Filed electronically with the Securities and Exchange Commission
                              on January 28, 2008

                                                               File No. 02-91577
                                                               File No. 811-4049

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM N-1A


             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933         /_/

                           Pre-Effective Amendment No.                       /_/
                         Post-Effective Amendment No. 43                     /X/
                                     and/or           --
                        REGISTRATION STATEMENT UNDER THE
                         INVESTMENT COMPANY ACT OF 1940                      /_/

                                Amendment No. 45                             /X/
                                              --

                                DWS Income Trust
                                ----------------
               (Exact Name of Registrant as Specified in Charter)

                 Two International Place, Boston, MA 02110-4103
                 ----------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's Telephone Number, including Area Code: (617) 295-1000
                                                            --------------

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

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

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

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



                                       1
<PAGE>


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


                                FEBRUARY 1, 2008








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




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



                                 DWS GNMA FUND




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


                                         [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]



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










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

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

  4      The Fund's Main Investment
         Strategy

  5      The Main Risks of Investing in
         the Fund

  7      The Fund's Performance
         History

  9      How Much Investors Pay

 10      Other Policies and Risks

 11      Who Manages and Oversees
         the Fund

 14      Financial Highlights


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

 16      How to Buy Shares

 17      How to Exchange or Sell
         Shares

 20      Policies You Should Know
         About

 31      Understanding Distributions
         and Taxes

 34      Appendix
</TABLE>


<PAGE>

HOW THE FUND WORKS

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


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

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

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

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


<TABLE>
--------------------------------------------------------------------------------
<S>                                                             <C>
                                                                Class S
                                           ticker symbol        SGINX
                                             fund number        2393

DWS GNMA FUND
--------------------------------------------------------------------------------

</TABLE>

            THE FUND'S MAIN INVESTMENT STRATEGY

            The fund seeks to produce a high level of income.


            It does this by investing, under normal circumstances, at least 80%
            of net assets, plus the amount of any borrowings for investment
            purposes, in "Ginnie Maes," which are mortgage-backed securities
            that are issued or guaranteed by the Government National Mortgage
            Association (GNMA). The balance of the fund's assets, among other
            permitted investments, may be invested in securities issued by the
            US government, its agencies or instrumentalities. These securities
            may not be guaranteed by the US Treasury or backed by the full
            faith and credit of the US government. The fund may also hold up to
            10% of its total net assets in uninvested cash, cash equivalents
            (such as money market securities), repurchase agreements or shares
            of money market funds or short-term bond funds, which investments
            may not be issued or guaranteed by the US government, its agencies
            or instrumentalities.

            In deciding which types of securities to buy and sell, the
            portfolio managers first consider the relative attractiveness of
            Ginnie Maes compared to US Treasury securities and decide on
            allocations for each. The decisions are generally based on a number
            of factors, including changes in supply and demand within the bond
            market.

            In choosing individual bonds, the managers review each bond's
            characteristics and compare the yields of shorter maturity bonds to
            those of longer maturity bonds.

            Although the managers are permitted to use various types of
            derivatives (contracts whose value is based on, for example,
            indices, currencies or securities), the managers do not intend to
            use them as principal investments and may choose not to use them at
            all.



4 | DWS GNMA Fund
<PAGE>

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


            THE MAIN RISKS OF INVESTING IN THE FUND

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


            INTEREST RATE RISK. Generally, fixed income securities will
            decrease in value when interest rates rise. The longer the
            effective maturity of the fund's securities, the more sensitive it
            will be to interest rate changes. (As a general rule, a 1% rise in
            interest rates means a 1% fall in value for every year of
            duration.) As interest rates decline, the issuers of securities
            held by the fund may prepay principal earlier than scheduled,
            forcing the fund to reinvest in lower-yielding securities and may
            reduce the fund's income. For any premium bonds (bonds acquired at
            prices that exceed their par or principal value) purchased by the
            fund, prepayment risk may be enhanced. As interest rates increase,
            slower than expected principal payments may extend the average life
            of fixed income securities. This will have the effect of locking in
            a below-market interest rate, increasing the fund's duration and
            reducing the value of such a security.

            CREDIT RISK. A fund purchasing bonds faces the risk that the
            creditworthiness of the issuer may decline, causing the value of
            the bonds to decline. In addition, an issuer may not be able
            to make timely payments on the interest and principal on the bonds
            it has issued. In some cases, bonds may decline in credit quality
            or go into default.


            MARKET RISK. Deteriorating market conditions might cause a general
            weakness in the market that reduces the overall level of securities
            prices in that market. Developments in a particular class of bonds
            or the stock market could also adversely affect the fund by
            reducing the relative attractiveness of bonds as an investment.

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

This fund is designed for investors who can accept  moderate  volatility and who
are  interested  in higher  yield than  Treasuries,  yet don't want to sacrifice
credit quality.

                                                              DWS GNMA Fund  | 5
<PAGE>

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

            Other factors that could affect performance include:

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


            -  derivatives could produce disproportionate losses due to a
               variety of factors, including the failure of the counterparty to
               meet its obligations or unexpected price or interest rate
               movements.


6 | DWS GNMA Fund
<PAGE>

THE FUND'S PERFORMANCE HISTORY

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


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


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

On July 17, 2000, the fund changed its name from AARP GNMA and US Treasury Fund
to Scudder GNMA Fund (now DWS GNMA Fund). At the same time, the fund changed
its strategy to eliminate investment requirements in US Treasury securities.
Consequently, the fund's past performance may have been different if the
current strategy had been in place.

The existing class of shares of AARP GNMA and US Treasury Fund were
redesignated Class AARP. On July 14, 2006, Class AARP shares were converted
into Class S shares. Performance figures for Class S reflect the historical
performance of the fund's original share class (Class AARP).

DWS GNMA Fund

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

[BAR CHART GRAPHIC APPEARS HERE]





<TABLE>
<S>       <C>       <C>        <C>       <C>       <C>       <C>       <C>       <C>       <C>
 6.79      0.59     10.49       7.12      8.31      2.22      3.83      2.76      3.99     6.13
 1998      1999      2000       2001      2002      2003      2004      2005      2006     2007
</TABLE>

<TABLE>
<CAPTION>
FOR THE PERIODS INCLUDED IN THE BAR CHART:
<S>                                        <C>
BEST QUARTER: 4.08%, Q3 2001               WORST QUARTER: -0.94%, Q2 2007
</TABLE>




                                                              DWS GNMA Fund  | 7
<PAGE>


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




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                             1 YEAR      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                                           <C>         <C>          <C>
 CLASS S
   Return before Taxes                         6.13         3.74         5.17
--------------------------------------------------------------------------------
   Return after Taxes on Distributions         4.24         2.11         3.10
--------------------------------------------------------------------------------
   Return after Taxes on Distributions
   and Sale of Fund Shares                     3.96         2.23         2.97
--------------------------------------------------------------------------------
 LEHMAN BROTHERS GNMA INDEX
 (reflects no deductions for fees,
 expenses or taxes)                            6.98         4.39         5.85
--------------------------------------------------------------------------------
</TABLE>




 The LEHMAN BROTHERS GNMA INDEX is an unmanaged market value-weighted measure
 of all fixed-rate securities backed by mortgage pools of the Government
 National Mortgage Association.



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

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



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

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


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



8 | DWS GNMA Fund
<PAGE>

HOW MUCH INVESTORS PAY


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




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FEE TABLE                                                       CLASS S
--------------------------------------------------------------------------------
<S>                                                             <C>
 SHAREHOLDER FEES, paid directly from your investment
--------------------------------------------------------------------------------
 Redemption/Exchange Fee on shares
 owned less than 15 days (as % of
 redemption proceeds) 1                                         2.00%
--------------------------------------------------------------------------------
 ANNUAL OPERATING EXPENSES, deducted from fund assets
--------------------------------------------------------------------------------
 Management Fee 2                                               0.42%
--------------------------------------------------------------------------------
 Distribution/Service (12b-1) Fee                               None
--------------------------------------------------------------------------------
 Other Expenses                                                 0.16%
--------------------------------------------------------------------------------
 TOTAL ANNUAL OPERATING EXPENSES                                0.58%
--------------------------------------------------------------------------------
</TABLE>



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


2    Includes 0.10% administration fee.

Based on the costs above, this example helps you compare this fund's expenses
to those of other mutual funds. This example assumes the expenses above remain
the same. It also assumes that you invested $10,000, earned 5% annual returns,
reinvested all dividends and distributions and sold all of your shares at the
end of each period. This is only an example; actual expenses will be different.





<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
EXAMPLE               1 YEAR      3 YEARS      5 YEARS      10 YEARS
--------------------------------------------------------------------------------
<S>                   <C>         <C>          <C>          <C>
 Class S shares         $59         $184         $321         $720
--------------------------------------------------------------------------------
</TABLE>




                                                              DWS GNMA Fund  | 9
<PAGE>

OTHER POLICIES AND RISKS

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


           -  Although major changes tend to be infrequent, the fund's Board
              could change the fund's investment objective without seeking
              shareholder approval. The Board of DWS GNMA Fund will provide
              shareholders with at least 60 days notice prior to making any
              changes to the fund's 80% investment policy as described herein.


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


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



           -  Portfolio management measures credit quality at the time it buys
              securities, using independent rating agencies or, for unrated
              securities, its own judgment. All securities must meet the credit
              quality standards applied by portfolio management at the time
              they are purchased. If a security's credit quality changes,
              portfolio management will decide what to do with the security,
              based on its assessment of what would most benefit the fund.



           For more information

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

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


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



10 | Other Policies and Risks
<PAGE>


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



WHO MANAGES AND OVERSEES THE FUND


           The investment advisor


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


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

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

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


                                         Who Manages and Oversees the Fund  | 11
<PAGE>


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




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FUND NAME                                               FEE PAID
--------------------------------------------------------------------------------
<S>                                                     <C>
  DWS GNMA Fund                                         0.32%
--------------------------------------------------------------------------------
</TABLE>




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


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


12 | Who Manages and Oversees the Fund
<PAGE>

Portfolio management

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

The following people handle the day-to-day management of DWS GNMA Fund:

William Chepolis, CFA
Managing Director of Deutsche Asset Management and Co-Manager of the fund.
- Joined Deutsche Asset Management in 1998 after 13 years of experience as vice
  president and portfolio manager for Norwest Bank where he managed the
  bank's fixed income and foreign exchange portfolios.
- Portfolio Manager for Retail Mortgage Backed Securities: New York.
- Joined the fund in 2002.
- BIS, University of Minnesota.

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


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



                                         Who Manages and Oversees the Fund  | 13
<PAGE>

FINANCIAL HIGHLIGHTS


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


DWS GNMA Fund - Class S



<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,                     2007           2006          2005          2004          2003
<S>                                            <C>            <C>            <C>           <C>            <C>
SELECTED PER SHARE DATA
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD      $  14.67       $  14.86      $  15.14       $ 15.26      $  15.44
-----------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
  Net investment income a                      .71            .66           .61           .49           .48
-----------------------------------------------------------------------------------------------------------------
  Net realized and unrealized gain
  (loss)                                    (  .04)        (  .14)       (  .21)          .00*       (  .02)
-----------------------------------------------------------------------------------------------------------------
  TOTAL FROM INVESTMENT OPERATIONS             .67            .52           .40           .49           .46
-----------------------------------------------------------------------------------------------------------------
Less distributions from:
  Net investment income                     (  .74)        (  .71)       (  .68)        ( .61)       (  .64)
-----------------------------------------------------------------------------------------------------------------
Redemption fees                                .00*           .00*          .00*            -             -
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD            $  14.60       $  14.67      $  14.86       $ 15.14      $  15.26
-----------------------------------------------------------------------------------------------------------------
Total Return (%)                              4.76 b         3.47 b        2.77          3.31 b        3.01
-----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ millions)       2,347          2,645           283           330           368
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%)                                 .58            .62           .60           .68           .70
-----------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%)                                 .56            .59           .60           .64           .70
-----------------------------------------------------------------------------------------------------------------
Ratio of net investment income (%)            4.85           4.55          4.05          3.25          3.13
-----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) c                  189             81           105           206           281
-----------------------------------------------------------------------------------------------------------------
</TABLE>



a    Based on average shares outstanding during the period.

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


c    The  annual  portfolio   turnover  rates  including  mortgage  dollar  roll
     transactions  were 381%,  289%,  300%,  302% and 499% for the periods ended
     September 30, 2007, 2006, 2005, 2004 and 2003, respectively.


*    Amount is less than $.005.

14 | Financial Highlights
<PAGE>


HOW TO INVEST IN THE FUND

THE FOLLOWING PAGES TELL YOU HOW TO INVEST IN THE FUND AND WHAT TO EXPECT AS A
SHAREHOLDER. The following pages also tell you about many of the services,
choices and benefits of being a shareholder. You'll also find information on
how to check the status of your account using the method that's most convenient
for you.

If you're investing directly with DWS Scudder, all of this information applies
to you. If you're investing through a "third party provider" - for example, a
workplace retirement plan, financial supermarket or financial advisor - your
provider may have its own policies or instructions and you should follow those.


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


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

<PAGE>


How to BUY Shares

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

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

                                              -  check payable to "DWS Scudder"
------------------------------------------------------------------------------------------
 BY WIRE
 -  Call (800) 728-3337 for instructions      -  Call (800) 728-3337 for instructions
------------------------------------------------------------------------------------------
 BY PHONE
 Not available                                -  Call (800) 728-3337 for instructions
------------------------------------------------------------------------------------------
 WITH AN AUTOMATIC INVESTMENT PLAN
 -  Fill in the information on our            -  To set up regular investments from a
    application including a check for the        bank checking account, call
    initial investment and a voided check        (800) 728-3337 (minimum $50)
------------------------------------------------------------------------------------------
 USING QuickBuy
 Not available                                -  Call (800) 728-3337 to make sure
                                                 QuickBuy is set up on your account; if
                                                 it is, you can request a transfer from
                                                 your bank account of any amount
                                                 between $50 and $250,000
------------------------------------------------------------------------------------------
 ON THE INTERNET
 -  Register at www.dws-scudder.com or        -  Call (800) 728-3337 to ensure you have
    log in if already registered                 electronic services

 -  Print out a prospectus and a new          -  Register at www.dws-scudder.com
    account application                          or log in if already registered

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



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

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

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


16 | How to Buy Shares
<PAGE>


How to EXCHANGE or SELL Shares

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

 -  Exchanges into existing accounts:            Some transactions, including most for
    $50 minimum per fund                         over $100,000, can only be ordered in
                                                 writing with a signature guarantee;
 -  Exchanges into new accounts:                 please see "Signature Guarantee"
    $2,500 minimum per fund
    $1,000 minimum for IRAs and UGMAs
------------------------------------------------------------------------------------------
 BY PHONE                                        BY PHONE OR WIRE
 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions
------------------------------------------------------------------------------------------
 USING THE AUTOMATED INFORMATION LINE
 -  Call (800) 728-3337 for instructions        -  Call (800) 728-3337 for instructions
------------------------------------------------------------------------------------------
 BY MAIL OR EXPRESS MAIL
 (see previous page for address)
 Your instructions should include:              Your instructions should include:
 -  the fund, class and account number          -  the fund, class and account number
    you're exchanging out of                       from which you want to sell shares

 -  the dollar amount or number of shares       -  the dollar amount or number of shares
    you want to exchange                           you want to sell

 -  the name and class of the fund you          -  your name(s), signature(s) and
    want to exchange into                          address, as they appear on your
                                                   account
 -  your name(s), signature(s) and
    address, as they appear on your             -  a daytime telephone number
    account

 -  a daytime telephone number
------------------------------------------------------------------------------------------
 WITH AN AUTOMATIC EXCHANGE PLAN                 WITH AN AUTOMATIC WITHDRAWAL PLAN
 -  To set up regular exchanges from a          -  To set up regular cash payments from
    fund account, call (800) 728-3337              a DWS fund account, call
                                                   (800) 728-3337
------------------------------------------------------------------------------------------
 USING QuickSell
 Not available                                  -  Call (800) 728-3337 to make sure
                                                   QuickSell is set up on your account; if
                                                   it is, you can request a transfer to your
                                                   bank account of any amount between
                                                   $50 and $250,000
------------------------------------------------------------------------------------------
 ON THE INTERNET
 -  Register at www.dws-scudder.com or          -  Register at www.dws-scudder.com or
    log in if already registered                   log in if already registered

 -  Follow the instructions for making on-      -  Follow the instructions for making on-
    line exchanges                                 line redemptions
------------------------------------------------------------------------------------------
</TABLE>



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


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




                                            How to Sell or Exchange Shares  | 17
<PAGE>

           Financial intermediary support payments


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


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


18 | How to Sell or Exchange Shares
<PAGE>


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


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

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


                                            How to Sell or Exchange Shares  | 19
<PAGE>

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


POLICIES YOU SHOULD KNOW ABOUT


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


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

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


           Policies about transactions

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

           To help the government fight the funding of terrorism and money
           laundering activities, federal law requires all financial
           institutions to obtain, verify and record information that
           identifies each person who opens an account. What this means to

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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

20 | Policies You Should Know About
<PAGE>

           you: When you open an account, we will ask for your name, address,
           date of birth and other information that will allow us to identify
           you. Some or all of this information will be used to verify the
           identity of all persons opening an account.

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


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


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

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


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


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

           INITIAL PURCHASE. The minimum initial investment is $2,500, except
           for investments on behalf of participants in certain fee-based and
           wrap programs offered through certain financial intermediaries
           approved by the Advisor, for which there is no
           minimum initial investment; and fiduciary accounts such as IRAs and
           custodial accounts such as Uniform Gifts to Minors Act and Uniform
           Transfers to Minors Act accounts for which the minimum initial
           investment is $1,000 per account. In addition, the


                                            Policies You Should Know About  | 21
<PAGE>

           minimum initial investment is $1,000 if an automatic investment plan
           of $50 per month is established. Group retirement plans and certain
           other accounts have similar or lower minimum share balance
           requirements.


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

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

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

           MARKET TIMING POLICIES AND PROCEDURES. Short-term and excessive
           trading of fund shares may present risks to long-term shareholders,
           including potential dilution in the value of fund shares,
           interference with the efficient management of the



22 | Policies You Should Know About
<PAGE>


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

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

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



                                            Policies You Should Know About  | 23
<PAGE>


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

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

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

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

           There is no assurance that these policies and procedures will be
           effective in limiting short-term and excessive trading in all cases.
           For example, the Advisor may not be able to effectively monitor,
           detect or limit short-term or excessive trading by underlying
           shareholders that occurs through omnibus accounts maintained by
           broker-dealers or other financial intermediaries. The Advisor



24 | Policies You Should Know About
<PAGE>


           reviews trading activity at the omnibus level to detect short-term
           or excessive trading. If the Advisor has reason to suspect that
           short-term or excessive trading is occurring at the omnibus level,
           the Advisor will contact the financial intermediary to request
           underlying shareholder level activity. Depending on the amount of
           fund shares held in such omnibus accounts (which may represent most
           of the fund's shares) short-term and/or excessive trading of fund
           shares could adversely affect long-term shareholders in the fund. If
           short-term or excessive trading is identified, the Advisor will take
           appropriate action.

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

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


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


           The redemption fee will not be charged in connection with the
           following exchange or redemption transactions: (i) transactions on
           behalf of participants in certain research wrap programs; (ii)
           transactions on behalf of a shareholder to return any excess IRA



                                            Policies You Should Know About  | 25
<PAGE>


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

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


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

THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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

26 | Policies You Should Know About
<PAGE>

           (ACH) services. Transactions take two to three days to be completed
           and there is a $50 minimum and a $250,000 maximum. To set up
           QuickBuy or QuickSell on a new account, see the account application;
           to add it to an existing account, call (800) 728-3337.


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


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


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

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

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


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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

                                            Policies You Should Know About  | 27
<PAGE>


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

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

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


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


           MONEY FROM SHARES YOU SELL is normally sent out within one business
           day of when your order is processed (not when it is received),
           although it could be delayed for up to seven days. There are other
           circumstances when it could be longer: When you are selling shares
           you bought recently by check or ACH (the funds will be placed under
           a 10 calendar day hold to ensure good funds) or when unusual
           circumstances prompt the SEC to allow further delays. Certain
           expedited redemption processes may also be delayed when you are
           selling recently purchased shares or in the event of closing of the
           Federal Reserve Bank's wire payment system. In addition, the fund
           reserves the right to suspend or postpone redemptions as permitted
           pursuant to Section 22(e) of the Investment Company Act of 1940.
           Generally, those circumstances are when 1) the New York Stock
           Exchange is closed other than customary weekend or holiday closings;
           2) trading on the New York Stock Exchange is restricted; 3) an
           emergency exists which makes the disposal of securities owned by the
           fund or the fair determination of the



28 | Policies You Should Know About
<PAGE>


           value of the fund's net assets not reasonably practicable; or 4) the
           SEC, by order, permits the suspension of the right of redemption.
           Redemption payments by wire may also be delayed in the event of a
           non-routine closure of the Federal Reserve wire payment system. For
           additional rights reserved by the fund, please see "Other rights we
           reserve."


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


           How the fund calculates share price

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


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



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


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

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



                                            Policies You Should Know About  | 29
<PAGE>

           Other rights we reserve

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

           -  withdraw or suspend the offering of shares at any time


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

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



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

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

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

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



30 | Policies You Should Know About
<PAGE>

UNDERSTANDING DISTRIBUTIONS AND TAXES

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


           THE FUND INTENDS TO PAY INCOME DIVIDENDS to its shareholders
           monthly; short-term and long-term capital gains are paid in December
           or otherwise as needed.

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

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

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

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


THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS

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

                                     Understanding Distributions and Taxes  | 31
<PAGE>

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

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



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

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

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

TRANSACTIONS INVOLVING FUND
SHARES

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




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

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

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



32 | Understanding Distributions and Taxes
<PAGE>


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

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


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


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

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

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



                                     Understanding Distributions and Taxes  | 33
<PAGE>


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


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

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



34 | Appendix
<PAGE>


DWS GNMA Fund - Class S



<TABLE>
<CAPTION>
              MAXIMUM           INITIAL HYPOTHETICAL                 ASSUMED RATE
           SALES CHARGE:             INVESTMENT:                      OF RETURN:
               0.00%                   $10,000                            5%
----------------------------------------------------------------------------------------------
                                                              HYPOTHETICAL
             CUMULATIVE        ANNUAL       CUMULATIVE          YEAR-END
           RETURN BEFORE        FUND       RETURN AFTER      BALANCE AFTER      ANNUAL FEES
              FEES AND        EXPENSE        FEES AND           FEES AND            AND
YEAR          EXPENSES         RATIOS        EXPENSES           EXPENSES         EXPENSES
----------------------------------------------------------------------------------------------
<S>       <C>                <C>          <C>               <C>                <C>
   1            5.00%        0.58%              4.42%       $ 10,442.50         $  58.77
----------------------------------------------------------------------------------------------
   2           10.25%        0.58%              9.05%       $ 10,904.58         $  61.37
----------------------------------------------------------------------------------------------
   3           15.76%        0.58%             13.87%       $ 11,387.11         $  64.09
----------------------------------------------------------------------------------------------
   4           21.55%        0.58%             18.91%       $ 11,890.99         $  66.92
----------------------------------------------------------------------------------------------
   5           27.63%        0.58%             24.17%       $ 12,417.16         $  69.89
----------------------------------------------------------------------------------------------
   6           34.01%        0.58%             29.67%       $ 12,966.62         $  72.98
----------------------------------------------------------------------------------------------
   7           40.71%        0.58%             35.40%       $ 13,540.40         $  76.21
----------------------------------------------------------------------------------------------
   8           47.75%        0.58%             41.40%       $ 14,139.56         $  79.58
----------------------------------------------------------------------------------------------
   9           55.13%        0.58%             47.65%       $ 14,765.23         $  83.10
----------------------------------------------------------------------------------------------
  10           62.89%        0.58%             54.19%       $ 15,418.60         $  86.78
----------------------------------------------------------------------------------------------
  TOTAL                                                                         $ 719.69
----------------------------------------------------------------------------------------------
</TABLE>





                                                                  Appendix  | 35

<PAGE>

TO GET MORE INFORMATION

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

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

For a free copy of any of these documents or to request other information about
the fund, call (800) 728-3337, or contact DWS Scudder at the address listed
below. The fund's SAI and shareholder reports are also available through the
DWS Scudder Web site at www.dws-scudder.com. These documents and other
information about the fund are available from the EDGAR Database on the SEC's
Internet site at www.sec.gov. If you like, you may obtain copies of this
information, after paying a copying fee, by e-mailing a request to
publicinfo@sec.gov or by writing the SEC at the address listed below. You can
also review and copy these documents and other information about the fund,
including the fund's SAI, at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the SEC's Public Reference Room may be
obtained by calling (800) SEC-0330.


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




<TABLE>
<S>                   <C>                <C>
SEC FILE NUMBER:
DWS Income Trust        DWS GNMA Fund    811-4049
</TABLE>






(02/01/08) 393-2
[RECYCLED PAPER GRAPHIC APPEARS HERE]    [DWS SCUDDER LOGO GRAPHIC APPEARS HERE]



<PAGE>

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

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

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


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

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


<PAGE>

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

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


<PAGE>






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


</TABLE>











                            Please Retain This Supplement for Future Reference


November 26, 2007

<PAGE>

                                DWS INCOME TRUST

                           DWS GNMA Fund (the "Fund")

                                 Class S Shares














                       STATEMENT OF ADDITIONAL INFORMATION


                                February 1, 2008

This Statement of Additional  Information is not a prospectus and should be read
in  conjunction  with the  prospectus  for the Fund,  dated  February 1, 2008 as
amended  from  time to time,  for DWS GNMA Fund  (the  "Fund"),  a series of DWS
Income Trust (the  "Trust"),  a copy of which may be obtained  without charge by
contacting DWS Distributors,  Inc., 222 South Riverside Plaza, Chicago, Illinois
60606, (800) 728-3337,  or from the firm from which this Statement of Additional
Information was obtained, and is available along with other related materials on
the Securities and Exchange Commission's Internet Web site (http://www.sec.gov).

The Annual  Report to  Shareholders  of the Fund,  dated  September 30, 2007, is
incorporated  herein by reference and is deemed to be part of this  Statement of
Additional  Information.  A copy of the Fund's  Annual  Report  may be  obtained
without charge by calling the Fund at the toll-free number (800) 728-3337.

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




<PAGE>


                                TABLE OF CONTENTS

                                                                          Page

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


INVESTMENT POLICIES AND TECHNIQUES..........................................3
   Portfolio Holdings .....................................................17

MANAGEMENT OF THE FUND.....................................................18
   Investment Advisor......................................................18
   Compensation of Portfolio Managers......................................21

FUND SERVICE PROVIDERS.....................................................30
   Administrator...........................................................30
   Distributor.............................................................31
   Independent Registered Public Accounting Firm...........................32
   Legal Counsel...........................................................32
   Custodian ..............................................................32
   Transfer Agent and Shareholder Service Agent............................32

PORTFOLIO TRANSACTIONS.....................................................33

PURCHASE AND REDEMPTION OF SHARES..........................................37

DIVIDENDS..................................................................54

TAXES......................................................................55

NET ASSET VALUE............................................................60

TRUSTEES AND OFFICERS......................................................61

FUND ORGANIZATION..........................................................77

PROXY VOTING GUIDELINES....................................................78

FINANCIAL STATEMENTS.......................................................80

ADDITIONAL INFORMATION.....................................................80

RATINGS OF INVESTMENTS.....................................................80


                                       i

<PAGE>

                             INVESTMENT RESTRICTIONS

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

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

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

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

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

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

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

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

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

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

(7)       concentrate its investments in a particular industry,  as that term is
          used  in the  Investment  Company  Act of  1940,  as  amended,  and as
          interpreted or modified by regulatory  authority  having  jurisdiction
          from time to time. The Trustees of the Trust have voluntarily  adopted
          certain policies and  restrictions,  which are observed in the conduct
          of the Fund's  affairs.  These  represent  intentions  of the Trustees
          based upon current circumstances.


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 Statement of Additional Information, means the lesser of (1) 67% or
more of the voting  securities  present at such meeting,  if the holders of more
than  50% of the  outstanding  voting  securities  of the Fund  are  present  or
represented by proxy, or (2) more than 50% of the outstanding  voting securities
of the Fund.

The Fund's Board has  voluntarily  adopted  certain  policies and  restrictions,
which  are  observed  in the  conduct  of the  Fund's  affairs.  Non-fundamental
policies may be changed by the  Trustees of the Trust  without  requiring  prior
notice to or approval of shareholders.  As a matter of  non-fundamental  policy,
the Fund currently does not intend to:



<PAGE>

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

(2)      purchase  securities  on margin or make short  sales,  except (i) short
         sales against the box, (ii) in connection with arbitrage  transactions,
         (iii) for margin deposits in connection with futures contracts, options
         or other  permitted  investments,  (iv) that  transactions  in  futures
         contracts  and  options  shall  not be  deemed  to  constitute  selling
         securities  short,  and (v) that the Fund may  obtain  such  short-term
         credits  as  may  be  necessary   for  the   clearance  of   securities
         transactions;

(3)      purchase  options,  unless  the  aggregate  premiums  paid on all  such
         options  held by the Fund at any time do not  exceed  20% of its  total
         assets; or sell put options, if as a result, the aggregate value of the
         obligations  underlying  such put options would exceed 50% of its total
         assets;

(4)      enter  into  futures  contracts  or  purchase  options  thereon  unless
         immediately  after the  purchase,  the value of the  aggregate  initial
         margin with respect to such futures contracts entered into on behalf of
         the Fund and the premiums  paid for such  options on futures  contracts
         does not exceed 5% of the fair market value of the Fund's total assets;
         provided that in the case of an option that is in-the-money at the time
         of purchase,  the in-the-money  amount may be excluded in computing the
         5% limit;

(5)      purchase warrants if as a result,  such securities,  taken at the lower
         of cost or market value,  would  represent more than 5% of the value of
         the Fund's total assets (for this purpose,  warrants  acquired in units
         or attached to securities will be deemed to have no value); and

(6)      lend  portfolio  securities  in an amount  greater  than 33 1/3% of its
         total assets.

The Fund will not acquire securities of registered open-end investment companies
or registered  unit  investment  trusts in reliance on Sections  12(d)(1)(F)  or
12(d)(1)(G) of the Investment Company Act of 1940, as amended.


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.


Temporary  Defensive  Policy.  For temporary  defensive  purposes,  the Fund may
invest,  without limit, in cash and cash equivalents,  US Government  securities
and money market instruments.

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

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


                                       2
<PAGE>

master  fund and  avoiding  transaction  costs  and,  if proper  procedures  are
followed, the realization of taxable gain or loss.

                       INVESTMENT POLICIES AND TECHNIQUES


General.  The Fund is a  diversified  series of DWS Income  Trust,  a registered
open-end management investment company organized as a business trust.

Investment Techniques

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


Adjustable  Rate  Securities.  The interest  rates paid on the  adjustable  rate
securities in which the Fund invests  generally  are  readjusted at intervals of
one year or less to an increment  over some  predetermined  interest rate index.
There  are  three  main  categories  of  indices:  those  based  on US  Treasury
securities,  those  derived  from a  calculated  measure such as a cost of funds
index and those  based on a moving  average of  mortgage  rates.  Commonly  used
indices  include  the  one-year,  three-year  and  five-year  constant  maturity
Treasury rates,  the three-month  Treasury bill rate, the 180-day  Treasury bill
rate, rates on longer-term Treasury  securities,  the 11th District Federal Home
Loan Bank Cost of Funds,  the  National  Median  Cost of Funds,  the  one-month,
three-month,  six-month or one-year London Interbank Offered Rate ("LIBOR"), the
prime rate of a specific bank or commercial paper rates.  Some indices,  such as
the one-year constant  maturity Treasury rate,  closely mirror changes in market
interest rate levels.  Others,  such as the 11th District Home Loan Bank Cost of
Funds  index,  tend to lag behind  changes in market  rate levels and tend to be
somewhat less volatile.


Pools of mortgages ("mortgage-backed securities") either issued or guaranteed by
the Government  National Mortgage  Association  ("GNMA"),  the Federal Home Loan
Mortgage  Corporation  ("FHLMC") or the Federal  National  Mortgage  Association
("FNMA" or "Fannie Mae")  ("Certificates") are called pass-through  Certificates
because a pro rata share of both regular  interest and principal  payments (less
GNMA's,  FHLMC's or FNMA's fees and any applicable loan servicing fees), as well
as unscheduled  early  prepayments  on the underlying  mortgage pool, are passed
through monthly to the holder of the Certificate (i.e., the Fund). The principal
and interest on GNMA  securities  are  guaranteed by GNMA and backed by the full
faith and credit of the US Government.  FNMA  guarantees full and timely payment
of all interest and principal, while FHLMC guarantees timely payment of interest
and ultimate collection of principal.  Mortgage-backed  securities from FNMA and
FHLMC are not backed by the full faith and credit of the United States; however,
they are generally considered to offer minimal credit risks. The yields provided
by these  mortgage-backed  securities have  historically  exceeded the yields on
other types of US  Government  Securities  with  comparable  maturities in large
measure due to the prepayment risk discussed below.


If prepayments of principal are made on the underlying  mortgages during periods
of rising  interest  rates,  the Fund  generally  will be able to reinvest  such
amounts in securities  with a higher current rate of return.  However,  the Fund
will not benefit from  increases in interest  rates to the extent that  interest
rates rise to the point where they cause the current  coupon of adjustable  rate
mortgages held as investments by the Fund to exceed the maximum allowable annual
or lifetime reset limits (or "cap rates") for a particular  mortgage.  Also, the
Fund's  net  asset  value  could  vary to the  extent  that  current  yields  on
mortgage-backed  securities  are different  than market  yields  during  interim
periods between coupon reset dates.


During  periods of  declining  interest  rates,  the coupon  rates may  readjust
downward,  resulting  in lower  yields to the  Fund.  Further,  because  of this
feature,  the value of  adjustable  rate  mortgages  is  unlikely to rise during


                                       3
<PAGE>

periods  of  declining   interest   rates  to  the  same  extent  as  fixed-rate
instruments.  As with other Mortgage-backed  securities,  interest rate declines
may result in  accelerated  prepayment of mortgages,  and the proceeds from such
prepayments must be reinvested at lower prevailing interest rates.


One  additional  difference  between  adjustable  rate  mortgages and fixed rate
mortgages is that for certain types of adjustable rate mortgage securities,  the
rate of amortization of principal,  as well as interest  payments,  can and does
change in  accordance  with  movements in a specified,  published  interest rate
index. The amount of interest due to an adjustable rate mortgage security holder
is  calculated  by adding a specified  additional  amount,  the "margin," to the
index, subject to limitations or "caps" on the maximum and minimum interest that
is charged to the  mortgagor  during the life of the  mortgage or to maximum and
minimum changes to that interest rate during a given period.

Advance  Refunded  Bonds.  The Fund may purchase  municipal  securities that are
subsequently refunded by the issuance and delivery of a new issue of bonds prior
to the date on which the outstanding issue of bonds can be redeemed or paid. The
proceeds  from the new issue of bonds  are  typically  placed in an escrow  fund
consisting  of US  Government  obligations  that are  used to pay the  interest,
principal  and call  premium  on the  issue  being  refunded.  The Fund may also
purchase  municipal  securities that have been refunded prior to purchase by the
Fund.


Asset-Backed and Mortgage-Backed Securities. Asset-backed securities may include
mortgage-backed  securities,  loans,  receivables  or other  assets.  Payment of
principal and interest may be largely dependent upon the cash flows generated by
the assets backing the securities. For purposes of determining the percentage of
the Fund's total assets invested in securities of issuers having their principal
business activities in a particular  industry,  asset-backed  securities will be
classified separately,  based on the nature of the underlying assets,  according
to the  following  categories:  captive auto,  diversified,  retail and consumer
loans, captive equipment and business, business trade receivables,  nuclear fuel
and capital and mortgage lending.  Asset-backed securities present certain risks
that  are  not  presented  by  mortgage-backed   securities.   Primarily,  these
securities  may not have the  benefit of any  security  interest  in the related
assets.  Credit card  receivables  are  generally  unsecured and the debtors are
entitled  to the  protection  of a number of state and federal  consumer  credit
laws,  many of which give such debtors the right to set off certain amounts owed
on the credit cards,  thereby reducing the balance due. There is the possibility
that  recoveries on repossessed  collateral may not, in some cases, be available
to support  payments  on these  securities.  Asset-backed  securities  are often
backed by a pool of assets representing the obligations of a number of different
parties.  To lessen the effect of failures by obligors on  underlying  assets to
make payments,  the securities may contain elements of credit support which fall
into two  categories:  (i) liquidity  protection,  and (ii)  protection  against
losses resulting from ultimate  default by an obligor on the underlying  assets.
Liquidity  protection  refers to the  provision  of  advances,  generally by the
entity  administering the pool of assets, to ensure that the receipt of payments
on the underlying  pool occurs in a timely  fashion.  Protection  against losses
results from payment of the insurance  obligations  on at least a portion of the
assets in the pool. This protection may be provided through guarantees, policies
or letters of credit  obtained  by the  issuer or  sponsor  from third  parties,
through various means of structuring the transaction or through a combination of
such  approaches.  The Fund will not pay any  additional  or  separate  fees for
credit  support.  The  degree  of  credit  support  provided  for each  issue is
generally  based on historical  information  respecting the level of credit risk
associated  with the  underlying  assets.  Delinquency or loss in excess of that
anticipated or failure of the credit support could  adversely  affect the return
on an investment in such a security. The availability of asset-backed securities
may be affected by legislative or regulatory  developments.  It is possible that
such  developments may require the Fund to dispose of any then existing holdings
of such securities.

At times the Fund may invest in securities  that pay higher than market interest
rates by paying a premium above the securities' par value.  Prepayments of these
securities  may cause losses on securities  purchased at a premium.  Unscheduled
payments,  which are made at par value, will cause the Fund to experience a loss
equal to any unamortized premium.

The negative  effect of interest rate increases on the  market-value of mortgage
backed  securities  is usually  more  pronounced  than it is for other  types of
fixed-income securities potentially increasing the volatility of the Fund.


Asset-Indexed  Securities.  The Fund may purchase asset-indexed securities which
are debt  securities  usually  issued by  companies in precious  metals  related
businesses such as mining,  the principal amount,  redemption terms, or interest
rates of which are related to the market  price of a specified  precious  metal.
The Fund will only enter into


                                       4
<PAGE>

transactions  in publicly  traded  asset-indexed  securities.  Market  prices of
asset-indexed  securities will relate  primarily to changes in the market prices
of the  precious  metals to which the  securities  are  indexed  rather  than to
changes  in  market  rates of  interest.  However,  there  may not be a  perfect
correlation between the price movements of the asset-indexed  securities and the
underlying precious metals.  Asset-indexed securities typically bear interest or
pay dividends at below market rates (and in certain cases at nominal rates). The
Fund may purchase asset-indexed securities to the extent permitted by law.

Bank and Savings and Loan  Obligations.  These  obligations  include  negotiable
certificates  of  deposit,  bankers'  acceptances,  deposit  notes,  fixed  time
deposits  or other  short-term  bank  obligations.  Certificates  of deposit are
negotiable  certificates  evidencing  the  obligations  of a bank to repay funds
deposited  with it for a  specified  period  of time.  The Fund  may  invest  in
certificates  of deposit of large  domestic  banks and their  foreign  branches,
large US regulated subsidiaries of large foreign banks (i.e., banks which at the
time of their most  recent  annual  financial  statements  show total  assets in
excess of $1 billion),  and of smaller  banks as described  below.  Although the
Fund  recognizes  that the size of a bank is  important,  this fact alone is not
necessarily  indicative of its  creditworthiness.  Investment in certificates of
deposit issued by foreign  branches of domestic banks involves  investment risks
that are  different in some respects from those  associated  with  investment in
certificates of deposit issued by domestic branches of domestic banks, including
the possible  imposition of withholding  taxes on interest income,  the possible
adoption of foreign  governmental  restrictions which might adversely affect the
payment of principal  and  interest on such  certificates  of deposit,  or other
adverse  political  or  economic  developments.  In  addition,  it might be more
difficult  to obtain  and  enforce  a  judgment  against  a foreign  branch of a
domestic bank.

The Fund may also invest in  certificates of deposit issued by banks and savings
and  loan  institutions  which  had,  at the time of their  most  recent  annual
financial  statements,  total assets of less than $1 billion,  provided that (i)
the principal  amounts of such  certificates of deposit are insured by an agency
of the US  Government,  (ii) at no time will the Fund  hold  more than  $100,000
principal  amount of  certificates of deposit of any one such bank, and (iii) at
the time of acquisition, no more than 10% of the Fund's assets (taken at current
value) are invested in certificates of deposit of such banks having total assets
not in excess of $1 billion.

Banker's acceptances are credit instruments evidencing the obligations of a bank
to  pay a  draft  drawn  on it by a  customer.  These  instruments  reflect  the
obligation  both of the bank and of the  drawer  to pay the face  amount  of the
instrument upon maturity.

Time deposits are non-negotiable  deposits  maintained in a banking  institution
for a specified  period of time at a stated  interest rate.  Time deposits which
may be held by the Fund will not benefit from  insurance from the Bank Insurance
Fund or the  Savings  Association  Insurance  Fund  administered  by the Federal
Deposit Insurance Corporation. Fixed time deposits may be withdrawn on demand by
the investor,  but may be subject to early  withdrawal  penalties that vary with
market  conditions  and the  remaining  maturity of the  obligation.  Fixed time
deposits  subject to withdrawal  penalties  maturing in more than seven calendar
days are subject to the Fund's limitation on investments in illiquid securities.

Collateralized   Mortgage  Obligations   ("CMOs").   CMOs  are  hybrids  between
mortgage-backed bonds and mortgage pass-through  securities.  Similar to a bond,
interest and prepaid principal are paid, in most cases,  semiannually.  CMOs may
be collateralized by whole mortgage loans but are more typically  collateralized
by portfolios of mortgage pass-through  securities guaranteed by GNMA, FHLMC, or
Fannie Mae, and their income streams.


CMOs are  structured  into  multiple  classes,  each bearing a different  stated
maturity.  Actual  maturity  and average  life will  depend upon the  prepayment
experience  of  the  collateral.  CMOs  provide  for a  modified  form  of  call
protection  through a de facto  breakdown  of the  underlying  pool of mortgages
according  to how  quickly the loans are repaid.  Monthly  payment of  principal
received from the pool of underlying mortgages,  including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity  classes  receive  principal only after the first class has been
retired.  An investor is partially  guarded against a sooner than desired return
of principal  because of the  sequential  payments.  The prices of certain CMOs,
depending on their structure and the rate of prepayments,  can be volatile. Some
CMOs may also not be as liquid as other  securities  and the  Advisor


                                       5
<PAGE>

may not be able to sell them at a time or for a price  which the  Advisor  would
want to. This may also make it more difficult to determine a price for a CMO


In a typical CMO transaction,  a corporation issues multiple series (e.g., A, B,
C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase
mortgages or mortgage pass-through certificates  ("Collateral").  The Collateral
is pledged to a third party  trustee as security  for the Bonds.  Principal  and
interest  payments from the Collateral are used to pay principal on the Bonds in
the order A, B, C, Z. The  Series A, B, and C bonds all bear  current  interest.
Interest  on the  Series Z Bond is  accrued  and added to  principal  and a like
amount is paid as principal on the Series A, B, or C Bond  currently  being paid
off. When the Series A, B, and C Bonds are paid in full,  interest and principal
on the Series Z Bond  begins to be paid  currently.  With some CMOs,  the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.

The principal  risk of CMOs results from the rate of  prepayments  on underlying
mortgages  serving as collateral and from the structure of the deal. An increase
or decrease in prepayment rates will affect the yield, average life and price of
CMOs.

Commercial Paper.  Subject to its investment  objectives and policies,  the Fund
may invest in commercial paper issued by major corporations under the Securities
Act of 1933, as amended (the "Securities Act") in reliance on the exemption from
registration  afforded by Section 3(a)(3) thereof.  Such commercial paper may be
issued only to finance  current  transactions  and must mature in nine months or
less.  Trading of such commercial paper is conducted  primarily by institutional
investors through investment dealers,  and individual investor  participation in
the  commercial  paper  market  is very  limited.  The Fund  also may  invest in
commercial  paper  issued  in  reliance  on the  so-called  "private  placement"
exemption from  registration  afforded by Section 4(2) of the 1933 Act ("Section
4(2)  paper").  Section 4(2) paper is  restricted  as to  disposition  under the
federal  securities laws, and generally is sold to institutional  investors such
as the Fund who agree that they are  purchasing the paper for investment and not
with a view to public  distribution.  Any resale by the purchaser  must be in an
exempt transaction. Section 4(2) paper normally is resold to other institutional
investors  like the  Fund  through  or with  the  assistance  of the  issuer  or
investment  dealers who make a market in the Section 4(2) paper,  thus providing
liquidity.  The Advisor  considers the legally  restricted but readily  saleable
Section 4(2) paper to be liquid; however, pursuant to procedures approved by the
Fund's Board, if a particular investment in Section 4(2) paper is not determined
to be liquid, that investment will be included within the limitation of the Fund
on illiquid securities. The Advisor monitors the liquidity of its investments in
Section 4(2) paper on a continuing basis.

Dollar Roll  Transactions.  Dollar roll transactions  consist of the sale by the
Fund to a bank or broker/dealer  (the  "counterparty")  of GNMA  certificates or
other mortgage-backed securities together with a commitment to purchase from the
counterparty  similar,  but not  identical,  securities at a future date, at the
same price.  The  counterparty  receives all  principal  and interest  payments,
including  prepayments,  made on the security  while it is the holder.  The Fund
receives a fee from the  counterparty  as  consideration  for entering  into the
commitment  to  purchase.  Dollar  rolls may be renewed over a period of several
months  with  a  different  purchase  and  repurchase  price  fixed  and a  cash
settlement  made  at each  renewal  without  physical  delivery  of  securities.
Moreover,  the  transaction  may  be  preceded  by a firm  commitment  agreement
pursuant to which the Fund agrees to buy a security on a future date.


The Fund will segregate cash, US Government securities or other liquid assets in
an amount sufficient to meet its purchase obligations under the transactions. In
the  alternative,  the Fund may maintain asset coverage of at least 300% for all
outstanding firm commitments, dollar rolls and other borrowings.

Dollar  rolls may be treated for purposes of the 1940 Act as  borrowings  of the
Fund because  they  involve the sale of a security  coupled with an agreement to
repurchase.  A dollar roll involves  costs to the Fund.  For example,  while the
Fund receives a fee as  consideration  for agreeing to repurchase  the security,
the Fund forgoes the right to receive all principal and interest  payments while
the  counterparty  holds the security.  These payments to the  counterparty  may
exceed the fee  received  by the Fund,  thereby  effectively  charging  the Fund
interest on its borrowing. Further, although the Fund can estimate the amount of
expected  principal  prepayment over the term of the dollar roll, a variation in
the actual  amount of  prepayment  could  increase or  decrease  the cost of the
Fund's borrowing.




                                       6
<PAGE>

The entry into dollar rolls involves  potential risks of loss that are different
from those related to the securities  underlying the transactions.  For example,
if the  counterparty  becomes  insolvent,  the Fund's right to purchase from the
counterparty might be restricted. Additionally, the value of such securities may
change adversely before the Fund is able to purchase them.  Similarly,  the Fund
may be required to purchase  securities  in  connection  with a dollar roll at a
higher price than may otherwise be available on the open market. Since, as noted
above,  the  counterparty  is required to deliver a similar,  but not  identical
security to the Fund,  the  security  that the Fund is required to buy under the
dollar roll may be worth less than an identical security.  Finally, there can be
no assurance that the Fund's use of the cash that it receives from a dollar roll
will provide a return that exceeds borrowing costs.


Illiquid Securities and Restricted Securities.  The Fund may purchase securities
that are subject to legal or  contractual  restrictions  on resale  ("restricted
securities").  Generally speaking, restricted securities may be sold (i) only to
qualified  institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers;  (iii) in limited  quantities after they have been
held for a specified  period of time and other conditions are met pursuant to an
exemption  from  registration;  or  (iv)  in  a  public  offering  for  which  a
registration  statement  is in  effect  under the  Securities  Act.  Issuers  of
restricted  securities  may not be subject to the  disclosure and other investor
protection  requirements  that  would be  applicable  if their  securities  were
publicly traded.


Restricted  securities  are often  illiquid,  but they may also be  liquid.  For
example,  restricted securities that are eligible for resale under Rule 144A are
often deemed to be liquid.

The Fund's Board has approved  guidelines  for use by the Advisor in determining
whether a security  is liquid or  illiquid.  Among the  factors  the Advisor may
consider in reaching  liquidity  decisions relating to Rule 144A securities are:
(1) the  frequency  of trades  and quotes  for the  security;  (2) the number of
dealers  wishing  to  purchase  or sell the  security  and the  number  of other
potential purchasers;  (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the market for the security
(i.e.,  the time  needed to dispose of the  security,  the method of  soliciting
offers, and the mechanics of the transfer.  Issuers of restricted securities may
not be subject to the disclosure and other investor protection  requirement that
would  be  applicable  if  their  securities  were  publicly  traded.   Where  a
registration statement is required for the resale of restricted securities,  the
Fund may be required to bear all or part of the registration  expenses. The Fund
may be deemed to be an  "underwriter"  for purposes of the  Securities  Act when
selling restricted  securities to the public and, in such event, the Fund may be
liable to purchasers of such securities if the registration  statement  prepared
by the issuer is materially inaccurate or misleading.

The  Fund  may  also  purchase  securities  that  are not  subject  to  legal or
contractual   restrictions  on  resale,  but  that  are  deemed  illiquid.  Such
securities  may be illiquid,  for example,  because  there is a limited  trading
market for them.

The Fund may be unable to sell a restricted or illiquid  security.  In addition,
it may be more  difficult to determine a market value for restricted or illiquid
securities.  Moreover,  if adverse market  conditions were to develop during the
period between the Fund's decision to sell a restricted or illiquid security and
the point at which the Fund is permitted or able to sell such security, the Fund
might  obtain a price  less  favorable  than the price  that  prevailed  when it
decided to sell. This investment practice,  therefore,  could have the effect of
increasing the level of illiquidity of the Fund.


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


Interfund Borrowing and Lending Program.  The Fund has received exemptive relief
from the SEC,  which  permits the Fund to  participate  in an interfund  lending
program among certain investment companies advised by the Advisor. The interfund
lending  program  allows the  participating  funds to borrow money from and loan
money to


                                       7
<PAGE>

each other for  temporary  or  emergency  purposes.  The program is subject to a
number of  conditions  designed to ensure fair and  equitable  treatment  of all
participating  funds,  including  the  following:  (1) no fund may borrow  money
through the program  unless it receives a more  favorable  interest  rate than a
rate  approximating  the  lowest  interest  rate at which  bank  loans  would be
available to any of the participating  funds under a loan agreement;  and (2) no
fund may lend money  through  the program  unless it  receives a more  favorable
return than that available from an investment in repurchase  agreements  and, to
the extent applicable, money market cash sweep arrangements. In addition, a fund
may participate in the program only if and to the extent that such participation
is consistent  with a fund's  investment  objectives and policies (for instance,
money market  funds would  normally  participate  only as lenders and tax exempt
funds only as borrowers).  Interfund loans and borrowings may extend  overnight,
but could  have a maximum  duration  of seven  days.  Loans may be called on one
day's notice. A fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed.  Any delay in repayment to a lending
fund could result in a lost  investment  opportunity  or additional  costs.  The
program is subject to the  oversight  and  periodic  review of the Boards of the
participating  funds.  To the extent the Fund is actually  engaged in  borrowing
through the interfund lending program,  the Fund, as a matter of non-fundamental
policy,  may not borrow for other than temporary or emergency  purposes (and not
for  leveraging),  except  that  the  Fund  may  engage  in  reverse  repurchase
agreements and dollar rolls for any purpose.

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

Certain of the Central Funds comply with rule 2a-7 under the 1940 Act. The other
Central Funds are or will be short-term  bond funds that invest in  fixed-income
securities  and maintain a dollar  weighted  average  maturity of three years or
less.  Each of the  Central  Funds will be managed  specifically  to  maintain a
highly liquid  portfolio,  and access to them will enhance the Fund's ability to
manage Uninvested Cash.

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


Inverse Floaters. The Fund may invest in inverse floaters.  Inverse floaters are
debt  instruments  with a  floating  rate of  interest  that  bears  an  inverse
relationship to changes in short-term market interest rates. Investments in this
type of  security  involve  special  risks as compared  to  investments  in, for
example, a fixed rate municipal security.  The Fund could lose money and its net
asset value ("NAV") could decline if movements in interest rates are incorrectly
anticipated.  Moreover,  the  markets  for  securities  of this type may be less
developed  and may have less  liquidity  than the markets  for more  traditional
municipal securities.


Indexed  Securities.  The Fund may  invest in indexed  securities,  the value of
which is linked to currencies,  interest  rates,  commodities,  indices or other
financial  indicators  ("reference  instruments").  Most indexed securities have
maturities of three years or less.

Indexed  securities differ from other types of debt securities in which the Fund
may invest in several  respects.  First, the interest rate or, unlike other debt
securities,  the principal amount payable at maturity of an indexed security may
vary based on changes in one or more specified reference instruments, such as an
interest rate compared with a fixed interest rate or the currency exchange rates
between  two  currencies  (neither  of which need be the  currency  in which the
instrument is denominated).  The reference instrument need not be related to the
terms of the indexed security.


                                       8
<PAGE>

For example,  the principal amount of a US dollar  denominated  indexed security
may vary  based on the  exchange  rate of two  foreign  currencies.  An  indexed
security  may be  positively  or  negatively  indexed;  that is,  its  value may
increase  or  decrease  if the  value  of the  reference  instrument  increases.
Further,  the change in the principal  amount payable or the interest rate of an
indexed  security  may be a  multiple  of the  percentage  change  (positive  or
negative) in the value of the underlying reference instrument(s).

Investment in indexed  securities  involves  certain  risks.  In addition to the
credit risk of the  security's  issuer and the normal risks of price  changes in
response  to  changes  in  interest  rates,  the  principal  amount  of  indexed
securities  may  decrease  as a result  of  changes  in the  value of  reference
instruments.  Further,  in the case of certain  indexed  securities in which the
interest  rate is linked to a reference  instrument,  the  interest  rate may be
reduced to zero, and any further  declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be  more  volatile  than  the  reference  instruments   underlying  the  indexed
securities.

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

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


Loan  Participations  and  Assignments.  The  Fund  may  invest  in  fixed-  and
floating-rate loans ("Loans") arranged through private  negotiations  between an
issuer of debt instruments and one or more financial  institutions  ("Lenders").
The Fund's investments in Loans are expected in most instances to be in the form
of  participations  in Loans  ("Participations")  and assignments of portions of
Loans ("Assignments") from third parties.  Participations  typically will result
in the Fund having a contractual  relationship only with the Lender and not with
the  borrower.  The Fund will have the right to receive  payments of  principal,
interest and any fees to which it is entitled  only from the Lender  selling the
Participation  and only upon  receipt  by the  Lender of the  payments  from the
borrower. In connection with purchasing Participations,  the Fund generally will
have no right to enforce  compliance  by the borrower with the terms of the loan
agreement  relating to the Loan, nor any rights of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation.  As a result, the Fund will assume the
credit  risk  of  both  the   borrower  and  the  Lender  that  is  selling  the
Participation.  In  the  event  of  the  insolvency  of  the  Lender  selling  a
Participation,  the Fund may be treated as a general  creditor of the Lender and
may not benefit from any set-off  between the Lender and the borrower.  The Fund
will acquire Participations only if the Lender interpositioned  between the Fund
and the borrower is determined by the Advisor to be creditworthy.


When the Fund purchases  Assignments from Lenders, it will acquire direct rights
against the  borrower on the Loan.  Because  Assignments  are  arranged  through
private  negotiations  between  potential  assignees  and  potential  assignors,


                                       9
<PAGE>

however,  the rights and obligations acquired by the Fund as the purchaser of an
Assignment  may differ  from,  and may be more limited  than,  those held by the
assigning Lender.

The  Fund may have  difficulty  disposing  of  Assignments  and  Participations.
Because  no liquid  market  for these  obligations  typically  exists,  the Fund
anticipates  that these  obligations  could be sold only to a limited  number of
institutional  investors.  The lack of a liquid  secondary  market  will have an
adverse  effect on the Fund's  ability to dispose of particular  Assignments  or
Participations  when necessary to meet the Fund's liquidity needs or in response
to a specific economic event, such as a deterioration in the creditworthiness of
the  borrower.  The  lack of a  liquid  secondary  market  for  Assignments  and
Participations may also make it more difficult for the Fund to assign a value to
those  securities for purposes of valuing the Fund's  portfolio and  calculating
its net asset value.


Mortgage-Backed Securities and Mortgage Pass-Through Securities. Mortgage-backed
securities are interests in pools of mortgage  loans,  including  mortgage loans
made by savings and loan  institutions,  mortgage bankers,  commercial banks and
others.  Pools  of  mortgage  loans  are  assembled  as  securities  for sale to
investors by various governmental,  government-related and private organizations
as further described below.  Underlying  mortgages may be of a variety of types,
including adjustable rate,  conventional 30-year,  graduated payment and 15-year
mortgages.


A decline  in  interest  rates  may lead to a faster  rate of  repayment  of the
underlying  mortgages,  and may expose  the Fund to a lower rate of return  upon
reinvestment. To the extent that such mortgage-backed securities are held by the
Fund, the prepayment right will tend to limit to some degree the increase in net
asset value of the Fund because the value of the mortgage-backed securities held
by the Fund may not  appreciate  as  rapidly as the price of  non-callable  debt
securities. Mortgage-backed securities are subject to the risk of prepayment and
the risk that the underlying loans will not be repaid.  Because principal may be
prepaid  at any  time,  mortgage-backed  securities  may  involve  significantly
greater price and yield volatility than traditional debt securities.

When  interest  rates rise,  mortgage  prepayment  rates tend to  decline,  thus
lengthening  the life of a  mortgage-related  security and  increasing the price
volatility  of that  security,  affecting  the price  volatility  of the  Fund's
shares.

Interests in pools of mortgage-backed securities differ from other forms of debt
securities,  which  normally  provide for periodic  payment of interest in fixed
amounts with principal  payments at maturity or specified  call dates.  Instead,
these  securities  provide a monthly payment which consists of both interest and
principal  payments.  In effect,  these  payments  are a  "pass-through"  of the
monthly  payments made by the individual  borrowers on their mortgage loans, net
of any fees  paid to the  issuer or  guarantor  of such  securities.  Additional
payments are caused by  repayments of principal  resulting  from the sale of the
underlying property,  refinancing or foreclosure, net of fees or costs which may
be incurred.  Some  mortgage-related  securities  (such as securities  issued by
GNMA) are described as "modified  pass-through."  These  securities  entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, at the scheduled payment dates regardless of whether or not
the mortgagor actually makes the payment.

The  principal  governmental  guarantor of  mortgage-related  securities  is the
Government  National  Mortgage  Association  (GNMA).  GNMA is a wholly  owned US
Government  corporation  within the Department of Housing and Urban Development.
GNMA is  authorized  to  guarantee,  with the full  faith  and  credit of the US
Government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks and mortgage  bankers) and backed by pools of FHA-insured or VA-guaranteed
mortgages. These guarantees,  however, do not apply to the market value or yield
of  mortgage-backed  securities  or to the  value  of fund  shares.  Also,  GNMA
securities  often are  purchased  at a premium  over the  maturity  value of the
underlying  mortgages.  This  premium  is not  guaranteed  and  will  be lost if
prepayment occurs.

Government-related  guarantors (i.e., not backed by the full faith and credit of
the  US  Government)   include   Fannie  Mae  and  (FHLMC).   Fannie  Mae  is  a
government-sponsored  corporation owned entirely by private stockholders.  It is
subject to general regulation by the Secretary of Housing and Urban Development.
Fannie Mae  purchases  conventional  (i.e.,  not  insured or  guaranteed  by any
government  agency)  mortgages  from a list of approved  seller/servicers  which
include  state and  federally-chartered  savings and loan  associations,  mutual
savings  banks,  commercial  banks  and  credit  unions  and  mortgage  bankers.
Pass-through securities issued by Fannie Mae are


                                       10
<PAGE>

guaranteed as to timely  payment of principal and interest by Fannie Mae but are
not backed by the full faith and credit of the US Government.

FHLMC is a corporate  instrumentality  of the US  Government  and was created by
Congress  in 1970 for the purpose of  increasing  the  availability  of mortgage
credit for  residential  housing.  Its stock is owned by the twelve Federal Home
Loan Banks.  FHLMC issues  Participation  Certificates  ("PCs") which  represent
interests in  conventional  mortgages  from FHLMC's  national  portfolio.  FHLMC
guarantees the timely payment of interest and ultimate  collection of principal,
but PCs are not backed by the full faith and credit of the US Government.

Commercial  banks,  savings and loan  institutions,  private mortgage  insurance
companies,  mortgage  bankers and other  secondary  market  issuers  also create
pass-through  pools  of  conventional  mortgage  loans.  Such  issuers  may,  in
addition,  be the originators and/or servicers of the underlying  mortgage loans
as well as the guarantors of the mortgage-related  securities.  Pools created by
such  non-governmental  issuers  generally  offer a higher rate of interest than
government and government-related  pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and  principal of these pools may be supported by various  forms of insurance or
guarantees,  including  individual  loan,  title,  pool and hazard insurance and
letters of credit.  The  insurance  and  guarantees  are issued by  governmental
entities,  private  insurers  and  the  mortgage  poolers.  Such  insurance  and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining  whether a  mortgage-related  security  meets the Fund's  investment
quality  standards.  There can be no  assurance  that the  private  insurers  or
guarantors can meet their obligations under the insurance  policies or guarantee
arrangements.  The Fund may buy mortgage-related securities without insurance or
guarantees,  if through an examination  of the loan  experience and practices of
the   originators/servicers   and  poolers,  the  Advisor  determines  that  the
securities  meet the  Fund's  quality  standards.  Although  the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.

Other Asset-Backed  Securities.  The  securitization  techniques used to develop
mortgage-backed  securities  are now being  applied to a broad  range of assets.
Through the use of trusts and special  purpose  corporations,  various  types of
assets, including automobile loans, computer leases and credit card receivables,
are  being   securitized  in   pass-through   structures   similar  to  mortgage
pass-through  structures  or in a  structure  similar to the CMO  structure.  In
general, the collateral  supporting these securities is of shorter maturity than
mortgage  loans and is less likely to experience  substantial  prepayments  with
interest rate fluctuations.

Several types of asset-backed securities have already been offered to investors,
including Certificates of Automobile ReceivablesSM ("CARSSM").  CARSSM represent
undivided  fractional  interests  in a trust whose  assets  consist of a pool of
motor vehicle retail  installment sales contracts and security  interests in the
vehicles  securing the  contracts.  Payments of principal and interest on CARSSM
are passed  through  monthly to  certificate  holders,  and are guaranteed up to
certain  amounts and for a certain time period by a letter of credit issued by a
financial institution  unaffiliated with the trustee or originator of the trust.
An investor's  return on CARSSM may be affected by early prepayment of principal
on the underlying vehicle sales contracts. If the letter of credit is exhausted,
the  trust  may be  prevented  from  realizing  the full  amount  due on a sales
contract  because  of  state  law  requirements  and  restrictions  relating  to
foreclosure  sales  of  vehicles  and  the  obtaining  of  deficiency  judgments
following  such sales or because of  depreciation,  damage or loss of a vehicle,
the  application of federal and state  bankruptcy and insolvency  laws, or other
factors.  As a result,  certificate holders may experience delays in payments or
losses if the letter of credit is exhausted.

Asset-backed  securities  present  certain  risks  that  are  not  presented  by
mortgage-backed securities. Primarily, these securities may not have the benefit
of any security  interest in the related  assets.  Credit card  receivables  are
generally  unsecured and the debtors are entitled to the  protection of a number
of state and federal  consumer  credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards,  thereby reducing the
balance due. There is the possibility that recoveries on repossessed  collateral
may not, in some cases, be available to support payments on these securities.

Asset-backed  securities are often backed by a pool of assets  representing  the
obligations of a number of different  parties.  To lessen the effect of failures
by obligors on underlying  assets to make  payments,  the securities may contain
elements  of credit  support  which  fall  into two  categories:  (i)  liquidity
protection,  and (ii) protection  against


                                       11
<PAGE>

losses resulting from ultimate  default by an obligor on the underlying  assets.
Liquidity  protection  refers to the  provision  of  advances,  generally by the
entity  administering the pool of assets, to ensure that the receipt of payments
on the underlying  pool occurs in a timely  fashion.  Protection  against losses
results from payment of the insurance  obligations  on at least a portion of the
assets in the pool. This protection may be provided through guarantees, policies
or letters of credit  obtained  by the  issuer or  sponsor  from third  parties,
through various means of structuring the transaction or through a combination of
such  approaches.  The Fund will not pay any  additional  or  separate  fees for
credit  support.  The  degree  of  credit  support  provided  for each  issue is
generally  based on historical  information  respecting the level of credit risk
associated  with the  underlying  assets.  Delinquency or loss in excess of that
anticipated or failure of the credit support could  adversely  affect the return
on an investment in such a security.

The Fund may also invest in residual  interests in asset-backed  securities.  In
the case of asset-backed securities issued in a pass-through structure, the cash
flow generated by the underlying  assets is applied to make required payments on
the securities and to pay related  administrative  expenses.  The residual in an
asset-backed  security  pass-through  structure  represents  the interest in any
excess cash flow remaining  after making the foregoing  payments.  The amount of
residual cash flow resulting from a particular issue of asset-backed  securities
will depend on,  among  other  things,  the  characteristics  of the  underlying
assets,  the coupon rates on the  securities,  prevailing  interest  rates,  the
amount of administrative  expenses and the actual  prepayment  experience on the
underlying  assets.  Asset-backed  security  residuals not registered  under the
Securities Act may be subject to certain  restrictions  on  transferability.  In
addition, there may be no liquid market for such securities.

The  availability of  asset-backed  securities may be affected by legislative or
regulatory  developments.  It is possible that such developments may require the
Fund to dispose of any then-existing holdings of such securities.

Participation  Interests.  The Fund may  purchase  from  financial  institutions
participation   interests  in  securities  in  which  the  Fund  may  invest.  A
participation  interest gives the Fund an undivided  interest in the security in
the  proportion  that the Fund's  participation  interest bears to the principal
amount of the security.  These instruments may have fixed,  floating or variable
interest rates. If the  participation  interest is unrated,  or has been given a
rating  below  that  which  is  permissible   for  purchase  by  the  Fund,  the
participation  interest  will be  backed by an  irrevocable  letter of credit or
guarantee of a bank, or the payment obligation  otherwise will be collateralized
by US Government securities,  or, in the case of unrated participation interest,
determined by the Advisor to be of comparable  quality to those  instruments  in
which the Fund may invest. For certain  participation  interests,  the Fund will
have the right to demand payment,  on not more than seven days' notice,  for all
or any part of the Fund's participation  interests in the security, plus accrued
interest.  As to these  instruments,  the Fund generally intends to exercise its
right to demand payment only upon a default under the terms of the security.

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

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

It is not clear whether a court would consider the  Obligation  purchased by the
Fund  subject to a  repurchase  agreement as being owned by the Fund or as being
collateral  for a  loan  by  the  Fund  to  the  seller.  In  the  event  of the
commencement of bankruptcy or insolvency  proceedings with respect to the seller
of the  Obligation  before  repurchase  of the  Obligation  under  a  repurchase
agreement,  the Fund may  encounter  delay and incur costs  before being able to
sell the  security.  Delays may involve  loss of interest or decline in price of
the  Obligation.  If the court  characterizes  the transaction as a loan and the
Fund has not perfected a security  interest in the  Obligation,  the Fund


                                       12
<PAGE>

may be required to return the  Obligation to the seller's  estate and be treated
as an unsecured creditor of the seller. As an unsecured creditor, the Fund would
be at risk of losing  some or all of the  principal  and income  involved in the
transaction.  As with any unsecured debt Obligation  purchased for the Fund, the
Advisor  seeks to  reduce  the risk of loss  through  repurchase  agreements  by
analyzing the  creditworthiness  of the obligor,  in this case the seller of the
Obligation.  Apart from the risk of bankruptcy or insolvency proceedings,  there
is also the risk that the seller may fail to repurchase the Obligation, in which
case  the  Fund may  incur a loss if the  proceeds  to the Fund of the sale to a
third party are less than the  repurchase  price.  However,  if the market value
(including  interest)  of the  Obligation  subject to the  repurchase  agreement
becomes  less than the  repurchase  price  (including  interest),  the Fund will
direct the seller of the Obligation to deliver additional securities so that the
market value  (including  interest) of all securities  subject to the repurchase
agreement will equal or exceed the repurchase price.

Reverse  Repurchase  Agreements.  The Fund may enter  into  "reverse  repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the  securities,  agrees to  repurchase  such  securities  at an agreed time and
price.  The Fund maintains a segregated  account in connection with  outstanding
reverse  repurchase  agreements.  The Fund will  enter into  reverse  repurchase
agreements only when the Advisor  believes that the interest income to be earned
from the investment of the proceeds of the transaction  will be greater than the
interest expense of the transaction. Such transactions may increase fluctuations
in the market value of fund assets and its yield.

Securities  with Put  Rights.  The Fund may  enter  into put  transactions  with
respect to obligations held in its portfolio with  broker/dealers  pursuant to a
rule under the 1940 Act and with commercial banks.

The right of the Fund to exercise a put is unconditional and unqualified.  A put
is not  transferable  by the  Fund,  although  the Fund may sell the  underlying
securities to a third party at any time. If necessary  and  advisable,  the Fund
may pay for certain puts either  separately  in cash or by paying a higher price
for portfolio  securities that are acquired subject to such a put (thus reducing
the yield to maturity  otherwise  available for the same  securities).  The Fund
expects,  however,  that puts generally will be available without the payment of
any direct or indirect consideration.

The Fund may enter  into puts only with  banks or  broker/dealers  that,  in the
opinion of the Advisor, present minimal credit risks. The ability of the Fund to
exercise a put will  depend on the ability of the bank or  broker/dealer  to pay
for the  underlying  securities at the time the put is  exercised.  In the event
that a bank or  broker/dealer  should default on its obligation to repurchase an
underlying security, the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere.

The Fund  intends to enter into puts solely to maintain  liquidity  and does not
intend to exercise its rights  thereunder  for trading  purposes.  The puts will
only be for  periods  of  substantially  less  than the  life of the  underlying
security.  The acquisition of a put will not affect the valuation by the Fund of
the  underlying  security.  The actual put will be valued at zero in determining
net asset value of the Fund.  Where the Fund pays directly or  indirectly  for a
put,  its  cost  will be  reflected  in  realized  gain or loss  when the put is
exercised or expires.  If the value of the underlying  security  increases,  the
potential for unrealized or realized gain is reduced by the cost of the put. The
maturity of an obligation purchased by the Fund will not be considered shortened
by any put to which such obligation is subject.

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

In the course of pursuing these investment strategies, the Fund may purchase and
sell  exchange-listed and  over-the-counter  put and call options on securities,
fixed-income indices and other instruments,  purchase and sell futures contracts
and options  thereon and enter into various  transactions  such as swaps,  caps,
floors  or  collars   (collectively,   all  the  above  are  called   "Strategic
Transactions").  In  addition,  strategic  transactions  may  also  include  new
techniques,  instruments or strategies that are permitted as regulatory  changes
occur.

Strategic  Transactions  may be used without limit (subject to limits imposed by
the 1940 Act) to attempt to protect against possible changes in the market value
of securities held in or to be purchased for the Fund's portfolio


                                       13
<PAGE>

resulting from securities markets fluctuations, to protect the Fund's unrealized
gains in the value of its portfolio  securities,  to facilitate the sale of such
securities for investment purposes, to manage the effective maturity or duration
of the Fund's portfolio,  or to establish a position in the derivatives  markets
as a substitute for purchasing or selling particular  securities.  Any or all of
these investment techniques may be used at any time and in any combination,  and
there is no particular  strategy  that dictates the use of one technique  rather
than  another,  as use of any  Strategic  Transaction  is a function of numerous
variables including market conditions.  The ability of the Fund to utilize these
Strategic  Transactions  successfully  will depend on the  Advisor's  ability to
predict  pertinent  market  movements,  which  cannot be assured.  The Fund will
comply  with  applicable   regulatory   requirements  when  implementing   these
strategies, techniques and instruments.  Strategic Transactions will not be used
to alter fundamental  investment  purposes and  characteristics of the Fund, and
the Fund will segregate assets (or as provided by applicable regulations,  enter
into certain  offsetting  positions)  to cover its  obligations  under  options,
futures and swaps to limit leveraging of the Fund.

Some Strategic Transactions may also be used to enhance potential gain, although
no more than 5% of the Fund's assets will be committed to Strategic Transactions
entered into for non-hedging purposes.

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

Combined Transactions. The Fund may enter into multiple transactions,  including
multiple options transactions,  multiple futures transactions, multiple currency
transactions  (including forward currency  contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions   ("component"   transactions),   instead  of  a  single  Strategic
Transaction,  as part of a single or combined  strategy  when, in the opinion of
the  Advisor,  it is in the best  interests  of the  Fund to do so.  A  combined
transaction  will usually  contain  elements of risk that are present in each of
its component transactions.  Although combined transactions are normally entered
into based on the Advisor's  judgment that the combined  strategies  will reduce
risk or otherwise  more  effectively  achieve the desired  portfolio  management
goal, it is possible that the  combination  will instead  increase such risks or
hinder achievement of the portfolio management objective.


Stripped  Zero Coupon  Securities.  Zero coupon  securities  include  securities
issued  directly by the US  Treasury,  and US Treasury  bonds or notes and their
unmatured   interest  coupons  and  receipts  for  their  underlying   principal
("coupons")  which have been  separated by their  holder,  typically a custodian
bank or investment  brokerage firm. A holder will separate the interest  coupons
from the  underlying  principal (the  "corpus") of the US Treasury  security.  A
number of  securities  firms and banks have  stripped the  interest  coupons and
receipts and then resold them in  custodial  receipt  programs  with a number of
different names,  including  "Treasury  Income Growth Receipts"  (TIGRS(TM)) and
"Certificate  of Accrual on Treasuries"  (CATS(TM)).  The underlying US Treasury
bonds and notes  themselves are held in book-entry  form at the Federal  Reserve
Bank or, in the case of bearer securities (i.e.,  unregistered  securities which
are owned ostensibly by the bearer or holder thereof), in trust on behalf of the
owners thereof.  The US Treasury has facilitated  transfers of ownership of zero
coupon  securities  by accounting  separately


                                       14
<PAGE>

for the beneficial  ownership of particular  interest coupon and corpus payments
on Treasury  securities  through the Federal Reserve  book-entry  record keeping
system. The Federal Reserve program as established by the Treasury Department is
known as "STRIPS" or "Separate  Trading of Registered  Interest and Principal of
Securities."  Under  the  STRIPS  program,  the  Fund  will be able to have  its
beneficial  ownership  of  zero  coupon  securities  recorded  directly  in  the
book-entry record-keeping system in lieu of having to hold certificates or other
evidences of ownership of the underlying US Treasury securities.

When US Treasury  obligations  have been  stripped of their  unmatured  interest
coupons  by the  holder,  the  principal  or corpus  is sold at a deep  discount
because the buyer  receives  only the right to receive a future fixed payment on
the security and does not receive any rights to periodic  interest (i.e.,  cash)
payments.  Once  stripped  or  separated,  the  corpus and  coupons  may be sold
separately.  Typically,  the coupons are sold  separately  or grouped with other
coupons with like  maturity  dates and sold bundled in such form.  Purchasers of
stripped  obligations   acquire,  in  effect,   discount  obligations  that  are
economically  identical to the zero coupon  securities  that the Treasury  sells
itself.


Trust Preferred  Securities.  The Fund may invest in Trust Preferred Securities,
which are hybrid  instruments  issued by a special  purpose  trust (the "Special
Trust"),  the entire equity  interest of which is owned by a single issuer.  The
proceeds of the issuance to the Fund of Trust Preferred Securities are typically
used to purchase a junior  subordinated  debenture,  and distributions  from the
Special  Trust are funded by the  payments  of  principal  and  interest  on the
subordinated debenture.

If payments on the underlying junior subordinated debentures held by the Special
Trust are deferred by the debenture  issuer,  the debentures would be treated as
original issue discount ("OID")  obligations for the remainder of their term. As
a result,  holders of Trust  Preferred  Securities,  such as the Fund,  would be
required to accrue  daily for  Federal  income tax  purposes  their share of the
stated interest and the de minimis OID on the debentures  (regardless of whether
the Fund receives any cash  distributions from the Special Trust), and the value
of Trust  Preferred  Securities  would likely be negatively  affected.  Interest
payments on the underlying junior subordinated  debentures typically may only be
deferred if dividends are  suspended on both common and  preferred  stock of the
issuer. The underlying junior  subordinated  debentures  generally rank slightly
higher in terms of payment priority than both common and preferred securities of
the issuer,  but rank below other  subordinated  debentures and debt securities.
Trust Preferred  Securities may be subject to mandatory prepayment under certain
circumstances.  The  market  values of Trust  Preferred  Securities  may be more
volatile than those of conventional debt securities.  Trust Preferred Securities
may be issued in reliance on Rule 144A under the Securities Act and,  unless and
until registered, are restricted securities; there can be no assurance as to the
liquidity  of Trust  Preferred  Securities  and the  ability of holders of Trust
Preferred Securities, such as the Fund, to sell their holdings.

US   Government   Securities.   There   are   two   broad   categories   of   US
Government-related debt instruments:  (a) direct obligations of the US Treasury,
and (b) securities issued or guaranteed by US Government agencies.

Examples of direct  obligations  of the US Treasury are Treasury  Bills,  Notes,
Bonds and other debt securities issued by the US Treasury. These instruments are
backed  by the  "full  faith and  credit"  of the  United  States.  They  differ
primarily in interest rates, the length of maturities and the dates of issuance.
Treasury bills have original maturities of one year or less. Treasury notes have
original  maturities  of one to ten  years and  Treasury  bonds  generally  have
original maturities of greater than ten years.

Some  agency  securities  are  backed by the full faith and credit of the United
States (such as Maritime Administration Title XI Ship Financing Bonds and Agency
for  International  Development  Housing Guarantee Program Bonds) and others are
backed only by the rights of the issuer to borrow from the US Treasury  (such as
Federal Home Loan Bank Bonds and Federal National Mortgage  Association  Bonds),
while still others,  such as the securities of the Federal Farm Credit Bank, are
supported only by the credit of the issuer. With respect to securities supported
only by the credit of the issuing agency or by an additional line of credit with
the US  Treasury,  there is no  guarantee  that the US  Government  will provide
support  to such  agencies  and  such  securities  may  involve  risk of loss of
principal and interest.



                                       15
<PAGE>

US Government  Securities  may include "zero coupon"  securities  that have been
stripped  by  the  US  Government  of  their  unmatured   interest  coupons  and
collateralized  obligations  issued or guaranteed  by a US Government  agency or
instrumentality.

Interest rates on US Government  obligations may be fixed or variable.  Interest
rates on variable rate obligations are adjusted at regular  intervals,  at least
annually,  according to a formula  reflecting  then current  specified  standard
rates, such as 91-day US Treasury bill rates.  These adjustments  generally tend
to reduce fluctuations in the market value of the securities.

The government guarantee of the US Government Securities in the Fund's portfolio
does not  guarantee  the net asset  value of the  shares of the Fund.  There are
market  risks  inherent in all  investments  in  securities  and the value of an
investment  in the  Fund  will  fluctuate  over  time.  Normally,  the  value of
investments  in US  Government  Securities  varies  inversely  with  changes  in
interest rates. For example,  as interest rates rise the value of investments in
US Government  Securities  will tend to decline,  and as interest rates fall the
value  of the  Fund's  investments  will  tend to  increase.  In  addition,  the
potential for  appreciation  in the event of a decline in interest  rates may be
limited or negated by increased  principal  prepayments  with respect to certain
mortgage-backed  securities,  such as  GNMA  Certificates.  Prepayments  of high
interest  rate  mortgage-backed  securities  during times of declining  interest
rates will tend to lower the return of the Fund and may even result in losses to
the Fund if some securities were acquired at a premium. Moreover, during periods
of rising interest rates, prepayments of mortgage-backed securities may decline,
resulting  in the  extension  of the Fund's  average  portfolio  maturity.  As a
result, the Fund's portfolio may experience greater volatility during periods of
rising interest rates than under normal market conditions.

When-Issued Securities.  The Fund may from time to time purchase equity and debt
securities on a "when-issued,"  "delayed  delivery" or "forward delivery" basis.
The price of such securities, which may be expressed in yield terms, is fixed at
the time the  commitment  to purchase is made,  but delivery and payment for the
securities  takes place at a later date.  During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. When the Fund purchases such securities, it immediately assumes the
risks of ownership, including the risk of price fluctuation.  Failure to deliver
a security purchased on this basis may result in a loss or missed opportunity to
make an alternative investment.

To the extent that assets of the Fund are held in cash pending the settlement of
a purchase of securities,  the Fund would earn no income.  While such securities
may be sold prior to the settlement date, the Fund intends to purchase them with
the  purpose of actually  acquiring  them unless a sale  appears  desirable  for
investment  reasons.  At the time the Fund makes the  commitment  to  purchase a
security on this basis,  it will record the transaction and reflect the value of
the  security  in  determining  its net asset  value.  The  market  value of the
securities may be more or less than the purchase price.  The Fund will establish
a segregated  account in which it will maintain cash and liquid securities equal
in value to commitments for such securities.

Zero Coupon Securities.  The Fund may invest in zero coupon securities which pay
no cash  income  and are  sold at  substantial  discounts  from  their  value at
maturity.  When  held to  maturity,  their  entire  income,  which  consists  of
accretion of  discount,  comes from the  difference  between the issue price and
their  value at  maturity.  The effect of owning  instruments  which do not make
current  interest  payments  is that a fixed  yield  is  earned  not only on the
original  investment but also, in effect,  on all discount  accretion during the
life of the obligation.  This implicit reinvestment of earnings at the same rate
eliminates the risk of being unable to reinvest  distributions at a rate as high
as the implicit yield on the zero coupon bond,  but at the same time  eliminates
any  opportunity  to reinvest  earnings at higher rates.  For this reason,  zero
coupon bonds are subject to  substantially  greater  price  fluctuations  during
periods of changing  market  interest rates than those of comparable  securities
that pay  interest  currently,  which  fluctuation  is  greater as the period to
maturity is longer.  Zero coupon  securities  which are convertible  into common
stock  offer the  opportunity  for capital  appreciation  (or  depreciation)  as
increases (or decreases) in market value of such  securities  closely follow the
movements  in the market  value of the  underlying  common  stock.  Zero  coupon
convertible  securities  generally  are  expected to be less  volatile  than the
underlying common stocks, as they usually are issued with maturities of 15 years
or less and are issued with options and/or  redemption  features  exercisable by
the holder of the  obligation  entitling the holder to redeem the obligation and
receive a defined cash payment.



                                       16
<PAGE>


Portfolio Holdings





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

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

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



                                       17
<PAGE>

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


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

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

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

                             MANAGEMENT OF THE FUND

Investment Advisor


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


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



                                       18
<PAGE>

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  who each  play an
important role in the Fund's management  process.  Team members work together to
develop  investment  strategies and select  securities for the Fund's portfolio.
This team works for the Advisor or its  affiliates  and is  supported by a large
staff  of  economists,   research   analysts,   traders  and  other   investment
specialists. The Advisor or its affiliates believe(s) its team approach benefits
Fund  investors  by  bringing  together  many  disciplines  and  leveraging  its
extensive resources.  Team members with primary responsibility for management of
the  Fund,  as  well  as  team  members  who  have  other   ongoing   management
responsibilities  for the Fund, are identified in the Fund's  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.

In  certain  cases,  the  investments  for the  Fund  are  managed  by the  same
individuals  who manage one or more other  mutual  funds  advised by the Advisor
that have similar names,  objectives and investment  styles. You should be aware
that the Fund is likely to differ from these other  mutual  funds in size,  cash
flow pattern and tax matters.  Accordingly,  the holdings and performance of the
Fund can be expected to vary from those of these other mutual funds.


The Board and the shareholders have approved an amended and restated  investment
management agreement (the "Investment  Management  Agreement") for the Fund with
DIMA.  Pursuant to the Investment  Management  Agreement,  the Advisor  provides
continuing  investment  management of the assets of the Fund. In addition to the
investment  management  of the assets of the Fund,  the Advisor  determines  the
investments to be made for the Fund, including what portion of its assets remain
uninvested in cash or cash equivalents, and with whom the orders for investments
are placed,  consistent with the Fund's policies as stated in its prospectus and
Statement of Additional  Information ("SAI"), or as adopted by the Fund's Board.
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  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.


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.

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



                                       19
<PAGE>

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 June 1, 2006, the Fund paid the Advisor an annual advisory fee equal to
0.40% for the first $5 billion of average  daily net assets,  0.385% on the next
$1 billion of net assets,  and 0.37% on net assets over $6 billion.  The fee was
payable  monthly,  provided  that the Fund made such interim  payments as may be
requested by the Advisor not to exceed 75% of the amount of the fee then accrued
on the books of the Fund and unpaid.  All of the Fund's expenses are paid out of
gross investment income.

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


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

DWS GNMA Fund         $7,856,279         $10,927,063           $13,671,125


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




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


DWS GNMA Fund                               0.315% to $5.0 billion
                                            0.300% next $1.0 billion
                                            0.285% thereafter


In addition,  the Board and  shareholders  have  approved a subadvisor  approval
policy for the Fund (the "Subadvisor Approval Policy").  The Subadvisor Approval
Policy  permits the Advisor,  subject to the approval of the Board,  including a
majority of its independent  board members,  to appoint and replace  subadvisors
and to amend  sub-advisory  contracts  without obtaining  shareholder  approval.
Under the Subadvisor Approval Policy, the Board, including its independent board
members,  will continue to evaluate and approve all new  sub-advisory  contracts
between the Advisor and any  subadvisor,  as well as all changes to any existing
subadvisory  contract.  The Fund cannot implement the Subadvisor 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


                                       20
<PAGE>

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  Subadvisor  Approval
Policy, including any shareholder notice requirements.

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


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

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

Officers and  employees  of the Advisor from time to time may have  transactions
with various  banks,  including the Fund's  custodian  bank. It is the Advisor's
opinion that the terms and conditions of those  transactions which have occurred
were  not   influenced  by  existing  or  potential   custodial  or  other  Fund
relationships.

The Advisor may serve as advisor to other funds with  investment  objectives and
policies  similar  to  those of the Fund  that may have  different  distribution
arrangements or expenses, which may affect performance.

None of the officers or Trustees of the Trust may have dealings with the Fund as
principals  in  the  purchase  or  sale  of  securities,  except  as  individual
subscribers to or holders of shares of the Fund.

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

o        DWS  Scudder  performance  and the  performance  of DeAM,  quantitative
         measures which include a fund's1-, 3- and 5-year pre-tax returns versus
         its benchmark (such as the benchmark used in the Fund's prospectus) and
         appropriate  peer  group,   taking  into  consideration  risk


                                       21
<PAGE>

         targets.  Additionally,  the portfolio  manager's  retail/institutional
         asset mix is weighted, as appropriate, for evaluation purposes.

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

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

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

Fund Ownership of Portfolio Managers

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

<TABLE>
<CAPTION>
                                                   Dollar Range of                    Dollar Range of All DWS
Name of Portfolio Manager                         Fund Shares Owned                      Fund Shares Owned
-------------------------                         -----------------                      -----------------

<S>                                                       <C>                            <C>       <C>
Matthew F. MacDonald                                      $0                             $10,001 - $50,000
William Chepolis                                  $10,001 - $50,000                     $100,001 - $500,000
</TABLE>

Conflicts of Interest

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

Other SEC Registered Investment Companies Managed:

<TABLE>
<CAPTION>
                                       Number of        Total Assets of    Number of Investment
                                      Registered          Registered         Company Accounts       Total Assets of
                                      Investment          Investment               with            Performance-Based
Name of Portfolio Manager              Companies           Companies       Performance-Based Fee     Fee Accounts
-------------------------              ---------           ---------       ---------------------     ------------

<S>                                       <C>         <C>                            <C>                  <C>
Matthew F. MacDonald                      15          $7,013,154,104                 0                    $0
William Chepolis                          15          $7,013,154,104                 0                    $0



                                       22
<PAGE>

Other Pooled Investment Vehicles Managed:

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

Matthew F. MacDonald                      0                   $0                      0            $0
William Chepolis                          0                   $0                      0            $0

Other Accounts Managed:

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

Matthew F. MacDonald                      0                   $0                     0                    $0
William Chepolis                          0                   $0                     0                    $0
</TABLE>

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

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

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

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

o        In some cases, an apparent  conflict may arise where the Advisor has an
         incentive, such as a performance-based fee, in managing one account and
         not with  respect to other  accounts it manages.  The Advisor  will not
         determine  allocations based on whether it receives a performance-based
         fee from the client.



                                       23
<PAGE>

         Additionally,  the Advisor has in place supervisory oversight processes
         to periodically  monitor performance  deviations for accounts with like
         strategies.

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

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

Codes of Ethics

The Fund,  the Advisor and the Fund's  principal  underwriter  have each adopted
codes of ethics under Rule 17j-1 under the 1940 Act. Board members,  officers of
the Trust and employees of the Advisor and principal  underwriter  are permitted
to make personal securities  transactions,  including transactions in securities
that  may be  purchased  or  held  by the  Fund,  subject  to  requirements  and
restrictions set forth in the applicable Code of Ethics ("Code of Ethics").  The
Advisor's  Code of Ethics  contains  provisions  and  requirements  designed  to
identify and address certain  conflicts of interest between personal  investment
activities and the interests of the Fund. Among other things, the Advisor's Code
of Ethics prohibits certain types of transactions absent prior approval, imposes
time  periods  during  which  personal  transactions  may not be made in certain
securities,  and requires the submission of duplicate broker  confirmations  and
quarterly reporting of securities transactions. Additional restrictions apply to
portfolio  managers,  traders,  research  analysts  and others  involved  in the
investment  advisory  process.  Exceptions to these and other  provisions of the
Advisor's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.






                                       24
<PAGE>




                                       25
<PAGE>




                                       26
<PAGE>




                                       27
<PAGE>




Regulatory Matters and Legal Proceedings

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

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

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

In addition,  DeAM is subject to certain  further  undertakings  relating to the
governance  of the mutual funds,  including  that at least 75% of the members of
the  Boards  of  Trustees/Directors  overseeing  the DWS  Funds  continue  to be
independent of DeAM; the Chairmen of the DWS Funds' Boards of Trustees/Directors
continue to be  independent  of DeAM;  DeAM  maintain  existing  management  fee
reductions  for  certain  funds  for a period  of five


                                       28
<PAGE>

years and not  increase  management  fees for these  certain  funds  during this
period;  the funds  retain a senior  officer  (or  independent  consultants,  as
applicable)  responsible  for  assisting in the review of fee  arrangements  and
monitoring  compliance by the funds and the investment  advisors with securities
laws,  fiduciary  duties,  codes of ethics and other  compliance  policies,  the
expense of which shall be borne by DeAM; and periodic account  statements,  fund
prospectuses and the mutual funds' web site contain additional disclosure and/or
tools that assist investors in understanding  the fees and costs associated with
an investment in the funds and the impact of fees and expenses on fund returns.

DeAM has also settled proceedings with the Illinois Secretary of State regarding
market timing matters. The terms of the Illinois settlement provide for investor
education  contributions  totaling approximately $4 million and a payment in the
amount of $2 million to the Securities Audit and Enforcement Fund.

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

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

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

Additional  information announced by DeAM regarding the terms of the settlements
is available at www.dws-scudder.com/regulatory_settlements.

The matters alleged in the regulatory  settlements described above also serve as
the general basis of a number of private class action lawsuits involving the DWS
funds. These lawsuits name as defendants various persons,  including certain DWS
funds,  the  funds'  investment  advisors  and  their  affiliates,  and  certain
individuals,  including  in some cases fund  Trustees/Directors,  officers,  and
other parties.  Each DWS fund's  investment  advisor has agreed to indemnify the
applicable  DWS funds in connection  with these  lawsuits,  or other lawsuits or
regulatory actions that may be filed making similar allegations.

Based on currently available information, the funds' investment advisors believe
the likelihood that the pending lawsuits will have a material adverse  financial
impact on a DWS fund is remote and such  actions  are not  likely to  materially
affect their ability to perform  under their  investment  management  agreements
with the DWS funds.




                                       29
<PAGE>

                             FUND SERVICE PROVIDERS


Administrator





Pursuant  to  an  administrative   services  agreement  with  the  Advisor  (the
"Administrative  Services  Agreement"),   the  Advisor  provides  administrative
services to the Fund including, among others, providing the Fund with personnel,
preparing and making required filings on behalf of the Fund,  maintaining  books
and records for the Fund, and monitoring the valuation of Fund  securities.  For
all services provided under the Administrative Services Agreement, the Fund pays
the  Advisor a fee,  computed  daily and paid  monthly,  of 0.100% of the Fund's
average daily net assets. Pursuant to the Administrative Services Agreement, the
Advisor  is  obligated  on a  continuous  basis to provide  such  administrative
services  as the Board of the Fund  reasonably  deems  necessary  for the proper
administration  of the Fund.  The  Advisor  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 Fund's  shareholders;
prepares and files updates to the Fund's  prospectus and statement of additional
information as well as other reports required to be filed by the SEC;  maintains
the Fund's records; provides the Fund with office space, equipment and services;
supervises,  negotiates  the contracts of and monitors the  performance of third
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


                                       30
<PAGE>

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  from June 1, 2006  through  September  30,  2006,  the  Advisor
received an  administration  fee of $899,368.  For the year ended  September 30,
2007, the Advisor received an administration fee of $2,494,057 of which $193,903
was unpaid.


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

Distributor

The Trust, on behalf of the Fund has an underwriting  agreement with DWS Scudder
Distributors,  Inc., 222 South  Riverside  Plaza,  Chicago,  Illinois 60606 (the
"Distributor" or "DWS-SDI"), a Massachusetts corporation,  which is a subsidiary
of the  Advisor,  a  Delaware  corporation.  The  Trust's  present  underwriting
agreement,  dated  September  30,  2002,  ("Underwriting  Agreement")  was  last
approved September 18, 2007 and will continue in effect until September 30, 2008
and from year to year thereafter only if its continuance is approved annually by
a majority of the  members of the Board of Trustees  who are not parties to such
agreement  or  interested  persons  of any such  party  and  either by vote of a
majority  of the Board of  Trustees  or a  majority  of the  outstanding  voting
securities of the Fund.

Under the  Underwriting  Agreement,  the Fund is responsible for: the payment of
all fees and expenses in connection with the preparation and filing with the SEC
of its registration  statement and prospectus and any amendments and supplements
thereto;  the registration  and  qualification of shares for sale in the various
states,  including registering the Fund as a broker or dealer in various states,
as  required;  the  fees  and  expenses  of  preparing,   printing  and  mailing
prospectuses  annually to existing shareholders (see below for expenses relating
to prospectuses paid by the Distributor);  notices, proxy statements, reports or
other  communications  to  shareholders  of the Fund;  the cost of printing  and
mailing  confirmations of purchases of shares and any prospectuses  accompanying
such  confirmations;  any issuance  taxes and/or any initial  transfer  taxes; a
portion of shareholder  toll-free  telephone charges and expenses of shareholder
service  representatives;  the cost of  wiring  funds for  share  purchases  and
redemptions (unless paid by the shareholder who initiates the transaction);  the
cost of printing and postage of business reply  envelopes;  and a portion of the
cost of computer terminals used by both the Fund and the Distributor.


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


Although the Fund does not currently have a 12b-1 Plan, and the Trustees have no
current  intention  of  adopting  one,  the Fund will  also pay  those  fees and
expenses  permitted to be paid or assumed by the Trust pursuant to a 12b-1 Plan,
if any,  adopted  by the  Trust,  notwithstanding  any  other  provision  to the
contrary in the Underwriting Agreement.


The  Distributor  currently  offers shares of the Fund on a continuous  basis to
investors  in all  states  in which  shares of the Fund may from time to time be
registered or where  permitted by  applicable  law. The  underwriting  agreement
provides that the Distributor accepts orders for shares at net asset value as no
sales commission or load is charged to the investor. The Distributor has made no
firm commitment to acquire shares of the Fund.



                                       31
<PAGE>

Fund Accounting Agent

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


Pursuant to a sub-accounting and sub-administration agreement among the Advisor,
SSB,  DWS-SFAC and the Advisor had  delegated  certain  administrative  and fund
accounting  functions to SSB under the investment  management  agreement and the
fund  accounting  agreement,  respectively.  The  costs  and  expenses  of  such
delegation were borne by the Advisor and DWS-SFAC, not by the Fund.

The Fund paid  DWS-SFAC an annual fee equal to 0.025% of the first $150  million
of average  daily net assets,  0.0075% of such assets in excess of $150  million
and 0.0045% of such assets in excess of $1 billion, plus holding and transaction
charges for this service.




Independent Registered Public Accounting Firm


The financial  highlights of the Fund included in the Fund's  prospectus and the
Financial Statements incorporated by reference in this SAI have been so included
or incorporated by reference in reliance on the report of PricewaterhouseCoopers
LLP, 125 High Street, Boston, MA 02110, Independent Registered Public Accounting
Firm for the Fund,  given on the  authority  of said firm as experts in auditing
and accounting.  PricewaterhouseCoopers  LLP audits the financial  statements of
the Funds and provides other audit, tax and related services.  Shareholders will
receive annual audited financial statements and semi-annual  unaudited financial
statements.


Legal Counsel


Ropes & Gray LLP, One International Place,  Boston,  Massachusetts 02110, serves
as legal counsel to the Fund and the Fund's Independent Trustees.


Custodian

State Street Bank and Trust  Company,  ("SSB" or the  "Custodian")  225 Franklin
Street,  Boston,  MA 02110 serves as the Custodian to the Fund. The  Custodian's
fee may be reduced by certain earnings credits in favor of the Fund.


Transfer Agent and Shareholder Service Agent

DWS Scudder  Investments  Service  Corporation  "DWS-SISC",  "Transfer Agent" or
"Service Agent"), 210 W. 10th Street,  Kansas City, MO 64105-1614,  a subsidiary
of the Advisor,  is the transfer  and  dividend  disbursing  agent for the Fund.
DWS-SISC also serves as shareholder servicing agent for the Fund. Prior to April
1, 2007,  DWS Scudder  Service  Corporation  ("DWS-SSC"),  an  affiliate  of the
Advisor, was the transfer agent,  dividend-paying agent, and shareholder service
agent for the Fund. Effective April 1, 2007, DWS-SSC merged with DWS-SISC.

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


                                       32
<PAGE>

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 that at any time during the month had a share balance
in the  Fund.  Smaller  fees are also  charged  for  closed  accounts  for which
information  must be retained on the Transfer Agent's system for up to 18 months
after closing for tax reporting purposes.

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

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


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



Pursuant to an agreement  between DWS Trust  Company and ADP, DWS Trust  Company
has delegated certain  sub-accounting  and  recordkeeping  functions to ADP. The
costs and expenses of such  delegation are borne by DWS Trust  Company,  not the
Fund.

                             PORTFOLIO TRANSACTIONS




                                       33
<PAGE>



                                       34
<PAGE>


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

The  policy of the  Advisor  in  placing  orders  for the  purchase  and sale of
securities  for the 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  broker-dealer's  ability to provide
access to new  issues;  the  broker-dealer's  ability  to provide  support  when
placing a difficult trade;  the financial  condition of the  broker-dealer;  and
whether the broker-dealer has the infrastructure and operational capabilities to
execute  and  settle  the trade.  The  Advisor  seeks to  evaluate  the  overall
reasonableness of brokerage  commissions with commissions  charged on comparable
transactions and compares the brokerage commissions (if any) paid by the 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 US securities exchanges
are  subject  to  negotiation.   Commission  rates  on  transactions  in  equity
securities on foreign  securities  exchanges are generally fixed.  Purchases and
sales of  fixed-income  securities and certain  over-the-counter  securities are
effected  on  a  net  basis,  without  the  payment  of  brokerage  commissions.
Transactions  in  fixed  income  and  certain  over-the-counter  securities  are
generally  placed by the  Advisor  with the  principal  market  makers for these
securities  unless the Advisor  reasonably  believes more favorable  results are
available elsewhere.  Transactions with dealers serving as market makers reflect
the spread between the bid and asked prices.  Purchases of  underwritten  issues
will  include  an  underwriting  fee  paid  to  the  underwriter.  Money  market
instruments are normally purchased in principal  transactions  directly from the
issuer or from an underwriter or market maker.

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

The Advisor is  permitted  by Section  28(e) of the  Securities  Exchange Act of
1934, as amended ("1934 Act"), when placing  portfolio  transactions for a Fund,
to cause the Fund to pay brokerage  commissions  in excess of that which another
broker-dealer might charge for executing the same transaction in order to obtain
research and brokerage  services if the Advisor determines that such commissions
are  reasonable in relation to the overall  services  provided.  The Advisor may
from  time to time,  in  reliance  on  Section  28(e) of the 1934  Act,  execute
portfolio  transactions with  broker-dealers that provide research and brokerage
services to the Advisor.  Consistent  with the Advisor's  policy  regarding best
execution,  where more than one broker is  believed  to be capable of  providing
best execution for a particular  trade, the Advisor may take into  consideration
the receipt of research and brokerage services in selecting the broker-dealer to
execute  the trade.  Although  certain  research  and  brokerage  services  from
broker-dealers may be useful to a Fund and to the Advisor,  it is the opinion of
the Advisor that such information only supplements its own research effort since
the  information  must still be analyzed,  weighed and reviewed by the Advisor's
staff. To the extent that research and brokerage  services of value are received
by the Advisor,  the Advisor may avoid expenses that it might  otherwise  incur.
Research and brokerage  services  received from a broker-dealer may be useful to
the Advisor and its affiliates in providing  investment  management  services to
all or some of its  clients,  which  includes  a


                                       35
<PAGE>

Fund.   Services   received  from   broker-dealers   that  executed   securities
transactions  for  the  Fund  will  not  necessarily  be  used  by  the  Advisor
specifically to service such Fund.

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

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

Research and brokerage services may include products obtained from third parties
if the Advisor determines that such product or service constitutes brokerage and
research as defined in Section 28(e) and interpretations thereunder.  Currently,
it  is  the  Advisor's  policy  that  Sub-Advisors  may  not  execute  portfolio
transactions  on behalf of the 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.

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

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

Investment  decisions for 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 a Fund with those to be sold or purchased  for other  accounts in
executing  transactions.  Purchases  or sales are then  averaged as to price and
commission  and  allocated  as to amount in a manner  deemed  equitable  to each
account.  While in some cases this practice  could have a detrimental  effect on
the price  paid or  received  by,  or on the size of the  position  obtained  or
disposed of for,  the Fund,  in other  cases it is believed  that the ability to
engage in volume transactions will be beneficial to the Fund.

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

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



                                       36
<PAGE>

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  charge  the Funds a rate
consistent  with that charged to  comparable  unaffiliated  customers in similar
transactions.

For the fiscal  years ended  September  30, 2007,  2006 and 2005,  the Fund paid
$100,368, $78,173.79 and $69,653.98, respectively, in brokerage commissions.


Portfolio Turnover

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


Portfolio  turnover rates for the two most recent fiscal periods ended September
30, 2007 and 2006 were 189% and 81%, respectively.


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

                        PURCHASE AND REDEMPTION OF SHARES

General Information

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

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

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

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


Additional  Minimum Balance Policies.  For fiduciary  accounts such as IRAs, and
custodial  accounts such as Uniform Gifts to Minor Act and Uniform  Transfers to
Minor Act accounts, the minimum balance is $1,000 for Class


                                       37
<PAGE>

S.  A  shareholder   may  open  an  account  with  at  least  $1,000  ($500  for
fiduciary/custodial   accounts),  if  an  automatic  investment  plan  (AIP)  of
$50/month is established.  DWS Scudder group  retirement plans and certain other
accounts have similar or lower minimum share balance requirements.

Shareholders  with a combined  household account balance in any of the DWS Funds
of $100,000 or more, as well as group  retirement  and certain  other  accounts,
will not be subject to an automatic redemption.

Fiduciary  (e.g., IRA or Roth IRA) and custodial  accounts (e.g.,  UGMA or UTMA)
with balances below $1,000are subject to automatic redemption following 60 days'
written notice to applicable shareholders.





Use of Financial  Services  Firms.  Investment  dealers and other firms  provide
varying arrangements for their clients to purchase and redeem the Fund's shares,
including higher minimum investments,  and may assess transaction or other fees.
Firms may arrange  with their  clients for other  investment  or  administrative
services.  Such firms may independently  establish and charge additional amounts
to their  clients for such  services.  Firms also may hold the Fund's  shares in
nominee or street  name as agent for and on behalf of their  customers.  In such
instances,  the Fund's transfer agent,  DWS-SISC,  will have no information with
respect  to  or  control  over  the  accounts  of  specific  shareholders.  Such
shareholders  may obtain access to their  accounts and  information  about their
accounts only from their firm.  Certain of these firms may receive  compensation
from the Fund  through  the  DWS-SISC  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 the  Distributor  may
receive compensation from the Fund through the DWS-SISC for these services.


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

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


                                       38
<PAGE>

advisors, who in turn may recommend investors purchase shares of a DWS fund. The
Plan is an incentive program that combines a monthly incentive  component with a
quarterly  strategic bonus  component.  Under the Plan, DWS Scudder  Wholesalers
will receive a monetary monthly incentive based on the amount of sales generated
from their marketing of the funds,  and that incentive will differ  depending on
the product  category of the fund.  Each fund is assigned to one of four product
categories  -- "Core,"  "Strategic,"  "Satellite"  or  "Non-CSS"  --taking  into
consideration, among other things, the following criteria, where applicable:

o        The Fund's 3-year performance;

o        The Fund's Morningstar rating;

o        Market size for the fund category;

o        The Fund's size, including sales and redemptions of the Fund's shares;

o        The length of time the Fund's Portfolio Managers have managed the Fund;
         and

o        The Fund's consistency with DWS Scudder's branding.

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

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

The prospect of receiving,  or the receipt of, additional  compensation by a DWS
Scudder  Wholesaler  under the Plan may provide an incentive to favor  marketing
the Core,  Strategic  or  Satellite  funds  over the  Non-CSS  funds.  The Plan,
however,  will not change the price that you pay for shares of the 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 will not be liable for any losses,  expenses or costs  arising out of
fraudulent or unauthorized instructions pursuant to these privileges if the Fund
or its agents reasonably believe, based upon reasonable verification procedures,
that the instructions were genuine.  Verification  procedures  include recording
instructions,  requiring  certain  identifying  information  before  acting upon
instructions  and  sending  written  confirmations.  During  periods  when it is
difficult to contact  DWS-SISC,  it may be difficult to use telephone,  wire and
other privileges.

QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via
the Automated  Clearing House System (minimum $50 and maximum  $250,000) from or
to a shareholder's bank, savings and loan, or credit union account in connection
with the purchase or  redemption  of Fund shares.  Shares  purchased by check or
through  QuickBuy and QuickSell or Direct Deposit may not be redeemed under this
privilege  until  such  Shares  have been owned for at least 10  calendar  days.
QuickBuy and  QuickSell  cannot be used with  passbook  savings  accounts or for
certain tax-deferred plans.




                                       39
<PAGE>




Share  Pricing.  Purchases  will be filled at the net asset value per share next
computed  after  receipt  of the  application  in good  order.  Net asset  value
normally  will be computed for each class as of the close of regular  trading on
the Exchange on each day during  which the Exchange is open for trading.  Orders
received after the close of regular  trading on the Exchange will be executed at
the next  business  day's net  asset  value.  If the order has been  placed by a
member of FINRA,  other than the Distributor,  it is the  responsibility  of the
member  broker,  rather than the Fund, to forward the purchase order to DWS-SISC
in Kansas City by the close of regular trading on the Exchange.


Dividend  Payment  Option.   Investors  may  have  dividends  and  distributions
automatically   deposited  to  their  predesignated  bank  account  through  DWS
Scudder's Dividend Payment Option request form. Shareholders whose predesignated
checking  account of record is with a member bank of  Automated  Clearing  House
Network  (ACH) can have  income and  capital  gain  distributions  automatically
deposited to their  personal  bank account  usually  within three  business days
after the Fund pays its distribution. A Dividend Payment Option request form can
be obtained by visiting our Web site at:  www.dws-scudder.com  or calling  (800)
728-3337. Confirmation Statements will be mailed to shareholders as notification
that distributions have been deposited.


Tax-Sheltered  Retirement Plans.  DWS-SISC provides retirement plan services and
documents  and the  Distributor  can establish  investor  accounts in any of the
following types of retirement plans:


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

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

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

Brochures  describing these plans as well as model defined benefit plans, target
benefit plans,  457 plans,  401(k) plans,  simple 401(k) plans and materials for
establishing   them  are  available  from  Service   Corporation  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 prospectus and to reject purchase orders for any reason.  Also, from time to
time, the Fund may  temporarily  suspend the offering of any class of its shares
to new investors. During the period of such suspension,  persons who are already
shareholders of such class of such Fund may be permitted to continue to purchase
additional shares of such class and to have dividends reinvested.


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


For initial  purchases the Fund may waive minimums for  investments on behalf of
fund  trustees  and  directors  or officers or  employees of the Advisor and its
affiliates.


                                       40
<PAGE>


Automatic Investment Plan. A shareholder may purchase shares of the Fund through
an automatic investment program.  With the Direct Deposit Purchase Plan ("Direct
Deposit"),  investments  are made  automatically  (minimum  $1,000  and  maximum
$250,000  for initial  investments  and a minimum of $50 and maximum of $250,000
for subsequent  investments) from the shareholder's  account at a bank,  savings
and loan or credit union into the shareholder's  Fund account.  Termination by a
shareholder will become effective within thirty days after the Service Agent has
received the request. The Fund may immediately  terminate a shareholder's Direct
Deposit  in the event  that any item is unpaid  by the  shareholder's  financial
institution.

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


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


Expedited Purchase Procedures for Existing  Shareholders.  Shareholders of other
DWS funds who have  submitted an account  application  and have  certified a tax
identification  number, clients having a regular investment counsel account with
the Advisor or its affiliates and members of their immediate families,  officers
and  employees  of the  Advisor  or of any  affiliated  organization  and  their
immediate  families,  members of FINRA, and banks may open an account by wire by
calling (800) 728-3337 for instructions. The investor must send a duly completed
and signed application to the Fund promptly.  A subsequent purchase order may be
placed by telephone,  etc. by  established  shareholders  (except by DWS Scudder
Individual  Retirement  Account  (IRA),  DWS Scudder  Horizon Plan,  DWS Scudder
Profit  Sharing and Money  Purchase  Pension  Plans,  DWS Scudder 401(k) and DWS
Scudder 403(b) Plan holders), members of FINRA, and banks.





Eligible Class S Investors

A.       The following investors may purchase Class S shares of DWS Funds either
         (i) directly from DWS-SDI,  the Fund's principal  underwriter;  or (ii)
         through an  intermediary  relationship  with a financial  services firm
         established with respect to the DWS Funds as of December 31, 2004.

         1.       Existing  shareholders of Class S shares of any DWS Fund as of
                  December 31, 2004, and household  members residing at the same
                  address.



                                       41
<PAGE>

         2.       Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection  with the  consolidation  of Class
                  AARP  and  Class S on July  17,  2006  and  household  members
                  residing at the same address.

         3.       Shareholders who have owned Class S shares  continuously since
                  December 31, 2004 and household  members  residing at the same
                  address  may open new  accounts  for Class S shares of any DWS
                  Fund.

         4.       Any  participant  who has owned Class S shares of any DWS Fund
                  through an  employee  sponsored  retirement,  employee  stock,
                  bonus,  pension  or profit  sharing  plan  continuously  since
                  December 31, 2004 may open a new individual  account for Class
                  S shares of any DWS Fund.

         5.       Any  participant  who  owns  Class S  shares  of any DWS  Fund
                  through a retirement, employee stock, bonus, pension or profit
                  sharing plan may complete a direct  rollover to an IRA account
                  that will hold Class S shares. This applies to individuals who
                  begin their retirement plan investments with a DWS Fund at any
                  time, including after December 31, 2004.

         6.       Officers, Fund Trustees and Directors, and full-time employees
                  and their family members, of the Advisor and its affiliates.

         7.       Class S shares are  available to any  accounts  managed by the
                  Advisor,  any  advisory  products  offered  by the  Advisor or
                  DWS-SDI  and to DWS  Allocation  Series or other fund of funds
                  managed by the Advisor or its affiliates.

         8.       Shareholders  of Class S of DWS Emerging  Markets  Equity Fund
                  who became  shareholders  of the fund in  connection  with the
                  fund's acquisition of Scudder New Asia Fund, Inc. on April 17,
                  2006.

         9.       Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders in connection with the  consolidation  of Class M
                  and Class S on August 18, 2006 and household  members residing
                  at the same address.

         10.      Shareholders  of Class S of any DWS Fund  who  became  Class S
                  shareholders  in connection with the renaming or conversion of
                  Investment Class to Class S on October 23, 2006.

B. The following additional investors may purchase Class S shares of DWS Funds.

         1.       Broker-dealers,   banks  and  registered  investment  advisors
                  ("RIAs")  may  purchase  Class S shares in  connection  with a
                  comprehensive  or  "wrap"  fee  program  or  other  fee  based
                  program.

          2.      Any  group  retirement,  employee  stock,  bonus,  pension  or
                  profit-sharing plans.

          3.      Persons  who  purchase  shares as part of an  investment  only
                  placement in a 529 College Savings Plan.

          4.      Persons who purchase  shares through a Health Savings  Account
                  or a Voluntary Employees' Benefit Association ("VEBA") Trust.

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




                                       42
<PAGE>



                                       43
<PAGE>


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





Revenue Sharing

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

The  Advisor,  the  Distributor  and/or  their  affiliates  may  pay  additional
compensation,  out of their own  assets and not as an  additional  charge to the
Fund, to financial  advisors in connection with the sale and/or  distribution of
Fund shares or the retention and/or servicing of Fund investors and Fund shares.
Such revenue  sharing  payments are in addition to any  distribution  or service
fees  payable  under any Rule  12b-1 or  service  plan of any fund,  any  record
keeping/sub-transfer  agency/networking  fees  payable  by the  Fund  (generally
through the  Distributor  or an  affiliate)  and/or the  Distributor  to certain
financial   advisors  for  performing  such  services  and  any  sales  charges,
commissions,   non-cash  compensation  arrangements  expressly  permitted  under
applicable  rules of FINRA or other  concessions  described  in the fee table or
elsewhere in the  Prospectus  or 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


                                       44
<PAGE>

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


                                       45
<PAGE>

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


                                       46
<PAGE>

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.






                                       47
<PAGE>




                                       48
<PAGE>




                                       49
<PAGE>




                                       50
<PAGE>




                                       51
<PAGE>

Redemptions


Redemption fee. The Fund imposes a redemption fee of 2% of the total  redemption
amount  (calculated at net asset value) on all Fund shares redeemed or exchanged
within 15 days of buying them (either by purchase or exchange).  The  redemption
fee is paid  directly  to the  Fund,  and is  designed  to  encourage  long-term
investment and to offset  transaction  and other cost 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  purchases 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 Funds'  agents.  Transactions  delays in
processing (and changing account features) due to circumstances within or beyond
the  control  of the  Fund and its  agents  may  occur.  Shareholder  (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.






                                       52
<PAGE>

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

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,
particularly  from   institutional  and  fiduciary  account  holders,   such  as
corporations,  custodians  (e.g.,  under the Uniform  Transfers  to Minors Act),
executors, administrators, trustees or guardians.


If the  proceeds of the  redemption  are  $100,000 or less and the  proceeds are
payable  to the  shareholder  of record at the  address  of  record,  normally a
telephone  request or a written  request  by any one  account  holder  without a
signature guarantee is sufficient for redemptions by individual or joint account
holders, and trust, executor and guardian account holders, provided the trustee,
executor or guardian is named in the account  registration.  Other institutional
account  holders may  exercise  this special  privilege  of redeeming  shares by
telephone request or written request without signature  guarantee subject to the
same conditions as individual account holders,  provided that this privilege has
been  pre-authorized by the institutional  account holder by written instruction
to the Shareholder Services 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 the Fund's shares at
the  offering  price (net asset  value) may  provide  for the  payment  from the
owner's  account  of any  requested  dollar  amount  to be paid  to the  owner a
designated  payee monthly,  quarterly,  semiannually or annually  pursuant to an
Automatic  Withdrawal Plan (the "Plan").  The $5,000 minimum account size is not
applicable to IRAs. The minimum  periodic payment is $50. Shares are redeemed so
that the payee  should  receive  payment  approximately  the first of the month.
Investors using this plan must reinvest Fund distributions.

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

A Plan request form can be obtained by calling (800) 225-5163.




                                       53
<PAGE>


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


Exchanges


Shareholders  may request a taxable  exchange of their  shares for shares of the
corresponding  class of other DWS Funds  without  imposition  of a sales charge,
subject to the provisions below.





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

Shareholders must obtain prospectuses of the funds they are exchanging into from
dealers, other firms or DWS-SDI.

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


                                    DIVIDENDS

The Fund intends to follow the practice of distributing substantially all of its
investment  company  taxable  income,  which includes any excess of net realized
short-term  capital gains over net realized  long-term capital losses.  The Fund
may follow the  practice  of  distributing  the  entire  excess of net  realized
long-term capital gains over net realized  short-term  capital losses.  However,
the Fund may retain all or part of such gain for reinvestment,  after paying the
related federal taxes for which  shareholders may then be able to claim a credit
against their federal tax liability.  If the Fund does not distribute the amount
of capital gain and/or  ordinary  income required to be distributed by an excise
tax  provision  of the Code,  the Fund may be subject  to that  excise  tax.  In
certain  circumstances,  the Fund may  determine  that it is in the  interest of
shareholders to distribute less than the required amount.



                                       54
<PAGE>

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

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

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

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

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


Dividends  will be  reinvested  in shares of the same  class of the Fund  unless
shareholders  indicate in writing  that they wish to receive  them in cash or in
shares  of other  DWS  Funds  with  multiple  classes  of shares or DWS Funds as
provided in the prospectus.  To use this privilege of investing dividends of the
Fund in shares of another DWS Fund, shareholders must maintain a minimum account
value of $1,000 in the Fund  distributing the dividends.  The Fund will reinvest
dividend checks (and future  dividends) in shares of that same Fund and class if
checks are returned as undeliverable.  Dividends and other  distributions of the
Fund in the  aggregate  amount of $10 or less are  automatically  reinvested  in
shares of the Fund 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 that  Fund  and
confirmations will be mailed to each shareholder. If a shareholder has chosen to
receive cash, a check will be sent.  Distributions of investment company taxable
income and net realized  capital  gains are  taxable,  whether made in shares or
cash.

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

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

                                      TAXES


The following is intended to be a general summary of certain U.S. 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


                                       55
<PAGE>

categories of investors.  Investors are therefore  advised to consult with their
tax advisors before making an investment in the Fund.


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


(a)      derive at least 90% of its gross  income for each taxable year from (i)
         dividends, interest, payments with respect to certain securities loans,
         and gains from the sale or other  disposition  of stock,  securities or
         foreign currencies, or other income (including but not limited to gains
         from options,  futures,  or forward  contracts) derived with respect to
         its business of investing in such stock, securities, or currencies, and
         (ii) net income  derived from interests in "qualified  publicly  traded
         partnerships" (as defined below);

(b)      diversify  its  holdings  so that,  at the end of each  quarter  of the
         Fund's taxable year, (i) at least 50% of the market value of the Fund's
         total  assets is  represented  by cash and cash  items,  US  Government
         securities,  securities of other regulated  investment  companies,  and
         other  securities  limited  in respect of any one issuer to a value not
         greater  than 5% of the value of the Fund's  total  assets and not more
         than 10% of the outstanding  voting securities of such issuer, and (ii)
         not more than 25% of the value of the Fund's  total  assets is invested
         (x) in the  securities  (other than those of the US Government or other
         regulated  investment  companies)  of any one  issuer or of two or more
         issuers  which the Fund  controls  and which are  engaged  in the same,
         similar,  or related trades or businesses,  or (y) in the securities of
         one or more qualified publicly traded  partnerships (as defined below).
         In the case of the Fund's investments in loan participations,  the Fund
         shall treat a financial  intermediary  as an issuer for the purposes of
         meeting this diversification requirement; and

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

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

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


If for any taxable year 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  would 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


                                       56
<PAGE>

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

Taxation  of  Distributions  from the Fund.  For  federal  income tax  purposes,
distributions  of investment  income are generally  taxable as ordinary  income.
Taxes on  distributions  of capital  gains are  determined  by how long the 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  before January 1, 2011,  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.  Interest  income  from  fixed-income
securities will not be eligible for treatment as qualified dividend income.


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 either (i) the
fair market  value of the new shares  issued to the  shareholder  or (ii) if the
shares are trading  below net asset value,  the amount of cash  allocated to the
shareholder for the purchase of the shares on its behalf in the open market. 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 lower rates applying to taxpayers in the 10%
and 15% rate brackets -- for taxable years beginning before January 1, 2011.

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, 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
interest,  or (4) if the dividend is received from a foreign corporation that is
(a)(i) 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.

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  qualified  dividends  received by the Fund during any taxable
year are 95% or more of its  gross  income,  then 100% of the  Fund's  dividends
(other than dividends  properly  designated as Capital Gain  Dividends)  will be
eligible to be


                                       57
<PAGE>

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


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

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. If dividends from domestic corporations constitute
a  substantial  portion  of a Fund's  gross  income,  a  portion  of the  income
distributions  of such Fund may be eligible for the 70%  deduction for dividends
received  by  corporations.  Shareholders  will be  informed  of the  portion of
dividends which so qualify. The  dividends-received  deduction is reduced to the
extent the shares of a Fund with respect to which the dividends are received are
treated as  debt-financed  under  federal  income tax law and is  eliminated  if
either  those shares or the shares of a fund are deemed to have been held by the
Fund or the  shareholder,  as the case may be, for less than 46 days  during the
91-day period beginning 45 days before the shares become ex-dividend.


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


Securities  Issued  or  Purchased  at  a  Discount.  The  Fund's  investment  in
securities  issued  at a  discount  and  certain  other  obligations  will  (and
investments  in  securities  purchased  at a discount  may)  require the Fund to
accrue and distribute income not yet received.  In order to generate  sufficient
cash to make the  requisite  distributions,  the Fund  may be  required  to sell
securities in its portfolio that it otherwise would have continued to hold.


Other 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.


Back-up  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.




                                       58
<PAGE>




Non-US Shareholders.  In general,  dividends (other than Capital Gain Dividends)
paid by the Fund to a shareholder  that is not a "US person"  within the meaning
of the Code (a "foreign person") are subject to withholding of US federal income
tax at a rate of 30% (or lower  applicable  treaty rate) even if they are funded
by income or gains (such as portfolio  interest,  short-term  capital gains,  or
foreign-source  dividend and interest  income) that, if paid to a foreign person
directly,  would not be subject to withholding.  However, for taxable years of a
Fund beginning before January 1, 2008, the Fund will not be required to withhold
any amounts (i) with respect to  distributions  (other than  distributions  to a
foreign  person (w) that has not  provided  a  satisfactory  statement  that the
beneficial  owner is not a US person,  (x) to the extent  that the  dividend  is
attributable  to certain  interest on an obligation if the foreign person is the
issuer or is a 10% shareholder of the issuer, (y) that is within certain foreign
countries that have inadequate  information  exchange with the United States, or
(z) to the extent the dividend is attributable to interest paid by a person that
is a related person of the foreign person and the foreign person is a controlled
foreign corporation) from US source interest income that would not be subject to
US federal income tax if earned directly by an individual foreign person, to the
extent such  distributions  are properly  designated by the Fund,  and (ii) with
respect to  distributions  (other than  distributions  to an individual  foreign
person who is present in the United  States for a period or periods  aggregating
183 days or more during the year of the distribution) of net short-term  capital
gains  in  excess  of  net  long-term   capital  losses,   to  the  extent  such
distributions are properly designated by the Fund.

Depending on the  circumstances,  a Fund may make such designations with respect
to all, some or none of its  potentially  eligible  dividends  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 foreign
person will need to comply with application certification  requirements relating
to its non-US status  (including,  in general,  furnishing an IRS Form W-8BEN or
substitute  form).  In the case of shares  held  through  an  intermediary,  the
intermediary  may withhold even if a Fund makes a designation  with respect to a
payment. Foreign persons should consult their intermediaries with respect to the
application  of these  rules to  their  accounts.  Legislation  to  extend  this
exemption  was proposed but not enacted in 2007. It is unclear  whether  similar
legislation will be enacted in 2008.


If a  beneficial  holder who is a foreign  person has a trade or business in the
United States,  and the dividends are effectively  connected with the conduct by
the beneficial holder of a trade or business in the United States,  the dividend
will be subject to US federal net income taxation at regular income tax rates.




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


                                       59
<PAGE>


Other Tax  Considerations.  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.

Investors  are advised to consult  their own tax advisors  with respect to their
own circumstances  regarding the above-described general federal income taxation
rules  and  with  respect  to  other  federal,   state,  local  or  foreign  tax
consequences to them of an investment in shares of a Fund.


                                 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.

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


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


                                       60
<PAGE>

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

                              TRUSTEES AND OFFICERS


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

Independent Board Members

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position with the Trust                                                                          Number of Funds
and Length of Time         Business Experience and                                               in DWS Fund
Served                     Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                                                          <C>
Dawn-Marie Driscoll (1946) President, Driscoll Associates (consulting firm); Executive Fellow,          76
Chairperson since 2004     Center for Business Ethics, Bentley College; formerly, Partner,
Board Member since         Palmer & Dodge (1988-1990); Vice President of Corporate Affairs and
1987                       General Counsel, Filene's (1978-1988). Directorships: Trustee of 8
                           open-end mutual funds managed by Sun Capital Advisers, Inc. (since
                           2007); Director of ICI Mutual Insurance Company (since 2007);
                           Advisory Board, Center for Business Ethics, Bentley College;
                           Trustee, Southwest Florida Community Foundation (charitable
                           organization); Former Directorships: Investment Company Institute
                           (audit, executive, nominating committees) and Independent Directors
                           Council (governance, executive committees)
-------------------------------------------------------------------------------------------------------------------
 Henry P. Becton, Jr.      Vice Chair, WGBH Educational Foundation. Directorships: Association          76
 (1943)                    of Public Television Stations; Becton Dickinson and Company(1)
 Board Member since        (medical technology company); Belo Corporation(1) (media company);
 1990                      Boston Museum of Science; Public Radio International. Former
                           Directorships: American Public Television; Concord Academy; New
                           England Aquarium; Mass. Corporation for Educational
                           Telecommunications; Committee for Economic Development; Public
                           Broadcasting Service
-------------------------------------------------------------------------------------------------------------------


                                       61
<PAGE>

-------------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position with the Trust                                                                          Number of Funds
and Length of Time         Business Experience and                                               in DWS Fund
Served                     Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
Keith R. Fox (1954)        Managing General Partner, Exeter Capital Partners (a series of               76
Board Member since         private equity funds). Directorships: Progressive Holding
1996                       Corporation (kitchen goods importer and distributor); Natural
                           History, Inc. (magazine publisher); Box Top Media Inc.
                           (advertising); The Kennel Shop (retailer)
-------------------------------------------------------------------------------------------------------------------
Kenneth C. Froewiss        Clinical Professor of Finance, NYU Stern School of Business                  76
(1945)                     (1997-present); Member, Finance Committee, Association for Asian
Board Member since         Studies (2002-present); Director, Mitsui Sumitomo Insurance Group
2001                       (US) (2004-present); prior thereto, Managing Director, J.P. Morgan
                           (investment banking firm) (until 1996)
-------------------------------------------------------------------------------------------------------------------
Martin J. Gruber           Nomura Professor of Finance, Leonard N. Stern School of Business,            76
(1937)                     New York University (since September 1965); Director, Japan Equity
Board Member since         Fund, Inc. (since January 1992), Thai Capital Fund, Inc. (since
1999                       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)
-------------------------------------------------------------------------------------------------------------------
Richard J. Herring         Jacob Safra Professor of International Banking and Professor,                76
(1946)                     Finance Department, The Wharton School, University of Pennsylvania
Board Member since         (since July 1972); Co-Director, Wharton Financial Institutions
1999                       Center (since July 2000); Director, Japan Equity Fund, Inc. (since
                           September 2007), Thai Capital Fund, Inc. (since September 2007),
                           Singapore Fund, Inc. (since September 2007). Formerly, Vice Dean and
                           Director, Wharton Undergraduate Division (July 1995-June 2000);
                           Director, Lauder Institute of International Management Studies (July
                           2000-June 2006)
-------------------------------------------------------------------------------------------------------------------
Graham E. Jones            Senior Vice President, BGK Realty, Inc. (commercial real estate)             76
(1933)                     (since 1995). Formerly, Trustee of various investment companies
Board Member since         managed by Sun Capital Advisors, Inc. (1998-2005), Morgan Stanley
2002                       Asset Management (1985-2001) and Weiss, Peck and Greer (1985-2005)
-------------------------------------------------------------------------------------------------------------------
Rebecca W. Rimel           President and Chief Executive Officer, The Pew Charitable Trusts             76
(1951)                     (charitable organization) (1994 to present); Trustee, Thomas
Board Member since         Jefferson Foundation (charitable organization) (1994 to present);
2002                       Trustee, Executive Committee, Philadelphia Chamber of Commerce (2001
                           to present). Formerly, Executive Vice President, The Glenmede Trust
                           Company (investment trust and wealth management) (1983 to 2004);
                           Board Member, Investor Education (charitable organization)
                           (2004-2005); Director, Viasys Health Care(1) (January 2007-June 2007)
-------------------------------------------------------------------------------------------------------------------
William N. Searcy, Jr.     Private investor since October 2003; Trustee of 8 open-end mutual            76
(1946)                     funds managed by Sun Capital Advisers, Inc. (since October 1998).
Board Member since         Formerly, Pension & Savings Trust Officer, Sprint Corporation((1))
2002                       (telecommunications) (November 1989-September 2003)
-------------------------------------------------------------------------------------------------------------------


                                       62
<PAGE>

-------------------------------------------------------------------------------------------------------------------
Name, Year of Birth,
Position with the Trust                                                                          Number of Funds
and Length of Time         Business Experience and                                               in DWS Fund
Served                     Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
Jean Gleason Stromberg     Retired. Formerly, Consultant (1997-2001); Director, US Government           76
(1943)                     Accountability Office (1996-1997); Partner, Fulbright & Jaworski,
Board Member since         L.L.P. (law firm) (1978-1996). Directorships: The William and Flora
1997                       Hewlett Foundation; Service Source, Inc. Former Directorships:
                           Mutual Fund Directors Forum (2002-2004), American Bar Retirement
                           Association (funding vehicle for retirement plans) (1987-1990 and
                           1994-1996)
-------------------------------------------------------------------------------------------------------------------
Carl W. Vogt               Retired Senior Partner, Fulbright & Jaworski, L.L.P. (law firm);             74
(1936)                     formerly, President (interim) of Williams College (1999-2000);
Board Member since         formerly, President of certain funds in the Deutsche Asset
2006                       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
-------------------------------------------------------------------------------------------------------------------

Interested Board Member

-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust                                                                         Number of Funds
 and Length of Time        Business Experience and                                               in DWS Fund
 Served                    Directorships During the Past 5 Years                                 Complex Overseen
-------------------------------------------------------------------------------------------------------------------
 Axel Schwarzer(2)         Managing Director(4), Deutsche Asset Management; Head of Deutsche            82
 (1958)                    Asset Management Americas; CEO of DWS Scudder; formerly board member
 Board Member since        of DWS Investments, Germany (1999-2005); formerly, Head of Sales and
 2006                      Product Management for the Retail and Private Banking Division of
                           Deutsche Bank in Germany (1997-1999); formerly, various strategic
                           and operational positions for Deutsche Bank Germany Retail and
                           Private Banking Division in the field of investment funds, tax
                           driven instruments and asset management for corporates (1989-1996)
-------------------------------------------------------------------------------------------------------------------

Officers(3)

-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
-------------------------------------------------------------------------------------------------------------------
 Michael G. Clark(5)        Managing Director(4), Deutsche Asset Management (2006-present); President of DWS
 (1965)                     family of funds; Director, ICI Mutual Insurance Company (since October 2007);
 President, 2006-present    formerly, Director of Fund Board Relations (2004-2006) and Director of Product
                            Development (2000-2004), Merrill Lynch Investment Managers; Senior Vice President
                            Operations, Merrill Lynch Asset Management (1999-2000)
-------------------------------------------------------------------------------------------------------------------
 John Millette(6) (1962)    Director(4), Deutsche Asset Management
 Vice President and
 Secretary, 1999-present
-------------------------------------------------------------------------------------------------------------------


                                       63
<PAGE>

-------------------------------------------------------------------------------------------------------------------
 Name, Year of Birth,
 Position with the Trust    Business Experience and
 and Length of Time Served  Directorships During the Past 5 Years
-------------------------------------------------------------------------------------------------------------------
 Paul H. Schubert(5)        Managing Director(4), Deutsche Asset Management (since July 2004); formerly,
 (1963)                     Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of
 Chief Financial Officer,   Funds (1998-2004); Vice President and Director of Mutual Fund Finance at UBS Global
 2004-present               Asset Management (1994-1998)
 Treasurer, 2005-present
-------------------------------------------------------------------------------------------------------------------
 Patricia DeFilippis(5)     Vice President, Deutsche Asset Management (since June 2005); formerly, Counsel, New
 (1963)                     York Life Investment Management LLC (2003-2005); legal associate, Lord, Abbett & Co.
 Assistant Secretary,       LLC (1998-2003)
 2005-present
-------------------------------------------------------------------------------------------------------------------
 Elisa D. Metzger(5)        Director(4), Deutsche Asset Management (since September 2005); formerly, Counsel,
 (1962)                     Morrison and Foerster LLP (1999-2005)
 Assistant Secretary,
 2005-present
-------------------------------------------------------------------------------------------------------------------
 Caroline Pearson(6)        Managing Director(4), Deutsche Asset Management
 (1962)
 Assistant Secretary,
 1997-present
-------------------------------------------------------------------------------------------------------------------
 Paul Antosca(6)            Director(4), Deutsche Asset Management (since 2006); formerly, Vice President, The
 (1957)                     Manufacturers Life Insurance Company (U.S.A.) (1990-2006)
 Assistant Treasurer,
 2007-present
-------------------------------------------------------------------------------------------------------------------
 Jack Clark (6)             Director(4), Deutsche Asset Management (since 2007); formerly, Vice President, State
 (1967)                     Street Corporation (2002-2007)
 Assistant Treasurer,
 2007-present
-------------------------------------------------------------------------------------------------------------------
 Kathleen Sullivan          Director(4), Deutsche Asset Management
 D-Eramo(6)
 (1957)
 Assistant Treasurer,
 2003-present
-------------------------------------------------------------------------------------------------------------------
 Diane Kenneally(6)         Director(4), Deutsche Asset Management
 (1966)
 Assistant Treasurer,
 2007-present
-------------------------------------------------------------------------------------------------------------------
 Jason Vazquez(5) (1972)    Vice President, Deutsche Asset Management (since 2006); formerly, AML Operations
 Anti-Money Laundering      Manager for Bear Stearns (2004-2006), Supervising Compliance Principal and
 Compliance Officer,        Operations Manager for AXA Financial (1999-2004)
 2007-present
-------------------------------------------------------------------------------------------------------------------
 Robert Kloby(5) (1962)     Managing Director(4), Deutsche Asset Management (2004-present); formerly, Chief
 Chief Compliance           Compliance Officer/Chief Risk Officer, Robeco USA (2000-2004); Vice President, The
 Officer, 2006-present      Prudential Insurance Company of America (1988-2000); E.F. Hutton and Company
                            (1984-1988)
-------------------------------------------------------------------------------------------------------------------
 J. Christopher Jackson(5)  Director(4), Deutsche Asset Management (2006-present); formerly, Director, Senior
 (1951)                     Vice President, General Counsel, and Assistant Secretary, Hansberger Global
 Chief Legal Officer,       Investors, Inc. (1996-2006); Director, National Society of Compliance Professionals
 2006-present               (2002-2005)(2006-2009)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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



                                       64
<PAGE>

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

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

(4)      Executive title, not a board directorship.

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

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

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

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

Paul H. Schubert:                         Vice President
Caroline Pearson:                         Secretary

Information Concerning Committees and Meetings of Board Members

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

Board  Committees.  Ms.  Driscoll  has served as Chair of the Board of the Funds
since June 2004.

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

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

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



                                       65
<PAGE>

The Valuation  Committee  oversees Fund  valuation  matters,  reviews  valuation
procedures  adopted  by the  Board,  determines  the fair  value  of the  Fund's
securities as needed in accordance  with the valuation  procedures  and performs
such other tasks as the full Board deems necessary or  appropriate.  The members
of the Valuation Committee are Keith R. Fox, Kenneth C. Froewiss (Chair), Martin
J. Gruber and Richard J. Herring. The Valuation Committee held 6 meetings during
the calendar year 2007.

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

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

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

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

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

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

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



                                       66
<PAGE>

<TABLE>
<CAPTION>
                                                                     Total Compensation
                                      Aggregate Compensation           from Fund and
Name of Board Member                   from DWS GNMA Fund            DWS Fund Complex(1)
--------------------                   ------------------            -------------------

<S>                 <C>                       <C>                         <C>
Henry P. Becton, Jr.(3)(4)                    $5,837                      $200,000
Dawn-Marie Driscoll(2)(3)(4)                  $7,323                      $253,000
Keith R. Fox(3)(4)                            $5,880                      $203,000
Kenneth C. Froewiss(3)(4)                     $5,793                      $200,000
Martin J. Gruber(3)(4)                        $5,620                      $198,000
Richard J. Herring(3)(4)                      $5,647                      $195,000
Graham E. Jones(3)                            $6,021                      $207,000
Rebecca W. Rimel(3)(4)                        $5,502                      $194,000
William N. Searcy, Jr.(3)(4)                  $5,793                      $200,000
Jean Gleason Stromberg(3)(4)                  $5,475                      $189,000
Carl W. Vogt(3)(4)                            $5,703                      $194,000
</TABLE>

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

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

(3)      For each Board Member, except Mr. Vogt, total compensation for calendar
         year 2007 includes  compensation,  as of December 31, 2007, for service
         on   the   boards   of   30   trusts/corporations   comprised   of   76
         funds/portfolios.  For Mr. Vogt total  compensation  for calendar  year
         2007   includes   compensation   for   service  on  the  boards  of  28
         trusts/corporations comprised of 74 funds/portfolios.

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

Board Member Ownership in the Fund

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

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

Independent Board Member:

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


                                       67
<PAGE>

                                                                              Aggregate Dollar Range of
                                               Dollar Range of            Ownership in all Funds Overseen by
                                             Beneficial Ownership                    Board Member
Board Member                                   in DWS GNMA Fund               in the DWS Fund Complex(1)
------------                                   ----------------               ---------------------------

Jean Gleason Stromberg                         $10,001-$50,000                    Over $100,000
Carl W. Vogt                                         None                         Over $100,000

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

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

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

Ownership in Securities of the Advisor and Related Companies

As  reported  to the Fund,  the  information  in the  following  table  reflects
ownership by the Independent Board Members and their immediate family members of
certain  securities as of December 31, 2007. An immediate family member can be a
spouse,  children  residing in the same  household  including  step and adoptive
children and any dependents.  The securities  represent ownership in the Advisor
or principal  underwriter  of the Fund and any persons  (other than a registered
investment company) directly or indirectly controlling,  controlled by, or under
common control with the Advisor or principal  underwriter of the Fund (including
Deutsche Bank AG).

<TABLE>
<CAPTION>
                                                                                   Value of        Percent of
                                   Owner and                                     Securities on     Class on an
Independent                     Relationship to                     Title of     an Aggregate       Aggregate
Board Member                      Board Member         Company        Class          Basis            Basis
------------                      ------------         -------        -----          -----            -----

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




                                       68
<PAGE>




                                       69
<PAGE>




                                       70
<PAGE>




                                       71
<PAGE>




                                       72
<PAGE>




                                       73
<PAGE>




                                       74
<PAGE>




                                       75
<PAGE>

Securities Beneficially Owned


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

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


Agreement to Indemnify Independent Trustees for Certain Expenses.


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


                                       76
<PAGE>

the indemnity  agreements is currently  unknown.  These agreements by the Fund's
investment  advisor will survive the  termination of the  investment  management
agreements between the applicable investment advisor and the Fund.


                                FUND ORGANIZATION


On February 6, 2006,  the Fund  changed its name from  Scudder  GNMA Fund to DWS
GNMA Fund.  The Fund is a series of DWS Income Trust, a  Massachusetts  business
trust  (the  "Trust"),  which  changed  its name from  Scudder  Income  Trust on
February 6, 2006. On July 17, 2000, the Fund changed its name from AARP GNMA and
US Treasury  Fund to Scudder GNMA Fund;  additionally,  the Fund was a series of
AARP Income  Trust,  a  Massachusetts  business  trust which changed its name to
Scudder Income Trust. The Trust was established under a separate  Declaration of
Trust dated June 8, 1984. The Trust's shares of beneficial  interest of $.01 par
value per share are issued in separate  series.  Other series may be established
and/or offered by the Trust in the future.  Each share of a series represents an
interest in that series  which is equal to each other share of that  series.  To
the extent that the Fund offers additional share classes,  these classes will be
offered in a separate  prospectus  and have  different  fees,  requirements  and
services.


The Fund is a series of the Trust, a  Massachusetts  business trust  established
under a Declaration of Trust dated June 8, 1984. The Trust's  authorized capital
consists of an unlimited  number of shares of  beneficial  interest of $0.01 par
value,  all of which  are of one  class  and have  equal  rights  as to  voting,
dividends and liquidation.  The Trust is comprised of one series: DWS GNMA Fund,
which was organized on June 8, 1984. The Fund consists of an unlimited number of
shares.  The Trustees have the authority to issue  additional  portfolios to the
Trust.  To the extent  that the Fund  offers  additional  share  classes,  these
classes  will be offered  in a  separate  prospectus  and have  different  fees,
requirements and services.

The Trustees have the authority to create  additional Funds and to designate the
relative  rights and  preferences as between the different  Funds.  The Trustees
also may  authorize the division of shares of the Fund into  different  classes,
which may bear different  expenses.  All shares issued and outstanding are fully
paid and non-assessable,  transferable, have no pre-emptive or conversion rights
and are  redeemable as described in the SAI and in the Fund's  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.  The Trustees may also  terminate  any fund or class by
notice to the shareholders  without  shareholder  approval.  Currently,  Class S
Shares are offered.

The  Trust  is a  Massachusetts  business  trust  organized  under  the  laws of
Massachusetts  and is governed by an Amended and Restated  Declaration  of Trust
that was approved by  shareholders  in 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.

The Fund generally is not required to hold meetings of its  shareholders.  Under
the  Declaration  of  Trust,  however,  shareholder  meetings  will  be  held in
connection  with the  following  matters to the extent  and as  provided  in the
Declaration  of Trust and as required by  applicable  law:  (a) the  election or
removal of trustees if a meeting is called for such purpose; (b) the termination
of the Trust or a Fund; (c) an amendment of the  Declaration  of Trust;  and (d)
such  additional  matters  as may be  required  by  law or as the  Trustees  may
determine to be necessary or desirable.  Shareholders  also vote upon changes in
fundamental policies or restrictions.

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



                                       77
<PAGE>

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

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

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

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

                             PROXY VOTING GUIDELINES

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



                                       78
<PAGE>

o        Shareholder  Rights -- The Advisor  generally  votes against  proposals
         that restrict shareholder rights.

o        Corporate  Governance -- The Advisor  generally  votes for proposals to
         restrict  a chief  executive  officer  from  serving on more than three
         outside  board  of  directors.  The  Advisor  generally  votes  against
         proposals  that  require a company  to  appoint  a  chairman  who is an
         independent director.

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

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

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

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

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

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

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

As mentioned above, the Policies  describe the way in which the Advisor resolves
conflicts  of  interest.  To  resolve  conflicts,   the  advisor,  under  normal
circumstances,  votes proxies in accordance with its Guidelines.  If the Advisor
departs  from  the  Guidelines  with  respect  to a  particular  proxy or if the
Guidelines do not specifically  address a certain proxy proposal, a proxy voting
committee established by the advisor will vote the proxy. Before voting any such
proxy,  however,  the  Advisor's  conflicts  review  committee  will  conduct an
investigation to determine whether any potential  conflicts of interest exist in
connection with the particular proxy proposal. If the conflicts review committee
determines  that the Advisor has a material  conflict  of  interest,  or certain
individuals on the proxy voting committee  should be recused from  participating
in a  particular  proxy vote,  it will  inform the proxy  voting  committee.  If
notified  that the Advisor has a material  conflict,  or fewer than three voting
members are eligible to  participate  in the proxy vote,  typically  the Advisor
will  engage an  independent  third  party to vote the proxy or follow the proxy
voting recommendations of an independent third party.

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



                                       79
<PAGE>

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

                              FINANCIAL STATEMENTS


The financial statements,  including the portfolio of investments,  of the Fund,
together  with the Report of  Independent  Registered  Public  Accounting  Firm,
Financial  Highlights and notes to financial  statements in the Annual Report to
the Shareholders of the Fund dated September 30, 2007 are incorporated herein by
reference herein and are deemed to be a part of this SAI.


                             ADDITIONAL INFORMATION


The CUSIP number of the Fund -- Class S is 23337P209.


The Fund has a fiscal year end of September 30.


The Fund's  prospectus  and this SAI omit certain  information  contained in the
Registration  Statement  which  the  Fund  has  filed  with  the SEC  under  the
Securities Act and the 1940 Act and reference is hereby made to the Registration
Statement for further  information  with respect to the Fund and the  securities
offered hereby. This Registration Statement and its amendments are available for
inspection by the public at the SEC in Washington, D.C.


                             RATINGS OF INVESTMENTS

Standard & Poor's Corporation Bond Ratings

AAA.  Debt  rated AAA had the  highest  rating  assigned  by  Standard & Poor's.
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 debt in higher rated categories.

BBB.  Debt rated BBB is regarded as having 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.

BB, B, CCC, CC and C. Debt rated BB, B, CCC, CC and C is  regarded,  on balance,
as predominantly  speculative with respect to capacity to pay interest and repay
principal in  accordance  with the terms of the  obligation.  BB  indicates  the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some  quality and  protective  characteristics,  these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

CI. The rating CI is  reserved  for income  bonds on which no  interest is being
paid.

D. Debt rated D is in  default,  and  payment of interest  and/or  repayment  of
principal is in arrears.



                                       80
<PAGE>

Moody's Investors Service, Inc. Bond Ratings

AAA. Bonds which are rated Aaa are judged to be of the best quality.  They carry
the  smallest  degree  of  investment  risk  and are  generally  referred  to as
"gilt-edge."  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  fluctuation of protective  elements
may be of greater  amplitude or there may be other  elements  present which make
the long term risks 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  safeguarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.

B. Bonds  which are rated B  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  speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C.  Bonds  which are rated C are the lowest  rated  class of bonds and issues so
rated can be regarded as having  extremely  poor prospects of ever attaining any
real investment standing.

Fitch Long-Term Debt Ratings

AAA.  Highest credit  quality.  "AAA" ratings  denote the lowest  expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments.  This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA. Very high credit  quality.  "AA" ratings  denote a very low  expectation  of
credit risk.  They indicate very strong capacity for timely payment of financial
commitments.  This  capacity  is not  significantly  vulnerable  to  foreseeable
events.

A. High credit quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial  commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.



                                       81
<PAGE>

BBB. Good credit quality.  "BBB" ratings  indicate that there is currently a low
expectation  of credit  risk.  The  capacity  for timely  payment  of  financial
commitments is considered adequate,  but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity.  This is the lowest
investment-grade category.

BB.  Speculative.  "BB" ratings  indicate that there is a possibility  of credit
risk  developing,  particularly  as the result of adverse  economic  change over
time;  however,  business or  financial  alternatives  may be available to allow
financial  commitments  to be met.  Securities  rated in this  category  are not
investment grade.

B. Highly  speculative.  "B" ratings  indicate that  significant  credit risk is
present,  but a limited  margin of safety  remains.  Financial  commitments  are
currently being met; however,  capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC,  CC, C. High  default  risk.  Default is a real  possibility.  Capacity for
meeting  financial  commitments  is solely  reliant  upon  sustained,  favorable
business or economic developments.  A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.

DDD, DD, D. Default.  The ratings of  obligations  in this category are based on
their prospects for achieving  partial or full recovery in a  reorganization  or
liquidation  of  the  obligor.   While  expected   recovery  values  are  highly
speculative  and cannot be estimated with any precision,  the following serve as
general  guidelines.  "DDD" obligations have the highest potential for recovery,
around  90%-100% of  outstanding  amounts and accrued  interest.  "DD" indicates
potential  recoveries  in the  range of  50%-90%,  and "D" the  lowest  recovery
potential, i.e., below 50%.

Entities  rated  in  this  category  have  defaulted  on  some  or all of  their
obligations.  Entities  rated "DDD" have the highest  prospect for resumption of
performance  or  continued  operation  with or  without a formal  reorganization
process.  Entities  rated  "DD"  and  "D"  are  generally  undergoing  a  formal
reorganization or liquidation process;  those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

Fitch Short-Term Debt Ratings

F1.  Highest credit  quality.  Indicates the Best capacity for timely payment of
financial commitments;  may have an added "+" to denote any exceptionally strong
credit feature.

F2. Good credit quality. A satisfactory capacity for timely payment of financial
commitments,  but the  margin  of  safety  is not as great as in the case of the
higher ratings.

F3.  Fair  credit  quality.   The  capacity  for  timely  payment  of  financial
commitments is adequate;  however,  near-term  adverse changes could result in a
reduction to non-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.

Commercial Paper Ratings

Commercial  paper rated by Standard & Poor's  Ratings  Services  ("S&P") has the
following   characteristics:   Liquidity   ratios  are  adequate  to  meet  cash
requirements.  Long-term  senior  debt is rated "A" or  better.  The  issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow  have an  upward  trend  with  allowance  made for  unusual  circumstances.
Typically, the issuer's industry is well established and the issuer has a strong


                                       82
<PAGE>

position  within the industry.  The  reliability  and quality of management  are
unquestioned.  Relative  strength  or weakness  of the above  factors  determine
whether the issuer's commercial paper is rated A-1 or A-2.

The ratings  Prime-1 and Prime-2 are the two highest  commercial  paper  ratings
assigned  by Moody's  Investors  Service,  Inc.  ("Moody's").  Among the factors
considered by it in assigning  ratings are the following:  (1) evaluation of the
management of the issuer;  (2) economic  evaluation of the issuer's  industry or
industries and an appraisal of  speculative-type  risks which may be inherent in
certain  areas;  (3)  evaluation  of  the  issuer's   products  in  relation  to
competition and customer  acceptance;  (4) liquidity;  (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years;  (7) financial
strength of a parent company and the relationships  which exist with the issuer;
and (8) recognition by the management of obligations which may be present or may
arise as a result of public  interest  questions and  preparations  to meet such
obligations.  Relative  strength  or weakness  of the above  factors  determines
whether the issuer's commercial paper is rated Prime-1 or 2.

Municipal Notes

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

S&P:  The  "SP-1"  rating  reflects  a "very  strong or strong  capacity  to pay
principal and interest". Notes issued with "overwhelming safety characteristics"
will be rated "SP-1+".  The "SP-2" rating reflects a "satisfactory  capacity" to
pay principal and interest.

Fitch:  The highest ratings for state and municipal  short-term  obligations are
"F-1+," "F-1," and "F-2."


                                       83

<PAGE>

                                DWS INCOME TRUST

                            PART C. OTHER INFORMATION

<TABLE>
<CAPTION>
    Item 23.        Exhibits.
    --------        ---------
                        <S>         <C>      <C>
                       (a)        (a)(1)    Amended and Restated Declaration of Trust dated June 27, 2006.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                       (b)        (b)(1)    By-laws of the Registrant dated as of June 27, 2006.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                       (c)        (c)(1)    Establishment of Series dated November 27, 1984.
                                            (Previously filed as Exhibit 1(b)(1) to Post-Effective Amendment No. 25 to
                                            the Registration Statement)

                                  (c)(2)    Redesignation of Series dated March 28, 1990.
                                            (Previously filed as Exhibit 1(b)(2) to Post-Effective Amendment No. 25 to
                                            the Registration Statement)

                                  (c)(3)    Establishment and Designation of Series of Beneficial Interest dated
                                            November 12, 1996.
                                            (Previously filed as Exhibit 1(b)(3) to Post-Effective Amendment No. 20 to
                                            the Registration Statement)

                                  (c)(4)    Establishment and Designation of Classes of Shares of Beneficial Interest
                                            dated March 2, 2000.
                                            (Incorporated by reference to Post-Effective Amendment No. 31 to the
                                            Registration Statement, as filed on July 17, 2000.)

                                  (c)(5)    Amended and Restated Designation of Series and Classes of Shares of
                                            Beneficial Interest dated June 27, 2006.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                       (d)        (d)(1)    Amended and Restated Investment Management Agreement between the Registrant
                                            on behalf of DWS GNMA Fund and Deutsche Investment Management Americas Inc.
                                            dated June 1, 2006.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                       (e)        (e)(1)    Underwriting Agreement between the Registrant and Scudder Distributors, Inc.
                                            dated September 30, 2002 (Incorporated by reference to Post-Effective
                                            Amendment No. 35, as filed on January 28, 2003.)

                       (f)        (f)(1)    Form of Retirement Agreement between the Registrant and each of Martin J.
                                            Gruber, Graham E. Jones and Carl W. Vogt dated November 14, 2007. (Filed
                                            herein.)

                                  (f)(2)    Indemnification and Reimbursement Agreement between the Registrant and DIMA
                                            dated November 14, 2007. (Filed herein.)

                       (g)        (g)(1)    Conformed Copy of Master Custodian Agreement between the Registrant and
                                            State Street Bank and Trust Company dated April 1, 2007. (Filed herein.)



                                       2
<PAGE>

                       (h)        (h)(1)    Conformed Copy of Agency Agreement between DWS Investment Trust on behalf of
                                            DWS GNMA Fund and DWS Scudder Investments Service Company dated April 1,
                                            2007. (Filed herein.)

                                  (h)(2)    Letter of Indemnity to the Scudder Funds dated October 13, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                                  (h)(3)    Letter of Indemnity to the Scudder Funds dated October 13, 2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                                  (h)(4)    Letter of Indemnity to the Independent Directors/Trustees dated October 13,
                                            2004.
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)

                                  (h)(5)    Form of Amended Administrative Services Agreement, between the Registrant,
                                            on behalf of DWS GNMA Fund, and Deutsche Investment Management Americas Inc.
                                            (Filed herein).

                                  (h)(6)    Form of Mutual Fund Rule 22c-2 Information Sharing Agreement between
                                            Registrant and DWS Scudder Distributors, Inc. (Filed herein).

                                  (h)(7)    Form of Expense Limitation Agreement, dated October 1, 2007, between the
                                            Registrant and Deutsche Investment Management Americas Inc. (Filed herein).

                       (i)                  Legal Opinion and Consent of Counsel.
                                            (Previously filed as Exhibit (i) to Post-Effective Amendment No. 34 to the
                                            Registration Statement.)

                       (j)                  Consent of Independent Registered Public Accounting Firm. (Filed herein.)

                       (k)                  Inapplicable

                       (l)                  Inapplicable

                       (m)                  Inapplicable

                       (n)        (n)(1)    Amended and Restated Multi-Distribution System Plan with respect to Scudder
                                            GNMA Fund, pursuant to Rule 18f-3, dated December 29, 2000.
                                            (Previously filed as Exhibit (n)(3) to Post-Effective Amendment No. 34 to
                                            the Registration Statement.)

                       (p)        (p)(1)    Code of Ethics for Deutsche Asset Management - U.S., dated January 1, 2008.
                                            (Filed herein.)

                                  (p)(2)    Consolidated Fund Code of Ethics (All Funds).
                                            (Incorporated by reference to Post-Effective Amendment No. 42 to the
                                            Registration Statement, as filed on February 1, 2007.)


                                       3
<PAGE>

                       (q)                  Power of Attorney dated June 27, 2006. (Incorporated by reference to
                                            Post-Effective Amendment No. 42 to the Registration Statement, as filed on
</TABLE>
                                            February 1, 2007.)

Item 24.          Persons Controlled by or under Common Control with Fund.
--------          --------------------------------------------------------

                  None

Item 25.          Indemnification.
--------          ----------------

                  Article IV of the Registrant's Agreement and Declaration of
                  Trust (Exhibit (a)(1) hereto, which is incorporated herein by
                  reference) provides in effect that the Registrant will
                  indemnify its officers and trustees under certain
                  circumstances. However, in accordance with Section 17(h) and
                  17(i) of the Investment Company Act of 1940 and its own terms,
                  said Article of the Agreement and Declaration of Trust does
                  not protect any person against any liability to the Registrant
                  or its shareholders to which such Trustee would otherwise be
                  subject by reason of willful misfeasance, bad faith, gross
                  negligence, or reckless disregard of the duties involved in
                  the conduct of his or her office.

                  The Registrant has purchased insurance policies insuring its
                  officers and trustees against certain liabilities which such
                  officers and trustees may incur while acting in such
                  capacities and providing reimbursement to the Registrant for
                  sums which it may be permitted or required to pay to its
                  officers and trustees by way of indemnification against such
                  liabilities, subject to certain deductibles.

                  On April 5, 2002, Zurich Scudder Investments, Inc.
                  ("Scudder"), the investment adviser, now known as Deutsche
                  Investment Management Americas Inc., was acquired by Deutsche
                  Bank AG, not including certain U.K. Operations (the
                  "Transaction"). In connection with the Trustees' evaluation of
                  the Transaction, Deutsche Bank agreed to indemnify, defend and
                  hold harmless Registrant and the trustees who were not
                  "interested persons" of Scudder, Deutsche Bank or Registrant
                  (the "Independent Trustees") for and against any liability and
                  claims and expenses based upon or arising from, whether in
                  whole or in part, or directly or indirectly, any untrue
                  statement or alleged untrue statement of a material fact made
                  to the Independent Trustees by Deutsche Bank in connection
                  with the Independent Trustees' consideration of the
                  Transaction, or any omission or alleged omission of a material
                  fact necessary in order to make statements made, in light of
                  the circumstances under which they were made, not misleading.

                  Deutsche Investment Management Americas Inc. (hereafter,
                  "DIMA"), the investment advisor, has agreed, subject to
                  applicable law and regulation, to indemnify and hold harmless
                  the Registrant against any loss, damage, liability and
                  expense, including, without limitation, the advancement and
                  payment, as incurred, of reasonable fees and expenses of
                  counsel (including counsel to the Registrant and counsel to
                  the Independent Trustees) and consultants, whether retained by
                  the Registrant or the Independent Trustees, and other
                  customary costs and expenses incurred by the Registrant in
                  connection with any litigation or regulatory action related to
                  possible improper market timing or other improper trading
                  activity or possible improper marketing and sales activity in
                  the Registrant ("Private Litigation and Enforcement Actions").
                  In the event that this indemnification is unavailable to the
                  Registrant for any reason, then DIMA has agreed to contribute
                  to the amount paid or payable by the Registrant as a result of
                  any loss, damage, liability or expense in such proportion as
                  is appropriate to reflect the relative fault of DIMA and the
                  Registrant with respect to the matters which resulted in such
                  loss, damage, liability or expense, as well as any other
                  relevant equitable considerations; provided, that if no final
                  determination is made in such action or proceeding as to the
                  relative fault of DIMA and the Registrant, then DIMA shall pay
                  the entire amount of such loss, damage, liability or expense.

                  In recognition of its undertaking to indemnify the Registrant,
                  and in light of the rebuttable presumption generally afforded
                  to non-interested board members of an investment company that
                  they have not engaged in disabling conduct, DIMA has also
                  agreed, subject to applicable law and regulation, to indemnify
                  and hold harmless each of the Independent Trustees against any
                  and all


                                       4
<PAGE>

                  loss, damage, liability and expense, including without
                  limitation the advancement and payment as incurred of
                  reasonable fees and expenses of counsel and consultants, and
                  other customary costs and expenses incurred by the Independent
                  Trustees, arising from the matters alleged in any Private
                  Litigation and Enforcement Actions or matters arising from or
                  similar in subject matter to the matters alleged in the
                  Private Litigation and Enforcement Actions (collectively,
                  "Covered Matters"), including without limitation:

                  1.    all reasonable legal and other expenses incurred by the
                        Independent Trustees in connection with the Private
                        Litigation and Enforcement Actions, and any actions that
                        may be threatened or commenced in the future by any
                        person (including any governmental authority), arising
                        from or similar to the matters alleged in the Private
                        Litigation and Enforcement Actions, including without
                        limitation expenses related to the defense of, service
                        as a witness in, or monitoring of such proceedings or
                        actions;

                  2.    all liabilities and reasonable legal and other expenses
                        incurred by any Independent Trustee in connection with
                        any judgment resulting from, or settlement of, any such
                        proceeding, action or matter;

                  3.    any loss or reasonable legal and other expenses incurred
                        by any Independent Trustee as a result of the denial of,
                        or dispute about, any insurance claim under, or actual
                        or purported rescission or termination of, any policy of
                        insurance arranged by DIMA (or by a representative of
                        DIMA acting as such, acting as a representative of the
                        Registrant or of the Independent Trustees or acting
                        otherwise) for the benefit of the Independent Trustee,
                        to the extent that such denial, dispute or rescission is
                        based in whole or in part upon any alleged
                        misrepresentation made in the application for such
                        policy or any other alleged improper conduct on the part
                        of DIMA, any of its corporate affiliates, or any of
                        their directors, officers or employees;

                  4.    any loss or reasonable legal and other expenses incurred
                        by any Independent Trustee, whether or not such loss or
                        expense is incurred with respect to a Covered Matter,
                        which is otherwise covered under the terms of any
                        specified policy of insurance, but for which the
                        Independent Trustee is unable to obtain advancement of
                        expenses or indemnification under that policy of
                        insurance, due to the exhaustion of policy limits which
                        is due in whole or in part to DIMA or any affiliate
                        thereof having received advancement of expenses or
                        indemnification under that policy for or with respect to
                        any Covered Matter; provided, that the total amount that
                        DIMA will be obligated to pay under this provision for
                        all loss or expense shall not exceed the amount that
                        DIMA and any of its affiliates actually receive under
                        that policy of insurance for or with respect to any and
                        all Covered Matters; and

                  5.    all liabilities and reasonable legal and other expenses
                        incurred by any Independent Trustee in connection with
                        any proceeding or action to enforce his or her rights
                        under the agreement, unless DIMA prevails on the merits
                        of any such dispute in a final, nonappealable court
                        order.

                  DIMA is not required to pay costs or expenses or provide
                  indemnification to or for any individual Independent Trustee
                  (i) with respect to any particular proceeding or action as to
                  which the Board of the Registrant has determined that such
                  Independent Trustee ultimately would not be entitled to
                  indemnification with respect thereto, or (ii) for any
                  liability of the Independent Trustee to the Registrant or its
                  shareholders to which such Independent Trustee would otherwise
                  be subject by reason of willful misfeasance, bad faith, gross
                  negligence, or reckless disregard of the Independent Trustee's
                  duties as a Trustee of the Registrant as determined in a final
                  adjudication in such proceeding or action. In addition, to the
                  extent that DIMA has paid costs or expenses under the
                  agreement to any individual Independent Trustee with respect
                  to a particular proceeding or action, and there is a final
                  adjudication in such proceeding or action of the Independent
                  Trustee's liability to the Registrant or its shareholders by
                  reason of willful misfeasance, bad faith, gross negligence, or
                  reckless disregard of the Independent Trustee's duties as a
                  Trustee of the Registrant, such Independent Trustee has
                  undertaken to repay such costs or expenses to DIMA.


                                       5
<PAGE>

                  On November 14, 2007, the Registrant and DIMA entered into an
                  agreement that provides certain retiring Non-interested
                  Trustees certain assurances regarding continuation of
                  insurance and indemnification rights. More specifically, the
                  agreement provides that the Registrant shall take all actions
                  reasonably necessary to assure that the retirement of certain
                  Non-interested Trustees and/or the election or appointment of
                  members of the consolidated Board shall not reduce or impair
                  any rights of those Non-interested Trustees to
                  indemnification, defense, advancement of expenses, or other
                  rights, for or with respect to actual or threatened claims,
                  liability, or expense that those Non-interested Trustees may
                  incur or suffer arising from or with respect to those
                  Non-interested Trustees' service in such capacity, except to
                  the extent that the consolidated Board determines in the
                  exercise of its duties to modify the rights of all Board
                  members, past and present, without distinction. It is
                  understood that any such modification of rights shall not,
                  without the written consent of the Non-interested Trustees,
                  serve to modify any contractual rights that the Non-interested
                  Trustees may have under any agreement to which the
                  Non-interested Trustees and the Registrant are parties.

                  For the six-year period following the election or appointment
                  of members of the consolidated Board, the Registrant currently
                  expect to maintain, D&O/E&O Insurance and IDL Insurance that
                  is substantially equivalent in scope to the current coverage,
                  and in amounts providing aggregate coverage with respect to
                  the Registrant and all funds overseen by the consolidated
                  Board of at least $100 million for D&O/E&O Insurance and at
                  least $25 million for IDL Insurance; subject however to the
                  right of the consolidated Board in the exercise of its duties
                  to determine that a lower level of insurance coverage is in
                  the best interests of the Registrant provided that any such
                  reduction in coverage apply equally to their present and
                  former Trustees.

                  Pursuant to the agreement, DIMA has agreed that the retirement
                  of the Non-interested Trustees under the terms of the
                  retirement agreements shall in no way affect or diminish the
                  contractual rights of indemnification that the Non-interested
                  Trustees may have under any agreement of indemnification
                  between an Non-interested Trustees and DIMA, including without
                  limitation agreements of indemnification currently in effect
                  with respect to matters related to market timing and matters
                  related to merged or liquidated funds. Upon request made by
                  any Non-interested Trustees, DIMA has agreed to execute a
                  separate instrument confirming the existence and continuation
                  of any such agreement of indemnification.

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

Item 26.          Business and Other Connections of Investment Advisor
--------          ----------------------------------------------------

                  During the last two fiscal years, no director or officer of
                  Deutsche Investment Management Americas Inc., the investment
                  advisor, has engaged in any other business, profession,
                  vocation or employment of a substantial nature other than that
                  of the business of investment management and, through
                  affiliates, investment banking.

Item 27.          Principal Underwriters
--------          ----------------------

                  (a)

                  DWS Scudder Distributors, Inc. acts as principal underwriter
                  of the Registrant's shares and acts as principal underwriter
                  for registered open-end management investment companies other
                  funds managed by Deutsche Investment Management Americas Inc.


                                       6
<PAGE>

                  (b)

                  Information on the officers and directors of DWS Scudder
                  Distributors, Inc., principal underwriter for the Registrant,
                  is set forth below. The principal business address is 222
                  South Riverside Plaza, Chicago, Illinois 60606.

<TABLE>
<CAPTION>
                     (1)                              (2)                                  (3)
         DWS Scudder Distributors, Inc.
         Name and Principal              Positions and Offices with               Positions and
         Business Address                DWS Scudder Distributors, Inc.           Offices with Registrant
         ----------------                ------------------------------           -----------------------
               <S>                                       <C>                              <C>
         Philipp Hensler                Director, Chairman of the Board and CEO   None
         345 Park Avenue
         New York, NY 10154

         Michael Colon                  Director and Chief Operating Officer      None
         345 Park Avenue
         New York, NY 10154

         Thomas Winnick                 Director and President                    None
         345 Park Avenue
         New York, NY 10154

         Cliff Goldstein                Chief Financial Officer and Treasurer     None
         60 Wall Street
         New York, NY 10005

         Robert Froehlich               Vice President                            None
         222 South Riverside Plaza
         Chicago, IL 60606

         Paul Schubert                  Vice President                            Chief Financial Officer
         345 Park Avenue                                                          and Treasurer
         New York, NY 10154

         Mark Perrelli                  Vice President                            None
         222 South Riverside Plaza
         Chicago, IL 60606

         Donna White                    Chief Compliance Officer                  None
         345 Park Avenue
         New York, NY 10154

         Jason Vazquez                  Vice President and AML Compliance         Anti-Money Laundering
         345 Park Avenue                Officer                                   Compliance Officer
         New York, NY 10154


                                       7
<PAGE>
                     (1)                              (2)                                  (3)
         DWS Scudder Distributors, Inc.
         Name and Principal              Positions and Offices with               Positions and
         Business Address                DWS Scudder Distributors, Inc.           Offices with Registrant
         ----------------                ------------------------------           -----------------------

         Caroline Pearson               Secretary                                 Assistant Secretary
         Two International Place
         Boston, MA 02110

         Philip J. Collora              Assistant Secretary                       None
         222 South Riverside Plaza
         Chicago, IL 60606

         Anjie LaRocca                  Assistant Secretary                       None
         345 Park Avenue
         New York, NY 10154
</TABLE>

         (c)      Not applicable

Item 28.          Location of Accounts and Records.
--------          ---------------------------------

                  Certain accounts, books and other documents required to be
                  maintained by Section 31(a) of the 1940 Act and the Rules
                  promulgated thereunder are maintained by Deutsche Investment
                  Management Americas Inc., Two International Place, Boston, MA
                  02110-4103. Records relating to the duties of the Registrant's
                  custodian are maintained by State Street Bank and Trust
                  Company, Heritage Drive, North Quincy, Massachusetts. Records
                  relating to the duties of the Registrant's transfer agents are
                  maintained by DWS Scudder Investments Service Corporation, Two
                  International Place, Boston, Massachusetts 02110-4103, DWS
                  Scudder Investments Service Company, 210 West 10th Street,
                  Kansas City, MO 64105-1614, or DST Systems, Inc., the
                  sub-transfer agent, at 127 West 10th Street, Kansas City,
                  Missouri 64105.

Item 29.          Management Services.
--------          --------------------

                  Inapplicable.

Item 30.          Undertakings.
--------          -------------

                  None.



                                       8
<PAGE>

                                   SIGNATURES
                                   ----------

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York and the State of New York, on
the 22nd day of January 2008.

                                              DWS INCOME TRUST

                                              By: /s/ Michael G. Clark
                                                  ---------------------
                                                  Michael G. Clark
                                                  President

            Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated:

<TABLE>
<CAPTION>

 SIGNATURE                                  TITLE                                        DATE
 ---------                                  -----                                        ----
<S>                                         <C>                                          <C>

 /s/ Michael G. Clark
 -------------------------------------
 Michael G. Clark                           President                                    January 22, 2008

 /s/ Paul H. Schubert
 -------------------------------------
 Paul H. Schubert                           Chief Financial Officer and Treasurer        January 22, 2008

 /s/ Henry P. Becton, Jr.
 -------------------------------------
 Henry P. Becton, Jr.*                      Trustee                                      January 22, 2008

 /s/ Dawn-Marie Driscoll
 -------------------------------------
 Dawn-Marie Driscoll*                       Chairperson and Trustee                      January 22, 2008

 /s/ Keith R. Fox
 -------------------------------------
 Keith R. Fox*                              Trustee                                      January 22, 2008

 /s/ Kenneth C. Froewiss
 -------------------------------------
 Kenneth C. Froewiss*                       Trustee                                      January 22, 2008

 /s/ Martin J. Gruber
 -------------------------------------
 Martin J. Gruber*                          Trustee                                      January 22, 2008

 /s/ Richard J. Herring
 -------------------------------------
 Richard J. Herring*                        Trustee                                      January 22, 2008

 /s/ Graham E. Jones
 -------------------------------------
 Graham E. Jones*                           Trustee                                      January 22, 2008

 /s/ Rebecca W. Rimel
 -------------------------------------
 Rebecca W. Rimel*                          Trustee                                      January 22, 2008

 /s/ William N. Searcy, Jr.
 -------------------------------------
 William N. Searcy, Jr.*                    Trustee                                      January 22, 2008


<PAGE>
 SIGNATURE                                  TITLE                                        DATE
 ---------                                  -----                                        ----

 /s/ Jean Gleason Stromberg
 -------------------------------------
 Jean Gleason Stromberg*                    Trustee                                      January 22, 2008

 /s/ Axel Schwarzer
 -------------------------------------
 Axel Schwarzer*                            Trustee                                      January 22, 2008

 /s/ Carl W. Vogt
 -------------------------------------
 Carl W. Vogt*                              Trustee                                      January 22, 2008
</TABLE>


*By:     /s/ Caroline Pearson
         --------------------
         Caroline Pearson**
         Assistant Secretary

**       Attorney-in-fact pursuant to the powers of attorney as filed herein.







                                       2

<PAGE>

                                                               File No. 2-91577
                                                               File No. 811-4049


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    EXHIBITS

                                       TO

                                    FORM N-1A

                         POST-EFFECTIVE AMENDMENT NO. 43
                            TO REGISTRATION STATEMENT

                                      UNDER

                           THE SECURITIES ACT OF 1933

                                       AND

                                AMENDMENT NO. 45

                            TO REGISTRATION STATEMENT

                                      UNDER

                       THE INVESTMENT COMPANY ACT OF 1940



                                DWS INCOME TRUST


                                       9
<PAGE>


                                DWS INCOME TRUST

                                  EXHIBIT INDEX

                                     (f)(1)

                                     (f)(2)

                                     (g)(1)

                                     (h)(1)

                                     (h)(5)

                                     (h)(6)

                                     (h)(7)

                                       (j)

                                     (p)(1)












                                       10