As filed with the Securities and Exchange Commission on January 28, 2008

                                                      1933 Act File No. 33-34079
                                                     1940 Act File No. 811-06071

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-1A

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933         /X/

                                AMENDMENT NO. 71                             /X/

                                       and

                          REGISTRATION STATEMENT UNDER
                       THE INVESTMENT COMPANY ACT OF 1940                    /X/

                                AMENDMENT NO. 86                             /X/

                             DWS INSTITUTIONAL FUNDS
               (Exact Name of Registrant as Specified in Charter)

                       345 Park Avenue, New York, NY 10154
               (Address of Principal Executive Offices) (Zip Code)

                                 (212) 454-7190
                         (Registrant's Telephone Number)

                                  John Millette
                             Two International Place
                                Boston, MA 02110
                     (Name and address of agent for service)

                                    Copy to:
                             Burton M. Leibert, Esq.
                          Willkie Farr & Gallagher LLP
                               787 Seventh Avenue
                             New York, NY 10019-6099

It is proposed that this filing will become effective:

/_/   Immediately upon filing pursuant to paragraph (b)
/X/   On February 1, 2008 pursuant to paragraph (b)
/_/   60 days after filing pursuant to paragraph (a)(1)
/_/   On _____________ 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>

                                EXPLANATORY NOTE
                                ----------------


This post-effective amendment contains the prospectuses and statements of
additional information relating to the classes of the following series of the
registrant:

o     DWS Inflation Protected Plus Fund - Classes A, B, C, S and Institutional

This post-effective amendment is not intended to update or amend any other
prospectuses or statements of additional information of the registrant's other
series or classes.



                                       2
<PAGE>

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

                                FEBRUARY 1, 2008








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



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


                       DWS INFLATION PROTECTED PLUS 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
  5      The Main Risks of Investing in
         the Fund
 10      The Fund's Performance
         History
 12      How Much Investors Pay
 14      Other Policies and Secondary
         Risks
 15      Who Manages and Oversees
         the Fund
 18      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUND
 22      Choosing a Share Class
 28      How to Buy Class A, B and C
         Shares
 29      How to Exchange or Sell
         Class A, B and C Shares
 32      Policies You Should Know
         About
 45      Understanding Distributions
         and Taxes
 48      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

On the next few pages, you'll find information about the fund's investment
objective, the main strategies it uses to pursue that objective 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      TIPAX      TIPTX      TIPCX
                                fund number      454        654        754

    DWS INFLATION PROTECTED PLUS FUND
--------------------------------------------------------------------------------
</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks to provide maximum inflation-adjusted return,
            consistent with preservation of capital.


            Under normal circumstances, the fund will invest at least 80% of
            its net assets, plus any borrowings for investment purposes, in
            inflation-indexed bonds of varying maturities issued by the US
            government, non-US governments, their agencies or
            instrumentalities, and corporations and derivatives related to
            these securities. The fund may invest the remaining portion of its
            assets in other types of fixed-income securities, cash or cash
            equivalents.

            In pursuing its investment objective, the fund seeks to protect
            against the erosive effect that US inflation can have on investment
            returns. The fund does this by investing primarily in
            inflation-indexed bonds, which are fixed-income securities that are
            structured to provide protection against inflation. The value of an
            inflation-indexed bond's principal and the interest income paid on
            the bond is adjusted to track changes in an official inflation
            measure, such as the Consumer Price Index for Urban Consumers or a
            comparable inflation index.


            The bond investment process involves both "top down" analysis as
            well as "bottom up" security selection. In completing top down
            analysis, the portfolio managers take into account break-even rates
            of inflation, current economic conditions, real yield curve shape
            and high quality credit spread levels. The results of this analysis
            determine the overall characteristics and structure of the fund's
            portfolio.


            Having determined the desired overall structure of the fund's
            portfolio, the portfolio managers select individual securities
            which best achieve that portfolio composition. Relative value
            compared to similar securities, liquidity of holdings, and credit
            quality of issuers are all factors considered by management when
            bonds are purchased and sold in the portfolio.



4 | DWS Inflation Protected Plus Fund
<PAGE>


            IGAP STRATEGY. In addition to the fund's policy of investing at
            least 80% of its net assets in inflation-indexed bonds and
            derivatives related to these securities, 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 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 over-the-counter forward currency contracts,
            and is expected to have a low correlation to the fund's investments
            in inflation-indexed bonds.

            OTHER DERIVATIVES. The Advisor may also use derivatives and
            currency transactions outside of the iGAP strategy for hedging
            purposes, in circumstances where the Advisor believes they offer a
            more efficient means of gaining exposure to a particular asset
            class or market or to maintain a high degree of liquidity to meet
            shareholder redemptions or other needs while maintaining exposure
            to the market. The derivatives the fund may use, include, among
            others, future contracts, forward currency contracts, interest rate
            swaps, total return swaps and credit default swaps.


            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.


            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.

            INFLATION-INDEXED BOND RISK. Although inflation-indexed bonds are
            expected to be protected from long-term inflationary trends,
            short-term increases in inflation may lead to a decline in the
            fund's value. If interest rates rise due to reasons other than
            inflation, the fund's investment in these securities may not be
            protected to the extent that the increase is not reflected in the
            bond's inflation measure. Moreover, if the fund purchases
            inflation-indexed bonds offered by foreign




THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for  investors who are  interested  in an investment  that
allows investors' income and principal to keep pace with inflation over time.


                                          DWS Inflation Protected Plus Fund  | 5
<PAGE>


            issuers, the rate of inflation measured by the foreign index may
            not be correlated to the rate of inflation in the US. Such foreign
            investments would, in that case, not provide protection against
            inflation in the US. There can be no assurance that the fund's
            returns will reflect the real rate of inflation.


            INTEREST RATE RISK. Generally, fixed-income securities will
            decrease in value when nominal interest rates rise and increase in
            value when nominal interest rates decline. A nominal interest rate
            can be described as the sum of a real interest rate and an expected
            inflation rate. Inflation-indexed bonds decline in value when real
            interest rates rise. In certain interest rate environments, such as
            when real interest rates are rising faster than nominal interest
            rates, inflation-indexed bonds may experience greater losses than
            other fixed-income securities with similar durations. 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.)


            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.



6 | DWS Inflation Protected Plus Fund
<PAGE>


            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of the
            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
            (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.


            AGENCY RISK. Some securities issued by US government agencies or
            instrumentalities are supported only by the credit of that agency
            or instrumentality while other government securities have an
            additional line of credit with the US Treasury. There is no
            guarantee that the US government will provide support to such
            agencies or instrumentalities and such securities may involve risk
            of loss of principal and interest. The full faith and credit
            guarantee of the US government for certain securities doesn't
            protect the fund against market-driven declines in the prices or
            yields of these securities, nor does it apply to shares of the fund
            itself.

            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.

            MARKET RISK. Deteriorating market conditions might cause a general
            weakness in the market that reduces the overall level of securities
            prices in that market. Developments in a particular class of bonds
            or the stock market could also adversely affect the fund by
            reducing the relative attractiveness of bonds as an investment.
            Also, to the extent that the fund emphasizes bonds from any given
            industry, it could be hurt if that industry does not do well.


                                          DWS Inflation Protected Plus Fund  | 7
<PAGE>

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.


            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.


            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

8 | DWS Inflation Protected Plus Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US investments.
               The procedures and rules governing foreign transactions and
               custody may also involve delays in payment, delivery or recovery
               of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.

            Another factor that could affect performance is:

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


                                          DWS Inflation Protected Plus 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 performance (which, unlike fund performance, does not reflect fees or
expenses). The table includes the effects of maximum sales loads on fund
performance. The performance of both the fund and the index 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 Inflation Protected Plus 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>
<C>       <C>
 1.02     11.41
2006      2007
</TABLE>







<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 4.48%, Q4 2007               WORST QUARTER: -2.24%, Q1 2006
</TABLE>




10 | DWS Inflation Protected Plus Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                                            SINCE
                                             1 YEAR      INCEPTION*
--------------------------------------------------------------------------------
<S>                                         <C>         <C>
 CLASS A
--------------------------------------------------------------------------------
   Return before Taxes                         8.34         4.51
--------------------------------------------------------------------------------
   Return after Taxes on Distributions         6.17         0.90
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares                     4.55         0.94**
--------------------------------------------------------------------------------
 CLASS B (Return before Taxes)                 7.53         3.74
--------------------------------------------------------------------------------
 CLASS C (Return before Taxes)                10.64         4.93
--------------------------------------------------------------------------------
 LEHMAN BROTHERS US TREASURY: US
 TIPS INDEX (reflects no deductions for
 fees, expenses or taxes)                     11.63         5.80
--------------------------------------------------------------------------------
</TABLE>




     *   Since July 8, 2005. Index comparison began July 31, 2005.



 **   Return after Taxes on Distributions and Sale of Fund Shares is higher
     than other return figures for the same period due to a capital loss
     occurring upon redemption resulting in an assumed tax deduction for the
     shareholder.

 LEHMAN BROTHERS USTREASURY: US TIPS INDEX is an unmanaged, dollar-denominated
 index consisting of inflation-protected securities issued by the US Treasury
 with at least one year to final maturity and must be rated investment grade
 Baa3/BBB or higher by at least two rating agencies.


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

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.



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

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


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 return
reflects taxes on both the fund's distributions and a shareholder's gain or
loss from selling fund shares.



                                         DWS Inflation Protected Plus 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 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)            2.75% 1          None          None
-------------------------------------------------------------------------------------------
 Maximum Deferred Sales Charge (Load)
 (as % of redemption proceeds)                    None2            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 4                                 0.50%            0.50%         0.50%
-------------------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee                 0.23             0.99          0.99
-------------------------------------------------------------------------------------------
 Other Expenses                                   1.01             1.02          0.90
-------------------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES                  1.74             2.51          2.39
-------------------------------------------------------------------------------------------
 Less Expense Waiver/Reimbursement 5              0.84             0.86          0.74
-------------------------------------------------------------------------------------------
 NET ANNUAL FUND OPERATING EXPENSES
 (AFTER WAIVER) 5                                 0.90             1.65          1.65
-------------------------------------------------------------------------------------------
</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 0.85% if redeemed
   within 12 months of purchase and 0.50% if redeemed within the following six
   months.


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  Includes 0.10% administration fee.


5  Through January 31, 2009, the investment advisor has contractually agreed
   to waive a portion of its fees and reimburse expenses so that total annual
   operating expenses will not exceed 0.90%, 1.65% and 1.65%, for Class A,
   Class B and Class C shares, respectively, excluding certain expenses such
   as extraordinary expenses, taxes, brokerage and interest.


12 | DWS Inflation Protected Plus Fund
<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>
 EXPENSES, assuming you sold your shares at the end of each period
--------------------------------------------------------------------------------
 Class A shares         $364       $  728       $1,116       $2,202
--------------------------------------------------------------------------------
 Class B shares*         568        1,000        1,458        2,416
--------------------------------------------------------------------------------
 Class C shares          268          675        1,209        2,670
--------------------------------------------------------------------------------

 EXPENSES, assuming you kept your shares
--------------------------------------------------------------------------------
 Class A shares         $364       $  728       $1,116       $2,202
--------------------------------------------------------------------------------
 Class B shares*         168          700        1,258        2,416
--------------------------------------------------------------------------------
 Class C shares          168          675        1,209        2,670
--------------------------------------------------------------------------------
</TABLE>




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


                                         DWS Inflation Protected Plus Fund  | 13
<PAGE>

OTHER POLICIES AND SECONDARY 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. The Board of DWS Inflation Protected Plus
              Fund will provide shareholders with at least 60 days notice prior
              to making any changes to the fund's 80% investment policy as
              described herein.


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


           -  The fund may trade actively. This could raise transaction costs
              (thus lowering return) and could mean higher taxable
              distributions.



           Secondary risks


           PRICING RISK. At times, market conditions might make it hard to
           value some investments, and the fund may use certain valuation
           methodologies for some of its investments, such as fair value
           pricing. Given the subjective nature of such methodologies, it is
           possible that the value determined for an investment may be
           different than the value realized upon such investment's sale. If
           the fund has valued its securities too highly, you may end up paying
           too much for fund shares when you buy into the fund. If the fund
           underestimates the price of its securities, you may not receive the
           full market value when you sell your fund shares.



           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).


14 | Other Policies and Secondary Risks
<PAGE>


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

           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. 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.



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.


                                         Who Manages and Oversees the Fund  | 15
<PAGE>


           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 Inflation Protected Plus Fund                    0.00%*
--------------------------------------------------------------------------------
</TABLE>



           *   Reflecting the effect of expense limitations and/or fee waivers
               then in effect.


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


           Under a separate administrative services agreement between the fund
           and the Advisor, the fund pays the Advisor for providing most of the
           fund's administrative services.


16 | Who Manages and Oversees the Fund
<PAGE>

Portfolio management

DWS Inflation Protected Plus 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.

The following people handle the day-to-day management of DWS Inflation
Protected Plus Fund:

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Co-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.

Robert Wang
Managing Director of Deutsche Asset Management and Co-Manager of the fund.
- Joined Deutsche Asset Management in 1995 as portfolio manager for asset
  allocation after 13 years of experience of trading fixed income, foreign
  exchange and derivative products at J.P. Morgan.
- Global Head of Quantitative Strategies Portfolio Management: New York.
- Joined the fund in 2005.
- BS, The Wharton School, University of Pennsylvania.

Matthew F. MacDonald
Director of Deutsche Asset Management and Co-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.


Thomas Picciochi


- Director of Deutsche Asset Management and Co-Manager of the fund.


- 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.


- Senior Portfolio Manager for Quantitative Strategies: New York.
- Joined the fund in 2007.
- BA and MBA, University of Miami.

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.



                                         Who Manages and Oversees the Fund  | 17
<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 PricewaterhouseCoopers
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).


DWS Inflation Protected Plus Fund - Class A



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                                 2007              2006             2005 A
----------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>               <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD                   $  9.91          $  10.11          $ 10.00
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
  Net investment income b                                  .38               .47              .06
----------------------------------------------------------------------------------------------------
  Net realized and unrealized gain (loss)                   17            (  .25)             .07
----------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS                         .55               .22              .13
----------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                                  ( .48)           (  .42)          (  .02)
----------------------------------------------------------------------------------------------------
  Net realized gains                                     ( .01)                -                -
----------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                                    ( .49)           (  .42)          (  .02)
----------------------------------------------------------------------------------------------------
Redemption fees                                            .00***            .00***             -
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD                         $  9.97          $   9.91          $ 10.11
----------------------------------------------------------------------------------------------------
Total Return (%) c,d                                      5.78              2.30             1.27**
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)                       4                 1              .1
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%)           1.81              2.08             2.52*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)             .90               .90              .90*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (%)                        3.94              4.88             2.47*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%)                                167               331               28*
----------------------------------------------------------------------------------------------------
</TABLE>



a   For the period from July 8, 2005 (commencement of operations) to September
    30, 2005.

b   Based on average shares outstanding during the period.

c   Total return does not reflect the effect of any sales charges.

d   Total return would have been lower had certain expenses not been reduced.

*   Annualized

**  Not annualized

*** Amount is less than $.005.

18 | Financial Highlights
<PAGE>

DWS Inflation Protected Plus Fund - Class B



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                              2007           2006            2005 A
----------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD                $  9.95       $  10.12        $  10.00
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
  Net investment income (loss) b                        .31            .40             .04
----------------------------------------------------------------------------------------------------
  Net realized and unrealized gain (loss)               .17         (  .26)            .08
----------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS                      .48            .14             .12
----------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                              (  .40)        (  .31)         (  .00)***
----------------------------------------------------------------------------------------------------
  Net realized gains                                 (  .01)             -               -
----------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                                (  .41)        (  .31)         (  .00)***
----------------------------------------------------------------------------------------------------
Redemption fees                                         .00***         .00***            -
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD                     $  10.02       $   9.95        $  10.12
----------------------------------------------------------------------------------------------------
Total Return (%) c,d                                   5.01           1.46            1.21**
----------------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)                  .3             .1              .1
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%)        2.58           2.81            3.26*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)         1.65           1.65            1.65*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%)              3.19           4.13            1.72*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%)                             167            331              28*
----------------------------------------------------------------------------------------------------
</TABLE>



a   For the period from July 8, 2005 (commencement of operations) to September
    30, 2005.

b   Based on average shares outstanding during the period.

c   Total return does not reflect the effect of any sales charges.

d   Total return would have been lower had certain expenses not been reduced.

*   Annualized

**  Not annualized

*** Amount is less than $.005.

                                                      Financial Highlights  | 19
<PAGE>

DWS Inflation Protected Plus Fund - Class C



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                              2007           2006            2005
----------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>
SELECTED PER SHARE DATA
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD                $  9.96       $  10.12        $  10.00
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
  Net investment income (loss) b                        .31            .40             .04
----------------------------------------------------------------------------------------------------
  Net realized and unrealized gain (loss)               .16         (  .25)            .08
----------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS                      .47            .15             .12
----------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                              (  .40)        (  .31)         (  .00)***
----------------------------------------------------------------------------------------------------
  Net realized gains                                 (  .01)             -               -
----------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                                (  .41)        (  .31)         (  .00)***
----------------------------------------------------------------------------------------------------
Redemption fees                                         .00***         .00***            -
----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD                     $  10.02       $   9.96        $  10.12
----------------------------------------------------------------------------------------------------
Total Return (%) c,d                                   4.90           1.58            1.22**
----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)                    1              1             .1
----------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%)        2.46           2.71            3.26*
----------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)         1.65           1.66            1.65*
----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%)              3.19           4.12            1.72*
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (%)                             167            331              28*
----------------------------------------------------------------------------------------------------
</TABLE>



a   For the period from July 8, 2005 (commencement of operations) to September
    30, 2005.

b   Based on average shares outstanding during the period.

c   Total return does not reflect the effect of any sales charges.

d   Total return would have been lower had certain expenses not been reduced.

*   Annualized

**  Not annualized

*** Amount is less than $.005.

20 | Financial Highlights
<PAGE>

HOW TO INVEST IN THE FUND

Offered in this prospectus are share classes noted on the cover of the
prospectus. 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.

THE FOLLOWING PAGES TELL YOU HOW TO INVEST IN THE FUND AND WHAT TO EXPECT AS A
SHAREHOLDER. 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 directly with DWS Scudder, all of this information applies
to 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.


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.

<PAGE>

CHOOSING A SHARE CLASS


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 description and
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 2.75% 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>




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 class share and fund you buy. Your financial advisor
may also receive compensation from the Advisor and/or its affiliates. Please
see "Financial intermediary support payments" for more information.




22 | Choosing a Share Class
<PAGE>


           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 A %         CHARGE AS A % OF YOUR
YOUR INVESTMENT       OF OFFERING PRICE 1,2         NET INVESTMENT 2
--------------------------------------------------------------------------------
<S>                       <C>                       <C>
  Up to $100,000          2.75%                     2.83%
--------------------------------------------------------------------------------
$  100,000-$249,999       2.50                      2.56
--------------------------------------------------------------------------------
$  250,000-$499,999       2.00                      2.04
--------------------------------------------------------------------------------
$  500,000-$999,999       1.50                      1.52
--------------------------------------------------------------------------------
$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 $100,000 in Class A shares (including
              Class A shares in other retail DWS funds) over the next 24 months
              ("Letter of Intent")

           -  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 $100,000 ("Cumulative
              Discount")

           -  you are investing a total of $100,000 or more in Class A shares
              of several retail DWS funds on the same day ("Combined
              Purchases")

                                                    Choosing a Share Class  | 23
<PAGE>

           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 may apply to transactions by
           certain retirement plans and certain other entities or persons
           (e.g., affiliated persons of Deutsche Asset Management 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).



24 | Choosing a Share Class
<PAGE>


           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 0.85% 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 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.



                                                    Choosing a Share Class  | 25
<PAGE>

           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.


           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.


           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).


26 | Choosing a Share Class
<PAGE>

           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.


                                                    Choosing a Share Class  | 27
<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                          IRAs
 $500 or more for an account with an            $50 or more for an account with an
 Automatic Investment Plan                      Automatic Investment Plan
-----------------------------------------------------------------------------------------
 THROUGH A FINANCIAL ADVISOR
 -  To obtain an application, contact your      -  Contact your advisor using the
    advisor                                        method that's most convenient for you
-----------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL (SEE BELOW)
 -  Fill out and sign an application            -  Send a check made payable to "DWS
                                                   Scudder" and an investment slip to us
 -  Send it to us at the appropriate
    address, along with an investment           -  If you don't have an investment slip,
    check made payable to "DWS                     simply include a letter with your
    Scudder"                                       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 information on our              -  To set up regular investments from a
    application including a check for the          bank checking account call (800) 621-
    initial investment and a voided check          1048 ($50 minimum)
-----------------------------------------------------------------------------------------
 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                                  -  Call (800) 621-1048 to ensure you have
                                                   electronic services
                                                -  Register at www.dws-scudder.com or
                                                   log in if already registered
                                                -  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


28 | How to Buy Class A, B and C Shares
<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 for regular         please see "Signature Guarantee"
    accounts and UGMAs
    $500 minimum for IRAs
---------------------------------------------------------------------------------------------------
 THROUGH A FINANCIAL ADVISOR
 -  Contact your advisor using the              -  Contact your advisor by the method
    method that's most convenient for you          that's most convenient for you
---------------------------------------------------------------------------------------------------
 BY PHONE                                        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 or          -  Register at www.dws-scudder.com or
    log in if already registered                   log in if already registered
 -  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) 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>



                           How to Exchange or Sell Class A, B and C Shares  | 29
<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 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.



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



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


32 | Policies You Should Know About
<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.


                                            Policies You Should Know About  | 33
<PAGE>

           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, 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.



34 | Policies You Should Know About
<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 fund may make exceptions to the roundtrip transaction policy for
           certain types of transactions if, in the opinion of the Advisor, 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).



                                            Policies You Should Know About  | 35
<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.



36 | Policies You Should Know About
<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 a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) transactions on behalf of any mutual fund advised by



                                            Policies You Should Know About  | 37
<PAGE>


           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; (v) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vi)
           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; (vii)
           transactions involving hardship of any registered shareholder;
           (viii) systematic transactions with pre-defined trade dates for
           purchases, exchanges or redemptions, such as automatic account
           rebalancing, or loan origination and repayments; (ix) transactions
           involving shares purchased through the reinvestment of dividends or
           other distributions; (x) 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); (xi) 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 (xii) 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
           purchase 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) 621-1048.


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.


38 | Policies You Should Know About
<PAGE>


           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, 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




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  | 39
<PAGE>

           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


           -  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

40 | Policies You Should Know About
<PAGE>

            -  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 or 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



                                            Policies You Should Know About  | 41
<PAGE>


           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 based on the NAV per share
           calculated after the order is received by the transfer agent,
           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 based on the NAV per share calculated
           after the order is received by the transfer agent, 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 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



42 | Policies You Should Know About
<PAGE>

           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


                                            Policies You Should Know About  | 43
<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)



44 | Policies You Should Know About
<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.


           INCOME DIVIDENDS ARE DECLARED DAILY AND PAID MONTHLY; short-term and
           long-term capital gains are paid in November or December, or
           otherwise as needed.

           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.


                                     Understanding Distributions and Taxes  | 45
<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



46 | Understanding Distributions and Taxes
<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.



                                     Understanding Distributions and Taxes  | 47
<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.



48 | Appendix
<PAGE>


DWS Inflation Protected Plus Fund - Class A





<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               2.75%                   $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            5.00%        0.90%              1.24%       $ 10,123.73        $   364.32
----------------------------------------------------------------------------------------------
   2           10.25%        1.74%              4.54%       $ 10,453.76        $   179.02
----------------------------------------------------------------------------------------------
   3           15.76%        1.74%              7.95%       $ 10,794.55        $   184.86
----------------------------------------------------------------------------------------------
   4           21.55%        1.74%             11.46%       $ 11,146.45        $   190.89
----------------------------------------------------------------------------------------------
   5           27.63%        1.74%             15.10%       $ 11,509.83        $   197.11
----------------------------------------------------------------------------------------------
   6           34.01%        1.74%             18.85%       $ 11,885.05        $   203.54
----------------------------------------------------------------------------------------------
   7           40.71%        1.74%             22.73%       $ 12,272.50        $   210.17
----------------------------------------------------------------------------------------------
   8           47.75%        1.74%             26.73%       $ 12,672.58        $   217.02
----------------------------------------------------------------------------------------------
   9           55.13%        1.74%             30.86%       $ 13,085.71        $   224.10
----------------------------------------------------------------------------------------------
  10           62.89%        1.74%             35.12%       $ 13,512.30        $   231.40
----------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 2,202.43
----------------------------------------------------------------------------------------------
</TABLE>




DWS Inflation Protected Plus 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            5.00%        1.65%              3.35%       $ 10,335.00        $   167.76
----------------------------------------------------------------------------------------------
   2           10.25%        2.51%              5.92%       $ 10,592.34        $   262.64
----------------------------------------------------------------------------------------------
   3           15.76%        2.51%              8.56%       $ 10,856.09        $   269.18
----------------------------------------------------------------------------------------------
   4           21.55%        2.51%             11.26%       $ 11,126.41        $   275.88
----------------------------------------------------------------------------------------------
   5           27.63%        2.51%             14.03%       $ 11,403.46        $   282.75
----------------------------------------------------------------------------------------------
   6           34.01%        2.51%             16.87%       $ 11,687.40        $   289.79
----------------------------------------------------------------------------------------------
   7           40.71%        1.74%             20.68%       $ 12,068.41        $   206.68
----------------------------------------------------------------------------------------------
   8           47.75%        1.74%             24.62%       $ 12,461.84        $   213.41
----------------------------------------------------------------------------------------------
   9           55.13%        1.74%             28.68%       $ 12,868.10        $   220.37
----------------------------------------------------------------------------------------------
  10           62.89%        1.74%             32.88%       $ 13,287.60        $   227.55
----------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 2,416.01
----------------------------------------------------------------------------------------------
</TABLE>





                                                                  Appendix  | 49

<PAGE>


DWS Inflation Protected Plus 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            5.00%        1.65%              3.35%       $ 10,335.00        $   167.76
----------------------------------------------------------------------------------------------
   2           10.25%        2.39%              6.05%       $ 10,604.74        $   250.23
----------------------------------------------------------------------------------------------
   3           15.76%        2.39%              8.82%       $ 10,881.53        $   256.76
----------------------------------------------------------------------------------------------
   4           21.55%        2.39%             11.66%       $ 11,165.54        $   263.46
----------------------------------------------------------------------------------------------
   5           27.63%        2.39%             14.57%       $ 11,456.96        $   270.34
----------------------------------------------------------------------------------------------
   6           34.01%        2.39%             17.56%       $ 11,755.98        $   277.39
----------------------------------------------------------------------------------------------
   7           40.71%        2.39%             20.63%       $ 12,062.81        $   284.63
----------------------------------------------------------------------------------------------
   8           47.75%        2.39%             23.78%       $ 12,377.65        $   292.06
----------------------------------------------------------------------------------------------
   9           55.13%        2.39%             27.01%       $ 12,700.71        $   299.69
----------------------------------------------------------------------------------------------
  10           62.89%        2.39%             30.32%       $ 13,032.20        $   307.51
----------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 2,669.83
----------------------------------------------------------------------------------------------
</TABLE>





50 | 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) 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 Institutional Funds        DWS Inflation Protected Plus Fund    811-6071
</TABLE>









(02/01/08) DIPPF-1
[RECYCLE GRAPHIC APPEARS HERE]
                                                 [DWS SCUDDER LOGO APPEARS HERE]


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

                                FEBRUARY 1, 2008








                                   PROSPECTUS
                              ------------------
                              INSTITUTIONAL CLASS



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

                       DWS INFLATION PROTECTED PLUS 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
  5      The Main Risks of Investing in
         the Fund
 10      The Fund's Performance
         History
 12      How Much Investors Pay
 13      Other Policies and Secondary
         Risks
 14      Who Manages and Oversees
         the Fund
 17      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUND
 19      Buying and Selling
         Institutional Class Shares
 25      Policies You Should Know
         About
 36      Understanding Distributions
         and Taxes
 40      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

On the next few pages, you'll find information about the fund's investment
objective, the main strategies it uses to pursue that objective 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     TIPIX
                                     fund number     854
--------------------------------------------------------------------------------

    DWS INFLATION PROTECTED PLUS FUND


</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks to provide maximum inflation-adjusted return,
            consistent with preservation of capital.


            Under normal circumstances, the fund will invest at least 80% of
            its net assets, plus any borrowings for investment purposes, in
            inflation-indexed bonds of varying maturities issued by the US
            government, non-US governments, their agencies or
            instrumentalities, and corporations and derivatives related to
            these securities. The fund may invest the remaining portion of its
            assets in other types of fixed-income securities, cash or cash
            equivalents.

            In pursuing its investment objective, the fund seeks to protect
            against the erosive effect that US inflation can have on investment
            returns. The fund does this by investing primarily in
            inflation-indexed bonds, which are fixed-income securities that are
            structured to provide protection against inflation. The value of an
            inflation-indexed bond's principal and the interest income paid on
            the bond is adjusted to track changes in an official inflation
            measure, such as the Consumer Price Index for Urban Consumers or a
            comparable inflation index.


            The bond investment process involves both "top down" analysis as
            well as "bottom up" security selection. In completing top down
            analysis, the portfolio managers take into account break-even rates
            of inflation, current economic conditions, real yield curve shape
            and high quality credit spread levels. The results of this analysis
            determine the overall characteristics and structure of the fund's
            portfolio.


            Having determined the desired overall structure of the fund's
            portfolio, the portfolio managers select individual securities
            which best achieve that portfolio composition. Relative value
            compared to similar securities, liquidity of holdings, and credit
            quality of issuers are all factors considered by management when
            bonds are purchased and sold in the portfolio.



4 | DWS Inflation Protected Plus Fund
<PAGE>


            iGAP STRATEGY. In addition to the fund's policy of investing at
            least 80% of its net assets in inflation-indexed bonds and
            derivatives related to these securities, 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 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 over-the-counter forward currency contracts,
            and is expected to have a low correlation to the fund's investments
            in inflation-indexed bonds.

            OTHER DERIVATIVES. The Advisor may also use derivatives and
            currency transactions outside of the iGAP strategy for hedging
            purposes, in circumstances where the Advisor believes they offer a
            more efficient means of gaining exposure to a particular asset
            class or market or to maintain a high degree of liquidity to meet
            shareholder redemptions or other needs while maintaining exposure
            to the market. The derivatives the fund may use, include, among
            others, future contracts, forward currency contracts, interest rate
            swaps, total return swaps and credit default swaps.


            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.

            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.

            INFLATION-INDEXED BOND RISK. Although inflation-indexed bonds are
            expected to be protected from long-term inflationary trends,
            short-term increases in inflation may lead to a decline in the
            fund's value. If interest rates rise due to reasons other than
            inflation, the fund's investment in these securities may not be
            protected to the extent that the increase is not reflected in the
            bond's inflation measure. Moreover, if the fund purchases
            inflation-indexed bonds offered by foreign


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors who are interested in an investment that
allows investors' income and principal to keep pace with inflation over time.


                                          DWS Inflation Protected Plus Fund  | 5
<PAGE>


            issuers, the rate of inflation measured by the foreign index may
            not be correlated to the rate of inflation in the US. Such foreign
            investments would, in that case, not provide protection against
            inflation in the US. There can be no assurance that the fund's
            returns will reflect the real rate of inflation.


            INTEREST RATE RISK. Generally, fixed-income securities will
            decrease in value when nominal interest rates rise and increase in
            value when nominal interest rates decline. A nominal interest rate
            can be described as the sum of a real interest rate and an expected
            inflation rate. Inflation-indexed bonds decline in value when real
            interest rates rise. In certain interest rate environments, such as
            when real interest rates are rising faster than nominal interest
            rates, inflation-indexed bonds may experience greater losses than
            other fixed-income securities with similar durations. 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.)


            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.



6 | DWS Inflation Protected Plus Fund
<PAGE>


            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of the
            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
            (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.


            AGENCY RISK. Some securities issued by US government agencies or
            instrumentalities are supported only by the credit of that agency
            or instrumentality while other government securities have an
            additional line of credit with the US Treasury. There is no
            guarantee that the US government will provide support to such
            agencies or instrumentalities and such securities may involve risk
            of loss of principal and interest. The full faith and credit
            guarantee of the US government for certain securities doesn't
            protect the fund against market-driven declines in the prices or
            yields of these securities, nor does it apply to shares of the fund
            itself.

            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.

            MARKET RISK. Deteriorating market conditions might cause a general
            weakness in the market that reduces the overall level of securities
            prices in that market. Developments in a particular class of bonds
            or the stock market could also adversely affect the fund by
            reducing the relative attractiveness of bonds as an investment.
            Also, to the extent that the fund emphasizes bonds from any given
            industry, it could be hurt if that industry does not do well.


                                          DWS Inflation Protected Plus Fund  | 7
<PAGE>

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.


            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income
               or gain received on these securities.


            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

8 | DWS Inflation Protected Plus Fund
<PAGE>

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US investments.
               The procedures and rules governing foreign transactions and
               custody may also involve delays in payment, delivery or recovery
               of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.

            Another factor that could affect performance is:

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


                                          DWS Inflation Protected Plus 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 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 performance (which, unlike fund performance, does not reflect fees or
expenses). The performance of both the fund and the index 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 Inflation Protected Plus Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Institutional Class
[GRAPHIC APPEARS HERE]






<TABLE>
<C>       <C>
 1.19     11.67
2006      2007
</TABLE>







<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 4.44%, Q4 2007               WORST QUARTER: -2.18%, Q1 2006
</TABLE>




10 | DWS Inflation Protected Plus Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                                              SINCE
                                              1 YEAR       INCEPTION*
--------------------------------------------------------------------------------
<S>                                         <C>           <C>
 INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
   Return before Taxes                          11.67          5.93
--------------------------------------------------------------------------------
   Return after Taxes on Distributions           9.35          2.16
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares                       6.67          2.02
--------------------------------------------------------------------------------
 LEHMAN BROTHERS US TREASURY: US
 TIPS INDEX (reflects no deductions for
 fees, expenses or taxes)                       11.63          5.80
--------------------------------------------------------------------------------
</TABLE>




     *   Since July 8, 2005. Index comparison began July 31, 2005.


 LEHMAN BROTHERS US TREASURY: US TIPS INDEX is an unmanaged, dollar-denominated
 index consisting of inflation-protected securities issued by the US Treasury
 with at least one year to final maturity and must be rated investment grade
 Baa3/BBB or higher by at least two rating agencies.


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

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.



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

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


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 return
reflects taxes on both the fund's distributions and a shareholder's gain or
loss from selling fund shares.



                                         DWS Inflation Protected Plus 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
--------------------------------------------------------------------------------
<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 2                            0.50%
--------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee            0.00
--------------------------------------------------------------------------------
 Other Expenses                              0.79
--------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES             1.29
--------------------------------------------------------------------------------
 Less Expense Waiver/Reimbursement 3         0.64
--------------------------------------------------------------------------------
 NET ANNUAL FUND OPERATING
 EXPENSES 3                                  0.65
--------------------------------------------------------------------------------
</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  Includes 0.10% administration fee.


3  Through January 31, 2009, the investment advisor has contractually agreed
   to waive a portion of its fees and reimburse expenses so that total annual
   operating expenses will not exceed 0.65%, excluding certain expenses such
   as extraordinary expenses, taxes, brokerage and interest.


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         $66         $346         $646       $1,500
--------------------------------------------------------------------------------
</TABLE>




12 | DWS Inflation Protected Plus Fund
<PAGE>

OTHER POLICIES AND SECONDARY 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. The Board of DWS Inflation Protected Plus
              Fund will provide shareholders with at least 60 days notice prior
              to making any changes to the fund's 80% investment policy as
              described herein.


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


           -  The fund may trade actively. This could raise transaction costs
              (thus lowering return) and could mean higher taxable
              distributions.



           Secondary risks


           PRICING RISK. At times, market conditions might make it hard to
           value some investments, and the fund may use certain valuation
           methodologies for some of its investments, such as fair value
           pricing. Given the subjective nature of such methodologies, it is
           possible that the value determined for an investment may be
           different than the value realized upon such investment's sale. If
           the fund has valued its securities too highly, you may end up paying
           too much for fund shares when you buy into the fund. If the fund
           underestimates the price of its securities, you may not receive the
           full market value when you sell your fund shares.



           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).


                                        Other Policies and Secondary Risks  | 13
<PAGE>


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

           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. 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.



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.


14 | Who Manages and Oversees the Fund
<PAGE>


           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 Inflation Protected Plus Fund                  0.00%*
--------------------------------------------------------------------------------
</TABLE>



           *   Reflecting the effect of expense limitations and/or fee waivers
               then in effect.


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


           Under a separate administrative services agreement between the fund
           and the Advisor, the fund pays the Advisor for providing most of the
           fund's administrative services.


                                         Who Manages and Oversees the Fund  | 15
<PAGE>

Portfolio management

DWS Inflation Protected Plus 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.

The following people handle the day-to-day management of DWS Inflation
Protected Plus Fund:

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Co-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.

Robert Wang
Managing Director of Deutsche Asset Management and Co-Manager of the fund.
- Joined Deutsche Asset Management in 1995 as portfolio manager for asset
  allocation after 13 years of experience of trading fixed income, foreign
  exchange and derivative products at J.P. Morgan.
- Global Head of Quantitative Strategies Portfolio Management: New York.
- Joined the fund in 2005.
- BS, The Wharton School, University of Pennsylvania.

Matthew F. MacDonald
Director of Deutsche Asset Management and Co-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.


Thomas Picciochi


Director of Deutsche Asset Management and Co-Manager of the fund.


- 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.


- Senior Portfolio Manager for Quantitative Strategies: New York.
- Joined the fund in 2007.
- BA and MBA, University of Miami.

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.



16 | 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 PricewaterhouseCoopers 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).


DWS Inflation Protected Plus Fund - Institutional Class



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                                 2007              2006             2005 A
---------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>               <C>
SELECTED PER SHARE DATA
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD                   $  9.91          $  10.12          $ 10.00
---------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
  Net investment income b                                  .41               .50              .07
---------------------------------------------------------------------------------------------------------
  Net realized and unrealized gain (loss) on
  investment transactions                                  .16            (  .26)             .07
---------------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS                         .57               .24              .14
---------------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                                  ( .50)           (  .45)          (  .02)
---------------------------------------------------------------------------------------------------------
  Net realized gains                                     ( .01)                -                -
---------------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                                    ( .51)           (  .45)          (  .02)
---------------------------------------------------------------------------------------------------------
Redemption fees                                            .00***            .00***             -
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD                         $  9.97          $   9.91          $ 10.12
---------------------------------------------------------------------------------------------------------
Total Return (%) c                                        6.05              2.50             1.43**
---------------------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)                      27                23               20
---------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%)           1.36              1.67             2.12*
---------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)             .65               .65              .65*
---------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)                        4.19              5.13             2.72*
---------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%)                                167               331               28*
---------------------------------------------------------------------------------------------------------
</TABLE>



a   For the period from July 8, 2005 (commencement of operations) to September
    30, 2005.

b   Based on average shares outstanding during the period.

c   Total return would have been lower had certain expenses not been reduced.

*   Annualized

**  Not annualized

*** Amount is less than $.005.

                                                      Financial Highlights  | 17
<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. 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 directly with DWS Scudder, all of this information applies
to 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.


                             Buying and Selling Institutional Class Shares  | 19
<PAGE>


           Investment minimum


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

           The minimum initial investment is waived for:

           -  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 fund in
              the aggregate meet (or, in the Advisor's judgment, will meet
              within a reasonable period of time) 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 64121-9210
  ADDITIONAL              DWS Scudder Investments Service Company
  INVESTMENTS BY          P.O. Box 219210
--------------------------------------------------------------------------------
  MAIL:                   Kansas City, MO 64121-9210
  BY OVERNIGHT MAIL:      DWS Scudder Investments Service Company
                          210 West 10th Street
                          Kansas City, MO 64105-1614
--------------------------------------------------------------------------------
</TABLE>




20 | Buying and Selling Institutional Class Shares
<PAGE>

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


           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. 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. See "Signature Guarantee" for any applicable additional
           requirements. 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  | 21
<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 Institutional Investment Services at (800) 730-1313 to
           notify us in advance of a wire transfer purchase. Inform
           Institutional Investment 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
           Institutional Investment Services at (800) 730-1313. Inform
           Institutional Investment Services of the amount of your redemption
           and receive a trade confirmation number. The minimum redemption by
           wire is $1,000. We must receive your order by 4:00 p.m. Eastern time
           to wire your account the next business day.



22 | 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 Institutional Investment 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 Institutional Investment 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 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  | 23
<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


24 | 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  | 25
<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.


26 | 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  | 27
<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 fund may make exceptions to the roundtrip transaction policy for
           certain types of transactions if, in the opinion of the Advisor, 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.



28 | 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  | 29
<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 a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) 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; (v) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vi)
           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; (vii)
           transactions involving hardship of any registered shareholder;
           (viii) systematic transactions with pre-defined trade dates for
           purchases, exchanges or redemptions, such as automatic account
           rebalancing, or loan origination and repayments; (ix) transactions
           involving shares purchased through the reinvestment of dividends or
           other distributions; (x) transactions involving shares transferred
           from another account in the same fund or converted from another
           class of the same fund (the



30 | Policies You Should Know About
<PAGE>


           redemption fee period will carry over to the acquired shares); (xi)
           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 (xii) 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.


           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 Institutional Investment 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
           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 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  | 31
<PAGE>


           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.


           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


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.


32 | Policies You Should Know About
<PAGE>


           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 or 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.

           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.



                                            Policies You Should Know About  | 33
<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


34 | Policies You Should Know About
<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


                                            Policies You Should Know About  | 35
<PAGE>


           -  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.


           INCOME DIVIDENDS ARE DECLARED DAILY AND PAID MONTHLY; short-term and
           long-term capital gains are paid in November or December, or
           otherwise as needed.

           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.





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.


36 | Understanding Distributions and Taxes
<PAGE>


           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 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.



                                     Understanding Distributions and Taxes  | 37
<PAGE>


           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.

           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.



38 | 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  | 39
<PAGE>


            DWS Inflation Protected Plus Fund - Institutional Class





<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            5.00%        0.65%              4.35%       $ 10,435.00        $    66.41
-----------------------------------------------------------------------------------------------
   2           10.25%        1.29%              8.22%       $ 10,822.14        $   137.11
-----------------------------------------------------------------------------------------------
   3           15.76%        1.29%             12.24%       $ 11,223.64        $   142.20
-----------------------------------------------------------------------------------------------
   4           21.55%        1.29%             16.40%       $ 11,640.04        $   147.47
-----------------------------------------------------------------------------------------------
   5           27.63%        1.29%             20.72%       $ 12,071.88        $   152.94
-----------------------------------------------------------------------------------------------
   6           34.01%        1.29%             25.20%       $ 12,519.75        $   158.62
-----------------------------------------------------------------------------------------------
   7           40.71%        1.29%             29.84%       $ 12,984.23        $   164.50
-----------------------------------------------------------------------------------------------
   8           47.75%        1.29%             34.66%       $ 13,465.95        $   170.60
-----------------------------------------------------------------------------------------------
   9           55.13%        1.29%             39.66%       $ 13,965.53        $   176.93
-----------------------------------------------------------------------------------------------
  10           62.89%        1.29%             44.84%       $ 14,483.65        $   183.50
-----------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 1,500.28
-----------------------------------------------------------------------------------------------
</TABLE>





40 | 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) 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 Institutional Funds        DWS Inflation Protected Plus Fund    811-6071
</TABLE>








(02/01/08) DIPPF-1-IN
[RECYCLE GRAPHIC APPEARS HERE]
                                                 [DWS SCUDDER LOGO APPEARS HERE]
<PAGE>

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


                                FEBRUARY 1, 2008








                                   PROSPECTUS
                              ------------------
                                    CLASS S



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

                       DWS INFLATION PROTECTED PLUS 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
  5      The Main Risks of Investing in
         the Fund
 10      The Fund's Performance
         History
 12      How Much Investors Pay
 13      Other Policies and Secondary
         Risks
 14      Who Manages and Oversees
         the Fund
 17      Financial Highlights


</TABLE>
<TABLE>
<S>      <C>
HOW TO INVEST IN THE FUND
 19      How to Buy Shares
 20      How to Exchange or Sell
         Shares
 23      Policies You Should Know
         About
 35      Understanding Distributions
         and Taxes
 38      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

On the next few pages, you'll find information about the fund's investment
objective, the main strategies it uses to pursue that objective 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      TIPSX
                                                fund number      2354

    DWS INFLATION PROTECTED PLUS FUND
--------------------------------------------------------------------------------



</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks to provide maximum inflation-adjusted return,
            consistent with preservation of capital.


            Under normal circumstances, the fund will invest at least 80% of
            its net assets, plus any borrowings for investment purposes, in
            inflation-indexed bonds of varying maturities issued by the US
            government, non-US governments, their agencies or
            instrumentalities, and corporations and derivatives related to
            these securities. The fund may invest the remaining portion of its
            assets in other types of fixed-income securities, cash or cash
            equivalents.

            In pursuing its investment objective, the fund seeks to protect
            against the erosive effect that US inflation can have on investment
            returns. The fund does this by investing primarily in
            inflation-indexed bonds, which are fixed-income securities that are
            structured to provide protection against inflation. The value of an
            inflation-indexed bond's principal and the interest income paid on
            the bond is adjusted to track changes in an official inflation
            measure, such as the Consumer Price Index for Urban Consumers or a
            comparable inflation index.


            The bond investment process involves both "top down" analysis as
            well as "bottom up" security selection. In completing top down
            analysis, the portfolio managers take into account break-even rates
            of inflation, current economic conditions, real yield curve shape
            and high quality credit spread levels. The results of this analysis
            determine the overall characteristics and structure of the fund's
            portfolio.


            Having determined the desired overall structure of the fund's
            portfolio, the portfolio managers select individual securities
            which best achieve that portfolio composition. Relative value
            compared to similar securities, liquidity of holdings, and credit
            quality of issuers are all factors considered by management when
            bonds are purchased and sold in the portfolio.



4 | DWS Inflation Protected Plus Fund
<PAGE>


            iGAP STRATEGY. In addition to the fund's policy of investing at
            least 80% of its net assets in inflation-indexed bonds and
            derivatives related to these securities, 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 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 over-the-counter forward currency contracts,
            and is expected to have a low correlation to the fund's investments
            in inflation-indexed bonds.

            OTHER DERIVATIVES. The Advisor may also use derivatives and
            currency transactions outside of the iGAP strategy for hedging
            purposes, in circumstances where the Advisor believes they offer a
            more efficient means of gaining exposure to a particular asset
            class or market or to maintain a high degree of liquidity to meet
            shareholder redemptions or other needs while maintaining exposure
            to the market. The derivatives the fund may use, include, among
            others, future contracts, forward currency contracts, interest rate
            swaps, total return swaps and credit default swaps.


            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.


            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.


            INFLATION-INDEXED BOND RISK. Although inflation-indexed bonds are
            expected to be protected from long-term inflationary trends,
            short-term increases in inflation may lead to a decline in the
            fund's value. If interest rates rise due to reasons other than
            inflation, the fund's investment in these securities may not be
            protected to the extent that the increase is not reflected in the
            bond's inflation measure. Moreover, if the fund purchases
            inflation-indexed bonds offered by foreign



                                          DWS Inflation Protected Plus Fund  | 5
<PAGE>


            issuers, the rate of inflation measured by the foreign index may
            not be correlated to the rate of inflation in the US. Such foreign
            investments would, in that case, not provide protection against
            inflation in the US. There can be no assurance that the fund's
            returns will reflect the real rate of inflation.


            INTEREST RATE RISK. Generally, fixed-income securities will
            decrease in value when nominal interest rates rise and increase in
            value when nominal interest rates decline. A nominal interest rate
            can be described as the sum of a real interest rate and an expected
            inflation rate. Inflation-indexed bonds decline in value when real
            interest rates rise. In certain interest rate environments, such as
            when real interest rates are rising faster than nominal interest
            rates, inflation-indexed bonds may experience greater losses than
            other fixed-income securities with similar durations. 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.)


            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.





THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors who are interested in an investment that
allows investors' income and principal to keep pace with inflation over time.




6 | DWS Inflation Protected Plus Fund
<PAGE>


            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of an issuer may decline, causing the value of the
            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
            (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.


            AGENCY RISK. Some securities issued by US government agencies or
            instrumentalities are supported only by the credit of that agency
            or instrumentality while other government securities have an
            additional line of credit with the US Treasury. There is no
            guarantee that the US government will provide support to such
            agencies or instrumentalities and such securities may involve risk
            of loss of principal and interest. The full faith and credit
            guarantee of the US government for certain securities doesn't
            protect the fund against market-driven declines in the prices or
            yields of these securities, nor does it apply to shares of the fund
            itself.

            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.


                                          DWS Inflation Protected Plus Fund  | 7
<PAGE>

            MARKET RISK. Deteriorating market conditions might cause a general
            weakness in the market that reduces the overall level of securities
            prices in that market. Developments in a particular class of bonds
            or the stock market could also adversely affect the fund by
            reducing the relative attractiveness of bonds as an investment.
            Also, to the extent that the fund emphasizes bonds from any given
            industry, it could be hurt if that industry does not do well.

            FOREIGN INVESTMENT RISK. Foreign investments involve certain
            special risks, including:

            -  POLITICAL RISK. Some foreign governments have limited the
               outflow of profits to investors abroad, imposed restrictions on
               the exchange or export of foreign currency, extended diplomatic
               disputes to include trade and financial relations, seized
               foreign investment and imposed high taxes.

            -  INFORMATION RISK. Companies based in foreign markets are usually
               not subject to accounting, auditing and financial reporting
               standards and practices as stringent as those in the US.
               Therefore, their financial reports may present an incomplete,
               untimely or misleading picture of a foreign company, as compared
               to the financial reports of US companies.


            -  LIQUIDITY RISK. Investments that trade less can be more
               difficult or more costly to buy, or to sell, than more liquid or
               active investments. This liquidity risk is a factor of the
               trading volume of a particular investment, as well as the size
               and liquidity of the entire local market. On the whole, foreign
               exchanges are smaller and less liquid than the US market. This
               can make buying and selling certain investments more difficult
               and costly. Relatively small transactions in some instances can
               have a disproportionately large effect on the price and supply
               of securities. In certain situations, it may become virtually
               impossible to sell an investment in an orderly fashion at a
               price that approaches portfolio management's estimate of its
               value. For the same reason, it may at times be difficult to
               value the fund's foreign investments.


            -  REGULATORY RISK. There is generally less government regulation
               of foreign markets, companies and securities dealers than in the
               US.

8 | DWS Inflation Protected Plus Fund
<PAGE>


            -  CURRENCY RISK. The fund invests in securities denominated in
               foreign currencies. This creates the possibility that changes in
               exchange rates between foreign currencies and the US dollar will
               affect the US dollar value of foreign securities or the income or
               gain received on these securities.


            -  LIMITED LEGAL RECOURSE RISK. Legal remedies for investors may be
               more limited than the remedies available in the US.

            -  TRADING PRACTICE RISK. Brokerage commissions and other fees are
               generally higher for foreign investments than for US
               investments. The procedures and rules governing foreign
               transactions and custody may also involve delays in payment,
               delivery or recovery of money or investments.

            -  TAXES. Foreign withholding and certain other taxes may reduce
               the amount of income available to distribute to shareholders of
               the fund. In addition, special US tax considerations may apply
               to the fund's foreign investments.

            Another factor that could affect performance is:

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


                                          DWS Inflation Protected Plus 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 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 performance (which,
unlike fund performance, does not reflect fees or expenses). The performance of
both the fund and the index 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 Inflation Protected Plus Fund

ANNUAL TOTAL RETURN (%) AS OF 12/31 EACH YEAR - Class S
[GRAPHIC APPEARS HERE]






<TABLE>
<C>       <C>
 1.13     11.53
2006      2007
</TABLE>







<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 4.42%, Q4 2007               WORST QUARTER: -2.11%, Q1 2006
</TABLE>




10 | DWS Inflation Protected Plus Fund
<PAGE>


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




<TABLE>
<CAPTION>
                                                              SINCE
                                              1 YEAR       INCEPTION*
--------------------------------------------------------------------------------
<S>                                         <C>           <C>
 CLASS S
--------------------------------------------------------------------------------
   Return before Taxes                          11.53          5.81
--------------------------------------------------------------------------------
   Return after Taxes on Distributions           9.26          2.07
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares                       6.58          1.93
--------------------------------------------------------------------------------
 LEHMAN BROTHERS US TREASURY: US
 TIPS INDEX (reflects no deductions for
 fees, expenses or taxes)                       11.63          5.80
--------------------------------------------------------------------------------
</TABLE>




     *   Since July 8, 2005. Index comparison began July 31, 2005.


 LEHMAN BROTHERS USTREASURY: US TIPS INDEX is an unmanaged, dollar-denominated
 index consisting of inflation-protected securities issued by the US Treasury
 with at least one year to final maturity and must be rated investment grade
 Baa3/BBB or higher by at least two rating agencies.


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

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.



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

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


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 return
reflects taxes on both the fund's distributions and a shareholder's gain or
loss from selling fund shares.



                                         DWS Inflation Protected Plus 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 2                                    0.50%
--------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee                    None
--------------------------------------------------------------------------------
 Other Expenses                                      0.89
--------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES                     1.39
--------------------------------------------------------------------------------
 Less Expense Waiver/Reimbursement 3                 0.69
--------------------------------------------------------------------------------
 NET ANNUAL FUND OPERATING
 EXPENSES 3                                          0.70
--------------------------------------------------------------------------------
</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  Includes 0.10% administration fee.


3  Through January 31, 2009,the investment advisor has contractually agreed to
   waive a portion of its fees and reimburse expenses so that total annual
   operating expenses will not exceed 0.70%, excluding certain expenses such
   as extraordinary expenses, taxes, brokerage and interest.


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>
 Class S shares         $72         $372         $695       $1,609
--------------------------------------------------------------------------------
</TABLE>




12 | DWS Inflation Protected Plus Fund
<PAGE>

OTHER POLICIES AND SECONDARY 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. The Board of DWS Inflation Protected Plus
              Fund will provide shareholders with at least 60 days notice prior
              to making any changes to the fund's 80% investment policy as
              described herein.


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


           -  The fund may trade actively. This could raise transaction costs
              (thus lowering return) and could mean higher taxable
              distributions.



           Secondary risks


           PRICING RISK. At times, market conditions might make it hard to
           value some investments, and the fund may use certain valuation
           methodologies for some of its investments, such as fair value
           pricing. Given the subjective nature of such methodologies, it is
           possible that the value determined for an investment may be
           different than the value realized upon such investment's sale. If
           the fund has valued its securities too highly, you may end up paying
           too much for fund shares when you buy into the fund. If the fund
           underestimates the price of its securities, you may not receive the
           full market value when you sell your fund shares.



           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).


                                        Other Policies and Secondary Risks  | 13
<PAGE>


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

           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. 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.



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.


14 | Who Manages and Oversees the Fund
<PAGE>


           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 Inflation Protected Plus Fund                    0.00%*
--------------------------------------------------------------------------------
</TABLE>



           *   Reflecting the effect of expense limitations and/or fee waivers
               then in effect.


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


           Under a separate administrative services agreement between the fund
           and the Advisor, the fund pays the Advisor for providing most of the
           fund's administrative services.


                                         Who Manages and Oversees the Fund  | 15
<PAGE>

Portfolio management

DWS Inflation Protected Plus 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.

The following people handle the day-to-day management of DWS Inflation
Protected Plus Fund:

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Co-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.

Robert Wang
Managing Director of Deutsche Asset Management and Co-Manager of the fund.
- Joined Deutsche Asset Management in 1995 as portfolio manager for asset
  allocation after 13 years of experience of trading fixed income, foreign
  exchange and derivative products at J.P. Morgan.
- Global Head of Quantitative Strategies Portfolio Management: New York.
- Joined the fund in 2005.
- BS, The Wharton School, University of Pennsylvania.

Matthew F. MacDonald
Director of Deutsche Asset Management and Co-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.


Thomas Picciochi


- Director of Deutsche Asset Management and Co-Manager of the fund.


- 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.


- Senior Portfolio Manager for Quantitative Strategies: New York.
- Joined the fund in 2007.
- BA and MBA, University of Miami.

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.



16 | 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 PricewaterhouseCoopers 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).


DWS Inflation Protected Plus Fund - Class S



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                                 2007              2006            2005 A
------------------------------------------------------------------------------------------ --------------
<S>                                                  <C>              <C>               <C>
SELECTED PER SHARE DATA
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD                   $  9.90          $  10.12          $ 10.00
--------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
  Net investment income b                                  .40               .48              .06
--------------------------------------------------------------------------------------------------------
  Net realized and unrealized gain (loss)                  .16            (  .26)             .08
--------------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS                         .56               .22              .14
--------------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                                  ( .49)           (  .44)          (  .02)
--------------------------------------------------------------------------------------------------------
  Net realized gains                                     ( .01)                -                -
--------------------------------------------------------------------------------------------------------
  TOTAL DISTRIBUTIONS                                    ( .50)           (  .44)          (  .02)
--------------------------------------------------------------------------------------------------------
Redemption fees                                            .00***            .00***             -
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD                         $  9.96          $   9.90          $ 10.12
--------------------------------------------------------------------------------------------------------
Total Return (%) c                                        5.87              2.32             1.40**
--------------------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)                       5                 1               .2
--------------------------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%)           1.47              1.79             2.39*
--------------------------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%)             .75               .80              .80*
--------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)                        4.08              4.98             2.57*
--------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%)                                167               331               28*
--------------------------------------------------------------------------------------------------------
</TABLE>



a   For the period from July 8, 2005 (commencement of operations) to September
    30, 2005.

b   Based on average shares outstanding during the period.

c   Total return would have been lower had certain expenses not been reduced.

*   Annualized

**  Not annualized

*** Amount is less than $.005.

                                                      Financial Highlights  | 17
<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. 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 directly with DWS Scudder, all of this information applies
to 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 Shares





<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                      IRAs
 $1,000 or more for an account with an        $50 or more for an account with an
 Automatic Investment Plan                    Automatic Investment Plan
--------------------------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL (SEE BELOW)
                                              Send a DWS Scudder investment slip or
 -  Fill out and sign an application          short note that includes:
 -  Send it to us at the appropriate          -  fund and class name
    address, along with an investment         -  account number
    check made payable to "DWS                -  check payable to "DWS Scudder"
    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 our            -  To set up regular investments from a
    application including a check for the        bank checking account, call
    initial investment and a voided check        (800) 728-3337 (minimum $50)
--------------------------------------------------------------------------------------------------------
 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
 -  Register at www.dws-scudder.com or        -  Call (800) 728-3337 to ensure you have
    log in if already registered                 electronic services
 -  Print out a prospectus and a new          -  Register at www.dws-scudder.com
    account application                          or log in if already registered
 -  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 Shares  | 19
<PAGE>


How to EXCHANGE or SELL 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;
    $2,500 minimum per fund                     please see "Signature Guarantee"
    $1,000 minimum for IRAs and UGMAs
--------------------------------------------------------------------------------------------------------
 BY PHONE                                        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
 -  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          - 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 or          - Register at www.dws-scudder.com or
    log in if already registered                  log in if already registered
 -  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>




20 | How to Sell or 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 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 Sell or Exchange Shares  | 21
<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


22 | How to Sell or 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  | 23
<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.


24 | 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  | 25
<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.



26 | 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 fund may make exceptions to the roundtrip transaction policy for
           certain types of transactions if, in the opinion of the Advisor, 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  | 27
<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.

           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


28 | Policies You Should Know About
<PAGE>

           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 a shareholder to return any excess IRA
           contributions to the shareholder; (iii) transactions on behalf of a
           shareholder to effect a required minimum distribution on an IRA;
           (iv) 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; (v) transactions on behalf of certain
           unaffiliated mutual funds operating as funds of funds; (vi)
           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; (vii)
           transactions involving hardship of any registered shareholder;
           (viii) systematic transactions with pre-defined trade dates for
           purchases, exchanges or redemptions, such as automatic account
           rebalancing, or loan origination and repayments; (ix) transactions
           involving shares purchased through the reinvestment of dividends or
           other distributions; (x) 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); (xi) 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 (xii) 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



                                            Policies You Should Know About  | 29
<PAGE>


           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
           purchase 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. 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.




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.



30 | Policies You Should Know About
<PAGE>


           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.

           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 or ACH (the



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  | 31
<PAGE>


           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.


           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,


32 | Policies You Should Know About
<PAGE>


           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.)


                                            Policies You Should Know About  | 33
<PAGE>

           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

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



34 | Policies You Should Know About
<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.


           INCOME DIVIDENDS ARE DECLARED DAILY AND PAID MONTHLY; short-term and
           long-term capital gains are paid in November or December, or
           otherwise as needed.

           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.

                                     Understanding Distributions and Taxes  | 35
<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



36 | Understanding Distributions and Taxes
<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.



                                     Understanding Distributions and Taxes  | 37
<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.



38 | Appendix
<PAGE>


DWS Inflation Protected Plus 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            5.00%        0.70%              4.30%       $ 10,430.00        $    71.51
--------------------------------------------------------------------------------------------------------
   2           10.25%        1.39%              8.07%       $ 10,806.52        $   147.59
--------------------------------------------------------------------------------------------------------
   3           15.76%        1.39%             11.97%       $ 11,196.64        $   152.92
--------------------------------------------------------------------------------------------------------
   4           21.55%        1.39%             16.01%       $ 11,600.84        $   158.44
--------------------------------------------------------------------------------------------------------
   5           27.63%        1.39%             20.20%       $ 12,019.63        $   164.16
--------------------------------------------------------------------------------------------------------
   6           34.01%        1.39%             24.54%       $ 12,453.54        $   170.09
--------------------------------------------------------------------------------------------------------
   7           40.71%        1.39%             29.03%       $ 12,903.11        $   176.23
--------------------------------------------------------------------------------------------------------
   8           47.75%        1.39%             33.69%       $ 13,368.91        $   182.59
--------------------------------------------------------------------------------------------------------
   9           55.13%        1.39%             38.52%       $ 13,851.53        $   189.18
--------------------------------------------------------------------------------------------------------
  10           62.89%        1.39%             43.52%       $ 14,351.57        $   196.01
--------------------------------------------------------------------------------------------------------
  TOTAL                                                                        $ 1,608.72
--------------------------------------------------------------------------------------------------------
</TABLE>





                                                                  Appendix  | 39

<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 Institutional Funds        DWS Inflation Protected Plus Fund    811-6071
</TABLE>








(02/01/08) 354-2
[RECYCLE GRAPHIC APPEARS HERE]
[DWS SCUDDER LOGO APPEARS HERE]
Supplement to the currently effective Statement of Additional Information of
each of the listed funds/portfolios:

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

Cash Management Fund Institutional
Cash Reserve Fund, Inc.
    Prime Series
Cash Reserve Fund Institutional
NY Tax Free Money Fund
Tax Free Money Fund Investment
DWS Capital Growth Fund
DWS Climate Change Fund
DWS Commodity Securities Fund
DWS Communications Fund
DWS Core Fixed Income Fund
DWS Core Plus Income Fund
DWS EAFE(R) Equity Index Fund
DWS Emerging Markets Equity Fund
DWS Emerging Markets Fixed Income Fund
DWS Enhanced S&P 500 Index Fund
DWS Equity 500 Index Fund
DWS Equity Income Fund
DWS Equity Partners Fund
DWS Europe Equity Fund
DWS Floating Rate Plus Fund
DWS Global Bond Fund
DWS Global Opportunities Fund
DWS Global Thematic Fund
DWS GNMA Fund
DWS Gold & Precious Metals Fund
DWS Growth & Income Fund
DWS Health Care Fund
DWS High Income Plus Fund
DWS High Yield Tax Free Fund
DWS Inflation Protected Plus Fund
DWS Intermediate Tax/AMT Free Fund
DWS International Fund
DWS International Select Equity Fund
DWS International Value Opportunities Fund
DWS Investments VIT Funds
    DWS Equity 500 Index VIP
    DWS RREEF Real Estate Securities VIP
    DWS Small Cap Index VIP
DWS Japan Equity Fund
DWS Large Company Growth Fund
DWS Latin America Equity Fund
DWS LifeCompass 2015 Fund
DWS LifeCompass 2020 Fund
DWS LifeCompass 2030 Fund
DWS LifeCompass 2040 Fund
DWS LifeCompass Retirement Fund
DWS Lifecycle Long Range Fund
DWS Managed Municipal Bond Fund
DWS Massachusetts Tax-Free Fund
DWS Micro Cap Fund
DWS Mid Cap Growth Fund
DWS Money Market Series
DWS RREEF Global Real Estate Securities Fund
DWS RREEF Real Estate Securities Fund
DWS S&P 500 Index Fund
DWS Short Duration Fund
DWS Short Duration Plus Fund
DWS Short-Term Municipal Bond Fund
DWS Small Cap Core Fund
DWS Small Cap Growth Fund
DWS Small Cap Value Fund
DWS U.S. Bond Index Fund
DWS Value Builder Fund
DWS Variable Series I
    DWS Bond VIP
    DWS Capital Growth VIP
    DWS Global Opportunities VIP
    DWS Growth & Income VIP
    DWS Health Care VIP
    DWS International VIP


At present, substantially all DWS mutual funds are overseen by one of two boards
of  trustees/directors  (the  "Boards").  Each Board,  including  the Board that
oversees your Fund (the "New York 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 and their shareholders. In this connection, each
Board  has  approved  a  plan  outlining  the  process  for   implementing   the
consolidation of the New York Board with the other primary DWS mutual fund board
(the "Chicago  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 New
York Board will nominate and elect four individuals (John W. Ballantine, Paul K.
Freeman,  William  McClayton and Robert H. Wadsworth) who currently serve on the
Chicago  Board to the Board of your Fund and each other fund overseen by the New
York Board.  Information regarding these four individuals is set forth below. In
addition,  the Chicago  Board has  determined  to nominate  and  recommend  that
shareholders  of each fund  overseen by that Board  elect eight  members of your
Fund's 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).  As a result,  as of the  Consolidation  Date,  it is
expected  that the four Chicago  Board  members and eight New York Board members
named above (each of whom will be an Independent  Board  Member),  together with
Axel  Schwarzer,  CEO of DWS  Scudder,  will  constitute  the  Board of each DWS
Scudder mutual fund (134 funds), including your Fund.


<PAGE>

To  facilitate  the Board  consolidation,  three  members  of the New York Board
(Martin J. Gruber, Graham E. Jones and Carl W. Vogt) have agreed to resign as of
the  Consolidation  Date,  which  is prior to  their  normal  retirement  dates.
Independent  Board Members of the New York Board do not receive  benefits  under
any pension or retirement plan. However,  the New York Board has determined that
it would be  appropriate  to provide those three  Independent  Board Members who
agreed to resign prior to the Board's normal  retirement  date with a retirement
agreement,  the terms of which include a one-time  benefit.  As 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 full cost of
this one-time  benefit  (which for each retiring  Independent  Board Member will
equal his annual  compensation  immediately  preceding  the  Consolidation  Date
multiplied  by the lesser of (i) two;  or (ii) the  number of years (or  portion
thereof)  from  the  Consolidation  Date  to his  normal  retirement  date).  As
consideration  for this  benefit,  each  retiring  Independent  Board Member has
agreed not to serve on the board of another  mutual fund without  prior  consent
for a specified  period.  In  addition,  pursuant to an  agreement  between each
retiring  Independent  Board Member,  the New York Funds and DIMA, each retiring
Independent Board Member has received certain assurances regarding  continuation
of insurance and indemnification rights.

Following the  Consolidation  Date, it is expected that the  consolidated  Board
will implement  certain  changes to the Fund's 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
the Fund's statement of additional information upon implementation.


<PAGE>






<TABLE>
<CAPTION>
                                                                                                      Position with
                                                                                                      the DWS Funds
                                                Business Experience and Directorships                 and Length of
     Name and Year of Birth                            During the Past 5 Years                         Time Served
---------------------------------- ---------------------------------------------------------------- ------------------
Chicago Board Members to be
   Elected to New York Board
---------------------------------- ---------------------------------------------------------------- ------------------
<S>                                <C>                                                              <C>
John W. Ballantine (1946)          Retired; formerly, Executive Vice President and Chief Risk       Chicago Board
                                   Management Officer, First Chicago NBD Corporation/The First      Member since
                                   National Bank of Chicago (1996-1998); Executive Vice President   1999.
                                   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
---------------------------------- ---------------------------------------------------------------- ------------------
Paul K. Freeman (1950)             Consultant, World Bank/Inter-American Development Bank;          Chicago Board
                                   formerly, Project Leader, International Institute for Applied    Member since
                                   Systems Analysis (1998-2001); Chief Executive Officer, The       2002,
                                   Eric Group, Inc. (environmental insurance) (1986-1998).          Chairperson
                                   Formerly, Trustee of funds managed by DIMA or its affiliates     since 2007.
                                   (1993-2002).
---------------------------------- ---------------------------------------------------------------- ------------------
William McClayton (1944)           Chief Administrative Officer, Diamond Management & Technology    Chicago Board
                                   Consultants, Inc. (global management consulting firm)            Member since
                                   (2001-present); formerly, Senior Partner, Arthur Andersen LLP    2004.
                                   (accounting) (1966-2001).  Directorships: Board of Managers,
                                   YMCA of Metropolitan Chicago; formerly, Trustee, Ravinia
                                   Festival.
---------------------------------- ---------------------------------------------------------------- ------------------
Robert H. Wadsworth (1940)         President, Robert H. Wadsworth & Associates, Inc. (consulting    Chicago Board
                                   firm) (1983 to present).  Formerly, Trustee of funds managed     Member since
                                   by DIMA or its affiliates (1999-2004).                           2004.
---------------------------------- ---------------------------------------------------------------- ------------------


</TABLE>











                            Please Retain This Supplement for Future Reference


November 26, 2007



<PAGE>


                             DWS INSTITUTIONAL FUNDS

                        DWS Inflation Protected Plus Fund

                        Classes A, B, C and Institutional


                       STATEMENT OF ADDITIONAL INFORMATION
                                February 1, 2008


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

The Annual Report to  Shareholders,  dated  September 30, 2007, is  incorporated
herein by reference  and is deemed to be part of this  Statement  of  Additional
Information.  A copy of the Fund's Annual Report may be obtained  without charge
by calling the Fund at the toll-free number 1-800-621-1048


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




<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----



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

INVESTMENT POLICIES AND TECHNIQUES............................................2
         Investment Techniques................................................2
         Portfolio Holdings..................................................24

MANAGEMENT OF THE FUND.......................................................26
         Investment Advisor..................................................26
         Compensation of Portfolio Managers..................................29

FUND SERVICE PROVIDERS.......................................................38
         Administrator.......................................................38
         Distributor.........................................................39
         Independent Registered Public Accounting Firm.......................43
         Legal Counsel.......................................................43
         Fund Accounting Agent...............................................43
         Custodian, Transfer Agent and Shareholder Service Agent.............43

PORTFOLIO TRANSACTIONS.......................................................45

PURCHASE AND REDEMPTION OF SHARES............................................49

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

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

NET ASSET VALUE..............................................................80

TRUSTEES AND OFFICERS........................................................81

FUND ORGANIZATION...........................................................101

PROXY VOTING GUIDELINES.....................................................103

FINANCIAL STATEMENTS........................................................104

ADDITIONAL INFORMATION......................................................104

APPENDIX....................................................................105





                                       i

<PAGE>



No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations  not contained in this SAI or in the  Prospectuses in connection
with  the  offering  made by  each  Prospectus  and,  if  given  or  made,  such
information or representations must not be relied upon as having been authorized
by the Trust or its Distributor. Each Prospectus does not constitute an offering
by the Trust or by the  Distributor in any  jurisdiction  in which such offering
may not  lawfully  be made.  Shares  of the Fund may not  available  in  certain
states.  Please call (800)  621-1048,  or (800)  730-1313 for the  Institutional
Class, to determine availability in your state.



                                       ii
<PAGE>


                             INVESTMENT RESTRICTIONS


Except as otherwise indicated,  the Fund's investment objective and policies are
not  fundamental  and may be changed by the Board of Trustees  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  separate
open-end  investment  management  companies.  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 (other than US government securities or securities
of investment  companies) or invest in more than 10% of the  outstanding  voting
securities of such issuer (with certain exceptions).


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

1.       borrow  money,   except  as  permitted  under  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, 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 or sell commodities,  except as permitted by the 1940 Act, and
         as  interpreted  or  modified  by  the  regulatory   authority   having
         jurisdiction, from time to time; and

7.       make loans except as permitted  under the 1940 Act, 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 a 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.

Non-Fundamental Policies. The Board has voluntarily adopted certain policies and
restrictions,  which are  observed in the conduct of the Fund's  affairs.  These
represent   intentions   of  the   Board   based   on   current   circumstances.
Non-fundamental  policies  may be changed by the Board  without  approval of or,
with certain exceptions, prior notice to shareholders.

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

1.       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

<PAGE>

         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;

2.       lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets; or

3.       acquire  securities  of  registered  open-end  investment  companies or
         registered unit investment  trusts in reliance on Sections  12(d)(1)(F)
         or 12(d)(1)(G) of the 1940 Act.

The Fund will not purchase illiquid securities,  including repurchase agreements
maturing in more than seven days, if, as a result thereof,  more than 15% of the
Fund's net assets,  valued at the time of the transaction,  would be invested in
such securities.


Under normal circumstances, the fund will invest at least 80% of its net assets,
plus any borrowings  for  investment  purposes,  in  inflation-indexed  bonds of
varying  maturities  issued  by the US  government,  non-US  governments,  their
agencies or instrumentalities, and corporations and derivatives related to those
securities.

To meet  federal  income  tax  requirements  for  qualification  as a  regulated
investment company,  the Fund must, among other things, limit its investments so
that at the close of each  quarter of its  taxable  year (1) no more than 25% of
the  value of its  total  assets  is  invested  in the  securities  (other  than
securities of the US Government or a regulated  investment  company) of a single
issuer or two or more  issuers of which the Fund holds 20% or more of the voting
stock and which are engaged in the same, similar or related trades or businesses
or in the securities of one or more qualified publicly traded partnerships,  and
(2) at least 50% of the value of its total assets is represented  by cash,  cash
items (including  receivables),  US Government  securities,  securities of other
regulated  investment companies and other securities of any issuer that does not
represent more than 5% of the value of the Fund's total assets and not more than
10% of the issuer's outstanding voting securities.


There will be no violation of any investment  restrictions  or policies  (except
with  respect  to  fundamental   investment   restriction  (1)  above)  if  that
restriction  is  complied  with  at the  time  the  relevant  action  is  taken,
notwithstanding  a later change in the market value of an investment,  in net or
total assets,  or in the change of securities  rating of the investment,  or any
other later change.

                       INVESTMENT POLICIES AND TECHNIQUES

Investment Techniques


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,  including  the  Fund,  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.  The Fund may  engage in  certain  additional
practices not described herein.


Fixed Income Securities

General. The Fund may invest in fixed income securities. In periods of declining
interest  rates,  the yield  (income from  portfolio  investments  over a stated
period of time) of the Fund may tend to be higher than prevailing  market rates,
and in periods of rising  interest  rates,  the yield of the Fund may tend to be
lower. In addition, when interest rates are falling, the inflow of net new money
to the Fund will likely be invested in  portfolio  instruments  producing  lower
yields than the balance of the Fund's  portfolio,  thereby reducing the yield of
the Fund. In periods of rising interest rates, the opposite can be true. The net
asset value of the Fund can generally be expected to change as


                                       2
<PAGE>

general levels of interest rates fluctuate. The value of fixed income securities
in the Fund's  portfolio  generally  varies  inversely  with changes in interest
rates.  Prices of fixed income  securities with longer effective  maturities are
more  sensitive  to interest  rate  changes  than those with  shorter  effective
maturities.

Inflation-Indexed  Bonds.  The Fund may  purchase  inflation-indexed  securities
issued by the US Treasury,  US government agencies and  instrumentalities  other
than the US Treasury,  and entities  other than the US Treasury or US government
agencies and instrumentalities.

Inflation-indexed  bonds are fixed income  securities or other instruments whose
principal value is periodically adjusted according to the rate of inflation. Two
structures  are common.  The US Treasury and some other  issuers use a structure
that accrues  inflation  on either a current or lagged basis into the  principal
value of the bond.  Most other issuers pay out the price index  accruals as part
of a semi-annual coupon.


Inflation-indexed  securities issued by the US Treasury have maturities of five,
ten or  twenty  years,  although  it is  possible  that  securities  with  other
maturities will be issued in the future. The US Treasury securities pay interest
on a semi-annual  basis,  equal to a fixed percentage of the  inflation-adjusted
principal amount. For example, if the Fund purchased an  inflation-indexed  bond
with a par value of $1,000  and a 3% real rate of return  coupon  (payable  1.5%
semi-annually),  and calculated  inflation over the first six months was 1%, the
mid-year  value of the bond would be $1,010 and the first  semi-annual  interest
payment would be $15.15 ($1,010 times 1.5%). If calculated  inflation during the
second half of the year resulted in the whole year's inflation  equaling 3%, the
end of year  value  of the bond  would  be  $1,030  and the  second  semi-annual
interest payment would be $15.45 ($1,030 times 1.5%).


If the periodic  adjustment rate measuring  inflation falls, the principal value
of inflation-indexed  bonds will be adjusted downward,  and,  consequently,  the
interest  payable  on these  securities  (calculated  with  respect to a smaller
principal  amount) will be reduced.  Repayment of the original bond principal on
maturity (as adjusted for  inflation)  is  guaranteed in the case of US Treasury
inflation-indexed bonds, even during a period of deflation. However, the current
market value of the bonds is not  guaranteed  and will  fluctuate.  The Fund may
also  invest in other  inflation  related  bonds  that may or may not  provide a
similar  guarantee.  If a guarantee of principal is not  provided,  the adjusted
principal  value of the bond  repaid at maturity  may be less than the  original
principal. In addition, if the Fund purchases inflation-indexed bonds offered by
foreign issuers,  the rate of inflation  measured by the foreign inflation index
may not be correlated to the rate of inflation in the US.

The value of  inflation-indexed  bonds is  expected  to change  in  response  to
changes in real interest  rates.  Real interest  rates, in turn, are tied to the
relationship   between  nominal  interest  rates  and  the  rate  of  inflation.
Therefore,  if  inflation  were to rise at a faster rate than  nominal  interest
rates,  real interest  rates might  decline,  leading to an increase in value of
inflation-indexed  bonds. In contrast,  if nominal interest rates increased at a
faster  rate than  inflation,  real  interest  rates  might  rise,  leading to a
decrease  in  value  of  inflation-indexed  bonds.  There  can be no  assurance,
however,  that the value of inflation-indexed  bonds will be directly correlated
to changes in interest rates.

While these securities are expected to be protected from long-term  inflationary
trends,  short-term  increases in inflation  may lead to a decline in value.  If
interest  rates rise due to reasons other than  inflation  (for example,  due to
changes in currency  exchange  rates),  investors in these securities may not be
protected  to the  extent  that the  increase  is not  reflected  in the  bond's
inflation measure.

In  general,  the  measure  used to  determine  the  periodic  adjustment  of US
inflation-indexed  bonds  is  the  Consumer  Price  Index  for  Urban  Consumers
("CPI-U"), which is calculated monthly by the US Bureau of Labor Statistics. The
CPI-U is a measurement  of changes in the cost of living,  made up of components
such as housing,  food,  transportation and energy. The inflation  adjustment to
the securities  references this index with a three month lag.  Inflation-indexed
bonds  issued  by a foreign  government  are  generally  adjusted  to  reflect a
comparable inflation index calculate by the applicable government.  There can be
no  assurance  that the CPI-U or any  foreign  inflation  index will  accurately
measure  the  real  rate of  inflation  in the  prices  of goods  and  services.
Moreover,  there can be no  assurance  that the rate of  inflation  in a foreign
country will be correlated to the rate of inflation in the US.  Finally,  income
distributions  of the  Fund  are  likely  to  fluctuate  more  than  those  of a
conventional bond fund.

                                       3
<PAGE>

The  taxation  of  inflation-indexed  US Treasury  securities  is similar to the
taxation of  conventional  bonds.  Both  interest  payments  and the  difference
between original principal and the inflation-adjusted  principal will be treated
as interest  income  subject to  taxation.  Interest  payments  are taxable when
received or accrued. The inflation adjustment to the principal is subject to tax
in the year the  adjustment  is made,  not at maturity of the security  when the
cash from the repayment of principal is received.  If an upward  adjustment  has
been  made  (which  typically  should  happen),  investors  in  non-tax-deferred
accounts  will pay taxes on this  amount  currently.  Decreases  in the  indexed
principal  can be  deducted  only from  current or  previous  interest  payments
reported as income.

Inflation-indexed  US Treasury  securities  therefore have a potential cash flow
mismatch   to  an   investor,   because   investors   must  pay   taxes  on  the
inflation-adjusted  principal before the repayment of principal is received.  It
is  possible  that,   particularly  for  high  income  tax  bracket   investors,
inflation-indexed  US Treasury  securities would not generate enough income in a
given year to cover the tax liability they could create.  This is similar to the
current tax treatment for zero-coupon  bonds and other discount  securities.  If
inflation-indexed  US Treasury  securities  are sold prior to maturity,  capital
losses or gains are realized in the same manner as traditional bonds.

Inflation-indexed securities are designed to offer a return linked to inflation,
thereby  protecting  future  purchasing  power of the  money  invested  in them.
However, inflation-indexed securities provide this protected return only if held
to maturity.  In  addition,  inflation-indexed  securities  may not trade at par
value.  Real interest  rates (the market rate of interest  less the  anticipated
rate of inflation)  change over time as a result of many  factors,  such as what
investors  are  demanding as a true value for money.  When real rates do change,
inflation-indexed securities prices will be more sensitive to these changes than
conventional  bonds,  because these securities were sold originally based upon a
real interest rate that is no longer prevailing.  Should market expectations for
real interest  rates rise,  the price of  inflation-indexed  securities  and the
share  price of the Fund may fall.  Investors  in the Fund should be prepared to
accept not only this share price  volatility  but also the possible  adverse tax
consequences it may cause.

An  investment  in  securities  featuring  inflation-adjusted  principal  and/or
interest  involves factors not associated with more traditional  fixed-principal
securities. Such factors include the possibility that the inflation index may be
subject  to  significant  changes,  that  changes  in the  index  may or may not
correlate to changes in interest rates generally or changes in other indices, or
that the  resulting  interest  may be greater or less than that payable on other
securities of similar  maturities.  In the event of sustained  deflation,  it is
possible that the amount of semiannual interest payments, the inflation-adjusted
principal  of the  security  and the  value  of the  stripped  components,  will
decrease. If any of these possibilities are realized, the Fund's net asset value
could be negatively affected.


Put  Bonds.  The Fund may  invest  in "put"  bonds  (including  securities  with
variable  interest rates) that may be sold back to the issuer of the security at
face value at the  option of the  holder  prior to their  stated  maturity.  The
Advisor  intends to purchase  only those "put" bonds for which the put option is
an integral part of the security as originally  issued.  The option to "put" the
bond back to the issuer  before the stated final  maturity can cushion the price
decline of the bond in a rising interest rate environment.  However, the premium
paid,  if any,  for an option to put will have the effect of reducing  the yield
otherwise payable on the underlying security. For the purpose of determining the
"maturity"  of  securities  purchased  subject to an option to put,  and for the
purpose of determining the Fund's dollar  weighted  average  maturity,  the Fund
will  consider  "maturity"  to be the  first  date on which it has the  right to
demand  payment from the issuer of the put  although  the final  maturity of the
security is later than such date.


US  Government  Securities.  The  Fund  may  invest  in  obligations  issued  or
guaranteed as to both principal and interest by the US Government, its agencies,
instrumentalities  or sponsored  enterprises ("US Government  securities").  The
full  faith  and  credit  of  the  United  States  support  some  US  Government
securities,  such  as US  Treasury  bills,  notes  and  bonds.  Others,  such as
obligations issued or guaranteed by US Government agencies or instrumentalities,
are supported either by (i) the full faith and credit of the US Government (such
as  securities  of the  Small  Business  Administration),  (ii) the right of the
issuer to borrow from the US Treasury  (such as  securities  of the Federal Home
Loan Banks), (iii) the discretionary  authority of the US Government to purchase
the agency's  obligations  (such as securities of the Federal National  Mortgage
Association),  or (iv) only the credit of the issuer.  No assurance can be given
that the US Government will provide financial support to US Government  agencies
or instrumentalities in the future.

                                       4
<PAGE>

The Fund may also invest in separately traded principal and interest  components
of  securities  guaranteed  or  issued  by the US  Government  or its  agencies,
instrumentalities  or  sponsored  enterprises  if  such  components  are  traded
independently under the Separate Trading of Registered Interest and Principal of
Securities  program  ("STRIPS")  or  any  similar  program  sponsored  by the US
Government.  STRIPS  are  sold as  zero  coupon  securities.  See  "Zero  Coupon
Securities."

Custodial  Receipts.  Custodial  receipts  are  interests in  separately  traded
interest and  principal  component  parts of US Government  securities  that are
issued by banks or brokerage  firms and are created by  depositing US Government
securities  into a special  account at a custodian bank. The custodian holds the
interest and principal  payments for the benefit of the registered owners of the
certificates  or  receipts.  The  custodian  arranges  for the  issuance  of the
certificates  or receipts  evidencing  ownership  and  maintains  the  register.
Custodial receipts include Treasury Receipts ("TRs"), Treasury Investment Growth
Receipts ("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS").
TIGRs and CATS are  interests  in  private  proprietary  accounts  while TRs and
STRIPS  (see  "US  Government  Securities"  above)  are  interests  in  accounts
sponsored by the US Treasury.  Receipts are sold as zero coupon securities;  for
more information, see "Zero Coupon Securities."

The Fund may  acquire US  Government  securities  and their  unmatured  interest
coupons  that have been  separated  ("stripped")  by their  holder,  typically a
custodian  bank or  investment  brokerage  firm.  Having  separated the interest
coupons from the  underlying  principal  of the US  Government  securities,  the
holder will resell the stripped  securities in custodial receipt programs with a
number of different  names,  including TIGRs and CATS. The stripped  coupons are
sold separately from the underlying  principal,  which is usually sold at a deep
discount  because the buyer  receives  only the right to receive a future  fixed
payment on the  security  and does not receive  any rights to periodic  interest
(cash)  payments.  The  underlying US Treasury  bonds and notes  themselves  are
generally  held in book-entry  form at a Federal  Reserve  Bank.  Counsel to the
underwriters  of  these  certificates  or other  evidences  of  ownership  of US
Treasury  securities  have stated  that,  in their  opinion,  purchasers  of the
stripped  securities  most likely will be deemed the  beneficial  holders of the
underlying US Government  securities for federal tax and securities purposes. In
the case of CATS and TIGRS, the Internal Revenue Service (the "IRS") has reached
this conclusion for the purpose of applying the tax diversification requirements
applicable to regulated  investment  companies such as the Fund.  CATS and TIGRS
are not  considered US Government  securities by the staff of the SEC.  Further,
the  IRS  conclusion  noted  above  is  contained  only  in  a  general  counsel
memorandum,  which is an internal  document of no precedential  value or binding
effect,  and a private letter  ruling,  which also may not be relied upon by the
Fund.  The  Trust  is  not  aware  of  any  binding  legislative,   judicial  or
administrative authority on this issue.


Zero Coupon Securities.  STRIPS and custodial receipts (TRs, TIGRs and CATS) are
sold as zero coupon securities,  that is, fixed income securities that have been
stripped of their unmatured interest coupons. Zero coupon securities are sold at
a (usually  substantial)  discount and redeemed at face value at their  maturity
date without interim cash payments of interest or principal.  The amount of this
discount  is  accreted  over  the  life  of  the  security,  and  the  accretion
constitutes  the  income  earned on the  security  for both  accounting  and tax
purposes.  Because the Fund must  distribute  the  accreted  amounts in order to
qualify for favorable tax treatment, it may have to sell portfolio securities to
generate cash to satisfy the applicable  distribution  requirements.  Because of
these features,  the market prices of zero coupon  securities are generally more
volatile  than the market prices of  securities  that have similar  maturity but
that pay interest periodically.  Zero coupon securities are likely to respond to
a greater  degree to interest rate changes than are non-zero  coupon  securities
with similar maturity and credit qualities. (See "Taxes" below).


Variable  and  Floating  Rate  Instruments.  The Fund may invest in  variable or
floating  rate  instruments  and  variable  rate demand  instruments,  including
variable amount master demand notes.  These  instruments  will normally  involve
industrial  development  or revenue bonds that provide that the rate of interest
is set as a specific  percentage  of a  designated  base rate (such as the prime
rate) at a major  commercial  bank.  In  addition,  the  interest  rate on these
securities may be reset daily, weekly or on some other reset period and may have
a floor or ceiling on interest  rate changes.  When holding such an  instrument,
the Fund can demand  payment  of the  obligation  at all times or at  stipulated
dates on short  notice  (not to  exceed 30 days) at par plus  accrued  interest.
Generally,  changes in interest  rates will have a smaller  effect on the market
value of these  instruments than on the market value of fixed income  securities
and,  thus,  may  allow  for  less  opportunity  for  capital   appreciation  or
depreciation.

                                       5
<PAGE>

Debt  instruments  purchased by the Fund may be  structured  to have variable or
floating  interest rates.  These  instruments may include variable amount master
demand notes that permit the  indebtedness  to vary in addition to providing for
periodic  adjustments  in the  interest  rates.  The Advisor  will  consider the
earning  power,  cash  flows  and other  liquidity  ratios  of the  issuers  and
guarantors  of such  instruments  and, if the  instrument is subject to a demand
feature,  will  continuously  monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
equivalent  to the  quality  standards  applicable  to the Fund's  fixed  income
investments, the issuer's obligation to pay the principal of the instrument will
be backed  by an  unconditional  bank  letter or line of  credit,  guarantee  or
commitment  to lend.  Any bank  providing  such a bank  letter,  line of credit,
guarantee or loan commitment will meet the Fund's  investment  quality standards
relating to investments in bank obligations.  The Advisor will also continuously
monitor the creditworthiness of issuers of such instruments to determine whether
the Fund should continue to hold the investments.

The absence of an active secondary market for certain variable and floating rate
notes could make it difficult to dispose of the instruments,  and the Fund could
suffer a loss if the issuer  defaults or during periods in which the Fund is not
entitled to exercise its demand rights.

Variable and floating rate  instruments  held by the Fund will be subject to the
Fund's limitation on investments in illiquid  securities when a reliable trading
market for the instruments does not exist and the Fund may not demand payment of
the principal amount of such instruments within seven days.

Yields  and  Ratings.  The yields on certain  obligations,  including  the money
market  instruments  in which the Fund may invest (such as commercial  paper and
bank  obligations),  are  dependent on a variety of factors,  including  general
market conditions,  conditions in the particular market for the obligation,  the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue.  The ratings of S&P,  Moody's and other
recognized rating  organizations  represent their respective  opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute  standards of quality or value.  Consequently,  obligations
with the same  rating,  maturity  and interest  rate may have  different  market
prices. See Appendix A for a description of the ratings provided by S&P, Moody's
and certain other recognized rating organizations.

Subsequent  to its purchase by the Fund, a rated  security may cease to be rated
or its rating may be reduced below the minimum  rating  required for purchase by
the  Fund.  The  Board  of  Trustees  or the  Advisor,  pursuant  to  guidelines
established by the Board of Trustees, will consider such an event in determining
whether the Fund should  continue to hold the  security in  accordance  with the
interests of the Fund and applicable regulations of the SEC.


Lower  Quality  Debt  Obligations  "Junk  Bonds."  The Fund may  invest in below
investment grade bonds,  including  securities in default.  These securities are
considered  speculative  and,  while  generally  offering  greater  income  than
investments  in  higher  quality  securities,  involve  greater  risk of loss of
principal and income,  including the possibility of default or bankruptcy of the
issuers of such securities, and have greater price volatility, especially during
periods of economic  uncertainty or change. These lower quality bonds tend to be
affected by economic changes and short-term corporate and industry  developments
to a greater extent than higher  quality  securities,  which react  primarily to
fluctuations in the general level of interest rates.


Below  investment grade bonds (junk bonds) will also be affected by the market's
perception  of  their  credit  quality,   especially  during  times  of  adverse
publicity,  and the outlook for economic growth. In the past, economic downturns
or an increase in interest  rates have,  under certain  circumstances,  caused a
higher  incidence of default by the issuers of these securities and may do so in
the future,  especially in the case of highly leveraged issuers.  The market for
these  lower  quality  bonds  is  generally  less  liquid  than the  market  for
investment grade bonds.  Therefore,  the Advisor's  judgment may at times play a
greater role in valuing these  securities  than in the case of investment  grade
bonds, and it also may be more difficult under certain adverse market conditions
to sell these lower quality securities to meet redemption  requests,  to respond
to changes in the market, or to determine accurately the Fund's net asset value.

Subject to its  investment  limitations,  the Fund may  invest in high  yielding
fixed  income  securities  that are rated  lower  than Baa by  Moody's or BBB by
Standard & Poor's and unrated securities determined to be of comparable quality.
The values of these lower quality securities generally fluctuate more than those
of higher quality  securities.


                                       6
<PAGE>

In addition, these securities involve a greater possibility of an adverse change
in financial  condition  affecting the ability of the issuer to make payments of
interest  and  principal.  The  Advisor  seeks to  reduce  these  risks  through
investment analysis and attention to current  developments in interest rates and
economic  conditions,  but there can be no  assurance  that the Advisor  will be
successful in reducing the risks associated with investments in such securities.
To the extent the Fund invests in such lower quality securities, the achievement
of its  investment  objective may be more  dependent on the Advisor's own credit
analysis.

The Fund may invest in  pay-in-kind  (PIK)  securities,  which pay  interest  in
either cash or additional  securities,  at the issuer's option,  for a specified
period.  In addition,  the Fund may invest in zero coupon  bonds.  Both of these
types of bonds may be more  speculative  and subject to greater  fluctuations in
value  than  securities  which pay  interest  periodically  and in cash,  due to
changes in interest rates.  The Fund will accrue income on such  investments for
tax and accounting purposes, as required, which is distributable to shareholders
and which,  because no cash is  generally  received at the time of accrual,  may
require the  liquidation  of other  portfolio  securities  to satisfy the Fund's
distribution obligations. See "Federal Income Taxes" below.

The market value of fixed income  securities that carry no equity  participation
usually reflects yields generally available on securities of similar quality and
type. When such yields decline, the market value of a portfolio already invested
at higher  yields  can be  expected  to rise if such  securities  are  protected
against early call. Similarly,  when such yields increase, the market value of a
portfolio already invested at lower yields can be expected to decline.

Convertible and Preferred  Securities.  Subject to its investment objectives and
policies,  the Fund may invest in convertible  securities,  which are ordinarily
preferred  stock or long-term  debt  obligations  of an issuer  convertible at a
stated  exchange  rate into  common  stock of the  issuer.  The market  value of
convertible  securities  tends  to  decline  as  interest  rates  increase  and,
conversely,  to increase  as  interest  rates  decline.  Convertible  securities
generally  offer  lower  interest  or  dividend   yields  than   non-convertible
securities  of similar  quality.  However,  when the market  price of the common
stock underlying a convertible  security exceeds the conversion price, the price
of the convertible  security tends to reflect the value of the underlying common
stock.  As the  market  price  of the  underlying  common  stock  declines,  the
convertible  security tends to trade increasingly on a yield basis, and thus may
not  depreciate to the same extent as the underlying  common stock.  Convertible
securities  generally  rank  senior to  common  stocks  in an  issuer's  capital
structure,  are  consequently of higher  quality,  and entail less risk than the
issuer's common stock. However, the extent to which such risk is reduced depends
in large measure upon the degree to which the  convertible  security sells above
its value as a fixed income  security.  The convertible debt securities in which
the Fund may invest are subject to the same rating criteria and downgrade policy
as the Fund's investments in fixed income securities.

The Fund,  subject to its investment  objectives,  may purchase preferred stock.
Preferred stock is an equity security,  but possesses certain attributes of debt
securities  and is  generally  considered a fixed  income  security.  Holders of
preferred  stock  normally  have the right to receive  dividends at a fixed rate
when and as declared by the issuer's board of directors,  but do not participate
in  other  amounts  available  for  distribution  by  the  issuing  corporation.
Dividends  on the  preferred  stock may be  cumulative,  and in such cases,  all
cumulative  dividends  usually must be paid prior to dividend payments to common
stockholders. Because of this preference, preferred stock generally entails less
risk than common  stocks.  Upon  liquidation,  preferred  stock is entitled to a
specified  liquidation  preference,  which is  generally  the same as the par or
stated  value,  and is senior in right of  payment  to  common  stock.  However,
preferred  stock is an equity security in that it does not represent a liability
of the issuer and  therefore  does not offer as great a degree of  protection of
capital or assurance  of  continued  income as  investments  in  corporate  debt
securities. In addition,  preferred stock is subordinated in right of payment to
all debt  obligations  and creditors of the issuer,  and  convertible  preferred
stocks may be subordinated to other preferred stock of the same issuer.

Warrants. The Fund may invest in warrants. Warrants generally entitle the holder
to buy a specified number of shares of common stock at a specified price,  which
is often higher than the market  price at the time of issuance,  for a period of
years or in perpetuity. Warrants may be issued in units with other securities or
separately,  and may be freely  transferable and traded on exchanges.  While the
market value of a warrant tends to be more volatile than that of the  securities
underlying the warrant, the market value of a warrant may not necessarily change
with that of the  underlying  security.  A warrant ceases to have value if it is
not exercised prior to any expiration date to which the


                                       7
<PAGE>

warrant is subject. The purchase of warrants involves a risk that the Fund could
lose the purchase  value of a warrant if the right to  subscribe  to  additional
shares is not exercised prior to the warrant's expiration. Also, the purchase of
warrants  involves the risk that the effective  price paid for the warrant added
to the  subscription  price of the related  security may exceed the value of the
subscribed  security's  market  price,  such as when there is no movement in the
level of the underlying security.

Indexed Securities.  As part of the Fund's global asset allocation strategy, the
Fund may invest in indexed securities.  The indexed securities in which the Fund
may invest  include debt  securities  whose value at maturity is  determined  by
reference  to the  relative  prices of various  currencies  or to the price of a
stock  index.  The value of such  securities  depends  on the  price of  foreign
currencies,  securities  indices or other financial values or statistics.  These
securities  may be positively or  negatively  indexed;  that is, their value may
increase or decrease if the underlying instrument appreciates.

Mortgage-Backed and Asset-Backed Securities

General.  The Fund may invest up to 20% of total Fund assets in  mortgage-backed
securities,  which  represent  direct  or  indirect  participations  in,  or are
collateralized by and payable from, mortgage loans secured by real property. The
Fund may also invest in asset-backed securities,  which represent participations
in, or are secured by and payable from, assets such as motor vehicle installment
sales, installment loan contracts,  leases of various types of real and personal
property and  receivables  from revolving  credit  (credit card)  agreements and
other categories of receivables.  Such securities are generally issued by trusts
and special purpose corporations.

Mortgage-backed  and  asset-backed  securities  are often  subject to more rapid
repayment  than their  stated  maturity  date would  indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During periods
of declining interest rates, prepayment of loans underlying  mortgage-backed and
asset-backed  securities  can be  expected  to  accelerate,  and thus impair the
Fund's  ability to  reinvest  the returns of  principal  at  comparable  yields.
Accordingly,  the market  values of such  securities  will vary with  changes in
market interest rates generally and in yield  differentials  among various kinds
of  US  Government   securities  and  other   mortgage-backed  and  asset-backed
securities. Asset-backed securities present certain risks that are not presented
by mortgage-backed  securities because asset-backed  securities generally do not
have the benefit of a security  interest in  collateral  that is  comparable  to
mortgage  assets.  In addition,  there is the  possibility  that, in some cases,
recoveries on repossessed collateral may not be available to support payments on
these  securities.  Many mortgage and asset-backed  securities may be considered
derivative instruments.

Mortgage-Backed.  The Fund may invest in mortgage-backed  securities,  including
derivative instruments.  Mortgage-backed securities represent direct or indirect
participations  in or  obligations  collateralized  by and payable from mortgage
loans  secured  by  real  property.  The  Fund  may  invest  in  mortgage-backed
securities issued or guaranteed by US Government  agencies or  instrumentalities
such as the  Government  National  Mortgage  Association  ("GNMA"),  the Federal
National  Mortgage  Association  ("FNMA")  and the  Federal  Home Loan  Mortgage
Corporation  ("FHLMC").  Obligations  of GNMA are  backed by the full  faith and
credit of the US Government. Obligations of FNMA and FHLMC are not backed by the
full  faith and credit of the US  Government  but are  considered  to be of high
quality since they are considered to be  instrumentalities of the United States.
The market value and yield of these  mortgage-backed  securities can vary due to
market interest rate fluctuations and early prepayments of underlying mortgages.
These  securities  represent  ownership in a pool of Federally  insured mortgage
loans with a maximum  maturity of 30 years.  The scheduled  monthly interest and
principal payments relating to mortgages in the pool will be "passed through" to
investors.  Government mortgage-backed securities differ from conventional bonds
in that principal is paid back to the  certificate  holders over the life of the
loan  rather  than at  maturity.  As a result,  there will be monthly  scheduled
payments of principal and interest.

The Fund may invest in  mortgage-backed  securities  issued by  non-governmental
entities including  collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs").  CMOs are securities  collateralized by
mortgages,   mortgage   pass-throughs,   mortgage   pay-through   bonds   (bonds
representing  an interest in a pool of mortgages  where the cash flow  generated
from  the  mortgage  collateral  pool  is  dedicated  to  bond  repayment),  and
mortgage-backed  bonds (general  obligations  of the issuers  payable out of the
issuers'  general  funds and  additionally  secured by a first lien on a pool of
single  family  detached  properties).  Many  CMOs are  issued  with


                                       8
<PAGE>

a number of classes or series that have different  maturities and are retired in
sequence.  Investors  purchasing such CMOs in the shortest maturities receive or
are  credited  with their pro rata  portion of the  unscheduled  prepayments  of
principal up to a predetermined portion of the total CMO obligation.  Until that
portion of such CMO  obligation  is repaid,  investors in the longer  maturities
receive interest only.  Accordingly,  the CMOs in the longer maturity series are
less  likely  than other  mortgage  pass-throughs  to be prepaid  prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance,  and some CMOs may be backed by GNMA certificates
or other mortgage  pass-throughs  issued or guaranteed by US Government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.

REMICs are  private  entities  formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities,  including  "regular"  interests
and "residual" interests. The Fund does not intend to acquire residual interests
in REMICs, due to certain  disadvantages for regulated investment companies that
acquire such  interests.  Mortgage-backed  securities are subject to unscheduled
principal  payments  representing   prepayments  on  the  underlying  mortgages.
Although  these  securities  may offer yields higher than those  available  from
other types of securities, mortgage-backed securities may be less effective than
other types of securities as a means of "locking in" attractive  long-term rates
because of the prepayment  feature.  For instance,  when interest rates decline,
the value of these  securities  likely will not rise as much as comparable  debt
securities due to the prepayment  feature.  In addition,  these  prepayments can
cause the price of a mortgage-backed  security originally purchased at a premium
to decline in price to its par value, which may result in a loss.

Due to  prepayments  of the  underlying  mortgage  instruments,  mortgage-backed
securities  do not  have a known  actual  maturity.  In the  absence  of a known
maturity,  market participants generally refer to an estimated average life. The
Advisor believes that the estimated average life is the most appropriate measure
of  the  maturity  of a  mortgage-backed  security.  Accordingly,  in  order  to
determine whether such security is a permissible  investment,  it will be deemed
to have a remaining  maturity of three  years or less if the  average  life,  as
estimated by the Advisor,  is three years or less at the time of purchase of the
security by the Fund.  An average life  estimate is a function of an  assumption
regarding anticipated  prepayment patterns. The assumption is based upon current
interest  rates,  current  conditions in the relevant  housing markets and other
factors.  The assumption is necessarily  subjective,  and thus different  market
participants could produce somewhat different average life estimates with regard
to the same security.  Although the Advisor will monitor the average life of the
portfolio  securities  of the Fund with a  portfolio  maturity  policy  and make
needed  adjustments  to  comply  with the  Fund's  policy as to  average  dollar
weighted portfolio maturity,  there can be no assurance that the average life of
portfolio securities as estimated by the Advisor will be the actual average life
of such securities.

Asset-Backed  Securities.  The Fund may invest up to 20% of total Fund assets in
asset-backed  securities,  which represent  participations in, or are secured by
and payable from, pools of assets including company receivables,  truck and auto
loans,   leases  and  credit  card  receivables.   The  asset  pools  that  back
asset-backed  securities  are  securitized  through the use of privately  formed
trusts or special purpose  corporations.  Payments or distributions of principal
and  interest  may be  guaranteed  up to certain  amounts and for a certain time
period by a letter of credit or a pool  insurance  policy  issued by a financial
institution  unaffiliated  with  the  trust  or  corporation,  or  other  credit
enhancements may be present.  Certain asset-backed  securities may be considered
derivative instruments.

Derivatives

General.  The Fund may invest in various  instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement,  the value of
which is based on, or "derived"  from, a traditional  security,  asset or market
index.  Some  "derivatives,"  such as  mortgage-related  and other  asset-backed
securities, are in many respects like any other investment, although they may be
more volatile and/or less liquid than more traditional  debt  securities.  There
are, in fact, many different types of derivatives and many different ways to use
them.  There are a range of risks  associated with those uses. For example,  the
Fund may use futures and options as a low-cost  method of gaining  exposure to a
particular  securities market without investing directly in those securities and
for traditional hedging purposes to attempt to protect the Fund from exposure to
changing  interest rates,  securities  prices or currency exchange rates and for
cash  management or other  investment  purposes.  In connection  with the global
asset  allocation  strategy,  the Fund may use  derivatives to add to investment
returns and  generally  not for hedging


                                       9
<PAGE>

purposes. The use of derivatives may result in leverage,  which tends to magnify
the  effects  of an  instrument's  price  changes as market  conditions  change.
Leverage  involves  the use of a small amount of money to control a large amount
of financial assets, and can in some  circumstances lead to significant  losses.
The  Fund  will  limit  the  leverage  created  by its  use of  derivatives  for
investment  purposes by  "covering"  such  positions as required by the SEC. The
Advisor may use  derivatives in  circumstances  where the Advisor  believes they
offer an  economical  means of gaining  exposure to a particular  asset class as
well as to seek excess returns.  The use of derivatives for non-hedging purposes
may be considered speculative.

The Fund's  investment  in  options,  futures,  forward  contracts,  and similar
strategies  depend  on the  Advisor's  judgment  as to the  potential  risks and
rewards of different  types of  strategies.  Options and futures can be volatile
investments,  and may not perform as expected. If the Advisor applies a hedge at
an inappropriate  time or judges price trends  incorrectly,  options and futures
strategies may lower the Fund's return. The Fund could also experience losses if
the prices of its options and futures  positions were poorly correlated with its
other  investments,  or if it could not close out its  positions  because  of an
illiquid  secondary  market.  Options  and futures  traded on foreign  exchanges
generally are not regulated by US authorities,  and may offer less liquidity and
less  protection  to the Fund in the event of default by the other  party to the
contract.

Hedging  Strategies.  The Fund may use certain strategies designed to adjust the
overall risk of its investment  portfolio.  These "hedging"  strategies  involve
derivative contracts,  including (but not limited to) US Treasury and Eurodollar
futures  contracts  and  exchange-traded  put and call  options on such  futures
contracts.  New financial products and risk management techniques continue to be
developed and may be used if consistent with the Fund's investment objective and
policies.  Among  other  purposes,  these  hedging  strategies  may be  used  to
effectively  maintain  desired  portfolio  duration or to protect against market
risk  should the Fund  change its  investments  among  different  types of fixed
income securities.

The Fund might not use any  hedging  strategies,  and there can be no  assurance
that any strategy used will succeed. If the Advisor is incorrect in its judgment
on market values,  interest  rates or other economic  factors in using a hedging
strategy,  the Fund may have lower net income and a net loss on the  investment.
Each of these strategies involves certain risks, which include:

o        the  fact  that  the  skills  needed  to use  hedging  instruments  are
         different from those needed to select securities for the Fund;

o        the  possibility  of  imperfect  correlation,  or even no  correlation,
         between the price movements of hedging  instruments and price movements
         of the securities or currencies being hedged;

o        possible  constraints  placed on the Fund's ability to purchase or sell
         portfolio  investments  at  advantageous  times due to the need for the
         Fund to maintain "cover" or to segregate securities; and

o        the possibility  that the Fund will be unable to close out or liquidate
         its hedged position.

A hedge is designed to offset a loss in a portfolio  position with a gain in the
hedged position;  at the same time,  however,  a properly  correlated hedge will
result in a gain in the portfolio  position being offset by a loss in the hedged
position.  As a  result,  the use of  options,  futures  and  currency  exchange
transactions  for  hedging  purposes  could  limit  any  potential  gain from an
increase in the value of the position hedged. With respect to futures contracts,
since the value of portfolio securities will far exceed the value of the futures
contracts  sold by the Fund,  an increase in the value of the futures  contracts
could only  mitigate,  but not totally  offset,  the decline in the value of the
Fund's assets.

To the extent that the Fund engages in the strategies  described above, the Fund
may experience losses greater than if these strategies had not been utilized. In
addition to the risks described above,  these instruments may be illiquid and/or
subject  to trading  limits,  and the Fund may be unable to close out a position
without incurring substantial losses, if at all. The Fund is also subject to the
risk of default by a counterparty to an off-exchange transaction.  See "Illiquid
Securities."

                                       10
<PAGE>

Futures Contracts and Options on Futures Contracts - General. The Fund may enter
into futures  contracts on securities,  securities  and other  indices,  foreign
currencies and interest  rates,  and purchase and write (sell)  options  thereon
which are  traded on  exchanges  designated  by the  Commodity  Futures  Trading
Commission  (the "CFTC") or, if  consistent  with CFTC  regulations,  on foreign
exchanges.  These futures  contracts are  standardized  contracts for the future
delivery of, among other things,  a commodity,  a non-US  currency,  an interest
rate  sensitive  security or, in the case of index futures  contracts or certain
other  futures  contracts,  a cash  settlement  with  reference  to a  specified
multiplier  times the change in the index. 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.

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.

The Fund may enter into futures  contracts  and options on futures  contracts on
securities,  securities  indices and  currencies  both to manage its exposure to
changing  interest rates,  security prices and currency exchange rates and as an
efficient means of managing allocations between asset classes.

The  successful  use of futures  contracts  and options  thereon  draws upon the
Advisor's skill and experience with respect to such  instruments and are subject
to special risk  considerations.  A liquid  secondary  market for any futures or
options  contract  may not be  available  when a futures or options  position is
sought to be closed. In addition,  there may be an imperfect correlation between
movements in the  securities or currency in the Fund.  Successful use of futures
or options  contracts is further  dependent on the Advisor's  ability to predict
correctly  movements  in the  securities  or  foreign  currency  markets  and no
assurance can be given that its judgment will be correct.

Futures  Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  US futures  contracts have been designed by exchanges which have
been designated  "contracts markets" by the CFTC, and must be executed through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts  trade on a number  of  exchange
markets,  and,  through their  clearing  corporations,  the exchanges  guarantee
performance  of the  contracts as between the clearing  members of the exchange.
The Fund may enter into  contracts for the purchase or sale for future  delivery
of fixed-income securities,  foreign currencies, or financial indices, including
any index of US government securities, foreign government securities,  corporate
debt  securities or inflation.  The Fund may enter into futures  contracts which
are based on debt securities that are backed by the full faith and credit of the
US  government,  such as  long-term  US Treasury  Bonds,  Treasury  Notes and US
Treasury Bills.  The Fund may also enter into futures  contracts which are based
on bonds issued by governments  other than the US government.  Futures contracts
on  foreign  currencies  may be  used  to  hedge  against  securities  that  are
denominated in foreign currencies.

At the same time a futures contract is entered into, the Fund must allocate cash
or liquid securities as a deposit payment ("initial margin").  Daily thereafter,
the  futures  contract is valued and the  payment of  "variation  margin" may be
required,  since each day the Fund would  provide or receive cash that  reflects
any decline or increase in the contract's value.

At the time of delivery of securities  pursuant to such a contract,  adjustments
are  made to  recognize  differences  in value  arising  from  the  delivery  of
securities  with a different  interest rate from that specified in the contract.
In some, but not many cases, securities called for by a futures contract may not
have been issued when the contract was written.

Although futures  contracts (other than those that settle in cash, such as index
futures)  by their  terms call for the actual  delivery  or  acquisition  of the
instrument underlying the contract, in most cases the contractual  obligation is
fulfilled by offset  before the date of the contract  without  having to make or
take delivery of the  instrument  underlying  the contract.  The offsetting of a
contractual  obligation is accomplished by entering into an opposite position in
an identical  futures contract on the commodities  exchange on which the futures
contract  was entered  into (or a linked  exchange)  calling for delivery in the
same  month.  Such a  transaction,  which is  effected  through  a member  of an
exchange,  cancels the  obligation  to make or take  delivery of the  instrument
underlying the contract.


                                       11
<PAGE>

Since all  transactions  in the  futures  market are made,  offset or  fulfilled
through a clearinghouse  associated with the exchange on which the contracts are
traded,  the  Fund  will  incur  brokerage  fees  when it  enters  into  futures
contracts.

The purpose of the acquisition or sale of a futures contract, in cases where the
Fund  holds or  intends to  acquire  fixed-income  securities,  is to attempt to
protect the Fund from fluctuations in interest or foreign exchange rates without
actually buying or selling  fixed-income  securities or foreign currencies.  For
example, if interest rates were expected to increase (which thus would cause the
prices of debt  securities  to  decline),  the Fund  might  enter  into  futures
contracts for the sale of debt securities.  Such a sale would have much the same
effect as selling an equivalent  value of the debt securities owned by the Fund.
If interest rates did increase, the value of the debt security in the Fund would
decline,  but the value of the futures  contracts to the Fund would  increase at
approximately  the same rate,  thereby  keeping  the net asset value of the Fund
from  declining as much as it otherwise  would have.  The Fund could  accomplish
similar  results by selling debt  securities  and  investing in bonds with short
maturities  when  interest  rates are expected to increase.  However,  since the
futures market is more liquid than the cash market, the use of futures contracts
as an  investment  technique  allows the Fund to maintain a  defensive  position
without having to sell its portfolio securities.

Similarly,  when it is expected that interest rates may decline (thus increasing
the value of debt securities),  futures contracts may be purchased to attempt to
hedge against anticipated  purchases of debt securities at higher prices.  Since
the fluctuations in the value of futures contracts should be similar to those of
debt  securities,  the Fund could take advantage of the anticipated  rise in the
value of debt  securities  without  actually  buying  them  until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could  then buy  debt  securities  on the cash  market.  The  segregated  assets
maintained  to  cover  the  Fund's  obligations  with  respect  to such  futures
contracts  will consist of cash or liquid  securities  acceptable  to the broker
from its portfolio in an amount equal to the difference  between the fluctuating
market value of such futures  contracts and the  aggregate  value of the initial
and  variation  margin  payments  made by the Fund with  respect to such futures
contracts.

The  ordinary  spreads  between  prices in the cash and futures  market,  due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,   investors  may  close  futures  contracts   through   offsetting
transactions  which could distort the normal  relationship  between the cash and
futures  markets.  Second,  the liquidity of the futures  market depends on most
participants entering into offsetting  transactions rather than making or taking
delivery.  To the extent that many participants decide to make or take delivery,
liquidity in the futures  market could be reduced,  thus  producing  distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin  requirements  in the securities
market. Therefore,  increased participation by speculators in the futures market
may cause temporary price distortions.  Due to the possibility of distortion,  a
correct forecast of securities price, general interest rate or currency exchange
rate trends by the Advisor may still not result in a successful transaction.

In addition,  futures contracts entail significant  risks.  Although the Advisor
believes  that use of such  contracts  will benefit the Fund,  if the  Advisor's
investment judgment about the general direction of interest rates or an index is
incorrect,  the Fund's  overall  performance  would be poorer than if it had not
entered into any such contract.  For example, if the Fund has hedged against the
possibility  of an increase  in  interest  rates or a decrease in an index which
would  adversely  affect  the  value of  securities  held in its  portfolio  and
interest rates decrease or securities  prices  increase  instead,  the Fund will
lose part or all of the benefit of the increased  value of its securities  which
it has hedged because it will have offsetting  losses in its futures  positions.
In addition, in such situations,  if the Fund has insufficient cash, it may have
to  sell  securities   from  its  portfolio  to  meet  daily  variation   margin
requirements.  Such sales of securities may be, but will not  necessarily be, at
increased  prices  which  reflect the rising  market.  The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Futures  Contracts on Securities  Indices.  The Fund may also enter into futures
contracts  providing for the making and  acceptance of a cash  settlement  based
upon  changes  in  the  value  of an  index  of US or  non-US  securities.  This
investment  technique may be used as a low-cost method of gaining  exposure to a
particular  securities market without investing  directly in those securities or
to hedge  against  anticipated  future  changes in general  market  prices which
otherwise might either adversely affect the value of securities held by the Fund
or adversely  affect the prices of securities which are intended to be purchased
at a later date for the Fund or as an  efficient  means of  managing


                                       12
<PAGE>

allocation between asset classes. A futures contract may also be entered into to
close out or offset an existing futures position.

When used for hedging  purposes,  each futures  contract on a  securities  index
transaction  involves  the  establishment  of  a  position  which,  the  Advisor
believes,  will move in a  direction  opposite to that of the  investment  being
hedged.  If these hedging  transactions  are successful,  the futures  positions
taken for the Fund will rise in value by an amount which  approximately  offsets
the  decline in value of the  portion of the Fund's  investments  that are being
hedged.  Should  general  market prices move in an unexpected  manner,  the full
anticipated  benefits of futures  contracts may not be achieved or a loss may be
realized.

Options  on  Futures  Contracts   (including  Futures  Contracts  on  Securities
Indices).  The Fund may purchase and write (sell)  options on futures  contracts
for hedging purposes.  For example,  as with the purchase of futures  contracts,
when the  Fund is not  fully  invested,  it may  purchase  a call  option  on an
interest rate  sensitive  futures  contract to hedge  against a potential  price
increase on debt securities due to declining interest rates.

The purchase of a call option on a futures  contract is similar in some respects
to the purchase of a call option on an index or individual  security.  Depending
on the  pricing  of the  option  compared  to either  the  price of the  futures
contract upon which it is based or the price of the underlying debt  securities,
it may or may not be less  risky  than  ownership  of the  futures  contract  or
underlying debt securities.

The  writing of a call option on a futures  contract  may  constitute  a partial
hedge against declining prices of the underlying  portfolio securities which are
the  same  as or  correlate  with  the  security  or  foreign  currency  that is
deliverable  upon  exercise of the  futures  contract.  If the futures  price at
expiration  of the option is below the price  specified in the premium  received
for writing the option ("exercise price"),  the Fund will retain the full amount
of the net  premium  (the  premium  received  for  writing  the option  less any
commission),  which  provides a partial  hedge against any decline that may have
occurred in the Fund's holdings.

The  writing of a put  option on an index  futures  contract  may  constitute  a
partial hedge against increasing prices of the underlying  securities or foreign
currency  that are  deliverable  upon exercise of the futures  contract.  If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full  amount of the option net  premium,  which  provides a
partial  hedge  against  any  increase  in the price of  securities  that a Fund
intends to purchase.

If a put or call option the Fund has written is exercised, the Fund will incur a
loss  that  will be  reduced  by the  amount  of the net  premium  it  receives.
Depending  on the  degree of  correlation  between  changes  in the value of its
portfolio  securities  and  changes in the value of its futures  positions,  the
Fund's losses from existing  options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.

The  purchase of a call or put option on a futures  contract  with respect to an
index is similar in some  respects to the purchase of a call or  protective  put
option on an index. For example,  the Fund may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk the Fund  assumes  when it  purchases  an option on a futures
contract  with  respect  to an index is the  premium  paid for the  option  plus
related transaction costs. In addition to the correlation risks discussed above,
the  purchase of such an option also  entails the risk that changes in the value
of the underlying  futures  contract will not be fully reflected in the value of
the option purchased.


Swaps, Caps, Floors and Collars. 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


                                       13
<PAGE>

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.

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.

Credit  Default  Swap  Transactions.  The Fund may invest up to 25% of its total
assets in credit default swaps (based on the notional amount).  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 assets may be invested in credit  default
swaps for purposes of buying  credit  protection.  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.IG.  By investing 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
IG is a  tradable  basket  of 125  credit  default  swaps  on  investment  grade
corporate  credits  which seeks to  replicate  the  returns of a corporate  bond
index. By purchasing  interests in CDX IG, the Fund is gaining  corporate credit
exposure through a single investment. Unlike other types


                                       14
<PAGE>

of credit default swaps which are generally  considered  illiquid,  interests in
tradable credit default swap baskets generally can be sold within seven days and
are not subject to the Fund's restrictions on investing in illiquid securities.

The Fund can  purchase or sell a credit  default  swap  basket.  In the event of
purchase (long), the Fund will benefit from income received as well as potential
price  appreciation  in the event of tightening  credit spreads.  However,  in a
widening  credit spread  environment,  the value of the long holding will likely
decrease,  which could negatively impact the performance of the Fund. Conversely
in the event of a sell  (short),  the Fund must pay out the coupon on the credit
default swap basket,  which has the effect of reducing the Fund's income.  Also,
in a positive  credit spread  environment,  a short position in a credit default
swap basket would fall in value,  negatively  impacting Fund  performance.  In a
widening credit spread environment, however, the short holding would likely rise
in value, positively impacting Fund performance.

Forward  Currency  Exchange   Contracts.   Forward  currency  contracts  may  be
considered  derivative  instruments.  The Fund may  exchange  currencies  in the
normal course of managing its  investments in foreign  securities  (for example,
the Fund may buy and sell securities denominated in currencies other than the US
dollar and receive  interest,  dividends and sale  proceeds in currencies  other
than the US dollar) and may incur  costs in doing so because a foreign  exchange
dealer will charge a fee for conversion.  The Fund may conduct foreign  currency
exchange  transactions  on  a  "spot"  basis  (i.e.,  for  prompt  delivery  and
settlement)  at the prevailing  spot rate for purchasing or selling  currency in
the  foreign  currency  exchange  market.  The Fund also may enter into  forward
foreign currency  exchange  contracts  ("forward  currency  contracts") or other
contracts to purchase and sell  currencies  for  settlement  at a future date. A
foreign  exchange  dealer,  in that  situation,  will expect to realize a profit
based on the difference between the price at which a foreign currency is sold to
the Fund and the price at which  the  dealer  will  cover  the  purchase  in the
foreign  currency  market.  Foreign  exchange  transactions  are entered into at
prices  quoted by dealers,  which may include a mark-up  over the price that the
dealer must pay for the currency.

A forward  currency  contract  involves  an  obligation  to  purchase  or sell 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.  These contracts are traded in the interbank  market  conducted
directly between  currency  traders  (usually large commercial  banks) and their
customers.  A forward  contract  generally  has no deposit  requirement,  and no
commissions are generally charged at any stage for trades,  but currency dealers
seek to obtain a "spread" or profit on each  transaction.  At the  maturity of a
forward  contract,  the Fund may either  accept or make delivery of the currency
specified  in the  contract  or, at or prior to  maturity,  enter into a closing
purchase transaction involving the purchase or sale of an offsetting contract.

For the  purposes  of  hedging,  when the Fund  enters  into a contract  for the
purchase or sale of a security  denominated in a foreign  currency,  or when the
Fund  anticipates  the  receipt in a foreign  currency  of  dividend or interest
payments on such a security which it holds, the Fund may desire to "lock in" the
US dollar price of the security or the US dollar  equivalent of such dividend or
interest  payment,  as the case may be. By entering into a forward  contract for
the purchase or sale, for a fixed amount of US dollars, of the amount of foreign
currency  involved  in the  underlying  transactions,  the Fund will  attempt to
protect  itself  against an adverse  change in the  relationship  between the US
dollar and the subject  foreign  currency  during the period between the date on
which the security is  purchased  or sold,  or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.

Additionally,  when the  Advisor  believes  that the  currency  of a  particular
foreign country may suffer a substantial  decline against the US dollar,  it may
cause the Fund to enter into a forward  contract to sell,  for a fixed amount of
US dollars,  the amount of foreign currency  approximating  the value of some or
all of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved  will not  generally  be  possible  because  the  future  value of such
securities  in  foreign  currencies  will  change  as a  consequence  of  market
movements  in the  value  of those  securities  between  the  date on which  the
contract is entered into and the date it matures.

Using  forward  currency  contracts  in an attempt  to protect  the value of the
Fund's  portfolio  securities  against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. It simply

                                       15
<PAGE>

establishes  a rate of exchange  which the Fund can achieve at some future point
in time. The precise  projection of short-term  currency market movements is not
possible,  and short-term hedging provides a means of fixing the dollar value of
only a portion of the Fund's foreign assets.

The Fund or the Fund's  custodian  will place cash or liquid  securities  into a
segregated  account  of the Fund in an amount  equal to the value of the  Fund's
total  assets  committed  to the  consummation  of  forward  currency  contracts
requiring  the  Fund  to  purchase  foreign  currencies.  If  the  value  of the
securities placed in the segregated account declines,  additional cash or liquid
securities  will be placed in the  account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.  The segregated  account will be  marked-to-market  on a daily basis.
Although forward currency contracts are not presently regulated by the CFTC, the
CFTC may in the future assert  authority to regulate  these  contracts.  In such
event,  the  Fund's  ability  to  utilize  forward  currency  contracts  may  be
restricted.  In addition, a particular forward currency contract and assets used
to cover such contract may be illiquid.

The Fund generally will not enter into a forward  currency  contract with a term
of  greater  than one  year.  The  forecasting  of  short-term  currency  market
movements is extremely  difficult and there can be no assurance that  short-term
hedging strategies will be successful.

While the Fund may benefit from currency transactions,  unanticipated changes in
currency prices may result in a poorer overall  performance for the Fund than if
it had not  engaged  in any  such  transactions.  For  example,  if the  Advisor
increases the Fund's exposure to a foreign  currency,  and that currency's value
subsequently  falls, the Advisor's  currency  management may result in increased
losses to the Fund.  If the  Advisor  hedges  the Fund's  exposure  to a foreign
currency, and that currency's value rises, the Fund will lose the opportunity to
participate in the currency's appreciation.  Moreover, there may be an imperfect
correlation between the Fund's portfolio holdings of securities denominated in a
particular  currency  and  forward  contracts  entered  into by the  Fund.  Such
imperfect  correlation  may cause the Fund to sustain  losses which will prevent
the Fund from  achieving a complete  hedge or expose the Fund to risk of foreign
currency exchange loss. In connection with the global asset allocation strategy,
the Fund may use forward currency  transactions to add to investment returns and
generally not for hedging purposes.

Securities of Foreign Issuers


Foreign Securities.  Subject to its investment objective and policies,  the Fund
may invest in  securities of foreign  issuers and  supranational  entities.  The
non-US  investments  of the Fund may be  denominated  in any  currency.  Foreign
securities  may offer  investment  opportunities  not  available  in the  United
States,  but such  investments  also  involve  significant  risks not  typically
associated  with investing in domestic  securities.  In many foreign  countries,
there is less publicly available information about foreign issuers, and there is
less government  regulation and supervision of foreign stock exchanges,  brokers
and listed companies. Also, in many foreign countries, companies are not subject
to uniform accounting, auditing, and financial reporting standards comparable to
those  applicable to domestic  issuers.  Security  trading  practices differ and
there may be difficulty  in enforcing  legal rights  outside the United  States.
Settlement of transactions in some foreign markets may be delayed or may be less
frequent  than in the United  States,  which could  affect the  liquidity of the
Fund's  portfolio.  Additionally,  in  some  foreign  countries,  there  is  the
possibility  of  expropriation  or  confiscatory  taxation,  limitations  on the
removal of  securities,  property,  or other Fund  assets,  political  or social
instability or diplomatic developments which could affect investments in foreign
securities.


If the Advisor  increases the Fund's  exposure to a foreign  currency,  and that
currency's  value  subsequently  falls,  the Advisor's  currency  management may
result in  increased  losses to the  Fund.  If the  Advisor  hedges  the  Fund's
exposure to a foreign  currency,  and that currency's value rises, the Fund will
lose the opportunity to participate in the currency's appreciation.

Foreign Government  Securities.  The foreign government  securities in which the
Fund may invest generally  consist of debt  obligations  issued or guaranteed by
national, state or provincial governments or similar political subdivisions. The
Fund may  invest  in  foreign  government  securities  in the  form of  American
Depository Receipts.  Foreign government securities also include debt securities
of supranational entities. Quasi-governmental and


                                       16
<PAGE>

supranational  entities  include  international   organizations   designated  or
supported  by  governmental  entities  to  promote  economic  reconstruction  or
development  and  international  banking  institutions  and  related  government
agencies.  Examples  include  the  International  Bank  for  Reconstruction  and
Development  (the  "World  Bank"),  the  Japanese  Development  Bank,  the Asian
Development Bank and the  InterAmerican  Development  Bank.  Foreign  government
securities  also include  mortgage-related  securities  issued or  guaranteed by
national,   state  or  provincial  governmental   instrumentalities,   including
quasi-governmental agencies.

Currency  Management  Techniques.  The instruments  involved in currency-related
transactions may be considered  derivative  instruments.  In connection with its
investments  in foreign  securities,  the Fund may enter  into  currency-related
transactions to attempt to protect against an anticipated  rise in the US dollar
price of securities that it intends to purchase. In addition, the Fund may enter
into currency-related  transactions to attempt to protect against the decline in
value of its foreign currency denominated or quoted portfolio  securities,  or a
decline in the value of anticipated  dividends or interest from such securities,
due to a decline in the value of the foreign currency against the US dollar.  In
addition  to  protecting  the Fund from  currency  movements,  the Fund will use
currency  management  techniques to add to investment  returns and generally not
for hedging purposes when it employs the global asset allocation  strategy.  The
forecasting of currency market movements is extremely difficult and there can be
no assurance  that currency  strategies  will be  successful.  If the Advisor is
incorrect  in  its  forecast,  currency  strategies  may  result  in  investment
performance  worse  than if the  strategies  were not  attempted.  In  addition,
forward contracts and over-the-counter  currency options may be illiquid and are
subject to the risk that the counterparty  will default on its obligations.  See
"Forward Currency Exchange Contracts" above.

Other Investments, Strategies and Techniques

Repurchase  Agreements.  The Fund may enter  into  repurchase  agreements.  In a
repurchase  agreement,  the  Fund  buys a  security  subject  to the  right  and
obligation  to sell it back to the other  party at the same price  plus  accrued
interest.  The Fund's  custodian  will hold the security as  collateral  for the
repurchase agreement. Collateral must be maintained at a value at least equal to
102% of the repurchase price, but repurchase agreements involve some credit risk
to the  Fund if the  other  party  defaults  on its  obligation  and the Fund is
delayed in or prevented from  liquidating  the  collateral.  The Fund will enter
into repurchase  agreements only with financial  institutions  deemed to present
minimal risk of bankruptcy  during the term of the agreement based on guidelines
established and periodically reviewed by the Trust's Board of Trustees.

For purposes of the Investment  Company Act of 1940, as amended (the "1940 Act")
and, generally,  for tax purposes,  a repurchase agreement is considered to be a
loan from the Fund to the seller of the obligation.  For other  purposes,  it is
not clear  whether a court would  consider  such an obligation 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 its  repurchase,  under the  repurchase
agreement,  the Fund may  encounter  delay and incur costs  before being able to
sell the  security.  Such  delays may result in a 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 treated as an
unsecured  creditor of the seller and required to return the  obligation  to the
seller's estate. 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 instrument  purchased for the Fund, the Advisor seeks to minimize
the risk of loss from repurchase agreements by analyzing the creditworthiness of
the obligor, in this case, the seller of the obligation. In addition to the risk
of bankruptcy or insolvency  proceedings,  there is the risk that the seller may
fail to repurchase the security.  However, if the market value of the obligation
falls below an amount equal to 102% of the repurchase price  (including  accrued
interest),  the seller of the obligation will be required to deliver  additional
securities so that the market value of all securities  subject to the repurchase
agreement equals or exceeds the repurchase price.

Reverse  Repurchase  Agreements.  The Fund may  borrow  funds for  temporary  or
emergency purposes, such as meeting larger than anticipated redemption requests,
and  not for  leverage,  by  among  other  things,  agreeing  to sell  portfolio
securities to financial institutions such as member banks of the Federal Reserve
System and certain  non-bank dealers and to repurchase them at a mutually agreed
date and price (a "reverse repurchase  agreement").  At the


                                       17
<PAGE>

time the Fund enters into a reverse repurchase  agreement it will segregate cash
or liquid  securities  having a value equal to the repurchase  price,  including
accrued  interest.  The  segregated  assets will be  marked-to-market  daily and
additional  assets will be  segregated on any day in which the assets fall below
the repurchase price (plus accrued  interest).  The Fund's liquidity and ability
to manage  its assets  might be  affected  when it sets aside cash or  portfolio
securities to cover such commitments.  Reverse repurchase agreements involve the
risk that the market value of the securities  sold by the Fund may decline below
the repurchase price of those  securities.  In the event the buyer of securities
under a reverse repurchase  agreement files for bankruptcy or becomes insolvent,
such buyer or its  trustee or  receiver  may  receive  an  extension  of time to
determine whether to enforce the Fund's obligation to repurchase the securities,
and the Fund's use of the  proceeds  of the  reverse  repurchase  agreement  may
effectively be restricted pending such decision.  Reverse repurchase  agreements
are considered to be borrowings by the Fund.

TBA Purchase  Commitments.  The Fund may enter into TBA purchase  commitments to
purchase  securities  for a fixed price at a future date up to 20% of total Fund
assets. TBA purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the  security  to be  purchased  declines
prior to  settlement  date,  which risk is in addition to the risk of decline in
the value of the Fund's other  assets.  Unsettled TBA purchase  commitments  are
valued at the current market value of the underlying securities.

"When-Issued" Purchases and Forward Commitments (Delayed Delivery). The Fund may
purchase  securities on a when-issued,  delayed  delivery or forward  commitment
basis.  When these  transactions are negotiated,  the price of the securities is
fixed at the time of the commitment,  but delivery and payment may take place up
to 90 days after the date of the  commitment to purchase for equity  securities,
and up to 45 days  after  such date for  fixed  income  securities.  When-issued
securities  or  forward  commitments  involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date.

These  transactions,  which involve a commitment by the Fund to purchase or sell
particular  securities  with payment and delivery  taking place at a future date
(perhaps one or two months  later),  permit the Fund to lock in a price or yield
on a security,  regardless of future  changes in interest  rates.  The Fund will
purchase securities on a "when-issued" or forward commitment basis only with the
intention of completing the transaction and actually  purchasing the securities.
If deemed  appropriate  by the  Advisor,  however,  the Fund may  dispose  of or
renegotiate a commitment  after it is entered into,  and may sell  securities it
has committed to purchase  before those  securities are delivered to the Fund on
the  settlement  date.  In these cases the Fund may realize a gain or loss,  and
distributions attributable to any such gain would be taxable to shareholders.

When the Fund  agrees to  purchase  securities  on a  "when-issued"  or  forward
commitment  basis, the Fund's custodian will set aside cash or liquid securities
equal to the amount of the  commitment  in a  separate  account.  Normally,  the
custodian will set aside portfolio  securities to satisfy a purchase commitment,
and in such a case the Fund may be  required  subsequently  to place  additional
assets in the separate  account in order to ensure that the value of the account
remains equal to the amount of the Fund's  commitments.  The market value of the
Fund's net assets  will  generally  fluctuate  to a greater  degree when it sets
aside portfolio  securities to cover such purchase commitments than when it sets
aside cash.  Because the Fund's  liquidity  and ability to manage its  portfolio
might be affected when it sets aside cash or portfolio  securities to cover such
purchase  commitments,  the  Fund  expects  that  its  commitments  to  purchase
when-issued  securities and forward  commitments  will not exceed 33 1/3% of the
value of its total assets.  When the Fund engages in  "when-issued"  and forward
commitment  transactions,  it relies on the other  party to the  transaction  to
consummate  the  trade.  Failure  of such  party to do so may result in the Fund
incurring a loss or missing an  opportunity  to obtain a price  considered to be
advantageous.

The market  value of the  securities  underlying a  "when-issued"  purchase or a
forward commitment to purchase  securities,  and any subsequent  fluctuations in
their market value,  are taken into account when determining the market value of
the Fund  starting on the day the Fund agrees to purchase  the  securities.  The
Fund does not earn  interest or dividends on the  securities it has committed to
purchase until the settlement date.

Borrowing.  The Fund may not borrow  money,  except as permitted  under the 1940
Act, and as interpreted or modified by regulatory authority having jurisdiction,
from  time to  time.  Under  the 1940  Act,  the Fund is  required  to  maintain
continuous  asset  coverage of 300% with respect to such  borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market


                                       18
<PAGE>

fluctuations or otherwise,  even if such  liquidation of the Fund's holdings may
be disadvantageous from an investment standpoint.

Lending Portfolio Securities. The Fund may lend portfolio securities to brokers,
dealers and other financial organizations.  These loans, if and when made by the
Fund, may not exceed 33 1/3% of the value of the Fund's total assets. The Fund's
loans of securities  will be  collateralized  by cash,  cash  equivalents  or US
Government securities. The cash or instruments  collateralizing the Fund's loans
of securities  will be maintained at all times in a segregated  account with the
Fund's custodian, in an amount at least equal to the current market value of the
loaned  securities.  From time to time,  the Fund may pay a part of the interest
earned from the investment of collateral  received for securities  loaned to the
borrower and/or a third party that is  unaffiliated  with the Fund and is acting
as a "placing  broker." No fee will be paid to  affiliated  persons of the Fund.
The Board of Trustees will make a determination that the fee paid to the placing
broker is reasonable.

By lending portfolio securities,  the Fund can increase its income by continuing
to receive  amounts equal to the interest or dividends on the loaned  securities
as well as by either investing the cash collateral in short-term  instruments or
obtaining  yield in the form of interest paid by the borrower when US Government
securities  are used as  collateral.  The Fund will  comply  with the  following
conditions whenever it loans securities: (i) the Fund must receive at least 100%
cash collateral or equivalent  securities  from the borrower;  (ii) the borrower
must increase the collateral  whenever the market value of the securities loaned
rises  above  the  level  of the  collateral;  (iii)  the  Fund  must be able to
terminate the loan at any time; (iv) the Fund must receive  reasonable  interest
on the  loan,  as well as  amounts  equal to the  dividends,  interest  or other
distributions  on the loaned  securities,  and any increase in market value; (v)
the Fund may pay only reasonable custodian fees in connection with the loan; and
(vi) voting  rights on the loaned  securities  may pass to the  borrower  except
that,  if a material  event will occur  affecting  the  investment in the loaned
securities,  the Fund must  terminate the loan in time to vote the securities on
such event.


Diversification.  The  Fund is  "diversified"  under  the  1940  Act and is also
subject to issuer  diversification  requirements imposed on regulated investment
companies by  Subchapter M of the US Internal  Revenue Code of 1986,  as amended
(the "Code"). See "Investment Restrictions" and "Taxes" below.

Concentration of Investments.  As a matter of fundamental  policy,  the Fund may
not 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.


Mortgage Dollar Rolls.  The Fund may enter into mortgage "dollar rolls" in which
the Fund sells  securities for delivery in the current month and  simultaneously
contracts to repurchase  substantially  similar (same type, coupon and maturity)
securities on a specified future date up to 20% of total Fund assets. During the
roll period, the Fund forgoes principal and interest paid on the securities. The
Fund is compensated  by the  difference  between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") or
fee income and by the interest  earned on the cash proceeds of the initial sale.
A  "covered  roll" is a  specific  type of  dollar  roll for  which  there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward  settlement date of the dollar roll transaction.  The Fund
may enter into both covered and uncovered rolls.

Illiquid Securities.  Historically, illiquid securities have included securities
subject to  contractual  or legal  restrictions  on resale because they have not
been  registered  under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase  agreements
having a maturity  of longer  than seven  days.  Securities  which have not been
registered  under  the  1933  Act  are  referred  to as  private  placements  or
restricted  securities  and are  purchased  directly  from the  issuer or in the
secondary  market.   Non-  publicly  traded  securities   (including  Rule  144A
Securities)  may involve a high degree of business  and  financial  risk and may
result in substantial losses.  These securities may be less liquid than publicly
traded  securities,  and it may take longer to liquidate  these  positions  than
would be the case for publicly traded securities. Companies whose securities are
not  publicly  traded may not be subject to the  disclosure  and other  investor
protection  requirements  applicable to companies whose  securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability of
portfolio  securities and a mutual fund might be unable to dispose of restricted
or other illiquid  securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. An investment in
illiquid  securities  is subject to the risk that should the Fund desire to sell
any of these


                                       19
<PAGE>

securities  when a ready buyer is not  available at a price that is deemed to be
representative  of their  value,  the value of the Fund's  net  assets  could be
adversely affected.

Mutual funds do not typically hold a significant  amount of these  restricted or
other  illiquid  securities  because of the  potential  for delays on resale and
uncertainty  in  valuation.  A mutual  fund  might  also have to  register  such
restricted  securities  in order to dispose  of them,  resulting  in  additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large  institutional  market has developed for certain securities that are not
registered  under  the 1933 Act,  including  repurchase  agreements,  commercial
paper,  non-US securities,  municipal  securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment.  The fact that there are contractual or legal restrictions
on resale of such  investments to the general public or to certain  institutions
may not be indicative of their liquidity.


The SEC has adopted  Rule 144A,  which  allows a broader  institutional  trading
market for  securities  otherwise  subject to restriction on their resale to the
general  public.  Rule 144A  establishes a "safe  harbor" from the  registration
requirements  of the 1933 Act for  resales of certain  securities  to  qualified
institutional  buyers.  The  Advisor  anticipates  that the market  for  certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and the development of automated  systems for the
trading,  clearance and  settlement of  unregistered  securities of domestic and
non-US issuers,  such as the PORTAL System  sponsored by the Financial  Industry
Regulatory Authority ("FINRA").


An investment in Rule 144A Securities will be considered  illiquid and therefore
subject to the Fund's  limit on the purchase of illiquid  securities  unless the
Board or its delegates  determines that the Rule 144A Securities are liquid.  In
reaching liquidity  decisions,  the Board and its delegates may consider,  inter
alia, the following factors:  (i) the unregistered nature of the security;  (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to  purchase  or sell the  security  and the  number of other  potential
purchasers;  (iv) dealer undertakings to make a market in the security;  and (v)
the nature of the security and the nature of the marketplace  trades (e.g.,  the
time needed to dispose of the security,  the method of soliciting offers and the
mechanics of the transfer).

Investing in Rule 144A Securities  could have the effect of increasing the level
of illiquidity in the Fund to the extent that qualified institutional buyers are
unavailable or  uninterested  in purchasing  such  securities from the Fund. The
Board has adopted  guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A  Securities,  although the
Board will retain ultimate responsibility for any liquidity determinations.

Other  Investment  Companies.  The Fund may invest in the aggregate no more than
10% of its total assets,  calculated at the time of purchase,  in the securities
of other  US-registered  investment  companies.  In  addition,  the Fund may not
invest  more  than 5% of its  total  assets  in the  securities  of any one such
investment company or acquire more than 3% of the voting securities of any other
such investment  company.  The Fund will indirectly bear its proportionate share
of any  management  or  other  fees  paid by  investment  companies  in which it
invests, in addition to its own fees.

Temporary Defensive Investments. For temporary defensive purposes during periods
when the Advisor determines that conditions  warrant,  the Fund may invest up to
100% of its assets in cash and money market  instruments,  including  securities
issued or guaranteed by the US  Government,  its agencies or  instrumentalities;
certificates of deposit, time deposits, and bankers' acceptances issued by banks
or savings and loans associations  having net assets of at least $500 million as
of the end of their most recent fiscal year;  commercial paper rated at the time
of  purchase  at least A-1 by  Standard & Poor's or P-1 by  Moody's,  or unrated
commercial  paper  determined  by  the  Advisor  to  be of  comparable  quality;
repurchase  agreements  involving  any  of the  foregoing;  and,  to the  extent
permitted by applicable  law,  shares of other  investment  companies  investing
solely in money market instruments.

Commercial  Paper.  Commercial  paper  is  a  short-term,  unsecured  negotiable
promissory  note of a US or  non-US  issuer.  The Fund may  purchase  commercial
paper.  The Fund may also invest in  variable  rate  master  demand  notes


                                       20
<PAGE>

which  typically are issued by large  corporate  borrowers and which provide for
variable  amounts of  principal  indebtedness  and periodic  adjustments  in the
interest rate. Demand notes are direct lending arrangements between the Fund and
an issuer, and are not normally traded in a secondary market. The Fund, however,
may demand  payment of principal and accrued  interest at any time. In addition,
while demand notes generally are not rated,  their issuers must satisfy the same
criteria as those that apply to issuers of  commercial  paper.  The Advisor will
consider the earning power,  cash flow and other liquidity  ratios of issuers of
demand  notes and  continually  will  monitor  their  financial  ability to meet
payment on demand.  See also "Fixed  Income  Securities -- Variable and Floating
Rate Instruments."

Bank Obligations. The Fund's investments in money market instruments may include
certificates of deposit, time deposits and bankers' acceptances. Certificates of
Deposit ("CDs") are short-term negotiable  obligations of commercial banks. Time
Deposits ("TDs") are non-negotiable  deposits maintained in banking institutions
for specified periods of time at stated interest rates. Bankers' acceptances are
time drafts drawn on commercial  banks by borrowers  usually in connection  with
international transactions.

US commercial  banks  organized under federal law are supervised and examined by
the  Comptroller  of the  Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal  Deposit  Insurance  Corporation
(the "FDIC").  US banks organized under state law are supervised and examined by
state banking  authorities but are members of the Federal Reserve System only if
they elect to join.  Most state  banks are  insured by the FDIC  (although  such
insurance  may not be of  material  benefit  to the  Fund,  depending  upon  the
principal  amount  of CDs of each bank  held by the  Fund)  and are  subject  to
federal examination and to a substantial body of federal law and regulation.  As
a result of  governmental  regulations,  US  branches  of US banks,  among other
things, generally are required to maintain specified levels of reserves, and are
subject to other  supervision  and  regulation  designed  to  promote  financial
soundness.  US savings and loan associations,  the CDs of which may be purchased
by the Fund,  are  supervised and subject to examination by the Office of Thrift
Supervision.  US  savings  and loan  associations  are  insured  by the  Savings
Association  Insurance Fund which is  administered by the FDIC and backed by the
full faith and credit of the US Government.

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 and Cash  Management  QP Trust,  or entities for the which the Advisor may
act as investment  advisor now or in the future that operate as cash  management
investment  vehicles but 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 comply with Rule
2a-7 under the 1940 Act and will be in  accordance  with the  Fund's  investment
policies and restrictions.

Asset Coverage. The Fund will comply with the segregation or coverage guidelines
established by the SEC and other  applicable  regulatory  bodies with respect to
certain  transactions,  including  (but  not  limited  to)  options  written  on
securities  and indexes;  currency,  interest  rate and security  index  futures
contracts  and  options  on  these  futures  contracts;   and  forward  currency
contracts.  These guidelines may, in certain instances,  require  segregation by
the Fund of cash or liquid securities to the extent the Fund's  obligations with
respect to these strategies are not otherwise  covered through  ownership of the
underlying security or financial instrument,  by other portfolio positions or by
other  means  consistent  with  applicable   regulatory  policies.   Unless  the
transaction is covered,  the segregated assets must at all times equal or exceed
the Fund's  obligations  with  respect to these  strategies.  Segregated  assets
cannot be sold or transferred  unless equivalent assets are substituted in their
place or it is no longer  necessary to segregate  them. As a result,  there is a
possibility  that  segregation of a large  percentage of the Fund's assets could
impede the Advisor or the Fund's  ability to meet  redemption  requests or other
current obligations.

For example,  a call option  written on securities  may require the Fund to hold
the  securities  subject  to  the  call  (or  securities  convertible  into  the
securities  without  additional   consideration)  or  to  segregate  assets  (as
described  above)


                                       21
<PAGE>

sufficient to purchase and deliver the  securities  if the call is exercised.  A
call option written on an index may require the Fund to own portfolio securities
that correlate with the index or to segregate  assets (as described above) equal
to the excess of the index value over the exercise  price on a current  basis. A
put option  written by the Fund may  require  the Fund to  segregate  assets (as
described  above) equal to the  exercise  price.  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.  If the Fund holds a futures  contract,
the Fund could purchase a put option on the same futures  contract with a strike
price as high or higher than the price of the contract  held. The Fund may enter
into  fully or  partially  offsetting  transactions  so that  its net  position,
coupled with any segregated assets (equal to any remaining  obligation),  equals
its  net  obligation.  Asset  coverage  may be  achieved  by  other  means  when
consistent with applicable regulatory policies.

The  use  of  options,  futures  and  foreign  currency  contracts  is a  highly
specialized  activity  which involves  investment  techniques and risks that are
different from those associated with ordinary portfolio transactions.  Gains and
losses on investments in options and futures depend on the Advisor's  ability to
predict the direction of interest rates,  currency  movements and other economic
factors.  The loss that may be  incurred by the Fund in  entering  into  futures
contracts  and  written  options  thereon  and  forward  currency  contracts  is
potentially  unlimited.  There is no  assurance  that  higher  than  anticipated
trading activity or other unforeseen events might not, at times,  render certain
facilities  of an  options  clearing  entity  or  other  entity  performing  the
regulatory and liquidity functions of an options clearing entity inadequate, and
thereby result in the institution by an exchange of special procedures which may
interfere with the timely execution of customers' orders. Most futures exchanges
limit the amount of fluctuation  permitted in a futures contract's prices during
a single  trading day. Once the limit has been reached no further  trades may be
made  that day at a price  beyond  the  limit.  The price  limit  will not limit
potential  losses,  and may in fact  prevent the prompt  liquidation  of futures
positions, ultimately resulting in further losses. Options and futures traded on
foreign exchanges  generally are not regulated by US authorities,  and may offer
less  liquidity  and less  protection to the Fund in the event of default by the
other party to the contract.

Except as set forth above under  "Derivative  Securities:  Futures Contracts and
Options on Futures  Contracts" (and the  sub-sections  thereunder),  there is no
limit on the  percentage  of the  assets  of the Fund  that may be at risk  with
respect to futures contracts and related options or forward currency  contracts.
The  Fund  may not  invest  more  than  15% of its  total  assets  in  purchased
protective put options.  The Fund's  transactions in options,  forward  currency
contracts,  futures contracts and options on futures contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes. See "Federal Income Taxes." There can be no assurance that the
use of these portfolio strategies will be successful.


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 the 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.


The  following  is a chart of the various  types of  securities  and  investment
strategies  employed by the Fund.  Unless otherwise  indicated,  the Fund is not
obligated to pursue any of the following  strategies and does not represent that
these  techniques  are  available  now or will be  available  at any time in the
future.  If the Fund's investment in a particular type of security is limited to
a certain percentage of the Fund's assets, that percentage  limitation is listed
in the chart.  Following the chart,  there is a description  of how each type of
security  and  investment  strategy  may be used by the  Fund.  As a  matter  of
non-fundamental  operating  policy,  the  Fund  may  be  subject  to  additional
restrictions. See the section entitled "Investment Restrictions."


                                       22
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------- --------------------------
INVESTMENT PRACTICE
--------------------------------------------------------------------------------------------------------------------

KEY TO TABLE:

+        Permitted without limit

o        Permitted without limit, but not expected to be used to a significant extent

X        Not permitted

20% Italic type (e.g.  20%)  represents  an  investment  limitation  as a percentage  of net fund assets;  does not
indicate actual use
20% Roman type (e.g.  20%)  represents  an investment  limitation  as a percentage  of total fund assets;  does not
indicate actual use
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES
----------------------------------------------------------------------------------------- --------------------------
<S>                                                                                                 <C>
Preferred Stock                                                                                       o
----------------------------------------------------------------------------------------- --------------------------
Convertible Securities                                                                                o
--------------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
--------------------------------------------------------------------------------------------------------------------
Inflation-Indexed Bonds                                                                               +
----------------------------------------------------------------------------------------- --------------------------
Short-Term Instruments                                                                                +
----------------------------------------------------------------------------------------- --------------------------
Corporate Bonds                                                                                       +
----------------------------------------------------------------------------------------- --------------------------
Obligations of Banks and Other Financial Institutions                                                 +
----------------------------------------------------------------------------------------- --------------------------
Certificates of Deposit and Banker's Acceptances                                                      +
----------------------------------------------------------------------------------------- --------------------------
Commercial Paper                                                                                      +
----------------------------------------------------------------------------------------- --------------------------
Repurchase Agreements                                                                                 +
----------------------------------------------------------------------------------------- --------------------------
Variable Rate Master Demand Notes                                                                     o
----------------------------------------------------------------------------------------- --------------------------
US Government Securities                                                                              +
----------------------------------------------------------------------------------------- --------------------------
Custodial Receipts                                                                                    o
----------------------------------------------------------------------------------------- --------------------------
Zero Coupon Securities and Deferred Interest Bonds                                                    +
----------------------------------------------------------------------------------------- --------------------------
Variable Rate Securities                                                                              +
----------------------------------------------------------------------------------------- --------------------------
Inverse Floating Rate Securities                                                                      o
----------------------------------------------------------------------------------------- --------------------------
Lower-Rated Debt Securities                                                                           +
----------------------------------------------------------------------------------------- --------------------------
Put Bonds                                                                                             +
----------------------------------------------------------------------------------------- --------------------------
Bank Loans                                                                                            o
--------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (OPTIONS)
----------------------------------------------------------------------------------------- --------------------------
Options on Securities                                                                                 +
----------------------------------------------------------------------------------------- --------------------------
Options on Securities Indices                                                                         +
----------------------------------------------------------------------------------------- --------------------------
Options on Non-US Securities Indices                                                                  +
--------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
----------------------------------------------------------------------------------------- --------------------------
Futures Contracts                                                                                     +
----------------------------------------------------------------------------------------- --------------------------
Futures Contracts on Securities Indices                                                               +
----------------------------------------------------------------------------------------- --------------------------
Options on Futures Contracts (including Contracts on Securities Indices)                              +
--------------------------------------------------------------------------------------------------------------------

DERIVATIVE SECURITIES
----------------------------------------------------------------------------------------- --------------------------
Credit Default  Swap Agreements                                                                      25%
----------------------------------------------------------------------------------------- --------------------------
Other Swap Agreements                                                                                 +
--------------------------------------------------------------------------------------------------------------------

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
----------------------------------------------------------------------------------------- --------------------------
Government Guaranteed Mortgage-Backed Securities                                                     20%
----------------------------------------------------------------------------------------- --------------------------
Government National Mortgage Association Certificates                                                20%
----------------------------------------------------------------------------------------- --------------------------
Federal National Mortgage Association Certificates                                                   20%
----------------------------------------------------------------------------------------- --------------------------
Federal Home Loan Mortgage Corporation Certificates                                                  20%
----------------------------------------------------------------------------------------- --------------------------
Multi-Class Mortgage-Backed Securities (CMOs and REMICs)                                             20%
----------------------------------------------------------------------------------------- --------------------------



                                       23
<PAGE>

----------------------------------------------------------------------------------------- --------------------------
INVESTMENT PRACTICE
--------------------------------------------------------------------------------------------------------------------

KEY TO TABLE:

+        Permitted without limit

o        Permitted without limit, but not expected to be used to a significant extent

X        Not permitted

20% Italic type (e.g.  20%)  represents  an  investment  limitation  as a percentage  of net fund assets;  does not
indicate actual use
20% Roman type (e.g.  20%)  represents  an investment  limitation  as a percentage  of total fund assets;  does not
indicate actual use
--------------------------------------------------------------------------------------------------------------------
Private Issued Mortgage-Backed Securities                                                            20%
----------------------------------------------------------------------------------------- --------------------------
Asset-Backed Securities                                                                              20%
----------------------------------------------------------------------------------------- --------------------------
SECURITIES OF NON-US ISSUERS
----------------------------------------------------------------------------------------- --------------------------
Foreign Corporate Debt Securities                                                                    20%
----------------------------------------------------------------------------------------- --------------------------
Foreign Government Debt Securities                                                                    +
----------------------------------------------------------------------------------------- --------------------------
Investments in Emerging Markets                                                                       +
--------------------------------------------------------------------------------------------------------------------
CURRENCY MANAGEMENT
----------------------------------------------------------------------------------------- --------------------------
Currency Exchange Transactions                                                                        +
----------------------------------------------------------------------------------------- --------------------------
Currency Hedging Transactions                                                                         +
----------------------------------------------------------------------------------------- --------------------------
Forward Currency Exchange Contracts                                                                   +
----------------------------------------------------------------------------------------- --------------------------
Options on Foreign Currencies                                                                         +
----------------------------------------------------------------------------------------- --------------------------
OTHER INVESTMENTS AND INVESTMENT PRACTICES
----------------------------------------------------------------------------------------- --------------------------
Illiquid Securities                                                                                  15%
----------------------------------------------------------------------------------------- --------------------------
When-Issued and Delayed Delivery Securities                                                           +
----------------------------------------------------------------------------------------- --------------------------
TBA Purchase Commitments                                                                             20%
----------------------------------------------------------------------------------------- --------------------------
Mortgage Dollar Rolls                                                                                20%
----------------------------------------------------------------------------------------- --------------------------
Lending of Portfolio Securities                                                                    33 1/3%
----------------------------------------------------------------------------------------- --------------------------
Borrowing (including reverse repurchase agreements)                                                   o
----------------------------------------------------------------------------------------- --------------------------
Short Sales                                                                                           o
----------------------------------------------------------------------------------------- --------------------------
Other Investment Companies                                                                           10%
----------------------------------------------------------------------------------------- --------------------------
Temporary Defensive Investments                                                                       +
----------------------------------------------------------------------------------------- --------------------------
</TABLE>

The Fund is not obligated to pursue any of the following strategies and does not
represent  that these  techniques  are available now or will be available at any
time in the future.

Portfolio Holdings


In addition to the public disclosure of Fund portfolio holdings through required
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 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").

                                       24
<PAGE>

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 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.

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


                                       25
<PAGE>

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


DIMA, which is part of Deutsche Asset Management,  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 10154, DIMA makes the Fund's
investment  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 and its  predecessors  have
more than 80 years of experience  managing  mutual  funds.  DIMA provides a full
range of investment  advisory services to institutional and retail clients.  The
Advisor  is  also  responsible  for  selecting   brokers  and  dealers  and  for
negotiating  brokerage  commissions  and dealer  charges.  On December 31, 2006,
Deutsche Asset Management, Inc. ("DAMI") merged into DIMA. Prior to December 31,
2006 DAMI was the  investment  advisor to the Fund.  As a result of the  merger,
DIMA is now the investment advisor to the Fund.


DeAM 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. 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.

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.


The Fund is managed by a team of investment professionals, each of whom plays 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  prospectus,  as of
the date of the Fund's prospectus. Composition of the team may change over time,
and Fund  shareholders  will be notified of changes  affecting  individuals with
primary Fund management responsibility.


Investment Management Agreement




The Board and the  shareholders  of the Fund approved an  investment  management
agreement (the  "Investment


                                       26
<PAGE>

Management  Agreement")  between the Fund and DIMA.  Pursuant to the  Investment
Management  Agreement,  the Advisor provides continuing investment management of
the assets of the Fund. In addition to the  investment  management of the assets
of the Fund,  the Advisor  determines  the  investments to be made for the Fund,
including  what  portion  of its  assets  remain  uninvested  in  cash  or  cash
equivalents,  and with whom the orders for  investments  are placed,  consistent
with the  Fund's  policies  as stated in its  Prospectuses  and this SAI,  or as
adopted  by the Fund's  Board.  The  Advisor  also  monitors,  to the extent not
monitored by the Fund's administrator or other agent, the Fund's compliance with
its investment and tax guidelines and other compliance policies.


The Advisor  provides  assistance to the Fund's Board in valuing the  securities
and other  instruments  held by the Fund, to the extent  reasonably  required by
valuation policies and procedures that may be adopted by the Fund.


Pursuant to theInvestment  Management  Agreement,  (unless otherwise provided in
the agreement or as  determined by the Fund's Board and to the extent  permitted
by applicable  law), the Advisor pays the compensation and expenses of all Board
members,  officers,  and executive  employees of the Fund,  including the Fund's
share of payroll taxes, who are affiliated persons of the Advisor.

The  Investment  Management  Agreement  provides  that  the  Fund  is  generally
responsible  for expenses  that  include:  fees payable to the Advisor;  outside
legal,  accounting  or auditing  expenses,  including  with  respect to expenses
related to negotiation,  acquisition or  distribution of portfolio  investments;
maintenance  of books and records that are  maintained  by the Fund,  the Fund's
custodian,  or other agents of the Fund; taxes and  governmental  fees; fees and
expenses   of  the   Fund's   accounting   agent,   custodian,   sub-custodians,
depositories,  transfer  agents,  dividend  reimbursing  agents and  registrars;
payment  for  portfolio  pricing  or  valuation   services  to  pricing  agents,
accountants,  bankers and other specialists,  if any;  brokerage  commissions or
other costs of  acquiring  or disposing  of any  portfolio  securities  or other
instruments  of the  Fund;  and  litigation  expenses  and  other  extraordinary
expenses not incurred in the ordinary course of the Fund's business.

The Investment  Management  Agreement  allows the Advisor to delegate any of its
duties under the  Agreement to a  subadvisor,  subject to a majority vote of the
Board of the Fund,  including  a  majority  of the Board who are not  interested
persons of the Fund, and, if required by applicable  law,  subject to a majority
vote of the Fund's shareholders.

The  Investment  Management  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  malfeasance,  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. The Investment
Management  Agreement may be terminated at any time, without payment of penalty,
by either party or by vote of a majority of the outstanding voting securities of
the Fund on 60 days' written notice.

In addition,  the Board and shareholders  approved a subadvisor  approval policy
for the Fund (the "Subadvisor Approval Policy").  The Subadvisor Approval Policy
permits the Advisor,  subject to the approval of the Board, including a majority
of its  independent  board members,  to appoint and replace  subadvisors  and to
amend sub-advisory  contracts without obtaining shareholder approval.  Under the
Subadvisor Approval Policy, the Board,  including its independent board members,
will continue to evaluate and approve any new sub-advisory contracts between the
Advisor and any subadvisor,  as well as all changes to any existing sub-advisory
contract.  The Fund cannot implement the Subadvisor  Approval Policy without the
SEC either adopting revisions to certain existing rules (as it proposed to do in
October 2003) or granting the Fund exemptive relief from such existing rules. In
the event that the Fund received  exemptive relief or the SEC adopted  revisions
to its  current  rules,  the Fund and the  Advisor  would  likely be  subject to
certain  conditions  imposed  by the SEC  (and  certain  conditions  that may be
imposed in the future within either  exemptive  relief or a rule) to ensure that
the interests of the Fund and its shareholders are adequately protected whenever
the Advisor acts under the Subadvisor Approval Policy, including any shareholder
notice requirements.


                                       27
<PAGE>

For all services provided under the Investment  Management  Agreement,  the Fund
pays the Advisor a fee, computed daily and paid monthly, at the annual rate as a
percentage of net assets shown below:

Average Daily Net Assets                  DWS Inflation Protected Plus Fund
------------------------                  ---------------------------------

$0 - $1.5 billion                                      0.400%
$1.5 billion - $2 billion                              0.375%
$2 billion - $3 billion                                0.360%
$3 billion - $4 billion                                0.345%
$4 billion - $5 billion                                0.330%
$5 billion - $6 billion                                0.315%
Over $6 billion                                        0.300%

The  advisory  fees  paid by the Fund  for its last  three  fiscal  years  ended
September 30 are shown in the table below.


                                             2007        2006**        2005**
                                             ----        ------        ------

DWS Inflation Protected Plus Fund*       $119,044      $103,190       $18,133


*  The Fund commenced operations on July 8, 2005.


** Prior to June 1, 2006, these fees included an administrative service fee.


Through  January 31, 2009, the investment  advisor has  contractually  agreed to
waive a  portion  of its  fees  and  reimburse  expenses  so that  total  annual
operating  expenses will not exceed 0.90%, 1.65% and 1.65%, for Class A, Class B
and  Class  C  shares,   respectively,   excluding   certain  expenses  such  as
extraordinary expenses, taxes, brokerage and interest.

Through  January 31, 2009, the investment  advisor has  contractually  agreed to
waive a  portion  of its  fees  and  reimburse  expenses  so that  total  annual
operating  expenses will not exceed 0.65%, for  Institutional  Class,  excluding
certain expenses such as extraordinary expenses, taxes, brokerage and interest.




For the same periods,  the Advisor  reimbursed the following amounts to the Fund
to cover expenses:


         2007                     2006                   2005
         ----                     ----                   ----

       $42,553                  $103,190                $18,133



In reviewing the terms of the Investment Management 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.

                                       28
<PAGE>

Under a separate agreement between Deutsche Bank AG and the Fund,  Deutsche Bank
AG has granted a license to the Fund to utilize the trademark "DWS."

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.

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.

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  Deutsche  Asset
         Management, quantitative measures which include 1, 3 and 5 year pre-tax
         returns versus benchmark (such as the benchmark used in the prospectus)
         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.

                                       29
<PAGE>

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

The following table shows the dollar range of shares owned  beneficially  and of
record by each  member of the Fund's  portfolio  management  team in the Fund as
well as in all DWS Funds as a group (i.e.  those funds advised by Deutsche Asset
Management or its affiliates),  including  investments by their immediate family
members sharing the same household and amounts invested  through  retirement and
deferred  compensation plans. This information is provided as of the Fund's most
recent fiscal year end.

<TABLE>
<CAPTION>
                                                                                   Dollar Range of All
Name of Portfolio Manager           DWS Inflation Protected Plus Fund             DWS Fund Shares Owned
-------------------------           ---------------------------------             ---------------------
<S>                                                    <C>                                    <C>
William Chepolis                            $10,001 - $50,000                      $100,001 - $500,000
Matthew F. MacDonald                               $0                               $10,001 - $50,000
Robert Wang                                   $1 - $10,000                         $100,001 - $500,000
Thomas Picciochi                            $10,001 - $50,000                      $100,001 - $500,000

Conflicts of Interest

In addition to managing the assets of the Fund,  the Fund's  portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled investment vehicles that are not registered investment
companies and (3) other  accounts  (e.g.,  accounts  managed for  individuals or
organizations)  managed by each portfolio  manager.  Total assets  attributed to
each portfolio  manager in the tables below include total assets of each account
managed  by them,  although  the  manager  may only  manage  a  portion  of such
account's  assets.  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                          15              $9,322,622,553             0                    $0
Matthew F. MacDonald                      15              $9,322,622,553             0                    $0
Robert Wang                               40             $15,335,062,025             0                    $0
Thomas Picciochi                          11              $6,008,561,151             0                    $0

                                       30
<PAGE>

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                            0                        $0              0                          $0
Matthew F. MacDonald                        0                        $0              0                          $0
Robert Wang                                22              $699,278,407              2                $291,834,605
Thomas Picciochi                            5              $341,411,072              2                $291,834,605

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                            0                        $0              0                          $0
Matthew F. MacDonald                        0                        $0              0                          $0
Robert Wang                                43            $8,307,356,074              3                $168,734,012
Thomas Picciochi                           10              $245,332,939              3                $168,734,012
</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 Funds
and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account,  including the following:

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 each  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


                                       31
<PAGE>

         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 each Fund's portfolio  management
         team. The Advisor and the portfolio  management  team have  established
         monitoring  procedures,  a protocol for supervisory reviews, as well as
         compliance  oversight  to ensure that  potential  conflicts of interest
         relating to this type of activity are properly addressed.

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.





                                       32
<PAGE>




                                       33
<PAGE>




                                       34
<PAGE>



Codes of Ethics

The Trust,  the Advisor and the Fund's  Distributor  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  Distributor  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  Code of
Ethics may be granted in particular  circumstances  after review by  appropriate
personnel.

                                       35
<PAGE>




Regulatory Matters and Legal Proceedings

On December 21, 2006,  DeAM  settled  proceedings  with the 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.

                                       36
<PAGE>

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  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")  (now  known as FINRA)  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


                                       37
<PAGE>

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.


                             FUND SERVICE PROVIDERS

Administrator


Pursuant to an administrative  services agreement (the "Administrative  Services
Agreement") with DIMA (the "Administrator"), 345 Park Avenue, New York, New York
10154, DIMA provides most administrative  services to the Fund including,  among
others, providing the Fund with personnel, preparing and making required filings
on  behalf  of the  Fund,  maintaining  books  and  records  for the  Fund,  and
monitoring the valuation of Fund securities. For all services provided under the
Administrative  Services  Agreement,  the Fund  pays  DIMA a fee of 0.10% of the
Fund's  average daily net assets.  DIMA pays the  accounting  agency out of such
Administrative Services Agreement fee.


Under  the  Administrative  Services  Agreement,  DIMA,  as  administrator,   is
obligated on a continuous basis to provide such  administrative  services as the
Board of the Fund reasonably  deems necessary for the proper  administration  of
the Fund.  DIMA provides the Fund with  personnel;  arranges for the preparation
and filing of the Fund's tax returns;  prepares and submits  reports and meeting
materials to the Board and the  shareholders;  prepares and files updates to the
Fund's Prospectuses and SAI as well as other reports required to be filed by the
SEC;  maintains  the  Fund's  records;  provides  the Fund  with  office  space,
equipment and services; supervises, negotiates the contracts of and monitors the
performance  of third parties  contractors;  oversees the tabulation of proxies;
monitors the  valuation of portfolio  securities  and monitors  compliance  with
Board-approved valuation procedures;  assists in establishing the accounting and
tax policies of the Fund;  assists in the  resolution of accounting  issues that
may arise  with  respect  to the  Fund;  establishes  and  monitors  the  Fund's
operating  expense budgets;  reviews and processes the Fund's bills;  assists in
determining  the amount of dividends and  distributions  available to be paid by
the Fund, prepares and arranges dividend  notifications and provides information
to agents to effect payments thereof; provides to the Board periodic and special
reports;  provides  assistance with investor and public relations  matters;  and
monitors the registration of shares under applicable federal and state law. DIMA
also performs certain fund accounting services under the Administrative Services
Agreement.  The Administrative Services Agreement provides that DIMA will not be
liable  under  the   Administrative   Services   Agreement  except  for  willful
misfeasance,  bad faith or negligence in the  performance  of its duties or from
the reckless disregard by it of its duties and obligations thereunder.


For the period ended September 30, 2007,  DIMA received  $50,000 as compensation
for adminstrative services, all of which was waived.

For the period June 1, 2006 through September 30, 2006, DIMA received $17,141 as
compensation for administrative services, all of which was waived.


Prior to June 1, 2006,  Investment Company Capital Corporation ("ICCC") received
a fee accrued daily and paid  monthly,  equal on an annual basis to 0.45% of the
average  daily net assets of the Fund's  Class A, B, C and  Institutional  Class
shares for serving as  administrator  of the Fund. For the years ended September
30, 2005 and September 30, 2006*, ICCC earned $7,321 and $28,642,  respectively,
as  compensation  for  administrative  and other services  provided to the Fund.
During the same periods,  ICCC waived $7,290 and $28,077,  respectively,  to the
Fund to cover expenses.

*        For the period October 1, 2005 through May 31, 2006.

The  fees  paid by the  Fund to DIMA  pursuant  to the  Administrative  Services
Agreement  are  reduced by the amount of any  credits  received  from the Fund's
custodian for cash balances.

                                       38
<PAGE>

Pursuant to an  agreement  between the  Administrator  and State Street Bank and
Trust Company ("SSB"),  the Administrator  has delegated certain  administrative
functions  to SSB. The costs and  expenses of such  delegation  are borne by the
Administrator, not by the Fund.

Various third-party service providers (the "Service  Providers"),  some of which
are affiliated with the Advisor,  provide certain  services to the Fund pursuant
to separate agreements with the Fund.


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.




Distributor


Pursuant to a Distribution Agreement  ("Distribution  Agreement"),  DWS-SDI, 222
South Riverside Plaza, Chicago,  Illinois 60606, an affiliate of the Advisor, is
the principal underwriter and distributor for the Class A, Class B, Class C, and
Institutional  Class  shares  of the  Fund  and acts as agent of the Fund in the
continuous  offering of Fund shares.  The  Distribution  Agreement  continues in
effect from year to year only if its  continuance  is approved at least annually
by a vote of the Board  members of the Fund,  including the Trustees who are not
interested  persons  of the Fund and who have no  direct or  indirect  financial
interest in the Distribution Agreement.

The  Distribution  Agreement  provides  that  the  Distributor  shall:  (i)  use
reasonable  efforts to sell shares upon the terms and  conditions  contained  in
Distribution  Agreement and the Fund's then-current  Prospectuses;  (ii) use its
best  efforts to conform  with the  requirements  of all  federal and state laws
relating to the sale of the shares;  (iii) adopt and follow procedures as may be
necessary  to comply  with the  requirements  of FINRA and any other  applicable
self-regulatory  organization;  (iv) perform its duties under the supervision of
and in  accordance  with the  directives of the Fund's Board of Trustees and the
Fund's  Declaration  of Trust and  By-Laws;  and (v) provide the Fund's Board of
Trustees with a written  report of the amounts  expended in connection  with the
Distribution Agreement.  The Distributor shall devote reasonable time and effort
to effect sales of shares but shall not be obligated to sell any specific number
of shares. The services of the Distributor are not exclusive and the Distributor
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment,  or for any action
or inaction of the Distributor in the absence of bad faith, willful misfeasance,
or gross  negligence in the  performance of its duties or obligations  under the
Distribution  Agreement or by reason of the reckless disregard of its duties and
obligations under the Distribution Agreement. The Distribution Agreement further
provides that the Fund and the  Distributor  will mutually  indemnify each other
for losses relating to disclosures in the Fund's registration statement.


The  Distribution  Agreement may be terminated at any time upon 60 days' written
notice by the Fund,  without penalty,  by the vote of a majority of the Trustees
of the  Fund  who  are  not  interested  persons  of the  Fund or by a vote of a
majority of the Fund's  outstanding shares of the related class or upon 60 days'
written notice by the Distributor and shall automatically terminate in the event
of an assignment.

DWS-SDI and certain broker-dealers  ("Participating  Dealers") have entered into
sub-distribution  agreements under which such Participating  Dealers have agreed
to process investor purchase and redemption orders and respond to inquiries from
shareholders  concerning  the status of their accounts and the operations of the
Fund.  Any  sub-distribution  agreement  may be terminated or assigned by either
party,  without penalty, by the vote of a majority of the Fund's  non-interested
Trustees or by a vote of a majority of the outstanding  voting securities of the
Fund in the same manner as the Distribution Agreement.


                                       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.

<TABLE>
<CAPTION>
                                         Aggregate Commissions
                     Aggregate Sales            Paid            Aggregate Commissions      Aggregate Commissions
Fiscal Year            Commissions            to Firms         Paid to Affiliated Firms     Retained by DWS-SDI
-----------            -----------            --------         ------------------------     -------------------
<S>                        <C>                   <C>                      <C>                            <C>

2007                      $8,000                   $0                       $0                      $8,000

2006                      $5,000               $2,000                       $0                      $3,000
2005*                         $0                   $0                       $0                          $0
</TABLE>

*        For the period July 8, 2005  (commencement  of operations) to September
         30, 2005.

Class A, B and C Shares  Only.  In  addition,  with  respect to Class A, B and C
shares  of  the  Fund,  these  classes  may  enter  into  shareholder  servicing
agreements with certain financial  institutions to act as shareholder  servicing
agents,  pursuant  to which the  Distributor  will  allocate  a  portion  of its
distribution  fee as  compensation  for  such  financial  institutions'  ongoing
shareholder services.  Currently, banking laws and regulations do not prohibit a
financial  holding  company  affiliate from acting as distributor or shareholder
servicing agent or in other capacities for investment  companies.  Should future
legislative,   judicial  or  administrative  action  prohibit  or  restrict  the
activities  of  the  shareholder   servicing   agents  in  connection  with  the
shareholder servicing agreements,  the Trust may be required to alter materially
or discontinue its  arrangements  with the shareholder  servicing  agents.  Such
financial  institutions  may  impose  separate  fees in  connection  with  these
services  and  investors   should  review  the  Prospectuses  and  this  SAI  in
conjunction with any such institution's fee schedule.

As compensation for providing distribution services as described above for Class
B and C shares, the Distributor  receives an annual fee, paid monthly,  equal to
0.75% of their respective average daily net assets. In addition, with respect to
Classes A, B and C shares, the Distributor receives a shareholder  servicing fee
at an annual rate of up to 0.25% of their  respective  average daily net assets.
(See the Prospectuses.)

Pursuant  to Rule  12b-1  under  the  1940  Act,  investment  companies  may pay
distribution expenses,  directly or indirectly,  only pursuant to a plan adopted
by the investment company's board of directors and approved by its shareholders.
The Fund has adopted a Plan of Distribution for each class of shares (except the
Institutional Class) (the "Plans").  Under each Plan, the Fund pays a fee to the
Distributor for distribution  and other  shareholder  service  assistance as set
forth in the Distribution  Agreement,  and the Distributor is authorized to make
payments out of its fee to Participating Dealers and shareholder service agents.
The Plans  remain in effect from year to year as  specifically  approved  (a) at
least annually by the Fund's Board of Trustees and (b) by the  affirmative  vote
of a majority of the  non-interested  Trustees,  who have not direct or indirect
financial  interest in such Plans,  by votes cast in person at a meeting  called
for such purpose.

In  approving  the Plans,  the  Trustees  concluded,  in the  exercise  of their
reasonable  business judgment,  that there was a reasonable  likelihood that the
Plans  would  benefit the Fund and its  shareholders.  The Plans will be renewed
only if the Trustees make a similar  determination  each year.  The Plans,  with
respect to any share class, may not be amended to increase materially the fee to
be paid  pursuant to the  Distribution  Agreement  without  the  approval of the
shareholders  of that class of the Fund. The Plans may be terminated at any time
by the vote of a majority of the Fund's non-interested  Trustees or by a vote of
a majority of the Fund's outstanding shares of a particular class.

During the  continuance  of the  Plans,  the Fund's  Board of  Trustees  will be
provided for their review,  at least quarterly,  a written report concerning the
payments made under the Plans to the  Distributor  pursuant to the  Distribution
Agreement  and  to  Participating   Dealers  pursuant  to  any  sub-distribution
agreements.  Such reports  shall be made by the persons  authorized to make such
payments.  In addition,  during the continuance of the Plans,  the selection and
nomination  of the Fund's  non-interested  Trustees  shall be  committed  to the
discretion of the non-interested Trustees then in office.

                                       40
<PAGE>

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 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.


                                       41
<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.



<TABLE>
<CAPTION>
                                       12b-1 Compensation to Underwriter for the
                                         Fiscal Year Ending September 30, 2007
                                         -------------------------------------

                                      12b-1             12b-1             12b-1
                                   Distribution      Shareholder       Compensation
                                       Fees         Services Fees     Paid to Firms
                                       ----         -------------     -------------
<S>                                           <C>            <C>               <C>
DWS Inflation        Class A                  $0             $3,110            $4,768
Protected Plus Fund  Class B              $1,378               $475            $3,282
                     Class C              $8,383             $2,230           $16,455
                     Class S                  $0                 $0                $0



                                                   Other Expenses Paid by Underwriter for the
                                                     Fiscal Year Ending September 30, 2007
                                                     -------------------------------------

                                   Advertising, Sales,
                                      Literature and                     Marketing     Postage
                                       Promotional        Prospectus     and Sales      and        Imputed
                                        Materials          Printing       Expenses     Mailing     Interest
                                        ---------          --------       --------     -------     --------

DWS Inflation        Class A               $6,356           $953        $1,046        $292           $0
Protected Plus Fund  Class B                 $237            $19           $57         $17          $97
                     Class C               $5,295           $448        $1,308        $335           $0
                     Class S                   $0             $0            $0          $0           $0
</TABLE>




                                       42
<PAGE>


DWS-SDI no longer  advances the first year  distribution  fee and 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.


The table below sets forth,  for the fiscal year ended  September 30, 2006,  the
distribution and shareholder servicing fees paid by the Fund:

<TABLE>
<CAPTION>
                       Distribution Fee        Amount Waived     Shareholder Servicing Fee     Amount Waived
                       ----------------        -------------     -------------------------     -------------
<S>                          <C>                     <C>                    <C>                      <C>
Class A                      $965                    $0                     $866                     $0
Class B                      $837                    $0                     $271                     $0
Class C                     $3,090                   $0                    $1,003                    $0


The table below sets forth,  for the fiscal year ended  September 30, 2007,  the
distribution and shareholder servicing fees paid by the Fund:

                       Distribution Fee        Amount Waived     Shareholder Servicing Fee     Amount Waived
                       ----------------        -------------     -------------------------     -------------

Class A                       $0                     $0                    $3,550                    $0
Class B                     $1,383                   $0                     $445                     $0
Class C                     $8,362                   $0                    $2,631                   $129
</TABLE>


Independent Registered Public Accounting Firm

PricewaterhouseCoopers  LLP, 125 High Street,  Boston,  MA 02110,  serves as the
Fund's Independent Registered Public Accounting Firm.

Legal Counsel

Willkie Farr & Gallagher  LLP,  787 Seventh  Avenue,  New York,  New York 10019,
serves as legal counsel to the Fund.

Ropes & Gray LLP, One International  Place,  Boston,  Massachusetts  02110-2624,
serves as counsel to the Independent Trustees of the Trust.

Fund Accounting Agent


Prior to June 1, 2006, ICCC, the then  administrator  for the Fund, had retained
DWS Scudder Fund Accounting Corporation  ("DWS-SFAC"),  Two International Place,
Boston,  Massachusetts,  02110, a subsidiary of the Advisor,  as the Fund's fund
accounting  agent.  DWS-SFAC was responsible for determining net asset value per
share and maintaining the portfolio and general accounting records for the Fund.


Pursuant to an  agreement  between  DWS-SFAC  and SSB,  DWS-SFAC  had  delegated
certain fund accounting  functions to SSB under the fund  accounting  agreement.
The costs and expenses of such  delegation  were 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 sub-custodians approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank AG, an affiliate of the Advisor,  as sub-custodian  ("DB  Subcustodian") in
certain countries.  To the extent the Fund holds any securities in the countries
in which SSB uses DB Subcustodian as a  sub-custodian,  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


                                       43
<PAGE>

average daily net assets of the Omnibus Account and (2) transaction charges with
respect to transactions that occur within the Omnibus Account.

DWS Scudder Investment Service Company ("DWS-SISC"),  210 W. 10th Street, Kansas
City,  MO  64105-1614 is the Fund's  transfer  agent and dividend  paying agent.
DWS-SISC,  an  affiliate  of  the  Advisor,   serves  as  the  Fund's  transfer,
dividend-paying  agent  and  shareholder  service  agent  ("Shareholder  Service
Agent") for the Fund's Class A, B, C and Institutional Class shares.


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.

Effective  April 1, 2007,  DWS-SISC is the Transfer Agent for all classes of all
DWS funds.





For the  fiscal  year  ended  September  30,  2006,  the Fund  paid  shareholder
servicing and distribution fees as follows:

<TABLE>
<CAPTION>
Fund                                           Class                    Total                    Amount Waived
----                                           -----                    -----                    -------------
<S>                                            <C>                       <C>                           <C>
DWS Inflation Protected Plus Fund             Class A                    $985                          $991
DWS Inflation Protected Plus Fund             Class B                    $115                          $116
DWS Inflation Protected Plus Fund             Class C                    $218                          $184
DWS Inflation Protected Plus Fund       Institutional Class            $7,225                        $7,295

For the  fiscal  year  ended  September  30,  2007,  the Fund  paid  shareholder
servicing and distribution fees as follows:

Fund                                           Class                    Total                    Amount Waived
----                                           -----                    -----                    -------------

DWS Inflation Protected Plus Fund             Class A                  $3,322                        $3,055
DWS Inflation Protected Plus Fund             Class B                    $400                          $396
DWS Inflation Protected Plus Fund             Class C                    $983                          $983
DWS Inflation Protected Plus Fund       Institutional Class              $260                             --

</TABLE>

Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc. ("DST"),  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.

                                       44
<PAGE>

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.

                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio securities, including the allocation of brokerage.

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.

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


                                       45
<PAGE>

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.

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.

                                       46
<PAGE>

Deutsche Bank AG or one of its  affiliates  may act as a broker for the Fund and
receive brokerage commissions or other transaction-related compensation from the
Fund 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 Fund's  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 Fund a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.





                                       47
<PAGE>



The Fund  commenced  operations  on July 8,  2005.  For the fiscal  years  ended
September 30, 2005 and  September  30, 2006,  the Fund did not pay any brokerage
commissions.


The Fund paid $3,474 in brokerage  commissions  for the most recent  fiscal year
end.

Securities  of Regular  Broker-Dealers.  The Fund is required  to  identify  any
securities  of its "regular  brokers or dealers" (as such term is defined in the
1940 Act) that the Fund has acquired  during the most recent  fiscal year. As of
September 30, 2007, the Fund did not hold any securities of its regular  brokers
or dealers.


Portfolio Turnover


The Fund's  portfolio  turnover rate is calculated by dividing the lesser of the
dollar  amount of sales or  purchases  of  portfolio  securities  by the average
monthly value of the Fund's portfolio securities,  excluding securities having a
maturity  at the  date of  purchase  of one  year or  less.  The  Fund  may sell
securities  held for a short time in order to take advantage of what the Advisor
believes to be  temporary  disparities  in normal  yield  relationships  between
securities. A high rate of portfolio turnover (i.e., 100% or higher) will result
in  correspondingly  higher  transaction costs to the Fund,  particularly if the
Fund's  primary  investments  are equity  securities.  A high rate of  portfolio
turnover  may  also  result  in  more  frequent  distributions  attributable  to
long-term  and  short-term  capital  gains,  which  could  increase  income  tax
liability of the Fund's shareholders.  For the fiscal years ended, September 30,
2006 and September 30, 2007,  the Fund's  portfolio  turnover rate was


                                       48
<PAGE>

331% and 167%, respectively. The portfolio turnover rate for the Fund was
significantly higher in fiscal year 2006 primarily because of a growth in assets
of the Fund.


                        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 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.

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 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 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 FINRA 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 financial  advisors,  who in turn
may  recommend  that  investors  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.

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.





                                       50
<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.




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.

                                       51
<PAGE>

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 such 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
Prospectuses.

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
ProStar,  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:


                                       52
<PAGE>


<TABLE>
<CAPTION>
                                                     Compensation Schedule #2:
           Compensation Schedule #1:                        DWS Scudder
   Retail Sales and DWS Scudder Flex Plan(1)            Retirement Plans(2)
   --------------------------------------               ----------------

                                    As a As a
                           Percentage of Percentage of
            Amount of                  Net       Amount of Shares         Net
           Shares Sold             Asset Value          Sold          Asset Value
           -----------             -----------          ----          -----------
<S>                                     <C>             <C>                <C>
$1 million to $3 million              0.85%      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
            Amount of                  Net
           Shares Sold             Asset Value
           -----------             -----------

All amounts                           0.85%

(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 the Fund
         and other DWS  Funds  including  purchases  pursuant  to the  "Combined
         Purchases,"  "Letter  of Intent"  and  "Cumulative  Discount"  features
         referred to below.

 (2)     Compensation  Schedule 2 applies 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").

                                       53
<PAGE>

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 FINRA 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  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

                                       54
<PAGE>

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.
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

                                       55
<PAGE>

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
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


                                       56
<PAGE>

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.





                                       57
<PAGE>




                                       58
<PAGE>




                                       59
<PAGE>




                                       60
<PAGE>




                                       61
<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 $100,000                              2.75%                 2.83%                    2.25%
$100,000 but less than $250,000                 2.50%                 2.56%                    2.00%
$250,000 but less than $500,000                 2.00%                 2.04%                    1.75%
$500,000 but less than $1 million               1.50%                 1.52%                    1.25%
$1 million and over                             0.00%***              0.00%***               0.00%****
</TABLE>

*        The Offering Price includes the sales charge.

**       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 order  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.

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 Fund that bear a sales charge.

Letter of Intent. The same reduced sales charges 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) of all 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).

                                       62
<PAGE>

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.




                                       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;

                                       64
<PAGE>

(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 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.

                                       65
<PAGE>

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 SAI.

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 firms acting for clients  whose shares will be held in an omnibus
account and employer-sponsored  employee benefit plans using the Flex subaccount
record keeping system ("Flex  System")  maintained by ADP under an alliance with
DWS-SDI and its affiliates ("DWS Scudder Flex Plans").

The following provisions apply to DWS Scudder Flex 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 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 Fund 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 Fund 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.
These minimum amounts may be changed at any time in management's discretion.

                                       66
<PAGE>

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 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  of $50 and  maximum  of  $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.

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 Scudder 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 sub-adviser  to any fund in the DWS family of funds
or a broker-dealer authorized to sell shares of the funds. Qualified individuals
will  generally  be  allowed  to  purchase  shares in the class  with the lowest
expense ratio,  usually the Institutional Class shares. If a Fund does not offer
Institutional  Class shares,  these  individuals  will be allowed to buy Class A
shares at NAV.  The Funds also  reserve 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.


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 FINRA, and banks may open an account by wire by
calling (800) 621-1048 for instructions. The investor must send a duly completed
and signed application to the Fund promptly.  A subsequent purchase order 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 FINRA, and banks.


Redemptions

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


                                       67
<PAGE>

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.

General.  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.

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 a 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.

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  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.

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. The 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


                                       68
<PAGE>

payment is $50. The maximum  annual rate at which shares subject to CDSCs 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
"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 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 the 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 Fund shares under the 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 a systematic  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.

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 on 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);

                                       69
<PAGE>

(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.

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  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 shareholder  may incur  transaction
expenses in converting these securities to cash.

Exchanges

Shareholders  may request a taxable  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.

                                       71
<PAGE>


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 Fund they are exchanging into from
dealers, other firms or DWS-SDI.

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 a Fund terminates
the  privilege.  Exchanges  are  subject to the terms and  conditions  described
above.

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.

Institutional  Class  Shares.  Shareholders  of the Fund's  Institutional  Class
shares can  exchange  all or part of their  shares for  corresponding  shares in
another DWS Fund, if available.  Exchanges  are subject to the  limitations  set
forth in the Prospectus.

                                    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  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 declare daily,  and distribute  monthly,  dividends from its
net  investment  income.  The Fund reserves the right to include net  short-term
capital gains in such dividends. The Fund intends to distribute capital gain net
income 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.

                                       72
<PAGE>

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 distributions in cash and
         long-term capital gain distributions in shares of the same class at net
         asset value; or

2.       To receive income and capital gain distributions 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. 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.  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 that  Fund  and
confirmations will be mailed to each 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.

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 gains
in order to satisfy the minimum distribution requirements contained in the Code.

                                      TAXES

The  following  is  a  summary  of  certain   material  US  federal  income  tax
considerations  regarding the purchase,  ownership and  disposition of shares in
the Fund.  It is not intended as a complete  discussion  of all of the potential
federal  income tax  consequences  that may be  applicable to the Fund or to all
categories of investors, some of which may be subject to special tax rules. Each
prospective  shareholder is urged to consult his own tax advisor with respect to
the specific federal,  state, local and foreign tax consequences of investing in
the Fund. The summary is based on the laws in effect on the date of this SAI and
existing judicial and administrative  interpretations  thereof, all of which are
subject to change, possibly with retroactive effect.

                                       73
<PAGE>

Taxation of the Fund and Its Investments


The Fund will be  treated  as a  separate  taxpayer  for US  federal  income tax
purposes.  The Fund  intends to continue to qualify to be treated as a regulated
investment  company under the Code each taxable  year.  To so qualify,  the Fund
must  meet  certain  requirements  regarding  the  source  of  its  income,  the
diversification  of its assets and the distribution of its income.  For example,
the Fund must  derive at least 90% of its gross  annual  income in each  taxable
year from  dividends,  interest,  payments with respect to securities  loans and
gains  from the  sale or other  disposition  of  stock  or  securities,  foreign
currencies,  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 interests in
"qualified publicly traded partnerships" (i.e.,  partnerships that are traded on
an established  securities market or tradable on a secondary market,  other than
partnerships that derive 90% of their income from interest,  dividends,  capital
gains, and other traditionally permitted mutual fund income). The Fund must also
diversify its holdings so that, at the end of each quarter of the Fund's taxable
year,  (i) at least 50% of the market value of the Fund's assets is  represented
by cash,  securities  of other  regulated  investment  companies,  US government
securities and other securities,  with such other securities limited, in respect
of any one issuer, to an amount not greater than 5% of the Fund's assets and not
greater 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 US government securities or securities of other regulated investment
companies) of any one issuer, any two or more issuers of which the Fund owns 20%
or more of the voting  securities  and which are determined to be engaged in the
same or similar  trades or businesses or related  trades or businesses or in the
securities of one or more  qualified  publicly  traded  partnerships.  Under the
minimum distribution  requirement,  the Fund must distribute to its shareholders
at least the sum of (i) 90% of its  "investment  company  taxable income" (i.e.,
income other than its net realized  long-term capital gain over its net realized
short-term capital loss), plus or minus certain adjustments, and (ii) 90% of its
net tax-exempt income for the taxable year.


Fund  investments  in  partnerships,  including  in  qualified  publicly  traded
partnerships,  may result in the Fund's being subject to state, local or foreign
income, franchise or withholding tax liabilities.

As a regulated  investment  company,  the Fund will not be subject to US federal
income tax on its investment  company  taxable income and net capital gains (the
excess of net long-term  capital gains over net short-term  capital losses),  if
any, that it distributes to shareholders. The Fund will be subject to income tax
at  regular  corporate  rates on any  taxable  income  or gain  that it does not
distribute.  The  Fund  intends  to  distribute  to its  shareholders,  at least
annually,  substantially  all of its investment  company  taxable income and net
capital gains,  and therefore does not anticipate  incurring  federal income tax
liability.

The Code imposes a 4%  nondeductible  excise tax on a Fund to the extent it does
not  distribute  by the end of any calendar  year at least the sum of (i) 98% of
its  ordinary  income for that year and (ii) 98% of its capital  gain net income
(both long-term and  short-term)  for the one-year  period ending,  as a general
rule, on October 31 of that year. For this purpose, however, any ordinary income
or capital  gain net income  retained  by the Fund that is subject to  corporate
income tax will be considered to have been distributed by year-end. In addition,
the minimum amounts that must be distributed in any year to avoid the excise tax
will  be   increased  or   decreased   to  reflect  any   underdistribution   or
overdistribution,  as the  case  may be,  from  the  previous  year.  The  Trust
anticipates   that  the  Fund  will  pay  such  dividends  and  will  make  such
distributions  as are necessary in order to avoid the application of this excise
tax.

If for any  taxable  year the Fund does not  qualify as a  regulated  investment
company or fails to meet the distribution requirement, all of its taxable income
will be subject to federal  income tax at regular  corporate  rates (without any
deduction for  distributions  to its  shareholders).  In such event,  the Fund's
distributions,  to the extent  derived  from the Fund's  current or  accumulated
earnings and profits, will constitute dividends that are taxable to shareholders
as ordinary dividend income, even though those distributions might otherwise (at
least in part) have been treated in the shareholders' hands as long-term capital
gains.  Such  distributions  will be  eligible  (i) to be treated  as  qualified
dividend  income in the case of  shareholders  taxed as individuals and (ii) for
the  dividends  received  deduction  in  the  case  of  corporate  shareholders.
Moreover,  if the Fund fails to qualify as a regulated investment company in any
year, it must pay out its earnings and profits accumulated in that year in order
to  qualify  again as a  regulated  investment  company.  If the Fund  failed to
qualify as a regulated  investment company for a period greater than two


                                       74
<PAGE>

taxable years, the Fund may be required to recognize any net built-in gains with
respect  to  certain of its assets  (i.e.,  the excess of the  aggregate  gains,
including items of income,  over aggregate  losses that would have been realized
with respect to such assets if the Fund had been liquidated) in order to qualify
as a regulated investment company in a subsequent year.

The Fund's  investment in so-called "OID bonds" and "market discount bonds" will
be subject to special tax rules.  An OID bond is a security  that is issued at a
discount from its face value (e.g., zero coupon  securities).  A market discount
bond is a  security  acquired  in the  secondary  market  at a price  below  its
redemption value (or its adjusted issue price if it is also an OID bond). If the
Fund  invests in an OID bond it will be  required  to accrue in income each year
for  federal  income tax purpose a portion of the  difference  between the issue
price  and the face  value of the OID bond (the  "original  issue  discount"  or
"OID"),  even  though  the Fund will not  receive  corresponding  cash  interest
payments with respect to such OID bond.  This original issue discount is imputed
income  that will  comprise  a part of the  Fund's  investment  company  taxable
income,  which must be  distributed  to  shareholders  in order to maintain  the
qualification of the Fund as a regulated investment company and to avoid federal
income  tax at the Fund  level.  As a result,  the Fund may have to  dispose  of
securities  which it might  otherwise  have  continued  to hold,  or  borrow  to
generate  cash in order to satisfy its  distribution  requirements.  If the Fund
invests  in a market  discount  bond,  it will be  required  to  treat  any gain
recognized on the  disposition of such market  discount bond as ordinary  income
(instead of capital gain) to the extent of the accrued  market  discount  unless
the Fund  elects to  include  the market  discount  in income as it  accrues.  A
positive inflation  adjustment on  inflation-indexed  US Treasury  securities is
OID.  A  negative  inflation  adjustment  will  reduce  the  amount of  interest
otherwise  includible  with respect to the debt  instrument.  Where the negative
inflation adjustment exceeds income includible by the Fund for the taxable year,
it will be treated  as an  ordinary  loss to the extent the Fund has  recognized
ordinary gain in previous years with respect to such debt instrument.

The Fund's  transactions in foreign currencies,  forward contracts,  options and
futures   contracts   (including   options  and  futures  contracts  on  foreign
currencies)  will be  subject  to  special  provisions  of the  Code  (including
provisions relating to "hedging transactions" and "straddles") that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may  affect  whether  gains or  losses  are  ordinary  or  capital),  accelerate
recognition  of income to the Fund and defer  Fund  losses.  These  rules  could
therefore   affect  the  character,   amount  and  timing  of  distributions  to
shareholders.  These provisions also (a) will require the Fund to mark-to-market
certain  types of the positions in its  portfolio  (i.e.,  treat them as if they
were closed out at the end of each year) and (b) may cause the Fund to recognize
income without receiving cash with which to pay dividends or make  distributions
in amounts  necessary  to satisfy the  distribution  requirements  for  avoiding
income and excise taxes. The Fund will monitor its  transactions,  will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of the Fund as a regulated investment company.

The Fund's  investment in so-called  "section 1256 contracts," such as regulated
futures  contracts,  most  foreign  currency  forward  contracts  traded  in the
interbank  market and options on most stock indices,  are subject to special tax
rules.  All section  1256  contracts  held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain or
loss on  those  positions  will be  included  in the  Fund's  income  as if each
position had been sold for its fair market value at the end of the taxable year.
The  resulting  gain or loss will be combined  with any gain or loss realized by
the Fund from  positions in section  1256  contracts  closed  during the taxable
year. Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as  short-term  capital gain or loss,  regardless of the
period of time the positions were actually held by the Fund.


As a result  of  entering  into  swap  contracts,  the Fund may make or  receive
periodic net  payments.  The Fund may also make or receive a payment when a swap
is  terminated  prior to  maturity  through an  assignment  of the swap or other
closing  transaction.  Periodic net payments will generally  constitute ordinary
income or  deductions,  while  termination  of a swap will  generally  result in
capital gain or loss (which will be a long-term capital gain or loss if the Fund
has been a party to the swap for more than one  year).  With  respect to certain
types of swaps,  the Fund may be required to currently  recognize income or loss
with  respect  to  future  payments  on such  swaps or may elect  under  certain

                                       75
<PAGE>

circumstances to mark such swaps to market annually for tax purposes as ordinary
income or loss.  The tax  treatment  of many  types of credit  default  swaps is
uncertain.

In general,  gain or loss on a short sale is recognized when the Fund closes the
sale by delivering  the borrowed  property to the lender,  not when the borrowed
property  is sold.  Gain or loss from a short sale is  generally  considered  as
capital  gain or loss to the extent  that the  property  used to close the short
sale  constitutes a capital  asset in the Fund's  hands.  Except with respect to
certain situations where the property used by the Fund to close a short sale has
a long-term  holding  period on the date of the short sale,  special rules would
generally  treat the gains on short sales as  short-term  capital  gains.  These
rules may also  terminate  the running of the holding  period of  "substantially
identical property" held by the Fund.  Moreover,  a loss on a short sale will be
treated  as a  long-term  capital  loss  if,  on the  date  of the  short  sale,
"substantially  identical  property" has been held by the Fund for more than one
year.  In general,  the Fund will not be  permitted to deduct  payments  made to
reimburse the lender of securities  for dividends  paid on borrowed stock if the
short  sale is closed on or before  the 45th day after the short sale is entered
into.


Every  shareholder of the Fund will receive,  if  appropriate,  various  written
notices  after the close of the  Fund's  prior  taxable  year as to the  federal
income status of his or her dividends and distributions which were received from
the Fund during the Fund's prior taxable year. Shareholders should consult their
tax  advisors as to any state and local taxes that may apply to these  dividends
and distributions.

Foreign  Investments.  Income  (including,  in some cases,  capital  gains) from
investments  in foreign  stocks or securities  may be subject to foreign  taxes,
including  withholding  and other taxes  imposed by foreign  jurisdictions.  Tax
conventions  between  certain  countries and the US may reduce or eliminate such
taxes.  It is  impossible  to  determine  the  effective  rate of foreign tax in
advance  since  the  amount  of the  Fund's  assets to be  invested  in  various
countries will vary.

If the Fund is liable for  foreign  taxes,  and if more than 50% of the value of
the Fund's total  assets at the close of its taxable year  consists of stocks or
securities of foreign corporations (including foreign governments), the Fund may
make an election  pursuant to which certain foreign taxes paid by the Fund would
be treated as having been paid directly by shareholders of the Fund. Pursuant to
such  election,  the amount of foreign taxes paid will be included in the income
of the Fund's  shareholders,  and such Fund's  shareholders  (except  tax-exempt
shareholders)  may,  subject to certain  limitations,  claim  either a credit or
deduction  for the taxes.  The Fund's  shareholders  will be notified  after the
close of the Fund's  taxable  year  whether  the  foreign  taxes paid will "pass
through"  for that year and, if so, such  notification  will  designate  (a) the
shareholder's portion of the foreign taxes paid to each such country and (b) the
amount which represents income derived from sources within each such country.


The amount of foreign taxes that a shareholder may claim as a credit in any year
will generally be subject to a separate limitation for "passive income," and for
"passive  category  income,"  which  includes,  among  other  items  of  income,
dividends,  interest and certain foreign  currency gains.  Because capital gains
realized  by the Fund on the sale of  foreign  securities  will be treated as US
source income,  the available  credit of foreign taxes paid with respect to such
gains may be restricted by this limitation.


Under Section 988 of the Code,  gains or losses  attributable to fluctuations in
exchange  rates  between  the time the Fund  accrues  income or  receivables  or
expenses or other liabilities denominated in a foreign currency and the time the
Fund  actually  collects  such  income or pays such  liabilities  are  generally
treated as  ordinary  income or  ordinary  loss.  Similarly,  gains or losses on
foreign currency,  foreign currency forward contracts,  certain foreign currency
options or futures contracts and the disposition of debt securities  denominated
in foreign  currency,  to the extent  attributable  to  fluctuations in exchange
rates  between  the  acquisition  and  disposition  dates,  are also  treated as
ordinary income or loss unless the Fund were to elect otherwise.

Investment in Passive Foreign Investment Companies. If the Fund purchases shares
in certain  foreign  investment  entities,  called "passive  foreign  investment
companies" ("PFICs"), it may be subject to US federal income tax on a portion of
any "excess  distribution"  or gain from the  disposition of such shares even if
such  income  is  distributed  as  a  taxable   dividend  by  the  Fund  to  its
shareholders. Additional charges in the nature of interest may be imposed on the
Fund in respect of deferred taxes arising from such distributions or gains.

                                       76
<PAGE>

If the Fund were to invest in a PFIC and elect to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing  requirements,  the Fund
might be  required  to  include in income  each year a portion  of the  ordinary
earnings  and net capital  gains of the  qualified  electing  fund,  even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise
tax distribution  requirements  described above. In order to make this election,
the Fund would be required to obtain certain annual  information  from the PFICs
in which it invests, which may be difficult or impossible to obtain.

Alternatively,  the Fund may make a mark-to-market  election that will result in
the Fund being treated as if it had sold and  repurchased  all of the PFIC stock
at the end of each year.  In such case,  the Fund would report any such gains as
ordinary  income and would  deduct any such  losses to the extent of  previously
recognized  income as  ordinary  losses to the extent of  previously  recognized
gains. The election must be made separately for each PFIC owned by the Fund and,
once made,  would be effective  for all  subsequent  taxable  years of the Fund,
unless  revoked  with the consent of the IRS. By making the  election,  the Fund
could  potentially  ameliorate the adverse tax consequences  with respect to its
ownership  of shares in a PFIC,  but in any  particular  year may be required to
recognize  income in excess of the  distributions it receives from PFICs and its
proceeds from  dispositions of PFIC stock.  The Fund may have to distribute this
"phantom"  income and gain to satisfy the 90%  distribution  requirement  and to
avoid imposition of the 4% excise tax.

The Fund will make the  appropriate  tax  elections,  if possible,  and take any
additional steps that are necessary to mitigate the effect of these rules.

Taxation of US Shareholders

Dividends and Distributions. The Fund intends to distribute substantially all of
its net income and capital gains,  if any, to shareholders  each year.  Unless a
shareholder  instructs the Fund to pay such dividends and distributions in cash,
they  will  be  automatically  reinvested  in  additional  shares  of the  Fund.
Dividends  and  distributions  received  by a  retirement  plan  qualifying  for
tax-exempt  treatment  under the Code will not be subject  to US federal  income
tax. The Fund's dividends and capital gain  distributions  are taxable when they
are paid,  whether you take them in cash or reinvest them in additional  shares.
Distributions  declared  to  shareholders  of record  in  October,  November  or
December and paid in January are taxable on December 31.

If the Fund  retains for  investment  an amount equal to all or a portion of its
net  long-term  capital  gains in excess of its net  short-term  capital  losses
(including any capital loss  carryovers),  it will be subject to a corporate tax
(currently at a maximum rate of 35%) on the amount retained.  In that event, the
Fund will designate such retained  amounts as  undistributed  capital gains in a
notice to its  shareholders who (a) will be required to include in income for US
federal income tax purposes,  as long-term  capital gains,  their  proportionate
shares  of the  undistributed  amount,  (b) will be  entitled  to  credit  their
proportionate shares of the 35% tax paid by the Fund on the undistributed amount
against their US federal income tax liabilities, if any, and to claim refunds to
the extent  their  credits  exceed  their  liabilities,  if any, and (c) will be
entitled to increase  their tax basis,  for US federal  income tax purposes,  in
their  shares by an amount equal to 65% of the amount of  undistributed  capital
gains included in the shareholder's income. Organizations or persons not subject
to federal  income tax on such  capital  gains will be  entitled  to a refund of
their pro rata  share of such  taxes  paid by the Fund upon  filing  appropriate
returns or claims for refund with the IRS.

Distributions  of net realized  long-term  capital gains,  if any, that the Fund
designates as capital gains  dividends are taxable as long-term  capital  gains,
whether paid in cash or in shares and  regardless of how long a shareholder  has
held shares of the Fund. All other  dividends of the Fund  (including  dividends
from short-term capital gains) from current and accumulated earnings and profits
("regular dividends") are generally subject to tax as ordinary income.

Special rules apply to regular  dividends paid to individuals.  Such a dividend,
with respect to taxable years  beginning  before January 1, 2011, may be subject
to tax at  the  rates  generally  applicable  to  long-term  capital  gains  for
individuals  (currently at a maximum rate of 15%),  provided that the individual
receiving the dividend satisfies certain holding period and other  requirements.
Dividends  subject to these  special  rules are not actually  treated as capital
gains,  however, and thus are not included in the computation of an individual's
net capital gain and  generally  cannot be used to offset  capital  losses.  The
long-term  capital gains rates will apply to: (i) 100% of the regular  dividends
paid by the Fund to an individual in a particular taxable year if 95% or more of
the Fund's gross income


                                       77
<PAGE>

(ignoring gains  attributable to the sale of stocks and securities except to the
extent net short-term capital gain from such sales exceeds net long-term capital
loss from such sales) in that taxable year is attributable to qualified dividend
income  received by the Fund; or (ii) the portion of the regular  dividends paid
by the Fund to an individual in a particular  taxable year that is  attributable
to qualified  dividend  income received by the Fund in that taxable year if such
qualified  dividend income accounts for less than 95% of the Fund's gross income
(ignoring gains  attributable to the sale of stocks and securities except to the
extent net short-term capital gain from such sales exceeds net long-term capital
loss from such  sales)  for that  taxable  year.  For this  purpose,  "qualified
dividend income"  generally means income from dividends  received by a fund from
US  corporations  and qualifying  foreign  corporations,  provided that the Fund
satisfies  certain  holding period  requirements in respect of the stock of such
corporations  and has not hedged  its  position  in the stock in  certain  ways.
However,  qualified dividend income does not include any dividends received from
tax-exempt corporations. Also, dividends received by the Fund from a real estate
investment trust ("REIT") or another regulated  investment company generally are
qualified dividend income only to the extent the dividend distributions are made
out of  qualified  dividend  income  received  by such  REIT or other  regulated
investment company. In the case of securities lending transactions,  payments in
lieu of dividends are not qualified  dividend income. If a shareholder elects to
treat Fund dividends as investment  income for purposes of the limitation on the
deductibility  of investment  interest,  such dividends would not be a qualified
dividend income.

The Fund does not expect that a  significant  portion of its  dividends  will be
eligible for treatment as qualified dividend income.

We will send you information after the end of each year setting forth the amount
of dividends paid by us that are eligible for the reduced rates.

If an individual  receives a dividend qualifying for the long-term capital gains
rates  and  such  dividend  constitutes  an  "extraordinary  dividend,"  and the
individual  subsequently  recognizes  a loss on the sale or exchange of stock in
respect of which the  "extraordinary  dividend" was paid,  then the loss will be
long-term  capital  loss to the  extent  of such  "extraordinary  dividend."  An
"extraordinary  dividend"  on  common  stock for this  purpose  is  generally  a
dividend  (i) in an amount  greater than or equal to 10% of the  taxpayer's  tax
basis  (or  trading  value)  in a share of  stock,  aggregating  dividends  with
ex-dividend  dates within an 85-day period or (ii) in an amount  greater than or
equal to 20% of the taxpayer's tax basis (or trading value) in a share of stock,
aggregating dividends with ex-dividend dates within a 365-day period.

Distributions  in excess of the Fund's  current  and  accumulated  earnings  and
profits will, as to each shareholder, be treated as a tax-free return of capital
to the  extent of a  shareholder's  basis in his  shares  of the Fund,  and as a
capital  gain  thereafter  (if the  shareholder  holds his shares of the Fund as
capital assets).  Shareholders  receiving dividends or distributions in the form
of  additional  shares  should be treated for US federal  income tax purposes as
receiving  a  distribution  in an amount  equal to the  amount of money that the
shareholders  receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount. Dividends paid by
the Fund that are  attributable to dividends  received by the Fund from domestic
corporations  may  qualify  for the  federal  dividends-received  deduction  for
corporations.


Investors  considering  buying  shares just prior to a dividend or capital  gain
distribution  should be aware that,  although the price of shares just purchased
at that time may  reflect  the  amount  of the  forthcoming  distribution,  such
dividend or distribution may nevertheless be taxable to them. If the Fund is the
holder of record of any stock on the record date for any dividends  payable with
respect to such stock,  such  dividends  will be  included  in the Fund's  gross
income  not as of the date  received  but as of the  later of (a) the date  such
stock became ex-dividend with respect to such dividends (i.e., the date on which
a buyer of the stock would not be entitled to receive the declared,  but unpaid,
dividends) or (b) the date the Fund acquired such stock.  Accordingly,  in order
to satisfy its income distribution requirements, the Fund may be required to pay
dividends based on anticipated earnings,  and shareholders may receive dividends
in an earlier year than would otherwise be the case.


Certain  types of  income  received  by the Fund  from  REITs,  REMICs,  taxable
mortgage pools or other  investments may cause the Fund to designate some or all
of its  distributions as "excess  inclusion  income." To Fund  shareholders such
excess  inclusion  income  may (1)  constitute  taxable  income,  as  "unrelated
business taxable income" ("UBTI") for those  shareholders who would otherwise be
tax-exempt such as individual retirement accounts, 401(k) accounts,


                                       78
<PAGE>


Keogh plans, pension plans and certain charitable entities; (2) not be offset by
otherwise allowable deductions for tax purposes; (3) not be eligible for reduced
US withholding for non-US  shareholders even from tax treaty countries;  and (4)
cause the Fund to be subject to tax if certain  "disqualified  organizations" as
defined by the Code are Fund shareholders.

In  addition,  a  tax-exempt  shareholder  could  realize  UBTI by virtue of its
investment in the Fund if shares in the Fund constitute  debt-financed  property
in the hands of the tax-exempt  shareholder within the meaning of Section 514(b)
of the Code. If a charitable  remainder  trust (as defined in Section 664 of the
Code)  realizes any UBTI for a taxable year, it will be subject to a 100% excise
tax of the UBTI.


Sale of Shares.  Upon the sale or  exchange of his shares,  a  shareholder  will
realize  a taxable  gain or loss  equal to the  difference  between  the  amount
realized and his basis in his shares. A redemption of shares by the Fund will be
treated as a sale for this purpose. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the  shareholder's  hands,  and
will be long-term  capital gain or loss if the shares are held for more than one
year and short-term  capital gain or loss if the shares are held for one year or
less.  Any loss  realized on a sale or exchange will be disallowed to the extent
the shares disposed of are replaced  (including  shares  acquired  pursuant to a
dividend  reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the shares. In such a case, the basis of
the shares  acquired will be adjusted to reflect the  disallowed  loss. Any loss
realized  by a  shareholder  on  a  disposition  of  Fund  shares  held  by  the
shareholder  for six months or less will be treated as a long-term  capital loss
to the  extent  of  any  distributions  of net  capital  gains  received  by the
shareholder with respect to such shares.

The  sale or other  disposition  of  shares  of the  Fund by a  retirement  plan
qualifying  for  tax-exempt  treatment  under the Code will not be subject to US
federal income tax.

Because the tax treatment  also depends on your purchase price and your personal
tax  position,  you  should  keep  your  regular  account  statements  to use in
determining your tax.

Backup Withholding

The  Fund  may be  required  to  withhold  US  federal  income  tax  on  taxable
distributions  and  redemption  proceeds  payable  to  shareholders  who fail to
provide the Fund with their correct  taxpayer  identification  number or to make
required  certifications,  or who have been  notified  by the  Internal  Revenue
Service that they are subject to backup withholding.  Corporate shareholders and
certain other shareholders  specified in the Code generally are exempt from such
backup  withholding.  Backup  withholding is not an additional  tax. Any amounts
withheld  may be  credited  against  the  shareholder's  US  federal  income tax
liability.

Taxation of Non-US Shareholders

Dividends  paid by the Fund to non-US  shareholders  are  generally  subject  to
withholding  tax at a 30% rate or a  reduced  rate  specified  by an  applicable
income tax treaty to the extent  derived from  investment  income and short-term
capital  gains.  In order to  obtain a  reduced  rate of  withholding,  a non-US
shareholder  will be  required  to provide  an IRS Form  W-8BEN  certifying  its
entitlement to benefits under a treaty.  The  withholding  tax does not apply to
regular  dividends  paid to a non-US  shareholder  who  provides a Form  W-8ECI,
certifying  that  the  dividends  are  effectively  connected  with  the  non-US
shareholder's conduct of a trade or business within the United States.  Instead,
the effectively  connected dividends will be subject to regular US income tax as
if the non-US shareholder were a US shareholder.  A non-US corporation receiving
effectively  connected  dividends  may also be  subject  to  additional  "branch
profits  tax"  imposed  at a rate of 30% (or  lower  treaty  rate).  A  non-U.S.
shareholder who fails to provide an IRS Form W-8BEN or other applicable form may
be subject to backup withholding at the appropriate rate.

In general,  United States federal withholding tax will not apply to any gain or
income realized by a non-US  shareholder in respect of any  distributions of net
long-term  capital gains over net  short-term  capital  losses,  exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.

                                       79
<PAGE>


For  taxable  years  beginning  before  January  1,  2008,   properly-designated
dividends are generally exempt from United States federal  withholding tax where
they (i) are paid in respect  of the  Fund's  "qualified  net  interest  income"
(generally,   the  Fund's  U.S.  source  interest  income,  other  than  certain
contingent   interest  and  interest  from   obligations  of  a  corporation  or
partnership in which the Fund is at least a 10% shareholder, reduced by expenses
that are  allocable  to such  income)  or (ii) are paid in respect of the Fund's
"qualified  short-term capital gains"  (generally,  the excess of the Fund's net
short-term  capital gain over the Fund's long-term capital loss for such taxable
year). However, depending on its circumstances, the Fund may designate all, some
or none of its  potentially  eligible  dividends as such  qualified net interest
income or as qualified short-term capital gains, and/or treat such dividends, in
whole or in part, as ineligible for this exemption from withholding. In order to
qualify for this exemption from withholding, a non-U.S. shareholder will need to
comply with  applicable  certification  requirements  relating  to its  non-U.S.
status  (including,  in general,  furnishing  an IRS Form  W-8BEN or  substitute
form). In the case of shares held through an intermediary,  the intermediary may
withhold  even if a Portfolio  designates  the payment as qualified net interest
income or  qualified  short-term  capital  gain.  Non-U.S.  shareholders  should
contact their  intermediaries  with respect to the application of these rules to
their accounts.

A distribution from the Fund to foreign  shareholders who have held more than 5%
of the  Fund at any  time  during  the  one-year  period  ending  on the date of
distribution is treated as real property gain subject to 35% withholding tax and
treated as income  effectively  connected to a US trade or business with certain
tax filing  requirements  applicable,  if such distribution is attributable to a
distribution received by the Fund from a REIT. Restrictions apply regarding wash
sales and substitute payment transactions.


Other Taxation

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund is liable for any income or franchise  tax in the
Commonwealth of Massachusetts,  provided that the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code.

The Fund's  shareholders  may be subject to state and local  taxes on their Fund
distributions.  Shareholders  are advised to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in a Fund.

If a  shareholder  recognizes  a loss with  respect to the  Fund's  shares of $2
million  or more for an  individual  shareholder  or $10  million  or more 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.  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 individual circumstances.

The  foregoing  is  only a  summary  of  certain  material  federal  income  tax
consequences affecting the Fund and its shareholders.  Prospective  shareholders
are advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in 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


                                       80
<PAGE>

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 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 not addressed above 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 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 New York Stock 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 a portfolio  asset 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 of
the Trust.  Each Board Member's year of birth is set forth in parentheses  after
his or her name.  Unless  otherwise  noted, (i) each Board Member has


                                       81
<PAGE>

engaged in the principal  occupation(s) noted in the table for at least the most
recent five years,  although not necessarily in the same capacity,  and (ii) the
address of each Board Member that is not an  "interested  person" (as defined in
the 1940 Act) of the Trust or the Advisor (each, an "Independent Board Member"),
is c/o Dawn-Marie  Driscoll,  PO Box 100176,  Cape Coral, FL 33904.  The term of
office  for each  Board  Member is until the  election  and  qualification  of a
successor,  or until such Board Member  sooner dies,  resigns,  is removed or as
otherwise  provided in the  governing  documents of the Trust.  Because the Fund
does not hold an annual  meeting of  shareholders,  each Board  Member will hold
office for an indeterminate  period. The Board Members may also serve in similar
capacities  with other funds in the DWS fund complex.  The Length of Time Served
represents  the year in which the Board  Member  joined the board of one or more
DWS funds now overseen by the Board.

Independent Board Members

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time        Business Experience and                                                in DWS Fund
 Served                    Directorships During the Past 5 Years                                  Complex Overseen
---------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                                                  <C>
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting firm); Executive Fellow,            76
Chairperson since 2006     Center for Business Ethics, Bentley College; formerly, Partner,
Board Member since         Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and
1987                       General Counsel, Filene's (1978-1988). Directorships: Trustee of 8
                           open-end mutual funds managed by Sun Capital Advisers, Inc. (since
                           2007); Director of ICI Mutual Insurance Company (since 2007);
                           Advisory Board, Center for Business Ethics, Bentley College; Trustee,
                           Southwest Florida Community Foundation (charitable organization);
                           Former Directorships: Investment Company Institute (audit, executive,
                           nominating committees) and Independent Directors Council (governance,
                           executive committees)
---------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.      Vice Chair, WGBH Educational Foundation. Directorships: Association            76
 (1943)                    of Public Television Stations; Becton Dickinson and Company(1)
 Board Member since        (medical technology company); Belo Corporation(1) (media company);
 1990                      Boston Museum of Science; 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
---------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)        Managing General Partner, Exeter Capital Partners (a series of                 76
Board Member since         private equity funds). Directorships: Progressive Holding Corporation
1996                       (kitchen goods importer and distributor); Natural History, Inc.
                           (magazine publisher); Box Top Media Inc. (advertising); The Kennel
                           Shop (retailer)
---------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss        Clinical Professor of Finance, NYU Stern School of Business                    76
(1945)                     (1997-present); Member, Finance Committee, Association for Asian
Board Member since         Studies (2002-present); Director, Mitsui Sumitomo Insurance Group
2001                       (US) (2004-present); prior thereto, Managing Director, J.P. Morgan
                           (investment banking firm) (until 1996)
---------------------------------------------------------------------------------------------------------------------
Martin J. Gruber           Nomura Professor of Finance, Leonard N. Stern School of Business, New          76
(1937)                     York University (since September 1965); Director, Japan Equity Fund,
Board Member since         Inc. (since January 1992), Thai Capital Fund, Inc. (since January
1999                       2000), Singapore Fund, Inc. (since January 2000), National Bureau of
                           Economic Research (since January 2006). Formerly, Trustee, TIAA
                           (pension funds) (January 1996-January 2000); Trustee, CREF and CREF
                           Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF
                           Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen
                           Mutual Funds (January 1985-January 2001)
---------------------------------------------------------------------------------------------------------------------



                                       82
<PAGE>

---------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time        Business Experience and                                                in DWS Fund
 Served                    Directorships During the Past 5 Years                                  Complex Overseen
---------------------------------------------------------------------------------------------------------------------
Richard J. Herring         Jacob Safra Professor of International Banking and Professor, Finance          76
(1946)                     Department, The Wharton School, University of Pennsylvania (since
Board Member since         July 1972); Co-Director, Wharton Financial Institutions Center (since
1999                       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)
---------------------------------------------------------------------------------------------------------------------
Graham E. Jones            Senior Vice President, BGK Realty, Inc. (commercial real estate)               76
(1933)                     (since 1995). Formerly, Trustee of various investment companies
Board Member since         managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley
2002                       Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005)
---------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel           President and Chief Executive Officer, The Pew Charitable Trusts               76
(1951)                     (charitable organization) (1994 to present); Trustee, Thomas
Board Member since         Jefferson Foundation (charitable organization) (1994 to present);
2002                       Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001
                           to present). Formerly, Executive Vice President, The Glenmede Trust
                           Company (investment trust and wealth management) (1983 to 2004);
                           Board Member, Investor Education (charitable organization)
                           (2004-2005); Director, Viasys Health Care(1) (January 2007-June 2007)
---------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.     Private investor since October 2003; Trustee of 8 open-end mutual              76
(1946)                     funds managed by Sun Capital Advisers, Inc. (since October 1998).
Board Member since         Formerly, Pension & Savings Trust Officer, Sprint Corporation((1))
2002                       (telecommunications) (November 1989-September 2003)
---------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg     Retired. Formerly, Consultant (1997-2001); Director, US Government             76
(1943)                     Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since         L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                       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)
---------------------------------------------------------------------------------------------------------------------
Carl W. Vogt               Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);               74
(1936)                     formerly, President (interim) of Williams College (1999-2000);
Board Member since         formerly, President of certain funds in the Deutsche Asset Management
2006                       family of funds (formerly, Flag Investors family of funds)
                           (registered investment companies) (1999-2000). Directorships: Yellow
                           Corporation (trucking); American Science & Engineering (x-ray
                           detection equipment). Former Directorships: ISI Family of Funds
                           (registered investment companies, 4 funds overseen); National
                           Railroad Passenger Corporation (Amtrak) Waste Management, Inc. (solid
                           waste disposal); formerly, Chairman and Member, National
                           Transportation Safety Board
---------------------------------------------------------------------------------------------------------------------

                                       83
<PAGE>

Interested Board Member

---------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time        Business Experience and                                                in DWS Fund
 Served                    Directorships During the Past 5 Years                                  Complex Overseen
---------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)         Managing Director(4), Deutsche Asset Management; Head of Deutsche              82
 (1958)                    Asset Management Americas; CEO of DWS Scudder; formerly board member
 Board Member since        of DWS Investments, Germany (1999-2005); formerly, Head of Sales and
 2006                      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)
---------------------------------------------------------------------------------------------------------------------

Officers(3)

---------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
---------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS
 (1965)                     family of funds; Director, ICI Mutual Insurance Company (since October 2007);
 President, 2006-present    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)
---------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 2003-present
---------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly, Executive
 (1963)                     Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds
 Chief Financial Officer,   (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset
 2004-present               Management (1994-1998)
 Treasurer, 2005-present
---------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New
 (1963)                     York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co.
 Assistant Secretary,       LLC (1998-2003)
 2005-present
---------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
---------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 2002-present
---------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
---------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
---------------------------------------------------------------------------------------------------------------------



                                       84
<PAGE>

---------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
---------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D'Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
---------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
---------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
 Anti-Money Laundering      Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations
 Compliance Officer,        Manager for AXA Financial (1999-2004)
 2007-present
---------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company
                            (1984-1988)
---------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior Vice
 (1951)                     President, General Counsel, and Assistant Secretary, Hansberger Global Investors, Inc.
 Chief Legal Officer,       (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      A publicly held company with securities  registered pursuant to Section
         12 of the Securities Exchange Act of 1934.

(2)      The  mailing  address  of Axel  Schwarzer  is c/o  Deutsche  Investment
         Management  Americas Inc.,  345 Park Avenue,  New York, New York 10154.
         Mr.  Schwarzer is an interested Board Member by virtue of his positions
         with Deutsche Asset Management.  As an interested person, Mr. Schwarzer
         receives no compensation from the Funds.

(3)      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 Funds.

(4)      Executive title, not a board directorship.

(5)      Address:  345 Park Avenue, New York, New York 10154.

(6)      Address: Two International Place, Boston, Massachusetts 02110.

Each Officer also holds  similar  positions for other  investment  companies for
which DIMA or an affiliate serves as the advisor.

Officer's Role with Principal Underwriter:  DWS Scudder Distributors, Inc.

 Paul H. Schubert:                         Vice President
 Caroline Pearson:                         Secretary

                                       85
<PAGE>

Information Concerning Committees and Meetings of Board Members

The  Board of the  Trust met ten (10)  times  during  the  calendar  year  ended
December 31, 2007 and each Board Member attended at least 80% of the meetings of
the Board and meetings of the committees of the Board on which such Board Member
served.

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since May 2006.

The Board has established the following  standing  committees:  Audit Committee,
Nominating/Corporate Governance Committee, Valuation Committee, Equity Oversight
Committee, Fixed Income Oversight Committee,  Marketing/Distribution/Shareholder
Service Committee,  Legal/Regulatory/Compliance Committee and Expense/Operations
Committee.

The Audit  Committee  assists the Board in  fulfilling  its  responsibility  for
oversight of the quality and integrity of the accounting, auditing and financial
reporting  practices  of the  applicable  Fund.  It also  makes  recommendations
regarding the selection of an independent  registered public accounting firm for
a Fund,  reviews the  independence of such firm,  reviews the scope of audit and
internal  controls,  considers and reports to the Board on matters relating to a
Fund's  accounting and financial  reporting  practices,  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
Keith R. Fox (Chair and Audit Committee Financial Expert),  Kenneth C. Froewiss,
Richard J. Herring, William N. Searcy, Jr. and Jean Gleason Stromberg. The Audit
Committee held nine (9) meetings during the calendar year 2007.

The  Nominating/Corporate  Governance  Committee  (i)  recommends  to the  Board
candidates  to serve as Board  Members and (ii)  oversees  and, as  appropriate,
makes  recommendations  to the Board  regarding  other  fund  governance-related
matters,  including but not limited to Board compensation practices,  retirement
policies,  self-evaluations  of effectiveness,  review of possible  conflicts of
interest  and  independence  issues  involving  Board  Members,  allocations  of
assignments  and  functions  of  committees  of the Board,  and share  ownership
policies. The members of the Nominating/Corporate Governance Committee are Henry
P.  Becton,  Jr.  (Chair),  Graham E. Jones,  Rebecca W. Rimel and Jean  Gleason
Stromberg.  The  Nominating/Corporate  Governance Committee (previously known as
the  Committee on  Independent  Directors)  held three (3)  meetings  during the
calendar year 2007.

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the 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 or  appropriate.  The members
of the Valuation Committee are Keith R. Fox, Kenneth C. Froewiss (Chair), Martin
J. Gruber and Richard J. Herring. The Valuation Committee held 6 meetings during
the calendar year 2007.

The Board has established two Investment Oversight  Committees,  one focusing on
Funds  primarily   investing  in  equity   securities  (the  "Equity   Oversight
Committee")  and one  focusing  on Funds  primarily  investing  in fixed  income
securities  (the "Fixed Income  Oversight  Committee").  These  Committees  meet
regularly with Fund portfolio managers and other investment  personnel to review
the relevant  Funds'  investment  strategies  and  investment  performance.  The
members of the Equity  Oversight  Committee are Henry P. Becton,  Jr., Martin J.
Gruber  (Chair),  Richard J.  Herring,  Rebecca  W. Rimel and Carl W. Vogt.  The
members of the Fixed Income Oversight Committee are Dawn-Marie  Driscoll,  Keith
R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr. (Chair) and
Jean  Gleason  Stromberg.  Each  Investment  Oversight  Committee  held  six (6)
meetings during the calendar year 2007.

The  Marketing/Distribution/Shareholder   Service  Committee  oversees  (i)  the
quality, costs and types of shareholder services provided to the Funds and their
shareholders,  and (ii) the distribution-related  services provided to the Funds
and their  shareholders.  The members of the  Marketing/Distribution/Shareholder
Service Committee are Martin J. Gruber,  Richard J. Herring (Chair),  Rebecca W.
Rimel,     Jean     Gleason     Stromberg     and    Carl    W.    Vogt.     The
Marketing/Distribution/Shareholder  Service  Committee  held seven (7)  meetings
during the calendar year 2007.

                                       86
<PAGE>

The  Legal/Regulatory/Compliance  Committee  oversees (i) the significant  legal
affairs of the Funds, including the handling of pending or threatened litigation
or  regulatory  action  involving  the Funds,  (ii) general  compliance  matters
relating   to  the  Funds  and  (iii)   proxy   voting.   The   members  of  the
Legal/Regulatory/Compliance  Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie
Driscoll,  Rebecca W. Rimel,  William N. Searcy, Jr., Jean Gleason Stromberg and
Carl W. Vogt (Chair).  The  Legal/Regulatory/Compliance  Committee  held six (6)
meetings during the calendar year 2007.

The Expense/Operations Committee (i) monitors the Fund's total operating expense
levels,  (ii)  oversees the  provision of  administrative  services to the Fund,
including the Fund's custody,  fund accounting and insurance  arrangements,  and
(iii) reviews the Fund's investment advisers' brokerage practices, including the
implementation  of  related  policies.  The  members  of the  Expense/Operations
Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie  Driscoll,  Keith R. Fox and
William  N.  Searcy,  Jr.  This  committee  held seven (7)  meetings  during the
calendar year 2007.

Ad Hoc Committees.  In addition to the standing committees described above, from
time to time the Board also forms ad hoc committees to consider specific issues.

Remuneration.  Each Independent Board Member receives compensation from the Fund
for his or her services, which includes an annual retainer and an attendance fee
for each meeting attended. No additional compensation is paid to any Independent
Board Member for travel time to meetings,  attendance at directors'  educational
seminars  or  conferences,   service  on  industry  or  association  committees,
participation  as speakers at directors'  conferences or service on special fund
industry director task forces or subcommittees. Independent Board Members do not
receive any employee  benefits such as pension or retirement  benefits or health
insurance from the Fund or any fund in the DWS fund complex.

Members of the Board who are officers,  directors,  employees or stockholders of
Deutsche Asset Management or its affiliates receive no direct  compensation from
a Fund, although they are compensated as employees of Deutsche Asset Management,
or its affiliates,  and as a result may be deemed to participate in fees paid by
the Funds.  The following tables show  compensation  from the Fund and aggregate
compensation  from all of the  funds in the DWS fund  complex  received  by each
Board Member during the calendar year 2007. Mr. Schwarzer became a member of the
Board on May 5,  2006,  is an  interested  person of the Funds and  received  no
compensation  from the  Funds or any fund in the DWS  fund  complex  during  the
relevant periods.

<TABLE>
<CAPTION>
                                      Aggregate Compensation         Total Compensation
                                       from DWS Inflation              from Fund and
Name of Board Member                   Protected Plus Fund           DWS Fund Complex(1)
--------------------                   -------------------           -------------------
<S>                                             <C>                       <C>
Henry P. Becton, Jr.(3)(4)                      $69                       $200,000
Dawn-Marie Driscoll(2)(3)(4)                    $87                       $253,000
Keith R. Fox(3)(4)                              $70                       $203,000
Kenneth C. Froewiss(3)(4)                       $69                       $200,000
Martin J. Gruber(3)(4)                          $66                       $198,000
Richard J. Herring(3)(4)                        $67                       $195,000
Graham E. Jones(3)                              $71                       $207,000
Rebecca W. Rimel(3)(4)                          $65                       $194,000
William N. Searcy, Jr.(3)(4)                    $69                       $200,000
Jean Gleason Stromberg(3)(4)                    $65                       $189,000
Carl W. Vogt(3)(4)                              $67                       $194,000
</TABLE>

(1)      The DWS Fund Complex is composed of 138 funds as of December 31, 2007.

(2)      Includes  $50,000 in annual  retainer  fees in Ms.  Driscoll's  role as
         Chairperson of the Board.

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of


                                       87
<PAGE>

         76 funds/portfolios.  For Mr. Vogt total compensation for calendar year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

(4)      Aggregate  compensation  includes amounts paid to the Board Members for
         special  meetings of ad hoc committees of the board in connection  with
         the  possible  consolidation  of the various DWS Fund boards and funds,
         meetings for considering fund expense simplification  initiatives,  and
         consideration  of issues  specific  to the Funds'  direct  shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $1,000 for Mr. Becton, $1,000 for
         Ms. Driscoll,  $1,000 for Mr. Fox, $1,000 for Mr. Froewiss,  $5,000 for
         Mr. Gruber,  $1,000 for Dr. Herring,  $5,000 for Ms. Rimel,  $1,000 for
         Mr.  Searcy,  $1,000 for Ms.  Stromberg and $1,000 for Mr. Vogt.  These
         meeting fees were borne by the Advisor.

Board Member Ownership in the Fund

The  following  table shows the dollar range of equity  securities  beneficially
owned by each Board  Member in the Fund and DWS Fund  Complex as of December 31,
2007.

<TABLE>
<CAPTION>
                                          Dollar Range of Beneficial           Aggregate Dollar Range of
                                                   Ownership              Ownership in all Funds Overseen by
                                               in DWS Inflation                      Board Member
Board Member                                  Protected Plus Fund            in the DWS Fund Complex(1)
------------                                  -------------------            --------------------------

Independent Board Member:
-------------------------

<S>                                                   <C>                               <C>
Henry P. Becton, Jr.                                 None                         Over $100,000
Dawn-Marie Driscoll                               $1-$10,000                      Over $100,000
Keith R. Fox                                         None                         Over $100,000
Kenneth C. Froewiss                                  None                         Over $100,000
Martin J. Gruber                                     None                         Over $100,000
Richard J. Herring                                $1-$10,000                      Over $100,000
Graham E. Jones                                      None                         Over $100,000
Rebecca W. Rimel                                     None                         Over $100,000
William N. Searcy, Jr.                         $10,001-$50,000                    Over $100,000
Jean Gleason Stromberg                         $10,001-$50,000                    Over $100,000
Carl W. Vogt                                         None                         Over $100,000

Interested Board Member:
------------------------

Axel Schwarzer                                       None                         Over $100,000
</TABLE>

(1)      Securities  beneficially  owned as defined  under the 1934 Act  include
         direct and/or indirect ownership of securities where the Board Member's
         economic interest is tied to the securities,  employment  ownership and
         securities  when the Board  Member can exert  voting power and when the
         Board Member has  authority to sell the  securities.  The dollar ranges
         are:  None,   $1-$10,000,   $10,001-$50,000,   $50,001-$100,000,   over
         $100,000.

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, 2007. 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

                                       88
<PAGE>

(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                     Title of     an Aggregate       Aggregate
Board Member                      Board Member         Company        Class          Basis            Basis
------------                      ------------         -------        -----          -----            -----
<S>                                      <C>              <C>            <C>             <C>            <C>
Henry P. Becton, Jr.                                    None
Dawn-Marie Driscoll                                     None
Keith R. Fox                                            None
Kenneth C. Froewiss                                     None
Martin J. Gruber                                        None
Richard J. Herring                                      None
Graham E. Jones                                         None
Rebecca W. Rimel                                        None
William N. Searcy, Jr.                                  None
Jean Gleason Stromberg                                  None
Carl W. Vogt                                            None
</TABLE>




                                       89
<PAGE>




                                       90
<PAGE>




                                       91
<PAGE>




                                       92
<PAGE>




                                       93
<PAGE>




                                       94
<PAGE>




                                       95
<PAGE>




                                       96
<PAGE>



Securities Beneficially Owned


As of _January 8, 2008, the Board Members and officers of the Trust owned,  as a
group, less than 1% of the outstanding shares of the Fund.

To the best of the Fund's  knowledge,  as of January 8, 2008, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

<TABLE>
<CAPTION>
Name and Address of Investor Ownership                            Shares                    % of Total Shares
--------------------------------------                            ------                    -----------------
<S>                                                           <C>                           <C>
CHARLES SCHWAB& CO INC                                        182,980.28                    20.25% of Class A
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT
OF CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA  94104-4151

FIRST CLEARING LLC                                             52,850.23                    5.85% of Class A
STEVEN MULLER
WASHINGTON DC 20008-4005

DWS TRUST COMPANY CUST                                         10,785.27                    20.77% of Class B
FOR THE IRA ROLLOVER OF FLOYD M KESTNER
MOUNT DORA FL32757-9144

DWS TRUST COMPANY CUST                                         6,252.12                     12.04% of Class B
BRENTWOOD UNION FREE SCHOOL
403 (B) 7 MAUREEN QUINN
FLORAL PARK NY11005-1204


                                       97
<PAGE>
Name and Address of Investor Ownership                            Shares                    % of Total Shares
--------------------------------------                            ------                    -----------------

FIRST CLEARINGLLC                                              5,328.81                     10.26% of Class B
GARY R WAXMONS
MC LEAN VA  22102-2700

FIRST CLEARING LLC                                             3,062.70                     5.90% of Class B
VERNA H SOKOLA
PLYMOUTH PA  18651-1902

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   2,880.73                     5.55% of Class B
ATTN FUND ADM
JACKSONVILLE FL  32246-6484

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   48,715.24                    16.90% of Class C
ATTN FUND ADMINISTRATION 9LTU2

PERSHING LLC                                                   36,600.89                    12.70% of Class C
JERSEY CITY NJ 07303-2052

FERRIS BAKER WATTS INC                                         29,180.62                    10.12% of Class C
ELAINE T HADDAD IRA #2
BLOOMFIELD MI 48302-1126

STATE STREET BANK & TRUST CO CUST FBO DWS ALT                1,790,279.89             38.47% of Institutional Class
ASSET ALLOC PLUS FUND
QUINCY MA  02171-2105

STATE STREET BANK & TRUST CO                                  937,739.79              20.15% of Institutional Class
CUST FBO DWS LIFECOMPASS 2015 FUND
QUINCY MA  02171-2105

STATE STREET BANK & TRUST CO                                  773,738.60              16.63% of Institutional Class
CUST FBO DWS LIFECOMPASS RETIREMENT FUND
QUINCY MA  02171-2105

STATE STREET BANK & TRUST CO                                  660,189.52              14.19% of Institutional Class
CUST FBO DWS LIFECOMPASS 2020 FUND
QUINCY MA  02171-2105

CHARLES SCHWAB & CO INC                                       237,697.64              5.11% of Institutional Class
SPECIAL CUSTODY ACCOUNT
MUTUAL FUNDS DEPARTMENT
SAN FRANCISCO CA  94104-4151

WELLS FARGO INVESTMENTS LLC                                    72,842.69                    8.03% of Class S
MINNEAPOLIS MN 55402-2308
</TABLE>


                                       98
<PAGE>




                                       99
<PAGE>




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 the Funds,  each Fund's  investment  advisor has agreed,
subject to  applicable  law and  regulation,  to indemnify and hold harmless the
applicable  Funds  against  any


                                      100
<PAGE>

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 Funds or the
investment  advisor  ("Enforcement  Actions")  or that are the basis for private
actions brought by shareholders of the Funds against the Funds,  their directors
and  officers,  the Funds'  investment  advisor  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
applicable 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,  each Fund's investment  advisor has also agreed,
subject to applicable law and  regulation,  to indemnify the  applicable  Funds'
Independent  Trustees against certain  liabilities the Independent  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 Independent
Trustees in connection with any Enforcement Actions or Private  Litigation.  The
applicable   investment   advisor   is  not,   however,   required   to  provide
indemnification and advancement of expenses:  (1) with respect to any proceeding
or action with respect to which the applicable  Fund's Board determines that the
Independent  Trustee  ultimately would not be entitled to indemnification or (2)
for any liability of the Independent  Trustee to the Funds or their shareholders
to which the Independent Trustee would otherwise be subject by reason of willful
misfeasance,   bad  faith,   gross  negligence  or  reckless  disregard  of  the
Independent Trustee's duties as a director or trustee of the Funds as determined
in a final  adjudication in such action or proceeding.  The estimated  amount of
any expenses that may be advanced to the Independent  Trustees or indemnity that
may be payable  under the  indemnity  agreements  is  currently  unknown.  These
agreements by each Fund's investment advisor will survive the termination of the
investment  management  agreements between the applicable investment advisor and
the Funds.



                                FUND ORGANIZATION

The Fund is a series of DWS  Institutional  Funds (the "Trust"),  is an open-end
management  investment  company.  The Trust is a  Massachusetts  business  trust
organized under the laws of  Massachusetts on March 26, 1990, and is


                                      101
<PAGE>

governed by an Amended and  Restated  Declaration  of Trust that was approved by
shareholders  in the second quarter of 2006, as may be further amended from time
to time (the "Declaration of Trust"). As of February 6, 2006, the Trust is known
as DWS Institutional Funds. All shares issued and outstanding are fully paid and
non-assessable,  transferable,  have no pre-emptive or conversion rights (except
as may be determined  by the Board of Trustees) and are  redeemable as described
in the SAI and 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 Fund generally is not required to hold meetings of its  shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or the Fund; (c) an amendment of the Declaration of Trust;  and (d)
such  additional  matters  as may be  required  by  law or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.

The Declaration of Trust provides that shareholder  meeting quorum  requirements
shall be established  in the Trust's  By-laws.  The By-laws  currently in effect
provide that the presence in person or by proxy of the holders of thirty percent
of the shares entitled to vote at a meeting (or of an individual series or class
if required to vote separately) shall constitute a quorum for the transaction of
business at meetings of shareholders of the Trust.

On any  matter  submitted  to a vote of  shareholders,  all  shares of the Trust
entitled to vote shall,  except as otherwise provided in the Trust's By-Laws, be
voted in the aggregate as a single class without  regard to series or classes of
shares,  except (a) when required by applicable  law or when the Trustees  shall
have  determined that the matter affects one or more series or classes of shares
materially differently, shares shall be voted by individual series or class; and
(b) when the Trustees have determined that the matter affects only the interests
of one or more series or classes,  only  shareholders  of such series or classes
shall be entitled to vote thereon.

The  Declaration  of Trust  provides  that the  Board of  Trustees  may,  in its
discretion,  establish  minimum  investment  amounts for  shareholder  accounts,
impose  fees on  accounts  that do not  exceed a minimum  investment  amount and
involuntarily  redeem  shares in any such  account in payment of such fees.  The
Board of Trustees,  in its sole  discretion,  also may cause the Trust to redeem
all of the  shares of the Trust or one or more  series  or  classes  held by any
shareholder for any reason, to the extent permissible by the 1940 Act, including
(a) if the  shareholder  owns shares having an aggregate net asset value of less
than a specified minimum amount, (b) if a particular  shareholder's ownership of
shares would disqualify a series from being a regulated  investment company, (c)
upon a shareholder's failure to provide sufficient  identification to permit the
Trust to verify the shareholder's  identity, (d) upon a shareholder's failure to
pay for  shares  or meet or  maintain  the  qualifications  for  ownership  of a
particular  class or series of shares,  (e) if the Board of Trustees  determines
(or pursuant to policies  established by the Board it is determined)  that share
ownership by a particular  shareholder is not in the best interests of remaining
shareholders, (f) when a Fund is requested or compelled to do so by governmental
authority or applicable law and (g) upon a shareholder's  failure to comply with
a request for  information  with respect to the direct or indirect  ownership of
shares of the  Trust.  The  Declaration  of Trust also  authorizes  the Board of
Trustees to terminate a Fund or any class without shareholder approval,  and the
Trust may  suspend  the right of  shareholders  to  require  the Trust to redeem
shares to the extent permissible under the 1940 Act.

Upon the  termination  of the Trust or any series,  after  paying or  adequately
providing for the payment of all liabilities which may include the establishment
of a liquidating  trust or similar  vehicle,  and upon receipt of such releases,
indemnities   and  refunding   agreements  as  they  deem  necessary  for  their
protection, the Trustees may distribute the remaining Trust property or property
of the series,  in cash or in kind or partly each,  to the  shareholders  of the
Trust or the series involved,  ratably  according to the number of shares of the
Trust or such  series  held by the  several  shareholders  of the  Trust or such
series on the date of termination,  except to the extent  otherwise  required or
permitted by the  preferences  and special or relative  rights and privileges of
any classes of shares of a series  involved,  provided that any  distribution to
the  shareholders  of a  particular  class  of  shares  shall  be  made  to such
shareholders  pro rata in  proportion to the number of shares of such class held
by  each  of  them.  The  composition  of any  such  distribution  (e.g.,  cash,
securities  or  other  assets)  shall  be  determined  by the  Trust in its sole
discretion, and may be different among shareholders (including differences among
shareholders in the same series or class).

                                      102
<PAGE>

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for
acts or obligations  of the Fund and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of the Fund and the Fund
may be  covered by  insurance  which the  Trustees  consider  adequate  to cover
foreseeable  tort claims.  Thus, the risk of a shareholder  incurring  financial
loss on account of shareholder liability is considered by the Advisor remote and
not  material,  since it is limited to  circumstances  in which a disclaimer  is
inoperative and the Fund itself is unable to meet its obligations.

                             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.

                                      103
<PAGE>

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.

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
SEC'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 September 30, 2007 are incorporated herein by
reference  and are  hereby  deemed to be a part of this  combined  Statement  of
Additional Information.


                             ADDITIONAL INFORMATION

The CUSIP numbers for each class of DWS Inflation Protected Plus Fund are:

Class A:  23339C883

Class B:  23339C875

Class C:  23339C867

Institutional Class:  23339C842

DWS Inflation Protected Plus Fund has a fiscal year ending September 30th.

Many of the investment changes in the Fund will be made at prices different from
those  prevailing  at the time  they may be  reflected  in a  regular  report to
shareholders of the Fund. These transactions will reflect  investment  decisions
made by the Advisor in light of the Fund's  investment  objective  and policies,
its other portfolio holdings and tax considerations, and should not be construed
as recommendations for similar action by other investors.

The Fund's Prospectuses and this SAI omit certain  information  contained in the
Registration  Statement and its amendments which the Fund has filed with the SEC
under the 1933 Act and  reference is hereby made to the  Registration  Statement
for further  information  with  respect to the Fund and the  securities  offered
hereby.  The  Registration  Statement  and  its  amendments  are  available  for
inspection by the public at the offices of the SEC in Washington, D.C.


                                      104
<PAGE>


                                    APPENDIX

RATINGS OF INVESTMENTS

Description of certain ratings assigned by S&P and Moody's:

S&P Long-Term

"AAA" -- An obligation  rated "AAA" has the highest rating  assigned by S&P. The
obligor's  capacity  to meet  its  financial  commitment  on the  obligation  is
extremely strong.

"AA" -- An obligation rated "AA" differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial  commitment on the
obligation is very strong.

"A" -- An  obligation  rated "A" is  somewhat  more  susceptible  to the adverse
effects of changes in circumstances and economic  conditions than obligations in
higher rated categories.  However,  the obligor's capacity to meet its financial
commitment on the obligation is still strong.

"BBB" -- An obligation  rated "BBB"  exhibits  adequate  protection  parameters.
However,  adverse economic conditions or changing  circumstances are more likely
to lead to a weakened  capacity of the obligor to meet its financial  commitment
on the obligation.

"BB," "B," "CCC," "CC," and "C" -- Obligations rated "BB," "B," "CCC," "CC," and
"C"  are  regarded  as  having  significant  speculative  characteristics.  "BB"
indicates  the least  degree of  speculation  and "C" the  highest.  While  such
obligations will likely have some quality and protective characteristics,  these
may  be  outweighed  by  large  uncertainties  or  major  exposures  to  adverse
conditions.

"BB" -- An obligation  rated "BB" is less  vulnerable  to nonpayment  than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or economic  conditions  which could lead to the
obligor's   inadequate  capacity  to  meet  its  financial   commitment  on  the
obligation.

"B" -- An obligation rated "B" is more vulnerable to nonpayment than obligations
rated "BB," but the obligor  currently  has the  capacity to meet its  financial
commitment  on  the  obligation.   Adverse  business,   financial,  or  economic
conditions will likely impair the obligor's  capacity or willingness to meet its
financial commitment on the obligation.

"CCC" -- An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable  business,  financial,  and economic conditions for the
obligor to meet its  financial  commitment  on the  obligation.  In the event of
adverse business,  financial, or economic conditions,  the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

"CC" -- An obligation rated "CC" is currently highly vulnerable to nonpayment.

"C" -- A subordinated  debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action taken, but payments
on this  obligation  are  being  continued.  A "C" also  will be  assigned  to a
preferred stock issue in arrears on dividends or sinking fund payments, but that
is currently paying.

"D" -- An obligation rated "D" is in payment default. The "D" rating category is
used when  payments  on an  obligation  are not made on the date due even if the
applicable grace period has not expired,  unless S&P 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 or the taking of a similar action if payments on
an obligation are jeopardized.

                                      105
<PAGE>

"r" -- The symbol "r" is attached to the ratings of instruments with significant
noncredit  risks.  It  highlights  risks to principal or  volatility of expected
returns  which  are  not  addressed  in the  credit  rating.  Examples  include:
obligations  linked  or  indexed  to  equities,   currencies,   or  commodities;
obligations  exposed  to  severe  prepayment  risk -- such as  interest-only  or
principal-only  mortgage  securities;   and  obligations  with  unusually  risky
interest terms, such as inverse floaters.

"N.R." -- The  designation  "N.R."  indicates that no rating has been requested,
that there is  insufficient  information on which to base a rating,  or that S&P
does not rate a particular obligation as a matter of policy.

Note:  The ratings  from "AA" to "CCC" may be modified by the addition of a plus
(+) or minus (-) sign  designation  to show relative  standing  within the major
rating categories.

Short-Term

"A-1" -- A short-term obligation rated "A-1" is rated in the highest category by
S&P. The obligor's  capacity to meet its financial  commitment on the obligation
is strong.  Within this category,  certain obligations are given a plus sign (+)
designation.  This indicates  that the obligor's  capacity to meet its financial
commitment on these obligations is extremely strong.

"A-2" -- A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse  effects  of changes  in  circumstances  and  economic  conditions  than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

"A-3" -- A  short-term  obligation  rated  "A-3"  exhibits  adequate  protection
parameters.  However,  adverse economic conditions or changing circumstances are
more likely to lead to a weakened  capacity of the obligor to meet its financial
commitment on the obligation.

"B" -- A  short-term  obligation  rated "B" is  regarded  as having  significant
speculative characteristics.  The obligor currently has the capacity to meet its
financial  commitment  on  the  obligation;  however,  it  faces  major  ongoing
uncertainties  which could lead to the obligor's  inadequate capacity to meet is
financial commitment on the obligation.

"C" -- A short-term  obligation rated "C" is currently  vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.

"D" -- A short-term  obligation rated "D" is in payment default.  The "D" rating
category  is used when  payments on an  obligation  are not made on the date due
even if the  applicable  grace period has not expired,  unless S&P 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 or the taking of a similar action
if payments on an obligation are jeopardized.

Note:  Moody's  applies  numerical  modifiers 1, 2, and 3 in each generic rating
classification  from "Aa"  through  "Caa".  The  modifier 1  indicates  that the
obligation ranks in the higher end of its generic rating category;  the modifier
2 indicates a mid-range  ranking;  and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

Preferred Stock

Because  of the  fundamental  differences  between  preferred  stocks and bonds,
Moody's  employs a variation of our familiar bond rating  symbols in the quality
ranking of preferred stock.

These  symbols,  presented  below,  are designed to avoid  comparison  with bond
quality in  absolute  terms.  It should  always be borne in mind that  preferred
stock occupies a junior position to bonds within a particular  capital structure
and that these securities are rated within the universe of preferred stocks.

                                      106
<PAGE>

"aaa" -- An issue rated "aaa" is considered to be a top-quality preferred stock.
This  rating  indicates  good asset  protection  and the least risk of  dividend
impairment within the universe of preferred stocks.

"aa" -- An issue rated "aa" is  considered a high-grade  preferred  stock.  This
rating  indicates  that there is a reasonable  assurance  the earnings and asset
protection will remain relatively well maintained in the foreseeable future.

"a" -- An issue rated "a" is  considered to be an  upper-medium-grade  preferred
stock.  While risks are judged to be somewhat greater than in the "aaa" and "aa"
classifications, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

"baa" -- An issue  rated  "baa" is  considered  to be a  medium-grade  preferred
stock,  neither  highly  protected  nor  poorly  secured.   Earnings  and  asset
protection  appear adequate at present,  but may be questionable  over any great
length of time.

"ba" -- An issue rated "ba" is  considered  to have  speculative  elements.  Its
future cannot be considered well assured.  Earnings and asset  protection may be
very moderate and not well safeguarded  during adverse  periods.  Uncertainty of
position characterizes preferred stocks in this class.

"b" -- An issue rated "b"  generally  lacks the  characteristics  of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.

"caa" -- An issue rated  "caa" is likely to be in arrears on dividend  payments.
This  rating  designation  does not  purport to  indicate  the future  status of
payments.

"ca" -- An issue rated "ca" is  speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payments.

"c" -- This is the lowest-rated  class of preferred or preference stock.  Issues
so rated  can thus be  regarded  as  having  extremely  poor  prospects  of ever
attaining any real investment standing.

Note: As in the case of bond ratings, Moody's applies to preferred stock ratings
the numerical modifiers 1, 2, and 3 in rating  classifications "aa" through "b".
The  modifier  1  indicates  that the  security  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.

Prime Rating System (Short-Term)

Issuers rated Prime-1 (or supporting  institutions)  have a superior ability for
repayment of senior short-term debt obligations.  Prime-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  supporting  institutions)  have a strong  ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the  characteristics  cited  above but to a lesser  degree.


                                      107
<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.

Issuers rated Prime-3 (or supporting  institutions)  have an acceptable  ability
for  repayment  of  senior  short-term  obligations.   The  effect  of  industry
characteristics and market  compositions may be more pronounced.  Variability in
earnings and profitability may result in changes in the level of debt protection
measurements  and may  require  relatively  high  financial  leverage.  Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

Statement Of Differences

The dagger symbol shall be expressed as "D."

Characters normally expressed as superscript shall be preceded by "pp."


                                      108

<PAGE>





                             DWS INSTITUTIONAL FUNDS

                        DWS Inflation Protected Plus Fund


                                     Class S

                       STATEMENT OF ADDITIONAL INFORMATION

                                February 1, 2008















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

The Annual Report to  Shareholders,  dated  September 30, 2007, is  incorporated
herein by reference  and is deemed to be part of this  Statement  of  Additional
Information.  A copy of the Fund's Annual Report may be obtained  without charge
by calling the Fund at the toll-free number (800) 621-1048.


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







<PAGE>


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----



INVESTMENT RESTRICTIONS........................................................2

INVESTMENT POLICIES AND TECHNIQUES.............................................4
         Investment Techniques.................................................4
         Portfolio Holdings...................................................26

MANAGEMENT OF THE FUND........................................................28
         Investment Advisor...................................................28
         Compensation of Portfolio Managers...................................31

FUND SERVICE PROVIDERS........................................................40
         Administrator........................................................40
         Distributor..........................................................41
         Independent Registered Public Accounting Firm........................42
         Legal Counsel........................................................42
         Fund Accounting Agent................................................42
         Custodian, Transfer Agent and Shareholder Service Agent..............42

PORTFOLIO TRANSACTIONS........................................................43

PURCHASE AND REDEMPTION OF SHARES.............................................47

DIVIDENDS.....................................................................64

TAXES.........................................................................65

NET ASSET VALUE...............................................................72

TRUSTEES AND OFFICERS.........................................................73

FUND ORGANIZATION.............................................................93

PROXY VOTING GUIDELINES.......................................................94

FINANCIAL STATEMENTS..........................................................96

ADDITIONAL INFORMATION........................................................96

APPENDIX......................................................................97




<PAGE>


No  person  has  been  authorized  to  give  any  information  or  to  make  any
representations  not  contained in this SAI or in the  Prospectus  in connection
with the offering made by the Prospectus and, if given or made, such information
or  representations  must not be relied  upon as having been  authorized  by the
Trust or its Distributor.  The Prospectus does not constitute an offering by the
Trust or by the  Distributor in any  jurisdiction in which such offering may not
lawfully be made. Shares of the Fund may not available in certain states. Please
call (800) 728-3337 to determine availability in your state.


                             INVESTMENT RESTRICTIONS


Except as otherwise indicated,  the Fund's investment objective and policies are
not  fundamental  and may be changed by the Board of Trustees  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  separate
open-end  investment  management  companies.  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 (other than US government securities or securities
of investment  companies) or invest in more than 10% of the  outstanding  voting
securities of such issuer (with certain exceptions).


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

                                       2
<PAGE>

1.       borrow  money,   except  as  permitted  under  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, 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 or sell commodities,  except as permitted by the 1940 Act, and
         as  interpreted  or  modified  by  the  regulatory   authority   having
         jurisdiction, from time to time; and

7.       make loans except as permitted  under the 1940 Act, 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 a 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.

Non-Fundamental Policies. The Board has voluntarily adopted certain policies and
restrictions,  which are  observed in the conduct of the Fund's  affairs.  These
represent   intentions   of  the   Board   based   on   current   circumstances.
Non-fundamental  policies may be changed by the Board  without  approval of, or,
with certain exceptions, prior notice to shareholders.

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

1.       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;

2.       lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets; or

3.       acquire  securities  of  registered  open-end  investment  companies or
         registered unit investment  trusts in reliance on Sections  12(d)(1)(F)
         or 12(d)(1)(G) of the 1940 Act.

The Fund will not purchase illiquid securities,  including repurchase agreements
maturing in more than seven days, if, as a result thereof,  more than 15% of the
Fund's net assets,  valued at the time of the transaction,  would be invested in
such securities.


Under normal circumstances, the fund will invest at least 80% of its net assets,
plus any borrowings  for  investment  purposes,  in  inflation-indexed  bonds of
varying  maturities  issued  by the US  government,  non-US  governments,  their
agencies or instrumentalities, and corporations and derivatives related to those
securities.

                                       3
<PAGE>

To meet  federal  income  tax  requirements  for  qualification  as a  regulated
investment company,  the Fund must, among other things, limit its investments so
that at the close of each  quarter of its  taxable  year (1) no more than 25% of
the  value of its  total  assets  is  invested  in the  securities  (other  than
securities of the US Government or a regulated  investment  company) of a single
issuer or two or more  issuers of which the Fund holds 20% or more of the voting
stock and which are engaged in the same, similar or related trades or businesses
or in the securities of one or more qualified publicly traded partnerships,  and
(2) at least 50% of the value of its total assets is represented  by cash,  cash
items (including  receivables),  US Government  securities,  securities of other
regulated  investment companies and other securities of any issuer that does not
represent more than 5% of the value of the Fund's total assets and not more than
10% of the issuer's outstanding voting securities.


There will be no violation of any investment  restrictions  or policies  (except
with  respect  to  fundamental   investment   restriction  (1)  above)  if  that
restriction  is  complied  with  at the  time  the  relevant  action  is  taken,
notwithstanding  a later change in the market value of an investment,  in net or
total assets,  or in the change of securities  rating of the investment,  or any
other later change.

                       INVESTMENT POLICIES AND TECHNIQUES

Investment Techniques


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, including the Fund 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.  The Fund may  engage in  certain  additional
practices not described herein.


Fixed Income Securities

General. The Fund may invest in fixed income securities. In periods of declining
interest  rates,  the yield  (income from  portfolio  investments  over a stated
period of time) of the Fund may tend to be higher than prevailing  market rates,
and in periods of rising  interest  rates,  the yield of the Fund may tend to be
lower. In addition, when interest rates are falling, the inflow of net new money
to the Fund will likely be invested in  portfolio  instruments  producing  lower
yields than the balance of the Fund's  portfolio,  thereby reducing the yield of
the Fund. In periods of rising interest rates, the opposite can be true. The net
asset value of the Fund can generally be expected to change as general levels of
interest  rates  fluctuate.  The value of fixed income  securities in the Fund's
portfolio  generally varies inversely with changes in interest rates.  Prices of
fixed income  securities with longer effective  maturities are more sensitive to
interest rate changes than those with shorter effective maturities.

Inflation-Indexed  Bonds.  The Fund may  purchase  inflation-indexed  securities
issued by the US Treasury,  US government agencies and  instrumentalities  other
than the US Treasury,  and entities  other than the US Treasury or US government
agencies and instrumentalities.

Inflation-indexed  bonds are fixed income  securities or other instruments whose
principal value is periodically adjusted according to the rate of inflation. Two
structures  are common.  The US Treasury and some other  issuers use a structure
that accrues  inflation  on either a current or lagged basis into the  principal
value of the bond.  Most other issuers pay out the price index  accruals as part
of a semiannual coupon.


Inflation-indexed  securities issued by the US Treasury have maturities of five,
ten or  twenty  years,  although  it is  possible  that  securities  with  other
maturities will be issued in the future. The US Treasury securities pay interest
on a semiannual  basis,  equal to a fixed  percentage of the  inflation-adjusted
principal amount. For example, if the Fund purchased an  inflation-indexed  bond
with a par value of $1,000  and a 3% real rate of return  coupon  (payable


                                       4
<PAGE>

1.5% semiannually),  and calculated  inflation over the first six months was 1%,
the mid-year value of the bond would be $1,010 and the first semiannual interest
payment would be $15.15 ($1,010 times 1.5%). If calculated  inflation during the
second half of the year resulted in the whole year's inflation  equaling 3%, the
end of year value of the bond would be $1,030 and the second semiannual interest
payment would be $15.45 ($1,030 times 1.5%).


If the periodic  adjustment rate measuring  inflation falls, the principal value
of inflation-indexed  bonds will be adjusted downward,  and,  consequently,  the
interest  payable  on these  securities  (calculated  with  respect to a smaller
principal  amount) will be reduced.  Repayment of the original bond principal on
maturity (as adjusted for  inflation)  is  guaranteed in the case of US Treasury
inflation-indexed bonds, even during a period of deflation. However, the current
market value of the bonds is not  guaranteed  and will  fluctuate.  The Fund may
also  invest in other  inflation  related  bonds  that may or may not  provide a
similar  guarantee.  If a guarantee of principal is not  provided,  the adjusted
principal  value of the bond  repaid at maturity  may be less than the  original
principal. In addition, if the Fund purchases inflation-indexed bonds offered by
foreign issuers,  the rate of inflation  measured by the foreign inflation index
may not be correlated to the rate of inflation in the US.

The value of  inflation-indexed  bonds is  expected  to change  in  response  to
changes in real interest  rates.  Real interest  rates, in turn, are tied to the
relationship   between  nominal  interest  rates  and  the  rate  of  inflation.
Therefore,  if  inflation  were to rise at a faster rate than  nominal  interest
rates,  real interest  rates might  decline,  leading to an increase in value of
inflation-indexed  bonds. In contrast,  if nominal interest rates increased at a
faster  rate than  inflation,  real  interest  rates  might  rise,  leading to a
decrease  in  value  of  inflation-indexed  bonds.  There  can be no  assurance,
however,  that the value of inflation-indexed  bonds will be directly correlated
to changes in interest rates.

While these securities are expected to be protected from long-term  inflationary
trends,  short-term  increases in inflation  may lead to a decline in value.  If
interest  rates rise due to reasons other than  inflation  (for example,  due to
changes in currency  exchange  rates),  investors in these securities may not be
protected  to the  extent  that the  increase  is not  reflected  in the  bond's
inflation measure.

In  general,  the  measure  used to  determine  the  periodic  adjustment  of US
inflation-indexed  bonds  is  the  Consumer  Price  Index  for  Urban  Consumers
("CPI-U"), which is calculated monthly by the US Bureau of Labor Statistics. The
CPI-U is a measurement  of changes in the cost of living,  made up of components
such as housing,  food,  transportation and energy. The inflation  adjustment to
the securities  references this index with a three month lag.  Inflation-indexed
bonds  issued  by a foreign  government  are  generally  adjusted  to  reflect a
comparable inflation index calculate by the applicable government.  There can be
no  assurance  that the CPI-U or any  foreign  inflation  index will  accurately
measure  the  real  rate of  inflation  in the  prices  of goods  and  services.
Moreover,  there can be no  assurance  that the rate of  inflation  in a foreign
country will be correlated to the rate of inflation in the US.  Finally,  income
distributions  of the  Fund  are  likely  to  fluctuate  more  than  those  of a
conventional bond fund.

The  taxation  of  inflation-indexed  US Treasury  securities  is similar to the
taxation of  conventional  bonds.  Both  interest  payments  and the  difference
between original principal and the inflation-adjusted  principal will be treated
as interest  income  subject to  taxation.  Interest  payments  are taxable when
received or accrued. The inflation adjustment to the principal is subject to tax
in the year the  adjustment  is made,  not at maturity of the security  when the
cash from the repayment of principal is received.  If an upward  adjustment  has
been  made  (which  typically  should  happen),  investors  in  non-tax-deferred
accounts  will pay taxes on this  amount  currently.  Decreases  in the  indexed
principal  can be  deducted  only from  current or  previous  interest  payments
reported as income.

Inflation-indexed  US Treasury  securities  therefore have a potential cash flow
mismatch   to  an   investor,   because   investors   must  pay   taxes  on  the
inflation-adjusted  principal before the repayment of principal is received.  It
is  possible  that,   particularly  for  high  income  tax  bracket   investors,
inflation-indexed  US Treasury  securities would not generate enough income in a
given year to cover the tax liability they could create.  This is similar to the
current tax treatment for zero-coupon  bonds and other discount  securities.  If
inflation-indexed  US Treasury  securities  are sold prior to maturity,  capital
losses or gains are realized in the same manner as traditional bonds.

Inflation-indexed securities are designed to offer a return linked to inflation,
thereby  protecting  future  purchasing  power of the  money  invested  in them.
However, inflation-indexed securities provide this protected return only if held
to maturity.  In  addition,  inflation-indexed  securities  may not trade at par
value.  Real interest  rates (the market


                                       5
<PAGE>

rate of interest less the anticipated  rate of inflation)  change over time as a
result of many factors, such as what investors are demanding as a true value for
money.  When real rates do change,  inflation-indexed  securities prices will be
more  sensitive  to  these  changes  than  conventional  bonds,   because  these
securities  were sold  originally  based  upon a real  interest  rate that is no
longer prevailing.  Should market expectations for real interest rates rise, the
price of inflation-indexed  securities and the share price of the Fund may fall.
Investors  in the Fund  should be  prepared  to accept not only this share price
volatility but also the possible adverse tax consequences it may cause.

An  investment  in  securities  featuring  inflation-adjusted  principal  and/or
interest  involves factors not associated with more traditional  fixed-principal
securities. Such factors include the possibility that the inflation index may be
subject  to  significant  changes,  that  changes  in the  index  may or may not
correlate to changes in interest rates generally or changes in other indices, or
that the  resulting  interest  may be greater or less than that payable on other
securities of similar  maturities.  In the event of sustained  deflation,  it is
possible that the amount of semiannual interest payments, the inflation-adjusted
principal  of the  security  and the  value  of the  stripped  components,  will
decrease. If any of these possibilities are realized, the Fund's net asset value
could be negatively affected.


Put  Bonds.  The Fund may  invest  in "put"  bonds  (including  securities  with
variable  interest rates) that may be sold back to the issuer of the security at
face value at the  option of the  holder  prior to their  stated  maturity.  the
Advisor  intends to purchase  only those "put" bonds for which the put option is
an integral part of the security as originally  issued.  The option to "put" the
bond back to the issuer  before the stated final  maturity can cushion the price
decline of the bond in a rising interest rate environment.  However, the premium
paid,  if any,  for an option to put will have the effect of reducing  the yield
otherwise payable on the underlying security. For the purpose of determining the
"maturity"  of  securities  purchased  subject to an option to put,  and for the
purpose of determining the Fund's dollar  weighted  average  maturity,  the Fund
will  consider  "maturity"  to be the  first  date on which it has the  right to
demand  payment from the issuer of the put  although  the final  maturity of the
security is later than such date.


US  Government  Securities.  The  Fund  may  invest  in  obligations  issued  or
guaranteed as to both principal and interest by the US Government, its agencies,
instrumentalities  or sponsored  enterprises ("US Government  securities").  The
full  faith  and  credit  of  the  United  States  support  some  US  Government
securities,  such  as US  Treasury  bills,  notes  and  bonds.  Others,  such as
obligations issued or guaranteed by US Government agencies or instrumentalities,
are supported either by (i) the full faith and credit of the US Government (such
as  securities  of the  Small  Business  Administration),  (ii) the right of the
issuer to borrow from the US Treasury  (such as  securities  of the Federal Home
Loan Banks), (iii) the discretionary  authority of the US Government to purchase
the agency's  obligations  (such as securities of the Federal National  Mortgage
Association),  or (iv) only the credit of the issuer.  No assurance can be given
that the US Government will provide financial support to US Government  agencies
or instrumentalities in the future.

The Fund may also invest in separately traded principal and interest  components
of  securities  guaranteed  or  issued  by the US  Government  or its  agencies,
instrumentalities  or  sponsored  enterprises  if  such  components  are  traded
independently under the Separate Trading of Registered Interest and Principal of
Securities  program  ("STRIPS")  or  any  similar  program  sponsored  by the US
Government.  STRIPS  are  sold as  zero  coupon  securities.  See  "Zero  Coupon
Securities."

Custodial  Receipts.  Custodial  receipts  are  interests in  separately  traded
interest and  principal  component  parts of US Government  securities  that are
issued by banks or brokerage  firms and are created by  depositing US Government
securities  into a special  account at a custodian bank. The custodian holds the
interest and principal  payments for the benefit of the registered owners of the
certificates  or  receipts.  The  custodian  arranges  for the  issuance  of the
certificates  or receipts  evidencing  ownership  and  maintains  the  register.
Custodial receipts include Treasury Receipts ("TRs"), Treasury Investment Growth
Receipts ("TIGRs"), and Certificates of Accrual on Treasury Securities ("CATS").
TIGRs and CATS are  interests  in  private  proprietary  accounts  while TRs and
STRIPS  (see  "US  Government  Securities"  above)  are  interests  in  accounts
sponsored by the US Treasury.  Receipts are sold as zero coupon securities;  for
more information, see "Zero Coupon Securities."

The Fund may  acquire US  Government  securities  and their  unmatured  interest
coupons  that have been  separated  ("stripped")  by their  holder,  typically a
custodian  bank or  investment  brokerage  firm.  Having  separated the interest

                                       6
<PAGE>

coupons from the  underlying  principal  of the US  Government  securities,  the
holder will resell the stripped  securities in custodial receipt programs with a
number of different  names,  including TIGRs and CATS. The stripped  coupons are
sold separately from the underlying  principal,  which is usually sold at a deep
discount  because the buyer  receives  only the right to receive a future  fixed
payment on the  security  and does not receive  any rights to periodic  interest
(cash)  payments.  The  underlying US Treasury  bonds and notes  themselves  are
generally  held in book-entry  form at a Federal  Reserve  Bank.  Counsel to the
underwriters  of  these  certificates  or other  evidences  of  ownership  of US
Treasury  securities  have stated  that,  in their  opinion,  purchasers  of the
stripped  securities  most likely will be deemed the  beneficial  holders of the
underlying US Government  securities for federal tax and securities purposes. In
the case of CATS and TIGRS, the Internal Revenue Service (the "IRS") has reached
this conclusion for the purpose of applying the tax diversification requirements
applicable to regulated  investment  companies such as the Fund.  CATS and TIGRS
are not  considered US Government  securities by the staff of the SEC.  Further,
the  IRS  conclusion  noted  above  is  contained  only  in  a  general  counsel
memorandum,  which is an internal  document of no precedential  value or binding
effect,  and a private letter  ruling,  which also may not be relied upon by the
Fund.  The  Trust  is  not  aware  of  any  binding  legislative,   judicial  or
administrative authority on this issue.


Zero Coupon Securities.  STRIPS and custodial receipts (TRs, TIGRs and CATS) are
sold as zero coupon securities,  that is, fixed income securities that have been
stripped of their unmatured interest coupons. Zero coupon securities are sold at
a (usually  substantial)  discount and redeemed at face value at their  maturity
date without interim cash payments of interest or principal.  The amount of this
discount  is  accreted  over  the  life  of  the  security,  and  the  accretion
constitutes  the  income  earned on the  security  for both  accounting  and tax
purposes.  Because the Fund must  distribute  the  accreted  amounts in order to
qualify for favorable tax treatment, it may have to sell portfolio securities to
generate cash to satisfy the applicable  distribution  requirements.  Because of
these features,  the market prices of zero coupon  securities are generally more
volatile  than the market prices of  securities  that have similar  maturity but
that pay interest periodically.  Zero coupon securities are likely to respond to
a greater  degree to interest rate changes than are non-zero  coupon  securities
with similar maturity and credit qualities. See "Taxes" below.


Variable  and  Floating  Rate  Instruments.  The Fund may invest in  variable or
floating  rate  instruments  and  variable  rate demand  instruments,  including
variable amount master demand notes.  These  instruments  will normally  involve
industrial  development  or revenue bonds that provide that the rate of interest
is set as a specific  percentage  of a  designated  base rate (such as the prime
rate) at a major  commercial  bank.  In  addition,  the  interest  rate on these
securities may be reset daily, weekly or on some other reset period and may have
a floor or ceiling on interest  rate changes.  When holding such an  instrument,
the Fund can demand  payment  of the  obligation  at all times or at  stipulated
dates on short  notice  (not to  exceed 30 days) at par plus  accrued  interest.
Generally,  changes in interest  rates will have a smaller  effect on the market
value of these  instruments than on the market value of fixed income  securities
and,  thus,  may  allow  for  less  opportunity  for  capital   appreciation  or
depreciation.

Debt  instruments  purchased by the Fund may be  structured  to have variable or
floating  interest rates.  These  instruments may include variable amount master
demand notes that permit the  indebtedness  to vary in addition to providing for
periodic  adjustments  in the  interest  rates.  The Advisor  will  consider the
earning  power,  cash  flows  and other  liquidity  ratios  of the  issuers  and
guarantors  of such  instruments  and, if the  instrument is subject to a demand
feature,  will  continuously  monitor their financial ability to meet payment on
demand. Where necessary to ensure that a variable or floating rate instrument is
equivalent  to the  quality  standards  applicable  to the Fund's  fixed  income
investments, the issuer's obligation to pay the principal of the instrument will
be backed  by an  unconditional  bank  letter or line of  credit,  guarantee  or
commitment  to lend.  Any bank  providing  such a bank  letter,  line of credit,
guarantee or loan commitment will meet the Fund's  investment  quality standards
relating to investments in bank obligations.  The Advisor will also continuously
monitor the creditworthiness of issuers of such instruments to determine whether
the Fund should continue to hold the investments.

The absence of an active secondary market for certain variable and floating rate
notes could make it difficult to dispose of the instruments,  and the Fund could
suffer a loss if the issuer  defaults or during periods in which the Fund is not
entitled to exercise its demand rights.

                                       7
<PAGE>

Variable and floating rate  instruments  held by the Fund will be subject to the
Fund's limitation on investments in illiquid  securities when a reliable trading
market for the instruments does not exist and the Fund may not demand payment of
the principal amount of such instruments within seven days.

Yields  and  Ratings.  The yields on certain  obligations,  including  the money
market  instruments  in which the Fund may invest (such as commercial  paper and
bank  obligations),  are  dependent on a variety of factors,  including  general
market conditions,  conditions in the particular market for the obligation,  the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue.  The ratings of S&P,  Moody's and other
recognized rating  organizations  represent their respective  opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute  standards of quality or value.  Consequently,  obligations
with the same  rating,  maturity  and interest  rate may have  different  market
prices. See Appendix A for a description of the ratings provided by S&P, Moody's
and certain other recognized rating organizations.

Subsequent  to its purchase by the Fund, a rated  security may cease to be rated
or its rating may be reduced below the minimum  rating  required for purchase by
the  Fund.  The  Board  of  Trustees  or the  Advisor,  pursuant  to  guidelines
established by the Board of Trustees, will consider such an event in determining
whether the Fund should  continue to hold the  security in  accordance  with the
interests of the Fund and applicable regulations of the SEC.

Lower  Quality  Debt  Obligations  "Junk-Bonds."  The Fund may  invest  in below
investment grade bonds,  including  securities in default.  These securities are
considered  speculative  and,  while  generally  offering  greater  income  than
investments  in  higher  quality  securities,  involve  greater  risk of loss of
principal and income,  including the possibility of default or bankruptcy of the
issuers of such securities, and have greater price volatility, especially during
periods of economic  uncertainty or change. These lower quality bonds tend to be
affected by economic changes and short-term corporate and industry  developments
to a greater extent than higher  quality  securities,  which react  primarily to
fluctuations in the general level of interest rates.

Below  investment grade bonds (junk bonds) will also be affected by the market's
perception  of  their  credit  quality,   especially  during  times  of  adverse
publicity,  and the outlook for economic growth. In the past, economic downturns
or an increase in interest  rates have,  under certain  circumstances,  caused a
higher  incidence of default by the issuers of these securities and may do so in
the future,  especially in the case of highly leveraged issuers.  The market for
these  lower  quality  bonds  is  generally  less  liquid  than the  market  for
investment grade bonds.  Therefore,  the Advisor's  judgment may at times play a
greater role in valuing these  securities  than in the case of investment  grade
bonds, and it also may be more difficult under certain adverse market conditions
to sell these lower quality securities to meet redemption  requests,  to respond
to changes in the market, or to determine accurately the Fund's net asset value.

Subject to its  investment  limitations,  the Fund may  invest in high  yielding
fixed  income  securities  that are rated  lower  than Baa by  Moody's or BBB by
Standard & Poor's and unrated securities determined to be of comparable quality.
The values of these lower quality securities generally fluctuate more than those
of higher quality  securities.  In addition,  these securities involve a greater
possibility of an adverse change in financial condition affecting the ability of
the issuer to make  payments of interest  and  principal.  The Advisor  seeks to
reduce  these  risks  through  investment  analysis  and  attention  to  current
developments  in interest  rates and  economic  conditions,  but there can be no
assurance  that the Advisor will be successful in reducing the risks  associated
with  investments  in such  securities.  To the extent the Fund  invests in such
lower quality  securities,  the  achievement of its investment  objective may be
more dependent on the Advisor's own credit analysis.

The Fund may invest in  pay-in-kind  (PIK)  securities,  which pay  interest  in
either cash or additional  securities,  at the issuer's option,  for a specified
period.  In addition,  the Fund may invest in zero coupon  bonds.  Both of these
types of bonds may be more  speculative  and subject to greater  fluctuations in
value  than  securities  which pay  interest  periodically  and in cash,  due to
changes in interest rates.  The Fund will accrue income on such  investments for
tax and accounting purposes, as required, which is distributable to shareholders
and which,  because no cash is  generally  received at the time of accrual,  may
require the  liquidation  of other  portfolio  securities  to satisfy the Fund's
distribution obligations. See "Federal Income Taxes" below.

                                       8
<PAGE>

The market value of fixed income  securities that carry no equity  participation
usually reflects yields generally available on securities of similar quality and
type. When such yields decline, the market value of a portfolio already invested
at higher  yields  can be  expected  to rise if such  securities  are  protected
against early call. Similarly,  when such yields increase, the market value of a
portfolio already invested at lower yields can be expected to decline.

Convertible and Preferred  Securities.  Subject to its investment objectives and
policies,  the Fund may invest in convertible  securities,  which are ordinarily
preferred  stock or long-term  debt  obligations  of an issuer  convertible at a
stated  exchange  rate into  common  stock of the  issuer.  The market  value of
convertible  securities  tends  to  decline  as  interest  rates  increase  and,
conversely,  to increase  as  interest  rates  decline.  Convertible  securities
generally  offer  lower  interest  or  dividend   yields  than   non-convertible
securities  of similar  quality.  However,  when the market  price of the common
stock underlying a convertible  security exceeds the conversion price, the price
of the convertible  security tends to reflect the value of the underlying common
stock.  As the  market  price  of the  underlying  common  stock  declines,  the
convertible  security tends to trade increasingly on a yield basis, and thus may
not  depreciate to the same extent as the underlying  common stock.  Convertible
securities  generally  rank  senior to  common  stocks  in an  issuer's  capital
structure,  are  consequently of higher  quality,  and entail less risk than the
issuer's common stock. However, the extent to which such risk is reduced depends
in large measure upon the degree to which the  convertible  security sells above
its value as a fixed income  security.  The convertible debt securities in which
the Fund may invest are subject to the same rating criteria and downgrade policy
as the Fund's investments in fixed income securities.

The Fund,  subject to its investment  objectives,  may purchase preferred stock.
Preferred stock is an equity security,  but possesses certain attributes of debt
securities  and is  generally  considered a fixed  income  security.  Holders of
preferred  stock  normally  have the right to receive  dividends at a fixed rate
when and as declared by the issuer's board of directors,  but do not participate
in  other  amounts  available  for  distribution  by  the  issuing  corporation.
Dividends  on the  preferred  stock may be  cumulative,  and in such cases,  all
cumulative  dividends  usually must be paid prior to dividend payments to common
stockholders. Because of this preference, preferred stock generally entails less
risk than common  stocks.  Upon  liquidation,  preferred  stock is entitled to a
specified  liquidation  preference,  which is  generally  the same as the par or
stated  value,  and is senior in right of  payment  to  common  stock.  However,
preferred  stock is an equity security in that it does not represent a liability
of the issuer and  therefore  does not offer as great a degree of  protection of
capital or assurance  of  continued  income as  investments  in  corporate  debt
securities. In addition,  preferred stock is subordinated in right of payment to
all debt  obligations  and creditors of the issuer,  and  convertible  preferred
stocks may be subordinated to other preferred stock of the same issuer.

Warrants. The Fund may invest in warrants. Warrants generally entitle the holder
to buy a specified number of shares of common stock at a specified price,  which
is often higher than the market  price at the time of issuance,  for a period of
years or in perpetuity. Warrants may be issued in units with other securities or
separately,  and may be freely  transferable and traded on exchanges.  While the
market value of a warrant tends to be more volatile than that of the  securities
underlying the warrant, the market value of a warrant may not necessarily change
with that of the  underlying  security.  A warrant ceases to have value if it is
not exercised prior to any expiration date to which the warrant is subject.  The
purchase of warrants involves a risk that the Fund could lose the purchase value
of a warrant if the right to subscribe  to  additional  shares is not  exercised
prior to the warrant's  expiration.  Also, the purchase of warrants involves the
risk that the  effective  price paid for the warrant  added to the  subscription
price of the related security may exceed the value of the subscribed  security's
market price,  such as when there is no movement in the level of the  underlying
security.

Indexed Securities.  As part of the Fund's global asset allocation strategy, the
Fund may invest in indexed securities.  The indexed securities in which the Fund
may invest  include debt  securities  whose value at maturity is  determined  by
reference  to the  relative  prices of various  currencies  or to the price of a
stock  index.  The value of such  securities  depends  on the  price of  foreign
currencies,  securities  indices or other financial values or statistics.  These
securities  may be positively or  negatively  indexed;  that is, their value may
increase or decrease if the underlying instrument appreciates.

                                       9
<PAGE>

Mortgage-Backed and Asset-Backed Securities

General.  The Fund may invest up to 20% of total Fund assets in  mortgage-backed
securities,  which  represent  direct  or  indirect  participations  in,  or are
collateralized by and payable from, mortgage loans secured by real property. The
Fund may also invest in asset-backed securities,  which represent participations
in, or are secured by and payable from, assets such as motor vehicle installment
sales, installment loan contracts,  leases of various types of real and personal
property and  receivables  from revolving  credit  (credit card)  agreements and
other categories of receivables.  Such securities are generally issued by trusts
and special purpose corporations.

Mortgage-backed  and  asset-backed  securities  are often  subject to more rapid
repayment  than their  stated  maturity  date would  indicate as a result of the
pass-through of prepayments of principal on the underlying loans. During periods
of declining interest rates, prepayment of loans underlying  mortgage-backed and
asset-backed  securities  can be  expected  to  accelerate,  and thus impair the
Fund's  ability to  reinvest  the returns of  principal  at  comparable  yields.
Accordingly,  the market  values of such  securities  will vary with  changes in
market interest rates generally and in yield  differentials  among various kinds
of  US  Government   securities  and  other   mortgage-backed  and  asset-backed
securities. Asset-backed securities present certain risks that are not presented
by mortgage-backed  securities because asset-backed  securities generally do not
have the benefit of a security  interest in  collateral  that is  comparable  to
mortgage  assets.  In addition,  there is the  possibility  that, in some cases,
recoveries on repossessed collateral may not be available to support payments on
these  securities.  Many mortgage and asset-backed  securities may be considered
derivative instruments.

Mortgage-Backed.  The Fund may invest in mortgage-backed  securities,  including
derivative instruments.  Mortgage-backed securities represent direct or indirect
participations  in or  obligations  collateralized  by and payable from mortgage
loans  secured  by  real  property.  The  Fund  may  invest  in  mortgage-backed
securities issued or guaranteed by US Government  agencies or  instrumentalities
such as the  Government  National  Mortgage  Association  ("GNMA"),  the Federal
National  Mortgage  Association  ("FNMA")  and the  Federal  Home Loan  Mortgage
Corporation  ("FHLMC").  Obligations  of GNMA are  backed by the full  faith and
credit of the US Government. Obligations of FNMA and FHLMC are not backed by the
full  faith and credit of the US  Government  but are  considered  to be of high
quality since they are considered to be  instrumentalities of the United States.
The market value and yield of these  mortgage-backed  securities can vary due to
market interest rate fluctuations and early prepayments of underlying mortgages.
These  securities  represent  ownership in a pool of Federally  insured mortgage
loans with a maximum  maturity of 30 years.  The scheduled  monthly interest and
principal payments relating to mortgages in the pool will be "passed through" to
investors.  Government mortgage-backed securities differ from conventional bonds
in that principal is paid back to the  certificate  holders over the life of the
loan  rather  than at  maturity.  As a result,  there will be monthly  scheduled
payments of principal and interest.

The Fund may invest in  mortgage-backed  securities  issued by  non-governmental
entities including  collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs").  CMOs are securities  collateralized by
mortgages,   mortgage   pass-throughs,   mortgage   pay-through   bonds   (bonds
representing  an interest in a pool of mortgages  where the cash flow  generated
from  the  mortgage  collateral  pool  is  dedicated  to  bond  repayment),  and
mortgage-backed  bonds (general  obligations  of the issuers  payable out of the
issuers'  general  funds and  additionally  secured by a first lien on a pool of
single  family  detached  properties).  Many  CMOs are  issued  with a number of
classes or series that have  different  maturities  and are retired in sequence.
Investors  purchasing  such  CMOs  in the  shortest  maturities  receive  or are
credited with their pro rata portion of the unscheduled prepayments of principal
up to a predetermined portion of the total CMO obligation. Until that portion of
such CMO  obligation  is  repaid,  investors  in the longer  maturities  receive
interest  only.  Accordingly,  the CMOs in the longer  maturity  series are less
likely than other  mortgage  pass-throughs  to be prepaid  prior to their stated
maturity.  Although  some of the mortgages  underlying  CMOs may be supported by
various types of insurance,  and some CMOs may be backed by GNMA certificates or
other mortgage  pass-throughs  issued or guaranteed by US Government agencies or
instrumentalities, the CMOs themselves are not generally guaranteed.

REMICs are  private  entities  formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities,  including  "regular"  interests
and "residual" interests. The Fund does not intend to acquire residual interests
in REMICs, due to certain  disadvantages for regulated investment companies that
acquire such  interests.  Mortgage-backed  securities are


                                       10
<PAGE>

subject  to  unscheduled  principal  payments  representing  prepayments  on the
underlying  mortgages.  Although  these  securities may offer yields higher than
those available from other types of securities,  mortgage-backed  securities may
be less  effective  than other types of  securities  as a means of "locking  in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline,  the value of these  securities  likely will not rise as
much as comparable debt securities due to the prepayment  feature.  In addition,
these prepayments can cause the price of a mortgage-backed  security  originally
purchased at a premium to decline in price to its par value, which may result in
a loss.

Due to  prepayments  of the  underlying  mortgage  instruments,  mortgage-backed
securities  do not  have a known  actual  maturity.  In the  absence  of a known
maturity,  market participants generally refer to an estimated average life. The
Advisor believes that the estimated average life is the most appropriate measure
of  the  maturity  of a  mortgage-backed  security.  Accordingly,  in  order  to
determine whether such security is a permissible  investment,  it will be deemed
to have a remaining  maturity of three  years or less if the  average  life,  as
estimated by the Advisor,  is three years or less at the time of purchase of the
security by the Fund.  An average life  estimate is a function of an  assumption
regarding anticipated  prepayment patterns. The assumption is based upon current
interest  rates,  current  conditions in the relevant  housing markets and other
factors.  The assumption is necessarily  subjective,  and thus different  market
participants could produce somewhat different average life estimates with regard
to the same security.  Although the Advisor will monitor the average life of the
portfolio  securities  of the Fund with a  portfolio  maturity  policy  and make
needed  adjustments  to  comply  with the  Fund's  policy as to  average  dollar
weighted portfolio maturity,  there can be no assurance that the average life of
portfolio securities as estimated by the Advisor will be the actual average life
of such securities.

Asset-Backed  Securities.  The Fund may invest up to 20% of total Fund assets in
asset-backed  securities,  which represent  participations in, or are secured by
and payable from, pools of assets including company receivables,  truck and auto
loans,   leases  and  credit  card  receivables.   The  asset  pools  that  back
asset-backed  securities  are  securitized  through the use of privately  formed
trusts or special purpose  corporations.  Payments or distributions of principal
and  interest  may be  guaranteed  up to certain  amounts and for a certain time
period by a letter of credit or a pool  insurance  policy  issued by a financial
institution  unaffiliated  with  the  trust  or  corporation,  or  other  credit
enhancements may be present.  Certain asset-backed  securities may be considered
derivative instruments.

Derivatives

General.  The Fund may invest in various  instruments that are commonly known as
"derivatives." Generally, a derivative is a financial arrangement,  the value of
which is based on, or "derived"  from, a traditional  security,  asset or market
index.  Some  "derivatives,"  such as  mortgage-related  and other  asset-backed
securities, are in many respects like any other investment, although they may be
more volatile and/or less liquid than more traditional  debt  securities.  There
are, in fact, many different types of derivatives and many different ways to use
them.  There are a range of risks  associated with those uses. For example,  the
Fund may use futures and options as a low-cost  method of gaining  exposure to a
particular  securities market without investing directly in those securities and
for traditional hedging purposes to attempt to protect the Fund from exposure to
changing  interest rates,  securities  prices or currency exchange rates and for
cash  management or other  investment  purposes.  In connection  with the global
asset  allocation  strategy,  the Fund may use  derivatives to add to investment
returns and  generally  not for hedging  purposes.  The use of  derivatives  may
result in leverage,  which tends to magnify the effects of an instrument's price
changes as market conditions change. Leverage involves the use of a small amount
of  money  to  control  a large  amount  of  financial  assets,  and can in some
circumstances  lead to  significant  losses.  The Fund will  limit the  leverage
created by its use of  derivatives  for investment  purposes by "covering"  such
positions  as  required  by  the  SEC.  The  Advisor  may  use   derivatives  in
circumstances  where the  Advisor  believes  they offer an  economical  means of
gaining  exposure to a particular asset class as well as to seek excess returns.
The use of derivatives for non-hedging purposes may be considered speculative.

The Fund's  investment  in  options,  futures,  forward  contracts,  and similar
strategies  depend  on the  Advisor's  judgment  as to the  potential  risks and
rewards of different  types of  strategies.  Options and futures can be volatile
investments,  and may not perform as expected. If the Advisor applies a hedge at
an inappropriate  time or judges price trends  incorrectly,  options and futures
strategies may lower the Fund's return. The Fund could also experience losses if
the prices of its options and futures  positions were poorly correlated with its
other  investments,  or if it could


                                       11
<PAGE>

not close out its positions because of an illiquid secondary market. Options and
futures  traded  on  foreign  exchanges   generally  are  not  regulated  by  US
authorities, and may offer less liquidity and less protection to the Fund in the
event of default by the other party to the contract.

Hedging  Strategies.  The Fund may use certain strategies designed to adjust the
overall risk of its investment  portfolio.  These "hedging"  strategies  involve
derivative contracts,  including (but not limited to) US Treasury and Eurodollar
futures  contracts  and  exchange-traded  put and call  options on such  futures
contracts.  New financial products and risk management techniques continue to be
developed and may be used if consistent with the Fund's investment objective and
policies.  Among  other  purposes,  these  hedging  strategies  may be  used  to
effectively  maintain  desired  portfolio  duration or to protect against market
risk  should the Fund  change its  investments  among  different  types of fixed
income securities.

The Fund might not use any  hedging  strategies,  and there can be no  assurance
that any strategy used will succeed. If the Advisor is incorrect in its judgment
on market values,  interest  rates or other economic  factors in using a hedging
strategy,  the Fund may have lower net income and a net loss on the  investment.
Each of these strategies involves certain risks, which include:

o        the  fact  that  the  skills  needed  to use  hedging  instruments  are
         different from those needed to select securities for the Fund;

o        the  possibility  of  imperfect  correlation,  or even no  correlation,
         between the price movements of hedging  instruments and price movements
         of the securities or currencies being hedged;

o        possible  constraints  placed on the Fund's ability to purchase or sell
         portfolio  investments  at  advantageous  times due to the need for the
         Fund to maintain "cover" or to segregate securities; and

o        the possibility  that the Fund will be unable to close out or liquidate
         its hedged position.

A hedge is designed to offset a loss in a portfolio  position with a gain in the
hedged position;  at the same time,  however,  a properly  correlated hedge will
result in a gain in the portfolio  position being offset by a loss in the hedged
position.  As a  result,  the use of  options,  futures  and  currency  exchange
transactions  for  hedging  purposes  could  limit  any  potential  gain from an
increase in the value of the position hedged. With respect to futures contracts,
since the value of portfolio securities will far exceed the value of the futures
contracts  sold by the Fund,  an increase in the value of the futures  contracts
could only  mitigate,  but not totally  offset,  the decline in the value of the
Fund's assets.

To the extent that the Fund engages in the strategies  described above, the Fund
may experience losses greater than if these strategies had not been utilized. In
addition to the risks described above,  these instruments may be illiquid and/or
subject  to trading  limits,  and the Fund may be unable to close out a position
without incurring substantial losses, if at all. The Fund is also subject to the
risk of default by a counterparty to an off-exchange transaction.  See "Illiquid
Securities."

Futures  Contracts  and Options on Futures  Contracts  -- General.  The Fund may
enter into  futures  contracts  on  securities,  securities  and other  indices,
foreign  currencies  and interest  rates,  and purchase and write (sell) options
thereon  which are  traded on  exchanges  designated  by the  Commodity  Futures
Trading  Commission  (the "CFTC") or, if consistent  with CFTC  regulations,  on
foreign  exchanges.  These futures contracts are standardized  contracts for the
future  delivery of, among other  things,  a commodity,  a non-US  currency,  an
interest rate sensitive  security or, in the case of index futures  contracts or
certain other futures contracts, a cash settlement with reference to a specified
multiplier  times the change in the index. 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.

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.

                                       12
<PAGE>

The Fund may enter into futures  contracts  and options on futures  contracts on
securities,  securities  indices and  currencies  both to manage its exposure to
changing  interest rates,  security prices and currency exchange rates and as an
efficient means of managing allocations between asset classes.

The  successful  use of futures  contracts  and options  thereon  draws upon the
Advisor's skill and experience with respect to such  instruments and are subject
to special risk  considerations.  A liquid  secondary  market for any futures or
options  contract  may not be  available  when a futures or options  position is
sought to be closed. In addition,  there may be an imperfect correlation between
movements in the  securities or currency in the Fund.  Successful use of futures
or options  contracts is further  dependent on the Advisor's  ability to predict
correctly  movements  in the  securities  or  foreign  currency  markets  and no
assurance can be given that its judgment will be correct.

Futures  Contracts.  Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future.  US futures  contracts have been designed by exchanges which have
been designated  "contracts markets" by the CFTC, and must be executed through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts  trade on a number  of  exchange
markets,  and,  through their  clearing  corporations,  the exchanges  guarantee
performance  of the  contracts as between the clearing  members of the exchange.
The Fund may enter into  contracts for the purchase or sale for future  delivery
of fixed-income securities,  foreign currencies, or financial indices, including
any index of US government securities, foreign government securities,  corporate
debt  securities or inflation.  The Fund may enter into futures  contracts which
are based on debt securities that are backed by the full faith and credit of the
US  government,  such as  long-term  US Treasury  Bonds,  Treasury  Notes and US
Treasury Bills.  The Fund may also enter into futures  contracts which are based
on bonds issued by governments  other than the US government.  Futures contracts
on  foreign  currencies  may be  used  to  hedge  against  securities  that  are
denominated in foreign currencies.

At the same time a futures contract is entered into, the Fund must allocate cash
or liquid securities as a deposit payment ("initial margin").  Daily thereafter,
the  futures  contract is valued and the  payment of  "variation  margin" may be
required,  since each day the Fund would  provide or receive cash that  reflects
any decline or increase in the contract's value.

At the time of delivery of securities  pursuant to such a contract,  adjustments
are  made to  recognize  differences  in value  arising  from  the  delivery  of
securities  with a different  interest rate from that specified in the contract.
In some, but not many cases, securities called for by a futures contract may not
have been issued when the contract was written.

Although futures  contracts (other than those that settle in cash, such as index
futures)  by their  terms call for the actual  delivery  or  acquisition  of the
instrument underlying the contract, in most cases the contractual  obligation is
fulfilled by offset  before the date of the contract  without  having to make or
take delivery of the  instrument  underlying  the contract.  The offsetting of a
contractual  obligation is accomplished by entering into an opposite position in
an identical  futures contract on the commodities  exchange on which the futures
contract  was entered  into (or a linked  exchange)  calling for delivery in the
same  month.  Such a  transaction,  which is  effected  through  a member  of an
exchange,  cancels the  obligation  to make or take  delivery of the  instrument
underlying the contract.  Since all transactions in the futures market are made,
offset or  fulfilled  through a  clearinghouse  associated  with the exchange on
which the  contracts  are  traded,  the Fund will incur  brokerage  fees when it
enters into futures contracts.

The purpose of the acquisition or sale of a futures contract, in cases where the
Fund  holds or  intends to  acquire  fixed-income  securities,  is to attempt to
protect the Fund from fluctuations in interest or foreign exchange rates without
actually buying or selling  fixed-income  securities or foreign currencies.  For
example, if interest rates were expected to increase (which thus would cause the
prices of debt  securities  to  decline),  the Fund  might  enter  into  futures
contracts for the sale of debt securities.  Such a sale would have much the same
effect as selling an equivalent  value of the debt securities owned by the Fund.
If interest rates did increase, the value of the debt security in the Fund would
decline,  but the value of the futures  contracts to the Fund would  increase at
approximately  the same rate,  thereby  keeping  the net asset value of the Fund
from  declining as much as it otherwise  would have.  The Fund could  accomplish
similar  results by selling debt  securities  and  investing in bonds with short
maturities  when  interest  rates are expected to increase.  However,  since the
futures market is more liquid than the cash market, the use of


                                       13
<PAGE>

futures  contracts  as an  investment  technique  allows the Fund to  maintain a
defensive position without having to sell its portfolio securities.

Similarly,  when it is expected that interest rates may decline (thus increasing
the value of debt securities),  futures contracts may be purchased to attempt to
hedge against anticipated  purchases of debt securities at higher prices.  Since
the fluctuations in the value of futures contracts should be similar to those of
debt  securities,  the Fund could take advantage of the anticipated  rise in the
value of debt  securities  without  actually  buying  them  until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could  then buy  debt  securities  on the cash  market.  The  segregated  assets
maintained  to  cover  the  Fund's  obligations  with  respect  to such  futures
contracts  will consist of cash or liquid  securities  acceptable  to the broker
from its portfolio in an amount equal to the difference  between the fluctuating
market value of such futures  contracts and the  aggregate  value of the initial
and  variation  margin  payments  made by the Fund with  respect to such futures
contracts.

The  ordinary  spreads  between  prices in the cash and futures  market,  due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,   investors  may  close  futures  contracts   through   offsetting
transactions  which could distort the normal  relationship  between the cash and
futures  markets.  Second,  the liquidity of the futures  market depends on most
participants entering into offsetting  transactions rather than making or taking
delivery.  To the extent that many participants decide to make or take delivery,
liquidity in the futures  market could be reduced,  thus  producing  distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin  requirements  in the securities
market. Therefore,  increased participation by speculators in the futures market
may cause temporary price distortions.  Due to the possibility of distortion,  a
correct forecast of securities price, general interest rate or currency exchange
rate trends by the Advisor may still not result in a successful transaction.

In addition,  futures contracts entail significant  risks.  Although the Advisor
believes  that use of such  contracts  will benefit the Fund,  if the  Advisor's
investment judgment about the general direction of interest rates or an index is
incorrect,  the Fund's  overall  performance  would be poorer than if it had not
entered into any such contract.  For example, if the Fund has hedged against the
possibility  of an increase  in  interest  rates or a decrease in an index which
would  adversely  affect  the  value of  securities  held in its  portfolio  and
interest rates decrease or securities  prices  increase  instead,  the Fund will
lose part or all of the benefit of the increased  value of its securities  which
it has hedged because it will have offsetting  losses in its futures  positions.
In addition, in such situations,  if the Fund has insufficient cash, it may have
to  sell  securities   from  its  portfolio  to  meet  daily  variation   margin
requirements.  Such sales of securities may be, but will not  necessarily be, at
increased  prices  which  reflect the rising  market.  The Fund may have to sell
securities at a time when it may be disadvantageous to do so.

Futures  Contracts on Securities  Indices.  The Fund may also enter into futures
contracts  providing for the making and  acceptance of a cash  settlement  based
upon  changes  in  the  value  of an  index  of US or  non-US  securities.  This
investment  technique may be used as a low-cost method of gaining  exposure to a
particular  securities market without investing  directly in those securities or
to hedge  against  anticipated  future  changes in general  market  prices which
otherwise might either adversely affect the value of securities held by the Fund
or adversely  affect the prices of securities which are intended to be purchased
at a later date for the Fund or as an  efficient  means of  managing  allocation
between asset classes.  A futures contract may also be entered into to close out
or offset an existing futures position.

When used for hedging  purposes,  each futures  contract on a  securities  index
transaction  involves  the  establishment  of  a  position  which,  the  Advisor
believes,  will move in a  direction  opposite to that of the  investment  being
hedged.  If these hedging  transactions  are successful,  the futures  positions
taken for the Fund will rise in value by an amount which  approximately  offsets
the  decline in value of the  portion of the Fund's  investments  that are being
hedged.  Should  general  market prices move in an unexpected  manner,  the full
anticipated  benefits of futures  contracts may not be achieved or a loss may be
realized.

Options  on  Futures  Contracts   (including  Futures  Contracts  on  Securities
Indices).  The Fund may purchase and write (sell)  options on futures  contracts
for hedging purposes.  For example,  as with the purchase of futures  contracts,

                                       14
<PAGE>

when the  Fund is not  fully  invested,  it may  purchase  a call  option  on an
interest rate  sensitive  futures  contract to hedge  against a potential  price
increase on debt securities due to declining interest rates.

The purchase of a call option on a futures  contract is similar in some respects
to the purchase of a call option on an index or individual  security.  Depending
on the  pricing  of the  option  compared  to either  the  price of the  futures
contract upon which it is based or the price of the underlying debt  securities,
it may or may not be less  risky  than  ownership  of the  futures  contract  or
underlying debt securities.

The  writing of a call option on a futures  contract  may  constitute  a partial
hedge against declining prices of the underlying  portfolio securities which are
the  same  as or  correlate  with  the  security  or  foreign  currency  that is
deliverable  upon  exercise of the  futures  contract.  If the futures  price at
expiration  of the option is below the price  specified in the premium  received
for writing the option ("exercise price"),  the Fund will retain the full amount
of the net  premium  (the  premium  received  for  writing  the option  less any
commission),  which  provides a partial  hedge against any decline that may have
occurred in the Fund's holdings.

The  writing of a put  option on an index  futures  contract  may  constitute  a
partial hedge against increasing prices of the underlying  securities or foreign
currency  that are  deliverable  upon exercise of the futures  contract.  If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full  amount of the option net  premium,  which  provides a
partial  hedge  against  any  increase  in the price of  securities  that a Fund
intends to purchase.

If a put or call option the Fund has written is exercised, the Fund will incur a
loss  that  will be  reduced  by the  amount  of the net  premium  it  receives.
Depending  on the  degree of  correlation  between  changes  in the value of its
portfolio  securities  and  changes in the value of its futures  positions,  the
Fund's losses from existing  options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.

The  purchase of a call or put option on a futures  contract  with respect to an
index is similar in some  respects to the purchase of a call or  protective  put
option on an index. For example,  the Fund may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk the Fund  assumes  when it  purchases  an option on a futures
contract  with  respect  to an index is the  premium  paid for the  option  plus
related transaction costs. In addition to the correlation risks discussed above,
the  purchase of such an option also  entails the risk that changes in the value
of the underlying  futures  contract will not be fully reflected in the value of
the option purchased.


Swaps, Caps, Floors and Collars. 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.

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


                                       15
<PAGE>

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.

Credit  Default  Swap  Transactions.  The Fund may invest up to 25% of its total
assets in credit default swaps (based on the notional amount).  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 assets may be invested in credit  default
swaps for purposes of buying  credit  protection.  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.IG.  By investing 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
IG is a  tradable  basket  of 125  credit  default  swaps  on  investment  grade
corporate  credits  which seeks to  replicate  the  returns of a corporate  bond
index. By purchasing  interests in CDX IG, the Fund is gaining  corporate credit
exposure through a single investment. Unlike other types of credit default swaps
which are generally  considered  illiquid,  interests in tradable credit default
swap baskets  generally can be sold within seven days and are not subject to the
Fund's restrictions on investing in illiquid securities.

The Fund can  purchase or sell a credit  default  swap  basket.  In the event of
purchase (long), the Fund will benefit from income received as well as potential
price  appreciation  in the event of tightening  credit spreads.  However,  in a
widening  credit spread  environment,  the value of the long holding will likely
decrease,  which could negatively impact the performance of the Fund. Conversely
in the event of a sell  (short),  the Fund must pay out the coupon on the credit
default swap basket,  which has the effect of reducing the Fund's income.  Also,
in a positive  credit spread  environment,  a short position in a credit default
swap basket would fall in value,  negatively  impacting Fund  performance.  In a
widening credit spread environment, however, the short holding would likely rise
in value, positively impacting Fund performance.

                                       16
<PAGE>

Forward  Currency  Exchange   Contracts.   Forward  currency  contracts  may  be
considered  derivative  instruments.  The Fund may  exchange  currencies  in the
normal course of managing its  investments in foreign  securities  (for example,
the Fund may buy and sell securities denominated in currencies other than the US
dollar and receive  interest,  dividends and sale  proceeds in currencies  other
than the US dollar) and may incur  costs in doing so because a foreign  exchange
dealer will charge a fee for conversion.  The Fund may conduct foreign  currency
exchange  transactions  on  a  "spot"  basis  (i.e.,  for  prompt  delivery  and
settlement)  at the prevailing  spot rate for purchasing or selling  currency in
the  foreign  currency  exchange  market.  The Fund also may enter into  forward
foreign currency  exchange  contracts  ("forward  currency  contracts") or other
contracts to purchase and sell  currencies  for  settlement  at a future date. A
foreign  exchange  dealer,  in that  situation,  will expect to realize a profit
based on the difference between the price at which a foreign currency is sold to
the Fund and the price at which  the  dealer  will  cover  the  purchase  in the
foreign  currency  market.  Foreign  exchange  transactions  are entered into at
prices  quoted by dealers,  which may include a mark-up  over the price that the
dealer must pay for the currency.

A forward  currency  contract  involves  an  obligation  to  purchase  or sell 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.  These contracts are traded in the interbank  market  conducted
directly between  currency  traders  (usually large commercial  banks) and their
customers.  A forward  contract  generally  has no deposit  requirement,  and no
commissions are generally charged at any stage for trades,  but currency dealers
seek to obtain a "spread" or profit on each  transaction.  At the  maturity of a
forward  contract,  the Fund may either  accept or make delivery of the currency
specified  in the  contract  or, at or prior to  maturity,  enter into a closing
purchase transaction involving the purchase or sale of an offsetting contract.

For the  purposes  of  hedging,  when the Fund  enters  into a contract  for the
purchase or sale of a security  denominated in a foreign  currency,  or when the
Fund  anticipates  the  receipt in a foreign  currency  of  dividend or interest
payments on such a security which it holds, the Fund may desire to "lock in" the
US dollar price of the security or the US dollar  equivalent of such dividend or
interest  payment,  as the case may be. By entering into a forward  contract for
the purchase or sale, for a fixed amount of US dollars, of the amount of foreign
currency  involved  in the  underlying  transactions,  the Fund will  attempt to
protect  itself  against an adverse  change in the  relationship  between the US
dollar and the subject  foreign  currency  during the period between the date on
which the security is  purchased  or sold,  or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.

Additionally,  when the  Advisor  believes  that the  currency  of a  particular
foreign country may suffer a substantial  decline against the US dollar,  it may
cause the Fund to enter into a forward  contract to sell,  for a fixed amount of
US dollars,  the amount of foreign currency  approximating  the value of some or
all of the Fund's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the securities
involved  will not  generally  be  possible  because  the  future  value of such
securities  in  foreign  currencies  will  change  as a  consequence  of  market
movements  in the  value  of those  securities  between  the  date on which  the
contract is entered into and the date it matures.

Using  forward  currency  contracts  in an attempt  to protect  the value of the
Fund's  portfolio  securities  against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. It simply
establishes  a rate of exchange  which the Fund can achieve at some future point
in time. The precise  projection of short-term  currency market movements is not
possible,  and short-term hedging provides a means of fixing the dollar value of
only a portion of the Fund's foreign assets.

The Fund or the Fund's  custodian  will place cash or liquid  securities  into a
segregated  account  of the Fund in an amount  equal to the value of the  Fund's
total  assets  committed  to the  consummation  of  forward  currency  contracts
requiring  the  Fund  to  purchase  foreign  currencies.  If  the  value  of the
securities placed in the segregated account declines,  additional cash or liquid
securities  will be placed in the  account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.  The segregated  account will be  marked-to-market  on a daily basis.
Although forward currency contracts are not presently regulated by the CFTC, the
CFTC may in the future assert  authority to regulate  these  contracts.  In such
event,  the  Fund's  ability  to  utilize  forward  currency  contracts  may  be
restricted.  In addition, a particular forward currency contract and assets used
to cover such contract may be illiquid.

                                       17
<PAGE>

The Fund generally will not enter into a forward  currency  contract with a term
of  greater  than one  year.  The  forecasting  of  short-term  currency  market
movements is extremely  difficult and there can be no assurance that  short-term
hedging strategies will be successful.

While the Fund may benefit from currency transactions,  unanticipated changes in
currency prices may result in a poorer overall  performance for the Fund than if
it had not  engaged  in any  such  transactions.  For  example,  if the  Advisor
increases the Fund's exposure to a foreign  currency,  and that currency's value
subsequently  falls, the Advisor's  currency  management may result in increased
losses to the Fund.  If the  Advisor  hedges  the Fund's  exposure  to a foreign
currency, and that currency's value rises, the Fund will lose the opportunity to
participate in the currency's appreciation.  Moreover, there may be an imperfect
correlation between the Fund's portfolio holdings of securities denominated in a
particular  currency  and  forward  contracts  entered  into by the  Fund.  Such
imperfect  correlation  may cause the Fund to sustain  losses which will prevent
the Fund from  achieving a complete  hedge or expose the Fund to risk of foreign
currency exchange loss. In connection with the global asset allocation strategy,
the Fund may use forward currency  transactions to add to investment returns and
generally not for hedging purposes.

Securities of Foreign Issuers

Foreign Securities.  Subject to its investment objective and policies,  the Fund
may invest in  securities of foreign  issuers and  supranational  entities.  The
non-US  investments  of the Fund may be  denominated  in any  currency.  Foreign
securities  may offer  investment  opportunities  not  available  in the  United
States,  but such  investments  also  involve  significant  risks not  typically
associated  with investing in domestic  securities.  In many foreign  countries,
there is less publicly available information about foreign issuers, and there is
less government  regulation and supervision of foreign stock exchanges,  brokers
and listed companies. Also, in many foreign countries, companies are not subject
to uniform accounting, auditing, and financial reporting standards comparable to
those  applicable to domestic  issuers.  Security  trading  practices differ and
there may be difficulty  in enforcing  legal rights  outside the United  States.
Settlement of transactions in some foreign markets may be delayed or may be less
frequent  than in the United  States,  which could  affect the  liquidity of the
Fund's  portfolio.  Additionally,  in  some  foreign  countries,  there  is  the
possibility  of  expropriation  or  confiscatory  taxation,  limitations  on the
removal of  securities,  property,  or other Fund  assets,  political  or social
instability or diplomatic developments which could affect investments in foreign
securities.

If the Advisor  increases the Fund's  exposure to a foreign  currency,  and that
currency's  value  subsequently  falls,  the Advisor's  currency  management may
result in  increased  losses to the  Fund.  If the  Advisor  hedges  the  Fund's
exposure to a foreign  currency,  and that currency's value rises, the Fund will
lose the opportunity to participate in the currency's appreciation.

Foreign Government  Securities.  The foreign government  securities in which the
Fund may invest generally  consist of debt  obligations  issued or guaranteed by
national, state or provincial governments or similar political subdivisions. The
Fund may  invest  in  foreign  government  securities  in the  form of  American
Depository Receipts.  Foreign government securities also include debt securities
of supranational entities. Quasi-governmental and supranational entities include
international  organizations designated or supported by governmental entities to
promote  economic   reconstruction  or  development  and  international  banking
institutions and related government agencies. Examples include the International
Bank for  Reconstruction  and  Development  (the  "World  Bank"),  the  Japanese
Development Bank, the Asian  Development Bank and the InterAmerican  Development
Bank. Foreign  government  securities also include  mortgage-related  securities
issued  or   guaranteed   by   national,   state  or   provincial   governmental
instrumentalities, including quasi-governmental agencies.

Currency  Management  Techniques.  The instruments  involved in currency-related
transactions may be considered  derivative  instruments.  In connection with its
investments  in foreign  securities,  the Fund may enter  into  currency-related
transactions to attempt to protect against an anticipated  rise in the US dollar
price of securities that it intends to purchase. In addition, the Fund may enter
into currency-related  transactions to attempt to protect against the decline in
value of its foreign currency denominated or quoted portfolio  securities,  or a
decline in the value of anticipated  dividends or interest from such securities,
due to a decline in the value of the foreign currency against the US dollar.  In
addition  to  protecting  the Fund from  currency  movements,  the Fund will use
currency  management


                                       18
<PAGE>

techniques to add to investment  returns and generally not for hedging  purposes
when it  employs  the global  asset  allocation  strategy.  The  forecasting  of
currency market  movements is extremely  difficult and there can be no assurance
that currency strategies will be successful.  If the Advisor is incorrect in its
forecast, currency strategies may result in investment performance worse than if
the  strategies  were  not  attempted.   In  addition,   forward  contracts  and
over-the-counter  currency  options may be illiquid  and are subject to the risk
that the  counterparty  will default on its obligations.  See "Forward  Currency
Exchange Contracts" above.

Other Investments, Strategies and Techniques

Repurchase  Agreements.  The Fund may enter  into  repurchase  agreements.  In a
repurchase  agreement,  the  Fund  buys a  security  subject  to the  right  and
obligation  to sell it back to the other  party at the same price  plus  accrued
interest.  The Fund's  custodian  will hold the security as  collateral  for the
repurchase agreement. Collateral must be maintained at a value at least equal to
102% of the repurchase price, but repurchase agreements involve some credit risk
to the  Fund if the  other  party  defaults  on its  obligation  and the Fund is
delayed in or prevented from  liquidating  the  collateral.  The Fund will enter
into repurchase  agreements only with financial  institutions  deemed to present
minimal risk of bankruptcy  during the term of the agreement based on guidelines
established and periodically reviewed by the Trust's Board of Trustees.

For purposes of the Investment  Company Act of 1940, as amended (the "1940 Act")
and, generally,  for tax purposes,  a repurchase agreement is considered to be a
loan from the Fund to the seller of the obligation.  For other  purposes,  it is
not clear  whether a court would  consider  such an obligation 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 its  repurchase,  under the  repurchase
agreement,  the Fund may  encounter  delay and incur costs  before being able to
sell the  security.  Such  delays may result in a 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 treated as an
unsecured  creditor of the seller and required to return the  obligation  to the
seller's estate. 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 instrument  purchased for the Fund, the Advisor seeks to minimize
the risk of loss from repurchase agreements by analyzing the creditworthiness of
the obligor, in this case, the seller of the obligation. In addition to the risk
of bankruptcy or insolvency  proceedings,  there is the risk that the seller may
fail to repurchase the security.  However, if the market value of the obligation
falls below an amount equal to 102% of the repurchase price  (including  accrued
interest),  the seller of the obligation will be required to deliver  additional
securities so that the market value of all securities  subject to the repurchase
agreement equals or exceeds the repurchase price.

Reverse  Repurchase  Agreements.  The Fund may  borrow  funds for  temporary  or
emergency purposes, such as meeting larger than anticipated redemption requests,
and  not for  leverage,  by  among  other  things,  agreeing  to sell  portfolio
securities to financial institutions such as member banks of the Federal Reserve
System and certain  non-bank dealers and to repurchase them at a mutually agreed
date and price (a "reverse repurchase  agreement").  At the time the Fund enters
into a reverse repurchase  agreement it will segregate cash or liquid securities
having a value equal to the repurchase price,  including  accrued interest.  The
segregated assets will be  marked-to-market  daily and additional assets will be
segregated on any day in which the assets fall below the repurchase  price (plus
accrued  interest).  The Fund's liquidity and ability to manage its assets might
be  affected  when it sets  aside  cash or  portfolio  securities  to cover such
commitments.  Reverse  repurchase  agreements  involve  the risk that the market
value of the securities sold by the Fund may decline below the repurchase  price
of those  securities.  In the  event  the  buyer of  securities  under a reverse
repurchase  agreement files for bankruptcy or becomes  insolvent,  such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's  obligation to repurchase the securities,  and the Fund's use
of  the  proceeds  of  the  reverse  repurchase  agreement  may  effectively  be
restricted pending such decision.  Reverse repurchase  agreements are considered
to be borrowings by the Fund.

TBA Purchase  Commitments.  The Fund may enter into TBA purchase  commitments to
purchase  securities  for a fixed price at a future date up to 20% of total Fund
assets. TBA purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the  security  to be  purchased  declines
prior to  settlement  date,


                                       19
<PAGE>

which  risk is in  addition  to the risk of  decline  in the value of the Fund's
other  assets.  Unsettled  TBA  purchase  commitments  are valued at the current
market value of the underlying securities.

"When-Issued" Purchases and Forward Commitments (Delayed Delivery). The Fund may
purchase  securities on a when-issued,  delayed  delivery or forward  commitment
basis.  When these  transactions are negotiated,  the price of the securities is
fixed at the time of the commitment,  but delivery and payment may take place up
to 90 days after the date of the  commitment to purchase for equity  securities,
and up to 45 days  after  such date for  fixed  income  securities.  When-issued
securities  or  forward  commitments  involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date.

These  transactions,  which involve a commitment by the Fund to purchase or sell
particular  securities  with payment and delivery  taking place at a future date
(perhaps one or two months  later),  permit the Fund to lock in a price or yield
on a security,  regardless of future  changes in interest  rates.  The Fund will
purchase securities on a "when-issued" or forward commitment basis only with the
intention of completing the transaction and actually  purchasing the securities.
If deemed  appropriate  by the  Advisor,  however,  the Fund may  dispose  of or
renegotiate a commitment  after it is entered into,  and may sell  securities it
has committed to purchase  before those  securities are delivered to the Fund on
the  settlement  date.  In these cases the Fund may realize a gain or loss,  and
distributions attributable to any such gain would be taxable to shareholders.

When the Fund  agrees to  purchase  securities  on a  "when-issued"  or  forward
commitment  basis, the Fund's custodian will set aside cash or liquid securities
equal to the amount of the  commitment  in a  separate  account.  Normally,  the
custodian will set aside portfolio  securities to satisfy a purchase commitment,
and in such a case the Fund may be  required  subsequently  to place  additional
assets in the separate  account in order to ensure that the value of the account
remains equal to the amount of the Fund's  commitments.  The market value of the
Fund's net assets  will  generally  fluctuate  to a greater  degree when it sets
aside portfolio  securities to cover such purchase commitments than when it sets
aside cash.  Because the Fund's  liquidity  and ability to manage its  portfolio
might be affected when it sets aside cash or portfolio  securities to cover such
purchase  commitments,  the  Fund  expects  that  its  commitments  to  purchase
when-issued  securities and forward  commitments  will not exceed 33 1/3% of the
value of its total assets.  When the Fund engages in  "when-issued"  and forward
commitment  transactions,  it relies on the other  party to the  transaction  to
consummate  the  trade.  Failure  of such  party to do so may result in the Fund
incurring a loss or missing an  opportunity  to obtain a price  considered to be
advantageous.

The market  value of the  securities  underlying a  "when-issued"  purchase or a
forward commitment to purchase  securities,  and any subsequent  fluctuations in
their market value,  are taken into account when determining the market value of
the Fund  starting on the day the Fund agrees to purchase  the  securities.  The
Fund does not earn  interest or dividends on the  securities it has committed to
purchase until the settlement date.

Borrowing.  The Fund may not borrow  money,  except as permitted  under the 1940
Act, and as interpreted or modified by regulatory authority having jurisdiction,
from  time to  time.  Under  the 1940  Act,  the Fund is  required  to  maintain
continuous  asset  coverage of 300% with respect to such  borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market  fluctuations or otherwise,  even
if such  liquidation  of the  Fund's  holdings  may be  disadvantageous  from an
investment standpoint.

Lending Portfolio Securities. The Fund may lend portfolio securities to brokers,
dealers and other financial organizations.  These loans, if and when made by the
Fund, may not exceed 33 1/3% of the value of the Fund's total assets. The Fund's
loans of securities  will be  collateralized  by cash,  cash  equivalents  or US
Government securities. The cash or instruments  collateralizing the Fund's loans
of securities  will be maintained at all times in a segregated  account with the
Fund's custodian, in an amount at least equal to the current market value of the
loaned  securities.  From time to time,  the Fund may pay a part of the interest
earned from the investment of collateral  received for securities  loaned to the
borrower and/or a third party that is  unaffiliated  with the Fund and is acting
as a "placing  broker." No fee will be paid to  affiliated  persons of the Fund.
The Board of Trustees will make a determination that the fee paid to the placing
broker is reasonable.

                                       20
<PAGE>

By lending portfolio securities,  the Fund can increase its income by continuing
to receive  amounts equal to the interest or dividends on the loaned  securities
as well as by either investing the cash collateral in short-term  instruments or
obtaining  yield in the form of interest paid by the borrower when US Government
securities  are used as  collateral.  The Fund will  comply  with the  following
conditions whenever it loans securities: (i) the Fund must receive at least 100%
cash collateral or equivalent  securities  from the borrower;  (ii) the borrower
must increase the collateral  whenever the market value of the securities loaned
rises  above  the  level  of the  collateral;  (iii)  the  Fund  must be able to
terminate the loan at any time; (iv) the Fund must receive  reasonable  interest
on the  loan,  as well as  amounts  equal to the  dividends,  interest  or other
distributions  on the loaned  securities,  and any increase in market value; (v)
the Fund may pay only reasonable custodian fees in connection with the loan; and
(vi) voting  rights on the loaned  securities  may pass to the  borrower  except
that,  if a material  event will occur  affecting  the  investment in the loaned
securities,  the Fund must  terminate the loan in time to vote the securities on
such event.


Diversification.  The  Fund is  "diversified"  under  the  1940  Act and is also
subject to issuer  diversification  requirements imposed on regulated investment
companies by  Subchapter M of the US Internal  Revenue Code of 1986,  as amended
(the "Code"). See "Investment Restrictions" above and "Taxes" below.


Concentration of Investments.  As a matter of fundamental  policy,  the Fund may
not 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.

Mortgage Dollar Rolls.  The Fund may enter into mortgage "dollar rolls" in which
the Fund sells  securities for delivery in the current month and  simultaneously
contracts to repurchase  substantially  similar (same type, coupon and maturity)
securities on a specified future date up to 20% of total Fund assets. During the
roll period, the Fund forgoes principal and interest paid on the securities. The
Fund is compensated  by the  difference  between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop") or
fee income and by the interest  earned on the cash proceeds of the initial sale.
A  "covered  roll" is a  specific  type of  dollar  roll for  which  there is an
offsetting cash position or a cash equivalent security position which matures on
or before the forward  settlement date of the dollar roll transaction.  The Fund
may enter into both covered and uncovered rolls.

Illiquid Securities.  Historically, illiquid securities have included securities
subject to  contractual  or legal  restrictions  on resale because they have not
been  registered  under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase  agreements
having a maturity  of longer  than seven  days.  Securities  which have not been
registered  under  the  1933  Act  are  referred  to as  private  placements  or
restricted  securities  and are  purchased  directly  from the  issuer or in the
secondary  market.   Non-publicly   traded   securities   (including  Rule  144A
Securities)  may involve a high degree of business  and  financial  risk and may
result in substantial losses.  These securities may be less liquid than publicly
traded  securities,  and it may take longer to liquidate  these  positions  than
would be the case for publicly traded securities. Companies whose securities are
not  publicly  traded may not be subject to the  disclosure  and other  investor
protection  requirements  applicable to companies whose  securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability of
portfolio  securities and a mutual fund might be unable to dispose of restricted
or other illiquid  securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days. An investment in
illiquid  securities  is subject to the risk that should the Fund desire to sell
any of these  securities  when a ready buyer is not available at a price that is
deemed to be  representative  of their value, the value of the Fund's net assets
could be adversely affected.

Mutual funds do not typically hold a significant  amount of these  restricted or
other  illiquid  securities  because of the  potential  for delays on resale and
uncertainty  in  valuation.  A mutual  fund  might  also have to  register  such
restricted  securities  in order to dispose  of them,  resulting  in  additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large  institutional  market has developed for certain securities that are not
registered  under  the 1933 Act,  including  repurchase  agreements,  commercial
paper,  non-US securities,  municipal  securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment.  The fact that there are contractual or legal


                                       21
<PAGE>

restrictions  on resale of such  investments to the general public or to certain
institutions may not be indicative of their liquidity.


The SEC has adopted  Rule 144A,  which  allows a broader  institutional  trading
market for  securities  otherwise  subject to restriction on their resale to the
general  public.  Rule 144A  establishes a "safe  harbor" from the  registration
requirements  of the 1933 Act for  resales of certain  securities  to  qualified
institutional  buyers.  The  Advisor  anticipates  that the market  for  certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and the development of automated  systems for the
trading,  clearance and  settlement of  unregistered  securities of domestic and
non-US issuers,  such as the PORTAL System  sponsored by the Financial  Industry
Regulatory Authority ("FINRA").


An investment in Rule 144A Securities will be considered  illiquid and therefore
subject to the Fund's  limit on the purchase of illiquid  securities  unless the
Board or its delegates  determines that the Rule 144A Securities are liquid.  In
reaching liquidity  decisions,  the Board and its delegates may consider,  inter
alia, the following factors:  (i) the unregistered nature of the security;  (ii)
the frequency of trades and quotes for the security; (iii) the number of dealers
wishing to  purchase  or sell the  security  and the  number of other  potential
purchasers;  (iv) dealer undertakings to make a market in the security;  and (v)
the nature of the security and the nature of the marketplace  trades (e.g.,  the
time needed to dispose of the security,  the method of soliciting offers and the
mechanics of the transfer).

Investing in Rule 144A Securities  could have the effect of increasing the level
of illiquidity in the Fund to the extent that qualified institutional buyers are
unavailable or  uninterested  in purchasing  such  securities from the Fund. The
Board has adopted  guidelines and delegated to the Advisor the daily function of
determining and monitoring the liquidity of Rule 144A  Securities,  although the
Board will retain ultimate responsibility for any liquidity determinations.

Other  Investment  Companies.  The Fund may invest in the aggregate no more than
10% of its total assets,  calculated at the time of purchase,  in the securities
of other  US-registered  investment  companies.  In  addition,  the Fund may not
invest  more  than 5% of its  total  assets  in the  securities  of any one such
investment company or acquire more than 3% of the voting securities of any other
such investment  company.  The Fund will indirectly bear its proportionate share
of any  management  or  other  fees  paid by  investment  companies  in which it
invests, in addition to its own fees.

Temporary Defensive Investments. For temporary defensive purposes during periods
when the Advisor determines that conditions  warrant,  the Fund may invest up to
100% of its assets in cash and money market  instruments,  including  securities
issued or guaranteed by the US  Government,  its agencies or  instrumentalities;
certificates of deposit, time deposits, and bankers' acceptances issued by banks
or savings and loans associations  having net assets of at least $500 million as
of the end of their most recent fiscal year;  commercial paper rated at the time
of  purchase  at least A-1 by  Standard & Poor's or P-1 by  Moody's,  or unrated
commercial  paper  determined  by  the  Advisor  to  be of  comparable  quality;
repurchase  agreements  involving  any  of the  foregoing;  and,  to the  extent
permitted by applicable  law,  shares of other  investment  companies  investing
solely in money market instruments.

Commercial  Paper.  Commercial  paper  is  a  short-term,  unsecured  negotiable
promissory  note of a US or  non-US  issuer.  The Fund may  purchase  commercial
paper.  The Fund may also invest in  variable  rate  master  demand  notes which
typically are issued by large corporate borrowers and which provide for variable
amounts of principal indebtedness and periodic adjustments in the interest rate.
Demand notes are direct lending arrangements between the Fund and an issuer, and
are not normally traded in a secondary  market.  The Fund,  however,  may demand
payment of principal and accrued interest at any time. In addition, while demand
notes  generally are not rated,  their issuers must satisfy the same criteria as
those that apply to issuers of commercial  paper.  The Advisor will consider the
earning power,  cash flow and other liquidity  ratios of issuers of demand notes
and continually will monitor their financial  ability to meet payment on demand.
See also "Fixed Income Securities -- Variable and Floating Rate Instruments."

Bank Obligations. The Fund's investments in money market instruments may include
certificates of deposit, time deposits and bankers' acceptances. Certificates of
Deposit ("CDs") are short-term negotiable  obligations of commercial banks. Time
Deposits ("TDs") are non-negotiable  deposits maintained in banking institutions
for


                                       22
<PAGE>

specified  periods of time at stated  interest rates.  Bankers'  acceptances are
time drafts drawn on commercial  banks by borrowers  usually in connection  with
international transactions.

US commercial  banks  organized under federal law are supervised and examined by
the  Comptroller  of the  Currency and are required to be members of the Federal
Reserve System and to be insured by the Federal  Deposit  Insurance  Corporation
(the "FDIC").  US banks organized under state law are supervised and examined by
state banking  authorities but are members of the Federal Reserve System only if
they elect to join.  Most state  banks are  insured by the FDIC  (although  such
insurance  may not be of  material  benefit  to the  Fund,  depending  upon  the
principal  amount  of CDs of each bank  held by the  Fund)  and are  subject  to
federal examination and to a substantial body of federal law and regulation.  As
a result of  governmental  regulations,  US  branches  of US banks,  among other
things, generally are required to maintain specified levels of reserves, and are
subject to other  supervision  and  regulation  designed  to  promote  financial
soundness.  US savings and loan associations,  the CDs of which may be purchased
by the Fund,  are  supervised and subject to examination by the Office of Thrift
Supervision.  US  savings  and loan  associations  are  insured  by the  Savings
Association  Insurance Fund which is  administered by the FDIC and backed by the
full faith and credit of the US Government.

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 and Cash  Management  QP Trust,  or entities for the which the Advisor may
act as investment  advisor now or in the future that operate as cash  management
investment  vehicles but 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 comply with Rule
2a-7 under the 1940 Act and will be in  accordance  with the  Fund's  investment
policies and restrictions.

Asset Coverage. The Fund will comply with the segregation or coverage guidelines
established by the SEC and other  applicable  regulatory  bodies with respect to
certain  transactions,  including  (but  not  limited  to)  options  written  on
securities  and indexes;  currency,  interest  rate and security  index  futures
contracts  and  options  on  these  futures  contracts;   and  forward  currency
contracts.  These guidelines may, in certain instances,  require  segregation by
the Fund of cash or liquid securities to the extent the Fund's  obligations with
respect to these strategies are not otherwise  covered through  ownership of the
underlying security or financial instrument,  by other portfolio positions or by
other  means  consistent  with  applicable   regulatory  policies.   Unless  the
transaction is covered,  the segregated assets must at all times equal or exceed
the Fund's  obligations  with  respect to these  strategies.  Segregated  assets
cannot be sold or transferred  unless equivalent assets are substituted in their
place or it is no longer  necessary to segregate  them. As a result,  there is a
possibility  that  segregation of a large  percentage of the Fund's assets could
impede the Advisor or the Fund's  ability to meet  redemption  requests or other
current obligations.

For example,  a call option  written on securities  may require the Fund to hold
the  securities  subject  to  the  call  (or  securities  convertible  into  the
securities  without  additional   consideration)  or  to  segregate  assets  (as
described  above)  sufficient to purchase and deliver the securities if the call
is  exercised.  A call  option  written on an index may  require the Fund to own
portfolio  securities  that correlate with the index or to segregate  assets (as
described  above) equal to the excess of the index value over the exercise price
on a current  basis.  A put option  written by the Fund may  require the Fund to
segregate  assets (as  described  above) equal to the exercise  price.  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. If the Fund holds
a futures  contract,  the Fund could  purchase a put option on the same  futures
contract  with a strike  price as high or higher than the price of the  contract
held. The Fund may enter into fully or partially offsetting transactions so that
its net  position,  coupled with any  segregated  assets (equal to any remaining
obligation),  equals its net obligation. Asset coverage may be achieved by other
means when consistent with applicable regulatory policies.

The  use  of  options,  futures  and  foreign  currency  contracts  is a  highly
specialized  activity  which involves  investment  techniques and risks that are
different from those associated with ordinary portfolio transactions.  Gains and
losses on


                                       23
<PAGE>

investments  in options and futures  depend on the Advisor's  ability to predict
the direction of interest rates,  currency movements and other economic factors.
The loss that may be incurred by the Fund in entering into futures contracts and
written options thereon and forward currency contracts is potentially unlimited.
There is no assurance  that higher than  anticipated  trading  activity or other
unforeseen events might not, at times,  render certain  facilities of an options
clearing  entity  or  other  entity  performing  the  regulatory  and  liquidity
functions of an options  clearing entity  inadequate,  and thereby result in the
institution  by an exchange of special  procedures  which may interfere with the
timely execution of customers'  orders.  Most futures exchanges limit the amount
of fluctuation  permitted in a futures contract's prices during a single trading
day. Once the limit has been reached no further trades may be made that day at a
price beyond the limit. The price limit will not limit potential losses, and may
in  fact  prevent  the  prompt  liquidation  of  futures  positions,  ultimately
resulting in further  losses.  Options and futures  traded on foreign  exchanges
generally are not regulated by US authorities,  and may offer less liquidity and
less  protection  to the Fund in the event of default by the other  party to the
contract.

Except as set forth above under  "Derivative  Securities:  Futures Contracts and
Options on Futures  Contracts" (and the  sub-sections  thereunder),  there is no
limit on the  percentage  of the  assets  of the Fund  that may be at risk  with
respect to futures contracts and related options or forward currency  contracts.
The  Fund  may not  invest  more  than  15% of its  total  assets  in  purchased
protective put options.  The Fund's  transactions in options,  forward  currency
contracts,  futures contracts and options on futures contracts may be limited by
the requirements for qualification of the Fund as a regulated investment company
for tax purposes. See "Federal Income Taxes." There can be no assurance that the
use of these portfolio strategies will be successful.


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 the 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.


The  following  is a chart of the various  types of  securities  and  investment
strategies  employed by the Fund.  Unless otherwise  indicated,  the Fund is not
obligated to pursue any of the following  strategies and does not represent that
these  techniques  are  available  now or will be  available  at any time in the
future.  If the Fund's investment in a particular type of security is limited to
a certain percentage of the Fund's assets, that percentage  limitation is listed
in the chart.  Following the chart,  there is a description  of how each type of
security  and  investment  strategy  may be used by the  Fund.  As a  matter  of
non-fundamental  operating  policy,  the  Fund  may  be  subject  to  additional
restrictions. See the section entitled "Investment Restrictions."

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE
========================================================================================= ==========================


KEY TO TABLE:

+        Permitted without limit

o        Permitted without limit, but not expected to be used to a significant extent

X        Not permitted

20% Italic type (e.g.  20%)  represents  an  investment  limitation  as a percentage  of net fund assets;  does not
indicate actual use
20% Roman type (e.g.  20%)  represents  an investment  limitation  as a percentage  of total fund assets;  does not
indicate actual use
====================================================================================================================
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>
Preferred Stock                                                                                       o
--------------------------------------------------------------------------------------------------------------------


                                       24
<PAGE>
--------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE
========================================================================================= ==========================


KEY TO TABLE:

+        Permitted without limit

o        Permitted without limit, but not expected to be used to a significant extent

X        Not permitted

20% Italic type (e.g.  20%)  represents  an  investment  limitation  as a percentage  of net fund assets;  does not
indicate actual use
20% Roman type (e.g.  20%)  represents  an investment  limitation  as a percentage  of total fund assets;  does not
indicate actual use
====================================================================================================================
Convertible Securities                                                                                o
--------------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
--------------------------------------------------------------------------------------------------------------------
Inflation-Indexed Bonds                                                                               +
--------------------------------------------------------------------------------------------------------------------
Short-Term Instruments                                                                                +
--------------------------------------------------------------------------------------------------------------------
Corporate Bonds                                                                                       +
--------------------------------------------------------------------------------------------------------------------
Obligations of Banks and Other Financial Institutions                                                 +
--------------------------------------------------------------------------------------------------------------------
Certificates of Deposit and Banker's Acceptances                                                      +
--------------------------------------------------------------------------------------------------------------------
Commercial Paper                                                                                      +
--------------------------------------------------------------------------------------------------------------------
Repurchase Agreements                                                                                 +
--------------------------------------------------------------------------------------------------------------------
Variable Rate Master Demand Notes                                                                     o
--------------------------------------------------------------------------------------------------------------------
US Government Securities                                                                              +
--------------------------------------------------------------------------------------------------------------------
Custodial Receipts                                                                                    o
--------------------------------------------------------------------------------------------------------------------
Zero Coupon Securities and Deferred Interest Bonds                                                    +
--------------------------------------------------------------------------------------------------------------------
Variable Rate Securities                                                                              +
--------------------------------------------------------------------------------------------------------------------
Inverse Floating Rate Securities                                                                      o
--------------------------------------------------------------------------------------------------------------------
Lower-Rated Debt Securities                                                                           +
--------------------------------------------------------------------------------------------------------------------
Put Bonds                                                                                             +
--------------------------------------------------------------------------------------------------------------------
Bank Loans                                                                                            o
--------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (OPTIONS)
--------------------------------------------------------------------------------------------------------------------
Options on Securities                                                                                 +
--------------------------------------------------------------------------------------------------------------------
Options on Securities Indices                                                                         +
--------------------------------------------------------------------------------------------------------------------
Options on Non-US Securities Indices                                                                  +
--------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
--------------------------------------------------------------------------------------------------------------------
Futures Contracts                                                                                     +
--------------------------------------------------------------------------------------------------------------------
Futures Contracts on Securities Indices                                                               +
--------------------------------------------------------------------------------------------------------------------
Options on Futures Contracts (including Contracts on Securities Indices)                              +
--------------------------------------------------------------------------------------------------------------------
DERIVATIVE SECURITIES
--------------------------------------------------------------------------------------------------------------------

Credit Default Swap Agreements                                                                       25%
--------------------------------------------------------------------------------------------------------------------
Other Swap Agreements                                                                                 +

--------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
--------------------------------------------------------------------------------------------------------------------
Government Guaranteed Mortgage-Backed Securities                                                     20%
--------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Certificates                                                20%
--------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association Certificates                                                   20%
--------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation Certificates                                                  20%
--------------------------------------------------------------------------------------------------------------------
Multi-Class Mortgage-Backed Securities (CMOs and REMICs)                                             20%
--------------------------------------------------------------------------------------------------------------------
Private Issued Mortgage-Backed Securities                                                            20%
--------------------------------------------------------------------------------------------------------------------
Asset-Backed Securities                                                                              20%
--------------------------------------------------------------------------------------------------------------------
SECURITIES OF NON-US ISSUERS
--------------------------------------------------------------------------------------------------------------------
Foreign Corporate Debt Securities                                                                    20%
--------------------------------------------------------------------------------------------------------------------

                                       25
<PAGE>
--------------------------------------------------------------------------------------------------------------------
INVESTMENT PRACTICE
========================================================================================= ==========================


KEY TO TABLE:

+        Permitted without limit

o        Permitted without limit, but not expected to be used to a significant extent

X        Not permitted

20% Italic type (e.g.  20%)  represents  an  investment  limitation  as a percentage  of net fund assets;  does not
indicate actual use
20% Roman type (e.g.  20%)  represents  an investment  limitation  as a percentage  of total fund assets;  does not
indicate actual use
====================================================================================================================
Foreign Government Debt Securities                                                                    +
--------------------------------------------------------------------------------------------------------------------
Investments in Emerging Markets                                                                       +
--------------------------------------------------------------------------------------------------------------------
CURRENCY MANAGEMENT
--------------------------------------------------------------------------------------------------------------------
Currency Exchange Transactions                                                                        +
--------------------------------------------------------------------------------------------------------------------
Currency Hedging Transactions                                                                         +
--------------------------------------------------------------------------------------------------------------------
Forward Currency Exchange Contracts                                                                   +
--------------------------------------------------------------------------------------------------------------------
Options on Foreign Currencies                                                                         +
--------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS AND INVESTMENT PRACTICES
--------------------------------------------------------------------------------------------------------------------
Illiquid Securities                                                                                  15%
--------------------------------------------------------------------------------------------------------------------
When-Issued and Delayed Delivery Securities                                                           +
--------------------------------------------------------------------------------------------------------------------
TBA Purchase Commitments                                                                             20%
--------------------------------------------------------------------------------------------------------------------
Mortgage Dollar Rolls                                                                                20%
--------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities                                                                    33 1/3%
--------------------------------------------------------------------------------------------------------------------
Borrowing (including reverse repurchase agreements)                                                   o
--------------------------------------------------------------------------------------------------------------------
Short Sales                                                                                           o
--------------------------------------------------------------------------------------------------------------------
Other Investment Companies                                                                           10%
--------------------------------------------------------------------------------------------------------------------
Temporary Defensive Investments                                                                       +
--------------------------------------------------------------------------------------------------------------------
</TABLE>

The Fund is not obligated to pursue any of the following strategies and does not
represent  that these  techniques  are available now or will be available at any
time in the future.

Portfolio Holdings


In addition to the public disclosure of Fund portfolio holdings through required
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 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 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


                                       26
<PAGE>

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.

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.

                                       27
<PAGE>

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


DIMA, which is part of Deutsche Asset Management,  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 10154, DIMA makes the Fund's
investment  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 and its  predecessors  have
more than 80 years of experience  managing  mutual  funds.  DIMA provides a full
range of investment  advisory services to institutional and retail clients.  The
Advisor  is  also  responsible  for  selecting   brokers  and  dealers  and  for
negotiating  brokerage  commissions  and dealer  charges.  On December 31, 2006,
Deutsche Asset Management, Inc. ("DAMI") merged into DIMA. Prior to December 31,
2006 DAMI was the  investment  advisor to the Fund.  As a result of the  merger,
DIMA is now the investment advisor to the Fund.


DeAM 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. 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.

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.


The Fund is managed by a team of investment professionals, each of whom plays 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  prospectus,  as of
the date of the Fund's prospectus. Composition of the team may change over time,
and Fund  shareholders  will be notified of changes  affecting  individuals with
primary Fund management responsibility.


Investment Management Agreement.


The Board and the  shareholders  of the Fund approved an  investment  management
agreement (the  "Investment  Management  Agreement")  between the Fund and DIMA.
Pursuant to the Investment Management Agreement, the Advisor provides continuing
investment  management of the assets of the Fund. In addition to the  investment
management of the assets of the Fund, the Advisor  determines the investments to
be made for the Fund,  including what portion of its assets remain uninvested in
cash or cash  equivalents,  and with whom the orders for investments are placed,
consistent with the Fund's policies as stated in its  Prospectuses and this SAI,
or as adopted by the Fund's Board. The Advisor also monitors,  to the extent not
monitored by the Fund's administrator or other agent, the Fund's compliance with
its investment and tax guidelines and other compliance policies.


                                       28
<PAGE>


The Advisor  provides  assistance to the Fund's Board in valuing the  securities
and other  instruments  held by the Fund, to the extent  reasonably  required by
valuation policies and procedures that may be adopted by the Fund.


Pursuant  to  the  Investment  Management,  (unless  otherwise  provided  in the
agreement or as  determined  by the Fund's Board and to the extent  permitted by
applicable  law),  the Advisor pays the  compensation  and expenses of all Board
members,  officers,  and executive  employees of the Fund,  including the Fund's
share of payroll taxes, who are affiliated persons of the Advisor.

The Investment  Management  provides that the Fund is generally  responsible for
expenses that include: fees payable to the Advisor; outside legal, accounting or
auditing  expenses,  including with respect to expenses  related to negotiation,
acquisition or distribution of portfolio  investments;  maintenance of books and
records that are maintained by the Fund, the Fund's  custodian,  or other agents
of the Fund;  taxes and  governmental  fees;  fees and  expenses  of the  Fund's
accounting  agent,  custodian,  sub-custodians,  depositories,  transfer agents,
dividend  reimbursing  agents and registrars;  payment for portfolio  pricing or
valuation   services  to  pricing   agents,   accountants,   bankers  and  other
specialists,  if any;  brokerage  commissions  or other  costs of  acquiring  or
disposing of any portfolio  securities  or other  instruments  of the Fund;  and
litigation  expenses  and  other  extraordinary  expenses  not  incurred  in the
ordinary course of the Fund's business.

The Investment Management allows the Advisor to delegate any of its duties under
the  Agreement to a  subadvisor,  subject to a majority vote of the Board of the
Fund,  including a majority of the Board who are not  interested  persons of the
Fund,  and, if required by  applicable  law,  subject to a majority  vote of the
Fund's shareholders.

The Investment  Management 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  malfeasance,  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.  The  Investment
Management may be terminated at any time, without payment of penalty,  by either
party or by vote of a majority of the outstanding  voting securities of the Fund
on 60 days' written notice.

In addition,  the Board and shareholders  approved a subadvisor  approval policy
for the Fund (the "Subadvisor Approval Policy").  The Subadvisor Approval Policy
permits the Advisor,  subject to the approval of the Board, including a majority
of its  independent  Board members,  to appoint and replace  subadvisors  and to
amend sub-advisory  contracts without obtaining shareholder approval.  Under the
Subadvisor Approval Policy, the Board,  including its independent Board members,
will continue to evaluate and approve any new sub-advisory contracts between the
Advisor and any subadvisor,  as well as all changes to any existing sub-advisory
contract.  The Fund cannot implement the Subadvisor  Approval Policy without the
SEC either adopting revisions to certain existing rules (as it proposed to do in
October 2003) or granting the Fund exemptive relief from such existing rules. In
the event that the Fund received  exemptive relief or the SEC adopted  revisions
to its  current  rules,  the Fund and the  Advisor  would  likely be  subject to
certain  conditions  imposed  by the SEC  (and  certain  conditions  that may be
imposed in the future within either  exemptive  relief or a rule) to ensure that
the


                                       29
<PAGE>

interests of the Fund and its shareholders are adequately protected whenever the
Advisor acts under the Subadvisor  Approval  Policy,  including any  shareholder
notice requirements.


For all services provided under the Investment  Management  Agreement,  the Fund
pays the Advisor a fee, computed daily and paid monthly, at the annual rate as a
percentage of net assets shown below:


Average Daily Net Assets                  DWS Inflation Protected Plus Fund
------------------------                  ---------------------------------

$0 - $1.5 billion                                      0.400%
$1.5 billion - $2 billion                              0.375%
$2 billion - $3 billion                                0.360%
$3 billion - $4 billion                                0.345%
$4 billion - $5 billion                                0.330%
$5 billion - $6 billion                                0.315%
Over $6 billion                                        0.300%

The  advisory  fees  paid by the Fund  for its last  three  fiscal  years  ended
September 30 are shown in the table below.


                                        2007            2006**      2005**
                                        ----            ------      ------

DWS Inflation Protected Plus Fund*     $119,044        $103,190     $18,133


* The Fund commenced operations on July 8, 2005.


** Prior to June 1, 2006, these fees included an administrative service fee.



Through  January 31, 2009, the investment  advisor has  contractually  agreed to
waive a  portion  of its  fees  and  reimburse  expenses  so that  total  annual
operating  expenses will not exceed 0.70%,  excluding  certain  expenses such as
extraordinary expenses, taxes, brokerage and interest.



For the same periods,  the Advisor  reimbursed the following amounts to the Fund
to cover expenses:


         2007                     2006                   2005
         ----                     ----                   ----

      $42,553                   $103,190                $18,133



In reviewing the terms of the Investment Management 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.

Under a separate agreement between Deutsche Bank AG and the Fund,  Deutsche Bank
AG has granted a license to the Fund to utilize the trademark "DWS."

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.

                                       30
<PAGE>

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.

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  Deutsche  Asset
         Management, quantitative measures which include 1, 3 and 5 year pre-tax
         returns versus benchmark (such as the benchmark used in the prospectus)
         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

The following table shows the dollar range of shares owned  beneficially  and of
record by each  member of the Fund's  portfolio  management  team in the Fund as
well as in all DWS Funds as a group (i.e.  those funds advised by Deutsche Asset
Management or its affiliates),  including  investments by their immediate family
members sharing the same household and amounts invested  through  retirement and
deferred  compensation plans. This information is provided as of the Fund's most
recent fiscal year end.

<TABLE>
<CAPTION>

                                                                                   Dollar Range of All
Name of Portfolio Manager           DWS Inflation Protected Plus Fund             DWS Fund Shares Owned
-------------------------           ---------------------------------             ---------------------

<S>                                         <C>                                    <C>
William Chepolis                            $10,001 - $50,000                      $100,001 - $500,000
Matthew F. MacDonald                               $0                               $10,001 - $50,000
Robert Wang                                   $1 - $10,000                         $100,001 - $500,000
Thomas Picciochi                            $10,001 - $50,000                      $100,001 - $500,000
</TABLE>


Conflicts of Interest

In addition to managing the assets of the Fund,  the Fund's  portfolio  managers
may have responsibility for managing other client accounts of the Advisor or its
affiliates.  The tables below show, for each portfolio  manager,  the number and
asset size of (1) SEC registered  investment companies (or series thereof) other
than the Fund, (2) pooled investment vehicles that are not registered investment
companies and (3) other  accounts  (e.g.,  accounts  managed for  individuals or
organizations)  managed by each portfolio  manager.  Total assets  attributed to
each portfolio  manager in the tables below include total assets of each account
managed  by them,  although  the  manager  may only  manage  a  portion  of such
account's  assets.  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                          15              $9,322,622,553             0                    $0
Matthew F. MacDonald                      15              $9,322,622,553             0                    $0
Robert Wang                               40             $15,335,062,025             0                    $0
Thomas Picciochi                          11              $6,008,561,151             0                    $0

                                       32
<PAGE>

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                            0                        $0              0                          $0
Matthew F. MacDonald                        0                        $0              0                          $0
Robert Wang                                22              $699,278,407              2                $291,834,605
Thomas Picciochi                            5              $341,411,072              2                $291,834,605

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                            0                        $0              0                          $0
Matthew F. MacDonald                        0                        $0              0                          $0
Robert Wang                                43            $8,307,356,074              3                $168,734,012
Thomas Picciochi                           10              $245,332,939              3                $168,734,012
</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 Funds
and other client accounts.

Real,  potential  or apparent  conflicts  of interest may arise when a portfolio
manager has day-to-day  portfolio  management  responsibilities  with respect to
more than one fund or account, including the following:

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 each  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


                                       33
<PAGE>

         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 each Fund's portfolio  management
         team. The Advisor and the portfolio  management  team have  established
         monitoring  procedures,  a protocol for supervisory reviews, as well as
         compliance  oversight  to ensure that  potential  conflicts of interest
         relating to this type of activity are properly addressed.

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.



                                       34
<PAGE>


                                       35
<PAGE>


                                       36
<PAGE>


Codes of Ethics

The Trust,  the Advisor and the Fund's  Distributor  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  Distributor  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  Code of
Ethics may be granted in particular  circumstances  after review by  appropriate
personnel.


Regulatory Matters and Legal Proceedings

On December 21, 2006,  DeAM  settled  proceedings  with the 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


                                       37
<PAGE>

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  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")  (now  known as FINRA)  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


                                       38
<PAGE>

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.




                                       39
<PAGE>

                             FUND SERVICE PROVIDERS

Administrator


Pursuant to an administrative  services agreement (the "Administrative  Services
Agreement") with DIMA (the "Administrator"), 345 Park Avenue, New York, New York
10154, DIMA provides most administrative  services to the Fund including,  among
others, providing the Fund with personnel, preparing and making required filings
on  behalf  of the  Fund,  maintaining  books  and  records  for the  Fund,  and
monitoring the valuation of Fund securities. For all services provided under the
Administrative  Services  Agreement,  the Fund  pays  DIMA a fee of 0.10% of the
Fund's  average daily net assets.  DIMA pays the  Accounting  Agency fees out of
such Administrative Services Agreement fee.


Under  the  Administrative  Services  Agreement,  DIMA,  as  administrator,   is
obligated on a continuous basis to provide such  administrative  services as the
Board of the Fund reasonably  deems necessary for the proper  administration  of
the Fund.  DIMA provides the Fund with  personnel;  arranges for the preparation
and filing of the Fund's tax returns;  prepares and submits  reports and meeting
materials to the Board and the  shareholders;  prepares and files updates to the
Fund's Prospectuses and SAI as well as other reports required to be filed by the
SEC;  maintains  the  Fund's  records;  provides  the Fund  with  office  space,
equipment and services; supervises, negotiates the contracts of and monitors the
performance  of third parties  contractors;  oversees the tabulation of proxies;
monitors the  valuation of portfolio  securities  and monitors  compliance  with
Board-approved valuation procedures;  assists in establishing the accounting and
tax policies of the Fund;  assists in the  resolution of accounting  issues that
may arise  with  respect  to the  Fund;  establishes  and  monitors  the  Fund's
operating  expense budgets;  reviews and processes the Fund's bills;  assists in
determining  the amount of dividends and  distributions  available to be paid by
the Fund, prepares and arranges dividend  notifications and provides information
to agents to effect payments thereof; provides to the Board periodic and special
reports;  provides  assistance with investor and public relations  matters;  and
monitors the registration of shares under applicable federal and state law. DIMA
also performs certain fund accounting services under the Administrative Services
Agreement.  The Administrative Services Agreement provides that DIMA will not be
liable  under  the   Administrative   Services   Agreement  except  for  willful
misfeasance,  bad faith or negligence in the  performance  of its duties or from
the reckless disregard by it of its duties and obligations thereunder.


For the period ended September 30, 2007,  DIMA received  $50,000 as compensation
for adminstrative services, all of which was waived.

For the period June 1, 2006 through September 30, 2006, DIMA received $17,141 as
compensation for administrative services, all of which was waived.



The  fees  paid by the  Fund to DIMA  pursuant  to the  Administrative  Services
Agreement  are  reduced by the amount of any  credits  received  from the Fund's
custodian for cash balances.

Pursuant to an  agreement  between the  Administrator  and State Street Bank and
Trust Company ("SSB"),  the Administrator  has delegated certain  administrative
functions  to SSB. The costs and  expenses of such  delegation  are borne by the
Administrator, not by the Fund.

Various third-party service providers (the "Service  Providers"),  some of which
are affiliated with the Advisor,  provide certain  services to the Fund pursuant
to separate agreements with the Fund.

                                       40
<PAGE>


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.



Distributor


Pursuant to a Distribution Agreement  ("Distribution  Agreement"),  DWS-SDI, 222
South Riverside Plaza, Chicago,  Illinois 60606, an affiliate of the Advisor, is
the principal underwriter and distributor for the Class S shares of the Fund and
acts as  agent  of the  Fund in the  continuous  offering  of Fund  shares.  The
Distribution  Agreement  continues  in  effect  from  year to  year  only if its
continuance  is approved at least annually by a vote of the Board members of the
Fund,  including the Trustees who are not interested persons of the Fund and who
have no direct or indirect financial interest in the Distribution Agreement.

The  Distribution  Agreement  provides  that  the  Distributor  shall:  (i)  use
reasonable  efforts to sell shares upon the terms and  conditions  contained  in
Distribution  Agreement and the Fund's then-current  Prospectuses;  (ii) use its
best  efforts to conform  with the  requirements  of all  federal and state laws
relating to the sale of the shares;  (iii) adopt and follow procedures as may be
necessary  to comply  with the  requirements  of FINRA and any other  applicable
self-regulatory  organization;  (iv) perform its duties under the supervision of
and in  accordance  with the  directives of the Fund's Board of Trustees and the
Fund's  Declaration  of Trust and  By-Laws;  and (v) provide the Fund's Board of
Trustees with a written  report of the amounts  expended in connection  with the
Distribution Agreement.  The Distributor shall devote reasonable time and effort
to effect sales of shares but shall not be obligated to sell any specific number
of shares. The services of the Distributor are not exclusive and the Distributor
shall not be liable to the Fund or its shareholders for any error of judgment or
mistake of law, for any losses arising out of any investment,  or for any action
or inaction of the Distributor in the absence of bad faith, willful misfeasance,
or gross  negligence in the  performance of its duties or obligations  under the
Distribution  Agreement or by reason of the reckless disregard of its duties and
obligations under the Distribution Agreement. The Distribution Agreement further
provides that the Fund and the  Distributor  will mutually  indemnify each other
for losses relating to disclosures in the Fund's registration statement.


The  Distribution  Agreement may be terminated at any time upon 60 days' written
notice by the Fund,  without penalty,  by the vote of a majority of the Trustees
of the  Fund  who  are  not  interested  persons  of the  Fund or by a vote of a
majority of the Fund's  outstanding shares of the related class or upon 60 days'
written notice by the Distributor and shall automatically terminate in the event
of an assignment.

DWS-SDI and certain broker-dealers  ("Participating  Dealers") have entered into
sub-distribution  agreements under which such Participating  Dealers have agreed
to process investor purchase and redemption orders and respond to inquiries from
shareholders  concerning  the status of their accounts and the operations of the
Fund.  Any  sub-distribution  agreement  may be terminated or assigned by either
party,  without penalty, by the vote of a majority of the Fund's  non-interested
Trustees or by a vote of a majority of the outstanding  voting securities of the
Fund in the same manner as the Distribution Agreement.

Note: Although Class S shares do not have a 12b-1 Plan, 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 Distribution 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  Distribution  Agreement

                                       41
<PAGE>

provides that the Distributor accepts orders for shares at net asset value as 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

PricewaterhouseCoopers  LLP, 125 High Street,  Boston,  MA 02110,  serves as the
Fund's Independent Registered Public Accounting Firm.

Legal Counsel

Willkie Farr & Gallagher  LLP,  787 Seventh  Avenue,  New York,  New York 10019,
serves as legal counsel to the Fund.

Ropes & Gray LLP, One International  Place,  Boston,  Massachusetts  02110-2624,
serves as counsel to the Independent Trustees of the Trust.

Fund Accounting Agent


Prior  to June  1,  2006,  Investment  Company  Capital  Corporation,  the  then
administrator for the Fund, had retained DWS Scudder Fund Accounting Corporation
("DWS-SFAC"),   Two  International  Place,  Boston,   Massachusetts,   02110,  a
subsidiary of the Advisor,  as the Fund's fund  accounting  agent.  DWS-SFAC was
responsible  for  determining  net asset  value per  share and  maintaining  the
portfolio and general accounting records for the Fund.


Pursuant to an  agreement  between  DWS-SFAC  and SSB,  DWS-SFAC  had  delegated
certain fund accounting  functions to SSB under the fund  accounting  agreement.
The costs and expenses of such  delegation  were 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 sub-custodians approved
by the  Trustees  pursuant to Rule 17f-5 under the 1940 Act.  SSB uses  Deutsche
Bank AG, an affiliate of the Advisor,  as sub-custodian  ("DB  Subcustodian") in
certain countries.  To the extent the Fund holds any securities in the countries
in which SSB uses DB Subcustodian as a  sub-custodian,  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.

DWS Scudder Investment Service Company ("DWS-SISC"),  210 W. 10th Street, Kansas
City,  MO  64105-1614 is the Fund's  transfer  agent and dividend  paying agent.
DWS-SISC,  an  affiliate  of  the  Advisor,   serves  as  the  Fund's  transfer,
dividend-paying  agent  and  shareholder  service  agent  ("Shareholder  Service
Agent") for the Fund's Class S shares.


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.

                                       42
<PAGE>

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.

Effective  April 1, 2007,  DWS-SISC is the Transfer Agent for all classes of all
DWS funds.


Pursuant to a sub-transfer  agency  agreement  between DWS-SISC and DST Systems,
Inc. ("DST"),  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.

                             PORTFOLIO TRANSACTIONS


The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio securities, including the allocation of brokerage.

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.

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


                                       43
<PAGE>

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. 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.

                                       44
<PAGE>

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 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.



                                       45
<PAGE>


The Fund  commenced  operations  on July 8,  2005.  For the fiscal  years  ended
September 30, 2005 and  September  30, 2006,  the Fund did not pay any brokerage
commissions.


The Fund paid $3,474 in brokerage  commissions  for the most recent  fiscal year
end.

Securities  of Regular  Broker-Dealers.  The Fund is required  to  identify  any
securities  of its "regular  brokers or dealers" (as such term is defined in the
1940 Act) that the Fund has acquired  during the most recent  fiscal year. As of
September 30, 2007, the Fund did not hold any securities of its regular  brokers
or dealers.


                                       46
<PAGE>

Portfolio Turnover


The Fund's  portfolio  turnover rate is calculated by dividing the lesser of the
dollar  amount of sales or  purchases  of  portfolio  securities  by the average
monthly value of the Fund's portfolio securities,  excluding securities having a
maturity  at the  date of  purchase  of one  year or  less.  The  Fund  may sell
securities  held for a short time in order to take advantage of what the Advisor
believes to be  temporary  disparities  in normal  yield  relationships  between
securities. A high rate of portfolio turnover (i.e., 100% or higher) will result
in  correspondingly  higher  transaction costs to the Fund,  particularly if the
Fund's  primary  investments  are equity  securities.  A high rate of  portfolio
turnover  may  also  result  in  more  frequent  distributions  attributable  to
long-term  and  short-term  capital  gains,  which  could  increase  income  tax
liability of the Fund's  shareholders.  For the fiscal years ended September 30,
2006 and September  30, 2007,  the Fund's  portfolio  turnover rate was 331% and
167%,  respectively.  The portfolio turnover rate for the Fund was significantly
higher in fiscal year 2006 primarily because of a growth in assets of the Fund.


                        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 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
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.


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 balance is $1,000 for Class S. A shareholder may
open an account with at least $1,000 ($500 for fiduciary/custodial accounts), if
an automatic  investment  plan (AIP) of $50/month  is  established.  DWS Scudder
group  retirement plans and certain other accounts have similar or lower minimum
share balance requirements.

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 an automatic redemption.

Fiduciary  (e.g., IRA or Roth IRA) and custodial  accounts (e.g.,  UGMA or UTMA)
with balances below $1,000are subject to automatic redemption following 60 days'
written notice to applicable shareholders.



                                       47
<PAGE>


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 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 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 FINRA 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 financial  advisors,  who in turn
may  recommend  that  investors  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,


                                       48
<PAGE>

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.

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.



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 1-(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 such 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
Prospectuses.


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.

         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.

                                       51
<PAGE>

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 FINRA and banks may, if they prefer,  subscribe  initially
for at least $2,500  through DeAM  Investor  Services,  Inc. by letter,  fax, or
telephone.

Automatic Investment Plan. A shareholder may purchase 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 of $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.

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  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 Scudder 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 funds.  Qualified  individuals
will  generally  be  allowed  to  purchase  shares in the class  with the lowest
expense ratio,  usually the Institutional Class shares. If a Fund does not offer
Institutional  Class shares,  these  individuals  will be allowed to buy Class A
shares at NAV.  The Funds also  reserve 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.


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 FINRA, 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 may be
placed by telephone,  etc. by  established  shareholders  (except by DWS Scudder
Individual  Retirement  Account  (IRA),  DWS Scudder  Horizon


                                       53
<PAGE>

Plan, DWS Scudder Profit Sharing and Money Purchase  Pension Plans,  DWS Scudder
401(k) and DWS Scudder 403(b) Plan holders), members of FINRA, and banks.

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 FINRA 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  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.

                                       54
<PAGE>

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.
Deutsche Bank Trust Company Americas
Emmett A. Larkin Company
Fiduciary Trust Co. - International
H.C. Denison Co.
Huntleigh Securities

                                       55
<PAGE>

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
Phoenix Life Insurance Company
Protective Life Insurance
Provident Mutual Life Insurance
Prudential Insurance Company of America

                                       56
<PAGE>

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.



                                       58
<PAGE>


                                       59
<PAGE>


                                       60
<PAGE>


                                       61
<PAGE>


Redemptions

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.

General.  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.

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 a 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.

                                       62
<PAGE>

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.

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 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.

Non-retirement plan shareholders may establish an Automatic Withdrawal Plan (the
"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 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 the 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 Fund shares under the Plan have been  liquidated or upon receipt by the
Trust of notice of death of the shareholder.

An  Automatic  Withdrawal  Plan  request  form can be obtained by calling  (800)
728-3337.

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  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 shareholder  may incur  transaction
expenses in converting these securities to cash.

                                       63
<PAGE>

Exchanges


Shareholders  may request a taxable  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 Fund they are exchanging into from
dealers, other firms or DWS-SDI.

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  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 declare daily,  and distribute  monthly,  dividends from its
net  investment  income.  The Fund reserves the right to include net  short-term
capital gains in such dividends. The Fund intends to distribute capital gain net
income after utilization of capital loss  carryforwards,  if any, in December to
prevent application of a federal excise tax, although 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.

                                       64
<PAGE>

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 distributions in cash and
         long-term capital gain distributions in shares of the same class at net
         asset value; or

2.       To receive income and capital gain distributions 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. 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.  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 that  Fund  and
confirmations will be mailed to each 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.

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 gains
in order to satisfy the minimum distribution requirements contained in the Code.

                                      TAXES

The  following  is  a  summary  of  certain   material  US  federal  income  tax
considerations  regarding the purchase,  ownership and  disposition of shares in
the Fund.  It is not intended as a complete  discussion  of all of the potential
federal  income tax  consequences  that may be  applicable to the Fund or to all
categories of investors, some of which may be subject to special tax rules. Each
prospective  shareholder is urged to consult his own tax advisor with respect to
the specific federal,  state, local and foreign tax consequences of investing in
the Fund. The summary is based on the laws in effect on the date of this SAI and
existing judicial and administrative  interpretations  thereof, all of which are
subject to change, possibly with retroactive effect.

Taxation of the Fund and Its Investments


The Fund will be  treated  as a  separate  taxpayer  for US  federal  income tax
purposes.  The Fund  intends to continue to qualify to be treated as a regulated
investment  company under the Code each taxable  year.  To so qualify,  the Fund
must  meet  certain  requirements  regarding  the  source  of  its  income,  the
diversification  of its assets and the distribution of its income.  For example,
the Fund must  derive at least 90% of its gross  annual  income in each


                                       65
<PAGE>

taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other  disposition  of stock or  securities,  foreign
currencies,  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 interests in
"qualified publicly traded partnerships" (i.e.,  partnerships that are traded on
an established  securities market or tradable on a secondary market,  other than
partnerships that derive 90% of their income from interest,  dividends,  capital
gains, and other traditionally permitted mutual fund income). The Fund must also
diversify its holdings so that, at the end of each quarter of the Fund's taxable
year,  (i) at least 50% of the market value of the Fund's assets is  represented
by cash,  securities  of other  regulated  investment  companies,  US government
securities and other securities,  with such other securities limited, in respect
of any one issuer, to an amount not greater than 5% of the Fund's assets and not
greater 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 US government securities or securities of other regulated investment
companies) of any one issuer, any two or more issuers of which the Fund owns 20%
or more of the voting  securities  and which are determined to be engaged in the
same or similar  trades or businesses or related  trades or businesses or in the
securities of one or more  qualified  publicly  traded  partnerships.  Under the
minimum distribution  requirement,  the Fund must distribute to its shareholders
at least the sum of (i) 90% of its  "investment  company  taxable income" (i.e.,
income other than its net realized  long-term capital gain over its net realized
short-term capital loss), plus or minus certain adjustments, and (ii) 90% of its
net tax-exempt income for the taxable year.


Fund  investments  in  partnerships,  including  in  qualified  publicly  traded
partnerships,  may result in the Fund's being subject to state, local or foreign
income, franchise or withholding tax liabilities.

As a regulated  investment  company,  the Fund will not be subject to US federal
income tax on its investment  company  taxable income and net capital gains (the
excess of net long-term  capital gains over net short-term  capital losses),  if
any, that it distributes to shareholders. The Fund will be subject to income tax
at  regular  corporate  rates on any  taxable  income  or gain  that it does not
distribute.  The  Fund  intends  to  distribute  to its  shareholders,  at least
annually,  substantially  all of its investment  company  taxable income and net
capital gains,  and therefore does not anticipate  incurring  federal income tax
liability.

The Code imposes a 4%  nondeductible  excise tax on a Fund to the extent it does
not  distribute  by the end of any calendar  year at least the sum of (i) 98% of
its  ordinary  income  for that  year and (ii)  98% of its  capital  gain  (both
long-term and short-term) for the one-year period ending,  as a general rule, on
October 31 of that year.  For this  purpose,  however,  any  ordinary  income or
capital gain net income retained by the Fund that is subject to corporate income
tax will be considered to have been  distributed by year-end.  In addition,  the
minimum  amounts  that must be  distributed  in any year to avoid the excise tax
will  be   increased  or   decreased   to  reflect  any   underdistribution   or
overdistribution,  as the  case  may be,  from  the  previous  year.  The  Trust
anticipates   that  the  Fund  will  pay  such  dividends  and  will  make  such
distributions  as are necessary in order to avoid the application of this excise
tax.

If for any  taxable  year the Fund does not  qualify as a  regulated  investment
company or fails to meet the distribution requirement, all of its taxable income
will be subject to federal  income tax at regular  corporate  rates (without any
deduction for  distributions  to its  shareholders).  In such event,  the Fund's
distributions,  to the extent  derived  from the Fund's  current or  accumulated
earnings and profits, will constitute dividends that are taxable to shareholders
as ordinary dividend income, even though those distributions might otherwise (at
least in part) have been treated in the shareholders' hands as long-term capital
gains.  Such  distributions  will be  eligible  (i) to be treated  as  qualified
dividend  income in the case of  shareholders  taxed as individuals and (ii) for
the  dividends  received  deduction  in  the  case  of  corporate  shareholders.
Moreover,  if the Fund fails to qualify as a regulated investment company in any
year, it must pay out its earnings and profits accumulated in that year in order
to  qualify  again as a  regulated  investment  company.  If the Fund  failed to
qualify as a regulated  investment company for a period greater than two taxable
years, the Fund may be required to recognize any net built-in gains with respect
to certain of its assets  (i.e.,  the excess of the aggregate  gains,  including
items of income,  over  aggregate  losses  that would  have been  realized  with
respect to such assets if the Fund had been liquidated) in order to qualify as a
regulated investment company in a subsequent year.

The Fund's  investment in so-called "OID bonds" and "market discount bonds" will
be subject to special tax rules.  An OID bond is a security  that is issued at a
discount from its face value (e.g., zero coupon  securities).  A market


                                       66
<PAGE>

discount bond is a security  acquired in the  secondary  market at a price below
its redemption value (or its adjusted issue price if it is also an OID bond). If
the Fund  invests in an OID bond it will be  required  to accrue in income  each
year for  federal  income tax  purpose a portion of the  difference  between the
issue price and the face value of the OID bond (the "original issue discount" or
"OID"),  even  though  the Fund will not  receive  corresponding  cash  interest
payments with respect to such OID bond.  This original issue discount is imputed
income  that will  comprise  a part of the  Fund's  investment  company  taxable
income,  which must be  distributed  to  shareholders  in order to maintain  the
qualification of the Fund as a regulated investment company and to avoid federal
income  tax at the Fund  level.  As a result,  the Fund may have to  dispose  of
securities  which it might  otherwise  have  continued  to hold,  or  borrow  to
generate  cash in order to satisfy its  distribution  requirements.  If the Fund
invests  in a market  discount  bond,  it will be  required  to  treat  any gain
recognized on the  disposition of such market  discount bond as ordinary  income
(instead of capital gain) to the extent of the accrued  market  discount  unless
the Fund  elects to  include  the market  discount  in income as it  accrues.  A
positive inflation  adjustment on  inflation-indexed  US Treasury  securities is
OID.  A  negative  inflation  adjustment  will  reduce  the  amount of  interest
otherwise  includible  with respect to the debt  instrument.  Where the negative
inflation adjustment exceeds income includible by the Fund for the taxable year,
it will be treated  as an  ordinary  loss to the extent the Fund has  recognized
ordinary gain in previous years with respect to such debt instrument.

The Fund's  transactions in foreign currencies,  forward contracts,  options and
futures   contracts   (including   options  and  futures  contracts  on  foreign
currencies)  will be  subject  to  special  provisions  of the  Code  (including
provisions relating to "hedging transactions" and "straddles") that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may  affect  whether  gains or  losses  are  ordinary  or  capital),  accelerate
recognition  of income to the Fund and defer  Fund  losses.  These  rules  could
therefore   affect  the  character,   amount  and  timing  of  distributions  to
shareholders.  These provisions also (a) will require the Fund to mark-to-market
certain  types of the positions in its  portfolio  (i.e.,  treat them as if they
were closed out at the end of each year) and (b) may cause the Fund to recognize
income without receiving cash with which to pay dividends or make  distributions
in amounts  necessary  to satisfy the  distribution  requirements  for  avoiding
income and excise taxes. The Fund will monitor its  transactions,  will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of the Fund as a regulated investment company.

The Fund's  investment in so-called  "section 1256 contracts," such as regulated
futures  contracts,  most  foreign  currency  forward  contracts  traded  in the
interbank  market and options on most stock indices,  are subject to special tax
rules.  All section  1256  contracts  held by the Fund at the end of its taxable
year are required to be marked to their market value, and any unrealized gain or
loss on  those  positions  will be  included  in the  Fund's  income  as if each
position had been sold for its fair market value at the end of the taxable year.
The  resulting  gain or loss will be combined  with any gain or loss realized by
the Fund from  positions in section  1256  contracts  closed  during the taxable
year. Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as  short-term  capital gain or loss,  regardless of the
period of time the positions were actually held by the Fund.

As a result  of  entering  into  swap  contracts,  the Fund may make or  receive
periodic net  payments.  The Fund may also make or receive a payment when a swap
is  terminated  prior to  maturity  through an  assignment  of the swap or other
closing  transaction.  Periodic net payments will generally  constitute ordinary
income or  deductions,  while  termination  of a swap will  generally  result in
capital gain or loss (which will be a long-term capital gain or loss if the Fund
has been a party to the swap for more than one  year).  With  respect to certain
types of swaps,  the Fund may be required to currently  recognize income or loss
with  respect  to  future  payments  on such  swaps or may elect  under  certain
circumstances to mark such swaps to market annually for tax purposes as ordinary
income or loss.  The tax  treatment  of many  types of credit  default  swaps is
uncertain.


In general,  gain or loss on a short sale is recognized when the Fund closes the
sale by delivering  the borrowed  property to the lender,  not when the borrowed
property  is sold.  Gain or loss from a short sale is  generally  considered  as
capital  gain or loss to the extent  that the  property  used to close the short
sale  constitutes a capital  asset


                                       67
<PAGE>

in the  Fund's  hands.  Except  with  respect to  certain  situations  where the
property used by the Fund to close a short sale has a long-term  holding  period
on the date of the short sale,  special rules would generally treat the gains on
short sales as  short-term  capital  gains.  These rules may also  terminate the
running of the holding period of "substantially  identical property" held by the
Fund.  Moreover,  a loss on a short sale will be treated as a long-term  capital
loss if, on the date of the short sale,  "substantially  identical property" has
been held by the Fund for more than one year.  In general,  the Fund will not be
permitted to deduct  payments  made to reimburse  the lender of  securities  for
dividends  paid on  borrowed  stock if the short sale is closed on or before the
45th day after the short sale is entered into.

Every  shareholder of the Fund will receive,  if  appropriate,  various  written
notices  after the close of the  Fund's  prior  taxable  year as to the  federal
income status of his or her dividends and distributions which were received from
the Fund during the Fund's prior taxable year. Shareholders should consult their
tax  advisors as to any state and local taxes that may apply to these  dividends
and distributions.

Foreign  Investments.  Income  (including,  in some cases,  capital  gains) from
investments  in foreign  stocks or securities  may be subject to foreign  taxes,
including  withholding  and other taxes  imposed by foreign  jurisdictions.  Tax
conventions  between  certain  countries and the US may reduce or eliminate such
taxes.  It is  impossible  to  determine  the  effective  rate of foreign tax in
advance  since  the  amount  of the  Fund's  assets to be  invested  in  various
countries will vary.

If the Fund is liable for  foreign  taxes,  and if more than 50% of the value of
the Fund's total  assets at the close of its taxable year  consists of stocks or
securities of foreign corporations (including foreign governments), the Fund may
make an election  pursuant to which certain foreign taxes paid by the Fund would
be treated as having been paid directly by shareholders of the Fund. Pursuant to
such  election,  the amount of foreign taxes paid will be included in the income
of the Fund's  shareholders,  and such Fund's  shareholders  (except  tax-exempt
shareholders)  may,  subject to certain  limitations,  claim  either a credit or
deduction  for the taxes.  The Fund's  shareholders  will be notified  after the
close of the Fund's  taxable  year  whether  the  foreign  taxes paid will "pass
through"  for that year and, if so, such  notification  will  designate  (a) the
shareholder's portion of the foreign taxes paid to each such country and (b) the
amount which represents income derived from sources within each such country.


The amount of foreign taxes that a shareholder may claim as a credit in any year
will generally be subject to a separate limitation for "passive income," and for
"passive  category  income,"  which  includes,  among  other  items  of  income,
dividends,  interest and certain foreign  currency gains.  Because capital gains
realized  by the Fund on the sale of  foreign  securities  will be treated as US
source income,  the available  credit of foreign taxes paid with respect to such
gains may be restricted by this limitation.


Under Section 988 of the Code,  gains or losses  attributable to fluctuations in
exchange  rates  between  the time the Fund  accrues  income or  receivables  or
expenses or other liabilities denominated in a foreign currency and the time the
Fund  actually  collects  such  income or pays such  liabilities  are  generally
treated as  ordinary  income or  ordinary  loss.  Similarly,  gains or losses on
foreign currency,  foreign currency forward contracts,  certain foreign currency
options or futures contracts and the disposition of debt securities  denominated
in foreign  currency,  to the extent  attributable  to  fluctuations in exchange
rates  between  the  acquisition  and  disposition  dates,  are also  treated as
ordinary income or loss unless the Fund were to elect otherwise.

Investment in Passive Foreign Investment Companies. If the Fund purchases shares
in certain  foreign  investment  entities,  called "passive  foreign  investment
companies" ("PFICs"), it may be subject to US federal income tax on a portion of
any "excess  distribution"  or gain from the  disposition of such shares even if
such  income  is  distributed  as  a  taxable   dividend  by  the  Fund  to  its
shareholders. Additional charges in the nature of interest may be imposed on the
Fund in respect of deferred taxes arising from such distributions or gains.

If the Fund were to invest in a PFIC and elect to treat the PFIC as a "qualified
electing fund" under the Code, in lieu of the foregoing  requirements,  the Fund
might be  required  to  include in income  each year a portion  of the  ordinary
earnings  and net capital  gains of the  qualified  electing  fund,  even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise
tax distribution  requirements  described above. In order to make this


                                       68
<PAGE>

election,  the Fund would be required to obtain certain annual  information from
the PFICs in which it invests, which may be difficult or impossible to obtain.

Alternatively,  the Fund may make a mark-to-market  election that will result in
the Fund being treated as if it had sold and  repurchased  all of the PFIC stock
at the end of each year.  In such case,  the Fund would report any such gains as
ordinary  income and would  deduct any such  losses to the extent of  previously
recognized  income as  ordinary  losses to the extent of  previously  recognized
gains. The election must be made separately for each PFIC owned by the Fund and,
once made,  would be effective  for all  subsequent  taxable  years of the Fund,
unless  revoked  with the consent of the IRS. By making the  election,  the Fund
could  potentially  ameliorate the adverse tax consequences  with respect to its
ownership  of shares in a PFIC,  but in any  particular  year may be required to
recognize  income in excess of the  distributions it receives from PFICs and its
proceeds from  dispositions of PFIC stock.  The Fund may have to distribute this
"phantom"  income and gain to satisfy the 90%  distribution  requirement  and to
avoid imposition of the 4% excise tax.

The Fund will make the  appropriate  tax  elections,  if possible,  and take any
additional steps that are necessary to mitigate the effect of these rules.

Taxation of US Shareholders

Dividends and Distributions. The Fund intends to distribute substantially all of
its net income and capital gains,  if any, to shareholders  each year.  Unless a
shareholder  instructs the Fund to pay such dividends and distributions in cash,
they  will  be  automatically  reinvested  in  additional  shares  of the  Fund.
Dividends  and  distributions  received  by a  retirement  plan  qualifying  for
tax-exempt  treatment  under the Code will not be subject  to US federal  income
tax. The Fund's dividends and capital gain  distributions  are taxable when they
are paid,  whether you take them in cash or reinvest them in additional  shares.
Distributions  declared  to  shareholders  of record  in  October,  November  or
December and paid in January are taxable on December 31.

If the Fund  retains for  investment  an amount equal to all or a portion of its
net  long-term  capital  gains in excess of its net  short-term  capital  losses
(including any capital loss  carryovers),  it will be subject to a corporate tax
(currently at a maximum rate of 35%) on the amount retained.  In that event, the
Fund will designate such retained  amounts as  undistributed  capital gains in a
notice to its  shareholders who (a) will be required to include in income for US
federal income tax purposes,  as long-term  capital gains,  their  proportionate
shares  of the  undistributed  amount,  (b) will be  entitled  to  credit  their
proportionate shares of the 35% tax paid by the Fund on the undistributed amount
against their US federal income tax liabilities, if any, and to claim refunds to
the extent  their  credits  exceed  their  liabilities,  if any, and (c) will be
entitled to increase  their tax basis,  for US federal  income tax purposes,  in
their  shares by an amount equal to 65% of the amount of  undistributed  capital
gains included in the shareholder's income. Organizations or persons not subject
to federal  income tax on such  capital  gains will be  entitled  to a refund of
their pro rata  share of such  taxes  paid by the Fund upon  filing  appropriate
returns or claims for refund with the IRS.

Distributions  of net realized  long-term  capital gains,  if any, that the Fund
designates as capital gains  dividends are taxable as long-term  capital  gains,
whether paid in cash or in shares and  regardless of how long a shareholder  has
held shares of the Fund. All other  dividends of the Fund  (including  dividends
from short-term capital gains) from current and accumulated earnings and profits
("regular dividends") are generally subject to tax as ordinary income.

Special rules apply to regular  dividends paid to individuals.  Such a dividend,
with respect to taxable years  beginning  before January 1, 2011, may be subject
to tax at  the  rates  generally  applicable  to  long-term  capital  gains  for
individuals  (currently at a maximum rate of 15%),  provided that the individual
receiving the dividend satisfies certain holding period and other  requirements.
Dividends  subject to these  special  rules are not actually  treated as capital
gains,  however, and thus are not included in the computation of an individual's
net capital gain and  generally  cannot be used to offset  capital  losses.  The
long-term  capital gains rates will apply to: (i) 100% of the regular  dividends
paid by the Fund to an individual in a particular taxable year if 95% or more of
the Fund's gross income  (ignoring gains  attributable to the sale of stocks and
securities  except to the extent  net  short-term  capital  gain from such sales
exceeds net  long-term  capital  loss from such sales) in that  taxable  year is
attributable  to qualified  dividend  income  received by the Fund;  or (ii) the
portion  of the  regular  dividends  paid  by the  Fund  to an  individual  in a
particular  taxable  year that is  attributable  to  qualified  dividend  income
received by the Fund in that  taxable  year


                                       69
<PAGE>

if such qualified dividend income accounts for less than 95% of the Fund's gross
income (ignoring gains  attributable to the sale of stocks and securities except
to the extent net short-term  capital gain from such sales exceeds net long-term
capital  loss  from  such  sales)  for that  taxable  year.  For  this  purpose,
"qualified  dividend income" generally means income from dividends received by a
fund from US corporations and qualifying foreign corporations, provided that the
Fund satisfies  certain  holding period  requirements in respect of the stock of
such  corporations and has not hedged its position in the stock in certain ways.
However,  qualified dividend income does not include any dividends received from
tax-exempt corporations. Also, dividends received by the Fund from a real estate
investment trust ("REIT") or another regulated  investment company generally are
qualified dividend income only to the extent the dividend distributions are made
out of  qualified  dividend  income  received  by such  REIT or other  regulated
investment company. In the case of securities lending transactions,  payments in
lieu of dividends are not qualified  dividend income. If a shareholder elects to
treat Fund dividends as investment  income for purposes of the limitation on the
deductibility  of investment  interest,  such dividends would not be a qualified
dividend income.

The Fund does not expect that a  significant  portion of its  dividends  will be
eligible for treatment as qualified dividend income.

We will send you information after the end of each year setting forth the amount
of dividends paid by us that are eligible for the reduced rates.

If an individual  receives a dividend qualifying for the long-term capital gains
rates  and  such  dividend  constitutes  an  "extraordinary  dividend,"  and the
individual  subsequently  recognizes  a loss on the sale or exchange of stock in
respect of which the  "extraordinary  dividend" was paid,  then the loss will be
long-term  capital  loss to the  extent  of such  "extraordinary  dividend."  An
"extraordinary  dividend"  on  common  stock for this  purpose  is  generally  a
dividend  (i) in an amount  greater than or equal to 10% of the  taxpayer's  tax
basis  (or  trading  value)  in a share of  stock,  aggregating  dividends  with
ex-dividend  dates within an 85-day period or (ii) in an amount  greater than or
equal to 20% of the taxpayer's tax basis (or trading value) in a share of stock,
aggregating dividends with ex-dividend dates within a 365-day period.

Distributions  in excess of the Fund's  current  and  accumulated  earnings  and
profits will, as to each shareholder, be treated as a tax-free return of capital
to the  extent of a  shareholder's  basis in his  shares  of the Fund,  and as a
capital  gain  thereafter  (if the  shareholder  holds his shares of the Fund as
capital assets).  Shareholders  receiving dividends or distributions in the form
of  additional  shares  should be treated for US federal  income tax purposes as
receiving  a  distribution  in an amount  equal to the  amount of money that the
shareholders  receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount. Dividends paid by
the Fund that are  attributable to dividends  received by the Fund from domestic
corporations  may  qualify  for the  federal  dividends-received  deduction  for
corporations.


Investors  considering  buying  shares just prior to a dividend or capital  gain
distribution  should be aware that,  although the price of shares just purchased
at that time may  reflect  the  amount  of the  forthcoming  distribution,  such
dividend or distribution may nevertheless be taxable to them. If the Fund is the
holder of record of any stock on the record date for any dividends  payable with
respect to such stock,  such  dividends  will be  included  in the Fund's  gross
income  not as of the date  received  but as of the  later of (a) the date  such
stock became ex-dividend with respect to such dividends (i.e., the date on which
a buyer of the stock would not be entitled to receive the declared,  but unpaid,
dividends) or (b) the date the Fund acquired such stock.  Accordingly,  in order
to satisfy its income distribution requirements, the Fund may be required to pay
dividends based on anticipated earnings,  and shareholders may receive dividends
in an earlier year than would otherwise be the case.

Certain  types of  income  received  by the Fund  from  REITs,  REMICs,  taxable
mortgage pools or other  investments may cause the Fund to designate some or all
of its  distributions as "excess  inclusion  income." To Fund  shareholders such
excess  inclusion  income  may (1)  constitute  taxable  income,  as  "unrelated
business taxable income" ("UBTI") for those  shareholders who would otherwise be
tax-exempt such as individual retirement accounts, 401(k) accounts, Keogh plans,
pension plans and certain  charitable  entities;  (2) not be offset by otherwise
allowable  deductions  for tax  purposes;  (3) not be  eligible  for  reduced US
withholding  for non-US  shareholders  even from tax treaty  countries;  and (4)
cause the Fund to be subject to tax if certain  "disqualified  organizations" as
defined by the Code are Fund shareholders.

                                       70
<PAGE>

In  addition,  a  tax-exempt  shareholder  could  realize  UBTI by virtue of its
investment in the Fund if shares in the Fund constitute  debt-financed  property
in the hands of the tax-exempt  shareholder within the meaning of Section 514(b)
of the Code. If a charitable  remainder  trust (as defined in Section 664 of the
Code)  realizes any UBTI for a taxable year, it will be subject to a 100% excise
tax on the UBTI.


Sale of Shares.  Upon the sale or  exchange of his shares,  a  shareholder  will
realize  a taxable  gain or loss  equal to the  difference  between  the  amount
realized and his basis in his shares. A redemption of shares by the Fund will be
treated as a sale for this purpose. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets in the  shareholder's  hands,  and
will be long-term  capital gain or loss if the shares are held for more than one
year and short-term  capital gain or loss if the shares are held for one year or
less.  Any loss  realized on a sale or exchange will be disallowed to the extent
the shares disposed of are replaced  (including  shares  acquired  pursuant to a
dividend  reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the shares. In such a case, the basis of
the shares  acquired will be adjusted to reflect the  disallowed  loss. Any loss
realized  by a  shareholder  on  a  disposition  of  Fund  shares  held  by  the
shareholder  for six months or less will be treated as a long-term  capital loss
to the  extent  of  any  distributions  of net  capital  gains  received  by the
shareholder with respect to such shares.

The  sale or other  disposition  of  shares  of the  Fund by a  retirement  plan
qualifying  for  tax-exempt  treatment  under the Code will not be subject to US
federal income tax.

Because the tax treatment  also depends on your purchase price and your personal
tax  position,  you  should  keep  your  regular  account  statements  to use in
determining your tax.

Backup Withholding

The  Fund  may be  required  to  withhold  US  federal  income  tax  on  taxable
distributions  and  redemption  proceeds  payable  to  shareholders  who fail to
provide the Fund with their correct  taxpayer  identification  number or to make
required  certifications,  or who have been  notified  by the  Internal  Revenue
Service that they are subject to backup withholding.  Corporate shareholders and
certain other shareholders  specified in the Code generally are exempt from such
backup  withholding.  Backup  withholding is not an additional  tax. Any amounts
withheld  may be  credited  against  the  shareholder's  US  federal  income tax
liability.

Taxation of Non-US Shareholders

Dividends  paid by the Fund to non-US  shareholders  are  generally  subject  to
withholding  tax at a 30% rate or a  reduced  rate  specified  by an  applicable
income tax treaty to the extent  derived from  investment  income and short-term
capital  gains.  In order to  obtain a  reduced  rate of  withholding,  a non-US
shareholder  will be  required  to provide  an IRS Form  W-8BEN  certifying  its
entitlement to benefits under a treaty.  The  withholding  tax does not apply to
regular  dividends  paid to a non-US  shareholder  who  provides a Form  W-8ECI,
certifying  that  the  dividends  are  effectively  connected  with  the  non-US
shareholder's conduct of a trade or business within the United States.  Instead,
the effectively  connected dividends will be subject to regular US income tax as
if the non-US shareholder were a US shareholder.  A non-US corporation receiving
effectively  connected  dividends  may also be  subject  to  additional  "branch
profits  tax"  imposed  at a rate  of 30%  (or  lower  treaty  rate).  A  non-US
shareholder who fails to provide an IRS Form W-8BEN or other applicable form may
be subject to backup withholding at the appropriate rate.

In general,  United States federal withholding tax will not apply to any gain or
income realized by a non-US  shareholder in respect of any  distributions of net
long-term  capital gains over net  short-term  capital  losses,  exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.

For  taxable  years  beginning  before  January  1,  2008,  properly  designated
dividends are generally exempt from United States federal  withholding tax where
they (i) are paid in respect  of the  Fund's  "qualified  net  interest  income"
(generally,  the Fund's US source interest income, other than certain contingent
interest and interest from  obligations of a corporation or partnership in which
the Fund is at least a 10%  shareholder,  reduced by expenses that are allocable
to such income) or (ii) are paid in respect of the Fund's "qualified  short-term
capital gains" (generally,  the


                                       71
<PAGE>

excess of the  Fund's net  short-term  capital  gain over the  Fund's  long-term
capital loss for such taxable year).  However,  depending on its  circumstances,
the Fund may designate all, some or none of its potentially  eligible  dividends
as such qualified net interest income or as qualified  short-term capital gains,
and/or  treat  such  dividends,  in  whole or in part,  as  ineligible  for this
exemption  from  withholding.  In  order to  qualify  for  this  exemption  from
withholding,   a  non-US   shareholder  will  need  to  comply  with  applicable
certification requirements relating to its non-US status (including, in general,
furnishing  an IRS Form W-8BEN or substitute  Form).  In the case of shares held
through  an  intermediary,  the  intermediary  may  withhold  even  if the  Fund
designates the payment as qualified net interest income or qualified  short-term
capital gain.  Non-US  shareholders  should  contact their  intermediaries  with
respect to the application of these rules to their accounts.


A distribution from the Fund to foreign  shareholders who have held more than 5%
of the  Fund at any  time  during  the  one-year  period  ending  on the date of
distribution is treated as real property gain subject to 35% withholding tax and
treated as income  effectively  connected to a US trade or business with certain
tax filing  requirements  applicable,  if such distribution is attributable to a
distribution received by the Fund from a REIT. Restrictions apply regarding wash
sales and substitute payment transactions.


Other Taxation

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor the Fund is liable for any income or franchise  tax in the
Commonwealth of Massachusetts,  provided that the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code.

The Fund's  shareholders  may be subject to state and local  taxes on their Fund
distributions.  Shareholders  are advised to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in a Fund.

If a  shareholder  recognizes  a loss with  respect to the  Fund's  shares of $2
million  or more for an  individual  shareholder  or $10  million  or more for a
corporate  shareholder,  the  shareholder  must file  with the IRS 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. 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 individual circumstances.

The  foregoing  is  only a  summary  of  certain  material  federal  income  tax
consequences affecting the Fund and its shareholders.  Prospective  shareholders
are advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in 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.

                                       72
<PAGE>

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 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 not addressed above 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 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 New York Stock 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 a portfolio  asset 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 of
the Trust.  Each Board Member's year of birth is set forth in parentheses  after
his or her name.  Unless  otherwise  noted, (i) each Board Member has engaged in
the principal occupation(s) noted in the table for at least the most recent five
years,  although not  necessarily in the same capacity,  and (ii) the address of
each Board  Member  that is not an  "interested  person" (as defined in the 1940
Act) of the Trust or the Advisor (each, an "Independent  Board Member"),  is c/o
Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33904. The term of office for
each Board  Member is until the election and  qualification  of a successor,  or
until  such Board  Member  sooner  dies,  resigns,  is  removed or as  otherwise

                                       73
<PAGE>

provided in the governing documents of the Trust. Because the Fund does not hold
an annual  meeting of  shareholders,  each Board  Member will hold office for an
indeterminate  period.  The Board  Members may also serve in similar  capacities
with other funds in the DWS fund complex.  The Length of Time Served  represents
the year in which the Board Member joined the board of one or more DWS funds now
overseen by the Board.

<TABLE>
<CAPTION>

Independent Board Members
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time        Business Experience and                                                in DWS Fund
 Served                    Directorships During the Past 5 Years                                  Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                                                            <C>
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting firm); Executive Fellow,            76
Chairperson since 2006     Center for Business Ethics, Bentley College; formerly, Partner,
Board Member since         Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and
1987                       General Counsel, Filene's (1978-1988). Directorships: Trustee of 8
                           open-end mutual funds managed by Sun Capital Advisers, Inc. (since
                           2007); Director of ICI Mutual Insurance Company (since 2007);
                           Advisory Board, Center for Business Ethics, Bentley College; Trustee,
                           Southwest Florida Community Foundation (charitable organization);
                           Former Directorships: Investment Company Institute (audit, executive,
                           nominating committees) and Independent Directors Council (governance,
                           executive committees)
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.      Vice Chair, WGBH Educational Foundation. Directorships: Association            76
 (1943)                    of Public Television Stations; Becton Dickinson and Company(1)
 Board Member since        (medical technology company); Belo Corporation(1) (media company);
 1990                      Boston Museum of Science; 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
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)        Managing General Partner, Exeter Capital Partners (a series of                 76
Board Member since         private equity funds). Directorships: Progressive Holding Corporation
1996                       (kitchen goods importer and distributor); Natural History, Inc.
                           (magazine publisher); Box Top Media Inc. (advertising); The Kennel
                           Shop (retailer)
--------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss        Clinical Professor of Finance, NYU Stern School of Business                    76
(1945)                     (1997-present); Member, Finance Committee, Association for Asian
Board Member since         Studies (2002-present); Director, Mitsui Sumitomo Insurance Group
2001                       (US) (2004-present); prior thereto, Managing Director, J.P. Morgan
                           (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Martin J. Gruber           Nomura Professor of Finance, Leonard N. Stern School of Business, New          76
(1937)                     York University (since September 1965); Director, Japan Equity Fund,
Board Member since         Inc. (since January 1992), Thai Capital Fund, Inc. (since January
1999                       2000), Singapore Fund, Inc. (since January 2000), National Bureau of
                           Economic Research (since January 2006). Formerly, Trustee, TIAA
                           (pension funds) (January 1996-January 2000); Trustee, CREF and CREF
                           Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF
                           Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen
                           Mutual Funds (January 1985-January 2001)
--------------------------------------------------------------------------------------------------------------------

                                       74
<PAGE>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time        Business Experience and                                                in DWS Fund
 Served                    Directorships During the Past 5 Years                                  Complex Overseen
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring         Jacob Safra Professor of International Banking and Professor, Finance          76
(1946)                     Department, The Wharton School, University of Pennsylvania (since
Board Member since         July 1972); Co-Director, Wharton Financial Institutions Center (since
1999                       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)
--------------------------------------------------------------------------------------------------------------------
Graham E. Jones            Senior Vice President, BGK Realty, Inc. (commercial real estate)               76
(1933)                     (since 1995). Formerly, Trustee of various investment companies
Board Member since         managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley
2002                       Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005)
--------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel           President and Chief Executive Officer, The Pew Charitable Trusts               76
(1951)                     (charitable organization) (1994 to present); Trustee, Thomas
Board Member since         Jefferson Foundation (charitable organization) (1994 to present);
2002                       Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001
                           to present). Formerly, Executive Vice President, The Glenmede Trust
                           Company (investment trust and wealth management) (1983 to 2004);
                           Board Member, Investor Education (charitable organization)
                           (2004-2005); Director, Viasys Health Care(1) (January 2007-June 2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.     Private investor since October 2003; Trustee of 8 open-end mutual              76
(1946)                     funds managed by Sun Capital Advisers, Inc. (since October 1998).
Board Member since         Formerly, Pension & Savings Trust Officer, Sprint Corporation(1)
2002                       (telecommunications) (November 1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg     Retired. Formerly, Consultant (1997-2001); Director, US Government             76
(1943)                     Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since         L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                       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)
--------------------------------------------------------------------------------------------------------------------
Carl W. Vogt               Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);               74
(1936)                     formerly, President (interim) of Williams College (1999-2000);
Board Member since         formerly, President of certain funds in the Deutsche Asset Management
2006                       family of funds (formerly, Flag Investors family of funds)
                           (registered investment companies) (1999-2000). Directorships: Yellow
                           Corporation (trucking); American Science & Engineering (x-ray
                           detection equipment). Former Directorships: ISI Family of Funds
                           (registered investment companies, 4 funds overseen); National
                           Railroad Passenger Corporation (Amtrak) Waste Management, Inc. (solid
                           waste disposal); formerly, Chairman and Member, National
                           Transportation Safety Board
--------------------------------------------------------------------------------------------------------------------

                                       75
<PAGE>

Interested Board Member
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                          Number of Funds
 and Length of Time        Business Experience and                                                in DWS Fund
 Served                    Directorships During the Past 5 Years                                  Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)         Managing Director(4), Deutsche Asset Management; Head of Deutsche              82
 (1958)                    Asset Management Americas; CEO of DWS Scudder; formerly board member
 Board Member since        of DWS Investments, Germany (1999-2005); formerly, Head of Sales and
 2006                      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)
--------------------------------------------------------------------------------------------------------------------

Officers(3)
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS
 (1965)                     family of funds; Director, ICI Mutual Insurance Company (since October 2007);
 President, 2006-present    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)
--------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 2003-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly, Executive
 (1963)                     Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds
--------------------------------------------------------------------------------------------------------------------
 Chief Financial Officer,   (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global Asset
 2004-present               Management (1994-1998)
 Treasurer, 2005-present
--------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New
 (1963)                     York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co.
 Assistant Secretary,       LLC (1998-2003)
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 2002-present
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------

                                       76
<PAGE>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D'Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
 Anti-Money Laundering      Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and Operations
 Compliance Officer,        Manager for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company
                            (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior Vice
 (1951)                     President, General Counsel, and Assistant Secretary, Hansberger Global Investors, Inc.
 Chief Legal Officer,       (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)      A publicly held company with securities  registered pursuant to Section
         12 of the Securities Exchange Act of 1934.

(2)      The  mailing  address  of Axel  Schwarzer  is c/o  Deutsche  Investment
         Management  Americas Inc.,  345 Park Avenue,  New York, New York 10154.
         Mr.  Schwarzer is an interested Board Member by virtue of his positions
         with Deutsche Asset Management.  As an interested person, Mr. Schwarzer
         receives no compensation from the Funds.

(3)      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 Funds.

(4)      Executive title, not a board directorship.

(5)      Address:  345 Park Avenue, New York, New York 10154.

(6)      Address: Two International Place, Boston, Massachusetts 02110.

Each Officer also holds  similar  positions for other  investment  companies for
which DIMA or an affiliate serves as the advisor.

Officer's   Role  with   Principal   Underwriter:   DWS  Scudder
Distributors, Inc.

 Paul H. Schubert:                         Vice President
 Caroline Pearson:                         Secretary

                                       77
<PAGE>

Information Concerning Committees and Meetings of Board Members

The  Board of the  Trust met ten (10)  times  during  the  calendar  year  ended
December 31, 2007 and each Board Member attended at least 80% of the meetings of
the Board and meetings of the committees of the Board on which such Board Member
served.

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since May 2006.

The Board has established the following  standing  committees:  Audit Committee,
Nominating/Corporate Governance Committee, Valuation Committee, Equity Oversight
Committee, Fixed Income Oversight Committee,  Marketing/Distribution/Shareholder
Service Committee,  Legal/Regulatory/Compliance Committee and Expense/Operations
Committee.

The Audit  Committee  assists the Board in  fulfilling  its  responsibility  for
oversight of the quality and integrity of the accounting, auditing and financial
reporting  practices  of the  applicable  Fund.  It also  makes  recommendations
regarding the selection of an independent  registered public accounting firm for
a Fund,  reviews the  independence of such firm,  reviews the scope of audit and
internal  controls,  considers and reports to the Board on matters relating to a
Fund's  accounting and financial  reporting  practices,  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
Keith R. Fox (Chair and Audit Committee Financial Expert),  Kenneth C. Froewiss,
Richard J. Herring, William N. Searcy, Jr. and Jean Gleason Stromberg. The Audit
Committee held nine (9) meetings during the calendar year 2007.

The  Nominating/Corporate  Governance  Committee  (i)  recommends  to the  Board
candidates  to serve as Board  Members and (ii)  oversees  and, as  appropriate,
makes  recommendations  to the Board  regarding  other  fund  governance-related
matters,  including but not limited to Board compensation practices,  retirement
policies,  self-evaluations  of effectiveness,  review of possible  conflicts of
interest  and  independence  issues  involving  Board  Members,  allocations  of
assignments  and  functions  of  committees  of the Board,  and share  ownership
policies. The members of the Nominating/Corporate Governance Committee are Henry
P.  Becton,  Jr.  (Chair),  Graham E. Jones,  Rebecca W. Rimel and Jean  Gleason
Stromberg.  The  Nominating/Corporate  Governance Committee (previously known as
the  Committee on  Independent  Directors)  held three (3)  meetings  during the
calendar year 2007.

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the 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 or  appropriate.  The members
of the Valuation Committee are Keith R. Fox, Kenneth C. Froewiss (Chair), Martin
J. Gruber and Richard J. Herring. The Valuation Committee held 6 meetings during
the calendar year 2007.

The Board has established two Investment Oversight  Committees,  one focusing on
Funds  primarily   investing  in  equity   securities  (the  "Equity   Oversight
Committee")  and one  focusing  on Funds  primarily  investing  in fixed  income
securities  (the "Fixed Income  Oversight  Committee").  These  Committees  meet
regularly with Fund portfolio managers and other investment  personnel to review
the relevant  Funds'  investment  strategies  and  investment  performance.  The
members of the Equity  Oversight  Committee are Henry P. Becton,  Jr., Martin J.
Gruber  (Chair),  Richard J.  Herring,  Rebecca  W. Rimel and Carl W. Vogt.  The
members of the Fixed Income Oversight Committee are Dawn-Marie  Driscoll,  Keith
R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr. (Chair) and
Jean  Gleason  Stromberg.  Each  Investment  Oversight  Committee  held  six (6)
meetings during the calendar year 2007.

The  Marketing/Distribution/Shareholder   Service  Committee  oversees  (i)  the
quality, costs and types of shareholder services provided to the Funds and their
shareholders,  and (ii) the distribution-related  services provided to the Funds
and their  shareholders.  The members of the  Marketing/Distribution/Shareholder
Service Committee are Martin J. Gruber,  Richard J. Herring (Chair),  Rebecca W.
Rimel,     Jean     Gleason     Stromberg     and    Carl    W.    Vogt.     The
Marketing/Distribution/Shareholder  Service  Committee  held seven (7)  meetings
during the calendar year 2007.

                                       78
<PAGE>

The  Legal/Regulatory/Compliance  Committee  oversees (i) the significant  legal
affairs of the Funds, including the handling of pending or threatened litigation
or  regulatory  action  involving  the Funds,  (ii) general  compliance  matters
relating   to  the  Funds  and  (iii)   proxy   voting.   The   members  of  the
Legal/Regulatory/Compliance  Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie
Driscoll,  Rebecca W. Rimel,  William N. Searcy, Jr., Jean Gleason Stromberg and
Carl W. Vogt (Chair).  The  Legal/Regulatory/Compliance  Committee  held six (6)
meetings during the calendar year 2007.

The Expense/Operations Committee (i) monitors the Fund's total operating expense
levels,  (ii)  oversees the  provision of  administrative  services to the Fund,
including the Fund's custody,  fund accounting and insurance  arrangements,  and
(iii) reviews the Fund's investment advisers' brokerage practices, including the
implementation  of  related  policies.  The  members  of the  Expense/Operations
Committee  are  Henry P.  Becton,  Jr.,  Dawn-Marie  Driscoll,  Keith R. Fox and
William  N.  Searcy,  Jr.  This  committee  held seven (7)  meetings  during the
calendar year 2007.

Ad Hoc Committees.  In addition to the standing committees described above, from
time to time the Board also forms ad hoc committees to consider specific issues.

Remuneration.  Each Independent Board Member receives compensation from the Fund
for his or her services, which includes an annual retainer and an attendance fee
for each meeting attended. No additional compensation is paid to any Independent
Board Member for travel time to meetings,  attendance at directors'  educational
seminars  or  conferences,   service  on  industry  or  association  committees,
participation  as speakers at directors'  conferences or service on special fund
industry director task forces or subcommittees. Independent Board Members do not
receive any employee  benefits such as pension or retirement  benefits or health
insurance from the Fund or any fund in the DWS fund complex.

Members of the Board who are officers,  directors,  employees or stockholders of
Deutsche Asset Management or its affiliates receive no direct  compensation from
a Fund, although they are compensated as employees of Deutsche Asset Management,
or its affiliates,  and as a result may be deemed to participate in fees paid by
the Funds.  The following tables show  compensation  from the Fund and aggregate
compensation  from all of the  funds in the DWS fund  complex  received  by each
Board Member during the calendar year 2007. Mr. Schwarzer became a member of the
Board on May 5,  2006,  is an  interested  person of the Funds and  received  no
compensation  from the  Funds or any fund in the DWS  fund  complex  during  the
relevant periods.

<TABLE>
<CAPTION>

                                      Aggregate Compensation         Total Compensation
                                       from DWS Inflation              from Fund and
Name of Board Member                   Protected Plus Fund           DWS Fund Complex(1)
--------------------                   -------------------           -------------------

<S>                                             <C>                       <C>
Henry P. Becton, Jr.(3)(4)                      $69                       $200,000
Dawn-Marie Driscoll(2)(3)(4)                    $87                       $253,000
Keith R. Fox(3)(4)                              $70                       $203,000
Kenneth C. Froewiss(3)(4)                       $69                       $200,000
Martin J. Gruber(3)(4)                          $66                       $198,000
Richard J. Herring(3)(4)                        $67                       $195,000
Graham E. Jones(3)                              $71                       $207,000
Rebecca W. Rimel(3)(4)                          $65                       $194,000
William N. Searcy, Jr.(3)(4)                    $69                       $200,000
Jean Gleason Stromberg(3)(4)                    $65                       $189,000
Carl W. Vogt(3)(4)                              $67                       $194,000
</TABLE>

(1)      The DWS Fund  Complex  is  composed  of 138 funds as of
         December 31, 2007.

(2)      Includes  $50,000 in annual  retainer  fees in Ms.  Driscoll's  role as
         Chairperson of the Board.

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of


                                       79
<PAGE>

         76 funds/portfolios.  For Mr. Vogt total compensation for calendar year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

(4)      Aggregate  compensation  includes amounts paid to the Board Members for
         special  meetings of ad hoc committees of the board in connection  with
         the  possible  consolidation  of the various DWS Fund boards and funds,
         meetings for considering fund expense simplification  initiatives,  and
         consideration  of issues  specific  to the Funds'  direct  shareholders
         (i.e., those shareholders who did not purchase shares through financial
         intermediaries). Such amounts totaled $1,000 for Mr. Becton, $1,000 for
         Ms. Driscoll,  $1,000 for Mr. Fox, $1,000 for Mr. Froewiss,  $5,000 for
         Mr. Gruber,  $1,000 for Dr. Herring,  $5,000 for Ms. Rimel,  $1,000 for
         Mr.  Searcy,  $1,000 for Ms.  Stromberg and $1,000 for Mr. Vogt.  These
         meeting fees were borne by the Advisor.

Board Member Ownership in the Fund

The  following  table shows the dollar range of equity  securities  beneficially
owned by each Board  Member in the Fund and DWS Fund  Complex as of December 31,
2007.

<TABLE>
<CAPTION>

                                          Dollar Range of Beneficial           Aggregate Dollar Range of
                                                   Ownership              Ownership in all Funds Overseen by
                                               in DWS Inflation                      Board Member
Board Member                                  Protected Plus Fund            in the DWS Fund Complex((1))
------------                                  -------------------            ----------------------------

Independent Board Member:
-------------------------

<S>                                                  <C>                               <C>
Henry P. Becton, Jr.                                 None                         Over $100,000
Dawn-Marie Driscoll                               $1-$10,000                      Over $100,000
Keith R. Fox                                         None                         Over $100,000
Kenneth C. Froewiss                                  None                         Over $100,000
Martin J. Gruber                                     None                         Over $100,000
Richard J. Herring                                $1-$10,000                      Over $100,000
Graham E. Jones                                      None                         Over $100,000
Rebecca W. Rimel                                     None                         Over $100,000
William N. Searcy, Jr.                         $10,001-$50,000                    Over $100,000
Jean Gleason Stromberg                         $10,001-$50,000                    Over $100,000
Carl W. Vogt                                         None                         Over $100,000


Interested Board Member:
------------------------

Axel Schwarzer                                       None                           Over $100,000
</TABLE>

(1)      Securities  beneficially  owned as defined  under the 1934 Act  include
         direct and/or indirect ownership of securities where the Board Member's
         economic interest is tied to the securities,  employment  ownership and
         securities  when the Board  Member can exert  voting power and when the
         Board Member has  authority to sell the  securities.  The dollar ranges
         are:  None,   $1-$10,000,   $10,001-$50,000,   $50,001-$100,000,   over
         $100,000.

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, 2007. 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


                                       80
<PAGE>

(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                     Title of     an Aggregate       Aggregate
Board Member                      Board Member         Company        Class          Basis            Basis
------------                      ------------         -------        -----          -----            -----

<S>                                   <C>               <C>           <C>             <C>               <C>
Henry P. Becton, Jr.                                    None
Dawn-Marie Driscoll                                     None
Keith R. Fox                                            None
Kenneth C. Froewiss                                     None
Martin J. Gruber                                        None
Richard J. Herring                                      None
Graham E. Jones                                         None
Rebecca W. Rimel                                        None
William N. Searcy, Jr.                                  None
Jean Gleason Stromberg                                  None
Carl W. Vogt                                            None
</TABLE>




                                       81
<PAGE>


                                       82
<PAGE>


                                       83
<PAGE>


                                       84
<PAGE>


                                       85
<PAGE>


                                       86
<PAGE>


                                       87
<PAGE>


                                       88
<PAGE>

Securities Beneficially Owned


As of January 8, 2008,  the Board Members and officers of the Trust owned,  as a
group, less than 1% of the outstanding shares of the Fund.

To the best of the Fund's  knowledge,  as of January 8, 2008, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

<TABLE>
<CAPTION>

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

<S>                                                           <C>                           <C>
CHARLES SCHWAB& CO INC                                        182,980.28                    20.25% of Class A
SPECIAL CUSTODY ACCOUNT FOR THE EXCLUSIVE BENEFIT
OF CUSTOMERS
ATTN MUTUAL FUNDS
SAN FRANCISCO CA  94104-4151

FIRST CLEARING LLC                                             52,850.23                    5.85% of Class A
STEVEN MULLER
WASHINGTON DC 20008-4005

DWS TRUST COMPANY CUST                                         10,785.27                    20.77% of Class B
FOR THE IRA ROLLOVER OF FLOYD M KESTNER
MOUNT DORA FL32757-9144

DWS TRUST COMPANY CUST                                         6,252.12                     12.04% of Class B
BRENTWOOD UNION FREE SCHOOL
403 (B) 7 MAUREEN QUINN
FLORAL PARK NY11005-1204

FIRST CLEARINGLLC                                                                           10.26% of Class B
GARY R WAXMONS
MC LEAN VA  22102-2700                                         5,328.81

FIRST CLEARING LLC                                             3,062.70                     5.90% of Class B
VERNA H SOKOLA
PLYMOUTH PA  18651-1902

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   2,880.73                     5.55% of Class B
ATTN FUND ADM
JACKSONVILLE FL  32246-6484

MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS                   48,715.24                    16.90% of Class C
ATTN FUND ADMINISTRATION 9LTU2
JACKSONVILLE FL  32246-6484

PERSHING LLC                                                   36,600.89                    12.70% of Class C
JERSEY CITY NJ 07303-2052

                                       89
<PAGE>
Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

FERRIS BAKER WATTS INC                                         29,180.62                    10.12% of Class C
ELAINE T HADDAD IRA #2
BLOOMFIELD MI 48302-1126

STATE STREET BANK & TRUST CO CUST FBO DWS ALT                1,790,279.89             38.47% of Institutional Class
ASSET ALLOC PLUS FUND
QUINCY MA  02171-2105

STATE STREET BANK & TRUST CO                                  937,739.79              20.15% of Institutional Class
CUST FBO DWS LIFECOMPASS 2015 FUND
QUINCY MA  02171-2105

STATE STREET BANK & TRUST CO                                  773,738.60              16.63% of Institutional Class
CUST FBO DWS LIFECOMPASS RETIREMENT FUND
QUINCY MA  02171-2105

STATE STREET BANK & TRUST CO                                  660,189.52              14.19% of Institutional Class
CUST FBO DWS LIFECOMPASS 2020 FUND
QUINCY MA  02171-2105

CHARLES SCHWAB & CO INC                                       237,697.64              5.11% of Institutional Class
SPECIAL CUSTODY ACCOUNT
MUTUAL FUNDS DEPARTMENT
SAN FRANCISCO CA  94104-4151

WELLS FARGO INVESTMENTS LLC                                    72,842.69                    8.03% of Class S
MINNEAPOLIS MN 55402-2308
</TABLE>




                                       90
<PAGE>


                                       91
<PAGE>




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 the Funds,  each Fund's  investment  advisor has agreed,
subject to  applicable  law and  regulation,  to indemnify and hold harmless the
applicable  Funds  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 Funds or the investment  advisor  ("Enforcement  Actions") or that
are the basis for private  actions  brought by shareholders of the Funds against
the Funds,  their directors and officers,  the Funds' investment  advisor 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  applicable  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,  each Fund's investment advisor
has also agreed,  subject to  applicable  law and  regulation,  to indemnify the
applicable  Funds'   Independent   Trustees  against  certain   liabilities  the
Independent  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  Independent  Trustees in  connection  with any  Enforcement
Actions  or  Private  Litigation.  The  applicable  investment  advisor  is not,
however,  required to provide  indemnification and advancement of expenses:  (1)
with respect to any  proceeding  or action with respect to which the  applicable
Fund's Board  determines that the Independent  Trustee  ultimately  would not be
entitled to indemnification or (2) for any liability of the Independent  Trustee
to the  Funds or their  shareholders  to which  the  Independent  Trustee  would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence  or  reckless  disregard  of the  Independent  Trustee's  duties as a
director or trustee of the Funds as determined in a final  adjudication  in such
action or proceeding.  The estimated amount of any expenses that may be advanced
to the Independent Trustees or indemnity that may be payable under


                                       92
<PAGE>

the indemnity  agreements is currently unknown.  These agreements by each Fund's
investment  advisor will survive the  termination of the  investment  management
agreements between the applicable investment advisor and the Funds.



                                FUND ORGANIZATION

The Fund is a series of DWS  Institutional  Funds.  The Trust is a Massachusetts
business trust organized under the laws of  Massachusetts on March 26, 1990, and
is governed by an Amended and Restated Declaration of Trust that was approved by
shareholders  in the second quarter of 2006, as may be further amended from time
to time (the "Declaration of Trust"). As of February 6, 2006, the Trust is known
as DWS Institutional Funds. All shares issued and outstanding are fully paid and
non-assessable,  transferable,  have no pre-emptive or conversion rights (except
as may be determined  by the Board of Trustees) and are  redeemable as described
in the SAI and 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 Fund generally is not required to hold meetings of its  shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or the Fund; (c) an amendment of the Declaration of Trust;  and (d)
such  additional  matters  as may be  required  by  law or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.

The Declaration of Trust provides that shareholder  meeting quorum  requirements
shall be established  in the Trust's  By-laws.  The By-laws  currently in effect
provide that the presence in person or by proxy of the holders of thirty percent
of the shares entitled to vote at a meeting (or of an individual series or class
if required to vote separately) shall constitute a quorum for the transaction of
business at meetings of shareholders of the Trust.

                                       93
<PAGE>

On any  matter  submitted  to a vote of  shareholders,  all  shares of the Trust
entitled to vote shall,  except as otherwise provided in the Trust's By-Laws, be
voted in the aggregate as a single class without  regard to series or classes of
shares,  except (a) when required by applicable  law or when the Trustees  shall
have  determined that the matter affects one or more series or classes of shares
materially differently, shares shall be voted by individual series or class; and
(b) when the Trustees have determined that the matter affects only the interests
of one or more series or classes,  only  shareholders  of such series or classes
shall be entitled to vote thereon.

The  Declaration  of Trust  provides  that the  Board of  Trustees  may,  in its
discretion,  establish  minimum  investment  amounts for  shareholder  accounts,
impose  fees on  accounts  that do not  exceed a minimum  investment  amount and
involuntarily  redeem  shares in any such  account in payment of such fees.  The
Board of Trustees,  in its sole  discretion,  also may cause the Trust to redeem
all of the  shares of the Trust or one or more  series  or  classes  held by any
shareholder for any reason, to the extent permissible by the 1940 Act, including
(a) if the  shareholder  owns shares having an aggregate net asset value of less
than a specified minimum amount, (b) if a particular  shareholder's ownership of
shares would disqualify a series from being a regulated  investment company, (c)
upon a shareholder's failure to provide sufficient  identification to permit the
Trust to verify the shareholder's  identity, (d) upon a shareholder's failure to
pay for  shares  or meet or  maintain  the  qualifications  for  ownership  of a
particular  class or series of shares,  (e) if the Board of Trustees  determines
(or pursuant to policies  established by the Board it is determined)  that share
ownership by a particular  shareholder is not in the best interests of remaining
shareholders, (f) when a Fund is requested or compelled to do so by governmental
authority or applicable law and (g) upon a shareholder's  failure to comply with
a request for  information  with respect to the direct or indirect  ownership of
shares of the  Trust.  The  Declaration  of Trust also  authorizes  the Board of
Trustees to terminate a Fund or any class without shareholder approval,  and the
Trust may  suspend  the right of  shareholders  to  require  the Trust to redeem
shares to the extent permissible under the 1940 Act.

Upon the  termination  of the Trust or any series,  after  paying or  adequately
providing for the payment of all liabilities which may include the establishment
of a liquidating  trust or similar  vehicle,  and upon receipt of such releases,
indemnities   and  refunding   agreements  as  they  deem  necessary  for  their
protection, the Trustees may distribute the remaining Trust property or property
of the series,  in cash or in kind or partly each,  to the  shareholders  of the
Trust or the series involved,  ratably  according to the number of shares of the
Trust or such  series  held by the  several  shareholders  of the  Trust or such
series on the date of termination,  except to the extent  otherwise  required or
permitted by the  preferences  and special or relative  rights and privileges of
any classes of shares of a series  involved,  provided that any  distribution to
the  shareholders  of a  particular  class  of  shares  shall  be  made  to such
shareholders  pro rata in  proportion to the number of shares of such class held
by  each  of  them.  The  composition  of any  such  distribution  (e.g.,  cash,
securities  or  other  assets)  shall  be  determined  by the  Trust in its sole
discretion, and may be different among shareholders (including differences among
shareholders in the same series or class).

Under Massachusetts law,  shareholders of a Massachusetts  business trust could,
under certain  circumstances,  be held  personally  liable for  obligations of a
Fund. The Declaration of Trust,  however,  disclaims  shareholder  liability for
acts or obligations  of the Fund and requires that notice of such  disclaimer be
given in each agreement,  obligation,  or instrument entered into or executed by
the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification  out of  Fund  property  for  all  losses  and  expenses  of any
shareholder held personally  liable for the obligations of the Fund and the Fund
may be  covered by  insurance  which the  Trustees  consider  adequate  to cover
foreseeable  tort claims.  Thus, the risk of a shareholder  incurring  financial
loss on account of shareholder liability is considered by the Advisor remote and
not  material,  since it is limited to  circumstances  in which a disclaimer  is
inoperative and the Fund itself is unable to meet its obligations.

                             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:

                                       94
<PAGE>

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 Investment Company Act of 1940.

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.

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.

                                       95
<PAGE>

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
SEC'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 September 30, 2007 are incorporated herein by
reference  and are  hereby  deemed to be a part of this  combined  Statement  of
Additional Information.


                             ADDITIONAL INFORMATION

The CUSIP number of DWS Inflation Protected Plus Fund Class S is 23339C 859.

The DWS Inflation Protected Plus Fund has a fiscal year end of September 30.

Many of the investment changes in the Fund will be made at prices different from
those  prevailing  at the time  they may be  reflected  in a  regular  report to
shareholders of the Fund. These transactions will reflect  investment  decisions
made by the Advisor in light of the Fund's  investment  objective  and policies,
its other portfolio holdings and tax considerations, and should not be construed
as recommendations for similar action by other investors.

The Fund's  Prospectus  and this SAI omit certain  information  contained in the
Registration  Statement and its amendments which the Fund has filed with the SEC
under the 1933 Act and  reference is hereby made to the  Registration  Statement
for further  information  with  respect to the Fund and the  securities  offered
hereby.  The  Registration  Statement  and  its  amendments  are  available  for
inspection by the public at the offices of the SEC in Washington, D.C.


                                       96
<PAGE>


                                    APPENDIX

RATINGS OF INVESTMENTS

Description of certain ratings assigned by S&P and Moody's:

S&P Long-Term

"AAA" -- An obligation  rated "AAA" has the highest rating  assigned by S&P. The
obligor's  capacity  to meet  its  financial  commitment  on the  obligation  is
extremely strong.

"AA" -- An obligation rated "AA" differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial  commitment on the
obligation is very strong.

"A" -- An  obligation  rated "A" is  somewhat  more  susceptible  to the adverse
effects of changes in circumstances and economic  conditions than obligations in
higher rated categories.  However,  the obligor's capacity to meet its financial
commitment on the obligation is still strong.

"BBB" -- An obligation  rated "BBB"  exhibits  adequate  protection  parameters.
However,  adverse economic conditions or changing  circumstances are more likely
to lead to a weakened  capacity of the obligor to meet its financial  commitment
on the obligation.

"BB," "B," "CCC," "CC," and "C" -- Obligations rated "BB," "B," "CCC," "CC," and
"C"  are  regarded  as  having  significant  speculative  characteristics.  "BB"
indicates  the least  degree of  speculation  and "C" the  highest.  While  such
obligations will likely have some quality and protective characteristics,  these
may  be  outweighed  by  large  uncertainties  or  major  exposures  to  adverse
conditions.

"BB" -- An obligation  rated "BB" is less  vulnerable  to nonpayment  than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or economic  conditions  which could lead to the
obligor's   inadequate  capacity  to  meet  its  financial   commitment  on  the
obligation.

"B" -- An obligation rated "B" is more vulnerable to nonpayment than obligations
rated "BB," but the obligor  currently  has the  capacity to meet its  financial
commitment  on  the  obligation.   Adverse  business,   financial,  or  economic
conditions will likely impair the obligor's  capacity or willingness to meet its
financial commitment on the obligation.

"CCC" -- An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable  business,  financial,  and economic conditions for the
obligor to meet its  financial  commitment  on the  obligation.  In the event of
adverse business,  financial, or economic conditions,  the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

"CC" -- An obligation rated "CC" is currently highly vulnerable to nonpayment.

"C" -- A subordinated  debt or preferred stock obligation rated "C" is currently
highly vulnerable to nonpayment. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed or similar action taken, but payments
on this  obligation  are  being  continued.  A "C" also  will be  assigned  to a
preferred stock issue in arrears on dividends or sinking fund payments, but that
is currently paying.

"D" -- An obligation rated "D" is in payment default. The "D" rating category is
used when  payments  on an  obligation  are not made on the date due even if the
applicable grace period has not expired,  unless S&P 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 or the taking of a similar action if payments on
an obligation are jeopardized.

                                       97
<PAGE>

"r" -- The symbol "r" is attached to the ratings of instruments with significant
noncredit  risks.  It  highlights  risks to principal or  volatility of expected
returns  which  are  not  addressed  in the  credit  rating.  Examples  include:
obligations  linked  or  indexed  to  equities,   currencies,   or  commodities;
obligations  exposed  to  severe  prepayment  risk -- such as  interest-only  or
principal-only  mortgage  securities;   and  obligations  with  unusually  risky
interest terms, such as inverse floaters.

"N.R." -- The  designation  "N.R."  indicates that no rating has been requested,
that there is  insufficient  information on which to base a rating,  or that S&P
does not rate a particular obligation as a matter of policy.

Note:  The ratings  from "AA" to "CCC" may be modified by the addition of a plus
(+) or minus (--) sign  designation to show relative  standing  within the major
rating categories.

Short-Term

"A-1" -- A short-term obligation rated "A-1" is rated in the highest category by
S&P. The obligor's  capacity to meet its financial  commitment on the obligation
is strong.  Within this category,  certain obligations are given a plus sign (+)
designation.  This indicates  that the obligor's  capacity to meet its financial
commitment on these obligations is extremely strong.

"A-2" -- A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse  effects  of changes  in  circumstances  and  economic  conditions  than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

"A-3" -- A  short-term  obligation  rated  "A-3"  exhibits  adequate  protection
parameters.  However,  adverse economic conditions or changing circumstances are
more likely to lead to a weakened  capacity of the obligor to meet its financial
commitment on the obligation.

"B" -- A  short-term  obligation  rated "B" is  regarded  as having  significant
speculative characteristics.  The obligor currently has the capacity to meet its
financial  commitment  on  the  obligation;  however,  it  faces  major  ongoing
uncertainties  which could lead to the obligor's  inadequate capacity to meet is
financial commitment on the obligation.

"C" -- A short-term  obligation rated "C" is currently  vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation.

"D" -- A short-term  obligation rated "D" is in payment default.  The "D" rating
category  is used when  payments on an  obligation  are not made on the date due
even if the  applicable  grace period has not expired,  unless S&P 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 or the taking of a similar action
if payments on an obligation are jeopardized.

Note:  Moody's  applies  numerical  modifiers 1, 2, and 3 in each generic rating
classification  from "Aa"  through  "Caa".  The  modifier 1  indicates  that the
obligation ranks in the higher end of its generic rating category;  the modifier
2 indicates a mid-range  ranking;  and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

Preferred Stock

Because  of the  fundamental  differences  between  preferred  stocks and bonds,
Moody's  employs a variation of our familiar bond rating  symbols in the quality
ranking of preferred stock.

These  symbols,  presented  below,  are designed to avoid  comparison  with bond
quality in  absolute  terms.  It should  always be borne in mind that  preferred
stock occupies a junior position to bonds within a particular  capital structure
and that these securities are rated within the universe of preferred stocks.

                                       98
<PAGE>

"aaa" -- An issue rated "aaa" is considered to be a top-quality preferred stock.
This  rating  indicates  good asset  protection  and the least risk of  dividend
impairment within the universe of preferred stocks.

"aa" -- An issue rated "aa" is  considered a high-grade  preferred  stock.  This
rating  indicates  that there is a reasonable  assurance  the earnings and asset
protection will remain relatively well maintained in the foreseeable future.

"a" -- An issue rated "a" is  considered to be an  upper-medium-grade  preferred
stock.  While risks are judged to be somewhat greater than in the "aaa" and "aa"
classifications, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

"baa" -- An issue  rated  "baa" is  considered  to be a  medium-grade  preferred
stock,  neither  highly  protected  nor  poorly  secured.   Earnings  and  asset
protection  appear adequate at present,  but may be questionable  over any great
length of time.

"ba" -- An issue rated "ba" is  considered  to have  speculative  elements.  Its
future cannot be considered well assured.  Earnings and asset  protection may be
very moderate and not well safeguarded  during adverse  periods.  Uncertainty of
position characterizes preferred stocks in this class.

"b" -- An issue rated "b"  generally  lacks the  characteristics  of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.

"caa" -- An issue rated  "caa" is likely to be in arrears on dividend  payments.
This  rating  designation  does not  purport to  indicate  the future  status of
payments.

"ca" -- An issue rated "ca" is  speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payments.

"c" -- This is the lowest-rated  class of preferred or preference stock.  Issues
so rated  can thus be  regarded  as  having  extremely  poor  prospects  of ever
attaining any real investment standing.

Note: As in the case of bond ratings, Moody's applies to preferred stock ratings
the numerical modifiers 1, 2, and 3 in rating  classifications "aa" through "b".
The  modifier  1  indicates  that the  security  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.

Prime Rating System (Short-Term)

Issuers rated Prime-1 (or supporting  institutions)  have a superior ability for
repayment of senior short-term debt obligations.  Prime-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  supporting  institutions)  have a strong  ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the  characteristics  cited  above but to a lesser  degree.


                                       99
<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.

Issuers rated Prime-3 (or supporting  institutions)  have an acceptable  ability
for  repayment  of  senior  short-term  obligations.   The  effect  of  industry
characteristics and market  compositions may be more pronounced.  Variability in
earnings and profitability may result in changes in the level of debt protection
measurements  and may  require  relatively  high  financial  leverage.  Adequate
alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

Statement Of Differences

The dagger symbol shall be expressed as "D."

Characters normally expressed as superscript shall be preceded by "pp."



                                      100
<PAGE>



                            PART C. OTHER INFORMATION


<TABLE>
<CAPTION>
Item 23           Exhibits:
-------           ---------
                  <S>      <C>          <C>
                  (a)      (1)   Amended and Restated Declaration of Trust dated June 27, 2006; (14)

                           (2)   Amended and Restated Designation of Series and Classes dated June 27, 2006; (14)

                           (3)   Redesignation of Class of Shares of Beneficial Interest dated October 20, 2006; (16)

                           (4)   Restated Designation of Series and Classes of Shares of Beneficial Interest dated
                                 December 20, 2006; (16)

                  (b)            By-Laws, dated June 27, 2006; (14)

                  (c)            Incorporated by reference to (a) above;

                  (d)      (1)   Amended and Restated Investment Management Agreement dated July 1, 2006, on behalf of
                                 DWS Commodity Securities Fund, DWS EAFE Equity Index Fund, DWS U.S. Bond Index Fund;
                                 Cash Management Fund Institutional, Cash Reserves Fund Institutional, Treasury Money
                                 Fund Investment, DWS Equity 500 Index Fund, Daily Assets Fund Institutional, DWS
                                 Inflation Protected Plus Fund; (15)

                           (2)   Sub-Advisory Agreement between Deutsche Investment Management Americas Inc. and
                                 Northern Trust Investments, N.A., dated April 25, 2003, as revised January 1, 2007;
                                 (17)

                  (e)      (1)   Distribution Agreement dated August 19, 2002; (3)

                           (2)   Exclusive Placement Agent Agreement dated August 19, 2002; (3)

                           (3)   Amendment to Distribution Agreement dated August 19, 2002; (3)


                  (f)      (1)   Form of Retirement Agreement between the Registrant and each of Martin J. Gruber,
                                 Graham E. Jones and Carl W. Vogt dated November 14, 2007, (filed herein);

                           (2)   Indemnification and Reimbursement Agreement between the Registrant and DIMA dated
                                 November 14, 2007, (filed herein);

                  (g)      (1)   Master Custodian Agreement between the Registrant and State Street Bank and Trust
                                 Company dated March 22, 2007 (filed herein);

                           (2)   Master Custodian Agreement between Registrant, on behalf of DWS Commodity Securities
                                 Fund, and Brown Brothers Harriman & Co., dated February 1, 2007; (17)

                  (h)      (1)   Form of Administrative Services Agreement between the Registrant and Deutsche
                                 Investment Management Americas Inc., (filed herein);

                           (2)   Form of Indemnification Agreements; (7)

                           (3)   Shareholder Services Plan dated June 1, 2006 on behalf of Cash Management Fund
                                 Institutional, Cash Reserves Fund Institutional and Treasury Money Fund Investment;
                                 (15)

                           (4)   Form of Mutual Fund Rule 22c-2 Information Sharing Agreement between Registrant and
                                 DWS Scudder Distributors, Inc.; (16)

                           (5)   Transfer Agency and Service Agreement between Registrant and DWS Scudder Investments
                                 Service Company, dated July 1, 2006; (16)

                           (6)   Form of Expense Limitation Agreement (filed herein)


                                       3
<PAGE>

                  (i)      (1)   Opinion of Willkie Farr & Gallagher LLP, counsel to the Registrant, with respect to
                                 DWS EAFE(R) Equity Index Fund and DWS U.S. Bond Index Fund; (12)

                           (2)   Opinion of Bingham McCutchen LLP, Massachusetts counsel to the Registrant, with
                                 respect to DWS EAFE(R) Equity Index Fund and DWS U.S. Bond Index Fund; (12)

                           (3)   Opinion of Willkie Farr & Gallagher LLP, counsel to the Registrant, with respect to
                                 Scudder Commodities Securities Fund; (8)

                           (4)   Opinion of Bingham McCutchen LLP, Massachusetts counsel to the Registrant, with
                                 respect to Scudder Commodities Securities Fund; (8)

                           (5)   Opinion of Willkie Farr & Gallagher LLP, counsel to the Registrant, with respect to
                                 Scudder Inflation Protected Plus Fund; (10)

                           (6)   Opinion of Bingham McCutchen LLP, Massachusetts counsel to the Registrant, with
                                 respect to Scudder Inflation Protected Plus Fund; (10)

                           (7)   Opinion of Willkie Farr & Gallagher LLP, counsel to the Registrant, with respect to
                                 Scudder Cash Management Fund Institutional, Scudder Cash Reserves Fund Institutional,
                                 Scudder Treasury Money Fund Institutional and Scudder Equity 500 Index Fund; (6)

                           (8)   Opinion of Bingham McCutchen LLP, Massachusetts counsel to the Registrant, with
                                 respect to Scudder Cash Management Fund Institutional, Scudder Cash Reserves Fund
                                 Institutional, Scudder Treasury Money Fund Institutional and Scudder Equity 500 Index
                                 Fund; (6)

                  (j)            Consent of independent registered public accounting firm (filed herein);

                  (k)            Omitted Financial Statements - Not Applicable;

                  (1)      (1)   Investment representation letter of initial shareholder of Equity 500 Index Fund; (2)

                           (2)   Investment representation letter of initial shareholder of Daily Assets Fund
                                 Institutional; (1)


                           (3)   Purchase Agreement dated February 4, 2005, between Scudder Institutional Funds, on
                                 behalf of Scudder Commodities Fund, and Deutsche Investment Management Americas Inc.;
                                 (9)


                           (4)   Purchase Agreement dated June 27, 2005, between Scudder Institutional Funds, on behalf
                                 of DWS Inflation Protected Plus Fund, and Deutsche Asset Management, Inc.; (10)

                  (m)      (1)   Rule 12b-1 Plan dated June 27, 2006 for DWS Commodity Securities Fund, Class A Shares;
                                 (14)

                           (2)   Rule 12b-1 Plan dated June 27, 2006 for DWS Commodity Securities Fund, Class B Shares;
                                 (14)

                           (3)   Rule 12b-1 Plan dated June 27, 2006 for DWS Commodity Securities Fund, Class C Shares;
                                 (14)

                           (4)   Rule 12b-1 Plan dated June 27, 2006, for DWS Inflation Protected Plus Fund, Class A
                                 Shares; (15)

                           (5)   Rule 12b-1 Plan dated June 27, 2006, for DWS Inflation Protected Plus Fund, Class B
                                 Shares; (15)

                           (6)   Rule 12b-1 Plan dated June 27, 2006, for DWS Inflation Protected Plus Fund, Class C
                                 Shares; (15)

                  (n)      (1)   Multiple Class Expense Allocation Plan Adopted Pursuant to Rule 18f-3 dated June 27,
                                 2005; (10)

                           (2)   Form of Amended and Restated Multi-Distribution System Plan; (16)

                  (p)      (1)   Code of Ethics for Deutsche Asset Management -- U.S., dated January 1, 2008, (filed
                                 herein);

                           (2)   Consolidated Fund Code of Ethics dated March 14, 2006; (15)


                                       4
<PAGE>

                           (3)   The Code of Ethics of Northern Trust Investments, N.A. dated February 1, 2005; (11)

                  (q)            Power of Attorney dated June 27, 2006; (13)

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


(1)      Incorporated by reference to Post-Effective Amendment No. 21 to the Registration
         Statement as filed with the Commission on September 24, 1996.

(2)      Incorporated by reference to Post-Effective Amendment No. 4 to the Registration
         Statement as filed with the Commission on April 30, 1992.

(3)      Incorporated by reference to Post-Effective Amendment No. 36 to the Registration Statement as
         filed with the Commission on February 24, 2003.

(5)      Incorporated by reference to Post-Effective Amendment No. 41 to the Registration Statement as
         filed with the Commission on February 27, 2004.

(6)      Incorporated by reference to Post-Effective Amendment No. 42 to the Registration Statement as
         filed with the Commission on April 29, 2004.

(7)      Incorporated by reference to Post-Effective Amendment No. 43 to the Registration Statement as
         filed with the Commission on November 16, 2004.

(8)      Incorporated by reference to Post-Effective Amendment No. 45 to the Registration Statement as
         filed with the Commission on January 28, 2005.

(9)      Incorporated by reference to Post-Effective Amendment No. 46 to the Registration Statement as
         filed with the Commission on February 4, 2005.

(10)     Incorporated by reference to Post-Effective Amendment No. 54 to the Registration Statement as
         filed with the Commission on July 1, 2005.

(11)     Incorporated by reference to Post-Effective Amendment No. 62 to the Registration Statement as
         filed with the Commission on April 28, 2006.

(12)     Incorporated by reference to Post-Effective Amendment No. 65 to the Registration Statement as
         filed with the Commission on June 13, 2006;

(13)     Incorporated by reference to Post-Effective Amendment No. 66 to the Registration Statement as
         filed with the Commission on June 30, 2006.

(14)     Incorporated by reference to Post-Effective Amendment No. 67 to the Registration Statement as
         filed with the Commission on September 29, 2006.

(15)     Incorporated by reference to Post-Effective Amendment No. 68 to the Registration Statement as
         filed with the Commission on January 26, 2007.

(16)     Incorporated by reference to Post-Effective Amendment No. 69 to the Registration Statement as
         filed with the Commission on April 30, 2007.

(17)     Incorporated by reference to Post-Effective Amendment No. 70 to the Registration Statement as
         filed with the Commission on October 1, 2007.
</TABLE>



                                       5
<PAGE>

Item 24.          Persons Controlled by or Under Common Control with Registrant
--------          -------------------------------------------------------------

                  Information pertaining to persons controlled by or under
                  common control with Registrant is incorporated by reference
                  from the Statement of Additional Information contained in Part
                  B of this Registration Statement.

Item 25.          Indemnification
--------          ---------------

Article IV 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.

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
"Independent 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
made to the Independent Trustees by Deutsche Bank in connection with the
Independent 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. (hereafter, "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 Independent Trustees) and consultants, whether retained by the
Registrant or the Independent 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, that 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, and in light of
the rebuttable presumption generally afforded to non-interested board members of
an investment company that they have not engaged in disabling conduct, DIMA has
also agreed, subject to applicable law and regulation, to indemnify and hold
harmless each of the Independent 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 Independent Trustees, arising
from the matters alleged in any Private Litigation and Enforcement Actions or
matters arising from or similar in subject matter to the matters alleged in the
Private Litigation and Enforcement Actions (collectively, "Covered Matters"),
including without limitation:


                                       6
<PAGE>

                  1. all reasonable legal and other expenses incurred by the
                  Independent 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 reasonable legal and other expenses
                  incurred by any Independent Trustee in connection with any
                  judgment resulting from, or settlement of, any such
                  proceeding, action or matter;

                  3. any loss or reasonable legal and other expenses incurred by
                  any Independent 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 Independent Trustees or acting otherwise) for the
                  benefit of the Independent 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 reasonable legal and other expenses incurred by
                  any Independent Trustee, whether or not such loss or expense
                  is incurred with respect to a Covered Matter, which is
                  otherwise covered under the terms of any specified policy of
                  insurance, but for which the Independent 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 any
                  Covered Matter; provided, that the total amount that DIMA will
                  be obligated to pay under this provision for all loss or
                  expense shall not exceed the amount that DIMA and any of its
                  affiliates actually receive under that policy of insurance for
                  or with respect to any and all Covered Matters; and

                  5. all liabilities and reasonable legal and other expenses
                  incurred by any Independent 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 Independent Trustee (i) with respect to any particular
proceeding or action as to which the Board of the Registrant has determined that
such Independent Trustee ultimately would not be entitled to indemnification
with respect thereto, or (ii) for any liability of the Independent Trustee to
the Registrant or its shareholders to which such Independent Trustee would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the Independent 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 DIMA has paid costs or
expenses under the agreement to any individual Independent Trustee with respect
to a particular proceeding or action, and there is a final adjudication in such
proceeding or action of the Independent Trustee's liability to the Registrant or
its shareholders by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the Independent Trustee's duties as a Trustee of the
Registrant, such Independent 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


                                       7
<PAGE>

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 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.

                                       8
<PAGE>

         (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>
         Philipp Hensler                Director, Chairman of the Board and CEO   None
         345 Park Avenue
         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

         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


                                       9
<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
          ----------------               ------------------------------           -----------------------

         Anjie LaRocca                  Assistant Secretary                       None
         345 Park Avenue
         New York, NY 10154

         (c)      Not applicable
</TABLE>

Item 28.          Location of Accounts and Records
--------          --------------------------------

   DWS Institutional Funds:                           345 Park Avenue
   (Registrant)                                       New York, New York  10154

   Deutsche Investment Management Americas Inc.       345 Park Avenue
   (Investment Advisor)                               New York, NY 10154

   Deutsche Investment Management Americas Inc.       345 Park Avenue
   (Administrator)                                    New York, NY 10154

                                                      Two International Place
                                                      Boston, MA 02110

   DWS Scudder Investments Service Company            222 South Riverside Plaza
   (Transfer Agent)                                   Chicago, IL 60606

   DWS Scudder Distributors, Inc.                     222 South Riverside Plaza
   (Distributor)                                      Chicago, IL 60606

   State Street Bank and Trust Company                225 Franklin Street
   (Custodian)                                        Boston, MA 02110

   Brown Brothers Harriman                            40 Water Street
   (Custodian)                                        Boston, MA 02110

   DST Systems, Inc.                                  127 West 10th Street
   (Sub-Transfer Agent and                            Kansas City, MO 64105
   Sub-Dividend Distribution Agent)


Item 29           Management Services:
-------           --------------------

                  Not applicable

Item 30           Undertakings:
-------           -------------

                  Not applicable



                                       10
<PAGE>
                                   SIGNATURES
                                   ----------


         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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 22nd day of January 2008.

                                                DWS INSTITUTIONAL FUNDS

                                                By:  /s/ Michael G. Clark
                                                     ---------------------------
                                                     Michael G. Clark

         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                                    January 22, 2008

 /s/ Paul H. Schubert
 -------------------------------------
 Paul H. Schubert                           Chief Financial Officer and Treasurer        January 22, 2008

 /s/Henry P. Becton, Jr.
 -------------------------------------
 Henry P. Becton, Jr.*                      Trustee                                      January 22, 2008

 /s/Dawn-Marie Driscoll
 -------------------------------------
 Dawn-Marie Driscoll*                       Chairperson and Trustee                      January 22, 2008

 /s/Keith R. Fox
 -------------------------------------
 Keith R. Fox*                              Trustee                                      January 22, 2008

 /s/Kenneth C. Froewiss
 -------------------------------------
 Kenneth C. Froewiss*                       Trustee                                      January 22, 2008

 /s/Martin J. Gruber
 -------------------------------------
 Martin J. Gruber*                          Trustee                                      January 22, 2008

 /s/Richard J. Herring
 -------------------------------------
 Richard J. Herring*                        Trustee                                      January 22, 2008

 /s/Graham E. Jones
 -------------------------------------
 Graham E. Jones*                           Trustee                                      January 22, 2008

 /s/Rebecca W. Rimel
 -------------------------------------
 Rebecca W. Rimel*                          Trustee                                      January 22, 2008

 /s/William N. Searcy, Jr.
 -------------------------------------
 William N. Searcy, Jr.*                    Trustee                                      January 22, 2008

 /s/Jean Gleason Stromberg
 -------------------------------------
 Jean Gleason Stromberg*                    Trustee                                      January 22, 2008


<PAGE>
 SIGNATURE                                  TITLE                                        DATE
 ---------                                  -----                                        ----

 /s/Carl W. Vogt
 -------------------------------------
 Carl W. Vogt*                              Trustee                                      January 22, 2008

 /s/Axel Schwarzer
 -------------------------------------
 Axel Schwarzer*                            Trustee                                      January 22, 2008
</TABLE>


*By:     /s/ Caroline Pearson
         ------------------------------
         Caroline Pearson**
         Assistant Secretary

**       Attorney-in-fact pursuant to the power of attorney as contained in and
         incorporated by reference to Post-Effective Amendment No. 66 to the
         Registration Statement, as filed on June 30, 2006.







                                       2


<PAGE>


                                                      1933 Act File No. 33-34079
                                                     1940 Act File No. 811-06071




                       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. 86
                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                             DWS INSTITUTIONAL FUNDS


                                       11
<PAGE>



                             DWS INSTITUTIONAL FUNDS

                                  EXHIBIT INDEX
                                  -------------


                                     (f)(1)
                                     (f)(2)
                                     (g)(1)
                                     (h)(1)
                                     (h)(6)
                                       (j)
                                     (p)(1)









                                       12