U.S. dollars had a total contract value generally indicative of a range from approximately $9,544,000 to $22,228,000, and the investment in forward currency contracts long vs. U.S. dollars had a total contract value generally indicative of a range from approximately $2,864,000 to $20,021,000. The investment in forward currency contracts long vs. other foreign currencies sold had a total contract value generally indicative of a range from $0 to approximately $5,199,000.

Asset Derivatives	Purchased Options		Forward Contracts		Swap Contracts		Futures Contracts		Total
Interest Rate Contracts (a) (b)	$	115,455	$	—	$	51,392	$	58,617	$	225,464
Credit Contracts (b)		—		—		45,788		—		45,788
Foreign Exchange Contracts (c)		—		38,930		—		—		38,930
	$	115,455	$	38,930	$	97,180	$	58,617	$	310,182
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Includes cumulative appreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. (b) Investments in securities, at value (includes purchased options) and unrealized appreciation on bilateral swap contracts, respectively (c) Unrealized appreciation on forward foreign currency exchange contracts

Liability Derivatives	Written Options			Forward Contracts			Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a) (b)	$	(137,937	)	$	—		$	(157,144	)	$	(120,419	)	$	(415,500	)
Foreign Exchange Contracts (c)		—			(136,141	)		—			—			(136,141	)
	$	(137,937	)	$	(136,141	)	$	(157,144	)	$	(120,419	)	$	(551,641	)
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts: (a) Includes cumulative depreciation of futures and centrally cleared swap contracts as disclosed in the Investment Portfolio. Unsettled variation margin is disclosed separately within the Statement of Assets and Liabilities. (b) Options written, at value (c) Unrealized depreciation on forward foreign currency exchange contracts

Realized Gain (Loss)	Forward Contracts		Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a)	$	—	$	(3,036	)	$	(70,584	)	$	(73,620	)
Credit Contracts (a)		—		18,311			—			18,311
Foreign Exchange Contracts (b)		386,528		—			—			386,528
	$	386,528	$	15,275			(70,584	)	$	331,219
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Net realized gain (loss) from swap contracts and futures, respectively (b) Net realized gain (loss) from foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)

Change in Net Unrealized Appreciation (Depreciation)	Purchased Options			Written Options		Forward Contracts			Swap Contracts			Futures Contracts			Total
Interest Rate Contracts (a)	$	(160,242	)	$	99,763	$	—		$	(109,256	)	$	(57,685	)	$	(227,420	)
Credit Contracts (a)		—			—		—			(33	)		—			(33	)
Foreign Exchange Contracts (b)		—			—		(339,314	)		—			—			(339,314	)
	$	(160,242	)	$	99,763	$	(339,314	)	$	(109,289	)	$	(57,685	)	$	(566,767	)
Each of the above derivatives is located in the following Statement of Operations accounts: (a) Change in net unrealized appreciation (depreciation) on investments (includes purchased options), written options, swap contracts and futures, respectively (b) Change in net unrealized appreciation (depreciation) on foreign currency (Statement of Operations includes both forward currency contracts and foreign currency transactions)

As of June 30, 2014, the Fund has transactions subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statements of Assets and Liabilities to the net amounts by derivative type, including any collateral exposure, is included in the following tables:

Counterparty	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Collateral Received		Net Amount of Derivative Assets
Australia & New Zealand Banking Group Ltd.	$	9,406	$	(9,406	)	$	—	$	—
Bank of America		13,206		—			—		13,206
BNP Paribas		41,538		(41,538	)		—		—
Canadian Imperial Bank of Commerce		14,859		—			—		14,859
Commonwealth Bank of Australia		10,780		(2,918	)		—		7,862
Credit Suisse		8,354		—			—		8,354
Goldman Sachs & Co.		8,777		—			—		8,777
JPMorgan Chase Securities, Inc.		54,447		(54,447	)		—		—
Macquarie Bank Ltd.		1,504		—			—		1,504
Nomura International PLC		28,339		(28,339	)		—		—
Societe Generale		2,108		(2,108	)		—		—
UBS AG		6,855		—			—		6,855
	$	200,173	$	(138,756	)	$	—	$	61,417
Counterparty	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments and Derivatives Available for Offset			Collateral Pledged		Net Amount of Derivative Liabilities
Australia & New Zealand Banking Group Ltd.	$	18,406	$	(9,406	)	$	—	$	9,000
Barclays Bank PLC		61,845		—			—		61,845
BNP Paribas		61,225		(41,538	)		—		19,687
Citigroup, Inc.		15,458		—			—		15,458
Commonwealth Bank of Australia		2,918		(2,918	)		—		—
JPMorgan Chase Securities, Inc.		61,817		(54,447	)		—		7,370
Nomura International PLC		28,454		(28,339	)		—		115
Societe Generale		23,955		(2,108	)		—		21,847
	$	274,078	$	(138,756	)	$	—	$	135,322

C. Purchases and Sales of Securities

During the six months ended June 30, 2014, purchases and sales of investment transactions (excluding short-term investments and U.S. Treasury obligations) aggregated $28,874,174 and $34,513,230, respectively. Purchases and sales of U.S. Treasury obligations aggregated $5,316,804 and $7,552,263, respectively.

For the six months ended June 30, 2014, transactions for written options on interest rate swap contracts were as follows:

	Contract Amount		Premiums
Outstanding, beginning of period		4,100,000	$	248,407
Outstanding, end of period		4,100,000	$	248,407

D. Related Parties

First $250 million	.550	%
Next $750 million	.520	%
Next $1.5 billion	.500	%
Next $2.5 billion	.480	%
Next $2.5 billion	.450	%
Next $2.5 billion	.430	%
Next $2.5 billion	.410	%
Over $12.5 billion	.390	%

For the six months ended June 30, 2014, fees waived and/or expenses reimbursed amounted to $87,682.

Security Lending Fees. Deutsche Bank AG serves as securities lending agent for the Fund. For the six months ended June 30, 2014, the Fund incurred securities lending agent fees to Deutsche Bank AG in the amount of $179.

E. Investing in High-Yield Securities

F. Investing in Emerging Markets

G. Ownership of the Fund

At June 30, 2014, two participating insurance companies were owners of record of 10% or more of the total outstanding Class A shares of the Fund, each owning 65% and 32%.

H. Line of Credit

I. Fund Name Change

Effective August 11, 2014, the "DWS Funds" were rebranded "Deutsche Funds."

Information About Your Fund's Expenses (Unaudited)

As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees and other Fund expenses. Examples of transaction costs include contract charges and account maintenance fees, which are not shown in this section. The following tables are intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. In the most recent six-month period, the Fund limited these expenses; had it not done so, expenses would have been higher. The example in the table is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (January 1, 2014 to June 30, 2014).

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

Expenses and Value of a $1,000 Investment for the six months ended June 30, 2014
Actual Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,048.70
Expenses Paid per $1,000*	$	3.86
Hypothetical 5% Fund Return	Class A
Beginning Account Value 1/1/14	$	1,000.00
Ending Account Value 6/30/14	$	1,021.03
Expenses Paid per $1,000*	$	3.81

Annualized Expense Ratio	Class A
Deutsche Variable Series II — Deutsche Unconstrained Income VIP	.76%

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

Proxy Voting

Advisory Agreement Board Considerations and Fee Evaluation

The Board of Trustees approved the renewal of DWS Unconstrained Income VIP's investment management agreement (the "Agreement") with Deutsche Investment Management Americas Inc. ("DIMA") in September 2013.

In terms of the process that the Board followed prior to approving the Agreement, shareholders should know that:

— In September 2013, all but one of the Fund's Trustees were independent of DIMA and its affiliates.

In connection with the contract review process, the Contract Committee and the Board considered the factors discussed below, among others. The Board also considered that DIMA and its predecessors have managed the Fund since its inception, and the Board believes that a long-term relationship with a capable, conscientious advisor is in the best interests of the Fund. The Board considered, generally, that shareholders chose to invest or remain invested in the Fund knowing that DIMA managed the Fund, and that the Agreement was approved by the Fund's shareholders. DIMA is part of Deutsche Bank AG, a major global banking institution that is engaged in a wide range of financial services. The Board believes that there are advantages to being part of a global asset management business that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts with research capabilities in many countries throughout the world.

Nature, Quality and Extent of Services. The Board considered the terms of the Agreement, including the scope of advisory services provided under the Agreement. The Board noted that, under the Agreement, DIMA provides portfolio management services to the Fund and that, pursuant to a separate administrative services agreement, DIMA provides administrative services to the Fund. The Board considered the experience and skills of senior management and investment personnel, the resources made available to such personnel, the ability of DIMA to attract and retain high-quality personnel, and the organizational depth and stability of DIMA. The Board reviewed the Fund's performance over short-term and long-term periods and compared those returns to various agreed-upon performance measures, including market indices and a peer universe compiled by the Fee Consultant using information supplied by Morningstar Direct ("Morningstar"), an independent fund data service. The Board also noted that it has put into place a process of identifying "Focus Funds" (e.g., funds performing poorly relative to their benchmark or a peer universe compiled by an independent fund data service), and receives more frequent reporting and information from DIMA regarding such funds, along with DIMA's remedial plans to address underperformance. The Board believes this process is an effective manner of identifying and addressing underperforming funds. Based on the information provided, the Board noted that for the one-, three- and five-year periods ended December 31, 2012, the Fund's performance (Class A shares) was in the 2nd quartile, 2nd quartile and 1st quartile, respectively, of the applicable Morningstar universe (the 1st quartile being the best performers and the 4th quartile being the worst performers). The Board also observed that the Fund has outperformed its benchmark in the one-, three- and five-year periods ended December 31, 2012.

Fees and Expenses. The Board considered the Fund's investment management fee schedule, operating expenses and total expense ratios, and comparative information provided by Lipper Inc. ("Lipper") and the Fee Consultant regarding investment management fee rates paid to other investment advisors by similar funds (1st quartile being the most favorable and 4th quartile being the least favorable). With respect to management fees paid to other investment advisors by similar funds, the Board noted that the contractual fee rates paid by the Fund, which include a 0.10% fee paid to DIMA under the Fund's administrative services agreement, were equal to the median of the applicable Lipper peer group (based on Lipper data provided as of December 31, 2012). The Board noted that the Fund's Class A shares total (net) operating expenses were expected to be higher than the median (3rd quartile) of the applicable Lipper expense universe (based on Lipper data provided as of December 31, 2012, and analyzing Lipper expense universe Class A (net) expenses less any applicable 12b-1 fees) ("Lipper Universe Expenses"). The Board considered the Fund's management fee rate as compared to fees charged by DIMA to comparable funds and considered differences between the Fund and the comparable funds. The Board also considered how the Fund's total (net) operating expenses compared to the total (net) operating expenses of a more customized peer group selected by Lipper (based on such factors as asset size). The Board also noted that the expense limitation agreed to by DIMA helped to ensure that the Fund's total (net) operating expenses would remain competitive.

On the basis of the information provided, the Board concluded that management fees were reasonable and appropriate in light of the nature, quality and extent of services provided by DIMA.

Economies of Scale. The Board considered whether there are economies of scale with respect to the management of the Fund and whether the Fund benefits from any economies of scale. The Board noted that the Fund's management fee schedule includes fee breakpoints. The Board concluded that the Fund's fee schedule represents an appropriate sharing between the Fund and DIMA of such economies of scale as may exist in the management of the Fund at current asset levels.

DeAWM Distributors, Inc.

222 South Riverside Plaza

Chicago, IL 60606

(800) 621-1148

VS2UI-3 (R-028389-3 8/14)

Deutsche Variable Series II – ‘N-CSRS’ for 6/30/14

On: Thursday, 8/21/14, at 11:49am ET · Effective: 8/21/14 · For: 6/30/14 · Accession #: 88053-14-1103 · File #: 811-05002

Previous ‘N-CSRS’: ‘N-CSRS’ on 8/22/13 for 6/30/13 · Next: ‘N-CSRS’ on 8/24/15 for 6/30/15 · Latest: ‘N-CSRS’ on 8/25/23 for 6/30/23

Certified Semi-Annual Shareholder Report of a Management Investment Company — Form N-CSR
Filing Table of Contents

N-CSRS — Deutsche Variable Series Ii

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

Date of fiscal year end:	12/31

Date of reporting period:	6/30/2014


ITEM 2.	CODE OF ETHICS

	Not applicable.

ITEM 3.	AUDIT COMMITTEE FINANCIAL EXPERT

	Not applicable

ITEM 4.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

	Not applicable

ITEM 5.	AUDIT COMMITTEE OF LISTED REGISTRANTS

	Not applicable

ITEM 6.	SCHEDULE OF INVESTMENTS

	Not applicable

ITEM 7.	DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

	Not applicable

ITEM 8.	PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

	Not applicable

ITEM 9.	PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

	Not applicable

ITEM 10.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	There were no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board. The primary function of the Nominating and Governance Committee is to identify and recommend individuals for membership on the Board and oversee the administration of the Board Governance Guidelines. Shareholders may recommend candidates for Board positions by forwarding their correspondence by U.S. mail or courier service to Kenneth C. Froewiss, Independent Chairman, Deutsche Mutual Funds, P.O. Box 390601, Cambridge, MA 02139.

ITEM 11.	CONTROLS AND PROCEDURES

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

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

ITEM 12.	EXHIBITS

	(a)(1)	Not applicable

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

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

Registrant:	Deutsche Variable Series II


By:	/s/*Brian E. Binder* Brian E. Binder President

Date:	August 20, 2014

This ‘N-CSRS’ Filing	Date	Other Filings

	12/31/17
	12/31/16
	12/31/15
	4/30/15
	12/31/14
	9/30/14
Filed on / Effective on:	8/21/14
	8/20/14
	8/11/14
For Period End:	6/30/14	485BXT, N-MFP, N-PX, NSAR-A
	5/1/14	485BPOS, 497, 497K
	4/30/14	497K, N-MFP
	1/1/14
	12/31/13	24F-2NT, N-CSR, N-MFP, NSAR-B
	11/1/13
	12/31/12	24F-2NT, N-CSR, N-MFP, NSAR-B
	12/31/09	24F-2NT, N-CSR, NSAR-B
	5/31/09
	5/18/09
	2/2/09
	1/31/09
		List all Filings

ITEM 1.	REPORT TO STOCKHOLDERS

Deutsche Variable Series II – ‘N-CSRS’ for 6/30/14

On: Thursday, 8/21/14, at 11:49am ET · Effective: 8/21/14 · For: 6/30/14 · Accession #: 88053-14-1103 · File #: 811-05002

Previous ‘N-CSRS’: ‘N-CSRS’ on 8/22/13 for 6/30/13 · Next: ‘N-CSRS’ on 8/24/15 for 6/30/15 · Latest: ‘N-CSRS’ on 8/25/23 for 6/30/23

Certified Semi-Annual Shareholder Report of a Management Investment Company — Form N-CSRFiling Table of Contents

N-CSRS — Deutsche Variable Series Ii

This is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

Certified Semi-Annual Shareholder Report of a Management Investment Company — Form N-CSR
Filing Table of Contents