Filed electronically with the Securities and Exchange Commission
                              on December 27, 2007

                                                               File No. 2-21789
                                                               File No. 811-1236

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM N-1A


             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933    /___/

                           Pre-Effective Amendment No.____              /___/
                         Post-Effective Amendment No. 71                / X /
                                     and/or
                        REGISTRATION STATEMENT UNDER THE
                         INVESTMENT COMPANY ACT OF 1940                 /___/

                                Amendment No. 71                        / X /


                                DWS BALANCED FUND
                                -----------------
               (Exact Name of Registrant as Specified in Charter)

                  222 South Riverside Plaza, Chicago, IL 60606
                  --------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's Telephone Number, including Area Code: 312-537-7000

                            John Millette, Secretary
                                DWS Balanced Fund
                    Two International Place, Boston, MA 02110
                    -----------------------------------------
                     (Name and Address of Agent for Service)

                                    Copy to:
                              David A. Sturms, Esq.
                     Vedder, Price, Kaufman & Kammholz, P.C.
                            222 North LaSalle Street
                                Chicago, IL 60601

It is proposed that this filing will become effective (check appropriate box):

/___/    Immediately upon filing pursuant to paragraph (b)
/___/    On __________________ pursuant to paragraph (b)
/___/    60 days after filing pursuant to paragraph (a)(1)
/ X /    On March 1, 2008 pursuant to paragraph (a)(1)
/___/    75 days after filing pursuant to paragraph (a)(2)
/___/    On __________________ pursuant to paragraph (a)(2) of Rule 485

         If appropriate, check the following box:
/___/    This post-effective amendment designates a new effective date for a
         previously filed post-effective amendment.


<PAGE>



                                 MARCH 1, 2008








                                   PROSPECTUS
                              ------------------
                               CLASSES A, B AND C

                               DWS BALANCED FUND


--------------------------------------------------------------------------------

As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.


                            ONE GLOBAL FORCE. ONE FOCUS. YOU. [DWS SCUDDER Logo]
                                                             Deutsche Bank Group

<PAGE>

CONTENTS
--------------------------------------------------------------------------------





<TABLE>
<S>      <C>
HOW THE FUND WORKS

  4      The Fund's Main Investment
         Strategy
  6      The Main Risks of Investing in
         the Fund
 10      The Fund's Performance
         History
 13      How Much Investors Pay
 15      Other Policies and Risks
 16      Who Manages and Oversees
         the Fund
 21      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUND

 23      Choosing a Share Class
 29      How to Buy Class A, B and C
         Shares
 30      How to Exchange or Sell
         Class A, B and C Shares
 33      Policies You Should Know
         About
 46      Understanding Distributions
         and Taxes
 49      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

On the next few pages, you'll find information about the fund's investment
goal, the main strategies it uses to pursue that goal and the main risks that
could affect performance.

Whether you are considering investing in the fund or are already a shareholder,
you'll want to LOOK THIS INFORMATION OVER CAREFULLY. You may want to keep it on
hand for reference as well.

CLASSES A, B AND C shares are generally intended for investors seeking the
advice and assistance of a financial advisor.

Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices will go up and down, and you could lose money by investing in them.

You can find DWS prospectuses on the Internet at WWW.DWS-SCUDDER.COM (the Web
site does not form a part of this prospectus).
<PAGE>


<TABLE>
<S>                    <C>        <C>        <C>
--------------------------------------------------------------------------------
                                                Class A    Class B    Class C
                          ticker symbol         KTRAX      KTRBX      KTRCX
                            fund number         002        202        302

    DWS BALANCED FUND
--------------------------------------------------------------------------------
</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks the highest total return, a combination of income
            and capital appreciation, consistent with reasonable risk.


            The fund can buy many types of securities, among them common
            stocks, convertible securities, corporate bonds, US government
            bonds, mortgage- and asset-backed securities and certain
            derivatives. The fund normally invests approximately 60% of its net
            assets in common stocks and other equity securities and
            approximately 40% of its net assets in fixed-income securities,
            including lower-quality, high-yield debt securities. These
            percentages may fluctuate in response to changing market
            conditions, but the fund will at all times invest at least 25% of
            net assets in fixed-income senior securities. Generally, most
            securities are from US issuers, but the fund may invest up to 25%
            of total assets in foreign securities.

            The Advisor may allocate the fund's assets among various asset
            categories including growth and value stocks of large and small
            capitalization companies and investment-grade and high-yield debt
            securities. The Advisor will review the fund's allocation among the
            various asset categories periodically and may adjust the fund's
            allocation among various asset categories based on current or
            expected market conditions or to manage risk as is consistent with
            the fund's overall investment strategy.

            The Advisor combines global strategies for selecting equity and
            debt securities for the fund's portfolio. Each strategy is run by
            portfolio managers that specialize in the respective asset
            category. The strategies that the Advisor may implement utilize a
            variety of quantitative and qualitative techniques.



4 | DWS Balanced Fund
<PAGE>


            IGAP STRATEGY. In addition to the fund's main investment strategy,
            the Advisor seeks to enhance returns by employing a global tactical
            asset allocation overlay strategy. This strategy, which the Advisor
            calls iGAP (integrated Global Alpha Platform), attempts to take
            advantage of short-term and medium-term mispricings within global
            bond, equity and currency markets. The iGAP strategy is implemented
            through the use of derivatives, which are contracts or other
            instruments whose value is based on, for example, indices,
            currencies or securities. The iGAP strategy primarily uses
            exchange-traded futures contracts on global bonds and equity
            indexes and over-the-counter forward currency contracts, and is
            expected to have a low correlation to the fund's other securities
            holdings. Because the iGAP strategy relies primarily on futures,
            forward currency contracts and other derivative instruments, the
            aggregate notional market exposure obtained from such investments
            may range up to 100% of the net assets of the fund (assuming the
            maximum allocation to the iGAP strategy).


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 33 1/3% of its total assets to approved
            institutional borrowers who need to borrow securities in order to
            complete certain transactions.


            DERIVATIVES. In addition to derivatives utilized within the iGap
            strategy, the Advisor may also use derivatives in circumstances
            where the Advisor believes they offer a more efficient means of
            gaining exposure to a particular asset class or market and to
            maintain a high level of liquidity to meet shareholder redemptions
            or other needs while maintaining exposure to the market. The
            Advisor may use futures, options, forward currency transactions and
            swaps.



                                                          DWS Balanced Fund  | 5
<PAGE>

            THE MAIN RISKS OF INVESTING IN THE FUND

            There are several risk factors that could hurt the fund's
            performance, cause you to lose money or cause the fund's
            performance to trail that of other investments.


            ASSET ALLOCATION RISK. Although asset allocation among different
            asset categories generally reduces risk and exposure to any one
            category, the risk remains that the Advisor may favor an asset
            category that performs poorly relative to the other asset
            categories.

            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes and the
            fund may not be able to get an attractive price for them.


            INDUSTRY RISK. While the fund does not concentrate in any industry,
            to the extent that the fund has exposure to a given industry or
            sector, any factors affecting that industry or sector could affect
            the value of portfolio securities. For example, manufacturers of
            consumer goods could be hurt by a rise in unemployment or
            technology companies could be hurt by such factors as market
            saturation, price competition and rapid obsolescence.


            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of its
            bonds to decline. In addition, an issuer may not be able to make
            timely payments on the interest and/or principal on the bonds it
            has issued. Because the issuers of high-yield bonds or junk bonds
            (rated below the fourth highest category) may be in uncertain
            financial health, the prices of their bonds can be more vulnerable
            to bad economic news or even the expectation of bad news, than
            investment-grade bonds. In


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors interested in asset class diversification in
a single fund that invests in a mix of stocks and bonds.




6 | DWS Balanced Fund
<PAGE>


            some cases, bonds, particularly high-yield bonds, may decline in
            credit quality or go into default. Because the fund may invest in
            securities not paying current interest or in securities already in
            default, these risks may be more pronounced.


            INTEREST RATE RISK. Generally, fixed income securities will
            decrease in value when interest rates rise. The longer the
            effective maturity of the fund's securities, the more sensitive it
            will be to interest rate changes. (As a general rule, a 1% rise in
            interest rates means a 1% fall in value for every year of
            duration.) As interest rates decline, the issuers of securities
            held by the fund may prepay principal earlier than scheduled,
            forcing the fund to reinvest in lower-yielding securities.
            Prepayment may reduce the fund's income. As interest rates
            increase, slower than expected principal payments may extend the
            average life of fixed income securities. This will have the effect
            of locking in a below-market interest rate, increasing the fund's
            duration and reducing the value of such a security. Because the
            fund may invest in mortgage-related securities, it is more
            vulnerable to both of these risks.


            SMALL COMPANY CAPITALIZATION RISK. Small company stocks tend to
            experience steeper price fluctuations - down as well as up - than
            the stocks of larger companies. A shortage of reliable information
            - the same information gap that creates opportunity in small
            company investing - can also pose added risk. Industry-wide
            reversals may have a greater impact on small companies, since they
            lack a large company's financial resources. Small company stocks
            are typically less liquid than large company stocks. Accordingly,
            it may be harder to find a buyer for a small company's shares.

            FOREIGN INVESTMENT RISK. To the extent the fund has exposure to
            companies based outside the US, it faces the risks inherent in
            foreign investing. Adverse political, economic or social
            developments could undermine the value of the fund's investments or
            prevent the fund from realizing their full value. Financial
            reporting standards for companies based in foreign markets differ
            from those in the US. Additionally, foreign securities markets
            generally are smaller and less liquid than the US markets. These
            risks tend to be greater in emerging markets so, to the extent the
            fund invests in emerging markets, it takes on greater risks. The
            currency of



                                                          DWS Balanced Fund  | 7
<PAGE>


            the country in which the fund has invested could decline relative
            to the value of the US dollar, which decreases the value of the
            investment to US investors. The investments of the fund may be
            subject to foreign withholding taxes.

            IGAP RISK. The success of the iGAP strategy depends, in part, on
            the Advisor's ability to analyze the correlation between various
            global markets and asset classes. If the Advisor's correlation
            analysis proves to be incorrect, losses to the fund may be
            significant and may substantially exceed the intended level of
            market exposure for the iGAP strategy.

            DERIVATIVES RISK. Risks associated with derivatives include the
            risk that the derivative is not well correlated with the security,
            index or currency to which it relates; the risk that derivatives
            may not have the intended effects and may result in losses or
            missed opportunities; the risk that the fund will be unable to sell
            the derivative because of an illiquid secondary market; the risk
            that a counterparty is unwilling or unable to meet its obligation;
            and the risk that the derivative transaction could expose the fund
            to the effects of leverage, which could increase the fund's
            exposure to the market and magnify potential losses. There is no
            guarantee that derivatives, to the extent employed, will have the
            intended effect, and their use could cause lower returns or even
            losses to the fund. The use of derivatives by the fund to hedge
            risk may reduce the opportunity for gain by offsetting the positive
            effect of favorable price movements.


            SECURITIES LENDING RISK. Any loss in the market price of securities
            loaned by the fund that occurs during the term of the loan would be
            borne by the fund and would adversely affect the fund's
            performance. Also, there may be delays in recovery of securities
            loaned or even a loss of rights in the collateral should the
            borrower of the securities fail financially while the loan is
            outstanding. However, loans will be made only to borrowers selected
            by the fund's delegate after a review of relevant facts and
            circumstances, including the creditworthiness of the borrower.

            Other factors that could affect performance include:

            -  portfolio management could be wrong in the analysis of
               industries, companies, economic trends, the relative
               attractiveness of different securities or other matters.


8 | DWS Balanced Fund
<PAGE>

            -  at times, market conditions might make it hard to value some
               investments or to get an attractive price for them.

            -  the Advisor measures credit quality at the time it buys
               securities, using independent rating agencies or, for unrated
               securities, the Advisor's own credit quality standards. If a
               security's credit quality declines, the Advisor will decide what
               to do with the security, based on the circumstances and its
               assessment of what would benefit shareholders most.


                                                          DWS Balanced Fund  | 9
<PAGE>

THE FUND'S PERFORMANCE HISTORY

While a fund's past performance (before and after taxes) isn't necessarily a
sign of how it will do in the future, it can be valuable for an investor to
know.


The bar chart shows how the performance of the fund's Class A shares has varied
from year to year, which may give some idea of risk. The bar chart does not
reflect sales loads; if it did, total returns would be lower than those shown.
The table on the following page shows how fund performance compares to relevant
index information (which, unlike fund performance, does not reflect fees or
expenses). The table includes the effects of maximum sales loads. The
performance of both the fund and the index information varies over time. All
figures assume reinvestment of dividends and distributions (in the case of
after-tax returns, reinvested net of assumed tax rates).


The table shows returns for Class A shares on a before-tax and after-tax basis.
After-tax returns are shown for Class A only and will vary for Classes B and C.
After-tax returns are estimates calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
state and local taxes. Actual after-tax returns depend on an investor's tax
situation and may differ from those shown in the table. After-tax returns shown
are not relevant for investors who hold their shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts.

DWS Balanced Fund


ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - CLASS A (Results do not reflect
sales loads; if they did, total returns would be lower than those shown.)

[GRAPHIC APPEARS HERE]






<TABLE>
<S>        <C>        <C>        <C>        <C>         <C>        <C>       <C>       <C>       <C>
15.91      14.60       -2.78      -6.78      -15.67     17.21       6.14      3.97      9.84
1998       1999       2000       2001        2002       2003       2004      2005      2006      2007
</TABLE>







<TABLE>
<CAPTION>
                 FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: _______, Q: ______           WORST QUARTER: _____%, Q: ______
</TABLE>




10 | DWS Balanced Fund
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007(Fund returns include the
effects of maximum sales load.)




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                              1 YEAR      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                                          <C>         <C>          <C>
 CLASS A
--------------------------------------------------------------------------------
   Return before Taxes
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares
--------------------------------------------------------------------------------
 CLASS B (Return before Taxes)
--------------------------------------------------------------------------------
 CLASS C (Return before Taxes)
--------------------------------------------------------------------------------
 S&P 500 (reflects no deductions for
 fees, expenses or taxes)
--------------------------------------------------------------------------------
 RUSSELL 1000 INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 RUSSELL 2000 INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 LEHMAN BROTHERS U.S. AGGREGATE
 INDEX (reflects no deductions for fees,
 expenses or taxes)
--------------------------------------------------------------------------------
 MSCI EAFE INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 CREDIT SUISSE HIGH YIELD INDEX
 (reflects no deductions for fees,
 expenses or taxes)
--------------------------------------------------------------------------------
 MERRILL LYNCH 3-MONTH US TREASURY
 BILL INDEX (reflects no deductions for
 fees, expenses or taxes)
--------------------------------------------------------------------------------
</TABLE>


 Total returns would have been lower had certain expenses not been reduced.


 The Russell 1000 Index replaces the S&P 500 as the fund's benchmark index for
 equity investments because the Advisor believes that it more accurately
 reflects the fund's investment strategy.


 STANDARD & POOR'S 500 INDEX (S&P 500) is an unmanaged, capitalization-weighted
 index of 500 stocks. The index is designed to measure performance of the broad
 domestic economy through changes in the aggregate market value of 500 stocks
 representing all major industries.

 RUSSELL 1000 (Reg. TM) INDEX is an unmanaged price-only index of the 1,000
 largest capitalized companies that are domiciled in the US and whose common
 stocks are traded.

 The RUSSELL 2000 (Reg. TM) INDEX is an unmanaged capitalization-weighted
 measure of approximately 2,000 small US stocks.

 LEHMAN BROTHERS U.S. AGGREGATE INDEX is an unmanaged market value-weighted
 measure of Treasury issues, agency issues, corporate bond issues and mortgage
 securities.



                                                         DWS Balanced Fund  | 11
<PAGE>


 MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, AUSTRALASIA AND THE FAR
 EAST (EAFE) INDEX is an unmanaged index that tracks international stock
 performance in the 21 developed markets of Europe, Australasia and the Far
 East.

 The CREDIT SUISSE HIGH YIELD INDEX is an unmanaged trader-priced portfolio,
 constructed to mirror the global high-yield debt market.

 The MERRILL LYNCH 3-MONTH US TREASURY BILL INDEX is an unmanaged index
 capturing the performance of a single issue maturing closest to, but not
 exceeding, three months from the re-balancing date.



--------------------------------------------------------------------------------
Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 621-1048 or visit our Web site at www.dws-scudder.com.


--------------------------------------------------------------------------------

The RETURN AFTER TAXES ON DISTRIBUTIONS assumes that an investor holds fund
shares at the end of the period. The number represents only the fund's taxable
distributions and not a shareholder's gain or loss from selling fund shares.

The RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES assumes that an
investor sold his or her fund shares at the end of the period. The number
reflects both the fund's taxable distributions and a shareholder's gain or loss
from selling fund shares.



12 | DWS Balanced Fund
<PAGE>

HOW MUCH INVESTORS PAY


The table below describes the fees and expenses that you may pay if you buy and
hold fund shares. This information doesn't include any fees that may be charged
by your financial advisor.




<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
FEE TABLE                                         CLASS A          CLASS B       CLASS C
----------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>          <C>
 SHAREHOLDER FEES, paid directly from your investment
----------------------------------------------------------------------------------------------
 Maximum Sales Charge (Load) Imposed
 on Purchases (as % of offering price)             5.75% 1          None          None
----------------------------------------------------------------------------------------------
 Maximum Deferred Sales Charge (Load)
 (as % of redemption proceeds)                     None 2           4.00%         1.00%
----------------------------------------------------------------------------------------------
Redemption/Exchange fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 3                            2.00             2.00          2.00
----------------------------------------------------------------------------------------------

 ANNUAL OPERATING EXPENSES, deducted from fund assets
----------------------------------------------------------------------------------------------
 Management Fee                                        %                %             %
----------------------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee
----------------------------------------------------------------------------------------------
 Other Expenses 4
----------------------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES 5
----------------------------------------------------------------------------------------------
 Less Expense Waiver/Reimbursement 6
----------------------------------------------------------------------------------------------
 Net Annual Operating Expenses 6
----------------------------------------------------------------------------------------------
</TABLE>



1  Because of rounding in the calculation of the offering price, the actual
   maximum front-end sales charge paid by an investor may be higher than the
   percentage noted (see "Choosing a Share Class - Class A shares").


2  The redemption of shares purchased at net asset value under the Large Order
   NAV Purchase Privilege (see "Choosing a Share Class - Class A shares") may
   be subject to a contingent deferred sales charge of 1.00% if redeemed
   within 12 months of purchase and 0.50% if redeemed within the following six
   months following purchase.


3  This fee is charged on all applicable redemptions or exchanges. Please see
   "Policies You Should Know About - Policies about transactions" for further
   information.

4  Restated on an annualized basis to reflect approved fee changes that took
   effect on February 1, 2007 and the conversion of Class R shares to Class A
   shares on November 17, 2006.

5  The distributor has temporarily agreed to eliminate the 12b-1 distribution
   fee for Class B shares only. Had this reduction been effective for the
   duration of the fund's prior fiscal year, net expenses would have equaled
   1.12%.


6  Through ___________, the Advisor has contractually agreed to waive all or a
   portion of its management fee and reimburse or pay operating expenses of
   the fund to the extent necessary to maintain the fund's total operating
   expenses at 0.93%, 1.88% and 1.80% for Class A, Class B and Class C shares,
   respectively, excluding certain expenses such as extraordinary expenses,
   taxes, brokerage and interest.


                                                         DWS Balanced Fund  | 13
<PAGE>

Based on the costs above (including one year of capped expenses in each period
for Class A and Class B shares), this example helps you compare the expenses of
the fund to those of other mutual funds. This example assumes the expenses
above remain the same. It also assumes that you invested $10,000, earned 5%
annual returns and reinvested all dividends and distributions. This is only an
example; actual expenses will be different.



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXAMPLE                1 YEAR      3 YEARS      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                   <C>         <C>          <C>          <C>
 EXPENSES, assuming you sold your shares at the end of each period.
--------------------------------------------------------------------------------
 Class A shares       $           $            $            $
--------------------------------------------------------------------------------
 Class B shares*
--------------------------------------------------------------------------------
 Class C shares
--------------------------------------------------------------------------------

 EXPENSES, assuming you kept your shares.
--------------------------------------------------------------------------------
 Class A shares       $           $            $            $
--------------------------------------------------------------------------------
 Class B shares*
--------------------------------------------------------------------------------
 Class C shares
--------------------------------------------------------------------------------
</TABLE>



*   Reflects conversion of Class B to Class A shares, which pay lower fees.
   Conversion occurs six years after purchase.

14 | DWS Balanced Fund
<PAGE>

OTHER POLICIES AND RISKS

           While the previous pages describe the main points of the fund's
           strategy and risks, there are a few other issues to know about:


           -  Although major changes tend to be infrequent, the fund's Board
              could change the fund's investment objective without seeking
              shareholder approval.

           -  As a temporary defensive measure, the fund could shift up to 100%
              of assets into investments such as money market securities or
              other short-term securities that offer comparable levels of risk
              This could prevent losses, but, while engaged in a temporary
              defensive position, the fund will not be pursuing its investment
              goal. However, portfolio management may choose not to use these
              strategies for various reasons, even in volatile market
              conditions.



           For more information

           This prospectus doesn't tell you about every policy or risk of
           investing in the fund.

           If you want more information on the fund's allowable securities and
           investment practices and the characteristics and risks of each one,
           you may want to request a copy of the Statement of Additional
           Information (the back cover tells you how to do this).

           Keep in mind that there is no assurance that the fund will achieve
           its goal.


           A complete list of the fund's portfolio holdings is posted as of the
           month-end on www.dws-scudder.com (the Web site does not form a part
           of this prospectus) on or after the last day of the following month.
           This posted information generally remains accessible at least until
           the date on which the fund files its Form N-CSR or N-Q with the
           Securities and Exchange Commission for the period that includes the
           date as of which the posted information is current. In addition, the
           fund's top ten equity holdings and other fund information is posted
           on www.dws-scudder.com as of the calendar quarter-end on or after
           the 15th day following quarter-end. The fund's Statement of
           Additional Information includes a description of the fund's policies
           and procedures with respect to the disclosure of the fund's
           portfolio holdings.



                                                  Other Policies and Risks  | 15
<PAGE>

WHO MANAGES AND OVERSEES THE FUND


           The investment advisor


           Deutsche Investment Management Americas Inc. ("DIMA" or the
           "Advisor"), with headquarters at 345 Park Avenue, New York, NY
           10154, is the investment advisor for the fund. Under the oversight
           of the Board, the Advisor makes investment decisions, buys and sells
           securities for the fund and conducts research that leads to these
           purchase and sale decisions. The Advisor provides a full range of
           global investment advisory services to institutional and retail
           clients.


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

           Deutsche Asset Management is a global asset management organization
           that offers a wide range of investing expertise and resources,
           including hundreds of portfolio managers and analysts and an office
           network that reaches the world's major investment centers. This
           well-resourced global investment platform brings together a wide
           variety of experience and investment insight across industries,
           regions, asset classes and investing styles.

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


           MANAGEMENT FEE. The Advisor receives a management fee from the fund.
           Below is the actual rate paid by the fund for the most recent fiscal
           year, as a percentage of the fund's average daily net assets.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FUND NAME                          FEE PAID
--------------------------------------------------------------------------------
<S>                               <C>
  DWS Balanced Fund                 ___%
--------------------------------------------------------------------------------
</TABLE>




16 | Who Manages and Oversees the Fund
<PAGE>


           A discussion regarding the basis for the Board's approval of the
           fund's investment management agreement (the discussion regarding the
           approval of the subadvisory agreement is contained in the semiannual
           report for the period ended March 31, 2008) is contained in the most
           recent shareholder reports for the annual period ended October 31
           (see "Shareholder reports" on the back cover).


           The Subadvisor


           Subadvisor for DWS Balanced Fund

           The subadvisor for DWS Balanced Fund is Deutsche Asset Management
           International GmbH ("DeAMi"), Mainzer Landstrasse 178-190, Frankfurt
           am Main, Germany. DeAMi renders investment advisory and management
           services to the fund. DeAMi is an investment advisor registered with
           the Securities and Exchange Commission and currently manages over
           $60 billion in assets, which is primarily comprised of institutional
           accounts and investment companies. DeAMi is a subsidiary of Deutsche
           Bank AG. DIMA compensates DeAMi out of the management fee it
           receives from the fund.



                                         Who Manages and Oversees the Fund  | 17
<PAGE>

Portfolio management

DWS Balanced Fund is managed by a team of investment professionals who
collaborate to develop and implement the fund's investment strategy. Each
portfolio manager has authority over all aspects of the fund's investment
portfolio, including, but not limited to, purchases and sales of individual
securities, portfolio construction techniques, portfolio risk assessment and
the management of daily cash flows in accordance with portfolio holdings.

DWS BALANCED FUND

The following people handle the day-to-day management of the fund.

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Joined Deutsche Asset Management in 1998 after 13 years of experience as
   vice president and portfolio manager for Norwest Bank, where he managed the
   bank's fixed income and foreign exchange portfolios.
-  Portfolio Manager for Retail Mortgage Backed Securities: New York.
-  Joined the fund in 2005.
-  BIS, University of Minnesota.

Matthew F. MacDonald
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Joined Deutsche Asset Management and the fund in 2006 after 14 years of
   fixed income experience at Bank of America Global Structured Products and
   PPM America, Inc., where he was portfolio manager for public fixed income,
   including MBS, ABS, CDOs and corporate bonds; earlier, as an analyst for
   MBS, ABS and money markets; and originally, at Duff & Phelps Credit Rating
   Company.
-  Portfolio Manager for Retail Mortgage Backed Securities: New York.
-  BA, Harvard University; MBA, University of Chicago Graduate School of
   Business.

Inna Okounkova
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Global Asset Allocation Portfolio Manager: New York.
-  Joined Deutsche Asset Management in 1999 as a quantitative analyst, becoming
   an associate Portfolio Manager in 2001.
-  Joined the fund in 2005.
-  BS, MS, Moscow State University; MBA, University of Chicago.

Gary Sullivan, CFA

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

-  Joined Deutsche Asset Management in 1996 and the fund in 2006. Served as the
   head of the High Yield group in Europe and as an Emerging Markets portfolio
   manager.
-  Prior to that, four years at Citicorp as a research analyst and structurer
   of collateralized mortgage obligations. Prior to Citicorp, served as an
   officer in the US Army from 1988 to 1991.
-  BS, United States Military Academy (West Point); MBA, New York University,
   Stern School of Business

18 | Who Manages and Oversees the Fund
<PAGE>

Julie M. Van Cleave, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Joined Deutsche Asset Management and the fund in 2002.
-  Head of Large Cap Growth Portfolio Selection Team.
-  Previous experience includes 18 years of investment industry experience at
   Mason Street Advisors, as Managing Director and team leader for the large
   cap investment team.
-  BBA, MBA, University of Wisconsin - Madison.

Robert Wang
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Global Asset Allocation Senior Portfolio Manager: New York.
-  Joined Deutsche Asset Management in 1995 as a senior fixed income portfolio
   manager after 13 years of experience at J.P. Morgan & Co. trading fixed
   income, derivatives and foreign exchange products.
-  Joined the fund in 2005.
-  BS, The Wharton School, University of Pennsylvania.

Thomas Picciochi
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Quantitative strategies: New York.
-  Joined Deutsche Asset Management in 1999, formerly serving as portfolio
   manager for Absolute Return Strategies, after 13 years of experience in
   various research and analysis positions at State Street Global Advisors,
   FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial
   Management.
-  Joined the fund in 2007.
-  BA and MBA, University of Miami.

Jin Chen
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Global strategies: New York
-  Joined Deutsche Asset Management in 1999; prior to that, served as portfolio
   manager for Absolute Return Strategies and as a fundamental equity analyst
   and portfolio manager for Thomas White Asset Management.
-  Joined the fund in 2007.
-  BS, Nanjing University; MS, Michigan State University

Julie Abbett
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Global Quantitative Equity: New York.
-  Joined Deutsche Asset Management in 2000 after four years of combined
   experience as a consultant with equity trading services for BARRA, Inc. and
   a product developer for FactSet Research.
-  Joined the fund in 2007.
-  BA, University of Connecticut.


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



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


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


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


                                         Who Manages and Oversees the Fund  | 19
<PAGE>


Thomas Schuessler, PhD
Director of Deutsche Asset Management and Portfolio Manager of the fund.


- Joined Deutsche Asset Management in 2001 after five years at Deutsche Bank
  where he managed various projects and worked in the office of the Chairman
  of the Management Board.


- US and Global Fund Management: Frankfurt.


- PhD, University of Heidelberg, studies in physics and economics at University
  of Heidelberg and University of Utah.

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


- Portfolio and Sector Manager for Institutional Fixed Income: Louisville.


- Joined Deutsche Asset Management and the fund in 2007 after 14 years of
  experience at INVESCO and Freddie Mac. Previously, was head of Structured
  Securities sector team at INVESCO and before that was senior fixed income
  portfolio manager at Freddie Mac specializing in MBS, CMBS, collateralized
  mortgage obligations, ARMS, mortgage derivatives, US Treasuries and agency
  debt.



- BS, University of Maryland; MBA William & Mary.

J. Richard Robben, CFA
Vice President of Deutsche Asset Management and Portfolio Manager of the fund.


- Joined Deutsche Asset Management and the fund in 2007 after 11 years of
  experience at INVESCO Institutional, most recently as senior portfolio
  manager for LIBOR-related strategies and head of portfolio construction
  group for North American Fixed Income.
- BA, Bellarmine University.

The fund's Statement of Additional Information provides additional information
about a portfolio manager's investments in the fund, a description of the
portfolio management compensation structure and information regarding other
accounts managed.



20 | Who Manages and Oversees the Fund
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of each table are for a single
share. The total return figures represent the percentage that an investor in
the fund would have earned (or lost), assuming all dividends and distributions
were reinvested. This information has been audited by Ernst & Young LLP,
independent registered public accounting firm, whose report, along with the
fund's financial statements, is included in the fund's annual report (see
"Shareholder reports" on the back cover).


                                                      Financial Highlights  | 21

<PAGE>

HOW TO INVEST IN THE FUND

The following pages tell you how to invest in the fund and what to expect as a
shareholder. If you're investing directly with DWS Scudder, all of this
information applies to you.

The following pages also tell you about many of the services, choices and
benefits of being a shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.

If you're investing through a "third party provider" - for example, a workplace
retirement plan, financial supermarket or financial advisor - your provider may
have its own policies or instructions and you should follow those.

You can find out more about the topics covered here by speaking with your
FINANCIAL ADVISOR OR A REPRESENTATIVE OF YOUR WORKPLACE RETIREMENT PLAN OR
OTHER INVESTMENT PROVIDER.
<PAGE>

CHOOSING A SHARE CLASS


Offered in this prospectus are the share classes noted on the front cover. Each
class has its own fees and expenses, offering you a choice of cost structures.
The fund may offer other classes of shares in a separate prospectus. These
shares are intended for investors seeking the advice and assistance of a
financial advisor, who will typically receive compensation for those services.


Before you invest, take a moment to look over the characteristics of each share
class, so that you can be sure to choose the class that's right for you. You
may want to ask your financial advisor to help you with this decision.

We describe each share class in detail on the following pages. But first, you
may want to look at the table below, which gives you a brief comparison of the
main features of each class.



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
CLASSES AND FEATURES                         POINTS TO HELP YOU COMPARE
--------------------------------------------------------------------------------------------
<S>                                          <C>
 CLASS A
 -  Sales charge of up to 5.75% charged      -   Some investors may be able to reduce
    when you buy shares                          or eliminate their sales charge; see
                                                 "Class A shares"
 -  In most cases, no charge when you
    sell shares                              -   Total annual expenses are lower than
                                                 those for Class B or Class C
 -  Up to 0.25% annual shareholder
    servicing fee
--------------------------------------------------------------------------------------------
 CLASS B
 -  No sales charge when you buy shares      -   The deferred sales charge rate falls to
                                                 zero after six years
 -  Deferred sales charge declining from
    4.00%, charged when you sell shares      -   Shares automatically convert to
    you bought within the last six years         Class A after six years, which means
                                                 lower annual expenses going forward
 -  0.75% annual distribution fee and up
    to 0.25% annual shareholder servicing
    fee
--------------------------------------------------------------------------------------------
 CLASS C
 -  No sales charge when you buy shares      -   The deferred sales charge rate for one
                                                 year is lower for Class C shares than
 -  Deferred sales charge of 1.00%,              Class B shares, but your shares never
    charged when you sell shares you             convert to Class A, so annual expenses
    bought within the last year                  remain higher

 -  0.75% annual distribution fee and up
    to 0.25% annual shareholder servicing
    fee
--------------------------------------------------------------------------------------------
</TABLE>




                                                    Choosing a Share Class  | 23
<PAGE>


           Your financial advisor will typically be paid a fee when you buy
           shares and may receive different levels of compensation depending
           upon which class of shares you buy. The fund may pay financial
           advisors or other intermediaries compensation for the services they
           provide to their clients. This compensation may vary depending on
           the fund you buy or the class of shares of a fund that you buy. Your
           financial advisor may also receive compensation from the Advisor
           and/or its affiliates, please see "Financial intermediary support
           payments."



           Class A shares

           Class A shares may make sense for long-term investors, especially
           those who are eligible for a reduced or eliminated sales charge.


           Class A shares have a 12b-1 plan, under which a shareholder
           servicing fee of up to 0.25% is deducted from class assets each
           year. Because the shareholder servicing fee is continuous in nature,
           it may, over time, increase the cost of your investment and may cost
           you more than paying other types of sales charges.


           Class A shares have an up-front sales charge that varies with the
           amount you invest:


<TABLE>
<CAPTION>
                              FRONT-END SALES          FRONT-END SALES
                                CHARGE AS %          CHARGE AS % OF YOUR
YOUR INVESTMENT            OF OFFERING PRICE 1,2        NET INVESTMENT 2
--------------------------------------------------------------------------------
<S>                              <C>                           <C>
     Up to $50,000               5.75%                         6.10%
--------------------------------------------------------------------------------
$    50,000-$99,999              4.50                          4.71
--------------------------------------------------------------------------------
$  100,000-$249,999              3.50                          3.63
--------------------------------------------------------------------------------
$  250,000-$499,999              2.60                          2.67
--------------------------------------------------------------------------------
$  500,000-$999,999              2.00                          2.04
--------------------------------------------------------------------------------
 $1 million or more            see below                   see below
--------------------------------------------------------------------------------
</TABLE>


           1   The offering price includes the sales charge.

           2   Because of rounding in the calculation of the offering price,
               the actual front-end sales charge paid by an investor may be
               higher or lower than the percentages noted.


           YOU MAY BE ABLE TO LOWER YOUR CLASS A SALES CHARGE IF:

           -  you plan to invest at least $50,000 in Class A shares (including
              Class A shares in other retail DWS funds) over the next 24 months
              ("Letter of Intent")

24 | Choosing a Share Class
<PAGE>

            -  the amount of Class A shares you already own (including Class A
               shares in other retail DWS funds) plus the amount you're
               investing now in Class A shares is at least $50,000 ("Cumulative
               Discount")

            -  you are investing a total of $50,000 or more in Class A shares of
               several retail DWS funds on the same day ("Combined Purchases")

           The point of these three features is to let you count investments
           made at other times or in certain other funds for purposes of
           calculating your present sales charge. Any time you can use the
           privileges to "move" your investment into a lower sales charge
           category, it's generally beneficial for you to do so.

           For purposes of determining whether you are eligible for a reduced
           Class A sales charge, you and your immediate family (your spouse or
           life partner and your children or stepchildren age 21 or younger)
           may aggregate your investments in the DWS family of funds. This
           includes, for example, investments held in a retirement account, an
           employee benefit plan or at a financial advisor other than the one
           handling your current purchase. These combined investments will be
           valued at their current offering price to determine whether your
           current investment qualifies for a reduced sales charge.

           To receive a reduction in your Class A initial sales charge, you
           must let your financial advisor or Shareholder Services know at the
           time you purchase shares that you qualify for such a reduction. You
           may be asked by your financial advisor or Shareholder Services to
           provide account statements or other information regarding related
           accounts of you or your immediate family in order to verify your
           eligibility for a reduced sales charge.


           For more information about sales charge discounts, please visit
           www.dws-scudder.com (click on the link entitled "Fund Sales Charge
           and Breakpoint Schedule"), consult with your financial advisor or
           refer to the section entitled "Purchase or Redemption of Shares" in
           the fund's Statement of Additional Information.


           IN CERTAIN CIRCUMSTANCES, YOU MAY BE ABLE TO BUY CLASS A SHARES
           WITHOUT A SALES CHARGE. For example, the sales charge will be waived
           if you are reinvesting dividends or distributions or if you are
           exchanging an investment in Class A shares of another fund in the
           DWS family of funds for an investment in Class A shares of the fund.
           In addition, a sales charge waiver


                                                    Choosing a Share Class  | 25
<PAGE>

           may apply to transactions by certain retirement plans and certain
           other entities or persons (e.g., affiliated persons of DeAM or the
           DWS funds) and with respect to certain types of investments (e.g.,
           an investment advisory or agency commission program under which you
           pay a fee to an investment advisor or other firm for portfolio
           management or brokerage services).

           Details regarding the types of investment programs and categories of
           investors eligible for a sales charge waiver are provided in the
           fund's Statement of Additional Information.

           There are a number of additional provisions that apply in order to
           be eligible for a sales charge waiver. The fund may waive the sales
           charge for investors in other situations as well. Your financial
           advisor or Shareholder Services can answer your questions and help
           you determine if you are eligible.


           IF YOU'RE INVESTING $1 MILLION OR MORE, either as a lump sum or
           through one of the sales charge reduction features described above,
           you may be eligible to buy Class A shares without a sales charge
           ("Large Order NAV Purchase Privilege"). However, you may be charged
           a contingent deferred sales charge (CDSC) of 1.00% on any shares you
           sell within 12 months of owning them and a similar charge of 0.50%
           on shares you sell within the following six months. This CDSC is
           waived under certain circumstances (see "Policies You Should Know
           About"). Your financial advisor or Shareholder Services can answer
           your questions and help you determine if you're eligible.



           Class B shares


           Class B shares may make sense for long-term investors who prefer to
           see all of their investment go to work right away and can accept
           somewhat higher annual expenses. Please note, however, that since
           not all DWS funds offer Class B shares, exchange options may be
           limited.

           With Class B shares, you pay no up-front sales charge to the fund.
           Class B shares have a 12b-1 plan, under which a distribution fee of
           0.75% and a shareholder servicing fee of up to 0.25% are deducted
           from class assets each year. This means the annual expenses for
           Class B shares are somewhat higher (and their performance
           correspondingly lower) compared to Class A shares. However, unlike
           Class A shares, your entire



26 | Choosing a Share Class
<PAGE>


           investment goes to work immediately. After six years, Class B shares
           automatically convert on a tax-free basis to Class A shares, which
           has the net effect of lowering the annual expenses from the seventh
           year on.


           Class B shares have a CDSC. This charge declines over the years you
           own shares and disappears completely after six years of ownership.
           But for any shares you sell within those six years, you may be
           charged as follows:


<TABLE>
<CAPTION>
    YEAR AFTER YOU BOUGHT SHARES               CDSC ON SHARES YOU SELL
--------------------------------------------------------------------------------
<S>                                                  <C>
  First year                                         4.00%
--------------------------------------------------------------------------------
  Second or third year                               3.00
--------------------------------------------------------------------------------
  Fourth or fifth year                               2.00
--------------------------------------------------------------------------------
  Sixth year                                         1.00
--------------------------------------------------------------------------------
  Seventh year and later               None (automatic conversion to Class A)
--------------------------------------------------------------------------------
</TABLE>


           This CDSC is waived under certain circumstances (see "Policies You
           Should Know About"). Your financial advisor or Shareholder Services
           can answer your questions and help you determine if you're eligible.

           While Class B shares don't have any front-end sales charge, their
           higher annual expenses mean that over the years you could end up
           paying more than the equivalent of the maximum allowable front-end
           sales charge.

           If you are thinking of making a large purchase in Class B shares or
           if you already own a large amount of Class A shares of the fund or
           other DWS funds, it may be more cost efficient to purchase Class A
           shares instead. Orders to purchase Class B shares of $100,000 or
           more will be declined with the exception of orders received from
           financial representatives acting for clients whose shares are held
           in an omnibus account and certain employer-sponsored employee
           benefit plans. You should consult with your financial advisor to
           determine which class of shares is appropriate for you.


           Class C shares


           Class C shares may appeal to investors who plan to sell some or all
           of their shares within six years of buying them or who aren't
           certain of their investment time horizon.



                                                    Choosing a Share Class  | 27
<PAGE>

           With Class C shares, you pay no up-front sales charge to the fund.
           Class C shares have a 12b-1 plan, under which a distribution fee of
           0.75% and a shareholder servicing fee of up to 0.25% are deducted
           from class assets each year. Because of these fees, the annual
           expenses for Class C shares are similar to those of Class B shares,
           but higher than those for Class A shares (and the performance of
           Class C shares is correspondingly lower than that of Class A
           shares).

           Unlike Class B shares, Class C shares do NOT automatically convert
           to Class A shares after six years, so they continue to have higher
           annual expenses.

           Class C shares have a CDSC, but only on shares you sell within one
           year of buying them:


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
   YEAR AFTER YOU BOUGHT SHARES        CDSC ON SHARES YOU SELL
--------------------------------------------------------------------------------
<S>                                               <C>
  First year                                    1.00%
--------------------------------------------------------------------------------
  Second year and later                         None
--------------------------------------------------------------------------------
</TABLE>


           This CDSC is waived under certain circumstances (see "Policies You
           Should Know About"). Your financial advisor or Shareholder Services
           can answer your questions and help you determine if you're eligible.


           While Class C shares do not have an up-front sales charge, their
           higher annual expenses mean that, over the years, you could end up
           paying more than the equivalent of the maximum allowable up-front
           sales charge.

           Orders to purchase Class C shares of $500,000 or more will be
           declined with the exception of orders received from financial
           representatives acting for clients whose shares are held in an
           omnibus account and certain employer-sponsored employee benefit
           plans.


28 | Choosing a Share Class
<PAGE>

How to BUY Class A, B and C Shares




<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
 FIRST INVESTMENT                              ADDITIONAL INVESTMENTS
<S>                                            <C>
 $1,000 or more for regular accounts           $50 or more for regular accounts and
 $500 or more for IRAs                         IRA accounts
 $500 or more with an Automatic                $50 or more with an Automatic
 Investment Plan                               Investment Plan
------------------------------------------------------------------------------------------
 THROUGH A FINANCIAL ADVISOR
 -  Contact your advisor using the             -  Contact your advisor using the
    method that's most convenient for you         method that's most convenient for you
------------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL (SEE BELOW)
 -  Fill out and sign an application           -  Send a check made out to "DWS
 -  Send it to us at the appropriate              Scudder" and a DWS Scudder
    address, along with an investment             investment slip to us at the
    check                                         appropriate address below
                                               -  If you don't have an investment slip,
                                                  simply include a letter with your
                                                  name, account number, the full name
                                                  of the fund and the share class and
                                                  your investment instructions
------------------------------------------------------------------------------------------
 BY WIRE
 -  Call (800) 621-1048 for instructions       -  Call (800) 621-1048 for instructions
------------------------------------------------------------------------------------------
 BY PHONE
 Not available                                 -  Call (800) 621-1048 for instructions
------------------------------------------------------------------------------------------
 WITH AN AUTOMATIC INVESTMENT PLAN
 -  Fill in the application and include a      -  Call (800) 621-1048 for instructions
    voided check
------------------------------------------------------------------------------------------
 USING QuickBuy
 Not available                                 -  Call (800) 621-1048 to make sure
                                                  QuickBuy is set up on your account; if
                                                  it is, you can request a transfer from
                                                  your bank account of any amount
                                                  between $50 and $250,000
------------------------------------------------------------------------------------------
 ON THE INTERNET
 Not available                                 -  Go to www.dws-scudder.com and
                                                  register
                                               -  Follow the instructions for buying
                                                  shares with money from your bank
                                                  account
</TABLE>



--------------------------------------------------------------------------------
REGULAR MAIL:

First Investment: DWS Scudder, PO Box 219356, Kansas City, MO 64121-9356
Additional Investments: DWS Scudder, PO Box 219154, Kansas City, MO 64121-9154

EXPRESS, REGISTERED OR CERTIFIED MAIL:

DWS Scudder, 210 West 10th Street, Kansas City, MO 64105-1614


                                        How to Buy Class A, B and C Shares  | 29
<PAGE>

How to EXCHANGE or SELL Class A, B and C Shares


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
 EXCHANGING INTO ANOTHER FUND                  SELLING SHARES
------------------------------------------------------------------------------------------
<S>                                            <C>

 -  Exchanges into existing accounts:          Some transactions, including most for
    $50 minimum per fund                       over $100,000, can only be ordered in
 -  Exchanges into new accounts:               writing with a signature guarantee;
    $1,000 minimum per fund                    please see "Signature Guarantee"
    $500 minimum for IRAs
------------------------------------------------------------------------------------------
 THROUGH A FINANCIAL ADVISOR
 -  Contact your advisor by the method         -  Contact your advisor by the method
    that's most convenient for you                that's most convenient for you
------------------------------------------------------------------------------------------
 BY PHONE OR WIRE
 -  Call (800) 621-1048 for instructions       -  Call (800) 621-1048 for instructions
------------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL
 (see previous page for address)
 Write a letter that includes:                 Write a letter that includes:
 -  the fund, class and account number         -  the fund, class and account number
    you're exchanging out of                      from which you want to sell shares
 -  the dollar amount or number of shares      -  the dollar amount or number of shares
    you want to exchange                          you want to sell
 -  the name and class of the fund you         -  your name(s), signature(s) and
    want to exchange into                         address, as they appear on your
 -  your name(s), signature(s) and                account
    address, as they appear on your            -  a daytime telephone number
    account
 -  a daytime telephone number
------------------------------------------------------------------------------------------
 WITH AN AUTOMATIC EXCHANGE PLAN                WITH AN AUTOMATIC WITHDRAWAL PLAN
 -  To set up regular exchanges from a         -  Call (800) 621-1048 (minimum $50)
    fund account, call (800) 621-1048
------------------------------------------------------------------------------------------
 USING QuickSell
 Not available                                 -  Call (800) 621-1048 to make sure
                                                  QuickSell is set up on your account; if
                                                  it is, you can request a transfer to your
                                                  bank account of any amount between
                                                  $50 and $250,000
------------------------------------------------------------------------------------------
 ON THE INTERNET
 -  Register at www.dws-scudder.com            -  Register at www.dws-scudder.com
    and log in and then follow the                and log in and then follow the
    instructions for making on-line               instructions for making on-line
    exchanges                                     redemptions
</TABLE>



--------------------------------------------------------------------------------

<TABLE>
<S>               <C>
TO REACH US:      WEB SITE: www.dws-scudder.com
                  TELEPHONE REPRESENTATIVE: (800) 621-1048, M-F, 9 a.m. - 6 p.m. ET
                  TDD LINE: (800) 972-3006, M-F, 9 a.m. - 6 p.m. ET
</TABLE>



30 | How to Exchange or Sell Class A, B and C Shares
<PAGE>


           Financial intermediary support payments

           The Advisor, DWS Scudder Distributors, Inc. (the "Distributor")
           and/or their affiliates may pay additional compensation, out of
           their own assets and not as an additional charge to the fund, to
           selected affiliated and unaffiliated brokers, dealers, participating
           insurance companies or other financial intermediaries ("financial
           advisors") in connection with the sale and/or distribution of fund
           shares or the retention and/or servicing of fund investors and fund
           shares ("revenue sharing"). Such revenue sharing payments are in
           addition to any distribution or service fees payable under any Rule
           12b-1 or service plan of the fund, any record keeping/sub-transfer
           agency/networking fees payable by the fund (generally through the
           Distributor or an affiliate) and/or the Distributor to certain
           financial advisors for performing such services and any sales
           charges, commissions, non-cash compensation arrangements expressly
           permitted under applicable rules of the Financial Industry
           Regulatory Authority ("FINRA") or other concessions described in the
           fee table or elsewhere in this prospectus or the Statement of
           Additional Information as payable to all financial advisors. For
           example, the Advisor, the Distributor and/or their affiliates may
           compensate financial advisors for providing the fund with "shelf
           space" or access to a third party platform or fund offering list or
           other marketing programs, including, without limitation, inclusion
           of the fund on preferred or recommended sales lists, mutual fund
           "supermarket" platforms and other formal sales programs; granting
           the Distributor access to the financial advisor's sales force;
           granting the Distributor access to the financial advisor's
           conferences and meetings; assistance in training and educating the
           financial advisor's personnel; and obtaining other forms of
           marketing support.

           The level of revenue sharing payments made to financial advisors may
           be a fixed fee or based upon one or more of the following factors:
           gross sales, current assets and/or number of accounts of the fund
           attributable to the financial advisor, the particular fund or fund
           type or other measures as agreed to by the Advisor, the Distributor
           and/or their affiliates and the financial advisors or any
           combination thereof. The amount of these revenue sharing payments is
           determined at the discretion of the Advisor, the Distributor and/or
           their affiliates from time to time, may be substantial, and may be
           different for different financial advisors based on, for example,
           the nature of the services provided by the financial advisor.



                           How to Exchange or Sell Class A, B and C Shares  | 31
<PAGE>


           The Advisor, the Distributor and/or their affiliates currently make
           revenue sharing payments from their own assets in connection with
           the sale and/or distribution of DWS Fund shares or the retention
           and/or servicing of investors and DWS Fund shares to financial
           advisors in amounts that generally range from .01% up to .50% of
           assets of the fund serviced and maintained by the financial advisor,
           .10% to .25% of sales of the fund attributable to the financial
           advisor, a flat fee of $12,500 up to $500,000, or any combination
           thereof. These amounts are subject to change at the discretion of
           the Advisor, the Distributor and/or their affiliates. Receipt of, or
           the prospect of receiving, this additional compensation may
           influence your financial advisor's recommendation of the fund or of
           any particular share class of the fund. You should review your
           financial advisor's compensation disclosure and/or talk to your
           financial advisor to obtain more information on how this
           compensation may have influenced your financial advisor's
           recommendation of the fund. Additional information regarding these
           revenue sharing payments is included in the fund's Statement of
           Additional Information, which is available to you on request at no
           charge (see the back cover of this prospectus for more information
           on how to request a copy of the Statement of Additional
           Information).

           The Advisor, the Distributor and/or their affiliates may also make
           such revenue sharing payments to financial advisors under the terms
           discussed above in connection with the distribution of both DWS
           funds and non-DWS funds by financial advisors to retirement plans
           that obtain record keeping services from ADP, Inc. on the DWS
           Scudder branded retirement plan platform (the "Platform") with the
           level of revenue sharing payments being based upon sales of both the
           DWS funds and the non-DWS funds by the financial advisor on the
           Platform or current assets of both the DWS funds and the non-DWS
           funds serviced and maintained by the financial advisor on the
           Platform.

           It is likely that broker-dealers that execute portfolio transactions
           for the fund will include firms that also sell shares of the DWS
           funds to their customers. However, the Advisor will not consider
           sales of DWS fund shares as a factor in the selection of
           broker-dealers to execute portfolio transactions for the DWS funds.
           Accordingly, the Advisor has implemented policies and procedures
           reasonably designed to prevent its traders from considering sales of
           DWS fund shares as a factor in the selection of



32 | How to Exchange or Sell Class A, B and C Shares
<PAGE>


           broker-dealers to execute portfolio transactions for the fund. In
           addition, the Advisor, the Distributor and/or their affiliates will
           not use fund brokerage to pay for their obligation to provide
           additional compensation to financial advisors as described above.



POLICIES YOU SHOULD KNOW ABOUT


           Along with the information on the previous pages, the policies below
           may affect you as a shareholder. Some of this information, such as
           the section on distributions and taxes, applies to all investors,
           including those investing through a financial advisor.


           If you are investing through a financial advisor or through a
           retirement plan, check the materials you received from them about
           how to buy and sell shares because particular financial advisors or
           other intermediaries may adopt policies, procedures or limitations
           that are separate from those described by the fund. Please note that
           a financial advisor may charge fees separate from those charged by
           the fund and may be compensated by the fund.

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

           In order to reduce the amount of mail you receive and to help reduce
           expenses, we generally send a single copy of any shareholder report
           and prospectus to each household. If you do not want the mailing of
           these documents to be combined with those for other members of your
           household, please contact your financial advisor or call (800)
           621-1048.


           Policies about transactions

           THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
           is open. The fund calculates its share price for each class every
           business day, as of the close of regular trading on the New York
           Stock Exchange (typically 4:00 p.m. Eastern time, but sometimes
           earlier, as in the case of scheduled half-day trading or unscheduled
           suspensions of trading). You can place an order to buy or sell
           shares at any time.


                                            Policies You Should Know About  | 33
<PAGE>

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

           We might request additional information about you (which may include
           certain documents, such as articles of incorporation for companies)
           to help us verify your identity and, in some cases, the information
           and/or documents may be required to conduct the verification. The
           information and documents will be used solely to verify your
           identity.

           We will attempt to collect any missing required and requested
           information by contacting you or your financial advisor. If we are
           unable to obtain this information within the time frames established
           by the fund, then we may reject your application and order.

           The fund will not invest your purchase until all required and
           requested identification information has been provided and your
           application has been submitted in "good order." After we receive all
           the information, your application is deemed to be in good order and
           we accept your purchase, you will receive the net asset value per
           share next calculated, less any applicable sales charge.

           If we are unable to verify your identity within time frames
           established by the fund, after a reasonable effort to do so, you
           will receive written notification.


           With certain limited exceptions, only US residents may invest in the
           fund.


           Because orders placed through a financial advisor must be forwarded
           to the transfer agent before they can be processed, you'll need to
           allow extra time. Your financial advisor should be able to tell you
           approximately when your order will be processed. It is the
           responsibility of your financial advisor to forward your order to
           the transfer agent in a timely manner.

           INITIAL PURCHASE. The minimum initial investment for Class A, B and
           C shares is $1,000, except for investments on behalf of participants
           in certain fee-based and wrap programs offered through certain
           financial intermediaries approved by the Advisor,


34 | Policies You Should Know About
<PAGE>

           for which there is no minimum initial investment; and IRAs, for
           which the minimum initial investment is $500 per account. The
           minimum initial investment is $500 per account if you establish an
           automatic investment plan. Group retirement plans and certain other
           accounts have similar or lower minimum share balance requirements.


           SUB-MINIMUM BALANCES. The fund may close your account and send you
           the proceeds if your balance falls below $1,000 ($250 for retirement
           accounts and $500 for accounts with an Automatic Investment Plan
           funded with $50 or more per month in subsequent investments). We
           will give you 60 days' notice (90 days for retirement accounts) so
           you can either increase your balance or close your account (these
           policies don't apply to investors with $100,000 or more in DWS fund
           shares, investors in certain fee-based and wrap programs offered
           through certain financial intermediaries approved by the Advisor, or
           group retirement plans and certain other accounts having lower
           minimum share balance requirements).

           SUBSEQUENT INVESTMENTS. The minimum subsequent investment is $50.
           However, there is no minimum investment requirement for subsequent
           investments in Class A shares on behalf of participants in certain
           fee-based and wrap programs offered through certain financial
           intermediaries approved by the Advisor.

           MARKET TIMING POLICIES AND PROCEDURES. Short-term and excessive
           trading of fund shares may present risks to long-term shareholders,
           including potential dilution in the value of fund shares,
           interference with the efficient management of the fund's portfolio
           (including losses on the sale of investments), taxable gains to
           remaining shareholders and increased brokerage and administrative
           costs. These risks may be more pronounced if the fund invests in
           certain securities, such as those that trade in foreign markets, are
           illiquid or do not otherwise have "readily available market
           quotations." Certain investors may seek to employ short-term trading
           strategies aimed at exploiting variations in portfolio valuation
           that arise from the nature of the securities held by the fund (e.g.,
           "time zone arbitrage"). The fund discourages short-term and
           excessive trading and has adopted policies and procedures that are
           intended to detect and deter short-term and excessive trading.



                                            Policies You Should Know About  | 35
<PAGE>


           Pursuant to its policies, the fund will impose a 2% redemption fee
           on fund shares held for less than a specified holding period
           (subject to certain exceptions discussed below under "Redemption
           fees"). The fund also reserves the right to reject or cancel a
           purchase or exchange order for any reason without prior notice. For
           example, the fund may in its discretion reject or cancel a purchase
           or an exchange order even if the transaction is not subject to the
           specific roundtrip transaction limitation described below if the
           Advisor believes that there appears to be a pattern of short-term or
           excessive trading activity by a shareholder or deems any other
           trading activity harmful or disruptive to the fund. The fund,
           through its Advisor and Transfer Agent, will measure short-term and
           excessive trading by the number of roundtrip transactions within a
           shareholder's account during a rolling 12-month period. A
           "roundtrip" transaction is defined as any combination of purchase
           and redemption activity (including exchanges) of the same fund's
           shares. The fund may take other trading activity into account if the
           fund believes such activity is of an amount or frequency that may be
           harmful to long-term shareholders or disruptive to portfolio
           management.

           Shareholders are limited to four roundtrip transactions in the same
           DWS Fund (excluding money market funds) over a rolling 12-month
           period. Shareholders with four or more roundtrip transactions in the
           same DWS Fund within a rolling 12-month period generally will be
           blocked from making additional purchases of, or exchanges into, that
           DWS Fund. The fund has sole discretion whether to remove a block
           from a shareholder's account. The rights of a shareholder to redeem
           shares of a DWS Fund are not affected by the four roundtrip
           transaction limitation, but all redemptions remain subject to the
           fund's redemption fee policy (see "Redemption fees" described
           below).

           The Advisor may make exceptions to the roundtrip transaction policy
           for certain types of transactions if in its opinion the transactions
           do not represent short-term or excessive trading or are not abusive
           or harmful to the fund, such as, but not limited to, systematic
           transactions, required minimum retirement distributions,
           transactions initiated by the fund or administrator and transactions
           by certain qualified fund-of-fund(s).



36 | Policies You Should Know About
<PAGE>


           In certain circumstances where shareholders hold shares of the fund
           through a financial intermediary, the fund may rely upon the
           financial intermediary's policy to deter short-term or excessive
           trading if the Advisor believes that the financial intermediary's
           policy is reasonably designed to detect and deter transactions that
           are not in the best interests of the fund. A financial
           intermediary's policy relating to short-term or excessive trading
           may be more or less restrictive than the DWS Funds' policy, may
           permit certain transactions not permitted by the DWS Funds'
           policies, or prohibit transactions not subject to the DWS Funds'
           policies.

           The Advisor may also accept undertakings from a financial
           intermediary to enforce short-term or excessive trading policies on
           behalf of the fund that provide a substantially similar level of
           protection for the fund against such transactions. For example,
           certain financial intermediaries may have contractual, legal or
           operational restrictions that prevent them from blocking an account.
           In such instances, the financial intermediary may use alternate
           techniques that the Advisor considers to be a reasonable substitute
           for such a block.

           In addition, if the fund invests some portion of its assets in
           foreign securities, it has adopted certain fair valuation practices
           intended to protect the fund from "time zone arbitrage" with respect
           to its foreign securities holdings and other trading practices that
           seek to exploit variations in portfolio valuation that arise from
           the nature of the securities held by the fund. (See "How the fund
           calculates share price.")

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of the fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in the fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.



                                            Policies You Should Know About  | 37
<PAGE>


           The fund's market timing policies and procedures may be modified or
           terminated at any time.


           REDEMPTION FEES. The fund imposes a redemption fee of 2% of the
           total redemption amount (calculated at net asset value, without
           regard to the effect of any contingent deferred sales charge; any
           contingent deferred sales charge is also assessed on the total
           redemption amount without regard to the assessment of the 2%
           redemption fee) on all fund shares redeemed or exchanged within 15
           days of buying them (either by purchase or exchange). The redemption
           fee is paid directly to the fund and is designed to encourage
           long-term investment and to offset transaction and other costs
           associated with short-term or excessive trading. For purposes of
           determining whether the redemption fee applies, shares held the
           longest time will be treated as being redeemed first and shares held
           the shortest time will be treated as being redeemed last.


           The redemption fee is applicable to fund shares purchased either
           directly or through a financial intermediary, such as a
           broker-dealer. Transactions through financial intermediaries
           typically are placed with the fund on an omnibus basis and include
           both purchase and sale transactions placed on behalf of multiple
           investors. These purchase and sale transactions are generally netted
           against one another and placed on an aggregate basis; consequently
           the identities of the individuals on whose behalf the transactions
           are placed generally are not known to the fund. For this reason, the
           fund has undertaken to notify financial intermediaries of their
           obligation to assess the redemption fee on customer accounts and to
           collect and remit the proceeds to the fund. However, due to
           operational requirements, the intermediaries' methods for tracking
           and calculating the fee may be inadequate or differ in some respects
           from the fund's. Subject to approval by the Advisor or the fund's
           Board, intermediaries who transact business on an omnibus basis may
           implement the redemption fees according to their own operational
           guidelines (which may be different than the fund's policies) and
           remit the fees to the fund.


           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of participants in certain group retirement
           plans and financial intermediaries whose processing systems are
           incapable of properly applying the redemption fee to underlying
           shareholders; (iii) transactions on behalf of a shareholder to


38 | Policies You Should Know About
<PAGE>


           return any excess IRA contributions to the shareholder; (iv)
           transactions on behalf of a shareholder to effect a required minimum
           distribution on an IRA; (v) transactions on behalf of any mutual
           fund advised by the Advisor and its affiliates (e.g., "funds of
           funds") or, in the case of a master/feeder relationship, redemptions
           by the feeder fund from the master portfolio; (vi) transactions on
           behalf of certain unaffiliated mutual funds operating as funds of
           funds; (vii) transactions following death or disability of any
           registered shareholder, beneficial owner or grantor of a living
           trust with respect to shares purchased before death or disability;
           (viii) transactions involving hardship of any registered
           shareholder; (ix) systematic transactions with pre-defined trade
           dates for purchases, exchanges or redemptions, such as automatic
           account rebalancing, or loan origination and repayments; (x)
           transactions involving shares purchased through the reinvestment of
           dividends or other distributions; (xi) transactions involving shares
           transferred from another account in the same fund or converted from
           another class of the same fund (the redemption fee period will carry
           over to the acquired shares); (xii) transactions initiated by the
           fund or administrator (e.g., redemptions for not meeting account
           minimums, to pay account fees funded by share redemptions, or in the
           event of the liquidation or merger of the fund); or (xiii)
           transactions in cases when there are legal or contractual
           limitations or restrictions on the imposition of the redemption fee
           (as determined by the fund or its agents in their sole discretion).
           It is the policy of the DWS funds to permit approved fund platform
           providers to execute transactions within the funds without the
           imposition of a redemption fee if such providers have implemented
           alternative measures that are determined by the Advisor to provide
           controls on short-term and excessive trading that are comparable to
           the DWS funds' policies.


           THE AUTOMATED INFORMATION LINE IS AVAILABLE 24 HOURS A DAY BY
           CALLING (800) 621-1048. You can use our automated phone services to
           get information on DWS funds generally and on accounts held directly
           at DWS Scudder. You can also use this service to make exchanges and
           sell shares.

           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

The DWS Scudder Web site can be a valuable resource for shareholders with
Internet access. Go to WWW.DWS-SCUDDER.COM to get up-to-date information, review
balances or even place orders for exchanges.


                                            Policies You Should Know About  | 39
<PAGE>

           (ACH) services. Transactions take two to three days to be completed
           and there is a $50 minimum and a $250,000 maximum. To set up
           QuickBuy or QuickSell on a new account, see the account application;
           to add it to an existing account, call (800) 621-1048.


           TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are
           automatically entitled to telephone and electronic transaction
           privileges, but you may elect not to have them when you open your
           account or by contacting Shareholder Services at (800) 621-1048 at a
           later date.


           Since many transactions may be initiated by telephone or
           electronically, it's important to understand that as long as we take
           reasonable steps to ensure that an order to purchase or redeem
           shares is genuine, such as recording calls or requesting
           personalized security codes or other information, we are not
           responsible for any losses that may occur as a result. For
           transactions conducted over the Internet, we recommend the use of a
           secure Internet browser. In addition, you should verify the accuracy
           of your confirmation statements immediately after you receive them.


           THE FUND DOES NOT ISSUE SHARE CERTIFICATES. However, if you
           currently have shares in certificated form, you must include the
           share certificates properly endorsed or accompanied by a duly
           executed stock power when exchanging or redeeming shares. You may
           not exchange or redeem shares in certificate form by telephone or
           via the Internet.


           WHEN YOU ASK US TO SEND OR RECEIVE A WIRE, please note that while we
           don't charge a fee to send or receive wires, it's possible that your
           bank may do so. Wire transactions are generally completed within 24
           hours. The fund can only send wires of $1,000 or more and accept
           wires of $50 or more.


           THE FUND ACCEPTS PAYMENT FOR SHARES ONLY IN US DOLLARS by check,
           bank or Federal Funds wire transfer or by electronic bank transfer.
           Please note that the fund does not accept cash, money orders,
           traveler's checks, starter checks, third party checks (except checks
           for retirement plan asset transfers and rollovers or for Uniform
           Gifts to Minors Act/Uniform Transfers to Minors Act accounts),
           checks drawn on foreign banks or checks issued by credit card
           companies or Internet-based companies. Thus,



40 | Policies You Should Know About
<PAGE>


           subject to the foregoing exceptions for certain third party checks,
           checks that are otherwise permissible must be drawn by the account
           holder on a domestic bank and must be payable to the fund.

           SIGNATURE GUARANTEE. When you want to sell more than $100,000 worth
           of shares or send proceeds to a third party or to a new address,
           you'll usually need to place your order in writing and include a
           signature guarantee. However, if you want money wired to a bank
           account that is already on file with us, you don't need a signature
           guarantee. Also, generally you don't need a signature guarantee for
           an exchange, although we may require one in certain other
           circumstances.


           A signature guarantee is simply a certification of your signature -
           a valuable safeguard against fraud. You can get a signature
           guarantee from an eligible guarantor institution, including
           commercial banks, savings and loans, trust companies, credit unions,
           member firms of a national stock exchange or any member or
           participant of an approved signature guarantor program. Note that
           you can't get a signature guarantee from a notary public and we must
           be provided the original guarantee.

           SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION
           ACCOUNTS may require additional documentation. Please call (800)
           621-1048 or contact your financial advisor for more information.


           WHEN YOU SELL SHARES THAT HAVE A CDSC, we calculate the CDSC as a
           percentage of what you paid for the shares or what you are selling
           them for - whichever results in the lower charge to you. In
           processing orders to sell shares, the shares with the lowest CDSC
           are sold first. Exchanges from one fund into another don't affect
           CDSCs; for each investment you make, the date you first bought
           shares is the date we use to calculate a CDSC on that particular
           investment.


           There are certain cases in which you may be exempt from a CDSC.
           These include:

           -  the death or disability of an account owner (including a joint
              owner). This waiver applies only under certain conditions. Please
              contact your financial advisor or Shareholder Services to
              determine if the conditions exist


           -  withdrawals made through an automatic withdrawal plan up to a
              maximum of 12% per year of the net asset value of the account


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

If you ever have difficulty placing an order by phone or Internet, you can send
us your order in writing.

                                            Policies You Should Know About  | 41
<PAGE>

           -  withdrawals related to certain retirement or benefit plans

           -  redemptions for certain loan advances, hardship provisions or
              returns of excess contributions from retirement plans

           -  for Class A shares purchased through the Large Order NAV Purchase
              Privilege, redemption of shares whose dealer of record at the
              time of the investment notifies the Distributor that the dealer
              waives the applicable commission

           -  for Class C shares, redemption of shares purchased through a
              dealer-sponsored asset allocation program maintained on an
              omnibus record-keeping system, provided the dealer of record has
              waived the advance of the first year distribution and service
              fees applicable to such shares and has agreed to receive such
              fees quarterly

           In each of these cases, there are a number of additional provisions
           that apply in order to be eligible for a CDSC waiver. Your financial
           advisor or Shareholder Services can answer your questions and help
           you determine if you are eligible.


           IF YOU SELL SHARES IN A DWS FUND AND THEN DECIDE TO INVEST WITH DWS
           SCUDDER AGAIN WITHIN SIX MONTHS, you may be able to take advantage
           of the "reinstatement feature." With this feature, you can put your
           money back into the same class of a DWS fund at its current NAV and,
           for purposes of a sales charge, it will be treated as if it had
           never left DWS Scudder.


           You'll be reimbursed (in the form of fund shares) for any CDSC you
           paid when you sold. Future CDSC calculations will be based on your
           original investment date, rather than your reinstatement date. There
           is also an option that lets investors who sold Class B shares buy
           Class A shares (if available) with no sales charge, although they
           won't be reimbursed for any CDSC they paid. You can only use the
           reinstatement feature once for any given group of shares. To take
           advantage of this feature, contact Shareholder Services or your
           financial advisor.


           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check (redemption proceeds from such a sale
           are unavailable until the check has cleared), when you make
           purchases by ACH (the funds will be placed under a 10 calendar day
           hold to ensure good funds) or when unusual circumstances prompt the
           SEC to allow further



42 | Policies You Should Know About
<PAGE>


           delays. Certain expedited redemption processes may also be delayed
           when you are selling recently purchased shares or in the event of
           closing of the Federal Reserve Bank's wire payment system. In
           addition, the fund reserves the right to suspend or postpone
           redemptions as permitted pursuant to Section 22(e) of the Investment
           Company Act of 1940. Generally, those circumstances are when 1) the
           New York Stock Exchange is closed other than customary weekend or
           holiday closings; 2) trading on the New York Stock Exchange is
           restricted; 3) an emergency exists which makes the disposal of
           securities owned by the fund or the fair determination of the value
           of the fund's net assets not reasonably practicable; or 4) the SEC,
           by order, permits the suspension of the right of redemption.
           Redemption payments by wire may also be delayed in the event of a
           non-routine closure of the Federal Reserve wire payment system. For
           additional rights reserved by the fund, please see "Other rights we
           reserve."


           You may obtain additional information about other ways to sell your
           shares by contacting your financial advisor.


           How the fund calculates share price

           To calculate net asset value, or NAV, each share class uses the
           following equation:


<TABLE>
<S>                                                     <C> <C>
            TOTAL ASSETS - TOTAL LIABILITIES
           -----------------------------------------    =    NAV
               TOTAL NUMBER OF SHARES OUTSTANDING
</TABLE>


           The price at which you buy shares is the NAV, although for Class A
           shares it will be adjusted to allow for any applicable sales charge
           (see "Choosing a Share Class"). The price at which you sell shares
           is also the NAV, although a CDSC may be taken out of the proceeds
           (see "Choosing a Share Class").


           THE FUND CHARGES A REDEMPTION FEE EQUAL TO 2.00% of the value of
           shares redeemed or exchanged within 15 days of purchase. Please see
           "Policies about transactions - Redemption fees" for further
           information.

           WE TYPICALLY VALUE SECURITIES USING INFORMATION FURNISHED BY AN
           INDEPENDENT PRICING SERVICE OR MARKET QUOTATIONS, WHERE APPROPRIATE.
           However, we may use methods approved by the fund's Board, such as a
           fair valuation model, which are intended to reflect fair value when
           pricing service information or market quotations are not readily
           available or when a security's value or



                                            Policies You Should Know About  | 43
<PAGE>

           a meaningful portion of the value of the fund's portfolio is
           believed to have been materially affected by a significant event,
           such as a natural disaster, an economic event like a bankruptcy
           filing, or a substantial fluctuation in domestic or foreign markets
           that has occurred between the close of the exchange or market on
           which the security is principally traded (for example, a foreign
           exchange or market) and the close of the New York Stock Exchange. In
           such a case, the fund's value for a security is likely to be
           different from the last quoted market price or pricing service
           information. In addition, due to the subjective and variable nature
           of fair value pricing, it is possible that the value determined for
           a particular asset may be materially different from the value
           realized upon such asset's sale. It is expected that the greater the
           percentage of fund assets that is invested in non-US securities, the
           more extensive will be the fund's use of fair value pricing. This is
           intended to reduce the fund's exposure to "time zone arbitrage" and
           other harmful trading practices. (See "Market timing policies and
           procedures.")

           TO THE EXTENT THAT THE FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when the
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities the fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


           Other rights we reserve

           You should be aware that we may do any of the following:

           -  withdraw or suspend the offering of shares at any time

           -  withhold a portion of your distributions and redemption proceeds
              as federal income tax if we have been notified by the IRS that
              you are subject to backup withholding or if you fail to provide
              us with a correct taxpayer ID number and certain certifications
              or certification that you are exempt from backup withholding


           -  reject a new account application if you don't provide any
              required or requested identifying information, or for any other
              reason


44 | Policies You Should Know About
<PAGE>


           -  refuse, cancel, limit or rescind any purchase or exchange order,
              without prior notice; freeze any account (meaning you will not be
              able to purchase fund shares in your account); suspend account
              services; and/or involuntarily redeem your account if we think
              that the account is being used for fraudulent or illegal
              purposes; one or more of these actions will be taken when, at our
              sole discretion, they are deemed to be in the fund's best
              interests or when the fund is requested or compelled to do so by
              governmental authority or by applicable law

           -  close and liquidate your account if we are unable to verify your
              identity, or for other reasons; if we decide to close your
              account, your fund shares will be redeemed at the net asset value
              per share next calculated after we determine to close your
              account (less any applicable sales charge or redemption fee); you
              may recognize a gain or loss on the redemption of your fund
              shares and incur a tax liability

           -  pay you for shares you sell by "redeeming in kind," that is, by
              giving you securities (which typically will involve brokerage
              costs for you to liquidate) rather than cash, but which will be
              taxable to the same extent as a redemption for cash; the fund
              generally won't make a redemption in kind unless your requests
              over a 90-day period total more than $250,000 or 1% of the value
              of the fund's net assets, whichever is less

           -  change, add or withdraw various services, fees and account
              policies (for example, we may adjust the fund's investment
              minimums at any time)



                                            Policies You Should Know About  | 45
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

           The fund intends to distribute to its shareholders virtually all of
           its net earnings. The fund can earn money in two ways: by receiving
           interest, dividends or other income from securities it holds and by
           selling securities for more than it paid for them. (The fund's
           earnings are separate from any gains or losses stemming from your
           own purchase and sale of shares.) The fund may not always pay a
           dividend or distribution for a given period.


           THE FUND INTENDS TO PAY DIVIDENDS to its shareholders in March,
           June, September and December. Long-term and short-term capital gains
           are paid in December. If necessary the fund may distribute at other
           times at well.

           Dividends or distributions declared to shareholders of record in the
           last quarter of a given calendar year are treated for federal income
           tax purposes as if they were received on December 31 of that year,
           provided such dividends or distributions are paid by the end of the
           following January.

           For federal income tax purposes, income and capital gains
           distributions are generally taxable. However, dividends and
           distributions received by retirement plans qualifying for tax
           exemption under federal income tax laws generally will not be
           taxable.

           YOU CAN CHOOSE HOW TO RECEIVE YOUR DIVIDENDS AND DISTRIBUTIONS. You
           can have them all automatically reinvested in fund shares (at NAV),
           all deposited directly to your bank account or all sent to you by
           check, have one type reinvested and the other sent to you by check
           or have them invested in a different fund. Tell us your preference
           on your application. If you don't indicate a preference, your
           dividends and distributions will all be reinvested in shares of the
           fund without a sales charge (if applicable). Distributions are
           treated the same for federal income tax purposes whether you receive
           them in cash or reinvest them in additional shares. For
           employer-sponsored qualified plans, and retirement plans,
           reinvestment (at NAV) is the only option.

           BUYING, SELLING OR EXCHANGING FUND SHARES WILL USUALLY HAVE FEDERAL
           INCOME TAX CONSEQUENCES FOR YOU (except in employer-sponsored
           qualified plans, IRAs or other tax-advantaged accounts). Your sale
           of shares may result in a capital


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investments, including any state and local
tax consequences.


46 | Understanding Distributions and Taxes
<PAGE>

           gain or loss. The gain or loss will be long-term or short-term
           depending on how long you owned the shares that were sold. For
           federal income tax purposes, an exchange is treated the same as a
           sale.

           THE FEDERAL INCOME TAX STATUS of the fund's earnings you receive and
           your own fund transactions generally depend on their type:



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
 GENERALLY TAXED AT LONG-TERM                           GENERALLY TAXED AT ORDINARY
CAPITAL GAIN RATES:                                   INCOME RATES:
------------------------------------------------------------------------------------------
<S>                                                   <C>
DISTRIBUTIONS FROM THE FUND
- gains from the sale of                              -  gains from the sale of
  securities held (or treated as                         securities held by the fund for
  held) by the fund for more                             one year or less
  than one year                                       -  all other taxable income
- qualified dividend income
------------------------------------------------------------------------------------------
TRANSACTIONS INVOLVING FUND
SHARES
- gains from selling fund                             -  gains from selling fund
  shares held for more than                              shares held for one year or
  one year                                               less
------------------------------------------------------------------------------------------
</TABLE>




           ANY DIRECT INVESTMENTS IN FOREIGN SECURITIES BY THE FUND MAY BE
           SUBJECT TO FOREIGN WITHHOLDING TAXES. In that case, the fund's yield
           on those securities would generally be decreased. Shareholders
           generally will not be entitled to claim a credit or deduction with
           respect to foreign taxes paid by the fund. In addition, any
           investments in foreign securities or foreign currencies may increase
           or accelerate the fund's recognition of ordinary income and may
           affect the timing or amount of the fund's distributions. If you
           invest in the fund through a taxable account, your after-tax return
           could be negatively impacted.

           To the extent that the fund invests in certain debt obligations or
           certain other securities, investments in these obligations or
           securities may cause the fund to recognize taxable income in excess
           of the cash generated by such obligations. Thus, the fund could be
           required at times to liquidate other investments in order to satisfy
           its distribution requirements.

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by the fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital



                                     Understanding Distributions and Taxes  | 47
<PAGE>


           gain rates. Qualified dividend income generally includes dividends
           from domestic and some foreign corporations. It does not include
           income from investments in debt securities or, generally, from
           REITs. In addition, the fund must meet certain holding period and
           other requirements with respect to the dividend-paying stocks in its
           portfolio and the shareholder must meet certain holding period and
           other requirements with respect to the fund's shares for the lower
           tax rates to apply.

           For taxable years beginning before January 1, 2011, the maximum
           federal income tax rate imposed on long-term capital gains
           recognized by individuals and other noncorporate shareholders has
           been reduced to 15%. For taxable years beginning on or after January
           1, 2011, the long-term capital gain rate is scheduled to return to
           20%. For more information, see the Statement of Additional
           Information, under "Taxes."


           YOUR FUND WILL SEND YOU DETAILED FEDERAL INCOME TAX INFORMATION
           EVERY JANUARY. These statements tell you the amount and the federal
           income tax classification of any dividends or distributions you
           received. They also have certain details on your purchases and sales
           of shares.


           IF YOU INVEST RIGHT BEFORE THE FUND PAYS A DIVIDEND, you'll be
           getting some of your investment back as a taxable dividend. You can
           avoid this by investing after the fund declares a dividend. In
           tax-advantaged retirement accounts you do not need to worry about
           this.


           CORPORATIONS are taxed at the same rates on ordinary income and
           capital gains, but may be eligible for a dividends-received
           deduction for a portion of the income dividends they receive from
           the fund, provided certain holding period and other requirements are
           met.

           The above discussion is applicable to shareholders who are US
           persons. If you are a non-US person, please consult your own tax
           advisor with respect to the US tax consequences to you of an
           investment in the fund.


48 | Understanding Distributions and Taxes
<PAGE>


APPENDIX
--------------------------------------------------------------------------------
           Hypothetical Expense Summary


           Using the annual fund operating expense ratios presented in the fee
           tables in the fund prospectus, the Hypothetical Expense Summary
           shows the estimated fees and expenses, in actual dollars, that would
           be charged on a hypothetical investment of $10,000 in the fund held
           for the next 10 years and the impact of such fees and expenses on
           fund returns for each year and cumulatively, assuming a 5% return
           for each year. The tables also assume that all dividends and
           distributions are reinvested and that Class B shares convert to
           Class A shares after six years. The annual fund expense ratios shown
           are net of any contractual fee waivers or expense reimbursements, if
           any, for the period of the contractual commitment. The tables
           reflect the maximum initial sales charge, if any, but do not reflect
           any contingent deferred sales charge or redemption fees, if any,
           which may be payable upon redemption. If contingent deferred sales
           charges or redemption fees were shown, the "Hypothetical Year-End
           Balance After Fees and Expenses" amounts shown would be lower and
           the "Annual Fees and Expenses" amounts shown would be higher. Also,
           please note that if you are investing through a third party
           provider, that provider may have fees and expenses separate from
           those of the fund that are not reflected here. Mutual fund fees and
           expenses fluctuate over time and actual expenses may be higher or
           lower than those shown.

           The Hypothetical Expense Summary should not be used or construed as
           an offer to sell, a solicitation of an offer to buy or a
           recommendation or endorsement of any specific mutual fund. You
           should carefully review the fund's prospectus to consider the
           investment objectives, risks, expenses and charges of the fund prior
           to investing.



                                                                  Appendix  | 49
<PAGE>


DWS Balanced Fund - Class A





<TABLE>
<CAPTION>
              MAXIMUM            INITIAL HYPOTHETICAL                  ASSUMED RATE
           SALES CHARGE:              INVESTMENT:                       OF RETURN:
               0.00%                    $10,000                             5%
--------------------------------------------------------------------------------------------------
                                                                HYPOTHETICAL
             CUMULATIVE         ANNUAL        CUMULATIVE          YEAR-END
           RETURN BEFORE         FUND        RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND         EXPENSE         FEES AND           FEES AND            AND
YEAR          EXPENSES          RATIOS         EXPENSES           EXPENSES         EXPENSES
--------------------------------------------------------------------------------------------------
<S>       <C>                <C>            <C>               <C>                <C>
   1            100.0%       100.0%              100.0%           $000,000       $  000,000
--------------------------------------------------------------------------------------------------
   2                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   3                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   4                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   5                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   6                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   7                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   8                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   9                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
  10                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
  TOTAL                                                                          $1,000,000
--------------------------------------------------------------------------------------------------
</TABLE>




DWS Balanced Fund - Class B






<TABLE>
<CAPTION>
              MAXIMUM            INITIAL HYPOTHETICAL                   ASSUMED RATE
           SALES CHARGE:              INVESTMENT:                        OF RETURN:
               0.00%                    $10,000                              5%
--------------------------------------------------------------------------------------------------
                                                                HYPOTHETICAL
             CUMULATIVE         ANNUAL        CUMULATIVE          YEAR-END
           RETURN BEFORE         FUND        RETURN AFTER      BALANCE AFTER         ANNUAL
              FEES AND         EXPENSE         FEES AND           FEES AND          FEES AND
YEAR          EXPENSES          RATIOS         EXPENSES           EXPENSES          EXPENSES
--------------------------------------------------------------------------------------------------
<S>       <C>                <C>            <C>               <C>                <C>
   1            100.0%       100.0%              100.0%           $000,000       $  000,000
--------------------------------------------------------------------------------------------------
   2                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   3                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   4                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   5                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   6                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   7                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   8                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   9                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
  10                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
  TOTAL                                                                          $1,000,000
--------------------------------------------------------------------------------------------------
</TABLE>





50 | Appendix

<PAGE>


DWS Balanced Fund - Class C





<TABLE>
<CAPTION>
              MAXIMUM            INITIAL HYPOTHETICAL                  ASSUMED RATE
           SALES CHARGE:              INVESTMENT:                       OF RETURN:
               0.00%                    $10,000                             5%
--------------------------------------------------------------------------------------------------
                                                                HYPOTHETICAL
             CUMULATIVE         ANNUAL        CUMULATIVE          YEAR-END
           RETURN BEFORE         FUND        RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND         EXPENSE         FEES AND           FEES AND            AND
YEAR          EXPENSES          RATIOS         EXPENSES           EXPENSES         EXPENSES
--------------------------------------------------------------------------------------------------
<S>       <C>                <C>            <C>               <C>                <C>
   1            100.0%       100.0%              100.0%           $000,000       $  000,000
--------------------------------------------------------------------------------------------------
   2                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   3                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   4                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   5                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   6                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   7                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   8                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
   9                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
  10                %            %                   %            $              $
--------------------------------------------------------------------------------------------------
  TOTAL                                                                          $1,000,000
--------------------------------------------------------------------------------------------------
</TABLE>





                                                                  Appendix  | 51

<PAGE>

TO GET MORE INFORMATION

SHAREHOLDER REPORTS - These include commentary from the fund's management team
about recent market conditions and the effects of the fund's strategies on its
performance. They also have detailed performance figures, a list of everything
the fund owns, and its financial statements. Shareholders get these reports
automatically.

STATEMENT OF ADDITIONAL INFORMATION (SAI) - This tells you more about the
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).

For a free copy of any of these documents or to request other information about
the fund, call (800) 621-1048, or contact DWS Scudder at the address listed
below. The fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about the fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about the fund,
including the fund's SAI, 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.


<TABLE>
<CAPTION>
DWS SCUDDER              SEC                     DISTRIBUTOR
---------------------    --------------------    -------------------------------
<S>                      <C>                     <C>
PO Box 219151            100 F Street, N.E.      DWS Scudder Distributors, Inc.
Kansas City, MO          Washington, D.C.        222 South Riverside Plaza
64121-9151               20549-0102              Chicago, IL 60606-5808
WWW.DWS-SCUDDER.COM      WWW.SEC.GOV             (800) 621-1148
(800) 621-1048           (800) SEC-0330
</TABLE>



<TABLE>
<S>                   <C>                    <C>
SEC FILE NUMBER:
                        DWS Balanced Fund    811-1236
</TABLE>







(03/01/08) _____
[RECYCLE GRAPHIC APPEARS HERE]

                                                 [DWS SCUDDER LOGO APPEARS HERE]



<PAGE>
--------------------------------------------------------------------------------

                                 MARCH 1, 2008








                                   PROSPECTUS

                              ------------------

                              INSTITUTIONAL CLASS





--------------------------------------------------------------------------------




                               DWS BALANCED FUND




As with all mutual funds, the Securities and Exchange  Commission (SEC) does not
approve or disapprove these shares or determine  whether the information in this
prospectus  is  truthful  or  complete.  It is a criminal  offense for anyone to
inform you otherwise.


                                         [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]


<PAGE>
--------------------------------------------------------------------------------










CONTENTS
--------------------------------------------------------------------------------


<TABLE>
<S>      <C>
HOW THE FUND WORKS

  4      The Fund's Main Investment
         Strategy

  5      The Main Risks of Investing in
         the Fund

  9      The Fund's Performance
         History

 11      How Much Investors Pay

 13      Other Policies and Risks

 14      Who Manages and Oversees
         the Fund

 19      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUND

 21      Buying and Selling
         Institutional Class Shares

 27      Policies You Should Know
         About

 38      Understanding Distributions
         and Taxes

 42      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

On the next few pages, you'll find information about the fund's investment
goal, the main strategies it uses to pursue that goal and the main risks that
could affect performance.

Whether you are considering investing in the fund or are already a shareholder,
you'll want to LOOK THIS INFORMATION OVER CAREFULLY. You may want to keep it on
hand for reference as well.

Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices will go up and down, and you could lose money by investing in them.

You can find DWS prospectuses on the Internet at WWW.DWS-SCUDDER.COM (the Web
site does not form a part of this prospectus).
<PAGE>


<TABLE>
--------------------------------------------------------------------------------
<S>                                                          <C>
                                                             Institutional Class
                                           ticker symbol     KTRIX
                                             fund number     1402

DWS BALANCED FUND
--------------------------------------------------------------------------------

</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks the highest total return, a combination of income
            and capital appreciation, consistent with reasonable risk.


            The fund can buy many types of securities, among them common
            stocks, convertible securities, corporate bonds, US government
            bonds, mortgage- and asset-backed securities and certain
            derivatives. The fund normally invests approximately 60% of its net
            assets in common stocks and other equity securities and
            approximately 40% of its net assets in fixed-income securities,
            including lower-quality, high-yield debt securities. These
            percentages may fluctuate in response to changing market
            conditions, but the fund will at all times invest at least 25% of
            net assets in fixed-income senior securities. Generally, most
            securities are from US issuers, but the fund may invest up to 25%
            of total assets in foreign securities.

            The Advisor may allocate the fund's assets among various asset
            categories including growth and value stocks of large and small
            capitalization companies and investment-grade and high-yield debt
            securities. The Advisor will review the fund's allocation among the
            various asset categories periodically and may adjust the fund's
            allocation among various asset categories based on current or
            expected market conditions or to manage risk as is consistent with
            the fund's overall investment strategy.

            The Advisor combines global strategies for selecting equity and
            debt securities for the fund's portfolio. Each strategy is run by
            portfolio managers that specialize in the respective asset
            category. The strategies that the Advisor may implement utilize a
            variety of quantitative and qualitative techniques.



4 | DWS Balanced Fund
<PAGE>


            iGAP STRATEGY. In addition to the fund's main investment strategy,
            the Advisor seeks to enhance returns by employing a global tactical
            asset allocation overlay strategy. This strategy, which the Advisor
            calls iGAP (integrated Global Alpha Platform), attempts to take
            advantage of short-term and medium-term mispricings within global
            bond, equity and currency markets. The iGAP strategy is implemented
            through the use of derivatives, which are contracts or other
            instruments whose value is based on, for example, indices,
            currencies or securities. The iGAP strategy primarily uses
            exchange-traded futures contracts on global bonds and equity
            indexes and over-the-counter forward currency contracts, and is
            expected to have a low correlation to the fund's other securities
            holdings. Because the iGAP strategy relies primarily on futures,
            forward currency contracts and other derivative instruments, the
            aggregate notional market exposure obtained from such investments
            may range up to 100% of the net assets of the fund (assuming the
            maximum allocation to the iGAP strategy).


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 33 1/3% of its total assets to approved
            institutional borrowers who need to borrow securities in order to
            complete certain transactions.


            DERIVATIVES. In addition to derivatives utilized within the iGap
            strategy, the Advisor may also use derivatives in circumstances
            where the Advisor believes they offer a more efficient means of
            gaining exposure to a particular asset class or market and to
            maintain a high level of liquidity to meet shareholder redemptions
            or other needs while maintaining exposure to the market. The
            Advisor may use futures, options, forward currency transactions and
            swaps.



            THE MAIN RISKS OF INVESTING IN THE FUND

            There are several risk factors that could hurt the fund's
            performance, cause you to lose money or cause the fund's
            performance to trail that of other investments.


            ASSET ALLOCATION RISK. Although asset allocation among different
            asset categories generally reduces risk and exposure to any one
            category, the risk remains that the Advisor may favor an asset
            category that performs poorly relative to the other asset
            categories.



                                                          DWS Balanced Fund  | 5
<PAGE>


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes and the
            fund may not be able to get an attractive price for them.


            INDUSTRY RISK. While the fund does not concentrate in any industry,
            to the extent that the fund has exposure to a given industry or
            sector, any factors affecting that industry or sector could affect
            the value of portfolio securities. For example, manufacturers of
            consumer goods could be hurt by a rise in unemployment or
            technology companies could be hurt by such factors as market
            saturation, price competition and rapid obsolescence.


            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of its
            bonds to decline. In addition, an issuer may not be able to make
            timely payments on the interest and/or principal on the bonds it has
            issued. Because the issuers of high-yield bonds or junk bonds (rated
            below the fourth highest category) may be in uncertain financial
            health, the prices of their bonds can be more vulnerable to bad
            economic news or even the expectation of bad news, than
            investment-grade bonds. In some cases, bonds, particularly
            high-yield bonds, may decline in credit quality or go into default.
            Because the fund may invest in securities not paying current
            interest or in securities already in default, these risks may be
            more pronounced.


            INTEREST RATE RISK. Generally, fixed income securities will
            decrease in value when interest rates rise. The longer the
            effective maturity of the fund's securities, the more sensitive it
            will be to interest rate changes. (As a general rule, a 1% rise in
            interest rates means a 1% fall in value for every year of
            duration.) As interest rates decline, the issuers of securities
            held by the fund may prepay principal earlier than scheduled,

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors interested in asset class diversification in
a single fund that invests in a mix of stocks and bonds.

6 | DWS Balanced Fund
<PAGE>

            forcing the fund to reinvest in lower-yielding securities.
            Prepayment may reduce the fund's income. As interest rates
            increase, slower than expected principal payments may extend the
            average life of fixed income securities. This will have the effect
            of locking in a below-market interest rate, increasing the fund's
            duration and reducing the value of such a security. Because the
            fund may invest in mortgage-related securities, it is more
            vulnerable to both of these risks.


            SMALL COMPANY CAPITALIZATION RISK. Small company stocks tend to
            experience steeper price fluctuations - down as well as up - than
            the stocks of larger companies. A shortage of reliable information
            - the same information gap that creates opportunity in small
            company investing - can also pose added risk. Industry-wide
            reversals may have a greater impact on small companies, since they
            lack a large company's financial resources. Small company stocks
            are typically less liquid than large company stocks. Accordingly,
            it may be harder to find a buyer for a small company's shares.

            FOREIGN INVESTMENT RISK. To the extent the fund has exposure to
            companies based outside the US, it faces the risks inherent in
            foreign investing. Adverse political, economic or social
            developments could undermine the value of the fund's investments or
            prevent the fund from realizing their full value. Financial
            reporting standards for companies based in foreign markets differ
            from those in the US. Additionally, foreign securities markets
            generally are smaller and less liquid than the US markets. These
            risks tend to be greater in emerging markets so, to the extent the
            fund invests in emerging markets, it takes on greater risks. The
            currency of the country in which the fund has invested could
            decline relative to the value of the US dollar, which decreases the
            value of the investment to US investors. The investments of the
            fund may be subject to foreign withholding taxes.

            iGAP RISK. The success of the iGAP strategy depends, in part, on
            the Advisor's ability to analyze the correlation between various
            global markets and asset classes. If the Advisor's correlation
            analysis proves to be incorrect, losses to the fund may be
            significant and may substantially exceed the intended level of
            market exposure for the iGAP strategy.



                                                          DWS Balanced Fund  | 7
<PAGE>


            DERIVATIVES RISK. Risks associated with derivatives include the
            risk that the derivative is not well correlated with the security,
            index or currency to which it relates; the risk that derivatives
            may not have the intended effects and may result in losses or
            missed opportunities; the risk that the fund will be unable to sell
            the derivative because of an illiquid secondary market; the risk
            that a counterparty is unwilling or unable to meet its obligation;
            and the risk that the derivative transaction could expose the fund
            to the effects of leverage, which could increase the fund's
            exposure to the market and magnify potential losses. There is no
            guarantee that derivatives, to the extent employed, will have the
            intended effect, and their use could cause lower returns or even
            losses to the fund. The use of derivatives by the fund to hedge
            risk may reduce the opportunity for gain by offsetting the positive
            effect of favorable price movements.


            SECURITIES LENDING RISK. Any loss in the market price of securities
            loaned by the fund that occurs during the term of the loan would be
            borne by the fund and would adversely affect the fund's
            performance. Also, there may be delays in recovery of securities
            loaned or even a loss of rights in the collateral should the
            borrower of the securities fail financially while the loan is
            outstanding. However, loans will be made only to borrowers selected
            by the fund's delegate after a review of relevant facts and
            circumstances, including the creditworthiness of the borrower.

            Other factors that could affect performance include:

            -  portfolio management could be wrong in the analysis of
               industries, companies, economic trends, the relative
               attractiveness of different securities or other matters.

            -  at times, market conditions might make it hard to value some
               investments or to get an attractive price for them.

            -  the Advisor measures credit quality at the time it buys
               securities, using independent rating agencies or, for unrated
               securities, the Advisor's own credit quality standards. If a
               security's credit quality declines, the Advisor will decide what
               to do with the security, based on the circumstances and its
               assessment of what would benefit shareholders most.

8 | DWS Balanced Fund
<PAGE>

THE FUND'S PERFORMANCE HISTORY

While a fund's past performance (before and after taxes) isn't necessarily a
sign of how it will do in the future, it can be valuable for an investor to
know.


The bar chart shows how the performance of the fund's Institutional Class
shares has varied from year to year, which may give some idea of risk. The
table on the following page shows how fund performance compares to relevant
index information (which, unlike fund performance, does not reflect fees or
expenses). The performance of both the fund and the index information varies
over time. All figures assume reinvestment of dividends and distributions (in
the case of after-tax returns, reinvested net of assumed tax rates).


The table shows returns for Institutional Class shares on a before-tax and
after-tax basis. After-tax returns are estimates calculated using the
historical highest individual federal marginal income tax rates and do not
reflect the impact of state and local taxes. Actual after-tax returns depend on
an investor's tax situation and may differ from those shown in the table.
After-tax returns shown are not relevant for investors who hold their shares
through tax-deferred arrangements, such as 401(k) plans or individual
retirement accounts.

DWS Balanced Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Institutional Class


[BAR CHART GRAPHIC APPEARS HERE]



<TABLE>
<S>        <C>        <C>        <C>        <C>         <C>        <C>       <C>       <C>        <C>
16.79      15.08       -2.63      -6.30      -15.44     17.61       6.57      4.21     10.19
1998       1999       2000       2001        2002       2003       2004      2005      2006       2007
</TABLE>






<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 13.08%, Q2 1997              WORST QUARTER: -9.92%, Q2 2002
</TABLE>



                                                          DWS Balanced Fund  | 9
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                              1 YEAR      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                                          <C>         <C>          <C>
 INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
   Return before Taxes
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares
--------------------------------------------------------------------------------
 S&P 500 (reflects no deductions for
 fees, expenses or taxes)
--------------------------------------------------------------------------------
 RUSSELL 1000 INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 RUSSELL 2000 INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 LEHMAN BROTHERS US AGGREGATE
 INDEX (reflects no deductions for fees,
 expenses or taxes)
--------------------------------------------------------------------------------
 MSCI EAFE INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 CREDIT SUISSE HIGH YIELD INDEX
 (reflects no deductions for fees,
 expenses or taxes)
--------------------------------------------------------------------------------
 MERRILL LYNCH 3-MONTH US TREASURY
 BILL INDEX (reflects no deductions for
 fees, expenses or taxes)
--------------------------------------------------------------------------------
</TABLE>



 Total returns would have been lower had certain expenses not been reduced.

 The Russell 1000 Index replaces the S&P 500 as the fund's benchmark index for
 equity investments because the Advisor believes that it more accurately
 reflects the fund's investment strategy.


 STANDARD & POOR'S 500 INDEX (S&P 500) is an unmanaged, capitalization-weighted
 index of 500 stocks. The index is designed to measure performance of the broad
 domestic economy through changes in the aggregate market value of 500 stocks
 representing all major industries.

 RUSSELL 1000 (Reg. TM) INDEX is an unmanaged price-only index of the 1,000
 largest capitalized companies that are domiciled in the US and whose common
 stocks are traded.

 The RUSSELL 2000 (Reg. TM) INDEX is an unmanaged capitalization-weighted
 measure of approximately 2,000 small US stocks.

 LEHMAN BROTHERS U.S. AGGREGATE INDEX is an unmanaged market value-weighted
 measure of Treasury issues, agency issues, corporate bond issues and mortgage
 securities.

 MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, AUSTRALASIA AND THE FAR
 EAST (EAFE) INDEX is an unmanaged index that tracks international stock
 performance in the 21 developed markets of Europe, Australasia and the Far
 East.



10 | DWS Balanced Fund
<PAGE>


 The CREDIT SUISSE HIGH YIELD INDEX is an unmanaged trader-priced portfolio,
 constructed to mirror the global high-yield debt market.

 The MERRILL LYNCH 3-MONTH US TREASURY BILL INDEX is an unmanaged index
 capturing the performance of a single issue maturing closest to, but not
 exceeding, three months from the re-balancing date.



--------------------------------------------------------------------------------

Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 730-1313 or visit our Web site at www.dws-scudder.com.


--------------------------------------------------------------------------------

The RETURN AFTER TAXES ON DISTRIBUTIONS assumes that an investor holds fund
shares at the end of the period. The number represents only the fund's taxable
distributions and not a shareholder's gain or loss from selling fund shares.

The RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES assumes that an
investor sold his or her fund shares at the end of the period. The number
reflects both the fund's taxable distributions and a shareholder's gain or loss
from selling fund shares.



HOW MUCH INVESTORS PAY


The table below describes the fees and expenses that you may pay if you buy and
hold fund shares. This information doesn't include any fees that may be charged
by your financial advisor.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FEE TABLE
--------------------------------------------------------------------------------
<S>                                                               <C>
 SHAREHOLDER FEES, paid directly from your investment
--------------------------------------------------------------------------------
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 1                                         2.00%
--------------------------------------------------------------------------------
 ANNUAL OPERATING EXPENSES, deducted from fund assets
--------------------------------------------------------------------------------
 Management Fees                                                    %
--------------------------------------------------------------------------------
 Distribution and/or Service (12b-1) Fees                       None
--------------------------------------------------------------------------------
 Other Expenses 2
--------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES
--------------------------------------------------------------------------------
 Less Expense Waiver/Reimbursement 3
--------------------------------------------------------------------------------
 Net Annual Operating Expenses 3
--------------------------------------------------------------------------------
</TABLE>



1     This fee is charged on all applicable redemptions or exchanges. Please see
      "Policies You Should Know About - Policies about transactions" for further
      information.

2     Restated on an annualized basis to reflect approved fee changes that took
      effect on February 1, 2007.


3     Through __________, the Advisor has contractually agreed to waive all or a
      portion of its management fee and reimburse or pay operating expenses of
      the fund to the extent necessary to maintain the fund's total operating
      expenses at 0.61% for Institutional Class shares, excluding certain
      expenses such as extraordinary expenses, taxes, brokerage and interest.


                                                         DWS Balanced Fund  | 11
<PAGE>

Based on the costs above (including one year of capped expenses in each
period), this example helps you compare the expenses of the fund to those of
other mutual funds. This example assumes the expenses above remain the same. It
also assumes that you invested $10,000, earned 5% annual returns and reinvested
all dividends and distributions. This is only an example; actual expenses will
be different.



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXAMPLE                    1 YEAR      3 YEARS      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>          <C>
 Institutional Class          $           $            $            $
--------------------------------------------------------------------------------
</TABLE>




12 | DWS Balanced Fund
<PAGE>

OTHER POLICIES AND RISKS

           While the previous pages describe the main points of the fund's
           strategy and risks, there are a few other issues to know about:


           -  Although major changes tend to be infrequent, the fund's Board
              could change the fund's investment objective without seeking
              shareholder approval.

           -  As a temporary defensive measure, the fund could shift up to 100%
              of assets into investments such as money market securities or
              other short-term securities that offer comparable levels of risk
              This could prevent losses, but, while engaged in a temporary
              defensive position, the fund will not be pursuing its investment
              goal. However, portfolio management may choose not to use these
              strategies for various reasons, even in volatile market
              conditions.



           For more information

           This prospectus doesn't tell you about every policy or risk of
           investing in the fund.

           If you want more information on the fund's allowable securities and
           investment practices and the characteristics and risks of each one,
           you may want to request a copy of the Statement of Additional
           Information (the back cover tells you how to do this).

           Keep in mind that there is no assurance that the fund will achieve
           its goal.


           A complete list of the fund's portfolio holdings is posted as of the
           month-end on www.dws-scudder.com (the Web site does not form a part
           of this prospectus) on or after the last day of the following month.
           This posted information generally remains accessible at least until
           the date on which the fund files its Form N-CSR or N-Q with the
           Securities and Exchange Commission for the period that includes the
           date as of which the posted information is current. In addition, the
           fund's top ten equity holdings and other fund information is posted
           on www.dws-scudder.com as of the calendar quarter-end on or after
           the 15th day following quarter-end. The fund's Statement of
           Additional Information includes a description of the fund's policies
           and procedures with respect to the disclosure of the fund's
           portfolio holdings.



                                                  Other Policies and Risks  | 13
<PAGE>

WHO MANAGES AND OVERSEES THE FUND

           The investment advisor


           Deutsche Investment Management Americas Inc. ("DIMA" or the
           "Advisor"), with headquarters at 345 Park Avenue, New York, NY
           10154, is the investment advisor for the fund. Under the oversight
           of the Board, the Advisor makes investment decisions, buys and sells
           securities for the fund and conducts research that leads to these
           purchase and sale decisions. The Advisor provides a full range of
           global investment advisory services to institutional and retail
           clients.


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

           Deutsche Asset Management is a global asset management organization
           that offers a wide range of investing expertise and resources,
           including hundreds of portfolio managers and analysts and an office
           network that reaches the world's major investment centers. This
           well-resourced global investment platform brings together a wide
           variety of experience and investment insight across industries,
           regions, asset classes and investing styles.

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


           MANAGEMENT FEE. The Advisor receives a management fee from the fund.
           Below is the actual rate paid by the fund for the most recent fiscal
           year, as a percentage of the fund's average daily net assets.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FUND NAME                                       FEE PAID
--------------------------------------------------------------------------------
<S>                                             <C>
  DWS Balanced Fund                             ___%
--------------------------------------------------------------------------------
</TABLE>




14 | Who Manages and Oversees the Fund
<PAGE>


           A discussion regarding the basis for the Board's approval of the
           fund's investment management agreement (the discussion regarding the
           approval of the subadvisory agreement is contained in the semiannual
           report for the period ended March 31, 2008) is contained in the most
           recent shareholder reports for the annual period ended September 30
           (see "Shareholder reports" on the back cover).

           The Subadvisor

           Subadvisor for DWS Balanced Fund

           The subadvisor for DWS Balanced Fund is Deutsche Asset Management
           International GmbH ("DeAMi"), Mainzer Landstrasse 178-190, Frankfurt
           am Main, Germany. DeAMi renders investment advisory and management
           services to the fund. DeAMi is an investment advisor registered with
           the Securities and Exchange Commission and currently manages over
           $60 billion in assets, which is primarily comprised of institutional
           accounts and investment companies. DeAMi is a subsidiary of Deutsche
           Bank AG. DIMA compensates DeAMi out of the management fee it
           receives from the fund.



                                         Who Manages and Oversees the Fund  | 15
<PAGE>

Portfolio management

DWS Balanced Fund is managed by a team of investment professionals who
collaborate to develop and implement the fund's investment strategy. Each
portfolio manager has authority over all aspects of the fund's investment
portfolio, including, but not limited to, purchases and sales of individual
securities, portfolio construction techniques, portfolio risk assessment and
the management of daily cash flows in accordance with portfolio holdings.

DWS BALANCED FUND

The following people handle the day-to-day management of the fund.

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Joined Deutsche Asset Management in 1998 after 13 years of experience as
   vice president and portfolio manager for Norwest Bank, where he managed the
   bank's fixed income and foreign exchange portfolios.
-  Portfolio Manager for Retail Mortgage Backed Securities: New York.
-  Joined the fund in 2005.
-  BIS, University of Minnesota.

Matthew F. MacDonald
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Joined Deutsche Asset Management and the fund in 2006 after 14 years of
   fixed income experience at Bank of America Global Structured Products and
   PPM America, Inc., where he was portfolio manager for public fixed income,
   including MBS, ABS, CDOs and corporate bonds; earlier, as an analyst for
   MBS, ABS and money markets; and originally, at Duff & Phelps Credit Rating
   Company.
-  Portfolio Manager for Retail Mortgage Backed Securities: New York.
-  BA, Harvard University; MBA, University of Chicago Graduate School of
   Business.

Inna Okounkova
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Global Asset Allocation Portfolio Manager: New York.
-  Joined Deutsche Asset Management in 1999 as a quantitative analyst, becoming
   an associate Portfolio Manager in 2001.
-  Joined the fund in 2005.
-  BS, MS, Moscow State University; MBA, University of Chicago.

Gary Sullivan, CFA

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

-  Joined Deutsche Asset Management in 1996 and the fund in 2006. Served as the
   head of the High Yield group in Europe and as an Emerging Markets portfolio
   manager.
-  Prior to that, four years at Citicorp as a research analyst and structurer
   of collateralized mortgage obligations. Prior to Citicorp, served as an
   officer in the US Army from 1988 to 1991.
-  BS, United States Military Academy (West Point); MBA, New York University,
   Stern School of Business

16 | Who Manages and Oversees the Fund
<PAGE>

Julie M. Van Cleave, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Joined Deutsche Asset Management and the fund in 2002.
-  Head of Large Cap Growth Portfolio Selection Team.
-  Previous experience includes 18 years of investment industry experience at
   Mason Street Advisors, as Managing Director and team leader for the large
   cap investment team.
-  BBA, MBA, University of Wisconsin - Madison.

Robert Wang
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Global Asset Allocation Senior Portfolio Manager: New York.
-  Joined Deutsche Asset Management in 1995 as a senior fixed income portfolio
   manager after 13 years of experience at J.P. Morgan & Co. trading fixed
   income, derivatives and foreign exchange products.
-  Joined the fund in 2005.
-  BS, The Wharton School, University of Pennsylvania.

Thomas Picciochi
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Quantitative strategies: New York.
-  Joined Deutsche Asset Management in 1999, formerly serving as portfolio
   manager for Absolute Return Strategies, after 13 years of experience in
   various research and analysis positions at State Street Global Advisors,
   FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial
   Management.
-  Joined the fund in 2007.
-  BA and MBA, University of Miami.

Jin Chen
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Global strategies: New York
-  Joined Deutsche Asset Management in 1999; prior to that, served as portfolio
   manager for Absolute Return Strategies and as a fundamental equity analyst
   and portfolio manager for Thomas White Asset Management.
-  Joined the fund in 2007.
-  BS, Nanjing University; MS, Michigan State University

Julie Abbett
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Global Quantitative Equity: New York.
-  Joined Deutsche Asset Management in 2000 after four years of combined
   experience as a consultant with equity trading services for BARRA, Inc. and
   a product developer for FactSet Research.
-  Joined the fund in 2007.
-  BA, University of Connecticut.


Matthias Knerr, CFA
Managing Director, Deutsche Asset Management and Portfolio Manager of the fund.
-  Joined Deutsche Asset Management in 1995 as a member of the International
   Equity team, serving as portfolio manager and investment analyst, and
   joined the fund in 2007.
-  Senior portfolio manager for International Select Equity and International
   Equity Strategies: New York.
-  Previously served as portfolio manager for the Deutsche European Equity
   Fund and the Deutsche Global Select Equity Fund, and as head of global
   equity research team for Capital Goods sector: London.
-  BS, Pennsylvania State University.


                                         Who Manages and Oversees the Fund  | 17
<PAGE>


Thomas Schuessler, PhD
Director of Deutsche Asset Management and Portfolio Manager of the fund.
- Joined Deutsche Asset Management in 2001 after five years at Deutsche Bank
  where he managed various projects and worked in the office of the Chairman
  of the Management Board.
- US and Global Fund Management: Frankfurt.
- PhD, University of Heidelberg, studies in physics and economics at University
  of Heidelberg and University of Utah.

John Brennan
Director of Deutsche Asset Management and Portfolio Manager of the fund.
- Portfolio and Sector Manager for Institutional Fixed Income: Louisville.
- Joined Deutsche Asset Management and the fund in 2007 after 14 years of
  experience at INVESCO and Freddie Mac. Previously, was head of Structured
  Securities sector team at INVESCO and before that was senior fixed income
  portfolio manager at Freddie Mac specializing in MBS, CMBS, collateralized
  mortgage obligations, ARMS, mortgage derivatives, US Treasuries and agency
  debt.
- BS, University of Maryland; MBA William & Mary.

J. Richard Robben, CFA
Vice President of Deutsche Asset Management and Portfolio Manager of the fund.
- Joined Deutsche Asset Management and the fund in 2007 after 11 years of
  experience at INVESCO Institutional, most recently as senior portfolio
  manager for LIBOR-related strategies and head of portfolio construction
  group for North American Fixed Income.
- BA, Bellarmine University.

The fund's Statement of Additional Information provides additional information
about a portfolio manager's investments in the fund, a description of the
portfolio management compensation structure and information regarding other
accounts managed.



18 | Who Manages and Oversees the Fund
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of the table are for a single share.
The total return figures represent the percentage that an investor in the fund
would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by Ernst & Young LLP, independent
registered public accounting firm, whose report, along with the fund's
financial statements, is included in the fund's annual report (see "Shareholder
reports" on the back cover).


                                                      Financial Highlights  | 19

<PAGE>

HOW TO INVEST IN THE FUND

The following pages tell you how to invest in the fund and what to expect as a
shareholder. If you're investing directly with DWS Scudder, all of this
information applies to you.

The following pages also tell you about many of the services, choices and
benefits of being a shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.

If you're investing through a "third party provider" - for example, a workplace
retirement plan, financial supermarket or financial advisor - your provider may
have its own policies or instructions and you should follow those.

You can find out more about the topics covered here by speaking with your
FINANCIAL ADVISOR OR A REPRESENTATIVE OF YOUR WORKPLACE RETIREMENT PLAN OR
OTHER INVESTMENT PROVIDER.
<PAGE>

Buying and Selling INSTITUTIONAL CLASS Shares



           You may buy Institutional Class shares through your securities
           dealer or through any financial institution that is authorized to
           act as a shareholder servicing agent ("financial advisor"). Contact
           them for details on how to enter and pay for your order. Your
           financial advisor may also receive compensation from the Advisor
           and/or its affiliates, please see "Financial intermediary support
           payments."


           You may also buy Institutional Class shares by sending your check
           (along with a completed Application Form) directly to DWS Scudder
           Investments Service Company (the "transfer agent"). Your purchase
           order may not be accepted if the fund withdraws the offering of fund
           shares, the sale of fund shares has been suspended or if it is
           determined that your purchase would be detrimental to the interests
           of the fund's shareholders.


           Eligibility requirements

           You may buy Institutional Class shares if you are any of the
           following:

           -  An eligible institution (e.g., a financial institution,
              corporation, trust, estate or educational, religious or
              charitable institution).

           -  An employee benefit plan with assets of at least $50 million.

           -  A registered investment advisor or financial planner purchasing
              on behalf of clients and charging an asset-based or
              hourly fee.

           -  A client of the private banking division of Deutsche Bank AG.

           -  A current or former director or trustee of the Deutsche or DWS
              mutual funds.

           -  An employee, the employee's spouse or life partner and children
              or stepchildren age 21 or younger of Deutsche Bank or its
              affiliates or a subadvisor to any fund in the DWS family of funds
              or a broker-dealer authorized to sell shares in the funds.


           Investment minimum

           Your initial investment must be for at least $1,000,000. There are
           no minimum subsequent investment requirements.


                             Buying and Selling Institutional Class Shares  | 21
<PAGE>

           The minimum initial investment is waived for:

           -  Shareholders with existing accounts prior to August 13, 2004 who
              met the previous minimum investment eligibility requirement.

           -  Investment advisory affiliates of Deutsche Bank Securities, Inc.,
              DWS funds or Deutsche funds purchasing shares for the accounts of
              their investment advisory clients.

           -  Employee benefit plans with assets of at least $50 million.

           -  Clients of the private banking division of Deutsche Bank AG.

           -  Institutional clients and qualified purchasers that are clients
              of a division of Deutsche Bank AG.

           -  A current or former director or trustee of the Deutsche or DWS
              mutual funds.


           -  An employee, the employee's spouse or life partner and children
              or stepchildren age 21 or younger of Deutsche Bank or its
              affiliates or a subadvisor to any fund in the DWS family of funds
              or a broker-dealer authorized to sell shares of the funds.


           -  Registered investment advisors who trade through platforms
              approved by the Advisor and whose client assets in the aggregate
              meet the $1,000,000 minimum investment.

           The fund reserves the right to modify the above eligibility
           requirements and investment minimum at any time.


           How to contact the transfer agent



<TABLE>
--------------------------------------------------------------------------------
<S>                       <C>
  BY PHONE:               (800) 730-1313
--------------------------------------------------------------------------------
  FIRST INVESTMENTS       DWS Scudder Investments Service Company
  BY MAIL:                P.O. Box 219210
                          Kansas City, MO 64121-9151
--------------------------------------------------------------------------------
  ADDITIONAL              DWS Scudder Investments Service Company
  INVESTMENTS BY          P.O. Box 219210
  MAIL:                   Kansas City, MO 64121-9154
--------------------------------------------------------------------------------
  BY OVERNIGHT MAIL:      DWS Scudder Investments Service Company
                          210 West 10th Street
                          Kansas City, MO 64105-1614
--------------------------------------------------------------------------------
</TABLE>



           You can reach the automated information line, 24 hours a day,
           7 days a week by calling (800) 621-1048.


22 | Buying and Selling Institutional Class Shares
<PAGE>

           How to open your fund account


<TABLE>
--------------------------------------------------------------------------------
<S>                  <C>
  MAIL:              Complete and sign the account application that
                     accompanies this prospectus. (You may obtain
                     additional applications by calling the transfer agent.)
                     Mail the completed application along with a check
                     payable to the fund you have selected to the transfer
                     agent. Be sure to include the fund number. (For fund
                     number, refer to "The Fund's Main Investment
                     Strategy"). The applicable addresses are shown under
                     "How to contact the transfer agent."
--------------------------------------------------------------------------------
  WIRE:              Call the transfer agent to set up a wire account.
--------------------------------------------------------------------------------
  FUND NAME AND      Please use the complete fund name. Refer to "The
  FUND NUMBER:       Fund's Main Investment Strategy" above for the fund
                     number.
--------------------------------------------------------------------------------
</TABLE>



           Please note that your account cannot become activated until we
           receive a completed application.


           How to BUY and SELL shares

           MAIL:


           BUYING: Send your check, payable to the fund you have selected, to
           the transfer agent. Be sure to include the fund number and your
           account number on your check. If you are investing in more than one
           fund, make your check payable to "DWS Scudder" and include your
           account number, the names and numbers of the funds you have
           selected, and the dollar amount or percentage you would like
           invested in each fund. Mailing addresses are shown under "How to
           contact the transfer agent."


           SELLING: Send a signed letter to the transfer agent with your name,
           your fund number and account number, the fund's name, and either the
           number of shares you wish to sell or the dollar amount you wish to
           receive. Unless exchanging into another DWS fund, you must submit a
           written authorization to sell shares in a retirement account.


                             Buying and Selling Institutional Class Shares  | 23
<PAGE>

           WIRE:


           BUYING: You may buy shares by wire only if your account is
           authorized to do so. Please note that you or your financial advisor
           must call Shareholder Services at (800) 730-1313 to notify us in
           advance of a wire transfer purchase. Inform Shareholder Services of
           the amount of your purchase and receive a trade confirmation number.
           Instruct your bank to send payment by wire using the wire
           instructions noted below. All wires must be received by 4:00 p.m.
           (Eastern time) the next business day following your purchase. If
           your wire is not received by 4:00 p.m. (Eastern time) on the next
           business day after the fund receives your request to purchase
           shares, your transaction will be canceled at your expense and risk.




<TABLE>
--------------------------------------------------------------------------------
<S>                 <C>
  BANK NAME:        State Street Bank Boston
--------------------------------------------------------------------------------
  ROUTING NO:       011000028
--------------------------------------------------------------------------------
  ATTN:             DWS Scudder
--------------------------------------------------------------------------------
  DDA NO:           9903-5552
--------------------------------------------------------------------------------
  FBO:              (Account name) (Account number)
--------------------------------------------------------------------------------
  CREDIT:           (fund name, fund number and, if applicable, class
                    name) (see "How to open your fund account")
--------------------------------------------------------------------------------
</TABLE>




           Refer to your account statement for the account name and number.
           Wire transfers normally take two or more hours to complete. Wire
           transfers may be restricted on holidays and at certain other times.

           SELLING: You may sell shares by wire only if your account is
           authorized to do so. You will be paid for redeemed shares by wire
           transfer of funds to your financial advisor or bank upon receipt of
           a duly authorized redemption request as promptly as feasible. For
           your protection, you may not change the destination bank account
           over the phone. To sell by wire, contact your financial advisor or
           Shareholder Services at (800) 730-1313. Inform Shareholder Services
           of the amount of your redemption and receive a trade confirmation
           number. The minimum redemption by wire is $1,000. The fund reserves
           the right to change the above eligibility requirements and
           investment minimum at any time. We must receive your order by 4:00
           p.m. (Eastern time) to wire your account the next business day.



24 | Buying and Selling Institutional Class Shares
<PAGE>

           TELEPHONE TRANSACTIONS:

           You may place orders to buy and sell over the phone by calling your
           financial advisor or Shareholder Services at (800) 730-1313. If your
           shares are in an account with the transfer agent, you may (1) redeem
           by check in an amount up to $100,000, or by wire (minimum $1,000),
           or (2) exchange the shares for Institutional shares of another DWS
           fund by calling the
           transfer agent.

           You may make regular investments from a bank checking account. For
           more information on setting up an automatic investment plan or
           payroll investment plan, call Shareholder Services at (800)
           730-1313.


           Financial intermediary support payments


           The Advisor, DWS Scudder Distributors, Inc. (the "Distributor")
           and/or their affiliates may pay additional compensation, out of
           their own assets and not as an additional charge to the fund, to
           selected affiliated and unaffiliated brokers, dealers, participating
           insurance companies or other financial intermediaries ("financial
           advisors") in connection with the sale and/or distribution of fund
           shares or the retention and/or servicing of fund investors and fund
           shares ("revenue sharing"). Such revenue sharing payments are in
           addition to any distribution or service fees payable under any Rule
           12b-1 or service plan of the fund, any record keeping/sub-transfer
           agency/networking fees payable by the fund (generally through the
           Distributor or an affiliate) and/or the Distributor to certain
           financial advisors for performing such services and any sales
           charges, commissions, non-cash compensation arrangements expressly
           permitted under applicable rules of the Financial Industry
           Regulatory Authority ("FINRA") or other concessions described in the
           fee table or elsewhere in this prospectus or the Statement of
           Additional Information as payable to all financial advisors. For
           example, the Advisor, the Distributor and/or their affiliates may
           compensate financial advisors for providing the fund with "shelf
           space" or access to a third party platform or fund offering list or
           other marketing programs, including, without limitation, inclusion
           of the fund on preferred or recommended sales lists, mutual fund
           "supermarket" platforms and other formal sales programs; granting
           the Distributor access to the financial advisor's sales



                             Buying and Selling Institutional Class Shares  | 25
<PAGE>

           force; granting the Distributor access to the financial advisor's
           conferences and meetings; assistance in training and educating the
           financial advisor's personnel; and obtaining other forms of
           marketing support.

           The level of revenue sharing payments made to financial advisors may
           be a fixed fee or based upon one or more of the following factors:
           gross sales, current assets and/or number of accounts of the fund
           attributable to the financial advisor, the particular fund or fund
           type or other measures as agreed to by the Advisor, the Distributor
           and/or their affiliates and the financial advisors or any
           combination thereof. The amount of these revenue sharing payments is
           determined at the discretion of the Advisor, the Distributor and/or
           their affiliates from time to time, may be substantial, and may be
           different for different financial advisors based on, for example,
           the nature of the services provided by the financial advisor.


           The Advisor, the Distributor and/or their affiliates currently make
           revenue sharing payments from their own assets in connection with
           the sale and/or distribution of DWS Fund shares or the retention
           and/or servicing of investors and DWS Fund shares to financial
           advisors in amounts that generally range from .01% up to .50% of
           assets of the fund serviced and maintained by the financial advisor,
           .10% to .25% of sales of the fund attributable to the financial
           advisor, a flat fee of $12,500 up to $500,000, or any combination
           thereof. These amounts are subject to change at the discretion of
           the Advisor, the Distributor and/or their affiliates. Receipt of, or
           the prospect of receiving, this additional compensation may
           influence your financial advisor's recommendation of the fund or of
           any particular share class of the fund. You should review your
           financial advisor's compensation disclosure and/or talk to your
           financial advisor to obtain more information on how this
           compensation may have influenced your financial advisor's
           recommendation of the fund. Additional information regarding these
           revenue sharing payments is included in the fund's Statement of
           Additional Information, which is available to you on request at no
           charge (see the back cover of this prospectus for more information
           on how to request a copy of the Statement of Additional
           Information).


           The Advisor, the Distributor and/or their affiliates may also make
           such revenue sharing payments to financial advisors under the terms
           discussed above in connection with the distribution of both DWS
           funds and non-DWS funds by financial advisors to


26 | Buying and Selling Institutional Class Shares
<PAGE>

           retirement plans that obtain record keeping services from ADP, Inc.
           on the DWS Scudder branded retirement plan platform (the "Platform")
           with the level of revenue sharing payments being based upon sales of
           both the DWS funds and the non-DWS funds by the financial advisor on
           the Platform or current assets of both the DWS funds and the non-DWS
           funds serviced and maintained by the financial advisor on the
           Platform.

           It is likely that broker-dealers that execute portfolio transactions
           for the fund will include firms that also sell shares of the DWS
           funds to their customers. However, the Advisor will not consider
           sales of DWS fund shares as a factor in the selection of
           broker-dealers to execute portfolio transactions for the DWS funds.
           Accordingly, the Advisor has implemented policies and procedures
           reasonably designed to prevent its traders from considering sales of
           DWS fund shares as a factor in the selection of broker-dealers to
           execute portfolio transactions for the fund. In addition, the
           Advisor, the Distributor and/or their affiliates will not use fund
           brokerage to pay for their obligation to provide additional
           compensation to financial advisors as described above.


POLICIES YOU SHOULD KNOW ABOUT


           Along with the information on the previous pages, the policies below
           may affect you as a shareholder. Some of this information, such as
           the section on distributions and taxes, applies to all investors,
           including those investing through a financial advisor.


           If you are investing through a financial advisor or through a
           retirement plan, check the materials you received from them about
           how to buy and sell shares because particular financial advisors or
           other intermediaries may adopt policies, procedures or limitations
           that are separate from those described by the fund. Please note that
           a financial advisor may charge fees separate from those charged by
           the fund and may be compensated by the fund.

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.


                                            Policies You Should Know About  | 27
<PAGE>

           In order to reduce the amount of mail you receive and to help reduce
           expenses, we generally send a single copy of any shareholder report
           and prospectus to each household. If you do not want the mailing of
           these documents to be combined with those for other members of your
           household, please contact your financial advisor or call (800)
           730-1313.


           Policies about transactions

           THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
           is open. The fund calculates its share price for each class every
           business day, as of the close of regular trading on the New York
           Stock Exchange (typically 4:00 p.m. Eastern time, but sometimes
           earlier, as in the case of scheduled half-day trading or unscheduled
           suspensions of trading). You can place an order to buy or sell
           shares at any time.

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

           We might request additional information about you (which may include
           certain documents, such as articles of incorporation for companies)
           to help us verify your identity and, in some cases, the information
           and/or documents may be required to conduct the verification. The
           information and documents will be used solely to verify your
           identity.

           We will attempt to collect any missing required and requested
           information by contacting you or your financial advisor. If we are
           unable to obtain this information within the time frames established
           by the fund, then we may reject your application and order.

           The fund will not invest your purchase until all required and
           requested identification information has been provided and your
           application has been submitted in "good order." After we receive all
           the information, your application is deemed to be in good order and
           we accept your purchase, you will receive the net asset value per
           share next calculated.


28 | Policies You Should Know About
<PAGE>

           If we are unable to verify your identity within time frames
           established by the fund, after a reasonable effort to do so, you
           will receive written notification.


           With certain limited exceptions, only US residents may invest in the
           fund.


           Because orders placed through a financial advisor must be forwarded
           to the transfer agent before they can be processed, you'll need to
           allow extra time. Your financial advisor should be able to tell you
           approximately when your order will be processed. It is the
           responsibility of your financial advisor to forward your order to
           the transfer agent in a timely manner.


           SUB-MINIMUM BALANCES. The fund may redeem your shares and close your
           account on 60 days' notice if it fails to meet the minimum account
           balance requirement of $1,000,000 for any reason other than a change
           in market value.

           MARKET TIMING POLICIES AND PROCEDURES. Short-term and excessive
           trading of fund shares may present risks to long-term shareholders,
           including potential dilution in the value of fund shares,
           interference with the efficient management of the fund's portfolio
           (including losses on the sale of investments), taxable gains to
           remaining shareholders and increased brokerage and administrative
           costs. These risks may be more pronounced if the fund invests in
           certain securities, such as those that trade in foreign markets, are
           illiquid or do not otherwise have "readily available market
           quotations." Certain investors may seek to employ short-term trading
           strategies aimed at exploiting variations in portfolio valuation
           that arise from the nature of the securities held by the fund (e.g.,
           "time zone arbitrage"). The fund discourages short-term and
           excessive trading and has adopted policies and procedures that are
           intended to detect and deter short-term and excessive trading.

           Pursuant to its policies, the fund will impose a 2% redemption fee
           on fund shares held for less than a specified holding period
           (subject to certain exceptions discussed below under "Redemption
           fees"). The fund also reserves the right to reject or cancel a
           purchase or exchange order for any reason without prior notice. For
           example, the fund may in its discretion reject or cancel a purchase
           or an exchange order even if the transaction is not subject to the
           specific roundtrip transaction limitation described below if the
           Advisor believes that there appears to be a pattern of short-term or
           excessive trading activity by a shareholder or deems any other
           trading activity harmful or



                                            Policies You Should Know About  | 29
<PAGE>


           disruptive to the fund. The fund, through its Advisor and Transfer
           Agent, will measure short-term and excessive trading by the number
           of roundtrip transactions within a shareholder's account during a
           rolling 12-month period. A "roundtrip" transaction is defined as any
           combination of purchase and redemption activity (including
           exchanges) of the same fund's shares. The fund may take other
           trading activity into account if the fund believes such activity is
           of an amount or frequency that may be harmful to long-term
           shareholders or disruptive to portfolio management.

           Shareholders are limited to four roundtrip transactions in the same
           DWS Fund (excluding money market funds) over a rolling 12-month
           period. Shareholders with four or more roundtrip transactions in the
           same DWS Fund within a rolling 12-month period generally will be
           blocked from making additional purchases of, or exchanges into, that
           DWS Fund. The fund has sole discretion whether to remove a block
           from a shareholder's account. The rights of a shareholder to redeem
           shares of a DWS Fund are not affected by the four roundtrip
           transaction limitation, but all redemptions remain subject to the
           fund's redemption fee policy (see "Redemption fees" described
           below).

           The Advisor may make exceptions to the roundtrip transaction policy
           for certain types of transactions if in its opinion the transactions
           do not represent short-term or excessive trading or are not abusive
           or harmful to the fund, such as, but not limited to, systematic
           transactions, required minimum retirement distributions,
           transactions initiated by the fund or administrator and transactions
           by certain qualified fund-of-fund(s).

           In certain circumstances where shareholders hold shares of the fund
           through a financial intermediary, the fund may rely upon the
           financial intermediary's policy to deter short-term or excessive
           trading if the Advisor believes that the financial intermediary's
           policy is reasonably designed to detect and deter transactions that
           are not in the best interests of the fund. A financial
           intermediary's policy relating to short-term or excessive trading
           may be more or less restrictive than the DWS Funds' policy, may
           permit certain transactions not permitted by the DWS Funds'
           policies, or prohibit transactions not subject to the DWS Funds'
           policies.



30 | Policies You Should Know About
<PAGE>


           The Advisor may also accept undertakings from a financial
           intermediary to enforce short-term or excessive trading policies on
           behalf of the fund that provide a substantially similar level of
           protection for the fund against such transactions. For example,
           certain financial intermediaries may have contractual, legal or
           operational restrictions that prevent them from blocking an account.
           In such instances, the financial intermediary may use alternate
           techniques that the Advisor considers to be a reasonable substitute
           for such a block.

           In addition, if the fund invests some portion of its assets in
           foreign securities, it has adopted certain fair valuation practices
           intended to protect the fund from "time zone arbitrage" with respect
           to its foreign securities holdings and other trading practices that
           seek to exploit variations in portfolio valuation that arise from
           the nature of the securities held by the fund. (See "How the fund
           calculates share price.")

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of the fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in the fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.

           The fund's market timing policies and procedures may be modified or
           terminated at any time.


           REDEMPTION FEES. The fund imposes a redemption fee of 2% of the
           total redemption amount (calculated at net asset value) on all fund
           shares redeemed or exchanged within 15 days of buying them (either
           by purchase or exchange). The redemption fee is paid directly to the
           fund and is designed to encourage long-term investment and to offset
           transaction and other costs


                                            Policies You Should Know About  | 31
<PAGE>

           associated with short-term or excessive trading. For purposes of
           determining whether the redemption fee applies, shares held the
           longest time will be treated as being redeemed first and shares held
           the shortest time will be treated as being redeemed last.

           The redemption fee is applicable to fund shares purchased either
           directly or through a financial intermediary, such as a
           broker-dealer. Transactions through financial intermediaries
           typically are placed with the fund on an omnibus basis and include
           both purchase and sale transactions placed on behalf of multiple
           investors. These purchase and sale transactions are generally netted
           against one another and placed on an aggregate basis; consequently
           the identities of the individuals on whose behalf the transactions
           are placed generally are not known to the fund. For this reason, the
           fund has undertaken to notify financial intermediaries of their
           obligation to assess the redemption fee on customer accounts and to
           collect and remit the proceeds to the fund. However, due to
           operational requirements, the intermediaries' methods for tracking
           and calculating the fee may be inadequate or differ in some respects
           from the fund's.

           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of participants in certain group retirement
           plans whose processing systems are incapable of properly applying
           the redemption fee to underlying shareholders; (iii) transactions on
           behalf of a shareholder to return any excess IRA contributions to
           the shareholder; (iv) transactions on behalf of a shareholder to
           effect a required minimum distribution on an IRA; (v) transactions
           on behalf of any mutual fund advised by the Advisor and its
           affiliates (e.g., "funds of funds") or, in the case of a
           master/feeder relationship, redemptions by the feeder fund from the
           master portfolio; (vi) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vii)
           transactions following death or disability of any registered
           shareholder, beneficial owner or grantor of a living trust with
           respect to shares purchased before death or disability; (viii)
           transactions involving hardship of any registered shareholder; (ix)
           systematic transactions with pre-defined trade dates for purchases,
           exchanges or redemptions, such as automatic account rebalancing, or
           loan origination and repayments; (x) transactions involving shares
           purchased through the


32 | Policies You Should Know About
<PAGE>


           reinvestment of dividends or other distributions; (xi) transactions
           involving shares transferred from another account in the same fund
           or converted from another class of the same fund (the redemption fee
           period will carry over to the acquired shares); (xii) transactions
           initiated by the fund or administrator (e.g., redemptions for not
           meeting account minimums, to pay account fees funded by share
           redemptions, or in the event of the liquidation or merger of the
           fund); or (xiii) transactions in cases when there are legal or
           contractual limitations or restrictions on the imposition of the
           redemption fee (as determined by the fund or its agents in their
           sole discretion). It is the policy of the DWS funds to permit
           approved fund platform providers to execute transactions within the
           funds without the imposition of a redemption fee if such providers
           have implemented alternative measures that are determined by the
           Advisor to provide controls on short-term and excessive trading that
           are comparable to the DWS funds' policies.


           THE AUTOMATED INFORMATION LINE IS AVAILABLE 24 HOURS A DAY BY
           CALLING (800) 621-1048. You can use our automated phone services to
           get information on DWS funds generally and on accounts held directly
           at DWS Scudder. You can also use this service to make exchanges and
           sell shares.

           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 730-1313.


           TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are
           automatically entitled to telephone and electronic transaction
           privileges, but you may elect not to have them when you open your
           account or by contacting Shareholder Services at (800) 730-1313 at a
           later date.


           Since many transactions may be initiated by telephone or
           electronically, it's important to understand that as long as we take
           reasonable steps to ensure that an order to purchase or redeem
           shares is genuine, such as recording calls or requesting
           personalized security codes or other information, we are not
           responsible for any losses that may occur as a result. For

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

The DWS Scudder Web site can be a valuable resource for shareholders with
Internet access. Go to WWW.DWS-SCUDDER.COM to get up-to-date information, review
balances or even place orders for exchanges.

                                            Policies You Should Know About  | 33
<PAGE>

           transactions conducted over the Internet, we recommend the use of a
           secure Internet browser. In addition, you should verify the accuracy
           of your confirmation statements immediately after you receive them.


           THE FUND DOES NOT ISSUE SHARE CERTIFICATES. However, if you
           currently have shares in certificated form, you must include the
           share certificates properly endorsed or accompanied by a duly
           executed stock power when exchanging or redeeming shares. You may
           not exchange or redeem shares in certificate form by telephone or
           via the Internet.


           WHEN YOU ASK US TO SEND OR RECEIVE A WIRE, please note that while we
           don't charge a fee to send or receive wires, it's possible that your
           bank may do so. Wire transactions are generally completed within 24
           hours. The fund can only send wires of $1,000 or more and accept
           wires of $50 or more.


           THE FUND ACCEPTS PAYMENT FOR SHARES ONLY IN US DOLLARS by check,
           bank or Federal Funds wire transfer or by electronic bank transfer.
           Please note that the fund does not accept cash, money orders,
           traveler's checks, starter checks, third party checks (except checks
           for retirement plan asset transfers and rollovers or for Uniform
           Gifts to Minors Act/Uniform Transfers to Minors Act accounts),
           checks drawn on foreign banks or checks issued by credit card
           companies or Internet-based companies. Thus, subject to the
           foregoing exceptions for certain third party checks, checks that are
           otherwise permissible must be drawn by the account holder on a
           domestic bank and must be payable to the fund.


           IF YOU PAY FOR SHARES BY CHECK and the check fails to clear, or if
           you order shares by phone and fail to pay for them by 4:00 p.m.
           Eastern time the next business day, we have the right to cancel your
           order, hold you liable or charge you or your account for any losses
           or fees the fund or its agents have incurred. To sell shares, you
           must state whether you would like to receive the proceeds by wire or
           check.


           SIGNATURE GUARANTEE. When you want to sell more than $100,000 worth
           of shares or send proceeds to a third party or to a new address,
           you'll usually need to place your order in writing and include a
           signature guarantee. However, if you want money wired to a bank
           account that is already on file with us, you don't need a signature
           guarantee. Also, generally you don't need a signature guarantee for
           an exchange, although we may require one in certain other
           circumstances.


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

If you ever have difficulty placing an order by phone or Internet, you can send
us your order in writing.

34 | Policies You Should Know About
<PAGE>

           A signature guarantee is simply a certification of your signature -
           a valuable safeguard against fraud. You can get a signature
           guarantee from an eligible guarantor institution, including
           commercial banks, savings and loans, trust companies, credit unions,
           member firms of a national stock exchange or any member or
           participant of an approved signature guarantor program. Note that
           you can't get a signature guarantee from a notary public and we must
           be provided the original guarantee.

           SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION
           ACCOUNTS may require additional documentation. Please call (800)
           730-1313 or contact your financial advisor for more information.


           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check (redemption proceeds from such a sale
           are unavailable until the check has cleared), when you make
           purchases by ACH (the funds will be placed under a 10 calendar day
           hold to ensure good funds) or when unusual circumstances prompt the
           SEC to allow further delays. Certain expedited redemption processes
           may also be delayed when you are selling recently purchased shares
           or in the event of closing of the Federal Reserve Bank's wire
           payment system. In addition, the fund reserves the right to suspend
           or postpone redemptions as permitted pursuant to Section 22(e) of
           the Investment Company Act of 1940. Generally, those circumstances
           are when 1) the New York Stock Exchange is closed other than
           customary weekend or holiday closings; 2) trading on the New York
           Stock Exchange is restricted; 3) an emergency exists which makes the
           disposal of securities owned by the fund or the fair determination
           of the value of the fund's net assets not reasonably practicable; or
           4) the SEC, by order, permits the suspension of the right of
           redemption. Redemption payments by wire may also be delayed in the
           event of a non-routine closure of the Federal Reserve wire payment
           system. For additional rights reserved by the fund, please see
           "Other rights we reserve."


           You may obtain additional information about other ways to sell your
           shares by contacting your financial advisor.


                                            Policies You Should Know About  | 35
<PAGE>

           ACCOUNT STATEMENTS. We or your financial advisor will generally
           furnish you with a written confirmation of every transaction that
           affects your account balance. You will also receive periodic
           statements reflecting the balances in your account.


           How the fund calculates share price

           To calculate net asset value, or NAV, each share class uses the
           following equation:


<TABLE>
<S>            <C>                                           <C>
               TOTAL ASSETS - TOTAL LIABILITIES
           -----------------------------------------    =    NAV
               TOTAL NUMBER OF SHARES OUTSTANDING
</TABLE>



           The price at which you buy and sell shares is the NAV.


           THE FUND CHARGES A REDEMPTION FEE EQUAL TO 2.00% of the value of
           shares redeemed or exchanged within 15 days of purchase. Please see
           "Policies about transactions - Redemption fees" for further
           information.

           WE TYPICALLY VALUE SECURITIES USING INFORMATION FURNISHED BY AN
           INDEPENDENT PRICING SERVICE OR MARKET QUOTATIONS, WHERE APPROPRIATE.
           However, we may use methods approved by the fund's Board, such as a
           fair valuation model, which are intended to reflect fair value when
           pricing service information or market quotations are not readily
           available or when a security's value or a meaningful portion of the
           value of the fund's portfolio is believed to have been materially
           affected by a significant event, such as a natural disaster, an
           economic event like a bankruptcy filing, or a substantial
           fluctuation in domestic or foreign markets that has occurred between
           the close of the exchange or market on which the security is
           principally traded (for example, a foreign exchange or market) and
           the close of the New York Stock Exchange. In such a case, the fund's
           value for a security is likely to be different from the last quoted
           market price or pricing service information. In addition, due to the
           subjective and variable nature of fair value pricing, it is possible
           that the value determined for a particular asset may be materially
           different from the value realized upon such asset's sale. It is
           expected that the greater the percentage of fund assets that is
           invested in non-US securities, the more extensive will be the fund's
           use of fair value pricing. This is intended to reduce the fund's
           exposure to "time zone arbitrage" and other harmful trading
           practices. (See "Market timing policies and procedures.")



36 | Policies You Should Know About
<PAGE>

           TO THE EXTENT THAT THE FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when the
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change significantly on days when the
           New York Stock Exchange is closed and you cannot buy or sell fund
           shares. Price changes in the securities the fund owns may ultimately
           affect the price of fund shares the next time the NAV is
           calculated.)


           Other rights we reserve

           You should be aware that we may do any of the following:

           -  withdraw or suspend the offering of shares at any time

           -  withhold a portion of your distributions and redemption proceeds
              as federal income tax if we have been notified by the IRS that
              you are subject to backup withholding or if you fail to provide
              us with a correct taxpayer ID number and certain certifications
              or certification that you are exempt from backup withholding


           -  reject a new account application if you don't provide any
              required or requested identifying information, or for any other
              reason

           -  refuse, cancel, limit or rescind any purchase or exchange order,
              without prior notice; freeze any account (meaning you will not be
              able to purchase fund shares in your account); suspend account
              services; and/or involuntarily redeem your account if we think
              that the account is being used for fraudulent or illegal
              purposes; one or more of these actions will be taken when, at our
              sole discretion, they are deemed to be in the fund's best
              interests or when the fund is requested or compelled to do so by
              governmental authority or by applicable law

           -  close and liquidate your account if we are unable to verify your
              identity, or for other reasons; if we decide to close your
              account, your fund shares will be redeemed at the net asset value
              per share next calculated after we determine to close your
              account (less any applicable redemption fee); you may recognize a
              gain or loss on the redemption of your fund shares and incur a
              tax liability


                                            Policies You Should Know About  | 37
<PAGE>


           -  pay you for shares you sell by "redeeming in kind," that is, by
              giving you securities (which typically will involve brokerage
              costs for you to liquidate) rather than cash, but which will be
              taxable to the same extent as a redemption for cash; the fund
              generally won't make a redemption in kind unless your requests
              over a 90-day period total more than $250,000 or 1% of the value
              of the fund's net assets, whichever is less

           -  change, add or withdraw various services, fees and account
              policies (for example, we may adjust the fund's investment
              minimums at any time)



UNDERSTANDING DISTRIBUTIONS AND TAXES

           The fund intends to distribute to its shareholders virtually all of
           its net earnings. The fund can earn money in two ways: by receiving
           interest, dividends or other income from securities it holds and by
           selling securities for more than it paid for them. (The fund's
           earnings are separate from any gains or losses stemming from your
           own purchase and sale of shares.) The fund may not always pay a
           dividend or distribution for a given period.


           THE FUND INTENDS TO PAY DIVIDENDS to its shareholders in March,
           June, September and December. Long-term and short-term capital gains
           are paid in December. If necessary the fund may distribute at other
           times at well.

           Dividends or distributions declared to shareholders of record in the
           last quarter of a given calendar year are treated for federal income
           tax purposes as if they were received on December 31 of that year,
           provided such dividends or distributions are paid by the end of the
           following January.

           For federal income tax purposes, income and capital gains
           distributions are generally taxable. However, dividends and
           distributions received by retirement plans qualifying for tax
           exemption under federal income tax laws generally will not be
           taxable.


           YOU CAN CHOOSE HOW TO RECEIVE YOUR DIVIDENDS AND DISTRIBUTIONS. You
           can have them all automatically reinvested in fund shares (at NAV),
           all deposited directly to your bank account or all sent to you by
           check, have one type reinvested and the other sent to you by check
           or have them invested in a different fund. Tell us your preference
           on your application. If you don't indicate a preference, your
           dividends and distributions will all be

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investments, including any state and local
tax consequences.

38 | Understanding Distributions and Taxes
<PAGE>


           reinvested in shares of the fund without a sales charge (if
           applicable). Distributions are treated the same for federal income
           tax purposes whether you receive them in cash or reinvest them in
           additional shares. For employer-sponsored qualified plans, and
           retirement plans, reinvestment (at NAV) is the only option.

           BUYING, SELLING OR EXCHANGING FUND SHARES WILL USUALLY HAVE FEDERAL
           INCOME TAX CONSEQUENCES FOR YOU (except in employer-sponsored
           qualified plans, IRAs or other tax-advantaged accounts). Your sale
           of shares may result in a capital gain or loss. The gain or loss
           will be long-term or short-term depending on how long you owned the
           shares that were sold. For federal income tax purposes, an exchange
           is treated the same as a sale.


           THE FEDERAL INCOME TAX STATUS of the fund's earnings you receive and
           your own fund transactions generally depend on their type:



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
GENERALLY TAXED AT LONG-TERM                 GENERALLY TAXED AT ORDINARY
CAPITAL GAIN RATES:                          INCOME RATES:
--------------------------------------------------------------------------------
<S>                                          <C>
DISTRIBUTIONS FROM THE FUND

-   gains from the sale of                   -  gains from the sale of
    securities held (or treated                 securities held by the fund for
    as held) by the fund for                    one year or less
    more than one year

-   qualified dividend income                -  all other taxable income
--------------------------------------------------------------------------------

TRANSACTIONS INVOLVING FUND
SHARES

-   gains from selling fund                  -  gains from selling fund
    shares held for more than                   shares held for one year or
    one year                                    less
--------------------------------------------------------------------------------
</TABLE>




           ANY DIRECT INVESTMENTS IN FOREIGN SECURITIES BY THE FUND MAY BE
           SUBJECT TO FOREIGN WITHHOLDING TAXES. In that case, the fund's yield
           on those securities would generally be decreased. Shareholders
           generally will not be entitled to claim a credit or deduction with
           respect to foreign taxes paid by the fund. In addition, any
           investments in foreign securities or foreign currencies may increase
           or accelerate the fund's recognition of ordinary income and may
           affect the timing or amount of the fund's distributions. If you
           invest in the fund through a taxable account, your after-tax return
           could be negatively impacted.



                                     Understanding Distributions and Taxes  | 39
<PAGE>


           To the extent that the fund invests in certain debt obligations or
           certain other securities, investments in these obligations or
           securities may cause the fund to recognize taxable income in excess
           of the cash generated by such obligations. Thus, the fund could be
           required at times to liquidate other investments in order to satisfy
           its distribution requirements.

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by the fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital gain rates. Qualified dividend income
           generally includes dividends from domestic and some foreign
           corporations. It does not include income from investments in debt
           securities or, generally, from REITs. In addition, the fund must
           meet certain holding period and other requirements with respect to
           the dividend-paying stocks in its portfolio and the shareholder must
           meet certain holding period and other requirements with respect to
           the fund's shares for the lower tax rates to apply.

           For taxable years beginning before January 1, 2011, the maximum
           federal income tax rate imposed on long-term capital gains
           recognized by individuals and other noncorporate shareholders has
           been reduced to 15%. For taxable years beginning on or after January
           1, 2011, the long-term capital gain rate is scheduled to return to
           20%. For more information, see the Statement of Additional
           Information, under "Taxes."


           YOUR FUND WILL SEND YOU DETAILED FEDERAL INCOME TAX INFORMATION
           EVERY JANUARY. These statements tell you the amount and the federal
           income tax classification of any dividends or distributions you
           received. They also have certain details on your purchases and sales
           of shares.


           IF YOU INVEST RIGHT BEFORE THE FUND PAYS A DIVIDEND, you'll be
           getting some of your investment back as a taxable dividend. You can
           avoid this by investing after the fund declares a dividend. In
           tax-advantaged retirement accounts you do not need to worry about
           this.


           CORPORATIONS are taxed at the same rates on ordinary income and
           capital gains, but may be eligible for a dividends-received
           deduction for a portion of the income dividends they receive from
           the fund, provided certain holding period and other requirements are
           met.


40 | Understanding Distributions and Taxes
<PAGE>

           The above discussion is applicable to shareholders who are US
           persons. If you are a non-US person, please consult your own tax
           advisor with respect to the US tax consequences to you of an
           investment in the fund.


                                     Understanding Distributions and Taxes  | 41
<PAGE>


APPENDIX
--------------------------------------------------------------------------------
           Hypothetical Expense Summary


           Using the annual fund operating expense ratios presented in the fee
           tables in the fund prospectus, the Hypothetical Expense Summary
           shows the estimated fees and expenses, in actual dollars, that would
           be charged on a hypothetical investment of $10,000 in the fund held
           for the next 10 years and the impact of such fees and expenses on
           fund returns for each year and cumulatively, assuming a 5% return
           for each year. The tables also assume that all dividends and
           distributions are reinvested. The annual fund expense ratios shown
           are net of any contractual fee waivers or expense reimbursements, if
           any, for the period of the contractual commitment. The tables do not
           reflect redemption fees, if any, which may be payable upon
           redemption. If redemption fees were shown, the "Hypothetical
           Year-End Balance After Fees and Expenses" amounts shown would be
           lower and the "Annual Fees and Expenses" amounts shown would be
           higher. Also, please note that if you are investing through a third
           party provider, that provider may have fees and expenses separate
           from those of the fund that are not reflected here. Mutual fund fees
           and expenses fluctuate over time and actual expenses may be higher
           or lower than those shown.

           The Hypothetical Expense Summary should not be used or construed as
           an offer to sell, a solicitation of an offer to buy or a
           recommendation or endorsement of any specific mutual fund. You
           should carefully review the fund's prospectus to consider the
           investment objectives, risks, expenses and charges of the fund prior
           to investing.



42 | Appendix
<PAGE>


DWS Balanced Fund - Class Institutional

<TABLE>
<CAPTION>
              MAXIMUM            INITIAL HYPOTHETICAL                  ASSUMED RATE
           SALES CHARGE:              INVESTMENT:                       OF RETURN:
               0.00%                    $10,000                             5%
----------------------------------------------------------------------------------------------
                                                                HYPOTHETICAL
             CUMULATIVE         ANNUAL        CUMULATIVE          YEAR-END
           RETURN BEFORE         FUND        RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND         EXPENSE         FEES AND           FEES AND            AND
YEAR          EXPENSES          RATIOS         EXPENSES           EXPENSES         EXPENSES
----------------------------------------------------------------------------------------------
<S>       <C>                <C>            <C>               <C>                <C>
   1           100.0%       100.0%              100.0%            $000,000       $000,000
----------------------------------------------------------------------------------------------
   2                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   3                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   4                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   5                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   6                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   7                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   8                %            %                   %            $              $
----------------------------------------------------------------------------------------------
   9                %            %                   %            $              $
----------------------------------------------------------------------------------------------
  10                %            %                   %            $              $
----------------------------------------------------------------------------------------------
  TOTAL                                                                          $1,000,000
----------------------------------------------------------------------------------------------
</TABLE>



                                                                  Appendix  | 43

<PAGE>

TO GET MORE INFORMATION

SHAREHOLDER REPORTS - These include commentary from the fund's management team
about recent market conditions and the effects of the fund's strategies on its
performance. They also have detailed performance figures, a list of everything
the fund owns, and its financial statements. Shareholders get these reports
automatically.

STATEMENT OF ADDITIONAL INFORMATION (SAI) - This tells you more about the
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).

For a free copy of any of these documents or to request other information about
the fund, call (800) 730-1313, or contact DWS Scudder at the address listed
below. The fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about the fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about the fund,
including the fund's SAI, 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.


<TABLE>
<CAPTION>
DWS SCUDDER              SEC                     DISTRIBUTOR
---------------------    --------------------    -------------------------------
<S>                      <C>                     <C>
PO Box 219210            100 F Street, N.E.      DWS Scudder Distributors, Inc.
Kansas City, MO          Washington, D.C.        222 South Riverside Plaza
64121-9210               20549-0102              Chicago, IL 60606-5808
WWW.DWS-SCUDDER.COM      WWW.SEC.GOV             (800) 621-1148
(800) 730-1313           (800) SEC-0330
</TABLE>



<TABLE>
<S>                   <C>                    <C>
SEC FILE NUMBER:
                        DWS Balanced Fund    811-1236
</TABLE>





(03/01/08) ______
[RECYCLED PAPER GRAPHIC APPEARS HERE]    [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]




<PAGE>


                                 MARCH 1, 2008








                                   PROSPECTUS

                              ------------------

                                    CLASS S

                               DWS BALANCED FUND

As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.


        ONE GLOBAL FORCE. ONE FOCUS YOU. [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]




<PAGE>

CONTENTS





<TABLE>
<S>      <C>
HOW THE FUND WORKS

  4      The Fund's Main Investment
         Strategy

  5      The Main Risks of Investing in
         the Fund

  9      The Fund's Performance
         History

 12      How Much Investors Pay

 13      Other Policies and Risks

 14      Who Manages and Oversees
         the Fund

 19      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUND

 21      How to Buy, Sell and
         Exchange Shares

 25      Policies You Should Know
         About

 38      Understanding Distributions
         and Taxes

 41      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

On the next few pages, you'll find information about the fund's investment
goal, the main strategies it uses to pursue that goal and the main risks that
could affect performance.

Whether you are considering investing in the fund or are already a shareholder,
you'll want to LOOK THIS INFORMATION OVER CAREFULLY. You may want to keep it on
hand for reference as well.

CLASS S shares are generally only available to new investors through fee-based
programs of investment dealers that have special agreements with the fund's
distributor and through certain registered investment advisors. These dealers
and advisors typically charge ongoing fees for services they provide.

Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices will go up and down, and you could lose money by investing in them.

You can find DWS prospectuses on the Internet at WWW.DWS-SCUDDER.COM (the Web
site does not form a part of this prospectus).
<PAGE>

--------------------------------------------------------------------------------
<TABLE>
<S>                      <C>
                                                                Class S

                                        ticker symbol           KTRSX

                                        fund number             2033

DWS BALANCED FUND
--------------------------------------------------------------------------------

</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks the highest total return, a combination of income
            and capital appreciation, consistent with reasonable risk.


            The fund can buy many types of securities, among them common
            stocks, convertible securities, corporate bonds, US government
            bonds, mortgage- and asset-backed securities and certain
            derivatives. The fund normally invests approximately 60% of its net
            assets in common stocks and other equity securities and
            approximately 40% of its net assets in fixed-income securities,
            including lower-quality, high-yield debt securities. These
            percentages may fluctuate in response to changing market
            conditions, but the fund will at all times invest at least 25% of
            net assets in fixed-income senior securities. Generally, most
            securities are from US issuers, but the fund may invest up to 25%
            of total assets in foreign securities.

            The Advisor may allocate the fund's assets among various asset
            categories including growth and value stocks of large and small
            capitalization companies and investment-grade and high-yield debt
            securities.

            The Advisor will review the fund's allocation among the
            various asset categories periodically and may adjust the
            fund's allocation among various asset categories based on
            current or expected market conditions or to manage risk as is
            consistent with the fund's overall investment strategy.

            The Advisor combines global strategies for selecting equity and
            debt securities for the fund's portfolio. Each strategy is run by
            portfolio managers that specialize in the respective asset
            category. The strategies that the Advisor may implement utilize a
            variety of quantitative and qualitative techniques.



4 | DWS Balanced Fund
<PAGE>


            IGAP STRATEGY. In addition to the fund's main investment strategy,
            the Advisor seeks to enhance returns by employing a global tactical
            asset allocation overlay strategy. This strategy, which the Advisor
            calls iGAP (integrated Global Alpha Platform), attempts to take
            advantage of short-term and medium-term mispricings within global
            bond, equity and currency markets. The iGAP strategy is implemented
            through the use of derivatives, which are contracts or other
            instruments whose value is based on, for example, indices,
            currencies or securities. The iGAP strategy primarily uses
            exchange-traded futures contracts on global bonds and equity
            indexes and over-the-counter forward currency contracts, and is
            expected to have a low correlation to the fund's other securities
            holdings. Because the iGAP strategy relies primarily on futures,
            forward currency contracts and other derivative instruments, the
            aggregate notional market exposure obtained from such investments
            may range up to 100% of the net assets of the fund (assuming the
            maximum allocation to the iGAP strategy).


            SECURITIES LENDING. The fund may lend its investment securities in
            an amount up to 33 1/3% of its total assets to approved
            institutional borrowers who need to borrow securities in order to
            complete certain transactions.


            DERIVATIVES. In addition to derivatives utilized within the iGap
            strategy, the Advisor may also use derivatives in circumstances
            where the Advisor believes they offer a more efficient means of
            gaining exposure to a particular asset class or market and to
            maintain a high level of liquidity to meet shareholder redemptions
            or other needs while maintaining exposure to the market. The
            Advisor may use futures, options, forward currency transactions and
            swaps.



            THE MAIN RISKS OF INVESTING IN THE FUND

            There are several risk factors that could hurt the fund's
            performance, cause you to lose money or cause the fund's
            performance to trail that of other investments.


            ASSET ALLOCATION RISK. Although asset allocation among different
            asset categories generally reduces risk and exposure to any one
            category, the risk remains that the Advisor may favor an asset
            category that performs poorly relative to the other asset
            categories.



                                                          DWS Balanced Fund  | 5
<PAGE>


            STOCK MARKET RISK. The fund is affected by how the stock market
            performs. To the extent the fund invests in a particular
            capitalization or market sector, the fund's performance may be
            proportionately affected by that segment's general performance.
            When stock prices fall, you should expect the value of your
            investment to fall as well. Because a stock represents ownership in
            its issuer, stock prices can be hurt by poor management, shrinking
            product demand and other business risks. These factors may affect
            single companies as well as groups of companies. In addition,
            movements in financial markets may adversely affect a stock's
            price, regardless of how well the company performs. The market as a
            whole may not favor the types of investments the fund makes and the
            fund may not be able to get an attractive price for them.


            INDUSTRY RISK. While the fund does not concentrate in any industry,
            to the extent that the fund has exposure to a given industry or
            sector, any factors affecting that industry or sector could affect
            the value of portfolio securities. For example, manufacturers of
            consumer goods could be hurt by a rise in unemployment or
            technology companies could be hurt by such factors as market
            saturation, price competition and rapid obsolescence.


            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value
            of its bonds to decline. In addition, an issuer may not be
            able to make timely payments on the interest and/or principal
            on the bonds it has issued. Because the issuers of high-yield
            bonds or junk bonds (rated below the fourth highest category)
            may be in uncertain financial health, the prices of their
            bonds can be more vulnerable to bad economic news or even the
            expectation of bad news, than investment-grade bonds. In some
            cases, bonds, particularly high-yield bonds, may decline in
            credit quality or go into default. Because the fund may invest
            in securities not paying current interest or in securities
            already in default, these risks may be more pronounced.


            INTEREST RATE RISK. Generally, fixed income securities will
            decrease in value when interest rates rise. The longer the
            effective maturity of the fund's securities, the more sensitive it
            will be to interest rate changes. (As a general rule, a 1% rise in
            interest rates means a 1% fall in value for every year of
            duration.) As interest rates decline, the issuers of securities
            held by the fund may prepay principal earlier than scheduled,




THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS



This fund is designed for investors interested in asset class diversification in
a single fund that invests in a mix of stocks and bonds.









6 | DWS Balanced Fund
<PAGE>

            forcing the fund to reinvest in lower-yielding securities.
            Prepayment may reduce the fund's income. As interest rates
            increase, slower than expected principal payments may extend the
            average life of fixed income securities. This will have the effect
            of locking in a below-market interest rate, increasing the fund's
            duration and reducing the value of such a security. Because the
            fund may invest in mortgage-related securities, it is more
            vulnerable to both of these risks.


            SMALL COMPANY CAPITALIZATION RISK. Small company stocks tend to
            experience steeper price fluctuations - down as well as up - than
            the stocks of larger companies. A shortage of reliable information
            - the same information gap that creates opportunity in small
            company investing - can also pose added risk. Industry-wide
            reversals may have a greater impact on small companies, since they
            lack a large company's financial resources. Small company stocks
            are typically less liquid than large company stocks. Accordingly,
            it may be harder to find a buyer for a small company's shares.

            FOREIGN INVESTMENT RISK. To the extent the fund has exposure to
            companies based outside the US, it faces the risks inherent in
            foreign investing. Adverse political, economic or social
            developments could undermine the value of the fund's investments or
            prevent the fund from realizing their full value. Financial
            reporting standards for companies based in foreign markets differ
            from those in the US. Additionally, foreign securities markets
            generally are smaller and less liquid than the US markets. These
            risks tend to be greater in emerging markets so, to the extent the
            fund invests in emerging markets, it takes on greater risks. The
            currency of the country in which the fund has invested could
            decline relative to the value of the US dollar, which decreases the
            value of the investment to US investors. The investments of the
            fund may be subject to foreign withholding taxes.

            IGAP RISK. The success of the iGAP strategy depends, in part, on
            the Advisor's ability to analyze the correlation between various
            global markets and asset classes. If the Advisor's correlation
            analysis proves to be incorrect, losses to the fund may be
            significant and may substantially exceed the intended level of
            market exposure for the iGAP strategy.



                                                          DWS Balanced Fund  | 7
<PAGE>


            DERIVATIVES RISK. Risks associated with derivatives include the
            risk that the derivative is not well correlated with the security,
            index or currency to which it relates; the risk that derivatives
            may not have the intended effects and may result in losses or
            missed opportunities; the risk that the fund will be unable to sell
            the derivative because of an illiquid secondary market; the risk
            that a counterparty is unwilling or unable to meet its obligation;
            and the risk that the derivative transaction could expose the fund
            to the effects of leverage, which could increase the fund's
            exposure to the market and magnify potential losses. There is no
            guarantee that derivatives, to the extent employed, will have the
            intended effect, and their use could cause lower returns or even
            losses to the fund. The use of derivatives by the fund to hedge
            risk may reduce the opportunity for gain by offsetting the positive
            effect of favorable price movements.


            SECURITIES LENDING RISK. Any loss in the market price of securities
            loaned by the fund that occurs during the term of the loan would be
            borne by the fund and would adversely affect the fund's
            performance. Also, there may be delays in recovery of securities
            loaned or even a loss of rights in the collateral should the
            borrower of the securities fail financially while the loan is
            outstanding. However, loans will be made only to borrowers selected
            by the fund's delegate after a review of relevant facts and
            circumstances, including the creditworthiness of the borrower.

            Other factors that could affect performance include:

            -  portfolio management could be wrong in the analysis of
               industries, companies, economic trends, the relative
               attractiveness of different securities or other matters.

            -  at times, market conditions might make it hard to value some
               investments or to get an attractive price for them.

            -  the Advisor measures credit quality at the time it buys
               securities, using independent rating agencies or, for unrated
               securities, the Advisor's own credit quality standards. If a
               security's credit quality declines, the Advisor will decide what
               to do with the security, based on the circumstances and its
               assessment of what would benefit shareholders most.


8 | DWS Balanced Fund
<PAGE>

THE FUND'S PERFORMANCE HISTORY

While a fund's past performance (before and after taxes) isn't necessarily a
sign of how it will do in the future, it can be valuable for an investor to
know.


The bar chart shows how the performance of the fund's Class S shares has varied
from year to year, which may give some idea of risk. The table on the following
page shows how fund performance compares to relevant index information (which,
unlike fund performance, does not reflect fees or expenses). The performance of
both the fund and the index information varies over time. All figures assume
reinvestment of dividends and distributions (in the case of after-tax returns,
reinvested net of assumed tax rates).


The table shows returns for Class S shares on a before-tax and after-tax basis.
After-tax returns are estimates calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
state and local taxes. Actual after-tax returns depend on an investor's tax
situation and may differ from those shown in the table. After-tax returns shown
are not relevant for investors who hold their shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts.

DWS Balanced Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Class S

[BAR GRAPHIC APPEARS HERE]



<TABLE>
<C>        <C>
10.06
2006       2007
</TABLE>







<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:

<S>                                        <C>
BEST QUARTER: _____%, Q____                WORST QUARTER: _____%, Q______
</TABLE>




                                                          DWS Balanced Fund  | 9
<PAGE>


AVERAGE ANNUAL TOTAL RETURNS (%) as of 12/31/2007




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                              1 YEAR      SINCE INCEPTION*
--------------------------------------------------------------------------------
<S>                                          <C>         <C>
 CLASS S
--------------------------------------------------------------------------------
   Return before Taxes
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares
--------------------------------------------------------------------------------
 S&P 500 (reflects no deductions for
 fees, expenses or taxes)
--------------------------------------------------------------------------------
 RUSSELL 1000 INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 RUSSELL 2000 INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 LEHMAN BROTHERS U.S. AGGREGATE
 INDEX (reflects no deductions for fees,
 expenses or taxes)
--------------------------------------------------------------------------------
 MSCI EAFE INDEX (reflects no
 deductions for fees, expenses or
 taxes)
--------------------------------------------------------------------------------
 CREDIT SUISSE HIGH YIELD INDEX
 (reflects no deductions for fees,
 expenses or taxes)
--------------------------------------------------------------------------------
 MERRILL LYNCH 3-MONTH US TREASURY
 BILL INDEX (reflects no deductions for
 fees, expenses or taxes)
--------------------------------------------------------------------------------
</TABLE>



Total returns would have been lower had certain expenses not been reduced.

 *   Since March 11, 2005. Index comparison begins March 31, 2005.

 The Russell 1000 Index replaces the S&P 500 as the fund's benchmark index for
 equity investments because the Advisor believes that it more accurately
 reflects the fund's investment strategy.


 STANDARD & POOR'S 500 INDEX (S&P 500) is an unmanaged, capitalization-weighted
 index of 500 stocks. The index is designed to measure performance of the broad
 domestic economy through changes in the aggregate market value of 500 stocks
 representing all major industries.

 RUSSELL 1000 (Reg. TM) INDEX is an unmanaged price-only index of the 1,000
 largest capitalized companies that are domiciled in the US and whose common
 stocks are traded.

 The RUSSELL 2000 (Reg. TM) INDEX is an unmanaged capitalization-weighted
 measure of approximately 2,000 small US stocks.

 LEHMAN BROTHERS U.S. AGGREGATE INDEX is an unmanaged market value-weighted
 measure of Treasury issues, agency issues, corporate bond issues and mortgage
 securities.



10 | DWS Balanced Fund
<PAGE>


 MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE, AUSTRALASIA AND THE FAR
 EAST (EAFE) INDEX is an unmanaged index that tracks international stock
 performance in the 21 developed markets of Europe, Australasia and the Far
 East.

 The CREDIT SUISSE HIGH YIELD INDEX is an unmanaged trader-priced portfolio,
 constructed to mirror the global high-yield debt market.

 The MERRILL LYNCH 3-MONTH US TREASURY BILL INDEX is an unmanaged index
 capturing the performance of a single issue maturing closest to, but not
 exceeding, three months from the re-balancing date.



--------------------------------------------------------------------------------
Current performance may be higher or lower than the performance data quoted
above. For more recent performance information, call your financial advisor or
(800) 728-3337 or visit our Web site at www.dws-scudder.com.


--------------------------------------------------------------------------------


The RETURN AFTER TAXES ON DISTRIBUTIONS assumes that an investor holds fund
shares at the end of the period. The number represents only the fund's taxable
distributions and not a shareholder's gain or loss from selling fund shares.

The RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES assumes that an
investor sold his or her fund shares at the end of the period. The number
reflects both the fund's taxable distributions and a shareholder's gain or loss
from selling fund shares.



                                                         DWS Balanced Fund  | 11
<PAGE>

HOW MUCH INVESTORS PAY


The table below describes the fees and expenses that you may pay if you buy and
hold fund shares. This information doesn't include any fees that may be charged
by your financial advisor.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FEE TABLE                                          CLASS S
--------------------------------------------------------------------------------
<S>                                      <C>
 SHAREHOLDER FEES, paid directly from your investment
--------------------------------------------------------------------------------
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds)1                               2.00%
--------------------------------------------------------------------------------

 ANNUAL OPERATING EXPENSES, deducted from fund assets
--------------------------------------------------------------------------------
 Management Fee                                         %
--------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee                   None
--------------------------------------------------------------------------------
 Other Expenses2
--------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES
--------------------------------------------------------------------------------
 Less Expense Waiver/Reimbursement3
--------------------------------------------------------------------------------
 Net Annual Operating Expenses3
--------------------------------------------------------------------------------
</TABLE>



1        This fee is charged on applicable redemptions or exchanges. Please see
         "Policies You Should Know About - Policies about transactions" for
         further information.

2        Restated on an annualized basis to reflect fee changes which took
         effect on February 1, 2007 and to reflect the conversion of Class AARP
         shares to Class S shares on July 14, 2006.


3        Through _______________, the Advisor has contractually agreed to waive
         all or a portion of its management fee and reimburse or pay operating
         expenses of the fund to the extent necessary to maintain the fund's
         total operating expenses at 0.74% for Class S shares, excluding certain
         expenses such as extraordinary expenses, taxes, brokerage and interest.


Based on the costs above (including one year of capped expenses in the "1 Year"
period and two years of capped expenses in each of the "3 Years," "5 Years" and
"10 Years" period), this example helps you compare the expenses of the fund to
those of other mutual funds. This example assumes the expenses above remain the
same. It also assumes that you invested $10,000, earned 5% annual returns and
reinvested all dividends and distributions. This is only an example; actual
expenses will be different.



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXAMPLE               1 YEAR      3 YEARS      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                  <C>         <C>          <C>          <C>
 Class S shares          $           $            $            $
--------------------------------------------------------------------------------
</TABLE>




12 | DWS Balanced Fund
<PAGE>

OTHER POLICIES AND RISKS

           While the previous pages describe the main points of the fund's
           strategy and risks, there are a few other issues to know about:


           -  Although major changes tend to be infrequent, the fund's Board
              could change the fund's investment objective without seeking
              shareholder approval.

           -  As a temporary defensive measure, the fund could shift up to 100%
              of assets into investments such as money market securities or
              other short-term securities that offer comparable levels of risk
              This could prevent losses, but, while engaged in a temporary
              defensive position, the fund will not be pursuing its investment
              goal. However, portfolio management may choose not to use these
              strategies for various reasons, even in volatile market
              conditions.



           For more information

           This prospectus doesn't tell you about every policy or risk of
           investing in the fund.

           If you want more information on the fund's allowable securities and
           investment practices and the characteristics and risks of each one,
           you may want to request a copy of the Statement of Additional
           Information (the back cover tells you how to do this).

           Keep in mind that there is no assurance that the fund will achieve
           its goal.


           A complete list of the fund's portfolio holdings is posted as of the
           month-end on www.dws-scudder.com (the Web site does not form a part
           of this prospectus) on or after the last day of the following month.
           This posted information generally remains accessible at least until
           the date on which the fund files its Form N-CSR or N-Q with the
           Securities and Exchange Commission for the period that includes the
           date as of which the posted information is current. In addition, the
           fund's top ten equity holdings and other fund information is posted
           on www.dws-scudder.com as of the calendar quarter-end on or after
           the 15th day following quarter-end. The fund's Statement of
           Additional Information includes a description of the fund's policies
           and procedures with respect to the disclosure of the fund's
           portfolio holdings.



                                                  Other Policies and Risks  | 13
<PAGE>

WHO MANAGES AND OVERSEES THE FUND


           The investment advisor


           Deutsche Investment Management Americas Inc. ("DIMA" or the
           "Advisor"), with headquarters at 345 Park Avenue, New York, NY
           10154, is the investment advisor for the fund. Under the oversight
           of the Board, the Advisor makes investment decisions, buys and sells
           securities for the fund and conducts research that leads to these
           purchase and sale decisions. The Advisor provides a full range of
           global investment advisory services to institutional and retail
           clients.


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

           Deutsche Asset Management is a global asset management organization
           that offers a wide range of investing expertise and resources,
           including hundreds of portfolio managers and analysts and an office
           network that reaches the world's major investment centers. This
           well-resourced global investment platform brings together a wide
           variety of experience and investment insight across industries,
           regions, asset classes and investing styles.

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


           MANAGEMENT FEE. The Advisor receives a management fee from the fund.
           Below is the actual rate paid by the fund for the most recent fiscal
           year, as a percentage of the fund's average daily net assets.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FUND NAME                          FEE PAID
--------------------------------------------------------------------------------
<S>                               <C>
  DWS Balanced Fund                 ___%
--------------------------------------------------------------------------------
</TABLE>




14 | Who Manages and Oversees the Fund
<PAGE>


           A discussion regarding the basis for the Board's approval of the
           fund's investment management agreement (the discussion regarding the
           approval of the subadvisory agreement is contained in the semiannual
           report for the period ended March 31, 2008) is contained in the most
           recent shareholder reports for the annual period ended September 30
           (see "Shareholder reports" on the back cover).

           The Subadvisor

           Subadvisor for DWS Balanced Fund

           The subadvisor for DWS Balanced Fund is Deutsche Asset Management
           International GmbH ("DeAMi"), Mainzer Landstrasse 178-190, Frankfurt
           am Main, Germany. DeAMi renders investment advisory and management
           services to the fund. DeAMi is an investment advisor registered with
           the Securities and Exchange Commission and currently manages over
           $60 billion in assets, which is primarily comprised of institutional
           accounts and investment companies. DeAMi is a subsidiary of Deutsche
           Bank AG. DIMA compensates DeAMi out of the management fee it
           receives from the fund.



                                         Who Manages and Oversees the Fund  | 15
<PAGE>

Portfolio management

DWS Balanced Fund is managed by a team of investment professionals who
collaborate to develop and implement the fund's investment strategy. Each
portfolio manager has authority over all aspects of the fund's investment
portfolio, including, but not limited to, purchases and sales of individual
securities, portfolio construction techniques, portfolio risk assessment and
the management of daily cash flows in accordance with portfolio holdings.

DWS BALANCED FUND

The following people handle the day-to-day management of the fund.

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Joined Deutsche Asset Management in 1998 after 13 years of experience as
   vice president and portfolio manager for Norwest Bank, where he managed the
   bank's fixed income and foreign exchange portfolios.
-  Portfolio Manager for Retail Mortgage Backed Securities: New York.
-  Joined the fund in 2005.
-  BIS, University of Minnesota.

Matthew F. MacDonald
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Joined Deutsche Asset Management and the fund in 2006 after 14 years of
   fixed income experience at Bank of America Global Structured Products and
   PPM America, Inc., where he was portfolio manager for public fixed income,
   including MBS, ABS, CDOs and corporate bonds; earlier, as an analyst for
   MBS, ABS and money markets; and originally, at Duff & Phelps Credit Rating
   Company.
-  Portfolio Manager for Retail Mortgage Backed Securities: New York.
-  BA, Harvard University; MBA, University of Chicago Graduate School of
   Business.

Inna Okounkova
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Global Asset Allocation Portfolio Manager: New York.
-  Joined Deutsche Asset Management in 1999 as a quantitative analyst, becoming
   an associate Portfolio Manager in 2001.
-  Joined the fund in 2005.
-  BS, MS, Moscow State University; MBA, University of Chicago.

Gary Sullivan, CFA

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

-  Joined Deutsche Asset Management in 1996 and the fund in 2006. Served as the
   head of the High Yield group in Europe and as an Emerging Markets portfolio
   manager.
-  Prior to that, four years at Citicorp as a research analyst and structurer
   of collateralized mortgage obligations. Prior to Citicorp, served as an
   officer in the US Army from 1988 to 1991.
-  BS, United States Military Academy (West Point); MBA, New York University,
   Stern School of Business

16 | Who Manages and Oversees the Fund
<PAGE>

Julie M. Van Cleave, CFA
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Joined Deutsche Asset Management and the fund in 2002.
-  Head of Large Cap Growth Portfolio Selection Team.
-  Previous experience includes 18 years of investment industry experience at
   Mason Street Advisors, as Managing Director and team leader for the large
   cap investment team.
-  BBA, MBA, University of Wisconsin - Madison.

Robert Wang
Managing Director of Deutsche Asset Management and Portfolio Manager of the
fund.
-  Global Asset Allocation Senior Portfolio Manager: New York.
-  Joined Deutsche Asset Management in 1995 as a senior fixed income portfolio
   manager after 13 years of experience at J.P. Morgan & Co. trading fixed
   income, derivatives and foreign exchange products.
-  Joined the fund in 2005.
-  BS, The Wharton School, University of Pennsylvania.

Thomas Picciochi
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Quantitative strategies: New York.
-  Joined Deutsche Asset Management in 1999, formerly serving as portfolio
   manager for Absolute Return Strategies, after 13 years of experience in
   various research and analysis positions at State Street Global Advisors,
   FPL Energy, Barnett Bank, Trade Finance Corporation and Reserve Financial
   Management.
-  Joined the fund in 2007.
-  BA and MBA, University of Miami.

Jin Chen
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Global strategies: New York
-  Joined Deutsche Asset Management in 1999; prior to that, served as portfolio
   manager for Absolute Return Strategies and as a fundamental equity analyst
   and portfolio manager for Thomas White Asset Management.
-  Joined the fund in 2007.
-  BS, Nanjing University; MS, Michigan State University

Julie Abbett
Director of Deutsche Asset Management and Portfolio Manager of the fund.
-  Senior portfolio manager for Global Quantitative Equity: New York.
-  Joined Deutsche Asset Management in 2000 after four years of combined
   experience as a consultant with equity trading services for BARRA, Inc. and
   a product developer for FactSet Research.
-  Joined the fund in 2007.
-  BA, University of Connecticut.


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



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


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


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


                                         Who Manages and Oversees the Fund  | 17
<PAGE>


Thomas Schuessler, PhD
Director of Deutsche Asset Management and Portfolio Manager of the fund.
- Joined Deutsche Asset Management in 2001 after five years at Deutsche Bank
  where he managed various projects and worked in the office of the Chairman
  of the Management Board.
- US and Global Fund Management: Frankfurt.
- PhD, University of Heidelberg, studies in physics and economics at University
  of Heidelberg and University of Utah.

John Brennan
Director of Deutsche Asset Management and Portfolio Manager of the fund.
- Portfolio and Sector Manager for Institutional Fixed Income: Louisville.
- Joined Deutsche Asset Management and the fund in 2007 after 14 years of
  experience at INVESCO and Freddie Mac. Previously, was head of Structured
  Securities sector team at INVESCO and before that was senior fixed income
  portfolio manager at Freddie Mac specializing in MBS, CMBS, collateralized
  mortgage obligations, ARMS, mortgage derivatives, US Treasuries and agency
  debt.
- BS, University of Maryland; MBA William & Mary.

J. Richard Robben, CFA
Vice President of Deutsche Asset Management and Portfolio Manager of the fund.
- Joined Deutsche Asset Management and the fund in 2007 after 11 years of
  experience at INVESCO Institutional, most recently as senior portfolio
  manager for LIBOR-related strategies and head of portfolio construction
  group for North American Fixed Income.
- BA, Bellarmine University.

The fund's Statement of Additional Information provides additional information
about a portfolio manager's investments in the fund, a description of the
portfolio management compensation structure and information regarding other
accounts managed.



18 | Who Manages and Oversees the Fund
<PAGE>

FINANCIAL HIGHLIGHTS


The financial highlights are designed to help you understand recent financial
performance. The figures in the first part of the table are for a single share.
The total return figures represent the percentage that an investor in the fund
would have earned (or lost), assuming all dividends and distributions were
reinvested. This information has been audited by Ernst & Young LLP, independent
registered public accounting firm, whose report, along with the fund's
financial statements, is included in the fund's annual report (see "Shareholder
reports" on the back cover).


                                                      Financial Highlights  | 19

<PAGE>

HOW TO INVEST IN THE FUND

The following pages tell you how to invest in the fund and what to expect as a
shareholder. If you're investing directly with DWS Scudder, all of this
information applies to you.

The following pages also tell you about many of the services, choices and
benefits of being a shareholder. You'll also find information on how to check
the status of your account using the method that's most convenient for you.

If you're investing through a "third party provider" - for example, a workplace
retirement plan, financial supermarket or financial advisor - your provider may
have its own policies or instructions and you should follow those.


Please remember, CLASS S shares are generally only available to new investors
through fee-based programs of investment dealers that have special agreements
with the fund's distributor, through certain group retirement plans and through
certain registered investment advisors. These dealers and advisors typically
charge ongoing fees for services they provide.


You can find out more about the topics covered here by speaking with your
FINANCIAL ADVISOR OR A REPRESENTATIVE OF YOUR WORKPLACE RETIREMENT PLAN OR
OTHER INVESTMENT PROVIDER.
<PAGE>


How to Buy, Sell and Exchange Shares



BUYING SHARES: Use these instructions to invest directly. Make out your check
to "DWS Scudder."


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
 FIRST INVESTMENT                               ADDITIONAL INVESTMENTS
----------------------------------------------------------------------------------------
<S>                                            <C>
 $2,500 or more for regular accounts           $50 or more for regular accounts and
 $1,000 or more for IRAs                       IRA accounts
 $1,000 or more with an Automatic              $50 or more with an Automatic
 Investment Plan                               Investment Plan
----------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL (SEE BELOW)

 -  Fill out and sign an application           Send a DWS Scudder investment slip or
                                               short note that includes:
 -  Send it to us at the appropriate           -  fund and class name
    address, along with an investment check    -  account number
                                               -  check payable to "DWS Scudder"
----------------------------------------------------------------------------------------
 BY WIRE

 -  Call (800) 728-3337 for instructions       -  Call (800) 728-3337 for instructions
----------------------------------------------------------------------------------------
 BY PHONE

 Not available                                 -  Call (800) 728-3337 for instructions
----------------------------------------------------------------------------------------
 WITH AN AUTOMATIC INVESTMENT PLAN

 -  Fill in the information on your            -  To set up regular investments from a
    application and include a voided check        bank checking account, call
                                                  (800) 728-3337
----------------------------------------------------------------------------------------
 USING QuickBuy

 Not available                                 -  Call (800) 728-3337 to make sure
                                                  QuickBuy is set up on your account; if
                                                  it is, you can request a transfer from
                                                  your bank account of any amount
                                                  between $50 and $250,000
----------------------------------------------------------------------------------------
 ON THE INTERNET

 -  Go to www.dws-scudder.com                  -  Call (800) 728-3337 to ensure you have
                                                  electronic services
 -  Print out a prospectus and a new
     account application                       -  Register at www.dws-scudder.com

 -  Complete and return the application        -  Follow the instructions for buying
     with your check                              shares with money from your bank
                                                  account
----------------------------------------------------------------------------------------
</TABLE>


--------------------------------------------------------------------------------
REGULAR MAIL:

First Investment: DWS Scudder, PO Box 219356, Kansas City, MO 64121-9356
Additional Investments: DWS Scudder, PO Box 219154, Kansas City, MO 64121-9154

EXPRESS, REGISTERED OR CERTIFIED MAIL:
DWS Scudder, 210 West 10th Street, Kansas City, MO 64105-1614


                                      How to Buy, Sell and Exchange Shares  | 21
<PAGE>

EXCHANGING OR SELLING SHARES: Use these instructions to exchange or sell shares
in an account opened directly with DWS Scudder.



<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
 EXCHANGING INTO ANOTHER FUND                    SELLING SHARES
---------------------------------------------------------------------------------------------
<S>                                             <C>

 -  Exchanges into existing accounts:           Some transactions, including most for
    $50 minimum per fund                        over $100,000, can only be ordered in
                                                writing with a signature guarantee;
 -  Exchanges into new accounts:                please see "Signature Guarantee" for
    $2,500 minimum per fund                     details
    $1,000 minimum for IRAs
---------------------------------------------------------------------------------------------
 BY PHONE OR WIRE

 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions
---------------------------------------------------------------------------------------------
 USING THE AUTOMATED INFORMATION LINE

 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions
---------------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL
 (see previous page for address)

 Your instructions should include:              Your instructions should include:
 -  the fund, class and account number          -  the fund, class and account number
    you're exchanging out of                       from which you want to sell shares
 -  the dollar amount or number of shares       -  the dollar amount or number of shares
    you want to exchange                           you want to sell
 -  the name and class of the fund you          -  your name(s), signature(s) and
    want to exchange into                          address, as they appear on your account
 -  your name(s), signature(s) and              -  a daytime telephone number
    address, as they appear on your
    account
 -  a daytime telephone number
---------------------------------------------------------------------------------------------
 WITH AN AUTOMATIC EXCHANGE PLAN                 WITH AN AUTOMATIC WITHDRAWAL PLAN

 -  To set up regular exchanges from a          -  To set up regular cash payments from
    fund account, call (800) 728-3337              a DWS fund account, call
                                                   (800) 728-3337
---------------------------------------------------------------------------------------------
 USING QuickSell

 Not available                                  -  Call (800) 728-3337 to make sure
                                                   QuickSell is set up on your account; if
                                                   it is, you can request a transfer to your
                                                   bank account of any amount between
                                                   $50 and $250,000
---------------------------------------------------------------------------------------------
 ON THE INTERNET
 -  Register at www.dws-scudder.com             -  Register at www.dws-scudder.com
 -  Follow the instructions for making on-      -  Follow the instructions for making on-
    line exchanges                                 line redemptions
---------------------------------------------------------------------------------------------
</TABLE>



--------------------------------------------------------------------------------


<TABLE>
<S>               <C>
TO REACH US:      WEB SITE: www.dws-scudder.com
                  TELEPHONE REPRESENTATIVE: (800) 728-3337, M-F, 9 a.m.- 6 p.m. ET
                  TDD LINE: (800) 972-3006, M-F, 9 a.m.- 6 p.m. ET
</TABLE>




22 | How to Buy, Sell and Exchange Shares
<PAGE>

           Financial intermediary support payments


           The Advisor, DWS Scudder Distributors, Inc. (the "Distributor")
           and/or their affiliates may pay additional compensation, out of
           their own assets and not as an additional charge to the fund, to
           selected affiliated and unaffiliated brokers, dealers, participating
           insurance companies or other financial intermediaries ("financial
           advisors") in connection with the sale and/or distribution of fund
           shares or the retention and/or servicing of fund investors and fund
           shares ("revenue sharing"). Such revenue sharing payments are in
           addition to any distribution or service fees payable under any Rule
           12b-1 or service plan of the fund, any record keeping/sub-transfer
           agency/networking fees payable by the fund (generally through the
           Distributor or an affiliate) and/or the Distributor to certain
           financial advisors for performing such services and any sales
           charges, commissions, non-cash compensation arrangements expressly
           permitted under applicable rules of the Financial Industry
           Regulatory Authority ("FINRA") or other concessions described in the
           fee table or elsewhere in this prospectus or the Statement of
           Additional Information as payable to all financial advisors. For
           example, the Advisor, the Distributor and/or their affiliates may
           compensate financial advisors for providing the fund with "shelf
           space" or access to a third party platform or fund offering list or
           other marketing programs, including, without limitation, inclusion
           of the fund on preferred or recommended sales lists, mutual fund
           "supermarket" platforms and other formal sales programs; granting
           the Distributor access to the financial advisor's sales force;
           granting the Distributor access to the financial advisor's
           conferences and meetings; assistance in training and educating the
           financial advisor's personnel; and obtaining other forms of
           marketing support.


           The level of revenue sharing payments made to financial advisors may
           be a fixed fee or based upon one or more of the following factors:
           gross sales, current assets and/or number of accounts of the fund
           attributable to the financial advisor, the particular fund or fund
           type or other measures as agreed to by the Advisor, the Distributor
           and/or their affiliates and the financial advisors or any
           combination thereof. The amount of these revenue sharing payments is
           determined at the discretion of the Advisor, the Distributor and/or
           their affiliates from time to time, may be substantial, and may be
           different for different financial advisors based on, for example,
           the nature of the services provided by the financial advisor.


                                      How to Buy, Sell and Exchange Shares  | 23
<PAGE>


           The Advisor, the Distributor and/or their affiliates currently make
           revenue sharing payments from their own assets in connection with
           the sale and/or distribution of DWS Fund shares or the retention
           and/or servicing of investors and DWS Fund shares to financial
           advisors in amounts that generally range from .01% up to .50% of
           assets of the fund serviced and maintained by the financial advisor,
           .10% to .25% of sales of the fund attributable to the financial
           advisor, a flat fee of $12,500 up to $500,000, or any combination
           thereof. These amounts are subject to change at the discretion of
           the Advisor, the Distributor and/or their affiliates. Receipt of, or
           the prospect of receiving, this additional compensation may
           influence your financial advisor's recommendation of the fund or of
           any particular share class of the fund. You should review your
           financial advisor's compensation disclosure and/or talk to your
           financial advisor to obtain more information on how this
           compensation may have influenced your financial advisor's
           recommendation of the fund. Additional information regarding these
           revenue sharing payments is included in the fund's Statement of
           Additional Information, which is available to you on request at no
           charge (see the back cover of this prospectus for more information
           on how to request a copy of the Statement of Additional
           Information).


           The Advisor, the Distributor and/or their affiliates may also make
           such revenue sharing payments to financial advisors under the terms
           discussed above in connection with the distribution of both DWS
           funds and non-DWS funds by financial advisors to retirement plans
           that obtain record keeping services from ADP, Inc. on the DWS
           Scudder branded retirement plan platform (the "Platform") with the
           level of revenue sharing payments being based upon sales of both the
           DWS funds and the non-DWS funds by the financial advisor on the
           Platform or current assets of both the DWS funds and the non-DWS
           funds serviced and maintained by the financial advisor on the
           Platform.

           It is likely that broker-dealers that execute portfolio transactions
           for the fund will include firms that also sell shares of the DWS
           funds to their customers. However, the Advisor will not consider
           sales of DWS fund shares as a factor in the selection of
           broker-dealers to execute portfolio transactions for the DWS funds.
           Accordingly, the Advisor has implemented policies and procedures
           reasonably designed to prevent its traders from considering sales of
           DWS fund shares as a factor in the selection of


24 | How to Buy, Sell and Exchange Shares
<PAGE>

           broker-dealers to execute portfolio transactions for the fund. In
           addition, the Advisor, the Distributor and/or their affiliates will
           not use fund brokerage to pay for their obligation to provide
           additional compensation to financial advisors as described above.


POLICIES YOU SHOULD KNOW ABOUT


           Along with the information on the previous pages, the policies below
           may affect you as a shareholder. Some of this information, such as
           the section on distributions and taxes, applies to all investors,
           including those investing through a financial advisor.


           If you are investing through a financial advisor or through a
           retirement plan, check the materials you received from them about
           how to buy and sell shares because particular financial advisors or
           other intermediaries may adopt policies, procedures or limitations
           that are separate from those described by the fund. Please note that
           a financial advisor may charge fees separate from those charged by
           the fund and may be compensated by the fund.

           Keep in mind that the information in this prospectus applies only to
           the shares offered herein. Other share classes are described in
           separate prospectuses and have different fees, requirements and
           services.

           In order to reduce the amount of mail you receive and to help reduce
           expenses, we generally send a single copy of any shareholder report
           and prospectus to each household. If you do not want the mailing of
           these documents to be combined with those for other members of your
           household, please contact your financial advisor or call (800)
           728-3337.

           Policies about transactions

           THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange
           is open. The fund calculates its share price for each class every
           business day, as of the close of regular trading on the New York
           Stock Exchange (typically 4:00 p.m. Eastern time, but sometimes
           earlier, as in the case of scheduled half-day trading or unscheduled
           suspensions of trading). You can place an order to buy or sell
           shares at any time.







THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

Questions? You can speak to a DWS Scudder representative between 9 a.m. and 6
p.m. Eastern time on any fund business day by calling (800) 728-3337.


                                            Policies You Should Know About  | 25
<PAGE>

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to you:
           When you open an account, we will ask for your name, address, date
           of birth and other information that will allow us to identify you.
           Some or all of this information will be used to verify the identity
           of all persons opening an account.

           We might request additional information about you (which may include
           certain documents, such as articles of incorporation for companies)
           to help us verify your identity and, in some cases, the information
           and/or documents may be required to conduct the verification. The
           information and documents will be used solely to verify your
           identity.

           We will attempt to collect any missing required and requested
           information by contacting you or your financial advisor. If we are
           unable to obtain this information within the time frames established
           by the fund, then we may reject your application and order.

           The fund will not invest your purchase until all required and
           requested identification information has been provided and your
           application has been submitted in "good order." After we receive all
           the information, your application is deemed to be in good order and
           we accept your purchase, you will receive the net asset value per
           share next calculated.

           If we are unable to verify your identity within time frames
           established by the fund, after a reasonable effort to do so, you
           will receive written notification.


           With certain limited exceptions, only US residents may invest in the
           fund.


           Because orders placed through a financial advisor must be forwarded
           to the transfer agent before they can be processed, you'll need to
           allow extra time. Your financial advisor should be able to tell you
           approximately when your order will be processed. It is the
           responsibility of your financial advisor to forward your order to
           the transfer agent in a timely manner.


26 | Policies You Should Know About
<PAGE>

           INITIAL PURCHASE. The minimum initial investment is $2,500, except
           for investments on behalf of participants in certain fee-based and
           wrap programs offered through certain financial intermediaries
           approved by the Advisor, for which there is no
           minimum initial investment; and fiduciary accounts such as IRAs and
           custodial accounts such as Uniform Gifts to Minors Act and Uniform
           Transfers to Minors Act accounts for which the minimum initial
           investment is $1,000 per account. In addition, the minimum initial
           investment is $1,000 if an automatic investment plan of $50 per
           month is established. Group retirement plans and certain other
           accounts have similar or lower minimum share balance requirements.


           SUB-MINIMUM BALANCES. The fund may close your account and send you
           the proceeds if your balance falls below $2,500 ($1,000 with an
           Automatic Investment Plan funded with $50 or more per month in
           subsequent investments); $250 for retirement accounts. We will give
           you 60 days' notice (90 days for retirement accounts) so you can
           either increase your balance or close your account (these policies
           don't apply to investors with $100,000 or more in DWS fund shares,
           investors in certain fee-based and wrap programs offered through
           certain financial intermediaries approved by the Advisor, or group
           retirement plans and certain other accounts having lower minimum
           share balance requirements).

           Because of the high cost of servicing accounts with low balances, an
           account maintenance fee of $6.25 per quarter (for a $25 annual fee)
           will be assessed on accounts whose balances fail to meet the minimum
           initial investment requirement for a period of 90 days prior to the
           assessment date. The quarterly assessment will occur on or about the
           15th of the last month in each calendar quarter. Please note that
           the fee will be assessed on accounts that fall below the minimum for
           any reason, including due to market value fluctuations, redemptions
           or exchanges. The account maintenance fee will apply to all
           shareholders of the DWS Funds except for: accounts with an automatic
           investment plan, accounts held in an omnibus account through a
           financial services firm, accounts maintained on behalf of
           participants in certain fee based and wrap programs offered through
           certain financial intermediaries approved by the Advisor,
           participant level accounts in group retirement plans held on the
           records of a retirement plan record keeper.



                                            Policies You Should Know About  | 27
<PAGE>


           SUBSEQUENT INVESTMENTS. The minimum subsequent investment is $50.
           However, there is no minimum investment requirement for subsequent
           investments on behalf of participants in certain fee-based and wrap
           programs offered through certain financial intermediaries approved
           by the Advisor.

           MARKET TIMING POLICIES AND PROCEDURES. Short-term and excessive
           trading of fund shares may present risks to long-term shareholders,
           including potential dilution in the value of fund shares,
           interference with the efficient management of the fund's portfolio
           (including losses on the sale of investments), taxable gains to
           remaining shareholders and increased brokerage and administrative
           costs. These risks may be more pronounced if the fund invests in
           certain securities, such as those that trade in foreign markets, are
           illiquid or do not otherwise have "readily available market
           quotations." Certain investors may seek to employ short-term trading
           strategies aimed at exploiting variations in portfolio valuation
           that arise from the nature of the securities held by the fund (e.g.,
           "time zone arbitrage"). The fund discourages short-term and
           excessive trading and has adopted policies and procedures that are
           intended to detect and deter short-term and excessive trading.

           Pursuant to its policies, the fund will impose a 2% redemption fee
           on fund shares held for less than a specified holding period
           (subject to certain exceptions discussed below under "Redemption
           fees"). The fund also reserves the right to reject or cancel a
           purchase or exchange order for any reason without prior notice. For
           example, the fund may in its discretion reject or cancel a purchase
           or an exchange order even if the transaction is not subject to the
           specific roundtrip transaction limitation described below if the
           Advisor believes that there appears to be a pattern of short-term or
           excessive trading activity by a shareholder or deems any other
           trading activity harmful or disruptive to the fund. The fund,
           through its Advisor and Transfer Agent, will measure short-term and
           excessive trading by the number of roundtrip transactions within a
           shareholder's account during a rolling 12-month period. A
           "roundtrip" transaction is defined as any combination of purchase
           and redemption activity (including exchanges) of the same fund's
           shares. The fund may take other trading activity into account if the
           fund believes such activity is of an amount or frequency that may be
           harmful to long-term shareholders or disruptive to portfolio
           management.



28 | Policies You Should Know About
<PAGE>


           Shareholders are limited to four roundtrip transactions in the same
           DWS Fund (excluding money market funds) over a rolling 12-month
           period. Shareholders with four or more roundtrip transactions in the
           same DWS Fund within a rolling 12-month period generally will be
           blocked from making additional purchases of, or exchanges into, that
           DWS Fund. The fund has sole discretion whether to remove a block
           from a shareholder's account. The rights of a shareholder to redeem
           shares of a DWS Fund are not affected by the four roundtrip
           transaction limitation, but all redemptions remain subject to the
           fund's redemption fee policy (see "Redemption fees" described
           below).

           The Advisor may make exceptions to the roundtrip transaction policy
           for certain types of transactions if in its opinion the transactions
           do not represent short-term or excessive trading or are not abusive
           or harmful to the fund, such as, but not limited to, systematic
           transactions, required minimum retirement distributions,
           transactions initiated by the fund or administrator and transactions
           by certain qualified fund-of-fund(s).

           In certain circumstances where shareholders hold shares of the fund
           through a financial intermediary, the fund may rely upon the
           financial intermediary's policy to deter short-term or excessive
           trading if the Advisor believes that the financial intermediary's
           policy is reasonably designed to detect and deter transactions that
           are not in the best interests of the fund. A financial
           intermediary's policy relating to short-term or excessive trading
           may be more or less restrictive than the DWS Funds' policy, may
           permit certain transactions not permitted by the DWS Funds'
           policies, or prohibit transactions not subject to the DWS Funds'
           policies.

           The Advisor may also accept undertakings from a financial
           intermediary to enforce short-term or excessive trading policies on
           behalf of the fund that provide a substantially similar level of
           protection for the fund against such transactions. For example,
           certain financial intermediaries may have contractual, legal or
           operational restrictions that prevent them from blocking an account.
           In such instances, the financial intermediary may use alternate
           techniques that the Advisor considers to be a reasonable substitute
           for such a block.



                                            Policies You Should Know About  | 29
<PAGE>


           In addition, if the fund invests some portion of its assets in
           foreign securities, it has adopted certain fair valuation practices
           intended to protect the fund from "time zone arbitrage" with respect
           to its foreign securities holdings and other trading practices that
           seek to exploit variations in portfolio valuation that arise from
           the nature of the securities held by the fund. (See "How the fund
           calculates share price.")

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor
           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of the fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in the fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.

           The fund's market timing policies and procedures may be modified or
           terminated at any time.



30 | Policies You Should Know About
<PAGE>

           REDEMPTION FEES. The fund imposes a redemption fee of 2% of the
           total redemption amount (calculated at net asset value) on all fund
           shares redeemed or exchanged within 15 days of buying them (either
           by purchase or exchange). The redemption fee is paid directly to the
           fund and is designed to encourage long-term investment and to offset
           transaction and other costs associated with short-term or excessive
           trading. For purposes of determining whether the redemption fee
           applies, shares held the longest time will be treated as being
           redeemed first and shares held the shortest time will be treated as
           being redeemed last.

           The redemption fee is applicable to fund shares purchased either
           directly or through a financial intermediary, such as a
           broker-dealer. Transactions through financial intermediaries
           typically are placed with the fund on an omnibus basis and include
           both purchase and sale transactions placed on behalf of multiple
           investors. These purchase and sale transactions are generally netted
           against one another and placed on an aggregate basis; consequently
           the identities of the individuals on whose behalf the transactions
           are placed generally are not known to the fund. For this reason, the
           fund has undertaken to notify financial intermediaries of their
           obligation to assess the redemption fee on customer accounts and to
           collect and remit the proceeds to the fund. However, due to
           operational requirements, the intermediaries' methods for tracking
           and calculating the fee may be inadequate or differ in some respects
           from the fund's.

           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of participants in certain group retirement
           plans whose processing systems are incapable of properly applying
           the redemption fee to underlying shareholders; (iii) transactions on
           behalf of a shareholder to return any excess IRA contributions to
           the shareholder; (iv) transactions on behalf of a shareholder to
           effect a required minimum distribution on an IRA; (v) transactions
           on behalf of any mutual fund advised by the Advisor and its
           affiliates (e.g., "funds of funds") or, in the case of a
           master/feeder relationship, redemptions by the feeder fund from the
           master portfolio; (vi) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vii)
           transactions following death or disability of any registered
           shareholder, beneficial owner or grantor of a living trust with
           respect to shares purchased before death or disability; (viii)


                                            Policies You Should Know About  | 31
<PAGE>


           transactions involving hardship of any registered shareholder; (ix)
           systematic transactions with pre-defined trade dates for purchases,
           exchanges or redemptions, such as automatic account rebalancing, or
           loan origination and repayments; (x) transactions involving shares
           purchased through the reinvestment of dividends or other
           distributions; (xi) transactions involving shares transferred from
           another account in the same fund or converted from another class of
           the same fund (the redemption fee period will carry over to the
           acquired shares); (xii) transactions initiated by the fund or
           administrator (e.g., redemptions for not meeting account minimums,
           to pay account fees funded by share redemptions, or in the event of
           the liquidation or merger of the fund); or (xiii) transactions in
           cases when there are legal or contractual limitations or
           restrictions on the imposition of the redemption fee (as determined
           by the fund or its agents in their sole discretion). It is the
           policy of the DWS funds to permit approved fund platform providers
           to execute transactions within the funds without the imposition of a
           redemption fee if such providers have implemented alternative
           measures that are determined by the Advisor to provide controls on
           short-term and excessive trading that are comparable to the DWS
           funds' policies.


           THE AUTOMATED INFORMATION LINE IS AVAILABLE 24 HOURS A DAY BY
           CALLING (800) 728-3337. You can use our automated phone services to
           get information on DWS funds generally and on accounts held directly
           at DWS Scudder. You can also use this service to make exchanges and
           sell shares.

           QUICKBUY AND QUICKSELL let you set up a link between a DWS fund
           account and a bank account. Once this link is in place, you can move
           money between the two with a phone call. You'll need to make sure
           your bank has Automated Clearing House (ACH) services. Transactions
           take two to three days to be completed and there is a $50 minimum
           and a $250,000 maximum. To set up QuickBuy or QuickSell on a new
           account, see the account application; to add it to an existing
           account, call (800) 728-3337.


           TELEPHONE AND ELECTRONIC TRANSACTIONS. Generally, you are
           automatically entitled to telephone and electronic transaction
           privileges, but you may elect not to have them when you open your
           account or by contacting Shareholder Services at (800) 728-3337 at a
           later date.






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

The DWS Scudder Web site can be a valuable resource for shareholders with
Internet access. Go to WWW.DWS-SCUDDER.COM to get up-to-date information, review
balances or even place orders for exchanges.








32 | Policies You Should Know About
<PAGE>

           Since many transactions may be initiated by telephone or
           electronically, it's important to understand that as long as we take
           reasonable steps to ensure that an order to purchase or redeem
           shares is genuine, such as recording calls or requesting
           personalized security codes or other information, we are not
           responsible for any losses that may occur as a result. For
           transactions conducted over the Internet, we recommend the use of a
           secure Internet browser. In addition, you should verify the accuracy
           of your confirmation statements immediately after you receive them.


           THE FUND DOES NOT ISSUE SHARE CERTIFICATES. However, if you
           currently have shares in certificated form, you must include the
           share certificates properly endorsed or accompanied by a duly
           executed stock power when exchanging or redeeming shares. You may
           not exchange or redeem shares in certificate form by telephone or
           via the Internet.


           WHEN YOU ASK US TO SEND OR RECEIVE A WIRE, please note that while we
           don't charge a fee to send or receive wires, it's possible that your
           bank may do so. Wire transactions are generally completed within 24
           hours. The fund can only send wires of $1,000 or more and accept
           wires of $50 or more.


           THE FUND ACCEPTS PAYMENT FOR SHARES ONLY IN US DOLLARS by check,
           bank or Federal Funds wire transfer or by electronic bank transfer.
           Please note that the fund does not accept cash, money orders,
           traveler's checks, starter checks, third party checks (except checks
           for retirement plan asset transfers and rollovers or for Uniform
           Gifts to Minors Act/Uniform Transfers to Minors Act accounts),
           checks drawn on foreign banks or checks issued by credit card
           companies or Internet-based companies. Thus, subject to the
           foregoing exceptions for certain third party checks, checks that are
           otherwise permissible must be drawn by the account holder on a
           domestic bank and must be payable to the fund.

           SIGNATURE GUARANTEE. When you want to sell more than $100,000 worth
           of shares or send proceeds to a third party or to a new address,
           you'll usually need to place your order in writing and include a
           signature guarantee. However, if you want money wired to a bank
           account that is already on file with us, you don't need a
           signature guarantee. Also, generally you don't need a signature
           guarantee for an exchange, although we may require one in certain
           other circumstances.






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

If you ever have difficulty placing an order by phone or Internet, you can send
us your order in writing.








                                            Policies You Should Know About  | 33
<PAGE>

           A signature guarantee is simply a certification of your signature -
           a valuable safeguard against fraud. You can get a signature
           guarantee from an eligible guarantor institution, including
           commercial banks, savings and loans, trust companies, credit unions,
           member firms of a national stock exchange or any member or
           participant of an approved signature guarantor program. Note that
           you can't get a signature guarantee from a notary public and we must
           be provided the original guarantee.

           SELLING SHARES OF TRUST ACCOUNTS AND BUSINESS OR ORGANIZATION
           ACCOUNTS may require additional documentation. Please call (800)
           728-3337 or contact your financial advisor for more information.


           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check (redemption proceeds from such a sale
           are unavailable until the check has cleared), when you make
           purchases by ACH (the funds will be placed under a 10 calendar day
           hold to ensure good funds) or when unusual circumstances prompt the
           SEC to allow further delays. Certain expedited redemption processes
           may also be delayed when you are selling recently purchased shares
           or in the event of closing of the Federal Reserve Bank's wire
           payment system. In addition, the fund reserves the right to suspend
           or postpone redemptions as permitted pursuant to Section 22(e) of
           the Investment Company Act of 1940. Generally, those circumstances
           are when 1) the New York Stock Exchange is closed other than
           customary weekend or holiday closings; 2) trading on the New York
           Stock Exchange is restricted; 3) an emergency exists which makes the
           disposal of securities owned by the fund or the fair determination
           of the value of the fund's net assets not reasonably practicable; or
           4) the SEC, by order, permits the suspension of the right of
           redemption. Redemption payments by wire may also be delayed in the
           event of a non-routine closure of the Federal Reserve wire payment
           system. For additional rights reserved by the fund, please see
           "Other rights we reserve."


           You may obtain additional information about other ways to sell your
           shares by contacting your financial advisor.


34 | Policies You Should Know About
<PAGE>

           How the fund calculates share price

           To calculate net asset value, or NAV, each share class uses the
           following equation:


<TABLE>
<S>                                                     <C> <C>
            TOTAL ASSETS - TOTAL LIABILITIES
           -----------------------------------------    =    NAV
               TOTAL NUMBER OF SHARES OUTSTANDING
</TABLE>



           The price at which you buy and sell shares is the NAV.


           THE FUND CHARGES A REDEMPTION FEE EQUAL TO 2.00% of the value of
           shares redeemed or exchanged within 15 days of purchase. Please see
           "Policies about transactions - Redemption fees" for further
           information.

           WE TYPICALLY VALUE SECURITIES USING INFORMATION FURNISHED BY AN
           INDEPENDENT PRICING SERVICE OR MARKET QUOTATIONS, WHERE APPROPRIATE.
           However, we may use methods approved by the fund's Board, such as a
           fair valuation model, which are intended to reflect fair value when
           pricing service information or market quotations are not readily
           available or when a security's value or a meaningful portion of the
           value of the fund's portfolio is believed to have been materially
           affected by a significant event, such as a natural disaster, an
           economic event like a bankruptcy filing, or a substantial
           fluctuation in domestic or foreign markets that has occurred between
           the close of the exchange or market on which the security is
           principally traded (for example, a foreign exchange or market) and
           the close of the New York Stock Exchange. In such a case, the fund's
           value for a security is likely to be different from the last quoted
           market price or pricing service information. In addition, due to the
           subjective and variable nature of fair value pricing, it is possible
           that the value determined for a particular asset may be materially
           different from the value realized upon such asset's sale. It is
           expected that the greater the percentage of fund assets that is
           invested in non-US securities, the more extensive will be the fund's
           use of fair value pricing. This is intended to reduce the fund's
           exposure to "time zone arbitrage" and other harmful trading
           practices. (See "Market timing policies and procedures.")


           TO THE EXTENT THAT THE FUND INVESTS IN SECURITIES THAT ARE TRADED
           PRIMARILY IN FOREIGN MARKETS, the value of its holdings could change
           at a time when you aren't able to buy or sell fund shares. This is
           because some foreign markets are open on days or at times when the
           fund doesn't price its shares. (Note that prices for securities that
           trade on foreign exchanges can change


                                            Policies You Should Know About  | 35
<PAGE>

           significantly on days when the New York Stock Exchange is closed and
           you cannot buy or sell fund shares. Price changes in the securities
           the fund owns may ultimately affect the price of fund shares the
           next time the NAV is calculated.)


           Other rights we reserve

           You should be aware that we may do any of the following:

           -  withdraw or suspend the offering of shares at any time

           -  withhold a portion of your distributions and redemption proceeds
              as federal income tax if we have been notified by the IRS that
              you are subject to backup withholding or if you fail to provide
              us with a correct taxpayer ID number and certain certifications
              or certification that you are exempt from backup withholding


           -  reject a new account application if you don't provide any
              required or requested identifying information, or for any other
              reason



           -  refuse, cancel, limit or rescind any purchase or exchange order,
              without prior notice; freeze any account (meaning you will not be
              able to purchase fund shares in your account); suspend account
              services; and/or involuntarily redeem your account if we think
              that the account is being used for fraudulent or illegal
              purposes; one or more of these actions will be taken when, at our
              sole discretion, they are deemed to be in the fund's best
              interests or when the fund is requested or compelled to do so by
              governmental authority or by applicable law

           -  close and liquidate your account if we are unable to verify your
              identity, or for other reasons; if we decide to close your
              account, your fund shares will be redeemed at the net asset value
              per share next calculated after we determine to close your
              account (less any applicable redemption fee); you may recognize a
              gain or loss on the redemption of your fund shares and incur a
              tax liability

           -  pay you for shares you sell by "redeeming in kind," that is, by
              giving you securities (which typically will involve brokerage
              costs for you to liquidate) rather than cash, but which will be
              taxable to the same extent as a redemption for cash; the fund
              generally won't make a redemption in kind unless your requests
              over a 90-day period total more than $250,000 or 1% of the value
              of the fund's net assets, whichever is less


36 | Policies You Should Know About
<PAGE>


           -  change, add or withdraw various services, fees and account
              policies (for example, we may adjust the fund's investment
               minimums at any time)



                                            Policies You Should Know About  | 37
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

           The fund intends to distribute to its shareholders virtually all of
           its net earnings. The fund can earn money in two ways: by receiving
           interest, dividends or other income from securities it holds and by
           selling securities for more than it paid for them. (The fund's
           earnings are separate from any gains or losses stemming from your
           own purchase and sale of shares.) The fund may not always pay a
           dividend or distribution for a given period.


           THE FUND INTENDS TO PAY DIVIDENDS to its shareholders in March,
           June, September and December. Long-term and short-term capital gains
           are paid in December. If necessary the fund may distribute at other
           times at well.

           Dividends or distributions declared to shareholders of record in the
           last quarter of a given calendar year are treated for federal income
           tax purposes as if they were received on December 31 of that year,
           provided such dividends or distributions are paid by the end of the
           following January.

           For federal income tax purposes, income and capital gains
           distributions are generally taxable. However, dividends and
           distributions received by retirement plans qualifying for tax
           exemption under federal income tax laws generally will not be
           taxable.

           YOU CAN CHOOSE HOW TO RECEIVE YOUR DIVIDENDS AND
           DISTRIBUTIONS. You can have them all automatically reinvested
           in fund shares (at NAV), all deposited directly to your bank
           account or all sent to you by check, have one type reinvested
           and the other sent to you by check or have them invested in a
           different fund. Tell us your preference on your application.
           If you don't indicate a preference, your dividends and
           distributions will all be reinvested in shares of the fund
           without a sales charge (if applicable). Distributions are
           treated the same for federal income tax purposes whether you
           receive them in cash or reinvest them in additional shares.
           For employer-sponsored qualified plans, and retirement plans,
           reinvestment (at NAV) is the only option.

           BUYING, SELLING OR EXCHANGING FUND SHARES WILL USUALLY HAVE FEDERAL
           INCOME TAX CONSEQUENCES FOR YOU (except in employer-sponsored
           qualified plans, IRAs or other tax-advantaged accounts). Your sale
           of shares may result in a capital






THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

Because each shareholder's tax situation is unique, ask your tax professional
about the tax consequences of your investments, including any state and local
tax consequences.



38 | Understanding Distributions and Taxes
<PAGE>

           gain or loss. The gain or loss will be long-term or short-term
           depending on how long you owned the shares that were sold. For
           federal income tax purposes, an exchange is treated the same as a
           sale.

           THE FEDERAL INCOME TAX STATUS of the fund's earnings you receive and
           your own fund transactions generally depend on their type:



<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
GENERALLY TAXED AT LONG-TERM            GENERALLY TAXED AT ORDINARY
CAPITAL GAIN RATES:                     INCOME RATES:
--------------------------------------------------------------------------------
<S>                                     <C>
DISTRIBUTIONS FROM THE FUND

- gains from the sale of               -  gains from the sale of
  securities held (or treated as          securities held by the fund for
  held) by the fund for more              one year or less
  than one year                        -  all other taxable income
- qualified dividend income

--------------------------------------------------------------------------------
TRANSACTIONS INVOLVING FUND
SHARES

- gains from selling fund             -  gains from selling fund
  shares held for more than              shares held for one year or
  one year                               less
--------------------------------------------------------------------------------
</TABLE>




           ANY DIRECT INVESTMENTS IN FOREIGN SECURITIES BY THE FUND MAY BE
           SUBJECT TO FOREIGN WITHHOLDING TAXES. In that case, the fund's yield
           on those securities would generally be decreased. Shareholders
           generally will not be entitled to claim a credit or deduction with
           respect to foreign taxes paid by the fund. In addition, any
           investments in foreign securities or foreign currencies may increase
           or accelerate the fund's recognition of ordinary income and may
           affect the timing or amount of the fund's distributions. If you
           invest in the fund through a taxable account, your after-tax return
           could be negatively impacted.

           To the extent that the fund invests in certain debt obligations or
           certain other securities, investments in these obligations or
           securities may cause the fund to recognize taxable income in excess
           of the cash generated by such obligations. Thus, the fund could be
           required at times to liquidate other investments in order to satisfy
           its distribution requirements.

           For taxable years beginning before January 1, 2011, distributions to
           individuals and other noncorporate shareholders of investment income
           designated by the fund as derived from qualified dividend income are
           eligible for taxation for federal income tax purposes at the more
           favorable long-term capital



                                     Understanding Distributions and Taxes  | 39
<PAGE>


           gain rates. Qualified dividend income generally includes dividends
           from domestic and some foreign corporations. It does not include
           income from investments in debt securities or, generally, from
           REITs. In addition, the fund must meet certain holding period and
           other requirements with respect to the dividend-paying stocks in its
           portfolio and the shareholder must meet certain holding period and
           other requirements with respect to the fund's shares for the lower
           tax rates to apply.

           For taxable years beginning before January 1, 2011, the maximum
           federal income tax rate imposed on long-term capital gains
           recognized by individuals and other noncorporate shareholders has
           been reduced to 15%. For taxable years beginning on or after January
           1, 2011, the long-term capital gain rate is scheduled to return to
           20%. For more information, see the Statement of Additional
           Information, under "Taxes."


           YOUR FUND WILL SEND YOU DETAILED FEDERAL INCOME TAX INFORMATION
           EVERY JANUARY. These statements tell you the amount and the federal
           income tax classification of any dividends or distributions you
           received. They also have certain details on your purchases and sales
           of shares.


           IF YOU INVEST RIGHT BEFORE THE FUND PAYS A DIVIDEND, you'll be
           getting some of your investment back as a taxable dividend. You can
           avoid this by investing after the fund declares a dividend. In
           tax-advantaged retirement accounts you do not need to worry about
           this.


           CORPORATIONS are taxed at the same rates on ordinary income and
           capital gains, but may be eligible for a dividends-received
           deduction for a portion of the income dividends they receive from
           the fund, provided certain holding period and other requirements are
           met.

           The above discussion is applicable to shareholders who are US
           persons. If you are a non-US person, please consult your own tax
           advisor with respect to the US tax consequences to you of an
           investment in the fund.


40 | Understanding Distributions and Taxes
<PAGE>


APPENDIX
--------------------------------------------------------------------------------
           Hypothetical Expense Summary


           Using the annual fund operating expense ratios presented in the fee
           tables in the fund prospectus, the Hypothetical Expense Summary
           shows the estimated fees and expenses, in actual dollars, that would
           be charged on a hypothetical investment of $10,000 in the fund held
           for the next 10 years and the impact of such fees and expenses on
           fund returns for each year and cumulatively, assuming a 5% return
           for each year. The tables also assume that all dividends and
           distributions are reinvested. The annual fund expense ratios shown
           are net of any contractual fee waivers or expense reimbursements, if
           any, for the period of the contractual commitment. The tables do not
           reflect redemption fees, if any, which may be payable upon
           redemption. If redemption fees were shown, the "Hypothetical
           Year-End Balance After Fees and Expenses" amounts shown would be
           lower and the "Annual Fees and Expenses" amounts shown would be
           higher. Also, please note that if you are investing through a third
           party provider, that provider may have fees and expenses separate
           from those of the fund that are not reflected here. Mutual fund fees
           and expenses fluctuate over time and actual expenses may be higher
           or lower than those shown.

           The Hypothetical Expense Summary should not be used or construed as
           an offer to sell, a solicitation of an offer to buy or a
           recommendation or endorsement of any specific mutual fund. You
           should carefully review the fund's prospectus to consider the
           investment objectives, risks, expenses and charges of the fund prior
           to investing.



                                                                  Appendix  | 41
<PAGE>


                          DWS Balanced Fund - Class S





<TABLE>
<CAPTION>
              MAXIMUM            INITIAL HYPOTHETICAL                  ASSUMED RATE
           SALES CHARGE:              INVESTMENT:                       OF RETURN:
               0.00%                    $10,000                             5%
------------------------------------------------------------------------------------------------
                                                                HYPOTHETICAL
             CUMULATIVE         ANNUAL        CUMULATIVE          YEAR-END
           RETURN BEFORE         FUND        RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND         EXPENSE         FEES AND           FEES AND            AND
YEAR          EXPENSES          RATIOS         EXPENSES           EXPENSES         EXPENSES
<S>       <C>                <C>            <C>               <C>                <C>
------------------------------------------------------------------------------------------------
   1            100.0%       100.0%              100.0%           $000,000       $  000,000
------------------------------------------------------------------------------------------------
   2                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   3                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   4                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   5                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   6                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   7                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   8                %            %                   %            $              $
------------------------------------------------------------------------------------------------
   9                %            %                   %            $              $
------------------------------------------------------------------------------------------------
  10                %            %                   %            $              $
------------------------------------------------------------------------------------------------
  TOTAL                                                                          $1,000,000
------------------------------------------------------------------------------------------------
</TABLE>





42 | Appendix

<PAGE>

TO GET MORE INFORMATION

SHAREHOLDER REPORTS - These include commentary from the fund's management team
about recent market conditions and the effects of the fund's strategies on its
performance. They also have detailed performance figures, a list of everything
the fund owns, and its financial statements. Shareholders get these reports
automatically.

STATEMENT OF ADDITIONAL INFORMATION (SAI) - This tells you more about the
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).

For a free copy of any of these documents or to request other information about
the fund, call (800) 728-3337, or contact DWS Scudder at the address listed
below. The fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about the fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about the fund,
including the fund's SAI, 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.


<TABLE>
<CAPTION>
DWS SCUDDER              SEC                     DISTRIBUTOR
---------------------    --------------------    -------------------------------
<S>                      <C>                     <C>
PO Box 219151            100 F Street, N.E.      DWS Scudder Distributors, Inc.
Kansas City, MO          Washington, D.C.        222 South Riverside Plaza
64121-9151               20549-0102              Chicago, IL 60606-5808
WWW.DWS-SCUDDER.COM      WWW.SEC.GOV             (800) 621-1148
(800) 728-3337           (800) SEC-0330
</TABLE>



<TABLE>
<S>                   <C>                    <C>
SEC FILE NUMBER:
                        DWS Balanced Fund    811-1236
</TABLE>



                                          [DWS SCUDDER LOG GRAPHIC APPEARS HERE]






(03/01/08) ____
                         [RECYCLE GRAPHIC APPEARS HERE]




<PAGE>


Supplement to the currently effective Statement of Additional Information of
each of the noted funds/portfolios:

--------------------------------------------------------------------------------

Cash Account Trust
    Government & Agency Securities Portfolio
    Money Market Portfolio
    Tax-Exempt Portfolio
DWS Alternative Asset Allocation Plus Fund
DWS Balanced Fund
DWS Blue Chip Fund
DWS California Tax-Free Income Fund
DWS Core Plus Allocation Fund
DWS Disciplined Long/Short Growth Fund
DWS Disciplined Long/Short Value Fund
DWS Disciplined Market Neutral Fund
DWS Dreman Concentrated Value Fund
DWS Dreman High Return Equity Fund
DWS Dreman Mid Cap Value Fund
DWS Dreman Small Cap Value Fund

DWS High Income Fund
DWS Large Cap Value Fund
DWS LifeCompass Protect Fund
DWS Money Market Prime Series
DWS New York Tax-Free Income Fund
DWS Strategic Income Fund
DWS Target 2008 Fund
DWS Target 2010 Fund
DWS Target 2011 Fund
DWS Target 2012 Fund
DWS Target 2013 Fund
DWS Target 2014 Fund
DWS Technology Fund
DWS U.S. Government Securities Fund
DWS Variable Series II
    DWS Balanced VIP
    DWS Blue Chip VIP
    DWS Conservative Allocation VIP
    DWS Core Fixed Income VIP
    DWS Davis Venture Value VIP
    DWS Dreman High Return Equity VIP

    DWS Dreman Small Mid Cap Value VIP
    DWS Global Thematic VIP
    DWS Government & Agency Securities VIP
    DWS Growth Allocation VIP
    DWS High Income VIP
    DWS International Select Equity VIP
    DWS Janus Growth & Income VIP
    DWS Large Cap Value VIP
    DWS Mid Cap Growth VIP
    DWS Moderate Allocation VIP
    DWS Money Market VIP
    DWS Small Cap Growth VIP
    DWS Strategic Income VIP
    DWS Technology VIP
    DWS Turner Mid Cap Growth VIP
Investors Cash Trust
    Treasury Portfolio
Tax-Exempt California Money Market Fund


At present, substantially all DWS mutual funds are overseen by one of two
clusters of boards of trustees/directors (the "Boards").  Each Board, including
the Board that oversees your Fund (the "Chicago Board"), has determined that
the formation of a single consolidated Board overseeing substantially all DWS
mutual funds is in the best interests of the Funds.  In this connection, each
Board has approved a plan outlining the process for implementing the
consolidation of the Chicago Board with the other primary DWS mutual fund board
(the "New York Board").  (The geographic references in the preceding sentences
merely indicate where each Board historically held most of its meetings.)

The consolidation of the two Boards is expected to take effect on or about
April 1, 2008 (the "Consolidation Date").  To accomplish the consolidation, the
Chicago Board has determined to nominate and recommend that shareholders of
each Fund re-elect four members of your Fund's Board (John W. Ballantine, Paul
K. Freeman, William McClayton and Robert H. Wadsworth, collectively, the
"Chicago Nominees") and elect eight individuals who  currently serve on the New
York Board (Henry P. Becton, Jr., Dawn-Marie Driscoll, Keith R. Fox, Kenneth C.
Froewiss, Richard J. Herring, Rebecca W. Rimel, William N. Searcy, Jr. and Jean
Gleason Stromberg, collectively, the "New York Nominees") to the Board of your
Fund.  Information regarding the New York Nominees is set forth below.  In
addition, the New York Board will nominate and elect the Chicago Nominees to
the Board of each fund currently overseen by the New York Board.  As a result,
as of the Consolidation Date, it is expected that the twelve individuals named
in this paragraph (each of which will be considered non-interested), together
with Axel Schwarzer, CEO of DWS Scudder, will constitute the Board of each DWS
mutual fund (134 funds), including your Fund.

To facilitate the Board consolidation, four members of the Chicago Board
(Donald L. Dunaway, James R. Edgar, Robert B. Hoffman and Shirley D. Peterson)
have agreed not to stand for re-election (the "Non-Continuing Board Members").
Independent members of the Chicago Board are not entitled to benefits under any
pension or retirement plan.  However, the Chicago Board determined that it
would be appropriate to provide the Non-Continuing Board Members with a
retirement agreement, the terms of

<PAGE>

which include a one-time retirement payment. For each Non-Continuing Board
Member, the amount of the retirement payment is based on the product of (i) such
individual's current annual Board member compensation times (ii) the lesser of
five years or the number of years (and/or portion thereof) from the expected
Consolidation Date to the date when such individual would reach the Funds'
mandatory retirement age. As Deutsche Investment Management Americas Inc.
("DIMA"), the Funds' investment adviser, will also benefit from the
administrative efficiencies of a consolidated Board, DIMA has agreed to
reimburse the Funds for the cost of the retirement payments. The amount to be
received by each Non-Continuing Board Member is as follows: $354,375 in the
aggregate for all the Funds (between $64 and $68,321 per Fund) for Mr. Dunaway;
$950,000 in the aggregate for all the Funds (between $172 and $183,153 per Fund)
for Mr. Edgar; $138,750 in the aggregate for all the Funds (between $25 and
$26,750 per Fund); for Mr. Hoffman; and $937,500 in the aggregate for all the
Funds (between $170 and $180,743 per Fund) for Ms. Peterson. In connection with
the receipt of the retirement payment, each Non-Continuing Board Member agreed
that, without the prior written consent of the DWS funds, he or she shall not in
any way, directly or indirectly, solicit, accept, or serve in any position as a
director, trustee, or equivalent role on the Board of any investment company
registered with the SEC for a specified period.

In addition, pursuant to the retirement agreement and a separate agreement
between the Funds and DIMA, each Non-Continuing Board Member has received
certain assurances from the Funds and DIMA regarding continuation of insurance
and indemnification rights.  With respect to insurance, for the six-year period
following the Consolidation Date, the Funds currently expect to maintain,
D&O/E&O Insurance and Independent Director Liability ("IDL") Insurance that is
substantially equivalent in scope to the current coverage, and in amounts
providing aggregate coverage with respect to the Funds and all funds overseen
by the consolidated Board of at least $100 million for D&O/E&O Insurance and at
least $25 million for IDL Insurance.  With respect to indemnification, the
Funds have provided assurances that the retirement agreement, the retirement of
the Non-Continuing Board Member and/or the election or appointment of members
of the consolidated Board shall not reduce or impair any rights of the
Non-Continuing Board Member to indemnification, defense, advancement of
expenses, or other rights, for or with respect to actual or threatened claims,
liability, or expense that the Non-Continuing Board Member may incur or suffer
arising from or with respect to the Non-Continuing Board Member's service in
such capacity.

DIMA has similarly agreed that the retirement of the Non-Continuing Board
Members under the terms of the retirement agreements shall in no way affect or
diminish the contractual rights of indemnification that the Non-Continuing
Board Members may have under any agreement of indemnification between a
Non-Continuing Board Member and DIMA.

In addition, in the event that the consolidated Board determines to reduce
insurance coverage below the minimum levels stated above, then DIMA at its
expense will purchase excess insurance coverage for the benefit of the
Non-Continuing Board Members sufficient to maintain such minimum coverage
levels in place for the duration of the period specified in the retirement
agreements, provided that in the event that such excess coverage is not
available in the marketplace on commercially reasonable terms from a
conventional third-party insurer, DIMA (or an affiliate of DIMA) may, at DIMA's
discretion and in lieu of purchasing such excess insurance coverage, elect
instead to provide the Non-Continuing Board Members substantially equivalent
protection in the form of a written indemnity or financial guaranty reasonably
acceptable to each such Non-Continuing Board Member.

Following the Consolidation Date, it is expected that the consolidated Board
will implement certain changes to the Funds' current committee structure and
other governance practices, including the appointment of new committee chairs
and members.  Additional information regarding these changes will be set forth
in each Fund's statement of additional information upon implementation.

                                       2
<PAGE>

Nominee Information

Information is provided below as of October 31, 2007 for each New York Nominee
and for Mr. Schwarzer, who would be an interested member of the Board by virtue
of his positions with Deutsche Asset Management.

<TABLE>
<CAPTION>

                                                                                                        Position
                                                                                                      with the DWS
                                                                                                        Funds and
                                                Business Experience and Directorships                   Length of
    Name and Year of Birth(1)                          During the Past 5 Years                         Time Served
----------------------------------------------------------------------------------------------------------------------
Independent Board Member New
   York Nominees
----------------------------------------------------------------------------------------------------------------------
<S>                                <C>                                                                     <C>
Henry P. Becton, Jr. (1943)        Vice Chairman, WGBH Educational Foundation (formerly President   New York Board
                                   1984-2007).  Directorships: Association of Public Television     Member since
                                   Stations; Becton Dickinson and Company (medical technology       1990.(2)
                                   company); Belo Corporation (media company); Boston Museum of
                                   Science; PBS Foundation; and Public Radio International.
                                   Former Directorships:  American Public Television; Concord
                                   Academy; New England Aquarium; Mass. Corporation for
                                   Educational Telecommunications; Committee for Economic
                                   Development; Public Broadcasting Service
----------------------------------------------------------------------------------------------------------------------
Dawn-Marie Driscoll (1946)         President, Driscoll Associates (consulting firm); Executive      New York Board
                                   Fellow, Center for Business Ethics, Bentley College; formerly,   Member since
                                   Partner, Palmer & Dodge (1988-1990); Vice President of           1987,(2)
                                   Corporate Affairs and General Counsel, Filene's (1978-1988).     Chairman since
                                   Directorships:  Trustee of 8 open-end mutual funds managed by    2004.
                                   Sun Capital Advisers, Inc. (since 2007); Director of ICI
                                   Mutual Insurance Company (since 2007); Advisory Board, Center
                                   for Business Ethics, Bentley College; Trustee, Southwest
                                   Florida Community Foundation (charitable organization); Former
                                   Directorships: Investment Company Institute (audit, executive,
                                   nominating committees) and Independent Directors Council
                                   (governance, executive committees)
----------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)                Managing General Partner, Exeter Capital Partners (a series of   New York Board
                                   private equity funds).  Directorships:  Progressive Holding      Member since
                                   Corporation (kitchen goods importer and distributor); Natural    1996.(2)
                                   History, Inc. (magazine publisher); Box Top Media Inc.
                                   (advertising); The Kennel Shop (retailer)
----------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss (1945)         Clinical Professor of Finance, NYU Stern School of Business      New York Board
                                   (1997-present); Member, Finance Committee, Association for       Member since
                                   Asian Studies (2002-present); Director, Mitsui Sumitomo          2001.(2)
                                   Insurance Group (US) (2004-present); prior thereto, Managing
                                   Director, J.P. Morgan (investment banking firm) (until 1996)
----------------------------------------------------------------------------------------------------------------------

                                       3
<PAGE>
                                                                                                        Position
                                                                                                      with the DWS
                                                                                                        Funds and
                                                Business Experience and Directorships                   Length of
    Name and Year of Birth(1)                          During the Past 5 Years                         Time Served
----------------------------------------------------------------------------------------------------------------------
Richard J. Herring (1946)          Jacob Safra Professor of International Banking and Professor,    New York Board
                                   Finance Department, The Wharton School, University of            Member since
                                   Pennsylvania (since July 1972); Co-Director, Wharton Financial   1990.(2)
                                   Institutions Center (since July 2000); Director, Japan Equity
                                   Fund, Inc. (since September 2007), Thai Capital Fund, Inc.
                                   (since September 2007), Singapore Fund, Inc. (since September
                                   2007).  Formerly, Vice Dean and Director, Wharton
                                   Undergraduate Division (July 1995-June 2000); Director, Lauder
                                   Institute of International Management Studies (July 2000-June
                                   2006)
----------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel (1951)            President and Chief Executive Officer, The Pew Charitable        New York Board
                                   Trusts (charitable organization) (1994 to present); Trustee,     Member since
                                   Thomas Jefferson Foundation (charitable organization) (1994 to   1995.(2)
                                   present); Trustee, Executive Committee, Philadelphia Chamber
                                   of Commerce (2001 to present).  Formerly, Executive Vice
                                   President, The Glenmede Trust Company (investment trust and
                                   wealth management) (1983-2004); Board Member, Investor
                                   Education (charitable organization) (2004-2005); Director,
                                   Viasys Health Care (January 2007-June 2007)
----------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr. (1946)      Private investor since October 2003; Trustee of 8 open-end       New York Board
                                   mutual funds managed by Sun Capital Advisers, Inc. (since        Member since
                                   October 1998).  Formerly, Pension & Savings Trust Officer,       1993.(2)
                                   Sprint Corporation (telecommunications) (November
                                   1989-September 2003)
----------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg (1943)      Retired.  Formerly, Consultant (1997-2001); Director, US         New York Board
                                   Government Accountability Office (1996-1997); Partner,           Member since
                                   Fulbright & Jaworski, L.L.P. (law firm) (1978-1996).             1997.(2)
                                   Directorships:  The William and Flora Hewlett Foundation;
                                   Service Source, Inc. Former Directorships: Mutual Fund
                                   Directors Forum (2002-2004), American Bar Retirement
                                   Association (funding vehicle for retirement plans) (1987-1990
                                   and 1994-1996)
----------------------------------------------------------------------------------------------------------------------
Interested Board Member
   Nominee
----------------------------------------------------------------------------------------------------------------------
Axel Schwarzer                     Managing Director, Deutsche Asset Management; Head of Deutsche   New York Board
                                   Asset Management Americas; CEO of DWS Scudder; formerly,         Member since
(1958)                             board  member of DWS Investments, Germany (1999-2005);           2006.
                                   formerly, Head of Sales and Product Management for the Retail
                                   and Private Banking Division of Deutsche Bank in Germany
                                   (1997-1999); formerly, various strategic and operational
                                   positions for Deutsche Bank Germany Retail and Private Banking
                                   Division in the field of investment funds, tax driven
                                   instruments and asset management for corporates (1989-1996)
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       4
<PAGE>
--------------------
(1)     Unless otherwise indicated, the mailing address of each New York Nominee
        is c/o Dawn Marie-Driscoll, P.O. Box 100176, Cape Coral, FL 33904.  The
        mailing address of Axel Schwarzer is c/o Deutsche Investment Management
        Americas Inc., 345 Park Avenue, New York, New York 10154.
(2)     Indicates the year in which the nominee joined the Board of one or more
        DWS funds now overseen by the New York Board.


               Please Retain This Supplement for Future Reference





November 26, 2007

                                       5

<PAGE>



                                DWS BALANCED FUND

                     Class A, B, C and Institutional Shares


                                  March 1, 2008


















                       STATEMENT OF ADDITIONAL INFORMATION


This Statement of Additional  Information is not a prospectus and should be read
in conjunction with the  prospectuses for DWS Balanced Fund (the "Fund"),  dated
March 1, 2008 as amended from time to time, for Class A, B, C and  Institutional
Class,  copies of which may be obtained without charge by contacting DWS Scudder
Distributors,  Inc., 222 South Riverside Plaza,  Chicago,  Illinois 60606, (800)
621-1148 or from the firm from which this  Statement of  Additional  Information
was obtained. The prospectuses are also available along with the other materials
on   the    Securities   and   Exchange    Commission's    Internet   Web   site
(http://www.sec.gov).

The  annual  report  to  shareholders  of the  Fund,  dated  October  31,  2007,
accompanies this Statement of Additional  Information.  The financial statements
contained  therein,  together  with  accompanying  notes,  are  incorporated  by
reference  and are  hereby  deemed to be part of this  Statement  of  Additional
Information.


This Statement of Additional  Information  ("SAI") is  incorporated by reference
into the prospectuses.



<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----


INVESTMENT RESTRICTIONS......................................................1

INVESTMENT POLICIES AND TECHNIQUES...........................................2
   Portfolio Holdings.......................................................26

MANAGEMENT OF THE FUND......................................................27
   Investment Advisor.......................................................27
   Compensation of Portfolio Managers.......................................31
   Fund Ownership of Portfolio Managers [TO BE UPDATED].....................32
   Code of Ethics...........................................................35

FUND SERVICE PROVIDERS......................................................35
   Principal Underwriter and Administrator..................................35
   Independent Registered Public Accounting Firm............................40
   Legal Counsel............................................................40
   Fund Accounting Agent....................................................40
   Custodian, Transfer Agent and Shareholder Service Agent..................40

PORTFOLIO TRANSACTIONS......................................................44

PURCHASE AND REDEMPTION OF SHARES...........................................48

DIVIDENDS...................................................................72

TAXES.......................................................................73

NET ASSET VALUE.............................................................76

TRUSTEES AND OFFICERS.......................................................83

TRUST ORGANIZATION..........................................................91

PROXY VOTING GUIDELINES.....................................................92

FINANCIAL STATEMENTS........................................................94

ADDITIONAL INFORMATION......................................................94

APPENDIX....................................................................94



                                       i

<PAGE>



                                       ii
<PAGE>


                             INVESTMENT RESTRICTIONS

Except as otherwise indicated,  the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders.  There can be
no assurance that the Fund's objective will be met.

Any  investment  restrictions  herein  which  involve  a maximum  percentage  of
securities  or assets shall not be  considered  to be violated  unless an excess
over the percentage occurs  immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.

The Fund has elected to be  classified  as a  diversified  series of an open-end
management  investment  company. A diversified fund may not, with respect to 75%
of total  assets,  invest more than 5% of total  assets in the  securities  of a
single issuer or invest in more than 10% of the outstanding voting securities of
such issuer.

As a matter of fundamental policy, the Fund may not:

(1)      borrow money,  except as permitted under the Investment  Company Act of
         1940,  as amended  ("1940  Act"),  and as  interpreted  or  modified by
         regulatory authority having jurisdiction, from time to time;

(2)      issue senior securities, except as permitted under the 1940 Act, and as
         interpreted or modified by regulatory  authority  having  jurisdiction,
         from time to time;

(3)      concentrate its investments in a particular  industry,  as that term is
         used in the 1940 Act,  and as  interpreted  or modified  by  regulatory
         authority having jurisdiction, from time to time;

(4)      engage in the  business of  underwriting  securities  issued by others,
         except to the extent  that the Fund may be deemed to be an  underwriter
         in connection with the disposition of portfolio securities;

(5)      purchase or sell real estate, which term does not include securities of
         companies which deal in real estate or mortgages or investments secured
         by real estate or  interests  therein,  except  that the Fund  reserves
         freedom of action to hold and to sell real estate  acquired as a result
         of the Fund's ownership of securities;

(6)      purchase  physical   commodities  or  contracts  relating  to  physical
         commodities; or

(7)      make loans except as permitted  under the 1940 Act, and as  interpreted
         or modified by regulatory authority having  jurisdiction,  from time to
         time.

The fundamental  policy may not be changed without the approval of a majority of
the Fund's  outstanding  voting shares.  As used in this Statement of Additional
Information,  a "majority" of the Fund's outstanding shares as defined under the
1940 Act,  means the lesser of (a) 67% or more of the voting  securities  of the
Fund present at such meeting, if the holders of more than 50% of the outstanding
voting  securities of the Fund are present in person or  represented by proxy or
(b) more than 50% of the outstanding voting securities of the Fund.

The  Trustees  of the  Trust  have  voluntarily  adopted  certain  policies  and
restrictions,  which  are  observed  in  the  conduct  of  the  Fund's  affairs.
Non-fundamental  policies  may be changed by the  Trustees of the Trust  without
requiring prior notice to or approval of shareholders.

As a matter of non-fundamental policy, the Fund currently does not intend to:

(a)      borrow money in an amount  greater  than 5% of its total assets  except
         (i) for temporary or emergency purposes and (ii) by engaging in reverse
         repurchase   agreements,   dollar  rolls,   or  other   investments  or
         transactions  described in the Fund's registration  statement which may
         be deemed to be borrowings;

(b)      enter into either of reverse  repurchase  agreements or dollar rolls in
         an amount greater than 5% of its total assets;


                                       1
<PAGE>

(c)      purchase  securities  on margin or make short  sales,  except (i) short
         sales against the box, (ii) in connection with arbitrage  transactions,
         (iii) for margin deposits in connection with futures contracts, options
         or other  permitted  investments,  (iv) that  transactions  in  futures
         contracts  and  options  shall  not be  deemed  to  constitute  selling
         securities  short,  and (v) that the Fund may  obtain  such  short-term
         credits  as  may  be  necessary   for  the   clearance  of   securities
         transactions;

(d)      purchase  options,  unless  the  aggregate  premiums  paid on all  such
         options  held by the Fund at any time do not  exceed  20% of its  total
         assets; or sell put options, if as a result, the aggregate value of the
         obligations  underlying  such put options would exceed 50% of its total
         assets;

(e)      purchase warrants if as a result,  such securities,  taken at the lower
         of cost or market value,  would  represent more than 5% of the value of
         the Fund's total assets (for this purpose,  warrants  acquired in units
         or attached to securities will be deemed to have no value);

(f)      invest  more than 15% of net assets in illiquid  securities,  including
         repurchase agreements maturing in more than seven days.

(g)      lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets; and

Temporary  Defensive  Policy.  For temporary  defensive  purposes,  the Fund may
invest,  without limit, in cash and cash equivalents,  US government securities,
money  market  instruments  and high  quality  debt  securities  without  equity
features.  In such a case, the Fund would not be pursuing,  and may not achieve,
its investment objective.

Master/feeder Fund Structure. The Board of Trustees has the discretion to retain
the current  distribution  arrangement  for the Fund while investing in a master
fund in a master/feeder fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing  directly in a portfolio of securities,  invests most or all of its
investment  assets in a separate  registered  investment  company  (the  "master
fund") with  substantially  the same  investment  objective  and policies as the
feeder  fund.  Such a  structure  permits  the  pooling of assets of two or more
feeder funds,  preserving  separate  identities or distribution  channels at the
feeder  fund  level.  Based on the  premise  that  certain  of the  expenses  of
operating an investment  portfolio are  relatively  fixed,  a larger  investment
portfolio may eventually  achieve a lower ratio of operating expenses to average
net assets. An existing  investment  company is able to convert to a feeder fund
by  selling  all  of  its  investments,   which  involves  brokerage  and  other
transaction  costs and realization of a taxable gain or loss, or by contributing
its assets to the master  fund and  avoiding  transaction  costs and,  if proper
procedures are followed, the realization of taxable gain or loss.

                       INVESTMENT POLICIES AND TECHNIQUES

General Investment Policies

The Fund is an open-end management  investment company which continuously offers
and redeems shares at net asset value (less  applicable  sales charges or fees).
The Fund is a company of the type commonly known as a mutual fund. The Fund is a
series of DWS  Balanced  Fund (the  "Trust").  The Fund offers  five  classes of
shares: Class A, Class B, Class C, Class S and Institutional Class shares.


In addition to the Fund's main investment strategy, the Advisor seeks to enhance
returns by employing a global tactical asset allocation (GTAA) overlay strategy.
The GTAA strategy,  which Advisor calls iGAP (integrated Global Alpha Platform),
is a total return  strategy  designed to add value by benefiting from short-term
mis-pricings within global equity,  bond and currency markets.  iGAP is expected
to have a low correlation to the fund's stock and bond holdings.

The  iGAP  strategy   combines  diverse  macro  investment  views  from  various
investment analysts within Deutsche Asset Management.  Since a single investment
approach  rarely  works in all  market  conditions,  the  teams  are  chosen  to
diversify  investment  approaches  thereby  enhancing the expected  return for a
given level of risk.  The  collective


                                       2
<PAGE>

views are then used to determine  iGAP's  positions  using a  disciplined,  risk
managed  process.  The  result  is a  collection  of long and  short  investment
positions within global equity, bonds and currencies designed to generate excess
returns that have little  correlation  to major  markets.  The bond and currency
positions are then implemented by the iGAP portfolio  managers using futures and
forward  contracts.  The  iGAP  portfolio  managers  consider  factors  such  as
liquidity,  cost,  margin  requirement  and credit  quality when  selecting  the
appropriate derivative instrument.


Descriptions  in  this  Statement  of  Additional  Information  of a  particular
investment  practice  or  technique  in which the Fund may  engage  are meant to
describe  the  spectrum  of  investments  that  Deutsche  Investment  Management
Americas Inc.  ("DIMA" or the  "Advisor") in its  discretion  might,  but is not
required to, use in managing the Fund's portfolio  assets.  The Advisor,  may in
its discretion at any time employ such practice, technique or instrument for one
or more funds but not for all funds advised by it.  Furthermore,  it is possible
that certain types of financial  instruments or investment  techniques described
herein may not be available, permissible, economically feasible or effective for
their  intended  purposes  in all  markets.  Certain  practices,  techniques  or
instruments  may not be  principal  activities  of the Fund,  but, to the extent
employed,  could  from  time  to  time  have a  material  impact  on the  Fund's
performance.

Borrowing.  As a matter of fundamental  policy,  the Fund will not borrow money,
except as  permitted  under the 1940 Act,  and as  interpreted  or  modified  by
regulatory  authority having  jurisdiction,  from time to time. While the Fund's
Board of Trustees does not currently intend to borrow for investment  leveraging
purposes,  if such a strategy were  implemented  in the future it would increase
the Fund's volatility and the risk of loss in a declining  market.  Borrowing by
the Fund will involve special risk considerations. Although the principal of the
Fund's  borrowings  will be fixed,  the Fund's assets may change in value during
the time a borrowing is outstanding, thus increasing exposure to capital risk.

The Fund may  borrow  up to 5% of the  Fund's  net  assets  against  called  and
tendered bonds in the Fund.

Bank Loans.  The Fund may invest in bank loans,  which are typically senior debt
obligations of borrowers  (issuers) and as such, are considered to hold a senior
position in the capital structure of the borrower. These may include loans which
hold the most senior  position,  that hold an equal  ranking  with other  senior
debt,  or loans that are, in the  judgment of the  Advisor,  in the  category of
senior debt of the borrower. This capital structure position generally gives the
holders of these loans a priority claim on some or all of the borrower's  assets
in the event of a default.  In most cases,  these loans are either  partially or
fully  collateralized  by the  assets  of a  corporation,  partnership,  limited
liability  company or other  business  entity,  or by cash flow that the Advisor
believes  has a market value at the time of  acquisition  that equals or exceeds
the  principal  amount of the loan.  These loans are often issued in  connection
with recapitalizations, acquisitions, leveraged buy-outs and refinancings. It is
important to note that Moody's and S&P generally  rate bank loans a notch or two
higher  than high yield  bonds of the same  issuer to reflect  their more senior
position.  The Fund may  invest  in both  fixed-  and  floating-rate  loans.  In
addition,  bank loans can trade either as an  "assignment"  or  "participation."
When the Fund buys an assignment, it is essentially becoming a party to the bank
agreement.  The vast majority of all trades are  assignments and would therefore
generally represent the preponderance of bank loans held by the Fund. In certain
cases, the Fund may buy bank loans on a participation basis, if for example, the
Fund did not want to become party to the bank agreement.  However, in all cases,
the Fund will not purchase  bank loans where  Deutsche  Bank,  or an  affiliate,
serves as an agent bank.

Participations  and  assignments   involve  credit  risk,  interest  rate  risk,
liquidity  risk,  and the  risk of  being a  lender.  If the  Fund  purchases  a
participation, it may only be able to enforce its rights through the lender, and
may assume the credit risk of both the lender and the borrower.

Investments  in loans through  direct  assignment  of a financial  institution's
interests with respect to a loan may involve additional risks. For example, if a
loan is foreclosed, the purchaser could become part owner of any collateral, and
would bear the costs and liabilities associated with owning and disposing of the
collateral.  In addition,  it is at least  conceivable that under emerging legal
theories of lender liability, a purchaser could be held liable as a co-lender.

In the case of loans administered by a bank or other financial  institution that
acts as agent for all holders,  if assets held by the agent for the benefit of a
purchaser  are  determined  to be subject to the claims of the  agent's  general

                                       3
<PAGE>

creditors,  the  purchaser  might incur  certain  costs and delays in  realizing
payment on the loan or loan  participation  and could suffer a loss of principal
or interest.

In the case of loan  participations  where a bank or other  lending  institution
serves as  financial  intermediary  between  the Fund and the  borrower,  if the
participation does not shift to the fund the direct debtor-creditor relationship
with the borrower, SEC interpretations  require the fund, in some circumstances,
to treat both the lending bank or other lending  institution and the borrower as
issuers for  purposes of the Fund's  investment  policies.  Treating a financial
intermediary  as an issuer of  indebtedness  may restrict the Fund's  ability to
invest in indebtedness related to a single financial intermediary, or a group of
intermediaries  engaged in the same industry,  even if the underlying  borrowers
represent many different companies and industries.

Common  Stocks.  Common  stock is issued by companies to raise cash for business
purposes  and  represents  a  proportionate  interest in the issuing  companies.
Therefore,  the Fund  participates  in the  success or failure of any company in
which  it  holds  stock.  The  market  values  of  common  stock  can  fluctuate
significantly,  reflecting  the  business  performance  of the issuing  company,
investor perception and general economic and financial market movements. Despite
the risk of price volatility, however, common stocks have historically offered a
greater potential for long-term gain on investment, compared to other classes of
financial  assets such as bonds or cash  equivalents,  although  there can be no
assurance that this will be true in the future.

Convertible Securities. The Fund may invest in convertible securities,  that is,
bonds,  notes,  debentures,  preferred  stocks  and other  securities  which are
convertible into common stock. Investments in convertible securities can provide
an  opportunity  for capital  appreciation  and/or income  through  interest and
dividend payments by virtue of their conversion or exchange features.

The convertible  securities in which the Fund may invest are either fixed income
or zero coupon debt  securities  which may be converted or exchanged at a stated
or  determinable  exchange  ratio into  underlying  shares of common stock.  The
exchange ratio for any particular convertible security may be adjusted from time
to time due to stock splits, dividends, spin-offs, other corporate distributions
or scheduled  changes in the exchange  ratio.  Convertible  debt  securities and
convertible  preferred  stocks,  until converted,  have general  characteristics
similar to both debt and equity  securities.  Although  to a lesser  extent than
with debt securities generally, the market value of convertible securities tends
to decline as interest  rates  increase  and,  conversely,  tends to increase as
interest  rates  decline.  In addition,  because of the  conversion  or exchange
feature,  the market value of convertible  securities  typically  changes as the
market value of the underlying common stocks changes, and, therefore, also tends
to follow  movements  in the  general  market  for equity  securities.  A unique
feature of convertible  securities is that as the market price of the underlying
common stock declines,  convertible  securities tend to trade  increasingly on a
yield basis, and so may not experience  market value declines to the same extent
as the underlying  common stock.  When the market price of the underlying common
stock  increases,  the prices of the  convertible  securities  tend to rise as a
reflection of the value of the underlying common stock,  although  typically not
as much as the  underlying  common stock.  While no securities  investments  are
without risk,  investments in convertible  securities generally entail less risk
than investments in common stock of the same issuer.

As debt securities,  convertible  securities are investments which provide for a
stream of income (or in the case of zero coupon securities, accretion of income)
with  generally  higher  yields  than  common  stocks.   Convertible  securities
generally offer lower yields than non-convertible  securities of similar quality
because of their conversion or exchange features.

Of course,  like all debt  securities,  there can be no  assurance  of income or
principal payments because the issuers of the convertible securities may default
on their obligations.

Convertible   securities   generally  are  subordinated  to  other  similar  but
non-convertible  securities of the same issuer,  although  convertible bonds, as
corporate debt  obligations,  enjoy  seniority in right of payment to all equity
securities,  and  convertible  preferred stock is senior to common stock, of the
same issuer.  However,  because of the subordination feature,  convertible bonds
and  convertible  preferred  stock  typically  have lower  ratings  than similar
non-convertible securities. Convertible securities may be issued as fixed income
obligations that pay current income or as zero coupon notes and bonds, including
Liquid Yield Option Notes ("LYONs"(TM)).

                                       4
<PAGE>

Debt  Securities.  The Fund may invest in debt  securities,  including  bonds of
private  issuers.  Portfolio debt  investments will be selected on the basis of,
among other things,  credit quality,  and the fundamental outlooks for currency,
economic  and interest  rate trends,  taking into account the ability to hedge a
degree  of  currency  or  local  bond  price   risk.   The  Fund  may   purchase
"investment-grade"  bonds,  rated Aaa,  Aa, A or Baa by Moody's or AAA, AA, A or
BBB by S&P or, if unrated,  judged to be of equivalent  quality as determined by
the Advisor.

The principal  risks involved with  investments  in bonds include  interest rate
risk, credit risk and pre-payment risk.  Interest rate risk refers to the likely
decline in the value of bonds as  interest  rates rise.  Generally,  longer-term
securities are more susceptible to changes in value as a result of interest-rate
changes than are shorter-term securities. Credit risk refers to the risk that an
issuer of a bond may  default  with  respect  to the  payment of  principal  and
interest.  The  lower  a bond  is  rated,  the  more  it is  considered  to be a
speculative or risky  investment.  Pre-payment risk is commonly  associated with
pooled debt  securities,  such as  mortgage-backed  securities  and asset backed
securities,  but may affect other debt  securities as well.  When the underlying
debt obligations are prepaid ahead of schedule,  the return on the security will
be lower than expected.  Pre-payment  rates usually increase when interest rates
are falling.

Depositary  Receipts.  The Fund may invest in sponsored or unsponsored  American
Depositary  Receipts ("ADRs"),  European  Depositary  Receipts ("EDRs"),  Global
Depositary  Receipts ("GDRs"),  International  Depositary  Receipts ("IDRs") and
other types of Depositary  Receipts (which,  together with ADRs, EDR's, GDRs and
IDRs are hereinafter referred to as "Depositary Receipts").  Depositary Receipts
provide  indirect  investment  in  securities  of  foreign  issuers.  Prices  of
unsponsored Depositary Receipts may be more volatile than if they were sponsored
by  the  issuer  of the  underlying  securities.  Depositary  Receipts  may  not
necessarily be  denominated  in the same currency as the  underlying  securities
into which  they may be  converted.  In  addition,  the  issuers of the stock of
unsponsored   Depositary   Receipts  are  not  obligated  to  disclose  material
information  in the US and,  therefore,  there may not be a correlation  between
such  information  and the market  value of the  Depositary  Receipts.  ADRs are
Depositary Receipts which are bought and sold in the US and are typically issued
by a US bank or trust company which evidence ownership of underlying  securities
by a foreign corporation.  GDRs, IDRs and other types of Depositary Receipts are
typically issued by foreign banks or trust companies,  although they may also be
issued by US banks or trust  companies,  and evidence  ownership  of  underlying
securities issued by either a foreign or a US corporation. Generally, Depositary
Receipts in registered  form are designed for use in the US  securities  markets
and  Depositary  Receipts  in bearer  form are  designed  for use in  securities
markets outside the US. For purposes of a Fund's investment policies, the Fund's
investments in ADRs, GDRs and other types of Depositary  Receipts will be deemed
to be investments in the underlying securities.  Depositary Receipts,  including
those  denominated  in US dollars will be subject to foreign  currency  exchange
rate risk.  However,  by  investing  in US  dollar-denominated  ADRs rather than
directly in foreign  issuers'  stock,  the Fund avoids currency risks during the
settlement  period.  In general,  there is a large,  liquid market in the US for
most ADRs. However, certain Depositary Receipts may not be listed on an exchange
and therefore may be illiquid securities.

Direct Debt  Instruments.  Direct debt instruments are interests in amounts owed
by a corporate,  governmental or other borrower to lenders  (direct  loans),  to
suppliers of goods or services  (trade claims or other  receivables) or to other
parties. The Fund may invest in all types of direct debt investments,  but among
these investments the Fund currently intends to invest primarily in direct loans
and trade claims.

When the Fund participates in a direct loan it will be lending money directly to
an issuer.  Direct loans generally do not have an underwriter or agent bank, but
instead,  are  negotiated  between a company's  management  team and a lender or
group of lenders.  Direct loans  typically  offer better security and structural
terms than other types of high yield  securities.  Direct debt  obligations  are
often  the most  senior-obligations  in an  issuer's  capital  structure  or are
well-collateralized so that overall risk is lessened.

Trade claims are unsecured rights of payment arising from obligations other than
borrowed funds.  Trade claims include vendor claims and other  receivables  that
are   adequately   documented   and  available  for  purchase  from   high-yield
broker-dealers.  Trade claims  typically may sell at a discount.  In addition to
the risks otherwise associated with low-quality  obligations,  trade claims have
other  risks,  including  the  possibility  that the  amount of the claim may be
disputed by the obligor.  Trade claims normally would be considered illiquid and
pricing can be volatile.

                                       5
<PAGE>

Direct debt instruments  involve a risk of loss in case of default or insolvency
of the borrower.  The Fund will rely primarily upon the  creditworthiness of the
borrower  and/or  the  collateral  for  payment of  interest  and  repayment  of
principal.  The value of the Fund's  investments  may be  adversely  affected if
scheduled interest or principal payments are not made. Because most direct loans
will be secured,  there will be a smaller  risk of loss with  direct  loans than
with an investment in unsecured  high yield bonds or trade claims.  Indebtedness
of borrowers whose creditworthiness is poor involves substantially greater risks
and may be highly speculative. Borrowers that are in bankruptcy or restructuring
may never pay off their  indebtedness  or may pay only a small  fraction  of the
amount owed.  Investments in direct debt  instruments also involve interest rate
risk  and  liquidity  risk.  However,  interest  rate  risk is  lessened  by the
generally  short-term  nature of direct debt instruments and their interest rate
structure,  which typically floats. To the extent the direct debt instruments in
which the Fund invests are considered  illiquid,  the lack of a liquid secondary
market (1) will have an  adverse  impact on the value of such  instruments,  (2)
will have an  adverse  impact on the  Fund's  ability  to  dispose  of them when
necessary  to meet the  Fund's  liquidity  needs or in  response  to a  specific
economic event, such as a decline in creditworthiness of the issuer, and (3) may
make it more difficult for the Fund to assign a value of these  instruments  for
purposes of valuing the Fund's portfolio and calculating its net asset value. In
order to lessen  liquidity  risk, the Fund  anticipates  investing  primarily in
direct debt  instruments that are quoted and traded in the high yield market and
will not  invest in these  instruments  if it would  cause  more than 15% of the
Fund's net assets to be  illiquid.  Trade  claims may also present a tax risk to
the Fund.  The Fund will not  invest in trade  claims if it  effects  the Fund's
qualification  as a  regulated  investment  company  under  Subchapter  M of the
Internal Revenue Code of 1986, as amended (the "Code").

Dollar Roll Transactions. Dollar roll transactions consist of the sale by a fund
to a bank or broker/dealer  (the  "counterparty")  of GNMA certificates or other
Mortgage-Backed  Securities  together  with a  commitment  to purchase  from the
counterparty  similar,  but not  identical,  securities at a future date, at the
same price.  The  counterparty  receives all  principal  and interest  payments,
including  prepayments,  made on the  security  while it is the  holder.  A fund
receives a fee from the  counterparty  as  consideration  for entering  into the
commitment  to  purchase.  Dollar  rolls may be renewed over a period of several
months  with  a  different  purchase  and  repurchase  price  fixed  and a  cash
settlement  made  at each  renewal  without  physical  delivery  of  securities.
Moreover,  the  transaction  may  be  preceded  by a firm  commitment  agreement
pursuant to which a fund agrees to buy a security on a future date.

A fund will segregate  cash, US government  securities or other liquid assets in
an amount sufficient to meet its purchase obligations under the transactions.

A dollar roll involves costs to a fund. For example, while a fund receives a fee
as  consideration  for agreeing to repurchase  the security,  a fund forgoes the
right to receive all  principal  and interest  payments  while the  counterparty
holds the  security.  These  payments  to the  counterparty  may  exceed the fee
received  by a  fund,  thereby  effectively  charging  a  fund  interest  on its
borrowing.  Further,  although  a fund  can  estimate  the  amount  of  expected
principal prepayment over the term of the dollar roll, a variation in the actual
amount of prepayment could increase or decrease the cost of a fund's borrowing.

The entry into dollar rolls involves  potential risks of loss that are different
from those related to the securities  underlying the transactions.  For example,
if the  counterparty  becomes  insolvent,  a fund's  right to purchase  from the
counterparty might be restricted. Additionally, the value of such securities may
change adversely before a fund is able to purchase them.  Similarly,  a fund may
be required to purchase  securities in connection with a dollar roll at a higher
price than may otherwise be available on the open market. Since, as noted above,
the counterparty is required to deliver a similar, but not identical security to
a fund, the security that a fund is required to buy under the dollar roll may be
worth less than an identical security. Finally, there can be no assurance that a
fund's use of the cash that it receives from a dollar roll will provide a return
that exceeds borrowing costs.

Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar  instruments are US  dollar-denominated  futures contracts or options
thereon  which are  linked  to the  London  Interbank  Offered  Rate  ("LIBOR"),
although  foreign  currency-denominated  instruments  are available from time to
time.  Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use  Eurodollar  futures  contracts  and options  thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.

                                       6
<PAGE>

Foreign  Currencies.  Because  investments  in foreign  securities  usually will
involve currencies of foreign  countries,  and because the Fund may hold foreign
currencies  and  forward  contracts,  futures  contracts  and options on foreign
currencies and foreign  currency futures  contracts,  the value of the assets of
the Fund as measured in US dollars may be affected  favorably or  unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
the  Fund  may  incur  costs  and   experience   conversion   difficulties   and
uncertainties  in  connection  with  conversions   between  various  currencies.
Fluctuations in exchange rates may also affect the earning power and asset value
of the foreign entity issuing the security.

The  strength  or  weakness  of  the  US  dollar  against  these  currencies  is
responsible for part of the Fund's investment  performance.  If the dollar falls
in value  relative to the  Japanese  yen,  for  example,  the dollar  value of a
Japanese  stock  held in the  portfolio  will rise even  though the price of the
stock remains  unchanged.  Conversely,  if the dollar rises in value relative to
the yen,  the  dollar  value of the  Japanese  stock  will  fall.  Many  foreign
currencies have experienced significant devaluation relative to the dollar.

Although  the Fund values its assets  daily in terms of US dollars,  it does not
intend to convert its holdings of foreign  currencies into US dollars on a daily
basis.  It will do so from time to time,  and  investors  should be aware of the
costs of currency conversion.  Although foreign exchange dealers do not charge a
fee for  conversion,  they do  realize  a profit  based on the  difference  (the
"spread")  between  the  prices at which they are  buying  and  selling  various
currencies.  Thus, a dealer may offer to sell a foreign  currency to the Fund at
one rate,  while  offering a lesser rate of  exchange  should the Fund desire to
resell that currency to the dealer.  The Fund will conduct its foreign  currency
exchange  transactions  either  on a spot  (i.e.,  cash)  basis at the spot rate
prevailing in the foreign  currency  exchange  market,  or through entering into
options or forward or futures contracts to purchase or sell foreign currencies.

Foreign Fixed Income Securities.  Since most foreign fixed income securities are
not rated, the Fund will invest in foreign fixed income  securities based on the
Advisor's analysis without relying on published ratings.  Since such investments
will be based upon the Advisor's  analysis  rather than upon published  ratings,
achievement  of the  Fund's  goals may  depend  more upon the  abilities  of the
Advisor than would otherwise be the case.

The value of the foreign fixed income  securities held by the Fund, and thus the
net asset value of the Fund's shares,  generally will fluctuate with (a) changes
in the  perceived  creditworthiness  of the  issuers  of those  securities,  (b)
movements  in  interest  rates,  and (c) changes in the  relative  values of the
currencies  in which the  Fund's  investments  in fixed  income  securities  are
denominated  with respect to the US Dollar.  The extent of the fluctuation  will
depend  on  various  factors,  such  as  the  average  maturity  of  the  Fund's
investments in foreign fixed income securities, and the extent to which the Fund
hedges its interest  rate,  credit and currency  exchange  rate risks.  A longer
average  maturity  generally is associated  with a higher level of volatility in
the market value of such securities in response to changes in market conditions.

Investments in sovereign  debt,  including  Brady Bonds,  involve special risks.
Brady Bonds are debt securities  issued under a plan implemented to allow debtor
nations to restructure their outstanding  commercial bank indebtedness.  Foreign
governmental  issuers of debt or the  governmental  authorities that control the
repayment  of the debt may be  unable or  unwilling  to repay  principal  or pay
interest  when due.  In the event of  default,  there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party.  Political conditions,  especially a sovereign entity's
willingness  to  meet  the  terms  of  its  fixed  income  securities,   are  of
considerable  significance.  Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign  entity may not contest  payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements.  In  addition,  there is no  bankruptcy  proceeding  with respect to
sovereign debt on which a sovereign has defaulted, and the Fund may be unable to
collect  all or any  part  of its  investment  in a  particular  issue.  Foreign
investment  in certain  sovereign  debt is  restricted  or controlled to varying
degrees,  including  requiring  governmental  approval for the  repatriation  of
income, capital or proceed of sales by foreign investors.  These restrictions or
controls may at times limit or preclude foreign  investment in certain sovereign
debt or  increase  the costs and  expenses  of the Fund.  Sovereign  debt may be
issued  as  part  of  debt  restructuring  and  such  debt  is to be  considered
speculative.  There is a history of defaults  with  respect to  commercial  bank
loans by public and private  entities  issuing Brady Bonds.  All or a portion of
the interest payments and/or principal repayment with respect to Brady Bonds may
be uncollateralized.


                                       7
<PAGE>

Foreign Investment.  While the Fund's investments in foreign countries offer the
potential   for   substantial   appreciation   over  time,   they  also  involve
above-average  investment  risk in  comparison  to a mutual fund  investing in a
broad  range of US  equity  securities.  The  Fund is  designed  as a  long-term
investment  and not for  short-term  trading  purposes.  The Fund  should not be
considered a complete investment program.  The Fund's net asset value, or price,
can  fluctuate  significantly  with  changes in stock market  levels,  political
developments,  movements  in  currencies,  global  investment  flows  and  other
factors.

Foreign  Securities.  Investing in foreign  securities  involves certain special
considerations,  including  those  set  forth  below,  which  are not  typically
associated   with  investing  in  US  securities  and  which  may  favorably  or
unfavorably  affect  the  Fund's  performance.  As  foreign  companies  are  not
generally  subject to  uniform  accounting,  auditing  and  financial  reporting
standards, practices and requirements comparable to those applicable to domestic
companies,  there may be less  publicly  available  information  about a foreign
company than about a domestic company.  Many foreign securities  markets,  while
growing in volume of trading activity,  have  substantially less volume than the
US market,  and  securities  of some  foreign  issuers  are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond  markets is less than in the US and, at times,  volatility  of
price can be greater than in the US Fixed commissions on some foreign securities
exchanges and bid to asked spreads in foreign bond markets are generally  higher
than  commissions  or bid to asked  spreads on US markets,  although the Advisor
will  endeavor  to achieve  the most  favorable  net  results  on its  portfolio
transactions. There is generally less governmental supervision and regulation of
securities exchanges,  brokers and listed companies in foreign countries than in
the US.  It may be  more  difficult  for the  Fund's  agents  to keep  currently
informed  about  corporate  actions  in foreign  countries  which may affect the
prices  of  portfolio  securities.  Communications  between  the US and  foreign
countries may be less reliable than within the US, thus  increasing  the risk of
delayed  settlements  of  portfolio  transactions  or loss of  certificates  for
portfolio securities. Payment for securities without delivery may be required in
certain foreign markets. In addition, with respect to certain foreign countries,
there is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect US investments
in those countries.  Moreover, individual foreign economies may differ favorably
or unfavorably  from the US economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment,  resource self-sufficiency and
balance of payments position. The Advisor seeks to mitigate the risks associated
with the foregoing considerations through continuous professional management.

High  Yield/High  Risk Bonds.  The Fund may purchase debt  securities  which are
rated below  investment-grade  (commonly referred to as "junk bonds"),  that is,
rated below Baa by Moody's or below BBB by S&P or Fitch and  unrated  securities
judged  to  be of  equivalent  quality  as  determined  by  the  Advisor.  These
securities  usually entail greater risk (including the possibility of default or
bankruptcy  of the  issuers  of  such  securities),  generally  involve  greater
volatility  of price and risk to principal  and income,  and may be less liquid,
than securities in the higher rating  categories.  The lower the ratings of such
debt  securities,  the more their  risks  render  them like  equity  securities.
Securities  rated D may be in default  with  respect to payment of  principal or
interest.

Issuers of such  high-yield  securities  often are highly  leveraged and may not
have available to them more  traditional  methods of financing.  Therefore,  the
risk  associated  with  acquiring the  securities  of such issuers  generally is
greater than is the case with higher-rated  securities.  For example,  during an
economic  downturn  or a  sustained  period of  rising  interest  rates,  highly
leveraged  issuers of high-yield  securities  may experience  financial  stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest  payment  obligations.   The  issuer's  ability  to  service  its  debt
obligations may also be adversely affected by specific  corporate  developments,
or the issuer's inability to meet specific projected business forecasts,  or the
unavailability  of  additional  financing.  The risk of loss from default by the
issuer is significantly greater for the holders of high-yield securities because
such  securities  are generally  unsecured and are often  subordinated  to other
creditors  of the  issuer.  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 the Fund's  net asset  value.  In
addition,  investments in high-yield  zero coupon or pay-in-kind  bonds,  rather
than income-bearing  high-yield  securities,  may be more speculative and may be
subject to greater fluctuations in value due to changes in interest rates.

The Fund may have difficulty disposing of certain high-yield  securities because
they may have a thin trading market. Because not all dealers maintain markets in
all high-yield  securities,  the Fund  anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. The lack of
a liquid secondary market may have an adverse effect on the market price and the
Fund's  ability  to  dispose  of  particular  issues  and may also


                                       8
<PAGE>

make it more  difficult for the Fund to obtain  accurate  market  quotations for
purposes of valuing the Fund's assets. Market quotations generally are available
on many  high-yield  issues  only from a limited  number of dealers  and may not
necessarily  represent  firm bids of such  dealers or prices  for actual  sales.
Adverse publicity and investor perceptions may decrease the values and liquidity
of high-yield securities. These securities may also involve special registration
responsibilities,   liabilities   and  costs,   and   liquidity   and  valuation
difficulties.

Credit  quality in the  high-yield  securities  market can change  suddenly  and
unexpectedly,  and even recently issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it is
generally the policy of the Advisor not to rely exclusively on ratings issued by
established credit rating agencies,  but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment  objective by investment in such  securities may be more dependent on
the Advisor's credit analysis than is the case for higher quality bonds.  Should
the rating of a portfolio  security be  downgraded,  the Advisor will  determine
whether  it is in the best  interests  of the Fund to retain or  dispose of such
security.

Prices for high-yield  securities may be affected by legislative  and regulatory
developments.  Also, Congress has from time to time considered legislation which
would  further  restrict or eliminate  the  corporate tax deduction for interest
payments  in  these  securities  and  regulate  corporate  restructurings.  Such
legislation may  significantly  depress the prices of outstanding  securities of
this type.

A portion of the  high-yield  securities  acquired by the Fund may be  purchased
upon  issuance,  which may  involve  special  risks  because the  securities  so
acquired  are new  issues.  In such  instances,  the Fund  may be a  substantial
purchaser of the issue and therefore  have the  opportunity  to  participate  in
structuring the terms of the offering. Although this may enable the Fund to seek
to protect itself against certain risks,  the  considerations  discussed  herein
would nevertheless remain applicable.

Restructuring  Instruments.  The Fund may hold distressed securities,  which are
securities  that are in default or in risk of being in  default.  In  connection
with an  exchange  or workout of such  securities,  the Fund may accept  various
instruments if the investment  adviser determines it is in the best interests of
the Fund and consistent with the Fund's investment objective and policies.  Such
instruments may include,  but not limited to,  warrants,  rights,  participation
interests in assets sales and contingent-interest obligations.

Illiquid Securities and Restricted Securities.  The Fund may purchase securities
that are subject to legal or  contractual  restrictions  on resale  ("restricted
securities").  Generally speaking, restricted securities may be sold (i) only to
qualified  institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers;  (iii) in limited  quantities after they have been
held for a specified  period of time and other conditions are met pursuant to an
exemption  from  registration;  or  (iv)  in  a  public  offering  for  which  a
registration  statement  is in  effect  under  the  Securities  Act of 1933,  as
amended.  Issuers of restricted  securities may not be subject to the disclosure
and other  investor  protection  requirements  that would be applicable if their
securities were publicly traded.

Restricted  securities  are often  illiquid,  but they may also be  liquid.  For
example,  restricted securities that are eligible for resale under Rule 144A are
often deemed to be liquid.

The Trust's Board has approved  guidelines for use by the Advisor in determining
whether a security  is liquid or  illiquid.  Among the  factors  the Advisor may
consider in reaching  liquidity  decisions relating to Rule 144A securities are:
(1) the  frequency  of trades  and quotes  for the  security;  (2) the number of
dealers  wishing  to  purchase  or sell the  security  and the  number  of other
potential purchasers;  (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the market for the security
(i.e.,  the time  needed to dispose of the  security,  the method of  soliciting
offers, and the mechanics of the transfer). Issuers of restricted securities may
not be subject to the disclosure and other investor protection  requirement that
would  be  applicable  if  their  securities  were  publicly  traded.   Where  a
registration statement is required for the resale of restricted securities,  the
Fund may be required to bear all or part of the registration  expenses. The Fund
may be deemed to be an "underwriter" for purposes of the Securities Act of 1933,
as amended, when selling restricted securities to the public and, in such event,
the Fund may be liable to  purchasers  of such  securities  if the  registration
statement prepared by the issuer is materially inaccurate or misleading.


                                       9
<PAGE>

The  Fund  may  also  purchase  securities  that  are not  subject  to  legal or
contractual   restrictions  on  resale,  but  that  are  deemed  illiquid.  Such
securities  may be illiquid,  for example,  because  there is a limited  trading
market for them.

The Fund may be unable to sell a restricted or illiquid  security.  In addition,
it may be more  difficult to determine a market value for restricted or illiquid
securities.  Moreover,  if adverse market  conditions were to develop during the
period between the Fund's decision to sell a restricted or illiquid 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.


Impact of Large  Redemptions  and  Purchases of Fund shares.  From time to time,
shareholders  of the Fund (which may include  affiliated  and/or  non-affiliated
registered investment companies that invest in a Fund) may make relatively large
redemptions or purchases of Fund shares.  These  transactions may cause the Fund
to have to sell securities or invest  additional cash, as the case may be. While
it is impossible to predict the overall impact of these  transactions over time,
there could be adverse effects on the Fund's  performance to the extent that the
Fund may be  required to sell  securities  or invest cash at times when it would
not otherwise do so. These transactions could also accelerate the realization of
taxable  income if sales of securities  resulted in capital gains and could also
increase transaction costs, which may impact the Fund's expense ratio.


Indexed  Securities.  The Fund may  invest in indexed  securities,  the value of
which is linked to currencies,  interest  rates,  commodities,  indices or other
financial  indicators  ("reference  instruments").  Most indexed securities have
maturities of three years or less.

Indexed  securities differ from other types of debt securities in which the Fund
may invest in several  respects.  First, the interest rate or, unlike other debt
securities,  the principal amount payable at maturity of an indexed security may
vary based on changes in one or more specified reference instruments, such as an
interest rate compared with a fixed interest rate or the currency exchange rates
between  two  currencies  (neither  of which need be the  currency  in which the
instrument is denominated).  The reference instrument need not be related to the
terms of the indexed security.  For example, the principal amount of a US dollar
denominated  indexed security may vary based on the exchange rate of two foreign
currencies.  An indexed security may be positively or negatively  indexed;  that
is, its value may increase or decrease if the value of the reference  instrument
increases.  Further,  the change in the principal amount payable or the interest
rate of an indexed security may be a multiple of the percentage change (positive
or negative) in the value of the underlying reference instrument(s).

Investment in indexed  securities  involves  certain  risks.  In addition to the
credit risk of the  security's  issuer and the normal risks of price  changes in
response  to  changes  in  interest  rates,  the  principal  amount  of  indexed
securities  may  decrease  as a result  of  changes  in the  value of  reference
instruments.  Further,  in the case of certain  indexed  securities in which the
interest  rate is linked to a reference  instrument,  the  interest  rate may be
reduced to zero, and any further  declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be  more  volatile  than  the  reference  instruments   underlying  the  indexed
securities.

IPO Risk.  Securities  issued  through  an  initial  public  offering  (IPO) can
experience an immediate drop in value if the demand for the securities  does not
continue to support the  offering  price.  Information  about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories.  The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and  adverse  tax  consequences.  The number of  securities  issued in an IPO is
limited,  so it is likely that IPO securities will represent a smaller component
of the Fund's  portfolio  as the Fund's  assets  increase  (and thus have a more
limited effect on the Fund's performance).

Interfund Borrowing and Lending Program. The Trust has received exemptive relief
from the SEC,  which  permits the Fund to  participate  in an interfund  lending
program among certain investment companies advised by the Advisor. The interfund
lending  program  allows the  participating  funds to borrow money from and loan
money to each other for temporary or emergency purposes.  The program is subject
to a number of conditions designed to ensure fair and equitable treatment of all
participating  funds,  including  the  following:  (1) no fund may borrow  money
through the program  unless it receives a more  favorable  interest  rate than a
rate  approximating  the  lowest  interest  rate at which  bank  loans  would be
available to any of the participating  funds under a loan agreement;  and (2)


                                       10
<PAGE>

no fund may lend money through the program  unless it receives a more  favorable
return than that available from an investment in repurchase  agreements  and, to
the extent applicable,  money market cash sweep arrangements.  In addition,  the
Fund  may  participate  in the  program  only  if and to the  extent  that  such
participation is consistent with the fund's  investment  objectives and policies
(for instance, money market funds would normally participate only as lenders and
tax exempt funds only as borrowers).  Interfund  loans and borrowings may extend
overnight,  but could have a maximum duration of seven days. Loans may be called
on one  day's  notice.  The  Fund  may  have to  borrow  from a bank at a higher
interest  rate if an  interfund  loan is  called  or not  renewed.  Any delay in
repayment  to a lending fund could result in a lost  investment  opportunity  or
additional costs. The program is subject to the oversight and periodic review of
the Board of the participating funds. To the extent the Fund is actually engaged
in borrowing through the interfund lending program,  such borrowings will comply
with the Fund's fundamental and non-fundamental policies.

Investing in Emerging Markets.  The Fund's investments in foreign securities may
be in developed  countries or in countries  considered by the Fund's  Advisor to
have  developing  or  "emerging"  markets,  which  involve  exposure to economic
structures  that are  generally  less  diverse and mature than in the US, and to
political  systems that may be less  stable.  A  developing  or emerging  market
country can be considered  to be a country that is in the initial  stages of its
industrialization  cycle.  Currently,  emerging markets  generally include every
country in the world other than the US, Canada, Japan,  Australia,  New Zealand,
Hong Kong, Singapore and most Western European countries.  Currently,  investing
in many emerging markets may not be desirable or feasible because of the lack of
adequate  custody   arrangements  for  the  Fund's  assets,   overly  burdensome
repatriation  and  similar  restrictions,  the  lack  of  organized  and  liquid
securities   markets,   unacceptable   political  risks  or  other  reasons.  As
opportunities to invest in securities in emerging markets develop,  the Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past,  markets of developing  or emerging  market  countries  have been more
volatile than the markets of developed  countries;  however,  such markets often
have  provided  higher rates of return to  investors.  The Advisor  believe that
these characteristics may be expected to continue in the future.

Most emerging  securities markets have substantially less volume and are subject
to less governmental supervision than US securities markets.  Securities of many
issuers in emerging markets may be less liquid and more volatile than securities
of  comparable  domestic  issuers.  In  addition,  there is less  regulation  of
securities  exchanges,  securities dealers, and listed and unlisted companies in
emerging markets than in the US.

Emerging markets also have different clearance and settlement procedures, and in
certain markets there have been times when  settlements  have not kept pace with
the volume of  securities  transactions.  Delays in  settlement  could result in
temporary  periods  when a portion of the assets of the Fund is  uninvested  and
therefore  no  return  is  earned  thereon.  The  inability  of the Fund to make
intended security  purchases due to settlement  problems could cause the Fund to
miss  attractive  investment  opportunities.  Inability  to dispose of portfolio
securities due to settlement  problems could result either in losses to the Fund
due to subsequent  declines in value of the  portfolio  security or, if the Fund
has  entered  into a contract  to sell the  security,  could  result in possible
liability  to the  purchaser.  Costs  associated  with  transactions  in foreign
securities,  particularly in emerging  markets,  are generally higher than costs
associated  with  transactions  in US  securities.  Such  transactions  may also
involve additional costs for the purchase or sale of foreign currency.

Certain emerging markets require prior  governmental  approval of investments by
foreign  persons,  limit the  amount  of  investment  by  foreign  persons  in a
particular  company,  limit the investment by foreign persons only to a specific
class of securities of a company that may have less advantageous rights than the
classes  available for purchase by  domiciliaries of the countries and/or impose
additional  taxes  on  foreign  investors.  Certain  emerging  markets  may also
restrict  investment  opportunities in issuers in industries deemed important to
national interest.  Certain emerging markets may require  governmental  approval
for the repatriation of investment  income,  capital or the proceeds of sales of
securities by foreign investors.  In addition,  if a deterioration  occurs in an
emerging  market's  balance of payments or for other  reasons,  a country  could
impose temporary restrictions on foreign capital remittances.  The Fund could be
adversely   affected  by  delays  in,  or  a  refusal  to  grant,  any  required
governmental approval for repatriation of capital, as well as by the application
to the Fund of any restrictions on investments.

In the course of investment in emerging markets, the Fund will be exposed to the
direct or indirect consequences of political, social and economic changes in one
or more emerging markets. While the Fund will manage its assets in a manner that
will seek to minimize the exposure to such risks, there can be no assurance that
adverse political,  social


                                       11
<PAGE>

or economic changes will not cause the Fund to suffer a loss of value in respect
of the securities in the Fund's holdings. The risk also exists that an emergency
situation may arise in one or more emerging markets as a result of which trading
of  securities  may cease or may be  substantially  curtailed and prices for the
Fund's  securities  in such markets may not be readily  available.  The Fund may
suspend  redemption  of its  shares  for any period  during  which an  emergency
exists,  as  determined  by the  SEC.  Accordingly,  if the Fund  believes  that
appropriate  circumstances  exist,  it  will  promptly  apply  to the  SEC for a
determination  that an emergency is present.  During the period  commencing from
the Fund's  identification  of such condition  until the date of the SEC action,
the  Fund's  securities  in the  affected  markets  will be valued at fair value
determined in good faith by or under the direction of the Trust's Board.

Volume  and  liquidity  in most  foreign  markets  are less than in the US,  and
securities  of many foreign  companies  are less liquid and more  volatile  than
securities of comparable US companies.  Fixed commissions on foreign  securities
exchanges  are generally  higher than  negotiated  commissions  on US exchanges,
although  the Fund  endeavors to achieve the most  favorable  net results on its
portfolio  transactions.  There is generally  less  government  supervision  and
regulation of business and industry practices,  securities  exchanges,  brokers,
dealers and listed  companies  than in the US. Mail  service  between the US and
foreign  countries  may be slower or less  reliable  than  within  the US,  thus
increasing the risk of delayed settlements of portfolio  transactions or loss of
certificates for certificated portfolio securities. In addition, with respect to
certain  emerging  markets,   there  is  the  possibility  of  expropriation  or
confiscatory   taxation,   political  or  social   instability,   or  diplomatic
developments  which  could  affect the Fund's  investments  in those  countries.
Moreover,   individual   emerging  market  economies  may  differ  favorably  or
unfavorably  from the US economy in such  respects  as growth of gross  national
product, rate of inflation, capital reinvestment,  resource self-sufficiency and
balance of payments position.

The Fund may have limited legal  recourse in the event of a default with respect
to certain debt  obligations it holds. If the issuer of a fixed-income  security
owned by the Fund  defaults,  the Fund may  incur  additional  expenses  to seek
recovery.  Debt obligations issued by emerging market country governments differ
from debt  obligations  of private  entities;  remedies  from  defaults  on debt
obligations issued by emerging market governments, unlike those on private debt,
must be pursued in the courts of the defaulting party itself. The Fund's ability
to enforce its rights  against  private  issuers may be limited.  The ability to
attach assets to enforce a judgment may be limited.  Legal recourse is therefore
somewhat diminished. Bankruptcy, moratorium and other similar laws applicable to
private issuers of debt obligations may be substantially different from those of
other  countries.  The  political  context,  expressed  as  an  emerging  market
governmental issuer's willingness to meet the terms of the debt obligation,  for
example, is of considerable  importance.  In addition, no assurance can be given
that the holders of commercial bank debt may not contest payments to the holders
of  debt  obligations  in the  event  of  default  under  commercial  bank  loan
agreements.

Income from securities held by the Fund could be reduced by a withholding tax at
the source or other taxes imposed by the emerging market  countries in which the
Fund makes its  investments.  The Fund's net asset value may also be affected by
changes  in the  rates  or  methods  of  taxation  applicable  to the Fund or to
entities in which the Fund has  invested.  The Advisor will consider the cost of
any taxes in determining whether to acquire any particular investments,  but can
provide no assurance that the taxes will not be subject to change.

Many  emerging  markets  have  experienced  substantial,  and, in some  periods,
extremely  high  rates  of  inflation  for  many  years.   Inflation  and  rapid
fluctuations  in  inflation  rates  have had and may  continue  to have  adverse
effects on the  economies  and  securities  markets of certain  emerging  market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain  countries.  Of these countries,  some, in recent years, have
begun to control inflation through prudent economic policies.

Emerging market governmental issuers are among the largest debtors to commercial
banks,  foreign  governments,  international  financial  organizations and other
financial  institutions.  Certain emerging market governmental  issuers have not
been able to make  payments of interest on or principal of debt  obligations  as
those payments have come due.

Obligations  arising from past restructuring  agreements may affect the economic
performance and political and social stability of those issuers.  Governments of
many  emerging  market   countries  have  exercised  and  continue  to  exercise
substantial  influence  over many  aspects of the  private  sector  through  the
ownership  or control of many  companies,  including  some of the largest in any
given  country.  As a result,  government  actions  in the  future  could have a

                                       12
<PAGE>

significant  effect on economic  conditions in emerging markets,  which in turn,
may adversely affect companies in the private sector,  general market conditions
and prices and yields of  certain  of the  securities  in the Fund's  portfolio.
Expropriation,  confiscatory taxation,  nationalization,  political, economic or
social instability or other similar  developments have occurred  frequently over
the history of certain  emerging  markets and could adversely  affect the Fund's
assets should these  conditions  recur.  The ability of emerging  market country
governmental  issuers to make timely payments on their  obligations is likely to
be influenced  strongly by the issuer's  balance of payments,  including  export
performance,  and its  access  to  international  credits  and  investments.  An
emerging market whose exports are  concentrated  in a few  commodities  could be
vulnerable  to a  decline  in the  international  prices of one or more of those
commodities. Increased protectionism on the part of an emerging market's trading
partners  could also  adversely  affect the  country's  exports and diminish its
trade  account  surplus,  if any. To the extent that  emerging  markets  receive
payment for its exports in currencies other than dollars or non-emerging  market
currencies,  its  ability  to make  debt  payments  denominated  in  dollars  or
non-emerging market currencies could be affected.

Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country.  Fluctuations
in the level of these  reserves  affect the amount of foreign  exchange  readily
available  for  external  debt  payments  and thus  could  have a bearing on the
capacity  of  emerging   market   countries  to  make  payments  on  these  debt
obligations.

To the extent that an emerging  market country cannot  generate a trade surplus,
it must  depend on  continuing  loans  from  foreign  governments,  multilateral
organizations or private commercial banks, aid payments from foreign governments
and inflows of foreign investment. The access of emerging markets to these forms
of external  funding may not be certain,  and a withdrawal  of external  funding
could  adversely  affect the capacity of emerging  market  country  governmental
issuers  to make  payments  on  their  obligations.  In  addition,  the  cost of
servicing  emerging  market  debt  obligations  can be  affected  by a change in
international  interest  rates  since the  majority of these  obligations  carry
interest rates that are adjusted periodically based upon international rates.

Investment  Company  Securities.  The  Fund  may  acquire  securities  of  other
investment  companies to the extent consistent with its investment objective and
subject to the  limitations of the 1940 Act. The Fund will  indirectly  bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.

For example, the Fund may invest in a variety of investment companies which seek
to track the  composition  and  performance  of  specific  indexes or a specific
portion of an index.  These  index-based  investments hold  substantially all of
their assets in securities representing their specific index.  Accordingly,  the
main risk of investing in index-based  investments is the same as investing in a
portfolio  of equity  securities  comprising  the index.  The  market  prices of
index-based  investments  will fluctuate in accordance  with both changes in the
market  value of their  underlying  portfolio  securities  and due to supply and
demand for the  instruments on the exchanges on which they are traded (which may
result in their  trading at a discount  or premium to their  NAVs).  Index-based
investments  may not replicate  exactly the performance of their specified index
because of  transaction  costs and because of the  temporary  unavailability  of
certain component securities of the index.

Examples of index-based investments include:

SPDRs(R):  SPDRs,  an acronym for "Standard & Poor's  Depositary  Receipts," are
based on the S&P 500  Composite  Stock Price Index.  They are issued by the SPDR
Trust,  a unit  investment  trust that  holds  shares of  substantially  all the
companies  in the S&P 500 in  substantially  the  same  weighting  and  seeks to
closely track the price performance and dividend yield of the Index.

MidCap  SPDRs(R):  MidCap SPDRs are based on the S&P MidCap 400 Index.  They are
issued by the MidCap SPDR Trust, a unit investment  trust that holds a portfolio
of securities  consisting of  substantially  all of the common stocks in the S&P
MidCap 400 Index in substantially  the same weighting and seeks to closely track
the price performance and dividend yield of the Index.

Select Sector SPDRs(R):  Select Sector SPDRs are based on a particular sector or
group of  industries  that are  represented  by a specified  Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end  management  investment  company with nine
portfolios  that each seeks to closely track the price  performance and dividend
yield of a particular Select Sector Index.

                                       13
<PAGE>

DIAMONDS(SM):  DIAMONDS are based on the Dow Jones Industrial Average(SM).  They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.

Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100  Trust, a unit investment  trust that holds a portfolio
consisting of substantially  all of the securities,  in  substantially  the same
weighting,  as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.



Investment-Grade  Bonds. The Fund may purchase  "investment-grade"  bonds, which
are those rated Aaa,  Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated,  judged to be of  equivalent  quality  as  determined  by the  Advisor.
Moody's  considers  bonds it rates Baa to have  speculative  elements as well as
investment-grade  characteristics.   To  the  extent  that  a  Fund  invests  in
higher-grade  securities,  the  Fund  will  not  be  able  to  avail  itself  of
opportunities for higher income which may be available at lower grades.

Investment of  Uninvested  Cash  Balances.  The Fund may have cash balances that
have not been invested in portfolio securities  ("Uninvested Cash").  Uninvested
Cash may result  from a variety of  sources,  including  dividends  or  interest
received from portfolio securities, unsettled securities transactions,  reserves
held for  investment  strategy  purposes,  scheduled  maturity  of  investments,
liquidation  of  investment  securities  to  meet  anticipated  redemptions  and
dividend payments, and new cash received from investors.  Uninvested Cash may be
invested  directly  in  money  market   instruments  or  other  short-term  debt
obligations.  Pursuant to an Exemptive Order issued by the SEC, the Fund may use
Uninvested  Cash to purchase  shares of affiliated  funds including money market
funds, short-term bond funds and Cash Management QP Trust, or one or more future
entities  for which the  Advisor  acts as trustee  or  investment  advisor  that
operate as cash  management  investment  vehicles and that are excluded from the
definition of investment  company  pursuant to section 3(c)(1) or 3(c)(7) of the
1940 Act  (collectively,  the "Central  Funds") in excess of the  limitations of
Section 12(d)(1) of the 1940 Act.  Investment by a Fund in shares of the Central
Funds will be in accordance with a Fund's  investment  policies and restrictions
as set forth in its registration statement.

Certain of the Central Funds comply with rule 2a-7 under the 1940 Act. The other
Central Funds are or will be short-term  bond funds that invest in  fixed-income
securities  and maintain a dollar  weighted  average  maturity of three years or
less.  Each of the  Central  Funds will be managed  specifically  to  maintain a
highly  liquid  portfolio,  and access to them will enhance a Fund's  ability to
manage Uninvested Cash.

The Fund will invest  Uninvested  Cash in Central  Funds only to the extent that
the Fund's aggregate  investment in the Central Funds does not exceed 25% of its
total  assets.  Purchase  and sales of shares of  Central  Funds are made at net
asset value.

Lending of Portfolio Securities.  The Fund may lend its investment securities to
approved  institutional  borrowers  who need to  borrow  securities  in order to
complete certain  transactions,  such as covering short sales, avoiding failures
to deliver  securities  or  completing  arbitrage  operations.  By  lending  its
investment  securities,  the Fund attempts to increase its net investment income
through  the  receipt of  interest  on the loan.  Any gain or loss in the market
price of the  securities  loaned  that might  occur  during the term of the loan
would belong to the Fund. The Fund may lend its investment securities so long as
the terms, structure and the aggregate amount of such loans are not inconsistent
with the 1940 Act or the rules and  regulations  or  interpretations  of the SEC
thereunder,  which  currently  require that (a) the borrower pledge and maintain
with the Fund  collateral  consisting  of liquid,  unencumbered  assets having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral  whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis),  (c) the loan
be made  subject  to  termination  by the  Fund at any  time,  and (d) the  Fund
receives  reasonable  interest on the loan (which may include the Fund investing
any  cash  collateral  in  interest   bearing   short-term   investments),   and
distributions  on the loaned  securities and any increase in their market value.
There may be risks of delay in recovery of the securities or even loss of rights
in the  collateral  should the  borrower  of the


                                       14
<PAGE>

securities  fail  financially.  However,  loans  will be made only to  borrowers
selected  by the  Fund's  delegate  after a  commercially  reasonable  review of
relevant  facts  and  circumstances,   including  the  creditworthiness  of  the
borrower.

At the  present  time,  the staff of the SEC does not  object  if an  investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such  fees are set  forth in a  written  contract  and  approved  by the
investment company's Board of Trustees/Directors. In addition, voting rights may
pass with the loaned  securities,  but if a material  event occurs  affecting an
investment on loan, the loan must be called and the securities  voted.  Pursuant
to an exemptive order granted by the SEC, cash  collateral  received by the Fund
may be  invested in a money  market  fund  managed by the Advisor (or one of its
affiliates).

Privatized Enterprises. Investments in foreign securities may include securities
issued  by  enterprises   that  have  undergone  or  are  currently   undergoing
privatization.  The  governments of certain  foreign  countries have, to varying
degrees,  embarked on privatization  programs  contemplating  the sale of all or
part of their  interests in state  enterprises.  The Fund's  investments  in the
securities  of  privatized   enterprises   may  include   privately   negotiated
investments in a government or  state-owned or controlled  company or enterprise
that has not yet  conducted  an  initial  equity  offering,  investments  in the
initial  offering of equity  securities  of a state  enterprise  or former state
enterprise and investments in the securities of a state enterprise following its
initial equity offering.

In certain jurisdictions,  the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less  advantageous  than for
local investors.  Moreover, there can be no assurance that governments that have
embarked on  privatization  programs will continue to divest their  ownership of
state  enterprises,  that  proposed  privatizations  will be  successful or that
governments will not re-nationalize enterprises that have been privatized.

In the case of the enterprises in which the Fund may invest, large blocks of the
stock of those  enterprises may be held by a small group of  stockholders,  even
after  the  initial  equity  offerings  by those  enterprises.  The sale of some
portion or all of those blocks could have an adverse  effect on the price of the
stock of any such enterprise.

Prior to making an initial  equity  offering,  most state  enterprises or former
state  enterprises go through an internal  reorganization  or  management.  Such
reorganizations  are made in an attempt to better  enable these  enterprises  to
compete in the private sector. However,  certain reorganizations could result in
a  management  team  that does not  function  as well as an  enterprise's  prior
management and may have a negative effect on such enterprise.  In addition,  the
privatization  of an  enterprise  by its  government  may occur over a number of
years,  with the  government  continuing to hold a  controlling  position in the
enterprise even after the initial equity offering for the enterprise.

Prior to  privatization,  most of the  state  enterprises  in which the Fund may
invest  enjoy the  protection  of and receive  preferential  treatment  from the
respective  sovereigns that own or control them.  After making an initial equity
offering,  these  enterprises may no longer have such protection or receive such
preferential  treatment and may become subject to market  competition from which
they were  previously  protected.  Some of these  enterprises may not be able to
operate  effectively in a competitive market and may suffer losses or experience
bankruptcy due to such competition.

Real  Estate  Investment  Trusts  ("REITs").   REITs  are  sometimes  informally
categorized  into equity REITs,  mortgage REITs and hybrid REITs.  Investment in
REITs may subject the Fund to risks associated with the direct ownership of real
estate,  such  as  decreases  in real  estate  values,  overbuilding,  increased
competition  and other risks  related to local or general  economic  conditions,
increases  in  operating  costs and  property  taxes,  changes  in zoning  laws,
casualty or condemnation losses, possible environmental liabilities,  regulatory
limitations on rent and  fluctuations  in rental income.  Equity REITs generally
experience  these risks  directly  through fee or leasehold  interests,  whereas
mortgage REITs generally  experience  these risks  indirectly  through  mortgage
interests,  unless the mortgage REIT  forecloses on the underlying  real estate.
Changes in interest rates may also affect the value of the Fund's  investment in
REITs.  For  instance,  during  periods of  declining  interest  rates,  certain
mortgage REITs may hold mortgages  that the  mortgagors  elect to prepay,  which
prepayment may diminish the yield on securities issued by those REITs.

Certain REITs have relatively  small market  capitalizations,  which may tend to
increase the  volatility of the market price of their  securities.  Furthermore,
REITs  are  dependent  upon   specialized   management   skills,   have  limited

                                       15
<PAGE>

diversification and are,  therefore,  subject to risks inherent in operating and
financing a limited  number of  projects.  REITs are also  subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free  pass-through  of income under the Code, and to maintain  exemption
from the  registration  requirements  of the 1940  Act.  By  investing  in REITs
indirectly  through  the  Fund,  a  shareholder  will  bear  not only his or her
proportionate share of the expenses of the Fund, but also,  indirectly,  similar
expenses of the REITs. In addition,  REITs depend  generally on their ability to
generate cash flow to make distributions to shareholders.

Repurchase Agreements.  The Fund may invest in repurchase agreements pursuant to
its  investment  guidelines.  In  a  repurchase  agreement,  the  Fund  acquires
ownership of a security and  simultaneously  commits to resell that  security to
the seller, typically a bank or broker/dealer.

A repurchase agreement provides a means for the Fund to earn income on funds for
periods as short as overnight.  It is an  arrangement  under which the purchaser
(i.e., the Fund) acquires a security  ("Obligation")  and the seller agrees,  at
the time of sale, to repurchase  the  Obligation at a specified  time and price.
Securities  subject to a repurchase  agreement are held in a segregated  account
and, as described in more detail below,  the value of such securities is kept at
least equal to the repurchase  price on a daily basis.  The repurchase price may
be higher than the purchase price,  the difference  being income to the Fund, or
the purchase and  repurchase  prices may be the same,  with interest at a stated
rate due to the Fund  together with the  repurchase  price upon  repurchase.  In
either case,  the income to the Fund is  unrelated  to the interest  rate on the
Obligation  itself.  Obligations will be held by the custodian or in the Federal
Reserve Book Entry System.

It is not clear whether a court would consider the  Obligation  purchased by the
Fund subject to a  repurchase  agreement as being owned by that Fund or as being
collateral  for a  loan  by  that  Fund  to the  seller.  In  the  event  of the
commencement of bankruptcy or insolvency  proceedings with respect to the seller
of the  Obligation  before  repurchase  of the  Obligation  under  a  repurchase
agreement,  the Fund may  encounter  delay and incur costs  before being able to
sell the  security.  Delays may involve  loss of interest or decline in price of
the  Obligation.  If the court  characterizes  the transaction as a loan and the
Fund has not perfected a security  interest in the  Obligation,  the Fund may be
required to return the  Obligation  to the seller's  estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
risk  of  losing  some  or all of  the  principal  and  income  involved  in the
transaction.  As with any unsecured debt Obligation  purchased for the Fund, the
Advisor  seeks to  reduce  the risk of loss  through  repurchase  agreements  by
analyzing the  creditworthiness  of the obligor,  in this case the seller of the
Obligation.  Apart from the risk of bankruptcy or insolvency proceedings,  there
is also the risk that the seller may fail to repurchase the Obligation, in which
case  the  Fund may  incur a loss if the  proceeds  to the Fund of the sale to a
third party are less than the  repurchase  price.  However,  if the market value
(including  interest)  of the  Obligation  subject to the  repurchase  agreement
becomes  less than the  repurchase  price  (including  interest),  the Fund will
direct the seller of the Obligation to deliver additional securities so that the
market value  (including  interest) of all securities  subject to the repurchase
agreement will equal or exceed the repurchase price.

Reverse  Repurchase  Agreements.  The Fund may enter  into  "reverse  repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the  securities,  agrees to  repurchase  such  securities  at an agreed time and
price.  The Fund  segregates  assets in an amount at least equal to  obligations
under  outstanding  reverse  repurchase  agreements.  The Fund will  enter  into
reverse  repurchase  agreements only when the Advisor believes that the interest
income to be earned from the investment of the proceeds of the transaction  will
be greater than the interest expense of the transaction.  Such  transactions may
increase fluctuations in the market value of Fund assets and its yield.

Short Sales  Against the Box. The Fund may make short sales of common stocks if,
at all  times  when a short  position  is open,  the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without payment
of further  consideration,  into the shares of common  stock sold  short.  Short
sales of this kind are  referred to as short sales  "against  the box." The Fund
will  incur a loss as a result  of the short  sale if the price of the  security
increases  between  the dates of the  short  sale and the date on which the Fund
replaces the borrowed  security.  The  broker/dealer  that executes a short sale
generally  invests  cash  proceeds  of the sale until they are paid to the Fund.
Arrangements  may be made with the  broker/dealer  to  obtain a  portion  of the
interest earned by the broker on the investment of short sale proceeds. The Fund
will segregate the common stock or convertible or  exchangeable  preferred stock
or debt securities in a special account with the custodian.  The Fund will incur
transaction  costs,  including  interest  expenses in  connection  with opening,
maintaining,  and closing short sales against the box.

                                       16
<PAGE>
Uncertainty regarding the tax effects of short sales of appreciated  investments
may limit the extent to which a Fund may enter into short sales against the box.

Small Company  Risk.  The Advisor  believes  that many small  companies may have
sales and earnings growth rates which exceed those of larger companies, and that
such  growth  rates  may  in  turn  be  reflected  in  more  rapid  share  price
appreciation  over time.  However,  investing in smaller company stocks involves
greater risk than is  customarily  associated  with  investing  in larger,  more
established companies.  For example,  smaller companies can have limited product
lines,  markets,  or financial and managerial  resources.  Smaller companies may
also be dependent on one or a few key persons,  and may be more  susceptible  to
losses and risks of bankruptcy. Also, the securities of smaller companies may be
thinly traded (and  therefore  have to be sold at a discount from current market
prices or sold in small lots over an extended period of time). Transaction costs
in smaller company stocks may be higher than those of larger companies.

Sovereign Debt.  Investment in sovereign debt can involve a high degree of risk.
The governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the  principal  and/or  interest when due in accordance
with the terms of such debt. A governmental  entity's  willingness or ability to
repay  principal  and interest due in a timely  manner may be affected by, among
other factors, its cash flow situation,  the extent of its foreign reserves, the
availability  of sufficient  foreign  exchange on the date a payment is due, the
relative  size of the  debt  service  burden  to the  economy  as a  whole,  the
governmental  entity's  policy toward the  International  Monetary Fund, and the
political   constraints  to  which  a   governmental   entity  may  be  subject.
Governmental  entities  may also be  dependent  on expected  disbursements  from
foreign governments, multilateral agencies and others abroad to reduce principal
and  interest  arrearages  on their debt.  The  commitment  on the part of these
governments,  agencies and others to make such  disbursements may be conditioned
on a governmental  entity's  implementation  of economic reforms and/or economic
performance  and the timely  service of such  debtor's  obligations.  Failure to
implement  such reforms,  achieve such levels of economic  performance  or repay
principal  or  interest  when due may result in the  cancellation  of such third
parties commitments to lend funds to the governmental  entity, which may further
impair such  debtor's  ability or  willingness  to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt may be requested to participate in the rescheduling of
such debt and to extend  further  loans to  governmental  entities.  There is no
bankruptcy  proceeding by which  sovereign debt on which  governmental  entities
have defaulted may be collected in whole or in part.

Strategic  Transactions and  Derivatives.  The Fund may, but is not required to,
utilize various other investment  strategies as described below for a variety of
purposes,  such as hedging various market risks, managing the effective maturity
or duration of the fixed-income  securities in the Fund's portfolio or enhancing
potential gain.  These  strategies may be executed through the use of derivative
contracts.

In the course of pursuing these investment strategies, the Fund may purchase and
sell  exchange-listed and  over-the-counter  put and call options on securities,
equity and fixed-income indices and other instruments, purchase and sell futures
contracts and options thereon,  enter into various  transactions  such as swaps,
caps, floors, collars,  currency forward contracts,  currency futures contracts,
currency swaps or options on currencies,  or currency  futures and various other
currency  transactions  (collectively,  all  the  above  are  called  "Strategic
Transactions").  In  addition,  Strategic  Transactions  may  also  include  new
techniques,  instruments or strategies that are permitted as regulatory  changes
occur.  Strategic  Transactions  may be used without  limit  (subject to certain
limits imposed by the 1940 Act) to attempt to protect against  possible  changes
in the market  value of  securities  held in or to be  purchased  for the Fund's
portfolio   resulting  from  securities   markets  or  currency   exchange  rate
fluctuations,  to  protect  the  Fund's  unrealized  gains  in the  value of its
portfolio  securities,  to facilitate the sale of such securities for investment
purposes,  to manage the effective maturity or duration of the Fund's portfolio,
or to  establish  a position  in the  derivatives  markets as a  substitute  for
purchasing or selling  particular  securities.  Some Strategic  Transactions may
also be used to  enhance  potential  gain,  consistent  with  Fund's  investment
objective. Any or all of these investment techniques may be used at any time and
in any combination, and there is no particular strategy that dictates the use of
one technique  rather than another,  as use of any  Strategic  Transaction  is a
function of numerous variables  including market conditions.  The ability of the
Fund to utilize these  Strategic  Transactions  successfully  will depend on the
Advisor's  ability  to  predict  pertinent  market  movements,  which  cannot be
assured.  The Fund will  comply with  applicable  regulatory  requirements  when
implementing   these   strategies,   techniques   and   instruments.   Strategic
Transactions  will  not be used to alter  fundamental  investment  purposes  and
characteristics  of the Fund, and the Fund


                                       17
<PAGE>

will  segregate  assets (or as provided by  applicable  regulations,  enter into
certain offsetting  positions) to cover its obligations under options,  futures,
swaps and other derivatives to limit leveraging of the Fund.

Strategic  Transactions,  including derivative contracts,  have risks associated
with them  including  possible  default by the other  party to the  transaction,
illiquidity and, to the extent the Advisor's view as to certain market movements
is incorrect,  the risk that the use of such Strategic Transactions could result
in losses  greater  than if they had not been used.  Use of put and call options
may  result  in losses to the Fund,  force  the sale or  purchase  of  portfolio
securities  at  inopportune  times or for prices higher than (in the case of put
options)  or lower than (in the case of call  options)  current  market  values,
limit the amount of  appreciation  the Fund can  realize on its  investments  or
cause the Fund to hold a security it might  otherwise  sell. The use of currency
transactions  can result in the Fund incurring losses as a result of a number of
factors   including  the   imposition  of  exchange   controls,   suspension  of
settlements,  or the inability to deliver or receive a specified  currency.  The
use of  options  and  futures  transactions  entails  certain  other  risks.  In
particular,  the  variable  degree of  correlation  between  price  movements of
futures contracts and price movements in the related  portfolio  position of the
Fund  creates  the  possibility  that losses on the  hedging  instrument  may be
greater than gains in the value of the Fund's position. In addition, futures and
options   markets   may  not  be  liquid  in  all   circumstances   and  certain
over-the-counter  options may have no markets.  As a result, in certain markets,
the  Fund  might  not be able  to  close  out a  transaction  without  incurring
substantial  losses,  if at  all.  Although  the  use  of  futures  and  options
transactions  for  hedging  should  tend to  minimize  the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any  potential  gain  which  might  result  from an  increase  in  value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential  financial risk than would purchases of
options,  where the  exposure  is  limited to the cost of the  initial  premium.
Losses resulting from the use of Strategic  Transactions  would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.

General  Characteristics of Options. Put options and call options typically have
similar structural  characteristics and operational  mechanics regardless of the
underlying  instrument on which they are purchased or sold.  Thus, the following
general  discussion relates to each of the particular types of options discussed
in greater  detail below.  In addition,  many Strategic  Transactions  involving
options  require  segregation of fund assets in special  accounts,  as described
below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option,  upon payment of a premium,  the
right to sell, and the writer the  obligation to buy, the  underlying  security,
commodity,  index,  currency or other  instrument  at the  exercise  price.  For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying  instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such  instrument at the option  exercise price. A call option,
upon payment of a premium,  gives the  purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price.  The Fund's  purchase of a call option on a security,  financial  future,
index,  currency  or other  instrument  might be  intended  to protect  the Fund
against an increase in the price of the underlying instrument that it intends to
purchase  in the  future  by  fixing  the  price at which it may  purchase  such
instrument.  An American  style put or call option may be  exercised at any time
during  the  option  period  while a  European  style put or call  option may be
exercised only upon expiration or during a fixed period prior thereto.  The Fund
is authorized to purchase and sell exchange listed options and  over-the-counter
options  ("OTC  options").  Exchange  listed  options  are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"),  which guarantees
the  performance  of the  obligations  of  the  parties  to  such  options.  The
discussion  below uses the OCC as an example,  but is also  applicable  to other
financial intermediaries.

With certain exceptions, OCC issued and exchange listed options generally settle
by physical  delivery of the  underlying  security or currency,  although in the
future cash  settlement  may become  available.  Index  options  and  Eurodollar
instruments are cash settled for the net amount,  if any, by which the option is
"in-the-money"  (i.e., where the value of the underlying  instrument exceeds, in
the case of a call  option,  or is less than,  in the case of a put option,  the
exercise  price of the option) at the time the option is exercised.  Frequently,
rather than taking or making delivery of the underlying  instrument  through the
process of  exercising  the option,  listed  options are closed by entering into
offsetting  purchase or sale transactions that do not result in ownership of the
new option.

The Fund's  ability to close out its position as a purchaser or seller of an OCC
or exchange listed put or call option is dependent,  in part, upon the liquidity
of the option  market.  Among the  possible  reasons for the absence of a liquid

                                       18
<PAGE>

option market on an exchange are: (i)  insufficient  trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts,  suspensions  or other  restrictions  imposed with respect to  particular
classes or series of options or underlying  securities  including reaching daily
price  limits;  (iv)  interruption  of the  normal  operations  of the OCC or an
exchange;  (v)  inadequacy  of the  facilities  of an  exchange or OCC to handle
current  trading  volume;  or  (vi)  a  decision  by one or  more  exchanges  to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant  market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed  options may not coincide  with the hours during
which the underlying  financial  instruments are traded.  To the extent that the
option   markets  close  before  the  markets  for  the   underlying   financial
instruments,  significant  price  and  rate  movements  can  take  place  in the
underlying markets that cannot be reflected in the option markets.

OTC  options  are  purchased  from  or  sold to  securities  dealers,  financial
institutions  or  other  parties  ("Counterparties")  through  direct  bilateral
agreement with the Counterparty.  In contrast to exchange listed options,  which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement,  term, exercise price,
premium,  guarantees and security,  are set by  negotiation of the parties.  The
Fund will only sell OTC  options  (other  than OTC  currency  options)  that are
subject to a buy-back provision  permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula  price within  seven days.  The
Fund  expects  generally  to enter into OTC  options  that have cash  settlement
provisions, although it is not required to do so.

Unless the  parties  provide  for it,  there is no central  clearing or guaranty
function in an OTC option.  As a result,  if the  Counterparty  fails to make or
take delivery of the security,  currency or other  instrument  underlying an OTC
option  it has  entered  into  with the Fund or fails to make a cash  settlement
payment due in accordance with the terms of that option,  the Fund will lose any
premium  it paid  for the  option  as well  as any  anticipated  benefit  of the
transaction.  Accordingly,  the Advisor must assess the creditworthiness of each
such Counterparty or any guarantor or credit  enhancement of the  Counterparty's
credit to  determine  the  likelihood  that the terms of the OTC option  will be
satisfied.  The  Fund  will  engage  in OTC  option  transactions  only  with US
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary  dealers"  or  broker/dealers,  domestic  or foreign  banks or other
financial  institutions which have received (or the guarantors of the obligation
of which have  received) a short-term  credit rating of A-1 from S&P or P-1 from
Moody's or an  equivalent  rating  from any  nationally  recognized  statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions,  are
determined to be of equivalent  credit quality by the Advisor.  The staff of the
SEC  currently  takes the position that OTC options  purchased by the Fund,  and
portfolio securities  "covering" the amount of the Fund's obligation pursuant to
an OTC  option  sold by it (the  cost of the  sell-back  plus  the  in-the-money
amount,  if any) are  illiquid,  and are  subject  to the Fund's  limitation  on
investing no more than 15% of its net assets in illiquid securities.

If the Fund sells a call  option,  the premium  that it receives  may serve as a
partial hedge,  to the extent of the option  premium,  against a decrease in the
value of the  underlying  securities  or  instruments  in its  portfolio or will
increase the Fund's income. The sale of put options can also provide income.

The Fund may purchase and sell call options on securities  including US Treasury
and agency  securities,  mortgage-backed  securities,  foreign  sovereign  debt,
corporate debt securities,  equity securities (including convertible securities)
and  Eurodollar  instruments  that  are  traded  on US  and  foreign  securities
exchanges  and in the  over-the-counter  markets,  and  on  securities  indices,
currencies and futures  contracts.  All calls sold by the Fund must be "covered"
(i.e., the fund must own the securities or futures contract subject to the call)
or must meet the asset segregation  requirements  described below as long as the
call is  outstanding.  Even though the Fund will  receive the option  premium to
help  protect it against  loss,  a call sold by the Fund exposes the Fund during
the term of the option to possible loss of opportunity  to realize  appreciation
in the market price of the underlying security or instrument and may require the
Fund to hold a security or instrument which it might otherwise have sold.

The Fund may purchase and sell put options on  securities  including US Treasury
and agency  securities,  mortgage-backed  securities,  foreign  sovereign  debt,
corporate debt securities,  equity securities (including convertible securities)
and Eurodollar  instruments (whether or not it holds the above securities in its
portfolio),  and on securities


                                       19
<PAGE>

indices,  currencies  and futures  contracts  other than  futures on  individual
corporate  debt and  individual  equity  securities.  The Fund will not sell put
options  if, as a result,  more than 50% of the  Fund's  total  assets  would be
required to be  segregated  to cover its  potential  obligations  under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price above the market price.

General Characteristics of Futures. The Fund may enter into futures contracts or
purchase  or sell  put and  call  options  on such  futures  as a hedge  against
anticipated  interest rate, currency or equity market changes,  and for duration
management,  risk  management  and  return  enhancement  purposes.  Futures  are
generally  bought and sold on the  commodities  exchanges  where they are listed
with payment of initial and variation  margin as described  below. The sale of a
futures contract creates a firm obligation by the Fund, as seller, to deliver to
the buyer the specific type of financial  instrument  called for in the contract
at a specific  future  time for a  specified  price (or,  with  respect to index
futures and  Eurodollar  instruments,  the net cash amount).  Options on futures
contracts  are  similar  to  options on  securities  except  that an option on a
futures contract gives the purchaser the right in return for the premium paid to
assume a position in a futures contract and obligates the seller to deliver such
position.

The Fund has claimed  exclusion from the definition of the term  "commodity pool
operator"  adopted  by the  CFTC and the  National  Futures  Association,  which
regulate trading in the futures markets.  Therefore,  the Fund is not subject to
commodity pool operator registration and regulation under the Commodity Exchange
Act.  Futures and options on futures may be entered into for bona fide  hedging,
risk management  (including  duration  management) or other portfolio and return
enhancement management purposes to the extent consistent with the exclusion from
commodity pool operator registration.  Typically, maintaining a futures contract
or selling an option  thereon  requires  the Fund to  deposit  with a  financial
intermediary or futures  commission  merchant as security for its obligations an
amount of cash or other  specified  assets  (initial  margin) which initially is
typically  1% to 10% of the face  amount of the  contract  (but may be higher in
some  circumstances).  Additional  cash  or  assets  (variation  margin)  may be
required  to be  deposited  thereafter  on a daily basis as the marked to market
value of the contract fluctuates. The purchase of an option on financial futures
involves  payment of a premium for the option without any further  obligation on
the part of the Fund. If the Fund  exercises an option on a futures  contract it
will be obligated to post initial  margin (and  potential  subsequent  variation
margin) for the  resulting  futures  position just as it would for any position.
Futures  contracts and options thereon are generally settled by entering into an
offsetting  transaction  but there can be no assurance  that the position can be
offset prior to  settlement  at an  advantageous  price,  nor that delivery will
occur.

Options on Securities  Indices and Other  Financial  Indices.  The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through  the sale or  purchase  of options  on  individual  securities  or other
instruments.  Options on  securities  indices  and other  financial  indices are
similar to options on a security or other  instrument  except that,  rather than
settling by physical delivery of the underlying instrument,  they settle by cash
settlement,  i.e.,  an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds,  in the case of a call, or is less than,
in the case of a put, the exercise  price of the option  (except if, in the case
of an OTC option, physical delivery is specified).  This amount of cash is equal
to the excess of the closing  price of the index over the exercise  price of the
option,  which  also may be  multiplied  by a formula  value.  The seller of the
option is  obligated,  in return for the premium  received,  to make delivery of
this  amount.  The  gain or loss on an  option  on an  index  depends  on  price
movements in the instruments making up the market,  market segment,  industry or
other  composite  on which the  underlying  index is based,  rather  than  price
movements in  individual  securities,  as is the case with respect to options on
securities.


Currency  Transactions.  The Fund  may  engage  in  currency  transactions  with
Counterparties  in order to hedge,  or manage the risk of the value of portfolio
holdings  denominated in particular  currencies against fluctuations in relative
value and to enhance return.  Currency  transactions  include  forward  currency
contracts,  exchange listed currency futures, exchange listed and OTC options on
currencies, and currency swaps. A forward currency contract involves a privately
negotiated  obligation to purchase or sell (with delivery generally  required) a
specific  currency at a future date,  which may be any fixed number of days from
the date of the contract agreed upon by the parties,  at a price set at the time
of the contract. A currency swap is an agreement to exchange cash flows based on
the notional  difference among two or more currencies and operates  similarly to
an  interest  rate  swap,  which is  described  below.  The Fund may enter  into
currency transactions with Counterparties which have received (or the guarantors
of the


                                       20
<PAGE>

obligations  which  have  received)  a  credit  rating  of  A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or (except
for OTC currency  options) are determined to be of equivalent  credit quality by
the Advisor.

The  Fund's   dealings  in  forward   currency   contracts  and  other  currency
transactions such as futures,  options, options on futures and swaps may be used
for enhancing return or for hedging  involving  either specific  transactions or
portfolio  positions except as described below.  Transaction hedging is entering
into a currency  transaction  with respect to specific  assets or liabilities of
the Fund,  which will generally arise in connection with the purchase or sale of
its portfolio securities or the receipt of income therefrom. Position hedging is
entering  into  a  currency  transaction  with  respect  to  portfolio  security
positions denominated or generally quoted in that currency.

The Fund generally will not enter into a transaction to hedge currency  exposure
to an  extent  greater,  after  netting  all  transactions  intended  wholly  or
partially to offset other transactions,  than the aggregate market value (at the
time of entering into the  transaction)  of the securities held in its portfolio
that are denominated or generally  quoted in or currently  convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.

The Fund may also  cross-hedge  currencies  by  entering  into  transactions  to
purchase or sell one or more  currencies  that are  expected to decline in value
relative to other  currencies to which the fund has or in which the fund expects
to have portfolio exposure.

To reduce  the  effect of  currency  fluctuations  on the value of  existing  or
anticipated holdings of portfolio securities,  the Fund may also engage in proxy
hedging.  Proxy  hedging  is often  used when the  currency  to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging  entails  entering into a commitment or option to sell a currency  whose
changes in value are  generally  considered  to be  correlated  to a currency or
currencies in which some or all of the Fund's  portfolio  securities  are or are
expected  to be  denominated,  in  exchange  for US  dollars.  The amount of the
commitment  or  option  would not  exceed  the  value of the  Fund's  securities
denominated in correlated currencies.  Currency transactions involve some of the
same risks and  considerations as other  transactions with similar  instruments.
Currency  transactions  can  result  in  losses  to the  Fund  if  the  currency
fluctuates  in value  to a degree  or in a  direction  that is not  anticipated.
Further,  there  is the risk  that the  perceived  correlation  between  various
currencies may not be present or may not be present  during the particular  time
that the Fund is engaging in proxy  hedging.  If the Fund enters into a currency
transaction,  the Fund  will  comply  with the  asset  segregation  requirements
described below.




                                       21
<PAGE>



Risks of  Currency  Transactions.  Currency  transactions  are  subject to risks
different from those of other portfolio  transactions.  Because currency control
is of great  importance  to the  issuing  governments  and  influences  economic
planning and policy, purchases and sales of currency and related instruments can
be  negatively  affected  by  government  exchange  controls,   blockages,   and
manipulations or exchange restrictions imposed by governments.  These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations  and could also cause hedges it has entered into to be
rendered  useless,  resulting  in full  currency  exposure as well as  incurring
transaction  costs.  Buyers and sellers of  currency  futures are subject to the
same risks that apply to the use of futures generally.  Further, settlement of a
currency  futures  contract for the purchase of most  currencies must occur at a
bank  based in the  issuing  nation.  Trading  options  on  currency  futures is
relatively  new,  and the ability to establish  and close out  positions on such
options is subject to the maintenance of a liquid market which may not always be
available.  Currency  exchange rates may fluctuate based on factors extrinsic to
that country's economy.

Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are  interest  rate,  currency,  and other types of swaps and the
purchase or sale of related caps, floors and collars.  The Fund expects to enter
into these transactions o preserve a return or spread on a particular investment
or portion of its portfolio,  to protect  against  currency  fluctuations,  as a
duration management  technique,  to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date or to enhance return.
The Fund  will not  sell  interest  rate  caps or  floors  where it does not own
securities  or other  instruments  providing  the income  stream the Fund may be
obligated  to pay.  Interest  rate swaps  involve the  exchange by the Fund with
another party of their respective commitments to pay or receive interest,  e.g.,
an exchange of floating  rate payments for fixed rate payments with respect to a
notional  amount of principal.  A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential  among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference  indices.  The
purchase  of a cap  entitles  the  purchaser  to receive  payments on a notional
principal  amount from the party selling such cap to the extent that a specified
index exceeds a predetermined  interest rate or amount.  The purchase of a floor
entitles the purchaser to receive  payments on a notional  principal amount from
the party selling such floor to the extent that a specified  index falls below a
predetermined  interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a  predetermined  range of interest
rates or values.


                                       22
<PAGE>

Swaps  have  special  risks  associated   including   possible  default  by  the
counterparty  to the  transaction,  illiquidity  and,  where  swaps are used for
hedges,  the risk that the use of a swap could result in losses  greater than if
the swap had not  been  employed.  Whether  the use of swap  agreements  will be
successful in furthering its  investment  objective will depend on the Advisor's
ability to correctly  predict whether certain types of investments are likely to
produce greater returns than other  investments.  Certain swap agreements may be
considered to be illiquid  because they are two party contracts and because they
may have terms of greater than seven days. Moreover,  the Fund bears the risk of
loss of the amount  expected to be received  under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty.

The Fund will  usually  enter into swaps on a net basis,  i.e.,  the two payment
streams  are  netted  out in a cash  settlement  on the  payment  date or  dates
specified in the  instrument,  with a fund receiving or paying,  as the case may
be, only the net amount of the two payments. Inasmuch as the Fund will segregate
assets (or enter  into  offsetting  positions)  to cover its  obligations  under
swaps,  the Advisor and the Fund  believe  such  obligations  do not  constitute
senior  securities under the 1940 Act and,  accordingly,  will not treat them as
being  subject to its borrowing  restrictions.  The Fund will not enter into any
swap, cap, floor or collar transaction unless, at the time of entering into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements,  is rated at least A by S&P or Moody's or has an equivalent
rating from a NRSRO or is determined to be of equivalent  credit  quality by the
Advisor. If there is a default by the Counterparty,  a Fund may have contractual
remedies pursuant to the agreements related to the transaction.  The swap market
has  grown  substantially  in  recent  years  with a large  number  of banks and
investment  banking  firms  acting both as  principals  and as agents  utilizing
standardized  swap  documentation.  As a  result,  the swap  market  has  become
relatively  liquid.  Caps,  floors and collars are more recent  innovations  for
which  standardized   documentation  has  not  yet  been  fully  developed  and,
accordingly, they are less liquid than swaps.

The Fund may  invest up to 15% of its  total  assets  in  credit  default  swaps
(measured by the notional  amount of the credit  default swap). A credit default
swap is a  contract  between  a buyer  and a  seller  of  protection  against  a
pre-defined  credit  event.  The  buyer of  protection  pays the  seller a fixed
regular  fee  provided  that no  event of  default  on an  underlying  reference
obligation has occurred.  If an event of default occurs, the seller must pay the
buyer the full notional  value,  or "par value," of the reference  obligation in
exchange for the reference obligation.  Credit default swaps are used as a means
of "buying" credit protection,  i.e., attempting to mitigate the risk of default
or credit  quality  deterioration  in some  portion of the Fund's  holdings,  or
"selling" credit protection,  i.e., attempting to gain exposure to an underlying
issuer's  credit  quality  characteristics  without  directly  investing in that
issuer.  No more than 5% of the Fund's  total  assets may be  invested in credit
default swaps for purposes of buying credit protection on individual  securities
if the Fund does not own the  underlying  security or  securities at the time of
investment. Where the Fund is a seller of credit protection, it effectively adds
leverage to its portfolio because, in addition to its total net assets, the Fund
would be subject to investment  exposure on the notional amount of the swap. The
Fund will only sell credit  protection  with respect to  securities  in which it
would be authorized to invest  directly.  The Fund  currently  considers  credit
default  swaps to be  illiquid  and treats the market  value of the  contract as
illiquid for purposes of determining  compliance with the Fund's restrictions on
investing in illiquid securities.

If the Fund is a buyer of a credit default swap and no event of default  occurs,
the Fund will lose its investment and recover nothing. However, if the Fund is a
buyer and an event of default  occurs,  the Fund will receive the full  notional
value of the reference obligation that may have little or no value. As a seller,
the Fund  receives  a fixed  rate of  income  through  the term of the  contract
(typically  between  six  months  and three  years),  provided  that there is no
default event. If an event of default occurs,  the seller must pay the buyer the
full notional  value of the reference  obligation.  Credit default swaps involve
greater  risks  than  if the  Fund  had  invested  in the  reference  obligation
directly.

The Fund may use credit default swaps to gain exposure to particular  issuers or
particular  markets  through  investments in portfolios of credit default swaps,
such  as  Dow  Jones  CDX.NA.HY  certificates.   By  investing  in  certificates
representing  interests in a basket of credit default swaps,  the Fund is taking
credit risk with respect to an entity or group of entities and providing  credit
protection  to the swap  counterparties.  For example,  the CDX EM is a tradable
basket of 19 credit  default  swaps on country  credits which seeks to replicate
the returns on the indices of a broad group of emerging markets  countries.  The
credits  are a subset of the  countries  represented  by the  JPMorgan  Emerging
Markets Bond Index Global  Diversified.  By purchasing  interests in CDX EM, the
Fund is gaining emerging markets  exposure through a single  investment.  Unlike
other types of credit  default  swaps which are


                                       23
<PAGE>

generally considered illiquid, credit default swap certificates generally can be
sold  within  seven  days and are not  subject  to the  Fund's  restrictions  on
investing in illiquid securities.

Combined Transactions. The Fund may enter into multiple transactions,  including
multiple options transactions,  multiple futures transactions, multiple currency
transactions  (including forward currency  contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions   ("component"   transactions),   instead  of  a  single  Strategic
Transaction,  as part of a single or combined  strategy  when, in the opinion of
the  Advisor,  it is in the best  interests  of the  Fund to do so.  A  combined
transaction  will usually  contain  elements of risk that are present in each of
its component transactions.  Although combined transactions are normally entered
into based on the Advisor's  judgment that the combined  strategies  will reduce
risk or otherwise  more  effectively  achieve the desired  portfolio  management
goal, it is possible that the  combination  will instead  increase such risks or
hinder achievement of the portfolio management objective.

Risks of Strategic  Transactions  Outside the US. When conducted outside the US,
Strategic  Transactions may not be regulated as rigorously as in the US, may not
involve a clearing mechanism and related guarantees, and are subject to the risk
of  governmental  actions  affecting  trading  in,  or the  prices  of,  foreign
securities,  currencies and other instruments.  The value of such positions also
could be adversely affected by: (i) other complex foreign  political,  legal and
economic  factors,  (ii) lesser  availability than in the US of data on which to
make trading decisions,  (iii) delays in the Fund's ability to act upon economic
events  occurring in foreign markets during  non-business  hours in the US, (iv)
the  imposition of different  exercise and  settlement  terms and procedures and
margin requirements than in the US, and (v) lower trading volume and liquidity.

Use of Segregated and Other Special Accounts.  Many Strategic  Transactions,  in
addition to other  requirements,  require that the Fund segregate cash or liquid
assets with its  custodian  to the extent  Fund  obligations  are not  otherwise
"covered" through ownership of the underlying security,  financial instrument or
currency.  In general,  either the full amount of any  obligation by the Fund to
pay or  deliver  securities  or  assets  must be  covered  at all  times  by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory  restrictions,  an amount of cash or liquid  assets at least equal to
the current amount of the obligation must be segregated with the custodian.  The
segregated  assets cannot be sold or transferred  unless  equivalent  assets are
substituted in their place or it is no longer  necessary to segregate  them. For
example,  a call  option  written by the Fund will  require the Fund to hold the
securities  subject  to the  call (or  securities  convertible  into the  needed
securities  without  additional  consideration)  or to segregate  cash or liquid
assets  sufficient  to  purchase  and  deliver  the  securities  if the  call is
exercised.  A call option sold by the Fund on an index will  require the Fund to
own portfolio  securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise  price on
a current basis. A put option written by the Fund requires the Fund to segregate
cash or liquid assets equal to the exercise price.

Except when the Fund enters into a forward  contract for the purchase or sale of
a security denominated in a particular currency,  which requires no segregation,
a  currency  contract  which  obligates  the Fund to buy or sell  currency  will
generally  require the Fund to hold an amount of that  currency or liquid assets
denominated  in that currency  equal to the Fund's  obligations  or to segregate
cash or liquid assets equal to the amount of the Fund's obligation.

OTC options entered into by the Fund,  including those on securities,  currency,
financial  instruments  or  indices  and OCC issued and  exchange  listed  index
options, will generally provide for cash settlement.  As a result, when the Fund
sells  these  instruments  it will  only  segregate  an amount of cash or liquid
assets  equal to its accrued net  obligations,  as there is no  requirement  for
payment or delivery of amounts in excess of the net amount.  These  amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by the Fund, or the in-the-money  amount
plus any sell-back  formula amount in the case of a cash-settled put or call. In
addition,  when a Fund  sells a call  option  on an  index  at a time  when  the
in-the-money  amount exceeds the exercise price, the Fund will segregate,  until
the option expires or is closed out, cash or cash equivalents  equal in value to
such excess.  OCC issued and exchange listed options sold by the Fund other than
those above  generally  settle with  physical  delivery,  or with an election of
either  physical  delivery or cash  settlement  and the Fund will  segregate  an
amount of cash or  liquid  assets  equal to the full  value of the  option.  OTC
options settling with physical delivery,  or with an election of either physical
delivery or cash settlement  will be treated the same as other options  settling
with physical delivery.

                                       24
<PAGE>

In the case of a futures  contract or an option  thereon,  the Fund must deposit
initial  margin and possible daily  variation  margin in addition to segregating
cash or liquid assets  sufficient to meet its  obligation to purchase or provide
securities  or  currencies,  or to pay the amount owed at the  expiration  of an
index-based  futures  contract.  Such liquid  assets may  consist of cash,  cash
equivalents, liquid debt or equity securities or other acceptable assets.

With  respect to swaps,  the Fund will accrue the net amount of the  excess,  if
any, of its  obligations  over its  entitlements  with respect to each swap on a
daily basis and will segregate an amount of cash or liquid assets having a value
equal to the accrued excess.  Caps,  floors and collars  require  segregation of
assets with a value equal to the Fund's net obligation, if any.

Strategic  Transactions  may be covered  by other  means  when  consistent  with
applicable  regulatory  policies.  The  Fund  may  also  enter  into  offsetting
transactions so that its combined position,  coupled with any segregated assets,
equals  its  net  outstanding   obligation  in  related  options  and  Strategic
Transactions.  For example,  the Fund could  purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover,  instead of segregating cash or liquid assets if the
Fund held a futures or forward  contract,  it could purchase a put option on the
same futures or forward  contract with a strike price as high or higher than the
price of the contract held.  Other Strategic  Transactions may also be offset in
combinations.  If the offsetting  transaction terminates at the time of or after
the primary  transaction no segregation is required,  but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.

Variable  Rate  Securities.  The Fund may invest in  Variable  Rate  Securities,
instruments  having  rates of interest  that are adjusted  periodically  or that
"float"  continuously  according to formulae intended to minimize fluctuation in
values  of the  instruments.  The  interest  rate of  Variable  Rate  Securities
ordinarily  is  determined  by reference  to or is a percentage  of an objective
standard  such as a bank's prime rate,  the 90-day US Treasury Bill rate, or the
rate of return on commercial paper or bank  certificates of deposit.  Generally,
the  changes  in the  interest  rate on  Variable  Rate  Securities  reduce  the
fluctuation  in the market value of such  securities.  Accordingly,  as interest
rates  decrease  or  increase,   the  potential  for  capital   appreciation  or
depreciation is less than for fixed-rate obligations.  Some Variable Rate Demand
Securities  ("Variable Rate Demand  Securities") have a demand feature entitling
the  purchaser  to resell the  securities  at an amount  approximately  equal to
amortized cost or the principal amount thereof plus accrued interest.  As is the
case for other  Variable  Rate  Securities,  the interest  rate on Variable Rate
Demand  Securities  varies  according  to some  objective  standard  intended to
minimize  fluctuation in the values of the instruments.  The Fund determines the
maturity of Variable Rate Securities in accordance with Rule 2a-7,  which allows
the Fund to consider  certain of such instruments as having  maturities  shorter
than the maturity date on the face of the instrument.

Warrants.  The holder of a warrant has the right, until the warrant expires,  to
purchase a given number of shares of a particular  issuer at a specified  price.
Such  investments  can  provide a greater  potential  for profit or loss than an
equivalent  investment  in the  underlying  security.  Prices of warrants do not
necessarily  move,  however,  in  tandem  with  the  prices  of  the  underlying
securities and are, therefore, considered speculative investments.  Warrants pay
no  dividends  and confer no rights  other than a purchase  option.  Thus,  if a
warrant held by the Fund were not exercised by the date of its  expiration,  the
Fund would lose the entire purchase price of the warrant.

When-Issued Securities.  The Fund may from time to time purchase equity and debt
securities on a "when-issued,"  "delayed  delivery" or "forward delivery" basis.
The price of such securities, which may be expressed in yield terms, is fixed at
the time the  commitment  to purchase is made,  but delivery and payment for the
securities  takes place at a later date.  During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. When the Fund purchases such securities, it immediately assumes the
risks of ownership, including the risk of price fluctuation.  Failure to deliver
a security purchased on this basis may result in a loss or missed opportunity to
make an alternative investment.

To the extent that assets of the Fund are held in cash pending the settlement of
a purchase of securities,  the Fund would earn no income.  While such securities
may be sold prior to the settlement date, the Fund intends to purchase them with
the  purpose of actually  acquiring  them unless a sale  appears  desirable  for
investment  reasons.  At the time the Fund makes the  commitment  to  purchase a
security on this basis,  it will record the transaction and reflect the value of
the  security  in  determining  its net asset  value.  The  market  value of the
securities may be more or less than


                                       25
<PAGE>

the purchase price. The Fund will segregate cash or liquid assets at least equal
in value to commitments for such securities.


Portfolio Holdings





In addition to the public disclosure of Fund portfolio holdings through required
Securities and Exchange Commission ("SEC") quarterly filings,  the Fund may make
its portfolio holdings information publicly available on the DWS Funds' Web site
as described in the Fund's prospectus.  The Fund does not disseminate non-public
information  about  portfolio  holdings  except in accordance  with policies and
procedures adopted by the Fund.

The Fund's  procedures permit non-public  portfolio  holdings  information to be
shared with Deutsche Asset Management and its affiliates  (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys,   officers  and  trustees/directors  and  each  of  their  respective
affiliates and advisers who require access to this  information to fulfill their
duties to the Fund and are subject to the duties of  confidentiality,  including
the duty not to trade on non-public information,  imposed by law or contract, or
by the Fund's  procedures.  This  non-public  information may also be disclosed,
subject to the  requirements  described  below,  to securities  lending  agents,
financial  printers,  proxy voting  firms,  mutual fund  analysts and rating and
tracking  agencies,  or to shareholders  in connection with in-kind  redemptions
(collectively, "Authorized Third Parties").

Prior to any disclosure of the Fund's non-public  portfolio holdings information
to   Authorized   Third   Parties,   a   person   authorized   by   the   Fund's
Trustees/Directors  must make a good faith  determination  in light of the facts
then known that the Fund has a legitimate  business  purpose for  providing  the
information,  that the  disclosure is in the best interest of the Fund, and that
the  recipient  assents  or  otherwise  has  a  duty  to  keep  the  information
confidential  and to not  trade  based on the  information  received  while  the
information remains non-public.  No compensation is received


                                       26
<PAGE>

by the Fund or DeAM for disclosing  non-public  holdings  information.  Periodic
reports   regarding   these   procedures   will  be   provided   to  the  Fund's
Trustees/Directors.

Portfolio  holdings  information  distributed  by the trading desks of DeAM or a
subadvisor for the purpose of facilitating  efficient trading of such securities
and receipt of relevant  research is not subject to the foregoing  requirements.
Non-public   portfolio   holding   information   does  not   include   portfolio
characteristics  (other than holdings or subsets of holdings) about the Fund and
information  derived  therefrom,  including,  but not limited to, how the Fund's
investments are divided among various sectors, industries,  countries, value and
growth stocks,  bonds,  currencies and cash,  types of bonds,  bond  maturities,
duration,  bond  coupons and bond credit  quality  ratings so long as the Fund's
holdings could not be derived from such information.


Registered  investment  companies  that are subadvised by DeAM may be subject to
different  portfolio  holdings  disclosure  policies,  and neither  DeAM nor the
Fund's  Trustees  exercise  control over such  policies.  In addition,  separate
account  clients of DeAM have  access to their  portfolio  holdings  and are not
subject  to the Fund's  portfolio  holdings  disclosure  policy.  The  portfolio
holdings  of some of the  funds  subadvised  by DeAM  and  some of the  separate
accounts managed by DeAM may substantially  overlap with the portfolio  holdings
of the Fund.

DeAM also  manages  certain  unregistered  commingled  trusts and creates  model
portfolios,  the portfolio holdings of which may substantially  overlap with the
portfolio holdings of the Fund. To the extent that investors in these commingled
trusts  or  recipients  of model  portfolio  holdings  information  may  receive
portfolio  holdings  information  of their  trust or of a model  portfolio  on a
different basis from that on which Fund portfolio  holdings  information is made
public,  DeAM has implemented  procedures  reasonably designed to encourage such
investors and recipients to keep such information  confidential,  and to prevent
those investors from trading on the basis of non-public holdings information.

There is no assurance that the Fund's  policies and  procedures  with respect to
the disclosure of portfolio holdings  information will protect the Fund from the
potential  misuse of portfolio  holdings  information  by those in possession of
that information.

                             MANAGEMENT OF THE FUND

Investment Advisor

Deutsche Investment  Management  Americas Inc. ("DIMA" or the "Advisor"),  DIMA,
which is part of Deutsche Asset Management  ("DeAM"),  is the investment advisor
for the Fund. Under the supervision of the Board of Trustees of the Trust, DIMA,
with  headquarters  at 345 Park  Avenue,  New York,  New York,  makes the Fund's
investment  decisions,  buys and  sells  securities  for the  Fund and  conducts
research  that leads to these  purchase  and sale  decisions.  DIMA  manages the
Fund's daily investment and business affairs subject to the policies established
by the Trust's  Board of Trustees.  DIMA,  has more than 80 years of  experience
managing  mutual  funds.  DIMA  provides  a full  range of  investment  advisory
services to  institutional  and retail  clients.  DIMA is also  responsible  for
selecting  brokers and dealers and for  negotiating  brokerage  commissions  and
dealer charges.

DeAM is the  marketing  name in the US for the asset  management  activities  of
Deutsche Bank AG, DIMA,  Deutsche Asset  Management,  Inc.,  Deutsche Bank Trust
Company  Americas  and DWS  Trust  Company.  DeAM is a global  asset  management
organization  that offers a wide range of  investing  expertise  and  resources,
including  hundreds of portfolio  managers and analysts,  and an office  network
that reaches the world's major investment centers.  This  well-resourced  global
investment  platform brings together a wide variety of experience and investment
insight, across industries, regions, asset classes and investing styles. DIMA is
an indirect,  wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global  banking  institution  that is engaged in a wide range of financial
services,  including  investment  management,  mutual fund, retail,  private and
commercial banking,  investment banking and insurance. The term "DWS Scudder" is
the  designation  given to the products  and  services  provided by DIMA and its
affiliates to the DWS Mutual Funds.

                                       27
<PAGE>

The Advisor manages the Fund's daily  investment and business affairs subject to
the policies  established  by the Fund's Board of Trustees.  The Trustees of the
Trust  have  overall  responsibility  for  the  management  of  the  Fund  under
Massachusetts law.

Pursuant to an investment  management agreement with the Fund (the "Agreement"),
the Advisor manages the Fund's  investments,  administers its business  affairs,
furnishes office facilities and equipment,  provides clerical and administrative
services and permits its officers and employees to serve without compensation as
trustees  or officers  of the Fund if elected to such  positions.  To the extent
permissible  by law,  the  Advisor  may  appoint  certain of its  affiliates  as
sub-advisors to perform certain of the Advisor's duties.

The Advisor provides  investment  counsel for many individuals and institutions,
including  insurance  companies,  industrial  corporations,  and  financial  and
banking  organizations,  as well as  providing  investment  advice  to open- and
closed-end SEC registered funds.

In  certain  cases,  the  investments  for the  Fund  are  managed  by the  same
individuals  who manage one or more other  mutual  funds  advised by the Advisor
that have similar names,  objectives and investment  styles. You should be aware
that the Fund is likely to differ from these other  mutual  funds in size,  cash
flow pattern and tax matters.  Accordingly,  the holdings and performance of the
Fund can be expected to vary from those of these other mutual funds.

Certain  investments  may be appropriate for the Fund and also for other clients
advised by the Advisor.  Investment decisions for the Fund and other clients are
made with a view to achieving their respective  investment  objectives and after
consideration  of such factors as their current  holdings,  availability of cash
for  investment  and the  size of their  investments  generally.  Frequently,  a
particular  security  may be bought or sold for only one client or in  different
amounts  and at  different  times for more  than one but less than all  clients.
Likewise,  a particular  security may be bought for one or more clients when one
or more other clients are selling the security. In addition,  purchases or sales
of the same  security  may be made for two or more  clients on the same day.  In
such event,  such  transactions  will be allocated among the clients in a manner
believed by the Advisor to be equitable to each. In some cases,  this  procedure
could have an adverse effect on the price or amount of the securities  purchased
or sold by the Fund.  Purchase and sale orders for the Fund may be combined with
those of other  clients of the  Advisor in the  interest of  achieving  the most
favorable net results to the Fund.

The Fund is  managed  by a team of  investment  professionals  who each  play an
important role in the Fund's management  process.  Team members work together to
develop  investment  strategies and select  securities for the Fund's portfolio.
This team works for the Advisor or its  affiliates  and is  supported by a large
staff  of  economists,   research   analysts,   traders  and  other   investment
specialists. The Advisor or its affiliates believe(s) its team approach benefits
Fund  investors  by  bringing  together  many  disciplines  and  leveraging  its
extensive resources.  Team members with primary responsibility for management of
the  Fund,  as  well  as  team  members  who  have  other   ongoing   management
responsibilities  for the Fund, are identified in the Fund's current prospectus.
Composition  of the  team may  change  over  time,  and  Fund  shareholders  and
investors will be notified of changes  affecting  individuals  with primary Fund
management responsibility.


The current  Agreement  dated April 5, 2002, was last renewed by the Trustees on
September 18, 2007. The Agreement  continues in effect from year to year only if
its continuance is approved annually by the vote of a majority of those Trustees
who arey not parties to such  Agreement or interested  persons of the Advisor or
the Trust ("Independent Trustees" or "Non-interested  Trustees"), cast in person
at a meeting called for the purpose of voting on such approval,  and either by a
vote  of  the  Trust's  Trustees  or of a  majority  of the  outstanding  voting
securities of the Fund.


The Agreement may be terminated at any time without payment of penalty by either
party on sixty days written notice and automatically  terminates in the event of
assignment.

Under the Agreement,  the Advisor  regularly  provides the Fund with  continuing
investment management consistent with the Fund's investment objective,  policies
and restrictions and determines what securities shall be purchased, held or sold
and what  portion of a Fund's  assets shall be held  uninvested,  subject to the
Trust's Declaration of Trust,  By-Laws, the 1940 Act, the Code and to the Fund's
investment objective,  policies and restrictions,  and subject,


                                       28
<PAGE>

further, to such policies and instructions as the Board of Trustees of the Trust
may from time to time  establish.  The  Advisor  also  advises  and  assists the
officers of the Trust in taking such steps as are  necessary or  appropriate  to
carry out the  decisions of the Trustees and the  appropriate  committees of the
Trustees regarding the conduct of the business of the Fund. Under the Agreement,
the Advisor may delegate its duties to a subadvisor.

Under the  Agreement,  the Advisor also  renders  administrative  services  (not
otherwise  provided by third parties)  necessary for the Fund's operations as an
open-end investment company including, but not limited to, preparing reports and
notices to the Trustees and shareholders;  supervising,  negotiating contractual
arrangements with, and monitoring various  third-party  service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian,  accountants
and others);  preparing  and making  filings  with the SEC and other  regulatory
agencies;  assisting in the preparation and filing of the Fund's federal,  state
and local tax  returns;  preparing  and  filing the  Fund's  federal  excise tax
returns;  assisting with investor and public relations  matters;  monitoring the
valuation of securities and the  calculation of net asset value;  monitoring the
registration of shares of the Fund under applicable federal and state securities
laws;  maintaining  the Fund's  books and  records  to the extent not  otherwise
maintained by a third party;  assisting in establishing  accounting  policies of
the  Fund;   assisting  in  the  resolution  of  accounting  and  legal  issues;
establishing and monitoring the Fund's operating budget;  processing the payment
of the Fund's bills;  assisting the Fund in, and  otherwise  arranging  for, the
payment of distributions and dividends;  and otherwise assisting the Fund in the
conduct of its business, subject to the direction and control of the Trustees.

Pursuant to a sub-accounting and administrator  agreement among the Advisor, DWS
Scudder Fund Accounting Corporation ("DWS-SFAC") and State Street Bank and Trust
Company ("SSB"), the Advisor has delegated certain  administrative  functions to
SSB under the Agreement.  The costs and expenses of such delegation are borne by
the Advisor, not by the Fund.

The  current  advisory  fee rates are  payable  monthly at the annual rate shown
below.

Average Daily Net Assets                                     DWS Balanced Fund
------------------------                                     -----------------

$0 - $1.50 billion                                                0.470%
$1.5 billion - $2 billion                                         0.445%
$2 billion - $3.5 billion                                         0.410%
$3.5 billion - $5.5 billion                                       0.400%
$5.5 billion - $7.5 billion                                       0.390%
$7.5 billion - $10 billion                                        0.380%
$10 billion - $12.5 billion                                       0.370%
Over $12.5 billion                                                0.360%

The  advisory  fee is  payable  monthly  provided  that the Fund  will make such
interim  payments as may be requested  by the Advisor,  not to exceed 75% of the
amount of the  unpaid  fee then  accrued  on the  books of the Fund.  All of the
Fund's expenses are paid out of gross investment income.


The advisory  fees paid by the Fund for its last three fiscal years are shown in
the table below. [To be updated]

      Fiscal 2007            Fiscal 2006           Fiscal 2005
      -----------            -----------           -----------

         $                  $9,131,853           $10,227,855


Through March 13, 2008, the Advisor has  contractually  agreed to waive all or a
portion of its  management  fee and reimburse or pay  operating  expenses of the
Fund to the extent necessary to maintain the Fund's total operating  expenses at
0.93%,  1.88%,  1.80% and 0.61% for Class A, Class B, Class C and  Institutional
Class shares,  respectively,  excluding  certain  expenses such as extraordinary
expenses, taxes, brokerage and interest.

Effective  October 1, 2004,  the Fund's  distributor  agreed to reduce the 12b-1
distribution fee to 0.375% for Class B shares only.  Effective December 1, 2005,
the distributor has temporarily  agreed to eliminate the 12b-1  distribution fee
for Class B shares only.  Under its Agreement the Fund is responsible for all of
its other expenses including:


                                       29
<PAGE>

organizational  costs,  fees and expenses incurred in connection with membership
in investment company organizations;  brokers' commissions;  legal, auditing and
accounting  expenses;  insurance;  taxes  and  governmental  fees;  the fees and
expenses of the transfer agent; any other expenses of issue, sale, underwriting,
distribution,  redemption or repurchase of shares;  the expenses of and the fees
for  registering  or qualifying  securities  for sale;  the fees and expenses of
Trustees,  officers and  employees of the Fund who are not  affiliated  with the
Advisor;   the  cost  of  printing  and  distributing  reports  and  notices  to
shareholders;  and the fees and  disbursements  of custodians.  Unless otherwise
agreed to, a Fund may  arrange to have third  parties  assume all or part of the
expenses of sale,  underwriting and distribution of shares of the Fund. The Fund
is also  responsible  for its expenses of  shareholders'  meetings,  the cost of
responding to shareholders'  inquiries,  and its expenses incurred in connection
with litigation,  proceedings and claims and the legal obligation it may have to
indemnify its officers and Trustees with respect thereto.

In reviewing  the terms of the  Agreement  and in  discussions  with the Advisor
concerning  such  Agreement,   the  Independent   Trustees  of  the  Trust,  are
represented by independent counsel at the Fund's expense.

The  Agreement  provides  that the Advisor  shall not be liable for any error of
judgment or mistake of law or for any loss  suffered  by the Fund in  connection
with  matters  to which the  Agreement  relates,  except a loss  resulting  from
willful misfeasance, bad faith or gross negligence on the part of the Advisor in
the  performance of its duties or from reckless  disregard by the Advisor of its
obligations and duties under the Agreement.

Officers and  employees  of the Advisor from time to time may have  transactions
with various  banks,  including the Fund's  custodian  bank. It is the Advisor's
opinion that the terms and conditions of those  transactions which have occurred
were  not   influenced  by  existing  or  potential   custodial  or  other  Fund
relationships.

The Advisor may serve as advisor to other funds with  investment  objectives and
policies  similar  to  those of the Fund  that may have  different  distribution
arrangements or expenses, which may affect performance.

None of the officers of the Fund or Trustees of the Trust may have dealings with
the  Fund  as  principals  in the  purchase  or sale of  securities,  except  as
individual subscribers to or holders of shares of the Fund.


The Advisor may enter into  arrangements with affiliates and third party service
providers to perform  various  administrative,  back-office  and other  services
relating to client accounts.  Such service providers may be located in the US or
in non-US jurisdictions.

Subadvisor to the Fund

Deutsche Asset Management  International  GmbH ("DeAMi"),  an investment advisor
registered  with  the  US  Securities  and  Exchange  Commission,  will  be  the
subadvisor to the Fund upon shareholder  approval of the sub-advisory  agreement
(the  "Sub-Advisory  Agreement").  DeAMi,  Mainzer  Landstrasse  178-190,  60325
Frankfurt am Main,  Germany,  will render  investment  advisory  and  management
services to the Fund pursuant to the terms of the Sub-Advisory Agreement between
DeAMi and DIMA.  DeAMi is an affiliate of DIMA and a subsidiary of Deutsche Bank
AG.  Under  the terms of the  Sub-Advisory  Agreement,  DeAMi  will  manage  the
investment and  reinvestment  of a portion of the large cap value  allocation of
the Fund's  portfolio  and will provide  such  investment  advice,  research and
assistance as DIMA may, from time to time, reasonably request.

DIMA will pay a fee to DeAMi for serving as subadvisor to the Fund at the annual
rates shown below:

Assets                                      Sub-Advisory Fee
Managed by DeAMi (in Euros)                 (as a % of average daily net assets)
---------------------------                 ------------------------------------

(euro)0 - (euro)250 million                                             0.300%
(euro)250 million - (euro)500 million                                   0.200%
(euro)500 million - (euro)1 billion                                     0.120%
(euro)1 billion - (euro)2.5 billion                                     0.080%
(euro)2.5 billion - (euro)5 billion                                     0.055%
(euro)5 billion - (euro)25 billion                                      0.035%



                                       30
<PAGE>

(euro)25 billion - (euro)50 billion                                     0.025%
over (euro)50 billion                                                   0.015%

The Sub-Advisory  Agreement provides that DeAMi will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with  matters  to  which  the  Sub-Advisory  Agreement  relates,  except  a loss
resulting from willful misconduct,  bad faith or gross negligence on the part of
DeAMi in the  performance  of its duties or from reckless  disregard by DeAMi of
its  obligations  and  duties  under the  Sub-Advisory  Agreement.


Pursuant  to  Deutsche  Asset  Management  procedures  approved by the Boards on
behalf of the DWS funds,  proof of claim forms are routinely  filed on behalf of
the  DWS  funds  by  a  third  party  service  provider,  with  certain  limited
exceptions.  The Boards of the DWS funds receive periodic reports  regarding the
implementation of these procedures.


Pursuant to DeAM  procedures  approved by the Boards on behalf of the DWS funds,
proof of claim forms are  routinely  filed on behalf of the DWS funds by a third
party service provider,  with certain limited exceptions.  The Boards of the DWS
funds receive periodic reports regarding the implementation of these procedures.


Compensation of Portfolio Managers

The  Fund has  been  advised  that the  Advisor  seeks to offer  its  investment
professionals  competitive  short-term  and  long-term  compensation.  Portfolio
managers and research professionals are paid (i) fixed base salaries,  which are
linked to job function,  responsibilities  and financial  services industry peer
comparison  and (ii)  variable  compensation,  which  is  linked  to  investment
performance, individual contributions to the team and DWS Scudder's and Deutsche
Bank's  financial  results.  Variable  compensation  may  include  a cash  bonus
incentive and  participation in a variety of long-term equity programs  (usually
in the form of Deutsche Bank equity).

Bonus  and  long-term   incentives   comprise  a  greater  proportion  of  total
compensation as an investment  professional's  seniority and compensation levels
increase.  Top performing  investment  professionals  earn a total  compensation
package  that is highly  competitive,  including  a bonus that is a multiple  of
their base  salary.  The amount of equity  awarded  under the  long-term  equity
programs is generally based on the individual's total  compensation  package and
may  comprise  from  0%-40%  of  the  total  compensation  award.  As  incentive
compensation increases,  the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be subject to
a mandatory diverting of a portion of their equity compensation into proprietary
mutual funds that they manage.

To  evaluate  its  investment  professionals,  the  Advisor  uses a  Performance
Management  Process.   Objectives  evaluated  by  the  process  are  related  to
investment  performance and generally take into account peer group and benchmark
related data.  The ultimate goal of this process is to link the  performance  of
investment  professionals  with  client  investment  objectives  and to  deliver
investment   performance   that  meets  or  exceeds  clients'  risk  and  return
objectives. When determining total compensation,  the Advisor considers a number
of quantitative and qualitative factors such as:

o        DWS  Scudder  performance  and the  performance  of DeAM,  quantitative
         measures which include 1, 3 and 5 year pre-tax returns versus benchmark
         (such as the benchmark used in the  prospectuses)  and appropriate peer
         group,  taking  into  consideration  risk  targets.  Additionally,  the
         portfolio  manager's  retail/institutional  asset mix is  weighted,  as
         appropriate for evaluation purposes.

o        Qualitative  measures include  adherence to the investment  process and
         individual  contributions  to  the  process,  among  other  things.  In
         addition, the Advisor assesses compliance, risk management and teamwork
         skills.

o        Other factors,  including  contributions made to the investment team as
         well as  adherence  to  compliance,  risk  management,  and "living the
         values" of the Advisor,  are part of a  discretionary  component  which
         gives  management the ability to reward these behaviors on a subjective
         basis through bonus incentives.

                                       31
<PAGE>

In addition,  the Advisor analyzes  competitive  compensation levels through the
use of extensive market data surveys. Portfolio manager compensation is reviewed
and may be modified each year as appropriate  to reflect  changes in the market,
as well as to adjust the  factors  used to  determine  overall  compensation  to
promote good sustained investment performance.


Fund Ownership of Portfolio Managers [TO BE UPDATED]


The following table shows the dollar range of shares owned  beneficially  and of
record by each  member of the Fund's  portfolio  management  team in the Fund as
well as in all DWS Funds as a group  (i.e.  those  funds  advised by DeAM or its
affiliates), including investments by their immediate family members sharing the
same household and amounts invested through retirement and deferred compensation
plans.  This  information  is provided as of the Fund's most recent  fiscal year
end.

<TABLE>
<CAPTION>
                                                       Dollar Range of                    Dollar Range of All DWS
Name of Portfolio Manager                             Fund Shares Owned                      Fund Shares Owned
-------------------------                             -----------------                      -----------------
<S>                                                           <C>                                    <C>
William Chepolis                                              $0                            $100,001 - $500,000
Matthew F. MacDonald                                          $0                                     $0
Inna Okounkova                                        $10,001 - $50,000                     $100,001 - $500,000
Gary Sullivan                                                 $0                             $10,001 - $50,000
Julie M. Van Cleave                                           $0                              Over $1,000,000
Robert Wang                                           $10,001 - $50,000                      $50,001 - $100,000
Jin Chen                                                      $0                            $100,001 - $500,000
Julie Abbett                                                  $0                             $50,001 - $100,000
Thomas Picciochi                                              $0                            $100,001 - $500,000

John Brennan                                                  $0                                     $0
J. Richard Robben                                             $0                                     $0


Conflicts of Interest

In addition to managing the assets of the Fund,  the Fund's  portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled investment vehicles that are not registered investment
companies and (3) other  accounts  (e.g.,  accounts  managed for  individuals or
organizations)  managed by each  portfolio  manager.  The  tables  also show the
number of  performance  based fee  accounts,  as well as the total assets of the
accounts for which the advisory fee is based on the  performance of the account.
This information is provided as of the Fund's most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

                                      Number of        Total Assets of       Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with           Performance-Based
Name of Portfolio Manager             Companies            Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------            ---------       ---------------------     ------------

William Chepolis                          16             $7,886,534,471                0                       $0
Matthew F. MacDonald                      15            $11,642,836,440                0                       $0
Inna Okounkova                            10             $1,491,550,350                0                       $0
Gary Sullivan                             11             $5,522,416,675                0                       $0
Julie M. Van Cleave                        5             $3,809,651,152                0                       $0
Robert Wang                               26             $6,194,454,478                0                       $0
Jin Chen                                  12             $4,042,881,320                0                       $0
Julie Abbett                              12             $4,042,881,320                0                       $0



                                       32
<PAGE>


                                      Number of        Total Assets of       Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with           Performance-Based
Name of Portfolio Manager             Companies            Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------            ---------       ---------------------     ------------

Thomas Picciochi                           7             $1,794,312,280                1              $32,518,662

John Brennan                               0                         $0                0                       $0
J. Richard Robben                          0                         $0                0                       $0


Other Pooled Investment Vehicles Managed:

                                                                              Number of Pooled
                                      Number of                              Investment Vehicle
                                       Pooled          Total Assets of         Accounts with        Total Assets of
                                     Investment       Pooled Investment      Performance-Based    Performance-Based
Name of Portfolio Manager             Vehicles             Vehicles                 Fee              Fee Accounts
-------------------------             --------             --------                 ---              ------------

William Chepolis                            1            $1,174,919,810                     0                   $0
Matthew F. MacDonald                        0                        $0                     0                   $0
Inna Okounkova                              5              $227,088,068                     0                   $0
Gary Sullivan                               0                        $0                     0                   $0
Julie M. Van Cleave                         1                $6,059,957                     0                   $0
Robert Wang                                 6              $555,931,180                     1         $170,337,400
Jin Chen                                    3               $93,281,241                     0                   $0
Julie Abbett                                3               $93,281,241                     0                   $0
Thomas Picciochi                            3              $390,173,081                     2         $271,430,825

John Brennan                                0                        $0                     0                   $0
J. Richard Robben                           0                        $0                     0                   $0


Other Accounts Managed:

                                                                             Number of Other
                                                                              Accounts with       Total Assets of
                                     Number of     Total Assets of Other   Performance- Based   Performance- Based
Name of Portfolio Manager         Other Accounts          Accounts                 Fee             Fee Accounts
-------------------------         --------------          --------                 ---             ------------

William Chepolis                           2           $507,601,891                   0                       $0
Matthew F. MacDonald                       0                     $0                   0                       $0
Inna Okounkova                             0                     $0                   0                       $0
Gary Sullivan                              0                     $0                   0                       $0
Julie M. Van Cleave                       11           $565,343,056                   0                       $0
Robert Wang                               38         $7,081,157,607                   3             $340,192,399
Jin Chen                                   4           $267,089,607                   0                       $0
Julie Abbett                               4           $267,089,607                   0                       $0
Thomas Picciochi                          11        $11,847,842,571                   9          $11,723,783,059

John Brennan                               0                     $0                   0                       $0
J. Richard Robben                          0                     $0                   0                       $0

</TABLE>

In  addition  to the  accounts  above,  an  investment  professional  may manage
accounts in a personal  capacity that may include  holdings that are similar to,
or the same as,  those of the Fund.  The  Advisor  has in place a Code of Ethics
that is designed to address  conflicts of interest and that, among other things,
imposes  restrictions  on the ability of


                                       33
<PAGE>

portfolio  managers and other "access  persons" to invest in securities that may
be recommended or traded in the Fund and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account,  including the following:

o        Certain  investments may be appropriate for the Fund and also for other
         clients advised by the Advisor, including other client accounts managed
         by the Fund's portfolio  management team.  Investment decisions for the
         Fund  and  other  clients  are  made  with a view  to  achieving  their
         respective  investment  objectives  and  after  consideration  of  such
         factors as their current holdings,  availability of cash for investment
         and the size of their investments  generally. A particular security may
         be bought or sold for only one client or in  different  amounts  and at
         different times for more than one but less than all clients.  Likewise,
         because   clients  of  the  Advisor  may  have   differing   investment
         strategies, a particular security may be bought for one or more clients
         when one or more other clients are selling the security. The investment
         results  achieved for the Fund may differ from the results achieved for
         other  clients of the Advisor.  In addition,  purchases or sales of the
         same  security  may be made for two or more clients on the same day. In
         such event,  such transactions will be allocated among the clients in a
         manner  believed by the Advisor to be most  equitable  to each  client,
         generally utilizing a pro rata allocation  methodology.  In some cases,
         the allocation  procedure could  potentially  have an adverse effect or
         positive  effect on the price or amount of the securities  purchased or
         sold by the Fund. Purchase and sale orders for the Fund may be combined
         with those of other clients of the Advisor in the interest of achieving
         the most favorable net results to the Fund and the other clients.

o        To the  extent  that  a  portfolio  manager  has  responsibilities  for
         managing  multiple client  accounts,  a portfolio  manager will need to
         divide time and attention among relevant accounts. The Advisor attempts
         to minimize these conflicts by aligning its portfolio  management teams
         by  investment  strategy and by  employing  similar  investment  models
         across multiple client accounts.

o        In some cases, an apparent  conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with  respect to other  accounts it manages.  The Advisor  will not
         determine  allocations based on whether it receives a performance-based
         fee from the client. Additionally, the Advisor has in place supervisory
         oversight processes to periodically monitor performance  deviations for
         accounts with like strategies.

o        The Advisor and its affiliates and the investment  team of the Fund may
         manage other mutual funds and separate  accounts on a long-short basis.
         The  simultaneous  management  of long  and  short  portfolios  creates
         potential  conflicts  of  interest  including  the risk that short sale
         activity could adversely  affect the market value of the long positions
         (and vice versa),  the risk arising from sequential  orders in long and
         short  positions,  and the risks  associated  with  receiving  opposing
         orders at the same time.  The Advisor has  adopted  procedures  that it
         believes are reasonably  designed to mitigate these potential conflicts
         of  interest.  Included in these  procedures  are  specific  guidelines
         developed to ensure fair and equitable  treatment for all clients whose
         accounts  are  managed by the Fund's  portfolio  management  team.  The
         Advisor and the portfolio  management team have established  monitoring
         procedures,  a protocol for supervisory  reviews, as well as compliance
         oversight to ensure that  potential  conflicts of interest  relating to
         this type of activity are properly addressed.

The Advisor is owned by Deutsche Bank AG, a  multi-national  financial  services
company.  Therefore,  the Advisor is affiliated  with a variety of entities that
provide, and/or engage in commercial banking, insurance,  brokerage,  investment
banking,  financial  advisory,  broker-dealer  activities  (including  sales and
trading),  hedge funds, real estate and private equity investing, in addition to
the provision of investment  management services to institutional and individual
investors.  Since  Deutsche  Bank AG, its  affiliates,  directors,  officers and
employees (the "Firm") are engaged in businesses  and have interests  other than
managing  asset  management  accounts,   such  other  activities  involve  real,
potential or apparent  conflicts of interest.  These  interests  and  activities
include potential  advisory,  transactional  and financial  activities and other
interests  in  securities  and  companies  that may be  directly  or  indirectly
purchased  or sold by the Firm for its  clients'  advisory  accounts.  These are
considerations  of which  advisory  clients  should be aware and which may cause
conflicts that could be to the disadvantage of the Advisor's  advisory  clients.

                                       34
<PAGE>

The Advisor has  instituted  business and  compliance  policies,  procedures and
disclosures  that are  designed to identify,  monitor and mitigate  conflicts of
interest and, as appropriate, to report them to the Fund's Board.

Code of Ethics

The Fund,  the Advisor and the Fund's  principal  underwriter  have each adopted
codes of ethics under Rule 17j-1 under the 1940 Act. Board members,  officers of
the Trust and employees of the Advisor and principal  underwriter  are permitted
to make personal securities  transactions,  including transactions in securities
that  may be  purchased  or  held  by the  Fund,  subject  to  requirements  and
restrictions  set forth in the applicable Code of Ethics.  The Advisor's Code of
Ethics  contains  provisions and  requirements  designed to identify and address
certain  conflicts of interest  between personal  investment  activities and the
interests  of the  Fund.  Among  other  things,  the  Advisor's  Code of  Ethics
prohibits  certain types of  transactions  absent prior  approval,  imposes time
periods  during  which  personal   transactions  may  not  be  made  in  certain
securities,  and requires the submission of duplicate broker  confirmations  and
quarterly reporting of securities transactions. Additional restrictions apply to
portfolio  managers,  traders,  research  analysts  and others  involved  in the
investment  advisory  process.  Exceptions to these and other  provisions of the
Advisor's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.

                             FUND SERVICE PROVIDERS

Principal Underwriter and Administrator

Pursuant  to  the  Underwriting  and   Distribution   Services   Agreement  (the
"Distribution  Agreement"),  DWS Scudder  Distributors,  Inc.  ("DWS-SDI" or the
"Distributor"), 222 South Riverside Plaza, Chicago, Illinois 60606, an affiliate
of the Advisor, is the principal underwriter,  distributor and administrator for
the Class A, Class B,  Class C and  Institutional  Class  shares of the Fund and
acts as the agent of the Fund in the  continuous  offering  of its  shares.  The
continuance of the Distribution Agreement for the Fund, dated April 5, 2002, was
last continued by the Trustees on September 22, 2006.

The Distribution Agreement continues in effect from year to year so long as such
continuance  is approved for each class at least annually by a vote of the Board
of Trustees of the Trust,  including the Independent Trustees who have no direct
or indirect financial interest in the Distribution Agreement.

The  Distribution  Agreement  automatically  terminates  in  the  event  of  its
assignment and may be terminated for a class at any time without  penalty by the
Fund or by DWS-SDI upon 60 days notice.  Termination by the Fund with respect to
a class may be by vote of (i) a majority  of the  Independent  Trustees  and who
have no direct or indirect financial interest in the Distribution  Agreement, or
(ii) a "majority of the outstanding voting securities" of the class of the Fund,
as defined under the 1940 Act. All material  amendments  must be approved by the
Board of Trustees in the manner described above with respect to the continuation
of  the  Agreement.  The  provisions  concerning  continuation,   amendment  and
termination  of  a  Distribution  Agreement  are  on  a  series  by  series  and
class-by-class basis.

DWS-SDI  bears  all  of its  expenses  of  providing  services  pursuant  to the
Distribution Agreement,  including the payment of any commissions. The Fund pays
the cost for the prospectuses and shareholder  reports to be typeset and printed
for existing shareholders,  and DWS-SDI, as principal underwriter,  pays for the
printing and distribution of copies thereof used in connection with the offering
of shares to prospective  investors.  DWS-SDI also pays for supplementary  sales
literature and advertising costs. As indicated under "Purchase and Redemption of
Shares,"  DWS-SDI  retains the sales  charge upon the purchase of Class A shares
and pays or allows  concessions or discounts to firms for the sale of the Fund's
shares. DWS-SDI receives compensation from the Fund as principal underwriter for
Class A Class B, Class C and Institutional shares.

Shareholder  and  administrative  services are provided to the Fund on behalf of
Class  A,  Class  B and  Class C  shareholders,  under  a  Shareholder  Services
Agreement  (the  "Services  Agreement")  with  DWS-SDI.  The Services  Agreement
continues  in effect from year to year so long as such  continuance  is approved
for the Fund at least  annually  by a vote of the Board of the Trust,  including
the Independent  Trustees who have no direct or indirect  financial  interest in
the Services Agreement.  The Services Agreement automatically  terminates in the
event of its


                                       35
<PAGE>

assignment  and may be terminated at any time without  penalty by the Fund or by
DWS-SDI  upon 60 days  notice.  Termination  with respect to the Class A, B or C
shares  of the  Fund  may be by a vote of (i) the  majority  of the  Independent
Trustees  who have no direct or  indirect  financial  interest  in the  Services
Agreement,  or (ii) a "majority of the  outstanding  voting  securities"  of the
Class A, B or C shares,  as defined  under the 1940 Act. The Services  Agreement
may not be amended for a class to increase  materially the fee to be paid by the
Fund without approval of a majority of the outstanding voting securities of such
class of the Fund, and all material  amendments must in any event be approved by
the  Board of  Trustees  in the  manner  described  above  with  respect  to the
continuation of the Services Agreement.

Under  the  Services   Agreement,   DWS-SDI  may  provide  or  appoint   various
broker-dealer  firms and other  service or  administrative  firms  ("firms")  to
provide  information and services to investors in the Fund.  Typically,  DWS-SDI
appoints  firms that provide  services  and  facilities  for their  customers or
clients who are investors in the Fund.  Firms  appointed by DWS-SDI provide such
office space and equipment,  telephone  facilities and personnel as is necessary
or beneficial  for providing  information  and services to their  clients.  Such
services and assistance may include,  but are not limited to,  establishing  and
maintaining   accounts  and   records,   processing   purchase  and   redemption
transactions,   answering  routine  inquiries  regarding  the  Fund,   providing
assistance  to clients in changing  dividend  and  investment  options,  account
designations  and  addresses  and such other  administrative  services as may be
agreed  upon from time to time and  permitted  by  applicable  statute,  rule or
regulation.

DWS-SDI bears all of its expenses of providing  those  services  pursuant to the
Services Agreement,  including the payment of a service fee to firms (as defined
below).  As indicated under the Rule 12b-1 Plan,  DWS-SDI receives  compensation
from the Fund for its services under the Services Agreement.

Rule 12b-1 Plans

The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the "Rule
12b-1 Plan") that  provides for fees payable as an expense of the Class B shares
and Class C shares,  that are used by DWS-SDI to pay for  distribution  services
for  those  classes.   Pursuant  to  the  Rule  12b-1  Plan,   shareholder   and
administrative services are provided to the Fund on behalf of its Class A, B and
C shareholders under the Fund's Services  Agreement with DWS-SDI.  Because 12b-1
fees are paid out of Fund  assets on an ongoing  basis,  they  will,  over time,
increase the cost of an  investment  and may cost more than other types of sales
charges.

The Rule  12b-1  distribution  plans  for  Class B and  Class C  shares  provide
alternative  methods  for  paying  sales  charges  and may help the Fund grow or
maintain  asset  levels to provide  operational  efficiencies  and  economies of
scale.   Rule  12b-1   service  plans   provide   compensation   to  DWS-SDI  or
intermediaries  for  post-sales  servicing.  Since  the  Distribution  Agreement
provides  for fees  payable  as an  expense of Class B shares and Class C shares
that are used by DWS-SDI to pay for distribution and services for those classes,
the  Distribution  Agreement  is approved and  reviewed  separately  for Class B
shares  and Class C shares in  accordance  with Rule  12b-1  under the 1940 Act,
which  regulates  the manner in which an  investment  company  may,  directly or
indirectly,  bear the  expenses of  distributing  its shares.  The  Distribution
Agreements  may not be amended to  increase  the fee to be paid by the Fund with
respect to a class  without  approval  by a majority of the  outstanding  voting
securities  of such class of the Fund.  Similarly,  the  Services  Agreement  is
approved and reviewed separately for Class A shares,  Class B shares and Class C
shares in accordance with Rule 12b-1.

If a Rule 12b-1 Plan is terminated in accordance with its terms,  the obligation
of the Fund to make  payments  to DWS-SDI  pursuant  to the Rule 12b-1 Plan will
cease and the Fund will not be  required  to make any  payments  not  previously
accrued past the termination  date.  Thus,  there is no legal obligation for the
Fund to pay any expenses incurred by DWS-SDI other than fees previously  accrued
and payable  under a Rule 12b-1  Plan,  if for any reason the Rule 12b-1 Plan is
terminated in accordance  with its terms.  Future fees under the Rule 12b-1 Plan
may or may not be sufficient to cover DWS-SDI for its expenses incurred.  On the
other hand, under certain circumstances,  DWS-SDI might collect in the aggregate
over certain periods more in fees under the Rule 12b-1 Plan than it has expended
over that same  period  in  providing  distribution  services  for the Fund.  In
connection  with  Class B  shares,  for  example,  if shares of the Fund were to
appreciate  (resulting  in greater  asset base against which Rule 12b-1 fees are
charged)  and sales of the Fund's  shares  were to decline  (resulting  in lower
expenditures  by DWS-SDI  under the Rule 12b-1 Plan),  fees payable could exceed
expenditures. This may also happen over certain periods shorter than the life of
the Rule 12b-1 Plan  simply due to the timing of  expenses  incurred  by DWS-SDI
that is not matched to the


                                       36
<PAGE>

timing of revenues  received  (e.g.,  a sales  commission may be paid by DWS-SDI
related to an investment in year 1, while the Rule 12b-1 fee to DWS-SDI  related
to that  investment  may accrue during year 1 through year 6 prior to conversion
of the  investment to Class A shares).  As a result,  if DWS-SDI's  expenses are
less than the Rule  12b-1  fees,  DWS-SDI  will  retain its full fees and make a
profit.

Class B and Class C Shares

Distribution  Services.  For its  services  under  the  Distribution  Agreement,
DWS-SDI receives a fee from the Fund under its Rule 12b-1 Plan, payable monthly,
at the annual rate of 0.75% of average daily net assets of the Fund attributable
to its  Class B  shares.  This fee is  accrued  daily as an  expense  of Class B
shares.  DWS-SDI also receives any  contingent  deferred sales charges paid with
respect  to Class B shares.  DWS-SDI  currently  compensates  firms for sales of
Class B shares at a commission rate of 3.75%.

For its services under the Distribution  Agreement,  DWS-SDI receives a fee from
the Fund under its Rule 12b-1 Plan, payable monthly, at the annual rate of 0.75%
of average daily net assets of the Fund attributable to Class C shares. This fee
is accrued daily as an expense of Class C shares.  DWS-SDI generally advances to
firms the first year  distribution  fee at a rate of 0.75% of the purchase price
of Class C shares. However, DWS-SDI does not advance the first year distribution
fee to firms for sales of Class C shares to employer  sponsored employee benefit
plans using the OmniPlus subaccount record keeping system made available through
ADP, Inc. under an alliance with DWS-SDI and its  affiliates.  For periods after
the  first  year,  DWS-SDI  currently  pays  firms for sales of Class C shares a
distribution  fee, payable  quarterly,  at an annual rate of 0.75% of net assets
attributable  to Class C shares  maintained  and serviced by the firm.  This fee
continues  until  terminated  by DWS-SDI or the  applicable  Fund.  DWS-SDI also
receives  any  contingent  deferred  sales  charges paid with respect to Class C
shares.

Effective  December 1, 2005, the Distributor has temporarily agreed to eliminate
the 12b-1 distribution fee for Class B shares only.

Class A, Class B and Class C Shares

Shareholder  Services.  For its services under the Services  Agreement,  DWS-SDI
receives a  shareholder  services  fee from the Fund  under a Rule  12b-1  Plan,
payable  monthly,  at an  annual  rate of up to 0.25% of the  average  daily net
assets of Class A, B and C shares of the Fund.

With  respect  to Class A shares of the Fund,  DWS-SDI  pays each firm a service
fee,  payable  quarterly,  at an annual rate of up to 0.25% of the net assets in
Fund accounts that it maintains and services  attributable  to Class A shares of
the Fund,  commencing with the month after  investment.  With respect to Class B
and  Class C shares  of the  Fund,  DWS-SDI  generally  advances  to  firms  the
first-year  service fee at a rate of up to 0.25% of the  purchase  price of such
shares.  However,  DWS-SDI  does not advance the first year service fee to firms
for sales of Class C shares to employer  sponsored  employee benefit plans using
the OmniPlus  subaccount  record keeping system made available through ADP, Inc.
under an alliance with DWS-SDI and its  affiliates.  For periods after the first
year,  DWS-SDI  currently  intends to pay firms a service fee at a rate of up to
0.25% (calculated  monthly and paid quarterly) of the net assets attributable to
Class B and  Class C shares of the Fund  maintained  and  serviced  by the firm.
Firms to which  service  fees may be paid  include  affiliates  of  DWS-SDI.  In
addition DWS-SDI may, from time to time, pay certain firms from it own resources
additional amounts for ongoing  administrative  services and assistance provided
to their customers and clients who are shareholders of the Fund.

DWS-SDI also may provide  some of the above  services and may retain any portion
of the fee under the Services  Agreement not paid to firms to compensate  itself
for shareholder or administrative  functions performed for the Fund.  Currently,
the shareholder  services fee payable to DWS-SDI is payable at an annual rate of
up to 0.25% of net assets  based upon Fund assets in  accounts  for which a firm
provides  administrative  services and at the annual rate of 0.15% of net assets
based upon Fund assets in accounts  for which there is no firm of record  (other
than DWS-SDI) listed on a Fund's records. The effective shareholder services fee
rate to be charged  against  all assets of the Fund while this  procedure  is in
effect will depend upon the  proportion  of Fund assets that is held in accounts
for  which a firm of  record  provides  shareholder  services.  The Board of the
Trust,  in its  discretion,  may approve basing the fee to DWS-SDI at the annual
rate of 0.25% on all Fund assets in the future.

                                       37
<PAGE>

Expenses of the Fund paid in connection with the Rule 12b-1 Plans for each class
of  shares  are set  forth  below.  A  portion  of the  marketing  and sales and
operating expenses shown below could be considered overhead expenses.

                                       38
<PAGE>



[TO BE UPDATED]

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                              Compensation to Underwriter and Firms
                            for Calendar Year Ended December 31, 2007
---------------------------------------------------------------------------------------------------
                                       12b-1 Fees    Compensation
                                     (Shareholder        Paid                 Compensation
                        12b-1 Fees     Servicing        by DWS-SDI           Paid by DWS-SDI
                          Paid        Fee) Paid      to Firms from           to Firms from
Fund                   to DWS-SDI     to DWS-SDI    Distribution Fee   Shareholder Servicing Fee
----                   ----------     ----------    ----------------   -------------------------
<S>                       <C>                    <C>      <C>                     <C>
DWS Balanced Fund
Class A
Class B
Class C


-----------------------------------------------------------------------------------------------
                                          Other Distribution Expenses Paid
                              by Underwriter for Calendar Year Ended December 31, 2007
-----------------------------------------------------------------------------------------------
                       Advertising,
                          Sales,
                       Literature and                  Marketing
                        Promotional      Prospectus    and Sales      Postage     Interest
Fund                     Materials        Printing      Expenses     and Mailing   Expenses
----                     ---------        --------      --------     -----------   --------

DWS Balanced Fund
Class A
Class B
Class C

</TABLE>



                                       39
<PAGE>

The  following  table  shows,  for  Class A  shares,  the  aggregate  amount  of
underwriting  commissions paid to DWS-SDI, the amount in commissions it paid out
to brokers and the amount of underwriting commissions retained by DWS-SDI.


[TO BE UPDATED]

<TABLE>
<CAPTION>
                                                             Aggregate                              Aggregate
                                                         Commissions Paid       Aggregate          Commissions
                                        Aggregate Sales  to Unaffiliated   Commissions Paid to    Retained by
Fund                       Fiscal Year    Commissions          Firms         Affiliated Firms        DWS-SDI
----                       -----------    -----------          -----         ----------------        -------
<S>                             <C>              <C>              <C>                   <C>          <C>
DWS Balanced Fund

                              2007             $                 $                  $                   $
                              2006         $311,000          $226,000            $43,000             $42,000
                              2005         $347,000          $272,000            $27,000             $48,000
</TABLE>


Certain  Trustees  of the Trust or officers  of the Fund are also  directors  or
officers of the Advisor or DWS-SDI, as indicated under "Officers and Trustees."

Independent Registered Public Accounting Firm

The financial highlights of the Fund included in the Fund's prospectuses and the
financial  statements of the Fund incorporated by reference in this Statement of
Additional  Information  have been so included or  incorporated  by reference in
reliance  on the  reports of Ernst & Young LLP,  independent  registered  public
accounting firm, 200 Clarendon Street,  Boston, MA 02116, given on the authority
of said firm as experts in auditing and accounting. Ernst & Young LLP audits the
financial  statements  of the Fund and  provides  other  audit,  tax and related
services.  Shareholders  will receive  annual audited  financial  statements and
semi-annual unaudited financial statements.

Legal Counsel

Vedder, Price, Kaufman & Kammholz,  P.C., 222 North LaSalle Street,  Chicago, IL
60601, serves as legal counsel to the Fund and its Independent Trustees.

Fund Accounting Agent

DWS Scudder Fund Accounting Corporation  ("DWS-SFAC"),  Two International Place,
Boston,  Massachusetts,  02110, a subsidiary of the Advisor,  is responsible for
determining  net asset value per share of the Fund and maintaining the portfolio
and general accounting records for the Fund. Currently, DWS-SFAC receives no fee
for its services to the Fund. However,  subject to Board approval,  at some time
in the future, DWS-SFAC may seek payment for its services under this agreement.

Pursuant  to an  agreement  between  DWS-SFAC  and State  Street  Bank and Trust
Company ("SSB"), DWS-SFAC has delegated certain fund accounting functions to SSB
under the fund accounting  agreement.  The costs and expenses of such delegation
are borne by the DWS-SFAC, not by the Fund.

Custodian, Transfer Agent and Shareholder Service Agent

The Fund employs  SSB, 225 Franklin  Street,  Boston,  Massachusetts  02110,  as
custodian.  SSB has entered into agreements with foreign subcustodians  approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank AG, an affiliate of the Advisor,  as subcustodian  ("DB  Subcustodian")  in
certain countries.  To the extent the Fund holds any securities in the countries
in which SSB uses DB Subcustodian as a  subcustodian,  those  securities will be
held by DB  Subcustodian  as part of a larger omnibus account in the name of SSB
(the "Omnibus  Account").  For its  services,  DB  Subcustodian  receives (1) an
annual fee based on a percentage  of the average daily net assets of the Omnibus
Account and (2)  transaction  charges  with respect to  transactions  that occur
within the  Omnibus  Account.  For the fiscal  year ended  October  31, 2006 the
custodian received $109,613.

                                       40
<PAGE>


SSB is also the Fund's transfer agent and dividend paying agent.

DWS Scudder  Investments  Service  Company  ("DWS-SISC"),  210 West 10th Street,
Kansas City, Missouri  64105-1614,  an affiliate of the Advisor, is the transfer
agent,  dividend-paying  agent and shareholder  service agent for all classes of
DWS funds.





The Transfer  Agent receives an annual service fee for each account of the Fund,
based on the type of account.  For open retail  accounts,  the fee is a flat fee
ranging from $20.00 to $27.50 per account,  for open  wholesale  money funds the
fee is $32.50 per account, while for certain retirement accounts serviced on the
recordkeeping system of ADP, Inc., the fee is a flat fee up to $3.46 per account
(as of October  2006,  indexed to  inflation)  plus an asset  based fee of up to
0.25% of  average  net  assets.  1/12th of the  annual  service  charge for each
account is  charged  and  payable to the  Transfer  Agent each  month.  A fee is
charged for any account  which at any time during the month had a share  balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

Certain  out-of-pocket  expenses  incurred  by  the  Transfer  Agent,  including
expenses of printing and mailing  routine fund  disclosure  documents,  costs of
record retention and transaction  processing costs are reimbursed by the Fund or
are paid  directly  by the  Fund.  Certain  additional  out-of-pocket  expenses,
including costs of computer  hardware and software,  third party  record-keeping
and processing of proxy statements,  may only be reimbursed by the Fund with the
prior approval of the Fund's Board.




Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc.  ("DST")  333 West  11th  Street,  Kansas,  Missouri  64105,  DWS-SISC  has
delegated certain transfer agent and dividend-paying agent functions to DST. The
costs and expenses of such delegation are borne by DWS-SISC, not by the Fund.

The Fund, or the Advisor (including any affiliate of the Advisor),  or both, may
pay   unaffiliated   third  parties  for  providing   recordkeeping   and  other
administrative  services with respect to accounts of  participants in retirement
plans or other  beneficial  owners of Fund shares whose  interests are generally
held in an omnibus account.




                                       41
<PAGE>




Regulatory Matters and Legal Proceedings

On December 21, 2006,  Deutsche Asset Management  ("DeAM")  settled  proceedings
with the  Securities and Exchange  Commission  ("SEC") and the New York Attorney
General on behalf of Deutsche  Asset  Management,  Inc.  ("DAMI") and DIMA,  the
investment advisors to many of the DWS Scudder funds,  regarding  allegations of
improper  trading of fund  shares at DeAM and at the legacy  Scudder  and Kemper
organizations prior to their acquisition by DeAM in April 2002. These regulators
alleged that although the prospectuses for certain funds in the regulators' view
indicated  that the funds did not permit market  timing,  DAMI and DIMA breached
their  fiduciary  duty to those  funds in that their  efforts  to limit  trading
activity in the funds were not effective at certain times.  The regulators  also
alleged that DAMI and DIMA  breached  their  fiduciary  duty to certain funds by
entering into certain market timing  arrangements with investors.  These trading
arrangements  originated  in  businesses  that  existed  prior to the  currently
constituted  DeAM  organization,  which  came  together  as a result of  various
mergers of the legacy Scudder,  Kemper and Deutsche fund groups,  and all of the
arrangements were terminated prior to the start of the regulatory investigations
that  began in the summer of 2003.  No  current  DeAM  employee  approved  these
trading arrangements.  Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.

The terms of the SEC settlement, which identified improper trading in the legacy
Deutsche and Kemper mutual funds only,  provide for payment of  disgorgement  in
the  amount  of $17.2  million.  The terms of the  settlement  with the New York
Attorney  General  provide for payment of  disgorgement  in the amount of $102.3
million, which is inclusive of the amount payable under the SEC settlement, plus
a civil penalty in the amount of $20 million.  The total amount payable by DeAM,
approximately  $122.3  million,  will  be  distributed  to  shareholders  of the
affected  funds in  accordance  with a  distribution  plan to be  developed by a
distribution  consultant.  The funds'  investment  advisors do not believe these
amounts  will have a material  adverse  financial  impact on them or  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.  The  above-described  amounts are not  material to Deutsche
Bank, and have already been reserved.

Among the terms of the settled orders,  DeAM is subject to certain  undertakings
regarding  the conduct of its business in the future,  including  formation of a
Code of Ethics  Oversight  Committee  to oversee all matters  relating to issues
arising  under  the  advisors'  Code of  Ethics;  establishment  of an  Internal
Compliance Controls Committee having overall compliance oversight responsibility
of the advisors; engagement of an Independent Compliance Consultant to conduct a
comprehensive review of the advisors' supervisory  compliance and other policies
and  procedures  designed to prevent  and detect  breaches  of  fiduciary  duty,
breaches  of the Code of Ethics and federal  securities  law



                                       42
<PAGE>

violations by the advisors and their  employees;  and  commencing  in 2008,  the
advisors shall undergo a compliance review by an independent third party.

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be  independent  of DeAM;  DeAM  maintain  existing  management  fee
reductions  for  certain  funds  for a period  of five  years  and not  increase
management  fees for these certain funds during this period;  the funds retain a
senior  officer (or  independent  consultants,  as applicable)  responsible  for
assisting in the review of fee  arrangements  and  monitoring  compliance by the
funds and the investment advisors with securities laws,  fiduciary duties, codes
of ethics and other compliance policies,  the expense of which shall be borne by
DeAM; and periodic account  statements,  fund prospectuses and the mutual funds'
web site contain  additional  disclosure  and/or tools that assist  investors in
understanding  the fees and costs associated with an investment in the funds and
the impact of fees and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

On  September  28,  2006,  the SEC and the National  Association  of  Securities
Dealers  ("NASD")  announced  final  agreements  in  which  Deutsche  Investment
Management Americas Inc. ("DIMA"),  Deutsche Asset Management, Inc. ("DAMI") and
Scudder  Distributors,  Inc. ("DWS-SDI") (now known as DWS Scudder Distributors,
Inc.)  settled  administrative  proceedings  regarding  disclosure  of brokerage
allocation  practices in connection  with sales of the Scudder Funds' (now known
as the DWS Scudder Funds) shares during  2001-2003.  The agreements with the SEC
and NASD are reflected in orders which state, among other things,  that DIMA and
DAMI failed to disclose potential conflicts of interest to the funds' Boards and
to  shareholders   relating  to  DWS-SDI's  use  of  certain  funds'   brokerage
commissions to reduce revenue sharing costs to broker-dealer  firms with whom it
had  arrangements to market and distribute  Scudder Fund shares.  These directed
brokerage practices were discontinued in October 2003.

Under the terms of the  settlements,  in which DIMA,  DAMI and  DWS-SDI  neither
admitted  nor denied any of the  regulators'  findings,  DIMA,  DAMI and DWS-SDI
agreed to pay  disgorgement,  prejudgment  interest  and civil  penalties in the
total amount of $19.3 million. The portion of the settlements distributed to the
funds was approximately $17.8 million and was paid to the funds as prescribed by
the settlement  orders based upon the amount of brokerage  commissions from each
fund used to satisfy revenue sharing  agreements  with  broker-dealers  who sold
fund shares.

As part of the  settlements,  DIMA,  DAMI and DWS-SDI  also agreed to  implement
certain measures and undertakings relating to revenue sharing payments including
making  additional  disclosures  in the funds'  Prospectuses  or  Statements  of
Additional  Information,  adopting or modifying relevant policies and procedures
and providing regular reporting to the fund Boards.

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.


                                       43
<PAGE>

                             PORTFOLIO TRANSACTIONS




                                       44
<PAGE>




The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio  securities,  including  the  allocation  of  brokerage.  With
respect to those  funds for which a  sub-investment  advisor  manages the fund's
investments,  references in this section to the "Advisor" should be read to mean
the Sub-Advisor, except as noted below.

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the Funds is to seek best  execution,  taking into  account such
factors,   among  others,   as  price;   commission  (where   applicable);   the
broker-


                                       45
<PAGE>

dealer's ability to ensure that securities will be delivered on settlement date;
the willingness of the broker-dealer to commit its capital and purchase a thinly
traded security for its own inventory;  whether the broker-dealer specializes in
block  orders or large  program  trades;  the  broker-dealer's  knowledge of the
market   and   the   security;   the   broker-dealer's   ability   to   maintain
confidentiality;  the  broker-dealer's  ability to provide access to new issues;
the  broker-dealer's  ability to provide support when placing a difficult trade;
the financial condition of the broker-dealer;  and whether the broker-dealer has
the infrastructure and operational capabilities to execute and settle the trade.
The  Advisor  seeks  to  evaluate  the  overall   reasonableness   of  brokerage
commissions with commissions charged on comparable transactions and compares the
brokerage commissions (if any) paid by the Funds to reported commissions paid by
others. The Advisor routinely reviews commission rates, execution and settlement
services performed and makes internal and external comparisons.

Commission  rates  on  transactions  in  equity  securities  on U.S.  securities
exchanges are subject to negotiation. Commission rates on transactions in equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are
generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.

It is  likely  that the  broker-dealers  selected  based  on the  considerations
described in this section will include  firms that also sell shares of the Funds
to their  customers.  However,  the Advisor does not consider sales of shares of
the Funds as a factor in the selection of  broker-dealers  to execute  portfolio
transactions  for the Funds  and,  accordingly,  has  implemented  policies  and
procedures  reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the  selection of  broker-dealers  to execute
portfolio transactions for the Funds.

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own research effort since
the  information  must still be analyzed,  weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage  services of value are received
by the Advisor,  the Advisor may avoid expenses that it might  otherwise  incur.
Research and brokerage  services  received from a broker-dealer may be useful to
the Advisor and its affiliates in providing  investment  management  services to
all or some of its  clients,  which  includes  a Fund.  Services  received  from
broker-dealers  that executed  securities  transactions for a Portfolio will not
necessarily be used by the Advisor specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include,  but are
not limited to,  information on the economy,  industries,  groups of securities,
individual   companies,   statistical   information,   accounting  and  tax  law
interpretations,  political developments, legal developments affecting portfolio
securities,  technical  market action,  pricing and appraisal  services,  credit
analysis,  risk measurement  analysis,  performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically  received  in the form of written  or  electronic  reports,  access to
specialized  financial  publications,  telephone  contacts and personal meetings
with  security  analysts,  but may also be  provided  in the form of  access  to
various  computer  software and meetings  arranged  with  corporate and industry
representatives.

The Advisor may also select  broker-dealers  and obtain from them  research  and
brokerage  services that are used in connection  with executing  trades provided
that such services are consistent  with  interpretations  under Section 28(e)


                                       46
<PAGE>

of the 1934 Act.  Typically,  these services take the form of computer  software
and/or  electronic  communication  services  used by the  Advisor to  facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder.  Currently,
it  is  the  Advisor's  policy  that  Sub-Advisors  may  not  execute  portfolio
transactions on behalf of the Funds to obtain third party research and brokerage
services.  The  Advisor  may, in the future,  change  this  policy.  Regardless,
certain  Sub-Advisors may, as matter of internal policy, limit or preclude third
party research and brokerage services.

The Advisor may use brokerage  commissions to obtain certain brokerage  products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment  decision-making process). In those circumstances,  the
Advisor  will make a good faith  judgment to evaluate  the various  benefits and
uses to which it  intends to put the mixed use  product or service  and will pay
for that portion of the mixed use product or service that it reasonably believes
does not constitute research and brokerage services with its own resources.

DIMA will  monitor  regulatory  developments  and market  practice in the use of
client  commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment  decisions for each Fund and for other investment accounts managed by
the  Advisor  are  made  independently  of each  other  in  light  of  differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases,  simultaneous  transactions are inevitable. To the
extent  permitted by law, the Advisor may aggregate the securities to be sold or
purchased  for a Fund with those to be sold or purchased  for other  accounts in
executing  transactions.  Purchases  or sales are then  averaged as to price and
commission  and  allocated  as to amount in a manner  deemed  equitable  to each
account.  While in some cases this practice  could have a detrimental  effect on
the price  paid or  received  by,  or on the size of the  position  obtained  or
disposed of for,  the Fund,  in other  cases it is believed  that the ability to
engage in volume transactions will be beneficial to the Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts,  some of which use short sales of securities as a part of
its  investment  strategy.  The  simultaneous   management  of  long  and  short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice  versa),  the  risk  arising  from  sequential  orders  in long  and  short
positions,  and the risks associated with receiving  opposing orders at the same
time.

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these  potential  conflicts  of interest.  Incorporated  in the  procedures  are
specific  guidelines  developed to ensure fair and  equitable  treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory  reviews,  as well as compliance  oversight to ensure
that  potential  conflicts  of interest  relating  to this type of activity  are
properly addressed.

Deutsche Bank AG or one of its affiliates (or in the case of a Sub-Advisor,  the
Sub-Advisor  or one of its  affiliates)  may act as a broker  for the  Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor,  and in accordance with  procedures  approved by
the Funds'  Boards,  the  affiliated  broker  will be able to obtain a price and
execution at least as favorable as those obtained from other  qualified  brokers
and if, in the  transaction,  the  affiliated  broker  charges  the Funds a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.

The following shows total brokerage  commissions  paid for the past three fiscal
years. [TO BE UPDATED]

For the fiscal years ended  October 31,  2007,  October 31, 2006 and October 31,
2005,  the Fund paid  $_________,  $1,534,763  and  $221,400 in total  brokerage
commissions.


                                       47
<PAGE>

The Fund is required to  identify  any  securities  of its  "regular  brokers or
dealers"  (as such term is  defined in Rule 10b-1 of the 1940 Act) that the Fund
has acquired during the most recent fiscal year. As of October 31, 2007 the Fund
held the following securities of its regular brokers or dealers:

<TABLE>
<CAPTION>
Name of Regular Broker or Dealer or Parent (Issuer)              Value of Securities Owned as of October 31, 2007
---------------------------------------------------              ------------------------------------------------
<S>                                                                                          <C>
</TABLE>




Portfolio Turnover

Portfolio  turnover  rate is  defined  by the SEC as the ratio of the  lesser of
sales or purchases to the monthly average value of such securities  owned during
the year,  excluding all securities  whose  remaining  maturities at the time of
acquisition were one year or less.

Higher levels of activity by the Fund result in higher transaction costs and may
also  result  in  taxes on  realized  capital  gains  to be borne by the  Fund's
shareholders.  Purchases and sales are made whenever necessary, in the Advisor's
discretion, to meet the Fund's objective.


Portfolio turnover rates for the two most recent fiscal periods for the Fund are
as follows: [TO BE UPDATED]

                             Fiscal Year Ended               Fiscal Year Ended
                             October 31, 2007                October 31, 2006
                             ----------------                ----------------

DWS Balanced Fund                    %                              98%


                        PURCHASE AND REDEMPTION OF SHARES

General Information

Policies and procedures affecting  transactions in Fund shares can be changed at
any  time  without  notice,  subject  to  applicable  law.  Transactions  may be
contingent  upon proper  completion of application  forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the Fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,  cancelled orders or the failure to consummate transactions effected
pursuant to instructions reasonably believed to be genuine.


                                       48
<PAGE>

A  distribution  will be  reinvested in shares of the same Fund and class if the
distribution check is returned as undeliverable.

Orders  will be  confirmed  at a price  based on the net asset value of the Fund
(including any applicable  sales charge) next  determined  after receipt in good
order by DWS-SDI of the order accompanied by payment. Orders received by dealers
or other financial  services firms prior to the determination of net asset value
and received in good order by DWS-SDI  prior to the  determination  of net asset
value will be confirmed at a price based on the net asset value next  determined
after receipt by DWS-SDI ("trade date").

Certificates. Share certificates will not be issued. Share certificates now in a
shareholder's  possession may be sent to the Transfer Agent for cancellation and
book-entry  credit to such  shareholder's  account.  Certain telephone and other
procedures   require   book-entry   holdings.   Shareholders   with  outstanding
certificates bear the risk of loss.

Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying arrangements for their clients to purchase and redeem the Fund's shares,
including higher minimum investments,  and may assess transaction or other fees.
Firms may arrange  with their  clients for other  investment  or  administrative
services.  Such firms may independently  establish and charge additional amounts
to their  clients  for such  services.  Firms  also may hold a Fund's  shares in
nominee or street  name as agent for and on behalf of their  customers.  In such
instances,  the  Fund's  transfer  agent,  DWS-SISC  (the  "Transfer  Agent") or
sub-transfer  agent will have no information with respect to or control over the
accounts of specific shareholders.  Such shareholders may obtain access to their
accounts and information  about their accounts only from their firm.  Certain of
these  firms may receive  compensation  from the Fund  through  the  Shareholder
Service Agent for  record-keeping  and other expenses  relating to these nominee
accounts.  In  addition,  certain  privileges  with  respect to the purchase and
redemption  of shares or the  reinvestment  of  dividends  may not be  available
through such firms. Some firms may participate in a program allowing them access
to  their  clients'  accounts  for  servicing  including,   without  limitation,
transfers of registration and dividend payee changes;  and may perform functions
such  as  generation  of  confirmation   statements  and  disbursement  of  cash
dividends. Such firms, including affiliates of DWS-SDI, may receive compensation
from the Fund through the Shareholder Service Agent for these services.

The Fund has authorized one or more financial  service  institutions,  including
certain   members   of  the  NASD  other   than  the   Distributor   ("financial
institutions"),  to accept purchase and redemption orders for the Fund's shares.
Such financial  institutions  may also designate  other parties,  including plan
administrator  intermediaries,  to accept purchase and redemption  orders on the
Fund's behalf.  Orders for purchases or redemptions  will be deemed to have been
received by the Fund when such financial  institutions or, if applicable,  their
authorized  designees  accept the orders.  Subject to the terms of the  contract
between the Fund and the financial institution, ordinarily orders will be priced
at the Fund's net asset value next computed  after  acceptance by such financial
institution or its authorized  designees and accepted by the Fund.  Further,  if
purchases or  redemptions  of the Fund's  shares are arranged and  settlement is
made  at  an  investor's   election  through  any  other  authorized   financial
institution, that financial institution may, at its discretion, charge a fee for
that  service.  The  Board of  Trustees  and the  Distributor,  also the  Fund's
principal  underwriter,  each has the right to limit the amount of purchases by,
and to refuse to sell to, any  person.  The  Trustees  and the  Distributor  may
suspend  or  terminate  the  offering  of shares of the Fund at any time for any
reason.




                                       49
<PAGE>




DWS-SDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents  ("DWS Scudder  Wholesalers").  Generally,  DWS Scudder
Wholesalers  market shares of the DWS funds to your  financial  advisor,  who in
turn may  recommend  that you  purchase  shares  of a DWS  fund.  The Plan is an
incentive program that combines a monthly  incentive  component with a quarterly
strategic bonus component.  Under the Plan, DWS Scudder Wholesalers will receive
a monetary  monthly  incentive based on the amount of sales generated from their
marketing of the funds,  and that incentive will differ depending on the product
category  of  the  fund.   Each  fund  is  assigned  to  one  of  four   product
categories--"Core,"    "Strategic,"   "Satellite"   or   "Non-CSS"-taking   into
consideration, among other things, the following criteria, where applicable:

o        The Fund's 3-year performance;
o        The Fund's Morningstar rating;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares;
o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and
o        The Fund's consistency with DWS Scudder's branding.

This  information  and other factors are  presented to a committee  comprised of
representatives  from  various  groups  within  DWS  Scudder,  who  review  on a
quarterly basis the funds assigned to each product category described above, and
make any  changes to those  assignments  at that time.  No one  factor,  whether
positive or negative,  determines a fund's  placement in a given  category;  all
these factors together are considered, and the designation of funds in the Core,
Strategic and Satellite categories represents management's judgment based on the
above criteria.  In addition,  management may consider a fund's profile over the
course  of  several  review  periods  before  making  a change  to its  category
assignment.  These  category  assignments  will be posted  quarterly  to the DWS
funds' Web site at www.dws-scudder.com, approximately one month after the end of
each quarter.  DWS Scudder Wholesalers will


                                       50
<PAGE>

receive  the  highest  compensation  for  Core  and  Strategic  funds,  less for
Satellite  funds and the lowest for  Non-CSS  funds.  The level of  compensation
among these categories may differ significantly.

In the normal course of business,  DWS Scudder will from time to time  introduce
new funds into the DWS family of funds. As a general rule, all new funds will be
placed in the  Strategic  compensation  category  for a  minimum  period of four
consecutive quarters, and DWS Scudder Wholesalers will be paid at a rate that is
equivalent to that of the Core Fund  category.  After that four quarter  period,
each new fund in the  Strategic  category  will be reviewed by the committee and
either  assigned to one of the four  categories or continued as a Strategic fund
at that time.

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change  the price that you pay for shares of a fund.  The DWS
Scudder  Compliance  Department  monitors DWS Scudder Wholesaler sales and other
activity  in an  effort  to  detect  unusual  activity  in  the  context  of the
compensation  structure under the Plan. However,  investors may wish to take the
Plan  and the  product  category  of the  fund  into  account  when  considering
purchasing a fund or evaluating any recommendations relating to fund shares.


Telephone  and  Electronic  Transaction  Procedures.  Shareholders  have various
telephone, Internet, wire and other electronic privileges available. The Fund or
its  agents may be liable  for any  losses,  expenses  or costs  arising  out of
fraudulent or unauthorized  instructions pursuant to these privileges unless the
Fund or its  agents  reasonably  believe,  based  upon  reasonable  verification
procedures,  that the  instructions  were genuine.  Verification  procedures may
include recording instructions, requiring certain identifying information before
acting upon instructions and sending written confirmations.  During periods when
it is difficult to contact the Shareholder Service Agent, it may be difficult to
use telephone, wire and other privileges.

QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of Fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans such as IRAs.

Tax-Sheltered   Retirement   Plans.  The  Shareholder   Service  Agent  provides
retirement  plan  services  and  documents  and DWS-SDI can  establish  investor
accounts in any of the following types of retirement plans:

o        Traditional,  Roth and Education IRAs. This includes Savings  Incentive
         Match Plan for  Employees  of Small  Employers  ("SIMPLE"),  Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7)  Custodial  Accounts.  This  type  of plan  is  available  to
         employees of most non-profit organizations.

o        Prototype  money  purchase  pension  and  profit-sharing  plans  may be
         adopted by employers.

Brochures  describing these plans as well as model defined benefit plans, target
benefit plans,  457 plans,  401(k) plans,  simple 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
Additional fees and transaction policies and procedures may apply to such plans.
Investors  should  consult with their own tax  advisors  before  establishing  a
retirement plan.

Purchases

The Fund  reserves the right to withdraw all or any part of the offering made by
its prospectuses  and to reject purchase orders for any reason.  Also, from time
to time,  the Fund may  temporarily  suspend  the  offering  of any class of its
shares to new investors.  During the period of such suspension,  persons who are
already  shareholders  of such class of the Fund may be permitted to continue to
purchase additional shares of such class and to have dividends reinvested.

                                       51
<PAGE>

To help the  government  fight the  funding of  terrorism  and money  laundering
activities,  federal law requires all financial  institutions to obtain,  verify
and record  information  that identifies  each person who opens an account.  For
more  information,  please see  "Policies  You Should  Know About" in the Fund's
prospectuses.

The Fund may waive the minimum for purchases by Trustees, directors, officers or
employees of the Fund or the Advisor, subadvisors and their affiliates.

Financial Services Firms' Compensation. Banks and other financial services firms
may provide  administrative  services  related to order placement and payment to
facilitate transactions in shares of the Fund for their clients, and DWS-SDI may
pay  them a  transaction  fee up to the  level  of the  discount  or  commission
allowable or payable to dealers.

DWS-SDI may,  from time to time,  pay or allow to firms a 1%  commission  on the
amount  of  shares of the Fund sold  under  the  following  conditions:  (i) the
purchased  shares are held in a DWS  Scudder  IRA  account,  (ii) the shares are
purchased as a direct "roll over" of a distribution from a qualified  retirement
plan account  maintained on the subaccount  record keeping system maintained for
DWS-branded  plans  by  ADP,  Inc.  under  an  alliance  with  DWS-SDI  and  its
affiliates, (iii) the registered representative placing the trade is a member of
Executive Council, a group of persons designated by DWS-SDI in acknowledgment of
their dedication to the employee benefit plan area; and (iv) the purchase is not
otherwise subject to a commission.

In  addition  to  the  discounts  or  commissions  described  herein  and in the
prospectuses,  DWS-SDI,  the  Advisor,  or  its  affiliates  may  pay  or  allow
additional  discounts,  commissions  or promotional  incentives,  in the form of
cash, to firms that sell shares of the Fund. In some instances, such amounts may
be  offered  only to  certain  firms that sell or are  expected  to sell  during
specified time periods  certain  minimum amounts of shares of the Fund, or other
funds underwritten by DWS-SDI.

Upon  notice to all  dealers,  DWS-SDI  may  re-allow  to dealers up to the full
applicable Class A sales charge during periods and for transactions specified in
such notice and such re-allowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is re-allowed,  such
dealers  may be deemed to be  underwriters  as that term is  defined in the 1933
Act.

DWS-SDI may at its discretion  compensate  investment dealers or other financial
services  firms in  connection  with  the sale of Class A shares  of the Fund in
accordance  with the Large  Order NAV  Purchase  Privilege  and one of the three
compensation schedules up to the following amounts:

<TABLE>
<CAPTION>
Compensation Schedule #1:                                 Compensation Schedule #2:  DWS
Retail Sales and DWS Scudder Flex Plan(1)                 Scudder Retirement Plans(2)
-----------------------------------------                 ---------------------------
                                                                           As a Percentage of
Amount of                         As a Percentage of Net  Amount of        Net
Shares Sold                       Asset Value             Shares Sold      Asset Value
-----------                       -----------             -----------      -----------

<S>                               <C>                          <C>                 <C>
$1 million to $3 million          1.00%                   Over $3 million  0.00%-0.50%
Over $3 million to $50 million    0.50%                   --                --
Over $50 million                  0.25%                   --                --
</TABLE>

Compensation Schedule #3:
DWS Scudder Choice Plan(3)
--------------------------
                                  As a Percentage of Net
Amount of Shares Sold             Asset Value
---------------------             -----------

All Amounts                       1.00%

(1)      For purposes of determining the appropriate commission percentage to be
         applied to a particular sale under the foregoing schedule, DWS-SDI will
         consider the cumulative  amount invested by the purchaser in a Fund


                                       52
<PAGE>

         and other DWS  Funds  including  purchases  pursuant  to the  "Combined
         Purchases,"  "Letter  of Intent"  and  "Cumulative  Discount"  features
         referred to below.

(2)      Compensation  Schedules  2 and 3 apply to employer  sponsored  employee
         benefit plans using the OmniPlus  subaccount record keeping system made
         available  through  ADP,  Inc.  under an alliance  with DWS-SDI and its
         affiliates.

(3)      DWS-SDI compensates UBS Financial 0.50%.

DWS-SDI  compensates  firms for sales of Class B shares at the time of sale at a
commission  rate of up to 3.75%  of the  amount  of  Class B  shares  purchased.
DWS-SDI is  compensated  by the Fund for services as  distributor  and principal
underwriter for Class B shares.  Except as provided below,  for sales of Class C
shares,  DWS-SDI advances to firms the first year  distribution fee at a rate of
0.75% of the  purchase  price of such shares,  and, for periods  after the first
year,  DWS-SDI  currently  pays firms for sales of Class C shares a distribution
fee, payable quarterly, at an annual rate of 0.75% of net assets attributable to
Class C shares  maintained and serviced by the firm. For sales of Class C shares
to employer  sponsored  employee  benefit  plans using the  OmniPlus  subaccount
record keeping  system made  available  through ADP, Inc. under an alliance with
DWS-SDI and its affiliates, DWS-SDI does not advance the first year distribution
fee and for  periods  after the date of sale,  DWS-SDI  currently  pays  firms a
distribution  fee,  payable  quarterly,  at an annual rate of 0.75% based on net
assets as of the last business day of the month  attributable  to Class C shares
maintained  and  serviced by the firm.  DWS-SDI is  compensated  by the Fund for
services as distributor and principal underwriter for Class C shares.


Revenue Sharing

In light of recent  regulatory  developments,  the Advisor,  the Distributor and
their affiliates have undertaken to furnish certain additional information below
regarding  the  level  of  payments  made  by them to  selected  affiliated  and
unaffiliated  brokers,  dealers,  participating  insurance  companies  or  other
financial  intermediaries  ("financial  advisors") in  connection  with the sale
and/or  distribution  of  Fund  shares  or the  retention  and/or  servicing  of
investors and Fund shares ("revenue sharing").

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable rules of the NASD or other concessions  described in the fee table or
elsewhere in the  Prospectuses or the SAI as payable to all financial  advisors.
For example, the Advisor, the Distributor and/or their affiliates may compensate
financial  advisors  for  providing  the Fund with "shelf  space" or access to a
third  party  platform  or fund  offering  list,  or  other  marketing  programs
including, without limitation, inclusion of the Fund on preferred or recommended
sales  lists,  mutual  fund  "supermarket"  platforms  and  other  formal  sales
programs;  granting the  Distributor  access to the  financial  advisor's  sales
force;  granting the Distributor access to the financial  advisor's  conferences
and meetings;  assistance  in training and  educating  the  financial  advisor's
personnel; and, obtaining other forms of marketing support. The level of revenue
sharing payments made to financial advisors may be a fixed fee or based upon one
or more of the following factors:  gross sales,  current assets and/or number of
accounts of the Fund attributable to the financial advisor,  the particular fund
or fund type or other  measures  as agreed to by the  Advisor,  the  Distributor
and/or their affiliates and the financial  advisors or any combination  thereof.
The amount of these payments is determined at the discretion of the Advisor, the
Distributor  and/or their affiliates from time to time, may be substantial,  and
may be different for different  financial  advisors  based on, for example,  the
nature of the services provided by the financial advisor.

The Advisor,  the  Distributor  and/or their  affiliates  currently make revenue
sharing  payments  from  their own  assets in  connection  with the sale  and/or
distribution of DWS Fund shares, or the retention and/or servicing of investors,
to financial  advisors in amounts that  generally  range from .01% up to .50% of
assets of the Fund serviced and  maintained by the  financial  advisor,  .10% to
..25% of sales of the Fund attributable to the financial  advisor,  a flat fee of
$12,500 up to $500,000, or any combination thereof. These amounts are subject to
change  at  the  discretion  of  the


                                       53
<PAGE>

Advisor, the Distributor and/or their affiliates. Receipt of, or the prospect of
receiving, this additional compensation,  may influence your financial advisor's
recommendation  of this Fund or of any  particular  share class of the Fund. You
should review your financial  advisor's  compensation  disclosure and/or talk to
your financial  advisor to obtain more information on how this  compensation may
have influenced your financial advisor's recommendation of this Fund.

The Advisor,  the Distributor and/or their affiliates may also make such revenue
sharing  payments  to  financial  advisors  under the terms  discussed  above in
connection  with  the  distribution  of both  DWS  funds  and  non-DWS  funds by
financial  advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS Scudder branded  retirement plan platform (the  "Platform")
with the level of revenue  sharing  payments  being based upon sales of both the
DWS funds and the  non-DWS  funds by the  financial  advisor on the  Platform or
current  assets  of both  the DWS  funds  and the  non-DWS  funds  serviced  and
maintained by the financial advisor on the Platform.

As of the  date  hereof,  the  Fund  has been  advised  that  the  Advisor,  the
Distributor  and their  affiliates  expect that the following firms will receive
revenue sharing payments at different points during the coming year as described
above:

Channel: Broker-Dealers and Financial Advisors

A G Edwards & Sons Inc.
AIG Advisors Group
Ameriprise
Cadaret, Grant & Co. Inc.
Capital Analyst, Incorporated
Citigroup Global Markets, Inc. (dba Smith Barney)
Commonwealth Equity Services, LLP (dba Commonwealth Financial Network)
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Group
LaSalle Financial Services, Inc. (dba ABN Amro)
Linsco/Private Ledger Corp.
Marsh Insurance and Investment Company
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Pacific Select Distributors Group
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wells Fargo Investments, LLC

Channel: Cash Product Platform

ADP Clearing & Outsourcing
Allegheny Investments LTD
Bank of New York (Hare & Co.)
Bear, Stearns Securities Corp.
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
Citibank NA
D.A. Davidson & Company
Deutsche Bank Securities Inc.

                                       54
<PAGE>

Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities
Investors Bank & Trust
JPMorgan Chase
Lincoln Investment Planning
Linsco Private Ledger Financial Services
Mellon Financial Markets LLC
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Romano Brothers and Company
SAMCO Capital Markets (Fund Services, Inc.)
Smith Moore & Company
State Street Bank & Trust Co.
Sungard Institutional Brokerage Inc.
US Bancorp
UBS Financial Services Inc.
William Blair & Company

Channel: Third Party Insurance Platforms

Acacia National Life Insurance
Allmerica Financial Life Insurance Company
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
American General Life Insurance Company
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
Genworth Life Insurance Company of New York
Genworth Life and Annuity Insurance Company
Great West Life and Annuity Insurance Company
Hartford Life Insurance Company
ICMG Registered Variable Life
Integrity Life Insurance Company
John Hancock Life Insurance companies
Kemper Investors Life Insurance Company
Lincoln Benefit Life Insurance Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Massachusetts Mutual Life Insurance Group
MetLife Group
Minnesota Life Insurance Company
Mutual of America Life Insurance Company
National Life Insurance Company
National Integrity Life Insurance Company
Nationwide Group
New York Life Insurance and Annuity Corporation

                                       55
<PAGE>

Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America
Sun Life GroupSymetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

Any additions,  modifications or deletions to the financial advisors  identified
above that have occurred since the date hereof are not reflected.

The Advisor,  the  Distributor  or their  affiliates  may enter into  additional
revenue sharing arrangements or change or discontinue existing arrangements with
financial advisors at any time without notice.

The  prospect  of  receiving,  or the  receipt  of  additional  compensation  or
promotional  incentives  described above by financial  advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS Funds or a particular  DWS Fund over sales of shares of mutual
funds (or  non-mutual  fund  investments)  with  respect to which the  financial
advisor does not receive additional compensation or promotional  incentives,  or
receives  lower levels of additional  compensation  or  promotional  incentives.
Similarly,  financial advisors may receive different  compensation or incentives
that may influence  their  recommendation  of any particular  share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that the Fund receives
to invest on behalf of an investor and will not increase Fund expenses.  You may
wish to take  such  payment  arrangements  into  account  when  considering  and
evaluating  any  recommendations  relating to Fund shares and you should discuss
this matter with your  financial  advisor  and review your  financial  advisor's
disclosures.





                                       56
<PAGE>




                                       57
<PAGE>




                                       58
<PAGE>




                                       59
<PAGE>




                                       60
<PAGE>




Class A Purchases.  The public  offering  price of Class A shares for purchasers
choosing  the initial  sales  charge  alternative  is the net asset value plus a
sales charge, as set forth below.

<TABLE>
<CAPTION>
                                                                 Sales Charge
                                                                 ------------
                                                                                         Allowed to Dealers
                                           As a Percentage of    As a Percentage of     as a Percentage of
Amount of Purchase                         Offering Price*,**    Net Asset Value***        Offering Price
------------------                         --------------        ---------------           --------------
<S>                                                <C>                   <C>                     <C>
Less than $50,000                                 5.75%                 6.10%                   5.20%
$50,000 but less than $100,000                    4.50                  4.71                    4.00
$100,000 but less than $250,000                   3.50                  3.63                    3.00
$250,000 but less than $500,000                   2.60                  2.67                    2.25
$500,000 but less than $1 million                 2.00                  2.04                    1.75
$1 million and over                                .00****               .00****                 *****
</TABLE>

*        The offering price includes the sales charge.

**       Because of rounding  in the  calculation  of the  offering  price,  the
         actual  front-end  sales  charge paid by an  investor  may be higher or
         lower than the percentage noted above.

***      Rounded to the nearest one-hundredth percent.

****     Redemption  of shares  may be subject to a  contingent  deferred  sales
         charge as discussed below.

*****    Commission is payable by DWS-SDI as discussed below.

Class A  Quantity  Discounts.  An  investor  or the  investor's  dealer or other
financial  services  firm must notify the  Shareholder  Service Agent or DWS-SDI
whenever  a  quantity  discount  or  reduced  sales  charge is  applicable  to a
purchase.  In order to qualify  for a lower  sales  charge,  all orders  from an
organized  group will have to be placed  through a single  investment  dealer or
other firm and identified as originating from a qualifying purchaser.

                                       61
<PAGE>

Combined  Purchases.  The  Fund's  Class A shares may be  purchased  at the rate
applicable to the sales charge discount  bracket  attained by combining same day
investments in Class A shares of any DWS Funds that bear a sales charge.

Letter of Intent.  The reduced sales charge for Class A shares,  as shown in the
applicable prospectus,  also apply to the aggregate amount of purchases of Class
A shares of DWS Funds that bear a sales  charge made by any  purchaser  within a
24-month period under a written Letter of Intent ("Letter") provided by DWS-SDI.
The Letter,  which imposes no obligation to purchase or sell additional  Class A
shares,  provides  for a price  adjustment  depending  upon  the  actual  amount
purchased  within  such  period.  The Letter  provides  that the first  purchase
following  execution  of the  Letter  must be at least 5% of the  amount  of the
intended  purchase,  and that 5% of the amount of the intended purchase normally
will be held in escrow in the form of shares pending  completion of the intended
purchase.  If the total  investments under the Letter are less than the intended
amount and thereby  qualify only for a higher sales charge than  actually  paid,
the  appropriate  number of escrowed  shares are redeemed and the proceeds  used
toward  satisfaction  of the obligation to pay the increased  sales charge.  The
Letter  for  an  employer-sponsored  employee  benefit  plan  maintained  on the
subaccount  record keeping system available  through ADP, Inc. under an alliance
with DWS-SDI and its affiliates may have special provisions regarding payment of
any  increased  sales charge  resulting  from a failure to complete the intended
purchase under the Letter.  A shareholder  may include the value (at the maximum
offering price,  which is determined by adding the maximum applicable sales load
charged to the net asset  value) of all Class A shares of such DWS Funds held of
record as of the  initial  purchase  date under the  Letter as an  "accumulation
credit" toward the  completion of the Letter,  but no price  adjustment  will be
made on such shares.

Class A Cumulative Discount. Class A shares of the Fund may also be purchased at
the rate  applicable to the discount  bracket  attained by adding to the cost of
shares being purchased, the value of all Class A shares of DWS Funds that bear a
sales charge (computed at the maximum offering price at the time of the purchase
for which the discount is  applicable)  already  owned by the investor or his or
her immediate family member (including the investor's spouse or life partner and
children or stepchildren age 21 or younger).

For purposes of the Combined Purchases, Letter of Intent and Cumulative Discount
features  described above,  employer  sponsored employee benefit plans using the
Flex  subaccount  record  keeping  system  available  through ADP, Inc. under an
alliance with DWS-SDI and its affiliates may include:  (a) Money Market Funds as
"DWS  Funds," (b) all classes of shares of any DWS Fund and (c) the value of any
other plan  investments,  such as guaranteed  investment  contracts and employer
stock,  maintained on such subaccount record keeping system.  Once eligible plan
assets under this provision reach the $1,000,000  threshold,  a later decline in
assets  below the  $1,000,000  threshold  will not affect the plan's  ability to
continue to purchase Class A shares at net asset value.




                                       62
<PAGE>




                                       63
<PAGE>





Class A NAV Sales. Class A shares may be sold at net asset value to:

(a)      a current  or former  director  or trustee  of  Deutsche  or DWS mutual
         funds;

(b)      an  employee  (including  the  employee's  spouse or life  partner  and
         children or  stepchildren  age 21 or  younger) of Deutsche  Bank or its
         affiliates or of a subadvisor to any fund in the DWS family of funds or
         of a  broker-dealer  authorized  to sell  shares of the Fund or service
         agents of the Funds;

(c)      certain  professionals  who assist in the promotion of DWS mutual funds
         pursuant to personal services contracts with DWS-SDI, for themselves or
         members of their  families.  DWS-SDI in its  discretion  may compensate
         financial  services  firms  for  sales  of Class A  shares  under  this
         privilege at a commission rate of 0.50% of the amount of Class A shares
         purchased;

(d)      any trust, pension,  profit-sharing or other benefit plan for only such
         persons listed under the preceding paragraphs (a) and (b);

(e)      persons who purchase such shares  through bank trust  departments  that
         process  such  trades  through an  automated,  integrated  mutual  fund
         clearing program provided by a third party clearing firm;

(f)      selected  employees  (including  their  spouses  or life  partners  and
         children  or  stepchildren  age  21 or  younger)  of  banks  and  other
         financial services firms that provide  administrative  services related
         to order placement and payment to facilitate  transactions in shares of
         the Fund for their clients pursuant to an agreement with DWS-SDI or one
         of its  affiliates.  Only those employees of such banks and other firms
         who  as  part  of  their  usual  duties  provide  services  related  to
         transactions in Fund shares qualify;

(g)      unit  investment  trusts  sponsored  by Ranson &  Associates,  Inc. and
         unitholders of unit investment trusts sponsored by Ranson & Associates,
         Inc. or its predecessors through reinvestment programs described in the
         prospectuses of such trusts that have such programs;

(h)      through certain  investment  advisors  registered  under the Investment
         Advisers Act of 1940 and other  financial  services firms acting solely
         as  agent  for  their  clients,   that  adhere  to  certain   standards
         established  by DWS-SDI,  including a  requirement  that such shares be
         sold for the benefit of their  clients  participating  in an investment
         advisory program or agency commission  program under which such clients
         pay a fee to  the  investment  advisor  or  other  firm  for  portfolio
         management  or agency  brokerage  services.  Such  shares  are sold for
         investment  purposes and on the condition  that they will not be resold
         except through redemption or repurchase by the Fund;

(i)      employer  sponsored  employee  benefit plans using the Flex  subaccount
         recordkeeping system ("Flex Plans") made available through ADP under an
         alliance with DWS-SDI and its affiliates,  established prior to


                                       64
<PAGE>

         October 1, 2003, provided that the Flex Plan is a  participant-directed
         plan that has not less than 200 eligible employees;

(j)      investors investing $1 million or more, either as a lump sum or through
         the "Combined  Purchases," "Letter of Intent" and "Cumulative Discount"
         features referred to above (collectively, the "Large Order NAV Purchase
         Privilege"). The Large Order NAV Purchase Privilege is not available if
         another net asset value purchase privilege is available;

(k)      defined contribution investment only plans with a minimum of $1,000,000
         in plan assets regardless of the amount allocated to the DWS funds;

In addition, Class A shares may be sold at net asset value in connection with:

(l)      the  acquisition  of the  assets  of or merger  or  consolidation  with
         another investment  company,  or to shareholders in connection with the
         investment or reinvestment  of income and capital gain  dividends,  and
         under other circumstances  deemed appropriate by DWS-SDI and consistent
         with regulatory requirements; and

(m)      a  direct  "roll  over"  of a  distribution  from a Flex  Plan  or from
         participants in employer sponsored employee benefit plans maintained on
         the OmniPlus  subaccount  record keeping system made available  through
         ADP, Inc. under an alliance with DWS-SDI and its affiliates  into a DWS
         Scudder IRA;

(n)      reinvestment of fund dividends and distributions;

(o)      exchanging  an  investment in Class A shares of another fund in the DWS
         family of funds for an investment in the fund.

Class A shares also may be purchased at net asset value in any amount by members
of the plaintiff class in the proceeding known as Howard and Audrey Tabankin, et
al. v. Kemper  Short-Term  Global  Income Fund, et al., Case No. 93 C 5231 (N.D.
IL). This privilege is generally non-transferable and continues for the lifetime
of individual class members and for a ten-year period for  non-individual  class
members.  To make a  purchase  at net asset  value  under  this  privilege,  the
investor  must,  at the time of  purchase,  submit a  written  request  that the
purchase be processed at net asset value pursuant to this privilege specifically
identifying the purchaser as a member of the "Tabankin  Class." Shares purchased
under this privilege will be maintained in a separate account that includes only
shares  purchased  under  this  privilege.  For  more  details  concerning  this
privilege,  class members should refer to the Notice of (i) Proposed  Settlement
with Defendants;  and (ii) Hearing to Determine Fairness of Proposed Settlement,
dated  August 31,  1995,  issued in  connection  with the  aforementioned  court
proceeding.  For  sales of Fund  shares  at net  asset  value  pursuant  to this
privilege,  DWS-SDI  may in its  discretion  pay  investment  dealers  and other
financial services firms a concession,  payable quarterly,  at an annual rate of
up to 0.25% of net assets attributable to such shares maintained and serviced by
the firm.  A firm  becomes  eligible  for the  concession  based upon  assets in
accounts  attributable  to shares  purchased  under this  privilege in the month
after the month of purchase and the  concession  continues  until  terminated by
DWS-SDI.  The  privilege of  purchasing  Class A shares of the Fund at net asset
value under this  privilege is not available if another net asset value purchase
privilege also applies.

Class B Purchases. Class B shares of the Fund are offered at net asset value. No
initial  sales charge is imposed.  Class B shares sold without an initial  sales
charge allow the full amount of the investor's  purchase  payment to be invested
in Class B shares  for his or her  account.  Class B  shares  have a  contingent
deferred  sales charge of 4.00% that  declines over time (for shares sold within
six  years  of  purchase)  and Rule  12b-1  fees,  as  described  in the  Fund's
Prospectus and SAI. Class B shares automatically convert to Class A shares after
six years.


Class C Purchases. Class C shares of the Fund are offered at net asset value. No
initial sales charge is imposed  which allows the full amount of the  investor's
purchase payment to be invested in Class C shares for his or her account.  Class
C shares are subject to a contingent  deferred sales charge of 1.00% (for shares
sold within one year of  purchase)  and Rule 12b-1  fees,  as  described  in the
Fund's prospectus and this SAI.

                                       65
<PAGE>

Multi-Class  Suitability.  DWS-SDI  has  established  the  following  procedures
regarding  the  purchase  of Class A,  Class B and  Class C  shares.  Orders  to
purchase  Class B shares of  $100,000  or more and  orders to  purchase  Class C
shares  of  $500,000  or more  will be  declined  with the  exception  of orders
received from financial  representatives acting for clients whose shares will be
held in an omnibus account and  employer-sponsored  employee benefit plans using
the subaccount record keeping system ("System") maintained for DWS-branded plans
under an alliance with DWS-SDI and its affiliates  ("DWS Scudder Flex Plans" and
"DWS Scudder Choice Plans").

The following  provisions apply to DWS Scudder Flex Plans and DWS Scudder Choice
Plans.

a.       Class B Share DWS Scudder Flex Plans. Class B shares have not been sold
         to DWS Scudder  Flex Plans that were  established  on the System  after
         October 1, 2003.  Orders to  purchase  Class B shares for a DWS Scudder
         Flex Plan  established  on the System prior to October 1, 2003 that has
         regularly been  purchasing  Class B shares will be invested  instead in
         Class A shares at net asset value when the combined subaccount value in
         DWS Funds or other  eligible  assets  held by the plan is  $100,000  or
         more.  This  provision  will be imposed  for the first  purchase  after
         eligible plan assets reach the $100,000  threshold.  A later decline in
         assets below the $100,000  threshold will not affect the plan's ability
         to continue to purchase Class A shares at net asset value.

 b.      Class C Share DWS Scudder Flex Plans. Orders to purchase Class C shares
         for a  DWS  Scudder  Flex  Plan,  regardless  of  when  such  plan  was
         established on the System,  will be invested  instead in Class A shares
         at net asset value when the combined  subaccount  value in DWS Funds or
         other  eligible  assets held by the plan is  $1,000,000  or more.  This
         provision  will be imposed for the first  purchase  after eligible plan
         assets reach the $1,000,000 threshold.  A later decline in assets below
         the $1,000,000 threshold will not affect the plan's ability to continue
         to purchase Class A shares at net asset value.

c.       Class C Share DWS Scudder  Choice  Plans.  Orders to  purchase  Class C
         shares for a DWS Scudder Choice Plan that has been regularly purchasing
         Class C shares will be invested  instead in Class A shares at net asset
         value when the combined subaccount value in DWS Funds or other eligible
         assets held by the plan is $1,000,000 or more.  This  provision will be
         imposed for purchases  made  beginning in the month after eligible plan
         assets reach the $1,000,000  threshold.  In addition, as a condition to
         being permitted to use the Choice Plan platform, plans must agree that,
         within  one month  after  eligible  plan  assets  reach the  $1,000,000
         threshold,  all  existing  Class  C  shares  held in the  plan  will be
         automatically converted to Class A shares.

 The procedures  above do not reflect in any way the suitability of a particular
 class of shares for a  particular  investor  and  should not be relied  upon as
 such. A suitability determination must be made by investors with the assistance
 of their financial representative.

Purchase of Institutional Class Shares.  Information on how to buy Institutional
Class shares is set forth in the section entitled "Buying and Selling Shares" in
the Fund's prospectus.  The following supplements that information.  The minimum
initial  investment for  Institutional  Class shares is $1,000,000.  There is no
minimum subsequent  investment  requirement for the Institutional  Class shares.
The minimum amounts may be changed at any time in management's discretion.

To sell shares in a retirement  account  other than an IRA, your request must be
made in writing,  except for exchanges to other eligible funds in the DWS family
of funds, which can be requested by phone or in writing.


Automatic  Investment Plan. A shareholder may purchase  additional shares of the
Fund through an automatic  investment program.  With the Direct Deposit Purchase
Plan ("Direct  Deposit"),  investments are made automatically  (minimum $500 and
maximum  $250,000  for  initial  investments  and a  minimum  o $50 and  maximum
$250,000 for subsequent  investments) from the shareholder's  account at a bank,
savings  and  loan  or  credit  union  into  the  shareholder's   Fund  account.
Termination by a shareholder  will become effective within thirty days after the
Shareholder  Service  Agent has received the request.  The Fund may  immediately
terminate a shareholder's Direct Deposit in the event that any item is unpaid by
the shareholder's financial institution.


                                       66
<PAGE>


Minimum Subsequent  Investment Policies.  For current shareholders of Class A, B
or C  shares  there  is a $50  minimum  investment  requirement  for  subsequent
investments in the fund. There is no minimum subsequent  investment  requirement
in Class A shares for investments on behalf of participants in certain fee-based
and wrap  programs  offered  through  financial  intermediaries  approved by the
Advisor or for Institutional Class shareholders.


Payroll  Investment  Plans. A shareholder  may purchase  shares through  Payroll
Direct Deposit or Government  Direct  Deposit.  Under these  programs,  all or a
portion of a shareholder's  net pay or government check is invested each payment
period.  A shareholder may terminate  participation  in these programs by giving
written  notice  to  the  shareholder's   employer  or  government   agency,  as
appropriate. (A reasonable time to act is required.) The Fund is not responsible
for the  efficiency of the employer or  government  agency making the payment or
any financial institutions transmitting payments.

It is our policy to offer purchase  privileges to current or former directors or
trustees of the Deutsche or DWS mutual funds,  employees,  their spouses or life
partners and children or step-children age 21 or younger of Deutsche Bank or its
affiliates  or a  subadvisor  to any  fund  in the  DWS  family  of  funds  or a
broker-dealer  authorized to sell shares of the Fund. Qualified individuals will
generally  be allowed to  purchase  shares in the class with the lowest  expense
ratio,  usually  the  Institutional  Class  shares.  If the Fund  does not offer
Institutional  Class shares,  these  individuals  will be allowed to buy Class A
shares at NAV.  The Fund also  reserves  the right to waive the minimum  account
balance  requirement for employee and director accounts.  Fees generally charged
to IRA accounts will be charged to accounts of employees and directors.

Redemptions

The fund may suspend or postpone  redemptions  as permitted  pursuant to Section
22(e) of the 1940 Act.  Generally,  those circumstances are when 1) the New York
Stock Exchange is closed other than customary  weekend or holiday  closings;  2)
trading on the New York Stock  Exchange is  restricted;  3) an emergency  exists
which  makes  the  disposal  of  securities  owned  by a  portfolio  or the fair
determination   of  the  value  of  a  portfolio's  net  assets  not  reasonably
practicable;  or 4) the SEC, by order,  permits the  suspension  of the right of
redemption.  Redemption  payments  by wire may also be delayed in the event of a
non-routine  closure of the Federal Reserve wire payment  system.  A request for
repurchase (confirmed redemption) may be communicated by a shareholder through a
financial  services firm to DWS-SDI,  which firms must promptly submit orders to
be effective.

Redemption fee. The Fund imposes a redemption fee of 2% of the total  redemption
amount  (calculated  at net asset  value,  without  regard to the  effect of any
contingent  deferred sales charge; any contingent  deferred sales charge is also
assessed on the total redemption  amount without regard to the assessment of the
2% redemption  fee) on all fund shares  redeemed or exchanged  within 15 days of
buying  them  (either by  purchase  or  exchange).  The  redemption  fee is paid
directly to the Fund, and is designed to encourage  long-term  investment and to
offset  transaction  and other costs  associated  with  short-term  or excessive
trading. For purposes of determining whether the redemption fee applies,  shares
held the longest  time will be treated as being  redeemed  first and shares held
the shortest time will be treated as being  redeemed last. The redemption fee is
applicable  to fund  shares  purchased  either  directly  or through a financial
intermediary,   such  as  a  broker-dealer.   Transactions   through   financial
intermediaries  typically  are  placed  with the Fund on an  omnibus  basis  and
include  both  purchase  and sale  transactions  placed on  behalf  of  multiple
investors. These purchase and sale transactions are generally netted against one
another and placed on an aggregate  basis;  consequently  the  identities of the
individuals on whose behalf the  transactions are placed generally are not known
to a fund.  For this  reason,  the  Fund  has  undertaken  to  notify  financial
intermediaries  of their  obligation  to assess the  redemption  fee on customer
accounts  and to collect  and remit the  proceeds to the Fund.  However,  due to
operational   requirements,   the  intermediaries'   methods  for  tracking  and
calculating the fee may be inadequate or differ in some respects from the Fund's
method.

Redemption  requests  must be  unconditional.  Redemption  requests (and a stock
power for certificated  shares) must be duly endorsed by the account holder.  As
specified  in the  prospectuses,  signatures  may  need  to be  guaranteed  by a
commercial bank, trust company,  savings and loan  association,  federal savings
bank,  member  firm  of  a  national  securities  exchange  or  other  financial
institution  permitted by SEC rule.  Additional  documentation  may be required,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.

                                       67
<PAGE>

If the proceeds of the  redemption  (prior to the  imposition of any  contingent
deferred  sales charge) are $100,000 or less and the proceeds are payable to the
shareholder of record at the address of record,  normally a telephone request or
a written  request by any one account  holder  without a signature  guarantee is
sufficient for  redemptions by individual or joint account  holders,  and trust,
executor  and  guardian  account  holders,  provided  the  trustee,  executor or
guardian  is named in the  account  registration.  Other  institutional  account
holders may  exercise  this special  privilege of redeeming  shares by telephone
request or  written  request  without  signature  guarantee  subject to the same
conditions as individual account holders,  provided that this privilege has been
pre-authorized by the institutional account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed.  This privilege may not be
used to  redeem  shares  held in  certificated  form  and may not be used if the
shareholder's account has had an address change within 15 days of the redemption
request.

Wires.  Delivery of the proceeds of a wire redemption of $250,000 or more may be
delayed by the Fund for up to seven days if the Fund or the Shareholder  Service
Agent deems it appropriate under then-current market conditions.  The ability to
send wires is limited by the business hours and holidays of the firms  involved.
The Fund is not responsible for the efficiency of the federal wire system or the
account  holder's  financial  services  firm or  bank.  The  account  holder  is
responsible  for any charges  imposed by the account  holder's  firm or bank. To
change the  designated  account  to receive  wire  redemption  proceeds,  send a
written request to the Fund Shareholder Service Agent with signatures guaranteed
as described above or contact the firm through which Fund shares were purchased.

Automatic  Withdrawal  Plan. An owner of $5,000 or more of a class of the Fund's
shares at the  offering  price (net  asset  value  plus,  in the case of Class A
shares the initial  sales  charge) may provide for the payment  from the owner's
account of any  requested  dollar amount to be paid to the owner or a designated
payee monthly,  quarterly,  semiannually or annually. The $5,000 minimum account
size is not applicable to IRAs. The minimum periodic payment is $50. The maximum
annual rate at which  shares,  subject to CDSC may be redeemed is 12% of the net
asset value of the account. Shares are redeemed so that the payee should receive
payment  approximately  the first of the month.  Investors  using this Plan must
reinvest Fund distributions.

Non-retirement plan shareholders may establish an Automatic Withdrawal Plan (the
"Withdrawal  Plan") to receive monthly,  quarterly or periodic  redemptions from
his or her account for any designated  amount of $50 or more.  Shareholders  may
designate  which day they want the automatic  withdrawal  to be  processed.  The
check  amounts may be based on the  redemption of a fixed dollar  amount,  fixed
share amount, percent of account value or declining balance. The Withdrawal Plan
provides for income  dividends  and capital gains  distributions,  if any, to be
reinvested  in  additional  shares.  Shares are then  liquidated as necessary to
provide for withdrawal  payments.  Since the withdrawals are in amounts selected
by the investor and have no relationship to yield or income,  payments  received
cannot be  considered  as yield or income on the  investment  and the  resulting
liquidations may deplete or possibly  extinguish the initial  investment and any
reinvested dividends and capital gains distributions.  Any such requests must be
received  by a Fund's  transfer  agent  ten days  prior to the date of the first
automatic withdrawal. An Automatic Withdrawal Plan may be terminated at any time
by the  shareholder,  the  Trust or its  agent on  written  notice,  and will be
terminated  when all  shares  of the Fund  under the  Withdrawal  Plan have been
liquidated or upon receipt by the Trust of notice of death of the shareholder.

The purchase of Class A shares while  participating  in an automatic  withdrawal
plan will  ordinarily be  disadvantageous  to the investor  because the investor
will be paying a sales  charge on the  purchase  of shares at the same time that
the investor is redeeming shares upon which a sales charge may have already been
paid.  Therefore,  the Fund will not knowingly permit additional  investments of
less  than  $2,000  if  the  investor  is at the  same  time  making  systematic
withdrawals.

Contingent  Deferred Sales Charge (CDSC).  The following example will illustrate
the operation of the CDSC.  Assume that an investor  makes a single  purchase of
$10,000 of the Fund's  Class B shares and that 16 months  later the value of the
shares has grown by $1,000  through  reinvested  dividends  and by an additional
$1,000 of share appreciation to a total of $12,000. If the investor were then to
redeem the entire  $12,000 in share  value,  the CDSC would be payable only with
respect to $10,000  because  neither the $1,000 of reinvested  dividends nor the
$1,000 of share  appreciation  is subject to the charge.  The charge would be at
the rate of 3.00%  ($300)  because it was in the second year after the  purchase
was made.

                                       68
<PAGE>

The rate of the CDSC is  determined  by the length of the  period of  ownership.
Investments  are tracked on a monthly  basis.  The period of ownership  for this
purpose  begins the first day of the month in which the order for the investment
is received.  For example, an investment made in March of the year of investment
will be eligible for the second  year's  charge if redeemed in or after March of
the following  year. In the event no specific  order is requested when redeeming
shares  subject  to a  CDSC,  the  redemption  will be made  first  from  shares
representing reinvested dividends and then from the earliest purchase of shares.
DWS-SDI  receives  any  CDSC  directly.  The  charge  will not be  imposed  upon
redemption of reinvested dividends or share appreciation.


The Class A CDSC will be waived in the event of:

(a)      redemptions  by  a   participant-directed   qualified  retirement  plan
         described in Code Section 401(a), a participant-directed  non-qualified
         deferred   compensation  plan  described  in  Code  Section  457  or  a
         participant-directed   qualified  retirement  plan  described  in  Code
         Section 403(b)(7) which is not sponsored by a K-12 school district;

(b)      redemptions  by  employer-sponsored  employee  benefit  plans using the
         subaccount record keeping system made available through ADP, Inc. under
         an alliance with DWS-SDI and its affiliates;

(c)      redemption  of shares of a  shareholder  (including a registered  joint
         owner) who has died or is disabled (under certain circumstances);

(d)      redemption  of shares of a  shareholder  (including a registered  joint
         owner) who after purchase of the shares being redeemed  becomes totally
         disabled  (as  evidenced  by a  determination  by  the  federal  Social
         Security Administration);

(e)      redemptions under the Fund's Automatic  Withdrawal Plan at a maximum of
         12% per year of the net asset value of the account;

(f)      redemptions  of  shares  whose  dealer  of  record  at the  time of the
         investment  notifies  DWS-SDI that the dealer waives the  discretionary
         commission applicable to such Large Order NAV Purchase; and

(g)      redemptions for certain loan advances,  hardship  provisions or returns
         of excess contributions from retirement plans.

The Class B CDSC will be waived  for the  circumstances  set forth in items (c),
(d), (e) and (g) for Class A shares. In addition, this CDSC will be waived:

(h)      for redemptions made pursuant to any IRA systematic withdrawal based on
         the  shareholder's  life  expectancy  including,  but not  limited  to,
         substantially  equal periodic  payments  described in Internal  Revenue
         Code Section 72(t)(2)(A)(iv) prior to age 59 1/2;

(i)      for redemptions to satisfy required minimum  distributions after age 70
         1/2 from an IRA account (with the maximum amount subject to this waiver
         being based only upon the shareholder's DWS Scudder IRA accounts); and

(j)      in connection with the following redemptions of shares held by employer
         sponsored  employee benefit plans  maintained on the subaccount  record
         keeping  system  made  available  through  ADP under an  alliance  with
         DWS-SDI and its affiliates:  (1) to satisfy  participant  loan advances
         (note that loan repayments constitute new purchases for purposes of the
         CDSC and the conversion  privilege),  (2) in connection with retirement
         distributions  (limited  at any one time to 12% of the  total  value of
         plan assets invested in the Fund), (3) in connection with distributions
         qualifying under the hardship  provisions of the Internal Revenue Code,
         (4) representing  returns of excess contributions to such plans and (5)
         in connection  with direct "roll over"  distributions  from a Flex Plan
         into a DWS  Scudder  IRA under the  Class A net  asset  value  purchase
         privilege.

                                       69
<PAGE>

The Class C CDSC will be waived  for the  circumstances  set forth in items (b),
(c), (d), (e) and (g) for Class A shares and for the  circumstances set forth in
items (h) and (i) for Class B shares. In addition, this CDSC will be waived for:

(k)      redemption  of shares by an employer  sponsored  employee  benefit plan
         that offers  funds in addition to DWS Funds and whose  dealer of record
         has waived the  advance of the first year  administrative  service  and
         distribution  fees applicable to such shares and agrees to receive such
         fees quarterly; and

(l)      redemption  of  shares  purchased  through  a  dealer-sponsored   asset
         allocation  program  maintained  on an  omnibus  record-keeping  system
         provided  the dealer of record had waived the advance of the first year
         administrative services and distribution fees applicable to such shares
         and has agreed to receive such fees quarterly.





                                       70
<PAGE>



In-kind  Redemptions.  The Fund  reserves  the  right to honor any  request  for
redemption  or  repurchase  by  making  payment  in whole or in part in  readily
marketable securities. These securities will be chosen by the Fund and valued as
they are for  purposes  of  computing  the Fund's net asset  value.  A redeeming
shareholder  who receives such  securities will be subject to federal income tax
in the same manner as if a cash  distribution  had been received.  A shareholder
may incur transaction expenses in converting these securities to cash.

Exchanges

Shareholders  may  request  a  exchange  of  their  shares  for  shares  of  the
corresponding  class of other DWS Funds  without  imposition  of a sales charge,
subject to the provisions  below. For purposes of calculating any CDSC,  amounts
exchanged retain their original cost and purchase date.




Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.  Certain series of DWS Target Fund are available on exchange
only during the offering  period for such series as described in the  applicable
prospectus.  Tax Free Money Fund --  Investment  Class,  NY Tax-Free  Money Fund
--Investment Class, Treasury Money Fund --Investment Class, Money Market Fund --
Investment  Class,  Cash  Management  Fund  Institutional,  Cash  Reserves  Fund
Institutional,  Treasury Money Fund -- Institutional  Class,  Cash Reserve Fund,
Inc. Prime Series,  Tax-Exempt  California Money Market Fund, Cash Account Trust
and Investors  Cash Trust are available on exchange but only through a financial
services  firm having a services  agreement  with DWS-SDI.  All exchanges  among
money  funds  must  meet   applicable   investor   eligibility   and  investment
requirements.  Exchanges  may only be made for funds that are available for sale
in the shareholder's state of residence.  Currently, Tax-Exempt California Money
Market Fund is available for sale only in California.


Shareholders must obtain prospectuses of the funds they are exchanging into from
dealers, other firms or DWS-SDI.  Exchanges are taxable transactions for federal
income tax purposes.

Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a
DWS Fund may  authorize  the  automatic  exchange  of a  specified  amount  ($50
minimum) of such  shares for shares of the same class of another  such DWS Fund.
Exchanges  will  be  made  automatically  until  the  shareholder  or  the  Fund
terminates  the  privilege.  Exchanges  are subject to the terms and  conditions
described above.

                                       71
<PAGE>

Multi-Class  Conversions.  For purposes of conversion to Class A shares,  shares
purchased  through the  reinvestment of dividends and other  distributions  paid
with respect to Class B shares in a shareholder's fund account will be converted
to Class A shares on a pro rata basis.

                                    DIVIDENDS

The  Fund  intends  to  distribute  dividends  from  its net  investment  income
(excluding  short-term  capital gains) quarterly in March,  June,  September and
December.  The Fund  intends to  distribute  net  realized  capital  gains after
utilization  of capital  loss  carryforwards,  if any,  in  December  to prevent
application of a federal excise tax. An additional  distribution may be made, if
necessary.

Any dividends or capital gains  distributions  declared in October,  November or
December  with a record  date in such a month  and  paid  during  the  following
January will be treated by  shareholders  for federal  income tax purposes as if
received on December 31 of the calendar year declared.

Dividends  paid by the Fund with  respect to each  class of its  shares  will be
calculated in the same manner, at the same time and on the same day.

The level of income  dividends  per share (as a  percentage  of net asset value)
will be lower for Class B and Class C shares  than for Class A shares  primarily
as a  result  of the  distribution  fee  applicable  to  Class  B and  Class  C.
Distributions of capital gains, if any, will be paid in the same amount for each
class.

Income and  capital  gain  dividends,  if any,  of the Fund will be  credited to
shareholder accounts in full and fractional shares of the same class of the Fund
at net asset value on the reinvestment  date,  except that, upon written request
to the Shareholder  Service Agent, a shareholder may select one of the following
options:

1.       To receive  income and  short-term  capital gain  dividends in cash and
         long-term  capital  gain  dividends  in shares of the same class at net
         asset value; or

2.       To receive income and capital gain dividends in cash.

Dividends  will be  reinvested  in shares of the same  class of the Fund  unless
shareholders  indicate in writing  that they wish to receive  them in cash.  The
Fund will reinvest dividend checks (and future dividends) in shares of that same
Fund and class if checks are  returned  as  undeliverable.  Dividends  and other
distributions  of  the  Fund  in  the  aggregate  amount  of  $10  or  less  are
automatically  reinvested in shares of the Fund unless the shareholder  requests
that such policy not be applied to the shareholder's account.

If an investment is in the form of a retirement  plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.

If  a  shareholder   has  elected  to  reinvest  any   dividends   and/or  other
distributions,  such  distributions  will be  made in  shares  of the  Fund  and
confirmations will be mailed to the shareholder.  If a shareholder has chosen to
receive cash, a check will be sent.  Distributions of investment company taxable
income and net realized  capital  gains are  taxable,  whether made in shares or
cash.

The distribution is accompanied by a brief explanation of the form and character
of  the   distribution.   The   characterization   of   distributions   on  such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund  issues to each  shareholder  a  statement  of the
federal income tax status of all distributions in the prior calendar year.

The Fund may at any time vary its foregoing dividend  practices and,  therefore,
reserves  the  right  from  time to time to  either  distribute  or  retain  for
reinvestment  such of its net  investment  income  and  its net  short-term  and
long-term  capital  gains as its  Board  determines  appropriate  under the then
current circumstances.  In particular,  and without limiting the foregoing,  the
Fund may make additional  distributions of net investment  income or net capital
gain in order to satisfy the minimum distribution  requirements contained in the
Code.

                                       72
<PAGE>

                                      TAXES

The following is intended to be a general  summary of certain US federal  income
tax  consequences  of  investing  in the Fund.  It is not intended as a complete
discussion  of all such  consequences,  nor  does it  purport  to deal  with all
categories of investors. This discussion reflects the applicable tax laws of the
United States as of the date of this Statement of Additional Information,  which
tax laws may  change or be subject  to new  interpretation  by the courts or the
IRS,  possibly with  retroactive  effect.  Investors  are  therefore  advised to
consult with their tax advisors before making an investment in the Fund.

Federal Taxation.  The Fund has elected to be treated as a regulated  investment
company  under  Subchapter M of the Code,  and has  qualified  each year as such
since its inception.  The Fund intends to continue to so qualify in each taxable
year as required under the Code so that it will not be subject to federal income
tax on the income and gains that it  distributes  to  shareholders.  In order to
qualify  as  a  regulated   investment  company,  the  Fund  must  meet  certain
requirements  regarding  the source of its income,  the  diversification  of its
assets and the distribution of its income.  The Fund must derive at least 90% of
its gross  income from  dividends,  interest,  payments  with respect to certain
securities  loans,  gains  from  the  sale  of  stock,  securities  and  foreign
currencies  and other income  (including  but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of investing
in such stock,  securities,  or currencies and net income derived from qualified
publicly traded  partnerships.  The Fund must diversify its holdings so that, at
the end of each  quarter  of its  taxable  year,  (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items,  US government
securities,  securities  of other  regulated  investment  companies,  and  other
securities  limited in respect of any one issuer to a value not greater  than 5%
of the  value  of the  Fund's  total  assets  and to not  more  than  10% of the
outstanding  voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is  invested in the  securities  (other than those of the US
government or other regulated investment  companies) of any one issuer or of two
or more  issuers  which the Fund  controls  and which are  engaged  in the same,
similar, or related trades or businesses.  The Fund is required to distribute to
its  shareholders  at least  90% of its  taxable  (including  the  excess of net
short-term  capital gain over net long-term  capital  losses) and tax-exempt net
investment  income and  generally  is not  subject to federal  income tax to the
extent that it distributes  annually such net investment income and net realized
capital gains in the manner required under the Code.

If for any  taxable  year the Fund does not  qualify as a  regulated  investment
company,  all of its  taxable  income  will be subject to federal  income tax at
regular  corporate  rates  (without  any  deduction  for  distributions  to  its
shareholders),  and all distributions  from earnings and profits,  including any
distributions of net tax-exempt  income and net long-term capital gains, will be
taxable to shareholders as dividends.  Such dividends,  however, would generally
be eligible  (i) to be treated as  "qualified  dividend  income," in the case of
individual  and other  noncorporate  shareholders,  subject to reduced  rates of
federal income taxation for taxable years beginning  before January 1, 2011, and
(ii)  for  the  70%  dividends  received  deduction  in the  case  of  corporate
shareholders.  In addition,  the Fund could be required to recognize  unrealized
gains,  pay substantial  taxes and interest and make  substantial  distributions
before  requalifying as a regulated  investment company that is accorded special
federal income tax treatment.

The Fund is subject to a nondeductible 4% federal excise tax on amounts required
to be, but not,  distributed  under a prescribed  formula.  The formula requires
payment to shareholders during a calendar year of distributions  representing at
least 98% of the Fund's  taxable  ordinary  income for the calendar  year and at
least 98% of the excess of its capital gains over capital losses realized during
the one-year  period  ending  October 31 (in most cases) of such year as well as
amounts  that were  neither  distributed  nor taxed to the Fund during the prior
calendar year.  Although each Fund's  distribution  policies should enable it to
avoid  excise tax  liability,  the Fund may retain  (and be subject to income or
excise tax on) a portion of its capital gain or other income if it appears to be
in the interest of such Fund.

Taxation  of  Distributions  from the Fund.  For  federal  income tax  purposes,
distributions  of investment  income are generally  taxable as ordinary  income.
Taxes on  distributions  of capital  gains are  determined by how long the Funds
owned  the  investments  that  generated  the  income,  rather  than  how long a
shareholder has owned his or her shares. Distributions of net capital gains from
the sale of investments  that the Fund owned for more than one year and that are
properly  designated  by the  Fund as  capital  gain  dividends  ("Capital  Gain
Dividends") will be taxable as long-term  capital gains.  Distributions of gains
from the sale of  investments  that the Fund  owned for one year or less will be
taxable as ordinary  income.  For taxable years  beginning on or before December
31, 2010,  distributions of investment  income designated by the Fund as derived
from  "qualified  dividend  income" will be taxed in the hands


                                       73
<PAGE>

of  individuals  at the rates  applicable to long-term  capital  gain,  provided
certain  holding period and other  requirements  are met at both the shareholder
and Fund level. A dividend will not be treated as qualified  dividend income (at
either the Fund or  shareholder  level) (1) if the  dividend  is  received  with
respect  to any share of stock held for fewer  than 61 days  during the  120-day
period  beginning  on the date  which is 60 days  before  the date on which such
share  becomes  ex-dividend  with respect to such  dividend  (or, in the case of
certain  preferred  stock,  91 days during the 180-day period  beginning 90 days
before such date),  (2) to the extent that the  recipient is under an obligation
(whether  pursuant to a short sale or otherwise)  to make related  payments with
respect to positions in substantially  similar or related  property,  (3) if the
recipient  elects to have the dividend  income treated as investment  income for
purposes  of  the  limitation  investment  interest  limitation,  or  (4) if the
dividend is received from a foreign corporation that is (a) not eligible for the
benefits of a  comprehensive  income tax treaty with the United States (with the
exception  of  dividends  paid on stock of such a  foreign  corporation  readily
tradable  on an  established  securities  market in the  United  States)  or (b)
treated as a foreign personal holding company,  foreign investment  company,  or
passive foreign investment company.

Distributions  are taxable to shareholders  even if they are paid from income or
gains  earned  by the Fund  before a  shareholder's  investment  (and  thus were
included in the price the shareholder  paid).  Distributions are taxable whether
shareholders  receive them in cash or reinvest them in additional shares through
the reinvestment  privilege. A shareholder whose distributions are reinvested in
shares  will be treated as having  received a dividend  equal to the fair market
value of the new shares issued to the  shareholder.  Any gain resulting from the
sale or exchange of Fund shares generally will be taxable as capital gain.

In general, distributions of investment income designated by the Fund as derived
from qualified dividend income will be treated as qualified dividend income by a
shareholder  taxed as an individual  provided the shareholder  meets the holding
period and other requirements described above with respect to the Fund's shares.
Only qualified  dividend  income received by the Fund after December 31, 2002 is
eligible  for  pass-through  treatment.  If  the  aggregate  qualified  dividend
received by the Fund during any taxable year is95% or more of its gross  income,
then 100% of the Fund's dividends (other than dividends  properly  designated as
Capital Gain  Dividends)  will be eligible to be treated as  qualified  dividend
income.  For this purpose,  the only gain included in the term "gross income" is
the excess of net short-term capital gain over net long-term capital loss.

Special   federal  income  tax  rules  apply  to   investments   though  defined
contribution plans and other  tax-qualified  plans.  Shareholders should consult
their tax  adviser  to  determine  the  suitability  of shares of the Fund as an
investment  through such plans and the precise effect of and investment on their
particular tax situation.

Dividends  from domestic  corporations  may comprise a substantial  part of each
Fund's gross income.  If any such  dividends  constitute a portion of the Fund's
gross income, a portion of the income distributions of such Fund may be eligible
for the 70% deduction for dividends received by corporations.  Shareholders will
be informed of the portion of dividends which so qualify. The dividends-received
deduction  is reduced to the extent the shares of the Fund with respect to which
the dividends are received are treated as debt-financed under federal income tax
law and is  eliminated  if either  those  shares  or the  shares of the Fund are
deemed to have been held by the Fund or the shareholder, as the case may be, for
less than 46 days during the 91-day  period  beginning 45 days before the shares
become ex-dividend.

Transactions  in Fund Shares.  Any loss realized  upon the  redemption of shares
held for six  months  or less at the time of  redemption  will be  treated  as a
long-term  capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period. Furthermore,  any loss from
the sale or  redemption  of shares  held six  months or less  generally  will be
disallowed to the extent that  tax-exempt  interest  dividends were paid on such
shares.

Under certain circumstances,  shareholders of the Fund may exchange their shares
for shares of the same class of certain other funds (the  "reinvested  shares").
If a shareholder  (other than tax-exempt  accounts) makes such an exchange,  the
shareholder  will  recognize  a  capital  gain or loss for  federal  income  tax
purposes  measured by the difference  between the value of the reinvested shares
and the basis of the  exchanged  shares.  Upon the  exchange  of shares  (or the
reinvestment in shares of the same Fund) that were purchased  subject to a sales
charge  and held for less  than 91 days,  the  lesser  of (i) the  sales  charge
incurred  on the  exchanged  shares  or (ii)  the  sales  charge  waived


                                       74
<PAGE>

on the reinvested  shares is included in the basis of the reinvested  shares and
is not included in the basis of the exchanged shares.

Foreign  Taxation.  Foreign  withholding  or other foreign taxes with respect to
income  (possibly  including,  in some cases,  capital gains) on certain foreign
securities may occur.  These taxes may be reduced or eliminated  under the terms
of an applicable US income tax treaty.  As it is not expected that more than 50%
of the value of the Fund's  total assets will  consist of  securities  issued by
foreign  corporations,  the  Fund  will  not be  eligible  to  pass  through  to
shareholders  their  proportionate  shares of any foreign  taxes paid,  with the
result that shareholders will not be required to include in income, and will not
be entitled to take any credits or deductions for such foreign taxes.

Passive Foreign Investment Companies.  Equity investments by the Fund in certain
"passive foreign investment  companies"  ("PFICs") could potentially subject the
Fund to a US federal income tax (including  interest  charges) on  distributions
received from the company or on proceeds received from the disposition of shares
in the company,  which tax cannot be eliminated by making  distributions to Fund
shareholders.  However,  the Fund may elect to avoid the imposition of that tax.
For example,  the Fund may elect to treat a PFIC as a "qualified  electing fund"
(a "QEF  election"),  in which case the Fund would be  required  to include  its
share of the  company's  income and net capital  gains  annually,  regardless of
whether it receives any distribution  from the company.  Such Fund also may make
an election to mark the gains (and to a limited  extent losses) in such holdings
"to the  market" as though it had sold and  repurchased  its  holdings  in those
PFICs on the last day of the  Fund's  taxable  year.  Such  gains and losses are
treated as ordinary  income and loss. The QEF and  mark-to-market  elections may
accelerate the  recognition of income (without the receipt of cash) and increase
the amount  required to be  distributed  by the Fund to avoid  taxation.  Making
either of these  elections  therefore  may require such Fund to liquidate  other
investments  (including  when  it is not  advantageous  to do so)  to  meet  its
distribution requirement,  which also may accelerate the recognition of gain and
affect the Fund's total return.  Dividends paid by PFICs will not be eligible to
be treated as "qualified dividend income."

Other  Federal  Income Tax  Considerations.  The Fund's use of options,  futures
contracts,  forward  contracts  (to the  extent  permitted)  and  certain  other
Strategic   Transactions  will  be  subject  to  special  tax  rules  (including
mark-to-market,  constructive  sale,  straddle,  wash sale, short sale and other
rules),  the effect of which may be to  accelerate  the  recognition  of income,
defer losses, cause adjustments in the holding periods of portfolio  securities,
convert capital gains into ordinary income and convert short-term capital losses
into long-term  capital losses.  These rules could therefore  affect the amount,
timing and character of distributions to investors.

The Fund's  investment  in zero coupon bonds and other debt  obligations  having
original issue discount may cause the Fund to recognize taxable income in excess
of any cash received from the investment.

Under the backup withholding provisions of the Code, redemption proceeds as well
as distributions (including exempt interest dividends) may be subject to federal
income tax  withholding  for certain  shareholders,  including those who fail to
furnish  the  Fund  with  their  correct  taxpayer  identification  numbers  and
certifications as to their tax status.

Shareholders   of  the  Fund  may  be  subject  to  state  and  local  taxes  on
distributions  received from the Fund and on  redemptions  of the Fund's shares.
Any  shareholder  who is not a US Person  (as such term is  defined in the Code)
should  consider the US and foreign tax  consequences  of ownership of shares of
the Fund,  including the possibility that such a shareholder may be subject to a
flat US  withholding  tax  rate of 30% (or a  potentially  lower  rate  under an
applicable  income  tax  treaty)  on amounts  received  by him or her.  Recently
enacted  legislation,  however,  modifies the tax treatment of certain dividends
paid by the Fund to non-US  persons.  Effective  for  taxable  years of the Fund
beginning  after  December  31,  2004 and before  January  1, 2008,  a Fund will
generally not be required to withhold tax on any amounts paid to a non-US person
with respect to dividends attributable to "qualified short-term gain" (i.e., the
excess of short-term capital gain over net long-term capital loss) designated as
such by the Fund and dividends attributable to certain US source interest income
that would not be subject to federal  withholding  tax if earned  directly  by a
non-US person, provided such amounts are properly designated by the Fund.

Capital gains  distributions  may be reduced if Fund capital loss  carryforwards
are available.  Any capital loss carryforwards to which the Fund is entitled are
disclosed in the Fund's annual and semi-annual reports to shareholders.

                                       75
<PAGE>

All  distributions  by the Fund result in a reduction  in the net asset value of
that Fund's  shares.  Should a  distribution  reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular,  investors  should be careful to consider  the tax  implications  of
buying  shares just prior to a  distribution.  The price of shares  purchased at
that time includes the amount of the forthcoming distribution.  Those purchasing
just prior to a  distribution  will receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

Treasury  Regulations  provide  that if a  shareholder  recognizes  a loss  with
respect to Fund  shares of $2 million  or more in a single  taxable  year (or $4
million or more in any  combination of taxable years) for  shareholders  who are
individuals,  S  corporations  or  trusts,  or $10  million  or more in a single
taxable year (or $20 million or more in any  combination of taxable years) for a
corporate  shareholder,  the  shareholder  must file with the  Internal  Revenue
Service a disclosure  statement on Form 8886.  Direct  shareholders of portfolio
securities are in many cases excepted from this reporting requirement, but under
current  guidance,  shareholders  of a  regulated  investment  company  are  not
excepted.  Future guidance may extend the current  exception from this reporting
requirement to shareholders of most or all regulated investment  companies.  The
fact that a loss is reportable under these regulations does not affect the legal
determination  of  whether  the  taxpayer's  treatment  of the  loss is  proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their particular circumstances.

Investors  are advised to consult  their own tax  advisors  with  respect to the
application to their own  circumstances of the  above-described  general federal
income taxation rules and with respect to other federal, state, local or foreign
tax consequences to them on an investment in shares of the Fund.

                                 NET ASSET VALUE

The net asset value of shares of the Fund is computed as of the close of regular
trading on the New York Stock Exchange (the "Exchange") on each day the Exchange
is open for trading (the "Value  Time").  The Exchange is scheduled to be closed
on the following  holidays:  New Year's Day, Dr.  Martin  Luther King,  Jr. Day,
Presidents'  Day,  Good  Friday,  Memorial  Day,  Independence  Day,  Labor Day,
Thanksgiving  and Christmas,  and on the preceding  Friday or subsequent  Monday
when one of these  holidays  falls on a Saturday  or Sunday,  respectively.  Net
asset  value  per share is  determined  separately  for each  class of shares by
dividing the value of the total assets of the Fund attributable to the shares of
that class, less all liabilities attributable to that class, by the total number
of shares of that class outstanding.  The per share net asset value may be lower
for  certain  classes  of the Fund  because  of higher  expenses  borne by these
classes.

An equity  security is valued at its most  recent  sale price on the  security's
primary  exchange  or OTC market as of the Value Time.  Lacking  any sales,  the
security is valued at the calculated  mean between the most recent bid quotation
and the most recent asked quotation (the "Calculated  Mean") on such exchange or
OTC  market  as of the  Value  Time.  If it is not  possible  to  determine  the
Calculated Mean, the security is valued at the most recent bid quotation on such
exchange  or OTC market as of the Value  Time.  In the case of  certain  foreign
exchanges  or OTC  markets,  the closing  price  reported by the exchange or OTC
market  (which may  sometimes  be  referred  to as the  "official  close" or the
"official  closing  price" or other similar  term) will be  considered  the most
recent sale price.

Debt securities are valued as follows.  Money market instruments  purchased with
an  original or  remaining  maturity  of 60 days or less,  maturing at par,  are
valued at amortized  cost.  Other money market  instruments  are valued based on
information  obtained from an approved  pricing agent or, if such information is
not readily  available,  by using  matrix  pricing  techniques  (formula  driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved  pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available,  and otherwise at the mean
of the most recent bid and asked quotations or evaluated  prices, as applicable,
based  on   quotations   or  evaluated   prices   obtained   from  one  or  more
broker-dealers.  Privately  placed  debt  securities,  other than Rule 144A debt
securities,  initially are valued at cost and  thereafter  based on all relevant
factors,  including  type of  security,  size of  holding  and  restrictions  on
disposition.  Municipal  debt  securities  are valued at prices  supplied  by an
approved  pricing  agent (which are intended to reflect the mean between the bid
and asked  prices),  if available,  and otherwise at the mean of the most recent
bid and asked quotations or evaluated price obtained from a broker-dealer. Other
debt securities are valued at prices  supplied by an approved  pricing agent, if
available, and otherwise at the most recent bid quotation or evaluated price, as
applicable,  obtained from one or


                                       76
<PAGE>

more  broker-dealers.  If it is not possible to value a particular debt security
pursuant to the above  methods,  the  security is valued on the basis of factors
including  (but not limited to)  maturity,  coupon,  creditworthiness,  currency
denomination,  and the  movement of the market in which the security is normally
traded.

An exchange-traded option contract on securities, currencies and other financial
instruments  is valued at its most recent sale price on the  relevant  exchange.
Lacking any sales,  the option contract is valued at the Calculated  Mean. If it
is not possible to determine the Calculated  Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased  option  contract or
the most recent asked  quotation in the case of a written  option  contract,  in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the  broker-dealer  with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price,  if available on the exchange on which they are traded most  extensively.
With the exception of stock index futures  contracts  which trade on the Chicago
Mercantile Exchange,  closing settlement times are prior to the close of trading
on the Exchange.  For stock index futures  contracts  which trade on the Chicago
Mercantile  Exchange,  closing  settlement  prices  are  normally  available  at
approximately  4:20 Eastern time. If no settlement price is available,  the last
traded price on such exchange will be used.

If market quotations for portfolio assets are not readily available or the value
of a portfolio asset as determined in accordance with Board approved  procedures
does not represent the fair market value of the  portfolio  asset,  the value of
the portfolio asset is taken to be an amount which, in the opinion of the Fund's
Pricing  Committee  (or,  in  some  cases,  the  Board's  Valuation  Committee),
represents fair market value. The value of other portfolio holdings owned by the
Fund is  determined  in a manner  which is intended  to fairly  reflect the fair
market value of the asset on the valuation date,  based on valuation  procedures
adopted  by the  Fund's  Board and  overseen  primarily  by the  Fund's  Pricing
Committee.




                                       77
<PAGE>




                                       78
<PAGE>




                                       79
<PAGE>




                                       80
<PAGE>




                                       81
<PAGE>




                                       82
<PAGE>




                              TRUSTEES AND OFFICERS
                              ---------------------

The following table presents certain information regarding the Board Members and
Officers of the Fund as of March 1, 2008. Each individual's year of birth is set
forth in parentheses  after his or her name.  Unless  otherwise  noted, (i) each
individual has engaged in the principal  occupation(s) noted in the table for at
least the most recent


                                       83
<PAGE>

five years, although not necessarily in the same capacity,
and (ii) unless  otherwise noted, the address of each individual is c/o Deutsche
Asset Management, 222 South Riverside Plaza, Chicago, Illinois 60606. Each Board
Member's term of office extends until the next shareholder's  meeting called for
the  purpose  of  electing   such  Board  Member  and  until  the  election  and
qualification of a successor,  or until such Board Member sooner dies,  retires,
resigns or is removed as provided in the governing documents of the Trust.

The  following  individuals  hold the same position with the Fund and the Trust.
Independent Board Members

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position(s) Held with the                                                                       Number of Funds
Fund and Length of Time        Principal Occupation(s) During Past 5 Years and                  in DWS Fund
Served(1)                      Other Directorships Held                                         Complex Overseen
-----------------------------------------------------------------------------------------------------------------
<S>                              <C>                                                                   <C>
Paul K. Freeman (1950)         Consultant, World Bank/Inter-American Development Bank;                 59
Chairperson since 2007, and    formerly, Project Leader, International Institute for Applied
Board Member, 2002-present     Systems Analysis (1998-2001); Chief Executive Officer, The Eric
                               Group, Inc. (environmental insurance) (1986-1998)
-----------------------------------------------------------------------------------------------------------------
John W. Ballantine (1946)      Retired; formerly, Executive Vice President and Chief Risk              59
Board Member, 1999-present     Management Officer, First Chicago NBD Corporation/The First
                               National Bank of Chicago (1996-1998); Executive Vice President
                               and Head of International Banking (1995-1996). Directorships:
                               Healthways Inc. (provider of disease and care management
                               services); Portland General Electric (utility company);
                               Stockwell Capital Investments PLC (private equity). Former
                               Directorships: First Oak Brook Bancshares, Inc. and Oak Brook
                               Bank
-----------------------------------------------------------------------------------------------------------------
Donald L. Dunaway (1937)       Retired; formerly, Executive Vice President, A. O. Smith                59
Board Member, 1980-present     Corporation (diversified manufacturer) (1963-1994)
-----------------------------------------------------------------------------------------------------------------
James R. Edgar (1946)          Distinguished Fellow, University of Illinois, Institute of              59
Board Member, 1999-present     Government and Public Affairs (1999-present); formerly,
                               Governor, State of Illinois (1991-1999). Directorships:  John
                               B. Sanfilippo & Son, Inc. (processor/packager/marketer of nuts,
                               snacks and candy products); Horizon Group Properties, Inc.;
                               Youbet.com (online wagering platform); Alberto-Culver Company
                               (manufactures, distributes and markets health and beauty care
                               products)
-----------------------------------------------------------------------------------------------------------------
Robert B. Hoffman (1936)       Retired; formerly, Chairman, Harnischfeger Industries, Inc.             59
Board Member, 1981-present     (machinery for the mining and paper industries) (1999-2001);
                               prior thereto, Vice Chairman and Chief Financial Officer,
                               Monsanto Company (agricultural, pharmaceutical and
                               nutritional/food products) (1994-1999). Directorship:  RCP
                               Advisors, LLC (a private equity investment advisory firm)
-----------------------------------------------------------------------------------------------------------------
William McClayton (1944)       Chief Administrative Officer, Diamond Management & Technology           59
Board Member, 2004-present     Consultants, Inc. (global management consulting firm)
                               (2001-present); formerly, Senior Partner, Arthur Andersen LLP
                               (accounting) (1966-2001). Directorship: Board of Managers, YMCA
                               of Metropolitan Chicago. Formerly Trustee, Ravinia Festival.
-----------------------------------------------------------------------------------------------------------------



                                       84
<PAGE>

-----------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position(s) Held with the                                                                       Number of Funds
Fund and Length of Time        Principal Occupation(s) During Past 5 Years and                  in DWS Fund
Served(1)                      Other Directorships Held                                         Complex Overseen
-----------------------------------------------------------------------------------------------------------------
Shirley D. Peterson (1941)     Retired; formerly, President, Hood College (1995-2000); prior           59
Board Member, 1995-present     thereto, Partner, Steptoe & Johnson (law firm); Commissioner,
                               Internal Revenue Service; Assistant Attorney General (Tax), US
                               Department of Justice. Directorships:  Federal Mogul Corp.
                               (supplier of automotive components and subsystems); AK Steel
                               (steel production); Goodyear Tire & Rubber Co.
                               (April 2004-present); Champion Enterprises, Inc. (manufactured
                               home building); Wolverine World Wide, Inc. (designer,
                               manufacturer and marketer of footwear) (April 2005-present);
                               Trustee, Bryn Mawr College. Former Directorship:  Bethlehem
                               Steel Corp.
-----------------------------------------------------------------------------------------------------------------
Robert H. Wadsworth (1940)     President, Robert H. Wadsworth & Associates, Inc. (consulting          62
Board Member, 2004-present     firm) (1983 to present). Formerly, Trustee of New York Board
                               DWS Funds.
-----------------------------------------------------------------------------------------------------------------
Officers(2)

-----------------------------------------------------------------------------------------------------------------
Name, Date of Birth,
Position(s) Held with the
Trust and Length of Time       Principal Occupation(s) During Past 5 Years and
Served(1)                      Other Directorships Held
-----------------------------------------------------------------------------------------------------------------
Michael G. Clark(4) (1965)     Managing Director(3), Deutsche Asset Management (2006-present); President of
President, 2006-present        DWS family of funds; Director, ICI Mutual Insurance Company (since October
                               2007); formerly, Director of Fund Board Relations (2004-2006) and Director of
                               Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice
                               President Operations, Merrill Lynch Asset Management (1999-2000)
-----------------------------------------------------------------------------------------------------------------
Philip J. Collora (1945)       Director(3), Deutsche Asset Management
Vice President and Assistant
Secretary, 1986-present
-----------------------------------------------------------------------------------------------------------------
Paul H. Schubert(4) (1963)     Managing Director(3), Deutsche Asset Management (since July 2004); formerly,
Chief Financial Officer,       Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of
2004-present                   Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS
Treasurer, 2005-present        Global Asset Management (1994-1998)
-----------------------------------------------------------------------------------------------------------------
John Millette(5) (1962)        Director(3), Deutsche Asset Management
Secretary, 2001-present
-----------------------------------------------------------------------------------------------------------------
Patricia DeFilippis(4) (1963)  Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel,
Assistant Secretary,           New York Life Investment Management LLC (2003-2005); legal associate, Lord,
2005-present                   Abbett & Co. LLC (1998-2003)
-----------------------------------------------------------------------------------------------------------------
Elisa D. Metzger(4) (1962)     Director(3), Deutsche Asset Management (since September 2005); formerly,
Assistant Secretary,           Counsel, Morrison and Foerster LLP (1999-2005)
2005-present
-----------------------------------------------------------------------------------------------------------------
Caroline Pearson(5) (1962)     Managing Director(3), Deutsche Asset Management
Assistant Secretary,
1998-present
-----------------------------------------------------------------------------------------------------------------
Paul Antosca(5)                Director(3), Deutsche Asset Management (since 2006); formerly, Vice President,
(1957)                         The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
Assistant Treasurer,
2007-present
-----------------------------------------------------------------------------------------------------------------
Kathleen Sullivan              Director(3), Deutsche Asset Management
D'Eramo(5) (1957)
Assistant Treasurer,
2003-present
-----------------------------------------------------------------------------------------------------------------



                                       85
<PAGE>

-----------------------------------------------------------------------------------------------------------------
Name, Date of Birth,
Position(s) Held with the
Trust and Length of Time       Principal Occupation(s) During Past 5 Years and
Served(1)                      Other Directorships Held
-----------------------------------------------------------------------------------------------------------------
Jason Vazquez(4) (1972)        Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
Anti-Money Laundering          Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and
Compliance Officer,            Operations Manager for AXA Financial (1999-2004)
2007-present
-----------------------------------------------------------------------------------------------------------------
Robert Kloby(4) (1962)         Managing Director(3), Deutsche Asset Management (2004-present); formerly, Chief
Chief Compliance Officer,      Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President,
2006-present                   The Prudential Insurance Company of America (1988-2000); E.F. Hutton and
                               Company (1984-1988)
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Length of time served  represents  the date that each Board  Member was
         first elected to the common Board which oversees a number of investment
         companies, including the Fund, managed by the Advisor. For the officers
         of the  Fund,  length  of time  served  represents  the date  that each
         officer was first  elected to serve as an officer of any fund  overseen
         by the aforementioned common Board.

(2)      As a result of their respective positions held with the Advisor,  these
         individuals are considered  "interested  persons" of the Advisor within
         the meaning of the 1940 Act. Interested persons receive no compensation
         from the Fund.

(3)      Executive title, not a board directorship.

(4)      Address:  345 Park Avenue, New York, New York 10154.

(5)      Address: Two International Place, Boston, Massachusetts 02110.

Officers' Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

Paul H. Schubert:                        Vice President
Caroline Pearson:                        Secretary
Philip J. Collora:                       Assistant Secretary

Board Members' Responsibilities. The officers of the Trust manage its day-to-day
operations under the direction of the Board. The primary  responsibility  of the
Board is to  represent  the  interests  of the  shareholders  of the Fund and to
provide  oversight of the  management of the Fund.  All of the Board Members are
not "interested persons" of the Advisor.

The Board has adopted  its own  Governance  Procedures  and  Guidelines  and has
established  a  number  of  committees,  as  described  below.  For  each of the
following committees,  the Board has adopted a written charter setting forth the
committees' responsibilities.

Board Committees. The Board oversees a number of investment companies managed by
the Advisor.  Information shown below represents  meetings held on behalf of all
such funds. The common Board has the following committees:

Audit  Committee:  The Audit Committee,  which consists  entirely of Independent
Board  Members,  makes  recommendations  regarding the selection of  independent
registered  public  accounting  firm for the Fund,  confers with the independent
registered public accounting firm regarding the Fund's financial statements, the
results of audits and related matters, and performs such other tasks as the full
Board deems  necessary  or  appropriate.  The Audit  Committee  receives  annual
representations from the independent registered public accounting firm as to its
independence.  The members of the Audit Committee are William McClayton (Chair),
Donald L.  Dunaway and Robert B.  Hoffman.  The Audit  Committee  held seven (7)
meetings during calendar year 2006.

                                       86
<PAGE>

Nominating and Governance  Committee:  The Nominating and Governance  Committee,
which  consists  entirely  of  Independent  Board  Members,  seeks  and  reviews
candidates  for  consideration  as  nominees  for  membership  on the  Board and
oversees the administration of the Fund's Governance  Procedures and Guidelines.
The members of the Nominating  and Governance  Committee are Shirley D. Peterson
(Chair),  James R. Edgar and William McClayton.  Shareholders  wishing to submit
the name of a candidate  for  consideration  as a Board member by the  committee
should submit their  recommendation(s) and resume to the Secretary of the Trust.
The Nominating and Governance  Committee held four (4) meetings  during calendar
year 2006.

Contract  Review  Committee:  The  Contract  Review  Committee,  which  consists
entirely of  Independent  Board  Members,  oversees the annual  contract  review
process.  The  members of the  Contract  Review  Committee  are Paul K.  Freeman
(Chair), John W. Ballantine,  Donald L. Dunaway, William McClayton and Robert H.
Wadsworth.  The Contract Review  Committee held two (2) meetings during calendar
year 2006.

Valuation  Committee:  The  Valuation  Committee  reviews  valuation  procedures
adopted by the Board,  determines fair value of the Fund's  securities as needed
in accordance with the valuation procedures and performs such other tasks as the
full Board deems necessary.  The members of the Valuation  Committee are John W.
Ballantine  (Chair),  Robert H.  Wadsworth,  Donald L. Dunaway  (alternate)  and
William McClayton (alternate).  The Valuation Committee held [number of meetings
varies by fund] meeting[s] during calendar year 2006.

Equity Oversight  Committee:  The Equity Oversight Committee oversees investment
activities of the [DWS equity funds],  such as investment  performance and risk,
expenses and services provided under the investment  management  agreement.  The
members of the Equity Oversight Committee are John W. Ballantine (Chair),  James
R. Edgar and Robert B. Hoffman.  The Equity  Oversight  Committee  held five (5)
meetings during calendar year 2006.

Operations  Committee:  The Operations  Committee oversees the operations of the
Fund,  such  as  reviewing   administrative  fees  and  expenses,   distribution
arrangements,  portfolio  transaction  policies,  custody  and  transfer  agency
arrangements and shareholder services.  Currently, the members of the Operations
Committee  are Robert H.  Wadsworth  (Chair),  John W.  Ballantine  and James R.
Edgar. The Operations Committee held six (6) meetings during calendar year 2006.

Fixed-Income Oversight Committee:  The Fixed-Income Oversight Committee oversees
investment  activities  of  the  DWS  fixed-income  funds,  such  as  investment
performance  and risk,  expenses  and  services  provided  under the  investment
management  agreement.  The members of the Fixed-Income  Oversight Committee are
Donald L. Dunaway  (Chair),  Shirley D.  Peterson and Robert H.  Wadsworth.  The
Fixed-Income  Oversight  Committee held five (5) meetings  during  calendar year
2006.

Remuneration.  Each  Independent  Board Member receives an annual base retainer,
paid  quarterly,  and, as  applicable,  an  additional  annual  fixed fee(s) for
serving as committee  member,  committee  chairperson  and/or as the Independent
Board  chairperson.  The Board  Members  serve as board members of various other
funds advised by the Advisor.  The Advisor  supervises  the Fund's  investments,
pays the  compensation  and expenses of its personnel who serve as Board Members
and  officers  on  behalf  of the Fund and  receives  a  management  fee for its
services.

The Board  established a deferred  compensation  plan for the Independent  Board
Members ("Deferred  Compensation Plan").  Under the Deferred  Compensation Plan,
the  Independent  Board Members may defer  receipt of all, or a portion,  of the
compensation  they earn for their  services  to the Fund,  in lieu of  receiving
current payments of such compensation.  Any deferred amount is treated as though
an  equivalent  dollar  amount has been  invested in shares of one or more funds
advised by the Advisor ("Shadow  Shares").  Governor Edgar currently has elected
to defer at least a portion of his fees. In addition,  previously,  Mr.  Dunaway
elected  to defer  fees that were  payable,  which  are now  included  under the
Deferred  Compensation Plan. The equivalent Shadow Shares are reflected below in
the table describing the Board Member's share ownership.

Members of the Board who are officers,  directors,  employees or stockholders of
the  Advisor or its  affiliates  receive no direct  compensation  from the Fund,
although they are  compensated as employees of the Advisor,  or its  affiliates,
and as a result  may be deemed  to  participate  in fees  paid by the Fund.  The
Independent Board Members are not entitled to benefits under any fund pension or
retirement plan. The following table shows  compensation  received by


                                       87
<PAGE>

each Board  Member from the Fund and  aggregate  compensation  from the DWS Fund
complex during the calendar year 2006.

<TABLE>
<CAPTION>
                                                            Pension or Retirement
                                                               Benefits Accrued         Total Compensation Paid to
Name of                          Compensation from                as Part of           Board Member from DWS Fund
Board Member                     DWS Balanced Fund              Fund Expenses                Complex(2)(3)(4)
------------                     -----------------              -------------                -------
<S>                                         <C>                        <C>                      <C>
John W. Ballantine                          $                         $0                      $222,670
Donald L. Dunaway                           $                         $0                      $210,170
James R. Edgar(1)                           $                         $0                      $180,170
Paul K. Freeman                             $                         $0                      $217,670
Robert B. Hoffman                           $                         $0                      $207,670
William McClayton                           $                         $0                      $193,560
Shirley D. Peterson(5)                      $                         $0                      $242,670
Robert H. Wadsworth                         $                         $0                      $228,250
</TABLE>

(1)       Includes deferred fees.  Pursuant to a Deferred  Compensation Plan, as
          discussed above,  deferred amounts are treated as though an equivalent
          dollar amount has been invested in Shadow Shares (as defined above) of
          funds managed by the Advisor in which  compensation may be deferred by
          Governor Edgar.  Total deferred fees (including  interest  thereon and
          the return from the  assumed  investment  in the funds  managed by the
          Advisor) payable from the Trust to Governor Edgar are [$____].

(2)       For each Board Member,  except Mr. Wadsworth,  total  compensation for
          calendar year 2006 includes  compensation for service on the boards of
          21   trusts/corporations   comprised  of  69   funds/portfolios.   Mr.
          Wadsworth's total  compensation for calendar year 2006 was for service
          on   the   boards   of   24   trusts/corporations   comprised   of  72
          funds/portfolios.  As of December 31, 2006, each Board Member,  except
          Mr.  Wadsworth,   served  on  the  boards  of  22  trusts/corporations
          comprised  of  63  funds/portfolios.  As of  December  31,  2006,  Mr.
          Wadsworth  served  on  the  boards  of  25  DeAM   trusts/corporations
          comprised of 66 funds/portfolios.

(3)      Aggregate  compensation  reflects amounts paid to the Board Members for
         numerous  special meetings of ad hoc committees of the Chicago Board in
         connection with reviewing the funds'  rebranding  initiatives to change
         to the DWS  Family of Funds and with  respect  to legal and  regulatory
         matters.  Such amounts  totaled $5,170 for each of Messrs.  Ballantine,
         Dunaway,  Edgar, Freeman,  Hoffman,  McClayton and Ms. Peterson.  These
         meeting fees were borne by the Advisor.

(4)       For calendar year 2007, John W. Ballantine,  Donald L. Dunaway,  James
          R. Edgar,  Paul K.  Freeman,  Robert B.  Hoffman,  William  McClayton,
          Shirley D.  Peterson,  Robert H.  Wadsworth  are  expected  to receive
          aggregate  compensation  from the DWS Fund  complex in the  amounts of
          $215,000,  $202,500,  $190,000,  $240,000, $185,000, $205,000, 187,500
          and $205,000,  respectively.  The differences in compensation  amounts
          from  calendar year 2006 are due to the changes in Board and committee
          chairpersons and committee  assignments that became effective  January
          1, 2007.

(5)      Includes  $50,000 in annual  retainer fees received by Ms.  Peterson as
         Chairperson  of the Board,  for which she served  through  December 31,
         2006.

Mr. Freeman, prior to his service as Independent Board Member, served as a board
member of certain funds in the Deutsche Bank complex ("DB Funds"). In connection
with his  resignation  and the resignation of certain other board members of the
DB  Funds  on  July  30,  2002  (the  "Effective  Date"),  which  was  part of a
restructuring of the boards overseeing the DB Funds,  Deutsche Asset Management,
Inc.  ("DAMI")  agreed to  recommend,  and, if necessary  obtain,  directors and
officers  ("D&O")  liability  insurance  coverage  for the prior board  members,
including Mr. Freeman, that is at least as equivalent in scope and amount to the
D&O  coverage  provided  to the prior  board  members  for the  six-year  period
following  the Effective  Date. In the event that D&O insurance  coverage is not
available in the commercial marketplace on commercially  reasonable terms from a
conventional   third  party   insurer,   DeAM  reserved  the  right  to  provide
substantially  equivalent  protection  in the form of an  indemnity or financial

                                       88
<PAGE>

guarantee  from an  affiliate  of DeAM.  The D&O  policy in effect  prior to the
Effective Date provided aggregate coverage of $25,000,000, subject to a $250,000
per claim deductible.

Board  Member  Fund  Ownership.  Under the  Trust's  Governance  Procedures  and
Guidelines,  the Independent Board Members have established the expectation that
within three years of becoming a Board Member,  an Independent Board Member will
have  invested an amount in those funds he or she oversees  (which shall include
amounts  held under a deferred  fee  agreement  that are valued based on "shadow
shares" in such funds) in the aggregate in excess of $150,000.  Each  interested
Board Member is also encouraged to own an amount of shares (based upon their own
individual judgment) of those funds that he or she oversees that is suitable for
his or her own appropriate investment needs. The following tables set forth each
Board Member's share ownership of the Fund and all funds in the DWS Fund complex
overseen by each Board Member as of December 31, 2006.

<TABLE>
<CAPTION>
                                                                        Aggregate Dollar Range of Securities
                                             Dollar Range of                        Owned in All
                                           Securities Owned in             Funds in the DWS Fund Complex
Name of Board Member                        DWS Balanced Fund                 Overseen by Board Member
--------------------                        -----------------                 ------------------------
<S>                                              <C>                                  <C>
John W. Ballantine                              [$/None]                         Over $100,000
Donald L. Dunaway*                              [$/None]                         Over $100,000
James R. Edgar*                                 [$/None]                         Over $100,000
Paul K. Freeman                                 [$/None]                         Over $100,000
Robert B. Hoffman                               [$/None]                         Over $100,000
William McClayton                               [$/None]                         $10,001-$50,000
Shirley D. Peterson                             [$/None]                         Over $100,000
Robert H. Wadsworth                             [$/None]                         Over $100,000

*         The dollar range of shares shown includes shadow shares of certain DWS
          Family of Funds in which Mr.  Dunaway and Governor Edgar are deemed to
          be invested pursuant to the Trust's Deferred Compensation Plan as more
          fully described above under "Remuneration."

Ownership in Securities of the Advisor and Related Companies

As  reported  to the Fund,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2006. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal  underwriter of the Fund (including
Deutsche Bank AG).
                                                                                     Value of         Percent of
                                Owner and                                          Securities on     Class on an
Independent                  Relationship to                                       an Aggregate       Aggregate
Board Member                   Board Member         Company      Title of Class        Basis            Basis
------------                   ------------         -------      --------------        -----            -----

John W. Ballantine                                    None
Donald L. Dunaway                                     None
James R. Edgar                                        None
Paul K. Freeman                                       None
Robert B. Hoffman                                     None
William McClayton                                     None
Shirley D. Peterson                                   None
Robert H. Wadsworth                                   None
</TABLE>


                                       89
<PAGE>

Securities Beneficially Owned


As of  ___________,  2008, all Board Members and Officers of the Fund as a group
owned  beneficially  (as that term is defined is section 13(d) of the Securities
Exchange Act of 1934) less than 1% of the outstanding securities of the Fund.

To the best of the Fund's knowledge,  as of ____________,  2008, no person owned
of record or  beneficially  5% or more of any  class of the  Fund's  outstanding
shares, except as noted below.





Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory  action related to possible improper
market timing or other improper trading activity or possible improper  marketing
and sales activity in certain DWS Funds (the "Affected Funds"),  DIMA has agreed
to  indemnify  and hold  harmless  the  Affected  Funds  ("Fund  Indemnification
Agreement")  against any and all loss,  damage,  liability and expense,  arising
from market  timing or marketing and sales  matters  alleged in any  enforcement
actions brought by governmental  authorities  involving or potentially affecting
the  Affected  Funds or DIMA  ("Enforcement  Actions") or that are the basis for
private  actions  brought by  shareholders  of the  Affected  Funds  against the
Affected Funds, their directors and officers,  DIMA and/or certain other parties
("Private Litigation"),  or any proceedings or actions that may be threatened or
commenced  in the future by any  person  (including  governmental  authorities),
arising  from or similar to the matters  alleged in the  Enforcement  Actions or
Private Litigation.  In recognition of its undertaking to indemnify the Affected
Funds  and  in  light  of  the  rebuttable  presumption  generally  afforded  to
independent  directors/trustees  of  investment  companies  that  they  have not
engaged in disabling  conduct,  DIMA has also agreed,  subject to applicable law
and  regulation,  to indemnify  Messrs.  Ballantine,  Dunaway,  Edgar,  Freeman,
Hoffman  and Ms.  Peterson,  each of whom is an  independent  trustee  and was a
trustee at the time DIMA entered into the Fund  Indemnification  Agreement  (the
"Covered Trustees"),  against certain liabilities the Covered Trustees may incur
from the matters  alleged in any  Enforcement  Actions or Private  Litigation or
arising  from or similar to the matters  alleged in the  Enforcement  Actions or
Private  Litigation,  and advance  expenses  that may be incurred by the Covered
Trustees in connection with any Enforcement Actions or Private Litigation.  DIMA
is  not,  however,  required  to  provide  indemnification  and  advancement  of
expenses: (1)


                                       90
<PAGE>

with  respect  to any  proceeding  or action  which the  Affected  Funds'  Board
determines  that the  Covered  Trustees  ultimately  would  not be  entitled  to
indemnification or (2) for any liability of the Covered Trustees to the Affected
Funds or their  shareholders  to which the Covered  Trustee  would  otherwise be
subject  by reason of  willful  misfeasance,  bad  faith,  gross  negligence  or
reckless  disregard of the Covered Trustee's duties as a trustee of the Affected
Funds as determined in a final  adjudication  in such action or proceeding.  The
estimated amount of any expenses that may be advanced to the Covered Trustees or
indemnity  that may be  payable  under the  indemnity  agreements  is  currently
unknown. This undertaking by DIMA will survive the termination of the investment
management agreements between DIMA and the Affected Funds.




                               TRUST ORGANIZATION

The Fund is a registered open-end  management  investment company organized as a
business  trust  under  the laws of  Massachusetts  on  October  24,  1985,  and
effective  January 31, 1986, the Fund pursuant to a reorganization  succeeded to
the assets  and  liabilities  of Kemper  Total  Return  Fund,  Inc.,  a Maryland
corporation  organized in 1963.  Effective March 14, 2005, the Fund succeeded to
the assets  and  liabilities  of the  Scudder  Balanced  Fund,  a  Massachusetts
business trust.

Organizational Description

The Trustees have the authority to create  additional funds and to designate the
relative  rights and  preferences as between the different  funds.  The Trustees
also may  authorize the division of shares of the Fund into  different  classes,
which may bear different  expenses.  All shares issued and outstanding are fully
paid and non-assessable,  transferable, have no pre-emptive or conversion rights
and are redeemable as described in the SAI and in the Fund's prospectuses.  Each
share has equal rights with each other share of the same class of the Fund as to
voting, dividends, exchanges, conversion features and liquidation.  Shareholders
are  entitled  to one vote for each full  share  held and  fractional  votes for
fractional  shares held.  The Trustees may also  terminate  any fund or class by
notice to the shareholders  without shareholder  approval.  Currently,  the Fund
offers Class A, Class B, Class C, Institutional Class and S shares.

                                       91
<PAGE>

The Fund generally is not required to hold meetings of its  shareholders.  Under
the  Agreement  and  Declaration  of  Trust  of  the  Trust,  as  amended,  (the
"Declaration  of  Trust"),  however,   shareholder  meetings  will  be  held  in
connection with the following  matters:  (a) the election or removal of trustees
if a meeting is called for such  purpose;  (b) the  adoption of any contract for
which approval by  shareholders is required by the 1940 Act; (c) any termination
or  reorganization  of the Fund or a class to the extent and as  provided in the
Declaration  of Trust;  (d) certain  material  amendments of the  Declaration of
Trust (such as other than amendments changing the name of a Trust, supplying any
omission,  curing any  ambiguity  or curing,  correcting  or  supplementing  any
defective or inconsistent provision thereof); and (e) such additional matters as
may be required by law, the  Declaration  of Trust,  the By-laws of the Fund, or
any  registration  of the Fund  with  the SEC or as the  trustees  may  consider
necessary  or  desirable.  Shareholders  also vote upon  changes in  fundamental
investment policies or restrictions.

The  Declaration of Trust for the Trust  provides that  obligations of the Trust
are not binding upon the Trustees individually but only upon the property of the
Trust,  that the Trustees and officers will not be liable for errors of judgment
or mistakes of fact or law, and that the Trust will  indemnify  its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved  because of their offices with the Trust except if
it is determined in the manner  provided in the  Declarations of Trust that they
have not acted in good faith in the reasonable belief that their actions were in
the best interests of the Trust.  However,  nothing in the  Declaration of Trust
protects or  indemnifies a Trustee or officer  against any liability to which he
would otherwise be subject by reason of willful  misfeasance,  bad faith,  gross
negligence, or reckless disregard of the duties involved in the conduct of their
office.

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Trust. The Declarations of Trust,  however,  disclaim shareholder  liability for
acts or obligations of the Trust and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Trust or the Trust's  Trustees.  Moreover,  the Declaration of Trust provide
for  indemnification  out of Trust  property  for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Trust
may be covered by insurance. Thus, the risk of a shareholder incurring financial
loss on account of shareholder  liability is considered remote and not material,
since it is limited to  circumstances  in which a disclaimer is inoperative  and
such Trust itself is unable to meet its obligations.

If a series were unable to meet its obligations,  the assets of all other series
may in some  circumstances be available to creditors for that purpose,  in which
case the assets of such other series could be used to meet liabilities which are
not otherwise properly chargeable to them.

Each Trustee serves until the next meeting of  shareholders,  if any, called for
the purpose of electing  Trustees and until the election and  qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed.

Any Trustee may be removed for cause at any time by written  instrument,  signed
by at  least a  majority  of the  number  of  Trustees  prior  to such  removal,
specifying the date upon which such removal shall become effective.  Any Trustee
may be  removed  with or  without  cause  (i) by the  vote  of the  shareholders
entitled to vote more than fifty percent (50%) of the votes  entitled to be cast
on the mater voting  together  without  regard to series or class at any meeting
called for such purpose,  or (ii) by a written  consent filed with the custodian
of the Trust's portfolio  securities and executed by the shareholder entitled to
vote more than  fifty  percent  (50%) of the  votes  entitled  to be cast on the
matter voting together  without regard to series or class.  Whenever ten or more
shareholders of record who have been such for at least six months  preceding the
date of application,  and who hold in the aggregate shares constituting at least
one percent of the outstanding  shares of the Trust, shall apply to the Trustees
in writing, stating that they wish to communicate with other shareholders with a
view to obtaining signatures to a request for a meeting to consider removal of a
Trustee and accompanied by a form of communication and request that they wish to
transmit,  the Trustees  will assist  shareholder  communications  to the extent
provided for in Section 16(c) under the 1940 Act.

                             PROXY VOTING GUIDELINES

The Fund has delegated proxy voting  responsibilities to its investment advisor,
subject to the Board's general oversight. The Fund has delegated proxy voting to
the Advisor with the direction that proxies should be voted  consistent with the
Fund's best  economic  interests.  The Advisor has adopted its own Proxy  Voting
Policies and


                                       92
<PAGE>

Procedures  ("Policies"),  and Proxy Voting Guidelines  ("Guidelines")  for this
purpose.  The Policies address,  among other things,  conflicts of interest that
may arise  between the  interests of the Fund,  and the interests of the Advisor
and its affiliates,  including the Fund's principal underwriter.  The Guidelines
set forth the Advisor's general position on various proposals, such as:

o        Shareholder  Rights -- The Advisor  generally  votes against  proposals
         that restrict shareholder rights.

o        Corporate  Governance -- The Advisor  generally votes for  confidential
         and cumulative voting and against supermajority voting requirements for
         charter and bylaw amendments. The Advisor generally votes for proposals
         to restrict a chief  executive  officer from serving on more than three
         outside  boards of  directors.  The  Advisor  generally  votes  against
         proposals  that  require a company  to  appoint  a  Chairman  who is an
         independent director.

o        Anti-Takeover Matters -- The Advisor generally votes for proposals that
         require shareholder ratification of poison pills or that request boards
         to redeem poison pills,  and votes against the adoption of poison pills
         if  they  are  submitted  for  shareholder  ratification.  The  Advisor
         generally votes for fair price proposals.

o        Compensation  Matters -- The Advisor generally votes for executive cash
         compensation  proposals,  unless they are unreasonably  excessive.  The
         Advisor generally votes against stock option plans that do not meet the
         Advisor's criteria.

o        Routine Matters -- The Advisor  generally votes for the ratification of
         auditors,  procedural matters related to the annual meeting and changes
         in company name, and against bundled proposals and adjournment.

The general provisions described above do not apply to investment companies. The
Advisor generally votes proxies solicited by investment  companies in accordance
with the  recommendations  of an  independent  third  party,  except for proxies
solicited by or with respect to investment companies for which the Advisor or an
affiliate  serves as investment  advisor or principal  underwriter  ("affiliated
investment companies").  The Advisor votes affiliated investment company proxies
in  the  same  proportion  as  the  vote  of  the  investment   company's  other
shareholders  (sometimes called "mirror" or "echo" voting).  Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the 1940 Act.

Although the  Guidelines  set forth the Advisor's  general  voting  positions on
various proposals,  the Advisor may,  consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.

The  Guidelines  on a  particular  issue  may or may  not  reflect  the  view of
individual members of the Board or of a majority of the Board. In addition,  the
Guidelines may reflect a voting position that differs from the actual  practices
of  the  public  companies  within  the  Deutsche  Bank  organization  or of the
investment  companies for which the Advisor or an affiliate serves as investment
advisor or sponsor.

The  Advisor  may  consider  the views of a portfolio  company's  management  in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  Advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the Advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review committee
determines  that the Advisor has a material  conflict  of  interest,  or certain
individuals on the proxy voting committee  should be recused from  participating
in a  particular  proxy vote,  it will  inform the proxy  voting  committee.  If
notified  that the Advisor has a material  conflict,  or fewer than three voting
members are eligible to  participate  in the proxy vote,  typically  the Advisor
will  engage an  independent  third  party to vote the proxy or follow the proxy
voting recommendations of an independent third party.

                                       93
<PAGE>

Under certain circumstances,  the Advisor may not be able to vote proxies or the
Advisor  may find that the  expected  economic  costs from voting  outweigh  the
benefits  associated with voting. For example,  the Advisor may not vote proxies
on certain foreign securities due to local restrictions or customs.  The Advisor
generally  does  not vote  proxies  on  securities  subject  to  share  blocking
restrictions.

You may  obtain  information  about how the Fund  voted  proxies  related to its
portfolio  securities  during the 12-month  period ended June 30 by visiting the
Securities and Exchange  Commission's Web site at www.sec.gov or by visiting our
Web site at:  www.dws-scudder.com  (click on "proxy voting" at the bottom of the
page).

                              FINANCIAL STATEMENTS


The financial  statements,  including the portfolio of investments,  of the Fund
together  with the Report of  Independent  Registered  Public  Accounting  Firm,
Financial  Highlights and notes to financial  statements in the annual report to
the shareholders of the Fund, dated October 31, 2007, are incorporated herein by
reference  and are hereby  deemed to be a part of this  Statement of  Additional
Information.


                             ADDITIONAL INFORMATION

The  CUSIP  numbers  for  each  Class of DWS  Balanced  Fund  discussed  in this
Statement of Additional Information are:

Class A:  23336W-106

Class B:  23336W-205

Class C:  23336W-304

Institutional Class:  23336W-601

DWS Balanced Fund has a fiscal year ending October 31.

The Fund's  prospectuses  and this  Statement  of  Additional  Information  omit
certain information  contained in the Registration  Statement which the Fund has
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration  Statement for further  information with respect to the Fund
and  the  securities  offered  hereby.  This  Registration   Statement  and  its
amendments  are available for inspection by the public at the offices of the SEC
in Washington, D.C.

                                    APPENDIX

BOND AND COMMERCIAL PAPER RATINGS

Set forth below are  descriptions of ratings which represent  opinions as to the
quality of the securities.  It should be emphasized,  however,  that ratings are
relative and subjective and are not absolute standards of quality.

MOODY'S INVESTORS SERVICE, INC. -- CORPORATE BOND RATINGS

Aaa:  Bonds  which are rated Aaa are judged to be of the highest  quality.  They
carry the smallest  degree of investment  risk and are generally  referred to as
"gilt-edged."  Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change,  such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all  standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds  because  margins of protection
may not be as large as in Aaa securities or fluctuations of protective  elements
may be of greater


                                       94
<PAGE>

amplitude or there may be other  elements  present which make the long-term risk
appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment  attributes and are
to be considered as upper -medium grade obligations.  Factors giving security to
principal  and interest  are  considered  adequate,  but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa:  Bonds  which are rated Baa are  considered  as medium  grade  obligations,
(i.e., they are neither highly protected nor poorly secured).  Interest payments
and principal  security appear adequate for the present,  but certain protective
elements may be lacking or may be  characteristically  unreliable over any great
length of time. Such bonds lack outstanding  investment  characteristics  and in
fact have speculative characteristics as well.

Ba:  Bonds  which are rated Ba are judged to have  speculative  elements;  their
future cannot be considered  as well assured.  Often the  protection of interest
and principal  payments may be very  moderate and thereby not well  safe-guarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.

B:  Bonds  which are  rated B are  considered  speculative  and  generally  lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of  maintenance  of other terms of the contract over any long period
of time may be small.

Caa:  Bonds  which are rated Caa are of poor  standing.  Such  issues  may be in
default or there may be present  elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are highly speculative.
Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, typically are in
default and can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Note:  Moody's  appends  numerical  modifiers 1, 2 and 3 to each generic  rating
classification  from Aa through Caa in its  corporate  bond rating  system.  The
modifier 1  indicates  that the issue  ranks in the  higher  end of its  generic
rating category;  the modifier 2 indicates a mid-range ranking; and the modifier
3  indicates  that  the  issue  ranks in the  lower  end of its  generic  rating
category.

MOODY'S INVESTORS SERVICE, INC. -- SHORT-TERM RATINGS

Moody's  short-term debt ratings are opinions of the ability of issuers to honor
short-term financial obligations. Ratings may be assigned to issuers, short-term
programs  or  to  individual  short-term  debt  instruments.   Such  obligations
generally  have an original  maturity  not  exceeding  thirteen  months,  unless
explicitly noted. Issuers rated Prime-1 or P-1 (or supporting institutions) have
a superior ability for repayment of short-term debt obligations.  Prime-1 or P-1
repayment   ability  will  often  be   evidenced   by  many  of  the   following
characteristics:

o        Leading market positions in well established industries.

o        High rates of return on funds employed.

o        Conservative  capitalization  structure with moderate  reliance on debt
         and ample asset protection.

o        Broad margins in earnings  coverage of fixed financial charges and high
         internal cash generation.

o        Well  established  access to a range of  financial  markets and assured
         sources of alternate liquidity.

Issuers rated Prime-2 or P-2 (or supporting  institutions) have a strong ability
for repayment of short-term debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree.


                                       95
<PAGE>

Earnings  trends  and  coverage  ratios,  while  sound,  may be more  subject to
variation. Capitalization characteristics,  while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

STANDARD & POOR'S RATINGS SERVICES -- CORPORATE BOND RATINGS

INVESTMENT GRADE

AAA:  Debt  rated  AAA  has the  highest  rating  assigned  by  S&P's  to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A: Debt  rated A has a strong  capacity  to pay  interest  and  repay  principal
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB:  Debt  rated  BBB  has an  adequate  capacity  to pay  interest  and  repay
principal. Whereas it normally exhibits adequate protection parameters,  adverse
economic  conditions  or  changing  circumstances  are more  likely to lead to a
weakened  capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

SPECULATIVE GRADE

Debt rated BB, B, CCC,  CC, and C has  significant  speculative  characteristics
with respect to capacity to pay interest and repay  principal.  BB indicates the
least degree of speculation and C the highest.  While such debt will likely have
some quality and  protective  characteristics,  these may be outweighed by large
uncertainties or major exposures to adverse conditions.

BB:  Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate capacity to meet timely interest and principal payments.

The BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater  vulnerability  to default but  currently  has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

The B rating category is also used for debt  subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

CCC:  Debt rated CCC has a current  vulnerability  to default,  and is dependent
upon  favorable  business,  financial,  and economic  conditions  to meet timely
payment  of  interest  and  repayment  of  principal.  In the  event of  adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay principal.

The CCC rating  category is also used for debt  subordinated to senior debt that
is assigned an actual or implied B or B- rating.

CC: Debt rated CC has a current high vulnerability to default,  and is dependent
upon  favorable  business,  financial,  and economic  conditions  to meet timely
payment of interest and repayment of principal.

The  rating CC is also  applied  to debt  subordinated  to senior  debt which is
assigned an actual or implied CCC debt rating.

                                       96
<PAGE>

C: The rating C is typically  applied to debt  subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation where a bankruptcy  petition has been filed,  but debt service
payments are continued.

C1: The Rating C1 is  reserved  for income  bonds on which no  interest is being
paid.

D:  Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless Standard & Poor's believes that
such payments  will be made during such grace period.  The D rating also will be
used upon the filing of a  bankruptcy  petition  if debt  service  payments  are
jeopardized.

Plus  (+) or  Minus  (-):  The  ratings  from AA to CCC may be  modified  by the
addition  of a plus or minus  sign to show  relative  standing  within the major
rating categories.

R:  Debt  rated  `R' is under  regulatory  supervision  owing  to its  financial
condition. During the pendency of the regulatory supervision, the regulators may
have the  power to  favor  one  class of  obligations  over  others  or pay some
obligations and not others.

N.R.: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient  information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.

STANDARD & POOR'S RATINGS SERVICES  -- SHORT-TERM RATINGS

S&P's  commercial  paper rating is a current  assessment  of the  likelihood  of
timely payment of debt considered short-term in the relevant market.

A-1: This highest category  indicates that the degree of safety regarding timely
payment is strong.  Those issues  determined to possess  extremely strong safety
characteristics are denoted with a plus (+) sign designation.

A-2:   Capacity  for  timely   payment  on  issues  with  this   designation  is
satisfactory.  However,  the  relative  degree  of  safety is not as high as for
issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely payment.
However,  adverse economic conditions or changing  circumstances are more likely
to lead to a weakened capacity of the issuer to meet its financial commitments.

FITCH INVESTORS SERVICE, INC. -- BOND RATINGS

INVESTMENT GRADE

AAA: Bonds  considered to be investment grade and of the highest credit quality.
The  obligor  has an  exceptionally  strong  ability to pay  interest  and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's  ability to pay interest and repay principal is very strong,  although
not quite as strong as bonds rated AAA. Bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable events.

A: Bonds  considered  to be  investment  grade and of high credit  quality.  The
obligor's  ability to pay  interest  and repay  principal  is  considered  to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds  considered to be investment  grade and of good credit  quality.  The
obligor's  ability to pay  interest  and repay  principal  is  considered  to be
adequate. Adverse changes in economic conditions and circumstances, however,


                                       97
<PAGE>

are more likely to have adverse  impact on these bonds,  and  therefore,  impair
timely  payment.  The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

SPECULATIVE GRADE

BB: Bonds are considered speculative.  The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes.  However,
business or  financial  alternatives  may be  available  which could  assist the
obligor in satisfying its debt service requirements.

B:  Bonds are  considered  highly  speculative.  While  bonds in this  class are
currently meeting debt service requirements, the probability of continued timely
payment of principal  and  interest  reflects the  obligor's  limited  margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to  default.  The  ability to meet  obligations  requires  an  advantageous
business and economic environment.

CC:  Bonds are  minimally  protected.  Default  in payment  of  interest  and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

DDD, DD, and D: Bonds are in default of interest and/or principal payments. Such
bonds  are  extremely  speculative  and  should  be valued on the basis of their
ultimate  recovery value in liquidation or  reorganization  of the obligor.  DDD
represents the highest  potential for recovery on these bonds,  and D represents
the lowest potential for recovery.

Plus (+) or Minus (-): The ratings from AA to CC may be appended by the addition
of a plus or  minus  sign to  denote  the  relative  status  within  the  rating
category.

NR: Indicates that Fitch Rating does not publicly rate the specific issue.

FITCH INVESTORS SERVICE, INC. -- SHORT-TERM RATINGS

Fitch's  short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit,  medium-term notes, and municipal and investment
notes.

F-1+:  Exceptionally  Strong  Credit  Quality.  Issues  assigned this rating are
regarded as having the strongest capacity for timely payment.

F-1: Very Strong Credit Quality.  Issues assigned this rating reflect a capacity
for timely payment only slightly less than issues rated F-1+.

F-2:  Good Credit  Quality.  Issues  assigned  this  rating have a  satisfactory
capacity  for  timely  payment,  but the margin of safety is not as great as the
F-1+ and F-1 categories.

F-3:  Fair Credit  Quality.  Issues  assigned  this rating have  characteristics
suggesting that the capacity for timely payment is adequate;  however, near-term
adverse changes could cause these securities to be rated below investment grade.

B:  Speculative.  Minimal capacity for timely payment of financial  commitments,
plus  vulnerability  to  near-term  adverse  changes in  financial  and economic
conditions.

C: High  default  risk.  Default is a real  possibility.  Capacity  for  meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
                                       98
<PAGE>

D: Default. Denotes actual or imminent payment default.


                                       99




<PAGE>











                                DWS BALANCED FUND

                                 Class S shares














                       STATEMENT OF ADDITIONAL INFORMATION


                                  March 1, 2008

This Statement of Additional  Information is not a prospectus and should be read
in  conjunction  with the Class S prospectus for DWS Balanced Fund (the "Fund"),
dated  March 1,  2008,  as  amended  from  time to time,  copies of which may be
obtained without charge by contacting DWS Scudder Distributors,  Inc., 222 South
Riverside Plaza, Chicago,  Illinois 60606, (800) 621-1148, or from the firm from
which this  Statement of  Additional  Information  was obtained and is available
along with other related  materials on the Securities and Exchange  Commission's
Internet Web site (http://www.sec.gov).

The  Annual  Report  to  Shareholders  dated  October  31,  2007  for  the  Fund
accompanies this Statement of Additional  Information.  The financial statements
contained  therein,  together  with  accompanying  notes,  are  incorporated  by
reference  and are  hereby  deemed to be part of this  Statement  of  Additional
Information.


This Statement of Additional  Information  ("SAI") is  incorporated by reference
into the prospectus for the Fund.



<PAGE>



                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----


INVESTMENT RESTRICTIONS.......................................................3

INVESTMENT POLICIES AND TECHNIQUES............................................4
   Portfolio Holdings........................................................28

MANAGEMENT OF THE FUND.......................................................29
   Investment Advisor........................................................29

FUND SERVICE PROVIDERS.......................................................38
   Underwriter...............................................................38
   Independent Registered Public Accounting Firm.............................38
   Legal Counsel.............................................................39
   Fund Accounting Agent.....................................................39
   Custodian, Transfer Agent and Shareholder Service Agent...................39

PORTFOLIO TRANSACTIONS.......................................................42

PURCHASE AND REDEMPTION OF SHARES............................................47

TAXES........................................................................65

NET ASSET VALUE..............................................................68

TRUSTEES AND OFFICERS........................................................69

TRUST ORGANIZATION...........................................................83

PROXY VOTING GUIDELINES......................................................85

FINANCIAL STATEMENTS.........................................................86

ADDITIONAL INFORMATION.......................................................86

APPENDIX.....................................................................87


                                       i


<PAGE>

                                       ii
<PAGE>


                             INVESTMENT RESTRICTIONS

Except as otherwise indicated,  the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders.  There can be
no assurance that the Fund's objective will be met.

Any  investment  restrictions  herein  which  involve  a maximum  percentage  of
securities  or assets shall not be  considered  to be violated  unless an excess
over the percentage occurs  immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.

The Fund has elected to be  classified  as a  diversified  series of an open-end
investment  management  company. A diversified fund may not, with respect to 75%
of total  assets,  invest more than 5% of total  assets in the  securities  of a
single issuer or invest in more than 10% of the outstanding voting securities of
such issuer.

As a matter of fundamental policy, the Fund may not:

(1)      borrow money,  except as permitted under the Investment  Company Act of
         1940, as amended (the "1940 Act"),  and as  interpreted  or modified by
         regulatory authority having jurisdiction, from time to time;

(2)      issue senior  securities,  except as  permitted  under the 1940 Act, as
         amended,  and as interpreted or modified by regulatory authority having
         jurisdiction, from time to time;

(3)      concentrate its investments in a particular  industry,  as that term is
         used in the 1940 Act, as  amended,  and as  interpreted  or modified by
         regulatory authority having jurisdiction, from time to time;

(4)      engage in the  business of  underwriting  securities  issued by others,
         except to the extent that a Fund may be deemed to be an  underwriter in
         connection with the disposition of portfolio securities;

(5)      purchase or sell real estate, which term does not include securities of
         companies which deal in real estate or mortgages or investments secured
         by real  estate  or  interests  therein,  except  that a Fund  reserves
         freedom of action to hold and to sell real estate  acquired as a result
         of a Fund's ownership of securities;

(6)      purchase  physical   commodities  or  contracts  relating  to  physical
         commodities; or

(7)      make loans except as permitted  under the 1940 Act, as amended,  and as
         interpreted or modified by regulatory  authority  having  jurisdiction,
         from time to time.

A  fundamental  policy may not be changed  without the approval of a majority of
the outstanding  voting securities of the Fund which, under the 1940 Act and the
rules thereunder and as used in this Statement of Additional Information,  means
the lesser of (1) 67% or more of the voting securities  present at such meeting,
if the holders of more than 50% of the outstanding voting securities of the Fund
are present or  represented  by proxy,  or (2) more than 50% of the  outstanding
voting securities of the Fund.

The  Trustees  of the  Trust  have  voluntarily  adopted  certain  policies  and
restrictions,  which  are  observed  in  the  conduct  of the  Trust's  affairs.
Nonfundamental  policies  may be changed by the  Trustees  of the Trust  without
requiring prior notice to or approval of shareholders.

As a matter of nonfundamental policy, the Fund currently does not intend to:

(a)      borrow money in an amount  greater than 10% of its total assets  except
         (i) for temporary or emergency purposes and (ii) by engaging in reverse
         repurchase   agreements,   dollar  rolls,   or  other   investments  or
         transactions  described in a Fund's registration statement which may be
         deemed to be borrowings;

                                       3
<PAGE>

(b)      enter into either reverse  repurchase  agreements or dollar rolls in an
         amount greater than 5% of its total assets;

(c)      purchase  securities  on margin or make short  sales,  except (i) short
         sales against the box, (ii) in connection with arbitrage  transactions,
         (iii) for margin deposits in connection with futures contracts, options
         or other  permitted  investments,  (iv) that  transactions  in  futures
         contracts  and  options  shall  not be  deemed  to  constitute  selling
         securities  short,  and (v)  that a Fund  may  obtain  such  short-term
         credits  as  may  be  necessary   for  the   clearance  of   securities
         transactions;

(d)      purchase  options,  unless  the  aggregate  premiums  paid on all  such
         options  held by a Fund  at any  time do not  exceed  20% of its  total
         assets; or sell put options, if as a result, the aggregate value of the
         obligations  underlying  such put options would exceed 50% of its total
         assets;

(e)      purchase warrants if as a result,  such securities,  taken at the lower
         of cost or market value, would represent more than 5% of the value of a
         Fund's total assets (for this  purpose,  warrants  acquired in units or
         attached to securities will be deemed to have no value);

(f)      invest  more than 15% of net assets in illiquid  securities,  including
         repurchase agreements maturing in more than seven days.

(g)      lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets.

Temporary  Defensive  Policy.  For temporary  defensive  purposes,  the Fund may
invest,  without limit, in cash and cash equivalents,  US government securities,
money  market  instruments  and high  quality  debt  securities  without  equity
features.  In such a case, the Fund would not be pursuing,  and may not achieve,
its investment objective.

Master/feeder Fund Structure. The Board of Trustees has the discretion to retain
the current distribution arrangement for a Fund while investing in a master fund
in a master/feeder fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing  directly in a portfolio of securities,  invests most or all of its
investment  assets in a separate  registered  investment  company  (the  "master
fund") with  substantially  the same  investment  objective  and policies as the
feeder  fund.  Such a  structure  permits  the  pooling of assets of two or more
feeder funds,  preserving  separate  identities or distribution  channels at the
feeder  fund  level.  Based on the  premise  that  certain  of the  expenses  of
operating an investment  portfolio are  relatively  fixed,  a larger  investment
portfolio may eventually  achieve a lower ratio of operating expenses to average
net assets. An existing  investment  company is able to convert to a feeder fund
by  selling  all  of  its  investments,   which  involves  brokerage  and  other
transaction  costs and realization of a taxable gain or loss, or by contributing
its assets to the master  fund and  avoiding  transaction  costs and,  if proper
procedures are followed, the realization of taxable gain or loss.

                       INVESTMENT POLICIES AND TECHNIQUES

General Investment Objective and Policies

The Fund is an open-end management  investment company which continuously offers
and  redeems  shares  at net  asset  value.  The Fund is a  company  of the type
commonly  known as a mutual fund.  DWS Balanced Fund is a series of DWS Balanced
Fund (the  "Trust").  The Fund offers five classes of shares:  Class A, Class B,
Class C, Institutional Class and Class S shares.


In addition to the Fund's main investment strategy, the Advisor seeks to enhance
returns by employing a global tactical asset allocation (GTAA) overlay strategy.
The GTAA strategy,  which Advisor calls iGAP (integrated Global Alpha Platform),
is a total return  strategy  designed to add value by benefiting from short-term
mis-pricings within global equity,  bond and currency markets.  iGAP is expected
to have a low correlation to the fund's stock and bond holdings.

                                       4
<PAGE>

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


Descriptions  in  this  Statement  of  Additional  Information  of a  particular
investment  practice  or  technique  in which a Fund  may  engage  are  meant to
describe  the  spectrum  of  investments  that  Deutsche  Investment  Management
Americas Inc.  ("DIMA or the  "Advisor")  in its  discretion  might,  but is not
required to, use in managing the Fund's portfolio  assets.  The Advisor,  may in
its discretion at any time employ such practice, technique or instrument for one
or more funds but not for all funds advised by it.  Furthermore,  it is possible
that certain types of financial  instruments or investment  techniques described
herein may not be available, permissible, economically feasible or effective for
their  intended  purposes  in all  markets.  Certain  practices,  techniques  or
instruments  may not be  principal  activities  of the Fund,  but, to the extent
employed,  could  from  time  to  time  have a  material  impact  on the  Fund's
performance.

Borrowing.  As a matter of fundamental  policy,  the Fund will not borrow money,
except as  permitted  under the 1940 Act,  and as  interpreted  or  modified  by
regulatory  authority having  jurisdiction,  from time to time. While the Fund's
Board of Trustees does not currently intend to borrow for investment  leveraging
purposes,  if such a strategy were  implemented  in the future it would increase
the Fund's volatility and the risk of loss in a declining  market.  Borrowing by
the Fund will involve special risk considerations. Although the principal of the
Fund's  borrowings  will be fixed,  the Fund's assets may change in value during
the time a borrowing is outstanding, thus increasing exposure to capital risk.

The Fund may  borrow  up to 5% of the  Fund's  net  assets  against  called  and
tendered bonds in the Fund.

Bank Loans.  The Fund may invest in bank loans,  which are typically senior debt
obligations of borrowers  (issuers) and as such, are considered to hold a senior
position in the capital structure of the borrower. These may include loans which
hold the most senior  position,  that hold an equal  ranking  with other  senior
debt,  or loans that are, in the  judgment of the  Advisor,  in the  category of
senior debt of the borrower. This capital structure position generally gives the
holders of these loans a priority claim on some or all of the borrower's  assets
in the event of a default.  In most cases,  these loans are either  partially or
fully  collateralized  by the  assets  of a  corporation,  partnership,  limited
liability  company or other  business  entity,  or by cash flow that the Advisor
believes  has a market value at the time of  acquisition  that equals or exceeds
the  principal  amount of the loan.  These loans are often issued in  connection
with recapitalizations, acquisitions, leveraged buy-outs and refinancings. It is
important to note that Moody's and S&P generally  rate bank loans a notch or two
higher  than high yield  bonds of the same  issuer to reflect  their more senior
position.  The Fund may  invest  in both  fixed-  and  floating-rate  loans.  In
addition,  bank loans can trade either as an  "assignment"  or  "participation."
When the Fund buys an assignment, it is essentially becoming a party to the bank
agreement.  The vast majority of all trades are  assignments and would therefore
generally represent the preponderance of bank loans held by the Fund. In certain
cases, the Fund may buy bank loans on a participation basis, if for example, the
Fund did not want to become party to the bank agreement.  However, in all cases,
the Fund will not purchase  bank loans where  Deutsche  Bank,  or an  affiliate,
serves as an agent bank.

Participations  and  assignments   involve  credit  risk,  interest  rate  risk,
liquidity  risk,  and the  risk of  being a  lender.  If the  Fund  purchases  a
participation, it may only be able to enforce its rights through the lender, and
may assume the credit risk of both the lender and the borrower.

Investments  in loans through  direct  assignment  of a financial  institution's
interests with respect to a loan may involve additional risks. For example, if a
loan is foreclosed, the purchaser could become part owner of any collateral, and
would bear the costs and liabilities associated with owning and disposing of the
collateral.  In addition,  it is at least  conceivable that under emerging legal
theories of lender liability, a purchaser could be held liable as a co-lender.

                                       5
<PAGE>

In the case of loans administered by a bank or other financial  institution that
acts as agent for all holders,  if assets held by the agent for the benefit of a
purchaser  are  determined  to be subject to the claims of the  agent's  general
creditors,  the  purchaser  might incur  certain  costs and delays in  realizing
payment on the loan or loan  participation  and could suffer a loss of principal
or interest.

In the case of loan  participations  where a bank or other  lending  institution
serves  as  financial  intermediary  between  a Fund  and the  borrower,  if the
participation does not shift to the Fund the direct debtor-creditor relationship
with the borrower, SEC interpretations  require the Fund, in some circumstances,
to treat both the lending bank or other lending  institution and the borrower as
issuers for  purposes of the Fund's  investment  policies.  Treating a financial
intermediary  as an issuer of  indebtedness  may restrict the Fund's  ability to
invest in indebtedness related to a single financial intermediary, or a group of
intermediaries  engaged in the same industry,  even if the underlying  borrowers
represent many different companies and industries.

Common  Stocks.  Common  stock is issued by companies to raise cash for business
purposes  and  represents  a  proportionate  interest in the issuing  companies.
Therefore,  the Fund  participates  in the  success or failure of any company in
which  it  holds  stock.  The  market  values  of  common  stock  can  fluctuate
significantly,  reflecting  the  business  performance  of the issuing  company,
investor perception and general economic and financial market movements. Despite
the risk of price volatility, however, common stocks have historically offered a
greater potential for long-term gain on investment, compared to other classes of
financial  assets such as bonds or cash  equivalents,  although  there can be no
assurance that this will be true in the future.

Convertible Securities. The Fund may invest in convertible securities,  that is,
bonds,  notes,  debentures,  preferred  stocks  and other  securities  which are
convertible into common stock. Investments in convertible securities can provide
an  opportunity  for capital  appreciation  and/or income  through  interest and
dividend payments by virtue of their conversion or exchange features.

The convertible  securities in which the Fund may invest are either fixed income
or zero coupon debt  securities  which may be converted or exchanged at a stated
or  determinable  exchange  ratio into  underlying  shares of common stock.  The
exchange ratio for any particular convertible security may be adjusted from time
to time due to stock splits, dividends, spin-offs, other corporate distributions
or scheduled  changes in the exchange  ratio.  Convertible  debt  securities and
convertible  preferred  stocks,  until converted,  have general  characteristics
similar to both debt and equity  securities.  Although  to a lesser  extent than
with debt securities generally, the market value of convertible securities tends
to decline as interest  rates  increase  and,  conversely,  tends to increase as
interest  rates  decline.  In addition,  because of the  conversion  or exchange
feature,  the market value of convertible  securities  typically  changes as the
market value of the underlying common stocks changes, and, therefore, also tends
to follow  movements  in the  general  market  for equity  securities.  A unique
feature of convertible  securities is that as the market price of the underlying
common stock declines,  convertible  securities tend to trade  increasingly on a
yield basis, and so may not experience  market value declines to the same extent
as the underlying  common stock.  When the market price of the underlying common
stock  increases,  the prices of the  convertible  securities  tend to rise as a
reflection of the value of the underlying common stock,  although  typically not
as much as the  underlying  common stock.  While no securities  investments  are
without risk,  investments in convertible  securities generally entail less risk
than investments in common stock of the same issuer.

As debt securities,  convertible  securities are investments which provide for a
stream of income (or in the case of zero coupon securities, accretion of income)
with  generally  higher  yields  than  common  stocks.   Convertible  securities
generally offer lower yields than non-convertible  securities of similar quality
because of their conversion or exchange features.

Of course,  like all debt  securities,  there can be no  assurance  of income or
principal payments because the issuers of the convertible securities may default
on their obligations.

Convertible   securities   generally  are  subordinated  to  other  similar  but
non-convertible  securities of the same issuer,  although  convertible bonds, as
corporate debt  obligations,  enjoy  seniority in right of payment to all equity
securities,  and  convertible  preferred stock is senior to common stock, of the
same issuer.  However,  because of the subordination feature,  convertible bonds
and  convertible  preferred  stock  typically  have lower  ratings  than similar

                                       6
<PAGE>

non-convertible securities. Convertible securities may be issued as fixed income
obligations that pay current income or as zero coupon notes and bonds, including
Liquid Yield Option Notes ("LYONs"(TM)).

Debt  Securities.  The Fund may invest in debt  securities,  including  bonds of
private  issuers.  Portfolio debt  investments will be selected on the basis of,
among other things,  credit quality,  and the fundamental outlooks for currency,
economic  and interest  rate trends,  taking into account the ability to hedge a
degree  of  currency  or  local  bond  price   risk.   The  Fund  may   purchase
"investment-grade"  bonds,  rated Aaa,  Aa, A or Baa by Moody's or AAA, AA, A or
BBB by S&P or, if unrated,  judged to be of equivalent  quality as determined by
the Advisor.

The principal  risks involved with  investments  in bonds include  interest rate
risk, credit risk and pre-payment risk.  Interest rate risk refers to the likely
decline in the value of bonds as  interest  rates rise.  Generally,  longer-term
securities are more susceptible to changes in value as a result of interest-rate
changes than are shorter-term securities. Credit risk refers to the risk that an
issuer of a bond may  default  with  respect  to the  payment of  principal  and
interest.  The  lower  a bond  is  rated,  the  more  it is  considered  to be a
speculative or risky  investment.  Pre-payment risk is commonly  associated with
pooled debt  securities,  such as  mortgage-backed  securities  and asset backed
securities,  but may affect other debt  securities as well.  When the underlying
debt obligations are prepaid ahead of schedule,  the return on the security will
be lower than expected.  Pre-payment  rates usually increase when interest rates
are falling.

Direct Debt  Instruments.  Direct debt instruments are interests in amounts owed
by a corporate,  governmental or other borrower to lenders  (direct  loans),  to
suppliers of goods or services  (trade claims or other  receivables) or to other
parties. The Fund may invest in all types of direct debt investments,  but among
these  investments  currently  intends to invest  primarily  in direct loans and
trade claims.

When the Fund participates in a direct loan it will be lending money directly to
an issuer.  Direct loans generally do not have an underwriter or agent bank, but
instead,  are  negotiated  between a company's  management  team and a lender or
group of lenders.  Direct loans  typically  offer better security and structural
terms than other types of high yield  securities.  Direct debt  obligations  are
often  the most  senior-obligations  in an  issuer's  capital  structure  or are
well-collateralized so that overall risk is lessened.

Trade claims are unsecured rights of payment arising from obligations other than
borrowed funds.  Trade claims include vendor claims and other  receivables  that
are   adequately   documented   and  available  for  purchase  from   high-yield
broker-dealers.  Trade claims  typically may sell at a discount.  In addition to
the risks otherwise associated with low-quality  obligations,  trade claims have
other  risks,  including  the  possibility  that the  amount of the claim may be
disputed by the obligor.  Trade claims normally would be considered illiquid and
pricing can be volatile.

Direct debt instruments  involve a risk of loss in case of default or insolvency
of the borrower.  The Fund will rely primarily upon the  creditworthiness of the
borrower  and/or  the  collateral  for  payment of  interest  and  repayment  of
principal.  The value of the Fund's  investments  may be  adversely  affected if
scheduled interest or principal payments are not made. Because most direct loans
will be secured,  there will be a smaller  risk of loss with  direct  loans than
with an investment in unsecured  high yield bonds or trade claims.  Indebtedness
of borrowers whose creditworthiness is poor involves substantially greater risks
and may be highly speculative. Borrowers that are in bankruptcy or restructuring
may never pay off their  indebtedness  or may pay only a small  fraction  of the
amount owed.  Investments in direct debt  instruments also involve interest rate
risk  and  liquidity  risk.  However,  interest  rate  risk is  lessened  by the
generally  short-term  nature of direct debt instruments and their interest rate
structure,  which typically floats. To the extent the direct debt instruments in
which the Fund invests are considered  illiquid,  the lack of a liquid secondary
market (1) will have an  adverse  impact on the value of such  instruments,  (2)
will have an  adverse  impact on the  Fund's  ability  to  dispose  of them when
necessary  to meet the  Fund's  liquidity  needs or in  response  to a  specific
economic event, such as a decline in creditworthiness of the issuer, and (3) may
make it more difficult for the Fund to assign a value of these  instruments  for
purposes of valuing the Fund's portfolio and calculating its net asset value. In
order to lessen  liquidity  risk, the Fund  anticipates  investing  primarily in
direct debt  instruments that are quoted and traded in the high yield market and
will not  invest in these  instruments  if it would  cause  more than 15% of the
Fund's net assets to be  illiquid.  Trade  claims may also present a tax risk to
the Fund.  The Fund will not  invest in trade  claims if it  effects  the Fund's
qualification  as a  regulated  investment  company  under  Subchapter  M of the
Internal Revenue Code of 1986, as amended (the "Code").

                                       7
<PAGE>

Depositary  Receipts.  The Fund may invest in sponsored or unsponsored  American
Depositary  Receipts ("ADRs"),  European  Depositary  Receipts ("EDRs"),  Global
Depositary  Receipts ("GDRs"),  International  Depositary  Receipts ("IDRs") and
other types of Depositary  Receipts  (which,  together with ADRs, EDRs, GDRs and
IDRs are hereinafter referred to as "Depositary Receipts").  Depositary Receipts
provide  indirect  investment  in  securities  of  foreign  issuers.  Prices  of
unsponsored Depositary Receipts may be more volatile than if they were sponsored
by  the  issuer  of the  underlying  securities.  Depositary  Receipts  may  not
necessarily be  denominated  in the same currency as the  underlying  securities
into which  they may be  converted.  In  addition,  the  issuers of the stock of
unsponsored   Depositary   Receipts  are  not  obligated  to  disclose  material
information  in the US and,  therefore,  there may not be a correlation  between
such  information  and the market  value of the  Depositary  Receipts.  ADRs are
Depositary Receipts which are bought and sold in the US and are typically issued
by a US bank or trust company which evidence ownership of underlying  securities
by a foreign corporation.  GDRs, IDRs and other types of Depositary Receipts are
typically issued by foreign banks or trust companies,  although they may also be
issued by US banks or trust  companies,  and evidence  ownership  of  underlying
securities issued by either a foreign or a US corporation. Generally, Depositary
Receipts in registered  form are designed for use in the US  securities  markets
and  Depositary  Receipts  in bearer  form are  designed  for use in  securities
markets  outside the US. For  purposes of the Fund's  investment  policies,  the
Fund's investments in ADRs, GDRs and other types of Depositary  Receipts will be
deemed to be  investments  in the underlying  securities.  Depositary  Receipts,
including  those  denominated in US dollars will be subject to foreign  currency
exchange rate risk. However, by investing in US  dollar-denominated  ADRs rather
than directly in foreign issuers' stock, a fund avoids currency risks during the
settlement  period.  In general,  there is a large,  liquid market in the US for
most ADRs. However, certain Depositary Receipts may not be listed on an exchange
and therefore may be illiquid securities.

Dollar Roll Transactions. Dollar roll transactions consist of the sale by a fund
to a bank or broker/dealer  (the  "counterparty")  of GNMA certificates or other
Mortgage-Backed  Securities  together  with a  commitment  to purchase  from the
counterparty  similar,  but not  identical,  securities at a future date, at the
same price.  The  counterparty  receives all  principal  and interest  payments,
including  prepayments,  made on the  security  while it is the  holder.  A fund
receives a fee from the  counterparty  as  consideration  for entering  into the
commitment  to  purchase.  Dollar  rolls may be renewed over a period of several
months  with  a  different  purchase  and  repurchase  price  fixed  and a  cash
settlement  made  at each  renewal  without  physical  delivery  of  securities.
Moreover,  the  transaction  may  be  preceded  by a firm  commitment  agreement
pursuant to which a fund agrees to buy a security on a future date.

A fund will segregate  cash, US government  securities or other liquid assets in
an amount sufficient to meet its purchase obligations under the transactions.

A dollar roll involves costs to a fund. For example, while a fund receives a fee
as  consideration  for agreeing to repurchase  the security,  a fund forgoes the
right to receive all  principal  and interest  payments  while the  counterparty
holds the  security.  These  payments  to the  counterparty  may  exceed the fee
received  by a  fund,  thereby  effectively  charging  a  fund  interest  on its
borrowing.  Further,  although  a fund  can  estimate  the  amount  of  expected
principal prepayment over the term of the dollar roll, a variation in the actual
amount of prepayment could increase or decrease the cost of a fund's borrowing.

The entry into dollar rolls involves  potential risks of loss that are different
from those related to the securities  underlying the transactions.  For example,
if the  counterparty  becomes  insolvent,  a fund's  right to purchase  from the
counterparty might be restricted. Additionally, the value of such securities may
change adversely before a fund is able to purchase them.  Similarly,  a fund may
be required to purchase  securities in connection with a dollar roll at a higher
price than may otherwise be available on the open market. Since, as noted above,
the counterparty is required to deliver a similar, but not identical security to
a fund, the security that a fund is required to buy under the dollar roll may be
worth less than an identical security. Finally, there can be no assurance that a
fund's use of the cash that it receives from a dollar roll will provide a return
that exceeds borrowing costs.

Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar  instruments are US  dollar-denominated  futures contracts or options
thereon  which are  linked  to the  London  Interbank  Offered  Rate  ("LIBOR"),
although  foreign  currency-denominated  instruments  are available from time to
time.  Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for

                                       8
<PAGE>

borrowings.  The Fund might use Eurodollar futures contracts and options thereon
to hedge against  changes in LIBOR,  to which many interest rate swaps and fixed
income instruments are linked.

Foreign  Currencies.  Because  investments  in foreign  securities  usually will
involve currencies of foreign  countries,  and because the Fund may hold foreign
currencies  and  forward  contracts,  futures  contracts  and options on foreign
currencies and foreign  currency futures  contracts,  the value of the assets of
the Fund as measured in US dollars may be affected  favorably or  unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
the  Fund  may  incur  costs  and   experience   conversion   difficulties   and
uncertainties  in  connection  with  conversions   between  various  currencies.
Fluctuations in exchange rates may also affect the earning power and asset value
of the foreign entity issuing the security.

The  strength  or  weakness  of  the  US  dollar  against  these  currencies  is
responsible for part of the Fund's investment  performance.  If the dollar falls
in value  relative to the  Japanese  yen,  for  example,  the dollar  value of a
Japanese  stock  held in the  portfolio  will rise even  though the price of the
stock remains  unchanged.  Conversely,  if the dollar rises in value relative to
the yen,  the  dollar  value of the  Japanese  stock  will  fall.  Many  foreign
currencies have experienced significant devaluation relative to the dollar.

Although  the Fund values its assets  daily in terms of US dollars,  it does not
intend to convert its holdings of foreign  currencies into US dollars on a daily
basis.  It will do so from time to time,  and  investors  should be aware of the
costs of currency conversion.  Although foreign exchange dealers do not charge a
fee for  conversion,  they do  realize  a profit  based on the  difference  (the
"spread")  between  the  prices at which they are  buying  and  selling  various
currencies.  Thus, a dealer may offer to sell a foreign  currency to the Fund at
one rate,  while  offering a lesser rate of  exchange  should the Fund desire to
resell that currency to the dealer.  The Fund will conduct its foreign  currency
exchange  transactions  either  on a spot  (i.e.,  cash)  basis at the spot rate
prevailing in the foreign  currency  exchange  market,  or through entering into
options or forward or futures contracts to purchase or sell foreign currencies.

Foreign Fixed Income Securities.  Since most foreign fixed income securities are
not rated, the Fund will invest in foreign fixed income  securities based on the
Advisor's analysis without relying on published ratings.  Since such investments
will be based upon the Advisor's  analysis  rather than upon published  ratings,
achievement  of the  Fund's  goals may  depend  more upon the  abilities  of the
Advisor than would otherwise be the case.

The value of the foreign fixed income  securities held by the Fund, and thus the
net asset value of the Fund's shares,  generally will fluctuate with (a) changes
in the  perceived  creditworthiness  of the  issuers  of those  securities,  (b)
movements  in  interest  rates,  and (c) changes in the  relative  values of the
currencies  in  which a  Fund's  investments  in  fixed  income  securities  are
denominated  with respect to the US Dollar.  The extent of the fluctuation  will
depend  on  various  factors,  such  as  the  average  maturity  of  the  Fund's
investments in foreign fixed income securities, and the extent to which the Fund
hedges its interest  rate,  credit and currency  exchange  rate risks.  A longer
average  maturity  generally is associated  with a higher level of volatility in
the market value of such securities in response to changes in market conditions.

Investments in sovereign  debt,  including  Brady Bonds,  involve special risks.
Brady Bonds are debt securities  issued under a plan implemented to allow debtor
nations to restructure their outstanding  commercial bank indebtedness.  Foreign
governmental  issuers of debt or the  governmental  authorities that control the
repayment  of the debt may be  unable or  unwilling  to repay  principal  or pay
interest  when due.  In the event of  default,  there may be limited or no legal
recourse in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party.  Political conditions,  especially a sovereign entity's
willingness  to  meet  the  terms  of  its  fixed  income  securities,   are  of
considerable  significance.  Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign  entity may not contest  payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements.  In  addition,  there is no  bankruptcy  proceeding  with respect to
sovereign debt on which a sovereign has defaulted, and the Fund may be unable to
collect  all or any  part  of its  investment  in a  particular  issue.  Foreign
investment  in certain  sovereign  debt is  restricted  or controlled to varying
degrees,  including  requiring  governmental  approval for the  repatriation  of
income, capital or proceed of sales by foreign investors.  These restrictions or
controls may at times limit or preclude foreign  investment in certain sovereign
debt or increase the costs and expenses of a Fund.  Sovereign debt may be issued
as part of debt  restructuring  and such debt is to be  considered  speculative.
There is a history of defaults with respect to  commercial  bank loans by public
and private


                                       9
<PAGE>

entities issuing Brady Bonds.  All or a portion of the interest  payments and/or
principal repayment with respect to Brady Bonds may be uncollateralized.

Foreign Investment.  While the Fund's investments in foreign countries offer the
potential   for   substantial   appreciation   over  time,   they  also  involve
above-average  investment  risk in  comparison  to a mutual fund  investing in a
broad  range of US  equity  securities.  The  Fund is  designed  as a  long-term
investment  and  not  for  short-term  trading  purposes.  The  Fund  should  be
considered not a complete  investment  program.  The Fund's net asset value,  or
price,  can  fluctuate  significantly  with  changes  in  stock  market  levels,
political  developments,  movements in currencies,  global  investment flows and
other factors.

Foreign  Securities.  Investing in foreign  securities  involves certain special
considerations,  including  those  set  forth  below,  which  are not  typically
associated   with  investing  in  US  securities  and  which  may  favorably  or
unfavorably  affect  the  Fund's  performance.  As  foreign  companies  are  not
generally  subject to  uniform  accounting,  auditing  and  financial  reporting
standards, practices and requirements comparable to those applicable to domestic
companies,  there may be less  publicly  available  information  about a foreign
company than about a domestic company.  Many foreign securities  markets,  while
growing in volume of trading activity,  have  substantially less volume than the
US market,  and  securities  of some  foreign  issuers  are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond  markets is less than in the US and, at times,  volatility  of
price  can be  greater  than  in the  US.  Fixed  commissions  on  some  foreign
securities  exchanges  and bid to asked  spreads in  foreign  bond  markets  are
generally  higher  than  commissions  or bid to  asked  spreads  on US  markets,
although the Advisor will endeavor to achieve the most  favorable net results on
its portfolio transactions. There is generally less governmental supervision and
regulation  of  securities  exchanges,  brokers and listed  companies in foreign
countries  than in the US. It may be more  difficult for a fund's agents to keep
currently informed about corporate actions in foreign countries which may affect
the prices of portfolio  securities.  Communications  between the US and foreign
countries may be less reliable than within the US, thus  increasing  the risk of
delayed  settlements  of  portfolio  transactions  or loss of  certificates  for
portfolio securities. Payment for securities without delivery may be required in
certain foreign markets. In addition, with respect to certain foreign countries,
there is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect US investments
in those countries.  Moreover, individual foreign economies may differ favorably
or unfavorably  from the US economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment,  resource self-sufficiency and
balance of payments position. The Advisor seeks to mitigate the risks associated
with the foregoing considerations through continuous professional management.

High  Yield/High  Risk Bonds.  The Fund may purchase debt  securities  which are
rated below  investment-grade  (commonly referred to as "junk bonds"),  that is,
rated below Baa by Moody's or below BBB by S&P or Fitch and  unrated  securities
judged  to  be of  equivalent  quality  as  determined  by  the  Advisor.  These
securities  usually entail greater risk (including the possibility of default or
bankruptcy  of the  issuers  of  such  securities),  generally  involve  greater
volatility  of price and risk to principal  and income,  and may be less liquid,
than securities in the higher rating  categories.  The lower the ratings of such
debt  securities,  the more their  risks  render  them like  equity  securities.
Securities  rated D may be in default  with  respect to payment of  principal or
interest.

Issuers of such high yielding  securities often are highly leveraged and may not
have available to them more  traditional  methods of financing.  Therefore,  the
risk  associated  with  acquiring the  securities  of such issuers  generally is
greater than is the case with higher rated  securities.  For example,  during an
economic  downturn  or a  sustained  period of  rising  interest  rates,  highly
leveraged  issuers of high yield  securities  may experience  financial  stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest  payment  obligations.   The  issuer's  ability  to  service  its  debt
obligations may also be adversely affected by specific  corporate  developments,
or the issuer's inability to meet specific projected business forecasts,  or the
unavailability  of  additional  financing.  The risk of loss from default by the
issuer is significantly greater for the holders of high yield securities because
such  securities  are generally  unsecured and are often  subordinated  to other
creditors  of the  issuer.  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 the  Fund's net asset  value.  In
addition,  investments  in high yield zero coupon or pay-in-kind  bonds,  rather
than  income-bearing  high yield securities,  may be more speculative and may be
subject to greater fluctuations in value due to changes in interest rates.

                                       10
<PAGE>

The Fund  may have  difficulty  disposing  of  certain  high-yield  (high  risk)
securities because they may have a thin trading market.  Because not all dealers
maintain  markets in all high yield  securities,  the Fund anticipates that such
securities  could be sold only to a limited  number of dealers or  institutional
investors.  The lack of a liquid  secondary market may have an adverse effect on
the market price and the Fund's ability to dispose of particular  issues and may
also make it more difficult for a fund to obtain accurate market  quotations for
purposes of valuing the Fund's assets. Market quotations generally are available
on many high yield  issues  only from a limited  number of  dealers  and may not
necessarily  represent  firm bids of such  dealers or prices  for actual  sales.
Adverse publicity and investor perceptions may decrease the values and liquidity
of high yield securities. These securities may also involve special registration
responsibilities,   liabilities   and  costs,   and   liquidity   and  valuation
difficulties.

Credit  quality in the  high-yield  securities  market can change  suddenly  and
unexpectedly,  and even recently issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it is
generally the policy of the Advisor not to rely exclusively on ratings issued by
established credit rating agencies,  but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the Fund's
investment  objective by investment in such  securities may be more dependent on
the Advisor's credit analysis than is the case for higher quality bonds.  Should
the rating of a portfolio  security be  downgraded,  the Advisor will  determine
whether  it is in the best  interests  of the Fund to retain or  dispose of such
security.

Prices for high-yield  securities may be affected by legislative  and regulatory
developments.  Also, Congress has from time to time considered legislation which
further  would  restrict or eliminate  the  corporate tax deduction for interest
payments  in  these  securities  and  regulate  corporate  restructurings.  Such
legislation may  significantly  depress the prices of outstanding  securities of
this type.

A portion of the  high-yield  securities  acquired by the Fund may be  purchased
upon  issuance,  which may  involve  special  risks  because the  securities  so
acquired  are new  issues.  In such  instances,  the Fund  may be a  substantial
purchaser of the issue and therefore  have the  opportunity  to  participate  in
structuring the terms of the offering. Although this may enable the Fund to seek
to protect itself against certain risks,  the  considerations  discussed  herein
would nevertheless remain applicable.

Restructuring  Instruments.  The Fund may hold distressed securities,  which are
securities  that are in default or in risk of being in  default.  In  connection
with an  exchange  or workout of such  securities,  the Fund may accept  various
instruments if the investment  adviser determines it is in the best interests of
the Fund and consistent with the Fund's investment objective and policies.  Such
instruments may include,  but not limited to,  warrants,  rights,  participation
interests in assets sales and contingent-interest obligations.

Illiquid Securities and Restricted Securities.  The Fund may purchase securities
that are subject to legal or  contractual  restrictions  on resale  ("restricted
securities").  Generally speaking, restricted securities may be sold (i) only to
qualified  institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers;  (iii) in limited  quantities after they have been
held for a specified  period of time and other conditions are met pursuant to an
exemption  from  registration;  or  (iv)  in  a  public  offering  for  which  a
registration  statement  is in  effect  under  the  Securities  Act of 1933,  as
amended.  Issuers of restricted  securities may not be subject to the disclosure
and other  investor  protection  requirements  that would be applicable if their
securities were publicly traded.

Restricted  securities  are often  illiquid,  but they may also be  liquid.  For
example,  restricted securities that are eligible for resale under Rule 144A are
often deemed to be liquid.

The Fund's Board has approved  guidelines  for use by the Advisor in determining
whether a security  is liquid or  illiquid.  Among the  factors  the Advisor may
consider in reaching  liquidity  decisions relating to Rule 144A securities are:
(1) the  frequency  of trades  and quotes  for the  security;  (2) the number of
dealers  wishing  to  purchase  or sell the  security  and the  number  of other
potential purchasers;  (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the market for the security
(i.e.,  the time  needed to dispose of the  security,  the method of  soliciting
offers, and the mechanics of the transfer.  Issuers of restricted securities may
not be subject to the disclosure and other investor protection  requirement that
would  be  applicable  if  their  securities  were  publicly  traded.   Where  a
registration  statement is required for the resale of restricted  securities,  a
fund may be required to bear all or part of the registration  expenses. The Fund
may be deemed to be an


                                       11
<PAGE>

"underwriter"  for  purposes  of the  Securities  Act of 1933,  as amended  when
selling  restricted  securities to the public and, in such event,  a fund may be
liable to purchasers of such securities if the registration  statement  prepared
by the issuer is materially inaccurate or misleading.

The  Fund  may  also  purchase  securities  that  are not  subject  to  legal or
contractual   restrictions  on  resale,  but  that  are  deemed  illiquid.  Such
securities  may be illiquid,  for example,  because  there is a limited  trading
market for them.

The Fund may be unable to sell a restricted or illiquid  security.  In addition,
it may be more  difficult to determine a market value for restricted or illiquid
securities.  Moreover,  if adverse market  conditions were to develop during the
period between a fund's  decision to sell a restricted or illiquid  security and
the point at which a fund is  permitted  or able to sell such  security,  a 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.


Impact of Large  Redemptions  and  Purchases of Fund shares.  From time to time,
shareholders  of the Fund (which may include  affiliated  and/or  non-affiliated
registered investment companies that invest in a Fund) may make relatively large
redemptions or purchases of Fund shares.  These  transactions may cause the Fund
to have to sell securities or invest  additional cash, as the case may be. While
it is impossible to predict the overall impact of these  transactions over time,
there could be adverse effects on the Fund's  performance to the extent that the
Fund may be  required to sell  securities  or invest cash at times when it would
not otherwise do so. These transactions could also accelerate the realization of
taxable  income if sales of securities  resulted in capital gains and could also
increase transaction costs, which may impact the Fund's expense ratio.


Indexed  Securities.  The Fund may  invest in indexed  securities,  the value of
which is linked to currencies,  interest  rates,  commodities,  indices or other
financial  indicators  ("reference  instruments").  Most indexed securities have
maturities of three years or less.

Indexed  securities differ from other types of debt securities in which the Fund
may invest in several  respects.  First, the interest rate or, unlike other debt
securities,  the principal amount payable at maturity of an indexed security may
vary based on changes in one or more specified reference instruments, such as an
interest rate compared with a fixed interest rate or the currency exchange rates
between  two  currencies  (neither  of which need be the  currency  in which the
instrument is denominated).  The reference instrument need not be related to the
terms of the indexed security.  For example, the principal amount of a US dollar
denominated  indexed security may vary based on the exchange rate of two foreign
currencies.  An indexed security may be positively or negatively  indexed;  that
is, its value may increase or decrease if the value of the reference  instrument
increases.  Further,  the change in the principal amount payable or the interest
rate of an indexed security may be a multiple of the percentage change (positive
or negative) in the value of the underlying reference instrument(s).

Investment in indexed  securities  involves  certain  risks.  In addition to the
credit risk of the  security's  issuer and the normal risks of price  changes in
response  to  changes  in  interest  rates,  the  principal  amount  of  indexed
securities  may  decrease  as a result  of  changes  in the  value of  reference
instruments.  Further,  in the case of certain  indexed  securities in which the
interest  rate is linked to a reference  instrument,  the  interest  rate may be
reduced to zero, and any further  declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be  more  volatile  than  the  reference  instruments   underlying  the  indexed
securities.

IPO Risk.  Securities  issued  through  an  initial  public  offering  (IPO) can
experience an immediate drop in value if the demand for the securities  does not
continue to support the  offering  price.  Information  about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories.  The fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and  adverse  tax  consequences.  The number of  securities  issued in an IPO is
limited,  so it is likely that IPO securities will represent a smaller component
of a fund's  portfolio  as the  fund's  assets  increase  (and  thus have a more
limited effect on the fund's performance).

Interfund Borrowing and Lending Program.  The Fund has received exemptive relief
from the Securities and Exchange Commission (the "SEC"),  which permits the Fund
to  participate  in  an  interfund  lending  program  among  certain  investment
companies  advised by the Advisor.  The  interfund  lending  program  allows the
participating  funds


                                       12
<PAGE>

to borrow  money from and loan money to each other for  temporary  or  emergency
purposes.  The program is subject to a number of  conditions  designed to ensure
fair  and  equitable  treatment  of  all  participating  funds,   including  the
following: (1) no fund may borrow money through the program unless it receives a
more favorable  interest rate than a rate approximating the lowest interest rate
at which bank loans would be available to any of the participating funds under a
loan  agreement;  and (2) no fund may lend money  through the program  unless it
receives a more  favorable  return than that  available  from an  investment  in
repurchase  agreements  and, to the extent  applicable,  money market cash sweep
arrangements.  In addition, a fund may participate in the program only if and to
the extent that such  participation  is  consistent  with the fund's  investment
objectives  and  policies  (for  instance,  money  market  funds would  normally
participate  only as lenders and tax exempt funds only as borrowers).  Interfund
loans and borrowings may extend overnight,  but could have a maximum duration of
seven days. Loans may be called on one day's notice. The fund may have to borrow
from a bank at a higher  interest  rate if an  interfund  loan is  called or not
renewed.  Any  delay in  repayment  to a  lending  fund  could  result in a lost
investment  opportunity  or  additional  costs.  The  program  is subject to the
oversight and periodic review of the Boards of the  participating  funds. To the
extent the Fund is actually engaged in borrowing  through the interfund  lending
program,  the Fund  intends to comply with its  fundamental  and  nonfundamental
policy regarding borrowing.

Investing in Emerging Markets.  The Fund's investments in foreign securities may
be in developed  countries or in countries  considered by the Fund's  Advisor to
have  developing  or  "emerging"  markets,  which  involve  exposure to economic
structures  that are  generally  less  diverse and mature than in the US, and to
political  systems that may be less  stable.  A  developing  or emerging  market
country can be considered  to be a country that is in the initial  stages of its
industrialization  cycle.  Currently,  emerging markets  generally include every
country in the world other than the US, Canada, Japan,  Australia,  New Zealand,
Hong Kong, Singapore and most Western European countries.  Currently,  investing
in many emerging markets may not be desirable or feasible because of the lack of
adequate  custody   arrangements  for  the  Fund's  assets,   overly  burdensome
repatriation  and  similar  restrictions,  the  lack  of  organized  and  liquid
securities   markets,   unacceptable   political  risks  or  other  reasons.  As
opportunities to invest in securities in emerging markets develop,  the Fund may
expand and further broaden the group of emerging markets in which it invests. In
the past,  markets of developing  or emerging  market  countries  have been more
volatile than the markets of developed  countries;  however,  such markets often
have  provided  higher rates of return to investors.  The Advisor  believes that
these characteristics may be expected to continue in the future.

Most emerging  securities markets have substantially less volume and are subject
to less governmental supervision than US securities markets.  Securities of many
issuers in emerging markets may be less liquid and more volatile than securities
of  comparable  domestic  issuers.  In  addition,  there is less  regulation  of
securities  exchanges,  securities dealers, and listed and unlisted companies in
emerging markets than in the US.

Emerging markets also have different clearance and settlement procedures, and in
certain markets there have been times when  settlements  have not kept pace with
the volume of  securities  transactions.  Delays in  settlement  could result in
temporary  periods  when a portion of the assets of the Fund is  uninvested  and
therefore  no  return  is  earned  thereon.  The  inability  of the Fund to make
intended security  purchases due to settlement  problems could cause the Fund to
miss  attractive  investment  opportunities.  Inability  to dispose of portfolio
securities due to settlement  problems could result either in losses to the Fund
due to subsequent  declines in value of the  portfolio  security or, if the Fund
has  entered  into a contract  to sell the  security,  could  result in possible
liability  to the  purchaser.  Costs  associated  with  transactions  in foreign
securities,  particularly in emerging  markets,  are generally higher than costs
associated  with  transactions  in US  securities.  Such  transactions  may also
involve additional costs for the purchase or sale of foreign currency.

Certain emerging markets require prior  governmental  approval of investments by
foreign  persons,  limit the  amount  of  investment  by  foreign  persons  in a
particular  company,  limit the investment by foreign persons only to a specific
class of securities of a company that may have less advantageous rights than the
classes  available for purchase by  domiciliaries of the countries and/or impose
additional  taxes  on  foreign  investors.  Certain  emerging  markets  may also
restrict  investment  opportunities in issuers in industries deemed important to
national interest.  Certain emerging markets may require  governmental  approval
for the repatriation of investment  income,  capital or the proceeds of sales of
securities by foreign investors.  In addition,  if a deterioration  occurs in an
emerging  market's  balance of payments or for other  reasons,  a country  could
impose temporary restrictions on foreign capital remittances.  The


                                       13
<PAGE>

Fund  could be  adversely  affected  by delays  in, or a refusal  to grant,  any
required  governmental  approval for repatriation of capital,  as well as by the
application to the Fund of any restrictions on investments.

In the course of investment in emerging markets, the Fund will be exposed to the
direct or indirect consequences of political, social and economic changes in one
or more emerging markets. While the Fund will manage its assets in a manner that
will seek to minimize the exposure to such risks, there can be no assurance that
adverse political,  social or economic changes will not cause the Fund to suffer
a loss of value in respect of the  securities in the Fund's  holdings.  The risk
also  exists  that an  emergency  situation  may  arise in one or more  emerging
markets  as a  result  of  which  trading  of  securities  may  cease  or may be
substantially curtailed and prices for the Fund's securities in such markets may
not be readily available.  The Fund may suspend redemption of its shares for any
period during which an emergency exists, as determined by the SEC.  Accordingly,
if the Fund  believes that  appropriate  circumstances  exist,  it will promptly
apply to the SEC for a  determination  that an emergency is present.  During the
period  commencing  from the Fund's  identification  of such condition until the
date of the SEC action,  the Fund's  securities in the affected  markets will be
valued at fair value  determined  in good faith by or under the direction of the
Trust's Board.

Volume  and  liquidity  in most  foreign  markets  are less than in the US,  and
securities  of many foreign  companies  are less liquid and more  volatile  than
securities of comparable US companies.  Fixed commissions on foreign  securities
exchanges  are generally  higher than  negotiated  commissions  on US exchanges,
although  the Fund  endeavors to achieve the most  favorable  net results on its
portfolio  transactions.  There is generally  less  government  supervision  and
regulation of business and industry practices,  securities  exchanges,  brokers,
dealers and listed  companies  than in the US. Mail  service  between the US and
foreign  countries  may be slower or less  reliable  than  within  the US,  thus
increasing the risk of delayed settlements of portfolio  transactions or loss of
certificates for certificated portfolio securities. In addition, with respect to
certain  emerging  markets,   there  is  the  possibility  of  expropriation  or
confiscatory   taxation,   political  or  social   instability,   or  diplomatic
developments  which  could  affect the Fund's  investments  in those  countries.
Moreover,   individual   emerging  market  economies  may  differ  favorably  or
unfavorably  from the US economy in such  respects  as growth of gross  national
product, rate of inflation, capital reinvestment,  resource self-sufficiency and
balance of payments position.

The Fund may have limited legal  recourse in the event of a default with respect
to certain debt  obligations it holds. If the issuer of a fixed-income  security
owned by the Fund  defaults,  the Fund may  incur  additional  expenses  to seek
recovery.  Debt obligations issued by emerging market country governments differ
from debt  obligations  of private  entities;  remedies  from  defaults  on debt
obligations issued by emerging market governments, unlike those on private debt,
must be pursued in the courts of the defaulting party itself. The Fund's ability
to enforce its rights  against  private  issuers may be limited.  The ability to
attach assets to enforce a judgment may be limited.  Legal recourse is therefore
somewhat diminished. Bankruptcy, moratorium and other similar laws applicable to
private issuers of debt obligations may be substantially different from those of
other  countries.  The  political  context,  expressed  as  an  emerging  market
governmental issuer's willingness to meet the terms of the debt obligation,  for
example, is of considerable  importance.  In addition, no assurance can be given
that the holders of commercial bank debt may not contest payments to the holders
of  debt  obligations  in the  event  of  default  under  commercial  bank  loan
agreements.

Income from securities held by the Fund could be reduced by a withholding tax at
the source or other taxes imposed by the emerging market  countries in which the
Fund makes its  investments.  The Fund's net asset value may also be affected by
changes  in the  rates  or  methods  of  taxation  applicable  to the Fund or to
entities in which the Fund has  invested.  The Advisor will consider the cost of
any taxes in determining whether to acquire any particular investments,  but can
provide no assurance that the taxes will not be subject to change.

Many  emerging  markets  have  experienced  substantial,  and, in some  periods,
extremely  high  rates  of  inflation  for  many  years.   Inflation  and  rapid
fluctuations  in  inflation  rates  have had and may  continue  to have  adverse
effects on the  economies  and  securities  markets of certain  emerging  market
countries. In an attempt to control inflation, wage and price controls have been
imposed in certain  countries.  Of these countries,  some, in recent years, have
begun to control inflation through prudent economic policies.

Emerging market governmental issuers are among the largest debtors to commercial
banks,  foreign  governments,  international  financial  organizations and other
financial  institutions.  Certain emerging market governmental  issuers


                                       14
<PAGE>

have  not  been  able to make  payments  of  interest  on or  principal  of debt
obligations as those payments have come due.

Obligations  arising from past restructuring  agreements may affect the economic
performance and political and social stability of those issuers.  Governments of
many  emerging  market   countries  have  exercised  and  continue  to  exercise
substantial  influence  over many  aspects of the  private  sector  through  the
ownership  or control of many  companies,  including  some of the largest in any
given  country.  As a result,  government  actions  in the  future  could have a
significant  effect on economic  conditions in emerging markets,  which in turn,
may adversely affect companies in the private sector,  general market conditions
and prices and yields of  certain  of the  securities  in the Fund's  portfolio.
Expropriation,  confiscatory taxation,  nationalization,  political, economic or
social instability or other similar  developments have occurred  frequently over
the history of certain  emerging  markets and could adversely  affect the Fund's
assets should these  conditions  recur.  The ability of emerging  market country
governmental  issuers to make timely payments on their  obligations is likely to
be influenced  strongly by the issuer's  balance of payments,  including  export
performance,  and its  access  to  international  credits  and  investments.  An
emerging market whose exports are  concentrated  in a few  commodities  could be
vulnerable  to a  decline  in the  international  prices of one or more of those
commodities. Increased protectionism on the part of an emerging market's trading
partners  could also  adversely  affect the  country's  exports and diminish its
trade  account  surplus,  if any. To the extent that  emerging  markets  receive
payment for its exports in currencies other than dollars or non-emerging  market
currencies,  its  ability  to make  debt  payments  denominated  in  dollars  or
non-emerging market currencies could be affected.

Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country.  Fluctuations
in the level of these  reserves  affect the amount of foreign  exchange  readily
available  for  external  debt  payments  and thus  could  have a bearing on the
capacity  of  emerging   market   countries  to  make  payments  on  these  debt
obligations.

To the extent that an emerging  market country cannot  generate a trade surplus,
it must  depend on  continuing  loans  from  foreign  governments,  multilateral
organizations or private commercial banks, aid payments from foreign governments
and inflows of foreign investment. The access of emerging markets to these forms
of external  funding may not be certain,  and a withdrawal  of external  funding
could  adversely  affect the capacity of emerging  market  country  governmental
issuers  to make  payments  on  their  obligations.  In  addition,  the  cost of
servicing  emerging  market  debt  obligations  can be  affected  by a change in
international  interest  rates  since the  majority of these  obligations  carry
interest rates that are adjusted periodically based upon international rates.

Investment  Company  Securities.  The  Fund  may  acquire  securities  of  other
investment  companies to the extent consistent with its investment objective and
subject to the  limitations of the 1940 Act. The Fund will  indirectly  bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.

For example, the Fund may invest in a variety of investment companies which seek
to track the  composition  and  performance  of  specific  indexes or a specific
portion of an index.  These  index-based  investments hold  substantially all of
their assets in securities representing their specific index.  Accordingly,  the
main risk of investing in index-based  investments is the same as investing in a
portfolio  of equity  securities  comprising  the index.  The  market  prices of
index-based  investments  will fluctuate in accordance  with both changes in the
market  value of their  underlying  portfolio  securities  and due to supply and
demand for the  instruments on the exchanges on which they are traded (which may
result in their  trading at a discount  or premium to their  NAVs).  Index-based
investments  may not replicate  exactly the performance of their specified index
because of  transaction  costs and because of the  temporary  unavailability  of
certain component securities of the index.

Examples of index-based investments include:

SPDRs(R):  SPDRs,  an acronym for "Standard & Poor's  Depositary  Receipts," are
based on the S&P 500  Composite  Stock Price Index.  They are issued by the SPDR
Trust,  a unit  investment  trust that  holds  shares of  substantially  all the
companies  in the S&P 500 in  substantially  the  same  weighting  and  seeks to
closely track the price performance and dividend yield of the Index.

                                       15
<PAGE>

MidCap  SPDRs(R):  MidCap SPDRs are based on the S&P MidCap 400 Index.  They are
issued by the MidCap SPDR Trust, a unit investment  trust that holds a portfolio
of securities  consisting of  substantially  all of the common stocks in the S&P
MidCap 400 Index in substantially  the same weighting and seeks to closely track
the price performance and dividend yield of the Index.

Select Sector SPDRs(R):  Select Sector SPDRs are based on a particular sector or
group of  industries  that are  represented  by a specified  Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end  management  investment  company with nine
portfolios  that each seeks to closely track the price  performance and dividend
yield of a particular Select Sector Index.

DIAMONDSSM:  DIAMONDS are based on the Dow Jones Industrial AverageSM.  They are
issued by the DIAMONDS Trust, a unit investment  trust that holds a portfolio of
all the component common stocks of the Dow Jones Industrial Average and seeks to
closely track the price performance and dividend yield of the Dow.

Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq-100 Index. They are
issued by the Nasdaq-100  Trust, a unit investment  trust that holds a portfolio
consisting of substantially  all of the securities,  in  substantially  the same
weighting,  as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.



Investment of  Uninvested  Cash  Balances.  The Fund may have cash balances that
have not been invested in portfolio securities  ("Uninvested Cash").  Uninvested
Cash may result  from a variety of  sources,  including  dividends  or  interest
received from portfolio securities, unsettled securities transactions,  reserves
held for  investment  strategy  purposes,  scheduled  maturity  of  investments,
liquidation  of  investment  securities  to  meet  anticipated  redemptions  and
dividend payments, and new cash received from investors.  Uninvested Cash may be
invested  directly  in  money  market   instruments  or  other  short-term  debt
obligations.  Pursuant to an Exemptive Order issued by the SEC, the Fund may use
Uninvested  Cash to purchase  shares of affiliated  funds including money market
funds, short-term bond funds and Cash Management QP Trust, or one or more future
entities  for which the  Advisor  acts as trustee  or  investment  advisor  that
operate as cash  management  investment  vehicles and that are excluded from the
definition of investment  company  pursuant to Section 3(c)(1) or 3(c)(7) of the
1940 Act  (collectively,  the "Central  Funds") in excess of the  limitations of
Section  12(d)(1)  of the 1940  Act.  Investment  by the Fund in  shares  of the
Central  Funds will be in  accordance  with the Fund's  investment  policies and
restrictions as set forth in its registration statement.

Certain of the Central Funds comply with Rule 2a-7 under the 1940 Act. The other
Central Funds are or will be short-term  bond funds that invest in  fixed-income
securities  and maintain a dollar  weighted  average  maturity of three years or
less.  Each of the  Central  Funds will be managed  specifically  to  maintain a
highly liquid  portfolio,  and access to them will enhance the Fund's ability to
manage Uninvested Cash.

The Fund will invest  Uninvested Cash in Central Funds only to the extent that a
Fund's  aggregate  investment  in the  Central  Funds does not exceed 25% of its
total  assets.  Purchase  and sales of shares of  Central  Funds are made at net
asset value.

Investment-Grade  Bonds. The Fund may purchase  "investment-grade"  bonds, which
are those rated Aaa,  Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P or, if
unrated,  judged to be of  equivalent  quality  as  determined  by the  Advisor.
Moody's  considers  bonds it rates Baa to have  speculative  elements as well as
investment-grade  characteristics.  To the  extent  that  the  Fund  invests  in
higher-grade   securities,   a  fund  will  not  be  able  to  avail  itself  of
opportunities for higher income which may be available at lower grades.

Lending of Portfolio Securities.  The Fund may lend its investment securities to
approved  institutional  borrowers  who need to  borrow  securities  in order to
complete certain  transactions,  such as covering short sales, avoiding failures
to deliver  securities  or  completing  arbitrage  operations.  By  lending  its
investment  securities,  the Fund


                                       16
<PAGE>

attempts to increase its net  investment  income through the receipt of interest
on the loan. Any gain or loss in the market price of the securities  loaned that
might occur during the term of the loan would  belong to the Fund.  The Fund may
lend its investment securities so long as the terms, structure and the aggregate
amount  of such  loans are not  inconsistent  with the 1940 Act or the rules and
regulations or  interpretations  of the SEC thereunder,  which currently require
that (a) the borrower pledge and maintain with the Fund collateral consisting of
liquid,  unencumbered  assets  having a value at all times not less than 100% of
the value of the  securities  loaned,  (b) the borrower  add to such  collateral
whenever the price of the securities  loaned rises (i.e., the borrower "marks to
the market" on a daily basis),  (c) the loan be made subject to  termination  by
the Fund at any time, and (d) the Fund receives  reasonable interest on the loan
(which may include the Fund  investing any cash  collateral in interest  bearing
short-term  investments),  and  distributions  on the loaned  securities and any
increase in their market  value.  There may be risks of delay in recovery of the
securities or even loss of rights in the  collateral  should the borrower of the
securities  fail  financially.  However,  loans  will be made only to  borrowers
selected  by the  Fund's  delegate  after a  commercially  reasonable  review of
relevant  facts  and  circumstances,   including  the  creditworthiness  of  the
borrower.

At the  present  time,  the staff of the SEC does not  object  if an  investment
company pays reasonable negotiated fees in connection with loaned securities, so
long as such  fees are set  forth in a  written  contract  and  approved  by the
investment company's Board of Trustees/Directors. In addition, voting rights may
pass with the loaned  securities,  but if a material  event occurs  affecting an
investment on loan, the loan must be called and the securities  voted.  Pursuant
to an exemptive order granted by the SEC, cash  collateral  received by the Fund
may be  invested in a money  market  fund  managed by the Advisor (or one of its
affiliates).

Privatized  Enterprises.  The Fund may  invest in foreign  securities  which may
include  securities  issued by enterprises  that have undergone or are currently
undergoing privatization.  The governments of certain foreign countries have, to
varying degrees,  embarked on privatization  programs  contemplating the sale of
all or part of their interests in state  enterprises.  The Fund's investments in
the  securities  of  privatized  enterprises  may include  privately  negotiated
investments in a government or  state-owned or controlled  company or enterprise
that has not yet  conducted  an  initial  equity  offering,  investments  in the
initial  offering of equity  securities  of a state  enterprise  or former state
enterprise and investments in the securities of a state enterprise following its
initial equity offering.

In certain  jurisdictions,  the ability of foreign entities,  such as a fund, to
participate in privatizations may be limited by local law, or the price or terms
on which a fund may be able to  participate  may be less  advantageous  than for
local investors.  Moreover, there can be no assurance that governments that have
embarked on  privatization  programs will continue to divest their  ownership of
state  enterprises,  that  proposed  privatizations  will be  successful or that
governments will not re-nationalize enterprises that have been privatized.

In the case of the enterprises in which the Fund may invest, large blocks of the
stock of those  enterprises may be held by a small group of  stockholders,  even
after  the  initial  equity  offerings  by those  enterprises.  The sale of some
portion or all of those blocks could have an adverse  effect on the price of the
stock of any such enterprise.

Prior to making an initial  equity  offering,  most state  enterprises or former
state  enterprises go through an internal  reorganization  or  management.  Such
reorganizations  are made in an attempt to better  enable these  enterprises  to
compete in the private sector. However,  certain reorganizations could result in
a  management  team  that does not  function  as well as an  enterprise's  prior
management and may have a negative effect on such enterprise.  In addition,  the
privatization  of an  enterprise  by its  government  may occur over a number of
years,  with the  government  continuing to hold a  controlling  position in the
enterprise even after the initial equity offering for the enterprise.

Prior to privatization, most of the state enterprises in which a fund may invest
enjoy the protection of and receive  preferential  treatment from the respective
sovereigns  that own or control them.  After making an initial equity  offering,
these   enterprises   may  no  longer  have  such  protection  or  receive  such
preferential  treatment and may become subject to market  competition from which
they were  previously  protected.  Some of these  enterprises may not be able to
operate  effectively in a competitive market and may suffer losses or experience
bankruptcy due to such competition.

Real Estate Investment Trusts ("REITs"). The Fund may invest in REITs. REITs are
sometimes  informally  characterized as equity REITs,  mortgage REITs and hybrid
REITs.  Investment  in REITs  may  subject a fund to risks


                                       17
<PAGE>

associated with the direct  ownership of real estate,  such as decreases in real
estate values,  overbuilding,  increased  competition and other risks related to
local or general economic conditions,  increases in operating costs and property
taxes,  changes  in zoning  laws,  casualty  or  condemnation  losses,  possible
environmental  liabilities,  regulatory  limitations on rent and fluctuations in
rental income.  Equity REITs generally  experience  these risks directly through
fee or leasehold  interests,  whereas mortgage REITs generally  experience these
risks indirectly through mortgage interests, unless the mortgage REIT forecloses
on the  underlying  real estate.  Changes in interest  rates may also affect the
value of a fund's investment in REITs. For instance, during periods of declining
interest  rates,  certain  mortgage REITs may hold mortgages that the mortgagors
elect to prepay, which prepayment may diminish the yield on securities issued by
those REITs.

Certain REITs have relatively  small market  capitalizations,  which may tend to
increase the  volatility of the market price of their  securities.  Furthermore,
REITs  are  dependent  upon   specialized   management   skills,   have  limited
diversification and are,  therefore,  subject to risks inherent in operating and
financing a limited  number of  projects.  REITs are also  subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free  pass-through  of income under the Code, and to maintain  exemption
from the  registration  requirements  of the 1940  Act.  By  investing  in REITs
indirectly  through  a  fund,  a  shareholder  will  bear  not  only  his or her
proportionate  share of the expenses of a fund,  but also,  indirectly,  similar
expenses of the REITs. In addition,  REITs depend  generally on their ability to
generate cash flow to make distributions to shareholders.

Repurchase Agreements.  The Fund may invest in repurchase agreements pursuant to
its  investment  guidelines.  In  a  repurchase  agreement,  the  Fund  acquires
ownership of a security and  simultaneously  commits to resell that  security to
the seller, typically a bank or broker/dealer.

A repurchase agreement provides a means for the Fund to earn income on funds for
periods as short as overnight.  It is an  arrangement  under which the purchaser
(i.e.,   the  Fund)   acquires  a  security   (for  purposes  of  this  section,
"Obligation")  and the seller  agrees,  at the time of sale, to  repurchase  the
Obligation  at a specified  time and price.  Securities  subject to a repurchase
agreement  are held in a  segregated  account  and, as  described in more detail
below,  the value of such  securities  is kept at least equal to the  repurchase
price on a daily  basis.  The  repurchase  price may be higher than the purchase
price,  the difference  being income to the Fund, or the purchase and repurchase
prices may be the same,  with  interest at a stated rate due to a fund  together
with the  repurchase  price upon  repurchase.  In either case, the income to the
Fund is unrelated to the interest  rate on the  Obligation  itself.  Obligations
will be held by the custodian or in the Federal Reserve Book Entry System.

It is not clear whether a court would consider the  Obligation  purchased by the
Fund  subject to a  repurchase  agreement as being owned by the Fund or as being
collateral  for a  loan  by  the  Fund  to  the  seller.  In  the  event  of the
commencement of bankruptcy or insolvency  proceedings with respect to the seller
of the  Obligation  before  repurchase  of the  Obligation  under  a  repurchase
agreement,  a fund may encounter delay and incur costs before being able to sell
the  security.  Delays may  involve  loss of interest or decline in price of the
Obligation.  If the court characterizes the transaction as a loan and a fund has
not perfected a security interest in the Obligation, the Fund may be required to
return the  Obligation  to the  seller's  estate and be treated as an  unsecured
creditor of the seller.  As an  unsecured  creditor,  a fund would be at risk of
losing some or all of the principal and income involved in the  transaction.  As
with any unsecured  debt  Obligation  purchased for a Fund, the Advisor seeks to
reduce  the  risk  of  loss  through  repurchase  agreements  by  analyzing  the
creditworthiness  of the  obligor,  in this case the  seller of the  Obligation.
Apart from the risk of bankruptcy or insolvency  proceedings,  there is also the
risk that the seller may fail to repurchase the Obligation, in which case a fund
may incur a loss if the proceeds to a Fund of the sale to a third party are less
than the repurchase price.  However, if the market value (including interest) of
the  Obligation  subject  to the  repurchase  agreement  becomes  less  than the
repurchase  price  (including  interest),  a fund will  direct the seller of the
Obligation to deliver additional  securities so that the market value (including
interest) of all securities  subject to the  repurchase  agreement will equal or
exceed the repurchase price.

Reverse  Repurchase  Agreements.  The Fund may enter  into  "reverse  repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the  securities,  agrees to  repurchase  such  securities  at an agreed time and
price. The Fund segregates assets in an amount at least equal to its obligations
under  outstanding  reverse  repurchase  agreements.  The Fund will  enter  into
reverse  repurchase  agreements only when the Advisor believes that the interest
income to be earned from the investment of the proceeds of the transaction  will
be greater


                                       18
<PAGE>

than the interest  expense of the  transaction.  Such  transactions may increase
fluctuations in the market value of fund assets and its yield.

Short Sales  Against the Box. The Fund may make short sales of common stocks if,
at all  times  when a short  position  is open,  the Fund owns the stock or owns
preferred stocks or debt securities convertible or exchangeable, without payment
of further  consideration,  into the shares of common  stock sold  short.  Short
sales of this kind are  referred to as short sales  "against  the box." The Fund
will  incur a loss as a result  of the short  sale if the price of the  security
increases  between  the dates of the  short  sale and the date on which the Fund
replaces the borrowed  security.  The  broker/dealer  that executes a short sale
generally  invests  cash  proceeds  of the sale until they are paid to the Fund.
Arrangements  may be made with the  broker/dealer  to  obtain a  portion  of the
interest earned by the broker on the investment of short sale proceeds. The Fund
will segregate the common stock or convertible or  exchangeable  preferred stock
or debt securities in a special account with the custodian.  The Fund will incur
transaction  costs,  including  interest  expenses in  connection  with opening,
maintaining,  and closing short sales against the box. Uncertainty regarding the
tax effects of short sales of  appreciated  investments  may limit the extent to
which the Fund may enter into short sales against the box.

Small Company  Risk.  The Advisor  believes  that many small  companies may have
sales and earnings growth rates which exceed those of larger companies, and that
such  growth  rates  may  in  turn  be  reflected  in  more  rapid  share  price
appreciation  over time.  However,  investing in small company  stocks  involves
greater risk than is  customarily  associated  with  investing  in larger,  more
established companies.  For example,  smaller companies can have limited product
lines,  markets,  or financial and managerial  resources.  Smaller companies may
also be dependent on one or a few key persons,  and may be more  susceptible  to
losses and risks of bankruptcy. Also, the securities of smaller companies may be
thinly traded (and  therefore  have to be sold at a discount from current market
prices or sold in small lots over an extended period of time). Transaction costs
in small company stocks may be higher than those of larger companies.

Sovereign Debt.  Investment in sovereign debt can involve a high degree of risk.
The governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the  principal  and/or  interest when due in accordance
with the terms of such debt. A governmental  entity's  willingness or ability to
repay  principal  and interest due in a timely  manner may be affected by, among
other factors, its cash flow situation,  the extent of its foreign reserves, the
availability  of sufficient  foreign  exchange on the date a payment is due, the
relative  size of the  debt  service  burden  to the  economy  as a  whole,  the
governmental  entity's  policy toward the  International  Monetary Fund, and the
political   constraints  to  which  a   governmental   entity  may  be  subject.
Governmental  entities  may also be  dependent  on expected  disbursements  from
foreign governments, multilateral agencies and others abroad to reduce principal
and  interest  arrearages  on their debt.  The  commitment  on the part of these
governments,  agencies and others to make such  disbursements may be conditioned
on a governmental  entity's  implementation  of economic reforms and/or economic
performance  and the timely  service of such  debtor's  obligations.  Failure to
implement  such reforms,  achieve such levels of economic  performance  or repay
principal  or  interest  when due may result in the  cancellation  of such third
parties commitments to lend funds to the governmental  entity, which may further
impair such  debtor's  ability or  willingness  to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt may be requested to participate in the rescheduling of
such debt and to extend  further  loans to  governmental  entities.  There is no
bankruptcy  proceeding by which  sovereign debt on which  governmental  entities
have defaulted may be collected in whole or in part.

Strategic  Transactions and  Derivatives.  The Fund may, but is not required to,
utilize various other investment  strategies as described below for a variety of
purposes,  such as hedging various market risks, managing the effective maturity
or duration of the fixed-income  securities in the Fund's portfolio or enhancing
potential gain.  These  strategies may be executed through the use of derivative
contracts.

In the course of pursuing these investment strategies, the Fund may purchase and
sell  exchange-listed and  over-the-counter  put and call options on securities,
equity and fixed-income indices and other instruments, purchase and sell futures
contracts and options thereon,  enter into various  transactions  such as swaps,
caps, floors, collars,  currency forward contracts,  currency futures contracts,
currency swaps or options on currencies,  or currency  futures and various other
currency  transactions  (collectively,  all  the  above  are  called  "Strategic
Transactions").  In  addition,  Strategic  Transactions  may  also  include  new
techniques,  instruments or strategies that are permitted as regulatory


                                       19
<PAGE>

changes  occur.  Strategic  Transactions  may be used without limit  (subject to
certain limits imposed by the 1940 Act) to attempt to protect  against  possible
changes in the  market  value of  securities  held in or to be  purchased  for a
fund's  portfolio  resulting from securities  markets or currency  exchange rate
fluctuations,  to  protect  the  Fund's  unrealized  gains  in the  value of its
portfolio  securities,  to facilitate the sale of such securities for investment
purposes,   to  manage  the  effective  maturity  or  duration  of  fixed-income
securities in a Fund's portfolio,  or to establish a position in the derivatives
markets as a substitute for purchasing or selling  particular  securities.  Some
Strategic  Transactions may also be used to enhance  potential gain,  consistent
with Fund's investment objective.  Any or all of these investment techniques may
be used at any time and in any combination,  and there is no particular strategy
that  dictates  the use of one  technique  rather  than  another,  as use of any
Strategic  Transaction  is a function of  numerous  variables  including  market
conditions.  The  ability of the Fund to utilize  these  Strategic  Transactions
successfully  will depend on the Advisor's  ability to predict  pertinent market
movements,  which  cannot be  assured.  The Fund  will  comply  with  applicable
regulatory  requirements  when  implementing  these  strategies,  techniques and
instruments.  Strategic  Transactions  will  not be  used to  alter  fundamental
investment purposes and characteristics of the Fund, and the Fund will segregate
assets (or as provided by applicable regulations,  enter into certain offsetting
positions) to cover its  obligations  under  options,  futures,  swaps and other
derivatives to limit leveraging of the Fund.

Strategic  Transactions,  including derivative contracts,  have risks associated
with them  including  possible  default by the other  party to the  transaction,
illiquidity and, to the extent the Advisor's view as to certain market movements
is incorrect,  the risk that the use of such Strategic Transactions could result
in losses  greater  than if they had not been used.  Use of put and call options
may  result  in  losses  to a Fund,  force  the sale or  purchase  of  portfolio
securities  at  inopportune  times or for prices higher than (in the case of put
options)  or lower than (in the case of call  options)  current  market  values,
limit the amount of  appreciation  the Fund can  realize on its  investments  or
cause the Fund to hold a security it might  otherwise  sell. The use of currency
transactions  can result in the Fund incurring losses as a result of a number of
factors   including  the   imposition  of  exchange   controls,   suspension  of
settlements,  or the inability to deliver or receive a specified  currency.  The
use of  options  and  futures  transactions  entails  certain  other  risks.  In
particular,  the  variable  degree of  correlation  between  price  movements of
futures  contracts and price  movements in the related  portfolio  position of a
Fund  creates  the  possibility  that losses on the  hedging  instrument  may be
greater than gains in the value of a fund's position.  In addition,  futures and
options   markets   may  not  be  liquid  in  all   circumstances   and  certain
over-the-counter options may have no markets. As a result, in certain markets, a
fund might not be able to close out a transaction without incurring  substantial
losses,  if at all.  Although  the use of futures and options  transactions  for
hedging  should tend to minimize  the risk of loss due to a decline in the value
of the hedged  position,  at the same time they tend to limit any potential gain
which might  result from an increase  in value of such  position.  Finally,  the
daily variation margin requirements for futures contracts would create a greater
ongoing  potential  financial  risk than would  purchases of options,  where the
exposure is limited to the cost of the initial  premium.  Losses  resulting from
the use of Strategic  Transactions  would  reduce net asset value,  and possibly
income,  and such losses can be greater than if the Strategic  Transactions  had
not been utilized.

General  Characteristics of Options. Put options and call options typically have
similar structural  characteristics and operational  mechanics regardless of the
underlying  instrument on which they are purchased or sold.  Thus, the following
general  discussion relates to each of the particular types of options discussed
in greater  detail below.  In addition,  many Strategic  Transactions  involving
options  require  segregation of fund assets in special  accounts,  as described
below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option,  upon payment of a premium,  the
right to sell, and the writer the  obligation to buy, the  underlying  security,
commodity,  index,  currency or other  instrument  at the  exercise  price.  For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying  instrument (or, in some cases, a similar
instrument)  against a  substantial  decline in the market  value by giving that
fund the right to sell such  instrument  at the option  exercise  price.  A call
option,  upon payment of a premium,  gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying  instrument at the
exercise price.  The Fund's  purchase of a call option on a security,  financial
future,  index,  currency or other  instrument  might be intended to protect the
Fund  against an  increase  in the price of the  underlying  instrument  that it
intends to purchase  in the future by fixing the price at which it may  purchase
such  instrument.  An American  style put or call option may be exercised at any
time during the option  period while a European  style put or call option may be
exercised only upon expiration or during a fixed period prior thereto.  The Fund
is authorized to purchase and sell exchange listed options and  over-the-counter
options  ("OTC  options").  Exchange  listed  options


                                       20
<PAGE>

are issued by a regulated  intermediary such as the Options Clearing Corporation
("OCC"),  which  guarantees the performance of the obligations of the parties to
such  options.  The  discussion  below uses the OCC as an  example,  but is also
applicable to other financial intermediaries.

With certain exceptions, OCC issued and exchange listed options generally settle
by physical  delivery of the  underlying  security or currency,  although in the
future cash  settlement  may become  available.  Index  options  and  Eurodollar
instruments are cash settled for the net amount,  if any, by which the option is
"in-the-money"  (i.e., where the value of the underlying  instrument exceeds, in
the case of a call  option,  or is less than,  in the case of a put option,  the
exercise  price of the option) at the time the option is exercised.  Frequently,
rather than taking or making delivery of the underlying  instrument  through the
process of  exercising  the option,  listed  options are closed by entering into
offsetting  purchase or sale transactions that do not result in ownership of the
new option.

The Fund's  ability to close out its position as a purchaser or seller of an OCC
or exchange listed put or call option is dependent,  in part, upon the liquidity
of the option  market.  Among the  possible  reasons for the absence of a liquid
option market on an exchange are: (i)  insufficient  trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts,  suspensions  or other  restrictions  imposed with respect to  particular
classes or series of options or underlying  securities  including reaching daily
price  limits;  (iv)  interruption  of the  normal  operations  of the OCC or an
exchange;  (v)  inadequacy  of the  facilities  of an  exchange or OCC to handle
current  trading  volume;  or  (vi)  a  decision  by one or  more  exchanges  to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant  market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.

The hours of trading for listed  options may not coincide  with the hours during
which the underlying  financial  instruments are traded.  To the extent that the
option   markets  close  before  the  markets  for  the   underlying   financial
instruments,  significant  price  and  rate  movements  can  take  place  in the
underlying markets that cannot be reflected in the option markets.

OTC  options  are  purchased  from  or  sold to  securities  dealers,  financial
institutions  or  other  parties  ("Counterparties")  through  direct  bilateral
agreement with the Counterparty.  In contrast to exchange listed options,  which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement,  term, exercise price,
premium,  guarantees and security, are set by negotiation of the parties. A Fund
will only sell OTC options (other than OTC currency options) that are subject to
a buy-back provision permitting the fund to require the Counterparty to sell the
option back to the fund at a formula  price  within  seven days.  A Fund expects
generally  to enter  into OTC  options  that  have cash  settlement  provisions,
although it is not required to do so.

Unless the  parties  provide  for it,  there is no central  clearing or guaranty
function in an OTC option.  As a result,  if the  Counterparty  fails to make or
take delivery of the security,  currency or other  instrument  underlying an OTC
option  it has  entered  into  with a Fund or  fails  to make a cash  settlement
payment due in accordance with the terms of that option,  the fund will lose any
premium  it paid  for the  option  as well  as any  anticipated  benefit  of the
transaction.  Accordingly,  the Advisor must assess the creditworthiness of each
such Counterparty or any guarantor or credit  enhancement of the  Counterparty's
credit to  determine  the  likelihood  that the terms of the OTC option  will be
satisfied.  The  fund  will  engage  in OTC  option  transactions  only  with US
government securities dealers recognized by the Federal Reserve Bank of New York
as "primary  dealers"  or  broker/dealers,  domestic  or foreign  banks or other
financial  institutions which have received (or the guarantors of the obligation
of which have  received) a short-term  credit rating of A-1 from S&P or P-1 from
Moody's or an  equivalent  rating  from any  nationally  recognized  statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions,  are
determined to be of equivalent  credit quality by the Advisor.  The staff of the
SEC  currently  takes the position  that OTC options  purchased  by a Fund,  and
portfolio securities  "covering" the amount of the Fund's obligation pursuant to
an OTC  option  sold by it (the  cost of the  sell-back  plus  the  in-the-money
amount,  if any) are  illiquid,  and are  subject  to the fund's  limitation  on
investing no more than 15% of its net assets in illiquid securities.

                                       21
<PAGE>

If the Fund sells a call  option,  the premium  that it receives  may serve as a
partial hedge,  to the extent of the option  premium,  against a decrease in the
value of the  underlying  securities  or  instruments  in its  portfolio or will
increase the fund's income. The sale of put options can also provide income.

The Fund may purchase and sell call options on securities  including US Treasury
and agency  securities,  mortgage-backed  securities,  foreign  sovereign  debt,
corporate debt securities,  equity securities (including convertible securities)
and  Eurodollar  instruments  that  are  traded  on US  and  foreign  securities
exchanges  and in the  over-the-counter  markets,  and  on  securities  indices,
currencies  and futures  contracts.  All calls sold by a fund must be  "covered"
(i.e., the fund must own the securities or futures contract subject to the call)
or must meet the asset segregation  requirements  described below as long as the
call is outstanding.  Even though a fund will receive the option premium to help
protect it against  loss, a call sold by a fund exposes the fund during the term
of the option to possible loss of  opportunity  to realize  appreciation  in the
market price of the  underlying  security or instrument and may require the fund
to hold a security or instrument which it might otherwise have sold.

The Fund may purchase and sell put options on  securities  including US Treasury
and agency  securities,  mortgage-backed  securities,  foreign  sovereign  debt,
corporate debt securities,  equity securities (including convertible securities)
and Eurodollar  instruments (whether or not it holds the above securities in its
portfolio),  and on securities  indices,  currencies and futures contracts other
than futures on individual  corporate debt and individual equity  securities.  A
fund will not sell put  options  if, as a  result,  more than 50% of the  fund's
total  assets  would  be  required  to be  segregated  to  cover  its  potential
obligations  under such put options other than those with respect to futures and
options  thereon.  In selling  put  options,  there is a risk that a fund may be
required to buy the  underlying  security at a  disadvantageous  price above the
market price.

General Characteristics of Futures. The Fund may enter into futures contracts or
purchase  or sell  put and  call  options  on such  futures  as a hedge  against
anticipated  interest rate, currency or equity market changes,  and for duration
management,  risk  management  and  return  enhancement  purposes.  Futures  are
generally  bought and sold on the  commodities  exchanges  where they are listed
with payment of initial and variation  margin as described  below. The sale of a
futures contract creates a firm obligation by the Fund, as seller, to deliver to
the buyer the specific type of financial  instrument  called for in the contract
at a specific  future  time for a  specified  price (or,  with  respect to index
futures and  Eurodollar  instruments,  the net cash amount).  Options on futures
contracts  are  similar  to  options on  securities  except  that an option on a
futures contract gives the purchaser the right in return for the premium paid to
assume a position in a futures contract and obligates the seller to deliver such
position.

The Fund has claimed  exclusion from the definition of the term  "commodity pool
operator"  adopted  by the  CFTC and the  National  Futures  Association,  which
regulate trading in the futures markets.  Therefore,  the Fund is not subject to
commodity pool operator registration and regulation under the Commodity Exchange
Act.  Futures and options on futures may be entered into for bona fide  hedging,
risk management  (including  duration  management) or other portfolio and return
enhancement management purposes to the extent consistent with the exclusion from
commodity pool operator registration.  Typically, maintaining a futures contract
or  selling  an option  thereon  requires  a fund to  deposit  with a  financial
intermediary or futures  commission  merchant as security for its obligations an
amount of cash or other  specified  assets  (initial  margin) which initially is
typically  1% to 10% of the face  amount of the  contract  (but may be higher in
some  circumstances).  Additional  cash  or  assets  (variation  margin)  may be
required to be deposited thereafter on a daily basis as the mark to market value
of the  contract  fluctuates.  The  purchase of an option on  financial  futures
involves  payment of a premium for the option without any further  obligation on
the part of the Fund. If the Fund  exercises an option on a futures  contract it
will be obligated to post initial  margin (and  potential  subsequent  variation
margin) for the  resulting  futures  position just as it would for any position.
Futures  contracts and options thereon are generally settled by entering into an
offsetting  transaction  but there can be no assurance  that the position can be
offset prior to  settlement  at an  advantageous  price,  nor that delivery will
occur.

Options on Securities  Indices and Other  Financial  Indices.  The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through  the sale or  purchase  of options  on  individual  securities  or other
instruments.  Options on  securities  indices  and other  financial  indices are
similar to options on a security or other  instrument  except that,  rather than
settling by physical delivery of the underlying instrument,  they settle by cash
settlement,  i.e.,  an option


                                       22
<PAGE>

on an index gives the holder the right to receive,  upon exercise of the option,
an amount of cash if the  closing  level of the index  upon  which the option is
based exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option,  physical
delivery  is  specified).  This  amount  of cash is equal to the  excess  of the
closing price of the index over the exercise price of the option, which also may
be multiplied  by a formula  value.  The seller of the option is  obligated,  in
return for the premium  received,  to make delivery of this amount.  The gain or
loss on an option on an index  depends  on price  movements  in the  instruments
making up the market,  market segment,  industry or other composite on which the
underlying index is based, rather than price movements in individual securities,
as is the case with respect to options on securities.


Currency  Transactions.  The Fund  may  engage  in  currency  transactions  with
Counterparties  in order to hedge,  or manage the risk of the value of portfolio
holdings  denominated in particular  currencies against fluctuations in relative
value and to enhance return.  Currency  transactions  include  forward  currency
contracts,  exchange listed currency futures, exchange listed and OTC options on
currencies, and currency swaps. A forward currency contract involves a privately
negotiated  obligation to purchase or sell (with delivery generally  required) a
specific  currency at a future date,  which may be any fixed number of days from
the date of the contract agreed upon by the parties,  at a price set at the time
of the contract. A currency swap is an agreement to exchange cash flows based on
the notional  difference among two or more currencies and operates  similarly to
an  interest  rate  swap,  which is  described  below.  The Fund may enter  into
currency transactions with Counterparties which have received (or the guarantors
of the obligations  which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or (except
for OTC currency  options) are determined to be of equivalent  credit quality by
the Advisor.

The  Fund's   dealings  in  forward   currency   contracts  and  other  currency
transactions such as futures,  options, options on futures and swaps may be used
for enhancing return or for hedging  involving  either specific  transactions or
portfolio  positions except as described below.  Transaction hedging is entering
into a currency  transaction  with respect to specific  assets or liabilities of
the Fund,  which will generally arise in connection with the purchase or sale of
its portfolio securities or the receipt of income therefrom. Position hedging is
entering  into  a  currency  transaction  with  respect  to  portfolio  security
positions denominated or generally quoted in that currency.

The Fund generally will not enter into a transaction to hedge currency  exposure
to an  extent  greater,  after  netting  all  transactions  intended  wholly  or
partially to offset other transactions,  than the aggregate market value (at the
time of entering into the  transaction)  of the securities held in its portfolio
that are denominated or generally  quoted in or currently  convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.

The Fund may also  cross-hedge  currencies  by  entering  into  transactions  to
purchase or sell one or more  currencies  that are  expected to decline in value
relative to other  currencies to which the fund has or in which the fund expects
to have portfolio exposure.

To reduce  the  effect of  currency  fluctuations  on the value of  existing  or
anticipated holdings of portfolio securities,  the Fund may also engage in proxy
hedging.  Proxy  hedging  is often  used when the  currency  to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging  entails  entering into a commitment or option to sell a currency  whose
changes in value are  generally  considered  to be  correlated  to a currency or
currencies in which some or all of the Fund's  portfolio  securities  are or are
expected  to be  denominated,  in  exchange  for US  dollars.  The amount of the
commitment  or  option  would not  exceed  the  value of the  Fund's  securities
denominated in correlated currencies.  Currency transactions involve some of the
same risks and  considerations as other  transactions with similar  instruments.
Currency  transactions  can  result  in  losses  to the  Fund  if  the  currency
fluctuates  in value  to a degree  or in a  direction  that is not  anticipated.
Further,  there  is the risk  that the  perceived  correlation  between  various
currencies may not be present or may not be present  during the particular  time
that the Fund is engaging in proxy  hedging.  If the Fund enters into a currency
transaction,  the Fund  will  comply  with the  asset  segregation  requirements
described below.



                                       23
<PAGE>


Risks of  Currency  Transactions.  Currency  transactions  are  subject to risks
different from those of other portfolio  transactions.  Because currency control
is of great  importance  to the  issuing  governments  and  influences  economic
planning and policy, purchases and sales of currency and related instruments can
be  negatively  affected  by  government  exchange  controls,   blockages,   and
manipulations or exchange restrictions imposed by governments.  These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations  and could also cause hedges it has entered into to be
rendered  useless,  resulting  in full  currency  exposure as well as  incurring
transaction  costs.  Buyers and sellers of  currency  futures are subject to the
same risks that apply to the use of futures generally.  Further, settlement of a
currency  futures  contract for the purchase of most  currencies must occur at a
bank  based in the  issuing  nation.  Trading  options  on  currency  futures is
relatively  new,  and the ability to establish  and close out  positions on such
options is subject to the maintenance of a liquid market which may not always be
available.  Currency  exchange rates may fluctuate based on factors extrinsic to
that country's economy.

                                       24
<PAGE>

Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest  rates,  currency,  and other types of swaps and the
purchase or sale of related caps, floors and collars.  The Fund expects to enter
into  these  transactions  to  preserve  a  return  or  spread  on a  particular
investment  or  portion  of  its   portfolio,   to  protect   against   currency
fluctuations,  as a  duration  management  technique,  to  protect  against  any
increase in the price of securities the Fund  anticipates  purchasing at a later
date or to enhance  return.  The Fund will not sell interest rate caps or floors
where it does not own  securities  or other  instruments  providing  the  income
stream  the Fund may be  obligated  to pay.  Interest  rate  swaps  involve  the
exchange by the Fund with another party of their  respective  commitments to pay
or receive interest,  e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional  amount of principal.  A currency swap is an
agreement to exchange cash flows on a notional  amount of two or more currencies
based on the  relative  value  differential  among  them and an index swap is an
agreement to swap cash flows on a notional amount based on changes in the values
of the  reference  indices.  The  purchase of a cap  entitles  the  purchaser to
receive payments on a notional  principal amount from the party selling such cap
to the extent that a specified  index exceeds a  predetermined  interest rate or
amount.  The purchase of a floor entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a  combination  of a cap and a floor that  preserves a certain  return  within a
predetermined range of interest rates or values.

Swaps  have  special  risks  associated   including   possible  default  by  the
counterparty  to the  transaction,  illiquidity  and,  where  swaps are used for
hedges,  the risk that the use of a swap could result in losses  greater than if
the swap had not  been  employed.  Whether  the use of swap  agreements  will be
successful in furthering its  investment  objective will depend on the Advisor's
ability to correctly  predict whether certain types of investments are likely to
produce greater returns than other  investments.  Certain swap agreements may be
considered to be illiquid  because they are two party contracts and because they
may have terms of greater than seven days. Moreover,  the Fund bears the risk of
loss of the amount  expected to be received  under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty.

The Fund will  usually  enter into swaps on a net basis,  i.e.,  the two payment
streams  are  netted  out in a cash  settlement  on the  payment  date or  dates
specified in the  instrument,  with a fund receiving or paying,  as the case may
be, only the net amount of the two payments.  Inasmuch as a Fund will  segregate
assets (or enter  into  offsetting  positions)  to cover its  obligations  under
swaps, the Advisor and a Fund believe such obligations do not constitute  senior
securities  under the 1940 Act and,  accordingly,  will not treat  them as being
subject to its  borrowing  restrictions.  The Fund will not enter into any swap,
cap,  floor or collar  transaction  unless,  at the time of  entering  into such
transaction, the unsecured long-term debt of the counterparty, combined with any
credit enhancements,  is rated at least A by S&P or Moody's or has an equivalent
rating from a NRSRO or is determined to be of equivalent  credit  quality by the
Advisor. If there is a default by the Counterparty,  a fund may have contractual
remedies pursuant to the agreements related to the transaction.  The swap market
has  grown  substantially  in  recent  years  with a large  number  of banks and
investment  banking  firms  acting both as  principals  and as agents  utilizing
standardized  swap  documentation.  As a  result,  the swap  market  has  become
relatively  liquid.  Caps,  floors and collars are more recent  innovations  for
which  standardized   documentation  has  not  yet  been  fully  developed  and,
accordingly, they are less liquid than swaps.

The Fund may  invest up to 15% of its  total  assets  in  credit  default  swaps
(measured by the notional  amount of the credit  default swap). A credit default
swap is a  contract  between  a buyer  and a  seller  of  protection  against  a
pre-defined  credit  event.  The  buyer of  protection  pays the  seller a fixed
regular  fee  provided  that no  event of  default  on an  underlying  reference
obligation has occurred.  If an event of default occurs, the seller must pay the
buyer the full notional  value,  or "par value," of the reference  obligation in
exchange for the reference obligation.  Credit default swaps are used as a means
of "buying" credit protection,  i.e., attempting to mitigate the risk of default
or credit  quality  deterioration  in some  portion of the Fund's  holdings,  or
"selling" credit protection,  i.e., attempting to gain exposure to an underlying
issuer's  credit  quality  characteristics  without  directly  investing in that
issuer.  No more than 5% of the Fund's  total  assets may be  invested in credit
default swaps for purposes of buying credit protection on individual  securities
if the Fund does not own the  underlying  security or  securities at the time of
investment. Where the Fund is a seller of credit protection, it effectively adds
leverage to its portfolio  because,  in addition,  to its total net assets,  the
Fund would be subject to investment exposure on the notional amount of the swap.
The Fund will only sell credit protection with respect to securities in which it
would be authorized to invest  directly.  The Fund


                                       25
<PAGE>

currently  considers  credit  default swaps to be illiquid and treats the market
value of the contract as illiquid for purposes of  determining  compliance  with
the Fund's restrictions on investing in illiquid securities.

If the Fund is a buyer of a credit default swap and no event of default  occurs,
the Fund will lose its investment and recover nothing. However, if the Fund is a
buyer and an event of default  occurs,  the Fund will receive the full  notional
value of the reference obligation that may have little or no value. As a seller,
the Fund  receives  a fixed  rate of  income  through  the term of the  contract
(typically  between  six  months  and three  years),  provided  that there is no
default event. If an event of default occurs,  the seller must pay the buyer the
full notional  value of the reference  obligation.  Credit default swaps involve
greater  risks  than  if the  Fund  had  invested  in the  reference  obligation
directly.

The Fund may use credit default swaps to gain exposure to particular  issuers or
particular  markets  through  investments in portfolios of credit default swaps,
such  as  Dow  Jones  CDX.NA.HY  certificates.   By  investing  in  certificates
representing  interests in a basket of credit default swaps,  the Fund is taking
credit risk with respect to an entity or group of entities and providing  credit
protection  to the swap  counterparties.  For example,  the CDX EM is a tradable
basket of 19 credit  default  swaps on country  credits which seeks to replicate
the returns on the indices of a broad group of emerging markets  countries.  The
credits  are a subset of the  countries  represented  by the  JPMorgan  Emerging
Markets Bond Index Global  Diversified.  By purchasing  interests in CDX EM, the
Fund is gaining emerging markets  exposure through a single  investment.  Unlike
other types of credit  default  swaps which are generally  considered  illiquid,
credit default swap certificates generally can be sold within seven days and are
not subject to the Fund's restrictions on investing in illiquid securities.

Risks of Strategic  Transactions  Outside the US. When conducted outside the US,
Strategic  Transactions may not be regulated as rigorously as in the US, may not
involve a clearing mechanism and related guarantees, and are subject to the risk
of  governmental  actions  affecting  trading  in,  or the  prices  of,  foreign
securities,  currencies and other instruments.  The value of such positions also
could be adversely affected by: (i) other complex foreign  political,  legal and
economic  factors,  (ii) lesser  availability than in the US of data on which to
make trading  decisions,  (iii) delays in a fund's  ability to act upon economic
events  occurring in foreign markets during  non-business  hours in the US, (iv)
the  imposition of different  exercise and  settlement  terms and procedures and
margin requirements than in the US, and (v) lower trading volume and liquidity.

Combined Transactions. The Fund may enter into multiple transactions,  including
multiple options transactions,  multiple futures transactions, multiple currency
transactions  (including forward currency  contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions   ("component"   transactions),   instead  of  a  single  Strategic
Transaction,  as part of a single or combined  strategy  when, in the opinion of
the  Advisor,  it is in the  best  interests  of a Fund  to do  so.  A  combined
transaction  will usually  contain  elements of risk that are present in each of
its component transactions.  Although combined transactions are normally entered
into based on the Advisor's  judgment that the combined  strategies  will reduce
risk or otherwise  more  effectively  achieve the desired  portfolio  management
goal, it is possible that the  combination  will instead  increase such risks or
hinder achievement of the portfolio management objective.

Use of Segregated and Other Special Accounts.  Many Strategic  Transactions,  in
addition to other  requirements,  require that a fund  segregate  cash or liquid
assets with its  custodian  to the extent  fund  obligations  are not  otherwise
"covered" through ownership of the underlying security,  financial instrument or
currency. In general,  either the full amount of any obligation by a Fund to pay
or deliver  securities or assets must be covered at all times by the securities,
instruments or currency required to be delivered,  or, subject to any regulatory
restrictions,  an amount of cash or liquid  assets at least equal to the current
amount of the obligation must be segregated  with the custodian.  The segregated
assets cannot be sold or transferred unless equivalent assets are substituted in
their place or it is no longer necessary to segregate them. For example,  a call
option written by a Fund will require a Fund to hold the  securities  subject to
the  call  (or  securities   convertible  into  the  needed  securities  without
additional  consideration)  or to segregate cash or liquid assets  sufficient to
purchase and deliver the securities if the call is exercised. A call option sold
by a Fund on an index  will  require a fund to own  portfolio  securities  which
correlate  with the index or to  segregate  cash or liquid  assets  equal to the
excess of the index  value over the  exercise  price on a current  basis.  A put
option  written by a Fund  requires a fund to  segregate  cash or liquid  assets
equal to the exercise price.

                                       26
<PAGE>

Except when the Fund enters into a forward  contract for the purchase or sale of
a security denominated in a particular currency,  which requires no segregation,
a  currency  contract  which  obligates  a Fund  to buy or  sell  currency  will
generally  require a Fund to hold an amount of that  currency  or liquid  assets
denominated in that currency equal to a Fund's  obligations or to segregate cash
or liquid assets equal to the amount of a fund's obligation.

OTC options  entered into by a Fund,  including  those on securities,  currency,
financial  instruments  or  indices  and OCC issued and  exchange  listed  index
options,  will generally provide for cash settlement.  As a result,  when a Fund
sells  these  instruments  it will  only  segregate  an amount of cash or liquid
assets  equal to its accrued net  obligations,  as there is no  requirement  for
payment or delivery of amounts in excess of the net amount.  These  amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed  listed option sold by a fund, or the  in-the-money  amount
plus any sell-back  formula amount in the case of a cash-settled put or call. In
addition,  when a Fund  sells a call  option  on an  index  at a time  when  the
in-the-money amount exceeds the exercise price, a Fund will segregate, until the
option expires or is closed out, cash or cash equivalents equal in value to such
excess.  OCC issued and exchange  listed options sold by a Fund other than those
above  generally  settle with physical  delivery,  or with an election of either
physical delivery or cash settlement and a fund will segregate an amount of cash
or liquid  assets  equal to the full value of the option.  OTC options  settling
with physical delivery,  or with an election of either physical delivery or cash
settlement  will be treated the same as other  options  settling  with  physical
delivery.

In the case of a futures  contract or an option  thereon,  the Fund must deposit
initial  margin and possible daily  variation  margin in addition to segregating
cash or liquid assets  sufficient to meet its  obligation to purchase or provide
securities  or  currencies,  or to pay the amount owed at the  expiration  of an
index-based  futures  contract.  Such liquid  assets may  consist of cash,  cash
equivalents, liquid debt or equity securities or other acceptable assets.

With  respect to swaps,  the Fund will accrue the net amount of the  excess,  if
any, of its  obligations  over its  entitlements  with respect to each swap on a
daily basis and will segregate an amount of cash or liquid assets having a value
equal to the accrued excess.  Caps,  floors and collars  require  segregation of
assets with a value equal to a fund's net obligation, if any.

Strategic  Transactions  may be covered  by other  means  when  consistent  with
applicable   regulatory   policies.  A  fund  may  also  enter  into  offsetting
transactions so that its combined position,  coupled with any segregated assets,
equals  its  net  outstanding   obligation  in  related  options  and  Strategic
Transactions.  For  example,  a Fund  could  purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by a fund. Moreover, instead of segregating cash or liquid assets if a Fund
held a futures or forward  contract,  it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the  contract  held.  Other  Strategic  Transactions  may also be  offset  in
combinations.  If the offsetting  transaction terminates at the time of or after
the primary  transaction no segregation is required,  but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.

Variable  Rate  Securities.  The Fund may invest in  Variable  Rate  Securities,
instruments  having  rates of interest  that are adjusted  periodically  or that
"float"  continuously  according to formulae intended to minimize fluctuation in
values  of the  instruments.  The  interest  rate of  Variable  Rate  Securities
ordinarily  is  determined  by reference  to or is a percentage  of an objective
standard  such as a bank's prime rate,  the 90-day US Treasury Bill rate, or the
rate of return on commercial paper or bank  certificates of deposit.  Generally,
the  changes  in the  interest  rate on  Variable  Rate  Securities  reduce  the
fluctuation  in the market value of such  securities.  Accordingly,  as interest
rates  decrease  or  increase,   the  potential  for  capital   appreciation  or
depreciation is less than for fixed-rate obligations.  Some Variable Rate Demand
Securities  ("Variable Rate Demand  Securities") have a demand feature entitling
the  purchaser  to resell the  securities  at an amount  approximately  equal to
amortized cost or the principal amount thereof plus accrued interest.  As is the
case for other  Variable  Rate  Securities,  the interest  rate on Variable Rate
Demand  Securities  varies  according  to some  objective  standard  intended to
minimize  fluctuation in the values of the instruments.  The Fund determines the
maturity of Variable Rate Securities in accordance with Rule 2a-7,  which allows
the Fund to consider  certain of such instruments as having  maturities  shorter
than the maturity date on the face of the instrument.

                                       27
<PAGE>

Warrants.  The holder of a warrant has the right, until the warrant expires,  to
purchase a given number of shares of a particular  issuer at a specified  price.
Such  investments  can  provide a greater  potential  for profit or loss than an
equivalent  investment  in the  underlying  security.  Prices of warrants do not
necessarily  move,  however,  in  tandem  with  the  prices  of  the  underlying
securities and are, therefore, considered speculative investments.  Warrants pay
no  dividends  and confer no rights  other than a purchase  option.  Thus,  if a
warrant held by a Fund were not exercised by the date of its expiration,  a Fund
would lose the entire purchase price of the warrant.

When-Issued Securities.  The Fund may from time to time purchase equity and debt
securities on a "when-issued,"  "delayed  delivery" or "forward delivery" basis.
The price of such securities, which may be expressed in yield terms, is fixed at
the time the  commitment  to purchase is made,  but delivery and payment for the
securities  takes place at a later date.  During the period between purchase and
settlement,  no payment is made by a Fund to the issuer and no interest  accrues
to a Fund.  When a Fund purchases such  securities,  it immediately  assumes the
risks of ownership, including the risk of price fluctuation.  Failure to deliver
a security purchased on this basis may result in a loss or missed opportunity to
make an alternative investment.

To the extent that assets of the Fund is held in cash pending the  settlement of
a purchase of securities,  the Fund would earn no income.  While such securities
may be sold prior to the settlement date, the fund intends to purchase them with
the  purpose of actually  acquiring  them unless a sale  appears  desirable  for
investment  reasons.  At the time the Fund makes the  commitment  to  purchase a
security on this basis,  it will record the transaction and reflect the value of
the  security  in  determining  its net asset  value.  The  market  value of the
securities may be more or less than the purchase price.  The Fund will segregate
cash or  liquid  assets  at  least  equal  in  value  to  commitments  for  such
securities.


Portfolio Holdings

In addition to the public disclosure of Fund portfolio holdings through required
Securities and Exchange Commission ("SEC") quarterly filings,  the Fund may make
its portfolio holdings information publicly available on the DWS Funds' Web site
as described in the Fund's prospectus.  The Fund does not disseminate non-public
information  about  portfolio  holdings  except in accordance  with policies and
procedures adopted by the Fund.

The Fund's  procedures permit non-public  portfolio  holdings  information to be
shared with Deutsche Asset Management and its affiliates  (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys,   officers  and  trustees/directors  and  each  of  their  respective
affiliates and advisers who require access to this  information to fulfill their
duties to the Fund and are subject to the duties of  confidentiality,  including
the duty not to trade on non-public information,  imposed by law or contract, or
by the Fund's  procedures.  This  non-public  information may also be disclosed,
subject to the  requirements  described  below,  to securities  lending  agents,
financial  printers,  proxy voting  firms,  mutual fund  analysts and rating and
tracking  agencies,  or to shareholders  in connection with in-kind  redemptions
(collectively, "Authorized Third Parties").

Prior to any disclosure of the Fund's non-public  portfolio holdings information
to   Authorized   Third   Parties,   a   person   authorized   by   the   Fund's
Trustees/Directors  must make a good faith  determination  in light of the facts
then known that the Fund has a legitimate  business  purpose for  providing  the
information,  that the  disclosure is in the best interest of the Fund, and that
the  recipient  assents  or  otherwise  has  a  duty  to  keep  the  information
confidential  and to not  trade  based on the  information  received  while  the
information remains non-public.  No compensation is received by the Fund or DeAM
for disclosing non-public holdings information. Periodic reports regarding these
procedures will be provided to the Fund's Trustees/Directors.

Portfolio  holdings  information  distributed  by the trading desks of DeAM or a
subadvisor for the purpose of facilitating  efficient trading of such securities
and receipt of relevant  research is not subject to the foregoing  requirements.
Non-public   portfolio   holding   information   does  not   include   portfolio
characteristics  (other than holdings or subsets of holdings) about the Fund and
information  derived  therefrom,  including,  but not limited to, how the Fund's
investments are divided among various sectors, industries,  countries, value and
growth stocks,  bonds,  currencies and cash,  types of bonds,  bond  maturities,
duration,  bond  coupons and bond credit  quality  ratings so long as the Fund's
holdings could not be derived from such information.


                                       28
<PAGE>


Registered  investment  companies that are sub-advised by DAMI may be subject to
different  portfolio  holdings  disclosure  policies,  and neither  DAMI nor the
Fund's  Trustees  exercise  control over such  policies.  In addition,  separate
account  clients of DAMI have  access to their  portfolio  holdings  and are not
subject  to the Fund's  portfolio  holdings  disclosure  policy.  The  portfolio
holdings  of some of the  funds  sub-advised  by DAMI and  some of the  separate
accounts managed by DAMI may substantially  overlap with the portfolio  holdings
of the Fund.

DAMI also  manages  certain  unregistered  commingled  trusts and creates  model
portfolios,  the portfolio holdings of which may substantially  overlap with the
portfolio holdings of the Fund. To the extent that investors in these commingled
trusts  or  recipients  of model  portfolio  holdings  information  may  receive
portfolio  holdings  information  of their  trust or of a model  portfolio  on a
different basis from that on which Fund portfolio  holdings  information is made
public,  DAMI has implemented  procedures  reasonably designed to encourage such
investors and recipients to keep such information  confidential,  and to prevent
those investors from trading on the basis of non-public holdings information.

There is no assurance that the Fund's  policies and  procedures  with respect to
the disclosure of portfolio holdings  information will protect the Fund from the
potential  misuse of portfolio  holdings  information  by those in possession of
that information.

                             MANAGEMENT OF THE FUND

Investment Advisor

Deutsche Investment  Management  Americas Inc. (`DIMA" or the "Advisor"),  DIMA,
which is part of Deutsche Asset Management  ("DAMI"),  is the investment advisor
for the Fund.  Under the  supervision of the Board of Trustees of the Fund, with
headquarters at 345 Park Avenue, New York, New York, makes the Fund's investment

                                       29
<PAGE>

decisions,  buys and sells  securities  for the Fund and conducts  research that
leads to these purchase and sale decisions. The Advisor manages the Fund's daily
investment  and  business  affairs  subject to the policies  established  by the
Trust's Board of Trustees.  DIMA has more than 80 years of  experience  managing
mutual  funds.  DIMA provides a full range of  investment  advisory  services to
institutional and retail clients. DIMA is also responsible for selecting brokers
and dealers and for negotiating brokerage commissions and dealer charges.

DAMI is the  marketing  name in the US for the asset  management  activities  of
Deutsche Bank AG, DIMA,  Deutsche  Asset  Management  Inc.,  Deutsche Bank Trust
Company  Americas  and DWS  Trust  Company.  DAMI is a global  asset  management
organization  that offers a wide range of  investing  expertise  and  resources,
including hundreds of portfolio managers and analysts and an office network that
reaches  the  world's  major  investment  centers.  This  well-resourced  global
investment  platform brings together a wide variety of experience and investment
insight, across industries, regions, asset classes and investing styles. DIMA is
an indirect,  wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global  banking  institution  that is engaged in a wide range of financial
services,  including  investment  management,  mutual fund, retail,  private and
commercial banking,  investment banking and insurance. The term "DWS Scudder" is
the  designation  given to the products  and  services  provided by DIMA and its
affiliates to the DWS Mutual Funds.

The Advisor manages the Fund's daily  investment and business affairs subject to
the policies  established  by the Fund's Board of Trustees.  The Trustees of the
Trust  have  overall  responsibility  for  the  management  of  the  Fund  under
Massachusetts law.

Pursuant to an investment  management agreement (the "Agreement") with the Fund,
the Advisor manages the Fund's  investments,  administers its business  affairs,
furnishes office facilities and equipment,  provides clerical and administrative
services and permits its officers and employees to serve without compensation as
directors  or officers of the Fund if elected to such  positions.  To the extent
permissible  by law,  the  Advisor  may  appoint  certain of its  affiliates  as
subadvisors to perform certain of the Advisor's duties.

The Advisor provides  investment  counsel for many individuals and institutions,
including  insurance  companies,  industrial  corporations,  and  financial  and
banking  organizations,  as well as  providing  investment  advice  to open- and
closed-end SEC registered funds.

In  certain  cases,  the  investments  for the  Fund  are  managed  by the  same
individuals  who manage one or more other  mutual  funds  advised by the Advisor
that have similar names,  objectives and investment  styles. You should be aware
that the Fund is likely to differ from these other  mutual  funds in size,  cash
flow pattern and tax matters.  Accordingly,  the holdings and performance of the
Fund can be expected to vary from those of these other mutual funds.

Certain  investments  may be appropriate for the Fund and also for other clients
advised by the Advisor.  Investment decisions for the Fund and other clients are
made with a view to achieving their respective  investment  objectives and after
consideration  of such factors as their current  holdings,  availability of cash
for  investment  and the  size of their  investments  generally.  Frequently,  a
particular  security  may be bought or sold for only one client or in  different
amounts  and at  different  times for more  than one but less than all  clients.
Likewise,  a particular  security may be bought for one or more clients when one
or more other clients are selling the security. In addition,  purchases or sales
of the same  security  may be made for two or more  clients on the same day.  In
such event,  such  transactions  will be allocated among the clients in a manner
believed by the Advisor to be equitable to each. In some cases,  this  procedure
could have an adverse effect on the price or amount of the securities  purchased
or sold by the Fund.  Purchase and sale orders for the Fund may be combined with
those of other  clients of the  Advisor in the  interest of  achieving  the most
favorable net results to the Fund.

The Fund is  managed  by a team of  investment  professionals  who each  play an
important role in the Fund's management  process.  Team members work together to
develop  investment  strategies and select  securities for the Fund's portfolio.
This team works for the Advisor or its  affiliates  and is  supported by a large
staff  of  economists,   research   analysts,   traders  and  other   investment
specialists. The Advisor or its affiliates believe(s) its team approach benefits
Fund  investors  by  bringing  together  many  disciplines  and  leveraging  its
extensive resources.  Team members with primary responsibility for management of
the  Fund,  as  well  as  team  members  who  have  other


                                       30
<PAGE>

ongoing management  responsibilities  for the Fund, are identified in the Fund's
current  prospectus.  Composition  of the team may change  over  time,  and Fund
shareholders  and investors  will be notified of changes  affecting  individuals
with primary Fund management responsibility.


The current  Agreement  dated April 5, 2002, was last renewed by the Trustees on
September 18, 2007. The Agreement  continues in effect from year to year only if
its continuance is approved annually by the vote of a majority of those Trustees
who are not parties to such  Agreement or  interested  persons of the Advisor or
the Trust ("Independent Trustees" or "Non-interested  Trustees"), cast in person
at a meeting called for the purpose of voting on such approval,  and either by a
vote  of  the  Trust's  Trustees  or of a  majority  of the  outstanding  voting
securities of the Fund.


The Agreement may be terminated at any time without payment of penalty by either
party on sixty days written notice and automatically  terminates in the event of
its assignment.

Under the Agreement,  the Advisor  regularly  provides the Fund with  continuing
investment management consistent with the Fund's investment objective,  policies
and restrictions and determines what securities shall be purchased, held or sold
and what portion of the Fund's assets shall be held  uninvested,  subject to the
Trust's Declaration of Trust,  By-Laws, the 1940 Act, the Code and to the Fund's
investment objective,  policies and restrictions,  and subject, further, to such
policies and instructions as the Board of Trustees of the Trust may from time to
time  establish.  The Advisor also advises and assists the officers of the Trust
in taking such steps as are necessary or  appropriate to carry out the decisions
of the Trustees and the  appropriate  committees  of the Trustees  regarding the
conduct of the business of the Fund.

Under the Fund's  Agreement,  the Advisor also renders  administrative  services
(not otherwise provided by third parties) necessary for the Fund's operations as
an open-end investment company including,  but not limited to, preparing reports
and notices to the  Trustees  and  shareholders;  supervising,  negotiating  and
monitoring  contractual  arrangements with various third-party service providers
to the Fund (such as the  Fund's  transfer  agent,  pricing  agents,  custodian,
accountants  and others);  preparing  and making  filings with the SEC and other
regulatory  agencies;  assisting  in the  preparation  and  filing of the Fund's
federal,  state and local tax returns;  preparing and filing the Fund's  federal
excise tax  returns;  assisting  with  investor  and public  relations  matters;
monitoring the valuation of securities  and the  calculation of net asset value;
monitoring the registration of shares of the Fund under  applicable  federal and
state  securities  laws;  maintaining the Fund's books and records to the extent
not otherwise maintained by a third party; assisting in establishing  accounting
policies  of the Fund;  assisting  in the  resolution  of  accounting  and legal
issues;  establishing and monitoring the Fund's operating budget; processing the
payment of the Fund's bills; assisting the Fund in, and otherwise arranging for,
the payment of distributions and dividends;  and otherwise assisting the Fund in
the  conduct  of its  business,  subject  to the  direction  and  control of the
Trustees.

Pursuant to a sub-accounting and administrator  agreement among the Advisor, DWS
Scudder Fund Accounting Corporation ("DWS-SFAC") and State Street Bank and Trust
Company ("SSB"), the Advisor has delegated certain  administrative  functions to
SSB under the Agreement.  The costs and expenses of such delegation are borne by
the Advisor, not by the Fund.

The  current  advisory  fee rates are  payable  monthly at the annual rate shown
below.

        Average Daily Net Assets                      DWS Balanced Fund
        ------------------------                      -----------------

$0 - $1.5 billion                                           0.470%
$1.5 billion - $2 billion                                   0.445%
$2 billion - $3.5 billion                                   0.410%
$3.5 billion - $5.5 billion                                 0.400%
$5.5 billion - $7.5 billion                                 0.390%
$7.5 billion - $10 billion                                  0.380%
$10 billion - $12.5 billion                                 0.370%
Over $12.5 billion                                          0.360%

                                       31
<PAGE>

The  advisory  fee is  payable  monthly,  provided  that the Fund will make such
interim  payments  as may be  requested  by the Advisor not to exceed 75% of the
amount of the fee then  accrued on the books of the Fund and unpaid.  All of the
Fund's expenses are paid out of gross investment income.


The advisory  fees paid by the Fund for its last three fiscal years are shown in
the table below. [TO BE UPDATED]

      Fiscal 2007              Fiscal 2006            Fiscal 2005
      -----------              -----------            -----------

           $                   $9,131,853             $10,227,855


Through March 13, 2008, the Advisor has  contractually  agreed to waive all or a
portion of its  management  fee and reimburse or pay  operating  expenses of the
Fund to the extent necessary to maintain the Fund's total operating  expenses at
0.74%  for  Class S shares  excluding  certain  expenses  such as  extraordinary
expenses, taxes, brokerage and interest.

Under its  Agreement,  the Fund is  responsible  for all of its  other  expenses
including:  organizational  costs, fees and expenses incurred in connection with
membership in investment company  organizations;  brokers'  commissions;  legal,
auditing and accounting  expenses;  insurance;  taxes and governmental fees; the
fees and  expenses of the Transfer  Agent;  any other  expenses of issue,  sale,
underwriting,  distribution, redemption or repurchase of shares; the expenses of
and the fees for  registering  or qualifying  securities  for sale; the fees and
expenses of Trustees,  officers and employees of the Fund who are not affiliated
with the Advisor;  the cost of printing and distributing  reports and notices to
shareholders; and the fees and disbursements of custodians. The Fund may arrange
to have third parties  assume all or part of the expenses of sale,  underwriting
and  distribution  of shares of the Fund. The Fund is also  responsible  for its
expenses of  shareholders'  meetings,  the cost of responding  to  shareholders'
inquiries, and its expenses incurred in connection with litigation,  proceedings
and claims and the legal  obligation  it may have to indemnify  its officers and
Trustees with respect thereto.

In reviewing  the terms of the  Agreement  and in  discussions  with the Advisor
concerning  such  Agreement,  the Trustees of the Trust who are not  "interested
persons" of the Advisor are  represented  by  independent  counsel at the Fund's
expense.

The  Agreement  provides  that the Advisor  shall not be liable for any error of
judgment or mistake of law or for any loss  suffered  by the Fund in  connection
with  matters  to which the  Agreement  relates,  except a loss  resulting  from
willful misfeasance, bad faith or gross negligence on the part of the Advisor in
the  performance of its duties or from reckless  disregard by the Advisor of its
obligations and duties under the Agreement.

Officers and  employees  of the Advisor from time to time may have  transactions
with various  banks,  including the Fund's  custodian  bank. It is the Advisor's
opinion that the terms and conditions of those  transactions which have occurred
were  not   influenced  by  existing  or  potential   custodial  or  other  Fund
relationships.

The Advisor may serve as advisor to other funds with  investment  objectives and
policies  similar  to  those of the Fund  that may have  different  distribution
arrangements or expenses, which may affect performance.

None of the officers of the Fund or Trustees of the Trust may have dealings with
the  Fund  as  principals  in the  purchase  or sale of  securities,  except  as
individual subscribers to or holders of shares of the Fund.

The Advisor may enter into  arrangements with affiliates and third party service
providers to perform  various  administrative,  back-office  and other  services
relating to client accounts.  Such service providers may be located in the US or
in non-US jurisdictions.


Subadvisor to the Fund

                                       32
<PAGE>

Deutsche Asset Management  International  GmbH ("DeAMi"),  an investment advisor
registered  with  the  US  Securities  and  Exchange  Commission,  will  be  the
subadvisor to the Fund upon shareholder  approval of the sub-advisory  agreement
(the  "Sub-Advisory  Agreement").  DeAMi,  Mainzer  Landstrasse  178-190,  60325
Frankfurt am Main,  Germany,  will render  investment  advisory  and  management
services to the Fund pursuant to the terms of the Sub-Advisory Agreement between
DeAMi and DIMA.  DeAMi is an affiliate of DIMA and a subsidiary of Deutsche Bank
AG.  Under  the terms of the  Sub-Advisory  Agreement,  DeAMi  will  manage  the
investment and  reinvestment  of a portion of the large cap value  allocation of
the Fund's  portfolio  and will provide  such  investment  advice,  research and
assistance as DIMA may, from time to time, reasonably request.

DIMA will pay a fee to DeAMi for serving as subadvisor to the Fund at the annual
rates shown below:

Assets                                      Sub-Advisory Fee
Managed by DeAMi (in Euros)                 (as a % of average daily net assets)
---------------------------                 ------------------------------------

(euro)0 - (euro)250 million                                 0.300%
(euro)250 million - (euro)500 million                       0.200%
(euro)500 million - (euro)1 billion                         0.120%
(euro)1 billion - (euro)2.5 billion                         0.080%
(euro)2.5 billion - (euro)5 billion                         0.055%
(euro)5 billion - (euro)25 billion                          0.035%
(euro)25 billion - (euro)50 billion                         0.025%
over (euro)50 billion                                       0.015%


The Sub-Advisory  Agreement provides that DeAMi will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with  matters  to  which  the  Sub-Advisory  Agreement  relates,  except  a loss
resulting from willful misconduct,  bad faith or gross negligence on the part of
DeAMi in the  performance  of its duties or from reckless  disregard by DeAMi of
its obligations and duties under the Sub-Advisory Agreement.


Pursuant  to  Deutsche  Asset  Management  procedures  approved by the Boards on
behalf of the DWS funds,  proof of claim forms are routinely  filed on behalf of
the  DWS  funds  by  a  third  party  service  provider,  with  certain  limited
exceptions.  The Boards of the DWS funds receive periodic reports  regarding the
implementation of these procedures.


Pursuant to DeAM  procedures  approved by the Boards on behalf of the DWS funds,
proof of claim forms are  routinely  filed on behalf of the DWS funds by a third
party service provider,  with certain limited exceptions.  The Boards of the DWS
funds receive periodic reports regarding the implementation of these procedures.


Compensation of Portfolio Managers

The  Fund has  been  advised  that the  Advisor  seeks to offer  its  investment
professionals  competitive  short-term  and  long-term  compensation.  Portfolio
managers and research professionals are paid (i) fixed base salaries,  which are
linked to job function,  responsibilities  and financial  services industry peer
comparison  and (ii)  variable  compensation,  which  is  linked  to  investment
performance, individual contributions to the team and DWS Scudder's and Deutsche
Bank's  financial  results.  Variable  compensation  may  include  a cash  bonus
incentive and  participation in a variety of long-term equity programs  (usually
in the form of Deutsche Bank equity).

Bonus  and  long-term   incentives   comprise  a  greater  proportion  of  total
compensation as an investment  professional's  seniority and compensation levels
increase.  Top performing  investment  professionals  earn a total  compensation
package  that is highly  competitive,  including  a bonus that is a multiple  of
their base  salary.  The amount of equity  awarded  under the  long-term  equity
programs is generally based on the individual's total  compensation  package and
may  comprise  from  0%-40%  of  the  total  compensation  award.  As  incentive
compensation increases,  the percentage of compensation awarded in Deutsche Bank
equity also increases. Certain senior investment professionals may be subject to
a mandatory diverting of a portion of their equity compensation into proprietary
mutual funds that they manage.

                                       33
<PAGE>

To  evaluate  its  investment  professionals,  the  Advisor  uses a  Performance
Management  Process.   Objectives  evaluated  by  the  process  are  related  to
investment  performance and generally take into account peer group and benchmark
related data.  The ultimate goal of this process is to link the  performance  of
investment  professionals  with  client  investment  objectives  and to  deliver
investment   performance   that  meets  or  exceeds  clients'  risk  and  return
objectives. When determining total compensation,  the Advisor considers a number
of quantitative and qualitative factors such as:

o        DWS  Scudder  performance  and the  performance  of DeAM,  quantitative
         measures which include 1, 3 and 5 year pre-tax returns versus benchmark
         (such as the benchmark used in the  prospectuses)  and appropriate peer
         group,  taking  into  consideration  risk  targets.  Additionally,  the
         portfolio  manager's  retail/institutional  asset mix is  weighted,  as
         appropriate for evaluation purposes.

o        Qualitative  measures include  adherence to the investment  process and
         individual  contributions  to  the  process,  among  other  things.  In
         addition, the Advisor assesses compliance, risk management and teamwork
         skills.

o        Other factors,  including  contributions made to the investment team as
         well as  adherence  to  compliance,  risk  management,  and "living the
         values" of the Advisor,  are part of a  discretionary  component  which
         gives  management the ability to reward these behaviors on a subjective
         basis through bonus incentives.

In addition,  the Advisor analyzes  competitive  compensation levels through the
use of extensive market data surveys. Portfolio manager compensation is reviewed
and may be modified each year as appropriate  to reflect  changes in the market,
as well as to adjust the  factors  used to  determine  overall  compensation  to
promote good sustained investment performance.


Fund Ownership of Portfolio Managers [TO BE UPDATED]


The following table shows the dollar range of shares owned  beneficially  and of
record by each  member of the Fund's  portfolio  management  team in the Fund as
well as in all DWS Funds as a group  (i.e.  those  funds  advised by DeAM or its
affiliates), including investments by their immediate family members sharing the
same household and amounts invested through retirement and deferred compensation
plans.  This  information  is provided as of the Fund's most recent  fiscal year
end.

                                 Dollar Range of         Dollar Range of All DWS
Name of Portfolio Manager       Fund Shares Owned           Fund Shares Owned
-------------------------       -----------------           -----------------


William Chepolis                        $0                  $100,001 - $500,000
Matthew F. MacDonald                    $0                           $0
Inna Okounkova                  $10,001 - $50,000           $100,001 - $500,000
Gary Sullivan                           $0                   $10,001 - $50,000
Julie M. Van Cleave                     $0                    Over $1,000,000
Robert Wang                     $10,001 - $50,000            $50,001 - $100,000
Jin Chen                                $0                  $100,001 - $500,000
Julie Abbett                            $0                   $50,001 - $100,000
Thomas Picciochi                        $0                  $100,001 - $500,000
John Brennan                            $0                           $0
J. Richard Robben                       $0                           $0


Conflicts of Interest

In addition to managing the assets of the Fund,  the Fund's  portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled


                                       34
<PAGE>

investment vehicles that are not registered  investment  companies and (3) other
accounts (e.g.,  accounts managed for individuals or  organizations)  managed by
each portfolio manager. The tables also show the number of performance based fee
accounts, as well as the total assets of the accounts for which the advisory fee
is based on the performance of the account.  This  information is provided as of
the Fund's most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

<TABLE>
<CAPTION>

                                      Number of         Total Assets of    Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with           Performance-Based
Name of Portfolio Manager             Companies            Companies       Performance-Based Fee     Fee Accounts
-------------------------             ---------            ---------       ---------------------     ------------


<S>                                       <C>            <C>                           <C>                     <C>
William Chepolis                          16             $7,886,534,471                0                       $0
Matthew F. MacDonald                      15            $11,642,836,440                0                       $0
Inna Okounkova                            10             $1,491,550,350                0                       $0
Gary Sullivan                             11             $5,522,416,675                0                       $0
Julie M. Van Cleave                        5             $3,809,651,152                0                       $0
Robert Wang                               26             $6,194,454,478                0                       $0
Jin Chen                                  12             $4,042,881,320                0                       $0
Julie Abbett                              12             $4,042,881,320                0                       $0
Thomas Picciochi                           7             $1,794,312,280                1              $32,518,662
John Brennan                               0                         $0                0                       $0
J. Richard Robben                          0                         $0                0                       $0


Other Pooled Investment Vehicles Managed:

                                                                              Number of Pooled
                                      Number of                              Investment Vehicle
                                       Pooled          Total Assets of         Accounts with        Total Assets of
                                     Investment       Pooled Investment      Performance-Based    Performance-Based
Name of Portfolio Manager             Vehicles             Vehicles                 Fee              Fee Accounts
-------------------------             --------             --------                 ---              ------------


William Chepolis                            1            $1,174,919,810                 0                      $0
Matthew F. MacDonald                        0                        $0                 0                      $0
Inna Okounkova                              5              $227,088,068                 0                      $0
Gary Sullivan                               0                        $0                 0                      $0
Julie M. Van Cleave                         1                $6,059,957                 0                      $0
Robert Wang                                 6              $555,931,180                 1            $170,337,400
Jin Chen                                    3               $93,281,241                 0                      $0
Julie Abbett                                3               $93,281,241                 0                      $0
Thomas Picciochi                            3              $390,173,081                 2            $271,430,825

                                       35
<PAGE>
                                                                              Number of Pooled
                                      Number of                              Investment Vehicle
                                       Pooled          Total Assets of         Accounts with        Total Assets of
                                     Investment       Pooled Investment      Performance-Based    Performance-Based
Name of Portfolio Manager             Vehicles             Vehicles                 Fee              Fee Accounts
-------------------------             --------             --------                 ---              ------------

John Brennan                                0                        $0                 0                      $0
J. Richard Robben                           0                        $0                 0                      $0


Other Accounts Managed:

                                                                              Number of Other
                                                                               Accounts with      Total Assets of
                                  Number of Other   Total Assets of Other   Performance-Based      Performance-
Name of Portfolio Manager             Accounts             Accounts                 Fee          Based Fee Accounts
-------------------------             --------             --------                 ---          ------------------


William Chepolis                            2           $507,601,891                   0                       $0
Matthew F. MacDonald                        0                     $0                   0                       $0
Inna Okounkova                              0                     $0                   0                       $0
Gary Sullivan                               0                     $0                   0                       $0
Julie M. Van Cleave                        11           $565,343,056                   0                       $0
Robert Wang                                38         $7,081,157,607                   3             $340,192,399
Jin Chen                                    4           $267,089,607                   0                       $0
Julie Abbett                                4           $267,089,607                   0                       $0
Thomas Picciochi                           11        $11,847,842,571                   9          $11,723,783,059
John Brennan                                0                     $0                   0                       $0
J. Richard Robben                           0                     $0                   0                       $0

</TABLE>

In  addition  to the  accounts  above,  an  investment  professional  may manage
accounts in a personal  capacity that may include  holdings that are similar to,
or the same as,  those of the Fund.  The  Advisor  has in place a Code of Ethics
that is designed to address  conflicts of interest and that, among other things,
imposes  restrictions  on the ability of portfolio  managers  and other  "access
persons" to invest in securities  that may be  recommended or traded in the Fund
and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account, including the following:

o        Certain  investments may be appropriate for the Fund and also for other
         clients advised by the Advisor, including other client accounts managed
         by the Fund's portfolio  management team.  Investment decisions for the
         Fund  and  other  clients  are  made  with a view  to  achieving  their
         respective  investment  objectives  and  after  consideration  of  such
         factors as their current holdings,  availability of cash for investment
         and the size of their investments  generally. A particular security may
         be bought or sold for only one client or in  different  amounts  and at
         different times for more than one but less than all clients.  Likewise,
         because   clients  of  the  Advisor  may  have   differing   investment
         strategies, a particular security may be bought for one or more clients
         when one or more other clients are selling the security. The investment
         results  achieved for the Fund may differ from the results achieved for
         other  clients of the Advisor.  In addition,  purchases or sales of the
         same  security  may be made for two or more clients on the same day. In
         such event,  such transactions will be allocated among the clients in a
         manner  believed by the Advisor to be most  equitable  to each  client,
         generally utilizing a pro rata allocation  methodology.  In some cases,
         the allocation  procedure could  potentially  have an adverse effect or
         positive  effect on the price or amount of the securities  purchased or
         sold by the Fund. Purchase and sale orders for the Fund may be combined
         with those of other clients of the Advisor in the interest of achieving
         the most favorable net results to the Fund and the other clients.

                                       36
<PAGE>

o        To the  extent  that  a  portfolio  manager  has  responsibilities  for
         managing  multiple client  accounts,  a portfolio  manager will need to
         divide time and attention among relevant accounts. The Advisor attempts
         to minimize these conflicts by aligning its portfolio  management teams
         by  investment  strategy and by  employing  similar  investment  models
         across multiple client accounts.

o        In some cases, an apparent  conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with  respect to other  accounts it manages.  The Advisor  will not
         determine  allocations based on whether it receives a performance-based
         fee from the client. Additionally, the Advisor has in place supervisory
         oversight processes to periodically monitor performance  deviations for
         accounts with like strategies.

o        The Advisor and its affiliates and the investment  team of the Fund may
         manage other mutual funds and separate  accounts on a long-short basis.
         The  simultaneous  management  of long  and  short  portfolios  creates
         potential  conflicts  of  interest  including  the risk that short sale
         activity could adversely  affect the market value of the long positions
         (and vice versa),  the risk arising from sequential  orders in long and
         short  positions,  and the risks  associated  with  receiving  opposing
         orders at the same time.  The Advisor has  adopted  procedures  that it
         believes are reasonably  designed to mitigate these potential conflicts
         of  interest.  Included in these  procedures  are  specific  guidelines
         developed to ensure fair and equitable  treatment for all clients whose
         accounts  are  managed by the Fund's  portfolio  management  team.  The
         Advisor and the portfolio  management team have established  monitoring
         procedures,  a protocol for supervisory  reviews, as well as compliance
         oversight to ensure that  potential  conflicts of interest  relating to
         this type of activity are properly addressed.

The Advisor is owned by Deutsche Bank AG, a  multi-national  financial  services
company.  Therefore,  the Advisor is affiliated  with a variety of entities that
provide, and/or engage in commercial banking, insurance,  brokerage,  investment
banking,  financial  advisory,  broker-dealer  activities  (including  sales and
trading),  hedge funds, real estate and private equity investing, in addition to
the provision of investment  management services to institutional and individual
investors.  Since  Deutsche  Bank AG, its  affiliates,  directors,  officers and
employees (the "Firm") are engaged in businesses  and have interests  other than
managing  asset  management  accounts,   such  other  activities  involve  real,
potential or apparent  conflicts of interest.  These  interests  and  activities
include potential  advisory,  transactional  and financial  activities and other
interests  in  securities  and  companies  that may be  directly  or  indirectly
purchased  or sold by the Firm for its  clients'  advisory  accounts.  These are
considerations  of which  advisory  clients  should be aware and which may cause
conflicts that could be to the disadvantage of the Advisor's  advisory  clients.
The Advisor has  instituted  business and  compliance  policies,  procedures and
disclosures  that are  designed to identify,  monitor and mitigate  conflicts of
interest and, as appropriate, to report them to the Fund's Board.

Codes of Ethics

The Fund,  the Advisor and the Fund's  principal  underwriter  have each adopted
codes of ethics under Rule 17j-1 under the 1940 Act. Board members,  officers of
the Trust and employees of the Advisor and principal  underwriter  are permitted
to make personal securities  transactions,  including transactions in securities
that  may be  purchased  or  held  by the  Fund,  subject  to  requirements  and
restrictions set forth in the applicable Code of Ethics.  The Advisor's Codes of
Ethics  contains  provisions and  requirements  designed to identify and address
certain  conflicts of interest  between personal  investment  activities and the
interests  of the  Fund.  Among  other  things,  the  Advisor's  Code of  Ethics
prohibits  certain types of  transactions  absent prior  approval,  imposes time
periods  during  which  personal   transactions  may  not  be  made  in  certain
securities,  and requires the submission of duplicate broker  confirmations  and
quarterly reporting of securities transactions. Additional restrictions apply to
portfolio  managers,  traders,  research  analysts  and others  involved  in the
investment  advisory  process.  Exceptions to these and other  provisions of the
Advisor's  Codes of Ethics  may be  granted in  particular  circumstances  after
review by appropriate personnel.

                                       37
<PAGE>

                             FUND SERVICE PROVIDERS

Underwriter

The Trust, on behalf of the Fund has an underwriting  agreement with DWS Scudder
Distributors,  Inc., 222 South Riverside Plaza, Chicago, Illinois 60606 (DWS-SDI
or the "Distributor"), a Massachusetts corporation, which is a subsidiary of the
Advisor, a Delaware corporation.  The Trust's underwriting agreement dated April
5,  2002,  continues  from  year to year  only if its  continuance  is  approved
annually  by a  majority  of the  members of the Board of  Trustees  who are not
parties to such agreement or interested  persons of any such party and either by
vote of a majority of the Board of  Trustees  or a majority  of the  outstanding
voting  securities of the Fund. The underwriting  agreement of the Fund was last
approved by the Trustees on September 22, 2006.

Under the  underwriting  agreement,  the Fund is responsible for: the payment of
all fees and expenses in connection with the preparation and filing with the SEC
of its registration  statement and prospectus and any amendments and supplements
thereto;  the registration  and  qualification of shares for sale in the various
states,  including registering the Fund as a broker or dealer in various states,
as  required;  the  fees  and  expenses  of  preparing,   printing  and  mailing
prospectuses  annually to existing shareholders (see below for expenses relating
to prospectuses paid by the Distributor);  notices, proxy statements, reports or
other  communications  to  shareholders  of the Fund;  the cost of printing  and
mailing  confirmations of purchases of shares and any prospectuses  accompanying
such  confirmations;  any issuance  taxes and/or any initial  transfer  taxes; a
portion of shareholder  toll-free  telephone charges and expenses of shareholder
service  representatives;  the cost of  wiring  funds for  share  purchases  and
redemptions (unless paid by the shareholder who initiates the transaction);  the
cost of printing and postage of business reply  envelopes;  and a portion of the
cost of computer terminals used by both the Fund and the Distributor.

The Distributor will pay for printing and  distributing  prospectuses or reports
prepared for its use in connection with the offering of the Fund's shares to the
public and preparing,  printing and mailing any other  literature or advertising
in  connection  with the  offering  of  shares  of the fund to the  public.  The
Distributor will pay all fees and expenses in connection with its  qualification
and  registration  as a broker or dealer under federal and state laws, a portion
of the cost of toll-free  telephone service and expenses of shareholder  service
representatives,  a portion of the cost of computer  terminals,  and expenses of
any activity which is primarily  intended to result in the sale of shares issued
by the Fund,  unless a Rule 12b-1 Plan is in effect which provides that the fund
shall bear some or all of such expenses.

Although the Fund does not currently  have a 12b-1 Plan for these  classes,  and
the Trustees  have no current  intention of adopting one, the Fund will also pay
those fees and expenses permitted to be paid or assumed by the Trust pursuant to
a 12b-1 Plan, if any, adopted by the Trust,  notwithstanding any other provision
to the contrary in the underwriting agreement.

The  Distributor  currently  offers shares of the Fund on a continuous  basis to
investors  in all  states  in which  shares of the Fund may from time to time be
registered or where  permitted by  applicable  law. The  underwriting  agreement
provides  that the  Distributor  accepts  orders for  shares at net asset  value
because no sales commission or load is charged to the investor.  The Distributor
has made no firm commitment to acquire shares of the Fund.

Independent Registered Public Accounting Firm

The financial  highlights of the Fund included in the Fund's  prospectus and the
financial  statements of the Fund incorporated by reference in this Statement of
Additional  Information  have been so included or  incorporated  by reference in
reliance  on the  reports of Ernst & Young LLP,  independent  registered  public
accounting firm, 200 Clarendon Street,  Boston, MA 02116, given on the authority
of said firm as experts in auditing and accounting. Ernst & Young LLP audits the
financial  statements  of the Fund and  provides  other  audit,  tax and related
services.  Shareholders  will receive  annual audited  financial  statements and
semi-annual unaudited financial statements.

                                       38
<PAGE>

Legal Counsel

Vedder,  Price,  Kaufman & Kammholz,  P.C., 222 North LaSalle  Street,  Chicago,
Illinois  60601,  serves  as  legal  counsel  to the  Fund  and its  Independent
Trustees.

Fund Accounting Agent

DWS Scudder Fund Accounting Corporation  ("DWS-SFAC"),  Two International Place,
Boston,  Massachusetts  02110, a subsidiary of the Advisor,  is responsible  for
determining  net asset value per share and maintaining the portfolio and general
accounting  records for the Fund.  Currently,  DWS-SFAC  receives no fee for its
services to the Fund;  however,  subject to Board  approval,  DWS-SFAC  may seek
payment for its services under this agreement in the future.

Pursuant  to an  agreement  between  DWS-SFAC  and State  Street  Bank and Trust
Company ("SSB"), DWS-SFAC has delegated certain fund accounting functions to SSB
under the fund  accounting  agreement.  The cost and expenses of such delegation
are borne by DWS-SFAC, not by the Fund.

Custodian, Transfer Agent and Shareholder Service Agent

The Fund  employs  SSB,  225 Franklin  Street,  Boston,  Massachusetts  02110 as
custodian.  SSB has entered into agreements with foreign subcustodians  approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank AG, an affiliate of the Advisor,  as subcustodian  ("DB  Subcustodian")  in
certain countries.  To the extent the Fund holds any securities in the countries
in which SSB uses DB Subcustodian as a  subcustodian,  those  securities will be
held by DB  Subcustodian  as part of a larger omnibus account in the name of SSB
(the "Omnibus  Account").  For its  services,  DB  Subcustodian  receives (1) an
annual fee based on a percentage  of the average daily net assets of the Omnibus
Account and (2)  transaction  charges  with respect to  transactions  that occur
within the Omnibus  Account.  For the fiscal year ended  October 31,  2006,  the
custodian received $109,613.


DWS Scudder  Investments  Service  Company  ("DWS-SISC"),  210 West 10th Street,
Kansas City, Missouri  64105-1614,  an affiliate of the Advisor, is the transfer
agent,  dividend-paying  agent and shareholder  service agent for all classes of
DWS funds.




The Transfer  Agent receives an annual service fee for each account of the Fund,
based on the type of account.  For open retail  accounts,  the fee is a flat fee
ranging from $20.00 to $27.50 per account,  for open  wholesale  money funds the
fee is $32.50 per account, while for certain retirement accounts serviced on the
recordkeeping system of ADP, Inc., the fee is a flat fee up to $3.46 per account
(as of October  2006,  indexed to  inflation)  plus an asset  based fee of up to
0.25% of  average  net  assets.  1/12th of the  annual  service  charge for each
account is  charged  and  payable to the  Transfer  Agent each  month.  A fee is
charged for any account  which at any time during the month had a share  balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

Certain  out-of-pocket  expenses  incurred  by  the  Transfer  Agent,  including
expenses of printing and mailing  routine fund  disclosure  documents,  costs of
record retention and transaction  processing costs are reimbursed by the Fund or

                                       39
<PAGE>

are paid  directly  by the  Fund.  Certain  additional  out-of-pocket  expenses,
including costs of computer  hardware and software,  third party  record-keeping
and processing of proxy statements,  may only be reimbursed by the Fund with the
prior approval of the Fund's Board.




Pursuant to a sub-transfer  agency  agreement  between  DWS-SSC and DST Systems,
Inc. ("DST"),  333 West 11th Street,  Kansas City,  Missouri 64105,  DWS-SSC has
delegated certain transfer agent and dividend paying agent functions to DST. The
costs and expenses of such delegation are borne by DWS-SSC, not by the Fund.

The Fund, or the Advisor (including any affiliate of the Advisor),  or both, may
pay   unaffiliated   third  parties  for  providing   recordkeeping   and  other
administrative  services with respect to accounts of  participants in retirement
plans or other  beneficial  owners of fund shares whose  interests are generally
held in an omnibus account.

Custodian fees may be reduced by certain earnings credits in favor of the Fund.


Regulatory Matters and Legal Proceedings

On December 21, 2006,  Deutsche Asset Management  ("DeAM")  settled  proceedings
with the  Securities and Exchange  Commission  ("SEC") and the New York Attorney
General on behalf of Deutsche  Asset  Management,  Inc.  ("DAMI") and DIMA,  the
investment advisors to many of the DWS Scudder funds,  regarding  allegations of
improper  trading of fund  shares at DeAM and at the legacy  Scudder  and Kemper
organizations prior to their acquisition by DeAM in April 2002. These regulators
alleged that although the prospectuses for certain funds in the regulators' view
indicated  that the funds did not permit market  timing,  DAMI and DIMA breached
their  fiduciary  duty to those  funds in that their  efforts  to limit  trading
activity in the funds were not effective at certain times.  The regulators  also
alleged that DAMI and DIMA  breached  their  fiduciary  duty to certain funds by
entering into certain market timing  arrangements with investors.  These trading
arrangements  originated  in  businesses  that  existed  prior to the  currently
constituted  DeAM  organization,  which  came  together  as a result of  various
mergers of the legacy Scudder,  Kemper and Deutsche fund groups,  and all of the
arrangements were terminated prior to the start of the regulatory investigations
that  began in the summer of 2003.  No  current  DeAM  employee  approved  these
trading arrangements.  Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.

The terms of the SEC settlement, which identified improper trading in the legacy
Deutsche and Kemper mutual funds only,  provide for payment of  disgorgement  in
the  amount  of $17.2  million.  The terms of the  settlement  with the New York
Attorney  General  provide for payment of  disgorgement  in the amount of $102.3
million, which is inclusive of the amount payable under the SEC settlement, plus
a civil penalty in the amount of $20 million.  The total amount payable by DeAM,
approximately  $122.3  million,  will  be  distributed  to  shareholders  of the
affected  funds in  accordance  with a  distribution  plan to be  developed by a
distribution  consultant.  The funds'  investment  advisors do not believe these
amounts  will have a material  adverse  financial  impact on them or  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.  The  above-described  amounts are not  material to Deutsche
Bank, and have already been reserved.

Among the terms of the settled orders,  DeAM is subject to certain  undertakings
regarding  the conduct of its business in the future,  including  formation of a
Code of Ethics  Oversight  Committee  to oversee all matters  relating to issues
arising  under  the  advisors'  Code of  Ethics;  establishment  of an  Internal
Compliance Controls Committee having overall compliance oversight responsibility
of the advisors; engagement of an Independent Compliance Consultant to conduct a
comprehensive review of the advisors' supervisory  compliance and other policies
and  procedures  designed to prevent  and detect  breaches  of  fiduciary  duty,
breaches  of the Code of Ethics and federal  securities  law  violations  by the
advisors and their employees; and commencing in 2008, the advisors shall undergo
a compliance review by an independent third party.

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be


                                       40
<PAGE>

independent  of DeAM;  DeAM maintain  existing  management  fee  reductions  for
certain  funds for a period of five years and not increase  management  fees for
these  certain funds during this period;  the funds retain a senior  officer (or
independent consultants,  as applicable) responsible for assisting in the review
of fee  arrangements  and monitoring  compliance by the funds and the investment
advisors  with  securities  laws,  fiduciary  duties,  codes of ethics and other
compliance  policies,  the expense of which shall be borne by DeAM; and periodic
account  statements,  fund  prospectuses  and the mutual funds' web site contain
additional  disclosure  and/or tools that assist investors in understanding  the
fees and costs associated with an investment in the funds and the impact of fees
and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

On  September  28,  2006,  the SEC and the National  Association  of  Securities
Dealers  ("NASD")  announced  final  agreements  in  which  Deutsche  Investment
Management Americas Inc. ("DIMA"),  Deutsche Asset Management, Inc. ("DAMI") and
Scudder  Distributors,  Inc. ("DWS-SDI") (now known as DWS Scudder Distributors,
Inc.)  settled  administrative  proceedings  regarding  disclosure  of brokerage
allocation  practices in connection  with sales of the Scudder Funds' (now known
as the DWS Scudder Funds) shares during  2001-2003.  The agreements with the SEC
and NASD are reflected in orders which state, among other things,  that DIMA and
DAMI failed to disclose potential conflicts of interest to the funds' Boards and
to  shareholders   relating  to  DWS-SDI's  use  of  certain  funds'   brokerage
commissions to reduce revenue sharing costs to broker-dealer  firms with whom it
had  arrangements to market and distribute  Scudder Fund shares.  These directed
brokerage practices were discontinued in October 2003.

Under the terms of the  settlements,  in which DIMA,  DAMI and  DWS-SDI  neither
admitted  nor denied any of the  regulators'  findings,  DIMA,  DAMI and DWS-SDI
agreed to pay  disgorgement,  prejudgment  interest  and civil  penalties in the
total amount of $19.3 million. The portion of the settlements distributed to the
funds was approximately $17.8 million and was paid to the funds as prescribed by
the settlement  orders based upon the amount of brokerage  commissions from each
fund used to satisfy revenue sharing  agreements  with  broker-dealers  who sold
fund shares.

As part of the  settlements,  DIMA,  DAMI and DWS-SDI  also agreed to  implement
certain measures and undertakings relating to revenue sharing payments including
making  additional  disclosures  in the funds'  Prospectuses  or  Statements  of
Additional  Information,  adopting or modifying relevant policies and procedures
and providing regular reporting to the fund Boards.

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.



                                       41
<PAGE>


                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio  securities,  including  the  allocation  of  brokerage.  With
respect to those  funds for which a  sub-investment  advisor  manages the fund's
investments,  references in this section to the "Advisor" should be read to mean
the Sub-Advisor, except as noted below.

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the Funds is to seek best  execution,  taking into  account such
factors,   among  others,   as  price;   commission  (where   applicable);   the
broker-dealer's   ability  to  ensure  that  securities  will  be  delivered  on
settlement date; the willingness of the  broker-dealer to commit its capital and
purchase  a  thinly  traded   security  for  its  own  inventory;   whether  the
broker-dealer   specializes  in  block  orders  or  large  program  trades;  the
broker-dealer's  knowledge of the market and the security;  the  broker-dealer's
ability to  maintain  confidentiality;  the  broker-dealer's  ability to provide
access to new  issues;  the  broker-dealer's  ability  to provide  support  when
placing a difficult trade;  the financial  condition of the  broker-dealer;  and
whether the broker-dealer has the infrastructure and operational capabilities to
execute  and  settle  the trade.  The  Advisor  seeks to  evaluate  the  overall
reasonableness of brokerage  commissions with commissions  charged on comparable
transactions  and compares the brokerage  commissions (if any) paid by the Funds
to reported commissions paid by others. The Advisor routinely reviews commission
rates,  execution  and  settlement  services  performed  and makes  internal and
external comparisons.

Commission  rates  on  transactions  in  equity  securities  on U.S.  securities
exchanges are subject to negotiation. Commission rates on transactions in equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are
generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.

                                       42
<PAGE>

It is  likely  that the  broker-dealers  selected  based  on the  considerations
described in this section will include  firms that also sell shares of the Funds
to their  customers.  However,  the Advisor does not consider sales of shares of
the Funds as a factor in the selection of  broker-dealers  to execute  portfolio
transactions  for the Funds  and,  accordingly,  has  implemented  policies  and
procedures  reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the  selection of  broker-dealers  to execute
portfolio transactions for the Funds.

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own research effort since
the  information  must still be analyzed,  weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage  services of value are received
by the Advisor,  the Advisor may avoid expenses that it might  otherwise  incur.
Research and brokerage  services  received from a broker-dealer may be useful to
the Advisor and its affiliates in providing  investment  management  services to
all or some of its  clients,  which  includes  a Fund.  Services  received  from
broker-dealers  that executed  securities  transactions for a Portfolio will not
necessarily be used by the Advisor specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include,  but are
not limited to,  information on the economy,  industries,  groups of securities,
individual   companies,   statistical   information,   accounting  and  tax  law
interpretations,  political developments, legal developments affecting portfolio
securities,  technical  market action,  pricing and appraisal  services,  credit
analysis,  risk measurement  analysis,  performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically  received  in the form of written  or  electronic  reports,  access to
specialized  financial  publications,  telephone  contacts and personal meetings
with  security  analysts,  but may also be  provided  in the form of  access  to
various  computer  software and meetings  arranged  with  corporate and industry
representatives.

The Advisor may also select  broker-dealers  and obtain from them  research  and
brokerage  services that are used in connection  with executing  trades provided
that such services are consistent  with  interpretations  under Section 28(e) of
the 1934 Act.  Typically,  these  services  take the form of  computer  software
and/or  electronic  communication  services  used by the  Advisor to  facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder.  Currently,
it  is  the  Advisor's  policy  that  Sub-Advisors  may  not  execute  portfolio
transactions on behalf of the Funds to obtain third party research and brokerage
services.  The  Advisor  may, in the future,  change  this  policy.  Regardless,
certain  Sub-Advisors may, as matter of internal policy, limit or preclude third
party research and brokerage services.

The Advisor may use brokerage  commissions to obtain certain brokerage  products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment  decision-making process). In those circumstances,  the
Advisor  will make a good faith  judgment to evaluate  the various  benefits and
uses to which it  intends to put the mixed use  product or service  and will pay
for that portion of the mixed use product or service that it reasonably believes
does not constitute research and brokerage services with its own resources.

DIMA will  monitor  regulatory  developments  and market  practice in the use of
client  commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment  decisions for each Fund and for other investment accounts managed by
the  Advisor  are  made  independently  of each  other  in  light  of  differing
conditions. However, the same investment decision may be made


                                       43
<PAGE>

for two or more of such accounts. In such cases,  simultaneous  transactions are
inevitable.  To the extent  permitted  by law,  the  Advisor may  aggregate  the
securities to be sold or purchased for a Fund with those to be sold or purchased
for  other  accounts  in  executing  transactions.  Purchases  or sales are then
averaged  as to price  and  commission  and  allocated  as to amount in a manner
deemed equitable to each account. While in some cases this practice could have a
detrimental  effect  on the  price  paid or  received  by, or on the size of the
position  obtained or disposed of for,  the Fund,  in other cases it is believed
that the  ability to engage in volume  transactions  will be  beneficial  to the
Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts,  some of which use short sales of securities as a part of
its  investment  strategy.  The  simultaneous   management  of  long  and  short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice  versa),  the  risk  arising  from  sequential  orders  in long  and  short
positions,  and the risks associated with receiving  opposing orders at the same
time.

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these  potential  conflicts  of interest.  Incorporated  in the  procedures  are
specific  guidelines  developed to ensure fair and  equitable  treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory  reviews,  as well as compliance  oversight to ensure
that  potential  conflicts  of interest  relating  to this type of activity  are
properly addressed.

Deutsche Bank AG or one of its affiliates (or in the case of a Sub-Advisor,  the
Sub-Advisor  or one of its  affiliates)  may act as a broker  for the  Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor,  and in accordance with  procedures  approved by
the Funds'  Boards,  the  affiliated  broker  will be able to obtain a price and
execution at least as favorable as those obtained from other  qualified  brokers
and if, in the  transaction,  the  affiliated  broker  charges  the Funds a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.



                                       44
<PAGE>


                                       45
<PAGE>


The following shows total brokerage  commissions  paid for the past three fiscal
years, as applicable and for the most recent fiscal year, the percentage thereof
that was allocated to firms based upon research information provided.


[TO BE UPDATED]For the fiscal year ended October 31, 2007,  October 31, 2006 and
October 31, 2005, the Fund paid $__________,  $1,534,763 and $2,214,000 in total
brokerage commissions.

The Fund is required to  identify  any  securities  of its  "regular  brokers or
dealers"  (as such term is  defined in Rule 10b-1 of the 1940 Act) that the Fund
has acquired during the most recent fiscal year. As of October 31, 2007 the Fund
held the following securities of its regular brokers or dealers:

<TABLE>
<CAPTION>

Name of Regular Broker or Dealer or Parent (Issuer)              Value of Securities Owned as of October 31, 2007
---------------------------------------------------              ------------------------------------------------
<S>                                                              <C>
</TABLE>





                                       46
<PAGE>

Portfolio Turnover

Portfolio  turnover  rate is  defined  by the SEC as the ratio of the  lesser of
sales or purchases to the monthly average value of such securities  owned during
the year,  excluding all securities  whose  remaining  maturities at the time of
acquisition were one year or less.

Portfolio turnover rates for the two most recent fiscal years are as follows:


                              Fiscal Year Ended               Fiscal Year Ended
                               October 31, 2007                October 31, 2006
                               ----------------                ----------------

DWS Balanced Fund                     %                              98%


Higher levels of activity by the Fund result in higher transaction costs and may
also  result  in  taxes on  realized  capital  gains  to be borne by the  Fund's
shareholders.  Purchases and sales are made whenever necessary, in the Advisor's
discretion, to meet the Fund's objective.

                        PURCHASE AND REDEMPTION OF SHARES

General Information

Policies and procedures affecting  transactions in Fund shares can be changed at
any  time  without  notice,  subject  to  applicable  law.  Transactions  may be
contingent  upon proper  completion of application  forms and other documents by
shareholders  and their  receipt by the  Fund's  agents.  Transaction  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the Fund and its  agents  may  occur.  Shareholders  (or  their
financial  service firms) are responsible for all losses and fees resulting from
bad checks,  cancelled orders or the failure to consummate transactions effected
pursuant to instructions reasonably believed to be genuine.

A distribution will be reinvested in shares of the same class of the Fund if the
distribution check is returned as undeliverable.

Orders  will be  confirmed  at a price  based on the net asset value of the fund
next determined after receipt in good order by DWS-SDI of the order  accompanied
by payment.  Orders received by dealers or other financial  services firms prior
to the  determination  of net asset value and  received in good order by DWS-SDI
prior to the determination of net asset value will be confirmed at a price based
on the net asset value next determined after receipt by DWS-SDI ("trade date").

Additional  Minimum Balance Policies.  For fiduciary  accounts such as IRAs, and
custodial  accounts such as Uniform Gifts to Minor Act and Uniform  Transfers to
Minor Act accounts,  the minimum  balances are $1,000 for Class S. A shareholder
may open an account with at least $1,000 ($500 for fiduciary/custodial accounts)
for Class S if an automatic  investment  plan (AIP) of $50/month is established.
DWS group  retirement  plans and certain  other  accounts  have similar or lower
minimum share balance requirements.

Reductions  in value that result  solely from market  activity  will not trigger
involuntary  redemption.  Shareholders with a combined household account balance
in any of the DWS Funds of $100,000  or more,  as well as group  retirement  and
certain other accounts will not be subject to involuntary redemption.

Fiduciary  (e.g., IRA or Roth IRA) and custodial  accounts (e.g.,  UGMA or UTMA)
with  balances  below $100 are subject to  involuntary  redemption  following 60
days' written notice to applicable shareholders.

Certificates. Share certificates will not be issued.

Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying arrangements for their clients to purchase and redeem the Fund's shares,
including higher minimum investments,  and may assess transaction or


                                       47
<PAGE>

other  fees.  Firms may  arrange  with their  clients  for other  investment  or
administrative  services.  Such  firms may  independently  establish  and charge
additional  amounts to their clients for such services.  Firms also may hold the
Fund's  shares in  nominee  or  street  name as agent for and on behalf of their
customers.  In such instances,  the Fund's  transfer agent,  DWS Scudder Service
Corporation (the "Transfer Agent"),  will have no information with respect to or
control over the accounts of specific shareholders. Such shareholders may obtain
access to their  accounts and  information  about their accounts only from their
firm. Certain of these firms may receive  compensation from the fund through the
Shareholder  Service Agent for  record-keeping  and other  expenses  relating to
these nominee  accounts.  In addition,  certain  privileges  with respect to the
purchase and  redemption of shares or the  reinvestment  of dividends may not be
available  through such firms.  Some firms may participate in a program allowing
them  access  to  their  clients'  accounts  for  servicing  including,  without
limitation,  transfers of  registration  and  dividend  payee  changes;  and may
perform functions such as generation of confirmation statements and disbursement
of cash  dividends.  Such firms,  including  affiliates of DWS-SDI,  may receive
compensation  from the fund  through  the  Shareholder  Service  Agent for these
services.

The Fund has authorized one or more financial  service  institutions,  including
certain   members   of  the  NASD  other   than  the   Distributor   ("financial
institutions"),  to accept purchase and redemption orders for the Fund's shares.
Such financial  institutions  may also designate  other parties,  including plan
administrator  intermediaries,  to accept purchase and redemption  orders on the
Fund's behalf.  Orders for purchases or redemptions  will be deemed to have been
received by the Fund when such financial  institutions or, if applicable,  their
authorized  designees  accept the orders.  Subject to the terms of the  contract
between the Fund and the financial institution, ordinarily orders will be priced
at the Fund's net asset value next computed  after  acceptance by such financial
institution or its authorized  designees and accepted by the Fund.  Further,  if
purchases or  redemptions  of the Fund's  shares are arranged and  settlement is
made  at  an  investor's   election  through  any  other  authorized   financial
institution, that financial institution may, at its discretion, charge a fee for
that  service.  The  Board of  Trustees  and the  Distributor,  also the  Fund's
principal  underwriter,  each has the right to limit the amount of purchases by,
and to refuse to sell to, any  person.  The  Trustees  and the  Distributor  may
suspend  or  terminate  the  offering  of shares of the Fund at any time for any
reason.


DWS-SDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents  ("DWS Scudder  Wholesalers").  Generally,  DWS Scudder
Wholesalers  market shares of the DWS funds to your  financial  advisor,  who in
turn may  recommend  that you  purchase  shares  of a DWS  fund.  The Plan is an
incentive program that combines a monthly  incentive  component with a quarterly
strategic bonus component.  Under the Plan, DWS Scudder Wholesalers will receive
a monetary  monthly  incentive based on the amount of sales generated from their
marketing of the funds,  and that incentive will differ depending on the product
category  of  the  fund.   Each  fund  is  assigned  to  one  of  four   product
categories--"Core,"    "Strategic,"   "Satellite"   or   "Non-CSS"-taking   into
consideration, among other things, the following criteria, where applicable:

o        The Fund's 3-year performance;
o        The Fund's Morningstar rating;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares;
o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and
o        The Fund's consistency with DWS Scudder's branding.

This  information  and other factors are  presented to a committee  comprised of
representatives  from  various  groups  within  DWS  Scudder,  who  review  on a
quarterly basis the funds assigned to each product category described above, and
make any  changes to those  assignments  at that time.  No one  factor,  whether
positive or negative,  determines a fund's  placement in a given  category;  all
these factors together are considered, and the designation of funds in the Core,
Strategic and Satellite categories represents management's judgment based on the
above criteria.  In addition,  management may consider a fund's profile over the
course  of  several  review  periods  before  making  a change  to its  category
assignment.  These  category  assignments  will be posted  quarterly  to the DWS
funds' Web site at www.dws-scudder.com, approximately one month after the end of
each quarter.  DWS Scudder Wholesalers will receive the highest compensation for
Core and Strategic  funds,  less for Satellite  funds and the lowest for Non-CSS
funds.   The  level  of   compensation   among  these   categories   may  differ
significantly.

                                       48
<PAGE>

In the normal course of business,  DWS Scudder will from time to time  introduce
new funds into the DWS family of funds. As a general rule, all new funds will be
placed in the  Strategic  compensation  category  for a  minimum  period of four
consecutive quarters, and DWS Scudder Wholesalers will be paid at a rate that is
equivalent to that of the Core Fund  category.  After that four quarter  period,
each new fund in the  Strategic  category  will be reviewed by the committee and
either  assigned to one of the four  categories or continued as a Strategic fund
at that time.

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change  the price that you pay for shares of a fund.  The DWS
Scudder  Compliance  Department  monitors DWS Scudder Wholesaler sales and other
activity  in an  effort  to  detect  unusual  activity  in  the  context  of the
compensation  structure under the Plan. However,  investors may wish to take the
Plan  and the  product  category  of the  fund  into  account  when  considering
purchasing a fund or evaluating any recommendations relating to fund shares.



                                       49
<PAGE>

Telephone  and  Electronic  Transaction  Procedures.  Shareholders  have various
telephone, Internet, wire and other electronic privileges available. The fund or
its  agents may be liable  for any  losses,  expenses  or costs  arising  out of
fraudulent or unauthorized  instructions pursuant to these privileges unless the
fund or its  agents  reasonably  believe,  based  upon  reasonable  verification
procedures, that the instructions were genuine.  Verification procedures include
recording instructions,  requiring certain identifying information before acting
upon instructions and sending written  confirmations.  During periods when it is
difficult to contact the  Shareholder  Service Agent, it may be difficult to use
telephone, wire and other privileges.

QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  Shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans such as IRAs.

Share  Pricing.  Purchases  will be filled at the net asset value per share next
computed after receipt of the application in good order.  The net asset value of
shares of each Fund is  calculated  at 4:00  p.m.  Eastern  time or the close of
business on each day the New York Stock  Exchange (the  "Exchange")  is open for
trading. Orders received after the close of regular trading on the Exchange will
be executed at the next  business  day's net asset value.  If the order has been
placed  by a  member  of  the  NASD,  other  than  the  Distributor,  it is  the
responsibility  of the member  broker,  rather  than the Fund,  to  forward  the
purchase order to Transfer Agent in Kansas City by the close of regular  trading
on the Exchange.

Dividend  Payment  Option.   Investors  may  have  dividends  and  distributions
automatically   deposited  to  their  predesignated  bank  account  through  DWS
Scudder's Dividend Payment Option request form. Shareholders whose predesignated
checking  account of record is with a member bank of  Automated  Clearing  House
Network  (ACH) can have  income and  capital  gain  distributions  automatically
deposited to their  personal  bank account  usually  within three  business days
after the Fund pays its distribution. A Dividend Payment Option request form can
be obtained by visiting our Web site at:  www.dws-scudder.com  or calling  (800)
728-3337. Confirmation Statements will be mailed to shareholders as notification
that distributions have been deposited.

Tax-Sheltered   Retirement   Plans.  The  Shareholder   Service  Agent  provides
retirement  plan  services  and  documents  and DWS-SDI can  establish  investor
accounts in any of the following types of retirement plans:

o        Traditional,  Roth and Education IRAs. This includes Savings  Incentive
         Match Plan for  Employees  of Small  Employers  ("SIMPLE"),  Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7)  Custodial  Accounts.  This  type  of plan  is  available  to
         employees of most non-profit organizations.

o        Prototype  money  purchase  pension  and  profit-sharing  plans  may be
         adopted by employers.

Brochures  describing these plans as well as model defined benefit plans, target
benefit plans,  457 plans,  401(k) plans,  simple 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
Additional fees and transaction policies and procedures may apply to such plans.
Investors  should  consult with their own tax  advisors  before  establishing  a
retirement plan.

                                       50
<PAGE>

Purchases

The fund  reserves the right to withdraw all or any part of the offering made by
its prospectus and to reject purchase orders for any reason.  Also, from time to
time, the Fund may  temporarily  suspend the offering of any class of its shares
to new investors. During the period of such suspension,  persons who are already
shareholders  of such class of the Fund may be permitted to continue to purchase
additional shares of such class and to have dividends reinvested.

To help the  government  fight the  funding of  terrorism  and money  laundering
activities,  federal law requires all financial  institutions to obtain,  verify
and record  information  that identifies  each person who opens an account.  For
more  information,  please  see  "Policies  You Should  Know  About" in the fund
prospectus.

The Fund may waive the minimum for purchases by trustees, directors, officers or
employees of the Fund or the Advisor and its affiliates.

Class S shares of the Fund will generally not be available to new investors.


Eligible Class S Investors

A.        The  following  investors  may  purchase  Class S shares  of DWS Funds
          either (i) directly from DWS Scudder  Distributors,  Inc. ("DWS-SDI"),
          the Fund's  principal  underwriter;  or (ii)  through an  intermediary
          relationship  with a financial  services firm established with respect
          to the DWS Funds as of December 31, 2004.

          1.      Existing  shareholders of Class S shares of any DWS Fund as of
                  December 31, 2004, and household  members residing at the same
                  address.

          2.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection  with the  consolidation  of Class
                  AARP  and  Class S on July  17,  2006  and  household  members
                  residing at the same address.

          3.      Shareholders who have owned Class S shares  continuously since
                  December 31, 2004 and household  members  residing at the same
                  address  may open new  accounts  for Class S shares of any DWS
                  Fund.

          4.      Any  participant  who has owned Class S shares of any DWS Fund
                  through an  employee  sponsored  retirement,  employee  stock,
                  bonus,  pension  or profit  sharing  plan  continuously  since
                  December 31, 2004 may open a new individual  account for Class
                  S shares of any DWS Fund.

          5.      Any  participant  who  owns  Class S  shares  of any DWS  Fund
                  through a retirement, employee stock, bonus, pension or profit
                  sharing plan may complete a direct  rollover to an IRA account
                  that will hold Class S shares. This applies to individuals who
                  begin their retirement plan investments with a DWS Fund at any
                  time, including after December 31, 2004.

          6.      Officers, Fund Trustees and Directors, and full-time employees
                  and their family members, of the Advisor and its affiliates.

          7.      Class S shares are  available to any  accounts  managed by the
                  Advisor,  any  advisory  products  offered  by the  Advisor or
                  DWS-SDI  and to DWS  Allocation  Series or other fund of funds
                  managed by the Advisor or its affiliates.

          8.      Shareholders  of Class S of DWS Emerging  Markets  Equity Fund
                  who became  shareholders  of the fund in  connection  with the
                  fund's acquisition of Scudder New Asia Fund, Inc. on April 17,
                  2006.

                                       51
<PAGE>

          9.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders in connection with the  consolidation  of Class M
                  and Class S on August 18, 2006 and household  members residing
                  at the same address.

          10.     Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection with the renaming or conversion of
                  Investment Class to Class S on October 23, 2006.

B. The following additional investors may purchase Class S shares of DWS Funds.

          1.      Broker-dealers,   banks  and  registered  investment  advisors
                  ("RIAs")  may  purchase  Class S shares in  connection  with a
                  comprehensive  or  "wrap"  fee  program  or  other  fee  based
                  program.

          2.      Any  group  retirement,  employee  stock,  bonus,  pension  or
                  profit-sharing plans.

          3.      Persons  who  purchase  shares as part of an  investment  only
                  placement in a 529 College Savings Plan.

          4.      Persons who purchase  shares through a Health Savings  Account
                  or a Voluntary Employees' Benefit Association ("VEBA") Trust.

DWS-SDI may, at its discretion,  require appropriate documentation that shows an
investor is eligible to purchase Class S shares.



                                       52
<PAGE>


Clients  having a regular  investment  counsel  account  with the Advisor or its
affiliates and members of their  immediate  families,  officers and employees of
the Advisor or of any  affiliated  organization  and members of their  immediate
families,  members of the  National  Association  of  Securities  Dealers,  Inc.
("NASD") and banks may, if they prefer,  subscribe initially for at least $2,500
for Class S through DeAM Investor Services, Inc. by letter or telephone.


Revenue Sharing

In light of recent  regulatory  developments,  the Advisor,  the Distributor and
their affiliates have undertaken to furnish certain additional information below
regarding  the  level  of  payments  made  by them to  selected  affiliated  and
unaffiliated  brokers,  dealers,  participating  insurance  companies  or  other
financial  intermediaries  ("financial  advisors") in  connection  with the sale
and/or  distribution  of  Fund  shares  or the  retention  and/or  servicing  of
investors and Fund shares ("revenue sharing").

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable rules of the NASD or other concessions  described in the fee table or
elsewhere in the  Prospectuses or the SAI as payable to all financial  advisors.
For example, the Advisor, the Distributor and/or their affiliates may compensate
financial  advisors  for  providing  the Fund with "shelf  space" or access to a
third  party  platform  or fund  offering  list,  or  other  marketing  programs
including, without limitation, inclusion of the Fund on preferred or recommended
sales  lists,  mutual  fund  "supermarket"  platforms  and  other  formal  sales
programs;  granting the  Distributor  access to the  financial  advisor's  sales
force;  granting the Distributor access to the financial  advisor's  conferences
and meetings;  assistance  in training and  educating  the  financial  advisor's
personnel; and, obtaining other forms of marketing support. The level of revenue
sharing payments made to financial advisors may be a fixed fee or based upon one
or more of the following factors:  gross sales,  current assets and/or number of
accounts of the Fund attributable to the financial advisor,  the particular fund
or fund type or other  measures  as agreed to by the  Advisor,  the  Distributor
and/or their affiliates and


                                       53
<PAGE>

the financial advisors or any combination  thereof. The amount of these payments
is determined at the  discretion of the Advisor,  the  Distributor  and/or their
affiliates  from time to time,  may be  substantial,  and may be  different  for
different  financial advisors based on, for example,  the nature of the services
provided by the financial advisor.

The Advisor,  the  Distributor  and/or their  affiliates  currently make revenue
sharing  payments  from  their own  assets in  connection  with the sale  and/or
distribution of DWS Fund shares, or the retention and/or servicing of investors,
to financial  advisors in amounts that  generally  range from .01% up to .50% of
assets of the Fund serviced and  maintained by the  financial  advisor,  .10% to
..25% of sales of the Fund attributable to the financial  advisor,  a flat fee of
$12,500 up to $500,000, or any combination thereof. These amounts are subject to
change  at  the  discretion  of  the  Advisor,   the  Distributor  and/or  their
affiliates.   Receipt  of,  or  the  prospect  of  receiving,   this  additional
compensation, may influence your financial advisor's recommendation of this Fund
or of any  particular  share class of the Fund. You should review your financial
advisor's  compensation  disclosure  and/or  talk to your  financial  advisor to
obtain  more  information  on how this  compensation  may have  influenced  your
financial advisor's recommendation of this Fund.

The Advisor,  the Distributor and/or their affiliates may also make such revenue
sharing  payments  to  financial  advisors  under the terms  discussed  above in
connection  with  the  distribution  of both  DWS  funds  and  non-DWS  funds by
financial  advisors to retirement plans that obtain record keeping services from
ADP, Inc. on the DWS Scudder branded  retirement plan platform (the  "Platform")
with the level of revenue  sharing  payments  being based upon sales of both the
DWS funds and the  non-DWS  funds by the  financial  advisor on the  Platform or
current  assets  of both  the DWS  funds  and the  non-DWS  funds  serviced  and
maintained by the financial advisor on the Platform.

As of the  date  hereof,  the  Fund  has been  advised  that  the  Advisor,  the
Distributor  and their  affiliates  expect that the following firms will receive
revenue sharing payments at different points during the coming year as described
above:

Channel: Broker-Dealers and Financial Advisors

A G Edwards & Sons Inc.
AIG Advisors Group
Ameriprise
Cadaret, Grant & Co. Inc.
Capital Analyst, Incorporated
Citigroup Global Markets, Inc. (dba Smith Barney)
Commonwealth  Equity Services,  LLP (dba Commonwealth  Financial  Network)
First Clearing/Wachovia Securities
HD Vest Investment Securities, Inc.
ING Group
LaSalle Financial Services, Inc. (dba ABN Amro)
Linsco/Private Ledger Corp.
Marsh Insurance and Investment Company
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Pacific Select Distributors Group
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wells Fargo Investments, LLC

Channel: Cash Product Platform

ADP Clearing & Outsourcing

                                       54
<PAGE>

Allegheny Investments LTD
Bank of New York (Hare & Co.)
Bear, Stearns Securities Corp.
Brown Brothers Harriman
Brown Investment Advisory & Trust Company
Cadaret Grant & Co.
Chicago Mercantile Exchange
Citibank NA
D.A. Davidson & Company
Deutsche Bank Securities Inc.
Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities
Investors Bank & Trust
JPMorgan Chase
Lincoln Investment Planning
Linsco Private Ledger  Financial  Services
Mellon  Financial  Markets LLC
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Romano Brothers and Company
SAMCO Capital Markets (Fund Services, Inc.)
Smith Moore & Company
State Street Bank & Trust Co.
Sungard Institutional Brokerage Inc.
US Bancorp
UBS Financial Services Inc.
William Blair & Company

Channel: Third Party Insurance Platforms

Acacia National Life Insurance
Allmerica Financial Life Insurance Company
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
American General Life Insurance Company
Annuity Investors Life Insurance Company
Columbus Life Insurance Company
Commonwealth Annuity and Life Insurance Company
Companion Life Insurance Company
Connecticut General Life Insurance Company
Farmers New World Life Insurance Company
Fidelity Security Life Insurance Company
First Allmerica Financial Life Insurance Company
Genworth Life Insurance Company of New York
Genworth Life and Annuity Insurance Company
Great West Life and Annuity  Insurance  Company
Hartford Life Insurance Company
ICMG Registered Variable Life
Integrity Life Insurance Company
John Hancock Life Insurance companies
Kemper Investors Life Insurance Company

                                       55
<PAGE>

Lincoln Benefit Life Insurance Company
Lincoln Life & Annuity Company of New York
Lincoln National Life Insurance Company
Massachusetts Mutual Life Insurance Group
MetLife Group
Minnesota Life Insurance Company
Mutual of America Life Insurance Company
National Life Insurance Company
National Integrity Life Insurance Company
Nationwide Group
New York Life Insurance and Annuity Corporation
Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America
Sun Life GroupSymetra Life Insurance Company
Transamerica Life Insurance Company
Union Central Life Insurance Company
United of Omaha Life Insurance Company
United Investors Life Insurance Company
Western Southern Life Assurance Company

Any additions,  modifications or deletions to the financial advisors  identified
above that have occurred since the date hereof are not reflected.

The Advisor,  the  Distributor  or their  affiliates  may enter into  additional
revenue sharing arrangements or change or discontinue existing arrangements with
financial advisors at any time without notice.

The  prospect  of  receiving,  or the  receipt  of  additional  compensation  or
promotional  incentives  described above by financial  advisors may provide such
financial advisors and/or their salespersons with an incentive to favor sales of
shares of the DWS Funds or a particular  DWS Fund over sales of shares of mutual
funds (or  non-mutual  fund  investments)  with  respect to which the  financial
advisor does not receive additional compensation or promotional  incentives,  or
receives  lower levels of additional  compensation  or  promotional  incentives.
Similarly,  financial advisors may receive different  compensation or incentives
that may influence  their  recommendation  of any particular  share class of the
Fund or of other funds. These payment arrangements, however, will not change the
price that an investor pays for Fund shares or the amount that the Fund receives
to invest on behalf of an investor and will not increase Fund expenses.  You may
wish to take  such  payment  arrangements  into  account  when  considering  and
evaluating  any  recommendations  relating to Fund shares and you should discuss
this matter with your  financial  advisor  and review your  financial  advisor's
disclosures.



                                       56
<PAGE>


                                       57
<PAGE>


                                       58
<PAGE>


                                       59
<PAGE>


                                       60
<PAGE>



Automatic  Investment Plan. A shareholder may purchase  additional shares of the
Fund through an automatic  investment program.  With the Direct Deposit Purchase
Plan ("Direct Deposit"),  investments are made automatically (minimum $1,000 and
maximum  $250,000  for  initial  investments  and a minimum  of $50 and  maximum
$250,0i00 for subsequent  investments) from the shareholder's account at a bank,
savings  and  loan  or  credit  union  into  the  shareholder's   fund  account.
Termination by a shareholder  will become effective within thirty days after the
Shareholder  Service  Agent has received the request.  The Fund may  immediately
terminate  a  shareholder's  Plan in the  event  that any item is  unpaid by the
shareholder's financial institution.

Minimum Subsequent Investment Policies.  For current shareholders there is a $50
minimum investment  requirement for subsequent investments in the fund. There is
no  minimum  subsequent  investment  requirement  for  investments  on behalf of
participants in certain  fee-based and wrap programs  offered through  financial
intermediaries approved by the Advisor.


Payroll  Investment  Plans. A shareholder  may purchase  shares through  Payroll
Direct Deposit or Government  Direct  Deposit.  Under these  programs,  all or a
portion of a shareholder's  net pay or government check is invested each payment
period.  A shareholder may terminate  participation  in these programs by giving
written  notice  to  the


                                       61
<PAGE>

shareholder's employer or government agency, as appropriate.  (A reasonable time
to act is  required.)  The Fund is not  responsible  for the  efficiency  of the
employer or government  agency making the payment or any financial  institutions
transmitting payments.


Expedited Purchase Procedures for Existing  Shareholders.  Shareholders of other
DWS Funds who have  submitted an account  application  and have  certified a tax
identification  number, clients having a regular investment counsel account with
the Advisor or its affiliates and members of their immediate families,  officers
and  employees  of the  Advisor  or of any  affiliated  organization  and  their
immediate  families,  members of the NASD, and banks may open an account by wire
by calling  (800)  728-3337  for  instructions.  The  investor  must send a duly
completed and signed  application  to the Fund promptly.  A subsequent  purchase
order for $10,000 or more that is not greater  than four times an account  value
may be placed by  telephone,  etc. by  established  shareholders  (except by DWS
Scudder  Individual  Retirement  Account  (IRA),  DWS Scudder  Horizon Plan, DWS
Scudder Profit Sharing and Money Purchase  Pension Plans, DWS Scudder 401(k) and
DWS Scudder 403(b) Plan holders), members of the NASD, and banks.


Redemptions

The Fund may suspend or postpone  redemptions  as permitted  pursuant to Section
22(e) of the 1940 Act.  Generally,  those circumstances are when 1) the New York
Stock Exchange is closed other than customary  weekend or holiday  closings;  2)
trading on the New York Stock  Exchange is  restricted;  3) an emergency  exists
which  makes  the  disposal  of  securities  owned  by a  portfolio  or the fair
determination   of  the  value  of  a  portfolio's  net  assets  not  reasonably
practicable;  or 4) the SEC, by order,  permits the  suspension  of the right of
redemption.  Redemption  payments  by wire may also be delayed in the event of a
non-routine  closure of the Federal Reserve wire payment  system.  A request for
repurchase (confirmed redemption) may be communicated by a shareholder through a
financial  services firm to DWS-SDI,  which firms must promptly submit orders to
be effective.

Redemption fee. The Fund imposes a redemption fee of 2% of the total  redemption
amount  (calculated at net asset value) on all fund shares redeemed or exchanged
within 15 days of buying them (either by purchase or exchange).  The  redemption
fee is paid  directly  to the  Fund,  and is  designed  to  encourage  long-term
investment and to offset  transaction and other costs associated with short-term
or excessive  trading.  For purposes of  determining  whether the redemption fee
applies,  shares held the longest time will be treated as being  redeemed  first
and shares held the shortest time will be treated as being  redeemed  last.  The
redemption fee is applicable to fund shares purchased either directly or through
a  financial  intermediary,  such  as  a  broker-dealer.   Transactions  through
financial  intermediaries typically are placed with the fund on an omnibus basis
and include  both  purchase and sale  transactions  placed on behalf of multiple
investors. These purchase and sale transactions are generally netted against one
another and placed on an aggregate  basis;  consequently  the  identities of the
individuals on whose behalf the  transactions are placed generally are not known
to the fund.  For this  reason,  the Fund has  undertaken  to  notify  financial
intermediaries  of their  obligation  to assess the  redemption  fee on customer
accounts  and to collect  and remit the  proceeds to the fund.  However,  due to
operational   requirements,   the  intermediaries'   methods  for  tracking  and
calculating the fee may be inadequate or differ in some respects from the Fund's
method.

Redemption  requests  must be  unconditional.  Redemption  requests (and a stock
power for certificated  shares) must be duly endorsed by the account holder.  As
specified  in  the  prospectus,  signatures  may  need  to  be  guaranteed  by a
commercial bank, trust company,  savings and loan  association,  federal savings
bank,  member  firm  of  a  national  securities  exchange  or  other  financial
institution  permitted by SEC rule.  Additional  documentation  may be required,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.

If the proceeds of the  redemption  (prior to the  imposition of any  contingent
deferred  sales charge) are $100,000 or less and the proceeds are payable to the
shareholder of record at the address of record,  normally a telephone request or
a written  request by any one account  holder  without a signature  guarantee is
sufficient for  redemptions by individual or joint account  holders,  and trust,
executor  and  guardian  account  holders,  provided  the  trustee,  executor or
guardian  is named in the  account  registration.  Other  institutional  account
holders may  exercise  this special  privilege of redeeming  shares by telephone
request or  written  request  without  signature  guarantee  subject to the same
conditions as individual account holders,  provided that this privilege has been
pre-authorized  by the


                                       62
<PAGE>

institutional  account by written  instruction to the Shareholder  Service Agent
with signatures guaranteed. This privilege may not be used to redeem shares held
in certificated form and may not be used if the shareholder's account has had an
address change within 15 days of the redemption request.

Wires.  Delivery of the proceeds of a wire redemption of $250,000 or more may be
delayed by the fund for up to seven days if the Fund or the Shareholder  Service
Agent deems it appropriate under then-current market conditions.  The ability to
send wires is limited by the business hours and holidays of the firms  involved.
The Fund is not responsible for the efficiency of the federal wire system or the
account  holder's  financial  services  firm or  bank.  The  account  holder  is
responsible  for any charges  imposed by the account  holder's  firm or bank. To
change the  designated  account  to receive  wire  redemption  proceeds,  send a
written request to the Fund Shareholder Service Agent with signatures guaranteed
as described above or contact the firm through which Fund shares were purchased.

Automatic  Withdrawal  Plan. An owner of $5,000 or more of a class of the Fund's
shares at the  offering  price may  provide  for the  payment  from the  owner's
account of any  requested  dollar amount to be paid to the owner or a designated
payee monthly,  quarterly,  semiannually or annually. The $5,000 minimum account
size is not applicable to IRAs. The minimum  periodic payment is $50. Shares are
redeemed so that the payee should receive payment  approximately on the first of
the month. Investors using this Plan must reinvest Fund distributions.

In-kind  Redemptions.  The Fund  reserves  the  right to honor any  request  for
redemption  or  repurchase  by  making  payment  in whole or in part in  readily
marketable securities. These securities will be chosen by the Fund and valued as
they are for  purposes  of  computing  the Fund's net asset  value.  A redeeming
shareholder  who receives such  securities will be subject to federal income tax
in the same manner as if a cash  distribution  had been received.  A shareholder
may incur transaction expenses in converting these securities to cash.

Exchanges

Shareholders  may  request  an  exchange  of  their  shares  for  shares  of the
corresponding class of other DWS Funds, subject to the provisions below.


Shares of money  market  funds that were  acquired  by purchase  (not  including
shares acquired by dividend  reinvestment)  are subject to the applicable  sales
charge on exchange.  Certain series of DWS Target Fund are available on exchange
only during the offering  period for such series as described in the  applicable
prospectus.  Tax Free Money Fund --  Investment  Class,  NY Tax-Free  Money Fund
--Investment Class, Treasury Money Fund --Investment Class, Money Market Fund --
Investment  Class,  Cash  Management  Fund  Institutional,  Cash  Reserves  Fund
Institutional,  Treasury Money Fund -- Institutional  Class,  Cash Reserve Fund,
Inc. Prime Series,  Tax-Exempt  California Money Market Fund, Cash Account Trust
and Investors  Cash Trust are available on exchange but only through a financial
services  firm having a services  agreement  with DWS-SDI.  All exchanges  among
money  funds  must  meet   applicable   investor   eligibility   and  investment
requirements.  Exchanges  may only be made for funds that are available for sale
in the shareholder's state of residence.  Currently, Tax-Exempt California Money
Market Fund is available for sale only in California.



Shareholders must obtain prospectuses of the funds they are exchanging into from
dealers, other firms or DWS-SDI.  Exchanges are taxable transactions for federal
income tax purposes.

                                       63
<PAGE>

Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a
DWS fund may  authorize  the  automatic  exchange  of a  specified  amount  ($50
minimum) of such  shares for shares of the same class of another  such DWS fund.
Exchanges  will  be  made  automatically  until  the  shareholder  or  the  Fund
terminates  the  privilege.  Exchanges  are subject to the terms and  conditions
described above.

Dividends

The Fund intends to follow the practice of distributing substantially all of its
investment  company  taxable  income,  which includes any excess of net realized
short-term  capital gains over net realized  long-term capital losses.  The Fund
may follow the  practice  of  distributing  the  entire  excess of net  realized
long-term capital gains over net realized  short-term  capital losses.  However,
the Fund may retain all or part of such gain for reinvestment,  after paying the
related federal taxes for which certain shareholders may then be able to claim a
credit against their federal tax liability.  If the Fund does not distribute the
amount of capital gain and/or  ordinary  income required to be distributed by an
excise tax provision of the Code, the Fund may be subject to that excise tax. In
certain  circumstances,  the Fund may  determine  that it is in the  interest of
shareholders to distribute less than the required amount.

The  Fund  intends  to  distribute  dividends  from  its net  investment  income
excluding  short-term  capital  gains  quarterly in March,  June,  September and
December each year.  The Fund intends to distribute  net realized  capital gains
after  utilization of capital loss  carryforwards,  if any,  annually to prevent
application of a federal excise tax. An additional  distribution may be made, if
necessary.

Any dividends or capital gains  distributions  declared in October,  November or
December  with a record  date in such a month  and  paid  during  the  following
January will be treated by  shareholders  for federal  income tax purposes as if
received on December 31 of the calendar year declared.

Dividends  paid by the Fund with  respect to each  class of its  shares  will be
calculated in the same manner, at the same time and on the same day.

Income and  capital  gain  dividends,  if any,  of the Fund will be  credited to
shareholder accounts in full and fractional shares of the same class of the Fund
at net asset value on the reinvestment  date,  except that, upon written request
to the Shareholder  Service Agent, a shareholder may select one of the following
options:

1.        To receive  income and  short-term  capital gain dividends in cash and
          long-term  capital  gain  dividends in shares of the same class at net
          asset value; or

2.        To receive income and capital gain dividends in cash.

Dividends  will be  reinvested  in shares of the same  class of the Fund  unless
shareholders  indicate in writing  that they wish to receive  them in cash or in
shares  of other  DWS  Funds  with  multiple  classes  of shares or DWS Funds as
provided in the prospectus.  To use this privilege of investing dividends of the
Fund in shares of another DWS Fund, shareholders must maintain a minimum account
value of $1,000 in the Fund  distributing the dividends.  The Fund will reinvest
dividend checks (and future  dividends) in shares of that same Fund and class if
checks are returned as undeliverable.  Dividends and other  distributions of the
Fund in the  aggregate  amount of $10 or less are  automatically  reinvested  in
shares of the same Fund and class  unless the  shareholder  requests  in writing
that a check be issued for that particular distribution.

If an investment is in the form of a retirement  plan, all dividends and capital
gains distributions must be reinvested into the shareholder's account.

If  a  shareholder   has  elected  to  reinvest  any   dividends   and/or  other
distributions,  such  distributions  will be  made in  shares  of the  Fund  and
confirmations will be mailed to the shareholder.  If a shareholder has chosen to
receive cash, a check will be sent.  Distributions of investment company taxable
income and net realized  capital  gains are  taxable,  whether made in shares or
cash.

                                       64
<PAGE>

Each  distribution  is  accompanied  by a  brief  explanation  of the  form  and
character of the  distribution.  The  characterization  of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund  issues to each  shareholder  a  statement  of the
federal income tax status of all distributions in the prior calendar year.

The Fund may at any time vary its foregoing dividend  practices and,  therefore,
reserves  the  right  from  time to time to  either  distribute  or  retain  for
reinvestment  such of its net  investment  income  and  its net  short-term  and
long-term  capital  gains as its  Board  determines  appropriate  under the then
current circumstances.  In particular,  and without limiting the foregoing,  the
Fund may make additional  distributions of net investment income or capital gain
net income in order to satisfy the minimum distribution  requirements  contained
in the Code.

                                      TAXES

The following is intended to be a general  summary of certain US federal  income
tax  consequences  of  investing  in the Fund.  It is not intended as a complete
discussion  of all such  consequences,  nor  does it  purport  to deal  with all
categories of investors. This discussion reflects the applicable tax laws of the
United States as of the date of this Statement of Additional Information,  which
tax laws may  change or be subject  to new  interpretation  by the courts or the
IRS,  possibly with  retroactive  effect.  Investors  are  therefore  advised to
consult with their tax advisors before making an investment in the Fund.

Federal Taxation.  The Fund has elected to be treated as a regulated  investment
company  under  Subchapter M of the Code,  and has  qualified  each year as such
since its inception.  The Fund intends to continue to so qualify in each taxable
year as required under the Code so that it will not be subject to federal income
tax on the income and gains that it  distributes  to  shareholders.  In order to
qualify  as  a  regulated   investment  company,  the  Fund  must  meet  certain
requirements  regarding  the source of its income,  the  diversification  of its
assets and the distribution of its income.  The Fund must derive at least 90% of
its gross  income from  dividends,  interest,  payments  with respect to certain
securities  loans,  gains  from  the  sale  of  stock,  securities  and  foreign
currencies  and other income  (including  but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of investing
in such stock,  securities,  or currencies and net income derived from qualified
publicly traded  partnerships.  The Fund must diversify its holdings so that, at
the end of each  quarter  of its  taxable  year,  (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items,  US government
securities,  securities  of other  regulated  investment  companies,  and  other
securities  limited in respect of any one issuer to a value not greater  than 5%
of the  value  of the  Fund's  total  assets  and to not  more  than  10% of the
outstanding  voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is  invested in the  securities  (other than those of the US
government or other regulated investment  companies) of any one issuer or of two
or more  issuers  which the Fund  controls  and which are  engaged  in the same,
similar, or related trades or businesses.  The Fund is required to distribute to
its  shareholders  at least  90% of its  taxable  (including  the  excess of net
short-term  capital gain over net long-term  capital  losses) and tax-exempt net
investment  income and  generally  is not  subject to federal  income tax to the
extent that it distributes  annually such net investment income and net realized
capital gains in the manner required under the Code.

If for any  taxable  year the Fund does not  qualify as a  regulated  investment
company,  all of its  taxable  income  will be subject to federal  income tax at
regular  corporate  rates  (without  any  deduction  for  distributions  to  its
shareholders),  and all distributions  from earnings and profits,  including any
distributions of net tax-exempt  income and net long-term capital gains, will be
taxable to shareholders as dividends.  Such dividends,  however, would generally
be eligible  (i) to be treated as  "qualified  dividend  income," in the case of
individual  and other  noncorporate  shareholders,  subject to reduced  rates of
federal income taxation for taxable years beginning  before January 1, 2011, and
(ii)  for  the  70%  dividends  received  deduction  in the  case  of  corporate
shareholders.  In addition,  the Fund could be required to recognize  unrealized
gains,  pay substantial  taxes and interest and make  substantial  distributions
before  requalifying as a regulated  investment company that is accorded special
federal income tax treatment.

The Fund is subject to a nondeductible 4% federal excise tax on amounts required
to be, but not,  distributed  under a prescribed  formula.  The formula requires
payment to shareholders during a calendar year of distributions  representing at
least 98% of the Fund's  taxable  ordinary  income for the calendar  year and at
least 98% of the excess of its capital gains over capital losses realized during
the one-year  period  ending  October 31 (in most cases) of such


                                       65
<PAGE>

year as well as  amounts  that were  neither  distributed  nor taxed to the Fund
during the prior  calendar  year.  Although  each Fund's  distribution  policies
should  enable it to avoid  excise tax  liability,  the Fund may retain  (and be
subject  to income or excise  tax on) a  portion  of its  capital  gain or other
income if it appears to be in the interest of such Fund.

Taxation  of  Distributions  from the Fund.  For  federal  income tax  purposes,
distributions  of investment  income are generally  taxable as ordinary  income.
Taxes on  distributions  of capital  gains are  determined by how long the Funds
owned  the  investments  that  generated  the  income,  rather  than  how long a
shareholder has owned his or her shares. Distributions of net capital gains from
the sale of investments  that the Fund owned for more than one year and that are
properly  designated  by the  Fund as  capital  gain  dividends  ("Capital  Gain
Dividends") will be taxable as long-term  capital gains.  Distributions of gains
from the sale of  investments  that the Fund  owned for one year or less will be
taxable as ordinary  income.  For taxable years  beginning on or before December
31, 2010,  distributions of investment  income designated by the Fund as derived
from  "qualified  dividend  income" will be taxed in the hands of individuals at
the rates applicable to long-term capital gain,  provided certain holding period
and  other  requirements  are met at both  the  shareholder  and Fund  level.  A
dividend will not be treated as qualified dividend income (at either the Fund or
shareholder  level) (1) if the dividend is received with respect to any share of
stock held for fewer than 61 days during the  120-day  period  beginning  on the
date which is 60 days  before the date on which such share  becomes  ex-dividend
with respect to such dividend (or, in the case of certain  preferred  stock,  91
days during the 180-day period  beginning 90 days before such date),  (2) to the
extent that the  recipient is under an obligation  (whether  pursuant to a short
sale or  otherwise)  to make  related  payments  with  respect to  positions  in
substantially  similar or related property,  (3) if the recipient elects to have
the dividend income treated as investment  income for purposes of the limitation
investment  interest  limitation,  or (4) if the  dividend  is  received  from a
foreign corporation that is (a) not eligible for the benefits of a comprehensive
income tax treaty with the United States (with the  exception of dividends  paid
on  stock of such a  foreign  corporation  readily  tradable  on an  established
securities  market in the United  States) or (b)  treated as a foreign  personal
holding  company,  foreign  investment  company,  or passive foreign  investment
company.

Distributions  are taxable to shareholders  even if they are paid from income or
gains  earned  by the Fund  before a  shareholder's  investment  (and  thus were
included in the price the shareholder  paid).  Distributions are taxable whether
shareholders  receive them in cash or reinvest them in additional shares through
the reinvestment  privilege. A shareholder whose distributions are reinvested in
shares  will be treated as having  received a dividend  equal to the fair market
value of the new shares issued to the  shareholder.  Any gain resulting from the
sale or exchange of Fund shares generally will be taxable as capital gain.

In general, distributions of investment income designated by the Fund as derived
from qualified dividend income will be treated as qualified dividend income by a
shareholder  taxed as an individual  provided the shareholder  meets the holding
period and other requirements described above with respect to the Fund's shares.
Only qualified  dividend  income received by the Fund after December 31, 2002 is
eligible  for  pass-through  treatment.  If  the  aggregate  qualified  dividend
received by the Fund during any taxable year is 95% or more of its gross income,
then 100% of the Fund's dividends (other than dividends  properly  designated as
Capital Gain  Dividends)  will be eligible to be treated as  qualified  dividend
income.  For this purpose,  the only gain included in the term "gross income" is
the excess of net short-term capital gain over net long-term capital loss.

Special   federal  income  tax  rules  apply  to   investments   though  defined
contribution plans and other  tax-qualified  plans.  Shareholders should consult
their tax  adviser  to  determine  the  suitability  of shares of the Fund as an
investment  through such plans and the precise effect of and investment on their
particular tax situation.

Dividends  from domestic  corporations  may comprise a substantial  part of each
Fund's gross income.  If any such  dividends  constitute a portion of the Fund's
gross income, a portion of the income distributions of such Fund may be eligible
for the 70% deduction for dividends received by corporations.  Shareholders will
be informed of the portion of dividends which so qualify. The dividends-received
deduction  is reduced to the extent the shares of the Fund with respect to which
the dividends are received are treated as debt-financed under federal income tax
law and is  eliminated  if either  those  shares  or the  shares of the Fund are
deemed to have been held by the Fund or the shareholder, as the case may be, for
less than 46 days during the 91-day  period  beginning 45 days before the shares
become ex-dividend.

                                       66
<PAGE>

Transactions  in Fund Shares.  Any loss realized  upon the  redemption of shares
held for six  months  or less at the time of  redemption  will be  treated  as a
long-term  capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period. Furthermore,  any loss from
the sale or  redemption  of shares  held six  months or less  generally  will be
disallowed to the extent that  tax-exempt  interest  dividends were paid on such
shares.

Foreign  Taxation.  Foreign  withholding  or other foreign taxes with respect to
income  (possibly  including,  in some cases,  capital gains) on certain foreign
securities may occur.  These taxes may be reduced or eliminated  under the terms
of an applicable US income tax treaty.  As it is not expected that more than 50%
of the value of the Fund's  total assets will  consist of  securities  issued by
foreign  corporations,  the  Fund  will  not be  eligible  to  pass  through  to
shareholders  their  proportionate  shares of any foreign  taxes paid,  with the
result that shareholders will not be required to include in income, and will not
be entitled to take any credits or deductions for such foreign taxes.

Passive Foreign Investment Companies.  Equity investments by the Fund in certain
"passive foreign investment  companies"  ("PFICs") could potentially subject the
Fund to a US federal income tax (including  interest  charges) on  distributions
received from the company or on proceeds received from the disposition of shares
in the company,  which tax cannot be eliminated by making  distributions to Fund
shareholders.  However,  the Fund may elect to avoid the imposition of that tax.
For example,  the Fund may elect to treat a PFIC as a "qualified  electing fund"
(a "QEF  election"),  in which case the Fund would be  required  to include  its
share of the  company's  income and net capital  gains  annually,  regardless of
whether it receives any distribution  from the company.  Such Fund also may make
an election to mark the gains (and to a limited  extent losses) in such holdings
"to the  market" as though it had sold and  repurchased  its  holdings  in those
PFICs on the last day of the  Fund's  taxable  year.  Such  gains and losses are
treated as ordinary  income and loss. The QEF and  mark-to-market  elections may
accelerate the  recognition of income (without the receipt of cash) and increase
the amount  required to be  distributed  by the Fund to avoid  taxation.  Making
either of these  elections  therefore  may require such Fund to liquidate  other
investments  (including  when  it is not  advantageous  to do so)  to  meet  its
distribution requirement,  which also may accelerate the recognition of gain and
affect the Fund's total return.  Dividends paid by PFICs will not be eligible to
be treated as "qualified dividend income."

Other  Federal  Income Tax  Considerations.  The Fund's use of options,  futures
contracts,  forward  contracts  (to the  extent  permitted)  and  certain  other
Strategic   Transactions  will  be  subject  to  special  tax  rules  (including
mark-to-market,  constructive  sale,  straddle,  wash sale, short sale and other
rules),  the effect of which may be to  accelerate  the  recognition  of income,
defer losses, cause adjustments in the holding periods of portfolio  securities,
convert capital gains into ordinary income and convert short-term capital losses
into long-term  capital losses.  These rules could therefore  affect the amount,
timing and character of distributions to investors.

The Fund's  investment  in zero coupon bonds and other debt  obligations  having
original issue discount may cause the Fund to recognize taxable income in excess
of any cash received from the investment.

Under the backup withholding provisions of the Code, redemption proceeds as well
as distributions (including exempt interest dividends) may be subject to federal
income tax  withholding  for certain  shareholders,  including those who fail to
furnish  the  Fund  with  their  correct  taxpayer  identification  numbers  and
certifications as to their tax status.

Shareholders   of  the  Fund  may  be  subject  to  state  and  local  taxes  on
distributions  received from the Fund and on  redemptions  of the Fund's shares.
Any  shareholder  who is not a US Person  (as such term is  defined in the Code)
should  consider the US and foreign tax  consequences  of ownership of shares of
the Fund,  including the possibility that such a shareholder may be subject to a
flat US  withholding  tax  rate of 30% (or a  potentially  lower  rate  under an
applicable  income  tax  treaty)  on amounts  received  by him or her.  Recently
enacted  legislation,  however,  modifies the tax treatment of certain dividends
paid by the Fund to non-US  persons.  Effective  for  taxable  years of the Fund
beginning  after  December  31,  2004 and before  January  1, 2008,  a Fund will
generally not be required to withhold tax on any amounts paid to a non-US person
with respect to dividends attributable to "qualified short-term gain" (i.e., the
excess of short-term capital gain over net long-term capital loss) designated as
such by the Fund and dividends attributable to certain US source interest income
that would not be subject to federal  withholding  tax if earned  directly  by a
non-US person, provided such amounts are properly designated by the Fund.

                                       67
<PAGE>

Capital gains  distributions  may be reduced if Fund capital loss  carryforwards
are available.  Any capital loss carryforwards to which the Fund is entitled are
disclosed in the Fund's annual and semi-annual reports to shareholders.

All  distributions  by the Fund result in a reduction  in the net asset value of
that Fund's  shares.  Should a  distribution  reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above,  even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular,  investors  should be careful to consider  the tax  implications  of
buying  shares just prior to a  distribution.  The price of shares  purchased at
that time includes the amount of the forthcoming distribution.  Those purchasing
just prior to a  distribution  will receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.

Treasury  Regulations  provide  that if a  shareholder  recognizes  a loss  with
respect to Fund  shares of $2 million  or more in a single  taxable  year (or $4
million or more in any  combination of taxable years) for  shareholders  who are
individuals,  S  corporations  or  trusts,  or $10  million  or more in a single
taxable year (or $20 million or more in any  combination of taxable years) for a
corporate  shareholder,  the  shareholder  must file with the  Internal  Revenue
Service a disclosure  statement on Form 8886.  Direct  shareholders of portfolio
securities are in many cases excepted from this reporting requirement, but under
current  guidance,  shareholders  of a  regulated  investment  company  are  not
excepted.  Future guidance may extend the current  exception from this reporting
requirement to shareholders of most or all regulated investment  companies.  The
fact that a loss is reportable under these regulations does not affect the legal
determination  of  whether  the  taxpayer's  treatment  of the  loss is  proper.
Shareholders should consult their tax advisors to determine the applicability of
these regulations in light of their particular circumstances.

Investors  are advised to consult  their own tax  advisors  with  respect to the
application to their own  circumstances of the  above-described  general federal
income taxation rules and with respect to other federal, state, local or foreign
tax consequences to them on an investment in shares of the Fund.

                                 NET ASSET VALUE

The net asset value of shares of the Fund is computed as of the close of regular
trading on the New York Stock Exchange (the "Exchange") on each day the Exchange
is open for trading (the "Value  Time").  The Exchange is scheduled to be closed
on the following  holidays:  New Year's Day, Dr.  Martin  Luther King,  Jr. Day,
Presidents'  Day,  Good  Friday,  Memorial  Day,  Independence  Day,  Labor Day,
Thanksgiving  and Christmas,  and on the preceding  Friday or subsequent  Monday
when one of these  holidays  falls on a Saturday  or Sunday,  respectively.  Net
asset  value  per share is  determined  separately  for each  class of shares by
dividing the value of the total assets of the Fund attributable to the shares of
that class, less all liabilities attributable to that class, by the total number
of shares of that class outstanding.  The per share net asset value may be lower
for  certain  classes  of the Fund  because  of higher  expenses  borne by these
classes.

An equity  security is valued at its most  recent  sale price on the  security's
primary  exchange  or  over-the-counter  ("OTC")  market as of the  Value  Time.
Lacking any sales,  the  security is valued at the  calculated  mean between the
most recent bid quotation and the most recent asked  quotation (the  "Calculated
Mean")  on such  exchange  or OTC  market  as of the  Value  Time.  If it is not
possible to determine the  Calculated  Mean,  the security is valued at the most
recent bid quotation on such exchange or OTC market as of the Value Time. In the
case of certain foreign exchanges or OTC markets,  the closing price reported by
the exchange or OTC market  (which may sometimes be referred to as the "official
close" or the "official closing price" or other similar term) will be considered
the most recent sale price.

Debt securities are valued as follows.  Money market instruments  purchased with
an  original or  remaining  maturity  of 60 days or less,  maturing at par,  are
valued at amortized  cost.  Other money market  instruments  are valued based on
information  obtained from an approved  pricing agent or, if such information is
not readily  available,  by using  matrix  pricing  techniques  (formula  driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved  pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available,  and otherwise at the mean
of the most recent bid and asked quotations or evaluated  prices, as applicable,
based  on   quotations   or  evaluated   prices   obtained   from  one  or  more
broker-dealers.  Privately  placed  debt  securities,  other than Rule 144A debt
securities,  initially are valued at cost and  thereafter  based on all


                                       68
<PAGE>

relevant factors,  including type of security,  size of holding and restrictions
on  disposition.  Municipal debt  securities are valued at prices supplied by an
approved  pricing  agent (which are intended to reflect the mean between the bid
and asked  prices),  if available,  and otherwise at the mean of the most recent
bid and asked quotations or evaluated price obtained from a broker-dealer. Other
debt securities are valued at prices  supplied by an approved  pricing agent, if
available, and otherwise at the most recent bid quotation or evaluated price, as
applicable,  obtained from one or more broker-dealers.  If it is not possible to
value a particular debt security pursuant to the above methods,  the security is
valued on the basis of factors including (but not limited to) maturity,  coupon,
creditworthiness, currency denomination, and the movement of the market in which
the security is normally traded.

An exchange-traded option contract on securities, currencies and other financial
instruments  is valued at its most recent sale price on the  relevant  exchange.
Lacking any sales,  the option contract is valued at the Calculated  Mean. If it
is not possible to determine the Calculated  Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased  option  contract or
the most recent asked  quotation in the case of a written  option  contract,  in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the  broker-dealer  with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price, if available,  on the security's primary exchange.  With the exception of
stock index futures  contracts which trade on the Chicago  Mercantile  Exchange,
closing settlement times are prior to the close of trading on the Exchange.  For
stock index futures  contracts which trade on the Chicago  Mercantile  Exchange,
closing  settlement prices are normally  available at approximately 4:20 Eastern
time.  If no  settlement  price  is  available,  the last  traded  price on such
exchange will be used.

If market quotations for portfolio assets are not readily available or the value
of a portfolio asset as determined in accordance with Board approved  procedures
does not represent the fair market value of the  portfolio  asset,  the value of
the portfolio asset is taken to be an amount which, in the opinion of the Fund's
Pricing  Committee  (or,  in  some  cases,  the  Board's  Valuation  Committee),
represents fair market value. The value of other portfolio holdings owned by the
Fund is  determined  in a manner  which is intended  to fairly  reflect the fair
market value of the asset on the valuation date,  based on valuation  procedures
adopted  by the  Fund's  Board and  overseen  primarily  by the  Fund's  Pricing
Committee.

                              TRUSTEES AND OFFICERS


The following table presents certain information regarding the Board Members and
Officers of the Fund as of March 1, 2008. Each individual's year of birth is set
forth in parentheses  after his or her name.  Unless  otherwise  noted, (i) each
individual has engaged in the principal  occupation(s) noted in the table for at
least the most recent five years, although not necessarily in the same capacity,
and (ii) unless  otherwise noted, the address of each individual is c/o Deutsche
Asset Management, 222 South Riverside Plaza, Chicago, Illinois 60606. Each Board
Member's term of office extends until the next shareholder's  meeting called for
the  purpose  of  electing   such  Board  Member  and  until  the  election  and
qualification of a successor,  or until such Board Member sooner dies,  retires,
resigns or is removed as provided in the governing documents of the Trust.

The following individuals hold the same position with the Fund and the Trust.
Independent Board Members

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position(s) Held with the                                                                       Number of Funds
Fund and Length of Time        Principal Occupation(s) During Past 5 Years and                  in DWS Fund
Served(1)                      Other Directorships Held                                         Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                            <C>                                                                     <C>
Paul K. Freeman (1950)         Consultant, World Bank/Inter-American Development Bank;                 59
Chairperson since 2007, and    formerly, Project Leader, International Institute for Applied
Board Member, 2002-present     Systems Analysis (1998-2001); Chief Executive Officer, The Eric
                               Group, Inc. (environmental insurance) (1986-1998)
--------------------------------------------------------------------------------------------------------------------

                                       69
<PAGE>
--------------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position(s) Held with the                                                                       Number of Funds
Fund and Length of Time        Principal Occupation(s) During Past 5 Years and                  in DWS Fund
Served(1)                      Other Directorships Held                                         Complex Overseen
--------------------------------------------------------------------------------------------------------------------
John W. Ballantine (1946)      Retired; formerly, Executive Vice President and Chief Risk              59
Board Member, 1999-present     Management Officer, First Chicago NBD Corporation/The First
                               National Bank of Chicago (1996-1998); Executive Vice President
                               and Head of International Banking (1995-1996). Directorships:
                               Healthways Inc. (provider of disease and care management
                               services); Portland General Electric (utility company);
                               Stockwell Capital Investments PLC (private equity). Former
                               Directorships: First Oak Brook Bancshares, Inc. and Oak Brook
                               Bank
--------------------------------------------------------------------------------------------------------------------
Donald L. Dunaway (1937)       Retired; formerly, Executive Vice President, A. O. Smith                59
Board Member, 1980-present     Corporation (diversified manufacturer) (1963-1994)
--------------------------------------------------------------------------------------------------------------------
James R. Edgar (1946)          Distinguished Fellow, University of Illinois, Institute of              59
Board Member, 1999-present     Government and Public Affairs (1999-present); formerly,
                               Governor, State of Illinois (1991-1999). Directorships:  John
                               B. Sanfilippo & Son, Inc. (processor/packager/marketer of nuts,
                               snacks and candy products); Horizon Group Properties, Inc.;
                               Youbet.com (online wagering platform); Alberto-Culver Company
                               (manufactures, distributes and markets health and beauty care
                               products)
--------------------------------------------------------------------------------------------------------------------
Robert B. Hoffman (1936)       Retired; formerly, Chairman, Harnischfeger Industries, Inc.             59
Board Member, 1981-present     (machinery for the mining and paper industries) (1999-2001);
                               prior thereto, Vice Chairman and Chief Financial Officer,
                               Monsanto Company (agricultural, pharmaceutical and
                               nutritional/food products) (1994-1999). Directorship:  RCP
                               Advisors, LLC (a private equity investment advisory firm)
--------------------------------------------------------------------------------------------------------------------
William McClayton (1944)       Chief Administrative Officer, Diamond Management & Technology           59
Board Member, 2004-present     Consultants, Inc. (global management consulting firm)
                               (2001-present); formerly, Senior Partner, Arthur Andersen LLP
                               (accounting) (1966-2001). Directorship: Board of Managers, YMCA
                               of Metropolitan Chicago. Formerly Trustee, Ravinia Festival.
--------------------------------------------------------------------------------------------------------------------
Shirley D. Peterson (1941)     Retired; formerly, President, Hood College (1995-2000); prior           59
Board Member, 1995-present     thereto, Partner, Steptoe & Johnson (law firm); Commissioner,
                               Internal Revenue Service; Assistant Attorney General (Tax), US
                               Department of Justice. Directorships:  Federal Mogul Corp.
                               (supplier of automotive components and subsystems); AK Steel
                               (steel production); Goodyear Tire & Rubber Co.
                               (April 2004-present); Champion Enterprises, Inc. (manufactured
                               home building); Wolverine World Wide, Inc. (designer,
                               manufacturer and marketer of footwear) (April 2005-present);
                               Trustee, Bryn Mawr College. Former Directorship:  Bethlehem
                               Steel Corp.
--------------------------------------------------------------------------------------------------------------------
Robert H. Wadsworth (1940)     President, Robert H. Wadsworth & Associates, Inc. (consulting          62
Board Member, 2004-present     firm) (1983 to present). Formerly, Trustee of New York Board
                               DWS Funds.
--------------------------------------------------------------------------------------------------------------------
Officers(2)

                                       70
<PAGE>

--------------------------------------------------------------------------------------------------------------------
Name, Date of Birth,
Position(s) Held with the
Trust and Length of Time       Principal Occupation(s) During Past 5 Years and
Served(1)                      Other Directorships Held
--------------------------------------------------------------------------------------------------------------------
Michael G. Clark(4) (1965)     Managing Director(3), Deutsche Asset Management (2006-present); President of
President, 2006-present        DWS family of funds; Director, ICI Mutual Insurance Company (since October
                               2007); formerly, Director of Fund Board Relations (2004-2006) and Director of
                               Product Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice
                               President Operations, Merrill Lynch Asset Management (1999-2000)
--------------------------------------------------------------------------------------------------------------------
Philip J. Collora (1945)       Director(3), Deutsche Asset Management
Vice President and Assistant
Secretary, 1986-present
--------------------------------------------------------------------------------------------------------------------
Paul H. Schubert(4) (1963)     Managing Director(3), Deutsche Asset Management (since July 2004); formerly,
Chief Financial Officer,       Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of
2004-present                   Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS
Treasurer, 2005-present        Global Asset Management (1994-1998)
--------------------------------------------------------------------------------------------------------------------
John Millette(5) (1962)        Director(3), Deutsche Asset Management
Secretary, 2001-present
--------------------------------------------------------------------------------------------------------------------
Patricia DeFilippis(4) (1963)  Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel,
Assistant Secretary,           New York Life Investment Management LLC (2003-2005); legal associate, Lord,
2005-present                   Abbett & Co. LLC (1998-2003)
--------------------------------------------------------------------------------------------------------------------
Elisa D. Metzger(4) (1962)     Director(3), Deutsche Asset Management (since September 2005); formerly,
Assistant Secretary,           Counsel, Morrison and Foerster LLP (1999-2005)
2005-present
--------------------------------------------------------------------------------------------------------------------
Caroline Pearson(5) (1962)     Managing Director(3), Deutsche Asset Management
Assistant Secretary,
1998-present
--------------------------------------------------------------------------------------------------------------------
Paul Antosca(5)                Director(3), Deutsche Asset Management (since 2006); formerly, Vice President,
(1957)                         The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
Assistant Treasurer,
2007-present
--------------------------------------------------------------------------------------------------------------------
Kathleen Sullivan              Director(3), Deutsche Asset Management
D'Eramo(5) (1957)
Assistant Treasurer,
2003-present
--------------------------------------------------------------------------------------------------------------------
Jason Vazquez(4) (1972)        Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
Anti-Money Laundering          Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and
Compliance Officer,            Operations Manager for AXA Financial (1999-2004)
2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(4) (1962)        Managing Director(3), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance Officer,     Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President,
 2006-present                  The Prudential Insurance Company of America (1988-2000); E.F. Hutton and
                               Company (1984-1988)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Length of time served  represents  the date that each Board  Member was
         first elected to the common Board which oversees a number of investment
         companies, including the Fund, managed by the Advisor. For the officers
         of the  Fund,  length  of time  served  represents  the date  that each
         officer was first  elected to serve as an officer of any fund  overseen
         by the aforementioned common Board.

(2)      As a result of their respective positions held with the Advisor,  these
         individuals are considered  "interested  persons" of the Advisor within
         the meaning of the 1940 Act. Interested persons receive no compensation
         from the Fund.

                                       71
<PAGE>

(3)      Executive title, not a board directorship.

(4)      Address:  345 Park Avenue, New York, New York 10154.

(5)      Address: Two International Place, Boston, Massachusetts 02110.

Officers' Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

Paul H. Schubert:                        Vice President
Caroline Pearson:                        Secretary
Philip J. Collora:                       Assistant Secretary

Board Members' Responsibilities. The officers of the Trust manage its day-to-day
operations under the direction of the Board. The primary  responsibility  of the
Board is to  represent  the  interests  of the  shareholders  of the Fund and to
provide  oversight of the  management of the Fund.  All of the Board Members are
not "interested persons" of the Advisor.

The Board has adopted  its own  Governance  Procedures  and  Guidelines  and has
established  a  number  of  committees,  as  described  below.  For  each of the
following committees,  the Board has adopted a written charter setting forth the
committees' responsibilities.

Board Committees. The Board oversees a number of investment companies managed by
the Advisor.  Information shown below represents  meetings held on behalf of all
such funds. The common Board has the following committees:

Audit  Committee:  The Audit Committee,  which consists  entirely of Independent
Board  Members,  makes  recommendations  regarding the selection of  independent
registered  public  accounting  firm for the Fund,  confers with the independent
registered public accounting firm regarding the Fund's financial statements, the
results of audits and related matters, and performs such other tasks as the full
Board deems  necessary  or  appropriate.  The Audit  Committee  receives  annual
representations from the independent registered public accounting firm as to its
independence.  The members of the Audit Committee are William McClayton (Chair),
Donald L.  Dunaway and Robert B.  Hoffman.  The Audit  Committee  held seven (7)
meetings during calendar year 2006.

Nominating and Governance  Committee:  The Nominating and Governance  Committee,
which  consists  entirely  of  Independent  Board  Members,  seeks  and  reviews
candidates  for  consideration  as  nominees  for  membership  on the  Board and
oversees the administration of the Fund's Governance  Procedures and Guidelines.
The members of the Nominating  and Governance  Committee are Shirley D. Peterson
(Chair),  James R. Edgar and William McClayton.  Shareholders  wishing to submit
the name of a candidate  for  consideration  as a Board member by the  committee
should submit their recommendation(s) and resume to the Secretary of the Trust.
 The Nominating and Governance  Committee held four (4) meetings during calendar
year 2006.

Contract  Review  Committee:  The  Contract  Review  Committee,  which  consists
entirely of  Independent  Board  Members,  oversees the annual  contract  review
process.  The  members of the  Contract  Review  Committee  are Paul K.  Freeman
(Chair), John W. Ballantine,  Donald L. Dunaway, William McClayton and Robert H.
Wadsworth.  The Contract Review  Committee held two (2) meetings during calendar
year 2006.

Valuation  Committee:  The  Valuation  Committee  reviews  valuation  procedures
adopted by the Board,  determines fair value of the Fund's  securities as needed
in accordance with the valuation procedures and performs such other tasks as the
full Board deems necessary.  The members of the Valuation  Committee are John W.
Ballantine  (Chair),  Robert H.  Wadsworth,  Donald L. Dunaway  (alternate)  and
William McClayton (alternate).  The Valuation Committee held [number of meetings
varies by fund] meeting[s] during calendar year 2006.

Equity Oversight  Committee:  The Equity Oversight Committee oversees investment
activities of the [DWS equity funds],  such as investment  performance and risk,
expenses and services provided under the investment  management


                                       72
<PAGE>

agreement.  The members of the Equity Oversight Committee are John W. Ballantine
(Chair),  James R. Edgar and Robert B. Hoffman.  The Equity Oversight  Committee
held five (5) meetings during calendar year 2006.

Operations  Committee:  The Operations  Committee oversees the operations of the
Fund,  such  as  reviewing   administrative  fees  and  expenses,   distribution
arrangements,  portfolio  transaction  policies,  custody  and  transfer  agency
arrangements and shareholder services.  Currently, the members of the Operations
Committee  are Robert H.  Wadsworth  (Chair),  John W.  Ballantine  and James R.
Edgar. The Operations Committee held six (6) meetings during calendar year 2006.

Fixed-Income Oversight Committee:  The Fixed-Income Oversight Committee oversees
investment  activities  of  the  DWS  fixed-income  funds,  such  as  investment
performance  and risk,  expenses  and  services  provided  under the  investment
management  agreement.  The members of the Fixed-Income  Oversight Committee are
Donald L. Dunaway  (Chair),  Shirley D.  Peterson and Robert H.  Wadsworth.  The
Fixed-Income  Oversight  Committee held five (5) meetings  during  calendar year
2006.

Remuneration.  Each  Independent  Board Member receives an annual base retainer,
paid  quarterly,  and, as  applicable,  an  additional  annual  fixed fee(s) for
serving as committee  member,  committee  chairperson  and/or as the Independent
Board  chairperson.  The Board  Members  serve as board members of various other
funds advised by the Advisor.  The Advisor  supervises  the Fund's  investments,
pays the  compensation  and expenses of its personnel who serve as Board Members
and  officers  on  behalf  of the Fund and  receives  a  management  fee for its
services.

The Board  established a deferred  compensation  plan for the Independent  Board
Members ("Deferred  Compensation Plan").  Under the Deferred  Compensation Plan,
the  Independent  Board Members may defer  receipt of all, or a portion,  of the
compensation  they earn for their  services  to the Fund,  in lieu of  receiving
current payments of such compensation.  Any deferred amount is treated as though
an  equivalent  dollar  amount has been  invested in shares of one or more funds
advised by the Advisor ("Shadow  Shares").  Governor Edgar currently has elected
to defer at least a portion of his fees. In addition,  previously,  Mr.  Dunaway
elected  to defer  fees that were  payable,  which  are now  included  under the
Deferred  Compensation Plan. The equivalent Shadow Shares are reflected below in
the table describing the Board Member's share ownership.

Members of the Board who are officers,  directors,  employees or stockholders of
the  Advisor or its  affiliates  receive no direct  compensation  from the Fund,
although they are  compensated as employees of the Advisor,  or its  affiliates,
and as a result  may be deemed  to  participate  in fees  paid by the Fund.  The
Independent Board Members are not entitled to benefits under any fund pension or
retirement plan. The following table shows  compensation  received by each Board
Member from the Fund and aggregate compensation from the DWS Fund complex during
the calendar year 2006.

<TABLE>
<CAPTION>

                                                            Pension or Retirement
                                                               Benefits Accrued         Total Compensation Paid to
Name of                          Compensation from                as Part of           Board Member from DWS Fund
Board Member                     DWS Balanced Fund              Fund Expenses                Complex(2)(3)(4)
------------                     -----------------              -------------                ----------------

<S>                                         <C>                       <C>                            <C>
John W. Ballantine                          $                         $0                          $222,670
Donald L. Dunaway                           $                         $0                          $210,170
James R. Edgar(1)                           $                         $0                          $180,170
Paul K. Freeman                             $                         $0                          $217,670
Robert B. Hoffman                           $                         $0                          $207,670
William McClayton                           $                         $0                          $193,560
Shirley D. Peterson(5)                      $                         $0                          $242,670
Robert H. Wadsworth                         $                         $0                          $228,250
</TABLE>

(1)       Includes deferred fees.  Pursuant to a Deferred  Compensation Plan, as
          discussed above,  deferred amounts are treated as though an equivalent
          dollar amount has been invested in Shadow Shares (as defined above) of
          funds managed by the Advisor in which  compensation may be deferred by
          Governor Edgar.  Total


                                       73
<PAGE>

          deferred  fees  (including  interest  thereon  and the return from the
          assumed  investment in the funds managed by the Advisor)  payable from
          the Trust to Governor Edgar are [$____].

(2)       For each Board Member,  except Mr. Wadsworth,  total  compensation for
          calendar year 2006 includes  compensation for service on the boards of
          21   trusts/corporations   comprised  of  69   funds/portfolios.   Mr.
          Wadsworth's total  compensation for calendar year 2006 was for service
          on   the   boards   of   24   trusts/corporations   comprised   of  72
          funds/portfolios.  As of December 31, 2006, each Board Member,  except
          Mr.  Wadsworth,   served  on  the  boards  of  22  trusts/corporations
          comprised  of  63  funds/portfolios.  As of  December  31,  2006,  Mr.
          Wadsworth  served  on  the  boards  of  25  DeAM   trusts/corporations
          comprised of 66 funds/portfolios.

(3)       Aggregate  compensation reflects amounts paid to the Board Members for
          numerous special meetings of ad hoc committees of the Chicago Board in
          connection with reviewing the funds' rebranding  initiatives to change
          to the DWS Family of Funds and with  respect  to legal and  regulatory
          matters.  Such amounts totaled $5,170 for each of Messrs.  Ballantine,
          Dunaway, Edgar, Freeman,  Hoffman,  McClayton and Ms. Peterson.  These
          meeting fees were borne by the Advisor.

(4)       For calendar year 2007, John W. Ballantine,  Donald L. Dunaway,  James
          R. Edgar,  Paul K.  Freeman,  Robert B.  Hoffman,  William  McClayton,
          Shirley D.  Peterson,  Robert H.  Wadsworth  are  expected  to receive
          aggregate  compensation  from the DWS Fund  complex in the  amounts of
          $215,000,  $202,500,  $190,000,  $240,000, $185,000, $205,000, 187,500
          and $205,000,  respectively.  The differences in compensation  amounts
          from  calendar year 2006 are due to the changes in Board and committee
          chairpersons and committee  assignments that became effective  January
          1, 2007.

(5)       Includes  $50,000 in annual  retainer fees received by Ms. Peterson as
          Chairperson of the Board,  for which she served  through  December 31,
          2006.

Mr. Freeman, prior to his service as Independent Board Member, served as a board
member of certain funds in the Deutsche Bank complex ("DB Funds"). In connection
with his  resignation  and the resignation of certain other board members of the
DB  Funds  on  July  30,  2002  (the  "Effective  Date"),  which  was  part of a
restructuring of the boards overseeing the DB Funds,  Deutsche Asset Management,
Inc.  ("DAMI")  agreed to  recommend,  and, if necessary  obtain,  directors and
officers  ("D&O")  liability  insurance  coverage  for the prior board  members,
including Mr. Freeman, that is at least as equivalent in scope and amount to the
D&O  coverage  provided  to the prior  board  members  for the  six-year  period
following  the Effective  Date. In the event that D&O insurance  coverage is not
available in the commercial marketplace on commercially  reasonable terms from a
conventional   third  party   insurer,   DeAM  reserved  the  right  to  provide
substantially  equivalent  protection  in the form of an  indemnity or financial
guarantee  from an  affiliate  of DeAM.  The D&O  policy in effect  prior to the
Effective Date provided aggregate coverage of $25,000,000, subject to a $250,000
per claim deductible.

Board  Member  Fund  Ownership.  Under the  Trust's  Governance  Procedures  and
Guidelines,  the Independent Board Members have established the expectation that
within three years of becoming a Board Member,  an Independent Board Member will
have  invested an amount in those funds he or she oversees  (which shall include
amounts  held under a deferred  fee  agreement  that are valued based on "shadow
shares" in such funds) in the aggregate in excess of $150,000.  Each  interested
Board Member is also encouraged to own an amount of shares (based upon their own
individual judgment) of those funds that he or she oversees that is suitable for
his or her own appropriate investment needs. The following tables set forth each
Board Member's share ownership of the Fund and all funds in the DWS Fund complex
overseen by each Board Member as of December 31, 2006.

<TABLE>
<CAPTION>

                                                                        Aggregate Dollar Range of Securities
                                             Dollar Range of                        Owned in All
                                           Securities Owned in             Funds in the DWS Fund Complex
Name of Board Member                        DWS Balanced Fund                 Overseen by Board Member
--------------------                        -----------------                 ------------------------

<S>                                              <C>                                  <C>
John W. Ballantine                              [$/None]                         Over $100,000
Donald L. Dunaway*                              [$/None]                         Over $100,000

                                       74
<PAGE>
                                                                        Aggregate Dollar Range of Securities
                                             Dollar Range of                        Owned in All
                                           Securities Owned in             Funds in the DWS Fund Complex
Name of Board Member                        DWS Balanced Fund                 Overseen by Board Member
--------------------                        -----------------                 ------------------------
James R. Edgar*                                 [$/None]                         Over $100,000
Paul K. Freeman                                 [$/None]                         Over $100,000
Robert B. Hoffman                               [$/None]                         Over $100,000
William McClayton                               [$/None]                         $10,001-$50,000
Shirley D. Peterson                             [$/None]                         Over $100,000
Robert H. Wadsworth                             [$/None]                         Over $100,000
</TABLE>

*         The dollar range of shares shown includes shadow shares of certain DWS
          Family of Funds in which Mr.  Dunaway and Governor Edgar are deemed to
          be invested pursuant to the Trust's Deferred Compensation Plan as more
          fully described above under "Remuneration."

Ownership in Securities of the Advisor and Related Companies

As  reported  to the Fund,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2006. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal  underwriter of the Fund (including
Deutsche Bank AG).

<TABLE>
<CAPTION>

                                                                                     Value of         Percent of
                                Owner and                                          Securities on     Class on an
Independent                  Relationship to                                       an Aggregate       Aggregate
Board Member                   Board Member         Company      Title of Class        Basis            Basis
------------                   ------------         -------      --------------        -----            -----

<S>                             <C>                   <C>         <C>                   <C>              <C>
John W. Ballantine                                    None
Donald L. Dunaway                                     None
James R. Edgar                                        None
Paul K. Freeman                                       None
Robert B. Hoffman                                     None
William McClayton                                     None
Shirley D. Peterson                                   None
Robert H. Wadsworth                                   None

</TABLE>


                                       75
<PAGE>


                                       76
<PAGE>


                                       77
<PAGE>


                                       78
<PAGE>


                                       79
<PAGE>


                                       80
<PAGE>


                                       81
<PAGE>



Securities Beneficially Owned


As of _________, 2008, a Board Members and Officers ll the Fund as a group ownof
beneficially  (as that  term ed  defined  is  section  13(d)  is the  Securities
Exchange Aof of 1934) less than 1% of tct outstanding securities of the Fund. he

To the best of the Fund knowledge,  as of __________'s  2008, no person owned _,
record or beneficially 5% of more of any class of tor Fund's outstanding sharehe
except as noted below. s,





Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory  action related to possible improper
market timing or other improper trading activity or possible improper  marketing
and sales activity in certain DWS Funds (the "Affected Funds"),  DIMA has agreed
to  indemnify  and hold  harmless  the  Affected  Funds  ("Fund  Indemnification
Agreement")  against any and all loss,  damage,  liability and expense,  arising
from market  timing or marketing and sales  matters  alleged in any  enforcement
actions brought by governmental  authorities  involving or potentially affecting
the  Affected  Funds or DIMA  ("Enforcement  Actions") or that are the basis for
private  actions  brought by  shareholders  of the  Affected  Funds  against the
Affected Funds, their directors and officers,  DIMA and/or certain other parties
("Private Litigation"),  or any proceedings or actions that may be threatened or
commenced  in the future by any  person  (including  governmental  authorities),
arising  from or similar to the matters  alleged in the  Enforcement  Actions or
Private Litigation.  In recognition of its undertaking to indemnify the Affected
Funds  and  in  light  of  the  rebuttable  presumption  generally  afforded  to
independent  directors/trustees  of  investment  companies  that  they  have not
engaged in disabling  conduct,  DIMA has also agreed,  subject to applicable law
and  regulation,  to indemnify  Messrs.  Ballantine,  Dunaway,  Edgar,  Freeman,
Hoffman  and Ms.  Peterson,  each of whom is an  independent  trustee  and was a
trustee at the time DIMA entered into the Fund  Indemnification  Agreement  (the
"Covered Trustees"),  against certain liabilities the Covered Trustees may incur
from the matters  alleged in any  Enforcement  Actions or Private  Litigation or
arising  from or similar to the matters  alleged in the  Enforcement  Actions or
Private  Litigation,  and advance  expenses  that may be incurred by the Covered
Trustees in connection with any Enforcement Actions or Private Litigation.  DIMA
is  not,  however,  required  to  provide  indemnification  and  advancement  of
expenses: (1)


                                       82
<PAGE>

with  respect  to any  proceeding  or action  which the  Affected  Funds'  Board
determines  that the  Covered  Trustees  ultimately  would  not be  entitled  to
indemnification or (2) for any liability of the Covered Trustees to the Affected
Funds or their  shareholders  to which the Covered  Trustee  would  otherwise be
subject  by reason of  willful  misfeasance,  bad  faith,  gross  negligence  or
reckless  disregard of the Covered Trustee's duties as a trustee of the Affected
Funds as determined in a final  adjudication  in such action or proceeding.  The
estimated amount of any expenses that may be advanced to the Covered Trustees or
indemnity  that may be  payable  under the  indemnity  agreements  is  currently
unknown. This undertaking by DIMA will survive the termination of the investment
management agreements between DIMA and the Affected Funds.



                               TRUST ORGANIZATION

DWS  Balanced  Fund  is a  registered  open-end  management  investment  company
organized  as a business  trust under the laws of  Massachusetts  on October 24,
1985,  and effective  January 31, 1986,  the Fund  pursuant to a  reorganization
succeeded to the assets and  liabilities  of Kemper  Total Return Fund,  Inc., a
Maryland  corporation  organized in 1963.  Effective  March 14,  2005,  the Fund
succeeded  to the  assets  and  liabilities  of the  Scudder  Balanced  Fund,  a
Massachusetts business trust.

Organizational Description

The Trustees have the authority to create  additional Funds and to designate the
relative  rights and  preferences as between the different  Funds.  The Trustees
also may  authorize  the  division of shares of a Fund into  different  classes,
which may bear different  expenses.  All shares issued and outstanding are fully
paid and non-assessable,  transferable, have no pre-emptive or conversion rights
and are  redeemable as described in the SAI and in the Fund's  prospectus.  Each
share has equal  rights  with each other share of the same class of a Fund as to
voting, dividends, exchanges, conversion features and liquidation.  Shareholders
are  entitled  to one vote for each full  share  held and  fractional  votes for
fractional  shares held.  The Trustees may also  terminate  any Fund or class by
notice to the shareholders


                                       83
<PAGE>

without shareholder approval. Currently, the Fund offers Class A, Class B, Class
C, Institutional Class and Class S shares.

The Fund generally is not required to hold meetings of its  shareholders.  Under
the  Agreement  and  Declaration  of  Trust  of  the  Trust,  as  amended,  (the
"Declaration  of  Trust"),  however,   shareholder  meetings  will  be  held  in
connection with the following  matters:  (a) the election or removal of trustees
if a meeting is called for such  purpose;  (b) the  adoption of any contract for
which approval by  shareholders is required by the 1940 Act; (c) any termination
or  reorganization  of a Fund or a class to the  extent and as  provided  in the
Declaration  of Trust;  (d) certain  material  amendments of the  Declaration of
Trust (such as other than amendments changing the name of a Trust, supplying any
omission,  curing any  ambiguity  or curing,  correcting  or  supplementing  any
defective or inconsistent provision thereof); and (e) such additional matters as
may be required by law, the Declaration of Trust,  the By-laws of a Fund, or any
registration of a Fund with the SEC or as the trustees may consider necessary or
desirable.  Shareholders  also  vote  upon  changes  in  fundamental  investment
policies or restrictions.

The Declaration of Trust for the Fund provides that obligations of the Trust are
not binding  upon the  Trustees  individually  but only upon the property of the
Trust,  that the Trustees and officers will not be liable for errors of judgment
or mistakes of fact or law, and that the Trust will  indemnify  its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with a Trust except if it
is determined in the manner provided in the Declarations of Trust that they have
not acted in good faith in the reasonable  belief that their actions were in the
best  interests  of the Trust.  However,  nothing in the  Declarations  of Trust
protects or  indemnifies a Trustee or officer  against any liability to which he
would otherwise be subject by reason of willful  misfeasance,  bad faith,  gross
negligence, or reckless disregard of the duties involved in the conduct of their
office.

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Trust. The Declarations of Trust,  however,  disclaim shareholder  liability for
acts or obligations of each Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by a
Trust or the Trust's Trustees.  Moreover,  the Declarations of Trust provide for
indemnification  out of  Trust  property  for all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of a Fund and each Trust
may be covered by insurance. Thus, the risk of a shareholder incurring financial
loss on account of shareholder  liability is considered remote and not material,
since it is limited to  circumstances  in which a disclaimer is inoperative  and
such Trust itself is unable to meet its obligations.

If a series were unable to meet its obligations,  the assets of all other series
may in some  circumstances be available to creditors for that purpose,  in which
case the assets of such other series could be used to meet liabilities which are
not otherwise properly chargeable to them.

Each Trustee serves until the next meeting of  shareholders,  if any, called for
the purpose of electing  Trustees and until the election and  qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed.

Any Trustee may be removed for cause at any time by written  instrument,  signed
by at  least a  majority  of the  number  of  Trustees  prior  to such  removal,
specifying the date upon which such removal shall become effective.  Any Trustee
may be  removed  with or  without  cause  (i) by the  vote  of the  shareholders
entitled to vote more than fifty percent (50%) of the votes  entitled to be cast
on the mater voting  together  without  regard to series or class at any meeting
called for such purpose,  or (ii) by a written  consent filed with the custodian
of the Trust's portfolio  securities and executed by the shareholder entitled to
vote more than  fifty  percent  (50%) of the  votes  entitled  to be cast on the
matter voting together  without regard to series or class.  Whenever ten or more
shareholders of record who have been such for at least six months  preceding the
date of application,  and who hold in the aggregate shares constituting at least
one percent of the outstanding  shares of the Trust, shall apply to the Trustees
in writing, stating that they wish to communicate with other shareholders with a
view to obtaining signatures to a request for a meeting to consider removal of a
Trustee and accompanied by a form of communication and request that they wish to
transmit,  the Trustees  will assist  shareholder  communications  to the extent
provided for in Section 16(c) under the 1940 Act.

                                       84
<PAGE>

                             PROXY VOTING GUIDELINES

The Fund has delegated proxy voting  responsibilities to its investment advisor,
subject to the Board's general oversight. The Fund has delegated proxy voting to
the Advisor with the direction that proxies should be voted  consistent with the
Fund's best  economic  interests.  The Advisor has adopted its own Proxy  Voting
Policies and Procedures ("Policies"), and Proxy Voting Guidelines ("Guidelines")
for this  purpose.  The  Policies  address,  among other  things,  conflicts  of
interest that may arise between the interests of the Fund,  and the interests of
the Advisor and its affiliates,  including the Fund's principal underwriter. The
Guidelines set forth the Advisor's general position on various  proposals,  such
as:
o        Shareholder  Rights -- The Advisor  generally  votes against  proposals
         that restrict shareholder rights.

o        Corporate  Governance -- The Advisor  generally votes for  confidential
         and cumulative voting and against supermajority voting requirements for
         charter and bylaw amendments. The Advisor generally votes for proposals
         to restrict a chief  executive  officer from serving on more than three
         outside  boards of  directors.  The  Advisor  generally  votes  against
         proposals  that  require a company  to  appoint  a  Chairman  who is an
         independent director.

o        Anti-Takeover Matters -- The Advisor generally votes for proposals that
         require shareholder ratification of poison pills or that request boards
         to redeem poison pills,  and votes against the adoption of poison pills
         if  they  are  submitted  for  shareholder  ratification.  The  Advisor
         generally votes for fair price proposals.

o        Compensation  Matters -- The Advisor generally votes for executive cash
         compensation  proposals,  unless they are unreasonably  excessive.  The
         Advisor generally votes against stock option plans that do not meet the
         Advisor's criteria.

o        Routine Matters -- The Advisor  generally votes for the ratification of
         auditors,  procedural matters related to the annual meeting and changes
         in company name, and against bundled proposals and adjournment.

The general provisions described above do not apply to investment companies. The
Advisor generally votes proxies solicited by investment  companies in accordance
with the  recommendations  of an  independent  third  party,  except for proxies
solicited by or with respect to investment companies for which the Advisor or an
affiliate  serves as investment  advisor or principal  underwriter  ("affiliated
investment companies").  The Advisor votes affiliated investment company proxies
in  the  same  proportion  as  the  vote  of  the  investment   company's  other
shareholders  (sometimes called "mirror" or "echo" voting).  Master fund proxies
solicited from feeder funds are voted in accordance with applicable requirements
of the 1940 Act.

Although the  Guidelines  set forth the Advisor's  general  voting  positions on
various proposals,  the Advisor may,  consistent with the Fund's best interests,
determine under some circumstances to vote contrary to those positions.

The  Guidelines  on a  particular  issue  may or may  not  reflect  the  view of
individual members of the Board or of a majority of the Board. In addition,  the
Guidelines may reflect a voting position that differs from the actual  practices
of  the  public  companies  within  the  Deutsche  Bank  organization  or of the
investment  companies for which the Advisor or an affiliate serves as investment
advisor or sponsor.

The  Advisor  may  consider  the views of a portfolio  company's  management  in
deciding how to vote a proxy or in establishing general voting positions for the
Guidelines, but management's views are not determinative.

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  Advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the Advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review


                                       85
<PAGE>

committee  determines that the Advisor has a material  conflict of interest,  or
certain  individuals  on the  proxy  voting  committee  should be  recused  from
participating  in a  particular  proxy  vote,  it will  inform the proxy  voting
committee.  If notified that the Advisor has a material conflict,  or fewer than
three voting members are eligible to  participate  in the proxy vote,  typically
the Advisor will engage an  independent  third party to vote the proxy or follow
the proxy voting recommendations of an independent third party.

Under certain circumstances,  the Advisor may not be able to vote proxies or the
Advisor  may find that the  expected  economic  costs from voting  outweigh  the
benefits  associated with voting. For example,  the Advisor may not vote proxies
on certain foreign securities due to local restrictions or customs.  The Advisor
generally  does  not vote  proxies  on  securities  subject  to  share  blocking
restrictions.

You may  obtain  information  about  how a fund  voted  proxies  related  to its
portfolio  securities  during the 12-month  period ended June 30 by visiting the
SEC's Web site at www.sec.gov or by visiting our Web site at www.dws-scudder.com
for Class S shares,  or  www-dws-scudder.com  for all  other  classes  (click on
"proxy voting" at the bottom of the page).

Information  concerning  portfolio  holdings of a DWS Fund as of a month-end  is
available upon request no earlier than the 16th day after month-end. Please call
DWS Investments at the number  appearing on the front cover of this Statement of
Additional Information to make such a request.

                              FINANCIAL STATEMENTS


The financial  statements,  including the  investment  portfolio of DWS Balanced
Fund, together with the Report of Independent Registered Public Accounting Firm,
Financial  Highlights and notes to financial  statements in the annual report to
the shareholders of the Fund dated October 31, 2007, are incorporated  herein by
reference  and are hereby  deemed to be a part of this  Statement of  Additional
Information.


                             ADDITIONAL INFORMATION

The CUSIP number for Class S of DWS Balanced Fund is Class S: 81123H-609

The Fund has a fiscal year ending October 31.

The Fund's  prospectuses  and this  Statement  of  Additional  Information  omit
certain information  contained in the Registration  Statement which the Fund has
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration  Statement for further  information with respect to the Fund
and  the  securities  offered  hereby.  This  Registration   Statement  and  its
amendments  are available for inspection by the public at the SEC in Washington,
D.C.




                                       86
<PAGE>


                                    APPENDIX

BOND AND COMMERCIAL PAPER RATINGS

Set forth below are  descriptions of ratings which represent  opinions as to the
quality of the securities.  It should be emphasized,  however,  that ratings are
relative and subjective and are not absolute standards of quality.

MOODY'S INVESTORS SERVICE, INC. -- CORPORATE BOND RATINGS

Aaa:  Bonds  which are rated Aaa are judged to be of the highest  quality.  They
carry the smallest  degree of investment  risk and are generally  referred to as
"gilt-edged."  Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change,  such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all  standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds  because  margins of protection
may not be as large as in Aaa securities or fluctuations of protective  elements
may be of greater  amplitude or there may be other  elements  present which make
the long-term risk appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment  attributes and are
to be considered as upper -medium grade obligations.  Factors giving security to
principal  and interest  are  considered  adequate,  but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa:  Bonds  which are rated Baa are  considered  as medium  grade  obligations,
(i.e., they are neither highly protected nor poorly secured).  Interest payments
and principal  security appear adequate for the present,  but certain protective
elements may be lacking or may be  characteristically  unreliable over any great
length of time. Such bonds lack outstanding  investment  characteristics  and in
fact have speculative characteristics as well.

Ba:  Bonds  which are rated Ba are judged to have  speculative  elements;  their
future cannot be considered  as well assured.  Often the  protection of interest
and principal  payments may be very  moderate and thereby not well  safe-guarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.

B:  Bonds  which are  rated B are  considered  speculative  and  generally  lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of  maintenance  of other terms of the contract over any long period
of time may be small.

Caa:  Bonds  which are rated Caa are of poor  standing.  Such  issues  may be in
default or there may be present  elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are highly speculative.
Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, typically are in
default and can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Note:  Moody's  appends  numerical  modifiers 1, 2 and 3 to each generic  rating
classification  from Aa through Caa in its  corporate  bond rating  system.  The
modifier 1  indicates  that the issue  ranks in the  higher  end of its  generic
rating category;  the modifier 2 indicates a mid-range ranking; and the modifier
3  indicates  that  the  issue  ranks in the  lower  end of its  generic  rating
category.

                                       87
<PAGE>

MOODY'S INVESTORS SERVICE, INC. -- SHORT-TERM RATINGS

Moody's  short-term debt ratings are opinions of the ability of issuers to honor
short-term financial obligations. Ratings may be assigned to issuers, short-term
programs  or  to  individual  short-term  debt  instruments.   Such  obligations
generally  have an original  maturity  not  exceeding  thirteen  months,  unless
explicitly noted. Issuers rated Prime-1 or P-1 (or supporting institutions) have
a superior ability for repayment of short-term debt obligations.  Prime-1 or P-1
repayment   ability  will  often  be   evidenced   by  many  of  the   following
characteristics:

o        Leading market positions in well established industries.

o        High rates of return on funds employed.

o        Conservative  capitalization  structure with moderate  reliance on debt
         and ample asset protection.

o        Broad margins in earnings  coverage of fixed financial charges and high
         internal cash generation.

o        Well  established  access to a range of  financial  markets and assured
         sources of alternate liquidity.

Issuers rated Prime-2 or P-2 (or supporting  institutions) have a strong ability
for repayment of short-term debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree.  Earnings trends
and  coverage   ratios,   while  sound,   may  be  more  subject  to  variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

STANDARD & POOR'S RATINGS SERVICES -- CORPORATE BOND RATINGS

INVESTMENT GRADE

AAA:  Debt  rated  AAA  has the  highest  rating  assigned  by  S&P's  to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A: Debt  rated A has a strong  capacity  to pay  interest  and  repay  principal
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB:  Debt  rated  BBB  has an  adequate  capacity  to pay  interest  and  repay
principal. Whereas it normally exhibits adequate protection parameters,  adverse
economic  conditions  or  changing  circumstances  are more  likely to lead to a
weakened  capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

SPECULATIVE GRADE

Debt rated BB, B, CCC,  CC, and C has  significant  speculative  characteristics
with respect to capacity to pay interest and repay  principal.  BB indicates the
least degree of speculation and C the highest.  While such debt will likely have
some quality and  protective  characteristics,  these may be outweighed by large
uncertainties or major exposures to adverse conditions.

BB:  Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate capacity to meet timely interest and principal payments.

The BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

                                       88
<PAGE>

B: Debt rated B has a greater  vulnerability  to default but  currently  has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

The B rating category is also used for debt  subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

CCC:  Debt rated CCC has a current  vulnerability  to default,  and is dependent
upon  favorable  business,  financial,  and economic  conditions  to meet timely
payment  of  interest  and  repayment  of  principal.  In the  event of  adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay principal.

The CCC rating  category is also used for debt  subordinated to senior debt that
is assigned an actual or implied B or B- rating.

CC: Debt rated CC has a current high vulnerability to default,  and is dependent
upon  favorable  business,  financial,  and economic  conditions  to meet timely
payment of interest and repayment of principal.

The  rating CC is also  applied  to debt  subordinated  to senior  debt which is
assigned an actual or implied CCC debt rating.

C: The rating C is typically  applied to debt  subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation where a bankruptcy  petition has been filed,  but debt service
payments are continued.

C1: The Rating C1 is  reserved  for income  bonds on which no  interest is being
paid.

D:  Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless Standard & Poor's believes that
such payments  will be made during such grace period.  The D rating also will be
used upon the filing of a  bankruptcy  petition  if debt  service  payments  are
jeopardized.

Plus  (+) or  Minus  (-):  The  ratings  from AA to CCC may be  modified  by the
addition  of a plus or minus  sign to show  relative  standing  within the major
rating categories.

R:  Debt  rated  `R' is under  regulatory  supervision  owing  to its  financial
condition. During the pendency of the regulatory supervision, the regulators may
have the  power to  favor  one  class of  obligations  over  others  or pay some
obligations and not others.

N.R.: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient  information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.



                                       89
<PAGE>



STANDARD & POOR'S RATINGS SERVICES -- SHORT-TERM RATINGS

S&P's  commercial  paper rating is a current  assessment  of the  likelihood  of
timely payment of debt considered short-term in the relevant market.

A-1: This highest category  indicates that the degree of safety regarding timely
payment is strong.  Those issues  determined to possess  extremely strong safety
characteristics are denoted with a plus (+) sign designation.

A-2:   Capacity  for  timely   payment  on  issues  with  this   designation  is
satisfactory.  However,  the  relative  degree  of  safety is not as high as for
issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely payment.
However,  adverse economic conditions or changing  circumstances are more likely
to lead to a weakened capacity of the issuer to meet its financial commitments.

FITCH INVESTORS SERVICE, INC. -- BOND RATINGS

INVESTMENT GRADE

AAA: Bonds  considered to be investment grade and of the highest credit quality.
The  obligor  has an  exceptionally  strong  ability to pay  interest  and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's  ability to pay interest and repay principal is very strong,  although
not quite as strong as bonds rated AAA. Bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable events.

A: Bonds  considered  to be  investment  grade and of high credit  quality.  The
obligor's  ability to pay  interest  and repay  principal  is  considered  to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds  considered to be investment  grade and of good credit  quality.  The
obligor's  ability to pay  interest  and repay  principal  is  considered  to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore,  impair timely
payment.  The  likelihood  that the  ratings  of these  bonds  will  fall  below
investment grade is higher than for bonds with higher ratings.

SPECULATIVE GRADE

BB: Bonds are considered speculative.  The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes.  However,
business or  financial  alternatives  may be  available  which could  assist the
obligor in satisfying its debt service requirements.

B:  Bonds are  considered  highly  speculative.  While  bonds in this  class are
currently meeting debt service requirements, the probability of continued timely
payment of principal  and  interest  reflects the  obligor's  limited  margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to  default.  The  ability to meet  obligations  requires  an  advantageous
business and economic environment.

CC:  Bonds are  minimally  protected.  Default  in payment  of  interest  and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

                                       90
<PAGE>

DDD, DD, and D: Bonds are in default of interest and/or principal payments. Such
bonds  are  extremely  speculative  and  should  be valued on the basis of their
ultimate  recovery value in liquidation or  reorganization  of the obligor.  DDD
represents the highest  potential for recovery on these bonds,  and D represents
the lowest potential for recovery.

Plus (+) or Minus (-): The ratings from AA to CC may be appended by the addition
of a plus or  minus  sign to  denote  the  relative  status  within  the  rating
category.

NR: Indicates that Fitch Rating does not publicly rate the specific issue.

FITCH INVESTORS SERVICE, INC. -- SHORT-TERM RATINGS

Fitch's  short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit,  medium-term notes, and municipal and investment
notes.

F-1+:  Exceptionally  Strong  Credit  Quality.  Issues  assigned this rating are
regarded as having the strongest capacity for timely payment.

F-1: Very Strong Credit Quality.  Issues assigned this rating reflect a capacity
for timely payment only slightly less than issues rated F-1+.

F-2:  Good Credit  Quality.  Issues  assigned  this  rating have a  satisfactory
capacity  for  timely  payment,  but the margin of safety is not as great as the
F-1+ and F-1 categories.

F-3:  Fair Credit  Quality.  Issues  assigned  this rating have  characteristics
suggesting that the capacity for timely payment is adequate;  however, near-term
adverse changes could cause these securities to be rated below investment grade.

B:  Speculative.  Minimal capacity for timely payment of financial  commitments,
plus  vulnerability  to  near-term  adverse  changes in  financial  and economic
conditions.

C: High  default  risk.  Default is a real  possibility.  Capacity  for  meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D: Default. Denotes actual or imminent payment default.




                                       91
<PAGE>


                                DWS BALANCED FUND

                            PART C. OTHER INFORMATION
<TABLE>
<CAPTION>

   Item 23.      Exhibits.
   --------      ---------

<S>                 <C>                     <C>
                    (a)                     Amended and Restated Agreement and Declaration of Trust.
                                            (Incorporated by reference to Post-Effective Amendment No. 49 to
                                            Registrant's Registration Statement on Form N-1A which was filed on January
                                            30, 1996.)

                   (a)(1)                   Certificate of Amendment of Declaration of Trust dated November 29, 2000.
                                            (Incorporated by reference to Post-Effective Amendment No. 58 to
                                            Registrant's Registration Statement.)

                   (a)(2)                   Certificate of Amendment of Declaration of Trust dated November 16, 2005.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)

                   (b)(1)                   By-laws.
                                            (Incorporated by reference to Post-Effective Amendment No. 49 to
                                            Registrant's Registration Statement.)

                   (b)(2)                   Amendment to the By-laws.
                                            (Incorporated by reference to Post-Effective Amendment No. 57 to
                                            Registrant's Registration Statement.)

                   (b)(3)                   Amendment to the By-laws, dated January 9, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 62 to the
                                            Registrant's Registration Statement.)

                   (b)(4)                   Amendment to the By-laws.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)

                   (c)(1)                   Text of Share Certificate.
                                            (Incorporated by reference to Post-Effective Amendment No. 49 to the
                                            Registrant's Registration Statement.)

                   (c)(2)                   Redesignation of Series dated November 16, 2005.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)

                   (c)(3)                   Redesignation of Classes of Shares of Beneficial Interest and Amended and
                                            Restated Establishment and Designation of Classes of Shares of Beneficial
                                            Interest dated May 10, 2006.
                                            (Incorporated by reference to Post-Effective Amendment No. 70 to
                                            Registrant's Registration Statement.)

                   (d)(1)                   Investment Management Agreement between the Registrant and Deutsche
                                            Investment Management Americas Inc. dated March 14, 2005.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)



                                       2
<PAGE>

                   (e)(1)                   Underwriting and Distribution Services Agreement between the Registrant and
                                            Scudder Distributors, Inc., dated March 15, 2005.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)

                    (f)                     Inapplicable.

                   (g)(1)                   Master Custodian Agreement between Registrant and State Street Bank and
                                            Trust Company dated March 17, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)

                   (h)(1)                   Agency Agreement.
                                            (Incorporated by reference to Post-Effective Amendment No. 49 to
                                            Registrant's Registration Statement.)

                 (h)(1)(a)                  Supplement to Agency Agreement between Registrant and Investors Fiduciary
                                            Trust Company dated June 1, 1997.
                                            (Incorporated by reference to Post-Effective Amendment No. 51 to the
                                            Registrant's Registration Statement.)

                 (h)(1)(b)                  Supplement to Agency Agreement dated January 1, 1999.
                                            (Incorporated by reference to Post-Effective Amendment No. 57 to
                                            Registrant's Registration Statement.)

                 (h)(1)(c)                  Transfer Agency and Service Agreement between Registrant and Scudder Service
                                            Corporation dated March 15, 2005.
                                            (Incorporated by reference to Post-Effective Amendment No. 59 to
                                            Registrant's Registration Statement.)

                 (h)(1)(d)                  Second Amendment to the Agency Agreement dated March 13, 2006.
                                            (Incorporated by reference to Post-Effective Amendment No. 70 to
                                            Registrant's Registration Statement.)

                   (h)(2)                   Administrative Services Agreement with Zurich Scudder Investments, Inc.,
                                            dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment
                                            No. 58 to Registrant's Registration Statement.)

                   (h)(3)                   Fund Accounting Agreement between the Registrant and Scudder Fund Accounting
                                            Corporation dated December 31, 1997.
                                            (Incorporated by reference to Post-Effective Amendment No. 51 to the
                                            Registrant's Registration Statement.)

                   (h)(4)                   First Amendment to Fund Accounting Services Agreement between the Registrant
                                            and Scudder Fund Accounting Corporation dated March 19, 2003.  (Incorporated
                                            by reference to Post-Effective Amendment No. 62 to the Registrant's
                                            Registration Statement.)

                   (h)(5)                   Letter of Indemnity to the Scudder Funds dated September 10, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 63 to the
                                            Registrant's Registration Statement.)



                                       3
<PAGE>

                   (h)(6)                   Letter of Indemnity to the Scudder Funds dated September 10, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 63 to the
                                            Registrant's Registration Statement.)

                   (h)(7)                   Letter of Indemnity to the Independent Trustees dated September 10, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 63 to the
                                            Registrant's Registration Statement.)

                   (h)(8)                   Form of Mutual Fund Rule 22c-2 Information Sharing Agreement between the
                                            Registrant and DWS Scudder Distributors Inc. (filed herein)

                    (i)                     Legal Opinion and Consent of Counsel incorporated by reference to
                                            Post-Effective Amendment No. 65 to the Registrant's Registration Statement.

                    (j)                     Consent of Independent Registered Public Accounting Firm. [To be filed by
                                            amendment]

                    (k)                     Inapplicable.

                    (l)                     Inapplicable.

                   (m)(1)                   Rule 12b-1 Plan between Scudder Total Return Fund (Class A Shares) and
                                            Scudder Distributors, Inc. dated July 1, 2001.
                                            (Incorporated by reference to Post-Effective Amendment No. 58 to
                                            Registrant's Registration Statement.)

                   (m)(2)                   Amended and Restated Rule 12b-1 Plan between Scudder Total Return Fund
                                            (Class C Shares) and Scudder Distributors, Inc. dated July 1, 2001.
                                            (Incorporated by reference to Post-Effective Amendment No. 58 to
                                            Registrant's Registration Statement.)

                   (m)(3)                   Shareholder Services Agreement for Class A, Class B and Class C dated
                                            April 5, 2002 between Scudder Total Return Fund and Scudder Distributors,
                                            Inc.  (Incorporated by reference to Post-Effective Amendment No. 59 to the
                                            Registrant's Registration Statement.)

                   (m)(4)                   Amended and Restated Rule 12b-1 Plan between Scudder Total Return Fund
                                            (Class R shares) and Scudder Distributors, Inc. dated October 1, 2003.
                                            (Incorporated by reference to Post-Effective Amendment No. 61 to the
                                            Registrant's Registration Statement.)

                   (m)(5)                   Amended and Restated Rule 12b-1 Plan between Scudder Total Return Fund
                                            (Class B shares) and Scudder Distributors, Inc. dated October 1, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 65 to
                                            Registrant's Registration Statement.)

                   (n)(1)                   Amended and Restated Multi-Distribution System Plan (Rule 18f-3 Plan), dated
                                            September 22, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 65 to
                                            Registrant's Registration Statement.)

                   (p)(1)                   Deutsche Asset Management - U.S. Code of Ethics, dated January 1, 2007.
                                            (filed herein)



                                       4
<PAGE>

                   (p)(3)                   Consolidated Fund Code of Ethics (All Funds).
                                            (Incorporated by reference to Post-Effective Amendment No. 70 to
                                            Registrant's Registration Statement.)

                   (p)(4)                   Code of Ethics for Deutsche Asset Management International GmbH (To be filed
                                            by amendment)

                   (q)(1)                   Power of Attorney.
                                            (Incorporated by reference to Post-Effective Amendment No. 68 to the
                                            Registrant's Registration Statement.)
</TABLE>

Item 24.          Persons Controlled by or under Common Control with Fund.
--------          --------------------------------------------------------

                  None

Item 25.          Indemnification.
--------          ----------------

                  Article VIII of the Registrant's  Agreement and Declaration of
                  Trust (Exhibit (a)(1) hereto,  which is incorporated herein by
                  reference)   provides  in  effect  that  the  Registrant  will
                  indemnify   its   officers   and   trustees    under   certain
                  circumstances.  However,  in accordance with Section 17(h) and
                  17(i) of the Investment Company Act of 1940 and its own terms,
                  said Article of the  Agreement and  Declaration  of Trust does
                  not protect any person against any liability to the Registrant
                  or its  shareholders  to which such Trustee would otherwise be
                  subject by reason of  willful  misfeasance,  bad faith,  gross
                  negligence,  or reckless  disregard of the duties  involved in
                  the conduct of his or her office.

                  Each of the  trustees  who is not an  "interested  person" (as
                  defined  under  the   Investment   Company  Act  of  1940)  of
                  Registrant  (a  "Non-interested  Trustee") has entered into an
                  indemnification  agreement with  Registrant,  which  agreement
                  provides   that   the   Registrant    shall    indemnify   the
                  Non-interested  Trustee against certain liabilities which such
                  Trustee may incur while  acting in the  capacity as a trustee,
                  officer or employee of the  Registrant  to the fullest  extent
                  permitted  by  law,  now  or  in  the  future,   and  requires
                  indemnification  and advancement of expenses unless prohibited
                  by  law.  The  indemnification  agreement  cannot  be  altered
                  without the consent of the  Non-interested  Trustee and is not
                  affected by  amendment of the  Agreement  and  Declaration  of
                  Trust.  In  addition,  the  indemnification  agreement  adopts
                  certain presumptions and procedures which may make the process
                  of  indemnification  and  advancement of expenses more timely,
                  efficient and certain. In accordance with Section 17(h) of the
                  Investment Company Act of 1940, the indemnification  agreement
                  does  not  protect  a   Non-interested   Trustee  against  any
                  liability to the Registrant or its  shareholders to which such
                  Trustee  would  otherwise  be  subject  by reason  of  willful
                  misfeasance,   bad  faith,   gross  negligence,   or  reckless
                  disregard of the duties  involved in the conduct of his or her
                  office.

                  The Registrant has purchased  insurance  policies insuring its
                  officers and trustees against certain  liabilities  which such
                  officers   and   trustees  may  incur  while  acting  in  such
                  capacities and providing  reimbursement  to the Registrant for
                  sums  which  it may be  permitted  or  required  to pay to its
                  officers and trustees by way of  indemnification  against such
                  liabilities, subject to certain deductibles.

                  On  April  5,   2002,   Zurich   Scudder   Investments,   Inc.
                  ("Scudder"),  the  investment  adviser,  now known as Deutsche
                  Investment  Management Americas Inc., was acquired by Deutsche
                  Bank  AG,  not   including   certain  U.K.   Operations   (the
                  "Transaction"). In connection with the Trustees' evaluation of
                  the Transaction, Deutsche Bank agreed to indemnify, defend and
                  hold  harmless  Registrant  and  the  trustees  who  were  not
                  "interested  persons" of Scudder,  Deutsche Bank or Registrant
                  (the "Non-interested  Trustees") for and against any liability
                  and claims and expenses based upon or arising from, whether in
                  whole  or in part,  or  directly  or  indirectly,  any  untrue
                  statement or alleged untrue  statement of a material fact


                                       5
<PAGE>

                  made  to  the   Independent   Trustees  by  Deutsche  Bank  in
                  connection with the Non-interested  Trustees' consideration of
                  the  Transaction,  or any  omission  or alleged  omission of a
                  material fact necessary in order to make  statements  made, in
                  light of the  circumstances  under  which they were made,  not
                  misleading.

                  Deutsche  Investment  Management  Americas Inc. ("DIMA"),  the
                  investment advisor, has agreed,  subject to applicable law and
                  regulation,  to indemnify  and hold  harmless  the  Registrant
                  against any loss,  damage,  liability and expense,  including,
                  without limitation,  the advancement and payment, as incurred,
                  of reasonable fees and expenses of counsel  (including counsel
                  to the Registrant and counsel to the Non-interested  Trustees)
                  and  consultants,  whether  retained by the  Registrant or the
                  Non-interested   Trustees,   and  other  customary  costs  and
                  expenses  incurred by the  Registrant in  connection  with any
                  litigation or regulatory  action related to possible  improper
                  market timing or other improper  trading  activity or possible
                  improper  marketing  and  sales  activity  in  the  Registrant
                  ("Private Litigation and Enforcement  Actions").  In the event
                  that this indemnification is unavailable to the Registrant for
                  any reason,  then DIMA has agreed to  contribute to the amount
                  paid or  payable  by the  Registrant  as a result of any loss,
                  damage,   liability  or  expense  in  such  proportion  as  is
                  appropriate  to  reflect  the  relative  fault of DIMA and the
                  Registrant  with respect to the matters which resulted in such
                  loss,  damage,  liability  or  expense,  as well as any  other
                  relevant equitable  considerations;  provided,  however, if no
                  final determination is made in such action or proceeding as to
                  the relative fault of DIMA and the Registrant, then DIMA shall
                  pay the  entire  amount of such  loss,  damage,  liability  or
                  expense.

                  In recognition of its undertaking to indemnify the Registrant,
                  DIMA  has  also  agreed,   subject  to   applicable   law  and
                  regulation,  to  indemnify  and  hold  harmless  each  of  the
                  Non-interested  Trustees  against  any and all  loss,  damage,
                  liability  and  expense,   including  without  limitation  the
                  advancement  and payment as incurred  of  reasonable  fees and
                  expenses of counsel and consultants, and other customary costs
                  and expenses incurred by the Non-interested Trustees,  arising
                  from the Private Litigation and Enforcement, including without
                  limitation:

                  1. all  reasonable  legal and other  expenses  incurred by the
                  Non-interested   Trustees  in  connection   with  the  Private
                  Litigation and Enforcement  Actions,  and any actions that may
                  be  threatened  or  commenced  in the  future  by  any  person
                  (including  any  governmental  authority),   arising  from  or
                  similar to the matters  alleged in the Private  Litigation and
                  Enforcement  Actions,  including without  limitation  expenses
                  related  to the  defense  of,  service  as a  witness  in,  or
                  monitoring of such proceedings or actions;

                  2. all liabilities and expenses incurred by any Non-interested
                  Trustee in  connection  with any judgment  resulting  from, or
                  settlement of, any such proceeding, action or matter;

                  3. any loss or expense incurred by any Non-interested  Trustee
                  as a result of the denial of, or dispute about,  any insurance
                  claim under, or actual or purported  rescission or termination
                  of,  any  policy  of  insurance  arranged  by  DIMA  (or  by a
                  representative   of  DIMA   acting   as  such,   acting  as  a
                  representative  of the  Registrant  or of  the  Non-interested
                  Trustees  or  acting   otherwise)   for  the  benefit  of  the
                  Non-interested  Trustee,  to  the  extent  that  such  denial,
                  dispute  or  rescission  is based in whole or in part upon any
                  alleged  misrepresentation  made in the  application  for such
                  policy or any other  alleged  improper  conduct on the part of
                  DIMA,  any  of its  corporate  affiliates,  or  any  of  their
                  directors, officers or employees;

                  4. any loss or expense incurred by any Non-interested Trustee,
                  whether or not such loss or expense is otherwise covered under
                  the  terms  of a  policy  of  insurance,  but  for  which  the
                  Non-interested  Trustee  is unable to  obtain  advancement  of
                  expenses or  indemnification  under that policy of  insurance,
                  due to the  exhaustion  of policy limits which is due in whole
                  or in part to DIMA or any affiliate  thereof  having  received
                  advancement of expenses or  indemnification  under that policy
                  for or with  respect to a matter  which is the  subject of the
                  indemnification agreement; provided, however, the total amount
                  which DIMA will be obligated to pay under this  provision  for
                  all loss or expense,  will not exceed the amount that DIMA and
                  any of its  affiliate  actually  receive  under that policy or
                  insurance for or with respect to a matter which is the subject
                  of the indemnification agreement; and



                                       6
<PAGE>

                  5. all liabilities and expenses incurred by any Non-interested
                  Trustee in connection with any proceeding or action to enforce
                  his or her rights under the agreement, unless DIMA prevails on
                  the merits of any such dispute in a final, nonappealable court
                  order.

                  DIMA is not  required  to pay  costs or  expenses  or  provide
                  indemnification  to  or  for  any  individual   Non-interested
                  Trustee  (i) with  respect  to any  particular  proceeding  or
                  action as to which the Board of the  Registrant has determined
                  that  such  Non-interested  Trustee  ultimately  will  not  be
                  entitled to indemnification  with respect thereto, or (ii) for
                  any liability of the Non-interested  Trustee to the Registrant
                  or its shareholders to which such Non-interested Trustee would
                  otherwise  be subject by reason of  willful  misfeasance,  bad
                  faith,   gross  negligence,   or  reckless  disregard  of  the
                  Non-interested Trustee's duties as a Trustee of the Registrant
                  as determined in a final  adjudication  in such  proceeding or
                  action. In addition, to the extent that DeAM has paid costs or
                  expenses under the agreement to any individual  Non-interested
                  Trustee with respect to a particular proceeding or action, and
                  there is a final  adjudication in such proceeding or action of
                  the  Non-interested  Trustee's  liability to the Registrant or
                  its shareholders by reason of willful misfeasance,  bad faith,
                  gross negligence,  or reckless disregard of the Non-interested
                  Trustee's  duties  as  a  Trustee  of  the  Registrant,   such
                  Non-interested  Trustee has  undertaken to repay such costs or
                  expenses to DIMA.

                  On November 14, 2007,  the Registrant and DIMA entered into an
                  agreement  that  provides  certain   retiring   Non-interested
                  Trustees   certain   assurances   regarding   continuation  of
                  insurance and indemnification  rights. More specifically,  the
                  agreement  provides that the Registrant shall take all actions
                  reasonably  necessary to assure that the retirement of certain
                  Non-interested  Trustees and/or the election or appointment of
                  members of the  consolidated  Board shall not reduce or impair
                  any    rights   of   those    Non-interested    Trustees    to
                  indemnification,  defense,  advancement of expenses,  or other
                  rights,  for or with respect to actual or  threatened  claims,
                  liability,  or expense that those Non-interested  Trustees may
                  incur  or  suffer  arising  from  or  with  respect  to  those
                  Non-interested  Trustees' service in such capacity,  except to
                  the  extent  that the  consolidated  Board  determines  in the
                  exercise  of its  duties  to  modify  the  rights of all Board
                  members,  past  and  present,   without  distinction.   It  is
                  understood  that any such  modification  of rights  shall not,
                  without the written  consent of the  Non-interested  Trustees,
                  serve to modify any contractual rights that the Non-interested
                  Trustees   may  have   under  any   agreement   to  which  the
                  Non-interested Trustees and the Registrant are parties.

                  For the six-year period  following the election or appointment
                  of members of the consolidated Board, the Registrant currently
                  expect to maintain,  D&O/E&O  Insurance and IDL Insurance that
                  is substantially  equivalent in scope to the current coverage,
                  and in amounts  providing  aggregate  coverage with respect to
                  the  Registrant  and all funds  overseen  by the  consolidated
                  Board of at least $100  million for D&O/E&O  Insurance  and at
                  least $25 million for IDL  Insurance;  subject  however to the
                  right of the consolidated  Board in the exercise of its duties
                  to determine  that a lower level of  insurance  coverage is in
                  the best  interests of the  Registrant  provided that any such
                  reduction  in  coverage  apply  equally to their  present  and
                  former Trustees.

                  Pursuant to the agreement, DIMA has agreed that the retirement
                  of  the  Non-interested   Trustees  under  the  terms  of  the
                  retirement  agreements  shall in no way affect or diminish the
                  contractual rights of indemnification  that the Non-interested
                  Trustees  may have  under  any  agreement  of  indemnification
                  between an Non-interested Trustees and DIMA, including without
                  limitation  agreements of indemnification  currently in effect
                  with respect to matters  related to market  timing and matters
                  related to merged or  liquidated  funds.  Upon request made by
                  any  Non-interested  Trustees,  DIMA has  agreed to  execute a
                  separate instrument  confirming the existence and continuation
                  of any such agreement of indemnification.

                  In addition,  pursuant to the agreement, in the event that the
                  consolidated  Board  determines to reduce  insurance  coverage
                  below  the  minimum  levels  stated  above,  then  DIMA at its
                  expense  will  purchase  excess  insurance  coverage  for  the
                  benefit of the Non-interested  Trustees sufficient to maintain
                  such minimum  coverage levels in place for the duration of the
                  period specified in the retirement  agreements,  provided that
                  in the event that such excess coverage is not available in the
                  marketplace   on


                                       7
<PAGE>

                  commercially reasonable terms from a conventional  third-party
                  insurer,  DIMA  (or an  affiliate  of  DIMA)  may,  at  DIMA's
                  discretion  and in lieu of  purchasing  such excess  insurance
                  coverage, elect instead to provide the Non-interested Trustees
                  substantially  equivalent  protection in the form of a written
                  indemnity or financial guaranty reasonably  acceptable to each
                  such Non-interested Trustee.

Item 26.          Business and Other Connections of Investment Advisor
--------          ----------------------------------------------------

                  During the last two fiscal  years,  no  director or officer of
                  Deutsche  Investment  Management Americas Inc., the investment
                  advisor,  has  engaged  in  any  other  business,  profession,
                  vocation or employment of a substantial nature other than that
                  of  the  business  of  investment   management  and,   through
                  affiliates, investment banking.

Item 27.          Principal Underwriters
--------          ----------------------

                  (a)

                  DWS Scudder  Distributors,  Inc. acts as principal underwriter
                  of the Registrant's  shares and acts as principal  underwriter
                  for registered open-end management  investment companies other
                  funds managed by Deutsche Investment Management Americas Inc.

                  (b)

                  Information  on the  officers  and  directors  of DWS  Scudder
                  Distributors,  Inc., principal underwriter for the Registrant,
                  is set forth  below.  The  principal  business  address is 222
                  South Riverside Plaza, Chicago, Illinois 60606.

<TABLE>
<CAPTION>
                      (1)                             (2)                                  (3)
          DWS Scudder
          Distributors, Inc.
          Name and Principal             Positions and Offices with               Positions and
          Business Address               DWS Scudder Distributors, Inc.           Offices with Registrant
          ----------------               ------------------------------           -----------------------

<S>      <C>                            <C>                                       <C>
         Philipp Hensler                Director, Chairman of the Board and       None
         345 Park Avenue                CEO
         New York, NY 10154

         Michael Colon                  Director and Chief Operating Officer      None
         345 Park Avenue
         New York, NY 10154

         Thomas Winnick                 Director and President                    None
         345 Park Avenue
         New York, NY 10154

         Cliff Goldstein                Chief Financial Officer and Treasurer     None
         60 Wall Street
         New York, NY 10005

         Robert Froehlich               Vice President                            None
         222 South Riverside Plaza
         Chicago, IL 60606



                                       8
<PAGE>

                      (1)                             (2)                                  (3)
          DWS Scudder
          Distributors, Inc.
          Name and Principal             Positions and Offices with               Positions and
          Business Address               DWS Scudder Distributors, Inc.           Offices with Registrant
          ----------------               ------------------------------           -----------------------

         Paul Schubert                  Vice President                            Chief Financial Officer
         345 Park Avenue                                                          and Treasurer
         New York, NY 10154

         Mark Perrelli                  Vice President                            None
         222 South Riverside Plaza
         Chicago, IL 60606

         Donna White                    Chief Compliance Officer                  None
         345 Park Avenue
         New York, NY 10154

         Jason Vazquez                  Vice President and AML Compliance         Anti-Money Laundering
         345 Park Avenue                Officer                                   Compliance Officer
         New York, NY 10154

         Caroline Pearson               Secretary                                 Assistant Secretary
         Two International Place
         Boston, MA 02110

         Philip J. Collora              Assistant Secretary                       None
         222 South Riverside Plaza
         Chicago, IL 60606

         Anjie LaRocca                  Assistant Secretary                       None
         345 Park Avenue
         New York, NY 10154
</TABLE>

         (c)      Not applicable

Item 28.          Location of Accounts and Records.
--------          ---------------------------------

                  Accounts,  books and other  documents  are  maintained  at the
                  offices  of  the  Registrant,   the  offices  of  Registrant's
                  investment adviser,  Deutsche  Investment  Management Americas
                  Inc., 222 South Riverside Plaza,  Chicago,  Illinois 60606, at
                  the offices of the  Registrant's  principal  underwriter,  DWS
                  Scudder   Distributors,   Inc.,  222  South  Riverside  Plaza,
                  Chicago,  Illinois 60606 or, in the case of records concerning
                  custodial  functions,  at the offices of the custodian,  State
                  Street Bank and Trust Company ("State  Street"),  225 Franklin
                  Street, Boston, MA 02110 or, in the case of records concerning
                  transfer agency functions,  at the offices of State Street and
                  of the  shareholder  service  agent,  DWS Scudder  Investments
                  Service Company,  210 West 10th Street,  Kansas City, Missouri
                  64105,  or at the offices of DST Systems,  Inc., 333 West 11th
                  Street,  Kansas City,  Missouri 64105, the sub-transfer  agent
                  for the Registrant.

Item 29.          Management Services.
--------          --------------------

                  Inapplicable.

Item 30.          Undertakings.
--------          -------------

                  Inapplicable.


                                       9
<PAGE>

                                   SIGNATURES
                                   ----------

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York on
the 19th day of December 2007.

                                                   DWS BALANCED FUND

                                                   By: /s/Michael G. Clark
                                                       ------------------------
                                                       Michael G. Clark
                                                       President

         Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE                                   TITLE                                        DATE
---------                                   -----                                        ----

<S>                                         <C>                                          <C>
/s/Michael G. Clark
--------------------------------------
Michael G. Clark                            President                                    December 19, 2007


/s/Paul K. Freeman
--------------------------------------
Paul K. Freeman*                            Chairman and Trustee                         December 19, 2007


/s/Paul Schubert
--------------------------------------
Paul Schubert                               Chief Financial Officer and Treasurer        December 19, 2007


/s/John W. Ballantine
--------------------------------------
John W. Ballantine*                         Trustee                                      December 19, 2007

/s/Donald L. Dunaway
--------------------------------------
Donald L. Dunaway*                          Trustee                                      December 19, 2007

/s/James R. Edgar
--------------------------------------
James R. Edgar*                             Trustee                                      December 19, 2007

/s/Robert B. Hoffman
--------------------------------------
Robert B. Hoffman*                          Trustee                                      December 19, 2007

/s/William McClayton
--------------------------------------
William McClayton*                          Trustee                                      December 19, 2007

/s/Shirley D. Peterson
--------------------------------------
Shirley D. Peterson*                        Trustee                                      December 19, 2007

/s/Robert H. Wadsworth
--------------------------------------
Robert H. Wadsworth*                        Trustee                                      December 19, 2007
</TABLE>

*By:   /s/Caroline Pearson
       -------------------------------
       Caroline Pearson**
       Assistant Secretary

**   Attorney-in-fact pursuant to the powers of attorney as contained in and
     incorporated by reference to Post-Effective Amendment No. 68 to the
     Registration Statement, as filed on December 30, 2005.

<PAGE>


                                                               File No. 2-21789
                                                               File No. 811-1236


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    EXHIBITS

                                       TO

                                    FORM N-1A

                        POST- EFFECTIVE AMENDMENT NO. 71
                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933

                                       AND

                                AMENDMENT NO. 71

                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                                DWS BALANCED FUND


                                       10
<PAGE>


                                DWS BALANCED FUND

                                  EXHIBIT INDEX

                                     (h)(8)

                                     (p)(1)





                                       11