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 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 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

 

 

 

**DWS ADVISOR FUNDS**

**DWS RREEF Real Estate Securities Fund**

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

**STATEMENT OF ADDITIONAL INFORMATION**

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

This Statement of Additional Information is not a prospectus and should            be read in conjunction with the prospectus (the “Prospectus”) dated May 1,            2007 for Class A, B, C, R and Institutional Class shares, as amended from time to time,            for DWS RREEF Real Estate Securities 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, 1-800-621-1148, 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            Annual Report to Shareholders, dated December 31, 2006, is incorporated herein by            reference and is deemed to be part of this Statement of Additional Information. A copy            of the Fund’s Annual Report may be obtained without charge by calling the Fund at            the toll-free number 1-800-621-1048.

This Statement of Additional Information (“SAI”) is            incorporated by reference into the corresponding Prospectus of the Fund.

 

----

**TABLE OF CONTENTS**

**Page**

| INVESTMENT                                RESTRICTIONS | 1 |
|--------------------------------------------------------|---|

| INVESTMENT POLICIES AND                                TECHNIQUES | 2 |
|-------------------------------------------------------------------|---|

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

|   | Portfolio                                Holdings | 10 |
|--------|---------------------------------------------------|----|

| MANAGEMENT OF THE                                FUND | 11 |
|-------------------------------------------------------|----|

|   | Investment                                Advisor | 11 |
|--------|---------------------------------------------------|----|

|   | Compensation of Portfolio                                Managers | 14 |
|--------|-------------------------------------------------------------------|----|

| FUND SERVICE                                PROVIDERS | 18 |
|-------------------------------------------------------|----|

|   | Administrator | 18 |
|--------|---------------|----|

|   | Distributor | 19 |
|--------|-------------|----|

|   | Custodian | 24 |
|--------|-----------|----|

|   | Transfer Agent and Shareholder                                Service Agent | 24 |
|--------|-----------------------------------------------------------------------------|----|

|   | Independent Registered Public                                Accounting Firm | 25 |
|--------|------------------------------------------------------------------------------|----|

|   | Legal Counsel | 25 |
|--------|---------------|----|

| PORTFOLIO                                TRANSACTIONS | 25 |
|-------------------------------------------------------|----|

| PURCHASE AND REDEMPTION OF                                SHARES | 28 |
|------------------------------------------------------------------|----|

| DIVIDENDS | 44 |
|-----------|----|

| TAXES | 46 |
|-------|----|

| NET ASSET                                VALUE | 50 |
|------------------------------------------------|----|

| TRUSTEES AND                                OFFICERS | 51 |
|------------------------------------------------------|----|

| TRUST                                ORGANIZATION | 61 |
|---------------------------------------------------|----|

| PROXY VOTING                                GUIDELINES | 62 |
|--------------------------------------------------------|----|

| FINANCIAL                                STATEMENTS | 63 |
|-----------------------------------------------------|----|

| ADDITIONAL                                INFORMATION | 64 |
|-------------------------------------------------------|----|

| APPENDIX | 65 |
|----------|----|

 

----

**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 is a non-diversified series of an open-end management company which continuously            offers and redeems shares at net asset value. A non-diversified fund can invest a            greater portion of its assets in a given company. The Fund is a series of the type            commonly known as a mutual fund.

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

| (1) | borrow money, except as permitted under the 1940 Act,                            and as interpreted or modified by regulatory authority having                            jurisdiction, from time to time. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (3) | 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. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | 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 interest 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. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | purchase or sell commodities, except as permitted by the                            1940 Act, as amended, and interpreted as modified by the regulatory                            authority having jurisdiction, from time to time. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | make loans, except as permitted by the 1940 Act, as                            amended, and interpreted as modified by the 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 Investment Company            Act of 1940, as amended (the “1940 Act”) and the rules thereunder and as            used in this SAI, 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 in person or represented by proxy, or (2) more than 50% of the            outstanding voting securities of the Fund.

The            Fund has voluntarily adopted certain policies and restrictions, which are observed in            the conduct of the Fund’s affairs. These nonfundamental policies represent the            intentions of the Trustees based upon current circumstances. Nonfundamental policies            may be changed by the Trustees without shareholder approval.

As a matter of non-fundamental policy:

| (a) | The Fund may not purchase additional investment                            securities at any time during which outstanding borrowings exceed 5% of                            the total assets of the Fund. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | The Fund may not purchase any security or enter into a                            repurchase agreement if, as a result, more than 15% of its net assets                            would be invested in repurchase agreements not entitling the holder to                            payment of principal and interest within seven days and in securities                            that are illiquid by virtue of legal or contractual restrictions on                            resale or the absence of a readily available market. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| (c) | The Fund may not sell securities short unless it owns or                            has the right to obtain securities equivalent in kind and amount to the                            securities sold short, and provided that transactions in futures                            contracts and options are not deemed to constitute selling securities                            short. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | The Fund may not purchase securities on margin, except                            to obtain such short-term credits as are necessary for the clearance of                            transactions and provided that margin payments in connection with                            futures contracts and options on futures contracts shall not constitute                            purchasing securities on margin. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | The Fund may enter into futures contracts, and write and                            buy put and call options relating to futures contracts. The Fund may                            not, however, enter into leveraged futures transactions if it would be                            possible for the Fund to lose more money than it invested. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (f) | The Fund may not invest 25% or more of its total assets                            in securities of companies principally engaged in any one industry,                            except that the Fund may invest without limitation in securities of                            companies engaged principally in the real estate industry. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (g) | The Fund may not acquire securities of registered                            open-end investment companies or registered unit investment trusts in                            reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the 1940                            Act. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

The            investment objective of the Fund is long-term capital appreciation and current income.            Under normal circumstances, the Fund will invest at least 80% of its net assets, plus            the amount of any borrowings for investment purposes (calculated at the time of any            investment), in equity securities of real estate investment trusts            (“REITs”) and real estate companies. The Fund will measure the percentage            at the time an investment is made. If market fluctuations or shareholder actions cause            the Fund’s investments to fall below this percentage, the Fund will act to remedy            the situation as promptly as possible, normally within three business days. However,            the Fund will not be required to dispose of portfolio holdings or purchase additional            investments immediately if the Advisor believes such action may expose the Fund to            losses or unreasonable risks of loss. Also, the Fund may occasionally depart from this            percentage. For example, the Fund may depart from this percentage to respond to            unusually large cash inflows or redemptions, or to avoid losses caused by adverse            market, economic, political or other conditions.

The            Fund will provide its shareholders with at least 60 days’ prior notice of any            change in the Fund’s 80% investment policy described above.

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.

**INVESTMENT POLICIES AND TECHNIQUES**

**General**

This section explains the extent to which Deutsche Investment Management            Americas Inc. (the “Advisor”) and RREEF America L.L.C., the Subadvisor,            (for purposes of the Investment Policies and Techniques section, the Advisor and            Subadvisor are referred to collectively as the “Advisor”) can use various            investment vehicles and strategies in managing the Fund’s assets. Descriptions of            the investment techniques and risks associated with the

 

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Fund appear herein. In the case of the Fund’s principal investment            strategies, these descriptions elaborate upon discussions contained in the            Prospectus.

On            February 6, 2006, the names of “Scudder RREEF Securities Trust” and its            series “Scudder RREEF Real Estate Securities Fund” were changed to            “DWS RREEF Securities Trust” and “DWS RREEF Real Estate Securities            Fund,” respectively. This change did not affect the operations of the Fund, but            resulted in modifications to the presentation of the Fund’s Prospectuses,            periodic reports and other publications on behalf of the Fund.

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

The            Fund offers the following classes of shares: Class A, Class B, Class C, Class R,            Institutional Class and Class S. Each class has its own features and policies. Class S            shares are offered in a separate Statement of Additional Information.

In            general, within the restrictions outlined here and in the Fund’s Prospectuses,            the Advisor has broad powers to decide how to invest Fund assets, including the power            to hold them uninvested.

Investments are varied according to what is judged advantageous under            changing economic conditions. It is the Advisor’s policy to retain maximum            flexibility in management without restrictive provisions as to the proportion of one or            another class of securities that may be held, subject to the investment restrictions            described herein. It is the Advisor’s intention that the Fund generally will            consist of common stocks and equity-equivalent securities. However, subject to the            specific limitations applicable to the Fund, the Advisor may invest the assets of the            Fund in varying amounts using other investment techniques, such as those reflected            below, when such a course is deemed appropriate in order to attempt to attain the            Fund’s investment objective. Senior securities that are high-grade issues, in the            opinion of the Advisor, also may be purchased for defensive purposes.

Since current income is part of the Fund’s objective, a portion of            the portfolio of the Fund may consist of debt securities.

So            long as a sufficient number of acceptable securities are available, the Advisor intends            to keep the Fund fully invested. However, under exceptional conditions, the Fund may            assume a defensive position, temporarily investing all or a substantial portion of its            assets in cash or short-term securities. When the Fund is invested for temporary            defensive purposes, it may not achieve its investment objective.

The            Advisor may use stock index futures and options as a way to expose the Fund’s            cash assets to the market while maintaining liquidity. However, the Advisor may not            leverage the Fund’s portfolio, so there is no greater market risk to the Fund            than if it purchases stocks.

**Investment Techniques**

Descriptions in this SAI of a particular investment practice or            technique in which the Fund may engage are meant to describe the spectrum of            investments that 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.

**REITS and Real Estate Companies.**The Fund            intends to invest at least 80% of its net assets, plus the amount of any borrowings for            investment purposes (calculated at the time of any investment), in equity securities of            REITs and real estate companies. A company is considered to be a real estate company            if, in the opinion of the portfolio managers, at least 50% of its revenues or 50% of            the market value of its assets at the time its securities are purchased by the Fund are            attributed to the ownership, construction, management or sale of real            estate.

 

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A            REIT invests primarily in income-producing real estate or makes loans to persons            involved in the real estate industry. Some REITs, called equity REITs, buy real estate            and pay investors income from the rents received from the real estate owned by the REIT            and from any profits on the sale of its properties. Other REITs, called mortgage REITs,            lend money to building developers and other real estate companies and pay investors            income from the interest paid on those loans. There are also hybrid REITs which engage            in both owning real estate and making loans. If a REIT meets certain requirements, it            is not taxed on the income it distributes to its investors.

**Equity Equivalents.**In addition to            investing in common stocks, the Fund may invest in other equity securities and equity            equivalents, including securities that permit the Fund to receive an equity interest in            an issuer, the opportunity to acquire an equity interest in an issuer or the            opportunity to receive a return on its investment that permits the Fund to benefit from            the growth over time in the equity of an issuer. Examples of equity securities and            equity security equivalents include preferred stock, convertible preferred stock and            convertible debt securities.

The            Fund will limit its holdings of convertible debt securities to those that, at the time            of purchase, are rated at least B- by the Standard & Poor’s Corporation            (“S&P”) or B3 by Moody’s Investors Service            (“Moody’s”), or, if not rated by S&P and Moody’s, are of            equivalent investment quality as determined by the Advisor. The Fund’s            investments in convertible debt securities and other high-yield/high-risk,            nonconvertible debt securities rated below investment-grade will comprise less than 20%            of the Fund’s net assets. Debt securities rated below the four highest categories            are not considered investment-grade obligations. These securities have speculative            characteristics and present more credit risk than investment-grade            obligations.

Equity equivalents also may include securities whose value or return is            derived from the value or return of a different security.

**Debt Securities.**The Fund may invest in            debt securities because the Fund has current income as a secondary investment            objective. As a result, the Fund may invest in debt securities when the Advisor            believes such securities represent an attractive investment for the Fund. It is            intended that the Fund may invest in debt securities for income or as a defensive            strategy when the Advisor believes adverse economic or market conditions            exist.

The            value of the debt securities in which the Fund may invest will fluctuate based upon            changes in interest rates and the credit quality of the issuer. Debt securities that            comprise part of the Fund’s fixed-income portfolio will be limited primarily to            investment-grade obligations. However, the Fund may invest up to 5% of its assets in            “high-yield/high-risk” securities. Investment grade means that at the time            of purchase, such obligations are rated within the four highest categories by a            nationally recognized statistical rating organization (for example, at least Baa by            Moody’s or BBB by S&P), or, if not rated, are of equivalent investment            quality as determined by the Advisor. According to Moody’s, bonds rated Baa are            medium-grade and possess some speculative characteristics. A BBB rating by S&P            indicates S&P’s belief that a security exhibits a satisfactory degree of            safety and capacity for repayment but is more vulnerable to adverse economic conditions            and changing circumstances.

“High-yield” securities, sometimes referred to as            “junk bonds,” are higher risk, non-convertible debt obligations that are            rated below investment-grade securities, or are unrated, but with similar credit            quality.

There are no credit or maturity restrictions on the fixed-income            securities in which the high-yield portion of the Fund’s portfolio may be            invested. Debt securities rated lower than Baa by Moody’s or BBB by S&P or            their equivalent are considered by many to be predominantly speculative. Changes in            economic conditions or other circumstances are more likely to lead to a weakened            capacity to make principal and interest payments on such securities than is the case            with higher quality debt securities. Regardless of rating levels, all debt securities            considered for purchase by the Fund are analyzed by the Advisor to determine, to the            extent reasonably possible, that the planned investment is sound, given the investment            objective of the Fund.

The            Fund will not necessarily dispose of high-yield securities if the aggregate value of            such securities exceeds 5% of the Fund’s assets, if such level is exceeded as a            result of market appreciation of the value of such securities or market depreciation of            the value of the other assets of the Fund. Rather, the Advisor will cease purchasing            any additional high-yield securities until the value of such securities is less than 5%            of the Fund’s assets and will monitor such investments to determine whether            continuing to hold such investments is likely to assist the Fund in meeting its            investment objective.

 

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In            addition, the value of the Fund’s investments in fixed-income securities will            change as prevailing interest rates change. In general, the prices of such securities            vary inversely with interest rates. As prevailing interest rates fall, the prices of            bonds and other securities that trade on a yield basis generally rise. When prevailing            interest rates rise, bond prices generally fall. These changes in value may, depending            upon the particular amount and type of fixed-income securities holdings of the Fund,            impact the net asset value of the Fund’s shares.

Notwithstanding the fact that the Fund will invest primarily in equity            securities, under adverse market or economic conditions, the Fund may temporarily            invest all or a substantial portion of its assets in cash or investment-grade            short-term securities (denominated in US dollars or foreign currencies). To the extent            that the Fund assumes a defensive position, it will not be investing for capital            appreciation. When the Fund is invested for temporary defensive purposes, it may not            pursue or achieve its investment objective.

**Convertible Debt Securities.**A convertible            debt security is a fixed-income security that offers the potential for capital            appreciation through a conversion feature that enables the holder to convert the            fixed-income security into a stated number of shares of common stock. As fixed-income            securities, convertible debt securities provide a stable stream of income with            generally higher yields than common stocks. Because convertible debt securities offer            the potential to benefit from increases in the market price of the underlying common            stock, they generally offer lower yields than non-convertible securities of similar            quality. Like all fixed-income securities, there can be no assurance of current income            because the issuers of the convertible securities may default on their obligations. In            addition, there can be no assurance of capital appreciation because the value of the            underlying common stock will fluctuate.

Convertible debt securities generally are subordinated to other similar            but non-convertible debt securities of the same issuer, although convertible bonds, as            corporate debt obligations, enjoy seniority in right of payment to all equity            securities. Because of the subordination feature, however, convertible securities            typically have lower ratings than similar non-convertible securities.

Convertible debt securities that comprise part of the Fund’s            fixed-income portfolio will be subject to the same limitations with respect to quality            as those described above under “Debt Securities.”

**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.

**Investment of Uninvested Cash Balances.**The            Fund may have cash balances that have not been invested in portfolio securities            (“Uninvested Cash”). Uninvested Cash may result from a variety of sources,            including dividends or interest received from portfolio securities, unsettled            securities transactions, reserves held for investment strategy purposes, scheduled            maturity of investments, liquidation of investment securities to meet anticipated            redemptions or dividend payments and new cash received from investors. Uninvested Cash            may be invested directly in money market instruments or other short-term debt            obligations. Pursuant to an exemptive order issued by the SEC, the Fund may use            Uninvested Cash to purchase shares of affiliated funds, including money market funds            and Cash Management QP Trust, or entities for which the Advisor may act as investment            advisor now or in the future that operate as cash management investment vehicles but            are excluded from the definition of investment company pursuant to Section 3(c)(1) or            3(c)(7) of the 1940 Act (collectively, the “Central Funds”) in excess of            the limitations of Section 12(d)(1) of the 1940 Act. Investment by the Fund in shares            of the Central Funds will be in accordance with the Fund’s investment policies            and restrictions as set forth in its registration statement.

**Lending of Portfolio Securities.**The Fund            may lend its investment securities to approved institutional borrowers who need to            borrow securities in order to complete certain transactions, such as covering short            sales, avoiding failures to deliver securities or completing arbitrage operations. By            lending its investment securities, the Fund attempts to increase its net investment            income through the receipt of interest on the loan. Any gain or loss in the market            price of the securities loaned that might occur during the term of the loan would            belong to the Fund. The Fund may lend its investment securities so long as the terms,            structure and the aggregate amount of such loans are

 

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not            inconsistent with the 1940 Act or the rules and regulations or interpretations of the            SEC thereunder, which currently require that (a) the borrower pledge and maintain with            the Fund collateral consisting of liquid, unencumbered assets having a value at all            times not less than 100% of the value of the securities loaned, (b) the borrower add to            such collateral whenever the price of the securities loaned rises (i.e., the borrower            “marks to the market” on a daily basis), (c) the loan be made subject to            termination by the Fund at any time, and (d) the Fund receives reasonable interest on            the loan (which may include the Fund investing any cash collateral in interest bearing            short-term investments), and distributions on the loaned securities and any increase in            their market value. There may be risks of delay in recovery of the securities or even            loss of rights in the collateral should the borrower of the securities fail            financially. However, loans will be made only to borrowers selected by the Fund’s            delegate after a commercially reasonable review of relevant facts and circumstances,            including the creditworthiness of the borrower.

At            the present time, the staff of the SEC does not object if an investment company pays            reasonable negotiated fees in connection with loaned securities, so long as such fees            are set forth in a written contract and approved by the investment company’s            Board of Trustees. In addition, voting rights may pass with the loaned securities, but            if a material event occurs affecting an investment on loan, the loan must be called and            the securities voted. Pursuant to an exemptive order granted by the SEC, cash            collateral received by the Fund may be invested in a money market fund managed by the            Advisor (or one of its affiliates).

**Short Sales.**The Fund may engage in short            sales, if, at the time of the short sale, the Fund owns or has the right to acquire            securities equivalent in kind and amount to the securities being sold short.

In            a short sale, the seller does not immediately deliver the securities sold and is said            to have a short position in those securities until delivery occurs. To make delivery to            the purchaser, the executing broker borrows the securities being sold short on behalf            of the seller. While the short position is maintained, the seller collateralizes its            obligation to deliver the securities sold short in an amount equal to the proceeds of            the short sale plus an additional margin amount established by the Board of Governors            of the Federal Reserve. If the Fund engages in a short sale, the collateral account            will be maintained by State Street Bank and Trust Company, the Fund’s custodian.            While the short sale is open, the Fund will maintain, in a segregated custodial            account, an amount of securities convertible into, or exchangeable for, such equivalent            securities at no additional cost. These securities would constitute the Fund’s            long position.

The            Fund may make a short sale, as described above, when it wants to sell the security it            owns at a current attractive price, but also wishes to defer recognition of gain or            loss for federal income tax purposes. There will be certain additional transaction            costs associated with short sales, but the Fund will endeavor to offset these costs            with returns from the investment of the cash proceeds of short sales.

**Derivative Securities.**To the extent            permitted by its investment objective and policies, the Fund may invest in securities            that are commonly referred to as derivative securities. Generally, a derivative is a            financial arrangement, the value of which is based on or derived from a traditional            security, asset or market index. Certain derivative securities are described more            accurately as index-structured securities. Index-structured securities are derivative            securities whose value or performance is linked to other equity securities (such as            depository receipts), currencies, interest rates, indices or other financial indicators            (reference indices).

Some derivatives, such as mortgage-related and other asset-backed            securities, are in many respects like any other investment, although they may be more            volatile or less liquid than more traditional debt securities.

There are many different types of derivatives and many different ways to            use them. Futures and options are commonly used for traditional hedging purposes to            attempt to protect the Fund from exposure to changing interest rates, securities prices            or currency exchange rates, and for cash management purposes as a low-cost method of            gaining exposure to a particular securities market without investing directly in those            securities.

The            Fund may not invest in a derivative security unless the reference index or the            instrument to which it relates is an eligible investment for the Fund.

 

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The            return on a derivative security may increase or decrease, depending upon changes in the            reference index or instrument to which it relates.

There is a range of risks associated with derivative investments,            including:

| **•** | The risk that the underlying security, interest rate,                            market index or other financial asset will not move in the direction                            the Advisor anticipates. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | The possibility that there may be no liquid secondary                            market, or the possibility that price fluctuation limits may be imposed                            by the exchange, either of which may make it difficult or impossible to                            close out a position when desired. |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | The risk that adverse price movements in an instrument                            can result in a loss substantially greater than the Fund’s                            initial investment. |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | The risk that the other party will fail to perform its                            obligations. |
|------------|------------------------------------------------------------------------------------------------|

**Other Investment Companies.**The Fund may            invest up to 10% of its total assets in other mutual funds, including those advised by            the Advisor, if any, provided that the investment is consistent with the Fund’s            investment policies and restrictions. Under the 1940 Act, the Fund’s investment            in such securities, subject to certain exceptions, currently is limited to (a) 3% of            the total voting stock of any one investment company; (b) 5% of the Fund’s total            assets with respect to any one investment company; and (c) 10% of the Fund’s            total assets in the aggregate. Such purchases will be made in the open market where no            commission or profit to a sponsor or dealer results from the purchase other than the            customary brokers’ commissions. As a shareholder of another investment company,            the Fund would bear, along with other shareholders, its pro rata portion of the other            investment company’s expenses, including advisory fees. These expenses would be            in addition to the management fee than the Fund bears directly in connection with its            own operations.

**Repurchase Agreements.**The Fund may invest            in repurchase agreements when such transactions present an attractive short-term return            on cash that is not otherwise committed to the purchase of securities pursuant to the            investment policies of the Fund.

A            repurchase agreement occurs when, at the time the Fund purchases an interest-bearing            obligation, the seller (a bank or a broker-dealer registered under the Securities            Exchange Act of 1934, as amended (the “1934 Act”)) agrees to purchase it on            a specified date in the future at an agreed-upon price. The repurchase price reflects            an agreed-upon interest rate during the time the Fund’s money is invested in the            security.

Because the security purchased constitutes a security for the repurchase            obligation, a repurchase agreement can be considered a loan collateralized by the            security purchased. The Fund’s risk is the ability of the seller to pay the            agreed-upon repurchase price on the repurchase date. If the seller defaults, the Fund            may incur costs in disposing of the collateral, which would reduce the amount realized            thereon. If the seller seeks relief under the bankruptcy laws, the disposition of the            collateral may be delayed or limited. To the extent the value of the security            decreases, the Fund could experience a loss.

The            Fund will limit repurchase agreement transactions to securities issued by the US            government and its agencies and instrumentalities and will enter into such transactions            with those banks and securities dealers who are deemed creditworthy pursuant to            criteria adopted by the Fund’s Board of Trustees or its designee.

The            Fund will not invest more than 15% of its net assets in repurchase agreements maturing            in more than seven days.

**When-Issued and Forward Commitment Agreements.**The Fund may sometimes purchase new issues of securities on a            when-issued or forward commitment basis in which the transaction price and yield are            each fixed at the time the commitment is made, but payment and delivery occur at a            future date (typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis,            the Fund assumes the rights and risks of ownership, including the risks of price and            yield fluctuations. Market rates of interest on debt securities at the time of delivery            may be higher or lower than those contracted for on the when-issued security.            Accordingly, the

 

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value of such a security may decline prior to delivery, which could            result in a loss to the Fund. While the Fund will make commitments to purchase or sell            securities with the intention of actually receiving or delivering them, it may sell the            securities before the settlement date if doing so is deemed advisable as a matter of            investment strategy. In purchasing securities on a when-issued or forward commitment            basis, the Fund will establish and maintain a segregated account consisting of cash,            cash equivalents or other appropriate liquid securities until the settlement date in an            amount sufficient to meet the purchase price. When the time comes to pay for the            when-issued securities, the Fund will meet its obligations with available cash, through            the sale of securities, or, although it would not normally expect to do so, by selling            the when-issued securities themselves (which may have a market value greater or less            than the Fund’s payment obligation). Selling securities to meet when-issued or            forward commitment obligations may generate taxable capital gains or losses.

**Restricted and Illiquid Securities.**The            Fund may, from time to time, purchase securities that are subject to legal or            contractual restrictions on resale (“Restricted Securities”) or illiquid            securities, including Rule 144A securities, when they present attractive investment            opportunities that otherwise meet the Fund’s criteria for investment. Rule 144A            securities are securities that are privately placed with and traded among qualified            institutional investors rather than the general public. Although Rule 144A securities            are considered Restricted Securities, they are not necessarily illiquid.

With respect to securities eligible for resale under Rule 144A, the            staff of the SEC has taken the position that the liquidity of such securities in the            portfolio of a fund offering redeemable securities is a question of fact for the Board            of that fund to determine, based upon a consideration of the readily available trading            markets and the review of any contractual restrictions. Accordingly, the Board of            Trustees of the Fund is responsible for developing and establishing the guidelines and            procedures for determining the liquidity of Rule 144A securities. As allowed by Rule            144A, the Board has delegated the day-to-day function of determining the liquidity of            Rule 144A securities to the Advisor. The Board retains the responsibility to monitor            the implementation of the guidelines and procedures it has adopted.

Because the secondary market for such securities is limited to certain            qualified institutional investors, the liquidity of such securities may be limited            accordingly, and the Fund may, from time to time, hold a Rule 144A or other security            that is illiquid. In such an event, the Advisor will consider appropriate remedies to            minimize the effect on the Fund’s liquidity.

**Short-Term Securities.**In order to meet            anticipated redemptions, to hold pending the purchase of additional securities for the            Fund’s portfolio, or, in some cases, for temporary defensive purposes, the Fund            may invest a portion (up to 100%) of its assets in money market and other short-term            securities. When the Fund is invested for temporary defensive purposes, it may not            achieve or pursue its investment objective.

Examples of short-term securities include:

| **•** | Securities issued or guaranteed by the US government and                            its agencies and instrumentalities; |
|------------|-------------------------------------------------------------------------------------------------------------------------|

| **•** | Commercial Paper; |
|------------|-------------------|

| **•** | Certificates of Deposit and Euro Dollar Certificates of                            Deposit; |
|------------|---------------------------------------------------------------------------------------------|

| **•** | Bankers’ Acceptances; |
|------------|-----------------------------|

| **•** | Short-term notes, bonds, debentures or other debt                            instruments; and |
|------------|-----------------------------------------------------------------------------------------------|

| **•** | Repurchase agreements. |
|------------|------------------------|

The            Fund may also invest up to 5% of its total assets in any money market fund, including            those advised by the Advisor, if any.

**Futures and Options.**To the extent            permitted by its investment objectives and policies, the Fund may enter into futures            contracts, options or options on futures contracts. Generally, futures transactions may            be used to:

| **•** | Protect against a decline in market value of the                            Fund’s securities (taking a short futures position); |
|------------|----------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Protect against the risk of an increase in market value                            for securities in which the Fund generally invests at a time when the                            Fund is not fully invested (taking a long futures position);                            and |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| **•** | Provide a temporary substitute for the purchase of an                            individual security that may not be purchased in an orderly                            fashion. |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Some futures and options strategies, such as selling futures, buying            puts and writing calls, hedge the Fund’s investments against price fluctuations.            Other strategies, such as buying futures, writing puts and buying calls, tend to            increase market exposure.

Although other techniques may be used to control the Fund’s            exposure to market fluctuations, the use of futures contracts may be a more effective            means of hedging this exposure. While the Fund pays brokerage commissions in connection            with opening and closing out futures positions, these costs are lower than the            transaction costs incurred in the purchase and sale of the underlying            securities.

For            example, the sale of a future by the Fund means the Fund becomes obligated to deliver            the security (or securities, in the case of an index future) at a specified price on a            specified date. The purchase of a future means the Fund becomes obligated to buy the            security (or securities) at a specified price on a specified date. Futures contracts            provide for the sale by one party and purchase by another party of a specific security            at a specified future time and price. The Advisor may engage in futures and options            transactions based on securities indices that are consistent with the Fund’s            investment objectives. An example of an index that may be used is the S&P 500®            Index. The managers also may engage in futures and options transactions based on            specific securities, such as US Treasury bonds or notes. Futures contracts are traded            on national futures exchanges. Futures exchanges and trading are regulated under the            Commodity Exchange Act by the Commodity Futures Trading Commission (the            “CFTC”), a US government agency.

Index futures contracts differ from traditional futures contracts in            that when delivery takes place, no stocks or bonds change hands. Instead, these            contracts settle in cash at the spot market value of the index. Although other types of            futures contracts by their terms call for actual delivery or acceptance of the            underlying securities, in most cases the contracts are closed out before the settlement            date. A futures position may be closed by taking an opposite position in an identical            contract (i.e., buying a contract that has previously been sold or selling a contract            that has previously been bought).

Unlike the situation in which the Fund purchases or sells an equity            security, no price is paid or received by the Fund upon the purchase or sale of the            future. Initially, the Fund will be required to deposit an amount of cash or securities            equal to a varying specified percentage of the contract amount. This amount is known as            initial margin. The margin deposit is intended to ensure completion of the contract            (delivery or acceptance of the underlying security) if it is not terminated prior to            the specified delivery date. A margin deposit does not constitute margin transactions            for purposes of the Fund’s investment restrictions. Minimum initial margin            requirements are established by the futures exchanges and may be revised. In addition,            brokers may establish margin deposit requirements that are higher than the exchange            minimums. Cash held in the margin account is not income-producing. Subsequent payments            to and from the broker, called variation margin, will be made on a daily basis as the            price of the underlying debt securities or index fluctuates, making the future more or            less valuable, a process known as marking the contract to market. Changes in variation            margin are recorded by the Fund as unrealized gains or losses. At any time prior to            expiration of the future, the Fund may elect to close the position by taking an            opposite position that will operate to terminate its position in the future. A final            determination of variation margin is then made, additional cash is required to be paid            by or released to the Fund, and the Fund realizes a loss or gain.

**Risks Related to Futures and Options Transactions.**Futures and options prices can be volatile, and trading in these markets            involves certain risks. If the Advisor utilizes a hedge at an inappropriate time or            judges interest rate or equity market trends incorrectly, futures and options            strategies may lower the Fund’s return.

The            Fund could suffer losses if it is unable to close out its position because of an            illiquid secondary market. Futures contracts may be closed out only on an exchange that            provides a secondary market for these contracts, and there is no assurance that a            liquid secondary market will exist for any particular futures contract at any            particular time. Consequently, it may not be possible to close a futures position when            the Advisor considers it appropriate or desirable to do so. In the event of adverse            price movements, the Fund would be required to continue making daily cash payments to            maintain its required margin. If the Fund had insufficient cash, it might have to sell            portfolio

 

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securities to meet daily margin requirements at a time when the Advisor            would not otherwise elect to do so. In addition, the Fund may be required to deliver or            take delivery of instruments underlying futures contracts it holds. The Advisor will            seek to minimize these risks by limiting the contracts entered into on behalf of the            Fund to those traded on national futures exchanges and for which there appears to be a            liquid secondary market.

The            Fund could suffer losses if the prices of its futures and options positions were poorly            correlated with its other investments, or if securities underlying futures contracts            purchased by the Fund had different maturities than those of the portfolio securities            being hedged. Such imperfect correlation may give rise to circumstances in which the            Fund loses money on a futures contract at the same time that it experiences a decline            in the value of its hedged portfolio securities. The Fund also could lose margin            payments it has deposited with a margin broker, if, for example, the broker became            bankrupt.

Most futures exchanges limit the amount of fluctuation permitted in            futures contract prices during a single trading day. The daily limit establishes the            maximum amount that the price of a futures contract may vary either up or down from the            previous day’s settlement price at the end of the trading session. Once the daily            limit has been reached in a particular type of contract, no trades may be made on that            day at a price beyond the limit. However, the daily limit governs only price movement            during a particular trading day and, therefore, does not limit potential losses. In            addition, the daily limit may prevent liquidation of unfavorable positions. Futures            contract prices have occasionally moved to the daily limit for several consecutive            trading days with little or no trading, thereby preventing prompt liquidation of            futures positions and subjecting some futures traders to substantial losses.

**Options on Futures.**By purchasing an option            on a futures contract, the Fund obtains the right, but not the obligation, to sell the            futures contract (a put option) or to buy the contract (a call option) at a fixed            strike price. The Fund can terminate its position in a put option by allowing it to            expire or by exercising the option. If the option is exercised, the Fund completes the            sale of the underlying security at the strike price. Purchasing an option on a futures            contract does not require the Fund to make margin payments unless the option is            exercised.

Although it does not currently intend to do so, the Fund may write (or            sell) call options that obligate them to sell (or deliver) the option’s            underlying instrument upon exercise of the option. While the receipt of option premiums            would mitigate the effects of price declines, the Fund would give up some ability to            participate in a price increase on the underlying security. If the Fund were to engage            in options transactions, it would own the futures contract at the time a call was            written and would keep the contract open until the obligation to deliver it pursuant to            the call expired.

**Restrictions on the Use of Futures Contracts and Options.**Under the Commodity Exchange Act, the Fund may enter into futures and            options transactions (a) for hedging purposes without regard to the percentage of            assets committed to initial margin and option premiums or (b) for purposes other than            hedging, provided that assets committed to initial margin and option premiums do not            exceed 5% of the Fund’s total assets. To the extent required by law, the Fund            will segregate cash or securities on its records in an amount sufficient to cover its            obligations under the futures contracts and options.

**Non-diversification.**The Fund is classified            as a non-diversified management investment company under the 1940 Act, which means that            the Fund is not limited by the 1940 Act in the proportion of its assets that it may            invest in the obligations of a single issuer. The investment of a large percentage of            the Fund’s assets in the securities of a small number of issuers may cause the            Fund’s share price to fluctuate more than that of a diversified fund.

**Portfolio Holdings**

In            addition to the public disclosure of Fund portfolio holdings through required SEC            quarterly filings, the Fund may make its portfolio holdings information publicly            available on the DWS Funds’ Web site as described in the Fund’s            Prospectuses. 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

 

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require access to this information to fulfill their duties to the Fund            and are subject to the duties of confidentiality, including the duty not to trade on            non-public information, imposed by law or contract, or by the Fund’s procedures.            This non-public information may also be disclosed, subject to the requirements            described below, to securities lending agents, financial printers, proxy voting firms,            mutual fund analysts and rating and tracking agencies, or to shareholders in connection            with in-kind redemptions (collectively, “Authorized Third            Parties”).

Prior to any disclosure of the Fund’s non-public portfolio            holdings information to Authorized Third Parties, a person authorized by the            Fund’s Trustees must make a good faith determination in light of the facts then            known that the Fund has a legitimate business purpose for providing the information,            that the disclosure is in the best interest of the Fund, and that the recipient assents            or otherwise has a duty to keep the information confidential and to 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.

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**

Deutsche Investment Management Americas Inc. (“DIMA” or the            “Advisor”), which is part of Deutsche Asset Management, is the investment            advisor for the Fund. Under the supervision of the Board of Trustees of the Fund, with            headquarters at 345 Park Avenue, New York, New York 10154, DIMA makes the Fund’s            investment decisions, buys and sells securities for the Fund and conducts research that            leads to these purchase and sale decisions. The Advisor manages the Fund’s daily            investment and business affairs subject to the policies established by each            Corporation’s Board of Directors. DIMA and its predecessors have more than 80            years of experience managing mutual funds. DIMA provides a full range of investment            advisory services to institutional and retail clients. The Fund’s investment            advisor is also responsible for selecting brokers and dealers and for negotiating            brokerage commissions and dealer charges. On December 31, 2006, Deutsche Asset            Management, Inc. (“DAMI’’) merged into DIMA. Prior to December 31,            2006 DAMI was the investment advisor to the Fund. As a result of the merger, DIMA is            now the investment advisor to the Fund.

 

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

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

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

**Investment Management Agreement**

The            Board of DWS Advisor Funds (the “Trust”) and the shareholders approved an            amended and restated investment management agreement (the “Investment Management            Agreement”), which became effective on January 1, 2007, between the Trust            and DIMA. Pursuant to the Investment Management Agreement, the Advisor provides            continuing investment management of the assets of the Fund. In addition to the            investment management of the assets of the Fund, the Advisor determines the investments            to be made for the Fund, including what portion of its assets remain uninvested in cash            or cash equivalents, and with whom the orders for investments are placed, consistent            with the Fund’s policies or as adopted by the Fund’s Board of Trustees. The            Advisor will also monitor, 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 Investment Management Agreement, (unless otherwise            provided in the agreement or as determined by the Fund’s Board and to the extent            permitted by applicable law), the Advisor pays the compensation and expenses of all the            Board members, officers, and executive employees of the Fund, including the            Fund’s share of payroll taxes, who are affiliated persons of the            Advisor.

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

 

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The            Investment Management 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 the Trust,            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.

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.

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

Prior to July 1, 2006, the Fund paid DAMI the monthly fee equal to an            annual rate of 0.650% of the first $100 million of the Fund’s average daily net            assets, 0.550% of the next $100 million of such net assets, 0.500% of the next $100            million of such net assets and 0.450% of such assets in excess of $300            million.

Effective July 1, 2006, for all services provided under the Investment            Management Agreement, the Fund pays DIMA a fee equal to an annual rate of 0.565% of the            first $100 million of the Fund’s average daily net assets, 0.465% of the next            $100 million of such net assets, 0.415% of the next $100 million of such net assets and            0.365% of such assets in excess of $300 million.

For            the year ended December 31, 2004 the investment management fee aggregated $4,566,379,            which was equivalent to an annual effective rate of 0.49% of the Fund’s average            daily net assets. For the year ended December 31, 2005, the investment management fee            aggregated $6,490,789, which was equivalent to an annual effective rate of 0.48% of the            Fund’s average daily net assets. For the year ended December 31, 2006, the            investment management fee aggregated $7,045,424, which was equivalent to an annual            effective rate of 0.42% of the Fund’s average daily net assets. During the period            January 1, 2004 through September 30, 2006, the Advisor had contractually agreed to            maintain the expenses of Class A, B, C, R and Institutional shares at no more than            1.25%, 2.00%, 2.00%, 1.50% and 1.00%, respectively, of average daily net assets. Prior            to June 1, 2006, these fees included an administrative service fee.

Through June 30, 2007, the Advisor has contractually agreed to waive all            or a portion of its management fee and reimburse or pay certain operating expenses of            the Fund to the extent necessary to maintain the fund’s total operating expenses            at 1.60%, 2.35%, 2.35%, 1.85% and 1.35% for Class A, Class B, Class C, Class R and            Institutional Class shares, respectively, excluding certain expenses such as            extraordinary expenses, taxes, brokerage, interest, proxy and organizational and            offering expenses.

In            reviewing the terms of the Investment Management Agreement and in discussions with the            Advisor concerning such Agreement, the Trustees of the Trust who are not            “interested persons” of the Advisor are represented by independent counsel            at the Fund’s expense.

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

 

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

***Subadvisor.***RREEF America L.L.C.            (“RREEF”), located at 875 North Michigan Avenue, 41st Floor, Chicago,            Illinois 60611, an affiliate of the Advisor, is the subadvisor for the Fund. RREEF            serves as sub-advisor pursuant to the terms of a subadvisory agreement (the            “Subadvisory Agreement”) between it and the Advisor. RREEF has provided            real estate investment management services to institutional investors since 1975 and            has been an investment advisor of real estate securities since 1993.

While DIMA is the investment advisor to the Fund, the day-to-day            activities of managing the Fund’s portfolio have been delegated to RREEF. DIMA            compensates RREEF out of the management fee it receives from the Fund.

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

The            Subadvisory Agreement shall continue in effect from year to year thereafter, but only            as long as such continuance is specifically approved at least annually (a) by a            majority of the Trustees of the Trust who are not parties to such agreement or            interested persons of any such party except in their capacity as Trustees of the Trust,            and (b) by the shareholders or the Board of Trustees of the Trust. The Research and            Advisory Agreement may be terminated at any time upon sixty days’ notice by the            Advisor or by the Board of Trustees of the Trust or by majority vote of the outstanding            shares of the Fund, and will terminate automatically upon assignment or upon            termination of the Fund’s investment management agreement.

The            Fund’s shareholder report for the period ended December 31, 2006, will contain a            discussion regarding the basis for the Board of Trustees’ approval of the            investment management agreement and the Subadvisory Agreement for the Fund.

**Compensation of Portfolio Managers**

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

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

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

 

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| **•** | 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** |
|----------------------------------------------|------------------------------------------------|--------------------------------------------------|
|                                         |                                           |                                             |
| Asad                            Kazim        | $1 -                            $10,000        | $10,001 -                            $50,000     |
| Jerry                            W. Ehlinger | $0                                             | $50,000 -                            $100,000    |
| John W.                            Vojticek  | $1 -                            $10,000        | $1 -                            $10,000          |
| John F.                            Robertson | $100,001 -                            $500,000 | $500,001 -                            $1,000,000 |

 

**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.

 

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***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** |
|-------------------------------|--------------------------------------------------------|--------------------------------------------------------------|-----------------------------------------------------------------------------------|--------------------------------------------------------------|
|                          |                                                   |                                                         |                                                                              |                                                         |
| Asad Kazim                    | 9                                                      | $3,016,000,000                                               | 0                                                                                 | $0                                                           |
| Jerry W. Ehlinger             | 9                                                      | $3,016,000,000                                               | 0                                                                                 | $0                                                           |
| John W. Vojticek              | 9                                                      | $3,016,000,000                                               | 0                                                                                 | $0                                                           |
| John F. Robertson             | 9                                                      | $3,739,200,000                                               | 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** |
|-------------------------------|---------------------------------------------|---------------------------------------------------|------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                          |                                        |                                              |                                                                                                       |                                                      |
| Asad Kazim                    | 8                                           | $1,009,100,000                                    | 3                                                                                                          | $205,300,000                                              |
| Jerry W. Ehlinger             | 8                                           | $1,009,100,000                                    | 3                                                                                                          | $205,300,000                                              |
| John W. Vojticek              | 8                                           | $1,009,100,000                                    | 3                                                                                                          | $205,300,000                                              |
| John F. Robertson             | 8                                           | $1,009,100,000                                    | 3                                                                                                          | $205,300,000                                              |

 

***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** |
|-------------------------------|------------------------------------|---------------------------------------|----------------------------------------------------------------------------------------|-----------------------------------------------------------|
|                          |                               |                                  |                                                                                   |                                                      |
| Asad Kazim                    | 45                                 | $5,031,900,000                        | 2                                                                                      | $626,500,000                                              |
| Jerry W. Ehlinger             | 45                                 | $5,031,900,000                        | 2                                                                                      | $626,500,000                                              |
| John W. Vojticek              | 45                                 | $5,031,900,000                        | 2                                                                                      | $626,500,000                                              |
| John F. Robertson             | 45                                 | $5,139,600,000                        | 2                                                                                      | $626,500,000                                              |

 

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

             

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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 Fund may manage other mutual funds and separate accounts on a                            long-short basis. The simultaneous management of long and short                            portfolios creates potential conflicts of interest including the risk                            that short sale activity could adversely affect the market value of the                            long positions (and vice versa), the risk arising from sequential                            orders in long and short positions, and the risks associated with                            receiving opposing orders at the same time. The Advisor has adopted                            procedures that it believes are reasonably designed to mitigate these                            potential conflicts of interest. Included in these procedures are                            specific guidelines developed to ensure fair and equitable treatment                            for all clients whose accounts are managed by the Fund’s                            portfolio management team. The Advisor and the portfolio management                            team have established monitoring procedures, a protocol for supervisory                            reviews, as well as compliance oversight to ensure that potential                            conflicts of interest relating to this type of activity are properly                            addressed. |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

***Codes of Ethics***

The            Fund has adopted a Code of Ethics pursuant to Rule 17j-1 under the 1940 Act, to ensure            that the interests of the Fund’s shareholders come before the interests of the            people who manage the Fund. Among other provisions, the Code of Ethics prohibits            portfolio managers and other investment personnel from buying or selling any real            estate securities or any securities sold in private placements in which the person has,            or by reason of the transaction acquires, any direct or indirect beneficial ownership            without the prior approval of the Fund’s compliance officer.

 

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The            Advisor and its affiliates (including the Fund’s distributor, DWS Scudder            Distributors, Inc. (the “Distributor”)) 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 requirements. In addition, the Consolidated Code also            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            settlements is available atwww.dws-scudder.com/regulatory_settlements            . For discussion of other regulatory matters see the Fund’s            prospectuses.

**FUND SERVICE PROVIDERS**

**Administrator**

Deutsche Investment Management Americas Inc. (“DIMA” or            “Administrator”), 345 Park Avenue, New York, New York 10154, serves as the            Fund’s Administrator. The Fund recently entered into an administrative services            agreement with the Administrator (the “Administrative Services Agreement”),            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. Prior to July 1, 2006, the Fund did not            have an administrative services agreement. Effective July 1, 2006, for 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.

Under the Administrative Services Agreements, DIMA is obligated on a            continuous basis to provide such administrative services as the Board of Trustees of            the Fund reasonably deems necessary for the proper administration of the Fund. DIMA            provides the Fund with personnel; arranges for the preparation and filing of the            Fund’s tax returns; prepares and submits reports and meeting materials to the            Board and the shareholders; prepares and files updates to the Fund’s Prospectus            and Statement of Additional Information as well as other reports required

 

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to            be filed by the SEC; maintains the Fund’s records; provides the Fund with office            space, equipment and services; supervises, negotiates the contracts of and monitors the            performance of third parties contractors; oversees the tabulation of proxies; monitors            the valuation of portfolio securities and monitors compliance with Board-approved            valuation procedures; assists in establishing the accounting and tax policies of the            Fund; assists in the resolution of accounting issues that may arise with respect to the            Fund; establishes and monitors the Fund’s operating expense budgets; reviews and            processes the Fund’s bills; assists in determining the amount of dividends and            distributions available to be paid by the Fund, prepares and arranges dividend            notifications and provides information to agents to effect payments thereof; provides            to the Board periodic and special reports; provides assistance with investor and public            relations matters; and monitors the registration of shares under applicable federal and            state law. 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 December 31, 2006, DIMA received $939,026 as            compensation for administrative services, of which $180,205 was unpaid as of December            31, 2006.

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

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

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**

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

The            Distribution Agreement dated September 3, 2002 was last approved by the Board of            Trustees on September 20, 2006 with respect to Class A, B and C shares of the Fund. The            Distribution Agreement dated June 24, 2003 was last approved by the Board of Trustees            on September 20, 2006 with respect to Class R shares of the Fund. The Distribution            Agreements will remain in effect from year to year only if their continuance is            approved for each class at least annually by a vote of the Board of Trustees of the            Trust, including the Independent Trustees who have no direct or indirect financial            interest in the agreement. The Distribution Agreements automatically terminate in the            event of their assignment and may be terminated for a class at any time without penalty            by the Fund or by DWS-SDI upon 60 days’ notice. Termination by the Fund with            respect to a class may be by vote of (i) a majority of the Board of Trustees or (ii) a            majority of the Trustees who are not interested persons of the Fund and who have no            direct or indirect financial interest in the Distribution Agreements or (iii) a            “majority of the outstanding voting securities,” as defined under the 1940            Act. The Distribution Agreements may not be amended for a class to increase the fee to            be paid by the Fund with respect to such class without approval by a majority of the            outstanding voting securities of such class of the Fund, and all material amendments            must in any event be approved by the Board of Trustees in the

 

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manner described above with respect to the continuation of the            Distribution Agreements. The provisions concerning the continuation, amendment and            termination of the Distribution Agreements are on a class-by-class basis.

Information and administrative services are provided to the Fund on            behalf of Class A, Class B, Class C and Class R shareholders under the Services            Agreement with DWS-SDI. The Services Agreement continues in effect from year to year so            long as such continuance is approved for the Fund at least annually by a vote of the            Board of Trustees for the Fund, including the Trustees who are not interested persons            of the Fund and who have no direct or indirect financial interest in the Service            Agreement. The Services Agreement automatically terminates in the event of its            assignment and may be terminated at any time without penalty by the Fund or by DWS-SDI            upon 60 days’ notice. Termination with respect to the Class A, B, C and R shares            of the Fund may be by a vote of (i) the majority of the Board of Trustees of the Fund            who are not interested persons of the Fund and who have no direct or indirect financial            interest in the Services Agreement or (ii) a “majority of the outstanding voting            securities,” (as defined under the 1940 Act) of the Class A, B, C or R shares.            The Services Agreement may not be amended for a class to increase materially the fee to            be paid by the Fund without approval by a majority of the outstanding voting securities            of such class of the Fund, and all material amendments must in any event be approved by            the Board of Trustees in the manner described above with respect to the continuation of            the Services Agreement.

The            Services Agreement authorizes the Fund to pay DWS-SDI a services fee computed at an            annual rate of up to 0.25 of 1% of the average daily net assets of the            Class.

DWS-SDI pays all expenses of distribution of the Fund’s Class A            shares under the Distribution Agreement not otherwise paid by dealers or other            financial services firms. As indicated under “Purchase and Redemption of            Shares,” DWS-SDI retains the sales charge upon the purchase of Class A shares and            pays or allows concessions or discounts to firms for the sale of the Fund’s            shares. DWS-SDI receives no compensation from the Fund as principal underwriter for            Class A and Institutional shares, except as noted below. DWS-SDI receives compensation            from the Fund as principal underwriter for Class B, Class C and Class R. The Fund pays            DWS-SDI a services fee pursuant to a Rule 12b-1 Plan, computed at an annual rate of up            to 0.25 of 1% of the average daily net assets of the Class A shares, as set forth            in the Services Agreement.

***Rule 12b-1 Plans***

The            Fund has adopted a plan under Rule 12b-1 (the “Rule 12b-1 Plan” or the            “Plan”) that provides for fees payable as an expense of the Class B shares,            Class C and Class R shares that are used by DWS-SDI to pay for distribution services            for those classes. Because 12b-1 fees are paid out of class assets on an ongoing basis            they will, over time, increase the cost of an investment and cost more than other types            of sales charges.

Since the Distribution Agreement provides for fees payable as an expense            of the Class B shares, Class C and Class R shares that are used by DWS-SDI to pay for            distribution services for those classes, that Agreement is approved and reviewed            separately for the Class B shares, Class C and Class R 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.

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

 

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conversion of the investment to Class A shares). As a result, if            DWS-SDI’s expenses are less than the Rule 12b-1 fees, DWS-SDI will retain its            full fees and make a profit.

***Class B, Class C and Class R Shares***

*Distribution Services.*For its services            under the Distribution Agreement, DWS-SDI is paid monthly a fee from Class B            shares’ net assets at the annual rate of 0.75% of average daily net assets of the            Fund attributable to Class B shares. This fee is accrued daily as an expense of Class B            shares. DWS-SDI also receives any contingent deferred sales charges. DWS-SDI currently            compensates firms for sales of Class B shares at a commission rate of 0.75%.

For            its services under the Distribution Agreement, DWS-SDI is paid monthly a fee from Class            C shares’ net assets at the annual rate of 0.75% of average daily net assets of            the Fund attributable to Class C shares. This fee is accrued daily as an expense of            Class C shares. Effective January 1, 2006, DWS-SDI will no longer advance the first            year distribution fee to firms for sales of Class C shares to employer sponsored            employee benefit plans using the OmniPlus subaccount record keeping system made            available through ADP, Inc. under an alliance with DWS-SDI and its affiliates. DWS-SDI            currently pays firms for sales of Class C shares a distribution fee, payable quarterly,            at an annual rate of 0.75% of net assets attributable to Class C shares maintained and            serviced by the firm and the fee continues until terminated by DWS-SDI or the Fund.            DWS-SDI also receives any contingent deferred sales charges.

For            its services under the Distribution Agreement, DWS-SDI is paid a monthly fee from Class            R shares’ net assets at the annual rate of 0.25% of average daily net assets of            the Fund attributable to Class R shares. This fee is accrued daily as an expense of            Class R shares.

***Class A, Class B, Class C and Class R Shares***

*Shareholder Services.*Pursuant to the Rule            12b-1 Plan, shareholder or administrative services are provided to the Fund on behalf            of Class A, B, C and R shareholders under the Services Agreement with DWS-SDI. DWS-SDI            bears all of its expenses of providing services pursuant to the Services Agreement            between DWS-SDI and the Fund, including the payment of service fees. The Fund pays            DWS-SDI a shareholder services fee, payable monthly, at an annual rate of up to 0.25%            of average daily net assets of Class A, B, C and R shares of the Fund. The Fund began            offering Class A, B and C shares on September 3, 2002. The Fund began offering Class R            shares on July 1, 2003.

DWS-SDI enters into related arrangements with various broker-dealer            firms and other service or administrative firms (“firms”) that provide            services and facilities for their customers or clients who are investors in the Fund.            The firms provide such office space and equipment, telephone facilities and personnel            as is necessary or beneficial for providing information and services to their clients.            Such services and assistance may include, but are not limited to, establishing and            maintaining accounts and records, processing purchase and redemption transactions,            answering routine inquiries regarding the Fund, assistance to clients in changing            dividend and investment options, account designations and addresses and such other            administrative services as may be agreed upon from time to time and permitted by            applicable statute, rule or regulation. With respect to Class A and R Shares, DWS-SDI            pays each firm a service fee, payable quarterly, at an annual rate of up to 0.25% of            the net assets in Fund accounts that it maintains and services attributable to Class A            and R Shares, commencing with the month after investment. With respect to Class B and            Class C Shares, DWS-SDI currently advances to firms the first-year service fee at a            rate of up to 0.25% of the purchase price of such shares. Effective January 1, 2006,            DWS-SDI will no longer advance the first year service fee to firms for sales of Class C            shares to employer sponsored employee benefit plans using the OmniPlus sub-account            record keeping system made available through ADP, Inc. under an alliance with DWS-SDI            and its affiliates. For periods after the first year, DWS-SDI currently intends to pay            firms a service fee at a rate of up to 0.25% (calculated monthly and paid quarterly) of            the net assets attributable to Class B and Class C Shares maintained and serviced by            the firm. After the first year, a firm becomes eligible for the quarterly service fee            and the fee continues until terminated by DWS-SDI or the Fund. Firms to which service            fees may be paid include affiliates of DWS-SDI. In addition, DWS-SDI may from time to            time, from its own resources pay certain firms additional amounts for ongoing            administrative services and assistance provided to their customers and clients who are            shareholders of the Fund.

DWS-SDI also may provide some of the above services and may retain any            portion of the fee under the Services Agreement not paid to firms to compensate itself            for shareholder or administrative functions performed for the Fund.

 

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Currently, the services fee payable to DWS-SDI is payable at an annual            rate of 0.25% based upon Fund assets in accounts for which a firm provides shareholder            or administrative services and at the annual rate of 0.15% based upon Fund assets in            accounts for which there is no firm of record (other than DWS-SDI) listed on the            Fund’s records. The effective shareholder or administrative services fee rate to            be charged against all assets of the Fund while this procedure is in effect will depend            upon the proportion of Fund assets that is in accounts for which a firm of record            provides shareholder or administrative services. The Board of the Fund, in its            discretion, may approve basing the fee to DWS-SDI at the annual rate of 0.25% on all            Fund assets in the future.

Expenses of the Fund paid in connection with the Rule 12b-1 Plan for            each class of shares are set forth below for the most recent year for which information            is available. A portion of the marketing and sales and operating expenses shown below            could be considered overhead expenses.

 

 

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| **Compensation to                            Underwriter and Firms**

**for Calendar                            Year 2006** | **Other                            Distribution Expenses Paid by**

**Underwriter                            for Calendar Year 2006** |
|-----------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                        | **12b-1 Fees                            (Distribution Fee) Paid****to DWS-SDI**                                                       | **12b-1 Fees                            (Shareholder Servicing Fee)****Paid to                            DWS-SDI** | **Compensation                            Paid by DWS-SDI****to Firms from****Distribution Fee** | **Compensation                            Paid by DWS-SDI****to Firms from                            Shareholder****Servicing                            Fee** | **Advertising,                            Sales,****Literature                            and****Promotional****Materials** | **Prospectus****Printing** | **Marketing and                            Sales****Expenses** | **Postage                            and****Mailing** | **Interest****Expenses** |
|                                                                                                                        |                                                                                                                                  |   |   |   |   |   |   |   |   |
| Class A                                                                                                                     | NA                                                                                                                                    | $4,473 | NA | $1,924,223 | NA | NA | NA | NA | NA |
| Class B                                                                                                                     | $235,537                                                                                                                              | $724 | $141,634 | $65,898 | $19,126 | $1,325 | $4,683 | $1,213 | $44,664 |
| Class C                                                                                                                     | $812,934                                                                                                                              | $198 | $891,172 | $227,722 | $126,373 | $8,476 | $29,588 | $8,057 | $0 |
| Class R                                                                                                                     | $43,237                                                                                                                               | $0 | $15,271 | $34,991 | $83,806 | $5,910 | $19,898 | $5,355 | $0 |

 

 

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**DWS RREEF Real Estate Securities Fund**

The            following table shows, for Class A shares, the aggregate amount of underwriting            commissions paid to DWS-SDI, the amount in commissions it paid out to brokers and the            amount of underwriting commissions retained by DWS-SDI.

 

| **Fund**                                  | **Fiscal Year****As of 12/31** | **Aggregate Sales****Commissions** | **Aggregate Commissions Paid to                            Unaffiliated****Firms** | **Aggregate Commissions Paid****to Affiliated Firms** | **Aggregate Commissions Retained by****DWS-SDI** |
|-------------------------------------------|--------------------------------|------------------------------------|------------------------------------------------------------------------------------|-------------------------------------------------------|--------------------------------------------------|
|                                      |                           |                               |                                                                               |                                                  |                                             |
| **DWS RREEF Real Estate Securities Fund** | 2006                           | $147,000                           | $66,000                                                                            | $13,000                                               | $68,000                                          |
|                                      | 2005                           | $199,000                           | $108,000                                                                           | $12,000                                               | $79,000                                          |
|                                      | 2004                           | $196,000                           | $91,000                                                                            | $21,000                                               | $84,000                                          |

 

Certain Trustees or officers of the Fund are also directors or officers            of the Advisor or DWS-SDI, as indicated under “Officers and            Trustees.”

**Custodian**

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

**Transfer Agent and Shareholder Service            Agent**

Effective December 16, 2002, DWS Scudder Investments Service Company, an            affiliate of the Advisor, is the Fund’s transfer agent, dividend paying and            shareholder services agent (“DWS-SISC” or the “Transfer            Agent”). For the year ended December 31, 2006, Transfer Agent charges to the Fund            by DWS-SISC aggregated $985,183, of which $826,956 was waived. For the year ended            December 31, 2005, Transfer Agent charges to the Fund by DWS-SISC aggregated $541,477.            For the year ended December 31, 2004, Transfer Agent charges to the Fund by DWS-SISC            aggregated $383,320.

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.

 

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Pursuant to a sub-transfer agency agreement between DWS-SISC and DST            Systems, Inc. (“DST”), DWS-SISC has delegated certain transfer agent and            dividend paying agent functions to DST. The costs and expenses of such delegation are            borne by DWS-SISC, not by the Fund.

Prior to July 1, 2006 Investment Company Capital Corp.            (“ICCC”), an affiliate of the Advisor and the Custodian, also provided            certain accounting services to the Fund under a Master Services Agreement between the            Fund and ICCC. As compensation for these services, ICCC received an annual fee,            calculated daily and paid monthly. For the period from January 1, 2006 through June 30,            2006, the amount charged the Fund by ICCC aggregated $66,578. For the year ended            December 31, 2005, the amount charged the Fund by ICCC aggregated $149,765. For the            year ended December 31, 2004, the amount charged the Fund by ICCC aggregated            $150,909.

**Independent Registered Public Accounting            Firm**

The            financial highlights of the Fund included in the Fund’s Prospectuses and the            Financial Statements of the Fund incorporated by reference into this SAI have been so            included or incorporated by reference in reliance on the report of            PricewaterhouseCoopers LLP, independent registered public accounting firm, 125 High            Street, Boston, MA 02110, given on the authority of said firm as experts in auditing            and accounting. PricewaterhouseCoopers LLP audits the financial statements of the Fund            and provides other audit, tax and related services. Shareholders will receive annual            audited financial statements and semi-annual unaudited financial statements.

**Legal Counsel**

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

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

**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 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.

 

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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 Funds.

The            Advisor is permitted by Section 28(e) of the 1934 Act, when placing portfolio            transactions for the 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 the 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 the 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 the 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 is 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.

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 the 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            the 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.

 

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

DIMA has adopted procedures that it believes are reasonably designed to            mitigate these potential conflicts of interest. Incorporated in the procedures are            specific guidelines developed to ensure fair and equitable treatment for all clients.            DIMA and the investment team have established monitoring procedures, 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’s            Board, 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.

During the year ended December 31, 2004, the Fund paid brokerage            commissions equal to $2,620,219 to such brokers. During the year ended December 31,            2005, the Fund paid brokerage commissions equal to $2,476,587 to such brokers. During            the year ended December 31, 2006, the Fund paid brokerage commissions equal to            $2,389,229 to such brokers. During the last year, the Advisor directed brokerage            transactions for the Fund to brokers based on research services provided on behalf of            the Fund.

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

***Portfolio Turnover***

The            Advisor will purchase and sell securities without regard to the length of time the            security has been held. Accordingly, the Fund’s rate of portfolio turnover may be            substantial.

The            Advisor intends to purchase a given security whenever it believes it will contribute to            the stated objective of the Fund. In order to achieve the Fund’s investment            objectives, the Advisor may sell a given security, no matter how long or how short a            period it has been held in the portfolio, and no matter whether the sale is at a gain            or at a loss, if the Advisor believes that the security is not fulfilling its purpose,            either because, among other things, it did not live up to the Advisor’s            expectations, or because it may be replaced with another security holding greater            promise, or because it has reached its optimum potential, or because of a change in the            circumstances of a particular company or industry or in general economic conditions, or            because of some combination of such reasons.

Because investment decisions are based on the anticipated contribution            of the security in question to the Fund’s objective, the Advisor believes that a            consideration of the rate of portfolio turnover is irrelevant when it believes a change            is in order to achieve the investment objective of the Fund. As a result, the            Fund’s annual portfolio turnover rate cannot be anticipated and may be higher            than other mutual funds with similar investment objective. Higher turnover would            generate correspondingly greater brokerage commissions, which is a cost the Fund pays            directly. Portfolio turnover also may affect the character of capital gains realized            and distributed by the Fund, if any, because short-term capital gains are taxable as            ordinary income.

For            the years ended December 31, 2006 and December 31, 2005, the Fund’s portfolio            turnover rates were 60% and 66%, respectively.

 

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**PURCHASE AND REDEMPTION OF SHARES**

***General Information***

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

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

Orders will be confirmed at a price based on the net asset value of the            Fund (including applicable sales charges) 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, DWS Scudder Investments Service Company, the Fund’s transfer agent            (“DWS-SISC” or the “Transfer Agent”), or sub-transfer agent            will have no information with respect to or control over the accounts of specific            shareholders. Such shareholders may obtain access to their accounts and information            about their accounts only from their firm. Certain of these firms may receive            compensation from the Fund through the Shareholder Service Agent for record-keeping and            other expenses relating to these nominee accounts. In addition, certain privileges with            respect to the purchase and redemption of shares or the reinvestment of dividends may            not be available through such firms. Some firms may participate in a program allowing            them access to their clients’ accounts for servicing including, without            limitation, transfers of registration and dividend payee changes; and may perform            functions such as generation of confirmation statements and disbursement of cash            dividends. Such firms, including affiliates of DWS-SDI, may receive compensation from            the Fund through the Shareholder Service Agent for these services.

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

DWS-SDI has adopted an Incentive Plan (the “Plan”) covering            wholesalers that are regional vice presidents (“DWS Scudder Wholesalers”).            Generally, DWS Scudder Wholesalers market shares of the DWS Funds to your            financial

 

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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 (not applicable to            Class** **R shares).**QuickBuy and QuickSell permits the transfer of money via the Automated            Clearing House System (minimum $50 and maximum $250,000) from or to a            shareholder’s bank, savings and loan, or credit union account in connection with            the purchase or redemption of Fund shares. Shares purchased by check or through            QuickBuy and QuickSell or the Direct Deposit Purchase Plan (“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 Individual            Retirement Accounts (“IRAs”).

 

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**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 the Fund may be permitted to continue to purchase additional shares of such            class and to have dividends reinvested.

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

The            Fund may waive any minimum for purchases by a current or former director or trustee of            the DWS mutual funds, an employee, the employee’s spouse or life partner and            children or step-children age 21 or younger of Deutsche Bank or its affiliates, or a            sub-advisor to any fund in the DWS family of funds, or a broker-dealer authorized to            sell shares of the funds.

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

DWS-SDI may, from time to time, pay or allow to firms a 1% commission on            the amount of shares of the Fund sold under the following conditions: (i) the purchased            shares are held in a DWS Scudder IRA account, (ii) the shares are purchased as a direct            “roll over” of a distribution from a qualified retirement plan account            maintained on the subaccount record keeping system maintained for DWS-branded plans by            ADP, Inc. under an alliance with DWS-SDI and its affiliates, (iii) the registered            representative placing the trade is a member of Executive Council, a group of persons            designated by DWS-SDI in acknowledgment of their dedication to the employee benefit            plan area; and (iv) the purchase is not otherwise subject to a commission. Furthermore,            DWS Scudder Distributors, Inc. may, from time to time, pay or allow to firms a 0.25%            commission on the amount of Class R shares of the Fund sold.

In            addition to the discounts or commissions described herein and the prospectus, DWS-SDI,            the Advisor or its affiliates may pay or allow additional discounts, commissions or            promotional incentives, in the form of cash, to firms that sell shares of the Fund. In            some instances, such amounts may be offered only to certain firms that sell or are            expected to sell during specified time periods certain minimum amounts of shares of the            Fund, or other funds underwritten by DWS-SDI.

Upon notice to all dealers, DWS-SDI may re-allow to dealers up to the            full applicable Class A sales charge during periods and for transactions specified            in such notice and such re-allowances may be based upon attainment of

 

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minimum sales levels. During periods when 90% or more of the sales            charge is re-allowed, such dealers may be deemed to be underwriters as that term is            defined in the 1933 Act.

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

 

| **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 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 Schedules 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 at the rate                            0.50%. |
|-----|---------------------------------------------------------------------------------|

DWS-SDI compensates firms for sales of Class B shares at the time of            sale at a commission rate of up to 3.75% of the amount of Class B shares purchased.            DWS-SDI is compensated by the Fund for services as distributor and principal            underwriter for Class B shares. Except as provided below, for sales of Class C shares,            DWS-SDI advances to firms the first year distribution fee at a rate of 0.75% of the            purchase price of such shares, and, for periods after the first year, DWS-SDI currently            pays firms for sales of Class C shares a distribution fee, payable quarterly, at an            annual rate of 0.75% of net assets attributable to Class C shares maintained and            serviced by the firm. For sales of Class C shares to employer sponsored employee            benefit plans using the OmniPlus subaccount record keeping system made available            through ADP, Inc. under an alliance with DWS-SDI and its affiliates, DWS-SDI does not            advance the first year distribution fee and for periods after the date of sale, DWS-SDI            currently pays firms a distribution fee, payable quarterly, at an annual rate of 0.75%            based on net assets as of the last business day of the month attributable to Class C            shares maintained and serviced by the firm. DWS-SDI is compensated by the Fund for            services as distributor and principal underwriter for Class C shares.

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

 

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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            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

 

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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. |
|----------------|

 

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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.

 

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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.

**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.

 

|                              | **Sales                            Charge**                         |
|-----------------------------------|---------------------------------------------------------------------|
| **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 $50,000                 | 5.75%                                                               | 6.10% | 5.20% |
| $50,000 but less than $100,000    | 4.50                                                                | 4.71 | 4.00 |
| $100,000 but less than $250,000   | 3.50                                                                | 3.63 | 3.00 |
| $250,000 but less than $500,000   | 2.60                                                                | 2.67 | 2.25 |
| $500,000 but less than $1 million | 2.00                                                                | 2.04 | 1.75 |
| $1 million and over               | .00**                                                               | .00*** | **** |

             

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

 

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**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 (or the equivalent) may be purchased at the rate applicable to the            sales charge discount bracket attained by combining concurrent investments in            Class A shares of any DWS Funds that bear a sales charge.

**Letter of Intent.**The same reduced sales            charges for Class A shares, as shown in the applicable prospectus, also apply to            the aggregate amount of purchases of Class A shares of DWS Funds that bear a sales            charge made by any purchaser within a 24-month period under a written Letter of Intent            (“Letter”) provided by DWS-SDI. The Letter, which imposes no obligation to            purchase or sell additional Class A shares, provides for a price adjustment            depending upon the actual amount purchased within such period. The Letter provides that            the first purchase following execution of the Letter must be at least 5% of the amount            of the intended purchase, and that 5% of the amount of the intended purchase normally            will be held in escrow in the form of shares pending completion of the intended            purchase. If the total investments under the Letter are less than the intended amount            and thereby qualify only for a higher sales charge than actually paid, the appropriate            number of escrowed shares are redeemed and the proceeds used toward satisfaction of the            obligation to pay the increased sales charge. The Letter for an employer-sponsored            employee benefit plan maintained on the subaccount record keeping system available            through ADP, Inc. under an alliance with DWS-SDI and its affiliates may have special            provisions regarding payment of any increased sales charge resulting from a failure to            complete the intended purchase under the Letter. A shareholder may include the value            (at the maximum offering price 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 members (including the investor’s spouse or life partner and            children or stepchildren age 21 or younger).

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

**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; |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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| (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; |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

| (m) | a direct “roll over” of a distribution from                            a Flex Plan or from participants in employer sponsored employee benefit                            plans maintained on the OmniPlus subaccount record keeping system made                            available through ADP, Inc. under an alliance with DWS-SDI and its                            affiliates into a DWS Scudder IRA. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (n) | reinvestment of fund dividends and                            distributions; |
|-----|------------------------------------------------------------------------------|

| (o) | exchanging an investment in Class A shares of another                            fund in the DWS family of funds for an investment in the                            fund. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Class A shares also may be purchased at net asset value in any amount by            members of the plaintiff class in the proceeding known as Howard and Audrey Tabankin,            et al. v. Kemper Short-Term Global Income Fund, et al., Case

 

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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 Fund’s            Prospectus and SAI. Class B shares automatically convert to Class A shares after six            years.

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

The            Fund will be deemed to have received a purchase or redemption order when an authorized            broker, service organization or, if applicable, an authorized designee, accepts the            order. Shares of the Fund may be purchased or redeemed on any business day at the net            asset value next determined after receipt of the order, in good order, by the transfer            agent. Investors who invest through authorized brokers, service organizations or their            designated intermediaries should submit purchase and redemption orders directly to            their brokers, service organization or designated intermediary. The broker or            intermediary may charge an investor a transaction fee.

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

The            following provisions apply to DWS Scudder Flex Plans and DWS Scudder Choice            Plans.

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

| b. | *Class C Share DWS Scudder Flex                            Plan*s. Orders to purchase Class C shares for                            a DWS Scudder Flex Plan, regardless of when such plan was established                            on the System, will be invested instead in Class A shares at net asset                            value when the combined subaccount value in DWS Funds or other eligible                            assets held by the plan is $1,000,000 or more. This provision will be                            imposed for the first purchase after eligible plan assets |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

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reach the $1,000,000 threshold. A later decline in assets below the            $1,000,000 threshold will not affect the plan’s ability to continue to purchase            Class A shares at net asset value.

| c. | *Class C Share DWS Scudder Choice Plans.*Orders to purchase Class C shares for a DWS Scudder                            Choice Plan that has been regularly purchasing Class C shares will be                            invested instead in Class A shares at net asset value when the combined                            subaccount value in DWS Funds or other eligible assets held by the plan                            is $1,000,000 or more. This provision will be imposed for purchases                            made beginning in the month after eligible plan assets reach the                            $1,000,000 threshold. In addition, as a condition to being permitted to                            use the Choice Plan platform, plans must agree that, within one month                            after eligible plan assets reach the $1,000,000 threshold, all existing                            Class C shares held in the plan will be automatically converted to                            Class A shares. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The            procedures described above do not reflect in any way the suitability of a particular            class of shares for a particular investor and should not be relied upon as such. A            suitability determination must be made by investors with the assistance of their            financial representative.

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

To            sell shares in a retirement account other than an IRA, your request must be made in            writing, except for exchanges to other eligible funds in the DWS family of funds, which            can be requested by phone or in writing.

**Purchase of Class R Shares.**’Class R shares are subject to an annual distribution and            shareholder servicing fee of 0.50% (0.25% distribution fee and 0.25% shareholder            servicing fee). Investors may invest in Class R shares through certain retirement            and other plans. Employer-sponsored retirement plans include: all Section 401(a) and            487 Plans, certain Section 403(b)(7) plans; 401(k) profit sharing, money purchase            pension and defined benefit plans; and non-qualified deferred compensation            plans.

You            may buy Class R shares if you are a participant in any of the following types of            employer sponsored plans that offer R shares of the Fund:

| • | All section 401(a) and 457 plans |
|--------|----------------------------------|

| • | Certain section 403(b)(7) plans |
|--------|---------------------------------|

| • | 401(k), profit sharing, money purchase pension and                            defined benefit plans |
|--------|-----------------------------------------------------------------------------------------------------|

| • | Non-qualified deferred compensation plans |
|--------|-------------------------------------------|

The            Fund’s transfer agent monitors transactions in Class R shares to help to ensure            that investors purchasing Class R shares meet the above eligibility requirements. If            the transfer agent is unable to verify that an investor meets the eligibility            requirements for Class R, either following receipt of a completed application form            within time frames established by the fund or as part of its ongoing monitoring, the            transfer agent may take corrective action up to and including canceling the purchase            order or redeeming the account.

**Automatic Investment Plan.**A shareholder            may purchase shares of the Fund through an automatic investment program. With Direct            Deposit, investments are made automatically (minimum $500 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

 

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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 DWS mutual funds, employees, their spouses or life partners and children or            step-children age 21 or younger of Deutsche Bank or its affiliates or a subadvisor to            any fund in the DWS family of funds or a broker-dealer authorized to sell shares of the            Fund. Qualified individuals will generally be allowed to purchase shares in the class            with the lowest expense ratio, usually the Institutional Class shares. If the Fund            does not offer Institutional Class shares, these individuals will be allowed to            buy Class A shares at NAV. The Fund also reserves the right to waive the minimum            account balance requirement for employee and director accounts. Fees generally charged            to IRA accounts will be charged to accounts of employees and directors.

***Redemptions***

**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.

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

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

Redemption requests must be unconditional. Redemption requests (and a            stock power for certificated shares) must be duly endorsed by the account holder. As            specified in the prospectus, signatures may need to be guaranteed by a commercial bank,            trust company, savings and loan association, federal savings bank, member firm of a            national securities exchange or other financial institution permitted by SEC rule.            Additional documentation may be required,

 

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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 (prior to the imposition of any contingent deferred            sales charge) are $100,000 or less and the proceeds are payable to the shareholder of            record at the address of record, normally a telephone request or a written request by            any one account holder without a signature guarantee is sufficient for redemptions by            individual or joint account holders, and trust, executor and guardian account holders,            provided the trustee, executor or guardian is named in the account registration. Other            institutional account holders may exercise this special privilege of redeeming shares            by telephone request or written request without signature guarantee subject to the same            conditions as individual account holders, provided that this privilege has been            pre-authorized by the institutional account holder by written instruction to the            Shareholder Service Agent with signatures guaranteed. This privilege may not be used to            redeem shares held in certificated form and may not be used if the shareholder’s            account has had an address change within 15 days of the redemption request.

**Wires.**Delivery of the proceeds of a wire            redemption of $250,000 or more may be delayed by the Fund for up to seven days if the            Fund or the Shareholder Service Agent deems it appropriate under then-current market            conditions. The ability to send wires is limited by the business hours and holidays of            the firms involved. The Fund is not responsible for the efficiency of the federal wire            system or the account holder’s financial services firm or bank. The account            holder is responsible for any charges imposed by the account holder’s firm or            bank. To change the designated account to receive wire redemption proceeds, send a            written request to the 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 and Class C 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 a CDSC,            may be redeemed is 12% of the net asset value of the account. Shares are redeemed so            that the payee should receive payment approximately the first of the month. Investors            using the Automatic Withdrawal Plan must reinvest Fund distributions.

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

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

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

 

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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; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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) | the 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); |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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 |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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) above 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                            Code Section 72(t)(2)(A)(iv) prior to age 59 1/2; |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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 by 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) above for Class A shares and for the circumstances set forth in items (g)            and (h) above 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 |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**In-kind Redemptions.**The Fund reserves the            right to honor any request for redemption or repurchase by making payment in whole or            in part in securities. These securities will be chosen by the fund and valued as they            are for purposes of computing the fund’s net asset value. A shareholder may incur            transaction expenses in converting these securities to cash.

***Exchanges***

Shareholders may request a taxable exchange of their shares for shares            of the corresponding class of other DWS Funds without imposition of a sales charge,            subject to the provisions below. For purposes of calculating any CDSC, amounts            exchanged retain their original cost and purchase date.

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 prospectus(es) of the fund they are exchanging            into from dealers, other firms or DWS-SDI.

**Automatic Exchange Plan (not applicable to Class R            shares).**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.

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

**DIVIDENDS**

The            Fund intends to follow the practice of distributing substantially all of its investment            company taxable income, which includes any excess of net realized short-term capital            gains over net realized long-term capital losses. The Fund may follow the practice of            distributing the entire excess of net realized long-term capital gains over net            realized short-term capital losses. However, the Fund may retain all or part of such            gain for reinvestment, after paying the related federal taxes for which shareholders            may then be able to claim a credit against their federal income tax liability. If the            Fund does not distribute the amount of capital gain and/or ordinary income required to            be

 

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distributed by an excise tax provision of the Internal Revenue Code of            1986, as amended (the “Code”), the Fund may be subject to that excise tax.            In certain circumstances, the Fund may determine that it is in the interest of            shareholders to distribute less than the required amount.

The            Fund intends to pay distributions of substantially all of its income            annually.

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, Class C and Class R Shares than for Class A Shares            primarily as a result of the distribution services fee applicable to Class B,            Class C and Class R Shares. Distributions of capital gains, if any, will be paid in the            same amount for each class.

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

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

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

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 of the Fund in shares of            another DWS Fund, shareholders must maintain a minimum account value of $1,000 in the            Fund distributing the dividends. The Fund will reinvest dividend checks (and future            dividends) in shares of that same Fund and class if checks are returned as            undeliverable. Dividends and other distributions of the Fund in the aggregate amount of            $10 or less are automatically reinvested in shares of the same Fund and class unless            the shareholder requests in writing that a check be issued for that particular            distribution.

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

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

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

The            Fund may at any time vary its foregoing dividend practices and, therefore, reserves the            right from time to time to either distribute or retain for reinvestment such of its net            investment income and its net short-term and long-term capital gains as its Board            determines appropriate under the then current circumstances. In particular, and without            limiting the foregoing, the Fund may make additional distributions of net investment            income or capital gain net income in order to satisfy the minimum distribution            requirements contained in the Code.

 

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**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. This summary is based on the laws in effect on the date of this            Statement of Additional Information and existing judicial and administrative            interpretations thereof, all of which are subject to change, possibly with retroactive            effect.

**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                            from dividends, interest, payments with respect to certain securities                            loans, and gains from the sale of stock, securities and 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). |
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| (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 20% or                            more of the voting securities are held by the Fund 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. |
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| (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) 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. |
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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.

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. Such distributions will be eligible            (i) to be treated as qualified dividend income in the case of shareholders taxed as            individuals and (ii) for the dividends received deduction in the case of corporate            shareholders. In addition, the Fund could be required to recognize unrealized gains,            pay substantial taxes and interest and make substantial distributions before            requalifying as a regulated investment company that is accorded special tax            treatment.

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

 

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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 Distributions from the Fund.**For federal income tax purposes, distributions of investment income are            generally taxable as ordinary income. Taxes on distributions of capital gains are            determined by how long the Fund owned the investments that generated them, rather than            how long a shareholder has owned his or her shares. Distributions of net capital gains            from the sale of investments that the Fund owned for more than one year and that are            properly designated by the Fund as capital gain dividends (“Capital Gain            Dividends”) will be taxable as long-term capital gains. Distributions of gains            from the sale of investments that the Fund owned for one year or less will be taxable            as ordinary income. For taxable years beginning on or before December 31, 2010,            distributions of investment income designated by the Fund as derived from            “qualified dividend income” will be taxed in the hands of individuals at            the rates applicable to long-term capital gain, provided holding period and other            requirements are met at both the shareholder and Fund level.

Distributions are taxable to shareholders even if they are paid from            income or gains earned by the Fund before a shareholder’s investment (and thus            were included in the price the shareholder paid). Distributions are taxable whether            shareholders receive them in cash or reinvest them in additional shares through the            reinvestment privilege. A shareholder whose distributions are reinvested in shares will            be treated as having received a dividend equal to the fair market value of the new            shares issued to the shareholder. Any gain resulting from the sale or exchange of Fund            shares generally will be taxable as capital gains.

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 on or before            December 31, 2010. A portion of the proceeds from the disposition of certain real            property assets held for more than one year may produce “unrecaptured section            1250 gain.” Any unrecaptured section 1250 gain received by the Fund will be            taxable to shareholders at a 25% rate.

In            order for some portion of the dividends received by the Fund shareholder to be            “qualified dividend income,” the Fund must meet holding period and other            requirements with respect to some portion of the dividend paying stocks in its            portfolio and the shareholder must meet holding period and other requirements with            respect to the Fund’s shares. A dividend will not be treated as qualified            dividend income (at either the Fund or shareholder level) (1) if the dividend is            received with respect to any share of stock held for fewer than 61 days during the            121-day period beginning on the date which is 60 days before the date on which such            share becomes ex-dividend with respect to such dividend (or, in the case of certain            preferred stock, for fewer than 91 days during the 181-day period beginning 90 days            before such date), (2) to the extent that the recipient is under an obligation (whether            pursuant to a short sale or otherwise) to make related payments with respect to            positions in substantially similar or related property, (3) if the recipient elects to            have the dividend income treated as investment income for purposes of the limitation on            deductibility of investment interest, or (4) if the dividend is received from a foreign            corporation that is (a) not eligible for the benefits of a comprehensive income tax            treaty with the United States (with the exception of dividends paid on stock of such a            foreign corporation readily tradable on an established securities market in the United            States) or (b) treated as a passive foreign investment company. Qualified dividend            income does not include interest from fixed-income securities. Dividends received by            the Fund from a REIT may be treated as qualified dividend income only to the extent the            dividends are attributable to qualified dividend income received by such            REIT.

In            general, distributions of investment income designated by the Fund as derived from            qualified dividend income will be treated as qualified dividend income by a shareholder            taxed as an individual provided the shareholder meets the holding period and other            requirements described above with respect to the Fund’s shares. If the aggregate            dividends received by the Fund during any taxable year are 95% or more of its gross            income (excluding net long-term capital gain over net short-term capital loss), then            100% of the Fund’s dividends (other than dividends properly designated as capital            gain dividends) will be eligible to be treated as qualified dividend income. If the            aggregate dividends received by the Fund during any taxable year are less than 95% of            the Fund’s dividends (excluding net long-term capital gain over net short-term            capital loss), that portion of the regular dividends paid by the Fund to an individual            in a particular taxable year that is attributable to qualified dividend income received            by the Fund in that taxable year (other than dividends properly designated as capital            gain dividends) will be eligible to be treated as

 

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qualified dividend income. For this purpose, the only gain included in            the term “gross income” is the excess of net short-term capital gain over            net long-term capital loss.

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

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

**Dividends Received Deduction.**Dividends            from domestic corporations are not expected to comprise a substantial part of the            Fund’s gross income. However, if any such dividends constitute a portion of a            Fund’s gross income, a portion of the income distributions of the Fund may be            eligible for the 70% deduction for dividends received by corporations. Shareholders            will be informed of the portion of dividends which so qualify. The dividends-received            deduction is reduced to the extent the shares of the Fund with respect to which the            dividends are received are treated as debt-financed under federal income tax law and is            eliminated if either those shares or the shares of the Fund are deemed to have been            held by the Fund or the shareholder, as the case may be, for fewer than 46 days during            the 91-day period beginning 45 days before the shares become ex-dividend.

Under current law, the Fund serves to block unrelated business taxable            income (“UBTI”) from being realized by its tax-exempt shareholders.            Notwithstanding the foregoing, 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).            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 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.

**Transactions in Fund 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 taxable disposition of shares will be treated as long-term            capital gain or loss if the shares have been held for more than one 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 the redemption of            shares held for six months or less at the time of redemption will be treated as a            long-term capital loss to the extent of any amounts treated as distributions of            long-term capital gain during such six-month period. Furthermore, any loss from the            sale or redemption of shares held six months or less generally will be disallowed to            the extent that tax-exempt interest dividends were paid on such shares. 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.

**Foreign Taxation.**Foreign withholding or            other foreign taxes with respect to income (possibly including, in some cases, capital            gains) on certain foreign securities may occur. These taxes may be reduced or            eliminated under the terms of an applicable US income tax treaty. If more than 50% of            the value of the Fund’s total assets consist of securities issued by foreign            corporations, the Fund will be eligible to elect to pass through to shareholders their            proportionate share of any foreign taxes paid. The result of such an election would be            that shareholders would include in income, and may be entitled to take the credits or            deductions for such foreign taxes.

 

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

**Other Federal Income Tax Considerations.**The Fund’s use of options, futures contracts, forward contracts            (to the extent permitted) and certain other strategic transactions will be subject to            special tax rules (including mark-to-market, constructive sale, straddle, wash sale,            short sale and other rules), the effect of which may be to accelerate the Fund’s            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.

Transactions in foreign currencies, foreign currency-denominated debt            securities and certain foreign currency options, futures contracts, forward contracts            and similar instruments (to the extent permitted) may give rise to ordinary income or            loss to the extent such income or loss results from fluctuations in the value of the            foreign currency concerned.

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.

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.

**Backup Withholding.**Under the backup            withholding provisions of the Code, redemption proceeds as well as distributions may be            subject to federal income tax withholding for certain shareholders, 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.

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

 

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

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

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

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

Foreign shareholders of the Fund must treat a distribution attributable            to the Fund’s sale of a real estate investment trust or other U.S. real property            holding company as real property gain if 50% or more of the value of the Fund’s            assets are invested in real estate investment trusts 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.            After December 31, 2007, a distribution from the Fund will be treated as attributable            to a U.S. real property interest only if such distribution is attributable to a            distribution received by the Fund from a real estate investment trust. Restrictions            apply regarding wash sales and substitute payment transactions.

**NET ASSET VALUE**

The            net asset value of shares of the Fund is computed as of the close of regular trading on            the New York Stock Exchange (the “Exchange”) on each day the Exchange is            open for trading (the “Value Time”). The Exchange is scheduled to be closed            on the following holidays: New Year’s Day, Dr. Martin Luther King, Jr. Day,            Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day,            Thanksgiving and Christmas, and on the preceding Friday or subsequent Monday when one            of these holidays falls on a Saturday or Sunday, respectively. Net asset value per            share is determined separately for each class of shares by dividing the value of the            total assets of the Fund attributable to the shares of that class, less all liabilities            attributable to that class, by the total number of shares

 

----

of            that class outstanding. The per share net asset value may be lower for certain classes            of the Fund because of higher expenses borne by these classes.

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

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

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

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

**TRUSTEES AND OFFICERS**

The            following table presents certain information regarding the Board Members of the Trust.            Each Board Member’s year of birth is set forth in parentheses after his or her            name. Unless otherwise noted, (i) each Board Member has engaged in the principal            occupation(s) noted in the table for at least the most recent five years, although not            necessarily in the same capacity, and (ii) the address of each Board Member that is not            an “interested persons” (as

 

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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 2006Board 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)                | 83                                                                          |
| 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                                                                                                                                                   | 81                                                                          |
| 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)                                                                                                                                                                                                                                                                                                                                                                                                | 83                                                                          |
| 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)                                                                                                                                                                                                                                                                                                                                                                                                     | 83                                                                          |
| 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) | 83                                                                          |

 

 

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| 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)                                                                                                                                                                                                                                                                                                                                                                                                           | 83 |
|------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|
| 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 83 |
| 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)                                                                                                                                                                                                                       | 83 |
| 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 83 |
| 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 83 |
| Jean Gleason Stromberg(1943)Board Member since2006                     | 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)                                                                                                                                                                                                                                                                                                                                                                                        | 83 |
| 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 | 81 |

 

 

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***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) | 82                                                                          |

 

***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)                                                                                                                                                                                                                                                                 |

 

 

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| 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.

 

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**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.

 

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**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 DWS RREEF Real****Estate Securities Fund** | **Total** **Compensation** **from Fund** **and** **DWS Fund Complex(1)** |
|---------------------------------|-----------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                            |                                                                        |                                                                                         |
| Henry P. Becton, Jr.(3)(5)      | $1,980                                                                      | $189,000                                                                                     |
| Dawn-Marie Driscoll(2)(3)(4)(5) | $2,602                                                                      | $251,000                                                                                     |
| Keith R. Fox(3)(4)(5)           | $1,998                                                                      | $195,000                                                                                     |
| Kenneth C. Froewiss(3)(4)(5)    | $2,206                                                                      | $234,988                                                                                     |
| Martin J. Gruber(3)(5)          | $5,152                                                                      | $188,000                                                                                     |
| Richard J. Herring(3)(4)(5)     | $5,071                                                                      | $184,000                                                                                     |
| Graham E. Jones(3)(4)(5)        | $5,644                                                                      | $206,000                                                                                     |
| Rebecca W. Rimel(3)(5)          | $5,101                                                                      | $185,000                                                                                     |
| Philip Saunders, Jr.(3)(4)(5)   | $5,689                                                                      | $207,000                                                                                     |
| William N. Searcy, Jr.(3)(4)(5) | $5,644                                                                      | $206,000                                                                                     |
| Jean Gleason Stromberg(3)(4)(5) | $2,147                                                                      | $202,000                                                                                     |
| Carl W. Vogt(3)(5)              | $1,980                                                                      | $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 Chairperson 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 RREEF Real****Estate Securities 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                                      | None                                                                                       | Over $100,000                                                                                                                                |
| Martin J. Gruber                                         | $50,001-$100,000                                                                           | Over $100,000                                                                                                                                |
| Richard J. Herring                                       | $10,001-$50,000                                                                            | Over $100,000                                                                                                                                |
| Graham E. Jones                                          | None                                                                                       | Over $100,000                                                                                                                                |
| Rebecca W. Rimel                                         | Over $100,000                                                                              | Over $100,000                                                                                                                                |
| Philip Saunders, Jr.                                     | None                                                                                       | Over $100,000                                                                                                                                |
| William N. Searcy, Jr.                                   | $10,001-$50,000                                                                            | 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 April 5, 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 April 5, 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**         |
|---------------------------------------------------------------------------------------------------------------------------------|---------------|-------------------------------|
|                                                                                                                            |          |                          |
| JOHN HANCOCK LIFE INSURANCE

COMPANY (USA)

BOSTON MA 02210-2805                                                                | 16,564,802.63 | 35.27% of Class A             |
|                                                                                                                            |          |                          |
| HARTFORD LIFE INSURANCE COMPANY

ATTN UIT OPERATIONS

HARTFORD CT 06104-2999                                                    | 2,532,168.62  | 5.39% of Class A              |
|                                                                                                                            |          |                          |
| MORGAN STANLEY DW

ATTN MUTUAL FUND OPERATIONS

JERSEY CITY NJ 07311-3907                                                       | 2,412,058.69  | 5.14% of Class A              |
|                                                                                                                            |          |                          |
| CHARLES SCHWAB & CO INC

SPECIAL CUSTODY ACCT FOR THE

BENEFIT OF CUSTOMERS

ATTN MUTUAL FUNDS

SAN FRANCISCO CA 94104-4151 | 6,289,176.79  | 21.13% of Institutional Class |
|                                                                                                                            |          |                          |
| MLPF&S FOR THE SOLE BENEFIT OF

ITS CUSTOMERS

ATTN FUND ADM (97HB0)

JACKSONVILLE FL 32246-6484                            | 4,763,657.83  | 16.01% of Institutional Class |
|                                                                                                                            |          |                          |
| DWS TRUST COMPANY TTEE

FBO DB MATCHED SAVINGS PLAN

ATTN ASSET RECON DEPT # XXXXXX

SALEM NH 03079-1143                        | 3,379,952.27  | 11.36% of Institutional Class |
|                                                                                                                            |          |                          |

 

 

----

 

| NATIONAL FINANCIAL SERVICES CORP

FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS

NEW YORK NY 10281-1003           | 3,071,935.05 | 10.32% of Institutional Class |
|----------------------------------------------------------------------------------------------------------------|--------------|-------------------------------|
|                                                                                                           |         |                          |
| CITIGROUP GLOBAL MARKETS INC

ATTN PETER BOOTH 7TH FL

NEW YORK NY 10001-2402                                  | 135,324.94   | 10.41% of Class B             |
|                                                                                                           |         |                          |
| MLPF&S FOR THE SOLE BENEFIT OF

ITS CUSTOMERS

ATTN FUND ADM (97HB0)

JACKSONVILLE FL 32246-6484           | 100,424.25   | 7.73% of Class B              |
|                                                                                                           |         |                          |
| MLPF&S FOR THE SOLE BENEFIT OF

ITS CUSTOMERS

ATTN FUND ADMINISTRATION

SEC #97JS4

JACKSONVILLE FL 32246 | 453,957.69   | 10.98% of Class C             |
|                                                                                                           |         |                          |
| CITIGROUP GLOBAL MARKETS INC

ATTN PETER BOOTH 7TH FL

NEW YORK NY 10001-2402                                  | 246,513.87   | 5.96% of Class C              |
|                                                                                                           |         |                          |
| MORGAN STANLEY DW

ATTN MUTUAL FUND OPERATIONS

JERSEY CITY NJ 07311-3907                                      | 217,983.64   | 5.27% of Class C              |
|                                                                                                           |         |                          |
| HARTFORD LIFE INSURANCE

COMPANY SEPARATE ACCOUNT

HARTFORD CT 06104-2999                                      | 665,694.50   | 64.37% of Class R             |
|                                                                                                           |         |                          |
| CHARLES SCHWAB & CO INC

SAN FRANCISCO CA 94104-4151                                                       | 238,778.44   | 38.62% of Class S             |

 

***Agreement to Advance Certain Independent Trustee            Expenses***

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 investment adviser 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 the investment adviser            (“Enforcement Actions”) or that are the basis for private actions brought            by shareholders of the Fund against the Fund, their Board Members and officers, the            investment adviser 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 Funds 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 Fund’s investment adviser 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 Fund’s investment adviser 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 Board Member 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 Member or indemnity that may be payable            under the indemnity agreements is currently unknown. These agreements by the investment            adviser 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. The Declaration of Trust authorizes the Board of Trustees to create a            separate investment series or portfolios of shares. Prior to July 10, 2006, the Fund            (then, the “RREEF Real Estate Securities predecessor Fund”) was a series of            DWS RREEF Securities Trust, a Delaware business trust. On July 10, 2006, in a            reorganization, the RREEF Real Estate Securities Predecessor Fund transferred all its            assets and liabilities from DWS RREEF Securities Trust into a new series of the            Trust.

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 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 a Fund, 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 hereof, the Trustees have established six classes of shares: Institutional class            shares, Class A shares, Class B shares, Class C shares, Class R shares and Class S            shares.

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

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

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

**FINANCIAL STATEMENTS**

The            Fund’s financial statements for the year ended December 31, 2006, together with            the Report of Independent Registered Public Accounting Firm, Financial Highlights and            notes to financial statements in the Annual Report to the Shareholders of the DWS RREEF            Real Estate Securities Fund dated December 31, 2006 are incorporated herein by            reference and are hereby deemed to be a part of this SAI. ’

 

----

**ADDITIONAL INFORMATION**

The            CUSIP numbers for each class of DWS RREEF Real Estate Securities Fund are:

 

| Class A: | 23339L 107 |
|----------|------------|

| Class B: | 23339L 206 |
|----------|------------|

| Class C: | 23339L 305 |
|----------|------------|

| Institutional Class: | 23339L 602 |
|----------------------|------------|

| Class R: | 23339L 404 |
|----------|------------|

| Class S: | 23339L 503 |
|----------|------------|

The            Fund has a fiscal year ending December 31.

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

The            Fund’s Class A, B, C, R and Institutional Class shares Prospectuses and this SAI            omit certain information contained in the Registration Statement and its amendments            which the Fund has filed with the SEC under the Securities Act of 1933 (the “1933            Act”) and reference is hereby made to the Registration Statement for further            information with respect to the Fund and the securities offered hereby. The 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. The Registration Statement and its amendments are available            for inspection by the public at the SEC in Washington, D.C.

 

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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. — CORPORATE BOND            RATINGS**

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

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

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

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

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

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

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

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

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

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

 

----

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

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

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.

**STANDARD & POOR’S RATINGS SERVICES — CORPORATE BOND            RATINGS**

**INVESTMENT GRADE**

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

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

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

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

**SPECULATIVE GRADE**

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

**STANDARD & POOR’S RATINGS SERVICES — SHORT-TERM            RATINGS**

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

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

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

 

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

**FITCH INVESTORS SERVICE, INC. — BOND RATINGS**

**INVESTMENT GRADE**

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

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

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

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

**SPECULATIVE GRADE**

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

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

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

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

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

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

**Plus (+) or Minus (-):**The ratings from AA            to CC may be appended by the addition of a plus or minus sign to denote the relative            status within the rating category.

**NR:**Indicates that Fitch Rating does not            publicly rate the specific issue.

 

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**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.