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

**_____________________________________________________________________________________________**

 

**Cash Management Fund Institutional**

**Cash Reserve Fund, Inc.**

Prime Series

**Cash Reserve Fund Institutional**

**NY Tax Free Money Fund**

**Tax Free Money Fund Investment**

**DWS Capital Growth Fund**

**DWS Climate Change Fund**

**DWS Commodity Securities Fund**

**DWS Communications Fund**

**DWS Core Fixed Income Fund**

**DWS Core Plus Income Fund**

**DWS EAFE® Equity Index Fund**

**DWS Emerging Markets Equity Fund**

**DWS Emerging Markets Fixed Income Fund**

**DWS Enhanced S&P 500 Index Fund**

**DWS Equity 500 Index Fund**

**DWS Equity Income Fund**

**DWS Equity Partners Fund**

**DWS Europe Equity Fund**

**DWS Floating Rate Plus Fund**

**DWS Global Bond Fund**

**DWS Global Opportunities Fund**

**DWS Global Thematic Fund**

**DWS GNMA Fund**

**DWS Gold & Precious Metals Fund**

**DWS Growth & Income Fund**

**DWS Health Care Fund**

**DWS High Income Plus Fund**

**DWS High Yield Tax Free Fund**

**DWS Inflation Protected Plus Fund**

**DWS Intermediate Tax/AMT Free Fund**

**DWS International Fund**

**DWS International Select Equity Fund**

**DWS International Value Opportunities Fund**

**DWS Investments VIT Funds**

DWS Equity 500 Index VIP

DWS RREEF Real Estate Securities VIP

DWS Small Cap Index VIP

**DWS Japan Equity Fund**

**DWS Large Company Growth Fund**

**DWS Latin America Equity Fund**

**DWS LifeCompass 2015 Fund**

**DWS LifeCompass 2020 Fund**

**DWS LifeCompass 2030 Fund**

**DWS LifeCompass 2040 Fund**

**DWS LifeCompass Retirement Fund**

**DWS Lifecycle Long Range Fund**

**DWS Managed Municipal Bond Fund**

**DWS Massachusetts Tax-Free Fund**

**DWS Micro Cap Fund**

**DWS Mid Cap Growth Fund**

**DWS Money Market Series**

**DWS RREEF Global Real Estate Securities Fund**

**DWS RREEF Real Estate Securities Fund**

**DWS S&P 500 Index Fund**

**DWS Short Duration Fund**

**DWS Short Duration Plus Fund**

 

----

**DWS Short-Term Municipal Bond Fund**

**DWS Small Cap Core Fund**

**DWS Small Cap Growth Fund**

**DWS Small Cap Value Fund**

**DWS U.S. Bond Index Fund**

**DWS Value Builder Fund**

**DWS Variable Series I**

DWS Bond VIP

DWS Capital Growth VIP

DWS Global Opportunities VIP

DWS Growth & Income VIP

DWS Health Care VIP

DWS International VIP

 

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

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

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

 

----

Board Member has received certain assurances regarding continuation of            insurance and indemnification rights.

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

 

----

| **Name and Year of Birth**                                                           | **Business Experience and                            Directorships****During the Past 5 Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **Position with the DWS Funds and Length of Time                            Served** |
|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|
| **Chicago Board Members                            to be Elected to New York Board** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                 |
| John W. Ballantine                            (1946)                                 | Retired; formerly,                            Executive Vice President and Chief Risk Management Officer, First                            Chicago NBD Corporation/The First National Bank of Chicago (1996-1998);                            Executive Vice President and Head of International Banking (1995-1996).                            Directorships: Healthways Inc. (provider of disease and care management                            services); Portland General Electric (utility company); Stockwell                            Capital Investments PLC (private equity). Former Directorships: First                            Oak Brook Bancshares, Inc. and Oak Brook Bank | Chicago Board Member                            since 1999.                          |
| Paul K. Freeman                            (1950)                                    | Consultant, World                            Bank/Inter-American Development Bank; formerly, Project Leader,                            International Institute for Applied Systems Analysis (1998-2001); Chief                            Executive Officer, The Eric Group, Inc. (environmental insurance)                            (1986-1998). Formerly, Trustee of funds managed by DIMA or its                            affiliates (1993-2002).                                                                                                                                                                                                                                       | Chicago Board Member                            since 2002, Chairperson since 2007.  |
| William McClayton                            (1944)                                  | Chief Administrative                            Officer, Diamond Management & Technology Consultants, Inc. (global                            management consulting firm) (2001-present); formerly, Senior Partner,                            Arthur Andersen LLP (accounting) (1966-2001). Directorships: Board of                            Managers, YMCA of Metropolitan Chicago; formerly, Trustee, Ravinia                            Festival.                                                                                                                                                                                                                                     | Chicago Board Member                            since 2004.                          |
| Robert H. Wadsworth                            (1940)                                | President, Robert H.                            Wadsworth & Associates, Inc. (consulting firm) (1983 to present).                            Formerly, Trustee of funds managed by DIMA or its affiliates                            (1999-2004).                                                                                                                                                                                                                                                                                                                                                                                                                                           | Chicago Board Member                            since 2004.                          |

 

 

 

 

*Please Retain This Supplement for Future Reference*

 

November 26, 2007

DMF-3913

 

 

**Supplement to the currently effective Statement of Additional            Information for the fund:**

**_______________________________________________**

 

**DWS Short-Term Municipal Bond Fund**

 

**Effective October 1, 2007, the following sections under            “Purchase and Redemption of Shares” in the Fund’s statement of            additional information are replaced as follows:**

*The following replaces related disclosure under “Purchases -            Financial Services Firms’ Compensation”:*

 

DWS-SDI            may at its discretion compensate investment dealers or other financial services firms            in connection with the sale of Class A shares of the Fund in accordance with the            Large Order NAV Purchase Privilege and one of the three compensation schedules up to            the following amounts:

 

| **Compensation Schedule #1:** 

**Retail Sales and DWS Scudder Flex                            Plan**(1) | **Compensation Schedule #2: DWS Scudder Retirement                            Plans**(2                            ) |
|---------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|
| **Amount of****Shares Sold**                                                                                  | **As a Percentage of Net**

**Asset Value**                                                                          | **Amount of****Shares Sold** | **As a****Percentage of Net**

**Asset Value** |
|                                                                                                          |                                                                                                                 |   |   |
| $250,000 - $50 million                                                                                        | 0.50%                                                                                                                | Over $3 million | 0.00%-0.50% |
| Over $50 million                                                                                              | 0.25%                                                                                                                | — | — |

 

| **Compensation Schedule #3: DWS Scudder Choice                            Plan**(3) |
|-------------------------------------------------------------------------------------|
| **Amount of****Shares Sold**                                                        | **As a Percentage of Net**

**Asset Value** |
|                                                                                |   |
| All amounts                                                                         | 1.00% |

             

| (1) | For purposes of determining the appropriate commission                            percentage to be applied to a particular sale under the foregoing                            schedule, DWS-SDI will consider the cumulative amount invested by the                            purchaser in the Fund and other DWS Funds including purchases pursuant                            to the “Combined Purchases,” “Letter of Intent”                            and “Cumulative Discount” features referred to                            below. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Compensation Schedule 2 applies to employer sponsored                            employee benefit plans using the OmniPlus subaccount record keeping                            system made available through ADP, Inc. under an alliance with DWS-SDI                            and its affiliates. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | DWS-SDI compensates UBS Financial 0.50%. |
|-----|------------------------------------------|

 

*The following replaces the sales charge table under “Class A            Purchases”:*

 

|  

                             

**Amount of Purchase** |  

**As a Percentage of**

**Offering Price*, **** |  

**As a Percentage of Net Asset Value***** | **Allowed to Dealers as a Percentage of Offering                            Price** |
|--------------------------------------------------------------------|---------------------------------------------------------|---------------------------------------------------|-------------------------------------------------------------------------------------|
| Less than $100,000                                                 | 2.00%                                                   | 2.04%                                             | 1.50%                                                                               |
| $100,000 but less than $250,000                                    |  

1.75                                            |  

1.78                                      |  

1.25                                                                        |
| $250,000 and over                                                  | 0.00****                                                | 0.00****                                          | 0.00*****                                                                           |

 

| * | The Offering Price includes the sales charge. |
|---|-----------------------------------------------|

 

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

 

| *** | Rounded to the nearest one-hundredth percent. |
|-----|-----------------------------------------------|

 

----

 

| **** | Redemption of shares may be subject to a contingent                            deferred sales charge as discussed below. |
|------|--------------------------------------------------------------------------------------------------------------------------|

 

| ***** | Commission is payable by DWS-SDI as discussed                            above. |
|-------|---------------------------------------------------------------------------------|

 

*The following replaces item (j) under “Class A NAV            Sales”:*

 

| (j) | investors investing $250,000 or more, either as a lump                            sum or through the “Combined Purchases,” “Letter of                            Intent” and “Cumulative Discount” features referred                            to above (collectively, the “Large Order NAV Purchase                            Privilege”). The Large Order NAV Purchase Privilege is not                            available if another net asset value purchase privilege is                            available. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

*The following replaces disclosure under “Class A Cumulative            Discount”:*

 

For            purposes of the Combined Purchases, Letter of Intent and Cumulative Discount features            described above, employer sponsored employee benefit plans using the Flex subaccount            record keeping system available through ADP, Inc. under an alliance with SDI and its            affiliates may include: (a) Money Market Funds as “DWS Funds”, (b) all            classes of shares of any DWS Fund and (c) the value of any other plan investments, such            as guaranteed investment contracts and employer stock, maintained on such subaccount            record keeping system. Once eligible plan assets under this provision reach the            $1,000,000 threshold ($250,000 threshold in the case of DWS Short Duration Plus Fund            and DWS Short-Term Municipal Bond Fund for the Large Order NAV Purchase Privilege), a            later decline in assets below the $1,000,000 threshold ($250,000 threshold in the case            of DWS Short Duration Plus Fund and DWS Short-Term Municipal Bond Fund) will not affect            the plan’s ability to continue to purchase Class A shares at net asset            value.

 

*The following replaces disclosure under “ Class A            Purchases”:*

 

**Multi-Class Suitability.**DWS-SDI has            established the following procedures regarding the purchase of Class A, Class B and            Class C shares. Orders to purchase Class B shares of $100,000 or more and orders to            purchase Class C shares of $250,000 or more will be declined with the exception of            orders received from firms acting for clients whose shares will be held in an omnibus            account and employer-sponsored employee benefit plans using the Flex subaccount record            keeping system (“Flex System”) maintained by ADP under an alliance with            DWS-SDI and its affiliates (“DWS Scudder Flex Plans”).

 

***Please Retain This Supplement for Future            Reference***

 

 

September 13, 2007

DSTMBF-3900

 

 

Supplement to the currently effective Statements of Additional            Information of each of the listed funds/portfolios:

 

| **Cash Management Fund Institutional**

**Cash Reserves Fund Institutional**

**Daily Assets Fund Institutional**

**DWS Alternative Asset Allocation Plus                            Fund**

**DWS Balanced Fund**

**DWS Blue Chip Fund**

**DWS California Tax-Free Income Fund**

**DWS Capital Growth Fund**

**DWS Commodity Securities Fund**

**DWS Communications Fund**

**DWS Conservative Allocation Fund**

**DWS Core Fixed Income Fund**

**DWS Core Plus Allocation Fund**

**DWS Core Plus Income Fund**

**DWS Disciplined Long/Short Growth Fund**

**DWS Disciplined Long/Short Value Fund**

**DWS Disciplined Market Neutral Fund**

**DWS Dreman Concentrated Value Fund**

**DWS Dreman High Return Equity Fund**

**DWS Dreman Mid Cap Value Fund**

**DWS Dreman Small Cap Value Fund**

**DWS EAFE® Equity Index                            Fund**

**DWS Emerging Markets Equity Fund**

**DWS Emerging Markets Fixed Income Fund**

**DWS Enhanced S&P 500 Index Fund**

**DWS Equity 500 Index Fund** | **DWS Equity Income Fund**

**DWS Equity Partners Fund**

**DWS Europe Equity Fund**

**DWS Floating Rate Plus Fund**

**DWS Global Bond Fund**

**DWS Global Opportunities Fund**

**DWS Global Thematic Fund**

**DWS GNMA Fund**

**DWS Gold & Precious Metals Fund**

**DWS Growth & Income Fund**

**DWS Growth Allocation Fund**

**DWS Growth Plus Allocation Fund**

**DWS Health Care Fund**

**DWS High Income Fund**

**DWS High Income Plus Fund**

**DWS High Yield Tax Free Fund**

**DWS Inflation Protected Plus Fund**

**DWS Intermediate Tax/AMT Free Fund**

**DWS International Fund**

**DWS International Select Equity Fund**

**DWS International Value Opportunities                            Fund**

**DWS Japan Equity Fund**

**DWS Large Cap Value Fund**

**DWS Large Company Growth Fund**

**DWS Latin America Equity Fund**

**DWS Lifecycle Long Range Fund**

**DWS Managed Municipal Bond Fund**

**DWS Massachusetts Tax-Free Fund**

  | **DWS Micro Cap Fund**

**DWS Mid Cap Growth Fund**

**DWS Moderate Allocation Fund**

**DWS Money Market Prime Series**

**DWS Money Market Series**

**DWS New York Tax-Free Income Fund**

**DWS RREEF Global Real Estate Securities                            Fund**

**DWS RREEF Real Estate Securities Fund**

**DWS S&P 500 Index Fund**

**DWS Short Duration Fund**

**DWS Short Duration Plus Fund**

**DWS Short-Term Municipal Bond Fund**

**DWS Small Cap Core Fund**

**DWS Small Cap Growth Fund**

**DWS Small Cap Value Fund**

**DWS Strategic Income Fund**

**DWS Technology Fund**

**DWS U.S. Bond Index Fund**

**DWS U.S. Government Securities Fund**

**DWS Value Builder Fund**

**NY Tax Free Money Fund**

**Tax Free Money Fund Investment**

**Tax-Exempt California Money Market                            Fund**

**Treasury Money Fund**

**Treasury Money Fund Investment** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

*The            following information replaces similar disclosure under “Revenue Sharing”            in the “Purchase and Redemption of Shares” section of each            Fund’s/Portfolio’s Statements of Additional Information:*

 

**Revenue Sharing**

In            light of recent regulatory developments, the Advisor, the Distributor and their            affiliates have undertaken to furnish certain additional information below regarding            the level of payments made by them to selected affiliated and unaffiliated brokers,            dealers, participating insurance companies or other financial intermediaries            (“financial advisors”) in connection with the sale and/or distribution of            Fund shares or the retention and/or servicing of investors and Fund shares            (“revenue sharing”).

The            Advisor, the Distributor and/or their affiliates may pay additional compensation, out            of their own assets and not as an additional charge to the Fund, to financial advisors            in connection with the sale and/or distribution of Fund shares or the retention and/or            servicing of Fund investors and Fund shares. Such revenue sharing payments are in            addition to any distribution or service fees payable under any Rule 12b-1 or service            plan of any fund, any record keeping/sub-transfer agency/networking fees payable by the            Fund (generally through the Distributor or an affiliate) and/or the Distributor to            certain financial advisors for performing such services and any sales charges,            commissions, non-cash compensation arrangements expressly permitted under applicable            rules of the NASD or other concessions described in the fee table or elsewhere in the            Prospectuses or the SAI as payable to all financial advisors. For example, the Advisor,            the Distributor and/or their affiliates may compensate financial advisors for providing            the Fund with “shelf space” or access to a third party platform or fund            offering list, or other marketing programs including, without limitation, inclusion of            the Fund on preferred or recommended sales lists, mutual fund “supermarket”            platforms and other formal sales programs; granting the Distributor access to the            financial advisor’s

 

----

sales force; granting the Distributor access to the financial            advisor’s conferences and meetings; assistance in training and educating the            financial advisor’s personnel; and, obtaining other forms of marketing support.            The level of revenue sharing payments made to financial advisors may be a fixed fee or            based upon one or more of the following factors: gross sales, current assets and/or            number of accounts of the Fund attributable to the financial advisor, the particular            fund or fund type or other measures as agreed to by the Advisor, the Distributor and/or            their affiliates and the financial advisors or any combination thereof. The amount of            these payments is determined at the discretion of the Advisor, the Distributor and/or            their affiliates from time to time, may be substantial, and may be different for            different financial advisors based on, for example, the nature of the services provided            by the financial advisor.

The            Advisor, the Distributor and/or their affiliates currently make revenue sharing            payments from their own assets in connection with the sale and/or distribution of DWS            Fund shares, or the retention and/or servicing of investors, to financial advisors in            amounts that generally range from .01% up to .50% of assets of the Fund serviced and            maintained by the financial advisor, .10% to .25% of sales of the Fund attributable to            the financial advisor, a flat fee of $12,500 up to $500,000, or any combination            thereof. These amounts are subject to change at the discretion of the Advisor, the            Distributor and/or their affiliates. Receipt of, or the prospect of receiving, this            additional compensation, may influence your financial advisor’s recommendation of            this Fund or of any particular share class of the Fund. You should review your            financial advisor’s compensation disclosure and/or talk to your financial advisor            to obtain more information on how this compensation may have influenced your financial            advisor’s recommendation of this Fund.

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

As            of the date hereof, the Fund has been advised that the Advisor, the Distributor and            their affiliates expect that the following firms will receive revenue sharing payments            at different points during the coming year as described above:

**Channel: Broker-Dealers and Financial Advisors**

A G            Edwards & Sons Inc.

AIG            Advisors Group

Ameriprise

Cadaret, Grant & Co. Inc.

Capital            Analyst, Incorporated

Citigroup Global Markets, Inc. (dba Smith Barney)

Commonwealth Equity Services, LLP (dba Commonwealth Financial            Network)

First            Clearing/Wachovia Securities

HD Vest            Investment Securities, Inc.

ING            Group

LaSalle            Financial Services, Inc. (dba ABN Amro)

Linsco/Private Ledger Corp.

Marsh            Insurance and Investment Company

Merrill            Lynch, Pierce, Fenner & Smith Inc.

Morgan            Stanley

Oppenheimer & Co., Inc.

Pacific            Select Distributors Group

Raymond            James & Associates

Raymond            James Financial Services

RBC            Dain Rauscher, Inc

Securities America, Inc.

UBS            Financial Services

Wells            Fargo Investments, LLC

 

----

 

**Channel: Cash Product Platform**

ADP            Clearing & Outsourcing

Allegheny Investments LTD

Bank of            New York (Hare & Co.)

Bear,            Stearns Securities Corp.

Brown            Brothers Harriman

Brown            Investment Advisory & Trust Company

Cadaret            Grant & Co.

Chicago            Mercantile Exchange

Citibank NA

D.A.            Davidson & Company

Deutsche Bank Securities Inc.

Deutsche Bank Trust Company Americas

Emmett            A. Larkin Company

Fiduciary Trust Co. – International

H.C.            Denison Co.

Huntleigh Securities

Investors Bank & Trust

JPMorgan Chase

Lincoln            Investment Planning

Linsco            Private Ledger Financial Services

Mellon            Financial Markets LLC

Penson            Financial Services

Pershing Choice Platform

ProFunds Distributors, Inc.

Romano            Brothers and Company

SAMCO            Capital Markets (Fund Services, Inc.)

Smith            Moore & Company

State            Street Bank & Trust Co.

Sungard            Institutional Brokerage Inc.

US            Bancorp

UBS            Financial Services Inc.

William            Blair & Company

**Channel: Third Party Insurance Platforms**

Acacia            National Life Insurance

Allmerica Financial Life Insurance Company

Allstate Life Insurance Company of New York

Ameritas Life Insurance Group

American General Life Insurance Company

Annuity            Investors Life Insurance Company

Columbus Life Insurance Company

Commonwealth Annuity and Life Insurance Company

Companion Life Insurance Company

Connecticut General Life Insurance Company

Farmers            New World Life Insurance Company

Fidelity Security Life Insurance Company

First            Allmerica Financial Life Insurance Company

Genworth Life Insurance Company of New York

Genworth Life and Annuity Insurance Company

Great            West Life and Annuity Insurance Company

Hartford Life Insurance Company

ICMG            Registered Variable Life

Integrity Life Insurance Company

John            Hancock Life Insurance companies

 

----

Kemper            Investors Life Insurance Company

Lincoln            Benefit Life Insurance Company

Lincoln            Life & Annuity Company of New York

Lincoln            National Life Insurance Company

Massachusetts Mutual Life Insurance Group

MetLife            Group

Minnesota Life Insurance Company

Mutual            of America Life Insurance Company

National Life Insurance Company

National Integrity Life Insurance Company

Nationwide Group

New            York Life Insurance and Annuity Corporation

Phoenix            Life Insurance Company

Protective Life Insurance

Provident Mutual Life Insurance

Prudential Insurance Company of America

Sun            Life GroupSymetra Life Insurance Company

Transamerica Life Insurance Company

Union            Central Life Insurance Company

United            of Omaha Life Insurance Company

United            Investors Life Insurance Company

Western            Southern Life Assurance Company

Any            additions, modifications or deletions to the financial advisors identified above that            have occurred since the date hereof are not reflected.

The            Advisor, the Distributor or their affiliates may enter into additional revenue sharing            arrangements or change or discontinue existing arrangements with financial advisors at            any time without notice.

The            prospect of receiving, or the receipt of additional compensation or promotional            incentives described above by financial advisors may provide such financial advisors            and/or their salespersons with an incentive to favor sales of shares of the DWS Funds            or a particular DWS Fund over sales of shares of mutual funds (or non-mutual fund            investments) with respect to which the financial advisor does not receive additional            compensation or promotional incentives, or receives lower levels of additional            compensation or promotional incentives. Similarly, financial advisors may receive            different compensation or incentives that may influence their recommendation of any            particular share class of the Fund or of other funds. These payment arrangements,            however, will not change the price that an investor pays for Fund shares or the amount            that the Fund receives to invest on behalf of an investor and will not increase Fund            expenses. You may wish to take such payment arrangements into account when considering            and evaluating any recommendations relating to Fund shares and you should discuss this            matter with your financial advisor and review your financial advisor’s            disclosures.

 

 

*Please Retain This Supplement for Future Reference*

 

August            8, 2007

DMF-3911

 

 

 

Supplement to the currently effective Statements of Additional            Information of each of the listed funds/portfolios:

**Cash Account Trust**

Tax-Exempt Portfolio

**DWS High Yield Tax Free Fund**

**DWS Intermediate Tax/AMT Free Fund**

**DWS Managed Municipal Bond Fund**

**DWS Short-Term Municipal Bond Fund**

**Tax Free Money Fund Investment**

*The            following information supplements the “Taxes” or “Federal Income            Taxes” section of each Fund’s/Portfolio’s Statements of Additional            Information:*

 

The            U.S. Supreme Court has agreed to hear an appeal of a state-court decision that might            significantly affect how states tax in-state and out-of-state municipal bonds. A            Kentucky state court held that a Kentucky law violates the U.S. Constitution by            treating, for Kentucky state tax purposes, the interest income on in-state municipal            bonds differently from the income on out-of-state municipal bonds. If the U.S. Supreme            Court affirms this holding, each state will likely revisit the way in which it treats            the interest on municipal bonds, and, depending on how each state decides, this has the            potential to increase significantly the amount of state tax paid by shareholders on            exempt-interest dividends and possibly affect the value of the bonds. The U.S. Supreme            Court likely will hold oral arguments on this case in the fall of 2007 and issue a            decision sometime thereafter. You should consult your tax advisor to discuss the tax            consequences of your investment in the fund.

 

 

 

*Please Retain This Supplement for Future Reference*

 

 

June            21, 2007

DMF-3909

 

 

Supplement to the currently effective Statement of Additional            Information of each of the listed funds:

**_____________________________________________________________________________________________**

 

**Class A and Class S**

 

**Cash            Account Trust**

|   | § | Tax-Exempt Portfolio |
|--------|--------|----------------------|

– DWS Tax Free Money Fund Class S

**DWS            Balanced Fund**

**DWS            Blue Chip Fund**

**DWS            California Tax-Free Income Fund**

**DWS            Capital Growth Fund**

**DWS            Commodity Securities Fund**

**DWS            Communications Fund**

**DWS            Conservative Allocation Fund**

**DWS            Core Fixed Income Fund**

**DWS            Core Plus Allocation Fund**

**DWS            Core Plus Income Fund**

**DWS Disciplined Long/Short Growth Fund**

**DWS Disciplined Long/Short Value Fund**

**DWS            Disciplined Market Neutral Fund**

**DWS            Dreman Concentrated Value Fund**

**DWS            Dreman High Return Equity Fund**

**DWS            Dreman Mid Cap Value Fund**

**DWS            Dreman Small Cap Value Fund**

**DWS            Emerging Markets Equity Fund**

**DWS Emerging Markets Fixed Income Fund**

**DWS            Enhanced S&P 500 Index Fund**

**DWS            Equity 500 Index Fund**

**DWS            Equity Income Fund**

**DWS            Equity Partners Fund**

**DWS            Europe Equity Fund**

**DWS            Global Bond Fund**

**DWS            Global Opportunities Fund**

**DWS            Global Thematic Fund**

**DWS            GNMA Fund**

**DWS            Gold & Precious Metals Fund**

**DWS            Growth & Income Fund**

**DWS            Growth Allocation Fund**

**DWS            Growth Plus Allocation Fund**

**DWS            Health Care Fund**

**DWS            High Income Fund**

**DWS            High Income Plus Fund**

**DWS            High Yield Tax Free Fund**

**DWS            Inflation Protected Plus Fund**

**DWS            Intermediate Tax/AMT Free Fund**

**DWS            International Fund**

**DWS            International Equity Fund**

**DWS            International Select Equity Fund**

**DWS International Value Opportunities Fund**

**DWS            Japan Equity Fund**

**DWS            Large Cap Value Fund**

**DWS            Large Company Growth Fund**

**DWS            Latin America Equity Fund**

**DWS            Lifecycle Long Range Fund**

**DWS            Managed Municipal Bond Fund**

**DWS            Massachusetts Tax-Free Fund**

 

----

**DWS            Micro Cap Fund**

**DWS            Mid Cap Growth Fund**

**DWS            Moderate Allocation Fund**

**DWS            Money Market Prime Series**

|   | § | DWS Cash Investment Trust Class A |
|--------|--------|-----------------------------------|

|   | § | DWS Cash Investment Trust Class S |
|--------|--------|-----------------------------------|

**DWS            New York Tax-Free Income Fund**

**DWS RREEF Global Real Estate Securities Fund**

**DWS RREEF Real Estate Securities Fund**

**DWS            S&P 500 Index Fund**

**DWS            Short Duration Fund**

**DWS            Short Duration Plus Fund**

**DWS            Short-Term Municipal Bond Fund**

**DWS            Small Cap Core Fund**

**DWS            Small Cap Growth Fund**

**DWS            Small Cap Value Fund**

**DWS            Strategic Income Fund**

**DWS            Technology Fund**

**DWS            U.S. Government Securities Fund**

**DWS            Value Builder Fund**

**Investors Cash Trust**

|   | § | Treasury Portfolio - DWS U.S. Treasury Money Fund Class                            S |
|--------|--------|--------------------------------------------------------------------------------------|

 

*The            following supplements the “Purchase and Redemption of Shares” section of            each of the above-referenced funds’ Statement of Additional Information for Class            A and Class S shares only:*

 

**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.

 

*Please retain this supplement for future reference.*

 

June            12, 2007

DMF-3908

 

 

 

Supplement to the currently effective Statements of Additional            Information of each of the listed funds/portfolios:

 

| **Cash Account Trust**

Government & Agency Securities Portfolio

Money Market Portfolio

Tax-Exempt Portfolio

**Cash Management Fund Institutional**

**Cash Management Fund Investment**

**Cash Reserve Fund, Inc.**

Prime Series

Treasury Series

**Cash Reserves Fund Institutional**

**Daily Assets Fund Institutional**

**DWS Balanced Fund**

**DWS Blue Chip Fund**

**DWS California Tax-Free Income Fund**

**DWS Capital Growth Fund**

**DWS Commodity Securities Fund**

**DWS Communications Fund**

**DWS Conservative Allocation Fund**

**DWS Core Fixed Income Fund**

**DWS Core Plus Allocation Fund**

**DWS Core Plus Income Fund**

**DWS Disciplined Long/Short Growth Fund**

**DWS Disciplined Long/Short Value Fund**

**DWS Disciplined Market Neutral Fund**

**DWS Dreman Concentrated Value Fund**

**DWS Dreman High Return Equity Fund**

**DWS Dreman Mid Cap Value Fund**

**DWS Dreman Small Cap Value Fund**

**DWS EAFE® Equity Index                            Fund**

**DWS Emerging Markets Equity Fund**

**DWS Emerging Markets Fixed Income Fund**

**DWS Enhanced S&P 500 Index Fund**

**DWS Equity 500 Index Fund** | **DWS Equity Income Fund**

**DWS Equity Partners Fund**

**DWS Europe Equity Fund**

**DWS Global Bond Fund**

**DWS Global Opportunities Fund**

**DWS Global Thematic Fund**

**DWS GNMA Fund**

**DWS Gold & Precious Metals Fund**

**DWS Growth & Income Fund**

**DWS Growth Allocation Fund**

**DWS Growth Plus Allocation Fund**

**DWS Health Care Fund**

**DWS High Income Fund**

**DWS High Income Plus Fund**

**DWS High Yield Tax Free Fund**

**DWS Inflation Protected Plus Fund**

**DWS Intermediate Tax/AMT Free Fund**

**DWS International Equity Fund**

**DWS International Fund**

**DWS International Select Equity Fund**

**DWS International Value Opportunities                            Fund**

**DWS Japan Equity Fund**

**DWS Large Cap Value Fund**

**DWS Large Company Growth Fund**

**DWS Latin America Equity Fund**

**DWS Lifecycle Long Range Fund**

**DWS Managed Municipal Bond Fund**

**DWS Massachusetts Tax-Free Fund**

**DWS Micro Cap Fund**

**DWS Mid Cap Growth Fund**

**DWS Moderate Allocation Fund**

**DWS Money Market Prime Series**

**DWS Money Market Series**

**DWS New York Tax-Free Income Fund**

**DWS Pacific Opportunities Equity Fund** | **DWS RREEF Global Real Estate Securities                            Fund**

**DWS RREEF Real Estate Securities Fund**

**DWS S&P 500 Index Fund**

**DWS Short Duration Fund**

**DWS Short Duration Plus Fund**

**DWS Short Term Bond Fund**

**DWS Short-Term Municipal Bond Fund**

**DWS Small Cap Core Fund**

**DWS Small Cap Growth Fund**

**DWS Small Cap Value Fund**

**DWS Strategic Income Fund**

**DWS Target 2008 Fund**

**DWS Target 2010 Fund**

**DWS Target 2011 Fund**

**DWS Target 2012 Fund**

**DWS Target 2013 Fund**

**DWS Target 2014 Fund**

**DWS Technology Fund**

**DWS U.S. Bond Index Fund**

**DWS U.S. Government Securities Fund**

**DWS U.S. Treasury Money Fund**

**DWS Value Builder Fund**

**Investors Cash Trust**

Treasury Portfolio

**Money Market Fund Investment**

**NY Tax Free Money Fund**

**Tax Free Money Fund Investment**

**Tax-Exempt California Money Market                            Fund**

**Treasury Money Fund**

**Treasury Money Fund Investment** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

*The            following information supplements disclosure under “Custodian, Transfer Agent and            Shareholder Service Agent” or “Transfer Agent and Shareholder Service            Agent” in the “Fund Service Providers” section of each            Fund’s/Portfolio’s Statements of Additional Information:*

 

The            Transfer Agent receives an annual service fee for each account of the Fund, based on            the type of account. For open retail accounts, the fee is a flat fee ranging from            $20.00 to $27.50 per account, for open wholesale money funds the fee is $32.50 per            account, while for certain retirement accounts serviced on the recordkeeping system of            ADP, Inc., the fee is a flat fee up to $3.46 per account (as of October 2006, indexed            to inflation) plus an asset based fee of up to 0.25% of average net assets.            1/12th of the annual service charge for each account is charged and payable            to the Transfer Agent each month. A fee is charged for any account which at any time            during the month had a share balance in the Fund. Smaller fees are also charged for            closed accounts for which information must be retained on the Transfer Agent’s            system for up to 18 months after closing for tax reporting purposes.

 

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

 

----

Effective April 1, 2007, DWS Scudder Investments Service Company is the            Transfer Agent for all classes of all DWS funds.

 

 

*Please Retain This Supplement for Future Reference*

 

March            22, 2007

DMF-3905

 

 

 

**DWS ADVISOR FUNDS**

 

**DWS Short-Term Municipal Bond Fund**

Class            A, Class B, Class C, and Institutional Class

 

**STATEMENT OF ADDITIONAL INFORMATION**

**March 1, 2007, as revised December 31, 2007**

 

This Statement of Additional Information is not a prospectus and should            be read in conjunction with the prospectuses dated March 1, 2007, as amended from time            to time, for DWS Short-Term Municipal Bond Fund (the “Fund”), a series of            DWS Advisor Funds (the “Trust”), copies of which may be obtained without            charge by contacting DWS Scudder Distributors, Inc., 222 South Riverside Plaza,            Chicago, Illinois 60606, (800) 621-1148, or from the firm from which this Statement of            Additional Information was obtained and are available along with other materials on the            Securities and Exchange Commission’s Internet Web site            (http://www.sec.gov).

The            audited financial statements for the Fund, together with accompanying notes, are            included in the Fund’s Annual Report, which are incorporated by reference into,            and are deemed to be a part of, this SAI. The audited financial statements for the            Short-Term Municipal Bond Predecessor Fund, together with accompanying notes, are            included in the Short-Term Municipal Bond Predecessor Fund’s Annual Report dated            October 31, 2006, which was filed electronically with the Securities and Exchange            Commission (the “SEC”) and are incorporated by reference. A copy of each            prospectus, statement of additional information and annual report of the Short-Term            Municipal Bond Predecessor Fund may be obtained without charge from Shareholder            Services by calling (800) 621-1048 or writing to DWS Scudder, P.O. Box 219210, Kansas            City, MO 64121.

This Statement of Additional Information (“SAI”) is            incorporated by reference into the corresponding prospectuses for each class of shares            of the Fund.

 

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**TABLE OF CONTENTS**

**Page**

 

| INVESTMENT                            RESTRICTIONS | 2 |
|----------------------------------------------------|---|

| INVESTMENT                            POLICIES AND TECHNIQUES | 3 |
|---------------------------------------------------------------|---|

|   | Investment                            Techniques | 3 |
|--------|--------------------------------------------------|---|

|   | Portfolio                            Holdings | 21 |
|--------|-----------------------------------------------|----|

| MANAGEMENT OF                            THE FUND | 22 |
|---------------------------------------------------|----|

|   | Investment                            Advisor | 22 |
|--------|-----------------------------------------------|----|

|   | Compensation of                            Portfolio Managers | 24 |
|--------|---------------------------------------------------------------|----|

| FUND SERVICE                            PROVIDERS | 28 |
|---------------------------------------------------|----|

|   | Administrator | 28 |
|--------|---------------|----|

|   | Distributor | 29 |
|--------|-------------|----|

|   | Custodian | 32 |
|--------|-----------|----|

|   | Transfer                            Agent | 32 |
|--------|-------------------------------------------|----|

|   | Legal                            Counsel | 32 |
|--------|------------------------------------------|----|

|   | Independent                            Registered Public Accounting Firm | 32 |
|--------|--------------------------------------------------------------------------|----|

| PORTFOLIO                            TRANSACTIONS | 33 |
|---------------------------------------------------|----|

| PURCHASES AND                            REDEMPTIONS OF SHARES | 35 |
|----------------------------------------------------------------|----|

| DIVIDENDS | 52 |
|-----------|----|

| NET ASSET                            VALUE | 53 |
|--------------------------------------------|----|

| TAXES | 54 |
|-------|----|

| TRUSTEES AND                            OFFICERS | 59 |
|--------------------------------------------------|----|

| TRUST                            ORGANIZATION | 68 |
|-----------------------------------------------|----|

| PROXY VOTING                            GUIDELINES | 70 |
|----------------------------------------------------|----|

| ADDITIONAL                            INFORMATION | 71 |
|---------------------------------------------------|----|

| FINANCIAL                            STATEMENTS | 72 |
|-------------------------------------------------|----|

| APPENDIX | 73 |
|----------|----|

             

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

 

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**INVESTMENT RESTRICTIONS**

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

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

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

In            addition, the policy of the Fund to invest at least 80% of its net assets in tax-exempt            securities has been designated as fundamental.

As            a matter of fundamental policy:

| (1) | The Fund may not borrow money, except as permitted under                            the 1940 Act, as amended, and as interpreted or modified by regulatory                            authority having jurisdiction, from time to time. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The Fund may not issue senior securities, except as                            permitted under the 1940 Act, as amended, and as interpreted or                            modified by regulatory authority having jurisdiction, from time to                            time. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | The Fund may not concentrate its investments in a                            particular industry, as that term is used in the 1940 Act, as amended,                            and as interpreted or modified by regulatory authority having                            jurisdiction, from time to time. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The Fund may not engage in the business of underwriting                            securities issued by others, except to the extent that the Fund may be                            deemed to be an underwriter in connection with the disposition of                            portfolio securities. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (6) | The Fund may not 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) | The Fund may not 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. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | The Fund has 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            fundamental policy may not be changed without the approval of a majority of the            outstanding voting securities of the Fund which, under the 1940 Act and the rules            thereunder and as used in this Statement of Additional Information, means the lesser of            (1) 67% or more of the voting securities present at a meeting, if the holders of            more than 50% of the outstanding voting securities of the Fund are present or            represented by proxy, or (2) more than 50% of the outstanding voting securities of the            Fund.

 

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As            a matter of nonfundamental policy:

| (a) | The Fund may not participate on a joint-and-several                            basis in any securities trading account. The “bunching” of                            orders for the sale or purchase of marketable Fund securities with                            other accounts under the management of the Advisor to save commissions                            or to average prices among them is not deemed to result in a securities                            trading account. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | The Fund may not purchase securities of other                            US-registered investment companies, except as permitted by the                            Investment Company Act of 1940 and the rules, regulations and any                            applicable exemptive order issued thereunder. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | The Fund may not invest for the purpose of exercising                            control over or management of any company. |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

| (d) | The Fund may not purchase any security, including any                            repurchase agreement maturing in more than seven days, which is                            illiquid, if more than 15% of the net assets of the Fund, taken at                            market value, would be invested in such securities. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The            staff of the Commission has taken the position that fixed time deposits maturing in            more than seven days that cannot be traded on a secondary market and participation            interests in loans are illiquid. Until such time (if any) as this position changes, the            Trust, on behalf of the Fund, will include such investments in determining compliance            with the 15% limitation on investments in illiquid securities. Restricted securities            (including commercial paper issued pursuant to Section 4(2) of the Securities Act of            1933) that the Board of Trustees has determined are readily marketable will not be            deemed to be illiquid for purposes of such restriction.

To            meet federal income tax requirements for qualification as a regulated investment            company, the Fund must, among other things, limit its investments so that at the close            of each quarter of its taxable year (1) no more than 25% of the value of its total            assets is invested in the securities (other than securities of the US Government or a            regulated investment company) of a single issuer or two or more issuers 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.

“Value” for the purposes of the foregoing investment            restrictions shall mean the market value used in determining the Fund’s net asset            value.

**INVESTMENT POLICIES AND TECHNIQUES**

**Investment Techniques**

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

***Fixed Income Securities***

**General.**The Fund may invest in fixed            income securities. In periods of declining interest rates, the yield (income from            portfolio investments over a stated period of time) of a 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

 

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lower. In addition, when interest rates are falling, the inflow of net            new money to such a fund will likely be invested in portfolio instruments producing            lower yields than the balance of the Fund’s portfolio, thereby reducing the yield            of the fund. In periods of rising interest rates, the opposite can be true. The net            asset value of a fund investing in fixed income securities can generally be expected to            change as general levels of interest rates fluctuate. The value of fixed income            securities in a fund’s portfolio generally varies inversely with changes in            interest rates. Prices of fixed income securities with longer effective maturities are            more sensitive to interest rate changes than those with shorter effective            maturities.

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

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

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

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

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

**Variable and Floating Rate Instruments.**The            Fund may invest in variable or floating rate instruments and variable rate demand            instruments, including variable amount master demand notes. These instruments will            normally involve industrial development or revenue bonds that provide that the rate of            interest is set as a specific percentage of a designated base rate (such as the prime            rate) at a major commercial bank. In addition, the interest rate on these

 

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securities may be reset daily, weekly or on some other reset period and            may have a floor or ceiling on interest rate changes. A fund holding such an instrument            can demand payment of the obligation at all times or at stipulated dates on short            notice (not to exceed 30 days) at par plus accrued interest.

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

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

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

**Impact of Large Redemptions and Purchases of Fund shares.**From time to time, shareholders of the Fund may make relatively large            redemptions or purchases of Fund shares. These transactions may cause the Fund to have            to sell securities or invest additional cash, as the case may be. While it is            impossible to predict the overall impact of these transactions over time, there could            be adverse effects on the Fund’s performance to the extent that the Fund may be            required to sell securities or invest cash at times when it would not otherwise do so.            These transactions could also accelerate the realization of taxable income if sales of            securities resulted in gains and could also increase transaction costs, which may            impact the Fund’s expense ratio.

**Inverse Floaters.**The Fund may invest in            inverse floaters. Inverse floaters are debt instruments with a floating rate of            interest that bears an inverse relationship to changes in short-term market interest            rates. Investments in this type of security involve special risks as compared to            investments in, for example, a fixed rate municipal security. The debt instrument in            which the Fund invests may be a tender option bond trust (the “trust”)            which can be established by the Fund, a financial institution or a broker, consisting            of underlying municipal obligations with intermediate to long maturities and a fixed            interest rate. Other investors in the trust usually consist of money market fund            investors receiving weekly floating interest rate payments who have put options with            the financial institutions. The Fund may enter into shortfall and forbearance            agreements by which the Fund agrees to reimburse the trust, in certain circumstances,            for the difference between the liquidation value of the fixed rate municipal security            held by the trust and the liquidation value of the floating rate notes. The Fund could            lose money and its NAV could decline as a result of investments in inverse floaters if            movements in interest rates are incorrectly anticipated. Moreover, the markets for            inverse floaters may be less developed and may have less liquidity than the markets for            more traditional municipal securities. The Fund’s investments in inverse floaters            will not be considered borrowing within the meaning of the Investment Company Act of            1940 or for purposes of the Fund’s investment restrictions on            borrowing.

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

 

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

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

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

***Municipal Securities***

**Municipal Notes.**Municipal securities in            the form of notes generally are used to provide for short-term capital needs, in            anticipation of an issuer’s receipt of other revenues or financing, and typically            have maturities of up to three years. Such instruments may include Tax Anticipation            Notes, Revenue Anticipation Notes, Bond Anticipation Notes, Tax and Revenue            Anticipation Notes and Construction Loan Notes. Tax Anticipation Notes are issued to            finance the working capital needs of governments. Generally, they are issued in            anticipation of various tax revenues, such as income, sales, property, use and business            taxes, and are payable from these specific future taxes. Revenue Anticipation Notes are            issued in expectation of receipt of other kinds of revenue, such as federal revenues            available under federal revenue sharing programs. Bond Anticipation Notes are issued to            provide interim financing until long-term bond financing can be arranged. In most            cases, the long-term bonds then provide the funds needed for repayment of the notes.            Tax and Revenue Anticipation Notes combine the funding sources of both Tax Anticipation            Notes and Revenue Anticipation Notes. Construction Loan Notes are sold to provide            construction financing. These notes are secured by mortgage notes insured by the            Federal Housing Authority; however, the proceeds from the insurance may be less than            the economic equivalent of the payment of principal and interest on the mortgage note            if there has been a default. The obligations of an issuer of municipal notes are            generally secured by the anticipated revenues from taxes, grants or bond financing. An            investment in such instruments, however, presents a risk that the anticipated revenues            will not be received or that such revenues will be insufficient to satisfy the            issuer’s payment obligations under the notes or that refinancing will be            otherwise unavailable.

**Tax-Exempt Commercial Paper.**Issues of            tax-exempt commercial paper typically represent short-term, unsecured, negotiable            promissory notes. These obligations are issued by state and local governments and their            agencies to finance working capital needs of municipalities or to provide interim            construction financing and are paid from general revenues of municipalities or are            refinanced with long-term debt. In most cases, tax-exempt commercial paper is backed by            letters of credit, lending agreements, note repurchase agreements or other credit            facility agreements offered by banks or other institutions.

**Municipal Securities.**The Fund may invest            in municipal securities. Municipal securities consist of bonds, notes and other            instruments issued by or on behalf of states, territories and possessions of the United            States (including the

 

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District of Columbia) and their political subdivisions, agencies or            instrumentalities, the interest on which is exempt from regular federal income tax            (i.e., excluded from gross income for federal income tax purposes but not necessarily            exempt from the federal alternative minimum tax or from state and local taxes).            Municipal securities may also be issued on a taxable basis (i.e., the interest on such            securities is not exempt from regular federal income tax).

Municipal securities are often issued to obtain funds for various public            purposes, including the construction of a wide range of public facilities such as            bridges, highways, housing, hospitals, mass transportation, schools, streets and water            and sewer works. Other public purposes for which municipal securities may be issued            include refunding outstanding obligations, obtaining funds for general operating            expenses, and obtaining funds to lend to other public institutions and facilities.            Municipal securities also include “private activity” or industrial            development bonds, which are issued by or on behalf of public authorities to provide            financing aid to acquire sites or construct or equip facilities within a municipality            for privately or publicly owned corporations.

The            two principal classifications of municipal securities are “general            obligations” and “revenue obligations.” General obligations are            secured by the issuer’s pledge of its full faith and credit for the payment of            principal and interest although the characteristics and enforcement of general            obligations may vary according to the law applicable to the particular issuer. Revenue            obligations, which include, but are not limited to, private activity bonds, resource            recovery bonds, certificates of participation and certain municipal notes, are not            backed by the credit and taxing authority of the issuer and are payable solely from the            revenues derived from a particular facility or class of facilities or, in some cases,            from the proceeds of a special excise or other specific revenue source. Nevertheless,            the obligations of the issuer may also be backed by a letter of credit, guarantee or            insurance. General obligations and revenue obligations may be issued in a variety of            forms, including commercial paper, fixed, variable and floating rate securities, tender            option bonds, auction rate bonds and capital appreciation bonds.

In            addition to general obligations and revenue obligations, there is a variety of hybrid            and special types of municipal securities. There are also numerous differences in the            credit backing of municipal securities both within and between these two principal            classifications.

For            the purpose of applying the Fund’s investment restrictions, the identification of            the issuer of a municipal security which is not a general obligation is made by the            Advisor based on the characteristics of the municipal security, the most important of            which is the source of funds for the payment of principal and interest on such            securities.

One            or a small number of institutional investors such as the Fund may purchase an entire            issue of municipal securities. Thus, the issue may not be said to be publicly offered.            Unlike some securities that are not publicly offered, a secondary market exists for            many municipal securities that were not publicly offered initially and such securities            can be readily marketable.

The            obligations of an issuer to pay the principal of and interest on a municipal security            are subject to the provisions of bankruptcy, insolvency and other laws affecting the            rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any,            that may be enacted by Congress or state legislatures extending the time for payment of            principal or interest or imposing other constraints upon the enforcement of such            obligations. There is also the possibility that, because of litigation or other            conditions, the power or ability of the issuer to pay when due principal of or interest            on a municipal security may be materially affected.

**Private Activity and Industrial Development Bonds.**The Fund may invest in private activity and industrial development            bonds, which are obligations issued by or on behalf of public authorities to raise            money to finance various privately owned or operated facilities for business and            manufacturing, housing, sports and pollution control. These bonds are also used to            finance public facilities such as airports, mass transit systems, ports, parking or            sewage or solid waste disposal facilities, as well as certain other facilities or            projects. The payment of the principal and interest on such bonds is generally            dependent solely on the ability of the facility’s user to meet its financial            obligations and the pledge, if any, of real and personal property so financed as            security for such payment.

 

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**Private Activity Bonds.**Certain types of            municipal securities, generally referred to as industrial development bonds (and            referred to under current tax law as private activity bonds), are issued by or on            behalf of public authorities to obtain funds for privately-operated housing facilities,            airport, mass transit or port facilities, sewage disposal, solid waste disposal or            hazardous waste treatment or disposal facilities and certain local facilities for water            supply, gas or electricity. Other types of industrial development bonds, the proceeds            of which are used for the construction, equipment, repair or improvement of privately            operated industrial or commercial facilities, may constitute municipal securities,            although the current federal tax laws place substantial limitations on the size of such            issues. The interest from certain private activity bonds owned by the Fund (including            the Fund’s distributions attributable to such interest) may be a preference item            for purposes of the alternative minimum tax.

**Municipal Leases, Certificates of Participation and other            Participation Interests.**A municipal lease is an obligation            in the form of a lease or installment purchase contract that is issued by a state or            local government to acquire equipment and facilities. Income from such obligations is            generally exempt from state and local taxes in the state of issuance (as well as            regular Federal income tax). Municipal leases frequently involve special risks not            normally associated with general obligation or revenue bonds. Leases and installment            purchase or conditional sale contracts (which normally provide for title to the leased            asset to pass eventually to the governmental issuer) have evolved as a means for            governmental issuers to acquire property and equipment without meeting the            constitutional and statutory requirements for the issuance of debt. The debt issuance            limitations are deemed to be inapplicable because of the inclusion in many leases or            contracts of “non-appropriation” clauses that relieve the governmental            issuer of any obligation to make future payments under the lease or contract unless            money is appropriated for such purpose by the appropriate legislative body on a yearly            or other periodic basis. Thus, the Fund’s investment in municipal leases will be            subject to the special risk that the governmental issuer may not appropriate funds for            lease payments.

In            addition, such leases or contracts may be subject to the temporary abatement of            payments in the event the issuer is prevented from maintaining occupancy of the leased            premises or utilizing the leased equipment. Although the obligations may be secured by            the leased equipment or facilities, the disposition of the property in the event of            nonappropriation or foreclosure might prove difficult, time consuming and costly, and            result in an unsatisfactory or delayed recoupment of the Fund’s original            investment.

Certificates of participation represent undivided interests in municipal            leases, installment purchase contracts or other instruments. The certificates are            typically issued by a trust or other entity that has received an assignment of the            payments to be made by the state or political subdivision under such leases or            installment purchase contracts.

Certain municipal lease obligations and certificates of participation            may be deemed illiquid for the purpose of the Fund’s limitations on investments            in illiquid securities. Other municipal lease obligations and certificates of            participation acquired by the Fund may be determined by the Advisor, pursuant to            guidelines adopted by the Board of Trustees of the Trust, to be liquid securities for            the purpose of the Fund’s limitation on investments in illiquid securities. In            determining the liquidity of municipal lease obligations and certificates of            participation, the Advisor will consider a variety of factors including: (1) the            willingness of dealers to bid for the security; (2) the number of dealers willing to            purchase or sell the obligation and the number of other potential buyers; (3) the            frequency of trades or quotes for the obligation; and (4) the nature of the marketplace            trades. In addition, the Advisor will consider factors unique to particular lease            obligations and certificates of participation affecting the marketability thereof.            These include the general creditworthiness of the issuer, the importance to the issuer            of the property covered by the lease and the likelihood that the marketability of the            obligation will be maintained throughout the time the obligation is held by the            Fund.

The            Fund may purchase participations in municipal securities held by a commercial bank or            other financial institution. Such participations provide the Fund with the right to a            pro rata undivided interest in the underlying municipal securities. In addition, such            participations generally provide the Fund with the right to demand payment, on not more            than seven days notice, of all or any part of the Fund’s participation interest            in the underlying municipal security, plus accrued interest.

**Pre-Refunded Municipal Securities.**The            principal of and interest on municipal securities that have been pre-refunded are no            longer paid from the original revenue source for the securities. Instead, after            pre-refunding the

 

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source of such payments of the principal of and interest on these            securities are typically paid from an escrow fund consisting of obligations issued or            guaranteed by the US Government. The assets in the escrow fund are derived from the            proceeds of refunding bonds issued by the same issuer as the pre-refunded municipal            securities. Issuers of municipal securities use this advance refunding technique to            obtain more favorable terms with respect to securities that are not yet subject to call            or redemption by the issuer. For example, advance refunding enables an issuer to            refinance debt at lower market interest rates, restructure debt to improve cash flow or            eliminate restrictive covenants in the indenture or other governing instrument for the            pre-refunded municipal securities. However, except for a change in the revenue source            from which principal and interest payments are made, the pre-refunded municipal            securities remain outstanding on their original terms until they mature or are redeemed            by the issuer. Pre-refunded municipal securities are usually purchased at a price which            represents a premium over their face value.

**Auction Rate Securities.**Auction rate            securities consist of auction rate municipal securities and auction rate preferred            securities issued by closed-end investment companies that invest primarily in municipal            securities. Provided that the auction mechanism is successful, auction rate securities            usually permit the holder to sell the securities in an auction at par value at            specified intervals. The dividend is reset by “Dutch” auction in which bids            are made by broker-dealers and other institutions for a certain amount of securities at            a specified minimum yield. The dividend rate set by the auction is the lowest interest            or dividend rate that covers all securities offered for sale. While this process is            designed to permit auction rate securities to be traded at par value, there is the risk            that an auction will fail due to insufficient demand for the securities.

Dividends on auction rate preferred securities issued by a closed-end            fund may be designated as exempt from federal income tax to the extent they are            attributable to tax-exempt interest income earned by the fund on the securities in its            portfolio and distributed to holders of the preferred securities, provided that the            preferred securities are treated as equity securities for federal income tax purposes            and the closed-end fund complies with certain requirements under the Internal Revenue            Code of 1986, as amended (the “Code”). For purposes of complying with the            20% limitation on the Fund’s investments in taxable investments, auction rate            preferred securities will be treated as taxable investments unless substantially all of            the dividends on such securities are expected to be exempt from regular federal income            taxes.

The            Fund’s investments in auction rate preferred securities of closed-end funds are            subject to limitations on investments in other US registered investment companies,            which limitations are prescribed by the 1940 Act. These limitations include            prohibitions against acquiring more than 3% of the voting securities of any other such            investment company, and investing more than 5% of the Fund’s assets in securities            of any one such investment company or more than 10% of its assets in securities of all            such investment companies. The Fund will indirectly bear its proportionate share of any            management fees paid by such closed-end funds in addition to the advisory fee payable            directly by the Fund.

**Strategic Transactions and Derivatives.**The            Fund may, but is not required to, utilize various other investment strategies as            described below, subject to its fundamental investment restrictions, for a variety of            purposes, such as hedging various market risks, managing the effective maturity or            duration of the Fund’s portfolio, or enhancing potential gain. These strategies            may be executed through the use of derivative contracts.

In            the course of pursuing these investment strategies, the Fund may purchase and sell            exchange-listed and over the counter put and call options on securities, fixed-income            indices and other financial instruments; and may purchase and sell futures contracts            and options thereon. The Fund may enter into various transactions such as swaps, caps,            floors or collars (collectively, all the above are called “Strategic            Transactions”). In addition, Strategic Transactions may also include new            techniques, instruments or strategies that are permitted as regulatory changes occur.            Strategic Transactions may be used without limit (except to the extent that 80% of the            Fund’s assets, determined at the time of purchase, are required to be invested in            municipal securities that pay interest exempt from regular federal income tax, and as            limited by the Fund’s other investment restrictions and subject to certain limits            imposed by the 1940 Act) to attempt to protect against possible changes in the market            value of securities held in or to be purchased for the Fund’s portfolio resulting            from securities markets fluctuations, to protect the Fund’s unrealized gains in            the value of its portfolio securities, to facilitate the sale of such securities for            investment purposes, to manage the effective maturity or duration of the Fund’s            portfolio, or to establish a position in the derivatives markets as a temporary            substitute for purchasing or selling particular securities. Some Strategic Transactions            may also be used to enhance

 

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potential gain. Any or all of these investment techniques may be used at            any time and in any combination, and there is no particular strategy that dictates the            use of one technique rather than another, as use of any Strategic Transaction is a            function of numerous variables including market conditions. The ability of the Fund to            utilize these Strategic Transactions successfully will depend on the Advisor’s            ability to predict pertinent market movements, which cannot be assured. The Fund will            comply with applicable regulatory requirements when implementing these strategies,            techniques and instruments. Strategic Transactions will not be used to alter            fundamental investment purposes and characteristics of the Fund, and the Fund will            segregate assets (or as provided by applicable regulations, enter into certain            offsetting positions) to cover its obligations under options, futures and swaps to            limit leveraging of the Fund.

Strategic Transactions, including derivative contracts, have risks            associated with them including possible default by the other party to the transaction,            illiquidity and, to the extent the Advisor’s view as to certain market movements            is incorrect, the risk that the use of such Strategic Transactions could result in            losses greater than if they had not been used. Use of put and call options may result            in losses to the Fund, force the sale or purchase of portfolio securities at            inopportune times or for prices higher than (in the case of put options) or lower than            (in the case of call options) current market values, limit the amount of appreciation            the Fund can realize on its investments or cause the Fund to hold a security it might            otherwise sell. The use of options and futures transactions entails certain other            risks. In particular, the variable degree of correlation between price movements of            futures contracts and price movements in the related portfolio position of the Fund            creates the possibility that losses on the hedging instrument may be greater than gains            in the value of the Fund’s position. In addition, futures and options markets may            not be liquid in all circumstances and certain over-the-counter options may have no            markets. As a result, in certain markets, the Fund might not be able to close out a            transaction without incurring substantial losses, if at all. Although the use of            futures and options transactions for hedging should tend to minimize the risk of loss            due to a decline in the value of the hedged position, at the same time they tend to            limit any potential gain which might result from an increase in value of such position.            Finally, the daily variation margin requirements for futures contracts would create a            greater ongoing potential financial risk than would purchases of options, where the            exposure is limited to the cost of the initial premium. Losses resulting from the use            of Strategic Transactions would reduce net asset value, and possibly income, and such            losses can be greater than if the Strategic Transactions had not been            utilized.

**General Characteristics of Options.**Put            options and call options typically have similar structural characteristics and            operational mechanics regardless of the underlying instrument on which they are            purchased or sold. Thus, the following general discussion relates to each of the            particular types of options discussed in greater detail below. In addition, many            Strategic Transactions involving options require segregation of Fund assets in special            accounts, as described below under “Use of Segregated and Other Special            Accounts.”

A            put option gives the purchaser of the option, upon payment of a premium, the right to            sell, and the writer the obligation to buy, the underlying security, commodity, index,            currency or other instrument at the exercise price. For instance, the Fund’s            purchase of a put option on a security might be designed to protect its holdings in the            underlying instrument (or, in some cases, a similar instrument) against a substantial            decline in the market value by giving the Fund the right to sell such instrument at the            option exercise price. A call option, upon payment of a premium, gives the purchaser of            the option the right to buy, and the seller the obligation to sell, the underlying            instrument at the exercise price. The Fund’s purchase of a call option on a            security, financial future, index, currency or other instrument might be intended to            protect the Fund against an increase in the price of the underlying instrument that it            intends to purchase in the future by fixing the price at which it may purchase such            instrument. An American style put or call option may be exercised at any time during            the option period while a European style put or call option may be exercised only upon            expiration or during a fixed period prior thereto. The Fund is authorized to purchase            and sell exchange listed options and over-the-counter options (“OTC            options”). Exchange listed options are issued by a regulated intermediary such as            the Options Clearing Corporation (“OCC”), which guarantees the performance            of the obligations of the parties to such options. The discussion below uses the OCC as            an example, but is also applicable to other financial intermediaries.

With certain exceptions, OCC issued and exchange listed options            generally settle by physical delivery of the underlying security or currency, although            in the future cash settlement may become available. Index options and Eurodollar            instruments are cash settled for the net amount, if any, by which the option is            “in-the-money” (i.e., where the value of the underlying instrument exceeds,            in the case of a call option, or is less than, in the case of a put option, the            exercise price of the option) at the time the option is exercised. Frequently, rather            than taking or making delivery

 

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of            the underlying instrument through the process of exercising the option, listed options            are closed by entering into offsetting purchase or sale transactions that do not result            in ownership of the new option.

The            Fund’s ability to close out its position as a purchaser or seller of an OCC or            exchange listed put or call option is dependent, in part, upon the liquidity of the            option market. Among the possible reasons for the absence of a liquid option market on            an exchange are: (i) insufficient trading interest in certain options; (ii)            restrictions on transactions imposed by an exchange; (iii) trading halts, suspensions            or other restrictions imposed with respect to particular classes or series of options            or underlying securities including reaching daily price limits; (iv) interruption of            the normal operations of the OCC or an exchange; (v) inadequacy of the facilities of an            exchange or OCC to handle current trading volume; or (vi) a decision by one or more            exchanges to discontinue the trading of options (or a particular class or series of            options), in which event the relevant market for that option on that exchange would            cease to exist, although outstanding options on that exchange would generally continue            to be exercisable in accordance with their terms.

The            hours of trading for listed options may not coincide with the hours during which the            underlying financial instruments are traded. To the extent that the option markets            close before the markets for the underlying financial instruments, significant price            and rate movements can take place in the underlying markets that cannot be reflected in            the option markets.

OTC            options are purchased from or sold to securities dealers, financial institutions or            other parties (“Counterparties”) through direct bilateral agreement with            the Counterparty. In contrast to exchange listed options, which generally have            standardized terms and performance mechanics, all the terms of an OTC option, including            such terms as method of settlement, term, exercise price, premium, guarantees and            security, are set by negotiation of the parties. The Fund will only sell OTC options            (other than OTC currency options) that are subject to a buy-back provision permitting            the Fund to require the Counterparty to sell the option back to the Fund at a formula            price within seven days. The Fund expects generally to enter into OTC options that have            cash settlement provisions, although it is not required to do so.

Unless the parties provide for it, there is no central clearing or            guaranty function in an OTC option. As a result, if the Counterparty fails to make or            take delivery of the security, currency or other instrument underlying an OTC option it            has entered into with the Fund or fails to make a cash settlement payment due in            accordance with the terms of that option, the Fund will lose any premium it paid for            the option as well as any anticipated benefit of the transaction. Accordingly, the            Advisor must assess the creditworthiness of each such Counterparty or any guarantor or            credit enhancement of the Counterparty’s credit to determine the likelihood that            the terms of the OTC option will be satisfied. The Fund will engage in OTC option            transactions only with US government securities dealers recognized by the Federal            Reserve Bank of New York as “primary dealers,” or broker-dealers, domestic            or foreign banks or other financial institutions which have received (or the guarantors            of the obligation of which have received) a short-term credit rating of A-1 from            S&P or P-1 from Moody’s or an equivalent rating from any other nationally            recognized statistical rating organization (“NRSRO”) or, in the case of OTC            currency transactions, are determined to be of equivalent credit quality by the            Advisor. The staff of the SEC currently takes the position that OTC options purchased            by the Fund, and portfolio securities “covering” the amount of the            Fund’s obligation pursuant to an OTC option sold by it (the cost of the sell-back            plus the in-the-money amount, if any) are illiquid, and are subject to the Fund’s            limitation on investing no more than 15% of its net assets in illiquid            securities.

If            the Fund sells a call option, the premium that it receives may serve as a partial            hedge, to the extent of the option premium, against a decrease in the value of the            underlying securities or instruments in its portfolio or will increase the Fund’s            income. The sale of put options can also provide income.

The            Fund may purchase and sell call options on securities including US Treasury and agency            securities, municipal obligations, mortgage-backed securities and Eurodollar            instruments that are traded on US and foreign securities exchanges and in the            over-the-counter markets, and on securities indices and futures contracts. All calls            sold by the Fund must be “covered” (i.e., the Fund must own the securities            or futures contract subject to the call) or must meet the asset segregation            requirements described below as long as the call is outstanding. Even though the Fund            will receive the option premium to help protect it against loss, a call sold by the            Fund exposes the Fund during the term

 

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of            the option to possible loss of opportunity to realize appreciation in the market price            of the underlying security or instrument and may require the Fund to hold a security or            instrument which it might otherwise have sold.

The            Fund may purchase and sell put options on securities including US Treasury and agency            securities, mortgage-backed securities, municipal obligations and Eurodollar            instruments (whether or not it holds the above securities in its portfolio) and on            securities indices and futures contracts other than futures on individual corporate            debt and individual equity securities. The Fund will not sell put options if, as a            result, more than 50% of the Fund’s assets would be required to be segregated to            cover its potential obligations under such put options other than those with respect to            futures and options thereon. In selling put options, there is a risk that the Fund may            be required to buy the underlying security at a disadvantageous price above the market            price.

**General Characteristics of Futures.**The            Fund may enter into futures contracts or purchase or sell put and call options on such            futures as a hedge against anticipated interest rate or fixed-income market changes and            for duration management, risk management and return enhancement purposes. Futures are            generally bought and sold on the commodities exchanges where they are listed with            payment of initial and variation margin as described below. The sale of a futures            contract creates a firm obligation by the Fund, as seller, to deliver to the buyer the            specific type of financial instrument called for in the contract at a specific future            time for a specified price (or, with respect to index futures and Eurodollar            instruments, the net cash amount). Options on futures contracts are similar to options            on securities except that an option on a futures contract gives the purchaser the right            in return for the premium paid to assume a position in a futures contract and obligates            the seller to deliver such position.

The            Fund’s use of futures and options thereon will in all cases be consistent with            applicable regulatory requirements and in particular the rules and regulations of the            Commodity Futures Trading Commission and will be entered into for bona fide hedging,            risk management (including duration management) or other portfolio management and            return enhancement purposes. Typically, maintaining a futures contract or selling an            option thereon requires the Fund to deposit with a financial intermediary as security            for its obligations an amount of cash or other specified assets (initial margin) which            initially is typically 1% to 10% of the face amount of the contract (but may be higher            in some circumstances). Additional cash or assets (variation margin) may be required to            be deposited thereafter on a daily basis as the mark-to-market value of the contract            fluctuates. The purchase of options on financial futures involves payment of a premium            for the option without any further obligation on the part of the Fund. If the Fund            exercises an option on a futures contract it will be obligated to post initial margin            (and potential subsequent variation margin) for the resulting futures position just as            it would for any position. Futures contracts and options thereon are generally settled            by entering into an offsetting transaction but there can be no assurance that the            position can be offset prior to settlement at an advantageous price, nor that delivery            will occur.

The            Fund will not enter into a futures contract or related option (except for closing            transactions) if, immediately thereafter, the sum of the amount of its initial margin            and premiums on open futures contracts and options thereon would exceed 5% of the            Fund’s total assets (taken at current value); however, in the case of an option            that is in-the-money at the time of the purchase, the in-the-money amount may be            excluded in calculating the 5% limitation. The segregation requirements with respect to            futures contracts and options thereon are described below.

**Swaps, Caps, Floors and Collars.**Among the            Strategic Transactions into which the Fund may enter are interest rate, index and other            swaps and the purchase or sale of related caps, floors and collars. The Fund expects to            enter into these transactions primarily to preserve a return or spread on a particular            investment or portion of its portfolio, 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 will not sell interest rate caps or floors where it does not            own securities or other instruments providing the income stream the Fund may be            obligated to pay. Interest rate swaps involve the exchange by the Fund with another            party of their respective commitments to pay or receive interest, e.g., an exchange of            floating rate payments for fixed rate payments with respect to a notional amount of            principal. An index swap is an agreement to swap cash flows on a notional amount based            on changes in the values of the reference indices. The purchase of a cap entitles the            purchaser to receive payments on a notional principal amount from the party selling            such cap to the extent that a specified index exceeds a predetermined interest rate or            amount. The purchase of a floor entitles the purchaser to receive payments on a            notional principal amount from the party selling such floor to the extent that a            specified index falls below a predetermined interest rate or amount. A collar is a            combination of a cap and a floor that preserves a certain return within a predetermined            range of interest rates or values.

 

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The            Fund will usually enter into swaps on a net basis, i.e., the two payment streams are            netted out in a cash settlement on the payment date or dates specified in the            instrument, with the Fund receiving or paying, as the case may be, only the net amount            of the two payments. Inasmuch as the Fund will segregate assets (or enter into            offsetting positions) to cover its obligations under swaps, the Advisor and the Fund            believe such obligations do not constitute senior securities under the 1940 Act and,            accordingly, will not treat them as being subject to its borrowing restrictions. The            Fund will not enter into any swap, cap, floor or collar transaction unless, at the time            of entering into such transaction, the unsecured long-term debt of the Counterparty,            combined with any credit enhancements, is rated at least BBB by S&P or            Moody’s or has an equivalent rating from another NRSRO or is determined to be of            equivalent credit quality by the Advisor. If there is a default by the Counterparty,            the Fund may have contractual remedies pursuant to the agreements related to the            transaction. The swap market has grown substantially in recent years with a large            number of banks and investment banking firms acting both as principals and as agents            utilizing standardized swap documentation. As a result, the swap market has become            relatively liquid. Caps, floors and collars are more recent innovations for which            standardized documentation has not yet been fully developed and, accordingly, they are            less liquid than swaps.

**Third Party Puts.**The Fund may purchase            long-term fixed rate bonds that have been coupled with an option granted by a third            party financial institution allowing the Fund at specified intervals to tender (or            “put”) the bonds to the institution and receive the face value thereof            (plus accrued interest). These third party puts are available in several different            forms, may be represented by custodial receipts or trust certificates and may be            combined with other features such as interest rate swaps. The Fund receives a            short-term rate of interest (which is periodically reset), and the interest rate            differential between that rate and the fixed rate on the bond is retained by the            financial institution. The financial institution granting the option does not provide            credit enhancement, and in the event that there is a default in the payment of            principal or interest, or downgrading of a bond to below investment grade, or a loss of            the bond’s tax-exempt status, the put option will terminate automatically, the            risk to the Fund will be that of holding such a long-term bond and the weighted average            maturity of the Fund’s portfolio would be adversely affected.

These bonds coupled with puts may present the same tax issues as are            associated with Stand-By Commitments. As with any Stand-By Commitments acquired by the            Fund, the Fund intends to take the position that it is the owner of any municipal            obligation acquired subject to a third-party put, and that tax-exempt interest earned            with respect to such municipal obligations will be tax-exempt in its hands. There is no            assurance that the IRS will agree with such position in any particular case.            Additionally, the federal income tax treatment of certain other aspects of these            investments, including the treatment of tender fees and swap payments, in relation to            various regulated investment company tax provisions is unclear. See            “Taxes.” However, the Advisor seeks to manage the Fund’s portfolio in            a manner designed to minimize any adverse impact from these investments.

**Use of Segregated and Other Special Accounts.**Many Strategic Transactions, in addition to other requirements, require            that the Fund segregates cash or liquid assets with its custodian to the extent Fund            obligations are not otherwise “covered” through ownership of the underlying            security, financial instrument or currency. In general, either the full amount of any            obligation by the Fund to pay or deliver securities or assets must be covered at all            times by the securities, instruments or currency required to be delivered, or, subject            to any regulatory restrictions, an amount of cash or liquid assets at least equal to            the current amount of the obligation must be segregated with the custodian. The            segregated assets cannot be sold or transferred unless equivalent assets are            substituted in their place or it is no longer necessary to segregate them. For example,            a call option written by the Fund will require the Fund to hold the securities subject            to the call (or securities convertible into the needed securities without additional            consideration) or to segregate cash or liquid assets sufficient to purchase and deliver            the securities if the call is exercised. A call option sold by the Fund on an index            will require the Fund to own portfolio securities which correlate with the index or to            segregate cash or liquid assets equal to the excess of the index value over the            exercise price on a current basis. A put option written by the Fund requires the Fund            to segregate cash or liquid assets equal to the exercise price.

Except when the Fund enters into a forward contract for the purchase or            sale of a security denominated in a particular currency, which requires no segregation,            a currency contract which obligates the Fund to buy or sell currency will generally            require the Fund to hold an amount of that currency or liquid assets denominated in            that

 

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currency equal to the Fund’s obligations or to segregate cash or            liquid assets equal to the amount of the Fund’s obligation.

OTC            options entered into by the Fund, including those on securities, currency, financial            instruments or indices and OCC issued and exchange listed index options, will generally            provide for cash settlement. As a result, when the Fund sells these instruments it will            only segregate an amount of cash or liquid assets equal to its accrued net obligations,            as there is no requirement for payment or delivery of amounts in excess of the net            amount. These amounts will equal 100% of the exercise price in the case of a non            cash-settled put, the same as an OCC guaranteed listed option sold by the Fund, or the            in-the-money amount plus any sell-back formula amount in the case of a cash-settled put            or call. In addition, when the Fund sells a call option on an index at a time when the            in-the-money amount exceeds the exercise price, the Fund will segregate, until the            option expires or is closed out, cash or cash equivalents equal in value to such            excess. OCC issued and exchange listed options sold by the Fund other than those above            generally settle with physical delivery, or with an election of either physical            delivery or cash settlement and the Fund will segregate an amount of cash or liquid            assets equal to the full value of the option. OTC options settling with physical            delivery, or with an election of either physical delivery or cash settlement will be            treated the same as other options settling with physical delivery.

In            the case of a futures contract or an option thereon, the Fund must deposit initial            margin and possible daily variation margin in addition to segregating cash or liquid            assets sufficient to meet its obligation to purchase or provide securities or            currencies, or to pay the amount owed at the expiration of an index-based futures            contract. Such liquid assets may consist of cash, cash equivalents, liquid debt or            equity securities or other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the            excess, if any, of its obligations over its entitlements with respect to each swap on a            daily basis. Caps, floors and collars require segregation of assets with a value equal            to the Fund’s net obligation, if any.

Strategic Transactions may be covered by other means when consistent            with applicable regulatory policies. The Fund may also enter into offsetting            transactions so that its combined position, coupled with any segregated assets, equals            its net outstanding obligation in related options and Strategic Transactions. For            example, the Fund could purchase a put option if the strike price of that option is the            same or higher than the strike price of a put option sold by the Fund. Moreover,            instead of segregating cash or liquid assets if the Fund held a futures or forward            contract, it could purchase a put option on the same futures or forward contract with a            strike price as high or higher than the price of the contract held. Other Strategic            Transactions may also be offset in combinations. If the offsetting transaction            terminates at the time of or after the primary transaction no segregation is required,            but if it terminates prior to such time, cash or liquid assets equal to any remaining            obligation would need to be segregated.

***Mortgage-Backed Securities***

**General.**The Fund may invest, to a limited            extent, in mortgage-backed securities, which represent direct or indirect            participations in, or are collateralized by and payable from, mortgage loans secured by            real property.

Mortgage-backed securities are often subject to more rapid repayment            than their stated maturity date would indicate as a result of the pass-through of            prepayments of principal on the underlying loans. During periods of declining interest            rates, prepayment of loans underlying mortgage-backed securities can be expected to            accelerate, and thus impair the Fund’s ability to reinvest the returns of            principal at comparable yields. Accordingly, the market values of such securities will            vary with changes in market interest rates generally and in yield differentials among            various kinds of US Government securities and other mortgage-backed securities. The            occurrence of mortgage prepayments is affected by various other factors, including            general economic conditions, the location, scheduled maturity and age of the mortgage            and other social and demographic conditions. Many mortgage-backed securities may be            considered derivative instruments.

**Mortgage-Backed.**The Fund may invest in            mortgage-backed securities, including derivative instruments. Mortgage-backed            securities represent direct or indirect participations in or obligations collateralized            by and payable from mortgage loans secured by real property. The Fund may invest in            mortgage-backed securities issued or guaranteed by US Government agencies or            instrumentalities or government-sponsored enterprises such as the

 

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Government National Mortgage Association (“GNMA”), the            Federal National Mortgage Association (“FNMA”) and the Federal Home Loan            Mortgage Corporation (“FHLMC”). Obligations of GNMA are backed by the full            faith and credit of the US Government. Obligations of FNMA and FHLMC are not backed by            the full faith and credit of the US Government but are considered to be of high quality            since they are considered to be instrumentalities of the United States (and are            supported by the credit of the instrumentality). The market value and yield of these            mortgage-backed securities can vary due to market interest rate fluctuations and early            prepayments of underlying mortgages. These securities represent ownership in a pool of            federally insured mortgage loans with a maximum maturity of 30 years. The scheduled            monthly interest and principal payments relating to mortgages in the pool will be            “passed through” to investors, net of certain fees. Government            mortgage-backed securities differ from conventional bonds in that principal is paid            back to the certificate holders over the life of the loan rather than at maturity. As a            result, there will be monthly scheduled payments of principal and interest.

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

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

For            purposes of the 1940 Act and, generally, for tax purposes, a repurchase agreement is            considered to be a loan from the Fund to the seller of the obligation. For other            purposes, it is not clear whether a court would consider such an obligation as being            owned by the Fund or as being collateral for a loan by the Fund to the seller. In the            event of the commencement of bankruptcy or insolvency proceedings with respect to the            seller of the obligation before its repurchase, under the repurchase agreement, the            Fund may encounter delay and incur costs before being able to sell the security. Such            delays may result in a loss of interest or decline in price of the            obligation.

If            the court characterizes the transaction as a loan and the Fund has not perfected a            security interest in the obligation, the Fund may be treated as an unsecured creditor            of the seller and required to return the obligation to the seller’s estate. As an            unsecured creditor, the Fund would be at risk of losing some or all of the principal            and income involved in the transaction. As with any unsecured debt instrument purchased            for the Fund, the Advisor seeks to minimize the risk of loss from repurchase agreements            by analyzing the creditworthiness of the obligor, in this case, the seller of the            obligation. In addition to the risk of bankruptcy or insolvency proceedings, there is            the risk that the seller may fail to repurchase the security. However, if the market            value of the obligation falls below an amount equal to 102% of the repurchase price            (including accrued interest), the seller of the obligation will be required to deliver            additional securities so that the market value of all securities subject to the            repurchase agreement equals or exceeds the repurchase price.

**"When-Issued" Purchases and Forward Commitments (Delayed            Delivery).**The Fund may purchase securities on a when-issued,            delayed delivery or forward commitment basis. When these transactions are negotiated,            the price

 

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of            the securities is fixed at the time of the commitment, but delivery and payment for the            securities takes place at a later date. When-issued securities or forward commitments            involve a risk of loss if the value of the security to be purchased declines prior to            the settlement date.

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

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

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

**Borrowing.**The Fund may borrow for            temporary or emergency purposes. This borrowing may be unsecured. Among the forms of            borrowing in which the Fund may engage is entering into reverse repurchase agreements.            The 1940 Act requires the Fund to maintain continuous asset coverage (that is, total            assets including borrowings, less liabilities exclusive of borrowings) of 300% of the            amount borrowed. If the asset coverage should decline below 300% as a result of market            fluctuations or for other reasons, the Fund is required to sell some of its portfolio            securities within three days to reduce its borrowings and restore the 300% asset            coverage, even though it may be disadvantageous from an investment standpoint to sell            securities at that time. To the extent the Fund borrows money, positive or negative            performance by the Fund’s investments may be magnified. Any gain in the value, or            income earned on the holding, of securities purchased with borrowed money that exceeds            the interest paid on the amount borrowed would cause the net asset value of the            Fund’s shares to increase more rapidly than otherwise would be the case.            Conversely, any decline in the value of securities purchased, or cost in excess of            income earned, would cause the net asset value of the Fund’s shares to decrease            more rapidly than otherwise would be the case. Borrowed money thus creates an            opportunity for greater capital gain but at the same time increases exposure to capital            risk. Money borrowed will be subject to interest costs which may or may not be            recovered by appreciation of the securities purchased or from income received as a            holder of those securities. The Fund also may be required to maintain minimum average            balances in connection with such borrowing or to pay a commitment or other fee to            maintain a line of credit; either of these requirements would increase the cost of            borrowing over the stated interest rate. See “Investment            Restrictions.”

**Lending Portfolio Securities.**The Fund may            lend portfolio securities to brokers, dealers and other financial organizations. These            loans, if and when made by the Fund, may not exceed 33 1/3% of the value of the            Fund’s total assets. The Fund’s loans of securities will be collateralized            by cash, cash equivalents or US Government securities. The cash or instruments            collateralizing the Fund’s loans of securities will be maintained at all times in            a segregated account with the Fund’s custodian, in an amount at least equal to            the current market value of the loaned securities.

 

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From time to time, the Fund may pay a part of the interest earned from            the investment of collateral received for securities loaned to the borrower and/or a            third party that is unaffiliated with the Fund and is acting as a “placing            broker.” No fee will be paid to affiliated persons of the Fund. The Board of            Trustees will make a determination that the fee paid to the placing broker is            reasonable.

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

**Diversification.**The Fund is            “diversified” under the 1940 Act and is also subject to issuer            diversification requirements imposed on regulated investment companies by Subchapter M            of the Code. See “Investment Restrictions” and “Taxes”            below.

**Concentration of Investments.**As a matter            of fundamental policy, the Fund may not invest 25% or more of its total assets in the            securities of one or more issuers conducting their principal business activities in the            same industry (except US Government securities). Currently, it is not anticipated that            the Fund will invest 25% or more of its total assets (at market value at the time of            purchase) in: (a) securities of one or more issuers conducting their principal            activities in the same state; or (b) securities the principal and interest of which is            paid from revenues of projects with similar characteristics, except that 25% or more of            the Fund’s total assets may be invested in single family and multi-family housing            obligations. To the extent the Fund concentrates its investments in single family and            multi-family housing obligations, the Fund will be subject to the peculiar risks            associated with investments in such obligations, including prepayment risks and the            risks of default on housing loans, which may be affected by economic conditions and            other factors relating to such obligations.

**Restricted Securities.**The Fund may invest            to a limited extent in restricted securities. Restricted securities are securities that            may not be sold freely to the public without prior registration under federal            securities laws or an exemption from registration. Restricted securities will be            considered illiquid unless they are restricted securities offered and sold to            “qualified institutional buyers” under Rule 144A under the Securities Act            of 1933. Although Rule 144A Securities have not been registered under the Securities            Act, they may be traded between certain qualified institutional investors, including            investment companies. The presence or absence of a secondary market may affect the            value of the Rule 144A Securities. The Fund’s Board of Trustees has established            guidelines and procedures for the Advisor to utilize to determine the liquidity of such            securities. Rule 144A Securities may become illiquid if qualified institutional buyers            are not interested in acquiring the securities.

**Short Sales.**The Fund may engage in short            sales with respect to securities that it owns or has the right to obtain (for example,            through conversion of a convertible bond). These transactions, known as short sales            “against the box,” allow the Fund to hedge against price fluctuations by            locking in a sale price for securities it does not wish to sell immediately. In a short            sale, the Fund sells a borrowed security and has a corresponding obligation to the            lender to return the identical security. The seller does not immediately deliver the            securities sold and is said to have a short position in those securities until delivery            occurs. If the Fund engages in a short sale, the collateral for the short position will            be segregated.

The            Fund does not intend to engage in short sales against the box for investment purposes.            The Fund may, however, make a short sale as a hedge, when it believes that the price of            a security may decline, causing a decline in the value of a security owned by the Fund            (or a security convertible or exchangeable for such security). In such case, any future            losses in the Fund’s long position should be offset by a gain in the short            position and, conversely, any gain in the long position should be reduced by a loss in            the short position. The extent to which such gains or losses are

 

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reduced will depend upon the amount of the security sold short relative            to the amount the Fund owns. There will be certain additional transaction costs            associated with short sales against the box, but the Fund will endeavor to offset these            costs with the income from the investment of the cash proceeds of short            sales.

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

**Temporary Defensive Investments.**For            temporary defensive purposes during periods when the Advisor determines that conditions            warrant, the Fund may invest up to 20% of its assets in cash and money market            instruments, including securities issued or guaranteed by the US Government, its            agencies or instrumentalities; certificates of deposit, time deposits, and            bankers’ acceptances issued by banks or savings and loans associations having net            assets of at least $500 million as of the end of their most recent fiscal year;            commercial paper rated at the time of purchase at least A-1 by S & P or P-1 by            Moody’s, or unrated commercial paper determined by the Advisor to be of            comparable quality; repurchase agreements involving any of the foregoing; and, to the            extent permitted by applicable law, shares of other investment companies investing            solely in money market instruments.

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

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

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

***Investment Policies***

The            following is a chart of the various types of securities and investment strategies            employed by the Fund. Unless otherwise indicated, the Fund is permitted, but not            obligated, to pursue any of the following strategies and does not represent that these            techniques are available now or will be available at any time in the future. If the            Fund’s

 

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investment in a particular type of security is limited to a certain            percentage of the Fund’s assets, that percentage limitation is listed in the            chart. Following the chart, there is a description of how each type of security and            investment strategy may be used by the Fund. As a matter of non-fundamental operating            policy, the Fund may be subject to additional restrictions. See the section entitled            “Investment Restrictions.”

 

| **INVESTMENT                            PRACTICE**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | **DWS Short-Term Municipal Bond Fund** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------|
| **KEY TO TABLE**:

+ Permitted without stated limito Permitted without stated limit, but not expected to be                            used to a significant extent**X**Not permitted

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

Roman type (e.g. 20%) represents an investment                            limitation as a percentage of**total**fund assets; does not indicate actual use |
| **EQUITY                            SECURITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | **X**                                  |
| Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | **X**                                  |
| Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | **X**                                  |
| Convertible Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **X**                                  |
| **FIXED INCOME SECURITIES                            & MONEY MARKET INSTRUMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Short-Term Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | +                                      |
| Obligations of Banks and Other Financial                            Institutions                                                                                                                                                                                                                                                                                                                                                                                                                                                       | *20%*                                  |
| Certificates of Deposit and Bankers’                            Acceptances                                                                                                                                                                                                                                                                                                                                                                                                                                                      | *20%*                                  |
| Commercial Paper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | +                                      |
| Variable Rate Master Demand Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | +                                      |
| U.S. Government Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | *20%*                                  |
| Custodial Receipts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | **X**                                  |
| Zero Coupon Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | +                                      |
| Variable and Floating Rate Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | +                                      |
| Inverse Floaters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | o                                      |
| Lower Quality Debt Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | *5%*                                   |
| Put Bonds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | +                                      |
| **MUNICIPAL                            SECURITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Municipal Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | +                                      |
| Tax Anticipation Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | +                                      |
| Revenue Anticipation Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | +                                      |
| Bond Anticipation Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | +                                      |
| Tax and Revenue Anticipation Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | +                                      |
| Construction Loan Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | +                                      |
| Miscellaneous, Temporary and Anticipatory                            Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                       | +                                      |
| Tax-Exempt Commercial Paper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | +                                      |
| Municipal Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | *At least 80%*                         |
| General Obligation Bonds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | +                                      |
| Revenue Bonds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | +                                      |
| Private Activity Bonds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | +                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                   |
| Municipal Leases, Certificates of Participation and                            Other Participation Interests                                                                                                                                                                                                                                                                                                                                                                                                                           | +                                      |
| Pre-Refunded Municipal Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | +                                      |
| Auction Rate Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | +                                      |

 

 

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| Pay-in-Kind Securities                                                                                    | **X**   |
|-----------------------------------------------------------------------------------------------------------|---------|
| **DERIVATIVE SECURITIES                            (OPTIONS)**                                            |
| Options on Securities                                                                                     | +       |
| Options on Securities Indices                                                                             | +       |
| Options on Non-US Securities Indices                                                                      | **X**   |
| **DERIVATIVE SECURITIES (FUTURES CONTRACTS AND OPTIONS                            ON FUTURES CONTRACTS)** |
| Futures Contracts                                                                                         | +       |
| Futures Contracts on Securities Indices                                                                   | +       |
| Options on Futures Contracts (including Contracts on                            Securities Indices)       | +       |
| **DERIVATIVE SECURITIES                            (HEDGING STRATEGIES)**                                 |
| Swap Agreement                                                                                            | +       |
| Hedging Strategies                                                                                        | +       |
| **MORTGAGE-BACKED AND                            ASSET-BACKED SECURITIES**                                |
| Government Guaranteed Mortgage-Backed                            Securities                               | *20%*   |
| Government National Mortgage Association                            Certificates                          | *20%*   |
| Federal National Mortgage Association                            Certificates                             | *20%*   |
| Federal Home Loan Mortgage Corporation                            Certificates                            | *20%*   |
| Multi-Class Mortgage-Backed Securities (CMOs and                            REMICs)                       | **X**   |
| Private Issued Mortgage-Backed Securities                                                                 | **X**   |
| Asset-Backed Securities                                                                                   | **X**   |
| **SECURITIES OF NON-U.S.                            ISSUERS**                                             |
| Foreign Securities & Depository Receipts (ADRs,                            EDRs, GDRs and IDRs)       | **X**   |
| Foreign Corporate Debt Securities                                                                         | **X**   |
| Foreign Government Debt Securities                                                                        | **X**   |
| Investments in Emerging Markets                                                                           | **X**   |
| **CURRENCY                            MANAGEMENT**                                                        |
| Currency Exchange Transactions                                                                            | **X**   |
| Currency Hedging Transactions                                                                             | **X**   |
| Forward Currency Exchange Contracts                                                                       | **X**   |
| Options on Foreign Currencies                                                                             | **X**   |
| **OTHER INVESTMENTS AND                            INVESTMENT PRACTICES**                                 |
| Illiquid Securities                                                                                       | *15%*   |
| When-Issued and Delayed Delivery Securities                                                               | +       |
| Repurchase Agreements                                                                                     | *20%*   |
| Mortgage Dollar Rolls                                                                                     | **X**   |
| Lending of Portfolio Securities                                                                           | 33 1/3% |
| Borrowing                                                                                                 | 33 1/3% |
| Short Sales                                                                                               | o       |
| Other Investment Companies                                                                                | 10%     |
| Temporary Defensive Investments                                                                           | *20%*   |

 

 

----

 

**Portfolio Holdings**

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

The            Fund’s procedures permit non-public portfolio holdings information to be shared            with Deutsche Asset Management and its affiliates (collectively “DeAM”),            subadvisors, if any, custodians, independent registered public accounting firms,            attorneys, officers and trustees/directors and each of their respective affiliates and            advisers who require access to this information to fulfill their duties to the Fund and            are subject to the duties of confidentiality, including the duty not to trade on            non-public information, imposed by law or contract, or by the Fund’s procedures.            This non-public information may also be disclosed, subject to the requirements            described below, to securities lending agents, financial printers, proxy voting firms,            mutual fund analysts and rating and tracking agencies, or to shareholders in connection            with in-kind redemptions (collectively, “Authorized Third            Parties”).

Prior to any disclosure of the Fund’s non-public portfolio            holdings information to Authorized Third Parties, a person authorized by the            Fund’s Trustees/Directors must make a good faith determination in light of the            facts then known that the Fund has a legitimate business purpose for providing the            information, that the disclosure is in the best interest of the Fund, and that the            recipient assents or otherwise has a duty to keep the information confidential and to            not trade based on the information receivedwhile the information            remains non-public. No compensation is received by the Fund or DeAM for disclosing            non-public holdings information. Periodic reports regarding these procedures will be            provided to the Fund’s Trustees/Directors.

Portfolio holdings information distributed by the trading desks of DeAM            or a subadvisor for the purpose of facilitating efficient trading of such securities            and receipt of relevant research is not subject to the foregoing requirements.            Non-public portfolio holding information does not include portfolio characteristics            (other than holdings or subsets of holdings) about the Fund and information derived            therefrom, including, but not limited to, how the Fund’s investments are divided            among various sectors, industries, countries, value and growth stocks, bonds,            currencies and cash, types of bonds, bond maturities, duration, bond coupons and bond            credit quality ratings so long as the Fund’s holdings could not be derived from            such information.

Registered investment companies that are subadvised by the Advisor or            its affiliates may be subject to different portfolio holdings disclosure policies, and            neither the Advisor or its affiliated nor Trustees exercise control over such policies.            In addition, separate account clients of the Advisor or its affiliates have access to            their portfolio holdings and are not subject to the Fund’s portfolio holdings            disclosure policy. The portfolio holdings of some of the funds subadvised by the            Advisor and its affiliates and some of the separate accounts managed by the Advisor or            its affiliates may substantially overlap with the portfolio holdings of the            Fund.

The            Advisor or its affiliates also manages certain unregistered commingled trusts and            creates model portfolios, the portfolio holdings of which may substantially overlap            with the portfolio holdings of the Fund. To the extent that investors in these            commingled trusts or recipients of model portfolio holdings information may receive            portfolio holdings information of their trust or of a model portfolio on a different            basis from that on which the Fund’s portfolio holdings information is made            public, the Advisor and its affiliates have implemented procedures reasonably designed            to encourage such investors and recipients to keep such information confidential, and            to prevent those investors from trading on the basis of non-public holdings            information.

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

 

----

**MANAGEMENT OF THE FUND**

**Investment Advisor**

DIMA, 345 Park Avenue, New York, New York 10154, is the Fund’s            investment advisor. DIMA is a wholly-owned subsidiary of Deutsche Bank AG. Deutsche            Bank AG 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. On December 31, 2006, Deutsche Asset Management, Inc.            (“DAMI’’) merged into DIMA. Prior to January 1, 2007, DAMI was the            investment advisor to the Fund. As a result of the merger, DIMA is now the investment            advisor to the Fund.

DeAM is the marketing name in the US for the asset management activities            of Deutsche Bank AG, DIMA, Deutsche Bank Trust Company Americas and DWS Trust Company.            DeAM is a global asset management organization that offers a wide range of investing            expertise and resources, including hundreds of portfolio managers and analysts and an            office network that reaches the world’s major investment centers. This            well-resourced global investment platform brings together a wide variety of experience            and investment insight, across industries, regions, asset classes and investing styles.            DIMA is an indirect, wholly-owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a            major global banking institution that is engaged in a wide range of financial services,            including investment management, mutual fund, retail, private and commercial banking,            investment banking and insurance. The term “DWS Scudder” is the designation            given to the products and services provided by DIMA and its affiliates to the DWS            Mutual Funds.

The            Advisor provides investment counsel for many individual and institutions, including            insurance companies, industrial corporations, and financial and banking organizations,            as well as providing investment advice to open- and closed-end SEC registered            funds.

The            Fund is managed by a team of investment professionals, each of whom plays an important            role in the Fund’s management process. Team members work together to develop            investment strategies and select securities for the Fund’s portfolio. This team            works for the Advisor or its affiliates and is supported by a large staff of            economists, research analysts, traders and other investment specialists. The Advisor or            its affiliates believe(s) its team approach benefits fund investors by bringing            together many disciplines and leveraging its extensive resources. Team members with            primary responsibility for management of the Fund, as well as team members who have            other ongoing management responsibilities for the Fund, are identified in the            Fund’s prospectus, as of the date of the Fund’s prospectus. Composition of            the team may change over time, and fund shareholders and investors will be notified of            changes affecting individuals with primary fund management responsibility.

**Investment Management Agreement**

The            Board and the shareholders of the Fund recently approved an amended and restated            investment management agreement (the “Investment Management Agreement”) for            the Fund with DAMI. In addition, the Board and the shareholders also approved an            amended and restated Investment Management Agreement (the “DIMA Agreement”)            between the Fund and DIMA. The fees charged and the services provided by DIMA under the            DIMA Agreement are identical to the fees and services that were provided by DAMI under            the Investment Management Agreement. The DIMA Agreement became effective on December            31, 2006. Pursuant to the DIMA Agreement, the Advisor provides continuing investment            management of the assets of the Fund. In addition to the investment management of the            assets of the Fund, the Advisor determines the investments to be made for the Fund,            including what portion of its assets remain uninvested in cash or cash equivalents, and            with whom the orders for investments are placed, consistent with the Fund’s            policies as stated in its Prospectuses and this SAI, or as adopted by the Fund’s            Board. The Advisor also monitors, to the extent not monitored by the Fund’s            administrator or other agent, the Fund’s compliance with its investment and tax            guidelines and other compliance policies.

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

 

----

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

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

The            DIMA Agreement allows the Advisor to delegate any of its duties under the Agreement to            a sub-adviser, 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 Fund, and, if            required by applicable law, subject to a majority vote of the Fund’s            shareholders.

The            DIMA Agreement provides that the Advisor shall not be liable for any error of judgment            or mistake of law or for any loss suffered by the Fund in connection with matters to            which the Agreement relates, except a loss resulting from willful malfeasance, bad            faith or gross negligence on the part of the Advisor in the performance of its duties            or from reckless disregard by the Advisor of its obligations and duties under the            Agreement. The DIMA Agreement may be terminated at any time, without payment of            penalty, by either party or by vote of a majority of the outstanding voting securities            of the Fund on 60 days’ written notice.

In            addition, the Board and shareholders approved a subadvisor approval policy for the Fund            (the “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 Fund            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 Fund            exemptive relief from existing rules. The Fund 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 Fund and its shareholders are adequately protected whenever the Advisor acts under            the Sub-advisor Approval Policy, including any shareholder notice            requirements.

Prior to July 1, 2006, the Fund paid the Advisor a monthly fee of 0.40%            of average daily net assets. Effective July 1, 2006, under the Investment Management            Agreement, the Fund pays the Advisor a fee of 0.400% on the first $500 million in            average daily net assets, which declines to a fee of 0.385% on average daily net assets            on the next $500 million, which declines to a fee of 0.370% on average daily net assets            of the next $1 billion, which declines to a fee of 0.355% on average daily net assets            thereafter.

The            following table sets forth the advisory fees that the Fund paid to the Advisor during            the periods indicated:

 

|                               | **Fiscal Year Ended October 31,** |
|------------------------------------|-----------------------------------|
|                               | **2006***                         | **2005*** | **2004*** |
|                               |                              |   |   |
| DWS Short-Term Municipal Bond Fund | $2,377,404                        | $2,901,897 | $3,357,893 |

 

| * | Prior to July 1, 2006, these fees included an                            administrative service fee. |
|---|------------------------------------------------------------------------------------------------------|

 

----

The            Fund’s prospectuses contain disclosure as to the amount of the Advisor’s            investment advisory and the Administrator’s administration and services fees,            including waivers thereof. The Advisor and the Administrator may not recoup any of            their waived investment advisory or administration and services fees.

The            term “DWS Scudder” is the designation given to the products and services            provided by the Advisor and its affiliates to the DWS Mutual Funds.

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.

**Compensation of Portfolio Managers**

The            Fund has been advised that the Advisor seeks to offer its investment professionals            competitive short-term and long-term compensation. Portfolio managers and research            professionals are paid (i) fixed base salaries, which are linked to job function,            responsibilities and financial services industry peer comparison and (ii) variable            compensation, which is linked to investment performance, individual contributions to            the team and DWS Scudder’s and Deutsche Bank’s financial results. Variable            compensation may include a cash bonus incentive and participation in a variety of            long-term equity programs (usually in the form of Deutsche Bank equity).

Bonus and long-term incentives comprise a greater proportion of total            compensation as an investment professional’s seniority and compensation levels            increase. Top performing investment professionals earn a total compensation package            that is highly competitive, including a bonus that is a multiple of their base salary.            The amount of equity awarded under the long-term equity programs is generally based on            the individual’s total compensation package and may comprise from 0%-40% of the            total compensation award. As incentive compensation increases, the percentage of            compensation awarded in Deutsche Bank equity also increases. Certain senior investment            professionals may be subject to a mandatory diverting of a portion of their equity            compensation into proprietary mutual funds that they manage.

To            evaluate its investment professionals, the Advisor uses a Performance Management            Process. Objectives evaluated by the process are related to investment performance and            generally take into account peer group and benchmark related data. The ultimate goal of            this process is to link the performance of investment professionals with client            investment objectives and to deliver investment performance that meets or exceeds            clients’ risk and return objectives. When determining total compensation, the            Advisor considers a number of quantitative and qualitative factors such as:

| **•** | DWS Scudder performance and the performance of Deutsche                            Asset Management, quantitative measures which include 1-, 3- and 5-year                            pre-tax returns versus benchmark (such as the benchmark used in the                            prospectus) and appropriate peer group, taking into consideration risk                            targets. Additionally, the portfolio manager’s                            retail/institutional asset mix is weighted, as appropriate for                            evaluation purposes. |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Qualitative measures include adherence to the investment                            process and individual contributions to the process, among other                            things. In addition, the Advisor assesses compliance, risk management                            and teamwork skills. |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Other factors, including contributions made to the                            investment team as well as adherence to compliance, risk management,                            and "living the values" of the Advisor, are part of a discretionary                            component which gives management the ability to reward these behaviors                            on a subjective basis through bonus incentives. |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

In            addition, the Advisor analyzes competitive compensation levels through the use of            extensive market data surveys. Portfolio manager compensation is reviewed and may be            modified each year as appropriate to reflect changes in the market, as well as to            adjust the factors used to determine overall compensation to promote good sustained            investment performance.

**Fund Ownership of Portfolio Managers**

 

----

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

 

| **Name of Portfolio Manager** | **Dollar Range of****Fund Shares Owned** | **Dollar Range of All DWS****Fund Shares Owned** |
|-------------------------------|------------------------------------------|--------------------------------------------------|
|                          |                                     |                                             |
| Philip G. Condon              | $10,001 - $50,000                        | Over $1,000,000                                  |
| Ashton P Goodfield            | $10,001 - $50,000                        | $500,001 - $1,000,000                            |
| Shelly Deitert                | None                                     | $50,001 - $100,000                               |

 

**Conflicts of Interest**

In            addition to managing the assets of the Fund, the Fund’s portfolio managers may            have responsibility for managing other client accounts of the Advisor or its            affiliates. The tables below show, for each portfolio manager, the number and asset            size of (1) SEC registered investment companies (or series thereof) other than the            Fund, (2) pooled investment vehicles that are not registered investment companies and            (3) other accounts (e.g., accounts managed for individuals or organizations) managed by            each portfolio manager. The tables also show the number of performance based fee            accounts, as well as the total assets of the accounts for which the advisory fee is            based on the performance of the account. This information is provided as of the            Fund’s most recent fiscal year end.

**Other SEC Registered Investment Companies Managed:**

 

| **Name of Portfolio Manager** | **Number of Registered Investment****Companies** | **Total Assets of Registered Investment****Companies** | **Number of Investment Company Accounts with                            Performance-****Based Fee** | **Total Assets of Performance-****Based Fee****Accounts** |
|-------------------------------|--------------------------------------------------|--------------------------------------------------------|-----------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                          |                                             |                                                   |                                                                                                |                                                      |
| Philip G. Condon              | 8                                                | $7,912,749,242                                         | 0                                                                                                   | $0                                                        |
| Ashton P Goodfield            | 3                                                | $5,110,007,892                                         | 0                                                                                                   | $0                                                        |
| Shelly Deitert                | 1                                                | $666,573,896                                           | 0                                                                                                   | $0                                                        |

 

**Other Pooled Investment Vehicles Managed:**

 

| **Name of Portfolio Manager** | **Number of Pooled Investment****Vehicles** | **Total Assets of Pooled Investment****Vehicles** | **Number of Pooled Investment Vehicle Accounts with                            Performance-****Based Fee** | **Total Assets of Performance-****Based Fee****Accounts** |
|-------------------------------|---------------------------------------------|---------------------------------------------------|------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                          |                                        |                                              |                                                                                                       |                                                      |
| Philip G. Condon              | 0                                           | $0                                                | 0                                                                                                          | $0                                                        |
| Ashton P Goodfield            | 0                                           | $0                                                | 0                                                                                                          | $0                                                        |
| Shelly Deitert                | 0                                           | $0                                                | 0                                                                                                          | $0                                                        |

 

 

----

 

**Other Accounts Managed:**

 

| **Name of Portfolio Manager** | **Number of Other****Accounts** | **Total Assets of****Other Accounts** | **Number of Other Accounts with                            Performance-****Based Fee** | **Total Assets of Performance-****Based Fee****Accounts** |
|-------------------------------|---------------------------------|---------------------------------------|----------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                          |                            |                                  |                                                                                   |                                                      |
| Philip G. Condon              | 0                               | $0                                    | 0                                                                                      | $0                                                        |
| Ashton P Goodfield            | 0                               | $0                                    | 0                                                                                      | $0                                                        |
| Shelly Deitert                | 0                               | $0                                    | 0                                                                                      | $0                                                        |

 

In            addition to the accounts above, an investment professional may manage accounts in a            personal capacity that may include holdings that are similar to, or the same as, those            of the Fund. The Advisor has in place a Code of Ethics that is designed to address            conflicts of interest and that, among other things, imposes restrictions on the ability            of portfolio managers and other “access persons” to invest in securities            that may be recommended or traded in the Fund and other client accounts.

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

| **•** | Certain investments may be appropriate for the Fund and                            also for other clients advised by the Advisor, including other client                            accounts managed by the Fund’s portfolio management team.                            Investment decisions for the Fund and other clients are made with a                            view to achieving their respective investment objectives and after                            consideration of such factors as their current holdings, availability                            of cash for investment and the size of their investments generally. A                            particular security may be bought or sold for only one client or in                            different amounts and at different times for more than one but less                            than all clients. Likewise, because clients of the Advisor may have                            differing investment strategies, a particular security may be bought                            for one or more clients when one or more other clients are selling the                            security. The investment results achieved for the Fund may differ from                            the results achieved for other clients of the Advisor. In addition,                            purchases or sales of the same security may be made for two or more                            clients on the same day. In such event, such transactions will be                            allocated among the clients in a manner believed by the Advisor to be                            most equitable to each client, generally utilizing a pro rata                            allocation methodology. In some cases, the allocation procedure could                            potentially have an adverse effect or positive effect on the price or                            amount of the securities purchased or sold by the Fund. Purchase and                            sale orders for the Fund may be combined with those of other clients of                            the Advisor in the interest of achieving the most favorable net results                            to the Fund and the other clients. |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | To the extent that a portfolio manager has                            responsibilities for managing multiple client accounts, a portfolio                            manager will need to divide time and attention among relevant accounts.                            The Advisor attempts to minimize these conflicts by aligning its                            portfolio management teams by investment strategy and by employing                            similar investment models across multiple client accounts. |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | In some cases, an apparent conflict may arise where the                            Advisor has an incentive, such as a performance-based fee, in managing                            one account and not with respect to other accounts it manages. The                            Advisor will not determine allocations based on whether it receives a                            performance-based fee from the client. Additionally, the Advisor has in                            place supervisory oversight processes to periodically monitor                            performance deviations for accounts with like strategies. |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | The Advisor and its affiliates and the investment team                            of the Funds may manage other mutual funds and separate accounts on a                            long-short basis. The simultaneous management of long and short                            portfolios creates potential conflicts of interest including the risk                            that short sale activity could adversely affect the market value of the                            long positions(and vice versa), the risk arising from sequential orders                            in long and short positions, and the risks associated with receiving                            opposing orders at the same time. The Advisor has adopted procedures                            that it believes are reasonably designed to mitigate these potential                            conflicts of interest. Included in these procedures are specific                            guidelines developed to ensure fair and equitable treatment for                            all |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

----

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

The            Advisor is owned by Deutsche Bank AG, a multi-national financial services company.            Therefore, the Advisor is affiliated with a variety of entities that provide, and/or            engage in commercial banking, insurance, brokerage, investment banking, financial            advisory, broker-dealer activities (including sales and trading), hedge funds, real            estate and private equity investing, in addition to the provision of investment            management services to institutional and individual investors. Since Deutsche Bank AG,            its affiliates, directors, officers and employees (the “Firm”) are engaged            in businesses and have interests other than managing asset management accounts, such            other activities involve real, potential or apparent conflicts of interest. These            interests and activities include potential advisory, transactional and financial            activities and other interests in securities and companies that may be directly or            indirectly purchased or sold by the Firm for its clients’ advisory accounts.            These are considerations of which advisory clients should be aware and which may cause            conflicts that could be to the disadvantage of the Advisor’s advisory clients.            The Advisor has instituted business and compliance policies, procedures and disclosures            that are designed to identify, monitor and mitigate conflicts of interest and, as            appropriate, to report them to the Fund’s Board.

**Codes of Ethics**

The            Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule 17j-1            under the 1940 Act. The Trust’s Code of Ethics permits access persons of the Fund            to invest in securities for their own accounts, but requires compliance with the            Code’s preclearance requirements, subject to certain exceptions. In addition, the            Trust’s Code provides for trading blackout periods that prohibit trading by            personnel within periods of trading by the Fund in the same security. The Trust’s            Code 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            Fund’s advisor and its affiliates (including the Fund’s Distributor,            DWS-SDI) 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 that may be purchased or held by the Fund for their own accounts,            subject to compliance with the Consolidated Code’s preclearance and other            requirements. Among other things, the Consolidated Code provides for trading            “blackout periods” that prohibit trading by personnel within periods of            trading by the Fund 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.

**Regulatory Matters**

On            September 28, 2006, the SEC and the National Association of Securities Dealers            (“NASD”) announced final agreements in which Deutsche Investment Management            Americas Inc. (“DIMA”), Deutsche Asset Management, Inc.            (“DAMI”) and Scudder Distributors, Inc. (“DWS-SDI”) (now known            as DWS Scudder Distributors, Inc.) settled administrative proceedings regarding            disclosure of brokerage allocation practices in connection with sales of the Scudder            Funds’ (now known as the DWS Scudder Funds) shares during 2001-2003. The            agreements with the SEC and NASD are reflected in orders which state, among other            things, that DIMA and DAMI failed to disclose potential conflicts of interest to the            funds’ Boards and to shareholders relating to DWS-SDI’s use of certain            funds’ brokerage commissions to reduce revenue sharing costs to broker-dealer            firms with whom it had arrangements to market and distribute Scudder Fund shares. These            directed brokerage practices were discontinued in October 2003.

Under the terms of the settlements, in which DIMA, DAMI and DWS-SDI            neither admitted nor denied any of the regulators’ findings, DIMA, DAMI and            DWS-SDI agreed to pay disgorgement, prejudgment interest and civil penalties in the            total amount of $19.3 million. The portion of the settlements distributed to the funds            was approximately $17.8 million and was paid to the funds as prescribed by the            settlement orders based upon the amount of brokerage commissions from each fund used to            satisfy revenue sharing agreements with broker-dealers who sold fund shares.

 

----

As            part of the settlements, DIMA, DAMI and DWS-SDI also agreed to implement certain            measures and undertakings relating to revenue sharing payments including making            additional disclosures in the funds’ Prospectuses or Statements of Additional            Information, adopting or modifying relevant policies and procedures and providing            regular reporting to the fund Boards.

Additional information announced by DeAM regarding the terms of the            expected settlements will be made available at            www.dws-scudder.com/regulatory_settlements, which will also disclose the terms of any            final settlement agreements once they are announced.

For            discussion of other regulatory matters see the Fund’s prospectus.

**FUND SERVICE PROVIDERS**

**Administrator**

DIMA, the investment advisor for the Fund, (the            “Administrator”) (the “Administrative Services Agreement”),            located at 345 Park Avenue, New York, New York 10154, pursuant to which the            Administrator provides most administrative services to the Fund including, among            others, providing the Fund with personnel, preparing and making required filings on            behalf of the Fund, maintaining books and records for the Fund, and monitoring the            valuation of Fund securities. For all services provided under the Administrative            Services Agreement, the Fund pays the Administrator a fee of 0.100% of the Fund’s            average daily net assets or $50,000 minimum per year, whichever is greater.

Under the Administrative Services Agreement, the Administrator is            obligated on a continuous basis to provide such administrative services as the Board of            the Fund reasonably deems necessary for the proper administration of the Fund. The            Administrator generally provides the Fund with personnel; arranges for the preparation            and filing of the Fund’s tax returns; prepares and submits reports and meeting            materials to the Board and the shareholders; prepares and files updates to the            Fund’s prospectus and statement of additional information as well as other            reports required to be filed by the SEC; maintains the Fund’s records; provides            the Fund with office space, equipment and services; supervises, negotiates the            contracts of and monitors the performance of third party contractors; oversees the            tabulation of proxies; monitors the valuation of portfolio securities and monitors            compliance with Board-approved valuation procedures; assists in establishing the            accounting and tax policies of the Fund; assists in the resolution of accounting issues            that may arise with respect to the Fund; establishes and monitors the Fund’s            operating expense budgets; reviews and processes the Fund’s bills; assists in            determining the amount of dividends and distributions available to be paid by the Fund;            prepares and arranges dividend notifications and provides information to agents to            effect payments thereof; provides to the Board periodic and special reports; provides            assistance with investor and public relations matters; and monitors the registration of            shares under applicable federal and state law. 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.

For            the period July 1, 2006 through October 31, 2006, DIMA received $190,418 as            compensation for administrative services, of which $45,602 was unpaid at October 31,            2006.

Prior to July 1, 2006, DAMI served as the Fund’s administrator            pursuant to an Administration Agreement dated August 27, 1998. For its services under            the Administration Agreement, DAMI received a monthly fee of 0.12% of the average daily            net assets for Class A, B, C and Institutional Class shares of the Fund. DAMI, as            administrator, paid accounting agency and transfer agency fees out of the            Administration fee. Previously, these fees were charged directly to the            Fund.

 

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The            following table sets forth the net administration fees that the Fund paid to            DAMI.

 

|                               | **For                            the fiscal year ended October 31,** |
|------------------------------------|----------------------------------------------------------------------|
|                               | **2006**                                                             | **2005** | **2004** |
|                               |                                                                 |   |   |
| DWS Short-Term Municipal Bond Fund | $488,170*                                                            | $872,005 | $1,007,823 |

 

| * | For the period November 1, 2005 through                            June 30, 2006, of which $94,915 was waived. |
|---|------------------------------------------------------------------------------------------------------------------------------------|

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

Pursuant to Deutsche Asset Management procedures approved by the Boards            on behalf of the DWS funds, proof of claim forms are routinely filed on behalf of the            DWS funds by a third party service provider, with certain limited exceptions. The            Boards of the DWS funds receive periodic reports regarding the implementation of these            procedures.

 

**Distributor**

DWS-SDI serves as the distributor of the Fund’s shares pursuant to            the Distribution Agreement. The terms and conditions of the Distribution Agreement are            exactly the same as those of the Distribution Agreement with ICC Distributors, Inc.,            the former distributor of the Fund. DWS-SDI enters into a Selling Group Agreement with            certain broker-dealers (each a “Participating Dealer”). If a Participating            Dealer previously had agreements in place with DWS-SDI and ICC Distributors, Inc., the            DWS-SDI Agreement will control. If the Participating Dealer did not have an agreement            with DWS-SDI, then the terms of the assigned ICC Distributors, Inc. agreement will            remain in effect. These Selling Group Agreements may be terminated by their terms or by            the terms of the Distribution Agreement, as applicable. DWS-SDI is a wholly-owned            subsidiary of Deutsche Bank AG. The address for DWS-SDI is 222 South Riverside Plaza,            Chicago, IL 60606.

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

As            compensation for providing distribution and shareholder services as described above for            the Class A Shares, the Distributor receives an annual fee, paid monthly, equal to            0.25% of the average daily net assets of the Class A Shares. With respect to the Class            A Shares, the Distributor expects to allocate up to all of its fee to participating            dealers and shareholder servicing agents. As compensation for providing distribution            and shareholder services as described above for the Class B and C Shares, the            Distributor receives an annual fee, paid monthly, equal to 0.75% of the respective            average daily net assets attributable to such class. In addition, with respect to the            Class B and C Shares, the Distributor receives a shareholder servicing fee at an annual            rate of up to 0.25% of their respective average daily net assets. (See the Prospectus.)            For the fiscal year ended October 31, 2006, the Fund paid shareholder servicing and            distribution fees to the Distributor as follows:

 

----

| **Fund And Class** | **Distribution Fee** | **Unpaid at****October 31, 2006** | **Shareholder****Servicing Fee** | **Unpaid at****October 31, 2006** | **CDSC Fees****Paid** |
|--------------------|----------------------|-----------------------------------|----------------------------------|-----------------------------------|-----------------------|
|               |                 |                              |                             |                              |                  |

 

| DWS Short-Term Municipal Bond Fund – Class                            A             | $185,363 | — | $76,464  | $31,139 | $3,842  |
|-------------------------------------------------------------------------------------------|----------|---------|----------|---------|---------|
| DWS Short-Term Municipal Bond Fund – Class                            B             | $35,357  | $2,779  | $11,347  | $1,380  | $12,925 |
| DWS Short-Term Municipal Bond Fund – Class                            C             | $331,830 | $24,664 | $108,585 | $18,645 | $7,887  |
| DWS Short-Term Municipal Bond Fund – Institutional                            Class | —  | — | —  | — | — |

 

The            Fund’s Class A, B and C shares were offered for the first time with their            Prospectus dated February 28, 2003.

Pursuant to Rule 12b-1 under the 1940 Act, investment companies may pay            distribution expenses, directly or indirectly, only pursuant to a plan adopted by the            investment company’s board of directors and approved by their shareholders. The            Fund has adopted plans of distribution for its Class A, B and C Shares (the            “Plans”). Under the Plans, the Fund pays a fee to the Distributor for            distribution and other shareholder servicing assistance as set forth in the            Distribution Agreement, and the Distributor is authorized to make payments out of its            fee to participating dealers and shareholder servicing agents. The Plans will remain in            effect from year to year as specifically approved (a) at least annually by the Board of            Trustees and (b) by the affirmative vote of a majority of the Independent Trustees, by            votes cast in person at a meeting called for such purpose.

In            approving the Plans, the Trustees concluded, in the exercise of reasonable business            judgment, that there was a reasonable likelihood that the Plans would benefit the Fund            and its shareholders. The Plans will be renewed only if the Board of Trustees makes a            similar determination in each subsequent year. The Plans may not be amended to increase            materially the fee to be paid pursuant to the Distribution Agreement without the            approval of the shareholders of the Fund. The Plan may be terminated at any time by the            vote of a majority of the Independent Trustees or by a vote of a majority of the            Fund’s outstanding shares.

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

Under the Plans, amounts allocated to participating dealers and            shareholder servicing agents may not exceed amounts payable to the Distributor under            the Plans. Payments under the Plans are made as described above regardless of the            Distributor’s actual cost of providing distribution services and may be used to            pay the Distributor’s overhead expenses. If the cost of providing shareholder            services to the Class A shares is less than 0.25% of the Class A shares’ average            daily net assets for any period or if the cost of providing distribution services to            the Class B and C shares is less than 0.75% of the classes’ respective average            daily net assets for any period, the unexpended portion of the distribution fees may be            retained by the Distributor. If a Plan is terminated in accordance with its terms, the            obligation of the Fund to make payments to the Distributor pursuant to such Plan will            cease and the Fund will not be required to make any payments past the date the            Distribution Agreement terminates with respect to that class. In return for payments            received pursuant to the Plans, the Distributor pays the shareholder servicing and the            distribution-related expenses of the Fund including one or more of the following:            advertising expenses; printing and mailing of prospectuses to other than current            shareholders; compensation to dealers and sales personnel; and interest, carrying or            other financing charges.

Shareholders of Class B of the Fund have recently approved an Amended            and Restated Rule 12b-1 Plan (the “Amended Plan” and, together with the            Class A and C Distribution Plans, the “Distribution Plans”) for that            class.

 

----

Under the Amended Plan, the Fund will pay a shareholder servicing fee at            an annual rate of up to 0.25% of the average daily net assets of its Class B shares to            its Distributor in addition to a distribution fee at an annual rate of up to 0.75% of            such assets. Pursuant to the Amended Plan, shareholder and administrative services are            provided to the Fund on behalf of its Class B shareholders under the Fund’s            Service Agreement with its Distributor. Because 12b-1 fees are paid out of Fund assets            on an ongoing basis, they will, over time, increase the cost of an investment and may            cost more than other types of sales charges.

The            Amended Plan for Class B shares provides alternative methods for paying sales charges            and may help the Fund grow or maintain asset levels to provide operational efficiencies            and economies of scale. Rule 12b-1 service plans provide compensation to the            Fund’s Distributor for post-sales servicing. Since the Distribution Agreement            provides for fees payable as an expense of Class B shares that are used by the            Distributor to pay for distribution and services for that class, the agreement is            approved and reviewed for Class B shares in accordance with Rule 12b-1 under the 1940            Act, which regulates the manner in which an investment company may, directly or            indirectly, bear the expenses of distributing its shares. The Distribution Agreement            may not be amended to increase the fee to be paid by the Fund with respect to a class            without approval by a majority of the outstanding voting securities of such class of            the Fund. Similarly, the Services Agreement is approved and reviewed separately for the            Class A shares, Class B shares and Class C shares in accordance with Rule            12b-1.

If            an Amended Plan is terminated in accordance with its terms, the obligation of the Fund            to make payments to the Distributor pursuant to the Amended Plan will cease and the            Fund will not be required to make any payments not previously accrued past the            termination date. Thus, there is no legal obligation for the Fund to pay any expenses            incurred by the Distributor other than fees already payable under an Amended Plan, if            for any reason the Amended Plan is terminated in accordance with its terms. Future fees            under the Amended Plan may or may not be sufficient to reimburse the Distributor for            its expenses incurred.

During the fiscal year ended October 31, 2006, the Distributor received            commissions on the sale of the Fund’s Class A shares in the amount of            $3,556.

If            a Rule 12b-1 Plan is terminated in accordance with its terms, the obligation of the            Fund to make payments to DWS-SDI pursuant to the Rule 12b-1 Plan will cease and the            Fund will not be required to make any payments not previously accrued past the            termination date. Thus, there is no legal obligation for the Fund to pay any expenses            incurred by DWS-SDI other than fees previously accrued and payable under a Rule 12b-1            Plan, if for any reason the Rule 12b-1 Plan is terminated in accordance with its terms.            Future fees under the Rule 12b-1 Plan may or may not be sufficient to cover DWS-SDI for            its expenses incurred. On the other hand, under certain circumstances, DWS-SDI might            collect in the aggregate over certain periods more in fees under the Rule 12b-1 Plan            than it has expended over that same period in providing distribution services for the            Fund. In connection with Class B shares, for example, if shares of the Fund were to            appreciate (resulting in greater asset base against which Rule 12b-1 fees are charged)            and sales of the Fund’s shares were to decline (resulting in lower expenditures            by DWS-SDI under the Rule 12b-1 Plan), fees payable could exceed expenditures. This may            also happen over certain periods shorter than the life of the Rule 12b-1 Plan simply            due to the timing of expenses incurred by DWS-SDI that is not matched to the timing of            revenues received (e.g., a sales commission may be paid by DWS-SDI related to an            investment in year 1, while the Rule 12b-1 fee to DWS-SDI related to that investment            may accrue during year 1 through year 6 prior to conversion of the investment to Class            A shares). As a result, if DWS-SDI’s expenses are less than the Rule 12b-1 fees,            DWS-SDI will retain its full fees and make a profit.

**Custodian**

State Street Bank and Trust Company (the “Custodian” or            “SSB”), One Heritage Drive-JPB/2N, North Quincy, MA 02171, serves as the            Fund’s custodian pursuant to a Custodian Agreement. Under its custody agreement            with the Fund, the Custodian (i) maintains separate accounts in the name of the            Fund, (ii) holds and transfers portfolio securities on account of the Fund,            (iii) accepts receipts and makes disbursements of money on behalf of the Fund,            (iv) collects and receives all income and other payments and distributions on            account of the Fund’s portfolio securities and (v) makes periodic reports to            the Trust’s Board of Trustees concerning the Fund’s operations. The            Custodian is authorized to select one or more foreign or domestic banks or companies to            serve as sub-custodian on behalf of the Fund.

 

----

Prior to April 4, 2003, Brown Brothers Harriman & Co., 40 Water            Street, Boston, MA 02109, served as the Fund’s custodian.

**Transfer Agent**

DWS            Scudder Investments Service Company (“DWS-SISC”) serves as            transfer agent of the Trust and of the Fund pursuant to a transfer agency            agreement. Under its transfer agency agreement with the Trust, DWS-SISC maintains the            shareholder account records for the Fund, handles certain communications between            shareholders and the Trust and causes to be distributed any dividends and distributions            payable by the Trust.

Pursuant to a sub-transfer agency agreement between DWS-SISC and DST            Systems, Inc. (“DST”), DWS-SISC has delegated certain transfer agent and            dividend paying agent functions to DST.

Effective July 1, 2006, the Fund pays transfer agency fees directly in            accordance to the following fee schedule:

 

|                                                                      | **Class A1** | **Class B** | **Class C** | **Institutional** |
|---------------------------------------------------------------------------|--------------|-------------|-------------|-------------------|
|                                                                      |         |        |        |              |
| **Annual Per Account Fee (Retail &                            IRA)**  | $14.00       | $14.00      | $14.00      | $14.00            |
| **Annual Per Account Fee (401(k)                            Retirement)** | $23.00       | $23.00      | $23.00      | $23.00            |
| **Annual Asset Based Fee**                                                | 0.02%        | 0.02%       | 0.02%       | 0.02%             |
|                                                                      |         |        |        |              |
| **Account Processing Fees:**                                              |         |        |        |              |
| CDSC                                                                      | N/A          | $2.00       | N/A         | N/A               |
| Redemption Fee                                                            | $2.00        | $2.00       | $2.00       | $2.00             |
| New Account Fee                                                           | $5.00        | $5.00       | $5.00       | $5.00             |
| Closed Accounts Fee (Retail & IRA)                                    | N/A          | N/A         | N/A         | N/A               |
| Closed Accounts Fee (401(k) Retirement)                                   | N/A          | N/A         | N/A         | N/A               |

 

| 1 | The “new account fee” is not applicable to                            Class A accounts established from a conversion from a Class B                            account. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Legal Counsel**

Willkie Farr & Gallagher, LLP 787 7th Avenue, New York, New York            10019, serves as counsel to the Trust and the Fund.

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

**Independent Registered Public Accounting            Firm**

PricewaterhouseCoopers LLP serves as the Independent Registered Public            Accounting Firm for the Trust and the Fund.

**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            Fund 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

 

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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            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 Fund to reported commissions paid by others. The Advisor routinely            reviews commission rates, execution and settlement services performed and makes            internal and external comparisons.

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

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

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. Research and brokerage services received from a broker-dealer            may be useful to the Advisor in providing services to clients other than the Fund            making the trade, and not all such information is used by the Advisor in connection            with such Fund. Conversely, such information provided to the Advisor by broker-dealers            through which other clients of the Advisor effect securities transactions may be useful            to the Advisor in providing services to a 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            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 associated hardware, 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 hardware used by the Advisor            to facilitate trading activity with those broker-dealers.

 

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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 Fund 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.

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 Fund’s management team manage            other mutual Fund 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 Fund            and receive brokerage commissions or other transaction-related compensation from the            Fund in the purchase and sale of securities, options or futures contracts when, in the            judgment of the Advisor, and in accordance with procedures approved by the Fund’            Boards, the affiliated broker will be able to obtain a price and execution at least as            favorable as those obtained from other qualified brokers and if, in the transaction,            the affiliated broker charges the Fund a rate consistent with that charged to            comparable unaffiliated customers in similar transactions.

For            the fiscal year ended October 31, 2004 the Trust, which includes the Fund, paid            $4,158,000 in brokerage commissions. For the fiscal years ended October 31, 2005 and            2006 the Fund did not have any brokerage commissions.

The            Fund did not pay any affiliated brokerage commissions for its most recent fiscal year            end.

**Securities of Regular Broker-Dealers.**The            Fund is required to identify any securities of its “regular broker or            dealers” (as such term is defined in the 1940 Act) that the Fund has acquired            during the most recent year. As of October 31, 2006, the Fund did not hold any            securities of its regular broker dealers.

**Portfolio Turnover.**The Fund’s            portfolio turnover rate is calculated by dividing the lesser of the dollar amount of            sales or purchases of portfolio securities by the average monthly value of the            Fund’s portfolio securities, excluding securities having a maturity at the date            of purchase of one year or less. The Fund may sell securities held for a short time in            order to take advantage of what the Advisor believes to be temporary disparities in            normal yield relationships between securities. A high rate of portfolio turnover (i.e.,            100% or higher) will result in

 

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correspondingly higher transaction costs to the Fund, particularly if            the Fund’s primary investments are equity securities. A high rate of portfolio            turnover may also result in more frequent distributions attributable to long-term and            short-term capital gains, which could increase income tax liability of the Fund’s            shareholders.

The            following table sets forth the portfolio turnover rates for the Fund during the periods            indicated:

 

|                                                          | **For the Fiscal Year Ended** |
|---------------------------------------------------------------|-------------------------------|
|                                                          | **2006**                      | **2005** |
|                                                          |                          |   |
| DWS Short-Term Municipal Bond                            Fund | 46%                           | 35% |

 

**PURCHASES AND REDEMPTIONS OF            SHARES**

***General Information***

Policies and procedures affecting transactions in Fund shares can be            changed at any time without notice, subject to applicable law. Transactions may be            contingent upon proper completion of application forms and other documents by            shareholders and their receipt by the Fund’s agents. Transaction delays in            processing (and changing account features) due to circumstances within or beyond the            control of the Fund and its agents may occur. Shareholders (or their financial service            firms) are responsible for all losses and fees resulting from bad checks, cancelled            orders or the failure to consummate transactions effected pursuant to instructions            reasonably believed to be genuine.

A            distribution will be reinvested in shares of the same Fund and class if the            distribution check is returned as undeliverable.

Orders will be confirmed at a price based on the net asset value of the            Fund next determined after receipt in good order by DWS-SDI of the order accompanied by            payment. Orders received by dealers or other financial services firms prior to the            determination of net asset value and received in good order by DWS-SDI prior to the            determination of net asset value will be confirmed at a price based on the net asset            value next determined after receipt by DWS-SDI (“trade date”).

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

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

The            Fund has authorized one or more financial service institutions, including certain            members of the NASD other than the Distributor (“financial institutions”),            to accept purchase and redemption orders for the Fund’s shares. Such financial            institutions may also designate other parties, including plan administrator            intermediaries, to accept purchase and redemption orders on the Fund’s behalf.            Orders for purchases or redemptions will be deemed to have

 

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been received by the Fund when such financial institutions or, if            applicable, their authorized designees accept the orders. Subject to the terms of the            contract between the Fund and the financial institution, ordinarily orders will be            priced at the Fund’s net asset value next computed after acceptance by such            financial institution or its authorized designees and accepted by the Fund. Further, if            purchases or redemptions of the Fund’s shares are arranged and settlement is made            at an investor’s election through any other authorized financial institution,            that financial institution may, at its discretion, charge a fee for that service. The            Board of Trustees and the Distributor, also the Fund’s principal underwriter,            each has the right to limit the amount of purchases by, and to refuse to sell to, any            person. The Trustees and the Distributor may suspend or terminate the offering of            shares of the Fund at any time for any reason.

DWS-SDI, the Fund’s distributor, has adopted an Incentive Plan            (the “Plan”) covering wholesalers that are regional vice presidents            (“DWS Scudder Wholesalers”). Generally, DWS Scudder Wholesalers market            shares of the DWS funds to your financial advisor, who in turn may recommend that you            purchase shares of a DWS fund. The Plan is an incentive program that combines a monthly            incentive component with a quarterly strategic bonus component. Under the Plan, DWS            Scudder Wholesalers will receive a monetary monthly incentive based on the amount of            sales generated from their marketing of the funds, and that incentive will differ            depending on the product category of the fund. Each fund is assigned to one of three            product categories — “Core,” “Satellite” or            “Non-Core/Satellite” — taking into consideration, among other things,            the following criteria, where applicable:

| **•** | The Fund’s 3-year performance; |
|------------|--------------------------------------|

| **•** | The Fund’s Morningstar rating; |
|------------|--------------------------------------|

| **•** | Market size for the fund category; |
|------------|------------------------------------|

| **•** | The Fund’s size, including sales and redemptions                            of the Fund’s shares; |
|------------|---------------------------------------------------------------------------------------------------------------|

| **•** | The length of time the Fund’s Portfolio Managers                            have managed the Fund; and |
|------------|--------------------------------------------------------------------------------------------------------------|

| **•** | The Fund’s consistency with DWS Scudder’s                            branding. |
|------------|--------------------------------------------------------------------------------------------|

This information and other factors are presented to a committee            comprised of representatives from various groups within DWS Scudder, who review on a            quarterly basis the funds assigned to each product category described above, and make            any changes to those assignments at that time. No one factor, whether positive or            negative, determines a fund’s placement in a given category; all these factors            together are considered, and the designation of funds in the Core and Satellite            categories represents management’s judgment based on the above criteria. In            addition, management may consider a fund’s profile over the course of several            review periods before making a change to its category assignment. These category            assignments will be posted quarterly to the DWS funds’ Web site atwww.dws-scudder.com            , approximately one month after the end of each quarter. DWS Scudder Wholesalers will            receive the highest compensation for Core funds, less for Satellite funds and the            lowest for Non-Core/Satellite funds.

In            the normal course of business, DWS Scudder will from time to time introduce new funds            into the DWS family of funds. As a general rule, all new funds will be placed in a New            Fund compensation category for a minimum period of four consecutive quarters, and DWS            Scudder Wholesalers will be paid at a rate that is equivalent to that of the Core Fund            category. After that four quarter period, each fund in the New Fund category will be            reviewed by the committee and either assigned to one of the three categories or            continued as a New Fund at that time.

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

**Telephone and Electronic Transaction Procedures.**Shareholders have various telephone, Internet, wire and other electronic            privileges available. The Fund or its agents may be liable for any losses, expenses or            costs arising out of fraudulent or unauthorized instructions pursuant to these            privileges unless the Fund or its agents reasonably believe,

 

----

based upon reasonable verification procedures, that the instructions            were genuine. Verification procedures 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, maximum $250,000) from or to a shareholder’s bank, savings and            loan, or credit union account in connection with the purchase or redemption of Fund            shares. Shares purchased by check or through QuickBuy and QuickSell or Direct Deposit            may not be redeemed under this privilege until such Shares have been owned for at least            10 calendar days. QuickBuy and QuickSell cannot be used with passbook savings accounts            or for certain tax-deferred plans such as IRAs.

**Tax-Sheltered Retirement Plans.**The            Shareholder Service Agent provides retirement plan services and documents and DWS-SDI            can establish investor accounts in any of the following types of retirement            plans:

| **•** | *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. |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| **•** | Prototype money purchase pension and profit-sharing                            plans may be adopted by employers. |
|------------|-------------------------------------------------------------------------------------------------------------------|

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

***Purchases***

The            Fund reserves the right to withdraw all or any part of the offering made by its            prospectuses and to reject purchase orders for any reason. Also, from time to time, the            Fund may temporarily suspend the offering of any class of its shares to new investors.            During the period of such suspension, persons who are already shareholders of such            class of such Fund may be permitted to continue to purchase additional shares of such            class and to have dividends reinvested.

To            help the government fight the funding of terrorism and money laundering activities,            federal law requires all financial institutions to obtain, verify and record            information that identifies each person who opens an account. For more information,            please see “Policies You Should Know About” in the Fund’s            prospectus.

**Financial Services Firms’            Compensation.**Banks and other financial services firms may            provide administrative services related to order placement and payment to facilitate            transactions in shares of the Fund for their clients, and DWS-SDI may pay them a            transaction fee up to the level of the discount or commission allowable or payable to            dealers.

DWS-SDI may, from time to time, pay or allow to firms a 1% commission on            the amount of shares of the Fund sold under the following conditions: (i) the            purchased shares are held in a DWS Scudder IRA account, (ii) the shares are            purchased as a direct “roll over” of a distribution from a qualified            retirement plan account maintained on the subaccount record keeping system maintained            for DWS-branded plans by ADP, Inc. under an alliance with DWS-SDI and its affiliates,            (iii) the registered representative placing the trade is a member of the Executive            Council, a group of persons designated by DWS-SDI in acknowledgment of their dedication            to the employee benefit plan area and (iv) the purchase is not otherwise subject            to a commission.

In            addition to the discounts or commissions described herein and in the Prospectuses,            DWS-SDI may pay or allow additional discounts, commissions or promotional incentives,            in the form of cash, to firms that sell shares of the

 

----

Fund. In some instances, such amounts may be offered only to certain            firms that sell or are expected to sell during specified time periods certain minimum            amounts of shares of the Fund, or other Funds underwritten by DWS-SDI.

Upon notice to all dealers, DWS-SDI may re-allow to dealers up to the            full applicable Class A sales charge during periods and for transactions specified            in such notice and such re-allowances may be based upon attainment of minimum sales            levels. During periods when 90% or more of the sales charge is re-allowed, such dealers            may be deemed to be underwriters as that term is defined in the Securities Act of 1933            (the “1933 Act”).

DWS-SDI may at its discretion compensate investment dealers or other            financial services firms in connection with the sale of Class A shares of the Fund            in accordance with the Large Order NAV Purchase Privilege and one of the three            compensation schedules up to the following amounts:

 

| **Compensation Schedule #1:****Retail Sales and DWS Scudder Flex                            Plan**(1) | **Compensation Schedule #2: DWS Scudder Retirement                            Plans**(2) |
|-------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|
| **Amount of****Shares Sold**                                                                          | **As a Percentage of Net****Asset Value**                                                | **Amount of****Shares Sold** | **As a Percentage of Net****Asset Value** |
|                                                                                                  |                                                                                     |   |   |
| $1 million to $3                            million                                                   | 1.00%                                                                                    | Over $3 million | 0.00%-0.50% |
| Over $3 million to $50                            million                                             | 0.50%                                                                                    | — | — |
| Over $50 million                                                                                      | 0.25%                                                                                    | — | — |

 

| **Compensation Schedule #3:****DWS Scudder Choice                            Plan**(3) |
|----------------------------------------------------------------------------------------|
| **Amount of****Shares                            Sold**                                | **As a Percentage of****Net Asset Value** |
|                                                                                   |   |
| All Amounts                                                                            | 1.00% |

             

| (1) | For purposes of determining the appropriate commission                            percentage to be applied to a particular sale under the foregoing                            schedule, DWS-SDI will consider the cumulative amount invested by the                            purchaser in a Fund and other DWS Funds including purchases pursuant to                            the “Combined Purchases,” “Letter of Intent”                            and “Cumulative Discount” features referred to                            below. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Compensation Schedules 2 and 3 apply to employer                            sponsored employee benefit plans using the OmniPlus subaccount record                            keeping system made available through ADP, Inc. under an alliance with                            DWS-SDI and its affiliates. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | DWS-SDI compensates UBS Financial 0.50%. |
|-----|------------------------------------------|

DWS-SDI compensates firms for sales of Class B shares at the time            of sale at a commission rate of up to 3.75% of the amount of Class B shares            purchased. DWS-SDI is compensated by the Fund for services as distributor and principal            underwriter for Class B shares. Except as provided below, for sales of Class C            shares, Effective January 1, 2006, DWS-SDI no longer advances the first year            distribution fee and service fee to firms for sales of Class C shares to employer            sponsored benefit plans using the OmniPlus subaccount record keeping system made            available through ADP, Inc. under an alliance with DWS-SDI and it affiliates. DWS-SDI            is compensated by the Fund for services as distributor and principal underwriter for            Class C shares.

Revenue Sharing. In light of recent regulatory developments, the            Advisor, the Distributor and their affiliates have undertaken to furnish certain            additional information below regarding the level of payments made by them to selected            affiliated and unaffiliated brokers, dealers, participating insurance companies or            other financial intermediaries (“financial advisors”) in connection with            the sale and/or distribution of Fund shares or the retention and/or servicing of            investors and Fund shares (“revenue sharing”).

The            Advisor, the Distributor and/or their affiliates may pay additional compensation, out            of their own assets and not as an additional charge to the Fund, to financial advisors            in connection with the sale and/or distribution of Fund

 

----

shares or the retention and/or servicing of Fund investors and Fund            shares. Such revenue sharing payments are in addition to any distribution or service            fees payable under any Rule 12b-1 or service plan of any fund, any record            keeping/sub-transfer agency fees payable by the Fund (generally by reimbursement to the            Distributor or an affiliate) to certain financial advisors for performing such services            and any sales charges, commissions, non-cash compensation arrangements expressly            permitted under applicable rules of the NASD or other concessions described in the fee            table or elsewhere in the Prospectuses or the SAI as payable to all financial advisors.            For example, the Advisor, the Distributor and/or their affiliates may compensate            financial advisors for administrative, sub-accounting or shareholder processing            services and/or for providing a fund with “shelf space” or access to a            third party platform or fund offering list, or other marketing programs including,            without limitation, inclusion of the Fund on preferred or recommended sales lists,            mutual fund “supermarket” platforms and other formal sales programs;            granting the Distributor access to the financial advisor’s sales force; granting            the Distributor access to the financial advisor’s conferences and meetings;            assistance in training and educating the financial advisor’s personnel; and,            obtaining other forms of marketing support. The level of revenue sharing payments made            to financial advisors may be a fixed fee or based upon one or more of the following            factors: gross sales, current assets and/or number of accounts of the Fund attributable            to the financial advisor, the particular fund or fund type or other measures as agreed            to by the Advisor, the Distributor and/or their affiliates and the financial advisors            or any combination thereof. The amount of these payments is determined at the            discretion of the Advisor, the Distributor and/or their affiliates from time to time,            may be substantial, and may be different for different financial advisors based on, for            example, the nature of the services provided by the financial advisor.

The            Advisor, the Distributor and/or their affiliates currently make revenue sharing            payments from their own assets in connection with the sale and/or distribution of DWS            Fund shares, or the retention and/or servicing of investors and DWS Fund shares to            financial advisors in amounts that generally range from .01% up to .50% of assets of            the Fund serviced and maintained by the financial advisor, .05% to .40% of sales of the            Fund attributable to the financial advisor, a flat fee of $12,500 up to $500,000, or            any combination thereof. These amounts are subject to change at the discretion of the            Advisor, the Distributor and/or their affiliates. Receipt of, or the prospect of            receiving, this additional compensation, may influence your financial advisor’s            recommendation of this Fund or of any particular share class of the Fund. You should            review your financial advisor’s compensation disclosure and/or talk to your            financial advisor to obtain more information on how this compensation may have            influenced your financial advisor’s recommendation of this Fund.

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

As            of the date hereof, the Fund has been advised that the Advisor, the Distributor and            their affiliates expect that the following firms will receive revenue sharing payments            at different points during the coming year as described above:

 

**Channel: Broker-Dealers and Financial Advisors**

 

A G            Edwards & Sons Inc.

AIG            Advisors Group

Cadaret, Grant & Co. Inc.

Brown            Brothers Harriman

Capital            Analyst, Incorporated

Citicorp Investment Services

Citigroup Global Markets, Inc. (dba Smith Barney)

Commonwealth Equity Services, LLP (dba Commonwealth Financial            Network)

HD Vest            Investment Securities, Inc.

ING            Group

LaSalle            Financial Services, Inc.

 

----

Linsco/Private Ledger Corp.

McDonald Investments Inc.

Merrill            Lynch, Pierce, Fenner & Smith Inc.

Morgan            Stanley

Oppenheimer & Co., Inc.

Pacific            Select Distributors Group

The            Principal Financial Group

Prudential Investments

Raymond            James & Associates

Raymond            James Financial Services

RBC            Dain Rauscher, Inc

Securities America, Inc.

UBS            Financial Services

Wachovia Securities

Wells            Fargo Investments, LLC

 

**Channel: Fund Supermarket Platforms**

 

ADP            Clearing

Charles            Schwab & Co., Inc.

E*Trade

Fidelity Investments

First            Trust

National Financial

National Investor Services Corporation

Pershing LLC

USAA            Investment Management

 

**Channel: Defined Contribution Investment Only            Platforms**

 

401K            Investment Services

ACS /            Buck Consultants

ADP,            Inc.

Alliance Benefit Group Financial Services Corp.

American Express Financial Advisors, Inc.

AMG            Service Corp. / Lincoln Retirement Services Company, LLC

AST            Trust Company

Benefit            Administration

BISYS

Ceridian Retirement Plan Services

Charles            Schwab & Co., Inc.

Charles            Schwab Trust Company

City            National Bank

Citistreet

C.N.A.            Trust

Compusys/ERISA Group Inc.

Copeland Companies

CPI            Qualified Plans Daily Access.Com Inc.

Digital            Retirement Solutions

Edgewood Services

Expert            Plan Inc.

Federated Securities Corp.

Fidelity Institutional Retirement Services Company

Fisserv

Franklin Templeton Defined Contribution

 

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GoldK

Great            West Life and Annuity / BenefitsCorp Equities Inc.

Hand            Securities

Hartford Life Insurance Company

Hewitt            Assoc. LLC

INGAetna Trust Company

Invesmart

JPMorgan Retirement Plan Services LLC

John            Hancock

Lincoln            National Life

Marsh            Insurance & Investment Company

Marshall & Ilsley Trust Company

Maryland Supplemental Retirement Plan

Matrix            Settlement & Clearance

Mercer            HR Services

Merrill            Lynch, Pierce, Fenner & Smith Inc.

Met            Life

MFS

Mid            Atlantic Capital Corporation

Nationwide Trust Company

Nationwide Financial

Neuberger Berman

New            York Life Investment Management Service Company

Nyhart/Alliance Benefit Group Indiana

PFPC,            Inc.

Plan            Administrators, Inc.

PNC            Bank N.A.

Principal Life Insurance Company

Prudential Investments

Reliance Trust Company

Resource Trust (IMS)

Retirement Financial Services

State            Street Bank and Trust Company

SunGard            Investment Products Inc.

The            Princeton Retirement Group, Inc.

T. Rowe            Price

Union            Bank of California

UMB            Bank

Valic/Virsco Retirement Services Co

Vanguard Group

Wachovia Bank (First Union National Bank)

Wells            Fargo

Wilmington Trust

 

**Channel: Cash Product Platform**

 

ADP            Clearing & Outsourcing

Allegheny Investments LTD

Bank of            New York (Hare & Co.)

Bear            Stearns

Brown            Investment Advisory & Trust Company

Brown            Brothers Harriman

Cadaret            Grant & Co.

Chase            Manhattan Bank

Chicago            Mercantile Exchange

 

----

| Citibank, N.A. |
|----------------|

D.A.            Davidson & Company

DB Alex            Brown/Pershing

DB            Securities

Deutsche Bank Trust Company Americas

Emmett            A. Larkin Company

Fiduciary Trust Co. – International

Huntleigh Securities

Lincoln            Investment Planning

Linsco            Private Ledger Financial Services

Mellon            Bank

Nesbitt            Burns Corp.

Penson            Financial Services

Pershing Choice Platform

Profunds Distributors, Inc.

SAMCO            Capital Markets (Fund Services, Inc.)

Saturn            & Co. (Investors Bank & Trust Company)

Smith            Moore & Company

Sungard            Financial

Turtle            & Co. (State Street)

UBS

US            Bank

William            Blair & Company

 

**Channel: Third Party Insurance Platforms**

 

Allmerica Financial Life Insurance Company

Allstate Life Insurance Company of New York

Ameritas Life Insurance Group

American General Life Insurance Company

Annuity            Investors Life Insurance Company

Columbus Life Insurance Company

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 Insurance Company

First            MetLife Investors Insurance Company

Genworth Life Insurance Company of New York

Genworth Life and Annuity Insurance Company

Great            West Life and Annuity Insurance Company

Hartford Life Insurance Company

Hartford Life and Annuity Insurance Company

ICMG            Registered Variable Life

John            Hancock Life Insurance Company of New York

John            Hancock Life Insurance Company (U.S.A.)

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 Company

MetLife            Group

Minnesota Life Insurance Company

Mutual            of America Life Insurance Company

 

----

National Life Insurance Company

Nationwide Financial Services Inc.

Nationwide Life and Annuity Company of America

Nationwide Life Insurance Company of America

New            York Life Insurance and Annuity Corporation

Phoenix            Life Insurance Company

Protective Life Insurance

Prudential Insurance Company of America

Sun            Life Assurance Company of Canada (U.S.)

Sun            Life Assurance and Annuity Company of New York

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 a 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.

**Class** **A            Purchases.**The public offering price of Class A shares            for purchasers choosing the initial sales charge alternative is the net asset value            plus a sales charge, as set forth below.

 

 

----

 

| **Amount of                            Purchase**               | **As a Percentage****of Offering                            Price*** | **As a Percentage of****Net Asset                            Value**** | **Allowed to Dealers****as a Percentage                            of****Offering Price** |
|-----------------------------------------------------------------|----------------------------------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|
|                                                            |                                                                 |                                                                   |                                                                                      |
| Less than                            $100,000                   | 2.00%                                                                | 2.04%                                                                  | 1.50%                                                                                     |
| $100,000 but less than                            $250,000      | 1.75                                                                 | 1.78                                                                   | 1.25                                                                                      |
| $250,000 but less than                            $500,000      | 1.50                                                                 | 1.52                                                                   | 1.00                                                                                      |
| $500,000 but less than $1                            million    | 1.25                                                                 | 1.26                                                                   | 1.00                                                                                      |
| $1 million but less than $5                            million  | —                                                              | —                                                                | 1.00                                                                                      |
| $5 million but less than                            $50 million | —                                                              | —                                                                | 0.50                                                                                      |
| $50 million and                            over                 | —                                                              | —                                                                | 0.25                                                                                      |

             

| * | The Offering Price includes the sales charge. |
|---|-----------------------------------------------|

| ** | Rounded to the nearest one-hundredth percent. |
|----|-----------------------------------------------|

| *** | Redemption of shares may be subject to a contingent                            deferred sales charge as discussed below. |
|-----|--------------------------------------------------------------------------------------------------------------------------|

| **** | Commission is payable by DWS-SDI as discussed                            below. |
|------|---------------------------------------------------------------------------------|

**Class A Quantity Discounts.**An investor or            the investor’s dealer or other financial services firm must notify the            Shareholder Service Agent or DWS-SDI whenever a quantity discount or reduced sales            charge is applicable to a purchase. In order to qualify for a lower sales charge, all            orders from an organized group will have to be placed through a single investment            dealer or other firm and identified as originating from a qualifying            purchaser.

**Combined Purchases.**The Fund’s Class A            shares may be purchased at the rate applicable to the sales charge discount bracket            attained by combining same day investments in Class A shares of any DWS Funds that bear            a sales charge.

**Letter of Intent.**The reduced sales charges            for Class A shares, as shown in the applicable prospectus, also apply to the aggregate            amount of purchases of Class A shares of DWS Funds that bear a sales charge made by any            purchaser within a 24-month period under a written Letter of Intent            (“Letter”) provided by DWS-SDI. The Letter, which imposes no obligation to            purchase or sell additional Class A shares, provides for a price adjustment depending            upon the actual amount purchased within such period. The Letter provides that the first            purchase following execution of the Letter must be at least 5% of the amount of the            intended purchase, and that 5% of the amount of the intended purchase normally will be            held in escrow in the form of shares pending completion of the intended purchase. If            the total investments under the Letter are less than the intended amount and thereby            qualify only for a higher sales charge than actually paid, the appropriate number of            escrowed shares are redeemed and the proceeds used toward satisfaction of the            obligation to pay the increased sales charge. The Letter for an employer-sponsored            employee benefit plan maintained on the subaccount record keeping system available            through ADP, Inc. under an alliance with DWS-SDI and its affiliates may have special            provisions regarding payment of any increased sales charge resulting from a failure to            complete the intended purchase under the Letter. A shareholder may include the value            (at the maximum offering price, which is determined by adding the maximum applicable            sales load charged to the net asset value) of all Class A shares of such DWS Funds held            of record as of the initial purchase date under the Letter as an “accumulation            credit” toward the completion of the Letter, but no price adjustment will be made            on such shares.

**Class A Cumulative Discount.**Class A shares            of the Fund may also be purchased at the rate applicable to the discount bracket            attained by adding to the cost of shares being purchased, the value of all Class A            shares of DWS Funds that bear a sales charge (computed at the maximum offering price at            the time of the purchase for which the discount is applicable) already owned by the            investor or his or her immediate family member (including the investor’s spouse            or life partner and children or stepchildren age 21 or younger).

For            purposes of the Combined Purchases, Letter of Intent and Cumulative Discount features            described above, employer sponsored employee benefit plans using the Flex subaccount            record keeping system available through ADP, Inc. under an alliance with SDI and its            affiliates may include: (a) Money Market Funds as “DWS Funds”,            (b)

 

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all            classes of shares of any DWS Fund and (c) the value of any other plan investments, such            as guaranteed investment contracts and employer stock, maintained on such subaccount            record keeping system. Once eligible plan assets under this provision reach the            $1,000,000 threshold, a later decline in assets below the $1,000,000 threshold will not            affect the plan’s ability to continue to purchase Class A shares at net asset            value.

**Class A NAV Sales.**Class A shares may be            sold at net asset value to:

| (a) | a current or former director or trustee of Deutsche or                            DWS mutual funds; |
|-----|-----------------------------------------------------------------------------------------------------|

| (b) | an employee (including the employee’s spouse or                            life partner and children or stepchildren age 21 or younger) of                            Deutsche Bank or its affiliates or of a subadvisor to any fund in the                            DWS family of funds or of a broker-dealer authorized to sell shares of                            the Fund or service agents of the Funds; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | certain professionals who assist in the promotion of DWS                            mutual funds pursuant to personal services contracts with DWS-SDI, for                            themselves or members of their families. DWS-SDI in its discretion may                            compensate financial services firms for sales of Class A shares under                            this privilege at a commission rate of 0.50% of the amount of Class A                            shares purchased; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | any trust, pension, profit-sharing or other benefit plan                            for only such persons listed under the preceding paragraphs (a) and                            (b); |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | persons who purchase such shares through bank trust                            departments that process such trades through an automated, integrated                            mutual fund clearing program provided by a third party clearing                            firm; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (f) | selected employees (including their spouses or life                            partners and children or stepchildren age 21 or younger) of banks and                            other financial services firms that provide administrative services                            related to order placement and payment to facilitate transactions in                            shares of the Fund for their clients pursuant to an agreement with                            DWS-SDI or one of its affiliates. Only those employees of such banks                            and other firms who as part of their usual duties provide services                            related to transactions in Fund shares qualify; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (g) | unit investment trusts sponsored by Ranson &                            Associates, Inc. and unitholders of unit investment trusts sponsored by                            Ranson & Associates, Inc. or its predecessors through reinvestment                            programs described in the prospectuses of such trusts that have such                            programs; |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (h) | through certain investment advisors registered under the                            Investment Advisers Act of 1940 and other financial services firms                            acting solely as agent for their clients, that adhere to certain                            standards established by DWS-SDI, including a requirement that such                            shares be sold for the benefit of their clients participating in an                            investment advisory program or agency commission program under which                            such clients pay a fee to the investment advisor or other firm for                            portfolio management or agency brokerage services. Such shares are sold                            for investment purposes and on the condition that they will not be                            resold except through redemption or repurchase by the Fund; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i) | employer sponsored employee benefit plans using the Flex                            subaccount recordkeeping system (“Flex Plans”) made                            available through ADP under an alliance with DWS-SDI and its                            affiliates, established prior to October 1, 2003, provided that the                            Flex Plan is a participant-directed plan that has not less than 200                            eligible employees; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (j) | investors investing $1 million or more, either as a lump                            sum or through the “Combined Purchases,” “Letter of                            Intent” and “Cumulative Discount” features referred                            to above (collectively, the “Large Order NAV Purchase                            Privilege”). The Large Order NAV Purchase Privilege is not                            available if another net asset value purchase privilege is                            available; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (k) | defined contribution investment only plans with a                            minimum of $1,000,000 in plan assets regardless of the amount allocated                            to the DWS funds; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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In addition, Class A shares may be sold at net asset value in connection            with:

| (l) | the acquisition of the assets of or merger or                            consolidation with another investment company, or to shareholders in                            connection with the investment or reinvestment of income and capital                            gain dividends, and under other circumstances deemed appropriate by                            DWS-SDI and consistent with regulatory requirements; and |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (m) | a direct “roll over” of a distribution from                            a Flex Plan or from participants in employer sponsored employee benefit                            plans maintained on the OmniPlus subaccount record keeping system made                            available through ADP, Inc. under an alliance with DWS-SDI and its                            affiliates into a DWS Scudder IRA; |
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| (n) | reinvestment of fund dividends and                            distributions; |
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| (o) | exchanging an investment in Class A shares of another                            fund in the DWS family of funds for an investment in the                            fund. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Class A shares also may be purchased at net asset value in any amount by            members of the plaintiff class in the proceeding known as Howard and Audrey Tabankin,            et al. v. Kemper Short-Term Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL).            This privilege is generally non-transferable and continues for the lifetime of            individual class members and for a ten-year period for non-individual class members. To            make a purchase at net asset value under this privilege, the investor must, at the time            of purchase, submit a written request that the purchase be processed at net asset value            pursuant to this privilege specifically identifying the purchaser as a member of the            “Tabankin Class.” Shares purchased under this privilege will be maintained            in a separate account that includes only shares purchased under this privilege. For            more details concerning this privilege, class members should refer to the Notice of (i)            Proposed Settlement with Defendants; and (ii) Hearing to Determine Fairness of Proposed            Settlement, dated August 31, 1995, issued in connection with the aforementioned court            proceeding. For sales of Fund shares at net asset value pursuant to this privilege,            DWS-SDI may in its discretion pay investment dealers and other financial services firms            a concession, payable quarterly, at an annual rate of up to 0.25% of net assets            attributable to such shares maintained and serviced by the firm. A firm becomes            eligible for the concession based upon assets in accounts attributable to shares            purchased under this privilege in the month after the month of purchase and the            concession continues until terminated by DWS-SDI. The privilege of purchasing Class A            shares of the Fund at net asset value under this privilege is not available if another            net asset value purchase privilege also applies.

**Class B Purchases.**Class B shares of the            Fund are offered at net asset value. No initial sales charge is imposed. Class B            shares sold without an initial sales charge allow the full amount of the            investor’s purchase payment to be invested in Class B shares for his or her            account. Class B shares have a contingent deferred sales charge of 4.00% that declines            (for shares sold within six years of purchase) and Rule 12b-1 fees, as described in the            Funds’ Prospectuses and SAI. Class B shares automatically convert to Class A            shares after six years.

**Class C Purchases.**Class C shares of the            fund are offered at net asset value. No initial sales charge is imposed, which allows            the full amount of the investor’s purchase payment to be invested in Class C            shares for his or her account. Class C shares are subject to a contingent deferred            sales charge of 1.00% (for shares sold within one year of purchase) and Rule 12b-1            fees, as described in the Fund’s Prospectuses and this SAI.

**Multi-Class Suitability.**DWS-SDI has            established the following procedures regarding the purchase of Class A, Class B and            Class C shares. Orders to purchase Class B shares of $100,000 or more and orders to            purchase Class C shares of $500,000 or more will be declined with the exception of            orders received from firms acting for clients whose shares will be held in an omnibus            account and employer-sponsored employee benefit plans using the Flex subaccount record            keeping system (“Flex System”) maintained by ADP under an alliance with            DWS-SDI and its affiliates (“DWS Scudder Flex Plans”).

The            following provisions apply to DWS Scudder Flex Plans.

| a. | *Class B Share DWS Scudder Flex Plans.*Class B shares have not been sold to DWS Scudder Flex                            Plans that were established on the Flex System after October 1, 2003.                            Orders to purchase Class B shares for a |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

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DWS Scudder Flex Plan established on the Flex System prior to October 1,            2003 that has regularly been purchasing Class B shares will be invested instead in            Class A shares at net asset value when the combined subaccount value in DWS Funds or            other eligible assets held by the plan is $100,000 or more. This provision will be            imposed for the first purchase after eligible plan assets reach the $100,000 threshold.            A later decline in assets below the $100,000 threshold will not affect the plan’s            ability to continue to purchase Class A shares at net asset value.

| b. | *Class C Share DWS Scudder Flex Plans.*Orders to purchase Class C shares for a DWS Scudder Flex                            Plan, regardless of when such plan was established on the Flex System,                            will be invested instead in Class A shares at net asset value when the                            combined subaccount value in DWS Funds or other eligible assets held by                            the plan is $1,000,000 or more. This provision will be imposed for the                            first purchase after eligible plan assets reach the $1,000,000                            threshold. A later decline in assets below the $1,000,000 threshold                            will not affect the plan’s ability to continue to purchase Class                            A shares at net asset value. |
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| c. | *Class C Share DWS Scudder Choice Plans.*Orders to purchase Class C shares for a DWS Scudder                            Choice Plan that has been regularly purchasing Class C shares will be                            invested instead in Class A shares at net asset value when the combined                            subaccount value in DWS Funds or other eligible assets held by the plan                            is $1,000,000 or more. This provision will be imposed for purchases                            made beginning in the month after eligible plan assets reach the                            $1,000,000 threshold. In addition, as a condition to being permitted to                            use the Choice Plan platform, plans must agree that, within one month                            after eligible plan assets reach the $1,000,000 threshold, all existing                            Class C shares held in the plan will be automatically converted to                            Class A shares. |
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The            procedures above do not reflect in any way the suitability of a particular class of            shares for a particular investor and should not be relied upon as such. A suitability            determination must be made by investors with the assistance of their financial            representative.

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.

**Purchase of Institutional Class Shares.**Information on how to buy Institutional Class shares is set forth in the            section entitled “Buying and Selling Shares” in the Fund’s            prospectus. The following supplements that information. The minimum initial investment            for Institutional Class shares is $1,000,000. There is no minimum subsequent investment            requirement for the Institutional Class shares. This minimum amount may be changed at            any time in management’s discretion.

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

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

It            is our policy to offer purchase privileges to current or former directors or trustees            of the Deutsche or DWS Scudder mutual funds, employees, their spouses or life partners            and children or step-children age 21 or younger of Deutsche Bank or its affiliates or a            sub-adviser to any fund in the DWS family of funds or a broker-dealer authorized to            sell shares of the funds. Qualified individuals will generally be allowed to purchase            shares in the class

 

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with the lowest expense ratio, usually the Institutional            Class shares. If a Fund does not offer Institutional Class shares, these            individuals will be allowed to buy Class A shares at NAV. The Funds also reserve            the right to waive the minimum account balance requirement for employee and director            accounts. Fees generally charged to IRA accounts will be charged to accounts of            employees and directors.

***Redemptions***

**Redemption fee.**The Fund imposes a            redemption fee of 2% of the total redemption amount (calculated at net asset value,            without regard to the effect of any contingent deferred sales charge; any contingent            deferred sales charge is also assessed on the total redemption amount without regard to            the assessment of the 2% redemption fee) on all Fund shares redeemed or exchanged            within 15 days of buying them (either by purchase or exchange). The redemption fee is            paid directly to the Fund, and is designed to encourage long-term investment and to            offset transaction and other costs associated with short-term or excessive trading. For            purposes of determining whether the redemption fee applies, shares held the longest            time will be treated as being redeemed first and shares held the shortest time will be            treated as being redeemed last. The redemption fee is applicable to Fund shares            purchased either directly or through a financial intermediary, such as a broker-dealer.            Transactions through financial intermediaries typically are placed with the Fund on an            omnibus basis and include both purchase and sale transactions placed on behalf of            multiple investors. These purchase and sale transactions are generally netted against            one another and placed on an aggregate basis; consequently the identities of the            individuals on whose behalf the transactions are placed generally are not known to the            Fund. For this reason, the Fund has undertaken to notify financial intermediaries of            their obligation to assess the redemption fee on customer accounts and to collect and            remit the proceeds to the Fund. However, due to operational requirements, the            intermediaries’ methods for tracking and calculating the fee may be inadequate or            differ in some respects from the Fund’s.

**General.**Policies and procedures affecting            transactions in Fund shares can be changed at any time without notice, subject to            applicable law. Transactions may be contingent upon proper completion of application            forms and other documents by shareholders and their receipt by the Fund’s agents.            Transaction delays in processing (and changing account features) due to circumstances            within or beyond the control of the Fund and its agents may occur. Shareholders (or            their financial service firms) are responsible for all losses and fees resulting from            bad checks, cancelled orders or the failure to consummate transactions effected            pursuant to instructions reasonably believed to be genuine.

A            distribution will be reinvested in shares of the same class if the distribution check            is returned as undeliverable.

Orders will be confirmed at a price based on the net asset value            (including any applicable sales charge) of the Fund next determined after receipt in            good order by DWS-SDI of the order accompanied by payment. However, orders received by            dealers or other financial services firms prior to the determination of net asset value            and received in good order by DWS-SDI prior to the close of its business day will be            confirmed at a price based on the net asset value effective on that day (“trade            date”).

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

A            request for repurchase (confirmed redemption) may be communicated by a shareholder            through a financial services firm to DWS-SDI, which firms must promptly submit orders            to be effective.

Redemption 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,

 

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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 the            Fund or the Shareholder Service Agent deems it appropriate under then-current market            conditions. The ability to send wires is limited by the business hours and holidays of            the firms involved. The Fund is not responsible for the efficiency of the federal wire            system or the account holder’s financial services firm or bank. The account            holder is responsible for any charges imposed by the account holder’s firm or            bank. To change the designated account to receive wire redemption proceeds, send a            written request to the Fund’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 the Fund’s shares at the offering price (net asset            value plus, in the case of Class A shares, the initial sales charge) may provide            for the payment from the owner’s account of any requested dollar amount to be            paid to the owner or a designated payee monthly, quarterly, semiannually or annually.            The $5,000 minimum account size is not applicable to IRAs. The minimum periodic payment            is $50. The maximum annual rate at which shares, subject to CDSC may be redeemed is 12%            of the net asset value of the account. Shares are redeemed so that the payee should            receive payment approximately on the first of the month. Investors using this Plan must            reinvest Fund distributions.

Non-retirement plan shareholders may establish an Automatic Withdrawal            Plan (the “Plan”) to receive monthly, quarterly or periodic redemptions            from his or her account for any designated amount of $50 or more. Shareholders may            designate which day they want the automatic withdrawal to be processed. The check            amounts may be based on the redemption of a fixed dollar amount, fixed share amount,            percent of account value or declining balance. The Plan provides for income dividends            and capital gains distributions, if any, to be reinvested in additional shares. Shares            are then liquidated as necessary to provide for withdrawal payments. Since the            withdrawals are in amounts selected by the investor and have no relationship to yield            or income, payments received cannot be considered as yield or income on the investment            and the resulting liquidations may deplete or possibly extinguish the initial            investment and any reinvested dividends and capital gains distributions. Any such            requests must be received by the transfer agent ten days prior to the date of the first            automatic withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the            shareholder, the Trust or its agent on written notice, and will be terminated when all            Fund shares under the Plan have been liquidated or upon receipt by the Trust of notice            of death of the shareholder.

The            purchase of Class A shares while participating in a systematic withdrawal plan            will ordinarily be disadvantageous to the investor because the investor will be paying            a sales charge on the purchase of shares at the same time that the investor is            redeeming shares upon which a sales charge may have already been paid. Therefore, the            Fund will not knowingly permit additional investments of less than $2,000 if the            investor is at the same time making systematic withdrawals.

**Contingent Deferred Sales Charge (CDSC).**The following example will illustrate the operation of the CDSC. Assume            that an investor makes a single purchase of $10,000 of the Fund’s Class B shares            and that 16 months later the value of the shares has grown by $1,000 through reinvested            dividends and by an additional $1,000 of share appreciation to a total of $12,000. If            the investor were then to redeem the entire $12,000 in share value, the CDSC would be            payable only with respect to $10,000 because neither the $1,000 of reinvested dividends            nor the $1,000 of

 

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share appreciation is subject to the charge. The charge would be at the            rate of 3.00% ($300) because it was in the second year after the purchase was            made.

The            rate of the CDSC is determined by the length of the period of ownership. Investments            are tracked on a monthly basis. The period of ownership for this purpose begins the            first day of the month in which the order for the investment is received. For example,            an investment made in March of the year of investment will be eligible for the second            year’s charge if redeemed on or after March of the following year. In the event            no specific order is requested when redeeming shares subject to a CDSC, the redemption            will be made first from shares representing reinvested dividends and then from the            earliest purchase of shares. DWS-SDI receives any CDSC directly. The charge will not be            imposed upon redemption of reinvested dividends or share appreciation.

The            Class A CDSC will be waived in the event of:

| (a) | redemptions by a participant-directed qualified                            retirement plan described in Code Section 401(a), a                            participant-directed non-qualified deferred compensation plan described                            in Code Section 457 or a participant-directed qualified retirement plan                            described in Code Section 403(b)(7) which is not sponsored by a K-12                            school district; |
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| (b) | redemptions by employer-sponsored employee benefit plans                            using the subaccount record keeping system made available through ADP,                            Inc. under an alliance with DWS-SDI and its affiliates; |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | redemption of shares of a shareholder (including a                            registered joint owner) who has died; |
|-----|---------------------------------------------------------------------------------------------------------------------|

| (d) | redemption of shares of a shareholder (including a                            registered joint owner) who after purchase of the shares being redeemed                            becomes totally disabled (as evidenced by a determination by the                            federal Social Security Administration); |
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| (e) | redemptions under the Fund’s Automatic Withdrawal                            Plan at a maximum of 12% per year of the net asset value of the                            account; and |
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| (f) | redemptions of shares whose dealer of record at the time                            of the investment notifies DWS-SDI that the dealer waives the                            discretionary commission applicable to such Large Order NAV                            Purchase. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The            Class B CDSC will be waived for the circumstances set forth in items (c), (d) and (e)            for Class A shares. In addition, this CDSC will be waived:

| (g) | for redemptions made pursuant to any IRA systematic                            withdrawal based on the shareholder’s life expectancy including,                            but not limited to, substantially equal periodic payments described in                            Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59                            1/2; |
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| (h) | for redemptions to satisfy required minimum                            distributions after age 70 1/2 from an IRA account (with the maximum                            amount subject to this waiver being based only upon the                            shareholder’s DWS Scudder IRA accounts); and |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i) | in connection with the following redemptions of shares                            held by employer sponsored employee benefit plans maintained on the                            subaccount record keeping system made available through ADP under an                            alliance with DWS-SDI and its affiliates: (1) to satisfy participant                            loan advances (note that loan repayments constitute new purchases for                            purposes of the CDSC and the conversion privilege), (2) in connection                            with retirement distributions (limited at any one time to 12% of the                            total value of plan assets invested in the Fund), (3) in connection                            with distributions qualifying under the hardship provisions of the                            Internal Revenue Code, (4) representing returns of excess                            contributions to such plans and (5) in connection with direct                            “roll over” distributions from a Flex Plan into a DWS                            Scudder IRA under the Class A net asset value purchase                            privilege. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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The            Class C CDSC will be waived for the circumstances set forth in items (b), (c), (d) and            (e) for Class A shares and for the circumstances set forth in items (g) and (h) for            Class B shares. In addition, this CDSC will be waived for:

| (j) | redemption of shares by an employer sponsored employee                            benefit plan that offers funds in addition to DWS Funds and whose                            dealer of record has waived the advance of the first year                            administrative service and distribution fees applicable to such shares                            and agrees to receive such fees quarterly, and |
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| (k) | redemption of shares purchased through a                            dealer-sponsored asset allocation program maintained on an omnibus                            record-keeping system provided the dealer of record had waived the                            advance of the first year administrative services and distribution fees                            applicable to such shares and has agreed to receive such fees                            quarterly. |
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**In-kind Redemptions.**The Fund reserves the            right to honor any request for redemption or repurchase by making payment in whole or            in part in securities. These securities will be chosen by the fund and valued as they            are for purposes of computing the fund’s net asset value. A shareholder may incur            transaction expenses in converting these securities to cash.

The            Fund reserves the right to redeem all of its shares, if the Fund’s Board of            Trustees votes to liquidate and terminate the Fund.

**Consideration for Purchases of Shares**

The            Trust generally will not issue shares of the Fund for consideration other than cash. At            the Trust’s sole discretion, however, it may issue Fund shares for consideration            other than cash in connection with an acquisition of portfolio securities or pursuant            to a bona fide purchase of assets, merger or other reorganization, provided the            securities meet the investment objectives and policies of the Fund and are acquired by            the Fund for investment and not for resale. An exchange of securities for Fund shares            will generally be a taxable transaction to the shareholder.

***Exchanges***

Shareholders may request a taxable exchange of their shares for shares            of the corresponding class of other DWS Funds, subject to the provisions below. For            purposes of calculating any CDSC, amounts exchanged retain their original cost and            purchase date.

Shares of money market funds that were acquired by purchase (not            including shares acquired by dividend reinvestment) are subject to the applicable sales            charge on exchange. Certain series of DWS Target Fund are available on exchange only            during the offering period for such series as described in the applicable prospectus.            Tax Free Money Fund — Investment Class, NY Tax-Free Money Fund —Investment            Class, Treasury Money Fund —Investment Class, Money Market Fund —            Investment Class, Cash Management Fund Institutional, Cash Reserves Fund Institutional,            Treasury Money Fund — Institutional Class, Cash Reserve Fund, Inc. Prime Series,            Tax-Exempt California Money Market Fund, Cash Account Trust and Investors Cash Trust            are available on exchange but only through a financial services firm having a services            agreement with DWS-SDI. All exchanges among money funds must meet applicable investor            eligibility and investment requirements. Exchanges may only be made for funds that are            available for sale in the shareholder’s state of residence. Currently, Tax-Exempt            California Money Market Fund is available for sale only in California.

Shareholders must obtain prospectuses of the funds they are exchanging            into from dealers, other firms or DWS-SDI. Exchanges are taxable transactions for            federal income tax purposes.

**Automatic Exchange Plan.**The owner of            $1,000 or more of any class of shares of a DWS Fund may authorize the automatic            exchange of a specified amount ($50 minimum) of such shares for shares of the same            class of another such DWS Fund. Exchanges will be made automatically until the            shareholder or the Fund terminates the privilege. Exchanges are subject to the terms            and conditions described above.

 

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**Multi-Class** **Conversions.**For purposes of conversion to            Class A shares, shares purchased through the reinvestment of dividends and other            distributions paid with respect to Class B shares in a shareholder’s Fund            account will be converted to Class A shares on a pro rata basis.

The            Fund has authorized one or more financial service institutions, including certain            members of the NASD other than the Distributor (“financial institutions”),            to accept purchase and redemption orders for the Fund’s shares. Such financial            institutions may also designate other parties, including plan administrator            intermediaries, to accept purchase and redemption orders on the Fund’s behalf.            Orders for purchases or redemptions will be deemed to have been received by the Fund            when such financial institutions or, if applicable, their authorized designees accept            the orders. Subject to the terms of the contract between the Fund and the financial            institution, ordinarily orders will be priced at the Fund’s net asset value next            computed after acceptance by such financial institution or its authorized designees and            accepted by the Fund. Further, if purchases or redemptions of the Fund’s shares            are arranged and settlement is made at an investor’s election through any other            authorized financial institution, that financial institution may, at its discretion,            charge a fee for that service. The Board of Trustees and the Distributor, also the            Fund’s principal underwriter, each has the right to limit the amount of purchases            by, and to refuse to sell to, any person. The Trustees and the Distributor may suspend            or terminate the offering of shares of the Fund at any time for any reason.

**DIVIDENDS**

The            Fund intends to accrue daily and distribute monthly substantially all of its net            investment income (excluding short-term capital gains) resulting from investment            activity. Distributions, if any, of net realized capital gains (short-term and            long-term) will normally be made in December. Although the Fund does not have a policy            of maintaining a stable dividend, the Fund typically seeks to avoid month-to-month            fluctuations in the dividend. As a result, there is a risk that the Fund’s            dividends in a year may exceed its taxable income, which would result in a return of            capital to shareholders.

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

Dividends paid by the Fund with respect to each class of its shares will            be calculated in the same manner, at the same time and on the same day.

The            level of income dividends per share (as a percentage of net asset value) will be lower            for Class B and Class C shares than for Class A shares primarily as a            result of the distribution services fee applicable to Class B and Class C            shares. Distributions of capital gains, if any, will be paid in the same amount for            each class.

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

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

| 2. | To receive income dividends and capital gain                            distributions in cash. |
|----|------------------------------------------------------------------------------------------------|

Dividends and distributions will be reinvested in shares of the same            class of the Fund unless shareholders indicate in writing that they wish to receive            them in cash or in shares of other DWS Funds with multiple classes of shares or DWS            Funds as provided in the prospectuses. To use this privilege of investing dividends and            distributions of the Fund in shares of another DWS Fund, shareholders must maintain a            minimum account value of $1,000 in the Fund distributing the dividends. The Fund will            reinvest dividend and distribution checks (and future dividends and distributions) in            shares of that same class if checks are returned as undeliverable. Dividends and other            distributions of the Fund in the aggregate amount of $10 or less are automatically            reinvested in shares of the same Fund and class unless the shareholder requests in            writing that a check be issued for that particular distribution.

 

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If            an investment is in the form of a retirement plan, all dividends and capital gains            distributions must be reinvested into the shareholder’s account.

If            a shareholder has elected to reinvest any dividends and/or other distributions, such            distributions will be made in shares of the Fund and confirmations will be mailed to            each shareholder. If a shareholder has chosen to receive cash, a check will be sent.            Dividends of investment company taxable income and distributions of net realized            capital gains are taxable, whether made in shares or cash.

Each dividend distribution is accompanied by a brief explanation of the            form and character of the dividend or distribution. The characterization of dividends            and distributions on such correspondence may differ from the characterization for            federal tax purposes. In January of each year the Fund issues to each shareholder            a statement of the federal income tax status of all dividends and distributions in the            prior calendar year.

The            Fund may at any time vary its foregoing dividend and 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, the Fund may make additional            dividends of net investment income or distributions of capital gain net income in order            to satisfy the minimum distribution requirements contained in the Code.

**NET ASSET VALUE**

The            net asset value of shares of the 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 the Fund attributable to the shares            of that class, less all liabilities attributable to that class, by the total number of            shares of that class outstanding. The per share net asset value may be lower for            certain classes of the Fund because of higher expenses borne by these            classes.

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

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

 

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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 NYSE. For stock index futures contracts which trade on the Chicago            Mercantile Exchange, closing settlement prices are normally available at approximately            4:20 Eastern time. If no settlement price is available, the last traded price on such            exchange will be used.

If            market quotations for a portfolio asset are not readily available or the value of a            portfolio asset as determined in accordance with Board approved procedures does not            represent the fair market value of the portfolio asset, the value of the portfolio            asset is taken to be an amount which, in the opinion of the Fund’s Pricing            Committee (or, in some cases, the Board’s Valuation Committee), represents fair            market value. The value of other portfolio holdings owned by the Fund is determined in            a manner which is intended to fairly reflect the fair market value of the asset on the            valuation date, based on valuation procedures adopted by the Fund’s Board and            overseen primarily by the Fund’s Pricing Committee.

**TAXES**

The            following is intended to be a general summary of certain federal income tax            consequences of investing in the Fund. It is not intended as a complete discussion of            all such consequences, nor does it purport to deal with all categories of investors.            Investors are therefore advised to consult with their tax advisors before making an            investment in the Fund.

**Taxation of the Fund.**The Fund has elected            to be treated as a regulated investment company under Subchapter M of the Code and has            qualified as such since its inception. The Fund intends to continue to so qualify in            each taxable year as required under the Code in order to avoid payment of federal            income tax at the fund level. In order to qualify as a regulated investment company,            the Fund must meet certain requirements regarding the source of its income, the            diversification of its assets, and the distribution of its income:

| (a) | The Fund must derive at least 90% of its gross income in                            each taxable year from dividends, interest, payments with respect to                            securities loans, and gains from the sale or other disposition of stock                            or, securities or foreign currencies, other income (including but not                            limited to gains from options, futures, or forward contracts) derived                            with respect to its business of investing in such stock, securities, or                            currencies, and net income derived from interests in “qualified                            publicly traded partnerships”                            (*i*.*e*., partnerships that are traded on an                            established securities market or tradable on a secondary market, other                            than partnerships that derive 90% of their income from interest,                            dividends, capital gains, and other traditional permitted mutual fund                            income); |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | The Fund must diversify its holdings so that, at the end                            of each quarter of its taxable year, (i) at least 50% of the market                            value of the Fund’s assets is represented by cash and cash items,                            US government securities, securities of other regulated investment                            companies, and other securities limited in respect of any one issuer of                            such other securities to a value not greater than 5% of the value of                            the Fund’s total assets and to not more than 10% of the                            outstanding voting securities of such issuer, and (ii) not more than                            25% of the value of its assets is invested in the securities (other                            than those of the US government or other regulated investment                            companies) of any one issuer, of two or more issuers of which the Fund                            owns 20% or more of the voting securities 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 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | The Fund is required to distribute to its shareholders                            at least 90% of its taxable and tax-exempt net investment income                            (including the excess of net short-term capital gain over net long-term                            capital losses) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

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and generally is not subject to federal income tax to the extent that it            distributes annually such net investment income and net realized capital gains in the            manner required under the Code. The Fund will be subject to income tax at regular            corporation rates on any taxable income or gains that it does not distribute to its            shareholders.

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

As            a regulated investment company, the Fund will not be subject to U.S. Federal income tax            on the portion of its taxable investment income and capital gains that it distributes            to its shareholders, provided that it satisfies a minimum distribution requirement, as            described above.

If            for any taxable year the Fund does not qualify for the special federal income tax            treatment afforded regulated investment companies, all of its taxable income will be            subject to federal income tax at regular corporate rates (without any deduction for            distributions to its shareholders), and all distributions from earnings and profits,            including any distributions of net tax-exempt income and net long-term capital gains,            will be taxable to shareholders as ordinary income. However, such dividends will be            eligible (i) to be treated as qualified dividend income in the case of shareholders            taxed as individuals and (ii) for the dividends received deduction in the case of            corporate shareholders. Moreover, if the Fund fails to qualify as a regulated            investment company in any year, it must pay out its earnings and profits accumulated in            that year in order to qualify again as a regulated investment company. If the Fund            fails to qualify as a regulated investment company for a period greater than two            taxable years, the Fund may be required to recognize any net built-in gains with            respect to certain of its assets            (*i.e*., the excess of the aggregate            gains, including items of income, over aggregate losses that would have been realized            with respect to such assets if the Fund had been liquidated) if it qualifies as a            regulated investment company in a subsequent year.

The            Fund is subject to a 4% nondeductible excise tax on amounts required to be but that are            not distributed under a prescribed formula. The formula requires payment to            shareholders during a calendar year of distributions representing at least 98% of the            Fund’s taxable ordinary income for the calendar year and at least 98% of the            excess of its capital gains over capital losses realized during the one-year period            ending October 31 (in most cases) of such year as well as amounts that were            neither distributed nor taxed to the Fund during the prior calendar year. Although the            Fund’s distribution policies should enable it to avoid excise tax liability, the            Fund may retain (and be subject to income or excise tax on) a portion of its capital            gain or other income if it appears to be in the interest of the Fund.

**Taxation of Fund distributions**.            Distributions from the Fund generally will be taxable to shareholders as ordinary            income to the extent derived from taxable investment income and net short-term capital            gains. However, any dividends paid by the Fund that are properly designated as            exempt-interest dividends will not be subject to regular federal income tax.            Distributions of net capital gains (that is, the excess of net gains from the sale of            capital assets held more than one year over net losses from the sale of capital assets            held for not more than one year) properly designated as capital gain dividends will be            taxable to shareholders as long-term capital gain, regardless of how long a shareholder            has held the shares in the Fund.

Long-term capital gain rates applicable to individuals have been            temporarily reduced—in general, to 15% with a lower rate applying to taxpayers in            the 10% and 15% rate brackets—for taxable years beginning before January 1,            2011.

For            taxable years beginning on or before January 1, 2011, “qualified dividend            income” received by an individual will be taxed at the rates applicable to            long-term capital gain. Qualified dividend income does not include interest from debt            securities. Because the Fund invests primarily in tax-exempt bonds and are not            permitted to invest in equity securities, the Fund does not expect any portion of Fund            distributions to be treated as qualified dividend income.

If            the Fund retains any net capital gain, the Fund may designate the retained amount as            undistributed capital gains in a notice to its shareholders who, if subject to US            federal income tax on long-term capital gains, (i) will be required to include in            income for federal income tax purposes, as long-term capital gain, their shares of such            undistributed

 

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amount, and (ii) will be entitled to credit their proportionate            shares of the tax paid by the Fund against their US federal income tax liabilities, if            any, and to claim refunds to the extent the credit exceeds such liabilities.

For            US federal income tax purposes, the tax basis of shares owned by a shareholder of the            Fund will be increased by an amount equal under current law to 65% of the amount of            undistributed net capital gain included in the shareholder’s gross            income.

Capital gains distributions may be reduced if Fund capital loss            carryforwards are available. Any capital loss carryforwards and any post-October loss            deferrals to which the Fund is entitled are disclosed in the Fund’s annual and            semi-annual reports to shareholders.

Distributions in excess of the Fund’s current and accumulated            earnings and profits will, as to each shareholder, be treated as a tax-free return of            capital to the extent of a shareholder’s basis in his shares of the Fund, and as            a capital gain thereafter (if the shareholder holds his shares of the Fund as capital            assets). Shareholders receiving dividends or distributions in the form of additional            shares should be treated for U.S. Federal income tax purposes as receiving a            distribution in an amount equal to the amount of money that the shareholders receiving            cash dividends or distributions will receive, and should have a cost basis in the            shares received equal to such amount. Investors should be careful to consider the tax            implications of buying shares just prior to a distribution. The price of shares            purchased at that time includes the amount of the forthcoming distribution. Those            purchasing just prior to a distribution will receive a partial return of capital upon            the distribution, which will nevertheless be taxable to them.

**Sale or redemption of shares**. The sale,            exchange or redemption of Fund shares 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 1 year. Otherwise, the            gain or loss on the taxable disposition of Fund shares will be treated as short-term            capital 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 Fund shares will be disallowed if other substantially            identical shares of the 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.

**Tax effects of certain transactions**. The            Fund’s use of options, futures contracts, forward contracts (to the extent            permitted) and certain other Strategic Transactions will be subject to special tax            rules (including mark-to-market, constructive sale, straddle, wash sale, short sale and            other rules), the effect of which may be to accelerate income, defer losses, cause            adjustments in the holding periods of portfolio securities, convert capital gains into            ordinary income and convert short-term capital losses into long-term capital losses.            These rules could therefore affect the amount, timing and character of distributions to            investors. These provisions also (a) will require the Fund to mark-to-market certain            types of the positions in its portfolio (i.e., treat them as if they were closed out at            the end of each year) and (b) may cause the Fund to recognize income without receiving            cash with which to pay dividends or make distributions in amounts necessary to satisfy            the distribution requirements for avoiding income and excise taxes. The Fund will            monitor its transactions, will make the appropriate tax elections and will make the            appropriate entries in its books and records when it acquires any foreign currency,            forward contract, futures contract or hedged investment in order to mitigate the effect            of these rules and prevent disqualification of the Fund as a regulated investment            company.

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

 

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The            Fund’s investment in zero coupon bonds and other debt obligations having original            issue discount may cause the fund to recognize taxable income in excess of any cash            received from the investment.

As            a result of entering into swap contracts, the Fund may make or receive periodic net            payments. The Fund may also make or receive a payment when a swap is terminated prior            to maturity through an assignment of the swap or other closing transaction. Periodic            net payments will generally constitute ordinary income or deductions and may reduce net            tax-exempt income, while termination of a swap will generally result in capital gain or            loss (which will be a long-term capital gain or loss if the Fund has been a party to            the swap for more than one year). The tax treatment of many types of credit default            swaps is uncertain.

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

Certain types of income received by the Fund from real estate investment            trusts (“REITs”), real estate mortgage investment conduits            (“REMICs”), taxable mortgage pools or other investments may cause the Fund            to designate some or all of its distributions as “excess inclusion income.”            To Fund shareholders such excess inclusion income may (1) constitute taxable income, as            “unrelated business taxable income” (“UBTI”) for those            shareholders who would otherwise be tax-exempt such as individual retirement accounts,            401(k) accounts, Keogh plans, pension plans and certain charitable entities; (2) not be            offset against net operating losses for tax purposes; (3) not be eligible for reduced            US withholding for non-US shareholders even from tax treaty countries; and (4) cause            the Fund to be subject to tax if certain “disqualified organizations” as            defined by the Code are Fund shareholders. In addition, a tax-exempt shareholder could            realize UBTI by virtue of its investment in the Fund if shares in the Fund constitute            debt-financed property in the hands of the tax-exempt shareholder within the meaning of            Code Section 514(b). If a charitable remainder trust (as defined in Code Section 664)            realizes any UBTI for a taxable year, it will lose its tax-exempt status for the            year.

Investments in debt obligations that are at risk of or in default            present special tax issues for the Fund. Tax rules are not entirely clear about issues            such as when the Fund may cease to accrue interest, original issue discount, or market            discount, when and to what extent deductions may be taken for bad debts or worthless            securities, how payments received on obligations in default should be allocated between            principal and income, and whether exchanges of debt obligations in a workout context            are taxable. These and other issues will be addressed by the Fund, to the extent it            invests in such securities, in order to reduce the risk of distributing insufficient            income to preserve its status as a regulated investment company and to seek to avoid            having to pay federal income or excise tax.

The            Fund may purchase municipal securities together with the right to resell the securities            to the seller at an agreed upon price or yield within a specified period prior to the            maturity date of the securities. Such a right to resell is commonly known as a            “put” and is also referred to as a “standby commitment.” The            Fund may pay for a standby commitment either separately, in cash, or in the form of a            higher price for the securities which are acquired subject to the standby commitment,            thus increasing the cost of securities and reducing the yield otherwise available.            Additionally, the Fund may purchase beneficial interests in municipal securities held            by trusts, custodial arrangements or partnerships and/or combined with third-party puts            or other types of features such as interest rate swaps; those investments may require            the Fund to pay “tender fees” or other fees for the various features            provided. The IRS has issued a revenue ruling to the effect that, under specified            circumstances, a regulated investment company will be the owner of tax-exempt municipal            obligations acquired subject to a put option. The IRS has also issued private letter            rulings to certain taxpayers (which do not serve as precedent for other taxpayers) to            the effect that tax-exempt interest received by a regulated investment company with            respect to such obligations will be tax-

 

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exempt in the hands of the company and may be distributed to its            shareholders as exempt-interest dividends. The IRS has subsequently announced that it            will not ordinarily issue advance ruling letters as to the identity of the true owner            of property in cases involving the sale of securities or participation interests            therein if the purchaser has the right to cause the security, or the participation            interest therein, to be purchased by either the seller or a third party. The Fund            intends to take the position that it is the owner of any municipal obligations acquired            subject to a standby commitment or other third party put and that tax-exempt interest            earned with respect to such municipal obligations will be tax-exempt in its hands.            There is no assurance that the IRS will agree with such position in any particular            case. Additionally, the federal income tax treatment of certain other aspects of these            investments, including the treatment of tender fees paid by the Fund, in relation to            various regulated investment company tax provisions is unclear. However, the Advisor            intends to manage the Fund’s portfolio in a manner designed to minimize any            adverse impact from the tax rules applicable to these investments.

Interest on indebtedness incurred directly or indirectly to purchase or            carry shares of the Fund will not be deductible to the extent it is deemed related to            exempt-interest dividends paid by the Fund. If a shareholder receives exempt-interest            dividends with respect to any share of the Fund and if the share is held by the            shareholder for six months or less, then any loss on the sale or exchange of the share            may, to the extent of the exempt-interest dividends, be disallowed. In addition, the            Code may require a shareholder that receives exempt-interest dividends to treat as            taxable income a portion of certain otherwise non-taxable social security and railroad            retirement benefit payments. Furthermore, a portion of any exempt-interest dividend            paid by the Fund that represents income derived from certain revenue or private            activity bonds held by the Fund may not retain its tax-exempt status in the hands of a            shareholder who is a “substantial user” of a facility financed by such            bonds, or a “related person” thereof. Moreover, some or all of the            exempt-interest dividends distributed by the Fund may be a specific preference item, or            a component of an adjustment item, for purposes of the Federal individual and corporate            alternative minimum taxes. In addition, the receipt of dividends and distributions from            the Fund may affect a foreign corporate shareholder’s Federal “branch            profits” tax liability and the Federal “excess net passive income”            tax liability of a shareholder of a Subchapter S corporation. Shareholders should            consult their own tax advisors as to whether they are (i) “substantial            users” with respect to a facility or “related” to such users within            the meaning of the Code or (ii) subject to a Federal alternative minimum tax, the            Federal “branch profits” tax, or the Federal “excess net passive            income” tax.

Shareholders that are required to file tax returns are required to            report tax-exempt interest income, including exempt-interest dividends, on their            federal income tax returns. The Fund will inform shareholders of the federal income tax            status of its distributions after the end of each calendar year, including the amounts            that qualify as exempt-interest dividends and any portions of such amounts that            constitute tax preference items under the federal alternative minimum tax. Shareholders            who have not held shares of the Fund for a full taxable year may have designated as            tax-exempt or as a tax preference item a percentage of their distributions which is not            exactly equal to a proportionate share of the amount of tax-exempt interest or tax            preference income earned during the period of their investment in the Fund.            Shareholders should consult their tax advisors for more information.

Furthermore, if shares of the Fund are redeemed or exchanged by a            shareholder after having been held for less than 91 days and (1) some or all of            the redemption proceeds are reinvested in the shares of the same Fund or another mutual            fund pursuant to the reinvestment privilege, or (2) such shares are exchanged for            shares of another mutual fund pursuant to the exchange privilege, all or a portion of            the sales charge paid on the shares that are redeemed or exchanged will not be included            in their tax basis under the Code to the extent a sales charge that would otherwise            apply to the shares received is reduced pursuant to the reinvestment or exchange            privilege. In either case, the portion of the sales charge not included in the tax            basis of the shares redeemed or surrendered in an exchange is included in the tax basis            of the shares acquired in the reinvestment or exchange.

**Other tax considerations**. Under the backup            withholding provisions of the Code, redemption proceeds as well as taxable            distributions may be subject to federal income tax withholding for certain            shareholders, including those who fail to furnish the Fund with their taxpayer            identification numbers and certifications as to their tax status.

Shareholders of the Fund may be subject to state and local taxes on            distributions received from the Fund and on redemptions of the Fund’s            shares.

 

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

If            a shareholder recognizes a loss with respect to the Fund’s shares of $2 million            or more for an individual shareholder or $10 million or more for a corporate            shareholder, the shareholder must file with the Internal Revenue Service a disclosure            statement on Form 8886. Direct shareholders of portfolio securities are in many cases            excepted from this reporting requirement, but under current guidance, shareholders of a            regulated investment company are not excepted. The fact that a loss is reportable under            these regulations does not affect the legal determination of whether the            taxpayer’s treatment of the loss is proper. Shareholders should consult their tax            advisors to determine the applicability of these regulations in light of their            individual circumstances.

A            distribution from the Fund to foreign shareholders who have held more than 5% of the            Fund at any time during the one-year period ending on the date of distribution is            treated as real property gain subject to 35% withholding tax and treated as income            effectively connected to a U.S. trade or business with certain tax filing requirements            applicable, if such distribution is attributable to a distribution received by the Fund            from a REIT. A distribution paid prior to 2008 attributable to the Fund’s sale of            a REIT or other U.S. real property holding company will also be treated as real            property gain if 50% or more of the value of the Fund’s assets are invested in            REITs and other U.S. real property holding corporations and if the foreign shareholder            has held more than 5% of a class of stock at any time during the one-year period ending            on the date of the distribution. Restrictions apply regarding wash sales and substitute            payment transactions.

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

**TRUSTEES AND OFFICERS**

The            following table presents certain information regarding the Board Members of the Trust.            Each Board Member’s year of birth is set forth in parentheses after his or her            name. Unless otherwise noted, (i) each Board Member has engaged in the principal            occupation(s) noted in the table for at least the most recent five years, although not            necessarily in the same capacity, and (ii) the address of each Board Member that is not            an “interested persons” (as defined in the 1940 Act) of the Trust or the            Advisor (each, an “Independent Board Member”), is c/o Dawn-Marie Driscoll,            PO Box 100176, Cape Coral, FL 33904. The term of office for each Board Member is until            the election and qualification of a successor, or until such Board Member sooner dies,            resigns, is removed or as otherwise provided in the governing documents of the Trust.            Because the Fund does not hold an annual meeting of shareholders, each Board Member            will hold office for an indeterminate period. The Board Members may also serve in            similar capacities with other funds in the DWS fund complex.

***Independent Board Members***

 

| **Name, Year of                            Birth, Position with the Trust and Length of Time Served** | **Business                            Experience and****Directorships During the Past 5 Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | **Number of                            Funds in DWS Fund Complex Overseen** |
|-------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|
| Dawn-Marie Driscoll (1946)Chairperson since 2006

Board Member since2006                         | President, Driscoll Associates (consulting firm);                            Executive Fellow, Center for Business Ethics, Bentley College;                            formerly, Partner, Palmer & Dodge (1988-1990); Vice President of                            Corporate Affairs and General Counsel, Filene’s (1978-1988).                            Directorships: Advisory Board, Center for Business Ethics, Bentley                            College; Trustee, Southwest Florida Community Foundation (charitable                            organization); Former Directorships: Investment Company Institute                            (audit, executive, nominating committees) and Independent Directors                            Council (governance, executive committees) | 87                                                                          |

 

 

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| Henry P. Becton, Jr. (1943)Board Member since2006 | President, WGBH Educational Foundation. Directorships:                            Association of Public Television Stations; Becton Dickinson and                            Company(1) (medical technology company); Belo                            Corporation(1) (media company); Boston Museum of Science;                            Public Radio International. Former Directorships: American Public                            Television; Concord Academy; New England Aquarium; Mass. Corporation                            for Educational Telecommunications; Committee for Economic Development;                            Public Broadcasting Service                                                                                                                                                   | 85 |
|---------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| Keith R. Fox (1954)Board Member since2006         | Managing General Partner, Exeter Capital Partners (a                            series of private equity funds). Directorships: Progressive Holding                            Corporation (kitchen goods importer and distributor); Natural History,                            Inc. (magazine publisher); Box Top Media Inc. (advertising). Former                            Directorships: The Kennel Shop (retailer)                                                                                                                                                                                                                                                                                                                                                                                                | 87 |
| Kenneth C. Froewiss(1945)Board Member since2006   | Clinical Professor of Finance, NYU Stern School of                            Business (1997-present); Member, Finance Committee, Association for                            Asian Studies (2002-present); Director, Mitsui Sumitomo Insurance Group                            (US) (2004-present); prior thereto, Managing Director, J.P. Morgan                            (investment banking firm) (until 1996)                                                                                                                                                                                                                                                                                                                                                                                                     | 87 |
| Martin J. Gruber(1937)Board Member since1999      | Nomura Professor of Finance, Leonard N. Stern School of                            Business, New York University (since September 1965); Director, Japan                            Equity Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since                            January 2000), Singapore Fund, Inc. (since January 2000), National                            Bureau of Economic Research (since January 2006). Formerly, Trustee,                            TIAA (pension funds) (January 1996-January 2000); Trustee, CREF and                            CREF Mutual Funds (January 2000-March 2005); Chairman, CREF and CREF                            Mutual Funds (February 2004-March 2005); and Director, S.G. Cowen                            Mutual Funds (January 1985-January 2001) | 87 |
| Richard J. Herring(1946)Board Member since1999    | Jacob Safra Professor of International Banking and                            Professor, Finance Department, The Wharton School, University of                            Pennsylvania (since July 1972); Co-Director, Wharton Financial                            Institutions Center (since July 2000). Formerly, Vice Dean and                            Director, Wharton Undergraduate Division (July 1995-June 2000);                            Director, Lauder Institute of International Management Studies (July                            2000-June 2006)                                                                                                                                                                                                                                                 | 87 |
| Graham E. Jones(1933)Board Member since2002       | Senior Vice President, BGK Realty, Inc. (commercial real                            estate) (since 1995). Formerly, Trustee of various investment companies                            managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley Asset                            Management (1985-2001) and Weiss, Peck and Greer (1985-2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 87 |
| Rebecca W. Rimel(1951)Board Member since2002      | President and Chief Executive Officer, The Pew                            Charitable Trusts (charitable foundation) (1994 to present); Trustee,                            Thomas Jefferson Foundation (charitable organization) (1994 to                            present); Trustee, Executive Committee, Philadelphia Chamber of                            Commerce (2001 to present); Director, Viasys Health Care(1)                            (since January 2007). Formerly, Executive Vice President, The Glenmede                            Trust Company (investment trust and wealth management) (1983 to 2004);                            Board Member, Investor Education (charitable organization)                            (2004-2005)                                                             | 87 |
| Philip Saunders, Jr.(1935)Board Member since1986  | Principal, Philip Saunders Associates (economic and                            financial consulting) (since November 1988). Formerly, Director,                            Financial Industry Consulting, Wolf & Company (consulting)                            (1987-1988); President, John Hancock Home Mortgage Corporation                            (1984-1986); Senior Vice President of Treasury and Financial Services,                            John Hancock Mutual Life Insurance Company, Inc. (1982-1986)                                                                                                                                                                                                                                                                                            | 87 |

 

 

----

 

| William N. Searcy, Jr.(1946)Board Member since2002 | Private investor since October 2003; Trustee of 8                            open-end mutual funds managed by Sun Capital Advisers, Inc. (since                            October 1998). Formerly, Pension & Savings Trust Officer, Sprint                            Corporation(1) (telecommunications) (November 1989-September                            2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 87 |
|------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| Jean Gleason Stromberg(1943)Board Member since2002                     | Retired. Formerly, Consultant (1997-2001); Director, US                            Government Accountability Office (1996-1997); Partner, Fulbright &                            Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The William and                            Flora Hewlett Foundation; Service Source, Inc. Former Directorships:                            Mutual Fund Directors Forum (2002-2004), American Bar Retirement                            Association (funding vehicle for retirement plans) (1987-1990 and                            1994-1996)                                                                                                                                                                                                                                                                                                                                                                                        | 87 |
| Carl W. Vogt(1936)Board Member since2006                               | Retired Senior Partner, Fulbright & Jaworski, L.L.P.                            (law firm); formerly, President (interim) of Williams College                            (1999-2000); formerly, President of certain funds in the Deutsche Asset                            Management family of funds (formerly, Flag Investors family of funds)                            (registered investment companies) (1999-2000). Directorships: Yellow                            Corporation (trucking); American Science & Engineering (x-ray                            detection equipment). Former Directorships: ISI Family of Funds                            (registered investment companies, 4 funds overseen); National Railroad                            Passenger Corporation (Amtrak) Waste Management, Inc. (solid waste                            disposal); formerly, Chairman and Member, National Transportation                            Safety Board | 85 |

 

***Interested Board Member***

 

| **Name, Year of                            Birth, Position with the Trust and Length of Time Served** | **Business                            Experience and****Directorships During the Past 5 Years**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **Number of                            Funds in DWS Fund Complex Overseen** |
|-------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|
| Axel Schwarzer(2)(1958)Board Member since2006                                                         | Managing Director(4), Deutsche Asset                            Management; Head of Deutsche Asset Management Americas; CEO of DWS                            Scudder; formerly board member of DWS Investments, Germany (1999-2005);                            formerly, Head of Sales and Product Management for the Retail and                            Private Banking Division of Deutsche Bank in Germany (1997-1999);                            formerly, various strategic and operational positions for Deutsche Bank                            Germany Retail and Private Banking Division in the field of investment                            funds, tax driven instruments and asset management for corporates                            (1989-1996) | 86                                                                          |

 

***Officers*****(3)**

 

| **Name, Year of                            Birth, Position with the Trust and Length of Time Served** | **Business                            Experience and****Directorships During the Past 5 Years**                                                                                                                                                                                                                                                                                                                                                                  |
|-------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Michael G. Clark(5) (1965)President, 2006-present                                                     | Managing Director(4), Deutsche Asset                            Management (2006-present); President of DWS family of funds; formerly,                            Director of Fund Board Relations (2004-2006) and Director of Product                            Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice                            President Operations, Merrill Lynch Asset Management                            (1999-2000) |
| John                            Millette(6) (1962)Vice President and Secretary, 2003-present          | Director(4), Deutsche Asset                            Management                                                                                                                                                                                                                                                                                                                                                                                                |

 

 

----

 

| Paul                            H. Schubert(5) (1963)Chief Financial Officer, 2004-presentTreasurer, 2005-present                   | Managing Director(4), Deutsche Asset                            Management (since July 2004); formerly, Executive Director, Head of                            Mutual Fund Services and Treasurer for UBS Family of Funds (1998-2004);                            Vice President and Director of Mutual Fund Finance at UBS Global Asset                            Management (1994-1998)         |
|-------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Patricia DeFilippis(5) (1963)Assistant Secretary, 2005-present                                                                      | Vice President, Deutsche Asset Management (since June                            2005); Counsel, New York Life Investment Management LLC (2003-2005);                            legal associate, Lord, Abbett & Co. LLC (1998-2003)                                                                                                                                                           |
| Elisa                            D. Metzger(5) (1962)Assistant Secretary, 2005-present                                              | Director(4), Deutsche Asset Management (since                            September 2005); Counsel, Morrison and Foerster LLP                            (1999-2005)                                                                                                                                                                                                                                |
| Caroline Pearson(6) (1962)Assistant Secretary, 2002-present                                                                         | Managing Director(4), Deutsche Asset                            Management                                                                                                                                                                                                                                                                                                                         |
| Paul                            Antosca(6)(1957)Assistant Treasurer, 2007-present                                                   | Director(4), Deutsche Asset Management (since                            2006); Vice President, The Manufacturers Life Insurance Company                            (U.S.A.) (1990 – 2006)                                                                                                                                                                                                   |
| Kathleen Sullivan D’Eramo(6)(1957)Assistant Treasurer, 2003-present                                                           | Director(4), Deutsche Asset                            Management                                                                                                                                                                                                                                                                                                                                  |
| Jason                            Vazquez(5) (1972)Anti-Money Laundering Compliance Officer,                            2007-present | Vice President, Deutsche Asset Management (since 2006);                            formerly, AML Operations Manager for Bear Stearns (2004-2006),                            Supervising Compliance Principal and Operations Manager for AXA                            Financial (1999-2004)                                                                                                      |
| Robert                            Kloby(5) (1962)Chief Compliance Officer, 2006-present                                             | Managing Director(4), Deutsche Asset                            Management (2004-present); formerly, Chief Compliance Officer/Chief                            Risk Officer, Robeco USA (2000-2004); Vice President, The Prudential                            Insurance Company of America (1988-2000); E.F. Hutton and Company                            (1984-1988)                            |
| J.                            Christopher Jackson(5)

(1951)Chief Legal Officer, 2006 - present                                     | Director(4), Deutsche Asset Management (2006                            - present); formerly, Director, Senior Vice President, General Counsel,                            and Assistant Secretary, Hansberger Global Investors, Inc. (1996                            – 2006); Director, National Society of Compliance Professionals                            (2002 - 2005)(2006 - 2009) |

             

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

| (2) | The mailing address of Axel Schwarzer is c/o Deutsche                            Investment Management Americas Inc., 345 Park Avenue, New York, New                            York 10154. Mr. Schwarzer is an interested Board Member by virtue of                            his positions with Deutsche Asset Management. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | As a result of their respective positions held with the                            Advisor, these individuals are considered “interested                            persons” of the Advisor within the meaning of the 1940 Act.                            Interested persons receive no compensation from the Funds. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Executive title, not a board directorship. |
|-----|--------------------------------------------|

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

 

----

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

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

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

 

| Paul H. Schubert: | Vice President |
|-------------------|----------------|
| Caroline Pearson: | Secretary      |

 

***Information Concerning Committees and Meetings of Board            Members***

The            Board of the Trust met ten (10) times during the calendar year ended December 31,            2006 and each Board Member attended at least 80% of the meetings of the Board and            meetings of the committees of the Board on which such Board Member served.

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

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

**The Audit Committee**assists the Board in            fulfilling its responsibility for oversight of the quality and integrity of the            accounting, auditing and financial reporting practices of the applicable Fund. It also            makes recommendations regarding the selection of an independent registered public            accounting firm for a Fund, reviews the independence of such firm, reviews the scope of            audit and internal controls, considers and reports to the Board on matters relating to            a Fund’s accounting and financial reporting practices, and performs such other            tasks as the full Board deems necessary or appropriate. The Audit Committee receives            annual representations from the independent registered public accounting firm as to its            independence. The members of the Audit Committee are Keith R. Fox (Chair and Audit            Committee Financial Expert), Kenneth C. Froewiss, Richard J. Herring, Graham E. Jones,            Philip Saunders, Jr., William N. Searcy, Jr. and Jean Gleason Stromberg. The Audit            Committee held eight (8) meetings during the calendar year 2006.

**The Nominating/Corporate Governance Committee**(i) recommends to the Board candidates to serve as Board Members            and (ii) oversees and, as appropriate, makes recommendations to the Board            regarding other fund governance-related matters, including but not limited to Board            compensation practices, retirement policies, self-evaluations of effectiveness, review            of possible conflicts of interest and independence issues involving Board Members,            allocations of assignments and functions of committees of the Board, and share            ownership policies. The members of the Nominating/Corporate Governance Committee are            Henry P. Becton, Jr. (Chair), Graham E. Jones, Rebecca W. Rimel and Jean Gleason            Stromberg. The Nominating/Corporate Governance Committee (previously known as the            Committee on Independent Directors) held three (3) meetings during the calendar year            2006.

**The Valuation Committee**oversees Fund            valuation matters, reviews valuation procedures adopted by the Board, determines the            fair value of the Fund’s securities as needed in accordance with the valuation            procedures when actual market values are unavailable and performs such other tasks as            the full Board deems necessary or appropriate. The members of the Valuation Committee            are Keith R. Fox, Kenneth C. Froewiss, Martin J. Gruber, Richard J. Herring and Philip            Saunders, Jr. (Chair). The Valuation Committee held six (6) meetings during the            calendar year 2006.

The            Board has established two**Investment Oversight            Committees**, one focusing on Funds primarily investing in            equity securities (the “Equity Oversight Committee”) and one focusing on            Funds primarily investing in fixed income securities (the “Fixed Income Oversight            Committee”). These Committees meet regularly with Fund portfolio managers and            other investment personnel to review the relevant Funds’ investment strategies            and investment performance. The members of the**Equity            Oversight Committee**are Henry P. Becton, Jr., Martin J.            Gruber (Chair), Richard J. Herring, Rebecca W. Rimel, Philip Saunders, Jr. and Carl W.            Vogt. The members of the**Fixed Income**

 

----

**Oversight Committee**are Dawn-Marie            Driscoll, Keith R. Fox, Kenneth C. Froewiss, Graham E. Jones, William N. Searcy, Jr.            (Chair) and Jean Gleason Stromberg. Each Investment Oversight Committee held six (6)            meetings during the calendar year 2006.

**The Marketing/Distribution/Shareholder Service Committee**oversees (i) the quality, costs and types of shareholder services            provided to the Funds and their shareholders, and (ii) the distribution-related            services provided to the Funds and their shareholders. The members of the            Marketing/Distribution/Shareholder Service Committee are Martin J. Gruber, Richard J.            Herring (Chair), Rebecca W. Rimel, Jean Gleason Stromberg and Carl W. Vogt. The            Marketing/Distribution/Shareholder Service Committee held six (6) meetings during the            calendar year 2006.

**The Legal/Regulatory/Compliance Committee**oversees (i) the significant legal affairs of the Funds, including            the handling of pending or threatened litigation or regulatory action involving the            Funds, (ii) general compliance matters relating to the Funds and (iii) proxy            voting. The members of the Legal/Regulatory/Compliance Committee are Henry P. Becton,            Jr., Dawn-Marie Driscoll, Rebecca W. Rimel, William N. Searcy, Jr., Jean Gleason            Stromberg and Carl W. Vogt (Chair). The Legal/Regulatory/Compliance Committee held            six (6) meetings during the calendar year 2006.

**The Expense/Operations Committee**(i) monitors the Fund’s total operating expense levels,            (ii) oversees the provision of administrative services to the Fund, including the            Fund's custody, fund accounting and insurance arrangements, and (iii) reviews the            Fund's investment advisers’ brokerage practices, including the implementation of            related policies. The members of the Expense/Operations Committee are Henry P. Becton,            Jr., Dawn-Marie Driscoll, Keith R. Fox, Kenneth C. Froewiss, Graham E. Jones (Chair),            Philip Saunders, Jr. and William N. Searcy, Jr. This committee held seven            (7) meetings during the calendar year 2006.

**Ad Hoc Committees.**In addition to the            standing committees described above, from time to time the Board also forms ad hoc            committees to consider specific issues. In 2006, various ad hoc committees of the Board            held an additional seven (7) meetings.

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

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

 

| **Name of Board Member**        | **Aggregate Compensation****from Fund** | **Total** **Compensation** **from Fund** **and** **DWS Fund Complex(1)** |
|---------------------------------|-----------------------------------------|----------------------------------------------------------------------------------------------|
|                            |                                    |                                                                                         |
| Henry P. Becton, Jr.(3)(5)      | $830                                    | $189,000                                                                                     |
| Dawn-Marie Driscoll(2)(3)(4)(5) | $1,095                                  | $251,000                                                                                     |
| Keith R. Fox(3)(4)(5)           | $839                                    | $195,000                                                                                     |
| Kenneth C. Froewiss(3)(4)(5)    | $927                                    | $234,988                                                                                     |
| Martin J. Gruber(3)(5)          | $2,354                                  | $188,000                                                                                     |
| Richard J. Herring(3)(4)(5)     | $2,325                                  | $184,000                                                                                     |
| Graham E. Jones(3)(4)(5)        | $2,575                                  | $206,000                                                                                     |

 

 

----

 

| Rebecca W. Rimel(3)(5)          | $2,330 | $185,000 |
|---------------------------------|--------|----------|
| Philip Saunders, Jr.(3)(4)(5)   | $2,597 | $207,000 |
| William N. Searcy, Jr.(3)(4)(5) | $2,575 | $206,000 |
| Jean Gleason Stromberg(3)(4)(5) | $901   | $202,000 |
| Carl W. Vogt(3)(5)              | $830   | $189,000 |

             

| (1) | The DWS Fund Complex is composed of 155                            funds. |
|-----|---------------------------------------------------------------------------|

| (2) | Includes $50,000 in annual retainer fees in                            Ms. Driscoll’s role as Chairman of the Board. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

| (3) | For each Board Member, except Mr. Becton, Mr.                            Froewiss and Mr. Vogt, total compensation includes compensation for                            service on the boards of 34 trusts/corporations comprised of 87                            funds/portfolios. For Messrs. Becton and Vogt total compensation                            includes compensation for service on the boards of 32                            trusts/corporations comprised of 85 funds/portfolios. For Mr. Froewiss                            total compensation includes compensation for services on the boards of                            37 trusts/corporations comprised of 90 funds/portfolios. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Aggregate compensation includes amounts paid to the                            Board Members for special meetings of ad hoc committees of the board in                            connection with the possible consolidation of the various DWS Fund                            boards and funds, meetings for considering fund expense simplification                            initiatives, and consideration of issues specific to the Funds’                            direct shareholders (i.e., those shareholders who did not purchase                            shares through financial intermediaries). Such amounts totaled $16,000                            for Ms. Driscoll, $1,000 for Mr. Fox, $17,000 for                            Mr. Froewiss, $1,000 for Dr. Herring, $16,000 for                            Mr. Jones, $17,000 for Dr. Saunders, $16,000 for                            Mr. Searcy and $16,000 for Ms. Stromberg. These meeting fees                            were borne by the applicable DWS Funds. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | During calendar year 2006, the total number of funds                            overseen by each Board Member was 87 funds, except for Mr. Becton and                            Mr. Vogt, who oversaw 85 funds, and Mr. Froewiss, who oversaw 90                            funds. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Board Member Ownership in the            Fund***(1)

The            following table shows the dollar range of equity securities beneficially owned by each            Board Member in the Fund and DWS Fund Complex as of December 31, 2006.

 

| **Board                            Member**              | **Dollar Range of Beneficial Ownership****in DWS Short-Term****Municipal Bond Fund** | **Aggregate Dollar Range of****Ownership in all Funds Overseen by****Board Member****in the DWS Fund                            Complex(2)** |
|----------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                     |                                                                                 |                                                                                                                                         |
| **Independent Board                            Member:** |                                                                                 |                                                                                                                                         |
|                                                     |                                                                                 |                                                                                                                                         |
| Henry P. Becton, Jr.                                     | None                                                                                 | Over $100,000                                                                                                                                |
| Dawn-Marie Driscoll                                      | None                                                                                 | Over $100,000                                                                                                                                |
| Keith R. Fox                                             | None                                                                                 | Over $100,000                                                                                                                                |
| Kenneth C. Froewiss                                      | $1-$10,000                                                                           | Over $100,000                                                                                                                                |
| Martin J. Gruber                                         | None                                                                                 | Over $100,000                                                                                                                                |
| Richard J. Herring                                       | None                                                                                 | Over $100,000                                                                                                                                |
| Graham E. Jones                                          | None                                                                                 | Over $100,000                                                                                                                                |
| Rebecca W. Rimel                                         | None                                                                                 | Over $100,000                                                                                                                                |
| Philip Saunders, Jr.                                     | $10,001-$50,000                                                                      | Over $100,000                                                                                                                                |
| William N. Searcy, Jr.                                   | None                                                                                 | Over $100,000                                                                                                                                |
| Jean Gleason Stromberg                                   | None                                                                                 | Over $100,000                                                                                                                                |
| Carl W. Vogt                                             | None                                                                                 | Over $100,000                                                                                                                                |
|                                                     |                                                                                 |                                                                                                                                         |

 

 

----

 

| **Interested Board Member:** |   |          |
|------------------------------|--------|---------------|
|                         |   |          |
| Axel Schwarzer               | None   | Over $100,000 |

             

| (1) | The amount shown includes share equivalents of funds                            which the Board Member is deemed to be invested pursuant to the                            Fund’s deferred compensation plan. The inclusion therein of any                            shares deemed beneficially owned does not constitute an admission of                            beneficial ownership of the shares. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Securities beneficially owned as defined under the 1934                            Act include direct and/or indirect ownership of securities where the                            Board Member’s economic interest is tied to the securities,                            employment ownership and securities when the Board Member can exert                            voting power and when the Board Member has authority to sell the                            securities. The dollar ranges are: None, $1-$10,000, $10,001-$50,000,                            $50,001-$100,000, over $100,000. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Ownership in Securities of the Advisor and Related            Companies***

As            reported to the Fund, the information in the following table reflects ownership by the            Independent Board Members and their immediate family members of certain securities as            of December 31, 2006. An immediate family member can be a spouse, children residing in            the same household including step and adoptive children and any dependents. The            securities represent ownership in the Advisor or principal underwriter of the Fund and            any persons (other than a registered investment company) directly or indirectly            controlling, controlled by, or under common control with the Advisor or principal            underwriter of the Fund (including Deutsche Bank AG).

             

| **Independent****Board Member**                   | **Owner and Relationship to****Board Member** | **Company** | **Title of****Class** | **Value of Securities on an Aggregate****Basis** | **Percent of Class on an Aggregate****Basis** |
|---------------------------------------------------|-----------------------------------------------|-------------|-----------------------|--------------------------------------------------|-----------------------------------------------|
|                                              |                                          |        |                  |                                             |                                          |
| Henry P. Becton, Jr.                              |                                          | None        |                  |                                             |                                          |
| Dawn-Marie Driscoll                               |                                          | None        |                  |                                             |                                          |
| Keith R. Fox                                      |                                          | None        |                  |                                             |                                          |
| Kenneth C. Froewiss                               |                                          | None        |                  |                                             |                                          |
| Martin J. Gruber                                  |                                          | None        |                  |                                             |                                          |
| Richard J. Herring                                |                                          | None        |                  |                                             |                                          |
| Graham E. Jones                                   |                                          | None        |                  |                                             |                                          |
| Rebecca W. Rimel                                  |                                          | None        |                  |                                             |                                          |
| Philip Saunders, Jr.                              |                                          | None        |                  |                                             |                                          |
| William N. Searcy, Jr.                            |                                          | None        |                  |                                             |                                          |
| Jean                            Gleason Stromberg |                                          | None        |                  |                                             |                                          |
| Carl                            W. Vogt           |                                          | None        |                  |                                             |                                          |

 

***Securities Beneficially Owned***

As            of February 8, 2007, the Board Members and officers of the Trust owned, as a group,            less than 1% of the outstanding shares of the Fund.

To            the best of the Fund’s knowledge, as of February 8, 2007, no person owned of            record or beneficially 5% or more of any class of the Fund’s outstanding shares,            except as noted below.

 

----

 

| **Name and Address of Investor                            Ownership**                                          | **Shares**   | **% of Total Shares**         |
|----------------------------------------------------------------------------------------------------------------|--------------|-------------------------------|
|                                                                                                           |         |                          |
| MLPF&S FOR THE SOLE BENEFIT OF

ITS CUSTOMERS

ATTN FUND ADM (97HB3)

JACKSONVILLE FL 32246-6484           | 741,187.03   | 10.02% of Class A             |
|                                                                                                           |         |                          |
| MORGAN STANLEY DW

ATTN MUTUAL FUND OPERATIONS

JERSEY CITY NJ 07311-3907                                      | 442,184.26   | 5.98% of Class A              |
|                                                                                                           |         |                          |
| FIRST CLEARING, LLC

A/C XXXX-XXXX

RICHARD W FOOTE

PORT ORANGE FL 32128-6765                                 | 439,127.42   | 5.93% of Class A              |
|                                                                                                           |         |                          |
| NATIONAL FINANCIAL SERVICES CORP

FOR THE EXCLUSIVE BENEFIT OF OUR

NEW YORK NY 10281-1003                     | 3,195,084.29 | 29.09% of Institutional Class |
|                                                                                                           |         |                          |
| CHARLES SCHWAB & CO INC

SPECIAL CUSTODY ACCOUNT

MUTUAL FUNDS DEPARTMENT

SAN FRANCISCO CA 94104-4151     | 2,096,908.17 | 19.09% of Institutional Class |
|                                                                                                           |         |                          |
| SHELDON & CO

C/O NATIONAL CITY

ATTN TRUST MUTUAL FUNDS

CLEVELAND OH 44101-4984                          | 1,203,207.17 | 10.96% of Institutional Class |
|                                                                                                           |         |                          |
| TIMOTHY S MATHER

DENVER CO 80265-2077                                                                         | 1,102,608.12 | 10.04% of Institutional Class |
|                                                                                                           |         |                          |
| MORGAN STANLEY DW

ATTN MUTUAL FUND OPERATIONS

JERSEY CITY NJ 07311-3907                                      | 55,796.58    | 13.95% of Class B             |
|                                                                                                           |         |                          |
| CITIGROUP GLOBAL MARKETS INC

XXXXXXXXXX

ATTN PETER BOOTH 7TH FL

NEW YORK NY 10001-2402                      | 42,107.73    | 10.53% of Class B             |
|                                                                                                           |         |                          |
| MLPF&S FOR THE SOLE BENEFIT OF

ITS CUSTOMERS

ATTN FUND ADM (97HB6)

JACKSONVILLE FL 32246-6484           | 41,445.35    | 10.36% of Class B             |
|                                                                                                           |         |                          |
| MLPF&S FOR THE SOLE BENEFIT OF

ITS CUSTOMERS

ATTN FUND ADMINISTRATION

SEC #97JS4

JACKSONVILLE FL 32246 | 869,326.36   | 25.53% of Class C             |

 

 

----

 

|                                                                                      |       |             |
|-------------------------------------------------------------------------------------------|------------|------------------|
| MORGAN STANLEY DW

ATTN MUTUAL FUND OPERATIONS

JERSEY CITY NJ 07311-3907                 | 296,293.74 | 8.70% of Class C |
|                                                                                      |       |             |
| CITIGROUP GLOBAL MARKETS INC

XXXXXXXXXX

ATTN PETER BOOTH 7TH FL

NEW YORK NY 10001-2402 | 198,598.58 | 5.83% of Class C |

 

**Certain Indemnification Arrangements**

In            addition to customary indemnification rights provided by the governing instruments of            the Trust, Trustees may be eligible to seek indemnification from the Advisor in            connection with certain matters as follows. In connection with litigation or regulatory            action related to possible improper market timing or other improper trading activity or            possible improper marketing and sales activity in the Fund, the Fund’s Advisor            has agreed, subject to applicable law and regulation, to indemnify and hold harmless            the Fund 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 Fund or Advisor            (“Enforcement Actions”) or that are the basis for private actions brought            by shareholders of the Fund against the Fund, its Board Members and officers, Advisor            and/or certain other parties (“Private Litigation”), or any proceedings or            actions that may be threatened or commenced in the future by any person (including            governmental authorities), arising from or similar to the matters alleged in the            Enforcement Actions or Private Litigation. In recognition of its undertaking to            indemnify the Fund and in light of the rebuttable presumption generally afforded to            Independent Board Members of investment companies that they have not engaged in            disabling conduct, the Advisor has also agreed, subject to applicable law and            regulation, to indemnify the Fund’s Independent Board Members against certain            liabilities the Independent Board Members 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 Board Members in connection with any Enforcement Actions            or Private Litigation. The Advisor is not, however, required to provide indemnification            and advancement of expenses: (1) in connection with any proceeding or action with            respect to which the Fund’s Board determines that the Independent Board Member            ultimately would not be entitled to indemnification or (2) for any liability of            the Independent Board Member to the Fund or its shareholders to which the Independent            Board Member would otherwise be subject by reason of willful misfeasance, bad faith,            gross negligence or reckless disregard of the Independent Board Members’ duties            as a director or trustee of the Fund as determined in a final adjudication in such            action or proceeding. The estimated amount of any expenses that may be advanced to the            Independent Board Members or indemnity that may be payable under the indemnity            agreements is currently unknown. These agreements by the Advisor will survive the            termination of the investment management agreements between the applicable Deutsche            Asset Management entity and the Fund.

**TRUST ORGANIZATION**

The            Fund is a series of DWS Advisor Funds (the “Trust”). The Trust was            organized on July 21, 1986 under the laws of The Commonwealth of Massachusetts. The            Trust was organized under the name BT Tax-Free Investment Trust and assumed its former            name of BT Investment Funds on May 16, 1988. The Trust’s name was changed to            Scudder Advisor Funds effective May 16, 2003 and to DWS Advisor Funds effective            February 6, 2006. On July 10, 2006, the DWS Short-Term Municipal Bond Predecessor Fund            transferred all its assets and liabilities from DWS Investment Trust, a Delaware            statutory trust, into a new series of the Trust under the same fund name.

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 27, 2006, 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

 

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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; (d) to the same extent as stockholders of Massachusetts            business corporation as to whether or not a court action, proceeding or claims should            or should not be brought or maintained derivatively or as a class action on behalf of            the Trust or any series or class thereof or the Shareholders; and (e) such additional            matters as may be required by law, the Declaration of Trust, the By-laws of the Trust,            or any registration of a Fund with the SEC or any state, or as the Trustees may            determine to be necessary or desirable. Shareholders also vote upon changes in            fundamental policies or restrictions.

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.

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 the date hereof, the Trustees have established five classes of shares: Class A,            Class B, Class C, Class S, and the Institutional Class.

Prior to July 10, 2006, DWS Short-Term Municipal Bond Fund            (“Short-Term Municipal Bond Predecessor Fund”) was a series of DWS            Investments Trusts, an open-end management investment company organized as a Delaware            statutory trust that was formerly known as Scudder MG Investments Trust. On July 10,            2006, the Fund, a series of

 

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the            Trust acquired all the assets and assumed all the liabilities of the Short-Term            Municipal Bond Predecessor Fund in a reorganization.

**PROXY VOTING GUIDELINES**

The            Fund has delegated proxy voting responsibilities to its investment advisor, subject to            the Board’s general oversight. The Fund has delegated proxy voting to the Advisor            with the direction that proxies should be voted consistent with the Fund’s best            economic interests. The Advisor has adopted its own Proxy Voting Policies and            Procedures (“Policies”), and Proxy Voting Guidelines            (“Guidelines”) for this purpose. The Policies address, among other things,            conflicts of interest that may arise between the interests of the Fund, and the            interests of the Advisor and its affiliates, including the Fund’s principal            underwriter. The Guidelines set forth the Advisor’s general position on various            proposals, such as:

| **•** | Shareholder Rights—                            The Advisor generally votes against proposals that restrict shareholder                            rights. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Corporate Governance— The Advisor generally votes for confidential and                            cumulative voting and against supermajority voting requirements for                            charter and bylaw amendments. The Advisor generally votes for proposals                            to restrict a chief executive officer from serving on more than three                            outside boards of directors. The Advisor generally votes against                            proposals that require a company to appoint a Chairman who is an                            independent director. |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Anti-Takeover Matters— The Advisor generally votes for proposals that                            require shareholder ratification of poison pills or that request boards                            to redeem poison pills, and votes “against” the adoption of                            poison pills if they are submitted for shareholder ratification. The                            Advisor generally votes for fair price proposals. |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Compensation Matters— The Advisor generally votes for executive cash                            compensation proposals, unless they are unreasonably excessive. The                            Advisor generally votes against stock option plans that do not meet the                            Advisor’s criteria. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Routine Matters— The                            Advisor generally votes for the ratification of auditors, procedural                            matters related to the annual meeting, and changes in company name, and                            against bundled proposals and adjournment. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The            general provisions described above do not apply to investment companies. The Advisor            generally votes proxies solicited by investment companies in accordance with the            recommendations of an independent third party, except for proxies solicited by or with            respect to investment companies for which the Advisor or an affiliate serves as            investment advisor or principal underwriter (“affiliated investment            companies”). The Advisor votes affiliated investment company proxies in the same            proportion as the vote of the investment company’s other shareholders (sometimes            called “mirror” or “echo” voting). Master fund proxies            solicited from feeder funds are voted in accordance with applicable requirements of the            1940 Act.

Although the Guidelines set forth the Advisor’s general voting            positions on various proposals, the Advisor may, consistent with the Fund’s best            interests, determine under some circumstances to vote contrary to those            positions.

The            Guidelines on a particular issue may or may not reflect the view of individual members            of the Board or of a majority of the Board. In addition, the Guidelines may reflect a            voting position that differs from the actual practices of the public companies within            the Deutsche Bank organization or of the investment companies for which the Advisor or            an affiliate serves as investment advisor or sponsor.

The            Advisor may consider the views of a portfolio company’s management in deciding            how to vote a proxy or in establishing general voting positions for the Guidelines, but            management’s views are not determinative.

As            mentioned above, the Policies describe the way in which the Advisor resolves conflicts            of interest. To resolve conflicts, the Advisor, under normal circumstances, votes            proxies in accordance with its Guidelines. If the Advisor departs from the Guidelines            with respect to a particular proxy or if the Guidelines do not specifically address a            certain proxy proposal, a proxy voting committee established by the Advisor will vote            the proxy. Before voting any

 

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such proxy, however, the Advisor’s conflicts review committee will            conduct an investigation to determine whether any potential conflicts of interest exist            in connection with the particular proxy proposal. If the conflicts review committee            determines that the Advisor has a material conflict of interest, or certain individuals            on the proxy voting committee should be recused from participating in a particular            proxy vote, it will inform the proxy voting committee. If notified that the Advisor has            a material conflict, or fewer than three voting members are eligible to participate in            the proxy vote, typically the Advisor will engage an independent third party to vote            the proxy or follow the proxy voting recommendations of an independent third            party.

Under certain circumstances, the Advisor may not be able to vote proxies            or the Advisor may find that the expected economic costs from voting outweigh the            benefits associated with voting. For example, the Advisor may not vote proxies on            certain foreign securities due to local restrictions or customs. The Advisor generally            does not vote proxies on securities subject to share blocking restrictions.

**ADDITIONAL INFORMATION**

**Annual and Semiannual Reports**

Shareholders of the Fund receive an annual report containing audited            financial statements and an unaudited semi-annual report. All transactions in shares of            the Fund and dividends and distributions paid by the Fund are reflected in            confirmations issued by the Transfer Agent at the time of the transaction and/or in            monthly statements issued by the Transfer Agent. A year-to-date statement will be            provided by the Transfer Agent.

***Registration Statement***

The            Trust has filed with the SEC, 100 F Street, N.E., Washington, D.C. 20549, a            Registration Statement under the 1933 Act with respect to the securities of the Fund            and certain other series of the Trust. If further information is desired with respect            to the Trust, the Fund or such other series, reference is made to the Registration            Statement and the exhibits filed as a part thereof.

***Other Information***

The            CUSIP numbers for each class of the Fund are:

 

| DWS Short-Term Municipal Bond Fund | Institutional Class:

Class A Shares:

Class B Shares:

Class C Shares:

Class S Shares:

                              | 23339E103

23339E400

23339E509

23339E608

23339E731

                              |
|------------------------------------|------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|

 

The            Fund has a fiscal year end of October 31.

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

**FINANCIAL STATEMENTS**

The            audited financial statements for the Short-Term Municipal Bond Predecessor Fund for the            year ended October 31, 2006, are included in, and incorporated by reference into,            this SAI in reliance upon the reports of PricewaterhouseCoopers LLP, the Fund’s            independent registered public accounting firm, as experts in accounting and            auditing.

 

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**APPENDIX**

**BOND AND COMMERCIAL PAPER RATINGS**

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

**MOODY'S INVESTORS SERVICE, INC.'S — 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.

 

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**MOODY'S INVESTORS SERVICE, INC.'S — 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:

Leading market positions in well established industries.

High rates of return on funds employed.

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

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

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.

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

MIG. 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.

Moody’s: The highest ratings for state and municipal short-term            obligations are “MIG 1,” “MIG 2,” and “MIG 3” (or            “VMIG 1,” “VMIG 2” and “VMIG 3” in the case of an            issue having a variable rate demand feature). Notes rated “MIG 1” or            “VMIG 1” are judged to be of the “best quality”. Notes rated            “MIG 2” or “VMIG 2” are of “high quality,” with            margins or protection “ample although not as large as in the preceding            group”. Notes rated “MIG 3” or “VMIG 3” are of            “favorable quality,” with all security elements accounted for but lacking            the strength of the preceding grades.

**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.

 

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**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.

 

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**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.

 

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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.

 

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**STATEMENT OF ADDITIONAL INFORMATION**

**March 1, 2007, as revised December 31, 2007**

**INVESTMENT ADVISOR**

Deutsche Investment Management Americas Inc.

345            Park Avenue

New            York, NY 10154

 

**ADMINISTRATOR**

Deutsche Investment Management Americas Inc.

345            Park Avenue

New            York, NY 10154

**DISTRIBUTOR**

DWS            Scudder Distributors, Inc.

222            South Riverside Plaza

Chicago, IL 60606

**CUSTODIAN**

State            Street Bank and Trust Company

One            Heritage Drive – JPN/2N

North Quincy, MA 02171

**TRANSFER AGENT**

DWS            Scudder Investments Service Company

222            South Riverside Plaza

Chicago, IL 60606

**INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

PricewaterhouseCoopers LLP

125            High Street

Boston,            MA 02110

**LEGAL COUNSEL**

| Willkie Farr & Gallagher LLP |
|----------------------------------|

787            Seventh Avenue

New            York, NY 10019

**SERVICE INFORMATION**

Existing accounts, new accounts, prospectuses, Statements of Additional            Information applications, service forms, telephone exchanges, share price and            performance.

 

**DWS ADVISOR FUNDS**

DWS            Short-Term Municipal Bond Fund

Class            A: 23339E764

Class            B: 23339E756

Class            C: 23339E749

Institutional: 23339E723

 

838SAI            (3/07)