STATEMENT OF ADDITIONAL INFORMATION


                   May 1, 2008 (As Revised February 17, 2009)

                             DWS INSTITUTIONAL FUNDS
                            DWS Equity 500 Index Fund
                            DWS U.S. Bond Index Fund

                                     Class S



This combined Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the prospectuses dated May 1, 2008 for
DWS Equity 500 Index Fund ("Equity 500 Index Fund"), and February 17, 2009, for
DWS U.S. Bond Index Fund ("U.S. Bond Index Fund") (each, a "Fund" and together,
the "Funds"), each a series of DWS Institutional Funds (the "Institutional
Trust" or the "Trust"), as amended from time to time (the "Prospectus"), a copy
of which may be obtained without charge by contacting DWS Investments
Distributors, Inc. ("DIDI" or the "Distributor"), 222 South Riverside Plaza,
Chicago, Illinois 60606, (800) 728-3337 or from the firm from which this SAI was
obtained. The Prospectus is also available along with other materials on the
Securities and Exchange Commission's (the "SEC" or "Commission") Internet Web
site (http://www.sec.gov).

Portions of the Annual Reports to Shareholders of each Fund, dated December 31,
2007, and the Semi-Annual Reports to Shareholders of each Fund, dated June 30,
2008, are incorporated herein by reference, as specified herein. A copy of each
Fund's Annual Report may be obtained without charge from Shareholder Services by
calling (800) 728-3337.

This SAI is incorporated by reference into the corresponding Prospectus of the
applicable Fund.


                                TABLE OF CONTENTS
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INVESTMENT RESTRICTIONS.......................................................1

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS..............................5
         Investment Objectives................................................5
         Investment Policies..................................................5

MANAGEMENT OF THE FUNDS AND PORTFOLIO........................................52
         Investment Advisor for the Funds and Portfolio......................52
         Subadvisor..........................................................55

FUND SERVICE PROVIDERS.......................................................62
         Administrator for the Funds and Portfolio...........................62
         Distributor.........................................................63
         Independent Registered Public Accounting Firm.......................64
         Legal Counsel.......................................................64
         Custodian and Transfer Agent........................................64

PORTFOLIO TRANSACTIONS.......................................................65

PURCHASE AND REDEMPTION OF SHARES............................................69

DIVIDENDS....................................................................83

TAXES........................................................................84

VALUATION OF SECURITIES......................................................96

BOARD MEMBERS AND OFFICERS...................................................97

TRUST ORGANIZATION..........................................................115

PROXY VOTING GUIDELINES.....................................................117

ADDITIONAL INFORMATION......................................................118

FINANCIAL STATEMENTS........................................................119

APPENDIX A -- PROXY VOTING GUIDELINES.......................................120

APPENDIX B -- RATINGS OF INVESTMENTS........................................145



                             INVESTMENT RESTRICTIONS

As used in this SAI, "Funds" means Equity 500 Index Fund and U.S. Bond Index
Fund. Unlike other mutual funds, and as described in the Prospectuses for Equity
500 Index Fund, the Trust seeks to achieve the investment objective of the
Equity 500 Index Fund by investing substantially all the investable assets of
the Fund in a diversified open-end management investment company (or a series
thereof) having the same investment objective as the Fund. This investment
company is DWS Equity 500 Index Portfolio (the "Portfolio").

The following investment restrictions are "fundamental policies" of each Fund
and the Portfolio and may not be changed with respect to the Fund or the
Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of the
outstanding voting securities" under the Investment Company Act of 1940, as
amended (the "1940 Act"), and as used in this SAI and the Prospectus, means,
with respect to the Fund (or the Portfolio), the lesser of (i) 67% or more of
the outstanding voting securities of the Fund (or of the total beneficial
interests of the Portfolio) present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund (or of the total beneficial
interests of the Portfolio) are present or represented by proxy or (ii) more
than 50% of the outstanding voting securities of the Fund (or of the total
beneficial interests of the Portfolio). Whenever the Trust is requested to vote
on a fundamental policy of the Portfolio, the Trust will hold a meeting of the
Equity 500 Index Fund's shareholders and will cast its vote as instructed by
that Fund's shareholders. Fund shareholders who do not vote will not affect the
Trust's votes at the Portfolio meeting. The percentage of the Trust's votes
representing Fund shareholders not voting will be voted by the Trustees of the
Trust in the same proportion as the Fund shareholders who do, in fact, vote.

As a matter of fundamental policy the Portfolio and each of the Funds may not
(except that no investment restriction of a Fund shall prevent a Fund from
investing all of its assets in an open-end investment company with substantially
the same investment objectives):

(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 a Fund may be deemed to be an underwriter in
         connection with the disposition of portfolio securities;

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

(6)      purchase or sell commodities, except as permitted by the 1940 Act, as
         amended, and as interpreted or modified by the regulatory authority
         having jurisdiction, from time to time;

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

The Portfolio/Funds have elected to be treated as a diversified investment
company, as that term is used in the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. A
diversified fund may not, with respect to 75% of total assets, invest in more
than 5% of its total assets in 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.

As a matter of nonfundamental policy, the Portfolio (or the Trust, on behalf of
each Fund) will not as a matter of operating policy (except that no operating
policy shall prevent a Fund from investing all of its assets in an open-end
investment company with substantially the same investment objectives):

(1)      borrow money (including through reverse repurchase or forward roll
         transactions) for any purpose in excess of 5% of the Portfolio's/Fund's
         total assets (taken at market), except that the Portfolio/Funds may
         borrow for temporary or emergency purposes up to 1/3 of its net assets;

(2)      pledge, mortgage or hypothecate for any purpose in excess of 10% of the
         Portfolio's/Fund's total assets (taken at market value), provided that
         collateral arrangements with respect to options and futures, including
         deposits of initial deposit and variation margin, and reverse
         repurchase agreements are not considered a pledge of assets for
         purposes of this restriction;

(3)      purchase any security or evidence of interest therein on margin, except
         that such short-term credit as may be necessary for the clearance of
         purchases and sales of securities may be obtained and except that
         deposits of initial deposit and variation margin may be made in
         connection with the purchase, ownership, holding or sale of futures;

(4)      sell securities it does not own such that the dollar amount of such
         short sales at any one time exceeds 25% of the net equity of the
         Portfolio/Funds, and the value of securities of any one issuer in which
         the Portfolio/Funds is short exceeds the lesser of 2% of the value of
         the Portfolio's/Fund's net assets or 2% of the securities of any class
         of any US issuer and, provided that short sales may be made only in
         those securities which are fully listed on a national securities
         exchange or a foreign exchange (This provision does not include the
         sale of securities the Portfolio/Funds contemporaneously own or have
         the right to obtain securities equivalent in kind and amount to those
         sold, i.e., short sales against the box.) (the Portfolio/Funds have no
         current intention to engage in short selling);

(5)      invest for the purpose of exercising control or management;

(6)      purchase securities issued by any investment company except by purchase
         in the open market where no commission or profit to a sponsor or dealer
         results from such purchase other than the customary broker's
         commission, or except when such purchase, though not made in the open
         market, is part of a plan of merger or consolidation; provided,
         however, that securities of any investment company will not be
         purchased for the Portfolio/Funds if such purchase at the time thereof
         would cause: (a) more than 10% of the Portfolio's/Fund's total assets
         (taken at the greater of cost or market value) to be invested in the
         securities of such issuers; (b) more than 5% of the Portfolio's/Fund's
         total assets (taken at the greater of cost or market value) to be
         invested in any one investment company; or (c) more than 3% of the
         outstanding voting securities of any such issuer to be held for the
         Portfolio/Funds, unless permitted to exceed these imitations by an
         exemptive order of the SEC; provided further that, except in the case
         of a merger or consolidation, the Portfolio/Funds shall not purchase
         any securities of any open-end investment company unless the
         Portfolio/Funds (1) waive the investment advisory fee with respect to
         assets invested in other open-end investment companies and (2) incur no
         sales charge in connection with the investment (as an operating policy,
         each Portfolio will not invest in another open-end registered
         investment company);

(7)      invest more than 15% of the Portfolio's/Fund's net assets (taken at the
         greater of cost or market value) in securities that are illiquid or not
         readily marketable not including (a) Rule 144A securities that have
         been determined to be liquid by the Board of Trustees; and (b)
         commercial paper that is sold under section 4(2) of the 1933 Act which:
         (i) is not traded flat or in default as to interest or principal; and
         (ii) is rated in one of the two highest categories by at least two
         nationally recognized statistical rating organizations and the
         Portfolio's/Fund's Board of Trustees have determined the commercial
         paper to be liquid; or (iii) is rated in one of the two highest
         categories by one nationally recognized statistical rating agency and
         the Portfolio's/Fund's Board of Trustees have determined that the
         commercial paper is equivalent quality and is liquid;

(8)      write puts and calls on securities unless each of the following
         conditions are met: (a) the security underlying the put or call is
         within the Investment Practices of the Portfolio/Funds and the option
         is issued by the Options Clearing Corporation, except for put and call
         options issued by non-US entities or listed on non-US securities or
         commodities exchanges; (b) the aggregate value of the obligations
         underlying the puts determined as of the date the options are sold
         shall not exceed 5% of the Portfolio's/Fund's net assets; (c) the
         securities subject to the exercise of the call written by the
         Portfolio/Funds must be owned by the Portfolio/Funds at the time the
         call is sold and must continue to be owned by the Portfolio/Funds until
         the call has been exercised, has lapsed, or the Portfolio/Funds have
         purchased a closing call, and such purchase has been confirmed, thereby
         extinguishing the Portfolio's/Fund's obligation to deliver securities
         pursuant to the call it has sold; and (d) at the time a put is written,
         the Portfolio/Funds establish a segregated account with its custodian
         consisting of cash or short-term US government securities equal in
         value to the amount the Portfolio/Funds will be obligated to pay upon
         exercise of the put (this account must be maintained until the put is
         exercised, has expired, or the Portfolio/Funds have purchased a closing
         put, which is a put of the same series as the one previously written);

(9)      buy and sell puts and calls on securities, stock index futures or
         options on stock index futures, or financial futures or options on
         financial futures unless such futures or options are written by other
         persons and: (a) the options or futures are offered through the
         facilities of a national securities association or are listed on a
         national securities or commodities exchange, except for put and call
         options issued by non-US entities or listed on non-US securities or
         commodities exchanges; (b) the aggregate premiums paid on all such
         options which are held at any time do not exceed 20% of the
         Portfolio's/Fund's total net assets; and (c) the aggregate margin
         deposits required on all such futures or options thereon held at any
         time do not exceed 5% of the Portfolio's/Fund's total assets; and

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

As a matter of non-fundamental policy, each Fund currently does not intend to
lend portfolio securities in an amount greater than 33 1/3% of its total assets.

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.

Master/feeder Fund Structure. The Board of Trustees has the discretion to retain
the current distribution arrangement for the Fund while investing in a master
fund in a master/feeder fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests most or all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.

Special Information Concerning Master-Feeder Fund Structure. Unlike other
open-end management investment companies (mutual funds) which directly acquire
and manage their own portfolio securities, the Equity 500 Index Fund seeks to
achieve its investment objective by investing substantially all of its assets in
the Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds,
investment vehicles or institutional investors. Such investors will invest in
the Portfolio on the same terms and conditions and will pay a proportionate
share of the Portfolio's expenses. However, the other investors investing in the
Portfolio are not required to sell their shares at the same public offering
price as the Fund due to variations in sales commissions and other operating
expenses. Therefore, investors in the Fund should be aware that these
differences might result in differences in returns experienced by investors in
the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available from the Fund's Service
Center at (800) 728-3337.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing the Fund's shareholders not voting will be voted by
the Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.

Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
redemption requests, such as borrowing.

The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees would consider what action might be taken, including the investment of
all the assets of the Fund in another pooled investment entity having the same
investment objective as the Fund or the retaining of an investment advisor to
manage the Fund's assets in accordance with the investment policies described
herein with respect to the Portfolio.

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to, but without the approval of, the Fund's shareholders. The
investment objective of the Portfolio is also not a fundamental policy.
Shareholders of the Fund will receive 60 days' prior written notice with respect
to any change in the investment objective of the Fund or the Portfolio.

To meet federal income tax requirements for qualification as a regulated
investment company, each 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 which the Fund controls 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.

                INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

Investment Objectives

The following is a description of each Fund's investment objective. There can,
of course, be no assurance that any Fund will achieve its investment
objective(s).

Equity 500 Index Fund seeks to replicate as closely as possible, before
expenses, the performance of the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index") which emphasizes stocks of large US companies. Under
normal circumstances, the Fund (through its investment in a portfolio) will
invest at least 80% of its assets, determined at the time of purchase, in stocks
of companies included in the S&P 500 Index and in derivative instruments, such
as futures contracts and options, that provide exposure to the stocks of
companies in the S&P 500 Index. The Fund will notify its shareholders 60 days
prior to a change in this investment policy.

U.S. Bond Index Fund seeks to replicate as closely as possible, before expenses,
the performance of the Barclays Capital U.S. Aggregate Index (the "Barclays
Capital US Aggregate Index"), which emphasizes government mortgage-backed and
corporate investment grade debt securities. Under normal circumstances, the Fund
will invest at least 80% of its assets, determined at the time of purchase, in
securities included in the Barclays Capital US Aggregate Index and in derivative
instruments, such as futures contracts and options, that provide exposure to the
securities listed in the Barclays Capital US Aggregate Index. The Fund will
notify its shareholders 60 days prior to a change in this investment policy.

Investment Policies

Equity 500 Index Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Portfolio. The Trust may withdraw the
Fund's investment from the Portfolio at any time if the Board of Trustees of the
Trust determines that it is in the best interests of the Fund to do so.

Descriptions in this SAI of a particular investment practice or technique in
which a fund may engage are meant to describe the spectrum of investments that
Deutsche Investment Management Americas Inc. ("DIMA," or the "Advisor") in its
discretion might, but is not required to, use in managing the fund's portfolio
assets. The Advisor, may in its discretion at any time employ such practice,
technique or instrument for one or more funds but not for all funds advised by
it. Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques or instruments may not be principal activities of
the fund, but, to the extent employed, could from time to time have a material
impact on a fund's performance.

Asset Segregation. Certain investment transactions expose each Fund to an
obligation to make future payments to third parties. Examples of these types of
transactions, include, but are not limited to, reverse repurchase agreements,
short sales, dollar rolls, when-issued, delayed-delivery or forward commitment
transactions and certain derivatives such as swaps, futures, forwards, and
options. To the extent that a Fund engages in such transactions, a Fund will (to
the extent required by applicable law) either (1) segregate cash or liquid
assets in the prescribed amount or (2) otherwise "cover" its future obligations
under the transaction, such as by holding an offsetting investment. If a Fund
segregates sufficient cash or other liquid assets or otherwise "covers" its
obligations under such transactions, the Fund will not consider the transactions
to be borrowings for purposes of its investment restrictions or "senior
securities" under the 1940 Act, and therefore, such transactions will not be
subject to the 300% asset coverage requirement under the 1940 Act otherwise
applicable to borrowings by the Fund.

In some cases (e.g., with respect to futures and forwards that are contractually
required to "cash-settle"), a Fund will segregate cash or other liquid assets
with respect to the amount of the daily net (marked-to-market) obligation
arising from the transaction, rather than the notional amount of the underlying
contract. By segregating assets in an amount equal to the net obligation rather
than the notional amount, a Fund will have the ability to employ leverage to a
greater extent than if it set aside cash or other liquid assets equal to the
notional amount of the contract, which may increase the risk associated with
such transactions.

A Fund may utilize methods of segregating assets or otherwise "covering"
transactions that are currently or in the future permitted under the 1940 Act,
the rules and regulation thereunder, or orders issued by the Securities and
Exchange Commission ("SEC") thereunder. For these purposes, interpretations and
guidance provided by the SEC staff may be taken into account when deemed
appropriate by the Fund.

Assets used as segregation or cover cannot be sold while the position in the
corresponding transaction is open, unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of a Fund's
assets for segregation and cover purposes could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.

Segregating assets or otherwise "covering" for these purposes does not
necessarily limit the percentage of the assets of the Fund that may be at risk
with respect to certain derivative transactions.

Equity Securities

General (Equity 500 Index Fund only). The Portfolio may invest in equity
securities listed on any domestic or non-US securities exchange or traded in the
OTC market as well as certain restricted or unlisted securities. As used herein,
"equity securities" include common stock, preferred stock, trust or limited
partnership interests, rights and warrants to subscribe to or purchase such
securities (except Equity 500 Index Fund) and convertible securities consisting
of debt securities or preferred stock that may be converted into common stock or
that carry the right to purchase common stock.

Common Stocks (Equity 500 Index Fund only). Common stocks, the most familiar
type of equity securities, represent an equity (i.e., ownership) interest in a
corporation. They may or may not pay dividends or carry voting rights. Common
stock occupies the most junior position in a company's capital structure.
Although equity securities have a history of long-term growth in value, their
prices fluctuate based on changes in a company's financial condition, as well as
changes in overall market and economic conditions. This affects the value of the
shares of the Portfolio, and thus the value of your investment. Smaller
companies are especially sensitive to these factors.

Preferred Stock (Equity 500 Index Fund only). The Portfolio may invest in
preferred stock. Preferred stock has a preference (i.e., ranks higher) in
liquidation (and generally dividends) over common stock but is subordinated
(i.e., ranks lower) in liquidation to fixed income securities. Dividends on
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 stocks generally entail less risk than common
stocks. As a general rule the market value of preferred stocks with fixed
dividend rates and no conversion rights moves inversely with interest rates and
perceived credit risk, with the price determined by the dividend rate. Some
preferred stocks are convertible into other securities (e.g., common stock) at a
fixed price and ratio or upon the occurrence of certain events. The market price
of convertible preferred stocks generally reflects an element of conversion
value. Because many preferred stocks lack a fixed maturity date, these
securities generally fluctuate substantially in value when interest rates
change; such fluctuations often exceed those of long-term bonds of the same
issuer. Some preferred stocks pay an adjustable dividend that may be based on an
index, formula, auction procedure or other dividend rate reset mechanism. In the
absence of credit deterioration, adjustable rate preferred stocks tend to have
more stable market values than fixed rate preferred stocks.

All preferred stocks are also subject to the same types of credit risks as
corporate bonds. In addition, because preferred stock is subordinate to debt
securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by the Standard & Poor's Division of The
McGraw-Hill Companies, Inc. ("S&P") and/or Moody's Investors Service, Inc.
("Moody's") or another rating agency, although there is no minimum rating which
a preferred stock must have to be an eligible investment for the Portfolio.
Generally, however, the preferred stocks in which the Portfolio invests will be
rated at least CCC by S&P or Caa by Moody's or the equivalent by another rating
agency or, if unrated, of comparable quality in the opinion of the portfolio
management team. Preferred stocks rated CCC by S&P are regarded as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations and represent the highest degree of speculation among securities
rated between BB and CCC; preferred stocks rated Caa by Moody's are likely to be
in arrears on dividend payments. Moody's ratings with respect to preferred
stocks do not purport to indicate the future status of payments of dividends.

Medium- and Small-Capitalization Stocks (Equity 500 Index Fund only). The
Portfolio invests in medium-capitalization stocks. Historically, medium- and
small-capitalization stocks have been more volatile in price than the
larger-capitalization stocks included in the S&P 500. Among the reasons for the
greater price volatility of these securities are the less certain growth
prospects of smaller firms, the lower degree of liquidity in the markets for
such stocks, and the greater sensitivity of medium- and small-size companies to
changing economic conditions. In addition to exhibiting greater volatility,
medium- and small-size company stocks may fluctuate independently of larger
company stocks. Medium- and small-size company stocks may decline in price as
larger company stocks rise, or rise in prices as large company stock decline.

Warrants. (EAFE(R) Equity Index Fund only.) The Fund may invest up to 5% of its
total assets in warrants listed on the NYSE or ASE (2% of its total assets in
warrants not listed on the NYSE or ASE). Warrants are securities that give the
holder the right but not the obligation 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 specified period (or in perpetuity). Warrants may
be issued in units with other securities or separately, and may be freely
transferable and traded on exchanges. Investing in warrants can provide a
greater potential for profit or loss than an equivalent investment in the
underlying security, and thus is a speculative investment. At the time of issue,
the cost of a warrant is substantially less than the cost of the underlying
security itself, and price movements in the underlying security are generally
magnified in the price movements of the warrant. This leveraging effect enables
the investor to gain exposure to the underlying security with a relatively low
capital investment. This leveraging increases an investor's risk, however, in
the event of a decline in the value of the underlying security and can result in
a complete loss of the amount invested in the warrant.

While the market value of a warrant tends to be more volatile than that of the
securities underlying the warrant, changes in the market value of a warrant may
not necessarily correlate with that of the underlying security. A warrant ceases
to have value if it is not exercised prior to the expiration date, if any, 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. The value of a warrant may
decline because of a decline in the value of the underlying security, the
passage of time, changes in interest rates or in the dividend or other policies
of the company whose equity underlies the warrant or a change in the perception
as to the future price of the underlying security, or any combination thereof.
Also, warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company.

Convertible Securities (Equity 500 Index Fund only). The Portfolio may invest in
convertible securities. A convertible security is a bond or preferred stock,
which may be converted at a stated price within a specific period of time into a
specified number of shares of common stock of the same or different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but are generally subordinate to non-convertible debt securities.
While providing a fixed income stream, generally higher in yield than in the
income derived from a common stock but lower than that afforded by a
non-convertible debt security, a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of common stock into which it is convertible.

The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of convertible preferred stock, the holders' claims on assets and
earnings are subordinated to the claims of all creditors and are senior to the
claims of common shareholders.

In general, the market value of a convertible security is the greater of its
investment value (its value as a fixed income security) or its conversion values
(the value of the underlying shares of common stock if the security is
converted). Because a convertible security is a fixed income security, its
market value generally increases when interest rates decline and generally
decreases when interest rates rise; however, the price of a convertible security
also generally increases as the market value of the underlying stock increases,
and generally decreases as the market value of the underlying stock declines.
Investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

Fixed Income Securities and Money Market Instruments

General. (U.S. Bond Index Fund only -- but only for domestic fixed income
securities.) The Fund may invest in a broad range of domestic fixed income
(debt) securities. Fixed income securities, including (but not limited to)
bonds, are used by issuers to borrow money from investors. The issuer pays the
investor a fixed or variable rate of interest, and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.

The value of fixed income securities in the Fund 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.

In periods of declining interest rates, the yield (the income generated over a
stated period of time) of the Fund that invests in fixed income securities 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. Also, when interest
rates are falling, the inflow of net new money to the Fund from the continuous
sale of its shares will likely be invested in portfolio instruments producing
lower yields than the balance of the Fund, 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 investing in fixed income securities can generally be
expected to change as general levels of interest rates fluctuate.

Fixed Income Security Risk. (U.S. Bond Index Fund only.) Fixed income securities
generally expose the Fund to five types of risk: (1) interest rate risk (the
potential for fluctuations in bond prices due to changing interest rates); (2)
income risk (the potential for a decline in the Fund's income due to falling
market interest rates); (3) credit risk (the possibility that a bond issuer will
fail to make timely payments of either interest or principal to the Fund); (4)
prepayment risk or call risk (the likelihood that, during periods of falling
interest rates, securities with high stated interest rates will be prepaid, or
"called" prior to maturity, requiring the Fund to invest the proceeds at
generally lower interest rates); and (5) extension risk (the likelihood that as
interest rates increase, slower than expected principal payments may extend the
average life of fixed income securities, which will have the effect of locking
in a below-market interest rate, increasing the security's duration and reducing
the value of the security).

Short-Term Instruments. When the Portfolio/Funds experience large cash inflows,
for example, through the sale of securities or of their shares and attractive
investments are unavailable in sufficient quantities, the Portfolio/Funds may
hold short-term investments (or shares of money market mutual funds) for a
limited time pending availability of such investments.

Short-term instruments consist of foreign and domestic: (1) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (2) other investment grade short-term
debt securities; (3) investment grade commercial paper; (4) bank obligations,
including negotiable certificates of deposit, time deposits and bankers'
acceptances; and (5) repurchase agreements. At the time a Portfolio/Fund invests
in commercial paper, bank obligations or repurchase agreements, the issuer or
the issuer's parent must have outstanding debt, commercial paper or bank
obligations rated investment grade; or, if no such ratings are available, the
instrument must be deemed to be of comparable quality in the opinion of the
portfolio management team. These instruments may be denominated in US dollars or
in foreign currencies.

At the time the Portfolio/Funds invest in commercial paper, bank obligations or
repurchase agreements, the issuer of the issuer's parent must have outstanding
debt rated AA or higher by S&P or Aa or higher by Moody's or outstanding
commercial paper or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or,
if no such ratings are available, the instrument must be of comparable quality
in the opinion of the portfolio management team. These instruments may be
denominated in US dollars or in foreign currencies.

Obligations of Banks and Other Financial Institutions. The Portfolio/Funds may
invest in US dollar-denominated fixed rate or variable rate obligations of US or
foreign financial institutions, including banks. Obligations of domestic and
foreign financial institutions in which the Portfolio/Funds may invest include
(but are not limited to) certificates of deposit, bankers' acceptances, bank
time deposits, commercial paper, and other US dollar-denominated instruments
issued or supported by the credit of US or foreign financial institutions,
including banks.

For purposes of the Portfolio's/Fund's investment policies with respect to bank
obligations, the assets of a bank will be deemed to include the assets of its
domestic and foreign branches. Obligations of foreign branches of US banks and
foreign banks may be general obligations of the parent bank in addition to the
issuing bank or may be limited by the terms of a specific obligation and by
government regulation. The Portfolio/Funds may invest in obligations of foreign
banks or foreign branches of US banks, which include banks located in the United
Kingdom, Grand Cayman Island, Nassau, Japan and Canada.

Investments in these obligations may entail risks that are different from those
of investments in obligations of US domestic banks because of differences in
political, regulatory and economic systems and conditions. These risks include
future political and economic developments, currency blockage, the possible
imposition of withholding taxes on interest payments, possible seizure or
nationalization of foreign deposits, difficulty or inability of pursuing legal
remedies and obtaining judgments in foreign courts, possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
that might affect adversely the payment of principal and interest on bank
obligations. Foreign branches of US banks and foreign banks may also be subject
to less stringent reserve requirements and to different accounting, auditing,
reporting and record keeping standards than those applicable to domestic
branches of US banks.

Certificates of Deposit and Bankers' Acceptances. The Portfolio/Funds may invest
in certificates of deposit and bankers' acceptances. Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity.

Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

Commercial Paper. The Portfolio/Funds may invest in fixed rate or variable rate
commercial paper, issued by US or foreign entities. Commercial paper consists of
short-term (usually up to one year) unsecured promissory notes issued by US or
foreign corporations in order to finance their current operations. Any
commercial paper issued by a foreign entity or corporation and purchased by the
Portfolio/Funds must be US dollar-denominated and must not be subject to foreign
withholding tax at the time of purchase.

Commercial paper when purchased by the Portfolio/Funds must be rated in the
highest short-term rating category by any two nationally recognized statistical
rating organizations ("NRSRO") (or one NRSRO if that NRSRO is the only such
NRSRO which rates such security) or, if not so rated, must be believed by the
portfolio management team to be of comparable quality. Investing in foreign
commercial paper generally involves risks similar to those described above
relating to obligations of foreign banks or foreign branches and subsidiaries of
US and foreign banks.

Variable Rate Securities. The Portfolio/Funds may also invest in variable rate
master demand notes. A variable rate master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.

For a description of commercial paper ratings, see the Appendix to this SAI.

US Government Securities. The Portfolio/Funds may invest in obligations issued
or guaranteed by the US government such as direct obligations of the US
Treasury. Included among direct obligations of the US are Treasury Bills,
Treasury Notes and Treasury Bonds, which differ in terms of their interest
rates, maturities and dates of issuance. Treasury Bills have maturities of less
than one year, Treasury Notes have maturities of one to 10 years and Treasury
Bonds generally have maturities of greater than 10 years at the date of
issuance.

U.S. Bond Index Fund only. Included among the obligations issued by agencies and
instrumentalities of the US government are: instruments that are supported by
the full faith and credit of the US government (such as certificates issued by
the Government National Mortgage Association ("GNMA" or "Ginnie Mae"));
instruments that are supported by the right of the issuer to borrow from the US
Treasury (such as securities of Federal Home Loan Banks); and instruments that
are supported solely by the credit of the instrumentality (such as Federal
National Mortgage Association ("FNMA" or "Fannie Mae") and Federal Home Loan
Mortgage Corporation ("FHLMC" or "Freddie Mac")).

Other US government securities the Fund may invest in include (but are not
limited to) securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the US,
Small Business Administration, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association.
Because the US government is not obligated by law to provide support to an
instrumentality it sponsors, and therefore these securities are not supported by
the full faith and credit of the US government, the Fund will invest in
obligations issued by such an instrumentality only if the portfolio management
team determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Fund.

Zero Coupon Securities and Deferred Interest Bonds. (U.S. Bond Index Fund only.)
The Fund may invest in zero coupon securities and deferred interest bonds. Zero
coupon and deferred interest bonds are debt obligations that are issued at a
significant discount from face value. The original discount approximates the
total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest accrual date at a rate of interest
reflecting the market rate of the security at the time of issuance. Zero coupon
securities are redeemed at face value at their maturity date without interim
cash payments of interest or principal. The amount of this discount is accrued
over the life of the security, and the accrual constitutes the income earned on
the security for both accounting and tax purposes. 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.

While zero coupon bonds do not require the periodic payment of interest,
deferred interest bonds generally provide for a period of delay before the
regular payment of interest begins. Although this period of delay is different
for each deferred interest bond, a typical period is approximately one-third of
the bond's term to maturity. Such investments benefit the issuer by mitigating
its initial need for cash to meet debt service, but some also provide a higher
rate of return to attract investors who are willing to defer receipt of such
cash.

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
"Taxes."

Mortgage-Backed and Asset-Backed Securities (U.S. Bond Index Fund only.)

General Characteristics. The Fund may invest in mortgage-backed securities. A
mortgage-backed security consists of a pool of mortgage loans evidenced by
promissory notes secured by first mortgages or first deeds of trust or other
similar security instruments creating a first lien on owner occupied and
non-owner occupied one-unit to four-unit residential properties, multifamily
(i.e., five or more) properties, agricultural properties, commercial properties
and mixed use properties.

The investment characteristics of adjustable and fixed rate mortgage-backed
securities differ from those of traditional fixed-income securities. The major
differences include the payment of interest and principal on mortgage-backed
securities on a more frequent (usually monthly) schedule, and the possibility
that principal may be prepaid at any time due to prepayments on the underlying
mortgage loans or other assets. These differences can result in significantly
greater price and yield volatility than is the case with traditional
fixed-income securities. As a result, if the Fund purchases mortgage-backed
securities at a premium, a faster than expected prepayment rate will decrease
both the market value and the yield to maturity from those which were
anticipated. A prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and market value. Conversely, if
the Fund purchases mortgage-backed securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
decrease yield to maturity and market values. To the extent that the Fund
invests in mortgage-backed securities, the portfolio management team may seek to
manage these potential risks by investing in a variety of mortgage-backed
securities and by using certain hedging techniques.

Mortgage-backed securities may be issued or guaranteed by GNMA, FNMA and FHLMC,
but also may be issued or guaranteed by other issuers, including private
companies. GNMA is a government-owned corporation that is an agency of the U.S.
Department of Housing and Urban Development. It guarantees, with the full faith
and credit of the United States, full and timely payment of all monthly
principal and interest on its mortgage-backed securities. Until recently, FNMA
and FHLMC were government-sponsored corporations owned entirely by private
stockholders. Both issue mortgage-related securities that contain guarantees as
to timely payment of interest and principal but that are not backed by the full
faith and credit of the U.S. government. The value of the companies' securities
fell sharply in 2008 due to concerns that the firms did not have sufficient
capital to offset losses. In mid-2008, the U.S. Treasury was authorized to
increase the size of home loans that FNMA and FHLMC could purchase in certain
residential areas and, until 2009, to lend FNMA and FHLMC emergency funds and to
purchase the companies' stock. More recently, in September 2008, the U.S.
Treasury announced that FNMA and FHLMC had been placed in conservatorship by the
Federal Housing Finance Agency ("FHFA"), a newly created independent regulator.
In addition to placing the companies in conservatorship, the U.S. Treasury
announced three additional steps that it intended to take with respect to FNMA
and FHLMC. First, the U.S. Treasury has entered into preferred stock purchase
agreements ("PSPAs") under which, if the FHFA determines that FNMA's or FHLMC's
liabilities have exceeded its assets under generally accepted accounting
principles, the U.S. Treasury will contribute cash capital to the company in an
amount equal to the difference between liabilities and assets. The PSPAs are
designed to provide protection to the senior and subordinated debt and the
mortgage-backed securities issued by FNMA and FHLMC. Second, the U.S. Treasury
established a new secured lending credit facility that is available to FNMA and
FHLMC until December 2009. Third, the U.S. Treasury initiated a temporary
program to purchase FNMA and FHLMC mortgage-backed securities, which is expected
to continue until December 2009. No assurance can be given that the U.S.
Treasury initiatives discussed above with respect to the debt and
mortgage-backed securities issued by FNMA and FHLMC will be successful.

Government Guaranteed Mortgage-Backed Securities. (U.S. Bond Index Fund only.)
The Fund's investments in mortgage-backed securities may include securities
issued or guaranteed by the US government or one of its agencies, authorities,
instrumentalities or sponsored enterprises, such as Ginnie Mae, Fannie Mae and
Freddie Mac. There are several types of guaranteed mortgage-backed securities
currently available, including guaranteed mortgage pass-through certificates and
multiple class securities, which include guaranteed Real Estate Mortgage
Investment Conduit Certificates ("REMIC Certificates"), collateralized mortgage
obligations and stripped mortgage-backed securities. The Fund is permitted to
invest in other types of mortgage-backed securities that may be available in the
future to the extent consistent with its investment policies and objective.

Ginnie Mae Certificates. (U.S. Bond Index Fund only.) Ginnie Mae is a wholly
owned corporate instrumentality of the United States within the Department of
Housing and Urban Development. The National Housing Act of 1934, as amended (the
"Housing Act"), authorizes Ginnie Mae to guarantee the timely payment of the
principal of and interest on certificates that are based on and backed by a pool
of mortgage loans insured by the Federal Housing Administration under the
Housing Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed
by the Department of Veterans Affairs under the Servicemen's Readjustment Act of
1944, as amended ("VA Loans"), or by pools of other eligible mortgage loans. The
Housing Act provides that the full faith and credit of the US government is
pledged to the payment of all amounts that may be required to be paid under any
Ginnie Mae guaranty. In order to meet its obligations under such guaranty,
Ginnie Mae is authorized to borrow from the US Treasury with no limitations as
to amount.

The Ginnie Mae Certificates in which the Fund may invest will represent a pro
rata interest in one or more pools of the following types of mortgage loans: (1)
fixed-rate level payment mortgage loans; (2) fixed-rate graduated payment
mortgage loans; (3) fixed-rate growing equity mortgage loans; (4) fixed-rate
mortgage loans secured by manufactured (mobile) homes; (5) mortgage loans on
multifamily residential properties under construction; (6) mortgage loans on
completed multifamily projects; (7) fixed-rate mortgage loans as to which
escrowed funds are used to reduce the borrower's monthly payments during the
early years of the mortgage loans ("buy down" mortgage loans); (8) mortgage
loans that provide for adjustments in payments based on periodic changes in
interest rates or in other payment terms of the mortgage loans; and (9)
mortgage-backed serial notes.

Fannie Mae Certificates. (U.S. Bond Index only.) Fannie Mae is a federally
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act of 1938. The obligations of
Fannie Mae are not backed by the full faith and credit of the US government.
Each Fannie Mae Certificate will represent a pro rata interest in one or more
pools of FHA Loans, VA Loans or conventional mortgage loans (i.e., mortgage
loans that are not insured or guaranteed by any governmental agency) of the
following types: (1) fixed-rate level payment mortgage loans; (2) fixed-rate
growing equity mortgage loans; (3) fixed-rate graduated payment mortgage loans;
(4) variable rate mortgage loans; (5) other adjustable rate mortgage loans; and
(6) fixed-rate and adjustable mortgage loans secured by multifamily projects.

Freddie Mac Certificates. (U.S. Bond Index only.) Freddie Mac is a federally
chartered and privately owned corporation created pursuant to the Emergency Home
Finance Act of 1970, as amended (the "FHLMC Act"). The obligations of Freddie
Mac are obligations solely of Freddie Mac and are not backed by the full faith
and credit of the US government. Freddie Mac Certificates represent a pro rata
interest in a group of mortgage loans (a "Freddie Mac Certificate group")
purchased by Freddie Mac. The mortgage loans underlying the Freddie Mac
Certificates will consist of fixed-rate or adjustable rate mortgage loans with
original terms to maturity of between ten and thirty years, substantially all of
which are secured by first liens on one- to four-family residential properties
or multifamily projects. Each mortgage loan must meet the applicable standards
set forth in the FHLMC Act. A Freddie Mac Certificate group may include whole
loans, participating interests in whole loans and undivided interests in whole
loans and participations comprising another Freddie Mac Certificate group.

Stripped Mortgage-Backed Securities. (U.S. Bond Index Fund only.) The Fund may
purchase stripped mortgage-backed securities ("SMBS"), which are derivative
multi-class mortgage securities. The market value of the class consisting
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest from the mortgaged assets are generally higher than
prevailing market yields on other mortgage-backed securities because their cash
flow patterns are more volatile and there is a greater risk that the initial
investment will not be fully recouped. See "Illiquid Securities."

In accordance with a requirement imposed by the staff of the Securities and
Exchange Commission (the "SEC"), the portfolio management team will consider
privately issued fixed rate IOs and POs to be illiquid securities for purposes
of the Fund's limitation on investments in illiquid securities. Unless the
portfolio management team determines that a particular government-issued fixed
rate IO or PO is liquid, it will also consider these IOs and POs to be illiquid.

Adjustable Rate Mortgages-Interest Rate Indices. (U.S. Bond Index Fund only.)
Adjustable rate mortgages in which the Fund invests may be adjusted on the basis
of one of several indices. The One Year Treasury Index is the figure derived
from the average weekly quoted yield on US Treasury securities adjusted to a
constant maturity of one year. The Cost of Funds Index reflects the monthly
weighted average cost of funds of savings and loan associations and savings
banks whose home offices are located in Arizona, California and Nevada (the
"FHLB Eleventh District") that are member institutions of the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco"), as computed from statistics
tabulated and published by the FHLB of San Francisco. The FHLB of San Francisco
normally announces the Cost of Funds Index on the last working day of the month
following the month in which the cost of funds was incurred.

A number of factors affect the performance of the Cost of Funds Index and may
cause the Cost of Funds Index to move in a manner different from indices based
upon specific interest rates, such as the One Year Treasury Index. Because of
the various origination dates and maturities of the liabilities of members of
the FHLB Eleventh District upon which the Cost of Funds Index is based, among
other things, at any time the Cost of Funds Index may not reflect the average
prevailing market interest rates on new liabilities of similar maturities. There
can be no assurance that the Cost of Funds Index will necessarily move in the
same direction or at the same rate as prevailing interest rates, since as longer
term deposits or borrowings mature and are renewed at market interest rates, the
Cost of Funds Index will rise or fall depending upon the differential between
the prior and the new rates on such deposits and borrowings. In addition,
dislocations in the thrift industry in recent years have caused and may continue
to cause the cost of funds of thrift institutions to change for reasons
unrelated to changes in general interest rate levels. Furthermore, any movement
in the Cost of Funds Index as compared to other indices based upon specific
interest rates may be affected by changes instituted by the FHLB of San
Francisco in the method used to calculate the Cost of Funds Index. To the extent
that the Cost of Funds Index may reflect interest changes on a more delayed
basis than other indices, in a period of rising interest rates, any increase may
produce a higher yield later than would be produced by such other indices, and
in a period of declining interest rates, the Cost of Funds Index may remain
higher than other market interest rates which may result in a higher level of
principal prepayments on mortgage loans which adjust in accordance with the Cost
of Funds Index than mortgage loans which adjust in accordance with other
indices.

LIBOR, the London InterBank Offered Rate, is the interest rate that the most
creditworthy international banks dealing in US dollar-denominated deposits and
loans charge each other for large dollar-denominated loans. LIBOR is also
usually the base rate for large dollar-denominated loans in the international
market. LIBOR is generally quoted for loans having rate adjustments at one,
three, six or twelve month intervals.

Asset-Backed Securities. (U.S. Bond Index Fund only.) The Fund may invest in
securities generally referred to as asset-backed securities. Asset-backed
securities are secured by and payable from, or directly or indirectly represent
undivided fractional interests in, pools of consumer loans (unrelated to
mortgage loans), trade receivables or other types of loans held in a trust.
Asset-backed securities may provide periodic payments that consist of interest
and/or principal payments. Consequently, the life of an asset-backed security
varies with the prepayment and loss experience of the underlying assets. Some
form of credit enhancement, such as a letter of credit, surety bond, limited
guarantee or senior/subordination typically supports payments of principal and
interest. The degree of credit enhancement varies, but generally amounts to only
a fraction of the asset-backed security's par value until exhausted. If the
credit enhancement is exhausted, certificate-holders may experience losses or
delays in payment if the required payments of principal and interest are not
made to the trust with respect to the underlying loans. The value of the
securities also may change because of changes in the market's perception of
creditworthiness of the servicing agent for the loan pool, the originator of the
loans or the financial institution providing the credit enhancement.
Asset-backed securities are ultimately dependent upon payment of loans and
receivables by individuals, businesses and other borrowers, and the
certificate-holder generally has no recourse against the entity that originated
the loans.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein but include assets such as (but not limited
to) motor vehicle installment sale contracts, other installment sale contracts,
home equity loans, leases of various types of real and personal property,
receivables from revolving credit (credit card) agreements and trade
receivables. Such assets are securitized through the use of trusts or special
purpose corporations. Payments or distributions of principal and interest on
asset-backed securities 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 issuer, or other credit enhancements
may be present.

Asset-backed securities present certain additional risks that are not presented
by mortgage-backed securities. Primarily, these securities do not have the
benefit of the same type of security interest in the related collateral. Credit
card receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to avoid payment of certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of automobile
receivables permit the servicer to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of the automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.

The market for privately issued asset-backed securities is smaller and less
liquid than the market for US government mortgage-backed securities. The
asset-backed securities in which the Portfolio may invest are limited to those
which are readily marketable, dollar-denominated and rated investment grade by
S&P or Moody's.

The yield characteristics of the asset-backed securities in which the Fund may
invest differ from those of traditional debt securities. Among the major
differences are that interest and principal payments are made more frequently on
asset-backed securities (usually monthly) and that principal may be prepaid at
any time because the underlying assets generally may be prepaid at any time. As
a result, if the Fund purchases these securities at a premium, a prepayment rate
that is faster than expected will reduce their yield, while a prepayment rate
that is slower than expected will have the opposite effect of increasing yield.
Conversely, if the Fund purchases these securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, the yield on these securities. Amounts available for reinvestment by the
Fund are likely to be greater during a period of declining interest rates and,
as a result, are likely to be reinvested at lower interest rates than during a
period of rising interest rates.

Mortgage-Backed Securities and Asset-Backed Securities -- Types of Credit
Support. (U.S. Bond Index Fund only.) Mortgage-backed securities and
asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failure by
obligors on underlying assets to make payments, such securities may contain
elements of credit support. Such credit support falls into two categories: (1)
liquidity protection and (2) protection against losses resulting from ultimate
default by an obligor on the underlying assets. Liquidity protection refers to
the provision of advances, generally by the entity administering the pool of
assets, to ensure that the pass-through of payments due on the underlying pool
occurs in a timely fashion. Protection against losses resulting from ultimate
default enhances the likelihood of ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor from third parties; through various means of structuring the
transaction; or through a combination of such approaches. The Fund will not
usually pay any additional fees for such credit support, although the existence
of credit support may increase the price of a security.

The ratings of mortgage-backed securities and asset-backed securities for which
third-party credit enhancement provides liquidity protection or protection
against losses from default are generally dependent upon the continued
creditworthiness of the provider of the credit enhancement. The ratings of such
securities could be subject to reduction in the event of deterioration in the
creditworthiness of the credit enhancement provider even in cases where the
delinquency and loss experience on the underlying pool of assets is better than
expected.

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over-collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or losses in excess of that which is anticipated could adversely
affect the return on an investment in such a security.

Securities of Non-US Issuers

Investments in American, European, Global and International Depository Receipts
(Equity 500 Index Fund only). The Portfolio may invest in non-US securities in
the form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and International Depository
Receipts ("IDRs") or other similar securities representing ownership of
securities of non-US issuers held in trust by a bank or similar financial
institution. ADRs are receipts typically issued by a US bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs and IDRs are receipts issued in Europe typically by non-US
banking and trust companies that evidence ownership of either foreign or US
securities. GDRs are receipts issued by either a US or non-US banking
institution evidencing ownership of the underlying non-US securities. Generally,
ADRs, in registered form, are designed for use in US securities markets and
EDRs, GDRs and IDRs, in bearer form, are designed for use in European and
international securities markets. An ADR, EDR, GDR or IDR may be denominated in
a currency different from the currency in which the underlying foreign security
is denominated. ADRs, EDRs, GDRs and IDRs are alternatives to the purchase of
the underlying securities in their national markets and currencies, but are
subject to the same risks as the non-US securities to which they relate.

Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because a Portfolio may hold
foreign currencies and forward contracts, futures contracts and options on
foreign currencies and foreign currency futures contracts, the value of the
assets of the Portfolio as measured in US dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations, and the Portfolio may incur costs and experience conversion
difficulties and uncertainties in connection with conversions between various
currencies. Fluctuations in exchange rates may also affect the earning power and
asset value of the foreign entity issuing the security.

The strength or weakness of the US dollar against these currencies is
responsible for part of the Portfolio's investment performance. If the dollar
falls in value relative to the Japanese yen, for example, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall. Many foreign
currencies have experienced significant devaluation relative to the dollar.

Although the Portfolio values its assets daily in terms of US dollars, it does
not intend to convert its holdings of foreign currencies into US dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Portfolio
at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer. The Portfolio will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into options or forward or futures contracts to purchase or sell
foreign currencies.

Foreign Fixed Income Securities. Since most foreign fixed income securities are
not rated, the Portfolio will invest in foreign fixed income securities based on
Deutsche Investment Management Americas Inc.'s ("DIMA" or "Advisor") or the
subadvisor's analysis without relying on published ratings. Since such
investments will be based upon the Advisor's analysis rather than upon published
ratings, achievement of the Portfolio's goals may depend more upon the abilities
of the Advisor than would otherwise be the case.

The value of the foreign fixed income securities held by the Portfolio, and thus
the net asset value of the Portfolio's shares, generally will fluctuate with (a)
changes in the perceived creditworthiness of the issuers of those securities,
(b) movements in interest rates, and (c) changes in the relative values of the
currencies in which the Portfolio's investments in fixed income securities are
denominated with respect to the US Dollar. The extent of the fluctuation will
depend on various factors, such as the average maturity of the Portfolio's
investments in foreign fixed income securities, and the extent to which the
Portfolio hedges its interest rate, credit and currency exchange rate risks. A
longer average maturity generally is associated with a higher level of
volatility in the market value of such securities in response to changes in
market conditions.

Investments in sovereign debt, including Brady Bonds (Brady Bonds are debt
securities issued under a plan implemented to allow debtor nations to
restructure their outstanding commercial bank indebtedness), involve special
risks. Foreign governmental issuers of debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or pay interest when due. In the event of default, there may be limited or no
legal recourse in that, generally, remedies for defaults must be pursued in the
courts of the defaulting party. Political conditions, especially a sovereign
entity's willingness to meet the terms of its fixed income securities, are of
considerable significance. Also, there can be no assurance that the holders of
commercial bank loans to the same sovereign entity may not contest payments to
the holders of sovereign debt in the event of default under commercial bank loan
agreements. In addition, there is no bankruptcy proceeding with respect to
sovereign debt on which a sovereign has defaulted, and the Portfolio may be
unable to collect all or any part of its investment in a particular issue.
Foreign investment in certain sovereign debt is restricted or controlled to
varying degrees, including requiring governmental approval for the repatriation
of income, capital or proceed of sales by foreign investors. These restrictions
or controls may at times limit or preclude foreign investment in certain
sovereign debt or increase the costs and expenses of the Portfolio.

Sovereign debt of emerging market governmental issuers is to be considered
speculative. Emerging market governmental issuers are among the largest debtors
to commercial banks, foreign governments, international financial organizations
and other financial institutions. Certain emerging market governmental issuers
have not been able to make payments of interest on or principal of debt
obligations as those payments have come due. There is a history of defaults with
respect to commercial bank loans by public and private entities issuing
sovereign debt. All or a portion of the interest payments and/or principal
repayment with respect to sovereign debt may be uncollateralized. Obligations
arising from past restructuring agreements may affect the economic performance
and political and social stability of those issuers.

The ability of emerging market country governmental issuers to make timely
payments on their obligations is likely to be influenced strongly by the
issuer's balance of payments, including export performance, and its access to
international credits and investments. An emerging market whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international prices of one or more of those commodities. Increased
protectionism on the part of an emerging market's trading partners could also
adversely affect the country's exports and diminish its trade account surplus,
if any. To the extent that emerging markets receive payment for its exports in
currencies other than dollars or non-emerging market currencies, its ability to
make debt payments denominated in dollars or non-emerging market currencies
could be affected.

Another factor bearing on the ability of emerging market countries to repay debt
obligations is the level of international reserves of the country. Fluctuations
in the level of these reserves affect the amount of foreign exchange readily
available for external debt payments and thus could have a bearing on the
capacity of emerging market countries to make payments on these debt
obligations.

To the extent that an emerging market country cannot generate a trade surplus,
it must depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign governments
and inflows of foreign investment. The access of emerging markets to these forms
of external funding may not be certain, and a withdrawal of external funding
could adversely affect the capacity of emerging market country governmental
issuers to make payments on their obligations. In addition, the cost of
servicing emerging market debt obligations can be affected by a change in
international interest rates since the majority of these obligations carry
interest rates that are adjusted periodically based upon international rates.

Foreign Investments. Foreign securities are normally denominated and traded in
foreign currencies. As a result, the value of the Portfolio's foreign
investments and the value of its shares may be affected favorably or unfavorably
by changes in currency exchange rates relative to the US dollar. There may be
less information publicly available about a foreign issuer than about a US
issuer, and foreign issuers may not be subject to accounting, auditing and
financial reporting standards and practices comparable to those in the US. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable US issuers. Foreign brokerage commissions and
other fees are also generally higher than in the US. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Portfolio's assets
held abroad) and expenses not present in the settlement of investments in US
markets. Payment for securities without delivery may be required in certain
foreign markets.

In addition, foreign securities may be subject to the risk of nationalization or
expropriation of assets, imposition of currency exchange controls or
restrictions on the repatriation of foreign currency, confiscatory taxation,
political or financial instability and diplomatic developments which could
affect the value of the Portfolio's investments in certain foreign countries.
Governments of many countries have exercised and continue to exercise
substantial influence over many aspects of the private sector through the
ownership or control of many companies, including some of the largest in these
countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. There is also generally less government
supervision and regulation of stock exchanges, brokers, and listed companies
than in the US. Dividends or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding taxes, and special US tax
considerations may apply. Moreover, foreign economies may differ favorably or
unfavorably from the US economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.

Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the US or in other
foreign countries. The laws of some foreign countries may limit the Portfolio's
ability to invest in securities of certain issuers organized under the laws of
those foreign countries.

Of particular importance, many foreign countries are heavily dependent upon
exports, particularly to developed countries, and, accordingly, have been and
may continue to be adversely affected by trade barriers, managed adjustments in
relative currency values, and other protectionist measures imposed or negotiated
by the US and other countries with which they trade. These economies also have
been and may continue to be negatively impacted by economic conditions in the US
and other trading partners, which can lower the demand for goods produced in
those countries.

The risks described above, including the risks of nationalization or
expropriation of assets, typically are increased in connection with investments
in "emerging markets." For example, political and economic structures in these
countries may be in their infancy and developing rapidly, and such countries may
lack the social, political and economic stability characteristic of more
developed countries (including amplified risk of war and terrorism). Certain of
these countries have in the past failed to recognize private property rights and
have at times nationalized and expropriated the assets of private companies.
Investments in emerging markets may be considered speculative.

The currencies of certain emerging market countries have experienced
devaluations relative to the US dollar, and future devaluations may adversely
affect the value of assets denominated in such currencies. In addition, currency
hedging techniques may be unavailable in certain emerging market countries. Many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation or deflation for many years, and future
inflation may adversely affect the economies and securities markets of such
countries.

In addition, unanticipated political or social developments may affect the value
of investments in emerging markets and the availability of additional
investments in these markets. Any change in the leadership or politics of
emerging market countries, or the countries that exercise a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and adversely affect
existing investment opportunities. The small size, limited trading volume and
relative inexperience of the securities markets in these countries may make
investments in securities traded in emerging markets illiquid and more volatile
than investments in securities traded in more developed countries. For example,
limited market size may cause prices to be unduly influenced by traders who
control large positions. In addition, the Portfolio may be required to establish
special custodial or other arrangements before making investments in securities
traded in emerging markets. There may be little financial or accounting
information available with respect to issuers of emerging market securities, and
it may be difficult as a result to assess the value of prospects of an
investment in such securities.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Portfolio's securities in such
markets may not be readily available. The Portfolio or the Fund may suspend
redemption of its shares for any period during which an emergency exists, as
determined by the Securities and Exchange Commission ("SEC"). Accordingly if the
Portfolio or the Fund believes that appropriate circumstances exist, it will
promptly apply to the SEC for a determination that an emergency is present.
During the period commencing from the Portfolio's/Fund's identification of such
condition until the date of the SEC action, the Portfolio's/Fund's securities in
the affected markets will be valued at fair value determined in good faith by or
under the direction of the Portfolio's/Fund's Board.

Certain of the foregoing risks may also apply to some extent to securities of US
issuers that are denominated in foreign currencies or that are traded in foreign
markets, or securities of US issuers having significant foreign operations.

Yankee Bonds. (U.S. Bond Index Fund only.) The Fund may invest in Yankee Bonds.
Yankee Bonds are US dollar-denominated bonds sold in the US by non-US issuers.
As compared with bonds issued in the US, such bond issues normally carry an
interest rate but are less actively traded. Investing in the securities of
foreign companies involves more risks than investing in securities of US
companies. Their value is subject to economic and political developments in the
countries where the companies operate and to changes in foreign currency values.
Values may also be affected by foreign tax laws, changes in foreign economic or
monetary policies, exchange control regulations and regulations involving
prohibitions on the repatriation of foreign currencies. 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 and custody arrangements abroad may offer less protection to
the Fund's investments 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. In addition, the relative performance of
various countries' fixed income markets historically has reflected wide
variations relating to the unique characteristics of each country's economy.
Year-to-year fluctuations in certain markets have been significant, and negative
returns have been experienced in various markets from time to time.

Derivative Securities

General. The Portfolio/Funds 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. For example, the Portfolio/Funds may use futures and
options as a low-cost method of gaining exposure to a particular securities
market without investing directly in those securities, for speculative purposes,
and for traditional hedging purposes to attempt to protect the Portfolio/Funds
from exposure to changing interest rates, securities prices or currency exchange
rates and for cash management or other investment purposes.

There is a range of risks associated with those uses. 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 Portfolio/Funds will limit the
leverage created by its use of derivatives for investment purposes by "covering"
such positions as required by the SEC. The portfolio management team may use
derivatives in circumstances where the portfolio management team believes they
offer an economical means of gaining exposure to a particular asset class.
Derivatives will not be used to increase portfolio risk above the level that
could be achieved using only traditional investment securities or to acquire
exposure to changes in the value of assets or indexes that by themselves could
not be purchased for the Portfolio/Funds. The use of derivatives for non-hedging
purposes may be considered speculative.

The Portfolio's/Funds' investment in options, futures or forward contracts,
swaps and similar strategies (collectively, "derivatives") depends on the
subadvisor's judgment as to the potential risks and rewards of different types
of strategies. Derivatives can be volatile investments and may not perform as
expected. If the subadvisor applies a hedge at an inappropriate time or judges
price trends incorrectly, derivative strategies may lower a Portfolio's/Fund's
return. A Portfolio/Fund could also experience losses if the prices of its
derivative 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 a
Portfolio/Fund in the event of default by the other party to the contract.

Derivative Securities: Options

Options on Securities. The Portfolio/Funds may write (sell) covered call and put
options to a limited extent on its portfolio securities ("covered options") in
an attempt to increase income. A call option gives the purchaser of the option
the right to buy, and obligates the writer to sell, the underlying security at
the exercise price at any time during the option period. Similarly, a put option
gives the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying security at the exercise price at any time during the option
period.

The Portfolio/Funds may write (sell) covered call and put options to a limited
extent on its portfolio securities ("covered options") in an attempt to increase
income through the premiums it receives for writing the option(s). However, in
return for the premium, the Portfolio/Funds may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the
Portfolio/Funds.

A call option written by the Portfolio/Funds is "covered" if the Portfolio/Fund
owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account) upon
conversion or exchange of other securities held in its portfolio. A call option
is also covered if the Portfolio/Fund holds a call option on the same security
and in the same principal amount as the written call option where the exercise
price of the call option so held (a) is equal to or less than the exercise price
of the written call option or (b) is greater than the exercise price of the
written call option if the difference is segregated by the Portfolio/Funds in
cash or liquid securities.

When the Portfolio/Fund writes a covered call option, it gives the purchaser of
the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio/Fund will
realize income in an amount equal to the premium received for writing the
option. If the option is exercised, a decision over which the Portfolio/Fund has
no control, the Portfolio/Fund must sell the underlying security to the option
holder at the exercise price. By writing a covered call option, the
Portfolio/Fund forgoes, in exchange for the premium less the commission ("net
premium"), the opportunity to profit during the option period from an increase
in the market value of the underlying security above the exercise price. In
addition, the Portfolio/Fund may continue to hold a security that might
otherwise have been sold to protect against depreciation in the market price of
the security.

A put option written by the Portfolio/Fund is "covered" when, among other
things, cash or liquid securities are placed in a segregated account to fulfill
the obligations undertaken. When the Portfolio/Fund writes a covered put option,
it gives the purchaser of the option the right to sell the underlying security
to the Portfolio/Fund at the specified exercise price at any time during the
option period. If the option expires unexercised, the Portfolio/Fund will
realize income in the amount of the net premium received for writing the option.
If the put option is exercised, a decision over which the Portfolio/Fund has no
control, the Portfolio/Fund must purchase the underlying security from the
option holder at the exercise price. By writing a covered put option, the
Portfolio/Fund, in exchange for the net premium received, accepts the risk of a
decline in the market value of the underlying security below the exercise price.
The Portfolio/Fund will only write put options involving securities for which a
determination is made at the time the option is written that the Portfolio/Fund
wishes to acquire the securities at the exercise price.

The Portfolio/Fund may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." The Portfolio/Fund will realize a profit or loss on a closing
purchase transaction if the amount paid to purchase an option is less or more,
as the case may be, than the amount received from the sale thereof. To close out
a position as a purchaser of an option, the Portfolio/Fund may enter into a
"closing sale transaction" that involves liquidating the Portfolio's/Fund's
position by selling the option previously purchased. Where the Portfolio/Fund
cannot effect a closing purchase transaction, it may be forced to incur
brokerage commissions or dealer spreads in selling securities it receives or it
may be forced to hold underlying securities until an option is exercised or
expires.

The current market value of a traded option is the last sale price or, in the
absence of a sale, the mean between the closing bid and asked price. If an
option expires on its stipulated expiration date or if the Portfolio/Fund enters
into a closing purchase transaction, the Portfolio/Fund will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the premium received
when the option was sold), and the deferred credit related to such option will
be eliminated. If a call option is exercised, the Portfolio/Fund will realize a
gain or loss from the sale of the underlying security and the proceeds of the
sale will be increased by the premium originally received.

The Portfolio/Fund may also purchase call and put options on any securities in
which it may invest. A Portfolio/Fund would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio/Fund, in exchange for the premium
paid, to purchase a security at a specified price during the option period. The
Portfolio/Fund would ordinarily have a gain if the value of the securities
increased above the exercise price sufficiently to cover the premium and would
have a loss if the value of the securities remained at or below the exercise
price during the option period.

The Portfolio/Fund would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio/Fund, in exchange for the premium paid,
to sell a security, which may or may not be held by the Portfolio/Fund, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio/Fund. Put options also may be purchased by the Portfolio/Fund for the
purpose of affirmatively benefiting from a decline in the price of securities
that the Portfolio/Fund does not own. A Portfolio/Fund would ordinarily
recognize a gain if the value of the securities decreased below the exercise
price sufficiently to cover the premium and would recognize a loss if the value
of the securities remained at or above the exercise price. Gains and losses on
the purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible to predict the
volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.

The Portfolio/Fund may enter into closing transactions in order to offset an
open option position prior to exercise or expiration by selling an option it has
purchased or by entering into an offsetting option. If the Portfolio/Fund cannot
effect closing transactions, it may have to retain a security in its portfolio
it would otherwise sell or deliver a security it would otherwise retain. The
Portfolio/Fund may purchase and sell options traded on recognized foreign
exchanges. The Portfolio/Fund may also purchase and sell options traded on US
exchanges and, to the extent permitted by law, options traded over-the-counter.

The Portfolio/Fund may also engage in options transactions in the OTC market
with broker-dealers who make markets in these options. The Portfolio/Fund will
engage in OTC options only with broker-dealers deemed by the portfolio
management team to be creditworthy. The ability to terminate OTC option
positions is more limited than with exchange-traded option positions because the
predominant market is the issuing broker rather than an exchange, and may
involve the risk that broker-dealers participating in such transactions will not
fulfill their obligations. To reduce this risk, the Portfolio/Fund will purchase
such options only from a counter party approved for these purposes by the
portfolio management team. The portfolio management team will monitor the
creditworthiness of dealers with whom the Portfolio/Fund enters into such
options transactions.

The Portfolio/Fund intends to treat OTC options as not readily marketable and
therefore subject to the Portfolio's/Fund's 15% limit on investments in illiquid
securities. See "Illiquid Securities" under "Other Investments and Investment
Practices."


Options on Securities Indices. A Portfolio/Fund may also purchase and write
exchange-listed and OTC put and call options on securities indices. The
Portfolio/Funds intends to treat OTC options as not readily marketable and
therefore subject to the Portfolio's/Fund's 15% limit on investments in illiquid
securities. See "Illiquid Securities" under "Other Investments and Investment
Practices." A securities index measures the movement of a certain group of
securities by assigning relative values to the securities included in the index,
fluctuating with changes in the market values of the securities included in the
index. Some securities index options are based on a broad market index, such as
the NYSE Composite Index, or a narrower market index, such as the Standard &
Poor's 100. Indices may also be based on a particular industry or market
segment.

Options on securities indices are similar to options on securities except that
(1) the expiration cycles of securities index options are monthly, while those
of US exchange-traded securities options are currently quarterly, and (2) the
delivery requirements are different. Instead of giving the right to take or make
delivery of securities at a specified price, an option on a securities index
gives the holder the right to receive a cash "exercise settlement amount" equal
to (a) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by (b)
a fixed "index multiplier." Receipt of this cash amount will depend upon the
closing level of the securities index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the index and the exercise price of the option times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Securities index options may
be terminated by entering into offsetting closing transactions as described
above for securities options.

No Portfolio/Fund will purchase such options unless the portfolio management
team believes the market is sufficiently developed such that the risk of trading
such options is no greater than the risk of trading options on securities.

As discussed in "Options on Securities," a Portfolio/Fund would normally
purchase a call option in anticipation of an increase in the market value of the
relevant index. The purchase of a call option would entitle the Portfolio/Fund,
in exchange for the premium paid, to receive upon exercise a cash payment based
on the level of the index on the exercise date. The Portfolio/Fund would
ordinarily have a gain if the value of the index increased above the exercise
price sufficiently to cover the premium and would have a loss if the value of
the index remained at or below the exercise price during the option period.

As discussed in "Options on Securities," a Portfolio/Fund would normally
purchase "protective puts" in anticipation of a decline in the market value of
the relevant index. The purchase of a put option would entitle the
Portfolio/Fund, in exchange for the premium paid, to receive upon exercise a
cash payment based on the level of the index on the exercise date. The purchase
of protective puts is generally designed to offset or hedge against a decline in
the market value of the index. A Portfolio/Fund would ordinarily recognize a
gain if the value of the index decreased below the exercise price sufficiently
to cover the premium and would recognize a loss if the value of the index
remained at or above the exercise price. Gains and losses on the purchase of
protective put options would tend to be offset by countervailing changes in the
value of the index.

Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular security, whether a Portfolio/Fund
will realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of securities prices in the securities
market generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular security.
Accordingly, successful use by the Portfolio/Funds of options on securities
indices will be subject to the portfolio management team's ability to predict
correctly movements in the direction of the securities market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual securities.

Options on securities indices entail risks in addition to the risks of options
on securities. The absence of a liquid secondary market to close out options
positions on securities indices may be more likely to occur, although the
Portfolio/Funds generally will only purchase or write such an option if the
portfolio management team believes the option can be closed out. Use of options
on securities indices also entails the risk that trading in such options may be
interrupted if trading in certain securities included in the index is
interrupted. No Portfolio/Fund will purchase such options unless the portfolio
management team believes the market is sufficiently developed such that the risk
of trading in such options is no greater than the risk of trading in options on
securities.

Price movements in a Portfolio's/Fund's holdings may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities indices
require settlement in cash, the Portfolio/Fund may be forced to liquidate
portfolio securities to meet settlement obligations. The Portfolio's/Funds'
activities in index options may also be restricted by the requirements of the
Internal Revenue Code of 1986, as amended (the "Code") for qualification as a
regulated investment company.

In addition, the hours of trading for options on the securities indices may not
conform to the hours during which the underlying securities are traded. To the
extent that the option markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
underlying securities markets that cannot be reflected in the option markets. It
is impossible to predict the volume of trading that may exist in such options,
and there can be no assurance that viable exchange markets will develop or
continue.

Yield Curve Options. The U.S. Bond Index Fund may enter into options on the
yield spread or yield differential between two securities. These options are
referred to as yield curve options. In contrast to other types of options, a
yield curve option is based on the difference between the yields of designated
securities, rather than the prices of the individual securities, and is settled
through cash payments. Accordingly, a yield curve option is profitable to the
holder if this differential widens (in the case of a call) or narrows (in the
case of a put), regardless of whether the yields of the underlying securities
increase or decrease.

Spreadlocks. The U.S. Bond Index Fund may enter into spreadlocks. A spreadlock
is a form of swap contract that involves an exchange of a one-time cash payment
based on a specific financial index between the Fund and another party. A
spreadlock allows an interest rate swap user to lock in the forward differential
between the interest rate swap rate and the yield of the government bond
underlying the swap. Essentially, a spreadlock allows the investor to buy or
sell the spread forward by entering into a forward contract on the swap spread
(i.e., the spread between the government yield and the swap rate (or yield)) for
a given maturity. The price of a spreadlock is determined by the yield spread
between a forward starting fixed/floating swap and a forward transaction in a
government bond. The value of the swap is adjusted daily and the change in value
is recorded as unrealized appreciation or depreciation until the agreement
matures, at which time the cash payment, based on the value of the swap on the
maturity date, is exchanged between the two parties.


Derivative Securities: Futures Contracts and Options on Futures Contracts

General. A Portfolio/Fund may enter into futures contracts on securities,
securities 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.

A Portfolio/Fund may, for example, enter into futures contracts and options on
futures contracts on securities, securities indices and currencies to manage its
exposure to changing interest rates, security prices and currency exchange rates
or as an efficient means of managing allocations between asset classes. All
futures contracts entered into by the Portfolio/Fund are traded on US exchanges
or boards of trade that are licensed and regulated by the CFTC or on foreign
exchanges approved by the CFTC. A Portfolio/Fund will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities or
instruments held by the Portfolio/Fund or securities or instruments that they
expect to purchase. The Portfolio/Funds are operated by persons who have claimed
an exemption from the definition of the term "commodity pool operator" under the
Commodity Exchange Act, as amended ("CEA") and, therefore, who are not subject
to registration or regulation under the CEA.

A Portfolio's/Fund's futures transactions may be entered into for traditional
hedging purposes -- i.e., futures contracts will be sold to protect against a
decline in the price of securities (or the currency in which they are
denominated) that the Portfolio/Fund owns, or futures contracts will be
purchased to protect the Portfolio/Fund against an increase in the price of
securities (or the currency in which they are denominated) that the
Portfolio/Fund intends to purchase. As evidence of this hedging intent, the
Portfolio/Fund expects that, on 75% or more of the occasions on which it takes a
long futures or option position (involving the purchase of futures contracts),
the Portfolio/Fund will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities (or assets denominated in the related
currency) in the cash market at the time when the futures or option position is
closed out. However, in particular cases, when it is economically advantageous
for the Portfolio/Fund to do so, a long futures position may be terminated or an
option may expire without the corresponding purchase of securities or other
assets.

The successful use of futures contracts and options thereon draws upon the
portfolio management team's skill and experience with respect to such
instruments and is 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 price movements of hedging instruments and price
movements in the securities or currencies being hedged. Successful use of
futures or options contracts is further dependent on the portfolio management
team'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.

The Board of Trustees of the Funds and the Portfolio has adopted the requirement
that futures contracts and options on futures contracts be used as a hedge and
that stock index futures may be used on a continual basis to equitize cash so
that the Portfolio may maintain 100% equity exposure. The Board of Trustees of
the Equity 500 Index Portfolio has adopted the requirement that index futures
contracts and options on index futures contracts be used only for cash
management purposes. The other Funds may purchase and write (sell) options on
futures contracts for hedging purposes.

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 "contract 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. A
Portfolio/Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income or equity securities, foreign currencies, or financial
indices, including any index of US or foreign securities, US government
securities, foreign government securities or corporate debt securities or
municipal securities. Futures contracts on foreign currencies may be used to
hedge the value of securities that are denominated in foreign currencies.

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

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, a Portfolio/Fund will incur brokerage fees when
it engages in these transactions.

One purpose of the acquisition or sale of a futures contract, in cases where a
Portfolio/Fund holds or intends to acquire fixed-income or equity securities, is
to attempt to protect the Portfolio/Fund from fluctuations in interest or
foreign exchange rates or in securities prices without actually buying or
selling fixed-income or equity securities or foreign currencies. For example, if
interest rates were expected to increase (which would cause the prices of debt
securities to decline), the Portfolio/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 Portfolio/Fund.
If interest rates did increase, the value of the debt security in the
Portfolio/Fund would decline, but the value of the futures contracts to the
Portfolio/Fund would increase at approximately the same rate, thereby keeping
the net asset value of the Portfolio/Fund from declining as much as it otherwise
would have. A Portfolio/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
Portfolio/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, a Portfolio/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
Portfolio/Fund could then buy debt securities on the cash market. The segregated
assets maintained to cover the Portfolio's/Fund's obligations with respect to
such futures contracts will consist of cash or liquid securities 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 Portfolio/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 and variation
margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions that 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 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 portfolio management team may still not result in a
successful transaction.

In addition, futures contracts entail significant risks. Although the portfolio
management team believes that use of such contracts will benefit the
Portfolio/Funds, if the portfolio management team's investment judgment about
the general direction of securities prices, currency rates, interest rates or an
index is incorrect, the Portfolio's/Fund's overall performance would be poorer
than if it had not entered into any such contract. For example, if a
Portfolio/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 Portfolio/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 Portfolio/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
that reflect the rising market. The Portfolio/Fund may have to sell securities
at a time when it may be disadvantageous to do so.

Futures Contracts on Securities Indices. The Portfolio/Funds 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. Index
futures 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 Portfolio/Fund
or adversely affect the prices of securities which are intended to be purchased
at a later date for the Portfolio/Fund or as an efficient means of managing
allocation between asset classes. An index futures contract may also be entered
into to close out or offset an existing futures position.

When used for hedging purposes, each transaction in futures contracts on a
securities index involves the establishment of a position which, the portfolio
management team 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 Portfolio/Fund will rise in value by an amount
which approximately offsets the decline in value of the portion of the
Portfolio's/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). As with the purchase of futures contracts, when a Portfolio/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 futures contract
that is deliverable upon exercise of the option on that futures contract. If the
futures price at expiration of the option is below the exercise price specified
in the option, the Portfolio/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
Portfolio's/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
Portfolio/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
the Portfolio/Fund intends to purchase.

If a put or call option the Portfolio/Fund has written is exercised, the
Portfolio/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 Portfolio's/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 Portfolio/Fund may purchase a put option on
an index futures contract to hedge against the risk of declining securities
values.

The amount of risk the Portfolio/Fund assumes when it purchases an option on an
index futures contract 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.

Derivative Securities: Swap Agreements

General. (U.S. Bond Index Fund only) The Fund may enter into swaps relating to
indices, currencies, interest rates, equity and debt interests to the extent
that obligations under such agreements represent not more than 10% of the Fund's
total assets. A swap transaction is an agreement between the Fund and a counter
party to act in accordance with the terms of the swap contract. Interest rate
swaps involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. Mortgage swaps are similar to interest rate
swaps in that they represent commitments to pay and receive interest. The
notional principal amount, however, is tied to a reference pool or pools of
mortgages. Index swaps involve the exchange by the Fund with another party of
the respective amounts payable with respect to a notional principal amount
related to one or more indexes. Currency swaps involve the exchange of cash
flows on a notional amount of two or more currencies based on their relative
future values. An equity swap is an agreement to exchange streams of payments
computed by reference to a notional amount based on the performance of a basket
of stocks or a single stock. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payment of interest on a notional principal amount from the
party selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling the interest rate floor. An interest
rate collar is the combination of a cap and a floor that preserves a certain
return within a predetermined range of interest rates.

The Fund may enter into these transactions to preserve a return or spread on a
particular investment or portion of its assets, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund may also use such transactions for speculative purposes, such as
to obtain the price performance of a security without actually purchasing the
security in circumstances, for example, where the subject security is illiquid,
is unavailable for direct investment or is available only on less attractive
terms. Swaps have special risks including possible default by the counter party
to the transaction, illiquidity and, where swaps are used as hedges, the risk
that the use of a swap could result in losses greater than if the swap had not
been employed. See "Illiquid Securities."

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 agreement, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments). Swaps do not involve the delivery
of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps is limited to the net amount of payments that the
Fund is contractually obligated to make or receive. If the counter party to a
swap defaults, the Fund's risk of loss consists of the net amount of payments
that the Fund is contractually entitled to receive. Where swaps are entered into
for good faith hedging purposes, the portfolio management team believes such
obligations do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to the Fund's borrowing
restrictions. Where swaps are entered into for other than hedging purposes, the
Fund will segregate an amount of cash or other liquid securities having a value
equal to the accrued excess of its obligations over entitlements with respect to
each swap on a daily basis.

Whether the use of swap agreements will be successful in furthering the Fund's
investment objective will depend on the portfolio management team's ability to
correctly predict whether certain types of investments are likely to produce
greater returns than other investments. Certain swap agreements may be
considered to be illiquid because they are two party contracts and because they
may have terms of greater than seven days. Moreover, the Fund bears the risk of
loss of the amount expected to be received under a swap agreement in the event
of the default or bankruptcy of a swap agreement counter party. The Fund will
minimize this risk by entering into agreements that mark to market no less
frequently than quarterly. In addition, the Fund will enter into swap agreements
only with counter parties that would be eligible for consideration as repurchase
agreement counter parties under the Fund's repurchase agreement guidelines.
Certain restrictions imposed on the Fund by the Code may limit a Fund's ability
to use swap agreements. The swaps market is a relatively new market and is
largely unregulated. It is possible that developments in the swaps market,
including potential government regulation, could adversely affect the Fund's
ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.

Certain swap agreements are exempt from most provisions of the CEA and,
therefore, are not regulated as futures or commodity option transactions under
the CEA, pursuant to regulations approved by the CFTC effective February 22,
1993. To qualify for this exemption, a swap agreement must be entered into by
eligible participants, which includes the following, provided the participant's
total assets exceed established levels: a bank or trust company, savings
association or credit union, insurance company, investment company subject to
regulation under the 1940 Act, commodity pool, corporation, partnership,
proprietorship, organization, trust or other entity, employee benefit plan,
governmental entity, broker-dealer, futures commission merchant, natural person,
or regulated foreign person. To be eligible, natural persons and most other
entities must have total assets exceeding $10 million; commodity pools and
employee benefit plans must have assets exceeding $5 million. In addition, an
eligible swap transaction must meet three conditions. First, the swap agreement
may not be part of a fungible class of agreements that are standardized as to
their material economic terms. Second, the creditworthiness of parties with
actual or potential obligations under the swap agreement must be a material
consideration in entering into or determining the terms of the swap agreement,
including pricing, cost or credit enhancement terms. Third, swap agreements may
not be entered into and traded on or through a multilateral transaction
execution facility.

This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a "safe harbor" for swap transactions from regulation as
futures or commodity option transactions under the CEA or its regulations. The
Policy Statement applies to swap transactions settled in cash that: (1) have
individually tailored terms; (2) lack exchange style offset and the use of a
clearing organization or margin system; (3) are undertaken in conjunction with a
line of business; and (4) are not marketed to the public. Restrictions adopted
by the CFTC may in the future restrict the Funds' ability to enter into swap
transactions.

The Fund will not enter into any swap, cap or floor transaction unless the
unsecured commercial paper, senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the portfolio
management team. If there is default by the other party to such a transaction,
the Fund will 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 in comparison with the markets for other
similar instruments that are traded in the interbank market. See "Illiquid
Securities."


Derivative Securities: Hedging Strategies

Hedging Strategies. A Portfolio/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) 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 Portfolio's/Fund's investment objective and
policies. Among other purposes, these hedging strategies may be used to
effectively maintain a desired portfolio duration or to protect against market
risk should the Portfolio/Fund change its investments among different types of
securities.

A Portfolio/Fund might not use any hedging strategies, and there can be no
assurance that any strategy used will succeed. If the portfolio management team
is incorrect in its judgment on market values, interest rates, currency rates or
other economic factors in using a hedging strategy, the Portfolio/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
         Portfolio/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 Portfolio's/Fund's ability to
         purchase or sell portfolio investments at advantageous times due to the
         need for the Portfolio/Fund to maintain "cover" or to segregate
         securities; and

o        the possibility that the Portfolio/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 derivative 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 generally far exceed the value of the futures contracts sold by
the Portfolio/Fund, an increase in the value of the futures contracts could only
mitigate, but not totally offset, the decline in the value of the
Portfolio's/Fund's assets.

In hedging transactions based on an index, whether the Portfolio/Fund will
realize a gain or loss depends upon movements in the level of securities prices
in the securities market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
security. The risk of imperfect correlation increases as the composition of the
Portfolio's/Fund's portfolio varies from the composition of the index. In an
effort to compensate for imperfect correlation of relative movements in the
hedged position and the hedge, the Portfolio's/Fund's hedge positions may be in
a greater or lesser dollar amount than the dollar amount of the hedged position.
Such "over hedging" or "under hedging" may adversely affect the
Portfolio's/Fund's net investment results if market movements are not as
anticipated when the hedge is established.

Securities index futures transactions may be subject to additional correlation
risks. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions that would distort the normal relationship between the securities
index and futures markets. Secondly, from the point of view of speculators, the
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 also may cause temporary price distortions.
Because of the possibility of price distortions in the futures market and the
imperfect correlation between movements in a securities index and movements in
the price of securities index futures, a correct forecast of general market
trends by the portfolio management team still may not result in a successful
hedging transaction.

To the extent that a Portfolio/Fund engages in the strategies described above,
the Portfolio/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 Portfolio/Fund may be
unable to close out a position without incurring substantial losses, if at all.
The Portfolio/Fund is also subject to the risk of default by a counterparty to
an off-exchange transaction. See "Illiquid Securities."

Currency Management

General. In connection with a Portfolio's/Fund's investments denominated in
foreign currencies, the portfolio management team may choose to utilize a
variety of currency management (hedging) strategies. The portfolio management
team seeks to take advantage of different yield, risk and return characteristics
that different currency, currency denominations and countries can provide to US
investors. In doing so, the portfolio management team will consider such factors
as the outlook for currency relationships; current and anticipated interest
rates; levels of inflation within various countries; prospects for relative
economic growth; and government policies influencing currency exchange rates and
business conditions. Although the portfolio management team may attempt to
manage currency exchange rate risks, there is no assurance that the portfolio
management team will do so, or do so at an appropriate time or that the
portfolio management team will be able to predict exchange rates accurately.

Currency Exchange Transactions. Because the Portfolio/Funds 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,
the Portfolio/Funds from time to time may enter into currency exchange
transactions to convert to and from different currencies and to convert foreign
currencies to and from the US dollar. A Portfolio/Fund either enters into these
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
currency exchange market or uses forward currency exchange contracts (discussed
below) to purchase or sell currencies. Neither spot transactions nor forward
currency exchange contracts eliminate fluctuations in the prices of the
Portfolio's/Funds' securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline.

Forward Currency Exchange Contracts. A forward currency exchange contract is an
obligation by a Portfolio/Fund 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. Forward currency exchange contracts establish an exchange rate at a
future date. These contracts are transferable in the interbank market conducted
directly between currency traders (usually large commercial banks and
brokerages) and their customers. A forward currency exchange contract may not
have a deposit requirement and may be traded at a net price without commission.
A Portfolio/Fund maintains a segregated account of cash or liquid securities in
an amount at least equal to its obligations under each forward currency exchange
contract.

A Portfolio/Fund may enter into foreign currency hedging transactions in an
attempt to protect against changes in currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in currency
exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into the Advisor's long-term investment
decisions, the Portfolio/Funds will not routinely enter into currency hedging
transactions with respect to security transactions; however, the Advisor
believes that it is important to have the flexibility to enter into currency
hedging transactions when it determines that the transactions would be in a
Portfolio/Fund's best interest. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. 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 such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

While these contracts are not presently regulated by the CFTC, the CFTC may in
the future assert authority to regulate forward contracts. In such event a
Portfolio's/Fund's ability to utilize forward contracts may be restricted.
Forward contracts may reduce the potential gain from a positive change in the
relationship between the US dollar and foreign currencies. Unanticipated changes
in currency prices may result in poorer overall performance for a Portfolio/Fund
than if it had not entered into such contracts. The use of currency forward
contracts may not eliminate fluctuations in the underlying US dollar equivalent
value of the prices of or rates of return on a Portfolio's/Fund's foreign
currency denominated portfolio securities and the use of such techniques will
subject a Portfolio/Fund to certain risks.

The matching of the increase in value of a forward contract and the decline in
the US dollar equivalent value of the foreign currency denominated asset that is
the subject of the hedge generally will not be precise. In addition, a
Portfolio/Fund may not always be able to enter into currency forward contracts
at attractive prices, and this will limit the Portfolio's/Fund's ability to use
such contracts to hedge or cross-hedge its assets. Also, with regard to a
Portfolio's/Fund's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain foreign currencies
relative to the US dollar will continue. Thus, at any time poor correlation may
exist between movements in the exchange rates of the foreign currencies
underlying a Portfolio's/Fund's cross-hedges and the movements in the exchange
rates of the foreign currencies in which a Portfolio's/Fund's assets that are
the subject of such cross-hedges are denominated.

A Portfolio/Fund will segregate cash or liquid securities in an amount equal to
the value of a Portfolio's/Fund's total assets committed to the consummation of
forward currency contracts requiring a Portfolio/Fund to purchase foreign
currencies or forward contracts entered into for non-hedging purposes. If the
value of the segregated securities declines, additional cash or liquid
securities will be segregated on a daily basis so that the value of the assets
will equal the amount of a Portfolio's/Fund's commitments with respect to such
contracts. The segregated assets will be marked-to-market on a daily basis.

A Portfolio/Fund may also utilize forward foreign currency contracts to
establish a synthetic investment position designed to change the currency
characteristics of a particular security without the need to sell such security.
Synthetic investment positions will typically involve the purchase of US
dollar-denominated securities together with a forward contract to purchase the
currency to which a Portfolio/Fund seeks exposure and to sell US dollars. This
may be done because the range of highly liquid short-term instruments available
in the US may provide greater liquidity to a Portfolio/Fund than actual
purchases of foreign currency-denominated securities in addition to providing
superior returns in some cases. Depending on (a) a Portfolio's/Fund's liquidity
needs, (b) the relative yields of securities denominated in different currencies
and (c) spot and forward currency rates, a significant portion of a
Portfolio's/Fund's assets may be invested in synthetic investment positions,
subject to compliance with the tax requirements for qualification as a regulated
investment company.

There is a risk in adopting a synthetic investment position. It is impossible to
forecast with absolute precision what the market value of a particular security
will be at any given time. If the value of the US dollar-denominated security is
not exactly matched with a Portfolio's/Fund's obligation under a forward
currency contract on the date of maturity, a Portfolio/Fund may be exposed to
some risk of loss from fluctuations in the value of the US dollar. Although the
portfolio management team will attempt to hold such mismatching to a minimum,
there can be no assurance that the portfolio management team will be able to do
so.


Certain options on foreign currencies are traded over-the-counter and involve
liquidity and credit risks that may not be present in the case of
exchange-traded currency options. In some circumstances, the Fund's ability to
terminate OTC options may be more limited than with exchange-traded options. It
is also possible that broker-dealers participating in OTC options transactions
will not fulfill their obligations. See "Illiquid Securities."

Additional Limitations and Risk Factors

In addition to the risks discussed above, the Portfolio's/Funds' investments may
be subject to the following limitations and risk factors:

Additional Risks Related to Transactions in Options, Futures Contracts, Options
on Futures Contracts, Swaps and Forward Foreign Currency Exchange Contracts. The
Portfolio's/Funds' active management techniques involve (1) liquidity risk
(contractual positions cannot be easily closed out in the event of market
changes or generally in the absence of a liquid secondary market), (2)
correlation risk (changes in the value of hedging positions may not match the
securities market and foreign currency fluctuations intended to be hedged), and
(3) market risk (an incorrect prediction of securities prices or exchange rates
by the portfolio management team may cause the Portfolio/Fund to perform worse
than if such positions had not been taken). In addition, the ability to
terminate OTC derivatives is more limited than with exchange traded derivatives
and may involve the risk that the counterparty to the option will not fulfill
its obligations.

Asset Coverage. A Portfolio/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; forward currency contracts;
and swaps, caps, floors and collars. These guidelines may, in certain instances,
require segregation by the Portfolio/Fund of cash or liquid securities to the
extent the Portfolio's/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 Portfolio's/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 Portfolio's/Fund's assets could impede
portfolio management or the Portfolio's/Fund's ability to meet redemption
requests or other current obligations.

The Board of Trustees of the Portfolio and the Funds has adopted the requirement
that futures contracts and options on futures contracts be used as a hedge and
that stock index futures may be used on a continual basis.

A call option written on securities may require a Portfolio/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 Portfolio/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 Portfolio/Fund may require the
Portfolio/Fund to segregate assets (as described above) equal to the exercise
price. A Portfolio/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
Portfolio/Fund. If a Portfolio/Fund holds a futures contract, the Portfolio/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. A Portfolio/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 derivatives is a highly specialized activity that involves investment
techniques and risks that are different from those associated with ordinary
portfolio transactions. Gains and losses on these derivatives depend on the
portfolio management team's ability to predict the direction of stock prices,
interest rates, currency movements and other economic factors. The loss that may
be incurred by the Portfolio/Fund in entering into futures contracts, written
options, forward currency contracts and certain swaps 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 Portfolio/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," there is no limit on the percentage of the assets
of a Portfolio/Fund that may be at risk with respect to futures contracts and
related options or forward currency contracts. The Portfolio's/Fund's
transactions in options, forward currency contracts, futures contracts, options
on futures contracts and swaps may be limited by the requirements for
qualification of the Portfolio/Fund as a regulated investment company for tax
purposes. See "Taxes." There can be no assurance that the use of these portfolio
strategies will be successful.

Rating Services. The ratings of Moody's and S&P represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial criterion
for selection of Portfolio/Fund investments, the portfolio management team also
makes its own evaluation of these securities, subject to review by the Board of
Trustees. After purchase by a Portfolio/Fund, an obligation may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Portfolio/Fund Neither event would require the Portfolio/Fund to eliminate
the obligation from its portfolio, but the portfolio management team will
consider such an event in its determination of whether the Portfolio/Fund should
continue to hold the obligation. A description of the ratings used herein and in
the Prospectus is set forth in the Appendix to this SAI.


Other Investments and Investment Practices

Illiquid Securities. The Portfolio/Funds may invest up to 15% of its net assets
in 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. Investments in 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 Portfolio/Funds 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 Portfolio's/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, 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.

Rule 144A under the 1933 Act 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 portfolio management team 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 National Association
of Securities Dealers, Inc. ("NASD").

An investment in Rule 144A securities will be considered illiquid and therefore
subject to the Portfolio's/Fund's limit on the purchase of illiquid securities
unless the portfolio management team determines that the Rule 144A securities
are liquid. In reaching liquidity decisions, the portfolio management team 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 Portfolio/Fund to the extent that qualified institutional
buyers are unavailable or uninterested in purchasing such securities from the
Portfolio/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.

Impact of Large Redemptions and Purchases of Fund Shares. From time to time,
shareholders of a Fund (which may include affiliated and/or non-affiliated
registered investment companies that invest in a Fund) may make relatively large
redemptions or purchases of Fund shares. These transactions may cause a 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 a Fund's performance to the extent that a 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 or other income
and could also increase transaction costs, which may impact a Fund's expense
ratio.

When-Issued and Delayed Delivery Securities. It is the current policy of the
Portfolio/Funds not to enter into when-issued commitments exceeding in the
aggregate 15% of the market value of the Portfolio's/Fund's total assets, less
liabilities other than the obligations created by when-issued commitments. The
Portfolio/Funds may purchase securities on a when-issued or delayed delivery
basis. Delivery of and payment for these securities can take place a month or
more after the date of the purchase commitment. The payment obligation and the
interest rate that will be received on when-issued and delayed-delivery
securities are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the yields obtained on such securities may be higher or
lower than the yields available in the market on the dates when the investments
are actually delivered to the buyers. When-issued securities may include
securities purchased on a "when, as and if issued" basis, under which the
issuance of the security depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring. The
value of such securities is subject to market fluctuation during this period and
no interest or income, as applicable, accrues to the Portfolio/Funds until
settlement takes place.

At the time a Portfolio/Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the transaction, reflect
the value each day of such securities in determining its net asset value and, if
applicable, calculate the maturity for the purposes of average maturity from
that date. At the time of settlement a when-issued security may be valued at
less than the purchase price. To facilitate such acquisitions, a Portfolio/Fund
identifies on its books cash or liquid assets in an amount at least equal to
such commitments. It may be expected that the Portfolio's/Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. On delivery dates for
such transactions, the Portfolio/Funds will meet its obligations from maturities
or sales of the segregated securities and/or from cash flow. If a Portfolio/Fund
chooses to dispose of the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. When a
Portfolio/Fund engages in when-issued or delayed-delivery transactions, it
relies on the other party to consummate the trade. Failure of the seller to do
so may result in the Portfolio's/Fund's incurring a loss or missing an
opportunity to obtain a price considered being advantageous.

Lending of Portfolio Securities. The Portfolio/Funds may lend its investment
securities to approved institutional borrowers who need to borrow securities in
order to complete certain transactions, such as covering short sales, avoiding
failures to deliver securities or completing arbitrage operations. By lending
its investment securities, the Portfolio/Fund attempts to increase its net
investment income through the receipt of interest on the loan. Any gain or loss
in the market price of the securities loaned that might occur during the term of
the loan would belong to the Portfolio/Fund. The Portfolio/Fund may lend its
investment securities so long as the terms, structure and the aggregate amount
of such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the SEC thereunder, which currently require,
among other things, that (a) the borrower pledge and maintain with the
Portfolio/Fund collateral consisting of liquid, unencumbered assets having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio/Fund at any time, and (d) the
Portfolio/Fund receives reasonable interest on the loan (which may include the
Portfolio/Fund investing any cash collateral in interest bearing short-term
investments), and distributions on the loaned securities and any increase in
their market value. There may be risks of delay in recovery of the securities or
even loss of rights in the collateral should the borrower of the securities fail
financially. However, loans will be made only to borrowers selected by the
Portfolio's/Fund's delegate after a commercially reasonable review of relevant
facts and circumstances, including the creditworthiness of the borrower.

The Portfolio/Fund may pay negotiated fees in connection with loaned securities,
pursuant to written contracts. In addition, voting rights may pass with the
loaned securities, but if a material event occurs affecting an investment on
loan, the loan must be called and the securities voted. Pursuant to an exemptive
order granted by the SEC, cash collateral received by the Portfolio/Fund may be
invested in a money market fund managed by the Advisor (or one of its
affiliates).


Other Investment Companies. Except with respect to Equity 500 Index Fund's
investment in the Portfolio, the Portfolio/Funds may invest in the aggregate no
more than 10% of its/their total assets, calculated at the time of purchase, in
the securities of other US-registered investment companies. In addition, the
Portfolio/Funds 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 Portfolio/Funds will indirectly bear a proportionate share of any management
or other fees paid by investment companies in which it invests, in addition to
its own fees.

Repurchase Agreements. The Portfolio/Funds may invest in repurchase agreements
pursuant to its/their investment guidelines. In a repurchase agreement, the fund
acquires ownership of a security and simultaneously commits to resell that
security to the seller, typically a bank or broker/dealer.

A repurchase agreement provides a means for a Portfolio/Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Portfolio/Fund) acquires a security ("Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. Securities subject to a repurchase agreement are held in a
segregated account and, as described in more detail below, the value of such
securities is kept at least equal to the repurchase price on a daily basis. The
repurchase price may be higher than the purchase price, the difference being
income to the Portfolio/Fund, or the purchase and repurchase prices may be the
same, with interest at a stated rate due to the Portfolio/Fund together with the
repurchase price upon repurchase. In either case, the income to the
Portfolio/Fund is unrelated to the interest rate on the Obligation itself.
Obligations will be held by the custodian or in the Federal Reserve Book Entry
System.

It is not clear whether a court would consider the Obligation purchased by the
Portfolio/Fund subject to a repurchase agreement as being owned by the
Portfolio/Fund or as being collateral for a loan by the Portfolio/Fund to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Portfolio/Fund may encounter delay and incur
costs before being able to sell the security. Delays may involve loss of
interest or decline in price of the Obligation. If the court characterizes the
transaction as a loan and the Portfolio/Fund has not perfected a security
interest in the Obligation, the Portfolio/Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Portfolio/Fund would be at risk of losing
some or all of the principal and income involved in the transaction. As with any
unsecured debt Obligation purchased for the Portfolio/Fund, the Advisor seeks to
reduce the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller of the Obligation.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the Obligation, in which case the
Portfolio/Fund may incur a loss if the proceeds to the Portfolio/Fund of the
sale to a third party are less than the repurchase price. However, if the market
value (including interest) of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including interest), a Portfolio/Fund
will direct the seller of the Obligation to deliver additional securities so
that the market value (including interest) of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.

Reverse Repurchase Agreements. The Portfolio/Funds may borrow funds by, among
other things, agreeing to sell portfolio securities to financial institutions
that meet the standards described under "Repurchase Agreements" and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). A Portfolio/Fund may enter into reverse repurchase agreements with
banks and domestic broker-dealers. At the time the Portfolio/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 Portfolio's/Funds' 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 Portfolio/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 Portfolio's/Fund's obligation to repurchase the
securities, and the Portfolio's/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
Portfolio/Fund.


Impact of Sub-Prime Mortgage Market. A Fund may invest in mortgage-backed,
asset-backed and other fixed-income securities whose value and liquidity may be
adversely affected by the critical downturn in the sub-prime mortgage lending
market in the US. Sub-prime loans, which, have higher interest rates, are made
to borrowers with low credit ratings or other factors that increase the risk of
default. Concerns about widespread defaults on sub-prime loans have also created
heightened volatility and turmoil in the general credit markets. As a result, a
Fund's investments in certain fixed-income securities may decline in value,
their market value may be more difficult to determine, and a Fund may have more
difficulty disposing of them.


Investment of Uninvested Cash Balances. A Portfolio/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 or 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, a
Portfolio/Fund may use Uninvested Cash to purchase shares of affiliated funds,
including money market funds and Cash Management QP Trust, or entities for 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 a Portfolio in shares of the Central
Funds will comply with Rule 2a-7 under the 1940 Act and will be in accordance
with a Portfolio's/Fund's investment policies and restrictions as set forth in
its registration statement.

A Portfolio/Fund will invest Uninvested Cash in Central Funds only to the extent
that a Portfolio's/Fund's aggregate investment in the Central Funds does not
exceed 25% of its total assets. Purchase and sales of shares of Central Funds
are made at net asset value.

The following is a discussion of the various types of securities and investment
strategies employed by the Portfolio and U.S. Bond Index Fund. Unless otherwise
indicated, the Funds are not obligated to pursue any of the following strategies
and do not represent that these techniques are available now or will be
available at any time in the future. If a Fund's investment in a particular type
of security is limited to a certain percentage of a 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 Funds.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------ ---------------- ---------------
INVESTMENT PRACTICE                                                               U.S. Bond       Equity 500
                                                                                 Index Fund       Index Fund
---------------------------------------------------------------------------------------------------------------

KEY TO TABLE:
|   Permitted without stated limit
o   Permitted without stated 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>                 <C>
Common Stock                                                                          X               |
------------------------------------------------------------------------------ ---------------- ---------------
Preferred Stock                                                                       X               |
------------------------------------------------------------------------------ ---------------- ---------------
Warrants Listed on the New York Stock Exchange ("NYSE") and the American              X               X
Stock Exchange ("ASE")
------------------------------------------------------------------------------ ---------------- ---------------
Warrants Not Listed on NYSE & ASE                                                     X               X
------------------------------------------------------------------------------ ---------------- ---------------
Convertible Securities                                                                |               |
------------------------------------------------------------------------------ ---------------- ---------------
Small Capitalization Stocks                                                           X               X
------------------------------------------------------------------------------ ---------------- ---------------
Medium Capitalization Stocks                                                          X          At least 80%
------------------------------------------------------------------------------ ---------------- ---------------
Large Capitalization Stocks                                                           X
------------------------------------------------------------------------------ ---------------- ---------------

FIXED INCOME SECURITIES & MONEY MARKET INSTRUMENTS
------------------------------------------------------------------------------ ---------------- ---------------
Short-Term Instruments                                                                |               o
------------------------------------------------------------------------------ ---------------- ---------------
Obligations of Banks and Other Financial Institutions                                 o               o
------------------------------------------------------------------------------ ---------------- ---------------
Certificates of Deposit and Bankers' Acceptances                                      o               o
------------------------------------------------------------------------------ ---------------- ---------------
Commercial Paper                                                                      o               o
------------------------------------------------------------------------------ ---------------- ---------------
Variable Rate Securities                                                              o               o
------------------------------------------------------------------------------ ---------------- ---------------
US Government Securities                                                              |               o
------------------------------------------------------------------------------ ---------------- ---------------
Zero Coupon Securities and Deferred Interest Bonds                                    o               X
---------------------------------------------------------------------------------------------------------------

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
------------------------------------------------------------------------------ ---------------- ---------------
Government Guaranteed Mortgage-Backed Securities                                      |               X
------------------------------------------------------------------------------ ---------------- ---------------
Ginnie Mae Certificates                                                               |               X
------------------------------------------------------------------------------ ---------------- ---------------
Fannie Mae Certificates                                                               |               X
------------------------------------------------------------------------------ ---------------- ---------------
Freddie Mac Certificates                                                              |               X
------------------------------------------------------------------------------ ---------------- ---------------
Multi-Class Mortgage-Backed Securities (CMOs and REMICs)                              |               X
------------------------------------------------------------------------------ ---------------- ---------------
Mortgage Pass-Through Securities                                                      |               X
------------------------------------------------------------------------------ ---------------- ---------------
Stripped Mortgage-Backed Securities                                                   |               X
------------------------------------------------------------------------------ ---------------- ---------------
Adjustable Rate Mortgages                                                             |               X
------------------------------------------------------------------------------ ---------------- ---------------
Asset-Backed Securities                                                               |               X
---------------------------------------------------------------------------------------------------------------

DERIVATIVE SECURITIES (OPTIONS)
------------------------------------------------------------------------------ ---------------- ---------------
Options on Securities                                                                 o               o
------------------------------------------------------------------------------ ---------------- ---------------
Options on Securities Indices                                                  15% OTC Options     15% OTC
                                                                                                   Options
------------------------------------------------------------------------------ ---------------- ---------------
Options on Non-US Securities Indices                                                  X               X
------------------------------------------------------------------------------ ---------------- ---------------
Yield Curve Options                                                                   o               X
------------------------------------------------------------------------------ ---------------- ---------------
Spreadlocks                                                                           o               X
---------------------------------------------------------------------------------------------------------------

DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS)
------------------------------------------------------------------------------ ---------------- ---------------
Futures Contracts                                                                     o               o
------------------------------------------------------------------------------ ---------------- ---------------
Futures Contracts on Securities Indices                                              5%               5%
------------------------------------------------------------------------------ ---------------- ---------------
Options on Futures Contracts (including Contracts on Security Indices)               5%               5%
---------------------------------------------------------------------------------------------------------------

DERIVATIVE SECURITIES
------------------------------------------------------------------------------ ---------------- ---------------
Swaps                                                                                10%              X
------------------------------------------------------------------------------ ---------------- ---------------
Hedging Strategies                                                                    o               o
------------------------------------------------------------------------------ ---------------- ---------------

SECURITIES OF NON-US ISSUERS
------------------------------------------------------------------------------ ---------------- ---------------
Foreign Corporate Debt Securities                                               X (except for         o
                                                                                Yankee Bonds)
------------------------------------------------------------------------------ ---------------- ---------------
Foreign Government Debt Securities                                              X (except for         o
                                                                                Yankee Bonds)
------------------------------------------------------------------------------ ---------------- ---------------
Investments in Emerging Markets                                                       X               X
------------------------------------------------------------------------------ ---------------- ---------------
Yankee Bonds                                                                          |               X
---------------------------------------------------------------------------------------------------------------

CURRENCY MANAGEMENT
------------------------------------------------------------------------------ ---------------- ---------------
Currency Exchange Transactions                                                        o               o
------------------------------------------------------------------------------ ---------------- ---------------
Forward Currency Exchange Contracts                                                   o               o
------------------------------------------------------------------------------ ---------------- ---------------
Options on Foreign Currencies                                                         X               X
---------------------------------------------------------------------------------------------------------------

OTHER INVESTMENTS AND INVESTMENT PRACTICES
------------------------------------------------------------------------------ ---------------- ---------------
Illiquid Securities                                                                  15%             15%
------------------------------------------------------------------------------ ---------------- ---------------
When-Issued and Delayed Delivery Securities                                          15%             15%
------------------------------------------------------------------------------ ---------------- ---------------
Repurchase Agreements                                                                 o               o
------------------------------------------------------------------------------ ---------------- ---------------
Reverse Repurchase Agreements                                                         o               o
------------------------------------------------------------------------------ ---------------- ---------------
Lending of Portfolio Securities                                                    33 1/3%         33 1/3%
------------------------------------------------------------------------------ ---------------- ---------------
Other Investment Companies                                                           10%             10%
------------------------------------------------------------------------------ ---------------- ---------------
Lehman US Aggregate Index                                                         At least           N/A
                                                                                     80%
------------------------------------------------------------------------------ ---------------- ---------------
S&P 500 Index                                                                        N/A           At least
                                                                                                     80%
------------------------------------------------------------------------------ ---------------- ---------------
MSCI EAFE(R) Index                                                                     N/A             N/A
------------------------------------------------------------------------------ ---------------- ---------------
</TABLE>


Portfolio Holdings Information

For Equity 500 Index Fund, references below to portfolio holdings of the "Fund"
refer to holdings of the Portfolio.

In addition to the public disclosure of Fund portfolio holdings through required
Securities and Exchange Commission ("SEC") quarterly filings, a Fund may make
its portfolio holdings information publicly available on the DWS Funds' Web site
as described in each Fund's prospectus. Each Fund does not disseminate
non-public information about portfolio holdings except in accordance with
policies and procedures adopted by each Fund.

Each Fund's procedures permit non-public portfolio holdings information to be
shared with Deutsche Asset Management and its affiliates (collectively "DeAM"),
subadvisors, if any, custodians, independent registered public accounting firms,
attorneys, officers and trustees/directors and each of their respective
affiliates and advisers who require access to this information to fulfill their
duties to each 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 each Fund's procedures. This non-public information may also be disclosed,
subject to the requirements described below, to certain third parties, such as
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 each Fund's non-public portfolio holdings information
to Authorized Third Parties, a person authorized by each Fund's
Trustees/Directors must make a good faith determination in light of the facts
then known that a Fund has a legitimate business purpose for providing the
information, that the disclosure is in the best interest of each 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 each Fund or DeAM
for disclosing non-public holdings information. Periodic reports regarding these
procedures will be provided to each Fund's Trustees/Directors.

Portfolio holdings information distributed by the trading desks of DeAM or a
subadvisor for the purpose of facilitating efficient trading of such securities
and receipt of relevant research is not subject to the foregoing requirements.
Non-public portfolio holding information does not include portfolio
characteristics (other than holdings or subsets of holdings) about each Fund and
information derived therefrom, including, but not limited to, how each 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 identity
of each 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 a
Fund's/Portfolio's Board of Trustees exercise control over such policies. In
addition, separate account clients of DeAM have access to their portfolio
holdings and are not subject to a Fund's/Portfolio'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 a 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 a Fund. To the extent that investors in these commingled
trusts or recipients of model portfolio holdings information may receive
portfolio holdings information of their trust or of a model portfolio on a
different basis from that on which fund portfolio holdings information is made
public, DeAM has implemented procedures reasonably designed to encourage such
investors and recipients to keep such information confidential, and to prevent
those investors from trading on the basis of non-public holdings information.

There is no assurance that the Fund's policies and procedures with respect to
the disclosure of portfolio holdings information will protect the Fund from the
potential misuse of portfolio holdings information by those in possession of
that information.

                      MANAGEMENT OF THE FUNDS AND PORTFOLIO

Investment Advisor for the Funds and Portfolio

Deutsche Investment Management Americas Inc. ("DIMA" or the "Advisor"), which is
part of Deutsche Asset Management ("DeAM"), is the investment advisor for the
Fund and the Portfolio. Under the supervision of the Board of Trustees of the
Fund/Portfolio, DIMA, with headquarters at 345 Park Avenue, New York, New York
10154, or a subadvisor, makes the Fund's/Portfolio's investment decisions, buys
and sells securities for the Fund/Portfolio and conducts research that leads to
these purchase and sale decisions. The Advisor, or a subadvisor manages the
Fund's/Portfolio's daily investment and business affairs subject to the policies
established by each Trust's Board. DIMA, together with its predecessors, has
more than 80 years of experience managing mutual funds and provides a full range
of investment advisory services to institutional and retail clients. The Advisor
or a subadvisor is also responsible for selecting brokers and dealers and for
negotiating brokerage commissions and dealer charges.

DeAM is the marketing name in the US for the asset management activities of
Deutsche Bank AG, DIMA, Deutsche 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. DWS Investments is part of Deutsche Bank's Asset Management division
and, within the US, represents the retail asset management activities of
Deutsche Bank AG, Deutsche Bank Trust Company Americas, Deutsche Investment
Management Americas Inc. and DWS Trust Company.

The Board and the shareholders have approved an amended and restated investment
management agreement (each an "Investment Management Agreement") between the
Trust and the Portfolio, and DIMA for each Fund and the Portfolio. Pursuant to
the Investment Management Agreements, DIMA provides continuing investment
management of the assets of the Funds and the Portfolio. In addition to the
investment management of the assets of the Funds/Portfolio, DIMA or a subadvisor
determines the investments to be made for the Portfolio/Funds, 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
Portfolio's/Funds' policies as adopted by the Portfolio's/Funds' Board of
Trustees. The Advisor will also monitor, to the extent not monitored by the
Portfolio's/Funds' Administrator or other agent, the Portfolio's/Funds'
compliance with its investment and tax guidelines and other compliance policies.
On December 31, 2006, Deutsche Asset Management, Inc. ("DAMI") merged into DIMA.
Prior to January 1, 2007, DAMI was the investment advisor to the Funds and the
Portfolio. As a result of the merger, DIMA is now the investment advisor to the
Funds and the Portfolio.

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

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

The Investment Management Agreements provide that the Funds/Portfolio are
generally responsible for expenses that include: fees payable to the Advisor,
outside legal, accounting or auditing expenses, including with respect to
expenses related to negotiating, acquisition or distribution of portfolio
investments; maintenance of books and records that are maintained by the
Funds/Portfolio, the Funds'/Portfolio's custodian, or other agents of the
Funds/Portfolio; taxes and governmental fees; fees and expenses of the Funds'
accounting agent, custodians, 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
Funds/Portfolio; and litigation expenses and other extraordinary expenses not
incurred in the ordinary course of business.

The Investment Management Agreements allow the Advisor to delegate any of its
duties under the Investment Management Agreements to a sub-advisor, subject to a
majority vote of the Board of Trustees, including a majority of the Board of
Trustees who are not interested persons of the Funds/Portfolio, and if required
by applicable law, subject to a majority vote of each Fund's shareholders.

The Investment Management Agreements provide that the Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by a
Fund in connection with matters to which the Investment Management 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 a Fund on 60 days' written notice.

For all services provided under the Investment Management Agreements, each Fund
and the Portfolio, as the case may be, pays DIMA a fee, accrued daily and paid
monthly as set forth below. For the Equity 500 Index Portfolio, the fee is equal
to, on an annual basis, 0.05% of average daily net assets of the Portfolio. The
Equity 500 Index Fund pays its pro rata portion of this fee. The Advisor
receives no fee from the Equity 500 Index Fund for monitoring its investment in
the Portfolio. In the event the Board of Trustees determines it is in the best
interests of the Equity 500 Index Fund's shareholders to withdraw its investment
in the Portfolio, the Advisor may become responsible for directly managing the
assets of the Equity 500 Index Fund. In such event, the Equity 500 Index Fund
would pay the Advisor an annual fee of 0.05% of the Fund's average daily net
assets, accrued daily and paid monthly. DIMA receives a fee equivalent to 0.15%
of the average daily net assets of the U.S. Bond Index Fund.

The Advisor is an indirect, wholly owned subsidiary of Deutsche Bank AG
("Deutsche Bank"). Deutsche Bank is a banking company with limited liability
organized under the laws of the Federal Republic of Germany. Deutsche Bank AG is
the parent company of a group consisting of banks, capital markets companies,
fund management companies, mortgage banks, a property finance company,
installments financing and leasing companies, insurance companies, research and
consultancy companies and other domestic and foreign companies.

The Advisor or its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of obligations which may be purchased on
behalf of the Funds, including outstanding loans to such issuers which could be
repaid in whole or in part with the proceeds of securities so purchased. Such
affiliates deal, trade and invest for their own accounts in such obligations and
are among the leading dealers of various types of such obligations. The Advisor
has informed the Funds that, in making its investment decisions, it does not
obtain or use material inside information in its possession or in the possession
of any of its affiliates. In making investment recommendations for the Fund, the
Advisor will not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by a Fund is a customer of the Advisor,
its parent or its subsidiaries or affiliates. Also, in dealing with its
customers, the Advisor, its parent, subsidiaries, and affiliates will not
inquire or take into consideration whether securities of such customers are held
by any fund managed by the Advisor or any such affiliate.

The Advisor, subject to the supervision and direction of the Board of Trustees
of the Trust, manages the Funds in accordance with each Fund's investment
objective and stated investment policies, makes investment decisions for the
Funds, places orders to purchase and sell securities and other financial
instruments on behalf of the Funds and employs professional investment managers
and securities analysts who provide research services to the Funds. The Advisor
may utilize the expertise of any of its worldwide subsidiaries and affiliates to
assist it in its role as investment advisor. All orders for investment
transactions on behalf of the Funds are placed by the Advisor with brokers,
dealers and other financial intermediaries that it selects, including those
affiliated with the Advisor. An Advisor affiliate will be used in connection
with a purchase or sale of an investment for a Fund only if the Advisor believes
that the affiliate's charge for transaction does not exceed usual and customary
levels. The Funds will not invest in obligations for which the Advisor or any of
its affiliates is the ultimate obligor or accepting bank. The Funds may,
however, invest in the obligations of correspondents or customers of the
Advisor. The Advisor has delegated many of these responsibilities to the
sub-advisor.

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.

From time to time, Deutsche Bank or an affiliate (collectively, "DB") may at its
sole discretion invest its own assets in shares of each Fund ("proprietary
investment") for such purposes it deems appropriate, including investments
designed to assist in the management of each Fund's portfolio. Any proprietary
investment may be hedged and, in that event, the return on the proprietary
investment, net of the effect of the hedge, would be expected to differ from the
return of each Fund. DB has no obligation to make any proprietary investments
and the amount of any proprietary investment this is made may or may not be
significant in comparison to the level of assets of each Fund. In the event that
a proprietary investment is made, except as otherwise required under the
Investment Company Act of 1940, DB would be permitted to redeem the investment
at such time that it deems appropriate provided; however, any such redemption
would be effected by DB in a manner designed to mitigate any adverse effects to
each Fund. DB may vote the shares associated with a proprietary investment, at
its option, either by "mirror" voting in the same proportion as the shares of
each Fund are voted by the other shareholders or by voting through an
independent third party.

The Board and shareholders have approved a subadvisor approval policy for the
Funds/Portfolio (the "Sub-advisor Approval Policy"). The Sub-advisor Approval
Policy permits the Advisor, subject to the approval of the Board, including a
majority of its independent board members, to appoint and replace sub-advisors
and to amend sub-advisory contracts without obtaining shareholder approval.
Under the Sub-advisor Approval Policy, the Board, including its independent
board members, will continue to evaluate and approve all new sub-advisory
contracts between the Advisor and any subadvisor, as well as all changes to any
existing sub-advisory contract. The Funds/Portfolio cannot implement the
Sub-advisor Approval Policy without the SEC either adopting revisions to current
rules (as it proposed to do in October 2003) or granting the Funds/Portfolio
exemptive relief from existing rules. The Funds/Portfolio and the Advisor would
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 Funds/Portfolio and its shareholders are adequately
protected whenever the Advisor acts under the Sub-advisor Approval Policy,
including any shareholder notice requirements.

For the year ended December 31, 2007, pursuant to the Investment Management
Agreement, the Advisor waived a portion of its investment management fee for
Equity 500 Index Portfolio of $1,413,177 and charged $388,250, which was
equivalent to an annual effective rate of 0.01% of Equity 500 Index Portfolio's
average daily net assets. For the year ended December 31, 2006, DAMI earned
$1,686,715 as compensation for investment advisory services provided to the
Equity 500 Index Portfolio. During the same period DAMI waived $1,015,449 of
such fee. For the year ended December 31, 2005 DAMI earned $1,609,116 as
compensation for investment advisory services provided to the Equity 500 Index
Portfolio. During the same period DAMI waived $295,945 of such fee.

For the year ended December 30, 2007, DIMA charged Institutional Class shares of
U.S. Bond Index Fund $271,498 for investment advisory services, all of which was
waived. In addition, under this arrangement, the Advisor reimbursed the Fund
$55,406 of other expenses. For the period January 14, 2006 through December 31,
2006 DAMI earned $185,613 as compensation for investment advisory services
provided to Institutional Class shares of U.S. Bond Index Fund, all of which was
waived. In addition, under this arrangement the Advisor and Administrator
reimbursed the Fund $113,138 of other expenses. Class S shares of U.S. Bond
Index Fund commenced operations on February 17, 2009. For the period January 1,
2006 through January 13, 2006 DAMI earned $7,939 as compensation for investment
advisory services provided to U.S. Bond Index Portfolio, all of which was
waived. In addition, the Advisor and Administrator reimbursed the Portfolio
$18,508 of other expenses. For the year ended December 31, 2005 DAMI earned
$223,360 as compensation for investment advisory services provided to U.S. Bond
Index Portfolio, all of which was waived. In addition, under this arrangement
the Advisor and Administrator reimbursed the Portfolio $27,562 of other
expenses.

The Advisor may enter into arrangements with affiliates and third party service
providers to perform various administrative, back-office and other services
relating to client accounts. Such service providers may be located in the US or
in non-US jurisdictions.

Subadvisor

Northern Trust Investments, N.A. ("NTI" or the "Subadvisor"), located at 50
South LaSalle Street, Chicago, IL 60603, serves as Subadvisor to each of the
Funds and the Portfolio. NTI is an investment adviser registered under the
Investment Advisers Act of 1940, as amended. It primarily manages assets for
defined contribution and benefit plans, investment companies and other
institutional investors. NTI is a subsidiary of The Northern Trust Company
("TNTC"). TNTC is an Illinois state chartered banking organization and a member
of the Federal Reserve System. Formed in 1889, TNTC administers and manages
assets for individuals, personal trusts, defined contribution and benefit plans
and other institutional and corporate clients. TNTC is the principal subsidiary
of Northern Trust Corporation, a company that is regulated by the Board of
Governors of the Federal Reserve System as a financial holding company under the
U.S. Bank Holding Company Act of 1956, as amended. Northern Trust Corporation,
through its subsidiaries, has for more than 100 years managed the assets of
individuals, charitable organizations, foundations and large corporate
investors. As of December 31, 2008, NTI and its affiliates had assets under
custody of $3.0 trillion, and assets under investment management of $575.5
billion.

NTI serves as investment subadvisor pursuant to the terms of a subadvisory
agreement (the "Subadvisory Agreement") between it and the Advisor. NTI manages
the investment and reinvestment of the Portfolio's assets. NTI will provide such
investment advice, research and assistance as DIMA may, from time to time,
reasonably request. NTI has served as Subadvisor for each Portfolio since April
25, 2003.

DIMA compensates NTI out of its advisory fee. Pursuant to the Subadvisory
Agreement with DIMA, NTI receives an annual fee, paid monthly in arrears, from
DIMA. For Equity 500 Index Portfolio, DIMA pays NTI 0.015% of the first $2
billion of the Fund's average daily net assets, 0.010% of the next $2 billion of
such net assets and 0.005% of such net assets exceeding $4 billion. For U.S.
Bond Index Fund, DIMA pays NTI 0.040% of first $100 million of the Fund's
average daily net assets, 0.020% of the next $400 million of such net assets and
0.010% of such net asset exceeding $500 million.

For the year ended December 31, 2007, NTI aggregated subadvisory fees of
$397,362 for Equity 500 Index Portfolio and $56,191 for U.S. Bond Index Fund.
For the year ended December 31, 2006, DAMI paid subadvisory fees to NTI of
$213,007 for Equity 500 Index Portfolio and $7,497 for U.S. Bond Index Fund. For
the year ended December 31, 2005, DAMI paid subadvisory fees to NTI of $294,598
for Equity 500 Index Portfolio and $52,603 for U.S. Bond Index Portfolio.

The Subadvisory Agreement provides that the Subadvisor shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which the Subadvisory Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Subadvisor in the performance of its duties or from reckless
disregard by the Subadvisor of its obligations and duties under the Subadvisory
Agreement.

Compensation of Portfolio Managers

Compensation for NTI index portfolio managers is based on the competitive
marketplace and consists of a fixed base salary plus a variable annual cash
incentive award. In addition, non-cash incentives, such as stock options or
restricted stock of Northern Trust Corporation, may be awarded from time to
time. The annual incentive award is discretionary and is based on the overall
financial performance of Northern Trust Corporation, the overall performance of
the investment management unit plus a qualitative evaluation of each portfolio
manager's performance and contribution to his or her respective team. For NTI
index portfolio managers, the annual incentive award is not based on performance
of the Portfolio/Funds or the amount of assets held in the Portfolio/Funds.
Moreover, no material differences exist between the compensation structure for
mutual fund accounts and other types of accounts.

Fund Ownership of Portfolio Managers

The following table shows the dollar range of shares owned beneficially and of
record by each of the Portfolio's/Funds' Portfolio Manager, 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 Funds' most recent fiscal year end.


<TABLE>
<CAPTION>
                                                                                       Dollar Range of
Fund Name                                  Name of Portfolio Manager               Portfolio Shares Owned
---------                                  -------------------------               ----------------------
<S>                                                 <C>                                      <C>
DWS Equity 500 Index Fund                   Brent Reeder                                     $0
DWS U.S. Bond Index Fund                    Louis D'Arienzo                                  $0

Conflicts of Interest

In addition to managing the assets of the Portfolio/Funds, each
Portfolio's/Fund's portfolio managers may have responsibility for managing other
client accounts of NTI 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) including the Portfolios, (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 accounts.
This information is provided as of each Fund's most recent fiscal year end.

Other SEC Registered Investment Companies Managed:

                                                                                      Number of
                                                                                      Investment
                                                Number of                              Company        Total Assets
                                               Registered      Total Assets of      Accounts with          of
                                Name of        Investment         Registered       Performance-Based Performance-Based
Name of Fund               Portfolio Manager    Companies    Investment Companies        Fee          Fee Accounts
------------               -----------------    ---------    --------------------        ---          ------------

DWS Equity 500 Index Fund  Brent Reeder            18           $12,323,268,547           0                $0
DWS U.S. Bond Index Fund   Louis D'Arienzo          1              $479,981,851           0                $0

Other Pooled Investment Vehicles Managed:

                                                                                   Number of Pooled
                                                Number of                             Investment       Total Assets
                                                  Pooled       Total Assets of       Vehicles with          of
                           Name of Portfolio    Investment    Pooled Investment    Performance-Based  Performance-Based
Name of Fund               Manager               Vehicles          Vehicles               Fee          Fee Accounts
------------               -------               --------          --------               ---          ------------

DWS Equity 500 Index Fund  Brent Reeder             30        $72,039,385,857              0                $0
DWS U.S. Bond Index Fund   Louis D'Arienzo          4          $7,400,000,000              0                $0

Other Accounts Managed:

                                                                                    Number of Other
                                                Number of                            Accounts with    Total Assets of
                           Name of Portfolio      Other        Total Assets of     Performance-Based  Performance-Based
Name of Fund               Manager               Accounts       Other Accounts            Fee           Fee Accounts
                           -------               --------       --------------            ---           ------------

DWS Equity 500 Index Fund  Brent Reeder             79        $50,557,125,284              0                 $0
DWS U.S. Bond Index Fund   Louis D'Arienzo          1          $2,800,000,000              0                 $0
</TABLE>

In addition to the accounts above, an investment professional may manage
accounts in a personal capacity that may include holdings that are similar to,
or the same as, those of the Portfolio/Funds. NTI 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.

Conflicts of Interest. NTI's portfolio managers are often responsible for
managing one or more funds, as well as other accounts, including separate
accounts and other pooled investment vehicles. A portfolio manager may manage a
separate account or other pooled investment vehicle that may have a materially
higher or lower fee arrangement. The side-by-side management of these accounts
may raise potential conflicts of interest relating to cross trading, the
allocation of investment opportunities and the aggregation and allocation of
trades. In addition, while portfolio managers generally only manage accounts
with similar investment strategies, it is possible that due to varying
investment restrictions among accounts that certain investments are made for
some accounts and not others or conflicting investment positions are taken among
accounts. The portfolio managers have a fiduciary responsibility to manage all
client accounts in a fair and equitable manner. NTI seeks to provide best
execution of all securities transactions and aggregate and then allocate
securities to client accounts in a fair and timely manner. To this end, NTI has
developed policies and procedures designed to mitigate and manage the potential
conflicts of interest that may arise from side-by-side management. In addition,
NTI has adopted policies limiting the circumstances under which cross-trades may
be effected. NTI conducts periodic reviews of trades for consistency with these
policies.


Code of Ethics

The Board of Trustees of the Trust and Portfolio has adopted a Code of Ethics
pursuant to Rule 17j-1 under the 1940 Act. The Code of Ethics permits access
persons of a Fund to invest in securities for their own accounts, but requires
compliance with the Code's pre-clearance requirements, subject to certain
exceptions. In addition, the Code provides for trading blackout periods that
prohibit trading by personnel within periods of trading by a Portfolio/Fund in
the same security. The Trusts' Code of Ethics prohibits short term trading
profits, prohibits personal investment in initial public offerings and requires
prior approval with respect to purchases of securities in private placements.

The Portfolio's/Funds' Advisor and its affiliates (including the Fund's
distributor, DIDI) have each adopted a Code of Ethics pursuant to Rule 17j-1
under the 1940 Act (the "Consolidated Code"). The Consolidated Code permits
access persons to trade in securities for their own accounts, subject to
compliance with the Consolidated Code's pre-clearance requirements (with certain
exceptions). In addition, the Consolidated Code provides for trading "blackout
periods" that prohibit trading by personnel within periods of trading by the
Funds in the same security. The Consolidated Code also prohibits short term
trading profits and personal investment in initial public offerings and requires
prior approval with respect to purchases of securities in private placements.

The Portfolio's/Fund's subadvisor, NTI, has adopted a code of ethics (the "NTI
Code of Ethics") pursuant to Rule 17j-1 of the 1940 Act. The NTI Code of Ethics
permits investment and advisory personnel, subject to the NTI Code of Ethics and
its pre-clearance, reporting and other provisions, to invest in securities,
including securities that may be purchased or held by a Portfolio/Fund. The NTI
Code of Ethics contains several provisions to address potential conflicts of
interest between investment and advisory personnel and the Portfolio/Funds,
including a prohibition on investment in initial public offerings and trading
"blackout" periods, within which trading in a security is prohibited during
prescribed times.

Regulatory Matters and Legal Proceedings

On December 21, 2006, Deutsche Asset Management ("DeAM") settled proceedings
with the Securities and Exchange Commission ("SEC") and the New York Attorney
General on behalf of Deutsche Asset Management, Inc. ("DAMI") and DIMA, the
investment advisors to many of the DWS Investments funds, regarding allegations
of improper trading of fund shares at DeAM and at the legacy Scudder and Kemper
organizations prior to their acquisition by DeAM in April 2002. These regulators
alleged that although the prospectuses for certain funds in the regulators' view
indicated that the funds did not permit market timing, DAMI and DIMA breached
their fiduciary duty to those funds in that their efforts to limit trading
activity in the funds were not effective at certain times. The regulators also
alleged that DAMI and DIMA breached their fiduciary duty to certain funds by
entering into certain market timing arrangements with investors. These trading
arrangements originated in businesses that existed prior to the currently
constituted DeAM organization, which came together as a result of various
mergers of the legacy Scudder, Kemper and Deutsche fund groups, and all of the
arrangements were terminated prior to the start of the regulatory investigations
that began in the summer of 2003. No current DeAM employee approved these
trading arrangements. Under the terms of the settlements, DAMI and DIMA neither
admitted nor denied any wrongdoing.

The terms of the SEC settlement, which identified improper trading in the legacy
Deutsche and Kemper mutual funds only, provide for payment of disgorgement in
the amount of $17.2 million. The terms of the settlement with the New York
Attorney General provide for payment of disgorgement in the amount of $102.3
million, which is inclusive of the amount payable under the SEC settlement, plus
a civil penalty in the amount of $20 million. The total amount payable by DeAM,
approximately $122.3 million, will be distributed to shareholders of the
affected funds in accordance with a distribution plan to be developed by a
distribution consultant. The funds' investment advisors do not believe these
amounts will have a material adverse financial impact on them or materially
affect their ability to perform under their investment management agreements
with the DWS funds. The above-described amounts are not material to Deutsche
Bank, and have already been reserved.

Among the terms of the settled orders, DeAM is subject to certain undertakings
regarding the conduct of its business in the future, including formation of a
Code of Ethics Oversight Committee to oversee all matters relating to issues
arising under the advisors' Code of Ethics; establishment of an Internal
Compliance Controls Committee having overall compliance oversight responsibility
of the advisors; engagement of an Independent Compliance Consultant to conduct a
comprehensive review of the advisors' supervisory compliance and other policies
and procedures designed to prevent and detect breaches of fiduciary duty,
breaches of the Code of Ethics and federal securities law violations by the
advisors and their employees; and commencing in 2008, the advisors shall undergo
a compliance review by an independent third party.

In addition, DeAM is subject to certain further undertakings relating to the
governance of the mutual funds, including that at least 75% of the members of
the Boards of Trustees/Directors overseeing the DWS Funds continue to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be 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 the Financial Industry Regulatory Authority, or
"FINRA") announced final agreements in which Deutsche Investment Management
Americas Inc. ("DIMA"), Deutsche Asset Management, Inc. ("DAMI") and DWS Scudder
Distributors, Inc. (now known as DWS Investments Distributors, Inc. ("DIDI"))
settled administrative proceedings regarding disclosure of brokerage allocation
practices in connection with sales of the DWS Funds' (now known as the DWS
Investments 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 DIDI'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 DWS Fund shares. These directed brokerage
practices were discontinued in October 2003.


Under the terms of the settlements, in which DIMA, DAMI and DIDI neither
admitted nor denied any of the regulators' findings, DIMA, DAMI and DIDI 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 DIDI 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-investments.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.


                             FUND SERVICE PROVIDERS

Administrator for the Funds and Portfolio

Pursuant to an administrative services agreements with Deutsche Investment
Management Americas Inc. ("DIMA" or the "Administrator") (the "Administrative
Services Agreements"), the Administrator provides most administrative services
to the Portfolio and the Funds, including, among others, providing the
Portfolio/Funds with personnel, preparing and making required filings on behalf
of the Portfolio/Funds, maintaining books and records for the Portfolio/Funds,
and monitoring the valuation of Portfolio/Funds securities. For all services
provided under the Administrative Services Agreements, the Administrator is paid
a fee, accrued daily and paid monthly, equal on an annual basis to 0.03% of the
average daily net assets of the DWS Equity 500 Index Portfolio, 0.10% of the
average daily net assets of the Equity 500 Index Fund and 0.10% of the average
daily net assets of the U.S. Bond Index Fund.

Under the Administrative Services Agreements, the Administrator is obligated on
a continuous basis to provide such administrative services as the Board of
Trustees of the Portfolio/Funds reasonably deems necessary for the proper
administration of the Portfolio/Funds. The Administrator generally provides the
Portfolio/Funds with personnel; arranges for the preparation and filing of the
Portfolio's/Fund's tax returns; prepares and submits reports and meeting
materials to the Board and the shareholders; prepares and files updates to the
Portfolio's/Fund's Prospectuses and Statements of Additional Information as well
as other reports required to be filed by the SEC; maintains the
Portfolio's/Fund's records; provides the Portfolio/Funds 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 Portfolio/Funds; assists in the resolution of accounting
issues that may arise with respect to the Portfolio/Funds; establishes and
monitors the Portfolio's/Fund's operating expense budgets; reviews and processes
the Portfolio's/Fund's bills; assists in determining the amount of dividends and
distributions available to be paid by the Portfolio/Funds; 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. The Advisor also performs certain
fund accounting services under the Administrative Services Agreement. The
Administrative Services Agreement provides that the Advisor 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.

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 Portfolio/Funds.

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.

Fund Expenses:

For the year ended December 31, 2007, DIMA received an administration fee of
$2,868,866, of which $1,637,958 was waived from DWS Equity 500 Index Fund and
$181,981 was unpaid. For the period June 1, 2006 through December 31, 2006, DIMA
received an administration fee for DWS Equity 500 Index Fund of $1,565,689, of
which $907,829 was waived. Prior to June 1, 2006, Investment Company Capital
Corporation ("ICCC") served as the Fund's/Portfolio's administrator. For the
period January 1, 2006 through May 31, 2006, ICCC, serving as Administrator for
DWS Equity 500 Index Fund - Class S (formerly Investment Class), earned
administrative service fee of $961,678, of which $335,643 was waived. For the
year ended December 31, 2005, ICCC earned $2,295,164 as compensation for
administrative and other services provided to Equity 500 Index Fund --
Investment Class. During the same period ICCC waived $824,933 of such fee.

For the year ended December 31, 2007, DIMA received an administration fee of
$180,999, of which $101,703 was waived from DWS U.S. Bond Index Fund. For the
period June 1, 2006 through December 31, 2006, DAMI received an administration
fee for DWS U.S. Bond Index Fund of $77,512, all of which was waived. For the
period January 1, 2006 through May 31, 2006, ICCC, serving as Administrator for
DWS U.S. Bond Index Fund, earned administrative service fee of $103,025, all of
which was waived. For the year ended December 31, 2005, ICCC earned $322,524 as
compensation for administrative and other services provided to U.S. Bond Index
Fund -- Institutional Class (formerly known as Premier Class). During the same
period ICCC waived $322,524 of such fee. In addition, under this arrangement the
Advisor and Administrator reimbursed the Fund in the amount of $26,576 of other
expenses.

For the year ended December 31, 2007, DIMA received an administration fee of
$1,084,763 from DWS Equity 500 Index Portfolio of which $88,470 was unpaid. For
the period June 1, 2006 through December 31, 2006, DAMI received an
administration fee of $593,827 from DWS Equity 500 Index Portfolio. Prior to
June 1, 2006, ICCC was the Administrator for DWS Equity 500 Index Portfolio and
did not receive a fee from the Portfolio.

Distributor


Pursuant to an Underwriting and Distribution Services Agreement ("Distribution
Agreement") and a separate Shareholder Services Agreement ("Services
Agreement"), DWS Investments Distributors, Inc., 222 South Riverside Plaza,
Chicago, Illinois 60606 ("DIDI") is the principal underwriter, distributor and
administrator for the Class A, S and Institutional Class shares of the Funds and
acts as agent of the Funds in the continuous offering of its shares. DIDI bears
all of its expenses of providing services pursuant to the Distribution
Agreement, including the payment of any commissions. DIDI bears all of its
expenses of providing services pursuant to the Services Agreement between DIDI
and the Funds, including the payment of service fees. Each Fund pays the cost
for the Prospectuses and shareholder reports to be set in type and printed for
existing shareholders, and DIDI, as principal underwriter, pays for the printing
and distribution of copies thereof used in connection with the offering of
shares to prospective investors. DIDI also pays for supplementary sales
literature and advertising costs. DIDI is a wholly owned subsidiary of Deutsche
Bank AG.

The Distribution Agreement for each Fund will continue in effect for an initial
two year period and from year to year thereafter, only if its continuance is
approved for each class at least annually by a vote of the Board of Trustees of
the Trust, including the Independent Trustees who have no direct or indirect
financial interest in the agreement. The Distribution Agreement automatically
terminates in the event of its assignment and may be terminated for a class at
any time without penalty by a Fund or by DIDI upon 60 days' notice. Termination
by a Fund with respect to a class may be by vote of (i) a majority of the Board
of Trustees or (ii) a majority of the Trustees who are not interested persons of
a Fund and who have no direct or indirect financial interest in the Distribution
Agreement or (iii) a "majority of the outstanding voting securities," as defined
under the 1940 Act. The Distribution Agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund, and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
Distribution Agreement. The provisions concerning the continuation, amendment
and termination of the Distribution Agreement are on a class-by-class basis.

DIDI will pay for printing and distributing prospectuses or reports prepared for
its use in connection with the offering of each Fund's shares to the public and
preparing, printing and mailing any other literature or advertising in
connection with the offering of shares of the Fund to the public. DIDI will pay
all fees and expenses in connection with its qualification and registration as a
broker or dealer under federal and state laws, a portion of the cost of
toll-free telephone service and expenses of shareholder service representatives,
a portion of the cost of computer terminals, and expenses of any activity which
is primarily intended to result in the sale of shares issued by the Fund, unless
a Rule 12b-1 Plan is in effect which provides that the Fund shall bear some or
all of such expenses.

Note: Although Class S shares of the Funds do not have a 12b-1 Plan, and the
Trustees have no current intention of adopting one, a 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.

DIDI currently offers shares of each Fund on a continuous basis to investors in
all states in which shares of a Fund may from time to time be registered or
where permitted by applicable law. The Distribution Agreement provides that DIDI
accepts orders for shares at net asset value plus any applicable sales charge.
DIDI has made no firm commitment to acquire shares of the Fund.

Independent Registered Public Accounting Firm

The financial highlights of the Funds/Portfolio are included in the
Funds'/Portfolio's prospectuses and the Financial Statements incorporated by
reference in this SAI have been incorporated by reference in reliance on the
report of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, 125 High Street, Boston, MA 02110, given on the authority of
said firm as experts in auditing and accounting. PricewaterhouseCoopers LLP
audits the financial statements of the Funds/Portfolio and provides other audit,
tax and related services. Shareholders will receive annual audited financial
statements and semiannual unaudited financial statements.

Legal Counsel


Ropes & Gray LLP, One International Place, Boston, Massachusetts 02110-2624,
serves as legal counsel to the Funds and Portfolio and as counsel to the
Independent Trustees.

Custodian and Transfer Agent

The Portfolio/Funds employ SSB, 225 Franklin Street, Boston, Massachusetts 02110
as custodian. SSB has entered into agreements with foreign subcustodians
approved by the Trustees pursuant to Rule 17f-5 under the 1940 Act. SSB uses
Deutsche Bank AG, an affiliate of the Investment Advisor, as subcustodian ("DB
Subcustodian") in certain countries. To the extent a Fund/Portfolio holds any
securities in the countries in which SSB uses DB Subcustodian as a subcustodian,
those securities will be held by DB Subcustodian as part of a larger omnibus
account in the name of SSB (the "Omnibus Account"). For its services, DB
Subcustodian receives (1) an annual fee based on a percentage of the average
daily net assets of the Omnibus Account and (2) transaction charges with respect
to transactions that occur within the Omnibus Account.

DISC serves as transfer agent of the Trust and of the Portfolio/Funds pursuant
to a transfer agency agreement. Under its transfer agency agreement with the
Trust, DISC maintains the shareholder account records for the Portfolio/Funds,
handles certain communications between shareholders and the Trust and causes to
be distributed any dividends and distributions payable by the Trust.

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 $3.60 per account
(as of 2007, indexed to inflation) plus an asset based fee of up to 0.25% of
average net assets. 1/12th of the annual service charge for each account is
charged and payable to the Transfer Agent each month. A fee is charged for any
account which at any time during the month had a share balance in the Fund.
Smaller fees are also charged for closed accounts for which information must be
retained on the Transfer Agent's system for up to 18 months after closing for
tax reporting purposes.

Certain out-of-pocket expenses incurred by the Transfer Agent, including
expenses of printing and mailing routine fund disclosure documents, costs of
record retention and transaction processing costs are reimbursed by the Fund or
are paid directly by the Fund. Certain additional out-of-pocket expenses,
including costs of computer hardware and software, third party record-keeping
and processing of proxy statements, may only be reimbursed by the Fund with the
prior approval of the Fund's Board.

Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc.
("DST"), DISC has delegated certain transfer agent, dividend paying agent and
shareholder servicing agent functions to DST. The costs and expenses of such
delegation are borne by DISC, not by the Funds.

                             PORTFOLIO TRANSACTIONS

The Advisor is generally responsible for placing the orders for the purchase and
sale of portfolio securities, including the allocation of brokerage. With
respect to those funds for which a sub-investment advisor manages the fund's
investments, references in this section to the "Advisor" should be read to mean
the Sub-Advisor, except as noted below.

The policy of the Advisor in placing orders for the purchase and sale of
securities for the Funds is to seek best execution, taking into account such
factors, among others, as price; commission (where applicable); the
broker-dealer's ability to ensure that securities will be delivered on
settlement date; the willingness of the broker-dealer to commit its capital and
purchase a thinly traded security for its own inventory; whether the
broker-dealer specializes in block orders or large program trades; the
broker-dealer's knowledge of the market and the security; the broker-dealer's
ability to maintain confidentiality; the broker-dealer's ability to provide
access to new issues; the broker-dealer's ability to provide support when
placing a difficult trade; the financial condition of the broker-dealer; and
whether the broker-dealer has the infrastructure and operational capabilities to
execute and settle the trade. The Advisor seeks to evaluate the overall
reasonableness of brokerage commissions with commissions charged on comparable
transactions and compares the brokerage commissions (if any) paid by the Funds
to reported commissions paid by others. The Advisor routinely reviews commission
rates, execution and settlement services performed and makes internal and
external comparisons.

Commission rates on transactions in equity securities on US securities exchanges
are subject to negotiation. Commission rates on transactions in equity
securities on foreign securities exchanges are generally fixed. Purchases and
sales of fixed-income securities and certain over-the-counter securities are
effected on a net basis, without the payment of brokerage commissions.
Transactions in fixed income and certain over-the-counter securities are
generally placed by the Advisor with the principal market makers for these
securities unless the Advisor reasonably believes more favorable results are
available elsewhere. Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
will include an underwriting fee paid to the underwriter. Money market
instruments are normally purchased in principal transactions directly from the
issuer or from an underwriter or market maker.

It is likely that the broker-dealers selected based on the considerations
described in this section will include firms that also sell shares of the Funds
to their customers. However, the Advisor does not consider sales of shares of
the Funds as a factor in the selection of broker-dealers to execute portfolio
transactions for the Funds and, accordingly, has implemented policies and
procedures reasonably designed to prevent its traders from considering sales of
shares of the Funds as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.

The Advisor is permitted by Section 28(e) of the Securities Exchange Act of
1934, as amended ("1934 Act"), when placing portfolio transactions for a Fund,
to cause the Fund to pay brokerage commissions in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage services if the Advisor determines that such commissions
are reasonable in relation to the overall services provided. The Advisor may
from time to time, in reliance on Section 28(e) of the 1934 Act, execute
portfolio transactions with broker-dealers that provide research and brokerage
services to the Advisor. Consistent with the Advisor's policy regarding best
execution, where more than one broker is believed to be capable of providing
best execution for a particular trade, the Advisor may take into consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute the trade. Although certain research and brokerage services from
broker-dealers may be useful to a Fund and to the Advisor, it is the opinion of
the Advisor that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage services of value are received
by the Advisor, the Advisor may avoid expenses that it might otherwise incur.
Research and brokerage services received from a broker-dealer may be useful to
the Advisor and its affiliates in providing investment management services to
all or some of its clients, which includes a Fund. Services received from
broker-dealers that executed securities transactions for a Portfolio will not
necessarily be used by the Advisor specifically to service such Fund.

Research and brokerage services provided by broker-dealers may include, but are
not limited to, information on the economy, industries, groups of securities,
individual companies, statistical information, accounting and tax law
interpretations, political developments, legal developments affecting portfolio
securities, technical market action, pricing and appraisal services, credit
analysis, risk measurement analysis, performance analysis and measurement and
analysis of corporate responsibility issues. Research and brokerage services are
typically received in the form of written or electronic reports, access to
specialized financial publications, telephone contacts and personal meetings
with security analysts, but may also be provided in the form of access to
various computer software and meetings arranged with corporate and industry
representatives.

The Advisor may also select broker-dealers and obtain from them research and
brokerage services that are used in connection with executing trades provided
that such services are consistent with interpretations under Section 28(e) of
the 1934 Act. Typically, these services take the form of computer software
and/or electronic communication services used by the Advisor to facilitate
trading activity with those broker-dealers.

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder. Currently,
it is the Advisor's policy that Sub-Advisors may not execute portfolio
transactions on behalf of the Funds to obtain third party research and brokerage
services. The Advisor may, in the future, change this policy. Regardless,
certain Sub-Advisors may, as matter of internal policy, limit or preclude third
party research and brokerage services.

The Advisor may use brokerage commissions to obtain certain brokerage products
or services that have a mixed use (i.e., it also serves a function that does not
relate to the investment decision-making process). In those circumstances, the
Advisor will make a good faith judgment to evaluate the various benefits and
uses to which it intends to put the mixed use product or service and will pay
for that portion of the mixed use product or service that it reasonably believes
does not constitute research and brokerage services with its own resources.

DIMA will monitor regulatory developments and market practice in the use of
client commissions to obtain research and brokerage services and may adjust its
portfolio transactions policies in response thereto.

Investment decisions for each Fund and for other investment accounts managed by
the Advisor are made independently of each other in light of differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases, simultaneous transactions are inevitable. To the
extent permitted by law, the Advisor may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other accounts in
executing transactions. Purchases or sales are then averaged as to price and
commission and allocated as to amount in a manner deemed equitable to each
account. While in some cases this practice could have a detrimental effect on
the price paid or received by, or on the size of the position obtained or
disposed of for, the Fund, in other cases it is believed that the ability to
engage in volume transactions will be beneficial to the Fund.

DIMA and its affiliates and the Funds' management team manage other mutual funds
and separate accounts, some of which use short sales of securities as a part of
its investment strategy. The simultaneous management of long and short
portfolios creates potential conflicts of interest including the risk that short
sale activity could adversely affect the market value of the long positions (and
vice versa), the risk arising from sequential orders in long and short
positions, and the risks associated with receiving opposing orders at the same
time.

DIMA has adopted procedures that it believes are reasonably designed to mitigate
these potential conflicts of interest. Incorporated in the procedures are
specific guidelines developed to ensure fair and equitable treatment for all
clients. DIMA and the investment team have established monitoring procedures and
a protocol for supervisory reviews, as well as compliance oversight to ensure
that potential conflicts of interest relating to this type of activity are
properly addressed.

Deutsche Bank AG or one of its affiliates (or in the case of a Sub-Advisor, the
Sub-Advisor or one of its affiliates) may act as a broker for the Funds and
receive brokerage commissions or other transaction-related compensation from the
Funds in the purchase and sale of securities, options or futures contracts when,
in the judgment of the Advisor, and in accordance with procedures approved by
the Funds' Boards, the affiliated broker will be able to obtain a price and
execution at least as favorable as those obtained from other qualified brokers
and if, in the transaction, the affiliated broker charges the Funds a rate
consistent with that charged to comparable unaffiliated customers in similar
transactions.

For the years ended December 31, 2007, 2006 and 2005, the Portfolio paid
brokerage commissions in the amount of $139,179, $133,547 and $207,021,
respectively. For the years ended December 31, 2007, 2006 and 2005, the
Portfolio did not pay any brokerage commissions to an affiliate.

For the years ended December 31, 2007 and 2006 the U.S. Bond Index Fund did not
pay any brokerage commissions. For the years ended December 31, 2007 and 2006,
the U.S. Bond Index Fund did not pay any brokerage commissions to an affiliate.
For the year ended December 31, 2005, the U.S. Bond Index Portfolio did not pay
any brokerage commissions. For the year ended December 31, 2005, the U.S. Bond
Index Portfolio did not pay brokerage commissions to an affiliate.

The Funds/Portfolio are required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the 1940 Act) that a
Fund/Portfolio has acquired during the most recent fiscal year.

As of December 31, 2007, the Equity 500 Index Portfolio held the following
securities of its regular brokers or dealers:

<TABLE>
<CAPTION>
                                                                             Value of Securities Owned as
Name of Regular Broker or Dealer or Parent (Issuer)                               of December 31, 2007
---------------------------------------------------                               --------------------
<S>                                                                                       <C>
E*Trade Financial Corp.                                                                   $389,000
First Horizon National Corp.                                                              $610,000
MBIA, Inc.                                                                                $640,000
AMBAC Financial Group Inc.                                                                $712,000
Federated Investors, Inc.                                                                 $943,000
CB Richard Ellis Group, Inc.                                                            $1,082,000
Janus Capital Group Inc.                                                                $1,363,000
Countrywide Financial Corp.                                                             $1,374,000
Torchmark Corp.                                                                         $1,514,000
American Capital Strategies Ltd.                                                        $1,566,000
H&R Block, Inc.                                                                         $1,574,000
Marshall & Ilsley Corp.                                                                 $1,648,000
Comerica Inc.                                                                           $1,774,000
Legg Mason, Inc.                                                                        $2,553,000
Bear Stearns Companies, Inc.                                                            $2,692,000
Washington Mutual, Inc.                                                                 $3,134,000
Ameriprise Financial, Inc.                                                              $3,406,000
Fifth Third Bancorp.                                                                    $3,538,000
Lincoln National Corp.                                                                  $4,144,000
Northern Trust Corp.                                                                    $4,174,000
T. Rowe Price Group, Inc.                                                               $4,240,000
BB&T Corp.                                                                              $4,451,000
Principal Financial Group Inc.                                                          $4,779,000
Franklin Resources, Inc.                                                                $4,814,000
Suntrust Banks, Inc.                                                                    $5,699,000
PNC Financial Services Group, Inc.                                                      $5,899,000
Charles Schwab Corp.                                                                    $6,358,000
State Street Corp.                                                                      $8,261,000
Lehman Brothers Holdings, Inc.                                                          $9,079,000
Prudential Financial Inc.                                                              $11,157,000
Merrill Lynch & Co., Inc.                                                              $12,089,000
US Bancorp                                                                             $14,318,000
Bank of New York Mellon Corp.                                                          $14,496,000
Morgan Stanley                                                                         $14,609,000
Wachovia Corp.                                                                         $19,310,000
The Goldman Sachs Group, Inc.                                                          $22,746,000
Wells Fargo & Co.                                                                      $26,681,000
Citigroup, Inc.                                                                        $38,668,000
American International                                                                 $38,848,000
JPMorgan Chase & Co.                                                                   $38,967,000
Bank of America Corp.                                                                  $48,563,000


As of December 31, 2007, U.S. Bond Index Fund held the following securities of
its regular brokers or dealers:

                                                                            Value of Securities Owned as
Name of Regular Broker or Dealer or Parent (Issuer)                             of December 31, 2007
---------------------------------------------------                             --------------------

Charter One Bank                                                                          $11,000
Washington Mutual Inc.                                                                    $17,000
Keybank NA                                                                                $24,000
Wells Fargo                                                                               $26,000
DLJ Commercial Mortgage Corp.                                                             $28,000
Mellon Funding Corporation                                                                $49,000
Marshall & Ilsley Corp.                                                                   $50,000
FIA Credit Services NA                                                                    $50,000
Bank of New York Mellon Corp.                                                             $50,000
Regions Financial Corp.                                                                   $51,000
National Westminster Bank PLC                                                             $53,000
National Australia Bank Ltd.                                                              $54,000
Santander Central Hispano Issuances Ltd.                                                  $54,000
Barclays Bank PLC                                                                         $63,000
Fifth Third Bancorp                                                                       $68,000
National City Corp.                                                                       $91,000
Korea Development Bank                                                                    $99,000
Capital One Bank                                                                         $100,000
Keycorp                                                                                  $100,000
Royal Bank of Scotland PLC                                                               $102,000
US Bank NA                                                                               $105,000
AXA Financial Inc.                                                                       $107,000
Kreditanstalt Fuer Wiederaufbaunt                                                        $112,000
FleetBoston Financial Corp.                                                              $115,000
HSBC Finance Corp.                                                                       $130,000
BB&T Corp.                                                                               $143,000
UFJ Finance Aruba AEC                                                                    $163,000
Bear Stearns & Co., Inc.                                                                 $168,000
Wells Fargo & Co.                                                                        $192,000
JP Morgan Chase & Co.                                                                    $208,000
Bank One Corp.                                                                           $222,000
Wachovia Corp.                                                                           $247,000
European Investment Bank                                                                 $252,000
HSBC Holdings PLC                                                                        $253,000
Wachovia Bank NA                                                                         $261,000
Inter-American Development Bank                                                          $269,000
Wells Fargo Bank                                                                         $293,000
Merrill Lynch & Co., Inc.                                                                $446,000
Lehman Brothers Holdings, Inc.                                                           $459,000
Credit Suisse (USA), Inc.                                                                $489,000
The Goldman Sachs Group, Inc.                                                            $725,000
Bank of America Corp.                                                                    $751,000
Morgan Stanley                                                                           $802,000
Citigroup Inc.                                                                           $969,000
</TABLE>


Portfolio Turnover

Portfolio turnover rate is defined by the SEC as the ratio of the lesser of
sales or purchases of investment portfolio securities to the monthly average
value of such securities owned during the year, excluding all securities whose
remaining maturities at the time of acquisition were one year or less.

Higher levels of activity by a Fund result in higher transaction costs and may
also result in taxes on realized capital gains to be borne by a Fund's
shareholders. Purchases and sales are made whenever necessary, in the
Subadvisor's discretion, to meet the Fund's objective.

Portfolio turnover rates for the two most recent fiscal years are as follows:

The portfolio turnover rates for Equity 500 Index Portfolio for the years ended
December 31, 2007 and 2006 were 5% and 4%, respectively.

The portfolio turnover rates for U.S. Bond Index Fund for the years ended
December 31, 2007 and 2006 were 35% and 25%, respectively.

                        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 a Fund's agents. Transaction delays in
processing (and changing account features) due to circumstances within or beyond
the control of a 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 a Fund next
determined after receipt in good order by DWS Investments Service Company
("DISC") 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 Investments Distributors, Inc. ("DIDI") 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 DIDI ("trade date").

Additional Minimum Balance Policies. For fiduciary accounts such as IRAs, and
custodial accounts such as Uniform Gifts to Minor Act and Uniform Transfers to
Minor Act accounts, the minimum balance is $1,000 for Class S. A shareholder may
open an account with at least $1,000, if an automatic investment plan (AIP) of
$50/month is established. DWS Investments 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 $1,000 are subject to automatic redemption following 60
days' written notice to applicable shareholders.

Certificates. Share certificates will not be issued. Share certificates now in a
shareholder's possession may be sent to the transfer agent for cancellation and
book-entry credit to such shareholder's account. Certain telephone and other
procedures require book-entry holdings. Shareholders with outstanding
certificates bear the risk of loss.

Use of Financial Services Firms. Investment dealers and other firms provide
varying arrangements for their clients to purchase and redeem a Fund's shares,
including higher minimum investments, and may assess transaction or other fees.
Firms may arrange with their clients for other investment or administrative
services. Such firms may independently establish and charge additional amounts
to their clients for such services. Firms also may hold a Fund's shares in
nominee or street name as agent for and on behalf of their customers. In such
instances, a Fund's transfer agent, DWS Investments Service Company (the
"Transfer Agent"), will have no information with respect to or control over the
accounts of specific shareholders. Such shareholders may obtain access to their
accounts and information about their accounts only from their firm. Certain of
these firms may receive compensation from the Fund through the Shareholder
Service Agent for record-keeping and other expenses relating to these nominee
accounts. In addition, certain privileges with respect to the purchase and
redemption of shares or the reinvestment of dividends may not be available
through such firms. Some firms may participate in a program allowing them access
to their clients' accounts for servicing including, without limitation,
transfers of registration and dividend payee changes, and may perform functions
such as generation of confirmation statements and disbursement of cash
dividends. Such firms, including affiliates of DIDI, may receive compensation
from a Fund through the Shareholder Service Agent for these services.

The Funds have authorized one or more financial service institutions, including
certain members of the NASD other than the Distributor ("financial
institutions"), to accept purchase and redemption orders for a Fund's shares.
Such financial institutions may also designate other parties, including plan
administrator intermediaries, to accept purchase and redemption orders on a
Fund's behalf. Orders for purchases or redemptions will be deemed to have been
received by a Fund when such financial institutions or, if applicable, their
authorized designees accept the orders. Subject to the terms of the contract
between a Fund and the financial institution, ordinarily orders will be priced
at a Fund's net asset value next computed after acceptance by such financial
institution or its authorized designees and accepted by a Fund. Further, if
purchases or redemptions of a 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 each Fund's principal
underwriter, each have 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 a Fund at any time for any reason.

DIDI has adopted an Incentive Plan (the "Plan") covering wholesalers that are
regional vice presidents ("DWS Investments Wholesalers"). Generally, DWS
Investments 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 Investments 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 three product
categories--"Strategic," "Tactical" or "all other funds"-taking into
consideration, among other things, the following criteria, where applicable:

o        The Fund's consistency with DWS Investments' branding and long-term
         strategy;
o        The Fund's competitive performance;
o        The Fund's Morningstar rating;
o        The length of time the Fund's Portfolio Managers have managed the
         Fund/Strategy;
o        Market size for the fund category;
o        The Fund's size, including sales and redemptions of the Fund's shares.

This information and other factors are presented to a committee comprised of
representatives from various groups within DWS Investments, 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
Strategic and Tactical 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-investments.com, approximately one month after the
end of each quarter. DWS Investments Wholesalers receive the highest
compensation for Strategic funds, less for Tactical funds and the lowest for all
other funds. The level of compensation among these categories may differ
significantly.

The prospect of receiving, or the receipt of, additional compensation by a DWS
Investments Wholesaler under the Plan may provide an incentive to favor
marketing the Strategic or Tactical funds over all other funds. The Plan,
however, will not change the price that investors pay for shares of a fund. The
DWS Investments Compliance Department monitors DWS Investments Wholesaler sales
and other activity in an effort to detect unusual activity in the context of the
compensation structure under the Plan. However, investors may wish to take the
Plan and the product category of the fund into account when considering
purchasing a fund or evaluating any recommendations relating to fund shares.

Telephone and Electronic Transaction Procedures. Shareholders have various
telephone, Internet, wire and other electronic privileges available. The Fund or
its agents will not be liable for any losses, expenses or costs arising out of
fraudulent or unauthorized instructions pursuant to these privileges if 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
Investments' 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-investments.com or calling (800) 621-1048. 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 DIDI can establish investor accounts
in any of the following types of retirement plans:

o        Traditional, Roth and Education IRAs. This includes Savings Incentive
         Match Plan for Employees of Small Employers ("SIMPLE"), Simplified
         Employee Pension Plan ("SEP") IRA accounts and prototype documents.

o        403(b)(7) Custodial Accounts. This type of plan is available to
         employees of most non-profit organizations.

o        Prototype money purchase pension and profit-sharing plans may be
         adopted by employers.

Brochures describing these plans as well as model defined benefit plans, target
benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and materials for
establishing them are available from the Shareholder Service Agent upon request.
Additional fees and transaction policies and procedures may apply to such plans.
Investors should consult with their own tax advisors before establishing a
retirement plan.

Purchases

Each 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, a 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 Funds'
Prospectuses.

Class S shares of a Fund will generally not be available to new investors.

Eligible Class S Investors

A.        The following investors may purchase Class S shares of DWS Funds
          either (i) directly from DWS Investments Distributors, Inc. ("DIDI"),
          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 DIDI
                  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.

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.

DIDI may, at its discretion, require appropriate documentation that shows an
investor is eligible to purchase Class S shares.

Clients having a regular investment counsel account with the Advisor or its
affiliates and members of their immediate families, officers and employees of
the Advisor or of any affiliated organization and members of their immediate
families, members of the NASD and banks may, if they prefer, subscribe initially
for at least $2,500 for Class S through DeAM Investor Services, Inc. by letter,
fax, or telephone.

Fees generally charged to IRA accounts will be charged to accounts of employees
and directors.

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.

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 each
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 each 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 each Fund with "shelf space" or access to a
third party platform or fund offering list, or other marketing programs
including, without limitation, inclusion of each 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 each 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, .05% to
..25% of sales of the Fund attributable to the financial advisor, a flat fee of
$13,350 up to $500,000, or any combination thereof. These amounts are annual
figures typically paid on a quarterly basis and 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, each 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
----------------------------------------------
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)
Deutsche Bank Group
Ensemble Financial Services
First Clearing/Wachovia Securities
Fiserv Trust Company
HD Vest Investment Securities, Inc.
ING Group
John Hancock Distributors LLC
LPL Financial
M.L. Stern & Co.
Meridien Financial Group
Merrill Lynch, Pierce, Fenner & Smith Inc.
Morgan Stanley
Oppenheimer & Co., Inc.
Raymond James & Associates
Raymond James Financial Services
RBC Dain Rauscher, Inc
Securities America, Inc.
UBS Financial Services
Wachovia Securities
Wells Fargo Investments, LLC

Channel: Cash Product Platform
------------------------------
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
D.A. Davidson & Company
Deutsche Bank Group
Emmett A. Larkin Company
Fiduciary Trust Co. - International
First Southwest Company
Huntleigh Securities
Lincoln Investment Planning
LPL Financial
Mellon Financial Markets LLC
Penson Financial Services
Pershing Choice Platform
ProFunds Distributors, Inc.
Ridge Clearing & Outsourcing Solutions
Robert W. Baird & Co.
Romano Brothers and Company
SAMCO Capital Markets
Smith Moore & Company
Sungard Institutional Brokerage Inc.
US Bancorp
UBS Financial Services
William Blair & Company

Channel: Third Party Insurance Platforms
----------------------------------------
Allstate Life Insurance Company of New York
Ameritas Life Insurance Group
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
First Great West Life and Annuity 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
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
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 Group
Symetra 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.

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.


Automatic Investment Plan. A shareholder may purchase shares of the Fund through
an automatic investment plan. Investments are made automatically (minimum $500
and maximum $250,000 for initial investments and a minimum of $50 and maximum
$250,000 for subsequent investments) from the shareholder's account at a bank,
savings and loan or credit union into the shareholder's Fund account.
Termination by a shareholder will become effective within thirty days after the
Shareholder Service Agent has received the request. The Fund may immediately
terminate a shareholder's automatic investment plan in the event that any item
is unpaid by the shareholder's financial institution.


Minimum Subsequent Investment Policies. For current shareholders there is a $50
minimum investment requirement for subsequent investments in the fund. There is
no minimum subsequent investment requirement for investments on behalf of
participants in certain fee-based and wrap programs offered through financial
intermediaries approved by the Advisor.

Payroll Investment Plans. A shareholder may purchase shares through Payroll
Direct Deposit or Government Direct Deposit. Under these programs, all or a
portion of a shareholder's net pay or government check is invested each payment
period. A shareholder may terminate participation in these programs by giving
written notice to the shareholder's employer or government agency, as
appropriate. (A reasonable time to act is required.) The Funds are not
responsible for the efficiency of the employer or government agency making the
payment or any financial institutions transmitting payments.

Redemptions

Redemption fee. Each 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 a 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 Funds 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 Funds. For this reason, the Funds have 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 Funds. However, due to
operational requirements, the intermediaries' methods for tracking and
calculating the fee may be inadequate or differ in some respects from the
Funds'.

To sell shares in a retirement account, 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. For information on retirement
distributions, contact your Service Agent or call the Transfer Agent at (800)
728-3337.

Each Fund may suspend or postpone redemptions as permitted pursuant to Section
22(e) of the 1940 Act. Generally, those circumstances are when: 1) the NYSE is
closed other than customary weekend or holiday closings; 2) trading on the NYSE
is restricted; 3) an emergency exists which makes the disposal of securities
owned by a portfolio or the fair determination of the value of a portfolio's net
assets not reasonably practicable; or 4) the SEC, by order, permits the
suspension of the right of redemption. Redemption payments by wire may also be
delayed in the event of a non-routine closure of the Federal Reserve wire
payment system.

A request for repurchase (confirmed redemption) may be communicated by a
shareholder through a financial services firm to DIDI, which firm 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 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 a 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's 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 a 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 the first of the
month. Investors using the Automatic Withdrawal Plan must reinvest Fund
distributions.

In-kind Redemptions. Each Fund reserves the right to honor any request for
redemption or repurchase by making payment in whole or in part in readily
marketable securities. These securities will be chosen by the Fund and valued as
they are for purposes of computing the Fund's net asset value. A shareholder may
incur transaction expenses in converting these securities to cash. The Trust, on
behalf of each Fund, and the Portfolio have elected, however, to be governed by
Rule 18f-1 under the 1940 Act, as a result of which each Fund and the Portfolio
are obligated to redeem shares or beneficial interests, as the case may be, with
respect to any one investor during any 90-day period, solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund or the Portfolio, as
the case may be, at the beginning of the period.

Exchanges

Shareholders may request a taxable exchange of their shares for shares of the
corresponding class of certain 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.

Shareholders who exchange their shares out of a DWS money market fund (not
including shares acquired by dividend reinvestment or by exchange from Class A
shares of another DWS fund) into Class A shares of certain other DWS funds, will
generally be subject to the applicable sales charge.

Certain DWS funds may not be available to shareholders on an exchange. To learn
more about which DWS funds may be available on exchange, please contact your
financial services firm or visit our Web site at: www.dws-investments.com or
call (800) 728-3337.

Shareholders may obtain prospectus(es) of the DWS fund they are exchanging into
from dealers, other firms or DIDI.


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.

                                    DIVIDENDS

Each Fund generally intends to distribute to its shareholders substantially all
of its net earnings, which includes net investment income and net realized
short-term and long-term capital gain. However, if a Fund determines that it is
in the interest of its shareholders, the Fund may retain all or part of its net
realized long-term capital gains for reinvestment, after paying the related
federal income and excise taxes. In such a case, shareholders will generally be
treated as having received their share of such gains, but will then be able to
claim a credit against their federal income tax liability for the federal income
tax liability for the federal income tax the Fund pays on such gain. If a Fund
does not distribute the amount of ordinary income or capital gain required to be
distributed by an excise tax provision of the Code, the Fund may be subject to
that excise tax on the undistributed amounts. In certain circumstances, a Fund
may determine that it is in the interest of shareholders to distribute less than
the required amount. See "Taxes" below for more information.

The Equity 500 Index Fund distributes income dividends quarterly. U.S. Bond
Index Fund accrues income dividends daily and distributes such dividends
monthly. Each Fund intends to distribute net realized capital gains after
utilization of capital loss carryforwards, if any, in December to prevent
application of a federal excise tax. An additional distribution may be made, if
necessary.

Any dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared.

Income and capital gain dividends, if any, of a Fund will be credited to
shareholder accounts in full and fractional shares of the same class of a Fund
at net asset value on the reinvestment date, except that, upon written request
to the Shareholder Service Agent, a shareholder may select one of the following
options:

1.       To receive income and short-term capital gain dividends in cash and
         long-term capital gain dividends in shares of the same class at net
         asset value; or

2.       To receive income and all capital gain dividends in cash.

Dividends will be reinvested in Shares of the same class of a Fund unless
shareholders indicate in writing that they wish to receive them in cash or in
shares of other DWS Funds with multiple classes of shares or as provided in the
prospectus. To use this privilege of investing dividends of a Fund in shares of
another DWS Fund, shareholders must maintain a minimum account value of $1,000
in a Fund distributing the dividends. A 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 a Fund in the aggregate
amount of $10 or less are automatically reinvested in shares of a Fund unless
the shareholder requests that such policy not be applied to 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 the shareholder. If a shareholder has chosen to
receive cash, a check will be sent. Distributions 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 each Fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.

Each Fund may at any time vary its foregoing distribution 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, a Fund
may make additional distributions of net investment income or net short-term
capital gain in order to satisfy the minimum distribution requirements
applicable to regulated investment companies under the Code.

                                      TAXES

The following is intended to be a general summary of certain US federal income
tax consequences of investing in a Fund. It is not intended as a complete
discussion of all such consequences, it does not address foreign, state or local
taxes or the effect of possible change in the tax laws, nor does deal with all
categories of investors. Investors are therefore advised to consult with their
tax advisors before making an investment in a Fund. This summary is based on the
Code, US Treasury Regulations, and other applicable authority, as of the date of
this SAI. These authorities are subject to change by legislative or
administrative action, possibly with retroactive effect.

Taxation of the Funds. Each Fund intends to elect to be treated and to qualify
each year as a regulated investment company under Subchapter M of the Code. In
order to qualify for the special tax treatment accorded regulated investment
companies and their shareholders, each Fund must, among other things:

(a)      derive at least 90% of its gross income for each taxable year from (i)
         dividends, interest, payments with respect to certain securities loans,
         and gains from the sale or other disposition of stock, securities or
         foreign currencies, or 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
         (ii) net income derived from interests in "qualified publicly traded
         partnerships" (as defined below);

(b)      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
         total assets is represented by cash and cash items, US government
         securities, securities of other regulated investment companies, and
         other securities limited in respect of any one issuer to a value not
         greater than 5% of the value of the Fund's total assets and not more
         than 10% of the outstanding voting securities of such issuer, and (ii)
         not more than 25% of the value of the Fund's total assets is invested
         (x) in the securities (other than those of the US government or other
         regulated investment companies) of any one issuer or of two or more
         issuers which the Fund controls and which are engaged in the same,
         similar, or related trades or businesses or (y) in the securities of
         one or more qualified publicly traded partnerships (as defined below);
         and

(c)      distribute with respect to each taxable year at least 90% of the sum of
         its investment company taxable income (as that term is defined in the
         Code without regard to the deduction for dividends paid - generally,
         taxable ordinary income and the excess, if any, of net short-term
         capital gains over net long-term capital losses) and net tax-exempt
         interest income, for such year.

In general, for purposes of the 90% gross income requirement described in
paragraph (a) above, income derived from a partnership will be treated as
qualifying income only to the extent such income is attributable to items of
income of the partnership which would be qualifying income if realized by a
regulated investment company. However, 100% of the net income derived from an
interest in a "qualified publicly traded partnership" (defined as a partnership
(x) interests in which are traded on an established securities market or readily
tradable on a secondary market or the substantial equivalent thereof, (y) that
derives at least 90% of its income from the passive income sources defined in
Code section 7704(d) and (z) that derives less than 90% of its income from the
qualifying income described in paragraph (a)(i) above) will be treated as
qualifying income. In addition, although in general the passive loss rules of
the Code do not apply to regulated investment companies, such rules do apply to
a regulated investment company with respect to items attributable to an interest
in a qualified publicly traded partnership. For purposes of meeting the
diversification requirement described in paragraph (b) above, in the case of a
Fund's investment in loan participations, if any, a Fund shall treat both the
financial intermediary and the issuer of the underlying loan as an issuer.
Finally, for purposes of paragraph (b) above, the term "outstanding voting
securities of such issuer" will include the equity securities of a qualified
publicly traded partnership.

Equity 500 Index Fund will be deemed to own its proportionate share of the
Portfolio's assets and to earn its proportionate share of the Portfolio's income
for purposes of determining whether the Fund satisfies the requirements
described above.

If a Fund qualifies as a regulated investment company that is accorded special
tax treatment, the Fund will not be subject to federal income tax on income
distributed in a timely manner to its shareholders in the form of dividends
(including Capital Gain Dividends, as defined below).

If for any taxable year a Fund were not to qualify for the special federal
income tax treatment accorded regulated investment companies, all of its taxable
income would be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders), and all
distributions from earnings and profits, including any distributions of net
tax-exempt income and net long-term capital gains, would be taxable to
shareholders as ordinary income. Such distributions may 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. In addition, a Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment company that is
accorded special federal income tax treatment.

As described in "Dividends" above, each Fund intends to distribute to its
shareholders, at least annually, substantially all of its net earnings,
including investment company taxable income (which generally includes taxable
ordinary income and any excess of net realized short-term capital gains over net
realized long-term capital losses) computed without regard to the dividends-paid
deduction, and net capital gain (that is, the excess of net realized long-term
capital gains over net realized short-term capital losses). Any investment
company taxable income retained by a Fund will be subject to federal income tax
at the Fund level at regular corporate rates. From time to time, a Fund may
determine to retain for reinvestment its net capital gain. If a Fund retains any
net capital gain, it will be subject to federal income tax at regular corporate
rates on the amount retained, but may designate the retained amount as
undistributed capital gains, in a notice to its shareholders who (i) will be
required to include in income for federal income tax purposes, as long-term
capital gain, their shares of such undistributed amount, and (ii) will be
entitled to credit their proportionate shares of the tax paid by the Fund on
such undistributed amount against their federal income tax liabilities, if any,
and to claim refunds on a properly filed US tax return to the extent the credit
exceeds such liabilities. For federal income tax purposes, the tax basis of
shares owned by a shareholder of a Fund will be increased by an amount equal to
the difference between the amount of undistributed capital gains included in the
shareholder's gross income under clause (i) of the preceding sentence and the
tax deemed paid by the shareholder under clause (ii) of the preceding sentence.

In determining its net capital gain for Capital Gain Dividend (as defined below)
purposes, a regulated investment company generally must treat any net capital
loss or any net long-term capital loss incurred after October 31 as if it had
been incurred in the succeeding year. Treasury regulations permit a regulated
investment company, in determining its taxable income, to elect to treat all or
part of any net capital loss, any net long-term capital loss or any foreign
currency loss incurred after October 31 as if it had been incurred in the
succeeding year.

Each Fund is subject to a 4% nondeductible federal excise tax on amounts that
have been retained rather than distributed, as required, under a prescribed
formula. The formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of a Fund's taxable ordinary income for
the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 (in most
cases) of such year as well as amounts that were neither distributed nor taxed
to the Fund during the prior calendar year. Although each Fund's distribution
policies should enable it to avoid federal excise tax liability, a Fund may
retain (and be subject to income or excise tax on) a portion of its capital gain
or other income if it appears to be in the interest of such Fund. However, in
any event, each Fund intends to comply with the minimum distribution
requirements applicable to regulated investment companies under Subchapter M of
the Code as described above.

Taxation of Fund Distributions. For federal income tax purposes, distributions
of net investment income are generally taxable to shareholders as ordinary
income. Taxes on distributions of capital gains are determined by how long a
Fund owned (or is deemed to have owned) the investments that generated them,
rather than how long a shareholder has owned his or her shares. Distributions of
net capital gains from the sale of investments that a Fund owned and that are
properly designated by the Fund as capital gain dividends ("Capital Gain
Dividends") will be taxable to shareholders as long-term capital gains. Capital
gains may be reduced if a Fund has capital loss carryforwards available. Any
capital loss carryforwards to which a Fund is entitled are disclosed in that
Fund's annual and semi-annual reports to shareholders. Long-term capital gain
rates applicable to individuals and other noncorporate taxpayers have been
temporarily reduced, to a maximum rate of 15% with lower rates applying to
taxpayers in the 10% and 15% rate brackets, for taxable years beginning before
January 1, 2011. Distributions derived from net short-term capital gain (the
excess of net short-term capital gain over net long-term capital loss) from the
sale of investments that a Fund owned will be taxable as ordinary income.

For taxable years beginning before January 1, 2011, distributions of net
investment income designated by a Fund as derived from "qualified dividend
income" will be taxed in the hands of individuals and other noncorporate
taxpayers at the rates applicable to long-term capital gain, provided certain
holding period and other requirements are met at both the shareholder and Fund
levels. In order for some portion of the dividends received by a Fund
shareholder to be "qualified dividend income," the Fund must meet holding period
and other requirements with respect to the dividend-paying stock in its
portfolio and the shareholder must meet holding period and other requirements
with respect to a Fund's shares. A dividend will not be treated as qualified
dividend income (at either the Fund or shareholder level) (i) if the dividend is
received with respect to any share of stock held for fewer than 61 days during
the 121-day period beginning on the date which is 60 days before the date on
which such share becomes ex-dividend with respect to such dividend (or, in the
case of certain preferred stock, 91 days during the 181-day period beginning 90
days before such date), (ii) to the extent that the recipient is under an
obligation (whether pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property,
(iii) if the recipient elects to have the dividend income treated as investment
income for purposes of the limitation on deductibility of investment interest,
or (iv) if the dividend is received from a foreign corporation that is (a) not
eligible for the benefits of a comprehensive income tax treaty with the United
States (with the exception of dividends paid on stock of a foreign corporation
readily tradable on an established securities market in the United States) or
(b) treated as a passive foreign investment company.

If a Fund received dividends from the Portfolio, and the Portfolio designates
such dividends as "qualified dividend income," then the Fund is permitted in
turn to designate a portion of its distributions as "qualified dividend income",
provided the Fund meets holding period and other requirements with respect to
the Portfolio shares.

If the aggregate qualified dividend income received by a Fund during any taxable
year is 95% or more of its gross income, then 100% of the Fund's dividends
(other than dividends properly designated as Capital Gain Dividends) will be
eligible to be treated as qualified dividend income. For this purpose, the only
gain included in the term "gross income" is the excess of net short-term capital
gain over net long-term capital loss.

Distributions are taxable whether shareholders receive them in cash or reinvest
them in additional shares through the reinvestment privilege. A shareholder
whose distributions are reinvested in shares will be treated as having received
a dividend equal to the fair market value of the new shares issued to the
shareholder.

If there are differences between a Fund's book income and the sum of its taxable
income and net tax-exempt income (if any), a Fund may be required to distribute
amounts in excess of its book income or a portion of Fund distributions may be
treated as a return of capital to shareholders. If a Fund's book income exceeds
the sum of its taxable income and net tax-exempt income (if any), the
distribution (if any) of such excess will be treated as (i) a dividend to the
extent of the Fund's remaining earnings and profits (including earnings and
profits arising from tax-exempt income), (ii) thereafter as a return of capital
to the extent of the recipient's basis in the shares, and (iii) thereafter as
gain from the sale or exchange of a capital asset. If a Fund's book income is
less than its taxable income and tax-exempt income (if any), the Fund could be
required to make distributions exceeding book income to qualify as a regulated
investment company that is accorded special federal income tax treatment.
Securities that are denominated in foreign currency may give rise to such a
difference.

All distributions by a Fund result in a reduction in the net asset value of that
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income, qualified dividend income or capital gain as
described herein, even though, from an investment standpoint, it may constitute
a partial return of capital. In particular, investors should be careful to
consider the tax implications of buying shares just prior to a distribution. The
price of shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing Fund shares just prior to a distribution will
receive a partial return of capital upon the distribution, which will
nevertheless be taxable to them for federal income tax purposes.

Dividends Received Deduction. If dividends from domestic corporations constitute
a substantial portion of a Fund's gross income, a portion of the income
distributions of such Fund may be eligible for the 70% deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends received deduction is reduced to the
extent the shares of a Fund with respect to which the dividends are received are
treated as debt-financed under federal income tax law. The dividends received
deduction is eliminated (i) if either the underlying shares or the shares of a
Fund are deemed to have been held by the Fund or the shareholder, as the case
may be, for less than 46 days during the 91-day period beginning 45 days before
the shares become ex-dividend (or, in the case of certain preferred stock, 91
days during the 181-day period beginning 90 days before such date), or (ii) to
the extent that a Fund is under an obligation (pursuant to a short sale or
otherwise) to make related payments with respect to positions in substantially
similar or related property.

If a Fund receives dividends from the Portfolio, and the Portfolio designates
such dividends as eligible for the dividends-received deduction, then the Fund
is permitted, in turn, to designate a portion of its distributions as eligible
for the dividends-received deduction, provided that the Fund meets the holding
period and other requirements with respect to the Portfolio shares.

Transactions in Fund Shares. The sale, exchange or redemption of shares of a
Fund may give rise to a gain or loss. In general, any gain or loss realized upon
a taxable disposition of shares will be treated as long-term capital gain or
loss if the shares have been held for more than 12 months. Otherwise, the gain
or loss on the taxable disposition of shares of a Fund will be treated as
short-term gain or loss. However, any loss realized upon a taxable disposition
of shares held for six months or less will be treated as long-term, rather than
short-term, to the extent of any long-term capital gain distributions received
(or deemed received) by the shareholder with respect to the shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
will be disallowed if other substantially identical shares of a Fund are
purchased within 30 days before or after the disposition. In such a case, the
basis of the newly purchased shares will be adjusted to reflect the disallowed
loss.

Under certain circumstances, shareholders of a Fund may exchange their shares
for shares of other funds (the "reinvested shares"). If a shareholder (other
than a shareholder who holds his or her shares in a tax-exempt account) makes
such an exchange, the shareholder will recognize a capital gain or loss for
federal income tax purposes measured by the difference between the value of the
reinvested shares and the basis of the exchanged shares. Upon the exchange of
shares (or the reinvestment in shares of the same Fund) that were purchased
subject to a sales charge and held for less than 91 days, the lesser of (i) the
sales charge incurred on the exchanged shares or (ii) the sales charge waived on
the reinvested shares is included in the basis of the reinvested shares and is
not included in the basis of the exchanged shares.

Fund of Funds Structure. The use of a fund-of-funds structure could affect the
amount, timing, and character of distributions from a Fund, and, therefore, may
increase the amount of taxes payable by shareholders. Because DWS Equity 500
Index Fund intends to invest all or substantially all of its assets in shares of
the Portfolio, its distributable income and gains will normally consist
primarily of distributions from the Portfolio and gains and losses on the
disposition of shares of the Portfolio. To the extent that the Portfolio
realizes net losses on its investments for a given taxable year, a Fund will not
be able to recognize its shares of those losses (so as to offset distributions
of net income or capital gains from other underlying funds) until it disposes of
shares of the Portfolio. Moreover, even when a Fund does make such a
disposition, a portion of its loss may be recognized as a long-term capital
loss, which will not be treated as favorably for federal income tax purposes as
a short-term capital loss or an ordinary deduction. In particular, each Fund
will not be able to offset any capital losses from its dispositions of Portfolio
shares against its ordinary income (including distributions of any net
short-term capital gains realized by the Portfolio). In addition to the
wash-sale rules, certain related-party transaction rules may cause any losses
generated by a Fund on the sale of Portfolio shares to be deferred (or, in some
cases, permanently disallowed) if the Fund and the Portfolio are part of the
same "controlled group" (as defined in Section 267(f) of the Code) at the time
the loss is recognized. For instance, for these purposes, the Fund and the
Portfolio will be part of the same controlled group if the Fund owns more than
50% of the total outstanding voting securities of the Portfolio.

As a result of the foregoing rules, and certain other special rules, it is
possible that the amounts of net investment income and net capital gains that a
Fund will be required to distribute to shareholders will be greater than such
amounts would have been had the Fund invested directly in the securities held by
the Portfolio, rather than investing in shares of the Portfolio. For similar
reasons, the character of distributions from a Fund (e.g., long-term capital
gain, exempt interest, eligibility for dividends-received deduction, etc.) will
not necessarily be the same as it would have been had the Fund invested directly
in the securities held by the Portfolio.

Depending on a Fund's percentage ownership in Portfolio both before and after a
redemption of Portfolio shares, the Fund's redemption of shares of such
Portfolio may cause the Fund to be treated as receiving a dividend taxable as
ordinary income on the full amount of the distribution instead of receiving
capital gain income on the shares of the Portfolio. This would be the case where
a Fund holds a significant interest in the Portfolio and redeems only a small
portion of such interest. It is possible that such a dividend would qualify as
"qualified dividend income" taxable to individual shareholders at long-term
capital gain rates; otherwise, it would be taxable as ordinary income.

Securities Lending. To the extent that a Fund makes a distribution of income
received by such Fund in lieu of dividends (a "substitute payment") with respect
to securities on a loan pursuant to a securities lending transaction, such
income will not constitute qualified dividend income to individual and other
noncorporate shareholders and will not be eligible for the dividends received
deduction for corporate shareholders.

Taxation of Certain Investments Made by a Fund or Portfolio. As the Portfolio
intends to elect to be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code, Equity 500 Index Fund is
required to take into account, in computing its federal income tax liability,
its respective shares of the Portfolio's income, gains, losses, deductions and
credits, without regard to whether it has received any cash distributions from
the Portfolio. Any reference to or description herein of the US federal income
tax aspects of a Fund's investment practices and activities, in effect, take
into account the investment practices and activities of the Portfolio.

Hedging and Related Transactions. A Fund's use of options, futures contracts,
forward contracts (to the extent permitted) and certain other Strategic
Transactions will be subject to special federal income tax rules (including
mark-to-market, constructive sale, straddle, wash sale, short sale and other
rules), the effect of which may be to accelerate income to such Fund, defer
losses to such Fund, cause adjustments in the holding periods of such Fund's
portfolio securities, convert long-term capital gains into short-term capital
gains or convert short-term capital losses into long-term capital losses. These
rules could therefore affect the amount, timing and character of distributions
to investors.


Certain of a Fund's hedging activities (including transactions, if any, in
foreign currencies or foreign currency-denominated instruments) will likely
produce a difference between its book income and its taxable income. As
described above, this difference may cause a portion of a Fund's distributions
to constitute returns of capital for tax purposes or require a Fund to make
distributions exceeding book income to qualify as a regulated investment company
for U.S. federal income tax purposes.

Foreign Currency Transactions. A Fund's transactions in foreign currencies,
foreign currency-denominated debt obligations and certain foreign currency
options, futures contracts and forward contracts (and similar instruments) may
give rise to ordinary income or loss to the extent such income or loss results
from fluctuations in the value of the foreign currency concerned.

Debt Obligations. Some debt obligations with a fixed maturity date of more than
one year from the date of issuance (and zero-coupon debt obligations with a
fixed maturity date of more than one year from the date of issuance) that are
acquired by a Fund will be treated as debt obligations that are issued
originally at a discount. Generally, the amount of the original issue discount
("OID") is treated as interest income to the Fund and is included in taxable
income over the term of the debt security, even though payment of that amount is
not received until a later time, usually when the debt security matures. This
OID imputed income will comprise a part of the investment company taxable income
of the Fund, 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 and/or excise tax at the Fund level. In addition, payment-in-kind
securities will give rise to income which is required to be distributed and is
taxable even though the Fund receives no interest payment in cash on the
security during the year from such debt obligations.

Some debt obligations with a fixed maturity date of more than one year from the
date of issuance that are acquired by a Fund in the secondary market may be
treated as having market discount. Generally, any gain recognized on the
disposition of, and any partial payment of principal on, a debt security having
market discount is treated as ordinary income to the extent the gain, or
principal payment, does not exceed the accrued (but as of yet unrecognized)
market discount on such debt security. Market discount generally accrues in
equal daily installments. A Fund may make one or more of the elections
applicable to debt obligations having market discount, which could affect the
character and timing of recognition of income from such debt obligations.

Some debt obligations with a fixed maturity date of one year or less from the
date of issuance that are acquired by a Fund may be treated as having
acquisition discount or OID. Generally, a Fund will be required to include the
acquisition discount or OID in income over the term of the debt security, even
though payment of that amount is not received until a later time, usually when
the debt security matures. A Fund may make one or more of the elections
applicable to debt obligations having acquisition discount or OID, which could
affect the character and timing of recognition of income from such debt
obligations.

If a Fund holds the foregoing kinds of securities, it may be required to pay out
as an income distribution each year an amount which is greater than the total
amount of cash interest the Fund actually received. Such distributions may be
made from the cash assets of a Fund or by liquidation of portfolio securities,
if necessary. A Fund may realize gains or losses from such liquidations. In the
event a Fund realizes net short-term or long-term capital gains from such
transactions, its shareholders may receive a larger distribution from the Fund
(which will be taxable to them) than they would in the absence of such
transactions.

Interest paid on debt obligations owned by a Fund that are considered for tax
purposes to be payable in the equity of the issuer or a related party will not
be deductible to the issuer, possibly affecting the cash flow of the issuer.

Certain Investments in Real Estate Investment Trusts (REITs). Any investment by
a Fund in REIT equity securities may result in the Fund's receipt of cash in
excess of the REIT's earnings; if the Fund distributes these amounts, these
distributions could constitute a return of capital to Fund shareholders for
federal income tax purposes. In addition, any investments in REIT equity
securities may require a Fund to accrue and distribute income not yet received.
To generate sufficient cash to make the requisite distributions, a Fund may be
required to sell securities in its portfolio (including when it is not
advantageous to do so) that it otherwise would have continued to hold. Dividends
received by a Fund from a REIT will not qualify for the corporate dividends
received deduction and generally will not constitute qualified dividend income.

A Fund could directly or indirectly hold residual interests in real estate
mortgage investment conduits ("REMICs") or equity interests in taxable mortgage
pools ("TMPs"). Under a notice issued by the Internal Revenue Service ("IRS") in
October 2006 and Treasury regulations that have yet to be issued by may apply
retroactively, a portion of a Fund's income (including income allocated to the
Fund from a REIT or other pass-through entity) that is attributable to a
residual interest in a REMIC or an equity interest in a TMP (referred to in the
Code as an "excess inclusion") will be subject to federal income tax in all
events. This notice also provides, and the regulations are expected to provide,
that excess inclusion income of a regulated investment company, such as a Fund,
will be allocated to shareholders of the regulated investment company in
proportion to the dividends received by such shareholders, with the same
consequences as if the shareholders held the related REMIC or TMP interest
directly. As a result, a Fund may not be a suitable investment for charitable
remainder trusts, as noted below.

In general, excess inclusion income allocated to shareholders (i) cannot be
offset by net operating losses (subject to a limited exception for certain
thrift institutions), (ii)will constitute unrelated business taxable income
("UBTI") to entities (including a qualified pension plan, an individual
retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity)
subject to tax on UBTI, thereby potentially requiring such an entity that is
allocated excess inclusion income, and otherwise might not be required to file a
federal income tax return, to file a tax return and pay tax on such income, and
(iii) in the case of a non-US shareholder, will not qualify for any reduction in
US federal withholding tax.

Passive Foreign Investment Companies. Equity investments by a Fund in certain
"passive foreign investment companies" ("PFICs") could potentially subject the
Fund to a US federal income tax (including interest charges) on distributions
received from the company or on proceeds received from the disposition of shares
in the company, which tax cannot be eliminated by making distributions to Fund
shareholders. However, a Fund may elect to avoid the imposition of that tax. For
example, a Fund may elect to treat a PFIC as a "qualified electing fund" (a "QEF
election"), in which case the Fund would be required to include its share of the
company's income and net capital gains annually, regardless of whether it
receives any distribution from the company. Such Fund also may make an election
to mark the gains (and to a limited extent losses) in PFIC holdings "to the
market" as though it had sold and repurchased its holdings in those PFICs on the
last day of the Fund's taxable year, with such gains and losses being treated as
ordinary income and loss. The QEF and mark-to-market elections may accelerate
the recognition of income (without the receipt of cash) and increase the amount
required to be distributed by the Fund to avoid taxation. Making either of these
elections therefore may require such Fund to liquidate other investments
(including when it is not advantageous to do so) to meet its distribution
requirement, which also may accelerate the recognition of gain and affect the
Fund's total return. As described above, dividends paid by PFICs will not be
eligible to be treated as "qualified dividend income."

Foreign Taxation. Foreign withholding or other foreign taxes with respect to
income (possibly including, in some cases, capital gains) on certain foreign
securities may occur. These taxes may be reduced or eliminated under the terms
of an applicable US income tax treaty. Under current law, Equity Index 500 Fund
cannot pass through to its shareholders foreign tax credits borne in respect of
foreign securities income earned by the Portfolio. A Fund is permitted to elect
to pass through to its shareholders foreign income taxes it pays only if it
directly holds more than 50% of its assets in foreign stock and securities at
the close of its taxable year.


Foreign securities held indirectly through the Portfolio do not contribute to
this 50% threshold. As it is not expected that more than 50% of the value of
total assets of a Fund or of the Portfolio will consist of securities issued by
foreign corporations, a Fund will generally not be eligible to pass through to
shareholders its proportionate share of any foreign taxes paid, with the result
that shareholders will not be able to include in income, and will not be
entitled to take any credits or deductions for such foreign taxes.


Tax-Exempt Shareholders. Under current law, the Funds generally serve to "block"
(that is, prevent the attribution to shareholders of) UBTI from being realized
by tax-exempt shareholders. Notwithstanding this "blocking" effect, a tax-exempt
shareholder could realize UBTI by virtue of its investment in a Fund if shares
in such Fund constitute debt-financed property in the hands of the tax-exempt
shareholder within the meaning of Code Section 514(b).

Any investment in residual interests of a collateralized mortgage obligation (a
"CMO") that has elected to be treated as a REMIC likewise can create complex tax
problems, especially if a Fund has state or local governments or other
tax-exempt organizations as shareholders. Furthermore, a tax-exempt shareholder
may recognize UBTI if a Fund recognizes "excess inclusion income" derived from
direct or indirect investments in REMIC residual interests or equity interests
in TMPs if the amount of such income recognized by a Fund exceeds such Fund's
investment company taxable income (after taking into account deductions for
dividends paid by such Fund).

In addition, special tax consequences apply to charitable remainder trusts
("CRTs") that invest in regulated investment companies that invest directly or
indirectly in residual interests in REMICs or equity interests in TMPs. Under
legislation enacted in December 2006, a CRT (as defined in section 664 of the
Code) that realizes any UBTI for a taxable year must pay an excise tax annually
of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a
CRT will not recognize UBTI as a result of investing in a Fund that recognizes
"excess inclusion income". Rather, if at any time during any taxable year a CRT
(or one of certain other tax-exempt shareholders, such as the United States, a
state or political subdivision, or an agency or instrumentality thereof, and
certain energy cooperatives) is a record holder of a share in a Fund that
recognizes "excess inclusion income", then the Fund will be subject to a tax on
that portion of its "excess inclusion income" for the taxable year that is
allocable to such shareholders at the highest federal corporate income tax rate.
The extent to which this IRS guidance remains applicable in light of the
December 2006 legislation is unclear. To the extent permitted under the 1940
Act, a Fund may elect to specially allocate any such tax to the applicable CRT,
or other shareholders, and thus reduce such shareholder's distributions for the
year by the amount of the tax that relates to such shareholder's interest in the
Fund. The Funds have not yet determined whether such an election will be made.
CRTs and other tax-exempt investors are urged to consult their tax advisors
concerning the consequences of investing in a Fund.

Backup Withholding. Under the backup withholding provisions of the Code,
redemption proceeds as well as distributions may be subject to federal income
tax withholding for certain shareholders, if (i) the shareholder fails to
furnish the Fund with a correct "taxpayer identification number" (TIN), (ii) the
shareholder underreports dividend or interest income, or (iii) the shareholder
has not certified to a Fund that withholding does not apply. The backup
withholding rate is 28% for amounts paid through 2010. This rate will expire and
the backup withholding rate will be 31% for amounts paid after December 31,
2010, unless Congress enacts tax legislation providing otherwise.

Backup withholding is not an additional tax. Any amounts withheld may be
credited against the shareholder's U.S. federal income tax liability, provided
the appropriate information is furnished to the IRS.


Tax Shelter Reporting Regulations. Under Treasury regulations, if a shareholder
recognizes a loss with respect to a 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. Future guidance may extend the current
exception from this reporting requirement to shareholders of most or all
regulated investment companies. The fact that a loss is reportable under these
regulations does not affect the legal determination of whether the taxpayer's
treatment of the loss is proper. Shareholders should consult their tax advisors
to determine the applicability of these regulations in light of their individual
circumstances.

Non-US Shareholders. Distributions properly designated as Capital Gain Dividends
generally will not be subject to withholding of federal income tax. In general,
dividends (other than Capital Gain Dividends) paid by each Fund to a shareholder
that is not a "US person" within the meaning of the Code (such shareholder, a
"foreign person") are subject to withholding of US federal income tax at a rate
of 30% (or lower applicable treaty rate) even if they are funded by income or
gains (such as portfolio interest, short-term capital gains, or foreign-source
dividend and interest income) that, if paid to a foreign person directly, would
not be subject to withholding.

However, effective for taxable years of a Fund beginning before January 1, 2010,
a Fund will not be required to withhold any amounts (i) with respect to
distributions (other than distributions to a foreign person (w) that has not
provided a satisfactory statement that the beneficial owner is not a US person,
(x) to the extent that the dividend is attributable to certain interest on an
obligation if the foreign person is the issuer or is a 10% shareholder of the
issuer, (y) that is within certain foreign countries that have inadequate
information exchange with the United States, or (z) to the extent the dividend
is attributable to interest paid by a person that is a related person of the
foreign person and the foreign person is a controlled foreign corporation) from
US-source interest income that would not be subject to US federal income tax if
earned directly by an individual foreign person, to the extent such
distributions are properly designated by a Fund ("interest-related dividends"),
and (ii) with respect to distributions (other than (a) distributions to an
individual foreign person who is present in the United States for a period or
periods aggregating 183 days or more during the year of the distribution and (b)
distributions subject to special rules regarding disposition of US real property
interests ("USRPIs," as described below) of net short-term capital gains in
excess of net long-term capital losses, to the extent such distributions are
properly designated by the Fund ("short-term capital gain dividends"). Absent
legislation extending these exemptions for taxable years beginning on or after
January 1, 2010, these special withholding exemptions for interest-related and
short-term capital gain dividends will expire and these dividends generally will
be subject to withholding as described above. It is currently unclear whether
Congress will extend these exemptions for tax years beginning on or after
January 1, 2010.

A beneficial holder of shares who is a foreign person is not, in general,
subject to US federal income tax on gains (and is not allowed a deduction for
losses) realized on the sale of shares of a Fund or on Capital Gain Dividends
unless (i) such gain or dividend is effectively connected with the conduct of a
trade or business carried on by such holder within the United States, (ii) in
the case of an individual holder, the holder is present in the United States for
a period or periods aggregating 183 days or more during the year of the sale or
the receipt of the Capital Gain Dividend and certain other conditions are met or
(iii) the shares constitute USRPIs or the Capital Gain Dividends are
attributable to gains from the sale or exchange of USRPIs in accordance with
certain special rules.

Special rules apply to distributions to certain foreign persons from a regulated
investment company that is either a "U.S. real property holding corporation"
("USRPHC") or would be a USRPHC absent exclusions from USRPI treatment for
interests in domestically controlled REITs and regulated investment companies
and not-greater-than-5% interests in publicly traded classes of stock in REITs
and regulated investment companies. Additionally, special rules apply to the
sale of shares in a regulated investment company that is a USRPHC. Very
generally, a USRPHC is a domestic corporation that holds USRPIs -- USRPIs are
defined generally as any interest in U.S. real property or any equity interest
in a USRPHC -- the fair market value of which equals or exceeds 50% of the sum
of the fair market values of the corporation's USRPIs, interests in real
property located outside the United States and other assets. Each Fund generally
does not expect that it will be a USRPHC or would be a USRPHC but for the
operation of these exceptions, and thus does not expect these special tax rules
to apply.

In order to qualify for any exemptions from withholding or for lower withholding
tax rates under income tax treaties, a foreign person 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 a
Fund makes a designation with respect to a payment. Foreign persons should
contact their intermediaries regarding the application of these rules to their
accounts.

Other Tax Considerations. Shareholders of a Fund may be subject to state and
local taxes on distributions received from a Fund and on redemptions of a Fund's
shares.

Special tax rules apply to investments though defined contribution plans and
other tax-qualified plans. Shareholders should consult their tax advisors to
determine the suitability of shares of a Fund as an investment through such
plans and the precise effect of such an investment on their particular tax
situation.

The US federal income tax discussion set forth above is for general information
only. Investors are advised to consult their own tax advisors with respect to
their own circumstances regarding the above-referenced federal income taxation
rules and with respect to other federal, state, local or foreign tax
consequences to them of an investment in shares of a Fund.


                             VALUATION OF SECURITIES

Valuation of Securities and Net Asset Value

The net asset value per share of each Fund is computed as of the close of
regular trading on the NYSE on each day the NYSE is open for trading (the "Value
Time"). The NYSE 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
each 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
each Fund because of higher expenses borne by these classes.

An equity security is valued at its most recent sale price on the security's
primary exchange or OTC market as of the Value Time. Lacking any sales, the
security is valued at the calculated mean between the most recent bid quotation
and the most recent asked quotation (the "Calculated Mean") on such exchange or
OTC market as of the Value Time. If it is not possible to determine the
Calculated Mean, the security is valued at the most recent bid quotation on such
exchange or OTC market as of the Value Time. In the case of certain foreign
exchanges or OTC markets, the closing price reported by the exchange or OTC
market (which may sometimes be referred to by the exchange or one or more
pricing agents as the "official close" or the "official closing price" or other
similar term) will be considered the most recent sale price.

Debt securities are valued as follows. Money market instruments purchased with
an original or remaining maturity of 60 days or less, maturing at par, are
valued at amortized cost. Other money market instruments are valued based on
information obtained from an approved pricing agent or, if such information is
not readily available, by using matrix pricing techniques (formula driven
calculations based primarily on current market yields). Bank loans are valued at
prices supplied by an approved pricing agent (which are intended to reflect the
mean between the bid and asked prices), if available, and otherwise at the mean
of the most recent bid and asked quotations or evaluated prices, as applicable,
based on quotations or evaluated prices obtained from one or more
broker-dealers. Privately placed debt securities, other than Rule 144A debt
securities, initially are valued at cost and thereafter based on all relevant
factors, including type of security, size of holding and restrictions on
disposition. Municipal debt securities are valued at prices supplied by an
approved pricing agent (which are intended to reflect the mean between the bid
and asked prices), if available, and otherwise at the mean of the most recent
bid and asked quotations or evaluated price obtained from a broker-dealer. Other
debt securities are valued at prices supplied by an approved pricing agent, if
available, and otherwise at the most recent bid quotation or evaluated price as
applicable, obtained from one or more broker dealers.. If it is not possible to
value a particular debt security pursuant to the above methods, the security is
valued on the basis of factors including (but not limited to) maturity, coupon,
creditworthiness, currency denomination, and the movement of the market in which
the security is normally traded.

An exchange-traded option contract on securities, currencies and other financial
instruments is valued at its most recent sale price on the relevant exchange.
Lacking any sales, the option contract is valued at the Calculated Mean. If it
is not possible to determine the Calculated Mean, the option contract is valued
at the most recent bid quotation in the case of a purchased option contract or
the most recent asked quotation in the case of a written option contract, in
each case as of the Value Time. An option contract on securities, currencies and
other financial instruments traded in the OTC market is valued on the Value Date
at the evaluated price provided by the broker-dealer with which it was traded.
Futures contracts (and options thereon) are valued at the most recent settlement
price, if available, on the exchange on which they are traded most extensively.
With the exception of stock index futures contracts which trade on the Chicago
Mercantile Exchange, closing settlement times are prior to the close of trading
on the Exchange. For stock index futures contracts which trade on the Chicago
Mercantile Exchange, closing settlement prices are normally available at
approximately 4:20 pm Eastern time. If no settlement price is available, the
last traded price on such exchange will be used.

If market quotations for Portfolio/Funds assets are not readily available or the
value of the Portfolio/Funds asset as determined in accordance with
Board-approved procedures does not represent the fair market value of the
Portfolio/Funds asset, the value of the Fund asset is taken to be an amount
which, in the opinion of the Pricing Committee (or, in some cases, the Board's
Valuation Committee), represents fair market value. The value of other holdings
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 Pricing Committee.

Trading in foreign countries may be completed at times which vary from the
closing of the NYSE.

                           BOARD MEMBERS 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
provided in the governing documents of the Trust. Because the Funds do 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.

Independent Board Members

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position                                                                   Number of Funds
 with the Trust and Length of     Business Experience and                                        in DWS Fund
 Time Served(1)                   Directorships During the Past 5 Years                          Complex Overseen
--------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                                              <C>
Paul K. Freeman                   Consultant, World Bank/Inter-American Development Bank;               134
(1950)                            Governing Council of the Independent Directors Council
Chairperson since 2009, and       (governance, executive committees); formerly: Project Leader,
Board Member since 1993           International Institute for Applied Systems Analysis
                                  (1998-2001); Chief Executive Officer, The Eric Group, Inc.
                                  (environmental insurance) (1986-1998)
--------------------------------------------------------------------------------------------------------------------
John W. Ballantine (1946)         Retired; formerly: Executive Vice President and Chief Risk            134
Board Member since 1999           Management Officer, First Chicago NBD Corporation/The First
                                  National Bank of Chicago (1996-1998); Executive Vice
                                  President and Head of International Banking (1995-1996);
                                  Directorships: Healthways Inc. (provider of disease and care
                                  management services); Portland General Electric (utility
                                  company); Stockwell Capital Investments PLC (private equity);
                                  former Directorships: First Oak Brook Bancshares, Inc. and
                                  Oak Brook Bank
--------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr. (1943)      Vice Chair, WGBH Educational Foundation; Directorships:               134
 Board Member since               Association of Public Television Stations; Becton Dickinson
 1990                             and Company(2) (medical technology company); Belo
                                  Corporation(2) (media company); Boston Museum of Science;
                                  Public Radio International; PRX, The Public Radio Exchange;
                                  The PBS Foundation; former Directorships: American Public
                                  Television; Concord Academy; New England Aquarium; Mass.
                                  Corporation for Educational Telecommunications; Committee for
                                  Economic Development; Public Broadcasting Service
--------------------------------------------------------------------------------------------------------------------
Dawn-Marie Driscoll (1946)        President, Driscoll Associates (consulting firm); Executive           134
Board Member since 1987           Fellow, Center for Business Ethics, Bentley University;
                                  formerly: Partner, Palmer & Dodge (1988-1990); Vice President
                                  of Corporate Affairs and General Counsel, Filene's
                                  (1978-1988); Directorships: Trustee of 20 open-end mutual
                                  funds managed by Sun Capital Advisers, Inc. (since 2007);
                                  Director of ICI Mutual Insurance Company (since 2007);
                                  Advisory Board, Center for Business Ethics, Bentley
                                  University; Trustee, Southwest Florida Community Foundation
                                  (charitable organization); former Directorships: Investment
                                  Company Institute (audit, executive, nominating committees)
                                  and Independent Directors Council (governance, executive
                                  committees)
--------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)               Managing General Partner, Exeter Capital Partners (a series           134
Board Member since                of private investment funds); Directorships: Progressive
1996                              Holding Corporation (kitchen goods importer and distributor);
                                  Box Top Media Inc. (advertising); The Kennel Shop (retailer)
--------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss               Clinical Professor of Finance, NYU Stern School of Business           134
(1945)                            (1997-present); Member, Finance Committee, Association for
Board Member since                Asian Studies (2002-present); Director, Mitsui Sumitomo
2001                              Insurance Group (US) (2004-present); prior thereto, Managing
                                  Director, J.P. Morgan (investment banking firm) (until 1996)
--------------------------------------------------------------------------------------------------------------------
Richard J. Herring                Jacob Safra Professor of International Banking and Professor,         134
(1946)                            Finance Department, The Wharton School, University of
Board Member since                Pennsylvania (since July 1972); Co-Director, Wharton
1990                              Financial Institutions Center (since July 2000); Director,
                                  Japan Equity Fund, Inc. (since September 2007), Thai Capital
                                  Fund, Inc. (since September 2007), Singapore Fund, Inc.
                                  (since September 2007); formerly: Vice Dean and Director,
                                  Wharton Undergraduate Division (July 1995-June 2000);
                                  Director, Lauder Institute of International Management
                                  Studies (July 2000-June 2006)
--------------------------------------------------------------------------------------------------------------------
William McClayton (1944)          Managing Director, Diamond Management & Technology                    134
Board Member since 2004           Consultants, Inc. (global management consulting firm)
                                  (2001-present); Directorship: Board of Managers, YMCA of
                                  Metropolitan Chicago; formerly: Senior Partner, Arthur
                                  Andersen LLP (accounting) (1966-2001); Trustee, Ravinia
                                  Festival
--------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel                  President and Chief Executive Officer, The Pew Charitable             134
(1951)                            Trusts (charitable organization) (1994 to present); Trustee,
Board Member since                Thomas Jefferson Foundation (charitable organization) (1994
1995                              to present); Trustee, Executive Committee, Philadelphia
                                  Chamber of Commerce (2001 to 2007); Trustee, Pro Publica
                                  (2007-present) (charitable organization); 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(2) (January 2007-June 2007)
--------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.            Private investor since October 2003; Trustee of 20 open-end           134
(1946)                            mutual funds managed by Sun Capital Advisers, Inc. (since
Board Member since                October 1998); formerly: Pension & Savings Trust Officer,
1993                              Sprint Corporation(2) (telecommunications) (November
                                  1989-September 2003)
--------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg            Retired; formerly: Consultant (1997-2001); Director, US               134
(1943)                            Government Accountability Office (1996-1997); Partner,
Board Member since                Fulbright & Jaworski, L.L.P. (law firm) (1978-1996);
1997                              Directorships: The William and Flora Hewlett Foundation;
                                  Business Leadership Council, Wellesley College; former
                                  Directorships: Service Source, Inc., Mutual Fund Directors
                                  Forum (2002-2004), American Bar Retirement Association
                                  (funding vehicle for retirement plans) (1987-1990 and
                                  1994-1996)
--------------------------------------------------------------------------------------------------------------------
Robert H. Wadsworth (1940)        President, Robert H. Wadsworth & Associates, Inc. (consulting         137
Board Member since 1999           firm) (1983 to present); Director, The Phoenix Boys Choir
                                  Association
--------------------------------------------------------------------------------------------------------------------

Interested Board Member

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position                                                                   Number of Funds
 with the Trust and Length of     Business Experience and                                        in DWS Fund
 Time Served(1)                   Directorships During the Past 5 Years                          Complex Overseen
--------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(3)                Managing Director(4), Deutsche Asset Management; Head of              134
 (1958)                           Deutsche Asset Management Americas; CEO of DWS Investments;
 Board Member since               formerly: board member of DWS Investments, Germany
 2006                             (1999-2005); Head of Sales and Product Management for the
                                  Retail and Private Banking Division of Deutsche Bank in
                                  Germany (1997-1999); 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((5))

--------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth, Position
 with the Trust and Length of     Business Experience and
 Time Served(6)                   Directorships During the Past 5 Years
--------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(7) (1965)       Managing Director(4), Deutsche Asset Management (2006-present); President of
 President, 2006-present          DWS family of funds; Director, ICI Mutual Insurance Company (since
                                  October 2007); formerly: Director of Fund Board Relations (2004-2006) and
                                  Director of Product Development (2000-2004), Merrill Lynch Investment Managers;
                                  Senior Vice President Operations, Merrill Lynch Asset Management (1999-2000)
--------------------------------------------------------------------------------------------------------------------
 John Millette(8) (1962)          Director(4), Deutsche Asset Management
 Vice President and Secretary,
 1999-present
--------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(7) (1963)       Managing Director(4), Deutsche Asset Management (since July 2004); formerly:
 Chief Financial Officer,         Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family
 2004-present                     of Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS
 Treasurer, 2005-present          Global Asset Management (1994-1998)
--------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(8) (1962)       Managing Director(4), Deutsche Asset Management
 Assistant Secretary,
 1997-present
--------------------------------------------------------------------------------------------------------------------
 Rita Rubin(9) (1970)             Vice President and Counsel, Deutsche Asset Management (since October 2007);
 Assistant Secretary,             formerly, Vice President, Morgan Stanley Investment Management (2004-2007);
 2009-present                     Attorney, Shearman & Sterling LLP (2004); Vice President and Associate General
                                  Counsel, UBS Global Asset Management (2001-2004)
--------------------------------------------------------------------------------------------------------------------
 Paul Antosca(8)                  Director(4), Deutsche Asset Management (since 2006); formerly: Vice President,
 (1957)                           The Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jack Clark (8)                   Director(4), Deutsche Asset Management (since 2007); formerly: Vice President,
 (1967)                           State Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(8)               Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(9) (1972)          Vice President, Deutsche Asset Management (since 2006); formerly: AML
 Anti-Money Laundering            Operations Manager for Bear Stearns (2004-2006); Supervising Compliance
 Compliance Officer,              Principal and Operations Manager for AXA Financial (1999-2004)
 2007-present
--------------------------------------------------------------------------------------------------------------------
 Robert Kloby(9) (1962)           Managing Director(4), Deutsche Asset Management (2004-present); formerly: Chief
 Chief Compliance Officer,        Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President,
 2006-present                     The Prudential Insurance Company of America (1988-2000); E.F. Hutton and
                                  Company (1984-1988)
--------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(9)        Director(4), Deutsche Asset Management (2006-present); formerly: Director,
 (1951)                           Senior Vice President, General Counsel, and Assistant Secretary, Hansberger
 Chief Legal Officer,             Global Investors, Inc. (1996-2006); Director, National Society of Compliance
 2006-present                     Professionals (2002-2005) (2006-2009)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      The length of time served represents the year in which the Board Member
         joined the board of one or more DWS funds currently overseen by the
         Board.

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

(3)      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.

(4)      Executive title, not a board directorship.

(5)      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.

(6)      The length of time served represents the year in which the officer was
         first elected in such capacity for one or more DWS funds.

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

(8)      Address: One Beacon Street, Boston, Massachusetts 02108.

(9)      Address:  280 Park Avenue, New York, New York 10017.

Certain officers hold similar positions for other investment companies for which
DIMA or an affiliate serves as the Advisor.

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

 Paul H. Schubert:                    Vice President
 Jason Vazquez:                       Vice President and AML Compliance Officer
 Caroline Pearson:                    Secretary

Board Members' Responsibilities. The officers of the Trust manage its day-to-day
operations under the direction of the Board. The primary responsibility of the
Board is to represent the interests of the Funds and to provide oversight of the
management of the Funds.

Board Committees. The Board has established the following standing committees:
Audit Committee, Nominating and Governance Committee, Contract Committee, Equity
Oversight Committee, Fixed-Income and Quant Oversight Committee, Marketing and
Shareholder Services Committee, and Operations Committee. For each committee,
the Board has adopted a written charter setting forth each committee's
responsibilities. Each committee was reconstituted effective April 1, 2008.

Audit Committee: The Audit Committee, which consists entirely of Independent
Board Members, assists the Board in fulfilling its responsibility for oversight
of (1) the integrity of the financial statements, (2) the Funds' accounting and
financial reporting policies and procedures, (3) the Funds' compliance with
legal and regulatory requirements related to accounting and financial reporting
and (4) the qualifications, independence and performance of the independent
registered public accounting firm for the Funds. It also approves and recommends
to the Board the appointment, retention or termination of the independent
registered public accounting firm for the Funds, reviews the scope of audit and
internal controls, considers and reports to the Board on matters relating to the
Funds' 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
William McClayton (Chair), Kenneth C. Froewiss (Vice Chair), John W. Ballantine,
Henry P. Becton, Jr., Keith R. Fox and William N. Searcy, Jr. During the
calendar year 2008, the Audit Committee of the Funds' Board held six (6)
meetings.

Nominating and Governance Committee: The Nominating and Governance Committee,
which consists entirely of Independent Board Members, recommends individuals for
membership on the Board, nominates officers, Board and committee chairs, vice
chairs and committee members, and oversees the operations of the Board. The
Nominating and Governance Committee also reviews recommendations by shareholders
for candidates for Board positions. Shareholders may recommend candidates for
Board positions by forwarding their correspondence by US mail or courier service
to Dawn-Marie Driscoll, P.O. Box 100176, Cape Coral, FL 33904. The members of
the Nominating and Governance Committee are Henry P. Becton, Jr. (Chair),
Rebecca W. Rimel (Vice Chair), Paul K. Freeman and William McClayton. During the
calendar year 2008, the Nominating and Governance Committee of the Funds' Board
held four (4) meetings.

Contract Committee: The Contract Committee, which consists entirely of
Independent Board Members, reviews at least annually, (a) the Funds' financial
arrangements with DIMA and its affiliates, and (b) the Funds' expense ratios.
The members of the Contract Committee are Robert H. Wadsworth (Chair), Keith R.
Fox (Vice Chair), Henry P. Becton, Jr., Richard J. Herring, William McClayton
and Jean Gleason Stromberg. During the calendar year 2008, the Contract Review
Committee of the Funds' Board held seven (7) meetings.

Equity Oversight Committee: The Equity Oversight Committee reviews the
investment operations of those funds that primarily invest in equity securities
(except for those funds managed by a quantitative investment team). The members
of the Equity Oversight Committee are John W. Ballantine (Chair), William
McClayton (Vice Chair), Henry P. Becton, Jr., Keith R. Fox, Richard J. Herring
and Rebecca W. Rimel. During the calendar year 2008, the Equity Oversight
Committee of the Funds' Board held five (5) meetings.

Fixed-Income and Quant Oversight Committee: The Fixed-Income and Quant Oversight
Committee reviews the investment operations of those funds that primarily invest
in fixed-income securities or are managed by a quantitative investment team. The
members of the Fixed-Income and Quant Oversight Committee are William N. Searcy,
Jr. (Chair), Jean Gleason Stromberg (Vice Chair), Dawn-Marie Driscoll, Kenneth
C. Froewiss and Robert H. Wadsworth. During the calendar year 2008, the
Fixed-Income Oversight Committee of the Funds' Board held five (5) meetings.

Marketing and Shareholder Services Committee: The Marketing and Shareholder
Services Committee reviews the Funds' marketing program, sales practices and
literature and shareholder services. The members of the Marketing and
Shareholder Services Committee are Richard J. Herring (Chair), Dawn-Marie
Driscoll (Vice Chair), Rebecca W. Rimel, Jean Gleason Stromberg and Robert H.
Wadsworth. During the calendar year 2008, the Marketing/Distribution/Shareholder
Service Committee of the Funds' Board held four (4) meetings.

The Operations Committee: The Operations Committee reviews the administrative
operations, legal affairs and general compliance matters of the Funds. The
Operations Committee reviews administrative matters related to the operations of
the Funds, policies and procedures relating to portfolio transactions, custody
arrangements, fidelity bond and insurance arrangements, valuation of Fund assets
and securities and such other tasks as the full Board deems necessary or
appropriate. The Operations Committee also oversees the valuation of the Funds'
securities and other assets and determines, as needed, the fair value of Fund
securities or other assets under certain circumstances as described in the
Funds' Valuation Procedures. The Operations Committee has appointed a Valuation
Sub-Committee, which may make determinations of fair value required when the
Operations Committee is not in session. The members of the Operations Committee
are Dawn-Marie Driscoll (Chair), John W. Ballantine (Vice Chair), Kenneth C.
Froewiss, Rebecca W. Rimel and William N. Searcy, Jr. The members of the
Valuation Sub-Committee are Kenneth C. Froewiss (Chair), John W. Ballantine,
Dawn-Marie Driscoll (Alternate), Rebecca W. Rimel (Alternate) and William N.
Searcy, Jr. (Alternate). During the calendar year 2008, the Operations Committee
held four (4) meetings and the Valuation Sub-Committee held no meetings.

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

Remuneration. Each Independent Board Member receives compensation from the Funds
for his or her services, which includes retainer fees and specified amounts for
various committee services and for the Board Chairperson. 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 Funds or any
fund in the DWS fund complex.

Board Members who are officers, directors, employees or stockholders of Deutsche
Asset Management or its affiliates receive no direct compensation from the
Funds, 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 Funds and aggregate
compensation from all of the funds in the DWS fund complex received by each
Independent Board Member during the calendar year 2008. Mr. Schwarzer 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          Aggregate              Total Compensation
                                     from DWS Equity 500      Compensation from DWS          from Fund and
  Name of Board Member                    Index Fund          U.S. Bond Index Fund        DWS Fund Complex(1)
  --------------------                    -----------         --------------------        -------------------
<S>                                          <C>                       <C>                     <C>
  John W. Ballantine                         $104                      $379                    $237,500
  Henry P. Becton, Jr.(2)                    $267                      $127                    $246,000
  Dawn-Marie Driscoll(2)(3)                  $307                      $132                    $292,500
  Keith R. Fox(2)                            $256                      $125                    $229,500
  Paul K. Freeman                            $104                      $398                    $255,000
  Kenneth C. Froewiss                        $256                      $125                    $226,750
  Richard J. Herring(2)                      $267                      $127                    $240,000
  William McClayton(4)                       $104                      $391                    $257,500
  Rebecca W. Rimel(2)                        $256                      $125                    $233,500
  William N. Searcy, Jr.                     $267                      $127                    $238,000
  Jean Gleason Stromberg                     $256                      $125                    $225,500
  Robert H. Wadsworth                        $104                      $391                    $273,500

(1)      The DWS fund complex is composed of 136 funds as of December 31, 2008.

(2)      Aggregate compensation includes amounts paid to the Board Members for
         special meetings of ad hoc committees of the Board in connection with
         the consolidation of the DWS fund boards and various 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 $8,000 for Mr. Becton, $2,000 for
         Ms. Driscoll, $2,000 for Mr. Fox, $2,000 for Dr. Herring and $8,000 for
         Ms. Rimel. These meeting fees were borne by the funds.

(3)      Includes $70,000 in annual retainer fees received by Ms. Driscoll as
         Chairperson of DWS funds.

(4)      Includes $15,000 paid to Mr. McClayton for numerous special meetings of
         an ad hoc committee of the former Chicago Board in connection with
         board consolidation initiatives.

Board Member Ownership in the Funds

The following table shows the dollar range of equity securities beneficially
owned by each Board Member in the Funds and DWS fund complex as of December 31,
2008.

                                                                    Dollar Range of       Aggregate Dollar Range of
                                           Dollar Range of       Beneficial Ownership       Ownership in all Funds
                                       Beneficial Ownership in     in DWS U.S. Bond      Overseen by Board Member in
Board Member                          DWS Equity 500 Index Fund       Index Fund          the DWS Fund Complex(1)
------------                          -------------------------       ----------          -----------------------

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

John W. Ballantine                               None                     None                   Over $100,000
Henry P. Becton, Jr.                             None                     None                   Over $100,000
Dawn-Marie Driscoll                              None                     None                   Over $100,000
Keith R. Fox                                     None                     None                   Over $100,000
Paul K. Freeman                           $50,001 - $100,000              None                   Over $100,000
Kenneth C. Froewiss                              None                 $1 - $10,000               Over $100,000
Richard J. Herring                               None                     None                   Over $100,000
William McClayton                                None                     None                   Over $100,000
Rebecca W. Rimel                                 None                     None                   Over $100,000
William N. Searcy, Jr.                           None                     None                   Over $100,000
Jean Gleason Stromberg                           None                     None                   Over $100,000
Robert H. Wadsworth                              None                     None                   Over $100,000

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

Axel Schwarzer                                   None                     None                   Over $100,000

(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 and over
         $100,000.

Ownership in Securities of the Advisor and Related Companies

As reported to the Funds, 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, 2008. Immediate family members 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 Funds and any persons (other than a registered
investment company) directly or indirectly controlling, controlled by, or under
common control with the Advisor or principal underwriter of the Funds (including
Deutsche Bank AG).


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

John W. Ballantine                                      None
Henry P. Becton, Jr.                                    None
Dawn-Marie Driscoll                                     None
Keith R. Fox                                            None
Paul K. Freeman                                         None
Kenneth C. Froewiss                                     None
Richard J. Herring                                      None
William McClayton                                       None
Rebecca W. Rimel                                        None
William N. Searcy, Jr.                                  None
Jean Gleason Stromberg                                  None
Robert H. Wadsworth                                     None

Securities Beneficially Owned

As of February 6, 2009, the Board Members and officers of the Trust owned, as a
group, less than 1% of the outstanding shares of each Fund.

To the best of each Fund's knowledge, as of February 6, 2009, no person owned of
record or beneficially 5% or more of any class of the Fund's outstanding shares,
except as noted below.

DWS Equity 500 Index Fund

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

DWS TRUST COMPANY TTEE                                       2,503,077.558            20.12% of Institutional Class
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET RECON DEPT # XXXXXX
SALEM NH  03079-1143

CHARLES SCHWAB & CO                                          2,469,837.105            19.86% of Institutional Class
OMNIBUS ACCOUNT REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151

STATE STREET BANK & TRUST CO TTEE                             824,537.492             6.63% of Institutional Class
LOCKHEED MARTIN CORP DEFERRED
MANAGEMENT INCENTIVE COMP PLAN
C/O LAURA SCULLY
NORTH QUINCY MA  02171-2119

DWS TRUST COMPANY TTEE                                        737,139.043             5.93% of Institutional Class
FARMERS GROUP INC
EMPLOYEES PROFIT SHARING SAVINGS
ATTN: ASSET RECON
SALEM NH  03079-1143

ING LIFE INSURANCE AND ANNUITY CO                             456,825.997                   10.70% of Class S
HARTFORD CT  06156-0001

ING NATIONAL TRUST                                            411,697.829                   9.64% of Class S
HARTFORD CT  06156-0001

CHARLES SCHWAB & CO                                           410,489.922                   9.61% of Class S
OMNIBUS ACCOUNT REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151


DWS US Bond Index Fund

Name and Address of Investor Ownership                          Shares                      % of Total Shares
--------------------------------------                          ------                      -----------------

MLPF&S FOR THE SOLE BENEFIT OF                               5,388,164.890            31.51% of Institutional Class
ITS CUSTOMERS
ATTN FUND ADM (9EKB2)
JACKSONVILLE FL  32246-6484

DWS TRUST COMPANY TTEE                                       4,011,366.654            23.46% of Institutional Class
FBO DB MATCHED SAVINGS PLAN
ATTN ASSET RECON DEPT # XXXXXX
SALEM NH  03079-1143

EDWARD D JONES & CO                                          2,584,282.419            15.12% of Institutional Class
ATTN MUTUAL FUND
SHAREHOLDER ACCOUNTING
201 PROGRESS PKWY
MARYLAND HTS MO  63043-3009

CHARLES SCHWAB & CO                                          2,570,100.500            15.03% of Institutional Class
OMNIBUS ACCOUNT REINVEST
ATTN: MUTUAL FUND ACCT MGMT TEAM
SAN FRANCISCO CA  94104-4151

TRADEWINDS INSURANCE LIMITED                                  888,877.872             5.20% of Institutional Class
ATTN PETER BROWN
DANBURY CT  06810-5103
</TABLE>


Agreement to Indemnify Independent Trustees for Certain Expenses

In connection with litigation or regulatory action related to possible improper
market timing or other improper trading activity or possible improper marketing
and sales activity in certain DWS Funds (the "Affected Funds"), DIMA has agreed
to indemnify and hold harmless the Affected Funds ("Fund Indemnification
Agreement") against any and all loss, damage, liability and expense, arising
from market timing or marketing and sales matters alleged in any enforcement
actions brought by governmental authorities involving or potentially affecting
the Affected Funds or DIMA ("Enforcement Actions") or that are the basis for
private actions brought by shareholders of the Affected Funds against the
Affected Funds, their directors and officers, DIMA and/or certain other parties
("Private Litigation"), or any proceedings or actions that may be threatened or
commenced in the future by any person (including governmental authorities),
arising from or similar to the matters alleged in the Enforcement Actions or
Private Litigation. In recognition of its undertaking to indemnify the Affected
Funds and in light of the rebuttable presumption generally afforded to
independent directors/trustees of investment companies that they have not
engaged in disabling conduct, DIMA has also agreed, subject to applicable law
and regulation, to indemnify certain (or, with respect to certain Affected
Funds, all) of the Independent Trustees of the Affected Funds, 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. DIMA is not, however, required to
provide indemnification and advancement of expenses: (1) with respect to any
proceeding or action which the Affected Funds' Board determines that the
Independent Trustees ultimately would not be entitled to indemnification or (2)
for any liability of the Independent Trustees 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 Affected Funds as
determined in a final adjudication in such action or proceeding. The estimated
amount of any expenses that may be advanced to the Independent Trustees or
indemnity that may be payable under the indemnity agreements is currently
unknown. These agreements by DIMA will survive the termination of the investment
management agreements between DIMA and the Affected Funds.

                               TRUST ORGANIZATION

Each Fund is a series of DWS Institutional Funds (the "Trust"). Prior to
February 6, 2006, DWS Institutional Funds was known as Scudder Institutional
Funds and BT Institutional Funds. DWS Institutional Funds was organized on March
15, 1990 under the laws of the Commonwealth of Massachusetts. On May 16, 2003,
Equity 500 Index Fund -- Premier Class acquired all of the assets of Equity 500
Index Fund -- Investment Class, a series of DWS Advisor Funds II. Prior to July
10, 2006, U.S. Bond Index Fund was a portfolio of DWS Advisor Funds II, an
open-end, management investment company that offered investors a selection of
investment portfolios, each having separate and distinct investment objectives
and policies. On July 10, 2006, U.S. Bond Predecessor Fund (the "Predecessor
Fund") transferred all its assets and liabilities from DWS Advisor Funds III, a
Massachusetts business trust, into a new series of the Trust, under the same
respective fund name. On October 20, 2006, Equity 500 Index Fund - Investment
Class shares were renamed Class S shares. On February 17, 2009 U.S. Bond Index
Fund launched Class A and Class S shares.

The Trust is a Massachusetts business trust organized under the laws of
Massachusetts and is governed by an Amended and Restated Declaration of Trust
dated June 2, 2008, as may be further amended from time to time (the
"Declaration of Trust"). 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 a Fund's prospectus. 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.

A 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 a
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).

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.

As of April 8, 2008, no shareholders of record owned more than 25% of the voting
securities of Equity 500 Index Fund.

As of April 8, 2008, the following shareholders of record owned more than 25% of
the voting securities of U.S. Bond Index Fund, and, therefore, are deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of its shareholders: FTC & Co., Datalynx House Account, Denver, CO
80217-3736: - 28.74% and MLPF&S, for the sole benefit of its customers, attn
Fund Adm (9EKB2), Jacksonville, FL 32246-6484 - 27.72% of the outstanding shares
of the Institutional Class.

                             PROXY VOTING GUIDELINES

Each Fund has delegated proxy voting responsibilities to the Advisor, subject to
the Board's general oversight. The Advisor votes proxies pursuant to the proxy
voting policy and guidelines set forth in Appendix A to this SAI).

You may obtain information about how a fund voted proxies related to its
portfolio securities during the 12-month period ended June 30 by visiting the
Securities and Exchange Commission's Web site at www.sec.gov or by visiting our
Web site at: www.dws-investments.com (click on "proxy voting" at the bottom of
the page).


                             ADDITIONAL INFORMATION

The CUSIP number for Class S of the Equity 500 Index Fund is 23339C305.

The CUSIP number for Class S of the U.S. Bond Index Fund is 23339C743.


Investment Advisor
DEUTSCHE  INVESTMENT   MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY 10154

Investment Subadvisor
NORTHERN TRUST INVESTMENTS, N.A.
50 South La Salle Street
Chicago, IL 60603

Custodian for Fund and Portfolio
STATE STREET BANK AND TRUST COMPANY 225
Franklin Street Boston, MA 02110

Distributor
DWS INVESTMENTS DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606

Administrator
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
345 Park Avenue
New York, NY 10154

Transfer Agent
DWS INVESTMENTS SERVICE COMPANY
222 South Riverside Plaza
Chicago, IL 60606

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
125 High Street
Boston, MA  02110

Counsel
ROPES & GRAY LLP
One International Place
Boston, MA 02110

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature in
connection with the offering of the Trust's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. Neither the Prospectuses nor this Statement of
Additional Information constitutes an offer in any state in which, or to any
person to whom, such offer may not lawfully be made.

Each Fund/Portfolio has a fiscal year ending December 31.

The Funds' Prospectuses and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Funds have
filed with the SEC, 100 F Street, N.E., Washington, D.C. 20549, under the 1933
Act and reference is hereby made to the Registration Statement for further
information with respect to each Fund and the securities offered hereby. This
Registration Statement and its amendments are available for inspection by the
public at the SEC in Washington, D.C.

                              FINANCIAL STATEMENTS

The financial statements, including the investment portfolio of the Portfolio,
together with the Reports of Independent Registered Public Accounting Firm,
Financial Highlights and notes to financial statements of the Funds and
Portfolio in the Annual Reports of the Funds dated December 31, 2007, and the
Semi-Annual Reports to Shareholders of the Funds dated June 30, 2008, are
incorporated herein by reference and are hereby deemed to be a part of this SAI.
A copy of a Fund's Annual Report may be obtained without charge by contacting
the Service Center at (800) 728-3337.

                      APPENDIX A -- PROXY VOTING GUIDELINES

       Deutsche Asset Management ("AM") Proxy Voting Policy and Guidelines


I.       INTRODUCTION

AM has adopted and implemented the following policies and procedures, which it
believes are reasonably designed to ensure that proxies are voted in the best
economic interest of clients, in accordance with its fiduciary duties and local
regulation. These Proxy Voting Policies, Procedures and Guidelines shall apply
to all accounts managed by US domiciled advisers and to all US client accounts
managed by non US regional offices. Non US regional offices are required to
maintain procedures and to vote proxies as may be required by law on behalf of
their non US clients. In addition, AM's proxy policies reflect the fiduciary
standards and responsibilities for ERISA accounts.

The attached guidelines represent a set of global recommendations that were
determined by the Global Proxy Voting Sub-Committee ("the GPVSC"). These
guidelines were developed to provide AM with a comprehensive list of
recommendations that represent how AM will generally vote proxies for its
clients. The recommendations derived from the application of these guidelines
are not intended to influence the various AM legal entities either directly or
indirectly by parent or affiliated companies. In addition, the organizational
structures and documents of the various AM legal entities allows, where
necessary or appropriate, the execution by individual AM subsidiaries of the
proxy voting rights independently of any DB parent or affiliated company. This
applies in particular to non U.S. fund management companies. The individuals
that make proxy voting decisions are also free to act independently, subject to
the normal and customary supervision by the management/boards of these AM legal
entities.


II.      AM'S PROXY VOTING RESPONSIBILITIES

Proxy votes are the property of AM's advisory clients.(1) As such, AM's
authority and responsibility to vote such proxies depend upon its contractual
relationships with its clients. AM has delegated responsibility for effecting
its advisory clients' proxy votes to Institutional Shareholder Services ("ISS"),
an independent third-party proxy voting specialist. ISS votes AM's advisory
clients' proxies in accordance with AM's proxy guidelines or AM's specific
instructions. Where a client has given specific instructions as to how a proxy
should be voted, AM will notify ISS to carry out those instructions. Where no
specific instruction exists, AM will follow the procedures in voting the proxies
set forth in this document. Certain Taft-Hartley clients may direct AM to have
ISS vote their proxies in accordance with Taft Hartley voting Guidelines

_____________________

(1)      For purposes of these Policies and Procedures, "clients" refers to
         persons or entities: for which AM serves as investment adviser or
         sub-adviser; for which AM votes proxies; and that have an economic or
         beneficial ownership interest in the portfolio securities of issuers
         soliciting such proxies.

Clients may in certain instances contract with their custodial agent and notify
AM that they wish to engage in securities lending transactions. In such cases,
it is the responsibility of the custodian to deduct the number of shares that
are on loan so that they do not get voted twice.


III.     POLICIES

1.       Proxy voting activities are conducted in the best economic interest of
         clients

AM has adopted the following policies and procedures to ensure that proxies are
voted in accordance with the best economic interest of its clients, as
determined by AM in good faith after appropriate review.

2.       The Global Proxy Voting Sub-Committee

The Global Proxy Voting Sub-Committee (the "GPVSC") is an internal working group
established by the applicable AM's Investment Risk Oversight Committee pursuant
to a written charter. The GPVSC is responsible for overseeing AM's proxy voting
activities, including:

(i)    adopting, monitoring and updating guidelines, attached as Exhibit A (the
       "Guidelines"), that provide how AM will generally vote proxies pertaining
       to a comprehensive list of common proxy voting matters;

(ii)   voting proxies where (A) the issues are not covered by specific client
       instruction or the Guidelines; (B) the Guidelines specify that the issues
       are to be determined on a case-by-case basis; or (C) where an exception
       to the Guidelines may be in the best economic interest of AM's clients;
       and

(iii)  monitoring the Proxy Vendor Oversight's proxy voting activities (see
       below).

AM's Proxy Vendor Oversight, a function of AM's Operations Group, is responsible
for coordinating with ISS to administer AM's proxy voting process and for voting
proxies in accordance with any specific client instructions or, if there are
none, the Guidelines, and overseeing ISS' proxy responsibilities in this regard.

3.       Availability of Proxy Voting Policies and Procedures and proxy voting
         record

Copies of these Policies and Procedures, as they may be updated from time to
time, are made available to clients as required by law and otherwise at AM's
discretion. Clients may also obtain information on how their proxies were voted
by AM as required by law and otherwise at AM's discretion; however, AM must not
selectively disclose its investment company clients' proxy voting records. The
Proxy Vendor Oversight will make proxy voting reports available to advisory
clients upon request. The investment companies' proxy voting records will be
disclosed to shareholders by means of publicly-available annual filings of each
company's proxy voting record for 12-month periods ended June 30 (see
"Recordkeeping" below), if so required by relevant law.


IV.      PROCEDURES

The key aspects of AM's proxy voting process are as follows:

1.       The GPVSC's Proxy Voting Guidelines

The Guidelines set forth the GPVSC's standard voting positions on a
comprehensive list of common proxy voting matters. The GPVSC has developed, and
continues to update the Guidelines based on consideration of current corporate
governance principles, industry standards, client feedback, and the impact of
the matter on issuers and the value of the investments.

The GPVSC will review the Guidelines as necessary to support the best economic
interests of AM's clients and, in any event, at least annually. The GPVSC will
make changes to the Guidelines, whether as a result of the annual review or
otherwise, taking solely into account the best economic interests of clients.
Before changing the Guidelines, the GPVSC will thoroughly review and evaluate
the proposed change and the reasons therefore, and the GPVSC Chair will ask
GPVSC members whether anyone outside of the AM organization (but within Deutsche
Bank and its affiliates) or any entity that identifies itself as a AM advisory
client has requested or attempted to influence the proposed change and whether
any member has a conflict of interest with respect to the proposed change. If
any such matter is reported to the GPVSC Chair, the Chair will promptly notify
the Conflicts of Interest Management Sub-Committee (see below) and will defer
the approval, if possible. Lastly, the GPVSC will fully document its rationale
for approving any change to the Guidelines.

The Guidelines may reflect a voting position that differs from the actual
practices of the public company(ies) within the Deutsche Bank organization or of
the investment companies for which AM or an affiliate serves as investment
adviser or sponsor. Investment companies, particularly closed-end investment
companies, are different from traditional operating companies. These differences
may call for differences in voting positions on the same matter. Further, the
manner in which AM votes investment company proxies may differ from proposals
for which a AM-advised or sponsored investment company solicits proxies from its
shareholders. As reflected in the Guidelines, proxies solicited by closed-end
(and open-end) investment companies are generally voted in accordance with the
pre-determined guidelines of ISS. See Section IV.3.B.

Funds ("Underlying Funds") in which Topiary Fund Management Fund of Funds (each,
a "Fund") invest, may from time to time seek to revise their investment terms
(i.e. liquidity, fees, etc.) or investment structure. In such event, the
Underlying Funds may require approval/consent from its investors to effect the
relevant changes. Topiary Fund Management has adopted Proxy Voting Procedures
which outline the process for these approvals.

2.       Specific proxy voting decisions made by the GPVSC

The Proxy Vendor Oversight will refer to the GPVSC all proxy proposals (i) that
are not covered by specific client instructions or the Guidelines; or (ii) that,
according to the Guidelines, should be evaluated and voted on a case-by-case
basis.

Additionally, if, the Proxy Vendor Oversight, the GPVSC Chair or any member of
the GPVSC, a portfolio manager, a research analyst or a sub-adviser believes
that voting a particular proxy in accordance with the Guidelines may not be in
the best economic interests of clients, that individual may bring the matter to
the attention of the GPVSC Chair and/or the Proxy Vendor Oversight.(2)

_____________________

(2)      The Proxy Vendor Oversight generally monitors upcoming proxy
         solicitations for heightened attention from the press or the industry
         and for novel or unusual proposals or circumstances, which may prompt
         the Proxy Vendor Oversight to bring the solicitation to the attention
         of the GPVSC Chair. AM portfolio managers, AM research analysts and
         sub-advisers also may bring a particular proxy vote to the attention of
         the GPVSC Chair, as a result of their ongoing monitoring of portfolio
         securities held by advisory clients and/or their review of the periodic
         proxy voting record reports that the GPVSC Chair distributes to AM
         portfolio managers and AM research analysts.

If the Proxy Vendor Oversight refers a proxy proposal to the GPVSC or the GPVSC
determines that voting a particular proxy in accordance with the Guidelines is
not in the best economic interests of clients, the GPVSC will evaluate and vote
the proxy, subject to the procedures below regarding conflicts.

The GPVSC endeavors to hold meetings to decide how to vote particular proxies
sufficiently before the voting deadline so that the procedures below regarding
conflicts can be completed before the GPVSC's voting determination.

3.       Certain proxy votes may not be cast

In some cases, the GPVSC may determine that it is in the best economic interests
of its clients not to vote certain proxies. If the conditions below are met with
regard to a proxy proposal, AM will abstain from voting:

o        Neither the Guidelines nor specific client instructions cover an issue;

o        ISS does not make a recommendation on the issue;

o        The GPVSC cannot convene on the proxy proposal at issue to make a
         determination as to what would be in the client's best interest. (This
         could happen, for example, if the Conflicts of Interest Management
         Sub-committee found that there was a material conflict or if despite
         all best efforts being made, the GPVSC quorum requirement could not be
         met).

In addition, it is AM's policy not to vote proxies of issuers subject to laws of
those jurisdictions that impose restrictions upon selling shares after proxies
are voted, in order to preserve liquidity. In other cases, it may not be
possible to vote certain proxies, despite good faith efforts to do so. For
example, some jurisdictions do not provide adequate notice to shareholders so
that proxies may be voted on a timely basis. Voting rights on securities that
have been loaned to third-parties transfer to those third-parties, with loan
termination often being the only way to attempt to vote proxies on the loaned
securities. Lastly, the GPVSC may determine that the costs to the client(s)
associated with voting a particular proxy or group of proxies outweighs the
economic benefits expected from voting the proxy or group of proxies.

The Proxy Vendor Oversight will coordinate with the GPVSC Chair regarding any
specific proxies and any categories of proxies that will not or cannot be voted.
The reasons for not voting any proxy shall be documented.

4.       Conflict of Interest Procedures

A. Procedures to Address Conflicts of Interest and Improper Influence

Overriding Principle. In the limited circumstances where the GPVSC votes
proxies,(3) the GPVSC will vote those proxies in accordance with what it, in
good faith, determines to be the best economic interests of AM's clients.(4)

_____________________

(3)      As mentioned above, the GPVSC votes proxies (i) where neither a
         specific client instruction nor a Guideline directs how the proxy
         should be voted, (ii) where the Guidelines specify that an issue is to
         be determined on a case by case basis or (iii) where voting in
         accordance with the Guidelines may not be in the best economic
         interests of clients.

(4)      The Proxy Vendor Oversight, who serves as the non-voting secretary of
         the GPVSC, may receive routine calls from proxy solicitors and other
         parties interested in a particular proxy vote. Any contact that
         attempts to exert improper pressure or influence shall be reported to
         the Conflicts of Interest Management Sub-Committee.

Independence of the GPVSC. As a matter of Compliance policy, the GPVSC and the
Proxy Vendor Oversight are structured to be independent from other parts of
Deutsche Bank. Members of the GPVSC and the employee responsible for Proxy
Vendor Oversight are employees of AM. As such, they may not be subject to the
supervision or control of any employees of Deutsche Bank Corporate and
Investment Banking division ("CIB"). Their compensation cannot be based upon
their contribution to any business activity outside of AM without prior approval
of Legal and Compliance. They can have no contact with employees of Deutsche
Bank outside of the Private Client and Asset Management division ("PCAM")
regarding specific clients, business matters or initiatives without the prior
approval of Legal and Compliance. They furthermore may not discuss proxy votes
with any person outside of AM (and within AM only on a need to know basis).

Conflict Review Procedures. There will be a committee (the "Conflicts of
Interest Management Sub-Committee") established within AM that will monitor for
potential material conflicts of interest in connection with proxy proposals that
are to be evaluated by the GPVSC. Promptly upon a determination that a vote
shall be presented to the GPVSC, the GPVSC Chair shall notify the Conflicts of
Interest Management Sub-Committee. The Conflicts of Interest Management
Sub-Committee shall promptly collect and review any information deemed
reasonably appropriate to evaluate, in its reasonable judgment, if AM or any
person participating in the proxy voting process has, or has the appearance of,
a material conflict of interest. For the purposes of this policy, a conflict of
interest shall be considered "material" to the extent that a reasonable person
could expect the conflict to influence, or appear to influence, the GPVSC's
decision on the particular vote at issue. GPVSC should provide the Conflicts of
Interest Management Sub-Committee a reasonable amount of time (no less than 24
hours) to perform all necessary and appropriate reviews. To the extent that a
conflicts review can not be sufficiently completed by the Conflicts of Interest
Management Sub-Committee the proxies will be voted in accordance with the
standard guidelines.

The information considered by the Conflicts of Interest Management Sub-Committee
may include without limitation information regarding (i) AM client
relationships; (ii) any relevant personal conflict known by the Conflicts of
Interest Management Sub-Committee or brought to the attention of that
sub-committee; (iii) and any communications with members of the GPVSC (or anyone
participating or providing information to the GPVSC) and any person outside of
the AM organization (but within Deutsche Bank and its affiliates) or any entity
that identifies itself as a AM advisory client regarding the vote at issue. In
the context of any determination, the Conflicts of Interest Management
Sub-Committee may consult with, and shall be entitled to rely upon, all
applicable outside experts, including legal counsel.

Upon completion of the investigation, the Conflicts of Interest Management
Sub-Committee will document its findings and conclusions. If the Conflicts of
Interest Management Sub-Committee determines that (i) AM has a material conflict
of interest that would prevent it from deciding how to vote the proxies
concerned without further client consent or (ii) certain individuals should be
recused from participating in the proxy vote at issue, the Conflicts of Interest
Management Sub-Committee will so inform the GPVSC chair.

If notified that AM has a material conflict of interest as described above, the
GPVSC chair will obtain instructions as to how the proxies should be voted
either from (i) if time permits, the effected clients, or (ii) in accordance
with the standard guidelines. If notified that certain individuals should be
recused from the proxy vote at issue, the GPVSC Chair shall do so in accordance
with the procedures set forth below.

Note: Any AM employee who becomes aware of a potential, material conflict of
interest in respect of any proxy vote to be made on behalf of clients shall
notify Compliance. Compliance shall call a meeting of the conflict review
committee to evaluate such conflict and determine a recommended course of
action.

Procedures to be followed by the GPVSC. At the beginning of any discussion
regarding how to vote any proxy, the GPVSC Chair (or his or her delegate) will
inquire as to whether any GPVSC member (whether voting or ex officio) or any
person participating in the proxy voting process has a personal conflict of
interest or has actual knowledge of an actual or apparent conflict that has not
been reported to the Conflicts of Interest Management Sub-Committee.

The GPVSC Chair also will inquire of these same parties whether they have actual
knowledge regarding whether any director, officer or employee outside of the AM
organization (but within Deutsche Bank and its affiliates) or any entity that
identifies itself as a AM advisory client, has: (i) requested that AM, the Proxy
Vendor Oversight (or any member thereof) or a GPVSC member vote a particular
proxy in a certain manner; (ii) attempted to influence AM, the Proxy Vendor
Oversight (or any member thereof), a GPVSC member or any other person in
connection with proxy voting activities; or (iii) otherwise communicated with a
GPVSC member or any other person participating or providing information to the
GPVSC regarding the particular proxy vote at issue, and which incident has not
yet been reported to the Conflicts of Interest Management Sub- Committee.

If any such incidents are reported to the GPVSC Chair, the Chair will promptly
notify the Conflicts of Interest Management Sub-Committee and, if possible, will
delay the vote until the Conflicts of Interest Management Sub-Committee can
complete the conflicts report. If a delay is not possible, the Conflicts of
Interest Management Sub-Committee will instruct the GPVSC whether anyone should
be recused from the proxy voting process, or whether AM should vote the proxy in
accordance with the standard guidelines, seek instructions as to how to vote the
proxy at issue from ISS or, if time permits, the effected clients. These
inquiries and discussions will be properly reflected in the GPVSC's minutes.

Duty to Report. Any AM employee, including any GPVSC member (whether voting or
ex officio), that is aware of any actual or apparent conflict of interest
relevant to, or any attempt by any person outside of the AM organization (but
within Deutsche Bank and its affiliates) or any entity that identifies itself as
a AM advisory client to influence, how AM votes its proxies has a duty to
disclose the existence of the situation to the GPVSC Chair (or his or her
designee) and the details of the matter to the Conflicts of Interest Management
Sub-Committee. In the case of any person participating in the deliberations on a
specific vote, such disclosure should be made before engaging in any activities
or participating in any discussion pertaining to that vote.

Recusal of Members. The GPVSC will recuse from participating in a specific proxy
vote any GPVSC members (whether voting or ex officio) and/or any other person
who (i) are personally involved in a material conflict of interest; or (ii) who,
as determined by the Conflicts of Interest Management Sub-Committee, have actual
knowledge of a circumstance or fact that could effect their independent
judgment, in respect of such vote. The GPVSC will also exclude from
consideration the views of any person (whether requested or volunteered) if the
GPVSC or any member thereof knows, or if the Conflicts of Interest Management
Sub-Committee has determined, that such other person has a material conflict of
interest with respect to the particular proxy, or has attempted to influence the
vote in any manner prohibited by these policies.

If, after excluding all relevant GPVSC voting members pursuant to the paragraph
above, there are three or more GPVSC voting members remaining, those remaining
GPVSC members will determine how to vote the proxy in accordance with these
Policies and Procedures. If there are fewer than three GPVSC voting members
remaining, the GPVSC Chair will vote the proxy in accordance with the standard
guidelines, will obtain instructions as to how to have the proxy voted from, if
time permits, the effected clients and otherwise from ISS.

B.       Investment Companies and Affiliated Public Companies

Investment Companies. As reflected in the Guidelines, all proxies solicited by
open-end and closed-end investment companies are voted in accordance with the
pre-determined guidelines of ISS, unless the investment company client directs
AM to vote differently on a specific proxy or specific categories of proxies.
However, regarding investment companies for which AM or an affiliate serves as
investment adviser or principal underwriter, such proxies are voted in the same
proportion as the vote of all other shareholders (i.e., "mirror" or "echo"
voting). Master fund proxies solicited from feeder funds are voted in accordance
with applicable provisions of Section 12 of the Investment Company Act of 1940.

Subject to participation agreements with certain Exchange Traded Funds ("ETF")
issuers that have received exemptive orders from the U.S. Securities and
Exchange Commission allowing investing DWS funds to exceed the limits set forth
in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will
echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of
outstanding voting shares globally when required to do so by participation
agreements and SEC orders.

Affiliated Public Companies. For proxies solicited by non-investment company
issuers of or within the Deutsche Bank organization, e.g., Deutsche bank itself,
these proxies will be voted in the same proportion as the vote of other
shareholders (i.e., "mirror" or "echo" voting).

Note: With respect to the QP Trust (not registered under the Investment Company
Act of 1940), the Fund is not required to engage in echo voting and the
investment adviser will use these Guidelines, and may determine, with respect to
the QP Trust, to vote contrary to the positions in the Guidelines, consistent
with the Fund's best interest.

C.       Other Procedures That Limit Conflicts of Interest

AM and other entities in the Deutsche Bank organization have adopted a number of
policies, procedures and internal controls that are designed to avoid various
conflicts of interest, including those that may arise in connection with proxy
voting, including:

o        Deutsche Bank Americas Restricted Activities Policy. This policy
         provides for, among other things, independence of AM employees from
         CIB, and information barriers between AM and other affiliates.
         Specifically, no AM employee may be subject to the supervision or
         control of any employee of CIB. No AM employee shall have his or her
         compensation based upon his or her contribution to any business
         activity within the Bank outside of the business of AM, without the
         prior approval of Legal or Compliance. Further, no employee of CIB
         shall have any input into the compensation of a AM employee without the
         prior approval of Legal or Compliance. Under the information barriers
         section of this policy, as a general rule, AM employees who are
         associated with the investment process should have no contact with
         employees of Deutsche Bank or its affiliates, outside of PCAM,
         regarding specific clients, business matters, or initiatives. Further,
         under no circumstances should proxy votes be discussed with any
         Deutsche Bank employee outside of AM (and should only be discussed on a
         need-to-know basis within AM).

Other relevant internal policies include the Deutsche Bank Americas Code of
Professional Conduct, the Deutsche Asset Management Information Sharing
Procedures, the Deutsche Asset Management Code of Ethics, the Sarbanes-Oxley
Senior Officer Code of Ethics, and the Deutsche Bank Group Code of Conduct. The
GPVSC expects that these policies, procedures and internal controls will greatly
reduce the chance that the GPVSC (or, its members) would be involved in, aware
of or influenced by, an actual or apparent conflict of interest.


V.       RECORDKEEPING

At a minimum, the following types of records must be properly maintained and
readily accessible in order to evidence compliance with this policy.

o        AM will maintain a record of each vote cast by AM that includes among
         other things, company name, meeting date, proposals presented, vote
         cast and shares voted.

o        The Proxy Vendor Oversight maintains records for each of the proxy
         ballots it votes. Specifically, the records include, but are not
         limited to:

         -        The proxy statement (and any additional solicitation
                  materials) and relevant portions of annual statements.

         -        Any additional information considered in the voting process
                  that may be obtained from an issuing company, its agents or
                  proxy research firms.

         -        Analyst worksheets created for stock option plan and share
                  increase analyses.

         -        Proxy Edge print-screen of actual vote election.

o        AM will retain these Policies and Procedures and the Guidelines; will
         maintain records of client requests for proxy voting information; and
         will retain any documents the Proxy Vendor Oversight or the GPVSC
         prepared that were material to making a voting decision or that
         memorialized the basis for a proxy voting decision.

o        The GPVSC also will create and maintain appropriate records documenting
         its compliance with these Policies and Procedures, including records of
         its deliberations and decisions regarding conflicts of interest and
         their resolution.

o        With respect to AM's investment company clients, ISS will create and
         maintain records of each company's proxy voting record for 12-month
         periods ended June 30. AM will compile the following information for
         each matter relating to a portfolio security considered at any
         shareholder meeting held during the period covered by the report and
         with respect to which the company was entitled to vote:

         -        The name of the issuer of the portfolio security;

         -        The exchange ticker symbol of the portfolio security (if
                  symbol is available through reasonably practicable means);

         -        The Council on Uniform Securities Identification Procedures
                  number for the portfolio security (if the number is available
                  through reasonably practicable means);

         -        The shareholder meeting date;

         -        A brief identification of the matter voted on;

         -        Whether the matter was proposed by the issuer or by a security
                  holder;

         -        Whether the company cast its vote on the matter;

         -        How the company cast its vote (e.g., for or against proposal,
                  or abstain; for or withhold regarding election of directors);
                  and

         -        Whether the company cast its vote for or against management.

Note: This list is intended to provide guidance only in terms of the records
that must be maintained in accordance with this policy. In addition, please note
that records must be maintained in accordance with the applicable AM Records
Management Policy.

With respect to electronically stored records, "properly maintained" is defined
as complete, authentic (unalterable) usable and backed-up. At a minimum, records
should be retained for a period of not less than six years (or longer, if
necessary to comply with applicable regulatory requirements), the first three
years in an appropriate AM office.


VI.      THE GPVSC'S OVERSIGHT ROLE

In addition to adopting the Guidelines and making proxy voting decisions on
matters referred to it as set forth above, the GPVSC will monitor the proxy
voting process by reviewing summary proxy information presented by ISS. The
GPVSC will use this review process to determine, among other things, whether any
changes should be made to the Guidelines. This review will take place at least
quarterly and will be documented in the GPVSC's minutes.


Attachment A - Global Proxy Voting Guidelines







                            Deutsche Asset Management

                         Global Proxy Voting Guidelines



                             As Amended October 2008


                                [GRAPHIC OMITTED]
Table of contents

I        Board Of Directors And Executives

         A        Election Of Directors

         B        Classified Boards Of Directors

         C        Board And Committee Independence

         D        Liability And Indemnification Of Directors

         E        Qualifications Of Directors

         F        Removal Of Directors And Filling Of Vacancies

         G        Proposals To Fix The Size Of The Board

         H        Proposals to Restrict Chief Executive Officer's Service on

                  Multiple Boards

         I        Proposals to Restrict Supervisory Board Members Service on

                  Multiple Boards

         J        Proposals to Establish Audit Committees

II       Capital Structure

         A        Authorization Of Additional Shares

         B        Authorization Of "Blank Check" Preferred Stock

         C        Stock Splits/Reverse Stock Splits

         D        Dual Class/Supervoting Stock

         E        Large Block Issuance

         F        Recapitalization Into A Single Class Of Stock

         G        Share Repurchases

         H        Reductions In Par Value

III      Corporate Governance Issues

         A        Confidential Voting

         B        Cumulative Voting

         C        Supermajority Voting Requirements

         D        Shareholder Right To Vote

IV       Compensation

         A        Establishment of a Remuneration Committee

         B        Executive And Director Stock Option Plans

         C        Employee Stock Option/Purchase Plans

         D        Golden Parachutes

         E        Proposals To Limit Benefits Or Executive Compensation

         F        Option Expensing

         G        Management board election and motion

         H        Remuneration (variable pay)

         I        Long-term incentive plans

         J        Shareholder Proposals Concerning "Pay For Superior
                  Performance"

         K        Executive Compensation Advisory

V        Anti-Takeover Related Issues

         A        Shareholder Rights Plans ("Poison Pills")

         B        Reincorporation

         C        Fair-Price Proposals

         D        Exemption From State Takeover Laws

         E        Non-Financial Effects Of Takeover Bids

VI       Mergers & Acquisitions

VII      Social & Political Issues

         A        Labor & Human Rights

         B        Diversity & Equality

         C        Health & Safety

         D        Government/Military

         E        Tobacco

VIII     Environmental Issues

IX       Miscellaneous Items

         A        Ratification Of Auditors

         B        Limitation Of Non-Audit Services Provided By Independent
                  Auditor

         C        Audit Firm Rotation

         D        Transaction Of Other Business

         E        Motions To Adjourn The Meeting

         F        Bundled Proposals

         G        Change Of Company Name

         H        Proposals Related To The Annual Meeting

         I        Reimbursement Of Expenses Incurred From Candidate Nomination

         J        Investment Company Proxies

         K        International Proxy Voting


These Guidelines may reflect a voting position that differs from the actual
practices of the public company (ies) within the Deutsche Bank organization or
of the investment companies for which AM or an affiliate serves as investment
adviser or sponsor.

NOTE: Because of the unique structure and regulatory scheme applicable to
closed-end investment companies, the voting guidelines (particularly those
related to governance issues) generally will be inapplicable to holdings of
closed-end investment companies. As a result, determinations on the appropriate
voting recommendation for closed-end investment company shares will be made on a
case-by-case basis.


I.       Board of Directors and Executives

A.       Election of Directors

Routine: AM Policy is to vote "for" the uncontested election of directors. Votes
for a director in an uncontested election will be withheld in cases where a
director has shown an inability to perform his/her duties in the best interests
of the shareholders.

Proxy contest: In a proxy contest involving election of directors, a
case-by-case voting decision will be made based upon analysis of the issues
involved and the merits of the incumbent and dissident slates of directors. AM
will incorporate the decisions of a third party proxy research vendor,
currently, Institutional Shareholder Services ("ISS") subject to review by the
Proxy Voting Sub-Committee (GPVSC) as set forth in the AM's Proxy Voting
Policies and Procedures.

Rationale: The large majority of corporate directors fulfill their fiduciary
obligation and in most cases support for management's nominees is warranted. As
the issues relevant to a contested election differ in each instance, those cases
must be addressed as they arise.

B.       Classified Boards of Directors

AM policy is to vote against proposals to classify the board and for proposals
to repeal classified boards and elect directors annually.

Rationale: Directors should be held accountable on an annual basis. By
entrenching the incumbent board, a classified board may be used as an
anti-takeover device to the detriment of the shareholders in a hostile take-over
situation.

C.       Board and Committee Independence

AM policy is to vote:

1.       "For" proposals that require that a certain percentage (majority up to
         66 2/3%) of members of a board of directors be comprised of independent
         or unaffiliated directors.

2.       "For" proposals that require all members of a company's compensation,
         audit, nominating, or other similar committees be comprised of
         independent or unaffiliated directors.

3.       "Against" shareholder proposals to require the addition of special
         interest, or constituency, representatives to boards of directors.

4.       "For" separation of the Chairman and CEO positions.

5.       "Against" proposals that require a company to appoint a Chairman who is
         an independent director.

Rationale: Board independence is a cornerstone of effective governance and
accountability. A board that is sufficiently independent from management assures
that shareholders' interests are adequately represented. However, the Chairman
of the board must have sufficient involvement in and experience with the
operations of the company to perform the functions required of that position and
lead the company.

No director qualifies as 'independent' unless the board of directors
affirmatively determines that the director has no material relationship with the
listed company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the company).

Whether a director is in fact not "independent" will depend on the laws and
regulations of the primary market for the security and the exchanges, if any, on
which the security trades.

D.       Liability and Indemnification of Directors

AM policy is to vote "for" management proposals to limit directors' liability
and to broaden the indemnification of directors, unless broader indemnification
or limitations on directors' liability would effect shareholders' interests in
pending litigation.

Rationale: While shareholders want directors and officers to be responsible for
their actions, it is not in the best interests of the shareholders for them to
be to risk averse. If the risk of personal liability is too great, companies may
not be able to find capable directors willing to serve. We support expanding
coverage only for actions taken in good faith and not for serious violations of
fiduciary obligation or negligence.

E.       Qualifications of Directors

AM policy is to follow management's recommended vote on either management or
shareholder proposals that set retirement ages for directors or require specific
levels of stock ownership by directors.

Rationale: As a general rule, the board of directors, and not the shareholders,
is most qualified to establish qualification policies.

F.       Removal of Directors and Filling of Vacancies

AM policy is to vote "against" proposals that include provisions that directors
may be removed only for cause or proposals that include provisions that only
continuing directors may fill board vacancies.

Rationale: Differing state statutes permit removal of directors with or without
cause. Removal of directors for cause usually requires proof of self-dealing,
fraud or misappropriation of corporate assets, limiting shareholders' ability to
remove directors except under extreme circumstances. Removal without cause
requires no such showing.

Allowing only incumbent directors to fill vacancies can serve as an
anti-takeover device, precluding shareholders from filling the board until the
next regular election.

G.       Proposals to Fix the Size of the Board

AM policy is to vote:

1.       "For" proposals to fix the size of the board unless: (a) no specific
         reason for the proposed change is given; or (b) the proposal is part of
         a package of takeover defenses.

2.       "Against" proposals allowing management to fix the size of the board
         without shareholder approval.

Rationale: Absent danger of anti-takeover use, companies should be granted a
reasonable amount of flexibility in fixing the size of its board.

H.       Proposals to Restrict Chief Executive Officer's Service on Multiple
         Boards

AM policy is to vote "For" proposals to restrict a Chief Executive Officer from
serving on more than three outside boards of directors.

Rationale: Chief Executive Officer must have sufficient time to ensure that
shareholders' interests are represented adequately.

Note: A director's service on multiple closed-end fund boards within a fund
complex are treated as service on a single Board for the purpose of the proxy
voting guidelines.

I.       Proposals to Restrict Supervisory Board Members Service on Multiple
         Boards (For FFT Securities)

AM policy is to vote "for" proposals to restrict a Supervisory Board Member from
serving on more than five supervisory boards.

Rationale: We consider a strong, independent and knowledgeable supervisory board
as important counter-balance to executive management to ensure that the
interests of shareholders are fully reflected by the company.

Full information should be disclosed in the annual reports and accounts to allow
all shareholders to judge the success of the supervisory board controlling their
company.

Supervisory Board Member must have sufficient time to ensure that shareholders'
interests are represented adequately.

Note: A director's service on multiple closed-end fund boards within a fund
complex are treated as service on a single Board for the purpose of the proxy
voting guidelines.

J.       Proposals to Establish Audit Committees (For FFT and U.S. Securities)
         AM policy is to vote "for" proposals that require the establishment of
         audit committees.

Rationale: The audit committee should deal with accounting and risk management
related questions, verifies the independence of the auditor with due regard to
possible conflicts of interest. It also should determine the procedure of the
audit process.


II.      Capital Structure

A.       Authorization of Additional Shares (For U.S. Securities)

AM policy is to vote "for" proposals to increase the authorization of existing
classes of stock that do not exceed a 3:1 ratio of shares authorized to shares
outstanding for a large cap company, and do not exceed a 4:1 ratio of shares
authorized to shares outstanding for a small-midcap company (companies having a
market capitalization under one billion U.S. dollars.).

Rationale: While companies need an adequate number of shares in order to carry
on business, increases requested for general financial flexibility must be
limited to protect shareholders from their potential use as an anti-takeover
device. Requested increases for specifically designated, reasonable business
purposes (stock split, merger, etc.) will be considered in light of those
purposes and the number of shares required.

B.       Authorization of "Blank Check" Preferred Stock (For U.S. Securities)

AM policy is to vote:

1.   "Against" proposals to create blank check preferred stock or to increase
     the number of authorized shares of blank check preferred stock unless the
     company expressly states that the stock will not be used for anti-takeover
     purposes and will not be issued without shareholder approval.

2.   "For" proposals mandating shareholder approval of blank check stock
     placement.

Rationale: Shareholders should be permitted to monitor the issuance of classes
of preferred stock in which the board of directors is given unfettered
discretion to set voting, dividend, conversion and other rights for the shares
issued.

C.       Stock Splits/Reverse Stock Splits

AM policy is to vote "for" stock splits if a legitimate business purpose is set
forth and the split is in the shareholders' best interests. A vote is cast "for"
a reverse stock split only if the number of shares authorized is reduced in the
same proportion as the reverse split or if the effective increase in authorized
shares (relative to outstanding shares) complies with the proxy guidelines for
common stock increases (see, Section II.A, above.)

Rationale: Generally, stock splits do not detrimentally effect shareholders.
Reverse stock splits, however, may have the same result as an increase in
authorized shares and should be analyzed accordingly.

D.       Dual Class/Supervoting Stock

AM policy is to vote "against" proposals to create or authorize additional
shares of super-voting stock or stock with unequal voting rights.

Rationale: The "one share, one vote" principal ensures that no shareholder
maintains a voting interest exceeding their equity interest in the company.

E.       Large Block Issuance (For U.S. Securities)

AM policy is to address large block issuances of stock on a case-by-case basis,
incorporating the recommendation of an independent third party proxy research
firm (currently ISS) subject to review by the GPVSC as set forth in AM's Proxy
Policies and Procedures.

Additionally, AM supports proposals requiring shareholder approval of large
block issuances.

Rationale: Stock issuances must be reviewed in light of the business
circumstances leading to the request and the potential impact on shareholder
value.

F.       Recapitalization into a Single Class of Stock

AM policy is to vote "for" recapitalization plans to provide for a single class
of common stock, provided the terms are fair, with no class of stock being
unduly disadvantaged.

Rationale: Consolidation of multiple classes of stock is a business decision
that may be left to the board and/management if there is no adverse effect on
shareholders.

G.       Share Repurchases

AM policy is to vote "for" share repurchase plans provided all shareholders are
able to participate on equal terms.

Rationale: Buybacks are generally considered beneficial to shareholders because
they tend to increase returns to the remaining shareholders.

H.       Reductions in Par Value

AM policy is to vote "for" proposals to reduce par value, provided a legitimate
business purpose is stated (e.g., the reduction of corporate tax
responsibility.)

Rationale: Usually, adjustments to par value are a routine financial decision
with no substantial impact on shareholders.


III.     Corporate Governance Issues

A.       Confidential Voting

AM policy is to vote "for" proposals to provide for confidential voting and
independent tabulation of voting results and to vote "against" proposals to
repeal such provisions.

Rationale: Confidential voting protects the privacy rights of all shareholders.
This is particularly important for employee-shareholders or shareholders with
business or other affiliations with the company, who may be vulnerable to
coercion or retaliation when opposing management. Confidential voting does not
interfere with the ability of corporations to communicate with all shareholders,
nor does it prohibit shareholders from making their views known directly to
management.

B.       Cumulative Voting (For U.S. Securities)

AM policy is to vote "against" shareholder proposals requesting cumulative
voting and "for"management proposals to eliminate it. The protections afforded
shareholders by cumulative voting are not necessary when a company has a history
of good performance and does not have a concentrated ownership interest.
Accordingly, a vote is cast "against" cumulative voting and "for" proposals to
eliminate it if:

a)       The company has a five year return on investment greater than the
         relevant industry index,

b)       All directors and executive officers as a group beneficially own less
         than 10% of the outstanding stock, and

c)       No shareholder (or voting block) beneficially owns 15% or more of the
         company.

Thus, failure of any one of the three criteria results in a vote for cumulative
voting in accordance with the general policy.

Rationale: Cumulative voting is a tool that should be used to ensure that
holders of a significant number of shares may have board representation;
however, the presence of other safeguards may make their use unnecessary.

C.       Supermajority Voting Requirements

AM policy is to vote "against" management proposals to require a supermajority
vote to amend the charter or bylaws and to vote "for" shareholder proposals to
modify or rescind existing supermajority requirements.

*Exception made when company holds a controlling position and seeks to lower
threshold to maintain control and/or make changes to corporate by-laws.

Rationale: Supermajority voting provisions violate the democratic principle that
a simple majority should carry the vote. Setting supermajority requirements may
make it difficult or impossible for shareholders to remove egregious by-law or
charter provisions. Occasionally, a company with a significant insider held
position might attempt to lower a supermajority threshold to make it easier for
management to approve provisions that may be detrimental to shareholders. In
that case, it may not be in the shareholders interests to lower the
supermajority provision.

D.       Shareholder Right to Vote

AM policy is to vote "against" proposals that restrict the right of shareholders
to call special meetings, amend the bylaws, or act by written consent. Policy is
to vote "for" proposals that remove such restrictions.

Rationale: Any reasonable means whereby shareholders can make their views known
to management or effect the governance process should be supported.


IV.      Compensation

Annual Incentive Plans or Bonus Plans are often submitted to shareholders for
approval. These plans typically award cash to executives based on company
performance. Deutsche Bank believes that the responsibility for executive
compensation decisions rest with the board of directors and/or the compensation
committee, and its policy is not to second-guess the board's award of cash
compensation amounts to executives unless a particular award or series of awards
is deemed excessive. If stock options are awarded as part of these bonus or
incentive plans, the provisions must meet Deutsche Bank's criteria regarding
stock option plans, or similar stock-based incentive compensation schemes, as
set forth below.

A.       Establishment of a Remuneration Committee (For FFT Securities)

AM policy is to vote "for" proposals that require the establishment of a
remuneration committee.

Rationale: Corporations should disclose in each annual report or proxy statement
their policies on remuneration. Essential details regarding executive
remuneration including share options, long-term incentive plans and bonuses,
should be disclosed in the annual report, so that investors can judge whether
corporate pay policies and practices meet the standard.

The remuneration committee shall not comprise any board members and should be
sensitive to the wider scene on executive pay. It should ensure that
performance-based elements of executive pay are designed to align the interests
of shareholders.

B.       Executive and Director Stock Option Plans

AM policy is to vote "for" stock option plans that meet the following criteria:

(1)      The resulting dilution of existing shares is less than (a) 15 percent
         of outstanding shares for large capital corporations or (b) 20 percent
         of outstanding shares for small-mid capital companies (companies having
         a market capitalization under one billion U.S. dollars.)

(2)      The transfer of equity resulting from granting options at less than FMV
         is no greater than 3% of the over-all market capitalization of large
         capital corporations, or 5% of market cap for small-mid capital
         companies.

(3)      The plan does not contain express repricing provisions and, in the
         absence of an express statement that options will not be repriced; the
         company does not have a history of repricing options.

(4)      The plan does not grant options on super-voting stock.

AM will support performance-based option proposals as long as a) they do not
mandate that all options granted by the company must be performance based, and
b) only certain high-level executives are subject to receive the performance
based options.

AM will support proposals to eliminate the payment of outside director pensions.

Rationale: Determining the cost to the company and to shareholders of
stock-based incentive plans raises significant issues not encountered with
cash-based compensation plans. These include the potential dilution of existing
shareholders' voting power, the transfer of equity out of the company resulting
from the grant and execution of options at less than FMV and the authority to
reprice or replace underwater options. Our stock option plan analysis model
seeks to allow reasonable levels of flexibility for a company yet still protect
shareholders from the negative impact of excessive stock compensation.
Acknowledging that small mid-capital corporations often rely more heavily on
stock option plans as their main source of executive compensation and may not be
able to compete with their large capital competitors with cash compensation, we
provide slightly more flexibility for those companies.

C.       Employee Stock Option/Purchase Plans

AM policy is to vote for employee stock purchase plans (ESPP's) when the plan
complies with Internal Revenue Code 423, allowing non-management employees to
purchase stock at 85% of FMV.

AM policy is to vote "for" employee stock option plans (ESOPs) provided they
meet the standards for stock option plans in general. However, when computing
dilution and transfer of equity, ESOPs are considered independently from
executive and director option plans.

Rationale: ESOPs and ESPP's encourage rank-and-file employees to acquire an
ownership stake in the companies they work for and have been shown to promote
employee loyalty and improve productivity.

D.       Golden Parachutes

AM policy is to vote "for" proposals to require shareholder approval of golden
parachutes and for proposals that would limit golden parachutes to no more than
three times base compensation. Policy is to vote "against" more restrictive
shareholder proposals to limit golden parachutes.

Rationale: In setting a reasonable limitation, AM considers that an effective
parachute should be less attractive than continued employment and that the IRS
has opined that amounts greater than three times annual salary, are excessive.

E.       Proposals to Limit Benefits or Executive Compensation

AM policy is to vote "against"

1.   Proposals to limit benefits, pensions or compensation and

2.   Proposals that request or require disclosure of executive compensation
     greater than the disclosure required by Securities and Exchange Commission
     (SEC) regulations.

Rationale: Levels of compensation and benefits are generally considered to be
day-to-day operations of the company, and are best left unrestricted by
arbitrary limitations proposed by shareholders.

F.       Option Expensing

AM policy is to support proposals requesting companies to expense stock options.

Rationale: Although companies can choose to expense options voluntarily, the
Financial Accounting Standards Board (FASB) does not yet require it, instead
allowing companies to disclose the theoretical value of options as a footnote.
Because the expensing of stock options lowers earnings, most companies elect not
to do so. Given the fact that options have become an integral component of
compensation and their exercise results in a transfer of shareholder value, AM
agrees that their value should not be ignored and treated as "no cost"
compensation. The expensing of stock options would promote more modest and
appropriate use of stock options in executive compensation plans and present a
more accurate picture of company operational earnings.

G.        Management board election and motion (For FFT Securities)

AM policy is to vote "against":

o        the election of board members with positions on either remuneration or
         audit committees;

o        the election of supervisory board members with too many supervisory
         board mandates;

o        "automatic" election of former board members into the supervisory
         board.

Rationale: Management as an entity, and each of its members, are responsible for
all actions of the company, and are - subject to applicable laws and regulations
- accountable to the shareholders as a whole for their actions.

Sufficient information should be disclosed in the annual company report and
account to allow shareholders to judge the success of the company.

H.       Remuneration (variable pay): (For FFT Securities)

Executive remuneration for Management Board

AM policy is to vote "for" remuneration for Management Board that is transparent
and linked to results.

Rationale: Executive compensation should motivate management and align the
interests of management with the shareholders. The focus should be on criteria
that prevent excessive remuneration; but enable the company to hire and retain
first-class professionals.

Shareholder interests are normally best served when management is remunerated to
optimise long-term returns. Criteria should include suitable measurements like
return on capital employed or economic value added.

Interests should generally also be correctly aligned when management own shares
in the company - even more so if these shares represent a substantial portion of
their own wealth.

Its disclosure shall differentiate between fixed pay, variable (performance
related) pay and long-term incentives, including stock option plans with
valuation ranges as well as pension and any other significant arrangements.

Executive remuneration for Supervisory Board

AM policy is to vote "for" remuneration for Supervisory Board that is at least
50% in fixed form.

Rationale: It would normally be preferable if performance linked compensation
were not based on dividend payments, but linked to suitable result based
parameters. Consulting and procurement services should also be published in the
company report.

I.       Long-term incentive plans (For FFT Securities)

AM policy is to vote "for" long-term incentive plans for members of a management
board that reward for above average company performance.

Rationale: Incentive plans will normally be supported if they:

o        directly align the interests of members of management boards with those
         of shareholders;

o        establish challenging performance criteria to reward only above average
         performance;

o        measure performance by total shareholder return in relation to the
         market or a range of comparable companies;

o        are long-term in nature and encourage long-term ownership of the shares
         once exercised through minimum holding periods;

o        do not allow a repricing of the exercise price in stock option plans.

J.       Shareholder Proposals Concerning "Pay for Superior Performance"

AM policy is to address pay for superior performance proposals on a case-by-case
basis, incorporating the recommendation of an independent third party proxy
research firm (currently ISS) subject to review by the GPVSC as set forth in
AM's Proxy Policies and Procedures.

Rationale: While AM agrees that compensation issues are better left to the
discretion of management, they appreciate the need to monitor for excessive
compensation practices on a case by case basis. If, after a review of the ISS
metrics, AM is comfortable with ISS's applying this calculation and will vote
according to their recommendation.

K.       Executive Compensation Advisory

AM policy is to follow management's recommended vote on shareholder proposals to
propose an advisory resolution seeking to ratify the compensation of the
company's named executive officers (NEOs) on an annual basis.

Rationale: AM believes that controls exist within senior management and
corporate compensation committees, ensuring fair compensation to executives.
This might allow shareholders to require approval for all levels of management's
compensation.

V.       Anti-Takeover Related Issues

A.       Shareholder Rights Plans ("Poison Pills")

AM policy is to vote "for" proposals to require shareholder ratification of
poison pills or that request boards to redeem poison pills, and to vote
"against" the adoption of poison pills if they are submitted for shareholder
ratification.

Rationale: Poison pills are the most prevalent form of corporate takeover
defenses and can be (and usually are) adopted without shareholder review or
consent. The potential cost of poison pills to shareholders during an attempted
takeover outweighs the benefits.

B.       Reincorporation

AM policy is to examine reincorporation proposals on a case-by-case basis. The
voting decision is based on: (1) differences in state law between the existing
state of incorporation and the proposed state of incorporation; and (2)
differences between the existing and the proposed charter/bylaws/articles of
incorporation and their effect on shareholder rights. If changes resulting from
the proposed reincorporation violate the corporate governance principles set
forth in these guidelines, the reincorporation will be deemed contrary to
shareholder's interests and a vote cast "against."

Rationale: Reincorporations can be properly analyzed only by looking at the
advantages and disadvantages to their shareholders. Care must be taken that
anti-takeover protection is not the sole or primary result of a proposed change.

C.       Fair-Price Proposals

AM policy is to vote "for" management fair-price proposals, provided that: (1)
the proposal applies only to two-tier offers; (2) the proposal sets an objective
fair-price test based on the highest price that the acquirer has paid for a
company's shares; (3) the supermajority requirement for bids that fail the
fair-price test is no higher than two-thirds of the outstanding shares; (4) the
proposal contains no other anti-takeover provisions or provisions that restrict
shareholders rights.

A vote is cast for shareholder proposals that would modify or repeal existing
fair-price requirements that do not meet these standards.

Rationale: While fair price provisions may be used as anti-takeover devices, if
adequate provisions are included, they provide some protection to shareholders
who have some say in their application and the ability to reject those
protections if desired.

D.       Exemption from state takeover laws

AM policy is to vote "for" shareholder proposals to opt out of state takeover
laws and to vote "against" management proposals requesting to opt out of state
takeover laws.

Rationale: Control share statutes, enacted at the state level, may harm
long-term share value by entrenching management. They also unfairly deny certain
shares their inherent voting rights.

E.       Non-financial Effects of Takeover Bids

Policy is to vote "against" shareholder proposals to require consideration of
non-financial effects of merger or acquisition proposals.

Rationale: Non-financial effects may often be subjective and are secondary to
AM's stated purpose of acting in its client's best economic interest.


VI.      Mergers & Acquisitions

Evaluation of mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings
and recapitalizations) are performed on a case-by-case basis incorporating
information from an independent proxy research source (currently ISS.)
Additional resources including portfolio management and research analysts may be
considered as set forth in AM's Policies and Procedures.


VII.     Social, Environmental & Political Issues

Social and environmental issues are becoming increasingly important to corporate
success. We incorporate social and environmental considerations into both our
investment decisions and our proxy voting decisions - particularly if the
financial performance of the company could be impacted.

With increasing frequency, shareholder proposals are submitted relating to
social and political responsibility issues. Almost universally, the company
management will recommend a vote "against" these proposals. These types of
proposals cover an extremely wide range of issues. Many of the issues tend to be
controversial and are subject to more than one reasonable, yet opposing, theory
of support. More so than with other types of proxy proposals, social and
political responsibility issues may not have a connection to the economic and
corporate governance principles effecting shareholders' interests. AM's policy
regarding social and political responsibility issues, as with any other issue,
is designed to protect our client shareholders' economic interests.

Occasionally, a distinction is made between a shareholder proposal requesting
direct action on behalf of the board and a request for a report on (or
disclosure of) some information. In order to avoid unduly burdening any company
with reporting requirements, AM's policy is to vote against shareholder
proposals that demand additional disclosure or reporting than is required by the
Securities and Exchange Commission unless it appears there is a legitimate issue
and the company has not adequately addressed shareholders' concerns.

A.       Labor & Human Rights

AM policy is to vote "against" adopting global codes of conduct or workplace
standards exceeding those mandated by law.

Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies

B.       Diversity & Equality

1.       AM policy is to vote "against" shareholder proposals to force equal
         employment opportunity, affirmative action or board diversity.

Rationale: Compliance with State and Federal legislation along with information
made available through filings with the EEOC provides sufficient assurance that
companies act responsibly and make information public.

2.       AM policy is also to vote "against" proposals to adopt the Mac Bride
         Principles. The Mac Bride Principles promote fair employment,
         specifically regarding religious discrimination.

Rationale: Compliance with the Fair Employment Act of 1989 makes adoption of the
Mac Bride Principles redundant. Their adoption could potentially lead to charges
of reverse discrimination.

C.       Health & Safety

1.       AM policy is to vote "against" adopting a pharmaceutical price
         restraint policy or reporting pricing policy changes.

Rationale: Pricing is an integral part of business for pharmaceutical companies
and should not be dictated by shareholders (particularly pursuant to an
arbitrary formula.) Disclosing pricing policies may also jeopardize a company's
competitive position in the marketplace.

2.       AM policy is to vote "against" shareholder proposals to control the use
         or labeling of and reporting on genetically engineered products.

Rationale: Additional requirements beyond those mandated by law are deemed
unnecessary and potentially burdensome to companies.

D.       Government/Military

1.       AM policy is to vote against shareholder proposals regarding the
         production or sale of military arms or nuclear or space-based weapons,
         including proposals seeking to dictate a company's interaction with a
         particular foreign country or agency.

Rationale: Generally, management is in a better position to determine what
products or industries a company can and should participate in. Regulation of
the production or distribution of military supplies is, or should be, a matter
of government policy.

2.       AM policy is to vote "against" shareholder proposals regarding
         political contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should
evaluate and determine the recipients of any contributions made by the company.

3.       AM policy is to vote "against" shareholder proposals regarding
         charitable contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should
evaluate and determine the recipients of any contributions made by the company.

E.       Tobacco

1.       AM policy is to vote "against" shareholder proposals requesting
         additional standards or reporting requirements for tobacco companies as
         well as "against" requesting companies to report on the intentional
         manipulation of nicotine content.

Rationale: Where a tobacco company's actions meet the requirements of legal and
industry standards, imposing additional burdens may detrimentally effect a
company's ability to compete. The disclosure of nicotine content information
could affect the company's rights in any pending or future litigation.

2.       Shareholder requests to spin-off or restructure tobacco businesses will
         be opposed.

Rationale: These decisions are more appropriately left to the Board and
management, and not to shareholder mandate.


VIII.    Environmental Issues

AM policy is to follow management's recommended vote on CERES Principles or
other similar environmental mandates (e.g., those relating to Greenhouse gas
emissions or the use of nuclear power).

Rationale: Environmental issues are extensively regulated by outside agencies
and compliance with additional requirements often involves significant cost to
companies.


IX.      Miscellaneous Items

A.       Ratification of Auditors

AM policy is to vote "for" a) the management recommended selection of auditors
and b) proposals to require shareholder approval of auditors.

Rationale: Absent evidence that auditors have not performed their duties
adequately, support for management's nomination is warranted.

B.       Limitation of non-audit services provided by independent auditor

AM policy is to support proposals limiting non-audit fees to 50% of the
aggregate annual fees earned by the firm retained as a company's independent
auditor.

Rationale: In the wake of financial reporting problems and alleged audit
failures at a number of companies, AM supports the general principle that
companies should retain separate firms for audit and consulting services to
avoid potential conflicts of interest. However, given the protections afforded
by the recently enacted Sarbanes-Oxley Act of 2002 (which requires Audit
Committee pre-approval for non-audit services and prohibits auditors from
providing specific types of services), and the fact that some non-audit services
are legitimate audit-related services, complete separation of audit and
consulting fees may not be warranted. A reasonable limitation is appropriate to
help ensure auditor independence and it is reasonable to expect that audit fees
exceed non-audit fees.

C.       Audit firm rotation

AM policy is to support proposals seeking audit firm rotation unless the
rotation period sought is less than five years.

Rationale: While the Sarbanes-Oxley Act mandates that the lead audit partner be
switched every five years, AM believes that rotation of the actual audit firm
would provide an even stronger system of checks and balances on the audit
function.

D.       Transaction of Other Business

AM policy is to vote against "transaction of other business" proposals.

Rationale: This is a routine item to allow shareholders to raise other issues
and discuss them at the meeting. As the nature of these issues may not be
disclosed prior to the meeting, we recommend a vote against these proposals.
This protects shareholders voting by proxy (and not physically present at a
meeting) from having action taken at the meeting that they did not receive
proper notification of or sufficient opportunity to consider.

E.       Motions to Adjourn the Meeting

AM Policy is to vote against proposals to adjourn the meeting.

Rationale: Management may seek authority to adjourn the meeting if a favorable
outcome is not secured. Shareholders should already have had enough information
to make a decision. Once votes have been cast, there is no justification for
management to continue spending time and money to press shareholders for
support.

F.       Bundled Proposals

AM policy is to vote against bundled proposals if any bundled issue would
require a vote against it if proposed individually.

Rationale: Shareholders should not be forced to "take the good with the bad" in
cases where the proposals could reasonably have been submitted separately.

G.       Change of Company Name

AM policy is to support management on proposals to change the company name.

Rationale: This is generally considered a business decision for a company.

H.       Proposals Related to the Annual Meeting

AM Policy is to vote in favor of management for proposals related to the conduct
of the annual meeting (meeting time, place, etc.)

Rationale: These are considered routine administrative proposals.

I.       Reimbursement of Expenses Incurred from Candidate Nomination

AM policy is to follow management's recommended vote on shareholder proposals
related to the amending of company bylaws to provide for the reimbursement of
reasonable expenses incurred in connection with nominating one or more
candidates in a contested election of directors to the corporation's board of
directors.

Rationale: Corporations should not be liable for costs associated with
shareholder proposals for directors.

J.       Investment Company Proxies

Proxies solicited by investment companies are voted in accordance with the
recommendations of an independent third party, currently ISS. However, regarding
investment companies for which AM or an affiliate serves as investment adviser
or principal underwriter, such proxies are voted in the same proportion as the
vote of all other shareholders. Proxies solicited by master funds from feeder
funds will be voted in accordance with applicable provisions of Section 12 of
the Investment Company Act of 1940.

Investment companies, particularly closed-end investment companies, are
different from traditional operating companies. These differences may call for
differences in voting positions on the same matter. For example, AM could vote
"for" staggered boards of closed-end investment companies, although AM generally
votes "against" staggered boards for operating companies. Further, the manner in
which AM votes investment company proxies may differ from proposals for which a
AM-advised investment company solicits proxies from its shareholders. As
reflected in the Guidelines, proxies solicited by closed-end (and open-end)
investment companies are voted in accordance with the pre-determined guidelines
of an independent third-party.

Subject to participation agreements with certain Exchange Traded Funds ("ETF")
issuers that have received exemptive orders from the U.S. Securities and
Exchange Commission allowing investing DWS funds to exceed the limits set forth
in Section 12(d)(1)(A) and (B) of the Investment Company Act of 1940, DeAM will
echo vote proxies for ETFs in which Deutsche Bank holds more than 25% of
outstanding voting shares globally when required to do so by participation
agreements and SEC orders.

Note: With respect to the QP Trust (not registered under the Investment Company
Act of 1940), the Fund is not required to engage in echo voting and the
investment adviser will use these Guidelines, and may determine, with respect to
the QP Trust, to vote contrary to the positions in the Guidelines, consistent
with the Fund's best interest.


K.       International Proxy Voting

The above guidelines pertain to issuers organized in the United States, Canada
and Germany. Proxies solicited by other issuers are voted in accordance with
international guidelines or the recommendation of ISS and in accordance with
applicable law and regulation.







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IMPORTANT: The information contained herein is the property of Deutsche Bank
Group and may not be copied, used or disclosed in whole or in part, stored in a
retrieval system or transmitted in any form or by any means (electronic,
mechanical, reprographic, recording or otherwise) without the prior written
permission of Deutsche Bank Group.
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                      APPENDIX B -- RATINGS OF INVESTMENTS

BOND AND COMMERCIAL PAPER RATINGS

Set forth below are descriptions of ratings which represent opinions as to the
quality of the securities. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.

MOODY'S INVESTORS SERVICE, INC. -- CORPORATE BOND RATINGS

Aaa: Bonds which are rated Aaa are judged to be of the highest quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper -medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B: Bonds which are rated B are considered speculative and generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent obligations which are highly speculative.
Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds, typically are in
default and can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

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

MOODY'S INVESTORS SERVICE, INC. -- SHORT-TERM RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to honor
short-term financial obligations. Ratings may be assigned to issuers, short-term
programs or to individual short-term debt instruments. Such obligations
generally have an original maturity not exceeding thirteen months, unless
explicitly noted. Issuers rated Prime-1 or P-1 (or supporting institutions) have
a superior ability for repayment of short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:

o        Leading market positions in well established industries.

o        High rates of return on funds employed.

o        Conservative capitalization structure with moderate reliance on debt
         and ample asset protection.

o        Broad margins in earnings coverage of fixed financial charges and high
         internal cash generation.

o        Well established access to a range of financial markets and assured
         sources of alternate liquidity.

Issuers rated Prime-2 or P-2 (or supporting institutions) have a strong ability
for repayment of short-term debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

STANDARD & POOR'S RATINGS SERVICES -- CORPORATE BOND RATINGS

INVESTMENT GRADE

AAA: Debt rated AAA has the highest rating assigned by S&P's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB: Debt rated BBB has an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

SPECULATIVE GRADE

Debt rated BB, B, CCC, CC, and C has significant speculative characteristics
with respect to capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest. While such debt will likely have
some quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

The BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.

CCC: Debt rated CCC has a current vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.

CC: Debt rated CC has a current high vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal.

The rating CC is also applied to debt subordinated to senior debt which is
assigned an actual or implied CCC debt rating.

C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

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

R: Debt rated `R' is under regulatory supervision owing to its financial
condition. During the pendency of the regulatory supervision, the regulators may
have the power to favor one class of obligations over others or pay some
obligations and not others.

N.R.: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.

STANDARD & POOR'S RATINGS SERVICES -- SHORT-TERM RATINGS

S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.

A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely payment.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the issuer to meet its financial commitments.

FITCH INVESTORS SERVICE, INC. -- BOND RATINGS

INVESTMENT GRADE

AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Bonds rated in the AAA and AA categories
are not significantly vulnerable to foreseeable events.

A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of good credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

SPECULATIVE GRADE

BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business or financial alternatives may be available which could assist the
obligor in satisfying its debt service requirements.

B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

DDD, DD, and D: Bonds are in default of interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

Plus (+) or Minus (-): The ratings from AA to CC may be appended by the addition
of a plus or minus sign to denote the relative status within the rating
category.

NR: Indicates that Fitch Rating does not publicly rate the specific issue.

FITCH INVESTORS SERVICE, INC. -- SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest capacity for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect a capacity
for timely payment only slightly less than issues rated F-1+.

F-2: Good Credit Quality. Issues assigned this rating have a satisfactory
capacity for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.

F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the capacity for timely payment is adequate; however, near-term
adverse changes could cause these securities to be rated below investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.

D: Default. Denotes actual or imminent payment default.